Jpel Priv Eqty Regulatory News (JPEL)

26 Feb 2008 15:19

Bear Stearns Private Equity Limited26 February 2008 Unaudited Interim Report for period ended 31 December 2007 Chairman's Statement I am pleased to announce that against a backdrop of economic uncertainty andmarket volatility over the past six months, Bear Stearns Private Equity Limited("BSPEL" or the "Company") has continued to produce positive results andincreased shareholder value. For the six-months ended 31 December 2007, Equity Share net asset value ("NAV")rose 6.3% to $1.70 per share from $1.60 as at 30 June 2007. Since inception on30 June 2005, BSPEL has grown its Equity Share NAV by 66.7% and has delivered 10consecutive quarters of positive net asset value growth. Moreover, despite adifficult period in the equity markets, BSPEL's Equity Share price remainedintact. Over the six-month period ending 31 December 2007, BSPEL's Equity Shareprice decreased 1.3% to close at $1.49 per share. This is in contrast to theperformance of the LPX(R) Composite, a leading global listed private equityindex, which declined by 15.3% over the same period. The NAV of the Zero Dividend Preference Shares ("ZDP Shares") increased 3.6% to49.54p per share from 47.81p per share as at 30 June 2007, and has increased19.4% since inception on 30 June 2005. The ZDP Share price increased 5.1% overthe six month period, closing at 51.75p on 31 December 2007. BSPEL's high level of investment activity during the six months ended 31December 2007 resulted in a higher level of capital calls than distributions.Capital calls for the private equity portfolio totalled approximately $47.8million, versus $17.4 million for the six months ended 31 December 2006. Theportfolio produced $28.9 million of distributions over the period versus $14.9million produced during the six months ended 31 December 2006. Investment Activity BSPEL continued to invest at a brisk pace during the first half of the fiscalyear. The Company committed $196.5 million into a variety of strategies thatthe Managers believe will better position the portfolio for the currentdifficult economic environment. The Company purchased interests in 22 privateequity funds and made its largest co-investment to date. This investmentactivity, coupled with performance gains, increased BSPEL's private equity NAVfrom $260.0 million at 30 June 2007 to $388.8 million at the end of the period,while total assets increased from $521.2 million to $542.1 million. Cashdecreased from $265.4 million as at 30 June 2007 to $153.4 million at the end ofthe period. As at 31 December 2007, private equity comprised approximately 72%of BSPEL's NAV. Secondary Commitments During the six months ended 31 December 2007, BSPEL committed $82.9 million tosecondary interests in 16 private equity funds. These interests werewell-funded at the time of purchase and are consistent with BSPEL's emphasis onthe distressed, turnaround, and restructuring sectors. The majority of theseinvestments were acquired through the purchase of a $63 million portfolio. Primary Commitments BSPEL committed $88.4 million to primary interests in six funds during theperiod. These funds represent a broad array of niche investment strategies,including a sector-specific fund focused on aviation opportunities,infrastructure funds, and additional lower middle market buyout funds. Theseprimary investments also demonstrate a diverse geographical mix with strongweighting toward pan-European and Asian funds. Consistent with the Company'sstrategy of investing in seasoned assets, four of these primary fund commitmentswere "funded primaries", and one was the result of a "stapled transaction" inwhich a secondary asset was bundled with a primary commitment. Co-Investments BSPEL made its seventh co-investment during the six months ended 31 December2007, investing €17.3 million into one of Germany's largest cable companies.The interest was acquired from a minority seller and is currently BSPEL'slargest single company interest. BSPEL continues to examine additionalco-investment opportunities. Optional Bi-Annual Redemption Facility In accordance with the Company's bi-annual redemption policy, on 10 August 2007BSPEL redeemed 3,597,890 Equity Shares and 3,375 ZDP Shares at their respectiveunaudited 30 June 2007 NAVs of $1.55 per share and 47.81p per share. At the Company's 8 October 2007 board meeting, the Board of Directors resolvedto give shareholders the opportunity to redeem up to 15% of the Equity Sharesand 15% of the ZDP Shares in issue on 31 December 2007. On 9 November 2007, the Board of Directors sent notice to Shareholders that anExtraordinary General Meeting would be held to, among other things, amend theCompany's Articles to allow the Company to hold Treasury Shares. This had theimmediate effect of replacing the Redemption Facility with a Share TenderFacility, and the resolution was passed at the Extraordinary General Meetingheld 28 November 2007. On 25 January 2008, BSPEL tendered 24,460,438 Equity Shares at the unaudited 31December 2007 Equity Share NAV of $1.70 per share and 274,822 ZDP Shares at the31 December 2007 ZDP Share NAV of 49.54p per share. Immediately following theTender Offer, the Company's issued share capital consisted of 260,837,918 EquityShares and 59,196,837 ZDP Shares (excluding those shares held in treasuryfollowing the Tender Offer). Share Buyback Following approval from the Board of Directors, the Company enacted a sharebuyback program from 17 August through 24 August and cancelled 1,130,000 sharesat a total cost of approximately $1.6 million. Following the conclusion of thebuyback period, there were 285,298,356 Equity Shares outstanding. Board On a 12 October 2007 Board of Directors meeting, the Board accepted theresignation of Mr. Paul Sanabria and appointed Mr. Troy Duncan as an executivedirector of the Company. Mr. Duncan, a US resident, is a Senior ManagingDirector at Bear Stearns Asset Management Inc. I would like to thank Paul forall of his contributions since BSPEL's inception. Principal Risks and Uncertainties The Managers believe that for the remaining six months of the financial year,BSPEL's principal risks relate to (i) the performance of its existing privateequity portfolio and the ability of the underlying fund managers to source andinvest in new assets, (ii) the competitive nature of the secondary privateequity market for transactions not sought on a proprietary basis, and (iii)shifts in the global credit and economic markets that may impact M&A and IPOactivity in the short term. Outlook BSPEL believes that the current credit market environment and economicturbulence will provide attractive investment opportunities. The Company isexperiencing an increase in secondary market deal flow across the globe asliquidity issues become more pronounced. In addition, the Managers haveconstructed a private equity portfolio that emphasizes lower middle marketbuyout and special situations funds - strategies that the Manager believes arebetter insulated against negative market factors. Furthermore, the Company hasavoided exposure to strategies most susceptible to various stresses in theglobal credit markets, including large cap US and European buyout and realestate funds. BSPEL will continue to deploy capital into conservativeinvestments with the goal of delivering consistent risk-adjusted returns. Trevor AshChairman26 February 2008 Responsibility Statement The Directors confirm to the best of their knowledge: a. The Interim Report includes a fair review of the information requiredby the FSA's Disclosure and Transparency Rules 4.2.7R; and b. The Interim Report includes a fair review of the information requiredby the Disclosure and Transparency Rules 4.2.8R (disclosure of related partytransactions and changes therein). The Interim Report was approved by the Board on 26 February 2008 and the aboveresponsibility statement was signed on its behalf by Trevor AshChairman Unaudited Consolidated Balance Sheet at 31 December 2007 31/12/2007 30/6/2007 £'000 £'000 Non-current assetsInvestments 227,836 150,460 Current assetsCash and cash equivalents 78,243 132,177Receivables 690 500 78,933 132,677Current liabilitiesPayables and accruals (940) (2,768) Net current assets 77,993 129,909 Non-current liabilitiesLoan (17,281) (14,876)Zero dividend preference shares (29,461) (28,433) (46,742) (43,309) Net assets 259,087 237,060 Represented by: Share Capital 29 29Reserves 243,608 230,972 Total equity attributable to equity holders of the Company 243,637 231,001 Minority Interest 15,450 6,059 Total equity 259,087 237,060 NAV per Equity share £0.85 £0.80 Unaudited Consolidated Income Statement for the period ended 31 December 2007 01/07/2007 01/07/2006 to to 31/12/2007 31/12/2006 £'000 £'000IncomeInterest income 2,304 598 Expenses Investment management fee (1,285) (306)Administrative fee (92) (50)Audit fee (15) (9)Directors' fees (35) (12)Performance fee - (674)Other expenses (643) (664) Total Expenses (2,070) (1,715) Net profit/(loss) before finance costs 234 (1,117) Finance costsInterest payable (1,437) (980) Gains from investmentsNet gains on investments 12,324 14,436 Profit for the period 11,121 12,339 Attributable to equity holders of the Company 9,491 12,339Attributable to minority interests 1,630 - 9,897 12,339 Basic earnings per share 3.88p 12.88p All items in the above statement are derived from continuing operations. Unaudited Consolidated Statement of Changes in Equity for the period ended 31December 2007 Share Share Accumulated Capital Currency Capital Special Total Minority Total Capital Premium Losses Reserve Translation Redemption Distributable Interest Reserve Reserve Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 July 29 154,329 (6,590) 43,487 (11,546) 1 51,291 231,001 6,059 237,0602007 Redemption of - - - - - - (3,385) (3,385) - (3,385)equity shares Effect of - - - - 6,530 - - 6,530 803 7,333translationofpresentationcurrency Movement for - - (1,127) 10,618 - - - 9,491 1,630 11,121the period Issue of - - - - - - - - 6,958 6,958shares insubsidiary tominorityinterests At 31 29 154,329 (7,717) 54,105 (5,016) 1 47,906 243,637 15,450 259,087December 2007 Unaudited Consolidated Statement of Changes in Equity for the period ended 31December 2006 Share Share Accumulated Capital Currency Special Total Capital Premium Losses Reserve Translation Distributable Reserve Reserve £'000 £'000 £'000 £000's £'000 £'000 £'000 At 1 July 2006 9 - (1,273) 7,459 (1,457) 57,260 61,998 Issue of equity - - - - - - -shares Redemption of - - - - (334) (334)equity shares Issue costs - - - - - - - Effect of - - - - (3,202) - (3,202)translation topresentationcurrency Movement for the - - (2,097) 14,436 - - 12,339period At 31 December 9 - (3,370) 21,895 -4,659 56,926 70,8012006 Unaudited Consolidated Statement of Cash Flows for the period ended 31 December 2007 01/07/2007 01/07/2006 to to 31/12/2007 31/12/2006 £'000 £'000 Operating activitiesProfit for the period 11,121 12,339Adjustments for:Interest income (2,304) (598)Interest expense 1,437 980Net gains on investments (12,324) (14,436) Operating cash flows before changes in working capital (2,070) (519) Decrease/(Increase) in receivables 57 (99)(Decrease)/Increase in payables (1,817) 994 Cash flows from operating activities (3,830) 376 Investing activitiesPurchase of investments (75,514) (29,501)Return of capital from investments 14,098 7,874Interest received 2,304 598 Cash flows from investing activities (59,112) (21,029) Financing activitiesEquity shares buy back (3,532) (333)Zero dividend preference shares buyback (2) -Loan proceeds received 2,172 -Interest paid (434) -Issue of shares in subsidiary to minority interest 6,790 - Cash flows from financing activities 4,994 (333) Net decrease in cash and cash equivalents (57,948) (22,182)Cash and cash equivalents at 1 July 2007 132,177 40,216Effects of exchange difference arising from cash and cash 4,014 (499)equivalentsCash and cash equivalents at 31 December 2007 78,243 17,535 Bear Stearns Private Equity Limited ("the Company") is a closed-ended investmentfund incorporated as a limited liability company in Guernsey under the Companies(Guernsey) Law, 1994 on 28 April 2005. The Company's capital structure consistsof two classes of shares, Equity Shares and Zero Dividend Preference Shares,both listed on the London Stock Exchange. The primary objective of the Company and its subsidiaries ("the Group") is toachieve capital growth, with income as secondary objective, from a diversifiedportfolio consisting predominantly of private equity limited partnershipinterests, whilst also employing an enhanced cash management strategy, includingdiversified investment in, amongst other things, funds of hedge funds and hedgefunds. The Group may also invest directly in private equity investments. STATEMENT OF COMPLIANCE These condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting (IFRS) IAS 34 InterimFinancial Reporting. They do not include all of the information required forfull annual financial statements, and should be read in conjunction with theconsolidated financial statements of the Group as at and for the year ended 30June 2007. These condensed consolidated interim financial statements were approved by theBoard of Directors on 26 February 2008. SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied by the Group in these condensed consolidatedinterim financial statements are the same as those applied by the Group in itsconsolidated financial statements as at and for the year ended 30 June 2007. RELATED PARTY TRANSACTIONS Mr. Sanabria was until the date of his retirement on 12 October 2007, themanaging director of Bear Stearns Asset Management Inc., the Manager (as to thePrivate Equity Portfolio and as to the Enhanced Cash Management Strategy) to theGroup. Mr. Duncan, who was appointed as a Director on 12 October 2007 is the ManagingDirector Principal of Bear Stearns Asset Management Inc., the Manager (as to thePrivate Equity Portfolio and as to the Enhanced Cash Management Strategy) to theGroup. The Directors do not hold directly or indirectly shares in the Group. From 1 January 2007 Mr. Ash is entitled to receive Directors fees of £25,000 perannum (previously £20,000), Mr. Loudon and Mr. Spencer are each entitled toreceive Directors fees of £20,000 per annum (previously £15,000). The Manager, Bear Stearns Asset Management Inc., is entitled to a basemanagement fee, payable monthly in arrears of 1.00 per cent. per annum of theaggregate Net Asset Value of the Equity Shares and the ZDP Shares The managementfee due payable at 31 December 2007 was £449,724 (2006: £147,109). The Manageris also entitled to a performance fee if the aggregate Net Asset Value of theEquity Shares and the ZDP Shares at the end of the performance period exceedsthe aggregate Net Assets at the start of the performance period by more than 8per cent. The amount of such performance fee will be 7.5 per cent of the totalincrease in aggregate Net Asset Value above the performance hurdle. Theperformance fee accrued at 31 December 2007 was £nil (2006: £836,815). The Administrator is entitled to an annual fee in respect of administration andcompany secretarial services calculated on the Total Assets of the Company of0.125 per cent. on the first $100 million, 0.1 per cent on the next $50 million,0.075 per cent. on the next $50 million and 0.05 per cent on the balance subjectto a minimum of $125,000. The fee is payable monthly in arrears. Theadministration fee due payable at 31 December 2007 was £49,167 (2006: £40,503). LOANS The Group has entered into a Revolving Loan Facility with the Bank of Scotland.The facility is for €35,000,000 and may be drawn down in Euros, Sterling or USDollars. Borrowed funds bear interest at a rate of LIBOR, or if the loan is inEuro EURIBOR, plus 1.75%. The maturity date of the facility is 2 May 2012. Theloan is secured over the Group's interest in the BoS Mezzanine Partners Fund, LPand its rights under the related limited partnership agreement. SUBSIDIARIES Name Country of % Holding Incorporation BSPEL Mezzanine Funding Limited Guernsey 100% BSPEL/MIGDAL Mezzanine Limited Guernsey 80% Hunter Acquisition Limited (acquired September 2007) Guernsey 65.3% All subsidiaries were incorporated by the Company. This information is provided by RNS The company news service from the London Stock Exchange