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Highlights
Peter Dicks, Chairman, said “The Company now has 21 venture fund investments and for all practical purposes is fully invested. The overall environment for venture capital and private equity firms remains good and I look forward to reporting to you on developments as they occur.” For further information please contact:
Chairman’s StatementResultsI am pleased to present Private Equity Investor’s interim results for the six months ended 30 September 2004. During this period, net assets attributable to ordinary shareholders decreased from 127.9 pence per share to 122.9 pence per share. In dollar terms, there was a decrease from $2.35 per share to $2.22 per share. Much of this decline was caused by a fall in the value of quoted shares held by one of the underlying partnerships. During the same period, the NASDAQ composite index fell by 5.9% from 2015.01 to 1896.84. This, however, compares with a 48% rise for this index for the twelve months ending 31 March 2004. No dividend is proposed for the period under review. The pace of distributions from our Limited Partnerships remained relatively steady with $3.4 million being received in the six month period to 30 September 2004, compared with $5.5 million in the six months to 31 March 2004 and $3.2 million for the equivalent period to 30 September 2003. Market OverviewThe overall environment for venture capital and private equity firms remains good. Institutional support for new funds raised by venture groups with good records was strong with a number of funds being significantly over-subscribed. For the first nine months of 2004 venture capital investment in the USA totalled $15.3 billion, compared with $13.3 billion for the first nine months of 2003, and should exceed 2003’s total of $18.7 billion dollars (National Venture Capital Association (NVCA)). During the third quarter of the current year, more companies received an initial venture capital investment than at any time in the last two years with software, biotechnology and medical services being the most popular sectors. Some 24 venture backed companies raised $3.2 billion through initial public offerings (IPOs) in the third quarter (according to Thompson Venture Economics and the NVCA). The third quarter figure was boosted by the Google offering which alone raised $1.7 billion. The second largest venture backed IPO during the third quarter was that of Mortgage IT inc. which raised $175 million – PEI owns a portion of Mortgage IT through its holdings of Dawntreader Fund II and Wit VC Fund I. From an activity standpoint, this was the strongest quarter for IPOs since the fourth quarter of 2000 when 27 companies went public. Portfolio ReviewAs at 30 September 2004, our Limited Partnerships were invested in 518 private companies valued at $4,442 million and 48 public companies valued at $1,241 million. Distributions from the portfolio during the period amounted to $3.4 million whilst the cost attributed to these investments amounted to $0.75 million. During the period under review the Company made one new commitment to Oak XI a leading technology-focused fund. Oak is one of the longer established US venture groups, being founded in 1978. In the six months under review six of PEI’s underlying portfolio companies undertook IPOs. These are:
The Company’s investment in the FRM Absolute Alpha Diversified US Dollar Fund, in line with many other hedge funds over the same period, recorded a slower performance as global markets offered limited trading opportunities. FRM is a well-established manager in this field, however, with a good record over a several year period. Benefiting from more active markets in October and November, the Fund’s recent performance has been encouraging. Board ChangesOn 22 October 2004, shareholders approved a number of changes to the Company’s capital structure, through the re-purchase and cancellation of the Loan Notes owned by certain Directors. At the same time, the Board was restructured. Following these changes, the Company will continue as a self-managed investment trust, with a currently unchanged investment policy, although the implementation of this policy is now likely to involve monitoring rather than making new investments. The restructuring resulted in exceptional costs in the period under review. However, there will be cost savings in the operation of the business arising from the change from active management to a monitoring approach. OutlookThe Company has 21 venture fund investments and for all practical purposes is fully invested. With investors remaining selective, IPOs that have taken place are generally of strong, reasonably priced companies which, for the most part, have shown good after market performance. The recent public offerings for Mortgage IT and Pharmion, two of PEI’s underlying holdings, are good examples of investor attitudes. Of the 24 companies which went public in the USA during the third quarter, it is noteworthy that, as at 1 October 2004, the great majority were currently trading above their offering price. An article published by Barrons On-Line in August highlighted 12 companies to watch as potential IPOs in 2005. PEI has interests in six of these companies. With regard to two portfolio companies which we have discussed previously, DivX Networks, a consumer-focused video technology company, recently completed a new round of financing adding Samsung and Kleiner Perkins Caulfield & Byers as new investors, while Baidu, the most widely used search engine in China, also received a new investment from Google. Zone Ventures own approximately 20% of DivX Networks and DFJ ePlanet 23% of Baidu. I look forward to reporting to you on developments as they occur. Peter Dicks 15 December 2004 Summarised Statement of Total Return (unaudited)(incorporating the Revenue Account*)
*The revenue column of this statement is the revenue account of the Company. All revenue and capital items in the above statement derive from continuing operations. These accounts have been prepared using the accounting standards and policies adopted at the previous year end. Summarised Balance Sheet (unaudited)
Summarised Statement of Cash Flows (unaudited)
The above financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The audited accounts for the period to 31 March 2004, which contained an unqualified auditors’ report, have been lodged with the Registrar of Companies and did not contain a statement required under Section 237(2) or (3) of the Companies Act 1985. Copies of the Interim Report will be sent to members in January 2005 and will be available to members of the public from the Registered Office at 23 Cathedral Yard, Exeter, EX1 1HB. Notes to editors The Company seeks to achieve substantial capital appreciation by investing in emerging growth companies through specialised US venture capital funds focused on the information technology, biotechnology and healthcare sectors. Return to Press Release Index
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