In the course of the first quarter of the financial year 2003/2004 (April 1 - June 30, 2003), the fair value per share of Private Equity Holding declined from CHF 60.46 to CHF 57.64.
The value of the investments (long-term assets) of the retained portfolio contracted from CHF 268 million to CHF 254 million. Permanent write-downs of CHF 14 million were recorded in the income statement and upward value adjustments considered to be of temporary nature amounting to net CHF 4 million were booked against equity. The main reasons were a change in the portfolio composition, a realized loss on the sale of VantagePoint Venture Partners III (Q), LP, continued corrections of valuations in line with market developments as well as portfolio companies failing to resolve operational issues and to secure sufficient funding.
Outstanding commitments decreased further from CHF 58.6 million to CHF 54.4 million mainly due to the aforementioned sale of VantagePoint Venture Partners III (Q), LP. Total commitments declined from CHF 451 million as of April 1, 2003, to CHF 433 million as of June 30, 2003.
The realization of swap transactions to hedge the USD foreign currency exposure of the Group in connection with the Swiss Life loan resulted in a net income contribution of CHF 21.1 million. Lower interest payments related to the swaps as well as lower long-term borrowings resulted in significantly reduced financial expenses.
In summary, the reporting quarter closed with a net gain of CHF 4 million compared to a loss of CHF 34.8 million in the corresponding period of the previous year. For the first time in over two years, Private Equity Holding can report a quarterly profit.
Executing the CSFB Transaction
On June 18, 2003, final documents of the transaction with CSFB to refinance Private Equity Holding were signed. The transfer of the individual investments to the purchasers will be executed over the coming months. With the financing of Private Equity Holding secured through the CSFB-transaction, a sustainable platform for designing the future has been established.
Annual General Meeting
The Board of Directors proposes to the Annual General Meeting of August 26, 2003 a decrease of the company's share capital from CHF 450 million to CHF 45 million through a reduction of the nominal value of the shares from CHF 100 to CHF 10 per share; the amount of the decrease will be applied to reduce the loss carried forward. In addition the Board proposes to the shareholders to approve the creation of a new authorized capital, thereby giving the company the flexibility to react quickly at any time in the next two years to raise additional equity in the market if conditions are favorable. The main purpose of any increase in capital would be to further diversify the current portfolio.
Outlook
With regard to the private equity market we reconfirm our fundamentally positive outlook for the long term. In particular over the past few months, investors' views on the private equity markets have improved. Some markets have witnessed first public offerings suggestive of a re-opening of the IPO window.
Private Equity Holding's portfolio companies have a strong bias towards becoming viable businesses with value growth potential. In this environment, follow-on investments in the direct portfolio can be an interesting possibility and presently several such opportunities are being evaluated. In addition Private Equity Holding continues to actively work on reducing the amount of outstanding commitments.
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The 2002/2003 Annual Report is available electronically on the company's website (www.peh.ch) and copies can be obtained from Investor Relations. The complete Quarterly Report as of June 30, 2003 is available on our website at www.peh.ch from August 5, 2003.
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Private Equity Holding AG (SWX: PEHN), managed by Swiss Life Private Equity Partners, 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).
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