Walsh mpany Asset Management Pty : Half-yearly report and accounts - 30 September 2021

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CD Private Equity Fund III

Contents

30 September 2021

Report to unitholders Directors' report

Auditor's independence declaration

Condensed statement of profit or loss and other comprehensive income Condensed statement of financial position

Condensed statement of changes in equity Condensed statement of cash flows

Notes to the condensed financial statements Directors' declaration

Independent auditor's review report to the unitholders of CD Private Equity Fund III Directory

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CD Private Equity Fund III Report to unitholders 30 September 2021

Dear Unitholders,

We present to you this report on the performance of the CD Private Equity Fund III (Fund) for the six-month period ended 30 September 2021 (HY22).

For the six-month period ended 30 September 2021, the Fund generated total returns of 27.5%, on a post-tax net asset value basis and inclusive of the 12.5 cent per Unit distribution paid to Unitholders in June 2021. This performance reflects the strong returns from underlying investment managers arising from buoyant equity markets and private equity deal flows in the United Stated (US) during the period. On the same basis, the Fund has generated total returns of 14.8% p.a. since inception (inclusive of distributions and net of all fees).

The performance of the Fund's investment in the US Select Private Opportunities Fund, L.P. III (LP), the investment vehicle through which the Fund's investments in the underlying US private investment funds are made, was strong during the period, up 25.0% in US dollar terms. The depreciation in the Australian dollar against the US dollar was also accretive to unit value performance this period, with the Australian dollar falling from 75.98 US cents to 72.27 US cents, leading to an unrealised foreign currency translation gain of $8.0 million. Overall, during the period the Fund posted a net profit of $40.6 million, or 56.42 cents per Unit, compared with a loss of $6.8 million, or 9.42 cents per Unit for the corresponding period last year. At 30 September 2021, the Fund had pre-tax net assets of $192.9 million representing $2.68 per Unit and post-tax net assets of $186.4 million representing $2.59 per Unit.

Market conditions

Globally, capital markets have recovered strongly in the 12-18 months since the initial impact of COVID-19 were felt. Despite the current spread of the Delta variant, momentum remained positive in HY22 as global economic conditions continued to improve, underpinned by successful vaccination rollouts and the gradual reopening of major developed markets.

Equity markets remain close to record highs, interest rates remain at low levels and liquidity in capital markets remains high. Global M&A (mergers and acquisitions) hit record highs in HY22 and private equity firms, helped by a strong fund-raising environment, are participating at an increasing deal size and rate. This current market dynamic is highly supportive for the lower-middle market, where the Fund has targeted investment, and has resulted in many strong outcomes prior to and during the period, some well above our expectations, including Conexiom (Luminate Capital Partners, L.P.), A Cloud Guru (Elephant Partners Fund I, L.P) and Knowbe4 (Elephant Partners Fund I, L.P and US Select Direct Private Equity II L.P.).

Recent meetings with our underlying managers have been universally positive, and momentum from the second half of 2020 has clearly continued into 2021, however, US inflation concerns are rising, along with yield curves, and this may dampen the recent positive market sentiment. Supply-side constraints (freight delays and production at capacity), inflationary pressures in the labour market, rising energy costs and strong economic activity all lead to a possibility that inflation may not be as "transitory" as initially expected.

Distributions

The Fund announced one distribution to unitholders in HY22, paying 12.5 cents per Unit on 29 June 2021.

The distributions paid since inception are shown in the graphic below, which also indicates the value of the original investment and the net tangible asset per Unit as at the end of this six-month period. Total distributions paid to investors since inception of 37.8 cents per Unit represents 24% of the $1.60 initial offer price.

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Positioning of the Fund

The Fund's investment objectives are to provide Unitholders with exposure to a portfolio of investments in small-to-mid-market private investment funds and privately held companies, predominantly focused in the US, and capital growth over a five to ten-year investment horizon.

Through the Fund's investment vehicle, US Select Private Opportunities Fund III, L.P. (LP), the Fund is committed across 13 highly attractive US private investment funds all focused on small-to-mid-market private investment opportunities, for a total consideration of US$117.5 million. The 13 funds, although substantially progressed, are still in the investment stage, with an aggregate investment in approximately 100 underlying companies (net of realisations).

At 30 September 2021, US$98.5 million (or 86.4% of total funds committed) had been called by the LP. The Fund's proportionate share of this is approximately US$70.2 million (a 71.2% share).

During the period, the LP received 14 drawdown requests and 8 capital returns for a total net capital call of US$2.7 million. At 30 September 2021, net drawdown requests from underlying investments were approximately US$92.1 million (or 78.4% of total commitments).

Underlying portfolio update

The LP made a distribution of US$10 million to limited partners in June 2021. CD3's net share was US$7.0 million which resulted in the 12.5 cent per unit distribution paid to unitholders at the end of June 2021.

Luminate Capital Partners, L.P. (Luminate) sold two portfolio investments, including AutoQuotes, and following the recapitalisation of a third investment paid net aggregate distributions to the LP totalling US$8.5 million.

Telescope Partners I, L.P. (Telescope) paid a distribution of US$0.8 million to the LP relating to the prior sale of portfolio company Brandfolder to Smartsheet Inc in Q3 2020. This distribution was received as shares in US-listed Smartsheet, Inc (the acquiring company),

PeakSpan Capital Fund I, L.P. (PeakSpan) sold several investments, including MindTouch and Kenna Security resulting in a distribution to the LP of US$2.6 million.

Elephant Partners Fund I, L.P. (Elephant) received proceeds of sale from several investments, including Knowbe4 and A Cloud Guru that resulted in aggregate distributions to the LP of US$5.6 million.