- 1 - May 19, 2005 Exits from Public Stocks Effectively Administering Private Equity Funds Harvard Club, New York, NY

- 2 - Conning Capital Partners (“CCP”)  Roots go back to founding of Conning & Company in 1912, as broker-dealer serving individuals and institutions in Hartford (e.g., insurance). Merchant banking practices expanded and institutionalized with formation of the first private equity fund in 1985, separate management in 1990, and spin-out from the sponsor in  The current active funds are Fund V and Fund VI, with $530 million in commitments. Twenty-one total employees, 23 portfolio companies.  Investment focus is on financial services and healthcare services. Seeking to invest $5 to $20 million in companies with revenues of $5 to $100 million, targeting a 20% to 30% IRR with a minimum 2.5x returns.  Over eight years CFO has conducted exits from a dozen public positions. Block trades, currency hedges, option exercise, collar transactions, et al.

- 3 - Objective

- 4 - The Three Points to Remember  It’s not an exit until it’s cash.  Nobody does it better.  Good partners make for good experiences.

- 5 - Shares are received from:  IPO  Shares of the acquirer of a portfolio company  PIPE  Follow-on investments post-IPO Common tools:  Dribble it Out  Block Trades  Stock Distributions  Secondary Offerings Uncommon / New Tools:  10b5-1 programs  Option overwrite / covered calls  Currency hedging  Collars  Basket hedges  Block with upside Exiting from Large and/or Illiquid Public Stock Positions } Positions are frequently in thinly traded, small or even micro cap stocks

- 6 - Sample Exit Using ZCF $18Deal Announced September 2003 $25Shares Valued and Deal Closes November 2003 $27December 2003 Price Per Share Portfolio Company Ownership 40% Cash 40% Stock 20% 1-Year Escrow Shares are subject to a 6-month lockup which prohibits hedging. Acquiror has positive EBITDA, but negligible net income. Investors Small-Cap Tech Co.

- 7 - Sample Exit Using ZCF Con’t.  Working through alternatives, basket hedging rejected.  Developed a brief on how our hedge would benefit the acquiror, who then agreed to allow this one amendment to our lock-up. No other investor pursued the possibility of hedging.  Low trading volumes forced a hedge in two tranches. Hedged Value VC retains Price Volatility Call Ceiling Put Floor Stock Price { Tranche #1 / #2 $28.33 / $27.77 $23.15 / $22.72 Opportunity Cost Eliminate Risk +/- about 10% of average price

- 8 - Final Pricing is the Result of an Actual Short Position ABSOLUTELY ESSENTIAL CHINA WALL Private Client Services Monetization Services Group Investment Banking Division Institutional Trading Desk Institutional Sales Traders INFORMATIONBARRIERINFORMATIONBARRIER

- 9 - Results  Economics Market price after expiration of lock-up$15 Market price at expiration of hedge$17 Weighted average floor price$23 Incremental gain$3.4 million  Hedge began in January, closed in December, avoiding hedge accounting  Throughout 2004, able to promise investors a year-end distribution. Early termination available at negotiated pricing.  The $3.4 million hedge gain was 22% of 2004’s total gains.

Over eight years, four different equity trading partners. Our experience:  We need wide-ranging products and services with an expert team. At the same time, we do few transactions.  We hold volatile small cap stocks where our trades can move the market.  Good execution adds 2% to 5% to the value realized on exit.  Good relationships grow.  Deal partners are rotten traders. Cut through the sales pitch:  Fast execution – weak compliance department.  Best pricing and best traders – inadequate China wall.  Not the major market maker – access to the potential block buyers.  China Wall not optional. Picking an Equity Trading Partner