9737 SVG Diamond Holdings A&R:9737 SVG Diamond Holdings Limited A&R 23/12/11 13:54 Page i SVG Diamond Holdings Limited Audited financial statements For the year ended 30 September 2011 Job No.: Proof Event: Park Communications Ltd 9737 5 Alpine Way London E6 6LA Customer: Project Title: T: F: SVG Annual Report 30 Sept 2010 020 7055 6500 020 7055 6600 9737 SVG Diamond Holdings A&R:9737 SVG Diamond Holdings Limited A&R 23/12/11 13:54 Page ii Company information Contents Directors Company information ii Elizabeth Ann Mills Investment adviser’s report 01 Peter John Richardson 20 largest investments 05 Investment adviser Directors’ report 07 SVG Advisers Limited Independent auditor’s report 08 61 Aldwych Statement of comprehensive income 09 London WC2B 4AE Statement of changes in equity 10 Statement of financial position 11 Advisory committee Statement of cash flows 12 Jeffrey Hodgman (Chairman) Notes to the financial statements 13 John McLachlan Sam Robinson Andrew Sykes James Witter Portfolio administrator, trustee, cash manager and custodian The Bank of New York Mellon (Ireland) Limited Hanover Building Windmill Lane Dublin 2 Issue and paying agent Bank of New York Mellon North America – London Branch One Canada Square London E14 5AL Corporate service provider and company secretary Structured Finance Management Offshore Limited 47 Esplanade St Helier Jersey JE1 0BD Registered office 47 Esplanade St Helier Jersey JE1 0BD Solicitors White & Case 7-11 Moorgate London EC2R 6HH Independent auditors Ernst & Young LLP 1 More London Place London SE1 2AF Job No.: Proof Event: Park Communications Ltd 9737 5 Alpine Way London E6 6LA Customer: Project Title: T: F: SVG Annual Report 30 Sept 2010 020 7055 6500 020 7055 6600 9737 SVG Diamond Holdings A&R:9737 SVG Diamond Holdings Limited A&R 23/12/11 13:54 Page 01 Investment adviser’s report SVG Diamond Holdings Limited (“SVG Diamond” or the ”Fund”) • SVG Diamond has a robust liquidity position – unfunded was established to provide investors with an enhanced exposure to commitments have reduced to €118.1 million at a diversified portfolio of private equity funds. SVG Diamond closed 30 September 2011 (30 September 2010: €161.0 million) and in September 2004 having issued approximately €260.0 million of are fully covered by the Fund’s cash resources (€103.8 million) rated Notes (“Notes”) and preferred equity shares representing and the undrawn cash collateralised AIG super senior liquidity commitments of €140.0 million. facility (€96.3 million) 3 • On 30 September 2011, SVG Diamond’s investment period Overview formally expired. The Fund has not made any commitments 4 We are pleased with SVG Diamond’s performance over the since 2008 and is 116% committed with current total 5 12 months to 30 September 2011. The Fund has reported an commitments of €485.7 million increase in net asset value (“NAV”) of 24% over the year driven • We believe the majority of the €118.1 million of unfunded by the returns from the underlying portfolio as well as the commitments will be invested over the next three years in enhancing effect of the Fund’s leverage. In aggregate, the what should be attractive investment vintages. We believe the NAV has increased by €35.6 million to €186.0 million which diversity and quality of the existing portfolio means the Fund is equates to an NAV per share of €1.33 at 30 September 2011 well placed to deliver value over the medium term (30 September 2010: €1.07). Despite the fall in public equity markets over Q3 2011 which Commitments adversely impacted portfolio valuations, the portfolio reported a SVG Diamond’s investment period formally expired on total return of 14% over the year and reported three quarters of 30 September 2011. The Fund has not made any new growth to 30 June 2011.This positive return has largely been commitments since 2008 and is currently 116% 4 committed. driven by EBITDA growth, as operating performance of the underlying portfolio companies showed material recovery in Debt repayment H1 2011, helped by significant portfolio actions undertaken by the General Partners (“GPs”) of the underlying portfolio funds. SVG Diamond has now entered the debt amortisation phase. The Alongside the increase in portfolio value, €88.6 million 1 of Fund will commence, in March 2012, repayment of the rated distributions were received by SVG Diamond from the underlying Notes in accordance with the terms set out in the Fund’s funds during the year. This is a considerable increase in the pace of prospectus using surplus cash over and above the PEI Reserve portfolio company exits compared to last year (30 September Account Minimum Balance 6. 2010: €39.7 million) and more than offsets the €50.4 million of calls paid over the year (30 September 2010: €48.5 million), Portfolio summary reflecting the increasing maturity of the portfolio. Since inception SVG Diamond has received total distribution proceeds of SVG Diamond’s 20 largest fund commitments by value represent €426.3 million 1. 66% of the portfolio value. A summary of the performance of the underlying portfolio funds at 30 September 30 September 30 September 2011 is as follows 7: 2011 2010 Value of investment portfolio 2 €346.4m €330.9m Performance Number of Number of Other assets €100.7m €75.8m since funds funds inception 8 30 Sept 2011 30 Sept 2010 Net loan notes (€261.1)m (€256.2)m NAV €186.0m €150.5m Gains over €1.0 million 31 25 Shares in issue 140.0m 140.0m Gains €0.0 – €1.0 million 13 15 NAV per share €1.33 €1.07 Losses €0.0 – €1.0 million 11 13 Total return on NAV over Losses over €1.0 million 8 10 the 12 months 24% (39%) Total 63 63 The continued improvement in the performance of the underlying Highlights companies over the last 12 months has resulted in 70% of the • The Fund had an NAV of €186.0 million at 30 September portfolio funds now being valued above cost and 49% of funds 2011 which equates to an NAV per share of €1.33 showing gains greater than €1.0 million. Across the top 20 companies, representing c.23% of the portfolio by value, • The underlying portfolio has reported a total return of 14% average revenue and EBITDA increased in H1 2011 versus over the year H1 2010 by 12% and 19% 9 respectively. • A series of risk reduction actions undertaken by GPs to improve the financial and operational strength of the portfolio companies combined with the broad diversification of investments within the portfolio has positioned the Fund to 3 withstand the contraction in comparable public market Available subject to its terms earnings multiples over Q3 2011. However, if macro-economic 4 Portfolio value plus uncalled commitments divided by total equity of €140.0 million plus concerns persist, the operating performance of underlying rated Notes of €260.0 million, totalling €400.0 million portfolio companies will likely be impacted 5 Current total commitments equals unfunded commitments plus funded commitments 6 PEI Reserve Account Minimum Balance is the cash balance equating to the sum of 78.57% of unfunded commitments plus six months of senior expenses 7 Based on 30 September 2011 GP values 8 Portfolio gains and losses exclude FX movements 1 Includes income distributions 9 Earnings and revenue data taken from 17 of the top 20 companies by value, remaining 2 Includes withholding tax receivable three companies are not meaningful/available – data as at 30 June 2011 SVG Diamond Holdings Limited 01 Audited financial statements Job No.: Proof Event: Park Communications Ltd 9737 5 Alpine Way London E6 6LA Customer: Project Title: T: F: SVG Diamond Annual Report 30 Sept 2011 020 7055 6500 020 7055 6600 9737 SVG Diamond Holdings A&R:9737 SVG Diamond Holdings Limited A&R 23/12/11 13:54 Page 02 Investment adviser’s report continued The future performance of the underlying companies is likely to be Portfolio calls and distributions impacted by the on-going uncertain macro-economic and volatile public market environment and certain companies operating with Over the last 12 months there has been a significant increase in the high leverage in challenging markets may well underperform. We pace of portfolio company exits with SVG Diamond receiving are actively monitoring the portfolio and are in regular discussions €88.6 million 12 of distributions from the portfolio over the year. The with GPs to continually assess the overall health of the portfolio. pace of new investments, by the underlying funds, has continued at a reasonable level with €50.4 million of calls being funded and Funds reporting largest gains since inception 10 62 new companies being added to the portfolio 13 . The majority of distributions were received during Q2 2011 and Total gains Total paid in Q3 2011 following some large investment exits from the since inception capital secondary funds in the portfolio. € million € million Schroder Canadian Buy-Out Fund II 22.9 7.1 As the portfolio continues to mature, we believe distributions Wind Point Partners IV 20.4 11.8 should continue at heightened levels subject to market conditions gradually stabilising. Industri Kapital 2004 Fund 18.7 23.5 3i Eurofund IV 13.9 14.4 Set out below is a summary of the top five GP calls and Carlyle Europe Partners II 11 12.5 24.2 distributions made during the period and since inception. Top five funds (by cash received since inception) Funds reporting largest gains over 12 months to 30 September 2011 10 SVG Diamond has received €88.6 12 million distributions over the year and €426.3 million 12 since inception.