14 August 2009, 14:27
Private Equity Inv: Interim Management Statement
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Private Equity Investor Plc
Interim Management Statement - 4 Months to 31 July 2009
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.
Distributions
The Funds provide little 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 2007, the Company made a Tender Offer to shareholders with a
value of up to £12.5 million, which was fully taken up. After receiving
shareholder and court approval to cancel the Company's Share Premium Account in
November 2008 a special reserve, which is distributable, was created and the
Company made a further tender offer, of up to £17.5 million, in December 2008,
which was also 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 advisor. The
Company has previously provided Campton with finance with a view to developing
Campton's private equity fund-of-funds management and advisory business.
Campton
As reported previously, Campton advises the Company on its existing portfolio
and has been developing a fund-of-funds management and advisory business.
Campton's efforts to develop its business have been hindered as a result of the
global financial crisis. While Campton continues its efforts, the Company and
Campton are also exploring strategic alternatives for Campton's business.
Financial Highlights
31 March 2004 = 100%
To 31 July To 31 To 31 To 31 To 31 To 31
2009 March 2009 March 2008 March 2007 March 2006 March 2005
Share price 118.96% 113.46% 147.47% 168.88% 165.53% 104.75%
*
NASDAQ 99.21% 76.65% 114.26% 121.43% 117.33% 100.25%
Composite
*Ordinary share total return with dividends reinvested
Company's Financial Position
As at 31 July 2009 As at 31 March 200
9
Net assets and shareholders funds £65,300,000 £74,721,000
Net assets per ordinary share 186.82p 213.77p
Net assets and shareholder' funds $108,258,000 $107,101,000
in US $
Net assets per ordinary share in US 309.72c 306.41c
cents
Mid-market price per ordinary share 117.50p 110.50p
Discount to NAV 37.11% 48.31%
Exchange rate (US$ / £) 1.65785 1.43335
LP Portfolio Revaluations
As at 31 July 2009 the Company's NAV included re-valuations by the Limited
Partnerships at the following dates:
APV Technology Partners III 30 June 2009
Bay III 30 June 2009
Crescendo IV 30 June 2009
Dawntreader Fund II 31 March 2009
Draper Fisher Jurvetson ePlanet Ventures 30 June 2009
Draper Fisher Jurvetson Fund VI 31 March 2009
Draper Fisher Jurvetson Fund VII 31 March 2009
Draper Fisher Jurvetson Gotham Venture Fund 31 March 2009
Focus Ventures II 30 June 2009
Francisco Partners II 31 March 2009
Institutional Venture Partners XII 31 March 2009
New Enterprise Associates 9 30 June 2009
New Enterprise Associates 10 30 June 2009
New Enterprise Associates 12 30 June 2009
Oak Investment Partners X 30 June 2009
Sprout Capital IX 30 June 2009
TCV IV 30 June 2009
Vanguard VII 30 June 2009
VantagePoint Venture Partners IV 31 March 2009
VantagePoint 2006 Fund 31 March 2009
Vector Capital IV 31 March 2009
Zone Venture Fund II 30 June 2009
Zone Venture Fund II Annex 30 June 2009
Material Events
There were no material events to report during the period under review.
Material Transactions
During the four months to 31 July 2009 the Company received distributions of
cash and shares from the Funds totalling $2,438,000. The Funds drew down
$930,000 during the four months.
Future outlook
As previously reported to shareholders, the Chairman commented that: According
to the NVCA, there were no venture-backed IPOs in the first quarter of 2009,
marking the second consecutive quarter in which this was the case. With a
virtually non-existent IPO market, corporate acquirers are in a position to be
more selective and to take more time when considering acquisitions. Until these
circumstances change, the Company's receipt of distributions is likely to be
limited.
Despite a sluggish exit market, low valuations and an uncertain outlook, all is
not gloomy. We remain encouraged by the quality of many of PEI's underlying
portfolio companies. For instance, Cisco Systems announced in March that it
planned to acquire Pure Digital Technologies for $590 million in Cisco stock.
Pure Digital develops the popular and simple Flip cameras that are targeted
towards the mass consumer market and is an underlying portfolio company in
three of PEI's funds. Total proceeds from this acquisition approximate $2.3
million based on the current Cisco share price. BrightSource Energy, in which
VantagePoint Venture Partners has a 24% stake, recently executed a series of
contracts whereby it will construct and provide Southern California Edison with
1,300 megawatts of electricity generated through solar thermal power. This is
the largest solar power purchase agreement in history and represents more solar
power than currently exists, from all sources, in the United States today.
Although the current lack of exits will delay returns from existing investments
held by the Funds, we believe they contain many companies with significant
potential from which we expect to see substantial returns in due course. For
new investments, which will principally be made by the 2006/2007 Funds, entry
prices are attractive and investors can be highly selective. We believe that
these conditions are conducive to producing above average returns for
investors.
The Company will continue to buy back shares or make distributions as and when
cash resources reach an appropriate level. The Board also monitors the market
in secondary participations and if suitable terms become available would
consider taking advantages of these to realise holdings and increase cash held
by the Company earlier than would other wise be possible.
Annual General Meeting
The Company's Annual General Meeting of the Company will be held on Wednesday
16 September 2009 at 10.00am the offices of JP Morgan Cazenove and Co Limited,
20 Moorgate, London EC2R 6DA.
In addition the Ordinary Resolutions the Board are proposing one Special
Resolution to renew its authority to make market purchases of up to 14.99% of
the issued share capital. The Directors consider that all the resolutions to be
put to the meeting are in the best interests of the Company and its
shareholders as a whole. The Directors intend to vote in favour of all
resolutions in respect to shares owned or controlled by them.
Peter Dicks
Chairman
14 August 2009
END</pre>
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