FUND INVESTMENTS
In order to strengthen its global network, VenFin made investments in a few equity funds. In addition to providing VenFin shareholders with access to high-growth opportunities in markets they otherwise would not have access to, these investments provide VenFin and its investee companies with access to potential direct investment opportunities as well as to networks and expertise in markets outside South Africa.
GEMS II AND III | MILESTONE CHINA I AND II | VERITAS
VenFin has invested US $12.5 million in GEMS II, US $5.37 million of which has been returned to date.
GEMS II originally made eleven investments – four are fully exited and seven remain in the portfolio. These investments comprise a Personal Digital Assistant (PDA) manufacturer, two semi-conductor manufacturers, a mobile software application provider, a supermarket chain, an oil reserve development company and a retailer.
GEMS III has made three investments to date – one in a listed property developer in Thailand, one in a Singapore-based insurance syndication company and one in a GSM network operator in New Zealand.
The future
Going forward, management will focus its efforts on the realisation of the remaining seven investments in GEMS II as well as making further investments through GEMS III.
To date VenFin has invested US $4.3 million in Milestone China I and the fund has already returned US $3.3 million to VenFin from investments exited or partly exited. The principal objective of MCM is to achieve superior medium-term capital appreciation in its funds through direct investments in well-established, highgrowth companies seeking expansion or acquisition capital in China. All the executive team members of MCM are mainland Chinese with extensive investment and operational experience in both China and the USA.
Overview of the year to 30 June 2007
Milestone China I’s commitment period ended in May 2007, hence MCM does not foresee any further investments to be made by this fund. Seven investments have been made to date, three of which have been exited. The most recent investment of US$10 million was in Trina Solar, a solar photovoltaic manufacturer in China, listed on the NYSE in December 2006 at US$17 per share. At the end of June 2007, the share traded at US$54. VenFin has also invested US$1.5 million directly alongside the fund in addition to its exposure in Trina Solar via Milestone China I.In the period under review the fund exited its very successful investment in Focus Media Holding Limited, which operates the largest out-of-home advertising network in China using television displays. Apart from Trina Solar, the three remaining investments comprise a Beijing-based distributor of imported medical equipment, a xanthan gum producer (xanthan gum is used as an emulsifier in food) and a mobile phone handset design company.
To date Milestone China II has received commitments of US $247 million from investors. Milestone China II’s first investment of US$15 million was in CDMTV, the largest digital mobile television advertising network operator in China. VenFin also made a direct investment of US$10 million in CDMTV.
The future
MCM will focus its future efforts on the realisation of the remaining four investments in Milestone China I as well as making new investments through the second fund.
The investment broadens VenFin’s access to international deal flow and networks. It has given VenFin exposure to Israel and, to a lesser extent, the southeast USA region, where the Fund is primarily invested in seed-stage technology companies.
Overview of the year to 30 June 2007
By June 2007, VVP Fund II L.P. had made thirteen investments in the following sectors: enterprise software (3), communications (5), medical devices (2), homeland security (1), semiconductors (1) and logistics (1).During the year under review, follow-on investments were made in ten of these companies, namely Asankya, Bamboo, CableMatrix, ClickFox, CytoDome, Escape, Fringland (fring), Guardium, Sirica, and WebLayers.
VenFin made a direct co-investment in fring, which provides a mobile communications service based on VoIP technology that allows mobile subscribers to communicate at zero or very low incremental costs per call by means of a software application installed on their existing cellular handsets.
The future
In Israel, approximately US$626 million was invested in 161 VC-backed start-ups in the first half of 2007. These numbers are slightly higher than those for the comparative period in 2006, with foreign VCs holding an investment market share of around 50%. Communications and networking-related investments continue to dominate with a 42% share, followed by software at 24%, life sciences at 16% and semiconductors at 8%. Seed and start-up companies represent about 18% of this amount.The Fund is expected to make another one or two fresh investments in the coming months, which it will focus on making follow-on investments in its existing portfolio companies.