Half-year Report

RNS Number : 4051E

HarbourVest Global Priv. Equity Ltd

18 October 2018

 

18 October 2018

Results for the Six Months Ended 31 July 2018

Continued strong NAV per share performance with 7% increase

HarbourVest Global Private Equity Limited ("HVPE" or the "Company"), a closed-end investment company, announces its unaudited results for the six months ended 31 July 2018. All figures relate to the half year ended 31 July 2018 unless otherwise stated.

Further NAV per share and share price growth

·      Growth in net asset value ("NAV") per share of 6.8% over the six-month period to $22.93 from $21.46 at 31 January 2018

o  15.6% in sterling terms to £17.47 from £15.12

·      Annual compound growth of 8.4% in the 10 years to 31 July 2018 (US dollars); equivalent to 13.0% in sterling

·      Share price up 3.8% to £13.00 at 31 July 2018, with further rise of 5.7% to £13.74 between financial period end and 15 October 2018

Active portfolio management, with ongoing commitments supporting future growth

·      $355.0m committed to new HarbourVest funds over period (six months to 31 July 2017: $162.2m)

o  Including $150.0 million to a new HarbourVest real assets vehicle intended to deliver a long-term income yield combined with capital growth

·      $121.5m value growth from investment portfolio (six months to 31 July 2017: $125.7m)

o  Direct Co-investment was the best performing strategy; Growth Equity led all other stages; US was the strongest performing geography

o  The 2013 Direct Fund was the largest single contributor to NAV per share growth, adding $0.17

Net investor over the period

·      $202.6m invested in private companies through HarbourVest funds (six months to 31 July 2017: $119.1m)

·      $142.1m received in distributions (six months to 31 July 2017: $148.9m); exits realised at weighted average of 53% above carrying value

o  A quarter of proceeds received came from several of HVPE's top 50 companies at 31 January 2018 including: TriTech Software, TMF Group, Wayfair, Secure-24, H-Line Shipping, Ssangyong Cement Industrial, CareCentrix and Uber.

·      Positive cash position of $192.5m on balance sheet, no drawings on its credit facility

Sir Michael Bunbury, Chairman of HVPE, said: "HVPE has continued to make good progress over the six months to 31 July, delivering NAV per share growth of 6.8% in US dollars. This performance builds on the nine-consecutive full financial years of NAV per share increases delivered by the Company to its shareholders since 31 January 2009, and represents a threefold rise since this point, from $7.61 to today's published figure of $22.93.

"This further growth demonstrates the ongoing strength of the Company's proven investment strategy. Access to HarbourVest funds enables shareholders to benefit from the outperformance of private markets and the investment decisions made by a quality investment manager. This is delivered through a well-managed, diversified portfolio, which has a track record of value creation since inception over a decade ago."

HVPE provides a complete private equity solution for institutional and retail investors by giving access to a diversified portfolio managed through four phases of the private equity cycle to create value: Commitments, Investment, Growth, and Realisation (Mature).

To view the Company's Semi Annual Financial Report please follow this link: Semi-Annual Report and Accounts - Period Ending 31 July 2018.  

The Semi-Annual Report and Accounts will also shortly be available on the National Storage Mechanism, which is situated at www.morningstar.co.uk/uk/nsm.

Enquiries:

HVPE
Richard Hickman	Tel: [phone]	[e-mail]
Charlotte Edgar	Tel: [phone]	[e-mail]
HarbourVest Partners
Alicia Sweeney	Tel: [phone]	[e-mail]
MHP Communications
Charlie Barker / Tim Rowntree / Kelsey Traynor	Tel: [phone]	[e-mail]

Notes to Editors:

About HarbourVest Global Private Equity Limited:

HarbourVest Global Private Equity Limited ("HVPE" or the "Company") is a Guernsey-incorporated, closed-end investment company which is listed on the Main Market of the London Stock Exchange and is a constituent of the FTSE 250 index. HVPE is designed to offer shareholders long-term capital appreciation by investing in a private equity portfolio diversified by geography, stage of investment, vintage year, and industry. The Company invests in and alongside HarbourVest-managed funds which focus on primary fund commitments, secondary investments and direct co-investments in operating companies. HVPE's investment manager is HarbourVest Advisers L.P., an affiliate of HarbourVest Partners, LLC, an independent, global private markets asset manager with more than 35 years of experience.

About HarbourVest Partners, LLC:

HarbourVest is an independent, global private markets asset manager with more than 35 years of experience and more than $55 billion in assets under management. The Firm's powerful global platform offers clients investment opportunities through primary fund investments, secondary investments, and direct co-investments in commingled funds or separately managed accounts. HarbourVest has more than 400 employees, including more than 100 investment professionals across Asia, Europe, and the Americas. This global team has committed approximately $35 billion to newly-formed funds, completed $21 billion in secondary purchases, and invested $9 billion directly in operating companies. Partnering with HarbourVest, clients have access to customised solutions, longstanding relationships, actionable insights, and proven results.

This announcement is for information purposes only and does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in any jurisdiction and should not be relied upon in connection with any decision to subscribe for or acquire any Shares.  In particular, this announcement does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States or to US Persons (as defined in Regulation S under the US Securities Act of 1933, as amended ("US Persons")).  Neither this announcement nor any copy of it may be taken, released, published or distributed, directly or indirectly to US Persons or in or into the United States (including its territories and possessions), Canada, Australia or Japan, or any jurisdiction where such action would be unlawful. Accordingly, recipients represent that they are able to receive this announcement without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which they reside or conduct business. No recipient may distribute, or make available, this announcement (directly or indirectly) to any other person. Recipients of this announcement should inform themselves about and observe any applicable legal requirements in their jurisdictions.

The Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and, accordingly, may not be offered, sold, resold, transferred, delivered or distributed, directly or indirectly, within the United States or to US Persons.  In addition, the Company is not registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act") and shareholders of the Company will not have the protections of that act.  There will be no public offer of the Shares in the United States or to US Persons.

This announcement has been prepared by the Company and its investment manager, HarbourVest Advisers L.P. (the "Investment Manager"). No liability whatsoever (whether in negligence or otherwise) arising directly or indirectly from the use of this announcement is accepted and no representation, warranty or undertaking, express or implied, is or will be made by the Company, the Investment Manager or any of their respective directors, officers, employees, advisers, representatives or other agents ("Agents") for any information or any of the opinions contained herein or for any errors, omissions or misstatements. None of the Investment Manager nor any of their respective Agents makes or has been authorised to make any representation or warranties (express or implied) in relation to the Company or as to the truth, accuracy or completeness of this announcement, or any other written or oral statement provided. In particular, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in this announcement and nothing in this announcement is or should be relied on as a promise or representation as to the future.

 Other than as required by applicable laws, the Company gives no undertaking to update this announcement or any additional information, or to correct any inaccuracies in it which may become apparent and the distribution of this announcement. The information contained in this announcement is given at the date of its publication and is subject to updating, revision and amendment. The contents of this announcement have not been approved by any competent regulatory or supervisory authority.

This announcement includes statements that are, or may be deemed to be, "forward looking statements".  These forward looking statements can be identified by the use of forward looking terminology, including the terms "believes", "projects", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could", "should" or "continue" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts and include statements regarding the intentions, beliefs or current expectations of the Company.  By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict. Forward looking statements are not guarantees of future performance.   More detailed information on the potential factors which could affect the financial results of the Company is contained in the Company's public filings and reports.

All investments are subject to risk. Past performance is no guarantee of future returns. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results.

This announcement is issued by the Company, whose registered address is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA

© 2018 HarbourVest Global Private Equity Limited. All rights reserved.

Chairman's Statement

Dear Shareholder,

The six months to 31 July 2018 represent a half year of further progress for your company, HarbourVest Global Private Equity. The 2018 Annual Report published in May set out a wealth of detail on the Company's affairs and the Investment Manager's Report, which follows this statement, updates shareholders on developments during the half year. Therefore I will concentrate on highlighting points which are expanded upon elsewhere in this report and comment on some additional corporate matters.

Performance and NAV per Share

As I have previously reminded shareholders, the Company's functional currency is the US dollar. At 31 July 2018, 77% of its underlying funds are denominated in US dollars and the majority of the Company's underlying assets are located in the US. It is on the NAV per share performance in US dollars that the Board and Investment Manager focus when judging the Company's investment performance.

During the six months to 31 July the Company made good progress with the NAV per share increasing by 6.8% to $22.93 whilst over the same period the total return of the FTSE All-World TR Index was negative at -2.7%. This performance builds on the nine consecutive full financial years to 31 January 2018 of NAV per share growth. On 31 January 2009 the NAV per share was $7.61. Over the last nine and a half years the US dollar NAV per share has increased threefold, equivalent to annual compound growth of 12.3%.

Share Price

HVPE's shares are listed on the London Stock Exchange in UK pounds sterling. The Company estimates that some 68% of the 79.86 million shares in issue are held by UK shareholders and so the performance of the share price in sterling is a key metric for those shareholders. Nevertheless, UK shareholders should acknowledge that they are invested in shares where the underlying assets are largely US dollar denominated. Thus, in addition to the US dollar NAV per share performance, the share price is heavily influenced by the USD/GBP exchange rate and by the discount to NAV at which the shares trade.

Over the six months the US dollar appreciated against sterling with the exchange rate moving from $1.42 to $1.31, an appreciation of 8.4%. The NAV per share increase and the US dollar appreciation were partly offset by the widening of the discount at which the shares were trading on 31 July 2018, with the HVPE share price increasing from £12.52 to £13.00, or by 3.8%.

The Discount to NAV per Share at which HVPE's Shares Trade

When considering the level of the discount, the market can only react to the latest released monthly estimate of NAV per share. At 31 July that latest released estimate was the end-June one of $21.79, being a sterling equivalent of £16.63. With the share price being £13.00, the shares were trading at a discount to NAV per share of 21.8%.¹ Subsequent to 31 July, the Company has released two further estimated NAVs per share, namely the end-July estimate of $21.96 and the end-August one of $22.87.

On account of the time lag between the Investment Manager calculating its estimate of NAV per share and the subsequent delivery of the relevant quarter-end valuations from the many managers represented within the HarbourVest funds, when finalising the Company's reports for periods to 31 January and 31 July, sometimes material revisions arise between the estimated NAV per share, as announced in the monthly factsheet, and the definitive figure shown in the reports published several weeks later. Historically almost all of those revisions have been upward and indeed that is the case in relation to the revision of the end-July 2018 estimate from $21.96 to the $22.93 now reported. The possibility of such revisions is always present given the multi-stage process through which asset values are reported and consolidated for the Company's formal reports at 31 January and 31 July.

The share price has responded positively to the release of the estimated end-August NAV per share of $22.87 and closed on 15 October 2018 at a price of £13.74, reflecting a discount of 21.0%.

1      Please refer to the reconciliation table under Disclosures for more details on this calculation.

Commitments, Cash and Balance Sheet

The Investment Manager's Report sets out the commitments that have been made in the half year. It also reports that the Company's cash balance has declined to $192.5 million from $257.0 million at 31 January as capital calls by HarbourVest funds exceeded distributions. The Investment Manager has been long expecting the Company's cash balance to shrink as calls are made. Indeed it is possible that the cash balance will have reduced significantly further by the year end on 31 January 2019.

The Investment Manager's Report repeats the announcement made in the June 2018 monthly factsheet that HVPE has committed $150.0 million to a new HarbourVest real assets vehicle which is intended to deliver an income yield as well as capital growth. The Company is a seed investor in this fund and has negotiated preferred economic arrangements in recognition of its early participation in this programme.

The Company's balance sheet remains strong, supported by $1.6 billion of invested assets, the cash balance of $192.5 million, and the undrawn bank facility of $500.0 million which is committed until at least December 2022. In addition, the Company has an Investment Pipeline in the shape of yet to be funded commitments to HarbourVest funds of $1.4 billion. The cash flow profile of a fund-of-funds company is very different from that of a company investing directly into unlisted companies and HVPE has nearly 11 years' experience of the flow of funds. The Investment Manager models a number of scenarios, including one which assumes even greater stress than was experienced through the global financial crisis of 2008/09. The Board is satisfied that the Company has resources and options open to it to weather a change in market conditions.

Although, as I mention above, the existing bank facility provided by Lloyds Bank plc and Credit Suisse is committed for a further four years and two months it is subject to an annual negotiation to extend its maturity by a further 12 months. These negotiations are both time consuming and expensive in legal fees, and the Company is exploring avenues by which such annual negotiations might be rendered unnecessary whilst preserving facilities which are at least as satisfactory as the present ones in regard to cost and longevity.

The Board

The Board is currently made up of eight directors. Two are non-independent, being partners in the Investment Manager, and six are considered by the Board to be independent. Of the eight directors, Brooks Zug (non-independent) and Keith Corbin, Andrew Moore, and myself (all considered to be independent) have served since the inception of the Company in 2007.

The Financial Reporting Council ("FRC") has recently issued a revised UK Corporate Governance Code applicable to companies with accounting years beginning on or after 1 January 2019. Thus it will apply to HVPE for the year commencing 1 February 2019. HVPE operates under the Code issued by the Association of Investment Companies ("AIC") but endorsed by the FRC. The revised AIC Code is out for consultation and is expected to be adopted later in the year. Once adopted, the Company will review the composition of the Board, and the plans for future changes, in the light of the revised Code. In due course the Company will make announcements as to the timing and identity of individual retirements and appointments. In making those appointments, the Board will take account of the requirements for good corporate governance and of diversity as well as always seeking to be good stewards of the shareholders' interests.

Outlook

Investment in equities should always be considered a long-term commitment. That is especially so in regard to private equity investment. There has been much comment in recent months about the elevated valuations of private companies and about deals being struck at record prices. Ten years ago the world was enmeshed in the maelstrom of the global financial crisis. Today many listed markets, which are the predominant influence on the pricing of private equity assets, are close to all-time highs. Yet there are many risks ahead of which the most dangerous look to be political, both in a number of individual countries and on a geo-political scale.

The Company's Investment Manager, HarbourVest, has over 35 years of experience investing in private markets through many peaks and troughs. Your Company's Board is made up of individuals who have experience of those same peaks and troughs and, although there will be Board changes ahead, it must be paramount that it should have the skills to take opportunities in good times and also guide the Company appropriately when testing times return.

Michael Bunbury

Chairman

17 October 2018

Investment Manager's Report

Performance

NAV per Share

The NAV per share continued to grow strongly over the six months ended 31 July 2018, increasing by 6.8% from $21.46 at 31 January 2018 to $22.93. Translated into sterling, NAV per share growth was 15.6%, due to the weakening of sterling against the US dollar over the reporting period.

HVPE's public benchmark, the FTSE All-World TR Index, declined by -2.7% in the six months to 31 July 2018. HVPE, by contrast, grew its NAV by 6.8%, representing outperformance of 9.5 percentage points in the period. HVPE's objective is to achieve NAV growth materially in excess of the public markets through the cycle. Measured over the last 10 years, HVPE's annualised outperformance of the FTSE All-World TR Index as of 31 July 2018 was 1.3% net of all costs. This outperformance has declined in recent months as the starting point for the 10-year period is now capturing the lower levels at which the FTSE All-World TR Index traded during 2008, while HVPE's NAV was still increasing at that point.

During the six months ended 31 July 2018 the value of the Investment Portfolio grew by $121.5 million. Of this, almost two thirds came from the Primary portfolio. In percentage terms, the Direct Co-Investment portfolio was the best-performing strategy, delivering value growth of 8.4%. Geographically, the strongest gains came from the US portfolio, which generated a value increase of 9.3%; this was closely followed by the Asian assets, which returned 6.8%. As might be expected given HVPE's substantial US exposure (56% of the Investment Portfolio value), in absolute terms the US assets were the most significant contributor to growth in the period. In terms of stage, Growth Equity was the strongest performer, growing 11.5% over the six months ended 31 July 2018. This was followed by Real Assets which returned 7.1%.

As at 31 July 2018, HVPE held 46 HarbourVest funds and five secondary co-investments¹ in total. Of these, the largest drivers of NAV per share growth over the reporting period are described overleaf and shown individually in the corresponding chart below.

· 2013 Direct, a direct co-investment fund, was the largest contributor to NAV per share growth, adding $0.17 over the six month period. This was driven by significant realised gains, largely arising from the exit of TriTech Software, as well as strong valuation increases from the companies within the remaining portfolio.

· HIPEP VI Partnership, a 2008 vintage international fund-of-funds programme entering the mature phase, contributed $0.14 to NAV per share.

· Fund VIII Buyout, a 2006 vintage US buyout fund-of-funds programme, is the third largest holding in the portfolio and is now in the mature phase. Continued strong distributions from this fund helped to deliver growth of 8.7% on HVPE's $116.4 million holding, adding $0.13 to NAV per share.

Two HarbourVest funds each added $0.12 to NAV per share:

· Global Annual Fund 2014, the first in a programme of funds conceived as an efficient way to provide global exposure across the HarbourVest platform.

· Dover Street VIII, a 2012 vintage global secondary fund, currently in the growth phase.

Finally:

· Fund IX Venture, a 2011 vintage fund in its growth phase, added $0.10, following gains of 11% on HVPE's $70.0 million holding.

Subsequent to the reporting period end, on 20 September 2018, the Investment Manager released an estimated NAV per share for 31 August 2018 of $22.87. This represents a reduction of $0.06 from the 31 July 2018 unaudited figure of $22.93. This is largely as a result of public market adjustments, foreign exchange and operating expenses.

1      One of these, Absolute, referred to as "HVPE Avalon Co-Investment L.P." in the Unaudited Condensed Interim Consolidated Schedule of Investments has been fully realised. However, $685,349 remains in escrow.

Cash Flows

HVPE was a net investor in the six months to 31 July 2018, investing cash of $202.6 million into HarbourVest funds (six months to 31 July 2017: $119.1 million) and receiving $142.1 million in distributions (six months to 31 July 2017: $148.8 million). This is consistent with forecasts made at the beginning of the six-month period to the effect that HVPE would see a more rapid pace of investment, driven by the additional commitments made to HarbourVest programmes in recent years. Another contributor to capital calls in the reporting period was the net figure of $10.6 million drawn down from HVPE by certain HarbourVest funds to repay part of the outstanding bridging finance in place on those funds (see the 2018 Audited Consolidated Financial Statements ("2018 Annual Report") for a full discussion on this topic). As a result, the total outstanding look-through leverage at the HarbourVest fund level (including project finance as well as bridging debt) fell from $238.7 million at 31 January 2018 to $228.1 million at 31 July 2018. Overall, net negative cash flow in the period resulted in HVPE's cash balance declining from $257.0 million to $192.5 million, in line with expectations.

The largest source of capital calls in the reporting period was Fund X Venture (HarbourVest's latest venture fund): this vehicle is currently in the investment phase and building out its portfolio. Strong investment activity was also seen across the Investment Manager's most recent co-investment fund, as it completed 10 new deals over the six months, and US fund-of-funds. Dover Street IX (HarbourVest's latest secondary fund) was also particularly active in the period, funding nine new secondary projects. The single largest call was to Secondary Overflow Fund III ("SOF III") Tranche F, to support the investment into Project Lodge, a traditional secondary transaction representing the acquisition of 60 fund interests from a non-US public pension. The SOF III tranches represent secondary co-investments, which have lower fees, thus reducing HVPE's overall fee rates. At 31 July 2018, HVPE had exposure to three SOF III projects, equating to $48.6 million, or 2.7% of NAV. A commitment was made in August to a further secondary co-investment as highlighted on page 22 of the Semi-Annual Report and Accounts.

Distributions in the HVPE portfolio were driven mostly by the primary funds, with the largest total amount in the period coming from HarbourVest VIII Buyout Fund, a 2006 vintage US fund in its mature phase. Strong distributions also came from the global direct co-investment funds (both 2007 and 2013 vintages), and HIPEP VI Partnership Fund, a 2008 vintage international fund-of-funds programme.

Portfolio Companies

During the period the 10 largest individual company realisations generated total distributions of $46.0 million, accounting for approximately one third of all proceeds received. Of these 10 companies, five were in HVPE's top 50 portfolio companies at 31 January 2018. Further details on these follow below (ordered by size of distribution):

· Insight Venture Partners sold TriTech Software, HVPE's 45th largest portfolio company, to Bain Capital in the period. HVPE received proceeds of $10.2 million from this exit.

· HVPE received proceeds of $6.6 million from Doughty Hanson & Co following the sale of TMF Group, HVPE's 17th largest portfolio company, to CVC Capital Partners.

· Following the continued sell down of shares in publicly traded company Wayfair, HVPE's 23rd largest position, the Company received proceeds of $5.2 million.

· HVPE received proceeds of $4.7 million from the sale of Secure-24, HVPE's 34th largest portfolio company, to NTT Communications Corporation.

· H-Line Shipping, HVPE's fifth largest company at 31 January 2018, delivered proceeds of $2.8 million, following a bond refinancing in March. It remains HVPE's ninth largest company at 31 July 2018 with a value of $11.6 million.

Other top 50 HVPE portfolio companies at 31 January 2018 which appeared in the largest company distributions (top 20 by value) included Ssangyong Cement Industrial, CareCentrix and Uber. Proceeds from these companies in the reporting period totalled $6.6 million.

During the six months ended 31 July 2018, the majority of exits from the HVPE portfolio were via trade sales. Of the 215 liquidity events in the period (six months to 31 July 2017: 207), 80% (172) of these were trade sales or sponsor-to-sponsor transactions, with the remaining 20% (43 transactions) being Initial Public Offerings ("IPOs"). Of these IPOs, 77% came from venture-backed companies, largely driven by an open IPO window for tech firms in the US.

Activity

Strategic Asset Allocation

No changes have been made to the Company's Strategic Asset Allocation ("SAA") targets since February 2018 as presented in the 2018 Annual Report. These targets, which are reviewed annually by the Board, continue to reflect the Investment Manager's and Board's current perspective on the best means of achieving long-term NAV growth for shareholders. An overview of the current portfolio composition with reference to these targets is included on page 14 of the Semi-Annual Report and Accounts.

New Fund Commitments

In the six months ended 31 July 2018, HVPE made new commitments of $355.0 million. These were spread across a number of HarbourVest programmes, as detailed on page 29 of the Semi-Annual Report and Accounts.

In line with the SAA targets, the largest new commitment in the reporting period was $150.0 million to a new HarbourVest real assets vehicle intended to deliver a long-term income yield combined with capital growth. The Board views the real assets strategy as a complementary addition to the existing private markets programme and, as a seed investor with preferred economics, HVPE is positioned to benefit from a share in potential upside as the platform grows.

A total commitment of $135.0 million was also made to a newly formed US-focused HarbourVest fund (Fund XI programme), split across strategies for buyout, micro buyout, and venture. Other smaller commitments were made to a global multi-strategy fund-of-funds (2018 Global Fund), a secondary co-investment through Secondary Overflow Fund III, and HarbourVest's latest global co-investment fund.

Principal Risks and Uncertainties

Risk Factors

The Board and the Investment Manager have identified a number of risks to the Company's business. A comprehensive risk assessment process is undertaken on a quarterly basis to evaluate the impact and probability of each risk materialising and the financial or strategic impact of the risk. Those risks which have a higher probability and a significant potential impact on performance, strategy, reputation or operations are identified below as principal risks faced by the Company over the next six months.

The Company's Board is responsible for monitoring and oversight of the risks facing the Company and conducts a structured review of the risks and the associated mitigants, on at least a quarterly basis.

Risk	Description	Mitigating Factor
Balance Sheet Risks	The Company's balance sheet strategy and its policy for the utilisation of leverage are described on page 62 of the Company's 2018 Annual Report. The Company continues to maintain an over-commitment strategy and may draw on its Facility to bridge periods of negative cash flow when capital calls on investments are greater than distributions and available cash. The level of potential borrowing available under the Facility could be negatively affected by declining NAVs. In a period of declining NAVs, reduced realisations, and rapid substantial cash calls, the Company's net leverage ratio could increase beyond an appropriate level, resulting in a need to sell assets. A reduction in the availability or utilisation of bridging debt at the HarbourVest fund level could result in an increase in capital calls to a level in excess of the base case forecast.	The Board has put in place a monitoring programme with a defined total commitment ratio cap, determined with reference to portfolio models, in order to mitigate against the requirement to sell assets at a discount during periods of NAV decline. Further, the monitoring programme also considers the level of debt at the HarbourVest fund level. Both the Board and the Investment Manager actively monitor these metrics and will take appropriate action as required to attempt to mitigate these risks. Additionally, the Board intends to renew the Facility regularly with the aim that there should always be a minimum of 48 months of unexpired Facility available.
Borrowing Risk	While it is currently undrawn, the Company depends on the availability of its Facility in order to operate an over-commitment strategy. The Company's lenders may be unable or unwilling to renew or extend the Company's Facility.	The Board monitors developments in credit markets and intends to renew the Facility regularly with the aim that there should always be a minimum of 48 months of unexpired Facility available. The Board is also actively considering options for other sources of financing.
Foreign Exchange Risk	Approximately 21% of the value of HVPE's total assets are denominated in non-US dollar currencies, primarily euros. Foreign currency movement affects the Company's investments, borrowings on the Facility, and unfunded commitments.	The Board and the Investment Manager monitor the foreign exchange risk experienced by the Company and will consider implementing hedging arrangements if deemed appropriate.
Popularity of Listed Private Equity Sector	Investor sentiment may change towards the listed private equity sector, resulting in a widening of the Company's share price discount to NAV.	The Board has set the Investment Manager the objective of ensuring that the widest possible variety of investors are informed about the Company's performance and proposition in order to mitigate against this. In addition, the Investment Manager actively participates in the marketing of the sector. The size of the Company means that its own success will contribute to the popularity of the sector as a whole.
Public Market Risks	Public markets in many developed countries are trading close to all-time highs. While economic fundamentals have improved, structural imbalances remain. The Company makes venture capital and buyout investments in companies where operating performance is affected by the broader economic environment within the countries in which those companies operate. While these companies are generally privately owned, their valuations are, in most cases, influenced by public market comparables. In addition, approximately 10% of the Company's portfolio is made up of publicly-traded securities whose values increase or decrease alongside public markets. Should global public markets decline or the economic situation deteriorate, it is likely that the Company's NAV could be negatively affected.	Both the Board and the Investment Manager actively monitor the Company's NAV, and exposure to individual public markets is partially mitigated by the geographic diversification of the portfolio. The Board notes that it has limited ability to mitigate public market risk. Stress testing takes place as part of the portfolio composition process to model the effect of different macroeconomic scenarios to provide comfort to the Board that the balance of risk and reward is appropriate in the event of a downturn in public markets.
Reliance on HarbourVest	The Company is dependent on its Investment Manager and HarbourVest's investment professionals. With the exception of the 2011 Absolute investment and 2012 Conversus investment, nearly all of the Company's assets, save for cash balances and short-term liquid investments, are invested in HarbourVest funds. Additionally, HarbourVest employees play key roles in the operation and control of the Company. The departure or reassignment of some or all of HarbourVest's professionals could prevent the Company from achieving its investment objectives.	This risk is mitigated by the Board monitoring the performance of the Investment Manager on an ongoing basis, including through regular reports and visits to the Investment Manager's offices, which took place once in the six months under review. In addition, the Audit Committee reviewed the most recent controls report from the Investment Manager to assess the controls environment of the Investment Manager. Succession planning at the Investment Manager is monitored by the Board.
Trading Liquidity and Price	Any ongoing or substantial discount to NAV has the potential to damage the Company's reputation and to cause shareholder dissatisfaction. The five largest shareholders at 4 October 2018 (latest available) represent approximately 48% of the Company's shares in issue. This may contribute to a lack of liquidity and widening discount. Also, in the event that a substantial shareholder chooses to exit their holding, this may have an effect on the Company's share price and consequently the discount to NAV.	Since September 2015, the Company's shares have traded on the Main Market of the London Stock Exchange, which has increased the liquidity of the shares and broadened the appeal to a wide variety of shareholders. In addition, the Board continues to monitor the discount to NAV and will consider appropriate solutions to address any ongoing or substantial discount to NAV.

Directors' Report

Semi-Annual Report and Accounts

A description of the important events that have occurred during the first six months of the financial year and their impact on the performance of the Company as shown in the financial statements are given in the Chairman's Statement, the Investment Manager's Report, and the Notes to the Interim Financial Statements, and are incorporated here by reference.

The principal risks and uncertainties facing the Company and how the Company seeks to mitigate them can be found on pages 23 and 24 of the Semi-Annual Report and Accounts. These remain unchanged from those disclosed in the Company's 2018 Annual Report.

There were no material related party transactions which took place in the first six months of the financial year, other than those disclosed in Note 9 to the Interim Financial Statements. There have been no changes to the related party transactions described in the 2018 Annual Report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.

This Semi-Annual Report and Unaudited Condensed Interim Consolidated Financial Statements for the six months ended 31 July 2018 ("Semi-Annual Report and Accounts") has been reviewed by the Company's auditors in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board ("ISRE 2410").

Going Concern

The performance of the investments held by the Company over the reporting period are described in Note 4 to the Interim Financial Statements and the outlook for the future is described in the Chairman's Statement. The Company's financial position, its cash flows, and liquidity position are set out in the Interim Financial Statements and the Company's financial risk management objectives and policies, details of its financial instruments, and its exposures to market risk, credit risk, interest rate risk, and currency risk, are set out in Note 2 to the Consolidated Financial Statements in the Company's 2018 Annual Report and are unchanged. After making due enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in the preparation of this Semi-Annual Report and Accounts.

Statement of Directors' Responsibilities in Respect of the Semi-Annual Report and Accounts

The Directors are responsible for preparing the Semi-Annual Report and Accounts in accordance with applicable law and regulations.

The Directors confirm that to the best of their knowledge:

· the Interim Financial Statements have been prepared in accordance with Accounting Standards Codification ("ASC") 270 'Interim Reporting'; and

· the Chairman's Statement and Investment Manager's Report include a fair review of the information required by:

(i)   The Interim Financial Statements, which have been prepared in accordance with US GAAP, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its undertakings included in the consolidation as a whole as required by DTR 4.2.4R.

(ii)  DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(iii) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position and performance of the entity during that period; and any changes in the related party transactions described in the 2018 Annual Report that could do so.

By order of the Board

17 October 2018

Unaudited Condensed Interim Consolidated Statements of Assets and Liabilities

At 31 July 2018 and 31 January 2018

In US Dollars	31 July 2018 (Unaudited)	31 January 2018 (Audited)
ASSETS
Investments (Note 4)	1,634,200,060	1,452,215,345
Cash and equivalents	192,480,401	256,961,145
Other assets	6,202,458	6,790,179
Total assets	1,832,882,919	1,715,966,669
LIABILITIES
Accounts payable and accrued expenses	1,745,056	1,872,066
Accounts payable to HarbourVest Advisers L.P. (Note 9)	124,436	227,767
Total liabilities	1,869,492	2,099,833
Commitments (Note 5)
NET ASSETS	$1,831,013,427	$1,713,866,836
NET ASSETS CONSIST OF
Shares, Unlimited shares authorised, 79,862,486 shares issued and outstanding at 31 July 2018 and 31 January 2018, no par value	1,831,013,427	1,713,866,836
NET ASSETS	$1,831,013,427	$1,713,866,836
NET ASSET VALUE PER SHARE	$22.93	$21.46

The accompanying notes are an integral part of the Unaudited Condensed Interim Consolidated Financial Statements.

The Unaudited Condensed Interim Consolidated Financial Statements on pages 45 to 57 of the Semi-Annual Report and Accounts were authorised and approved for issue by the Directors on 17 October 2018 and were signed on their behalf by:

Michael Bunbury                             Steven Wilderspin

Chairman                                         Chairman of Audit Committee

 

 

 

 

Unaudited Condensed Interim Consolidated Statements of Operations

For the Six Month Periods Ended 31 July 2018 and 2017

In US Dollars	31 July 2018	31 July 2017
REALISED AND UNREALISED GAINS (LOSSES) ON INVESTMENTS
Net realised gain (loss) on investments	33,228,561	84,820,920
Net change in unrealised appreciation (depreciation) on investments	88,234,256	40,919,047
NET GAIN ON INVESTMENTS	121,462,817	125,739,967
INVESTMENT INCOME
Interest from cash and equivalents	1,842,239	882,100
EXPENSES
Non-utilisation fees (Note 6)	2,890,972	2,890,972
Investment services (Note 3)	837,315	679,681
Financing expenses	693,651	620,282
Professional fees	491,311	342,755
Management fees (Note 3)	395,813	859,268
Directors' fees and expenses (Note 9)	308,997	286,580
Marketing expenses	176,846	171,075
Other expenses	363,560	229,121
Total expenses	6,158,465	6,079,734
NET OPERATING EXPENSES	(4,316,226)	(5,197,634)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$117,146,591	$120,542,333

The accompanying notes are an integral part of the Unaudited Condensed Interim Consolidated Financial Statements.

 

 

 

 

 

 

 

Unaudited Condensed Interim Consolidated Statements of Changes in Net Assets

For the Six Month Periods Ended 31 July 2018 and 2017

In US Dollars	31 July 2018	31 July 2017
INCREASE IN NET ASSETS FROM OPERATIONS
Net realised gain (loss) on investments	33,228,561	84,820,920
Net change in unrealised appreciation (depreciation)	88,234,256	40,919,047
Net operating expenses	(4,316,226)	(5,197,634)
Net increase in net assets resulting from operations	117,146,591	120,542,333
NET ASSETS AT BEGINNING OF PERIOD	1,713,866,836	1,474,857,821
NET ASSETS AT END OF PERIOD	$1,831,013,427	$1,595,400,154

The accompanying notes are an integral part of the Unaudited Condensed Interim Consolidated Financial Statements.

 

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the Six Month Periods Ended 31 July 2018 and 2017

In US Dollars	31 July 2018	31 July 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations	117,146,591	120,542,333
Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) provided by operating activities:
Net realised (gain) loss on investments	(33,228,561)	(84,820,920)
Net change in unrealised (appreciation) depreciation	(88,234,256)	(40,919,047)
Contributions to private equity investments	(202,633,073)	(119,080,548)
Distributions from private equity investments	142,111,175	148,830,481
Other	357,380	675,054
Net cash (used in) provided by operating activities	(64,480,744)	25,227,353
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS	(64,480,744)	25,227,353
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	256,961,145	175,195,209
CASH AND EQUIVALENTS AT END OF PERIOD	$192,480,401	$200,422,562

The accompanying notes are an integral part of the Unaudited Condensed Interim Consolidated Financial Statements.

 

 

 

 

Unaudited Condensed Interim Consolidated Schedule of Investments

At 31 July 2018

In US Dollars
US Funds			Unfunded Commitment		Amount Invested 1	Distributions Received	Fair Value		Fair Value as a % of  Net Assets
HarbourVest Partners V-Partnership Fund L.P.			2,220,000		46,709,079	45,688,697	1,491,157		0.1
HarbourVest Partners VI-Direct Fund L.P.			1,312,500		46,722,408	38,404,878	4,894,874		0.3
HarbourVest Partners VI-Partnership Fund L.P.			5,175,000		204,623,049	234,825,827	3,905,942		0.2
HarbourVest Partners VI-Buyout Partnership Fund L.P.			450,000		8,633,048	9,355,366	72,007		0.0
HarbourVest Partners VII-Venture Partnership Fund L.P.2			2,318,750		135,290,448	176,041,437	31,827,361		1.7
HarbourVest Partners VII-Buyout Partnership Fund L.P.2			3,850,000		74,417,291	96,314,456	7,892,222		0.4
HarbourVest Partners VIII-Cayman Mezzanine and Distressed Debt Fund L.P.			2,000,000		48,201,553	55,038,262	11,325,508		0.6
HarbourVest Partners VIII-Cayman Buyout Fund L.P.			11,250,000		241,508,801	300,639,802	103,739,531		5.7
HarbourVest Partners VIII-Cayman Venture Fund L.P.			1,000,000		49,191,736	56,641,659	32,114,301		1.8
HarbourVest Partners 2007 Cayman Direct Fund L.P.			2,250,000		97,876,849	159,156,127	7,592,070		0.4
HarbourVest Partners IX-Cayman Buyout Fund L.P.			17,572,500		53,708,226	30,911,059	52,259,367		2.9
HarbourVest Partners IX-Cayman Credit Opportunities Fund L.P.			4,062,500		8,486,193	4,318,119	7,935,866		0.4
HarbourVest Partners IX-Cayman Venture Fund L.P.			3,500,000		66,825,714	28,130,688	77,956,308		4.3
HarbourVest Partners 2013 Cayman Direct Fund L.P.			3,228,996		97,131,486	55,360,165	106,543,670		5.8
HarbourVest Partners Cayman Cleantech Fund II L.P.			7,800,000		12,255,952	2,557,526	11,193,017		0.6
HarbourVest Partners X Buyout Feeder Fund L.P.			194,040,000		57,987,552	7,939,113	71,179,425		3.9
HarbourVest Partners X Venture Feeder Fund L.P.			82,510,000		65,543,838	3,651,991	77,677,222		4.2
HarbourVest Partners Mezzanine Income Fund L.P.			28,405,000		21,816,579	2,670,050	26,710,294		1.5
HarbourVest Partners XI Buyout Feeder Fund L.P.			75,000,000		-	-	314,304		0.0
HarbourVest Partners XI Micro Buyout Feeder Fund L.P.			20,000,000		-	-	55,210		0.0
HarbourVest Partners XI Venture Feeder Fund L.P.			40,000,000		-	-	162,322		0.0
Total US Funds			507,945,246		1,336,929,802	1,307,645,222	636,841,978		34.8
International/Global Funds	Unfunded Commitment		Amount Invested 1		Distributions Received		Fair Value		Fair Value as a % of Net Assets
HarbourVest International Private Equity Partners III-Partnership Fund L.P.	3,450,000		147,728,557		148,439,622		499,072		0.0
HarbourVest International Private Equity Partners IV- Direct Fund L.P.	-		61,452,400		53,436,349		3,389,611		0.2
HIPEP V - 2007 Cayman European Buyout Companion Fund L.P.3	1,664,212		63,880,350		73,759,592		12,411,382		0.7
Dover Street VII Cayman L.P.4	4,413,862		95,586,138		121,515,548		16,438,372		0.9
HIPEP VI-Cayman Partnership Fund L.P.5	9,352,800		114,404,950		59,177,370		120,998,560		6.6
HIPEP VI-Cayman Asia Pacific Fund L.P.	3,250,000		46,937,431		27,370,170		46,313,803		2.5
HIPEP VI-Cayman Emerging Markets Fund L.P.	1,350,000		28,709,489		7,122,156		27,316,557		1.5
HVPE Avalon Co-Investment L.P.	1,643,962		85,135,136		124,138,700		685,349		0.0
Dover Street VIII Cayman L.P.	20,700,000		159,424,389		160,487,254		85,601,676		4.7
HVPE Charlotte Co-Investment L.P.	-		93,894,011		129,186,159		33,318,113		1.8
HarbourVest Global Annual Private Equity Fund L.P.	26,800,000		73,201,202		18,188,442		89,049,715		4.9
HIPEP VII Partnership Feeder Fund L.P.	53,437,500		71,562,500		8,104,241		83,245,784		4.6
HIPEP VII Asia Pacific Feeder Fund L.P.	9,675,000		20,325,000		2,432,924		23,238,163		1.3
HIPEP VII Emerging Markets Feeder Fund L.P.	9,400,000		10,600,000		1,381,661		10,561,374		0.6
HIPEP VII Europe Feeder Fund L.P.6	37,931,450		34,991,029		4,480,255		41,015,244		2.2
HarbourVest Canada Parallel Growth Fund L.P.7	18,390,047		6,304,078		343,759		6,073,530		0.3
HarbourVest 2015 Global Fund L.P.	36,500,000		63,517,309		9,569,115		72,378,475		4.0
HarbourVest 2016 Global AIF L.P.	51,000,000		49,026,107		7,567,332		54,269,903		3.0
HarbourVest Partners Co-Investment IV AIF L.P.	24,250,005		75,749,995		-		86,052,654		4.7
Dover Street IX Cayman L.P.	62,000,000		38,000,000		8,052,511		42,538,784		2.3
HarbourVest Real Assets III Feeder L.P.	32,000,000		18,000,000		542,545		25,731,775		1.4
HarbourVest 2017 Global AIF L.P.	66,000,000		34,020,959		1,695,205		37,856,318		2.1
HIPEP VIII Partnership AIF L.P.	155,550,000		14,450,000		-		18,920,900		1.0
Secondary Overflow III Tranche B	1,200,766		8,957,071		-		14,411,402		0.8
HarbourVest Asia Pacific VIII AIF Fund L.P.	40,000,000		10,005,566		-		10,656,017		0.6
Secondary Overflow III Tranche C	1,335,088		8,267,887		-		11,534,228		0.6
HarbourVest 2018 Global Feeder Fund L.P.	20,000,000		-		-		173,950		0.0
HarbourVest Adelaide Feeder L.P.	150,000,000		-		-		(6,422)		(0.0)
HarbourVest Partners Co-Investment V Feeder Fund L.P.	20,000,000		-		-		-		-
Secondary Overflow III Tranche F	13,213,541		16,786,459		-		22,683,793		1.2
Total International/Global Funds	874,508,233		1,450,918,013		966,990,910		997,358,082		54.5
TOTAL INVESTMENTS	$1,382,453,479		$2,787,847,815		$2,274,636,132		$1,634,200,060		89.3

As of 31 July 2018, the cost basis of partnership investments is $1,385,092,370.

The accompanying notes are an integral part of the Unaudited Condensed Interim Consolidated Financial Statements.

1        Includes purchase of limited partner interests for shares and cash at the time of HVPE's IPO.

2        Includes ownership interests in HarbourVest Partners VII-Cayman Partnership entities.

3        Fund denominated in euros. Commitment amount is €47,450,000.

4        Includes ownership interest in Dover Street VII (AIV 1) Cayman L.P.

5        Fund denominated in euros. Commitment amount is €100,000,000.

6        Fund denominated in euros. Commitment amount is €63,000,000.

7        Fund denominated in Canadian dollars. Commitment amount is C$32,000,000.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

Note 1 Company Organisation and Investment Objective

HarbourVest Global Private Equity Limited (the "Company" or "HVPE") is a closed-end investment company registered with the Registrar of Companies in Guernsey under The Companies (Guernsey) Law, 2008 (as amended). The Company's registered office is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey GY1 1WA.

The Company was incorporated and registered in Guernsey on 18 October 2007. HVPE is designed to offer shareholders long-term capital appreciation by investing in a diversified portfolio of private equity investments. The Company invests in private equity through private equity funds and may make co-investments or other opportunistic investments. The Company is managed by HarbourVest Advisers L.P. (the "Investment Manager"), an affiliate of HarbourVest Partners, LLC ("HarbourVest"), a private equity fund-of-funds manager. The Company is intended to invest in and alongside existing and newly-formed HarbourVest funds. HarbourVest is a global private equity fund-of-funds manager and typically invests capital in primary partnerships, secondary investments, and direct co-investments across vintage years, geographies, industries, and strategies.

Operations of the Company commenced on 6 December 2007, following the initial global offering of the Class A ordinary shares.

Share Capital

At 31 July 2018, the Company's shares were listed on the London Stock Exchange under the ticker "HVPE". At 31 July 2018, there were 79,862,486 shares issued and outstanding. The shares are entitled to the income and increases and decreases in the net asset value ("NAV") of the Company, and to any dividends declared and paid, and have full voting rights. Dividends may be declared by the Board of Directors and paid from available assets subject to the Directors being satisfied that the Company will, immediately after payment of the dividend, satisfy the statutory solvency test prescribed by The Companies (Guernsey) Law, 2008 (as amended).

Dividends will be paid to shareholders pro rata to their shareholdings.

The shareholders must approve any amendment to the Memorandum and Articles of Incorporation. The approval of 75% of the shares is required in respect of any changes that are administrative in nature, any material change from the investment strategy and/or investment objective of the Company, or any change to the terms of the investment management agreement.

There is no minimum statutory capital requirement under Guernsey law.

Investment Manager, Company Secretary, and Administrator

The Directors have delegated certain day-to-day operations of the Company to the Investment Manager and the Company Secretary and Administrator, under advice to the Directors, pursuant to service agreements with those parties, within the context of the strategy set by the Board. The Investment Manager is responsible for, among other things, selecting, acquiring, and disposing of the Company's investments, carrying out financing, cash management, and risk management activities, providing investment advisory services, including with respect to HVPE's investment policies and procedures, and arranging for personnel and support staff of the Investment Manager to assist in the administrative and executive functions of the Company.

Directors

The Directors are responsible for the determination of the investment policy of the Company on the advice of the Investment Manager and have overall responsibility for the Company's activities. This includes the periodic review of the Investment Manager's compliance with the Company's investment policies and procedures and the approval of certain investments. A majority of directors must be independent directors and not affiliated with HarbourVest or any affiliate of HarbourVest.

Note 2 Summary of Significant Accounting Policies

Accounting policies have been applied consistently as presented in the latest audited accounts. Certain comparative amounts have been reclassified to conform to the current period's presentation. This is the first interim period that has been reviewed by the Company's auditor and therefore the comparative financial information for the six month period ended 31 July 2017 was not reviewed by the auditor.

Note 3 Material Agreements and Related Fees

Administrative Agreement

The Company retained BNP Paribas ("BNP") as Company Secretary and Administrator for the period from 11 May 2018 to 31 July 2018. Fees for these services are paid as invoiced by BNP and include an administration fee of £50,000 per annum, a secretarial fee of £50,000 per annum, compliance services fee of £15,000 per annum, ad-hoc service fees, and reimbursable expenses. The Company had previously retained JTC Group as Company Secretary and Administrator for the period from 2 February 2017 to 10 May 2018.

During the period ended 31 July 2018, fees of $43,726 were incurred to BNP and fees of $56,655 were incurred to JTC Group and are included as other expenses in the Unaudited Condensed Interim Consolidated Statements of Operations. During the period ended 31 July 2017, fees of $64,337 were incurred to JTC and included as other expenses in the Unaudited Condensed Interim Consolidated Statements of Operations.

Registrar

The Company has retained Link Asset Services (formerly "Capita") as share registrar. Fees for this service include a base fee of £22,262, plus other miscellaneous expenses. During the periods ended 31 July 2018 and 2017, registrar fees of $26,877 and $34,408, respectively, were incurred and are included as other expenses in the Unaudited Condensed Interim Consolidated Statements of Operations.

Independent Auditor's Fees

For the period ended 31 July 2018, $67,700 (31 July 2017: $67,700) has been accrued for auditor's fees and is included in professional fees in the Unaudited Condensed Interim Consolidated Statements of Operations. Non-audit fees due to the auditor of $73,600 (31 July 2017: nil) have been accrued during the period, in relation to the semi-annual review for the six months ended 31 July 2018, and are included in the Unaudited Condensed Interim Consolidated Statements of Operations. Ernst & Young in the US was paid non-audit fees of nil (31 July 2017: $53,725) by the Investment Manager, in relation to tax services provided.

Investment Management Agreement

The Company has retained HarbourVest Advisers L.P. as the Investment Manager. The Investment Manager is reimbursed for costs and expenses incurred on behalf of the Company in connection with the management and operation of the Company. The Investment Manager does not directly charge HVPE management fees or performance fees other than with respect to parallel investments. However, as an investor in the HarbourVest funds, HVPE is charged the same management fees and is subject to the same performance allocations as other investors in such HarbourVest funds. During the periods ended 31 July 2018 and 2017, reimbursements paid by the Company for services provided by the Investment Manager were $837,315 and $679,681, respectively.

During the period ended 31 July 2018, HVPE had two parallel investments: HarbourVest Acquisition S.à.r.l. (via HVPE Avalon Co-Investment L.P.) and HarbourVest Structured Solutions II, L.P. (via HVPE Charlotte Co-Investment L.P.). Management fees paid for the parallel investments made by the Company were consistent with the fees charged by the funds alongside which the parallel investments were made during the periods ended 31 July 2018 and 2017. Management fees included in the Unaudited Condensed Interim Consolidated Statements of Operations are shown in the table below:

	2018	2017
HVPE Avalon Co-Investment L.P.	-	466,921
HVPE Charlotte Co-Investment L.P.	395,813	392,347
Total Management Fees	$395,813	$859,268

The HVPE Avalon Co-Investment L.P. management fee was terminated on 30 September 2017. For the period ended 31 July 2018, management fees on the HVPE Charlotte Co-Investment L.P. investment were calculated based on a weighted average effective annual rate of 0.95% on capital originally committed (0.91% on committed capital net of management fee offsets) to the parallel investment.

Note 4 Investments

In accordance with the authoritative guidance on fair value measurements and disclosures under US generally accepted accounting principles ("US GAAP"), the Company discloses the fair value of its investments in a hierarchy that prioritises the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active.

Level 3 - Inputs that are unobservable. Generally, the majority of the Company's investments are valued utilising unobservable inputs, and are therefore classified within Level 3.

Level 3 investments include limited partnership interests in HarbourVest funds which report under US GAAP. Inputs used to determine fair value are primarily based on the most recently reported NAV provided by the underlying investment manager as a practical expedient under Accounting Standards Codification ("ASC") 820. The fair value is then adjusted for known investment operating expenses and subsequent transactions, including investments, realisations, changes in foreign currency exchange rates, and changes in value of private and public securities.

Income derived from investments in HarbourVest funds is recorded using the equity pick-up method. Under the equity pick-up-method of accounting, the Company's proportionate share of the net income (loss) and net realised gains (losses), as reported by the HarbourVest funds, is reflected in the Unaudited Condensed Interim Consolidated Statements of Operations as net realised gain (loss) on investments. The Company's proportionate share of the aggregate increase or decrease in unrealised appreciation (depreciation), as reported by the HarbourVest funds, is reflected in the Unaudited Condensed Interim Consolidated Statements of Operations as net change in unrealised appreciation (depreciation) on investments.

Because of the inherent uncertainty of these valuations, the estimated fair value may differ significantly from the value that would have been used had a ready market for this security existed, and the difference could be material.

The following table summarises the Company's investments that were accounted for at fair value by level within the fair value hierarchy:

	Level 1	Level 2	Level 3	Total
Balance at 31 January 2017	$-	$-	$1,295,753,465	$1,295,753,465
Contributions to investments			312,684,514	312,684,514
Net realised gain (loss) on investments			157,395,016	157,395,016
Net change in unrealised appreciation (depreciation) on investments			91,527,458	91,527,458
Distributions received from investments			(405,145,108)	(405,145,108)
Balance at 31 January 2018	$-	$-	$1,452,215,345	$1,452,215,345
Contributions to investments			202,633,073	202,633,073
Net realised gain (loss) on investments			33,228,561	33,228,561
Net change in unrealised appreciation (depreciation) on investments			88,234,256	88,234,256
Distributions received from investments			(142,111,175)	(142,111,175)
Balance at 31 July 2018	$-	$-	$1,634,200,060	$1,634,200,060
Net change in unrealised gain (loss) on investments still held at 31 July 2018			$46,011,229

The Company recognises transfers at the current value at the transfer date. There were no transfers during the period ended 31 July 2018. Investments include limited partnership interests in private equity partnerships, all of which carry restrictions on redemption. The investments are non-redeemable and the Investment Manager estimates an average remaining life of 10 years with a range of 1 to 35 years remaining.

As of 31 July 2018, the Company had invested $2,971,219,920, or 68.2% of the Company's committed capital in investments, and had received $2,477,779,794 in cumulative distributions (including dividends from the formerly held investment HarbourVest Senior Loans Europe).

There were no investment transactions during the period ended 31 July 2018 in which an investment was both acquired and disposed of.

Note 5 Commitments

As of 31 July 2018, the Company has unfunded investment commitments to other limited partnerships of $1,382,453,479 which are payable upon notice by the partnerships to which the commitments have been made. Unfunded investment commitments of $1,315,114,970 are denominated in US dollars, $48,948,462 are denominated in euros, and $18,390,047 are denominated in Canadian dollars. As of 31 January 2018, the Company had unfunded investment commitments to other limited partnerships of $1,237,494,068. Unfunded investment commitments of $1,157,772,486 were denominated in US dollars, $55,690,445 were denominated in euros, and $24,031,137 were denominated in Canadian dollars.

Note 6 Debt Facility

On 4 December 2007, the Company entered into an agreement with Lloyds Bank plc regarding a multi-currency revolving credit facility (the "Facility") for an aggregate amount up to $500 million. As of 28 September 2015, the Facility was amended to include Credit Suisse as an additional lender to the Company's Facility agreement with Lloyds Bank plc. On 1 December 2017, the Facility was amended to extend to December 2022 and to adjust lender commitments. Lloyds Bank plc's commitment was amended to $250 million, and Credit Suisse's commitment was amended to $250 million.

Amounts borrowed against the Facility accrue interest at an aggregate rate of the LIBOR/EURIBOR, a margin, and, under certain circumstances, a mandatory minimum cost. The Facility is secured by the private equity investments and cash and equivalents of the Company, as defined in the agreement. Availability of funds under the Facility and interim repayments of amounts borrowed are subject to certain covenants and diversity tests applied to the Investment Portfolio of the Company. At 31 July 2018 and 31 January 2018, there was no debt outstanding against the Facility. Included in other assets at 31 July 2018 are deferred financing costs of $5,689,682 related to refinancing the Facility. The deferred financing costs are amortised over the life of the Facility. The Company is required to pay a non-utilisation fee calculated as 115 basis points per annum. For the periods ended 31 July 2018 and 2017, $2,890,972 and $2,890,972, respectively, in non-utilisation fees have been incurred.

Note 7 Financial Highlights

For the Six Month Periods Ended 31 July 2018 and 2017

	2018	2017
Shares
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period	21.46	18.47
Net realised and unrealised gains	1.52	1.57
Net operating expenses	(0.05)	(0.06)
Total from investment operations	1.47	1.51
Net asset value, end of period	$22.93	$19.98
Market value, end of period	$17.061	$16.78
Total return at net asset value	6.8%	8.2%
Total return at market value	(4.0%)	11.6%
RATIOS TO AVERAGE NET ASSETS
Expenses2	0.35%	0.40%
Net operating expenses	(0.24%)	(0.34%)
PORTFOLIO TURNOVER3	0.0%	0.0%

1        Represents share price of £13.00 converted.

2        Does not include operating expenses of underlying investments.

3        The turnover ratio has been calculated as the number of transactions divided by the average net assets.

Note 8 Publication and Calculation of Net Asset Value

The NAV of the Company is equal to the value of its total assets less its total liabilities. The NAV per share is calculated by dividing the NAV by the number of shares in issue on that day. The Company publishes the NAV per share of the shares as calculated, monthly in arrears, at each month end, generally within 20 days.

Note 9 Related Party Transactions

Other amounts payable to HarbourVest Advisers L.P. of $124,436 represent expenses of the Company incurred in the ordinary course of business, which have been paid by and are reimbursable to HarbourVest Advisers L.P. at 31 July 2018.

Board-related expenses, primarily compensation, of $308,997 and $286,580 were incurred during the periods ended 31 July 2018 and 2017, respectively.

Note 10 Indemnifications

General Indemnifications

In the normal course of business, the Company may enter into contracts that contain a variety of representations and warranties and which provide for general indemnifications. The Company's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. Based on the prior experience of the Investment Manager, the Company expects the risk of loss under these indemnifications to be remote.

Investment Manager Indemnifications

Consistent with standard business practices in the normal course of business, the Company has provided general indemnifications to the Investment Manager, any affiliate of the Investment Manager, and any person acting on behalf of the Investment Manager or such affiliate when they act in good faith, in the best interest of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim, but expects the risk of having to make any payments under these general business indemnifications to be remote.

Directors and Officers Indemnifications

The Company's Articles of Incorporation provide that the Directors, managers or other officers of the Company shall be fully indemnified by the Company from and against all actions, expenses, and liabilities which they may incur by reason of any contract entered into or any act in or about the execution of their offices, except such (if any) as they shall incur by or through their own negligence, default, breach of duty, or breach of trust, respectively.

Note 11 Subsequent Events

In the preparation of the financial statements, the Company has evaluated the effects, if any, of events occurring between 31 July 2018 and 17 October 2018, the date that the financial statements were issued.

On 24 August 2018, the Company committed $15 million to Secondary Overflow Fund III L.P. (Tranche G).

On 28 September 2018, the Company committed $50 million to HarbourVest 2018 Global Fund.

On 17 October 2018, the Company committed $30 million to HarbourVest Partners Co-Investment Fund V.

There were no other events or material transactions subsequent to 31 July 2018 that required recognition or disclosure in the financial statements.

Disclosures

Investments

The companies represented within this report are provided for illustrative purposes only, as example portfolio holdings. There are over 8,000 individual companies in the HVPE portfolio, with no one company comprising more than 1.3% of the entire portfolio.

The deal summaries, general partners (managers), and/or companies shown within the report are intended for illustrative purposes only. While they may represent an actual investment or relationship in the HVPE portfolio, there is no guarantee they will remain in the portfolio in the future.

Past performance is no guarantee of future returns.

Forward-Looking Statements

This report contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," and "would," or the negative of those terms, or other comparable terminology. The forward-looking statements are based on the Investment Manager's beliefs, assumptions, and expectations of future performance and market developments, taking into account all information currently available. These beliefs, assumptions, and expectations can change as a result of many possible events or factors, not all of which are known or are within the Investment Manager's control. If a change occurs, the Company's business, financial condition, liquidity, and results of operations may vary materially from those expressed in forward-looking statements.

By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events, and depend on circumstances, that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Any forward-looking statements are only made as at the date of this document, and the Investment Manager neither intends nor assumes any obligation to update forward-looking statements set forth in this document whether as a result of new information, future events, or otherwise, except as required by law or other applicable regulation.

In light of these risks, uncertainties, and assumptions, the events described by any such forward-looking statements might not occur. The Investment Manager qualifies any and all of its forward-looking statements by these cautionary factors.

Please keep this cautionary note in mind while reading this report.

Some of the factors that could cause actual results to vary from those expressed in forward-looking statements include, but are not limited to:

·        the factors described in this report;

·        the rate at which HVPE deploys its capital in investments and achieves expected rates of return;

·        HarbourVest's ability to execute its investment strategy, including through the identification of a sufficient number of appropriate investments;

·        the ability of third-party managers of funds in which the HarbourVest funds are invested and of funds in which the Company may invest through parallel investments to execute their own strategies and achieve intended returns

·        the continuation of the Investment Manager as manager of the Company's investments, the continued affiliation with HarbourVest of its key investment professionals, and the continued willingness of HarbourVest to sponsor the formation of and capital raising by, and to manage, new private equity funds;

·        HVPE's financial condition and liquidity, including its ability to access or obtain new sources of financing at attractive rates in order to fund short-term liquidity needs in accordance with the investment strategy and commitment policy;

·        changes in the values of, or returns on, investments that the Company makes;

·        changes in financial markets, interest rates or industry, general economic or political conditions; and

·        the general volatility of the capital markets and the market price of HVPE's shares.

Publication and Calculation of Net Asset Value

The NAV of the Company is equal to the value of its total assets less its total liabilities. The NAV per share is calculated by dividing the NAV of the Company by the number of shares in issue. The Company intends to publish the estimated NAV per share as calculated, monthly in arrears, as at each month end, generally within 20 days.

Reconciliation of Share Price Discount to Net Asset Value per Share

The share price discount to NAV per share will vary depending on which NAV per share figure is used. For the purpose of this report discounts have been calculated using the live NAVs per share available in the market as at 31 January 2018 and 31 July 2018, those being the 31 December 2017 and 30 June 2018 estimates of $20.79 (sterling equivalent £14.65) and $21.79 (sterling equivalent £16.63) respectively, against share prices of £12.44 at 31 December 2017 and £13.00 at 31 July 2018. The table below outlines the notional discounts to the share price at 31 July 2018, based on the NAVs per share published after this date (31 July 2018 estimate and final). Movements between the published NAVs per share for the same calendar date largely arise as further underlying fund valuations are received, and as adjustments are made for public markets, foreign exchange and operating expenses.

Date of NAV (estimate and final)	NAV per share	NAV converted to sterling at 31 July exchange rate (USD/GBP: 1.31)	Share price at 31 July 2018	Discount to NAV at 31 July 2018
Estimated NAV at 30 June 2018 (published 18 July)	$21.79	£16.63	£13.00	21.8%
Estimated NAV at 31 July 2018
(published 15 August)	$21.96	£16.73	£13.00	22.2%
Final NAV (IFRS) at 31 July 2018
(published 18 October)	$22.93	£17.47	£13.00	25.5%

Regulatory Information

HVPE is required to comply with the Listing, Disclosure Guidance and Transparency Rules of the Financial Conduct Authority in the United Kingdom (the "LDGT Rules"). It is also authorised by the Guernsey Financial Services Commission as an authorised closed-ended investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (the "POI Law"). HVPE is subject to certain ongoing requirements under the LDGT Rules and the POI Law and certain rules promulgated thereunder relating to the disclosure of certain information to investors, including the publication of annual and half-yearly financial reports.

 

END

 

 

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