Private Equity Fund Administration – Not a “Conveyor Belt” Process David Bailey MSI Augentius Fund Administration 1st November 2006

1.Introduction 2.Revision (and test!!) from previous session 3.Private Equity vs. The Rest 4.Private Equity Fund Processes 5.Questions

Why me?  Settlement and Global Custody  5 years in Luxembourg as a fund administrator – Long Only Funds/Hedge Funds/Funds of Funds/Emerging Market Funds etc.  Funds Product Manager with Management Group – Hedge Funds  Ansbacher Fund Services in 2002 – closed down existing Administration business and created specialist Private Equity Fund Admin Business  Completed MBO of Ansbacher Fund Services in August 2006 and re-named business Augentius Fund Administration

Augentius Fund Administration LLP  Specialist Private Equity Administrator – its all we do  1 st Jan no clients, no name, no reputation  1 st Nov clients funds entities - €15bn committed under administration  Offices in London and Guernsey; 40 staff increasing to 50.

PE Fund Structure German Executives Investors Advisers Manager General Partner (Scottish Limited Partnership) French adviser Italian adviser German adviser Guernsey Co General Partner French Executives UK Executives UK Co KG LP I - ERISA (English LP) LP 2 - Non ERISA (English LP) General Partner Investors Italian Executives

PE Fund Structure - Simple Limited Partnership Carried Interest Partnership Investors General Partner Manager Management Agreement Portfolio Companies IHC

PE vs The Rest Private Equity FundsOther Funds  Closed Ended  Open-ended  Partnership  Corporate Structure  Multiple closings within first 12 months requiring “ Rebalances ” (equalisations)  Ongoing subs and reds  Quarterly Financial Reporting  Daily/Weekly/Monthly valuations  Individual Limited Partner Reporting - with special arrangements for some LPs  Fund NAV  Assets Valued by Managers – but no trading  Assets valued by Administrator – independent  Highly complex structures including co-investment opportunities  Generally straightforward structures  Minimal cash balances and no stock to lend  Substantial cash balances with large portfolios to lend  Just docs to hold in safe-keeping  Custody/Prime brokerage relationships/reconcilliations  Complex accounting issues requiring considerable expertise  Complex valuation issues

Private Equity Fund Processes  Initial Closings  Rebalances  Drawdowns/Investments  Quarterly/Annual Accounts  Distributions

The Closing Process AML/KYC on LPs – either the administrator or the GP Side Letters/Special Arrangements Negotiations Revised LPA – most favoured nations GP to consider/approve LPs and scale back? Board Meeting to approve LPs Initial Drawdown for Management Fees and Expenses and “Welcome” letter

The Rebalance (Equalisation) Process New Investors Existing Investors – receive distribution of funds received from new investors to equalise Carried out on subsequent fund closings to “true up” all investors as if they joined the fund on Day 1 Pay interest for “late arrival” Contribute share to investments made Pay arrears of Management Fees Pay arrears of Expenses To equalise to Day 1 of the Fund

Private Equity Fund Bank Account Augentius Fund Administration LPs/ Investors Read only access to bank account 2. AFA issues drawdown notices to a total of £x m across LP’s, Calculated on a commitment basis 1. Instructs Administrator to generate drawn down for £x m 4. Instructs administrator to pay away £xm to cover cost of investment 3. LP’s remit a total of £xm to fund bank account to cover drawdown 5. Banking instruction to remit funds to settle transaction 6. Funds remitted to settle transaction Drawdowns/Investment

Quarterly/Annual Accounts Full Fund accounts issued every three months - Balance Sheet - Profit and Loss - Cash Flow Statement In addition, individual Partner Statements - Capital Account - Income Account - Loan Account to reflect each LPs individual share of partnership assets/liabilities/ income/expenses Other issues – Consolidation with Co-Invest schemes There are no industry standards – everything thing is personalised to each client – their own look and feel

Read only access to bank account 2. Calculations of proceeds due to each LP and carry & advice of pending distribution 1. Advice of pending sale generating distribution to LP’s to AFA 3. Advice of amount due to each LP plus amount of carry 6. Funds remitted to individual LP bank accounts 5. Automated banking instructed issued re payments to be made to LP’s and carry payment 4. Proceeds received from sale of portfolio investment 7. Carry paid to vehicle Distributions

David Bailey Managing Partner t f e Augentius Fund Administration LLP Two London Bridge London SE1 9RA United Kingdom