Quest For Growth. Buy. Company update. FY10 release and portfolio update. Belgium/ Financial Services Share price: EUR

Transcription

1 Belgium/ Financial Services Company update Investment Research 2 February 2011 Buy Recommendation unchanged Share price: EUR closing price as of 01/02/2011 Reuters/Bloomberg 5.50 QUFG.BR/QFG BB Daily avg. no. trad. sh. 12 mth 10,565 Daily avg. trad. vol. 12 mth (m) 0.05 Price high 12 mth (EUR) 5.55 Price low 12 m th (EUR) 4.15 Abs. perf. 1 mth 3.6% Abs. perf. 3 mth 6.2% Abs. perf. 12 m th 22.0% Market capitalisation (EURm ) 65 Current N of shares (m) 12 Free float 76% Estimated NAV breakdown (EURm) 12/11e Listed shares - ICT 25.2 Listed shares - Pharma & biotech /11e 24% Listed shares - Other % Direct private equity stakes % Venture Capital funds 13.1 Convertible loan notes & warrants 0.5 0% Other assets 7.2 Net cash/(debt) position 3.8 Total Net Asset Value NAVPS (EUR) Share price*: EUR 5.50 Discount/ to NAV -39.5% FY10 release and portfolio update The improving M&A climate and higher transaction multiples give perspective on a better exit environment in 2011 and hence capital gains on unlisted assets (directly held: 22% of NAV, VC funds: 13%). Moreover we expect the discount to decline in the course of the year, in prospect of a dividend early We therefore maintain our Buy rating and computed a EUR 6.6 TP (upside of 21%). Outstanding FY10 result Last week Quest for Growth (QfG) published a FY10 net result of EUR 20.6m or EUR 1.74/share (ROE of 24.1% since 31-Dec-09), to be compared to a net result of EUR 18.1m or EUR 1.53/share in FY09 and in line with our estimate of EUR 20.6m. The FY10 result is also very satisfying in relative terms: QfG s FY10 ROE amounted to +24.1%, to be compared with a return of +26.0% and +13.2% for the Nasdaq Composite index (in EUR) and the Bloomberg New Markets 50 index, respectively. However, the apparent outperformance of the Nasdaq was due to the increase of the USD vs. the EUR as performance in USD was +17%. 259k treasury shares to be cancelled Yesterday QfG announced that it has scheduled an EGM on 25-Feb-11. Main topic to be voted is the cancellation of treasury shares (present value EUR 1.4m or 1.3% of NAV). We adjusted our SOTP. Impact on NAVps is EUR 0.08 (+0.8% of NAV). 10% Deal flow in private equity (at present 34% of NVAV) expected to improve In recent months the markets have witnessed the start of a revival in leveraged finance. On a macro level, all the key conditions are in place for a strong resurgence in deal making. Balance sheets have become stronger and some have unprecedented amounts of idle cash, debt financing is available at historically low 13% rates and equity valuations remain relatively cheap. The outlook for M&A in Europe therefore is one of cautious improvement, supported by GDP growth buoying business sentiment. 7% 4% No dividend to be paid out yet The FY10 net result in addition to the FY09 result of EUR 18.1m still do not 100% compensate the FY08 loss (EUR -48.4m). The balance sheet after appropriation of nm the result shows a retained loss of EUR 6.0m on 31-Dec-10. Therefore and as expected, no FY10 dividend will be proposed to the AGM of 17-Mar-11. A positive 5.50 FY11 would however give perspective to a possible dividend pay-out early 2012, which could lead to a lower discount in the course of vvdsvdvsdy Jan 10 Feb 10 M ar 10 Apr 10 M ay 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Source: Factset QUEST FOR GROWTH Belgium All Share (Rebased) Shareholders: Dexia insurance Belgium 12%; Laxey Partners Limited 10%; Treasury shares 2%; Quest Management to merge with Capricorn Venture Partners Regarding the previously announced intention to merge Quest Management with Capricorn Venture Partners, it was announced that an application to the Belgian financial regulator has been submitted to obtain a license for asset management and investment advice. Capricorn Venture Partners will acquire the activities and the personnel as well as all other assets and liabilities of Quest Management. We expect cost synergies to remain limited and anticipate that the merger possibly could enhance the deal flow in private equity as we expect it to increase the average ticket size. Both companies are based on the same premises in Louvain- Belgium and they share the same Chairman of the BoD, Philippe Haspeslagh. For QfG, nothing changes to the fund s listing. Analyst(s): Hans D Haese +32 (0) hans.dhaese@degroof.be Produced by: Bank Degroof All ESN research is available on Bloomberg: ESNR <go> Distributed by the Members of ESN (see last page of this report)

2 CONTENTS Investment Case... 3 Lagging share price 3 Improving market environment 3 Merger with Capricorn Venture Partners 4 EUR 15m committed to Capricorn Health-tech Fund 5 Excessive discount to NAV 6 QfG in a nutshell... 8 Privak regulation... 9 Valuation SWOT-Analysis & Events Calendar ESN Recommendation System Page 2

3 Investment Case Lagging share price Not only the absolute FY10 NAV performance, but also the relative performance was very satisfying. The obtained return of 24% (+25.4% until 01-Feb-11, see table below) is indeed considerably higher than the return of the reference indices (ex forex impact). Nevertheless the evolution of the share price was disappointing: the increase of +18.3% since 31-Dec-09 stayed far behind the increase of the NAV over that period. QfG NAVps (EUR) QfG share price (EUR) Discount % DJ Euro STOXX 600 Nasdaq Composite (in EUR) Bloomberg New Markets 50 Index 31-Dec % , Feb % , % Change +25.4% +18.3% +10.0% +11.9% +25.7% +20.0% Although since our upgrade in May 2010, QfG s share price has risen 32% (see our Analyser dd. 21-May-10), we still see over 20% upside potential and therefore maintain our Buy recommendation. Our EUR 6.6 TP is derived from a target NAVps of EUR 9.4 and a 5- years historical average discount to NAV of -29%. EUR 6.6 target price, share price range between EUR 4.8 to EUR 8.4 Quest for Growth Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Target price Shaded: TP range applying 5-yr historical min/max discount on target NAV Source: Bloomberg, ESN Bank Degroof Research Improving market environment Although Europe still has not yet fully emerged from the economic doldrums, the financial markets managed to regain investor s confidence. On the back of a still fragile economic pickup private equity is showing a modest recovery thus far and preliminary 2010 data point to an increase in investment and exit levels on According to recent surveys on 2011, market players expect that the more favourable macroeconomic environment should contribute positively to the investment side and the exit side of the market. Page 3

4 The performance of QfG s private equity portfolio has been disappointing thus far, although the increasing number of transactions in private equity illustrate that the M&A climate is improving. We think that this is a good time to enter into private equity companies. The natural leverage on both the equity market and the economic cycle make them an attractive investment target with the increasing deal activity as the major catalyst. Historical data suggest that investment activity is closely linked to GDP growth and periods of economic growth are usually followed by growth in private equity investment. Stable GDP growth has an overall positive impact on companies activities, which makes current investments look promising. Evolution of European private equity firms investments and senior loan volume for LBO transactions in Europe Evolution of European private equity investments and GDP growth in EU 70 EUR bn EUR bn Buy-out * (LHS) Senior Loan volume (RHS) Source: EVCA/PEREP_Analytics for data. EVCA/Thomson-Reuters/PWC for data, S&P s LCD, ESN Bank Degroof Research * Buy-out figures include rescue/turnaround and replacement capital (until 30-Sep-10). Senior loan volume data include all PE-related transactions, including refinancing & recapitalisations (until 30-Jun-10). Source: EVCA, Eurostat Note: 2010 investment data refer to the period Jan-Sep GDP growth is a forecast of Eurostat, exact figure not available yet Merger with Capricorn Venture Partners One month ago Quest Management and Capricorn Venture Partners announced that their respective BoDs have proposed to merge both companies, with Capricorn Venture Partners being the surviving entity. Capricorn Venture Partners will submit an application to the Belgian regulator to obtain a license for asset management and investment advice. Following the granting of the license and the approval of the proposal to merge by the shareholders of the two companies, Capricorn Venture Partners will acquire the activities and the personnel as well as all other assets and liabilities of Quest Management. The merged company will assure the continuity of the advice to and the daily management of the different funds and investment companies. Bringing together the Capricorn Venture Partners and Quest Management investment teams in one legal entity will enhance the synergies between both teams, which both invest in private equity and which both have a strong focus on cleantech investments. Hence, for investors in QfG the proposed merger has the advantage that Quest Management will have access to a larger deal flow and a stronger investment team for non-quoted companies. We expect cost synergies to remain limited. Both companies are based on the same premises in Louvain-Belgium and they share the same Chairman of the BoD, Philippe Haspeslagh. For QfG, nothing changes to the fund s listing. Page 4

5 EUR 15m committed to Capricorn Health-tech Fund QfG committed EUR 15m to Capricorn Health-tech Fund, of which EUR 3.8m has already been invested. Last year Capricorn Venture Partners (CVP) announced the first closing of the fund at EUR 42m, subscribed by Dexia Insurance, QfG, FPIM (Federale Participatie- en Investeringsmaatschappij), PMV (ParticipatieMaatschappij Vlaanderen), CHP (feeder fund representing 13 individuals), SRIW (Société Régionale d Investissement de Wallonie), University of Leuven and University of Liège. Capricorn Health-tech Fund investment team Jos Peeters Managing partner Frank Bulens Senior investment manager Els Hubloux Senior investment manager Els Vanheusden Senior investment manager Curriculum vitae and relevant experience PhD in physics, engineering career at Bell Telephone, consultancy at PA Technology Seasoned VC: BeneVent, QfG, Capricorn VC Fd I, Capricorn VC Fd II, Capricorn Cleantech Fd European authority in private equity: past Chariman of BVA and EVCA, co-founder of Easdaq (Equiduct) 2 decades of VC experience in Europe: Innogenetics (20x), Omrix BioPharmaceutical (5x) Experienced negotiator and deal maker Investment banking and VC network Board experience at Innogenetics, BioAlliance Pharma, Omrix BioPharmaceuticals and Orthovita Engineer in chemistry/biochemistry and PhD in medical sciences R&D at Diadal (Nutricia) Academic research at the faculty of medicine of Louvain University (KULeuven) Senior scientific advisor at IWT 11 years VC life sciences at Gimv Academic research in molecular biology in general, and more specifically in gene expression and gene therapy Opportunity assessment and deal structuring Trade sale transactions, the IPO process and quoted companies Portfolio company follow-up and support Board experience at Ablynx, CareX, Diatos, Fovea, Innate Pharma, Neurotech, Arrow Therapeutics, Inpharmatica, Aclara BioSciences, AGY Therapeutics, Ceres, Nereus Pharmaceuticals and X-Ceptor Chemical engineering degree and MBA Clinical development at Abbott and Merck Financial analyst at KBC Securities 7 years senior investment manager at KBC PE and Quest Management Pharma clinical development experience In-depth knowledge of financial markets, in particular of the biotech sector Opportunity assessment and deal structuring Portfolio company follow-up and support Board experience at 4AZA/Elbion, Algonomics, PharmaNeuroBoost, Protona and TcLand Expression LP board experience at university spin-off & VC funds: BI3, Vives, Baekeland Fd II and Capricorn Venture Fd II MD (KULeuven), Master in Hospital Administration (UCL) and Graduate Air and Space Travel Medicine European Marketing director J&J Medical (Cordis-Biosense Webster) and marketing career at Guidant and P&G Pharmaceuticals CEO PharmaDM (Bioinformatics spin-off KULeuven) General manager FlandersBio (Flemish biotech sector federation) and co-founder Council of European Biotech Regions (CEBR) Seasoned entrepreneur with proven track-record of starting new entities and fundraising Experienced technical and market expertise in major domains of the health-tech sector Strong network with companies, R&D institutes and VCs involved in health-tech Board experience at PharmaDM, FlandersBio, UroGene and CEBR Page 5

6 CVP s investment activity has already started and the fund aims to reach a size of EUR m within 12 months time. When fully invested, the fund will have 10 to 15 participations in early to midstage health-tech investments. Given the size of QfG s commitment, this implies that it will abandon pursuing direct life sciences deals. We expect the commitment to CVP, which can be considered as a future in-house VC fund, as the start of less direct investments in private equity and more indirect investments in Capricorn funds. At end 2010, QfG s total commitments amounted to EUR 17.8m, of which EUR 12.4m was committed to Capricorn Cleantech Fund and Capricorn Health-tech Fund. Excessive discount to NAV Only 3 periods in 10 years time with discount to NAV 10 years valuation graph above or around -40% 24 months valuation graph Anomaly: discount expansion in a rising strong market -50% Discount (Est.) NAV (Adj.) Share price 20-50% Discount (Est.) Share price NAV (Adj.) 10-40% 16-45% 8-30% 12-40% 6-20% 8-35% -10% 4-30% 4 0% Source: Company data, Bloomberg, ESN Bank Degroof Research -25% 2/09 6/09 11/09 4/10 8/10 1/11 Source: Company data, Bloomberg, ESN Bank Degroof Research 2 It is well known that, typically, holding company discounts tend to shrink during a stock market rally and tend to expand in depressed markets. That is what we observe during previous stock market cycles (see various charts above).however, although Belgian holding company discounts have shrunk since the peak of the financial crisis at end 2008, QfG s discount to NAV has remained excessive. Discount to NAV evolution QfG compared to average discounts of Belgian holding companies -50% -45% -40% Still excessive -35% -30% -25% -20% -15% Normalised, though remains above pre-crisis level -10% Avg discount QfG -5% Source: Company data, Bloomberg, ESN Bank Degroof Research Page 6

7 We tend to believe that the gap is not only due to QfG s very disappointing performance over FY08, but also that some stock overhang in FY10 could have triggered this evolution. End September QfG published a shareholder notification stating that Laxey Partners Ltd has crossed downwards the 10% shareholding threshold. At 17-Sep-10 the fund held 1,162,349 shares or 9.86%, down from 11.99% (as mentioned in the FY09 annual report). The discount to NAV has widened again from 30%-35% at end FY09 to 40% at present, which we believe to be unjustifiably high (vs. a 5-years historical average discount of -29%). Given the cheap valuation and an improving M&A climate, which we expect to lead to additional capital gains, we remain positive on the company and reiterate our Buy recommendation. Discount to NAV close to 52 weeks average -70% -60% -50% -40% -30% -20% -10% 0% NAV (discount)/premium 52 weeks rolling average +/- 2 * St Dev Source: Company data, Bloomberg, ESN Bank Degroof Research Page 7

8 QfG in a nutshell Company description and investment policy QfG is a closed-end investment company (PRIVAK) which focuses on European technology-based growth companies in sectors such as biotechnology, health care, information technology, software, electronics, new materials and special situations in other growth sectors. It invests in both public and private equity. QfG takes investment decisions based upon fundamental research, though it is not excluded that occasionally speculative positions are taken. QfG s investment managers are free to apply their own ideas without the constraints of a benchmarked fund. The largest part of the portfolio is invested in growth companies listed on European stock exchanges. Assets can also be invested in venture or private equity funds having an investment policy compatible with that of QfG. Furthermore QfG invests in unquoted companies with the intention to seek an exit within 36 months. Investments in start-ups or early stage companies are allowed, but are rather exceptional. Under the PRIVAK regulations (see below), the company enjoys tax privileges against its commitment of a high pay-out ratio. Dividend policy: The volatile nature of the growth stocks in which QfG invests inevitably means that investment returns (and hence dividends) are volatile. This results in exceptional dividends in good years and small or no dividends in bad years. QfG is required by law (Belgian Privak regulation) to pay-out at least 80% and by its by-laws to pay out even at least 90% of its net realised gains each year. As the sum of the profit of FY09 and FY10 (EUR 18.1m and EUR 20.6m, respectively) do not compensate the FY08 loss (EUR 48.4m), it still is legally impossible for QfG to distribute a dividend from the FY10e profit to its shareholders. We only expect a possible dividend pay-out as of FY11e (early 2012). Shareholding: Shareholders structure # shares % Voting rights Free float 8,973, % 77.8% Dexia insurance Belgium 1,393, % 12.1% Laxey Partners Ltd 1,162, % 10.1% Treasury shares 259, % 0.0% Total Laxey has been reducing its shareholding in QfG 11,789, % 100% in the course of 2H10 of which Ordinary shares 11,788, % A Shares % B Shares % 1 A and B shareholders are entitled to a preference dividend that is paid out of the part of the net profit that exceeds the amount necessary to pay out all the shareholders a dividend equal to the risk free rate (reference index 10 year Bund Bloomberg code GDBR10) + a 1.5% risk premium on the equity value at financial year start. Of that surplus amount, 20% is paid out to shareholders A and B with the remaining 80% equally distributed over all shareholders. Page 8

9 Privak regulation The Privak statute, created by Royal Decree of 18-Apr-97, is intended to allow investment vehicles, specially tailored to provide a suitable framework for investments in private equity and in growth companies. A Privak is a closed-end fund under the regulation of the Belgian financial regulator and subject to specific investment and dividend pay out rules. Investment rules A minimum of 50% of the portfolio must be invested in equity. A minimum of 70% of the portfolio (qualified investments) must be invested in: unquoted companies; companies quoted on a growth market or venture funds with an investment policy similar to the Privak. However, investments in companies quoted on a growth market can never exceed 50% of the qualified investments. This means that minimum 50% of 70%, or 35%, has to be invested in unquoted debt/equity and/or venture funds. The 35% level has to be achieved at the latest 5 years after the capital raise. A maximum of 20% of the portfolio and not over EUR 6.2m per annum, can be invested in one single company. Tax Benefits The Privak benefits from important tax advantages. These benefits only apply as long as the investment rules are met and: all investments are made in companies, subject to a normal tax regime over 80% of the realised benefits of the fiscal year are paid out as dividend. (QfG states in its bylaws that at least 90% of the realised benefits will be paid out.) Dividends The part of the dividend resulting from capital gains will be exempt from withholding tax. The remaining part of the dividend will be subject to a withholding tax of 15%. Individuals: withholding taxes are considered as final taxes; Companies: 95% of the gross dividend income resulting from capital gains can be deducted of the taxable profit (Dividend Received Deduction); withholding taxes can be credited against corporate taxes. Capital gains Individuals: exempt from taxation; Companies: subject to normal corporate taxes. Page 9

10 Valuation We believe the best way to value the portfolio of an investment company is by using a SOTP valuation. QfG s NAV breakdown is based on yesterday s closing prices for listed stocks and updated with the most recent information for the unlisted assets. Furthermore, we adjusted for currency evolutions. Our NAV estimated of EUR 104.8m or EUR 9.09/share implies that the share is currently trading at a discount of 39.5%. Detailed NAV breakdown About 50% of QfG s investments in listed companies in various sectors Quoted portfolio Participations are cleantech related Stock Current Value per # price in % Currency value share shares local NAV (EUR) (EUR) currency Sector Econocom 71, EUR 888, % 0.08 Software & Services Init Innovation 135, EUR 2,012, % 0.17 Software & Services Leguide com 62, EUR 1,706, % 0.15 Software & Services Nemetschek AG 150, EUR 4,752, % 0.41 Software & Services Pharmagest Interactive 17, EUR 821, % 0.07 Software & Services Transics 250, EUR 1,555, % 0.13 Software & Services Unit4 Agresso 195, EUR 4,717, % 0.41 Software & Services EVS 72, EUR 3,353, % 0.29 Tech. Hardw. Hewlett Packard 50, USD 1,680, % 0.15 Tech. Hardw. LEM Holding SA 7, CHF 3,689, % 0.32 Tech. Hardw. Ablynx 135, EUR 1,053, % 0.09 Farma & Biotech Roche 20, CHF 2,235, % 0.19 Farma & Biotech Stratec Biomedical 35, EUR 1,099, % 0.10 Farma & Biotech Teva Pharmaceutical 75, USD 3,021, % 0.26 Farma & Biotech United Drug 1,476, EUR 3,174, % 0.28 Farma & Biotech Andritz Ag 55, EUR 3,465, % 0.30 Electrical & Engineering Arcadis 260, EUR 4,474, % 0.39 Electrical & Engineering Faiveley 27, EUR 1,820, % 0.16 Electrical & Engineering Imtech 140, EUR 3,815, % 0.33 Electrical & Engineering Pfeiffer Vacuum 22, EUR 1,905, % 0.17 Electrical & Engineering Phoenix Solar 45, EUR 1,026, % 0.09 Electrical & Engineering SMA Solar 30, EUR 2,160, % 0.19 Electrical & Engineering Centrotec 100, EUR 1,996, % 0.17 Energy & Materials Umicore 110, EUR 4,237, % 0.37 Energy & Materials Accell Group 40, EUR 1,533, % 0.13 Other sectors KPN 150, EUR 1,740, % 0.15 Other sectors Quoted 63,936, % 5.55 Other sectors Covers the present share price (EUR 5.50), which implies that direct PE stakes, VC funds ands cash & other assets are for free! Page 10

11 Unquoted portfolio Private Equity Current value - local currency Currency Current value (EUR) % NAV Value per share (EUR) Active Circle 400,000 EUR 400, % 0.03 Anteryon 1,499,027 EUR 1,499, % 0.13 Clear2Pay 5,570,337 EUR 5,570, % 0.48 Idea AG 164,417 EUR 164, % 0.01 KiadisPharma 2,299,952 EUR 2,299, % 0.20 Magwel 430,000 EUR 430, % 0.04 Nantofen 527 USD % 0.00 Oxagen 4,041 GBP 4, % 0.00 Prosonix 1,047,474 GBP 1,222, % 0.11 Sphere Medical Holding 703,927 GBP 821, % 0.07 Syntaxin 1,945,570 GBP 2,270, % 0.20 TcLand 1,499,995 EUR 1,499, % 0.13 Loan notes Face value Kiadis Pharma Convertible 74,327 EUR 74, % 0.01 Mapper Convertible 605,000 EUR 100, % 0.01 Nantofen 384,962 USD 278, % 0.02 TcLand Convertible Loan note 500,000 EUR 500, % 0.04 Prosonix Loan note 200,000 GBP 233, % 0.02 Deme Commercial paper 4,000,000 EUR 4,000, % 0.35 Codralux Commercial paper (JDN) 1,500,000 EUR 1,500, % 0.13 Unquoted 22,869, % 1.98 Venture capital Venture funds Current value Current value Value per Last valuation Currency % NAV - local (EUR) share (EUR) at Capricorn Cleantech Fund 1,070,789 EUR 1,070, % Sep-10 Capricorn Health-tech Fund 3,750,000 EUR 3,750, % Dec-10 Carlyle Europe Tech. Partners I 1,808,135 EUR 1,808, % Sep-10 Carlyle Europe Tech. Partn II 1,153,162 EUR 1,153, % Sep-10 CETP LP Co-investments 1,566,881 EUR 1,566, % Sep-10 Kiwi Ventura Services 150,636 EUR 150, % Jun-10 Life Sciences Partners III 1,360,863 EUR 1,360, % Sep-10 Life Sciences Partners IV 285,149 EUR 285, % Sep-10 Schroder Ventures LSF II 267,855 USD 193, % Jun-10 Ventech Capital 2 803,497 EUR 803, % Sep-10 Vertex III 1,371,813 USD 990, % Sep-10 Total 13,133, % 1.14 Page 11

12 Total portfolio Participations Current value (EUR) % NAV Value per share (EUR) Quoted 63,936, % 5.55 Unquoted 22,869, % 1.98 Venture Fund 13,133, % 1.14 Cash 3,837, % 0.33 Other net assets (2) 1,013, % 0.09 Total NAV 104,790, % 9.09 Price/share 5.50 Discount to NAV -39.5% Target price and target NAV Based on ESN Research target prices for listed stocks, discount to NAV mean averaging (targeting in 12 months time the 5 years average discount of -29%) and the cancellation of 259k treasury shares (still to be voted at an EGM later this month, present value at share price is EUR 1.4m), we arrive at a target NAV of EUR 108m or target NAVps of EUR 9.36 and a QfG TP of EUR 6.6. Page 12

13 SWOT-Analysis & Events Calendar STRENGTHS WEAKNESSES Actively managed, well diversified portfolio of listed shares No capital gains taxes in Belgium Outstanding corporate communication As a PRIVAK, important tax privileges Size and liquidity of the share Management fee * (inflated by limited size) OPPORTUNITIES THREATS Access to private equity Clear improvement of the M&A climate in general could trigger some exits of mature private equity companies Hidden value at the level of the private equity portfolio Change of tax legislation for holding companies in Belgium Lack of scale versus European peers * Note: The fee for the management of the privak paid to Quest Management amounts to EUR 1,500,000 (fixed annual fee or EUR 0.13/QfG share, i.e. 1.4% of NAV). The agreement comes to an end on 31-Mar-12. If and when during this period QfG s Total Expense Ratio (TER) exceeds 3.5%, in concert with Quest Management the company will examine how to reduce costs below this level. If and when during this period the management fee paid falls below 1.5% p.a. a possible adjustment of the agreement will also be considered between both parties. QfG s BoD decided at 24-Jan-11 to maintain the management fee at EUR 1.5m as compensation for the fee directly paid by QfG to the Capricorn Health-tech Fund and the Capricorn Cleantech Fund. Upcoming Events Calendar Date 25-Feb Mar Mar Apr Apr Jul Jul Oct Oct Jan Jan-12 Source: Company data Event EGM EGM AGM 1Q11 Results Analyst meeting 1Q11 Results Analyst meeting 3Q11 Results Analyst meeting FY11 Results Analyst meeting Page 13

14 Quest For Growth: Key charts 10 years valuation graph 24 months valuation graph -50% Discount (Est.) NAV (Adj.) Share price 20-50% Discount (Est.) Share price NAV (Adj.) 10-40% 16-45% 8-30% 12-40% 6-20% 8-35% -10% 4-30% 4 0% % 2/09 6/09 11/09 4/10 8/10 1/11 2 NAV distribution Dividend per share & dividend yield 120 EUR m 25 EUR Dividend yield (RS) Gross dividend (LS) 50% % Market cap % % 20 0 Listed stakes Private equity Venture Fund Cash & other Total NAV % 0% Evolution portfolio sector breakdown 100% 80% 60% 40% 20% Distribution of the portfolio by sector Health Care equipment & Services 5% Materials 6% Other sectors 9% Semiconductors 2% Software & Services 23% 0% -20% Private equity & VC funds 11% 15% 12% 6% 2% 5% 13% 11% 9% 18% 31% 19% 15% 15% Listed - Other 1% 2% 1% 6% 11% 3% 6% 3% 7% 8% 11% 5% 26% 27% Listed - Pharma & biotech 12% 9% 28% 15% 10% 12% 13% 20% 24% 14% 7% 12% 10% 10% Listed - ICT 45% 27% 31% 36% 36% 63% 52% 50% 63% 49% 30% 49% 24% 24% Net cash 30% 40% 22% 29% 33% 11% 11% 14% -9% 4% 8% 2% 4% 4% Funds & Diversified Companies 13% Technology hardware 10% Electrical & Engineering 17%, Note: dd. 31-Dec-10 Pharma & Biotech 15% Page 14

15 Quest For Growth: Summary tables PROFIT & LOSS (EURm) e Revenues Non Recurrent Items Net Profit (reported) BALANCE SHEET (EURm) Shareholders Equity Minorities equity Net Debt NAV Constituents & Total NAV (EURm) Listed shares - ICT Listed shares - Pharma & biotech Listed shares - Other Direct private equity stakes Venture Capital funds Convertible loan notes & warrants Other assets Net cash/(debt) position Total Net Asset Value Discount/(Premium) to NAV -44.9% -35.8% -40.9% -39.5% Listed shareholdings on NAV 48.1% 63.9% 59.9% 61.0% OTHER ITEMS (EURm) Total Market Cap Debt / Equity -7.7% -2.1% -3.5% Payout Ratio 0.0% 0.0% 0.0% P/BV Dividend Yield (Gross) 0.0% 0.0% 0.0% 0.0% PER SHARE DATA (EUR) EPS (reported) NAVPS BVPS DPS Source: Company, Bank Degroof estimates Quest For Growth: Company Description Sector: Financial Services/Holding Company Description: Quest for Grow th (QfG) invests in grow th companies w ith the objective of converting capital gains into tax-free income through the Privak structure. The largest part of the portfolio is invested in grow th companies listed on European stock exchanges (Euronext, London SE, Deutsche Börse, etc.) and other regulated markets. The balance is invested in unquoted companies w orking tow ards an introduction to a stock exchange or trade sale w ithin 36 months. Investments in start-ups or early stage companies are allow ed but remain rather exceptional. Quest For Growth: Statement of Risk Portfolio companies, private equity players and venture capitalists typically are very exposed to the volatility of the stock market and changes of the market sentiment. Visibility on underlying operations of the private equity portfolio is limited, while some are exposed to the economic cycle in Western- Europe. Furthermore, the company is depending on the funding conditions for buy-out investments, the performance of third-party funds, trends of M&A multiples and volatility of the holding companies discount. Quest For Growth: Valuation Methodology Our valuation model is based on a sum of the parts as most recently disclosed by the company. We consequently updated for market evolutions, present share prices and target prices for listed shareholdings. Furthermore we are taking into account forex evolutions and estimated impacts of post balance sheet investments & divestments. Fin. details of unquoted companies are not disclosed. Hence, we base our valuation on QfG s reported NAV. Page 15

16 ESN Recommendation System The ESN Recommendation System is Absolute. It means that each stock is rated on the basis of a total return, measured by the upside potential (including dividends and capital reimbursement) over a 12 month time horizon. The ESN spectrum of recommendations (or ratings) for each stock comprises 5 categories: Buy, Accumulate (or Add), Hold, Reduce and Sell (in short: B, A, H, R, S). Furthermore, in specific cases and for a limited period of time, the analysts are allowed to rate the stocks as Rating Suspended (RS) or Not Rated (NR), as explained below. Meaning of each recommendation or rating: Buy: the stock is expected to generate total return of over 20% during the next 12 months time horizon Accumulate: the stock is expected to generate total return of 10% to 20% during the next 12 months time horizon Hold: the stock is expected to generate total return of 0% to 10% during the next 12 months time horizon. Reduce: the stock is expected to generate total return of 0% to -10% during the next 12 months time horizon Sell: the stock is expected to generate total return under -10% during the next 12 months time horizon Rating Suspended: the rating is suspended due to a capital operation (takeover bid, SPO, ) where the issuer of the document (a partner of ESN) or a related party of the issuer is or could be involved or to a change of analyst covering the stock Not Rated: there is no rating for a company being floated (IPO) by the issuer of the document (a partner of ESN) or a related party of the issuer Bank Degroof Ratings Breakdown History of ESN Recommendation System Since 18 October 2004, the Members of ESN are using an Absolute Recommendation System (before was a Relative Rec. System) to rate any single stock under coverage. Since 4 August 2008, the ESN Rec. System has been amended as follow. Time horizon changed to 12 months (it was 6 months) Recommendations Total Return Range changed as below: TODAY SELL REDUCE HOLD ACCUMULATE BUY -10% 0% 10% 20% BEFORE SELL REDUCE HOLD ACCUMULATE BUY -15% 0% 5% 15% Page 16

17 Institutional & corporate equity desk Equity brokerage Damien Crispiels John Paladino Bart Beullens Wouter De Blaere Laurent Goethals Tanguy del Marmol Pascal Magis Robin Podevyn Peter Rysselaere Christian Saint-Jean Institutional & corporate bond desk Derivatives brokerage Peter Deknopper Mohamed Abalhossain Gauthier de Ghellinck Olivier-Pierre Morrot Fabrice Faccenda Charles Feiner* Treasury desk Institutional & Structured products Alain Strapart Edouard Nouvellon Jeroen De Keer Gaëtan De Vliegher Sebastian Fraboni Mathieu Neirinck Equity research Jean-Marie Caucheteux Fund Services Hans D Haese Thomas Palmblad Bernard Hanssens Oliver Gigounon Siddy Jobe Fabio Ghezzi Morgalanti Marc Leemans, CFA Frederic Collett Thibaud Rutsaert, CFA Real Estate coordinator Jean-Baptiste Van Ex * authorised agent Mail: firstname.lastname@degroof.be Page 17

18 Recommendation history for QUEST FOR GROWTH Date Recommendation Target price Price at change date 14-Oct-10 Buy May-10 Accumulate 4.18 Source: Factset & ESN, price data adjusted for stock splits. Current analyst: Hans D'Haese (since 31/03/2005) Bank Degroof acts as liquidity provider for: Aedifica, Atenor, Banimmo, Bois Sauvage, BSB International, D'Ieteren, Duvel, Elia, Floridienne, GIMV, IBt, Intervest Retail, IPTE, I.R.I.S., Kinepolis, Leasinvest, Luxempart, Montea, PinguinLutosa, Realco, Resilux, Roularta, Sapec, Ter Beke and Van de Velde. Bank Degroof holds a significant stake in: Aedifica, Fountain and Proximedia. Bank Degroof board members and employees hold mandates in the following listed companies: Aedifica, Atenor, Barco, Bois Sauvage, Brederode, Cofinimmo, Deceuninck, D'Ieteren, Elia, Emakina, Floridienne, FuturaGene, Lotus Bakeries, PinguinLutosa, Proximedia, Recticel, Sapec, Sipef, Ter Beke, Tessenderlo, UCB and Zetes. All opinions and projections expressed in this document constitute the judgement of Bank Degroof as of the date of their publication and are subject to change without notice. Bank Degroof and/or any of its subsidiaries may hold long/short positions in the securities referred to herein including derivative instruments related to the latter or may have business relations with the companies discussed herein. This material is intended for the information of the recipient only and does not constitute an offer to subscribe or purchase any securities. Although they are based on data which is presumed to be reliable and all while reasonable care has been taken to ensure they are derived from sources which are reliable, Bank Degroof has not independently verified such data and takes no responsibility as to their accuracy or completeness and accepts no liability for loss arising from the use of the opinions expressed in this document. Local laws and regulations may restrict the distribution of this document in other jurisdictions. Persons who enter in possession of this document should inform themselves about and observe any such restrictions. All information presented in this document is, unless otherwise specified, under copyright of Bank Degroof. No part of this publication may be copied or redistributed to other persons or firms without the written consent of Bank Degroof. Page 18

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