Opening Panel State of the Nation Industry Insights, Investor Perspectives

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Opening Panel - State of the NationIndustry
Insights, Investor Perspectives

• FRANCESKA BANGA CEO, New Zealand Venture
  Investment Fund
• ROB CAMERON Partner, Cameron Partners
• OVIDIO IGLESIAS Managing Director, Wilshire
  Private Markets
• PAUL CHRYSTALL Former Head of NZ PE Goldman
  Sachs JBWere
• DAVID JONES Managing Director, CHAMP /
  Chairman, AVCAL
• MODERATOR HAMISH BELL NZVCA Chairman

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The Panel

• FRANCESKA BANGA is deputy chair of the NZVCA and
  is CEO of the NZ Venture Investment Fund which
  manages on behalf of the government more than
  NZ200 million VIF and SCIF. Previously she held
  positions at Treasury, MoRST and the Reserve
  Bank.
• ROB CAMERON established Cameron Partners in July
  1995. With more than 20 years experience, he is
  recognised as one of New Zealands most
  experienced investment bankers.
• PAUL CHRYSTALL has spent the last 7 years as Head
  of NZ PE for Goldman Sachs JB Were, where he
  established the successful Hauraki Private Equity
  12 Funds. He remains a director of Norfolk Group
  Limited, the first divestment of the Hauraki 2
  Fund.
• OVIDIO IGLESIAS manages Wilshire Private Markets
  Groups Asia-Pacific team and is a member of
  Wilshires global Investment and Management
  committees. He sits on the advisory board of
  partnerships managed by Castle Harlan, GBS
  Ventures, Hastings Funds Management, Innovation
  Capital, Propel Investments and Quadrant Private
  Equity
• DAVID JONES is the Managing Director of CHAMP
  Private Equity and Chairman of AVCAL. He has
  spent the last thirteen years in the private
  equity industry and was previously in management
  consulting, investment banking and general
  management.
• HAMISH BELL is Chairman of NZVCA and Director
  Capital Solutions
• at ANZ National Bank. He spent the last 8
  years in Asia, including
• several years at 3i Asia Pacific plc.

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Agenda

• Setting the scene - some facts and figures
• Big Picture opening observations from each
  panellist
• Context discussion re risks within industry
  context
• The role of private capital in the NZ economy
• Global issues putting the credit crunch in
  perspective
• Sources of Capital the funding environment
• Audience QA
• Wrap-up quick observations on the year ahead

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At a Glance
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Setting the Stage

• In the early stages, but developing strongly

FY06 1,209m
1H07 1,126m
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Top end Private Equity / LBO

• Continued strong activity in LBOs with EV gt150m
• Yellow Pages provides foundation, though 2H
  expected to slow
• Continued interest at top end, though credit
  conditions expected to dampen activity at least
  in the short term

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Mid Market Private Equity

• 132m invested in 10 deals (EVlt150m) up 134 on
  06
• Average equity invested size 13.2m, up 154 from
  5.2m
• Notable deals Ezibuy (Catalyst), NDA (RMB),
  Nutralife (Next) Tiri

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Venture Capital

• 56m invested in 29 deals, up 101 on 1H06 28m
• Average deal size (equity invested) up 150 to
  1.9m
• Notable activity the Health and Biosciences sector

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Fundraising / Divestments

• Committed capital for NZ funds up 468m to 2.5bn
  
• Largely attributable to GSJBWs A415m
  trans-Tasman PE fund
• Total Funds Raised 468m in 1H07, up 3935 (1H06
  12m)
• 5 divestments reported for the half with value
  59 million, more than double activity by value
  over 1H06
• , but down significantly on the second half of
  2006 which included one significant top-end
  private equity exit.

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Opening Observations The Big Picture

• David Jones an Australian industry perspective
• Franceska Banga a VC perspective
• Rob Cameron a NZ market perspective
• Ovidio Iglesias an investors perspective
• Paul Chrystall a managers perspective

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Speaker Slides
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• VC 2012
• 10-12 funds, 5-6 actively investing
• 1bn capital committed
• 100m average fund size
• Investment performance VCs have raised
  multiple funds, with successful returns
• LP structure in place
• Investor profile mature - dominated by insto
  investors
• VC investment GDP Top quartile OECD
• Transactions continue to grow, avg investment
  size increases

• VC Today
• 7 VC funds, 3-4 actively investing
• 350-380m committed
• 50m fund size
• Investment performance further realisations,
  of companies achieving further investment incl
  up rounds
• LP due April 08
• Investor profile greater institutional interest,
  but still dominated by HNWs / small pools of
  capital
• VC 0.04 of GDP (c.f. 0.12 for top quartile
  OECD)
• 77 transactions ()
• 2006 EY Monitor

• VC 2006
• 7 VC funds, 4 actively investing
• 300m capital committed
• 30m-50m fund size
• Investment performance No fund through full
  cycle, limited realisation, many promising
  companies
• LP structure still to come
• Investor profile atypical
• VC 0.02 of GDP
• 51 transactions ()
• 2005 EY Monitor

Franceska Banga
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NZ PE Performance

• Based on a small sample size 6 Buyout/
  expansion funds but reflective of investable
  universe
• Excludes venture capital as too early to have
  meaningful return data

Franceska Banga
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NZVIF Market Research

• There is strong appetite for institutional and
  retail investor access to unlisted equities
  market in NZ
• NZ institutions currently lack scale resource
  needed to implement PE investment programme
• Institutional fund managers often lack depth of
  understanding of PE, how to assess the
  opportunities
• Wide interest from institutions for a pooled PE
  investment product (Fund of Fund etc)
• Australian investors are reaping the benefits of
  NZ PE opportunities, NZ institutions starting to
  show interest

Franceska Banga
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Looking Forward

• Greater NZ institutional investor participation
  in PE, fuelled by
• Continuation of good investment opportunities in
  small/mid cap PE, increasing pipeline of good VC
  investment opportunities
• Maturing local industry, visible track record,
  better understanding of the asset class
• Introduction of Kiwi Saver work based super
  scheme (NZ500m forecast inflow p.a.)

Franceska Banga
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MA Trends

• In the last few years MA activity has been
  driven by powerful global forces which are still
  in place
• The globalisation of trade
• The liberalisation of formerly closed economies
• The integration of world capital markets
• The ICT revolution
• Abundance of cheap debt capital has also been a
  driver
• This credit crunch means that its influence
  will abate
• This is likely to impact on mega
  highly-leveraged transactions

Rob Cameron
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MA Trends

• Australasian MA is also driven by
• Integration of New Zealand and Australian
  economies
• Baby boomer demographics
• Growing availability of capital for PE, primarily
  from superannuation/savings
• We expect the strong MA trend to continue,
  especially in the mid-market (lt1 billion EV)
• The increased cost of debt (and WACC) will
  moderate valuations

Rob Cameron
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The Role of Private Equity

• The pressure for industry consolidation and
  business transformation arising from the global
  and regional forces of change pose particular
  challenges for smaller and mid-size publicly
  listed companies.
• Their ability to adapt rapidly to the changing
  business environment is affected by
• Increasing regulation of the market for corporate
  control
• Rising direct and indirect costs (including the
  cost of capital and the costs faced by directors
  and managers)
• The thinness of the New Zealand talent market

Rob Cameron
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The Role of Private Equity

• PE as an organisational form is particularly
  well-suited to address change challenges and
  bring about industry consolidation and business
  transformation.
• We see PE playing an increasing role in NZ MA
• A number of earlier acquisitions will become
  platforms for consolidation/roll-ups
• Much of this activity should be seen as
  transforming and preparing companies for public
  listing

Rob Cameron
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Private Equity Boosts Key Internal Metrics
INVESTMENT IN EUROPEAN BUY-OUT FIRMS AS A
PERCENTAGE OF SALES
62
59
54
66
David Jones
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Private Equity Boosts Employment
JOB CREATION DATA
David Jones
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Private Equity Boosts Revenue
REVENUE GROWTH DATA
David Jones
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An Investor's Perspective

• Allocations to private equity by institutional
  investors (globally) are growing and are expected
  to keep growing
• The primary reason for investing in private
  equity is the prospect of earning superior
  returns
• Institutional capital is internationally mobile
• Two challenges to attracting more international
  institutional capital to New Zealand private
  equity are
• Scale and
• A "standard" limited partnership structure

Ovidio Iglesias
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Audience QA
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Final Question
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Opening Panel - State of the NationIndustry
Insights, Investor Perspectives

• FRANCESKA BANGA CEO, New Zealand Venture
  Investment Fund
• ROB CAMERON Partner, Cameron Partners
• OVIDIO IGLESIAS Managing Director, Wilshire
  Private Markets Group
• PAUL CHRYSTALL Former Head of NZ Private
  Equity, Goldman Sachs JBWere
• DAVID JONES Managing Director, CHAMP Private
  Equity / Chairman, AVCAL
• MODERATOR HAMISH BELL NZVCA Chairman

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Appendices
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About NZVIF

• Cornerstone investor in the NZ Venture Capital
  market
• Crown company established 2002, with private
  sector Board
• Managing two Investment Funds 200m VC FoF, 40m
  SCIF
• Catalyse growth (/skills) of NZ VC Angel
  investment markets
• Establish best practice investment structures
• Operating as a Fund of Fund investor
• VC Programme Investment through privately
  managed VC funds
• Seed Programme Direct co-investment into
  companies alongside angel investors
• Market development role
• Catalysing increased institutional investment
  into
• VC/PE asset class, providing capital for high
  growth
• NZ companies on commercial terms

Franceska Banga
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NZVIF At a Glance
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