ABERDEEN PRIVATE EQUITY FUND LIMITED

AUDITED ANNUAL FINANCIAL REPORT ANNOUNCEMENT

for the year ended 31 March 2016

 

 

STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS

 

 

Net asset total return{A}			Share price total return{A}
2016	+6.6%		2016	+2.3%
2015	+18.2%		2015	+15.5%
Discount to Net Asset Value			Ongoing charges (excluding performance fee)
2016 2015	34.1% 30.8%		2016 2015	1.9% 1.8%

Source: Aberdeen Asset Management & Morningstar

{A}Total return represents capital return plus dividends reinvested on the dividend date.

 

 

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Introduction

The Company aims to attract long term private and institutional investors wanting to benefit from the growth prospects of a diversified portfolio of PE investments.

 

The business of the Company is that of an investment company and the Directors do not envisage any change in this activity in the foreseeable future. 

 

Duration

The Articles of Incorporation require the Company to propose a continuation vote at every third Annual General Meeting.  The next continuation resolution, proposing that the Company continue its business as a closed-ended investment company, will be proposed at the Annual General Meeting to be held on 13 September 2016.

 

Investment Objective and Policy

The investment objective of the Company is to maximise total returns to shareholders, principally through long-term capital gains.  The Company aims to achieve its objective through investment in a diversified portfolio of PE funds and direct co-investments.

 

The Company may also hold direct holdings, as an ancillary part of its portfolio, in hedge funds, other specialty funds, quoted and unquoted companies and securities, including fixed interest securities, cash-equivalent investments and cash.

 

The Company will not invest more than 10%, in aggregate, of the value of its gross assets in other investment trusts or investment companies admitted to the Official List, provided that this restriction does not apply to investments in any such investment trusts or investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other investment trusts or investment companies admitted to the Official List. In any event, the Company will not invest more than 15% of its gross assets in other investment trusts or investment companies admitted to the Official List.

 

Investment Process and Investment Opportunities

The Manager's key objective is to select PE managers which it believes will produce, over time, superior risk-adjusted returns in their chosen investment strategy and which can demonstrate significant competitive advantages compared with other funds in their peer group. The focus is on the individual merits of investments, but the industry and economic environment in which that manager is operating is also taken into consideration.

 

The investment process is systematic and disciplined. Due diligence is at its heart and typically around three to four months are spent analysing a potential manager, a process which includes a number of on-site visits with that manager. The process culminates in the provision of a detailed report that is then presented to, and discussed by, the Manager's Investment Committee (the "Investment Committee"), where a selection decision is made on all potential funds.  The Investment Committee has to approve an investment before it can be recommended to the Company's Board for approval. The Manager will also conduct operational and legal due diligence on the potential manager and proposed investment.

 

On-going monitoring is similarly robust, and includes regular reviews of market conditions and their potential effect on the underlying funds and any direct PE investment. In response to the conclusions drawn from this process, the Investment Committee recommends to the Company's Board whether or not to retain an investment.

 

Asset Allocation

The Company seeks to hold a portfolio of investments which is broadly diversified by industry sector, investment stage and size of investment, as well as by strategy. The Company intends to invest the majority of its portfolio in the buyout, growth capital, distressed and venture capital funds sectors.

 

Risk Diversification

The Manager actively monitors the Company's portfolio and attempts to mitigate risk through diversification. Not more than 20% of the NAV, at the time of investment, is permitted to be invested in any single investment. If the Company acquires a portfolio of investments in a single transaction, this limitation will be applied individually to each of the underlying investments acquired and not to the portfolio as a whole.

 

Gearing

On 31 March 2016 the Company entered into a new secured £40 million three year committed revolving credit facility, with Lloyds Bank Plc ("Lloyds") which replaced an expiring £15 million facility from Lloyds.  The credit facility is available for general corporate and working capital purposes including bridging capital contribution commitments in accordance with the investment policy.  The Company's formal policy with respect to gearing is to ensure that its aggregate borrowings do not exceed a maximum of 25% of NAV.  During the year to 31 March 2016 and up to the date of this report, the Company has not made any drawings under the Lloyds facility. The Company's obligations under the facility are secured against the Company's assets pursuant the terms of a Guernsey security agreement and an English security deed.

 

Key Performance Indicators (KPIs)

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determine the progress of the Company in pursuing its investment policy.  The main KPIs identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

 

KPI	Description
NAV and NAV total return	The Board considers the Company's NAV total return figures to be the best indicator of performance over time and these are therefore the main indicators of performance used by the Board. A table showing the total NAV return over one, three and five years is shown under Results below.
Share price and Share price total return	The Board also monitors the price at which the Company's Shares trade relative to the Company's peer group and a number of major indices on a total return basis over time. Graphs showing the total share price return against the peer group and major indices are shown in the Annual Report.
Discount/Premium to NAV	The discount/premium relative to the NAV per share represented by the share price is closely monitored by the Board. The objective is to minimise fluctuations in the discount/premium relative to similar investment companies and in seeking to achieve this objective the Company may, subject to market conditions and if considered to be in the best interests of shareholders, use share buy backs or the issuance of new shares.  A graph showing the share price discount relative to the NAV is also shown in the Annual Report.
Ongoing Charges Ratio	The Board monitors the Company's operating costs carefully. Ongoing charges for the year and previous year are disclosed under Results below.

 

Risk Management

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has undertaken a robust review of the principal risks and uncertainties facing the Company including those that would threaten its business model, future performance, solvency or liquidity.  Those principal risks are disclosed in the table below together with a description of the mitigating actions taken by the Board.  The principal risks associated with an investment in the Company's Shares are published monthly on the Company's factsheet or they can be found in the pre-investment disclosure document published by the Manager, both of which are available on the Company's website. The Board reviews the risks and uncertainties faced by the Company in the form of a risk matrix and heat map at its Audit Committee meetings.

 

Description	Mitigating Action
Investment strategy and objectives - the setting of an unattractive strategic proposition to the market and the failure to adapt to changes in investor demand may lead to the Company becoming unattractive to investors, a decreased demand for shares and a widening discount.	The Board keeps under review the level of discount at which the Company's Shares trade, in absolute terms and relative to its peer group, as well as the investment objective and policy. It regularly reviews the Company's strategy and receives regular updates from the Manager and investor relations reports from the Broker on the market. The Board is updated at each Board meeting on the make-up of and any movements in the shareholder register.
Investment portfolio and investment management - investing outside of the investment restrictions and guidelines set by the Board could result in poor performance and inability to meet the Company's objectives.	The Board sets, and monitors, its investment restrictions and guidelines, and receives regular Board reports which include performance reporting on the implementation of the investment policy, the investment process and application of the Board guidelines. The Manager attends each quarterly Board meeting.
Gearing - increasing the level of gearing could result in the Company becoming over-geared, unable to meet its financial obligations, or unable to take advantage of potential opportunities and any of these could result in a loss of shareholder value.	The Company has a £40 million credit facility that may be used to fund future commitments. The Board sets a gearing limit and receives regular updates from the Manager on the assets and liabilities of the Company and reviews these at each Board meeting. The Board receives regular reports and modelling from the Manager on the likely pattern of future calls and the expected rate of realisations from the portfolio.
Financial - the financial risks associated with the portfolio could result in losses to the Company. In addition, failure to comply with relevant regulation (including Guernsey Company Law, the Financial Services and Markets Act, the Alternative Investment Fund Managers Directive, Accounting Standards and the FCA's Listing Rules, Disclosure and Prospectus Rules) may have an impact on the Company.	The financial risks associated with the Company include overcommitment risk, market risk, liquidity risk and credit risk, all of which are mitigated through regular consultation with the Manager. The Manager reports to the Board using a range of forecast scenarios to determine the impact of future drawdowns and the likely rate at which future realisations will generate cash. The Manager monitors the Company's liquidity on a frequent basis and provides regular updates to the Board.  Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 20 to the financial statements. The Board relies upon its third party service providers to ensure the Company's compliance with applicable law and regulations and from time to time employs external advisers to advise on specific concerns.
Operational - the Company is dependent on third parties for the provision of all systems and services (in particular, those of the Aberdeen Group and Ipes) and any control failures and gaps in these systems and services could result in a loss or damage to the Company.	The Board receives annual reports from the Manager (ISAE 3402 and six monthly internal controls reports) and from Ipes (AAF 01/06) on internal controls and risk management and receives compliance and administration reports at each Board meeting. It receives assurances from all its significant service providers, as well as back to back assurance from the Manager at least annually. Further details of the internal controls which are in place are set out in the Directors' Report in the Annual Report.
PE Investment - PE investments are long-term in nature and they may take a considerable period to be realised. Unquoted investments are less readily realisable than quoted securities. Such investments may therefore carry a higher degree of risk than quoted securities. In valuing its investments the Company relies to a significant extent on the accuracy of financial and other information the funds in its portfolio provide to the Manager; this information is typically unaudited and updated on a quarterly or six-monthly basis.	Under it investment policy the Company may participate in co-investments, acquire secondary investments as well as subscribing for LP interests. The Manager reviews the valuations produced by the GPs of LP investments and reports to the Board.

 

Promoting the Company

The Board recognises the importance of communicating the long-term attractions of your Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's Shares.  The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by the Aberdeen Group on behalf of a number of investment companies under its management. The Company supports the Aberdeen Group's investor relations programme which involves regional roadshows, promotional and public relations campaigns. The purpose of these initiatives is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's Shares. The Company's financial contribution to the programmes is matched by the Aberdeen Group.  The Aberdeen Group Head of Brand reports at least annually to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make-up of that register.

 

Alternative Investment Fund Managers Directive ("AIFMD")

To comply with the AIFMD, the Company had appointed ASVG as its AIFM until 29 October 2015, with AFML acting as AIFM from 30 October 2015.  The management agreement with AFML complies with the AIFMD regulatory regime and under this arrangement, AFML has been appointed to provide investment management, risk management, administration and promotional services. The Company's portfolio is managed by AAML by way of a group delegation agreement in place between AFML and AAML. In addition, AFML has sub-delegated promotional services to AAML.

 

AFML has notified the UK Financial Conduct Authority in accordance with the requirements of the UK National Private Placement Regime of its intention to market the Company (as a non-EEA AIF under the Directive) in the UK.  The AIFMD requires AFML, as the AIFM of the Company, to make available to investors certain information prior to such investors' investment in the Company. The Company's Pre-investment Disclosure Document ("PIDD") is available for viewing on the Company's website.

 

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge in order to allow the Board to fulfill its obligations.  When Board positions become available as a result of retirement or resignation, the Company ensures that a diverse group of candidates is considered.  No new appointments have been made to the Board since 2009, and at 31 March 2016 there were four male Directors. The Board's Statement on diversity is set out in the Annual Report.

 

Environmental, Social and Human Rights Issues

The Company has no employees as all its executive functions are undertaken by the Manager and other service providers. There are no disclosures to be made in respect of employees.  The Company's socially responsible investment policy is set out in the Annual Report.

 

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have direct responsibility for any other emissions producing sources.

 

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least three times per year. The Board considers the Company to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of five years is an appropriate period over which to report. The Board considers that this period is more representative of a typical PE cycle and reflects a balance between the desirability of looking out over a long term horizon and the inherent uncertainties involved.

In assessing the viability of the Company over the review period the Directors have focussed upon the following factors:

 

-    The principal risks detailed in the Strategic Report

-    The ongoing relevance of the Company's investment objective in the current environment

-    The historical level of demand for the Company's Shares

-    The flexibility of the Company's £40 million loan facility which matures in March 2019

-    Financial modelling including the expected future rate of drawdowns versus likely rate of realisations under varying market conditions

 

Taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of five years from the date of this Report. In making this assessment, the Board has considered that factors such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future. In particular the Board recognises that this assessment makes the assumption that the resolution to continue the Company, which is put to shareholders at every third Annual General Meeting (''AGM''), is passed at the AGM on 13 September 2016 and the AGM to be held in 2019, as it was previously at the AGM held in 2013.

 

Future

Many of the non-performance related trends likely to affect the Company in the future are common across all closed ended investment companies, such as the attractiveness of investment companies as investment vehicles, the impact of regulatory changes (including MiFID II and Packaged Retail Investment and Insurance Products) and the recent changes to the pensions and savings market in the UK.  These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's view on the general outlook for the Company can be found in the Chairman's Statement, whilst the Manager's views on the outlook for the portfolio are included in the Manager's Review.

 

 

Howard Myles

Chairman

11 July 2016

 

 

STRATEGIC REPORT - CHAIRMAN'S STATEMENT

I am pleased to present to shareholders the Annual Report and financial statements of the Company for the financial year ended 31 March 2016.

 

Performance

During the period under review the Net Asset Value ("NAV") per Share rose by 4.6% to 133.33p. Inclusive of the 2.2p dividend paid in September 2015, shareholders received a NAV total return of 6.6%.

 

This NAV performance was driven by both the underlying investment portfolio and favourable currency movements. The portfolio, which retains its bias to US dollar denominated assets, experienced translational gains (in respect of the sterling NAV) following a strengthening in the US dollar versus sterling over the period.

 

Dividend

In 2012 the Board implemented a distribution policy whereby the Company will return a proportion of the net distributions that it receives from its investments by way of a dividend to shareholders. The Board stated then that it intended to distribute approximately 10% of the received distributions (net of recallable distributions) each year, subject to a minimum of 1p per Share per annum, regardless of the distributions received. Accordingly, we are pleased to be able to recommend to shareholders the payment of a dividend of 2.2p per Share (the same level as last year) which, subject to approval of shareholders at the AGM on 13 September 2016, will be payable on 16 September 2016 to shareholders on the register on 19 August 2016. 

 

Going forward, in the absence of unforeseen circumstances, the Board expects to pay at least the same level of dividend for the financial year to 31 March 2017.

 

Share Capital Management

During the period under review no Shares were purchased in the market. The Board will continue to monitor the level of discount to NAV at which the shares trade, both in absolute terms and against the discounts of comparable companies. Accordingly, the Board is seeking to renew the shareholder authority to buy back up to 14.99% of the Company's Share capital at the forthcoming Annual General Meeting.

 

Discount

On 31 March 2016 the share price discount to NAV stood at 34.1%.  Since the period end the NAV has decreased to 130.47p per Share (based upon 31 May 2016 figures, our latest available information) and the discount has narrowed to 32.9%, based on the share price as at that date.

 

As I highlighted in our interim review, listed PE discounts to NAV remain frustratingly wide. Your Board believes this to be unjustified given the relatively low overall exposure of most listed PE funds to more cyclical industries such as mining, oil/gas and banks. NAV growth for the sector has been strong so we continue to believe the gap should ultimately narrow.

 

The Company has produced annualized NAV total returns of 8.4% over the period since the current Manager was appointed^[1] and has received a growing level of distributions from its portfolio.  In particular, we have continued to see exits of underlying companies held in our funds come at an aggregate premium to their most recent valuation. It also produces a yield and for many shareholders the Company continues to provide diversified access to the PE market which can otherwise be difficult to achieve.  We believe that over time these factors will have a positive influence on the market rating of our Shares but the Board is not complacent on this matter and will continue to work with the Manager on ways to reduce the current level of discount.

 

Gearing

On 31 March 2016 the Company entered into a new £40m revolving credit facility with Lloyds Banking Group, an increase from the previous £15m facility. The facility has been renewed at this higher level to support an increased pace of investment and to ensure efficient capital usage. It also provides additional headroom and flexibility in the event that market conditions deteriorate.

 

Continuation Vote

In 2011 the Company's Articles of Incorporation were amended to introduce a three-yearly continuation vote with the first vote being in 2013. This was passed on 25 September 2013, with support from 99.9% of the voting shareholders with 74.7% of all shareholders having voted. At the Annual General Meeting convened for 13 September 2016 Resolution 7 proposes that the Company continue as an Investment Company in accordance with Article 126.

 

In view of the investment returns now being delivered following the renewal of the investment programme in 2010, the premia to book value being achieved by our investee funds on exits from underlying portfolio companies, and the resulting distributions being received from our portfolio, your Board believes that it is in the shareholders' interests that the Company continue. Having taken soundings from our larger shareholders, the Board believes that the majority of shareholders would not support a discontinuation at this time because this would lead to a portfolio run off, a process which is likely to be protracted and where values ultimately realised may be adversely affected as a result of the Company being known to be a forced seller of its assets.

 

Accordingly, your Board recommends that shareholders vote in favour of the Company's continuation. A further continuation vote will be held at the Company's AGM in 2019.

 

Activity Levels

The Manager has been active over the year in redeploying the Company's strong cash flow into new investments, subject to dividend distributions in accordance with the new dividend policy. Four new fund commitments were made:

-    Montagu V, a Northern European buyout fund

-    MML Capital Partners VI, a fund focused on the UK, US and French lower mid-market

-    Latour Capital II, a French lower-mid market fund

-    Wisequity IV, an Italian lower mid-market fund

 

Additionally, the Company made two new co-investments:

 

-    Achilles, a supply chain management business^[2]

-    Hampshire Trust Bank^[3], a UK based 'challenger' bank

 

The Company also disposed of its interest in Resonant Music 1 LP. The Resonant fund invested in original music scores and was no longer deemed a core holding. The sale took place at marginally above the last received NAV and was non-dilutive.

 

Subsequent to the year end the Company has also committed to an additional two funds:

 

-    Northzone VIII, a Nordic focused Venture Capital Fund

-    MTS Health Partners IV,  a US lower mid-market healthcare fund

 

In addition to these new primary investments underlying activity levels have been high, with a number of new companies added to the portfolio via our underlying funds. We have also seen 46^[4] full or partial exits, from these funds.

 

The most significant event within the underlying portfolio was the exit by the Northzone VI fund of its holding of Avito, a Russian classified advertising business. This was a full cash exit, at a significant multiple to its original cost. Avito had been for some time the Company's largest underlying holding, and this disposal led to our receiving Euro10.9m.

 

Our strategy on geographical balance is to retain the portfolio's US bias, though we do expect to see this reduce over time as the effect of our more recent commitments to European funds becomes more pronounced. Whilst valuations in the European lower mid-market space remain relatively attractive, the Manager will continue to prioritise the most compelling opportunities from its global pipeline.

 

Portfolio Performance

The Board is pleased to note the good NAV performance, which has again been generated from a wide range of investment vintages.

 

The Northzone VI fund, discussed above, was the largest contributor to performance, with positive impact from Avito which was marked up in the six month period prior to exit. The fund also saw other holdings being marked up. Northzone was one of the first new investments made by the investment management team following the manager change in 2009 and this welcome exit has meant that distributions from this fund are already now greater than the amount paid into it.

 

The Silver Lake Partners III Fund, the HIG Bayside Debt & LBO Fund, and the Thoma Bravo IX Fund were committed to between 2007 and 2008, and have also helped drive performance with valuation increases from their remaining underlying investments.

A number of funds saw negative returns for the period, and these included Pine Brook Capital Partners and MatlinPatterson Global Opportunities Partners III, which saw the values of some of their public equity investments fall in value.

 

Outlook

In our last Annual Report I expressed some caution on the impact that higher purchase costs for PE assets might have on future returns from this asset class.

 

Whilst we have continued to see elevated pricing levels at the larger end of the deal spectrum, the average purchase price multiple for smaller privately owned companies remains relatively attractive. This has been one of the reasons behind the strategy of adding investments to the portfolio such as Latour Capital and Wisequity, and the new co-investments.

 

Your Board notes the continued rise in PE dry powder^[5] which, in aggregate, remains at record highs. Within that, dry powder as relates specifically to Buyout is at 2008 levels^[6] which may help to underpin current levels of deal pricing. With large proven PE managers continuing to be able to raise significant amounts of new commitments from their Limited Partners, there appears to be continuing strong appetite for this asset class.

 

Private Equity specific risks relate to familiar themes and include, but are not limited to, a continuing decline in the absolute number of PE backed exits since 2014^[7] (in particular a reduction of exits via Initial Public Offering ("IPO")); the increased use of "covenant-lite"^[8] loans by PE borrowers; and a tightening in funding availability for venture-backed investments. More generally, the UK's June referendum on membership of the European Union, and the surprise result to 'leave' may introduce additional layers of uncertainty to nearer term investment outcomes. Much of this will be focused on currency, particularly Sterling, and potential contagion issues for European economies. Your Company's long standing bias to US denominated assets should position us well however to cope with any sustained UK or European weakness. Whilst we may see some shorter term downturn in PE investment activity we believe there will inevitably be compelling investment opportunities for our recently committed to European funds as they commence their investing phases.   Accordingly we remain optimistic on the investment portfolio, and its ability to continue to deliver long term investment performance for Shareholders.

 

 

Howard Myles

Chairman

11 July 2016

 

 

 

 

 

 

STRATEGIC REPORT - MANAGER'S REVIEW

At the end of March 2016, 77.1% of the Company's NAV was invested in 29 PE funds and 5.8% in six co-investments.

 

Performance Commentary

The 29 PE funds in the Company's portfolio invest across a wide range of sectors, geographies and market capitalisations, providing exposure in aggregate to 338 underlying companies^[9].

 

In local currency terms the portfolio generated a total return of 7.4%^[10] for the period under review. Northzone Ventures VI, a 2010 commitment, was the single largest contributor to performance. Older vintage portfolios also helped deliver performance. Across the board the portfolio benefitted from uplifts in carrying value for ongoing investments and gains on exit (whether by IPO, trade or secondary sale).

 

We show below the movement of the Company's investment portfolio from the opening value to the closing value:^[11]

 

Alongside strong performance from our fund investments, we have seen continuing momentum from the Company's co-investment portfolio. Via Mechanics, in particular, has performed well. The company recorded figures ahead of budget which allowed it to complete a dividend recapitalisation^[12] during the period. Alain Afflelou was marked up by Lion Capital based on a returning of momentum in overall group sales.  Dell and Hillman Group (where we invest alongside Silver Lake and CCMP respectively) have also continued to perform to plan. We completed on two new co-investments, Achilles and Hampshire Trust Bank, in October 2015 and February 2016 respectively.

 

Largest Positive Performance by Fund^[13]

Fund	Performance ($m)
Northzone Ventures VI L.P.	+5.3
Thoma Bravo IX Fund L.P.	+2.1
HIG Bayside Debt & LBO Fund II L.P.	+1.9
Longreach Capital Partners 2 L.P.	+1.7
Silver Lake Partners III L.P.	+1.6
Rest of the portfolio	+2.6
Total	+15.2

 

Northzone VI, a European venture fund, performed well over the period with TrustPilot and iZettle producing significant uplifts in value. The largest driver of performance however was Avito, which was sold in November to South African media group, Naspers, in one of the largest ever venture-backed technology deals^[14].

 

Thoma Bravo Fund IX, a US growth and buyout fund, saw all unrealised investments showing positive performance. InfoVista and Deltek produced the largest uplifts and Blue Coat Systems posted a small uplift over its previous carrying value following its sale to Bain Capital in May 2016.

 

HIG Bayside Debt & LBO II generated strong performance with a large proportion of the portfolio producing valuation uplifts over the period. Investments producing significant increases included the two largest assets by Fair Market Value ('FMV'), Surgery Partners, which had an IPO in October 2015, and Caraustar Industries.

 

The Longreach Capital Partners 2 portfolio consists of three investments to date. Over the period, two of these investments, VIA Mechanics, a leading manufacturer of micro-drilling machines for printed circuit boards (PCBs), and Primo, a Japanese bridal jewellery business, produced strong performance and subsequent valuation increases.

 

Silver Lake Partners III's performance is attributable to the uplift in the valuation of its holding in GoDaddy which went public in the US in April 2015 at a premium to held value. Other valuation uplifts were produced by Interactive Data Corporation, which was sold to Intercontinental Exchange during the period, and William Morris Endeavor Entertainment (WME).

 

Largest Negative Performance by Fund^[15]

Fund	Performance ($m)
Oaktree OCM Opportunities Fund VIIb L.P.	-0.5
MatlinPatterson Global Opportunities Partners III L.P.	-0.6
RHO Ventures VI L.P.	-0.7
Longreach Capital Partners 1 L.P	-0.9
Pine Brook Capital Partners L.P.	-1.2

 

We set out above the five largest negative performers over the period. Within each of these funds there was no one significant contributor to negative performance.

 

Weakness in global energy markets impacted holdings in the Oaktree OCM Opportunities VIIb, MatlinPatterson Global Opportunities Partners III L.P and the Pine Brook Capital Partners funds. The Longreach Capital Partners Ireland 1 and RHO Ventures VI funds experienced some writedowns in their portfolio.

 

Portfolio Activity

With a focus on an increased investment pace, the Company was active over the financial year, making a number of new primary fund commitments and co-investments whilst executing on one fund divestiture.

 

Commitments were made to Montagu V (August 2015, €8m), Latour Capital II (November 2015, €10m), MML Capital Partners Fund VI (December 2015, €13m) and Wisequity IV (February 2016, €10m). More information on these investments is provided in the "Private Equity Portfolio". Two co-investments were also completed into Achilles, a leader in collaborative supply chain networks, and Hampshire Trust Bank, a specialist lender targeting the UK SME^[16] market.

 

We also sold the Company's commitment in Resonant Music in February 2016 at marginally above the last NAV.  Despite the attractive business model (royalty income from original music scores developed for movies and TV series') the fund was no longer a core holding. Securing NAV on the sale of this fund was exceptional given that non-mainstream funds such as these typically price in the secondary funds market at a significant discount to their NAV.

 

Calls for New Investments

The Company paid calls of $26.4m over the year in relation to new investments ($31.5m the previous year)^[17] funding 29 new underlying investments and a number of follow-on investments.

 

Five Largest Aggregate Fund Calls (excluding Co - investments)	US$m
A8 A Feeder LP	5.8
MML Capital Partners Fund VI LP	3.2
HIG Bayside Debt & LBO Fund II LP	3.1
Exponent Private Equity Partners III LP	2.7
Resolute Fund III LP	2.0

 

A8 A Feeder or Apax 8 was able to complete nine new investments during the period bringing the fund up to 83% drawn. The nine investments were: Azelis S.A., Shriram City Union, Quality Distribution, Wehkamp, Idealista, Ideal Protein, Zensar Technologies, Full Beauty and Assured Partners.

 

The Company committed to MML Capital Partners VI in December. MML is a €382m fund focusing on small to mid-cap companies in the UK, France and the US. Having held their first close in 2014, the fund has been able to deploy capital in five portfolio companies to date: Luneau Group, CH&Co, Learning Curve, BMB and Iqarus.

 

As a result of a slower investment pace during its investment period, HIG Bayside Debt & LBO II has had significant capital to utilise in its follow-on period. Further capital was invested in portfolio companies such as JW Resources and WhiteHorse Finance.

 

The Company committed to Exponent III in March 2015. The fund has since completed four deals in Big Bus Tours, BBI Diagnostics, Wowcher and Photobox.

 

Resolute Fund III completed the acquisition of DiversiTech Corporation in May 2015 and was also able to complete four follow-on investments in its existing portfolio companies.

 

Distributions

The Company received cash distributions of $42.8m during the period under review (2015: $39.2m).

 

Five Largest Aggregate Fund Distributions (excluding sold investments)	US$m
Northzone VI LP	11.4
Thoma Bravo IX Fund LP	4.7
Gores Capital Partners III LP	3.3
Silver Lake Partners III LP	3.1
Tenaya Capital V LP	2.5

 

Northzone VI completed the sale of Avito, Russia's largest classified advertising website and the Company's largest single underlying holding in October 2015. This was significant news for the Company and for Northzone, allowing for a substantial de-risking of the Company's overall portfolio, given the risk that a material ongoing Russian economic exposure might have posed.

 

A large proportion of Thoma Bravo Fund IX's distributions came from the sale of the fund's largest investment (by cost), Blue Coat Systems. Sizeable proceeds were also received in relation to the fund's investments in Deltek, The Attachmate Group and Local Media San Diego.

 

It was a successful year for Gores Capital III which completed the sale of Therakos to Irish pharmaceutical company Mallinckrodt, representing the largest sale transaction in the history of Gores Capital. The fund was also able to complete the sales of Big Strike and Etrali during the period.

 

The distributions from Silver Lake Partners III relate to the sale of Interactive Data Corporation to Intercontinental Exchange. It also includes significant proceeds from the partial share sell downs in Alibaba, GoDaddy and Virtu Financial following their IPOs in September 2014 and April 2015. Contributions also came from the sale of Hillstone Network.

 

Tenaya Capital V sold its entire holding in New Relic during the period. New Relic completed its IPO in December 2014 with Tenaya's lock-up period ending in June 2015. Furthermore, portfolio company Baixing Holdings sold its Chinese operating company during the third quarter generating a material distribution back to the Company.

 

Market News and PE Environment

In our last report^[18] we said that whilst the global economic recovery had continued, various factors had prompted the International Monetary Fund (IMF) to downgrade their global growth forecasts for 2015 to 3.1% from 3.3%^[19]. With several potential headwinds still remaining for the global economy, including the slowdown in China and low commodity prices it came as no surprise that the IMF again cut its forecast for 2016 to 3.2% ^[20] in April. However a degree of balance to economic sentiment remains in place and with the European Central Bank expanding its monetary stimulus programme and the US tightening interest rates at a slower pace than previously anticipated, we remain broadly optimistic, notwithstanding the 'leave' result from the UK's European Union membership referendum held in June.

 

The precise look and feel of Britain's exit (or 'Brexit'), post the 'leave' result remains to be determined, but it does seem likely that the UK will experience some form of economic slowdown. Our UK exposure remains limited, with just one largely UK focused manager (Exponent) and one co-investment (Hampshire Trust), though other global funds in our portfolio also own UK based businesses. In aggregate our underlying UK exposure accounted, at March 31, for 12.8% of the portfolio.

 

We believe that the immediate impact is likely to be confined to a slowdown in deal activity, particularly in the UK, and further Sterling weakness, though this could also serve to increase the shorter term competitiveness of UK exporters, as well as providing a currency translation benefit to NAV.

 

The PE market has seen valuations continuing to rise, though we note that the share of highly priced deals in Europe (those pricing at > 12x their EBITDA^[21]) dropped in 2015, versus 2014.^[22] Q1 2016 also saw both the number of global PE backed buyout transactions and the aggregate value^[23] of these transactions fall from the previous quarter, which is a sign that some of the overheating in this market may be easing. Whilst there is an element of seasonality in Q1 data, the 69% decline in aggregate deal value^[24] is the greatest quarter on quarter decline over the same period we have seen.  Given matters Brexit related, these trends are likely to be exacerbated going forward, particularly if investors feel that there may be any political contagion into other European countries. 

 

Trade sales continue to be the most common route for PE GPs^[25] to exit with the ten largest buyouts in the first quarter of 2016 exiting in this manner, though the aggregate exit value of $62bn in the same period was the lowest quarterly aggregate value of exits over the last 3 years^[26]. IPOs have fallen to a 4 year low due in part to the volatility seen in financial markets in the first part of this year though there are signs that we may see some IPO exit opportunities later in the year. 

 

Fundraising by PE funds has declined from the exceptionally strong 2014 experienced by the industry. The most recent figures from Q1 2016 saw 151 PE funds raise a total of $71bn, a 25% fall in the number of funds and a 6% increase in aggregate capital raised compared with Q1 in 2015^[27].

 

PE dry powder^[28] has continued to rise and the increase in dry powder globally to $775bn^[29] at the end of Q1 2016 highlights the ongoing challenges that private managers face in putting money to work. The dry powder issue appears to be a multi-cycle phenomenon, and will likely test PE GPs' discipline into the foreseeable future, particular on larger deal sizes. With nearly half of all investors (with at least 10% of their capital allocated to PE) still looking to allocate further to the asset class,^[30] pricing looks set to continue to be an issue for some time notwithstanding any major public market dislocations or prolonged fall out from Brexit.

 

Portfolio Strategy and Outlook

In our Half Yearly Report last year we set out a clear strategy to remain appropriately diversified, to increase our co-investment exposure, and in particular, to focus on the global lower mid-market in terms of primary fund selection. We have since made good progress in building out the portfolio, with these positions now being funded from the cash proceeds of the post-2010 vintage investment programme, as well as continuing distributions from older vintages.  

 

The co-investment programme is delivering high conviction investment ideas into the portfolio and serves to mitigate fee impact from our primary funds programme. Our largest underlying company position is Via Mechanics, an acquisition by Longreach 2 from Hitachi Ltd, and a pioneer in PCB^[31] machining, and is also one of our co-investments^[32]. More recent additions to the co-investment portfolio include Hampshire Trust Bank, a UK challenger bank^[33], and Achilles, a UK based supplier information and supply chain management business. In order to deliver more targeted exposure to co-investments we have also increased our typical deal size to c$4-5m, with an objective of achieving an overall co-investment exposure of around 20-25% of the portfolio. Our approach to sponsor GPs has also expanded to include funds owned on behalf of other Aberdeen Group mandates^[34] thus creating a larger potential investment opportunity set.

 

The primary funds programme has maintained its velocity with four new commitments being made in the financial year. This included MML Capital Partners VI, which we were able to commit to with that fund already having made five investments. This gave us visibility on the quality of the portfolio, and our money was able to be put to work immediately. We continue to aim to identify these opportunities, thereby helping to reduce unnecessary fee drag within the overall investment programme.

 

We are also targeting smaller investment opportunities where the GP may be experiencing less competition for deals and can take advantage of more attractive purchase price multiples. We categorise these as 'harder to find, harder to diligence' opportunities and see these as a key point of differentiation for this investment portfolio.

 

Post the year end we have also been able to approve a new commitment into MTS Healthcare Partners IV, a New York manager focused on small buy outs in the healthcare services arena. We have also recommitted to Northzone (via their Fund VIII) and thus maintain exposure to this talented Nordic venture capital team who have already delivered strong performance to this Company via their Fund VI.

 

As we look at all areas to improve the effectiveness and impact of our investment decisions, we have increased our leverage facility to £40m, in order to allow us to increase our investment pace by using existing cash, but maintaining our historic levels of overall commitment cover.

 

We recognise that valuations remain expensive, but as we have previously noted, many of the managers in our portfolio are well placed to be able to add value through their operational influence, and as such we remain supportive long term investors in PE. Brexit is understandably a very real concern for all investors across all asset classes, but the 'check' effect that this event may have, specifically on UK and European deal pricing, may ultimately serve to be beneficial in taking some of the heat out of this market. As patient long term investors we welcome the opportunities that may present themselves to us, and our selected GPs, over the next 12 to 18 months.

 

Alexander Barr & Colin Burrow

Aberdeen Asset Managers Limited

11 July 2016

 

 

STRATEGIC REPORT - RESULTS

 

As at 31 March 2016

 

Financial Highlights

	31 March 2016	31 March 2015	% change
Total assets{A} (US$'000)	209,135	205,785	+1.6
Total equity shareholders' funds (net assets) (US$'000)	209,135	205,785	+1.6
Share price (mid market) (pence)	87.88	88.13	-0.3
Net asset value per Share (pence)	133.33	127.41	+4.6
Discount to net asset value	34.1%	30.8%
Dividend and earnings
Return per Share{B} (pence)	4.53	6.29
Dividend per Share (pence)	2.20	2.20
Ongoing charges{C}
Excluding performance fee	1.87%	1.79%
Including performance fee	1.87%	2.57%
{A}      Total Assets less current liabilities (before deducting prior charges). Prior Charges is the name given to all amounts which would be repayable in the liquidation of the Company prior to any distribution to the holders of Shares; these comprise borrowings including debentures, long and short term loans and overdrafts that are to be used for investment purposes, reciprocal foreign currency loans, currency facilities to the extent that they are drawn down, index-linked securities, and all types of preference or preferred capital and the income shares of split capital trusts, irrespective of the time until repayment.
{B}      Measures the relevant earnings for the year divided by the weighted average number of shares in issue.
{C}      Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income NAV throughout the year.

 

Performance (total return {A})

	1 year	3 year	5 year
	% return	% return	% return
Share price	+2.3%	+6.2%	+42.7%
Net asset value	+6.6%	+25.8%	+53.0%
Source: Aberdeen Asset Management & Morningstar
{A}        Total return represents capital return plus dividends reinvested on the dividend date.

 

Dividends

	Rate	Ex dividend date	Record date	Payment date
Dividend 2016	2.20p	18 August 2016	19 August 2016	16 September 2016
Dividend 2015	2.20p	20 August 2015	21 August 2015	18 September 2015

 

Investment Portfolio - Schedule of Investments

As at 31 March 2016

		Total	Investment
Investments		Commitments	called/cost{C}	Fair Value	% of
Private Equity Portfolio{A}		US$'000{B}	US$'000	US$'000	NAV
Apax 8 (A8-A(feeder)) L.P.		€ 10,000	9,386	11,882	5.7
CCMP Capital Investors III L.P.		15,000	6,701	7,942	3.8
Coller International Partners V L.P.		15,000	-	3,758	1.8
CVC Capital Partners Asia Pacific IV L.P.		10,000	869	1,118	0.5
Exponent Private Equity Partners III L.P.		£10,000	3,937	3,935	1.9
FFL Parallel Fund IV L.P.		10,000	2,490	2,609	1.3
Goldman Sachs Capital Partners VI L.P.		15,000	5,618	4,669	2.2
Gores Capital Partners III L.P.		10,000	5,600	5,255	2.5
HIG Bayside Debt & LBO Fund II L.P.		15,000	9,272	11,834	5.7
Latour Capital II		€ 10,000	54	21	-
Lion Capital Fund III L.P.		€ 10,000	8,748	13,726	6.6
Longreach Capital Partners Ireland 1, L.P.		7,425	8,385	4,266	2.0
Longreach Capital Partners 2 - USD, L.P.		7,500	3,232	6,327	3.0
MatlinPatterson Global Opportunities Partners III L.P.		10,000	7,351	6,196	3.0
MML Capital Partners Fund VI L.P.		€ 13,000	3,045	3,368	1.6
Montagu V L.P.		€ 8,000	-	-	-
Northzone Ventures VI L.P.		€ 10,000	6,197	8,070	3.9
Oaktree OCM Opportunities Fund VIIb L.P.		15,000	-	1,355	0.7
Pangaea Two Parallel L.P.		5,000	2,221	2,710	1.3
Pine Brook Capital Partners L.P.		10,000	6,292	5,501	2.6
Resolute Fund III L.P.		15,000	3,874	4,845	2.3
RHO Ventures VI L.P.		10,000	9,466	8,035	3.8
Silver Lake Partners III L.P.		15,000	6,231	10,343	4.9
StepStone International Investors III L.P. (formerly Greenpark International Investors III L.P.)		€ 14,600	7,032	4,680	2.2
Tenaya Capital V L.P.		12,500	7,075	7,530	3.6
Tenaya Capital VI L.P.		5,000	3,564	3,875	1.9
Thoma Bravo IX Fund L.P.		10,000	1,531	6,590	3.2
Thomas H Lee Parallel Fund VI L.P.		15,000	5,809	10,543	5.0
Wisequity IV		€ 10,000	-	-	-
			133,980	160,983	77.0
Co-investments{D}
CCMP Co-Invest III A L.P.		1,500	1,500	1,501	0.7
Finvest L.P.		£2,900	-	-	-
Lion Seneca Cayman 3 L.P.		€ 810	988	1,273	0.6
Hg Capital 5 Co-Invest 1 L.P.		£3,000	4,638	4,322	2.1
LVM LP Co-Investment L.P.		1,500	625	2,754	1.3
SLP Denali Co-Invest L.P.		1,242	1,236	2,271	1.1
			8,987	12,121	5.8
Total investments			142,967	173,104	82.8
{A} Includes direct investments and co-investments.
{B} All commitments are in US$ unless otherwise stated.
{C} Investments called/cost represents commitments drawn down less net distributions.
{D} Fair values ascribed to individual co-investments are not disclosed due to commercial sensitivity.
				Fair Value	% of
				US$'000	NAV
Aberdeen Liquidity Funds
Sterling Fund Income				3,577	1.7
US Dollar Fund Income				23,980	11.5
				27,557	13.2
Cash at bank				9,017	4.3
Cash and cash equivalents{E}				36,574	17.5
Other assets less liabilities				(543)	(0.3)
Net current assets				36,031	17.2
Net assets				209,135	100.0
{E} Represents sum of fixed term deposits, Aberdeen liquidity funds and cash.

 

 

Private Equity Portfolio

As at 31 March 2016

 

	Strategy	Geography	Fund Size	Vintage Year	NAV Weighting
Apax 8 (A8-A (feeder)) L.P.	Buyout	Global	€5.8 billion	2012	5.7%
Apax Partners is a large global private equity partnership investing in growth companies across four key sectors: Consumer, Healthcare, Services and Technology and Telecommunications. The firm has a strong operational intervention capability and actively uses this resource to help improve operational efficiencies in their portfolio companies. This fund is currently in its investment period.
CCMP Capital Investors III L.P.	Buyout	US	US$3.6 billion	2013	3.8%
CCMP is a US (and London) based private equity business focusing on predominantly US mid-market buyout transactions. They invest across four sectors: Consumer / Retail, Industrial, Healthcare and Energy. The fund is currently in its investment period and has made its first investments.
Coller International Partners V L.P.	Secondaries	Global	US$4.8 billion	2006	1.8%
Coller Capital is a leading global investor in the private equity secondary market where they seek to make investments in both Limited Partnership interests and portfolios of private companies. Coller have also bought listed private equity funds at deep discounts to NAV. This fund was originally selected for the portfolio to provide the Company with vintage year diversification and a degree of j-curve mitigation. The fund has completed its investment period but continues to make follow on investments.
CVC Capital Partners Asia Pacific IV L.P.	Buyout	Asia	US$3.2 billion	2013	0.5%
CVC Asia is one of the more established private equity partnerships in the Asia-Pacific region. Founded in 1999, CVC Asia has now raised four funds. This, their fourth fund, will invest in 15-20 control or significant minority positions across the Asian region, equally split between South East Asia, China, Japan, Korea, and other regional markets. The fund is currently in its investment period and has made its first investments.
Exponent Private Equity Partners III L.P.	Buyout & Growth	UK	US$1 billion	2015	1.9%
Exponent is a London based GP, focusing on UK upper mid-market deals with an enterprise value ("EV") of £75m to £300m. Most of its transactions will involve buying UK domiciled businesses, though such is the EV range, many of these businesses could have significant overseas elements of manufacturing and/or sales. The fund has now made its first investment and is at the start of its investment period.
FFL Parallel Fund IV L.P.	Buyout	US	US$1.5 billion	2014	1.3%
FFL was established in 1997 to undertake buyout and growth investments in US-middle market companies incorporating top down macro analysis and industry themes within their four core sectors: Business Services, Consumer, Financial Services and Healthcare. The fund is at the start of its investment period and, at the time of writing, has made three investments.
Goldman Sachs Capital Partners VI L.P.	Buyout	Global	US$20.3 billion	2006	2.2%
Goldman Sachs Capital Partners make private equity investments globally across all market capitalisations. This fund did not focus on any particular sector and invested in buy-outs, minority stakes, listed and unlisted companies and across a variety of industries. It also allocated a proportion of the portfolio to stressed and distressed opportunities. The fund has completed its investment period and remains in distribution mode.
Gores Capital Partners III L.P.	Buyout	Global	£2.0 billion	2009	2.5%
Gores is a Los Angeles based global private equity business which invests in both mature and growing businesses. Its approach combines experienced merger and acquisition transaction capability with a strong operational angle. It aims to improve the operating performance of its portfolio companies, many of which are mature or have encountered growth problems. It typically sells its investments to strategic buyers once the businesses have regained a sound footing. This fund has reached the end of its investment period.
HIG Bayside Debt & LBO Fund II L.P.	Distressed	US	US$3.0 billion	2008	5.7%
HIG Capital is a global private equity firm with a number of distinct businesses, including Bayside Capital which invests across several segments of the primary and secondary debt capital markets. Bayside focuses upon three types of transactions: 1) Debt-for-control investments in companies' debt obligations with the intention to take control; 2) Leveraged buy-outs of underperforming, stressed or distressed companies; and 3) Non-control distressed debt opportunistic investments. The fund's investment period finished in May 2014 and we now expect it to move to divestment mode.
Latour Capital II	Buyout & Growth	France	€300 million	2015	-
Latour Capital is a Paris-based private equity firm operating in the small/lower mid-market in France and neighbouring French-speaking countries. It has a strong focus on business services and companies that are either undermanaged or have a specific competitive advantage. Investments are typically in the Enterprise Value range of €30m-€200m. This fund is currently in its investment period and has made its first investment.
Lion Capital Fund III L.P.	Buyout	Europe & US	€1.5 billion	2010	6.6%
Lion Capital is a buyout manager focused on the consumer sector, with a historical bias to Europe although it has also invested in the US. We committed to Lion in order to provide greater exposure to an eventual European consumer recovery, and at a time of competitive European transaction valuations. The fund has invested at a good pace, and whilst the fund is still in its investment period it has already been able to refinance and exit some of its underlying businesses.
Longreach Capital Partners Ireland 1, L.P.	Buyout	Japan, North Asia	US$750 million	2006	2.0%
Longreach is based in Hong Kong and invests in Northern Asia with a particular focus on Japan. Its core strategy is to buy non-core businesses from Japanese conglomerates before selling them subsequently as operationally improved businesses. It also looks at investment opportunities elsewhere in the region and not necessarily with Japan connections. The fund is now past its investment period, in an approved formal extension period and is actively seeking to divest its remaining holdings.
Longreach Capital Partners 2, L.P.	Buyout	Japan, North Asia	US$220 million	2012	3.0%
Longreach is based in Hong Kong and invests in Northern Asia with a particular focus on Japan. Its core strategy is to buy non-core businesses from Japanese conglomerates before selling them subsequently as operationally improved businesses. It also looks at investment opportunities elsewhere in the region and not necessarily with Japan connections. The fund is currently in its investment period.
MatlinPatterson Global Opportunities Partners III L.P.	Distressed	Global	US$5.0 billion	2007	3.0%
MatlinPatterson is a "distressed for control" manager investing on a global basis. The fund invested in companies in distressed situations with the aim of controlling the financial and operational restructuring of the company, and also took minority positions in stressed and distressed situations. The fund has completed its investment period although it is still calling capital for follow on investments.
MML Capital Partners Fund VI L.P.	Buyout	Europe & US	€382 million	2014	1.6%
MML Capital operates in an attractive niche within the lower mid-market in the UK, US and France. It has a flexible approach, partnering with management teams often on a minority basis. It uses creative structuring using junior debt instruments providing downside protection whilst ensuring potential for strong equity upside through significant equity stakes. The fund is currently in its investment period has completed its first investments.
Montagu V L.P.	Buyout & Growth	Europe	€2.75 billion	2015	-
Montagu is a prominent European manager focusing on growth and buyout deals in the UK, France, Benelux, DACH, Nordics and Poland. Its stock-picking strategy is backing mid-size market leading businesses, often in more defensive sectors. It has a proven, long-term origination model based on relationships which frequently makes them management's preferred bidder. The fund is currently in its investment period and has not made its first investment as at 31 March 2016.
Northzone Ventures VI L.P.	Venture capital	Nordics	€130.0 million	2010	3.9%
Northzone primarily invests in technology companies either in the Nordic region or with strong Nordic components that have global potential. The management team looks for opportunities arising from major market transformation. It particularly concentrates on consumer focused internet services, new delivery platforms and network infrastructure. The fund is still in its investment period, although it will now only call capital to fund follow-on investments.
Oaktree OCM Opportunities Fund VIIb L.P.	Distressed debt	Global	US$10.9 billion	2007	0.7%
Oaktree is a distressed debt manager and focuses on acquiring debt securities at discounted prices during stressed and distressed cycles. The manager is capable of taking control and driving the financial and operational restructuring if it does not feel that it is getting the right value from a transaction. The fund has now completed its investment period and is in active divestment mode.
Pangaea Two Parallel L.P.	Growth	Global	US$910 million	2011	1.3%
The manager of this fund is Cartesian Capital, which was founded in 2006 by Peter Yu and the former senior management team from AIG Capital Partners. The firm is a global, opportunistic growth capital investor, with a focus on emerging markets. The investment strategy is based on long-term continuities, driving economic change via technology, politics or demographics. This fund is still in its investment period.
Pine Brook Capital Partners L.P.	Growth	Global	US$1.15 billion	2007	2.6%
Pine Brook is a growth equity manager focusing on mid-to-large-cap growth equity investments in the Energy and Financial Services sectors. The fund's strategy was to invest ahead of current industry practices and trends and to then take advantage of under-served markets. It is a differentiated model in as much as it is willing to invest in start-up entities albeit with established management teams. The fund has now completed its investment period and is in active divestment mode; however, it will still make selective follow-on equity injections to underlying businesses.
Resolute Fund III L.P.	Specialist	US	US$3.2 billion	2013	2.3%
Resolute Fund III is managed by The Jordan Company, a US mid-market private equity business. Its investment focus covers a wide array of industries including Industrial Products and Services, Energy, Chemical, Healthcare and Financial Services. It aims to invest in companies with an enterprise value of between $100m and $2bn and help drive growth via operational improvements.  The Company committed to this Fund in 2014 and it is within its investment period.
RHO Ventures VI L.P.	Venture capital	US	US$510 million	2008	3.8%
RHO Ventures takes minority positions in start-up entities, principally in the Technology and Life Sciences sectors. The manager takes a top-down view as to which sectors have the most favourable conditions and has taken a pragmatic approach to changing investment focus. The fund has now completed its investment period and, although it is still making follow on investments, will divest where appropriate.
Silver Lake Partners III L.P.	Buyout & Growth	Global	US$9.4 billion	2007	4.9%
Silver Lake is a prominent large cap technology investor. The firm invests globally in established, cash-flow generative businesses which are leaders in their respective industries. Silver Lake acts as a partner to management teams, investing with experienced participants to take advantage of opportunities in technology and technology-enabled industries. The fund has now completed its investment period but can still call for capital to fund follow on investments.
StepStone International Investors III L.P. (formerly Greenpark International Investors III L.P.)	Secondaries	Europe	€732.3 million	2006	2.2%
StepStone is a global private markets firm which took over the management of this fund from Greenpark Capital in 2013. Greenpark's focus had been on purchasing limited partnership interests in private equity funds on the secondary market with a focus on Europe. The holding in this fund was originally acquired by the Company to provide vintage diversification and some j-curve mitigation. The fund has now completed its investment period, but continues to make follow on investments (as capital calls are made from underlying funds).
Tenaya Capital V L.P.	Venture capital	US	US$365 million	2007	3.6%
The manager co-invests in the mid to late stage rounds of venture financing of revenue positive, privately held technology companies alongside many of the top-tier venture capital firms in the US. Its aim is to diversify across the technology spectrum, and to actively manage those companies in which it is invested. The fund has now completed its investment period.
Tenaya Capital VI L.P.	Venture capital	US	US$200 million	2012	1.9%
The manager co-invests in the mid to late stage rounds of venture financing of revenue positive, privately held technology companies alongside many of the top-tier venture capital firms in the US. Its aim is to diversify across the technology spectrum, and to actively manage those companies in which it is invested. This fund is currently in its investment period.
Thoma Bravo Fund IX L.P.	Buyout & Growth	US	US$823 million	2008	3.2%
Thoma Bravo is a long-established US equity private equity business with a focus on investing in Software, Services and other Consolidating Industries. It does this by identifying talented management teams operating in a niche industry segment upon which additional acquisitions can be added, in combination with organic growth. The fund has completed its investment period and is in divestment mode.
Thomas H Lee Parallel Fund VI L.P.	Buyout	US	US$8.2 billion	2006	5.0%
Thomas H Lee is a long-established US private equity business with a focus on investing in Business & Financial Services; Consumer & Healthcare; and Media & Information services. It uses its wide network to source deals and deploy management teams to operate the businesses. Thomas H Lee only takes deals where the valuations are attractive and where it believes it will be possible to grow revenues by at least high single digit percentages. The fund has now completed its investment period and whilst it still calls for capital to fund follow on investments, it is in divestment mode.
Wisequity IV	Buyout	Italy	€215 million	2016	0.0%
Milan-based Wise is an established lower mid-market Italian GP. It invests in Italian-headquartered global market leaders with scope for further rapid growth both organically and through acquisitions. The firm looks to take a hands-on approach to value creation working closely with management teams, taking on short term roles within management if required. The fund is at the beginning of its investment period and has not made its first investment.

 

 

TOP TEN HOLDINGS

As at 31 March 2016

			Fair
		Book	Market	NAV
		Cost	Value	Weighting
Holding	Strategy	US$m	US$m	%
Lion Capital Fund III L.P.	Buyout	8.7	13.7	6.6
Apax 8 (A8-A(feeder)) L.P.	Buyout	9.4	11.9	5.7
HIG Bayside Debt & LBO Fund II L.P.	Distressed	9.3	11.8	5.7
Thomas H Lee Parallel Fund VI L.P.	Buyout	5.8	10.5	5.0
Silver Lake Partners III L.P.	Buyout & Growth	6.2	10.3	4.9
Northzone Ventures VI L.P.	Venture capital	6.2	8.1	3.9
RHO Ventures VI L.P.	Venture capital	9.5	8.0	3.8
CCMP Capital Investors III L.P.	Buyout	6.7	7.9	3.8
Tenaya Capital V L.P.	Venture capital	7.1	7.5	3.6
Thoma Bravo IX Fund L.P.	Buyout & Growth	1.5	6.6	3.2
		_____	_____	_____
Top 10 Holdings		70.4	96.5	46.2
		_____	_____	_____

 

 

EXTRACTS FROM THE DIRECTORS' REPORT

The Directors present their report and the audited financial statements for the year ended 31 March 2016.

 

Results and Dividend

Details of the Company's results are shown under Results. The Company's policy is to distribute approximately 10% of the received distributions net of recallable distributions each year subject to a minimum of at least 1p per Share per annum. For the year ended 31 March 2016 the Directors are recommending the payment of a dividend of 2.2p per Share which, subject to shareholder approval at the AGM on 13 September 2016, will be payable on 16 September 2016 to shareholders on the register on 19 August 2016.  In the absence of unforeseen circumstances, the Board expects to pay at least the same level of dividend for the financial year to 31 March 2017.

 

Status

The Company is a Guernsey authorised closed-ended investment company listed on the London Stock Exchange. The Company was incorporated on 5 January 2007 in Guernsey, Channel Islands with registered number 46192. Trading in the Company's Shares commenced on 9 July 2007.

 

The Company is a member of the Association of Investment Companies ("AIC").

 

Individual Savings Accounts

The Company intends to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account ('ISA') and it is the Directors' intention that the Company should continue to be a qualifying investment.

 

The Company currently conducts its affairs so that its securities can be recommended by financial advisers to ordinary retail investors in accordance with the Financial Conduct Authority's rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future.  The Company's securities are excluded from the Financial Conduct Authority's restrictions which apply to non-mainstream pooled investments (NMPIs) because the Company would qualify as an investment trust if it were incorporated in the UK.

 

Share Capital

As at 31 March 2016 there were 109,131,199 Shares in issue. During the year no Shares were issued or purchased in the market for cancellation.

 

Voting Rights

Each Share holds one voting right and shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Shares carry a right to receive dividends. On a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to shareholders in proportion to their shareholdings. There are no restrictions on the transfer of Shares in the Company other than certain restrictions which may be applied from time to time by law.

 

Management Agreement

In the period up to 29 October 2015 the Company was managed by ASVG. On 30 October 2015 the management agreement for the Company was novated to AAML.

 

Throughout the year under review the Manager has been paid by the Company a monthly fee equal to:

 

-    one twelfth of 1.5% of the NAV of the Company before deduction of any performance fee but after deducting liabilities (excluding from such liabilities the amount of any long-term structured bank debt approved by the Board) and deducting cash at bank, short-term deposits and the value of holdings in money market funds; plus

-    one twelfth of 0.75% of the value of all cash at bank, short-term deposits and holdings in money market funds (together the "Fee")

 

The Fee is calculated and accrued as at the last business day of each month and is paid monthly in arrears.

 

There is also a performance fee element to the management agreement.  Applicable for the year ended 31 March 2016, the performance fee element of the management fee has been amended and now incorporates a three year 8% per annum compound return hurdle rate.  In order to earn a performance fee all of the following criteria must be met in a performance fee year:

 

-    The NAV must have risen by more than 8% in the performance fee year

-    The NAV must exceed the high watermark (at which a fee was last paid)

-    The NAV must have risen by more than 8% per annum compound over the previous three performance fee years

 

The performance fee itself is now calculated at 10% of the NAV gain above the hurdle rate in the latest performance fee year, rather than at 10% of the entire NAV gain.  Furthermore the total fees payable to the Manager in any performance period are now capped at 3% (previously 4.99%). The NAV high watermark in relation to any future performance fee is 127.41p per Share.

The Directors review the terms of the Agreement on a regular basis and have confirmed that, owing to the investment skills, experience and commitment of the Manager, in their opinion the continuing appointment of AAML, on the terms agreed, is in the interests of shareholders as a whole.

 

The Agreement will continue in force until the Company is wound-up unless and until terminated earlier by either party giving to the other not less than 12 months' written notice. In certain circumstances the Agreement may be terminated forthwith by notice in writing by a party to the other party, including where key persons depart from the Manager or the Manager is no longer authorised to carry on investment business in the United Kingdom.

 

The Agreement contains indemnities from the Company in favour of the Manager and its associates which are restricted to exclude matters arising by reason of the negligence, wilful default, fraud or breach of the Agreement of or by the Manager or any of its associates. Furthermore, neither the Manager nor any of its associates will be liable to the Company for any loss suffered by the Company in connection with the Agreement, unless the Company has suffered such loss due to the negligence, wilful default, fraud or breach of the Agreement of or by the Manager or any of its associates.

 

Risk Management

Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company are set out in note 20 to the financial statements.

 

Substantial Interests

The Board has been advised that the following shareholders owned 3% or more of the issued Share capital of the Company at 31 March 2016:

 

Shareholder	Number of Shares held	% held
ReAssure Limited	28,470,818	26.1
Hampshire County Council Pension Fund	21,500,000	19.7
Merseyside Pension Fund	18,695,076	17.1
Clients of Aberdeen Asset Managers Limited	5,972,674	5.5
Old Mutual Global Investors	4,705,978	4.3

 

Subsequent to the year-end the Company has been advised that clients of Aberdeen Asset Managers are now interested in 5,384,221 Shares representing 4.9% of the issued class of capital.

 

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 applies the principles identified in the UK Corporate Governance Code ("UK Code") which is available on the Financial Reporting Council's website: frc.org.uk.

 

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance for Guernsey Domiciled Investment Companies which was published in February 2015 ("AIC Guernsey Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Guernsey Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.  The AIC Guernsey Code also explains that Guernsey-domiciled investment companies which report against the AIC Guernsey Code are not required to report separately against the Guernsey Financial Services Commission ("GFSC") Finance Sector Code of Corporate Governance ("Guernsey Code"). In addition, the GFSC required the submission of an assurance statement from companies by no later than 31 July 2012 to confirm that the Directors have considered the effectiveness of their corporate governance practices and are satisfied with their degree of compliance with the principles of the Guernsey Code, or alternative codes accepted by the GFSC. The Board confirms that it has considered and approved the Company's assurance statement which was submitted to the GFSC on 15 June 2012.

 

The Board considers that reporting against the principles and recommendations of the AIC Guernsey Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.

 

The Company has complied with the recommendations of the AIC Guernsey Code and the relevant provisions of the UK Corporate Governance Code, except as set out below.

 

The UK Corporate Governance Code includes provisions relating to:

 

-     the role of the chief executive;

-     the appointment of a senior independent director;

-     executive directors' remuneration; and,

-     and the need for an internal audit function.

 

For the reasons set out in the AIC Code, and as explained in the UK Code, 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 the Company's website, aberdeenprivateequity.co.uk.

 

Directors

The current Directors are Messrs H Myles, D Copperwaite, P Hebson and D Staples. Messrs Myles and Hebson will retire by rotation at the Annual General Meeting and, being eligible, will offer themselves for re-election. 

 

The Directors submit themselves for re-election every three years.  All Directors are considered to be free from any business or other relationship that could materially interfere with the exercise of their independent judgement. Mr Staples was, until 2003, a partner of PwC LLP in the UK ("PwC"). The Board notes that PwC is a separate partnership to PwC CI LLP which acts as auditors to the Company and Mr Staples has no financial or other interest in PwC CI LLP. In view of this the Directors are completely satisfied that Mr Staples is independent notwithstanding the fact that he is a former partner of PwC.  Mr Staples is also a non executive director of the General Partner of Apax 8 (A8-A (feeder)) LP in which the Company has an investment.  In accordance with the Company's policy on the management of possible conflicts of interest, Mr Staples did not take any part in the Board's consideration of the decision to invest in Apax 8 and Mr Staples does not participate in any specific Board discussions relating to the on-going investment in Apax 8.

 

Each Director has the requisite high level and range of business and financial experience which enables the Board to provide clear and effective leadership and proper stewardship of the Company.  The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all Directors contribute effectively.

 

The Board is committed to improving the opportunities for people from a diverse range of backgrounds to understand and prepare for membership of corporate boards. During the period under review an apprentice was appointed from Board Apprentice Limited, which is a not-for-profit organisation dedicated to creating a wider pool of board-ready candidates. For a period of one year, the Board appointed Katie Hutchins as a Board apprentice, and in that capacity, she attended all Board and Committee meetings as an observer for educational purposes. Ms Hutchins received no expenses or remuneration from the Company and her twelve month term of appointment came to an end on 1 May 2016.

 

The Board meets quarterly, with ad hoc meetings in between to deal with issues as they arise. Mr Hebson is a UK resident. In order to be eligible to attend a Board meeting a UK resident Director must be situated outside the UK at the time of the meeting.  The Directors attended the following meetings during the year ended 31 March 2016 (with their eligibility to attend the relevant meetings in brackets):

 

	Scheduled Board	Other Board	Audit	AGM	Other Com
H Myles	4 (4)	4 (3)	3 (3)	1 (1)	3 (3)
D Staples	4 (4)	4 (4)	3 (3)	1 (1)	3 (3)
D Copperwaite	4 (4)	4 (4)	3 (3)	1 (1)	3 (3)
P Hebson	4 (4)	3 (0)	3 (3)	1 (1)	3 (3)

 

The Board has a schedule of matters reserved to it for decision and the requirement for Board approval on these matters is communicated directly to the senior staff of the Manager. Such matters include strategy, gearing, treasury and dividend policy. Full and timely information is provided to the Board to enable the Directors to function effectively and to discharge their responsibilities. The Board also reviews the financial statements, performance and revenue budgets.

 

Board Committees

The Directors have 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 website. The terms of reference of each of the Committees are reviewed and re-assessed by the Board for their adequacy on an ongoing basis.

 

Audit Committee

The Audit Committee Report is in the Annual Report.

 

Management Engagement Committee

The Management Engagement Committee comprises all of the Directors and is chaired by Mr Copperwaite. The Committee reviews the performance of the Manager and the investment management and secretarial agreements and compliance with their terms. The Committee also reviews the engagement terms of all other material third party service providers. The terms and conditions of the Manager's appointment, including an evaluation of fees, are reviewed by the Committee on an annual basis. The Committee believes that the continuing appointment of the Manager on the terms agreed is in the interests of shareholders as a whole.

 

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the entire Board and is chaired by Mr Myles. Possible new Directors are identified against the requirements of the Company's business and the need to have a balanced Board.  Every Director is entitled to receive appropriate training as deemed necessary. A Director appointed during the year is required, under the provisions of the Company's Articles of Incorporation, to retire and seek election by shareholders at the next Annual General Meeting. The Articles of Incorporation require that one third of the Directors retire by rotation at each Annual General Meeting.  The Board's policy is that Directors who have served more than nine years will submit themselves for annual re-election on a voluntary basis. The Board's overriding priority in appointing new Directors to the Board is to identify the candidate with the best range of skills and experience to complement existing Directors. The Board recognises the benefits of diversity in the composition of the Board. When Board positions become available as a result of retirement or resignation, the Company will ensure that a diverse group of candidates is considered. 

 

The Company has put in place the necessary procedures to conduct, on an annual basis, an appraisal of the Chairman of the Board, Directors' individual self-evaluation and an evaluation of the Board as a whole.  Following formal performance evaluations, the performance of each Director, including those seeking re-election continues to be effective and demonstrates commitment to the role. Accordingly, the Board has no hesitation in recommending the re-election of Mr Myles and Mr Hebson at the forthcoming AGM.

 

Remuneration Committee

A Remuneration Committee has been established comprising the entire Board and which is chaired by Mr Hebson.   The remuneration of the Directors has been set in order to attract and retain individuals of a calibre appropriate to the future development of the Company. The Company's policy on Directors' remuneration, together with details of the remuneration of each Director, is detailed in the Directors' Remuneration Report.

 

Management of Conflicts of Interests

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, the Directors are required to disclose 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, 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.

 

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 Aberdeen Group 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 Aberdeen Group's anti-bribery and corruption policies are available on its website aberdeen-asset.com.

 

Internal Control

The Board is ultimately responsible for the Company's system of internal control and risk management and for reviewing its effectiveness. The Board confirms that as at 31 March 2016 there was an ongoing process for identifying, evaluating and managing the Company's significant business and operational risks, that it was in place for the year ended 31 March 2016 and up to the date of approval of the Annual Report, that it is regularly reviewed by the Board and accords with the internal control guidance for directors in the UK Code.

 

The design, implementation and maintenance of controls and procedures to safeguard the assets of the Company and to manage its affairs properly extends to operational and compliance controls and risk management. The Directors have delegated the investment management of the Company's assets to the Manager within overall guidelines, and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by the Manager's internal audit function which undertakes periodic examination of business processes, including compliance with the terms of the management agreement, and ensures that recommendations to improve controls are implemented.

 

Risks are identified and documented through a risk management framework by each function within the Manager's activities. Risk is considered in the context of the FRC and the UK Code guidance, and includes financial, regulatory, market, operational and reputational risk. This helps the Manager's internal audit risk assessment model identify those functions for review. Any weaknesses identified are reported to the Board, and timetables are agreed for implementing improvements to systems. The implementation of any remedial action required is monitored and feedback provided to the Board. The principal risks and uncertainties facing the Company are identified in the Strategic Report.

 

The key components designed to provide effective internal control are outlined as follows:

 

-    the Board and Manager have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board;

-    the Manager prepares forecasts and management accounts which allow the Board to assess the Company's activities and review its performance;

-    internal controls reports (ISAE3402 and AAF 01/06) are reviewed from all key service providers;

-    as a matter of course, the Manager's compliance department continually reviews the Manager's operations; and

-    written agreements are in place which specifically define the roles and responsibilities of the Manager and other third party service providers.

 

The Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place at the Manager, has decided to place reliance on the Manager's systems and internal audit procedures. At its meeting in June 2016, the Audit Committee carried out an annual assessment of internal controls for the year ended 31 March 2016 by considering documentation from the Manager, including the internal audit and compliance functions and taking account of events since 31 March 2016. The results of the assessment were then reported to the Board at the next Board meeting.

 

The system of internal control and risk management is designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the system of internal control and risk is designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss.

 

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. The Manager and the Company's stockbroker aim to meet larger shareholders at least annually. The Annual Report and financial statements are widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the Manager's freephone information service and the Company's website (aberdeenprivateequity.co.uk).

 

The Notice of AGM included within the Annual Report and financial statements is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board or Manager, either formally at the Company's Annual General Meeting, informally following the meeting or in writing at any time during the year via the Company Secretary. The Company Secretary is available to answer general shareholder queries at any time throughout the year.

 

The Board recognises and supports the Manager's investor relations programme which includes active engagement with substantial shareholders. The Directors make themselves available to meet substantial shareholders on an ad hoc basis.  The Board receives regular detailed reports and updates on investor relations from the Manager.

 

Socially Responsible Investment Policy

The Board is aware of its duty to act in the interests of the Company and its shareholders. The Board acknowledges that there are risks associated with investments into privately held companies, via Limited Partnerships ("LPs"), or direct investment, which fail to conduct business in a responsible manner. The Directors, through the Company's Manager, therefore encourage PE General Partners ("GPs") to adhere to best practice across the spectrum of Environmental, Social and Corporate Governance ("ESG") issues.

 

The Manager considers a range of material social, environmental and governance factors in the evaluation of investments into PE funds and direct investments.  Specifically, the investment team considers these factors in line with the Principles for Responsible Investment ("PRI"). Aberdeen Asset Management signed the United Nations Principles for Responsible Investment in 2007. The guide is now known simply as PRI, which has been specifically designed for PE. These are used within the diligence process for new fund investments and in the on-going monitoring of these commitments. The Manager requests specific information on the process that a GP uses in its own due diligence to assess the Company's potential exposure to environmental, social, human capital and governance risks, as well as financial factors. This helps to ensure a holistic approach is taken to risk assessment and that these issues are fully considered within that GP's investment approval process. Where a particular GP lacks transparency on ESG issues, this will be taken into account when making an investment recommendation.

 

Prior to making a commitment, the investment team also undertake due diligence on how the General Partner approaches the reporting of ESG issues to investors and other stakeholders, to ensure that LPs will receive adequate disclosure of any material risks or issues arising during a fund's life.

 

The Manager also requests information on how GPs address ESG issues in their portfolio companies during their period of ownership. Where material issues arise, the Manager becomes fully involved in LP decision making where appropriate, and will track the progress of these issues through to resolution.

 

Annual General Meeting

The Company's Annual General Meeting is convened for 10.30 a.m. on 13 September 2016 at the offices of Ipes (Guernsey) Limited, 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.

 

Continuation of the Company

The Articles of Incorporation require the Company to propose a continuation vote at its Annual General Meeting in 2016 and at every third Annual General Meeting of the Company thereafter. Accordingly Resolution 7 will be proposed at the Annual General Meeting convened for 13 September 2016 as an ordinary resolution requiring a bare majority of votes cast in order for the Company to continue its business as a closed ended investment company.

 

Accountability and Audit

The respective responsibilities of the Directors and the auditors in connection with the financial statements are set out in the Annual Report.

 

Independent Auditors

Our independent auditors, PricewaterhouseCoopers CI LLP ("PwC CI LLP"), have indicated their willingness to remain in office. Resolution 6 will be proposed as an ordinary resolution at the AGM to re-appoint PwC CI LLP as independent auditors for the ensuing year, and to authorise the Directors to determine their remuneration.

 

Disapplication of Pre-emption Rights

Resolution 8 will be proposed as a special resolution at the AGM to provide the Directors with an annual authority to disapply pre-emption rights in respect of up to 10% of the Share capital when issuing Shares and/or selling Shares from treasury. This authority will expire at the conclusion of the AGM in 2017.  Any future issues, or sales of Shares from treasury, will only be undertaken at a premium to the prevailing NAV per Share.

 

Purchase of the Company's Securities

As part of the discount control mechanisms, the Board may consider implementing a Share buy-back (subject to the limitations to be set out in Resolution 9 in the Notice of the Annual General Meeting of the Company and all other applicable laws and regulations) at each quarterly Board meeting should the Shares have been trading at a discount to NAV of 10% or greater for more than 90 days. The Company has the authority to manage demand flows for its Shares by purchasing up to 14.99% of the issued Share capital. Up to 10% may be held within treasury and resold. The remainder will be cancelled. Annual shareholder approval will be sought to renew this authority.

 

Purchases of Shares will only be made through the market for cash at prices below the prevailing NAV per Share (as last calculated) when the Directors believe that it would be in the interests of shareholders generally to do so. No Shares were repurchased in the year ended 31 March 2016.

 

At the Annual General Meeting to be held on 13 September 2016, Resolution 9, a special resolution, will be proposed to renew the Directors' authority to make market purchases of the Company's Shares in accordance with the provisions of the Listing Rules of the Financial Services Authority. Accordingly, the Company will seek authority to purchase up to 14.99% of the current issued Share capital. The authority being sought shall expire at the conclusion of the Annual General Meeting in 2017 unless such authority is renewed prior to such time. Any Shares purchased in this way will either be cancelled and the number of Shares will be reduced accordingly, or the Shares will be held in treasury.

 

Recommendation

Your Board considers each of the AGM resolutions to be in the best interests of the Company and its members as a whole. Accordingly, your Board recommends that shareholders should vote in favour of each of the resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own beneficial shareholdings amounting to 105,658 Shares.

 

Going Concern

The Company's Directors have reviewed the viability and going concern status of the Company and they believe that the Company has adequate resources to continue in operational existence for the foreseeable future. In drawing this conclusion the Directors have taken account of financial modelling of future drawdowns versus the rate of realisations provided by the Manager as well as the availability of the Company's revolving credit facility.  Furthermore, the Directors are recommending shareholders to vote in favour of the continuation vote and, based upon initial discussions with the larger shareholders, they believe that the resolution to continue will be passed. Notwithstanding the resolution being proposed at the forthcoming Annual General Meeting to approve the continuation of the Company, the Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Nevertheless, the Directors are making full disclosure, as required by accounting standards, to indicate the existence of a material uncertainty (the continuation vote referred to above), which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

 

Note 20 to the financial statements includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit risk and liquidity risk. The Directors have undertaken a rigorous review of the Company's ability to continue as a going concern including reviewing the level of the Company's assets and significant areas of financial risk including the level of liquidity, the estimated draw down of commitments and timing of realisations from the portfolio.

 

By order of the Board

 

David Staples

Director

 

Registered Office:

1 Royal Plaza, Royal Avenue

St Peter Port, Guernsey

GY1 2HL

 

11 July 2016

 

 

 

 

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing financial statements for each financial year which give a true and fair view in accordance with applicable Guernsey law and International Financial Reporting Standards, of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing the financial statements, the Directors are required to:

 

-    select suitable accounting policies and apply them consistently;

-    make judgements and estimates that are reasonable and prudent;

-    state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and

-    assess whether the Annual Report and financial statements, taken as a whole, is 'fair, balanced and understandable'.

 

The Directors confirm to the best of their knowledge that:

 

-    they have complied with the above requirements in preparing the financial statements;

-    there is no relevant audit information of which the Company's auditors are unaware.

 

In accordance with Disclosure and Transparency Rule 4.1.12:

 

The Directors confirm to the best of their knowledge that:

 

-    the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-    that in the opinion of the Directors, the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and

-    the Strategic Report, including the Chairman's Statement and the Manager's Review, includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.

 

The Directors are responsible for keeping proper accounting records which 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 (Guernsey) Law, 2008. 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.

 

Each Director confirms that, so far as he is aware, there is no relevant audit information of which the Company's auditors are unaware, and he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information. Additionally, all important events since the year end are properly disclosed in the financial statements.

 

The maintenance and integrity of the Company's website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

For Aberdeen Private Equity Fund Limited

 

David Staples

Director

11 July 2016

 

 

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2016

 

		Year ended	Year ended
		31 March 2016	31 March 2015
	Notes	US$'000	US$'000
Gains on investments	13	11,180	16,279
Income	4	78	52
Currency gains/(losses)		40	(505)
Investment management fee	5	(2,833)	(2,685)
Performance fee	5	-	(1,568)
Other operating expenses	6	(1,211)	(1,372)
Tax incurred on distribution income	7	(142)	(46)
		_____	_____
Profit attributable to equity shareholders		7,112	10,155
		_____	_____
Earnings per share (sterling pence)	9	4.53	6.29
		_____	_____
The Company does not have any income or expense that is not included in profit for the year, and therefore the "Profit attributable to equity shareholders" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised).
All of the profit and total comprehensive income is attributable to the equity holders of the Company.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.

 

 

BALANCE SHEET

As at 31 March 2016

		As at	As at
		31 March 2016	31 March 2015
	Notes	US$'000	US$'000
Non-current assets
Financial assets held at fair value through profit or loss	10	173,104	175,125
Current assets
Cash and cash equivalents		36,574	32,649
Tax receivable	7	-	35
Trade and other receivables	14	666	29
		_____	_____
		37,240	32,713
		_____	_____
Creditors: amounts falling due within one year
Trade and other payables	15	(1,050)	(2,053)
Net current assets		36,190	30,660
		_____	_____
Creditors: amounts falling due after more than one year
Trade and other payables	15	(159)	-
		_____	_____
Net assets		209,135	205,785
		_____	_____
Share capital and reserves
Share capital	16	-	-
Share premium	16	229,199	229,199
Revenue reserves	17	(20,064)	(23,414)
		_____	_____
Equity shareholders' funds		209,135	205,785
		_____	_____
Net asset value per share (sterling pence)	18	133.33	127.41
		_____	_____

 

 

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2016
	Share capital &	Revenue
	Share premium	reserves	Total
	US$'000	US$'000	US$'000
Balance at 31 March 2015	229,199	(23,414)	205,785
Dividend paid	-	(3,762)	(3,762)
Profit attributable to equity shareholders	-	7,112	7,112
	_____	_____	_____
Balance at 31 March 2016	229,199	(20,064)	209,135
	_____	_____	_____
For the year ended 31 March 2015
	Share capital &	Revenue
	Share premium	reserves	Total
	US$'000	US$'000	US$'000
Balance at 31 March 2014	229,199	(30,025)	199,174
Dividend paid	-	(3,544)	(3,544)
Profit attributable to equity shareholders	-	10,155	10,155
	_____	_____	_____
Balance at 31 March 2015	229,199	(23,414)	205,785
	_____	_____	_____
The accompanying notes are an integral part of the financial statements.

 

 

STATEMENT OF CASH FLOWS

	Year ended	Year ended
	31 March 2016	31 March 2015
	US$'000	US$'000
Cash flows from operating activities
Profit for the year	7,112	10,155
Net interest income from cash and cash equivalents	(78)	(52)
Gains on investments	(11,180)	(16,279)
Tax incurred on investment distributions	93	60
Distribution income from investments	2,497	4,932
Realised gains on investee distributions	28,125	13,415
Tax incurred on investment distributions	(93)	(60)
Realised currency losses on investment distributions	(2,925)	(504)
Capital calls in relation to investee expenses	(3,260)	(3,069)
Purchases of investments including calls	(26,402)	(31,520)
Sales of investments and returns of capital	15,166	21,409
(Decrease)/increase in trade and other payables	(844)	1,607
Decrease in trade and other receivables	(602)	78
	_____	_____
Net cash outflow from operating activities	7,609	172
Cash flows from investing activities
Net interest income from cash and cash equivalents	78	52
	_____	_____
Net cash inflow from investing activities	78	52
Cash flows from financing activities
Equity dividends paid	(3,762)	(3,544)
	_____	_____
Net cash outflow from financing activities	(3,762)	(3,544)
	_____	_____
Net change in cash and cash equivalents for the year	3,925	(3,320)
	_____	_____
Cash and cash equivalents at beginning of the year	32,649	35,969
	_____	_____
Cash and cash equivalents at the end of the year	36,574	32,649
	_____	_____

 

 

NOTES TO THE FINANCIAL STATEMENTS:

 

For the year ended 31 March 2015

1.	General information
	Aberdeen Private Equity Fund Limited (the "Company") was incorporated with limited liability and registered in Guernsey on 5 January 2007. The Company's shares were listed on 9 July 2007 whereupon the Company became a closed-ended investment company, domiciled in Guernsey. The Company is authorised by the Guernsey Financial Services Commission.

 

2.	Accounting policies
	The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements;
	(a)	Basis of preparation
		The financial statements are prepared on a going concern basis under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.
		Notwithstanding the resolution being proposed at the forthcoming Annual General Meeting to approve the continuation of the Company, the Directors had, at the time of approving the financial statements, a reasonable expectation that the Company had adequate resources to continue in operational existence for the foreseeable future. Thus they have continued to adopt the going concern basis of accounting in preparing the financial statements. Further detail is included in the Directors' Report.
		The financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").
		The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates which requires management to exercise its judgement in the process of applying the accounting policies. Actual results may differ from these estimates. It is in the area of valuation of investments where management are required to exercise judgement in the adoption of critical estimates and judgements which can impact the carrying values of investments.
		At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective;
		IFRS 7 (amendments) - Financial Instruments: Disclosure (effective 1 January 2016)
		IFRS 9 - Financial Instruments (revised, early adoption permitted) (effective for annual periods beginning on or after 1 January 2018).
		IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (date to be determined)
		IFRS 15 - Revenue from Contracts with Customers (effective 1 January 2018)
		IFRS 16 - Leases (effective 1 January 2018)
		IAS 1 - Disclosure Initiative (effective 1 January 2016)
		IAS 7 - Additional disclosure of changes in liabilities arising from financial activities (effective 1 January 2017).
		IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016)
		IAS 27 - Equity Method in Separate Financial Statements  (effective 1 January 2016)
		The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Company's financial results in the period of initial application although there will be revised presentations to the Financial Statements and additional disclosures. The Company intends to adopt the Standards in the reporting period when they become effective.
	(b)	Financial assets
		i)	Classification
			A financial asset or financial liability at fair value through profit or loss is a financial asset or liability that is classified as held-for-trading or designated at fair value through profit or loss on inception.
			Financial assets that are not held at fair value through profit or loss include certain balances due from brokers and accounts receivable. Financial liabilities that are not at fair value through profit or loss include certain balances due to brokers and accounts payable.
		ii)	Recognition
			The Company recognises financial assets and financial liabilities on the date it becomes party to the contractual provisions of the investment. Purchases and sales of financial assets and financial liabilities are recognised using trade date accounting. From trade date, any gains and losses arising from changes in fair value of the financial assets or financial liabilities are recorded in the Statement of Comprehensive Income.
		iii)	Fair value measurement principles
			Financial assets and liabilities are initially recorded at their transaction price and then measured at fair value subsequent to initial recognition. Gains and losses arising from changes in the fair value of the 'financial assets or financial liabilities at fair value through profit or loss' category are presented in the Statement of Comprehensive Income for the period in which they arise.
			Financial assets classified as receivables are carried at amortised cost less any impairment losses. Financial liabilities, other than those at fair value through profit or loss, are measured at amortised cost using the effective interest rate method.
			IFRS 13 'Fair Value Measurement' aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS.
		iv)	Investees
			The Company's investments in investees (that is, limited partnerships, co-investments and companies in the investment portfolio) are subject to the terms and conditions of the respective investee's offering documentation. The investments in the investees are valued based on the reported Net Asset Value ("NAV") of such assets as determined by the administrator or General Partner of the investee and adjusted by the Directors in consultation with the Manager to take account of concerns such as liquidity so as to ensure that investments held at fair value through profit or loss are carried at fair value. The reported NAV is net of applicable fees and expenses including carried interest amounts of the investees and the underlying investments held by each investee are accounted for, as defined in the respective investee's offering documentation. While the underlying fund managers may utilise various model-based approaches to value their investment portfolios, on which the Company's valuations are based, no such models are used directly in the preparation of fair values of the investments. The NAV of investees reported by the administrators may subsequently be adjusted when such results are subject to audit and audit adjustments may be material to the Company.
		v)	Cash and cash equivalents
			Cash and cash equivalents consist principally of cash on hand, demand deposits and short-term, highly liquid investments with original maturities of three months or less.
		vi)	Listed securities
			Listed investments are designated upon initial recognition as at fair value through profit or loss. Investments are recognised on the trade date at cost. Listed investments are derecognised when the right to receive cash flows from the investments has expired or the Company has transferred substantially all risks and rewards of ownership. Subsequent to initial recognition, investments are valued at fair value which for listed investments is deemed to be last trade market prices. If an asset or a liability measured at fair value has a bid price and an ask price, the standard requires valuation to be based on a price within the bid-ask spread that is most representative of fair value and allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurement within a bid-ask spread. On adoption of the standard, the Company elected to use last traded price for valuing listed assets, where this falls between the bid-ask spread. Gains and losses arising from changes in fair value are presented in the Statement of Comprehensive Income for the period in which they arise.
	(c)	Interest income and dividend/distribution income
		Interest income on cash and cash equivalents is accrued using the effective interest method. Dividend income and income from investees is recognised in gains on investments when the right to receive payment is established. Dividend income and income from investees is recognised gross of tax deducted at source, which is recognised as an operating expense.
	(d)	Realised and unrealised gains and losses
		Realised gains and losses arising on the disposal of investments are calculated by reference to the proceeds received on disposal and the average cost attributable to those investments, and are recognised in the Statement of Comprehensive Income. Unrealised gains and losses on investments held at fair value through profit or loss are also recognised in the Statement of Comprehensive Income.
	(e)	Foreign currency
		i)	Functional and presentation currency
			The investments which the Company makes are primarily denominated in US Dollars. The Board of Directors considers US Dollars as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in US Dollars, which is the Company's functional and presentation currency.
		ii)	Transactions and balances
			Foreign currency transactions are translated into the functional and presentation currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies other than US Dollars are recognised in the Statement of Comprehensive Income.
	(f)	Expenses
		All expenses recognised in the Statement of Comprehensive Income are on an accruals basis.
	(g)	Share issue expenses
		Expenses which are directly incurred only on the issue of shares are written off against the share premium account.
	(h)	Statement of Cash Flows
		For the purpose of the Statement of Cash Flows, the Company considers balances due to and from banks as cash and cash equivalents.
	(i)	Dividends payable
		Dividends which are proposed as final dividends for shareholder approval are recognised upon shareholder approval being granted. Interim dividends which are declared by the Board and do not require shareholder approval are recognised upon their declaration.
	(j)	Distributions in-specie
		Distributions in-specie have been designated upon initial recognition as at fair value through profit or loss. Thereafter the assets are valued at fair value and in line with the relevant accounting policy.
	(k)	Other receivables and payables
		Other receivables do not carry any interest and are short-term in nature, and are, accordingly, stated at their amortised cost. Other payables are non-interest bearing and are stated at their amortised cost.

 

3.	Segmental information
	The Company engaged in a single segment of business during the year: investment in the Private Equity Funds (including direct and co-investments) portfolio. A reconciliation of movements in value during the year can be found in notes 10 and 13 where additional analysis has been provided for the benefit of shareholders. Whilst the Company details holdings of investments in Private Equity Funds (including direct and co-investments) and Quoted Equities, these are considered a single business segment and are not monitored or reported on separately to management. The holdings in Quoted Equities were acquired as part of an in-specie distribution from one of the underlying Private Equity investments and were not deemed to be a separate activity or investment strategy of the Company prior to the disposal of the final remaining holding during the previous financial year. The Company did not have any holdings in Quoted Equities during the current year.
	The Company is domiciled in Guernsey. All of the Company's income from investments is from underlying investments that are incorporated in countries other than Guernsey.
	The Company has a diversified portfolio of investments and in accordance with the Company's investment policy no single investment may account for more than 20% of the Company's net assets at the date of investment.

 

		2016	2015
4.	Income	US$'000	US$'000
	Net interest income from cash and cash equivalents	78	52
		_____	_____

 

		2016	2015
5.	Management fees	US$'000	US$'000
	Investment management fee	2,833	2,685
		_____	_____
	During the year ASVG provided management services to the Company until 30 October 2015. Following an acquisition by AAM PLC of the remaining shares in ASVG, the Company was managed by AFML with effect from 30 October 2015. AFML also acts as the alternative investment fund manager (AIFM) of the Company and delegates the portfolio management of the Company to AAML.
	Under the terms of the management agreement the basis of the monthly fee to be paid to the Manager is equal to one-twelfth of 1.5% of the NAV of the Company before deduction of any performance fee but after deducting liabilities (excluding from such liabilities the amount of any long-term structured bank debt approved by the Board) and deducting cash at bank, short-term deposits and the value of holdings in money market funds plus one-twelfth of 0.75% of the value of all cash at bank, short-term deposits and holdings in money market funds. The fee is calculated and accrued as at the last business day of each month and is paid monthly in arrears. At 31 March 2016 US$239,000 was outstanding (31 March 2015 - US$239,000).
	At the time of the launch of the Company the previous manager entered into agreements to share part of its management fee with certain shareholders that had subscribed to the original offer. These arrangements are continuing to the extent that original shareholders have remained continuously interested in the Company's shares.
		2016	2015
		US$'000	US$'000
	Performance fee	-	1,568
		_____	_____
	In addition, the Manager is entitled to a performance fee subject to certain conditions.
	In order to earn a performance fee all of the following criteria must be met in a performance fee period:
	-    the NAV must have risen by more than 8% in the performance fee period;
	-    the NAV must exceed the high watermark (at which a performance fee was last paid); and
	-    the NAV must have risen by more than 8% per annum compounded over the previous three performance periods.
	The performance fee itself is calculated at 10% of the NAV gain above the hurdle rate in the performance period. Furthermore, the total fees payable to the Manager in any performance period is capped at 3% of NAV. As at 31 March 2016 US$nil was payable (31 March 2015 - US$1,568,000).

 

		2016	2015
6.	Other operating expenses	US$'000	US$'000
	Administration fees{A}	176	192
	Auditors' fees:
	-    audit	74	80
	-    for review of the interim report	22	26
	-    for taxation services{B}	-	61
	Bank charges	4	5
	Brokerage fees	52	56
	Custody fees	15	18
	Depositary fees	19	31
	Directors' fees	195	237
	Directors' and officers' insurance	18	24
	Legal and professional fees{C}	195	197
	Loan facility fees	206	269
	Printing and communication{D}	136	91
	Travel expenses	10	11
	Listing fee	14	9
	Registrar's fees	40	31
	Regulatory fees	12	7
	Subscription fees	19	19
	Other expenses	4	8
		_____	_____
		1,211	1,372
		_____	_____
	{A}    The Administrator is paid by the Company a fee of £105,000 (US$176,000) per annum plus disbursements. The contract notice period is 90 days. At 31 March 2016 £29,000 (US$42,000) was outstanding (31 March 2015 - £28,000 (US$41,000)).
	{B}    During the year ended 31 March 2015 certain taxation services include tax planning and advice in respect of determining the Company's reporting obligations in the US as a result of taxes being incurred on distributions were undertaken by PwC US. These services were approved by the Audit Committee and appropriate safeguards put in place to ensure the auditors' independence was not impacted. The auditors are PwC CI LLP and the Audit Committee notes that PwC CI LLP is a separate network firm from PwC US. Subsequent to the completion of these services by PwC US the Company engaged Ernst & Young LLP to undertake taxation services.
	{C}    Included within the total are costs of US$nil (2015 - US$100,000) attributable to the renewal of the loan facility and costs of US$37,000 (2015 - US$62,000) related to taxation services provided by Ernst & Young LLP and PWC US respectively.
	{D}    Included in the total are costs attributable to the Company's agreement with AAML ('AAML') for the provision of promotional activities in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement were £74,000 (2015 - £40,000) and the sum due to AAM at the year end was £45,000 (2015 - £6,000).

 

7.

Taxation

The Company is subject to federal and state tax on effectively connected income ("ECI") received from certain of its underlying portfolio holdings in the US. Such taxes are deducted by the investee from income before being paid to the Company. Upon filing the Company's annual tax return with US authorities the Company will be able to assess whether any ECI tax paid on its behalf may be recoverable. Nil was identified as recoverable at 31 March 2016 (31 March 2015 - US$35,000). In certain circumstances, the Company is also in a position to receive recoverable withholding taxes on distribution income from underlying holdings. During the year ended 31 March 2016, the Company incurred state taxes of US$49,000 and withholding tax expenses of US$248,000 and received withholding tax refunds of US$155,000, therefore amounting to a net tax expense for the year of US$142,000. The Company is domiciled and registered for taxation purposes in Guernsey where it pays an annual exempt status fee (which is currently £1,200) under The Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989 (as amended). Consequently, the Company does not pay income or corporation taxes there and, other than in the US as noted above, does not currently suffer such taxes anywhere else.

 

		2016	2015
8.	Dividends	US$'000	US$'000
	Proposed dividend for 2016 - 2.20p (2015 - 2.20p)	3,451	3,553
		_____	_____
	The proposed dividend for 2016 has not been included as a liability in these financial statements as it is subject to shareholders' approval at the Annual General Meeting which is scheduled for 13 September 2016 (2015 - US$ nil).

 

9.

Earnings per share

The basic earnings per share is calculated by dividing the return attributable to shareholders of £4,948,000 (US$7,112,000); (2015 - £6,861,000) (US$10,155,000)) by 109,131,199 (2015 - 109,131,199) shares, the weighted average number of shares in issue during the year. There were no potentially dilutive shares in issue at 31 March 2016 (31 March 2015 - nil). Whilst the Company has chosen to report basic earnings per share in a currency other than its functional and presentation currency as supplementary information it has complied with the requirements of IFRS including the translation method.

 

		2016		2015
		Private Equity	Quoted	Private Equity
		Funds	Equities	Funds	Total
10.	Financial assets at fair value through profit or loss	US$'000	US$'000	US$'000	US$'000
	Cost at beginning of year	131,609	391	128,830	129,221
	Additions	26,402	414	31,106	31,520
	Disposals and return of capital	(15,166)	(851)	(20,558)	(21,409)
	Realised gains/(losses) on investments	122	46	(7,769)	(7,723)
		_____	_____	_____	_____
	Cost at end of year	142,967	-	131,609	131,609
	Unrealised gains on investments	30,137	-	43,516	43,516
		_____	_____	_____	_____
	Fair value at end of year	173,104	-	175,125	175,125
		_____	_____	_____	_____
	As at 31 March 2016 (2015 - same) there was one operating segment, being Private Equity Funds (including direct and co-investments).

 

11.	Unconsolidated structured entities
	The Company invests in investment funds and has assessed whether these investees should be classified as unconsolidated structured entities in accordance with IFRS 12 - Disclosure of Interests in Other Entities. These investees are closed-end private equity limited partnerships or investment companies which invest in underlying companies for the purposes of capital appreciation. These entities are generally financed through committed capital from limited partners or shareholders, with cash being drawn down for financing investment activity. The Company has considered the voting rights and other similar rights afforded to investors in these investees, including the rights to remove the General Partner or liquidate the investee. The Company has concluded that these rights or the contractual agreement with the General Partner is the dominant factor in controlling the investees.
	As at 31 March 2016, the Company's maximum exposure to loss attributable to these entities comprises the current carrying value of the assets, along with the uncalled committed capital relating to those investments, as summarised below:
		31 March 2016	31 March 2015
		US$'000	US$'000
	Financial assets held at fair value through profit or loss	173,104	175,125
	Uncalled commitments	122,816	92,422
		________	________
	Maximum loss exposure	295,920	267,547
		________	________

 

12.	Fair value hierarchy
	IFRS 7 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making measurements.
	Fair value estimation
	The Company has adopted IFRS 13 'Fair Value Measurement'. The fair value of financial assets and liabilities traded in active markets is based on quoted market prices at the close of trading on the period end. If a significant movement in fair value occurs immediately subsequent to the close of trading on the period end date, valuation techniques will be applied to determine the fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
	Investments in private equity funds, including co-investments, may not have a readily available market and are therefore valued based on the fair value of each private equity fund as reported by the respective General Partner as per the capital account summary statement, normally updated and received on a calendar quarterly basis, which includes estimates made by those General Partners. The Board and Manager believe that this value, in most cases, represents fair value as of the relevant statement date, although, if other factors lead the Board or Manager to conclude that the fair value attributed by the General Partner does not match their estimate of actual fair value, the Board and Manager will adjust the value of the investment from the General Partner's estimate. The Board and Manager estimate fair value using publicly available information and the most recent financial information provided by the General Partners, as adjusted for cash flows since the date of the most recent financial information. As the key input into the model is official valuation statements, we do not consider it appropriate to put forward a sensitivity analysis on the basis insufficient benefit is likely to be derived by the end user. 97% by value of the portfolio has been valued using 31 March 2016 quarter-end valuations and 3% has been valued using an estimate of value at 31 March 2016.
	The Company has classified fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement of the instrument in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the financial asset or liability.
	The determination of what constitutes "observable" requires significant judgement by the Directors in consultation with the Manager. The Directors consider observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
	The following tables summarise by level within the fair value hierarchy the Company's financial assets and liabilities at fair value as follows:
		Level 1	Level 2	Level 3	Total
	31 March 2016	US$'000	US$'000	US$'000	US$'000
	Financial assets at fair value through profit and loss	-	-	173,104	173,104
		_____	_____	______	_______
		Level 1	Level 2	Level 3	Total
	31 March 2015	US$'000	US$'000	US$'000	US$'000
	Financial assets at fair value through profit and loss	-	-	175,125	175,125
		_____	_____	_______	_______
	A reconciliation of fair value measurements in Level 3 is set out in the following table (Private Equity Funds includes co-investments):
					Private Equity
					Funds
	Year ended 31 March 2016				US$'000
	Opening balance				175,125
	Purchases including calls				26,402
	Sales and return of capital				(15,166)
	Total gains or losses on investments included in Statement of Comprehensive Income:
	- on assets sold				122
	- on assets held at the year end				(13,379)
					_______
					173,104
					_______
					Private Equity
					Funds
	Year ended 31 March 2015				US$'000
	Opening balance				162,981
	Purchases including calls				31,106
	Sales and return of capital				(20,558)
	Total gains or losses on investments included in Statement of Comprehensive Income:
	- on assets sold				(7,769)
	- on assets held at the year end				9,365
					_______
					175,125
					_______

 

13.	Net changes in fair value of financial assets at fair value through profit or loss
	The net realised and unrealised investment gain or loss from financial assets at fair value through profit or loss shown in the Statement of Comprehensive Income is analysed as follows:
		2016	2015
		US$'000	US$'000
	Unrealised (losses)/gains on investments	(13,379)	9,228
	Capital calls in relation to investee expenses{A}	(3,260)	(3,069)
	Realised gains/(losses) on disposal of investments	122	(7,723)
	Realised gains on investee distributions	28,125	13,415
	Realised currency losses on investee distributions	(2,925)	(504)
	Distribution income from investments	2,497	4,932
		_____	_____
		11,180	16,279
		_____	_____
	{A} Capital call expenses relate to management fees and other expenses paid to investees.

 

		2016	2015
14.	Trade and other receivables	US$'000	US$'000
	Prepayments	654	25
	Accrued interest	12	4
		_____	_____
		666	29
		_____	_____
	The fair value of trade and other receivables approximates carrying value due to the short-term nature of these instruments.

 

		2016	2015
15.	Trade and other payables	US$'000	US$'000
	Due within one year
	Management fees	239	239
	Performance fee	-	1,568
	Loan facility arrangement fee	474	-
	Other expenses	337	246
		_____	_____
		1,050	2,053
		_____	_____
	Due after more than one year
	Loan facility arrangement fee	159	-
		_____	_____
	The fair value of trade payables approximates carrying value due to the short-term maturity of these instruments.

 

		2016	2015
16.	Share capital and share premium	US$'000	US$'000
	Share capital
	Management shares
	Authorised: 10,000 shares of £1 each
	2 Management shares of £1 each	-	-
		_____	_____
		-	-
		_____	_____
		2016	2015
		US$'000	US$'000
	Ordinary shares
	Authorised: unlimited number of shares of no par value
	Share capital and share premium issued and fully paid
	Opening balance of 109,131,199 (2015 - 109,131,199) Sterling shares	229,199	229,199
	Nil (2015 - nil) Sterling shares repurchased/issued during the year	-	-
		_____	_____
	Closing balance of 109,131,199 Sterling shares	229,199	229,199
		_____	_____
	The authorised share capital of the Company on incorporation was £10,000 divided into 10,000 shares of £1.00 each. On 31 May 2007 a special resolution was passed by the Company to increase the share capital to an unlimited number of participating shares of no par value ("shares"), which upon issue, the Directors were able to designate as Sterling shares, US Dollar shares or otherwise as determined by the Directors at the time of issue, and 10,000 Management shares of £1.00 each.
	The shares were issued on 4 July 2007 as a result of the Company announcing the placing and offer for subscription of its shares on 6 June 2007. Shareholders' rights attaching to the Sterling shares are detailed within the "Glossary of Terms and Definitions" in the Annual Report.
	Following approval by shareholders of the Share Conversion Proposal on 3 June 2010, all the US Dollar shares were converted into new Sterling shares on 2 July 2010, on the basis of 0.5810 new Sterling shares for every US Dollar share held.
	The Company's Sterling shares give shareholders the entitlement to all of the capital growth in the Company's assets and to all the income from the Company that is resolved to be distributed. The Sterling shares are in registered form and traded on the London Stock Exchange's Main Market.  Subject to the Articles of Incorporation, on a show of hands every registered holder of Shares (a shareholder) who is present in person (or, being a corporation, by representative) shall have one vote. On a poll every shareholder present in person (or, being a corporation, by representative) or by proxy shall be entitled to one vote in respect of each Share held by him. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the Shares. On a winding up of the Company, following payment to the holders of Management Shares of any sums up to the nominal amount paid up thereon, the assets of the Shares available for distribution among the holders of Shares shall be distributed amongst the holders pro rata to the number of such Participating Shares held by each shareholder and no holder of Shares shall have any claim against the Company or any remaining assets of the Company in respect of any shortfall.

 

		2016	2015
17.	Revenue reserves	US$'000	US$'000
	Opening revenue reserves	(23,414)	(30,025)
	Profit attributable to equity shareholders	7,112	10,155
	Dividend paid	(3,762)	(3,544)
		_____	_____
	Closing revenue reserves	(20,064)	(23,414)
		_____	_____
	Revenue reserves attributable to shareholders	(20,064)	(23,414)
		_____	_____

 

18.

Net asset value

The NAV of each share is determined by dividing the net assets of the Company attributable to the shares of £145,505,000 (US$209,135,000); (2015 - £139,044,000 (US$205,785,000)) by 109,131,199 (2015 - 109,131,199) shares, being the number of shares in issue at the period end. Whilst the Company has chosen to report NAV per share in a currency other than its functional and presentation currency as supplementary information it has complied with the requirements of IFRS including the translation method.

 

19.	Commitments
	The table below summarises commitments to the underlying investments of the Company at 31 March 2016
			Total		Outstanding
		Currency	Commitments	Currency	Commitments
		'000	US$'000	'000	US$'000
	Apax 8 (A8-A (feeder)) L.P.	€ 10,000	11,396	€ 1,739	1,982
	CCMP Capital Investors III L.P.		15,000		7,589
	Coller International Partners V L.P.		15,000		3,270
	CVC Capital Partners V-A L.P.		10,000		8,839
	Exponent Private Equity Partners III, LP	£10,000	14,373	£7,051	10,134
	FFL Parallel Fund IV LP		10,000		7,259
	Goldman Sachs Capital Partners VI L.P.		15,000		3,319
	Gores Capital Partners III L.P.		10,000		1,924
	HIG Bayside Debt & LBO Fund II L.P.		15,000		2,341
	Latour Capital II L.P.	€ 10,000	11,396	€ 9,700	11,054
	Lion Capital Fund III L.P.	€ 10,000	11,396	€ 2,665	3,037
	Longreach Capital Partners Ireland 1, L.P		7,425		280
	Longreach Capital Partners 2 - USD, L.P.		7,500		2,664
	MatlinPatterson Global Opportunities Partners III L.P.		10,000		469
	MML Capital Partners Fund VI	€ 13,000	14,815	€ 10,141	11,556
	Montagu V L.P.	€ 8,000	9,117	€ 7,882	8,982
	Northzone Ventures VI L.P.	€ 10,000	11,396	€ 488	556
	Oaktree OCM Opportunities Fund VIIb L.P.		15,000		1,500
	Pangaea Two Parallel L.P.		5,000		2,350
	Pine Brook Capital Partners L.P.		10,000		1,083
	Resolute Fund III L.P.		15,000		10,639
	Rho Ventures VI L.P.		10,000		-
	Silver Lake Partners III L.P.		15,000		2,345
	StepStone International Investors III LP(formerly Greenpark International Investors III L.P.)	€ 14,600	16,638	€ 506	577
	Tenaya Capital V L.P.		12,500		1,188
	Tenaya Capital VI L.P.		5,000		1,124
	Thoma Bravo Fund IX L.P.		10,000		-
	Thomas H Lee Parallel Fund VI L.P.		15,000		1,259
	Wisequity IV	€ 10,000	11,396	€ 9,938	11,325
	Co-investments		13,646		4,171
			_______		_______
	As at 31 March 2016		352,994		122,816
			_______		_______

 

20.

Financial risk management

The Company maintains positions in a variety of investees as determined by its investment management strategy.

The investees' own investing activities expose the Company to various types of risks that are associated with the financial investments and markets in which they invest. The significant types of financial risks, to which the Company is exposed are market risk, credit risk and liquidity risk.

Asset allocation is determined by the Company's Manager which manages the allocation of assets to achieve the investment objectives as detailed in the Strategic Report. Achievement of the investment objectives involves taking risks. The Manager exercises judgement based on analysis, research and risk management techniques when making investment decisions. Adherence to target asset allocations and the composition of the portfolio is monitored by the Board.

Risk management framework

The directors of Aberdeen Fund Managers Limited collectively assume responsibility for obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.

AFML is a fully integrated member of the Aberdeen Group, which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. AFML has delegated the day to day administration of the investment policy to Aberdeen Asset Managers Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). AFML has delegated responsibility for monitoring and oversight of the Investment Manager and other members of the Aberdeen Group which carry out services and support to APWML to Aberdeen Fund Managers Limited.

The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD").

The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.

The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.

Risk management

The significant types of risk that the Company is exposed to are detailed below:

a)

Capital management risk

-       the Company may not be able to continue as a going concern, and

-       the balance between equity capital and debt may become inappropriate resulting in an adverse impact on returns to shareholders.

The capital of the Company is represented by the net assets attributable to the holders of the Company's shares.

It is the Board's policy to monitor and review the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which any return of capital may be made to equity shareholders via dividends or share repurchases. The Board normally seeks to limit gearing to 25% of the net assets. Capital transactions undertaken during the year are disclosed in the Chairman's Statement.

b)

Market risk

The potential for adverse changes in the fair value of the Company's investment portfolio is referred to as market risk. Commonly used categories of market risk include currency risk, interest rate risk and other price risk.

-       Currency risk may result from exposure to changes in spot prices, forward prices and volatilities of currency exchange rates.

-       Interest rate risk may result from exposures to changes in the level, slope and curvature of the various yield curves, the volatility of interest rates, and credit spreads.

-       Other price risk is the risk that the value of an instrument will fluctuate as a result of changes in market prices other than those arising from currency risk or interest rate risk.

i) Market risk management

The Company's unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Manager provides the Company with investment recommendations that are consistent with the Company's objectives.

The valuation method of these investments is described within the accounting policies. The nature of some of the Company's investments, which are unquoted investments in private equity funds and co-investments, means that the investments are valued by the Manager on behalf of the Company after due consideration of the most recent available information from the underlying investments as adjusted where relevant by the Directors. While the underlying fund managers may utilise various model-based approaches to value their investment portfolios, on which the Company's valuations are based, no such models are used directly in the preparation of fair values of the investments.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The investments of the Company are subject to normal market fluctuations and the risks inherent with investment in financial markets. The maximum risk resulting from financial instruments held by the Company is determined by the fair value of the financial instruments. The Manager moderates this risk through careful selection of funds managed by experienced fund managers, which meet the investment objectives outlined in the Strategic Report; the Company's market risk is managed through diversification of the investment portfolio. Through a variety of analytical techniques, the Manager monitors, on a daily basis, the Company's overall market positions, as well as its exposure to market risk.

ii) Currency risk

The Company has assets and liabilities denominated in currencies other than US Dollars, its functional currency. The Company is therefore exposed to currency risk, as the value of the assets and liabilities denominated in other currencies fluctuates due to changes in exchange rates. During the year ended 31 March 2016, the value of Sterling decreased by 2.89% (2015 - decreased 11.01%) against the US Dollar, resulting in a decrease of US$239,000 (2015 - US$158,000) in the US$ NAV. At 31 March 2016, an opposite movement of a similar scale in the value of Sterling against the US Dollar would, with all other variables held constant, increase the NAV of the Company by approximately US$239,000 (2015 - US$158,000).

During the year ended 31 March 2016, the value of the Euro increased by 5.33% (2015 - decreased 20.13%) against the US Dollar, resulting in an increase of US$2,150,000 (2015 - decrease of US$8,255,000) in US$ NAV. At 31 March 2016, an opposite movement of a similar scale in the value of the Euro against the US Dollar would, with all other variables held constant, decrease the NAV of the Company by approximately US$2,141,000 (2015 - increase of US$8,255,000).

The table below summarises the Company's exposure in US Dollars to currency risks at the year end:

As at 31 March 2016

US'000

£'000

€'000

Total

Assets/(liabilities)

Financial assets at fair value through profit or loss

121,829

8,257

43,018

173,104

Cash and cash equivalents

29,995

3,644

2,935

36,574

Other assets and liabilities

(543)

-

-

(543)

_______

_______

_______

_______

Total at 31 March 2016

151,281

11,901

45,953

209,135

_______

_______

_______

_______

As at 31 March 2015

US'000

£'000

€'000

Total

Assets/(liabilities)

Financial assets at fair value through profit or loss

133,865

1,595

39,665

175,125

Cash and cash equivalents

29,856

534

2,259

32,649

Other assets and liabilities

(1,989)

-

-

(1,989)

_______

_______

_______

_______

Total at 31 March 2015

161,732

2,129

41,924

205,785

_______

_______

_______

_______

iii) Interest rate risk

The Company is exposed to interest rate risk. The Company invests primarily in private equity funds and private equity like funds that are non interest bearing investments, mainly subject to market risk. Interest receivable on bank deposits or payable on loan positions will be affected by fluctuations in interest rates. Changes to prevailing interest rates or changes in expectations of future rates may result in an increase or decrease in the value of the securities held. In general, if interest rates rise, the value of fixed income securities will decline. A decline in interest rates will, in general, have the opposite effect.

Although the majority of the Company's financial assets and liabilities are non interest bearing, cash and cash equivalents represent 18% of the Company's NAV (31 March 2015 - 15%). As a result, the Company is subject to some risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates.

As at 31 March 2016 the Company's interest bearing assets and liabilities, all of which receive or pay interest at a variable rate, were as follows:

2016

2015

US$'000

US$'000

Cash and cash equivalents

36,574

32,649

_____

_____

Based on the cash and cash equivalents held at 31 March 2016, a movement of 1% in market interest rates would impact the Company's annual income by approximately US$366,000 per annum (2015 - US$326,000 per annum).

iv) Other price risk

Other price risk is the risk that the value of the investees' financial investments will fluctuate as a result of changes in market prices, other than those changes arising from currency risk or interest rate risk whether caused by factors specific to an individual investment, its issuer or any factor affecting financial investments traded in the market.

As the Company's investments are carried at fair value with fair value changes recognised in the Statement of Comprehensive Income, all changes in market conditions will directly affect the overall NAV.

The investments are valued based on the latest available unaudited price of such shares or interests as determined by the administrator or General Partner of each investee. Furthermore, valuations received from the administrators or General Partners of the investees may be estimates and such values are generally used to calculate the NAV of the Company. Such estimates provided by the administrators or General Partner of the investees may be subject to subsequent revisions which may not be restated for the purpose of the Company's final month-end NAV.

Currency, interest rate and other price risk are managed by the Company's Manager as part of the integrated market risk management processes.

c)

Credit risk

The Company takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Manager has adopted procedures to reduce credit risk related to the Company's dealings with counterparties. Before transacting with any counterparty, the Manager or its affiliates evaluate both creditworthiness and reputation by conducting a credit analysis of the party, its business and its reputation. The credit risk of approved counterparties is then monitored on an ongoing basis, including periodic reviews of financial statements and interim financial reports as needed. Impairment provisions are provided for losses, if any, that have been incurred by the Balance Sheet date.

At 31 March 2016 and 31 March 2015, the following financial assets were exposed to counterparty credit risk: cash and cash equivalents and other receivables. The carrying amounts of financial assets best represent the maximum credit risk exposure at the year end date.

The Company places cash deposits with counterparties whose credit ratings are all investment graded. Ratings for fixed deposits, as rated primarily by Moody's that subject the Company to credit risk at 31 March 2016 and 31 March 2015 are noted below:

2016

2015

Credit ratings for short-term notes

Rating

% of NAV

Rating

% of NAV

Standard Chartered

A1

2.5

A1

3.4

Barclays Bank

A2

1.7

A2

0.3

The Company has also placed funds within Aberdeen Liquidity Funds which are rated by S&P at 31 March 2016 and 31 March 2015 as noted below:

2016

2015

Credit ratings for short-term funds

Rating

% of NAV

Rating

% of NAV

Sterling Fund Income

A-1

1.7

A-1

0.2

Euro Fund Income

A-1

-

A-1

1.0

US Dollar Fund Income

A-1

11.5

A-1

10.9

d)

Liquidity risk

The Company's financial instruments include investments in unlisted securities, which are not traded in an organised public market and may generally be illiquid. Although this illiquidity is considered as part of the investment valuations, should the Company be required to dispose of such investments in a short time-frame, an action that is not consistent with the Company's investment objective, the Company may have difficulty liquidating quickly its investments in these instruments at an amount close to fair value in order to respond to its liquidity requirements or to specific events.

The financial liabilities of the Company comprise trade and other payables. The Company will generally retain sufficient cash and cash equivalent balances to satisfy trade and other payables as they fall due.

The Company's outstanding commitments are detailed in note 19. When an over-commitment approach is followed, the aggregate amount of capital committed by the Company to investments at any given time may exceed the aggregate amount of cash that the Company has available for immediate investment, so there is a risk that the Company might not be able to meet capital calls when they fall due. To manage this risk, the Company holds an appropriate amount of its assets in cash and cash equivalents together with a selection of readily realisable investments.

In planning the Company's commitments, the Manager takes into account expected cash flows to and from the portfolio of fund interests and, from time to time, may use borrowings to meet draw downs; these expected cash flows are monitored against actual draw downs and distributions on a monthly basis to assess the level of additional commitments that can be made and how much cash needs to be kept on hand. The Directors have resolved that the Company may borrow up to 25% of its NAV for short-term or long-term purposes. As at 31 March 2016, the Company had a revolving credit facility in place of £40 million (2015 - £15 million).

The table below sets out the liquidity risk of the Company as at 31 March 2016 and 31 March 2015. All liabilities represent amounts falling due within twelve months. Amounts due within twelve months equal their carrying balances.

Less than one year

Less than one year

2016

2015

Financial liabilities

US$'000

US$'000

Trade and other payables

1,050

2,053

_____

_____

Based on on-going communications with General Partners and the Manager's best estimates as at 31 March 2016, the outstanding commitments could be drawn down with the following maturity profile:

2016

2015

Maturity

US$ million

US$ million

Less than 3 months

11

12

3-6 months

8

9

6-12 months

14

13

1-2 years

19

23

Greater than 2 years

70

35

_____

_____

122

92

_____

_____

There is no guarantee of this call rate. Any new investments or secondary sales made will alter these figures and assumptions.

As at 31 March 2016, an analysis of the financial instruments by category shows assets at fair value through profit or loss of US$172,341,000 (2015 - US$175,125,000), deposits and receivables of US$36,586,000 (2015 - US$32,653,000) and other financial liabilities totalling US$891,000 (2015 - US$2,053,000).

 

21.	Related party transactions and transactions with Service Providers
	Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report in the Annual Report.
	During the year, the Company had an agreement with ASVG until 30 October 2015 and thereafter AFML for the provision of management services following the acquisition of remaining shares in ASVG by AAM. AFML also acts as the alternative investment fund manager (AIFM) of the Company and delegates the portfolio management of and the provision of promotional activities for the Company to AAML. ASVG, AFML and AAML are all wholly owned subsidiaries of AAM PLC. The change reflected an internal re-organisation within AAM and the same team continues to be involved in the management of the Company. ASVG was released and discharged from the Management Agreement made between ASVG and the Company dated 18 July 2014 with AFML having become party thereto in place of ASVG. Performance fee arrangements under the management agreement were amended by way of a deed. The Company has an agreement with Ipes (Guernsey) Limited for the provision of administration and secretarial services, an agreement with Ipes (UK) Limited for the provision of depositary services and an agreement with BNP Paribas Securities Services Guernsey for the provision of custody services. Details of certain transactions during the year and balances outstanding at the year end are disclosed in notes 5 and 6.
	As at 31 March 2016, the Company had holdings amounting to US$27,557,000 (2015 - US$24,988,000) in Aberdeen Liquidity Funds which are managed and administered by AAML. The Company pays a management fee of 0.75% per annum on the value of these holdings but no fee is chargeable at the underlying fund level. Details of these holdings can be found within the Investment Portfolio.

 

22.	Controlling party
	In the opinion of the Directors on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party.

 

23.	Exchange rates
	As at 31 March 2016 and 31 March 2015, the exchange rates used (against US$) in preparation of these financial statements are as follows:
		2016	2015
		US$	US$
	Sterling	1.4373	1.4800
	Euro	1.1396	1.0819

 

24.	Geographical analysis
	Geographic breakdown is determined by the geographical area in which each Fund has indicated that it will invest:
		2016	2015
		US$m	US$m
	North America	67.6	65.7
	Global	59.3	64.8
	Europe	31.7	30.0
	Asia & Other	14.5	14.6
	The Company engages in a single segment of business as detailed in note 3 to the financial statements and geographical analysis is provided as supplemental information.

 

25.	Subsequent events
	On 4 May 2016 the Company committed €12,000,000 to Northzone VIII L.P. and on 23 May 2016 US$15,000,000 was committed to MTS Health Partners IV L.P.
	Other than this there were no material subsequent events.

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

 

The above financial information does not constitute statutory financial statements as defined in Section 262 of The Companies (Guernsey) Law, 2008. The comparative information is based on the statutory financial statements for the year ended 31 March 2015. Those financial statements, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. Statutory financial statements for the year ended 31 March 2016 will be filed in due course.

 

The Annual General Meeting of the Company will be held at 10.30 a.m. on 13 September 2016 at 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey GY1 2HL.

 

The audited Annual Report and Financial Statements incorporating the Notice of Annual General Meeting will be posted to shareholders during July. Copies may be obtained during normal business hours from the Company's Registered Office, 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey GY1 2HL Channel Islands or from the Manager, Bow Bells House, 1 Bread Street, London EC4M 9HH.  Further copies will be available for download from the Company's website www.aberdeenprivateequity.co.uk.

 

Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 

By order of the Board

Ipes (Guernsey) Limited

Company Secretary

11 July 2016