With the successful restructuring of Private Equity Holding through the completion of the CSFB transaction and the appointment of ALPHA Associates as the new manager, the financial year ended on a positive note for Private Equity Holding. The appointment of ALPHA Associates secures investment management know-how, continuity and expertise for Private Equity Holding. Based on the performance of the team and the quality of the services provided, the team received the full support of the board of directors of Private Equity Holding during the spin-out process from Swiss Life.
The Financial Year in Review
As of March 31, 2004, the fair value per share stood at EUR 33.44 (April 1, 2003: EUR 40.95). The decrease over the financial year is mainly due to (i) the implementation of PEH's commitment reduction strategy, (ii) write-downs on certain fund and direct investments in connection with new financing rounds and (iii) the weakening of the USD against the Euro.
The total investments were valued at EUR 181.5 million as of April 1, 2003; as of March 31, 2004, they amounted to EUR 147.5 million. This change results from exits from portfolio investments but also certain valuation adjustments related to market developments and operational issues of investee companies as well as currency effects.
The portfolio generated a positive cash flow with distributions received of EUR 13.5 million compared to draw downs of EUR 7.5 million.
The reporting period closed with a net loss of EUR 8.2 million. Permanent write-downs over the period were made in the amount of EUR 36.3 million. The profit-sharing arrangement with CSFB on a portion of the sold portfolio generated income in the amount of EUR 9.9 million; from swap transactions PEH realized foreign exchange gains of EUR 17.8 million, which are booked under other income.
CSFB Transaction Completed
The CSFB transaction was completed in February 2004 with the transfer of the last remaining funds. Private Equity Holding now has a debt-free balance sheet and retains a mature venture portfolio with reduced investment commitments.
Short-Term Strategic Goals Accomplished
As communicated at the Annual General Meeting in August 2003, the short-term strategic priorities were the further reduction of outstanding commitments in the portfolio, the realization of mature direct investments and selective follow-on investments.
During the financial year these goals were accomplished. Outstanding fund commitments were successfully reduced, bringing the total down to just 44% of the level as at beginning of the financial year, with EUR 17.6 million outstanding on March 31, 2004. Private Equity Holding realized some of its mature direct investments and invested in selected follow-on financing opportunities to prevent dilution and maximize returns.
New Long-Term Strategy
After the completion of the restructuring of Private Equity Holding, the board reviewed and discussed various strategic options and decided to focus on the development of a globally diversified venture portfolio. The strategy will also allow investment in later stage and buyout funds investing in traditional venture sectors such as technology and life science. Private Equity Holding will make new fund commitments to managers with top tier track records, acquire fund positions in the secondary market and make selective direct co-investments.
The venture market has consolidated and matured and now offers investment opportunities at attractive entry valuations. Private Equity Holding will aim to capitalize on this opportunity and build a focused portfolio diversified across stages, countries and industries through a combination of primary investments and secondary acquisitions. This said, the strategy remains a dynamic one and the continuous evaluation of opportunities outside the venture segment remains a task.
Outlook
As IPO activity is accelerating, with the number of venture-backed IPOs reaching highs not achieved since 2000, and the M&A markets are re-opening, Private Equity Holding expects an increased realization rate in the portfolio and distributions of proceeds by the funds. The portfolio of Private Equity Holding is relatively mature, and proceeds will allow new investments in interesting opportunities.
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The Annual Results Report as of March 31, 2004 is available on our website at www.peh.ch from May 4, 2004.
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Private Equity Holding AG (SWX: PEHN), managed by ALPHA Associates, offers investors the opportunity to invest, within a simple legal and tax optimized structure, in a broadly diversified and professionally managed private equity portfolio. For further information: www.peh.ch or Tamara Krebs, Investor Relations and Communications (phone +41 41 726 79 80).