EVCA Handbook Professional Standards for the Private Equity and ...
EVCA Handbook Professional Standards for the Private Equity and ...
EVCA Handbook Professional Standards for the Private Equity and ...
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66 <strong>EVCA</strong> <strong>H<strong>and</strong>book</strong> <strong>Professional</strong> <strong>St<strong>and</strong>ards</strong> <strong>for</strong> <strong>the</strong> <strong>Private</strong> <strong>Equity</strong> <strong>and</strong> Venture Capital IndustryD EFINITIONSThe following definitions shall apply in <strong>the</strong>se Guidelines.Fair ValueNet Asset Value (‘NAV’)Underlying BusinessActive MarketA financial instrument is regarded as quoted in an activemarket if quoted prices are readily <strong>and</strong> regularly availablefrom an exchange, dealer, broker, industry group, pricingservice or regulatory agency, <strong>and</strong> those prices representactual <strong>and</strong> regularly occurring market transactions onan arm's length basis.A market is considered active when transactions are takingplace regularly at an arms length basis with sufficientvolume <strong>and</strong> frequency to determine a price on an ongoingbasis. The necessary level of trading required to meet <strong>the</strong>secriteria is a matter of judgement.Attributable Enterprise ValueThe Attributable Enterprise Value is <strong>the</strong> Enterprise Valueattributable to <strong>the</strong> financial instruments held by <strong>the</strong> Fund<strong>and</strong> o<strong>the</strong>r financial instruments in <strong>the</strong> entity that rankalongside or beneath <strong>the</strong> highest ranking instrumentof <strong>the</strong> Fund.Distressed or Forced TransactionThe Fair Value is <strong>the</strong> price at which an orderly transactionwould take place between Market Participants at <strong>the</strong>Reporting Date (measurement date).Fund or <strong>Private</strong> <strong>Equity</strong> FundThe Fund or <strong>Private</strong> <strong>Equity</strong> Fund is <strong>the</strong> generic term usedin <strong>the</strong>se Guidelines to refer to any designated pool ofinvestment capital targeted at all stages of private equityInvestment from start-up to large buyout, including thoseheld by corporate entities, limited partnerships <strong>and</strong>o<strong>the</strong>r investment vehicles.Fund-of-FundsFund-of-Funds is <strong>the</strong> generic term used in <strong>the</strong>se Guidelinesto refer to any designated pool of investment capitaltargeted at investment in underlying <strong>Private</strong> <strong>Equity</strong> Funds.Investee CompanyThe term Investee Company refers to a single business orgroup of businesses in which a Fund is directly invested.InvestmentNAV of a Fund is <strong>the</strong> amount estimated as beingattributable to <strong>the</strong> investors in that Fund on <strong>the</strong> basisof <strong>the</strong> Fair Value of <strong>the</strong> underlying Investee Companies<strong>and</strong> o<strong>the</strong>r assets <strong>and</strong> liabilities.Orderly TransactionAn orderly transaction is a transaction that assumesexposure to <strong>the</strong> market <strong>for</strong> a period prior to <strong>the</strong> ReportingDate to allow <strong>for</strong> marketing activities that are usual <strong>and</strong>customary <strong>for</strong> transactions involving such assets or liabilities.Quoted InstrumentA Quoted Instrument is any financial instrument <strong>for</strong> whichquoted prices reflecting normal market transactions arereadily <strong>and</strong> regularly available from an exchange, dealer,broker, industry group, pricing service or regulatory agency.RealisationRealisation is <strong>the</strong> sale, redemption or repayment ofan Investment, in whole or in part; or <strong>the</strong> insolvency ofan Investee Company, where no significant return to<strong>the</strong> Fund is envisaged.The Underlying Business is <strong>the</strong> operating entities in which<strong>the</strong> Fund has invested, ei<strong>the</strong>r directly or through a numberof dedicated holding companies.ValuerThe Valuer is <strong>the</strong> person with direct responsibility <strong>for</strong>valuing one or more of <strong>the</strong> Investments of <strong>the</strong> Fundor Fund-of-Funds.A <strong>for</strong>ced liquidation or distress sale (i.e., a <strong>for</strong>cedtransaction) is not an orderly transaction <strong>and</strong> is notdeterminative of Fair Value. An entity applies judgementin determining whe<strong>the</strong>r a particular transactionis distressed or <strong>for</strong>ced.Enterprise ValueThe Enterprise Value is <strong>the</strong> value of <strong>the</strong> financialinstruments representing ownership interests inan entity plus <strong>the</strong> net financial debt of <strong>the</strong> entity.An Investment refers to all of <strong>the</strong> financial instrumentsin an Investee Company held by <strong>the</strong> Fund.LiquidityLiquidity is defined as <strong>the</strong> relative ease <strong>and</strong> promptnesswith which an instrument may be sold when desired.Market ParticipantsMarket Participants are potential or actual willing buyersor willing sellers when nei<strong>the</strong>r is under any compulsionto buy or sell, both parties having reasonable knowledgeof relevant facts <strong>and</strong> who have <strong>the</strong> ability to per<strong>for</strong>msufficient due diligence in order to be able to make orderlyinvestment decisions related to <strong>the</strong> enterprise.Reporting DateIs <strong>the</strong> date <strong>for</strong> which <strong>the</strong> valuation is being prepared,which equates to <strong>the</strong> measurement date.Secondary TransactionA Secondary Transaction refers to a transaction whichtakes place when a holder of an interest in unquoted orilliquid Funds trades <strong>the</strong>ir interest to ano<strong>the</strong>r party.Unquoted InstrumentAn Unquoted Instrument is any financial instrument o<strong>the</strong>rthan a Quoted Instrument.8 I NTERNATIONAL P RIVATE E QUITY A ND V ENTURE C APITAL VALUATION G UIDELINESI NTERNATIONAL P RIVATE E QUITY A ND V ENTURE C APITAL VALUATION G UIDELINES 9