1. Corporate Governance A view from the private equity world John Mackie Chief Executive

2. Agenda Introduction to private equity Prior to investment Post investment Key issues

3. Introduction to private equity

4. Largest market after US UK accounts for one third of total European investment £80 billion plus under management BVCA represents vast majority of private equity/venture capital in the UK (171full members and 154 associates) £6.2 billion invested in 1,597 companies in 2001

5. £millions Growth of investment by BVCA members in UK firms 1984 - 2001

6. Economic impact of private equity Private Equity backed companies create more jobs –People employed increase 23% p.a. –Almost 3 million people work in private equity backed companies Private Equity backed companies boost the UK economy –Sales rise by 30% p.a. –Exports grow by 20% p.a. (national growth rate 2.9%) –Investment increases by 25% (national growth rate 2.3%)

7. 2001 Performance Measurement The net returns of private equity funds raised between 1980 and 2001 measured to 31.12.01 One year - 7.1% Three year 13.0% pa Five year 15.7% pa Ten year 17.4% pa

8. Highlights of 2001 Performance Measurement Over one, three, five year and ten years outperformed the FTSE 100 and the FTSE All-Share Indices The overall long-term (since inception) net return to investors now stands at 16.2%

9. Prior to investment

10. Timescale 3-12 months Business plan – strategic – market – financials

11. Prior to investment Due diligence - legal - accounting - market - environmental

12. Prior to investment Management- references - change/supplement - new environment -financial commitment -equity upside

13. Prior to investment Milestones- financial - operational - drawdown

14. Prior to investment Shareholder agreement - remuneration - reporting - Board representation - acquisitions/disposals - borrowing - share issues

15. Prior to investment Exit planning- trade sale -IPO - refinancing -value maximisation

16. Prior to investment -A mass of detailed information about the business, its markets, management, opportunities, threats -A detailed agreement on governance, monitoring, decision taking, forward planning

17. Post investment

18. -Shareholder Director(s) -Independent Director/Chairman -Continuous monitoring

19. Post investment -Strategic input -Management change -Acquisitions

20. Post investment -Development capital -Growth -Exit planning

21. Key issues

22. Key Issues -Real shareholder involvement -Board representation -Management change/development

23. Key Issues Leverage Alignment of interests Good governance = more value