ANNUAL REPORT 2006 09 18 – 2007 12 31
NAXS Nordic Access Buyout Fund AB (publ)
Summary of the financial year
• Profit before tax for the financial year amounted to MSEK 7.8.
• Net asset value per share at the end of the period amounted to SEK 39.24, of which cash and cash equivalent amounted to SEK 36.26 per share.
• In June 2007, NAXS made a MSEK 60 commitment to the Swedish fund Valedo Partners Fund I AB (formerly CreVal).
• In August 2007, NAXS made a MEUR 7 (approx. MSEK 66) commitment to the Finnish fund Intera Fund I Ky.
• In December 2007, NAXS made a MEUR 15 (approx.
MSEK 142) commitment to the pan-European fund Apax Europe VII.
Events after the end of the period
• In March 2008, NAXS made a MEUR 10 commitment to the Norwegian fund FSN Capital III.
• In April 2008, NAXS made a MEUR 20 commitment to Nordic Capital Fund VII.
Contents Page
Shareholders information 2
Summary of the financial year 2 NAXS – a unique opportunity
within Nordic private equity 3 Comments from the CEO,
Chairman and adviser 4
Market – continued growth and
turbulence generate opportunities 5
Goals and strategy 6
Organisation and legal structure 7
Fund portfolio 7
Board and Management 8
Investment adviser 9
Share capital and ownershi p 10 Board of Director’s report 11
Income statements 13
Balance sheets 13
Changes in shareholders’ equity 14
Cash-flow statements 14
Notes to the financial statements 14
Notes 16
Auditors’ report 19
Shareholders information
Annual General Meeting, 12 June, 2008
The 2008 Annual General Meeting will be held on 12 June 2008 at 5:00 p.m. at the law firm Delphi & Co, Regeringsgatan 30–32, in Stockholm. Any questions prior to the Annual General Meeting should be sent to the Chairman of the Board, Björn C Andersson, who can be reached via e-mail at: bjorn.c.andersson@comhem.se or telephone
+46 (0)70-5861021.
Participation
In order to participate in the Annual General Meeting, shareholders must be registered in the shareholders’ register at VPC AB not later than 5 June 2008 and have notified their intention to attend and the identity of any representative, proxy or advisor who will represent/accompany the shareholder to the Meeting not later than 4 June 2008 at 4:00 p.m.
Registration
Registration for participation shall occur either in writing to Law firm Delphi & Co, Attn: Annika Labbate, BOX 1432, SE-111 84 Stockholm, by fax, +46 (0)8-20 18 84, or via e-mail to annika.labbate@delphi.se, stating full name, civil registration number or corporate registration number (or similar), address, daytime telephone number and, where approp- riate, information on proxies, representatives and advisors.
Nominee-registered shares
To be entitled to participate in the Annual General Meeting, shareholders whose shares are held in the name of a trustee must request to be temporarily registered in the VPC AB’s shareholders’ register. Shareholders must inform the trustee sufficiently in advance to enable completion of such registration by Thursday, 5 June 2008.
Dividend
The Board of Directors proposes that no dividend be paid for the 18 September 2006 – 31 December 2007 financial year.
Financial information, 2008 Annual General Meeting: 12 June Interim report (6 months): 14 August Interim report (9 months): 6 November
Contents Page
Shareholders information 2
Summary of the financial year 2 NAXS – a unique opportunity
within Nordic private equity 3 Comments from the CEO,
Chairman and adviser 4
Market – continued growth and
turbulence generate opportunities 5
Goals and strategy 6
Organisation and legal structure 7
Fund portfolio 7
Board and Management 8
Investment adviser 9
Share capital and ownershi p 10 Board of Director’s report 11
Income statements 13
Balance sheets 13
Changes in shareholders’ equity 14
Cash-flow statements 14
Notes to the financial statements 14
Notes 16
Auditors’ report 19
NAXS – a unique opportunity in Nordic private equity
NAXS, which started its operations in 2007, is Swedish limited company operating as a fund of funds with a focus on Nordic buyout funds. The NAXS model, based on a listed fund-in-fund structure, makes the Nordic private equity market accessible for a broader range of investors than in the past. NAXS has an investment strategy aimed creating a diversified portfolio of participations in buyout funds. Approximately one year after NAXS conducted a new share issue of MSEK 600 and listed its share on First North, it has allocated nearly its entire capital.
For NAXS, this means that about 93% of the available capital of MSEK 589 has been committed to five different buyout funds. These funds in turn proceed to investments in primarily Nordic companies. Most of the funds to which NAXS has allocated funds have also begun to deploy their capital and, at the end of May 2008, approximately 13% of NAXS’ capital had been utilised for investments in portfolio companies.
Meanwhile, the remaining capital has been managed in hedged fixed-interest securities, while waiting for the funds that are included in the NAXS portfolio to call for future investment capital. To date, interest earned on NAXS’ available capital has more than covered the Company’s current expenses for management and listing.
When all the funds in NAXS’ portfolio are fully invested, NAXS will basically also have invested all its capital in the various companies acquired by such funds.
After its first year of operations, having complied with its strategy of investing in a diversified portfolio of buyout funds with a Nordic focus, NAXS has now entered a new phase.
Capital is paid to funds for investments, but the funds are also evaluated continuously, based on investments made and how these are managed and progress.
An independent investment advisory company, NAXS Nordic Access Advisors AB, identifies and reviews investment oppor- tunities, and prepares and submit investment proposals to the boards of the NAXS Group. However, investment and financing decisions are entirely up to NAXS and its subsidiaries. The advisory company also is responsible for the monitoring and evaluation of the private equity managers to whose funds NAXS has allocated capital.
Although the allocations made by NAXS to various funds were implemented over a time span of about one year, the distribution in terms of years for the underlying investments is nevertheless significant, partly due to NAXS entering the underlying funds in various stages in their fund raising process and partly due to the varying investment pace of the private equity funds. In this manner, NAXS expects that the capital pledged to the five funds in its portfolio will also be invested at a relatively uniform rate over a few years, commencing in summer 2007. Since the investments will be spread over time, this will reduce any downturn risks. Similarly, the risk will be reduced by NAXS investing in Nordic funds focused on large and small-cap businesses, which is also completely in line with the initially established investment strategy.
Since NAXS has now allocated its current capital in funds that have also started to invest in portfolio companies, the company is also entering a new phase. The news of the funds’ various investments and possible exits will increase. At the same time, the portion of NAXS’ net asset value that derives from invest- ments made in funds will steadily increase, in parallel with a decrease in the portion of cash and cash equivalents.
NAXS reports its net asset value every quarter, based on reports from the underlying funds in its portfolio, which estimate the current value of investments made according to approved valuation principles. NAXS then reports the aggre- gate total value of investments in the funds and the cash and cash equivalents. An increasing portion of fund investments in net asset value changes its character and increases its volatility.
When the funds in NAXS portfolio eventually begin to exit their underlying investments, there will be an inflow of capital back to NAXS. Such capital can then be used to fund new investment commitments or be distributed to shareholders.
• Portion of allocated capital: 93% (end of May 2008)
• Portion of capital invested by underlying funds: 13%
(end of May 2008)
• Capital allocated to five funds
• Commitment size between MEUR 6.3 and MEUR 20
• Profit before tax for the financial year 2007: 7.8MSEK
• Net asset value per share as per 31/12/2007: 39.21SEK
Comments from the CEO, Chairman and Advisors
How has the past year been for NAXS?
Björn C. Andersson: The year has been very satisfactory. Our goal was to invest our assets in a range of Nordic buyout funds within 18 months. It is gratifying to state that this was achieved in less than 12 months. We are basically fully invested with commitments in five very high-quality funds.
What was it like gaining access to funds suitable for investment? Was there any doubt, since NAXS is listed?
Amaury de Poret: We feel that we have had good access to the funds in which we were interested and have received a satis- factory response from the market. Naturally, questions were asked about our listing and being a new type of private equity investor in the Swedish market, but when we explained how we function, there is not much difference between us and other investors.
How is the market for NAXS developing this year? Is it easy to find good funds to invest in?
Thomas Åkerman: There are numerous funds that are raising capital or are en route to doing so. More than we had expected in 2008 and 2009. Naturally, this is very good for NAXS.
Could NAXS even utilise the opportunity to make commitments that are up to 30% higher than net asset value?
Björn C. Andersson: We will probably do that. That possibility is there, so we will be able to take advantage of good market conditions and investment possibilities. When that opportunity is discussed, it is important to remember that it often takes several years for a fund to be fully invested.
How did you choose the funds in which you have invested?
Thomas Åkerman: For funds with a slightly longer history, we want them to be ranked among the best performers in their segment, based on their track record. Smaller and newer funds must have an experienced team with a satisfactory previous track record and an investment strategy with attractive return prospects.
How many have you looked at?
Amaury de Poret: We permanently have around 30 funds under monitoring. Naturally, there are many established funds with a good track record but we also take a look at emerging managers that we feel potentially could be interesting. These are often managers, who started their careers with teams with long experience of the industry. Creval and Intera are example of such emerging managers.
Will there be a new share issue when you are fully invested?
Jeff Bork: Naturally, it will only when we are fully invested that a new share issue will be possible but it is primarily about the
Why is there a NAV discount on the share?
Jeff Bork: The ambition is, of course, that the share will be traded at a premium and that we are now trading with a discount is probably because we are a new investment tool and the market is unsure of what we are offering. The Stock Market has also been quite shaky since NAXS was introduced. We are now also fully invested and investing activities in our funds are increasing. We are already building upon the 16 underlying companies and communication around our fund portfolio will become more active. We are convinced that the NAV discount is unwarranted and will eventually disappear.
Why are you still on the First North?
Jeff Bork: Being listed there means relatively low costs. However, over time, we intend to move to main list of the OMX.
When will income from the investments start to flow in?
Jeff Bork: It is of course very difficult to say. To begin with, it is important to remember that private equity is about long-term investments but it is most probable that we will see the first sales of portfolio companies in our underlying funds in about 3–4 years. When that happens, capital will flow back into NAXS. But, quite soon our shareholders should be able to monitor the value performance of the funds’ investments.
We will update the net asset value every quarter.
How do you view the private equity market at the moment?
Thomas Åkerman: We currently have a positive view on the market. Our underlying funds will primarily be investing in 2008 and forward. Our funds also completed several acquisitions during the first half of the year. There are indications that price levels will drop somewhat, which will benefit us since our funds are now in the process of investing.
How successful has it been following the established investment strategy?
Jeff Bork: I believe it has been better than expected, with regard to the geographic spread and exposure to various segment sizes. We have succeeded in creating the portfolio structure we had described as our goal.
How do you monitor and follow-up investments made?
Amaury de Poret: We continuously monitor fund managers to ensure that they comply with the strategy they have promised.
We also have frequent meetings with managers to discuss the situation of their investments, current investment possibilities and potential opportunities for co-investments. Follow-ups and contacts are very important. We also carefully monitor development in industries and companies in which the underlying funds are invested.
From left; Jeff Bork, CEO of NAXS AB (publ), Björn C. Andersson, Chairman of NAXS AB (publ), Amaury de Poret, Partner NAXS Nordic Access Advisors AB (independent investment advisor to NAXS), Thomas Åkerman, Partner NAXS Nordic Access Advisors AB
Market – continued growth and turbu- lence generate opportunities
Despite global turbulence in credit markets, which has resulted in access to credit being limited, private equity continues to flourish and develop. The restricted access to loans has primarily affected the private equity actors that focus on mega transactions, amounting to SEK 10 billions or more. Smaller and mid-size deals and the Nordic market, in particular, have
fared relatively better.
Interest in private equity has not faded despite the turbulence, and 2007 was a new record year for the amount of money raised for new funds. According to Private Equity Intelligence, new private equity funds raised USD 518 billion last year, which was slightly better than 2006, which reached USD 516 billion. Buyout funds totalled around USD 210 billion in 2007.
Interest continued in 2008, with USD 163.5 billion raised during the first quarter, a figure that is only surpassed by the second quarter of 2007, which was the best quarter ever. For the full year, Private Equity Intelligence believes that new funds will raise between USD 500 and 600 billion.
In the most recent survey from Private Equity Intelligence, issued at the end of 2007 after the credit crisis struck, 52% of the investors stated that they would increase their exposure to private equity. The remainder said that they would leave their allocation unchanged and none would decrease.
Nordic region remained strong
Interest from investors remained strong and although there was a shortage of large deals, buyout investments in Swedish companies rose to approximately MSEK 22 billion in 2007 from MSEK 16.2 billion in 2006, according to statistics from Swedish Private Equity & Venture Capital Association. Figures from Candover and Incisive Media also show that the Nordic region was one of few regions in Europe to actually increase activity in the buyout market during the first quarter of 2008.
That the Nordic market performed relatively well is due to the Nordic banks escaping more or less unscathed from the credit crisis, while relations with buyout companies based in the Nordic regions are excellent. Nordic banks have basically never lost money in connection with buyout transactions in the Nordic region that have been managed by regional players.
Even in such a developed market as the Swedish, capital accessible for private equity funds accounts for only 8% of public market capitalisation.
The entire industry is also steering steadily towards increased openness, transparency and information disclosure. In the UK, the industry produced the Walker report with guidelines for information supply and in Sweden, Swedish Private Equity &
Venture Capital Association will also publish guidelines for its members’ openness and communication. The reasons include the industry’s rapid growth and actual size, high demand from cer- tain investors, such as pension funds, and increased competition.
Comparison of buyout funds 10-year rolling net IRR (%)
Goals and strategy
Below are the overall investment criteria for the Company’s investment operations.
Type of Fund
Private equity buyout funds that are managed by established managers. However, a smaller portion of the Company’s assets may be invested in newly established buyout funds and mana- gement teams.
Instruments
Interests in private equity funds, e.g. share or contract-based partnership interests. However, the company’s assets shall not be invested in pure debt instruments or various intermediate types, such as convertible debentures and mezzanine instrument.
Geographic focus
Funds, which have the Nordic region (Denmark, Finland, Norway and Sweden) or at least one of the Nordic countries as their investment focus, or have a management group dedicated to the Nordic region.
NAXS Nordic Access Buyout
Fund AB
NAXS Nordic Access Advisors AB NAXS Nordic
Access Buyout AS
Investeringar i fondandelar
Investeringar i fondandelar Investeringar
i fondandelar 100 %
Source: Thomson Financials, 1996 -06-30 until 2006-06-30
The Nordic region, including Sweden, which accounts for more than half of the Nordic private equity market, also shows very distinct statistics concerning prior investments. The Nordic markets are at the top in terms of delivering returns to investors and this particularly involves buyouts (refer also to
the diagram below).
Excellent investment opportunities
No difficulties have arisen to date in financing the mid-size transactions that represent the backbone of the Nordic buyout market. In the Nordic region, as in other regions, greater caution has been noted, which has led to slightly lower prices measured as P/E ratios and somewhat lower loan financing of acquisitions. Meanwhile, the time to complete transactions could increase due to the difference in the expected price between seller and buyer and uncertainty arising from the uneasy credit market.
There has been no sign that access to attractive investment opportunities for buyout funds could be declining; on the contrary, continued restructuring of certain industries and many generation changes in family-owned companies around the Nordic region indicate that the deal flow will remain strong.
These circumstances also point to the years ahead being really profitable for making investments, which will also coincide with the funds in which NAXS has allocated capital entering an investment phase in earnest. In May, Nordic Capital VII also announced one of the largest transactions to date for the year, even globally, with the acquisition of a division of the pharma- ceutical company, Bristol Myers, valued at about USD 4.1 billion.
The flow of capital to private equity in combination with weak share prices will also speed up interest in buying out listed companies from the stock exchange. A number of such businesses were conducted in the Nordic region in early 2008 and most assessors expect continued high activity in the area during 2008.
Broadening of operations
There is a trend amongst private equity actors in the Nordic region and the rest of Europe to develop a broader offering of private equity-related funds. These include real estate funds, infrastructure funds and distressed debt funds, or direct investments in the companies themselves. This trend in private equity is another sign that the industry is rapidly maturing.
Despite the explosive growth in the industry in recent decades, a continued rapid development is expected. Private Equity Intelligence forecasts that private equity could double in the next five years. Private equity currently represents 3% of global market capitalisation, which indicates major scope for growth.
Fund portfolio
APAX Europe VII LP
Segment focus: large in the Tech & Telecom, Retail & Consumer, Media, Healthcare and Financial & Business Services sectors.
Geographic focus: Pan-European Fund size: MEUR 1100
NAXS’ commitment: MEUR 15 Website: www.apax.com
Apax Europe VII is the latest pan-European fund to be established by Apax Partners Worldwide LLP, one of the largest and most well-established private equity organisations in the world.
Apax has maintained an office in Stockholm since 2003, and funds advised by Apax have conducted a series of transactions in the Nordic region, including Mölnlycke Healthcare, TDC and Capio.
Amongst the investments made by Apax Europe VII is Plantasjen, the leading garden chain in the Nordic region
Intera Fund I Ky Segment focus: small cap Geographic focus: Finland Fund size: MEUR 125
NAXS’ commitment: MEUR 7 Website: www.interapartners.fi
Intera is a newly established Finnish private equity fund, whose primary focus is companies that have not yet achieved their full capacity and that have the potential to become leaders in their respective industry. Intera’s three founders have an extensive private equity experience from Capman, Industri Kapital and CVC, as well as experience from industrial and corporate finance operations. Investors in the fund include a number of leading Nordic financial institutions (for example, municipalities and pension insurances in Finland and Argen- tum Fondsinvesteringar in Norway).
Valedo Partners Fund I AB Segment focus: small cap Geographic focus: Sweden Fund size: MSEK 1000
NAXS’ commitment: MSEK 60 Website: www.valedopartners.com
Valedo is a growth-oriented Swedish private equity fund with an industrial focus. The fund focuses on investments in well-established and profitable companies with strong market positions within their segments and with the potential to develop the operations significantly. The fund was established in the autumn of 2006 by Per Forsberg and Nils Forsberg, both with a background from EQT.
Investors in Valedo are primarily a number of Swedish financial institutions (such as the Third AP Fund and Sixth AP fund).
Investment size
Typically MSEK 50 – 300, depending on the size of the par- ticular fund, the Company’s available means for investments and the number of fund holdings in the portfolio.
Number of Fund Investments1
Commitments made to 7-10 different fund managers’ funds and, over time, different vintages.
Other Limitations2
Commitments and/or investments may not result in exposure to the Group’s net value assets (NAV), at the time of invest- ment, exceeding:
• 130% for commitments to and/or investments in underlying funds
• 40% in funds with the same manager
• 20% for co-investments
Organisation and legal structure
NAXS Nordic Access Buyout Fund AB (publ) (“NAXS” or the
“Company”) is the Group’s Parent Company, with registered office in Stockholm, Sweden. In addition to the Parent Company, the Group comprises the operating Norwegian subsidiary NAXS Nordic Access Buyout AS, with registered office in Oslo, Norway. The subsidiary functions as a holding company for fund investments.
The operation started on April 17, 2007 and the Company has been listed on First North, part of the OMX Nordic Exchange since May 14, 2007.
NAXS Nordic Access Advisors AB has been contracted as the investment and management advisor to the Company. The management agreement is for a five-year period, starting on 14 March, 2007.
NAXS Nordic Access Buyout
Fund AB
NAXS Nordic Access Advisors AB NAXS Nordic
Access Buyout AS
Investeringar
i fondandelar Investeringar
i fondandelar Investeringar
i fondandelar 100 %
Legal structure
Net asset value (NAV) is defined as the net value of the Group’s total fund assets plus net cash less deferred tax.
1) Refers to the Company’s target portfolio in the long term.
2) The aim is to improve the return on equity through a relatively higher portion of NAXS’ capital remaining invested, since underlying private equity funds seldom draw 100% of the commitment. However, commitments must never be made in an amount that exceeds NAXS’
available funds, which (i) are covered by bank guarantees, (ii) are immediately accessible within the Group, or (iii) can reasonably be expected to be realized from other investments in time for new commitments.
Birgitta Johansson-Hedberg, Board member
Birgitta Johansson-Hedberg has been a Board member of NAXS Nordic Access Buyout Fund AB (publ) since 2007. Birgitta has long experience of executive positions and the Nordic financial sector, most recently as President of Svenska Lantmännen AB and prior to that as President and CEO of Swedbank AB (publ) (formerly Förenings Sparbanken AB).
Birgitta is currently active as Chairman of the Board of Umeå University and Vinnova as well as Board member of Fortum Abp, Sveaskog AB (publ), Finansinspektionen, Rieber & Son AS, A-Banan and Botniabanan. Birgitta holds a B.A. in Psychol- ogy from the University of Lund. Birgitta is a Swedish citizen.
Shareholding in NAXS: 25 000
Clas Romander, Board member
Clas Romander has been a Board member of NAXS Nordic Access Buyout Fund AB (publ) since 2007. Clas is also a practising attorney and partner in Delphi & Co. In addition, he is a Board member of GIMAB Global MedITech Investment AB, Nordic Growth Market AB and Nordic Growth Market Holding AB (publ). He is also member of the Swedish Bar Association, American Bar Associ-ation, International Bar Association and ICC Commission on Insurance and Financial Services, Paris. He is also included in the ICC’s reference group for Finance and Insurance. Clas holds a LL.M. from Stockholm University. Clas is a Swedish citizen.
Shareholding in NAXS: 10 000
Board of Directors and Management
BOARD OF DIRECTORS Björn C. Andersson, Chairman
Björn C Andersson has been Chairman of the Board of Directors of NAXS Nordic Access Buyout Fund (publ) since 2007.
Björn is currently active Board member of Euroben Life & Pension Ltd, Dublin (chairman), Nordben Life & Pension Ltd, Guernsey (chairman), D Carnegie & Co AB (publ), Carnegie Investment Bank AB and Medivir AB (publ).
In addition, Björn has been employed as Executive Vice President of Svenska Handelsbanken 1989-2006. During that period, he held various senior positions in Investment Banking and Asset Management. In recent years, he has been active as chairman of the Board of Handelsbanken’s life insurance company. Björn is a Graduate in Business Administration and holds an M.Sc. from Carnegie. Mellon University, Pittsburgh, USA and a Licentiate from the Stockholm School of Economics.
Björn is a Swedish citizen.
Shareholding in NAXS: 4 000
Robin Ahlström, Board member
Robin Ahlström has been a Board member of NAXS Nordic Access Buyout Fund AB (publ) since 2007. Robin is presently active as chairman of the Board of Ahlstrom Oy and he has more than 30 years experience in the financial sector, most recently as CEO for Alfred Berg/ABN AMRO for the Nordic region, but also at Goldman Sachs in London, where he was head of the bank’s investment operations in the Nordic region and at the American Scandinavian Bank, New York and Scandinavian Bank in Milano, where he was CEO. In addition, Robin is an industrial adviser to Altor Equity Partners. Robin holds a Diplomekonom, Hanken, Helsinki and a M.Sc. Econ.
from Stanford Business School, Stanford, USA.
Robin is a Finish citizen.
Shareholding in NAXS: 7 500 Commitments during 2008 FSN Capital III LP
Segment focus: Mid-size transactions Geographic focus: Norway and Nordic region NAXS’ commitment: MEUR 10
Website: www.fsncapital.no
FSN Capital III is the third fund established by FSN Capital to pursue its successful strategy to invest in mid-size companies in Norway and the rest of the Nordic region.
FSN Capital has an investment team of 12 professional,
operating out of offices in Oslo and Stockholm.
With its first two funds of a combined MEUR 200, FSN has made eight platform investments and 12 add-on acquisitions, amongst which Kongsberg Automotive, Via Travel and Nautilus.
Nordic Capital Fund VII LP Segment focus: large cap
Geographic focus: primarily the Nordic region NAXS’ commitment: MEUR 20.
Gösta Lundgren, CFO
Gösta Lundgren has been the CFO of NAXS Nordic Access Buyout Fund AB (publ) since 2007. Since 1993, Gösta has been a consultant through his own company with an emphasis on consolidated accounts and CFO assign- ments for primarily listed companies. Gösta holds a B.Sc. in Economics and LL.M. from Uppsala University. Gösta is a Swedish citizen.
Shareholding in NAXS: 12 500
Thomas Åkerman, Partner
Thomas Åkerman, who is a co-founder of the NAXS Group and partner in NAXS Nordic Access Advisors AB, has 15 years experience in investment banking and private equity.
Thomas was previously President of AB Novestra, a private equity fund listed on OMX Nordic Stockholm Exchange (Small Cap), and prior to that Head of Corporate Finance, Sweden at Alfred Berg ABN Amro and Head of Merger & Acquisition, Sweden at Enskilda Securities. Thomas has extensive experi- ence in advice to and negotiations with most leading private equity funds in the Nordic region. Thomas holds a B.Sc.
(economics and mathematics) from Stockholm University and Lund University.
Shareholding in NAXS: 100 000
AUDITORS
Björn Fenström, Ernst & Young AB, Authorized public accountant MANAGEMENT
Jeff Bork, CEO
Jeff Bork has been CEO of NAXS Nordic Access Buyout Fund AB (publ) and Board member of NAXS Nordic Access Buyout Fund AS since 2007. Jeff has extensive experience of senior positions in listed and unlisted companies and has been President and CEO of Biotage AB, Allgon AB and Dynal Biotech AS, as well as senior positions at Perstorp AB and Pharmacia Biotech AB. Jeff is Chairman of the Board of SmartTrust AB and Board member at CMA Microdialysis AB and Toul Medical AB. Jeff holds a M.Sc. Chem. Eng., from the Royal Institute of Technology, Stockholm, a Ph.D. Biochemistry from University of Stockholm and an MBA from IMD (IMI) Geneva. Jeff is a Swedish citizen.
Shareholding in NAXS: 140 000
Investment adviser
Amaury de Poret, Partner
Amaury de Poret, who is co-founder of the NAXS Group, and partner in NAXS Nordic Access Advisors AB, has more than eight years’ experience in private equity, both through legal advisory and management positions. Amaury previously worked in Private Equity and Mergers & Acquisitions practices at several leading international legal firms (lastly at White & Case LLP’s office in Stockholm), and he was part of the management team of a private equity fund managed from Washington DC and São Paulo, Brazil. Amaury holds a LL.B.
from University of Fribourg, Switzerland.
Shareholding in NAXS: 100 000
Per Rinder, Chairman of the Board
Per Rinder is chairman of the Board of NAXS Nordic Access Advisors AB. Per Rinder previously was head of the private equity investment at the Sixth AP Fund.
He also is a Board member of Accent Equity Partners AB, Fyrfond AB and NE Advisory AB. Per has a Master of Laws from Stockholm University and is the reporting clerk at the Svea Court of Appeal.
Shareholding in NAXS: 1 000
Share capital and shareholding
The NAXS share was listed on the First North (part of OMX Nordic Exchange) on May 14, 2007. The share is traded under the designation “NAXS” and a full trading lot consists of 200 shares. The price at the time of listing was SEK 40.
Through the initial public offering and subsequent new share issue in April 2007, the Company was provided with SEK 578,455,947, after transaction expenses of SEK 21,544,053.
In parallel with the new issue, a share redemption programme totalling SEK 500,000 was implemented, resulting in all of the
shares issued before the initial public offering being redeemed.
The number of shares in the Company currently amounts to 15,000,000.
The average daily share turnover during the period amounted to 29,000 shares, corresponding to SEK 1 M.
At the end of the period, 31 December 2007, the share price for NAXS was SEK 32.00 and the Company’s net asset value was SEK 39.21 per share. The Company’s market value amounted to MSEK 480. The number of shareholders was 782.
0 0 9 2 7 8 8 r
e h t
O 55.70%
0 0 0 0 0 0 5
1 100.00%
1) As of May 2008, the combined shareholding in NAXS of the management, board and investment advisers amounted to 2.7% of the Company's capital.
Board of Directors’ Report
Group
GENERAL OPERATIONS
NAXS is a Swedish limited company operating as a fund of funds with a focus on Nordic buyout funds. The objective is to make the Nordic equity market accessible to a broader range of investors, while offering liquidity through the Company’s publicly traded shares. The investment strategy is oriented towards a selective but diversified fund portfolio.
NAXS Nordic Access Advisors AB has been contracted as the investment advisor to the Company.
Operations commenced on 17 April 2007 and the Company has been listed on First North (part of the OMX Nordic Exchange) since 14 May 2007. The Company’s first financial year extends from 18 September, 2006 to 31 December, 2007.
NAXS Nordic Access Buyout Fund AB (publ), headquartered in Stockholm, is the Group’s parent company. Besides the Parent Company, the Group consists of the operational Norwegian subsidiary NAXS Nordic Buyout AS, headquartered in Oslo.
The subsidiary operates as a holding company for NAXS’ investments.
EARNINGS
Operating profit/loss
The operating result amounted to a loss of KSEK 7,227 for the financial year. Operating expenses totalled KSEK 7,227 and mainly comprised personnel costs of KSEK 1,459 and remu- neration of KSEK 3,816 to the investment advisor. The expense trend was according to plan.
Financial items
Financial items totalled KSEK 15,070 for the financial year.
Interest income amounted to KSEK 14,841 and exchange rate gains to KSEK 229.
Tax and profit after tax
Consolidated profit before tax amounted to KSEK 7,843 for the financial year. Tax comprising deferred tax income amounted to KSEK 3,581 and profit after tax amounted to KSEK 11,424.
Tax loss carryforwards have been taken into account in the Parent Company and the tax advantages are expected to be utilized within a two year period. Initial public offering expenses charged to shareholders’ equity were taken into account in the tax assets, which is why the effective tax deviates from 28% of the reported profit before tax.
INVESTMENTS
During the financial year, KSEK 39,290 was invested in underly- ing funds. Taking into account exchange-rate translation, investments on the closing date amounted to KSEK 40,657.
Investments in equipment amounted to KSEK 9.
CASH FLOW AND FINANCIAL POSITION
Cash flow amounted to KSEK 346,794. Cash flow from operating activities amounted to KSEK 7,672. In April 2007, an initial public offering was completed, which provided the company with KSEK 578,456 after issue expenses. At the same time, a share-redemption programme of KSEK 500 was carried out.
Financing currently occurs through shareholders’ equity.
Shareholders’ equity amounted to KSEK 588,114 at the end of the period, corresponding to SEK 39.21 per share and an equity/asset ratio of 99.8%.
On the closing date, cash and cash equivalents amounted to KSEK 343,900 and current interest-bearing investments to KSEK 200,000, corresponding to SEK 36.26 per share.
Apax Europe VII
NAXS’ commitment to Apax Europe VII amounts to MEUR 15 (approx. MSEK 141).
Apax Europe VII is the latest Pan-European fund to be established by Apax Partners Worldwide LLP (“Apax”). Total commitments from investors to the fund amount to EUR 11 billion. Apax is one of the largest and most well-established private equity organization in the world.
Funds advised by Apax have conducted a series of transactions in the Nordic region, including the acquisition of Mölnlycke Healthcare, TDC and Capio. Investments already made by Apax Europe VII include Plantasjen, the leading garden chain in the Nordic region. Apax has maintained an office in Stockholm since 2003. For more information, please refer to Apax website at www.apax.com.
Intera Fund I
NAXS has made a MEUR 7 (approx. MSEK 66) commitment to Intera Fund I Ky (“Intera”). Intera is a newly established Finnish private equity fund focusing primarily on Finnish companies with sales of MEUR 10 to MEUR 100. Total commitments from investors to the fund amount to MEUR 125. Investors in the fund are primarily leading Nordic institutional investors.
For more information, please refer to Intera’s website at www.interapartners.fi.
FUND PORTFOLIO
Commitments made
Currency (M) MSEK
Apax Europe VII EUR 15 141
Intera Fund I EUR 7 66
Valedo Partners Fund I SEK 60 60 FSN Capital III * EUR 10 94 Nordic Capital Fund VII
8 8 1 0 2 R U E
*
Total 548
*) commitments after the closing date
FUND PORTFOLIO
Commitments made
Currency (M) MSEK
Apax Europe VII EUR 15 141
Intera Fund I EUR 7 66
Valedo Partners Fund I SEK 60 60 FSN Capital III * EUR 10 94 Nordic Capital Fund VII
8 8 1 0 2 R U E
*
Total 548
*) commitments after the closing date
Valedo Partners Fund I
NAXS has made a MSEK 60 commitment to Valedo Partners Fund I AB (Valedo). Valedo is a growth-oriented Swedish private equity fund with an industrial focus and a network of experienced industrialists. Valedo focuses on well-established, profitable companies in Sweden and the rest of the Nordic region with annual sales of MSEK 100 – 500, with strong market positions in their respective segments and potential for considerable business development. Valedo was established in the autumn of 2006. Total commitments to the fund amount to MSEK 1,000 and investors in the fund are primarily a number of Swedish financial institutions, such as the Swedish Sixth and Third National Pension Funds. For more information, please refer to Valedo’s website at: www.valedopartners.com.
Further to the commitments to Apax Europe VII, Intera Fund I and Valedo Partners Fund I, NAXS has made commitments totalling slightly more than 46% of the company’s equity.
The NAV for NAXS’ portfolio is not reported, in view of the short period that has lapsed since the investments where made in the underlying funds.
EVENTS AFTER THE END OF THE PERIOD
In March 2008, NAXS made a MEUR 10 commitment to FSN Capital III. FSN Capital III LP is the third fund to be established by Oslo-based FSN Capital Partners, one of the most experienced Nordic managers in the mid-size segment. FSN Capital Partners focuses on Norwegian and Nordic industrial, consumer products and service companies with established products and technol- ogies, which benefit from strong market positions. For further information, please refer to FSN’s website: www.fsncapital.no.
In April 2008, NAXS made a MEUR 20 commitment to Nordic Capital Fund VII.
With these two additional commitments NAXS has committed about 93% of its equity (based on the equity as per
March 31st 2008)
SIGNIFICANT RISKS AND UNCERTAINTY FACTORS NAXS’ operations, financial position and performance could be affected by a number of risk factors.
As interest and thus competition for investments in private equity as a class of assets increases, the number of investment oppor- tunities with reasonable risks and return profiles could decrease.
A large portion of the Company’s return on invested capital will be dependent upon the success and return of respective underlying private equity funds. Private equity funds with a buyout focus usually use a high degree of leverage to finance investments in their target companies. In a situation where the target Company’s profits are not satisfactory and where market interest rates increase, this can result in reduced and even negative returns for private equity funds.
The Investment Advisor is responsible for NAXS investment activities, based on the Advisory Agreement. Should the principals or others employed by the Investment Advisor leave the Investment Advisor, such could have negative consequences for NAXS’ performance, earnings and financial position.
Since fund investments are conducted via a Norwegian subsidiary and the investment currency is normally EUR or USD, NAXS is inevitably exposed to the financial effects 0f currency fluctuations.
PROSPECTS FOR 2008
The Company has a strong financial position. The intention is to continue to grow through new commitments to buyout funds with a Nordic focus by making use of the Company’s right to make over-commitments.
Parent Company
Profit before tax amounted to KSEK 8,754 for the financial year. Tax comprising deferred tax revenue amounted to KSEK 3,581 and profit after tax amounted to KSEK 12,335. The tax advantage arising from the tax-loss carryforwards is expected to be utilized within a two-year period.
In February, the newly established Norwegian subsidiary NAXS Nordic Access Buyout AS was acquired for KSEK 151 and in August the newly established Swedish subsidiary NAXS Nordic Access Buyout AB was acquired for KSEK 100.
At the end of the period, the Parent Company’s cash and cash equivalents amounted to KSEK 35,013 and short-term investments KSEK 200,000.
BOARD OF DIRECTORS AND CEO
The Board of Directors comprises the Chairman Björn C Andersson and Board members Robin Ahlström, Birgitta Johansson-Hedberg and Clas Romander. Jeff Bork is the CEO.
THE BOARD’S ACTIVITIES
During the financial year, the Board held 15 meetings on record, of which seven were held after the Company initiated its actual operations in conjunction with the implementation of the public offering. The Board’s activities follow the rules of procedure established for the Board and the CEO. The Board has established a financial policy and an information-disclosure policy. The Board has no subcommittees.
PROPOSAL FOR APPROPRIATION OF PROFITS
The Parent Company’s non-restricted equity amounted to KSEK 590,041, of which KSEK 577,706 belongs to the Share Premium Reserve. The Board and CEO propose to the Annual General Meeting that the standing unappropriated earnings of KSEK 590,041 be carried forward.
NAXS Nordic Access Buyout Fund (publ) Corporate Registration Number: 556712-2972
Notes to the financial statements
Accounting principles
This annual report was prepared in accordance with the follow ing accounting principles. The consolidated accounts and the annual accounts for the Parent Company were prepared in accordance with Swedish law and the application of general recommendations and statements from the Swedish Accounting Standards Board. In this connection, the instructions pertaining to large companies in accordance with the Swedish Accounting Standards Board were applied, unless otherwise stated. The same principles applied in the consolidated accounts and in
Basis for the preparation of the accounting
The consolidated accounts are based on historic acquisition values.
Basis for consolidation
The consolidated accounts comprise the Parent Company, subsidiaries and associated companies. Subsidiaries refer to the companies in which the Company’s holdings are more than 50% of the share votes or in any other manner have controlling influence. Associated companies refer to companies over which the Company has a significant influence, normally when holdings correspond to not less than 20% but not more than
50% of the votes.
All company acquisitions are reported in accordance with the purchase method.
Divested companies are included in the Group’s accounting up to the divestment date. Companies that were acquired during the current year are included in the Group’s accounting from the acquisition date.
Holdings in associated companies are reported in accordance with the equity method. In the consolidated income statement, Income from participation in associated companies consists of the Group’s portion of the associated companies’ reported profit after financial items adjusted for minority interests, where applicable, less depreciation of the surplus value.
Transactions, receivables and liabilities in foreign currencies
Transactions in foreign currencies are translated at the exchange rate that applied on the transaction date. Monetary assets and liabilities are translated on the closing date at the closing day rate. Exchange-rate differences arising during translation are reported in the income statement. Non-monetary assets and liabilities are reported at historic rates, meaning the rates that applied on each transaction occasion.
Foreign operations
Foreign subsidiaries and associated companies are translated into SEK by assets and liabilities being translated at the closing day rate. Income and expenses are translated at the average rate for the year. The difference arising in the translation is reported in the Group directly against shareholders’ equity and classified as “Translation differences”. In the future sale of a subsidiary or an associated company, the accumulated translation difference is transferred to the income statement as part of capital gains/losses.
Tangible fixed assets
Tangible fixed assets are reported as assets in the balance sheet valued at acquisition value less accumulated depreciation and possible impairments. The acquisition value includes, in addition to the purchase price, expenses that are directly attributable to bringing the asset to the position and condition for use in accordance with the acquisition purpose.
Depreciation/amortisation
Fixed assets are depreciated by the depreciable amount straight line across the estimated useful life. The depreciable amount represents the difference between the acquisition value and the estimated residual value. The useful life and residual value are assessed annually. Tangible assets may include significant components, in terms of value, with a useful life that deviates from the underlying useful life of the asset. In such cases, the component is depreciated separately over its useful life. The calculated useful life is as follows:
Office equipment 5 years
Financial assets including fund units and financial liabilities
Loan receivables and loan liabilities are reported at accrued acquisition cost and applying the effective interest method.
Fund units and other financial assets and liabilities are reported at acquisition cost. Profits and losses are reported when the asset/liability is removed from the balance sheet or is impaired.
Impairment
When there is indication that an asset has reduced in value, an impairment requirement assessment is performed. If the assessment shows that the reported value exceeds the fair value, the asset is impaired to this value.
Assessment of impairment requirement for fund units is conducted individually for each investment. Impairment is reversed if grounds no longer exist.
Provisions
Provisions are reported when there exists a legal or informal obligation resulting from an occurrence and it is probable that it must be realised and the amount can be reliably estimated.
Income taxes
Income taxes consist of current and deferred tax. Income taxes are reported in the income statement when the tax is attributable to items that are reported in the income statement. Income taxes are recognised directly in shareholders’ equity when the tax is attributable to items that are recognised directly in shareholders’ equity.
Current tax consists of tax based on taxable income pertaining to the current year and any corrections pertaining to preceding years. Deferred tax is calculated on the differences (temporary differences) between the taxable values of the assets and liabilities on the one hand and their reported value on the other. Deferred tax is calculated based on the tax rates that are deemed to apply to tax adjustments. Deferred tax liabilities are reported for all taxable temporary differences. Deferred tax assets are reported only when it is probable that the deductible temporary difference will be utilized and will lead to a reduced
future tax payment.
Cash and cash equivalents
Cash and cash equivalents comprise liquid funds and immediately accessible balances in banks and corresponding institutes as well as current liquid investments with a maturity period from the acquisition date of less than three months and which are only exposed to insignificant risks of value fluctuations.
Stockholm May 6, 2008
NAXS Nordic Access Buyout Fund AB (publ)
Björn C Andersson Robin Ahlström Birgitta Johansson-Hedberg
Chairman Board member Board member
Clas Romander Jeff Bork
Board member CEO
My auditors’ report was submitted on 6 May, 2008
Björn Fernström Authorised Public Accountant
Audit Report
Corporate identity number 556712-2972
I have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of NAXS Nordic Access Buyout Fund AB (publ) for the year September 18, 2006 - December 31, 2007. These accounts and the administration of the company and the application of the Annual Accounts Act when preparing the annual accounts and the consolidated accounts are the responsibility of the board of directors and the managing director. My respon- sibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on my audit.
I conducted my audit in accordance with generally accepted auditing standards in Sweden. Those standards require that I plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the managing director and significant estimates made by the board of directors and the managing director when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for my opinion concerning discharge from liability, I examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. I also examined whether any board member or the managing director has, in any other way, acted in contravention
of the Companies Act, the Annual Accounts Act or the Articles of Association. I believe that my audit provides a reasonable basis for my opinion set out below.
The annual accounts and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company’s and the group’s financial position and results of operations in accordance with generally accepted accounting principles
in Sweden. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.
I recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the statutory administra- tion report and that the members of the board of directors and the managing director be discharged from liability for the financial year.
Stockholm May 6, 2008
Björn Fernström
Authorized Public Accountant
To the annual meeting of the shareholders of NAXS Nordic Access Buyout Fund AB (publ)
NAXS Nordic Access Buyout Fund AB (publ), Corp. Reg. No: 556712-2972
