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Conversus Capital Releases Financial Results for the Six Months Ended 30 June 2012


    Conversus Capital, L.P. (NYSE Euronext Amsterdam: CCAP) ("Conversus") today reported its financial results for the six months ended 30 June 2012 and reported an estimated net asset value ("NAV") per unit of $22.14.

    Transaction with HarbourVest Structured Solutions II, L.P.

    On 2 July 2012, Conversus signed a definitive agreement (the "Purchase Agreement") with HarbourVest Structured Solutions II, L.P. ("HarbourVest Structured Solutions") whereby HarbourVest Structured Solutions will acquire Conversus´ subsidiaries that hold Conversus´ gross assets. Pursuant to the Purchase Agreement, HarbourVest Structured Solutions will acquire Conversus´ private equity fund interests and direct co-investments for approximately $1,439.1 million, as adjusted for capital calls and distributions subsequent to 30 April 2012. Based on capital calls and distributions between 30 April and 30 June, the adjusted purchase price as of 30 June would be $1,385.0 million. HarbourVest Structured Solutions will also assume, upon each closing, the unfunded commitments of the private equity fund interests that are transferred at such closing, as adjusted for capital calls since 30 April. The unfunded commitments totaled $362.5 million as of 30 June. HarbourVest Structured Solutions is not acquiring Conversus´ directly held public equity securities or net cash.

    Liquidation Basis of Accounting

    Conversus has adopted the liquidation basis of accounting as the result of the transaction with HarbourVest Structured Solutions. Upon the completion of all closings pursuant to the Purchase Agreement and the completion of a subsequent liquidation period, Conversus intends to cease operations. Under the liquidation basis of accounting, an accrued liquidation expense liability has been established for all future operating expenses through final liquidation.

    Net Asset Value Estimate

    As of 30 June, Conversus had an estimated NAV per unit of $22.14. By comparison, Conversus´ NAV as of 31 December 2011 was $26.88 per unit. Investment NAV was $1,394.6 million while unfunded commitments were $362.5 million as of 30 June.

     

    (in millions except per unit data)

        30 Jun 2012   31 Dec 2011         (Unaudited)   (Audited)   % Change Investment NAV   $ 1,394.6     $ 1,725.2     (19.2 )% Cash and Cash Equivalents     116.6       82.6     41.2 % Notes Payable     (1.0 )     (1.0 )   -   Performance Fees Payable     -       (54.7 )   (100.0 )% Other Net Assets (Liabilities)     (0.5 )     (15.4 )   (96.8 )% Accrued Liquidation Expense Liability, net     (68.5 )     -     (100.0 )% Estimated NAV   $ 1,441.2     $ 1,736.7     (17.0 )%               Common Units Outstanding     65.1       64.6     0.8 % Estimated NAV per Unit   $ 22.14     $ 26.88     (17.6 )%    

    Financial Highlights for the Six Months Ended 30 June 2012

    (in millions and unaudited)

      Net Change in Unrealized Depreciation on Investments   $ (228.2 ) Net Realized Gains on Investments     49.5   Investment Income     9.0   Operating Expenses     (29.8 ) Liquidation Expenses, net     (56.8 ) Total Decrease in Net Assets Resulting from Operations     (256.3 ) Distributions Paid to Unit Holders     (48.7 ) Units Issued from Treasury     9.5   Net Decrease in Net Assets   $ (295.5 )  

    Liquidity and Capital Resources

    For the six months ended 30 June, Conversus received $210.4 million in distributions and funded $57.0 million in capital calls, resulting in net positive portfolio cash flow of $153.4 million. As of 30 June, Conversus had a cash balance of $116.6 million and total net liabilities of $70.0 million.

    Portfolio Activity

    For the six months ended 30 June, $210.4 million in distributions were 70% from buyout funds, 12% from venture capital funds and 9% from special situation funds, with the remaining 9% coming from sales of directly held public equity securities. For the six months ended 30 June, $57.0 million of capital calls included $42.6 million for buyout funds, $12.0 million for venture capital funds and $2.4 million for special situation funds. During the six month period, 74% of capital calls came from fund vintage years 2008 (50%) and 2007 (24%).

    During the six months ended 30 June, thirteen Conversus portfolio companies, held by funds in Conversus´ portfolio, completed IPOs. The companies included Guidewire Software, Caesars Entertainment, GSE Holdings, Bazaarvoice, ExactTarget, CafePress, Millennial Media, Rexnord, Splunk, Proofpoint, Everbank Financial, Facebook and Tesaro.

    Unit Holder Distributions

    During the six month period ending 30 June, Conversus paid cash distributions to unit holders totaling $48.7 million, or $0.75 per unit.

    On 2 July, Conversus declared a distribution to unit holders of $0.30 per unit, or $19.5 million in aggregate, which was paid to unit holders on 16 July.

    Distributions to unit holders are based on net cash flow from Conversus´ portfolio, the forecast for net cash flows, the timing of closings under the Purchase Agreement and appropriate cash reserves based on the circumstances prevailing at the time. Conversus intends to make unit holder distributions following each closing under the Purchase Agreement and may make distributions at other times as deemed appropriate. No assurances can be given as to exactly when closings under the Purchase Agreement will occur, when the related unit holder distributions will be paid or the amount of the unit holder distributions. Conversus´ distribution policy can be found in the Investor Relations section of Conversus´ website under the heading "Distribution & Tax Information."

    Acquisition of Investment Manager

    On 20 July, Conversus completed the acquisitions of Conversus Asset Management LLC ("CAM") and Conversus Participation Company LLC for $42.5 million, less net liabilities assumed, for a net purchase price of $38.8 million. HarbourVest Structured Solutions will reimburse Conversus for up to $25.0 million of the purchase price.

    Semi-Annual Financial Report

    Conversus has filed its Semi-Annual Financial Report with the Netherlands Authority for the Financial Markets for the six months ended 30 June. The document can be accessed in the Investor Relations section of Conversus´ website under the heading "Financial Reports." Other than as disclosed in this release or the Semi-Annual Financial Report, there have been no events or transactions which have materially impacted the financial position of Conversus.

    Valuation and Reporting Policies

    Conversus carries investments on its books at fair value in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). As a result of the transaction with HarbourVest Structured Solutions, the fair value of fund investments and direct co-investments are estimated at realizable value as contemplated in the Purchase Agreement. Directly held public equity securities are marked to market as of the last quoted price on the reporting date.

    Conversus issues an Annual Financial Report as of 31 December each year that includes audited annual financial statements and a semi-annual Financial Report as of 30 June each year that includes financial statements reviewed by its auditors in accordance with the standards applicable to reviews of interim financial information. Conversus also issues Interim Management Statements for the quarters ending 31 March and 30 September each year that include summary quarterly financial information. Conversus prepares its financial information on the liquidation basis of accounting in accordance with U.S. GAAP. Conversus is required to consider, and will consider, all known material information in preparing such financial information, including information that may become known subsequent to the issuance of monthly NAV reports. Accordingly, amounts included in the quarterly, semi-annual and annual filings may differ from amounts included in the monthly NAV reports.

    About Conversus Capital

    Conversus is a publicly traded portfolio of third party private equity funds. Upon the completion of all closings pursuant to the Purchase Agreement and the completion of a subsequent liquidation period, Conversus intends to cease operations.

    Legal Disclaimer

    This press release is not an offer to sell, or a solicitation of an offer to buy, securities in the United States or elsewhere. Securities may not be sold in the United States absent registration with the U.S. Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. Conversus is not a registered investment company under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"), and the resale of Conversus securities in the United States or to U.S. persons other than to qualified purchasers as defined in the Investment Company Act is prohibited. Conversus does not intend to register any offering in the United States or to conduct a public offering of its securities in the United States. Conversus is an authorised closed-ended investment scheme for Guernsey regulatory purposes. Conversus is registered with the Netherlands Authority for the Financial Markets as a collective investment scheme which may offer participation rights in the Netherlands pursuant to article 2:66 of the Financial Market Supervision Act (Wet op het financieel toezicht). Past performance is not necessarily indicative of future results.

    The common units and related restricted depositary units of Conversus are subject to a number of ownership and transfer restrictions. Information concerning these ownership and transfer restrictions is included in the Investor Relations section of Conversus´ website at www.conversus.com.

    Forward-Looking Statements

    This press release contains certain forward-looking statements. In some cases, forward-looking statements can be identified by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," and "would," or the negative of those terms or other comparable terminology. Forward-looking statements speak only as of the date of these materials and include statements relating to expectations, beliefs, forecasts, projections (which may include statements regarding future economic performance, and the financial condition, results of operations, liquidity, cash flows, investments, business, net asset value and prospects of Conversus), future plans and strategies and anticipated results thereof, anticipated events or trends and similar matters that are not historical facts. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future, and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements including, but not limited to, the following: our ability to successfully close the sale of all of our fund interests and direct co-investments to HarbourVest Structured Solutions; our ability to successfully integrate CAM; the actual level of our operating costs relative to the estimates used to accrue our liquidation expenses; our ability to implement successful investment strategies; risks associated with private equity investments generally, the performance and financial condition of the funds in our portfolio and their portfolio companies, and the actual realized value of investments; the size, volume and timing of capital calls, distributions and other transactions involving our investments; changes potential conflicts of interest; changes in our financial condition, liquidity (including availability and cost of capital), cash flows and ability to meet our funding needs and satisfy our contractual obligations; general economic and political conditions and conditions in the equity, debt, credit, currency, foreign exchange and private equity markets; the trading price, liquidity and volatility, of our common units; competitive conditions; regulatory and legislative developments; and the risks, uncertainties and other factors discussed elsewhere in these materials or in our public filings and documents on our website (www.conversus.com). Conversus does not undertake to update any of these forward-looking statements.

    FINANCIAL TABLES FOR THE SIX MONTHS ENDED 30 JUNE 2012 FOLLOW

     

    Combined Statements of Net Assets in Liquidation

    As of 30 June 2012 and 31 December 2011

    (US$ in thousands except for per unit amounts)

          30 June 2012   31 Dec 2011     (Unaudited)   (Audited)           Assets         Investments, at fair value   $ 9,649     $ 1,725,162  

    (cost $5,379 as of 30 June 2012; $1,607,649 as of 31 Dec 2011)

            Investments, contracted to be sold, at fair value     1,384,971       -  

    (cost $1,499,934 as of 30 June 2012; $0 as of 31 Dec 2011)

            Cash and cash equivalents     116,626       82,573   Receivables and prepaid expenses     2,455       2,049   Total Assets     1,513,701       1,809,784             Liabilities        

    Performance fees payable

        -       54,715   Management fees payable     2,955       6,522   Notes and interest payable     1,000       1,000   Other liabilities     -       10,871   Accrued liquidation expense liability, net     68,536       -   Total Liabilities     72,491       73,108             NET ASSETS   $ 1,441,210     $ 1,736,676             Net Assets         General Partners´ capital   $ -     $ -   Limited Partners´ capital  

     

     

     

    (66,603 units issued and 65,086 units outstanding as of 30 June 2012; 66,603 units issued and 64,603 units outstanding as of 31 Dec 2011)

       

    1,470,918

         

    1,775,841

      Treasury units         (1,517 units as of 30 June 2012; 2,000 units as of 31 Dec 2011)     (29,708 )     (39,165 )           NET ASSETS   $ 1,441,210     $ 1,736,676             NET ASSET VALUE PER UNIT OUTSTANDING   $ 22.14     $ 26.88      

    Combined Statement of Operations

    For the six months ended 30 June 2012

    (US$ in thousands except for per unit amount)

    (Unaudited)

          Six months ended     30 June 2012 Investment Income     Dividend income   $ 5,828   Interest and other income     3,210   Total Investment Income     9,038         Expenses     Performance fees   $ 4,396   Management fees     6,553   Fund fees and expenses     9,097   Professional service fees     3,054   Personnel     2,107   Public company costs     1,244   Administrative fees to CAM     1,364   Other general and administrative     1,961   Total Expenses     29,776         Net Investment Loss     (20,738 )      

    Net Realized Gains and Net Change in Unrealized Depreciation on Investments

     

        Net realized gains on investments     49,474   Net change in unrealized depreciation on investments     (228,207 )

    Total Net Realized Gains and Net Change in Unrealized Depreciation on Investments

        (178,733 )      

    NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

        (199,471 )      

    LIQUIDATION EXPENSES, NET

        (56,759 )      

    NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS AND LIQUIDATION EXPENSES

      $ (256,230 )      

    LOSS PER UNIT OUTSTANDING FROM OPERATIONS AND LIQUIDATION EXPENSES

      $ (3.94 )    

    Combined Condensed Schedule of Investments

    As of 30 June 2012

    (US$ in thousands and Unaudited)

                  % of Net   Unfunded     Cost   Fair Value   Assets   Commitments INVESTMENTS, AT FAIR VALUE                 Publicly Traded Equity Securities (1) (2)                 Industrials   $ -   $ 4,725   0.4 %   $ - Financials     2,591     2,755   0.2       - Information Technology     2,207     1,616   0.1       - Materials     532     502   0.0       - Health Care     49     51   0.0       - Total Publicly Traded Equity Securities     5,379     9,649   0.7       -                  

    TOTAL INVESTMENTS, AT FAIR VALUE

      $ 5,379   $ 9,649   0.7 %   $ -                  

    INVESTMENTS, CONTRACTED TO BE SOLD, AT FAIR VALUE

     

                    Fund Investments                 North America                 Buyout   $ 989,962   $ 925,465   64.2 %   $ 285,494 Venture Capital     243,435     213,579   14.8       41,239 Special Situation     57,411     53,247   3.7       5,886 Total North America     1,290,808     1,192,291   82.7       332,619                   Europe, Asia and RoW                 Buyout     114,226     91,435   6.4       29,587 Venture Capital     2,356     3,374   0.2       252 Total Europe, Asia and RoW     116,582     94,809   6.6       29,839                   Total Fund Investments     1,407,390     1,287,100   89.3       362,458                   Direct Co-Investments(1)                 Industrials     52,544     58,153   4.0       - Information Technology     25,000     20,863   1.5       - Consumer Discretionary     10,000

     

      13,027   0.9       - Health Care     5,000     5,828   0.4       - Total Direct Co-Investments     92,544     97,871   6.8       -                  

    TOTAL INVESTMENTS, CONTRACTED TO BE SOLD, AT FAIR VALUE

      $ 1,499,934   $ 1,384,971   96.1 %   $ 362,458  

    (1) Industry classifications are determined at the individual portfolio company level and are based on the North American Industry Classification System ("NAICS").

    (2) Publicly traded equity securities represent equity security distributions from fund investments and direct public equity investments.

       

    Combined Condensed Schedule of Investments (Continued)

    As of 31 December 2011(US$ in thousands and Audited)

                  % of Net   Unfunded     Cost   Fair Value   Assets   Commitments FUND INVESTMENTS, AT FAIR VALUE               Unfunded North America                 Buyout   $ 1,054,470   $ 1,130,664   65.1 %   $ 308,589 Venture Capital     249,033     269,238   15.5       50,061 Special Situation     66,244     93,501   5.4       5,922 Total North America     1,369,747     1,493,403   86.0       364,572