Glossary of terms

AIF
Alternative Investment Fund. Electra Private Equity PLC is an AIF.

AIFM
Alternative Investment Fund Manager (AFIM) The AIFM for Electra Private Equity PLC is G10.

AIFMD
Alternative Investment Fund Managers Directive 2011/61/EU of the European Parliament.

Carried Interest
The incentive arrangements, which are similar to arrangements found elsewhere in the private equity industry, were designed to align previous managers interests with those of Electra’s shareholders. These arrangements are typically referred to as “carried interest”.

The carried interest payable to previous managers is based on three year pools of investments. Under the terms of this arrangement all qualifying investments in a three year period are aggregated into a separate pool. Electra must first receive back the aggregate cost of all the investments in the pool, plus related priority profit share (see below) and an 8% compound return (this is often referred to as the “hurdle”). Once Electra has received sufficient cash to pay the amounts as described above, the previous managers will be entitled to a carried interest of 18% of the profits. Consequently, they will receive the next 18/82 of the hurdle so that they will have an amount equal to 18% of the profits on the pool up to that point (this is referred to as a “catch up”). Thereafter, Electra and previous managers will share future cash flows in the ratio of 82:18.

Below is an example to illustrate in principle how the above described arrangements work: 

 £mAssumptions
Amount invested 500 Amount invested and priority profit share
Amount realised 1,000 Realised after year five
Pool profit 500  
Hurdle (210) 8% per annum compound
Catch-up 46 18/82 of the hurdle
Balance 44 The amount over the hurdle to get to an
    aggregate 18% of the pool profit
Total carried interest 90 18%
Electra 410 82%

With effect from 31st May 2017, when the contract with the previous manager terminated, any provision on post 2006 Pools, which was unpaid at that date and any future uplift to it was reduced by 20% and reverted back to the Company.

Commitments
Legal obligation to provide capital for future investment in a private equity fund or in relation to a single investment.

Discount
Investment trust shares frequently trade at a discount to NAV. This occurs when the share price is less than the NAV per share. In this circumstance, the price that a shareholder would pay or receive for a share would be less than the value attributable to it by reference to the underlying assets. Traditionally expressed as a percentage.

Earnings Multiple
This is normally referred to as a price earnings (P/E) ratio. It is the ratio of a company’s valuation compared to its earnings.

EBITDA
Earnings Before Interest, Tax, Depreciation and Amortisation. Often used to compare the profitability of similar companies.

EBITA
Earnings Before Interest, Tax and Amortisation.

EBITDA Margin
EBITDA expressed as a percentage derived by dividing EBITDA by net sales.

EV (enterprise value)
This is the aggregate value of a company’s entire issued share capital and net debt.

Gearing
This is the level of a company’s debt related to its equity capital and is usually expressed in percentage form. It shows the extent to which a company is funded by lenders as opposed to shareholders.

Hedging
Hedging is an investment technique designed to offset a potential loss on one investment by purchasing a second investment that is expected to perform in the opposite way.

Investment Return
This is the aggregate of income and capital profits and losses from the Investment Portfolio. This is sometimes disclosed as portfolio return. This is a common measure used by investment companies.

IRR (internal rate of return)
Is the annualised return on an investment calculated from the cash flows arising from that investment taking account of the timing of each cash flow. It is derived by computing the discount rate at which the present value of all subsequent cash flows arising from an investment are equal to the original amount invested. Where an IRR is stated to be net, this denotes that it has been calculated net of investment management fees (PPS and carried interest).

Listed Company
Any company where the shares are freely tradable and are listed or traded on a recognised stock exchange.

LTM
Last twelve months.

NAV
This is the value of all the Company’s assets minus current and long-term liabilities. Can also be referred to as ‘shareholders’ funds’.

NAV per share
This is the value of the Company’s assets attributable to one ordinary share. It is calculated by dividing ‘shareholders’ funds’ by the total number of Ordinary shares in issue. This is a common measure used by investment companies.

NAV Total Return
The total return to shareholders is the aggregate of income and capital profits of the investment portfolio for the period less all costs. It can be expressed as a percentage of the opening position. This is a common measure used by investment companies.

Reported under IFRS2018Annual 2017201810 Year to 2017
Dividend per share (pence) 939 3,636 4,735 3,821
(Decrease)/increase in NAV per share (pence) (1,089) (3,168) (908) (20)
Total return (pence)  (150) 468 3,827 3,801
Opening NAV per share (pence) 1,981 5,149 1,801 2,001
NAV total return (8)% 9% 213% 190%

Calculation of Diluted and Basic NAV
The unaudited NAV per share at 30 September 2018 is calculated on the basis of the 38,282,763 ordinary shares in issue at 30th September 2018.

The audited NAV per share at 30 September 2017 was calculated on the basis of the 38,282,763 ordinary shares in issue at 30 September 2017.

Permanent Capital
An investment entity that manages capital for an unlimited time horizon.

Priority Profit Share
This is a share of profits equivalent to a management fee. It is calculated at 1.5% of the gross value of the Company’s core investment portfolio and 1% of the gross value of the Company’s Non-Core Listed and Primary Fund Investments, no fee is paid on cash. Following the Board’s decision to serve notice of termination of the management agreement in May 2016, the management fee reverts back to the structure in place prior to 1 April 2015, whereby the Company pays the Manager 1.5% on assets held in cash (rather than nil) and 1.5% is paid on non-core investments (rather than 1%) as well as 1.5% on core assets.

Return on Equity (ROE)
This is the total return divided by opening shareholder funds. Electra’s ROE has been calculated by taking the percentage change in NAV per share and adding back dividends paid per share. This is a common measure used by investment companies.

Reported under IFRS 201810 Year Annualised 2017
Closing NAV per share (pence) 892 1,981
Dividends per share during period (pence) 4,735 3,821
Opening NAV per share (pence) 1,801 2,001
Return on Equity 12% 11%

Total Shareholder Return (TSR) 
TSR is the percentage increase in share price over the period, where the closing price is multiplied by an adjustment factor for each dividend paid in the year (‘dividend adjusted closing price’).

To calculate the dividend adjusted closing price, the closing price is multiplied by an adjustment factor for each dividend paid in the year. The adjustment factor is the share price on the day prior to the ex dividend date divided by the amount of the dividend subtracted from that prior day’s price. Where there are multiple dividends in the year, the cumulative adjustment factor is the product of the adjustment factor for each dividend paid.

 Share Price (p)Dividend Adjustment FactorDividend Adjusted Share Price (p)
30/09/2017 1,665 - 1,665
31/09/2018 879 2.01 1,770
Total Shareholder Return (%)     6%
 Dividend per Share (p)Share Price Prior to Ex-Div Date (p)Adjustment Factor
01/12/2017 914 1,867 1.96
28/06/2018 25 918 1.03
Cumulative Adjustment Factor     2.01

 

Termination Payment
On 26 May 2016 the Company served notice of termination of the Management and Investment Guideline Agreement on Epiris. This termination becomes effective on 31 May 2017. Under the terms of the contract the previous manager are entitled to compensation based on priority profit share received in the year to 31 May 2017.

Unlisted Company
Any company whose shares are not listed or traded on a recognised stock exchange.

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