erseus focuses on making value-oriented investments in companies with sound business and macroeconomic fundamentals. After investing, Perseus actively participates with the management of its portfolio companies to generate superior returns on invested capital. The firm’s record demonstrates that the Perseus principals have the skills and creativity required to develop productive working relationships with the management teams of its portfolio companies and to implement value-building strategies. Perseus has consistently implemented restructurings and other cost reduction programs, consolidated companies in the same sector to take advantage of economies of scale and cross-selling opportunities, and initiated brand revitalization and other growth strategies often using Perseus’ wide network of contacts. Perseus has the expertise and personnel necessary to generate superior returns for its investors. Perseus’ investment activities fall into the categories described on the following pages:

Value-focused buyouts and recapitalizations have been and will remain an important dimension of Perseus’ overall investment strategy. Perseus’ strategy is to acquire platform companies in the firm’s primary areas of expertise and subsequently use these companies to transform itself from a financial investor to a strategic investor. The firm’s principals work closely with the management teams of its portfolio companies to execute restructurings, design and implement programs to reduce costs and increase productivity and quality, and to consolidate companies within the same market sectors so as to take advantage of economies of scale, cross-selling, and similar value creation opportunities. Perseus’ investment philosophy allows it to effectively target undervalued public companies and financially constrained companies with one or more of the following characteristics:

• Achievable and sustainable cash flow;
• Strong brands;
• Powerful intellectual property;
• Highly skilled work forces;
• Proven management teams with equity interests in their companies;
• Well-developed business strategies; and
• Significant market share or a defensible niche with meaningful growth potential.

The Perseus principals draw on their decades of experience, as well as industry, financial, and investor contacts, to find investment opportunities. As of September 2007, all but one of the 56 investments made through Perseus’ managed investment funds were sourced outside of traditional investment banking auctions. Perseus is confident that its network of contacts will continue to provide access to attractive investment opportunities and advantages in transaction execution that are not available to other private equity firms. The Chairman and Vice Chairmen of the firm are members of more than 25 corporate and non-profit boards of directors, excluding the boards of directors of Perseus’ portfolio companies. The principals believe that this network provides immediate intelligence and insight into industry dynamics and geopolitical and macroeconomic trends, significant access to boards of directors, management teams and financing sources for purposes of identifying, developing, closing, and exiting investments, and an ability to identify areas of opportunity that may not be readily apparent to other private equity firms. Further, due to its reputation for creativity and willingness to pursue difficult and complex transactions, Perseus has been approached on numerous occasions by management teams of companies with specific strategic or financial problems.

The personal and professional networks of its principals afford Perseus a unique perspective on opportunities created by international macroeconomic trends and developments. By focusing on select international markets and industries and leveraging the firm’s investment experience, Perseus is able to take advantage of opportunities that may not be obvious to others.

Perseus’ investments in energy and environmental technologies offer a paradigmatic example of the firm’s ability to capitalize on emerging opportunities. Perseus has long invested in energy and environmental technologies and highly engineered processes and has made particularly successful investments in industry segments such as solar power, flywheels, fuel cells, metering, micro turbines, waste oil refining, and grid enhancing technologies.

SECTOR FOCUSED INVESTMENTS

Perseus’ depth of expertise and broad experience in varied market sectors provide it access to investment opportunities available to few firms. The areas on which Perseus is focusing are described below; however, the Perseus team’s combined decades of experience allow it to move across the investment landscape beyond these areas.

Biotechnology and Medical Devices. The Perseus principals have a long history of investing in healthcare and biotechnology businesses and expect that over the next ten years numerous molecular biological products to fight and cure many forms of cancer, infectious diseases, and cardiovascular disease will be developed and brought to market.

Many smaller drug development companies have insufficient financing and infrastructure as stand-alone entities to develop promising drugs and are largely ignored by investors and analysts. Perseus believes that it can create meaningful value by consolidating biotechnology companies. Perseus expects that its consolidation strategy will initially involve investments in one or more platform companies that have multiple promising products and strong management. To gain sufficient influence to implement this strategy, the firm expects to acquire majority or significant equity positions in such companies, thereby effectively providing Perseus with control. By then leveraging the resources of each portfolio company’s assets, the principals plan to acquire other small drug development companies and drugs in development by other companies. It is expected that this consolidation strategy will yield multiple benefits, including the elimination of duplicative cost infrastructure and overhead, the rationalization of research and development product pipelines, a focus on the best products and product candidates, and improved financial and operational scale to facilitate other acquisitions. Additionally, as the public markets typically reward biotechnology companies with proven drug development success, significant value also may be created by virtue of the expansion of the platform company’s own drug pipeline.

Branded Consumer Products. The Perseus principals have long and profound experience with value creation in branded consumer product companies. Potentially powerful brands have always been one of the key attributes sought by Perseus in its investment initiatives. Not infrequently, important brands lose their luster by virtue of inadequate brand management practices as well as poor corporate management in general. Perseus has long relationships with professional managers in this sector whom Perseus has serially backed.

The Perseus funds have made successful investments (or have the expectation of ultimate success) in several branded consumer products companies, including Converse (footwear), Raleigh and Diamondback (bicycles), and Haggar (apparel). Further, Perseus’ principals have made very successful investments in this sector in their previous positions, including Wilson Sporting Goods, The North Face, Avis Rent-a-Car, Simmons Mattress, WearEver Products, and ProctorSilex.

Business Services
Perseus believes that powerful investment potential exists in the rapidly expanding outsourced business services sector. In the past decade, the market size of this sector has increased significantly, with global market size expected to exceed $1 trillion by 2007. Perseus expects opportunities in this sector will continue to grow. As businesses continue seeking ways to achieve divergent objectives—namely to reduce costs and increase focus on core operations while simultaneously enhancing the quality and diversity of the services or products offered—increasingly, companies are turning to outsourcing vendors that offer cost-efficient, technologically superior, integrated business services solutions. Perseus is capitalizing on the growth potential available in the outsourcing sector by acquiring control positions in U.S.-based outsourcing companies, many of which are undervalued or financially constrained. In targeting such companies, Perseus is applying its historical investment strategy by selecting for investment companies that have highly skilled work forces, powerful intellectual property, and achievable and sustainable cash flow.

Perseus has invested in companies that provide integrated business solutions in the printing, communications, building technology, and security sectors, including companies such as Workflow Management and Relizon, each in the print outsourcing business; Maritime Telecommunications Network, a global satellite services provider supplying broadband solutions for voice, data, Internet, and compressed video services to leisure cruise lines, oil and gas companies, and other customers; and Biometric Access Company, a systems integration and software/hardware development company that provides identity verification solutions with applications for, among others, retail financial transactions and PC/network security functions.

Energy and Environmental Technology, Engineered Processes
Perseus believes that (i) enormous capital has been employed in the last two decades in the research and development of energy efficiency and environmental technologies that are only now maturing and becoming commercially valuable; (ii) energy deregulation has created vast new investment opportunities; (iii) new technologies are needed to upgrade and modernize the North American electrical grid; (iv) the growth of the “digital economy” has created demand for reliable, high-quality power, which presents unique investment opportunities in the areas of energy storage, distributed power, and power marketing; and (v) there is enormous demand for new energy, environmental, and engineering technologies and products, and alternative and renewable fuel sources.

Perseus has been one of the most active private equity investors in the energy technology industry and has made successful investments in such sectors as distributed generation, solar power, power storage, oil recycling, clean fuels, and grid enhancing technologies. Perseus will continue this industry focus, with particular emphasis on companies developing products in the areas of distributed generation, power transmission and distribution, alternative and renewable energy, energy management systems, water purification technology and infrastructure, and manufacturing technologies.

 
Perseus sweeps in from above astride the winged horse Pegasus, who arose from the blood of the slain Medusa. Below, the sea serpent snarls at his pursuer, as Andromeda, seen here as a voluptuous, indeed Titianesque, northern Italian beauty, looks on from her rocky perch.