15 February 2010, 15:46
Private Equity Inv: Interim Management Statement
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Private Equity Investor Plc
Interim Management Statement - 3 Months to 31 December 2009
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 those funds that are not yet full drawn down or
distributions 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 received the necessary court approval on 29 October
2008, permitting 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 2004 = 100%
To 31 To 31 July To 31 To 31 To 31 To 31 To 31
2009 March March March March March
December 2008 2007 2006 2005
2009
2009
Shareprice 115.96% 118.96% 113.46% 147.47% 168.88% 165.53% 104.75%
*
NASDAQ 113.79% 99.21% 76.65% 114.29% 121.43% 117.33% 100.25%
Composite
($)
*Ordinary share total return with dividends reinvested
The above performance was following the return of £12,500,000 and £17,500,000
in December 2007 and 2008 respectively.
Financial Position
As at 31 December As at 30 September
2009 2009
Net assets and shareholders funds £68,142,000 £69,020,000
Net assets per ordinary share 194.95p 197.46p
Net assets and shareholder' funds $110,038,000 $110,387,000
in US $
Net assets per ordinary share in US 314.81c 315.81c
cents
Mid-market price per ordinary share 113.00p 129.50p
Discount to NAV 42.04% 34.42%
Exchange rate (US$ / £) 1.6149 1.5994
LP Portfolio Revaluations
As at 31 December 2009 the Company's NAV included re-valuations by the Limited
Partnerships at the following dates:
APV Technology Partners III 30 September 2009
Bay III 30 September 2009
Crescendo IV 30 September 2009
Dawntreader Fund II 30 September 2009
Draper Fisher Jurvetson ePlanet Ventures 30 September 2009
Draper Fisher Jurvetson Fund VI 30 September 2009
Draper Fisher Jurvetson Fund VII 30 September 2009
Draper Fisher Jurvetson Gotham Venture Fund 30 September 2009
Focus Ventures II 30 September 2009
Francisco Partners II 30 September 2009
Institutional Venture Partners XII 30 September 2009
New Enterprise Associates 9 30 September 2009
New Enterprise Associates 10 30 September 2009
New Enterprise Associates 12 30 September 2009
Oak Investment Partners X 30 September 2009
Sprout Capital IX 30 September 2009
TCV IV 30 September 2009
Vanguard VII 30 September 2009
VantagePoint Venture Partners IV 30 September 2009
VantagePoint 2006 Fund 30 September 2009
Vector Capital IV 30 September 2009
Zone Ventures Fund II Annex 30 September 2009
Zone Ventures Fund II 30 September 2009
Campton
As reported previously, Campton advises the Company on its existing portfolio
and has been developing a fund-of-funds management and advisory business. While
Campton's efforts to develop its business were held back as a result of
unsettled market conditions resulting from the global financial crisis these
efforts are continuing.
Material Events
There were no material events to report during the period under review.
Material Transactions
During the three months to 31 December 2009 the Company received distributions
of cash and shares from the Funds totalling $3,129,187. The Funds drew down
$1,100,500 during the three months.
Future Outlook
We are optimistic that IPO and M&A activity will pick up during the year but
this clearly depends on positive markets. If markets remain positive,
distributions should continue to improve as was evidenced during the last six
months. We remain encouraged by the quality of many of PEI's underlying
portfolio companies, which include a number of innovative technology companies
that are growing rapidly with little to no debt, and believe that further,
significant value will be released as markets improve.
The Company expects to continue to return cash to shareholders when cash
balances reach appropriate levels as a result of distributions from the
portfolio. In the meantime, the Board is critically aware of the discount to
NAV at which the Company's shares are quoted and continues to seek ways to
redress this. In the recent past, discussions have been held with prospective
purchasers for all or part of the portfolio, with a view to accelerating the
realisation of value. However, indicative offers to date have been such that
shareholders would not have received any higher value than the prevailing
market price of the shares.
PETER F.DICKS
Chairman
15 February 2010
END</pre>
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