Private Equity Apax Partners 2007 Annual Report

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Apax Partners Annual Report 2007

www.apax.com

Apax Partners Annual Report 2007

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Front cover: Apax Partners new headquarters, 33 Jermyn Street, London

Apax Partners Annual Report 2007

Award winning private equity

Acquisitions Monthly Winner Exit of the year Mölnlycke

Dow Jones/Private Equity News Awards Winner European fundraising of the year Winner European large buyout of the year Winner European exit of the year Intelsat

Private Equity International Winner European buyout firm of the year Winner Exit of the year Mölnlycke

EVCA/Real Deals European Private Equity Awards Winner House of the year Winner Nordic deal of the year Mölnlycke

Unquote Private Equity Awards Winner Large buyout house of the year

Health Investor Awards Winner Private Equity deal of the year General Healthcare Group

What’s in this Annual Report?

1

Section 1: Overview 6

Performance highlights

7

Overview of Apax Partners

8

Strategy summary Our model

10

Portfolio summary

12

Chief Executive’s letter from Martin Halusa

16

The Private Equity market Market and industry overview

2

Section 2: Our approach 22

Operational structure

24

Our values

26

Governance and compliance How we run our business

29

Stakeholder engagement

30

The Apax Foundation

3

Section 3: Our operations 34

Investment strategy Outlining the strategy behind our operations

42

Sector review Tech & Telecom

46

Sector review Retail & Consumer

50

Sector review Media

54

Sector review Healthcare

58

Sector review Financial & Business Services

64

Investors

65

The development of Apax Partners

68

Walker-compliant portfolio companies

72

Current portfolio

76

Apax Partners international offices

1

Section 1: Overview 6

Performance highlights

7

Overview of Apax Partners

8

Strategy summary Our model

10

Portfolio summary

12

Chief Executive’s letter from Martin Halusa

16

The Private Equity market Market and industry overview

6

Performance highlights

Apax Funds performance

18%

average annual profit growth rate over the past ten years among Apax portfolio companies.

65% of which is top line improvement. Apax Partners funds average investment period (last 15 years)

5.6 years

New investments in 2007

Key divestments in 2007

Deal name

Location

India

Apollo Hospitals

USA/Canada

Cengage Learning

Spain

Electro Stocks

USA

Hub International

Norway

Plantasjen

USA

Qualitest Pharmaceuticals

Canada

SMARTTechnologies

UK

Trader Media Group

Deal name

Location

Germany

CBR Group

Netherlands

Global Refund

UK

Healthcare at Home

Sweden

Mölnlycke Health Care

Netherlands

PCM

Germany

SULO Group

UK

The Stationery Office

Greece

TIM Hellas

Germany

Equity : Debt ratio in the Apax Funds live portfolio

Versatel

43:57

Vueling Airlines

Spain

Total amount invested in 2007 (€)

Total amount distributed in 2007 (€)

10%

3.2bn

3.5bn

AEVII (Latest Apax Fund) Investor Breakdown by type

A Apax Partners funds returns to Investors

Average increase in jobs per annum (last five years)

Total amount raised in 2007 (€)

11bn

Banks 7.0% Endowments 6.5% Funds of funds 10.8%

40% 34.9%

High net worth individuals 12.7% Insurance 9.1% 30%

0%

15 year

7.3%

MSCI Europe

23.2%

Net IRR top decile benchmark 2

Net IRR – Apax Europe Funds

11.6%

10%

Net IRR top decile benchmark 2

20%

Net IRR – Apax Europe Funds1

Sovereign funds 6.0%

MSCI Europe

Public pension funds 31.9%

1

28.2%

Private pension funds 11.7%

35.7%

Gatekeepers 4.3%

10 year

1 At 31 December 2007. 2 Benchmark is the top decile buy-out cumulative vintage year annual IRR as of June 2007 (latest available for 2007) for AEVI and all private equity IRR for other funds.10 year and 15 year benchmarks are the cumulative composite vintage year IRRs over each period. Source:Thomson Financial. MSCI data as of 31 December 2007.

Apax Partners Annual Report 2007

7

Overview of Apax Partners

What is Apax Partners? Apax Partners Worldwide LLP (‘Apax Partners’) is the holding company for the worldwide Apax partnership which is the lead investment adviser to the most recent Apax Funds.

About us Apax Partners is an independent global private equity advisory firm. Funds advised by Apax Partners (‘Apax Funds’) typically invest in companies with a value of between €1bn and €5bn. The Funds invest in five growth sectors: Tech & Telecom, Retail & Consumer, Media, Healthcare, and Financial & Business services. Apax Funds commit capital on behalf of a diverse range of investors, which include public and private pension funds, insurance companies, university endowments and other financial institutions. Apax Funds buy both majority and minority stakes in large companies that have strong, established market positions and the potential to expand. Apax Funds back excellent management teams to create efficient and sustainable businesses that have a strong track record of growing by investing in research and development, exports, sales and employment. Our mission Our mission is to release the potential of companies, management teams and portfolio company employees in order to generate superior returns for the millions of individuals whose pension funds and investment plans commit to our funds. Our team Apax Partners employs around 300 people. This team operates within an organisational infrastructure that promotes an entrepreneurial attitude towards the identification and realisation of investment opportunities.

Our values Apax Partners and the companies in which Apax Funds invest are committed to operating with the utmost integrity and professionalism. (See page 26).

8

Strategy summary

Our model

Sector focus...

Apax Partners advises the Apax Funds which invest capital on behalf of large institutional investors such as pension funds, insurance companies and university endowments. The latest Apax fund, Apax Europe VII (AEVII), will make investments in a variety of businesses

and will hold those stakes for 3-7 years. Apax Funds are long-term, patient investors and back excellent management teams to release the potential in their businesses.

Our operational structure

Apax Funds invest in large companies across five global growth sectors: Tech & Telecom, Retail & Consumer, Media, Healthcare, Financial & Business Services. Apax Funds have invested successfully in these sectors over the last 25 years.

Apax Funds live portfolio value by sector Media 24.7% Retail & Consumer 21.1%

Executive Committee

Financial & Business Services 19.5%

Support

Healthcare 16.8% Tech & Telecom 12.4%

Investments Compliance Investment Committee

Portfolio Review Committee

Exit Committee

Investor Relations

Sectors Tech & Telecom

Retail & Consumer

Media

Healthcare

Funds Admin

Financial & Business Services

Communications Tax

Centres of Excellence Portfolio Development

IT Financing

Human Resources

Portfolio value

Apax Partners Annual Report 2007

9

Local presence...

...Global reach.

Apax Partners offices have been established for an average of 13 years each and are primarily staffed by local nationals. Close relationships with decision makers in the countries in which we operate gives us an advantage in terms of finding new investment opportunities and understanding the market in which Apax Funds portfolio companies operate.

Apax Partners has an established global platform with nine offices in nine countries across three continents. This breadth enables it to spot emerging trends early, support the growth of companies and use the financial markets most effectively.

As the private equity market matures, we believe that some of the bestperforming firms will be those with genuine global reach and financial scale. Apax Partners is one of a small group of private equity firms to have embraced the challenge of globalisation.

UK Established: 1981

Sweden Established: 2003

Germany Established: 1990

China Established: 2005

Spain Established: 1989

Italy Established: 2000

Israel Established: 1994

India Established: 2006

US Established: 1969

9 46 10 countries

partners worldwide

years average partner experience in private equity

10

Apax Funds live portfolio summary

Tech &Telecom sector

Retail & Consumer sector *

*

*UK portfolio companies that will comply with the enhanced reporting requirements of the Walker guidelines. See page 68 for further details.

Apax Partners Annual Report 2007

Media sector

Healthcare sector

11

Financial & Business Services sector

*

*

*

*

*

*

12

Chief Executive’s letter

Why are we reporting? Welcome to the inaugural Apax Partners Annual Report. The purpose of this report is to increase the understanding of Apax Partners in particular and private equity in general. This report is, in part, an acknowledgement of the ‘major transparency and accountability gap’ in private equity that was identified last year. We have worked closely with Sir David Walker, who was asked to look into this matter in the UK, and intend to exceed the code that was published in November 2007 on a comply or explain basis. As well as publishing this Annual Report, we are currently working with seven UK portfolio companies which between them employ 83,541 people and will comply with the enhanced reporting guidelines outlined in the code (see pages 68-71). Martin Halusa, CEO Apax Partners

83,541 employees in UK-based Walker compliant portfolio companies Source: Apax Partners

What are our reporting aims? Sir David’s work is a reflection of the unprecedented amount of attention the industry has received over the last year. The publication of this report will go some way to enhancing transparency and also provides a platform for us to tell the very good story that I believe we have to tell. We understand that, as the industry matures, it is in its own best interest to explain itself to a wider audience, even if it remains privately owned. How does this affect stakeholders? The long-term alignment of interests between private equity firms and their investors is a key feature of the asset class. Our investors comprise some of the world’s largest and most sophisticated pension funds, insurance companies, endowments and banks. We are long-term stewards of these investors’ capital, in relationships that often stretch over decades. These relationships are founded on an alignment of interests and also on trust. We have talked to our investors about this report and they have been overwhelmingly supportive of our efforts to increase transparency. However, some areas of the business remain subject to legal confidentiality clauses between Apax Partners and its investors. As a private business, we have also not disclosed any information on the financial affairs of private individuals. In all other respects, we have tried to be as open as possible given the legal and competitive constraints that everyone in the industry has to work with. What is happening in the private equity market? Private equity activity has grown at an unprecedented rate in the last few years buoyed by favourable macroeconomic conditions and a strong tail-wind from the debt market. These favourable conditions have enabled our funds to return over 13.5bn to our investors in the last year through the sale of stakes in companies such as TIM Hellas in Greece, Mölnlycke in Sweden, Sulo in Germany and Healthcare at Home and The Stationery Office in the UK. In recent months the completion of new deals and the sale of stakes in companies has slowed down because of the dislocation in global credit markets.

Apax Partners Annual Report 2007

13

However, the companies in which the Apax Funds have invested continue to perform well despite a deterioration in the overall trading environment. It is also pleasing to note that, looking across the private equity market as a whole, we have witnessed very few signs of undue stress at the portfolio company level. Because we take a long-term view on our investments, we are prepared for corrections of this nature. The private equity model is robust and proven throughout the economic cycle. We complete very detailed investigations of the companies in which Apax Funds invest and we consider the wider impact of an economic downturn before the funds make a commitment.

18%

average annual growth rate over the past 10 years among Apax portfolio companies. Source: Apax Partners

What do we actually do? Our core business is fundamentally about finding creative ways to grow the companies in which the Apax Funds invest. We work with exceptional management teams and portfolio company employees to help release the full potential of their businesses. The average growth rate in profits of portfolio companies that Apax Funds have backed over the last 10 years has been 18% per year, with 65% of this improvement generated by growing sales and 35% from margin improvement. Our analysis of the long-term (post IPO) performance of Apax Funds’ portfolio companies also shows that this growth continues in the period after our investment. Apax Funds’ portfolio companies also contribute to the overall health of the economy at large by growing jobs, investment, exports and R&D at a faster rate than comparable quoted companies. How do we maximise growth? Throughout our 30-year history, Apax Funds have always been growth investors. Initially we enabled entrepreneurs to take great ideas to a wider market by providing the capital for them to develop their ideas. More recently we have used the deep sector understanding forged in these early years and our extensive contacts to help more established companies realise their full potential. Our deep sector understanding remains at the core of our business and, to this end, we have developed world-class pockets of industrial expertise within each of our sectors. This shift in emphasis toward larger investments has been accompanied by a more global investment outlook. It is our belief that the globalisation of the economy as a whole has created a need for a global equity capability. As private equity deals get larger, they are increasingly taking on an international dimension. We are excited by the opportunity to expand our model into new geographies and by the prospect of being a UK-based firm with a global outlook.

Martin Halusa Chief Executive

Case study: Our investors

WellcomeTrust Sir Henry Wellcome,

the founder of the charity, established his pharmaceutical company in 1880 and left it to the Wellcome Trust on his death in 1936. The private company was the sole major asset of the Trust until it was floated in 1986 and sold to Glaxo in 1995. The Wellcome Trust first invested in private equity funds in 1994, which included significant allocations to both buyouts and venture capital, and subsequently has again extended its private interests to include direct stakes in assets and companies. The Trust has currently committed £3.9bn of its £15bn portfolio to private equity interests. It has over 500 investments in private equity partnerships or companies. The Trust has no strategic asset allocation target and is generally flexible as to whether it invests in public or private vehicles. It can only achieve its charitable mission by maximising long-term absolute returns within its risk budget. Since 1986, the total portfolio has achieved an annual return of 16.2% p.a., about 7% p.a. above the return of equities, although it targets

a more conservative real investment return of 6% p.a. in line with long-term equity returns. Its private equity portfolio has achieved an annual IRR (net of fees) of 21.5% since inception; it aspires to maintain similar levels of return. Partnering with outstanding people with a strong investment culture is key to the Trust’s success. It prefers to invest with GPs* who share its long-term investment horizon and its ability to tolerate high levels of short-term volatility. It requires GPs to be financially aligned with the Trust and expects them to be active in managing their allocations to LPs** so as to ensure long-term continuity. It seeks GPs with clear advantages in terms of size, area of expertise or geography. The Trust’s sole mission is to promote and foster research to improve human and animal health. (Source: Wellcome Trust) * GPs are General Partners, a shorthand for private equity and venture capital managers. **LPs are Limited Partners, a shorthand for investors in private equity funds.

26%

TheTrust has currently committed 26% of its £15bn portfolio to private equity interests.

21.5%

WellcomeTrust’s private equity portfolio has achieved an annual IRR (net of fees) of 21.5% since inception.

> Wellcome Trust central office in Euston, London.

Partnering with outstanding people with a strong investment culture is key to theTrust’s success.

WellcomeTrust

16

The Private Equity market

Growth in the Global Private Equity market Buyout value (US$bn)

Number of buyouts

1,000

100

500

0

Source: Dealogic

2006

200

2007

1,500

2004

300

2005

2,000

2002

400

2003

2,500

2001

500

2000

3,000

1999

600

1998

3,500

1997

700

0

Steady growth During the last two decades, the global private equity market has experienced steady growth. It has evolved from a cottage industry dominated by entrepreneurial individuals into a highly differentiated asset class with its own global institutions. In terms of value, the industry’s recent growth has been primarily driven by a leading group of large firms whose core business is private equity buyouts. At this level, a handful of firms are emerging that are uniquely equipped to structure complex cross-border deals and buy businesses worth billions of euros. In the last three years, this growth has accelerated dramatically. In 2006 alone, around 3,000 buyout deals were completed for a combined value of more than half a trillion euros. Institutionalisation The largest firms have acquired this status because they have provided consistently superior returns. They are well positioned to maintain this advantage because they possess a unique set of skills and personnel within highly developed institutional frameworks. The prize for those few that are able to crack the challenge of becoming global is a big one; capital will continue to migrate from traditional asset classes to those alternative assets that are best able to provide long-term outperformance. At present, around 3% of global capital under management is invested in alternative assets. As this figure rises, institutional investors will be forced by their own internal economics to commit larger amounts of capital to fewer firms. The globalisation of the economy as a whole also creates the need for a global equity capability. As private equity deals get larger, they are increasingly taking on a global dimension. It stands to reason that the investors best able to understand these businesses, perform local due diligence, find and recruit local management and fully grasp the sectors in which they operate, will themselves share knowledge gained across different geographies. Investors As it moves into the mainstream, private equity has become an established part of the investment mix for many of the world’s largest investors, including pension funds, insurance companies, banks and university endowments. These institutions are committing an increasing proportion of their capital to private equity because it has outperformed the more established investment choices available. Apax Funds have consistently out-performed stock market indicators and the best benchmarks in the private equity industry. The ultimate beneficiaries of this continued outperformance are the millions of individuals who commit to the pension funds which invest in Apax Funds.

Apax Partners Annual Report 2007

84%

of portfolio companies believe Apax Partners helped to increase employment levels. Source: IE Consulting

94%

of respondents said that Apax Partners had provided beneficial support with strategic direction. Source: IE Consulting

10%

average increase in employment was achieved across portfolio companies. Source: IE Consulting

17

Economic impact As well as offering institutional investors superior returns, available studies show that private equity plays an important role in economic growth and job creation. Apax Partners recently engaged an independent consultancy to assess the drivers of value creation and the economic contribution of the Apax Funds’ Portfolio to the wider economy. Some 84% of the participants to the study consider Apax Partners’ investment to have helped increase employment levels. Overall, of the companies surveyed, employment growth averaged 10% per year. The three areas in which Apax Partners was deemed to have helped most businesses were with strategic direction, where 94% of respondents stated that Apax Partners had provided beneficial support, management recruitment (58%) and business contacts (58%). Other industry surveys point to a similar picture. Research conducted for the British Venture Capital Association (BVCA) found that over the five years to 2006/07, the number of people employed worldwide by UK private equity-backed companies increased by an average of 8% p.a. Of this, 84% of responding companies said their growth was organic, rather than through acquisition. It is estimated that companies that have received private equity funding account for the employment of around three million people in the UK, equivalent to 21% of UK private sector employees. According the BVCA research, these companies performed well against other measures. Over the five years to 2006/07, sales rose by 8% p.a., exports grew by 10%, corporate investment rose by 11% and R&D by 14%. For the financial year 2006/07 it was estimated that private equity-backed companies generated total sales of £310bn, exports of £60bn and contributed nearly £35bn in taxes. The private equity business also has a wider multiplier effect on the financial services industry. Recent BVCA figures show that professional services firms generated an estimated £5.4bn in revenue through the provision of services to the private equity community, representing around 12% of the total annual turnover of the UK financial services industry.

Case study: Retail & Consumer sector

New Look New Look is the leading women’s value fashion retailer in the UK. It has more than 500 stores in the UK and 200 stores trading under the Mim format in France. New Look sells clothes and accessories at prices which are typically 30% below traditional competitors, but with significantly more fashion content than the value competitors. The founder of New Look, Tom Singh, approached Apax Partners in May 2003 with the concept of a public to private transaction, led by the management team and supported by Apax Partners and himself. A review of the opportunity confirmed the attractiveness of the deal. When Permira and Apax Funds invested in New Look it had been through a difficult period. The business had been floated on the stock exchange in 1998 but the management team had become increasingly frustrated by what it felt was the stock market’s primary focus with share prices and shortterm performance. Permira and Apax Funds felt that the company’s diffuse and distant shareholders could not see the big picture and that with some attention and investment New Look could be turned into a genuine champion of the high street. In April 2004, Apax Funds (AEIV and AEV) and Permira Funds each invested £100m in the buyout vehicle led by Tom Singh which was designed for the purpose of purchasing New Look. Apax and Permira Funds each assumed a 31% stake in the company, with Tom Singh retaining 23% and management the remainder of the equity.

Much has been achieved thus far by the business under joint private equity ownership. This has included the reorganisation of the management team with a new CEO and new buying and international directors appointed. The business’s product range has widened to include men’s and children’s wear. Average store sizes have increased with an investment in a new distribution centre to cater for this. In turn, its customer base increased significantly. The support from private equity ownership was crucial in achieving this increase in scale. Beyond its operations in France, the business has sought further international expansion into the markets in Belgium and Ireland and as far wide as Kuwait and Dubai. A staff incentivisation scheme has also been introduced to drive growth across the business. The transformation has been significant, achieved at a pace beyond what would be possible under public ownership.

Employment has increased significantly with over 3,000 jobs created. EBITDA has also grown by over 50%. Apax Funds saw an opportunity to create value in a public to private transfer of ownership of New Look. During that period of ownership the management team has sought and achieved a significant transformation of the business. New Look has an active CSR policy and has appointed a Director of Corporate Social Responsibility accountable for all aspects of the group’s strategy for ethical trading, social responsibility, the environment and sustainability. In particular, a key focus at New Look is ensuring appropriate standards of factory conditions for the workers of suppliers. New Look has been a member of the Ethical Trading Initiative since 2003 and has adopted the ETI Base Code for its Ethical Aims. The Company has materially increased its investment and activity over a number of years. New Look also has clear policies on environmentally sound, sustainable raw material sourcing, recycling, employee “We have transformed the business over the last 31/2 years and I am not sure communication/rights and energy conservation. we could have done that as a public company. An extraordinary number of changes have been made over a short period of time which has required a significant amount of financial investment and also a significant amount of communication to ensure that investors were comfortable with the scope of changes being made... this was a significant transformation and included investment in people and systems to create the infrastructure that gives the business the capability to grow to become a global retailer which is the ambition of the management team.” Phil Wrigley, CEO

> New Look store at Moorgate, London

New Look

“We have transformed the business over the last 31/2 years and I am not sure we could have done that as a public company.” Phil Wrigley CEO, New Look

20

2

Section 2: Our approach 22

Operational structure

24

Our values

26

Governance and compliance How we run our business

29

Stakeholder engagement

30

The Apax Foundation

22

Our approach Operational structure

Apax Partners Executive Committee

Martin Halusa Worldwide CEO (London) Martin joined Apax Partners in 1990 from Daniel Swarovski Corporation and BCG and was MD of Apax Germany from 1990–2003. He is the Chairman of the global Executive Committee and the Investment Committee and a member of the Approval and Exit Committees. Martin has advised Apax Funds on investments that include Kabel Deutschland, Versatel, Tropolys and Primacom.

John Megrue (New York) John originally joined Apax Partners in 1988; he rejoined in 2005 from Saunders, Karp & Megrue which he co-founded in 1990. He is a member of the Investment Committee and Approval Committee. John has advised Apax Funds on investments that include Bob’s Discount Furniture, Tommy Hilfiger Corp. and MagnaCare.

Investments

Approval Committee Chaired by Peter Englander, the Approval Committee acts as a sounding board to the deal teams and ensures that the best opportunities are pursued across our sectors and geographies.

Sectors

Tech & Telecom Richard Wilson

Centres of Excellence

Portfolio Development Assists deal teams in preparing and executing the strategic, organisational and operational improvements during the first 100 days of ownership and beyond.

Retail & Consumer Alex Fortiscue

Investment Committee Chaired by Martin Halusa, the Investment Committee makes the investment recommendations to the General Partners of the Apax Funds who have the final say on all investment decisions.

Media Stephen Grabiner

Apax Partners Annual Report 2007

23

Support Compliance Ensures the business complies with governance regulations. Ensures the business complies with external regulations and the Apax Partners internal code of conduct. Funds Administration/Finance Provides administrative operations to ensure the smooth financial running of the business and timely and accurate investor reporting.

Michael Phillips (Munich) Michael joined Apax Partners in 1992, after having worked at Ciba-Geigy Ltd. and Otto Waste Management Ltd. He is a member of the Approval, Investment, Portfolio Review and Exit Committees. Michael has advised Apax Funds on investments that include Sulo, IFCO, PVH, Tommy Hilfiger and CME.

Stephen Grabiner (London) Stephen joined Apax Partners in 1999 from ONdigital and the Daily Telegraph. He is a member of the Investment, Portfolio Review and Exit Committees. Stephen has advised Apax Funds on investments that include Incisive Media, Bezeq, PCM and Yell.

Investor Relations Manages the relationships with our investors. Communications Manages the dialogue between the firm and its stakeholders. Tax Manages reporting of information to investors to allow them to comply with their own tax filing obligations. IT Provides and manages the technology infrastructure. Human Resources Manages all aspects of the company’s relationship with its employees.

Portfolio Review Committee Chaired by Peter Englander, the Portfolio Review Committee periodically monitors individual portfolio companies to assess ways in which Apax Partners can add further value or to iron out potential problems.

Healthcare Ian Jones

Exit Committee Chaired by Paul Fitzsimons, the Exit Committee reviews exit options for specific portfolio companies.

Financial & Business Services Michael Phillips

Financing Assists deal teams in obtaining and structuring financing from banks and other sources of debt.

Our values

Our values are built into every aspect of our business. Because private equity is such a long-term business, and depends on the trust it receives from investors, business owners and management teams, the values of integrity and sustainability are crucial in everything we do.We apply these values equally across our business in all of the countries in which we operate.They inform our interactions with employees, portfolio companies, suppliers, investors and the local communities in which we operate. Apax Funds are long-term stewards of over US$35bn of our investors’ capital, which has been entrusted to us on the basis of our values and uncompromising integrity. Apax Funds predominantly invest in modern growth companies within our five sectors of expertise. The Apax Funds do not invest in companies involved in firearms, pornography or that derive significant revenues from the production or sale of tobacco. We are long-term investors with the aim of building robust and sustainable businesses. We employ a rigorous screening process before we make any investment, which includes an assessment of the environmental, ethical and social impact of that business. These aspects of the business are then assessed on an ongoing basis as part of the portfolio review process and are analysed by the whole team on a twice-yearly basis. Portfolio companies are encouraged to take an active lead in terms of corporate social responsibility partly because we believe that this will enhance the reputation and long-term prospects of the business and help to reduce potential liabilities. We are proud of what we do: backing management to release the full potential of their businesses through insight and patient long-term investment. We are very aware of our responsibilities and at all times are guided by our values.

Our approach: Values

These values apply as much to portfolio companies as within Apax Partners itself: Integrity We apply the highest standards of integrity across our worldwide business in our dealings with all of our stakeholders. Safeguarding our environment We run environmentally sound operations which aspire to create minimal damage to the environment. We seek to drive down the environmental impact of operations by reducing waste, emissions and discharges and by using energy efficiently. Apax Partners has also embarked on a project to become carbon neutral and will be actively working to evaluate and reduce our carbon footprint and offset our carbon emissions as appropriate. Supporting communities We act with respect and consideration for the quality of life and economic and social progress of the communities within which we operate. Building long-term relationships

We conduct business on a long-term, sustainable and transparent basis, looking to create relationships founded on mutual advantage which are capable of enduring beyond a single transaction. Putting people first We treat people with dignity and respect, just as we would wish to be treated ourselves. We only recruit, select and advance employees on merit, irrespective of age, gender, nationality, disability, religious belief or sexual orientation. We do not tolerate abusive, harassing or offensive conduct in the workplace. The welfare of our employees and those of Apax Funds’ portfolio companies is a top priority. We aspire to have no accidents, no harm to people and not to subject anyone to unnecessary risks at work.

26

Our approach Governance and compliance

Introduction Apax Partners Worldwide LLP (‘Apax Partners’) is the holding company for the worldwide Apax partnership and is the lead investment adviser to the most recent Apax Funds. It is regulated by the Financial Services Authority (FSA) and advises Apax Partners Europe Managers Limited (APEM) which is also regulated by the FSA. APEM is owned by the firm’s senior partners and manages the assets of the most recent Apax Funds. Apax Partners is committed to maintaining the highest business standards consistently across all of its offices. In the UK, and certain other jurisdictions, some firms within the Apax Partners structure are subject to local financial services regulation, whilst in other countries there is no similar legal obligation, although market regulation will of course apply. However, the business principles set by Apax Partners ensure that the Apax Partners team, wherever they are based, work to the same high standards of business conduct. Global business standards The Compliance department has developed a series of principles and procedures to guide and support both the investment and support team members throughout the Apax Partners offices worldwide. The key principles are communicated through regular training and visits to all offices, as well as being available electronically. This is supported by a full monitoring programme to ensure that Apax Partners’ standards are being adhered to.

There follows a summary of the main areas: Conflicts of interest Apax Partners maintains policies concerning potential conflicts of interest not only to comply with its FSA regulatory obligations but in particular to identify and manage those conflicts. Typically, conflicts are managed by obtaining consent, refraining from taking action and by disclosure. Detailed procedures are in place to manage conflicts, for example co-investment, remuneration, carried interest, allocation and responsibility of directors. There are also policies designed to manage personal conflicts such as personal share and securities dealing, the receipt of gifts and entertainment, and external non-Apax activities. Each fund has a Board of Advisers, made up of the major investors in that fund to which potential conflicts can be referred for guidance. The scope of this Board is set out in its terms of reference and in the fund’s partnership agreement. Senior management arrangements The business of Apax Partners is operated and managed through a small number of Committees whose respective terms of reference clearly define responsibilities and accountability. Certain positions and functions within Apax Partners require key individuals to receive approval from the FSA before they can be appointed: these include all Partners and Directors, and certain key support functions such as Compliance and Finance. As an Approved Person, those individuals are required to conduct themselves in a manner consistent with a specified set of principles and are personally accountable to the Regulator for their actions.

Apax Partners Annual Report 2007

27

Confidentiality Members of the Apax Partners team recognise the trust that is placed in them, both by investors and by the companies that the funds are looking to invest in. Confidential information received by any Apax Partners representative is treated as such and all reasonable practical steps are taken to restrict access by unauthorised persons. Everyone is required to sign an undertaking reminding them of their obligations on joining the firm and annually thereafter. Personal responsibilities Apax Partners prides itself on the honesty and integrity of the people it employs, and recognises its duty to make all employees aware of their responsibilities. The Compliance department provides guidance to all members of the team on how they should conduct themselves and the consequences of their behaviour, and encourages all members of the team to voice any concerns that they might have. All employees are required to sign an undertaking confirming that they will adhere to the standards which are available to everyone via the Apax Partners’ Intranet site and also brought to their attention as appropriate. Apax Partners recognises that an individual may act in a way which places them in direct conflict with the interests of the business and it has adopted a strict personal account dealing procedure and requires all members of the global team to obtain prior approval from Compliance before carrying out any personal transaction. Compliance maintains a restricted list and permission to deal will not usually be granted where the transaction relates to a company on that list. Gifts and inducements over a certain monetary value must receive the authorisation of an independent partner. Anti-money laundering Apax Partners considers it unlikely that parties will seek to use their relationship with Apax Partners in connection with money laundering or terrorist financing. Nevertheless it views its responsibilities in the area of anti-money laundering seriously and has worked with the BVCA and the FSA to contribute to the standards currently in place within the private equity industry in the UK. A risk-based approach has been developed to ensure that appropriate information about the source and control of funding both from investors and investee companies is obtained. Custody APEM is appointed by the General Partner of the Apax Funds to act as custodian of the assets of the Apax Funds. This is a regulated activity in the UK. Its activities as Custodian are specifically reported on by external auditors to the FSA. Since its appointment, APEM has only received unqualified audit reports in respect of this activity.

28

Our approach Governance and compliance continued

Monitoring approach, programme and matrix Monitoring of the firm’s activities against its stated procedures is carried out by reference to the Compliance Monitoring Programme. This programme is the basis for developing appropriate tests by Compliance and is subject to constant revisions to reflect the results from previous testing and developments in the business and regulatory expectations. Areas of the business considered to represent a greater inherent risk are subject to more frequent monitoring. Results from the monitoring and recommended actions are discussed with the Chief Operating Officer and reported as appropriate to the Executive Committee. Risk management The responsibility for risk management within Apax Partners rests with the Executive Committee. The overriding culture within the organisation is always to adopt the highest standards in all areas of the business and demand the same from all third parties who perform activities on our behalf. Where specific risks within the business have been identified, appropriate controls are in place to mitigate those risks from occurring wherever possible. Relationship with FSA Apax Partners was subject to a routine inspection by the FSA in October 2006, the previous inspection having been carried out in 2002. The purpose of the visit (described as an ARROW II inspection) was to enable the FSA team with responsibility for supervising Apax to update its risk assessment of the firm. The assessment is designed to identify to the FSA areas of Apax Partners’ business which might present a risk to its stated statutory objectives. The report did not identify any significant findings and the next visit is not scheduled to take place until 2009. Furthermore, the FSA stated that they had noted a good compliance and corporate governance culture within the organisation. The Compliance team has always strived to maintain a good relationship with their FSA supervisors, with regular dialogue ensuring that the FSA is aware of any current developments and that Apax Partners is able to anticipate any regulatory concerns.

Apax Partners Annual Report 2007

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Our approach Stakeholder engagement

Advisory Boards As well as the internal corporate governance structures, Apax Partners has a well-established structure of external advisory boards. Each of the Apax Funds managed or advised by Apax Partners has a Board of Advisers. Representatives of up to 15 of Apax Funds’ Investors are invited to become members of the Board. The Board of Advisers meets twice a year and is consulted by the General Partner on certain of the affairs and operations of the Funds, in particular, issues relating to conflicts of interest and review of the valuations at which investments are carried in the notes to the accounts. The Board of Advisers is chaired by a member of the Board, who is appointed every two years. The responsibility of the Chairman is to set the agenda and ensure that the Board of Advisers complies with its terms of reference. Media In terms of Apax Partners’ relationship with the media, it is our policy to be as open and helpful as possible within the bounds of confidentiality agreements and commercial sensitivities. The internal communication team is assisted by a network of external agencies across the globe. We bring the same level of integrity to our relationships with the media as we do with everyone else. Labour Unions/Politicians/Regulators Apax Partners is acutely aware of the need to consult and engage with the political and regulatory regimes in each of the countries in which it operates. As a company we do not make political donations but aim to build strong and lasting relationships with parties of all political persuasions.

Our approach: The Apax Foundation

The Apax Foundation The Apax Foundation is the formal channel for Apax Partners’ charitable giving and receives a percentage of the firm’s profits and carried interest. The Trustees of the Foundation are Sir Ronald Cohen (Chairman), Peter Englander (Chief Executive), Martin Halusa, Khawar Mann, David Marks, John Megrue, Michael Phillips and Richard Wilson. Apax Partners has a history of support for social entrepreneurship and the firm is continuing this tradition with social entrepreneurship chosen as the area on which the Apax Foundation will mainly focus. Social entrepreneurship not only meshes well with the work of the firm but also enables us to draw on the expertise of several people within the firm who are personally active in this sphere. Support for the personal charitable activities of Apax employees and others in the Apax network Apax Partners employs a

large group of extremely talented people, many of whom have long been committed to their own personal charitable endeavours. One of the primary goals of the Foundation is to support the range and diversity of the personal charitable efforts of the Apax Partners team. The Apax Foundation supports their endeavours by making grants to all of the charitable organisations that benefit from the active involvement of an Apax employee. The Apax Foundation has also made several donations this year in support of causes close to the hearts of people in Apax Partners’ network.

Projects supported by the Apax Foundation Bridges Community Ventures Bridges Community Ventures is a venture capital company with a social mission: its funds are dedicated to investing in businesses that can deliver strong social benefits as well as generate financial returns for investors. Apax Partners was a founder of Bridges in 2002 and has maintained its support for the company since its inception, with Sir Ronald Cohen and Peter Englander continuing to serve as Chairman and Director respectively of Bridges. We believe that the Bridges model can be successfully adapted to other countries and the Apax Foundation is building on Apax Partners’ tradition of commitment to social investment with the provision of a grant to Bridges to assist it in establishing a community development fund overseas. The Prince’sTrust The Prince’s Trust is one of the UK’s leading youth charities, dedicated to improving the lives of disadvantaged young people in the UK. The Trust’s support for young entrepreneurs complements Apax Partners’ core business and the firm has been a Patron of The Prince’s Trust Business Programme for several years. To continue our support of The Trust, this year the Apax Foundation has agreed to become the lead partner of The Prince’s Trust Business Programme 25th anniversary campaign. Private Equity Foundation In addition to having its own charitable foundation, Apax Partners is a member of the Private Equity Foundation, which was founded in 2006 as the collective charity for the UK private equity community. The Private Equity Foundation supports charities in the fields of education, family/community support and children, with the majority of funding going to causes in the UK and Europe.

Apax Foundation

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3

Section 3: Our operations 34

Investment strategy Outlining the strategy behind our operations

42

Sector review Tech & Telecom

46

Sector review Retail & Consumer

50

Sector review Media

54

Sector review Healthcare

58

Sector review Financial & Business Services

64

Investors

65

The development of Apax Partners

68

Walker-compliant portfolio companies

72

Current portfolio

76

Apax Partners international offices

34

Investment strategy

9 5

Apax Partners has offices in nine countries across three continents.

Apax Partners focuses on five industry sectors bringing deep expertise and experience to management.

Introduction Apax Funds have a proven strategy of sector focused investing, looking for opportunities where capital, experience and insight can release the potential of businesses and lead to significant growth. The firm has successfully pursued this strategy since 1990. Our sector focus, combined with an established network of local offices and a global platform, represents the foundation of Apax Partners’ strategy. Sector focus Apax Funds invest across five global growth sectors: Tech & Telecom, Retail & Consumer, Media, Healthcare, Financial & Business Services. Funds advised by Apax Partners have invested successfully in these sectors over the last 25 years, giving us genuine insight into the businesses in which our funds invest. The team at Apax Partners is geared toward this strategy of sector-focused investing, with 79% of investment professionals having prior relevant sector expertise. Local presence Our offices have been established for an average of 13 years each and are primarily staffed by local nationals. Close relationships with decision makers in the countries in which we operate helps us to unearth new investment opportunities and understand the market in which portfolio companies operate. Global reach Apax Partners has an established global presence, with nine offices in nine countries across three continents. Our global platform enables us to grow businesses by spotting emerging trends early, supporting the growth of global companies and using the world’s stock markets most effectively. As the private equity market matures, we believe that some of the best-performing firms will be those with genuine global reach and financial scale.

Apax Partners Annual Report 2007

How do we grow businesses? Typically, Apax Partners attempts to grow businesses by acting as a catalyst for change.

How we help businesses grow

Step 1

Define the full potential Step 2

Develop the business plan Step 3

18%

average annual growth rate over the past 10 years among Apax portfolio companies.

Accelerate performance Step 4

Harness the talent Step 5

65%

Make equity sweat

of which is top line improvement.

Step 6

Focus on results

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Cengage The number two US and global publisher of print and electronic higher education learning materials.

Case study: Media sector

Cengage Learning Cengage Learning, formerly Thomson Learning, is the number two US and global publisher of print and electronic higher education learning materials as well as a leading provider of library reference materials through its Gale subsidiary. Apax Partners had long been interested in the business due to its unique ability to provide valuable educational content to the growing number of university students and professional learners worldwide. Moreover, while Cengage Learning has traditionally focused on producing traditional print textbooks and reference materials, Apax Partners believed that the industry was in the early stages of a transition to digital learning solutions that would drive strong growth in the business for the foreseeable future. To ensure Cengage Learning was properly positioned to take advantage of these trends, Apax Partners selected outside managers Ron Dunn (CEO) and Dave Shaffer (Chairman) to aid in due diligence and run the company after acquisition. In February 2007, Thomson Corporation began the process of divesting Cengage Learning so it could focus on its core information services businesses. While Thomson approached a broad number of buyers for the business, Apax Partners was uniquely positioned to win the auction due to the deep insights into the business provided by Mr. Dunn and Mr. Shaffer. Because of this industry knowledge on May 11 2007 Apax Funds and OMERS announced that they had acquired Cengage Learning and its Canadian affiliate Nelson Education (majority owned by OMERS) for a total of $7.7bn.

Since the transaction closed in July 2007, Apax Partners has worked closely with management to ensure the company is well positioned for future growth. In particular, the company merged two of its divisions to allow more effective contact with its customers and appointed several new managers to help identify key growth opportunities. Moreover, on December 3 2007, Cengage Learning announced the acquisition of the Houghton Mifflin college assets from Educational Media and Publishing Group. As part of a large K-12 publisher which has changed ownership three times in the last five years, Houghton Mifflin has significantly underinvested in new product development (especially digital and custom solutions). Cengage Learning believes it can drive significant improvements in operating performance by pushing increased investment in these products. The merger is currently undergoing customary antitrust review and is expected to close mid-year 2008. We believe that as owners we can continue to drive solid growth in the business by continuing to provide students with valuable educational content. In doing so, we hope to make our ownership in Cengage Learning a success for our customers, employees, and ultimately, our investors.

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Investment strategy Continued

Investment focus The five sectors in which Apax Funds invest follow different business cycles, which can also vary by country. Apax Funds do not pre-allocate capital to sectors or countries but invest according to the prospects for each sector and economy as well as the detailed strategies developed by each Apax Partners sector team. Investments are structured around the individual growth needs of the specific business. Apax Partners believes that investments in companies which are typically valued between €1bn and €5bn are best suited to its experience and expertise. In its view, these larger businesses offer more established and resilient business models, more opportunities to create value, greater attraction for excellent management teams, and more diverse exit options than smaller businesses. These are also businesses that often benefit from Apax Partners’ extensive global platform and presence in multiple markets and its ability to deploy a large amount of experienced resources in complex international transactions. Responsible Investment Apax Partners is focused on advising the Apax Funds on managing the portfolio risks as well as the risks of the individual companies in which the Funds invest. Apax Funds take a responsible attitude toward the capital structures in the portfolio companies in which they invest to avoid over-leveraging a business. The average debt level in Apax Funds’ live portfolio is 4.6X EBITDA and the average debt to equity ratio is 57:43%. Value creation Throughout its 30+ year history, Apax Partners has been committed to helping businesses through all stages of their development. Apax Funds continue to look for opportunities where they can use their insight into the growth drivers of the underlying business. We believe that this is a more robust source of returns, over the business cycle, than a sole reliance on financial leverage or multiple arbitrage. Over the last 10 years, the cumulative annual growth rate of profits across the Apax Funds’ portfolio was 18% per annum; of this, 65% can be accounted for by top-line growth. Assessing value creation Apax Partners recently engaged an independent consultancy to assess the drivers of value creation and the economic contribution of the Apax Funds portfolio to the wider economy. The three areas in which Apax Partners was deemed to have helped most businesses were with strategic direction, where 94% of respondents stated that Apax Funds had provided beneficial support, management recruitment and business contacts.

Apax Partners Annual Report 2007

39

In the case of virtually every investment, at least one Apax Partners executive will join the board of a portfolio company in a non-executive capacity to bring broad experience to bear and to give the company access to the international resources that Apax Partners can provide. This can assist Apax Funds portfolio companies with matters as diverse as acquisition opportunities, IPO planning, key management hires, understanding competitive threats and opportunities, international expansion and benchmarking Key Performance Indicators against best practice. Apax Partners believes that having its own executives perform this role is key to driving value creation. The Apax Partners representative will also monitor non-financial aspects of portfolio companies such as corporate governance, corporate social responsibility and compliance with the Apax Partners values. How has Apax helped your business? % of respondents

94%

100%

0% Source: IE Consulting

M&A advisory

36%

55% Financial advice

Business contacts

Management recruitment

25%

Strategic direction

50%

58%

58%

75%

Case study: Telecom sector

TIM Hellas In June 2005, Apax Funds

(AEVI) identified an opportunity to invest in TIM Hellas, the third largest mobile phone company in Greece which, at the time, was owned by Telecom Italia. Apax Partners bucked the conventional wisdom that number three mobile players were a no-go investment area and instead saw: a stable business environment with attractive margins and market growth; an under-managed asset with potential for improvement; the possibility of further Greek consolidation; and the potential to sell on for a higher price because of a rapidly consolidating mobile market in Europe. At the time of the Apax Funds’ acquisition, TIM Hellas was an underperforming and unloved subsidiary of a major international telecommunications group. As such, the company was losing ground to its two major competitors and also scored poorly on customer satisfaction and coverage surveys. “The company was in a bad condition before Apax came.There was a decline in all key performance indicators, in particular in sales, which reflected on EBITDA and revenues. Apax had been monitoring the situation atTIM Hellas for a while and saw an opportunity for turnaround with a new, experienced management team installed.” Socrates Kominakis, CEO The Apax Fund and its investment partner TPG backed a strong management team which successfully turned the company around and put it on a growth footing through investment and a series of initiatives. New product launches captured subscribers as well as increasing the usage of existing customers. Acquisition and retention of customers significantly improved because of increased investment and focus on marketing, network coverage and distribution.

“The difference between being owned by Apax Partners and a strategic owner is interference. Apax’s interference was very selective, specifically when management asked for assistance. On those occasions, they acted promptly hiring consultants or using their own operational resources to assist. Apax placed their trust completely in the local expertise of management.” Socrates Kominakis, CEO In January 2006, the company was further bolstered by the acquisition of the fourthplaced Greek mobile provider Q-Telecom. The combined business continued to exceed expectations throughout 2006, generating double digit revenue growth leading to a very substantial profit growth, and, towards the end of the year, after several approaches from interested buyers, a decision was made to sell. “Concerning Q-Telecom, Apax was fully involved in the acquisition.They fully supported management’s proposal on the acquisition, realising that it was key for the turnaround and the future success of the company.” Socrates Kominakis, CEO In February 2007, a robust company with genuine further growth prospects was sold to Weather Investments. Apax Partners had used its sector expertise to take a risk on an underperforming business in an unfashionable market position. With renewed management focus, increased investments in network, distribution and marketing, and the acquisition of Q Telecom, the group gained positive momentum and is now in a strong position to profit from further growth.

Apax had been monitoring the situation atTIM Hellas for a while and saw an opportunity for turnaround with a new, experienced management team installed” Socrates Kominakis CEO, TIM Hellas

TIM Hellas

Bucking the trend by investing in an under-managed Greek mobile phone company.

TopTech &Telecom investments Investment year

Enterprise value €bn

Versatel

2005

0.9

Tim Hellas

2005

2.0

Intelsat/PanAmSat

2005

9.3

Kabel Deutschland

2003

1.8

Inmarsat

2003

1.2

Deal name

42

Sector review Tech & Telecom

Richard Wilson Tech & Telecom Richard leads the Tech & Telecom sector team and sits on Apax Partners’ Investment Committee, Portfolio Review Committee and Exit Committee. He joined Apax Partners in 1995, with prior experience at Scientific Generics and Marconi Space Systems. Richard has advised Apax Funds on investments that include TDC, Inmarsat, Mobifon, Jazztel and Autonomy.

Apax Funds are pioneers in Technology and Telecommunications investing. It has backed companies on both sides of the Atlantic from the very first days of the venture capital industry and was one of the first private equity firms to apply the skills forged in these venture capital deals to the buyout arena. Nowadays Apax Partners focuses purely on buyouts and larger growth investments, but still offers a unique sector-focused capability, with the growth DNA and industry expertise remaining a core feature of one of the largest sector teams in the business. This capability has led to a number of buyout investments having been made ‘ahead of the curve’, or in non-obvious areas. The 25-strong team come from a variety of backgrounds in industry, consultancy and banking and each specialise in different niche sub-sectors. This pool of industry knowledge can be rapidly deployed across Apax Partners’ global platform according to the needs of the specific investment. The team, which is led by Richard Wilson, has advised Apax Funds on more than €3.8bn of investment in the last 15 years. Marketplace/trends and drivers In the telecoms space we segment the market into incumbents, altnets, cable and mobile. One of the overarching industry dynamics of the last few years has been convergence. Previously nationalised incumbent players such as BT are now competing with alternative operators and cable companies across multiple products including fixed-line and mobile telecommunications, broadband Internet and TV. These overall dynamics differ markedly from country to country, depending on the market structure and regulatory environment. In the mobile space, operators face maturing penetration and initially a slow take up rate of data products, but service revenues continue to grow and consolidation within countries is improving the competitive environment. The Technology sector is best viewed in terms of four sub-sectors, each with their own dynamics: Components, Systems, Software and IT Services. In Components, strong economies of scale are helping larger companies become more efficient. We have also witnessed a trend toward more ‘asset-lite’ strategies that enable companies to cope with the traditionally cyclical nature of this part of the industry. In Systems, we are witnessing strong growth within some sub-segments (e.g. Video) and high levels of M&A activity amongst vendors. In Software, overall growth is modest, but new revenue streams are being delivered as the sub-sector becomes more service orientated. IT Services has been a strong growth area because of the proliferation of offshore providers, however we are now seeing margins come under pressure.

Apax Partners Annual Report 2007

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Strategy Telecom As discussed above, the dynamics in the telecom market differ quite considerably from country to country. While it is difficult to generalise, in terms of incumbent players the opportunities usually lie in operational improvement. In Altnets there is still scope for consolidation and EBITDA growth opportunities in some countries. Cable operators have been an active investment area though relatively high valuations, so until recently we prioritised other investment areas. In the mobile space we are looking at opportunities to help existing operators expand their franchise through acquisitions. We also see scope for stand-alone acquisitions in underperforming assets where we can help to unlock value. Tech Looking at the four sub-sectors, Components is a consolidation play, with strong opportunities for existing portfolio companies; Systems offers selective disposals and roll-up opportunities in high growth sub-segments; Software has opportunities for vertical specialists and roll-ups of mid-sized players; and IT Services has high growth outsourcers with more defensible margins. Key investments: SMART Technologies (2007) SMART Technologies Inc. focuses on the design

and distribution of interactive display applications such as white boards, as well as interactive pen displays, interactive digital signage, wireless slates and software. NXP (2006) NXP is a leading supplier of silicon system solutions for mobile communications, consumer electronics, digital displays, contactless payment and connectivity, and in-car entertainment and networking. TDC (2006) Buyout of the Danish telecommunications incumbent, with a number of international subsidiaries such as Sunrise in Switzerland. Outlook The Telecom space is in dynamic flux with competition for innovative services creating new challenges and opportunities for all of the different types of operators. Individual country market structure, regulatory regime and technological changes will play an important role in determining both end-user prices and competitive dynamics. In Technology, it is our opinion that consolidation will continue to improve industry profitability and defensibility, but with wide variations in growth and defensibility.

Richard Wilson Head of Tech & Telecom

Case study: Retail & Consumer sector

In May 2006, Tommy Hilfiger’s European management, acting together with lifestyle brand and one of the largest Apax Funds (AEVI and USVII), acquired designer brands globally. Distributed in 65 Tommy Hilfiger for a purchase price of countries, the group’s products can be approximately US$1.6bn. Upon completion found in its network of dedicated retail of the management buyout, Fred Gehring stores in Europe, the United States and and Ludo Onnink, both of whom had been Canada, as well as in leading specialty and with the European business since its department stores throughout Europe and inception in 1997 and had been North America. instrumental in its success, were appointed With approximately 5,400 employees Chief Executive Officer and Chief Financial worldwide, the Group designs, sources and Officer/Chief Operating Officer of the markets men’s and women’s casual wear, Company, respectively. sportswear, jeans, children’s wear and Since the management buyout, an footwear. In addition, the Group’s business important part of the group’s strategy includes approximately 35 product licences has been to redefine the group’s focus and eight geographic licences worldwide, to reflect the brand’s global presence, through which a broad array of apparel, premium brand image and positioning, accessories, fragrance and home and to improve operating efficiencies furnishings are offered and distributed. and eliminate loss-making activities. The company story began in 1982 The group has undertaken a number when designer Thomas J. Hilfiger founded of key initiatives including the revitalisation the company, which subsequently went of the corporate culture in the US and the public on the New York Stock Exchange extension of successful European products in 1992. into the US market. The US brand has been During this period the Company grew repositioned and the wholesale in different directions in the US and Europe organisation has been rationalised. and analysts based their assumptions on In terms of CSR, the company supports the performance of the company in its various initiatives through the Tommy domestic market. In reality, the US brand Hilfiger Foundation which is funded by had been devalued by a move into highannual company donations and is managed street sportswear, while the European arm by three full-time company employees. In retained a reputation as a luxury fashion addition, the company implemented a strict label. Frustrated by this dislocation, the code of conduct that covers the following European management began to investigate areas: forced labour, child labour, the possibility of acquiring the company. harassment or abuse, discrimination, health and safety, freedom of association, wages and benefits, work hours, overtime “We developed the idea to make an offer for the company because we didn’t compensation, contract labour and legal agree with the global strategy. In the US and ethical business practices. things had been going down for a while and we didn’t think that management, at that time, had the ideas to fix that. They had the wrong perspective on the business entirely.” Fred Gehring, CEO

Unleashing the potential of a global fashion brand Tommy Hilfiger is a leading

Tommy Hilfiger Redefining the Group’s focus to reflect the brand’s global presence, premium brand image and positioning.

Top Retail investments Investment year

Enterprise value €bn

Somerfield Ltd

2005

2.4

Sisal

2006

1.2

Tommy Hilfiger Corporation

2006

1.2

New Look Group

2004

1.0

Panrico

2005

0.9

Deal name

46

Sector review Retail & Consumer

Alex Fortescue Retail & Consumer Leading the Retail & Consumer sector, Alex joined Apax Partners in 1999 from OC&C Strategy Consultants. Alex has advised Apax Funds on investments that include Plantasjen, Somerfield and New Look.

Apax Funds have been one of the leading global investors in the Retail and Consumer sector over several decades, during which time they have invested €2.4bn of equity in retail businesses. Apax Funds have backed a diverse range of retail, consumer and leisure businesses across its global platform: companies such as Somerfield and New Look in the UK; Plantasjen in Scandinavia; CBR in Germany; Sisal and Panrico in Southern Europe and Tommy Bahama, Spyder and Life Time Fitness in the USA as well as global brands such as Tommy Hilfiger and PVH/Calvin Klein. The Retail & Consumer team is made up of 23 investment professionals globally, including seven partners, spread throughout North America, Europe and Asia. The team has a range of professional backgrounds and wide experience across many segments within retail, consumer and leisure. Marketplace/trends and drivers The overall macroeconomic environment for retail and consumer businesses has become increasingly challenging during the last year. Particularly in the US and UK, revenues have come under pressure as the consumer outlook has deteriorated. This has been driven by a combination of decreased consumer confidence, reduced credit availability and falling asset prices, especially housing. Although consumer demand is also forecast to decline in continental Europe, commentators believe that demand in particular in Eastern Europe and Asia will be more resilient. In addition to this change in consumer environment, the operational challenges have increased. A number of retail businesses have historically been able to lower prices and improve margins through supply chain investment and increased sourcing from lower cost countries. However, with raw material and energy price increases and wage inflation in countries such as China, costs are increasing and gross margins are coming under pressure. However, the current economic slowdown is not hitting all areas of retail and consumer equally and evidence from previous recessions suggests that whilst certain sub-sectors are hit hard others are relatively insulated. Even within individual cyclical sub-sectors, there remain winners and losers and particularly in a tough environment, performance levels polarise. Successful businesses are those which are best positioned to take advantage of geographic or consumer trend led growth reflecting trends such as: Increasing reach and scale of multiple grocers: in every major Western country there is a very large and typically concentrated grocery sector which has considerable influence on a number of food and non-food consumer and retail categories. Development of ‘Consumer’ societies: the emergence of a middle class in regions such as Asia, Central and Eastern Europe is driving the rapid expansion in domestic retail and consumer industries.

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Polarisation between value and premium: consumers are increasingly showing their willingness to vary their shopping habits – making savings on basics whilst indulging in treats. The desire for convenience: time pressured consumers are prepared to pay a price premium or change their purchasing channel for a product or service that makes their life easier. In addition, during 2007, sector valuations across the US and Europe were significantly above historical long-run averages in a number of geographic markets. Apax Funds therefore took a very cautious view on investing in this environment, with completed investments limited to contexts where clear secular trends underpinned growth. Since late 2007, many of these sectors have experienced very significant valuation decline driven in part by the uncertain consumer outlook. Strategy Apax Funds’ investment strategy in the sector is to focus on growth driven by exposure to underlying positive trends (some of which are outlined above). Apax Partners’ local market presence, combined with a global reach, enables it to understand the themes from around the world and adapt them to local market circumstances. It also allows Apax Partners to build relationships with and Apax Funds to invest behind the very best international retail, consumer, and leisure sector management. Key investments: Plantasjen (2007) a Nordic operator of garden centres, acquired from funds

advised by EQT Partners. Plantasjen has good growth prospects, particularly from expanding its store portfolio both in its Nordic base as well as through entering new markets (e.g. Poland and Russia). Sisal (2006) an Italian gaming and betting business, in which Apax Funds invested alongside funds advised by Permira. Sisal has the potential for increased growth in the sports betting, video games and lotteries markets in Italy and elsewhere. Outlook The Apax Partners sector strategy will remain focused on highgrowth global sub-sectors, backing strong management teams executing within the context of the secular trends identified above. The uncertain consumer environment will inevitably be reflected in the nature of deals undertaken, but the ongoing adjustment to valuations is likely to generate continued investment opportunities.

Alex Fortescue Head of Retail & Consumer

“We were trading at what we considered to be an unfair discount to our peers and were finding it difficult to raise the capital (both debt and equity) we needed on the public markets to be an active participant in the consolidation in our sector. Obligations faced by the senior management team as a listed business also meant we had to spend a considerable amount of time out of the business on investor relations.” Tim Weller CEO, Incisive Media

IncisiveMedia Creating the environment to allow ambitious management to flourish.

Case study: Media sector

Incisive Media Faced with a consolidating

market, and the inability to participate, owing to the ownership structure of the business at the time, the management team of listed B2B publisher Incisive Media was looking for a strategic partner that could help it achieve the ambitious growth it planned. Founded by CEO Tim Weller in 1994, the company had initially grown organically and then through a series of significant acquisitions having floated on the main market of the London Stock Exchange in December 2000. Recent M&A activity in the B2B publishing markets had meant that there was no time to lose. “We were trading at what we considered to be an unfair discount to our peers and were finding it difficult to raise the capital (both debt and equity) we needed to be on the public markets to be an active participant in the consolidation in our sector. Obligations faced by the senior management team as a listed business also meant we had to spend a considerable amount of time out of the business on investor relations.” Tim Weller, CEO With a return to private ownership seen as the best means of achieving the management team’s ambitions, a management buyout, with Apax Funds as the backer was an attractive option. “Apax has an extremely good track record as a media investor and the media team, led by Stephen Grabiner, is, rightly, one of the most respected teams in Private Equity. Given that the chemistry was great we felt that we would be able to work very well with Apax and that they would give us the financial support and experience we needed, whilst still leaving us to run the business.” Tim Weller, CEO

< Television presenter at Incisive Media’s production studio in Soho, London.

Apax Partners, attracted by the strength and track record of the management team and recognising the opportunity for consolidation, was keen to be involved. Released from the shackles of public ownership, the management team set about achieving their ambition of creating a leading global business-to-business media company. The acquisitions of MSM international, VNU’s UK operations and Central Banking Publications followed in quick succession. The purchase of US-based publisher ALM in July 2007 for US$630m rubber stamped Apax Partners’ commitment to the strategy, giving Incisive Media a significant presence in the United States and almost doubling its global headcount. “Since the buyout, our most significant investment, by some distance, has been the acquisition of US-based ALM... the way that Apax threw know-how, resources and people at the deal was breathtaking. It was a great example of management and private equity being totally aligned.” Tim Weller, CEO Incisive Media is recognised as one of the world’s fastest growing B2B information providers serving the financial and professional services markets globally, in print, in person and online. With strong management backed by a committed and experienced investor, that growth looks set to continue.

Top Media investments Deal name

Investment year

Enterprise value €bn

Cengage Learning

2007

3.6

Trader Media Group

2007

2.6

Truvo/World Directories

2004

2.4

Central European Media Enterprises Ltd

2006

1.9

HIT Entertainment Limited

2005

0.8

50

Sector review Media

The 20-strong Media team is one of the largest and longest-established in the industry. The team has a wide variety of industry, consulting, private equity and banking experience, with members focusing on niche sub-sectors of the market. In the last ten years, the team has advised Apax Funds on the investment of €3.4bn of equity. In the last five of those years, Apax Funds have led eight investments in the sector, of which four have been in non-competitive situations.

Stephen Grabiner Media Stephen joined Apax Partners in 1999, with prior experience at On Digital and The Daily Telegraph. He leads the Media sector team and has advised Apax Funds on investments that include Incisive Media, Bezeq, Emap and Yell.

Marketplace/trends and drivers The pace of technological change is having a profound impact across the media space. The internet has led to a revolution in the way media content is distributed. The changing technology has led to rapidly falling costs of distribution and storage and lower costs of entry for new participants; in other instances the impact of digital content has changed the game for incumbent suppliers. Widespread penetration of digital media across multiple channels including cable television, broadband internet and mobile internet has led to changes in consumer behaviour with regard to media consumption. In the UK, for instance, the number of households connected to broadband internet shot up to 38% in 2005 from just 1% in 2001. This has corresponded with a rapid increase in usage. In the three years to 2006, internet usage across Europe rose by 28% against a backdrop of falling circulations in more traditional media formats like newspapers and magazines. Digitisation has led to its own changes in the radio, TV and music landscapes. Across Europe, the old incumbent TV and radio channels are seeing their viewing figures fall as new digital competitors take market share. In the music space, the major record labels are struggling to find business models that fit the new world of digital publishing. These changes are underpinned by steadily rising advertising spend across all media. Strategy This fast-paced change and convergence is creating commercial opportunities for those that are able to understand and exploit sub-sector dynamics and understand the variations across national markets. Working in conjunction with Apax Partners Tech & Telecom team, the Media team is well positioned to react and continue to advise on investments that are ‘ahead of the curve’. The old cliché that content is king is increasingly true in the new multichannel, multi-platform world, so we will continue to focus on businesses with ‘must-have’ content. We will also look to invest in situations where businesses are seeking to build out an online platform or in situations where brand strength can enable companies to operate across various media platforms.

Apax Partners Annual Report 2007

51

Key investments: Trader Media Group (2007) UK market leader in automotive classified

advertising. Joint ownership with corporate shareholder, Guardian Media Group, which maintains a 50% share. Undisputed market leading position both offline and online. Very advanced in the offline-to-online transition (>55% of revenue coming from online). Scope for substantial operational improvements and strategic realignment. Central European Media Enterprises (CME) (2006) No.1 free TV stations in the Czech Republic, Slovakia, Slovenia, Romania, Ukraine. High GDP growth economies in which TV is the dominant and growing media in usage and ad spend. High barriers to entry due to limited local language programmes and broadcasting bandwidth. Multi-channel strategy based on large local language programming library of CME and strong brands. Consolidation potential in wider Eastern Europe. HIT Entertainment (2005) Owns key pre-school brands: Thomas and Friends, Bob the Builder, Barney and The Wiggles. Content provider/part owner to the fastest growing payTV/ VoD channel in US market. Accounts for approximately €1.6bn of sales at retail level – driving step change in licensee economics/distribution to secure greater value. World Directories (2004) Leading international publisher of classified directories: incumbent in Belgium, Ireland, Portugal, Romania (over 90% market share) and Netherlands (50% market share). Recruited new management team (during auction process) to turn around this under-managed asset. Business now has sales growth in both print and online products after years of stagnation. Outlook The impact of technological change is having a variable impact across the sector. This will continue to be the case, and the prospects for the various sub-sectors will consequently differ widely according to how they are affected. In segments such as consumer book publishing and outdoor advertising, the impact of technological change is relatively low; in others, like business-tobusiness publishing, recorded music and newspapers it will continue to have a massive impact. Understanding the uptake of new technology across different geographies and how this will impact the various sub-sectors within the media space will continue to be the key to successful investing.

Stephen Grabiner Head of Media

52

Universities Superannuation Scheme Widely regarded as an industry leader in responsible investment, and the second largest pension fund in the UK.

Case study: Investors

Universities Superannuation Scheme

(USS) is the second largest pension fund in the UK with assets in excess of £30bn. It was established in 1974 as the principal pension scheme for academic and senior administrative staff in UK universities and other higher education and research institutions. USS currently has a total membership of approximately 240,000 individuals from 391 institutions such as Oxford and Cambridge universities and the London School of Economics and Political Science. USS is widely regarded as an industry leader in responsible investment, and has played a significant role in a number of projects including the Institutional Investor Group on Climate Change and the UN Principles for Responsible Investment, to which the Fund was a founding signatory. USS promotes a long-term approach to investing and launched a competition in 2003 in conjunction with investment consultants Hewitt, Bacon & Woodrow entitled ‘Managing pension funds as if the long term really did matter.’ The Fund considers private equity a natural fit with this long-term investment approach and recognises the clear advantages of the private equity business model, which has a strong alignment between the owners and managers of a company. The Fund is a relatively new investor in the private equity asset class and the current programme started in 2006 as part of a new allocation to alternative assets. It is targeting a 5% allocation to alternatives by March 2008 and 20% over the medium term. Private equity and infrastructure assets will represent approximately half of this allocation. Since 2006, the Fund

240,000 Almost one quarter of a million members from 391 institutions.

2

has committed around £1.5bn to private equity funds and expects to commit a similar amount annually. The intention is to build a global private equity programme diversified across geographies, strategies and vintage years. The commitment to private equity is not only in terms of assets but also in building high quality internal expertise to generate superior returns from our commitments over the long term. USS expects our private equity programme to generate a sufficient longterm premium return to public equity markets consistent with the additional risk. In terms of managers, the Fund looks for consistently superior performance, high quality personnel across the organisation and a remuneration structure that promotes long-term performance and alignment of interests between the general partner and its limited partners. USS believes that a successful private equity partnership requires trust and alignment of interests between the general partner and its limited partners in order to build a strong long-term relationship. For this reason, the Fund aims to focus upon a limited number of key, leading private equity managers where we can form strong relationships, which is often complemented by taking a seat on the investor advisory committee. USS tends to favour private equity firms that generate their performance from sustainable competitive advantages such as operational experience as opposed to transitory factors such as favourable credit conditions. (Source: USS)

The second largest pension fund in the UK.

Top Healthcare investments Deal name

Investment year

Enterprise value €bn

General Healthcare Group

2006

3.4

Capio

2006

2.9

Apollo Hospitals Enterprise

2007

0.6

Qualitest Pharmaceuticals

2007

0.7

54

Sector review Healthcare

Ian Jones Healthcare Ian has been a partner with Apax Partners since 1997 and leads the Healthcare team. Ian has advised Apax Funds on investments that include General Healthcare Group and the three investments Medlock Medical, Regent Medical and Mölnlycke Health Care which were combined to form Mölnlycke Health Care Group, now successfully sold. Within the last year Ian has also advised on investments in Capio in Sweden, Apollo Hospitals in India and Qualitest Pharmaceuticals in the US.

The Healthcare team at Apax Partners comprises 17 dedicated investment professionals based in London, New York, Stockholm, Munich, Madrid and Mumbai. The team is characterised by its very strong scientific background, with many of the members having achieved academic success in their specialist field before moving into industry, consulting or private equity directly. Led from London by Ian Jones, it is a very stable team, with the core members having advised the last three Apax Funds. In keeping with the change of strategy of Apax Partners as a whole, the Healthcare group began focusing purely on buyouts in 2003. The team has advised Apax Funds on equity investments of over €1.8bn in companies such as Apollo Hospitals, General Healthcare Group, Capio, Mölnlycke Health Care Group and Qualitest Pharmaceuticals. Marketplace trends and drivers The Healthcare team focuses specifically on three core areas: medical products, devices and supplies; speciality and generic pharmaceuticals and healthcare service providers. Dynamics are different in each sub-sector. The key drivers in the medical products space are consolidation and globalisation. There are pressures on many large healthcare companies to divest non-core assets like their medical product businesses. In our opinion the medical products sub-sector has attractive LBO characteristics, displaying long-term growth prospects with good margins and cash flow characteristics. The pharmaceuticals space is characterised by increased pressure on growth, margins and valuations. Many of the European pharmaceutical companies are mid-sized conglomerates which have sub-critical mass in key businesses. Patent expiries on key drugs over the coming years and the need to manage R&D spend among the major pharmaceutical companies is creating opportunities for more nimble competitors. In the generics space, we are witnessing strong growth in demand balanced by continued consolidation and increased competition from low cost manufacturers; our sector knowledge and global footprint enables us to participate in this consolidation. Across the broad sweep of companies that are covered by the healthcare providers tag, the key dynamics are ageing populations, consumer awareness and patient choice. The sector is also becoming increasingly regulated and specialised management teams are emerging on a global basis, which are well equipped to deal with a rapidly changing part of the healthcare sector.

Apax Partners Annual Report 2007

Strategy The Healthcare team has specialists in each of the three key areas of focus outlined above. It is focused on making investments where it has a proprietary angle, derived from its sector knowledge and expertise. The primary focus of the team is on European and US opportunities but there are significant opportunities for transatlantic and global transactions, reflecting the global nature of the healthcare industry. In October 2007, the team completed Apax Funds’ first Asian investment, with the acquisition of a stake in Apollo Hospitals, India’s leading private hospital group. Key Investments: Qualitest & Vintage Pharmaceuticals (2007) The team has been working to

establish a platform in the generics space for the last two years. Qualitest is the eighth largest generics company in the US, with a particular specialism in liquids and narcotics. The business provides a strong basis for consolidation in the US and around the world. The deal was completed by a transatlantic dealteam providing industry expertise, local market knowledge and execution. Apollo Hospitals (2007) Apax Partners has considerable experience in the acute hospital sector through Apax Funds’ portfolio companies Capio and General Healthcare Group. Apollo Hospitals is the market leader in the provision of private healthcare in India and also represents the Apax Funds’ first investment in the Indian market. We foresee strong growth in the sector over the next five years and also the potential for further consolidation in the Indian market and a roll-out of the company’s retail pharmacy business. Outlook As discussed above, the healthcare sector is in flux and we are concentrating on areas where rapid change is producing interesting opportunities. As consumers move from public to private care and governments become increasingly burdened with providing for older and more sophisticated healthcare consumers, we anticipate that there will continue to be far-reaching consequences in the healthcare sub-sectors that we focus on.

Ian Jones Head of Healthcare

55

“There was a situation where the company was lacking in focus, sitting on unrealised synergies and savings and not exploring its opportunities internationally.” Pierre Guyot CEO, Mölnlycke

Mölnlycke The consolidation of three European companies to build a world leader in the medical products space.

Case study: Healthcare sector

Mölnlycke Health Care Group The

consolidation of three European companies to build a world leader in the medical products space. The creation of MHCG ‘Mölnlycke Health Care Group’ was part of a preidentified buy-and-build strategy within the medical products arena. Using its expertise in the healthcare sector and many months due diligence into the European medical products space, Apax Partners identified three companies that would perform better as a whole than as separate parts. “They gave a clear focus to the respective businesses, this was very important to the development of the company. Apax motivated the processes required to maximise the synergies and savings from the combined businesses.” Pierre Guyot, CEO, Mölnlycke Apax Partners identified a compelling fit between the wound care and surgical businesses owned by the UK’s SSL International Plc and the wound care and surgical businesses that made up Sweden-based Mölnlycke. “Apax saw the opportunity; they saw in us a company with high quality products, strong technology and innovation with the potential to grow further and saw a case for the strategic acquisitions.” Pierre Guyot, CEO, Mölnlycke Having had early discussions with the Board of SSL, Apax Partners earned the company’s trust, enabling the Apax Fund (AEV) to win the auctions for both the wound care division (later re-named ‘Medlock Medical’) and the surgical division (later re-named ‘Regent Medical’). Having acquired Medlock and Regent, Apax Funds put themselves into a very good position to buy Mölnlycke, which they knew was slated for auction. The three businesses were subsequently merged in August 2005 to form MHCG. Following the merger, Apax Partners worked closely with management and specialist project management support to ensure that the carve-out of Medlock and Regent from SSL and their subsequent merger to form MHCG ran smoothly.

Apax Partners was also heavily involved in upgrading the senior management team of the business, promoting talent from within the merged businesses and also bringing in a new CEO, CFO and Head of Wound Care. Anthony Habgood (Chairman of Whitbread Plc and Bunzl Plc) joined as Non-Executive Chairman. “They brought in an international management team with experience in working in global companies which gave the motivation to explore opportunities abroad.They were also very active owners, keeping in close contact with management which made for a very quick decision-making process.” Pierre Guyot, CEO, Mölnlycke The combined group is now a leading global medical products company which manufactures and markets single-use wound care and surgical products for the professional healthcare sector. MHCG holds a top three market position in the European advanced wound care market and is the number one European singleuse surgical products provider. MHCG has established production facilities in Asia and Europe, and sells into Europe and North America. The consolidation strategy bore fruit in January 2007 when, following a dual track sales process, the Apax Fund took the decision to sell its interest to Sweden’s Investor AB, the holding company of the Wallenberg family, rather than list the company on the London Stock Exchange. The excellent return that was generated for the investors and management was tribute to the hard work of the staff and the management at the company as well as the combination of sector insight and M&A skills that brought the three businesses together.

Top Financial & Business Services investments Investment year

Enterprise value €bn

Travelex Holdings

2005

1.3

Hub International

2007

1.0

Sulo

2003

0.5

Electro Stocks Grup, S.L.

2007

0.4

IFCO Systems

2003

0.3

Deal name

58

Sector review Financial & Business Services

Michael Phillips Financial & Business Services Prior experience at Ciba-Geigy Ltd. and Otto Waste Management Ltd. Michael has advised Apax Funds on investments that include Xerium, Sulo, IFCO, PVH, Tommy Hilfiger and CME.

Overview The Financial & Business Services (‘FABS’) sector represents a substantial portion of the global economy, with approximately 25% of the market capitalisation of the MSCI Global Index in the sector. The sector itself encompasses a diverse range of businesses, ranging from diversified global financial institutions such as Citigroup and HSBC, to international business services companies like MMC or Accenture, through to countless regional, national, and local players. Worldwide, the FABS team is made up of 16 investment professionals located across Apax Partners’ office network. The team has a broad range of expertise spanning industry, consulting, and investment banking that enables Apax Partners both to identify opportunities and to work deeply with portfolio companies across the sector. Apax Funds have invested €1.4bn in the sector over the past 15 years. Marketplace/trends and drivers The long-term trends impacting the financial services sector include the continued impact of global liquidity, industry globalisation and consolidation, deregulation and rapid financial innovation. These trends have provided a strong tail wind to drive growth and profitability across the industry over the past five years. However, during 2006/07 a dislocation, which began in the US sub-prime mortgage sector, began to spread to the wider global money markets. Although many parts of the industry – for example, insurance – have been relatively unaffected by this, tightening liquidity has placed smaller businesses that rely on the wholesale financial markets under pressure. In business services, the main drivers continue to be the implications of outsourcing and globalisation. Companies are looking to outsource more of their non-core functions, and are increasingly seeking partners that are able to fulfil these functions across their entire office network. This has led to strong organic growth within the sector, as well as consolidation as business services firms strive to meet their clients’ needs around the world. Strategy The team pursues different strategies for financial services and business services, reflecting the unique dynamics of each sector. In the financial services arena, we aim to target businesses with strong brands and existing customer bases and expand the number of products that we offer these customers. In business services, we believe that as the market tends to be characterised by relative fragmentation there exists a substantial opportunity to build and develop businesses of scale through organic growth and acquisition. Our goal is therefore to acquire strong platforms that can be used to drive growth both within their own markets and overseas.

Apax Partners Annual Report 2007

59

Key investments: Electro Stocks (2007) Electro Stocks, a specialist distributor of electrical

components headquartered in Spain. The business has a strong niche position and multiple acquisition opportunities that can drive future growth. Farmafactoring (2006) Farmafactoring provides finance to suppliers to the Servizio Sanitario Nazionale, the Italian national health service. Farmafactoring has a highly efficient operating platform and deep industry relationships that will enable it to meet its clients’ growing funding needs cheaply and effectively. In addition, the business has many growth opportunities both in Italy and overseas. Hub International (2007) Hub is a mid-market insurance brokerage with operations both in Canada and the United States. Hub has a network of strong local franchises across Canada and the northern US, and the Apax Funds are backing its expansion within the US and internationally. Outlook The trends underlying both the financial services and business services industries mean that they are likely to continue to deliver good growth into the future, and present attractive investment opportunities for the Apax Funds. Within financial services, continued industry consolidation is likely to present a flow of opportunities as large groups seek to exit non-core businesses and geographies. Continued turbulence in the capital markets may also create opportunities as firms seek strategic partners to help them through the downturn. In business services, globalisation and consolidation will continue to present opportunities for investment in the sector.

Michael Phillips Head of Financial & Business Services

Case study: Financial & Business Services sector

Travelex Travelex is the world’s largest nonbank foreign exchange specialist and is a global brand. The Travelex Group has offices in 35 countries and corporate relationships in 110 countries, and serves over 29 million customers each year. In 2005, following a review of its strategic options, the business was put up for sale in a very competitive auction process involving a number of other private equity firms. Apax Partners stood out as being the best strategic partners for the business in the long term. The decision of former majority shareholder Lloyd Dorfman to retain a stake in the business represented a statement of faith in the future of the business under Apax Partners. Soon after the Apax Funds (AEV and AEVI) became majority shareholders, Travelex signed an exclusive deal with Western Union, offering money transfer services to its existing customer base through Travelex branches. Apax Partners also appointed a new management team including John Martin, CFO who joined from Hays where he was also CFO, David Sear, Division Head Outsourcing from Voca, where he was Commercial Director, and Peter Burridge, Division Head Commercial Payments, who joined from Siebel where he was an executive committee member responsible for the Asia Pacific region. Ian Meakins was appointed as CEO in January 2007, formerly of Alliance Unichem.

“They brought in a new management team and have been consistent on issues important to the business in terms of performance and strategy. They have been helpful in helping us diagnose and analyse the business in order to understand the key profit levers.” Ian Meakins, CEO The appointments were in alignment with Travelex’s focus on its three core businesses, Commercial Foreign Exchange, Outsourcing and Retail Foreign Exchange.

The commercial payments business was significantly expanded with the acquisition of Ruesch International, a business-tobusiness payments provider, in March 2007. “Overall, the impact of the acquisition will be very positive... the way Apax worked with management in doing the deal was genuinely first-class and it felt like a joint team.They dedicated resources to the deal which we didn’t have internally for an acquisition of this scale.These resources were highly valued and fitted very well within our team. The decision making process within Apax was very fast and responsive making it easy to get the deal done.We could not have completed the deal with such speed without the help of Apax.” Ian Meakins, CEO The combined business expands Travelex’s corporate customer base, with 35,000 small and medium-sized businesses being served, as well as multi-national financial institutions and global consumer and industrial firms. Travelex’s existing customers will also enjoy an enhanced range of products. Travelex has cemented its position as the leading non-bank provider of foreign exchange services. Through the help of Apax Partners industry network and its experienced resources, the business has developed its position in its core markets and expanded internationally. The expected IPO of the business should generate much interest. “...in the last two years there has been a compound growth in EBITDA of nearly 20%. Clearly there has been quite a dramatic shift in the performance of the business.This is very much attributable to the efforts of theTravelex team in combination with Apax”. Ian Meakins, CEO

> Travelex foreign exchange branch in central London.

Travelex

Cementing its position as the leading non-bank provider of foreign exchange services.

Case study: Investors

Gartmore Private Equity Gartmore Private

Equity (GPE) is the private equity division of Gartmore Investment Management Limited. Gartmore is a global investment manager established in 1969 with €37.5bn in assets under management. These assets include approximately €10.4bn in alternative investment products, of which €2.9bn is in private equity investments. The GPE team comprises 14 individuals and is led by Peter Gale and Nick Shaw. During the 1990s Peter and Nick managed two of the UK’s largest pension funds, NatWest Bank (now Royal Bank of Scotland plc) and Shell plc; schemes whose combined values exceed €40bn. As general pension scheme managers, Peter and Nick were responsible for managing diversified portfolios, including private equity which was incorporated, for both funds, as a core added value strategy in the mid-1990s. GPE became a private equity specialist in 2003. GPE’s investment process begins with a top-down review of the relative attractiveness of private equity markets by geography and investment strategy. This strategic view is continually developed and re-appraised. When assessing the relative merits of each market GPE specifically examines five factors in developing its investment strategy. These are the economic attractiveness of the market, the structural drivers for private equity activity, relative valuations, cultural acceptance and levels of corporate governance. Having identified which markets are of interest, GPE focuses on selecting those private equity managers that are best able to deliver in these markets.

GPE invests in funds and also makes minority co-investments in private equity transactions alongside managers with whom it has a relationship. In determining whether a manager is a suitable investment partner GPE takes into account four factors, namely the fund’s investment strategy, the organisation’s ability to execute the strategy, the strength of the investment team and the track record of the group in generating returns. When evaluating co-investment opportunities GPE adopts a different approach, specific to each transaction. GPE examines the market conditions in which the company operates, its competitive position, management capabilities, financial projections, company valuation and return prospects. GPE believes that the success of a private equity investment relies on having strong managers with drive, expertise and entrepreneurship to increase the value of companies for their shareholders. In GPE’s experience this is most often found in an environment that rewards managers for adding value; aligning management teams’ interests with those of the shareholders. GPE completes around 40 investments per annum, committing between €500m and €700m on behalf of corporate and public pension schemes, insurance companies, family offices and private individuals. (Source: Gartmore, 30.9.2007)

Gartmore

Focused on selecting those private equity managers that are best able to deliver in these markets.

64

Investors

The relationship with our investors is at the heart of our business, and communications are detailed, frequent and open. The Investor Relations (IR) team manages formal communications with investors through an annual meeting, quarterly reports, ad hoc activity updates and regular meetings. Investor communications The IR team coordinates with the Funds Administration team to prepare Reports to Investors, formally updating investors on Apax Fund performance. The team also distributes “Activity Updates” (or press releases) upon the occurrence of significant events such as the making or disposal of an investment. There is also a secure Investors Extranet, providing online access to financial, legal and reporting information for investors, as well as copies of presentations given to investors at the Annual Meeting and Board of Advisers Meetings, and Minutes of the Boards of Advisers Meetings. Relationship management The Investor Relations team also manages a robust relationship management programme with institutional investors ensuring their access to senior investment professionals in the firm. In addition to the above, the Funds Administration team provides quarterly Capital Statements to Investors and audited Financial Statements for the Apax Fund Partnerships and can assist in answering more technical and accounting queries from investors. A specialist tax team is also available to assist in the provision of tax reporting information. AEVII (Latest Apax Fund) Investor Breakdown by type

AEVII Investor Breakdown by region%

Banks 7.0%

Asia 6.0%

Endowments 6.5%

Australasia 1.7%

Funds of funds 10.8%

Europe (excl. UK) 18.9%

Gatekeepers 4.3%

UK 16.0%

High net worth individuals 12.7%

Middle East 4.0%

Insurance 9.1%

North America 53.4%

Private pension funds 11.7% Public pension funds 31.9% Sovereign funds 6.0%

Apax Partners Annual Report 2007

65

The development of Apax Partners

39.0 18.6

13.1 2004

18.6 13.1 2003

2006

13.1 2002

2005

13.1 2001

7. 5

2007

2000

3.8 1999

1998

3.4

6.4

*Apax Europe VII represents the current fund.

1997

€300.00

2.6

¥20,000.00

Venture capital firm built around industry sectors

2.1

1999

Other Apax European Buy-In Fund 1989

Starts transition into buyouts

1996

Japan Apax Globis Japan Fund

Transition to buyouts completed

1995

US$25.53 US$109.13 US$29.82 US$40.40 US$175.00 US$60.61 US$265.15 US$100.00 US$406.00 US$1,100.00 US$856.34 US$300.00 US$516.00 US$720.00

1. 5

1981 1985 1985 1987 1989 1993 1995 1997 1998 2000 2006 1993 1996 2000

1994

United States Excelsior Fund Excelsior II Excelsior Jersey The P/A Fund Excelsior III P/A Fund II Excelsior IV P/A Fund III Excelsior V Excelsior VI Apax US VII SKM Equity Fund I SKM Equity Fund II SKM Equity Fund III

Apax Europe V raised (the largest European private equity fund at the time)

1. 4

US$40.05 US$102.50

1. 1

1994 1999

1993

Israel Israel Growth Fund Apax Israel II

1992

€49.39 €133.20

1. 0

1992 1997

Succession issues managed as Martin Halusa is elected CEO to succeed founder Sir Ronald Cohen

1991

Germany APA German European Ventures Apax Germany II

1. 0

€1,803.15 €4,404.30 €4,310.33 €11,123.27

0.8

1999 2001 2005 2007

Continued geographic expansion. Entry into India, opened office in Hong Kong

1990

Pan-European Apax Europe IV Apax Europe V Apax Europe VI Apax Europe VII

Apax Europe VII* raised (the largest European private equity fund at the time)

1989

£10.15 £30.12 £75.00 £109.60 £164.00 £313.20

0.4

1982 1984 1987 1990 1995 1997

1988

UK Apax VC Fund Apax Ventures II Apax Ventures III Apax Ventures IV Apax UK V Apax UK VI

Cumulative capital raised US$bn

0.4

Total amount raised (m)

0.2

Year of first investment

Fund

1987

At 31.12.2007

€26.49bn £19.54bn US$38.99bn

1986

At 31.12.2007

0.2

At 31.12.2007

The development of Apax Partners The history of Apax Partners is interwoven with the development of the private equity asset class on both sides of the Atlantic. Throughout its 30-year history, the company has successfully invested across all investment stages, and through several complete economic cycles. The firm’s current focus on large buyouts is rooted in a culture that has always been outward looking, pioneering and committed to growing businesses. The deep understanding of the five sectors in which it invests has been at the core of Apax Partners’ strategy, giving it early access to investment opportunities and an ability to add value quickly to portfolio companies.

1985

Total funds raised

Case study: Financial & Business Services

Hub International Hub International (‘Hub’) is a middle market insurance broker with an extensive footprint in the United States and Canada. Hub has over 200 offices and employs over 4,500 people. Hub markets property, health insurance and employee benefits insurance lines to small and medium sized businesses and personal lines insurance to high net worth individuals and affinity groups. Hub is a key distribution asset in the North American insurance industry and through its 750 brokers, it controls significant distribution of insurance in United States and Canada. In June 2007 Apax Funds (AEVII and USVII), together with Morgan Stanley Principal Investments, acquired all of Hub’s common shares. Prior to the acquisition, HUB had a solid track record of organic and inorganic growth and had completed over 115 acquisitions since 2000. Since the North American insurance brokerage industry is highly fragmented, there are

over 30,000 potential acquisition targets in Hub’s business segments. Additionally, Hub enjoyed high levels of recurring revenues through renewals and cash conversion and had a sound management team. With Apax Partners’ industry expertise, international network and extensive publicto-private transaction experience, Hub is well positioned to continue its growth trajectory. Since going private, Hub has grown from the fifth largest insurance broker in Canada to the second largest in the country and from the eleventh largest US brokerage to the tenth largest in the country. In 2007, Hub acquired US$127m of revenue. Additionally, Hub’s staff strength has increased by 22% since going private. HUB is expected to remain on track for growth and improved performance and the overall outlook remains positive.

“Quote.” Name CEO, Hub Insurance

67

Hub International

A middle market insurance broker with an extensive footprint in the United States and Canada.

68

Walker-compliant portfolio companies These companies represent the large UK buyout portfolio of the Apax Funds, which will comply with the enhanced reporting guidelines of the Walker Code.

General Healthcare Group

Contact: Adrian Fawcett Chief Executive Officer 10th Floor 66 Chiltern Street London W1U 6GH T: +44 (0)20 7009 4631 Apax Partners contacts: Ian Jones Khawar Mann

General Healthcare Group (GHG) is the leading provider of independent health care services in the UK. Its primary businesses are BMI Healthcare and Netcare UK. BMI Healthcare is the acute private hospital division of GHG and is the largest independent private provider in the UK. With 47 acute care private patient hospitals, over 2,400 beds and the scope to handle major and complex procedures, it is the largest independent provider of acute surgical services in the UK. In addition, BMI recently purchased nine hospitals from Nuffield Hospitals, seven of which it is anticipated will be brought within the existing BMI Healthcare business over the coming months. Netcare UK provides specialised clinical services to patients under contract to the National Health Service. Its service range includes surgical centres, cataract mobile unit, walk-in centres and diagnostic centres. Netcare UK is currently fulfilling a contract to perform 44,500 cataract operations for the NHS via mobile services. It is also performing 44,800 orthopaedic, ENT and general surgical procedures for NHS patients at its 45-bed, three-theatre facility in Manchester. In 2006, it was awarded contracts to run Leeds NHS Walk-in Centre as well as the London Diagnostic services contract, won with InHealth. The initial investment in this company was made by the Apax Europe VI fund in 2006. The company’s turnover for the 2006/07 financial year was £684.3m and the average number of employees in the year was 8,869. Turnover in 2007

Number of employees

£684.3m 8,869

Number of hospital beds

2,400

HIT Entertainment

Contact: Jeff Dunn CEO HIT Entertainment Limited Maple House, 5th Floor 149 Tottenham Court Road London W1T 7NF T: +44 (0)20 7554 2500 Apax Partners contact: Paul Fitzsimons

HIT Entertainment is the world’s largest independent owner and distributor of preschool children’s content. HIT owns brands such as Thomas and Friends, Bob the Builder, Barney, Pingu, Fireman Sam and Angelina Ballerina. Content is mainly produced in-house and is carried on TV in almost every country worldwide. The company’s revenues are mainly generated from the sale of home entertainment (DVDs) and character merchandise (consumer products such as toys, books etc). HIT also owns a minority stake and carriage rights in Sprout, the first dedicated pre-school children’s channel in the US alongside Comcast, Sesame and PBS. The initial investment in this company was made by the Apax Europe VI fund in 2005. Turnover for 2007 was US$263.4m and the average number of employees in the year was 483. Turnover in 2007

Market position worldwide

$263.4m 1st

Number of employees

483

Apax Partners Annual Report 2007

69

Incisive Media

Contact: Tim Weller Group Chief Executive Incisive Media Haymarket House 28-29 Haymarket London SW1Y 4RX T: +44 (0)20 7484 9700 Apax Partners contacts: Stephen Grabiner Irina Hemmers

Incisive Media is a fast-growing specialist business information provider operating in four segments of the B2B publishing markets including retail financial services, financial risk management, professional services and marketing and specialist services. American Lawyer Media is a leading US legal media publisher acquired by Incisive Media in August 2007. The combined group delivers key information to defined target audiences in financial and professional services across a variety of platforms including magazines, conferences and exhibitions, websites, newsletters, contract publishing and data in the UK, US and, increasingly, Asia, where it has a nascent but fast growing office presence. The initial investment in this company was made by the Apax Europe VI fund in 2006. The company’s turnover for the 2007 financial year was £167.3m and its average number of employees in the year was 1,971. Turnover in 2007

Number of employees

£167.3m

1,971

New Look

Contact: Carl McPhail Group Chief Executive New Look Retailers Ltd New Look House Mercery Road Weymouth Dorset DT3 5HJ T: +44 (0)1305 765000 Apax Partners contacts: Alex Fortescue Matthew Brockman

New Look is a retailer of value fashion clothing and the third-largest womenswear retailer in the UK. The company has 590 stores in the UK and Eire, and 263 stores in France trading under the name Mim. In addition, the business has 13 New Look-branded stores in France and Belgium, and has recently opened franchise stores in Dubai, Kuwait and Saudi Arabia. The company sells predominantly womenswear, including apparel, footwear and accessories with a growing men’s and childrenswear business added in the last three years. The initial investment in this company was made by the Apax Europe IV and Apax Europe V funds in 2004. Its turnover for the 2007/08 financial year was £1.16bn (unaudited) and the average number of employees worldwide was 18,772. Turnover in 2007

Number of stores in UK

Number of employees

£1.16bn

590

18,772

70

Walker-compliant portfolio companies Continued

Somerfield

Contact: Paul Mason Chief Executive Somerfield House Whitchurch Lane Bristol BS14 0TJ T: +44 (0)117 935 9359 Apax Partners contacts: Alex Fortescue Oliver Bower

Somerfield is the fifth largest grocery retailer in the UK with over 1,000 stores nationwide and more than 4,000 own label products. The company has approximately 50,000 staff and its stores serve around 12million customers every week. In the current competitive food retail market Somerfield has focused on its clear strength: providing shoppers with a convenient alternative to the larger out-of-town supermarkets whilst maintaining a commitment to high quality food, with a particular emphasis on fresh foods. The initial investment in this company was made by the Apax Europe VI fund in 2005. Somerfield’s turnover for the 2006/07 financial year was £4.38bn (unaudited) and the average number of employees in the year was 44,000. Turnover in 2007

Number of stores

Number of employees

£4.38bn

>1,000

44,000

Trader Media Group

Contact: John King Chief Executive Officer Trader Media Group Unit 15 Thatcham Business Village Colthrop Lane Thatcham Berkshire RG19 4LW T: +44 (0)1635 588 500 Apax Partners contacts: Tom Hall Irina Hemmers

Trader Media Group is one of Europe’s largest specialist media publishers, with over 70 leading classified titles, a selection of popular and profitable websites and several high-volume printing businesses. Its titles focus primarily on the automotive sector and occupy every print point in the market, from the entry level Auto Freeway, through mid-market Auto Trader, to the high end Top Marques. The company’s titles also cater for other types of vehicle such as bikes, trucks and caravans, and provide wider classified offerings such as Ad Trader. Many of the company’s products also have popular related websites, which are accounting for an ever greater share of the market. Trader Media Group prints around 62million magazines each year and maintains and operates its own dedicated printing businesses, over 50% of whose turnover comes from serving external customers, including blue-chip corporations and even competing publishers. The initial investment in this company was made by the Apax Europe VII fund in 2007. The company’s turnover in 2007/08 was £325.5m (unaudited) and the average number of employees during the year was 3,746. Turnover in 2007

Total magazines printed in 2008

Number of employees

£325.5m 62million 3,746

Apax Partners Annual Report 2007

71

Travelex

Contact: Ian Meakins Chief Executive Officer 65 Kingsway London WC2B 6TD T: +44 (0)20 7400 4000 Apax Partners contact: Mark Ransford

Travelex is the world’s largest non-bank provider of commercial foreign exchange services, providing integrated payment solutions for business customers globally. The Group is also one of the world’s leading providers of outsourced travel money to banks, travel agencies and other financial institutions. In addition, Travelex operates over 700 retail foreign exchange branches around the world. The Travelex Group has offices in 35 countries and corporate relationships in over 100 countries spanning the globe, serving over 29,000,000 customers each year. The initial investment in this company was made by the Apax Europe V and Apax Europe VI funds in 2005. The company’s turnover for the 2007 financial year was £541.6m and its average number of employees during the year was 5,700. Turnover in 2007

Number of employees

Number of customers annually

£541.6m

5,700

29million

72

Current portfolio

Following is a complete list of all live Apax Funds portfolio companies.

Portfolio company

Year of initial investment

Portfolio company

Year of initial investment

7th Online, Inc.

2001

Electro-Stocks Grup S.L.

2007

Action Sports Media Inc.

2005

Elliptec Resonant Actuator AG

2004

Aerovance, Inc.

2004

Emap plc

2007

Affymax Pharmaceuticals, Inc.

2001

Empire Pacific Windows Corp.

2005

Ale House Holdings, Inc.

2004

Farmafactoring S.P.A.

2006

ANG Acquisition, LLC

1998

Fractus SA

2002

AngioDynamics, Inc.

1999

Frontier Silicon Holdings Limited

2003

Apollo Hospitals Enterprise Ltd

2007

General Healthcare Group Limited

2006

Applied Tech, LLC

2005

Global Refund Holdings BV

1999

Ascent Healthcare Solutions, Inc.

2000

Go Networks Inc

2004

Astex Technology Ltd/Metagen GmbH

2001

Handmark

2005

Audible, Inc. (PUBLIC)

2003

Hartford Computer Group, Inc.

1997

Axeda/Quadrant

1998

HIT Entertainment Limited

2005

Best International/Spring Group Plc

1997

Home Organizers, Inc.

2000

Bezeq The Israel Telecommunication Corp

2005

Hub International Ltd

2007

BitBand Inc

2003

IFCO Systems N.V.

2003

Blue Arc Corporation

2000

Incisive Media Limited

2006

Bob's Discount Furniture, LLC

2005

InnovaLight, Inc.

2004

Bolero.net Limited

2000

Intelsat, Ltd.

2005

Builders TradeSource Corporation

2003

IPG Photonics Corporation

2000

Cadent

2000

Iris Financial Engineering Holdings Ltd

2003

Café Rio, Inc.

2004

Karmel Medical/Karmelsonix Ltd

1998

Capio AB

2006

L3, Inc.

2000

Celldex Therapeutics, Inc (Lorantis)

2003

LR Health and Beauty Systems

2004

Cengage Learning

2007

MagnaCare Holdings, Inc.

2002

CenterBeam, Inc.

2000

Marchfifteen

2000

Central European Media Enterprises Ltd

2006

mFoundry

2004

Coal Bed Methane Limited

1995

Comark, Inc.

2005

Midasplayer International Holding Company Limited

2005

Mobixell Networks, Inc

2000

Composite Software, Inc.

2002

Contech Construction Products, Inc.

2006

Corvil Networks Limited

2003

Crescendo Networks Limited

2003

CSG Solar AG

2005

Dialog Semiconductor Plc

1998

Digital Fuel Technologies Inc

2005

Dune Medical Devices Limited

2004

Morgan Int'l Participations

1998

Nanomix, Inc.

2002

Neomedia Technologies Inc/12snap AG

2000

New Look Group Plc

2004

NewsMarket, Inc.

2004

Norcraft Companies, L.P.

2003

Novacea, Inc. (IPO 5-15-06)

2003

Apax Partners Annual Report 2007

Portfolio company

73

Year of initial investment

Portfolio company

Year of initial investment

NXP

2006

Sonim Technologies Inc

Oberon Media Inc/Digital Bridges Ltd

2000

Spectrum Laboratory Network, LLC

2002 2005

Ollies Bargain Outlet, Inc.

2003

Spyder Active Sportswear, Inc.

2004

OnePath Networks Limited

1997

Stage Three Music Limited

2004

Onespin Solutions GmbH

2005

Starhome BV

2004

Orexo AB (Biolipox AB)

2002

Streamserve Inc

1999

Panrico, S.A.

2005

Streetbroadcast Limited

2003

Peregrine Semiconductor Corporation

1997

Sulo

2003

Perfect Commerce, Inc.

2005

Syndesis Ltd

1998

Pictage, Inc.

2006

Synetrix Holdings Limited

2004

Plantasjen

2007

TAG Networks, Inc.

2004

Planview, Inc.

2004

TDC A/S

2005

Plexus Systems, Inc.

2006

Teavana Holdings, Inc.

2004

Power Paper Limited

2005

Telcast Media Group GmbH

2001

Precision Partners, Inc.

1998

The Learning Annex LLC

2006

Prestige Holdings Limited

1995

Tideway Systems Limited

2004

Printar Limited

2004

Tommy Hilfiger Corporation

2006

Procognia Limited

2002

Trader Media Group

2007

Promethean Ltd

2004

Transera Communications, Inc.

2004

Prometheus Laboratories, Inc.

1999

Travelex Holdings Limited

2005

Qualitest Pharmaceuticals

2007

Truvo/ World Directories

2004

Quartermaster, Inc.

2005

Ultronics/Senstronics Group Ltd

1998

RaySat, Inc.

2005

Versatel AG

2005

RealPage, Inc.

2003

VINtek, Inc.

1996

Red-M Group

2001

VoodooVox

2004

rue21, inc.

1998

Voyager HospiceCare, Inc.

2004

S.B. Restaurant Co.

2000

Vueling Airlines SA

2004

Savaria Corporation

1998

Wilex

1998

Senex Financial Corp.

2004

Wisair Inc

2002

Sense Proteomic Ltd/Procognia

1998

Wisdom Entertainment S.a.r.l

2004

Silicon Optix, Inc.

2004

Xanodyne Pharmaceuticals, Inc.

2005

Sisal S.p.A.

2006

Xerium Technologies Inc

1999

SkinMedica, Inc.

2003

Yazam/US Technologies

2000

SMART Technologies, Inc.

2007

Zinio Systems, Inc.

2002

Solid Information Technology Oy

2000

ZymoGenetics, Inc.

2000

Somerfield Ltd

2005

Case study: Investors

GE Asset Management A wholly-owned subsidiary of General Electric Company (GE), GE Asset Management Incorporated (GEAM), is a global asset manager with US$190bn in assets under management (as at December 31, 2007). GEAM and its predecessor organisations have been managing investments for GE’s US employee pension and benefits plans for 80 years. In 1988, the firm began offering investment management products and services to investors outside GE, and today counts corporate and public plan sponsors, foundations, endowments, Taft-Hartley plans, and insurance companies around the world as clients. Investment offerings cover all major asset classes,

including U.S. and international equities, fixed income and alternative assets. Private equity is one of GEAM’s core investment competencies. GEAM has been investing in private equity in the United States since 1978 and outside of the United States since the early 1990s. The senior members of GEAM’s international private equity investment team have combined deal experience of more than 70 years and have access to the collective experience of a pool of retired senior executives from GE and other companies. Bringing extensive market knowledge and operational skills, these key senior advisers may be utilised as board members, advisers or in other roles at companies in which GEAM invests.

GEAM has been investing in private equity in the United States since 1978 and outside of the United States since the early 1990s.

GE Asset Management The firm also utilises GE’s worldwide resources, which include a local market presence in more than 100 countries, to gain market knowledge and operational expertise that can facilitate and enhance the underwriting, execution and realisation of private equity transactions. GEAM targets companies that have strong, well-incentivised management teams, the potential to be national or regional market leaders in their respective industries, stable cash flows, sustainable profit margins, and defendable business models. It seeks to make investments where management expertise, vision, and incentives are properly aligned with the success of the investment strategy.

Branded, defendable business models centered around core technologies or service competencies tend to have sustainable profit margins, and are the focus of the GEAM private equity investment philosophy. GEAM generally invests in and with those General Partners with which it has long-term relationships and an alignment of investment philosophy. The firm has a global partner network through which it makes its private equity investments in countries around the world, ensuring a consistent investment approach based on core values. GEAM strongly prefers that the financial investor groups in which it and its local partners collectively participate have voting control over their investments.

Portfolios managed by GEAM and its subsidiaries include US$96bn in client assets and the US$60bn GE US Pension Trust (GEPT), an overfunded plan to which the company has not made a contribution since 1987. Private equity investing has been an important part of the success of the GEPT – a plan that includes more than 500,000 participants – by helping it to meet and exceed performance targets over the long term. Just as important, it continues to serve as a key growth area within GEAM’s third-party business, as a critical asset class among the firm’s array of institutional product offerings. (Source: GE Asset Management)

76

Apax Partners international offices

China

India

Apax Partners Hong Kong Ltd 18th Floor One International Finance Centre No. 1 Harbour View Street Central Hong Kong People’s Republic of China T: +852 2166 8230

Apax Partners India Advisers Private Limited Hilton Towers Room Nos. 1433-35 Nariman Point Mumbai – 400021 India T: +91 22 6630 8715

Germany

Apax Partners Beteiligungsberatung GmbH Possartstrasse 11 Kopernikustrasse 81679 Munich Germany T: +49 (0)89 998 9090 Israel

Apax Partners (Israel) Ltd Museum Tower 4 Berkowitz Street Tel Aviv 64238 Israel T: +972 3 777 4400 Italy

Apax Partners S.r.l. Palazzo Gallarati Scotti Via A. Manzoni, 30 Milan 20121 Italy T: +39 02 762 1191

For any questions on this Report please contact Ben Harding in the UK office.

Spain

Apax Partners España, S.A. Velázquez 10-5° 28001 Madrid Spain T: +34 91 423 1000 Sweden

Est2004 Advisors AB Birger Jarlsgatan 5 SE-111 45 Stockholm Sweden T: +46 8 5450 7400 UK

Apax Partners Ltd 33 Jermyn Street London SW1Y 6DN United Kingdom T: +44 (0)20 7872 6300 USA

Apax Partners, L.P. 53rd Floor 153 East 53rd Street New York, NY 10022 USA T: +1 212 753 6300

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