Secondary Market Presentation

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Secondary Market Presentation September 30,
2008 Mexico City
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Private Equity Innovator Since 1991
Paul VII 808M
Paul I-IV 142M
Paul V 202M
Paul VI 273M
Paul IX 1.65Bn
Paul VIII 960M
PRF I 294M
PCH III 650M
Top Tier I 213M
Top Tier II 478M
Top Tier IV 550M
91-95 95 98
99 00 01 02 03
04 05 06 07 08
Secondary Fund Facts
Offices San Francisco, New York, Paris,
London, São Paulo, Hong Kong Staffing 33
Investment and Sourcing Professionals 88
Employees Overall in Firm
Capital Raised 4.2 billion GPs Invested
with gt 300 Funds acquired gt 500 Underlying
portfoliocompanies gt 4,000
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Paul Capital Partners Platforms - 6.6 billion

• Dedicated Secondary Private Equity Fund
• Provides liquidity to private equity investors
  (LP positions and direct portfolios)
• Global leader in the secondary market since 1991,
  having completed more than 150 secondary
  transactions
• Oldest and largest of Pauls investment programs
• Currently investing from Paul IX, a US1.65
  billion dedicated fund with a significant
  emerging markets allocation
• Private Equity Fund of Funds
• Currently US1.5 billion of assets under
  management in top-quartile U.S. venture capital
  funds
• Top Tier III - US626 million
• Top Tier IV - US550 million
• Small-cap buyout fund with US350 target
• Healthcare Royalty Acquisition Fund
• Acquires revenue and royalty interests from
  pharmaceutical companies, universities, research
  institutions
• Currently US1.8 billion of assets under
  management
• Completed several securitizations of assets

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Paul Capital Partners A Global Presence
Netherlands
Toronto
Germany
Switzerland
London
CEE
.
.
.

Paris

.
.

San Francisco

.
Japan and Korea
Spain
Middle East
New York
Hong Kong

Italy
Sao Paulo
Paul Capital Partners has the resources,
personnel and expertise to work with GPs and LPs
to complete transactions quickly and
confidentially.

Office Locations

Exclusive Representatives
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Select Investors

• AMB Generali
• Baltimore County Employee Retirement System
• BP Investments Management
• British Coal Board Pension
• Brunei Investment Agency
• Canada Pension Plan Investment Board
• Danica Insurance
• Danske Bank
• DuPont Pension
• Halifax Bank of Scotland
• Industriens Pensionsforsikring
• Kamehameha Schools
• Kenyon College
• Marquette University

• Missouri Teachers
• New York Presbyterian Hospital
• Nomura Funds
• Ontario Municipal Employee Retirement
• OP Life Assurance
• Pacific Life Insurance
• Producer-Writers Guild
• San Diego County
• Schindler Pensionskasse
• Sony Life
• Taiyo Life
• Virginia Tech Foundation
• WLD Enterprises
• YMCA Retirement

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Types of Private Equity Funds
Secondary Fund
Primary Fund
Fund of Funds

• Makes investments in primary private equity funds
  on a blind pool basis
• Builds portfolio of primary fund interests to
  provide its investors with exposure to a broad
  range of funds
• More diversity than a primary fund

• Provides liquidity to private equity investors
• Buys private equity partnership interests
  (several years after the underlying fund was
  formed) as well as portfolios of direct
  investments
• Provides good visibility into lower risk assets
  and mitigation of J-curve

• Makes direct investments in single companies
• Generally purchases stakes in each company one at
  a time
• More concentrated
• Examples include buyout funds, venture funds or
  mezzanine funds

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Secondary Private Equity

• Purchase of private equity interests
• Interests in private equity funds (LP
  interests)
• Interests in portfolios of private companies
  (directs)
• From existing owners of the private equity
  interests
• No transaction-related payment to the private
  equity fund or private company
• Purchase of portfolios of directs not competitive
  with primary private equity funds
• Assume owners obligation to pay capital calls or
  make follow-on investments
• Assets generally aged 3-8 years from original
  issuance (with shortened investment horizon)
• Tends to be on a portfolio basis
• Portfolios can comprise just LP interests, just
  directs, or a combination of both
• Different from a secondary buyout
• Usually requires consent of underlying
  funds/companies/investors
• Purchased interests passively managed by the
  buyer post-closing
• Underlying GPs continue to manage funds in which
  an LP interest is purchased
• For purchases of portfolios of directs, the buyer
  will engage as manager either the team that made
  the investments or a specialized management firm

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Primary Market Continues to Grow
Global Primary PE Funds Raised (B)
Latin American Primary PE Funds Raised (B)

• - Secondary market viewed as a percentage of
  primary market
• - Global secondary market size of between US8 to
  US12 billion per year

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Rationale for Secondary Market Transactions
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Who can use the Secondary Market in Emerging
Markets?

• Financial Institutions
• Captive GP groups investing in direct PE
  investments
• Portfolios of funds to support Leveraged Finance
  business
• Asset management
• Corporations
• Corporate VC programs and strategic PE
  investments
• Family Offices and High Net Worth Individuals
• Funds and portfolios of direct PE investments,
  including co-investments
• Developmental Financial Institutions
• Reallocation of assets to different regions or
  asset types
• Liquidity for new investments when facing capital
  constraints
• Promote development of regional PE market
• Pension Plans
• Many international pension plans are mature and
  reducing GP exposure
• Hedge Funds
• Increasingly invested in illiquid assets

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Secondary Private EquityGeneral Partner
Facilitated Transactions

• GPs utilize the secondary market to achieve their
  own objectives
• Accelerate distributions
• Assist with fundraising through combined primary
  and secondary transactions
• Assist existing LPs
• Monetize club deals
• Recapitalize a fund
• Efficiently monetize tail end assets in older
  funds
• Raise annex funds to maximize value of
  investments held in funds lacking dry powder
• Captive investment teams within
  corporations/institutions use the secondary
  market to finance spinouts of team assets, with
  the following objectives
• Investment independence
• Improved economics
• Diversified investor base
• Control of ultimate destiny and ability to expand
  existing platform
• Increasing number of specialized GPs focused on
  finding, acquiring and managing orphan assets
  in partnership with secondary private equity
  funds

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Transaction Structures that Match Seller Needs

• All cash purchase
• Deferred payment structures
• Form of seller financing
• Allows buyer to be more aggressive
• Upside sharing
• Reconciles different perceptions of value or risk
• Transfer of economic ownership
• Allows LPs to cap or reduce exposure while
  remaining an investor in relevant funds and
  maintain he relationship
• Prevents the need for time consuming fund
  transfer process and reduces administrative and
  legal burden
• Joint venture agreement
• Complicated sharing of portfolio cash flows in a
  non-traditional manner
• Can be facilitated through an economic transfer
  of interests

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• Case Studies

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Case Study IInstitutionalization of a GP
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Case Study IInstitutionalization of a GP
Before
Post-Transaction Step 1
Post-Transaction Step 2
Paul Capital Syndicate
Marshall Capital
Paul Syndicate New LPs
Marshall Capital
Marshall Capital
MarCap Fund I 500 million
Existing Portfolio Co I
Existing Portfolio Co 2
Existing Portfolio Co 3
Part of larger 2.5 billion portfolio
New Investment 1
Existing Portfolio Co I
Existing Portfolio Co 2
Existing Portfolio Co 3
New Investment 2
New Investment 3
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Case Study IIGeneral Partner Facing End-of-Fund
Constraints
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Case Study IIGeneral Partner Facing End-of-Fund
Constraints
Before Transaction
Post-Transaction
LPs interested in staying in
LPs that want to exit
PAUL CAPITAL
LPs which stayed in
Fresh Capital Commitment 20mm
Fund I US 50m of NAV Original Terms
Portfolio Co I
Portfolio Co II
Portfolio Co I
Portfolio Co II
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Case Study III Single Purpose Entities
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Case Study IIISpecial Purpose Entity
Pre -Transaction
Post-Transaction
Original Investors in Companies through separate
SPVs managed by Pegasus
Paul buys 45m slice of portfolio and forms SPV
Reduced Original Investors Exposure to Portfolio
Co 1
Co 1
Original Investors
Original Investors
Co 2
Co 2
Pegasus Capital
Co 3
Co 3
Pegasus Capital
Original Investors
Original Investors

Co 4
Co 4
Paul-Pegasus Fund
Co 5
Co 5
Original Investors
Original Investors
Co 6
Co 6
Paul Capital
Co 7
Co 7
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• Muchas Gracias!
• Contact Information
• Latin American Office
• Duncan Littlejohn
• dlittlejohn_at_paulcap.com
• 55 (11) 5105 1515
• 55 (11) 9943 7255
• Other Locations Hong Kong London
  New York Paris San Francisco
• Please visit our website www.paulcap.com