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SPICE PRIVATE EQUITY  ANNUAL REPORT 2014

ANNUAL REPORT 2014

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ANNUAL REPORT 2014  SPICE PRIVATE EQUITY

SHARE PRICE DEVELOPMENT 2014

25

+10.3%

24

23

SHARE PRICE GROWTH IN 2014

22

21

20

19

03.01.14 03.02.14 03.03.14

01.04.14 02.05.14 02.06.14

Share Price (CHF) As of 31 December 2014: Share Price: CHF 22.50 Net Asset Value per Share: CHF 37.78

01.07.14 04.08.14

01.09.14

01.10.14

03.11.14

01.12.14

30.12.14

Share Price

40.4 %

YEAR-END NAV DISCOUNT TO SHARE PRICE

THE BRIDGE TO EMERGING MARKETS. SPICE PRIVATE EQUITY PROVIDES INVESTORS WITH ACCESS TO ATTRACTIVE PRIVATE EQUITY OPPORTUNITIES IN EMERGING MARKETS.


SPICE PRIVATE EQUITY  ANNUAL REPORT 2014

CONTENTS

COMPANY PROFILE

Spice Private Equity Ltd is a Swiss investment company with exclusive focus on private equity investments in emerging markets. Spice Private Equity Ltd has over a decade of operating history and is managed by GP Advisors part of the GP Investments Group. The company is listed on the SIX Swiss Exchange under the ticker symbol SPCE.

KEY INFORMATION AS OF 31 DECEMBER 2014

Closing price per share Net Asset Value per share Exchange rate Number of shares outstanding Market capitalization

CHF 22.50 CHF 37.78 USD/CHF 0.99365 5 355 800 CHF 120.5 million

Swiss security number ISIN Ticker symbol

915.331 CH0009153310 SPCE

Reuters Bloomberg

SPCE.BN SPCE:SW

www.spice-private-equity.com

NAME CHANGE

The Extraordinary General Meeting (EGM) on 26 February 2015 approved a name change from APEN Ltd to Spice Private Equity Ltd. Subsequantly the name of APEN Bermuda EM Ltd was changed to Spice Private Equity (Bermuda) Ltd. Throughout this report the new names are used.

ROUNDING

Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Percentages and percent changes are calculated based on figures that are not rounded and may not precisely reflect the percentages and percent changes that would be derived based on rounded figures displayed in the tables and text.

04

Chairman’s Statement

06

Management Report

Review of 2014 and outlook

Ten largest underlying investments

Current investments and commitments

Detailed supplementary information

23

Financial Statements (IFRS) – Spice Private Equity Ltd

53

Corporate Governance

65

Compensation Report

69

Financial Statements (Swiss law) – Spice Private Equity Ltd

76

Addresses and Contacts

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ANNUAL REPORT 2014  CHAIRMAN’S STATEMENT

CHAIRMAN’S STATEMENT Antonio Bonchristiano

David Emery

David Pinkerton

Fersen Lambranho

Board of Directors, from left to right: Antonio Bonchristiano, Vice Chairman – David Emery, Member Eduardo Leemann, Chairman of the Board – David Pinkerton, Member – Fersen Lambranho, Member (elected by EGM on 26 February 2015, replaces Alvaro Lopes)

“WITH OUR NETWORK AND OUR EXPERTISE WE CAN BRING TOGETHER THE CAPITAL NEEDS IN EMERGING MARKETS AND THE CAPITAL RESOURCES OF OUR GLOBAL INVESTORS.” EDUARDO LEEMANN


CHAIRMAN’S STATEMENT  ANNUAL REPORT 2014

Eduardo Leemann

In 2013 Spice Private Equity (“the Company”) underwent a major restructuring in which it strengthened its capital base and announced the new investment strategy to focus on emerging markets. Among other things, the restructuring signaled the return of the Company to active investing after the interruption which took place in 2009. During 2014, the Company pursued various investment opportunities and was able to allocate the capital raised in 2013. However, almost 90 % of the assets were still related to the pre-2009 period and concentrated on North America and Western Europe. At the end of 2014, Spice Private Equity made a further, decisive step to accelerate its repositioning: it sold the entire “Legacy Portfolio” to Strategic Partners, part of Blackstone Group. With this transaction, all assets and liabilities related to investments made prior to 2009 have now been sold. Several goals were achieved with this USD 200 million transaction: a simplified overall group structure and balance sheet, elimination of the indebtedness from the 2009 restructuring, enhancement of the cash flow predictability, and an investment

portfolio 100 % focused on emerging markets. To underline its clear new positioning, the Company has decided to change its name from APEN Ltd to Spice Private Equity Ltd. The new name provides a new identity, more closely linked to the new investment focus of the Company. In the same spirit, the overall corporate identity of Spice Private Equity now has a more dynamic and appealing look. Starting from 1 January 2015, Spice Private Equity will report in USD and its shares will be traded in USD (after publication of the first quarterly results in USD). This decision was announced prior to the decision of the Swiss National Bank delinking the Swiss Franc from the Euro, and is related to the fact that current and future investments are generally linked to USD. This step will avoid unnecessary volatility in the reported Net Asset Value (“NAV”) and in the share price. Several additional initiatives have been started in order to raise the profile of the Company: in January 2014, Spice Private Equity joined LPEQ, an association of listed private equity companies and an excellent platform fostering communication among investors, analysts, brokers, and managers. Leading European broker Kepler Cheuvreux took up its role as market maker beginning in August 2014, providing additional liquidity to the listed shares. We will continue to develop new

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strategies to make the Spice Private Equity brand and its unique strategy better known, with the goal of increasing its appeal and reducing the gap between share price and NAV, a discount which remains unsatisfactory. The Board of Directors remained unchanged during 2014, with the members elected in June 2013 being re-elected in May 2014. At the beginning of 2015, Alvaro Lopes decided to step down as of the date of the Extraordinary General Meeting (EGM) on 26 February 2015, and he has been replaced by Fersen Lambranho, representing GP Investments (as did Alvaro Lopes). The Board of Directors would like to thank Alvaro Lopes for his excellent cooperation, his valuable contributions and his commitment on behalf of Spice Private Equity. The current members of the Board of Directors will stand for re-election at the 2015 Annual General Meeting (AGM). With over USD 200 million available to invest, Spice Private Equity is looking forward to taking advantage of an investment climate in the emerging markets which is increasingly favorable to buyers. The strengthening of the US economy has redirected capital flows towards the North American economy, thus reducing capital available for investments in the emerging markets. This situation is creating a favorable environment for those who are willing and able to seize the opportunities that arise. Spice Private Equity is ready.

Eduardo Leemann Chairman of the Board


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ANNUAL REPORT 2014  MANAGEMENT REPORT

MANAGEMENT REPORT David Salim

Guido Cornella

Management of GP Advisors: David Salim, Chief Executive Officer and Dr. Guido Cornella, Chief Financial Officer

“THE EVER-GROWING NEED OF EMERGING MARKETS FOR PRIVATE EQUITY CAPITAL WILL MAKE THE EXPERTISE AND KNOW-HOW TO SINGLE OUT ATTRACTIVE INVESTMENT OPPORTUNITIES EVEN MORE DEMANDING AND INDISPENSABLE THAN IN THE PAST.” DAVID SALIM


MANAGEMENT REPORT  ANNUAL REPORT 2014

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REVIEW OF 2014 AND OUTLOOK DISPOSAL OF LEGACY HOLDINGS On 31 December 2014, Spice Private Equity divested its entire “Legacy Portfolio” for USD 192.0 million (CHF 190.0 million as of the closing date) to a fund managed by Strategic Partners Funds Solutions, the secondary private equity and fund solutions division of Blackstone. The disposal of the legacy holding is a major breakthrough for Spice Private Equity. The Company is now debt-free and cash-rich and in a position to allocate substantial capital to the targeted investment areas. While until December 2014, the majority of the portfolio was still linked to the past strategy, beginning in January 2015 all investments are related to emerging markets, thus accelerating the transformation announced in mid-2013. Moreover, the complex structure with leverage and a distribution participation by Fortress has been substituted with a much simpler and straightforward corporate structure composed of two entities: one in Switzerland and one in Bermuda. These essential transformation steps have been achieved at a limited cost. The disposal was executed through a structured transaction involving the

sale of two subsidiaries, APEN Faith Media Holdings LLC and APEN Holdings LLC, as well as the respective subsidiaries of APEN Holdings LLC (APEN Bermuda Legacy Ltd (formerly APEN Bermuda Ltd), APEN Holdings (Bermuda) Ltd and APEN FMH LLC), to a Strategic Partners acquisition vehicle. The transaction also transferred to Strategic Partners the subsidiaries’ USD 95 million loan obligation (as of 30 June 2014), resulting in the full deleveraging of Spice Private Equity. After the disposal of the “Legacy Portfolio,” the Company’s only remaining subsidiary is Spice Private Equity (Bermuda) Ltd (formerly APEN Bermuda EM Ltd), (“the Subsidiary”). The reference date for the transaction is 30 June 2014. The transaction price of CHF 190.7 million represents a discount of 3.1 % (13.5 % in USD terms) to the value of the portfolio at the reference date. Additionally, the purchaser purchased from Spice Private Equity a USD 7.8 million (CHF 7.7 million) loan obligation from APEN Faith Media Holdings LLC, resulting in a total transaction value of USD 199.7 million (CHF 198.4 million). After purchase price adjustments of USD 12.9 million (CHF 12.8 million) for distributions already received by the

seller between the reference and closing dates, the final consideration to be paid amounts to USD 186.9 million (CHF 185.7 million) and will be paid in five equal installments commencing on the closing date and at 9-month intervals thereafter, with the last payment to be received at year-end 2017. Through this complex structured secondary transaction, the Company has now fully exited its historical non-core portfolio in a single transaction. It has also achieved a simplified financial and legal structure resulting in a more transparent corporate structure. The transaction allows the Company to concentrate much sooner than expected on the pursuit of its new emerging marketsfocused investment strategy. FINANCIALS Spice Private Equity generated operating income of CHF 3.7 million (2013: CHF 0.0 million) and operating expenses of CHF 5.2 million (2013: CHF 6.0 million), resulting in a net operating loss of CHF 1.5 million (2013: loss of CHF 6.0 million) for the period. Charges for discontinued operations of CHF 4.0 million (2013: CHF 24.3 million) resulted in a comprehensive loss of CHF 5.5 million (2013: loss of CHF 30.3 million) for the period.


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ANNUAL REPORT 2014  MANAGEMENT REPORT

At subsidiary level (Spice Private Equity (Bermuda) Ltd), the emerging market investments performed well, with a net gain of CHF 3.8 million versus total cost of investments of CHF 12.9 million, resulting in a return on investment of more than 29 %. After accounting for operating costs, an overall gain of CHF 0.8 million resulted for the Subsidiary. Due to the sale of the “Legacy Portfolio,” the Company achieved a sizable net cash flow of CHF 37.7 million (2013: CHF 7.6 million). During 2014, CHF 29.2 million have been allocated for new emerging markets investments, of which CHF 12.9 million have been called and CHF 16.3 million are outstanding commitments. Outstanding receivables deriving from the sale of the “Legacy Portfolio” totaling CHF 148.5 million (gross of discount) will be received over the next three years in four equal installments, increasing the Company’s cash predictability. The Company’s Net Asset Value (“NAV”) decreased by CHF 1.00 or 2.6 % during the period to CHF 37.78 per share as of 31 December 2014 (31 December 2013: CHF 38.78 per share). The main factor for the decrease were

the transaction costs of CHF 5.9 million incurred as part of the sale of the “Legacy Portfolio” (total revenues generated in 2014 by the “Legacy Portfolio” were offset by the loss incurred on the sale). The economic NAV as of 31 December 2014 amounted to CHF 40.70 per share. The difference between the published NAV per share (CHF 37.78) and the economic NAV per share relates to the accounting treatment of the “derivative financial liability”. Based on the put-call agreement between the Company and Fortress entities, the Fortress entities can put their Spice Private Equity shares from 12 June 2014 through 12 June 2018 to the Company at a price of CHF 21.80 per share. In line with IFRS accounting, the Company presents the put option as a liability, resulting in a charge of CHF 2.92 per share. At year-end, the Company was debtfree. In 2014, the Company’s share price increased from CHF 20.40 by 10.3 % and ended the year at CHF 22.50. As of 31 December 2014, the shares traded at a discount of 40 % to the NAV (31 December 2013: 47 %).

MARKETS Spice Private Equity is active at two levels in the private equity investment space: it invests directly in companies, as well as investing indirectly through fund managers. The latter approach is a combination of primary investments in blind pools and of secondary purchases of investors’ commitments in existing private equity funds. Secondary purchases are generally done in mature private equity funds, i. e. funds which have invested 50 % to 100 % of their callable capital. While the overall investments focus is on emerging markets, Spice Private Equity concentrates its efforts on three main regions: Asia-Pacific, Sub-Saharan Africa and Latin America. The fundamental theme is to benefit from the growth of the middle class in those regions by investing in production and services companies. During 2014, emerging markets in general were confronted with headwinds mainly due to a slow-down of the Chinese economy and other regional or country-specific issues, such as the Ukraine war, the Ebola outbreak in Western Africa, and the recession in Brazil.

DIVERSIFICATION BY INVESTMENT FOCUS

DIVERSIFICATION BY MATURITY

Expressed as % of invested assets in underlying companies applying fair values

Expressed as % of invested assets in underlying companies applying fair values 60 % 55 % 50 % 45 % 40%

Growth 54.8 %

Buyout 45.2 %

35 % 30 % 25 % 20 % 15 % 10 % 5% 0%

0–1 year

1–2 years

2–3 years

3–4 years

4–5 years

5–6 years

> 6 years


MANAGEMENT REPORT  ANNUAL REPORT 2014

Combined with the increased attractiveness of the US economy, this situation has provoked a shift of capital flow out of emerging markets. Nevertheless, prices for well-run companies continued to remain sustained during the year. Together with established local partners, Spice Private Equity was involved in several potential Co-Investment processes across the three main regions, with many situations at very advanced stages. Only one of these situations resulted in an investment: Giant Interactive, a Chinese gaming company, which was taken private from the New York Stock Exchange. Other potential transactions failed to materialize mostly due to pricing and competition issues, notably in Brazil, Western Africa and in North Asia. In the Secondary Fund Investments Space, Spice Private Equity invested in one situation (Quvat, an Indonesia focused fund) out of a multitude of opportunities. The pricing aspect was even more pronounced in relation to secondary transactions, highlighting the need to maintain discipline and not overpay, which is particularly important in times of high volatility of currencies and of trading comparables.

Primary Fund Investments serve to support the co-investment and secondary investment strategies. The Company committed to four funds with excellent management teams on the ground: Baring Asia and Navis in Asia, and Carlyle SSA and Helios in Africa. Carlyle SSA, Helios and Navis already began allocating money during 2014, while Baring Asia will start doing so in 2015. All four managers have established franchises and will help Spice Private Equity successfully develop its private equity portfolio. ASSET ALLOCATION The investment portfolio is in a build-up phase. The total investable capital is approximately USD 220 million, although part of this amount will be received from Strategic Partners over four installments by the end of 2017. In order to accelerate the investment pace – and should attractive investment opportunities materialize – we are in the process of negotiating a USD 75 million credit line with a lender. The credit line is not to be seen as a leverage of the portfolio, but as an anticipation of future, predetermined cash flows. The overall goal is to fully allocate the available USD 220 million between the

end of 2016 and the end of 2017. USD 30.9 million has already been allocated during 2014. Once fully allocated, the portfolio composition will be diversified from a geographic standpoint as well as based on the type of investments. Looking at the geographic standpoint, emphasis will be on Asia, Sub-Saharan Africa and Latin America, while also opportunistically looking at situations in other regions of the emerging markets. The bulk of investments will be either direct in nature (co-investments) or in funds at an advanced stage (secondary opportunities). Primary investments will represent a smaller portion with a strategic angle, enhancing further investment opportunities. Except for Primary Investments, investment opportunities are the result of an iterative process combining bottom-up and top-down approaches. We are seeking to develop a portfolio with good diversification from a geographic standpoint; however, if during the coming years, investment opportunities in a certain region are not sufficiently attractive and do not meet our risk/return criteria, we will adjust our geographic

DIVERSIFICATION BY REGION

DIVERSIFICATION BY SECTOR

Expressed as % of invested assets in underlying companies applying fair values

Expressed as % of invested assets in underlying companies applying fair values

Sub-Saharan Africa 7.7 %

Industrial 19.3 %

Leisure 11.5 %

Others 17.2 % Asia Pacific 92.3 % Technology 45.2 %

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Services 6.8 %


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ANNUAL REPORT 2014  MANAGEMENT REPORT

and type allocation to reflect prevailing market conditions. PORTFOLIO The portfolio has been developing well, with investments completed across all types of products. On secondary transactions, the portfolio companies of Quvat Capital Partners II have developed in line with expectations. On co-investments, Giant Interactive has been implementing its strategy after the transaction taking it private. Finally, on the primary investments, Carlyle Sub-Saharan Africa Fund has made four investments diversified across Africa and sectors, and Helios Fund III has made one investment in the financial services sector in Africa. In the last quarter of the year, commitments to Baring Asia Fund VI and Navis Asia Fund VII were made, with no capital drawn at year-end. In the case of Navis, a capital call has taken place after year end 2014 giving Spice Private Equity a participation in the fund’s investments which were in place as of 31 December 2014. OUTLOOK The strength of the US economy has continued in the initial months of 2015, maintaining pressure particularly on emerging markets currencies. The Chinese economy is decelerating, creating

additional headwinds for exporters. As the other economic and political factors registered during the second half of 2014 continue to be valid, we expect for 2015 a similar macro scenario as in 2014, with some potential outbreaks of regional crises. Overall, this environment should help reduce sellers’ expectations and thus make investments increasingly attractive.

sold prior to year-end. Moreover, from 2015 onwards, Spice Private Equity will report and be listed in USD, reducing the currency-related volatility experienced by the share price in the past. The investment pipeline since the beginning of the year is promising, in particular in the Secondary Fund Investment and Direct Co-Investment sectors.

“Our focus on emerging markets reflects where we see the best potential returns for our investors and where we feel at home with our advice.” ANTONIO BONCHRISTIANO

In January 2015, the Swiss National Bank decided to lift the target minimum exchange rate of the Swiss Franc against the Euro. This decision has not materially affected Spice Private Equity: since the end of 2014, most assets are in USD, which is the reference currency in which investments are expected to be made in the future. All the Euro positions were

Several transactions are in an advanced stage, some of them with exclusivity. In one situation we have signed a purchase agreement and expect to close the transaction by end of March 2015. Regions include Latin America and Asia-Pacific. In all focus regions, we are in discussions concerning potential co-investment opportunities with leading local partners.


MANAGEMENT REPORT  ANNUAL REPORT 2014

TEN LARGEST UNDERLYING INVESTMENTS

Rank Company name

Fund name

Type

Country

Region

Sector

Date of initial investment

Fair value in million USD

1 Giant Interactive

Buyout

China

Asia Pacific

Technology

Jul 2014

7.5

2 Linq Asia Capital

Quvat Capital Partners II

Growth

Indonesia

Asia Pacific

Various

Jun 2010

2.1

3 Blitz Megaplex

Quvat Capital Partners II

Growth

Indonesia

Asia Pacific

Leisure

Dec 2013

1.9

4 Vulcan Steelmills

Quvat Capital Partners II

Growth

Indonesia

Asia Pacific

Industrial

May 2008

1.6

5 Qalyper Shipbuilding Quvat Capital Partners II

Growth

Singapore

Asia Pacific

Industrial

Apr 2008

0.7

6 Diamond Bank

Carlyle Sub-Saharan Africa Fund

Growth

Nigeria

Sub-Saharan Africa

Services

Sep 2014

0.4

7 Premier Housing

Quvat Capital Partners II

Growth

Indonesia

Asia Pacific

Various

Apr 2008

0.4

8 ETC Group

Carlyle Sub-Saharan Africa Fund

Growth

Tanzania

Sub-Saharan Africa

Industrial

May 2014

0.3

9 Altus Shipping

Quvat Capital Partners II

Growth

Singapore

Asia Pacific

Industrial

May 2008

0.2

Carlyle Sub-Saharan Africa Fund

Growth

Mozambique Sub-Saharan Africa

Services

May 2014

0.2

10 J & J Africa

“THE HIGH GROWTH POTENTIAL OF EMERGING ASIA HAS CREATED A STRONG DEMAND FOR PRIVATE EQUITY CAPITAL IN THIS REGION.” DAVID EMERY

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ANNUAL REPORT 2014  MANAGEMENT REPORT

CURRENT INVESTMENTS AND COMMITMENTS

Kuala Lumpur, Malaysia


MANAGEMENT REPORT  ANNUAL REPORT 2014

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DIRECT CO-INVESTMENTS GIANT INTERACTIVE Giant Interactive is a direct Co-Investment in one of the largest online game developers and operators in China. The company has significant presence in the Chinese active role playing games market through its ownership of well known game franchises. This was a take private transaction led by Baring Asia, and other participants included Hony Capital and CDH Investments. China’s PC based gaming market has grown to a USD 4 billion+ market with steady growth anticipated going forward. Shanghai, China This is projected to be driven by both an increase in the average revenue per user and penetration increase in lower tier cities and rural areas. The latter is driven by improvement in infrastructure, access to technology and increase in disposable income, common themes across Spice Private Equity investments. Future growth opportunity for Giant Interactive is also likely to be from mobile gaming, where the market has been growing as penetration of smart phones has accelerated. In an attractive growing market with high barriers to entry, the investment in Giant Interactive gives Spice Private Equity access to one of the dominant participants in this market. www.ga-me.com

FUND INVESTMENTS SECONDARY FUND INVESTMENTS QUVAT CAPITAL PARTNER II Spice Private Equity acquired through a secondary transaction a LP stake in Quvat Capital Partners II, a private equity fund managed by Quvat Management, a leading Indonesia focused private equity fund manager with deep local network.

Jakarta, Indonesia

The fund was established in August 2007 with USD 343 million of capital commitment. The 12 portfolio companies operate in a broad array of industries including financial services, entertainment, mining, logistics and real estate. The assets are mostly based in Indonesia with some exposure to neighboring countries such as Singapore and Malaysia.

The investment represented an opportunity to purchase a mature fund position at an attractive price. It provides exposure to a diversified portfolio of companies in Indonesia, which is one of the largest countries in the world in terms of population and GDP and one with the highest GDP growth expectations. > Quvat Capital Partner II is fully invested and out of its investment period. www.quvat.com


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ANNUAL REPORT 2014  MANAGEMENT REPORT

FUND INVESTMENTS PRIMARY FUND INVESTMENTS CARLYLE SUB-SAHARAN AFRICA FUND Carlyle has established an experienced team comprised of African nationals with many years of combined experience and offices in Johannesburg, South Africa and Lagos, Nigeria. The fund has closed at approximately USD 700 million. Carlyle targets both control investments and minority investments and employs a thematic investment process focused on sectors with high growth potential, low cost production advantages, low penetration, and those that are undergoing Johannesburg, South Africa liberalization. The fund has a pan-regional focus and should deploy capital across the Sub-Saharan Region (SSA). The investment fits Spice Private Equity’s diversification and size. SSA presents a highly compelling market opportunity based on the accelerating and diversified economic growth, favourable demographics, urbanization trends, improving macroeconomic environment and political stability. Additionally the private equity industry is still underpenetrated with total deals in 2013 representing only 0.2 % of GDP according to Emerging Markets Private Equity Association (EMPEA). SSA attracts a fraction of the world’s private equity capital compared with other emerging regions, notably Asia Pacific and Latin America. However, interest has increased recently, buoyed by strong economic growth. > As of 31 December 2014 Carlyle Sub-Saharan Africa Fund has made four investments. www.carlyle.com

HELIOS FUND III Helios Investment Partners (Helios) is one of the leading private equity managers in Africa. The team has just raised its third fund of approximately USD 1.1 billion, which is the first USD 1bn+ Africa-focussed private equity fund. Established in 2004, the firm has offices in London, Lagos and Nairobi, with a team of over 25 professionals and has completed investments in the region’s most significant countries, including Nigeria, Ghana, Kenya, Tanzania, Angola, South Africa and Morocco. Helios is complementary to Spice Private Equity commitment to Carlyle Sub-Saharan Africa Fund. The fund will target Nairobi, Kenya growth equity investments in sectors exhibiting high growth potential and acquisitions of large, established businesses. The manager has deep local and international networks, breadth of private equity transaction expertise and high degree of hands-on operational involvement. This positions Helios to generate strong, risk-adjusted returns from investments in the African market. > As of 31 December 2014 Helios has made one investment through Fund III. www.heliosinvestment.com


MANAGEMENT REPORT  ANNUAL REPORT 2014

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NAVIS ASIA FUND VII Navis Capital Partners (Navis) is one of the leading private equity managers in South East Asia with a large and institutional team. Founded in 1998, Navis manages over USD 5 billion of capital commitments with almost 100 employees spread over eight offices in Asia. As of 31 December 2014 Navis Asia Fund VII was close to its hard cap of USD 1.5 billion. Navis has an investment strategy focused on control buyouts with minimal leverage in high growth companies in a region dominated by minority growth capital investments. Geographic focus is primarily on South and South East Asia, which has one of the most attractive macroeconomic growth and demographic trends going forward.

Kuala Lumpur, Malaysia

The investment in Navis fits well with Spice Private Equity portfolio strategy in terms of geography, industry diversification and size. It represents a good complementary fit to the commitment in Baring Asia VI in both geographic coverage and investment size. > As of 31 December 2014 Navis Asia Fund VII has made three investments. www.naviscapital.net

BARING ASIA FUND VI Baring Asia seeks to make both control and significant minority investments in high growth companies on a country and pan-regional basis. Asia has favourable macro economic and demographic trends, as well as the increase in the purchase power of the growing middle class. The manager seeks to take advantage of the favourable tailwinds by leveraging its cross border network and collective knowledge of its team to facilitate growth of its portfolio companies.

Hong Kong, China

Baring Asia is an experienced pan-Asia private equity manager, having raised USD 9 billion in commitments across six funds. Its new fund, Baring Asia Fund VI, has just had final close at its hard cap of USD 3.988 billion.

Established in 1997, Baring Asia has depth of presence in the region with 7 offices and over 100 professionals in its team. These themes resonate and are consistent with Spice Private Equity investment thesis of tapping into the growth of the middle class. Baring Asia’s coverage and fund size dovetails well with Navis Fund VII, which is primarily focused in South East Asia. Furthermore, Spice Private Equity has already completed one co-investment with Baring Asia in Giant Interactive. www.bpeasia.com


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ANNUAL REPORT 2014  MANAGEMENT REPORT

“E MERGING MARKETS PRIVATE EQUITY WILL BE OF INCREASING IMPORTANCE IN ANY SAVVY INVESTOR’S PORTFOLIO IN THE COMING YEARS.” DAVID PINKERTON


MANAGEMENT REPORT  ANNUAL REPORT 2014

DETAILED SUPPLEMENTARY INFORMATION ON INVESTMENT PORTFOLIO AND UNCONSOLIDATED SUBSIDIARIES As of 1 January 2014, Spice Private Equity Ltd (formerly APEN Ltd, Zug) (“the Company”) has adopted the amendments to IFRS 10 Investment Entities (“the Amendment”). The adoption required the Company to fundamentally revise the presentation of its financial statements. Despite the fact that the Company has not changed its underlying business model, investment portfolio and financing arrangements, the Company was required by IFRS to discontinue consolidation of its subsidiaries. From 1 January 2014, the Company carries its immediate subsidiaries at fair value through profit or loss. As a consequence, the Company’s investment portfolio and associated financial liabilities as well as related income and expense items are merged into a single line item in the balance sheet (“unconsolidated subsidiaries at fair value through profit or loss”) and Statement of Comprehensive Income (“change in fair value of unconsolidated subsidiaries”). Previously available, more granular information about the Company’s investments and financial liabilities held, as well as related income and expense items incurred in its subsidiaries are no longer visible in the Company’s primary financial statements.

Investment Portfolio Details The business purpose of the Company is to invest solely for capital appreciation, investment income or both. Capital appreciation and investment income is driven by the Group’s investments in Fund Investments and Direct Investments held within the “Legacy Portfolio” and “Emerging Markets Portfolio”. The following table presents a summary of the Company’s investments through its subsidiaries:

Legacy 1) Portfolio

Emerging Markets Portfolio

Total

Direct Investments

7 491

7 491

Funds

9 169

9 169

Total Spice Private Equity Group investments

16 660

16 660

Cash

14 268

14 268

Other liabilities

(118)

(118)

Total fair value of subsidiaries

30 810

30 810

31 December 2014 in TCHF

The “Legacy Portfolio” was disposed as of 31 December 2014 through a structured transaction involving the sale of two Spice Private Equity subsidiaries, APEN Faith Media Holdings LLC and APEN Holdings LLC, to Strategic Partners the secondary private equity and fund solutions division of Blackstone. The transaction also transferred to Strategic Partners the Spice Private Equity subsidiaries’ USD 95 million loan obligation (as of 30 June 2014), resulting in the full deleveraging of the Company.

1)

The Company has included detailed financial information related to its underlying investments, associated financial liabilities, income and expense items and cash flows in this Supplementary Information section to provide a similar level of information as in previous years. The additional information provided differentiates between the Company’s “Legacy Portfolio” (including all investments made under its previous investment strategy and entered before 2009 and sold as of 31 December 2014), the Company’s “Emerging Markets Portfolio” (including investments made in 2014, based on the Company’s revised investment strategy) and the holding structure where applicable.

31 December 2013 (restated) in TCHF

Loans Direct Investments

The “Holding Structure” as defined here encompasses the legal entities Spice Private Equity Ltd and APEN Faith Media Holdings LLC, where applicable.

Total

1 931

1 931

19 544

19 544

302 174

302 174

Total Spice Private Equity Group investments

323 649

323 649

13 142

17 608

30 750

1 311

1 311

156

2

158

Borrowings

(97 829)

(97 829)

Financial liability – Class A units

(40 127)

(40 127)

(9 216)

(9 216)

191 088

17 609

208 697

Net Asset Value of APEN Faith Media Holdings LLC Other assets

Other liabilities 1)

The “Emerging Markets Portfolio” as defined here encompasses the legal entity Spice Private Equity (Bermuda) Ltd and the entirety of the investment portfolio held by it.

Emerging Markets Portfolio

Funds

Cash

The “Legacy Portfolio” as defined here encompasses the legal entities APEN Holdings LLC including its subsidiary APEN Bermuda Legacy Ltd and its subsidiaries APEN FMH LLC and APEN Holdings (Bermuda) Ltd and the entirety of the investment portfolio held by these entities.

Legacy Portfolio

Total fair value of subsidiaries

Including outstanding intercompany loan of CHF 8.2 million

1)

During 2014, CHF 29.2 million have been allocated for new emerging markets investments, of which CHF 12.9 million have been called and CHF 16.3 million are outstanding commitments

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ANNUAL REPORT 2014  MANAGEMENT REPORT

Please see the table on pages 20 to 21 which presents the detailed information in relation to Spice Private Equity’s investment portfolio. Leverage Ratios by Portfolio, Holding Structure and for the Group The following reconciliation provides information on the allocation of investments, net cash and borowings of Spice Private Equity Group to provide information on leverage. Leverage ratio is defined as ratio between borrowings and the sum of investments and current assets (net).

31 December 2014 in TCHF

Legacy Portfolio

Emerging Markets Portfolio

Holding Structure

Spice Private Equity Group

Investments

16 660

16 660

Cash

14 268

46 355

60 623

Other assets

237

237

Other liabilities 

(118)

(6 137)

(6 255)

Net cash

14 150

40 455

54 605

1)

Outstanding commitments

16 292

16 292

Receivables

146 694

146 694

Net cash and receivables

14 150

187 150

201 300

Investments, net cash and receivables

30 810

187 150

217 960

Borrowings

0.0 %

0.0 %

0.0 %

0.0 %

Leverage ratio

Excludes financial liability (put option on own equity-instruments of CHF 15.6 million).

1)

Legacy Portfolio

Holding Structure

Spice Private Equity Group

323 649

323 649

13 142

17 606

8 619

39 367

156

2

153

311

Other liabilities

(982)

(749)

(1 731)

Net cash

12 317

17 608

8 022

37 947

Investments Cash Other assets 1)

Outstanding commitments Investments and net cash Borrowings2) Leverage

47 058

47 058

335 966

17 608

8 022

361 596

97 829

97 829

29.1 %

0.0 %

0.0 %

27.1 %

Excludes financial liability (put option on own equity-instruments of CHF 15.6 million) and intercompany loans. 2) Excludes the Class A units (CHF 44.1 million) within APEN Holdings LLC, as these do not represent a means of financing the investments. 1)

1 January – 31 December 2014 in TCHF

Legacy Portfolio

Emerging Markets Portfolio

Holding Structure

Spice Private Equity Group

Net unrealized gain on investments

2 227

2 227

Total income

2 227

2 227

Management and administration fees

(3 413)

(100)

(3 513)

Other operating expenses

(221)

(2 595)

(2 816)

Total expenses

(3 634)

(2 695)

(6 329)

Profit/(loss) before FX impact and taxes

(1 407)

(2 695)

(4 102)

Net FX impact

2 251

367

2 618

Discontinued operation

(4 015)

(4 015)

Net profit/(loss) for the period

844

(6 342)

(5 499)

Legacy Portfolio

Emerging Markets Portfolio

Holding Structure

Spice Private Equity Group

4 355

3

4 358

1 January – 31 December 2013 (restated) in TCHF

Interest and dividend income Net realized gain Total income Management and service fees

Emerging Markets Portfolio

31 December 2013 (restated) in TCHF

Profit and Loss by Portfolio, Holding Structure and for the Group The following table summarizes the actual income and expense items incurred at portfolio level, holding structure and for the Group.

42 167

42 167

46 522

3

46 525

(2 678)

(980)

(1 648)

(50)

Other operating expenses

(3 830)

(17)

(3 568)

(7 416)

Finance cost

(26 156)

(1)

(26 158)

(2 354)

(2 354)

Net unrealized loss (on investments) Write-down of non-current assets Total expenses Profit/(loss) before FX impact, Class A loss and taxes

1 January – 31 December 2013 (restated) in TCHF

(11 101)

(11 101)

(44 420)

(1 665)

(3 620)

(49 705)

2 102

(1 665)

(3 617)

(3 180)

Legacy Portfolio

Emerging Markets Portfolio

Holding Structure

Spice Private Equity Group


19

MANAGEMENT REPORT  ANNUAL REPORT 2014

Net loss on financial liability (Class A units) Net FX impact Tax expenses Net profit/(loss) for the period

(3 759)

(23 097) (32)

(24 785)

(3 759)

(130)

(2)

(23 230)

(39)

(70)

(1 795)

(3 658)

(30 239)

– Non-controlling interests

(24 786) –

(1 795) –

(3 658) –

(30 239) –

Statement of Cash Flows by Portfolio, Holding Structure and for the Group The following table provides information on cash flows incurred at portfolio level, holding structure and for the Group.

1 January – 31 December 2014 in TCHF

Legacy Portfolio

Emerging Markets Portfolio

Holding Structure

Spice Private Equity Group

Purchases and capital calls

(12 933)

(12 933)

Dividends received from non-current assets

16 089

16 089

Operating costs

(3 515)

(3 314)

(6 829)

Net cash impact from operating activities

(16 447)

12 774

(3 673)

Investment in unconsolidated subsidiary Proceeds from sale of subsidiary, net of cash transferred

Legacy Portfolio

Emerging Markets Portfolio

Holding Structure

Spice Private Equity Group

Purchases and capital calls

(18 112)

(18 112)

Proceeds from non-current assets

68 692

68 692

8

3

11

1 536

1 536

Interest income received from current assets Net interest income from non-current assets

Net profit/(loss) attributable to: – Owners of the Parent

1 January – 31 December 2013 (restated) in TCHF

12 359

(12 359)

37 135

37 135

Total net cash generated from/(used) in investing activities

12 359

24 776

37 135

Treasury share purchase

(181)

(181)

Net cash impact from borrowing activities

(181)

(181)

Foreign exchange effect

750

367

1 117

Total foreign exchange effect

750

367

1 117

Increase/(decrease) in cash and cash equivalents

(3 338)

37 736

34 398

Cash and cash equivalents as of 1 January

17 606

8 619

26 224

Cash and cash equivalents as of 31 December

14 268

46 355

60 623

Dividends received from non-current assets

3 046

3 046

Operating costs

(4 675)

(1 665)

(5 051)

(11 391)

Net cash impact from operating activities

50 495

(1 665)

(5 048)

43 782

20 000 (20 000)

Investment in unconsolidated subsidiary

Net cash generated from/(used) in investing activities

166

166

Total net cash generated from/(used) in investing activities

20 000

(19 834)

166

Repayment of borrowings

(71 199)

(179)

(71 378)

Refinancing net payment

(19 525)

(19 525)

Interest paid on borrowings

(7 881)

(1)

(7 883)

Borrowing costs

(1 044)

(1 044)

Dividends paid/received

(1 369)

1 369

Class A units payout

(4 643)

(4 643)

Proceeds from share capital increase

26 998

26 998

Treasury share sale

4 269

4 269

Net cash impact from borrowing activities

(105 661)

32 455

(73 206)

Foreign exchange effect

716

(729)

(13)

Total foreign exchange effect

716

(729)

(13)

Increase/(decrease) in cash and cash equivalents

(54 450)

17 606

7 573

(29 271)

Cash and cash equivalents as of 1 January

67 592

1 046

68 638

Cash and cash equivalents as of 31 December

13 142

17 606

8 619

39 367


20

ANNUAL REPORT 2014  MANAGEMENT REPORT

SPICE PRIVATE EQUITY GROUP “EMERGING MARKETS PORTFOLIO” AS OF 31 DECEMBER 2014 IN TCHF Opening balance at cost 1.1.2014

Opening balance at fair value 1.1.2014

Cumulative gain/loss 1.1.2014

Giant Interactive Group Inc.

Subtotal Direct Co-Investments

Quvat Capital Partners II

Helios Investors III, LP

Baring Asia Fund VI

Paid in capital 1.1.2014-31.12.2014

Returned capital 1.1.2014-31.12.2014

6 798

6 798

4 483

Navis Asia Fund VII

Subtotal Asia Pacific Funds Portfolio

4 483

Carlyle Sub-Saharan African Fund

1 616

Subtotal Sub-Saharan Africa Funds Portfolio

1 616

12 897

Name of Fund

Direct Co-Investments

As % of Total Spice Private Equity Group Investments

Fund Investments Asia Pacific Funds Portfolio

As % of Total Spice Private Equity Group Investments Sub-Saharan Africa Funds Portfolio

As % of Total Spice Private Equity Group Investments

Total Total of all Investments As % of Total Spice Private Equity Group Investments


21

MANAGEMENT REPORT  ANNUAL REPORT 2014

Cost 31.12.2014

Fair value 31.12.2014

Unrealized gain 31.12.2014

Unrealized loss 31.12.2014

Cumulative gain/loss 31.12.2014

Realized gain 31.12.2014

Realized loss 31.12.2014

Outstanding commitments

Investment currency

Vintage year

6 798

7 491

803

(110)

693

USD

2014

6 798

7 491

803

(110)

693

45 %

4 483

7 852

3 369

3 369

85

USD

2007

4 968

USD

2 981

USD

4 968

USD

4 483

7 852

3 369

3 369

13 002

47 %

1 616

1 317

278

(577)

(299)

3 290

USD

2014

1 616

1 317

278

(577)

(299)

3 290

4 450

(687)

3 763

16 292

8 %

12 897

16 660 100 %


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD


24

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

BALANCE SHEET AS OF 31 DECEMBER 2014 AND 31 DECEMBER 2013 (RESTATED) IN TCHF Note

31.12.2014

31.12.2013 (restated)

– Cash and cash equivalents

4.1

46 355

8 619

– Receivables and prepayments

4.2

37 086

153

83 441

8 772

109 846

Assets Current assets

Total current assets Non-current assets – Receivables

5.1

Total receivables – Loans to subsidiary

5.2

Total loans – Unconsolidated subsidiaries at fair value through profit or loss

3

Total unconsolidated subsidiaries at fair value through profit or loss Total non-current assets Total assets

109 846

6 921

6 921

30 810

208 697

30 810

208 697

140 656

215 618

224 097

224 390

Liabilities and Shareholders’ Equity Current liabilities – Payables and accrued charges

6.1

4 237

749

– Derivative financial liability

6.2

15 636

15 636

– Provision for other liabilities and charges

6.3

1 900

Total current liabilities

21 773

16 385

Total liabilities

21 773

16 385

Shareholders’ Equity – Share capital

7

– Share capital premium – Treasury shares (at cost) – Retained earnings /(accumulated deficit) – Net profit /(loss) for the period

53 637

53 637

347 400

379 177

(181)

(193 033)

( 194 544)

(5 499)

(30 266)

Total equity

202 324

208 005

Total Shareholders’ Equity

202 324

208 005

224 097

224 390

5 355 800

5 363 717

37.78

38.78

Total liabilities and Shareholders’ Equity Net Asset Value per share Number of shares outstanding at reporting date

8

Net Asset Value per share (in CHF) attributable to shareholders

The accompanying notes on pages 28 to 50 form an integral part of these financial statements.


25

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2014 AND 1 JANUARY TO 31 DECEMBER 2013 (RESTATED) IN TCHF 01.01.2014 – 31.12.2014

01.01.2013 – 31.12.2013 (restated)

Note

Income Interest income from current assets Net gain on foreign currency exchange Change in fair value of unconsolidated subsidiaries Total income

3

3 736

3 736

3

Expenses Administration fees

14

(100)

(50)

Other operating expenses

11

(2 595)

(3 527)

Finance costs

(1)

Net loss on foreign currency exchange

(889)

(2 525)

(1 506)

(5 220)

(5 973)

16

(1 484)

( 5 954)

(4 015)

(24 312)

(5 499)

(30 266)

5 360 529

4 717 376

(0.28)

(1.26)

(0.28)

(1.26)

Change in fair value of unconsolidated subsidiaries

10.1

Total expenses Tax expenses/refund

12

Net operating profit (loss) from continuing operation Discontinued Operations

9

Total net profit (loss) for the period Earnings per share Weighted average number of shares outstanding during the period Net profit /(loss) per share (in CHF) – basic

13

Net profit /(loss) per share (in CHF) – diluted Other comprehensive income Items not to be reclassified to profit or (loss) in subsequent periods:

27

Net other comprehensive income not being reclassified to profit /(loss) in subsequent periods

Actuarial gain /(loss) on pension fund

27

Other comprehensive income or loss (–) for the period

27

(5 499)

(30 239)

(5 499)

(30 239)

Total comprehensive profit or loss (–) for the period Net profit/(loss) attributable to: Shareholders

The accompanying notes on pages 28 to 50 form an integral part of these financial statements.


26

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

STATEMENT OF CASH FLOWS FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2014 AND 1 JANUARY TO 31 DECEMBER 2013 (RESTATED) IN TCHF Note

31.12.2014

31.12.2013 (restated)

3

Cash flows from operating activities Interest income received from current assets Dividends received from unconsolidated subsidiaries

9

Operating costs Total net cash generated from /(used) in operating activities

16 038

1 369

(3 314)

(5 049)

12 724

(3 677)

(12 359)

(20 000)

Cash flows from investing activities Investment in unconsolidated subsidiary Proceeds from sale of subsidiaries

9

Total net cash generated from /(used) in investing activities

37 1 3 5

166

24 776

(19 834)

Cash flows from financing activities Repayment of borrowings Proceeds from share capital received Treasury share purchase Treasury share sale Interest paid on borrowings Total net cash generated from /(used) in financing activities Foreign exchange effect Increase /(decrease) in cash and cash equivalents Cash and cash equivalents as of 1 January Cash and cash equivalents as of 31 December

The accompanying notes on pages 28 to 50 form an integral part of these financial statements.

51

(179)

26 998

(409)

228

4 269

(1)

(130)

31 086

367

(2)

37 736

7 573

8 619

1 046

46 355

8 619


27

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY AS OF 31 DECEMBER 2014 AND 31 DECEMBER 2013 (RESTATED) IN TCHF Attributable to Owners of the Parent

Share capital

Share capital premium

Less treasury stock (at cost)

Revaluation reserves investments AFS

41 250

406 924

(30 691)

109 694

41 250

406 924

(30 691)

Net profit

Currency translation differences

Actuarial loss on pension fund

– –

Shareholders’ Equity

Presented balance as of 1 January 2013 Restatement revaluation reserves on investments AFS Restated balance as of 1 January 2013

Total comprehensive income Capital increase

– (109 694)

Currency translation adjustment CTA

Retained earnings/ accumulated deficit

Total

Noncontrolling interests

Total equity

(69 888) (234 378)

222 911

28 182

251 093

69 888

39 806

(28 182)

(28 182)

(194 572)

222 911

222 911

(30 266)

(30 266)

(30 266)

27

27

27

(30 239)

(30 239)

(30 239)

12 387

14 312

26 699

26 699

Sale of treasury shares

(26 423)

30 691

4 268

4 268

Contractual obligation to purchase own equity instruments

(15 636)

(15 636)

(15 636)

Total equity as of 31 December 2013

53 637

379 177

– (224 810)

208 005

208 005

Balance as of 1 January 2014

53 637

379 177

– (224 810)

208 005

208 005

Reclass reserves to retained earnings

(31 777)

31 777

Treasury shares

(181)

(181)

(181)

Net profit/(loss)

(5 499)

(5 499)

(5 499)

Total equity changes

(31 777)

(181)

26 278

(5 680)

(5 680)

Total equity as of 31 December 2014

53 637

347 400

(181)

198 532

202 324

202 324

The accompanying notes on pages 28 to 50 form an integral part of these financial statements.


28

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1

CORPORATE INFORMATION

Spice Private Equity Ltd (formerly APEN Ltd, Zug) (“the Company”) is a Swiss stock corporation established under the relevant provisions of the Swiss Code of Obligations and domiciled in Zug. The Company’s shares are listed on the SIX Swiss Exchange. The address of the registered office of the Company is Industriestrasse 13c, 6304 Zug, Switzerland. On 31 December 2014, Spice Private Equity Ltd sold its previous operating segment “Legacy Portfolio” in a single, coordinated transaction which includes its investments in former unconsolidated subsidiaries APEN Holdings LLC and APEN Faith Media Holdings LLC as well as the respective subsidiaries of APEN Holdings LLC (APEN Bermuda Legacy Ltd (for-

merly APEN Bermuda Ltd), APEN Holdings (Bermuda) Ltd and APEN FMH LLC). After the disposal of the “Legacy Portfolio” the Company’s only remaining subsidiary is Spice Private Equity (Bermuda) Ltd (formerly APEN Bermuda EM Ltd), (“the Subsidiary”). Spice Private Equity (Bermuda) Ltd is an unconsolidated subsidiary and carried at fair value in these financial statements. The Group’s structure after the transaction is displayed below. To emphasize the transformation of the Group and the implementation of its new emerging markets focused investment

Organizational Structure after Transaction occurring on 31 December 2014

GP INVESTMENTS

NEWBURY PARTNERS

FORTRESS ENTITIES

OTHER

(SHAREHOLDER)

(SHAREHOLDER)

(SHAREHOLDER)

SHAREHOLDERS

100 % GP ADVISORS LTD, ZURICH

1

SPICE PRIVATE EQUITY LTD, ZUG*

BoD***

2

100 % GP ADVISORS (BERMUDA) LTD

100 % SPICE PRIVATE EQUITY

IC****

(BERMUDA) LTD**

3

1

Administration Agreement between GP Advisors Ltd, Zurich and Spice Private Equity Ltd

2

Advisory Agreement between GP Advisors Ltd, Zurich and GP Advisors (Bermuda) Ltd

3

Investment Management Agreement between GP Advisors (Bermuda) Ltd and Spice Private Equity (Bermuda) Ltd

* ** *** ****

Spice Private Equity Ltd, formerly APEN Ltd Spice Private Equity (Bermuda) Ltd, formerly APEN Bermuda EM Ltd Board of Directors Investment Committee


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

strategy the Board of Directors has decided to change the name of the Company to Spice Private Equity Ltd (new ticker symbol SPCE at SIX Swiss Exchange). The name change was approved by the Extraordinary General Meeting (EGM) held on 26 February 2015. The investment objective of the Group is to realize long-term capital appreciation by creating a portfolio of Direct Investments and Fund Investments in the private equity sector. The investments will be diversified among fund managers, geographical regions, economic sectors and stages with a focus on emerging markets.

the sale of the “Legacy Portfolio” are planned to be invested in emerging markets, covering various regions, in particular Asia Pacific, Sub-Saharan Africa and Latin America. The allocation will be opportunistic, generally within asset allocation boundaries. With Direct Investments the diversification will mainly be achieved through industry and stage, as well as through geography. With primary and secondary fund investments the diversification will mainly be achieved through different managers in various countries. Although the Company may invest directly in Fund Investments or companies, it is anticipated that also its future investments will generally be made through the Subsidiary.

The portfolio currently held by the Subsidiary consists exclusively of investments in emerging markets. Inflows arising from

The Company’s Board of Directors is responsible for the policies and management of the Company as well as valuations.

Organizational Structure before Transaction occurring on 31 December 2014

GP INVESTMENTS

NEWBURY PARTNERS

OTHER

FORTRESS ENTITIES

(SHAREHOLDER)

(SHAREHOLDER)

SHAREHOLDERS

(SHAREHOLDER)

100 % GP ADVISORS LTD ZURICH *

5

APEN LTD, ZUG

1

99.75 % 100 % 2

100 %

APEN FAITH MEDIA HOLDINGS LLC

GP ADVISORS

APEN BERMUDA EM LTD ***

4

APEN HOLDINGS LLC DELAWARE 99 %

100 %

(BERMUDA) LTD

4

0.25 %

1%

APEN BERMUDA LEGACY LTD **

3

APEN FMH LLC

1

Administration Agreement between GP Advisors Ltd, Zurich and APEN Ltd, Zug

2

Advisory Agreement between GP Advisors Ltd, Zurich and GP Advisors (Bermuda) Ltd

3

Investment Management Agreement between GP Advisors (Bermuda) Ltd and APEN Bermuda EM Ltd and APEN Bermuda Legacy Ltd

4

Class C shares

5

Class A shares

*

GP Advisors Ltd, Zurich, formerly APEN Services GmbH

** APEN Bermuda Legacy Ltd, formerly APEN Bermuda Ltd *** APEN Bermuda EM Ltd, formerly APEN Bermuda Two Ltd

APEN HOLDINGS (BERMUDA) LTD

29


30

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

As of 31 December 2014 the Company employed no employees (31 December 2013: nil). Beginning 1 July 2013, responsibility for portfolio management of the Company was delegated to GP Advisors (Bermuda) Ltd (“the Manager”) through two separate Investment Management Agreements with APEN Bermuda Legacy Ltd (since divested) and Spice Private Equity (Bermuda) Ltd, while responsibility

for administrative services was delegated to GP Advisors Ltd, Zurich (“Administrator”) through an Administration Agreement with Spice Private Equity Ltd. The Company’s financial statements were authorized for issue on 18 March 2015 by the Board of Directors. The financial statements are subject to approval at the Annual General Meeting of shareholders on 21 May 2015.

Legal entity

Change

Effective date

APEN Bermuda Two Ltd

Incorporated

6 May 2013

APEN Services GmbH

Renamed to APEN Services AG

3 June 2013

APEN Services AG

Sold to GP Investments and renamed GP Advisors Ltd

28 June 2013

APEN Bermuda Ltd

Renamed to APEN Bermuda Legacy Ltd

16 July 2013

APEN Bermuda Two Ltd

Renamed to APEN Bermuda EM Ltd

19 July 2013

APEN Holdings LLC

Sold to Strategic Partners

31 December 2014

APEN Faith Media Holdings LLC

Sold to Strategic Partners

31 December 2014

APEN Ltd Zug

Renamed to Spice Private Equity Ltd

26 February 2015

APEN Bermuda EM Ltd

Renamed to Spice Private Equity (Bermuda) Ltd

3 March 2015

NOTE 2 ACCOUNTING POLICIES 2.1 Basis of Preparation The accompanying financial statements of the Company for the year ended 31 December 2014 have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and comply with Swiss law and the accounting provisions for investment companies of the SIX Swiss Exchange. The Company’s financial statements are prepared under the Historical Cost Convention, with the exception of its unconsolidated subsidiaries carried at fair value through profit or loss and derivative financial instruments which are stated at their fair values as disclosed in the accounting policies hereafter. The financial statements are presented in Swiss Francs and all values are rounded to the nearest thousand except when otherwise indicated. In October 2012, the IASB issued an amendment to IFRS 10 to provide an exception to the consolidation requirement for entities that meet the definition of an investment entity. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with IAS 39 Financial Instruments. Please see Note 2.3 “Changes in Accounting Policies”. The financial statements are those of Spice Private Equity Ltd. The unconsolidated subsidiary of Spice Private Equity Ltd is carried as financial investments at fair value through profit or loss and has a 31 December year-end.

2.2 Significant Accounting Judgments and Estimates The preparation of financial statements requires the Board of Directors to make estimates and assumptions and exercise judgment that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Judgments The Board of Directors has assessed the definition of an investment entity and concluded that Spice Private Equity Ltd as well as Spice Private Equity (Bermuda) Ltd meet the three key characteristics of an investment entity, as the entities: • Obtain funds from one or more investors for the purpose of providing its investors with professional investment management services; • Commit to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and • Measure and evaluate the performance of substantially all of its investments on a fair value basis. Neither Spice Private Equity Ltd nor Spice Private Equity (Bermuda) Ltd have any other business activity or separate substantial source of income apart from its business purpose which is to invest solely for capital appreciation, investment income or both. Underlying investments are commonly held


31

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

by Spice Private Equity (Bermuda) Ltd, however could also be held by Spice Private Equity Ltd itself. The Company’s exit strategy for all of its underlying investments follows the defined exit strategy of the lead investor/sponsor for Direct Investments and the General Partners for Fund Investments. The Company’s underlying investments are usually divested within a period of five to seven years. No underlying investments are planned to be held indefinitely. The Company indirectly holds a number of different underlying investments to diversify the risk within the portfolio and to maximize its returns for its multiple investors. Estimates The areas involving assumptions and estimates that are significant to the financial statements are the following: • Fair value of unconsolidated subsidiaries. In accordance with the requirements for investment entities, the Company recognizes its subsidiaries at fair value through profit or loss. Major inputs for determining the fair value of the subsidiaries is the measurement of their underlying investments and operating expenses. The fair value of its unconsolidated subsidiaries is determined as the net equity of those subsidiaries, as the underlying assets and liabilities carried in those subsidiaries equal or approximate fair value, i. e., net equity is most reflective of fair value (please see also Note 2.5.6 “Financial Instruments – Determination of Fair Value”). The Company uses its judgment to select an appropriate valuation technique and make assumptions that are not always supported by observable market prices or rates. Changes in assumptions could affect the reported fair value of these investments. The carrying amounts of the Company’s unconsolidated subsidiaries (which are affected by the fair values of its ultimate investments) amounted to CHF 30.8 million (2013: CHF 208.7 million). Refer to Note 15.5 for further details. 2.3 Changes in Accounting Policies The IASB has published interpretations, new standards and amendments to existing standards that are effective for the 2014 financial statements. The main change arises from the application of the Amendment to IFRS 10 Consolidated Financial Statements – Investment Entities as outlined in Note 2.3.1 below: 2.3.1 Adoption of IFRS 10 Consolidated Financial Statements – Investment Entities (Amendment) The Amendment to IFRS 10 which was issued in October 2012 provides an exception to the consolidation requirement for entities that meet the definition of an investment entity. The exception to consolidation requires investment entities to ac-

count for subsidiaries at fair value through profit or loss in accordance with IAS 39 Financial Instruments. As a result of qualifying as an investment entity, the following implications are reflected in the Company’s financial statements as of 31 December 2014: • Spice Private Equity Ltd discontinued consolidating its subsidiaries; • Spice Private Equity Ltd measures its unconsolidated subsidiaries at fair value through profit or loss; • Spice Private Equity Ltd discontinued to account for its investment portfolio as available-for-sale financial instruments with fair value changes recorded through other comprehensive income; • The above amendments are applied retrospectively as of the beginning of the comparative period. The following subsidiaries have therefore not been consolidated by Spice Private Equity Ltd anymore but are carried at fair value through profit or loss since 1 January 2013 when the Company applied the Amendment retrospectively. Proportion of ownership interest

Proportion of voting rights held

Wilmington, USA

87.5 %

APEN Faith Media Holdings LLC 1) Wilmington, USA

100 %

100 %

Spice Private Equity (Bermuda) Ltd

100 %

100 %

Name of subsidiary

APEN Holdings LLC 1)

Country of incorporation

Hamilton, Bermuda

Sold as of 31 December 2014 as part of the disposal of the “Legacy Portfolio”

1)

The Subsidiary is incorporated in Hamilton Bermuda. Its main business purpose is to make private equity investments solely for capital appreciation, investment income or both. Inflows arising from the sale of the “Legacy Portfolio” as of 31 December 2014 are planned to be invested through the Subsidiary (Spice Private Equity (Bermuda) Ltd) (“the Subsidiary”). The Subsidiary has no employees, therefore in order to perform its investment activity it has delegated the relevant tasks to GP Advisors (Bermuda) Ltd through an Investment Management Agreement. According to the agreement all investments and divestiments made at the Subsidiary level are proposed by the Investment Committee of GP Advisors (Bermuda) Ltd and approved by the Subsidiary’s Board of Directors. The Subsidiary’s Board of Directors is composed of three members of which two members are also board members of Spice Private Equity Ltd.


32

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

Borrowings presented in the Company’s 2013 consolidated financial statements prior to adoption of the new requirements were legally associated with APEN Bermuda Legacy Ltd, and were initially provided to contribute cash for investment purposes and to meet capital commitments in prior periods, i. e., these had a purpose of funding the Company to maximise returns through leveraging. APEN Bermuda Legacy Ltd, also actively held investments and qualified for recognition at fair value through profit or loss. Due to the adoption of the standard and fair value measurement of the subsidiaries, third party debt attached to sub-holdings of Spice Private Equity Ltd were included in the fair value measurement of the respective sub-holding. The impact of this amendment is presented below in Note 2.4 “Restatement Related to the Adoption of IFRS 10 Consolidation Financial Statements – Investment Entities”. 2.3.2 Adoption of other Standards and Interpretations As of 1 January 2014, the Company adopted also the following new and revised IFRS standards and IFRS interpretations: • IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (“the Amendment”); • IAS 39 Financial Instruments: Novation of Derivatives (“the Amendment”); • IFRIC 21 Levies.

2.4

Restatement Related to the Adoption of IFRS 10 Consolidation Financial Statements – Investment Entities Retrospective application of the amended standard resulted in the following changes to the financial statements. Opening Balance Sheet as of 1 January 2013 in TCHF

Restatement

Restated

68 638

(67 592)

1 046

330

(232)

98

1 770

(1 770)

9 612

9 612

23 179

(23 179)

370 932 (370 932)

Current assets – Cash and cash equivalents – Receivables and prepayments Non-current assets – Loans – Loans to unconsolidated – subsidiary – Direct Investments – Funds Unconsolidated subsidiaries at fair value through profit or loss Total assets

214 075

214 075

464 849 (240 018)

224 831

Liabilities Current liabilities – Payables and accrued charges

1 948

(445)

1 503

31 099

(31 099)

– Borrowings

49 945

(49 945)

– Class B units

130 347 (130 347)

– Borrowings

Apart from the adoption of IFRS 10 Consolidated Financial Statements – Investment Entities (“the Amendment”), no other adoption of the above amendments had an impact on the financial position or performance of the Company.

Presented

Assets

Non-current liabilities

Post-employment benefits Total liabilities in TCHF

417

417

213 756

(211 836)

1 920

Presented

Restatement

Restated

Equity – Shareholders’ Equity

41 250

41 250

– Share capital premium

406 924

406 924

– Treasury stock (at cost)

(30 691)

(30 691)

– Revaluation Reserve (AFS)

109 694 (109 694)

– Currency translation – adjustment (CTA)

(69 888)

69 888

– Accumulated losses

(234 378)

39 806

(194 572)

222 911

222 911

Total equity attributable to the Owners of the Parent Equity attributable to non-controlling interests Total Shareholders’ Equity

28 182

(28 182)

251 093

(28 182)

222 911


33

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

Income Statement 1 January to 31 December 2013 in TCHF

Presented

Restatement

Restated

Interest income from non-current assets

1 399

(1 399)

Dividend income from unconsolidated subsidiaries

2 948

(1 579)

1 369

42 167

(42 167)

in TCHF

Presented

Restatement

Restated

Other comprehensive income

(5 677)

5 704

27

Total comprehensive profit

(9 283)

(20 956)

(30 239)

Comprehensive income attributable to the Owners of the Parent

(9 420)

(20 819)

(30 239)

137

(137)

Income

Net realized gain on investments Interest income from current assets Net gain on foreign currency exchange Total income

11

(8)

3

1 050

(1 050)

47 575

(46 203)

1 372

Comprehensive income attributable to non-controlling interest

Cash Flow Statement 1 January to 31 December 2013

Expenses

in TCHF

Management fees

Cash flows from operating activities

Administration Impairment of non-current assets Change in FV of unconsolidated subsidiaries Other operating expenses Finance cost Net loss on derivative instruments

(2 507)

2 507

(171)

121

(50)

(1 1 101)

1 1 101

(20 4 1 1 )

(20 4 1 1 )

(7 416)

3 889

(3 527)

(26 158)

26 157

(1)

– Purchase of non-current assets – Proceeds from non-current assets – Interest income received from current assets – Net interest income from non-current assets

(3 759)

3 759

Net loss on foreign currency exchange

(4 971)

(4 971)

– Dividends received from unconsolidated subsidiaries

Write-down of non-current assets

(2 695)

(2 695)

– Operating costs

(70)

86

16

Total expenses

Tax expenses

(51 181)

19 543

(31 638)

Net loss for the period

(3 606)

(26 660)

(30 266)

Net profit attributable to the Owners of the Parent

(26 477)

(30 266)

183

(183)

4 717 376

4 717 376

Net profit per share – basic

(0.80)

(5.61)

(6.42)

Net profit per share – diluted

(0.80)

(5.61)

(6.42)

Earnings per share 2013 Weighted average number of shares outstanding during the period

Other comprehensive income – Change in value of available for sale financial assets – Currency translation adjustment Net other comprehensive income to be reclassified to profit or loss in subsequent periods

1 652 (7 356)

(1  652) 7 356

– –

Initial capital contribution subsidiary (EM) Total net cash from investing activities

5 704

27

27

Net other comprehensive income not to be reclassified to profit or loss in subsequent periods

27

27

(18 112)

18 112

68 692

(68 692)

11

(8)

3

1 536

(1 536)

3 046

(1 677)

1 369

(11 391)

6 342

(5 049)

43 782

(47 459)

(3 677)

166

166

– (20 000) (20 000) 166 (20 000)

(19 834)

– Repayment of borrowings

(71 378)

71 199

– Refinancing net payment

(19 525)

19 525

– Interest paid on borrowings

(7 883)

7 882

(1)

– Borrowing costs

(1 044)

1 044

– 26 998

– Proceeds from share capital increase Payment to Class A unit holders Treasury share sale

Foreign exchange effect – Actuarial gain on pension fund

Restated

Cash flows from financing activities

Total net cash from/(used) in financing activities (5 704)

Restatement

Cash flows from investing activities Proceeds from sale of subsidiary, net of cash transferred

(3 789)

Net profit attributable to non-controlling interest

Total net cash from/(used) operating activities

Presented

(179)

26 998

(4 643)

4 643

4 269

4 269

(73 206)

104 292

31 086

(13)

11

(2)


34

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

in TCHF

Increase/(decrease) in cash and cash equivalents Cash and cash equivalents as of 1 January 2013 Cash and cash equivalents as of 31 December 2013

Presented

Restatement

Restated

(29 271)

36 844

7 573

68 638

(67 592)

1 046

39 367

8 619

Presented

Restatement

Restated

39 367

(30 748)

8 619

311

(158)

153

All figures presented in this report, unless noted otherwise, are presented in CHF ’000 (TCHF).

1 931

(1 931)

6 921

6 921

19 544

(19 544)

302 174 (302 174)

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the Statement of Comprehensive Income (“net gain or loss on foreign currency exchange”). Translation differences on monetary items, such as derivatives held at fair value through profit or loss, are reported as part of the gain or loss on foreign currency exchange.

Assets Current assets – Cash and cash equivalents – Receivables and prepayments

The presentation currency of the financial statements of the Company is CHF and its shares are traded on the SIX Swiss Exchange in CHF. The Company’s investments and proceeds are held in currencies other than the presentation currency. Investments are held by Spice Private Equity (Bermuda) Ltd, (as well as APEN Bermuda Legacy Ltd, APEN Holdings (Bermuda) Ltd and APEN FMH LLC prior to the sale of the “Legacy Portfolio”), which engages primarily in USD transactions.

(30 748)

Balance Sheet as of 31 December 2013 in TCHF

2.5 Summary of Significant Accounting Policies 2.5.1 Foreign Currency Transactions Functional and presentation currency The functional currency of Spice Private Equity Ltd is the CHF as this entity is primarily exposed to the CHF.

Non-current assets – Loans – Loans to subsidiary – Direct Investments – Funds – Unconsolidated subsidiaries at fair value through profit or loss Total assets

208 697

208 697

363 327 (138 937)

224 390

Liabilities Current liabilities – Payables and accrued charges – Borrowings – Derivative financial liability

1 205

(456)

526

(526)

749 –

15 636

15 636

Non-current liabilities – Borrowings

97 828

(97 828)

– Class A units

40 127

(40 127)

155 322 (138 937)

16 386

Total liabilities Equity – Shareholders’ Equity – Share capital premium – Revaluation Reserve (AFS) – Currency Translation Adjustment (CTA) – Accumulated losses – Net profit for the period Total equity attributable to the Owners of the Parent – Equity attributable to non-controlling interests Total Shareholders’ Equity

2.5.2 Foreign Exchange Rates The following exchange rates have been applied to translate the foreign currencies of significance for the Company: Unit

2014 CHF

2013 CHF

US Dollar

1 USD

0.99365

0.88935

Euro

1 EUR

1.2024

1.2255

1 USD

0.91542

0.92733

Year-end rates

Average annual rates 53 637

53 637

379 177

379 177

1 1 8  678 (118 678)

(79 197)

(260 501)

79 197

65 958 (194 543)

(3 789)

(26 477)

(30 266)

208 005

208 005

208 005

208 005

US Dollar

2.5.3 Cash and Cash Equivalents Cash includes cash on hand and cash with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, with original maturities of three months or less, and that are subject to an insignificant risk of change of value. Cash and cash equivalents are recorded at nominal value. In order to mitigate concentration risk, cash is held at various banks.


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

2.5.4 Financial Instruments – Initial Recognition and Subsequent Measurement a) Financial assets – initial recognition Financial assets are classified as financial assets at fair value through profit or loss or as loans and receivables. The Company determines the classification of its financial assets at initial recognition.

cial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Company. Financial assets at fair value through profit and loss are carried in the balance sheet at fair value. Changes in the fair value of financial instruments at fair value through profit or loss are recorded in the Statement of Comprehensive Income.

Financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way purchases) are recognized on the settlement date, i. e., the date a financial asset is delivered to or by the Company. The Company’s financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables, quoted and unquoted financial instruments, and derivative financial instruments.

Investments in unconsolidated subsidiaries are carried at fair value.

The Company’s financial liabilities include payables and accrued charges, loans and borrowings, other financial liabilities and derivative liabilities.

b) Financial assets – subsequent measurement The subsequent measurement of financial assets depends on their classification as follows:

d) Financial liabilities – subsequent measurement The measurement of financial liabilities depends on their classification as follows:

b1) Loans and receivables All loans and receivables are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in the Statement of Comprehensive Income when the loans and receivables are derecognized or impaired, as well as through the amortization process.

• Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss. This category includes derivative financial instruments entered into by the Company. Gains or losses on liabilities held for trading are recognized in the Statement of Comprehensive Income.

c) Financial liabilities – Initial recognition Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss or as other financial liabilities, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and in the case of loans and borrowings, less directly attributable transaction costs.

b2) Investments in unconsolidated subsidiaries In accordance with the amended requirements for investment entities, Spice Private Equity Ltd recognizes its subsidiaries at fair value through profit or loss. Major input for determining the fair value of the subsidiaries is the underlying measurement of the investments Spice Private Equity Ltd has entered into to benefit from capital appreciation, investment income or both. Changes in fair value are recorded in the Statement of Comprehensive Income in changes in fair values of unconsolidated subsidiaries. b3) Other financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and finan-

• Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in the Statement of Comprehensive Income when the liabilities are derecognized as well as through the amortization process. • Other financial liabilities Shareholders’ rights to request repurchase of Spice Private Equity Ltd own equity instruments (put options) are subsequently remeasured to match the present value of the redemption amount expected to be payable in case the investor exercises its rights.

35


36

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

2.5.5 Financial Instruments – Derecognition A financial asset is derecognized if, and only if, the Company either transfers the contractual rights to receive the cash flows of the financial asset, or it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients, and in doing so transfers substantially all of the risks and rewards of the asset. A financial liability is derecognized when the obligation under the liability is discharged, is cancelled or has expired. When an existing financial liability is replaced by another liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the Statement of Comprehensive Income. 2.5.6 Financial Instruments – Determination of Fair Value 2.5.6.1 Investment in Unconsolidated Subsidiaries The Company’s investments in unconsolidated subsidiaries do not have a quoted market price, nor can the fair value be determined with respect to observable input variables. The fair value of investments in unconsolidated subsidiaries is determined as the net assets of those subsidiaries as the underlying assets and liabilities carried in those subsidiaries equal or approximate fair value. Therefore, net assets are most reflective of fair value. The main driver of fair value of Spice Private Equity Ltd unconsolidated subsidiaries is the valuation of its investment portfolio assets, valuation of financial liabilities as well as to a much lesser extent the valuation of remaining asset and liability line items. The valuation assumptions and techniques are therefore disclosed hereafter. Direct and Fund Investments The unconsolidated subsidiaries’ investments are primarily non-current financial assets for which market quotations are not readily available, therefore these investments are measured at their fair value using the most appropriate valuation techniques as described in detail below. General Partners of funds in which the subsidiaries invests, the Manager and the Service Manager of the subsidiaries’ Direct Investments provide valuations of these investments. Due to inherent uncertainties, used fair values may differ significantly from values that would have been used in actual market transactions. a) Direct Investments Valuations for Direct Investments as of 31 December 2014 are provided by third party sources, such as General Partners of

funds that are holding the same investment and that the Company is invested in or the lead investor of the relevant direct investment. The Manager monitors investments by analyzing regular reports and through direct contact with General Partners and company management. The Manager use valuations and valuation input provided by the Lead Fund Manager of the respective direct investment. Financial and market performance is compared with budget information, data obtained from competitors and subsequent rounds of financing. The Board of Directors reviews and discusses the valuations with the Manager and may independently apply adjustments to determine the investments’ fair value. In determining the fair value of an unquoted direct investment, all appropriate and applicable factors relevant to their value, including, but not limited to, the following are considered in general: • Reference to the valuation of the lead investor or other investors provided that these were determined in accordance with IFRS 13; • Transaction price paid for an identical or a similar instrument in an investment, including subsequent financing rounds; • Comparable company valuation multiples; • Discounted cash flow method. For venture capital investments, the following is also considered: A new financing round that is material in size for the Company and having new, sophisticated institutional investors making up a significant piece of the financing round. An inside round of financing does not qualify. For buyout/later stage investments for which subsequent rounds of finance are not anticipated the following is also considered: Once an investment has been held for one year, an analysis of the fair market value of such investment will be performed. This analysis will typically be based on one of the following methods (depending on what is appropriate for that particular company/industry): • Result of multiple analysis; • Result of discounted cash flow analysis; • Reference to transaction prices (including subsequent financing rounds); • Reference to the valuation of other investors; • Reference to comparable companies. Based on a composite assessment of all appropriate and applicable indicators of fair value, the Board of Directors determines the fair values as of the valuation date.


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

b) Fund Investments The valuation of Fund Investments is generally based on the latest available Net Asset Value (“NAV”) of the fund reported by the corresponding fund manager provided that the NAV has been appropriately determined by using proper fair value principles in accordance with IFRS 13. The Board of Directors reviews and approves the NAV provided by the fund’s General Partners unless the Board of Directors is aware of reasons that such a valuation may not be the best approximation of fair value. In general, NAV is adjusted by capital calls and distributions falling between the date of the latest NAV of the fund and the reporting date of the Company. Investment valuations are further generally based on 30 September capital accounts. Adjustments to the valuation are considered when either of the following applies: • The Company becoming aware of subsequent changes in the fair values of underlying companies; • New/amended features of the fund agreement that might affect distributions; • Changes to market or other economic conditions impacting the value of the fund; • NAV reported by the fund has not been appropriately determined by applying the valuation principles as per IFRS 13. Further, when information is used based on data different from the reporting date, capital drawdowns and capital distribution activity of the remaining period until year-end is being added to and subtracted from the valuation as appropriate. Where more recent reporting is not available, valuations are based on June capital accounts provided by portfolio funds, with capital drawdowns and capital distribution activity of the second half of 2014 being added to and subtracted from the valuation. The Company monitors current market activity related to these funds and the overall market developments to determine implications on the valuations and apply appropriate adjustments if necessary. The Company reviews the valuations of these funds and discusses portfolio company performance with the relevant portfolio fund manager. The portfolio fund managers determine fair values of the underlying investments by using the same valuation techniques as noted above for Direct Investments. Investments in securities and in other financial instruments traded on recognized exchanges (including bonds, equities, futures contracts, options, and funds), are valued at the last price which is most representative of fair value on the reporting date. c) Other financial assets Investments in securities and in other financial instruments traded in the over the counter market and listed securities for which no trade is reported on the valuation date are valued at

the price within the bid-ask spread that is most representative of fair value in the circumstances. d) Derivative financial instruments Fair values for derivative financial instruments are obtained from quoted market prices, discounted cash flow models, or option pricing models as appropriate. 2.5.6.2 Investment Related Liabilities Fair values of investment related liabilities carried in the books of unconsolidated subsidiaries are determined individually by determining the net present value of future cash flows based on expected highly probable or contractual cash flows and a market interest rate adjusted to the risk profile of the Company. 2.5.7 Shareholders’ Equity Ordinary shares are classified as equity. The transaction costs of an equity transaction are accounted for as a deduction from equity. Transaction costs for equity are comprised of only those incremental external costs directly attributable to the equity transaction, which would otherwise have been avoided. Equity is comprised of the following: • Share capital and share capital premium Please refer to Note 7 for a description and further details on the share capital and share capital premium. • Treasury stock Treasury shares are presented in the balance sheet as a deduction from equity and are measured at cost. The acquisition of treasury shares is presented as a change in equity. No gain or loss is recognized in the Statement of Comprehensive Income on the sale, issuance, or cancellation of treasury shares. The consideration received is presented in the financial statements as a change in equity. 2.5.8 Earnings per Share and Net Asset Value per Share Basic earnings per share are calculated by dividing the net profit for the period of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding assuming conversion of all dilutive potential ordinary shares. The Net Asset Value per share is calculated by dividing the net assets (total equity) included in the balance sheet by the number of ordinary shares outstanding at the reporting date.

37


38

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

2.5.9 Taxes Tax expense and taxes payable are based on reported income. Taxes are calculated in accordance with enacted tax regulations. Capital taxes charged to the Company are included in operating expenses in the Statement of Comprehensive Income. Switzerland The Company is taxed as a holding company in the canton of Zug. Income, including dividend income and capital gains deriving from its participations are exempt from taxation at the Zug cantonal/communal level. However, capital taxes are levied on Zug cantonal/communal level. For Swiss federal tax purposes, income tax at an effective tax rate of 7.8 % is levied. Provisions for taxes payable on profits earned in the Company companies are calculated and recorded based on the applicable tax rate in Switzerland. 2.5.10 Capital Management The investment objective of the Company is to realize longterm capital appreciation by creating a portfolio of Fund Investments and Direct Investments in the private equity sector. The investments will be diversified among fund managers, geographical regions, economic sectors and stages. Please refer to Note 1 for further details. 2.5.11 Segment Reporting IFRS 8 requires companies to define operating segments and segment performance in the financial statements. The sole operating segment of the Group is investing in private equity. Therefore, the results published in this report reflect the required operating segment information provided to the Chief Operating Decision Maker which are equivalent with the members of the Board of Directors. Additional disclosures required by IFRS 8 are presented in Note 18. 2.5.12 Contingencies Contingent liabilities are not recognized in the balance sheet. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized except for limited instances where economic benefits are virtually certain. If these are only deemed probable, they are disclosed in the financial statements. Please refer to Note 17 for further details.

2.5.13 Share-based Compensation Plans Share Appreciation Rights (SARs) The Company operates a cash settled, share-based compensation plan. The corresponding liability is re-measured at each balance sheet date to fair value, with changes recognized immediately in the Statement of Comprehensive Income. 2.6 Standards Issued but not yet Effective The following standards, amendments and interpretations to existing standards have been published but are not yet effective. The Company has yet to adopt those standards and plans to do so for the reporting period beginning after the effective date stated in the respective standard: Expected to be applied first in financial year

Potential impact

Improvements to IFRSs – 2010–2012 cycle

2015

2)

Various

Improvements to IFRSs – 2011–2013 cycle

2015

2)

IFRS 10/IAS 28

Investment entities: applying the consolidation exception

2016

3)

Various

Improvements to IFRSs – 2012–2014 cycle

2016

2)

IFRS 15

Revenue from contracts with customers

2017

1)

IFRS 9

Financial instruments

2018

3)

New IFRS pronouncement

Title

Various

The Company is currently evaluating the impact of these changes. Based on the Board of Directors’ preliminary assessment, the Company expects the following implications: 1) The changes arising from this new pronouncement are not expected to have any material impact on the Company’s financial statements. 2) The changes arising from this new pronouncement are not expected to have a material impact on either the financial position or financial performance of the Company, however, the changes will give rise to additional or amended disclosures. 3) The Company is assessing the impact of adopting the new or amended pronouncements. Based on the assessment, the Company might determine that the Amendment has an impact on the Statement of Financial Position or Financial Performance of the Company as noted below: • IFRS 9 fundamentally changes the way to classify financial assets based on the business model of the Company and cash flows obtained from these investments. IFRS 9 also fundamentally changes the requirements for impairment of financial assets and hedge accounting. However, IFRS 9 does not fundamentally change the classification and measurement requirements for financial liabilities. The implications of these changes have not yet been determined.


39

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

NOTE 3 INVESTMENT TABLE (UNCONSOLIDATED SUBSIDIARIES)

Investment table in subsidiaries 2014

Opening balance at cost 1.1.2014

Opening balance at fair value 1.1.2014

Cumulative gain/loss 1.1.2014

Paid in capital 1.1.2014– 31.12.2014

Returned capital 1.1.2014– 31.12.2014

Cost 31.12.2014

APEN Holdings LLC 1)

215 479

189 776 (25 703)

215 479

APEN Faith Media Holdings LLC 1)

(1 403)

1 313

2 716

(1 403)

Spice Private Equity (Bermuda) Ltd

20 000

17 608

(2 392)

12 359

32 359

234 076 208 697 (25 379)

12 359

– 246 435

Selling price

Unrealized gain/loss 31.12.2014

– (174 781)

(1 314)

2 717

1

30 810

844

(1 549)

30 810 (176 095)

844

Fair value 31.12.2014

Cumulative gain/loss 31.12.2014

Realized gain/loss 31.12.2014

(40 698) (14 995)

Total

Investment table in subsidiaries 2013

Opening balance at cost 1.1.2013

Opening balance at fair value 1.1.2013

Cumulative gain/loss 1.1.2013

Paid in capital 1.1.2013– 31.12.2013

APEN Holdings LLC 1)

215 479

215 479

APEN Faith Media Holdings LLC 1)

(1 403)

(1 403)

– 214 076

Spice Private Equity (Bermuda) Ltd Total 1)

Returned capital 1.1.2013– 31.12.2013

(39 530) (14 994)

Unrealized gain/loss 31.12.2013

Cumulative gain/loss 31.12.2013

Realized gain/loss 31.12.2013

– (25 703)

(25 703)

2 716

(2 392)

(2 392)

– (25 379)

(25 379)

Cost 31.12.2013

Fair value 31.12.2013

Selling price

– 215 479

189 776

(1 403)

1 313

2 716

– 20 000

20 000

17 608

214 076

– 20 000

– 234 076 208 697

Investments in unconsolidated subsidiaries sold as of 31 December 2014

NOTE 4 CURRENT ASSETS 4.1

Cash and Cash Equivalents 2014

2013 (restated)

Cash at banks

46 355

8 619

Total

46 355

8 619

Cash and cash equivalents comprise all cash, short-term deposits and other money market instruments, net of short-term overdrafts, with an original maturity of three months or less. Cash and cash equivalents are at the full disposal of the Company.

The carrying amount of other receivables and prepayments approximate fair value due to their short-term maturities and that the effect of not discounting them is immaterial. There were no related party transactions to be reported for 2014 (2013: nil).

NOTE 5 NON-CURRENT ASSETS 5.1

Receivables 2014

2013 (restated)

The carrying amounts of cash and cash equivalents approximate fair value.

Receivables non-current

109 846

Total

109 846

4.2

Receivables non-current of TCHF 109 846 related to deferred payments resulting from the sale of the “Legacy Portfolio” as of 31 December 2014 are presented at carrying amount less effective interest rate which is the estimated future cash flows payments over the expected period when the outstanding balance will be received in three equal instalments every nine months as follows: 30 June 2016, 31 March 2017 and 29 December 2017 respectively.

Receivables and Prepayments

Receivables (from sale of “Legacy Portfolio”) Other receivables and prepayments Total

2014

2013 (restated)

36 849

237

153

37 086

153

Receivable of TCHF 36 849 (2013: nil) related to deferred payments resulting from the sale of the “Legacy Portfolio” as of 31 December 2014 are presented at carrying amount less effective interest rate which is the estimated future cash flow payment that will be received as of 30 September 2015.


40

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

5.2

Loans to Subsidiary

NOTE 7 SHARE CAPITAL 2014

2013 (restated)

Loan to subsidiary

6 921

Total

6 921

Loan to subsidiary TCHF 6 921 was sold as part of the sale of the “Legacy Portfolio” as of 31 Dec 2014. For more details on the transaction please see Note 9 discontinued operations.

NOTE 6 CURRENT LIABILITIES 6.1

Payables and Accrued Charges 2014

2013 (restated)

Payables and accrued charges

4 237

749

Total

4 237

749

The carrying amounts of accounts payable and accrued charges approximate fair value.

The share capital of the Company as of 31 December 2014 amounts to CHF 53 637 170 (31 December 2013: 53 637 170) consisting of 5 363 717 registered shares (31 December 2013: 5 363 717) with a par value of CHF 10 (2013: CHF 10) each. All issued shares are fully paid-in. As of 31 December 2014 the Company has CHF 26.8 million (2013: CHF 26.8 million) authorized share capital outstanding. This authorized share capital will expire per 24 June 2015. As of 31 December 2014 the Company has CHF 26.8 million (2013: CHF 26.8 million) conditional share capital outstanding. On 25 May 2014 Company’s Annual General Meeting (AGM) decided to reclassify TCHF 31 777 from share capital premium to reduce total retained earnings/accumulated deficit.

NOTE 8 NUMBER OF SHARES OUTSTANDING AT YEAR-END Share capital is broken down as follows:

6.2

Derivative Financial Liability (Put/Call on Shares of Spice Private Equity Ltd) Pursuant to the subscription agreement dated 17 May 2013 between Drawbridge Special Opportunities Fund LP, New York, NY, USA (“Fortress-Drawbridge”) and the Company, Fortress-Drawbridge has the right to sell to the Company 717 266 shares acquired in connection with the implementation of the new corporate structure in 2013. This right to sell may be exercised for the first time on 12 June 2014 and not later than 12 June 2018. The exercise price is CHF 21.80 per share. The subscription agreement also provides that the Company has the right to buy from Fortress-Drawbridge the 717 266 shares. This right to buy may be exercised for the first time on 12 June 2014 and not later than 12 June 2018. The exercise price shall be CHF 41.50 per share. As a result, the Company has recognized a financial liability in the amount of CHF 15.6 million, which equals the present value of the redemption amount. 6.3

Provisions for other Liabilities 2014

2013 (restated)

Provisions for other liabilities

1 900

Total

1 900

The carrying amounts of provisions for other liabilities approximate fair value.

Number of Shares

Outstanding 1 January 2013 – Treasury shares sold – Treasury shares purchased – New shares from capital increase

3 929 185 195 815 – 1 238 717

Outstanding 31 December 2013

5 363 717

Outstanding 1 January 2014

5 363 717

– Treasury shares sold – Treasury shares purchased – New shares from capital increase Outstanding 31 December 2014

9 988 17 905 – 5 355 800

The Company can trade in treasury shares in accordance with the relevant guidelines (the Company’s Articles of Association, Swiss company law, listing rules of the SIX Swiss Exchange). Treasury shares are treated as a deduction from the consolidated Shareholders’ Equity TCHF 181 (2013: nil). During 2014 the Company sold 9 988 (2013: 195 815) shares, and purchased 17 905 shares (2013: nil). Currently, the Company does not intend to pay any dividends to shareholders.


41

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

The following major shareholders held shares and voting rights of 3 % and more as of 31 December 2014 (number of shares according to the public disclosures of shareholdings at SIX; Swiss Exchange voting rights recalculated based on current share capital): Number of shares 2014

GP Investments/Newbury Capital 1)

2 419 208

Participation in % 2014

Number of shares 2013

Participation in % 2013

45.10 % 2 416 798

45.1 %

Drawbridge Special Opportunities Fund LP (Fortress)

717 266

13.37 %

717 266

13.4 %

OAM European Value Fund

270 149

5.04 %

217 104

4.0 %

Wellington Management Company, LLP

210 936

3.93 %

210 936

3.9 %

AXA Life

167 000

3. 1 1  %

167 000

3.1 %

The shares are held by two entities, namely GP Swiss Ltd. (Switzerland) (formerly GP Secondaries Investment Company (Switzerland) Ltd) and Newbury Holdings A Ltd. (Cayman Islands). These two entities are connected through a Shareholders’ Agreement.

1)

During 2014, the Company received a number of notifications from shareholders disclosing that they had fallen below or exceeded one of the thresholds that trigger a reporting requirement. The reports were subsequently published by the Company and are available under the following web link: http:// www.six-exchange-regulation.com/obligations/disclosure/ major_shareholders_en.html

Faith Media Holdings LLC leading to a total transaction value of USD 199.7 million (CHF 198.4 million). After purchase price adjustments of USD 12.9 million (CHF 12.8 million) for distributions already received by the seller between the reference and closing dates the final consideration to be paid amounts to USD 186.8 million (CHF 185.7 million) and will be paid in five equal installments commencing on the closing date and in nine month intervals thereafter with the last payment to be received at year-end 2017. Amount in TUSD

Type of payment

Due date

Closing payment

31 December 2014

37 372

1. deferred payment

30 September 2015

37 372

2. deferred payment

30 June 2016

37 372

3. deferred payment

31 March 2017

37 372

4. deferred payment

29 December 2017

37 372

Sum of all payments

186 862

The “Legacy Portfolio” was held through APEN Faith Media Holdings LLC and a participation in APEN Holdings LLC which were carried as unconsolidated subsidiaries at fair value through profit or loss. The portfolio was remeasured through profit and loss at the date of reclassification to discontinued operations. Balance sheet impact of discontinued operations: 2014

NOTE 9 DISCONTINUED OPERATIONS As of 31 December 2014 APEN Holdings LLC, APEN Faith Media Holdings LLC and their subsidiaries, together the “Legacy Portfolio”, were disposed of through outright sale. The sale was pursued by the Board of Directors in line with Spice Private Equity Ltd’s new focus on emerging markets which will be followed through investments by Spice Private Equity (Bermuda) Ltd. Inflows arising from liquidation of the “Legacy Portfolio” will primarily be invested in emerging markets through Spice Private Equity (Bermuda) Ltd. As the “Legacy Portfolio” qualified as an operating segment, this component of the Company represented a major line of business and was part of a single coordinated plan to be sold, hence it qualified as a discontinued operation. The transaction price of USD 192.0 million (CHF 190.7 million) represents a discount of 3.1 % (13.5 % in USD terms) to the value of the portfolio at the reference date (30 June 2014). Additionally, the purchaser purchased from the Company a USD 7.8 million (CHF 7.7 million) loan obligation from APEN

Fair value unconsolidated subsidiary as of 1 January Unrealized gain/loss on subsidiary Selling price Net loss on sale of subsidiary Fair value unconsolidated subsidiary as of 31 December

2013 (restated)

191 089

214 076

(22 987)

(176 095)

(14 994)

191 089

Statement of Comprehensive Income impact of Discontinued Operations: 2014

2013 (restated)

Dividends revenues from discontinuing operations

16 038

1 369

Transactions costs

(5 923)

(14 994)

Net unralized gain/loss on subsidiary

(22 987)

Write-down of non-current assets

(2 695)

Net loss on sale of subsidiary

Net gain on sale of loan Discontinued operations

864

(4 015)

(24 312)

For disclosure of related “Earnings per Share” please refer to Note 13.


42

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

NOTE 12 TAXES

Cash flows associated with Discontinued Operations: 2014

2013 (restated)

Cash flow from operating activity

16 038

1 369

Cash flow from investing activity

37 135

Cash flow from financing activity Net cash flows

53 173

1 369

Current income tax

– Gain/loss before tax expense – Income tax – non-taxable profits

2014

2013 (restated)

17 608

Paid in capital Unrealized gain/loss – fair value

12 359

20 000

(2 525)

(1 506)

3 369

(887)

30 810

17 608

Unrealized gain/loss foreign exchange Fair value of unconsolidated subsidiary 31 December

– unrecognized tax losses – non-refundable withholding tax paid, income tax expense Total income tax expenses

Expiry of unrecognized tax losses

Within 2–4 years Within 5–7 years

NOTE 11 OTHER OPERATING EXPENSES

Total

Board of Directors/SARs

2014

2013 (restated)

1 225

864

383

Accounting

185

189

Consulting

179

333

Audit fees

212

183

Legal

212

785

Other Total operating expenses

16

(5 499)

(30 282)

7.8 %

7.8 %

(429)

(2 362)

943

428

2 595

3 527

(126)

429

2 488

16

16

In 2014, the Company paid nil (2013: TCHF 32) non-refundable withholding taxes. The Company did not recognize income tax assets in the form of losses that can be carried forward against future taxable income.

Within 1 year

Personnel

Effect from:

10.1 Change in Fair Value of Unconsolidated Subsidiaries Change in fair value of unconsolidated subsidiaries was follows:

Fair value of unconsolidated subsidiary 1 January

2013 (restated)

Reconciliation of income tax calculated with the applicable tax rate: – Applicable tax rate

NOTE 10 INCOME

2014

Amount

– 343 663 43 265 386 928

No deferred tax assets are capitalized due to the inherent uncertainty of a refund which depends on achieving taxable net incomes in Switzerland in the foreseeable future.


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

NOTE 13 EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS 2014

2013 (restated)

Net profit/(loss) per share outstanding from continuing operations (in CHF) – basic

(0.28)

(1.26)

Net profit/(loss) per share outstanding from continuing operations (in CHF) – fully diluted

(0.28)

(1.26)

Earnings per Share

Net profit/(loss) for the period from continuing operations

(1 484)

(5 954)

Weighted average of total number of shares outstanding – basic

5 360 529

4 717 376

Weighted average of total number of shares outstanding – diluted

5 360 529

4 717 376

Net profit/(loss) per share outstanding for the period from discontinued operations (in CHF) – basic

(0.75)

(5.15)

Net profit/(loss) per share outstanding for the period from discontinued operations (in CHF) – fully diluted

(0.75)

(5.15)

Net profit/(loss) for the period for the period from discontinued operations

(4 015)

(24 312)

Weighted average of total number of shares outstanding – basic

5 360 529

4 717 376

Weighted average of total number of shares outstanding – diluted

5 360 529

4 717 376

(1.03)

(6.42)

Net profit/(loss) per share outstanding (in CHF) – basic Net profit/(loss) per share (in CHF) – fully diluted

(1.03)

(6.42)

(5 499)

(30 266)

Weighted average of total number of shares outstanding – basic

5 360 529

4 717 376

Weighted average of total number of shares outstanding – diluted

5 360 529

4 717 376

Net profit/(loss) for the period

Material transactions Total compensation paid to the Board of Directors in the reporting period was TCHF 806 (2013: TCHF 275). Management fees paid to GP Advisors (Bermuda) Ltd in the reporting period amounted to CHF 5.0 million (2013: CHF 2.6 million) of which CHF 1.6 million related to the management of the “Legacy Portfolio”. Administration fees of TCHF 100 (2013: TCHF 50) were paid to GP Advisors Ltd, Zurich. GP Advisors (Bermuda) Ltd is entitled to a Performance Fee of 10 % of the increase, if any, in the Company’s NAV after a 5 % hurdle and subject to customary catch-up and highwatermark clauses. The high-watermark was reset to the USD value of the Company’s NAV as of 31 December 2014 to reflect the new structure and size of the Company after the sale of the “Legacy Portfolio”. No Performance Fees have been accrued or paid as of 31 December 2014.

NOTE 15 FINANCIAL RISK MANAGEMENT 15.1 Strategy in Using Financial Instruments The investment objective of the Company is to realize longterm capital appreciation, investment income or both by creating a portfolio of Direct Investments and Fund Investments in the private equity sector. The investments will be diversified among fund managers, geographical regions, economic sectors and stages through its unconsolidated subsidiaries. Although the Company may invest directly in Fund Investments or companies, it is anticipated that investments will generally be made through Spice Private Equity (Bermuda) Ltd after the transaction as of 31 December 2014 in which the portfolio held by APEN Bermuda Legacy Ltd (formerly APEN Bermuda Ltd), APEN Holdings (Bermuda) Ltd and APEN FMH LLC had been liquidated.

NOTE 14 RELATED PARTY TRANSACTIONS Related Parties are individuals and companies where the individual or company has the ability, directly or indirectly, to control the other party or to exercise significant influence over the other party in making financial and operating decisions. Related Parties include: • Board of Directors of Spice Private Equity Ltd; • GP Investments Group consisting of GP Investments Ltd. (Bermuda), GP Advisors (Bermuda) Ltd and GP Advisors Ltd, Zurich.

The Company’s activities expose it to a variety of financial risks, namely market risk (including interest rate risk, currency risk and other price risks), liquidity risk and credit risk. Management observes and manages these risks. These risks could result in a reduction of the Company’s net assets. The Company seeks to minimize these risks and adverse effects by considering potential impacts from the financial markets. The Company manages these risks, where necessary, via collaboration with service partners that are market leaders in their respective area of expertise. Additionally, the Company has internal guidelines and policies in place to ensure that transactions are effected in a consistent and diligent manner.

43


44

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

15.2 Market Risk a) Interest rate risk The Company is subject to cash flow interest rate risk due to fluctuations in the prevailing levels of market interest rates. Changes in interest rates affect mainly financial assets classified receivables (“Cash” and “Receivables”) as well as financial liabilities. The majority of the Company’s assets and liabilities are non-interest bearing.

As of 31 December 2014, should interest rates change by 1 basis point (change for previous 12 month period) (2013: 6 basis points) with all other variables ceteris paribus, the increase/ decrease in profit and loss for the year would be approximately TCHF 6 (2013 (restated): TCHF 5). The Manager monitors interest rates on a regular basis and informs the Board of Directors accordingly at its quarterly meetings.

The table below summarizes the Company’s exposure to interest rate risks. It includes the Company’s assets and liabilities categorized by the earlier of contractual re-pricing or maturity dates. As of 31.12.2014 in TCHF

< 1 month

1 – 3 months

3 months – 1 year

> 1 year Non-interest bearing

Total

Assets Cash and cash equivalents

46 355

46 355

Receivables and prepayments

37 086

37 086

Receivables non-current

109 846

109 846

Investment in unconsolidated subsidiaries at fair value through profit and loss

30 810

30 810

Total assets

224 097

224 097

Payables and accrued charges

4 237

4 237

Derivative liability (put option)

15 636

15 636

Liabilities

Provisions for other liabilities and charges

1 900

1 900

Total liabilities

21 773

21 773

< 1 month

1 – 3 months

3 months – 1 year

> 1 year

Non-interest bearing

Total

Cash and cash equivalents

8 619

8 619

Receivables and prepayments

153

153

Loans (intercompany)

6 921

6 921

Investment in unconsolidated subsidiaries at fair value through profit and loss

208 697

208 697

Total assets

224 390

224 390

Payables and accrued charges

749

749

Derivative liability (put option)

15 636

15 636

Total liabilities

16 385

16 385

As of 31.12.2013 (restated) in TCHF

Assets

Liabilities

b) Currency risk The Net Asset Value per share is calculated in CHF, the presentation currency of the Company. However, as the Company’s underlying investments are largely denominated in USD, the Company is exposed to a certain degree of currency risk, which can adversely affect performance. Fluctuations in foreign currency exchange rates affect the Net Asset Value of the investments and therefore the Company. The Company

can enter into currency contracts to mitigate these currency risks. Additionally, the Company regards loans in the same currencies as its assets as a measure to mitigate the impact of currencies on the Net Asset Value. The Company has assessed currency risk against the Swiss Franc as follows: if the USD were to change 1.6 % (average monthly fluctuation), with all other variables held constant, it


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

would result in a change in net profit of CHF 3.5 million (2013 (restated): 1.5 %; CHF 3.2 million). The Company’s currency position is monitored on a regular basis and the FX exposure is reviewed by the Board of Directors at the quarterly meetings. As of 31.12.2014 in TCHF

USD

GBP

EUR

CHF

Total

Cash and cash equivalents

46 143

212

46 355

Receivables and prepayments

36 919

167

37 086

109 846

109 846

30 810

Assets

Receivables – non current assets Investment in unconsolidated subsidiaries at fair value through profit and loss

30 810

223 718

Payables and accrued charges

2 715

1 522

4 237

Derivative liability (put option)

15 636

15 636

Provision for other liabilities and charges

1 900

1 900

Total liabilities

4 615

17 158

21 773

Total assets

379 224 097

Liabilities and Equity

Equity Total liabilities and equity

As of 31.12.2013 (restated) in TCHF

– 202 324 202 324

4 615

USD

GBP

EUR

CHF

Total

5

1

8 613

8 619

85

10

58

153

6 921

6 921

– 208 697

10

1

8 671 224 390

219 483 224 097

Assets Cash and cash equivalents Receivables and prepayments Receivables – non current assets

Investment in unconsolidated subsidiaries at fair value through profit and loss 208 697 Total assets

215 708

– Payables and accrued charges

749

749

Derivative liability (put option)

15 636

15 636

Total liabilities

16 385

16 385

Total equity

– 208 005 208 005

Total liabilities and equity

– 224 390 224 390

c) Other price risks Other price risks (i. e. changes in market prices other than from interest rate risks or currency risk) may affect the value of the unconsolidated subsidiaries carried at fair value through profit or loss. Other price risks arise mainly from the uncertainty about future valuations of the underlying investments held by these subsidiaries. For these unconsolidated subsidiaries the Company determines the corresponding fair value on a

monthly basis. Please see Note 2 “Accounting Policies” for more information on the fair value process as well as Note 3 “Investment Table (Unconsolidated Subsidiaries)”. The Company’s former investment advisor has performed extensive due diligence prior to recommending any fund or direct investment within the “Legacy Portfolio”, including an analysis of the potential risks of the investment. The Manager monitors investments by analyzing regular reports and through direct contact with General Partners and company management. Investment recommendations were approved by the Board of Directors (before 1 July 2013) and the Investment Committee of the Manager and the Board of Directors of the Subsidiary (after 1 July 2013) prior to commitment. Investment performance is reviewed regularly by the Manager and the Board of Directors. Valuations are updated on a monthly basis by taking new currency rates, stock price at the end of the month for listed portfolio companies and new reports from portfolio funds available to the Manager into account. Furthermore the Manager discusses fund performance with the fund managers and may take part in the annual meetings of significant portfolio funds. Detailed valuations are established at year-end in collaboration with fund managers. The Board of Directors reviews and subsequently approves the valuations. Changes in valuations can have an impact on net profit. In order to demonstrate the sensitivity, the average change of the TR LPX50® index (one of the leading benchmarks for the listed private equity industry) of the past two years is calculated and used as input to the sensitivity analysis. If the value of the investments (based on year-end values) had increased or decreased by 13.4 % with all other variables held constant, the impact on the Shareholders’ Equity would have been CHF 2.2 million (2013: 21.6 %, CHF 70.0 million). The Group is exposed to a variety of market risk factors which may change significantly over time. As a result, measurement of such exposure at any given point in time may be difficult given the complexity and limited transparency of the underlying investments. Therefore, a sensitivity analysis is deemed to be of limited explanatory value. 15.3 Liquidity Risk Due to the specific nature of private equity funds of the type in which the Company invests through its unconsolidated subsidiaries, immediate and full investment of assets is not always possible. Commitments made by a private equity investor in a private equity fund typically result in actual investments being made over a period of up to five years. Outstanding commitments entered into at unconsolidated subsidiaries level amounted to CHF 16.3 million at year-end 2014 (2013: CHF 47.1 million).

45


46

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

Cash in hand is in excess of 100 % of all unfunded commitments. Management monitors cash flows on a weekly basis by updating its cash flow report and reports at least on a quarter-

ly basis to the Board of Directors. The table below summarizes the maturities of the Company’s liabilities (gross undiscounted cash-flows).

As of 31.12.2014

< 1 month

1 – 3 months

3 months – 1 year

1 – 3 years

> 3 years/ no stated maturity

Total

Payables and accrued charges

4 237

4 237

Derivative liability (put option)

15 635

15 636

1 900

1 900

Total liabilities

Provisions for other liabilities and charges

21 773

21 773

Unfunded commitments

16 292

16 292

< 1 month

1 – 3 months

3 months – 1 year

1 – 3 years

> 3 years/ no stated maturity

Total

Payables and accrued charges

749

749

Derivative liability (put option)

15 635

15 636

749

15 635

16 385

47 058

47 058

As of 31.12.2013 (restated)

Total liabilities Unfunded commitments

15.4 Credit Risk The Company has credit exposure only to established, creditworthy third parties, so that no collateralization is required. Receivables are monitored continuously. The Board of Directors monitors credit risk on a regular basis. The Company holds cash with a number of internationally renowned financial institutions for diversification reasons. The Company monitors the standing of these institutions on a regular basis. The minimum credit rating of these institutions at year-end 2014 was “A”. As of 31 December 2014 the Company has a significant outstanding receivables balance with Strategic Partners VI Acquisitions G, L.P. (a special purpose vehicle majority owned by Strategic Partners Fund VI, L.P.) resulting in a concentration of credit risk with one counter party. The receivable was incurred

as a result of the disposal of the “Legacy Portfolio” through the sale of two Company subsidiaries, APEN Faith Media Holdings LLC and APEN Holdings LLC. The incurred credit risk is mitigated by a multiple layer guarantee structure with the ultimate majority guarantor being Strategic Partners Fund VI, L.P., a USD 4.4 billion private equity secondary fund managed by Strategic Partners Fund Solutions, Blackstone’s dedicated secondary and fund solutions platform. The Company attempts to minimize the investment risk incurred at level of its unconsolidated subsidiaries through effective due diligence prior to investing, conservative underwriting, reviews of investment partners, and contractual provisions that limit the Company’s downside risk (please see also other price risk). 2014 Total carrying amount

Neither past due nor impaired

Past due but not impaired

Individually impaired

Less allowance for impairment

Cash and cash equivalents

46 355

46 355

Receivables and prepayments

37 086

37 086

109 846

109 846

As of 31.12.2014

Receivables non-current Derivative instruments Total financial assets (excl. investments)

As of 31.12.2013 (restated)

Cash and cash equivalents Receivables and prepayments Derivative instruments Loans Total financial assets (excl. investments)

193 287

193 287

Neither past due nor impaired

Past due but not impaired

Individually impaired

Less allowance for impairment

2013 Total carrying amount

8 619

8 619

153

153

6 921

6 921

15 694

15 694


47

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

15.5 Fair Value Estimation In addition to the fair value approach highlighted in Note 2.5.6, IFRS requires the Company to disclose fair value measurements by level of the following fair value measurement hierarchy: Level 1 – inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The type of investments listed under Level 1, include unrestricted securities listed in active markets. Level 2 – inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Investments which are included in this category include restricted securities listed in active markets, securities traded in other than active markets, derivatives, corporate bonds and loans. Level 3 – inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category include investments in privately held entities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The following table summarizes the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels: As of 31.12.2014

Level 1

Level 2

Level 3

Total

Investments in unconsolidated subsidiaries

30 810

30 810

Total assets measured at fair value

30 810

30 810

Level 1

Level 2

Level 3

Total

As of 31.12.2013 (restated)

Investments in unconsolidated subsidiaries

– 208 697 208 697

Total assets measured at fair value

– 208 697 208 697

Due to the nature of the business the Company is engaged in, there are no significant transfers between level 1, 2 and 3 assets. Level 3 investments consist of unconsolidated subsidiaries. These are by nature unquoted. The fair values of these unquoted subsidiaries is derived based on the Net Asset Values (including adjustments that are calculated by the respective fund manager) in the underlying investments considering also inherent leveraging with financial liabilities appropriately, as outlined in Note 2.5.6. All inputs used to derive at the adjusted Net Asset Values are unobservable. For year-end 2014 the Company used 30 September 2014, quarterly reports (unaudited) as input parameters for its investments in unconsolidated subsidiaries. In cases where September reports were used, the Company calculated the year-end fair value of a specific fund by adding (cash paid to the fund) and subtracting (cash received from the fund) fourth quarter activity to the Company’s September capital account balance of the fund. 2014 activity is also reviewed for any significant developments that may have an impact on the year-end valuation. The following table discloses the changes to the fair value of Level 3 assets during the year:

Level 3 assets fair value at 1 January (restated) Capital distribution Capital contribution Unrealized gains/losses of Level 3 assets (incl. FX impact) Realized gains/losses of Level 3 assets (incl. FX impact) Disposal of Level 3 financial assets Level 3 assets fair value at 31 December

2014

2013

208 697

214 075

12 359

844

(5 378)

(14 994)

(176 095)

30 810

208 697

As outlined in Note 2.5.6, the Company does not utilize valuation models with model inputs to calculate the fair value for their Level 3 investments. Rather, the Company utilizes a methodology that uses NAV as the key input. Thus, the main “unobservable input” would be NAV itself. Source

2014 Audited financial statements Unaudited Q4 2014 reporting

Fair value investment

0.0 % 100.0 %

Rollforward of Q3 2014 reporting

0.0 %

Rollforward of Q2 2014 reporting

0.0 %


48

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

Assets and liabilities not carried at fair value but for which fair value is disclosed: As of 31.12.2014

Level 1

Level 2

Level 3

Total

46 355

46 355

Assets Cash and cash equivalents Receivables and prepayments

37 086

37 086

Receivables non-current

109 846

109 846

46 355

146 932

193 287

Total Liabilities Payables and accrued charges

Derivative financial liability (put option)

Provisions for other liabilities and charges Total

As of 31.12.2013 (restated)

4 237

4 237

15 636

1 900

1 900

21 773

21 773

Level 1

Level 2

Level 3

15 636

Total

Assets Cash and cash equivalents Receivables and prepayments Loans

8 619

8 619

153

153

6 921

6 921

8 619

7 074

15 693

Payables and accrued charges

749

749

Derivative financial liability (put option)

15 636

15 636

Total

16 385

16 385

Total Liabilities

The assets and liabilities included in the above table are carried at amortized cost, and their carrying values are a reasonable approximation of fair value.

NOTE 16 SHARE-BASED COMPENSATION PLAN Share Appreciation Rights (SARs) In 2011, 2012, 2013 and 2014 a total of 183 000 SARs were issued to members of the Board of Directors. Outstanding SARs as of 31 December 2014 were 179 000 and are split as follows: Number of SARs

16 000

Year of grant

Vesting date

Expiry

Subscription ratio

Strike price

2011

vested

12.1.2016

1:1

CHF 16.76

16 000

2011

vested

12.1.2016

1:1

CHF 16.76

16 000

2011

vested

12.1.2016

1:1

CHF 16.76

16 000

2012

vested

12.1.2017

1:1

CHF 17.24

16 000

2012

vested

12.1.2017

1:1

CHF 17.24

16 000

2012

vested

12.1.2017

1:1

CHF 17.24 CHF 23.19

12 663

2013

vested

21.8.2018

1:1

12 666

2013

21.8.2015

21.8.2018

1:1

CHF 23.19

12 671

2013

21.8.2016

21.8.2018

1:1

CHF 23.19

14 996

2014

03.9.2015

03.9.2019

1:1

CHF 23.42

14 999

2014

03.9.2016

03.9.2019

1:1

CHF 23.42

15 005

2014

03.9.2017

03.9.2019

1:1

CHF 23.42

The SARs were granted free of charge. Each SAR entitles the holder to receive in cash the difference between the strike price and the market price of one share of the Company at the exercise date. A third of the SARs are each exercisable after a vesting period of one, two and three years. The SARs expire after five years. In case of a termination of the working contract during the vesting period, the SARs are cancelled. The Company has agreed to change of control clauses for the beneficiaries with respect to SARs, in that vesting may be immediate in a change of control situation (this policy has been applied to all SARs issued in 2011 and 2013). Movements in the number of Stock Appreciation Rights (SARs) and their related exercise prices are as follows: 2014 Average exercise price per share

SARs

2013 Average exercise price per share

SARs

18.70 138 000

17.00

100 000

Granted

23.42

45 000

23.19

38 000

Exercised

24.43

(4 000)

19.89 179 000

18.70

138 000

As of January 1

Matured As of 31 December

Of the outstanding 179 000 SARs (2013: 138 000), 108 663 SARs (2013: 100 000) were exercisable per 31 December 2014. In 2014, 12 663 SARs vested without being exercised (2013: 83 336). A number of 4 000 SARs (2 000 SARs granted in 2011 and 2 000 SARs granted in 2012) were exercised in 2014 (2013: nil).


49

FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

In the current year, TCHF 427 (2013: 27) was charged as an expense relating to SARs within other operating expenses in the Statement of Comprehensive Income. The carrying amount of the liability at the end of the period amounted to TCHF 651 (2013: 224).

NOTE 18 SEGMENT REPORTING

The following table lists the inputs in the models used for the plan for the year ended 31 December 2014:

During its 2014 quarterly reporting, the Company has disaggregated the way how it managed its portfolios. The Company determined two discrete operating segments namely the “Emerging Markets Segment” and the “Legacy Segment”.

Model input variables

2014 SARs

2013 SARs

2012 SARs

Dividend yield

0 %

0 %

0 %

0 %

21.3 %

20.1 %

16.6 %

15.3 %

(0.175 %)

(0.283 %)

(0.327 %)

(0.38 2 %)

3.64 years 2.04 years

1.03 years

Expected volatility Risk-free interest rate Expected life of option/SARs Weighted average share price Model used Exercise multiple

4.68 years – Hull-White 2

2011 SARs

Hull-White Hull-White Hull-White 2

2

As of 31 December 2013 the Company reported a geographical analysis of assets and profits identifying a sole operating segment of private equity investments.

After the sale of the “Legacy Portfolio” the only operating segment remaining was the emerging markets. Therefore as of 31 December 2014 the management determined that the Group operates in the sole operating segment of private equity investments in emerging markets. The geographical analysis of total assets is determined by specifying in which region the investment was made:

2

Since market implied volatilities for Spice Private Equity Ltd are not available, the average of the historical volatility of a basket of peer Companies was determined (for 2014 SARs: 17.1 %, 2013 SARs: 15.9 %; for 2012 SARs: 13.7 % and for 2011 SARs: 12.6 %). Additionally, a historical volatility estimate of the Company, using a time window of observations equal to 4.68 years was calculated at 21.3 % (for 2014 SARs), 3.6 years at 21.0 % (for 2013 SARs) 2.04 years at 16.6 % (for 2012 SARs) and 1.03 years at 15.3 % (for 2011 SARs). For calculation purposes the average of the two values was taken.

in TCHF

2014

2013

USA 1)

146 694

198 011

Bermuda

30 810

17 608

Switzerland

46 592

8 772

224 097

224 390

Total

For 2014 corresponding to receivable from the “Legacy Portfolio” sale.

1)

The geographical analysis of total income is determined by specifying from which region the investment profits are generated: in TCHF

USA Bermuda

NOTE 17 COMMITMENTS, CONTINGENCIES AND OTHER OFF-BALANCE SHEET TRANSACTIONS In addition to those commitments disclosed in the Investment Schedule (please see “Detailed Supplementary Information on Investment Portfolio and Unconsolidated Subsidiaries”) the Company has nil off-balance-sheet transactions open as of 31 December 2014 (2013: nil). The operations of the Company may be affected by legislative, fiscal and regulatory developments for which provisions are made where deemed necessary. Please refer to Note 15.3 “Liquidity Risk” for additional information on commitments. Customary representations and warranties related to the sale of the “Legacy Portfolio” were given to the purchaser by the Company.

Switzerland Total

2014

2013

3 369

367

3

3 736

3

NOTE 19 SUBSEQUENT EVENTS Since the balance sheet date of 31 December 2014, there have been no further material subsequent events that could impair the integrity of the information presented in the financial statements. To better reflect the performance of the underlying investments in the financial statements of the Company, the Board of Directors has decided to switch the reporting and functional currency from CHF to USD as of 1 January 2015. With the first publication of the Company financials in USD (Interim Report as of 31 March 2015) the quoting currency at the SIX Swiss Exchange will also be switched from CHF to USD (expected in May 2015).


50

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

Between 1 January 2015 and 18 March 2015, the following aggregate investment related cash flows have been recorded (by the partnerships under the commitments existing as of 31 December 2014 and Direct Investments): Capital calls (in CHF)

Amount

USD

2 255 561

Total

2 255 561


FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS (IFRS) – SPICE PRIVATE EQUITY LTD

As statutory auditor, we have audited the accompanying financial statements of Spice Private Equity Ltd, which comprise the balance sheet, statement of comprehensive income, statement of cash flows, statement of changes in Shareholders’ Equity and notes (page 24 to 50), for the year ended 31 December 2014. Board of Directors’ Responsibility The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with the International Financial Reporting Standards (IFRS), the Article 14 of the Directive on Financial Reporting (DFR) of SIX Swiss Exchange and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as the International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements for the year ended 31 December 2014 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with the Article 14 of the Directive on Financial Reporting (DFR) of SIX Swiss Exchange and Swiss law. Report on other Legal Requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers AG Daniel Pajer Audit expert Auditor in charge

Zurich, 19 March 2015

Martin Gubler Audit expert

51


CORPORATE GOVERNANCE


54

ANNUAL REPORT 2014  CORPORATE GOVERNANCE

CORPORATE GOVERNANCE AT SPICE PRIVATE EQUITY LTD

Preliminary remark: in connection with the sale of its “Legacy Portfolio” (as described below) APEN Ltd changed its company name to Spice Private Equity Ltd. This name change was adopted by the Extraordinary General Meeting (EGM) held on 26 February 2015. In this report, the Company uses its new company name.

Group Structure after Transactions occurring on 31 December 2014 The Company owns all shares in Spice Private Equity (Bermuda) Ltd through which investments are made exclusively in emerging markets, covering various regions, in particular Asia Pacific, Sub-Saharan Africa, Latin America.

1. GROUP STRUCTURE AND SHAREHOLDERS Spice Private Equity Ltd Spice Private Equity Ltd (the Company) is a holding company according to Swiss law and has its registered office at Industriestrasse 13c, 6300 Zug, Switzerland.

Group Structure before Transaction occurring on 31 December 2014 On 31 December 2014, the Company disposed of its “Legacy Portfolio” to a fund managed by Strategic Partners, the secondary and fund of funds investment affiliate of leading alternative investments group Blackstone.

Organizational Structure after Transaction occurring on 31 December 2014

GP INVESTMENTS

NEWBURY PARTNERS

FORTRESS ENTITIES

OTHER

(SHAREHOLDER)

(SHAREHOLDER)

(SHAREHOLDER)

SHAREHOLDERS

100 % GP ADVISORS LTD, ZURICH

1

SPICE PRIVATE EQUITY LTD, ZUG*

BoD***

2

100 % GP ADVISORS (BERMUDA) LTD

100 % SPICE PRIVATE EQUITY

IC****

(BERMUDA) LTD**

3

1

Administration Agreement between GP Advisors Ltd, Zurich and Spice Private Equity Ltd

2

Advisory Agreement between GP Advisors Ltd, Zurich and GP Advisors (Bermuda) Ltd

3

Investment Management Agreement between GP Advisors (Bermuda) Ltd and Spice Private Equity (Bermuda) Ltd

* ** *** ****

Spice Private Equity Ltd, formerly APEN Ltd Spice Private Equity (Bermuda) Ltd, formerly APEN Bermuda EM Ltd Board of Directors Investment Committee


CORPORATE GOVERNANCE  ANNUAL REPORT 2014

The sale of the “Legacy Portfolio” comprised the following direct participations of the Company:

The sale of the “Legacy Portfolio” comprised the following indirect participations of the Company:

• APEN Faith Media Holdings LLC, Delaware, USA, (100 %); • APEN Holdings LLC, Delaware, USA (99.75 % of Class C shares). APEN Holdings LLC was created in the restructuring in October 2009. The Company had issued three categories of membership interests: Class A, Class B and Class C shares. With the implementation of the new corporate structure in 2013, the Class B shares were redeemed and extinguished with the main effect that the holders of the remaining shares became entitled to receive distributions from available cash flows as follows: first 12.5 % to the Class A shares and second 87.5 % to the Class C shares.

• APEN Holdings LLC, Delaware (0.25 % of Class C shares, through APEN Faith Media Holding LLC). • APEN Bermuda Legacy Ltd, Bermuda (99 %, through APEN Holdings LLC); • APEN Bermuda Legacy Ltd, Bermuda (1 %, through APEN Faith Media Holding LLC); • APEN FMH LLC, Delaware (100 %, through APEN Bermuda Legacy Ltd); • APEN Holdings (Bermuda) Ltd, Bermuda (100 %, through APEN Bermuda Legacy Ltd). As of 31 December 2014, APEN Bermuda Legacy Ltd held the investments of the “Legacy Portfolio”.

Organizational Structure before Transaction occurring on 31 December 2014

GP INVESTMENTS

NEWBURY PARTNERS

OTHER

FORTRESS ENTITIES

(SHAREHOLDER)

(SHAREHOLDER)

SHAREHOLDERS

(SHAREHOLDER)

100 % GP ADVISORS LTD ZURICH *

5

APEN LTD, ZUG

1

99.75 % 100 % 2

100 %

APEN FAITH MEDIA HOLDINGS LLC

GP ADVISORS

APEN BERMUDA EM LTD ***

4

APEN HOLDINGS LLC DELAWARE 99 %

100 %

(BERMUDA) LTD

4

0.25 %

1%

APEN BERMUDA LEGACY LTD **

3

APEN FMH LLC

1

Administration Agreement between GP Advisors Ltd, Zurich and APEN Ltd, Zug

2

Advisory Agreement between GP Advisors Ltd, Zurich and GP Advisors (Bermuda) Ltd

3

Investment Management Agreement between GP Advisors (Bermuda) Ltd and APEN Bermuda EM Ltd and APEN Bermuda Legacy Ltd

4

Class C shares

5

Class A shares

*

GP Advisors Ltd, Zurich, formerly APEN Services GmbH

** APEN Bermuda Legacy Ltd, formerly APEN Bermuda Ltd *** APEN Bermuda EM Ltd, formerly APEN Bermuda Two Ltd

APEN HOLDINGS (BERMUDA) LTD

55


56

ANNUAL REPORT 2014  CORPORATE GOVERNANCE

Significant Shareholders There are several shareholders with a reported participation exceeding the 3 % threshold of the Company’s share capital. The number of shares and voting rights of the major shareholders are disclosed in Note 8 of the financial statements. Disclosure notices relating to persons or groups with significant shareholdings (more than 3 % of voting rights) can be found at: http://www.six-exchange-regulation.com/obligations/disclosure/ major_shareholders_en.html. Cross Shareholdings There are no cross-shareholdings with other companies.

2. CAPITAL STRUCTURE Capital As of 31 December 2014 the issued share capital of the Company was CHF 53 637 170, divided into 5 363 717 fully paid registered shares with a nominal amount of CHF 10 each. As per the same date the Company held 7 917 shares as treasury shares. The reserves from capital contributions (statutory reserves) amounted to CHF 384.5 million. The market capitalization of the Company per year-end amounted to CHF 120.5 million. The shares are listed on the SIX Swiss Exchange (ISIN: CH0009153310). Changes of Capital In June 2013 the share capital was increased by CHF 12 387 170 through the issuance of 1 238 717 new shares with a nominal value of CHF 10 each by utilizing the authorized share capital. There were no further share capital increases or other changes to the share capital during the last three reporting years. Shares and Participation Certificates There are no shares with preferential rights or similar rights. Each share is entitled to one vote and has full dividend rights. voting rights may be exercised only after a shareholder has been registered in the Company’s share register. No shares and/or share certificates will be physically issued to shareholders. Transfers of shares are effected through a book-entry system maintained by SIX SIS Ltd. There are neither participation certificates nor profit sharing certificates.

Authorized and Conditional Capital The Board of Directors is entitled to an increase in authorized capital up to a maximum amount of CHF 26 818 580 by issuing no more than 2 681 858 shares with a nominal value of CHF 10 each. The authorization expires on 24 June 2015. Shares for which subscription rights were granted but not executed are at the Board of Director’s disposal. The pre-emptive rights of the shareholders can be excluded in case of acquisitions of other companies or additional listings on foreign stock exchanges. The share capital may be increased from conditional capital in connection with the exercise of conversion or option rights, which are granted in connection with bonds or similar debt instruments up to a maximum amount of CHF 26 818 580 by issuing no more than 2 681 858 shares with a nominal value of CHF 10 each. In connection therewith, the shareholders’ pre-emptive rights are excluded. Whenever options or conversion rights are issued, the Board of Directors shall be entitled to withdraw the preferential subscription rights of shareholders for valid reasons. For further details see also Article 4b and 4c of the Articles of Association available at (http://www.spice-private-equity. com/userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf). Limitations of Transferability The Company’s shares are freely transferable, without any limitations, provided that the buyers declare they are the beneficial owners of the shares. See also Article 4 of the Articles of Association available at (http://www.spice-private-equity.com/userfiles/file/Download %20Center/Articles%20of%20Associations/150226Statuten SpicePrivateEquityAG.pdf). Convertible Bonds and Warrants/Put and Call Options/ right of First Refusal Put and call option of Drawbridge Special Opportunities Fund Pursuant to the Subscription Agreement dated 17 May 2013 between Drawbridge Special Opportunities Fund LP, New York, NY, USA (“Fortress-Drawbridge”) and the Company, Fortress-Drawbridge has the right to sell to the Company 717 266 shares acquired in connection with the implementation of the new corporate structure in 2013. This right to sell may be exercised for the first time on 12 June 2014 and not later than 12 June 2018 (provided that such exercise period shall be extended up to the date, when the Company may purchase such shares in compliance with the relevant rules of the Swiss


CORPORATE GOVERNANCE  ANNUAL REPORT 2014

Code of Obligations governing the acquisition of own shares). The exercise price is CHF 21.80 per share. The Subscription Agreement also provides that the Company has the right to buy from Fortress-Drawbridge the 717 266 shares. This right to buy may be exercised for the first time on 12 June 2014 and not later than 12 June 2018. The exercise price shall be CHF 41.50 per share. Right of first refusal of GP Swiss Ltd Pursuant to the Subscription Agreement dated 17 May 2013 between GP Swiss Ltd (formerly GP Secondaries Investment Company (Switzerland) Ltd) a subsidiary of GP Investments Ltd and the Company, the Company grants to GP Swiss Ltd, for as long as GP Swiss Ltd holds at least 10 % of the share capital of the Company outstanding from time to time, but in no event for longer than two years after the put and call arrangement (referred to above) shall have expired, a right of first refusal with respect to any shares acquired by the Company under the above mentioned put and call arrangement. The right of first refusal entitles GP Swiss Ltd to purchase the relevant number of shares previously transferred to the Company upon exercise of the put option or the call option, in the event that the Company were to sell or otherwise directly or indirectly transfer, all or a part of such shares to an independent third party. If GP Swiss Ltd exercises its right of first refusal, it will pay the same price as the third party offered to pay for the relevant shares or, in the absence of such a third party offer, the bona fide price and terms offered by the Company.

3. BOARD OF DIRECTORS Responsibilities The Board of Directors consists of one or more members. The Board of Directors is ultimately responsible for the policies and management of the Company. The Board of Directors establishes the strategic, accounting, organizational and financing policies of the Company. The Board of Directors further determines the authorized signatories of the Company and their signing authority. The Board of Directors is entrusted with preparing meetings of the shareholders and carrying out Shareholders’ Resolutions. Since 1 July 2013, the Board of Directors has discontinued the delegation to a Management Board of the day-to-day operations of the Company and has carried out these functions by itself. Meeting Schedule The Board of Directors usually meets four times per year in person (minimum twice). The regular meetings are typically held in March, May, August and November. Additional

meetings are called on short notice if and when required. In the year under review, five board meetings took place, in the second half of the year and a large number of additional board calls in particular related to the sale of the “Legacy Business” as described above. Each of the regular board meetings has a special focus which is basically connected to the Company’s reporting rhythm. Such focuses are the financial statements, interim results, the medium-term plan, foreign exchange exposure, the Annual General Meeting (AGM) and corporate governance. The Board of Directors resolves by majority vote with the presence of a majority of members. The average duration of a board meeting is ninety minutes. Principles of the Election Procedure The members of the Board of Directors as well as the Chairman of the Board of Directors are elected by the Annual General Meeting (AGM) according to Articles 10 and 11 of the Articles of Association available at (http://www.spice-private-equity. com/userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf). The members of the Board of Directors are elected for a term of office of one year (or, in case of an election at an Extraordinary General Meeting (EGM), for a term of office until the next Annual General Meeting (AGM)), with the possibility of repeated re-election. Members of the Board of Directors Eduardo Leemann, born 1956, Swiss citizen, Chairman, executive member, term of office expires in 2015. Mr. Leemann joined AIG Investments in 1997 as Chief Executive Officer of AIG Private Bank (now Falcon Private Bank Ltd.) in Zurich serving later as Chairman of the Board for AIG Private Bank. He returned to the Executive Board of AIG Private Bank in September 2008 and is now appointed Chief Executive Officer of Falcon Private Bank Ltd. He previously worked at Goldman, Sachs & Co Bank as Member of the Management Committee and Head of Private Banking. Prior to that, Mr. Leemann was Deputy to the Head of Private Banking Worldwide at Bank Julius Baer with direct responsibilities for the Western Hemisphere, Switzerland as well as the overall marketing effort in Private Banking. Prior to that, he was responsible for building the private banking business of Bank Julius Baer in their New York branch. Eduardo Leemann is a graduate of the Swiss School of Economics and Business Administration (SEBA) and the Advanced Executive Program of the J.L. Kellogg Graduate School of Management at Northwestern University in Chicago, USA. Mr. Leemann joined the Company’s Board of Directors and became its Chairman in September 1999.

57


58

ANNUAL REPORT 2014  CORPORATE GOVERNANCE

David Pinkerton, born 1961, US citizen, executive member, term of office expires in 2015. Mr. Pinkerton joined Falcon Private Bank Ltd. in October 2010 as Chief Investment Officer. Previously, he was a Managing Director in the Alternative Investments Group at AIG Investments in New York. Mr. Pinkerton also set up a successful external asset management business in New York to provide consulting services and manage family investments. He has over 30 years of far-reaching experience and expertise in private equity and hedge funds. David B. Pinkerton holds a Bachelor’s Degree in Finance and Economics from the University of Delaware and is admitted to New York and New Jersey State Bar. Mr. Pinkerton joined the Company’s Board of Directors in June 2010. Antonio Carlos Augusto Ribeiro Bonchristiano, born 1967, Brazilian citizen, Vice-Chairman, executive member, term of office expires in 2015. Mr. Bonchristiano is a member of the board and CEO of GP Investments Ltd and a member of the Investment Committee of GP Advisors (Bermuda) Ltd. He joined GP Investments in 1993 and has been a Managing Director since 1995. Prior to joining GP Investments, Mr. Bonchristiano was a Partner at Johnston Associates Inc., a finance consultancy based in London, and worked for Salomon Brothers Inc. in London and New York. Currently, he serves as a member of the Boards of Directors of AMBEV, Lupatech, San Antonio International and BRZ Investimentos. Mr. Bonchristiano is also on the board of several non-profit organizations, including: Fundação Bienal and Fundação Estudar in São Paulo, Brazil and John Carter Brown Library in Providence, RI, USA. Previously, he served as a member of the Boards of Directors of Allis, BHG, Estácio, BR Properties, LBR – Lácteos Brasil, LAHotels, Sé Supermercados, ALL, Kuala, CEMAR, ABC Supermercados, Gafisa, Hopi Hari, Submarino, Equatorial, Geodex Commumication, Trio Assessoria (holding Sascar), BR Malls, Tempo, Magnesita Refratários, and Playcenter. He was also previously the Chief Financial Officer of SuperMar Supermercados and Founder and Chief Executive Officer of Submarino. He was further Vice-Chairman of the Board of Directors of BR Properties, Director of Geodex Communication, Contax Participações and IRO of ABC Supermarkets and GP Investments, Ltd.. Mr. Bonchristiano holds a Bachelor’s degree in Politics, Philosophy, and Economics from the University of Oxford. Mr. Bonchristiano joined the Company’s Board of Directors in June 2013. Please see “Administrative Services and Investment Management” below for a description of the significant business connections between subsidiaries of the Company and the GP Investments group.

Alvaro Lopes da Silva Neto, born 1957, Brazilian citizen, executive member, elected until the Annual General Meeting (AGM) 2015, but resigned as of the Extraordinary General Meeting (EGM) held on 26 February 2015. Mr. Lopes is a member of the board and CFO & IRO of GP Investments Ltd and a member of the Investment Committee of GP Advisors (Bermuda) Ltd. He joined GP Investments Ltd in May 2012, having previously served as CFO of Genesis Investments and as an advisor to Bac Florida Bank. He was also the CEO of Mercure Investments, Senior Vice-President of Prudential/Wachovia Securities and CEO, COO and EVP of Banco Bozano, Simonsen SA and its affiliates. Mr. Lopes holds a Bachelor’s degree in Economics and Business Administration from Faculdade de Ciências Políticas e Econômicas do Rio de Janeiro and an MBA from COPPEAD-UFRJ. Mr. Lopes joined the Company’s Board of Directors in June 2013. Please see “Administrative Services and Investment Management” below for a description of the significant business connections between subsidiaries of the Company and the GP Investments group. David Justinus Emery, born 1962, Swiss citizen, executive member, term of office expires in 2015. Mr. Emery is the Founder and Chairman of Reciprocus International Pte Ltd, a Global M&A Advisory Boutique based in Singapore. Prior to setting up his own firm in October 2011, he was with Dun & Bradstreet, Inc (D&B) for over 16 years, lastly as Member of the Group’s Executive Board (GLT), President of Asia Pacific and Head of International Business Development and M&A. Mr. Emery serves today as an advisor to several organizations and government agencies and sits on several boards. He is also an entrepreneur in his own right, mainly as an early stage investor. He holds a Swiss Federal Bachelor’s degree in Commerce and General Management. Mr. Emery joined the Company’s Board of Directors in June 2013. During the two years prior to his election to the Board of Directors, Mr. Emery (through Reciprocus International Pte Ltd) served as advisor to the Company. In 2014, Reciprocus International Pte Ltd, received no fees. Fersen Lamas Lambranho, born 1961, Brazilian and Portuguese citizen, executive member. Elected on Extraordinary General Meeting held on 26 February 2015, term of office expires at Annual General Meeting (AGM) 2015. Mr. Lambranho is a member of the board and Chairman of GP Investments Ltd and a member of the Investment Committe of GP Advisors (Bermuda) Ltd. He joined the firm in 1998 and


CORPORATE GOVERNANCE  ANNUAL REPORT 2014

became a Managing Director in 1999. Prior to joining GP Advisors, Mr. Lambranho was CEO of Lojas Americanas, where he worked for 12 years and was a board member from 1998 to 2003. Currently, he is Chairman of the Board of Centauro. He has served as Chairman of the Boards of Oi, Contax, Gafisa and ABC Supermercados. Mr. Lambranho serves on the boards of Centauro and BRZ Investimentos. He previously served on the board of BRMalls, San Antonio, Estácio, Tele Norte Leste Participações, São Carlos Empreendimentos e Participações, Playcenter, Shoptime, Farmasa, BR Properties and Americanas.com. He is a board member of several non-profit entities, such as Fundação Bienal de São Paulo e COPPEAD-UFRJ. Mr. Lambranho holds a Bachelor’s degree in Civil Engineering from the Universidade Federal do Rio de Janeiro and a M.S. degree in Business Administration from COPPEAD-UFRJ. He also completed the Owner President Management Program at the Harvard Business School. Mr. Lambranho joined the Company’s Board of Directors in February 2015. Please see “Administrative Services and Investment Management” below for a description of the significant business connections between subsidiaries of the Company and the GP Investments group. Neither Mr. Leemann nor Mr. Pinkerton, as former non-executive members of the Board of Directors, (i) were in the three financial years preceding the period under review (i. e. the financial year 2014) a member of the management of the Company or one of the Company’s subsidiaries, nor (ii) has one of them significant business connections with the Company or one of the Company’s subsidiaries. Internal Organisation In connection with the implementation of the new corporate structure as of 1 July 2013, the Board of Directors decided to discontinue the delegation to the Management Board of the day-to-day operations of the Company. Since 1 July 2013, the Board of Directors carries out these functions by itself. In view of the lean structure of the Company, the Board of Directors did not constitute any committees. Due to its relatively narrow business activities and the investment management arrangements with GP Advisors (Bermuda) Ltd, the Company does not have dedicated internal audit personnel. Risks are managed via a variety of measures. These include various regulations that are reviewed by the Board of Directors on a regular basis.

The Company is exposed to a variety of risks such as: • Liquidity risk (financing of unfunded commitments, loan servicing etc.); • Currency risk; • Investment related risks; and • Financial reporting by portfolio company. The Board of Directors discusses these risks on a quarterly basis at the board meetings and develops measures where required. The Company has set up its own internal control system, which is updated and reviewed on an annual basis. For the tasks and responsibilities of the Board of Directors see internal regulations of the Board of Directors available at (http://spice-private-equity.com/userfiles/file/Download%20 Center/Internal%20Regulations/131125%20APEN%20Ltd%20-% 20Internal%20Regulations%20of%20the%20Board%20of%20 Directors%20%28Organisationsreglement%29.pdf). Administrative Services and Investment Management In 2013 Spice Private Equity (Bermuda) Ltd entered into a Services Agreement with Codan Services Ltd. in respect to administrative services to be provided in Bermuda. In 2013, the Company and GP Advisors Ltd (formerly APEN Services GmbH) amended their agreement on administrative services to be provided to the Company. Under the agreement, the Company issued a power-of-attorney to GP Advisors Ltd staff to handle matters of a mere administrative nature. Under this agreement, the Company shall pay to GP Advisors Ltd an annual fee of CHF 100 000 plus out-of-pocket expenses reasonably incurred. In 2013, Spice Private Equity (Bermuda) Ltd entered into an Investment Management Agreement with GP Advisors (Bermuda) Ltd in respect to services to be provided for its investment portfolio. The Investment Management Agreement empowers, inter alia, GP Advisors (Bermuda) Ltd to take investment decisions on behalf of Spice Private Equity (Bermuda) Ltd. The agreement has an initial life of 7.5 years starting on 1 July 2013. In essence, Spice Private Equity (Bermuda) Ltd, pays to GP Advisors (Bermuda) Ltd a Management Fee of CHF 5 mio per annum and a Performance Fee of 10 % of the increase, if any, in the Company’s NAV after a 5 % hurdle and subject to customary catch-up and high-watermark clauses. The highwatermark was reset to the USD value of the Company’s NAV as of 31 December 2014 to reflect the new structure and size

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ANNUAL REPORT 2014  CORPORATE GOVERNANCE

of the Company after the sale of the “Legacy Portfolio”. No Performance Fees have been accrued or paid as of 31 December 2014 up to that point.

ue of each Distribution during the period from such reference date through such calculation date) and (ii) second, 10 % of the remaining amount of such Excess Return shall be allocated to GP Advisors (Bermuda) Ltd.

In more detail, the fees are calculated as follows: As of 1 January 2015, the Investment Management Agreement was modified and provides, as of that date, in essence that Spice Private Equity (Bermuda) Ltd shall pay to GP Advisors (Bermuda) Ltd a management fee and a performance fee on a modified basis (compared to the regime applicable until 31 December 2014). The management fee shall be calculated as follows: (a) during the period from 1 January 2015 to 31 December 2018 (“Initial Period”), the management fee shall be equal to the sum of (i) CHF 1 250 000 plus (ii) 1/4  of 1.5 % of the New Capital Amount (meaning the total amount of capital raised by the Company from the issuance and sale of ordinary registered shares or other securities of the Company after 1 January 2015) and (b) after the Initial Period, be equal to 1/4 of 1.5 % of the Company’s NAV. The performance fee shall be calculated on the basis of the Excess Return (meaning the excess, if any, of (A) the Company’s NAV as of the relevant calculation date over (B) the sum of (x) the Company’s NAV as of the most recent reference date, increased at an annual rate of 5 %, compounded annually, from such reference date through such calculation date, plus (y) the aggregate value of each Contribution (meaning a transfer of cash or securities into the Company in payment or exchange for its capital stock, or as a Contribution with respect to its capital stock) during the period from such reference date through such calculation date, increased in each case at an annual rate of 5 % from the date of such Contribution through such calculation date, less (z) the aggregate value of each Distribution (meaning a transfer of cash or securities from the Company as a dividend or Distribution with respect to its capital stock, or in a redemption or repurchase of it capital stock) during the period from such reference date through such calculation date, decreased in each case at an annual rate of 5 % from the date of such Distribution through such calculation date) as follows: (i) first, 100 % of such Excess Return shall be allocated to GP Advisors (Bermuda) Ltd until GP Advisors (Bermuda) Ltd has been allocated for the relevant calendar semester an amount at least equal to 10 % of the Excess NAV Amount (meaning, with respect to any calculation date, the excess, if any, of (A) the Company’s NAV as of such calculation date over (B) the sum of (x) the Company’s NAV as of the most recent reference date plus (y) the aggregate value of each Contribution during the period from such reference date through such calculation date, less (z) the aggregate val-

GP Advisors (Bermuda) Ltd entered into an Investment Advisory Agreement with GP Advisors Ltd, Zurich in respect of advisory services to be provided for the investment portfolio of the Company. Mandates in other Entities The number of mandates the members of the Board of Directors may exercise as member of the top governing or administrative body of other entities which are required to register with the Swiss Commercial Register or a similar foreign register according to Article 12 para. 1 subpara. 1 of the ordinance against excessive compensation in listed joint stock companies (VegüV, ORAb) can be found in Article 13a of the Articles of Association of the Company. The Articles of Association of the Company are available at (http://www.spice-private-equity. com/userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf).

4. MANAGEMENT BOARD No Management Board Since 1 July 2013, the Board of Directors has discontinued the delegation to the Management Board of the day-to-day operations of the Company and has carried out these functions by itself. In light of this, the Company and GP Advisors Ltd, Zurich (formerly APEN Services GmbH) amended their agreement on administrative services to be provided to the Company. The former Chief Executive Officer of the Company, Mr. David Salim together with Dr. Guido Cornella, assumed main responsibility for the administrative services under the Services Agreement. Neither Mr. Salim nor Dr. Cornella has any managerial functions within the Company or its subsidiaries. The Company will nevertheless continue to disclose in the corporate governance report information regarding the responsible employees of GP Advisors Ltd, Zurich. Responsible Employees of GP Advisors Ltd, Zurich David Salim, born 1965, Swiss citizen. Mr. Salim was, before joining GP Advisors Ltd, Zurich in July 2013, Chief Executive Officer of the Company from August 2010 until June 2013. He has over 20 years of professional ex-


CORPORATE GOVERNANCE  ANNUAL REPORT 2014

perience in investment banking and investment management with international financial groups and as an independent advisor. Since 1999, he has been active in alternative investments and in particular deeply involved in managing private equity funds and Direct Investments, first as founder and CEO of Swiss Life Private Equity Partners and from 2004 as independent advisor to family offices and institutional investors. David Salim holds a Master of Arts degree from the School of Economics of the University of St. Gallen (M.A. HSG). Dr. Guido Cornella, born 1969, Swiss citizen. Dr. Guido Cornella, also joined GP Advisors Ltd, Zurich in July 2013. He has 15 years of experience as a strategy consultant and finance executive. Initially he worked at McKinsey & Co. in Zurich for four years and subsequently practiced as an independent strategy consultant with projects in private equity, banking, insurance, telecoms, media, logistics and pharmaceuticals in Europe, USA, Latin America and Asia. Additionally he served as director of finance and marketing for a start-up for two years. Prior to joining GP Advisors, Dr. Cornella (through Cornella Industries) was involved in developing the Company’s new strategy and supporting the balance sheet restructuring transaction. In 2014, Cornella Industries received no fees. Dr. Cornella holds an engineering degree from the Swiss Federal Institute of Technology in Zurich (Dipl. Ing. ETH) and M. S. and Ph. D. degrees in Materials Science from Stanford University in California, USA. Mandates in other Entities As the Company has no Management Board, the Articles of Association do not contain any rules on the number of mandates the members of the Management Board may exercise as member of the top governing or administrative body of entities which are required to register with the Swiss Commercial Register or a similar foreign register according to Article 12 para. 1 subpara. 1 VegüV.

5. COMPENSATIONS, SHAREHOLDINGS AND LOANS Content and Method of Determining the Compensations Performance-based Compensation and Share Ownership Plans The rules governing the principles of performance-based compensation and the grant of equity securities, conversion rights and option rights for compensation purposes according to Article 12 para. 2 subpara. 2 and 3 VegüV can be found in the Article 17a and 17b of the Articles of Association of the Company. The Articles of Association are available at (http:// www.spice-private-equity.com/userfiles/file/Download%20 Center/Articles%20of%20Associations/150226StatutenSpice PrivateEquityAG.pdf). As the Company does not have a Management Board, the Articles of Association do not contain any corresponding rules on compensation of the management. Credits and Loans As the Company does not grant any credits, loans and post-retirement benefits beyond occupational pensions to members of the Board of Directors, its Articles of Association do not contain any rule according to Article 12 para. 2 subpara. 1 VegüV. Shareholder Vote on Compensation The rules governing the shareholder vote on compensation according to Article 12 para. 2 subpara. 6 VegüV can be found in Article 17c of the Articles of Association. The Articles of Association are available at (http://www.spice-private-equity. com/userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf). Compensation Report For further information on compensation, please also refer to the compensation report on page 66 of this annual report.

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ANNUAL REPORT 2014  CORPORATE GOVERNANCE

6. SHAREHOLDERS’ PARTICIPATION RIGHTS Voting-Rights Restrictions and Representations Each registered share in the Company is entitled to one vote. Please see also Article 7 section 1 in the Articles of Association available at (http://www.spice-private-equity.com/ userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf). voting rights may be exercised only after a shareholder has been registered as shareholder with voting rights in the Company’s share register. Rules on participating in the General Meeting if different from Law No restrictions. Please see Article 7 section 2 in the Articles of Association available at (http://www.spice-private-equity. com/userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf). Statutory Quora The Statutory Quora comply with the applicable legal regulations. Please see Article 8 in the Articles of Association available at (http://www.spice-private-equity.com/ userfiles/file/Download%20Center/Articles%20of%20 Associations/150226StatutenSpicePrivateEquityAG.pdf). Convocation of the Shareholders’ Meeting and Proposal for Agenda Items The rules for the convocation of the Shareholders’ Meeting complies with the applicable legal regulations. The convocation may also be requested by one or several shareholders representing together at least ten percent of the share capital. In accordance with the applicable legal regulations, one or several shareholders holding at least ten percent of the share capital or shares with an aggregate nominal value of CHF 1 000 000 are entitled to propose items for the agenda of the Shareholders’ Meeting. Please see also Articles 5 and 6 in the Articles of Association available at (http://www. spice-private-equity.com/userfiles/file/Download%20Center/ Articles%20of%20Associations/150226StatutenSpicePrivate EquityAG.pdf). Registration in the Share Register for Annual General Meeting (AGM) 2014 In 2015, the Annual General Meeting (AGM) is scheduled to be held on 21 May 2015; investors who wish to attend the Annual General Meeting (AGM) 2014 must be registered in the share register of the Company no later than 28 April 2015.

Independent Proxy The Articles of Association of the Company do not contain any rules on the submission of directives to the independent proxy or the electronic participation in the Annual General Meeting (AGM).

7. CHANGES OF CONTROL AND DEFENCE MEASURES Duty to make an Offer There is no duty to make an offer (opting-out; please see also Article 23 in the Articles of Association available at (http:// www.spice-private-equity.com/userfiles/file/Download%20 Center/Articles%20of%20Associations/150226StatutenSpice PrivateEquityAG.pdf). pursuant to Article 32 of the Federal Stock Exchange Act (SESTA). Change of Control Clauses The Company has agreed to change of control clauses for the benefit of the Board Members with respect to Stock Appreciation Rights (SARs), in that vesting may be immediate in a change of control situation. Such benefits are also granted to Mr Salim and Dr. Cornella, executive officers of GP Advisors Ltd, Zurich, and to certain other non-executive employees of GP Advisors Ltd, Zurich.


CORPORATE GOVERNANCE  ANNUAL REPORT 2014

8. AUDITORS

9. INFORMATION POLICY

Date of Assumption of the existing Auditing Mandate PricewaterhouseCoopers AG (PwC) is elected until the next Annual General Meeting which is scheduled to be held on 21 May 2015.

The Company aims to offer the shareholders a high degree of transparency. In this respect the Company publishes an annual report, a semi-annual report and two quarterly reports.

Responsible Partner: Daniel Pajer (since 2012). Total of Audit Fees in 2014 TCHF 212 Additional Fees in 2014 TCHF 17 additional fees related to tax preparation services. Supervisory and Control Instruments vis-à-vis the Auditors, Control Instruments Since there is no Audit Committee and no separate internal audit function, the Auditors’ report is presented to the whole Board of Directors as a part of the annual report. In addition, the responsible Auditor participates in the Annual General Meeting and is standing by for questions and detailed audit information.

In between the quarterly report publications relevant information (including information subject to ad-hoc publicity according to section 53 of the SIX Swiss Exchange Listing Rules) is published in the form of press releases and available at (http://www.spice-private-equity.com/Default-cms.aspx? cmsid=38#newsReadmore_42).

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COMPENSATION REPORT


66

ANNUAL REPORT 2014  COMPENSATION REPORT

COMPENSATION REPORT 2014

1

BOARD COMPENSATION

1.1

Member of the Board-Compensation from 1 January 2014 until 31 December 2014

in TCHF

Base compensation

Variable compensation

Other benefits

Total

125

Board of Directors Eduardo Leemann (Chairman and Member of the Compensation Committee)

102

15

8

Antonio Carlos Augusto Ribeiro Bonchristiano (Vice-Chairman and Member of the Compensation Committee)

52

15

4

71

David Pinkerton (Member of the Compensation Committee)

77

15

6

98

Alvaro Lopes da Silva Neto (Member of the Compensation Committee)

52

15

4

70

David Justinus Emery (Member of the Compensation Committee)

87

15

7

109

370

75

28

472

Total Board of Directors

Note: Since 1 July 2013, the Board of Directors has discontinued the delegation to a Management Board of the day-to-day operations of the Company and has carried out these functions by itself. As a result of this organizational change, the Board of Directors decided to adapt its compensation reporting used in 2013 as follows: • The “Variable Compensation” reported in 2013 (see below) comprises exclusively board meeting attendance fees and has been integrated in the “Base Compensation” for the 2014 reporting. • Stock Appreciation Rights (SARs) constitute Variable Compensation and are now reported under “Variable Compensation”. The amount reported corresponds to the value of the SARs allotted in the relevant business year. • “Other Benefits” means social security insurance contributions paid by the Company with respect to compensation of Board Members.

1.2 Member of the Board-Compensation from 1 January 2013 until 31 December 2013 In prior years the compensation disclosures for the Board of Directors have been presented according to the cash paid in the relevant year. The compensation related to the 2012 term was paid out in January 2013 and is disclosed in the table below.

in TCHF

Base compensation

Variable compensation

Other benefits

Total

100

3

7

110

75

2

5

82

Board of Directors Eduardo Leemann (Chairman) Dr. Christian Wenger (Vice-Chairman), until 25 June 2013 Antonio Carlos Augusto Ribeiro Bonchristiano (Vice-Chairman), since 25 June 2013

75

3

5

83

Alvaro Lopes da Silva Neto (Member), since 25 June 2013

David Justinus Emery (Member), since 25 June 2013

250

8

17

275

David Pinkerton (Member)

Total Board of Directors

Company’s Board of Directors compensation for 2013 was paid in January 2014 totaling TCHF 290.

2

MANAGEMENT COMPENSATION AS OF 31 DECEMBER 2013 AND 31 DECEMBER 2014

In the absence of a Management Board, the Company has not paid remuneration to a Management Board in 2014. In 2013 the overall remuneration paid to the Management Board was TCHF 1 790 and the highest remuneration paid to a member of the Management Board was TCHF 1 372 to David Salim, CEO until 30 June 2013.

3

CREDITS OR LOANS AS OF 31 DECEMBER 2013 AND 31 DECEMBER 2014

No credits or loans were granted to any current or former members of executive bodies or Related Parties nor are any credits or loans outstanding. The Company did not pay any non-market standard compensation, directly or indirectly, to any current or former members of the executive bodies or related parties.


COMPENSATION REPORT  ANNUAL REPORT 2014

REPORT OF THE STATUTORY AUDITOR COMPENSATION REPORT 2014

We have audited the accompanying Remuneration Report (page 66) dated 18 March 2015 of Spice Private Equity Ltd for the year ended 31 December 2014. Board of Directors’ Responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the Remuneration Report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages. Auditor’s Responsibility Our responsibility is to express an opinion on the accompanying Remuneration Report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Remuneration Report complies with Swiss law and articles 14–16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the Remuneration Report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the Remuneration Report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the Remuneration Report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the Remuneration Report of Spice Private Equity Ltd for the year ended 31 December 2014 complies with Swiss law and articles 14–16 of the Ordinance. PricewaterhouseCoopers AG PricewaterhouseCoopers AG Daniel Pajer Audit expert Auditor in charge

Zurich, 19 March 2015

Martin Gubler Audit expert

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FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD


70

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD

REPORTING AS OF 31 DECEMBER 2014 AND AS OF 31 DECEMBER 2013 IN TCHF Note

31.12.2014

31.12.2013

Cash and cash equivalents

46 355

8 619

Receivables

37 205

58

167

95

83 727

8 772

BALANCE SHEET Assets Current assets

Prepayments Total current assets Non-current assets Long-term receivables Participations

7

Loan to subsidiary Total non-current assets Total assets

111 405

30 810

207 384

6 921

142 216

214 305

225 943

223 077

Liabilities and Shareholders’ Equity Current liabilities Payables and accrued charges Total liabilities

6 137

749

6 137

749

53 637

53 637

31 777

384 476

384 476

Shareholders’ Equity Share capital General reserve Reserve from capital contributions Treasury shares Accumulated deficit brought forward Net profit/loss (–) for the year Total Shareholders’ Equity Total liabilities and Shareholders’ Equity

8

(181)

(215 785)

(215 667)

(2 340)

(31 895)

219 806

222 328

225 943

223 077


71

FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

REPORTING JANUARY 1 TO 31 DECEMBER 2014 AND JANUARY 1 TO 31 DECEMBER 2013 IN TCHF Note

01.01.2014 – 31.12.2014

01.01.2013– 31.12.2013

16 038

1 664

INCOME STATEMENT Income Dividend income from non-current assets Interest income from current assets

3

Realized gain on sale of own shares

989

Realized gain on sale of participation Gain on foreign currency exchange Realized gain on sale of loan Realized FX gain on sale of participation Total income

296

4 544

56

22 256

42 894

2 952

1 591

Expenses Service fees Administration fees Other operating expenses Loss on participation

100

8 511

2 520

2 525

28 094

34 091

Value adjustment loan

2 695

Loss on foreign currency exchange

2

Tax expenses

7

(55)

Total expenses

45 234

34 847

Net profit/loss (–) for the year

(2 340)

(31 895)

Loss on sale of participation


72

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1

COMPANY INFORMATION

Spice Private Equity Ltd, Zug (“the Company”) is a Swiss stock corporation established under the relevant provisions of the Swiss Code of Obligations (“CO”) and domiciled in Zug.

NOTE 2 MAJOR SHAREHOLDERS Major Shareholders The following major shareholders held shares and voting rights of 3 % and more as of 31 December 2014 (number of shares according to the public disclosures of shareholdings at SIX Swiss Exchange; voting rights recalculated based on current share capital): Number of Shares 2014

Participation in % 2014

Number of Shares 2013

Participation in % 2013

2 419 208

45.10 %

2 416 798

45.06 %

Drawbridge Special Opportunities Fund LP (Fortress)

717 266

13.37 %

717 266

13.37 %

OAM European Value Fund

270 149

5.04 %

217 104

4.05 %

Wellington Management Company, LLP

210 936

3.93 %

210 936

3.93 %

AXA Life

167 000

3.1 1  %

167 000

3.1 1  %

GP Investments / Newbury Capital 1)

The shares are held by two entities, namely GP Swiss Ltd (Switzerland) (formerly GP Secondaries Investment Company (Switzerland) Ltd), and Newbury Holdings A Ltd. (Cayman Islands). These two entities are connected through a shareholders’ agreement.

1)

NOTE 3 METHOD OF FINANCIAL ACCOUNTING These financial statements have been prepared in accordance with the provisions of commercial accounting as set out in the Swiss Code of Obligations (Art. 957 to 963b CO, effective since 1 January 2013).

On 25 May 2014 the Company’s Annual General Meeting (AGM) decided to reclassify TCHF 31 777 from share capital premium to reduce total retained earnings/accumulated deficit in order to comply with Swiss CO Art. 725a.

NOTE 5 TOTAL AMOUNT OF REPLACEMENT RESERVES USED AND REALIZED HIDDEN RESERVES NOTE 4 EXPLANATION OF BALANCE SHEET AND PROFIT AND LOSS STATEMENT POSITIONS Spice Private Equity generated operating income of CHF 42.9 million (2013: CHF 2.9 million) and operating expenses of CHF 45.2 million (2013: CHF 34.8 million) resulting in a net operating loss of CHF 2.3 million (2013: loss of CHF 31.9 million) for the period. Due to the sale of the “Legacy Portfolio” the Company achieved a solid net cash flow of CHF 37.7 million (2013: CHF 7.6 million). Part of the positive cash flows of CHF 12.4 million (2013: 20.0 million) were invested during 2014 in the new “Emerging Markets Portfolio” in line with the new strategy of the Company. Outstanding receivables deriving from the sale of the “Legacy Portfolio” totaling CHF 148.6 million will be received in the next three years in four equal instalments increasing cash predictability of the Company.

In the year 2014, no replacement reserves used and no hidden reserves were realized.

NOTE 6 NUMBER OF FULL-TIME POSITIONS The Company does not have any employees (2013: nil).


FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

NOTE 7 PARTICIPATIONS 2014 Company

NOTE 9 LEASING

Domicile

Function

Spice Private Equity Hamilton, (Bermuda) Ltd Bermuda

% held

Investment Company 100

The Company has no leasing obligations.

Currency

Share capital

USD

1 USD

NOTE 10 OBLIGATIONS TOWARDS PENSION FUNDS 2013 Company

Function

% held

Currency

Share capital

APEN Holdings LLC Wilmington, USA

Holding Company

87.5

USD

APEN Faith Media Holdings, LLC 1)

Holding Company

100

USD

Investment Company 100

USD

1 USD

Domicile

Wilmington, USA

Spice Private Equity Hamilton, (Bermuda) Ltd 1) Bermuda

The Company does not have any obligations towards pension funds.

NOTE 11 SECURITIES, RESERVATION OF TITLE

Disposed of during 2014 as part of the “Legacy Portfolio” sale.

1)

NOTE 8 BALANCES AND TRANSACTIONS WITH OWN SHARES

NOTE 12 CONTINGENT LIABILITIES

Per year-end 2014 the Company held 7 917 own shares (2013: nil). As shown in the table below during 2014 the Company purchased 17 905 shares (2013: nil) at market conditions (average price of CHF 22.85) and sold 9 988 (2013: 195 815) at market conditions (average price of CHF 22.83). Transactions with own shares 2014

As of January 1 Purchase Sold As of December 31

The Company has not granted any securities for third parties. The Company has not used own assets to secure liabilities and none of its assets are subject to a reservation of title.

No of shares

Amount in CHF

Average price

17 905

409 068

22.85

9 988

228 011

22.83

7 917

181 057

22.87

Spice Private Equity (Bermuda) Ltd does not have any holdings in Spice Private Equity Ltd.

The Company has no contingent liabilities.

73


74

ANNUAL REPORT 2014  FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD

NOTE 13 SHAREHOLDINGS, CONVERSION AND OPTION RIGHTS Shareholdings, Conversion and Option Rights

Name

Function

Shares 2014

SARs 2) 2014

Shares 2013

SARs 2) 2013

200

16 000

200

12 000

8 000

8 000

1 702 482

8 000

1 702 482

4 000

Board of Directors Eduardo Leemann

Chairman

Dr. Christian Wenger

Vice-Chairman, until 25 June 2013

Antonio Carlos Augusto Ribeiro Bonchristiano Vice-Chairman, since 25 June 2013 David Pinkerton

Member

16 000

12 000

Alvaro Lopes da Silva Neto

Member, since 25 June 2013

8 000

4 000

David Justinus Emery

Member, since 25 June 2013

8 000

4 000

Management 1) David Salim

CEO

48 000

Conradin Schneider

CFO

3 000

16 000

For Management: as of 30 June 2013 (since 1 July 2013, the Board of Directors has discontinued the delegation to a Management Board of the day-to-day operations of the Company and has carried out these functions by itself) 2) SARs are granted free of charge. Each SAR entitles the holder to receive in cash the difference between the strike price and the market price of one share of the Company at the exercise date. A third of the SARs are each exercisable after a vesting period of one, two and three years. The SARs expire after five years. In case of a termination of the working contract during the vesting period, the SARs are cancelled. The Company has agreed to change of control clauses for the beneficiaries with respect to SARs, in that vesting may be immediate in a change of control situation (this policy has been applied to all SARs issued in 2011 and 2013). 1)

NOTE 14 SPECIAL EVENTS REGARDING THE PROFIT AND LOSS STATEMENT There have not been any extraordinary or single events nor have there been any events relating to other periods that need further explanation of items in the profit and loss statement.

NOTE 16 LONG-TERM LIABILITIES The Company has no long-term interest bearing liabilities outstanding

NOTE 17 AUDIT FEES NOTE 15 SUBSEQUENT EVENTS Since the balance sheet date of 31 December 2014, there have been no material events that could impair the integrity of the information presented in the financial statements.

The Company during 2014 incurred the following fees to its auditors: Service

Audit Tax preparation

To better reflect the performance of the underlying investments in the financial statements of the Company, the Board of Directors has decided to switch the reporting currency and functional from CHF to USD as of 1 January 2015. With the first publication of the Company financials in USD (Interim Report as of 31 March 2015) the quoting currency at the SIX Swiss Exchange will also be switched from CHF to USD (expected in May 2015).

Fee (TCHF)

212 17


FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD  ANNUAL REPORT 2014

REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS (SWISS LAW) – SPICE PRIVATE EQUITY LTD

As statutory auditor, we have audited the accompanying financial statements of Spice Private Equity Ltd, which comprise the balance sheet, income statement and notes (pages 70 to 74), for the year ended 31 December 2014. Board of Directors’ Responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the Company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended 31 December 2014 comply with Swiss law and the Company’s articles of incorporation.

Report on other Legal Requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers AG Daniel Pajer Audit expert Auditor in charge

Zurich, 19 March 2015

Martin Gubler Audit expert

75


76 2

ANNUAL REPORT 2014  SPICE PRIVATE EQUITY EMERGING MARKETS SPICE PRIVATE EQUITY

ADDRESSES AND CONTACTS ORGANIZATION

REGISTERED OFFICES

Board of Directors Eduardo Leemann, Chairman Antonio Bonchristiano, Vice Chairman David Emery, Member Fersen Lambranho, Member David Pinkerton, Member

Spice Private Equity Ltd Industriestrasse 13c CH-6304 Zug Phone +41 41 710 70 60 Fax +41 41 710 70 64 info@spice-private-equity.com

Investment Committee Antonio Bonchristiano Fersen Lambranho Alvaro Lopes David Salim

Spice Private Equity (Bermuda) Ltd Clarendon House 2, Church Street Hamilton, HM 11 Bermuda

Auditors PricewaterhouseCoopers AG Birchstrasse 160 CH-8050 Zürich

www.spice-private-equity.com

INVESTOR RELATIONS

KEY INFORMATION Swiss Security Number: 915.331 ISIN: CH0009153310 Ticker symbol: SPCE Reuters: SPCE.BN Bloomberg: SPCE:SW

Dr. Guido Cornella Investor & Media Relations GP Advisors Ltd Löwenstrasse 29 CH-8001 Zurich Phone +41 44 578 50 50 investor.relations@spice-private-equity.com


18.03.2015

THE BRIDGE TO EMERGING MARKETS. www.spice-private-equity.com

Spice annual report 2014  
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