abrdn Pvt Equity - Annual Financial Report
31/01/2023 07:00
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RNS Number : 3253O abrdn Private Equity Opp Trst plc 31 January 2023
abrdn Private Equity Opportunities Trust plc
Legal Entity Identifier (LEI): 2138004MK7VPTZ99EV13
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2022
FINANCIAL HIGHLIGHTS
As at As at
30 September 30 September
2022 2021
Net Asset Value Total Return(*+) 14.1% 37.9%
Share Price Total Return(*+) -15.1% 60.6%
FTSE All - Share Index Total Return -4.0% 27.9%
Net Assets £1,158.1m £1,036.0m
Share Price 410.0p 498.0p
Expense Ratio(*+) 1.06% 1.10%
(*) Considered to be an Alternative Performance Measure.
(+) A Key Performance Indicator by which the performance of the Manager is
measured by the Board.
HIGHLIGHTS TO 30 SEPTEMBER 2022
· NAV Performance - APEO has shown strong annual Net Asset Value
("NAV") growth in spite of the difficult backdrop in both the global economy
and financial markets. NAV total return ("NAV TR") for the year to 30
September 2022 was 14.1% versus -4.0% for the FTSE All-Share Index. The
valuation of the underlying portfolio increased by 10.5% during the period
(excluding FX).
· Share Price Performance - The deterioration in public market
sentiment during the year led to share price pressures across the sector
during 2022. In that context, APEO's share price total return was -15.1%
during the year to 30 September 2022 and therefore underperformed the -4.0%
total return from the FTSE All-Share, APEO's comparator index.
· Investment Activity - APEO made twelve new primary investments,
nine new direct co-investments and two new secondary investments during the
year. Direct co-investment has continued to grow as a proportion of the
portfolio and has now reached a portfolio of 22 underlying companies and 19.1%
of NAV.
· Realisations - The portfolio generated record levels of
realisations (distributions and secondary sales) during the year under review,
with distributions of £210.2 million (30 September 2021: £197.6 million). In
addition, APEO received an additional £15.7 million (2021: £1.1 million)
from proceeds from secondary sales relating to two fund positions.
· Outstanding Commitments - Outstanding commitments at the year-end
amounted to £678.9 million (2021: £557.1 million). The overcommitment ratio
of 42.8% at year-end (2021: 32.5%) was at the lower end of APEO's target range
(30-75%).
· Balance Sheet - APEO had cash and cash equivalents of £30.3
million (2021: £29.7 million) at year-end. APEO also had £138.0 million
remaining undrawn on its £200.0 million revolving credit facility at 30
September 2022 (2021: £200.0 million undrawn). Following year-end, the
revolving credit facility was increased to £300.0 million in size and
extended in duration by a year (to December 2025).
TEN YEAR FINANCIAL RECORD
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Per share data
NAV (diluted) (p) ^ 243.4 257.4 281.6 346.4 389.6 430.2 461.9 501.0 673.8 753.2
Share price (p) 198.0 230.0 214.0 267.3 341.5 345.5 352.0 320.0 498.0 410.0
Discount to diluted(^) NAV per Share (%)(*+) (18.6) (10.6) (24.0) (22.8) (12.3) (19.7) (23.8) (36.1) (26.1) (45.6)
Dividend per Share (p) 5.00 5.00 5.25 5.40 12.00 12.40 13.20
12.80 13.60 14.40
Expense Ratio(*+1) (%) 0.99 0.96 0.98 0.99 1.14(2) 1.10 1.09 1.10 1.10 1.06
Returns data
NAV Total Return(*+) (%) 9.1 7.7 11.9 24.8 14.9 13.3 11.7
10.5 37.9 14.1
Total Shareholder Return(*+) (%) 23.4 19.1 27.9 31.9 5.8 (4.6)
(4.0) 5.7 60.6 (15.1)
Portfolio data
Net Assets (£m) 401.2 409.1 438.7 532.6 599.0 661.4 710.1 770.3 1,036.0 1,158.1
Top 10 Managers as a % of net assets(3) 68.4 65.0 65.2 65.0 58.9 63.6 67.8
67.9 62.9 65.1
Top 10 investments as a % net assets 51.7 52.9 48.6 45.9 47.7 48.4 53.9 48.3
40.3 35.6
Source: The Manager & Refinitiv
1 For further information on the calculation of the expense ratio, as well as
the ongoing charges of the Company, please refer to the Alternative
Performance Measures.
2The incentive fee arrangement ended on 30 September 2016. Following the end
of the incentive fee period, a single management fee of 0.95% per annum of the
NAV of the Company replaced the previous management and incentive fees.
3 The top 10 managers as a % of net assets do not strictly represent the
current core private equity managers of the APEO portfolio.
* Considered to be an Alternative Performance Measure.
+ A Key Performance Indication by which the performance of the Manager is
measured by the Board.
^ There are no diluting elements to the net asset value per equity share
calculation in 2022.
An introduction to abrdn Private Equity Opportunities Trust plc (the "Company"
or "APEO")
- A diversified portfolio of private equity funds and co-investments
principally focused on the European mid-market.
- APEO partners with some of the leading private equity firms in
Europe, through funds and co-investments. Our 12 core European private equity
relationships represent around 59% of portfolio NAV.
- Through funds and co-investments, these private equity firms then
invest into market-leading private companies, some of which are household
names, but many of which are not widely known.
- This approach, developed over 21 years, has created a portfolio that
provides underlying exposure to over 650 underlying private companies via
funds and co-investments, well-balanced across sectors and vintages.
% Exposure as at
Sector 30 September 2022
Information technology 20
Healthcare 20
Industrials 18
Consumer discretionary 14
Consumer staples 12
Financials 11
Materials 4
Energy 1
Based on the latest available information from underlying managers. Figures
represent % of total value of underlying private company exposure. This
excludes any underlying funds and co-investments held through the Company
portfolio.
Our Pillars - The key pillars that have guided our business for more than 21
years and differentiate us in our industry
Access - APEO gives investors access to high quality private equity managers and private companies
Private equity can be a challenging asset class to access and navigate.
Our long-term market presence and local networks provide us with insights and
relationships that, we believe, unlock some of the best opportunities for
investment in private equity funds and co-investments, alongside our core
private equity managers. We work hard to find and foster these relationships
so we become strong and reliable partners to these core managers. This enables
us to build and maintain a diversified and high quality portfolio of
underlying private companies.
As an investment trust listed on the London Stock Exchange, APEO offers
shareholders an opportunity to invest in these private equity funds and
co-investments for as little as the price of one share. As APEO's shares are
listed on the London Stock Exchange, they provide daily tradable access to an
asset class which is normally relatively illiquid.
Expertise - The Investment Management team has specialist knowledge in European markets
The Investment Manager has a large and well established team of investment
professionals. They have managed APEO for over 21 years, since its inception,
and have generated consistent performance over that time.
The European private equity market is a complex investment arena, with
multiple strategies and managers to choose from, not to mention the different
cultural and technical nuances across the various countries. The Investment
Manager's specialist expertise is a key asset in navigating these complexities
and honing in on the best private equity managers, funds and co-investments
for our shareholders.
Alongside our European focus, we also have exposure to the North American
market through our European managers and selectively through North American
focused funds.
Geography of the Underlying Portfolio as at 30 September 2022
Exposure %
North America 23
United Kingdom 17
Nordics 14
France 13
Germany 12
Benelux 9
Spain 3
Italy 3
Switzerland 1
Based on the latest available information from underlying managers. Figures
represent % of total value of underlying private company exposure. This
excludes any underlying fund and co-investments held through APEO's portfolio.
Geographic exposure is defined as the geographic region where underlying
portfolio companies are headquartered.
In addition to the above, 4% of underlying portfolio companies are based in
European countries not separately disclosed above, while 1% are based in
countries outside of Europe, excluding North America.
APEO has no Russian, Ukrainian or Belarussian headquartered companies. These
three countries make up less than 1% of the underlying company revenues
Focus - the APEO portfolio is focused on one of the most established and
consistently performing parts of the growing private markets universe
Our objective is to build and manage a carefully selected and continually
evolving portfolio of the best private equity funds and co-investments
available in the European market. We do this by partnering with 12 core
European private equity manager relationships, a selective approach in a
market where there are thousands of private equity managers to choose from.
Diversification is a well-recognised means of managing investment risk and
we achieve that through a portfolio of around 50 "active" private equity fund
investments, that in turn have exposure to over 650 underlying portfolio
companies. But we also believe it is important to have conviction and to
concentrate our firepower. We do this by selecting and focusing our capital
with a group of a dozen or so core buyout managers and partnering with them
through primary commitments to their funds, providing liquidity to their
investors through secondary transactions and making direct co-investments
alongside them in private companies.
Consistency - APEO has a history and track record of more than 20 years
We take a rigorous and disciplined approach to investment analysis that
delivers consistent long term investment returns across market cycles.
Private equity is often perceived to be a risky business, but our historic
track record proves that steady NAV performance and consistent growth are
possible. What's more, stability does not have to translate into reduced
returns; our NAV has grown over ten times since launch.
STRATEGIC REPORT
INVESTMENT STRATEGY
Investment Objective
The Company's investment objective is to achieve long-term total returns
through holding a diversified portfolio of private equity funds and direct
investments into private companies alongside private equity managers
("co-investments"), a majority of which will have a European focus.
Investment Policy
The Company: (i) commits to private equity funds on a primary basis; (ii)
acquires private equity fund interests in the secondary market; and (iii)
makes direct investments into private companies via co-investments. Its policy
is to maintain a broadly diversified portfolio by country, industry sector,
maturity and number of underlying investments.
The objective is for the portfolio to comprise around 50 ''active'' private
equity fund investments; this excludes funds that have recently been raised,
but have not yet started investing, and funds that are close to or being wound
up. The Company may also invest up to 20% of its assets in co-investments.
The Company may also hold direct private equity investments or quoted
securities as a result of distributions in specie from its portfolio of fund
investments. The Company's policy is normally to dispose of such assets where
they are held on an unrestricted basis.
To maximise the proportion of invested assets, the Company follows an
over-commitment strategy by making commitments which exceed its uninvested
capital. In making such commitments, the Manager, together with the Board,
will take into account the uninvested capital, the value and timing of
expected and projected cashflows to and from the portfolio and, from time to
time, may use borrowings to meet drawdowns. The Board has agreed that the
over-commitment ratio should sit within the range of 30% to 75% over the
long-term.
The Company's maximum borrowing capacity, defined in its articles of
association, is an amount equal to the aggregate of the amount paid up on the
issued share capital of the Company and the amount standing to the credit of
the reserves of the Company. However, it is expected that borrowings would not
normally exceed 30% of the Company's net assets at the time of drawdown.
The Company's non-sterling currency exposure is principally to the euro and US
dollar. The Company does not seek to hedge this exposure into sterling,
although any borrowings in euros and other currencies in which the Company is
invested would have such a hedging effect.
Cash held pending investment is invested in short-dated government bonds,
money-market instruments, bank deposits or other similar investments. Cash
held pending investment may also be invested in other listed investment
companies or trusts. The Company will not invest more than 15% of its total
assets in such listed equities.
The investment limits described above are all measured at the time of
investment.
Portfolio Construction Approach
Investments made by APEO are typically with or alongside private equity firms
with whom the Manager has an established relationship of more than 10 years.
As at 30 September 2022, APEO directly held 75 separate fund investments
(2021: 64) comprising of primary and secondary fund interests, as well as 22
co-investments (2021: 13).
Through its portfolio of directly held investments, the Company indirectly has
exposure to a diverse range of underlying private companies, as well as
additional underlying fund of fund and co-investment interests. At 30
September 2022, APEO's underlying portfolio included exposure to 655 separate
underlying private companies (2021: 578), 41 underlying fund investments
(2021: 36) and 9 underlying co-investments (2021: 9).
APEO predominantly invests in European mid-market companies. Around 76% (2021:
79%) of the total value of underlying private company exposure is invested in
European domiciled operating companies and the Board expects this to remain
the case over the longer term, with a weighting towards North Western Europe.
This has been APEO's
geographic focus since its inception in 2001 and where it has a strong,
long-term track record. However, APEO also selectively seeks exposure to North
American mid-market companies, as a means to access emerging growth or
investment trends that cannot be fully captured by investing in Europe alone.
APEO has a well-balanced portfolio in terms of non-cyclical and cyclical
exposure. Currently the largest single sector exposure represents 20% of the
total value of underlying private company exposure(1) (2021: 21%) and it is
expected that no single sector will be more than 30% of the portfolio over the
longer term. Over time, the Manager anticipates a continuation of the recent
shift toward sectors that are experiencing long-term growth (such as
Technology and Healthcare) at the expense of more cyclical sectors, such as
Industrial and Consumer Discretionary.
Environmental, Social and Governance ("ESG") is a strategic priority for the
Board and the Manager. APEO aims to be an active, long-term responsible
investor and ESG is a fundamental component of APEO's investment process.
Further detail on the Manager's approach to ESG is set out below.
(1) Excludes underlying fund and co-investments indirectly held through the
Company portfolio.
CHAIR'S STATEMENT
Introduction
In my first year as Chair, I am delighted to present APEO's Annual Report
& Accounts for the financial year to 30 September 2022, a year in which
the portfolio has delivered a resilient NAV performance in the face of a
challenging backdrop in both the global economy and financial markets. This
performance is credited to our focused Investment Strategy, the capabilities
of our Investment Manager, and an active Board.
2022 has been a year of some key milestones for APEO. Most notably, following
shareholder approval at the AGM in early March, the Company changed its name
from Standard Life Private Equity Trust plc to abrdn Private Equity
Opportunities Trust plc to align itself with the Manager's rebrand. And, on
the back of a sustained period of growth for shareholders, APEO was rewarded
with a promotion to the FTSE 250 Index for the first time in its history.
Of course, I remain mindful that the macroeconomic environment and financial
markets have changed materially in 2022, culminating in higher borrowing rates
and inflationary price pressures. This will invariably result in a tougher
period for both corporate earnings and the valuation environment in private
equity. That said, APEO has held a focused and consistent strategy for over 21
years, and we continue to take comfort from the quality and diversified nature
of the existing and evolving portfolio.
Investment Performance & Discount
The deterioration in public market sentiment during the year, including
private equity investment trusts, led to share price pressures across the
sector during 2022. Disappointingly, APEO's share price total return was
-15.1% during the year to 30 September 2022 and therefore underperformed the
-4.0% total return from the FTSE All-Share, APEO's comparator index, during
the same period.
In contrast, APEO's NAV performance remained strong during the year, with NAV
per share total return of 14.1%, outperforming the FTSE All-Share Index. This
resilient NAV performance is testament to APEO's investment and relationship
strategy, which has remained focused on partnering with a relatively small
cohort of high-quality private equity firms, predominately in the European
mid-market.
As a result of the contrast between the share price and NAV performance during
the year, the share price discount to NAV at 30 September 2022 widened to
45.6%. The discount ranged between 11.2% and 46.7% during the year, and
averaged 28.0%, which was slightly narrower than the 29.9% average of its
close peer group.
The Board does not have a stated discount control policy. That said, the Board
and Manager monitor the discount on a regular basis to ensure that APEO is not
an outlier when compared to other investment companies with a similar
investment approach and shareholder structure. The Board has bought back its
own shares in the past and is seeking shareholder approval to do so again, as
we keep this matter under active and careful consideration. Suffice to say
there is always a balance to consider in terms of buying-back shares on an
accretive discount and preserving cash liquidity for investment purposes. The
Board is also cognisant of APEO's relatively concentrated shareholder register
and, when considering buybacks, we are mindful of liquidity in the Company's
shares, which we believe is a key long-term focus of our shareholders.
Commitments, Investments & Distributions
The 12 months ended 30 September 2022 was an active year for investment,
continuing the momentum seen in 2021. APEO made commitments totalling £340.3
million (2021: £307.1 million). In line with our investment policy, these
commitments were well across twelve new primary commitments (£257.2 million),
two new secondary investments (£17.1 million), nine new direct co-investments
(£65.7 million), and one follow-on investment in an existing co-investment.
Of particular note is the fact that direct co-investment has continued to grow
as a proportion of the portfolio and has now reached a portfolio of 22
underlying companies and 19.1% of portfolio NAV (2021: 13 underlying companies
and 10.5% of portfolio NAV). Outstanding commitments at the year end amounted
to £678.9 million (2021: £557.1 million).
APEO received £210.2 million of distributions (2021: £197.6 million) from
underlying investments during the year, another annual record for APEO,
exceeding the previous year's record total. The realised return from the
ongoing investment operations of APEO's core portfolio equated to 2.2 times
cost (2021: 2.8 times cost). In addition, APEO received an additional £15.7
million (2021: £1.1 million) from proceeds from secondary sales relating to
two fund positions, meaning that APEO received a total of £225.9 million cash
proceeds during the financial year (2021: £198.7 million). The Manager
focused on reinvesting distributions into new investment opportunities during
the year, amounting to total drawdowns of £253.6 million (2021: £184.2
million).
Dividends
APEO received £210.2 million of distributions (2021: £197.6 million) from
underlying investments during the year, another annual record for APEO,
exceeding the previous year's record total. The realised return from the
ongoing investment operations of APEO's core portfolio equated to 2.2 times
cost (2021: 2.8 times cost). In addition, APEO received an additional £15.7
million (2021: £1.1 million) from proceeds from secondary sales relating to
two fund positions, meaning that APEO received a total of £225.9 million cash
proceeds during the financial year (2021: £198.7 million). The Manager
focused on reinvesting distributions into new investment opportunities during
the year, amounting to total drawdowns of £253.6 million (2021: £184.2
million).
Liquidity and Bank Facility
At the year end, APEO had cash and cash equivalents of £30.3 million (2021:
£29.7 million). APEO also had £138.0 million remaining undrawn (2021:
£200.0 million undrawn) on its £200.0 million revolving credit facility at
30 September 2022.
Following the year-end, the revolving credit facility was increased to £300.0
million and the maturity extended by a year to December 2025. The larger
facility, provided by RBS International, Société Générale and State Street
Bank International, will provide APEO with additional capacity for new
investments in the months and years ahead.
Environmental, Social & Governance ("ESG")
The Board continues to believe that integrating ESG best practice into APEO's
investment process will help to generate stronger, more sustainable returns
for shareholders over the long term. Accordingly, the Board monitors the
Manager's commitment to ESG factors closely and encourages it to stay close to
the latest market developments in this area. The majority of our portfolio is
managed by third-party managers and the Board takes comfort from the Manager's
policy to invest only with private equity firms who the Manager believes are
ESG market leaders or have a strong cultural commitment to improve their ESG
credentials.
The Board has encouraged the Manager to continue to raise ESG standards across
the industry and to publicise the work that it has done in this area. For
further detail of the Manager's approach to ESG, including an ESG case study,
is set out below.
Investment Manager
Each year, the Board, through the Management Engagement Committee, considers
whether the continued appointment of the Manager is in the best interests of
shareholders as a whole. Following its most recent review, the Board considers
that the Manager continues to have suitably qualified personnel and robust
operational processes to deliver APEO's investment objective over the long
term for shareholders.
Board
Christina McComb retired from the Board following the conclusion of the AGM in
March 2022. Christina served on the Board since 2013, the last 3 years as
Chair. On behalf of the Board, I would like to thank Christina for her
considerable contribution to APEO and wish her well in her future endeavours.
AGM and Manager's Presentation
The Board intends to hold APEO's AGM at the Balmoral Hotel, 1 Princes Street,
Edinburgh, EH2 2EQ at 12:30 pm on 22 March 2023. The meeting will include a
presentation by the Manager and will be followed by lunch. This is a good
opportunity for shareholders to meet the Board and the Manager and the Board
encourages you to attend. The Notice of the Meeting is contained in the Annual
Report.
Outlook
The broader financial markets and the outlook for the global economy have
shifted materially during the year, with the developed economies of the world
moving from a Covid-recovery phase in late 2021 to a much more challenging
environment in 2022. Both the Board and the Manager expect this tough
environment to persist in the short to medium term, which will continue to
have an impact on the performance of APEO as inflationary pressures persist in
the underlying portfolio companies and private equity valuations continue to
experience headwinds.
I have always viewed private equity as a long-term asset class where new
investment decisions are often made with a five-year time horizon in mind.
Whilst the immediate road ahead appears more uncertain, the governance model
of private equity has proved many times in the past, most notably during the
global financial crisis of 2008-09, that it facilitates nimble and active
ownership and allows underlying businesses to adapt more quickly to changing
market circumstances. Periods of market dislocation have previously offered up
new and different opportunities for investment, which private equity firms
have proved adept at generating and completing.
A key lesson from past crises is to ensure that you have ample balance sheet
capacity to take advantage of these attractive new investment opportunities,
particularly given distributions from private equity funds tend to slow down
during these periods of dislocation. In that context, I'd again highlight
that, following the financial year end, APEO increased the size of its
revolving credit facility to £300.0 million.
With so much new capital having flowed into private equity in recent years and
some recent dramatic shifts in the shape of investor portfolios, it is
inevitable that investors will look to re-balance their asset allocations and
portfolio weightings over the coming quarters, which in turn is beginning to
fuel activity in the secondary market - APEO is well placed to take advantage
of opportunities in this part of the market.
APEO has invested for over 21 years, emerging in the aftermath of the dot-com
bubble, through the global financial crisis and the Covid-19 pandemic. Our
strategy has historically worked through the cycle. I believe that the quality
and diversification of the existing portfolio, and its strong balance sheet,
will help to position APEO well during these challenging market conditions and
will allow APEO to continue to generate attractive long-term returns to
shareholders in the coming years.
Alan Devine
Chair,
30 January 2023
PRINCIPAL RISKS & UNCERTAINITIES
The Board and Audit Committee carry out a regular and robust review of the
risk environment in which APEO operates. The Board also identifies emerging
risks such as a material change in the geopolitical or macroeconomic
environment, or developments in climate change from an investor attitude or
regulatory expectation, which might affect the APEO's underlying investments.
During the financial year, the outlook for the global economy changed. The
world's developed economies moved from a Covid-19 recovery state to a much
more challenging environment as geopolitical uncertainty impacted equity
markets and inflation impacted the margins of underlying portfolio companies.
Private equity valuations experienced high levels of pressure.
The Board has also discussed the potential impact of climate change with the
Manager. APEO is committed to being an active, long-term responsible investor
and ESG is a fundamental component of its investment process. The Manager
commits APEO's capital with private equity managers who demonstrate strong
adherence to ESG principles and processes or have a cultural commitment to
improve their ESG credentials. Focus on climate change is part of that
assessment. The private equity industry is still relatively early in its
response to climate change and the Manager is focused on engaging with its
portfolio of private equity managers to help promote further positive change.
The Board is aware that there are a number of risks which, if realised, could
have a material adverse effect on APEO
and its financial condition, performance and prospects. The Board monitors
APEO's principal and emerging risks
regularly, alongside the Manager, and the operating and control environment in
which APEO operates.
The Board considers its risk appetite in relation to each principal risk and
monitors this on an ongoing basis. Where a risk is approaching or is outside
the tolerance level, the Board will take action to manage the risk. Currently,
the Board considers the risks to be managed within acceptable levels.
The principal risks faced by APEO relate to the Company's investment
activities and these are set out below.
Risk Definition Tolerance Mitigation / Update
Market (increased) a) Pricing risk Medium a) The decline in publicly-listed equities during the year has put pressure on
private equity valuations. Investments in APEO's portfolio are generally
APEO is at risk of the economic cycle impacting listed financial markets and subject to private equity guidelines such as IPEV with respect of valuations.
hence potentially affecting the pricing of underlying investments and timing
of exits. Private equity market deal activity has declined in 2022 and this expected to
continue into 2023. This will likely extend the timing of some investment
b) Currency risk exits and distributions. Subsequent to the year end, APEO increased the size
of its revolving credit facility to £300.0 million to help mitigate this
APEO has a material proportion of its investments and cash balances in risk.
currencies other than sterling and is therefore sensitive to movements in
foreign exchange rates. Inflation and interest rate rises have the potential to impact both the
valuations of the existing underlying portfolio and the pricing of new
investments in the future.
Pricing risk is mitigated by APEO having a diversified portfolio of fund
investments and co-investments.
b) The Manager monitors APEO's exposure to foreign currencies and reports to
the Board on a regular basis. It is not the APEO's policy to hedge foreign
currency risk. APEO's non-sterling currency exposure is primarily to the euro
and the US dollar.
During the year ended 30 September 2022, sterling depreciated by 2.1% relative
to the euro (2021: appreciated 5.5%) and depreciated by 17.2% relative to the
US dollar (2021: appreciated 4.3%).
This movement in the euro and the US dollar had a net positive impact on the
net assets of APEO.
Liquidity (Unchanged) The risk that APEO is unable to meet short-term financial demands. Low APEO manages its liquid investments to ensure that sufficient cash is
available to meet contractual commitments and also seeks to have cash
available to meet other short-term needs. Additional short-term flexibility is
achieved through the use of the revolving multi-currency loan facility, which
was extended to £300.0 million shortly after the financial year end.
APEO had cash and cash equivalents of £30.3 million (2021: £29.7 million) as
at 30 September 2022.
Over-commitment (Unchanged) The risk that APEO is unable to settle outstanding commitments to fund Medium APEO makes commitments to private equity funds, which are typically drawn over
investments. three to five years. Hence APEO will tolerate a degree of over-commitment risk
in order to deliver long-term investment performance.
In order to mitigate this risk, the Manager ensures that APEO has appropriate
levels of resources, whether through resources available for investment or the
revolving credit facility, relative to the levels of overcommitment.
The Manager will also forecast and assess the maturity of the underlying
portfolio to determine likely levels of distributions in the near term.
The Manager will also track the over-commitment ratio and ensure that it sits
within the range, agreed with the Board, of 30% to 75% over the long term.
At 30 September 2022 APEO had £678.9 million (2021: £557.1 million) of
outstanding commitments, with £69.9 million (2021: £46.7 million) expected
not to be drawn. The over-commitment ratio was 42.8% (2021: 32.5%).
Credit (Unchanged) The exposure to loss from failure of a counterparty to deliver securities or Low APEO places funds with authorised deposit takers from time to time and,
cash for acquisitions or disposals of investments or to repay deposits. therefore, is potentially at risk from the failure of such an institution.
APEO's cash is held by BNP Paribas Securities Services S.A., which is rated
'A+' by S&P Global Ratings.
The credit quality of the counterparties is kept under regular review. Should
the credit quality or the financial position of these financial institutions
deteriorate significantly, the Manager would move cash balances to other
institutions.
Investment selection (Unchanged) The risk that the Manager makes decisions to invest in funds and/or Medium The Manager undertakes detailed due diligence prior to investing in, or
co-investments that are not accretive to APEO's NAV over the long term. divesting, any fund or co-investment. It has an experienced team which
monitors market activity closely. APEO's management team has long-established
relationships with the third party fund managers in the Company's portfolio
which have been built up over many years. ESG factors are integrated into the
investment selection process and the Board and the Manager believes that will
improve investment decision making and help to generate stronger, more
sustainable returns.
Operational (Unchanged) The risk of loss or a missed opportunity resulting from a regulatory failure Low The Manager's business continuity plans, and approach to cyber security risk,
or a failure relating to people, processes or systems. are reviewed on an ongoing basis alongside those of APEO's key service
providers.
The Board has received reports from its key service providers setting out
their existing business continuity framework. Having considered these
arrangements, the Board is confident that a good level of service will be
maintained in the event of an interruption to business operations or other
major event, including another global pandemic.
APEO's financial risk management objectives and policies are contained in note
18 to the financial statements.
Review of performance
An outline of the performance, market background, investment activity and
portfolio during the year under review and the performance over the longer
term, as well as the investment outlook, are provided in the Highlights,
Chair's Statement, and Investment Manager's Review. Details of APEO's
investment portfolio, the ten largest investments and the top ten underlying
private company investments are shown below.
STAKEHOLDER ENGAGEMENT AND RESPONSIBLE MANAGEMENT
Section 172 Statement
The Board is required to describe how the Directors have discharged their
duties and responsibilities over the course of the financial year following
the guidelines set out in the UK under section 172 (1) of the Companies Act
2006 (the "s172 Statement"). This Statement provides an explanation of how the
Directors have promoted the success of APEO for the benefit of its
shareholders as a whole, taking into account the likely long-term consequences
of decisions, the need to foster relationships with all stakeholders and the
impact of APEO's operations on the environment.
Stakeholders
APEO is an investment trust and is externally managed, has no employees, and
is overseen by an independent non-executive board of directors. The Board
makes decisions to promote the success of APEO for the benefit of the
shareholders as a whole, with the ultimate aim of delivering its investment
objective to achieve long-term total returns.
The Directors set APEO's investment mandate, monitor the performance of all
service providers (including the Manager), and are responsible for reviewing
strategy on a regular basis. All this is done with the aim of preserving and
enhancing shareholder value over the longer term.
The following section discusses how the actions taken by the Board work
towards ensuring that the interests of all stakeholders are appropriately
considered. In line with the FRC Guidance, this statement focuses on
stakeholders that are considered key to APEO's business and does not therefore
cover every one of APEO's stakeholders.
Shareholders
The Board is committed to maintaining open channels of communication and to
engaging with shareholders. The Board seeks shareholder feedback in order to
ensure that decisions are taken with the views of shareholders in mind. These
shareholder communications include:
Annual General Meeting
The AGM provides an opportunity for the Directors to engage with shareholders,
answer their questions and meet them informally. At the AGM there is typically
a presentation on APEO's performance and the future outlook as well as an
opportunity to ask questions of the Manager and Board. The next AGM will take
place on 22 March 2023 in Edinburgh and the Board encourages shareholders to
attend the AGM, and for those unable to attend, to lodge their votes by proxy
on all of the resolutions put forward. For more information on how to lodge
proxy votes in advance of the AGM, please see the Annual Report.
Shareholder Meetings
Unlike trading companies, shareholders in investment companies often meet
representatives of the Manager rather than members of the Board. Feedback from
the Manager's meetings with shareholders is provided to the Board at every
meeting. The Chair, Senior Independent Director and other members of the Board
are also available to meet with shareholders to understand their views at any
time during the year.
Publications
APEO publishes a full annual report each year that contains a strategic
report, governance section, financial statements and additional information.
The report is available online and in paper format. APEO also produces a
half-yearly report each year. The purpose of these reports is to provide
shareholders with a clear understanding of APEO's activities, portfolio,
financial position and performance. The Manager also publishes a Monthly
Factsheet, and a Monthly Net Asset Value Statement. The purpose of these
publications is to keep shareholders abreast of APEO's developments.
Investor Relations and Website
APEO subscribes to the Manager's Investor Relations programme. APEO's website
contains a range of information and includes a full monthly portfolio listing
of APEO's investments as well as podcasts and presentations by the Manager.
Details of financial results, the investment process and Manager together with
APEO announcements and contact details can be found at: abrdnpeot.co.uk.
Keeping in Touch
The Board encourages shareholder feedback and invites shareholders to write to
the Board at its registered office. The Board has also set up an email account
to encourage shareholders to write directly to the Board. Shareholders are
invited to email any feedback or questions to the Board at
APEOT.Board@abrdn.com. Any questions received will be replied to by either the
Manager or Board via the Company Secretary.
The Manager
The Manager's performance is critical for APEO to achieve its investment
objective and the Board maintains a close and constructive working
relationship with the Manager. The Board meets the Manager at formal Board
meetings five times per year and more regularly as necessary. The Board
Members also keep in touch with the Manager informally throughout the year and
receive reports and updates as appropriate. During the year, the Management
Engagement Committee, on behalf of the Board, reviewed the continued
appointment of Manager, and the terms of the Management Agreement, and
believes that the continued appointment of the Manager is in the best
interests of shareholders.
Suppliers
As an investment trust, APEO has outsourced its entire operations to third
party suppliers. The Board is responsible for selecting the most appropriate
outsourced service providers and, alongside the Investment Manager, monitors
their services to ensure a constructive working relationship. The Board,
through the Investment Manager, maintains regular contact with its key
suppliers, namely the Company Secretary, the Administrator, the Registrar, the
Depositary and the Broker, and receives regular reporting from them. The
Board, via the Management Engagement Committee, ensures that the arrangements
with service providers are reviewed at least annually. The aim is to ensure
that contractual arrangements remain in line with best practice, services
being offered meet the requirements and needs of APEO and performance is in
line with the expectations of the Board, Manager, and other relevant
stakeholders. The Audit Committee considers the internal controls at these
service providers to ensure they are fit for purpose.
Debt Providers
On behalf of the Board, the Manager maintains a positive working relationship
with RBS International, Société Générale and State Street Bank
International, the providers of APEO's multi-currency revolving credit
facility, and provides regular updates on business activity and compliance
with its loan covenants.
Investee Funds and Companies
Responsibility for actively monitoring the activities of investment managers,
funds and companies, which make up APEO's portfolio, has been delegated by the
Board to the Manager.
On behalf of the Board and its stakeholders, the Manager invests in a
carefully selected range of private equity managers, built from years of
established relationships and proprietary research. The Manager assesses all
investment opportunities and participates on the advisory boards of some
investments.
The Board is responsible for overseeing the work of the Manager and this is
not limited solely to the investment performance of the investments. The Board
also has regard for environmental (including climate change), social and
governance matters that subsist within the portfolio companies. Please see the
Manager's approach to ESG below for more details.
Principal Decisions
Pursuant to the Board's aim of promoting APEO's long-term success, the
following principal decisions were taken during the year:
- The Investment Manager's Review below details the key investment
decisions taken during the year. In the opinion of the Board, the performance
of the investment portfolio is the key factor in determining the long-term
success of APEO. Accordingly, at each Board meeting the Directors discuss
performance in detail with the Investment Manager. As explained in more detail
below, during the year the Management Engagement Committee decided that the
continuing appointment of the Manager was in the best interests of
shareholders.
- During the year, the Board agreed to increase APEO's syndicated
multi-currency revolving credit facility from £200.0 million to £300.0
million. The facility, which is provided by RBS International, Société
Générale and State Street Bank International, was extended in October 2022,
subsequent to the year end. The Board decided to extend the facility in light
of the strong pipeline of investment opportunities in primary funds,
secondaries and co-investments believing that an extended loan facility would
allow the Manager to take advantage of emerging investment opportunities.
- The level of dividend to be paid to shareholders was carefully
assessed during the financial year. The Board is pleased to have paid three
quarterly dividends of 3.6 pence per share and to have announced a fourth
quarterly dividend payment of 3.6 pence per share making a total dividend for
the year to 30 September 2022 to 14.4 pence per share. This represents a
dividend yield of 3.5%, based on the APEO Share Price at 30 September 2022,
and is an increase of 5.9% on the 13.6 pence per share paid for the year to 30
September 2021.
- Following the Manager's sale of the Standard Life brand the Phoenix
Group in May 2021, the Board agreed to recommend to shareholders that the
Company change its name to abrdn Private Equity Opportunities Trust plc.
Shareholders overwhelmingly voted in favour of the name change at the AGM in
March 2022. The Board believes that the proposed name change aligns APEO with
the Manager's new brand and comes at an exciting time in APEO's development.
- As reported in the Annual Report to 30 September 2021, the Board
appointed Alan Devine as Chair on 22 March 2022, following Christina McComb's
retirement from the Board. The Board agreed that Alan Devine is an experienced
Board Member, having served as Senior Independent Director since 2019 and, has
a breadth of experience in debt markets and private equity backed business.
Board Diversity Policy
The Board's statement on diversity is set out in the Statement of Corporate
Governance in the Annual Report.
At 30 September 2022, there were three male and two female Directors on the
Board.
Modern Slavery Act
Being a company that does not offer goods and services to customers and has no
turnover, the Board considers that APEO is not within the scope of the Modern
Slavery Act 2015. APEO is therefore not required to make a slavery and human
trafficking statement. In any event, the Board considers APEO's supply chains,
dealing predominantly with professional advisers and service providers in the
financial services industry, to be low risk in relation to this matter.
Streamlined Energy and Carbon Reporting ("SECR") Statement: Greenhouse Gas
Emissions and Energy Consumption Disclosure
APEO has no employees, premises or operations either as a producer or provider
of goods and services. Therefore, it is not required to disclose energy and
carbon information as there are zero emissions associated or attributed to the
Company and no underlying global energy consumption.
Viability Statement
The Board has decided that five years is an appropriate period over which to
consider its viability. The Board considers this to be an appropriate period
for an investment trust company with a portfolio of private equity investments
and the financial position of the Company.
In determining this time period the Directors considered the nature of APEO's
commitments and it's associated cash flows. Generally the private equity funds
and co-investments in which APEO invests call monies over a five year period,
whilst they are making investments, and these drawdowns should be offset by
the more mature funds and co-investments, which are realising their
investments and distributing cash back to APEO. The Manager presents the Board
with a comprehensive review of APEO's detailed cash flow model on a regular
basis, including projections for up to five years ahead depending on the
expected life of the commitments. This analysis takes account of the most up
to date information provided by the underlying managers, together with the
Manager's current expectations in terms of market activity and performance.
The Directors have also carried out an assessment of the principal risks as
noted above and discussed in note 18 to the financial statements that are
facing APEO over the period of the review. These include those that would
threaten its business model, future performance, solvency or liquidity such as
over-commitment, liquidity and market risks. When considering the risks, the
Board reviewed the impact of stress testing on the portfolio, including
multiple downside scenarios which modelled a reduction in forecast
distributions from 50% to 100% in an extreme downside case and the impact this
would have on liquidity and deployment. Under an extreme downside scenario
which involved i) a 100% reduction in forecast distributions over a 12 months
period; ii) all underlying General Partner debt facilities being drawn
simultaneously; and iii) a 25% reduction in portfolio valuations spread over a
period of 12 months, a significant adjustment to planned deployment would be
required to maintain sufficient liquid resources over the financial year to 30
September 2023 and over the period through to January 2024. From January 2024
onwards, the implied resumption of forecast distribution activity then
provides sufficient liquidity in this extreme downside scenario.
By having a portfolio of predominantly fund investments, diversified by
manager, vintage year, sector and geography; by assessing market and economic
risks as decisions are made on new commitments; and by monitoring APEO's cash
flows together with the Manager, the Directors believe APEO is able to
withstand economic cycles. The Directors are also aware of APEO's indirect
exposure to ongoing risks through underlying funds.
These are continually assessed by the Manager monitoring the underlying
managers themselves and by participation on a number of fund advisory boards.
Based on the results of this analysis, and the ongoing ability to adjust the
portfolio, the Directors have a reasonable expectation that APEO will be able
to continue in operation and meet its liabilities as they fall due over the
five year period following the date of this report.
Future Strategy
The Board intends to maintain the strategic policies set out in the Strategic
Report for the year ending 30 September 2023 as it is believes that these are
in the best interests of shareholders.
Long-Term Investment
The Manager's investment process seeks to outperform its comparator index over
the longer term. The Board has in place the necessary procedures and processes
to continue to promote APEO's long-term success. The Board will continue to
monitor, evaluate and seek to improve these processes as APEO continues to
grow over time, to ensure that the investment proposition is delivered to
shareholders and other stakeholders in line with their expectations.
On behalf of the Board
Alan Devine
Chair
30 January 2023
INVESTMENT MANAGER'S REVIEW
INTRODUCTION TO THE MANAGER - HOW WE INVEST
In order to achieve the investment objective, maintain a balanced portfolio
and take advantage of opportunities as they arise, APEO invests in three types
of private equity investment:
1. Primary Investment
APEO commits to investing in a new private equity fund. The committed capital
will generally be drawn over a three to five year period as investments in
underlying private companies are made. Proceeds are then returned to APEO when
the underlying companies are sold, typically over a four to five year holding
period.
Primary investment has been the core focus of APEO's Investment Objective
since its inception in 2001. Primary investments can provide APEO with:
• consistent exposure to leading private equity managers;
• underlying portfolio diversification;
• a steady, predictable cashflow profile; and
• help drive APEO's dealflow in secondaries and co-investments.
2. Secondary Investment
APEO acquires a single fund interest or a portfolio of fund interests from
another investor, with the prior approval of the private equity managers of
the target funds. APEO pays the seller a cash amount for the interests and
takes on any outstanding commitments to the target funds.
Typically this would occur at a point where the target funds have already
invested the majority of its capital. The price paid in this type of
transaction will reflect the age profile of the funds, the quality of the
managers and the quality of the underlying portfolios. Secondaries allow the
Manager to gain exposure to funds of new or existing managers a later stage in
a fund's life.
Therefore they typically have a shorter investment duration than a primary
investment. Secondaries are opportunistic in nature and their availability is
dependent on multiple market and deal-specific factors.
3. Co-investment
APEO makes direct investments into private companies alongside other private
equity managers. APEO's strategy is to invest alongside private equity
managers with which abrdn Private Equity has made a primary investment.
Co-investment was introduced to the Investment Objective in 2019. The Manager
is seeking to build a diversified portfolio of around 30 co-investments in
order to mitigate concentration risk.
INVESTMENT MANAGER'S REVIEW
Summary of the Year
The portfolio has shown strong performance during the financial year, in spite
of headwinds in the broader financial markets and the uncertain global
economic backdrop. APEO's 21-year-old strategy of partnering with a small
group of top performing private equity firms, focusing on underlying
businesses in the mid-market (enterprise values between £100 million and £1
billion) and targeting diversification across a range of resilient sectors
continues to position it well. This has been reflected in continued strong
trading in the underlying portfolio and robust realisation activity, helping
APEO to deliver a NAV TR of 14.1% during period, an outperformance of 18.1% to
the FTSE All-Share, which declined by -4.0%.
A large part of this performance relates to the record realisation activity
that APEO has seen during the year. The Company received £210.2 million of
distributions from underlying funds during the year (2021: £197.6 million),
exceeding the record total seen in the prior year. These realisations came at
an average uplift of 20% when compared with the unrealised valuation two
quarters prior, therefore driving valuation increases. Notable exits in the
portfolio were General Life (European fertility clinic group), Benvic
(European developer and producer of thermoplastic solutions) and Sbanken
(Norwegian online bank).
The portfolio of private companies continues to perform well, with the top 50
largest underlying portfolio companies by value showing average revenue and
EBITDA growth of 23% and 24% respectively in the twelve months to 30 September
2022.
That has helped drive the resilient valuation performance in the unrealised
book, in spite of declining listed market comparable multiples. We are
particularly pleased about progress in APEO's co-investment portfolio, which
has seen a valuation uplift of 51.8% on a constant currency basis during the
year. The co-investment portfolio now stands at 22 underlying companies and
19.1% of NAV, close to our target of 25%.
The impact of listed equity market declines seen in 2022 has been most
apparent in the publicly listed company exposures APEO has. As a reminder, the
Company is not a long-term holder of listed shares but saw strong IPO activity
in the portfolio in 2021, with successful listings including Moonpig (UK-based
online gifting business), Dr Martens (leading consumer footwear brand) and
Inpost (self-service lockers for ecommerce consumers). Listed companies
equated to 12.4% of the portfolio at the beginning of the financial year.
Through a combination of realisations and a decline in the aggregate value of
this cohort over twelve months to 30 September 2022, listed companies now
equate to 5.4%of the portfolio.
The war in Ukraine had a minimal direct impact on APEO during the year. The
Company has no Russian, Belarussian or Ukrainian headquartered businesses in
its portfolio of 655 separate underlying companies. In addition, through
discussions with the private equity managers in APEO's portfolio, we estimate
that revenues from these countries accounted for less than 1% of aggregate
underlying portfolio company revenues at the start of the financial year, and
have declined further since then. That said, the indirect impacts are
materialising in the portfolio, mainly through the war exacerbating already
elevated energy and raw materials pricing, impacting upon the margins of many
of APEO's underlying businesses.
On the new investment side, the 12 months ended 30 September 2022 was another
active year for investment. APEO made commitments totalling £340.3 million
(2021: £307.1 million), with twelve new primary investments, two secondary
investments, nine direct co-investments and one follow-on investment in an
existing co-investment. These new fund commitments are aligned with our
long-term strategy of backing private equity firms that have a mid-market
orientation and have proven expertise within one or more specified sectors. As
aforementioned, we are delighted with the strong deployment in co-investments
during the year and the good balance in deployment across our key sectors.
Whilst secondary deployment in the year was modest relative to primary and
co-investment, we are excited by the potential of the two new investments and
see a window of strong secondary opportunities emerging as we move into the
new financial year.
In terms of cashflows, the aforementioned exit activity has helped drive
record levels of distributions. The realised return from the ongoing
investment operations of APEO's core portfolio equated to 2.2 times cost
(2021: 2.8 times cost). In addition, APEO received an additional £15.7
million (2021: £1.1 million) from proceeds from secondary sales relating to
two fund positions, meaning that APEO earned a total of £225.9 million cash
proceeds during the financial year (2021: £198.7 million). We have focused on
reinvesting distributions into new investment opportunities during the period,
and therefore drawdowns during the year totalled £253.6 million (2021:
£184.2 million). This figure includes £74.7 million of new co-investment and
secondaries, which is deployment directly under the Manager's control. The
balance sheet remains in a strong position with cash and cash equivalents of
£30.3 million (2021: £29.7 million). APEO also had £138.0 million remaining
undrawn on its £200.0 million revolving credit facility at 30 September 2022
(2021: £200.0 million undrawn). We are also delighted that, immediately
following the year-end, the revolving credit facility was increased to £300.0
million and the maturity extended by a year to December 2025. The larger
facility, provided by RBS International, Société Générale and State Street
Bank International, will provide APEO with ample liquidity for new investments
in the months and years ahead.
Performance
The NAV TR for the year ended 30 September 2022 was 14.1% versus -4.0% for the
FTSE All-Share Index. The valuation of the portfolio at 30 September 2022
increased 10.5% on the prior year on a constant currency basis, with a further
increase of 5.1% attributable to FX gains during the year, principally due to
the weakness of pound sterling compared to US dollar and the Euro.
The increase in value of the NAV on a per share basis was 79.4p. This was
principally made up of unrealised and realised gains and income of 102.4p,
partially offset by dividends and costs associated with management fee,
administrative and financing of 23.0p.
The unrealised gains in the year are attributable to the strong performance of
the underlying portfolio. At 30 September 2022 the top 50 largest underlying
portfolio companies by value in APEO exhibited average last twelve months
("LTM") revenue and EBITDA growth of 23% and 24% respectively. Realised gains
were derived from full or partial sales of companies during the 12-month
period, which were at an average uplift of 20% to the unrealised value two
quarters prior.
Pence per share
NAV as at 1 October 2021 673.8
Net unrealised losses at constant FX on portfolio(1) -5.0
Net realised gains and income from portfolio 74.0
Net unrealised FX gains on portfolio 32.7
Net income from other assets 0.7
Dividends paid -14.0
Management fee, administrative and finance costs -9.0
NAV as at 30 September 2022 753.2
(1) Includes the reversal of previously recognised unrealised gains that have
realised during the financial year and are therefore included in Net realised
gains
and income from portfolio.
Drawdowns
Amount - £million
Vitruvian IV 11.0
Altor V (including secondary purchase) 10.3
Nordic Capital X 9.7
Cinven 7 9.2
Advent Tech II 8.6
Other 204.9
During the year £253.6 million was invested into existing and new underlying
companies. £176.7 million of this figure related to primary fund drawdowns,
with the remainder related to co-investment and secondary deployment, which
are fully under the control of the Manager and as planned. Secondary and
co-investment activity are covered in detail later in the review.
Primary fund drawdowns during the year were mainly used to fund new underlying
investments into portfolio companies, with notably large drawdowns relating to
the following new portfolio companies:
- CFC Underwriting (Vitruvian IV) - global leader and category
innovator in the cyber security insurance market;
- Inovalon (Nordic Capital X) - US-based provider of cloud-based
healthcare software and data analytics;
- BioAgilytix (Cinven 7) - global healthcare contract research
organisation;
- McAfee (Advent Tech II) - global provider of cyber security
protection;
- STARK Group (CVC Fund VII) - distributor of heavy building materials
in Northern Europe.
We estimate that APEO had around £113.3 million held on underlying fund
credit facilities at 30 September 2022 (30 September 2021: £47.3 million),
and we expect that this will all be drawn over the next 12 months.
Realisations
Amount - £million
Investindustrial Growth 20.2
Altor Fund IV 16.9
Equistone VI (secondary sale) 15.5
Astorg VI 14.2
Permira V 13.0
Other 146.1
£210.2 million of distributions were received from funds during the year,
which is a record annual total for APEO. Exit activity was driven by the
strong market appetite for high quality private companies in resilient sectors
following the global pandemic. Both trade and financial buyers remain active
during the period, albeit the demand for IPOs declined significantly in the
second half of the year. The headline realised return from the portfolio
equated to 2.2 times cost (30 September 2021: 2.8 times cost).
In addition, APEO sold its fund positions in Equistone Fund VI and IK Small
Cap Fund III for portfolio management reasons, contributing a further £15.7
million in proceeds and meaning that an aggregate total of £225.9 million was
received from distributions and secondary sales during the period.
Outstanding Commitments
As at 30 September Outstanding Commitments Outstanding commitments in excess of undrawn loan facility and case resources
as a % of portfolio NAV (£million)
2018 33.6 369.3
2019 47.4 450.3
2020 30.9 471.4
2021 32.5 557.1
2022 42.8 678.9
Commitments
APEO made commitments totalling £340.3 million during the year (2021: £307.1
million). These commitments were well diversified, with twelve new primary
investments, two secondary investments, nine direct co-investments and one
follow-on investment in an existing co-investment. The total outstanding
commitments at 30 September 2022
were £678.9 million (30 September 2021: £557.1 million).
The value of outstanding commitments in excess of liquid resources as a
percentage of portfolio value increased to 42.8% in the financial year (30
September 2021: 32.5%). This is largely due to the strong investment activity
during the year ended 30 September 2022. This figure is at the lower end of
our long-term target range of 30-75%. We estimate that £69.9 million of the
reported outstanding commitments are unlikely to be drawn down, due to the
nature of private equity investing, with private equity funds not always being
fully drawn.
Investment Activity
Primary Funds
£257.2 million was committed to twelve new primary funds during the year
ended 30 September 2022 (2021: £175.7 million into eight new primary funds).
As a reminder, APEO's primary fund strategy is to partner with private equity
firms, principally in Europe, that have genuine sector expertise and
operational value creation capabilities and have a core mid-market buyout
orientation, i.e. focusing on businesses with an enterprise value between
£100 million and £1 billion. The firms that APEO has partnered with during
period fulfil most, if not all, of this criteria and all are relationships
with who the Manager known for many years, often decades.
Investment £m Description
Capiton VI 16.9 European lower mid-market fund with a focus in Pharma, MedTech, Industrial
Automation and Sustainable Consumption.
Great Hill Equity Partners VIII 14.6 Growth-focused private equity fund based in the United States.
Windrose Health Investors Fund VI 15.1 Mid-market buyout fund based in the United States, that has a specialist focus
on the healthcare sector.
PAI VIII 25.1 Pan-European upper mid-market fund focused on Food & Consumer, Business
Services, General Industrials and Healthcare.
IK Partnership II 20.8 Pan-European mid-market fund focused on co-control and minority opportunities
in Food & Consumer, Business Services, Healthcare and Financial Services.
Hg Saturn 3 25.8 European buyout fund focused on Software and B2B Services.
Advent Global Private Equity X 25.2 Global buyout fund which focuses on attractive niches within business and
financial services, healthcare, industrial, retail and technology sectors.
ArchiMed MP 2 25.1 Healthcare specialist fund, focused on European and North American mid-market
companies.
Investindustrial Growth III 25.2 Southern European lower mid-market fund focused on niches within the
Industrials, Business Services and Consumer & Leisure sectors.
Nordic Capital XI 25.2 Northern European buyout fund, principally focused on the Healthcare,
Technology & Payments and Financial Services sectors.
One Peak Growth III 12.9 European growth fund which targets rapidly growing technology and tech-enabled
companies.
Latour Capital IV 25.4 French mid-market buyout fund which focuses principally on companies in the
Business Services and Industrials sectors.
Case study - primary - Investindustrial
Investindustrial is a leading private equity manager in Southern Europe with
excellent networks and a high quality and well-resourced team.
Investment: Investindustrial Growth III
Fund size: €1bn target
APEO's commitment: €30 million
Commitment year: 2022
Geographic focus: Western Europe but with a focus on Southern Europe
Target company size: Lower mid-market
Sectors: Industrials, Healthcare & Services, Consumer and Technology
Investment strategy: Buyout / Growth
Overview
· Founded in 1990, out of an industrial conglomerate owned by the
Bonomi family and with more than €11 billion of raised fund capital,
Investindustrial is one of Europe's leading private equity managers. The firm
is focused on taking majority or control positions in mid-market companies,
primarily across the Industrial, Healthcare & Services, Consumer and
Technology sectors.
· Investindustrial has a strong Southern European heritage and
specialism but today operates globally, with a team of c.160 professionals
representing 21 nationalities, based across offices in Switzerland, Spain,
United Kingdom, France, United States, Luxembourg, and China.
· The firm covers the entire mid-market across its mid-market and
growth investment strategies. The growth strategy is differentiated by its
focus on the attractive lower mid-market space and specialism in Southern
Europe. It also benefits from the wider Investindustrial platform, with access
to the firm's regional offices and dedicated resources across business
development (focused on driving international organic and acquisitive growth),
capital markets, digitisation and ESG.
APEO's Exposure
· The Manager's relationship with Investindustrial goes back 15
years, with a first commitment to Investindustrial IV in 2008. abrdn has
committed to every Investindustrial fund since that time.
· APEO first invested with Investindustrial in 2018 through Growth
Fund I and subsequently it committed to Investindustrial VII in 2019.
Previous / current investments
Benvic, GeneraLife, Morgan Motor Company
Secondaries
During the 12 month period, APEO committed £17.2 million into two secondary
transactions (2021: £54.5 million into two secondaries).
Investment £m Description
Project Concorde 5.1 The acquisition of interests in a French e-commerce business, initially part
of a larger portfolio process where the acquisition of the remaining assets
did not subsequently complete.
Project Ivy 12.1 The acquisition of interests in three buyout funds managed by American
Industrial Partners, Altor and Vitruvian.
Case study - secondary - Project Ivy
Compelling opportunity to acquire exposure to high-quality private equity
funds at attractive relative pricing, out of a wider sale process.
Investments: Portfolio of funds managed by Altor, American Industrial
Partners and Vitruvian Investment Partners which will provide exposure to ~30
underlying companies
Transaction Date: September 2022
Vintage Years: 2011 - 2019
Fund size: Various
APEO's Secondary Exposure: €11.6 million
Geographic focus: Europe and North America
Target company size: Mid-Market
Sectors: Diversified: including Business Services, Industrials, Financial
Services, Consumer Goods and Services
Investment strategy: Buyout
Transaction Overview
· The Seller was looking to manage its eclectic mix of private
markets exposure and generate liquidity via a portfolio sale comprising
numerous funds and strategies.
· The Manger was able to carve out three specific buyout fund
interests from the wider portfolio sale process.
· APEO is an existing investor with all three underlying managers
and the Manager had recently undertaken extensive primary diligence on each
manager, which provided strong access, portfolio insights and competitive
positioning.
Underlying Investments
· Portfolio of three funds with vintages ranging from 2011 to 2019,
with the majority of value concentrated in the younger funds but with
near-term cash flows expected from the older assets.
· 27 high quality underlying portfolio companies, across a range of
geographies and sectors.
· Underlying portfolio likely to grow to around 30 underlying
portfolio companies in due course.
Why We Invested
· Unusual deal dynamics - rare opportunity to carve out interests
in funds managed by three highly sought-after buyout managers from a larger
portfolio sale at attractive relative pricing.
· High conviction in the assets being acquired - the Manager's
existing knowledge of the underlying portfolios and confidence in the managers
of the funds provided the conviction to pursue and secure this opportunity.
· Strong portfolio fit and diversified profile - all three funds
are managed by core APEO managers and the underlying portfolios offer an
attractive balance of short-term cash generation and longer-term value growth
potential.
Previous / current investments
Altor Funds, Vitruvian Partners, American Industrial Partners
Co-investments
During the 12-month period, APEO invested and committed £66.1 million into
nine new co-investments and one follow-on investment in an existing
co-investment (2021: £76.9m into ten new co-investments).
As a reminder, co-investments were introduced to APEO's investment objective
in 2019 and bring a number of advantages, most notably greater control over
portfolio construction and lower associated costs (and therefore higher return
potential). Over the longer term the Manager expects co-investments to equate
to around 25% of the portfolio.
At 30 September 2022 there were 22 co-investments in APEO's portfolio,
equating to 19.1% of NAV. All companies except one are at least on plan.
Mademoiselle Desserts, the co-investment behind original plan, was impacted by
the global pandemic as the hotel, restaurant and cafe channel is a core end
market for the business. However, the company has been performing strongly
following the broad reopening of the hospitality sector in Europe and we have
strong conviction in its prospects moving forward.
Investment £m Description
SportPursuit 4.2 Flash sale e-commerce business which sells clearance stock from leading sports
and outdoor brands. The co-investment was made alongside bd-capital Partners.
SuanFarma 6.3 Manufacturer, CDMO and distributor of active pharmaceutical and nutraceutical
ingredients. The co-investment was made alongside ArchiMed SaS.
Tropicana 8.6 A portfolio of well-known beverage brands, including Tropicana and Naked. The
co-investment was made alongside PAI Partners.
CDL Nuclear Technologies 5.2 Provider of turnkey cardiac PET/PET-CT imaging technology solutions and
radioisotope delivery to independent cardiology practices and hospitals in the
US. The co-investment was made alongside Excellere Partners.
European Camping Group 6.7 European leader in the premium outdoor vacation accommodation market. The
co-investment was made alongside PAI Partners.
NGE 8.9 The leading independent player in the construction and public works sector in
France. The co-investment was made alongside Montefiore Investment.
ACT 8.4 The largest specialist intermediary in the environmental certification market
globally, headquartered in the Netherlands. The co-investment was made
alongside Bridgepoint.
Uvesco 8.3 Leading food retail operator in the North of Spain. The co-investment was made
alongside PAI.
CFC 9.0 Tech-led insurance platform, who are a global leader and category innovator in
the cyber market. The co-investment was made alongside Vitruvian Partners.
Insightsoftware (follow-on) 0.3 Provider of financial reporting and enterprise performance management (ERM)
software. The co-investment was made alongside Hg. The initial commitment to
this co-investment was made in 2021.
Case Study - Co-investment- NGE
NGE is a leading French civil works and engineering company involved in the
construction and ongoing maintenance across a range of infrastructure
projects.
Lead Manager: Montefiore
Investment year: 2021
APEO's investment: €10.5 million
Geographic focus: France / Global
Company size: Large (>€1bn EV)
Sector: Infrastructure Services
Company Overview
· NGE ("Nouvelles Générations d'Entrepreneurs") is the fourth
largest infrastructure construction business in France and its growth has
consistently outperformed the broader infrastructure market over the past two
decades since its founding in 2002
· NGE provides services across 7 areas including railways, water
pipes and networks, road, civil engineering, general earthworks, geotechnical
solutions and buildings.
· NGE differentiates itself to clients through its broad geographic
footprint and flexible business model which allows it to respond quickly to
clients' demands with superior quality.
· The majority of NGE's clients are public authorities in France
although the business has a significant and growing exposure internationally.
Outside of France NGE is present in 14 countries across Europe, Latin America
and French speaking Africa. Activity includes larger scale railway projects
and also multi-expertise projects.
The Opportunity
· Strong growth in the French public works market forecast over the
investment period supported by major projects (e.g. Paris Metro, Paris Olympic
Games 2024).
· NGE management have an outstanding reputation and have built a
growing, disruptive player in the French market, with an
· entrepreneurial culture that includes widespread employee
ownership.
· Investing alongside a high-quality private equity manager in
Montefiore, with a strong track record and experience in the
· French civil engineering market.
· Strong ESG focus, with NGE's services delivering improvements and
innovations in sustainable infrastructure, specifically
· addressing multiple UN Sustainable Development Goals ("SDGs").
· Several value creation initiatives started in recent years are
expected to bear fruit during the investment period. The most
notable initiatives include offering new and more recurring services to grow
market share amongst local authority clients.
In addition, continued international expansion by strengthening NGE's position
in large scale rail infrastructure projects.
Portfolio Construction
The underlying portfolio consists of over 650 private companies, largely
within the European mid-market and spread across different countries, sectors
and vintages. At 30 September 2022, only 12 underlying private companies
equated to more than 1% of APEO NAV based on the value of underlying private
company exposure (2021: 8). The largest single underlying private company
exposure is 5.1%, being Action (2021: Action, 4.0%).
Geographic Exposure(1 2)
We believe that the portfolio is well diversified and that will position APEO
well as we move into a more recessionary macroeconomic environment. At 30
September 2022, 76% of underlying private companies, by total value of
underlying private company exposure, were headquartered in Europe (2021: 79%).
APEO's underlying portfolio remains largely positioned to North Western
Europe, with only 6% of underlying private company exposure in Italy and
Spain. APEO is well diversified by region across North Western Europe, with
exposure of 17% in the UK (2021: 17%). North America has the highest exposure
of 23% (2021: 19%) of underlying private company exposure.
1 Based on the latest available information from underlying managers. Figures
represent % of total value of underlying private company exposure. This
excludes any underlying fund and co-investments held through the Company
portfolio. Geographic exposure is defined as the geographic region where
underlying portfolio companies are headquartered.
2 In addition to the above, 4% of underlying portfolio companies are based in
European countries not separately disclosed above, while 1% are based in
countries outside of Europe, excluding North America.
3 APEO has no Russian, Ukrainian or Belarussian headquartered companies. These
three countries make up less than 1% of the underlying company revenues.
Sector Exposure(1)
At 30 September 2022 Technology and Healthcare represented a combined 40% of
the portfolio (30 September 2021: 41%). When combined with Consumer Staples,
these more stable, less cyclical sectors equate to 52% of APEO's portfolio (30
September 2021: 53%). It is worth noting that APEO generally invests in
Information Technology businesses that are profitable and B2B-focused and
therefore has relatively low exposure to higher growth, unprofitable
technology businesses that have been particularly out of favour in the public
markets during 2022.
The other half of the portfolio is exposed to more cyclical sectors, notably
Industrials, Consumer Discretionary and Financials. That said, there are
sub-sectors within these areas that provide growth opportunities, such as
Fintech, ecommerce and B2B Services, where businesses often have a valuable
product or an essential service offering with a strong digital component.
% Exposure as at
Sector 30 September 2022
Information technology 20
Healthcare 20
Industrials 18
Consumer discretionary 14
Consumer staples 12
Financials 11
Materials 4
Energy 1
1 Based on the latest available information from underlying managers. Figures
represent % of total value of underlying private company exposure. This
excludes any underlying funds and co-investments held through the Company
portfolio.
Maturity Analysis(1)
A large proportion of the portfolio is reaching maturity, with 47% being in
vintages of four years and older (30 September 2021: 49%). This should
underpin consistent distribution activity moving forward.
Outlook
We are delighted by APEO's performance during the year, but we remain cautious
as we look ahead. Higher inflation, interest rate rises and the war in Ukraine
have created a high degree of uncertainty and volatility in financial markets,
and we do not expect these challenging conditions to abate in the immediate
short-term. We also don't think the full impact of high inflation has been
felt by economies and underlying companies yet; the first half of 2023 will be
instructive in this regard.
Specifically in relation to private equity, we are seeing the levels of
dealflow slow down as buyers and sellers attempt to reconcile differing price
expectations and current access to debt financing is more difficult than in
recent years. That will have implication on cashflows going forward, with less
short-term distributions coming in but less money being drawn too. It will
also have valuation implications, as private equity investments typically sell
at an uplift to carrying value, which helps drive APEO's NAV in normal times.
Dealflow will pick up again soon, given the record levels of 'dry powder' in
private equity, but we expect that the next twelve months might see a slower
pace compared to recent years.
That said, it is worth reiterating that APEO has navigated multiple cycles
over a 21-year period and the strategy has remained broadly consistent since
its inception in 2001. We take comfort in the quality of the private equity
firms that APEO partners with, the broad diversification of the underlying
portfolio by sector, geography and maturity, and the Company's strong balance
sheet position, which has been further enhanced by the extension of its
revolving credit facility from £200.0 million to £300.0 million.
More generally, the governance model of private equity, through majority
control and active ownership, provides the opportunity for hands-on value
creation and for decisions to be taken more efficiently and effectively in
response to changing market circumstances. The private equity firms that APEO
partners with today are much more specialised within sectors and sub-sectors,
and have deeper value creation toolkits compared to, for example, before the
global financial crisis.
Furthermore, market volatility does provide a silver lining around attractive
new investment opportunities and we believe that private equity particularly
thrives in these periods. Trade and family owners of attractive businesses can
often be more willing to sell long-held assets for liquidity or portfolio
reasons and entry multiples tend to be lower during these periods. In addition
to our selected managers taking advantage of these market circumstances, we
also expect interesting opportunities in the secondary investment space to
emerge as some investors, that are tackling liquidity issues or the
'denominator effect', look to rebalance their portfolios and sell assets.
APEO's balance sheet is in a strong position, and we therefore believe that it
is well positioned to take advantage of opportunities through the remainder of
2022 and beyond.
In summary, we believe that private equity is a long-term asset class, and we
expect it to continue to deliver outperformance on both absolute and relative
bases. Whilst the road ahead appears to be more challenging in terms of
financial markets and the global economy, we take comfort in the private
equity governance model, the quality of APEO's current portfolio and its set
of core managers, and the opportunity to make attractive new investments
during this period of greater uncertainty.
Alan Gauld,
Lead Portfolio Manager
For abrdn Capital Partners LLP
30 January 2023
APPROACH TO ESG
ESG is a fundamental component of the Manager's investment process. We believe
that through consideration of ESG factors, we make better informed investment
decisions. We strongly believe that the private equity model, with its
long-term investment horizon and high degree of shareholder control, is
well-suited to add value to its portfolio companies through responsible
investment. As such, we integrate ESG factors in all stages of the investment
process.
APEO is an indirect investor in private companies and therefore its portfolio
of underlying companies is controlled by the private equity managers that APEO
partners with. However, through direct engagement and legal negotiations, the
Manager of APEO can play an important role in ensuring its private equity
manager relationships are focused and committed to implementing ESG
improvements at a portfolio company level.
The Manager has been a signatory to the Principles for Responsible Investment
("PRI") since 2007 and was awarded the top PRI rating for Indirect Private
Equity in 2021. Our commitment to ESG starts at the top. While in 2021 we
hired a dedicated ESG function, the whole investment team takes responsibility
to input and implement our ESG agenda. To strengthen our commitment, we
introduced ESG objectives in the investment team's annual performance
assessment.
The Manager's Investment Committee ("IC") is ultimately accountable for our
ESG policies and to ensure that ESG risks and opportunities are adequately
flagged and discussed for investment decision making. As ESG has evolved
across multiple areas, in mid-2021 we introduced a cross-functional ESG forum,
chaired by our Head of ESG, to bring together senior team representatives from
Investment, Legal, Operations, Product and Compliance.
The Manager's ESG investment process for primary fund investments is outlined
at a high-level below:
The Manager focuses on the integration of ESG principles into the operations
of underlying private equity managers. Key facets include culture, governance
with senior accountability, full integration into a manager's investment
processes and appropriate disclosure to assist investors.
There are different ESG approaches depending on the type of private equity
investment:
· Primary investment - Assessment typically includes analysing
private equity manager's ESG cultural buy-in, its ESG process, procedures and
reporting, its engagement with underlying portfolio companies, its ESG Survey
score and an Operational Due Diligence review of the manager and the fund.
· Co-investment - Assessment normally includes a detailed review of
the underlying company's ESG due diligence documents, sector and company
analysis using RepRisk, a third party ESG database, and leveraging expertise
on specific ESG issues, be it via the Manager's central ESG & Stewardship
team or a third party expert. The primary ESG assessment of the private equity
manager will be taken into account in all cases.
· Secondary investment - Leverages primary investment and/or
co-investment processes depending on the transaction characteristics. If the
secondary is concentrated in a small number of underlying portfolio companies
then it may follow the co-investment process. The primary ESG assessment of
the private equity manager will be taken into account where possible.
In summary, the Board and Manager fundamentally believe that integrating ESG
into APEO's strategy and investment processes improves the investment decision
making and ultimately will help to generate stronger, more sustainable returns
for its investors.
ESG Achievements 2022:
· UNPRI - Top Rating achieved in the UN PRI assessment for indirect
Private Equity.
· Initiative Climate International - abrdn joined the first of its
kind climate initiative for private equity committed to step up climate action
across the industry.
Roadmap to Multistakeholders Success
· 2015 - ESG Integration- The Manager begins testing the market
with its first ESG survey, for primary funds. ESG considerations begin to
feature the Manager's Investment Committee papers and ESG terms in legal
negotiations.
· 2019 - Enhanced Side Letters and Products- The Manager develops
more advanced ESG requirements in investment side letters. More broadly, it
launched its first sustainability themed Fund of Funds.
· 2020 - ESG Team and Targets - Dedicated ESG resources appointed
to private markets, with a Head of ESG appointed in March 2021. The Manager
starts a dedicated ESG co investment survey and integrates ESG linked
performance outcome in investment team's valuation.
· 2021 - SDFR Products and ESG Forum - Enhancement of abrdn's
private equity approach to ESG integration to comply with SFDR standards and
integrate market developments. Introduced consideration related to
Biodiversity and Human Rights. Abrdn launched Article 8 Fund of Funds. abrdn
launched private equity multi functional ESG Forum. Introduced a "Good
Governance Policy".
· 2022 - Climate and Engagement - abrdn signed up to iC
International and ESG Data Convergence Initiative. Defined a Climate Strategy
and start drafting reporting according to TCFD for June 2023. More broadly,
launched an Article 8+ co-investment product, with 25% commitment to
sustainable investment.
Case Study - ESG - ACT
ACT is a leading global provider of market-based environmental solutions.
Lead Manager: Bridgepoint
APEO's investment: €10.0 million
Investment year: 2022
APEO's investment: €10.5 million
Geographic focus: Global
Company size: Large (enterprise value >€1bn)
Sector: Technology/Services
Company Overview
· ACT is the largest specialist intermediary in the environmental
certification market globally, offering 80+ products to 5000+ customers across
five core markets, with its headquarters in the Netherlands and hubs across
Europe, the US and China
· ACT intermediates between sellers of certificates / offsets (e.g.
renewable energy producers) and buyers (e.g. businesses with a need to prove
compliance with a regulatory standard or offset emissions), leveraging its
large network and technical and regulatory know-how to advise companies and
trade certificates, often 'making a market' in new areas as a first mover.
Responsible Investment
· Environmental certificates are an increasingly important
instrument in successfully managing climate change and are becoming essential
for organisations that are required to reduce greenhouse gases from
operations.
· ACT sourced ≈168 TWh of renewable energy to help its clients
achieve their sustainability goals, equivalent to almost 4% of the US energy
consumption as of the 2021/2022 fiscal year.
· Through carbon credit sourcing on behalf of its clients, ACT set
aside 48 million metric tons of CO2 to be used for offsetting solutions,
equivalent to 4% of the carbon removed annually by the Amazon rainforest
· In supporting its French clients in their energy efficiency
initiatives, ACT helped save 1 TWhc of energy, equivalent to the annual energy
usage of more than 71,000 households in Europe.
· ACT's activities directly address three of the UN SDGs.
APEO's Investment
· Having made a primary commitment to Bridgepoint Europe VI (which
led the investment into ACT), APEO made a co-investment alongside Bridgepoint
in ACT in 2022.
· The Manager has had a close relationship with Bridgepoint over
many years and has monitored the development of its ESG policies and approach,
which are highly rated.
· The fact that environmental solutions and ESG are at the core of
what ACT offers its clients was a clear attraction for Bridgepoint (and APEO)
in making the investment.
TEN LARGEST INVESTMENTS
at 30 September 2022
1 Action
Since its establishment in 1993, Benelux-based Action has grown into the
leading non-food discount retailer in the region with more than 2,100 stores
and over 65,000 employees
Fund Size: €2.5bn 3i 2020 Co-investment 1 SCSp 30/09/22 30/9/21
Sector: Consumer staples
Location: Netherlands
Year of Investment: 2020
Private Equity Manager: 3i Group plc
Investment: Co-investment
Company Website: www.action.nl
Value (£'000) 58,695 41,454
Cost (£'000) 22,630 22,630
5.1% of NAV (30 September 2021: 4.0%) Commitment (€'000) 26,540 26,540
Amount Funded 100.0% 100.0%
Income (£'000)* - -
2 Advent International Invests in attractive niches within business & financial services,
healthcare, industrial, retail and technology sectors
Fund Size: €13.0bn Advent International Global Private Equity VIII 30/09/22 30/9/21
Strategy: Mid to large buyouts
Enterprise Value of investments: $200m-$3bn
Geography: Global with a focus on Europe and North America
Website: www.adventinternational.com
Value (£'000) 52,171 55,818
Cost (£'000) 31,652 31,102
4.5% of NAV Commitment (€'000) 45,000 45,000
(30 September 2021: 5.4%)
Amount Funded 100.0% 95.2%
Income (£'000)* - -
3 CVC Capital Partners Undertakes medium and large sized buyout transactions across a range of
industries and geographies
Fund Size: €16.4bn CVC Capital Partners VII 30/09/22 30/9/21
Strategy: Mid to large buyouts
Enterprise Value of investments: €500m-€5bn
Geography: Europe and North America
Website: www.cvc.com
Value (£'000) 44,399 28,902
Cost (£'000) 24,862 18,601
3.8% of NAV Commitment (€'000) 35,000 35,000
(30 September 2021: 2.8%)
Amount Funded 84.1% 64.3%
Income (£'000)* 50 101
4 Hg Invests in medium sized buyout transactions in the technology and services
sectors, primarily in Northern Europe
Fund Size: £2.5bn HgCapital 8 30/09/22 30/9/21
Strategy: Mid-market buyouts
Enterprise Value of investments: £100m-£500m
Geography: Northern Europe
Website: www.hgcapital.com
Value (£'000) 42,144 30,769
Cost (£'000) 12,668 13,083
3.6% of NAV Commitment (€'000) 22,000 22,000
(30 September 2021: 3.4%)
Amount Funded 79.5% 67.1%
Income (£'000)* - -
5 IK Partner Invests in growth strategies supporting business transformation. Unique
Northern Continental European footprint
Fund Size: €1.9bn IK Fund VIII 30/09/22 30/9/21
Strategy: Mid-market buyouts
Enterprise Value of investments: £100m-£500m
Geography: Northern Europe
Website: www.ikinvest.com
Value (£'000) 38,225 35,006
Cost (£'000) 22,947 28,909
3.3% of NAV Commitment (€'000) 46,000 46,000
(30 September 2021: 3.4%)
Amount Funded 94.7% 94.7%
Income (£'000)* 4 391
6 Altor Funds Focuses on investing in and developing medium-sized companies with a Nordic
origin that offer potential for value creation through revenue growth, margin
expansion, improved capital management and strategic re-positioning
Fund Size: €2.1bn Altor Fund IV 30/09/22 30/9/21
Strategy: Mid-market buyouts
Enterprise Value of investments: €50m-€500m
Geography: Northern Europe
Website: www.altor.com
Value (£'000) 37,158 51,229
Cost (£'000) 27,886 30,679
3.2% of NAV Commitment (€'000) 55,000 55,000
(30 September 2021: 4.9%)
Amount Funded 73.2% 69.7%
Income (£'000)* 847 2,614
7 A diversified secondary transaction comprising large cap buyout funds in
Europe and the US
Fund Size: $125m Structured Solutions IV Primary Holdings 30/09/22 30/9/21
Strategy: Various
Enterprise Value of investments: $500m-$5bn
Geography: Europe and North America
Website: n/a
Value (£'000) 36,504 28,507
Cost (£'000) 27,594 28,093
3.2% of NAV Commitment (€'000) 62,500 62,500
(30 September 2021: 2.7%)
Amount Funded 62.9% 61.5
Income (£'000)* - -
8 Nordic Capital Invests in medium to large-sized buyout deals in Northern Europe, through five
dedicated sector teams, with the ability to invest in healthcare on a global
basis
Fund size: €4.3bn Nordic Capital Fund IX 30/09/22 30/9/21
Strategy: Mid to large buyouts
Enterprise Value of investments: €200m-€800m
Geography: Northern Europe (Global in Healthcare)
Website: www.nordiccapital.com
Value (£'000) 35,841 43,119
Cost (£'000) 22,355 21,065
3.1% of NAV Commitment (€'000) 30,000 30,000
(30 September 2021: 4.2%)
Amount Funded 89.0% 79.3%
Income (£'000) - -
9 Exponent Target businesses have strong market positions, evidence of historical
constraints and are capable of transformation. Companies often have a
significant international footprint
Fund Size: £1.0bn Exponent Private Equity Partners III, LP. 30/09/22 30/9/21
Strategy: Mid-market buyouts
Enterprise Value of investments: £75m-£350m
Geography: UK
Website: www.exponentpe.com
Value (£'000) 34,963 37,704
Cost (£'000) 22,749 25,262
3.0% of NAV Commitment (£'000) 28,000 28,000
(30 September 2021: 3.6%)
Amount Funded 87.5% 87.8%
Income (£'000) 411 348
10 Towerbrook Control-oriented private equity investments in mid-market companies in Europe
and North America, principally on a proprietary basis and in situations
characterized by complexity
Fund Size: $3.6bn TowerBrook Investors IV 30/09/22 30/9/21
Strategy: Mid-market buyouts
Enterprise Value of investments: $200m - $1bn
Geography: Europe and North America
Website: www.towerbrook.com
Value (£'000) 31,936 35,816
Cost (£'000) 16,056 16,947
2.8% of NAV Commitment ($'000) 36,561 36,561
(30 September 2021: 3.6%)
Amount Funded 61.8% 59.9%
Income (£'000) 72 456
Notes
Performance information has been prepared by APEO and has not been approved by
the General Partners of the funds or any of their Associates.
* Income figures are for the year ended 30 September 2022 and 30 September
2021 respectively.
APEO's position in Action is held through 3i 2020 Co-investment 1 SCSp
(formerly known as 3i Venice SCSp, a special purpose vehicle managed by 3i as
co-investment lead).
INVESTMENT PORTFOLIO
at 30 September 2022
Vintage Investment Number of investments Outstanding commitments Cost Valuation Net multiple(2) % of NAV
£'000
£'000
£'000(1)
2020 3i 2020 Co-investment 1 SCSp (Action)(3,4) 1 - 22,630 58,695 2.7x 5.1
2016 Advent International Global Private Equity VIII 29 - 31,652 52,171 2.0x 4.5
2017 CVC Capital Partners VII 33 4,887 24,862 44,399 1.8x 3.8
2017 HgCapital 8 11 4,504 12,668 42,144 2.5x 3.6
2016 IK Fund VIII 12 2,150 22,947 38,225 1.8x 3.3
2014 Altor Fund IV 16 12,930 27,886 37,158 1.9x 3.2
2021 Structured Solutions IV Primary Holdings* 50 20,780 27,594 36,504 1.4x 3.2
2018 Nordic Capital Fund IX 14 2,905 22,355 35,841 1.6x 3.1
2015 Exponent Private Equity Partners III, LP. 9 3,511 22,749 34,963 1.9x 3.0
2013 TowerBrook Investors IV 10 12,497 16,056 34,936 2.4x 2.8
2014 CVC VI 22 2,715 14,889 31,927 2.2x 2.8
2019 Advent International Global Private Equity IX 36 2,788 18,401 31,000 1.7x 2.7
2018 Bridgepoint Europe VI 17 5,341 20,118 28,650 1.5x 2.5
2016 Sixth Cinven Fund 15 1,906 16,651 28,151 1.9x 2.4
2018 PAI Europe VII 18 6,978 19,402 24,801 1.4x 2.1
2018 Investindustrial Growth 4 6,283 14,201 22,979 2.4x 2.0
2014 PAI Europe VI 12 1,960 13,745 22,510 2.0x 1.9
2014 Permira V 10 739 11,079 22,334 3.5x 1.9
2019 Altor Fund V 18 19,676 17,845 21,271 1.3x 1.8
2013 Nordic Capital VIII 10 2,745 18,673 20,810 1.6x 1.8
2018 Triton Fund V 17 13,059 13,174 19,887 1.4x 1.7
2015 Bridgepoint Europe V 9 2,551 13,158 19,273 2.1x 1.7
2019 American Industrial Partners VII 12 5,115 12,532 16,875 1.4x 1.5
2020 MPI-COI-NAMSA SLP (NAMSA)(3) 1 2,614 4,863 16,860 2.9x 1.5
2019 Cinven 7 12 9,277 12,362 15,486 1.2x 1.3
2021 Arbor Co-Investment LP (ACT)(3) 1 - 8,374 15,345 1.8x 1.3
2020 Vitruvian IV 26 8,734 12,707 15,082 1.2x 1.3
2015 Nordic Capital VII 4 1,599 14,145 15,045 1.4x 1.3
2019 IK IX 12 8,399 13,163 14,590 1.1x 1.3
2019 Vitruvian I CF LP 5 8,349 10,403 14,369 1.3x 1.2
2015 Equistone Partners Europe Fund V 12 2,351 16,301 13,893 1.6x 1.2
2020 Nordic Capital X 16 11,199 10,433 13,499 1.3x 1.2
2019 Investindustrial VII 11 10,636 11,642 13,485 1.2x 1.2
2018 MSouth Equity Partners IV 10 8,330 9,282 12,323 1.3x 1.1
2021 MPI-COI-PROLLENIUM SLP (Undisclosed)(3, 5) 1 1,448 7,133 12,198 1.7x 1.1
2017 Onex Partners IV LP 8 1,143 10,404 11,222 1.4x 1.0
2019 PAI Strategic Partnerships SCSp 2 204 6,579 10,647 1.6x 0.9
2022 Uvesco Co-invest SCSp (Uvesco)(3) 1 - 8,451 10,443 1.2x 0.9
2021 ECG Co-invest SLP (European Camping Group)(3) 1 1,401 5,485 10,355 1.9x 0.9
2021 Hg Isaac Co-Invest LP (Insightsoftware)(3) 1 174 7,452 10,032 1.3x 0.8
2012 IK Fund VII 4 1,754 9,867 9,991 2.1x 0.8
2016 Astorg VI 5 4,033 205 9,825 1.7x 0.8
2021 Hg Riley Co-Invest LP (Riskalyze)(3) 1 - 6,836 9,440 1.4x 0.8
2020 Capiton VI 10 9,815 7,522 9,265 1.2x 0.8
2021 IK Co-invest Questel (Questel)(3) 1 - 8,554 9,222 1.1x 0.8
2021 MI NGE S.L.P. (NGE)(3) 1 847 8,153 9,102 1.1x 0.8
2020 Vitruvian III 28 1,664 5,001 9,080 2.0x 0.8
2019 Great Hill Partners VII 18 2,402 6,581 8,779 1.6x 0.7
2021 Advent Technology II 10 18,765 8,630 8,479 1.0x 0.7
2020 Hg Saturn 2 6 6,896 5,966 8,362 1.3x 0.7
2021 Eurazeo Payment Luxembourg Fund SCSp 1 1,103 7,798 8,088 1.0x 0.7
(Planet)(3)
2021 Bengal Co-Invest SCSp (Tropicana Brands 1 2,756 6,198 7,973 1.3x 0.7
Group)(3)
2020 Hg Vardos Co-invest L.P. (Visma)(3) 1 - 4,871 7,893 1.6x 0.7
2020 Hg Genesis 9 12 7,045 5,979 7,630 1.2x 0.7
2021 Excellere Partners Fund IV 3 23,567 7,045 7,308 1.0x 0.6
2015 Capiton V 10 930 6,929 6,500 0.9x 0.6
2012 Equistone Partners Europe Fund IV 7 648 8,762 6,448 2.2x 0.6
2011 Montagu IV 5 663 5,740 6,418 1.8x 0.5
2021 CDL Coinvestment SPV (CDL)(3) 1 - 5,294 6,292 1.2x 0.5
2021 Latour Co-invest Funecap (Funecap)*(3) 1 811 4,287 5,879 1.3x 0.5
2020 Triton Smaller Mid-Cap Fund II 8 14,751 6,944 5,788 0.9x 0.5
2021 MPI-COI-SUAN SLP (Suanfarma)(3) 1 991 5,452 5,587 1.0x 0.5
2021 Capiton VI Wundex Co-Investment (Wundex)3 1 3,263 5,352 5,050 1.0x 0.5
2020 PAI Mid-Market I 5 16,786 4,987 5,339 1.1x 0.5
2021 bd-capital Partners Chase (Sport Pursuit)(3) 1 - 4,279 5,304 1.2x 0.5
2020 Seidler Equity Partners VII L.P. 4 10,873 4,085 5,167 1.2x 0.4
2020 Hg Mercury 3 8 6,742 4,015 5,148 1.3x 0.4
2022 AV Invest B3* 1 413 4,691 4,841 1.0x 0.4
2019 Alphaone International S.à.r.l. (Mademoiselle 1 1,740 3,522 4,773 1.4x 0.4
Desserts)(3)
2021 VIP SIV I LP (CFC)(3) 1 5,085 3,915 4,483 1.1x 0.4
2021 WindRose Health Investors Fund VI 4 13,253 4,493 4,461 1.0x 0.4
2012 Advent International Global Private Equity VII 13 834 5,496 4,370 2.1x 0.4
2022 ArchiMed - Med Platform 2 2 22,525 3,642 4,015 1.1x 0.3
2021 IK Partnership II 2 18,562 3,375 3,374 1.0x 0.3
2021 Nordic Capital WH1 Beta, L.P. (Boost.ai)(3) 1 1,193 2,524 3,070 1.1x 0.3
2001 CVC III* 0 466 4,283 2,258 2.7x 0.2
2013 Bridgepoint Europe IV 5 794 2,920 1,801 1.6x 0.2
2021 ASI Omega Holdco Limited (KD Pharma)(3) 1 2,832 1,462 1,785 1.2x 0.2
2011 American Industrial Partners V 7 13 1,257 1,715 1.4x 0.1
2008 CVC V* 1 438 4,329 1,161 2.4x 0.1
2006 3i Eurofund V 1 - 11,308 834 2.7x 0.1
2022 Advent International Global Private Equity X 1 25,406 944 756 0.8x 0.1
2021 ArchiMed III 3 12,379 759 540 0.7x 0.0
2019 Gilde Buy-Out Fund IV 1 - 2,262 525 1.2x 0.0
2022 Investindustrial Growth III 0 25,789 521 193 0.4x 0.0
2021 Permira Growth Opportunities II 9 28,845 2,303 121 0.1x 0.0
2007 Industri Kapital 2007 Fund 0 1,523 5,545 68 1.4x 0.0
2009 Capiton IV GmbH & Co. Beteiligungs KG 5 149 241 41 1.1x 0.0
2019 Borromin Capital Fund III L.P. 0 212 808 6 1.6x 0.0
2021 Great Hill Equity Partners VIII 4 17,916 - - 0.0x 0.0
2022 Hg Saturn 3 1 31,195 157 - 0.0x 0.0
2006 HgCapital 5 0 - 5,642 - 1.7x 0.0
2022 Latour Capital IV* 0 26,327 - - 0.0x 0.0
2021 Nordic Capital Evolution Fund 4 26,327 - - 0.0x 0.0
2022 Nordic Capital Fund XI 0 26,327 - - 0.0x 0.0
2022 One Peak Growth III 4 13,027 133 - 0.0x 0.0
2022 PAI Europe VIII 0 26,237 - - 0.0x 0.0
Total investments(6) 735 678,880 846,318 1,192,380 103.0
Non-portfolio assets less liabilities (34,328) (-3.0)
Total shareholders' funds 1,158,052 100.0
1 All funds are valued by the manager of the relevant fund or co-investment as
at 30 September 2022, with the exception of those funds suffixed with an *
which were valued as at 30 June 2022 or initial funding amount paid.
2 The net multiple has been calculated by the Manager in sterling on the basis
of the total realised and unrealised return for the interest held in each fund
and coinvestments. These figures have not been reviewed or approved by the
relevant fund or its manager.
3 Co-investment position. The name of the underlying co-investment which is
indirectly held by APEO has been included within the bracketed text.
4 Formerly known as 3i Venice SCSp.
5 Due to disclosure restrictions associated with this investment, the
underlying Company name cannot be disclosed.
6 The 735 underlying investments represent holdings in 655 separate underlying
private companies, 41 underlying fund investments and 9 underlying
co-investments.
TOP 30 UNDERLYING PRIVATE COMPANY INVESTMENTS
at 30 September 2022(1)
Entity Description Fund/Co-investment Year of Investment(1) % of NAV(2)
Action Non-food discount retailer 3i Venice SCSp 2020 5.1%
Access Group Software solutions HgCapital 8 2018 2.3%
ACT Leading global provider of market-based sustainability solutions Arbor Co-Investment LP/Bridgepoint Europe VI 2021 1.5%
NAMSA Provider of medical devices MPI-COI-NAMSA SLP 2020 1.5%
R1 RCM Healthcare revenue services TowerBrook Investors IV 2016 1.1%
ECG European leader in outdoor ECG Co-invest SLP/PAI Europe VII 2021 1.1%
accommodation market
Froneri Ice cream manufacturer for take home and private label segments PAI Strategic Partnerships SCSp / PAI Europe VII 2019 1.1%
Uvesco Leading Spanish regional grocer Uvesco Co-invest SCSp/PAI Mid- Market I 2022 1.1%
Undisclosed(4) Medical aesthetics company MPI-COI-PROLLENIUM SLP 2021 1.1%
Binding Site Clinical laboratory diagnostics Nordic Capital VII 2011 1.0%
Insightsoftware Financial reporting and enterprise performance management software provider Hg Isaac Co-Invest LP / Hg Saturn 2 2021 1.0%
InfoPro Digital B2B professional information services TowerBrook Investors IV 2016 1.0%
Riskalyze Risk tolerance software Hg Riley Co-Invest LP/ Hg Mercury 3 2021 0.9%
CFC Global leader in the cyber insurance market VIP SIV I LP/Vitruvian IV 2022 0.9%
Trioplast Manufacturer of polyethylene film Altor Fund IV 2018 0.9%
CDL Provides support to the medical profession CDL Coinvestment SPV/Excellere 2021 0.9%
through advanced diagnostics Partners Fund IV
Tropicana Global portfolio of juice brands Bengal Co-Invest SCSp/PAI Europe VII 2022 0.9%
Visma Accounting software and services Hg Vardos Co-invest L.P. / Hg Saturn 2 2020 0.8%
Planet Leading provider of integrated payment Eurazeo Payment Luxembourg Fund SCSp/Advent International Global Private 2021 0.8%
Equity IX
solutions for hospitality and retail
Mademoiselle Desserts Dessert and confectionery producer Alphaone International S.à.r.l. / IK Fund VIII 2018 0.8%
Questel Intelligence Software IK Co-invest Questel 2021 0.8%
Groupe NGE Independant public works concessions group MI NGE S.L.P. 2021 0.8%
Norican Metallic parts formation and preparation Altor Fund IV 2015 0.7%
industry
Transcom Customer management specialist Altor Fund IV 2015 0.7%
Natus Medical device solutions provider for the ArchiMed - Med Platform 2 2022 0.7%
diagnosis and treatment of patients with
central nervous and sensory systems disorders
Undisclosed(4) Software provider to automotive collision repairers, parts suppliers and Advent International Global Private Equity VIII 2017 0.7%
insurers
RL360 Specialist international life assurance provider Vitruvian I CF LP 2019 0.7%
Linxis Group Industrial equipment for bakery, dairy, pharma IK Fund VIII 2017 0.6%
and cosmetics manufacturing
Infradata Cybersecurity and secure networking solutions IK Fund VIII 2019 0.6%
Trustly Online payment provider Nordic Capital Fund IX 2018 0.6%
Total 32.8%
1 Based on latest available information. This excludes any underlying fund and
co-investments held through the Company portfolio.
2 Year of investment is disclosed as the first year of investment by a
portfolio investment.
3 All % of NAV figures are based on gross valuations, before any carry
provision.
4 Due to disclosure restrictions associated with our holding in the associated
investments, we are unable to name the underlying private company.
LARGEST 10 UNDERLYING PRIVATE COMPANIES
at 30 September 2022(1,2)
The below represents the ten largest underlying private companies which are
indirectly held through APEO's fund investments and/or co-investments.
1 5.1% of NAV ACTION Since its establishment in 1993, Benelux-based Action has grown into the
leading non-food discount retailer in the region with more than 2,100 stores
Sector: Consumer staples and over 65,000 employees.
Location: Netherlands
Year of Investment: 2020
Private Equity Manager: 3i Group plc
Investment: 3i 2020 Co-investment 1 SCSp
Company Website: www.action.nl
2 2.3% of NAV access Founded in 1991, the Access Group ("Access") is a leading UK mid market
Enterprise Resource Planning business, providing financial management systems
Sector: Information technology and human capital management software, as well as industry specific software
solutions. Access' software helps over 75,000 customers across commercial and
Location: UK not for- profit organisations to work efficiently, with expertise across
numerous industries.
Year of Investment: 2018
Private Equity Manager: HgCapital
Investment: HgCapital 8
Company Website: www.theaccessgroup.com
3 1.5% of NAV ACT ACT is the leading global provider of market-based sustainability solutions.
It is headquartered in the Netherlands but operates from a global platform,
Sector: Industrials and is the largest specialist intermediary in the global environmental
certificate sector. ACT acts as an intermediary between corporates seeking to
Location: Netherlands purchase certificates and suppliers with whom it has entrenched relationships.
It also provides advisory services, helping clients to navigate this rapidly
Year of Investment: 2021 evolving market and meet their environmental goals.
Private Fund Manager: Bridgepoint Capital
Investments: Arbor Co-Investment LP/Bridgepoint Europe VI
Company Website: www.actcommodities.com
4 1.5% of NAV NAMSA NAMSA is the global industry leading Contract Research Organisation ("CRO")
for preclinical and clinical medical device companies, and a global market
Sector: Healthcare leader in preclinical and biocompatibility testing.
Location: United States
Year of Investment: 2020
Private Fund Manager: ArchiMed SaS
Investment: MPI-COI-NAMSA SLP
Company Website: www.namsa.com
5 1.1% of NAV R1 RCM R1 RCM, headquartered in Chicago, provides outsourced revenue cycle management
services that help healthcare providers to more efficiently and cost
Sector: Healthcare effectively manage their revenue cycles through people, processes and
integrated technology and analytics solutions. The company offers a fully
Location: USA outsourced end-to-end-technology enabled solution, which spans the entire
revenue cycle from patient registration to collection from patients and
Year of Investment: 2016 third-party payors.
Private Fund Manager: TowerBrook Investors
Investment: TowerBrook Investors IV
Company Website: www.r1rcm.com
6 1.1% of NAV European Camping Group European Camping Group is a leading outdoor accommodation operator in Europe.
At acquisition, ECG operated a fleet of 21,000 high-quality holiday lets
Sector: Consumer Discretionary across over 300 European sites. It operates under a number of strong brands,
including Eurocamp and Homair.
Location: France
Year of Investment: 2021
Private Equity Manager: PAI Partners
Investments: ECG Co-invest SLP/PAI Europe VII
Company Website: www.europeancampinggroup.com
7 1.1% of NAV FRONERI Froneri is a global ice cream manufacturer, and largest pure-play ice-cream
manufacturer globally, benefitting from market-leading positioning in both
Sector: Consumer Discretionary branded and private label ice cream. It was formed as a joint venture
Location: United Kingdom between R&R Ice cream plc and Nestlé in 2016.
Year of Investment: 2019
Private Equity Manager: PAI Partners
Investments: PAI Strategic Partnerships SCSp/PAI Europe VII
Company Website: www.froneri.com
8 1.1% of NAV UVESCO Uvesco is a leading food retailer in the North of Spain with a growing
presence in Madrid. The company follows a differentiated model based on
ocation: Spain proximity stores and a high-quality offering, including a significant fresh
product component that is locally sourced and sold through its network of over
Year of Investment: 2022 270 stores across six regions.
Private Equity Manager: PAI Partners
Investments: Uvesco Co-Invest SCSp/PAI Mid-Market I
Company Website: www.uvesco.es
9 1.1% of NAV UNDISCLOSED Medical aesthetics company.
Sector: Healthcare
Location: Canada Due to disclosure restrictions associated with this investment, no further
information can be provided.
Year of Investment: 2021
Private Equity Manager: ArchiMed SaS
Investment: MPI-COI-PROLLENIUM SLP
Company Website: restricted
10 1.0% of NAV Binding Site Binding Site provides specialist diagnostic products to
Sector: Healthcare clinicians and laboratory professionals worldwide,
Location: United Kingdom principally for the diagnosis of blood cancers and
Year of Investment: 2011 immune system disorders. Founded by researchers
Private Equity Manager: Nordic Capital Partners at the University of Birmingham, Binding Site has
Investment: Nordic Capital VII continued to build on its strong scientific foundations,
Company Website: www.bindingsite.com supporting research and development within their
field and responding to the changing needs of
patients, researchers and clinicians for over 25 years.
1 All % of APEO's NAV figures are based on gross valuations, before any carry
provision.
2 Based on latest available information. This excludes any underlying fund and
co-investments held through the Company portfolio.
DIRECTORS' REPORT
The Directors present their report and the audited financial statements of the
Company for the year ended 30 September 2022.
The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position, performance, business model
and strategy.
Results and Dividends
The financial statements for the year ended 30 September 2022 are set out
below. Interim dividends of 3.6 pence per Ordinary share were paid in April,
July and October 2022. The Board declared, on 14 December 2022, a fourth
interim dividend for the year to 30 September 2022 of 3.6 pence per share to
be paid on 27 January 2023 to shareholders on the register on 23 December
2022.
Principal Activity and Status
The Company is registered as a public limited company in Scotland under
company number SC216638, is an investment company within the meaning of
Section 833 of the Companies Act 2006 and carries on business as an investment
trust.
The Company has applied for and has been accepted as an investment trust under
Sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of
Statutory Instrument 2011/2999. This approval relates to accounting periods
commencing on or after 1 October 2012. The Directors are of the opinion that
the Company has conducted its affairs so as to be able to retain such
approval.
The Company intends to manage its affairs so that its Ordinary shares continue
to be a qualifying investment for inclusion in the stocks and shares component
of an Individual Savings Account.
Capital Structure and Voting Rights
The Company's issued share capital at 30 September 2022 consisted of
153,746,294 (2021: 153,746,294) Ordinary shares of 0.2 pence each in issue.
Each ordinary shareholder is entitled to one vote on a show of hands and, on a
poll, to one vote for every Ordinary share held.
Management Agreement
The Company has appointed abrdn Capital Partners LLP, a wholly owned
subsidiary of abrdn, as its alternative investment fund manager ("AIFM") and
Manager (the "Manager"). abrdn Capital Partners LLP has been appointed to
provide investment management, risk management, administration and company
secretarial services, and promotional activities to the Company. abrdn Capital
Partners LLP has sub-delegated administrative and secretarial services to
abrdn Holdings Limited (previously known as Aberdeen Asset Management PLC) and
promotional activities to abrdn.
The management fee, payable quarterly, is calculated as 0.95% per annum of the
Company's net asset value at the end of the relative quarter. No fee is
payable on any investments in any investment trust, collective investment
scheme or any other company or fund managed, operated or advised by the
Manager or any other subsidiary of abrdn where there is an entitlement to a
fee on that investment.
Further details of the fees payable to the Manager are shown in notes 3 and 4
to the financial statements.
The management agreement is terminable on not less than twelve months' written
notice.
External Agencies
The Board has contractually delegated depositary services (which include the
custody and safeguarding of the Company's assets) to IQ-EQ Depositary Company
(UK) Limited and the share registration services to Equiniti Limited. These
contracts were entered into after full and proper consideration by the Board
of the quality and cost of services offered in so far as they relate to the
affairs of the Company.
Substantial Interests
Information provided to the Company by major shareholders pursuant to the
FCA's Disclosure, Guidance and Transparency Rules is published by the Company
via a Regulatory Information Service.
The table below sets out the interests in 3% or more of the issued share
capital of the Company, of which the Board was aware as at 30 September 2022.
Shareholder Number of Ordinary shares % held
Phoenix Group Holdings(1) 86,736,912 56.4
Interactive investor 7,609,065 5.0
Hargreaves Lansdown 5,676,406 3.7
Oxfordshire County Council Pension Fund 4,839,784 3.2
Quilter Cheviot Investment Management 4,589,572 3.0
(1) The voting rights of these shares are retained by abrdn.
The Company has not been notified of any changes to these holdings as at the
date of this Report.
Relationship Agreement with Standard Life Assurance Limited
The Company's largest shareholder, Phoenix Group Holdings, holds its shares
through Standard Life Assurance Limited ("SLAL", which is 100% owned by
Phoenix Group Holdings). SLAL has irrevocably undertaken to the Company that,
at any time when SLAL and its Associates (meaning any company which is a
member of the SLAL group) are entitled to exercise or control 30% or more of
the rights to vote at general meetings of the Company, it will not (and will
procure that none of its Associates will) seek to nominate directors to the
Board of the Company who are not independent of SLAL and its Associates, enter
into any transaction or arrangement with the Company which is not conducted at
arm's length and on normal commercial terms, take any action that would have
the effect of preventing the Company from carrying on an independent business
as its main activity or from complying with its obligations under the Listing
Rules or propose or procure the proposal of any shareholder resolution which
is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
Directors
Each of the Directors of the Company as at 30 September 2022, whose
biographies are shown on in the Annual Report are considered by the Board to
be independent of the Company and the Manager and free of any relationship
which could materially interfere with the exercise of their independent
judgement on issues of strategy, performance, resources and standards of
conduct.
All of the Directors held office throughout the year under review and up to
the date of signing the financial statements.
The Directors attended scheduled Board and Committee meetings during the year
ended 30 September 2022 as follows (with their eligibility to attend the
relevant meetings in brackets):
Board Meetings Audit Committee Management Engagement and Nomination Committee Meetings
Meetings
Dugald Agble(1) 5 (5) 2 (2) 1 (1)
Alan Devine 5 (5) 2 (2) 1 (1)
Christina McComb(1) 3 (3) 1 (1) 1 (1)
Diane Seymour-Williams 5 (5) 2 (2) 1 (1)
Yvonne Stillhart(1) 5 (5) 2 (2) 1 (1)
Calum Thomson 5 (5) 2 (2) 1 (1)
(1) Retired from the Board on 22 March 2022..
The Board and Committees meet more frequently when business needs require.
There are a number of matters reserved for the Board's approval which include
overall strategy, investment policy, borrowings, dividend policy and Board
composition.
All of the Directors will retire and, being eligible, will offer themselves
for re-election at the Annual General Meeting.
The Board believes that each Director has the requisite high level and range
of business, investment and financial experience which enables the Board to
provide clear and effective leadership and proper governance of the Company.
Each Director remains independent and free from any relationship which could
materially interfere with the exercise of their judgement on issues of
strategy, performance, resources and standards of conduct. Following the
Company's formal annual performance evaluation, the Board concluded that each
Director's performance continues to be effective and each Director
demonstrates commitment to the role, and their individual performances
contribute to the long-term sustainable success of the Company. The Board
therefore recommends the re-election, of each of the Directors at the Annual
General Meeting. The biographies set out their range of skills and experience
as well as length of service and their contribution to the Board during the
year.
Board's Policy on Tenure
In normal circumstances, it is the Board's expectation that Directors will not
serve beyond the Annual General Meeting following the ninth anniversary of
their appointment. However, the Board takes the view that independence of
individual Directors is not necessarily compromised by length of tenure on the
Board and that continuity and experience can add significantly to the Board's
strength. The Board believes that recommendation for re-election should be on
an individual basis following a rigorous review which assesses the
contribution made by the Director concerned, but also taking into account the
need for regular refreshment and diversity.
It is the Board's policy that the Chair of the Board will not normally serve
as a Director beyond the Annual General Meeting following the ninth
anniversary of his or her appointment to the Board. However, this may be
extended in certain circumstances or to facilitate effective succession
planning and the development of a diverse Board. In such a situation the
reasons for the extension will be fully explained to shareholders and a
timetable for the departure of the Chair clearly set out. Alan Devine was
appointed to the Board on 28 May 2014, and as Chairman on 22 March 2022, and
the Annual General Meeting in March 2023 follows the eighth anniversary of his
appointment.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced
individuals with appropriate knowledge represented on the Board in order to
allow it to fulfil its obligations. The Board also recognises the benefits and
is supportive of the principle of diversity in its recruitment of new Board
members. The Board will not display any bias for age, gender, race, sexual
orientation, religion, ethnic or national origins, or disability in
considering the appointment of its Directors. In view of its size, the Board
will continue to ensure that all appointments are made on the basis of merit
against the specification prepared for each appointment. The Board does not
therefore consider it appropriate to set measurable objectives in relation to
its diversity.
However, the Board will take account of the diversity targets set out in the
FCA's Listing Rules, which are set out below. The Board voluntarily discloses
the following information in relation to its diversity.
As an externally managed investment company, the Board employs no executive
staff, and therefore does not have a chief executive officer ("CEO") or a
chief financial officer ("CFO") both of which are deemed senior board
positions by the FCA. Other senior board positions recognised by the FCA are
chair of the board and senior independent director ("SID"). In addition, the
Board has resolved that the Company's year end date be the most appropriate
date for disclosure purposes.
The following information has been provided by each Director. There have been
no changes since 30 September 2022.
Number of Percentage Number of
Board of the Board senior
members positions on
the Board
Men 3 60 2
Women 2 40(1) 0
(1) Meets target of at least 40% as set out in LR 9.8.6R (9)(a)(i)..
Number of Percentage Number of
Board of the Board senior
members positions on
the Board
White British or other White (including minority-white groups) 3 60 2
Black/African/Caribbean/Black British 1 20(1) 0
(1) Meets target of at least one individual from a minority background as set
out in LR 9.8.6R (9)(a)(i).
The Role of the Chair and Senior Independent Director
Alan Devine is the Chair and Calum Thomson is the Senior Independent Director.
The Chair is responsible for providing effective leadership to the Board, by
setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The Chair facilitates the
effective contribution and encourages active engagement by each Director. In
conjunction with the Company Secretary, the Chair ensures that Directors
receive accurate, timely and clear information to assist them with effective
decision making. The Chair leads and acts upon the results of the formal and
rigorous annual Board and Committee evaluation process by recognising
strengths and addressing any weaknesses of the Board. He also ensures that the
Board engages with major shareholders and that all Directors understand
shareholder views.
The Senior Independent Director acts as a sounding board for the Chair and
acts as an intermediary for other directors, when necessary. Working closely
with the Nomination Committee, the Senior Independent Director takes
responsibility for an orderly succession process for the Chair, and leads the
annual appraisal of the Chair's performance. The Senior Independent Director
is also available to shareholders to discuss any concerns they may have.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of directors' and officers'
liabilities in relation to their acts on behalf of the Company. The Company's
articles of association provide that any director or other officer of the
Company is to be indemnified out of the assets of the Company against any
liability incurred by him as a director or other officer of the Company to the
extent permitted by law.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, each Director discloses
other positions held and all other conflict situations that may need to be
authorised either in relation to the Director concerned or his or her
connected persons. The Board considers each Director's situation and decides
whether to approve any conflict or other external positions, taking into
consideration what is in the best interests of the Company and whether the
Director's ability to act in accordance with his or her wider duties is
affected. Each Director is required to notify the Company Secretary of any
potential, or actual, conflict situations that will need authorising by the
Board. Authorisations given by the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although all Directors are
issued with letters of appointment. There were no contracts during, or at the
end of the year, in which any Director was interested.
The Company has a policy of conducting its business in an honest and ethical
manner. The Company takes a zero-tolerance approach to bribery and corruption
and has procedures in place that are proportionate to the Company's
circumstances to prevent them. The Manager also adopts a group-wide
zero-tolerance approach and has its own detailed policy and procedures in
place to prevent bribery and corruption. Copies of the Manager's anti-bribery
and corruption policies are available on its website. In relation to the
corporate offence of failing to prevent tax evasion, it is the Company's
policy to conduct all business in an honest and ethical manner. The Company
takes a zero-tolerance approach to facilitation of tax evasion whether under
UK law or under the law of any foreign country and is committed to acting
professionally, fairly and with integrity in all its business dealings and
relationships.
Financial Risk Management
The principal risk and uncertainties facing the Company are set out above. The
principal financial risks and the Company's policies for managing these risks
are set out in note 18 to the financial statements.
Corporate Governance
The Company is committed to high standards of corporate governance. The Board
is accountable to the Company's shareholders for good governance and this
statement describes how the Company has applied the principles identified in
the UK Corporate Governance Code as published in July 2018 (the "UK Code"),
which is available on the Financial Reporting Council's (the "FRC") website:
frc.org.uk.
The Board has also considered the principles and provisions of the AIC Code of
Corporate Governance as published in February 2019 (the "AIC Code"). The AIC
Code addresses the principles and provisions set out in the UK Code, as well
as setting out additional provisions on issues that are of specific relevance
to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.
The Board considers that reporting against the principles and provisions of
the AIC Code, which has been endorsed by the FRC, provides more relevant
information to shareholders.
The Board confirms that, during the year, the Company complied with the
principles and provisions of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating to:
- interaction with the workforce (provisions 2, 5 and 6);
- the role and responsibility of the chief executive (provisions 9 and
14);
- previous experience of the chair of a remuneration committee
(provision 32); and
- executive directors' remuneration (provisions 33 and 36 to 40).
The Board considers that these provisions are not relevant to the position of
the Company, being an externally managed investment company. In particular,
all of the Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive
directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
The full text of the Company's Corporate Governance Statement can be found on
its website.
Board Committees
The Board has appointed a number of Committees, as set out below. Copies of
their terms of reference, which clearly define the responsibilities and duties
of each Committee, are available on the Company's website, or upon request
from the Company.
The performance of the Committees and their terms of reference are reviewed by
the Board on an ongoing basis and formally at least annually.
Audit Committee
The Audit Committee is chaired by Calum Thomson who is a Chartered Accountant
and has recent and relevant financial experience. The Committee comprises all
non-executive Directors. The Chair of the Board is a member of the Audit
Committee as the Audit Committee and Board consider that Alan Devine was
independent on appointment, and continues to be independent of the Manager.
Given the size of the Board, and the continued independence of Alan Devine,
the Board believes that it is appropriate for all the independent Directors,
including the Chair, to constitute the Audit Committee. The Board is satisfied
that the Committee as a whole has competence relevant to the investment trust
sector.
The Audit Committee's Report is contained in the Annual Report.
Management Engagement Committee
The Management Engagement Committee comprises the full Board and was chaired
by Alan Devine during the financial year. Given the size of the Board, the
Board believes that it is appropriate for all the independent Directors to
constitute the Management Engagement Committee. Subsequent to the financial
year end, Yvonne Stillhart was appointed as Chair of the Management Engagement
Committee with effect from 13 December 2022. The main responsibilities of the
Committee include:
- monitoring and evaluating the performance of the Manager;
- reviewing at least annually the continued retention of the Manager;
- reviewing, at least annually, the terms of appointment of the
Manager including, but not limited to, the level and method of remuneration
and the notice period of the Manager; and
- reviewing the performance and remuneration of the other key service
providers to the Company.
The Committee met in respect of the year ended 30 September 2022 to review of
performance and the terms of appointment of the Manager. Following which, the
Committee recommended to the Board that the continuing appointment of the
Manager was in the best interests of the shareholders and the Company as a
whole.
In reaching this decision, the Committee considered the Company's long-term
performance record and concluded that it remained satisfied with the
capability of the Manager to deliver satisfactory investment performance, that
its processes are thorough and robust and that it employs a well-resourced
team of skilled and experienced fund managers. In addition, the Committee is
satisfied that the Manager has the secretarial, administrative and promotional
skills required for the effective operation and administration of the Company.
Nomination Committee
The Nomination Committee comprises the full Board and was chaired by Alan
Devine during the financial year. Given the size of the Board, the Board
believes that it is appropriate for all the independent Directors to
constitute the Nomination Committee. Subsequent to the financial year end,
Diane Seymour-Williams was appointed as Chair of the Nomination Committee with
effect from 13 December 2022. The Committee met once during the year to carry
out its responsibilities. The main responsibilities of the Committee include:
- regularly reviewing the structure, size and composition (including
the skills, knowledge, experience, diversity and gender) of the Board;
- undertaking succession planning, taking into account the challenges
and opportunities facing the Company and identifying candidates to fill
vacancies;
- recruiting new Directors, undertaking open advertising or engaging
external advisers to facilitate the search, as appropriate, with a view to
considering candidates from a wide range of backgrounds, on merit, and with
due regard for the benefits of diversity on the Board, taking care to ensure
that appointees have enough time available to devote to
the position;
- ensuring that new appointees receive a formal letter of appointment
and suitable induction and ongoing training;
- arranging for the annual Board and Committee performance evaluations
and ensuring that Directors are able to commit the time required to properly
discharge their duties;
- making recommendations to the Board as to the position of Chair,
Senior Independent Director and Chair of the Nomination, Audit and Management
Engagement Committees;
- assessing, on an annual basis, the independence of each Director;
and
- approving the re-election of any Director, subject to the UK Code,
the AIC Code, or the Articles of Association, at the Annual General Meeting,
having due regard to their performance, ability to continue to contribute to
the Board in the light of the knowledge, skills and experience required and
the need for progressive refreshing of the Board.
Going Concern
The Board has considered its obligation to satisfy itself as to the
appropriateness of the adoption of the going concern assumption as a basis for
the preparation of the financial statements.
At 30 September 2022, the Company had a £200.0 million (2021: £200.0
million) committed, multi-currency syndicated revolving credit facility, under
which £62.0 million (2021: £nil) had been drawn down. The facility is
provided by Citi, Société Générale and State Street Bank International.
Following the year end, the revolving credit facility was increased to £300.0
million and the maturity extended by a year to December 2025. The larger
facility is provided by RBS International, Société Générale and State
Street Bank International.
The Directors are mindful of the Principal Risks and Uncertainties disclosed
in the Strategic Report, including the difficult conditions in the global
economy and financial markets, and they believe that the Company has adequate
financial resources to continue its operational existence for a period of not
less than 12 months from the date of approval of this Report. They have
arrived at this conclusion having reviewed the Company's revolving credit
facility, the future cash flow projections, including the impact of stress
testing on the portfolio, the ongoing expenses forecasts for the coming year,
and taking into account that the Company had net resources available for
investment at the year end.
Accordingly, the Directors believe that it is appropriate to continue to adopt
the going concern basis in preparing the financial statements.
Accountability and Audit
The respective responsibilities of the Directors and the Independent Auditor
in connection with the financial statements appear in the Annual Report.
The Directors confirm that, so far as they are each aware, there is no
relevant audit information of which the Company's Independent Auditor was
unaware, and that each Director has taken all the steps that they might
reasonably be expected to have taken as a Director to make themselves aware of
any relevant audit information and to establish that the Company's Independent
Auditor was aware of that information.
Independent Auditor
Shareholders approved the re-appointment of BDO LLP as the Company's
Independent Auditor at the AG on 22 March 2022 and resolutions to approve its
reappointment for the year to 30 September 2023 and to authorise the Directors
to determine its remuneration will be proposed at the AGM on 22 March 2023.
Relations with Shareholders
The Board recognises the importance of promoting the Company to prospective
investors both for improving liquidity and enhancing the value and rating of
the Company's shares. One of the benefits of being managed by abrdn is the
ability to subscribe to, and participate in, the promotional programme run by
abrdn on behalf of a number of investment trusts under its management. The
Company's financial contribution to the programme is matched by abrdn. The
Company also supports abrdn's investor relations programme which involves
regional roadshows, promotional and public relations campaigns. abrdn's
promotional and investor relations teams report to the Board on a quarterly
basis giving analysis of the promotional activities as well as updates on the
shareholder register and any changes in the make-up of that register.
Shareholders and investors may obtain up to date information on the Company
through its website and the Manager's Customer Services Department.
The Board also communicates directly with shareholders and their
representative bodies without the involvement of the management group
(including the Company Secretary or the Manager) in situations where direct
communication is required, and representatives from the Manager and Board meet
with major shareholders on at least an annual basis in order to gauge their
views, and report back to the Board on these meetings. In addition, the
Company Secretary only acts on behalf of
the Board, not the Manager, and there is no filtering of communication.
The Company's Annual General Meeting provides a forum for communication
primarily with private shareholders and is attended by the Board. The Manager
makes a presentation to the meeting and all shareholders have the opportunity
to put questions to both the Board and the Manager at the meeting.
The notice of the Annual General Meeting is sent out at least 20 working days
in advance of the meeting. All shareholders have the opportunity to put
questions to the Board and Manager at the meeting.
Additional Information
Where not provided elsewhere in the Directors' Report, the following provides
the additional information required to be disclosed by Part 15 of the
Companies Act 2006.
There are no restrictions on the transfer of Ordinary shares in the Company
issued by the Company other than certain restrictions which may from time to
time be imposed by law. The Company is not aware of any agreements between
shareholders that may result in a transfer of securities and/or voting rights.
The rules governing the appointment of Directors are set out in the Directors'
Remuneration Report in the Annual Report. The Company's Articles of
Association may only be amended by a special resolution passed at a general
meeting of shareholders.
Annual General Meeting
The Notice of the Annual General Meeting, which will be held at 12:30pm at the
Balmoral Hotel, 1 Princes Street, Edinburgh, EH2 2EQ, Edinburgh on Wednesday,
22 March 2023, and related notes, may be found in the Annual Report.
Shareholders are encouraged vote on the resolutions proposed in advance of the
AGM and submit questions to the Board and the Manager by emailing
APEOT.Board@abrdn.com.
Resolutions including the following business will be proposed:
Dividend Policy
As a result of the timing of the payment of the Company's interim dividends,
the Company's shareholders are unable to approve a final dividend each year.
In line with good corporate governance, the Board therefore proposes to put
the Company's dividend policy to shareholders for approval at the Annual
General Meeting and on an annual basis thereafter.
The Company's dividend policy is that interim dividends on the Ordinary shares
are payable quarterly. Resolution 4 will seek shareholder approval for the
dividend policy.
Issue of Ordinary Shares
Resolution 12, which is an ordinary resolution, will, if passed, renew the
Directors' authority to allot new Ordinary shares up to 10% of the issued
share capital of the Company (excluding treasury shares) as at the date of the
passing of the resolution.
Resolution 13, which is a special resolution, will, if passed, renew the
Directors' existing authority to allot new Ordinary shares or sell treasury
shares for cash without the new Ordinary shares first being offered to
existing shareholders in proportion to their existing holdings. This will give
the Directors authority to allot Ordinary shares or sell shares from treasury
on a non pre-emptive
basis for cash up to an aggregate nominal amount of £30,749.25 (representing
10% of the issued ordinary share capital of the Company (excluding treasury
shares) as at 30 January 2023).
New Ordinary shares, issued under this authority, will only be issued at
prices representing a premium to the last published net asset value per share.
The authorities being sought under Resolutions 12 and 13 shall expire at the
conclusion of the Company's next AGM
in 2024 or, if earlier, on the expiry of 15 months from the date of the
passing of the resolutions, unless such authorities are renewed, varied or
extended prior to such time. The Directors have no current intention to
exercise these authorities and will only do so if they believe it is
advantageous and in the best interests of shareholders as a whole.
Purchase of the Company's Ordinary Shares
Resolution 14, which is a special resolution, seeks to renew the Board's
authority to make market purchases of the Company's Ordinary shares in
accordance with the provisions contained in the Companies Act 2006 and the
FCA's Listing Rules. Accordingly, the Company will seek authority to purchase
up to a maximum of 14.99% of the issued share capital (excluding treasury
shares) at the date of passing of the resolution at a minimum price of 0.2
pence per share (being the nominal value). Under the Listing Rules, the
maximum price that may be paid on the exercise of this authority must not
exceed the higher of: (i) 105% of the average of the middle market quotations
(as derived from the Daily Official List of the London Stock Exchange) for the
shares over the five business days immediately preceding the date of purchase;
and (ii) the higher of the last independent trade and the highest current
independent bid on the trading venue on which the purchase is carried out.
The Board does not intend to use this authority to purchase the Company's
Ordinary shares, unless to do so would result in an increase in the net asset
value per Ordinary share and would be in the best interests of shareholders.
Any Ordinary shares purchased shall either be cancelled or held in treasury.
The authority being sought shall expire at the conclusion of the AGM in 2024
or, if earlier, on the expiry of 15 months from the date of the passing of the
resolution unless such authority is renewed prior to such time.
Notice of General Meetings
The Companies Act 2006 provides that the minimum notice period for general
meetings of listed companies is 21 days, but with an ability for companies to
reduce this period to 14 days (other than for annual general meetings)
provided that two conditions are met. The first condition is that the company
offers a facility, accessible to all shareholders, to appoint a proxy by means
of a website. The second condition is that there is an annual resolution of
shareholders approving the reduction of the minimum notice period from 21 days
to 14 days.
The Board is therefore proposing Resolution 15 as a special resolution to
approve 14 days as the minimum period of notice for all general meetings of
the Company other than annual general meetings, renewing the authority passed
at last year's annual general meeting. The approval would be effective until
the end of the Company's next annual general meeting, when it is intended that
the approval be renewed.
The Board would consider on a case by case basis whether the use of the
flexibility offered by the shorter notice period is merited, taking into
account the circumstances, including whether the business of the meeting is
time sensitive and it would therefore be to the advantage of the shareholders
to call the meeting on shorter notice.
Recommendation
The Board considers that the resolutions to be proposed at the Annual General
Meeting are in the best interests of the Company and most likely to promote
the success of the Company for the benefit of its members as a whole.
Accordingly, the Board recommends that shareholders vote in favour of the
resolutions as they intend to do in respect of their own beneficial
shareholdings, amounting to 64,457 Ordinary shares, representing 0.04% of the
issued share capital.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
30 January 2023
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
THE FINANCIAL STATEMENTS
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with UK Accounting Standards.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Company for that
period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable and
prudent;
- state whether they have been prepared in accordance with applicable
UK Accounting Standards, subject to any material departures disclosed and
explained in the financial statements;
- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in business; and
- prepare a Directors' Report, a Strategic Report and Directors'
Remuneration Report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring that the
annual report and accounts, taken as a whole, are fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the company's position and performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are
published on the Company's website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company's website is the responsibility of
the Directors. The Directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
- the financial statements have been prepared in accordance with
applicable accounting standards and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company; and
- the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Company,
together with a description of the principal risks and uncertainties that they
face.
On behalf of the Board
Alan Devine
Chair
30 January 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2022
For the year ended 30 September 2022 For the year ended 30 September 2021
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Total capital gains on investments 9 - 147,940 147,940 - 291,578 291,578
Currency gains / (losees) 14 - 942 942 - (2,368) (2,368)
Income 2 9,368 - 9,368 8,968 - 8,968
Investment management fee 3 (1,060) (9,540) (10,600) (884) (7,959) (8,843)
Administrative expenses 4 (1,054) - (1,054) (1,020) - (1,020)
Profit before finance costs and taxation 7,254 139,342 146,596 7,064 281,251 288,315
Finance costs 5 (318) (1,907) (2,225) (323) (1,568) (1,891)
Profit before taxation 6,936 137,435 144,371 6,741 279,683 286,424
Taxation 6 (1,174) 414 (760) (735) 587 (148)
Profit after taxation 5,762 137,849 143,611 6,006 280,270 286,276
Earnings per share - basic and diluted 8 3.75p 89.66p 93.41p 3.91p 182.29p 186.20p
The Total columns of this statement represents the profit and loss account of
the Company.
There are no items of other comprehensive income, therefore this statement is
the single statement of comprehensive income of the Company.
All revenue and capital items in the above statement are derived from
continuing operations.
No operations were acquired or discontinued in the year.
The dividend which has been recommended based on this Statement of
Comprehensive Income is 14.40p (2021: 13.60p) per ordinary share.
The accompanying notes form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2022
As at As at
30 September 2022 30 September 2021
Notes £'000 £'000
Non-current assets
Investments 9 1,192,380 1,007,843
Current assets
Receivables 10 1,056 1,144
Cash and cash equivalents 30,341 29,714
Total Current assets 31,397 30,858
Creditors: amounts falling due within one year
Payables 11 (3,713) (2,734)
Revolving credit facility 12 (62,012) -
Net current (liabilities) / assets (34,328) 28,124
Total assets less current liabilities 1,158,052 1,035,967
Capital and reserves
Called-up share capital 13 307 307
Share premium account 14 86,485 86,485
Special reserve 14 51,503 51,503
Capital redemption reserve 14 94 94
Capital reserves 14 1,019,663 897,578
Revenue reserve 14 - -
Total shareholders' funds 1,158,052 1,035,967
Net asset value per equity share 15 753.2p 673.8p
The accompanying notes form an integral part of these financial statements.
The Financial Statements of abrdn Private Equity Opportunities Trust plc,
registered number SC216638 were approved and authorised for issue by the Board
of Directors on 30 January 2023 and were signed on its behalf by Alan Devine,
Chair.
Alan Devine
Chair
30 January 2023
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2022
Notes Called-up Share Capital Share premium account Special reserve Capital redemption reserve Capital reserves Revenue reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 307 86,485 51,503 94 897,578 - 1,035,967
Profit after taxation - - - - 137,849 5,762 143,611
Dividends paid 7 - - - - (15,764) (5,762) (21,526)
Balance at 30 September 2022 13,14 307 86,485 51,503 94 1,019,663 - 1,158,052
For the year ended 30 September 2021
Notes Called-up Share Special Capital Capital Revenue Total
share premium reserve redemption reserves reserve
capital account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2020 307 86,485 51,503 94 631,904 - 770,293
Profit after taxation - - - - 280,270 6,006 286,276
Dividends paid 7 - - - - (14,596) (6,006) (20,602)
Balance at 30 September 2021 13,14 307 86,485 51,503 94 897,578 - 1,035,967
The accompanying notes form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended For the year ended
30 September 2022 30 September 2021
Notes £'000 £'000
Cashflows from operating activities
Profit before taxation 144,371 286,424
Adjusted for:
Finance costs 5 2,225 1,891
Gains on disposal of investments 9 (107,007) (96,065)
Revaluation of investments 9 (41,433) (195,839)
Currency gains / (losses) 14 (942) 2,368
Increase / (decrease) in debtors (6) 60
Increase in creditors 854 1,394
Tax deducted from non-UK income 6 (760) (148)
Net cash (outflow) / inflow from operating activities (2,698) 85
Investing activities
Purchase of investments 9 (245,270) (185,338)
Purchase of secondary investments 9 (8,347) -
Distributions of capital proceeds received by investments 201,557 187,772
Disposal of quoted investments 9 - 2,193
Receipt of proceeds from disposal of unquoted investments 9 15,714 16,376
Net cash inflow / (outflow) from investing activities (36,346) 21,003
Financing activities
Revolving credit facility - amounts drawn 12 79,031 -
Revolving credit facility - amounts repaid 12 (17,019) -
Interest paid and arrangement fees (1,757) (1,539)
Ordinary dividends paid 7 (21,526) (20,602)
Net cash inflow / (outflow) from financing activities 38,729 (20,602)
Net decrease in cash and cash equivalents (315) (1,053)
Cash and cash equivalents at the beginning of the year 29,714 33,135
Currency gains / (losses) on cash and cash equivalents 942 (2,368)
Cash and cash equivalents at the end of the year 30,341 29,714
Cash and cash equivalents consist of:
Money-market funds - 16,414
Cash 30,341 13,300
Cash and cash equivalents 30,341 29,714
Included in profit before taxation is dividends received from investments of
£3,964,000 (2021: £3,651,000), interest received from investments of
£4,538,000 (2021: £5,305,000) and interest received from cash balances and
money market funds of £46,000 (2021: £12,000).
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
(a) Basis of Accounting
The financial statements have been prepared in accordance with the Companies
Act 2006, Financial Reporting Standard 102 and with the Statement of
Recommended Practice 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts (the "SORP"), updated in July 2022. They have also been
prepared on the assumption that approval as an investment trust will continue
to be granted. The financial statements have been prepared on a going concern
basis. The Directors believe that this is appropriate for the reasons outlined
in the Directors' Report in the Annual Report. The principal accounting
policies adopted are set out below. These policies have been applied
consistently throughout the current and prior year.
Rounding is applied to the disclosures in these financial statements, where
considered relevant.
(b) Revenue, Expenses and Finance Costs
Dividends and income from unquoted investments are included when the right to
receipt is established, which is the notice value date. Dividends are
accounted for as revenue in the Statement of Comprehensive Income. Interest
receivable is dealt with on an accruals basis.
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account of the Statement of Comprehensive Income except as
follows:
• transaction costs incurred on the purchase and disposal of
investments are recognised as a capital item in the Statement of Comprehensive
Income;
• the Company charges 90% of investment management fees and finance
costs to capital, in accordance with the Board's expected long-term split of
returns between capital gains and income from the Company's investment
portfolio. Bank interest expense has been charged wholly to revenue.
(c) Investments
Investments are accounted for at fair value through profit or loss as detailed
below. On the date of making a legal commitment to invest in a fund or
co-investment, such commitment is recorded and disclosed. When funds are drawn
in respect of these commitments, the resulting investment is recognised in the
financial statements. The investment is removed when it is realised or when
the investment is wound up. Gains and losses arising from changes in fair
value are included as a capital item in the Statement of Comprehensive Income
and are ultimately recognised in the capital reserves.
Unquoted investments are stated at the directors' estimate of fair value and
follow the recommendations of the European Private Equity & Venture
Capital Association ("EVCA") and the British Private Equity & Venture
Capital Association ("BVCA"). The estimate of fair value is normally the
latest valuation placed on an investment by its manager as at the Statement of
Financial Position date. The valuation policies used by the manager in
undertaking that valuation will generally be in line with the joint
publication from the EVCA and the BVCA, 'International Private Equity and
Venture Capital Valuation guidelines'. Where formal valuations are not
completed as at the Statement of Financial Position date, the last available
valuation from the manager is adjusted for any subsequent cash flows occurring
between the valuation date and the Statement of Financial Position date. The
Company's Manager may further adjust such valuations to reflect any changes in
circumstances from the last manager's formal valuation date to arrive at the
estimate of fair value.
For listed investments, which were actively traded on recognised stock
exchanges, fair value is determined by reference to their quoted bid prices on
the relevant exchange as at the close of business on the last trading day of
the Company's financial year.
(d) Dividends payable
Dividends are recognised in the period in which they are paid.
(e) Capital and Reserves
Share Premium - The share premium account represents the premium above nominal
value received by the Company on issuing shares net of issue costs.
Special Reserve - Court approval was given on 27 September 2001 for 50% of the
initial premium arising on the issue of the ordinary share capital to be
cancelled and transferred to a special reserve. The reserve is a distributable
reserve and may be applied in any manner as a distribution, other than by way
of a dividend.
Capital Redemption Reserve - This reserve is used to record the amount
equivalent to the nominal value of any of the Company's own shares purchased
and cancelled in order to maintain the Company's capital.
Capital Reserve - Gains/(Losses) on Disposal - Represents gains or losses on
investments realised in the period that have been recognised in the Statement
of Comprehensive Income, in addition to the transfer of any previously
recognised unrealised gains or losses on investments within "Capital reserve -
revaluation" upon disposal. This reserve also represents other accumulated
capital related expenditure such as management fees and finance costs, as well
as other currency gains/losses from non-investment activity.
Capital Reserve - Revaluation - Represents increases and decreases in the fair
value of investments that have been recognised in the Statement of
Comprehensive Income during the period.
Revenue Reserve - The revenue reserve represents accumulated revenue profits
retained by the Company that have not currently been distributed to
shareholders as a dividend.
The revenue and capital reserves - Gains/(losses) on disposal represent the
amount of the Company's reserves distributable by way of dividend.
(f) Taxation
i) Current taxation - Provision for corporation tax is made at the current
rate on the excess of taxable income net of any allowable deductions. In line
with the recommendations of the SORP, the allocation method used to calculate
tax relief on expenses presented against capital in the Statement of
Comprehensive Income is the "marginal basis". Under this basis, if taxable
income is capable of being offset entirely by expenses presented in the
revenue column of the Statement of Comprehensive Income, then no tax relief is
transferred to the capital column. Withholding tax suffered on income from
overseas investments is taken to the revenue column of the Statement of
Comprehensive Income.
ii) Deferred taxation is recognised in respect of all timing differences that
have originated but not reversed at the Statement of Financial Position date,
where transactions or events that result in an obligation to pay more or a
right to pay less tax in future have occurred at the Statement of Financial
Position date, measured on an undiscounted basis and based on enacted tax
rates. This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits from which
the future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company's taxable
profits and its results as stated in the financial statements which are
capable of reversal in one or more subsequent periods.
Due to the Company's status as an investment trust company, and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
(g) Foreign currency translation, functional and presentation currency
Foreign currency translation - Transactions in foreign currencies are
converted to sterling at the exchange rate ruling at the date of the
transaction. Overseas assets and liabilities are translated at the exchange
rate prevailing at the Company's Statement of Financial Position date. Gains
or losses on translation of investments held at the year end are accounted for
in the Statement of Comprehensive Income through inclusion in total capital
gains/losses on investments and is transferred to capital reserves. Gains or
losses on the translation of overseas currency balances held at the year end
are also accounted for through the Statement of Comprehensive Income and are
transferred to capital reserves.
Functional and presentation currency - For the purposes of the financial
statements, the results and financial position of the Company is expressed in
sterling, which is the functional currency and the presentation currency of
the Company.
Rates of exchange to sterling at 30 September were:
2022 2021
Euro 1.1395 1.1635
US Dollar 1.1163 1.3484
Canadian Dollar 1.5339 1.7082
Transactions in overseas currency are translated at the exchange rate
prevailing on the date of transaction.
The Company's investments are made in a number of currencies. However, the
Board considers the Company's functional currency to be sterling. In arriving
at this conclusion, the Board considers that the shares of the Company are
listed on the London Stock Exchange. The Company is regulated in the United
Kingdom, principally having its shareholder base in the United Kingdom, pays
dividends as well as expenses in sterling.
(h) Cash and Cash Equivalents
Cash comprises bank balances and cash held by the Company. Cash equivalents
comprise money-market funds which are used by the Company to provide
additional short-term liquidity. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
(i) Debtors
Debtors are recognised initially at transaction price. They are subsequently
measured at amortised cost using the effective interest method, less the
appropriate allowances for estimated irrecoverable amounts.
(j) Creditors
Creditors are recognised initially at transaction price. They are subsequently
stated at amortised cost using the effective interest method.
(k) Revolving Credit Facility
Revolving credit facility drawdowns are recognised initially at cost, being
the fair value of the consideration received. They are subsequently stated at
amortised cost using the effective interest method.
(l) Segmental Reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business activity, being investment business. Consequently, no
business segmental analysis is provided.
(m) Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements requires the Company to make estimates
and assumptions and exercise judgements in applying the accounting policies
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses arising
during the year. Estimates and judgements are continually evaluated and based
on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. The area
where estimates and assumptions have the most significant effect on the
amounts recognised in the financial statements is the determination of fair
value of unquoted investments, as disclosed in note 1(c).
2. Income
Year to Year to
30 September 2022 30 September 2021
£'000 £'000
Dividends from investments 4,759 3,651
Income from investments 4,538 5,305
Interest from cash balances and money-market funds 71 12
Total income 9,368 8,968
3. Investment Management Fees
Year to 30 September 2022 Year to 30 September 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 1,060 9,540 10,600 884 7,959 8,843
The Manager of the Company is abrdn Capital Partners LLP. In order to comply
with the Alternative Investment Fund Managers Directive, the Company appointed
abrdn Capital Partners LLP as its Alternative Investment Fund Manager from 1
July 2014.
The investment management fee payable to the Manager is 0.95% per annum of the
NAV of the Company. The investment management fee is allocated 90% to the
realised capital reserve - gains/(losses) on disposal and 10% to the revenue
account. Effective 1 October 2022, the investment management fee will be
allocated 95% to the realised capital reserve - gains/(losses) on disposal and
5% to the revenue account. The management agreement between the Company and
the Manager is terminable by either party on twelve months written notice.
Investment management fees due to the Manager as at 30 September 2022 amounted
to £2,888,000 (30 September 2021: £2,227,000).
4. Administrative Expenses
Year to Year to
30 September 2022 30 September 2021
£'000 £'000
Directors' fees 269 224
Employers' national insurance 32 26
Secretarial and administration fees 247 222
Marketing fees 243 244
Fees and subscriptions 78 67
Auditor's remuneration 63 45
Depositary fees 59 53
Professional and consultancy fees 49 49
Legal fees 12 2
Other expenses 2 88
Total 1,054 1,020
No non-audit services were provided by the Company auditor, BDO LLP during the
year to 30 September 2022.
Irrecoverable VAT has been shown under the relevant expense line.
The administration fee payable to IQ EQ Administration Services (UK) Ltd is
adjusted annually in line with the retail prices index. The administration
agreement is terminable by the Company on three months' notice.
The secretarial fee payable to abrdn Holdings plc (formerly known as Aberdeen
Asset Management plc) is adjusted annually in line with the retail price
index. The secretarial agreement is terminable by the Company on six months'
notice.
The emoluments paid to the directors during the year can be found in the
Directors' Remuneration Report in the Annual Report.
5. Finance Costs
Year to 30 September 2022 Year to 30 September 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Revolving credit facility interest expense 107 965 1,072 - - -
Revolving credit facility commitment fee 70 634 704 140 1,260 1,400
Revolving credit facility arrangement fee 34 308 342 34 308 342
Bank interest expense 107 - 107 149 - 149
Total 318 1,907 2,225 323 1,568 1,891
6. Taxation
(a) Analysis of the tax charge throughout the year
Year to Year to
30 September 2022 30 September 2021
£'000 £'000
Overseas withholding tax 760 148
Year to 30 September 2022 Year to 30 September 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(b) Factors affecting the total tax charge for the year
Profit before taxation 6,936 137,435 144,371 6,741 279,683 286,424
The tax assessed for the year is different from the standard rate of
corporation tax in the UK. The differences are explained below.
Profit multiplied by the effective rate of corporation tax in the UK - 19.0% 1,318 26,113 27,431 1,281 53,140 54,421
(2021: 19.0%)
Non-taxable capital gains on investments (1) - (28,109) (28,109) - (55,400) (55,400)
Non-taxable currency (gains)/losses - (179) (179) - 450 450
Non-taxable income (904) - (904) (694) - (694)
Overseas withholding tax 760 - 760 148 - 148
Surplus management expenses and loan relationship deficits not relieved - 1,761 1,761 - 1,223 1,223
Total tax charge/(credit) for the year 1,174 (414) 760 735 (587) 148
1 The Company carries on business as an investment trust company with respect
to sections 1158-1159 of the Corporation Tax Act 2010. As such any capital
gains are exempt from UK taxation.
(c) Factors that may affect future tax charges
At the year end there is a potential deferred tax asset of £5,764,000 (2020:
£3,157,000) in relation to excess management expenses carried forward. The
deferred tax asset is unrecognised at the year end in line with the Company's
stated accounting policy.
The Corporation Tax main rate for the years 1 April 2020 and 2021 was 19%. A
proposed revision to Corporation Tax was introduced in Finance Bill 2021,
which retains the main rate at 19% from 1 April 2022, followed by an increase
to 25% from 1 April 2023. Deferred taxes at the Statement of Financial
Position date have been measured at these enacted rates and reflected in these
financial statements.
7. Dividend on Ordinary Shares
Year to Year to
30 September 2022 30 September 2021
£'000 £'000
Amount recognised as a distribution to equity holders in the year:
2021 third quarterly dividend of 3.40p (2020: 3.30p) per ordinary share paid 5,227 5,074
on 29 October 2021 (2020: paid on 30 October 2020)
2021 fourth quarterly dividend of 3.40p per ordinary share (2020: 3.30p) paid 5,227 5,074
on 28 January 2022 (2020: paid on 29 January 2021)
2022 first quarterly dividend of 3.60p (2021: 3.40p) per ordinary share paid 5,536 5,227
on 22 April 2022 (2021: paid on 20 April 2021)
2022 second quarterly dividend of 3.60p (2021: 3.40p) per ordinary share paid 5,536 5,227
on 29 July 2022 (2021: paid on 27 July 2021)
Total 21,526 20,602
Set out below are the total dividends paid and proposed in respect of the
financial year, which is the basis on which the requirements of sections
1158-1159 of the Corporation Tax Act 2010 are considered. Of the total profit
after taxation for the year of £143,611,000 (2021: £286,276,000), the total
revenue and capital profits which are available for distribution by way of a
dividend for the year is £102,755,000 (2021: £90,437,000).
Year to Year to
30 September 2022 30 September 2021
£'000 £'000
2022 first quarterly dividend of 3.60p (2021: 3.40p) per ordinary share paid 5,536 5,227
on 22 April 2022 (2021: paid on 20 April 2021)
2022 second quarterly dividend of 3.60p (2021: 3.40p) per ordinary share paid 5,536 5,227
on 29 July 2022 (2021: paid on 27 July 2021)
2022 third quarterly dividend of 3.60p (2021: 3.40p) per ordinary share paid 5,536 5,227
on 28 October 2022 (2021: paid on 29 October 2021)
Proposed 2022 fourth quarterly dividend of 3.60p per ordinary share (2021: 5,536 5,227
3.40p per ordinary share) paid on 27 January 2023 (2021: 28 January 2022).
Total 22,144 20,908
8. Earnings Per Share - Basic and Diluted
Year to Year to
30 September 2022 30 September 2021
p £'000 p £'000
The net return per ordinary share is based on the following figures:
Revenue net return 3.75 5,762 3.91 6,006
Capital net return 89.66 137,849 182.29 280,270
Total net return 93.41 143,611 186.20 286,276
Weighted average number of ordinary shares in issue: 153,746,294 153,746,294
There are no diluting elements to the earnings per share calculation in 2022
(2021: none).
9. Investments
Year to 30 September 2022 Year to 30 September 2021
Quoted Unquoted Quoted Unquoted
Investments Investments Total Investments Investments Total
£'000 £'000 £'000 £'000 £'000 £'000
Fair value through profit or loss:
Opening market value - 1,007,843 1,007,843 - 721,650 721,650
Opening investment holding gains - (304,629) (304,629) - (108,790) (108,790)
Opening book cost - 703,214 703,214 - 612,860 612,860
Movements in the year:
Additions at cost - 245,270 245,270 2,422 147,656 150,078
Secondary purchases - 8,347 8,347 - 35,260 35,260
Distribution of capital proceeds - (201,806) (201,806) - (187,772) (187,772)
Disposal of quoted investments - - - (2,193) - (2,193)
Secondary sales - (15,714) (15,714) - (1,084) (1,084)
- 739,311 739,311 229 606,920 607,149
Gains on disposal of underlying investments - 107,007 107,007 - 96,294 96,294
Losses on disposal of quoted investments - - - (229) - (229)
Closing book cost - 846,318 846,318 - 703,214 703,214
Closing investment holding gains - 346,062 346,062 - 304,629 304,629
Closing market value - 1,192,380 1,192,380 - 1,007,843 1,007,843
Year ended 30 September 2022 Year ended 30 September 2021
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value through profit or loss based (229) 96,294 96,065
on historical costs.
- 107,007 107,007
(Gains)/losses recognised as unrealised in previous years in respect of - 3,370 3,370
distributed capital proceeds or disposal of investments.
- (44,999) (44,999)
Gains/(losses) on distribution of capital proceeds or disposal of investments (229) 99,664 99,435
based on the carrying value at the previous year end date
- 62,008 62,008
Net movement in unrealised investment gains - 192,469 192,469
- 86,432 86,432
Total capital gains/(losses) on investments held at fair value through (229) 292,133 291,904
profit or loss
- 148,440 148,440
Transaction costs
During the year expenses were incurred in acquiring or disposing of
investments. These have been expensed through capital and are included within
capital gains on investments of £147,940,000 (2021: £291,578,000) in the
Statement of Comprehensive Income. The total costs were as follows:
30 September 2022 30 September 2021
£'000 £'000
Transaction costs 500 326
10. Receivables
30 September 2022 30 September 2021
£'000 £'000
Amounts falling due within one year:
Unamortised bank loan arrangement fees 748 1,091
Investments receivable 249 -
Prepayments 34 53
Investments receivable 25 -
Total 1,056 1,144
11. Payables
30 September 2022 30 September 2021
£'000 £'000
Amounts falling due within one year:
Management fee 2,888 2,227
Accruals 719 448
Secretarial and administration fee 105 48
Bank interest 1 11
Total 3,713 2,734
12. Revolving Credit Facility
30 September 2022 30 September 2021
£'000 £'000
Revolving credit facility 62,012 -
As at 30 September 2022, the Company had a £200.0 million syndicated
revolving credit facility provided by Citi, Société Générale and State
Street Bank International GmbH, which was to expire in December 2024.
The interest rate on the facility at that time was calculated as the defined
reference rate of the currency drawn plus 1.625%, rising to 2.0% depending on
the level of facility utilisation. The commitment fee rate payable on
non-utilisation was 0.7% per annum.
On 10 October 2022, the Company announced an expansion of the credit facility
which increased from £200.0 million to £300.0 million with The Royal Bank of
Scotland International Limited joining as a lender and Natwest Markets Plc
replacing Citibank Europe plc as Agent in the syndicate of banks providing the
revolving credit facility, alongside current providers Société Générale
and State Street Bank International GmbH.
The interest rate on the expanded facility is unchanged, whilst the commitment
fee rate payable on non-utilisation is now between 0.7% and 0.8% per annum
based on the level of facility utilisation.
13. Called-up Share Capital
30 September 2022 30 September 2021
£'000 £'000
Issued and fully paid:
Ordinary shares of 0.2p
Opening balance of 153,746,294 (2021: 153,746,294) ordinary shares 307 307
Closing balance of 153,746,294 (2021: 153,746,294) ordinary shares 307 307
The Company may buy back its own shares where it is judged to be beneficial to
shareholders, taking into account the
discount between the Company's Net Asset Value and the share price, and the
supply and demand for the Company's
shares in the open market.
No shares were bought back during the year (2021: Nil).
14. Reserves
Capital reserves
Share Special Capital Gains/ Revaluation Revenue
premium reserve redemption (losses) on reserve
account reserve disposal
£'000 £'000 £'000 £'000 £'000 £'000
Opening balances at 1 October 2021 86,485 51,503 94 592,949 304,629 -
Gains on disposal of investments - - - 107,007 - -
Management fee charged to capital - - - (9,540) - -
Finance costs charged to capital - - - (1,907) - -
Transaction costs - - - (500) - -
Tax relief on management fee and finance costs above - - - 414 - -
Currency gains / (losses) - - - 1,514 (572) -
Revaluation of investments - - - - 41,433 -
Return after taxation - - - - -
Dividends during the year - - - (15,764) -
Closing balances at 30 September 2022 86,485 51,503 94 674,173 345,490 -
The revenue and capital reserve - gains/(losses) on disposal represent the
amounts of the Company's reserve distributable by way of dividend.
15. Net Asset Value Per Equity Share
30 September 2022 30 September 2021
Basic and diluted:
Ordinary shareholders' funds £1,158,052,447 £1,035,967,006
Number of ordinary shares in issue 153,746,294 153,746,294
Net asset value per ordinary share 753.2p 673.8p
The net asset value per ordinary share and the ordinary shareholders' funds
are calculated in accordance with the Company's articles of association.
There are no diluting elements to the net asset value per equity share
calculation in 2022 (2021: none).
16. Commitments and Contingent Liabilities
30 September 2022 30 September 2021
£'000 £'000
Outstanding calls on investments 678,880 557,051
This represents commitments made to fund and co-investment interests remaining
undrawn.
17. Parent Undertaking, Related Party Transactions and Transactions with the
Manager
The ultimate parent undertaking of the Company is Phoenix Group Holdings. The
results for the year to 30 September 2022 are incorporated into the group
financial statements of Phoenix Group Holdings, which will be available to
download from the website www.thephoenixgroup.com.
Standard Life Assurance Limited ("SLAL", which is 100% owned by Phoenix Group
Holdings), and the Company have entered into a relationship agreement which
provides that, for so long as SLAL and its Associates exercise, or control the
exercise, of 30% or more of the voting rights of the Company, SLAL and its
Associates, will not seek to enter into any transaction or arrangement with
the Company which is not conducted at arm's length and on normal commercial
terms, take any action that would have the effect of preventing the Company
from carrying on an independent business as its main activity or from
complying with its obligations under the Listing Rules or propose or procure
the proposal of any shareholder resolution which is intended or appears to be
intended to circumvent the proper application of the Listing Rules. During the
year ended 30 September 2022, SLAL received dividends from the Company
totalling £11,533,000 (2021: £11,539,000).
During the year ended 30 September 2022 the Manager charged management fees
totalling £10,600,000 (2021: £8,843,000) to the Company in the normal course
of business. The balance of management fees outstanding at 30 September 2022
was £2,888,000 (30 September 2021: £2,227,000).
abrdn Investment Management Limited, which shares the same ultimate parent as
the Manager, received fees for the provision of promotional activities of
£145,200 (2021: £240,000) during the year. The balance of promotional fees
outstanding at 30 September 2022 was a payable of £325,000 (30 September
2021: payable of £180,000).
The Company Secretarial services for the Company are provided by abrdn
Holdings plc (formerly known as Aberdeen Asset Management plc), which shares
the same ultimate parent as the Manager. During the year ended 30 September
2022, the Company incurred secretarial fees of £70,000 (2021: £71,000). The
balance of secretarial fees outstanding at 30 September 2022 was £104,000
(2021: £35,000).
The Company previously invested in liquidity funds managed by abrdn
Investments Luxembourg S.A. (formerly known as Aberdeen Standard Investments
(Lux)), which share the same ultimate parent as the Manager. During the year
ended 30 September 2022, the Company received interest amounting to £2,000
(30 September 2021: £10,000) on sterling denominated positions and £nil on
euro denominated positions (30 September 2021: £nil). The Company realised
its holding in the liquidity funds in November 2021.
No other related party transactions were undertaken during the year ended 30
September 2022.
18. Risk Management, Financial Assets and Liabilities
Financial Assets and Liabilities
The Company's financial instruments comprise fund and other investments,
money-market funds, cash balances, debtors and creditors that arise from its
operations. The assets and liabilities are managed with the overall objective
of achieving long-term total returns for shareholders.
Summary of Financial Assets and Financial Liabilities by Category
The carrying amounts of the Company's financial assets and financial
liabilities, as recognised at the Statement of Financial Position date of the
reporting periods under review, are categorised as follows:
30 September 2022 30 September 2021
£'000 £'000
Financial assets
Financial assets measured at fair value through profit or loss:
Fixed asset investments 1,192,380 1,007,843
Financial assets measured at amortised cost:
Investments receivable 249 -
Money-market funds, cash and short-term deposits 30,341 29,714
1,222,970 1,037,557
Non-financial assets
Other receivables 807 1,144
807 1,144
Financial Liabilities
Measured at amortised cost:
Creditors: amounts falling due within one year: -
Accruals 3,713 2,734
Revolving credit facility 62,012 -
65,725 2,734
Assets/Liabilities Measured at Amortised Cost
The carrying value of the current assets and liabilities is deemed to be fair
value due to the short-term nature of the instruments and/or the instruments
bearing interest at the market rates.
Risk Management
The Directors manage investment risk principally through setting an investment
policy and by contracting management of the Company's investments to an
investment manager under terms which incorporate appropriate duties and
restrictions and by monitoring performance in relation to these. The Company's
investments are in private equity funds, typically unquoted limited
partnerships and co-investments. These are valued by their managers generally
in line with the EVCA and the BVCA guidelines, which provide for a fair value
basis of valuation. The funds may hold investments that have become quoted or
the co-investment may become quoted and these will be valued at the
appropriate listed price, subject to any discount for marketability
restrictions.
As explained in the Company's investment policy, risk is spread by investing
across a range of countries and industrial sectors, thereby reducing excessive
exposure to particular areas. The Manager's investment review and monitoring
process is used to identify and, where possible, reduce risk of loss of value
in the Company's investments.
The Company's investing activities expose it to various types of risk that are
associated with the financial instruments and markets in which it invests. The
most important types of financial risk to which the Company is exposed are
market risk, overcommitment risk, liquidity risk, credit risk and interest
rate risk.
The nature and extent of the financial instruments outstanding at the
Statement of Financial Position date and the risk management policies employed
by the Company are discussed below.
Market Risk
a) Price Risk
The Company is at risk of the economic cycle impacting the listed financial
markets and hence potentially affecting the pricing of new underlying
investments, the valuation of existing underlying investments and the price
and timing of exits. By having a diversified and rolling portfolio of
investments the Company is well placed to take advantage of economic cycles.
100% of the Company's investments are held at fair value. The valuation
methodology employed by the managers of the unquoted investments may include
the application of EBITDA ratios derived from listed companies with similar
characteristics. Therefore, the value of the Company's portfolio is indirectly
affected by price movements on listed financial exchanges. A 10% increase in
the valuation of investments at 30 September 2022 would have increased the net
assets attributable to the Company's shareholders and the total return for the
year by £119,238,000 (2021: £100,784,000); a 10% change in the opposite
direction would have decreased the net assets attributable to the Company's
shareholders and the total return for the year by an equivalent amount. Due to
the private nature of the underlying companies in which the Company's
investments are invested, it is not possible for the Company to pinpoint the
effect to the Company's net assets of changes to the EBITDA ratios of listed
markets any more accurately.
b) Currency Risk
The Company makes fund and co-investment commitments in currencies other than
sterling and, accordingly, a significant proportion of its investments and
cash balances are in currencies other than sterling. In addition, the
Company's syndicated revolving credit facility is a multi-currency facility.
Therefore, the Company's NAV is sensitive to movements in foreign exchange
rates.
The Manager monitors the Company's exposure to foreign currencies and reports
to the Board on a regular basis. It is not the Company's policy to hedge
foreign currency risk. It is expected that the majority of the Company's
commitments and investments will be denominated in euros. Accordingly, the
majority of the Company's indebtedness will usually be held in that currency.
No currency swaps or forwards were used during the year.
The table below sets out the Company's currency exposure.
30 September 2022 30 September 2021
Local Sterling Local Sterling
Currency Equivalent Currency Equivalent
'000 £'000 '000 £'000
Fixed asset investments:
Euro 1,045,818 917,787 951,223 817,588
Sterling 86,894 86,894 69,213 69,213
US Dollar 209,527 187,698 163,206 121,042
Money-market funds, cash and short-term deposits:
Euro 17,596 15,442 12,243 10,523
Sterling 5,624 5,624 16,523 16,523
US Dollar 10,351 9,273 3,596 2,667
Canadian Dollar 3 2 3 1
Investment receivable
US Dollar 278 249 - -
Revolving credit facility:
Euro (53,000) (46,512)
Sterling (15,500) (15,500)
Other debtors and creditors:
Euro (86) (75) (14) (12)
Sterling 2,817 2,817 (1,537) (1,537)
US Dollar (16) (14) (55) (41)
Total 1,158,052 1,035,967
Outstanding commitments:
Euro 525,075 460,794 463,209 398,134
Sterling 13,100 13,100 10,878 10,878
US Dollar 228,826 204,986 199,608 148,039
Total 678,880 557,051
c) Currency Sensitivity
During the year ended 30 September 2022 sterling depreciated by 2.1% relative
to the euro (2021: appreciated 5.5%) and depreciated by 17.2% relative to the
US dollar (2021: appreciated 4.3%).
To highlight the sensitivity to currency movements, if the value of sterling
had weakened against both of the above currencies by 10% compared to the
exchange rates at 30 September 2022, the capital gain for the year would have
increased by £120,428,000 (2021: £105,752,000); a 10% change in the opposite
direction would have decreased the capital gain for the year by £98,532,000
(2021: £86,524,000).
The calculations above are based on the portfolio valuation and cash and
revolving credit facility balances as at the respective Statement of Financial
Position dates and are not necessarily representative of the year as a whole.
Based on similar assumptions, the amount of outstanding commitments would have
increased by £73,976,000 at the year end (2021: £60,686,000), a 10% change
in the opposite direction would have decreased the amount of outstanding
commitments by £60,525,000 (2021: £49,652,000).
Liquidity Risk
The Company has significant investments in unquoted investments which are
relatively illiquid. As a result, the Company may not be able to quickly
liquidate its investments at an amount close to their fair value in order to
meet its liquidity requirements, including the need to meet outstanding
undrawn commitments. The Company manages its liquid investments to ensure
sufficient cash is available to meet contractual commitments and also seeks to
have cash available to meet other short-term financial needs. Short term
flexibility is achieved, where necessary, through the use of the syndicated
revolving credit facility. Liquidity risk is monitored by the Manager on an
ongoing basis and by the Board on a regular basis. Payables, as disclosed in
note 11, all fall due within one year and the revolving credit facility, as
described in note 12, has drawn £62,012,000 as at 30 September 2022 (2021:
undrawn), with an amount of £137,988,000 (2021: £200,000,000) still
available to be drawn.
Credit Risk
Credit risk is the exposure to loss from failure of a counterparty to deliver
securities or cash for acquisitions or disposals of investments or to repay
deposits. The Company places funds with authorised deposit takers from time to
time and, therefore, is potentially at risk from the failure of any such
institution. At the year end, the Company's financial assets exposed to credit
risk amounted to the following:
30 September 2022 30 September 2021
£'000 £'000
Money-market funds, cash and short-term deposits 30,341 29,714
Investment receivable 249 -
30,590 29,714
The Company's cash is held by BNP Paribas Securities Services S.A., which is
rated 'A+' by Standard and Poors. The Company's money-market funds are held in
two Aberdeen Standard Investments (Lux) Liquidity funds, rated 'A' by Standard
and Poors. Should the credit quality or the financial position of either bank
deteriorate significantly, the Manager would move the cash balances to another
institution.
The investment receivable relates to distribution proceeds payable to the
Company as at 30 September 2022 which were received subsequent to the
financial year end and is therefore no longer at risk of default.
Interest Rate Risk
The Company will be affected by interest rate changes as it holds some
interest bearing financial assets and liabilities which are shown in the table
below, however, the majority of its financial assets are investments in
private equity investments which are non-interest bearing. Interest rate
movements may affect the level of income receivable on money-market funds and
cash deposits and interest payable on the Company's variable rate borrowings.
The possible effects on the cash flows that could arise as a result of changes
in interest rates are taken into account when making investment and borrowing
decisions. Derivative contracts are not used to hedge against any exposure to
interest rate risk.
Interest Risk Profile
The interest rate risk profile of the portfolio of financial assets and
liabilities at the Statement of Financial Position date
was as follows:
30 September 2022 30 September 2021
Weighted average Weighted average
interest rate interest rate
% £'000 % £'000
Floating rate
Financial assets: Money-market funds, cash and short-term deposits 1.06 30,341 (0.24) 29,714
Financial liabilities: Revolving credit facility 0.40 62,012 - -
Fixed rate
Financial liabilities: Revolving credit facility 1.63 62,012
The weighted average interest rate on the bank balances is based on the
interest rate payable, weighted by the total value of the balances. The
weighted average period for which interest rates are fixed on the bank
balances is 31.0 days (2021: 31.0 days).
The weighted average interest rate on the revolving credit facility is based
on the interest rate paid on the individual loan balances, weighted by the
duration and value of each individual loan balance outstanding during the
financial year.
Interest rate Sensitivity
An increase of 1% in interest rates would have decreased the net assets
attributable to the Company's shareholders and decreased the total gain for
the year ended 30 September 2022 by £530,000 (2021: £1,000). A decrease of
1% would have increased the net assets attributable to the Company's
shareholders and increased the total gain for the year ended 30 September 2022
by £158,000 (2021: £1,000). The calculations are based on the interest paid
and received during the year.
19. Fair Value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following classifications:
• Level 1: The unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the measurement
date.
• Level 2: Inputs other than quoted prices included within Level 1
that are observable (i.e., developed using market data) for the asset or
liability, either directly or indirectly.
• Level 3: Inputs are unobservable (i.e., for which market data is
unavailable) for the asset or liability.
The Company's financial assets and liabilities, measured at fair value in the
Statement of Financial Position, are grouped into the following fair value
hierarchy at 30 September 2022:
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £'000 £'000 £'000 £'000
Unquoted investments - - 1,192,380 1,192,380
Net fair value - - 1,192,380 1,192,380
As at 30 September 2021
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £'000 £'000 £'000 £'000
Unquoted investments - - 1,007,843 1,007,843
Net fair value - - 1,007,843 1,007,843
Unquoted Investments
Unquoted investments are stated at the directors' estimate of fair value and
follow the recommendations of the EVCA and the BVCA. The estimate of fair
value is normally the latest valuation placed on an investment by its manager
as at the Statement of Financial Position date. The valuation policies used by
the manager in undertaking that valuation will generally be in line with the
joint publication from the EVCA and the BVCA, 'International Private Equity
and Venture Capital Valuation guidelines'. Fair value can be calculated by the
manager of the investment in a number of ways.
In general, the managers with whom the Company invests adopt a valuation
approach which applies an appropriate comparable listed company multiple to a
private company's earnings or by reference to recent transactions. Where
formal valuations are not completed as at the Statement of Financial Position
date, the last available valuation from the manager is adjusted for any
subsequent cash flows occurring between the valuation date and the Statement
of Financial Position date. The Company's Manager may further adjust such
valuations to reflect any changes in circumstances from the last manager's
formal valuation date to arrive at the estimate of fair value.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures ("APMs") are numerical measures of the
Company's current, historical or future performance, financial position or
cash flows, other than financial measures defined or specified in the
applicable financial framework. The Company's applicable financial framework
includes FRS 102 and the AIC SORP.
In selecting these Alternative Performance Measures, the Directors considered
the key objectives and expectations of typical investors in an investment
trust such as APEO.
Discount
The amount by which the market price per share is lower than the net asset
value per share of an investment trust. The discount is normally expressed as
a percentage of the net asset value per share.
As at As at
30 September 30 September
2022
2021
Share price (p) a 410.0 498.0
Net Asset Value per share (p) b 753.2 673.8
Discount (%) c = (b-a) / b 45.6 26.1
Dividend Yield
The total dividend per ordinary share in respect of the financial year divided
by the share price, expressed as a percentage, calculated at the year end date
of the Company:
2022 2021
Dividend per share (p) a 14.4 13.6
Share price (p) b 410.0 498.0
Dividend yield (%) c = a / b 3.5 2.7
NAV Total Return/NAV TR
NAV total return shows how the NAV has performed over a period of time in
percentage terms, taking into account both capital returns and dividends paid
to shareholders.
This involves reinvesting the net dividend into the NAV at the end of the
quarter in which the shares go ex-dividend. Returns are calculated to each
quarter end in the year and then the total return for the year is derived from
the product of these individual returns.
NAV per share (p) as at 30 September 2021 a 673.8
NAV per share (p) as at 30 September 2022 b 753.2
Price Movement c = (b - a) / 1 11.8%
Dividend Reinvestment(1) d 2.3%
NAV Total return e = c + d 14.1%
1 NAV total return assumes investing the dividend in the NAV of the Company on
the date on which that dividend goes ex-dividend.
Ongoing Charges Ratio/Expense Ratio
The ongoing charges ratio is calculated as management fees and all other
recurring operating expenses that are payable by the Company, excluding the
costs of purchasing and selling investments, performance fees, finance costs,
taxation, non-recurring costs, and the costs of any share buy-back
transactions, expressed as a percentage of the average NAV during the period.
The ratio also includes an allocation of the look-through expenses of the
Company's underlying investments, excluding performance-related fees.
The ongoing charges ratio has been calculated in accordance with the
applicable guidance issued by the Association of Investment Companies ("AIC"),
which was last updated in October 2020.
Year ended Year ended
30 September 2022 30 September 2021
£'000 £'000
Investment management fee a 10,600 8,843
Administrative expenses b 1,054 1,020
Ongoing charges c = a + b 11,654 9,863
Average net assets d 1,099,764 899,097
Expense ratio e = c / d 1.06% 1.10%
Look-through expenses f 1.67% 1.69%
Ongoing charges ratio g = e + f 2.73% 2.79%
The look-through expenses represent an allocation of the management fees and
other expenses charged by the underlying investments held in the portfolio of
the Company. Performance related fees, such as carried interest, are excluded
from this figure. This is calculated over a five year historic average, and is
recalculated on an annual basis based on the previous calendar year.
Over-commitment Ratio
Outstanding commitments less cash and cash equivalents and the value of
undrawn loan facilities divided by portfolio NAV.
As at As at
30 September 2022
30 September 2021
£000
£000
Undrawn Commitments a 678,880 557,051
Less undrawn loan facility b (137,988) (200,000)
Less resources available for investment c (30,341) (29,714)
Net outstanding commitments d = a - b - c 510,550 327,337
Portfolio NAV e 1,192,380 1,007,843
Over-commitment ratio f = d / e 42.8% 32.5%
Share Price Total Return
The theoretical return derived from reinvesting each dividend in additional
shares in the Company on the day that the share price goes ex-dividend.
Date Share
price (p)
Share price (p) as at 30 September 2021 a 498.0
Share price (p) as at 30 September 2022 b 410.0
Price Movement c = (b / a) - 1 -17.7%
Dividend Reinvestment1 d 2.6%
NAV Total return e = c + d -15.1%
1 Share price total return assumes reinvesting the dividend in the share price
of the Company on the date on which that dividend goes ex-dividend.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2022 or 2021 but is
derived from those accounts. Statutory accounts for 2021 have been delivered
to the registrar of companies, and those for 2022 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006
The statutory accounts for the financial year ended 30 September 2022 have
been approved by the Board and audited but will not be filed with the
Registrar of Companies until after the Company's Annual General Meeting which
will be held at the Balmoral Hotel, Edinburgh at 12:30 on 22 March 2023.
The Annual Report will be posted to shareholders shortly and copies will be
available from the Manager or from the Company's website
(www.abrdnpeot.co.uk).
For abrdn Private Equity Opportunities Trust plc
abrdn Holdings Limited, Company Secretary
For further information please contact:
Alan Gauld,
Lead Portfolio Manager, abrdn Capital Partners LLP
Tel: 0131 528 4424
William Hemmings
Client Director, Investment Trusts, abrdn
Tel: 020 7463 6223
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