For personal use only ASX: USG US SELECT PRIVATE OPPORTUNITIES FUND II QUARTERLY UPDATE FOR PERIOD ENDING 31 MARCH 2014 Private Equity Market Commentary While the US economy finished last year on a softer note than initially reported, consumer spending continues to be healthy, and many analysts feel growth may begin to pick up in 2014. The fading effects of higher income taxes put in place at the start of 2013, ongoing gains in employment and the positive wealth effects from rising equities and home prices have left household balance sheets in a position to support faster spending growth. The recent labour market data shows unemployment is now at the lowest level since 2008. Corporate profits and cash are at record levels and the equity and credit markets continue be strong. Private equity industry fundamentals are stronger today than they have been since the global financial crisis, but asset prices and competition remain at elevated levels. According to Bain & Company, the private equity market is primed to continue to expand and prosper in 2014 and beyond. An increase in competition from a robust 2013 fundraising environment confirms that investing in differentiated lower middle-market investment managers with demonstrated track records of finding off-market transactions, and with the ability to create value through operational growth, is essential for delivering outsized returns. We continue to see many compelling opportunities in the market, and expect this to continue throughout 2014. Fund Activity and Portfolio FUND UPDATE During the quarter, the Fund received eight drawdown requests for a total net consideration of US$3.8 million. Inclusive of this, total drawdowns at 31 March 2014 were US$13.5 million, or 19.8% of total commitments. At 31 March 2014, the Fund had committed to six private investment funds, totalling US$52.5 million (or 77.1% of total capital). The NTA at 31 March 2014 was $1.67* per Unit (31 December 2013 was $1.74* per Unit). SUMMARY OF THE UNDERLYING FUNDS AT 31 MARCH 2014 UNDERLYING FUND INDUSTRY FOCUS LP COMMITMENT (US$ MILLION) NET LP CAPITAL DRAWDOWN (US$ MILLION) RFE Investment Partners VIII, L.P. Small market buyouts of companies in market leading positions $8.0 $2.2 Tengram Capital Partners Gen2 Fund, L.P. Branded consumer product and retail sectors $10.0 $4.0 Trive Capital Partners, L.P. Strategically viable, but under-resourced, middle-market companies $10.0 $2.0 U.S. Select Direct Private Equity (US), L.P. Invests in a direct portfolio of select private companies alongside leading, specialist private investment funds $12.0 $2.4 High Road Capital Partners Fund II, LP Buying and building leading companies at the smaller end of the middle-market $7.5 $1.4 DFW Capital Partners IV, LP Acquire companies exclusively in the lower middle-market $5.0 $1.4 $52.5 $13.5 Total Note: the Fund has an 85.2% interest in the LP. Cordish Private Ventures and US Select Private Opportunities Fund II GP, LLC, contributed the remaining amount based on their proportional shares. Numbers may not add up due to rounding. *Source: Walsh & Company Investments Limited. Historical performance is not a guarantee of the future performance of the Fund. US SELECT PRIVATE OPPORTUNITIES FUND II | QUARTERLY INVESTMENT UPDATE | MARCH 2014 1 UNDERLYING FUND ACTIVITY Trive Capital Fund I, LP (Trive): closed on the acquisition of AGM Automotive, Inc. Headquartered in Troy, MI, AGM is a leading For personal use only global supply partner of premium interior components and systems, including interior lighting, overhead console systems, technical textiles, and other interior assemblies to the automotive marketplace (agmautomotive.com). High Road Capital Partners Fund II, LP (High Road): completed the acquisition of New York-based General Tools & Instruments, LLC, a leading designer and developer of precision specialty hand tools and handheld test instruments for consumers and professionals (generaltools.com). DFW Capital Partners IV, L.P. (DFW): formed Evolution Research Group and closed on the acquisition of three companies in the clinical trials industry. U.S. Select Direct Private Equity (US), LP (US Direct): co-invested with Fort Point Capital in its acquisition of Van Pool Transportation (vanpooltransportation.com). Additional Information on Prior Underlying Investments RFE INVESTMENT PARTNERS VIII, L.P. RFE Investment Partners VIII, L.P. (RFE) has been a leading small market buyout firm throughout its history and the RFE VIII team of 11 professionals has more than 160 years of combined private equity and related experience in this market. The team is led by five managing directors who have worked together at RFE for an average of 20 years. RFE will target buyouts of small market companies with enterprise values of between US$20 million and US$100 million that possess leading market share positions in their core markets and exhibit strong growth prospects that will enable them to become middle-market-size companies within five years. RFE has already made four attractive investments. Website: rfeip.com TENGRAM CAPITAL PARTNERS GEN2 FUND, L.P. Tengram Capital Partners Gen2 Fund, L.P. (Tengram) makes investments in the branded consumer product and retail sectors, focusing on segments including apparel, home goods, sporting goods, consumer electronics, health and beauty, spirits, food and beverage, packaged goods and branded retail. The firm is led by three senior partners William (Bill) Sweedler, Matthew Eby and Richard Gersten, who are proven operators and investors with over three decades of combined experience investing in branded consumer product companies. The Fund has already made four attractive investments. (See the website for information on portfolio companies.) Website: tengramcapital.com TRIVE CAPITAL PARTNERS, L.P. Trive Capital is a Dallas, Texas-based private equity fund focused on acquiring strategically viable, but under-resourced, middle-market companies with the potential for transformational upside through operational improvement. The firm’s vision is to use proven operational best practices and identify actionable opportunities that allow businesses, shareholders and employees to realise their full long-term potential. The Fund has made an investment in one portfolio company to date. Website: trivecapital.com U.S. SELECT DIRECT PRIVATE EQUITY (US), L.P. U.S. Select Direct Private Equity (US), L.P. (US Direct) was established with the sole purpose of investing in a direct portfolio of select private companies alongside leading, specialist private investment funds, a strategy commonly referred to as co-investing. US Direct provides a platform through which the investors can access attractive co-investment opportunities within the LP’s target market of small and mid-market private investments. Co-investing enables the LP to accelerate its deployment of capital, thereby enhancing returns and cash flows, better tailor its investment exposures and reduce investment management fees. The LP’s investment in US Direct is consistent with its investment mandate. Co-investing is an increasingly competitive and sought-after segment of the private investment market. By building a specialist coinvestment platform and leveraging existing relationships with leading private investment managers, US Direct will be well placed to access highly coveted co-investment opportunities. US SELECT PRIVATE OPPORTUNITIES FUND II | QUARTERLY INVESTMENT UPDATE | MARCH 2014 2 HIGH ROAD CAPITAL PARTNERS II, L.P. For personal use only High Road Capital Partners (High Road) is a private investment firm focused on buying and building leading companies at the smaller end of the middle-market. High Road raised US$300 million in capital commitments (plus US$20 million from the general partner) to invest in High Road Capital Partners II, LP, which will acquire, in partnership with management, companies with revenues of US$10 to US$100 million and EBITDA of US$3 to US$10 million. The LP has committed a US$7.5 million investment. High Road will seek companies with attractive growth prospects and those that are well positioned within their respective market niches. They will work together with underlying management to develop and implement strategies to build value and take companies to the next level. High Road’s investment professionals have completed transactions with an aggregate value of approximately US$2 billion, and have over 80 years of combined experience. We believe they have the skill, experience and judgment needed to build companies into market leaders and to create substantial value for our investors and management team partners. Website: highroadcap.com DFW CAPITAL PARTNERS IV, L.P. DFW Capital Partners (DFW) is a leading private equity investment firm, focused exclusively on the lower middle-market. For over 25 years, DFW has demonstrated an outstanding track record of investing in and acquiring high growth businesses in the health care, business services and industrial services industries. DFW partners with talented entrepreneurs, supports strong management teams and equips them for rapid growth. The firms’ investments can take many forms, including management buyouts, corporate divestitures, liquidity-driven recapitalisation or growth and acquisition capital. The DFW team is comprised of seasoned professionals and augmented by a group of highly experienced operating affiliates. DFW actively manages several pools of committed private capital, with over US$200 million in aggregate commitments. Website: dfwcapital.com About the Fund US Select Private Opportunities Fund II (Fund) was formed in February 2013 to invest in US Select Private Opportunities Fund II, L.P. (LP). The Fund invests in the LP in partnership with Cordish Private Ventures, LLC, the private investment arm of the Cordish family of Baltimore, Maryland, USA. The Fund pursues a fund-of-funds strategy, investing as a limited partner in small-to-medium sized private investment funds in the United States, using the experience and relationships of the Cordish family in that market. The Fund represents a unique vehicle for Australian retail investors to access attractive smaller, nimble US private investment funds that have historically outperformed their larger counterparts. The underlying funds are focused on proven investment strategies in specialised areas. They pursue investments in operating businesses with proven revenues and operating profits, take a hands-on approach to their investments in those businesses and employ moderate and judicious amounts of leverage. US SELECT PRIVATE OPPORTUNITIES FUND II | QUARTERLY INVESTMENT UPDATE | MARCH 2014 3