A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

INDUSTRY OVERVIEW

After the initial closing, there might be additional periods during which investors will be offered to subscribe to the fund’s units/shares, as determined by the GP. They are called subsequent closings. When a GP announces a final closing , then the fund is no longer open to new investors. In order to align the interests of the LPs with those of the GP, the GP is often requested to make a commitment amounting for at least 1% of the aggregate commitments (or one share/unit, depending on the legislation in force in a specific domicile) received by the fund at initial closing and any subsequent closings. This percentage is negotiated between the GP and LPs. • Private Placement Memorandum The GP offers shares to investors on the basis of the information contained in the Private Placement Memorandum (PPM) . This document aims at informing potential investors about: > The structure of the private equity company; > The investment objectives, strategy and restrictions; > The management, governance and administration; > The depositary and administration agent; > The shares of the company and capital funding; > Restrictions on the ownership of shares; > The determination of the Net Asset Value (short “NAV”) and potential temporary sus- pension of the NAV calculation (if applicable); > Distributions; > Costs, fees and expenses; > Financial year, general meetings of shareholders and documents available for inspection; > Taxation; > Duration and liquidation of the company; > Data protection; > Exculpation and indemnification; > General risk considerations. C apital calls and investment period A capital call is whenever a private equity fund manager (usually a GP in a partnership) re- quests that an investor in the fund (an LP) provides additional capital through a contribution that has been agreed to through the above described commitment process. Capital calls occur when cash is required by the fund in order to pay fees (incorporation or ongoing) or to purchase an asset. Capital call amounts can be netted with distribution proceeds if an exit takes place coincidently. During the investment period , i.e. the period during which the fund will make investments into new portfolio companies, the GP issues a capital call notice on behalf of the fund to each investor, requesting the payment of the amount specified therein to be contributed to the fund. Capital contributions to make portfolio investments are typically drawn down over an initial three to five year period known as the commitment period or the investment period . The amount of the request to pay a certain percentage of the initially committed capital (usually

page 14 | A thorough understanding of PE