Quarterly Report for the period ending 30 September Princess Private Equity Holding Limited. Princess

Transcription

1 Quarterly Report for the period ending 30 September 2000 Princess Private Equity Holding Limited Princess

2 The Princess Private Equity Holding Limited convertible bonds, with a AAA security rating from Standard & Poor s, provide institutional as well as private investors with access to an internationally diversified portfolio of private equity partnerships and the opportunity to seek superior returns in the private equity asset class while the par value of the bonds at maturity is protected under an insurance policy reinsured by Swiss Re. 2 This document is not intended to be an investment advertisement; it constitutes neither an offer nor an attempt to solicit offers for regulated investments.

3 Private Equity Bonds with a AAA security rating Through Princess Princess Private Equity Private Equity Holding s Holding Limited (Princess), convertible bonds, investors opt for optimisation equity investment com- a Guernsey based private of their portfolio of pany, first issued its zero traditional securities, coupon convertible bonds accessing the chance for in June 1999 and now has attractive and stable a total of USD 700 million long-term returns and in such bonds outstanding. The bonds which are low correlation to public market volatility. listed on the Luxembourg and Frankfurt Stock Exchanges, provide institutional as well as private investors with access to the private equity asset class while the par value of the bonds at maturity is protected under an insurance policy reinsured by Swiss Re and rated AAA by Standard & Poor s. Private equity investments are generally privately negotiated investments in mostly unlisted companies aiming at achieving substantial increases of the company valuation during the investors holding period. They are frequently described by the development phase of the company during which the private equity investment is made. Investments in private equity allow investors to seek attractive long-term returns which historical data suggests can be substantially higher than those from traditional investments. Further, private equity investments have in the past shown low to negative correlation with investments in publicly traded traditional asset classes. In the context of a larger, diversified investment portfolio, this may reduce the negative impact from price fluctuations of securities traded in public markets. Investment Strategy and Process Through two integrated approaches - top-down The bond s nominal value of USD 700 million is and bottom-up Princess entirely dedicated to aims to create an optimised portfolio. Based on defined allocation guidelines Princess s investment managers (Partners Group, Hamilton Lane and Invesco) search for what investments in a portfolio of what Princess believes are potential top-quartile private equity partnerships. Princess s investment strategy requires it to diversify its private equity investments across they consider the best geographic regions, possible investment targets. financing stages, vintage years and industries in an effort to optimise returns while striving to minimise investment risk. In its top-down approach, Princess utilises a proprietary risk/return model developed by Swiss Re and Partners Group. Based on world-wide statistical data, the model seeks to determine the optimal quantitative asset allocation. This information, combined with bottom-up qualitative partnership selections, leads to what Princess believes will be a superior global private equity portfolio. Princess is advised by more than 50 private equity specialists throughout Europe and the USA. With Partners Group, one of Europe s leading private equity managers, Invesco Private Capital, one of the world s most senior venture capital specialists and Hamilton Lane Advisors, one of the world s largest private equity asset managers, Princess combines the investment experience and networks of these advisers on a global basis to gain access to promising private equity investment opportunities. Many of these targeted partnerships produced excellent returns from their previous funds. Some of them are no longer accessible to new investors due to a high reinvestment rate of their current investors and increasingly limited subscription periods. Over-Commitment Strategy The over-commitment strategy is used in pursuit of higher returns. It aims to accelerate the Based on its top-down approach and the use of its proprietary risk/return model, Princess pursues rate at which Princess s an over-commitment funds are actually invested and therefore to create a chance to reap earlier returns. Through the over-commitment strategy a full investment level may be sustained over time. strategy in an effort to accelerate cash returns from the investment portfolio and maximise returns on investors paid-in capital. Statistical data from Venture Economics have shown that private equity funds are operating with a level of investment which on average does not exceed 65 per cent, while leaving the remainder of the investors committed capital invested in shortterm instruments. This relatively low level of investment attenuates the overall investment result. Princess has created an over-commitment strategy using cash flow forecasting and monitoring models that Princess believes will result after an initial build-up phase in higher investment returns because a full investment level should be achieved in a shorter period and be sustained over time. The quicker the amounts, which Princess have been entrusted with, are invested by the underlying partnerships, the earlier the returns shall generate an increase in the company s underlying Net Asset Value and thus stagger the valuation of the Princess publicly traded bonds. Due to this strategy, Princess will show a considerable higher amount of signed commitments compared to the company s initial principal amount. The expected Net Asset Value increase resulting from cash returns from the partnerships, will catch up with the commitment level over time. 3

4 Returns from Princess s portfolio of fund investments have increased the company s consolidated unaudited NAV to USD 711 million on 30 September 2000 or, on a fully diluted basis, to an NAV of USD per share. Princess s aggregate commitments are close to USD one billion. They exceed the bond s paid-in capital by 40%. Through a successful implementation of its over-commitment strategy (as described on page 3), Princess has already put more than USD 337 million or 48% of the bondholders capital to work. 4

5 Net Asset Value (NAV) continues to grow News from the Princess investment portfolio Other news Growing returns from Your board of directors is Princess s portfolio of pleased to report that private equity investments led to an increase folio continued to develop Princess s investment port- of the adjusted NAV to to our full satisfaction USD per share during the past summer. during last quarter. With total commitments nearing USD one billion, the commitment level exceeds the initial paid-in capital by 40 %. USD 337 million have so far been drawn down by the partnerships, representing an investment level of 48 % in relation to the USD 700 million initial principal amount of Princess s zero coupon convertible bonds. At the partnership level the funds were invested in a broad portfolio of private companies of different sizes, at different stages of development and in a variety of industries. During the 16 month period from inception in June 1999 through September 2000, cash proceeds in excess of USD 12 million have been returned to Princess Holding from the portfolio partnerships. Some of the partnerships have reported impressive realised and unrealised gains on their investments. The increase by 138 basis points to an adjusted NAV of USD per fully diluted share can be attributed to few partnerships which have reported on recent returns from their investments. Most of the value enhancing transactions (either trade sales or IPO s) were concluded before or during the summer and may now materialise after the usual lock-up period expires. We expect reports from the majority of Princess s investment partnerships to arrive during the next two months. Despite volatile and IPOhostile market condi- round during this sum- In a pre-ipo financing tions, Princess s partnerships have achieved through one of its partmer Princess, indirectly successful exits during nerships, invested into last quarter. GAP AG, a rapidly expanding engineering company that has developed applications for telematic and telemetric processes. On 20 September 2000, less than two and one- half years after its founding, the company went public on the Neuer Markt at an initial offering valuation of 15 per share or a company market valuation of 81 million. Thirtythree times oversubscribed, the share price started trading at 26.5 and has since increased its valuation. Indirectly Princess more than doubled the value of its investment within less than 12 weeks. Again during September 2000 Princess received several stock distributions from Access Technology Partners, L.P. The investments in the Access portfolio which led to these distributions, comprised mostly of companies which had been previously acquired by and merged into larger competitors in exchange for listed securities. These distributions at the partnership level produced returns of between 3 to 35 times the valuations of the companies at the time the partnership made its investments in them. Index Ventures I, L.P. realised a return of eight times its initial investment with Fantastic Corporation during July, when the lock-up period expired from last year s IPO on the Neuer Markt. Fantastic is a Swiss software company that specialised in broadband technology services. The Index partnership is also a shareholder with Numerical Technologies, Inc., which was listed on the NASDAQ in April The company is considered the leader in Subwavelength design to manufacturing solutions for the semiconductor industry. Princess adopts a hedging strategy for foreign currencies are translated Transactions in foreign currency investments. into US dollars at the prevailing rate of exchange on the date of the transaction. If, for example, European partnerships are drawing down money from their investors either in or local currencies, the amounts are exchanged into USD and the investment is then booked at the exchange rate on the date of transfer. This leads to a currency appreciation or depreciation as the exchange rate later fluctuates. In order to avoid exchange losses, Princess s board of directors decided that non-us dollar investments shall be hedged by US dollar forward exchange contracts. Through such foreign exchange policy and due to the current difference in interest rates, particularly between and USD, Princess generates additional income for the investors and at the same time neutralises foreign currency risks. The first forward exchange contracts were purchased during last quarter. Monthly and quarterly reports published on the Internet; the Princess Princess quarterly reports may now be downloaded from the Internet under box is open to the following address: answer bondholders questions. <<Info>>. In addition, the Princess team issues a monthly newsletter, which briefly summarises the portfolio s breakdown by geographic region and investment stages, recent investment decisions and the bonds latest mid-market price as traded on the Frankfurt stock exchange. The newsletter is published under the same address. Questions may be addressed to Princess@Partners.co.gg. 5 NAV Price News

6 Although the third quarter is usually the calmest of the year, partnerships of the Princess portfolio invested a further USD 60 million into private companies world-wide. The Princess investment level grew by 25% to USD 337 million during the last three months. Commitments by Vintage Year Commitments by Geographic Regions Commitments by Financing Stage Million USD Rest of World 5% Special Situations 15 % Early Stage Venture 21% Europe 38 % USA 57 % Large Size Buyout 22 % Small and Mid Size Buyout 21% Later Stage Venture 21% 6

7 New Partnership commitments Princess Portfolio Allocation and Investment Process USD 85 million in Between 1 July and 30 new commitments added September 2000 Princess during last quarter. made aggregate commitments of USD 85 million to thirteen new partnerships. The new entries include: Apollo Investment V, L.P. EnerTech Capital Partners II, L.P. Exxel Capital Partners VI, L.P. Galileo III, L.P. Industri Kapital 2000 Fund, L.P. Menlo Ventures IX, L.P. Merlin Bioscience Fund, L.P. Mercapital Spanish Private Equity Fund II, L.P. Polish Enterprise Fund IV, L.P. Sevin Rosen Fund VIII, L.P. TA IX, L.P. TL Ventures V, L.P. Weiss, Peck & Greer Venture Associates VI, L.P. Investment Process Commitment and investment level are developing above Princess s On 30 September 2000 the Princess aggregate portfolio value of commitments to private equity targets. partnerships world- wide stood at USD 983 million. Compared to the investors paid-in capital of USD 700 million, Princess s commitment level exceeds 140 %. Aggregate commitments drawn down by the Princess partnerships grew by 25 % during the last quarter and now total 48 % in relation to paid-in capital. We believe this result is more than satisfactory considering the relatively short period Princess has had to invest. Committed Capital and Investment Degree Princess Private Equity Holding Limited Portfolio Allocation The Top Down guidelines maintain a balanced portfolio based on a risk reducing diversification policy. The Princess investment strategy pursues its target of a balanced portfolio allocation by region and by financing stage. Portfolio allocation by Geographic Region The Rest of world position remains underweighted in favour of commitments to partnerships of the Europe region. Portfolio allocation by Financing Stage During the recent months of world-wide stock market volatility, some promising deal entry and exit opportunities primarily arose within the buyout segment. Asset Allocation Our investment teams are particularly proud that Princess was able to participate in some new partnerships they regard as being among the most promising in the US venture capital business. The funds operated by the general partners of these partnerships often have been oversubscribed by their existing investors and therefore are usually inaccessible to newly entering parties. Remaining Cash Investment Level Over-commitment Degree Portfolio allocation by Vintage Year Due to earlier secondary portfolio acquisitions (purchase of existing private equity investments), Princess holds a number of commitments to partnerships from vintage years dating before its own founding. They contributed significantly to recent returns and increase in NAV. Princess is also very pleased to announce its first investment in a private equity partnership in Eastern Europe. The Polish Enterprise Fund IV, L.P. is operated by an experienced team which developed an impressive track record of investment returns in its previous three funds. The Polish market has emerged as being one of the fastest growing economies within the former Eastern bloc and apparently provides a favourable macroeconomic framework to a steadily increasing number of private companies. Your Board of Directors takes pride in the investment activities and the development of the portfolio summarised in this report. We continue to work hard to live up to the trust and confidence you have placed in us. Your Board of Directors 7

8 As of 30 September 2000, the Princess portfolio, with total commitments of USD 983 million, consists of the following 87 partnerships: 8

9 USA and Canada Venture Access Technology Partners Advanced Technology Ventures VI APAX Excelsior VI Austin Ventures VII Battery Ventures VI Cardinal Health Partners II Catterton Partners IV Offshore Chancellor V Columbia Capital Equity Partners III Crescendo IV Dolphin Communications Fund Infinity Capital Venture Fund 1999 Invesco Venture Partnersh.Fund II Invesco Venture Partnersh.Fund II-A Menlo Ventures IX Morgan Stanley Venture Partners IV Sevin Rosen Fund VIII Sierra Ventures VIII TA IX TH Lee.Putnam Internet Parallel Partners TL Ventures V Vortex Corporate Development Fund Weiss, Peck & Greer Venture Ass.VI Worldview Technology Partners III USA and Canada Buyouts Apollo Investment V Blackstone Communication Partners I Bruckmann, Rosser, Sherrill & Co. II Carlyle Partners III Fenway Capital Partners II Heritage Fund III Invesco U.S. Buyout Partnersh.Fund II Silver Lake Partners T3 Partners Thomas H. Lee Equity Fund V Thomas Weisel Capital Partners TPG Partners III Vestar Capital Partners IV William Blair Capital Partners VI USA and Canada Special Situations Blackstone Mezzanine Partners Canterbury Mezzanine Capital II Chase 1998 Pool Participation Fund EnerTech Capital Partners II Levine Leichtmann Capital Partners II OCM Opportunities Fund III OCM/GFI Power Opportunities Fund Pegasus Partners II Europe Venture Elderstreet Capital Partners European E-Commerce Fund European Private Equity Partners III GMT Communications Partners II Galileo III Index Ventures I Merlin Biosciences Fund Schroder Vent.Intern.Life Science II Wellington Partners II Europe Buyouts 3i Eurofund III Astorg II Botts Capital Partners Coller International Partners III NW1 Coller International Partners III NW2 Doughty Hanson & Co III European Private Equity Fund D FCV Capital Partners V A FCV Capital Partners V F Industri Kapital 2000 Fund Italian Private Equity Fund III Mercapital Spanish Private Equity II Nordic Capital IV Palamon European Equity C Partners Private Equity Quadriga Capital Private Equity Fund II Schroder Ventures European Fund II Segulah II The Second Cinven Fund Warburg Pincus International Partners Europe Special Situations Coller International Partners III Doughty Hanson Europe Real Estate ICG Mezzanine Fund 2000 Mezzanine Management Fund III The Rutland Fund Rest of World Venture Carmel Software Fund Genesis Partners II Jerusalem Venture Partners III Polaris Venture Capital Fund III Rest of World Buyouts Exxel Capital Partners VI Polish Enterprise Fund IV Unison Capital Partners Partnerships New partnership entries from the reported quarter are stated in italics. 34 partnerships, which had been reported in the June quarterly report as having been invested through commitments to INVESCO limited partnerships, are now included within the Invesco Venture Partnership Fund II, L.P. and Invesco Venture Partnership Fund II-A, L.P. and Invesco U.S. Buyout Partnership Fund II, L.P. 9

10 10 Figures and Contacts

11 The results for the period are shown in the statement of income on page 12. Princess Private Equity Holding Limited ( the company ) and Princess Private Equity Subholding Limited (together the Group ) have made a basic loss per share of USD (USD : 30 September 1999) and a diluted loss per share of USD (USD : 30 September 1999). This loss for the period is the result of the presentation requirements of International Accounting Standard 32, Financial Instruments: Disclosure and Presentation. In accordance with IAS 32, the net proceeds of USD are allocated to the liability component. The liability is therefore stated at a discount of % per quarter, including transaction costs, to the maturity value. The result of this technical requirement in IAS 32 is that the discount is amortised through the income statement as a finance cost, on a yield to maturity basis, over the 7.5-year life of the bonds until the first conversion at 1 January In the longer term, this accounting treatment has no effect on either the economic position or the net asset value of the company. The cumulative finance cost in retained earnings is offset by an equivalent credit in share premium. However, the required treatment clearly does have a significant impact on the net profit or loss reported in the income statement over the period to the conversion of the bond. 11 Figures

12 Consolidated unaudited statement of income For the period from 01 July 2000 to 30 September Notes USD USD USD USD Income 1 Bank deposit interest Income from short-term investments Income from unquoted investments Foreign exchange gain Expenses Investment Management fee Insurance fee Administration fee Service fee Legal fees Audit fees Salary Bank custody fees and charges Formation fees Tax exemption fee Advertising and printing Sundry expenses Amortisation of transaction costs Finance cost on convertible bond Foreign exchange loss Unrealised foreign exchange hedging loss Movement on revaluation of investment in underlying partnerships Unrealised loss on short-term investments Loss for the financial period ( ) ( ) ( ) The disclosures relating to the calculation of the loss Basic Loss per Share USD per share are included in note 14. Diluted Loss per Share USD

13 Consolidated unaudited balance sheet At 30 September Notes USD USD USD USD Assets Non current assets Investments in underlying partnerships 1& Investments 1& Current assets Debtors Short-term investments 1& Loan Cash at banks Total assets Equity and Liabilities Capital and reserves Issued capital Reserves Liabilities falling due after more than one year Bond Liabilities falling due within one year Creditors Loans Total equity and liabilities Figures

14 Consolidated unaudited statement of changes in equity For the period from 01 January 2000 to 30 September 2000 Movement on revaluation of investments Surplus/(loss) Share Share in underlying on underlying Accumulated capital premium partnerships partnerships income/(loss) Total USD USD USD USD USD USD At 01 January ( ) Surplus on underlying partnerships Movement on revaluation of investments in underlying partnerships Loss for the financial period ( ) ( ) At 30 September ( )

15 Consolidated unaudited cash flow statement For the period from 01 January 2000 to 30 September Notes USD USD USD USD Cash flow from operating activities Cash paid to suppliers and employees ( ) ( ) Net cash from operating activities ( ) ( ) Cash flow from investing activities Purchase of investments ( ) ( ) Proceeds from redemption of investments Investments in underlying partnerships ( ) ( ) Proceeds from sale in underlying partnerships Income received from underlying partnerships Interest received Net cash from investing activities ( ) ( ) Cash flow from financing activities Proceeds from issuance of share capital Proceeds from bond issue Payment of bond transaction costs ( ) Net cash from financing activities Net (decrease)/increase in cash and cash equivalents ( ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Figures

16 Unaudited statement of income For the period from 01 July 2000 to 30 September Notes USD USD USD USD Income 1 Bank deposit interest Income from short-term investments Foreign exchange gain 169 Expenses Investment Management fee Insurance fee Administration fee Service fee Legal fees Audit fees Salary Bank custody fees and charges Formation fees Tax exemption fee Advertising and printing Sundry expenses Amortisation of transaction costs Finance cost on convertible bond Foreign exchange loss Unrealised foreign exchange hedging loss Unrealised loss on short-term investments Loss for the financial period ( ) ( ) ( ) The disclosures relating to the calculation of the loss Basic Loss per Share USD per share are included in note 15. Diluted Loss per Share USD

17 Unaudited balance sheet At 30 September 2000 Assets Notes USD USD USD USD Non current assets Loan Investment in subsidiary Investments 1& Current assets Debtors Short-term investments 1& Loan Cash at banks Total assets Equity and Liabilities Capital and reserves Issued capital Reserves Liabilities falling due after more than one year Bond Liabilities falling due within one year Creditors Loan Total equity and liabilities Figures

18 Unaudited statement of changes in equity For the period from 01 January 2000 to 30 September 2000 Share Share Accumulated capital premium income/(loss) Total USD USD USD USD At 01 January ( ) Loss for the financial period ( ) ( ) At 30 September ( )

19 Unaudited cash flow statement For the period from 01 January 2000 to 30 September Notes USD USD USD USD Cash flow from operating activities Cash paid to suppliers and employees ( ) ( ) Net cash from operating activities ( ) ( ) Cash flow from investing activities Purchase of investments ( ) ( ) Proceeds from redemption of investments Monies lent to subsidiary ( ) ( ) Interest received Net cash from investing activities ( ) ( ) Cash flow from financing activities Proceeds from issuance of share capital Proceeds from bond issue Payment of bond transaction costs ( ) Net cash from financing activities Net (decrease)/increase in cash and cash equivalents ( ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Figures

20 Notes to the Consolidated unaudited financial statements 1 Principal accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group s financial statements: Basis of preparation The financial statements have been prepared in accordance with International Accounting Standard No. 34 (Interim Reporting). Revenue Interest on bonds and bank deposits is included on an accruals basis. Bond interest also includes the increase in value of bonds purchased at a discount. Reporting currency As the Group invests primarily in US dollars and manages its activities and makes decisions based on the US dollar, this currency has been chosen as the reporting currency for the Group. Investment management fee The investment management fee is paid quarterly in advance pursuant to the Investment Management Agreement between Princess Private Equity Holding Limited and Princess Management & Insurance Limited. Insurance fee The insurance fee is paid quarterly in advance pursuant to the Insurance Trust Agreement between Princess Private Equity Holding Limited and Princess Management & Insurance Limited. Investments in underlying partnerships The investments in underlying partnerships are valued at the most recent net asset value as reported by the underlying General Partner and are adjusted for subsequent net capital activity. The difference between the net assets as reported and the contributed capital up to that date is shown as either revaluation of underlying partnerships under the heading of reserves or as revaluation of underlying partnerships in the statement of income. Investments and Short-term investments The investments and short-term investments are included in the balance sheet at market values ruling at the balance sheet date. The difference between cost and valuation is shown as revaluation of short-term investments under the heading of reserves should this result in a surplus or as revaluation of short-term investments in the statement of income should this result in a deficit. Realised surpluses and deficits on short-term investments are shown in the statement of income. Foreign exchange Transactions in foreign currencies are translated into US dollars at the rate of exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into US dollars at the exchange rate prevailing at the balance sheet date. Exchange gains and losses are included in the statement of income. 2 Taxation status The companies are exempt from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989 and 1992 and they are each charged an annual exemption fee of 600 (USD 911). 3 Investments in underlying partnerships USD USD At 01 July Movement on revaluation of underlying partnerships ( ) Net contribution capital activity from 01 July to 30 September Foreign exchange loss ( ) At 30 September Of this amount USD has been funded to forty-six United States partnerships, USD to thirty-four European partnerships and USD to seven Rest of the World partnerships. 20

21 4 Investments Cost Short-term Short-term Investments Investments Investments Bonds issued Bonds issued Bonds issued at par at par at a discount Total USD USD USD USD At 01 July Additions Interest received on redemption Redemptions ( ) ( ) ( ) At 30 September Valuation At 30 September Included under additions is USD of money market investments with maturity of up to three months from date of acquisition, which were issued at a discount. As a result, these have been classified as cash equivalents for the purposes of the cash flow statement. 7 Cash and cash equivalents USD USD Cash at banks Investments in money market instruments Cash and cash equivalents as previously reported Adjustment due to overstatement in December 1999 quarterly ( ) Cash and cash equivalents as previously reported Effect of exchange rate changes (415) Cash and cash equivalents as previously reported Cash and cash equivalents consist of cash at banks and investments in money market instruments. Cash and cash equivalents included in the cash flow statement comprise the above mentioned balance sheet amounts. The overstatement occurred due to the cash and cash equivalents being disclosed at market value instead of at cost. This overstatement does not affect the net asset value. 5 Loan The loan, which is to Princess Management & Insurance Limited, is unsecured, interest free and repayable on demand. 6 Cash at banks During the period, Princess Private Equity Holding Limited entered into a forward foreign exchange agreement whereby it bought USD against GBP maturing in March As at the balance sheet date this has resulted in an unrealised foreign exchange loss of USD USD USD Cash at banks Unrealised foreign exchange loss ( ) Figures

22 8 Share capital Authorised USD USD Class A shares of USD 0.01 each Class B shares of USD 0.01 each Issued Class B shares of USD 0.01 each Bond USD USD At 01 July Transaction costs attributed to debt ( ) Amortisation of transaction costs Finance cost on convertible bond At 30 September As at the balance sheet date the nominal value of the bond outstanding was USD (USD : 30 September 1999) The bond is not convertible into shares until on or after 1 January 2007, at the option of the investor, using the relevant conversion price. Princess Private Equity Holding Limited has entered into an insurance policy to ensure that it is provided with sufficient funds for the payment of the principal upon redemption of the Bond on 31 December In accordance with IAS 32, Financial Instruments: Disclosure and Presentation, the net proceeds of the bond have been split between the liability and equity option components. The fair value of the equity component has been calculated as USD using an accepted option valuation model. This amount is classified as share premium and will remain part of the permanent equity of the company. The remaining net proceeds, after the allocation of the liability related transaction costs, of USD are allocated to the liability component. The liability is therefore stated at a discount of % per quarter, including transaction costs, to the maturity value. The result of this technical requirement in IAS 32 is that the discount is amortised through the income statement as a finance cost, on a yield to maturity basis, over the 7.5-year life of the bonds until the first conversion at 01 January In the longer term, this accounting treatment has no effect on either the economic position or the net asset value of the company. The cumulative finance cost in retained earnings is offset by an equivalent credit in share premium. However, the required treatment clearly does have a significant impact on the net profit or loss reported in the income statement over the period to the conversion of the bond. 10 Loans The loans, which are from Partners Group Private Equity Administration Limited and Princess Management & Insurance Limited, are unsecured, interest free and repayable on demand. 11 Commitments During the financial period the Group entered into contracts with thirteen underlying partnerships and at the balance sheet date had committed the sum of USD (USD : 30 June 2000). The unfunded commitments at the balance sheet date amount to USD (USD : 30 June 2000). 12 Group Net Assets per ordinary share As at the 30 September 2000, the Group had issued shares, and USD convertible bonds (USD bonds: 30 September 1999) that if converted at USD 100 per share would result in shares ( shares: 30 September 1999). This would result in a total of shares ( shares: 30 September 1999) and diluted Net Assets per share of USD (USD : 30 September 1999), based on Net Assets for the period of USD (USD : 30 September 1999). The Net Assets are calculated by deducting the Current Liabilities from the Gross Assets.

23 13 Company Net Assets per ordinary share For the period ended 30 September 2000, the Company had issued shares, and USD convertible bonds (USD bonds: 30 September 1999) that if converted at USD 100 per share would result in shares ( shares: 30 September 1999). This would result in a total of shares ( shares: 30 September 1999) and diluted Net Assets per share of USD (USD : 30 September 1999), based on Net Assets for the period of USD (USD : 30 September 1999). The Net Assets are calculated by deducting the Current Liabilities from the Gross Assets. 14 Group Basic and Diluted Loss per Share Basic Loss per Share For the period ended 30 September 2000, the Group had issued shares that result in a basic loss per share of USD (USD : 30 September 1999), based on a loss for the period of USD (USD : 30 September 1999). Diluted Loss per Share For the period ended 30 September 2000, the Group had issued shares, and USD convertible bonds (USD bonds: 30 September 1999) that if converted at USD 100 per share would result in shares ( shares: 30 September 1999). This would result in a total of shares ( shares: 30 September 1999) and a diluted loss per share of USD (USD : 30 September 1999), based on a loss for the period of USD (USD : 30 September 1999). 15 Company Basic and Diluted Loss per Share Basic Loss per Share For the period ended 30 September 2000, the Company had issued shares that result in a basic loss per share of USD (USD : 30 September 1999), based on a loss for the period of USD (USD : 30 September 1999). Diluted Loss per Share For the period ended 30 September 2000, the Company had issued shares, and USD convertible bonds (USD bonds: 30 September 1999) that if converted at USD 100 per share would result in shares ( shares: 30 September 1999). This would result in a total of shares ( shares: 30 September 1999) and a diluted loss per share of USD (USD : 30 September 1999), based on a loss for the period of USD (USD : 30 September 1999). 16 Contingent Asset On 30 September 1999, Princess Private Equity Holding Limited entered into an Insurance Agreement with Princess Management & Insurance Limited, to ensure that it will be provided with sufficient funds to be able to pay the principal amount of the Bond at maturity on 31 December Loan The loan, which is to Princess Private Equity Subholding Limited, is unsecured, interest free and although repayable on demand, Princess Private Equity Holding Limited has confirmed that it will not seek repayment within one year. 18 Investment in subsidiary Princess Private Equity Subholding Limited 100% wholly owned subsidiary USD USD 10'000 shares of USD 1.00 each 10'000 10' Post Balance Sheet Event Since the period end Princess Private Equity Subholding Limited has committed an additional USD to two United States partnerships and the net contribution capital activity has been USD Since the period end, Princess Private Equity Holding Limited has entered into two foreign exchange agreements. One whereby it bought USD against GBP maturing in December 2000 and another whereby it bought USD against Euro maturing in December Figures

24 Contacts Registered Offices Princess Private Equity Holding Limited Elizabeth House Les Ruettes Braye St. Peter Port, Guernsey Channel Islands Tel.: Fax: Info: Info Investment Manager Princess Management & Insurance Limited Guernsey, Channel Islands Market Makers Deutsche Bank AG Frankfurt, Germany Tel. +49 (0) ABN Amro Rothschild London, England Auditors PricewaterhouseCoopers Trading Information Listing Frankfurt and Luxembourg ISIN-Number XS Swiss Security Number German Security Number Reuters DBSTRUK03 Bloomberg PRINEQ <<equity>> RELS <go> Telekurs, Investdata CH813917