ANALYSIS OF RESULTS


INVESTORS

As at 30 June 2010, $17.3b was committed to direct VC&LSPE investment vehicles, $4.7b of which was committed via fund of funds investment vehicles. As at 30 June 2010, $5.0b of commitments to direct VC&LSPE investment vehicles were unused, $2.1b of which was committed via fund of funds investment vehicles (see Table 1).

The following graph presents drawdown investment for VC&LSPE investors by type of investor. The largest source of funds in terms of drawdowns for VC&LSPE vehicles was provided by domestic pension funds, with 60% of total drawdowns (up slightly from 56% for 2008-09).

VC&LSPE MANAGERS AND INVESTMENT VEHICLES

The survey identified 158 active VC&LSPE managers who were managing 269 VC&LSPE investment vehicles.

VC&LSPE managers received income in the form of management fees ($257m) (see table 20). In 2009-10, fund managers spent on average 4.0 days a month per investee company. This compares with 3.5 days in 2008-09 and 3.8 days in 2007-08 (see Table 18).

VC&LSPE investment vehicles had net assets of $10.2b as at 30 June 2010 compared with $9.4b as at 30 June 2009 and $10.6b as at 30 June 2008 (see Table 8).

Most VC&LSPE investment vehicles were either trusts (funds) or corporations. Of the 269 vehicles operating in 2009-10, 78 were companies, 14 of which were listed with the Australian Stock Exchange (see Table 9).

As at 30 June 2010, 100 of the 269 VC&LSPE investment vehicles were participating in a government program, a 5% fall on the number of participants as at 30 June 2009. Of the 100 participating investment vehicles, 60 were with the Federal government's Pooled Development Fund (PDF) program, a 15% fall in the number of participants (see Table 10).

The value of total assets held by VC&LSPE investment vehicles was widely dispersed, from 132 investment vehicles having less than $10m in assets, to 41 with more than $80m in total assets (see following graph).

Table 2 shows the financial flows between VC&LSPE investment vehicles and investee companies over the survey period. New and follow-on investments by VC&LSPE investment vehicles fell $435m (26%) in 2009-10 to $1,243m.

Most return on investment to investees is through exits from investments. The value of exits through trade sales, IPOs and buybacks was $686m in 2009-10, compared to $682m in 2008-09. The value of vehicles that left the Australian VC&LSPE industry ($33m in 2009-10) was lower than recorded in the previous year ($91m).

Investment vehicles had total expenditure of $535m during 2009-10, of which the largest component was management fees ($257m, compared to $234m during 2008-09). Total income rose to $428m, driven mainly by rises in dividends received ($109m in 2009-10 compared to $41m in 2008-09) and other inflows ($121m in 2009-10 compared to $90m in 2008-09) (see Table 20).

VC&LSPE funds used various valuation methods (refer to paragraph 14 of the Explanatory Notes). The AVCAL method was most frequently used, with 165 vehicles using this method in 2009-10, followed by book value/cost valuation methods (45), directors' valuation (34) and independent valuation methods (25).

INVESTEE COMPANIES

At the beginning of the 2009-10 financial year there was $7,093m invested in 1,075 investee companies (deals). During the 2009-10 financial year a further $799m was invested in new vehicles and projects, and an additional $444m of follow on investment was made in existing vehicles and projects. Net of revaluations and exits this resulted in an investment as at 30 June 2010 of $8,887m in 973 investee companies. See Table 2 for more details.

The following graph indicates that as at 30 June 2010, the largest concentration of deals held by VC&LSPE vehicles was with investee companies established for between 2 and 4 years (34%). Investee companies in the 5 to 10 year category accounted for 32% of deals at the end of 2009-10.

In terms of the current stage of investment, total investments in the late expansion stage attracted the largest share, with $2,985m or 34% of total value as at 30 June 2010 (see Table 14).

See paragraph 12 of the Explanatory Notes for a description of the VC&LSPE stages referred to in the following graph.

The following graph shows the distribution of the value of investment placed by VC&LSPE managers in individual investee companies. Most deals attracted less than $10m from any one investment vehicle, with approximately half of these attracting less than $1m.

Most of the value of VC&LSPE investment was in investee companies with head offices in New South Wales and Victoria (45% and 20% respectively as at 30 June 2010). The current value of investee companies with head offices in New South Wales rose $974m to $4,018m compared to 2008-09, whereas Victoria fell $124m to $1,777m. The current value of investments by Australian vehicles in offshore investee companies rose $184m to $1,484m, accounting for 17% of total investment (see Table 11).

VC&LSPE vehicles invested in a wide range of industries. Of the total value of $8,887m invested in 2009-10, Manufacturing and Utilities remained the predominant industry of investment, with investments as at 30 June 2010 of $2,010m (23% of total investment) with a $219m rise in the level of investment. The Finance and Property industries with investments of $1,933m (22% of total investment) and the Health and Services industries with investments of $1,668m (19% of total investment) ranked the second and third most predominant industries of investment respectively. The Trade and Accommodation industries experienced a fall of $86m in the level of investment, dropping from second place in 2008-09 to rank in fourth place in 2009-10. The ranking of all other industries remained constant (see Table 12).

When analysed by activity, as defined by the Standard and Poors Activity Classification, the Retail, Services and Real estate related activities attracted the largest share of investment, with $3,143m or 35% of total investment as at 30 June 2010. Manufacturing and Transport with $2,770m (31%) and Biotech, Pharmaceuticals and Health activities with $1,396m (16%) also attracted large shares of the total investments as at 30 June 2010 (see Table 13).