Venture Capital & Private Equity: An Invested Investment STEVEN WHITTINGHAM PRESIDENT, FIRST GLOBAL FINANCIAL SERVICES LTD. November 6, 2013 CGSR 10 th Annual Conference

Outline  An Introduction to Venture Capital (VC) and Private Equity (PE)  The Local Market Opportunity  The Institutional Investor  Harvesting Opportunities  Ideal VC/PE Fund Structure  Challenges  Final Thoughts

An Introduction to VC and Private Equity Time Revenue Angel InvestmentVenture CapitalPrivate EquityPublic Markets Seed Capital StageEarly StageExpansion StageMature Stage Emerging Growth Opportunities Buyouts Distressed Investments Different companies are at different lifecycle stages.

The Local Market Opportunity  Known capacity for institutional investors  The pension fund asset pool is approx. JMD $296 billion as at March 2013  Allocation to Government bonds fell 2.4% in six months (Sept 2012 – March 2013)  Globally, pension fund assets in alternative investments have moved from 5% to 19% since Source: Towers Watson, Global Pension Assets Study 2013

The Local Market Opportunity Viable Harvesting Options: strategic exits possible given maturing Junior Market and increasing M&A activity Source: The Venture Capital and Private Equity Country Attractiveness Index 2013, Ernst & Young VC/PE Country Attractiveness Rank 2009Rank 2011Rank 2013 (118 countries) Score 2013 Quartile 2013 VC/PE Index (maximum score of 100) Q3 1. Economic Activity Q4 2. Depth of Capital Market Q3 3. Taxation Q4 4. Investor Protection & Corporate Governance Q3 5. Human & Social Environment Q2 6. Entrepreneurial Culture & Deal Opportunities Q3

Ideal VC/PE Fund Structure US $5 million - $10 million Institutional & Private Investors Government matching of private investor funds Size Pledge fund with multiple rounds of capital calls Management fees of 2% per annum Capital Commitment & Fees Traditional sectors: technology, consumer & business services Currently listed Junior Market companies would have been viable VC candidates Deal Pipeline Technical resources would be assigned to the investee firms from the Fund Manager’s staff complement Active Investment

Challenges  Government intervention needed on current legal & regulatory environment  Restrictive bankruptcy laws  Inadequate protection for minority shareholders  Shallow talent pool limits effective investment selection, deal structuring and active management of target company  Limited research data for comprehensive company valuations  Little information on comparables and few competing VCs to assess demand  Sluggish macroeconomic conditions do not favour organic growth for SMEs

Final Thoughts  A local VC/PE industry can play a substantial role in achieving Jamaica’s economic growth objectives  Local pension funds have investable assets and are seeking higher real returns  Demonstrated growth in public issuing activity offer successful IPO exiting  Potential fee income generation is attractive to Financial Institutions (who will act as Fund Manager)  Government must design a clear policy and regulatory framework that will work in the interest of private operators and the entrepreneurs

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