Page 10 - SIBC Brochure
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Equity Investment EXPLAINED
Once a Tailor-Made Private Equity Fund is established for a specific project or business enterprise, the fund becomes a direct equity investor into the underlying operating company.
This is acheived by the Fund subscribing to Preference Shares in the operating company. Preference shares will give the Fund and its investors preferential rights, such as rights to a fixed dividend, liquidation preferences and a right to convert the preference shares into any other class of share that may be issued in the future. Voting rights are reserved for the Ordinary shareholders. However, the Fund may, at it’s option, nominate a non-executive director to the board of the operating company to provide added value advice as well as providing for investment oversight.
Investors into the Fund will be relying on the operating company increasing its equity value over time through normal business activity and the reinvestment of trading income. Investors will normally exit from the investment at a point where the operating company’s share value has increased significantly enough to enable the fund to dispose of its equity holding at a profit. Traditional exit routes include and Initial Public Offering of Shares, A Management Buyout, sale of shares to another Fund, or a rollover into another fund managed by SIBC.
Upon exit, the fund will distribute all exit proceeds to its investors and the fund will then be wound-up.
In some situations, the Fund may seek a listing of it’s own shares in a secondary market in order to give investors an early opportunity of trading their Fund Shares for profit before the fund is wound-up.
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