Quarterly report as at 31 March 2004

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KBC PRIVATE EQUITY FUND BIOTECH

PRIVAK under Belgian law

CONTENTS OF QUARTERLY REPORT AS AT 31 MARCH 2004

A word of explanation ............................................................................................................ General investment climate.................................................................................................... Outlook ................................................................................................................................ Role and activity of the Biotech Advisory Council ..................................................................... Investment objective .............................................................................................................. Message from the Fund manager to the shareholders............................................................... Balance sheet 31-03-2004 ..................................................................................................... Profit and loss account for the period ended 31-03-2004 ........................................................... Position of equity portfolio and other net assets as at 31-03-2004..............................................
Overview of transactions from 01-01-2004 to 31-03-2004 ............................................................. Valuation rules .......................................................................................................................

3 4 8 10 11 11 19 20 21 23 24

General information ...............................................................................................................

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A word of explanation
KBC Private Equity Fund Biotech (or BIOTECH in brief) is a PRIVAK, i.e. a closed-end Belgian equity company the sole objective of which is collective investment in unlisted companies. BIOTECH was incorporated as a public limited company by KBC Asset Management, which is also responsible for the management, assisted on the one hand by the Investment Committee and on the other by the BIOTECH Advisory Council. The Investment Committee consists of specialist KBC employees. The BIOTECH Advisory Council contains representatives from the biotech sector at home and abroad, from both the business and the academic world. Within the limitations imposed by the PRIVAK legislation, BIOTECH invests in biotechnology companies worldwide. In the case of investments in listed companies the emphasis is on leading product-oriented firms. When BIOTECH was set up a portfolio was put together of 30 quality names, which are generally held for the longer term. In the case of the unlisted companies the preference is for product-oriented firms that already have products undergoing clinical trials and which have the potential to evolve into biotech firms with full vertical integration (i.e. from research right through to marketing). Unlisted technology firms that are among the world leaders in their domain and that are developing or could develop products on the basis of their technology platform also meet the desired profile. Finally BIOTECH may also invest in other VC or private equity funds up to a maximum of 15 % of the portfolio. BIOTECH does not project itself as a VC fund that invests in start-ups but, rather, as a fund that seeks out firms that have already achieved a certain degree of maturity and will be ready for flotation in no more than three years. BIOTECH is listed on Euronext Brussels. Evolution of market price and net asset value 31-12-2003 Market price 6,60 31-03-2004 5,82

The Biotech market price may be found daily in the newspapers under the Euronext price lists (double fixing market). 31-12-2003 Net asset value 7,88 31-03-2004 8,20

The net asset value of Biotech may be found daily in the newspapers under the KBC investment funds and on www.kbcam.be/biotech Allowance needs to be made for the fact that the market price need not necessarily be an accurate reflection of the net asset value of the share and that the market price can deviate - either way - more or less substantially from the net asset value.

Contact details:

BIOTECH NV Havenlaan 2 1080 Brussels Tel. +32 (0)2/ 429 96 94 +32 (0)2/ 429 42 63 http://www.kbcam.be/biotech

General investment climate

1 April 2003 to 31 March 2004 In recent months, the investment climate has been characterized by an improvement in confidence. After the TMT bubble burst (March 2000), the financial markets suffered due to an extremely high degree of risk aversion, which was fuelled by a large number of factors such as the continuing geopolitical risks, accounting scandals and the fear of deflation. However, the economic doom and gloom scenarios failed to pan out. One by one, the factors accounting for the aversion to risk disappeared and stock markets started to rally from March 2003. This recovery became more broadly based when US economic indicators improved, too.

US economy: job creation is vital Although the US economy was still flirting with a fresh recession as late as the Spring of 2003, real GDP headed back up again in the third quarter by an annualized 8.2%, the highest growth rate since the Spring of 1984. During the fourth quarter, growth persisted at a rate of 4.1%. Successive packages of tax cuts, the extremely flexible monetary policy, low mortgage rates, the ebbing of uncertainty following the war in Iraq and the sharp upturn in corporate profitability provided the catalyst for strong growth, and disposable household income and private consumption were given a hefty boost. The disappointing trend on the labour market despite strong economic growth, very few new jobs were created once again highlighted the surprisingly sharp rise in US labour productivity. Accordingly, US companies saw their profit margins widen considerably, and doing business started to pay off again. Under these conditions, business investment headed up sharply. The growth spurt in the third quarter triggered a self-perpetuating economic uptrend. The exceptionally brisk productivity growth has resulted in an uninterrupted decline in unit labour costs over a two-year period and accounted for the drop in core inflation (i.e. inflation adjusted for fluctuations in the price of energy, food, beverages and tobacco) in January to 0.8% (the lowest level since 1960). In the meantime, the worldwide, robust economic trend has led to much higher price pressure on the commodity and oil markets, while the weaker USD has resulted in upward pressure on import prices in the US. Consequently, inflation is gradually bottoming out. Since 2001, economic policy has steered a distinctly expansionary course. Through various measures, including tax cuts and an increase in the defence budget, the Bush Administration has turned the federal budgets structural surplus into a structural deficit. Fiscal 2002-2003 (that ended 30 September 2003) was closed with a deficit of 374 billion USD. With further tax rebates in the pipeline and given the robust increase in spending, the fiscal 2003-04 deficit will probably be in the region of 500 billion USD. In real terms, the money market rate has been negative since late 2001. In June 2003, the Fed cut its key rate by 25 basis points to 1.00%. This cut was probably the last one in this cycle, though the Fed is waiting for convincing evidence that economic growth is leading to sustained job creation before putting up its rates. For a long time, the flagging economy and mounting fear of deflation led to downward pressure on US bond rates. In mid-June 2003, interest rates hit a record low of 3.10%, a level not seen since the 1950s. However, the tide turned during the Summer. From the middle of June until the end of October, US bond rates went up by 125 basis points to 4.35%. At one point, they even reached 4.60% before heading down again to bring the ten-year rate to 3.85% at the end of the period under review. Indeed, the figures showed that the pronounced economic recovery was taking place without general upward pressure on prices. The decline in risk aversion, the favourable trend in company earnings and investors interest in assets offering a higher rate of return also benefited corporate bonds. Credit spreads fell to exceptionally low levels, and given the tighter monetary conditions ahead, it would seem that the narrowing of spreads has come to an end. In 2003, the Canadian economy initially outperformed its US counterpart. However, a series of one-off events (the mini-SARS epidemic, a case of mad cow disease that paralyzed meat exports, a power failure in and around Ontario) crippled economic growth in the second and third quarters of the year. Fundamentally, final domestic demand continued to increase at a robust pace, thanks to the sharp rise in employment and higher commodities prices. In light of Canadas better growth performance initially and the fear that inflation would

exceed the official target, the Canadian central bank did not hesitate to raise interest rates by 50 basis points in the first quarter of 2003. Fears of excessive inflation turned out to be premature, however, and the policy rate was lowered in various stages to end the period under review at 2.25%. Nonetheless, the CAD benefited from what on balance was a wider short-term interest rate differential with the US, as well as from the healthier Canadian budget and external position. Consequently, the currency appreciated and, by the end of 2003, reached its highest level against the USD since 1993. However, it has had to surrender some ground since then. The long-term interest rate differential between Canadian and US government bonds fluctuated within a band of 40 to 55 basis points.

European economy : moderate recovery Since the Summer of 2003, the euro area has also begun to experience economic recovery, some time after the other industrialized countries. After contracting during the first half of the year, real GDP went up by around 1.5% on an annual basis, rather a modest recovery. In addition, the components accounting for growth in the fourth quarter give cause for concern. Net exports proved a great disappointment, partly because of the strength of the euro. However, even more worrying was the continued weakness of private consumption, which barely increased at all in the fourth quarter (up a mere 0.3%, annualized). Once again, consumer spending in Europe did not live up to expectations. The last and only ray of hope for the European economic recovery is the relatively positive business climate. The better earnings outlook, favourable financing terms and increasing confidence are prompting companies to start investing again. What is more, three years of rationalization have created not only the scope, but also the need for more replacement investment. The modest economic recovery has not yet given rise to any inflationary pressure. Core inflation fluctuated during the latter half of 2003 at around 1.7%. Since the Member States rejected the European Commissions recommendation to force France to reduce its spending, the ruckus surrounding the EMU Member States public finances has subsided somewhat. Most have taken measures to keep their budgets from going further off the rails. Nonetheless, many Member States, including Germany and France, will have a budget deficit in 2004 of more than 3% of GDP for the third year running. Moreover, the moderate recovery will not alleviate the budgetary difficulties right away, so additional measures may well be needed if the deficits are to be reduced. In light of the budding economic recovery and with the rate of inflation in the neighbourhood of 2% (the target set by the European Central Bank (ECB)), the ECB has had little cause to intervene over the past year. The brisk appreciation of the euro has not been enough to force the ECBs hand. In mid-June, the refinancing rate was cut by 50 basis points. Since then, the policy rate has held steady at 2%. True to tradition, the German ten-year rate has kept up with developments on the US bond markets. The German-US interest rate gap remained slightly positive (0 to 20 basis points) throughout the period under review.

Weak dollar At the end of the period under review, the EUR was worth 1.23 USD, 12.4% more compared to the end of March 2003. The dollar depreciated against practically every major currency, continuing a trend that had started in the Spring of 2002. The enormous deficit on the US balance-of-payments current account (5% of GDP) appears more difficult to finance than before. Long-term investment by entrepreneurs seeking to do business in the US is at a low pitch and the direct investment balance has turned negative. Portfolio investments, too, have gone down and their quality is deteriorating. The past few years have seen foreign investors turn their backs on US equities, and now private investors are reluctant to buy bonds issued by US semi-public institutions. This has resulted in foreign central banks increasingly resorting to support purchases to prevent the USD going into free fall. It was probably no accident that the USD hit a low on 11 February, as it coincided with a peak on the equity markets (see below). Increasing doubts about the sustainability of the economic recovery (a poor labour market report on 5 March) and new terrorist threats (Madrid, 11 March) have led to an upsurge in investors aversion to risk.

Massive interventions by the Asian central banks seeking to preserve local competitiveness mean that the USD has, temporarily, weakened primarily against the EUR and the peripheral dollar currencies. The Asian currencies have gained hardly any ground at all, with the JPY in the middle of the pack.

End of the bear market In the period between 2000 and 2002, negative sentiment predominated almost without interruption on equity markets around the world. The rapid end to military operations against Saddam Hussein's regime in Iraq mitigated investors aversion to risk from the middle of March 2003, but has not done away with it entirely. Since then, the international equity markets have been through a few fine rallies. During the period under review, the Dow Jones Industrials went up by 25.0% and the NASDAQ by as much as 42.8%. The BEL 20 posted a gain of 38.5%. Admittedly, there is still a long way to go compared with the record highs of 2000. This was not the first time the stock market has rallied recently. This time, however, a number of factors were involved: Saddams regime crumbled more quickly than expected, and SARS did not develop into a global epidemic. Moreover, the problems in the insurance sector resulting from the continuing stock market malaise and the sharp fall in bond yields - appear to be under control. The health of the global economy in general and of the US economy in particular is a lingering source of uncertainty, but here too, the indicators have improved considerably in recent months. In any event, the publication of generally favourable company earnings for the seventh quarter in succession was a shot in the arm. In the fourth quarter of 2003, earnings per share on the S&P 500 reached a new record high. On 11 February, the S&P 500 reached its highest point of the period under review, but in recent weeks the markets have lost some of the ground gained. The macroeconomic indicators were unable to provide an extra stimulus, although the indicators released were very strong, with some even at record highs. However, the financial markets have been convinced for some time that the US economy is going through a phase of robust expansion, so the good news did not come as a surprise. Rather, the stock markets proved to be more sensitive to bad news. A typical example of this was the reaction to the poor labour-market report published on 5 March. Job creation remained well below expectations in February, which immediately gave rise to doubts as to the sustainability of the economic expansion. In this uncertain climate, the terrorist attacks in Madrid led to a further drop in prices. The sharp depreciation of the USD against the EUR has driven a wedge between the performance of the European and the US stock markets, a gap that becomes all the more apparent when stock market movements are converted from the local currency to a common currency. During the period under review, the MSCI EMU went up by 34.7% (in EUR), while the MSCI US went up by 29.9% in USD, but by only 13.8% in EUR. The correlation between price movements in both regions increased even more. In fact, developments on European markets were driven by the same factors as on US markets. In Europe, too, the sharp downturn during the period to March 2003 was followed by a striking upturn. On balance, the Belgian stock market significantly outperformed the European average. This was the start of a move to catch up with the pack. Since the euro was introduced, the lack of foreign interest in the Belgian market and the international diversification of Belgian equity portfolios has had a negative effect on the BEL 20. As a result, Belgian shares had become very attractively priced compared to shares on other European markets. Over the past twelve months, shares with a fairly small market capitalization and financial sector shares have also put in a very good performance (see below). These shares are more prevalent in the BEL 20 than elsewhere in Europe. The Japanese stock market put in a fine performance during the entire period under review. The MSCI Japan went up by 47.0% (in EUR). This outperformance was certainly not constant: initially, the Japanese stock market significantly underperformed the others before strongly outperforming them between the end of May and the middle of October, after which it lagged well behind the general trend for four months before heading up without interruption when the turning point was reached on 11 February, whereas the other stock markets underwent a correction. Share prices in Tokyo are affected more by local factors than on other markets. Each time, the temporary outperformance occurred against a backdrop of an unexpectedly strong domestic recovery, the dissipation of the threat (at least on the short term) of a banking crisis, a reversal in the view of deflation and stronger leadership by Prime Minister Koizumi. Only the first of these factors appears to be based on hard data. Another striking feature was the strong performance put in by emerging markets on all continents. Until May 2003, Latin American and Asian markets saw prices moving more or less in step with prices on the international markets, but since then they have significantly outperformed the latter. In Asia, technology-

sensitive markets attracted the most attention from investors. In Central Europe, the outperformance has manifested itself mainly since the turn of the year.

So-called small caps outperformed blue chips while growth shares generally did not perform as well. There was a shift from early- to late-cyclical sectors. In addition, rapid factor and sector rotation characterized the investment climate over the past few months. The Energy sector benefited for a good while from persistently high oil prices, but in January a shock wave went through the industry when Royal Dutch announced that it was writing off a good 20% of its proved oil reserves. The sector is suffering from higher development and prospecting costs and diminishing returns on capital. In the Materials sector, it was mainly the early-cyclical segments that were long in the lead. Metals & mining benefited from the improved economic picture and the much higher metals prices resulting from the robust demand from China, among other things. Indeed, in China, the huge amount of work being done on infrastructure is creating an enormous demand for metals. But robust domestic demand on the US market has also pushed up prices. In February 2004, the price index of the London Metal Exchange was more than 80% higher than its most recent low recorded in 2001, although since then doubts have arisen about the sustainability of economic growth in China. These trends were also apparent in the steel sector and led to the US abolishing import duties in December. However, the entire Materials sector remains burdened by higher energy prices, higher transport costs, the weak USD and overcapacity. This has led to a narrowing of margins, as reflected most clearly in segments such as the chemicals and paper industries, which are unable to fall back on higher output prices. The Industrial sectors were dominated by sector-specific developments. Aircraft makers, for instance, still have to contend with a low level of orders, although the end of the tunnel appears to be in sight. Engineering, electrical installation manufacturers and building materials capitalized on the favourable trend of final demand. Already in 2003, the Consumer discretionary sector had extensively anticipated the economic recovery. When, during the early months of 2004, the labour market in the US failed to improve adequately and doubts arose about the sustainability of economic recovery, however, this sector lagged behind the general market trend. Automobile manufacturers continue to grapple with structural overcapacity and downward pressure on profit margins. US car-makers, for example, attempted to steal a march on the competition by offering extra discounts and free financing facilities. Increased car sales did not, however, result in a corresponding rise in profits. Meanwhile, car sales around the world appear to have peaked and stocks are piling up. Broadcasting companies and advertising agencies benefited from the recovery of the advertising market and are starting to anticipate the higher income that will flow in from the upcoming presidential elections in the US, from the Olympics and the European football championships. Concasts bid for Disney attracted a good deal of attention in the industry. Consumer staples shares underperformed the market average. Company-specific news predominated. After 141 days of tough negotiations, a social agreement was concluded at the Southern California supermarkets, which had a favourable effect on wage cost pressure. In the UK, the legal difficulties regarding the Safeway acquisition finally came to an end. German food retailers are struggling with overcapacity and slack private consumption. A good deal of attention was focused on the merger between Interbrew and AmBev, which will be linked via a complicated share exchange to become the worlds largest brewery (at least in terms of volume). The Health care sector also proved disappointing during the period under review. The heat generated by the mergers and acquisitions fever at the start of 2004 was short-lived. Cost-savings achieved by means of external growth are supposed to guarantee earnings growth on the long term, now that the imminent expiry of patents and the lack of new product launches are hampering organic growth. In the US, it was unclear what sort of impact the reform of Medicare would have on the pharmaceuticals industry. The new legislation should lead to higher sales, but also to lower unit prices. In addition, competition from the generic industry is extremely aggressive, which means that many patents are in reality lapsing sooner than they should by law. After marking time during the closing months of 2003, Biotechnology resumed its upward trend in early 2004. Strong sales figures for products such as Erbitux, Avastin and Antegren continued to buoy up share prices. Genzyme bid one billion USD for Ilex Oncology.

The climate surrounding the interest-sensitive Financials sector has improved considerably. Debtor quality in the banks loan portfolios improved, allowing banks to set aside lower loan loss provisions. Aside from a few exceptions (the Parmalat affair for the Italian banks, the USD for Dexia, and the diminished volatility on the financial markets for Socit Gnrale), the European banks boasted good results. Merchant banks benefited from increased activity on the Mergers & Acquisitions market. The outstanding performance of Real estate shares was not confined to one single segment or region, but was broad-based. Bucking this trend however was residential property in the US. With interest rates at an all-time low, the high dividend yields characteristic of real estate shares are very tempting. Given the steep price falls of the past few years and the conspicuous increase in companies IT budgets in 2003, the price rally in the IT sectors shares should have been more pronounced during the period under review. The Software & Services segment, in particular, proved to be a disappointment. Company results published were excellent, but did not really exceed expectations. At the results presentations, pronouncements about prospects were always very cautiously worded - a sharp contrast with recent practice. In the Telecom operators sector, a good deal of attention was devoted to the takeover of AT&T Wireless Services by Cingular Wireless. The market was relieved when Vodafone did not launch a counterbid and opted instead for co-operation with Verizon. There is no longer any specific use for the much improved cashflow position, now that the debt-reduction phase has come to an end. Indeed, there are no expensive investment programmes in the pipeline any more on the short and medium terms. The markets are increasingly taking account of a higher payout ratio (i.e. higher dividends) or share buy-back programmes (i.e. higher earnings per share). In Belgium, Belgacoms IPO (March 2004) attracted a good deal of attention. That transparency is the best policy was illustrated by the trend in the price of a number of Utilities. German RWE continued to streamline its core activities and disposed of its waste management company. Suez found favour amongst investors when it sold almost all its stake in the French M6 - Metropole Tlvision.

Outlook
Although in the fourth quarter of 2003, the by then notorious yo-yo movement in sales volumes on the US car market temporarily slowed real GDP growth, all the signs are that the global economy will remain buoyant in the months ahead. The investment engine has reached cruising speed in the US, reflecting the significant improvement in corporate profitability after two and half years of draconian cost-cutting. Conditions on the labour market are gradually improving. Together with the sizeable tax rebates still in the pipeline, this will help sustain consumer spending. Following the stock reduction in the first three quarters of 2003, the stock cycle will also buoy up US domestic demand for some time yet. In Europe, the economic recovery is still having a hard time getting off the ground. Although confidence indicators are heading up, months of optimism are alternating with months of renewed pessimism. The economic expansion in Europe looks set to be less vigorous than elsewhere around the globe. The full effects of the loss of competitiveness have yet to make themselves felt, and private consumption is on shaky ground. Despite high oil prices and rising commodities prices, there is no need to fear a quick reversal of the disinflation trend. The pressure on prices will remain low, thanks to persistent overcapacity, sharp productivity gains, modest pay increases and the structural effects of globalization (and the expensive euro in Europe). The policy-makers will probably not upset the economic applecart. With the presidential elections approaching, it will still be a year or so before US budgetary policy is tightened. In Europe, governments have bought themselves a little more breathing space. Aside from some reproachful finger-pointing from Frankfurt, politicians got off scot-free when they refused to comply with the Stability Pact. Persistently low inflation means that central banks may not have to raise their key rates any time soon. In the US, the Fed is still not convinced that the risk of deflation has entirely disappeared and, therefore, will raise its key rate later rather than sooner. The European Central Bank is likely to remain on the sidelines, as well. If it does act in the next few months, it will be more likely to cut rates than raise them in view of the political pressure, the expensive euro and the persistent weakness of the European economy.

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The towering US borrowing requirement is taking its toll. In the longer term, a weaker dollar will result in more balanced and more sustainable world growth. In the short term, there may well be a difficult adjustment period to get through. A sustained flexible monetary policy will not be able to prevent a further rise in bond rates in the US and Europe. Government bonds are not cheap. Mounting budget deficits will make considerable issue activity necessary, while investors, in light of the economic upturn, are more inclined to opt for riskier assets anyway. Sustained disinflation and stable money market rates will, however, probably prevent bond rates from increasing too dramatically over the next few months. Credit spreads have already narrowed sharply in recent months, hitting all-time lows. As a result, the appeal of corporate bonds as a financing technique is vastly enhanced, compared with classic bank loans. In turn, this means there is a risk of a sharp increase in issue volumes in the months ahead. In parallel with this increase in supply, which is expected to be considerable, there is greater uncertainty about the trend in demand. Many issues are due to mature in the months ahead. It is difficult to predict how far investors will seek reinvestment opportunities in this market or take advantage of low returns to adjust the composition of their portfolio (opting for risk-free government bonds or undervalued equities, for instance). In any event, the rate spread between corporate and government bonds has become so slim that even a tiny increase in the spread would mean a lower yield on corporate bonds than on government bonds. Despite the rallying o prices over the past few months, equity markets remain very attractively priced. At f present, the consensus expectation is for a rise in earnings per share by 13.4 % in the US and by 20.6 % in Europe over the next twelve months. Only recently, corporate earnings already went up year-on-year for seven consecutive quarters (from the second quarter of 2002 through the fourth quarter of 2003), often by more than 10%. In more than 85% of the cases, reported earnings were either higher than expected or in line with expectations. The recovery in earnings also occurred against the backdrop of a fairly weak global economy. Companies current earnings projections can therefore be considered to be quite realistic. Share prices in the US and Europe are an average of, respectively, 18.2 and 14.6 times the expected earnings for the next twelve months, close to the historical average. Ratios that take account of interest rates, too, suggest that considerable undervaluation still exists. This is noticeable, for instance, when a comparison is made of the dividend yield and the bond yield. Aside from a few exceptions, dividends have not reflected the stock market malaise or the decline in earnings. Consequently, the margin between the current return on equities and the return on risk-free government paper has narrowed considerably. Our earnings-bond yield model, which uses P/E ratios adjusted for the bond yield to measure stock market valuations, shows that US and European equity markets are currently underpriced by more than 20%. Of course, this situation will not necessarily be undone by an increase in share prices alone, but most likely by a combination of interest rate and share price increases. In the US, for instance, this undervaluation will be able to be corrected if, aside from price increases, there is either an increase in bond rates to around 5.75% (which is higher than in 1994, and implies a much stronger economic situation than is currently on the cards, but then the recovery in earnings will be at east as explosive), or a new recession that results not in the anticipated increase in l earnings, but rather a decrease in earnings by some 15%. All this demonstrates that equity markets are still discounting pessimistic scenarios in share prices. If this pessimism clears up, that alone could create considerable upside potential. Edited to 2 April 2004

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Role and activity of the Biotech Advisory Board

The BIOTECH Advisory Board has no separate legal status and was set up to assist KBC Asset Management and the Investment Committee in their respective tasks of managing and researching investment opportunities. Its mission is to provide non-binding advice on files for study if requested to do so by the Investment Committee of the Board of Directors. The Advisory Board is pre-eminently the Board for keeping in touch with the biotechnology industry and the academic sphere. Due to its contacts with industry and the academic world, it can inform the Investment Committee of new developments within biotechnology and can supply information on new opportunities. The Advisory Board is kept informed on the state of affairs: investments made, policies followed and actions undertaken. The Advisory Board may express its opinion at meetings on investments made, policy followed and actions undertaken. In addition to the formal meetings, the aim shall be to have numerous bilateral informal contacts between the members of the Advisory Board and the Investment Committee. The aim shall be to keep contacts between the Advisory Board and the Investment Committee open. It is also the intention that the members of the Advisory Board should make a material contribution to the success of BIOTECH. Reports shall be drafted on the contact between the Advisory Board and the Investment Committee. These reports shall be available from the registered office of the Company and shall contain all information that is not confidential. The members of the Advisory Board shall sign an internal set of rules which include a confidentiality undertaking concerning confidential information and a ban on the use of such information. The tasks of the Advisory Board include the following: in concrete terms, providing non-binding advice on files for study at the request of the Investment Committee of the Board of Directors monitoring the biotechnology sector and progress in biotechnological sciences and informing the Investment Committee accordingly (formally every quarter, informally on an ad hoc basis) commenting on the investments made, policy followed, and actions undertaken by the Investment Committee (formally every quarter, informally on an ad hoc basis). Meetings between the Investment Committee and the Advisory Board cover two aspects: 1. Provision by the Investment Committee to the Advisory Board of information on: the portfolio composition the allocation over the various regions and sub-sectors the funds performance justification of the actions undertaken, at the request of the Advisory Board justification of the investment policy followed, at the request of the Advisory Board submission of specific files for advice 2. Provision by the Advisory Board to the Investment Committee of information on: important scientific developments suggestions and justification for concrete investment opportunities suggestions and justification for concrete investment policy. The Advisory Board shall comprise experts from the biotechnology and academic field and the world of business. Chairman of the Advisory Board: Members of the Advisory Board: Marc Van Montagu Professor, Rijksuniverseit, Ghent Gil Byen Nancy Chang Rudi Dekeyser James Geraghty Andr Tartar Supervisory Director, Arthur D. Little (Brussels) Chief Executive Officer, Tanox Inc. Deputy General Manager, VIB Senior VP International Development, Genzyme Corporation Professor, Pasteur Institute, Lille

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KBC Private Equity Fund Biotech

Investment objective BIOTECH attempts to achieve a good return on investment through long-term capital gains on investments in equities and equity-linked financial instruments issued by growth companies in the biotechnology sector. BIOTECH focuses worldwide on biotechnology growth companies and investment opportunities which arise in this sector. BIOTECH conducts dynamic portfolio management, observing the investment conditions set out in the PRIVAK Decree on investment in: - listed growth companies; - unlisted companies; - other venture or private equity funds.

MESSAGE FROM THE INVESTMENT COMMITTEE TO THE SHAREHOLDERS

MARKET CLIMATE IN THE BIOTECHNOLOGY SECTOR

The NASDAQ Biotech index rose from 724.14 (31 December 2003) to 778.10 points (31 March 2004) during the first quarter, a minor gain of 7.45% (in USD). During this time, the index failed on four occasions (2 April 2004 included) to breach the (purely psychological) barrier of 800 points. Although the sector was in fine operational condition (compared to the much-beleaguered pharmaceutical industry), the news - while positive was hardly world-shattering. A major exception in this regard was the announcement made by Biogen Idec that it would be submitting its Antegren file - for the treatment of Multiple Sclerosis (MS) - for approval to the American and European agencies, based (surprisingly enough) on data from just one years Phase III trials, instead of the usual two for this indication. The conclusion that was quickly reached (by us, too) was that Biogen Idec must have obtained very convincing results in its MS trials during this short period of time, which was not the case for the treatment of Crohns disease. We have also concluded that Biogen Idecs Antegren has what it takes to change the face of MS treatment. This, therefore, is very positive news, which in itself is exciting enough to stimulate new interest in this sector. Although this has certainly been the case, it has still not been enough to give Biotech a spectacular shot in the arm. What about valuation? With an average PEG ratio (price/earnings ratio divided by expected per-share earnings growth) of 1.8, we are still well below the historical average of 2.3, but far closer to the historical average of 1.9, disregarding the Biotech bubble of 1998 & 1999. Other valuation criteria (Relative Forward Earnings Yield, Relative Price to Forward Sales, Relative Book Yield, etc.) also point to a sector that is correctly valued. As expected, this means that the Biotech sector has turned in a steady, though not very spectacular, performance over the past quarter. A moderately positive climate, averse to all forms of hype, is - in our opinion - creating an ideal environment for IPOs. During the first quarter of 2004, these were to be seen in abundance, with no less than 21 companies announcing their intention to go public, including Barrier Therapeutics. Indeed, a handful of companies achieved their objective. A striking common feature has been sensitivity to price. Aside from a couple of exceptions, it was noticeable that the shares of the companies being floated did not reach the top of their announced IPO price range. In some cases (Dynavax, Renovis, Tercica), the companies were even floated below this range. This shows that there is a certain appetite for the sector: the companies were easily floated, but not just at any old price. That is an encouraging sign. Another striking feature is the lack of highly successful IPOs. This prevents investors who are simply interested in making a quick killing from distorting the market. Although this shows that interest has been aroused in Biotechnology, it also reveals that it remains the domain of the specialist.

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Currency Anadys Pharmaceuticals Ark Therapeutics Basileae Therapeutics Corgentech Dynavax Eyetech GTx Renovis Santarus Tercica USD GBP CHF USD USD USD USD USD USD USD

Price range 7 120 90 14 12 18 13 13 9 11 8 146 115 16 14 20 15 15 9 13

Introduction 7 133 98 16 7.5 21 14.5 12 9 9

Price trend 1st day 0.06% 1.50% 3.06% 33.75% 25.33% 54.21% -11.03% 20.83% 12.22% -1.11%

Price trend 1st month NR NR NR 24.38% 0.67% 68.0% -22.07% 28.91% NR NR

BIOTECH'S NET ASSET VALUE AND PRICE TREND

During the last quarter, BIOTECHs net asset value fluctuated between 7.81 EUR and 8.59 EUR per share. The price ranged from a low of 5.81 EUR to a high of 6.65 EUR per share.

January-March 2004

Share price (EUR) Highest Lowest Net asset value (EUR) Highest Lowest NASDAQ Biotech Index Highest Lowest
661,28 (16/1) 574,10 (11/3) 8,59 (16/1) 7,81 (11/3) 6,65 (3/1) 5,81 (11/2)

Although the net asset value tracks the major movements in the NASDAQ Biotech Index, the composition of the index and the BIOTECH portfolio clearly differ. At the end of December 2003, for instance, BIOTECHs equity portfolio was also invested in private paper and a cash reserve was held. Furthermore, the NASDAQ Biotech Index is 100% American, whereas BIOTECH also invests outside the US. Lastly, a number of companies - the most important of which is Genentech - are not included in the NASDAQ Biotech Index. All this explains why BIOTECH's net asset value tracks the leading sector index only to a certain extent. As more positions are taken in private companies, the correlation with the NASDAQ Biotech Index will diminish. During the first quarter, the discount of the share price vis--vis the net asset value fluctuated between 15% and 30%. The discount averaged 22%, and was 26% towards the end of the period under review.

14

(EUR)
10.00 9.00 8.00

BIOTECH's SHARE PRICE Compared to its net asset value and the Nasdaq Biotech Index

(index)
800

600 7.00 6.00 5.00 4.00 3.00 200 2.00 1.00 0.00
1/2 00 4 2/2 00 4 3/2 00 4

400

BIOTECH share price (EUR)

Net asset value (EUR)

NASBIOT (index)

The NASDAQ Biotech Index gained more than 7.5% during the first quarter of 2004, or an increase of 10% (in EUR) due to the appreciation of the USD. BIOTECHs share price fell by 9% over the same period. The flow of information to investors is crucial if a normal price trend is to be achieved. For that reason, the net asset value is calculated on a daily basis. This figure is available at http://www.kbcam.be/biotech, along with a weekly overview of the portfolio and a brief commentary on the sector. The net asset value of BIOTECH also appears daily under the Investment Funds heading in leading newspapers, while the BIOTECH share price is published in the Euronext price lists (double fixing market).

OVERVIEW OF PORTFOLIO OF LISTED PAPER

Although investments in listed biotechnology firms are still the backbone of the portfolio, one of BIOTECH's main objectives is to build up a portfolio of unlisted securities. Dealflow. The dealflow slowed down during 2003, which was a reflection of the generally poor funding climate, with companies tending to wait for the economy to pick up before they started to raise funds. However, there was a marked improvement in the fourth quarter of 2003, a trend which continued in the first quarter of 2004, though at a slower rate. The influx of new proposals increased especially in January and March.

15

Dealflow
35

30

25

20

15

10

0 Q101 Q201 Q301 Q401 Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Q104

No additional investments were finalized in the first quarter of 2004 and, therefore, the composition of the private equity portfolio has remained unchanged. Report on the existing portfolio Barrier Therapeutics, Inc. Established in 2001, Barrier is a US company active in the development of new drugs, with a focus on dermatology. The company is in the process of developing and plans to commercialize a portfolio of dermatological products based on intellectual property licensed from subsidiaries of Johnson & Johnson. The company launched Phase III clinical trials on two of its products in 2003: the final Phase III study for Barriers key product, Zimycan, used to treat Candida diaper rash, and Phase III tests for Seboride, for the treatment of seborrhoeic dermatitis. The products that are at an earlier stage of development relate to the treatment of psoriasis, acne, skin infections, allergies and the healing of wounds. The J&J licence also includes a portfolio of products on which pre-clinical research is currently being conducted and various categories of dermatology-relevant molecules suitable for further screening and research. Barrier has an exclusive licence for these products, along with the technology and pharmacological know-how relevant to dermatology. In June 2003, the European Commission granted orphan drug status to Barriers Liarozole, a drug for treating congenital ichthyosis. In July 2003, via an exclusive licence, Barrier obtained the rights to Ecalcidene, a new D3 derivative applicable to numerous therapeutic areas which are directly or indirectly linked to dermatology. The company is headquartered in Princeton, New Jersey, with a branch in Geel, Belgium. In the fourth quarter of 2003, Barrier Therapeutics Inc. raised 32 million USD in a Series C investment round. This brings the total raised by the company to roughly 78 million USD. MPM Capital, a new investor, led this Series C round, investing 19.2 million USD. All the existing investors in Barrier took part in this round, including Johnson and Johnson, Development Corporation, TL Ventures, JP Morgan Partners, Perseus-Soros BioPharmaceutical Fund, Baker/Tisch Investment Partners and KBC. KBC Private Equity Biotech Fund forked out an additional 0.35 million USD during this round, bringing the total invested in Barrier to 1.85 million USD. In the first quarter of 2004, Barriers plans to go public were formalized when it submitted its proposal to the SEC. The managing underwriter was Morgan Stanley, with Banc of America Securities and JP Morgan Securities acting as co-managers. Ceres was set up in 1997 in Malibu, California. It uses a broad technology platform in order to discover plant genes and their functions very rapidly in an integrated and quasi-industrial manner. In April 2002, Monsanto and Ceres entered into a major product development agreement involving the application of genetic research for the improvement of certain agricultural crops. Payments to Ceres under the agreement will total 137 million USD over several years plus potential royalties. Monsanto also funds a joint research programme and has taken a minority stake in Ceres' capital. Ceres will receive additional payments on meeting predefined targets in the further development of the technology. Ceres is currently in talks with other companies regarding the setting up of similar co-operation agreements in other areas.

16

In 2001, KBC Private Equity Fund Biotech invested 3.75 million USD (4.203 million EUR) in Ceres. This was the first and rather sizeable stake in an unlisted company. The highly-prized co-operation with Monsanto confirms the potential of Ceres technology. Innapharma, Inc. is a life sciences company specializing in antidepressants. The business has been headed since 1999 by Dr. John Feighner, founder of the Feighner Research Institute (FRI), a clinical research centre that has carried out clinical trials on more than 33 antidepressants, including all the major brands currently on the market. Since the arrival of Feighner, the companys primary objective has been to continue the development of its lead compound the antidepressant Nemifitide. Nemifitide or MIF-1 (melanocyte-stimulating hormone inhibitory release factor) is an endogenous (growing and produced from within) neuropeptide that had been the subject of various clinical trials by large pharmaceutical companies since as far back as the 1970s and 80s. Clinical trials involving more than 200 people have shown that Nemifitide clearly differs from existing antidepressants and holds out the prospect o a new, highly f promising treatment for depression. At the end of March 2003, the FDA requested Innapharma to halt all clinical trials with Nemifitide. This was prompted by the findings of routine toxicological trials on dogs, which revealed that there w hitherto ere unnoticed side effects. After evaluating its strategic options, the company decided to file for Chapter 11 bankruptcy protection against its creditors in mid-April. A panel of experts evaluated the data and provided input regarding the steps to be taken to get the hold placed on clinical trials lifted. In September, Innapharma submitted a recovery plan to the bankruptcy court, which included a limited fund-raising effort to finance additional animal testing in order to get the clinical hold lifted. However, not enough funds were raised by the end of the 2003 financial year to relaunch these trials at that time. In February 2004, Innapharma submitted a new recovery plan to the bankruptcy court which is threatening to undermine the rights of Preferred D shareholders (including BIOTECH). The Board of Directors of BIOTECH has resolved to take measures against this. In March 2002, BIOTECH invested 2 million USD (2.276 million EUR) in Innapharma. Due to the recent developments, this investment was fully written off during the course of 2003. Maize Technologies International (MTI). MTI is a maize seed company with activities in Europe and the US. The company develops hybrid maize seeds with a superior yield and stress tolerance profile. Founded in 2000, MTI operates five seed distribution stations and collaborates with a network of 25 seed distributors linked to research institutes in Central Europe. MTIs central research entity is based in Neusiedl in Austria. Maize accounts for the lions share of the worlds seed and crop-protection market and is the crop for which the most biotech traits are developed. Crop protection companies aim to secure access to high-quality maize gene pools in order to leverage sales and market those biotech traits which have been developed in their research labs. Since the mid-1990s, the market leaders in maize seed have been systematically bought up by cropprotection companies. The company is optimally positioned in its industry; it is a vehicle for technology suppliers in agricultural biotechnology and crop protection, has access to a rich gene pool for research companies in search of biotech traits and, lastly, offers high-quality material for improvement purposes that maize-seed-improvement companies need to safeguard their competitive position over the long term. This, combined with the substantial experience of MTIs management team, makes MTI an interesting investment opportunity. In 2003, MTI organized large-scale field tests for new varieties of maize in Europe and the US. The findings of an initial evaluation are satisfactory and a number of varieties seem suitable for further development with a view to their commercialization. In December 2002, BIOTECH invested 1 million EUR in MTI in a financing round which raised a total of 9 million EUR. Other participants in the funding round were BBL and the German Sachsen LB Group. Since it was founded in 2000, MTI has raised over 18 million EUR in equity capital and obtained 2 million EUR in research subsidies.

17

During the first quarter of 2004, the shareholders provided a guarantee to secure a bank loan to MTI. This ensured that the company obtained substantial additional funding in March 2004. If the guarantee is invoked, it means that BIOTECH would have to invest an additional 0.55 million EUR (maximum) in MTI.

18

Metabolex is a private pharmaceutical company that develops drugs to treat diabetes and other metabolism disorders. Its lead chemical compound, MBX-102, is a new insulin sensitizer, which is currently in Phase II clinical trials. In August 2003, BIOTECH invested 1.5 million USD in this company via a 27 million USD private equity finance deal. The financing syndicate included Bay City Capital (US), Biotechnology Turnaround Fund BV (Netherlands/US), KBC, CDP Capital Technology Ventures (Canada) and Charter Ventures (US). In December 2003, Birchmere Ventures (US) and Merlin BioMed Group (UK) also joined the syndicate, bringing the total capital raised to 31 million USD. Metabolex will use the fresh funds to continue the Phase II trials of its main compound, MBX-102, and to help it develop other compounds. It is also continuing to seek out in-licencing opportunities, so that it can increase its critical mass. MBX-102 is an insulin-sensitizer with a known action mechanism and a superior activity and side effect profile compared to currently approved drugs. It is a patented, single optical form (enantiomer) of another experimental drug with a prior clinical history that reduces blood glucose and lipid levels without the same side effects on the stomach, abdomen and intestines as the related compound. Clinical trials were conducted in the past with the other enantiomer on over 900 patients. The company launched its Phase II trials of MBX-102 at the start of 2004. The companys portfolio includes other drugs (at an earlier stage of development) that could be used to treat diabetes. Metabolex has also finalized two research programmes, leading to the creation of one of the largest diabetes gene databases. Pfizer is a partner in the programme on insulin output and Yamanouchi Pharmaceuticals Co. Ltd. in the insulin resistance programme. PR Pharmaceuticals is a technology-driven company active in the field of research, development and commercialization of a wide range of pharmaceutical products for the human and veterinary health markets. Its core technology is controlled-release drug delivery, i.e. administration systems that allow the therapeutic effect of drugs to be increased by extending the interaction time of the drugs and ensuring the very even release of the therapeutic substances. PR Pharmaceuticals most advanced system is TheraPhase, which permits the controlled release of drugs over periods of up to one year by means of a single injection. It has various products under development that are based on this technology and has also built a commercial production unit to manufacture these products on a large scale. In June 2003, this unit was accredited by the FDA, so the company can in principle start commercializing a first (veterinary) product. In August 2001, BIOTECH invested 2.25 million USD (2.474 million EUR ) in this company. It has been particularly strapped for cash since the second half of 2002. In light of the unfavourable funding climate, 75% of this investment was written off in the fourth quarter of 2002. Cost-cutting measures and a modest cash inflow (due to the sale of certain assets, among other things) have enabled the company to carry on with normal operations. During the first quarter of 2004, BIOTECH approved a pending capital restructuring plan and a limited injection of additional capital for PR Pharmaceuticals. New developments since the balance sheet date On 28 April 2004, Barrier Therapeutics announced that its IPO had raised 75 million USD. It started trading on NASDAQ on 29 April. The managing underwriter was Morgan Stanley, with Banc of America Securities and JP Morgan Securities acting as co-managers. Five million shares were offered at 15 USD per share, which gave the company a post-money valuation of 327 million USD. The IPO price values BIOTECHs investment in Barrier Therapeutics at 4.43 million USD (compared with an investment value of 1.85 million USD).

19

Funding climate Ten new IPOs were completed in the first quarter of 2004. Most of these companies are listed on NASDAQ, but there have also been a few IPOs in Europe, too, viz. on the LSE and SWX. The total capital raised came to 878 million USD, making 1Q2004 the best quarter for IPOs since 2000. Compared to the excellent fourth quarter of 2003, less money was raised in the past quarter via public capital increases. In the first quarter of 2004, 17 companies successfully rounded off a public capital increase, raising a total of 961 million USD (compared to 1.5 billion USD in the ourth quarter of 2003), the average per f transaction coming to 57 million USD (compared to the quarter-earlier figure of 68 million USD). Another important source of funding were other forms of investment (such as convertible loans, PIPEs, etc.), accounting for 2.8 billion USD of the capital invested.
FUNDING OF THE BIOTECH INDUSTRY WORLDWIDE (in USD millions)) 18000 16000 14000

IPO's Capital increases Other (convertible bonds, etc..)

12000 10000 8000 6000 4000 2000 0 1996 1997 1998 1999 2000 2001

Venture capital

2002

2003

4Q03

1Q04

Source : BioCentury

Venture capital financing, in particular, picked up in the first quarter of 2004. Although it had clearly declined from its peak in 2000, it appeared to be bottoming out towards the end of 2003. This was confirmed in the first quarter of 2004, when 1.6 billion USD was invested in venture capital. This represented an increase of 129% on the 720 million USD invested a year earlier and an increase of 80% on the 918 million USD invested in the preceding quarter. Boosted by the clear upturn in IPOs, venture capital activity also seems to be improving again.

20

MARKET CLIMATE: A GLANCE AT THE FUTURE

Although you need no reminding, the adage Sell in May and go away is equally valid for the Biotech sector, and points to an increasingly recurring phenomenon. A robust performance by the Biotech sector during the first half of the second quarter, in anticipation of a meaningful ASCO (American Society of Clinical Oncology) meeting, with profit-taking thereafter to ensure that the dreary Summer months are not a source of worry. ASCO could lead to fireworks this year again. Last year, Genentech put Biotechnology firmly in the spotlight with Avastin (for the treatment of colorectal cancer). This year, the company could pull the same stunt, but this time with Tarceva. Another tripling of the share price is no longer likely for Genentech, but interest could be stimulated in other biotech companies. Therefore, we expect oncology companies, in particular, to do well in the second quarter, closely followed by antibody companies. However, we should bear in mind that Biotechnology runs development risks. A damp squib, or worse still, a series of products which later fail to fulfil their promise, could be an instant dampener on enthusiasm. It is then a question of waiting until the fourth quarter, until the other big event, the Hambrecht & Quist meeting, recently renamed the JP Morgan H&Q meeting, towards the end of the year. Until then, it is highly unlikely that the performance of the Biotech sector will be based on multiple expansion (more expensive valuation), but rather on its merits, certainly over the next two quarters. And that is not a bad thing. The fact is that Biotechnology recorded a turnover of 15 billion USD (source: Bernstein) in 2003. If we assume that this turnover expands to 30 billion USD in 2007 (source: Bernstein), this gives us a good idea of what we may expect from the sector in terms of its performance on the stock market, account taken of an unchanged PEG ratio. It will only be towards the end of the year that we could expect (even) more. Not only will it become clear as to what we can expect from all the products that have been launched (including Genentechs Avastin, which we will be keeping a close eye on), but it will become clear that, if everything goes well, 2005 will be an extremely productive year. In such a situation, we are assuming that the FDA will approve 20 products, compared to the 12 in 2004. IPOs depend on IPO windows. Such a window opened in the fourth quarter of 2003 and historical data show that windows stay open for three to five quarters. We expect IPO activity to decline considerably in the Summer and, therefore, it is highly likely that the second quarter of 2004 will be the last quarter in which an IPO can be successfully launched. The success of subsequent IPOs will depend on the appetite of the investor and the valuation and quality of the underlying information. There will continue to be sensitivity to price. We do not see any more IPOs at all being carried out in Europe, unlike the situation in the US, where this activity is continuing at full throttle. A summary of the sector-specific risk factors for the quarters ahead are a disappointing ASCO meeting, the May syndrome, and the FDA rejecting a Biotechnology product. In our opinion, the drivers for the sector in the months ahead are concentrated around the ASCO meeting.

21

KBC Private Equity Fund Biotech

KBC Private Equity Fund Biotech 1. Balance sheet as at 31/03/2004 (in EUR) ASSETS CURRENT ASSETS VIII. Investments B. Other investments IX. Cash at bank and in hand Total Assets LIABILITIES SHAREHOLDERS EQUITY I. Capital V. Lost to be carried forward VI. Result of the period CREDITORS IX. Debts at less than 1 year F. Sundry debts X. Accrued charges and deferred income Total LIABILITIES Net assets Net asset value per unit
28.011.467,79 51.250.005,00 -24.329.058,85 1.090.521,64 133.205,13 26.740.475,93 51.250.005,00 -25.019.216,21 509.687,14 134.410,17 28.144.672,92 24.656.086,47 24.656.086,47 3.488.586,45 28.144.672,92 26.874.886,10 25.451.393,78 25.451.393,78 1.423.492,32 26.874.886,10 31/03/2004 31/03/2003

120.212,89 120.212,89 12.992,24 28.144.672,92 28.011.467,79 8,20

116.332,17 116.332,17 18.078,00 26.874.886,10 26.740.475,93 7,83

22

KBC Private Equity Fund Biotech

2. Profit and loss account for the period ended 31/03/2004 (in EUR) II. Operating charges (-) B Services and sundry goods C Remuneration, social security charges & pensions G Other operating charges III. Operating loss (-) IV. Financial income B. Income from current assets - Realized - Unrealized C. Other financial income V Financial charges (-) A. Debt service charges B. Write-downs on current assets C. Losses on the realization of current assets VI Result for the period

31/03/2004 -167.632,80 -167.186,12 0,00 -446,68 -167.632,80 1.662.418,06 1.559.524,75 106.414,85 1.453.109,90 102.893,31 -404.263,62 -12,38 -389.449,92 -14.801,32 1.090.521,64

31/03/2003 -169.678,94 -164.018,00 -620,00 -5.040,94 -169.678,94 1.589.544,37 1.571.738,27 42.340,95 1.529.397,32 17.806,10 -910.178,29

-906.791,22 -3.387,07 509.687,14

Comments The continuing improvement in biotech share prices had a favourable impact on the performance of the listed companies in the portfolio. Given the still dominant share of US paper in the overall securities portfolio, the result of the past financial year was also affected by the USD, which has slightly appreciated in value. These trends have led to a return on current assets and a positive result for the period.

23

KBC Private Equity Fund Biotech

Position of the equity portfolio and other net assets as at 31-03-2004 (in EUR)
Number or nominale value Name Purchase value Price Market value As % of total net

assets
A. Moveable assets admitted to official listing on a stock exchange SHARES The Netherlands EUR = 1,228900 USD 49,100.00 QIAGEN NV U.K. EUR = 0,668650 GBP 58,700.00 CELLTECH GROUP PLC 27,600.00 CAMBRIDGE ANTIBODY TECHNOL 240,000.00 ANTISOMA PLC Switzerland EUR = 1,556800 CHF 7,500.00 ACTELION LTD U.S.A. EUR = 1,228900 USD 66,400.00 AMGEN 32,800.00 GENZYME CORP 22,100.00 GILEAD SCIENCES 17,900.00 HUMAN GENOME SCIENCES INC 21,700.00 CELL THERAPEUTICS INC. 38,800.00 PROTEIN DESIGN 53,500.00 MEDIMMUNE INC. 11,800.00 CEPHALON INC 35,100.00 VERTEX PHARMAC. 14,000.00 TRIMERIS INC 54,685.00 MILLENNIUM PHARMA 35,200.00 TANOX 22,200.00 BIOGEN IDEC INC 16,800.00 GENENTECH INC. SPECIAL COM 20,000.00 BIOTECH HOLDERS TRUST 29,700.00 ABGENIX INC 27,100.00 SANGAMO BIOSCIENCES INC 25,300.00 CORIXA CORP 25,400.00 ILEX ONCOLOGY INC 511,945.00 METABOLEX TOTAL SHARES TOTAL A B. Other moveable assets SHARES Belgium EUR = 1,000000 EUR 846,051.00 MAIZE TECHNOLOGIES INTL NV U.S.A. EUR = 1,228900 USD 68,182.00 PR PHARMACEUTICALS INC. 625,000.00 CERES INC 5.00 CERES INC 5.00 CERES INC 200.00 INNAPHARMA INC. 500,000.00 BARRIER THERAPEUTICS 90,303.00 BARRIER THERAPEUTICS TOTAL SHARES

1,031,556.41

13.150

525,400.76

1.88

1,047,716.32 600,567.47 133,685.51

4.655 4.600 0.402

408,657.00 189,875.12 144,470.20

1.46 0.68 0.52

509,329.31

137.000

660,007.71

2.36

4,670,343.86 1,691,081.15 687,978.19 1,005,908.21 537,413.99 821,234.84 2,381,283.81 750,421.94 1,027,314.74 565,418.27 1,783,644.27 756,776.49 1,052,722.66 907,098.06 2,345,722.75 985,055.99 295,548.75 341,559.36 373,632.67 1,325,322.50 27,628,337.52 27,628,337.52

58.150 46.780 55.450 12.530 8.460 23.820 23.080 57.330 9.420 14.750 16.900 14.890 55.600 105.820 142.100 13.320 6.180 6.400 23.920 2.930

3,141,964.36 1,248,583.29 997,188.54 182,510.38 149,387.26 752,067.70 1,004,784.77 550,487.43 269,055.25 168,036.46 752,035.56 426,501.75 1,004,410.45 1,446,640.08 2,312,637.32 321,917.16 136,282.85 131,760.11 494,399.87 1,220,602.86 18,639,664.24 18,639,664.24

11.22 4.46 3.56 0.65 0.53 2.68 3.59 1.97 0.96 0.60 2.68 1.52 3.59 5.16 8.26 1.15 0.49 0.47 1.76 4.36 66.56 66.56

SERIE A

999,998.44

1.181

999,998.44

3.57

CONV PREF "D" -C- PREF -A- (PREF) -B-C-

2,473,882.47 4,202,697.80 0.00 0.00 2,276,607.85 1,469,936.87 297,865.86 11,720,989.29

8.250 6.000 0.000 0.000 0.000 3.000 3.900

457,727.64 3,051,509.48 0.00 0.00 0.00 1,220,603.79 286,582.88 6,016,422.23

1.63 10.89 0.00 0.00 0.00 4.36 1.02 21.47

24

KBC Private Equity Fund Biotech

Position of the equity portfolio and other net assets as at 31-03-2004 (in EUR)
Number or nominale value Name Purchase value Price Market value As % of total net

assets
WARRANTS U.S.A. EUR = 1,228900 USD 62,500.00 CERES INC 10,227.00 PR PHARMACEUTICALS INC. 80,000.00 INNAPHARMA INC. TOTAL WARRANTS TOTAL B TOTAL EQUITY PORTFOLIO (A+B) Bankbalances CURRENCY ACCOUNTS EUR = 1,000000 781,251.33 EUR = 0,668650 36,774.18 EUR = 1,556800 358,726.90 EUR = 1,228900 2,976,287.24 EUR KBC GBP KBC CHF KBC USD KBC

CALL TO 14/03/06 CALL TO 27/08/06 CALL TO 12/03/07

0.00 0.00 0.00 0.00 11,720,989.29 39,349,326.81

0.000 0.000 0.000

0.00 0.00 0.00 0.00 6,016,422.23 24,656,086.47

0.00 0.00 0.00 0.00 21.47 88.03

BANK-& VERZEKERINGSHOLDING EURO BANK-& VERZEKERINGSHOLDING GBP BANK-& VERZEKERINGSHOLDING CHF BANK-& VERZEKERINGSHOLDING USD

781,251.33 53,888.07 229,093.94 2,450,289.55 3,514,522.89

1.000 1.000 1.000 1.000

781,251.33 54,997.65 230,425.81 2,421,911.66 3,488,586.45

2.79 0.20 0.82 8.65 12.46

TOTAL CURRENCY ACCOUNTS Debts EUR = 1,000000 EUR -120,212.89 KBC BANK-& VERZEKERINGSHOLDING EUR TO PAY TOTAL DEBTS Other net assets COSTS PAYABLE TOTAL OTHER NET ASSETS TOTAL NET ASSETS AS AT 31 MARCH 2004

-120,212.89 -120,212.89

1.000

-120,212.89 -120,212.89

-0.43 -0.43

-12,992.24 -12,992.24 28,011,467.79

-0.05 -0.05 100.00

25

KBC Private Equity Fund Biotech

Overview of transactions from 01-01-2004 to 31-03-2004
Name
SHARES AMGEN CELLTECH GROUP PLC GENZYME CORP CELL THERAPEUTICS INC. MEDIMMUNE INC. CEPHALON INC VERTEX PHARMAC. QIAGEN NV BIOGEN IDEC INC GENENTECH INC. SPECIAL COMMON BIOTECH HOLDERS TRUST ABGENIX INC ACTELION LTD ANTISOMA PLC METABOLEX USD GBP USD USD USD USD USD USD USD USD USD USD CHF GBP USD 4,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4,000.00 0.00 0.00 0.00 0.00 23,000.00 0.00 0.00 -9,000.00 -3,000.00 -5,000.00 -5,000.00 -6,000.00 -5,000.00 -4,000.00 0.00 -4,500.00 -4,000.00 -3,000.00 -2,500.00 -23,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -9,726,963.00

Currency

Purchases

Sales

Attributions

26

Valuation rules
The net asset value shall be calculated and published every day. The investments shall be broken down as follows: investments in admissible financial instruments issued by young companies which are neither listed nor traded on a regulated market; investments in admissible financial instruments issued by reasonably mature companies which are neither listed nor traded on a regulated market; investments in admissible financial instruments which are listed or traded on a regulated market.

They shall be valued in accordance with the provisions of Section II of the Royal Decree of 8 October 1976 on the annual reports of companies and the provisions of Article 56 of the PRIVAK Decree. Investments in financial instruments listed or traded on a regulated market shall be valued in accordance with the relevant provisions of the Royal Decree of 8 March 1994 on the accounting and annual accounts of specific undertakings for collective investment. The board of Directors has decided that positions built up via several transactions are to be valued at average cost. Transactions are booked net of charges, which are recorded separately.

27

KBC Private Equity Fund Biotech GENERAL INFORMATION

Registered office Havenlaan 2, 1080 Brussels

Board of Directors Chairman Stefan DUCHATEAU, Chairman of the Executive Committee, KBC Asset Management NV, Havenlaan 2, 1080 Brussels Directors Ignace VAN OORTEGEM, Managing Director, KBC Asset Management NV, Havenlaan 2, 1080 Brussels KBC Securities NV, with Guy Van Eechaute acting as permanent representative Havenlaan 12, 1080 Brussel Marc VAN MONTAGU, Chairman of the Advisory Board Supervision of the day-to-day management Stefan DUCHATEAU, Chairman of the Executive Committee, KBC Asset Management NV, Havenlaan 2, 1080 Brussels Ignace VAN OORTEGEM, Managing Director, KBC Asset Management NV, Havenlaan 2, 1080 Brussels

Auditor Ernst & Young Bedrijfsrevisoren, burg.cv, represented by J.P. Romont, company auditor

Custodian KBC Bank NV, Havenlaan 2, 1080 Brussels

Bankers KBC Bank NV, Havenlaan 2, 1080 Brussels CBC Banque NV, Grote Markt 5, 1000 Brussels CENTEA NV, Mechelsesteenweg 180, 2018 Antwerp

In the event of discrepancies or differences of interpretation between the Dutch version and versions in other languages of this report the Dutch text alone shall be binding.

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29