ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders

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ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders

  A leading listed private equity investor
  Generating long term growth for shareholders

                                                 ICG ENTERPRISE TRUST PLC
                                                 Annual Report and Accounts 2019
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
ICG enterprise trust                                                                                                                    Highlights of the year

                                  We focus on delivering consistently strong
                                   returns through investing in profitable
                                        private companies, primarily
                                                                                                                                            NAV PER SHARE
                                                                                                                                                                                                         +12.4 %
                                                                                                                                                                                                         NAV PER SHARE
                                                                                                                                                                                                                                                                       Share price

                                           in Europe and the US.                                                                            (31 January 2018: 959p)                                      total return
                                                                                                                                                                                                         (31 January 2018: 12.5%)
                                                                                                                                                                                                                                                                       total return
                                                                                                                                                                                                                                                                       (31 January 2018: 20.1%)

                             We do this by investing in companies managed
                                by ICG and other leading private equity
                                managers, directly and through funds.                                                                       22P
                                                                                                                                                                                                         +   15.0%
                                                                                                                                                                                                         Portfolio return
                                                                                                                                                                                                                                                                       +    35.0%
                                                                                                                                                                                                                                                                       Realisation uplift

                                  A flexible mandate and highly selective                                                                   (31 January 2018: 21p)                                       on a local
                                                                                                                                                                                                         currency basis
                                                                                                                                                                                                                                                                       to previous
                                                                                                                                                                                                                                                                       carrying value
                                approach allow us to strike the right balance                                                                                                                            (31 January 2018: 16.4%)                                      (31 January 2018: 40%)

                                between concentration and diversification,
                                              risk and reward.

                                                                                                                                                Our continued strong performance
Strategic report
                                                02                                         04                                                   reflects the high quality of the Portfolio
                                                Governance                                 Supplementary Information
2     At a glance                               40   Board of Directors                    86    The 30 largest fund investments
                                                                                                                                                and the benefits of our highly selective
4     Chairman’s statement                      42   Corporate governance report           88    Private equity explained                       investment approach and focus on
      Investing in private equity                    Report of the Directors                     Portfolio analysis
                                                                                                                                                defensive growth companies.
6                                               45                                         90
8     Our approach                              48   Investment policy                     90    Realisation activity
10    How we create value                       49   Directors’ Remuneration Report        90    Investment activity
12    A strong track record                     52   Report of the Audit Committee         91    Commitments analysis                           Jeremy Tigue, Chairman
14    Key performance indicators                54   Additional disclosures required       92    Currency exposure
      Manager’s review
      Market review
      30 largest underlying companies           55
                                                     by the Alternative Investment Fund
                                                     Managers Directive
                                                     Statement of Directors’
                                                                                                 Dividend analysis
                                                                                                 Glossary                                                                                                                                                            FOCUSED
      ICG Enterprise Trust Team
      Corporate social responsibility
      Principal risks and uncertainties

                                                                                           05                                                                                                                                                                        FLEXIBLE
                                                03                                         Shareholder Information
                                                                                           97    The Annual General Meeting
                                                Financial statements
                                                                                           98    Notice of meeting
                                                57   Independent auditors’ report to the   99    Notice of meeting: explanatory notes
                                                     members of ICG Enterprise Trust plc   101   Useful information
                                                63   Income statement                      102   How to invest in ICG Enterprise
                                                64   Balance sheet                                                                      1    This is an Alternative Performance Measure (“APM”)
                                                65   Cash flow statement                                                                     We assess our performance using a variety of measures that are not specifically defined under IFRS and are therefore termed APMs. These APMs have been used if considered by the
                                                                                                                                             Board and the Manager to be the most relevant basis for shareholders in assessing the overall performance of the Company, and for comparing the performance of the Company to its
icg-enterprise.co.uk                            66   Statement of changes in equity                                                          peers and its previously reported results. The Glossary includes further details of APMs and reconciliations to IFRS measures, where appropriate. Throughout this report, all share
                                                                                                                                             price and NAV per share performance figures are stated on a total return basis (i.e. including the effect of reinvested dividends).
To view and download our Annual Report online   67   Notes to the financial statements
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic             Governance       Financial            Supplementary         Shareholder
AT A GLANCE                                                                                                                                 report                                 statements           Information           Information

We combine our proven strategy and
balanced approach with the strength
of ICG’s global platform

                                                                               The Company                                                              Our unique approach
                                                                                    Proven strategy

                                                                                    ICG Enterprise Trust listed on the London Stock
                                                                                                                                                        ICG Enterprise is unique in the listed private equity sector in
                                                                                    Exchange in 1981, raising £23m. It has since grown
                              A leading listed private equity investor.             its net assets to £731m, generating significant                     combining directly managed investments with those managed by
                                                                                    value for shareholders through multiple cycles.                     third parties, both directly and through funds.
                              Providing shareholders with access to a
                              portfolio of investments in profitable private
                              companies, primarily in Europe and the US.
                              We invest directly and through funds with
                              a flexible mandate that enables us to both
                                                                                    38                         £731m1
                                                                                                                                                        on strong and
                                                                                                                                                        consistent returns
                                                                                                                                                                                     investment mandate
                                                                                                                                                                                                                        investment driving
                                                                                    YEAR Track RECORD          NET ASSETS                                                            enables us to both                 consistently strong
                              enhance returns and manage risk, optimising                                                                               by investing in              enhance returns and                returns, while limiting
                              the portfolio mix and capital deployment.
                                                                                                                                                        profitable private           manage risk.                       downside risk.

                                                                                    return on original
                                                                                                               returned to
                                                                                                                                                        companies, primarily in
                                                                                                                                                        Europe and the US.
                              Data as at 31 January 2019                            capital raised             shareholders
                              1 31 January 2018: £664m                                                         since listing

                                                                               the manager
                                                                                    a Global network

                                                                                    ICG has offices in:
                              Global alternative asset manager in
                              private debt, credit and equity.                      •   London        •   Stockholm     •   Hong Kong
                                                                                    •   New York      •   Frankfurt     •   San Francisco
                              A leading global alternative asset manager            •   Paris         •   Luxembourg    •   Singapore                   Expertise                    Access                             Insights
                              with €35bn of assets under management                 •   Madrid        •   Warsaw        •   Sydney                      and long track               to proprietary deal                into private equity
                              across 18 strategies.                                 •   Amsterdam     •   Tokyo                                         record of lending            flow from the wider                managers and
                              ICG focuses on providing capital to help                                                                                  to and investing             ICG network and                    companies through
                              companies grow. It develops long term                                                                                     in private equity            through relationships              local investment teams
                              relationships with its business partners to deliver
                              value for shareholders, clients and employees.
                                                                                    YEAR Track RECORD
                                                                                                               assets under
                                                                                                                                                        backed businesses.           across the private
                                                                                                                                                                                     equity asset class.
                                                                                                                                                                                                                        across the globe.

                              ICG invests across the capital structure, with an
                              objective of generating income and consistently                                                                           ICG Enterprise benefits from access to the proprietary deal flow
                              high returns while protecting against investment
                              downside.                                             13
                                                                                                                                                        of investments from ICG’s network and its expertise and insights
                                                                                                                                                        gained from 30 years of investing in private markets.

                              Data as at 31 December 2018

2   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                ICG ENTERPRISE TRUST Annual Report and Accounts 2019      3
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic              Governance               Financial                 Supplementary       Shareholder
Chairman’s statement                                                                                                                                                                                report                                          statements                Information         Information

Strong growth across the                                                                                                                                                       We have a high quality Portfolio
                                                                                                                                                                                                                                                                                         Read more:
                                                                                                                                                                                                                                                                                         board of directors              40
portfolio delivers another                                                                                                                                                     that is increasingly geographically                                                                       corporate
year of double digit growth                                                                                                                                                    diverse and continues to produce                                                                          Governance                       42
                                                                                                                                                                               consistently strong returns

                                                               Performance to 31 January 2019                                                                               Strengthening of the ICG                       As part of this process, Alastair Bruce joined      Progress against
                                                                                                                                                                            Enterprise team and succession                 the Board in May 2018 and became Chairman           strategic goals
                                                                   FTSE All-Share Index                                                                    431%
                                                                                                                                                                            ICG continues to invest in the development     of the Audit Committee in February of this
                                                                   Share price
                                                                                                                                                                            of the investment team, which has              year. Andrew Pomfret will be retiring from
                                                                   Net asset value per share                                                                                                                                                                                   Investment portfolio
                                                               All figures are on a total return basis.
                                                                                                                                                                            benefitted significantly from the enhanced     the Board at the forthcoming AGM, having            as % of net assets
                                                                                                                                                                            support and oversight provided by ICG,         served for over eight years, and I would
                                                                                                                                                                            as a leading alternative asset manager.        like to thank Andrew for his wise counsel
                                                                                                                                                                  173%                                                     and guidance.                                                 95%
                                                                                                                                                                            The team has grown over the last three
                                                                                                                                                                            years. We now have an investment team          Jane Tufnell will join the Board later this                          By increasing the
                                                                                                                                            75%                             with over 60 years’ combined experience        month. She brings extensive financial services                       capital invested in
                                                                                                           63%                     67%
                                                                                                                    54%                                                                                                                                                                         individual
                                                                                                 29%                        31%                                             in private equity, which is supported by       and investment management experience to                              co-investments, the
                                                                         3%                                                                                                                                                                                                        82%
                                                               (4)%                                                                                                         oversight from ICG on the Investment           the Board, and I welcome her. We expect to                           team has been able to
                                                                       1 year                             3 years                 5 years                  10 years         Committee, which includes ICG’s Chief          appoint one further non-executive director                           increase capital
                                                                                                                                                                            Investment Officer and Chief Executive,        during the course of this year and I intend to                       deployment without
                                                                                                                                                                            Benoît Durteste, and Andrew Hawkins,           step down from the Board during 2020,                                the team being any less
                                                                                                                                                                            ICG’s Head of Private Equity Solutions. We     when I will have served on the Board for                2016 2019
                                                            Strong underlying earnings growth and                         previous year and 33% in 2016. A key driver
                                                                                                                                                                            also have a strong dedicated team in legal,    12 years. We will continue to evolve the
                                                            realisations at material uplifts to carrying                  of this has been the increase in proprietary
HIGHLIGHTS                                                                                                                                                                  finance and IR and access to a number of       Board and make further appointments,
                                                            value have driven another year of double                      deal-flow from ICG. Over the last five years,
                                                                                                                                                                            specialist shared resources, including risk,   as appropriate.
                                                            digit growth and I am delighted to report                     high conviction investments have generated                                                                                                           Increase amount deployed into

    NAV per share
                                                            a strong set of results. NAV per share
                                                            increased from 959p to 1,057p, a 12.4%
                                                            total return, significantly outperforming
                                                                                                                          a return of 19% p.a.2 in local currencies, and
                                                                                                                          we expect them to continue to produce
                                                                                                                          strong returns.
                                                                                                                                                                            treasury, compliance and IT.
                                                                                                                                                                            Emma Osborne, who has led the Company’s
                                                                                                                                                                            investment team since 2004, will be moving
                                                                                                                                                                                                                           A cautious and selective
                                                                                                                                                                                                                           approach remains key in the
                                                                                                                                                                                                                           current environment
                                                                                                                                                                                                                                                                               high conviction investments
                                                                                                                                                                                                                                                                               as % of capital invested

                                                            the loss from the FTSE All-Share of -3.8%.                                                                      to a senior adviser role within ICG at the     The macro-economic backdrop remains                                  Our high conviction
                                                                                                                          The Portfolio is more geographically                                                                                                                           50%
                                                                                                                                                                            end of 2019. Over the last 14 years,           uncertain, geopolitical risks are increasing                         investments
                                                            Continued progress towards                                    diverse. In particular, we have made a number
                                                                                                                                                                            Emma has built a strong multi-disciplined      and volatility is rising. Against this backdrop,                     (co-investments,
                                                            strategic goals                                               of new commitments and co-investments in                                                                                                                              secondary fund
                                                                                                                                                                            investment team with significant private       the Manager remains patient and selective
                                                                                                                          the US, which now represents 26% of the                                                                                                                               investments and ICG

    +12.4 %
                                                            We continue to make excellent progress                                                                          equity expertise and a strong track record                                                             33%
                                                                                                                          Portfolio. The US is the largest private equity                                                  in deploying capital, focusing on                                    funds) represented
                                                            towards our strategic goals. In particular,                                                                     of outperformance. As a senior adviser,
                                                                                                                          market in the world, and over the medium                                                         opportunities that the team has a high                               41% of the Portfolio
                                                            becoming more fully invested, increasing our                                                                    she will remain on the Investment                                                                                   and 50% of capital
                                                                                                                          term, we expect US investments to represent                                                      conviction will outperform and in sectors
    NAV per share                                           weighting towards high conviction                                                                               Committee to provide oversight of the                                                                               deployed in the year.
                                                                                                                          30% to 40% of the Portfolio.                                                                     with non-cyclical growth drivers. In the
    total return                                            investments and becoming more                                                                                   Portfolio. ICG is in the process of                                                                                 Over the medium term
                                                                                                                                                                                                                           case of our ICG investments, many of                                 we expect 50% to 60%
                                                            geographically diverse.                                                                                         identifying Emma’s successor, and with
                                                                                                                          Dividend                                                                                         these investments also have the benefit                              of the Portfolio to be
                                                            The Portfolio1 now represents 95% of net                      We know that a reliable source of income is       her assistance, we expect that person          of structural downside protection, which                2016 2019    weighted towards
                                                            assets versus 82% three years ago. By                         important for shareholders so last year we        to transition into the leadership of the       we believe will serve us well should the                             these investments.
                                                            increasing the capital invested in individual                 committed to a progressive annual dividend        investment team in the second half of          macro-economic environment deteriorate.
                                                            co-investments, we have been able to                          policy and quarterly payments. In line with       this year. Emma has provided excellent
                                                                                                                                                                            leadership of the team and I am                I am confident our differentiated portfolio,        Increase in exposure to US market (%)
                                                            increase capital deployment without being                     this, we are proposing a final dividend of 7p,
                                                                                                                                                                            delighted we will continue to benefit          highly selective approach and focus on
                                                            any less selective as the team recycles the                   which, together with the three interim
                                                                                                                                                                            from her involvement.                          delivering consistently strong returns will
                                                            record levels of proceeds from the                            dividends of 5p each, will take total
                                                                                                                                                                                                                           continue to generate significant growth
                                                            Portfolio into compelling opportunities.                      dividends for the year to 22p. This is a 4.8%                                                                                                                  26%
                                                                                                                                                                            continued evolution                            well in excess of public markets.
                                                                                                                          increase on the prior year dividend of 21p                                                                                                                            Our exposure to the US
                                                            We have a target for high conviction                                                                            of the board
                                                                                                                          and a 2.7% yield on the year-end share price.                                                    JEREMY TIGUE                                                         market has increased
                                                            investments to represent 50% – 60% of the                                                                       We have worked closely over the last few                                                                            from 14% three years
                                                            Portfolio and this year they made up 50%                                                                        years to ensure that changes to the Board      Chairman                                                             ago to 26% at the year
                                                            of capital deployed, up from 42% in the                                                                         strike the right balance between continuity    12 April 2019                                                        end. Over the medium
1 In the Chairman’s Statement, Manager’s Review and
  Supplementary Information, reference is made to the                                                                                                                       and succession.                                                                                                     term we expect US
  “Portfolio”. The Portfolio is defined as the aggregate                                                                                                                                                                                                                                        investments to
  of the investment portfolios of the Company and of its                                                                                                                                                                                                                                        represent 30% to 40%
  subsidiary limited partnerships. The rationale for this                                                                                                                                                                                                                                       of the Portfolio.
  APM is discussed in detail in the Glossary.                                                                                                                                                                                                                                      2016 2019
2 Net of management fees and carried interest.

    4   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                                                                              ICG ENTERPRISE TRUST Annual Report and Accounts 2019            5
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic       Governance             Financial            Supplementary          Shareholder
INVESTING IN PRIVATE EQUITY                                                                                                                                                          report                                 statements           Information            Information

An active ownership                                                                                                                                                                                                                                         Read more:
                                                                                                                                                         within private equity, we have a
model driving returns in                                                                                                                                 Highly focused approach, aiming                                                                    manager’s review                     16
                                                                                                                                                         for strong and consistent returns
excess of public markets                                                                                                                                 with relatively low downside risk
                                                                                                                                                                                                                                                            private equity
                                                                                                                                                                                                                                                            explained                           88

                                                                                                                                                     OUR INVESTMENT philosophy
                                                                                                                                                     Targeting defensive growth

                                                                                                                                                                                                                  all private equity

Private equity backed companies touch           AN ACTIVE OWNERSHIP MODEL                                                    Value
most of us in our everyday lives, whether it    How private equity creates value                                            creation
                                                                                                                                                                                                                                                                     Buyouts offer more
be a restaurant chain, a manufacturer, a                                                                                                                                                                                                                             consistent returns with lower
healthcare provider, or a software company.                                                                                                                                                                                                                          risk than other private equity
                                                                                                                                                                                                                                                                     strategies e.g. venture capital
Most sectors in almost every country have                                  Exit planning
                                                                                                                                                                                                                                                                     and distressed debt
companies owned and funded through
                                                                                                                                                     Developed markets have a
private equity investment. With an                                                                                                                   more established private
                                                                        Financial discipline                                                                                                                         developed
opportunity set far greater than that available                                                                                                      equity sector and more

                                                                                                                                  Active ownership
                                                                                                                                                     experienced managers
in the listed market, private equity has, over
multiple cycles, generated returns that have                        Operational improvements
significantly outperformed public markets.                                                                                                                                                                                                                           Mid-market and larger
                                                                                                                                                                                                                   mid-market and                                    companies are more likely to
It is an active ownership model. When you                                   Strategic change                                                                                                                                                                         be more resilient to economic
                                                                                                                                                                                                                    larger deals
                                                                                                                                                                                                                                                                     cycles and typically attract
invest in private equity you are investing in                                                                                                                                                                                                                        stronger management teams
the skills and expertise of a manager to                         Governance and responsible investing
identify and work with companies whose                                                                                                               Leading private equity
growth can be unlocked through a focused                                                                                                             managers with track records                                   leading private
                                                                         Extensive due diligence                                                     of investing and adding value                                equity managers
and hands-on approach. It is not a simple                                                                                                            through cycles

asset class to navigate, barriers to entry are                                                                                                                                                                                                                       Defensive growth – targeting
high and manager selection is key. However,          Strong alignment of interest and focused stakeholder group                                                                                                                                                      companies with strong market
                                                                                                                                                                                                                                                                     positions and high barriers to
when executed well private equity’s active                                                                                                                                                                           Defensive
                                                                                                                                                                                                                                                                     entry in industries with low
ownership model and focus on creating value                          Long term investment horizon                                                                                                                    companies                                       correlation to economic
                                                                                                                                                                                                                                                                     cycles, strong cash flow
through operational and strategic change has                                                                                                                                                                                                                         conversion, high recurring
driven strong returns for investors.                                                                                                                                                                                                                                 revenues and high margins

How private equity                               Extensive due diligence                        Strategic change, operational
creates value                                    Due to the illiquid nature of investment in    improvement and financial discipline
Long term investment horizon                     private companies, private equity managers     Private equity managers provide focused
When compared to listed companies, there         will only invest after a long period of deep   strategic and operational guidance to                Case study: CO-INVESTMENT
is less short term performance pressure.         investigation, in most cases alongside         management teams. They bring significant             IN endeavor schools
This long term view means that fundamental       management.                                    financial and capital markets expertise,
value creation can be prioritised over short                                                    encouraging strong financial discipline.
                                             Governance and responsible investing                                                                    • Leading US operator of schools for children
term profit targets.
                                             Through investing responsibly and                  Exit planning                                          aged from four to 13
Strong alignment of interest and             considering Environmental, Social and              Ultimately, all private equity backed
                                                                                                                                                     • Currently has 43 campuses, serving over
focused stakeholder group                    Governance (“ESG”) issues at all stages of         companies are for sale. Ensuring a business
                                                                                                                                                       6,500 students across nine states in the US
Remuneration structures prioritise equity    the investment cycle, private equity is able       is an attractive asset for a purchaser, by
incentivisation, aligning company management to manage ESG risks to generate long term          creating value and generating a strong               • Continuing to grow, both by greenfield
teams with private equity managers. In       sustainable returns.                               return on capital invested, is fundamental             expansion and by selectively acquiring
addition, private equity backed companies                                                       to the investment process.                             high performing schools
benefit from a focused group of stakeholders
                                                                                                                                                     • Endeavor benefits from strong underlying
that have the expertise and control to drive
                                                                                                                                                       growth trends and stable cash flows
strategic and operational change.
                                                                                                                                                     • Value of ICG Enterprise holding is £9m

 6    ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                           READ MORE ON PAGE 23                                                        ICG ENTERPRISE TRUST Annual Report and Accounts 2019            7
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic              Governance     Financial              Supplementary           Shareholder
our approach                                                                                                                                    report                                statements             Information             Information

balancing risk                                                                                                                                                                        CONCENTRATION
and reward                                                                                                                                                                            We proactively increase exposure to companies that we have a high
                                                                                                                                                                                      conviction will outperform through the cycle. We enhance returns
                                                                                                                                                                                      and increase visibility and control on underlying performance drivers
                                                                                                                                                                                      through co-investments and secondary fund investments. These
                                                                                                                                                                                      investments sit alongside ICG funds in our high conviction portfolio.
                                                                                                                                                                                      We mitigate the more concentrated risk in our high conviction
BALANCING CONCENTRATION                                                                                                                                                               portfolio through a highly selective approach, a focus on defensive
AND DIVERSIFICATION WITH                                                                                                                                                              growth and close monitoring of performance.
HIGH CONVICTION INVESTMENTS                                                                                                                                                           Over the medium term we expect 50% – 60% of the Portfolio to be
UNDERPINNED BY A PORTFOLIO                                                                                                                                                            weighted towards high conviction investments.

                                                                                                                                                                                      19.0% P.A.
                                                                                                                                                                                      local currency Returns from high conviction
                                                                                                                                                                                      investments over the last five years 1

We invest in companies managed by ICG and other
leading private equity managers, in both cases through
funds as well as directly.
This approach allows us to proactively increase
exposure to companies that we have a high conviction
will outperform, enabling us to strike the right balance
between concentration and diversification, risk and
reward. While diversification at both the manager and
company level reduces risk, concentration in our high
conviction investments enhances returns and allows
individual portfolio companies to make a difference         DIVERSIFICATION
to performance.                                             Our portfolio of leading third party private equity
                                                            funds provides a diversified base of strong returns
The common theme in our high conviction portfolio           and forms the foundation of our strategy. It is the
is that we have selected the underlying companies           key source of deal flow for the third party
for investment, whether this be an ICG managed              co-investments and secondary fund investments in our
                                                            high conviction portfolio. It also provides insights that
investment, third party co-investment or secondary
                                                            inform the management of the portfolio as a whole.
fund investment. This approach is in contrast to
                                                            We manage risk in our funds portfolio through
a conventional fund of funds in which the third
                                                            diversification, strict application of our investment
party managers make all of the underlying                   criteria, close monitoring of performance and active        Case study: TAILWIND CAPITAL
investment decisions.                                       portfolio management through secondary sales.               and abode healthcare
Our mandate allows us to be nimble and take advantage
of opportunities to adjust the mix of investments
dependent on market conditions, developments in the         13.1% p.a.
                                                            local CURRENCY Returns FROM THE THIRD PARTY
                                                                                                                        • US mid-market private equity investor,
                                                                                                                          focused on sectors with strong defensive
                                                                                                                          growth characteristics
portfolio, the flow of opportunities and relative value.    FUNDS PORTFOLIO OVER THe LAST FIVE YEARS 1
                                                                                                                        • Committed $15m to Tailwind III in June
This flexibility and our highly selective approach allows                                                                 2018 and co-invested $6m alongside the
us both to enhance returns and to manage risk.                                                                            fund in Abode Healthcare in July 2018
                                                                                                                        • Abode provides hospice and home-care
                                                                                                                          services across the US
                                                                                                                        • Situations such as these fit well with our
                                                                                                                          strategy, allowing us to deploy capital
                                                            1 This is an APM as defined in the Glossary                   into high conviction investments while
                                                                                                                          growing our primary investment
 8   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                 programme in the US                                       ICG ENTERPRISE TRUST Annual Report and Accounts 2019                9
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic        Governance   Financial           Supplementary         Shareholder
How we create value                                                                                                               report                        statements          Information           Information

CREATING VALUE THROUGH                                                                                                                                                                         Read more:

A HIGHLY SELECTIVE AND                                                                                                                                                                         Manager’s review            16
                                                                                                                                                                                               key performance
ACTIVE INVESTMENT PROCESS                                                                                                                                                                      INDICATORS                  14

 Investment strategy                            Investment process                                                                                                   Growth


                                                                                                                                                                               15.3% p.a.
                                                                                                      The team actively sources new
                                                                                                      opportunities, maintaining close
                                                                                                      relationships with private equity
                                                                                                      managers and intermediaries. As part of
                                                                                                      ICG, the team also benefits from insights
                                                                                                                                                                               Portfolio growth
                                                             Reinvest                                 and proprietary deal flow from the wider                                 over the last five
                                                                or                                                                                                             years (local currency)
                                                                                                      ICG network.
                                                                                                      Analyse and select
                                                                                                      Ahead of any investment, deep and
                                                                                                      granular due diligence is undertaken with
                                                                                                      strict application of investment criteria

                                                                     Our dedicated
                                                                                                      and with the benefit of insights from ICG.
A focused investment                                              investment team has                 Monitor and actively                                                     Average realisation
strategy with a                                                                                       manage portfolio                             Generate                    uplift over the last
                                                Finance                a long track
flexible mandate                                and risk                                              Underlying performance is closely             growth                     five years
                                                                   record of investing                monitored and the Portfolio’s exposures
                                                                    in private equity                 are actively managed to ensure
                                                                                                      consistently strong performance.
                                                                                             select   Finance and risk
                                                                                                      Financial strength is maintained
                                                                                                      through the cycle, with a rigorous
                                                                                                      risk-management framework to
                                                                                                      support long term investment.
                                                             Monitor and
                                                                                                                                                                               Average multiple of
                                                            actively manage                                                                                                    cost of realisations
                                                               portfolio                              Reinvest or return                                                       over the last five years
                                                                                                      Proceeds from the sales of portfolio
                                                                                                      companies are reinvested in new
                                                                                                      investment opportunities, or returned
                                                                                                      to shareholders through dividends or
                                                                                                      share buybacks.

10   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                           ICG ENTERPRISE TRUST Annual Report and Accounts 2019   11
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic   Governance   Financial           Supplementary         Shareholder
A strong track record                                                                                                                                                          report                   statements          Information           Information

Outperforming public                                                                                                                                          An investment in ICG Enterprise made
markets through                                                                                                                                               on the year end date in any of the last
multiple cycles                                                                                                                                               20 years would have outperformed the
                                                                                                                                                              FTSE All-Share Index (Total Return)
                                                                                                                                                              if still held on 31 January 2019

net asset value                               share price
                                                                                               4.6x                                         £4561
Our highly selective approach and flexible
mandate have delivered returns for our
                                              The Company’s share price was 822p
                                              at the year end, generating a total return
                                              of 3.0% in the 12 months compared to the
                                                                                               share price                                                    5.3x                                             ICG Enterprise
                                                                                                                                                                                                                                                   NAV TOTAL RETURN
shareholders well in excess of public                                                          total return                                                   NAV total return

                                                                                               OVER THe LAST                                                                                                   nav Total return
markets over multiple cycles.                 FTSE All-Share (Total Return) which fell by      20 YEARS 1
                                                                                                                                                              OVER THe LAST 20 YEARS
                                              3.8%, an outperformance of 6.8% over the
The 12.4% NAV per share total return in the
                                              same period.                                                                      £279
year further extends the Company’s long                                                            FTSE All-Share                                                                                              FTSE All-Share Index
track record of growth and outperformance.    Over the longer term, ICG Enterprise’s               ICG Enterprise                                                                                              total return
                                                                                                   share price
                                              share price has continued to deliver returns
Over the last 20 years ICG Enterprise’s NAV
has grown by 8.6% p.a., outperforming the
                                              for shareholders above those of the
                                              FTSE All-Share (Total Return). £100
FTSE All-Share (Total Return) by 3.4% p.a.
                                              invested in ICG Enterprise in December
over the same period.
                                              1998 would now be worth £456, compared
                                              to £279 if invested in the FTSE All-Share
                                              (Total Return).                                                                                         300
                                                                                                                    Dec 1998   Jan 2019    Jan 2019

                                                                                               1   Share price and dividends at 31 January 2019.

                                                                                                                                                      200   £100
                                                         Case study:                         • Cambium provides educational software

                                                         CamBIum – icg                         for primary schools in the United States
                                                         strategic EQUITY                    • It was acquired as part of a restructuring
                                                                                               transaction originated by the ICG Strategic                  Dec 1998                                                                                      Jan 2019
                                                                                               Equity team in 2016
                                                                                             • The ICG Strategic Equity team acquired
                                                                                               Cambium at an effective entry multiple of
                                                                                               less than 7x EBITDA. Over the next two
                                                                                               years ICG played an active role in the
                                                                                               management of Cambium, helping to drive
                                                                                               strategic change and to make key changes
                                                                                               to Cambium’s senior management team
                                                                                             • Between 2016 and 2018, EBITDA grew
                                                                                               by 10% p.a. and free cash flow was used
                                                                                               to completely deleverage the business
                                                                                             • In 2018, Cambium was realised generating
                                                                                               a return for ICG Enterprise of 4.8x cost

                                                                                             READ MORE ON PAGE 18

 12   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                                  ICG ENTERPRISE TRUST Annual Report and Accounts 2019   13
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic                Governance                Financial               Supplementary             Shareholder
Key performance indicators                                                                                                                                report                                             statements              Information               Information

a focus on generating
long term growth for
The Company regularly reviews its KPIs to ensure that they are the                                              Key
most effective metrics for measuring the Company’s performance                                                     New KPI
and monitoring progress in delivering against its strategic objectives
of providing shareholders with long term capital growth through
investment in unquoted companies.

  NAV per Share                           15.4% p.a.                 Rationale
                                                                                                                               Progress in the year                                Links to strategic objective              Examples of related factors that we monitor
  Total Return                                                       Includes all of the components of the Company’s
                                 12.4%                                                                                         The Company has continued to build on its           • Maximising long term capital            • Performance relative to the wider public market
                                                        11.8% p.a.   performance. It reflects the attributable value of
                                                                                                                               strong performance, reporting NAV total                growth through a flexible mandate        and in particular the FTSE All-Share (TR)

                                                                     a shareholder’s investment in ICG Enterprise.
                                                                                                                               return of 12.4% in the 12 months to 31 January         and highly selective approach          • Performance relative to listed private equity
                                                                     NAV per share growth is shown net of all costs            2019 (31 January 2018: 12.5%).                                                                  peer group
                                                                     associated with running the Company and includes                                                                                                        • Monitoring of the Portfolio performance
                                                                                                                               This return compares favourably to the loss                                                   • Valuations provided by private equity managers
                                                                     the impact of any movement in foreign exchange on
                                                                                                                               from the FTSE All-Share (Total Return) of -3.8%                                               • Impact of foreign exchange on valuations
                                                                                                                               over the same period.                                                                         • Effect of financing (cash drag) on performance
                                                                                                                                                                                                                             • Accretive impact of any share buy backs
                                 1 Year    3 Years       5 Years                                                                                                                                                             • Ongoing charges

  Total shareholder                       17.6% p.a.                 Rationale
                                                                                                                               Progress in the year                                Links to investment objective             Examples of related factors that we monitor
  return                                                             Measures performance in the delivery of
                                                                                                                               Share price increased from 818p to 822p,            • Maximising shareholder returns          • Performance relative to the wider public market
                                                                     shareholder value, after taking into account share
                                                                                                                               which together with dividends of 21p                   through long term capital growth         and in particular the FTSE All-Share (TR)

  3.0%                                                  10.8% p.a.   price movements (capital growth) and any
                                                                                                                               generated a total shareholder return of 3.0%        • Progressive annual dividend policy      • Performance relative to listed private equity
                                                                     dividends paid in the period.
                                                                                                                               in the 12 months to 31 January 2019                                                             peer group
                                                                     The share price total return will differ from NAV         (31 January 2018: 20.1%).                                                                     • Level of discount in absolute terms and relative
                                                                     per share total return depending on the movement                                                                                                          to the wider listed private equity peer group
                                                                                                                               This return compares favourably to the loss                                                   • Trading liquidity and demand for Company’s shares
                                 3.0%                                in the share price discount to NAV per share.
                                                                                                                               from the FTSE All-Share (Total Return) of -3.8%                                                 in conjunction with marketing activity
                                                                                                                               over the same period.
                                 1 Year    3 Years       5 Years

  Portfolio                                17.7% p.a.                Rationale
                                                                                                                               Progress in the year                                Links to investment objective             Examples of related factors that we monitor
  Return on a local              15.0%                  15.3% p.a.   A measure of the performance of the investment
                                                                                                                               The Portfolio generated a local currency return     • Maximising long term capital            • Monitoring of the Portfolio performance and watchlist
  Currency Basis                                                     team’s selective investment approach and
                                                                                                                               of 15.0% in the 12 months to 31 January 2019,          growth through a flexible mandate      • Valuations provided by private equity managers
                                                                     management of the portfolio.
                                                                                                                               net of management fees and carried interest            and highly selective approach          • Performance of the high conviction investments and

  15.0%                                                              Portfolio Return on a Local Currency Basis
                                                                     measures the total movement in the underlying
                                                                     investment portfolio valuation. It is net of underlying
                                                                     managers’ fees and carried interest and before
                                                                                                                               charged by the underlying managers.                                                             funds portfolio
                                                                                                                                                                                                                             • Detailed analysis of the Top 30 companies’
                                                                                                                                                                                                                               performance, EBITDA and revenue growth, leverage,
                                                                                                                                                                                                                               valuation multiples, performance against investment
                                                                     taking into account the impact of foreign exchange                                                                                                        thesis and exit prospects
                                                                     on valuations.                                                                                                                                          • Monitoring of the overall EBITDA and revenue growth,
                                 1 Year    3 Years       5 Years                                                                                                                                                               leverage and valuation multiples of the Portfolio

 Total Dividend                                            22p       Rationale
                                 20p                                                                                           Progress in the year                                Links to investment objective             Examples of related factors that we monitor
 per Ordinary share                                                  Demonstrates the Company’s commitment
                                                                                                                               The directors are proposing a final dividend of     • The Board recognises that a             • Distributable reserves
 in Year                                                             to a progressive annual dividend.
                                                                                                                               7p, which, together with the interim dividends         reliable source of growing             • Cash balances
                                                                     In the absence of unforeseen circumstances                of 15p, will take total dividends for the year to      dividends is an important part of      • Proceeds received during the year

 22p                                                                 the Board intends to grow the annual dividend
                                                                     Distributions by way of dividends may be paid from
                                                                                                                               22p. This is a 4.8% increase on the prior year
                                                                                                                               dividend of 21p and a 2.7% yield on the year-end
                                                                                                                               share price of 822p.
                                                                                                                                                                                      shareholder total return over both
                                                                                                                                                                                      the short and the longer terms
                                                                                                                                                                                                                             • Investment pipeline and available financing

                                                                     the revenue reserve and/or the realised capital
                                                                     reserve, as permitted by the Company’s articles.
                                 2017       2018          2019

14   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                                          ICG ENTERPRISE TRUST Annual Report and Accounts 2019            15
ENTERPRISE TRUST A leading listed private equity investor - Generating long term growth for shareholders
Strategic         Governance          Financial            Supplementary                Shareholder
Manager’s review                                                                                                                                                   report                                statements           Information                  Information

10th consecutive year of
double digit portfolio

Performance overview
Profit growth and realisations drive
10th consecutive year of double digit
                                               Top 30 companies dominated by high
                                               conviction investments and generating
                                               double digit earnings growth
                                                                                            LOCAL CURRENCY PORTFOLIO RETURN1                Third party                                                                             High conviction
underlying growth                              Our largest 30 underlying companies                                                          funds portfolio                                                                         companies
Continued strong operating performance         (“Top 30”) represent 46% of the Portfolio    12 months to 31 January 2018: 16%
                                                                                                                                            • Underlying companies selected by                                                      • Underlying companies
and realisations at significant uplifts to     by value (31 January 2018: 47%), and are

                                                                                                                                              36 leading private equity managers                                                      selected by ICG
carrying value generated a return of 15.0%     weighted towards our high conviction
in local currencies, or 16.6% in sterling.
These results represent the 10th
                                               investments, which make up 70% of the
                                               Top 30 by value.                             TOP 30 COMPANIES EARNINGS GROWTH
                                                                                                                                            • Strong relationships in many
                                                                                                                                              cases over multiple fund cycles                 £695m
                                                                                                                                                                                                 total value of
                                                                                                                                                                                                                  1                 • Increases exposure to
                                                                                                                                                                                                                                      attractive assets
                                                                                            (LAST 12 MONTHS)                                • A base of strong diversified returns                                                  • Enhances returns, increases
consecutive year of double digit underlying                                                                                                                                                  investment portfolio
                                               The Top 30 performed well in the year,                                                       • Source of deal flow and insights                                                        visibility and control
portfolio growth, over which time period                                                    31 January 2018: 12%
                                               reporting average LTM earnings growth                                                          for the high conviction portfolio                                                     • Enables greater flexibility
the Portfolio return has averaged 16.4%
                                               of 16% and revenue growth of 13%. It is      1   This is an APM as defined in the Glossary   • Five year constant currency returns                                                     in portfolio management
p.a. in local currencies. Approximately 35%
                                               particularly encouraging that a third of                                                       of 13.1% p.a.4                                                                        • Targeting 50% – 60% weighting
of the valuation gain in the year came from
realisations and IPOs.
                                               these companies are generating LTM
                                               earnings growth in excess of 20%, driven
                                                                                                                                                                                           ICG managed investments
                                                                                                                                                                                                                                    • Five year constant currency
                                                                                                                                                                                                                                      returns of 19.0% p.a.4
Portfolio overview                             by both organic growth and M&A activity.
High conviction investments underpinned        Over the year, the valuation multiples of
by a portfolio of leading funds                the Top 30 increased marginally from
Our Portfolio combines investments
managed by ICG and those managed by
                                               10.6x to 10.9x, a reflection of the change
                                               of mix and weightings, rather than an                                                                                                               15.8%
third parties, in both cases through funds
and directly and at 31 January 2019 was
                                               increase in aggregate multiples overall.
                                               The net debt/EBITDA ratio remained flat
                                                                                                                                                          59%                                 Third party direct
                                                                                                                                                                                               co-investments                                    41%
valued at £695m.                               at 4.2x, although mix and weightings
Third party funds were valued at £407m,        also had an impact with the majority of
                                               companies de-levering in the year on
                                                                                                                                                                                      Third party secondary investments
providing the Portfolio with a base of
strong diversified returns and also deal
flow for our high conviction portfolio. The
underlying funds have a bias to mid-market
                                               a like-for-like basis.
                                               Compared with the portfolio as a whole,
                                                                                                                                             Third party funds PORTFOLIO
                                                                                                                                                                                                                                       high conviction COMPANIES

                                               the Top 30 have a higher weighting to
and large-cap European and US private          larger deals and to the healthcare and
equity managers and over the last five years   education sectors, reflecting our strong                                                      14.8% invested in funds managed                    Insights and                           Within the ICG weighting, we
this portfolio has generated a return of                                                                                                     by the former manager, Graphite                      source of                            are invested in four of ICG’s
                                               focus on defensive growth in our                                                              Capital, a leading mid-market                     deal flow for                           strategies with a focus on funds
13.1% p.a. in local currencies.                co-investments.                                                                               buyout manager.                                     third party                           that have a bias to equity returns
                                                                                                                                                                                              co-investments                           targeting annualised gross
High conviction investments, which                                                                                                                                                            and secondary                            returns of 15% – 20%.
includes those managed directly by ICG as                                                                                                                                                       investments                            Of the 19.9% invested with ICG,
well as our third party co-investments and                                                                                                                                                                                             10.1% is via funds (both primary
secondary funds, were valued at £288m.                                                                                                                                                                                                 and secondary investments) and
                                                                                                                                                                                                                                       9.8% is via co-investments.
These are underlying companies that we
have proactively increased exposure to,
where we have a high conviction they will
outperform and over the last five years                                                            we focus on the buyout
                                                                                                                                             43.8% invested in other third
                                                                                                                                             party funds. The funds portfolio
                                                                                                                                             has a bias to mid-market and
                                                                                                                                                                                                   Third party                         21.5% of the portfolio is
these investments have generated a local                                                           segment of the market,                    large cap European and US                                                                 weighted towards third party
                                                                                                                                                                                                  primary funds
currency return of 19.0% p.a. We have a                                                            in which target companies                 private equity managers.                                                                  co-investments and secondary
strategic goal of increasing the weighting                                                                                                                                                                                             investments.
                                                                                                   are almost invariably
of these investments to 50% – 60% of the                                                           established, profitable
Portfolio.                                                                                         and cash generative, which
                                                                                                   we believe will generate                                                                                                            1   31 January 2018: £601m
                                                                                                   STRONGER AND MORE                                                                                                                   2   31 January 2018: £349m
                                                                                                   CONSISTENT RETURNS THAN                                                                                                             3   31 January 2018: £252m
                                                                                                                                                                                                                                       4   This is an APM as defined
                                                                                                   OTHER PRIVATE EQUITY                                                                                                                    in the Glossary

 16   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                                    ICG ENTERPRISE TRUST Annual Report and Accounts 2019          17
Strategic                Governance             Financial               Supplementary                  Shareholder
Manager’s review continued                                                           report                                          statements              Information                    Information


Cambium provides educational
software for primary schools in
the United States. ICG Enterprise
                                                             Continued strong realisation activity
                                                             at significant uplifts to carrying value
                                                                                                              In addition to sales by our underlying
                                                                                                              managers, we completed a secondary sale
                                                                                                                                                             realisation uplift to previous
invested in the company in 2016                              and cost                                         of our interest in GCP Europe Fund II and      carrying value3
alongside the ICG Strategic                                  The Portfolio continued to be highly cash        the co-investment in Frontier Medical
                                                             generative in the year as our underlying         alongside it, which generated a further        31 January 2018: 40%
Equity team
                                                             managers took advantage of the sustained         £10m of proceeds. These investments have

4.8x                                                         favourable exit environment, generating
                                                             proceeds of £153m1. While this is lower than
                                                             the record £217m, generated in the year to
                                                                                                              performed well and we took the
                                                                                                              opportunity to lock-in a strong return at a
                                                                                                              time when we perceived the downside risks
                                                                                                                                                             multiple of cost of realisations3
return on investment                                         January 2018, at 26%1 of the opening             to outweigh the further upside potential.
for icg enterprise                                                                                                                                           31 January 2018: 2.7x
                                                             Portfolio, cash generation remained              This transaction highlights our active
Cambium was acquired in 2016 as part of a                    relatively high.                                 approach to managing the portfolio.
restructuring transaction originated by the ICG              The realisations of 60 companies                 From our largest 30 underlying companies
Strategic Equitys team. The team agreed to acquire           completed at an average uplift of 35%2           at the start of the year, six were fully
interests in US based mid-market manager, Veronis            to the previous carrying value, which is         realised: Cambium from the ICG portfolio;
Suhler Stevenson’s (“VSS”) 2005 vintage fund. VSS            consistent with the long term trend of           The Laine Pub Company, Swiss Education
believed that the remaining portfolio needed additional      significant uplifts being generated when         and Frontier Medical, from our third party
time to optimise returns but much of the investor base       companies are sold. The average return           co-investment portfolio; and CeramTec and
wanted to realise their interests in the fund, which was     multiple of 2.4x cost was also strong,           TMF from the third party funds portfolio,
in its 11th year.                                            reflecting a number of highly successful         including a secondary investment in the
The restructuring of the fund resulted in ICG Strategic      investments realised in the year with over a     latter company.
Equity providing additional capital to invest in the         third, by number, being sold for more than
                                                             3.0x cost. Over the last five years exits have   New investments
underlying companies, extending the fund’s life and
                                                             averaged 33% uplift to carrying value and a      Selective investment into high
providing existing investors with an option to exit. As a
                                                             multiple of 2.3x cost.                           conviction opportunities
result, the ICG Strategic Equity team acquired Cambium
                                                                                                              We invested a total of £158m in the year,
at a highly attractive entry multiple. ICG Enterprise        The sale of Cambium by the ICG Strategic         up from £142m in the year to January 2018.
participated in the transaction through its commitment       Equity team was by far the most significant      Half of new investment was into our high
to ICG Strategic Secondaries II and directly.                realisation in terms of both total proceeds      conviction portfolio, up from 42% in the
The ICG Strategic Equity team played an active role in       (£18.6m) and the gain in the year (+113%).       year to January 2018. Investments
the management of the Cambium, helping to drive              Cambium, which provides educational              sourced through the ICG network
strategic change and to make key changes to                  software for US schools, was acquired as         accounted for 27% of capital deployed,
Cambium’s senior management team. The team also              part of a fund restructuring transaction in      including two co-investments and a
helped to accelerate the digitisation of the business        2016 and was sold in December 2018 for           secondary investment, totalling £22m,
and its conversion to a subscription based model as          4.8x the original cost, a gross IRR of 82%.      sourced from three of the in-house teams
well as working with VSS to formulate an exit strategy.      IPOs also contributed to performance,            we partner with. We also completed three
Between 2016 and 2018, EBITDA grew by 10% p.a.               with three companies listed during the year.     co-investments and a secondary investment
and free cash flow was used to completely deleverage         The most significant of these was Ceridian,      alongside our third party managers,
the business.                                                a global human capital management                totalling £35m, all of which were US based.
In December 2018, Cambium was sold for $685m, a              software company, in which we co-invested        Co-investments have always been a feature
113% uplift to the January 2018 valuation and a gross        in 2007 alongside Thomas H Lee. The              of our strategy and have performed
IRR on the investment of 82%. The transaction                company floated in April 2018 at $22 per         strongly over multiple cycles. Over the
demonstrated the ability of the Strategic Equity team        share and at the year end the share price        last three years we have increased capital
to acquire companies at attractive valuations and the        had risen to $41. Over the course of the         deployed in individual co-investments,
value of its active operational involvement to generate      year the value of our holding in Ceridian        allowing us to increase deployment, while at
strong returns.                                              increased by 178% which moved it from the        the same time not being any less selective.
                                                             27th largest underlying company at the                                                          1 Refers to proceeds generated from underlying
                                                                                                                                                               portfolio (excludes secondary sales)
                                                             start of the year to the 8th at January 2019.
                                                                                                                                                             2 Uplift figure excludes publically listed companies
                                                                                                                                                               that were exited via multiple share sales
                                                                                                                                                             3 This is an APM as defined in the Glossary

 18   ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                ICG ENTERPRISE TRUST Annual Report and Accounts 2019                      19
Strategic               Governance     Financial           Supplementary         Shareholder
Manager’s review continued                                                                                                                                                                     report                                 statements          Information           Information

                                                                                                                                                                        INVESTING IN STRONG
                                                                                                                                                                        AND CONSISTENT GROWTH
                                                                                                                                                                        Using our relationships with leading managers
                                                                                                                                                                        to source attractive co-investments for our
                                                                                                                                                                        high conviction portfolio

Our focus remains on defensive growth                      • IRI (a market leading provider of                        Of the seven third party fund commitments,        iri is one of the world’s leading
businesses with high cash flow conversion                    “must-have” data and predictive analytics                three are to European managers we have            data providers to the Consumer
which have demonstrated resilience to                        to consumer goods manufacturers)                         invested with for many years (Graphite Capital,   Packaged Goods (“CPG”) industries.
economic cycles. The investments with the                    co-investment alongside New Mountain                     Bowmark Capital and Bain Capital). We also        ICG Enterprise co-invested $15
ICG Europe and Asia Pacific subordinated                     Capital, in which we invested £11m                       added four new manager relationships of           million in the company in December
debt and equity teams also feature a                       • Endeavor Schools (a US schools                           which three are focused on the US mid-market      2018, alongside New Mountain
combination of investments across the capital                operator) co-investment alongside                        (The Jordan Company, Tailwind Capital and
structure which provides an element of                       education investment specialist Leeds                    Five Arrows Capital Partners) and one on the      IRI was established in 1979. The initial idea was to take
downside protection. While defensive growth                  Equity Partners, in which we invested £8m                European mid-market (Five Arrows Principal        advantage of the development of the then nascent
and structural downside protection are our                                                                            Investments). The Portfolio is increasingly       technology of barcode scanners to try to measure
                                                           10 new fund commitments to both
key areas of focus, we also remain alert to                                                                           geographically diverse; of our 28 core            consumer behaviour by supplying a small number of local
                                                           existing and new manager relationships
opportunities where we can find relative                                                                              manager relationships, nine are US managers       supermarkets with scanners. 40 years later, the company
                                                           We completed 10 new fund commitments
value in the current challenging market,                                                                              and over the medium term we expect our            has grown into a global leader, providing data about
                                                           in the year totalling £162m. In addition, we
usually as a result of unusual transaction                                                                            weighting to the US market to increase to         consumption patterns and behaviour to the world’s
                                                           committed £20m to a new ICG Strategic
dynamics. Relative value is a feature of                                                                              30% – 40% of the Portfolio.                       leading consumer packaged goods manufacturers.
                                                           Equity transaction, and a number of other
investments made by the ICG Strategic Equity
                                                           commitments relating to co-investments                     Four of the 10 new funds have already led to      New Mountain originally acquired IRI from a specialist
team which completed five transactions in the
                                                           and secondaries, taking the total of new                   co-investments or secondaries, highlighting       technology investor in 2012. During its period of
year at an average entry multiple significantly
                                                           commitments in the year to £185m.                          the effectiveness of our strategy of              ownership, the business has grown consistently. New
below the market average.
                                                                                                                      leveraging manager relationships for high         Mountain believes that there is considerable opportunity to
                                                           Three of the new funds, totalling £73m, are
The three largest new investments made in                                                                             conviction investments.                           develop its existing service lines and we were invited to
                                                           managed by ICG including the addition of a
the year were:                                                                                                                                                          provide new equity alongside a consortium of institutional
                                                           fourth ICG strategy to our Portfolio with a                The £20m committed alongside ICG
• Minimax (a global provider of fire                       $10m commitment to ICG’s North American                    Strategic Equity is part of a $1bn transaction    investors arranged by New Mountain.
  protection systems and services)                         Private Debt II. The fund invests in                       backing the spin-out of Standard                  Data provided by IRI is “mission critical” to CPG
  alongside ICG Europe, in which we                        subordinated debt and equity of US private                 Chartered’s private equity team in Asia and       manufacturers such as Pepsi, Nestlé and Unilever: it is
  invested £17m. ICG has a 12 year history                 equity-backed mid-market companies,                        comprising a diversified portfolio of over 30     used to understand product demand patterns and to
  with this business and is the sole                       targeting gross annualised returns of 13%                  companies. This transaction is expected to        guide critical business decisions around promotional
  institutional equity provider in the                     to 17% with low downside risk. We also                     complete in the first half of 2019.               activities, production and performance. The business
  most recent management buyout                            committed €40m to ICG Europe VII and                                                                         model has many of the features we seek for our defensive
                                                           $40m to ICG Strategic Equity III, strategies                                                                 growth theme: It has considerable barriers to entry given
                                                           the Company has backed since 1989 and                                                                        the significant upfront costs required to replicate its
                                                           2016 respectively.                                                                                           intellectual property and databases. It has low customer
                                                                                                                                                                        concentration and its core (syndicated data) business is
                                                                                                                                                                        resilient and has demonstrated consistent revenue and
ICG investments summary
                                                                                                                                                                        EBITDA growth through cycles. There is further potential
ICG Europe                            ICG Strategic Equity                 ICG Asia Pacific                   ICG North American                                        for growth through the development of new ancillary
                                                                                                              Private Debt                                              tools such as predictive analytics.
Subordinated debt and equity          Acquisitions of significant          Subordinated debt and              Subordinated debt, second
in European mid-market                positions in funds and/or            equity in mid-market               lien debt, first lien debt and
companies targeting companies         portfolios of companies              companies in developed             equity co-investments in
with experienced management
teams who have a proven
strategy, typically in non-cyclical
industries. The team works with
                                      through fund restructurings,
                                      recapitalisations and whole-fund
                                      liquidity solutions. The team
                                      works with incumbent private
                                                                           Asia Pacific markets. The team
                                                                           focuses on providing flexible
                                                                           capital solutions to leveraged
                                                                           buyouts, corporate
                                                                                                              mid-market companies – both
                                                                                                              private equity sponsored and
                                                                                                              sponsorless. Targeting gross
                                                                                                              returns of 13% – 17% p.a. with
                                                                                                                                                                        Total ICG ENTERPRISE INVESTMENT
                                                                                                                                               total value
businesses to develop flexible        equity managers to provide           investments and restructuring      low downside risk, with the      £138m
capital solutions tailored to         liquidity options for investors in   of capital structures (excluding   majority of the return           20% of
achieve a company’s goals             mature fund vehicles. Targeting      those of distressed                generated from current           portfolio
and will usually be the sole          gross returns in excess of           companies). Targeting gross        income.
institutional investor. Targeting     20% p.a.                             returns of 15 – 20% p.a. with
gross returns of 15 – 20% p.a.                                             low downside risk.                                                  Undrawn
with low downside risk.                                                                                                                        commitment
                  Undrawn                               Undrawn                             Undrawn                           Undrawn          £124m
Value             commitment          Value             commitment         Value            commitment        Value           commitment       30% of uncalled
£91m              £46m                £22m              £65m               £25m             £5m               £-              £8m              commitments

 20     ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                                                              ICG ENTERPRISE TRUST Annual Report and Accounts 2019   21
Strategic                       Governance                       Financial              Supplementary            Shareholder
Manager’s review continued                                                                                                                                                                                         report                                                           statements             Information              Information

Portfolio analysis                                                                      Attractive and well-balanced                     Portfolio by investment type %                                                                                                                                    mid-market managers ( $15m to Gryphon
Focus on mid-market companies                                                           vintage year exposure                                                                                                                                                                                              Investors and $20m to AEA Investors) and
                                                                                                                                                                                   £m                                                                 31 Jan 2019                           31 Jan 2018
The Portfolio is biased towards mid-market                                              The Portfolio’s maturity profile balances near                                                                                                                                                                     one existing European relationship
                                                                                        term realisation prospects with a strong                                                   Portfolio*                                                                 695                                 601
(47%) and large deals (45%), which we view                                                                                                                                                                                                                                                                 (€20m to Cinven VII). We have a strong
as more defensive than smaller deals,                                                   pipeline of medium to longer term growth.                                                  Cash                                                                         61                                  78     pipeline of further opportunities with a
benefiting from experienced management                                                  Investments completed in 2015 or earlier,                                                                                                                                                                          number of co-investments under review and
teams and often market leading positions. Our                                           which are more likely to generate gains from                                               Net obligations                                                           (25)                                 (15)     several new and existing private equity
definition of large deals in a private equity                                           realisations in the shorter term, represent                                                Net assets                                                                  731                                664      manager relationships fundraising this year,
context is those with an entry transaction size                                         42% of the Portfolio. Against this, 58% of                                                 Portfolio as % of net assets                                            95.0%                                90.4%      providing us with a wide choice of new
of over €500m , which would be small or mid                                             value is in investments made in 2016 or later,                                                                                                                                                                     fund opportunities.
cap for a public company.                                                               providing the Portfolio with medium to longer      Large buyouts                  44.7%    * Refer to the Glossary for reconciliation to the Portfolio balance presented in the unaudited results and
                                                                                                                                           Mid-market buyouts             47.2%    definition of net obligations.                                                                                          Portfolio well positioned to generate
                                                                                        term growth potential as value created within
Portfolio becoming more                                                                                                                    Small buyouts                   4.6%                                                                                                                            significant shareholder value
                                                                                        these businesses translates into gains.            Other                           3.5%
geographically diverse                                                                                                                                                                                                                                                                                     The Portfolio is highly cash generative and,
The Portfolio is focused on developed                                                   Bias towards sectors with non-cyclical                                                     Undrawn commitments of £411m provide                            €176m (£150m), which matures in two equal               against the current backdrop of high
private equity markets: primarily continental                                           growth drivers                                   Portfolio by sector breakdown %           the Company with a robust medium term                           tranches in April 2021 and April 2022. This             valuations for new investments and
Europe (39%), the UK (31%) and the US                                                   The Portfolio is weighted towards sectors                                                  investment pipeline. If outstanding                             enlarged facility gives us greater flexibility to       continuing geopolitical uncertainties, we
(26%). Investments in the Asia Pacific region                                           that primarily have non-cyclical growth                                                    commitments, which are typically drawn                          take advantage of investment opportunities.             remain cautious in re-deploying capital. Our
represent 4% of value, which is primarily in                                            drivers, such as demographics, increasing                                                  down over a period of four to six years, follow                 The negotiation of the new facility was led by          flexible mandate allows us to adapt the mix of
developed Asian markets through ICG’s Asia                                              regulation and the provision of “must-have”                                                a linear investment pace to the end of their                    ICG’s dedicated treasury team and has been              new investment to evolving market conditions
Pacific subordinated debt and equity team,                                              data. 21% of the Portfolio is invested in                                                  respective remaining investment periods, we                     agreed on more favourable terms than our                and where we see the best relative value. The
while there is minimal emerging markets                                                 healthcare and education and 16% in business                                               estimate that approximately £90m would be                       prior facility. Pro forma for this new facility,        proprietary opportunities sourced through
exposure. In line with one of our strategic                                             services with the remainder of the portfolio                                               called over the next 12 months. Including                       overcommitment at the year end would have               the ICG network, which have the additional
objectives, our weighting to the US has                                                 broadly spread across the industrial (21%),                                                realisation proceeds likely to be generated in                  been 27%.                                               benefit of structural downside protection, are
increased from 14% at the time of the move to                                           consumer goods and services (14%), leisure                                                 the next 12 months, this leaves significant                                                                             proving to be particularly attractive and these
ICG in 2016. Over the same period, the UK                                               (9%) and technology (10%) sectors.                 Healthcare and education       20.8%    available capital for high conviction                           Outlook                                                 are becoming a more significant part of the
bias has reduced from 45%. We expect both
                                                                                                                                           Industrials                    20.6%
                                                                                                                                                                                   investments over and above the investments                      Further realisations and a strong pipeline              Portfolio.
                                                                                                                                           Business services               15.8%                                                                   of new opportunities
of these trends to gain momentum as the                                                 Balance sheet and financing                                                                that will be made by our underlying funds.
                                                                                                                                           Consumer goods and services     13.6%                                                                                                                           We have a high quality Portfolio that is
benefits of being part of ICG’s global                                                  Strong balance sheet                               TMT                             11.8%
                                                                                                                                                                                                                                                   Since the year end, the Portfolio has
                                                                                        At the year end the Portfolio represented                                                  At 31 January 2019, commitments exceeded                        continued to generate cash proceeds, with               increasingly geographically diverse and
alternative asset manager platform are                                                                                                     Leisure                          8.7%
                                                                                        95% of net assets, an increase from 90% at         Financials                       5.5%   available liquidity by £247m, or 34% of net                     £19m of distributions received in the two               believe it is well positioned to continue to
further realised.                                                                                                                                                                  assets. Since the year end, we have further
                                                                                        31 January 2018. Becoming more fully               Other                            3.2%                                                                   months to 31 March 2019. Against this, we               generate shareholder value.
                                                                                        invested, without compromising the quality of                                              strengthened the Company’s financial                            have paid £12m in capital calls and have
                                                                                                                                                                                   position by agreeing a new bank facility of                                                                             ICG Private Equity Fund Investments Team
Portfolio by calendar year                                                              the Portfolio, was one of our key strategic      Portfolio by Geography %                                                                                  recently committed to two new US                        12 April 2019
of investment %                                                                         objectives at the time of the move to ICG
25                                                                                      when the investment level was 82%.
                                                                                        In managing the Company’s balance sheet                                                                                                                    It has a particular focus on Montessori                 resources and above all specialist
                                                                      20.0 20.1                                                                                                    Case study:
                                                               17.9                     our objective is to be broadly fully invested                                                                                                              education, which aims to create an ethos of             experience to guide the business to
                                                                                                                                                                                   endeavor schools
                                                                                        through the cycle while ensuring that we                                                                                                                   critical thought, respect and independent               its next phase of development.
                                                                                        have sufficient liquidity to be able to take                                               Endeavor Schools is a leading US operator                       learning and which is becoming increasingly
                                                  11.9                                                                                                                                                                                                                                                     Endeavor was recently named as one
                                                         9.8                            advantage of attractive investment                                                         of schools for children aged from four to 13.                   popular in the United States.
10                                          9.2                                                                                                                                                                                                                                                            of the top 1,000 growing private
                                                                                        opportunities as they arise. We do not                                                     It currently has 43 campuses, serving over
                                                                                                                                                                                                                                                   Leeds Equity acquired Endeavor in                       companies in the United States and one
                                                                                        intend to be geared other than, potentially,       Europe                         38.8%
                                                                                                                                                                                   6,500 students across nine states, and is
 5                                                                                                                                                                                                                                                 February 2018. Endeavor has begun to                    of the top 20 fastest growing companies
            2.7                       2.8
                                                                                        for short term working capital purposes.           UK                             30.9%    continuing to grow, both by greenfield
      0.8               1.1 1.7 1.4                                                                                                                                                                                                                expand the number of sites and is                       in the education sector. ICG Enterprise
                  0.3                                                             0.3
0                                                                                                                                          US                             25.9%    expansion and by selectively acquiring high
                                                                                                                                           Rest of world                   4.4%                                                                    performing well. Leeds has extensive                    co-invested directly as well as investing
      ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19                                                                                                                      performing schools.
                                                                                                                                                                                                                                                   knowledge of this sector having                         through its commitment to Leeds
                                                                                                                                                                                   The group is a supportive partner to its                        successfully managed a schools group in                 Equity VI.
                                                                                                                                                                                   schools, allowing them to maintain their                        a prior fund. Leeds was selected by the
                                                                                                                                                                                   identities and individual learning cultures
                                                                                                                                                                                   whilst providing support in areas such as
                                                                                                                                                                                   curriculum development and management.
                                                                                                                                                                                                                                                   company’s management team as the optimal
                                                                                                                                                                                                                                                   partner to grow the business with the                   £9M
                                                                                                                                                                                                                                                                                                           TOTAL ICG ENTERPRISE HOLDING
3 Refer to supplementary information for
comparative information.

 22         ICG ENTERPRISE TRUST Annual Report and Accounts 2019                                                                                                                                                                                                                           ICG ENTERPRISE TRUST Annual Report and Accounts 2019           23
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