18 February 2009, 07:00
Private Equity Inv: Interim Management Statement
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Private Equity Investor Plc
Interim Management Statement - 3 Months to 31 December 2008
INVESTMENT OBJECTIVE AND POLICY
Investment Objective
The Company was launched in February 2000 and provides both private and
institutional investors with a means to participate in specialised venture
capital funds in the USA, a category of funds that is not otherwise accessible
to many investors. The Company's objective is to achieve substantial capital
appreciation for shareholders over its intended life.
Investment Policy
Risk Diversification
The Company has invested in high quality venture capital funds, managed by
several different management groups, focused on various stages of growth from
early stage to pre-IPO, so as to obtain exposure to a diversified underlying
portfolio of investments in unlisted companies in the IT and other technology
sectors. Such funds have been selected with regard to the experience and track
record of the managers, their investment strategy and the strength and quality
of their deal flow.
As an Investment Trust, it is the Company's policy that no single investment
will represent more than 15% by value of the Company's investments at the time
of investment.
The Company's policy is that it will invest no more than 15% of its gross
assets in other closed-end listed investment companies (including investment
trusts). The Company currently has made no such investments and the Directors
do not envisage circumstances in which it is likely to do so.
Asset Allocation
The Company's investments are in funds based in the USA ("the Funds"). The
Managers of the Funds invest principally in the USA and in unlisted companies.
As a result of the flotation or sale of their investments, the Funds may hold
listed securities and these may be distributed to the Company so that the
Company may from time to time hold listed securities which, however, are
unlikely to represent a significant part of the Company's investments.
The Company continues to invest in the Funds to meet existing commitments but
is not making commitments to new investments. The Company proposes to make
periodic returns of capital to shareholders from the return cash flows from the
Funds.
Gearing
In normal circumstances the Company does not expect to borrow. The Company's
Articles of Association limit borrowing to an amount broadly equal to its
capital and reserves. Some investments made by the Funds may be geared but the
Company does not review the level of gearing of these underlying investments.
Liquidity
Because of distributions from the Funds, the Company may hold substantial
balances of liquid funds. These are held principally in open-ended investment
funds pending investment in the Funds or distribution to shareholders.
Derivatives
The Company does not make use of financial derivatives and does not hedge
against currency fluctuations.
Distribution
The Funds provide little, if any, income. Income may be generated from liquid
funds and the Company may be required to pay dividends to continue to qualify
as an Investment Trust. Such dividends are, however, likely to be small and
irregular. In May 2008, shareholders approved the cancellation of the Company's
Share Premium Account which, subject to the necessary court approval, which was
obtained on 29 October 2008, permitted the creation of a special distribution
reserve. This enables the Company to make returns of capital to shareholders
from time to time. In December 2008, the Company made a Tender Offer to
shareholders with a value of up to £17.5 million, which was fully taken up.
Benchmark
NASDAQ Composite Index.
Continuation Vote
Shareholders will have the opportunity to vote at the Annual General Meeting in
2014 whether to continue the Company and at five yearly intervals thereafter.
Management
The Company is self-managed. The Company has appointed Campton Group, Inc.
("Campton") which is based in San Francisco as its investment adviser and has
provided it with finance with a view to developing Campton's private equity
fund-of-funds management and advisory business.
Financial Highlights
31 March 2003 = 100%
To 31 To 31 To 31 To 31 To 31 To 31 To 31
December July March March March March March
2008 2008 2008 2007 2006 2005 2004
Shareprice 156.35% 143.88% 167.12% 191.38% 187.59% 118.71% 113.32%
*
NASDAQ 117.59% 173.40% 169.93% 180.56% 174.46% 149.07% 148.69%
Composite
($)
*Ordinary share total return with dividends reinvested
Financial Position
As at 31 December As at 30 September
2008* 2008
Net assets and shareholders funds £82,052,000 £82,808,000
Net assets per ordinary share 234.74p 193.82p
Net assets and shareholder' funds $117,970,000 $147,601,000
in US $
Net assets per ordinary share in US 337.50c 345.47c
cents
Mid-market price per ordinary share 135.00p 132.50p
Discount to NAV 42.49% 31.64%
Exchange rate (US$ / £) 1.43775 1.78245
Figures exclude current period deficit
*December figures after repurchase of shares by tender in December 2008
LP Portfolio Revaluations
As at 31 December 2008 the Company's NAV included re-valuations by the Limited
Partnerships at the following dates:
APV Technology Partners III 30 September 2008
Bay III 30 September 2008
Crescendo IV 30 September 2008
Dawntreader Fund II 30 September 2008
Draper Fisher Jurvetson ePlanet Ventures 30 September 2008
Draper Fisher Jurvetson Fund VI 30 September 2008
Draper Fisher Jurvetson Fund VII 30 September 2008
Draper Fisher Jurvetson Gotham Venture Fund 30 September 2008
Focus Ventures II 30 September 2008
Francisco Partners II 30 September 2008
Institutional Venture Partners XII 30 September 2008
New Enterprise Associates 9 30 September 2008
New Enterprise Associates 10 30 September 2008
New Enterprise Associates 12 30 September 2008
Oak Investment Partners X 30 September 2008
Sprout Capital IX 30 September 2008
TCV IV 30 September 2008
Vanguard VII 30 September 2008
Vantagepoint Venture Partners IV 30 September 2008
Vantagepoint 2006 Fund 30 September 2008
Vector Capital IV 30 September 2008
Zone Ventures Fund II Annex 30 September 2008
Zone Ventures Fund II 30 September 2008
Share Premium Account
At the Extraordinary General Meeting held on 29 May 2008 Shareholders gave
approval, subject to the sanction of the court, for the cancellation of the
Company's entire Share Premium Account. This court sanction was obtained on 29
October 2008 and became effective on that date. The amount set free from this
cancellation has been used to create a special reserve which can be used for,
amongst other things, share buy-backs, distributions and writing off losses.
Campton
Campton, the Company's investment adviser, is continuing with its aim of
raising a new fund-of-funds vehicle. The global financial crisis has inevitably
slowed this effort but talks are continuing with a number of potential
investors.
Material Events
Tender Offer
On 21 November 2008, shareholders were sent a circular giving details of the
Company's proposal to make a Tender Offer to purchase shares with a value of
£17.5 million. An Extraordinary General Meeting was held on 11 December 2008 at
which shareholders approved a resolution allowing the Company to purchase
shares under the Tender Offer. The Tender Offer was completed on 15 December
2008 with a total of 7,769,733 shares being repurchased by the Company for
cancellation at the Tender Price of 225.2295 pence per share. Following
settlement of the Tender Offer, which was made on 18 December 2008, there are
now 34,953,675 shares in issue. It is the Company's intention periodically to
distribute surplus funds to shareholders.
During the three months to 31 December 2008, the Company received distributions
of cash and shares totalling $581,723. Limited Partnerships drew down
$2,817,087 during the three months.
Outlook
The election of Barak Obama as the new U.S. president has removed a good deal
of political uncertainty and the new administration is clearly pushing ahead
with an aggressive economic recovery package. President Obama's recovery
package contains a number of provisions, outlined in his "Blueprint for
Change", aimed at promoting innovation and technology which are likely, in
part, to be useful to the venture capital industry. The President has had a
close association with this industry over a number of years and has appointed a
number of prominent venture capitalists and technology entrepreneurs to various
posts in his administration. We believe these developments will be of
considerable benefit to the industry over the next few years.
PETER F.DICKS
Chairman
18 February 2009
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