12.8% NAV growth driven by robust portfolio performance

Highlights

·     Increase in net assets per share of 12.8% to 337.1p (excluding the Dec 2011 unaudited valuation of SVG Advisers and SVG Investment Managers)

·     Including the Dec 2011 13.1p unaudited Directors' valuation for SVG Advisers and SVG Investment Managers, NAV per share at year end was 350.2p, a 10.9% rise

·     Balance sheet strengthened through material distributions, buy-backs of Senior Notes and convertible bonds and extension of the Company's revolving credit facility

·     Company's liquidity position significantly improved; net debt of £127.8 million - 12.3% of Shareholders' funds at December 2011 and cash balances of £121.0 million

·     £50 million tender to be priced at a 10% discount to the December 2011 NAV (excluding the valuation of SVG Advisers and SVG Investment Managers and rolled forward for movements in the quoted holdings, fees, financing costs, foreign exchange and realisations)

Strategy

·     Future investment strategy proposed in December 2011 focused on maximising shareholder returns in the short and longer term

·     Focus for the short term is the return of up to £170 million of capital through a series of tender offers and buy-backs

·     Relationship with Permira remains important; over the longer term the Company proposes to evolve from a concentrated, single manager investor to one that is more diversified

·     Investment strategy will build upon SVG Capital's heritage as an investor in management buyout funds  and SVG Advisers' core strengths of private equity fund selection

Investment portfolio

·     Investment portfolio total return of 11.2% over the year, despite the negative impact of contracting comparable earnings multiples in the year

·     Performance driven by sustained earnings and revenue growth from the underlying Permira portfolio companies and strong performance from the quoted investments

·     Much of the earnings growth supported by top-line expansion as management teams continued to drive initiatives such as geographic expansion and new product launches

·     Significant distributions from the portfolio, principally the partial realisation of Galaxy, the full realisation of Provimi and the refinancing of the P25 subordinated debt. Total distributions for the year were £253.4 million, a two fold increase on 2010 (£123.0 million)

SVG Advisers and SVG Investment Managers

·     Funds managed or advised by SVG Advisers continue to perform well, with most reporting both increases in NAV and positive portfolio returns at the latest reporting date

·     Profits before tax for the year have increased by 8% to £8.4 million, driven by tight cost controls

Lynn Fordham, CEO of SVG Capital, commented:"The Company has reported another year of good progress, both in terms of performance and paving the way for its future investment strategy.

"We have a strong balance sheet and the underlying portfolio companies continue to demonstrate good earnings and revenue growth. Looking forward, the positive momentum has continued into 2012 and Permira is not seeing much evidence of any meaningful softness in earnings. That said, we remain cautious on the outlook for the macroeconomic environment, which we believe will remain challenging in the near term.

"With increased flexibility we are looking to the future and are focused on improving shareholder value. In the short term, we believe the best allocation of capital is to return capital to shareholders and have committed to return up to £170 million of capital to shareholders through a series of tender offers and buy-backs. We believe that the medium to longer term investment environment plays to the strengths of the private equity model, especially in a capital constrained environment. As a strategic investor in the asset class, we believe we are well placed to take advantage of these opportunities as they arise."

For further information, please contact:

Copies of the press release and other corporate information can be found on the company website at: http://www.svgcapital.com 

Forward-looking statements - this announcement contains certain forward-looking statements with respect to the portfolio of investments of SVG Capital and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast. 

Chairman's statement                                                                                                                                         December 2011

I am pleased to report another year of progress for SVG Capital. We have laid the foundations of the Company's future strategy; and, against a backdrop of market uncertainty and volatility, we are able to report a positive set of results.  Our NAV per share (excluding the value of SVG Advisers and SVG Investment Managers) increased by 12.8% to 337.1p over the year, which compares to a fall in the FTSE All-Share (TR) of 3.5% over the same period. This has been driven by continued strong performance from the underlying Permira funds' portfolio companies, which has outweighed the negative impact of lower comparable earnings multiples over the year. Including the 13.1p unaudited Directors' valuation for SVG Advisers and SVG Investment Managers our NAV per share at year end was 350.2p, a 10.9% increase. 

At the end of 2011, following consultation with our shareholders, we set out our intentions with regards to the future strategy of the Company. Throughout the downturn our over-riding priority has been to maintain a strong balance sheet. The actions taken by the management team over the last three years have significantly strengthened the balance sheet. Coupled with the growth in the asset value, this has resulted in net debt having fallen from 70.1% (1) at the end of 2008 to 12.3% at December 2011. With the material distributions from the portfolio in the latter half of 2011, the Company's liquidity position has improved significantly, which in turn has given us increased flexibility.

The Board is clearly focused on improving shareholder returns. In the short term, we believe these can be maximised by returning capital to shareholders, and we propose to return up to £170 million through a series of market buy-backs and tender offers. Looking to the longer term, while our relationship with Permira remains an important one, we propose to evolve from a concentrated, single manager investor to one that is more diversified, in order to achieve wider asset diversity and better flexibility in the management of the Company's cash-flows.  We will therefore look to add to our Permira portfolio through commitments to a limited number of other leading private equity funds. In time, we may also potentially make co-investments alongside funds. This proposed investment strategy will build upon SVG Capital's heritage as an investor in management buyout funds and upon SVG Advisers' core strengths of private equity fund selection. A Circular will be sent to shareholders in due course seeking approval at a general meeting for both the series of tender offers and for an amendment to our investment objective to allow for more diversification.

In 2011 the private equity industry experienced a year of two halves: while investment activity and financing conditions improved in the first half, market volatility and increased risk aversion in the second half of the year has clouded the outlook, and hampered activity. Private equity managers are more cautious about near-term deal flow and disposals. However, we believe that our underlying portfolio of Permira investments are well-diversified, high quality companies with global reach and will continue to return value to our investors over time.

SVG Capital remains fully committed to the asset class, and we believe the competitive dynamics will continue to improve and play to private equity strengths. We are mindful of the uncertain macroeconomic backdrop and the impact this may have on private equity activity in the near-term. That said, we are in a very different place to 24 months ago: corporate balance sheets are much healthier and most private equity backed companies are much stronger following the action taken by managers and their underlying management teams through the downturn.

Listed private equity plays a pivotal role in providing access to the asset class for those investors who value and need liquidity. SVG Capital is a leading London-listed private equity investor underpinned by a strong balance sheet and armed with increased flexibility following another positive year. We believe that we are in a good position to capitalise on investment opportunities as they arise, and that our portfolio and future strategy for the Company can unlock and create value for our shareholders across business cycles.

(1) 31 December 2008

CEO's statement

This has been another positive year for SVG Capital. We continue to see good performance from the large majority of the underlying Permira portfolio companies, and despite the negative impact of market volatility on comparable earnings multiples during the year, we are able report a positive total return of 11.2% on the investment portfolio over the year. This has been driven by sustained earnings and revenue growth from the underlying portfolio companies, and strong performance from the quoted investments.

In the latter part of the year, SVG Capital benefited from a number of significant distributions from the portfolio, principally the partial realisation of Galaxy, the full realisation of Provimi and the refinancing of the P25 subordinated debt. Total distributions in 2011 were £253.4 million, a two fold increase on 2010, and the Company ended the year with cash balances of £121.0 million and net debt as a percentage of Shareholders' funds of 12.3%.

The management team have continued their focus on balance sheet strength, both through the buy-back of Senior Notes and convertible bonds, and also in the extension of €100 million of the Company's revolving credit facility until December 2015. All of these actions, combined with the continued improvement in the performance and value of our investment portfolio, have meant that it was apposite for the Board to look to the future investment strategy and in December we outlined a strategy focused on maximising both short and longer term shareholder returns. 

We have a strong belief in the quality of our underlying investment portfolio and Permira's ability to realise value for investors. In the near-term, the Board is very much focused on improving returns through returning capital to shareholders via share buy-backs and tender offers. The first of the tender offers for £50 million is expected to take place next month.  This tender offer will be priced at a discount of 10% to the December 2011 net asset value per share (excluding the value of SVG Advisers and SVG Investment Managers and rolled forward for movements in quoted holdings, finance costs, foreign exchange, realisations and fees). In addition to this, we have been using authorities granted at the 2011 AGM to buy back shares in the market and since 20 December 2011 we have bought back 1.8 million shares at an average discount of 37% to the December 2010 net asset value of the Company (excluding the value of SVG Advisers and SVG Investment Managers). The timing of future returns will be dependent on distributions from the portfolio which will be supplemented by more active management of the assets of the Company through the sale of non-core assets.

Over the medium term, we expect the investment portfolio to evolve from its current concentrated strategy to one of a portfolio made up of a limited number of private equity managers and potentially, in time, co-investments alongside funds. This strategy will build upon SVG Advisers' strong fund selection, monitoring and risk management skills which will be augmented by the formation of an investment committee made up of investment professionals and senior members of the SVG Advisers' team.  The investment committee will be responsible for allocating capital with the over-riding objective of maximising value for shareholders. This may be by improving the capital structure through deleveraging, making new investments, or returning capital to shareholders if the discount that the shares trade at remains relatively wide.

SVG Advisers and SVG Investment Managers

The strong performance across the investment portfolios of the funds advised by SVG Advisers in 2010 has continued into 2011. The funds managed or advised by SVG Advisers continue to perform well, with most funds reporting both increases in NAV and positive portfolio returns at the latest reporting date. SVG Investment Managers' fund performance was mixed with the strategic funds delivering positive returns despite a sharp fall in smaller company valuations while the unconstrained mandates underperformed their respective indices. 

The SVG Advisers' investment platform is a key source of intellectual capital for the Group. We have continued to invest in both the people and the infrastructure of the business in order to support longer term growth and we expect to see the benefits of this over the course of 2012 and 2013. The fundraising environment is challenging, however, we are beginning to see renewed interest in private equity funds of funds and expect to be fundraising with a new primary offering during the course of 2012.

At 31 December 2011, the businesses had funds under management or advice of €3.7 billion. Total fee income was £31.8 million, compared to £30.7 million for 2010. Profits before tax for the year have increased by 8% to £8.4 million, driven by tight cost controls. 

The Directors have placed an unaudited valuation on the business of £40.4 million, a decline of 24.8% on the previous year. This decline has predominantly been driven by a fall in comparable earnings multiples.

Outlook

The Company has reported another year of good progress.  The growth in the investment portfolio has continued to outperform public markets and as a management team we have reduced the interest costs of the business by approximately 17%. The profits from SVG Advisers continue to make a positive contribution to the Group, partially offsetting running costs and in September 2012 the management fees paid to our underlying managers  will reduce by 46% to approximately £22.0 million p.a.

For the 12 months to December 2011, the Permira IV companies that SVG Capital has an exposure to  reported weighted average earnings growth of 40% and revenue growth of 32%, year-on-year (1).  Permira is still not seeing much evidence of a meaningful softness in earnings, however, we remain cautious on the outlook for the macroeconomic environment, which we believe will remain challenging in the near-term and may impact the timing of distributions from the portfolio. The significant deleveraging required across the western world will likely hamper growth for some time and the challenge for companies will be to maintain earnings momentum in a low growth environment. Looking at our underlying portfolio more than half of the companies are multinational, and the bulk of these have a significant and increasing percentage of revenues from higher growth economies.

We believe that the medium to longer term investment environment plays to the strengths of the private equity model, especially in a capital constrained environment. As a strategic investor in the asset class, SVG Capital is well placed to take advantage of these opportunities as they arise.

(1) Permira IVa companies only. Earnings and revenue growth across all of the Permira IV companies was 28% and 25% respectively

Financial review

The Group's NAV per share increased during the year by 12.8% from 298.9p to 337.1p. If you include the unaudited Directors' valuation for SVG Advisers and SVG Investment Managers of 13.1p the NAV per share was 350.2p. The portfolio performance is analysed in more depth in the investment portfolio review.

Cash balances and uncalled commitments

The Company received significant cash inflows from investments in the second half of the year, notably from the part-realisation of Galaxy, the full realisation of Provimi, and the refinancing of P25's subordinated debt.  As a result, the Group's short-term net liquidity position increased by £123.2 million, from a deficit of £2.2 million at the end of last year to a surplus of £121.0 million at 31 December 2011. The loan facility was undrawn, compared to £19.3 million drawn at the beginning of the year, and Group cash balances increased from £17.1 million to £121.0 million. The main cash outflows during the year included £38.0 million of Senior Note buy-backs, £14.3 million of convertible loan note buy-backs, £14.3 million of share purchases for the Employee Benefit Trust, £6.8 million of share buy-backs into treasury and finance costs of £35.0 million. Against this we had net investment cash inflows of £222.4 million. 

The positive cash position will be used in part to finance the proposed first tender offer which is expected to return £50 million to shareholders.  It is the Company's intention to maintain a strong balance sheet. Under current conditions, capital returns to shareholders will only take place if there are sufficient financial resources (1) to cover 75% of outstanding fund commitments plus any debt falling due for repayment within 12 months. Once the Company has sufficient financial resources, it has committed to return a minimum of 50% of excess capital to shareholders, until it has returned £170 million. The Board will keep the free cash flow requirement under review as conditions change. Under the Company's current debt documentation, it is unable to distribute more than 10% of the Group's gross assets to shareholders in any one 12 month period.

The Company made no new primary commitments during the period. Uncalled commitments fell from £209.8 million to £170.2 million, helped by the 3% appreciation of sterling against the euro. There was a €7.2 million (0.3%) call from Permira IV, reducing the uncalled commitment to this fund from €108.3 million to €101.1 million, falling in sterling terms from £92.8 million to £84.5 million. In addition there was the disposal of CVC Europe V from the warehoused private equity fund portfolio, which released uncalled commitments of £11.3 million. On 15 July 2011 the Company's uncalled commitment to Vintage I was reduced by €8.0 million.

Borrowings

Net borrowings fell by £173.9 million over the year from £301.7 million to £127.8 million, and net debt to Shareholders' funds fell from 31.9% to 12.3%.  At 31 December 2011, the Company's Loan to Value ratio (LTV) for its senior borrowings was 13.4%. The fair value of the currency swap is netted off against senior debt for the purposes of the LTV calculations.

The Company has extended €100 million of its revolving credit facility until December 2015.  The remaining €150 million matures in January 2013.

Foreign exchange

The appreciation of sterling against the euro had a negative impact on portfolio gains, partly offset by a marginally stronger US dollar, decreasing the portfolio uplift by an estimated £21.2 million to an overall gain of £143.2 million (2).  The foreign exchange losses on senior borrowings were offset by gains on the related currency swap.

Risks

A description of the Group's principal risks and uncertainties is included in the report and accounts. These include risks relating to valuation, leverage, funding, borrowing, concentration and portfolio company risk.

(1) Cash plus the undrawn loan facility (excluding the facility which expires in 2013)

(2) Including investment income

Investment portfolio review

The investment portfolio reported a total return of 11.2% over 2011, driven by strong earnings momentum which more than outweighed the negative impact of contracting comparable earnings multiples used to value the portfolio.

2011 was a year of two disparate halves. During the first half the investment portfolio reported a total return of 21.3%, as valuations benefited from strong earnings growth, an overall strengthening of the quoted investments and the positive impact of foreign exchange. However, the second half saw a significant increase in financial market instability and macroeconomic risks, leading to a contraction in comparable earnings multiples and the unwinding of the positive foreign exchange movements over the first half. Within this context, the investment portfolio reported a negative total return of 8.5% over the second half, despite continued strengthening of portfolio company earnings.

Private equity funds' portfolio - £955.9 million

(81.8% of the net investment portfolio)

The private equity funds' portfolio is dominated by funds advised by Permira which represent 95.9% of the private equity funds' portfolio and 78.4% of the investment portfolio.

The private equity funds' portfolio reported an 11.4% total return over the year, as the strong earnings momentum across the Permira funds' portfolio companies outweighed the negative impact of the weakening comparable earnings multiples over the second half with like-for-like weighted average earnings multiples declining by 6.8% over the year.

Encouragingly, much of the earnings growth has been supported by top-line expansion as management teams continued to drive a number of initiatives, such as geographic expansion and new product launches. For the 12 months to December 2011, the Permira IV portfolio companies that SVG Capital has an exposure to reported weighted average earnings growth of 40% and revenue growth of 32% year-on-year (1).

The portfolio value also benefitted from the 71.3% total return on its investment in Hong Kong listed Galaxy Entertainment over the year. In September 2011, Permira took advantage of a rising share price and disposed of 33.8% of the Permira funds' holdings in Galaxy Entertainment at a 101.6% uplift to the December 2010 valuation. In addition, the residual holding benefitted from the share price increasing to HK$14.22 from HK$8.78 over the year.

Permira and the underlying management teams have continued to reduce portfolio companies' net debt positions through targeted sales of non-core assets, partial disposals of quoted shares and free cash flow generation. Aggregate debt across the top 15 companies decreased by 9.1% over the year (in constant currencies) and at 31 December 2011, less than 10% of the Permira funds' portfolio companies' debt was due to expire before 2014.

The portfolio's five largest investments (Hugo Boss and VFG, Arysta LifeScience, Galaxy Entertainment, iglo Group and TDC) represent 67.3% of the gross private equity funds' portfolio value, with the four largest companies reporting the largest valuation gains over the year. The top five portfolio companies are well diversified across industry and geography with a mixture of Permira IV and Permira Europe III and II assets.

Major unrealised portfolio movements

(1) Permira IVa companies only. Earnings and revenue growth across all of the Permira IV companies was 28% and 25% respectively

(2) Gross of any carried interest protect

(3) Including Permira feeder vehicles

Hugo Boss and VFG was the largest value driver over the year (+£96.1 million) and represents 25.0% of the gross private equity funds' portfolio value at 31 December 2011. Hugo Boss reported an increase in revenues and earnings over the first nine months of 2011 of 20% and 36% respectively (in local currency terms), with all regions reporting double digit sales growth, largely driven by a solid wholesale order book and sales from new stores. Following the stronger than expected results, Hugo Boss raised its forecast for the year as a whole, projecting an increase in sales of 15% to 17% (previously: at least 12%) and EBITDA of 25% to 30% (previously: at least 15%). In addition, it increased its sales and earnings targets for 2015 to €3 billion (previously: €2.5 billion) and €750 million (previously: €500 million) respectively. Valentino also continues to report good trading. In Q4 2011, the Permira funds sold a small stake in the company (4.5 million preference shares), using the c.€300 million proceeds to deleverage the investment.

Galaxy Entertainment delivered a £79.4 million gain driven by the 62.0% increase in its share price over the year, following continued improvements in trading and the successful opening of Galaxy Macau in May 2011, as well as the partial exit of 33.8% of Permira funds' holding in Galaxy Entertainment at HK$17.70 per share (31 December 2010: HK$8.78).

iglo Group has maintained good trading momentum across all regions driven by successful new product launches and continuing international expansion while the integration of Findus Italy is progressing well. The valuation has increased by £18.1 million over the year and the company should be well placed to continue driving revenue growth through product innovation, continued international expansion and top-line synergies as a result of the Findus integration.

Arysta LifeScience is the second largest portfolio company, representing 14.2% of the gross private equity funds' portfolio value. The company reported double-digit EBITDA growth over the year as higher volume levels and continued cost savings across the business offset the negative effects of the Japanese earthquake in March and adverse weather conditions in North America. In addition, the company has completed two add-on acquisitions which operate in the high growth markets of India and Russia. The valuation of the business has increased by £15.1 million over the year.

Consistent with other companies in the semiconductor industry, Freescale experienced some revenue and backlog softness in Q3 and Q4 2011, largely driven by global macroeconomic uncertainties and weakness in the industrial and networking businesses. Despite this, the company has made further progress on several operating initiatives over the year, improving gross margins and increasing design wins momentum. Freescale completed an IPO in May 2011, raising approximately US$843 million which was used to deleverage the business. Furthermore, shortly after the IPO, Freescale raised US$750 million of debt due in 2020 which was used to pay down 2014 maturities. Following the IPO and a subsequent 29.7% fall in share price Freescale's valuation has declined by £14.6 million over the year.

ProSiebenSat's valuation declined by £14.8 million over the year, entirely driven by a significant decline in comparable earnings multiples. The business continues to report revenue growth in all segments, with Q3 2011 revenues increasing 6.2% year-on-year and recurring EBITDA increasing 11.1%. Following completion of a strategic review in H1 2011, ProSiebenSat sold its Benelux assets and used the proceeds to pay back €1.2 billion of its term loans ahead of schedule and extended the maturity of approximately €2.1 billion of its term loans to 2016. Management have confirmed their positive outlook for the full year, targeting mid single-digit growth in revenues for 2011.

Realisations

Distributions of £247.0 million were received from the private equity funds' portfolio over the year following the exercise of a call option in relation to the exit of BorsodChem, the sale of Maxeda's individual fashion formats, the partial realisation of Galaxy Entertainment, the full realisation of Provimi and the refinancing of P25's subordinated debt.

In January 2011, Wanhua Industrial Group, a Chinese chemical firm and strategic investor in BorsodChem, exercised a call option to acquire the Permira funds' stake in the company. BorsodChem had been held at zero since December 2008 following a decline in operating performance and a consensual restructuring of the capital structure in 2009.

Maxeda completed the full exit of its individual fashion formats in Q1 2011. Following the sale, Maxeda continues to trade as a DIY retailer with stores in Holland and Belgium. At 31 December 2011, SVG Capital's remaining investment in the business was valued at £1.7 million.

Permira IV sold 33.8% of its holding in Galaxy Entertainment in September at a 101.6% uplift to the 31 December 2010 share price. The value of this partial realisation for SVG Capital represents 70% of the original cost of the investment. SVG Capital's remaining investment in Galaxy Entertainment was valued at £120.2 million at 31 December 2011.

Permira IV also completed a full realisation of Provimi to Cargill during the year. Permira IV acquired Provimi in April 2007 and under the fund's ownership Provimi's management team has transformed the business from a disparate group of individual businesses into an integrated international organisation with a strong presence in emerging markets. The company disposed of non-core assets such as its Fish Feed and Pet Foods activities and made strategic acquisitions in fast-growing markets, including the acquisition of NASSA in Mexico last year, to enhance its geographic footprint. This transformation process has enabled the business to capture further growth while continuing to drive margins and deliver strong annual revenue and EBITDA performance. Significant investment in its innovation platform has also helped to transform Provimi into the global leader it is today.

In 2009, SVG Capital invested €40.0 million in a subordinated loan note to P25 (a Permira feeder vehicle advised by SVG Advisers) which accrued an effective annual interest rate of 30%. In December 2011, P25 completed a refinancing in order to significantly reduce its finance costs which included the refinancing of SVG Capital's subordinated loan note and SVG Capital received proceeds of £60.0 million. SVG Capital did not participate in the new financing structure but retains an equity commitment to the fund. At 31 December 2011, SVG Capital's equity commitment to P25 was valued at £67.1 million.

New investments and follow-ons

Permira IV announced four portfolio company acquisitions and one follow-on investment during 2011. SVG Capital will participate in these investments indirectly through its holdings in the Permira feeder vehicles and the SVG Diamond programme.

BakerCorp is the industry leader in providing liquid and solid containment, pump, filtration and trench shoring solutions. Permira IV is backing BakerCorp's current management to accelerate revenue growth and expansion internationally, particularly in its European business, which represented 5% of revenues at acquisition having grown rapidly since its launch in 2007. Operating from five locations in Germany, France and the Netherlands, the European business has significant potential to further penetrate existing markets, expand into new geographic regions and extend its product set. SVG Capital's share of this investment was approximately £3.2 million.

On 30 June 2011, Permira IV made a follow-on investment to support the merger of eDreams and Go Voyages and the subsequent acquisition of Opodo. The companies operate a multi-channel marketplace that connects travel suppliers (airlines, hotels, car rental companies etc.) with end customers and other intermediaries such as travel agents. Together they form one of Europe's leading online travel groups, with a presence in 27 countries and strong positions in all key European countries (France, Italy, Germany, Nordics, Spain and the UK). The value of the follow-on for SVG Capital was £1.1 million.

Renaissance is a leading provider of technology-based school improvement and student assessment programs for pre-kindergarten through to senior high (pre-K-12) schools and districts. The company's products and services, currently adopted by more than 70,000 schools, are primarily focused on two curriculum areas: reading and mathematics. The progress-monitoring and assessment tools provided by Renaissance enable teachers to make data-driven decisions to enhance core curriculum and tailor instruction for students at varying levels. SVG Capital's share of this investment was approximately £1.7 million.

Netafim is the pioneer and global leader in smart drip and micro irrigation solutions for sustainable agriculture and other applications. Netafim provides drip irrigation solutions for value crops in over 100 countries globally and is the clear market leader with c.30% share of the global market. In comparison to traditional flood irrigation or sprinklers, drip irrigation controls water flow so that crop yields can be increased by up to 50% whilst saving up to 40% in water consumption. As drip irrigation is only used in 6% of global irrigated arable land, the market offers substantial growth opportunities through penetrating existing markets but also in new crops and new regions. SVG Capital's share of this investment was approximately £3.2 million.

Genesys is a leading supplier of enterprise software and solutions that enable best-in-class customer service for companies and organisations. Genesys software provides products for call routing and handling which integrate with all major contact centre hardware vendors. Headquartered in California, USA, and with over 45 offices worldwide, Genesys software directs more than 100 million customer interactions every day for 4,000 companies and government agencies in 80 countries. With the backing of Permira IV, Genesys intends to enhance its core product portfolio and expand its offerings in the growing areas of customised customer service solutions. SVG Capital's share of this investment, which completed in January 2012, was approximately £5.7 million.

Valuation basis

On a like-for-like basis, discounted earnings multiples decreased by 6.8% over the year.

At 31 December 2011, the weighted average discounted earnings multiple used to value the portfolio was 9.3x and the median was 8.8x.

Portfolio maturity - investments in companies - 31 December 2011 (£m)

Year of original investment in underlying companies

Other assets

Private equity funds of funds portfolio - £147.4 million

(12.6% of the investment portfolio)

The private equity funds of funds portfolio has reported a 19.1% total return over the year, as underlying valuation increases have been amplified by the leverage within many of the fund structures. At 31 December 2011 the funds were valued at £147.4 million.

Public equity funds portfolio - £55.0 million

(4.7% of the investment portfolio)

The funds managed by SVG Investment Managers reported mixed performance over 2011. The unconstrained funds delivered negative total returns driven by their exposure to European periphery economies and financials, however, the strategic funds reported solid single-digit gains with Strategic Equity Capital ending the year having delivered nine consecutive quarters of outperformance. At 31 December 2011, the funds were valued at £55.0 million, a 6.4% negative total return over the year.

Other investments - £10.1 million

(0.9% of the investment portfolio)

Other investments are made up of two investments in Indian private equity funds. At 31 December 2011, these funds were valued at £10.1 million, a negative total return of 8.3% over the year driven by negative foreign exchange movements and a decline in the quoted investments.

Capital commitments

At 31 December 2011, the Group had uncalled commitments to its fund investments as follows:

* At 31 December 2011 exchange rates

15 largest underlying companies December 2011

Statement of Directors' responsibilities

The Directors confirm to the best of their knowledge that:

(a)  the condensed set of financial statements have been prepared in accordance with IAS 34 as adopted by the European Union;

(b) the condensed set of financial statements includes a fair review of the important events, principle risks and uncertainties and other information it is required to include; and

(c)   the condensed set of financial statements includes a fair review of the information required on material transactions with related parties and changes since the last annual report.

The Directors of SVG Capital plc and their functions are listed below.

By order of the Board:

Nicholas Ferguson, Chairman

Lynn Fordham, Chief Executive

Francis Finlay, Non-executive Director

Caroline Goodall, Non-executive Director

Edgar Koning, Non-executive Director

Denis Raeburn, Non-executive Director

Charles Sinclair, Non-executive Director

Andrew Sykes, Non-executive Director

Consolidated income statement

The total column of this statement represents the Group's income statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of changes in equity

Consolidated balance sheet