Jpel Priv Eqty Regulatory News (JPEL)

30 Mar 2007 15:30

Bear Stearns Private Equity Limited30 March 2007 Bear Stearns Private Equity Limited30 March 2007 Interim Results for period ended 31 December 2006 Chairman's Statement I am pleased to announce that Bear Stearns Private Equity Limited ("BSPEL" orthe "Company") continued to produce positive returns for the six months ended 31December 2006. A robust private equity market, along with continued benefitfrom distribution activity and valuation uplifts among many of BSPEL's limitedpartnership interests, have resulted in the Company's strongest six-monthperformance to date. Equity Share net asset value ("NAV") rose 21.8% from $1.19 per share as at 30June 2006 to $1.45 per share. Since inception on 30 June 2005, BSPEL's NAV perEquity Share has grown 42.2%, representing an average annual return of 26.4%.Over the six-month period ending 31 December 2006, the price per Equity Sharetraded below reported NAV, averaging a 4.7% discount. The share price surpassedthe Equity Share at the end of the period, closing at $1.27 per share versus areported NAV of $1.26 per share. The NAV of the Zero Dividend Preference ("ZDP") Share has increased 11.2% sinceinception, and continues to trade at a slight premium to accreted value. For the six months ended 31 December 2006, BSPEL's cash-flow activity has beenvery balanced. The private equity portfolio called capital of approximately$17.4 million versus producing $14.9 million of distributions, resulting in anet outflow of $2.5 million. Investment Activity The six-month period witnessed a high level of investment activity. The Companypurchased interests in eleven private equity funds and made two co-investments.These investments represented total commitments of $62.1 million. As a resultof these new investments and the overall investment activity of the existingportfolio, BSPEL's private equity NAV grew from $89.8 million to $159.9 million,while total assets increased from $163.6 million to $192.5 million. As of 31December 2006, private equity comprised approximately 83% of the portfolio. Secondary Commitments During the six months ended 31 December 2006, BSPEL committed $43.5 million toeight private equity secondary interests. These investments, which wereapproximately 80% funded at purchase, are consistent with BSPEL's emphasis oninvesting in seasoned assets that provide the potential for both near-term cashdistributions as well as long-term NAV appreciation. The majority of theseinvestments were in pan-European funds with a broad industry focus. Six of thefunds follow buyout strategies, with the remaining two funds investing inventure and special situations, respectively. Primary Commitments BSPEL committed $14.5 million to three primary funds. Though the Companyprefers to commit capital to funded assets, it will on occasion consider primaryfund investments that are bundled with secondary acquisitions. These threeprimary fund commitments were made alongside secondary purchases, and includeglobal funds that invest primarily in Europe. Two of these commitments weremade to buyout strategy funds, and the remaining commitment was made to aspecial situations fund. Co-Investments BSPEL made its third and fourth co-investment during the six months ended 31December 2006. BSPEL invested alongside Penta Capital and Graphite Capital inthe leveraged buyout of a United Kingdom retail company, Penta Maldini LP.BSPEL's other co-investment was in Freescale Semiconductor, the world's tenthlargest chipmaker. This investment was made alongside several of the largestprivate equity houses, including The Blackstone Group, The Carlyle Group, TexasPacific Group and Permira Funds. BSPEL continues to actively evaluateco-investment opportunities. Optional Bi-Annual Redemption Facility At the Company's board meeting held on 27 October 2006, the Board of Directorsconsidered the appropriateness of offering shareholders the opportunity toparticipate in the bi-annual redemption facility, whereby shareholders couldredeem shares at the NAV as of the last day of December 2006. The Directorsresolved to give shareholders, if they so wished, the opportunity to redeem upto 15% of each class of the Company in issue on 31 December 2006. The notice to shareholders regarding the optional bi-annual redemption policywas published on 31 October 2006. None of the ZDP shareholders elected toredeem shares. Of the 95,787,049 Equity Shares outstanding as of 31 December2006, 7,628,577 elected by their shareholders to be redeemed. These shares wereredeemed at $1.45 per share for at total consideration of $11.1 million. Company Actions On 11 December 2006, the Company issued notices of (i) a Separate GeneralMeeting of ZDP Shareholders and (ii) Extraordinary General Meeting to considerproposals from the Board of Directors for the capital reorganisation of theCompany in order to convert the Company from its current split capital structureinto a conventional investment company. In addition, the Board proposedamendments to the borrowing and over-commitment policies, the managementagreement and the adoption of a new Articles of Association. After discussions with certain BSPEL shareholders, the Company announced on 11January 2007 that it convened the General Meeting without putting theaforementioned resolutions before shareholders. Outlook BSPEL believes that the market environment continues to be favorable for itsinvestment strategy and will seek to continue its focus of acquiring limitedpartnerships in the secondary market as well as selectively making directinvestments in individual companies. The Company will make primary investmentsin order to facilitate its secondary and co-investment activities. TheCompany's existing portfolio is well-diversified by fund manager, industry,geography, stage and vintage year - and it will seek to maintain this diversityas it adds new investments to the portfolio. Trevor AshChairman10 March 2007 Balance Sheet at 31 December 2006 (Unaudited) 31/12/2006 31/12/2005 £'000 £'000 Non-current assetsInvestments 81,645 21,885 Current assetsCash and cash equivalents 17,535 11,823Receivables 413 1,411 17,948 13,234Current liabilitiesPayables and accruals (1,347) (105) Net current assets 16,601 13,129 Non-current liabilitiesZero dividend preference shares (27,445) (14,257) 70,801 20,757Represented by: Share Capital 9 3Reserves 70,792 20,754 70,801 20,757 NAV per Equity share £0.74 £0.63 Income Statement for the period ended 31 December 2006(Unaudited) 01/07/2006 28/04/2005 to to 31/12/2006 31/12/2006 £'000 £'000IncomeInterest income 598 455 Expenses Investment management fee (306) (166)Valuers' fees - (74)Administrative fee (50) (35)Audit fee (9) (6)Directors' fees (12) (25)Performance fee (674) -Other expenses (664) (86) Total Expenses (1,715) (392) Net Operating (loss)/ profit before net finance costs (1,117) 63 Net finance costsInterest payable (980) (488) Gains from investmentsUnrealised gains on revaluation of investments 14,436 1,557 Profit for the period 12,339 1,132 Basic earnings per share 12.88p 3.42p All items in the above statement are derived from continuing operations. Statement of Changes in Equity for the period ended 31 December 2006 (Unaudited) Share Share Accumulated Capital Currency Special Total Capital Premium Losses Reserve Translation Distributable Reserve Reserve £'000 £'000 £'000 £'000 £000's £'000 £'000 At 1 July 9 - (1,273) 7,459 (1,457) 57,260 61,9982006 Issue of - - - - - - -equity shares Redemption of - - - - (334) (334)equity shares Issue costs - - - - - - - Effect of - - - - (3,202) - (3,202)translationtopresentationcurrency Movement for - - (2,097) 14,436 - - 12,339the period At 31 9 - (3,370) 21,895 (4,659) 56,926 70,801December 2006 Statement of Cash Flows for the period ended 31 December 2006 (Unaudited) 01/07/2006 28/04/2005 to to 31/12/2006 31/12/2005 £'000 £'000 Operating activitiesProfit for the period 12,339 1,132Adjustments for:Interest expense 980 488Unrealised gains from investments (14,436) (1,557) Operating (loss)/profit before changes in working capital (1,117) (63) Increase in receivables (99) (83)Increase in payables 994 105 Cash flows from operating activities (222) (85) Investing activitiesPurchase of investments (29,501) (23,566)Return of capital 7,874 1,911 Cash flows from investing activities (21,627) (21,655) Financing activitiesProceeds on issue of equity shares - 19,031Equity shares redemptions (333) -Issue costs - (447)Proceeds from issue of zero dividend preference shares - 13,757 Cash flows from financing activities (333) 32,341 Net (decrease)/increase in cash and cash equivalents (22,182) 10,771Effects of exchange difference arising from cash and cash (499) 1,052equivalentsCash and cash equivalents at 1 July 2006 40,216 - Cash and cash equivalents at 31 December 2006 17,535 11,823 SIGNIFICANT ACCOUNTING POLICIES 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 is to achieve capital growth, with incomeas secondary objective, from a diversified portfolio consisting predominantly ofprivate equity limited partnership interests, whilst also employing an enhancedcash management strategy, including diversified investment in, amongst otherthings, funds of hedge funds and hedge funds. The Company may also investdirectly in private equity investments. Statement of compliance The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") issued and adopted by the InternationalAccounting Standards Board (the "IASB"), interpretations issued by theInternational Financial Reporting Standards committee, applicable legal andregulatory requirements of Guernsey Law and the Listing Rules of the UK ListingAuthority. Basis of Preparation The financial statements are presented in Sterling, rounded to the nearestthousand. Financial assets, financial liabilities and derivative instruments aremeasured at fair value with changes in fair value recorded in the incomestatement. Other financial assets and financial liabilities are as stated atamortised cost. The accounting policies have been consistently applied to the results, assets,liabilities and cash flows of the company. The preparation of financial statements in conformity with IFRS, requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and the reported amounts of assets and liabilities,income and expenses. The estimates and associated assumptions are based onhistorical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis ofmaking judgements about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates. Investments The investments, classified as fair value through profit or loss, are initiallyrecognised at fair value. Subsequently investments are measured at fair valuewhich is based on the latest available net asset values of the funds in whichthe company invests. The underlying investments held by the funds are measuredat fair value, which is based on the General Partners' estimate. The valuationpolicies used by many of the private equity general partners and sponsors inundertaking such valuations are generally in line with the recommendations ofeither the International Private Equity and Venture Capital Valuation Guidelinesor standard industry practice. For unquoted investments, the value are at themost recent valuation placed by the respective private equity sponsors, adjustedas necessary by the Manager for changes in the value of publicly tradedportfolio companies comprised in the Company Portfolio and for cash flowsbetween the Company and the fund concerned which occur between the privateequity sponsor's (or general partner's) valuation date and the Company's balancesheet date. Transaction costs incurred on the purchase of investments are included withinother expenses in the Income Statement. Zero dividend preference shares Zero dividend preference shares ("ZDP Shares") are classified as a liability inthe financial statements as they carry no entitlement to participate in theincome of the Company. They are initially recognised at their capitalentitlement less issuance costs. Subsequent to the initial recognition, ZDPshares are carried at amortised cost using the effective interest rate method.Increases in the carrying value of ZDP shares are recognised in the IncomeStatement. Cash and cash equivalents Cash comprises deposits with banks. Cash equivalents are short-term highlyliquid investments that are readily convertible to known amounts of cash, aresubject to an insignificant risk of changes in value and are held for thepurpose of meeting short term cash commitments rather than for investment orother purposes. Costs incurred for the issuance of equity shares Incremental external costs directly attributable to the equity transaction andcosts associated with the establishment of the Company that would otherwise havebeen avoided are written off against share premium account. Interest Interest income and expense is recognised in the income statement as it accruesusing the original effective interest rate of the instrument calculated at theacquisition or origination date. Expenses Expenses are recognised on an accruals basis in the income statement. Foreign Exchange Foreign currency transactions Transactions in foreign currencies are translated at foreign exchange ratesruling at the dates of the transactions. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated intoUS dollars at foreign exchange rate ruling at that date. Foreign exchangedifferences arising from translation and realized gains and losses on thedisposals or settlement of monetary assets and liabilities are recognised in theIncome Statement. Non-monetary assets and liabilities measured at cost in aforeign currency are translated using exchange rates at the date of thetransaction. Non-monetary assets and liabilities measured at fair value inforeign currencies are translated to US Dollars at foreign exchange rates rulingat the dates the fair value was determined and the foreign exchange movementsare recognised in the income statement as part of the unrealised gain onrevaluation of investments. Presentation currency The financial statements of the Company are presented in Sterling as theshareholders are residing mainly in the UK. Assets and liabilities aretranslated from the functional currency US dollars to Sterling at rates ofexchange ruling at the balance sheet date. Income and expense items aretranslated at the average exchange rate for the year. All equity items otherthan the result for the current year are translated at historical rates.Resultant exchange differences are recognised directly in the CurrencyTranslation Reserve. Taxation The Company has obtained exempt company status in Guernsey under the terms ofthe Income Tax (Exempt Bodies) Ordinance 1989 so that it is exempt from Guernseytaxation on income arising outside Guernsey and on bank interest receivable inGuernsey. The Company is therefore only liable to a fixed fee of £600 perannum. This information is provided by RNS The company news service from the London Stock Exchange