30 November 2007, 16:23
Private Equity Inv: Half-yearly Report
PRIVATE EQUITY INVESTOR PLC
Half-Yearly Report 30 September 2007
INVESTMENT OBJECTIVE AND POLICY
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, in 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 the long-term. The Company's policy has been to invest 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 their strength and quality of deal flow.
PERFORMANCE STATISTICS
30 September 31 March % change
2007 2007
Net Asset Value per ordinary share 171.51p 173.42p (1.10)
("NAV")*
NAV per ordinary share in US#cents 349.43c 340.14c 2.73
Mid market price per ordinary share 155.00p 167.00p (7.19)
Discount to NAV 9.63% 3.70%
Total (loss)/return per ordinary share (1.44)p 2.64p
Exchange rate - US$/£ 2.03735 1.96135
* excludes current period revenue for 30 September 2007
CHAIRMAN'S STATEMENT
I am pleased to present the interim results for Private Equity Investor PLC
("PEI" or "the Company") for the six months ended 30 September 2007. During the
period, the Company's Net Asset Value ("NAV") decreased from 173.42 pence per
share to 171.51 pence per share, but increased in dollar terms from 340.14
cents per share to 349.43 cents per share, or approximately 2.7%. During the
same period the NASDAQ Composite Index rose by 11.6% (from 2421.6 to 2701.5)
and the US dollar/sterling exchange rate moved from $1.96 to $2.04.
No dividend is proposed for the period.
Portfolio Review
As at 30 September 2007 the Company was invested in 23 venture funds and these
holdings were valued at $105.2 million. PEI's cash and readily realisable
assets totalled $69.1 million, compared with outstanding commitments of $28.8
million. Of this figure approximately $10.4 million is due to be called from
the original portfolio and $18.4 million from the five more recent holdings. In
the six month period to 30 September 2007 the Company paid $5.4 million in
capital drawdowns to its Limited Partnerships, of which $3.3 million was paid
in calls to the original Limited Partnerships, compared with $5.7 million for
the equivalent period to 30 September 2006.
Distributions received in the six month period to 30 September 2007 from PEI's
Limited Partnerships were $9.0 million compared with $15.9 million in the six
months to 31 March 2007 and $16.6 million for the equivalent period to 30
September 2006. Cash distributions accounted for $6.1 million and stock for
$2.9 million. The largest amounts of cash received came in the form of two cash
distributions: $1.6 million was received from Focus Ventures II as a result of
the sale of their shares in Isilon Systems which resulted in a 5.3x return on
the underlying investment and a further $1.6 million was received from
Dawntreader Fund II from the sale of their portfolio company ProactiveNet to
BMC Software, resulting in a 1.24x return on the underlying investment. Since
the period end the Company has received further distributions totalling $5.9
million ($5.8 million in cash and $0.1 million in stock).
During the period under review, six of PEI's underlying portfolio companies
undertook IPO's. These were:
EnerNOC (DFJ VI); a leading developer and provider of clean and intelligent
power solutions to commercial, institutional and industrial customers, as well
as electric power grid operators and utilities.
Data Domain (NEA 10); a provider of a disk and network based data protection
service.
Infinera (Sprout IX); a manufacturer of high capacity optical transmission
equipment for the service provider market.
Starent Networks (Focus II); a leading provider of networking solutions
required by mobile operators to provide multimedia services to their customers.
Virtusa (Focus II); an IT outsourcing solution providing IT offshoring
consulting and custom software development services.
Athenahealth (DFJ VII); a provider of Internet-based business services for
physician practices. Athenahealth was the largest IPO in the Technology sector
in the third quarter of 2007 ($113.2 million issue).
Also, since the period end two portfolio companies undertook IPO's; Compellent
Technologies (Crescendo IV) (the third best IPO debut of 2007) and Ulta Salon
(Oak X). A further six underlying companies also filed IPO Registration
Statements.
Tender Offer
On 12 November Shareholders were sent a circular informing them that the
Company was proposing to make a Tender Offer to shareholders to purchase shares
with a value of £12.5 million. An Extraordinary General Meeting will be held on
7 December at which approval of Shareholders will be sought to allow the
Company to purchase shares under the Tender Offer. The Board is unanimously
recommending shareholders to vote in favour of this Resolution as the Directors
intend to do in respect of their own beneficial holdings of shares. The Company
believes that a Tender Offer is an equitable way to distribute surplus
available cash to all shareholders on a pro-rata basis at a purchase price
close to the Net Asset Value. To the extent that fewer than all the shares
available for purchase under the scheme are tendered in the offer, the Company
will retain the right to utilise the remainder of its authority to make
individual market purchases of shares. It is envisaged that after the Tender
Offer the Company will continue periodically to distribute surplus funds to
shareholders.
Campton Group Update
The circular also noted that the Board had allocated $40 million to assist the
Campton Group in developing its business. Campton advises the Company on its
existing portfolio and intends to develop a fund of funds management and
advisory business that may provide its services both to the Company and to
third parties. While the business of Campton is being developed the Company has
made a number of commitments to highly regarded venture capital funds with the
intention of transferring these to a new fund of funds vehicle to be raised by
the Company and Campton. Providing that Campton is successful in its fund
raising activities PEI will be reimbursed for its contribution to the fund
launch costs as well as for the cost of the recently committed "warehoused"
funds. The Company believes that these warehoused commitments will be the
cornerstone of a new fund of funds and that the Company will benefit from this
through the development of Campton's fund management business in which it will
have a significant interest.
Outlook
Sixty-seven venture-backed mergers and acquisitions were completed in the third
quarter of 2007, thirty four of which had disclosed values totalling $7.7
billion, according to the Exit Poll report by Thomson Financial and the NVCA.
This dollar volume represents a 104% increase from the same quarter last year.
Additionally, the average disclosed acquisition value was at its highest level
since the fourth quarter of 2000. The venture-backed IPO market had twelve
offerings for $945.2 million in Q3 2007, a slight increase from the same
quarter last year when $934.2 million was raised from eight offerings.
Despite the third quarter of 2007 being marked by significant stock market
volatility and growing concerns about the state of sub-prime mortgages, the
market saw strong M&A transactions and a growing pipeline of venture-backed
companies in registration.
There has recently been substantial turbulence in financial markets and, in the
short term at least, this may result in fewer M&A transactions and a more
difficult IPO market. However, the Company has a diversified portfolio of
venture capital assets (which are principally equity rather than debt financed)
and which we believe will prove resilient.
Peter F.Dicks
Chairman
30 November 2007
INTERIM MANAGEMENT REPORT
This Half-Yearly Report is the first such report to be published by this
Company under the Disclosure and Transparency Rules ("DTR") that apply to all
listed companies with accounting periods commencing after 20 January 2007.
Under the DTR the company is required to make a number of new disclosures,
including those on this page.
The important events that have occurred during the period under review are set
out in the Chairman's Statement. The key factors influencing the financial
statements aren also set out in the Chairman's Statement.
The principal risks and uncertainties for the remaining six months of the
financial year are reviewed in the Outlook section of the Chairman's Statement.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements contained within the Half-Yearly
Report have been prepared in accordance with applicable accounting standards in
the United Kingdom, and give a true and fair view of the assets, liabilities,
financial position and profit of the Company as required by the Disclosure and
Transparency Rules ("DTR") 4.2.4R;
(b) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of the important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(c) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have been materially affected the financial position
or performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
This Half-Yearly Report was approved by the Board of Directors on 30 November
2007 and the above responsibility statement was signed on its behalf by Peter
F. Dicks, Chairman.
INCOME STATEMENT (unaudited)
for the six months to 30 September 2007
2007 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (857) (857) - 964 964
investments at fair value
Exchange losses on capital - (95) (95) - (265) (265)
items
Income 846 - 846 558 - 558
Expenses (617) - (617) (279) - (279)
Net return before taxation 229 (952) (723) 279 699 978
Taxation - - - - - -
Net return after taxation 229 (952) (723) 279 699 978
Return/(loss) per ordinary
- share basic and diluted 0.46p (1.90)p (1.44)p 0.56p 1.40p 1.96p
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are both prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the period.
SUMMARISED BALANCE SHEET (unaudited)
As at As at As at
30 September 31 March 30 September
2007 2007 2006
£'000 £'000 £'000
Fixed assets
Investments at fair 82,761 85,286 76,892
value
Net current assets 3,224 1,422 9,477
Net assets 85,985 86,708 86,369
Share capital and
reserves
Called up share 5 5 5
capital
Share premium 96,862 96,862 96,862
account
Capital reserves 13,155 13,143 13,309
realised
Capital reserves (24,839) (23,875) (23,950)
unrealised
Revenue reserve 802 573 143
Total equity
shareholders' funds 85,985 86,708 86,369
Net asset value per
ordinary share
(excluding current
period return at
30 September 2007
and 30 September 171.51p 173.42p 172.18p
2006)
SUMMARISED STATEMENT OF CASH FLOWS (unaudited)
for the six months to 30 September 2007
2007 2006
£'000 £'000
Net cash inflow from operating 116 311
activities
Capital expenditure and financial
investment
Purchases of investments (2,734) (4,995)
Sales of investments 4,697 13,415
Realised exchange losses on settlement (19) (34)
Net cash inflow from capital
expenditure and
financial investment 1,944 8,386
Increase in cash 2,060 8,697
INVESTMENT PORTFOLIO
at 30 September 2007
Total Market Market % of
commitment value value net
US$'000 US$'000 £'000 assets
Unquoted Venture Capital Funds
APV Technology Partners III 5,000 882 433 0.5
Bay III 5,000 686 337 0.4
Crescendo IV 10,000 4,301 2,111 2.5
Draper Fisher Jurvetson 30,000 16,967 8,328 9.7
E-Planet
Draper Fisher Jurvetson Fund 2,000 1,711 840 1.0
VI*
Draper Fisher Jurvetson Fund 5,000 3,111 1,527 1.8
VII
Draper Fisher Jurvetson Gotham 3,000 2,018 990 1.2
Focus Ventures II 30,000 14,625 7,178 8.3
Francisco Partners II 5,000 1,766 867 1.0
IVP XII 5,000 - - -
New Enterprise Associates 9 5,000 1,731 850 1.0
New Enterprise Associates 10 10,000 6,907 3,390 3.9
New Enterprise Associates 12 3,000 781 383 0.4
Oak Investment Partners X 10,000 5,592 2,745 3.2
Sprout Capital IX 3,750 2,150 1,055 1.2
Technology Crossover Ventures 25,000 9,427 4,627 5.4
IV
Vanguard VII 3,000 1,345 660 0.8
Vantagepoint 2006 Fund 5,000 316 155 0.2
Vantagepoint IV 10,000 8,072 3,962 4.6
Vector Capital IV 4,000 161 79 0.1
Wit Dawntreader Fund II 30,000 16,352 8,026 9.3
Zone Ventures II 10,000 5,779 2,836 3.3
Zone Ventures Fund II Annex 400 547 269 0.3
Total Unquoted Venture Capital 219,150 105,227 51,648 60.1
Funds
Open-ended Investment Funds
Global Treasury Funds Plc - 21,000 10,308 12.0
JP Morgan USD Liquidity - 20,000 9,816 11.4
Distribution Fund
Merrill Lynch Instituitional - 21,000 10,308 12.0
USD Fund
Total Open-ended Investment - 62,000 30,432 35.4
Funds
Other investments held
directly by the Company
Common Stock**
Bakbone Software Inc - 30 15 -
Broadcom Corporation Class A - 21 11 -
DivX Inc - 885 434 0.5
- 936 460 0.5
Campton Group Inc
Convertible Note - 250 123 0.2
Promissory Note - 200 98 0.1
Total other investments - 1,386 681 0.8
Total investments 219,150 168,613 82,761 96.3
Net current assets 6,568 3,224 3.7
Net assets 175,181 85,985 100.0
* Stated at the adjusted June 2007 revaluation.
** These were acquired as distributions from the portfolio of Venture Funds.
NOTES TO THE FINANCIAL STATEMENTS
at 30 September 2007
1 Financial information
The financial information contained in this report does not constitute full
statutory accounts as defined in section 240 of the Companies Act 1985. The
financial information for the six months ended 30 September 2007 and 30
September 2006 has not been audited nor reviewed by the Company's Auditor
pursuant to the Auditing Practices Board guidance on such reviews.
The information for the year ended 31 March 2007 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditors on those financial
statements contained no qualification or statement under sections 237 (2) or
(3) of the Companies Act 1985.
2 Tax credit/charge on ordinary activities
The tax charge for the half-year is nil (30 September 2006: nil; 31 March 2007:
nil) based on an estimated effective tax rate of 0% for the year ending 31
March 2008. The estimated effective tax rate is 0% as investment gains are
exempt from Capital Gains Tax owing to the Company's status as an Investment
Trust. There is expected to be an excess of management expenses over taxable
income and therefore there is no liability to Corporation Tax during the
half-year to
30 September 2007 (30 September 2006: nil; 31 March 2007: nil).
3 Reconciliation of net return before taxation to net cash inflow from
operating activities
6 months 6 months
to to
30 30
September September
2007 2006
£'000 £'000
Net return before taxation 229 279
(Decrease) / increase in creditors (15) 39
Increase in prepayments and accrued (98) (7)
income
Net cash inflow from operating activities 116 311
4 Reconciliation of net cash flow to net funds
2007 2006
£'000 £'000
Increase in cash in the period 2,060 8,697
Effect of foreign exchange rate movements (74) (207)
Movement in net funds 1,986 8,490
Net Funds at begining of the period 723 937
Net funds at the end of the period 2,709 9,427
Net funds are comprised as follows:
2007 2006
£'000 £'000
Cash at bank 2,709 9,427
5 Accounting policies
The financial statements are prepared on the basis of the accounting policies
set out in note 2 of the annual financial statements for the year ended 31
March 2007.
Copies of the interim report may be obtained from the Company Secretary or
downloaded from the website www.peiplc.com
END
Return to Regulatory News Index
|
