1 | BMO Private Equity Trust PLC Report and Accounts 2021 | PB
BMO Private
Equity Trust plc
Report and Accounts
31 December 2021
2 | BMO Private Equity Trust PLC Report and Accounts 2021 | 1
2 | BMO Private Equity Trust PLC Report and Accounts 2021 | 1
Overview
Company Overview 2
Financial Highlights 3
Summary of Performance 4
Chairman’s Statement
5
Strategic Report
Strategic Report – Introduction 7
Principal Policies 9
Promoting the Success and Sustainability of the Company 11
Sustainability and ESG 12
Key Performance Indicators 16
Investment Manager 18
Investment Manager’s Review 19
Portfolio Summary 23
Top Ten Holdings 24
Portfolio Holdings 26
Principal Risks 28
Governance Report
Board of Directors 30
Report of the Directors 31
Corporate Governance Statement 35
Report of the Audit Committee 37
Report of the Nomination Committee 39
Directors’ Remuneration Report 40
Report of the Management Engagement Committee 42
Statement of Directors’ Responsibilities 43
Overview
Auditor’s Report
Independent Auditor’s Report 44
Financial Report
Statement of Comprehensive Income 51
Balance Sheet 52
Statement of Changes in Equity 53
Statement of Cash Flows 54
Notes to the Financial Statements 55
AIFM Disclosures 67
Annual General Meeting
Notice of Annual General Meeting 68
Other Information
Shareholder Information 73
History 74
Historical Record 74
Alternative Performance Measures 75
Glossary of Terms 77
How to Invest 79
Corporate Information 80
Contents
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
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Company Overview
BMO Private Equity Trust PLC
The Company
BMO Private Equity Trust PLC (‘the Company’) is an investment trust and its Ordinary Shares are traded on the
Main Market of the London Stock Exchange.
Objective and Investment Policy
The Company’s objective is to achieve long-term capital growth through investment in private equity
assets, whilst providing shareholders with a predictable and above average level of dividend funded from a
combination of the Company’s revenue and realised capital profits.
The Company’s investment policy is contained on page 9.
Dividend Policy
The Company aims to pay quarterly dividends with an annual yield equivalent to not less than four per cent of
the average of the published net asset values per Ordinary Share as at the end of each of its last four financial
quar
ters prior to the announcement of the relevant quarterly dividend or, if higher, equal (in terms of pence
per share) to the highest quarterly dividend previously paid. All quarterly dividends will be paid as interim
dividends. The interim dividends payable in respect of the quarters ended 31 March, 30 June, 30 September and
31 December are expected to be paid in the following July, October, January and April respectively.
Management
The Company’s investment manager, BMO Investment Business Limited (‘the Manager’) is a wholly owned
subsidiary of BMO Global Asset Management (Europe) Ltd (“BMO GAM”).
BMO GAM is owned by Columbia Threadneedle Investments UK International Limited and is part of the
Ameriprise Financial, Inc group of companies.
Capital Structure as at 31 December 2021
73,941,429 Ordinary Shares of 1 pence, each entitled to one vote at a general meeting.
Further details of the Company’s capital structure, including the rights attributable to the Ordinary Shares, are
provided on page 31.
How to Invest
The Manager operates a number of investment plans which facilitate investment in the shares of the
Company. Details are contained on page 79.
Visit our website at: www.bmoprivateequitytrust.com.
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Overview
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
(1)
Total Return. Refer to Alternative Performance Measures on page 76.
(2)
Dividend Yield. Refer to Alternative Performance Measures on page 75.
Financial Highlights
Ordinary NAV Total Return FTSE All Share Total Return
Ordinary Share Price Total Return
0
50
10
0
150
200
25
0
300
350
400
450
500
550
Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21
The Longer Term Rewards
66.2% 20.04p35.8% 4.1%
Share price performance
• Share price total return
(1)
for
the year of 66.2 per cent for
the Ordinary Shares.
Quarterly dividends
• Total quarterly dividends of
20.04p per Ordinary Share
• Quarterly dividend of
4.35p per Ordinary Share
paid 30 July 2021
• Quarterly dividend of
4.77p per Ordinary Share
paid 29 October 2021
• Quarterly dividend of
5.27p per Ordinary Share
paid on 28 January 2022
• Quarterly dividend of
5.65p per Ordinary Share
payable 30 April 2022
NAV total return
• Net Asset Value total return
(1)
for the year of 35.8 per cent
for the Ordinary Shares.
Dividend yield
• Dividend yield
(2)
of 4.1 per
cent based on the year-end
share price.
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Summary of Performance
Summary of Performance
31 December
31 Decembe
r
Total Returns for the Year
†
2021
2020
% change
Net asset value per Ordinary Share
+35.8%
+22.7%
Ordinary Share price
+66.2%
-14.2%
Capital Values
Net assets (£’000)
473,447
359,483
+31.7
Net asset value per Ordinary Share
640.30p
486.17p
+31.7
Ordinary Share price
489.0p
307.5p
+59.0
Discount to net asset value
†
23.6%
36.8%
Income
Revenue return after taxation (£’000)
5,080
3,490
Revenue return per Ordinary Share
6.87p
4.72p
Dividends per Ordinary Share
20.04p
16.13p
Dividend Yield
†
4.1%
5.2%
Gearing
†
0.7%
14.9%
Ongoing Charges
†
As a percentage of average net assets excluding performance fees
1.2%
1.3%
As a percentage of average net assets including performance fees
2.3%
2.2%
Future commitments (£’000) 136,436
125,058
†
Refer to Alternative Performance Measures on pages 75 and 76.
Sources: BMO Investment Business and Refinitiv Eikon
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Chairman’s Statement
Chairman’s Statement
Fellow Shareholders,
Firstly, I would like to take this opportunity, on behalf of the Board
to thank you for your continuing support during these difficult and
uncertain times.
This report is for the year ended 31 December 2021. During this
period your Company has achieved a net asset value (“NAV”) total
return of 35.8 per cent. This compares to a total return from the FTSE
All-Share Index for 2021 of 18.3 per cent. The NAV per share at the
year-end was 640.30p (2020: 486.17p).
The share price at the year-end was 489.00p per share (2020:
307.50p). During the year the share price discount narrowed. As at 31
December 2021 it was 23.6 per cent in comparison to 36.8 per cent as
at 31 December 2020. As a consequence, the share price total return
for the year was an impressive 66.2 per cent.
During the year the Company made new investments, either through
funds or as co-investments, totalling £83.2 million. Realisations and
associated income totalled £161.4 million. Outstanding undrawn
commitments at the year-end were £136.4 million of which £26
million was to funds where the investment period had expired.
The Company’s performance fee arrangements contain a hurdle
rate, calculated over rolling three-year periods, of an IRR of 8.0 per
cent per annum. The annual IRR of the NAV for the three-year period
ended 31 December 2021 was 22.6 per cent and, consequently, a
capped performance fee of £4.5 million is payable to the Manager,
BMO Investment Business Limited, in respect of 2021. This is the
ninth consecutive year that a performance fee has been payable,
demonstrating consistent performance and providing Shareholders
with an attractive total return, which includes capital growth and an
above average dividend yield.
Dividends
Since 2012 your Company has paid a substantial dividend from
realised capital profits allowing Shareholders to participate, to some
degree, directly in the proceeds of the steady stream of private
equity realisations which the Company achieves. This policy has been
well received by Shareholders and provides for a steadily growing
dividend with downside protection. Your Board is fully committed to
maintaining this general approach for the foreseeable future.
The Company’s quarterly dividends are payable in respect of the
quarters ended 31 March, 30 June, 30 September and 31 December
and are paid in the following July, October, January and April
respectively. As Shareholders do not have an opportunity to approve
a final dividend at each Annual General Meeting, Shareholders are
asked to approve the Company’s dividend policy at the forthcoming
Annual General Meeting.
In accordance with the Company’s stated dividend policy, the Board
recommends a further quarterly dividend of 5.65p per Ordinary Share,
payable on 29 April 2022 to Shareholders on the register on 8 April
2022 and an ex-dividend date of 7 April 2022. Total dividends paid for
the year therefore amount to 20.04p per Ordinary Share equivalent to
a dividend yield of 4.1 per cent at the year-end.
Directorate Change
On 17 February 2022, as part of its Board succession plan, the
Company announced that I will retire as Chairman at the completion
of the Company’s Annual General Meeting (“AGM”) on 26 May 2022.
I joined the Board in February 2009 and was appointed Chairman in
May 2010. It has been a period of continuous change. The Company
has experienced, amongst other events, the Eurozone Crisis, the
withdrawal of the United Kingdom from the European Union, the
COVID-19 pandemic and, more recently, Russian military action in
Ukraine. Many of these events still impact upon the social, macro-
economic and political environments in which this Company operates
and I wish to express my sincere thanks to my fellow Directors, the
BMO Private Equity management team and the Company’s advisors
for their support in successfully navigating these challenges.
Upon my retirement Richard Gray, who was appointed to the Board in
March 2017, will be appointed Chairman. I know that his wise counsel
will serve this Company extremely well.
As a further part of the Board succession plan it is anticipated that
David Shaw will retire from the Board at the conclusion of the
Company’s 2023 AGM.
Ownership of the Manager
On 12 April 2021 BMO announced that it had reached an agreement
to sell its asset management business in Europe, the Middle East
and Africa to Columbia Threadneedle, the global asset management
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Mark Tennant, Chairman
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Chairman’s Statement
business of Ameriprise Financial, Inc. This acquisition completed on 8
November 2021.
During this acquisition process the Board has sought and received
confirmation from senior management at Columbia Threadneedle of
the importance of maintaining stability and continuity of the teams
which presently support your Company. The Board welcomes these
assurances and will ensure that Shareholders are kept informed of
developments as this new relationship develops.
Annual General Meeting
The 2021 Annual General Meeting of the Company (“2021 AGM”) was
held on 27 May 2021. Due to travel and gathering restrictions arising
from the COVID-19 pandemic, Shareholders were not able to attend
the 2021 AGM in person. However, Shareholders were able to view an
online presentation by the Company’s Investment Manager, Hamish
Mair and participate in a live question and answer session with him
and me. I would like to thank those Shareholders who participated.
I am pleased to report that we intend to revert to normal practices
for the 2022 AGM. The AGM will be held on Thursday 26 May 2022 at
12.00 noon at Exchange House, Primrose Street, London, EC2A 2NY,
being the London offices of the Manager. The meeting will include a
presentation from Hamish Mair on the performance of the Company.
However, as the situation with regard to the COVID-19 pandemic
remains uncertain, if circumstances change on or prior to 26
May 2022 so that laws, regulations or Government guidance no
longer permit physical Shareholders’ attendance, or if the Board
should otherwise determine Shareholders’ attendance at an open
meeting to be contrary to the safety and wellbeing of Shareholders,
alterations may be required to be made to the AGM format. In these
circumstances, the Company will communicate to Shareholders
any changes to arrangements by a London Stock Exchange
announcement and through updates to the Company’s website:www.
bmoprivateequitytrust.com.
The Board strongly advises all Shareholders to consider their
personal circumstances before deciding whether or not to attend
the AGM in person. Any Shareholders who choose not to attend
can submit questions regarding the resolutions proposed at the
AGM, or the performance of the Company, to the dedicated email
account: privateequitytrustagm@bmogam.com. Questions should
be submitted not later than Thursday 19 May 2022. The Board will
endeavour to ensure that questions received by such date are
addressed at the meeting. In addition, so all Shareholders have an
opportunity to view the AGM, the meeting will be recorded and will
be available to view shortly thereafter on the Company’s website as
detailed above.
Although normal practices have resumed in respect of the AGM, to
ensure that each Shareholder’s votes will count in the event that they
cannot attend in person, or in the event that Shareholder attendance
has been subsequently restricted due to health and safety concerns
and the Company must put in place alternative arrangements, the
Board would encourage all Shareholders to complete and submit
their Form of Proxy or Form of Direction in advance of the AGM, in
accordance with the requirements contained in the AGM notice.
Further, should the AGM be restricted, Shareholders are strongly
encouraged to appoint the Chairman of the AGM as their proxy as any
other person so appointed may not be admitted to the AGM, resulting
in that Shareholder’s vote not being counted.
Outlook
The last two years have presented all of us with many challenges
and as noted above there are fresh challenges and threats to be met.
No matter how frustrating they are we cannot control such external
events nor avoid resulting shocks. We can however oversee and
manage the Company’s portfolio such that it is capable of growth and
resilience over the long term. The careful selection of investments
and investment partners preceded by much research and deliberation
identifies the engine for the growth, and the maintenance of a
substantial degree of diversification in what is an innately risky
asset class provides the resilience to see the Company through
challenging phases. In the recent period private equity in general
and your Company’s portfolio in particular has fared impressively.
Indeed, during all my years as a Director and as Chairman of your
Company I have been repeatedly reminded of the power of the
private equity model and its potential to deliver excellent long term
returns. I therefore commend the asset class and the Company to
you. Whilst past performance is not necessarily a guide to the future,
I am confident that your Company will continue to meet shareholders’
expectations for many years to come.
Mark Tennant
Chairman
7 April 2022
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Strategic Report – Introduction
Strategic Report
Purpose
The purpose of the Company is to deliver long-term capital growth
and an above average level of dividend to Shareholders.
Investment Objective
The Company’s investment objective is to achieve long-term capital
growth through investment in private equity assets, whilst providing
Shareholders with a predictable and above average level of dividend
funded from a combination of the Company’s revenue and realised
capital profits.
Business Model
The Directors have a duty to promote the success of the Company.
As an investment trust with no employees, the Board believes that
the optimum basis for doing this and achieving the Company’s
investment objective is a strong working relationship with the
Company’s appointed manager, BMO Investment Business Limited
(the “Manager”). Within policies set and overseen by the Board, the
Manager has been given overall responsibility for the management of
the Company’s assets, gearing and risk.
As an investment trust the Company is not subject to redemption
requests which have triggered forced asset sales at some open ended
funds and is well suited to investors seeking longer term returns. The
share capital structure provides the flexibility to take a long-term view.
Having the ability to borrow to invest is a significant advantage over a
number of other investment fund structures.
The Board remains responsible for decisions over corporate strategy,
corporate governance, risk and control assessment, setting policies,
setting limits on gearing, monitoring investment performance and
monitoring marketing performance.
At each Board meeting, the Board receives a presentation from the
Manager which includes a review of investment performance, recent
portfolio activity and a market outlook. The Board also considers
compliance with the investment policy and other investment
restrictions during the reporting period. An analysis of the portfolio as
at 31 December 2021 is presented in the Investment Manager’s Review
on pages 19 to 22 and in the Portfolio Summary on page 23. The full
portfolio listing is provided on pages 26 and 27.
The Manager
The investment management contract is with BMO Investment
Business Limited (‘the Manager’), a wholly owned subsidiary of BMO
Global Asset Management (Europe) Limited (“BMO GAM”). BMO GAM
is owned by Columbia Threadneedle UK International Limited and is
part of the Ameripirse Financial, Inc group of companies.
The Manager has been appointed as Alternative Investment
Fund Manager (‘AIF Manager’). BMO GAM provides investment
management and other services to a range of investment companies.
Hamish Mair is the investment manager appointed by the Manager to
the Company. His biography is provided on page 18.
The fee that the Manager receives for its services is based on
the value of assets under management of the Company and its
performance thus aligning its interests with those of the shareholders.
The ancillary functions of secretarial and marketing services are also
provided by the Manager. Details of the management and secretarial
fees payable to the Manager are provided on pages 32 and 58.
Environmental, Social and Governance (“ESG”) Impact
The Board’s ESG approach is set out on page 12. The direct
environmental impact of the Company’s activities is minimal as the
Company has no employees, premises, physical assets or operations
either as a producer or a provider of goods or services. Its indirect
impact occurs through the investments that it makes and this is
mitigated through the Manager’s Responsible Investment Approach as
explained on page 12.
Manager Evaluation
Investment performance and responsible ownership are fundamental
to delivering sustainable long-term growth in capital for the
Company’s shareholders and therefore an important responsibility of
the Board is exercising a robust annual evaluation of the Manager’s
performance. This is an essential part of the strong governance that is
carried out by the Board, all the members of which are independent
and non-executive. The process for the evaluation for the year under
review and the basis on which the decision to reappoint the Manager
for another year is made are set out on page 32.
Communication and Marketing with Stakeholders
The Company fosters good working relationships with its key
stakeholders; the Manager, as described above, Shareholders,
investee funds and co-investments, suppliers and service providers. All
appropriate channels are used including the internet and social media
as well as the BMO savings plans.
The Company’s activities and performance are reported through
the publication of its financial statements but the vast majority
of Shareholders and savings plan investors prefer not to receive
such detailed information. To avoid losing this essential line of
communication, the Company sends instead a short notification with
the key highlights of its half-yearly and annual results. Shareholders,
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
“The Company’s investment objective is to achieve, long-term capital growth through investment in private
equity assets, whilst providing Shareholders with a predictable and an above average level of dividend.”
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savings plan investors and other stakeholders can locate the full
information on the Company’s website,
bmoprivateequitytrust.com
,
if they so wish.
Through the Manager, the Company also ensures that savings plan
investors are encouraged to attend and vote at annual general
meetings in addition to those who hold their shares on the main
Shareholder register. Details of the proxy voting results on each
resolution are published on the website where there is also a link
to the quarterly publication of the Company’s NAV and its quarterly
factsheet.
The Manager also has in place a programme of visits designed
to foster good relations with wealth managers in promoting the
Company’s investment proposition. These visits are reported
regularly to the Board. Any contact with the Company’s institutional
Shareholders is also reported. The Chairman is available to meet with
major Shareholders.
Managing Risks and Opportunities
Like all businesses, investment opportunities do not come without
risks and uncertainties and so the performance of the Manager is
monitored at each Board meeting on a number of levels. In addition to
managing the investments, the ancillary functions of administration,
secretarial, accounting and marketing services are all carried out by
the Manager.
The Board receives reports on the investment portfolios; the wider
portfolio structure; risks; income and expense forecasts; errors;
internal control procedures; marketing; Shareholder and other
stakeholder issues, including the Company’s share price premium or
discount to NAV; and accounting and regulatory updates.
Shareholders can assess the financial performance from the Key
Performance Indicators that are set out on page 16 and, on page 28,
can see what the Directors consider to be the Principal Risks that the
Company faces.
In addition to regularly monitoring the Manager’s performance, their
commitment and available resources and their systems and controls,
the Directors also review the services provided by other principal
suppliers. These include the Depositary in their duties towards the
safeguarding of the assets.
The principal policies that support our investment and business
strategy are set out on page 9, whilst the Investment Manager’s
review of activity in the year can be found on pages 19 to 22.
Strategic Report
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Strategic Report
Principal Policies
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Investment Policy
The Company makes private equity investments by taking stakes
in private equity focused limited partnerships, offshore funds,
investment companies and investment trusts. In addition to investing
in newly-formed private equity funds, the Company may also
purchase secondary private equity fund interests (that is, portfolios of
investments in existing private equity funds). The Company may also
make direct private equity investments, mainly through co-investment
with the funds in which the Company is invested.
The private equity funds in which the Company invests comprise
buy-out funds, venture capital funds and mezzanine funds. Both
the funds and the direct investments are selected in order to create
an underlying portfolio which is well-diversified by geography,
sector, size of company, stage of development, transaction type and
management style.
The Company may use gearing of up to 30 per cent of its total assets
at the point of drawdown.
At the time of investment:
•
No more than 15 per cent of total assets may be invested in UK-
listed investment companies;
•
No more than 15 per cent of total assets may be invested in non-
UK listed investment companies;
•
No more than 50 per cent of total assets may be invested in direct
private equity co-investments;
•
No more than 5 per cent of total assets to be invested in any one
direct investment or co-investment; and
•
No more than 10 per cent of total assets may be invested outside
the United States of America, the United Kingdom and Continental
Europe.
As far as practicable the Company will be fully invested at all times.
Dividend Policy
The Company aims to pay quarterly dividends:
•
with an annual yield equivalent to not less than four per cent of
the average of the published net asset values per Ordinary Share
as at the end of each of its last four financial quarters prior to the
announcement of the relevant quarterly dividend; or
•
if higher, equal (in terms of pence per share) to the highest
quarterly dividend previously paid.
The dividend can be funded from a combination of the Company’s
revenue and realised capital profits.
Taxation
The Board’s policy towards taxation is one of full commitment to
complying with applicable legislation and statutory guidelines. It is
essential that the Company always retains its investment trust tax
status by complying with Section 1158 of the Corporation Tax Act
2010 (“Section 1158”) such that it does not suffer UK Corporation Tax
on capital gains. The Company has received approval from HMRC as
an investment trust under Section 1158 and has since continued to
comply with the eligibility conditions. The Manager also ensures that
the Company submits correct taxation returns annually to HMRC and
settles promptly any taxation due.
Liquidity
The Board recognises the need to address any sustained and
significant imbalance of buyers and sellers which might otherwise
lead to shares trading at a material discount or premium to NAV per
share. While it has not adopted any formal discount or premium
targets which would dictate the point at which the Company
would seek to purchase shares or issue further shares, the Board
is committed to utilising its share purchase and share issuance
authorities where appropriate in such a way as to mitigate the effects
of any such imbalance. In considering whether buyback or issuance
might be appropriate in any particular set of circumstances, the Board
will take into account: the prevailing market conditions; the degree of
NAV accretion that will result from the buyback or issuance; the cash
resources readily available to the Company; the immediate pipeline
of investment opportunities open to the Company; and the working
capital requirements of the Company.
Board Diversity
The Board's policy towards the appointment of non-executive
Directors is based on its belief in the benefits of having a diverse
range of experience, skills, length of service and backgrounds. The
policy is always to appoint the best person for the role and, by
way of this policy statement, it is confirmed that there will be no
discrimination on the grounds of gender, race, ethnicity, religion,
sexual orientation, age or physical ability.
The overriding aim of the policy is to ensure that the Board is
composed of the best combination of people for ensuring the delivery
of the Company's objective. In achieving gender diversity, the Board
composition of four men and three women Directors met the target of
33% of women on FTSE 350 company boards set under The Hampton-
Alexander Review.
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Strategic Report
Integrity and business ethics
The Company applies a strict anti-bribery and anti-corruption policy
insofar as it applies to any Directors or employee of the Manager or of
any other organisation with which it conducts business. The Board also
ensures that adequate procedures are in place and followed in respect
of third-party appointments, acceptance of gifts and hospitality and
similar matters.
Prevention of the facilitation of tax evasion
The Company is committed to compliance with the UK’s Criminal
Finances Act 2017, designed to prevent tax evasion in the jurisdictions
in which it operates. The policy is based on a risk assessment
undertaken by the Board and professional advice is sought as and
when deemed necessary.
Modern Slavery Act 2015
The Company is an investment company with no employees or
customers and does not provide goods or services in the normal
course of business. We have appointed the Manager to manage the
investments, engage on ESG issues and to carry out administrative
and secretarial services.
The Company's own supply chain consists predominately of
professional advisers and service providers in the financial services
industry, which is highly regulated. The Board therefore believes that
the potential for acts of modern slavery or human trafficking in the
Company’s own environment is extremely low.
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Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Promoting the Success and Sustainability
of the Company – Section 172 Statement
Under s172 (1) of the Companies Act 2006 (“the Act”), Directors have
a duty to promote the success of the Company for the benefit of its
members as a whole. This will include the likely consequences of
Directors’ decisions for the longer term and how the Board has taken
wider stakeholders’ needs into consideration.
The Directors value engagement with stakeholders. The key
stakeholders of the Company are its Shareholders, the Manager,
suppliers, service providers and investee funds and co-investments. As
an investment trust the Company does not have any employees.
The Company’s website
www.bmoprivateequitytrust.com
is
available to all stakeholders and key decisions are announced to the
London Stock Exchange through a Regulatory News Service.
The Company holds an Annual General Meeting. In normal
circumstances all Shareholders are invited to attend, and this provides
an open forum for Shareholders to discuss issues and matters of
concern with the Board and representatives of the Manager and the
Company’s advisors. The Managers have also engaged during the year
with the Company’s largest Shareholders and the outcome of these
discussions are reported to the Board at the following Board Meeting.
Stakeholders are invited to communicate with the Board through the
Chairman or Company Secretary.
Under the Investment management agreement detailed on page
32 and note 3 to the financial statements, the monitoring of the
activities of investee fund and co-investment managers is delegated
to the Manager. The Manager reports at each Board meeting on the
performance of the Company’s investments.
The Board takes a responsible approach to Environmental, Social and
Governance (“ESG”) Issues. The Board has appointed a manager that
applies high standards of ESG practice. We have therefore included on
page 12 information on the Manager’s approach towards responsible
investment which focuses on engagement with investee companies
on ESG issues.
Principal decisions
The table below details the decision making and engagement process for corporate decisions and actions that the Board has considered
sufficiently material to warrant an announcement to the London Stock Exchange.
Decision/Action
On 26 March 2021 the Company
announced that the Board had
amended the format of the 2021
AGM. Shareholders were not
permitted to attend the AGM in
person but were represented
by the Chairman of the meeting
acting as their proxy. The AGM was
held as a closed meeting with the
minimum attendance required to
form a quorum.
However to allow Shareholder
engagement despite these
restricted circumstances,
Shareholders could attend an online
presentation by the Company’s
Chairman and Investment Manager
immediately prior to the formal
business of the AGM.
The Board has agreed a succession
plan to refresh its composition.
Experienced, long serving Directors
will retire during a transition period
which will involve the appointment
of new Directors.
Rationale
This decision was taken by the Board
mindful of government travel and
social gathering restrictions arising
from the COVID-19 pandemic.
The Board's policy on tenure is
that continuity and experience
add significantly to its strength. In
addition, the Board recognises the
value in attracting new talent.
The Board has agreed a plan for
a transitional period to allow
the transfer of knowledge and
experience from long-serving
Directors to newly appointed ones.
Outcome
With the current reduction in restrictions arising from the
COVID – 19 pandemic the Board has reverted to previous
practice with an AGM to be held at 12 noon on 26 May
2022 at Exchange House, Primrose Street, London, EC2A
2NY. The meeting will include a presentation from
Hamish Mair on the Company and its investment portfolio.
All Shareholders are strongly advised to consider their
personal circumstances before deciding whether or not
to attend the AGM in person. Any Shareholders who
choose not to attend can submit questions regarding the
resolutions proposed at the AGM, or the performance
of the Company, to the dedicated email account:
privateequitytrustagm@bmogam.com. In addition the
meeting will be recorded and will be available to view
shortly thereafter on the Company’s website.
On 17 February 2022 the Company announced that Mark
Tennant would retire from the Board at the conclusion of
the Company’s Annual General Meeting. Mark Tennant
joined the Board in February 2009 and was appointed
Chairman in May 2010.
Upon the retirement of Mark Tennant, Richard Gray will be
appointed Chairman of the Company.
On 25 March 2022 it was announced that it is anticipated
that David Shaw will retire from the Board at the
conclusion of the Company’s 2023 AGM.
Engagement
The decision was announced on 26
March 2021 through the Company’s
annual results announcement
released through a Regulatory
News Service. Shareholders unable
to attend the online presentation
were encouraged to direct any
questions they may have had
with regard to the resolutions
proposed at the AGM or the
performance of the Company
to a specially designated email
account. Attendees to the online
presentation could participate in
a question and answer session.
The Manager’s presentation
was also made available on
the Company’s website
www.
bmoprivateequitytrust.com
.
A committee of long serving
Directors met with possible
candidates for the role of Chairman.
Following Board discussion it was
agreed unanimously that Richard
Gray would be appointed Chairman
upon the retirement of Mark
Tennant.
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Sustainability and ESG
The approach
Environmental, Social and Governance (“
ESG
”) issues are the three
central factors in measuring sustainability and can present both
opportunities and threats to the long-term investment performance
the Company aims to deliver to Shareholders. The Board is therefore
committed to taking a responsible approach to ESG matters. There
are two strands to this approach. The Company’s own responsibilities
on matters such as its governance and the impact it has through the
investments that are made on its behalf by its Manager.
The Company’s compliance with the revised AIC Code of Corporate
Governance is detailed in the Corporate Governance Statement on
pages 35 to 36. In addition, the Principal Policies statement on pages
9 and 10 notes the Company’s policies towards board diversity,
integrity and business ethics, prevention of the facilitation of tax
evasion and the Modern Slavery Act 2015.
The Board recognises that the most material way in which the
Company can have an impact is through its responsible ownership
of its investments. The Board has therefore appointed a manager
that engages actively with the management of investee companies
to encourage that high standards of ESG practice are adopted. The
Manager has long been at the forefront of the investment industry
in its consideration of these issues and has one of the longest
established and largest teams in the City focused solely on ESG.
Responsible investment
Responsible investment is core to the approach adopted by BMO
GAM. With over three decades of experience, BMO GAM believes
that ESG factors can reduce risk and underpin long-term returns
and is committed to integrating ESG in all asset classes. As a strong
supporter of the Sustainable Development Goals, it also believes in
using its influence as an investor to promote long-term sustainability.
It was a founding member of the United Nations Principles for
Responsible Investment (“
UN PRI
”) and has held an A+ rating for
Strategy and Governance for the past five years.
BMO GAM is also a founding member of the Net Zero Asset Managers
Initiative and has committed to a net-zero ambition across all of its
asset classes by 2050. It is a member of the investor coalition for
Climate Action 100+ and the 30% Club (in the UK, France and US) in
which it leads and supports engagements and is Chair of the Platform
Living Wage Financials’ Garment Working Group. It is an active
participant in the Initiative Climate International working group, in
order to be part of the ESG discussion and shape its evolution. BMO
GAM believes that it has played an integral role in the ESG journey
for the past three decades having launched Europe’s first socially and
environmentally screened fund in 1984.
As part of this ESG commitment, BMO Private Equity engages
actively with its underlying private equity fund managers (General
Partners or ‘GPs’) to encourage them to develop responsible policies
that sufficiently mitigate ESG risks and generate opportunities. It
leverages its position to influence and collaborate with its GPs and
management teams to drive positive change from pre-investment
stage through to exit.
As stewards of £473 million of invested assets we support positive change. The Company benefits from the
Manager’s leadership in this field.
Key Results of 2021 ESG Survey
92%
of managers have ESG policies
and procedures in place
83%
of GPs include ESG as a Board agenda item
2
/
3rds
of managers are signatories to industry-
leading bodies
79%
&
90%
response rate from GPs and co-investments
to the BMO Private Equity survey
60%
of GPs have Diversity and
Inclusion policies in place
93%
of managers would decline an
opportunity based on ESG alone
42%
of GPs track greenhouse gas
emissions
91%
of managers consider ESG factors
within their due diligence process
84%
of managers rated ‘Good’,
‘Excellent’ or ‘Best-in-Class’ for ESG
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
ESG Survey
BMO Private Equity assesses its GP’s annually through its ESG survey
which encompasses key topics, metrics and trends. The survey is
based around four core elements outlined below, and respondents
are rated 1-5 from leader to laggard. Managers who score below
average will be encouraged to develop over time and BMO Private
Equity comments are fed back over the life of an investment in a
collaborative and bilateral process.
Four Core Elements
A. ESG Culture and Commitment
– BMO Private Equity believes the
A. ESG Culture and Commitment – BMO Private Equity believes the A. ESG Culture and Commitment
integration of ESG factors permeates throughout an organisation from
the top down. The strategic importance and commitment to ESG was
assessed through a number of metrics such as the sophistication of
policies and procedures, adherence to broader industry standards and
existence of ESG resource and training.
B. Investment Process
– The extent to which ESG factors are
embedded throughout the investment workflow from pre-acquisition
to exit. BMO Private Equity considered the degree to which processes
were institutionalised, the significance of ESG-factors to investment
decisions, the integration of formal frameworks and how ESG matters
were formally analysed and debated within investment papers and
committees.
C. Active Ownership
– Active ownership goes beyond the mitigation
of ESG risks and focuses upon the embedding of ESG opportunities
within the value creation plan. BMO Private Equity evaluated its GPs
on the extent to which they were driving positive ESG change, not just
across their portfolio companies but also within their own firm.
D. Oversight and Reporting
– BMO Private Equity believes that
outcome oriented approaches are imperative to implement, monitor
and drive positive ESG development. BMO Private Equity evaluated
its GP’s oversight and reporting capabilities through the breadth and
sophistication of ESG-metrics monitored, tracked and reported. It also
assessed the sophistication of manager’s ESG case studies and Annual
ESG Reports.
From a group of 60 managers, 84% were rated ‘Good’, ‘Excellent’ or ‘Best-in-Class’, up from 80% in 2020. None of the GPs were rated Laggard as
all demonstrated a willingness to develop.
Survey Results
Overall Ratings
ESG Survey Ratings
BMO Private Equity Annual ESG Report 2021 11
ESG Ratings Methodology
Rating Assessment
1
Best-in-class
Market-leading commitment to ESG with robust, institutional policies and processes in place.
GP has firmly
integrated ESG
throughout the investment process, is an active owner
in promoting ESG development and reports on ESG metrics.
2
Excellent
Strong commitment to ESG with institutionalised policies and processes in place.
GP has integrated ESG throughout its investment
process and has shown to be active in promoting some aspects of ESG. Tracks, monitors and reports on some ESG metrics or
de
veloping
to do so over the short term.
3
Good
Commitment to ESG demonstrated with some taken steps to integrate ESG, albeit not across the entire workflow
(e.g.
reporting). Processes institutionalised and
GP
motivated to improve with development underway.
4
Developing
P demonstrated some commitment to ESG or has begun development on some ESG initiatives but lacks institutionalised processes.
5
Laggard
P demonstrates little or no commitment to ESG and no willingness to develop or
trending
negatively
BMO Global Asset Management12
2021 ESG Private Equity Funds
– Survey Results
Global ESG Ratings
Best-in-Class
Excellent
Good
Developing
Laggard
48%
12%
34%
38%
16%
0
20
40
60
80
100
14%
86%
14%
62%
14%
10%
26%
52%
17%
4%
80%
20%
UK Europe North America Asia
Since March 2021, the Company will not invest with a new GP unless it has an ESG policy in place, or a clear intention to introduce one within
six months.
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Strategic ReportStrategic Report
Core Element B: Investment Process Results
Core Element C: Active Ownership Results
With a strong emphasis on stewardship, and close relationships
between GPs and company management, private equity is naturally
suited to responsible investment. BMO Private Equity believes that
those recognising the importance of adapting to environmental and
socio-economic factors will be better positioned to identify strategic
opportunities, widen their competitive moat and sustain their
advantage over the longer term. Responsible investment is also a
marker of the operational excellence of the GP itself and typically
demonstrates strong leadership and transparency. BMO Private
Equity believes that on a company level, management who exhibit
strong ESG credentials are more likely to be strategic thinkers,
adhere to sound governance practices and engage their workforce –
all of which culminates in lowering risk for shareholders.
Most respondents noted their due diligence suite now includes
ESG-specific reports covering items such as labour standards or
cyber security. Half of GP’s outline their ESG analysis within their
investment papers and discuss this as a standing agenda item
within their Investment Committees.
74% of respondents rank ‘Good’ to ‘Best-in-Class’ for Active Ownership.
In 2021, 75% of managers track surveyed ESG metrics and 63%
report on these to investors. For context, only 40% of managers
surveyed provided any such reporting in 2014.
Core Element D: Oversight and Reporting Results
The vast majority of GPs now exhibit a strong ESG culture through formalised policies & procedures (92%) and staff training (88%).
Core Element A: ESG Culture and Commitment Results
Are ESG factors formally analysed as part of due diligence
processes, with output detailed within Investment Committee
papers and discussed at Investment Committees?
Produce an Annual ESG Report
Track & report ESG related KPIs across their portfolios
BMO Global Asset Management14
Investment Process
BestinClass
Excellent
Good
Developing
Laggard
30%
25%
7%
39%
UN SDGs
Another framework
Implementing in
No
0 5 10 15 20 25 30 35
Yes
In IC papers
In IC meetings
Implementing in NTM
No
19%
24%
31%
27%
Yes
In papers
In I meetings
Implementing in
No
No
Implementing in NTM
Yes, in the P/F
Yes, at the GP
Yes, at GP & P/F
0 10 20 30 40 50
%
17%
25%
7%
2%
0
20
40
60
80
100%
40%
70%
48%
58%
83%
64%
47%
90%
66%
48%
92%
69%
46%
54%
91%
63%
58%
63%
92%
70%
88%
2020201920182017 20212016
UN PRI signatory or equivalent
ESG Policy & Procedures Internal ESG Capability Provide ESG training
BMO Global Asset Management14
Investment Process
BestinClass
Excellent
Good
Developing
Laggard
30%
25%
7%
39%
UN SDGs
Another framework
Implementing in
No
0 5 10 15 20 25 30 35
Yes
In IC papers
In IC meetings
Implementing in NTM
No
19%
24%
31%
27%
Yes
In papers
In I meetings
Implementing in
No
No
Implementing in NTM
Yes, in the P/F
Yes, at the GP
Yes, at GP & P/F
0 10 20 30 40 50
%
17%
25%
7%
2%
0
20
40
60
80
100%
40%
70%
48%
58%
83%
64%
47%
90%
66%
48%
92%
69%
46%
54%
91%
63%
58%
63%
92%
70%
88%
2020201920182017 20212016
UN PRI signatory or equivalent
ESG Policy & Procedures Internal ESG Capability Provide ESG training
BMO Global Asset Management20
Oversight & Reporting
Yes, across all
Yes, across some
Track, don’t report on all/some
Implementing in
No
0 10 20 30 40 50 60
Yes
Implementing in NTM
No
7%
18%
12%
10%
53%
Yes
Implementing in
No
0 10 20 30 40 50
No
Implementing in NTM
Yes, on an ad-hoc basis
Yes, ESG is a standing agenda item at
every Board
43%
28%
28%
ESG Reporting initiatives implemented at our GPs
Best-in-Clas
s
Excellent
Good
Developing
5%
38%
31%
26%
BMO Global Asset Management20
Oversight & Reporting
Yes, across all
Yes, across some
Track, don’t report on all/some
Implementing in
No
0 10 20 30 40 50 60
Yes
Implementing in NTM
No
7%
18%
12%
10%
53%
Yes
Implementing in
No
0 10 20 30 40 50
No
Implementing in NTM
Yes, on an ad-hoc basis
Yes, ESG is a standing agenda item at
every Board
43%
28%
28%
ESG Reporting initiatives implemented at our GPs
44%
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Co-investments
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Strategic Report
Portfolio case studies
Summa Equity
Summa Equity have long been standout performers with regards to market leading ESG practices.
The firm looks to use ESG for value enhancement, working to use sustainability as an anchor to
improve operations of portfolio companies. The Sortera investment is a great example of this.
Throughout the ownership period, Sortera displayed an impressive growth story with active
value creation through a focus on sustainability. This resulted in Sortera becoming the 11th most
sustainable B2B business in Sweden.
TDR Capital – Modulaire Group
Modulaire is a leader in European modular services and
infrastructures, and provides tailored equipment, connectivity, and
services for both private and public entities in need of modular
space units and ancillary items. Having appointed an ESG &
Sustainability Director at the company, TDR identified an opportunity
for Modulaire to become a market leader in sustainability. Although
still in development, the steps Modulaire is taking to better understand the risks and opportunities of the transition to a low carbon economy
are bringing measurable benefits to their customers, the environment, and the communities in which the business operates.
The circular nature of modular solutions means the units are fully reusable and flexible to ensure full utilisation, thus reducing waste over the
long term. Useful life per unit can exceed 30 years, including 20 re-uses. Modulaire has established a circular, ‘Loops within Loops’ model which
ensures most of the material used in the assembly of units has a long life, with little residual waste. An estimated 96% of material is recyclable
and a typical modular space unit has half the carbon footprint of a traditional building.
BMO Private Equity believes that it is in an even stronger position to influence and drive ESG development within co-investments given that
typically a larger stake is held in the business and a closer relationship to the GP and management team maintained.
For the first time, BMO Private Equity has surveyed its co-investments on ESG matters. Similar to the GP funds survey, BMO Private Equity rate
each of its co-investments from 1-5, Leader to Laggard across multiple ESG topics, trends and metrics to assess the businesses’ commitment
to ESG. Keys results from this survey were:
These provide us valuable insight on where companies and management teams are focussing their efforts and where more attention may be
required.
BMO Private Equity Annual ESG Report 2021 23
Assessment Rating
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Co-investment KPIs
In its inaugural year, our co-investment ESG survey achieved a 90% response rate from 43
individual companies across different regions, sectors and size.
a
te
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Strategic Report
Key Performance Indicators
Total return performance
1 Year % 3 Years % 5 Years %
BMO Private Equity Trust net asset value per share total return
†
+35.8
+84.3
+118.9
This is used to measure the performance
of the manager in terms of growth of
the Company taking account of
dividends paid to shareholders.
BMO Private Equity Trust share price total return
†
+66.2
+76.3
+104.7
This is used to measure the return to
shareholders in terms of share price
growth and dividends received.
Share price premium/(discount) as at 31 December
2021
%
2020
%
2019
%
Premium/(discount)
†
(23.6)
(36.8)
(8.8)
This is the difference between the share
price and the NAV per share. It is an
indicator of excess supply over demand
for the Company's shares in the case of
a discount and the excess demand over
supply in the case of a premium.
Dividends per share during the year ended 31 December
2021 2020 2019
Dividend per share
20.04p
16.13p
15.33p
Yield
†
4.1%
5.2%
4.1%
Ongoing charges as at 31 December (as a percentage of shareholders funds)
2021
%
2020
%
2019
%
Ongoing charges – excluding performance fees
†
Ongoing charges – including performance fees
†
1.2
2.3
1.3
2.2
1.2
1.9
This is a measure of the cost of running
the Company as a percentage of net
assets. It can give an indication of
cost efficiency over time and can be
compared to the ongoing charges of
competitor investment vehicles.
The Board recognises that it is longer term share price performance
and a sustained flow of regular dividends that is most important
to the Company’s investors. Share price performance is driven by
the performance of the net asset value and the demand for the
Company’s shares. The overriding priority is to continue to strive for
the consistent achievement of long-term investment performance;
adding value for Shareholders through net asset value and share
price total return; the management of the Company’s share price
premium/discount; an attractive dividend; low and competitive
ongoing charges; and effective marketing. The Board assesses
its performance in meeting the Company’s objective against the
following key performance indicators (“KPIs”):
1. Net asset value per share total return
2. Share price total return
3. Premium / (discount) to net asset value
4. Dividends declared
5. Ongoing charges
Information in relation to these KPIs is set out in the tables below.
Commentary can be found in the Chairman’s Statement and the
Investment Manager’s Review.
†
Alternative performance measures defined on pages 75 and 76.
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Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
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Strategic Report
Hamish Mair
is Managing Director, Head of Private Equity at BMO Global Asset Management and the fund manager of
BMO Private Equity Trust PLC. He has over 30 years of investment experience of which over a quarter of a century are in
private equity. He has been head of Private Equity at BMO GAM since inception and oversees all the funds it manages.
Hamish was a director of Martin Currie Investment Management between 1996 and 2005. He began his career as an
investment analyst with Robert Fleming Asset Management in 1988. Hamish is a graduate of Aberdeen University and
Edinburgh University. Hamish chairs the investment committee of Old College Capital, the venture capital fund which
holds ‘spin-outs’ from Edinburgh University.
Richard Nairn
is a director in the private equity funds team at BMO Investment Business Limited. He has 20 years of
investment experience, including 15 years in private equity. He joined the private equity team in 2006. Richard was
previously corporate finance manager at Intelli Corporate Finance between 2001 and 2006. He trained as a chartered
accountant with PricewaterhouseCoopers. Richard is a graduate of Edinburgh University and spent a year at the
Gothenburg Business School in Sweden.
Andrew Carnwath
is a director in the private equity funds team at BMO Investment Business Limited. He has 13 years
of investment experience in private equity. He is a former member of the private equity team (2008-2013) and re-
joined the team in 2018. From 2013 to 2018 Andrew was a Principal at Scottish Equity Partners LLP, a UK based private
equity firm, where his responsibilities included the co-management of an energy focussed secondary fund. He is a
chartered accountant and CFA Charterholder. Andrew is a graduate of Edinburgh University.
Investment Manager
Investment Manager
BMO Private Equity Trust PLC is managed by BMO Investment Business Limited, a wholly-owned subsidiary of BMO Global Asset Management
(Europe) Ltd (“BMO GAM”). BMO GAM is a leading asset manager in both the UK and Europe and provides investment management and other
services to a range of investment trust clients.
BMO GAM is owned by Columbia Threadneedle UK International Limited and is part of the Ameriprise Financial, Inc group of companies.
Scott McEllen represents BMO GAM as Company Secretary and is responsible for the Company’s statutory compliance. He joined BMO Asset
Management in 2007.
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Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Investment Manager’s Review
Introduction
2021 has been an outstanding year for the Company with the NAV
total return of 35.8% following a 22.7% return in 2020. The 10 year
NAV total return is 14.1% p.a. and the NAV total return since the
Company was established nearly 23 years ago is 11% p.a. 10 and 23
year total returns for the stock market as represented by the FTSE
All-Share Index are 7.7% p.a. and 5.2% p.a. respectively. Over the long
term your Company has returned approximately double the annual
return that could have been achieved by investment in the stock
market.
The principal drivers of this year’s returns have been ongoing recovery
from the pandemic and an exceptionally strong flow of realisations
across the breadth of the portfolio. Whilst there was clearly some
catch up with deals postponed from the previous year, there has
also been a genuine increase in the proportion of investment capital
allocated towards private equity in general and this has underpinned
the strong market. Your portfolio is composed of companies which
are operating in markets where there is secular growth and who are
led by highly competent management teams. Experience suggests
that those companies and managers who have coped well with the
challenges of the pandemic will also cope well with other problems.
Since the end of the year inflationary pressures have become more
acute and these have been exacerbated by the recent invasion of
Ukraine by Russia which is likely to lead to more extensive pressures
for many companies. We have no direct exposure to Russia or Ukraine,
but we are monitoring the knock-on effects in the region and the
continent generally. It remains to be seen how the private equity
investment environment will be impacted. As with the pandemic, a
very well diversified portfolio is our first line of defence.
New Investments
Dealflow has been excellent both for funds and co-investments.
After a quieter period for new investments last year, 2021 saw a
substantial return to normality albeit that for most of the year face to
face meetings have been very limited. The new fund commitments
were in every case to management groups whom we know well and
have invested with before. We do however remain very much open to
backing new funds managed by emerging private equity managers.
All the fund commitments are to funds which we first backed when
they were emerging managers.
The largest commitment of £10 million was to one of our most
important and longstanding relationships, Inflexion Buyout Fund
VI. This principally UK focussed fund now also makes selective
investments in Northern Europe. We have backed consumer brands
specialist Piper in its Fund VII with a £7.5 million commitment. We
have also backed growth equity manager FPE in its Fund III with a £7.5
million commitment. FPE specialise in UK mid-market investing in B2B
software and services. We continue our successful involvement with
our longest standing growth equity investment partner SEP in its Fund
VI with a £10 million commitment.
We have invested in two funds which cover Europe generally. Apposite
Healthcare Fund III (£5 million) is focussed on lower mid-market
healthcare and life sciences. We have co-invested with them on a
number of occasions. Agilitas 2020 Private Equity Fund (€5 million)
is a mid-market specialist focussing on North West Europe. We have
co-invested with them also. ArchiMed MED III (€5 million) is a France
based mid-cap healthcare buyout fund investing into well-established
profitable companies across six healthcare sectors internationally;
Medtech, Biopharma, Healthcare IT, Diagnostics, Life Sciences and
Consumer Health.
The Nordic region has performed well for us and we have a fresh
commitment there. Vaaka IV (€6 million) is a Finland focussed lower
mid-market buyout fund.
Our dealflow in co-investments is strong with many opportunities to
invest directly in private companies alongside experienced private
equity managers whom we know and trust. Co-investments account
for 43% of the current portfolio. The investment guidelines allow us to
invest up to 50% of the portfolio in co-investments. As holdings are
realised we replace them with new investments. These are typically
lower mid-market buyouts or growth equity investments in companies
with strong management experiencing secular growth often in niche
sectors. Nine new co-investments were made during the year. These
are diverse by sector, geography and lead manager.
£3 million has been invested into Habitus, a Denmark based leading
private provider of complex social care services for high acuity
citizens. The deal is led by Apposite.
£5 million has been invested in JT IoT, the Jersey based ‘internet
of things’ infrastructure provider. The company, which is a spin out
from the state-owned Jersey Telecom, provides SIMs to a wide range
of devices together with a platform that allows connectivity and
Hamish Mair, Fund Manager
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subscription management services as well as securely connecting IoT
devices and controlling SIMs anywhere in the world. The deal is led by
the specialist family office backed private equity firm Perwyn.
€5 million has been invested in Prollenium Medical Technologies, a
Canadian aesthetic company that develops, produces and distributes
injectable hyaluronic acid dermal fillers. The deal is led by ArchiMed.
£3.4 million has been invested in Contained Air Solutions, the UK
market leading producer of clean air containment products for the
healthcare, research and pharma sectors. Based in Manchester, it
manufactures and services biological safety cabinets, fume cupboards,
robotic enclosures and filter consumables. The deal is led by new
private equity manager Accord.
£5 million has been invested in Omlet, the market leading direct to
consumer chicken coop and pet accessories company. This company
has grown substantially over the last 15 years entirely through its
e-commerce offering within established international markets which
are poised for further growth.
C$3.5 million has been invested into Pathfactory, a Toronto
headquartered SaaS-based marketing content automation platform,
which allows B2B marketers to deliver personalised relevant content
experiences to B2B buyers throughout their buying journey.
£5 million has been invested in Orbis, the Wales based leading
provider of residential and education services for high acuity children
and adults. August Equity, the lead on the deal, have been invested
since 2016 but believe that there is considerable further growth in
prospect and so have transferred the investment into its current fund
and a new SPV.
$1.7 million has been invested in Vero Biotech, an American company
which has developed a novel device to supply Nitric Oxide which is
used to treat severe pulmonary hypertension in new born babies
and adults following cardiac surgery. The Nitric Oxide helps to relax
the blood vessels in the lungs and thereby increases blood supply,
decreases blood pressure and improves oxygenation, all of which are
potentially lifesaving. The device is the first FDA-approved ‘tankless’
system which generates Nitric Oxide through disposable cassettes.
This has a number of advantages over the existing heavy tanks. The
deal is led by MVM, the life sciences specialists with whom we have
invested on a number of occasions over the years.
£5 million has been invested in 1MED, a contract research organisation
(CRO) providing regulatory strategy, clinical trial management and
quality assurance services primarily to the medical device market.
The market growth is driven by increased regulation to ensure patient
safety. The company is based in Switzerland. The deal is led by
Apposite.
The funds in our portfolio have been typically active in making new
investments throughout the year. These have been into a greatly
varied range of companies selected by our investment partners
in different geographies and sectors. In common with the co-
investment portfolio, there is a strong representation for technology
and technology enabled business and for those with healthcare
applications. Some of the larger drawdowns illustrate this.
Inflexion has made several new investments during the year. These
included £0.9 million for Digital Wholesale Solutions (DWS) an IT and
cloud services wholesaler. FPE invested £0.6 million in Codestone (ERP
and hosting services) and £0.5 million in Zest (employee benefits
software). SEP invested £0.5 million in Tyk (Application Programming
Interfaces software). Apposite invested £0.9 million in CrestOptics
(advanced systems for florescence and confocal microscopy used
in biological and medical research). In Slovenia ARX CEE IV invested
£0.5 million in Instrumentation Technologies (components for particle
accelerators). In the USA Blue Point Capital IV invested £0.6 million in
Transtar (distributor of automotive aftermarket parts).
New investment for 2021 has totalled £83.2 million.
Since the start of 2022 the pace of investment has kept up with two
new fund commitments and three new co-investments so far.
In the Nordics we have backed sustainability focussed private equity
fund Summa III with a €7 million commitment.
We have committed $14 million (£10 million) to financial services
specialist Corsair VI. The fund invests in mid-market buyouts across
North America and Europe. Previously we have invested alongside
their earlier fund in Italy based insurance software company RGI.
We have made a co-investment of €3.3 million (£2.8 million)
alongside Italy based Augens Capital in Bomaki, a Milan based chain
of Brazilian themed Sushi restaurants.
We have invested $10 million (£7.8 million) in Aurora Payments
Solutions, a Texas based digital payments processor, in a deal led by
Corsair.
Lastly, we have invested £3.9 million alongside Chiltern Capital in
Perfect Image, an IT services group servicing the UK SME sector.
Weird Fish
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Realisations
The strong flow of realisations continued throughout the year with
the total of realisations for 2021 reaching £161.4 million. This is more
than four times the total received in 2020. The realisations in 2021
were at an aggregate premium to the valuation in the prior quarter
of 32%. This is a reminder that the valuation methodology of private
equity is conservative. The average money multiple of the realisations
was 4.4x cost and the IRR was 39%. These are well above what we
would usually regard as satisfactory. 50% of realisations were through
sales to other private equity, 43% to trade or strategic buyers and 7%
through IPO.
Our co-investment portfolio was a significant contributor to the
realisation total, as would be expected.
Earlier in the year we benefitted from the excellent sale of the SEP
led investment in Dotmatics (software for the pharmaceutical, science
and academic sectors) which returned in total £33.9 million (8.7x cost,
85% IRR) across the fund and co-investment position, a spectacular
success. We continue to hold a small portion following a 12% rollover
of the equity. We also received £19.8 million from the Inflexion led co-
investment in builders merchant Huws Gray on its exit, including the
portion held within the Inflexion funds. Our co-investment in the TRG
led large format pet retailer Pet Network was exited returning £16.3
million (4.2x cost, 54% IRR).
We have also had some partial realisations from our co-investment
portfolio. Cleanroom consumables company STAXS, which is led by
Silverfleet, has so far returned £2.5m or 90% of cost via a refinancing.
Subsea equipment rental and solutions company Ashtead Technology
has been partially realised through a floatation on AIM on 23
November 2021 which enabled c.26% of the holding to be realised
with £4.2 million returned in cash representing 53% of invested
capital with a money multiple and IRR to date of 2.3x and 18%. The
deal is led by Buckthorn who will continue to hold the remainder for
the time being. Calucem, the Croatia based manufacturer of calcium
aluminate cement, has been sold by Ambienta achieving a money
multiple of 1.9x and an IRR of 13%. The first instalment of £3.2 million
came in before the year end with a further £2.5 million expected
shortly. Our investment in Norwegian software company Safran was
realised returning £1.7 million which was lower than expected at just
1.2x cost and 2.7% IRR.
In addition to these co-investment realisations there were many
exits from our funds portfolio. A few of the larger exits showcase the
successes of our investment partners.
The largest individual realisation from the funds portfolio was from
the exit of temporary buildings company Modulaire Group by TDR
Capital. The company was sold to Canada based investor Brookfield
and our share of the return was £8.1 million (1.6x cost, IRR 8%).
This investment, which started as Algeco, has been in the portfolio
in some form since 2007. There has been a substantial build up of
the business which ultimately had a fleet of 290,000 units and was
generating an EBITDA of €424 million.
Inflexion have had an outstanding year with many realisations across
their range of funds. The sales of testing and inspection services
provider British Engineering Services (£2.1 million; 14.8x cost, 60%
IRR), insurance broker Bollington Wilson (£0.9 million; 5.1x cost, 50%
IRR), agricultural and animal data services provider Kynetec (£1.0
million; 3.3x cost, 28% IRR) and investment consultancy LCP (£0.6
million; 3.4x cost, 34% IRR) were earlier exits. The series of exits has
continued with Inflexion Partnership Capital and Supplemental Fund
IV selling veterinary practices chain Medivet returning £1.0 million
(3.3x cost, 25% IRR). Inflexion Enterprise IV and Supplemental Fund
IV exited optical transceivers manufacturer Halo returning £2.1 million
(6.0x cost, 53% IRR).
FPE had an excellent run of exits with software business TNP (£1.5
million; 5.6x, 76%), data provider for the drinks industry IWSR
(£1.0 million; 3.6x, 56%) and testing and assessment software
Questionmark (£1.2 million; 3.5x, 28%).
There have been other strong exits from the growth equity and
venture capital element of the portfolio. Pentech Fund II, which earlier
in the year returned £1.5 million from sports betting company Fanduel,
also sold Nutmeg, Europe’s fastest growing wealth manager returning
£1.1 million (12.8x cost, 34% IRR). Lastly the final remaining holding
in the Alta Berkeley Fund VI, high performance software company
Teradici, was sold to HP returning £1.2 million (4.0x cost, 10% IRR).
This completes this fund after 20 years.
Our other UK Funds also produced many notable exits. August Equity
III sold Orbis, as noted above, returning £1.0 million (4.0x cost, 32%
IRR). We remain involved through the co-investment and through
AEP V. Horizon Capital 2013 sold digitally enabled facilities manager
Bellrock returning £1.0 million (3.0x cost, 16% IRR). Dunedin Capital II
sold U-Pol the automotive refinishes products company returning £1.5
million (4.4x, 16% IRR).
Habitus
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There has been considerable activity in the Nordic component of the
portfolio. Procuritas V exited furniture seller Sofaco (£2.1 million; 6.1x,
54%), climate control solutions provider Dantherm (£1.7 million; 5.6x
cost, 37% IRR) and Finland based building management company Fidelix
(£0.7 million, 4.0x cost, 30% IRR). Their later fund Procuritas VI sold
plagiarism detection software company Ouriginal (£1.3 million, 5.8x cost,
68% IRR). Procuritas V also returned £1.3 million from the partial exit of
vehicle parts company Pierce which is now listed on the Stockholm stock
exchange. Summa I exited antibodies and antigens production company
Hytest (£1.7 million, 5.0x cost, 79% IRR) and environmental services
provider Sortera (£1.1 million, 8.1x cost, 82% IRR).
In Iberia Corpfin IV exited Secna Natural Ingredients (£1.1 million,
4.4x, 35% IRR). In France Astorg VI sold on street parking payments
solutions company Flowbird with proceeds of £0.8 million (1.4x cost
6% IRR). This company had been held back by lockdown. In Germany
DBAG VI exited prisoner communications company Telio (£0.6 million,
1.8x cost, 13% IRR) and DBAG VII and VIIB achieved a partial realisation
of Blikk, the radiology provider for ambulant and stationary products
(£0.8 million, 2.1x cost, 37% IRR).
In the US, Graycliff returned £2.3 million from the sale of PebbleTec,
the swimming pool finishes company. This represents an excellent
9.0x cost and 112% IRR. This company saw strong demand through the
pandemic when spend on home improvements increased. Also in the
USA Blue Point III exited Fire and Safety America with proceeds of £1.2
million (2.8x cost, 28% IRR).
The portfolio has delivered excellent realisations across a wide range
of geographies and sectors with many outstanding results which have
in most cases substantially exceeded the original plans.
Valuation Changes
There were many valuation uplifts during the year. As noted,
realisations and improved trading were the principal drivers of
these changes. There has also been some multiple expansion
reflecting re-rating of certain sectors. Notable uplifts include Huws
Gray (+£9.8 million), Weird Fish (+£9.4 million), Pet Network (+£7.9
million), Inflexion Strategic Partners (+£6.8 million) and Ashtead
(+£6.2 million). There have been very few significant downgrades
in valuation and some of these are in funds where the long term
progress is fine. Examples include Inflexion 2012 Co-Invest Fund (-£0.7
million), Avallon MBO Fund III (-£0.5 million) and NEM Impresse III
(-£0.4 million).
Outlook
The recovery from the pandemic and the resilience of the private
equity sector has been the dominant theme of 2021. A strong
subordinate theme has been that appetite to invest in private equity
internationally grows and this has been a factor behind the surge
in realisations. Large funds, the prime recipients of the new capital,
source much of their dealflow from mid-market funds which comprise
nearly all of our portfolio. Private Equity is a long term asset class
and commitments made last for years so we should not expect
this trend to change in the near term. Indeed, recent performance,
which builds on a long term successful track record for the asset
class, will tend to reinforce this trend. The private equity model of
investment management and its attractions as a means of financing
smaller and medium sized enterprises continues to gain acceptance
internationally. The vendors of companies and their management
increasingly understand the substantial benefit that private equity can
bring to their companies which goes far beyond merely appropriately
priced capital. The results from our portfolio where many private
equity markets aside from the US and UK have delivered truly
excellent returns attest to the success of European private equity in
general as well as the specific judgements of our investment partners.
Looking forwards the repercussions of the Russian military invasion
of Ukraine will influence the investment environment for everyone
with the private equity sector being no exception. Our direct exposure
to the combatants’ geographies is nil but experience suggests that
second and third order impacts will feed through to consumer and
corporate behaviour and decision-making in due course. Inflation,
which was already rising, is likely to be higher for longer and this
will colour investment decisions. After an exceptional year it is likely
that the pace of investment activity will moderate, however we
remain confident that the proven abilities of our investment partners
to achieve excellent returns will result in further growth for our
shareholders over the long term.
Hamish Mair
Investment Manager
BMO Investment Business Limited
7 April 2022
Ashtead
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Other Information
Chairman’s statementOverview Auditor’s Report
Portfolio Summary
Ten Largest Holdings
As at 31 December 2021
Total % of
Valuation Total
£’000 Portfolio
Inflexion Strategic Partners
19,674 4.1
Weird Fish
15,829 3.3
Sigma
14,835 3.1
August Equity Partners IV
12,901 2.7
TWMA
12,349 2.6
Ashtead
12,241 2.4
Coretrax
11,760 2.4
Aliante Equity 3
10,733 2.2
Ambio Holdings
10,641 2.2
Volpi Capital
10,214 2.1
131,177 27.1
Portfolio Distribution
As at 31 December 2021
% of
% of
Total
Total
2021
2020
Buyout Funds – Pan European*
9.6
10.0
Buyout Funds – UK
19.4
18.3
Buyout Funds – Continental Europe†
19.8
19.3
Secondary Funds
0.3
0.3
Private Equity Funds – USA
4.0
3.3
Private Equity Funds – Global
0.6
0.7
Venture Capital Funds
2.9
3.5
Direct – Quoted
0.1
–
Direct – Investments/Co-investments
43.3
44.6
100.0
100.0
* Europe including the UK.
† Europe excluding the UK.
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Top Ten Holdings
31 December
31 December
2021
2020
£’000
£’000
Residual cost 6,433
6,436
Value 14,835
13,427
Sigma
Investment type:
Direct Investment
Region:
USA
Valuation basis:
Percentage of co-investment value
The Company has committed $7.8m to an investment in Sigma, a leading manufacturer of metal
castings, precision machined components and sub-assemblies for the US low voltage electrical
product market. It is the global leader by market share in electrical fittings, weatherproof boxes
and power transmission and distribution cut-outs and connectors. The investment is led by Argand
Partners, a US value investor focussed on the mid-market.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 3,861
8,044
Value 12,901
9,193
August Equity Partners IV
Investment type:
Buyout Fund
Region:
UK
Valuation basis:
Percentage of fund value
In April 2016, the Company committed £10m to August Equity Partners IV, the fourth in the series of
funds managed by August Equity Partners. The Company has committed to all three previous August
Equity funds. AEP IV targets investments in four core sectors: healthcare, social care, educational
services and technology enabled services in the UK.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 9,329
8,238
Value 12,349
7, 574
TWMA
Investment type:
Direct investment
Region:
UK
Valuation basis:
Percentage of co-investment value
The Company has committed £9.7m to TWMA, a drilling waste management solutions provider.
It has successfully pioneered and established a fully comprehensive management solution for
Offshore Services, Onshore Services, Waste Handling & Transfer Services and Environmental
Solutions. The group’s revenues are generated from treating and handling offshore oil and gas drill
cuttings and slops which must be removed efficiently and safely from the drilling process, treated
and disposed of.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 5,151
5,151
Value 15,829
6,437
Weird Fish
Investment type:
Direct investment
Region:
UK
Valuation basis:
Percentage of co-investment value
The Company has committed £6.2m to an investment in Weird Fish, a UK premium lifestyle clothing
brand serving men, women and children, with a core focus on the ‘stable and affluent’ 35-55
age demographic. The investment is led by Total Capital Partners, a lower mid-market manager
investing both debt and equity.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 9,230
9,657
Value 19,674
13,326
Inflexion Strategic Partners
Investment type:
Buyout funds - UK
Region:
UK
Valuation basis:
Percentage of fund value
In December 2019, the Company completed an investment into Inflexion Strategic Partners (ISP). ISP is
a limited partnership which holds interests in past and future Inflexion funds, related entities, limited
partnerships and co-investments. The investment of £10m complements our existing diverse and
longstanding exposure to Inflexion’s funds and gives us an even closer alignment with arguably the
leading mid-market private equity specialist in the UK.
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Other Information
Chairman’s statementOverview Auditor’s Report
Top Ten Holdings
31 December
31 December
2021
2020
£’000
£’000
Residual cost 3,688
7,777
Value 12,241
10,212
Ashtead
Investment type:
Direct Investment
Region:
Global
Valuation basis:
Percentage of co-investment value
The Company has committed £7.7m to an investment in Ashtead Technology, a global rental and
service provider of advanced subsea tools and systems for the global offshore energy industry.
Ashtead Technology’s solutions are applicable across a broad range of markets, including the
oil and gas and renewable energy sectors, and are used in the inspection, maintenance and
repair of field assets. The investment is led by Buckthorn, an emerging UK based private equity
manager established to invest on a deal by deal basis.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 7,713
7,6 07
Value 11,760
11,514
Coretrax
Investment type:
Direct investment
Region:
UK
Valuation basis:
Percentage of co-investment value
The Company has committed £8.2m to an investment in Coretrax, a provider of well integrity
product and services crucial to the responsible and efficient end of life well operations in the North
Sea, Middle East (Saudi Arabia and Abu Dhabi) and Malaysia. The investment is led by Buckthorn,
an emerging UK based private equity manager established to invest on a deal by deal basis.
31 December
31 December
2021
2020
£’000
£’000
Residual cost –
–
Value 10,641
9,672
Ambio Holdings
Investment type:
Direct investment
Region:
USA
Valuation basis:
Percentage of co-investment value
In October 2014, the Company invested $6 million in Ambio Holdings, a new Delaware company
established to hold 100% of the shares and assets of both AmbioPharm and Ambio which were
merged as part of a deal constructed by MVM, a London/Boston based private equity manager
which focuses on life science investments in Europe and the US. Ambiopharm is a profitable
pharmaceutical contract manufacturing business, and Ambio is a drug development company
focused on high-value complex generic pharmaceuticals.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 2,642
3,237
Value 10,733
9,883
Aliante Equity 3
Investment type:
Buyout fund - Continental Europe
Region:
Italy
Valuation basis:
Percentage of fund value
Aliante III is the third vehicle raised by Aliante, an independent Italian private equity manager that
focuses on lower mid-market investments predominately in the Italian food and beverage sector.
Aliante III was raised in late 2011 and is unusually structured as an Italian corporate. In February
2015, the Company committed €4m.
Volpi Capital
Investment type:
Buyout Fund
Region:
Northern Europe
Valuation basis:
Percentage of fund value
Volpi Capital is a Northern and Western European focused buyout firm focusing on investments in
the information and tech-enabled services space. It invests in companies with enterprise values
between €50 million and €200 million. The Company committed €7m to this fund, which closed at
€187m in April 2018.
31 December
31 December
2021
2020
£’000
£’000
Residual cost 5,507
5,394
Value 10,214
8,324
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Portfolio Holdings
Total
% of
Geographic
Valuation
Total
Investment
Focus
£’000
Portfolio
Buyout Funds – Pan European
Volpi Capital
Northern Europe
10,214
2.1
Apposite Healthcare II
Europe
7,7 8 2
1.6
Astorg VI
Western Europe
6,163
1.3
Stirling Square Capital II
Europe
5,570
1.1
Apposite Healthcare III
Europe
4,952
1.0
Agilitas 2015 Fund
Northern Europe
4,194
0.9
ArchiMed II
Western Europe
4,090
0.8
Silverfleet European Dev Fund
Europe
2,923
0.6
TDR II Annex Fund
Western Europe
270
0.1
TDR Capital II
Western Europe
259
0.1
ArchiMed MED III
Global
2
–
Total Buyout Funds – Pan European 46,419 9.6
Buyout Funds – UK
Inflexion Strategic Partners
United Kingdom
19,674
4.1
August Equity Partners IV
United Kingdom
12,901
2.7
Inflexion Buyout Fund IV
United Kingdom
5,401
1.1
Inflexion Supplemental V
United Kingdom
4,548
0.9
Inflexion Buyout Fund V
United Kingdom
4,420
0.9
Primary Capital IV
United Kingdom
4,114
0.9
GCP Europe II
United Kingdom
4,090
0.9
Piper Private Equity VI
United Kingdom
3,779
0.8
Inflexion Enterprise Fund IV
United Kingdom
3,520
0.7
Apiary Capital Partners I
United Kingdom
2,877
0.6
Kester Capital II
United Kingdom
2,821
0.6
Inflexion 2010 Fund
United Kingdom
2,804
0.6
Inflexion Supplemental IV
United Kingdom
2,795
0.6
Horizon Capital 2013
United Kingdom
2,750
0.6
RJD Private Equity Fund III
United Kingdom
2,628
0.5
FPE Fund II
United Kingdom
2,299
0.5
Inflexion Partnership Capital I
United Kingdom
2,101
0.4
August Equity Partners V
United Kingdom
2,074
0.4
Dunedin Buyout Fund II
United Kingdom
2,064
0.4
Inflexion Partnership Capital II
United Kingdom
2,057
0.4
Inflexion 2012 Co-Invest Fund
United Kingdom
1,446
0.3
Inflexion Enterprise Fund V
United Kingdom
1,383
0.3
Piper Private Equity V
United Kingdom
1,001
0.2
August Equity Partners III
United Kingdom
5
–
Total Buyout Funds – UK 93,552 19.4
Buyout Funds – Continental Europe
Aliante Equity 3
Italy
10,733
2.2
Bencis V
Benelux
8,507
1.8
Verdane Edda
Nordic
4,880
1.0
Procuritas Capital IV
Nordic
4,862
1.0
Summa II
Nordic
4,587
0.9
DBAG VII
DACH
4,524
0.9
Vaaka Partners Buyout Fund III
Finland
4,505
0.9
Corpfin Capital Fund IV
Spain
4,359
0.9
Capvis III CV
DACH
4,138
0.9
Italian Portfolio
Italy
3,918
0.8
Montefiore IV
France
3,722
0.8
Procuritas VI
Nordic
3,569
0.7
Chequers Capital XVII
France
3,441
0.7
ARX CEE IV
Eastern Europe
3,238
0.7
Procuritas Capital V
Nordic
2,697
0.6
Summa I
Nordic
2,637
0.5
Chequers Capital XVI
France
2,076
0.4
DBAG Fund VI
DACH
2,075
0.4
NEM Imprese III
Italy
2,066
0.4
Capvis IV
DACH
1,921
0.4
Vaaka II
Finland
1,886
0.4
Avallon MBO Fund II
Poland
1,289
0.3
Ciclad 5
France
1,286
0.3
Portobello Fund III
Spain
1,256
0.3
Avallon MBO Fund III
Poland
1,178
0.2
Montefiore V
France
989
0.2
DBAG VIIB
DACH
980
0.2
DBAG VIII
DACH
906
0.2
Corpfin V
Spain
891
0.2
PineBridge New Europe II
Eastern Europe
779
0.2
Ciclad 4
France
744
0.2
DBAG Fund V
DACH
423
0.1
DBAG VIIIB
DACH
282
0.1
Gilde Buyout Fund III
Benelux
88
–
N+1 Private Equity Fund II
Iberia
61
–
Capvis III
DACH
50
–
Herkules Private Equity III
Nordic
6
–
Total Buyout Funds – Continental Europe 95,549 19.8
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Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Total
% of
Geographic
Valuation
Total
Investment
Focus
£’000
Portfolio
Private Equity Funds – USA
Blue Point Capital IV
North America
7,434
1.5
Graycliff III
United States
3,381
0.7
Blue Point Capital III
North America
2,269
0.5
Camden Partners IV
United States
2,397
0.5
Stellex Capital Partners
North America
1,875
0.4
Graycliff IV
North America
1,337
0.3
HealthpointCapital Partners III
United States
436
0.1
Blue Point Capital II
North America
249
-
Total Private Equity Funds – USA 19,378 4.0
Private Equity Funds – Global
PineBridge GEM II
Global
1,561
0.3
F&C Climate Opportunity Partners
Global
746
0.2
AIF Capital Asia III
Asia
367
0.1
PineBridge Latin America II
South America
116
–
Warburg Pincus IX
Global
83
–
Total Private Equity Funds – Global 2,873 0.6
Venture Capital Funds
SEP V
United Kingdom
8,381
1.7
MVM V
Global
2,434
0.5
SEP IV
United Kingdom
1,533
0.3
Pentech Fund II
United Kingdom
867
0.2
Life Sciences Partners III
Western Europe
519
0.1
SEP II
United Kingdom
369
0.1
Environmental Technologies Fund
Europe
62
–
Alta Berkeley VI
Europe
59
–
SEP III
United Kingdom
44
–
Total Venture Capital Funds 14,268 2.9
Direct – Quoted
Antero
Global
276
0.1
Laredo Petroleum
USA
24
–
Total Direct – Quoted 300 0.1
Secondary Funds
The Aurora Fund
Europe
1,308
0.3
Total Secondary Funds 1,308 0.3
Direct – Investments/Co-investments
Weird Fish
United Kingdom
15,829
3.3
Sigma
United States
14,835
3.1
TWMA
United Kingdom
12,349
2.6
Ashtead
United Kingdom
12,241
2.4
Coretrax
United Kingdom
11,760
2.4
Ambio Holdings
United States
10,641
2.2
San Siro
Italy
10,073
2.1
STAXS
Netherlands
9,403
1.9
Jollyes
United Kingdom
8,517
1.8
AccuVein
United States
6,375
1.3
Swanton
United Kingdom
6,254
1.3
Avalon
United Kingdom
6,234
1.3
1Med
Switzerland
5,885
1.2
JT IoT
United Kingdom
5,750
1.2
Amethyst Radiotherapy
Europe
5,617
1.2
ATEC (CETA)
United Kingdom
5,102
1.1
Omlet
United Kingdom
5,027
1.1
Agilico (DMC Canotec)
United Kingdom
4,919
1.0
Cyberhawk
United Kingdom
4,827
1.0
Contained Air Solutions
United Kingdom
4,463
0.9
Prollenium
North America
4,312
0.9
RGI
Italy
4,149
0.9
Orbis
United Kingdom
4,143
0.9
Dotmatics
United Kingdom
4,121
0.8
Rosa Mexicano
United States
3,729
0.8
Tier1 CRM
Canada
3,600
0.7
Walkers Transport
United Kingdom
3,529
0.7
Collingwood Insurance Group
United Kingdom
3,241
0.7
Habitus
Denmark
3,164
0.6
Babington
United Kingdom
2,596
0.5
Calucem
Croatia
2,547
0.5
PathFactory
Canada
2,045
0.4
Vero Bioscience
United States
1,276
0.3
TDR Algeco/Scotsman
Europe
406
0.1
Stone Computers
United Kingdom
282
0.1
Pet Network
Eastern Europe
159
–
Total Direct – Investments/Co-investments 209,400 43.3
Total Portfolio 483,047 100.0
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Governance Report
Principal Risks Mitigation Actions taken in the year
Economic, macro and political
External events such as global financial/political
instability including terrorism, war, climate change,
disease including pandemics, protectionism, inflation or
deflation, economic shocks or recessions, the availability
of credit and movements in interest rates could affect
share prices and the valuation of investments.
No change in overall risk in year
Each regular meeting of the Board provides a forum
to discuss with the Managers the general economic
environment and to consider any impact upon the
investment portfolio and objectives.
The investment portfolio is diversified across end
markets and regions.
Since the onset of the COVID-19 pandemic detailed stress testing,
cashflow and valuation modelling has been undertaken by the
Manager and presented to Directors at Board meetings.
Liquidity and capital structure:
Failure by the Company to meet its outstanding
undrawn commitments could lead to financial loss for
shareholders.
Failure to replace maturing borrowings or enter
agreement for new borrowings.
No change in overall risk in year
The Board receives a detailed analysis of
outstanding commitments at each meeting. A
medium term cashflow projection is also provided.
The Company has a borrowing facility which will not
expire until 19 June 2024. At 31 December 2021 the
facility was composed of a €25 million term loan
and a £95 million revolving credit facility.
During the year the Company has worked with RBSI to increase the
size of the revolving credit facility by £20 million to £95 million.
This has been achieved through the introduction of State Street as
another lender alongside RBSI. There are no changes to rates or
covenants.
Regulatory
Failure by the Company to meet or adhere to regulatory/
legislative standards. Loss of investment trust status.
Regulatory or taxation changes resulting in disincentives
or market barriers limiting demand for the Company’s
shares.
No change in overall risk in year
At each Board meeting the Company’s legal counsel
provides an update on regulatory and legislative
developments.
The Company employs BMO Asset Management as
Company Secretary.
Due to travel and gathering restrictions arising from the COVID-19
pandemic and following advice from the Company’s legal counsel
and Company Secretary, Shareholders were not able to attend the
2021 Annual General Meeting in person. However, Shareholders
were able to view an online presentation by the Company’s
Investment Manager, Hamish Mair and participate in a live
question and answer session.
The company has submitted its 2020 tax computation to HMRC.
Personnel issues
Loss of key personnel from the BMO Private Equity team.
No change in overall risk in year
Regular meetings between the Board and senior
staff of the Manager.
There is a six month notice period to the
investment management agreement.
During the acquisition of BMO GAM by Columbia Threadneedle
the Board has sought and received confirmation from senior
management of the importance of maintaining stability and
continuity of the teams which presently support the Company.
Fraud and cyber risks
Theft of Company and customer assets or data, including
cyber risks.
No change in overall risk in year
The Depositary oversees custody of investments
and cash in accordance with the requirements of
the AIFMD.
The Manager has extensive internal controls in
place. The Board receives a regular report on its
effectiveness. The Board also receives an annual
internal controls report from the Registrar, and the
Depository.
The Depositary provided quarterly reports to the Board and
attended an Audit Committee meeting.
The Manager continues to strength and develop its Risk,
Compliance and internal control functions and to invest in IT
security.
Supervision of BMO’s third party service providers, including State
Street and SS&C, has been maintained by BMO and includes
assurances regarding IT security and cyber-attack prevention.
Market
Poor investment selection and/or performance against
other assets classes and peer group. Increased share
price discount diminishes attractiveness of Company to
investors. A premium could represent a lost opportunity
to issue shares.
No change in overall risk in year
At each meeting of the Board, the Directors monitor
performance against peer group and returns from
the FTSE All Share Index.
Market intelligence is maintained via the
Company’s broker, N+1 Singer and the provision of
shareholder analyses.
The Board reviewed the Company’s share price discount and its
investment performance against the peer group and the FTSE All
Share Index at each regular meeting held during the year ended 31
December 2021.
ESG
Failure to respond to increasing investor focus on ESG.
Stranded assets within the investment portfolio.
No change in overall risk in year
The Manager has one of the longest established
and largest Responsible Investment teams in the
City. The BMO Private Equity Team undertake an
annual survey of the ESG practices of underlying
portfolio fund managers.
The BMO Private Equity team attended the COP 26 Climate
conference in Glasgow.
The latest BMO Private Equity team annual ESG survey has been
published.
Additional ESG disclosures have been included within this Report
and Accounts.
Operational
Failure of the Manager’s accounting systems or
disruption to the Manager’s or service providers’
business or business continuity failure could lead to an
inability to provide accurate reporting and monitoring
leading to a loss of Shareholder confidence.
No change in overall risk in year
The Board receives annual internal controls
reports from the Manager, Registrar and the
Depositary. The administration system employed
by the Manager is Efront. This is an industry wide
investment and accounting package used to record
transactions. Legal agreements/ engagement
letters in place with the Manager and service
providers.
For much of 2021 the Manager and service providers adopted
home working arrangements with no impact upon service delivery.
Principal Risks
The Board has carried out a comprehensive robust assessment of the principal risks as well as a thorough
process for the identification of emerging risks and has reviewed the uncertainties that could threaten the
Company’s success.
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Strategic Report
The 2018 UK Corporate Governance Code requires a Board to
assess the future prospects for the Company, and report on the
assessment within the Annual Report.
The Board considered that a number of characteristics of the
Company’s business model and strategy were relevant to this
assessment:
•
The Board looks to long-term performance rather than short
term opportunities.
•
The Company’s investment objective, strategy and policy,
which are subject to regular Board monitoring, mean that the
Company is invested in a well-diversified portfolio of funds
and direct investments and that the level of borrowings is
restricted.
•
The Company has a single class of Ordinary Shares.
•
The Company’s business model and strategy is not time limited.
Also relevant were a number of aspects of the Company’s
operational arrangements:
•
The Company has title to all assets held.
•
The Company’s five-year borrowing facility is composed of
a
€
25 million term loan and a £95 million multi-currency
revolving credit facility. The interest rate payable is variable.
•
The Company aims to pay quarterly dividends with an annual
yield equivalent to not less than four per cent of the average
of the published net asset values per ordinary share for the
previous four financial quarters, or if higher in pence per share
the highest quarterly dividend previously paid. Dividends can
be funded from the capital reserves of the Company.
•
Revenue and expenditure forecasts and projected cash
requirements are reviewed by the Directors at each Board
Meeting.
Given the current volatility in stock markets and the economic
disruption arising from the COVID-19 pandemic, inflation concerns
and the conflict in Ukraine the Directors also considered detailed
cashflow projections modelling various scenarios on the future
drawdowns to be paid and distributions to be received by the
Company. These projections were adjusted to consider various
plausible scenarios and took account of possible impacts upon
the future NAV of the Company and the ability of the Company to
meet its loan covenants. The Board concluded that there was a
low probability that a covenant breach related to capacity to meet
cashflow requirements would occur. Furthermore the Board has
considered the remedies available if it appears that a covenant
breach is possible. Having considered the likelihood of the events
which could cause a covenant breach and the remedies available to
the Company, the Directors are of the view that the Company is well
placed to manage such an eventuality satisfactorily. Further details
are provided on page 32.
In addition, the Board carried out a robust assessment of the
principal risks which could threaten the Company’s objective,
strategy, future performance, liquidity and solvency. These risks,
mitigating actions in place to ensure the Company’s resilience and
the processes for monitoring risks are set out on page 28 and in
Note 16 of the accounts. These principal risks were identified as
relevant to the viability assessment.
The Board took into account the forecasted cash requirements of
the Company, the long-term nature of the investments held, the
existence of the borrowing facility and the effects of any significant
future falls in investment values on the ability to repay and
re-negotiate borrowings, maintain dividend payments and retain
investors.
These matters were assessed over a five year period to April
2027, and the Board will continue to assess viability over five year
rolling periods, taking account of foreseeable severe but plausible
scenarios. Note 16 to the financial statements includes an analysis
of the potential impact of movements of interest rates and foreign
exchange on net asset value. A rolling five year period represents
the horizon over which the Directors believe they can form a
reasonable expectation of the Company’s prospects, balancing the
Company’s financial flexibility and scope with the current uncertain
outlook for longer-term economic conditions affecting the Company
and its Shareholders.
Based on their assessment, and in the context of the Company’s
business model, strategy and operational arrangements set out
above, the Board has a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as they
fall due over the five year period to April 2027. For this reason, the
Board also considers it appropriate to continue adopting the going
concern basis in preparing the Report and Accounts.
Rolling five year viability assessment and statement
By order of the Board
BMO Asset Management (Holdings) PLC
6th Floor
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
7 April 2022
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Governance Report
Board of Directors
* Member of the Audit Committee
†
Member of the Management Engagement Committee
‡
Member of the Nomination Committee
Mark Tennant †‡
Chairman
is Chairman of the Centrica Combined Common
Investment Fund Limited and Chairman of Scottish
Land and Estates. He is also a member of the
Advisory Board of T Rowe Price Global Investor
Services and a director of UTI International. Until
recently he was a Senior Adviser to J.P. Morgan.
He joined the Board in February 2009 and was
appointed as Chairman in May 2010.
Elizabeth Kennedy *†‡
Chairman of the Audit Committee
has over 30 years’ experience in corporate finance,
principally in IPOs, secondary issues and takeovers.
She is a director of Octopus AIM VCT 2 plc, Beatson
Cancer Charity and a private technology company,
a consultant with Davidson Chalmers Stewart,
Solicitors and a member and past Chair of the AIM
Advisory Group of the London Stock Exchange. She
joined the Board in July 2007.
David Shaw *†‡
sits on the boards of a number of private
companies including acting as Chairman of the
charity Dyslexia Scotland. He was previously Chief
Executive, then Chairman, of Bridgepoint Capital,
a leading European mid corporate private equity
firm until his retiral in December 2009. He joined
the Board in November 2009.
Swantje Conrad *†‡
began her career in banking at J.P. Morgan in 1991
from where she retired as Managing Director in
2017. During this time Swantje gained extensive
experience in corporate finance/M&A, global markets
and investment management. She is a supervisory
board member at RENK GmbH and previously
served as Independent Director of Siemens Gamesa
Renewable Energy S.A. and on various charitable
boards. She was appointed to the Board in April 2017.
Audrey Baxter *†‡
has a distinguished career in business and public life.
Audrey is currently Chairman and CEO of W. A. Baxter
& Sons (Holdings) Ltd and has served previously
on the boards of a number of public and private
companies, charities and voluntary organisations.
She was appointed to the Board in June 2020.
Tom Burnet *†‡
is Non-Executive Chairman of Inspired Thinking
Group, Aker Systems Ltd, Kainos plc and The Baillie
Gifford US Growth Trust plc. Previously he served
as CEO, Executive Chairman and as a Non-Executive
Director of AIM company accesso Technology Group
plc. He started his career as an Army Officer serving
in the Black Watch (R.H.R.) and is a member of the
Queen’s Bodyguard in Scotland. He was appointed to
the Board in June 2020.
Richard Gray *†‡
is a career investment banker with extensive
capital markets and corporate finance experience.
He has worked previously with Lazard,
Charterhouse and UBS and was Vice Chairman of
Panmure Gordon. He is a director of Zeus Capital,
a non-executive director of CVS Group plc, an
independent director of Alpha Real Capital and Vice
Chairman of Invescore Group. He was appointed to
the Board in March 2017 and will become Chairman
of the Company at the conclusion of the Annual
General Meeting to be held on 26 May 2022.
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Governance ReportGovernance ReportGovernance Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Report of the Directors
Results and Dividends
The Directors submit the Annual Report and financial statements of
the Company for the year ended 31 December 2021. The results for the
year are set out in the attached financial statements.
The Company’s financial statements have been prepared in
accordance with UK adopted international accounting standards.
During the year, interim dividends of 3.99p per Ordinary Share were
paid on 29 January 2021, 4.16p per Ordinary Share on 30 April 2021,
4.35p per Ordinary Share on 30 July 2021 and 4.77p per Ordinary Share
on 29 October 2021.
Principal Activity and Status
The Company is registered as a public limited company in terms of
the Companies Act 2006 (the ‘Act’) and is an investment company as
defined by Section 833 of the Act.
The Company has been approved as an investment trust for
accounting periods commencing on or after 1 January 2012 subject to
it continuing to meet the eligibility conditions of Section 1158 of the
Corporation Tax Act 2010 and the ongoing requirements for approved
companies in Chapter 3 of Part 2 Investment Trust (Approved
Company) (Tax) Regulations 2011 (Statutory Instrument 2011/2999).
Company Number: SC179412
Share Capital
Ordinary Shares
Dividends
The Ordinary Shares carry the right to participate in the revenue and
realised capital profits of the Company. The dividends paid to the
holders of Ordinary Shares currently depend on, inter alia, the income
return on the Company’s assets, capital structure and gearing and,
accordingly, may vary over time.
In respect of the Ordinary Shares, the Company aims to pay quarterly
dividends with an annual yield equivalent to not less than 4 per
cent of the average of the published net asset values per Ordinary
Share as at the end of each of its last four financial quarters prior to
the announcement of the relevant quarterly dividend or, if higher,
equal (in terms of pence per share) to the highest quarterly dividend
previously paid.
Capital Entitlement
On a winding up of the Company, after satisfying all liabilities,
Ordinary Shareholders would be entitled to all the remaining assets.
Voting Rights
Ordinary Shareholders are entitled to receive notice of, and, in normal
circumstances, attend and vote at, all general meetings of the
Company. Each Ordinary Share is entitled to one vote.
Dividend Policy
Resolution 3
is to approve the Company’s dividend policy. The
resolution is being proposed to comply with guidance issued by
certain voting agencies since, in line with the dividend policy set out
on page 9, all dividends are now declared as interim dividends, and
without this resolution shareholders would otherwise not have the
opportunity to vote on dividends.
Directors
Biographical details of the Directors, all of whom are non-executive,
can be found on page 30.
Ms Elizabeth Kennedy, Mr David Shaw and Mr Mark Tennant have
served on the Board for nine years or more. The Board subscribes
to the view that long-serving Directors should not be prevented
from forming part of an independent majority. It does not consider
that a Director’s tenure necessarily reduces his or her ability to act
independently and, following formal performance evaluations,
believes that each of those Directors is independent in character and
judgement and that there are no relationships or circumstances which
are likely to affect their judgement. The Board’s policy on tenure is
that continuity and experience are considered to add significantly to
the strength of the Board. The term of any non-executive Director
beyond nine years is subject to rigorous review by the Board.
A plan for the refreshment of the Board has been determined. As part
of this plan Mark Tennant will retire from the Board at the conclusion
of the Company’s Annual General Meeting (“AGM”) on 26 May 2022.
Upon his retirement, Richard Gray will become Chairman. As a further
part of this plan it is also anticipated that David Shaw will retire from
the Board at the conclusion of the Company’s 2023 AGM.
The Directors believe that the Board has an appropriate balance of
skills, experience, independence and knowledge of the Company
to enable it to provide effective strategic leadership and proper
governance of the Company. The Board confirms that, following
performance evaluations, the performance of each of the Directors
continues to be effective and demonstrates commitment to the role.
The Board therefore believes that it is in the interests of shareholders
that those Directors seeking re-election are re-elected and therefore
recommends that shareholders vote in favour of Resolutions 4 to 9.
Resolution 4
concerns the re-election of Richard Gray. He has served
on the Board for 5 years. He has broad experience across equity
research, sales and capital markets and corporate broking and finance.
Subject to the passing of this resolution, Richard Gray will be appointed
as Chairman at the conclusion of the Company’s AGM on 26 May 2022.
Resolution 5
c
oncerns the re-election of Elizabeth Kennedy. She has
served on the Board for over 14 years. She has over 30 years’ experience
in corporate finance, principally IPOs, secondary issues and takeovers.
Resolution 6
concerns the re-election of Audrey Baxter. She was
appointed to the Board in June 2020 and has extensive experience
operating a global food manufacturer.
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Governance Report
which have been disclosed and approved by the other Directors. This
register is kept up-to-date and the Directors are required to disclose to
the Company Secretary any changes to conflicts or any potential new
conflicts.
Management and Management Fees
BMO Investment Business Limited provides investment management
services to the Company and was appointed as the Company’s AIFM
on 22 July 2014. A summary of the contract between the Company and
the Manager in respect of investment management services provided
is given in note 3 to the financial statements.
The Management Engagement Committee has reviewed the
appropriateness of the Manager’s appointment. In carrying out its
review, the Committee considered the past investment performance
of the Company and the capability and resources of the Manager to
deliver satisfactory investment performance. It also considered the
length of the notice period of the investment management contract
and the fees payable to the Manager and its peers, together with the
commitment of the Manager to the Company and its investment trust
business and the standard of other services provided, which include
administration, marketing and corporate development.
Following this review it is the Directors’ opinion that the continuing
appointment of the Manager on the terms agreed is in the interests
of shareholders as a whole.
Independent Auditor
Following the conclusion of a formal tender process led by the
Company’s Audit Committee, the Board approved the proposed
appointment of BDO LLP as Auditor for the financial year commencing
1 January 2021. The proposed appointment was approved by
Shareholders at the Annual General Meeting held on 27 May 2021.
Resolutions 10
and
11
seek shareholder approval, respectively, for
the re-appointment of BDO LLP as the Auditor of the Company and to
authorise the Audit Committee to determine its remuneration for the
year ended 31 December 2022.
BDO LLP has expressed its willingness to be reappointed as Auditor to
the Company.
Depositary
JPMorgan Europe Limited was appointed as Depositary on 22 July 2014
in accordance with the AIFM Directive. The Depositary’s responsibilities
include, but are not limited to, cash monitoring, segregation and
safe keeping of the Company’s financial instruments and monitoring
the Company’s compliance with investment limits and leverage
requirements.
Company Secretary
BMO Asset Management (Holdings) PLC provides secretarial services
to the Company.
Greenhouse Gas Emissions
All of the Company’s activities are outsourced to third parties. As
such it does not have any physical assets, property, employees or
operations of its own and does not generate any greenhouse gas or
other emissions.
The company is exempt from Streamlined Energy and Carbon
Reporting Disclosures as it has consumed less than 40,000 Kwh of
energy in the United Kingdom during the year.
Resolution 7
concerns the re-election of Tom Burnet. He was
appointed to the Board in June 2020 and has broad experience of
managing technology companies. He is also the chairman of another
investment trust.
Resolution 8
concerns the re-election of Swantje Conrad. She has
served on the Board for 5 years. She has extensive experience in
corporate finance/M&A, global markets and investment management.
Resolution 9
concerns the re-election of David Shaw. He has served
on the Board for over 12 years. He was Chairman of Bridgepoint
Capital, a leading European private equity firm.
No Director has any material interest in any contract to which the
Company is a party.
Substantial Interests in Share Capital
At 31 December 2021 the Company had received notification of the
following holdings of voting rights (under the FCA’s Disclosure and
Transparency Rules):
Since 31 December 2021, M&G PLC has notified the Company that its
holding has been reduced to 3,422,567 shares. Bank of Montreal has
disposed of its holding.
BMO Retail Products owned 21,978,414 shares or 29.7 per cent of
the issued share capital of the Company at 31 December 2021. For
non-contentious resolutions the nominee company holding these
shares will vote the shares held on behalf of planholders who have
not returned their voting directions in proportion to the directions
of those who have (“proportional voting”). Implementation of
this arrangement is subject to a minimum threshold of 5% of the
shares held in the BMO savings plans being voted. A maximum limit
of 10,000 shares that any one individual investor can vote, being
approximately 1.0% of the relevant minimum threshold, also applies.
Any individual voting directions received in excess of the maximum
limit will remain valid, but will not form part of the proportional
voting basis. Planholders have the right to exclude their shares from
the proportional voting arrangement.
Conflicts of Interest
Under the Act a Director must avoid a situation where he or she has,
or could have, a direct or indirect interest that conflicts, or possibly
may conflict, with the Company’s interests. The requirement is
very broad and could apply, for example, if a Director becomes a
director of another company or a trustee of another organisation.
The Act allows directors of public companies to authorise conflicts
and potential conflicts where appropriate and where the Articles of
Association contain a provision to this effect. The Company’s Articles
of Association give the Directors authority to approve such situations.
The Company maintains a register of Directors’ conflicts of interest
Ordinary % of
Shares Ordinary
Held Shares
CCLA Investment Management
7, 327,043
9.9
M&G PLC
4,378,908
5.9
Oxford County Council Pension Fund
4,000,000
5.4
Smith and Williamson Holdings
3,638,081
4.9
Lazard Asset Management
3,617,271
4.9
Bank of Montreal
2,779,650
3.8
Transact Nominees Limited
2,223,778
3.0
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Going Concern
In assessing the going concern basis of accounting the Directors have
had regard to the guidance issued by the Financial Reporting Council.
They have considered the current cash position of the Company,
the availability of the Company’s loan facility and compliance with
its banking covenants. They have also considered year-end cash
balances and forecast cash flows, especially those relating to capital
commitments and realisations.
As at 31 December 2021, the Company had outstanding undrawn
commitments of £136.4 million. Of this amount, approximately
£26 million is to funds where the investment period has expired
and the Manager would expect very little of this to be drawn. Of
the outstanding undrawn commitments remaining within their
investment periods, the Manager would expect that a significant
amount will not be drawn before these periods expire.
As at 31 December 2021, the Company had a committed borrowing
facility comprising a term loan of €25 million and a revolving credit
facility of £95 million. This facility is due to expire on 19 June 2024
when its five-year term concludes.
At the 31 December 2021 the Company had fully drawn the term
loan of €25 million and had drawn £15.7 million of the revolving
credit facility, leaving £79.3 million of the revolving credit facility
available. This available proportion of the facility can be used to fund
any shortfall between the proceeds received from realisations and
drawdowns made from funds in the Company’s portfolio or funds
required for co-investments. Under normal circumstances this amount
of ‘headroom’ in the facility would be more than adequate to meet
any such shortfall. In addition, as at 31 December 2021 the Company
had a cash balance of £32.7 million.
At present the global economy continues to suffer disruption due
to the effects of the COVID-19 pandemic, inflation concerns and the
conflict in Ukraine and the Directors have given serious consideration
to the consequences of this for the private equity market in general
and for the cashflows and asset values of the Company specifically
over the next twelve months. The Company has a number of loan
covenants and at present the Company’s financial situation does not
suggest that any of these covenants are close to being breached.
The Directors are mindful of the extraordinary nature of the current
economic situation and have conducted stress tests to examine
the possible circumstances which would result in the Company’s
covenants being breached. Three scenarios were tested: business as
usual; the experience of the global financial crisis; and the impact
of a very severe recession. The Directors have also considered any
remedial measures which the Company could practically employ to
avoid a covenant breach if that appears likely.
It is the Directors’ opinion that the circumstances which would give
rise to a covenant breach have a low probability. The primary risk
is that there is a very substantial decrease in the asset value of the
Company in the short or medium term. Given prior experience in
the last financial crisis of 2008/2009 and allowing for the breadth
of the Company’s portfolio and the valuation methodologies of the
Company’s investment managers and their investment partners, the
Directors do not expect that the possible reduction in asset value
arising from this disruption will be of sufficient magnitude to give rise
to a covenant breach.
In addition to the possible effect of this disruption on valuations, the
Directors have also reviewed the forecast cashflows of the Company
comprising future drawdowns and distributions. The cashflow
forecasts take into account potential equity refinancings of portfolio
companies, whether held through funds or as coinvestments, which
may be necessary as a result of disruption during the period. The
Manager has incorporated detailed responses from companies and
investment managers in preparing the cashflow forecasts.
Having compared these against the Company’s current and projected
available funding sources, principally its committed borrowing
facility noted above, the Directors have confidence that there is a
low probability that a covenant breach related to capacity to meet
cashflow requirements will occur.
Furthermore, being aware of the possible risks the Directors have
considered in detail a number of remedial measures that are
open to the Company which it may take if such a covenant breach
appears possible. These include reducing commitments and raising
cash through engaging with the private equity secondaries market.
The Manager has considerable experience in the private equity
secondaries market through the activities of the Company and
through the management of other private equity funds. The Directors
have considered other actions which the Company may take in
the event that a covenant breach was imminent including taking
measures to increase the Company’s asset base through an issuance
of equity either for cash or pursuant to the acquisition of other private
equity assets. The Directors have also considered the likelihood of the
Company making alternative banking arrangements with its current
lenders or another lender.
Having considered the likelihood of the events which could cause
a covenant breach and the remedies available to the Company, the
Directors are of the view that the Company is well placed to manage
such an eventuality satisfactorily. Based on this information the
Directors believe that the Company has the ability to meet its financial
obligations as they fall due for a period of at least twelve months
from the date of approval of the financial statements. Accordingly, the
financial statements have been prepared on a going concern basis.
Financial Instruments
The Company’s financial instruments comprise its investment
portfolio, cash balances, bank debt and debtors and creditors.
Financial instruments recognised at fair value are shown in the fair
value hierarchy in note 10 to the financial statements. The financial
risk management objectives and policies arising from the Company’s
financial instruments and the exposure to risk are disclosed in note 16
to the financial statements. Details of the Company’s bank facility are
contained in note 14 to the financial statements.
Disclosure of Information to the Auditor
The Directors confirm that, so far as each of them is aware, there is no
relevant audit information of which the Company’s auditor is unaware
and the Directors have taken all reasonable steps in order to make
themselves aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
Individual Savings Accounts
The Company’s shares are qualifying investments as defined by HM
Revenue & Customs’ regulations for Individual Savings Accounts. It
is the intention of the Directors that the Company will continue to
conduct its affairs to satisfy this requirement.
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Annual General Meeting
The Notice of Annual General Meeting to be held on 26 May 2022 is
set out on pages 68 to 72.
Directors’ Authority to Allot Shares
The Directors are seeking to renew the authority to allot shares.
Resolution 12
in the Notice of Annual General Meeting seeks renewal
of such authority to allot Ordinary Shares up to an aggregate nominal
amount of £73,941 (being an amount equal to 10 per cent of the total
issued share capital of the Company as at the date of this report).
Under
resolution 13
, which is a special resolution, the Directors are
also seeking to renew the authority to allot new Ordinary Shares and/
or sell Ordinary Shares held by the Company as treasury shares for
cash as if Section 561 of the Companies Act 2006 did not apply. (This
section requires that, when equity securities are allotted for cash,
such new shares are first offered to existing equity shareholders in
proportion to their existing holdings of shares, this entitlement being
known as ‘‘pre-emption rights’’). The purpose of holding shares in
treasury is to allow the Company to re-issue those shares quickly and
cost-effectively.
Allotments of Ordinary Shares pursuant to these authorities would
enable the Directors to issue shares for cash and/or to sell equity
securities held as treasury shares to take advantage of changes in
market conditions that may arise, in order to increase the amount of
the Company’s issued share capital. The purpose of such an increase
would be to improve the liquidity of the market in the Company’s
shares and to spread the fixed costs of administering the Company
over a wider base. The Directors believe that this would increase
the investment attractions of the Company to the benefit of existing
shareholders. No issue of shares and/or sale of shares held in treasury
would be made which would dilute the net asset value per Ordinary
Share of existing shareholders.
Resolution 13
, if passed, will give the Directors power to allot for
cash Ordinary Shares of the Company and to sell Ordinary Shares out
of treasury up to a maximum nominal amount of £36,970 (being an
amount representing 5 per cent of the total issued ordinary share
capital of the Company as at the date of this report) without the
application of the pre-emption rights described above. The calculation
of the above figure is in accordance with the limits laid down by the
Pre-Emption Group guidelines, and the Directors will not use the
authority other than in accordance with the above guidelines.
The authorities contained in resolutions 12 and 13 will continue
until the Annual General Meeting of the Company in 2023, and the
Directors envisage seeking renewal of these authorities in 2023 and
in each succeeding year, subject to such renewals again being in
accordance with the above guidelines.
Directors’ Authority to Buy Back Shares
The current authority of the Company to make market purchases
of up to 14.99 per cent of the issued Ordinary Shares expires at the
end of the Annual General Meeting and
resolution 14
, as set out in
the Notice of the Annual General Meeting, seeks renewal of such
authority. The renewed authority to make market purchases will be
in respect of a maximum of 14.99 per cent of the issued Ordinary
Shares as at the date of the passing of the resolution (approximately
11.1 million Ordinary Shares). The price paid for shares will not be
less than the nominal value of 1p per Ordinary Share nor more than
the higher of (i) 5 per cent above the average of the middle market
values of those shares for the five business days before the shares are
purchased, (ii) the price of the last independent trade on the trading
venue where the purchase is carried out; and (iii) the highest current
independent bid on that venue. This power will only be exercised if,
in the opinion of the Directors, a purchase will result in an increase
in net asset value per share of the Ordinary Shares and be in the
interests of shareholders as a whole. Purchases would only be made
for cash at a cost which is below the prevailing net asset value per
share. Any shares purchased under this authority will be cancelled
or held in treasury for future re-issue at a premium to the prevailing
net asset value per share. The effect of any cancellation would be
to reduce the number of shares in issue. For most purposes, where
held in treasury, shares are treated as if they had been cancelled (for
example they carry no voting rights and do not rank for dividends).
The purpose of holding some shares in treasury is to allow the
Company to re-issue these share quickly and cost effectively, thus
providing the Company with greater flexibility.
Recommendation
The Board considers that the passing of the resolutions to be
proposed at the Annual General Meeting is in the interests of the
Company and its shareholders as a whole and they unanimously
recommend that shareholders vote in favour of those resolutions.
Statement Regarding Annual Report and Accounts
Following a detailed review of the Annual Report and Accounts
by the Audit Committee to assess the Company’s position and
performance, business model and strategy, the Directors consider
that taken as a whole it is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company’s performance, business model and strategy. In reaching this
conclusion, the Directors have assumed that the reader of the Annual
Report and Accounts would have a reasonable level of knowledge of
the investment industry in general and investment trusts in particular.
By order of the Board
BMO Asset Management (Holdings) PLC
6th Floor
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
7 April 2022
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Other Information
Chairman’s statementOverview Auditor’s Report
Corporate Governance Statement
The Company is committed to high standards of corporate governance
and accordingly adheres, in so far as they are relevant to an
investment trust the requirements of the 2018 revised Corporate
Governance Code (‘the Code’) of the Financial Reporting Council
(‘FRC’). The Association of Investment Companies issued its own
revised Code of Corporate Governance (‘the AIC Code’) which can
be found at www.theaic.co.uk. As a matter of good practice, the
Company has adopted corporate governance arrangements which
follow the general principles of the AIC Code. Significant differences in
actual practice are detailed below.
Since all Directors are non-executive, the provisions on the role of the
chief executive and on Directors’ remuneration are not relevant to the
Company (except in so far as they apply to non-executive Directors)
and are therefore not reported on further.
In view of its non-executive nature and the requirement of the
Articles of Association that all are subject to retirement by rotation,
the Board does not consider it appropriate for the Directors to be
appointed for a specified term. The Articles of Association require
the Directors to retire by rotation at least every three years, and the
Board has agreed that in accordance with the AIC Code all Directors
will retire annually. In addition, due to its size and non-executive
nature, the Board does not consider it appropriate for a Senior
Independent Director to be appointed.
The Board consists solely of non-executive Directors. Mark Tennant,
who is the Chairman will retire from the Board at the conclusion of
the Company’s Annual General Meeting on 26 May 2022. Upon his
retirement, Richard Gray will become Chairman.
All Directors are considered by the Board to be independent of the
Manager. New Directors receive an induction from the Manager on
joining the Board and all Directors are made aware of appropriate
training courses.
During the year the performance of the Board, committees and
individual Directors was evaluated through a discussion process led
by the Chairman. The performance of the Chairman was evaluated by
the other Directors.
A
mongst other considerations, the performance evaluation
considered the balance of skills and diversity of the Board, as well
as the Board’s overall effectiveness. The Board believes it has an
appropriate balance of skills and experience, length of service and
knowledge of the Company. The Board does not consider that the use
of external consultants to conduct this evaluation is likely to provide
any meaningful advantage over the process adopted. But the option
is kept under review.
The table below sets out the number of scheduled Board and
Committee meetings held during the year ended 31 December 2021
and the number of meetings attended by each Director. In addition
further committee and board meetings can be held at short notice
to address issues arising. In accordance with the best corporate
governance practice, the Chairman is not a member of the Audit
Committee.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them
in the furtherance of their duties. No such advice was sought during
the year. The Company maintains appropriate Directors’ and Officers’
liability insurance.
The basis on which the Company aims to generate value over the
longer term is set out within the Strategic Report. The Company has
no executive Directors or employees. A management agreement
between the Company and its Manager (BMO Investment Business
Limited) sets out the matters over which the Manager has authority
and the limits above which Board approval must be sought.
All other matters, including corporate strategy, investment and
dividend policies, gearing, corporate governance procedures and risk
management are reserved for the approval of the Board of Directors.
The Board receives full information on the Company’s investment
performance, assets, liabilities and other relevant information in
Attendance at meetings held during year ended 31 December 2021
Management
Engagement Nomination
Board of Directors Audit Committee Committee Committee
Held Attended Held Attended Held Attended Held Attended
Mark Tennant
4
4
–
–
1
1
1
1
Elizabeth Kennedy
4
4
2
2
1
1
1
1
Audrey Baxter
4
4
2
2
1
1
1
1
Tom Burnet
4
4
2
2
1
1
1
1
Swantje Conrad
4
4
2
2
1
1
1
1
Richard Gray
4
4
2
2
1
1
1
1
David Shaw
4
3
2
2
1
1
1
1
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advance of Board meetings. The Board has direct access to the
company secretarial advice and services provided by BMO. The
proceedings at all board meetings are fully recorded through a
process that allows any Director’s concerns to be recorded in the
minutes. The Board has the power to appoint or remove the Company
Secretary.
The Manager, in the absence of explicit instructions from the Board, is
empowered to exercise discretion in the use of the Company’s voting
rights.
The length of tenure of the Chairman is determined by reference
to the AIC Code. The Board’s policy on tenure of the Chairman is
that continuity and experience are considered to add significantly
to the strength of that role. As noted on page 31 the term of any
non-executive Director, including the Chairman, beyond nine years is
subject to rigorous review by the Board.
Throughout the year, a number of committees have been in
operation. Those committees are the Audit Committee, the
Management Engagement Committee, and the Nomination
Committee. The committees operate within clearly defined terms
of reference which are available for inspection on request at the
Company’s registered office.
Bribery Act
The Company has a zero tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and openly. The
Manager also adopts a zero tolerance approach and has policies and
procedures in place to prevent bribery.
Audit Committee
The Audit Committee is chaired by Elizabeth Kennedy and comprised
all of the Directors with the exception of Mark Tennant, the Chairman
of the Company. The Report of the Audit Committee is contained on
pages 37 and 38.
Management Engagement Committee
The Management Engagement Committee comprises all of the
Directors and is chaired by Mark Tennant, the Chairman of the
Company. The report of the Management Engagement Committee is
included on page 42.
Nomination Committee
The Nomination Committee comprises all of the Directors and is
chaired by Mark Tennant, the Chairman of the Company. The report
of the Nomination Committee is contained on page 39.
Relations with Shareholders
The Company welcomes the views of Shareholders and places great
importance on communications with them. The Manager holds
meetings with the Company’s largest Shareholders and reports back
to the Board on these meetings. The Board is also regularly briefed
on Shareholder attitudes by the Company’s broker. The Chairman
and other Directors are available to meet Shareholders if required
to discuss any significant issues that have arisen and address
Shareholder concerns and queries. In normal circumstances, the
Annual General Meeting of the Company provides a forum, both
formal and informal, for Shareholders to meet and discuss issues with
the Directors and Manager of the Company.
In accordance with the AIC Code, when votes of 20 per cent or
more have been cast against a resolution at a General Meeting the
Company will announce the actions it intends to take to consult
Shareholders to understand the reasons behind the result. A further
update will be published within six months. No such votes were
received during 2021.
By order of the Board
BMO Asset Management (Holdings) PLC
6th Floor
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
7 April 2022
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Other Information
Chairman’s statementOverview Auditor’s Report
Report of the Audit Committee
The members of the Audit Committee who served throughout the
year ended 31 December 2021 were Elizabeth Kennedy, Audrey
Baxter, Tom Burnet, Swantje Conrad, Richard Gray and David Shaw. In
accordance with best corporate governance practice, the Chairman of
the Company, Mark Tennant is not a member of the Audit Commitee.
The committee is chaired by Elizabeth Kennedy. The duties of the
committee include reviewing the Annual and Interim Accounts,
the system of internal controls, and the terms of appointment
and remuneration of the Auditor, BDO LLP (“BDO”), including its
independence and objectivity. It is also the forum through which BDO
reports to the Board of Directors. The Committee meets at least twice
yearly including at least one meeting with BDO.
The Audit Committee met on two occasions during the year and the
attendance of each of the members is set out on page 35. In the
course of its duties, the committee had direct access to BDO and
senior members of the Manager’s fund management and investment
trust teams. Amongst other things, the Audit Committee considered
and reviewed the following matters and reported thereon to the
Board:
•
The annual results announcements, and annual and half-yearly
reports and accounts;
•
The accounting policies of the Company;
•
The principal risks faced by the Company and the effectiveness of
the Company’s internal control environment;
•
The effectiveness of the audit process and related non-audit
services and the independence and objectivity of BDO, their re-
appointment, remuneration and terms of engagement;
•
The policy on the engagement of BDO to supply non-audit
services;
•
The implications of proposed new accounting standards and
regulatory changes;
•
The receipt of an internal controls report from the Manager; and
•
Whether the Annual Report and Accounts is fair, balanced and
understandable.
As part of its review of the scope and results of the audit, during the
year the Audit Committee considered and approved BDO’s plan for the
audit of the financial statements for the year ended 31 December 2021.
At the conclusion of the audit BDO did not highlight any issues to the
Audit Committee which would cause it to qualify its audit report nor
did it highlight any fundamental internal control weaknesses. BDO
issued an unqualified audit report which is included on pages 44 to 50.
As part of the review of auditor independence and effectiveness,
BDO has confirmed that it is independent of the Company and has
complied with relevant auditing standards. In evaluating BDO, the
Audit Committee has taken into consideration the standing, skills and
experience of the firm and the audit team.
The financial year ended 31 December 2021 is the first period of
appointment of BDO as the Auditor of the Company. In prior years
Ernst and Young LLP was the Auditor. BDO was unanimously chosen
by the Board following a robust and transparent audit tender process.
In recognition of underlying audit rotation requirements, the
Committee currently intends that a further tender process should be
undertaken not later than 31 December 2030 to cover the financial
years ending 31 December 2031 onwards.
Internal Control
The Board is responsible for the Company’s system of internal
control and for reviewing its effectiveness. The Board has therefore
established an ongoing process designed to meet the particular needs
of the Company in managing the risks to which it is exposed.
The process is based principally on the Manager’s existing risk-
based approach to internal control whereby a register is created that
identifies the key functions carried out by the Manager and other
service providers, the individual activities undertaken within those
functions, the risks associated with each activity and the controls
employed to minimise those risks. These functions include the
financial reporting process. A residual risk rating is then applied. The
register is regularly updated and the Board is provided with regular
Matter Action
Valuation of Unlisted Investments
The Company’s portfolio is invested predominantly in unlisted
securities. Errors in the valuation could have a material impact on
the Company’s net asset value per share.
Significant Issues Considered by the Audit Committee in Relation to the Financial Statements
The Company’s accounting policy for valuing its unlisted
investments is stated in note 1(e) to the financial statements.
The Audit Committee reviewed and challenged the valuation
prepared by the Manager, taking account of the latest available
information about the Company’s investments, the Manager’s
knowledge of underlying funds and current market information
where appropriate. The Audit Committee satisfied itself that the
investments were valued, where appropriate, on a consistent
basis with prior periods and in accordance with published industry
guidelines and applicable accounting standards.
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reports highlighting all material changes to the risk ratings and
confirming the action which has been, or is being, taken.
A formal annual review of these procedures is carried out by the
Audit Committee and includes consideration of internal control
reports issued by the Manager and other service providers. Such
review procedures have been in place throughout the financial year
and up to the date of approval of the Annual Report, and the Board
is satisfied with their effectiveness. These procedures are designed
to manage rather than eliminate risk and, by their nature, can only
provide reasonable, but not absolute, assurance against material
misstatement or loss. At each Board meeting the Board monitors the
investment performance of the Company in comparison to its stated
objective, its peer group and a broad equity market index. The Board
also reviews the Company’s activities since the last Board meeting to
ensure that the Manager adheres to the agreed investment policy and
approved investment guidelines and, if necessary, approves changes
to such policy and guidelines. Since its appointment in July 2014, the
Depositary has provided quarterly reports to the Board and carries
out daily independent checks on cost and investment transactions,
annually verifies asset ownership and has strict liability for the loss of
the Company’s financial assets in respect of which it has safekeeping
duties.
The Board has reviewed the need for an internal audit function. It has
decided that the systems and procedures employed by the Manager,
including its internal audit function, provide sufficient assurance that
a sound system of internal control, which safeguards shareholders’
investments and the Company’s assets, is maintained. An internal
audit function specific to the Company is therefore considered
unnecessary but this decision will be kept under review.
Elizabeth Kennedy
Chairman of the Audit Committee
7 April 2022
Matter Action
Title to Unlisted Investments
If the Company did not have legal title to its unlisted
investments this could have a material impact on its net asset
value per share.
Going Concern
The Directors of the Company are responsible for preparing the
Report and Accounts. In preparing these financial statements
the Directors are required to consider whether it is appropriate to
adopt the going concern basis. The Directors will consider if the
Company has the ability to meet its financial obligations as they
fall due for a period of at least twelve months from the date of
this report.
Significant Issues Considered by the Audit Committee in Relation to the Financial Statements (continued)
The Board receives quarterly reports from the Depositary and on
an annual basis the Audit Committee reviews the Manager’s AAF
Report on its internal controls.
The Directors considered the current cash position of the Company,
the availability of the Company’s loan facility and compliance with
its covenants.
Given the current volatility in stock markets and the economic
disruption arising from the COVID-19 pandemic, inflation concerns
and the conflict in Ukraine, the Audit Committee also considered
detailed cashflow projections modelling various scenarios
relating to this volatility on the future drawdowns to be paid and
distributions to be received by the Company. These projections
were adjusted to consider various plausible scenarios and took
account of possible impacts upon the future NAV of the Company
and the ability of the Company to achieve its loan covenants. The
Board concluded that there was a low probability that a covenant
breach related to capacity to meet cashflow requirements would
occur. Furthermore the Board has considered the remedies
available if it appears that a covenant breach appears possible.
Having considered the likelihood of the events which could cause
a covenant breach and the remedies available to the Company,
the Directors are of the view that the Company is well placed to
manage such an eventuality satisfactorily.
Further details are provided on page 32. The Directors were satisfied
that the adoption of the going concern basis was appropriate.
Calculation of Performance Fee
As disclosed in note 3 to the financial statements, the Manager
is entitled to both a basic and performance related management
fee. The entitlement to a performance fee is based on a number
of criteria. Errors in its calculation could result in an overpayment
or underpayment of fees to the Manager.
The Audit Committee reviews the Manager’s entitlement to
a performance fee and also reviews the calculation of any
performance fee provisions twice a year.
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Other Information
Chairman’s statementOverview Auditor’s Report
Report of the Nomination Committee
As a further part of the Board succession plan it is anticipated that
David Shaw will retire from the Board at the conclusion of the
Company’s 2023 AGM.
Diversity
Any appointments to the Board are based on merit, but in
considering appointments, the Nomination Committee also takes
into account the ongoing requirements of the Company and the
need to have a balance of skills, experience, diversity, including
gender, independence and knowledge of the Company within the
Board. The Directors have not set any measurable objectives in
relation to the diversity of the Board.
Committee evaluation
The activities of the committee were considered as part of the
Board appraisal process completed in accordance with standard
governance arrangements as summarised on page 35. The
conclusion from the process was that the committee was operating
effectively, with the right balance of membership, experience and
skills.
Mark Tennant
Chairman of Nomination Committee
7 April 2022
Role of the Committee
The Committee met on one occasion during the year. The duties of
the Nomination Committee are:
•
To be responsible for reviewing and nominating candidates
for the approval of the Board to fill vacancies on the Board
of Directors.
•
To consider and review the composition and balance of the
Board from time to time and, where appropriate, to make
recommendations to the Board.
•
To review the re-appointment of Directors, as they fall
due for re-election, under the terms of their appointment
and the UK Corporate Governance Code, and to make
recommendations to the Board as considered appropriate.
•
To review actual or possible conflicts of interest in respect
of each Director and any authorised conflicts.
•
To review annually the level of Directors’ fees and
recommend any changes to the Board.
•
To consider other topics, as defined by the Board.
Composition of the Committee
All Directors of the Company served on the Committee throughout
the year. The Committee is chaired by the Chairman of the Company,
Mark Tennant. Terms of reference of which can be found on the
website at
www.bmoprivateequitytrust.com
.
Succession planning
Appointments of all new Directors are made on a formal basis,
normally using professional search consultants, with the Nomination
Committee agreeing the selection criteria and the method of
recruitment, selection and appointment.
Succession plan
The Board has an agreed succession plan to refresh its composition.
As part of this plan, on 17 February 2022 the Company announced
that Mark Tennant, Chairman would retire from the Board at the
completion of the Annual General Meeting to be held on 26 May
2022.
A committee of long serving Directors met with possible candidates
for the role of Chairman. Following Board discussion it was agreed
unanimously that Richard Gray would be appointed Chairman upon
the retirement of Mark Tennant.
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Governance Report
The Board consists solely of independent non-executive Directors. The
Company has no executive Directors or employees. The Nomination
Committee fulfils the function of a Remuneration Committee
in addition to its nomination function, and is responsible for
determining the level of Directors’ fees.
Full details of the Company’s policy with regards to Directors’ fees and
fees paid during the year ended 31 December 2021, are shown below.
Under company law, the Auditor is required to audit certain
disclosures provided. Where disclosures have been audited they are
indicated as such. The Auditor’s opinion is included in its report on
pages 44 to 50.
Nomination Committee
The Nomination Committee is chaired by
the Chairman of the
Company,
Mark Tennant. All Directors served on the Nomination
Committee throughout the year. The Board has appointed the
Company Secretary, BMO Asset Management (Holdings) PLC, to
provide information in advance of the Nomination Committee
considering the level of Directors’ fees.
Directors’ Remuneration Policy
The Company’s policy is that the remuneration of non-executive
Directors should reflect the experience of the Board as a whole,
Directors’ time commitment, their responsibilities and skills and
be fair and comparable to that of other investment trusts that are
similar in size and have similar investment objectives. There were no
changes to the policy during the year. Fees are reviewed annually.
Following this review the Board has decided that with effect from 1
January 2022, the annual remuneration of the Chairman is increased
to £59,000, the Chair of the Audit Committee to £46,000 and Non-
Executive Directors to £40,000.
The fees for the non-executive Directors are determined within the
limits set out in the Company’s Articles of Association. The present
limit is £350,000 per annum and may not be changed without
seeking Shareholder approval at a general meeting. Directors are
not eligible for bonuses, pension benefits, share options, long-term
incentive schemes or other benefits.
The non-executive Directors are engaged under letters of
appointment and do not have service contracts. Each Director has
a letter of appointment setting out the terms and conditions of
his or her appointment and, in normal circumstances, such letters
are available for inspection at the Company’s registered office and
immediately prior and during the Company’s Annual General Meeting.
Directors’ Remuneration Report
The terms of appointment provide that a Director shall retire and be
subject to re-election at the first Annual General Meeting after his or
her appointment. Directors are thereafter obliged to retire by rotation
and, if they wish, to offer themselves for re-election, at least every
three years after that.
In accordance with the revised AIC Code all Directors, with the
exception of Mark Tennant, will seek re-appointment to the Board at
the Annual General Meeting to be held on 26 May 2022 and at each
meeting thereafter. Mark Tennant will retire from the Board at the
conclusion of this Annual General Meeting.
There is no notice period and no provision for compensation upon
termination of appointment.
Future Policy Table
Based on the current levels of fees, Directors’ remuneration for the
forthcoming financial year would be as follows:
1
Retiring from the Board on 26 May 2022.
2
To be appointed Chairman with effect from 26 May 2022.
* Directors’ remuneration for the year ending 31 December 2022 based on current fee
levels. Directors are not eligible for any other payments.
The Company has not received any views from its Shareholders in
respect of the levels of Directors’ remuneration.
Annual Report on Directors’ Remuneration
Directors’ Emoluments for the Year (audited)
The Directors who served during the financial year received the
following amounts for services as non-executive Directors as well as
reimbursement for expenses necessarily incurred. No other forms of
remuneration were paid during the year.
2022* 2021
£ £
Mark Tennant (Chairman)
1
23,600
52,000
Audrey Baxter
40,000
35,000
Tom Burnet
40,000
35,000
Swantje Conrad
40,000
35,000
Richard Gray
2
51,400
35,000
Elizabeth Kennedy
46,000
42,000
David Shaw
40,000
35,000
Total
281,000
269,000
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Report and Accounts 2021 | 41
Governance Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Relative Importance of Spend on Pay
The table below shows the actual expenditure during the year in
relation to Directors’ remuneration, other expenses and shareholder
distributions:
Directors’ Shareholdings (audited)
The Directors who held office at the year end and their interests in
the Ordinary Shares of the Company were as follows:
There have been no other changes in the Directors’ interests in the
shares of the Company between 31 December 2021 and 6 April 2022
.
Company Performance
The graph below compares, for the ten financial years ended
31 December 2021, the total return (assuming all dividends are
reinvested) to shareholders compared to the total return on the FTSE
All-Share Index. However, the Board recognises that the FTSE All-
Share Index is not directly correlated with private equity investment
.
Voting at Annual General Meeting
At the Company’s last Annual General Meeting, held on 27 May 2021,
Shareholders approved the Report on Directors’ Remuneration for the
year ended 31 December 2020. 94.0 per cent of votes were in favour
of the resolution and 6.0 per cent were against.
An ordinary resolution for the approval of this Directors’
Remuneration Report,
resolution 2
will be put to shareholders at
the forthcoming Annual General Meeting.
The remuneration policy of the Company is approved by
Shareholders tri-annually. It was last approved by Shareholders at
the Annual General Meeting held on 20 May 2020, 97.0 per cent of
votes were in favour and 3.0 per cent of votes against. A resolution
to approve this policy will be an agenda item for the 2023 Annual
General Meeting of the Company.
On behalf of the Board
Mark Tennant
, Chairman
7 April 2022
Fees for services to the Company (audited)
Fees
Taxable Benefits
(1)
Total
(audited)
(audited)
(audited)
2021
2020
%
2021
2020
%
2021
2020
%
Director
£
£
change
£
£
change
£
£
change
Mark Tennant (Chairman)
52,000
50,000
4%
1,997
853
134%
53,997
50,853
6%
Audrey Baxter
‡
35,000
18,941
85%
–
–
–
35,000
18,941
85%
Tom Burnet
‡
35,000
18,941
85%
–
–
–
35,000
18,941
85%
Swantje Conrad
35,000
33,000
6%
926
30
2,987%
35,926
33,030
9%
Richard Gray
35,000
33,000
6%
256
65
294%
35,256
33,065
7%
Elizabeth Kennedy
42,000
40,000
5%
–
256
(100%)
42,000
40,256
4%
David Shaw
35,000
33,000
6%
–
–
–
35,000
33,000
6%
Total
269,000
226,882
19%
3,179
1,204
164%
272,179
228,086
19%
‡
Appointed to the Board on 4 June 2020.
(1)
Comprises amounts reimbursed for expenses incurred in carrying out business for the Company, which have been grossed up to include PAYE and NI contributions.
Share Price Total ReturnPerformanceGraph
50
0
100
150
200
350
300
250
400
500
450
550
10
11
12
Dec
Dec
Dec
17
Dec
16
Dec
18
Dec
19
Dec
20
Dec
15
Dec
14
Dec
13
Dec
Source: Refinitiv Eikon
Ordinary Shares
FTSE All-Share Index
2021 2020 Change
£ £ %
Aggregate Directors’
Remuneration
269,000
226,882
18.6%
Management and
other expenses*
9,435,000
6,903,000
36.7%
Dividends paid to
Shareholders
12,769,000
11,661,000
9.5%
*Includes Directors’ remuneration.
31 December 31 December
2021 2020
Ordinary Ordinary
Shares Shares
Mark
Tennant
(Chairman)
Beneficial
11,665
11,665
Audrey Baxter
Beneficial
10,000
10,000
Tom Burnet
Beneficial
15,000
15,000
Swantje Conrad
Beneficial
14,600
14,600
Richard Gray
Beneficial
10,000
10,000
Elizabeth Kennedy
Beneficial
30,000
30,000
David Shaw
Beneficial
10,000
10,00
0
FTSE All Share Total Return
Ordinary Share Price Total Return
0
50
100
150
200
250
300
350
400
450
500
550
Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21
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Independent Auditor’s Report
Report of the Management
Engagement Committee
Duties of the Committee
The duties of the Management Engagement Committee are to review
the terms and conditions of the appointment and the appropriateness
of the continuing appointment of the Manager.
Composition of the Committee
All Directors of the Company served on this Committee throughout the
year.
The Committee is Chaired by the Chairman of the Company, Mark
Tennant.
Currently all members of the Board have been appointed to the
Management Engagement Committee.
The terms of reference of the Management Engagement Committee are
available on the Company’s website
www.bmoprivateequitytrust.com
.
The Manager’s Evaluation Process
The Committee meets annually. Its most recent meeting was held in
March 2022 which included a formal evaluation of the performance
and remuneration of the Manager. At each Board meeting throughout
the year the performance of the Company is reviewed. The Board
receives detailed papers, reports and reviews from the Manager on
performance at each regular Board meeting. These papers include
details of the portfolio, gearing and risk. These enable the Board to
assess the success or failure of the Manager’s performance against the
Key Performance Indicators determined by the Board.
The Manager’s Re-appointment
During March 2022, the Management Engagement Committee of the
Board reviewed the appropriateness of the Manager’s continuing
appointment. In carrying out the review, consideration was given to
past investment performance and the ability of the Manager to produce
satisfactory investment performance in the future, including any impact
following its recent acquisition by Columbia Threadneedle. Consideration
was also given to the standard of other services provided which include
company secretarial, accounting, administration and marketing. The
length of notice of the investment management contract and fees
payable to the Manager were also reviewed. Following this review, it is
the Board’s opinion that the continuing appointment of the Manager on
the terms agreed is in the interests of Shareholders as a whole.
The Manager’s Fee
An important responsibility of the Committee is the review of the
Manager’s fee. Details of the investment management fee are included
in Note 3 to the Accounts. At each annual Committee meeting the
Directors compare the basis of the remuneration of the Manager against
that of the peer group.
Reporting Procedures
The Company Secretary circulates the minutes of meetings of the
Management Engagement Committee to all members of the Board
at the next Board meeting following a Management Engagement
Committee Meeting.
In normal circumstances, a member of the Management Engagement
Committee attends the Annual General Meeting and is available to
answer questions on the Management Engagement Committee’s
activities and responsibilities.
Mark Tennant
Chairman
7 April 2022
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Governance Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor's Report
Statement of Directors’ Responsibilities
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with UK adopted international
accounting standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required
to prepare the financial statements and have elected to prepare
the Company financial statements in accordance with UK adopted
international accounting standards. Under Company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss for the Company for that period.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them
consistently;
•
make judgements and accounting estimates that are reasonable
and prudent;
•
state whether they have been prepared in accordance with
UK adopted international accounting standards, subject to any
material departures disclosed and explained in the financial
statements;
•
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
•
prepare a Directors’ report, a strategic report and Directors’
remuneration report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors are
responsible for ensuring that the Annual Report and accounts, taken
as a whole, are fair, balanced, and understandable and provides
the information necessary for shareholders to assess the Company’s
performance, business model and strategy.
.
Website publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company’s website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The
Directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Directors’ responsibilities pursuant to DTR4
•
The financial statements have been prepared in accordance with
the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit and loss
of the Company.
•
The Annual Report includes a fair review of the development and
performance of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Mark Tennant
Chairman
7 April 2022
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Independent Auditor’s Report
Independent Auditor’s Report to the Members of BMO Private Equity Trust PLC
Opinion on the financial statements
In our opinion, the financial statements:
•
give a true and fair view of the state of the Company’s affairs as at 31 December 2021 and of its profit for the year then ended;
•
have been properly prepared in accordance with UK adopted international accounting standards; and
•
have been prepared in accordance with the requirements of the Companies Act 2006;
We have audited the financial statements of BMO Private Equity Trust plc (the ‘Company’) for the year ended 31 December 2021 which comprise
the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the
financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the
additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we were appointed by the Directors on 27 May 2021 to audit the financial statements
for the year ended 31 December 2021 and subsequent financial periods. The period of total uninterrupted engagement is one year, covering the
year ended 31 December 2021. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the
Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern
basis of accounting included:
•
Reviewing the forecasted cash flows that support the Directors’ assessment of going concern and challenging the Directors assumptions and
judgements made in the forecasts, assessing them for reasonableness, and assessing the precision of the prior forecast by comparing them
to actual results in the current year.
•
We considered the available cash resources relative to the forecast expenditure and future commitments given that the Board has taken the
decision to make commitments to new fund investments which are greater than the current cash and committed credit facilities (see key
audit matter below);
•
Evaluating the appropriateness of Directors’ method of assessing the going concern in light of worst-case assumptions and the undrawn
commitments modelling (see key audit matter below).
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Independent Auditor’s Report
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor's Report
Independent Auditor’s Report
Key audit matter How the scope of our audit addressed
the key audit matter
Valuation and ownership
of investments:
(Note 1e and 9)
In respect of the unquoted investments valuation testing we:
•
Held discussions with the Investment Manager and reviewed their
year-end ‘portfolio review’ paper which was prepared for the Audit
Committee. Where appropriate, we challenged the valuation
For a sample of the funds held, we:
•
Agreed the valuations to the direct confirmations received from the
G P.
•
Discussed with the Investment Manager key judgments affecting the
valuations, such as the basis for the valuation and any adjustments
made to the independent valuation produced by the underlying GP.
•
Considered the appropriateness of the overall valuation policies
undertaken by underlying GP fund managers in line with the
International Private Equity and Venture Capital Valuation (“IPEV”)
Guidelines.
•
Where an up to date “bottom up” GP valuation was not available,
we agreed the valuation to the cash roll forward performed by the
GP. Where the cash roll forward was performed by the Investment
Manager, we independently tested the cash flows and adjustments for
the intervening period to year-end. Our work also considered events
which occurred subsequent to the year-end up until signing.
•
We considered the need for the Investment Manager to adjust the
underlying valuations for specific cases, such as any carried interest,
and agreed these adjustments to the underlying calculations
and support; considering where hurdles are met or not based on
performance.
•
Considered the accuracy of the underlying GP’s valuation process
by comparing net asset value per the most recent audited financial
statements for a sample of funds to the GP statement for the
coterminous period.
For direct co-investments, in addition to the above, we:
•
Obtained and assessed evidence for inputs to the valuation models
based around the Investment Manager’s year-end ‘portfolio review’
paper including latest trading results and key assumptions. We
benchmarked valuation multiples to our own independent data
and assessed the appropriateness of data inputs and challenged
assumptions used to support the valuations.
Over 99% of the Company's investment
portfolio consists of unquoted
investments in private equity funds
("funds") and direct co-investments
via limited partnerships or similar fund
structures ("direct co-investments").
These unquoted investments, which
constitute Level 3 financial instruments
in accordance with IFRS 13 Financial
Instruments, are valued in accordance
with the International Private Equity
and Venture Capital ("IPEV") Guidelines
and use inputs which are not based
on observable market data. As a result
there is a high degree of estimation
uncertainty and judgement involved in
the underlying General Partner ("GP")
valuations, which is applicable to all
investments, and as such, there is a
significant risk over the valuation of
these investments.
In addition, the Investment Manager’s
fees are based on the value of the net
assets of the Company. As it is possible
for the Investment Manager to make
adjustments to the underlying valuations,
there is a potential risk of overstatement
of investment valuations.
As the unquoted investments comprise
the majority of the statement of financial
position, valid title to these investments
is also part of the key audit matter as
there is a risk that the Company does
not have the appropriate title for the
investments.
Overview
Key audit matters
Materiality
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. All audit work
was performed by BDO LLP.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
2021
Valuation and ownership of unquoted investments
Yes
Unfunded commitments and cash flow modelling
Yes
£4,700,000 based on 1% of net assets
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Independent Auditor’s Report
An overview of the scope of our audit (continued)
Key audit matter continued How the scope of our audit addressed
the key audit matter continued
Unfunded commitments
and cash flow modelling:
(Note 1a and 14)
The Investment Manager monitors the
Company’s ongoing cash requirements
by the use of cash flow modelling and
reports to the Board on a regular basis.
The Board has taken the decision
to make commitments to new fund
investments which are greater than
the current cash and committed credit
facilities. As private equity funds
generally call monies over a five-
year period whilst they are making
investments, the drawdowns for funds
which are investing should be offset
by the more mature funds which
are realising their investments and
distributing cash back to the Company.
There is a risk of having an obligation
to pay out more cash than is available
at any particular time.
To minimise the risk of having an
obligation to pay out more cash than
is in the bank or on short-term deposit
on any particular day, a loan and multi-
currency revolving credit facility are in
place.
As at 31 December 2021, the
Company had outstanding undrawn
commitments of £136m. Of this
amount, approximately £26m is to
funds where the investment period
has expired and the Manager would
expect very little of this to be drawn.
As a result of the assumptions required
in the cash flow modelling, this was
considered to be a key audit matter.
We reviewed the cash flow modelling and the underlying assumptions
for reasonableness. This included:
•
Testing the mathematical accuracy of the model including the
valuations and commitment balances,
•
Inspecting that the timing and amount of projected commitments
agrees to the underlying supporting documentation,
•
Testing the likelihood of anticipated drawdowns based on historic
data, and
•
Performing a sensitivity using the ‘worst case’ cash flow model by
assuming accelerated drawdowns of the total amount of outstanding
commitments.
We reviewed the loan agreements to confirm the loan covenants in place
and obtained an independent loan confirmation to confirm existence
of the loan at year-end. We also reviewed the monthly / quarterly loan
compliance certificates submitted throughout the year for any breaches
of loan covenants, ensuring the loan covenants tested agree to those in
the loan agreements and considered compliance with loan covenants for
the next 12 months.
Key observations:
Based on our procedures performed we consider the judgement made by
management in their cash flow modelling to be appropriate.
•
Assessed other facts and circumstances such as market movement
and comparative company information that might have an impact on
the valuation.
In respect of the ownership of investments we:
•
Obtained an understanding of the Company’s processes and controls
surrounding legal title
•
Obtained direct confirmations from a sample of the underlying GPs for
funds and direct co-investments in the portfolio at year-end
•
For confirmations not received, we confirmed title through alternative
procedures including reviewing cash movements in the year and other
relevant documentation.
Key observations:
Based on our procedures performed we did not identify any matters
to suggest that the valuation or ownership of investments was not
appropriate
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Independent Auditor’s Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that
are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence,
when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as
follows:
Company financial statements
2021
Materiality
£4,700,000
Basis for determining materiality
1% of net assets
Rationale for the benchmark applied
In setting materiality, we considered the nature and composition of the
investment portfolio. As an investment trust, we consider that the net
asset value is the key measure of performance for users of the financial
statements. Given that the fund portfolio is comprised of unquoted funds
which typically are not complex in nature, we have applied 1% of net
assets.
Performance materiality
£3,055,000
Basis for determining performance materiality
65% of materiality
The level of performance materiality applied was set after having
considered a number of factors including the audit being a first year and
the level of transactions in the year.
Lower Threshold
We determined that for Revenue return before tax, a misstatement of less than materiality for the financial statements as a whole, could
influence users of the financial statements as it is a measure of the Company’s performance of income generated from its investments after
expenses. As a result, we have set a lower testing threshold for those items impacting revenue return of £254,000, which is based on 5% of
revenue return before tax of this respectively.
Reporting threshold
We agreed with the audit committee that we would report to them all audit differences in excess of £94,000 as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Report and Accounts
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
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Financial Report
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and longer-term
viability
•
The Directors' statement with regards to the appropriateness of adopting the going concern basis
of accounting and any material uncertainties identified; and
•
The Directors’ explanation as to their assessment of the Company’s prospects, the period this
assessment covers and why the period is appropriate.
Other Code provisions
•
Directors' statement on fair, balanced and understandable;
•
Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks;
•
The section of the annual report that describes the review of effectiveness of risk management
and internal control systems; and
•
The section describing the work of the audit committee
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act
2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
•
the Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the
Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Corporate governance statement
In our opinion, based on the work undertaken in the course of the audit the information about
internal control and risk management systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance
and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is
consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in
the course of the audit, we have not identified material misstatements in this information.
In our opinion, based on the work undertaken in the course of the audit information about the
Company’s corporate governance code and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
We have nothing to report arising from our responsibility to report if a corporate governance
statement has not been prepared by the Company.
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Report and Accounts 2021 | 49
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Matters on which we are required
to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the financial statements and the part of the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to the entity and the industry in which it operates and considered
the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. These included but were not limited
to the Companies Act 2006, the UK Listing rules, the DTR rules, the principles of the UK Corporate Governance Code, the applicable accounting
framework, VAT and other taxes. We also considered the Company’s qualification as an Investment Trust under UK tax legislation.
Our procedures included:
•
agreement of the financial statement disclosures to underlying supporting documentation;
•
obtaining an understanding of the control environment in monitoring compliance with laws and regulations;
•
enquiries of management and those charged with governance regarding known or suspected instances of non-compliance with laws and
regulations or fraud;
•
reviewed correspondence with the relevant authorities and review of minutes of board meetings throughout the period for any evidence of
fraud or non-compliance with laws and regulations.
We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud risk areas to be
management override of controls and valuation and ownership of investments.
Our procedures in response to these risks included:
•
testing the appropriateness of a sample of the journal entries in the general ledger and adjustments made in the preparation of the
financial statements, by agreeing to supporting documentation reviewing and assessing the accounting estimates for possible bias and
obtaining an understanding of the business rationale of significant transactions that are outside the normal course of the business for the
Company and those that appear to be unusual;
•
we have obtained independent confirmations for bank, investment and loan balances; and
•
the procedures set out in the Key Audit Matters section above.
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Financial Report
The engagement partner has assessed and confirmed that the engagement team collectively had the appropriate competence and capabilities
to identify or recognise non-compliance with laws and regulations.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert
to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed
and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements,
the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Peter Smith
(Senior statutory auditor)
For and on behalf of BDO LLP,
Statutory Auditor
London UK
7 April 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
Statement of Comprehensive Income
Notes
2021 2021 2021
2020
2020
2020
Revenue Capital Total
Revenue
Capital
Total
£’000 £’000 £’000
£’000
£’000
£’000
Inco
me
Gains on investments held at fair value
– 128,313 128,313
–
74,076
74,076
Exchange gains/(losses)
– 3,686 3,686
–
(2,705)
(2,705)
Investment income
6,719 – 6,719
4,988
–
4,988
Other income
3 – 3
8
–
8
Total income
6,722 131,999 138,721
4,996
71,371
76,367
Expenditure
Investment management fee – basic fee
(394) (3,546) (3,940)
(294)
(2,650)
(2,944)
Investment management fee – performance fee
– (4,502) (4,502)
–
(3,007)
(3,007)
Other expenses
(993) – (993)
(952)
–
(952)
Total expenditure
(1,387) (8,048) (9,435)
(1,246)
(5,657)
(6,903)
Profit before finance costs and
taxation
5,335 123,951 129,286
3,750
65,714
69,464
Finance costs
(255) (2,298) (2,553)
(260)
(2,337)
(2,597)
Profit before taxation
5,080 121,653 126,733
3,490
63,377
66,867
Taxation
– – –
–
–
–
Profit for year/total comprehensive income
5,080 121,653 126,733
3,490
63,377
66,867
Return per Ordinary Share
6.87p 164.53p 171.40p
4.72p
85.71p
90.43p
For the year ended 31 December 2021
The total column of this financial statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with UK adopted
international accounting standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above financial statement derive from continuing operations.
No operations were acquired or discontinued during the year.
The accompanying notes are an integral part of the above financial statement.
9
2
2
3
3
4
5
6
8
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Financial Report
Balance Sheet
As at 31 December 2021
2021
£’000
2020
£’000
Non-current assets
9
Investments at fair value through profit or loss
483,047
426,249
483,047
426,249
Current Assets
11
Other receivables
230
562
12
Cash and cash equivalents
32,702
8,344
32,932
8,906
Current liabilities
13
Other payables
(6,610)
(4,492)
14
Interest-bearing bank loan
(15,726)
(49,666)
(22,336)
(54,158)
Net current assets/(liabilities)
10,596
(45,252)
Total assets less current liabilities
493,643
380,997
Non-current liabilities
14
Interest-bearing bank loan
(20,196)
(21,514)
Net assets
473,447
359,483
Equity
15
Called-up ordinary share capital
739
739
Share premium account
2,527
2,527
Special distributable capital reserve
15,040
15,040
Special distributable revenue reserve
31,403
31,403
Capital redemption reserve
1,335
1,335
Capital reserve
422,403
308,439
Shareholders’ funds
473,447
359,483
8
Net asset value per Ordinary Share
640.30p
486.17
p
Notes
The financial statements were approved and authorised for issue by the Board of Directors on 7 April 2022, and signed on its behalf by:
Mark Tennant
Chairman
The accompanying notes are an integral part of the above financial statement.
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
The accompanying notes are an integral part of the above financial statement.
Statement of Changes in Equity
Special Special
Share Distributable Distributable Capital
Share Premium Capital Revenue Redemption Capital Revenue
Capital Account Reserve Reserve Reserve Reserve* Reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
For the year ended 31 December 2021
Net assets at 1 January 2021
739
2,527
15,040
31,403
1,335
308,439
–
359,483
Profit for the year/total comprehensive
income
–
–
–
–
–
121,653
5,080
126,733
Dividends paid
–
–
–
–
–
( 7,6 89)
(5,080)
(12,769)
Net assets at 31 December 2021
739
2,527
15,040
31,403
1,335
422,403
–
473,447
For the year ended 31 December 2020
Net assets at 1 January 2020
739
2,527
15,040
31,403
1,335
253,233
–
304,277
Profit for the year/total comprehensive
income
–
–
–
–
–
63,377
3,490
66,867
Dividends paid
–
–
–
–
–
(8,171)
(3,490)
(11,661)
Net assets at 31 December 2020
739
2,527
15,040
31,403
1,335
308,439
–
359,483
For the year ended 31 December 2021
Notes
7
7
* As at 31 December 2021, the distributable element of this reserve was £223,629,000 (2020 £147,697,000).
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Financial Report
Statement of Cash Flows
For the year ended 31 December 2021
Notes
14
14
14
7
9
9
2
2
5
9
9
2021
2020
£’000
£’000
Operating activities
Profit before taxation
126,733
66,867
Adjustments for:
Gains on disposals of investments
(90,281)
(8,954)
Increase in holding gains
(38,032)
(65,122)
Exchange differences
(3,686)
2,705
Interest income
(3)
(8)
Interest received
3
8
Investment income
(6,719)
(4,988)
Investment income received
6,719
4,988
Finance costs
2,553
2,597
Decrease/(increase) in other receivables
531
(536)
Increase in other payables
2,279
1,299
Net cash inflow/(outflow) from operating activities
97
(1,144)
Investing activities
Purchases of investments
(81,234)
(36,117)
Sales of investments
152,749
32,588
Net cash inflow/(outflow) from investing activities
71,515
(3,529)
Financing activities
Drawdown of bank loans
–
20,208
Repayment of bank loans
(31,243)
–
Arrangement costs of loan facility
(236)
–
Interest paid
(2,607)
(2,194)
Equity dividends paid
(12,769)
(11,661)
Net cash (outflow)/inflow from financing activities
(46,855)
6,353
Net increase in cash and cash equivalents
24,757
1,680
Currency (losses)/gains
(399)
155
Net increase in cash and cash equivalents
24,358
1,835
Opening cash and cash equivalents
8,344
6,509
Closing cash and cash equivalents
32,702
8,344
The accompanying notes are an integral part of the above financial statement.
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
Notes to the Financial Statements
1 Accounting policies
A summary of the significant accounting policies adopted is set out below.
(a)
Basis of accounting
The financial statements of the Company have been prepared in accordance with the Companies Act 2006 and UK adopted international
accounting standards.
The principal accounting policies are set out below. Where presentational guidance set out in the Statement of Recommended Practice
“Financial Statements of Investment Trust Companies and Venture Capital Trusts” (‘SORP’) issued by the Association of Investment
Companies (‘AIC’) in November 2014 and updated in February 2018 is consistent with the requirements of UK adopted international
accounting standards, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the
SORP.
The notes and financial statements are presented in pounds sterling (functional and presentation currency) and are rounded to the nearest
thousand except where otherwise indicated.
Going concern
After making enquiries, and bearing in mind the nature of the Company’s business and assets, the Directors consider that the Company
has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of the
financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Further detail is
contained in the Report of the Directors on page 32.
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting
Council. They have considered the current cash position of the Company, the availability of the Company’s loan facility and compliance
with its banking covenants. They have also considered year-end cash balances and forecast cash flows, especially those relating to capital
commitments and realisations.
As at 31 December 2021, the Company had outstanding undrawn commitments of £136.4 million. Of this amount, approximately £26 million
is to funds where the investment period has expired and the Manager would expect very little of this to be drawn. Of the outstanding
undrawn commitments remaining within their investment periods, the Manager would expect that a significant amount will not be drawn
before these periods expire. As at 31 December 2021 the Company had a committed borrowing facility comprising a term loan of €25
million and a revolving credit facility of £95 million. This facility is due to expire on 19 June 2024 when its five-year term concludes.
At the 31 December 2021 the Company had fully drawn the term loan of €25 million and had drawn £15.7 million of the revolving credit
facility. The available proportion of the facility can be used to fund any shortfall between the proceeds received from realisations and
drawdowns made from funds in the Company’s portfolio or funds required for co-investments. Under normal circumstances this amount of
‘headroom’ in the facility would be more than adequate to meet any such shortfall.
At present the global economy continues to suffer disruption due to the effects of COVID-19, inflation concerns and the conflict in Ukraine
and the Directors have given serious consideration to the consequences of this for the private equity market in general and for the
cashflows and asset values of the Company specifically over the next twelve months. The Company has a number of loan covenants and
at present the Company’s financial situation does not suggest that any of these covenants are close to being breached. The Directors
are mindful of the extraordinary nature of the current economic situation and have conducted stress tests to examine the possible
circumstances which would result in the Company’s covenants being breached.
Three scenarios were tested: business as usual; the
experience of the global financial crisis; and the impact of a very severe recession.
The Directors have also considered any remedial
measures which the Company could practically employ to avoid a covenant breach if that appears likely.
It is the Directors’ opinion that the circumstances which would give rise to a covenant breach have a low probability. The primary risk is
that there is a very substantial decrease in the asset value of the Company in the short or medium term. Given prior experience in the last
financial crisis of 2008/2009 and allowing for the breadth of the Company’s portfolio and the valuation methodologies of the Company’s
investment managers and their investment partners, the Directors do not expect that the possible reduction in asset value arising from the
current volatility will be of sufficient magnitude to give rise to a covenant breach.
In addition to the possible effect of the current volatility on valuations, the Directors have also reviewed the forecast cashflows of the
Company comprising future drawdowns and distributions. The cashflow forecasts take into account potential equity refinancings of portfolio
companies, whether held through funds or as coinvestments, which may be necessary as a result of disruption during the COVID-19
pandemic. The Managers have incorporated detailed responses from companies and investment managers in preparing the cashflow
forecasts.
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Financial Report
1 Accounting policies (continued)
Having compared these against the Company’s current and projected available funding sources, principally its committed borrowing facility
noted above, the Directors have confidence that there is a low probability that a covenant breach related to capacity to meet cashflow
requirements will occur.
Furthermore, being aware of the possible risks the Directors have considered in detail a number of remedial measures that are open to
the Company which it may take if such a covenant breach appears possible. These include reducing commitments and raising cash through
engaging with the private equity secondaries market. The Managers have considerable experience in the private equity secondaries
market through the activities of the Company and through the management of other private equity funds. The Directors have considered
other actions which the Company may take in the event that a covenant breach was imminent including taking measures to increase the
Company’s asset base through an issuance of equity either for cash or pursuant to the acquisition of other private equity assets. The Directors
have also considered the likelihood of the Company making alternative banking arrangements with its current lenders or another lender.
Having considered the likelihood of the events which could cause a covenant breach and the remedies available to the Company, the
Directors are of the view that the Company is well placed to manage such an eventuality satisfactorily. Based on this information the
Directors believe that the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months
from the date of approval of the financial statements. Accordingly, the financial statements have been prepared on a going concern basis.
The accounting policies adopted are consistent with those of the previous financial year.
Standards issued but not yet effective.
There are no standards or amendments to standards not yet effective that are relevant to the Company and should be disclosed.
(b)
Income
Investment income is determined on the date on which the investments are quoted ex-dividend or, where no ex-dividend date is quoted,
when the Company’s right to receive payment is established. Overseas dividends are shown net of withholding tax. Where the Company
has elected to receive its dividends in the form of additional shares rather than in cash (scrip dividends), the amount of the cash dividend
foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is
recognised in the Statement of Comprehensive Income. Other income which includes deposit interest is recognised on an accruals basis.
(c)
Expenses
Expenses are accounted for on an accruals basis.
In accordance with the Board’s expected long-term split of returns in the form of capital gains and income, management fee and bank loan
interest are allocated 90 per cent to capital and 10 per cent to revenue. All other expenses are charged to revenue with the exception of
any performance fee (described in more detail in note 3) which is charged fully to capital.
Transaction costs incurred on the purchase and sale of investments are taken to the Statement of Comprehensive Income as a capital item.
(d)
Reserves
(i)
Share Premium Account – the surplus of net proceeds received from the issue of new ordinary shares over the nominal value of such
shares is credited to this account. The nominal value of the shares issued is recognised in share capital.
(ii)
Special Distributable Capital Reserve – the Special Distributable Capital Reserve is available for the Company to return capital to
shareholders and for the buy back of shares.
(iii)
Special Distributable Revenue Reserve – the Special Distributable Revenue Reserve is available for the Company to return revenue to
shareholders by way of special dividends and for the buy back of shares.
(iv)
Capital Redemption Reserve – the nominal value of the Restricted Voting Shares bought back for cancellation was added to this
reserve. This reserve is non-distributable.
(v)
Capital Reserve – holding gains and losses, gains and losses on the disposal of investments and exchange adjustments to overseas
currencies are taken to the Capital Reserve together with the proportion of management fees, finance costs and taxation allocated to
capital. Dividends paid may be deducted from accumulated realised capital profits recognised within this reserve.
(vi)
Revenue Reserve – the net profit/loss arising in the revenue column of the Statement of Comprehensive Income is added to this
reserve. Dividends paid during the year may be deducted from this reserve.
(e)
Investments
Investments are classified as fair value through profit or loss at initial recognition and are recognised on trade date. Investments are
measured initially and at subsequent reporting dates at fair value. For listed investments this is closing bid price. Unlisted investments are
fair valued by the Directors and determined in accordance with the International Private Equity and Venture Capital Valuation guidelines. The
guidelines are also followed in respect of the marketability discounts applied to unlisted investments. The estimate of fair value is normally
the latest valuation placed on an investment by its manager as at the Balance Sheet date. Where formal valuations are not completed as
at the Balance Sheet date, the last available valuation from the manager is adjusted for any subsequent cash flows occurring between the
valuation date and the Balance Sheet date. Investments held in foreign currencies are translated at the rates of exchange ruling on the
balance sheet date. Purchases and sales of investments are recognised at the trade date of the transaction. Gains and losses arising from
the changes in fair value are included in net profit for the year as a capital item.
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
1 Accounting policies (continued)
All investments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy in
note 10, described as follows, based on the lowest significant applicable input:
Level 1
reflects financial instruments quoted in an active market.
Level 2
reflects financial instruments whose fair value is evidenced by comparison from direct or indirectly observable current market data
over the entire period of the instrument’s life. Such inputs include observable current market transactions in the same instrument or based
on a valuation technique which include observable inputs from active markets.
Level 3
reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on assumptions
that are not supported by prices from observable market transactions in the same instrument and not based on available observable
market data.
For investments that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing the categorisation (based on the lowest significant applicable input) at the date of
the event that caused the transfer.
(f)
Foreign currencies
Transactions denominated in foreign currencies are recorded in sterling at actual exchange rates as at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the year-end are reported at the rates of exchange prevailing at the year-end.
Non-monetary fixed assets held at fair value through profit and loss and denominated in foreign currencies are reported at the rates of
exchange prevailing when the fair value was assessed. Any gain or loss arising from a change in exchange rates subsequent to the date of
the transaction is included as an exchange gain or loss in either the capital or revenue column of the Statement of Comprehensive Income
depending on whether the gain or loss is of a capital or revenue nature respectively.
Foreign currency transaction gains and losses on financial instruments classified as at fair value through profit or loss are included in profit
or loss in the Statement of Comprehensive Income as part of the ‘Gains on investments held at fair value’. Exchange differences on other
financial instruments are included in profit or loss in the Statement of Comprehensive Income as ‘Exchange gains’.
Rates of exchange at 31 December
2021
2020
Euro
1.19105
1.1172
US Dollar
1.35445
1.36695
Norwegian Krone
11.944006
11.70385
Swedish Krona
12.263017
11.22624
Swiss Franc
1.2341
1.2083
(g)
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Tax payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other periods and it further
excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Investment trusts which have approval under section 1158 Corporation Tax Act 2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly
to equity, in which case the deferred tax is also dealt with in equity.
(h)
Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at banks and overnights deposits.
(i)
Interest-bearing borrowings
All borrowings are initially recognised at cost, being fair value of the consideration received, net of arrangement costs associated with
the borrowings. After initial recognition, all interest-bearing borrowings are subsequently measured at amortised cost using the effective
interest method. Amortised cost is calculated by taking into account any loan arrangement costs and any discount or premium on
settlement.
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Financial Report
1 Accounting policies (continued)
(j)
Use of judgements, estimates and assumptions
The presentation of the financial statements in accordance with accounting standards requires the Board to make judgements, estimates
and assumptions that affect the accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates and
judgements are continually evaluated and are based on perceived risks, historical experience, expectations of plausible future events
and other factors. The nature of the estimations means that actual outcomes could differ from those estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are
revised and in any future periods affected.
The area requiring the most significant judgement and estimation in the preparation of the financial statements is accounting for the
value of unquoted investments. The policy for valuation of unquoted investments is set out in note 1(e) and further information on Board
procedures is contained in the Report of the Audit Committee and note 10.
2 Income
31 December
31 December
2021
2020
£’000
£’000
Investment income
6,719
4,988
Other income
Deposit interest
3
8
6,722
4,996
3 Investment management fee
2021
2020
Revenue Capital Total
Revenue
Capital
Total
£’000 £’000 £’000
£’000
£’000
£’000
Investment management fee – basic fee
394 3,546 3,940
294
2,650
2,944
Investment management fee – performance fee
– 4,502 4,502
–
3,007
3,007
Total
394 8,048 8,442
294
5,657
5,951
The Company’s investment manager is BMO Investment Business Limited (“the Manager”).
Throughout the year the Manager was entitled to a basic management fee payable quarterly in arrears, of 0.9 per cent per annum of the
relevant assets of the Company (2020: 0.9 per cent). For the purposes of the basic management fees, the ‘relevant’ assets are the net assets
plus the amount of any long-term borrowings undertaken for the purpose of investment but excluding the value of any investment in any fund
which is managed by the Manager or an associate of the Manager.
The Manager is also entitled to an annual performance fee if the internal rate of return per Ordinary Share over the relevant performance period
(based on the net asset values per Ordinary Share at the beginning and end of that period, before accruing for any performance fee, and the
dividends paid and other distributions made per Ordinary Share during that period) exceeds 8 per cent per annum (the "performance hurdle").
The performance fee is also subject to a "high water mark" such that the aggregate of the net asset value per Ordinary Share at the end of the
relevant performance period, before accruing for any performance fee, and the dividends paid and other distributions made per Ordinary Share
since 31 December 2020 (the end of the last period in respect of which a performance fee was paid) must exceed the audited diluted net asset
value of 486.17p per Ordinary Share as at 31 December 2020 (the net asset value per Ordinary Share (fully diluted) at the end of the last period
in respect of which a performance fee was paid, after accruing for that performance fee).
If the above conditions are satisfied in respect of a performance period, the performance fee will be equal to 7.5 per cent of the annualised
increase in the net asset value per Ordinary Share (calculated using the internal rate of return per Ordinary Share) over that period multiplied by
the time-weighted average number of Ordinary Shares in issue (excluding any shares held in treasury) during that period, provided that such
performance fee will be reduced to such amount as may be necessary to ensure that (i) both the performance hurdle and the high water mark
would still be satisfied if calculated based on the net asset value per Ordinary Share at the end of that period after accruing for the performance
fee and (ii) the aggregate basic management and performance fees do not exceed 2 per cent per annum of the Company's net asset value. The
performance period is the 36 month period ending on 31 December in the year in respect of which the performance fee may be payable.
The management agreement between the Company and the Manager may be terminated at any time by either party giving six months’ notice
of termination. The management agreement can be terminated by the Company by written notice with immediate effect and no compensation
being payable, if, inter alia, the Manager ceases to be an authorised person under the Financial Services and Markets Act 2000, or becomes
insolvent, is wound up, has a receiver appointed over the whole or a substantial part of its assets or is liquidated. In the event that the Company
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
3 Investment management fee (continued)
terminates the agreement otherwise than in accordance with the management agreement, the Manager is entitled to receive a compensation
payment. The compensation sum shall be an amount equal to 0.9 per cent of the net asset value of the Company as calculated at the business
day prior to such termination becoming effective reduced pro rata in respect of any period of notice actually given from the date of receipt by
the Manager of such notice to the effective date of termination.
During the year the Manager, also received a secretarial and administrative fee of £157,000 (2020: £152,000), which is subject to increases in line
with the Consumer Price Index.
4 Other expenses
2021
2020
£’000
£’000
Auditor’s remuneration for:
– statutory audit of the financial statements
48
96
Broker fees
41
28
Depositary fees
80
57
Directors’ fees
269
227
Legal fees
3
14
Printing and postage
35
31
Registrars fees
27
35
Secretarial and administrative fee
157
152
Stock exchange fees
23
56
Irrecoverable VAT
104
107
Other
Other Other
206
149
993
952
5 Finance costs
2021
2020
Revenue Capital Total
Revenue
Capital
Total
£’000 £’000 £’000
£’000
£’000
£’000
Interest payable on bank loans
255 2,298 2,553
260
2,337
2,597
6 Taxation on ordinary activities
(a) Analysis of charge for the year
2021
2020
Revenue Capital Total
Revenue
Capital
Total
£’000 £’000 £’000
£’000
£’000
£ ’ 0 0 0
UK corporation tax
– – –
–
–
–
(b)
Reconciliation of taxation for the year
The taxation charge for the year is 19.00 per cent (2020: 19.00 per cent). The table below provides a reconciliation of the respective charges.
2021
2020
Revenue Capital Total
Revenue
Capital
Total
£’000 £’000 £’000
£’000
£’000
£ ’ 0 0 0
Profit before tax
5,080 121,653 126,733
3,490
63,377
66,867
Corporation tax at standard rate of 19.00 per cent
(2020: 19.00 per cent)
965 23,114 24,079
663
12,042
12,705
Effects of:
Non taxable capital gains
– (25,079) (25,079)
–
(13,561)
(13,561)
Non taxable dividend income
(37) – (37)
(199)
–
(199)
Unutilised expenses
(928) 1,965 1,037
(464)
1,519
1,055
– – –
–
–
–
At 31 December 2021, there was an unrecognised deferred tax asset of £9,064,000 in respect of unutilised losses carried forward which has not
been recognised as it is unlikely to be utilised in the foreseeable future (2020: £6,706,000).
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Financial Report
7 Dividends
2021
2020
£’000
£’000
Amounts recognised as distributions to shareholders in the year:
Quarterly Ordinary Share dividend of 3.87p per share for the quarter ended 30 September 2019
–
2,862
Quarterly Ordinary Share dividend of 3.92p per share for the quarter ended 31 December 2019
–
2,899
Quarterly Ordinary Share dividend of 3.99p per share for the quarter ended 31 March 2020
–
2,950
Quarterly Ordinary Share dividend of 3.99p per share for the quarter ended 30 June 2020
–
2,950
Quarterly Ordinary Share dividend of 3.99p per share for the quarter ended 30 September 2020
2,950
–
Quarterly Ordinary Share dividend of 4.16p per share for the quarter ended 31 December 2020
3,076
–
Quarterly Ordinary Share dividend of 4.35p per share for the quarter ended 31 March 2021
3,216
–
Quarterly Ordinary Share dividend of 4.77p per share for the quarter ended 30 June 2021
3,527
–
12,769
11,661
Amounts relating to the year but not paid at the year end:
Quarterly Ordinary Share dividend of 3.99p per share for the quarter ended 30 September 2020
–
2,950
Quarterly Ordinary Share dividend of 4.16p per share for the quarter ended 31 December 2020
–
3,076
Quarterly Ordinary Share dividend of 5.27p per share for the quarter ended 30 September 2021
3,897
–
Quarterly Ordinary Share dividend of 5.65p per share for the quarter ended 31 December 2021*
4,178
–
8,075
6,026
The third and fourth quarterly dividends were paid from the Company’s revenue and capital reserves.
* Based on 73,941,429 Ordinary Shares in issue at 6 April 2022.
Special dividends
There were no special dividends paid during the year ended 31 December 2021 and 31 December 2020.
8 Returns and net asset values
2021
2020
The returns and net asset values per share are based
on the following figures:
Revenue return
£5,080,000
£3,490,000
Capital return
£121,653,000
£63,377,000
Net assets attributable to shareholders
£473,447,000
£359,483,000
Number of shares in issue at end of year
73,941,429
73,941,429
Weighted average number of shares in issue during year
73,941,429
73,941,429
2021
2020
Revenue Capital Total
Revenue
Capital
Total
Return per Ordinary Share
6.87p 164.53p 171.40p
4.72p
85.71p
90.43p
2021
2020
Net asset value per Ordinary Share
640.30p
486.17p
Returns per share are calculated on the weighted average number of shares in issue during the year. Net asset values per share are
calculated on the number of shares in issue at the year end. During the year ended 31 December 2021, the Company issued nil Ordinary
Shares (31 December 2020: nil).
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Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
9 Investments
2021
2020
Listed Unlisted Total
Listed
Unlisted
Total
£’000 £’000 £’000
£’000
£’000
£’000
Cost at beginning of year
– 265,507 265,507
1,872
251,152
253,024
Movements during the year:
Purchases
– 83,187 83,187
–
36,117
36,117
Sales
– (154,702) (154,702)
–
(32,588)
(32,588)
Realised gains/(losses)
– 90,281 90,281
(1,872)
10,826
8,954
Cost at end of the year
– 284,273 284,273
–
265,507
265,507
Holding gains
300 198,474 198,774
93
160,649
160,742
Valuation at end of year
300 482,747 483,047
93
426,156
426,249
2021
2020
£’000
£’000
Realised gains on investments sold
90,281
8,954
Increase in holding gains
38,032
65,122
Gains on investments
128,313
74,076
Unlisted investments are valued in accordance with the policies set out in note 1(e). It is in the nature of Private Equity and similar unquoted
investments that they may be loss making, with no certainty of survival, and that they may prove difficult to realise. The concept of “fair value”
as applied to such investments is not precise and their ultimate realisation may be at a value materially different from that reflected in the
accounts. Further details on the valuation process in respect of Private Equity investments can be found in note 10.
No transaction costs were incurred outwith commitment (2020: £nil).
10 Fair value of assets and liabilities
Fair value hierarchy
The following table shows an analysis of the fair values of financial instruments recognised in the balance sheet by level of the fair value
hiera
rchy:
2021
2020
Level 1 Level 2 Level 3 Total
Level 1
Level 2
Level 3
Total
£’000 £’000 £’000 £’000
£’000
£’000
£’000
£’000
Financial assets
Investments
300 – 482,747 483,047
93
–
426,156
426,249
Other receivables
– 230 – 230
–
562
–
562
Cash and cash equivalents
32,702 – – 32,702
8,344
–
–
8,344
Financial liabilities
Other payables
– (6,610) – (6,610)
–
(4,492)
–
(4,492)
Multi-currency revolving credit facility
– (15,726) – (15,726)
–
(49,666)
–
(49,666)
Term loan
– (20,981) – (20,981)
–
(22,371)
–
(22,371)
There were no transfers between levels in the fair value hierarchy in the year ended 31 December 2021 (2020: none).
Valuation techniques and processes
Listed equity investments
Quoted non-current investments held are valued at bid prices which equate to their fair values. When fair values of publicly traded equities are
based on quoted market prices in an active market without any adjustments, the investments are included within Level 1 of the hierarchy.
Unlisted equity investments
The Company invests primarily in private equity funds and co-investments via limited partnerships or similar fund structures. Such vehicles are
mostly unquoted and in turn invest in unquoted securities. The fair value of a holding is based on the Company’s share of the total net asset
value of the fund or share of the valuation of the co-investment calculated by the lead private equity manager on a quarterly basis.
The lead private equity manager derives the net asset value of a fund from the fair value of underlying investments. The fair value of these
underlying investments and the Company’s co-investments is calculated using methodology which is consistent with the International Private
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10 Fair value of assets and liabilities (continued)
Equity and Venture Capital Valuation Guidelines (“IPEG”). In accordance with IPEG these investments are generally valued using an appropriate
multiple of maintainable earnings, which has been derived from comparable multiples of quoted companies or recent transactions. The BMO
private equity team has access to the underlying valuations used by the lead private equity managers including multiples and any adjustments.
The BMO Private Equity team generally values the Company’s holdings in line with the lead managers but may make adjustments where they
do not believe the underlying managers’ valuations represent fair value.
On a quarterly basis, the BMO Private Equity team present the valuations to the Board. This includes a discussion of the major assumptions used
in the valuations, which focuses on significant investments and significant changes in the fair value of investments. If considered appropriate,
the Board will approve the valuations.
Interest-bearing bank loans
The interest-bearing bank loans are recognised in the Balance Sheet at amortised cost in accordance with international accounting standards.
The fair value of the term loan, on a marked to market basis was £20,981,000 at 31 December 2021 (2020: £22,371,500). The fair value is derived
from directly observable market data and is calculated using a discounted cash flow technique based on relevant current interest rates. The fair
value of the multi-currency revolving credit facility is not materially different to the carrying value at 31 December 2021.
Significant unobservable inputs for Level 3 valuations
The Company’s unlisted investments are all classified as Level 3 investments. The fair values of the unlisted investments have been determined
principally by reference to earnings multiples, with adjustments made as appropriate to reflect matters such as the sizes of the holdings and
liquidity. The weighted average earnings multiple for the portfolio as at 31 December 2021 was 12.2 times EBITDA (Earnings Before Interest, Tax,
Depreciation and Amortisation) (2020: 10.0 times EBITDA).
The significant unobservable input used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a
quantitative sensitivity analysis are shown below:
Sensitivity Effect on fair value
Input used* £’000
31 December 2021
Weighted average earnings multiple
1x 52,219
31 December 2020
Weighted average earnings multiple
1x
59,874
*The sensitivity analysis refers to an amount added or deducted from the input and the effect this has on the fair value of the Company’s direct and indirect unlisted investments.
The fair value of the Company’s unlisted investments is sensitive to changes in the assumed earnings multiples. The managers of the underlying
funds assume an earnings multiple for each holding. An increase in the weighted average earnings multiple would lead to an increase in the fair
value of the investment portfolio and a decrease in this multiple would lead to a decrease in the fair value.
Level 3 reconciliation
The following table shows a reconciliation of all movements in the fair value of financial instruments categorised within Level 3 between the
beginning and the end of the year:
2021
2020
£’000
£’000
Balance at beginning of year
426,156
348,574
Purchases
83,187
36,117
Sales
(154,702)
(32,588)
Gains on disposal
90,281
10,826
Holding gains
37,825
63,227
Balance at end of year
482,747
426,156
The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet.
11 Other receivables
2021
2020
£’000
£’000
Investment debtors
–
533
Other debtors
230
29
230
562
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Chairman’s statementOverview Auditor’s Report
Financial Report
12 Cash and cash equivalents
2021
2020
£’000
£’000
Cash at banks and on hand
8,512
1,384
Short-term deposits
24,190
6,960
32,702
8,344
13 Current liabilities
Other payables
2021
2020
£’000
£’000
Interest accrued
9
413
Due to Manager
5,620
3,862
Accrued expenses
210
217
Trade Creditors
771
–
6,610
4,492
14 Interest-bearing bank loans
On 19 June 2019, the Company entered into a five year €25 million term and £75 million multi-currency revolving credit facility agreement
("RCF") with The Royal Bank of Scotland International Limited.
During the year, the Company worked with RBSI to increase the size of the revolving credit facility by £20 million to £95 million. This was
achieved through the introduction of State Street as another lender alongside RBSI. There were no changes to rates or covenants. At 31
December 2021, €25 million term loan was drawn down (31 December 2020: €25 million). £15.7 million of the RCF was drawn down at 31
December 2021 (31 December 2020: £49.7 million). The amount of undrawn RCF at 31 December 2021 which is available for future operating
activities and settling capital commitments is £79.3 million.
Interest rate margins on the amount drawn down are variable and are dependent upon commercial terms agreed with the bank. Commitment
commissions are payable on undrawn amounts at commercial rates.
The borrowing facility will mature on 19 June 2024.
Interest payable on bank loans is shown in note 5 and loan interest accrued in note 13.
Under the covenants which relate to the facility, the Company is required to ensure that at all times:
•
the total borrowings of the Company do not exceed 32.5 per cent of the adjusted portfolio value;
•
the number of Investments shall not be less than 40;
•
outstanding uncalled commitments expressed as a percentage of net asset value do not exceed 70 per cent;
•
outstanding uncalled commitments forecast to be called during the three month period following a covenant test date do not exceed the
available funds; and
•
the net asset value is not less than £180 million.
The Company met all covenant conditions during the year.
£’000
£’000
Amounts payable after more than one year:
€25 million term loan
20,196
21,514
Amounts payable in less than one year:
Multi-currency revolving credit facility
15,726
49,666
Total interest-bearing bank loans
35,922
71,180
31 December
31 December
2021
2020
Analysis of movement in interest-bearing loans
£’000
£’000
Opening balance
71,180
47,864
Loans drawn in the year
–
20,208
Loan repaid in the year
(31,243)
–
Arrangement costs from issue of new loan facility agreement
(236)
–
Amortisation of set up costs
305
249
Non-cash foreign currency movements
(4,084)
2,859
Closing balance
35,922
71,180
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15 Share capital
Equity share capital
31 December
31 December
2021
2020
£’000
£’000
Equity share capital:
Ordinary Shares of 1p each in issue
739
739
During the year ended 31 December 2021, the Company issued nil Ordinary Shares (2020: nil).
Capital management
The Company’s capital is represented by its issued share capital, share premium account, special distributable capital reserve, special
distributable revenue reserve, capital redemption reserve, capital reserve and revenue reserve.
The capital of the Company is managed in accordance with its investment policy, in pursuit of its investment objective, both of which are
detailed on pages 7 and 9.
16 Financial instruments
The Company’s financial instruments comprise equity investments, cash balances, a bank loan and liquid resources including debtors and
creditors. As an investment trust, the Company holds a portfolio of financial assets in pursuit of its investment objective. From time to time the
Company may make use of borrowings to fund outstanding commitments and achieve improved performance in rising markets. The downside
risk of borrowings may be reduced by raising the level of cash balances held.
The sensitivity calculations given in this note are based on positions at the respective balance sheet dates and are not representative of the year
as a whole.
The Company’s investing activities expose it to various types of risk that are associated with the financial instruments and markets in which
it invests. The most important types of financial risk to which the Company is exposed are market price risk, interest rate risk, liquidity and
funding risk, credit risk and foreign currency risk.
Market price risk
The Company’s strategy for the management of market price risk is driven by the Company’s investment policy as outlined on page 9. The
management of market price risk is part of the investment management process and is typical of private equity investment. The portfolio
is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis, with an objective of
maximising overall returns to shareholders. Further information on the investment portfolio is set out on pages 23 to 27. Investments in
unquoted stocks, by their nature, involve a higher degree of risk than investments in the listed market. Some of that risk can be, and is,
mitigated by diversifying the portfolio across geographies, business sectors and asset classes, and by having a variety of underlying private
equity managers. New private equity managers are only chosen following a rigorous due diligence process. The Company’s overall market
positions are monitored by the Board on a quarterly basis. The effect on the portfolio of a 20% increase or decrease in the portfolio as at the
year-end would have resulted in an increase or decrease of £96,609,400.
Interest rate risk
Some of the Company’s financial assets are interest bearing and, as a result, the Company is subject to exposure to fair value interest rate risk
due to fluctuations in the prevailing levels of market interest rates.
When the Company retains cash balances the majority of the cash is held in deposit accounts. The benchmark rate which determines the
interest payments received on cash balances is the bank base rate for the relevant currency.
The Company held the following floating rate instruments at the year-end:
2021 2021
2020
2020
weighted weighted average
weighted
weighted average
2021 average for which rate is
2020
average
for which rate is
£’000 interest rate fixed (years)
£’000
interest rate
fixed (years)
Cash and cash equivalents
32,702 0.01% –
8,344
0.03%
–
Multi-currency revolving credit facility
(15,726) 2.75% 0.2
(49,666)
2.75%
0.2
Term loan
(20,196) 2.50% 0.2
(21,514)
1.96%
0.2
An increase of 25 basis points in interest rates as at 31 December 2021 would have increased loan interest payable, increased interest income
receivable and decreased the total profit for the year by £10,035 (2020: increased loan interest payable, increased interest income receivable and
decreased the total profit by £159,248. A decrease of 25 basis points would have had an equal but opposite effect.
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Other Information
Chairman’s statementOverview Auditor’s Report
Financial Report
16 Financial instruments (continued)
Liquidity and funding risk
The Company’s financial instruments include investments in unlisted equity investments which are not traded in an organised public market and
which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at
an amount close to their fair value in order to meet its liquidity requirements, including the need to meet outstanding undrawn commitments or
to respond to specific events such as a deterioration in the creditworthiness of any particular issuer.
Capital commitments in respect of outstanding calls on investments at 31 December 2021 amounted to £136,436,000 (2020: £125,058,000). Of
these outstanding commitments, at least £26 million (2020: £21 million) is to funds where the investment period has ended and the Manager
would expect very little of this to be drawn. The outstanding undrawn commitments remaining within their investment periods are regularly
monitored by the Manager using a cashflow model and will be funded using cash, the revolving credit facility and realised capital gains from
more mature funds which are distributing cash back to the Company.
The Company’s listed securities are considered to be readily realisable.
The Company’s liquidity risk is managed on an ongoing basis by the Manager in accordance with policies and procedures in place as described
on page 9. The Company’s overall liquidity risks are currently monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses.
Contractual maturity analysis for financial liabilities
As at 31 December 2021
Between Between
one and three and Between one
One month three months twelve months and five years Total
£’000 £’000 £’000 £’000 £’000
Liabilities
Other creditors
1,855 253 4,502 – 6,610
Multi-currency revolving credit facility
– 15,726 – – 15,726
Term bank loan
– – 394 21,768 22,162
Total liabilities
1,855 15,979 4,896 21,768 44,498
As at 31 December 2020
Between
Between
one and
three and
Between one
One month
three months
twelve months
and five years
Total
£’000
£’000
£’000
£’000
£’000
Liabilities
Other creditors
1,160
325
3,007
–
4,492
Multi-currency revolving credit facility
–
49,905
–
–
49,905
Term bank loan
–
94
348
22,428
22,870
Total liabilities
1,160
50,324
3,355
22,428
77,267
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into
with the Company. The Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The
carrying amounts of financial assets best represents the maximum credit risk exposure at the balance sheet date, hence no separate disclosure
is required.
At the reporting date, the Company’s financial assets exposed to credit risk amounted to the following:
2021
2020
£’000
£’000
Cash and cash equivalents
32,702
8,344
Interest and other receivables
230
562
32,932
8,906
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered
to be small due to the short settlement period involved and the high credit quality of the brokers used. The Manager monitors the quality of
service provided by the brokers used to further mitigate this risk.
All the listed assets of the Company (which are traded on a recognised exchange) are held by JPMorgan Chase Bank, the Company’s custodian.
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Financial Report
16 Financial instruments (continued)
The Company has an ongoing contract with the Custodian for the provision of custody services. The contract was reviewed and updated in
2014. Details of securities held in custody on behalf of the Company are received and reconciled monthly. The Depositary has regulatory
responsibilities relating to segregation and safekeeping of the Company’s financial assets, amongst other duties, as set out in the Directors’
Report. The Board has direct access to the Depositary and receives regular reports from it.
To the extent that the Manager carries out management and administrative duties (or causes similar duties to be carried out by third parties)
on the Company’s behalf, the Company is exposed to counterparty risk. The Board assesses this risk continuously through regular meetings with
the management of BMO (including the Fund Manager). In reaching its conclusions, the Board also reviews BMO’s annual Audit and Assurance
Faculty Report.
The Company’s cash balances are held by a number of counterparties with a credit rating above BBB+. Bankruptcy or insolvency of these
counterparties may cause the Company’s rights with respect to the cash balances to be delayed or limited. The Manager monitors the credit
quality of the relevant counterparties and should the credit quality or the financial position of these counterparties deteriorate significantly the
Manager would move the cash holdings to another bank.
Foreign currency risk
The Company invests in overseas securities and holds foreign currency cash balances which give rise to currency risks. It is not the Company’s
policy to hedge this risk on a continuing basis but it may do so from time to time. The Company has a multi-currency revolving credit facility
which allows it to be drawndown in multiple currencies. There were no currency forwards open at the year end.
Foreign currency exposure at the year end is:
2021 2021 2021
2020
2020
2020
Investments Cash Borrowings
Investments
Cash
Borrowings
£’000 £’000 £’000
£’000
£’000
£’000
US Dollar
64,694 – –
52,178
564
–
Euro
159,589 3,738 (36,716)
151,917
817
(72,044)
Norwegian Krone
6 129 –
1,854
–
–
Swedish Krona
12,103 – –
10,285
–
–
Canadian Dollar
2,045 – –
–
–
–
Swiss Franc
– – –
–
–
–
Total
238,437 3,867 (36,716)
216,234
1,381
(72,044)
To highlight the sensitivity to currency movements, if the value of sterling had weakened against each of the currencies in the portfolio by 5 per
cent at 31 December 2021, the capital gain would have increased for the year by £10.8 million (2020: positive £7.7 million). If the value of sterling
had strengthened against each of the currencies in the portfolio by 5 per cent, the capital gain would have decreased for the year by £9.8 million
(2020: negative £6.9 million). The calculations are based on the portfolio valuation and cash and loan balances as at the respective balance
sheet dates and are not representative of the year as a whole.
17 Related Parties and Transactions with the Manager
The Directors are considered to be related parties. There are no transactions with the Directors other than aggregated remuneration for services
as Directors and Directors‘ shareholding as disclosed in the Directors’ Remuneration Report on pages 40 and 41 and set out in note 4 to the
accounts. There are no outstanding balances with the Directors at year end.
The amounts paid and due to the Manager, together with the details of the Investment Management Agreement, are disclosed in note 3 and
note 13. The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating
policies and therefore, under the AIC SORP, the Manager is not considered to be a related party.
18 Securities Financing Transactions (“SFT”)
The Company has not, in the year to 31 December 2021 (2020: same), participated in any: repurchase transactions; securities lending or
borrowing; buy-sell back transactions; margin lending transactions collectively called SFT. As such, it has no disclosure to make in satisfaction of
the EU regulations on transparency of SFT, issued in November 2015.
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Chairman’s statementOverview Auditor’s Report
Financial Report
AIFM Disclosures
Alternative Investment Fund Managers (‘AIFM’) Directive
In accordance with the AIFM Directive, information in relation to the Company’s leverage and the remuneration of the Company’s AIFM, BMO
Investment Business Limited, is required to be made available to investors.
The Company’s maximum and average actual leverage levels at 31 December 2021 are shown below:
Gross
Commitment
Leverage exposure
method
method
Maximum limit
200%
200%
Actual
102%
109%
For the purposes of the AIFM Directive, leverage is any method which increases the Company’s exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a percentage of Company’s exposure to its net asset value and is calculated on both a gross and
commitment method.
Under the gross method, exposure represents the sum of the Company’s positions after deduction of cash balances, without taking account of
any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and after
certain hedging and netting positions are offset against each other.
The leverage limits are set by the AIFM and approved by the Board and are in line with the maximum leverage levels permitted in the
Company’s Articles of Association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings.
Detailed regulatory disclosures including those on the AIFM’s remuneration policy and costs are available on the Company’s website or from BMO
on request.
An Investor Disclosure Document for the Company is available on the Company’s website
bmoprivateequitytrust.com
.
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Annual General Meeting
Notice of Annual General Meeting
Notice is hereby given that the twenty-third Annual General Meeting of BMO Private Equity Trust PLC (in this notice, the “Company”) will be held
on 26 May 2022 commencing at 12 noon at Exchange House, Primrose Street, London EC2A 2NY, to transact the following business:
Ordinary Business
To consider and, if thought fit, pass the following as ordinary resolutions:
1.
That the Report of the Directors, the Auditor’s Report and the financial statements for the year ended 31 December 2021 be received and
adopted.
2.
That the Directors’ Remuneration Report for the year ended 31 December 2021 be approved.
3.
To approve the Company’s dividend policy as set out on page 9 of the 2021 annual report.
4.
That Richard Gray, who retires annually, be re-elected as a Director.
5.
That Elizabeth Kennedy, who retires annually, be re-elected as a Director.
6.
That Audrey Baxter, who retires annually, be re-elected as a Director.
7.
That Tom Burnet, who retires annually, be re-elected as a Director.
8.
That Swantje Conrad, who retires annually, be re-elected as a Director.
9.
That David Shaw, who retires annually, be re-elected as a Director.
10.
That BDO LLP be re-appointed as auditor.
11.
That the Directors be authorised to determine the remuneration of the auditor.
Special Business
To consider and, if thought fit, pass the following resolutions, of which resolution 12 will be passed as an ordinary resolution and resolutions 13
and 14 will be passed as special resolutions.
12.
That, in accordance with Section 551 of the Companies Act 2006 (the “Act”), the Directors be and they are hereby generally and
unconditionally authorised to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the
Company (“Rights”) up to an aggregate nominal amount of £73,941 (being an amount equal to 10 per cent of the total issued ordinary share
capital of the Company (excluding shares held in treasury) as at 6 April 2022, being the latest practicable date before the publication of this
notice). Unless previously varied, revoked or renewed, this authority shall expire at the conclusion of the Annual General Meeting of the
Company in 2023, save that the Company may, before the expiry of any authority contained in this resolution, make an offer or agreement
which would or might require shares to be allotted or Rights to be granted after such expiry and the Directors may allot shares or grant
Rights in pursuance of such offer or agreement as if the authority conferred hereby had not expired. This authority is in substitution for all
previous authorities conferred on the Directors in accordance with Section 551 of the Act.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about the contents of this document or as
to the action you should take, you are recommended immediately to seek your own independent financial advice from your stockbroker, bank
manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 or, if outside
the United Kingdom, another appropriately authorised financial adviser.
If you have sold or otherwise transferred all of your shares in BMO Private Equity Trust PLC, please forward this document and the accompanying
form of proxy as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer
was, or is being, effected, for delivery to the purchaser or transferee.
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Annual General Meeting
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
13.
That the Directors be empowered pursuant to section 570 of the Act to allot equity securities (as defined in section 560 of that Act) for
cash pursuant to the general authority conferred on them by resolution 12 and/or to sell equity securities held as treasury shares for cash
pursuant to section 727 of the Act, in each case as if section 561 of that Act did not apply to any such allotment or sale, provided that this
power shall be limited to:
a)
any such allotment and/or sale of equity securities in connection with an offer or issue by way of rights or other pre-emptive offer or
issue, open for acceptance for a period fixed by the Directors, to holders of Ordinary Shares (other than the Company) on the register
on any record date fixed by the Directors in proportion (as nearly as may be) to the respective number of Ordinary Shares deemed to
be held by them, subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to
fractional entitlements, legal or practical problems arising in any overseas territory, the requirements of any regulatory body or stock
exchange or any other matter whatsoever; and
b)
any such allotment and/or sale, otherwise than pursuant to sub-paragraph (a) above, of equity securities having an aggregate
nominal value not exceeding the sum of £36,970 (being an amount equal to 5 per cent of the total issued ordinary share capital of the
Company as at 6 April 2022, being the latest practicable date before the publication of this notice).
This authority shall expire, unless previously varied, revoked or renewed by the Company in general meeting at the conclusion of the
Annual General Meeting of the Company in 2023, except that the Company may before such expiry make any offer or agreement which
would or might require equity securities to be allotted or equity securities held as treasury shares to be sold after such expiry and the
Directors may allot equity securities and/or sell equity securities held as treasury shares in pursuance of such an offer or agreement as if
the power conferred by this resolution had not expired.
14.
That the Company be and it is hereby authorised in accordance with Section 701 of the Act to make market purchases (within the meaning
of Section 693(4) of the Act) of Ordinary Shares in the capital of the Company provided that:
(i)
the maximum number of Ordinary Shares authorised to be purchased shall be 11,083,820, (being 14.99 per cent of the number of the
Ordinary Shares in issue as at 6 April 2022, being the latest practicable date before the publication of this notice);
(ii)
the minimum price which may be paid for an Ordinary Share shall be 1p;
(iii)
the maximum price (exclusive of expenses) which may be paid for an Ordinary Share shall not be more than the higher of:
(a)
5 per cent above the average of the middle market quotations of Ordinary Shares as derived from the Daily Official List for the five
business days immediately preceding the date of purchase;
(b)
the price of the last independent trade on the trading venue where the purchase is carried out; and
(c)
the highest current independent purchase bid on that venue; and
(iv)
unless previously varied, revoked or renewed, the authority hereby conferred shall expire at the conclusion of the Annual General
Meeting of the Company in 2023, save that the Company may, prior to such expiry, enter into a contract to purchase Ordinary Shares
under such authority which will or might be executed wholly or partly after the expiration of such authority and may make a purchase
of Ordinary Shares pursuant to any such contract.
By order of the Board
BMO Asset Management (Holdings) PLC, Secretary
6th Floor
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
7 April 2022
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Annual General Meeting
Notes
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
1
.
Website Giving Information Regarding the AGM
Information regarding the AGM, including the information required by Section 311A of the Companies Act 2006, is available from
bmoprivateequitytrust.com.
2.
2022 Annual General Meeting
All Ordinary Shareholders are strongly advised to consider their own personal circumstances before attending the AGM in person. For
Ordinary Shareholders who choose not to attend, any questions they may have regarding the resolutions proposed at the AGM or the
performance of the Company can be directed to a dedicated email account,
privateequitytrustagm@bmogam.com
, by Thursday 19 May
2022. The Board will endeavour to ensure that all such questions are fully addressed during the meeting. In addition, the meeting will be
recorded and will be available to view on the Company’s website,
www.bmoprivateequitytrust.com
shortly thereafter.
An Ordinary Shareholder who wishes to attend the AGM in person should arrive at the venue for the AGM in good time to allow their
attendance to be registered. As they may be asked to provide evidence of their identity prior to being admitted to the AGM, it is advisable
for Ordinary Shareholders to have some form of identification with them.
However, as the situation with regard to the COVID-19 pandemic remains uncertain, if circumstances change on or prior to 26 May 2022 so that
laws, regulations or Government guidance no longer permit physical Shareholders’ attendance, or if the Board should otherwise determine
Shareholders’ attendance at an open meeting to be contrary to the safety and wellbeing of Shareholders, alterations may be required to be
made to the AGM format. In these circumstances, the Company will communicate to Shareholders any changes to arrangements by a London
Stock Exchange announcement and through updates to the Company’s website:
www.bmoprivateequitytrust.com
.
In addition, the Company
may impose entry restrictions on certain persons wishing to attend the meeting in order to secure the orderly and proper conduct of the
business.
Although normal practices have resumed in respect of the AGM, to ensure that each Shareholder’s votes will count in the event that they
cannot attend in person, or in the event that Shareholder attendance has been subsequently restricted due to health and safety concerns
and the Company must put in place alternative arrangements, the Board would encourage all Shareholders to complete and submit their
Form of Proxy or Form of Direction in advance of the AGM. Further, should the AGM be restricted, Shareholders are strongly encouraged
to appoint the Chairman of the AGM as their proxy as any other person so appointed may not be admitted to the AGM, resulting in that
Shareholder’s vote not being counted.
3.
Entitlement to Vote
3.1
Notice is given only to Ordinary Shareholders registered in the Company’s register of members at close of business on 24 May 2022 (or,
if the AGM is adjourned, at close of business on the day two business days prior to the adjourned meeting) in respect of the number of
Ordinary Shares registered in their name at that time. Changes to entries on the register of members after close of business on 24 May
2022 (or, if the AGM is adjourned, at close of business on the day two business days prior to the date of the adjourned meeting) shall be
disregarded in determining the rights of any person to vote at the AGM.
If you have sold or otherwise transferred all your shares in the Company please forward this document, together with the Form of Proxy
enclosed at once to the purchaser or transferee, or to the stockbroker, bank, or other agent, through whom the sale of transfer was
effected, from transmission to the purchaser or transferee. If you have sold or otherwise transferred only a part of your holding of shares,
you should retain these documents.
3.2
An Ordinary Shareholder is entitled to appoint a proxy to exercise all or any of their rights to attend, speak and vote at the AGM. A proxy
may only be appointed using the procedures set out below.
An Ordinary Shareholder may instruct their proxy to abstain from voting on a particular resolution to be considered at the AGM by marking
the “Vote Withheld” option in relation to that particular resolution when appointing their proxy. It should be noted that an abstention is not
a vote in law and will not be counted in the calculation of the proportion of votes “For” or “Against” that particular resolution.
3.3
An Ordinary Shareholder who wishes to change their proxy instruction must submit a new appointment of proxy in accordance with notes
4-6 (as appropriate) below. If an Ordinary Shareholder requires another hard-copy Form of Proxy to enable them to change their proxy
instruction, they should contact the Registrar on the telephone number 0871 664 0300. Overseas shareholders should call +44 (0) 208 639
3399.
3.4
In order to revoke a proxy instruction, an Ordinary Shareholder must inform the Company by sending a hard-copy notice clearly stating their
revocation of their proxy instruction to Link Asset Services PXS, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL. In the case
of an Ordinary Shareholder which is a company, the revocation notice must be executed under its common seal or signed on its behalf by
an officer of the company or an attorney for the company. Any power of attorney or other authority under which the Form of Proxy is signed
(or a duly certified copy of such power or authority) must be included with the revocation of proxy instruction. The revocation notice must
be received by the Registrar not later than 12 noon on 24 May 2022.
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Annual General Meeting
3.5
A person who is not an Ordinary Shareholder but has been nominated by an Ordinary Shareholder to enjoy information rights does not have
a right to appoint any proxies under the procedures set out in these notes and should read note 8 below.
4.
Appointment of Proxy using Hard-copy Form of Proxy
The notes on the Form of Proxy explain how to direct a proxy how to vote, or abstain from voting, on the resolution. To appoint a
proxy using the Form of Proxy, the Form of Proxy must be completed and signed and sent or delivered to Link Asset Services PXS,
10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL, so as to be received by the Registrar by not later than 12 noon on 24 May
2022. In the case of an Ordinary Shareholder which is a company, the Form of Proxy must be executed under its common seal or signed on
its behalf by an officer of the company or an attorney for the company. Any power of attorney or other authority under which the Form of
Proxy is signed (or a duly certified copy of such power or authority) must be included with the Form of Proxy.
5.
Appointment of Proxy through CREST
5.1
CREST members who wish to appoint a proxy for the AGM by utilising the CREST electronic proxy appointment service may do so by using
the procedures described in the CREST Manual, which can be reviewed at www.euroclear.com/CREST. CREST personal members or other
CREST sponsored members and those CREST members who have appointed (a) voting service provider(s) should refer to their CREST sponsor
or voting service provider(s) who will be able to take the appropriate action on their behalf.
5.2
In order for a proxy appointment made via CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly
authenticated in accordance with the specifications of Euroclear and must contain the information required for such instruction, as described
in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction
given to a previously appointed proxy, must be transmitted so as to be received by the Registrar (RA10) by not later than 12 noon on 24 May
2022. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the
CREST Applications Host) from which the Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
5.3
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available
special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed (a) voting service provider(s), to procure that their CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
5.4
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
6.
Appointment of Proxy by Joint Members
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's
register of members in respect of the joint holding (the first-named being the most senior).
7.
Corporate Representatives
Any corporation which is an Ordinary Shareholder can appoint one or more corporate representatives who may exercise, on its behalf, all
its powers as an Ordinary Shareholder provided that no more than one corporate representative exercises powers over the same Ordinary
Share(s).
8.
Nominated Persons
A person who has been nominated under section 146 of the Act 2006 to enjoy information rights (a “Nominated Person”):
(i)
may have a right under an agreement between the Nominated Person and the Ordinary Shareholder who has nominated them to have
information rights (the “Relevant Member”) to be appointed or to have someone else appointed as a proxy for the AGM; and
(ii)
if they either do not have such a right or if they have such a right but do not wish to exercise it, may have a right under an agreement
between them and the Relevant Member to give instructions to the Relevant Member as to the exercise of voting rights.
A Nominated Person's main point of contact in terms of their investment in the Company remains the Relevant Member (or, perhaps, their
custodian or broker) and they should continue to contact them (and not the Company) regarding any changes or queries relating to their
personal details and their interest in the Company (including any administrative matters). The only exception to this is where the Company
expressly requests a response from the Nominated Person.
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Other Information
9.
Website Publication of Audit Concerns
Pursuant to Chapter 5 of Part 16 of the Companies Act 2006 (Sections 527 to 531), where requested by (a) Ordinary Shareholder(s) meeting
the qualification criteria set out in note 10 below, the Company must publish on its website a statement setting out any matter that such
Ordinary Shareholder(s) propose(s) to raise at the AGM relating to the audit of the Company's accounts (including the auditor's report and
the conduct of the audit) that are to be laid before the AGM. Where the Company is required to publish such a statement:
(i)
it may not require the Ordinary Shareholder(s) making the request to pay any expenses incurred by the Company in complying with
the request;
(ii)
it must forward the statement to the Company's auditors no later than the time the statement is made available on the Company's
website; and
(iii)
the statement may be dealt with as part of the business of the AGM. The request:
(a)
may be in hard copy form or in electronic form (see note 11 below);
(b)
either set out the statement in full or, if supporting a statement sent by another Ordinary Shareholder, clearly identify the
statement which is being supported;
(c)
must be authenticated by the person or persons making it (see note 11 below); and
(d)
be received by the Company at least one week before the AGM.
10.
Ordinary Shareholders’ Qualification Criteria
In order to be able to exercise the members' right to require the Company to publish audit concerns (see note 9 above) the relevant request
must be made by:
(i)
(a) Ordinary Shareholder(s) having a right to vote at the AGM and holding at least 5 per cent of the total voting rights of the Company;
or
(ii)
at least 100 Ordinary Shareholders having a right to vote at the AGM and holding, on average, at least £100 of paid up share capital.
11.
Submission of Hard Copy and Electronic Requests and Authentication Requirements
Where (a) Ordinary Shareholder(s) wish(es) to request the Company to publish audit concerns (see note 9 above) such request must be
made in accordance with one of the following ways:
(i)
a hard copy request which is signed by the Ordinary Shareholder(s), states their full name(s) and address(es) and is sent to the
Company Secretary, BMO Asset Management (Holdings) PLC, 6th Floor, Quartermile 4, 7a Nightingale Way, Edinburgh EH3 9EG;
(ii)
a request which is signed by the Ordinary Shareholder(s), states their full name(s) and address(es) and is sent to the Company
Secretary, BMO Asset Management (Holdings) PLC, 6th Floor, Quartermile 4, 7a Nightingale Way, Edinburgh EH3 9EG; or
(iii)
a request which states “BPET - AGM” in the subject line of the e-mail and the full name(s) and address(es) of the Ordinary
Shareholder(s) and is sent to investor.enquiries@bmogam.com.
12.
Issued Shares and Total Voting Rights
At 6 April 2022, the Company's issued share capital comprised 73,941,429 Ordinary Shares, none of which were held in treasury. Each
Ordinary Share carries the right to one vote, and, therefore, the total number of voting rights in the Company at 6 April 2022 was 73,941,429.
13.
Communication
Any electronic address provided either in this notice of AGM or any related documents (including the Form of Proxy) to communicate with
the Company may not be used for any purposes other than those expressly stated.
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Other Information
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Shareholder Information
Warning to Shareholders – Beware of Share Fraud
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to be worthless or
non-existent, or to buy shares at an inflated price in return for an upfront payment.
If you receive unsolicited investment advice or requests:
•
Check the Financial Services Register at
www.fca.org.uk
to see if the person or firm contacting you is authorised by the Financial Conduct
Authority (‘FCA’)
•
Call the FCA on
0800 111 6768
if the firm does not have contact details on the Register or you are told they are out of date
•
Search the list of unauthorised firms to avoid at
www.fca.org.uk/scams
•
Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or Financial
Services Compensation Scheme
•
Think about getting independent financial and professional advice
If you are approached by fraudsters please tell the FCA by using the share fraud reporting form at
www.fca.org.uk/scams
where you can find
out more about investment scams. You can also call the FCA Consumer Helpline on
0800 111 6768
. If you have already paid money to share
fraudsters you should contact Action Fraud on
0300 123 2040
.
Dividends
Shareholders who wish to have dividends paid directly into a bank
account rather than by cheque to their registered address can
complete a mandate form for the purpose. Mandates may be obtained
from Link Asset Services, 10th Floor, Central Square, 29 Wellington
Street, Leeds, LS1 4DL on request. Where dividends are paid to
shareholders’ bank accounts, dividend tax vouchers are sent directly to
shareholders’ registered addresses.
Dividend Reinvestment Plan
Shareholders who wish to use their dividends to purchase further
shares in the Company by participating in the Company’s Dividend
Reinvestment Plan can complete an application form which may
be obtained from Link Asset Services, 10th Floor, Central Square,
29 Wellington Street, Leeds, LS1 4DL on request.
Share Price
The Company’s shares are listed on the London Stock Exchange. Prices
are given daily in the Financial Times and in other newspapers.
Change of Address
Communications with Shareholders are mailed to the address held
on the share register. In the event of a change of address or other
amendment this should be notified to Link Asset Services under the
signature of the registered holder.
Website
Additional information regarding the Company may be found at its
website address which is:
www.bmoprivateequitytrust.com
Financial Calendar 2021/2022
29 April 2022
Payment of final quarterly for 2021
26 May 2022
Annual General Meeting
May 2022
Announcement of quarterly results to 31 March 2022
July 2022
Payment of first interim dividend for 2022
August 2022
Announcement of interim results to 30 June 2022
October 2022
Payment of second interim dividend for 2022
November 2022
Announcement of quarterly results to 30 September 2022
January 2023
Payment of third interim dividend for 2022
March 2023
Announcement of annual results to 31 December 2022
April 2023
Payment of fourth interim dividend for 2022
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Other Information
History
1999
The Company was launched in March 1999 as part of the reorganisation of
The Scottish Eastern Investment Trust plc with the objective of managing the
private equity investments formerly held by that company so as to realise
those assets and return cash to shareholders.
2001
In August 2001, the Company was reorganised and shareholders were given
the opportunity to convert all or part of their existing ordinary shares into
A Shares (subsequently renamed Restricted Voting Shares) and B Shares
(subsequently renamed Ordinary Shares).
2005
In August 2005, shareholders approved a change of company name from
Martin Currie Capital Return Trust plc to F&C Private Equity Trust plc and the
Company issued 49,758,449 C Shares following the acquisition of Discovery
Trust plc and a subscription of £20 million by Friends Provident. The C Shares
subsequently converted into Ordinary Shares.
2009
In December 2009 the Company, through its wholly owned subsidiary F&C
Private Equity Zeros plc (‘FCPEZ’) issued 30,000,000 ZDP Shares at 100 pence
per share. The ZDP Shares were designed to have a predetermined capital
entitlement at the end of their life, on 15 December 2014, of 152.14 pence per
share giving a redemption yield of 8.75 per cent per annum.
2012
On 23 May 2012 the Company adopted its current dividend policy, which is
designed to provide shareholders with a regular and relatively predictable
source of income, and the prospect of income growth over time.
2013
On 14 February 2013 the Restricted Voting Shares were converted and
redesignated as Deferred Shares and the Deferred Shares were bought back by
the Company and cancelled on that date. On 15 February 2013 the admission of
the Restricted Voting Shares to the Official List of the UKLA and trading on the
London Stock Exchange’s Main Market were cancelled.
2014
On 15 December 2014, FCPEZ repaid its 30,000,000 ZDP Shares at 152.14 pence
per share.
2016
During the year, the Company issued 1,959,156 Ordinary Shares of 1p each in the
capital of the Company, following the exercise of subscription rights by holders
of a corresponding number of management warrants previously issued by the
Company in the capital of the Company. No warrants remain in issue.
2017
During the year the Company amended its dividend policy to introduce the
payment of quarterly dividends. The first quarterly dividend was paid in January
2018. Previously the Company paid semi-annual dividends.
2018
In November 2018, the Board of Directors approved a change of company name
from F&C Private Equity Trust plc to BMO Private Equity Trust PLC.
Historical Record
(Since reconstruction in 2005)
Net Asset Value per
Ordinary Share
Revenue per
Dividends per
31 December
Ordinary Share#
Price
Discount
Ordinary Share#
Ordinary Share
Ongoing Charges
2005*
131.40p
107.00p
18.6%
1.96p
1.95p
1.3%
2006
178.10p
161.00p
9.6%
3.20p
2.50p
1.6%
2007
231.08p
187.00p
19.1%
0.60p
0.60p
1.7%
2008
218.74p
75.50p
65.5%
0.64p
0.50p
1.3%
2009
206.84p
107.00p
48.3%
0.58p
0.80p
1.3%
2010
228.02p
129.75p
43.1%
0.96p
0.95p
1.5%
2011
243.54p
146.00p
40.1%
0.78p
0.80p
1.4%
2012
254.38p
185.75p
27.0%
1.76p
10.03p
1.5%
2013
269.07p
207.50p
22.9%
0.94p
10.58p
1.4%ø
2014
277.55p
217.88p
21.5%
2.62p
10.84p
1.4%ø
2015
295.74p
241.75p
18.3%
6.78p
11.41p
1.3%ø
2016
350.98p
295.50p
15.8%
(0.41)p
12.60p
1.3%ø
2017
357.23p
339.00p
5.1%
(0.58)p
14.04p
1.3%ø
2018
386.29p
317.00p
17.9%
0.63p
14.37p
1.3%ø
2019
411.51p
375.50p
8.8%
3.45p
15.33p
1.2%ø
2020
486.17p
307.5p
36.8%
4.72p
16.13p
1.3%ø
2021 640.3p 489.0p 23.6% 6.87p 20.04p 1.2%ø
* as at 31 July 2005 # fully diluted ø excluding performance fee
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Other Information
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Alternative Performance Measures
The Company uses the following Alternative Performance Measures (“APMs”):
Discount (or Premium)
– If the share price of an Investment Trust is less than its Net Asset Value per share, the shares are trading at a discount.
If the share price is greater than the Net Asset Value per share, the shares are trading at a premium.
31 December
31 December
2021
2020
Net Asset Value per share (pence)
(a)
640.30
486.17
Ordinary share price per share (pence)
(b)
489.00
307.50
Discount (c = (b-a)/a)
(c)
23.6%
36.8%
Dividend Yield
– The dividends declared for the year divided by the share price at the year end. An analysis of dividends is contained in note 7 to
the accounts.
31 December
31 December
2021
2020
Dividend per share (pence)
(a)
20.04
16.13
Ordinary share price per share (pence)
(b)
489.00
307.50
Dividend yield (c=a/b)
4.1%
5.2%
Gearing
–
this is the ratio of the borrowings less cash of the Company to its total assets less current liabilities (excluding borrowings and cash).
Borrowings may include: preference shares; debentures; overdrafts and short and long-term loans from banks; and derivative contracts. If the
Company has cash assets, these may be assumed either to net off against borrowings, giving a “net” or “effective” gearing percentage, or to be
used to buy investments, giving a “gross” or “fully invested” gearing figure. Where cash assets exceed borrowings, the Company is described as
having “net cash”.
31 December
31 December
2021
2020
£’000
£’000
Borrowings less cash
(a)
3,220
62,836
Total assets less current liabilities (excluding borrowings and cash)
(b)
476,667
422,319
Gearing (c = a/b)
(c)
0.7%
14.9%
Ongoing Charges
– All operating costs expected to be incurred in future and that are payable by the Company expressed as a proportion of
the average Net Assets of the Company over the reporting year. The costs of buying and selling investments are excluded, as are interest costs,
taxation, performance fees, non-recurring costs and the costs of buying back or issuing Ordinary Shares. Ongoing charges of the Company’s
underlying investments are also excluded.
Year to
Year to
31 December
31 December
2021
2020
Investment management fee – basic fee (£'000)
3,940
2,944
Other expenses (£'000)
993
952
Less non-recurring costs (£’000)
–
–
Ongoing charges (£'000):
4,933
3,896
Ongoing charges as a percentage of average net assets:
1.2%
1.3%
Ongoing charges (including performance fees) (£'000)
9,435
6,903
Ongoing charges (including performance fees) as a percentage of average net assets:
2.3%
2.2%
Average net assets (£'000)
406,332
307,068
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Other Information
Total Return
– The return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in
the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets.
Year to
Year to
31 December 2021
31 December 2020
NAV per share at start of year (pence)
486.17
411.51
NAV per share at end of year (pence)
640.30
486.17
Change in year
+31.7%
+18.1%
Impact of dividend reinvestments
+4.1%
+4.6%
Total NAV return for the year
+35.8%
+22.7%
Year to
Year to
31 December 2021
31 December 2020
Share price per share at start of year (pence)
307.50
375.50
Share price per share at end of year (pence)
489.00
307.50
Change in year
+59.0%
-18.1%
Impact of dividend reinvestments
+7. 2 %
+3.9%
Total share price return for the year
+66.2%
-14.2%
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Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Other Information
Corporate Terms
AAF
– Audit and Assurance Faculty guidance issued by the Institute of Chartered Accountants in England and Wales.
AIC
– Association of Investment Companies, is the trade body for Closed-end Investment Companies (www.theaic.co.uk).
AIFMD
– Alternative Investment Fund Managers Directive. Issued by the European Parliament in 2012 and 2013, the Directive requires that all
investment vehicles in the European Union, including Investment Trusts, must appoint a Depositary and an Alternative Investment Fund Manager.
The Board of Directors of an Investment Trust, nevertheless, remains fully responsible for all aspects of the Company’s strategy, operations and
compliance with regulations.
Closed-end Investment Company
– A company, including an Investment Trust, with a fixed issued ordinary share capital which is traded on
an exchange at a price not necessarily related to the Net Asset Value of the company and where shares can only be issued or bought back by
the company in certain circumstances. This contrasts with an open-ended investment company, which has units not traded on an exchange but
issued or bought back from investors at a price directly related to the Net Asset Value.
Custodian
– A specialised financial institution responsible for safeguarding, worldwide, the listed securities and certain cash assets of the
Company, as well as the income arising therefrom, through provision of custodial, settlement and associated services. The Company’s Custodian
is JPMorgan Chase Bank.
Depositary
– Under AIFMD rules applying from July 2014, the Company must appoint a Depositary, whose duties in respect of investments, cash
and similar assets include: safekeeping; verification of ownership and valuation; and cash monitoring. Under AIFMD regulations, the Depositary
has strict liability for the loss of the Company’s financial assets in respect of which it has safekeeping duties. The Depositary’s oversight duties
include, but are not limited to, oversight of share buybacks, dividend payments and adherence to investment limits. The Company’s Depositary is
JPMorgan Europe Limited.
Derivative
– A contract between two or more parties, the value of which fluctuates in accordance with the value of an underlying security. The
contract is usually short-term (for less than one year). Examples of derivatives are put and call options, swap contracts, futures and contracts for
difference. A derivative can be an asset or a liability and is a form of gearing because the fluctuations in its value are usually greater than the
fluctuations in the underlying security’s value.
Dividend
– The income from an investment. The Company currently pays dividends to shareholders quarterly.
GAAP
– Generally Accepted Accounting Practice. This includes UK GAAP and International GAAP (international accounting standards. The
Company’s financial statements are prepared in accordance with UK adopted international accounting standards.
Gearing
– Unlike open-ended investment companies, Investment Trusts have the ability to borrow to invest. This term is used to describe the
level of borrowings that an Investment Trust has undertaken. The higher the level of borrowings, the higher the gearing ratio.
Investment Trust
– A Closed-end Investment Company which satisfies the requirements of Section 1158 of the Corporation Tax Act 2010.
Companies which meet these criteria are exempt from having to pay tax on the capital gains they realise from sales of the investments within
their portfolios.
Leverage
– As defined under AIFMD rules, leverage is any method by which the exposure of an AIF is increased through borrowing of cash
or securities or leverage embedded in derivative positions. Leverage is broadly equivalent to Gearing, but is expressed as a ratio between
the assets (excluding borrowings) and the Net Assets (after taking account of borrowings). Under the gross method, exposure represents the
sum of the Company’s positions after deduction of cash balances, without taking account of any hedging or netting arrangements. Under the
commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting positions are offset
against each other.
Manager
– The Company’s investment manager is BMO Investment Business Limited, a wholly owned subsidiary of BMO Global Asset
Management (Europe) Limited. BMO Global Asset Management (Europe) Limited is owned by Columbia Threadneedle Investments UK
International Limited and is part of the Amerprise Financial, Inc., group of companies
Further details are set out on page 32 and in note 3 to the financial statements.
Glossary of Terms
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Other InformationOther Information
Market Capitalisation
– The stock market value of a company as determined by multiplying the number of shares in issue, excluding those
shares held in treasury, by the market price of the shares.
Net Assets (or Shareholders’ Funds)
– This is calculated as the value of the investments and other assets of an Investment Trust, plus cash and
debtors, less borrowings and any other creditors. It represents the underlying value of an Investment Trust at a point in time.
Ordinary Shares
– The main type of equity capital issued by conventional Investment Trusts. Shareholders are entitled to their share of both
income, in the form of dividends paid by the Investment Trust, and any capital growth. As at 31 December 2021 the Company had only Ordinary
Shares in issue.
Share Price
– The value of a share at a point in time as quoted on a stock exchange. The Company’s Ordinary Shares are quoted on the Main
Market of the London Stock Exchange.
SORP
– Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” issued by the AIC.
Total Assets
– This is calculated as the value of the investments and other assets of an Investment Trust, plus cash and debtors.
Zero Dividend Preference Shares (“ZDP Shares”)
– An additional share class issued by some Investment Trusts. Their aim is to give investors
back a certain amount of money, which is set in advance – called the redemption value.
Private Equity Terms
Carried Interest
– The share in the proceeds of a sale of an investee company or fund that is retained by the private equity fund manager as a
performance fee if the investment has performed well.
Co-investment
– An investment made directly into a company alongside a financial sponsor or other private equity investors.
Deal Flow
– The rate at which investment proposals come to a private equity fund manager.
Drawdown
– When a private equity firm has decided where it would like to invest, it will approach its investor to drawdown the money already
committed to the fund.
General Partner (“GP”)
– The manager of a limited partnership private equity fund.
Internal Rate of Return (“IRR”)
– Generally, the term refers to the annual compound rate of return to an investor over a given period. Returns
normally include dividend and interest distributions and proceeds from disposals or a fair valuation of the company if unrealised.
Lead Investor
– A private equity investor who either wins the mandate for, or invests the most in, a syndicated investment.
Limited Partnership
– The legal structure of most private equity funds, comprising a fixed-life investment vehicle managed by General Partners
with the Limited Partners being the investors. Limited Partners have limited liability and are not involved in the day-to-day management of the
fund but receive regular and detailed reports on the holdings in the fund.
Management Buy-in (“MBI”)
– The purchase of a business by private equity investors together with one or more outside managers. The
managers sometimes put up some of the finance and gain a share of the equity.
Management Buy-out (“MBO”)
– The purchase of a business by private equity investors with some or all of the existing management. The
managers put up some of the finance and gain a share of the equity.
Mezzanine Finance/Debt
– Loans, usually unsecured, which rank after secured or senior debt but before equity in the event of the company
defaulting. To compensate for the greater risk, these loans usually carry interest at a higher rate than on a secured loan and an element of
equity.
Secondaries Transaction
– This is where an institutional, corporate or fund-of-funds investor in a private equity fund sells part or all of their
portfolio of individual fund holdings to another institutional or corporate investor or fund-of-funds.
Senior Debt
– Secured debt which ranks first in terms of repayment in the event of default.
Syndicated Investment
– An investment which is too large to be undertaken by one fund on its own and which is therefore shared among
several private equity funds.
Trade Sale
– The sale of an investee company to another company in the same sector as opposed to a financial institution.
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Other Information
Chairman’s statementOverview Auditor’s Report
Report and Accounts 2021 | 79
Other Information
How to Invest
How to Invest
BMO ISA
You can use your ISA allowance to make an annual tax-
efficient investment of up to £20,000 for the current tax year
with a lump sum from £100 or regular savings from £25 a
month. You can also transfer any existing ISAs to us whilst
maintaining the tax benefits.
BMO Junior ISA (JISA)*
A tax efficient way to invest up to £9,000 per tax year for
a child. Contributions start from £100 lump sum or £25 a
month. JISAs or CTFs with other providers can be transferred
to BMO.
BMO Lifetime ISA (LISA)
For those aged 18-39, a Lifetime ISA could help towards
purchasing your first home or retirement in later life. Invest
up to £4,000 for the current tax year and receive a 25%
Government bonus up to £1,000 per year. Invest with a lump
sum from £100 or regular savings from £25 a month.
BMO Child Trust Fund (CTF)*
If your child already has a CTF you can invest up to £9,000
per birthday year, from £100 lump sum or £25 a month. CTFs
with other providers can be transferred to BMO.
BMO General Investment Account (GIA)
This is a flexible way to invest in our range of Investment
Trusts. There are no maximum contributions, and investments
can be made from £100 lump sum or £25 a month.
BMO Junior Investment Account (JIA)
This is a flexible way to save for a child in our range of
Investment Trusts. There are no maximum contributions,
and the plan can easily be set up under bare trust (where
the child is noted as the beneficial owner) or kept in your
name if you wish to retain control over the investment.
Investments can be made from a £100 lump sum or £25 a
month per account. You can also make additional lump sum
top-ups at any time from £100 per account.
*The CTF and JISA accounts are opened by parents in the child’s name
and they have access to the money at age 18. **Calls may be recorded or
monitored for training and quality purposes.
Charges
Annual management charges and other charges apply according to
the type of plan.
Annual account charge
ISA/LISA:
£60+VAT
GIA:
£40+VAT
JISA/JIA/CTF:
£25+VAT
You can pay the annual charge from your account, or by direct debit
(in addition to any annual subscription limits).
Dealing charges
£12 per fund (reduced to £0 for deals placed through the online BMO
Investor Portal) for ISA/GIA/LISA/JIA and JISA. There are no dealing
charges on a CTF.
Dealing charges apply when shares are bought or sold but not on the
reinvestment of dividends or the investment of monthly direct debits.
Government stamp duty of 0.5% also applies on the purchase of
shares (where applicable).
The value of investments can go down as well as up and you may
not get back your original investment. Tax benefits depend on your
individual circumstances and tax allowances and rules may change.
Please ensure you have read the full Terms and Conditions, Privacy
Policy and relevant Key Features documents before investing. For
regulatory purposes, please ensure you have read the Pre-sales Cost &
Charges disclosure related to the product you are applying for, and the
relevant Key Information Documents (KIDs) for the investment trusts
you want to invest into.
How to Invest
To open a new BMO plan, apply online at
bmogam.com/apply
Online applications are not available if you are transferring an existing
plan with another provider to BMO, or if you are applying for a new
plan in more than one name but paper applications are available at
bmoinvestments.co.uk/documents or by contacting BMO.
New Customers
Call:
0800 136 420** (8.30am – 5.30pm, weekdays)
Email:
info@bmogam.com
Existing Plan Holders
Call:
0345 600 3030** (9.00am – 5.00pm, weekdays)
Email:
investor.enquiries@bmogam.com
By post:
BMO Administration Centre
PO Box 11114
Chelmsford
CM99 2DG
You can also invest in the trust through online dealing platforms for
private investors that offer share dealing and ISAs. Companies include:
Barclays Stockbrokers, EQi, Halifax, Hargreaves Lansdown, HSBC,
Interactive Investor, Lloyds Bank, The Share Centre
bmoinvestments.co.uk
facebook.com/bmoinvestmentsuk
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be
recorded or monitored for training and quality purposes.
BMO Asset Management Limited
22
2
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Other Information
Corporate Information
Directors
Mark Tennant (Chairman)*
Elizabeth Kennedy†
Audrey Baxter
Tom Burnet
Swantje Conrad
Richard Gray
David Shaw
Company Secretary
BMO Asset Management (Holdings) PLC
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
Tel: 0207 628 8000
Alternative Investment Fund Manager (“AIFM”)
and Investment Manager
BMO Investment Business Limited
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
Tel: 0207 628 8000
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Broker and Financial Adviser
N+1 Singer
1 Bartholomew Lane
London EC2N 2AX
Solicitors
CMS Cameron McKenna LLP
Saltire Court
20 Castle Terrace
Edinburgh EH1 2EN
Depositary
JPMorgan Europe Limited
25 Bank Street
Canary Wharf
London E14 5JP
Bankers
JPMorgan Chase Bank
25 Bank Street
Canary Wharf
London E14 5JP
The Royal Bank of Scotland International Limited
1 Princes Street
London EC2R 8BP
Company Number
Registered in Scotland No: SC179412
* Chairman of the Management Engagement Committee and the Nomination Committee
† Chairman of the Audit Committee
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© 2022 BMO Global Asset Management. All rights reserved. BMO Global Asset Management is a trading name of BMO Asset Management Limited, which is authorised and regulated
by the Financial Conduct Authority.
Registered office:
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
0207 628 8000
Registrars:
Link Asset Services
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
0871 664 0300*
www.linkassetservices.com
* Calls to this number cost 12p per minute plus network extras. Callers from outside the UK: +44(0) 208 639 3399
BMO Private Equity Trust PLC
Report and Accounts 31 December 2021