SVG Capital

Results for the 13 months to 31 January 2015

Fifth consecutive year of double digit returns

·    NAV per share growth of 14% to 588p

·    Continued strong performance of the investment portfolio

-  10% total return in the 13 months, despite the significant headwinds of foreign exchange

-  In constant currencies the portfolio generated a total return of 17%

-  Fifth consecutive year of double digit returns

·    Good progress on new investment strategy

-  £467m committed to private equity since 2012

-  Post-2012 investments now account for 24%[1] of the investment portfolio

-  Weighted average earnings and revenue growth of 12% and 10% respectively[2]

·    $100m commitment to FFL, a leading US mid-market private equity investor

-  Invests in lower middle market companies with a typical enterprise value of $100m to $500m

·    Record period for distributions - £330m in total

-  In addition, £300m of distributions announced since 31 January

·    Good pipeline of new investment opportunities

-  Expect to make at least one further commitment this year and further co-investments

·    £470m capital return target reached[3]

-  Further tender offer of up to £70m in May 2015[4], taking total capital returned since December 2011 to £540m, well in excess of target

-  Pricing of the tender offer will be with reference to share price and adjusted 31 January 2015 NAV

-  Will continue to return excess capital through share buybacks and tenders

·    Balance sheet remains strong and good coverage of £367m of uncalled commitments

Lynn Fordham, CEO of SVG Capital commented: "This is our fifth consecutive year of double digit growth with significant gains across the portfolio, despite the significant headwinds of foreign exchange.  The period also marked a record year for distributions with £330 million of proceeds received from the portfolio. Against this we have paid £177 million of calls as the transition to post-2012 investments gathers pace. New investments now account for 24%[5] of the portfolio with a number of the investments reporting strong operating performance.

Since the announcement of the change of investment strategy in 2011 we have returned £470 million of capital to shareholders and committed £467 million to new private equity investment, balancing longer term net asset growth with efficient balance sheet management.   The forthcoming tender offer of up to £70 million takes total capital returned to shareholders to well in excess of our £470 million target and we will continue to return excess capital to shareholders through share buybacks and tenders, dependent on market conditions and our investment pipeline."

For further information, please contact:

Copies of the press release and other corporate information, including the shareholder presentation, can be found on the company website at: http://www.svgcapital.com 

Forward-looking statements - this announcement contains certain forward-looking statements with respect to the portfolio of investments of SVG Capital and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast. 

Chairman's statement

The Company has continued to perform well. Strong investment returns and significant realisation activity in the investment portfolio translated into an increase of 14% in net asset value per share to 588p, together with capital returns to shareholders aggregating £205 million, including tenders of £100 million and share buybacks of £105 million.

We have also made good progress towards the Company's strategic goals with commitments to two leading US private equity managers and three co-investments added to the portfolio in the year; post 2012-investments now represent 24%^[6] of the investment portfolio. The investment portfolio will continue to evolve as we add carefully selected managers and investments in the US and Europe.

Since the change to our investment strategy three years ago, we have committed £467 million to new private equity investments and returned £458 million of capital to shareholders, balancing the need for efficient balance sheet management with longer-term net asset growth. In addition £238 million has been used to repay or service debt. Since the period end, we have returned a further £12 million[7] of capital to shareholders and are seeking permission at our AGM in May for one or more tender offers, with the first of up to £70 million expected in May. This will take total capital returned to shareholders since December 2011 to £540 million, well in excess of our £470 million target. The pricing of the next tender offer will be with reference to the share price and the adjusted 31 January 2015 NAV[8]. Disciplined capital allocation remains an essential principle of our investment strategy, and we will continue to return excess capital to shareholders, dependent on market conditions and our investment pipeline. Given the nature of private equity investment and realisations, we anticipate that capital returns will be through share buybacks and tenders, rather than through a fixed dividend.

At different points of the cycle, different areas of the private equity asset class will be attractive and our strategy is to invest across the asset class dependent on market conditions, targeting superior risk-adjusted returns for our shareholders in our asset allocation and investments. 

Currently, our largest investment weighting is to mid to large buyout transactions. In this part of the market, our exposure to the underlying assets is through commitments to funds and co-investments alongside a select number of leading private equity managers. Our exposure to small to mid-sized transactions will be through commitments to funds, such as our recent commitment to FFL in the US, and directly through specific co-investments.  In smaller investments, where we believe control offers access to better risk-adjusted returns, we are also prepared to be a lead investor, leveraging off the direct investment experience of our investment team.

The global economic recovery remains uneven, with the US and UK achieving a growth rate of 2.4% and 2.6% respectively in 2014^[9], while the Eurozone continues to see relative stagnation, leading to substantial additional monetary stimulus from the European Central Bank. In aggregate, leverage levels across the developed economies have not reduced since 2008, but have been transferred from the banks to the public sector balance sheet.  Against a background of slow growth, the burden of public sector debt remains daunting and in some instances unsustainable. Given this challenging economic outlook and heightened geopolitical concerns, we expect markets to remain volatile. At the same time deflationary risks in the Eurozone and elsewhere, together with expected monetary tightening in the US, are likely to weigh on sentiment. 

While this volatility may impact the exit and financing markets, a period of dislocation could translate subsequently into an attractive investment environment. We expect to make at least one, if not two further fund commitments and to make further co-investments this year. Given the strength of the Company's balance sheet, we are well positioned to take advantage of investment opportunities as they arise.

I am fortunate to have the support of a hardworking and capable Board, with a diverse set of skills and backgrounds. During the year, Caroline Goodall stepped down from the Board after four years and I would like to reiterate my thanks for her valuable contribution during a period of significant progress. Helen Mahy joined the Board in July bringing with her a broad range of legal and commercial experience and we are delighted to have her as a colleague.  

CEO's statement

Significant realisation activity and the strong performance of some of the quoted portfolio companies have translated into a 10% total return from our investment portfolio. This is our fifth consecutive year of double digit returns, and has been achieved despite the significant headwinds of foreign exchange, with the euro depreciating by 11% against sterling. In constant currencies, the total return on the investment portfolio over the 13 month period was 17%.

The period also marked another record period of distributions, with over £330 million of proceeds received from our portfolio. Our 10 largest companies now represent 66%[10] of the gross investment portfolio, down from 88% at the end of 2013 with several of the post-2012 investments featuring in our 10 largest companies. Looking across the portfolio, performance has been driven by both our holdings in the more mature Permira funds, in particular Freescale and also the SVG Diamond portfolio. The post 2012 investments, which reported weighted average earnings and revenue growth of 12% and 10% respectively[11], also made a positive contribution to returns.

The transition to the post-2012 investments will continue to gather pace as we invest across the asset class through a differentiated strategy of accessing attractive opportunities, whether that is through funds, co-investments or in select smaller opportunities as lead investors.

During the year we made new commitments to two leading managers, CCMP Capital and FFL, both investing in the US market. The US private equity market is the largest and most developed market and we believe it presents a significant opportunity for SVG Capital to generate superior risk-adjusted returns through the cycle. To date, we have made commitments to three leading US managers: Clayton Dubilier & Rice, CCMP Capital and FFL, which together give us access to a broad cross section of investment opportunities in the US. In Europe, we have commitments to two leading private equity managers, Cinven and Permira, both investing in mid to large buyout transactions and giving us access to investments in both European and global companies. We will continue to selectively add to our manager relationships over the coming years with a view to creating a portfolio of eight to 10 managers.

We have also started to lay the foundation for our co-investment portfolio with three co-investments made in 2014 and good visibility on potential further investments in 2015. Co-investments are a core part of our strategy and we will look to invest selectively in transactions that we believe are in the manager's particular area of expertise. Dependent on market conditions and investment opportunities we may also co-invest alongside other private equity investors or as a lead investor on a deal by deal basis.

Turning to the wider market, 2014 was a steady year for private equity with buyout activity in both the US and Europe remaining relatively flat, in terms of deal value, compared to 2013. Pricing in both the US and Europe rose in 2014 to near peak 2007 levels following a period of stable pricing in the preceding three years. This has been driven by a competitive environment, good supply of leverage and a continued general rise in asset prices. Managers have also continued to take advantage of the strong exit market, as evidenced by our record year of distributions in 2014.

Against this backdrop and a continued uncertain macro-economic outlook, we believe investment discipline is paramount. Private equity investors need a clear strategy on the types of business they are seeking to acquire and an approach that enables a granular view on how they will develop the business once under their ownership. Amongst the characteristics we seek in our managers are a clear sector focus and the ability to implement operational improvement over the life of their ownership. These characteristics enable managers to originate in their preferred sub-sectors, demonstrate credibility with management and vendors and, through a proactive operational improvement approach, deliver both more certain and enhanced returns even in less favourable economic environments.

Looking forward, we have a portfolio of high-quality businesses. The portfolio has continued to be highly cash generative and after allowing for the forthcoming tender offer and the repayment of our outstanding convertible bonds we will have net cash balances of £212 million[12].  Against this we have uncalled commitments of £367 million, a healthy pipeline of potential new investments and we expect to add at least one new manager to the portfolio this year. Over the last few years we have returned a significant amount of capital to shareholders and will continue to return excess capital to shareholders through share buybacks and tenders, dependent on the market conditions and the investment pipeline.  

With an outlook of macro-economic uncertainty and volatility in the markets, we are well positioned to take advantage of investment opportunities through disciplined and cautious investment.

Financial review

Investment activity
For the fifth year in succession, the investment portfolio has been cash generative with investment proceeds of £330 million[13] significantly outweighing calls paid of £177 million.

Of the £177 million of calls paid, £159 million or 90% were for post-2012 investments, including three co-investments. To date £197 million[14] of calls have been paid to the post-2012 investment portfolio and we expect the pace of calls to continue to gather pace.

Returns of capital
During the period, the Company returned £205 million to Shareholders through two £50 million tender offers priced at 480p per share and £105 million of share buybacks at an average price of 422p per share resulting in an accretion of 5% or 26p per share to the NAV over the period. The 21 million shares repurchased through the tender offers have been cancelled.

Since 31 January 2015, an additional 2 million shares have been repurchased at an average share price of 479p[15] per share.  The Company is also seeking shareholder permission at the forthcoming AGM for one or more tender offers, with the first of up to £70 million expected in May, which will take total capital returned to shareholders since December 2011 to £540 million.

Cash balances and borrowings
The Company had gross cash balances of £135 million at 31 January 2015. Adjusting cash balances for the Company's convertible bonds which mature in June 2016, net cash balances were £38 million, or 3% of Shareholders' funds. During the period the Company increased its revolving credit facility ("RCF") with Lloyds Bank plc, The Royal Bank of Scotland plc, and State Street Bank and Trust Company by €50 million and extended the maturity date to December 2019. The Company now has an available RCF of €300 million. The RCF was undrawn throughout the period.

With no senior debt outstanding at 31 January 2015, the Loan to Value ratio ("LTV") was nil. The Company does have outstanding convertible debt, repayable in June 2016, but this debt is subordinated to the senior loan facility and therefore has no impact on the LTV ratio.

Uncalled commitments
Uncalled commitments increased to £367 million from £292 million at 31 December 2013 due to new commitments made during the period, including CCMP and FFL, as the portfolio continues to be rebalanced towards new long-term growth opportunities. The Company remains well capitalised with a strong balance sheet and is well placed to meet these commitments with net cash balances of £38 million and an undrawn facility of £225 million (€300 million), giving commitment coverage of 0.7x.

Valuation of Aberdeen SVG Private Equity
Following the sale of 50% of SVG Advisers to Aberdeen Asset Management in May 2013, Aberdeen has the option to buy the remaining stake in the business in May 2016. The option price is determined by a pre-agreed valuation basis and is subject to a minimum value of £20 million and a maximum value of £35 million. In addition the Company also benefits from its share of the accumulated profits until the option is exercised. At 31 January 2015, the Company's remaining holding in the business was valued on a discounted cash flow basis at £41 million.

Foreign exchange
The strengthening of sterling against the euro had a negative impact on portfolio gains. In aggregate, foreign exchange movements resulted in a negative return of £74 million. Sterling has continued to appreciate against the euro, which will have a negative impact on the portfolio value but will also reduce the exposure to euro-denominated uncalled commitments.

Investment Portfolio Review

Listed below are the Company's 10 largest fund investments by value at 31 January 2015.

The investment portfolio has delivered its fifth consecutive year of double digit growth, reporting a total return of 10%, despite the significant headwinds of negative foreign exchange movements on valuations.  In constant currencies the investment portfolio generated a total return of 17%.

Looking across the portfolio, returns have been driven by a combination of positive share price movements in some of our larger quoted portfolio companies, realisation activity and robust earnings and revenue growth.  In addition, the non-core strategy investments and in particular the SVG Diamond fund of funds programme has also contributed to the strong performance of the portfolio.

Core strategy portfolio (£812m - 77% of investment portfolio)
The core strategy portfolio of management buyout funds and co-investments generated a total return of 8% over the 13 months to 31 January 2015.

The largest valuation gain in the period was the £70 million write-up of SVG Capital's holding in Freescale, reflecting the 100% increase in the company's share price and positive foreign exchange movements. Freescale's five business units reported double-digit growth during the year with performance driven by new leadership and reallocation of R&D initiatives which are resulting in market share gains across the business lines. In particular, the Q4 results were very strong relative to analyst expectations, with the company reporting record gross margin levels, and resulted in a 27% increase in Freescale's share price in January 2015 alone.  Since the year end, NASDAQ listed NXP Semiconductors and Freescale have announced that they have entered into a definitive agreement under which the two companies will merge in a transaction valuing the combined businesses at over $40 billion. Under the terms of the agreement, Freescale shareholders will receive a combination of cash and NXP shares.  The merger values SVG Capital's holding in Freescale at approximately £143 million[16], of which an estimated £25 million is expected in cash proceeds on closing. The transaction is subject to regulatory approval and is expected to close in the second half of 2015.

Major unrealised portfolio movements

Gross of any carried interest provision. All figures include Permira Feeder Vehicles

The write-up of Arysta LifeScience reflects the sale of the business to New York listed Platform Specialty Products, which was announced in October 2014 and completed in February 2015. The sale valued SVG Capital's holding in the investment at £222 million. The value of the company at the year end reflects the value of the convertible preference note and sales proceeds at that time.  Since the year end, SVG Capital has received net proceeds of £122 million[17] with the remainder of the value held in a convertible preferred note and cash within the investment holding company.

The write-up of the investment in Acromas reflects its full exit of The AA and the IPO of Saga in 2014. Saga remains one of SVG Capital's largest 10 underlying investments and is valued on a quoted basis. The negative movement in the value of Hugo Boss is a reflection of negative foreign exchange movements rather than underlying performance with the company continuing to report top-line and earnings growth and the share price appreciating by 10% over the 13 month period.

The valuation of our fourth largest investment, iglo Group, was broadly unchanged over the year (£58 million). iglo benefits from good margins and strong cash flow generation, however, the markets in which it operates in are challenging, particularly in the UK and Germany. The group has launched several growth initiatives focusing on innovation, brand and promotional activity, firstly into Italy, which has since experienced 16 months of consecutive growth.

The favourable exit environment during 2014 resulted in a record period for distributions with £308 million of proceeds received from the core strategy portfolio. The majority of the distributions were  driven by a series of partial realisations of Hugo Boss, which in total generated proceeds of £161 million and the full realisation of ProSiebenSat.1 Media in early 2014 (£92 million). Since the year end, Permira has continued to realise investments with the full realisation of Hugo Boss, the completion of the sale of Arysta LifeScience and the above mentioned merger of Freescale and NXP. Together, these realisations will generate a further approximate £300 million of proceeds, with the bulk of the proceeds coming from the sales of Hugo Boss and Arysta LifeScience. The significant realisation activity at the larger end of the portfolio has also served to de-risk the portfolio with the Top 10 underlying investments now representing 66%[18]of the gross investment portfolio, down from 88% at December 2013. 

The weighted average LTM earnings and revenue growth across the portfolio was 9% and 7% respectively. This was heavily influenced by our three largest investments - Arysta LifeScience, Hugo Boss and Freescale. Looking at our post-2012 investment portfolio the respective weighted average earnings and revenue growth was 12% and 10%[19]. A number of the portfolio companies reporting significant growth in both earnings and revenues over the year. This strong operating performance has translated into a number of write-ups in the portfolio, most notable of which were AMCo (Cinven) and Brand Energy & Infrastructure (CD&R).

AMCo has been valued at 2.0x[20] cost on the back of continued strong performance and significant earnings growth. The result of Cinven's merger in 2013 of Amdipharm and the Mercury Pharma Group, AMCo is a niche speciality pharmaceuticals company. Cinven's strategy is based on continued buy and build, further internationalisation and applying best practice across the enlarged, fully integrated group to accelerate growth and create value. Having significantly deleveraged AMCo and grown EBITDA by more than 80% in less than two years, Cinven successfully refinanced AMCo's debt in November 2014, returning 1.1x cost to the fund. AMCo continues to trade well on an organic basis, and to execute its buy and build strategy, most recently acquiring Focus Pharmaceuticals in October. This marks AMCo's fourth acquisition, building on the original transformative merger of Mercury with Amdipharm and the subsequent acquisitions of Abcur and Fucithalmic.

Brand Energy & Infrastructure (formed by the merger of Brand Energy and Harsco Infrastructure) has been written up to 1.4x[21] cost and is now one our 10 largest underlying companies. The business is a premier provider of integrated specialty services to the global energy, industrial and infrastructure markets. Valuation gains have been driven by strong earnings growth and good performance in the US industrial service segment, particularly in the power generation markets. The business is on track to deliver the synergies of the integration of Brand and Harsco, which is now largely complete. Looking ahead to 2015, strategic focus will shift from integration and restructuring to optimisation and growth.  SVG Capital's holding in the company was valued at £11 million at 31 January 2015.

The weighted average net debt/EBITDA ratio of the core strategy portfolio was 4.7x and the weighted average multiple used to value the percentage of the core strategy portfolio valued on an earnings basis (21%) was 9.0x.

The transition to post-2012 investments continued to gain momentum with £159 million of calls paid funding 25 new and one follow-on investment, including three co-investments. With 30 investments in total, the post-2012 investment portfolio now represents 24%[22] of the net investment portfolio and we expect the influence that this part of the portfolio has on returns to continue to become more meaningful as the number of companies increase and investments mature. Of the 30 investments, three are co-investments in companies that we believe represent compelling opportunities and are in the manager's particular area of expertise.  The largest investment was a $25 million co-investment in The Hillman Group, alongside CCMP and was covered more fully in our interim accounts. In the second half we also made co-investments alongside The Fifth Cinven Fund (Visma) and Permira V (TeamViewer).

Visma is a leading provider of business management software and business process outsourcing (BPO) services in the Nordic region. The Group comprises three divisions - Software SMB (small and medium size businesses), BPO and Software GLA (Government & Large Accounts). The company is a highly cash generative and stable business, delivering critical software to a wide customer base through a subscription-based model with high recurring revenues. Cinven's strategy is to support Visma through its next stage of organic and acquisitive growth. Building on Visma's market-leading position in the Nordic region, there is significant growth potential in SaaS, as companies migrate their legacy applications to improve business administration and process efficiencies. Growth will be driven by further bolt-on acquisitions and continued R&D investment, accelerating customer migration from legacy to SaaS and developing new functional services. SVG Capital's total investment in Visma was valued at £17 million at 31 January 2015.

Founded in 2005 and headquartered near Stuttgart, Germany, TeamViewer is a leading global provider of secure remote support software with a focus on the small and medium-sized business market. The company offers an easy-to-install-and-use solution encompassing remote access administration, multi-user web-conferencing, desktop and file sharing. The software is charged as a license to corporate/business customers but is free for personal/private use, which drives product awareness and commercial adoption. Installed on more than 800 million devices, the product is currently used in more than 220 countries and is available in 34 languages. The investment thesis is based on the build-up of dedicated outbound and key account sales teams to increase customer monetisation, the optimisation of pricing and packaging including an enterprise offering, an improved conversion rate from free usage to paying customers, and the development of new products with cross-selling potential. SVG Capital's total investment in TeamViewer was valued at £17 million at 31 January 2015.

Two new fund commitments were made in the year; both to US-based private equity managers. The first, a $150 million commitment to CCMP Capital Investors III was made in June 2014 and announced in the interim accounts and is 42% called with six investments. Towards the end of the year we also made a $100 million commitment to the US mid-market fund, FFL Capital Partners IV. FFL was established in 1997 to undertake buyouts and growth-oriented investments in US middle-market companies with a typical enterprise value of $100 million to $500 million. FFL's strategy is to deliver superior risk-adjusted returns through a combination of top-down macro and industry thematic research to identify attractive sub-sectors with the firm's four core sectors: business services, consumer, financial services and healthcare services. We believe that the US middle-market is an attractive area for investment and FFL's combination of macro and sector research and process, flexible deal structuring and active company involvement should create superior risk-adjusted returns for our shareholders. The fund has made one investment, Eyemart Express, one of the largest optical retailers in the US operating in more than 35 states.

Non-core strategy portfolio (£241m - 23% of the investment portfolio)
The non-core strategy portfolio generated a total return of 19% over the 13-month period. The portfolio is primarily made up of the SVG Diamond fund of funds programme, which were valued at £186 million at 31 January 2015. This represented an uplift of £23 million over the period, with strong realisation activity and valuation gains augmented by leverage in the corporate structure of the SVG Diamond products. The strong distributions from the underlying portfolios have enabled all of the products to repay debt ahead of previous expectations and we expect all three SVG Diamond products to be completely or substantially deleveraged in the next 12-18 months paving the way for distributions back to shareholders.  During the year, we also made a small commitment (€20 million) to Aldwych Capital Partners, a fund investing in a number of Carlyle funds giving us access to an attractive portfolio of secondary Carlyle assets and a commitment to a new Carlyle buyout fund. To date the investment has generated a total return of 3% and is currently valued at 1.1x cost.

Capital commitments

At 31 January 2015, the Company had uncalled commitments as follows:

10 largest underlying companies (31 January 2015)

·    Arysta LifeScience

Arysta LifeScience is a leading global provider of crop solutions, with expertise in agrochemical and biological products. Arysta has a solutions-oriented business model which focuses on product innovation to address grower needs. It is also the second largest company, by revenue, in the high-growth biostimulants market. The valuation basis is expected sales proceeds.

·    Hugo Boss

Hugo Boss operates in the fashion and luxury goods market. It is the global leader in the formal menswear fashion market with a presence of over 6,800 points of sale across 129 countries. The valuation basis is quoted.

·    Freescale

Freescale is a global leader in the design and manufacture of semiconductors for the automotive, consumer, industrial and networking markets. The company has a heritage of innovation and product leadership spanning more than 50 years. It has an extensive intellectual property portfolio, including approximately 6,000 patent families, and serves more than 18,000 customers with leading products and solutions. The valuation basis is quoted.

·    iglo Group

The iglo Group is a branded European frozen food company that produces fish, vegetables and poultry, including a number of iconic products such as Fish Fingers, Schlemmer Filets and Sofficini. The Group operates under three brands: Birds Eye (UK and Ireland), iglo (Germany, Austria, Belgium, The Netherlands and other countries) and Findus (Italy). The valuation basis is earnings.

·    The Hillman Group

The Hillman Group is a leader in the hardware and home improvement industry distributing over 130,000 Stock Keeping Units ("SKU") in categories including fasteners, key duplication systems, letters, numbers and signs, engraved tags, builder's hardware, and the recently added nail, deck and drywall category. The company provides inventory management and in-store merchandising services to its retail customers for managing these SKU‑intensive, complex home improvement categories. The valuation basis is cost.

·    New Look

New Look is a leading fast-fashion retailer with over 800 stores worldwide: circa 570 owned stores in the UK, circa 110 in Europe (Ireland, France, Belgium, The Netherlands, Poland and Germany), 16 stores in China and a franchise network mainly in the Middle East. In addition to its store network, the company has a fast-growing eCommerce offering serving over 120 countries. New Look is positioned as a fast-fashion value retailer with a broad product offering that focuses on  womenswear, footwear and accessories as well as an expanding menswear offer. The valuation basis is earnings.

·    TeamViewer

TeamViewer is a leading global provider of secure remote support software with a focus on small and medium-sized businesses. The company is the industry leader in remote support and administration solutions for medium-sized businesses. There are over 814 million activated devices, 167 million active users and almost 300,000 commercial customers. The TeamViewer product is used in 220 countries and is available in 34 languages. The valuation is cost.

·    Visma

Visma is a leading provider of business management software and business process outsourcing (BPO) services in the Nordic region. The group comprises three divisions - Software SMB (small and medium size businesses), BPO and Software GLA (Government & Large Accounts). Visma delivers enterprise resource planning (ERP) software and services including accounting, tax and payroll applications and services to over 340,000 SME customers, retailers and local authorities across the Nordic region. The valuation is cost.

·    Acromas (Saga)

Acromas is the holding company for Saga. Saga provides financial services to people aged over 50 in the UK, including motor and home insurance as well as personal financial products. Saga also offers a broad range of holidays and other travel services to its customers (including the famous Saga world cruises) as well as private pay domiciliary care services. The valuation basis is quoted.

·    Brand Energy & Infrastructure

Brand Energy & Infrastructure Services was formed by the merger of Brand Energy and Harsco Infrastructure. The business is a premier provider of integrated specialty services to the global energy, industrial and infrastructure markets. Its extensive portfolio of specialised industrial service offerings include scaffolding, coatings, insulation, refractory, formwork & shoring, specialty mechanical services, cathodic protection and other related crafts. The valuation basis is earnings.

Principal Risks, Risk Management and Risk Oversight

The Board is responsible for managing and overseeing risk. A Board-driven, objective centric approach to risk management and internal audit has been adopted that focuses on identifying the most critical value creation objectives and potential value erosion risks if an objective is not met; recording these objectives in a corporate objectives register; assigning specific management personnel in ASVG to objectives to regularly assess and report to the Board on the state of retained/residual risk, including whether the current residual risk status is consistent with the Company's risk appetite; and direct, senior ASVG management and Board input and involvement in deciding which end-result objectives warrant formal risk assessments; and the appropriate level of risk assessment rigour and independent assurance to be applied in light of cost/benefit considerations. The Board believes this approach better positions the Company to meet the emerging risk governance expectations proposed by the Financial Stability Board (FSB) globally, and the Financial Reporting Council (FRC).

The Companies Act and FRC require companies to disclose the principal risks and uncertainties the Company faces. The Company believes this process is best done by considering the Company's most important value creation objectives and objectives that have the potential, if not achieved, to significantly erode shareholder value. Independent expert advice has been obtained to ensure that the processes used to populate and maintain the Company's objectives register and the related residual risk status information are robust, effective, and 'fit for purpose'.

Principal risks and uncertainties' are defined by the Board as risks with the highest overall potential to affect the achievement of the Company's business objectives. These objectives include: ensuring the ability to meet liabilities as they fall due and meet liabilities in full; and achieving target returns. Principal risks relating to delivery of these objectives are described in the Report and Accounts, along with other principal risks identified in relation to other key objectives.

Internal control/risk treatment

The Code requires the Board to at least annually conduct a review of the adequacy of the Company's systems of risk management and internal control processes and report to shareholders that it has done so.

The principal risks to two of the Company's top objectives, including liquidity and solvency, are identified in the Annual Report and Accounts.

A copy of the Company's risk management policy is available on the Company's website at www.svgcapital.com. The Board and management believe that implementation of this approach to identifying, measuring, treating, and overseeing risks that create uncertainty that the Company's key strategic and core objectives will be achieved, will significantly enhance the Company's risk management and oversight capabilities and better meet the emerging expectations from the FRC in the UK and FSB globally, and provide additional assurance to our shareholders, clients, institutional investors and regulators that risks are being managed effectively.

During the year, the Board retained the services of an independent risk adviser to assist the Board and management with the implementation of this new approach to risk and control governance.

Following implementation of the European Alternative Investment Fund Managers ("AIFM") Directive, Aberdeen SVG Private Equity Managers Limited ("ASVGM"), as the Company's AIFM, has put in place a risk framework for the Company in accordance with regulatory requirements. This risk framework is reviewed by the Board on a periodic basis. This framework includes limits to mitigate various risks including, for example, financing risk which is assessed through cash flow modelling and stress testing. ASVGM's Risk Management Committee reviews reports prepared to ensure compliance with the risk limits set out in the framework. ASVGM's Chief Risk Officer has oversight responsibility for this process.

The Board believes that the combination of the Company's risk management and governance framework described in the Company's risk management policy, risk assessment training provided to key ASVG management personnel, reviews and feedback provided by our adviser combined with the work done by Ernst & Young, the Company's external auditors, are appropriate to the Company's business as an investment trust.

The Board considers that adequate risk mitigation risk treatments/controls exist over the financial reporting process. An experienced team is responsible for preparing and consolidating the financial reporting for the Company and ensuring that financial information is accurate, complete, reconciled and reviewed by senior members of staff, and that transactions and balances are recognised and measured on a consistent basis and in accordance with accounting policies and financial reporting standards. Management personnel responsible for the integrity and reliability of the Company's financial statements have completed formal risk assessments on the objective of publishing financial disclosures that are fair, balanced and understandable. These risk assessments have been reviewed by the Board. Although the Board believes that it has a robust framework of risk management and internal control over financial reporting in place, this can only provide reasonable and not absolute assurance against material financial mis-statement or loss and is designed to manage, not eliminate, risk.

Statement of comprehensive income

There is no other comprehensive income and therefore the profit for the period is the total comprehensive income for the period.

The total column of this statement represents the Company's income statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

Statement of changes in equity

¹  Included within other reserves are the share purchase, capital redemption and convertible loan note reserves

Balance sheet

Cash flow statement

Notes

1   General information

The preliminary results for the period ended 31 January 2015 are unaudited, and represent the annual financial report announcement, which is regulated information. The financial information included in this statement does not constitute the Company's statutory accounts within the meaning of Section 435 of the Companies Act 2006. The information given as comparative figures for the year ended 31 December 2013 does not constitute the Company's statutory accounts for that financial year. Statutory accounts for the year ended 31 December 2013, prepared in accordance with IFRS as adopted by the European Union, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

This statement was approved by the Board of Directors on 23 March 2015. The audit report on the full financial statements has not yet been signed.

2   Accounting policies

In preparing the financial information included in this statement the Company has applied policies which are consistent with those applied in the Group's most recent annual financial statements.

The Company has changed its year end from 31 December to 31 January. This is driven by the Company's move away from a single manager focus to one that is more diversified and the resultant expectation that Fund investment valuations will be received across a broader timeframe, which the change in year end is anticipated to accommodate. As a result of this reporting date change, performance for the current period is measured over a 13 month period, compared to the 12 month period for the 2013 comparatives, and therefore amounts provided in the financial statements are not entirely comparable.

3   Finance costs

4   Earnings per share

The calculation of the basic and diluted earnings per share, in accordance with IAS 33, is based on the following data:

The convertible loan notes are exercisable at a strike price of 640p and were therefore not dilutive at 31 January 2015 or 31 December 2013.

5   Investments

The total gain of £131,149,000 (2013: gain of £296,673,000) shown in the Company's income statement also includes a gain on associate during the year of £13,555,000 (2013: loss on subsidiaries of £380,000).

All funds in the core strategy portfolio are unlisted. However, some of the underlying companies held within those funds are listed. Included in the total core strategy portfolio value are gross valuations of listed investments amounting to £320.5 million (2013: £494.0 million). The Company investment portfolio includes Permira IV at a value of £447.8 million, which is net of a 25% provision against future distributions on the realisation of investments held by Permira IV, in accordance with the terms of the Permira IV reorganisation in December 2008. It should also be noted that the value of the Permira IV investments attributed to follow-ons that were made after 2008 are not subject to a provision, as distributions in respect of such investments will be received in full.

During 2012, the Company sold its direct holding in Permira Europe III ("PE III"), however it retained 50% of its exposure through PE III to one of the underlying investments, the iglo Group ("iglo"). Deferred consideration due on the disposal of PE III amounted to £14.2 million at 31 December 2013. The consideration due was received in full during the period ended 31 January 2015.

A contract is in place giving the Company the rights to 50% of all future distributions received by the acquirer in relation to its holding in iglo.

The contract has been valued at £20.1 million (2013: £19.6 million). The Board considers that the best indication of the fair value of the right to future distributions from iglo is the current valuation of iglo as calculated in accordance with the Company's accounting policies.

Significant interests in investment funds

The Company has a 35.5% interest in SVG Diamond Holdings Limited, a 35.8% interest in SVG Diamond Holdings II Limited, and a 25.5% interest in SVG Diamond Private Equity Holdings III plc, for all of which Aberdeen SVG Private Equity Advisers Limited provides services under an investment advisory contract.

The Company's holdings in these entities do not represent controlling interests as the Company does not have power over relevant activities of those entities under IFRS 10.

Unconsolidated structured entities

The Company invests in several investment funds which meet the definition of unconsolidated structured entities in accordance with IFRS 12 - Disclosure of Interests in Other Entities. The investment funds are closed ended 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. Based on the latest available information relating to these funds, the total size of the unconsolidated structured entities is £7,224 million.

As at 31 January 2015, 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:

6   Investments in associates at fair value through profit and loss

In the prior period, on 31 May 2013, the Company's interests in Aberdeen SVG Private Equity Advisers Limited ("ASVGA") and Aberdeen Private Equity Managers Limited ("ASVGM") ceased to be classified as subsidiaries following the sale of 50.1% of the share capital to Aberdeen Asset Management plc.

The remaining 49.9% interest in these companies has been recognised as an associate as the Board consider the Company to have significant influence over the affairs of the businesses. In addition to owning 49.9% of the voting rights, the Company's nominees make up half of the directors of those companies.

The Company measures its investments in associates at fair value, with changes in fair value recognised in profit and loss in the period in which they occur.

For the period ended 31 January 2015 investment income included dividends received from ASVGM and ASVGA of £1.3 million (2013: £2.1 million) and £nil (2013: £5.8 million) respectively.

7   Borrowings

Loan facility

At December 2013, the Company had a €250.0 million loan facility with Lloyds Bank plc and The Royal Bank of Scotland plc, of which £nil was drawn ("the original facility"). During June 2014, the Company entered into an amended and restated loan facility agreement ("the amended facility") whereby the facility was increased to €300.0 million, at which time the loan facility was split into two tranches. Tranche A was a €200.0 million facility from Lloyds Bank plc maturing in December 2019. Tranche B was a €100.0 million facility from the Royal Bank of Scotland plc and State Street Bank and Trust Company, maturing in June 2019. During January 2015, the Tranche B lenders extended the maturity on the facility to December 2019.

The loan facility remains undrawn at 31 January 2015.

Drawings on the facility are subject to an interest charge of Euribor plus a margin of 3.00%. Undrawn amounts on the original facility were subject to a non-utilisation fee of 1.375% per annum. Undrawn amounts on the amended facility are subject to a non-utilisation fee of 1.10% per annum. There were no other material changes to the terms of the facility upon these amendments.

Covenants

The loan facility is subject to financial covenants. The maximum loan to value (LTV) covenant is 30% and the Board manages the Company against that limit. However, the Company has the flexibility of one three month period to rectify an LTV above 30% (up to a maximum of 40%) to below 30%. At 31 January 2015, the LTV covenant stood at 0% (2013: 0%). Borrowings under the loan facility are subject to an increased margin should the LTV exceed 30%.

Convertible loan notes

Non-current liabilities include £100.7 million of convertible loan notes. Further details are provided in the following table:

The loan notes were issued on 5 June 2008 and are redeemable at par on 5 June 2016. At issue the conversion option was valued at £14,726,000 and this amount was credited to an equity reserve.

As a result of the Rights Issue and Placing in 2009, the Conversion Price was amended to £6.48 on 10 February 2009, in accordance with the Terms and Conditions of the convertible loan notes. Following the Tender Offer completed in 2012 the Conversion Price was amended to £6.44. The Tender Offer completed in 2013 was at a premium of less than 5% to the share price and therefore no amendment to the Conversion Price was required. Following the Tender Offers completed in May 2014 and December 2014, the conversion price was amended to £6.42 and £6.40 respectively. The convertible loan notes are convertible at the option of the convertible loan note holder. They are not currently dilutive as the Conversion Price is above the Company's undiluted NAV per share.

As the convertible loan notes are subordinated to the loan facility, they are not counted as debt for the purposes of calculating the loan to value covenants.

8   Share capital

During the year, the Company twice invited shareholders to tender ordinary shares for sale to J.P.Morgan Cazenove and subsequent on-sale to the Company ("the Tender Offers"). In May 2014, the first Tender Offer was at a price of 480.0p per share. The second Tender Offer took place in December 2014 and again was at a tender offer price of 480.0p per share. The Company purchased a total of 20.8 million shares from J.P.Morgan Cazenove following the Tender Offers. All shares purchased through the Tender Offers have been subsequently cancelled by the Company.

In addition to the Tender Offers, the Company purchased 24.6 million shares through on-market buy-backs. The cost of shares purchased through the tender offers and on-market share buy-backs, along with associated transaction costs, were debited to the Capital Reserve. In the year ended 31 December 2013, the cost of share buy-backs and associated transaction costs were debited to the Share Purchase Reserve until that was fully utilised and were thereafter debited to the Capital Reserve.

0.2 million shares were transferred from treasury to satisfy the exercise of LTIP awards in respect of US employees. At 31 January 2015, the Company held 62,958,757 shares in Treasury (2013: 38,544,208). At 31 January 2015, shares held by the SVIIT Employee Benefit Trust and the SVIIT USA Employee Benefit Trust totalled 686,790 (2013: 3,894,852).

9   Net asset value per ordinary share ("Shareholders' funds")

Calculations of the net asset values per share are based on net assets attributable to equity Shareholders of £1,127,105,000 (31 December 2013: £1,221,237,000), and on 190,077,621 (31 December 2013: 232,117,440) ordinary shares in issue at the period end.

The Company diluted net asset value per share assumes that share options and performance shares with a strike price lower than the undiluted net asset value per share are exercised at the balance sheet date. This would result in the issue of 1,892,907 ordinary shares (31 December 2013: 5,174,776) for consideration of £1,353,000 (31 December 2013: £942,000).

The convertible loan notes 2016 are exercisable at a strike price of 640p and were therefore not dilutive at 31 January 2015 or 31 December 2013.

Therefore, the calculation of the diluted net asset value per share is based on net assets attributable to equity shareholders of £1,128,458,000 (31 December 2013: £1,222,179,000), and on 191,970,528 (31 December 2013: 237,292,216) ordinary shares in issue at the period end.

10         Related party transactions

Lynn Fordham is a member of the Advisory Committees of certain funds in the core strategy portfolio in which the Company invests. She does not receive fees for these services.

Lynn Fordham is eligible to participate in the Performance Share Plan ("PSP") at the discretion of the Remuneration Committee. During the period ended 31 January 2015, Lynn Fordham received no awards of performance shares (2013: 155,844 performance shares). Lynn Fordham is employed by a member of the Aberdeen Asset Management plc ("AAM") group of companies and her compensation is determined and paid by AAM.

Lynn Fordham is employed by a member of the AAM group of companies and is seconded to Aberdeen SVG Private Equity Advisers Limited ("ASVGA"). During the period ended 31 January 2015, Andrew Sykes was a non-executive Director of Aberdeen SVG Private Equity Advisers Limited and Aberdeen SVG Private Equity Managers Limited ("ASVGM"). Andrew Sykes resigned as a director of ASVGA and ASVGM on 21 July 2014. No other Director has any material interest in any other contract that is significant to the Company's business.

In addition, certain Directors and their beneficial family interests also have an interest in funds managed or advised by associated entities of the Company, as detailed below:

No other Director has any material interest in any funds managed or advised by associated entities of the Company.

The Directors are the only key management personnel of the Company. Details of their remuneration are included in the Remuneration Report.

The Company invests in a number of funds for which the associated companies ASVGA and ASVGM act as either investment adviser or investment manager and receive fees for their services. The following table details funds managed or advised by ASVGA or ASVGM that are also part of SVG Capital plc's investment portfolio.

The Company has no employees but during the period used the services of ASVGA and ASVGM, associated companies, to provide certain advisory and administrative services to SVG Capital plc in return for a fee of 0.5% p.a. of gross assets. The fees payable in respect of these services for the period ended 31 January 2015 amounted to £6.1 million (2013: £7.2 million) of which £3.5 million (2013: £3.6 million) remained payable at the period end. ASVGM pays for all staff costs, including the remuneration costs of the Company's executive Director, Lynn Fordham, as well as the office costs incurred in providing the services to SVG Capital plc.

During the period ended 31 January 2015, the Company received a dividend of £1.3 million from ASVGM (2013: £2.1 million). In addition the Company received a dividend of £nil from ASVGA (2013: £10.0 million). There were no other distributions paid by associates or subsidiaries during the period.

As previously disclosed, the 'Diamond Investment Scheme' enabled staff to purchase shares in SVG Diamond II from the Company. Until they have been transferred, shares remain in the name of SVG Capital plc but are held on trust for the beneficiaries. At 31 January 2015, the total amounts receivable by the Company under the Scheme was £0.1 million (2013: £0.1 million).

Related party transactions during the year were made on terms equivalent to those that prevail in arm's-length transactions.

11         Ten largest fund investments (by value)

END OF CONDENSED FINANCIAL STATEMENTS