ACTU

Brett Himbury, CEO, IFM

June 2011

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What is Private Equity?

Private equity is a model of ownership for investors based on specific investment strategies and contractual agreements between fund managers and investors

Usually not quoted or quoted companies with the purpose of delisting

Stage of development varies from very young companies to more mature businesses. Private equity fund managers will create a portfolio by making a number of investments

Usually made with one of two objectives in mind:

Develop innovative portfolio companies with high growth potential; or

Increase the value of portfolio companies, through growth strategies actively monitoring the decisions taken by the management and establishing clear lines of responsibility and corresponding incentives

Investments are long term

“True Private Equity” IFM’s definition

SME’s of below $500 million Enterprise Value

Businesses with the potential to grow and build value

Businesses in need of transformation

Long term, building better companies, delivering returns well in excess of listed market returns

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Private Equity Performance

US Buyout Net Performance relative to Public Market Benchmark

As at December 2010 for vintage years 1984 – 2005

Average net performance is 1.20x the listed benchmark

2.4x

2.7x

1.3x

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Large Buyout Small Buyout Venture Capital

Australian Buyouts have delivered >2x Multiple of Capital return, and >25% IRR

Australian Private Equity Performance by Realised Investment(IFM Aggregate Performance 1998 to 2010, Gross Multiple Return on Capital Invested)

$100m EV or greater $100m EV or less

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Impact of Private Equity

Growth in employment under private equity ownership vs comparable benchmarks

Sources: Shapiro and Pham (2008), BVCA/IE Consulting (2007), AIFI/PwC (2008), ASCRI (2009), AVCAL analysis

Australian Private Equity Companies are major employers – eg. Rebel Sports JB Hi-FI Hoyts Bras & Things Kathmandu etc