TIDMHVPE
RNS Number : 0020N
HarbourVest Global Priv. Equity Ltd
27 May 2022
27 May 2022
RESULTS FOR THE 12 MONTHSED 31 JANUARY 2022
Record NAV per share growth; HVPE well positioned with
resilient, diverse portfolio
HarbourVest Global Private Equity Limited ("HVPE" or the
"Company"), a FTSE 250 investment company with global exposure to
private companies, managed by HarbourVest Partners, today announces
its audited results for the 12 months ended 31 January 2022.
Highlights - Year to 31 January 2022
-- Largest annual net asset value ("NAV") per share increase in HVPE's history
o NAV per share growth of 37% to $49.11 (31 January 2021:
$35.97)
o Record performance driven by strong exit activity and value
gains
o Total of 555 IPO and M&A transactions - more than double
the prior year
o Net assets increased to $3.9 billion (31 January 2021: $2.9
billion)
-- Record distribution proceeds
o Net positive portfolio cash flow of $320 million (2021: $141
million net cash invested)
o Driven in large part by HVPE's exposure to Venture and Growth
Equity
o Top IPO exits included Roblox, Coinbase, Allfunds Bank,
monday.com and UiPath
-- Balance sheet remains strong
o Year-end cash balance of $284 million (31 January 2021: $98
million)
o Credit facility increased to GBP700 million in December
2021
o Total new commitments of $1.4 billion to refresh investment
pipeline (2021 new commitments: $195 million)
Ed Warner, Chair of HVPE, said:
"HVPE has delivered extraordinary returns through extraordinary
times, and this year the Company has reported its largest ever
annual NAV per share increase. The performance demonstrates the
resilience of our portfolio against a challenging global
macroeconomic backdrop, testament to our consistent and proven
strategy, the excellence of our Investment Manager and a highly
engaged Board.
" While mindful of the very severe economic and political
challenges currently besetting global markets, the Board and I feel
optimistic about the long-term prospects for HVPE. We believe that
investment into private companies presents an attractive
opportunity for investors. As an asset class it has proven to
reward patience, and we remain convinced that this Company can
continue to generate superior returns for shareholders over the
long term."
Annual Report and Accounts
To view the Company's Annual Report and Accounts please visit
HVPE's result centre:
https://www.hvpe.com/shareholders/results-centre/ . Page number
references in this announcement refer to pages in this report. The
Annual Report and Accounts will also shortly be available on the
National Storage Mechanism, here:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
Annual General Meeting ("AGM") and Capital Markets Morning
HVPE's AGM will be held in Guernsey at 1pm BST on 20 July 2022.
Formal notice will be sent to registered shareholders by 21 June
2022. In advance of the formal AGM, HVPE will hold a hybrid
(in-person/virtual) Capital Markets event on the morning of 15 June
2022, from 10am BST. Shareholders should contact Liah Zusman at
hvpe_events@harbourvest.com should they wish to participate.
Enquiries:
HVPE
Richard Hickman Tel: +44 (0)20 7399 rhickman@harbourvest.com
9847
Charlotte Edgar Tel: +44 (0)20 7399 cedgar@harbourvest.com
9826
HarbourVest Partners
Lily Cabianca Tel: +44 (0)20 7151 lcabianca@harbourvest.com
4261
MHP Communications
Charlie Barker / Tel: +44(0)20 3128 hvpe@mhpc.com
Robert Collett-Creedy 8540
Notes to Editors:
About HarbourVest Global Private Equity Limited:
HarbourVest Global Private Equity Limited ("HVPE" or the
"Company") is a Guernsey-incorporated, closed-end investment
company which is listed on the Main Market of the London Stock
Exchange and is a constituent of the FTSE 250 index. HVPE is
designed to offer shareholders long-term capital appreciation by
investing in a private equity portfolio diversified by geography,
stage of investment, vintage year, and industry. The Company
invests in and alongside HarbourVest-managed funds which focus on
primary fund commitments, secondary investments and direct
co-investments in operating companies. HVPE's investment manager is
HarbourVest Advisers L.P., an affiliate of HarbourVest Partners,
LLC, an independent, global private markets asset manager with 40
years of experience.
About HarbourVest Partners, LLC:
HarbourVest is an independent, global private markets firm with
40 years of experience and more than $92 billion of assets under
management as of December 31, 2021. Our interwoven platform
provides clients access to global primary funds, secondary
transactions, direct co-investments, real assets and
infrastructure, and private credit. Our strengths extend across
strategies, enabled by our team of more than 800 employees,
including more than 175 investment professionals across Asia,
Europe, and the Americas. Across our private markets platform, our
team has committed more than $49 billion to newly-formed funds,
completed over $40 billion in secondary purchases, and invested
over $27 billion in directly operating companies. We partner
strategically and plan our offerings innovatively to provide our
clients with access, insight, and global opportunities.
This announcement is for information purposes only and does not
constitute or form part of any offer to issue or sell, or the
solicitation of an offer to acquire, purchase or subscribe for, any
securities in any jurisdiction and should not be relied upon in
connection with any decision to subscribe for or otherwise acquire
any Shares. In particular, this announcement does not constitute or
form part of any offer to issue or sell, or the solicitation of an
offer to acquire, purchase or subscribe for, any securities in the
United States or to US Persons (as defined in Regulation S under
the US Securities Act of 1933, as amended ("US Persons")). Neither
this announcement nor any part of it shall form the basis of or be
relied on in connection with or act as an inducement to enter into
any contract or commitment whatsoever. Neither this announcement
nor any copy of it may be taken, released, published, transmitted
or distributed, directly or indirectly to US Persons or into the
United States (including its territories and possessions), Canada,
Australia or Japan, or any jurisdiction where such action would be
unlawful. Any failure to comply with this restriction may
constitute a violation of applicable law. Accordingly, recipients
represent that they are able to receive this announcement without
contravention of any applicable legal or regulatory restrictions in
the jurisdiction in which they reside or conduct business. No
recipient may distribute, or make available, this announcement
(directly or indirectly) to any other person. Recipients of this
announcement should inform themselves about and observe any
applicable legal requirements in their jurisdictions.
The Shares have not been and will not be registered under the US
Securities Act of 1933, as amended (the "Securities Act") or with
any securities or regulatory authority of any state or other
jurisdiction of the United States and, accordingly, may not be
offered, sold, exercised, resold, transferred, delivered or
distributed, directly or indirectly, within the United States or to
US Persons. In addition, the Company is not, and will not be,
registered under the US Investment Company Act of 1940, as amended
(the "Investment Company Act") and shareholders of the Company will
not have the protections of that act. There will be no public offer
of the Shares in the United States or to US Persons.
This announcement has been prepared by the Company and its
investment manager, HarbourVest Advisers L.P. (the "Investment
Manager"). No liability whatsoever (whether in negligence or
otherwise) arising directly or indirectly from the use of this
announcement is accepted and no representation, warranty or
undertaking, express or implied, is or will be made by the Company,
the Investment Manager or any of their respective directors,
officers, employees, advisers, representatives or other agents
("Agents") for any information or any of the opinions contained
herein or for any errors, omissions or misstatements. None of the
Investment Manager nor any of their respective Agents makes or has
been authorised to make any representation or warranties (express
or implied) in relation to the Company or as to the truth, accuracy
or completeness of this announcement, or any other written or oral
statement provided. In particular, no representation or warranty is
given as to the achievement or reasonableness of, and no reliance
should be placed on any projections, targets, estimates or
forecasts contained in this announcement and nothing in this
announcement is or should be relied on as a promise or
representation as to the future.
The ongoing spread of the Coronavirus has had and will continue
to have a material adverse impact on local economies in the
affected jurisdictions and also on the global economy as
cross-border commercial activity and market sentiment are
increasingly impacted by the outbreak and government and other
measures seeking to contain its spread. In addition to these
developments having potentially adverse consequences for underlying
portfolio investments of the HarbourVest funds and the value of the
investments therein, the operations of HVPE, the Investment
Manager, and HVPE's portfolio of HarbourVest funds have been, and
could continue to be, adversely impacted and could materially and
adversely affect the Investment Manager's ability to source, manage
and divest its investments and its ability to fulfil its investment
objectives. Similar consequences could arise with respect to other
comparable infectious diseases.
Other than as required by applicable laws, the Company gives no
undertaking to update this announcement or any additional
information, or to correct any inaccuracies in it which may become
apparent and the distribution of this announcement. The information
contained in this announcement is given at the date of its
publication and is subject to updating, revision and amendment. The
contents of this announcement have not been approved by any
competent regulatory or supervisory authority.
This document contains certain forward-looking statements, which
are based on current expectations and projections about future
events as of the date of this announcement. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. In
some cases, forward-looking statements can be identified by terms
such as "anticipate", "project", "continue", "target", "believe",
"could", "estimate", "expect", "intend", "may", "plan",
"potential", "should", "will" and "would" or the negative of those
terms or other comparable terminology. The forward-looking
statements are based on the Investment Manager's beliefs,
assumptions, and expectations of future performance and market
developments, taking into account all information currently
available. These beliefs, assumptions, and expectations are subject
to risks, uncertainties and assumptions about HVPE, including,
among other things, the development of its business, trends in its
operating industry and future capital expenditures and acquisitions
and can change as a result of many possible events or factors, not
all of which are known or are within the Investment Manager's
control. If a change occurs, the Company's business, financial
condition, liquidity, and results of operations may vary materially
from those expressed in forward-looking statements. As such,
forward-looking statements are not a guarantee of future
performance.
This announcement is issued by the Company, whose registered
address is BNP Paribas House, St Julian's Avenue, St Peter Port,
Guernsey, GY1 1WA
(c) 2022 HarbourVest Global Private Equity Limited. All rights
reserved.
Chair's statement
Dear Shareholder
I am pleased to report a year of record NAV growth for HVPE. The
Company's portfolio has continued to demonstrate resilience against
a challenging global macroeconomic backdrop, testament to our
consistent and proven strategy, the excellence of our Investment
Manager and a highly engaged Board.
Despite this strong progress, we are mindful of potential
challenges ahead, in particular that we are entering a period of
higher inflation and rising interest rates, exacerbated by the
Russia-Ukraine conflict. HVPE's key strength lies in its broad and
diverse global portfolio, a core component of our strategy that is
by nature defensive and which should help us weather this change in
the economic environment. We maintain high conviction in our
strategy and remain confident that over the long term HVPE will
continue to outperform.
Financial Performance and Balance Sheet
In the year to 31 January 2022, HVPE delivered record NAV per
share growth of 37%. Activity levels were high, with some 555 IPO
and M&A transactions across the portfolio during the 12 months
- on a par with levels last seen in 2015. Record distribution
proceeds from the HarbourVest funds more than offset capital calls
during a strong period for investments and contributed to net
positive portfolio cash flow of $320 million. This, combined with
value gains in the unrealised portion of the portfolio, underpinned
the impressive NAV growth over the year. A full review of the key
drivers of performance is provided in the Investment Manager's
report on pages 34 to 37.
The strong exit activity and resulting cash inflows contributed
to a year-end closing cash balance of $284 million. Active
portfolio and balance sheet management as highlighted below should
ensure that this cash is deployed steadily in the months and years
ahead as HarbourVest and the underlying managers continue to
identify attractive new investment opportunities.
Company Activity
HVPE's investment strategy has remained consistent and the Board
continues to be active in its oversight and governance of the
Company. There have been several key developments in the financial
year, covered below.
Share Price and Discount to NAV
The sterling share price increased by 48% over the year to 31
January 2022. Despite this very strong performance, the shares
continue to trade at a discount to the value of the Company's net
assets. We remain frustrated that discounts in the listed private
equity sector as a whole remain stubbornly wide, and note that the
recent widening trend has also been reflected in the share prices
of some newer entrants in the market which were previously trading
at premiums.
In addressing HVPE's discount, we are resolved to take the
action that we believe is in the best long-term interest of
shareholders. One option that we evaluate on a regular basis is
buying back shares. At our most recent review, having consulted
with our advisers, we concluded that reinvesting capital into new
private markets opportunities, rather than buying back shares,
should provide a better outcome for our shareholders over the long
term. We have not seen evidence that buybacks are an effective
discount control mechanism in our sub-sector. Instead, we will
continue to look for ways to ensure that our long-term track record
is understood and recognised by the market. With Directors
personally invested in the Company, we are aligned with our
investors and right now we believe this is the best course of
action on behalf of all the Company's owners. The Board will,
however, re-evaluate this position on a regular basis, and to this
end has developed a framework to ensure that discussions on the
topic of share buybacks are well-structured, and focused on
optimising long-term shareholder returns. More detail can be found
on page 24, under our Section 172 disclosures.
Portfolio and Balance Sheet Management
Following continued strong NAV performance, HVPE has increased
significantly in size, and this brings new considerations about how
the Board and Investment Manager manage the Company. Shareholders
should note the substantial level of new commitments made to
HarbourVest funds during the financial year ($1.4 billion). This
compares to just $195 million in the prior year, when new
commitments were paused for a time due to the impact of COVID-19.
As highlighted in my interim statement, the decision to increase
commitments during the year was borne out of a desire to remain
fully invested through the cycle. While the latest commitment
figure in isolation is larger than prior years, for context, HVPE's
Investment Pipeline at 31 January 2022 represented 63% of total net
assets, still at the lower end of the 10-year historical range.
To underpin the increase in commitments, as an additional
prudent measure, in December we increased our credit facility by
$100 million. The additional lending is provided by Credit Suisse
and takes the facility to $700 million. At the time of writing, the
credit facility remained completely undrawn, leaving the full
amount available to the Company.
Focus on Environmental, Social, and Governance ("ESG")
This Board believes that a focus on ESG can help deliver
superior returns, and therefore places high importance on the
integration and monitoring of ESG at both the HVPE and HarbourVest
levels. As part of its own efforts and contributing to its social
responsibility, the Board has, within the financial year, appointed
a Board Observer to attend meetings. This position is occupied by
an individual in the early stage of their career, and will allow
them to gain valuable boardroom experience while providing us with
the benefit of a new perspective on HVPE and its operations.
Details of how the Board engages with the community and environment
are shown on page 23.
Following regular updates and engagement with the Investment
Manager, we remain encouraged by positive progress made on its ESG
work. HarbourVest continues to make great strides in this area, and
we have been impressed by the growth of its efforts, from evolving
the evaluation and monitoring of managers and risks within the
portfolios, to the pledges made at the firm level to help tackle
wider global climate issues. This sits alongside efforts made to
improve diversity and inclusion across the business. This summary
is not exhaustive, and this year we are pleased to provide a more
detailed review of HarbourVest's approach to ESG, including recent
developments in this area, on pages 38 to 43.
Transparency and Disclosure
The Board of HVPE aims to uphold the highest level of corporate
governance and best practice standards. Considering this, during
the year we took the step to provide an estimate of full
look-through costs in our Key Information Document ("KID"). It is
vital that shareholders understand that fees have not increased,
but for complete transparency our KID cost figure now includes an
estimate of the fees at the underlying partnership level (costs
borne by the HarbourVest fund of funds vehicles in which HVPE
invests), including estimated performance fees. We appreciate that
this increased level of disclosure may bring challenges for some of
our shareholders, and we remain focused on trying to be as
cost-effective as possible. It should be remembered, however, that
HVPE offers investors a truly differentiated proposition in the
form of an actively managed portfolio comprising thousands of
private companies across the globe. This has taken many years to
build and would be very difficult to replicate. Furthermore, HVPE's
performance figures are always quoted net of all fees and
costs.
Post-Period End
Board Changes
In accordance with the Board's succession planning programme,
and our ambition for Directors to hold the necessary balance of
skills to deliver the best stewardship of the Company for HVPE's
shareholders, I am delighted to announce the appointment of Anulika
Ajufo, who joined the Board as an independent non-executive
Director with effect from 19 May 2022. Anulika brings 15 years'
experience in capital raising and investments across sectors,
including roles with the Soros Economic Development Fund, The
Carlyle Group, and Goldman Sachs International. We are delighted to
welcome Anulika to the Board, and hope that her appointment will
allow us to continue to promote an engaged and collaborative
culture in the boardroom.
Alan Hodson will step down from the Board at the Annual General
Meeting in July 2022. Alan has provided invaluable service to HVPE,
particularly in his role as Senior Independent Director ("SID"),
and he leaves with our heartfelt thanks and best wishes on behalf
of all shareholders. Francesca Barnes will assume the role of SID
and of Chair of the Remuneration Committee and Libby Burne will
take on the role of Chair of the Management Engagement and Service
Providers Committee in her place after the Annual General Meeting.
Further details of all the Board members can be found on pages 72
to 73.
New Joint Corporate Broker
As announced in May 2022, Peel Hunt was appointed as HVPE's
joint corporate broker to work alongside Jefferies International.
We have been impressed by Peel Hunt's proposition and feel the firm
can bring focused support to the Company as we continue to grow and
diversify our shareholder base, through expanding our distribution
network and assisting our efforts to broaden HVPE's appeal to new
investors.
Brand and Messaging
The Board appreciates the importance of clear communication.
HVPE can appear complex, so it is vital we articulate our
proposition clearly. We are also aware of our broadening
shareholder base, and the growing number of individual private
investors joining the share register. With this in mind, the Board
and Investment Manager have put weight behind improving the
Company's brand representation and simplifying our messaging. The
objective is to make HVPE more accessible and inclusive for a wider
range of shareholders. We launched a new website (www.hvpe.com),
which we have designed with an expanding shareholder base in mind.
As well as delivering key financial reports, we have introduced new
content for those less familiar with the asset class and its unique
terminology. We hope the new website is an improvement, and, most
importantly, that it continues to deliver the information you need
from us.
Annual General Meeting ("AGM") and Capital Markets Morning
HVPE's AGM will be held in Guernsey at 1.00 p.m. BST on 20 July
2022. Formal notice will be sent to registered shareholders by 21
June 2022. We hope that all registered shareholders will exercise
their votes by proxy. Except for Alan Hodson, who will be stepping
down at this AGM, all Directors will submit themselves for
re-election. As in prior years, in advance of the formal AGM, HVPE
will hold a Capital Markets event for shareholders. This will take
place on the morning of 15 June 2022 from 10.00 a.m. BST, and will
assume a hybrid (in-person and virtual) format. Shareholders should
contact Liah Zusman at hvpe_events@harbourvest.com should they wish
to participate.
Outlook
This Company has delivered extraordinary returns through
extraordinary times. While private markets continue to present a
huge opportunity for investors, we are mindful of the very severe
economic and political challenges currently besetting global
markets. Not least, since the year end, most major public markets
have experienced significant declines, driven by the war in
Ukraine, and wider macro concerns. Specifically, the world is
currently facing surging inflation, supply-chain dislocation, and
rising interest rates; these factors, exacerbated by the ongoing
war that is showing no sign of abating, will likely contribute to a
significant slowdown in global economic growth over the near term.
Private markets are likely to feel some degree of impact from these
developments, so we might expect to see downward pressure on
valuations in parts of HVPE's portfolio. In particular, the
technology exposure that contributed to recent record NAV increases
may face headwinds as investors rotate away from the growth theme,
instead favouring investments in more traditional sectors.
Nevertheless, we are strong believers in the power of
diversification, and with other segments of the Company's portfolio
potentially standing to benefit from the changed macro environment,
we remain optimistic about the long-term prospects for HVPE. At
times of uncertainty, it is vital to keep a level head, and we will
remain measured and disciplined in our approach, maintaining our
prudent, yet active, management of the Company's balance sheet and
assets. This should enable HVPE to prosper through more challenging
times.
This is a long-term asset class which rewards patience. The
Board and I remain convinced that our proven strategy can continue
to deliver strong returns to investors. As we approach our 15-year
anniversary with a proud track record of having delivered compound
annual growth of 12% over that period, we thank all shareholders
for your continued support and encouragement.
Ed Warner
Chair
26 May 2022
Principal risks and uncertainties
Risk Factors and Internal Controls
The Board is responsible for the Company's risk management and
internal control systems and actively monitors the risks faced by
the Company, taking steps to mitigate and minimise these where
possible. Further details on the Board's governance and oversight
can be found on pages 71 to 89.
Risk Appetite
The Board's investment risk appetite is to follow an
over-commitment policy that allows balanced, regular investment
through economic and investment cycles whilst ensuring that it has
access to sufficient funding for any potential negative cash flow
situations, including under an Extreme Downside scenario. At the
same time, the funding available to the Company by way of cash
balances and lending facilities is managed to ensure that its cost,
by way of interest, facility fees or cash drag, is reasonable. When
considering other risks, the Board's risk appetite is to balance
the potential impact and likelihood of each risk with the cost of
any additional control and mitigation measures. In doing so, as a
baseline, the Board will seek to follow best practice and remain
compliant with all applicable laws, rules, and regulations.
Risk Management
As recommended by the Audit and Risk Committee (see the report
of the activities of that Committee on pages 83 to 85), the
Directors have adopted a risk management framework to govern how
the Board identifies existing and emerging risks, determines risk
appetite, identifies mitigation and controls, assesses, monitors
and measures risk, and reports on risks.
The Board reviews risks at least twice a year and receives
deep-dive reports on specific risks as recommended by the Audit and
Risk Committee. The Board divides identified risks into those which
have a higher probability and a significant potential impact on
performance, strategy, reputation, or operations, and those which
are less material and are monitored on a watchlist. The Board also
conducts an annual exercise to identify new or emerging risks. As a
result of this exercise, emerging risks relating to developing
competitive threats in the private equity fund market and the
relationship between the Board and the Investment Manager, were
identified and will form part of the ongoing risk management
process.
In considering material risks, the Board identified those which
should be categorised as principal risks, which are those where the
combination of probability and impact was assessed as being most
significant and which the Board therefore considers could seriously
affect the performance, future prospects, or reputation of the
Company. These principal risks are described below and include all
those previously identified by the Board, together with an
additional risk relating to ESG which was classified as a principal
risk following the year-end.
Principal Risk Description and Potential Mitigation and Management Outcome for the Year
Impact
============================ ============================ ============================ ============================
Balance Sheet Risks The Company's balance sheet The size and term of the With continual strong
Risks to the Company's strategy and its policy for Company's credit facility performance in the
balance sheet resulting the utilisation of leverage helps to mitigate this risk. underlying portfolio and
from its over-commitment are described The Board record distributions
strategy and its policy on page 75. The Company has put a monitoring received
for the use of leverage. continues to maintain an programme in place, during the year, the
over-commitment strategy and determined with reference to opposite risk actually
may draw on portfolio models, in emerged during the period -
its credit facility to order to mitigate against that the Company would
bridge periods of negative the requirement to sell not make enough new
cash flow when capital calls assets at a discount during commitments to ensure that
on investments any periods the balance sheet is
are greater than of NAV decline. The efficiently deployed.
distributions. The level of monitoring programme also The Board has consequently
potential borrowing considers the level of authorised an increase in
available under the credit borrowing at the HarbourVest commitments but, given the
facility could be negatively fund level which is factored uncertain
affected by declining NAVs. into the credit facility economic backdrop, is being
In a period of declining loan-to-value ratio cautious about the pacing of
NAVs, reduced covenants. Both those new commitments.
realisations, and rapid the Board and the Investment
substantial cash calls, the Manager will continue to
Company's net leverage ratio monitor these metrics
could increase actively and will
beyond an appropriate level, take appropriate action as
resulting in a need to sell required, such as pausing
assets. A reduction in the further commitments, to
availability attempt to mitigate
or utilisation of borrowing these risks. Please also see
at the HarbourVest fund the Going Concern and
level, or accelerated Viability Statement on pages
repayment thereof, 78 and 79
could result in an increase for information on the
in capital calls to a level scenarios that are
in excess of the modelled considered by the Board.
scenarios.
============================ ============================ ============================ ============================
Popularity of Listed Investor sentiment may Private equity as an asset The Company carried out an
Private Equity Sector change towards the listed class, and the Company in exercise to estimate the
The risk that investor private equity sector for a particular, have both fees and costs, looking
sentiment may change number of reasons, performed strongly through its underlying
towards the listed private resulting in a widening of over recent years. The portfolio during the year,
equity sector as a the Company's share price Company has demonstrated the and included the results
whole. discount relative to NAV per value of investing through with its KID disclosures
share. For the perceived (see Company
instance, this may be investment cycle. website).
because of perceptions of HVPE continues to make the The discount in the listed
where the market is at in case for private markets private equity sector as a
the private equity investment. While the public whole remains stubbornly
cycle, perceptions about the markets are wide, and the
cost of private equity increasingly dominated by recent widening trend has
investing, or due to large, mature businesses, we also been reflected in the
investors making believe that HVPE's share prices of some newer
their own judgments portfolio will entrants in
regarding current valuation continue to benefit from the the market which were
given reporting lags. presence of younger, previously trading at
faster-growing companies premiums.
choosing to stay
private for longer.
The Company supports
increased transparency
regarding industry fees and
costs.
============================ ============================ ============================ ============================
Public Market Risks The Company makes venture The Company's exposure to Public markets grew strongly
The risk of a decline in capital and buyout individual public markets is through most of the year
global public markets or a investments in companies partially mitigated by the before falling from
deterioration in the where operating performance geographical November/December
economic environment. is affected by the broader and sector diversification 2021 as concerns grew about
economic environment within of the portfolio. In inflation and interest
the countries in which those previous downturns private rates. There was a
companies market valuations particular sell-off
carry out business. While have not been impacted as in the technology sector.
these companies are much as public markets and Post year-end there was
generally privately owned, there has been a dampened further market volatility as
their valuations effect on volatility. Russia invaded Ukraine. The
are, in most cases, Company has
influenced by public market very limited exposure to
comparables. In addition, at Russian or Ukrainian
31 January 2022, markets.
approximately 12% of the
Company's portfolio was made
up of publicly traded
securities whose
values increase or decrease
in response to market
movements. When global
public markets decline
or the economic situation
deteriorates, the Company's
NAV is usually negatively
affected.
============================ ============================ ============================ ============================
Performance of HarbourVest The Company is dependent on
The risk posed by the its Investment Manager and
Company's dependence on its HarbourVest's investment HarbourVest has a long-term Investment performance
Investment Manager. professionals. track record in managing its during the year was strong
With the exception of 16 investment portfolios. The in absolute terms and
secondary co-investments, performance relative to peers.
all of the Company's assets, of HarbourVest is monitored The HarbourVest control
save for cash by the Management Engagement environment remained robust
balances and short-term and Service Provider as the team migrated from a
liquid investments, are Committee as 'work from
invested in HarbourVest detailed on page 86. The home' basis to hybrid
funds. Significant HarbourVest control working as the impact of the
reliance is placed by the environment is assessed by COVID-19 pandemic eased.
Company on HarbourVest's the Audit and Risk
control environment. Committee as detailed on
pages 83 to 85.
============================ ============================ ============================ ============================
Trading Liquidity and Price Any ongoing discount to NAV
The risk that an per share that is materially
insufficient number of different to the Company's The Company's shares trade Liquidity in the shares,
shares in the Company are peer group on the Main Market of the measured by mean daily
traded, widening the has the potential to damage London Stock Exchange, which trading volume, is an
discount the Company's reputation and generally important KPI. The mean
of the share price relative to cause shareholder provides good liquidity and has continued to increase
to the NAV per share. dissatisfaction. accessibility to a wide substantially over the
During periods of short-term range of potential period, as shown on page 14.
market stress, supply and shareholders. In addition, The Board is particularly
demand for shares can be the Board continues to pleased that the proportion
impacted. monitor the discount to NAV of the share register that
If demand decreases or per share. is held by
supply increases The Board has overseen the substantial shareholders
disproportionately, the allocation of additional (more than 5% of voting
bid/offer spread could investor relations resource rights) has reduced during
widen, in recent the financial
resulting in less attractive years and the Company has year from 38% at 31 January
pricing for investors attracted new shareholders. 2021 to 19% at 31 January
seeking to buy or sell Through the activities of 2022 (see details on page
shares in the short the Investment 76) - noting
term. Manager the Board seeks to the latest figure at 5 May
Also, in the event that a drive improved liquidity 2022 is 25%. This has
substantial shareholder over the medium to long term increased due to Smith &
chooses to exit the share by promoting Williamson crossing
register, this the Company's shares to a the 5% threshold.
may have an effect on the broad range of prospective Additionally, the proportion
Company's share price and investors. held by individual private
consequently the discount to investors has increased
NAV per share. from 8% to 14%.
============================ ============================ ============================ ============================
ESG Risk The Company is exposed to
The risk that the Company the impact of a
or the Investment Manager mismanagement or failure to HVPE has established its own The Board has increased its
fails to respond recognise potential policy in relation to ESG. focus on ESG matters and has
appropriately to the ESG issues at portfolio This includes close received a comprehensive
increasing global focus on company level, industry oversight of service update from
Environmental, Social and level, service provider and providers and particularly the Investment Manager on
Governance issues. Board level, which the Investment Manager. The its ESG controls.
could damage the reputation Investment Manager has ESG The Board has expanded its
and standing of the Company policies description of the
and ultimately affect its in place and actively Investment Manager's
investment engages with underlying processes to ensure
performance. managers to assess their ESG stakeholders
credentials. The are fully informed (see
Board will continue its pages 38 to 43) and has
close oversight of these begun active monitoring and
processes to ensure that disclosure of
they are adequate the Investment Manager's ESG
and continue to be developed score.
in accordance with
regulation and best
practice.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Investment Manager's report
NAV per Share - 12 Months to 31 January 2022
HVPE's portfolio generated a record NAV per share return over
the reporting period, increasing by 37% year-on-year to reach
$49.11 as at 31 January 2022 (31 January 2021: $35.97). This
continued strong performance represents the highest annual NAV per
share growth figure on record, surpassing the previous record of
30% set in the prior financial year.
The COVID-19 vaccine roll-out in most major global economies,
which gathered pace around the start of this reporting period,
helped to stimulate economic recovery which, in turn, contributed
to the strong gains in our NAV per share through the year. By the
end of the half-year period, we had already reported a NAV per
share increase of 23%. While the rate of NAV per share growth
moderated in the second half, the resulting financial year-end NAV
per share increase of 37% exceeded the return of most major public
equity markets(1) over the same period. HVPE's public market
benchmark, the FTSE AW TR Index (in US dollars), increased by 14%
in the 12 months to 31 January 2022. Although HVPE's NAV per share
growth outperformed, public markets tend to be more volatile
especially during periods of uncertainty, and therefore we believe
short-term comparisons are less meaningful. Longer-term comparisons
through the cycle are more reflective of HVPE's relative
performance, as described on pages 14 and 15 of the KPIs
section.
During the 12 months ended 31 January 2022, there was a $1.06
billion net gain on investments, contributing to an overall
increase in net assets of $1.05 billion. This compares with a $682
million net gain on investments and an overall increase in net
assets of $670 million for the 12 months to 31 January 2021. In
contrast to the prior financial year, whereby the gain on
investments was driven by the unrealised portion of the portfolio,
the overall net gain in this financial year was broadly split
between unrealised and realised gains, the latter following the
large number of exits during the period (see pages 36 and 37 for
more detail on these).
The higher overall net gains in absolute terms in this reporting
period compared with the same period last year reflect increased
exit activity and the strong performance of the underlying
portfolio, particularly in overweight sector exposures such as Tech
& Software and, to a lesser extent, Medical & Biotech (see
the industry diversification charts on page 37). Despite these
sector overweights, HVPE remains very well diversified, as
demonstrated by the same charts on pages 36 and 37. We believe
diversification remains essential to achieving consistently strong
returns, as the various sub-sectors within the portfolio tend to
outperform on a relative basis at different stages in the cycle. As
at 31 January 2022, the top 100 companies in the portfolio
represented 32% of the Investment Portfolio (31 January 2021: 35%)
and the top 1,000 companies represented 84% (31 January 2021:
84%).
In percentage terms, the Primary portfolio was the best
performing strategy, delivering value growth of 40% over the 12
months. Geographically, the strongest gains came from the US
portfolio, which generated a value increase of 35%; this was
followed by the Rest of World assets, which returned 28%. In terms
of stage, Venture and Growth Equity was the strongest performer,
growing 46% over the 12 months ended 31 January 2022. In the prior
financial year, the best performers by strategy and stage were the
same as above, but by geography Europe was the strongest. More
information on the growth drivers for the year to 31 January 2022
can be found on page 50.
As at 31 January 2022, HVPE held investments in 57 HarbourVest
funds and 16 secondary co-investments(2) (compared with 51 and 10,
respectively, at 31 January 2021). Secondary co-investments are
transactions that HVPE is invited to participate in through the
Secondary Overflow funds; HVPE assesses these on a case-by-case
basis, but sees them as a cost-effective route to accessing
attractive secondary deals.
New commitments during the period can be found on page 35. Of
all the underlying funds, the largest drivers of NAV per share
growth during the 12 months to 31 January 2022 are described
below:
-- Fund X Venture, a US-focused venture fund of funds, was the
largest contributor, adding $1.95 to NAV per share. With a vintage
year of 2015, this fund is in the growth phase. This growth came
predominantly from unrealised gains over the period.
-- Following behind this was Fund XI Venture, a later fund of
the same strategy, adding $1.12 to NAV per share. This is a 2018
vintage fund in its investment phase. This uplift was derived
primarily from unrealised gains over the period.
-- Fund XI Buyout, a US-focused buyout fund of funds, added
$0.99. This 2018 vintage fund is in its investment phase. As might
be expected at this stage of the fund's life, most of this growth
was driven by unrealised gains.
-- Fund X Buyout, a 2015 vintage US-focused buyout fund of
funds, was the fourth largest contributor adding $0.94 to NAV per
share over the period. This growth came predominantly from realised
gains over the period.
-- HIPEP VII Partnership, a 2014 vintage international fund of
funds, added $0.65 to NAV per share. This growth came predominantly
from realised gains over the period.
All of the remaining HarbourVest funds in the portfolio added an
aggregate $9.05 to HVPE's NAV per share over the financial
year.
1 Public market comparisons include: S&P 500, FTSE 100, FTSE
250, Dow Jones, Nasdaq, Stoxx50, Nikkei 225, and Hang Seng
indices.
2 These include five Secondary Overflow III investments, 10
Secondary Overflow IV investments, and Conversus, referred to as
"HVPE Charlotte Co-Investment L.P.", in the Audited Consolidated
Schedule of Investments. Absolute ("HVPE Avalon Co-Investment
L.P.") has been fully realised
New Fund Commitments
In the 12 months ended 31 January 2022, HVPE made total
commitments of $1.4 billion across seven HarbourVest funds and
seven secondary co-investments (12 months to 31 January 2021: $195
million). This took total unfunded commitments to $2.5 billion at
31 January 2022. The substantial year-on-year increase in
commitments largely reflects below-average commitments made in the
prior financial year, following the temporary pause to the
commitment plan during 2020 in response to COVID-19.
Of the total capital committed, the largest commitment was $445
million to HIPEP IX (an international multi-strategy fund of
funds). Other large commitments included $245 million to Fund XII
Buyout (a US-focused buyout fund of funds) and a commitment of $210
million to Asia Pacific 5 (an Asia-focused multi-strategy fund of
funds). The remaining commitments included $170 million to 2021
Global Fund (a global multi-strategy fund of funds), $135 million
to Fund XII Venture (a US-focused venture fund of funds), $100
million to Co-Investment VI (a global direct co-investment fund),
$73 million to various secondary transactions within Secondary
Overflow IV, and $45 million to Fund XII Micro Buyout (a US-focused
small buyout fund of funds). More information is available on page
46.
These commitments are in line with the Company's Strategic Asset
Allocation targets and reflect the Investment Manager's and Board's
current perspective on the most appropriate portfolio composition
required to optimise long-term NAV growth for shareholders.
Portfolio Cash Flows and Balance Sheet
HVPE was net portfolio cash flow positive in the 12 months to 31
January 2022, driven largely by elevated distributions during the
months of June, September, November, and December 2021.
In the 12 months to 31 January 2022, HVPE received a record (in
absolute terms) annual total of $835 million in cash distributions
(12 months to 31 January 2021: $290 million), while funding a
record capital call amount of $515 million into HarbourVest funds
(12 months to 31 January 2021: $431 million). This resulted in HVPE
receiving net proceeds of $320 million over the reporting
period.
Record monthly levels of distributions (in absolute terms) from
HarbourVest funds were seen in June ($131 million) and then quickly
surpassed in September ($132 million), reflecting consistently
strong exit activity. Over the year, proceeds were mostly driven
from HarbourVest primary funds (69%), followed by secondary funds
(18%).
As a result of the net positive cash inflows, HVPE's cash
balance increased from $98 million at 31 January 2021 to $284
million at 31 January 2022, while the Company also repaid its
remaining outstanding borrowing on the credit facility.
To further support HVPE's unfunded commitments as the Company
scales, a $100 million increase to the credit facility was
announced on 21 December 2021, bringing the total size of the
facility to $700 million at that date. The additional $100 million
is being provided by Credit Suisse, which increases its total
commitment to $400 million. Mitsubishi UFJ retained its current
commitment of $300 million. As at 31 January 2022, HVPE had the
full $700 million credit facility available. The latest cash
position is reported under Recent Events on page 64.
The largest HarbourVest fund capital calls and distributions
over the reporting period are set out in the tables below.
Top Five HarbourVest Fund Calls
HarbourVest Fund Name Vintage Year Description Called amount ($m)
=========================== ============= ============================================= ==================
Adelaide 2018 Global infrastructure and real assets fund $87
--------------------------- ------------- --------------------------------------------- ------------------
Fund XII Buyout 2021 US buyout fund of funds $65
--------------------------- ------------- --------------------------------------------- ------------------
Fund XII Venture 2021 US venture fund of funds $51
--------------------------- ------------- --------------------------------------------- ------------------
Fund X Buyout 2018 US buyout fund of funds $47
--------------------------- ------------- --------------------------------------------- ------------------
HIPEP VIII Partnership AIF 2017 International fund of funds $29
=========================== ============= ============================================= ==================
Top Five HarbourVest Fund Distributions
HarbourVest Fund Name Vintage Year Description Distributed amount ($m)
====================== ============= =================================== =======================
Fund X Buyout 2015 US buyout fund of funds $77
---------------------- ------------- ----------------------------------- -----------------------
Co-Investment IV AIF 2016 Global direct co-investment fund $60
---------------------- ------------- ----------------------------------- -----------------------
Fund X Venture 2015 US venture fund of funds $49
---------------------- ------------- ----------------------------------- -----------------------
Dover Street VIII 2012 Global secondary fund $44
---------------------- ------------- ----------------------------------- -----------------------
Fund IX Venture 2011 US venture fund of funds $42
====================== ============= =================================== =======================
HVPE has indirect exposure, on a look-through basis, to a pro
rata share of borrowing carried on the balance sheets of some of
the HarbourVest funds (referred to as HarbourVest fund-level
borrowing) in which HVPE is a LP. It is important to note that HVPE
has no additional liability for these borrowings beyond its
uncalled commitments to each fund. As at 31 January 2022, HVPE's
share of HarbourVest fund-level borrowing on a look-through basis
was $450 million, a net increase of $72 million from $378 million
at 31 January 2021. Expressed as a percentage of NAV, the figure
decreased from 13% to 11% over the 12-month period. In order to
calculate a look-through gearing figure, an investor should take
the fund-level borrowing of $450 million and factor in HVPE's net
cash/debt position at the Company level (net cash $284 million). As
at 31 January 2022, the resulting net total borrowing figure of
$166 million would translate to an approximate level of
look-through gearing of 4%. More detail on the HarbourVest
fund-level borrowing, and how we factor this into our balance sheet
management, can be found under Managing the Balance Sheet on page
16.
M&A Transactions and IPOs
During the 12 months ended 31 January 2022, there were a total
of 555 known M&A transactions and IPOs. This is more than
double the 270 seen in the 12 months to 31 January 2021. Last year
proved to be one of the strongest exit markets on record for the
industry(1) , driven by an open IPO window, and following a
disrupted 2020 market in which uncertainty caused by COVID-19 led
many GPs to suspend or delay exit processes. That said,
approximately 73% (404) of the 555 liquidity events in HVPE's
portfolio were trade sales or sponsor-to-sponsor transactions, with
the remaining 27% (151) being IPOs.
Over the period, the weighted average uplift to pre-transaction
carrying value for a large sample of transactions was 92%. This was
driven by IPOs from within the Venture and Growth Equity
portfolio.
The top five M&A transactions and IPOs (by contribution to
HVPE NAV per share) are listed below.
Top Five M&A transactions
(by contribution to HVPE NAV per share(2) )
Infinitas Learning $0.29
------------------- -----
Valeo Foods $0.20
------------------- -----
Rodenstock $0.15
------------------- -----
Aldevron $0.13
------------------- -----
Novotech $0.07
=================== =====
Top Five IPOs
(by contribution to HVPE NAV per share(2) )
Roblox $0.50
-------------- -----
Coinbase $0.42
-------------- -----
Allfunds Bank $0.20
-------------- -----
Monday.com $0.13
-------------- -----
UiPath $0.10
============== =====
Of HVPE's total 555 known M&A transactions and IPOs, 281, or
just over half, related to venture-backed companies. This figure is
representative of wider market trends as there were a considerable
number of venture-related exits in the first half of the year, with
the technology and healthcare sectors dominating this activity.
1 EY "PE Pulse", January 2022.
2 As measured since the announcement of the transaction or IPO filing.
Breakdown of Liquidity Events
Strategic Asset Allocation
The Company's SAA targets are reviewed annually and in November
2021, the HVPE Board approved a set of revisions to the Company's
geographical target weights. These were: an increase to Europe from
18% to 20%, an increase to Asia Pacific from 17% to 20%, and
removal of the Rest of World allocation (previously 5%). The
rationale for removing the Rest of World allocation was that
long-term historic returns had not compensated sufficiently for the
heightened risk and volatility observed in that part of the
portfolio. Secular growth trends in Asia and a growing range of
attractive investment opportunities drove a desire to increase
exposure to that region over the medium to long term, while recent
positive developments in the European private markets prompted a
partial reversal of our 2016 decision to reduce exposure to Europe.
All other targets remain unchanged. The next review is scheduled to
take place in November 2022.
Recent events
New Commitments Since 31 January 2022
Between 1 February 2022 and 26 May 2022, HVPE committed $510
million to the HarbourVest funds outlined below.
HarbourVest Fund Date Committed Commitment ($m)
============================================= ================= ===============
Fund XII Buyout March $250
--------------------------------------------- ----------------- ---------------
Fund XII Micro Buyout March $35
--------------------------------------------- ----------------- ---------------
Secondary Overflow Fund IV (one transaction) March $35
--------------------------------------------- ----------------- ---------------
Fund XII Venture AIF April $115
--------------------------------------------- ----------------- ---------------
2022 Global Fund April $75
============================================= ================= ===============
Total $510
================================================================ ===============
HVPE Estimated NAV at 30 April 2022
HVPE releases an estimated NAV on a monthly basis. These reports
are available on the Company's website, generally within 20
calendar days of the month-end.
On 19 May, HVPE published an estimated NAV per share at 30 April
2022 of $47.54 (GBP37.81), a decrease of $1.57 from the final 31
January 2022 NAV (US Generally Accepted Accounting Principles
("GAAP")) figure of $49.11. This latest NAV per share is based on a
valuation breakdown of: 10% as at 30 April 2022 (representing the
public companies in the portfolio) and 90% actual 31 December 2021.
Consistent with previous estimated NAV reports, valuations are also
adjusted for foreign exchange movements, cash flows, and any known
material events to 30 April 2022.
The Investment Pipeline of unfunded commitments increased from
$2.5 billion at 31 January 2022 to $2.8 billion at 30 April 2022,
based on the new commitments, capital funded, and taking foreign
exchange movements into account.
HVPE's cash and cash equivalents also increased from $284
million at 31 January 2022 to $295 million at 30 April 2022.
At the end of April, HVPE's credit facility of $700 million
remained undrawn. HVPE's look-through exposure to borrowing at the
HarbourVest fund level had increased by $62 million, from $450
million at 31 January 2022 to $512 million at 30 April 2022. The
latest balance sheet ratios can be found in the factsheet on the
HVPE website: www.hvpe.com.
Share Price Since 31 January 2022
Like most major public equity indices(1) , HVPE's share price
has declined since 31 January 2022, driven by the war in Ukraine,
rising interest rates, broader technology sell off and wider macro
concerns. While the closing price of GBP21.85 on 20 May 2022
represents a fall of 21% since the financial year end, it is worth
noting that this corresponds to an increase of 17% from the 31
January 2021 share price of GBP18.70.
The market capitalisation of the Company as at 20 May 2022 was
GBP1.7 billion and, as of the same date, HVPE was ranked 81st in
the FTSE 250.
1 Public market comparisons include: S&P 500, FTSE 250, Dow
Jones, Nasdaq, Stoxx50, Nikkei 225, and Hang Seng indices.
Market perspectives and outlook
Market Perspectives from HarbourVest Partners
Peter Wilson
Managing Director, HarbourVest
John Toomey
Managing Director, HarbourVest
As 2022 began, the aftershocks of COVID-19 were impacting
economies in now familiar ways: inflation, supply chain disruption,
and labour market pressures.
These downside pressures were balanced by positive factors too -
not least a belief that coordinated Central Bank action could take
the steam out of inflation, and that the reliable US consumer would
help sustain growth. Our sense is that these forces were broadly
balanced in the first part of the year - and indeed, through the
end of March, the S&P 500 and MSCI Europe were only down
roughly 5%(1) .
However, the lengthening war in Ukraine, the knock-on
implications for commodity and energy markets, combined with the
drumbeat of steadily rising inflation figures are making a
recession in the medium term more likely. We continue to monitor
these macro factors closely and consider their impact throughout
the balance of 2022 and beyond.
Note on Russia and Ukraine from HarbourVest Partners
"The ongoing conflict in Ukraine has brought immense human
suffering; simultaneously it is having a significant negative
impact on global markets that likely will be long lasting.
Over HarbourVest's 40 year history, it has witnessed multiple
periods of economic dislocation, including the 1991 Gulf War, the
1999/2000 technology bubble, and most recently, the Global
Financial Crisis and the COVID-19 pandemic. HarbourVest believes
this experience gives it an ability to recognise patterns that then
inform its portfolio construction choices going forward.
HarbourVest can confirm, for example, that it has no investment
exposure to Ukraine and negligible residual exposure to Russia -
less than 0.2% of HVPE's NAV(2) .
1 Data from Bloomberg, May 2022.
2 As at 31 January 2022. This includes companies based in the
country, according to information reported by the underlying
manager. This does not reflect companies that derive revenues from
these countries, nor those with a portion of their team or
operations in the region.
Outlook Across HarbourVest Strategies
Primary
Carolina Espinal
Managing Director, HarbourVest
Fundraising momentum and broadening GP offerings set to run into
2022.
"2021 saw the deepening of private markets globally, with strong
recovery following the pandemic's initial impacts and record levels
of performance. Even with market volatility in early 2022, investor
demand for private equity exposure remains high and 2022 looks set
to be a record fundraising year, which could lead to a paradigm
shift in the industry's scale. The opportunity set within private
equity is also broadening, with proven managers expanding fund
offerings to specific sectors or adjacent size opportunities,
giving LPs access to an ever-widening range of investment
opportunities. The main challenge for LP investors will be whether
their allocations and bandwidth can stretch to meet the wealth of
opportunity available.
"We have been operating in a high valuation environment for a
number of years now. The pandemic compounded the issue as
uncertainty drove a flight to quality, resilient assets. For
managers to continue to deliver strong returns in this environment,
we anticipate something of an arms race as managers at all levels
in the market enhance their value creation capabilities to
differentiate themselves in this competitive landscape, through
areas such as data integration, tech-enablement, and resource
efficiencies.
"Looking ahead, some of biggest areas of opportunity lie in the
next layer of innovation and digital penetration. We have already
seen sectors such as education and healthcare digitally transform
during the pandemic, and we expect this trend to continue across a
broader range of sectors including energy transition."
Secondary
David Atterbury
Managing Director, HarbourVest
Potential for volumes to reach a new record level in 2022 as
investors look for ways to maintain allocations to private
markets.
"2021 was a record setting year in the secondary market, with
total transaction volume across the industry eclipsing $130bn.
Looking ahead, we predict that GP-led transactions will continue to
drive opportunities and the move towards a greater penetration of
single assets is likely to stay.
"Given the myriad opportunities, we do foresee potential for a
liquidity crunch which plays to the strengths of the secondary
market. The strong performance across all parts of the private
equity market in 2021 saw many investors bump up against their
allocation limits well before the end of the year. This led to
several large secondary transactions as investors required dry
powder to commit to GPs who are returning to the market with new
fund offerings more quickly than in the past. Volatility in public
markets may exacerbate this problem through the 'denominator
effect', when a decline in overall portfolio valuations driven by
public equities has the effect of increasing an investor's relative
weighting to private equity. As a buyer, these dynamics represent
huge opportunities as investors look at alternative ways to free up
allocations with secondary liquidity being an important way of
achieving that through 2022.
"Lastly, the wave of consolidation and expansion across both the
buyside and advisory landscape over recent years has highlighted
the importance of finding the right investment partner. This is an
attractive segment of the market - something that has not gone
unnoticed with many choosing to expand their teams to chase the
opportunity. Investors should ultimately be careful in choosing
when, where and with whom their capital is deployed. While there
will be many great investment opportunities in 2022, there will
also be those looking to dress up and offload poor investments that
have stagnated through the pandemic or suffered in an inflationary
period. Investing with the right GP who can separate the wheat from
the chaff will be the key to success next year."
Direct
Craig MacDonald
Managing Director, HarbourVest
Portfolio diversity and downside risk protection to gain renewed
focus in 2022.
"2021 was a year of considerable activity particularly in the
tech and healthcare sectors, as investors sought resilient assets
which were well-placed to weather and even grow in the continued
pandemic environment. However, in line with the broader global
recovery, other sectors such as industrials and consumer started to
spring back and deal activity across sectors was recovering toward
pre-pandemic levels. As the move out of the pandemic was
complicated by events in the Ukraine and related impacts on
inflation and supply chains, the sectors have new challenges.
Nevertheless, the COVID-19 pandemic reinforced the importance of a
diverse portfolio to mitigate risk, whilst also capitalising on
opportunities those same risks create.
"Despite the general trend of recovery, companies will still
face challenges in 2022, particularly around inflation and supply
chains - challenges heightened by events in Ukraine. Private equity
as an ownership model is well-placed to handle both inflationary
pressures and supply chain issues, thanks to the industry's ability
to react quickly to the environment.
"Looking ahead, investors will need to be particularly focused
in their partnerships. Who they are working with, from a GP
perspective, will be crucial. Superior managers' abilities to
differentiate themselves from both public and private benchmarks
against the backdrop of a potential downturn in markets is key and
investors will want to be as selective as possible in their GP
relationships. This has always been the case but will gain renewed
focus as we move into 2022."
Infrastructure and Real Assets
Kevin Warn-Schindel
Managing Director, HarbourVest
Continued interest in infrastructure as investors seek inflation
protection.
"Over the long term, infrastructure and real assets investment
opportunities will be impacted by mega-trends related to policy,
demographics, technology, and increasingly sustainability. The
pandemic has strengthened these trends and we have been leaning
into them. Of note, 2021 was a year of considerable activity for
energy transition investments across a range of risk-return
profiles, spanning renewable energy, battery storage, and
electronic vehicle charging infrastructure. We expect private
infrastructure investment will continue to play a significant role
in organising the necessary capital to facilitate the transition of
the energy grid and increasing the capacity of new renewable power
generation. These infrastructure investments are critical to
meeting the continued projected growth in global power demand.
"As we look ahead to 2022, we expect investors will continue to
increase their exposure to infrastructure, by rotating out of bond
allocations and into inflation hedging assets. Rising inflation -
driven by excess monetary liquidity, excess fiscal stimulus, and by
supply and labour constraints - is a concern for many investors who
have inflation-linked liabilities or are worried about a decline in
purchasing power. Investors are using infrastructure allocation to
mitigate against these inflationary price pressures, as real assets
perform well in a high interest rate environment. Our expectation
is that investor appetite will continue to increase as institutions
seek out infrastructure for stable yield, downside protection, and
inflation mitigation."
ESG factors are in consideration across all HarbourVest
strategies. For more information, please turn to pages 38 to
43.
Board of Directors
Edmond ("Ed") Warner
Chair, Independent
Non-Executive Director, appointed August 2019
Key relevant skills:
-- Leadership skills
-- Investment strategist
-- Extensive financial services experience
Ed Warner has extensive financial services experience from years
spent in senior positions at several investment banks and financial
institutions, including IFX Group, Old Mutual Plc, NatWest Markets,
and Dresdner Kleinwort Benson. He has considerable Plc experience
and has chaired the boards at a range of prominent organisations.
He is also chair of the online derivatives exchange LMAX.
Prior chair roles include Air Partner Plc, the BlackRock Energy
and Resources Income Trust, Grant Thornton UK LLP, Standard Life
Private Equity Trust, and Panmure Gordon & Co.
Committees:
Chair of the Nomination Committee and Member of the Management
Engagement and Service Provider, Remuneration and Inside
Information Committees.
Anulika Ajufo
Independent Non-Executive Director, appointed May 2022
Key relevant skills:
-- Extensive experience in investment strategy development and execution
-- Experience with multiple investment structures
-- Strong background in ESG
Anulika manages a portfolio of investments across EMEA and
chairs the Board of Governors at University of East London.
Anulika has extensive investment experience and believes in
investing for good. Having worked at some of the leading financial
institutions -- Lehman Brothers and Goldman Sachs in investment
banking, and private equity with The Carlyle Group and Soros Fund,
Anulika has developed an impressive investment track record.
She has led the development of greenfield impact investment
structures in emerging markets. She has developed inclusive
investment strategies for development finance institutions (DFIs),
corporations, and foundations; of note, she co-led the design and
implementation of George Soros' $500 million commitment to
programmes and companies.
Anulika has a Master's (MEng) in Medical Engineering from Queen
Mary University of London and an MSc in Law and Finance from the
University of Oxford.
Committees:
Member of the Audit and Risk, Remuneration, Nomination, and
Management Engagement and Service Provider Committees
Francesca Barnes
Independent
Non-Executive Director, appointed April 2017
Key relevant skills:
-- Extensive private equity investment experience
-- Ten years' governance experience on public and private company boards
-- Risk management experience
Francesca Barnes is a Non-Executive Director of NatWest Holdings
Limited, and a number of NatWest Group's other ring-fenced bank
boards, as well as Capvis private equity. She is a member of the
University of Southampton council and recently stood down as Chair
of Trustees for Penny Brohn UK. Francesca spent 16 years at UBS AG.
For the latter seven of these she served as Global Head of Private
Equity, following on from senior positions in restructuring and
loan portfolio management. Prior to this, she spent 11 years with
Chase Manhattan UK and US, in roles spanning commodity finance,
financial institutions, and private equity.
Committees:
Chair of the Management Engagement and Service Provider
Committee and Member of the Audit and Risk, Remuneration and
Nomination Committees.
Following the AGM, Ms Barnes will take on the role of Senior
Independent Director and as such will become Chair of the
Remuneration Committee. Ms Barnes will stand down as Chair of the
MESPC but will remain a Member of that Committee.
Elizabeth ("Libby") Burne
Independent
Non-Executive Director, appointed March 2021
Key relevant skills:
-- Chartered certified accountant
-- Extensive audit and risk management experience
-- Over 20 years' experience of working with Guernsey regulated,
listed, and closed-ended investment structures
Libby Burne has spent her career working within the financial
services sector. She is a Non-Executive Director of Bluefield Solar
Income Fund Limited as well as a number of private venture capital,
real estate and Insurance structures. Prior to becoming a
Non-Executive Director Libby was an audit director at PwC in the
Channel Islands and, previously, PwC Australia where she led the
audits of investment vehicles listed on the London Stock Exchange
and Australian Stock Exchange as well as many private structures.
Libby is a Fellow of the Association of Chartered Certified
Accountants, holds a degree in Applied Accounting, and is a
Guernsey resident, as such bringing recent and relevant financial
and sector experience.
Committees:
Member of the Audit and Risk, Remuneration, Nomination, and
Management Engagement and Service Provider Committees.
Following the AGM, Ms Burne will take on the role of Chair of
the MESPC.
Carolina Espinal
Non-Executive Director, appointed July 2019
Key relevant skills:
-- 19 years' private equity investment experience
-- Responsibility for strategy and business development of
European and global primary businesses
-- Lead Director for ESG factors
Carolina Espinal joined HarbourVest in 2004 to focus on
partnership investments in Europe and other emerging markets and
became a Managing Director in 2015. Carolina focuses on managing
European venture capital and buyout partnership investments and has
collaborated with the secondary and co-investment groups on several
investment opportunities. As a HarbourVest executive she currently
serves on the advisory boards of funds managed by Abénex Capital,
ECI, Inflexion, and Advent International.
Her previous experience includes two years as a financial
analyst with the Merrill Lynch Energy and Power M&A team in
Houston.
Carolina graduated from Rice University with a BA in Managerial
Studies, Policy Studies, and Economics in 2000. She received an MSc
in Finance from the London Business School in 2003.
Committees:
None (as a HarbourVest executive)
Alan Hodson
Senior Independent Non-Executive Director, appointed April
2013
Key relevant skills:
-- Knowledge of listed equity markets
-- Experience on several investment company boards
-- Strong background in governance and risk management
Alan Hodson is Chairman of Charity Bank. Alan joined Rowe and
Pitman (subsequently SG Warburg, SBC, and UBS) in 1984 and worked
in a range of roles, all related to listed equity markets. He
became Global Head of Equities in April 2001 and was a member of
the Executive Committee of UBS Investment Bank and of the UBS AG
Group Managing Board. He retired from UBS in June 2005 and has
since held positions on a variety of commercial and charity
boards.
Due to his length of tenure, Mr Hodson will not be standing for
re-election at the AGM.
Committees:
Chair of the Remuneration Committee, Member of the Audit and
Risk, Nomination, and Management Engagement and Service Provider
Committees.
Steven Wilderspin
Independent Non-Executive Director, appointed May 2018
Key relevant skills:
-- Chartered accountant, qualified in audit
-- Extensive governance experience on public and private company boards
Steven Wilderspin has more than ten years' experience as a
Non-Executive Director on the boards of private equity partnerships
and listed investment companies.
Steven, a qualified Chartered Accountant, has provided
independent directorship services since 2007. He has served on a
number of private equity, property, and hedge fund boards as well
as commercial companies. Steven currently serves as the Chairman of
the risk committee of Blackstone Loan Financing Limited and
Chairman of the audit and risk committee of GCP Infrastructure
Investments Limited. In 2017 Steven stepped down from the Board of
3i Infrastructure Plc, where he was Chairman of the Audit and Risk
committee, after ten years' service. From 2001 until 2007, Steven
was a Director of fund administrator Maples Finance Jersey Limited,
where he was responsible for fund and securitisation structures.
Steven has recent and relevant financial and sector experience.
Committees:
Chair of the Audit and Risk Committee, and Member of the Inside
Information, Nomination, Remuneration and Management Engagement and
Service Provider Committees.
Peter Wilson
Non-Executive Director, appointed May 2013
Key relevant skills:
-- Member of HarbourVest's two-person Executive Management
Committee ("EMC"), including responsibility for HarbourVest's
corporate strategy
-- 25 years' private equity industry knowledge and experience
Peter Wilson joined HarbourVest's London team in 1996 and is one
of two members of the firm's Executive Management Committee, which
serves as HarbourVest's CEO.
He serves on the advisory committees for partnerships managed by
CVC Capital Partners, Holtzbrinck Ventures, and Index Venture
Management. Peter also served as Founding Chair of the Board of
Trustees of City Year UK Limited.
Prior to joining the firm, he spent three years working for the
European Bank for Reconstruction and Development, where he
originated and managed two regional venture capital funds in
Russia. Peter also spent two years at the Monitor Company, a
strategy consulting firm based in Cambridge, Massachusetts.
He received a BA (with honours) from McGill University in 1985
and an MBA from Harvard Business School in 1990. Peter speaks
German and French.
Committees:
None (as a HarbourVest executive)
Directors' report
Annual Report and Audited Consolidated Financial Statements
The Directors present their report and the Audited Consolidated
Financial Statements (the "Financial Statements" or "Accounts") for
the year ended 31 January 2022.
A description of important events and principal activities which
have occurred during the financial year and their impact on the
performance of the Company, as shown in the Financial Statements,
is provided in the Strategic Report, beginning with the Chair's
Statement on pages 4 to 7.
A description of the emerging and principal risks and
uncertainties facing the Company, together with an indication of
the Company's likely future development and the important events
that have occurred since the end of the financial year, is also
provided in the Strategic Report and referenced in the notes to the
Financial Statements. Combined, all sections in this document
constitute the "Annual Report".
Corporate Summary
The Company is a closed-ended investment company incorporated in
Guernsey on 18 October 2007 with an unlimited life. The Company
currently has one class of shares (the "Ordinary Shares"), and
these shares are admitted to trading on the Main Market of the
London Stock Exchange.
With effect from 10 December 2018, the Company introduced an
additional US dollar market quotation which operates alongside the
Company's existing sterling quotation, allowing shares to be traded
in either currency.
Investment Objective and Investment Policy
The Company's investment objective is to generate superior
shareholder returns through long-term capital appreciation by
investing primarily in a diversified portfolio of private equity
investments. The Company may also make investments in private
market assets other than private equity where it identifies
attractive opportunities.
The Company seeks to achieve its investment objective primarily
by investing in investment funds managed by HarbourVest, which
invests in or alongside third-party managed investment funds
("HarbourVest Funds"). HarbourVest Funds are broadly of three
types: (i) "Primary HarbourVest Funds", which make limited partner
commitments to underlying private market funds prior to final
closing; (ii) "Secondary HarbourVest Funds", which make purchases
of private market assets by acquiring positions in existing private
market funds or by acquiring portfolios of investments made by such
private market funds; and (iii) "Direct HarbourVest Funds", which
invest into operating companies, projects, or assets alongside
other investors.
In addition, the Company may, on an opportunistic basis, make
investments (generally at the same time and on substantially the
same terms) alongside HarbourVest Funds ("Co-investments") and in
closed-ended listed private equity funds not managed by HarbourVest
("Third-Party Funds"). Co-investments made by the Company may,
inter alia, include investments in transactions structured by other
HarbourVest vehicles including, but not limited to, commitments to
private market funds or operating companies in which other
HarbourVest funds have invested.
Cash at any time not held in such longer-term investments will,
pending such investment, be held in cash, cash equivalents, money
market instruments, government securities, asset-backed securities,
and other investment-grade securities and interests in any private
equity vehicle that is listed or traded on any securities exchange
("Temporary Investments").
The Company uses an over-commitment strategy in order to remain
as fully invested as possible. To achieve this objective, the
Company has undrawn capital commitments to HarbourVest Funds and
Co-investments which exceed its liquid funding resources but uses
its best endeavours to maintain capital resources which, together
with anticipated cash flows, will be sufficient to enable the
Company to satisfy such commitments as they are called.
Diversification and Investment Guidelines
The Company will, by investing in a range of HarbourVest Funds,
Co-investments, and Third-Party Funds, seek to achieve portfolio
diversification in terms of:
-- geography: providing exposure to assets in the US, Europe, Asia, and other markets;
-- stage of investment: providing exposure to investments at
different stages of development such as early stage, balanced and
late stage venture capital, small and middle-market businesses or
projects, large capitalisation investments, mezzanine investments,
and special situations such as restructuring of funds or distressed
debt;
-- strategy: providing exposure to primary, secondary, and direct co-investment strategies;
-- vintage year: providing exposure to investments made across many years; and
-- industry: with investments exposed, directly or indirectly,
to a large number of different companies across a broad array of
industries.
In addition, the Company will observe the following investment
restrictions:
-- With the exception, at any time, of not more than one
HarbourVest Fund or Co-investment to which up to 40% of the
Company's Gross Assets (see page 130 for the definition) may be
committed or in which up to 40% of the Company's Gross Assets may
be invested, no more than 20% of the Company's Gross Assets will be
invested in or committed at any time to a single HarbourVest Fund
or Co-investment.
-- No more than 10% of the Company's Gross Assets will be
invested (in aggregate) in Third-Party Funds.
-- The Investment Manager will use its reasonable endeavours to
ensure that no more than 20% of the Company's Gross Assets, at the
time of making the commitment, will be committed to or invested in,
directly or indirectly, whether by way of a Co-investment or
through a HarbourVest Fund, (a) any single ultimate underlying
investment, or (b) one or more collective investment undertakings
which may each invest more than 20% of the Company's Gross Assets
in other collective investment undertakings (ignoring, for these
purposes, appreciations, and depreciations in the value of assets,
fluctuations in exchange rates, and other circumstances affecting
every holder of the relevant asset).
-- Any commitment to a single Co-investment which exceeds 5% of
the Company's NAV (calculated at the time of making such
commitment) shall require prior Board approval, provided however
that no commitment shall be made to any single Co-investment which,
at the time of making such commitment, represents more than 10%
(or, in the case of a Co-investment that is an investment into an
entity which is not itself a collective investment undertaking (a
"Direct Investment"), 5% of the aggregate of: (a) the Company's NAV
at the time of the commitment; and (b) undrawn amounts available to
the Company under any credit facilities.
-- The Company will not, without the prior approval of the
Board, acquire any interest in any HarbourVest Fund from a third
party in a secondary transaction for a purchase price that:
(i) exceeds 5% of the Company's NAV; or
(ii) is greater than 105% of the most recently reported NAV of
such interest (adjusted for contributions made to and distributions
made by such HarbourVest Fund since such date).
Save for cash awaiting investment which may be invested in
Temporary Investments, the Company will invest only in HarbourVest
Funds (either by subscribing for an interest during the initial
offering period of the relevant fund or by acquiring such an
interest in a secondary transaction), in Co-investments or in
Third-party Funds.
Company's Right to Invest in HarbourVest Funds
Pursuant to contractual arrangements with HarbourVest, the
Company has the right to invest in each new HarbourVest Fund,
subject to the following conditions:
-- Unless the Board agrees otherwise, no capital commitment to
any HarbourVest Fund may, at the time of making the commitment,
represent more than 35% or less than 5% of the aggregate total
capital commitments to such HarbourVest Fund from all its
investors.
-- Unless HarbourVest agrees otherwise, the Company shall not
have a right to make an investment in, or a commitment to, any
HarbourVest Fund to which ten or fewer investors (investors who are
associates being treated as one investor for these purposes) make
commitments.
Leverage
The Company does not intend to have on its balance sheet
aggregate leverage outstanding at Company level for investment
purposes at any time in excess of 20% of the Company's NAV. The
Company may use additional borrowings for cash management purposes,
or in the event of a material downturn. These borrowings could be
for extended periods of time depending on market conditions.
Principal Risks and Uncertainties
The principal risks the Board has reviewed are disclosed on
pages 26 to 29 of the Strategic Report.
Results and Dividend
The results for the financial year ended 31 January 2022 are set
out in the Consolidated Statements of Operations within the
Financial Statements on page 100. In accordance with the investment
objective of the Company to generate superior shareholder returns
through long-term capital appreciation, the Directors did not
declare any dividends during the year under review and the
Directors do not recommend the payment of dividends as at the date
of this report.
Directors
The Directors as shown on pages 72 and 73 all held office
throughout the entire reporting period, except for Ms Burne who was
appointed with effect from 1 March 2021 and Ms Ajufo who was
appointed with effect from 19 May 2022. All Directors listed were
in place at the date of signature of this Annual Report. Ms Espinal
and Mr Wilson are Managing Directors of HarbourVest Partners (UK)
Limited, a subsidiary of HarbourVest Partners, LLC. All Directors,
other than Ms Espinal and Mr Wilson, are considered to be
independent. Mr Hodson is the Senior Independent Director. Further
details of the Board composition can be found on page 81.
Mr Hodson has been an independent Director of the Company since
April 2013, a period of just over nine years. In accordance with
the Board's Tenure Policy, Mr Hodson has therefore notified the
Company of his intention to stand down as a Director at the
upcoming AGM. Ms Barnes will be appointed as Senior Independent
Director in his place.
Save as disclosed in this Annual Report, the Company is not
aware of any other potential conflicts of interest between any duty
owed to it by any of the Directors and their respective private
interests.
Directors' Interests in Shares
31 January 2022 31 January 2021
================== =============== ===============
Francesca Barnes 4,200 4,200
------------------ --------------- ---------------
Libby Burne 786 -(1)
------------------ --------------- ---------------
Carolina Espinal 3,391(2) 1,696
------------------ --------------- ---------------
Alan Hodson 30,000 30,000
------------------ --------------- ---------------
Ed Warner 8,000 3,000
------------------ --------------- ---------------
Steven Wilderspin 1,300 1,300
------------------ --------------- ---------------
Peter Wilson 25,200(3) 25,000
================== =============== ===============
1 Ms Burne was appointed as a Director with effect from 1 March
2021 at which point she held 786 shares.
2 Of the total shares held, 2,391 shares were split equally (797
each) between Ms Espinal's three children, with Ms Espinal holding
1,000 shares.
3 Of the total shares held, 200 were held by Mr Wilson's father,
with Mr Wilson holding 25,000.
Ms Ajufo was appointed as a Director with effect from 19 May
2022. She does not own any shares in the Company.
Substantial Shareholders
The table that follows shows the interests of major shareholders
based on the best available information provided by the analysis of
the Company's share register, incorporating any disclosures
provided to the Company in accordance with Disclosure Guidance and
Transparency Rule 5 in the period under review and up to 5 May
2022.
% of Voting Rights % of Voting Rights
31 January 2022 5 May 2022
========================== ================== ==================
M&G 7.74 7.92
-------------------------- ------------------ ------------------
Quilter Cheviot 5.91 6.48
-------------------------- ------------------ ------------------
City of Edinburgh Council 5.55 5.46
-------------------------- ------------------ ------------------
Smith & Williamson <5.00(4) 5.35
-------------------------- ------------------ ------------------
Total 19.20 25.21
-------------------------- ------------------ ------------------
4 Please note that, at 31 January 2022, Smith & Williamson
was below the 5% of voting rights threshold to be classed as a
substantial shareholder.
Corporate Governance
The Board recognises the importance of sound corporate
governance and follows best practice requirements wherever
possible. The Company complies with the AIC Code published in
February 2019, which is endorsed by the Financial Reporting Council
("FRC"). A Statement of Compliance with the AIC Code is provided on
page 89 and further details about how our Corporate Governance
framework operates can be found throughout this Governance
Report.
Corporate Responsibility
The Board considers the ongoing interests of stakeholders and
investors through open and regular dialogue with the Investment
Manager. The Board receives regular updates outlining regulatory
and statutory developments, and responds as appropriate.
Approach to ESG
The Board recognises the critical importance of ESG
considerations to many investors. It acknowledges that ESG issues
can present both opportunities and threats to long-term investment
performance, and is committed to responsible and sustainable
investing. The Board also believes that HVPE will benefit from the
continued evolution of HarbourVest's ESG practices and
standards.
The Board is aware that as an investment company, its approach
to ESG matters is materially informed by the strategy of the
Investment Manager and accordingly the Board is committed to
ensuring that it has appointed an Investment Manager that applies
the highest standards of ESG practice, and has the skill and vision
to respond to ongoing developments. It is confident that in
HarbourVest it has such an Investment Manager.
The Board is reliant on the Investment Manager's screening
processes, controls, and priorities to address ESG matters within
the investment portfolio in both the selection and oversight of
investments. The Board believes that engagement with management of
investee companies and funds is an effective way of driving
meaningful change and takes considerable comfort from the extent of
the Investment Manager's activity in this area, which is described
on pages 38 to 43.
The Board receives regular updates from the Investment Manager
on the development and implementation of its ESG policies and
processes, and the Board will continue to monitor those closely.
These updates include information on the levels of engagement with
investee companies and ESG issues in respect of their monitoring
and selection of holdings in the Company's portfolio. This provides
a valuable opportunity for the Board to confirm and challenge the
Investment Manager to demonstrate that it is continuing to apply
the highest standards of ESG practice across its investments and
operations.
The Board recognises that the Investment Manager has been a
signatory to the UN Principles for Responsible Investment ("PRI")
since 2013, that it is committed to considering the potential
impact that its investment and operational decisions could have,
and that it encourages the GPs with which it invests to adopt the
PRI. With regard to environmental and climate disclosures, the
Investment Manager has started to report annually on its progress
through its ESG report
(https://viewpoints.harbourvest.com/2020-esg-report/cover/) in line
with the recommendations of the TCFD. The Board has noted that the
Investment Manager is a CarbonNeutral(R) company in accordance with
The CarbonNeutral Protocol, a leading framework for carbon
neutrality. The Investment Manager's offsetting programme delivers
finance to emission reduction projects, supporting the transition
to a low carbon economy. Finally, the Board also reviews the
Investment Manager's approach to promoting diversity, social
responsibility, and projects to combat social exclusion and enhance
opportunities.
The Board is committed to incorporating ESG oversight across the
Company's outsourced providers and within its own operations. Ms
Espinal has been designated as the lead HVPE Director responsible
for ESG matters. She helps to promote and facilitate closer
monitoring and further development in this area for the
Company.
The Company's oversight of outsourced providers has been
expanded to include questions and confirmations in respect of their
ESG policies as part of its annual review of providers.
As an investment company with no direct employees, the core of
the Company's ESG initiatives is derived from its oversight of its
service providers, most importantly the Investment Manager.
However, the Board also considers the application of ESG standards
to its own activities as an Investment Company, including the
following:
-- Carbon Footprint: The Board initiated a project to calculate
its own carbon footprint and achieved CarbonNeutral status on 1
July 2021.
-- Relations with Stakeholders: The Board will extend its
interaction with its shareholders and other stakeholders to include
a consideration of ESG matters. The Board has noted the governance
and environmental benefits of broader shareholder participation,
facilitated by virtual shareholder events, and is continuing to
offer remote access where possible.
-- Diversity and Inclusion: The Board's approach to diversity
and inclusion is set out on page 82 and is reflected in the
activities of the Nomination Committee. Four of the seven Directors
who are being proposed for re-election at the AGM are female,
which, at 57%, is a figure well above the level recommended in the
Hampton-Alexander Review. While the Board does not have a diversity
target in mind, given the range of factors that this term
necessarily covers, two of the seven Directors being proposed for
re-election at the AGM are from an ethnic minority background. The
Board will continue to consider all factors, including diversity,
in its recruitment processes.
-- Position on Modern Slavery: The Board recognises the
importance of the issues which the UK Modern Slavery Act 2015 is
designed to address. It has expanded its oversight of outsourced
providers, including the Investment Manager, to include questions
relating to their policies to combat Modern Slavery.
Significant Votes Against Policy
The Directors have adopted a policy whereby, should 20% or more
of votes be cast against a recommendation made by the Board for a
resolution, the Company shall:
-- explain, when announcing voting results, what actions it
intends to take to consult shareholders in order to understand the
reasons behind the result;
-- no later than six months after the shareholder meeting
publish an update on the views received from shareholders and
actions taken; and
-- provide a final summary in the Annual Report and, if
applicable, in the explanatory notes to resolutions at the next
shareholder meeting state what impact the feedback has had on the
decisions the Board has taken and any actions or resolutions
proposed.
No significant votes were received against any Board-recommended
resolution at the 2021 AGM.
Anti-bribery Policy
The Directors have undertaken to operate the business in an
honest and ethical manner, and accordingly take a zero-tolerance
approach to bribery and corruption, including the facilitation of
corporate tax evasion. The key components of this approach are
implemented as follows:
-- The Board is committed to acting professionally, fairly, and
with integrity in all its business dealings and relationships.
-- The Company implements and enforces effective procedures to counter bribery.
-- The Company requires all its service providers and advisers
to adopt equivalent or similar principles.
Disclosures Required Under LR 9.8.4R
The Financial Conduct Authority's Listing Rule 9.8.4R requires
that the Company includes certain information relating to
arrangements made between a controlling shareholder and the
Company, waivers of Directors' fees, and long-term incentive
schemes in force. The Directors confirm that there are no
disclosures to be made in this regard.
Investment Manager
A description of how the Company has invested its assets,
including a quantitative analysis, may be found on pages 1 to 69,
with further information disclosed in the Notes to the Financial
Statements on pages 107 to 113. The Board has considered the
appointment of the Investment Manager and, in the opinion of the
Directors, the continuing appointment of the Investment Manager on
the terms agreed is in the interests of its shareholders as a
whole.
In considering this appointment, the Board has reviewed the past
performance of the Investment Manager, the engagement of the
Investment Manager with shareholders and the Board, and the
strategic plan presented to the Board by the Investment
Manager.
The Investment Manager is HarbourVest Advisers L.P., and the
principal contents of the Investment Management Agreement ("IMA")
are as follows:
-- to manage the assets of the Company (subject always to
control and supervision by the Board, and subject both to the
investment policy of the Company and any restrictions contained in
any prospectuses published by the Company);
-- to assist the Company with shareholder liaison;
-- to monitor compliance with the Investment Policy on a regular basis; and
-- to nominate up to two Board representatives for election by
shareholders at the Company's AGM.
The Investment Manager is not entitled to any direct
remuneration (save in respect of expenses incurred in the
performance of its duties) from the Company, instead deriving its
revenue from the management fees and carried interest payable by
the Company on its investments in underlying HarbourVest Funds. The
IMA, which was amended and restated on 30 July 2019, may be
terminated by either party by giving 12 months' notice. In the
event of termination within ten years and three months of the date
of the listing on the Main Market, the Company would be required to
pay a contribution, which would have been $3.1 million at 31
January 2022 and $2.9 million as at 30 April 2022, as reimbursement
of the Investment Manager's remaining unamortised IPO costs. In
addition, the Company would be required to pay a fee to the
Investment Manager equal to the aggregate of the management fees
for the underlying investments payable over the course of the
12-month period preceding the effective date of such
termination.
Delegation of Responsibilities
Under the IMA, the Board has delegated to the Investment Manager
substantial authority for carrying out the day-to-day management
and operations of the Company, including making specific investment
decisions, subject at all times to the control of, and review by,
the Board. In particular, the IMA provides that the Board and the
Investment Manager shall agree a strategy mandate which sets out a
rolling five-year plan for the Company. The Board is responsible
for the overall leadership of the Company and the setting of its
values and standards. This includes setting the investment and
business strategy, and ongoing review of the Company's investment
objective and investment policy, along with recommending to
shareholders the approval of alterations thereto. Matters reserved
for the Board include areas such as the Board and Committee
membership, including the review and authorisation of any conflicts
of interest arising. Areas such as approval of the raising of new
capital, major financing facilities, and approval of contracts that
are not in the ordinary course of business are also reserved for
the Board, together with any governance and regulatory
requirements. Any changes in relation to the capital structure of
the Company, including the allotment and issuance of shares, are
the responsibility of the Board.
Share Repurchase Programme
At its meeting in November 2021 and having consulted with the
Company's advisors, taking into account shareholder sentiment, the
Board adopted a policy that sets out the criteria that need to be
met in order for the Board to consider implementing a buyback
programme. These criteria include the extent and duration of any
discount of the Company's share price to NAV per share, as well as
requiring that the Investment Manager should have good reason to
believe that a share buyback at the prevailing discount to NAV
would generate superior risk-adjusted returns to an incremental new
commitment to a HarbourVest fund or co-investment. These criteria
have not been met.
At the 2021 AGM, held on 21 July 2021, the Directors sought and
were granted authority to repurchase 11,971,386 Ordinary Shares
(being equal to 14.99% of the aggregate number of Ordinary Shares
in issue at the date of the AGM) for cancellation, or to be held as
treasury shares. This authority, which has not been used, will
expire at the upcoming AGM. The Directors intend to seek annual
renewal of this authority from shareholders.
Introduction to the Going Concern and Viability Statement
Since the inception of HVPE, the Directors have relied upon
model scenarios to manage the Company's liquidity requirements and
balance sheet risk more generally. This modelling also allows the
Directors to evaluate whether the Company is a Going Concern, as
well as assess its Viability. While the modelling process has been
refined over the years, it has provided a consistent approach
through which the Directors have been able to make these
assessments, as demonstrated through the Global Financial Crisis
("GFC") and the more recent COVID-19 pandemic. The Investment
Manager typically updates the model scenarios annually in November,
projecting NAV growth and cash flow for the subsequent five-year
period. For the purpose of assessing the Going Concern and
Viability Statements from the signing of this report over the
respective assessment periods, the Investment Manager utilised the
four model scenarios (Extreme Downside, Low, Base and Optimistic)
presented to the Board in November 2021, which extend over the next
five-year period through to 31 December 2026, and reflect the
current economic environment. These were updated to reflect actual
cash flows through to December 2021.
Going Concern
After due consideration, the Directors are satisfied that it is
appropriate to continue to adopt the going concern basis in
preparing the Financial Statements. This has been concluded
following a review of the model scenarios presented by the
Investment Manager compared to actual cash flows to date, making
due enquiries of the Investment Manager, and being mindful of the
closed-ended structure of the Company with no fixed life, as well
as the nature of its investments. On this basis, the Directors
consider that the Company is able to continue in operation at least
through 30 June 2023. The Board monitors and manages its ongoing
commitments via the criteria set out on pages 74 and 75 and reviews
reports from the Investment Manager detailing ongoing commitments
and the Investment Pipeline.
Furthermore, the Board, as part of its regular review of the
Consolidated Statement of Assets and Liabilities and debt position,
regularly considers the model scenario outputs that are based on a
look-through to the anticipated underlying fund and portfolio cash
flows.
Viability Statement
Pursuant to the UK Corporate Governance Code 2018 and the AIC
Code, the Board has assessed the viability of the Company over the
period from 31 January 2022 to 31 December 2026, which aligns with
the timing of the Investment Manager's current five-year model
scenarios. Whilst the Board has no reason to believe that the
Company will not be viable over a longer period, it has chosen this
period as it aligns with the Board's strategic horizon and is
within the term of the Company's credit facility.
The Company's investment objective is to generate superior
shareholder returns through long-term capital appreciation by
investing primarily in a diversified portfolio of private equity
investments. The majority of the Company's investments are in
HarbourVest managed private equity fund of funds, which have fund
lives of 10 to 14 years.
While the Company's investment lifecycle spans a time period of
ten years or more, the Board currently focuses on a time period
extending through to 31 December 2026 when considering the
strategic planning of the Company. The strategic planning centres
on building a portfolio of long-term assets through capital
allocation into a set of rolling five-year calendar year-end
portfolio construction targets defined by investment stage,
geography, and strategy. This rolling five-year process allows the
Board a medium-term view of potential growth, projected cash flow,
and potential future commitments under various economic
scenarios.
As part of its strategic planning, the Board considered model
scenarios as explained above, assuming varying degrees of impact on
the portfolio. The Board primarily focused on two scenarios, the
Base and Extreme Downside, the latter of which is a worst-case
scenario that assumes large NAV declines and a material reduction
in realisations from the underlying investment portfolio. Based on
a review of the existing liquidity resources of the Company and the
model scenarios noted above, the Board concluded that the Company's
cash balance and available credit facility would be sufficient to
cover capital requirements under even the Extreme Downside
scenario. The results of this modelling showed that the Company
would be viable in the face of these scenarios occurring over the
period ending 31 December 2026.
Statement of Directors' Responsibilities in Respect of the
Financial Statements
The Directors are required to prepare Financial Statements for
each financial year which give a true and fair view of the assets,
liabilities, financial position, and profit or loss of the Company
in accordance with US GAAP at the end of the financial year, and of
the gain or loss for that period. In preparing those Financial
Statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed subject to any material departures disclosed and explained
in the Financial Statements; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements have been properly prepared in accordance
with The Companies (Guernsey) Law, 2008. They are also responsible
for safeguarding the assets of the Company, and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for ensuring that the Annual
Report and Financial Statements include the information required by
the Listing Rules and the Disclosure Guidance and Transparency
Rules of the Financial Conduct Authority (together "the Rules").
They are also responsible for ensuring that the Company complies
with the provisions of the Rules which, with regard to corporate
governance, require the Company to disclose how it has applied the
principles, and complied with the provisions, of the corporate
governance code applicable to the Company.
Disclosure of Information to the Auditor
So far as each of the Directors is aware, there is no relevant
audit information of which the Company's auditor is unaware, and
each has taken all the steps they ought to have taken as a Director
to make themselves aware of any relevant audit information and to
establish that the Company's auditor is aware of that
information.
Responsibility Statement
The Board of Directors, as identified on pages 72 and 73,
jointly and severally confirm that, to the best of their
knowledge:
-- the Financial Statements, prepared in accordance with US
GAAP, give a true and fair view of the assets, liabilities,
financial position, and profits of the Company and its
undertakings;
-- this report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
-- the Annual Report and Financial Statements taken as a whole
are fair, balanced, and understandable and provide the information
necessary for shareholders to assess the Company and its
undertakings' position, performance, business model, and
strategy.
Signed on behalf of the Board by:
Ed Warner
Chair
26 May 2022
Board structure and committees
The activities of the Company are overseen by the Board, which
comprises a majority of independent Directors. The Board meets at
least four times a year, and between these scheduled meetings there
is regular contact between Directors, the Investment Manager, the
Administrator, and the Company Secretary, including a formal
strategy meeting and Board update calls.
The Board aims to run the Company in a manner which is
consistent with its belief in honesty, transparency, and
accountability. This is reflected in the way in which Board
meetings are conducted, during which the Chair promotes and
facilitates a culture of open and constructive debate on each
topic, encouraging input from all Directors to ensure a wide
exchange of views. The Directors believe that good governance means
managing the affairs of the Company well and engaging effectively
with investors. The Board is committed to maintaining high
standards of financial reporting, transparency, and business
integrity.
Board of Directors
Audit and Risk Inside Information Nomination Management Remuneration
Committee Committee Committee Engagement Committee
and Service
Provider Committee
--------------------- --------------------- ------------------- --------------------- --------------------
Role Role Role Role Role
To ensure that To consider To agree the To review the To determine
the Company any developments method and Company's Investment the policy
maintains high which may require oversee the Manager and for Directors'
standards of an immediate process for service providers remuneration,
risk management, announcement the selection to ensure that set the
integrity, by virtue of and recruitment a good value remuneration
financial reporting, being of new Directors service of of the Chair
and internal price-sensitive and to nominate satisfactory of the Board,
controls. information. candidates quality is and make
for approval delivered, recommendations
by the Board. and to manage to the Board
the appointment for Directors'
process of remuneration
new or replacement levels.
service providers.
--------------------- --------------------- ------------------- --------------------- --------------------
Members Members Members Members Members
Chaired by: Chaired by: Chaired by: Chaired by: Chaired by:
Steven Wilderspin Ed Warner Ed Warner Francesca Alan Hodson
Francesca Barnes Steven Wilderspin Francesca Barnes Barnes Francesca Barnes
Alan Hodson Alan Hodson Alan Hodson Libby Burne
Libby Burne Libby Burne Libby Burne Ed Warner
Steven Wilderspin Ed Warner Steven Wilderspin
Steven Wilderspin
--------------------- --------------------- ------------------- --------------------- --------------------
Anulika Ajufo was appointed post financial year-end, on 19 May
2022 and sits on the following committees: Audit and Risk
Committee, Nomination Committee, Management Engagement and Service
Provider Committee, and Remuneration Committee.
Board and Committee Meetings with Director Attendance
The table below sets out the Directors' attendance at the Board
and Committee meetings held during the financial year ended 31
January 2022:
Management
Engagement
Scheduled Inside and Service
Board and Audit and Information Provider Nomination Remuneration
Board Strategy Risk Committee Committee Committee Committee Committee
Director Meetings Meetings Meetings Meetings Meetings Meeting
================= =============== =============== ============ ============ ========== ============
Francesca Barnes 9 of 9 8 of 8 n/a 2 of 2 2 of 2 1 of 1
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Libby Burne(1) 8 of 9 7 of 8 n/a 2 of 2 1 of 2 1 of 1
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Carolina Espinal 7 of 9 n/a n/a n/a n/a n/a
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Alan Hodson 9 of 9 8 of 8 n/a 2 of 2 2 of 2 1 of 1
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Andrew Moore(2) 4 of 9 3 of 8 n/a n/a 1 of 2 n/a
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Ed Warner 9 of 9 n/a 2 of 2 2 of 2 2 of 2 1 of 1
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Steven Wilderspin 9 of 9 8 of 8 2 of 2 2 of 2 2 of 2 1 of 1
----------------- --------------- --------------- ------------ ------------ ---------- ------------
Peter Wilson 7 of 9 n/a n/a n/a n/a n/a
================= =============== =============== ============ ============ ========== ============
1 Libby Burne was appointed to the Board on 1 March 2021 and so
was only eligible to attend 8 meetings.
2 Andrew Moore retired at the AGM in July 2021 and thus was only eligible to attend 4 meetings .
Note Anulika Ajufo was appointed on 19 May 2022 and therefore is
not included in the table above.
The Directors are kept fully informed of investment and
financial controls and other matters that are relevant to the
business of the Company. Such information is brought to the
attention of the Board by the Investment Manager, the
Administrator, and the Company Secretary in their regular reports
to the Board. The Directors also have access where necessary, in
the furtherance of their duties, to professional advice at the
expense of the Company. Further details of the Board Committees can
be found on page 80 and their terms of reference are available on
the Company's website:
www.hvpe.com/shareholders/corporate-governance.
All Directors received notice of the meetings, the agenda, and
supporting documents and were able to comment on the matters to be
raised at the proposed meeting. During each meeting, the Chair
promoted and facilitated open, constructive debate on each topic,
encouraging input from all Directors. As well as the formal
scheduled strategy meeting, the Board also received detailed
information from the Investment Manager via update calls with
particular reference to the impact on the Company of the pandemic
and other external developments. In addition to the above meetings,
ad-hoc Board and Committee meetings can be convened at short notice
and, as they only require a quorum of two Directors, there is a
possibility of lower attendance than for the scheduled meetings. If
any Director is unable to attend a meeting, they receive the papers
and have the opportunity to discuss them with the Chair. During the
financial year, there were three ad-hoc Board meetings with a
quorum at each.
At each scheduled Board meeting, amongst other items, the
Directors review and discuss the Investment Manager's report,
HVPE's financial position, drivers of performance, how HVPE has
performed, the commitment plan, and the corporate broking report
(which includes an update on the Company's peer group). Marketing
and investor relations are covered in detail at two Board meetings,
and at a higher level at the remaining meetings.
Responsibilities
The Board has adopted formal responsibilities for the Chair and
the Senior Independent Director, as well as a schedule of matters
reserved for the Board. All of these documents are available on the
Company's website:
https://www.hvpe.com/shareholders/corporate-governance.
Board Composition
Together, the members of the Board possess a balance of skills,
experience, and length of service, which the Directors believe is
appropriate. Succession planning remains an ongoing process,
designed to bring effective and smooth transition between Director
appointments and to avoid undue disruption. This ensures that the
Board is well-balanced through the appointment of new Directors
with the necessary skills and experience. The Board's careful
consideration of its composition and the ongoing refreshment
process led to the addition of Anulika Ajufo in May 2022. Further
details on the selection and appointment process can be found in
the Nomination Committee report on page 86.
All Directors are subject to annual re-election by shareholders.
When a new Director is appointed to the Board, they participate in
a structured induction process. Accordingly, the Board actively
engaged with the Investment Manager and Company Secretary to ensure
that Anulika Ajufo was given a detailed induction process
comprising of a series of meetings with the Chair of the Board and
Chair of the Audit and Risk Committee, key individuals within the
Investment Manager, and other service providers. Directors must be
able to demonstrate commitment to the Company, including in terms
of time. Therefore, if a Director wishes to undertake additional
external appointments, approval is sought from the Chair in order
to confirm that the Director will be able to continue to dedicate
sufficient time to carry out their duties as a Director of the
Company, in addition to assessing any potential conflicts of
interest and independence issues.
Tenure Policy
When considering its composition, the Board is strongly
committed to striking the correct balance between the benefits of
continuity, experience, and knowledge and those that come from the
introduction of Directors with diversity of perspectives and
skills. The Board has adopted a Tenure Policy confirming its
intention that each independent Director will retire at the AGM
immediately following the completion of their ninth year on the
Board.
It is acknowledged that there could be unusual circumstances in
which a short extension of that time period could be appropriate.
In that event, a comprehensive explanation of the circumstances
would be provided to stakeholders.
As representatives of the Investment Manager, Carolina Espinal,
who was appointed to the Board in July 2019, and Peter Wilson, who
was appointed in May 2013, are outside the scope of this policy.
The independent Directors believe their contributions to the Board
offer considerable value to shareholders.
Board and Committees Evaluation
The Board undertakes a formal annual evaluation of its
performance. This includes the Chair carrying out an individual
review with each Director of their performance and contribution,
and the Senior Independent Director leading an annual evaluation of
the performance of the Chair.
An externally facilitated Board evaluation occurs every three
years and the Board engaged Board Alpha to conduct the evaluation
due in 2022. Their report is complete and has been delivered to the
Board. Board Alpha raised no substantive issues but recommended a
number of actions to be taken, which the Board will implement
during the current financial year. Board Alpha has conducted
previous Board evaluations for the Company but otherwise has no
connections to the Company or its Directors.
Policy on Diversity and Inclusion
The Board and Nomination Committee actively consider the
diversity of the Board when considering future appointments. The
Board exceeds the Hampton-Alexander Review target for 33% female
representation on FTSE 350 company boards. The Company has no
employees. The Board has also achieved the level of ethnic
diversity targeted by the Parker Review, with two of its seven
Directors seeking re-election at the AGM being from an ethnic
minority background.
The Board also recognises that diversity includes racial,
socio-economic, and other factors such as physical ability, and
that different backgrounds and experiences can bring real value to
the Company in terms of decision-making. The Board does not have
any specific diversity targets in mind, given the range of factors
that this term necessarily covers. While its main priority will
always be to appoint the most appropriate candidate for any role,
the benefits of diversity are nevertheless a significant
consideration in all recruitment.
Audit and Risk Committee
About the Committee
The Audit and Risk Committee members are outlined on page 80. Ms
Barnes, Mr Hodson, and Mr Moore (who served until 21 July 2021)
each held senior banking roles for a number of years, as described
in their biographies. Ms Burne (who served from 1 March 2021) is a
former auditor with 20 years' experience. Mr Wilderspin is a
qualified Chartered Accountant and has over 15 years' experience as
an Executive and Non-Executive Director on a number of private and
listed fund boards as well as commercial companies. Ms Ajufo became
a member of this Committee on 19 May 2022. Members of the Committee
are deemed by the Board to have recent and relevant financial and
sector experience.
The Audit and Risk Committee is responsible for the review of
the Company's accounting policies, periodic Financial Statements,
and auditor engagement. The Committee is also responsible for
making appropriate recommendations to the Board, including that the
Financial Statements are fair, balanced, and understandable, and
ensuring that the Company complies to the best of its ability with
applicable laws and regulations, and adheres to the tenet of
generally accepted codes of conduct. The Committee is also
responsible for overseeing the Company's risk management framework
and regulatory compliance.
All of the Company's management and administration functions are
delegated to independent third parties or the Investment Manager
and it is therefore felt that it would not be practical or
cost-effective for the Company to have its own internal audit
facility. This matter is reviewed annually. The Audit and Risk
Committee does have the power to commission third-party assurance
work as it sees fit, but did not do so in the year under
review.
Activities of the Committee
Audit and Risk Committee Meetings
In the financial year ended 31 January 2022, the Audit and Risk
Committee met eight times. The section "Board and Committee
Meetings with Director Attendance" on page 81 summarises attendance
at those meetings, during which the Committee considered the
following matters:
Auditor Tenure and Effectiveness
The Audit and Risk Committee reviewed the effectiveness of the
external audit process during the year, including audit quality,
objectivity (level of challenge and professional scepticism), and
independence. This included discussions with the Company's auditor
(Ernst & Young LLP), Investment Manager, and Company Secretary
to review how well the previous year's audit had gone. The main
conclusion from this review was that the audit process had been
robust and efficient. The Committee concluded that Ernst &
Young LLP's appointment as the Company's auditor should be
continued.
The Company's auditor has been engaged by the Company since 2007
and was re-engaged following a competitive tender process in May
2017. The partner responsible for the audit, David Moore, stepped
down after the completion of the audit of the prior year's
Financial Statements and has been replaced by Richard Le Tissier.
The Committee thanked Mr Moore for his time as audit partner. The
Company's auditor performed the audit of the Company's Financial
Statements, prepared in accordance with applicable law, US GAAP,
and audited under both relevant US Generally Accepted Auditing
Standards ("US GAAS") and International Standards on Auditing (UK).
The audit approach remained substantially unchanged relative to the
prior year.
Auditor Independence
The Audit and Risk Committee understands the importance of
auditor independence and during the year it reviewed the
independence and objectivity of the Company's auditor. The Audit
and Risk Committee received a report from the external auditor
describing its independence, controls, and current practices to
safeguard and maintain auditor independence. Other than fees paid
for conducting a review of the Interim Financial Statements, there
were no other non-audit fees paid to the auditor by the Company.
The Committee has previously adopted a non-audit services policy
that voluntarily complied with the Revised Ethical Standard 2019
issued by the UK FRC which determines those services that the
auditor is prohibited from providing to the Company and those
services that the auditor may conduct. This policy was revised
during the year to reflect the fact that the applicable provisions
are now mandatory for the Company due to the adoption of new Crown
Dependency audit rules and guidance. The new policy now includes a
cap on the cost of any non-audit services provided by the auditor
at 70% of the average of the previous three years' audit fees.
In all cases the Audit and Risk Committee reviews the potential
engagement of the auditor in advance to ensure that the auditor is
the most appropriate party to deliver the proposed services, and to
put in place safeguards, where appropriate, to manage any threats
to auditor independence.
Terms of Engagement
The Audit and Risk Committee reviewed the audit scope and fee
proposal set out by the auditor in its audit planning. The auditor
requested a substantial increase in fees for 2022 for a number of
reasons, including: an increase in its cost base in a competitive
market for talent; an increase in regulatory requirements; and
growth in the number of underlying funds in which the Company
invests. This was discussed by the Committee at length which also
noted general audit market fee pressure resulting from the
operational and financial separation of audit and consulting
businesses driven by regulatory requirements. The Committee agreed
certain mitigating measures to improve the efficiency of the audit
and the auditor confirmed that it would continue to evaluate its
approach which may include a more control-based approach at a
future date. The Committee recommended to the Board the total
negotiated fee for audit and interim review work of GBP268,000 for
2022, a 26% increase on the fees for 2021.
Internal Controls
The internal control systems (including those relating to cyber
security) are designed to meet the Company's particular needs and
the risks to which it is exposed. Accordingly, the internal control
systems are designed to manage rather than eliminate the risk of
failure to achieve business objectives and by their nature can only
provide reasonable and not absolute assurance against misstatement
and loss. The Company places reliance on the control environment of
its service providers, including its independent Administrator and
the Investment Manager. In order to satisfy itself that the
controls in place at the Investment Manager are adequate, the Audit
and Risk Committee has reviewed the Private Equity Fund
Administration Report on Controls Placed in Operation and Tests of
Operating Effectiveness ("Type II SOC I Report") for the period
from 1 October 2020 to 30 September 2021 (a bridging letter covers
the period 1 October 2021 to 31 January 2022), detailing the
controls environment in place at the Investment Manager. The
Committee has also reviewed ISAE 3402 Reports on Fund
Administration, Global and Local Custody Services, Securities
Lending Services, and Listed Derivatives Clearing Services for the
period 1 October 2020 to 30 September 2021 detailing the controls
environment in place at the Administrator and Company Secretary. In
both of these reports there were minor findings, but the Committee
is satisfied that the identified weaknesses were not material to
the affairs of the Company, and that the respective service
providers had taken action to improve controls in the identified
areas. In addition, during the year, the Management Engagement and
Service Provider Committee conducted a detailed review of the
performance of the Company's service providers,
including the Investment Manager and Administrator.
The Investment Manager's Type II SOC I Report describes the
internal controls in the HarbourVest Accounting group, which is
responsible for maintaining the Company's accounting records and
the production of the accounts contained in the Company's Financial
Statements. The main features of the controls are: clearly
documented valuation policies; detailed review of financial
reporting from underlying limited partnerships and investee
companies; detailed reconciliation of capital accounts in
underlying limited partnerships; monthly reconciliation of bank
accounts; and a multi-layered review of financial reporting to
ensure compliance with accounting standards and other reporting
obligations.
Risk Management
The Audit and Risk Committee reviewed the Company's risk
management framework during the year, including the ongoing impact
of COVID-19 on the Company and confirmed it was satisfied that it
was appropriate for the Company's requirements. Further details of
the principal risks and uncertainties facing the Company are given
on pages 26 to 29. This is in accordance with relevant best
practice as detailed in the FRC's guidance on Risk Management,
Internal Control, and Related Financial and Business Reporting.
During the year, the Committee clarified the relative
responsibilities regarding risk between the Committee and the
Board. The Audit and Risk Committee is responsible for the overall
risk framework, for mapping each risk through the framework, and
for conducting specific risk reviews, while the Board is
responsible for setting risk appetite, identifying and assessing
risks in terms of potential impact and likelihood, and considering
emerging and topical risks.
Financial Risks
The Company is funded from equity balances, comprising issued
Ordinary Share capital, as detailed in Note 1 to the Financial
Statements, and retained earnings. The Company has access to
borrowings pursuant to the credit facility of up to $700 million.
As at 26 May 2022, the credit facility remained undrawn. Although
the Company's currency exposure is currently not hedged, the
Company's stance on hedging is kept under review by the Audit and
Risk Committee.
The Investment Manager and the Directors ensure that all
investment activity is performed in accordance with the investment
guidelines. The Company's investment activities expose it to
various types of risks that are associated with the financial
instruments and markets in which it invests. Risk is inherent in
the Company's activities and it is managed through a process of
ongoing identification, measurement, and monitoring. The financial
risks to which the Company is exposed include market risk,
liquidity risk, and cash flow risk.
Regulatory Compliance
The Audit and Risk Committee has engaged with the
Administrator's compliance team to ensure that the Company fulfils
its regulatory obligations. A Compliance Monitoring Plan is in
place and is regularly reviewed by the Committee.
Audited Financial Statements and Significant Reporting
Matters
As part of the 31 January 2022 year-end audit, the Audit and
Risk Committee reviewed and discussed the most relevant issues for
the Company, most notably the risk of misstatement or manipulation
of the valuation of its investments in underlying HarbourVest
funds, the ongoing impact of COVID-19, and of the invasion of
Ukraine by Russia after the year-end, specifically with regard to
the Board's statements on going concern and viability.
The Audit and Risk Committee remains satisfied that the
valuation techniques used are accurate and appropriate for the
Company's investments and consistent with the requirements of US
GAAP. The Audit and Risk Committee ensures that the Board is kept
regularly informed of relevant updates or changes to US GAAP that
impact the Company, including but not limited to valuation
principles.
During the year the Audit and Risk Committee kept the risks
associated with the pandemic and the measures adopted by
HarbourVest Partners and other service providers under review, to
ensure continuity of service to the Company. The Committee also
reviewed all of the Company's risks through the lens of COVID-19.
It recommended changes to the Company's risk matrix that are
reflected in the "Principal Risks and Uncertainties" section on
pages 26 and 29.
Fair, balanced, and understandable
As a result of the work performed, the Audit and Risk Committee
has concluded that the Audited Financial Statements for the year
ended 31 January 2022 are fair, balanced, and understandable, and
provide the information necessary for shareholders to assess the
Company's position and performance, business model, and strategy.
It has reported on these findings to the Board.
Corporate Governance
The Audit and Risk Committee continues to monitor the Board's
assessment of the Company's compliance with the AIC Code of
Corporate Governance for Investment Companies (the 2019
edition).
Governance and Effectiveness
The Committee conducted a review of its activities against its
constitution and terms of reference in respect of the year under
review and concluded that all requisite activities had been
undertaken. Minor amendments to the terms of reference were
proposed and approved.
Other Matters
During the year the Committee conducted a "deep dive" review of
the Company's structure and tax position. This will now be an
annual exercise.
In presenting this report, I have set out for the Company's
shareholders the key areas on which the Audit and Risk Committee
focuses. If any shareholders would like any further information
about how the Audit and Risk Committee operates and its review
process, I, or any of the other members of the Audit and Risk
Committee, would be pleased to meet them to discuss this.
Steven Wilderspin
Chair of the Audit and Risk Committee
26 May 2022
Nomination Committee and Management Engagement and Service
Provider Committee
Nomination Committee
About the Committee
The Nomination Committee was established on 24 November 2015 and
is chaired by the Chair of the Company. Its members are outlined on
page 80.
There was one scheduled meeting held during the year. All
members attended the meeting held. The mandate of the Nomination
Committee is to consider issues related to the identification and
appointment of Directors to the Board.
Activities of the Committee
Changes to Board Composition
In accordance with the approach to succession planning outlined
below, Anulika Ajufo was appointed as a Director with effect from
19 May 2022 and will stand for election by shareholders at the 2022
AGM.
Approach to Succession Planning
To help facilitate an orderly succession process, the Nomination
Committee considered the results of the Board's last review of its
composition requirements, designed to ensure that the Board
demonstrated an appropriate balance of skills, knowledge,
experience, and diversity. Following the appointment of Libby Burne
with effect from 1 March 2021, the Committee implemented the next
stage of the Board refreshment and prepared a role profile for a
new independent Director, engaging a third-party recruitment firm,
Odgers Berndston, to assist it in the search. The Committee
reviewed a long list of candidates and, following a detailed
evaluation, selected suitable candidates for first round interviews
and proposed a sub-set of these for interview by the entire Board.
In May 2022, the Committee made a formal recommendation to the
Board that Anulika Ajufo be appointed as a Director. The Board
agreed with this recommendation and Anulika Ajufo was appointed
with effect from 19 May 2022.
Odgers Berndston has no connections to the Company or its
Directors.
Governance and Effectiveness
During the year, the Nomination Committee conducted a review of
its activities against its constitution and terms of reference in
respect of the year under review and concluded that it had
satisfactorily complied with all of its terms of reference.
Management Engagement and Service Provider Committee
About the Committee
The MESPC was established on 24 November 2015 and is currently
chaired by Ms Barnes. The members are outlined on page 80. The
other Directors of the Company may attend by invitation of the
Committee.
The MESPC held two meetings in the year under review and all
members of the Committee attended the meetings.
Activities of the Committee
In the course of the year under review, the MESPC conducted a
review of the Company's service providers to ensure the safe and
accurate management and administration of the Company's affairs and
business under terms which were competitive and reasonable for the
shareholders.
Investment Manager Review
Due to continuing travel restrictions imposed by COVID-19, the
annual Investment Manager review was undertaken virtually, in July
2021, rather than in person. As part of this review, the Board
received presentations from the investment committee, as well as
various operational teams and the senior management of the
Investment Manager regarding investment strategy, ESG processes,
and other matters relating to the Company's affairs. Following this
review, the Board discussed its conclusions with the Investment
Manager. The Board and MESPC Committee are satisfied with the
performance of the Investment Manager with respect to investment
returns and the overall level of service provided to the Company.
Subject to the continued easing of travel restrictions, it is
anticipated that the Board as a whole will undertake visits to the
Investment Manager's offices in Boston and London during the next
financial year. In accordance with its terms of reference, the
MESPC carries out a formal review of the Investment Management
Agreement every three years and following that review will
recommend any changes to the Board for consideration. The next
review is due to take place during 2022.
MESPC Review
The MESPC met in November 2021 and conducted a detailed review
of the performance of all key service providers to the Company for
the year to January 2022 against the following criteria:
-- scope of service;
-- key personnel;
-- key results achieved for the Company;
-- fees charged to the Company;
-- breaches and errors in the year under review;
-- ESG policies and initiatives;
-- anti-slavery policies;
-- anti-bribery controls;
-- cyber security and IT controls environment; and
-- General Data Protection Regulation ("GDPR") compliance.
Governance and Effectiveness
In November 2021, the MESPC conducted a review of its activities
against its constitution and terms of reference in respect of the
year under review and concluded that it had satisfactorily complied
with all of its terms of reference.
Remuneration Committee and Inside Information Committee
Remuneration Committee
About the Committee
The Remuneration Committee was established on 23 March 2021 and
is chaired by the Senior Independent Director of the Company,
currently Mr Hodson. The members are outlined on page 80. The other
Directors of the Company may attend by invitation of the
Committee.
The Remuneration Committee has delegated responsibility for
determining the policy for Directors' remuneration and setting the
remuneration of the Chair of the Board. The Committee also makes
recommendations to the Board for the Directors' remuneration levels
which shall be determined in accordance with the Company's Articles
of Association. Remuneration will not include performance-related
elements.
There was one scheduled meeting held during the year. All
members attended the meeting held. The Committee approved
incremental increases in the fees paid to the independent Directors
as well as small additional fees to the Senior Independent Director
and the Chairs of Committees of the Board, to take effect from 1
February 2022. It was confirmed that non-Independent Directors do
not receive any remuneration.
Inside Information Committee
About the Committee
The Committee was formed on 12 July 2016 to consider information
which may need to be made public in order for the Company to comply
with its obligations under the UK Market Abuse Regulation ("UK
MAR"). It met twice during the year and issued two flash NAV per
share updates as a result of the meetings.
Directors' remuneration report
An ordinary resolution for the approval of this Directors'
Remuneration Report will be put to shareholders at the forthcoming
AGM to be held on 20 July 2022.
There are no long-term incentive schemes provided by the Company
and no performance fees are paid to Directors. Directors affiliated
to HarbourVest do not receive any fees.
No Director has a service contract with the Company; however,
each Director is appointed by a letter of appointment which sets
out the terms of the appointment.
Directors are remunerated in the form of fees, payable quarterly
in arrears to the Director personally. The table below details the
fees paid to each Director of the Company for the years ended 31
January 2021 and 31 January 2022. The Company's Articles limit the
aggregate fees payable to Directors to a maximum of GBP550,000 per
annum. Following the recommendation of the Remuneration Committee,
the Board approved increases in the fees paid to the Independent
Directors to take effect from 1 February 2022. The rationale for
this change was that it represented two years' incremental
increases to reflect the time commitment required given the
complexity of the Company. In reaching this recommendation, the
Committee carried out a review of the marketplace by reference to a
number of external remuneration studies.
Under the Company's Articles, Directors are entitled to
additional ad-hoc remuneration for project work outside of the
scope of their ordinary duties. No such payments were made in the
year ended 31 January 2022.
Fees Paid for Fees Paid for
the 12 Months the 12 Months
Director Role ended 31 January Ended 31 January
2022 2021
----------------- --------------------------- ----------------- -----------------
Francesca Barnes Independent Director GBP54,000 GBP54,000
----------------- --------------------------- ----------------- -----------------
Libby Burne Independent Director GBP45,150 n/a(1)
----------------- --------------------------- ----------------- -----------------
Carolina Espinal Director Nil Nil
----------------- --------------------------- ----------------- -----------------
Alan Hodson Independent Director GBP54,000 GBP54,000
----------------- --------------------------- ----------------- -----------------
Andrew Moore Independent Director GBP30,082(2) GBP54,000
----------------- --------------------------- ----------------- -----------------
Ed Warner Chair, Independent Director GBP100,000 GBP75,127(3)
----------------- --------------------------- ----------------- -----------------
Steven Wilderspin Audit and Risk Committee GBP64,000 GBP64,000
Chair
----------------- --------------------------- ----------------- -----------------
Peter Wilson Director Nil Nil
----------------- --------------------------- ----------------- -----------------
1 Ms Burne was appointed with effect from 1 March 2021
2 Mr Moore retired from the Board on 22 July 2021
3 Mr Warner was appointed Chair of the Board of Directors on 22 July 2020
Revised fees
for
the year to
Role 31 Jan 2023
========================================================= ============
Chair, Independent Director GBP107,000
--------------------------------------------------------- ------------
Audit and Risk Committee Chair GBP68,500
--------------------------------------------------------- ------------
Independent Director GBP57,000
--------------------------------------------------------- ------------
Additional fee payable to the Senior Independent Director
and the Chair of the MESPC GBP3,000
========================================================= ============
Ed Warner Steven Wilderspin
Chair Chair of the Audit and Risk Committee
26 May 2022
Statement of Compliance with the AIC Code of Corporate
Governance
The Directors place a large degree of importance on ensuring
that high standards of corporate governance are maintained and aim
to comply to the greatest extent possible with the provisions of
the AIC Code published in February 2019.
The Board has considered the principles and provisions of the
AIC Code. The AIC Code addresses all the principles and provisions
set out in the 2018 UK Corporate Governance Code (the "UK Code"),
as well as setting out additional provisions on issues that are of
specific relevance to the Company. The AIC Code has been endorsed
by the Financial Reporting Council ("FRC") and the Guernsey
Financial Services Commission ("GFSC"). By reporting against the
AIC Code, the Company is meeting its obligations under the UK Code,
the 2011 GFSC Finance Sector Code of Corporate Governance, and the
associated disclosure requirements set out under paragraph 9.8.6R
of the Financial Conduct Authority's ("FCA's") Listing Rules. The
Board considers that reporting against the principles and
provisions of the AIC Code provides more relevant information to
stakeholders. The AIC Code is available on the AIC website:
www.theaic.co.uk.
The Company complied with all the principles and provisions of
the AIC Code during the year ended 31 January 2022 except for a
difference relating to the duties of the Nomination Committee.
Details of this difference, which constitutes an ongoing exception
to one of the principles of the AIC Code, are set out below:
The Duties of the Nomination Committee
As set out on page 86, the Board has established a Nomination
Committee, but it has chosen to limit its remit to focus purely on
the identification and nomination of Board candidates to fill
Independent Director Board vacancies as and when they arise. Other
matters relating to the structure, size, and composition of the
Board, and plans in respect of tenure and succession for
Independent Directors form part of the matters reserved for the
entire Board. The Directors believe that their deliberations in
relation to these matters benefit from the input from all the
Directors, including those appointed by HarbourVest.
Set out below is where stakeholders can find further information
within the Annual Report about how the Company has complied with
the various principles and provisions of the AIC Code.
1. Board Leadership and Purpose
Purpose On page 1
---------------------- ------------------
Strategy On pages 74 and 75
---------------------- ------------------
Values and culture On page 80
---------------------- ------------------
Shareholder engagement On pages 22 to 25
---------------------- ------------------
Stakeholder engagement On pages 22 to 25
====================== ==================
2. Division of responsibilities
Director independence On page 75
------------------------------- --------------------------------------------
Board meetings On page 81
------------------------------- --------------------------------------------
Relations with Investment Investment Manager on page 22 and Investment
Manager Manager's report on pages 34 to 37
------------------------------- --------------------------------------------
Management Engagement Committee On page 86
=============================== ============================================
3. Composition, Succession, and Evaluation
Nomination Committee On page 86
------------------------- ------------------------------------------
Director re-election On pages 81 and 82
------------------------- ------------------------------------------
Use of an external search
agency Approach to Succession Planning on page 86
------------------------- ------------------------------------------
Board evaluation Board and Committees Evaluation on page 82
========================= ==========================================
4. Audit, Risk, and Internal Control
Audit and Risk Committee On pages 83 to 85
---------------------------- -----------------
Emerging and principal risks On pages 26 to 29
---------------------------- -----------------
Risk management and internal
control systems On page 84
---------------------------- -----------------
Going concern statement On page 78
---------------------------- -----------------
Viability statement On page 79
============================ =================
5. Remuneration
Directors' remuneration report On page 88
============================== ==========
Independent Auditor's Report
to the Members of HarbourVest Global Private Equity Limited
Opinion
We have audited the Financial Statements (the "Financial
Statements") of HarbourVest Global Private Equity Limited (the
"Company") and its subsidiaries (together the "Group") for the year
ended 31 January 2022, which comprise the Consolidated Statements
of Assets and Liabilities, the Consolidated Statements of
Operations, the Consolidated Statements of Changes in Net Assets,
the Consolidated Statements of Cash Flows, the Consolidated
Schedule of Investments, and the related Notes 1 to 11, including a
summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and United States Generally Accepted Accounting Principles ("US
GAAP").
In our opinion, the Financial Statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 January 2022 and of its profit for the year then
ended;
-- have been properly prepared in accordance with US GAAP; and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities 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.
Independence
We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements, including the UK 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 the FRC's Ethical Standard
were not provided to the Company and we remain independent of the
Company in conducting the audit.
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:
-- We discussed with the Directors their assessment of going
concern, which included four scenario analysis models, including
the 'Base Case' and 'Extreme Downside' scenarios, the 'Base Case'
being considered by the Directors to be the most likely
scenario;
-- We ascertained that the going concern assessment covered a
period up until 30 June 2023 from the date of approval of the
Financial Statements;
-- We reviewed the arithmetical accuracy of the 'Base Case' and
'Extreme Downside' scenario models;
-- For the 'Base Case' scenario, we reviewed the working capital
documentation which supports the Directors' assessment of going
concern;
-- We considered the estimation uncertainty of the prior year's
most likely scenario by comparing it to the Group's actual
performance to date, discussed the material movements with the
Board and the Investment Manager, and obtained the required
supporting documentation;
-- For the 'Extreme Downside' scenario, we challenged the
sensitivities and assumptions used in the forecast through reverse
stress testing to understand how severe the downside scenario would
have to be to result in the elimination of liquidity headroom or a
covenant breach;
-- We held discussions with the Audit and Risk Committee and
Investment Manager to determine whether, in their opinion, there is
any material uncertainty regarding the Company's ability to pay
liabilities and commitments as they fall due. Through these
discussions we considered and challenged the options available to
the Company if it were in a stressed scenario. These options
included but were not limited to the use of credit facilities and
sales in the secondary market;
-- We assessed whether the commitments made to underlying
investments cast significant doubt over the going concern status of
the Group and compared the historical calls made by underlying
investments as a % of the total commitments made, including a
discussion with the Investment Manager regarding the possibility
for uncalled commitments to be called;
-- We confirmed available bank facility balances to understand
the potential impact of the leverage in the underlying funds;
-- We recalculated the forecast debt covenants on external loans
to validate compliance within the going concern period;
-- We considered whether the Directors' assessment of going
concern as included in the Annual Report is appropriate and
consistent with the disclosure in the Viability Statement; and
-- We evaluated the disclosures made in the Annual Report and
Consolidated Financial Statements regarding going concern to
ascertain that they are in accordance with US GAAP and have
complied with, or explained reasons for non-compliance, with all
the AIC Code of Corporate Governance provisions.
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
Group's ability to continue as a going concern over a period from
the date of approval of the Financial Statements up until 30 June
2023.
In relation to the Group'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. However, because not all future events or
conditions can be predicted, this statement is not a guarantee as
to the Company's ability to continue as a going concern.
Overview of Our Audit Approach
Key audit matters Risk of misstatement or manipulation of the valuation of the Group's investments in the underlying
Primary or Secondary HarbourVest funds, together the "HarbourVest investment funds".
================= ==================================================================================================
Materiality Overall materiality of $78.4m which represents 2% of Net Assets.
================= ==================================================================================================
An Overview of the Scope of Our Audit
Tailoring the Scope
Our assessment of audit risk, our evaluation of materiality, and
our allocation of performance materiality determine our audit scope
for the Company. This enables us to form an opinion on the
Financial Statements. We take into account size, risk profile, the
organisation of the Company, and effectiveness of controls,
including controls and changes in the business environment, when
assessing the level of work to be performed.
The audit was led from Guernsey and utilised audit team members
from the Boston office of Ernst & Young LLP in the US. We
operated as an integrated audit team across the two jurisdictions,
and we performed audit procedures and responded to the risk
identified as described below.
The Group comprises the Company and its five wholly owned
subsidiaries as explained in Note 2 to the Financial Statements.
The Company, each subsidiary, and the consolidation are subject to
full scope audit procedures. Other than the investments which the
Company holds directly, the subsidiaries own the investments, which
are set out in the Consolidated Schedule of Investments, and on
which we performed our work on valuation.
Climate Change
The Company has explained climate-related risks in the
"Purposeful growth (ESG)" section which forms part of the "Other
Information", rather than the audited Financial Statements. Our
procedures on these disclosures therefore consisted solely of
considering whether these disclosures are materially inconsistent
with the Company's Financial Statements, or our knowledge obtained
in the course of the audit, or otherwise appear to be materially
misstated.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, 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. These matters included 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 our opinion
thereon, and we do not provide a separate opinion on these
matters.
Risk Our Response to the Risk Key Observations
Communicated
to the Audit
and Risk Committee
------------------ ----------------------------------------------------------------------------- -------------------
Misstatement or Our response comprised the performance We reported
manipulation of the following procedures: to the Audit
of the valuation * Confirmed and documented our understanding of the and Risk Committee
of the Group's Group's processes, controls, and methodologies for that we did
investments valuing investments held by the Group in the not identify
in the underlying HarbourVest investment funds, including the use of any instances
Primary or the practical expedient as set out in Accounting of the use
Secondary Standard Codification (ASC) Topic 820 Fair Value of inappropriate
HarbourVest funds, Measurement by performing our walkthrough processes methodologies
together the and evaluating the implementation and design and that the
"HarbourVest effectiveness of controls; valuation
investment funds" of the Group's
($3,633 million; investments
2021: $2,889 * We also utilised the System and Organisation Controls in the HarbourVest
million). 1 Report for Private Equity Fund Administration investment
Report on Controls Placed in Operation and Tests of funds were
Refer to the Operating Effectiveness of HarbourVest Partner LLC to not materially
Accounting confirm our understanding of the production on the misstated.
policies and Note NAVs of the HarbourVest investment funds;
4 of the Financial
Statements.
* Agreed 100% by value of the individual net asset
There is a risk values of each HarbourVest investment fund to its
that underlying audited NAV in the corresponding Financial
the valuation of Statements as at 31 December 2021 which, prior to
the Group's adjustments, formed the basis for the Group's
investments carrying amount as at 31 January 2022; and
at 31 January
2022,
which comprise * We obtained a schedule of all adjustments made to
92.6% those audited NAV between 1 January 2022 and 31
(2021: 100.6%) of January 2022, and:
net assets is
materially
misstated. * Verified contributions and distributions made to/from
the HarbourVest investment funds to supporting bank
The valuation of statements;
the investments is
the principal
driver * Recalculated a sample of accrued management fees in
of the Group's net the HarbourVest investment funds based on the terms
asset value of the signed management agreements and agreed terms
("NAV") to relevant supporting documents;
and hence
incorrect
valuations would * Verified foreign exchange rate changes to independent
have a significant third-party sources, and their application to any
impact on the NAV HarbourVest investment funds denominated in foreign
and performance of currencies;
the Group.
* Considered whether there were changes in market
conditions during the period 1 January 2022 to 31
January 2022 that could have had a material impact
when applied to the key sensitive inputs to the
valuations of the direct investments of the
HarbourVest investment funds;
* Considered whether there were changes in market
conditions during the period 1 January 2022 to 31
January 2022 that could have had a material impact
when applied to the marketable securities held by the
HarbourVest investment funds;
* Independently sourced third-party prices and verified
fair value changes on publicly traded securities held
in the HarbourVest investment funds;
* Verified that there were no post-closing adjustments
since 31 December 2021 and that there were no
material changes to the NAV subsequent to the
HarbourVest investment funds' finalised financial
reporting process.
------------------ ----------------------------------------------------------------------------- -------------------
Our Application of Materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements on
the audit, and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Group to be $78.4 million
(2021: $57.5 million), which is 2% (2021: 2%) of net assets. We
believe that net assets provides us with a basis for determining
the nature, timing, and extent of risk assessment procedures,
identifying and assessing the risk of material misstatement, and
determining the nature, timing, and extent of further audit
procedures. We used the net assets as a basis for determining
planning materiality because the Group's primary performance
measures for internal and external reporting are based on net
assets as we consider it is the measure most relevant to the
stakeholders of the Group.
We calculated materiality during the planning stage of the
audit, and during the course of our audit we reassessed initial
materiality based on 31 January 2022 net assets.
Performance Materiality
The application of materiality at the individual account or
balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our
assessment of the company's overall control environment, our
judgement was that performance materiality was 75% (2021: 75%) of
our planning materiality, namely $58.8m (2021: $43.1m). Our
objective in adopting this approach was to ensure that total
uncorrected and undetected audit differences in the Financial
Statements did not exceed our materiality level. We have set
performance materiality at this percentage given that there is no
history of material misstatements, the likelihood of misstatement
in the future is deemed low, we have a strong understanding of the
control environment, there were no changes in circumstances (such
as a change in accounting personnel or events out of the normal
course of business) and it is not a close monitored audit, and
hence we consider 75% to be reasonable.
Reporting Threshold
An amount below which identified misstatements are considered as
being clearly trivial.
We agreed with the Audit and Risk Committee that we would report
to them all uncorrected audit differences in excess of $3.9m (2021:
$2.9m), which is set at 5% of planning materiality, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our
opinion.
Other Information
The other information comprises the information included in the
Annual Report, other than the Financial Statements and our
auditor's report thereon. The Directors are responsible for the
other information contained within the Annual Report.
Our opinion on the Financial Statements does not cover the other
information and, except to the extent otherwise explicitly stated
in this 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 the other
information, we are required to report that fact.
We have nothing to report in this regard.
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 (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
-- proper accounting records have not been kept by the Company; or
-- the Financial Statements are not in agreement with the
Company's accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors' statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group's compliance with the
provisions of the UK Corporate Governance Code specified for our
review by the Listing Rules.
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:
-- Directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on page 78;
-- Directors' explanation as to its assessment of the Company's
prospects, the period this assessment covers, and why the period is
appropriate set out on page 78;
-- Directors' statement on whether it has a reasonable
expectation that the Group will be able to continue in operation
and meets its liabilities set out on page 78;
-- Directors' statement on fair, balanced, and understandable set out on page 85;
-- Board's confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on pages 26
to 29;
-- The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems set
out on page 84; and
-- The section describing the work of the Audit and Risk Committee set out on page 83.
Responsibilities of Directors
As explained more fully in the Statement of Directors'
Responsibilities set out on page 79, 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.
Explanation as to what extent the audit was considered 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 irregularities,
including fraud. 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 or intentional misrepresentations, or through
collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance of
the Company and its management.
-- We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and determined that
the most significant are:
-- Financial Conduct Authority ("FCA") Listing Rules;
-- Disclosure Guidance and Transparency Rules ("DTR") of the FCA;
-- The 2018 UK Corporate Governance Code;
-- The 2019 AIC Code of Corporate Governance;
-- The Companies (Guernsey) Law, 2008, as amended.
-- We understood how the Group is complying with those frameworks by:
-- Discussing the processes and procedures used by the
Directors, the Investment Manager, the Company Secretary, and
Administrator to ensure compliance with the relevant
frameworks;
-- Inspecting the Group's relevant documented policies, processes, and procedures; and
-- Reviewing internal reports that evidence compliance testing.
-- We assessed the susceptibility of the Group's Financial
Statements to material misstatement, including how fraud might
occur by:
-- Undertaking the audit procedures set out in the "Key Audit
Matters" section above, and reading the Financial Statements to
check that the disclosures are consistent with the relevant
regulatory requirements;
-- Obtaining an understanding of entity-level controls and
considering the influence of the control environment;
-- Obtaining management's assessment of fraud risks including an
understanding of the nature, extent, and frequency of such
assessment documented in the HVPE Risk Review;
-- Making inquiries with those charged with governance as to how
they exercise oversight of management's processes for identifying
and responding to fraud risks and the controls established by
management to mitigate specifically those risks the entity has
identified, or that otherwise help to prevent, deter, and detect
fraud;
-- Making inquiries with management and those charged with
governance regarding how they identify related parties including
circumstances related to the existence of a related party with
dominant influence; and
-- Making inquiries with management and those charged with
governance regarding their knowledge of any actual or suspected
fraud or allegations of fraudulent financial reporting affecting
the Group.
-- Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations. Our
procedures involved:
-- Having discussions with those charged with governance, the
Investment Manager, the Company Secretary, and Administrator to
obtain an understanding of how instances of non-compliance with
relevant laws and regulations are identified;
-- Reviewing Board minutes and internal compliance reporting;
-- Inspecting correspondence with regulators;
-- Reviewing the Financial Statements to check that they comply
with the reporting requirements of the Group; and
-- Obtaining relevant written representations from the Board of Directors.
A further description of our responsibilities for the audit of
the Financial Statements is located on the Financial Reporting
Council's website at
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor's report.
Other Matters We are Required to Address
-- Following the recommendation from the Audit and Risk
Committee, we were appointed by the Company on 2 November 2007 to
audit the Financial Statements for the year ending 31 January 2008
and subsequent financial periods.
The period of total uninterrupted engagement including previous
renewals and reappointments is 15 years, covering the years ended
31 January 2008 to 31 January 2022.
-- The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of Our Report
This report is made solely to the Company's members, as a body,
in accordance with Section 262 of The Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Notes:
1 The maintenance and integrity of the Company's website is the
sole responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditor accepts no responsibility for any changes
that may have occurred to the Financial Statements since they were
initially presented on the website.
2 Legislation in Guernsey governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.
97
Richard Geoffrey Le Tissier,
For and on behalf of Ernst & Young LLP
Guernsey
26 May 2022
Notes:
1. The maintenance and integrity of the Company's website is the
sole responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditor accepts no responsibility for any changes
that may have occurred to the Financial Statements since they were
initially presented on the website.
2. Legislation in Guernsey governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.
Report of Independent Auditors
To the Directors of HarbourVest Global Private Equity
Limited
Opinion
We have audited the Consolidated Financial Statements of
HarbourVest Global Private Equity Limited (the "Company") and its
subsidiaries (together the "Group"), which comprise the
Consolidated Statements of Assets and Liabilities, including the
Consolidated Schedules of Investments, as of January 31 2022 and
2021, and the related Consolidated Statements of Operations, the
Consolidated Statements of Changes in Net Assets, the Consolidated
Statements of Cash Flows for the years then ended, and the related
Notes 1 to 11 (collectively referred to as the "Financial
Statements").
In our opinion, the accompanying Financial Statements present
fairly, in all material respects, the financial position of the
Group at January 31, 2022 and 2021, and the results of its
operations, changes in its net assets, and its cash flows for the
year then ended in accordance with accounting principles generally
accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America (GAAS). 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 are required to be
independent of the Group and to meet our other ethical
responsibilities in accordance with the relevant ethical
requirements relating to our audit. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair
presentation of the Financial Statements in accordance with
accounting principles generally accepted in the United States of
America, and for the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation
of Financial Statements that are free of material misstatement,
whether due to fraud or error.
In preparing the Financial Statements, management is required to
evaluate whether there are conditions or events, considered in the
aggregate, that raise substantial doubt about the Group's ability
to continue as a going concern for one year after the date that the
Financial Statements are available to be issued.
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 of 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 absolute assurance and
therefore is not a guarantee that an audit conducted in accordance
with GAAS will always detect a material misstatement when it
exists. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial
likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the
Financial Statements.
In performing an audit in accordance with GAAS, we:
-- Exercise professional judgement and maintain professional scepticism throughout the audit.
-- Identify and assess the risks of material misstatement of the
Financial Statements, whether due to fraud or error, and design and
perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts
and disclosures in the Financial Statements.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control. Accordingly,
no such opinion is expressed.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by
management, as well as evaluate the overall presentation of the
Financial Statements.
-- Conclude whether, in our judgement, there are conditions or
events, considered in the aggregate, that raise substantial doubt
about the Group's ability to continue as a going concern for a
reasonable period of time.
We are required to communicate with those charged with
governance regarding, among other matters, the planned scope and
timing of the audit, significant audit findings, and certain
internal control-related matters that we identified during the
audit.
Other Information
Management is responsible for the other information. The other
information comprises the Strategic Report, Governance, and Other
Information but does not include the Financial Statements and our
auditor's report thereon. Our opinion on the Financial Statements
does not cover the other information, and we do not express an
opinion or any form of assurance thereon.
In connection with our audit of the Financial Statements, our
responsibility is to read the other information and consider
whether a material inconsistency exists between the other
information and the Financial Statements, or the other information
otherwise appears to be materially misstated. If, based on the work
performed, we conclude that an uncorrected material misstatement of
the other information exists, we are required to describe it in our
report.
Ernst & Young LLP
Guernsey, Channel Islands.
26 May 2022
Financial Statements
Consolidated Statements of Assets and Liabilities
For the Years Ended 31 January 2022 and 2021
2022 2021
In US Dollars (in thousands*) (in thousands*)
------------------------------------------------------------------------------ ---------------- ----------------
Assets
Investments (Note 4) 3,633,361 2,889,178
Cash and equivalents 284,023 98,416
Other assets 7,865 7,062
------------------------------------------------------------------------------ ---------------- ----------------
Total assets 3,925,249 2,994,656
Liabilities
Accounts payable and accrued expenses 3,280 2,072
Accounts payable to HarbourVest Advisers L.P. (Note 9) 36 73
Amounts due under the credit facility (Note 6) - 120,000
------------------------------------------------------------------------------ ---------------- ----------------
Total liabilities 3,316 122,145
Commitments (Note 5)
Net assets $3,921,933 $2,872,511
Net assets consist of
Shares, unlimited shares authorised, 79,862,486 shares issued and outstanding
at 31 January 2022 and 2021, no par value 3,921,933 2,872,511
------------------------------------------------------------------------------ ---------------- ----------------
Net assets $3,921,933 $2,872,511
Net asset value per share $49.11 $35.97
============================================================================== ================ ================
* Except net asset value per share
The accompanying notes are an integral part of the Financial
Statements.
The Financial Statements on pages 99 to 113 were approved by the
Board on 26 May 2022 and were signed on its behalf by:
Ed Warner Steven Wilderspin
Chair Chair of the Audit and Risk Committee
Consolidated Statements of Operations
For the Years Ended 31 January 2022 and 2021
2022 2021
In US Dollars (in thousands) (in thousands)
================================= =============== ===============
Realised and unrealised
gains on investments
Net realised gain on investments 586,396 107,439
Net change in unrealised
appreciation on investments 477,401 574,813
--------------------------------- --------------- ---------------
Net gain on investments 1,063,797 682,252
Investment income
Interest and dividends
from cash and equivalents 13 1,484
Expenses
Non-utilisation fees (Note
6) 5,346 4,923
Investment services (Note
2) 2,612 2,176
Interest expense 1,885 3,013
Financing expenses 1,679 1,538
Management fees (Note 3) 757 762
Professional fees 720 690
Directors' fees and expenses
(Note 9) 498 480
Marketing expenses 316 224
Tax expenses 8 57
Other expenses 567 49
--------------------------------- --------------- ---------------
Total expenses 14,388 13,912
--------------------------------- --------------- ---------------
Net investment loss (14,375) (12,428)
--------------------------------- --------------- ---------------
Net increase in net assets
resulting from operations $1,049,422 $669,824
================================= =============== ===============
The accompanying notes are an integral part of the Financial
Statements.
Consolidated Statements of Changes in Net Assets
For the Years Ended 31 January 2022 and 2021
2022 2021
In US Dollars (in thousands) (in thousands)
----------------------------------------------------- --------------- ---------------
Increase in net assets from operations
Net realised gain on investments 586,396 107,439
Net change in unrealised appreciation 477,401 574,813
Net investment loss (14,375) (12,428)
----------------------------------------------------- --------------- ---------------
Net increase in net assets resulting from operations 1,049,422 669,824
Net assets at beginning of year 2,872,511 2,202,687
----------------------------------------------------- --------------- ---------------
Net assets at end of year $3,921,933 $2,872,511
===================================================== =============== ===============
The accompanying notes are an integral part of the Financial
Statements.
Consolidated Statements of Cash Flows
For the Years Ended 31 January 2022 and 2021
2022 2021
In US Dollars (in thousands) (in thousands)
--------------------------------------------------------- --------------- ---------------
Cash flows from operating activities
Net increase in net assets resulting from operations 1,049,422 669,824
Adjustments to reconcile net increase in net assets
resulting from operations
to net cash provided by (used in) operating activities:
Net realised gain on investments (586,396) (107,439)
Net change in unrealised appreciation on investments (477,401) (574,813)
Contributions to private equity investments (514,938) (430,949)
Distributions from private equity investments 834,552 289,543
Other 368 1,634
------------------------------------------------------------- --------------- ---------------
Net cash provided by (used in) operating activities 305,607 (152,200)
Cash flows from financing activities
Proceeds from borrowing on the credit facility 80,000 200,000
Repayments in respect of the credit facility (200,000) (80,000)
------------------------------------------------------------- --------------- ---------------
Net change in financing activities (120,000) 120,000
------------------------------------------------------------- --------------- ---------------
Net increase (decrease) in cash and equivalents 185,607 (32,200)
Cash and equivalents at beginning of year 98,416 130,616
------------------------------------------------------------- --------------- ---------------
Cash and equivalents at end of year $284,023 $98,416
------------------------------------------------------------- --------------- ---------------
The accompanying notes are an integral part of the Financial
Statements.
Consolidated Schedule of Investments
At 31 January 2022
In US Dollars
========================== =============== =============== =============== =============== ===========
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
US Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
========================== =============== =============== =============== =============== ===========
HarbourVest Partners
V-Partnership Fund
L.P. 2,220 46,709 45,924 915 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VI-Direct Fund L.P. 1,313 46,722 38,405 3,705 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VI-Partnership Fund
L.P. 5,175 204,623 237,227 786 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VII-Venture Partnership
Fund L.P.? 2,319 135,290 203,839 3,673 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VII-Buyout Partnership
Fund L.P.? 3,850 74,417 103,486 184 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VIII-Cayman Mezzanine
and Distressed Debt
Fund L.P. 2,000 48,202 60,766 4,080 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VIII-Cayman Buyout
Fund L.P. 7,500 245,259 392,851 33,469 0.9
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VIII-Cayman Venture
Fund L.P. 1,000 49,192 84,940 24,875 0.6
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
2007 Cayman Direct
Fund L.P. 2,250 97,877 160,808 5,257 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
IX-Cayman Buyout Fund
L.P. 10,473 60,808 73,709 61,575 1.6
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
IX-Cayman Credit
Opportunities
Fund L.P. 2,500 10,049 9,245 7,690 0.2
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
IX-Cayman Venture Fund
L.P. 3,500 66,826 114,259 130,115 3.3
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
2013 Cayman Direct
Fund L.P. 3,229 97,131 139,036 65,939 1.7
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
Cayman Cleantech Fund
II L.P. 2,000 18,056 11,083 26,972 0.7
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
X Buyout Feeder Fund
L.P. 65,520 186,508 118,114 224,411 5.7
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
X Venture Feeder Fund
L.P. 10,730 137,324 76,438 338,753 8.6
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
Mezzanine Income Fund
L.P. 8,155 42,067 61,619 15,931 0.4
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XI Buyout Feeder Fund
L.P. 203,000 147,000 37,599 213,870 5.5
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XI Micro Buyout Feeder
Fund L.P. 38,025 26,975 8,556 38,292 1.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XI Venture Feeder Fund
L.P. 71,250 118,786 20,538 211,899 5.4
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Adelaide
Feeder L.P. 6,000 144,000 5,339 174,714 4.5
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XII Buyout Feeder Fund
L.P. 245,000 - - 984 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XII Micro Buyout Feeder
Fund L.P. 45,000 - - 4 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XII Venture Feeder
Fund L.P. 135,000 - - 890 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
Total US Funds 877,008 2,003,821 2,003,781 1,588,985 40.5
=========================== =============== =============== =============== =============== ===========
Amount
Unfunded Distributions
Commitment Invested(*) Received Fair Value
Fair Value
as a %
International/Global of Net
Funds (in thousands) (in thousands) (in thousands) (in thousands) Assets
===================== =============== =============== =============== =============== ==========
HarbourVest International
Private Equity Partners
III-Partnership Fund
L.P. 3,450 147,729 148,440 457 0.0
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest International
Private Equity Partners
IV-Direct Fund L.P. - 61,452 53,436 1,635 0.0
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP V-2007 Cayman
European
Buyout Companion Fund
L.P.(--) 1,599 63,880 84,434 715 0.0
------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street VII Cayman
L.P.(++) 4,250 95,586 132,298 3,195 0.1
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VI-Cayman
Partnership
Fund L.P.(**) 5,618 117,845 144,955 100,544 2.6
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VI-Cayman Asia
Pacific Fund L.P. 2,500 47,687 50,367 34,028 0.9
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VI-Cayman Emerging
Markets Fund L.P. - 30,059 10,713 33,221 0.8
------------------------- --------------- --------------- --------------- --------------- ----------
HVPE Avalon Co-Investment
L.P. - 85,135 124,574 - -
------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street VIII Cayman
L.P. 14,400 165,724 244,188 34,995 0.9
------------------------- --------------- --------------- --------------- --------------- ----------
HVPE Charlotte
Co-Investment
L.P. - 93,894 154,205 8,485 0.2
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Global Annual
Private Equity Fund L.P. 11,300 88,701 107,487 110,988 2.8
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Partnership
Feeder Fund L.P. 19,063 105,938 65,503 171,243 4.4
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Asia Pacific
Feeder Fund L.P. 2,100 27,900 13,111 40,662 1.0
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Emerging
Markets
Feeder Fund L.P. 3,000 17,000 6,245 23,625 0.6
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Europe Feeder
Fund L.P. 12,034 59,661 43,554 96,083 2.4
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Canada
Parallel
Growth Fund L.P.(++++) 6,650 17,957 10,765 34,991 0.9
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2015 Global
Fund L.P. 15,000 85,017 75,574 112,362 2.9
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2016 Global
AIF L.P. 24,000 76,026 51,143 104,956 2.7
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Partners
Co-Investment IV AIF
L.P. 7,000 93,000 82,102 108,069 2.8
------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street IX Cayman
L.P. 17,000 83,000 71,318 78,623 2.0
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Real Assets
III Feeder L.P. 3,750 46,250 6,642 47,889 1.2
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2017 Global
AIF L.P. 28,500 71,521 39,881 98,300 2.5
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VIII Partnership
AIF L.P. 85,425 84,575 16,964 128,778 3.3
------------------------- --------------- --------------- --------------- --------------- ----------
Secondary Overflow Fund
III L.P. 27,025 67,735 57,423 77,769 2.0
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Asia Pacific
VIII AIF Fund L.P. 13,750 36,256 4,275 46,613 1.2
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2018 Global
Feeder Fund L.P. 24,500 45,500 8,442 71,101 1.8
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Partners
Co-Investment V Feeder
Fund L.P. 22,500 77,548 5,192 125,936 3.2
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Real Assets
IV Feeder L.P. 38,250 11,750 463 16,204 0.4
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2019 Global
Feeder Fund L.P. 49,000 51,007 7,717 78,060 2.0
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Credit
Opportunities
Fund II L.P. 28,500 21,500 1,134 23,786 0.6
------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street X Feeder
Fund L.P. 87,000 63,018 17,592 89,841 2.3
------------------------- --------------- --------------- --------------- --------------- ----------
Secondary Overflow Fund
IV L.P. 52,792 52,055 16,700 63,675 1.6
------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP IX Feeder Fund
L.P. 470,450 14,558 - 37,440 1.0
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2020 Global
Feeder Fund L.P. 30,250 19,751 1,342 26,175 0.7
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Partners
Co-Investment VI Feeder
Fund L.P. 100,000 - - 107 0.0
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Asia Pacific
5 Feeder Fund L.P. 210,000 - - (1,166) (0.0)
------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2021 Global
Feeder Fund L.P. 157,250 12,801 - 14,990 0.4
------------------------- --------------- --------------- --------------- --------------- ----------
Total
International/Global
Funds 1,577,906 2,239,018 1,858,181 2,044,376 52.1
------------------------- --------------- --------------- --------------- --------------- ----------
Total Investments $2,454,914 $4,242,839 $3,861,962 $3,633,361 92.6
========================= =============== =============== =============== =============== ==========
* Includes purchase of limited partner interests for shares and
cash at the time of HVPE's IPO.
Includes ownership interests in HarbourVest Partners VII-Cayman
Partnership entities.
++ Includes ownership interest in Dover Street VII (AIV 1) Cayman L.P.
-- Fund denominated in euros. Commitment amount is EUR47,450,000.
** Fund denominated in euros. Commitment amount is EUR100,000,000.
Fund denominated in euros. Commitment amount is
EUR63,000,000.
++++ Fund denominated in Canadian dollars. Commitment amount is C$32,000,000.
As of 31 January 2022, the cost basis of partnership investments
is $2,030,502,000.
Totals and subtotals may not recalculate due to rounding.
The accompanying notes are an integral part of the Financial
Statements.
Consolidated Schedule of Investments
At 31 January 2021
In US Dollars
========================== =============== =============== =============== =============== ===========
Fair Value
Unfunded Amount Distributions as a %
Commitment Invested* Received Fair Value of
US Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
========================== =============== =============== =============== =============== ===========
HarbourVest Partners
V-Partnership Fund
L.P. 2,220 46,709 45,924 924 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VI-Direct Fund L.P. 1,313 46,722 38,405 2,749 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VI-Partnership Fund
L.P. 5,175 204,623 237,227 1,097 0.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VII-Venture Partnership
Fund L.P. 2,319 135,290 192,044 16,399 0.6
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VII-Buyout Partnership
Fund L.P. 3,850 74,417 102,016 1,688 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VIII-Cayman Mezzanine
and Distressed Debt
Fund L.P. 2,000 48,202 60,039 4,168 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VIII-Cayman Buyout
Fund L.P. 7,500 245,259 367,877 47,829 1.7
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
VIII-Cayman Venture
Fund L.P. 1,000 49,192 75,249 27,771 1.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
2007 Cayman Direct
Fund L.P. 2,250 97,877 160,808 4,269 0.1
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
IX-Cayman Buyout Fund
L.P. 10,473 60,808 57,470 62,330 2.2
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
IX-Cayman Credit
Opportunities
Fund L.P. 2,500 10,049 7,605 7,501 0.3
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
IX-Cayman Venture Fund
L.P. 3,500 66,826 72,125 127,055 4.4
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
2013 Cayman Direct
Fund L.P. 3,229 97,131 130,937 58,636 2.0
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
Cayman Cleantech Fund
II L.P. 3,100 16,956 5,340 19,648 0.7
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
X Buyout Feeder Fund
L.P. 112,140 139,888 41,111 182,885 6.4
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
X Venture Feeder Fund
L.P. 29,230 118,824 27,794 215,230 7.5
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
Mezzanine Income Fund
L.P. 8,155 42,067 26,148 35,001 1.2
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XI Buyout Feeder Fund
L.P. 267,750 82,250 5,791 107,277 3.7
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XI Micro Buyout Feeder
Fund L.P. 52,325 12,675 635 16,253 0.6
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Partners
XI Venture Feeder Fund
L.P. 122,550 67,486 2,036 93,380 3.3
--------------------------- --------------- --------------- --------------- --------------- -----------
HarbourVest Adelaide
Feeder L.P. 92,625 57,375 2,799 78,543 2.7
--------------------------- --------------- --------------- --------------- --------------- -----------
Total US Funds 735,203 1,720,626 1,659,381 1,110,633 38.7
=========================== =============== =============== =============== =============== ===========
Amount
Unfunded Distributions
Commitment Invested(*) Received Fair Value
Fair Value
as a %
International/Global of Net
Funds (in thousands) (in thousands) (in thousands) (in thousands) Assets
====================== =============== =============== =============== =============== ==========
HarbourVest International
Private Equity Partners
III-Partnership Fund
L.P. 3,450 147,729 148,440 443 0.0
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest International
Private Equity Partners
IV-Direct Fund L.P. - 61,452 53,436 1,636 0.1
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP V-2007 Cayman
European
Buyout Companion Fund
L.P.(--) 1,727 63,880 83,848 1,505 0.1
-------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street VII Cayman
L.P.(++) 4,414 95,586 128,607 7,518 0.3
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VI-Cayman
Partnership
Fund L.P.(**) 6,067 117,845 108,821 122,570 4.3
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VI-Cayman Asia
Pacific Fund L.P. 2,500 47,687 41,011 45,060 1.6
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VI-Cayman Emerging
Markets Fund L.P. - 30,059 8,702 31,787 1.1
-------------------------- --------------- --------------- --------------- --------------- ----------
HVPE Avalon Co-Investment
L.P. 1,644 85,135 124,139 475 0.0
-------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street VIII Cayman
L.P. 16,200 163,924 199,885 71,111 2.5
-------------------------- --------------- --------------- --------------- --------------- ----------
HVPE Charlotte
Co-Investment
L.P. - 93,894 146,161 17,510 0.6
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Global Annual
Private Equity Fund L.P. 12,300 87,701 67,210 114,804 4.0
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Partnership
Feeder Fund L.P. 23,750 101,250 25,844 160,446 5.6
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Asia Pacific
Feeder Fund L.P. 2,850 27,150 7,410 42,471 1.5
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Emerging Markets
Feeder Fund L.P. 4,800 15,200 2,668 20,100 0.7
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VII Europe Feeder
Fund L.P. 16,052 56,717 17,715 84,559 2.9
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Canada
Parallel
Growth Fund L.P.(++++) 8,256 16,285 4,294 26,843 0.9
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2015 Global
Fund L.P. 17,000 83,017 41,802 107,211 3.7
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2016 Global
AIF L.P. 30,500 69,526 34,008 81,601 2.8
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Partners
Co-Investment IV AIF
L.P. 7,000 93,000 21,945 150,040 5.2
-------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street IX Cayman
L.P. 20,000 80,000 39,039 87,916 3.1
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Real Assets
III Feeder L.P. 7,000 43,000 5,917 36,451 1.3
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2017 Global
AIF L.P. 40,000 60,021 12,204 84,132 2.9
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP VIII Partnership
AIF L.P. 114,750 55,250 6,792 75,751 2.6
-------------------------- --------------- --------------- --------------- --------------- ----------
Secondary Overflow Fund
III L.P. 26,990 67,771 27,072 84,579 2.9
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Asia Pacific
VIII AIF Fund L.P. 23,000 27,006 2,718 32,503 1.1
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2018 Global
Feeder Fund L.P. 32,200 37,800 895 47,740 1.7
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Partners
Co-Investment V Feeder
Fund L.P. 30,000 70,048 - 100,012 3.5
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Real Assets
IV Feeder L.P. 50,000 - - 1,333 0.0
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2019 Global
Feeder Fund L.P. 65,000 35,007 216 45,435 1.6
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest Credit
Opportunities
Fund II L.P. 33,500 16,500 - 17,158 0.6
-------------------------- --------------- --------------- --------------- --------------- ----------
Dover Street X Feeder
Fund L.P. 116,250 33,768 3,509 41,770 1.5
-------------------------- --------------- --------------- --------------- --------------- ----------
Secondary Overflow Fund
IV L.P. 35,816 19,064 3,722 29,757 1.0
-------------------------- --------------- --------------- --------------- --------------- ----------
HIPEP IX Feeder Fund
L.P. 40,000 - - 299 0.0
-------------------------- --------------- --------------- --------------- --------------- ----------
HarbourVest 2020 Global
Feeder Fund L.P. 45,000 5,001 - 6,020 0.2
-------------------------- --------------- --------------- --------------- --------------- ----------
Total International/Global
Funds 838,015 2,007,275 1,368,030 1,778,545 61.9
-------------------------- --------------- --------------- --------------- --------------- ----------
Total Investments $1,573,218 $3,727,901 $3,027,411 $2,889,178 100.6
========================== =============== =============== =============== =============== ==========
* Includes purchase of limited partner interests for shares and
cash at the time of HVPE's IPO.
Includes ownership interests in HarbourVest Partners VII-Cayman
Partnership entities.
++ Includes ownership interest in Dover Street VII (AIV 1) Cayman L.P.
-- Fund denominated in euros. Commitment amount is EUR47,450,000.
** Fund denominated in euros. Commitment amount is EUR100,000,000.
Fund denominated in euros. Commitment amount is
EUR63,000,000.
++++ Fund denominated in Canadian dollars. Commitment amount is C$32,000,000.
As of 31 January 2021, the cost basis of partnership investments
is $1,890,413,000.
Totals and subtotals may not recalculate due to rounding.
The accompanying notes are an integral part of the Financial
Statements.
Notes to Consolidated Financial Statements
Note 1 Company Organisation and Investment Objective
HarbourVest Global Private Equity Limited (the "Company" or
"HVPE") is a closed-ended investment company registered with the
Registrar of Companies in Guernsey under The Companies (Guernsey)
Law, 2008. The Company's registered office is BNP Paribas House, St
Julian's Avenue, St Peter Port, Guernsey GY1 1WA.
The Company was incorporated and registered in Guernsey on 18
October 2007. HVPE is designed to offer shareholders long-term
capital appreciation by investing in a diversified portfolio of
private equity investments. The Company invests in private equity
through private equity funds and may make co-investments or other
opportunistic investments. The Company is managed by HarbourVest
Advisers L.P. (the "Investment Manager"), an affiliate of
HarbourVest Partners, LLC ("HarbourVest"), a private equity fund of
funds manager. The Company is intended to invest in and alongside
existing and newly-formed HarbourVest funds. HarbourVest is a
global private equity fund of funds manager and typically invests
capital in primary partnerships, secondary investments, and direct
investments across vintage years, geographies, industries, and
strategies.
Operations of the Company commenced on 6 December 2007,
following the initial global offering of the Class A Ordinary
Shares.
Share Capital
At 31 January 2022, the Company's 79,862,486 shares continued to
be listed on the London Stock Exchange under the symbol "HVPE". The
shares are entitled to the income and increases and decreases in
the net asset value ("NAV") of the Company, and to any dividends
declared and paid, and have full voting rights. Dividends may be
declared by the Board of Directors and paid from available assets
subject to the Directors being satisfied that the Company will,
immediately after payment of the dividend, satisfy the statutory
solvency test prescribed by The Companies (Guernsey) Law, 2008.
Dividends would be paid to shareholders pro rata to their
shareholdings.
The shareholders must approve any amendment to the Memorandum
and Articles of Incorporation. The approval of 75% of the shares is
required in respect of any changes that are administrative in
nature, any material change from the investment strategy and/or
investment objective of the Company, or any material change to the
terms of the Investment Management Agreement.
There is no minimum statutory capital requirement under Guernsey
law.
Investment Manager, Company Secretary, and Administrator
The Directors have delegated certain day-to-day operations of
the Company to the Investment Manager and the Company Secretary and
Administrator, under advice of the Directors, pursuant to service
agreements with those parties, within the context of the strategy
set by the Board. The Investment Manager is responsible for, among
other things, selecting, acquiring, and disposing of the Company's
investments, carrying out financing, cash management, and risk
management activities, providing investment advisory services,
including with respect to HVPE's investment policies and
procedures, and arranging for personnel and support staff of the
Investment Manager to assist in the administrative and executive
functions of the Company.
Directors
The Directors are responsible for the determination of the
investment policy of the Company on the advice of the Investment
Manager and have overall responsibility for the Company's
activities. This includes the periodic review of the Investment
Manager's compliance with the Company's investment policies and
procedures, and the approval of certain investments. A majority of
Directors must be independent Directors and not affiliated with
HarbourVest or any affiliate of HarbourVest.
Note 2 Summary of Significant Accounting Policies
The following accounting policies have been applied consistently
in dealing with items which are considered material in relation to
the Company's consolidated financial statements ("Financial
Statements").
Basis of Preparation
The Company maintains an over-commitment strategy in an attempt
to remain fully invested over time (refer to Note 5 on page 111 for
further details on unfunded commitments). On an annual basis,
HarbourVest prepares updated forecasts and predictions to provide
assurance that the Company has sufficient resources to meet its
ongoing requirements.
As part of this process the Investment Manager has created four
revised model scenarios with varying degrees of decline in
investment value and investment distributions, with the worst being
an Extreme Downside scenario representing an impact to the
portfolio that is worse than that experienced during the GFC. All
four models verified that the Company has enough resources to meet
the Company's upcoming financial obligations. However, in all
circumstances HVPE can take steps to limit or mitigate the impact
on the Consolidated Statements of Assets and Liabilities, namely
drawing on the credit facility, pausing new commitments, raising
additional credit or capital, and selling assets to increase
liquidity and reduce outstanding commitments. As a result, the
Company's Financial Statements have been prepared on a going
concern basis.
Basis of Presentation
The Financial Statements include the accounts of HarbourVest
Global Private Equity Limited and its five wholly owned
subsidiaries: HVGPE - Domestic A L.P., HVGPE - Domestic B L.P.,
HVGPE - Domestic C L.P., HVGPE - International A L.P., and HVGPE -
International B L.P. (together "the undertakings"). Each of the
subsidiaries is a Cayman Islands limited partnership formed to
facilitate the purchase of certain investments. All intercompany
accounts and transactions have been eliminated in
consolidation.
Method of Accounting
The Financial Statements are prepared in conformity with US
generally accepted accounting principles ("US GAAP"), The Companies
(Guernsey) Law, 2008, and the Principal Documents. Under applicable
rules of Guernsey law implementing the EU Transparency Directive,
the Company is allowed to prepare its financial statements in
accordance with US GAAP.
The Company is an investment company following the accounting
and reporting guidance of the Financial Accounting Standards Boards
("FASB") Accounting Standards Codification ("ASC") Topic 946 -
Financial Services - Investment Companies.
Estimates
The preparation of the Financial Statements in conformity with
US GAAP requires management to make estimates and assumptions that
affect the amounts reported in the Financial Statements and
accompanying notes. Actual results could differ from those
estimates.
Investments
Investments are stated at fair value in accordance with the
Company's investment valuation policy. The inputs used to determine
fair value include financial statements provided by the investment
partnerships which typically include fair market value capital
account balances. In reviewing the underlying financial statements
and capital account balances, the Company considers compliance with
ASC Topic 820 - Fair Value Measurement, the currency in which the
investment is denominated, and other information deemed
appropriate.
The fair value of the Company's investments is primarily based
on the most recently reported NAV provided by the underlying
Investment Manager as a practical expedient under ASC Topic 820.
This fair value is then adjusted for known investment operating
expenses and subsequent transactions, including investments,
realisations, changes in foreign currency exchange rates, and
changes in value of private and public securities. This valuation
does not necessarily reflect amounts that might ultimately be
realised from the investment and the difference can be
material.
Securities for which a public market does exist are valued by
the Company at quoted market prices at the year-end date.
Generally, the partnership investments have a defined term and
cannot be transferred without the consent of the GP of the limited
partnership in which the investment has been made.
Foreign Currency Transactions
The currency in which the Company operates is US dollars, which
is also the presentation currency. Transactions denominated in
foreign currencies are recorded in the local currency at the
exchange rate in effect at the transaction dates. Foreign currency
investments, investment commitments, cash and equivalents, and
other assets and liabilities are translated at the rates in effect
at the year-end date. Foreign currency translation gains and losses
are included in realised and unrealised gains (losses) on
investments as incurred. The Company does not segregate that
portion of realised or unrealised gains and losses attributable to
foreign currency translation on investments.
Cash and Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
The carrying amount included in the Consolidated Statements of
Assets and Liabilities for cash and equivalents approximates their
fair value. The Company maintains bank accounts denominated in US
dollars, in euros, and in pounds sterling. The Company may invest
excess cash balances in highly liquid instruments such as
certificates of deposit, sovereign debt obligations of certain
countries, and money market funds that are highly rated by the
credit rating agencies.
The associated credit risk of the cash and equivalents is
monitored by the Board and the Investment Manager on a regular
basis. The Board has authorised the Investment Manager to manage
the cash balances on a daily basis according to the terms set out
in the treasury policies created by the Board.
Investment Income
Investment income includes interest from cash and equivalents,
dividends, and interest received from certain investments due to
subsequent fund closings. Dividends are recorded when they are
declared, and interest is recorded when earned. During the year
ended 31 January 2021, the Company received $1,150,000 from
HarbourVest Adelaide L.P. related to interest received from limited
partners that participated in subsequent fund closings. The Company
did not receive interest related to any subsequent fund closings
during the year ended 31 January 2022.
Operating Expenses
Operating expenses include amounts directly incurred by the
Company as part of its operations, and do not include amounts
incurred from the operations of the investment entities.
Net Realised Gains and Losses on Investments
For investments in private equity funds, the Company records its
share of realised gains and losses as reported by the Investment
Manager including fund-level related expenses and management fees,
and is net of any carry allocation. Realised gains and losses are
calculated as the difference between proceeds received and the
related cost of the investment.
Net Change in Unrealised Appreciation and Depreciation on
Investments
For investments in private equity funds, the Company records its
share of change in unrealised gains and losses as reported by the
Investment Manager as an increase or decrease in unrealised
appreciation or depreciation of investments and is net of any carry
allocation. When an investment is realised, the related unrealised
appreciation or depreciation is recognised as realised.
Income Taxes
The Company is registered in Guernsey as a tax exempt company.
The States of Guernsey Income Tax Authority has granted the Company
exemption from Guernsey income tax under the provision of the
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and the
Company will be charged an annual exemption fee of GBP1,200
included as other expenses in the Consolidated Statements of
Operations. Income may be subject to withholding taxes imposed by
the US or other countries, which will impact the Company's
effective tax rate.
Investments made in entities that generate US source income may
subject the Company to certain US federal and state income tax
consequences. A US withholding tax at the rate of 30% may be
applied on the distributive share of any US source dividends and
interest (subject to certain exemptions) and certain other income
that is received directly or through one or more entities treated
as either partnerships or disregarded entities for US federal
income tax purposes. Furthermore, investments made in entities that
generate income that is effectively connected with a US trade or
business may also subject the Company to certain US federal and
state income tax consequences. The US requires withholding on
effectively connected income for corporate partners at the rate of
21%. In addition, the Company may also be subject to a branch
profits tax which can be imposed at a rate of up to 30% of any
after-tax, effectively connected income associated with a US trade
or business. However, no amounts have been accrued.
The Company accounts for income taxes under the provisions of
ASC Topic 740 - Income Taxes. This standard establishes consistent
thresholds as it relates to accounting for income taxes. It defines
the threshold for recognising the benefits of tax return positions
in the Financial Statements as "more-likely-than-not" to be
sustained by the taxing authority and requires measurement of a tax
position meeting the more-likely-than-not criterion, based on the
largest benefit that is more than 50% likely to be realised. For
the year ended 31 January 2022, the Investment Manager has analysed
the Company's inventory of tax positions taken with respect to all
applicable income tax issues for all open tax years (in each
respective jurisdiction), and has concluded that no provision for
income tax is required in the Company's Financial Statements.
Shareholders in certain jurisdictions may have individual tax
consequences from ownership of the Company's shares. The Company
has not included the impact of these tax consequences on the
shareholders in these Financial Statements.
Market and Other Risk Factors
The Company's investments are subject to various risk factors
including market price, credit, interest rate, liquidity, and
currency risk. Investments are based primarily in the US, Europe,
and Asia Pacific, and thus have concentrations in such regions. The
Company's investments are also subject to the risks associated with
investing in leveraged buyout and venture capital transactions that
are illiquid and non-publicly traded. Such investments are
inherently more sensitive to declines in revenues and to increases
in expenses that may occur due to general downward swings in the
world economy or other risk factors including increasingly intense
competition, rapid changes in technology, changes in federal, state
and foreign regulations, and limited capital investments.
The Company is subject to credit and liquidity risk to the
extent any financial institution with which it conducts business is
unable to fulfil contracted obligations on its behalf. Management
monitors the financial condition of those financial institutions
and does not anticipate any losses from these counterparties.
Note 3 Material Agreements and Related Fees
Administrative Agreement
The Company has retained BNP Paribas ("BNP") as Company
Secretary and Administrator. Fees for these services are paid as
invoiced by BNP and include an administration fee of GBP50,000 per
annum, a secretarial fee of GBP60,000 per annum, a compliance
services fee of GBP15,000 per annum, ad-hoc service fees, and
reimbursable expenses. During the years ended 31 January 2022 and
2021, fees of $184,000 and $171,000, respectively, were incurred to
BNP and are included as other expenses in the Consolidated
Statements of Operations.
Registrar
The Company has retained Link Asset Services (formerly "Capita")
as share registrar. Fees for this service include a base fee of
GBP15,000, plus other miscellaneous expenses. During the years
ended 31 January 2022 and 2021, registrar fees of $25,000 and
$47,000 respectively, were incurred and are included as other
expenses in the Consolidated Statements of Operations.
Independent Auditor's Fees
For the years ended 31 January 2022 and 2021, auditor fees of
$340,000 and $336,000 were accrued, respectively, and are included
in professional fees in the Consolidated Statements of Operations.
The 31 January 2022 figure includes $257,000 relating to the 31
January 2022 annual audit fee and $3,000 relating to the prior
financial year's audit fee. The 31 January 2021 figure includes
$201,000 relating to the 31 January 2021 annual audit fee and
$48,000 relating to the prior financial year's audit fee. In
addition, the 31 January 2022 and 2021 figures include fees of
$80,000 and $87,000, respectively, for audit-related services due
to the auditor, Ernst & Young LLP, conducting a review of the
Interim Financial Statements for each period end. There were no
other non-audit fees paid to the auditor by the Company during the
years ended 31 January 2022 and 2021.
Investment Management Agreement
The Company has retained HarbourVest Advisers L.P. as the
Investment Manager. The Investment Manager is reimbursed for costs
and expenses incurred on behalf of the Company in connection with
the management and operation of the Company. During the years ended
31 January 2022 and 2021, reimbursements for services provided by
the Investment Manager were $2,612,000 and $2,176,000,
respectively. The Investment Manager does not directly charge HVPE
management fees or performance fees other than with respect to
parallel investments. However, as an investor in the HarbourVest
funds, HVPE is charged the same management fees and is subject to
the same performance allocations as other investors in such
HarbourVest funds.
During the years ended 31 January 2022 and 2021, HVPE had two
parallel investments: HarbourVest Acquisition S.à.r.l. (via HVPE
Avalon Co-Investment L.P.) and HarbourVest Structured Solutions II,
L.P. (via HVPE Charlotte Co-Investment L.P.). Management fees paid
for the parallel investments made by the Company were consistent
with the fees charged by the funds alongside which the parallel
investments were made during the years ended 31 January 2022 and
2021. The HVPE Avalon Co-Investment L.P. management fee was
terminated on 30 September 2017.
Management fees included in the Consolidated Statements of
Operations are shown in the table below:
2022 2021
(in thousands) (in thousands)
==================== =============== ===============
HVPE Charlotte
Co-Investment L.P. $757 $762
======================== =============== ===============
For the years ended 31 January 2022 and 2021, management fees on
the HVPE Charlotte Co-Investment L.P. investment were calculated
based on a weighted average effective annual rate of 0.89% on
capital originally committed (0.87% and 0.88%, respectively, on
committed capital net of management fee offsets) to the parallel
investment.
Note 4 Investments
In accordance with the authoritative guidance on fair value
measurements and disclosures under generally accepted accounting
principles in the US, the Company discloses the fair value of its
investments in a hierarchy that prioritises the inputs to valuation
techniques used to measure the fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The
guidance establishes three levels of the fair value hierarchy as
follows:
Level 1 - Inputs that reflect unadjusted quoted prices in active
markets for identical assets or liabilities that the Company has
the ability to access at the measurement date;
Level 2 - Inputs other than quoted prices that are observable
for the asset or liability either directly or indirectly, including
inputs in markets that are not considered to be active; and
Level 3 - Inputs that are unobservable.
Level 3 investments include limited partnership interests in
HarbourVest funds which report under US generally accepted
accounting principles. Inputs used to determine fair value are
primarily based on the most recently reported NAV provided by the
underlying investment manager as a practical expedient under ASC
Topic 820. The fair value is then adjusted for known investment
operating expenses and subsequent transactions, including
investments, realisations, changes in foreign currency exchange
rates, and changes in value of private and public securities.
Income derived from investments in HarbourVest funds is recorded
using the equity pick-up method. Under the equity pick-up-method of
accounting, the Company's proportionate share of the net income
(loss) and net realised gains (losses), as reported by the
HarbourVest funds, is reflected in the Consolidated Statements of
Operations as net realised gain (loss) on investments. The
Company's proportionate share of the aggregate increase or decrease
in unrealised appreciation (depreciation), as reported by the
HarbourVest funds, is reflected in the Consolidated Statements of
Operations as net change in unrealised appreciation (depreciation)
on investments.
Because of the inherent uncertainty of these valuations, the
estimated fair value may differ significantly from the value that
would have been used had a ready market for this security existed,
and the difference could be material.
During the years ended 31 January 2022 and 2021, the Company
made contributions of $514,938,000 and $430,949,000, respectively,
to Level 3 investments and received distributions of $834,552,000
and $289,543,000, respectively, from Level 3 investments. As of 31
January 2022, $3,633,361,000 of the Company's investments are
classified as Level 3. As of 31 January 2021, $2,889,178,000 of the
Company's investments were classified as Level 3.
Note 5 Commitments
As of 31 January 2022, the Company had unfunded investment
commitments to other limited partnerships of $2,454,914,000 which
are payable upon notice by the partnerships to which the
commitments have been made. As of 31 January 2021, the Company had
unfunded investment commitments to other limited partnerships of
$1,573,218,000.
The Investment Manager is not entitled to any direct
remuneration (save expenses incurred in the performance of its
duties) from the Company, instead deriving its fees from the
management fees and carried interest payable by the Company on its
investments in underlying HarbourVest Funds. The Investment
Management Agreement (the "IMA"), which was amended and restated on
30 July 2019, may be terminated by either party by giving 12
months' notice. In the event of termination within ten years and
three months of the date of the listing on the Main Market on 9
September 2015, the Company would be required to pay a
contribution, which would have been $3.1 million at 31 January 2022
and $3.9 million at 31 January 2021, as reimbursement of the
Investment Manager's remaining unamortised IPO costs. In addition,
the Company would be required to pay a fee equal to the aggregate
of the management fees for the underlying investments payable over
the course of the 12-month period preceding the effective date of
such termination to the Investment Manager.
Note 6 Debt Facility
As of 31 January 2022 and 2021, the Company had an agreement
with Mitsubishi UFJ Trust and Banking Corporation ("MUFG") and
Credit Suisse for the provision of a multi-currency revolving
credit facility (the "Facility") with a termination date no earlier
than January 2026, subject to usual covenants. The MUFG commitment
was $300 million. On 20 December 2021, the Credit Suisse commitment
increased from $300 million to $400 million.
Amounts borrowed against the Facility accrue interest at an
aggregate rate of Term SOFR/SONIA/EURIBOR, a margin, and, under
certain circumstances, a mandatory minimum cost. The Facility is
secured by the private equity investments and cash and equivalents
of the Company, as defined in the agreement. Availability of funds
under the Facility and interim repayments of amounts borrowed are
subject to certain loan-to-value ratios (which factor in borrowing
on the Facility and fund-level borrowing) and portfolio diversity
tests applied to the Investment Portfolio of the Company. At 31
January 2022, there was no debt outstanding against the
Facility.
At 31 January 2021, there was $120 million debt outstanding. For
the years ended 31 January 2022 and 2021, interest of $1,885,000
and $3,013,000, respectively, was incurred and is included as other
expenses in the Consolidated Statements of Operations. Included in
other assets at 31 January 2022 and 2021 are deferred financing
costs of $7,357,000 and $6,629,000, respectively, related to
refinancing the Facility. The deferred financing costs are
amortised on the terms of the Facility. The Company is required to
pay a non-utilisation fee of 100 basis points per annum for the
Credit Suisse commitment and 90 basis points per annum for the MUFG
commitment. For the years ended 31 January 2022 and 2021,
$5,346,000 and $4,923,000, respectively, in non-utilisation fees
have been incurred.
Note 7 Financial Highlights
For the Years Ended 31 January 2022 and 2021
In US Dollars 2022 2021
----------------------------------- --------- ---------
Shares
Per share operating performance:
Net asset value, beginning of year $35.97 $27.58
Net realised and unrealised gains 13.32 8.54
Net investment loss (0.18) (0.15)
------------------------------------ --------- ---------
Total from investment operations 13.14 8.39
Net asset value, end of year $49.11 $35.97
Market value, end of year $37.30(*) $25.55(*)
Total return at net asset value 36.5% 30.4%
Total return at market value 46.0% 5.8%
------------------------------------ --------- ---------
Ratios to average net assets
Expenses 0.42% 0.55%
Net investment loss (0.42)% (0.49)%
------------------------------------ --------- ---------
* Represents the US dollar-denominated share price.
Does not include operating expenses of underlying
investments.
Note 8 Publication and Calculation of Net Asset Value
The net asset value ("NAV") of the Company is equal to the value
of its total assets less its total liabilities. The NAV per share
is calculated by dividing the net asset value by the number of
shares in issue on that day. The Company publishes the NAV per
share of the shares as calculated, monthly in arrears, at each
month-end, generally within 20 days.
Note 9 Related Party Transactions
Other amounts payable to HarbourVest Advisers L.P. of $36,000
and $73,000 represent expenses of the Company incurred in the
ordinary course of business, which have been paid by and are
reimbursable to HarbourVest Advisers L.P. at 31 January 2022 and
2021, respectively.
Board-related expenses, primarily compensation, of $498,000 and
$480,000 were incurred during the years ended 31 January 2022 and
2021, respectively.
Note 10 Indemnifications
General Indemnifications
In the normal course of business, the Company may enter into
contracts that contain a variety of representations and warranties
and which provide for general indemnifications. The Company's
maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Company that
have not yet occurred. Based on the prior experience of the
Investment Manager, the Company expects the risk of loss under
these indemnifications to be remote.
Investment Manager Indemnifications
Consistent with standard business practices in the normal course
of business, the Company has provided general indemnifications to
the Investment Manager, any affiliate of the Investment Manager,
and any person acting on behalf of the Investment Manager or such
affiliate when they act in good faith, in the best interest of the
Company. The Company is unable to develop an estimate of the
maximum potential amount of future payments that could potentially
result from any hypothetical future claim but expects the risk of
having to make any payments under these general business
indemnifications to be remote.
Directors' and Officers' Indemnifications
The Company's Articles of Incorporation provide that the
Directors, managers, or other officers of the Company shall be
fully indemnified by the Company from and against all actions,
expenses, and liabilities which they may incur by reason of any
contract entered into or any act in or about the execution of their
offices, except such (if any) as they shall incur by or through
their own negligence, default, breach of duty, or breach of trust,
respectively.
Note 11 Subsequent Events
In the preparation of the Financial Statements, the Company has
evaluated the effects, if any, of events occurring after 31 January
2022 to 26 May 2022, the date that the Financial Statements were
issued.
During March 2022, the Company closed an additional $34.5
million to Secondary Overflow Fund IV L.P.
On 31 March 2022, the Company committed an additional $250
million to HarbourVest Partners XII Buyout Feeder Fund L.P. and an
additional $35 million to HarbourVest Partners XII Micro Buyout
Feeder Fund L.P.
On 28 April 2022, the Company committed $115 million to
HarbourVest Partners XII Venture AIF SCSp.
On 29 April 2022, the Company committed $75 million to
HarbourVest 2022 Global Feeder Fund L.P.
There were no other events or material transactions subsequent
to 31 January 2022 that required recognition or disclosure in the
Financial Statements.
Disclosures
Investments
The companies represented within this report are provided for
illustrative purposes only, as example portfolio holdings. There
are over 12,000 individual companies in the HVPE portfolio, with no
one company comprising more than 1.7% of the entire portfolio.
The deal summaries, General Partners (managers), and/or
companies shown within the report are intended for illustrative
purposes only. While they may represent an actual investment or
relationship in the HVPE portfolio, there is no guarantee they will
remain in the portfolio in the future.
Past performance is no guarantee of future returns.
Forward-looking Statements
This report contains certain forward-looking statements.
Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or
trends, and similar expressions concerning matters that are not
historical facts. In some cases, forward-looking statements can be
identified by terms such as "anticipate", "believe", "could",
"estimate", "expect", "intend", "may", "plan", "potential",
"should", "will", and "would", or the negative of those terms, or
other comparable terminology. The forward-looking statements are
based on the Investment Manager's beliefs, assumptions, and
expectations of future performance and market developments, taking
into account all information currently available. These beliefs,
assumptions, and expectations can change as a result of many
possible events or factors, not all of which are known or are
within the Investment Manager's control. If a change occurs, the
Company's business, financial condition, liquidity, and results of
operations may vary materially from those expressed in
forward-looking statements.
By their nature, forward-looking statements involve known and
unknown risks and uncertainties because they relate to events, and
depend on circumstances, that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance. Any forward-looking statements are only made as at the
date of this document, and the Investment Manager neither intends
nor assumes any obligation to update forward-looking statements set
forth in this document whether as a result of new information,
future events, or otherwise, except as required by law or other
applicable regulation.
In light of these risks, uncertainties, and assumptions, the
events described by any such forward-looking statements might not
occur. The Investment Manager qualifies any and all of its
forward-looking statements by these cautionary factors.
Please keep this cautionary note in mind while reading this
report.
Some of the factors that could cause actual results to vary from
those expressed in forward-looking statements include, but are not
limited to:
-- the factors described in this report;
-- the rate at which HVPE deploys its capital in investments and
achieves expected rates of return;
-- HarbourVest's ability to execute its investment strategy,
including through the identification of a sufficient number of
appropriate investments;
-- the ability of third-party managers of funds in which the
HarbourVest funds are invested and of funds in which the Company
may invest through parallel investments to execute their own
strategies and achieve intended returns;
-- the continuation of the Investment Manager as manager of the
Company's investments, the continued affiliation with HarbourVest
of its key investment professionals, and the continued willingness
of HarbourVest to sponsor the formation of and capital raising by,
and to manage, new private equity funds;
-- HVPE's financial condition and liquidity, including its
ability to access or obtain new sources of financing at attractive
rates in order to fund short-term liquidity needs in accordance
with the investment strategy and commitment policy;
-- changes in the values of, or returns on, investments that the Company makes;
-- changes in financial markets, interest rates, or industry,
general economic, or political conditions; and
-- the general volatility of the capital markets and the market price of HVPE's shares.
Publication and Calculation of Net Asset Value
The NAV of the Company is equal to the value of its total assets
less its total liabilities. The NAV per share is calculated by
dividing the NAV of the Company by the number of shares in issue.
The Company intends to publish the estimated NAV per share as
calculated, monthly in arrears, as at each month-end, generally
within 20 days.
Regulatory Information
HVPE is required to comply with the Listing Rules, Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority
in the United Kingdom (the "LDGT Rules"). It is also authorised by
the Guernsey Financial Services Commission as an authorised
closed-end investment scheme under the Protection of Investors
(Bailiwick of Guernsey) Law, 2020, as amended (the "POI Law"). HVPE
is subject to certain ongoing requirements under the LDGT Rules and
the POI Law and certain rules promulgated thereunder relating to
the disclosure of certain information to investors, including the
publication of annual and half-yearly financial reports.
Valuation Policy
Valuations Represent Fair Value Under US GAAP
HVPE's 31 January 2022 NAV is based on the 31 December 2021 NAV
of each HarbourVest fund, Absolute(1) , and Conversus, adjusted for
changes in the value of public securities, foreign currency, known
material events, cash flows, and operating expenses during January
2022. The valuation of each HarbourVest fund is presented on a fair
value basis in accordance with US generally accepted accounting
principles ("US GAAP"). See Note 4 in the Notes to the Financial
Statements on page 110.
The Investment Manager typically obtains financial information
from 90% or more of the underlying investments for each of HVPE's
HarbourVest funds to calculate the NAV. For each fund, the
accounting team reconciles investments, distributions, and
unrealised/realised gains and losses to the Financial Statements.
The team also reviews underlying partnership valuation
policies.
Management of Foreign Currency Exposure
The Investment Portfolio includes three euro-denominated
HarbourVest funds and a Canadian dollar-denominated fund. 14% of
underlying partnership holdings are denominated in euros. The
euro-denominated Investment Pipeline is EUR17.1 million.
-- 2% of underlying partnership holdings are denominated in
sterling. There is no sterling-denominated Investment Pipeline.
-- 1% of underlying partnership holdings are denominated in
Australian dollars. There is no Australian dollar-denominated
Investment Pipeline.
-- 0.5% of underlying partnership holdings are denominated in Canadian dollars. The Canadian dollar-denominated Investment Pipeline is C$8.5 million.
-- 0.3% of underlying partnership holdings are denominated in Swiss francs. There is no Swiss franc-denominated Investment Pipeline.
HVPE has exposure to foreign currency movement through foreign
currency-denominated assets within the Investment Portfolio and
through its Investment Pipeline of unfunded commitments, which are
long term in nature. The Company's most significant currency
exposure is to euros. The Company does not actively use derivatives
or other products to hedge the currency exposure.
1 Absolute, referred to as "HVPE Avalon Co-Investment L.P." in
the Audited Consolidated Schedule of Investments, has been fully
realised.
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