INTERNATIONAL PRIVATE EQUITY FUND II, L.P. Annual Report and Audited Financial Statements

Transcription

1 INTERNATIONAL PRIVATE EQUITY FUND II, L.P. Annual Report and Audited Financial Statements For the year ended 31 December

2 CONTENTS Page Management, Administration and Auditor 2 Report of the General Partner 3-4 Independent Auditor s Report 5-6 Balance Sheet 7 Statement of Income and Retained Earnings 8 Statement of Cash Flows 9 Notes to the Financial Statements Portfolio of Investments (Unaudited) 24 1

3 MANAGEMENT, ADMINISTRATION AND AUDITOR GENERAL PARTNER AUDITOR Althjoda Framtakssjodurinn GP Limited KPMG Channel Islands Limited 11 New Street Glategny Court, Glategny Esplanade St Peter Port St Peter Port Guernsey Guernsey GY1 2PF GY1 1WR INVESTMENT MANAGER LISTING SPONSOR Arion Bank hf. Vistra Fund Services (Guernsey) Limited. Bogartuni 19 (formerly Orangefield Legis Fund Services Limited) 105 Reykjavik PO Box 91 Iceland 11 New Street St Peter Port Guernsey GY1 3EG ADMINISTRATOR, REGISTRAR LEGAL ADVISERS TO THE AND SECRETARY GENERAL PARTNER In Iceland Vistra Fund Services (Guernsey) Limited Arion Bank hf. (formerly Orangefield Legis Fund Services Limited) Legal Department, PO Box 91 Bogartuni New Street 105 Reykjavik St Peter Port Iceland Guernsey GY1 3EG In Guernsey Mourant Ozannes PO Box Le Marchant Street St Peter Port Guernsey GY1 4HP 2

4 REPORT OF THE GENERAL PARTNER FOR THE YEAR ENDED 31 DECEMBER 2015 The General Partner submits its annual report, together with the audited financial statements for International Private Equity Fund II L.P. (the Partnership ) for the year ended 31 December Principal Activities The Partnership is a Guernsey Limited Partnership, established under the Limited Partnerships (Guernsey) Law, 1995 of Guernsey, to promote investments in private equity. The Partnership invests in an international portfolio of leading private equity funds, managed by managers who have gained substantial investment experience in their fields of expertise. Results The results for the year are shown in the Statement of Income and Retained Earnings on page 8. Statement of Responsibilities The General Partner is required by The Limited Partnerships (Guernsey) Law, 1995, (the Partnerships law ), to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Partnership as at the end of the financial year and of its profit or loss for that period. Under the law, they have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and in accordance with the Limited Partnership Agreement (the LPA ) unless otherwise stated. In preparing those financial statements, the General Partner is required to: select suitable accounting policies and then 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 a going concern basis, unless it is inappropriate to presume that the Partnership will continue in business. The General Partner is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Partnership and enable it to ensure that the financial statements comply with the Partnerships law. The General Partner is also responsible for safeguarding the assets of the Partnership and hence for taking reasonable steps for the prevention and detection of fraud, error and other irregularities. Going concern The Partnership currently meets its working capital requirements through cash balances held. The settlement, if demanded, of any remaining portfolio purchase costs or commitments would be met by further investor commitments. Note 13 also includes the Partnership s financial risk management objectives and its exposures to liquidity risk, market price risk, interest rate risk, credit risk and currency risk. Based on this information and the forecast cash flows of the Partnership, the General Partner has a reasonable expectation that the Partnership has adequate resources to continue in operational existence for the foreseeable future. Accordingly, it has adopted the going concern basis in preparing these Financial Statements. 3

5 REPORT OF THE GENERAL PARTNER Auditor A resolution for the reappointment of KPMG Channel Islands Limited will be proposed at the forthcoming meeting of the General Partner. Signed for and on behalf of Althjoda Framtakssjodurinn GP Limited, as General Partner, by: David Walker Director 22 June

6 INDEPENDENT AUDITOR S REPORT TO THE PARTNERS OF INTERNATIONAL PRIVATE EQUITY FUND II, L.P. We have audited the financial statements of International Private Equity Fund II, L.P. (the Partnership ) for the year ended 31 December 2015 which comprise the balance sheet, the statement of income and retained earnings, the statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom accounting standards, including FRS102 The Financial Reporting Standard Applicable in UK and Republic of Ireland. This report is made solely to the partners, as a body, in accordance with section 18 of the Limited Partnerships (Guernsey) Law, Our audit work has been undertaken so that we might state to the partners 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 Partnership and the partners as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the general partner and auditor As explained more fully in the statement of responsibilities set out on page 3, the general partner is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Partnership s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the general partner; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements In our opinion the financial statements: give a true and fair view, in accordance with United Kingdom accounting standards, of the Partnership s affairs as at 31 December 2015 and of its profit for the year then ended; and have been properly prepared in accordance with the Limited Partnerships (Guernsey) Law,

7 INDEPENDENT AUDITOR S REPORT TO THE PARTNERS OF INTERNATIONAL PRIVATE EQUITY FUND II, L.P.(Continued) Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Limited Partnerships (Guernsey) Law, 1995 requires us to report to you if, in our opinion: proper accounting records have not been kept; the balance sheet or the statement of income and retained earnings is not in agreement with the accounting records; the report of the general partner is inconsistent with the balance sheet or the statement of income and retained earnings; or we have failed to obtain all access, information and explanations necessary for our audit. KPMG Channel Islands Limited Chartered Accountants, Guernsey 22 June

8 BALANCE SHEET AS AT 31 DECEMBER 2015 Note NON-CURRENT ASSETS Investments 7 22,838,890 32,092,000 CURRENT ASSETS Debtors and prepayments 9 2, ,417 Cash at bank and cash equivalents 3,455,095 4,494,211 CURRENT LIABILITIES 3,457,443 4,691,628 Creditors 10 (381,563) (114,439) NET CURRENT ASSETS 3,075,880 4,577,189 NET ASSETS 25,914,770 36,669,189 PARTNERS EQUITY Partners' contributed capital 11 54,549,000 54,549,000 Distributions to Partners (64,207,099) (48,707,099) Retained earnings 35,572,869 30,827,288 TOTAL PARTNERS FUNDS 12 25,914,770 36,669,189 The financial statements on pages 7 to 23 were approved by Althjoda Framtakssjodurinn GP Limited, as General Partner, and signed on its behalf on 22 June 2016 by David Walker Director The notes on pages 10 to 23 form an integral part of these financial statements 7

9 STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED 31 DECEMBER 2015 Note Revenue 4 600,774 1,484,165 Other income 5 285, ,214 Total operating expenses 6 (385,767) (446,366) Operating profit 500,258 1,546,013 Net realised gain on investments 2 8,423,267 7,271,273 Loss on revaluation of investments 7 (4,009,159) (2,639,004) Net gain on investments 4,414,108 4,632,269 Taxation - witholding tax 168,785 - Profit for the year 12 4,745,581 6,178,282 Partners' Equity at 1 January 36,669,189 49,846,907 Distributions (15,500,000) (19,356,000) Partners' Equity at 31 December 25,914,770 36,669,189 There are no components of other comprehensive income. All results relate to continuing activities. The notes on pages 10 to 23 form an integral part of these financial statements. 8

10 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015 Cash flows from operating activities Profit for the year 4,745,581 6,178,282 Adjustments for: Unrealised foreign exchange gain (16,844) (106,454) Interest income (443) (14) Interest and similar charges 5,318 3,980 Investment income (600,774) (1,484,165) (Decrease)/Increase in trade and other debtors (483) 183,418 Increase/(Decrease) in trade and other creditors 251,175 (574,349) Net realised gain on investments (8,423,267) (7,271,273) Loss on revaluation of investments 4,009,159 2,639,004 Witholding tax 168,785 - Net cash inflow/(outflow) from operating activities 138,207 (431,571) Interest and similar charges paid (5,318) (3,980) Witholding tax paid (168,785) - Net cash outflow generated from operating activities (35,896) (435,551) Net cash flows from investing activities Acquisition of investments (375,019) (440,859) Proceeds on realisation of investments 14,237,789 11,867,730 Interest received Investment income received 600,774 1,484,165 Net cash inflow from investing activities 14,463,987 12,911,050 Net cash flows from financing activities Distributions to partners (15,484,051) (19,384,680) Net cash outflow from financing activities (15,484,051) (19,384,680) Net decreases in cash and cash equivalents (1,055,960) (6,909,181) Net cash at start of the year 4,494,211 11,296,938 Effect of exchange rate fluctuations on cash held 16, ,454 Net cash at end of the year 3,455,095 4,494,211 The notes on pages 10 to 23 form an integral part of these financial statements. 9

11 FOR THE YEAR ENDED 31 DECEMBER ESTABLISHMENT AND PRINCIPAL ACTIVITY International Private Equity Fund II, L.P. (the Partnership ) was established under the Limited Partnerships (Guernsey) Law, 1995 as Althjoda Framtakssjodurinn Fund II, L.P. Its name was changed to International Private Equity Fund II, L.P. on 6 May The Partnership was admitted to the Channel Islands Stock Exchange (CISX) on 12 November 2004 and was subsequently transferred to Channel Island Securities Exchange (CISE). The Partnership acquires, holds and disposes of interests in investment funds, mutual funds or other investment schemes established as corporations, associations, trusts or partnerships domiciled, listed or carrying on business anywhere in the world, but primarily in Europe or North America and whose primary business focus is investment incorporations or other legal entities which are themselves domiciled, listed or carrying on business in Europe or North America. The Partnership targets investments in a balanced portfolio of funds. The underlying funds invest in privately held companies that range from small venture investments to large buyouts. In selecting investment opportunities in other funds, the Partnership seeks to collaborate with other investors in private equity and consults with its Advisory Board and a network of private equity professionals. Althjoda Framtakssjodurinn GP Limited, a Guernsey limited liability company, is the General Partner of the Partnership and in such capacity is responsible for the operation and management of the Partnership. The General Partner has delegated the day to day management of the assets of the Partnership to Arion Bank hf which is owned by Kaupskil (87%), a company formed on behalf of the creditors of Kaupthing and The Icelandic State Financial Investments (13%) which is 100% owned by the Government of Iceland. The Investment Manager is subject to the authority and overall supervision of the General Partner and its Directors and implements the investment guidelines and restrictions as set out by the Directors of the General Partner from time to time. 2. SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation The financial statements, which are presented in Euros and are rounded to the nearest Euro, are prepared under the historical cost convention as modified by the revaluation of investments and in accordance with United Kingdom Accounting Standards including FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ( FRS102 ) issued in September 2015 and the Limited Partnership Agreement ( LPA ) dated 12 October 2004 unless otherwise stated. These are the Partnership s first financial statements prepared in accordance with FRS102. The accounting policies set out below have been applied consistently by the Partnership in preparing the financial statements for the year ended 31 December 2015, the comparative information presented in these financial statements for the year ended 31 December 2014 and in the preparation of an opening FRS102 Balance Sheet at 1 January 2014 (the Partnership s date of transition). On application of FRS102 there have been a number of changes to the presentation of the financial statements and disclosures required, however no changes to the results of the Partnership in prior years were required as a consequence of the application. The financial statements have been prepared on a going concern basis. In March 2016, amendments were made to FRS 102, FRED 62 to align the fair value hierarchy disclosures to those required by EU adopted IFRS. They relate to the disclosure of financial instruments in an analysis based on the fair value hierarchy. These are effective for accounting periods beginning on or after 1 January 2017, with early adoption permitted. The Partnership has opted to early adopt this amendment. b) Allocation of gains and losses At the end of each accounting period of the Partnership, any net capital appreciation or depreciation will be allocated to all Partners (including the General Partner) in proportion to their respective capital commitments to the Partnership. 10

12 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) c) Realised and Unrealised Gains/ (Losses) Realised and unrealised gains/ (losses) on investments are recognised in profit or loss. d) Income Bank interest is recognised on an accruals basis. Income and capital distributions are recognised when due. Dividend income, if any, is recognised on the ex-dividend date. e) Expense Expenses are accounted for on an accruals basis. f) Investments The Partnership is invested in private equity funds and these unquoted fund investments are carried at fair value as determined by the Directors of the General Partner. The Partnership also invests in quoted securities and their fair values are determined by their quoted market price at the balance sheet date. The General Partner s valuation is generally based on the valuations provided by the general partners or managers of underlying fund investments. The valuations provided by the general partners or managers typically reflect the fair value of the Partnership s capital account balance of each fund investment, including unrealised gains and losses, as reported in the financial statements of the respective fund. The valuations used were based upon the underlying fund manager s/ general partner s valuations and audited financial statements as at 31 December 2015 of the underlying investment net of carried interest. The fair value of investments in securities traded in active markets (such as publicly traded securities) are based on quoted market prices at the balance sheet date. The quoted market price used for investment in securities held by the Partnership is the current bid price. Notwithstanding the above, the variety of valuation bases adopted and quality of management data of the ultimate underlying investee companies means that there are inherent difficulties in determining the value of these investments. Given the long term nature of these investments and periods of illiquidity which occur within the secondary market, amounts realised on sale of investments may differ from the values recorded in these financial statements and these differences may vary significantly. Realised surpluses and deficits on sales of investments are arrived at by deducting the average costs of such investments from their sale proceeds and are recognised in profit or loss. Investments are recorded on the trade date, which is defined as the date the Partnership obtains an enforceable right to demand the securities or payment thereof. Interest income and expenses are recorded on an accruals basis. Distributions from investments are recorded when declared and classified as either income or realised gains as disclosed to the Partnership by the management of the investments. The General Partner has elected to early adopt FRED 62 requiring the disclosure of financial instruments held at fair value on the basis of a fair value hierarchy consistent with EU-adopted IFRS. Further details are disclosed in note 2(a) and note 7. g) Taxation The Partnership is domiciled in Guernsey and is not subject to income tax in Guernsey under the current law. The tax effects of its activities accrue to the Partners. In certain jurisdictions other than Guernsey, foreign taxes may be withheld at source on distributions received by the Partnership, these have been shown in the "Taxationwithholding tax" line in the Statement of Income and Retained Earnings. 11

13 1. SIGNIFICANT ACCOUNTING POLICIES (continued) h) Cash at bank and cash equivalents Cash at bank and cash equivalents, includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. i) Foreign currency translation Foreign currency monetary assets and liabilities are translated into euros at the exchange rates ruling at the balance sheet date. Transactions in foreign currencies during the period are translated at the exchange rate ruling at the transaction date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in profit or loss. j) Functional currency and presentation currency The financial statements are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the financial statements, the results and financial position are presented in Euros ( ). k) Financial instruments The Company adopted Sections 11 and 12 of FRS 102 in respect of financial instruments. (i) Financial assets Basic financial assets, including debtors and prepayments, and cash at bank and in hand balances are initially recognised at transaction price, including transaction costs, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using the effective interest method, unless due within one year, then are carried at the undiscounted amount of cash or other asset receivable. At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset s original effective interest rate. The impairment loss is recognised in profit or loss. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss. Other financial assets, including investments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price, excluding transaction costs. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss. Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) despite having retained some significant risks and rewards of ownership, control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions. Gains or losses are recognised as realised gains or losses in profit or loss. ii) Financial liabilities Basic financial liabilities, including payables and accruals are initially recognised at transaction price, including transaction costs. 12

14 2. SIGNIFICANT ACCOUNTING POLICIES (continued) k) Financial instruments (continued) Payables are obligations to pay for services that have been acquired in the ordinary course of business. Payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as noncurrent liabilities. Payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method, unless due within one year, then are carried at the undiscounted amount of cash or other asset payable. Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires. l) Critical judgements, estimates and uncertainties In the application of the Partnership s accounting policies, which are described above, the General Partner is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The most significant estimates and judgements made in preparing these financial statements are as follows: Estimates Valuation of investments The General Partner and the Investment Manager believe that the underlying unlisted investments are reasonably valued based on their knowledge of the investments and information provided from the underlying investment managers and administrators. All investment valuations are reviewed on a regular basis based on information provided by the underlying administrators. Where, based on the knowledge of the Investment Manager, there are doubts as to the basis of the valuation provided, the Investment Manager can recommend to the General Partner that they feel it is appropriate that discounts to the value provided are applied. Further details of considerations are disclosed in note 8. Judgements The classification of the partners capital as either a liability or as equity is based on the principle of substance over form. The Partnership makes the decision as to the classification of the instrument at the time that the instrument is initially recognised. The classification is not subsequently changed based on changed circumstances. Although the Partner s capital meets the definition of a liability it is classified as equity because it represents the residual interest in the net assets of the Partnership. m) Going concern The Partnership currently meets its working capital requirements through cash balances held. The settlement, if demanded, of the remaining outstanding capital commitments, disclosed in note 6, would be met by further investor uncalled commitments as disclosed in note 10. Note 13 also includes the Partnership s financial risk management objectives and its exposures to liquidity risk, market price risk, interest rate risk, credit risk and currency risk. Based on this information and the forecast cash flows of the Partnership, the General Partner has a reasonable expectation that the Partnership has adequate resources to continue in operational existence for the foreseeable future. Accordingly, it has adopted the going concern basis in preparing these Financial Statements. 13

15 3. FEES Management fees Althjoda Framtakssjodurinn GP Limited, as General Partner to the Partnership is entitled to a fee payable by the Partnership in consideration for the General Partner s services for each fiscal quarter in arrears equal to, with effect from 1 January 2010 and for each subsequent fiscal quarter or portion thereof, 0.25% of the Net Asset Value of the Partnership. The charge for the year was 341,884 (2014: 409,611) and 341,884 (2014: 92,129) was outstanding at year end. In accordance with the Partnership Agreement, the Partnership has entered into an agreement with Arion Bank hf as Investment Manager which arranges custody of the Partnership s securities. The Investment Manager is entitled to a fee borne by the General Partner in consideration for the Investment Manager s services for each fiscal quarter in arrears equal to, with effect from 1 January 2010 and for each subsequent fiscal quarter or portion thereof, 0.125% of the Net Asset Value of the Partnership. The charge for the year was 170,071 (2014: 206,640) and 176,452 (2014: 52,446) was outstanding at year end. Administration and other expenses In consideration for the Management Fee, the General Partner bears the administrative expenses of the Partnership and provides office space and utilities, news quotation, computer equipment and services, administrative services, and secretarial, clerical and other personnel. The charge for the year was 57,469 (2014: 60,791) and Nil (2014: Nil) was outstanding at year end. The Partnership bears expenses other than administrative expenses such as investment expenses, travel and other expenses incurred by the General Partner in connection with its investment activities for the Partnership, legal and consulting expenses, accounting, auditing and tax preparation expenses, organisational expenses, expenses relating to the offer and sale of Partnership Interests and extraordinary expenses. 4. OPERATING INCOME - REVENUE Distributions received 588,120 1,477,884 Dividend received 12,654 6, ,774 1,484, OPERATING INCOME OTHER INCOME Bank interest income Foreign exchange gain 284, , , ,214 14

16 6. OPERATING EXPENSE Management fee 341, ,611 Audit fee 26,120 24,224 Legal & professional fees 3,312 - GFSC Licence fee 4,738 3,833 CISE annual fee and annual validation fee 4,395 4,718 Bank charges 5,318 3, , , INVESTMENTS Cost Unrealised gain/(loss) Share of Partnership valuation/ MV 2015 Advent Central & Eastern Europe III Limited Partnership 210,759 53, ,266 Advent International GPE V-B Limited Partnership 1,311,698 (276,239) 1,035,459 Apax Europe VI A, L.P. 2,605,068 1,027,796 3,632,864 Blackstone Capital Partners V L.P. 3,889, ,121 4,363,983 Candover 2005 Fund UK No 2 Limited Partnership 4,449,616 (2,834,856) 1,614,760 Carlyle Partners IV, L.P. 587,985 (199,442) 388,543 Carlyle U.S Growth Fund III LP (formerly known as Carlyle Venture Partners III, L.P) 1,144,086 (315,422) 828,664 Doughty Hanson & Co IV Limited Partnership 4 2,407,505 (1,774,694) 632,811 Fourth Cinven Fund (No 1) Limited Partnership 4,270,912 (760,831) 3,510,081 KKR Millennium Fund, L.P. 3,194,004 (904,316) 2,289,688 Lexington Middle Market Investors, L.P. 704,832 (86,812) 618,020 Panorama Capital, L.P. 993,880 (633,304) 360,576 Sofinnova Venture Partners VII L.P. 661, , ,338 VantagePoint Venture Partners 2006 (Q), L.P. 1,368,474 (601,712) 766,762 Warburg Pincus Private Equity IX, L.P. 146, , ,092 Aerie Pharmaceutical Inc. 13,501 10,387 23,888 Targa Resources Corp. 104,154 (41,846) 62,308 Fidelity National Information Services Inc. 303, , ,049 Laredo Petroleum Holdings Inc. 249,924 (154,186) 95,738 28,617,325 (5,778,435) 22,838,890 15

17 7. INVESTMENTS (continued) INTERNATIONAL PRIVATE EQUITY FUND II, L.P. Cost Unrealised gain/(loss) Share of Partnership valuation/ MV 2014 Advent Central & Eastern Europe III Limited Partnership 495, , ,543 Advent International GPE V-B Limited Partnership 1,239,198 (87,389) 1,151,809 Apax Europe VI A, L.P. 3,151,261 1,287,553 4,438,814 Blackstone Capital Partners V L.P. 5,042,828 1,287,297 6,330,125 Candover 2005 Fund UK No 2 Limited Partnership 4,498,634 (2,470,477) 2,028,157 Carlyle Partners IV, L.P. 1,036,888 (100,052) 936,836 Carlyle U.S Growth Fund III LP (formerly known as Carlyle Venture Partners III, L.P) 1,328,630 (222,183) 1,106,447 Doughty Hanson & Co IV Limited Partnership 4 2,718,420 (1,324,311) 1,394,109 Fourth Cinven Fund (No 1) Limited Partnership 5,305,862 (910,416) 4,395,446 KKR Millennium Fund, L.P. 3,701,212 (516,494) 3,184,718 Lexington Middle Market Investors, L.P. 808,019 (38,091) 769,928 Panorama Capital, L.P. 1,158, ,365 1,591,658 Sofinnova Venture Partners VII L.P. 735, , ,764 VantagePoint Venture Partners 2006 (Q), L.P. 1,321,529 (575,581) 745,948 Warburg Pincus Private Equity IX, L.P. 571, ,213 1,568,759 Aerie Pharmaceutical Inc. 13,501 7,642 21,143 Hyperion Therapeutics Inc. 77,348 3,248 80,596 Targa Resources Corp. 104, , ,275 Fidelity National Information Services Inc. 303, , ,563 Laredo Petroleum Holdings Inc. 249,924 (138,562) 111,362 33,861,276 (1,769,276) 32,092,000 Additionally at the year-end, the Partnership had outstanding capital call commitments for the following investments: Advent Central & Eastern Europe III Limited Partnership 135, ,000 Advent International GPE V-B Limited Partnership 352, ,000 Blackstone Capital Partners V L.P. 448, ,822 Candover 2005 Fund UK No 2 Limited Partnership 9,894 10,689 Carlyle Partners IV, L.P. 294, ,602 Carlyle Venture Partners III, L.P. 294, ,823 Doughty Hanson & Co IV Limited Partnership 4 80,022 80,122 Fourth Cinven Fund (No 1) Limited Partnership 797, ,599 Lexington Middle Market Investors, L.P. 16,774 15,063 Panorama Capital, L.P ,165 Sofinnova Venture Partners VII L.P. 36,812 82,640 VantagePoint Venture Partners 2006 (Q), L.P. 46,015 82,640 Total 2,512,756 2,903,165 16

18 8. FAIR VALUE OF FINANCIAL INSTRUMENTS FRS 102 requires the Partnership to classify investments according to a fair value hierarchy that reflects the significance of the inputs used in making the measurements. FRS 102, as amended in March 2016, establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The highest priority to unadjusted quoted prices for identical instruments in active markets (Level 1 measurements) and the lowest priority to valuation techniques using observable inputs or valuation techniques using unobservable inputs (Level 3 measurements). For financial purposes fair value measurements are categorised into Level 1, 2 and 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described below: - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; - Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly; and - Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level of input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, then the measurement is level 3 measurements. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes "observable" requires significant judgement. The Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If the entity can demonstrate that the last transaction price is not a good estimate of fair value, that price is adjusted using a valuation technique and classified as a Level 3 investment. Level 3 is comprised of Investee Funds held by the Partnership that are not quoted in active markets. In determining the fair value of its Investee Funds, the Partnership relies on the valuation as reported in the latest available financial statements and /or capital account statements provided by the Investee Fund's general partner, unless the Partnership is aware of reasons that such a valuation may not be the best approximation of fair value. In such cases, the Partnership reserves the right to assign a fair value to such investments which differs from the one reported by the Investee Fund's general partner. These differences may arise because a number of reasons including but not limited to: a) The report received from the Investee Fund's general partner may be non-coterminous with the Partnership's reporting date; b) The report received from the Investee Fund's general partner may be based on principles that are not aligned with the fair value principles set out in the Partnership; and c) The Investment Adviser and General Partner of the Partnership may have other observable or unobservable data that would indicate that amendments are required to a particular portfolio company at fair values presented in the report from Investee Fund's general partner. No such adjustments were made to the valuations as at 31 December

19 8. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) As at the reporting date the classification of investments was as follows: 2015 Level 1 Level 2 Level 3 Investment at valuation 800,983-22,037, Level 1 Level 2 Level 3 Investment at valuation 1,002,939-31,089,061 There have been no transfers between levels during the period. The level 1 consists of the market value of shares as at 31 December 2015, for which the value is readily available. 9. DEBTORS AND PREPAYMENTS Distribution receivable on investments - 195,552 Stock Exchange listing fee prepaid 2,348 1,865 2, , CREDITORS Management fees 341,884 92,129 Audit fee 23,730 22,310 Distribution payable 15, , ,439 18

20 11. STATEMENT OF DRAWN COMMITMENTS Total Partners Interests Total Partners Interests Partnership committed capital 62,700,000 62,700,000 Net capital drawn down at beginning of year 54,549,000 54,549,000 Net capital drawn down at end of year 54,549,000 54,549, CUMULATIVE PARTNERS ACCOUNTS Total Partners Interests Total Partners Interests Partners interest at beginning of year 36,669,189 49,846,907 Distributions made during the year (15,500,000) (19,356,000) Net profits for the financial year allocated to limited partners 4,745,581 6,178,282 Partners interest at end of year 25,914,770 36,669,189 Subject to the Law, the General Partner may, from time to time, determine to make distributions to the Partners on the following basis:- (a) First, all Partners shall be repaid their Capital Contributions (pro rata according to the number of Units held) together with interest at 8% compounded annually as at 31 December in each year based on paid up subscriptions from the day payments were made to the date of repayment thereof. (b) Subject as aforesaid, the Limited Partners shall be paid 90% of all further distributions (pro rata according to the number of Units held) and the General Partner shall be paid 10% thereof. (c) All distributions declared shall be payable only to Partners if they are registered as holders of Interests on the record date specified by the General Partner at the time such distributions are declared. (d) The General Partner shall not be obliged to cause the Partnership to make any distribution pursuant to the above. The carried interest payable to the General Partner at 31 December 2015 is nil (2014: nil), assuming that the investments are realised at their value on that date. 19

21 13. FINANCIAL INSTRUMENTS Financial assets Measured at fair value through profit or loss: Private Equity investments (see note 6) 22,037,907 31,089,061 Quoted Investments (see note 6) 800,983 1,002,939 Debt instruments measured at amortised cost Trade and other debtors (see note 8) 2, ,417 Cash and cash equivalents 3,455,095 4,494,211 Financial liabilities measured at amortised cost Trade and other creditors (see note 9) (381,563) (114,439) The Partnership s income, expense, gains and losses in respect of financial instruments are summarised below: Interest income and expense Total interest income for financial assets at amortised cost Fair value gains and losses On financial assets (including Equity Investments) measured at fair value through profit or loss 4,414,108 4,632,269 The General Partner considers the carrying amounts of financial assets and liabilities recorded at amortised cost in the financial statements approximate their fair value. 14. FINANCIAL RISK MANAGEMENT The Partnership's principal financial instruments comprise cash and cash equivalents and investments in multicurrency private equity funds and quoted investments. The Partnership has other financial instruments such as accounts receivable and other assets, accounts payable and accrued expenses, which arise directly from its operations. The Partnership is exposed to a variety of financial risks; being market risk (which includes price risk, currency risk and interest rate risk), credit risk and liquidity risk arising from the financial instruments they hold. The General Partner is responsible for reviewing and agreeing policies for managing each of these risks, which are summarised below: 20

22 14. FINANCIAL RISK MANAGEMENT (continued) Market Risk Price risk Price risk exposure arises from the uncertainty about future prices of financial instruments held, and it represents the potential loss the Partnership may suffer in the face of price movements. The determination of the valuation of private equity funds requires significant judgements and estimates as such valuations are subject to sensitivities. There is no assurance that the estimates resulting from the valuation process will accurately reflect the actual return on the investment. Such risk is mitigated through the appointment of a suitably qualified and experienced Investment Manager who advises on appropriate investments and who monitors the performance and results of those investments in considering the appropriateness of the valuations provided by the underlying administrators. Foreign currency risk Foreign currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates. Such risk is mitigated through the appointment of a suitably qualified and experienced Investment Manager who advises on appropriate investments based on his expertise knowledge and experience of the markets in which investments are made. The Partnership's principal currency exposures are as follows: Net Financial Assets 2015 Net Financial Assets 2014 Sterling (21,382) (20,445) US Dollar 12,164,787 18,081,123 Sensitivity analysis 12,143,405 18,060,678 The present sensitivity analysis is projected on the net exposure of the Partnership to foreign currency risk over a period of one month, under the assumption that all other relevant factors remain constant. At the period end, the net asset value stands to increase or decrease by the following amounts if the volatility of exchange rates observed in December 2015 was to continue in January, under the assumption that all other factors are held constant. For the period ended 31 December 2015, the impact would have been: Net exposure Change in Volatility NAV Sterling (21,382) 0.90% (193) US Dollars 12,164, % 98,862 98,669 21

23 14. FINANCIAL RISK MANAGEMENT (continued) Interest rate risk Interest rate risk arises from the effects of fluctuations in the prevailing levels of markets interest rates on the fair value of financial assets and financial liabilities. The Partnership is exposed to interest rate risk associated with the effects of fluctuations in the prevailing levels of market interest rates on cash balances. This interest rate risk is not considered to be significant as the interest received on cash balances is immaterial to the Partnership. All these cash balances receive interest at a floating rate. The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the reporting period. As at 31 December 2015 the impact on the result of a 100 basis points increase of the interest rates (all other factor remaining equal) would be 24,312 increase (2014: 32,816). Similarly a 100 basis points decrease in interest rates would result in 24,312 decrease in interest bearing cash balance (2014:( 32,816)). Credit risk Credit risk is the risk that the counterparty to a financial instrument transaction will fail to discharge an obligation or commitment that it has entered into with the Partnership. The following carrying amount of financial assets best reflects the maximum credit risk exposure at the period end: Cash at bank and cash equivalents 3,455,095 4,494,211 Debtors and prepayments 2, ,417 3,457,443 4,691,628 The Partnership manages this risk by transacting only with recognised and credit worthy third parties. The Partnerships exposure to credit risk from financial assets, such as cash and cash equivalents arises from the default of the counterparty, with maximum exposure equal to the carrying amount of these instruments. As at 31 December 2015, the Partnership held cash and cash equivalents with the following financial institutions: Standard and Poor's Rating 2015 Standard and Poor's Rating The Royal Bank of Scotland International Limited (RBS International) BBB+ 3,047,413 BBB+ 4,474,485 Arion Bank BBB- 407,682 BB+ 19,726 Total cash and cash equivalents 3,455,095 4,494,

24 14. FINANCIAL RISK MANAGEMENT (continued) Liquidity risk Liquidity risk is the risk that the Partnership may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can do so on terms that are materially disadvantageous. It is the nature of investments in private equity funds that a commitment to invest is made, that draw downs of this commitment will be made over time, and can be irregular in timing. CAPITAL MANAGEMENT The Partnership s objective when managing capital is to Safeguard it s ability to continue as a going concern, so that they can continue to provide returns for partners and benefits for other stakeholders, and Maintain an optimal capital structure to reduce the cost of capital. The capital of the partnership is represented by the net assets attributable to Partners. The amount of net assets attributable to each partner can change significantly on a monthly basis as the Partnership maintains its capital structure by adjusting the amounts of dividend paid to Partners, return capital to Partners, issue new shares or sell assets. 15. RELATED PARTY TRANSACTIONS Althjoda Framtakssjodurinn GP Limited, the General Partner, is a related party of the Limited Partnership. Allocation and payment of their Management Fee is regulated by the terms of the Limited Partnership Agreement dated 12 October On 31 October 2008 the immediate controlling party of the General Partner changed from Kirna to Gen hf, a company registered in Iceland. The controlling party of Gen hf is Arion Bank hf. Arion Bank hf is owned by Kaupskil (87%), a company formed on behalf of the creditors of Kaupthing and The Icelandic State Financial Investments (13%) which is 100% owned by the Government of Iceland. 16. EXPLANATION ON TRANSITION TO FRS102 As stated in note 2, these are the Partnership's first financial statements prepared in accordance with FRS 102. The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 December 2015, the comparative information presented in these financial statements for the year ended 31 December 2014 and in the preparation of an opening FRS 102 statement of financial position at 1 January 2014 (the Partnership's date of transition). The transition to the new Financial Reporting Framework has had no impact on recognition and measurement, but has required amendments to presentation and disclosure. The additional disclosures in relation to the prior year have been presented consistently with those for the current year. 17. EVENTS AFTER THE END OF THE YEAR END On 29 January 2016, the directors of Althjoda Framtakksjodurinn G.P Limited, acting in the capacity as general partner to the Partnership made a distribution of 4,500,000 which represents an 8.25% of the called capital as at 31 December There were no other significant events after the year end that requires disclosure. 23

25 Investment in Limited Partnerships INTERNATIONAL PRIVATE EQUITY FUND II, L.P. Draw downs 1, 2 PORTFOLIO OF INVESTMENTS AS AT 31 DECEMBER 2015 (UNAUDITED) Return of capital at cost ² Investment cost Valuation Unrealised gain/(loss) Investment income and capital gains/ (losses) ² Cumulative Investment Performance² Advent Central & Eastern Europe III Limited 2,865,000 (2,654,241) 210, ,266 53,507 1,488,049 1,541,556 Partnership Advent International GPE V-B Limited Partnership 4,647,500 (3,414,118) 1,311,698 1,035,459 (276,239) 6,612,595 6,336,356 Apax Europe VI A, L.P. 5,973,957 (3,368,888) 2,605,068 3,632,864 1,027,796 4,800,942 5,828,738 Blackstone Capital Partners V L.P. 6,372,962 (2,762,242) 3,889,862 4,363, ,121 4,972,218 5,446,339 Candover 2005 Fund UK No 2 Limited Partnership 4,970,766 (490,804) 4,449,616 1,614,760 (2,834,856) 621,938 (2,212,918) Carlyle Partners IV, L.P. 3,029,338 (2,441,354) 587, ,543 (199,442) 3,067,827 2,868,385 Carlyle U.S. growth Fund III LP (formerly known 2,215,070 (1,105,878) 1,144, ,664 (315,422) 1,596,450 1,281,028 as Carlyle Venture Partners III, L.P.) Doughty Hanson & Co IV Limited Partnership 4 4,342,299 (1,934,794) 2,407, ,811 (1,774,694) 3,688,837 1,914,143 Fourth Cinven Fund (No 1) Limited Partnership 8,328,911 (4,058,000) 4,270,912 3,510,081 (760,831) 5,263,609 4,502,778 KKR Millennium Fund, L.P. 6,706,645 (3,467,160) 3,194,004 2,289,688 (904,316) 6,883,220 5,978,904 Lexington Middle Market Investors, L.P. 1,507,213 (830,302) 704, ,020 (86,812) 957, ,151 Panorama Capital, L.P. 1,346,419 (353,477) 993, ,576 (633,304) 2,240,871 1,607,567 Sofinnova Venture Partners VII L.P. 1,441,091 (799,309) 661, , ,055 1,210,930 1,450,985 VantagePoint Venture Partners 2006 (Q), L.P. 1,442,819 (74,345) 1,368, ,762 (601,712) - (601,712) Warburg Pincus Private Equity IX, L.P. 4,566,890 (4,417,137) 146, , ,552 2,805,383 3,488,935 Aerie Pharmaceutical Inc ,501 23,888 10,387-10,387 Targa Resources Corp ,154 62,308 (41,846) 11,025 (30,821) Fidelity National Information Services Inc , , ,807 19, ,920 Laredo Petroleum Holdings Inc ,924 95,738 (154,186) - (154,186) Total 59,756,880 (32,172,049) 28,617,325 22,838,890 (5,778,435) 46,240,969 40,462,534 ¹ This includes drawdowns for management fees, which are deemed to be outside the capital commitment by some of the limited partnerships. It also includes returns of recallable capital. ² These columns include cumulative totals from inception to date. 24