Result hit by Slump in Venture Capital Markets - Change in Corporate Governance and Fee-Structure

Caused by recurring substantial write-downs Private Equity Holding AG reported a net loss of CHF 70.6 million in the first six months of the financial year 2000/2001. This compares with a net profit of CHF 63.4 million in the corresponding period of the previous year.
Capital gains on private equity investments which amounted to CHF 55.9 million in the first half of 2001/2002 (first half 2000/2001 CHF 85.0 million) were overcompensated by a number of negative effects. In particular the investments in venture capital suffered from the adverse market conditions.
From April 1 to September 30, 2001, consolidated equity declined from CHF 1.36 billion to CHF 1.19 billion. This change considers the application of the new International Accounting Standards (IAS 39) under which unrealized appreciation and depreciation are taken into ac-count within equity. Depreciation of value turning out to be permanent require booking in the income statement. Accordingly, as of September 30, unrealized losses of CHF 95 million were booked against equity. The company is fully invested with outstanding commitments of CHF 2.25 billion.
The closing of the secondary market transaction in October reduced debt levels to CHF 200 million. With the credit facility of up to CHF 500 million provided by Swiss Life/Rentenanstalt the financing of the company is secured.
The fair value per share declined from CHF 401.14 as of April 1, 2001, to CHF 273.20. This massive reduction was caused by the decline of the net asset value of the fund investments by CHF 506 million and by CHF 36 million for the direct investments. With CHF 438 million the venture capital funds contributed the largest share to this depreciation. Over the coming months the fair value development will continue to regress. The situation on the capital mar-kets rendering initial public offerings almost impossible coupled with an overall uncertain economic outlook leave little room for a short-term turnaround.

New Corporate Governance
Owing to the principles of modern corporate governance, the responsibilities and tasks of the Board of Directors and management were re-defined in a transparent fashion:

The Board of Directors will continue to be responsible for the ultimate management of the company and will as such define its strategic orientation and organization. In addition, the Board will be directly responsible for the investment strategy, asset allocation, group borrow-ings, as well as strategic and financial planning for the Private Equity Group overall. In support of these tasks, the Board resolved to appoint its Chairman, Dr. Marinus W. Keijzer, to the position of Delegate of the Board with additional executive responsibilities and supervisory tasks.
Within the context of the management mandate, Swiss Life Private Equity Partners will support him in his duties and will be responsible for the day to day operations. Beyond that Swiss Life Private Equity Partners will assume responsibility for the investment advisory and manage-ment, finance and reporting.
With this new organizational structure in place as of December 1, 2001, the current members of the Executive Board will resign from their functions. Dr. Dominik Meyer, Dr. Ulrich Geilinger and Christoph Huber will continue to provide their know-how to the company as partners or principal, respectively, of Swiss Life Private Equity Partners.

New Fee Structure
As an additional measure the fee structure was rendered more performance oriented and transparent and was brought in line with international standards. In the future the management fee will follow the development of the fair value of the portfolio. In addition, the performance-linked component of the fee will be coupled to the share price development. With the aim to increase transparency the concept of an all-in-fee was abandoned. In the future, corporate, transactions and administrative costs will be budgeted separately for approval by the Board. With this new concept in place, the annual management fee of approx. CHF 31.2 million will be reduced by about 25%. The new fee structure will become effective on January 1, 2002.
The Board of Directors views the new arrangement, which was defined together with Swiss LifePrivate Equity Partners, as an important contribution by the management partner to this new beginning and as a sign of the successful co-operation.
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Private Equity Holding AG (SWX: PEHN), managed by Swiss Life Private Equity Partners AG, offers investors the opportunity to invest, within a simple legal and tax optimized structure, in a broadly diversified and professionally managed private equity portfolio. As of September 30, 2001, the company held fund investments in 86 funds and direct investments in 46 companies. For further information: www.peh.ch or Eva Kalias, Investor Relations and Communications (phone +41-41-726 79 80).
The full semi-annual report as of 30 September 2001 is available on our website at www.peh.ch. from 16 October 2001. For this reason we will not provide a separate print copy or mailing at a later stage.

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