The Blue Sky Private Equity EC2010 Fund is focused on providing expansion capital to Australian-based small to medium sized enterprises to fund growth. The EC2010 Fund will typically hold substantial equity stakes of 30% to 50% with the aim to deliver investor exposure to rapidly growing private companies run by high quality entrepreneurs.

The EC2010 Fund is Australia's only direct private equity fund with an Approved rating from a major research provider (Zenith).

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Benefits of the EC2010 Fund

An important source of uncorrelated returns and diversification in portfolios and an increasingly important asset class for high net worth and retail investors

Private equity provides superior risk adjusted returns to listed equities

Historically, private equity has proven to be most profitable as an investment class following an economic downturn

Expansion capital is an attractive segment of private equity as entrepreneurs seek growth capital that banks are currently unwilling to provide

The longer term horizon in private equity allows investors to mitigate the volatility involved in listed equity markets

Blue Sky Private Equity has a strong track record of delivering returns in the expansion capital segment, with more than $40 million of invested capital and returns of approximately 30% per annum across the downturn

First round offering of $25 million fully subscribed, second round offering now open

The EC2010 Fund has been seeded with two investments, Viking Rentals and Lenard's. The EC2010 Fund has been seeded with these investments in order to provide investors with:

Immediate exposure to high quality private equity investments

A shorter fund term relative to typical private equity funds

Exit year diversification (Viking and Lenard's may be exited early in the term of the fund, providing early capital returns to investors)

The opportunity to provide follow-on expansion capital to these two businesses

In the four years since it was established, Viking Rentals (Viking) has become one of Australia's largest toilet hire businesses with a fleet of approximately 3,700 toilets.

Ownership of the Segment through a Superior Model

Viking operates a high-service model where toilets are cleaned more frequently than is the case for competitors, allowing Viking to capture significant market share and customer loyalty. Viking's high market share minimises travel times between customer locations, reducing the average cost of servicing each toilet and allowing Viking to price competitively.

Compatible Event Hire Opportunity

Viking recently acquired Elite Portables, an event hire business serving clients like music festivals and major sporting events. Viking Elite generates business on weekends and across summer, which balances the construction sector's 'working week' utilisation and the construction slowdown over summer.

Growth Opportunities

Geographical Expansion in Construction Hire

Viking Rentals' recent success in Melbourne indicates that its superior service-oriented rental model is appealing beyond South East Queensland. Viking Rentals will seek to grow its construction hire business organically and through acquisitions.

Expanding Events Hire Business

Viking Rentals' initial focus was on the residential construction sector, which will continue to be a core part of the business. However, Viking Rentals' successful acquisition and integration of Elite Portables demonstrates the potential in the event hire sector and the benefits of participating in both segments of the market.

Related Services to the Construction Sector

While Viking Rentals began purely as a porta-loo rental business it has developed a small and profitable business providing rental power poles to builders, and more recently temporary fencing sales. There is potential opportunity to expand these product lines in Viking Rentals' existing, loyal customer base.

Lenard's is an established, profitable food retailer specialising in the delivery of poultry products to consumers. The Lenard's franchise network now comprises over 200 stores, an annual system turnover of more than $150 million and an estimated market share of 10% - 12% of retail chicken consumption.

BSPE invested in Lenard's in order to fund the purchase of master franchise licenses of the Lenard's business in Victoria and South Australia, completing a nationwide buy-back of all Master Franchise Licenses.

This structural change allowed Lenard's to purchase back existing royalty streams and allowed Lenard's to achieve direct 'line of sight' to their franchisees, more aggressively roll-out expansion plans across the network, and improve delivery of marketing and product initiatives.

Growth Opportunities

Expanding the Franchise Network

Lenard's continues to grow the franchise network, with new store openings and low levels of franchisee churn. In addition, Lenard's has signed an agreement with Metcash, which will result in a significant number of 'stores-in-stores' in the IGA network.

Pre-packaged Branded Food

Lenard's is exploring opportunities to distribute branded, packaged Lenard's food across the entire IGA network. A successful roll-out would form a platform to expand overseas into other supermarket chains.

Increased Profitability

There is significant EBIT upside potential through increasing franchise fees to industry benchmarks and increasing supplier rebates.

Investors

Open to both retail and wholesale/institutional investors

Target Fund Size

$50 million

Target Fund Return

30% IRR

Minimum Investment

$20,000 for retail fund; $100,000 for wholesale/institutional fund

Fund Term

5 year term, with the flexibility to extend the fund term by two successive one year periods

Unit Structure

Partly paid units for wholesale fund, fully paid units for retail fund

Redemptions

No redemptions during the life of the fund

Management Fee

1.85% per annum of committed capital for wholesale/ institutional fund; 2.0% per annum for retail fund

Performance Fee

20% of all returns, only after investors receive 8% per annum preferred return

The tables below will be updated monthly with latest net asset values (NAV) for the EC2010 Fund. We expect these NAV's to hover around $1.00 over the coming months. Early in the life of the EC2010 Fund, small increases in unit valuation are largely due to interest earned on called capital not yet deployed. Small decreases in unit valuation are largely due to the impact of management fees.

To date, there has been no change in the carrying value of the investments in the EC2010 Fund (Lenard's and Viking Rentals). Investors will be advised of any change in carrying value through the quarterly Investor Updates that they receive.

BSPE EC2010 Retail Fund NAV

BSPE EC2010 Institutional Fund NAV