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APEO Annual Report and Accounts 2022
Overview
Strategic Report
Investment Strategy 9
Chair’s Statement 11
Principal Risks and Uncertainties 15
Stakeholder Engagement and
Responsible Management 18
Investment Manager’s Review
Corporate Governance
Financial Statements
Corporate Information
abrdnpeot.co.uk
Overview Corporate GovernanceStrategic Report Financial Statements Corporate Information
Investment Manager’s Review
and the terms of the Management Agreement, and
believes that the continued appointment of the Manager
is in the best interests of shareholders.
Suppliers
As an investment trust, APEO has outsourced its entire
operations to third party suppliers. The Board is responsible
for selecting the most appropriate outsourced service
providers and, alongside the Investment Manager, monitors
their services to ensure a constructive working relationship.
The Board, through the Investment Manager, maintains
regular contact with its key suppliers, namely the Company
Secretary, the Administrator, the Registrar, the Depositary
and the Broker, and receives regular reporting from them.
The Board, via the Management Engagement Committee,
ensures that the arrangements with service providers are
reviewed at least annually. The aim is to ensure that
contractual arrangements remain in line with best practice,
services being offered meet the requirements and needs of
APEO and performance is in line with the expectations of
the Board, Manager, and other relevant stakeholders. The
Audit Committee considers the internal controls at these
service providers to ensure they are fit for purpose.
Debt Providers
On behalf of the Board, the Manager maintains a positive
working relationship with RBS International, Société
Générale and State Street Bank International, the
providers of APEO’s multi-currency revolving credit
facility, and provides regular updates on business activity
and compliance with its loan covenants.
Investment Managers, Funds and Companies
Responsibility for actively monitoring the activities of
investment managers, funds and companies, which make
up APEO’s portfolio, has been delegated by the Board to
the Manager.
On behalf of the Board and its stakeholders, the Manager
invests in a carefully selected range of private equity
managers, built from years of established relationships
and proprietary research. The Manager assesses all
investment opportunities and participates on the advisory
boards of some investments.
The Board is responsible for overseeing the work of the
Manager and this is not limited solely to the investment
performance of the investments. The Board also has
regard for environmental (including climate change),
social and governance matters that subsist within the
portfolio companies. Please see the Manager’s approach
to ESG on page 49 for more details.
Principal Decisions
Pursuant to the Board’s aim of promoting APEO’s long-
term success, the following principal decisions were taken
during the year:
• The Investment Manager’s Review on pages 35 to 48
details the key investment decisions taken during the
year. In the opinion of the Board, the performance of the
investment portfolio is the key factor in determining the
long-term success of APEO. Accordingly, at each Board
meeting the Directors discuss performance in detail
with the Investment Manager. As explained in more
detail on page 69, during the year the Management
Engagement Committee decided that the continuing
appointment of the Manager was in the best interests
of shareholders.
• During the year, the Board agreed to increase APEO’s
syndicated multi-currency revolving credit facility from
£200.0 million to £300.0 million. The facility, which is
provided by RBS International, Société Générale and
State Street Bank International, was extended in
October 2022, subsequent to the year end. The Board
decided to extend the facility in light of the strong
pipeline of investment opportunities in primary funds,
secondaries and co-investments believing that an
extended loan facility would allow the Manager to take
advantage of emerging investment opportunities.
• The level of dividend to be paid to shareholders was
carefully assessed during the financial year. The Board
is pleased to have paid three quarterly dividends of
3.6 pence per share and to have announced a fourth
quarterly dividend payment of 3.6 pence per share
making a total dividend for the year to 30 September
2022 to 14.4 pence per share. This represents a dividend
yield of 3.5%, based on the APEO Share Price at
30 September 2022, and is an increase of 5.9% on the 13.6
pence per share paid for the year to 30 September 2021.
• Following the Manager’s sale of the Standard Life brand
the Phoenix Group in May 2021, the Board agreed to
recommend to shareholders that the Company change
its name to abrdn Private Equity Opportunities Trust plc.
Shareholders overwhelmingly voted in favour of the
name change at the AGM in March 2022. The Board
believes that the proposed name change aligns APEO
with the Manager’s new brand and comes at an exciting
time in APEO’s development.
• As reported in the Annual Report to 30 September 2021,
the Board appointed Alan Devine as Chair on 22 March
2022, following Christina McComb’s retirement from
the Board. The Board agreed that Alan Devine is an
experienced Board Member, having served as Senior
Independent Director since 2019 and, has a breadth
of experience in debt markets and private equity
backed business.
Stakeholder Engagement and Responsible Management continued
Board Diversity
The Board’s statement on diversity is set out in the
Statement of Corporate Governance.
At 30 September 2022, there were three male and two
female Directors on the Board.
Modern Slavery Act
Being a company that does not offer goods and services
to customers and has no turnover, the Board considers
that APEO is not within the scope of the Modern Slavery
Act 2015. APEO is therefore not required to make a slavery
and human trafficking statement. In any event, the Board
considers APEO’s supply chains, dealing predominantly
with professional advisers and service providers in the
financial services industry, to be low risk in relation to
this matter.
Streamlined Energy and Carbon Reporting (“SECR”)
Statement: Greenhouse Gas Emissions and Energy
Consumption Disclosure
APEO has no employees, premises or operations either as
a producer or provider of goods and services. Therefore, it
is not required to disclose energy and carbon information
as there are zero emissions associated or attributed to the
Company and no underlying global energy consumption.
Viability Statement
The Board has decided that five years is an appropriate
period over which to consider its viability. The Board
considers this to be an appropriate period for an
investment trust company with a portfolio of private equity
investments and the financial position of the Company.
In determining this time period the Directors considered
the nature of APEO’s commitments and it’s associated
cash flows. Generally the private equity funds and co-
investments in which APEO invests call monies over a five
year period, whilst they are making investments, and these
drawdowns should be offset by the more mature funds
and co-investments, which are realising their investments
and distributing cash back to APEO. The Manager presents
the Board with a comprehensive review of APEO’s detailed
cash flow model on a regular basis, including projections
for up to five years ahead depending on the expected life
of the commitments. This analysis takes account of the
most up to date information provided by the underlying
managers, together with the Manager’s current
expectations in terms of market activity and performance.
The Directors have also carried out an assessment of the
principal risks as noted on pages 15 to 17 and discussed in
note 18 to the financial statements that are facing APEO
over the period of the review. These include those that
would threaten its business model, future performance,
solvency or liquidity such as over-commitment, liquidity
and market risks. When considering the risks, the Board
reviewed the impact of stress testing on the portfolio,
including multiple downside scenarios which modelled a
reduction in forecast distributions from 50% to 100% in an
extreme downside case and the impact this would have
on liquidity and deployment. Under an extreme downside
scenario which involved i) a 100% reduction in forecast
distributions over a 12 months period; ii) all underlying
General Partner debt facilities being drawn simultaneously;
and iii) a 25% reduction in portfolio valuations spread over
a period of 12 months, a significant adjustment to planned
deployment would be required to maintain sufficient liquid
resources over the financial year to 30 September 2023
and over the period through to January 2024. From
January 2024 onwards, the implied resumption of forecast
distribution activity then provides sufficient liquidity in this
extreme downside scenario.
By having a portfolio of predominantly fund investments,
diversified by manager, vintage year, sector and
geography; by assessing market and economic risks
as decisions are made on new commitments; and by
monitoring APEO’s cash flows together with the Manager,
the Directors believe APEO is able to withstand economic
cycles. The Directors are also aware of APEO’s indirect
exposure to ongoing risks through underlying funds.
These are continually assessed by the Manager
monitoring the underlying managers themselves and
by participation on a number of fund advisory boards.
Based on the results of this analysis, and the ongoing ability
to adjust the portfolio, the Directors have a reasonable
expectation that APEO will be able to continue in operation
and meet its liabilities as they fall due over the five year
period following the date of this report.
Future Strategy
The Board intends to maintain the strategic policies set out
in the Strategic Report for the year ending 30 September
2023 as it is believes that these are in the best interests of
shareholders.
Long-Term Investment
The Manager’s investment process seeks to outperform its
comparator index over the longer term. The Board has in
place the necessary procedures and processes to continue
to promote APEO’s long-term success. The Board will
continue to monitor, evaluate and seek to improve these
processes as APEO continues to grow over time, to ensure
that the investment proposition is delivered to shareholders
and other stakeholders in line with their expectations.
On behalf of the Board
Alan Devine
Chair
30 January 2023