Private equity value investing in public markets

2

Introduction

Avenir Capital specialises in fundamental, value –based and special-situation investments in global equity and debt markets

We search for materially mispriced securities which we can buy well below intrinsic value (that is, with a large margin of safety) and that offer the potential for superior returns with limited risk of permanent loss of capital

Our investment program applies key elements of private equity investing to public markets with 3 underlying pillars:

Focus on the downside first – fixate on avoiding permanent loss of capital Fundamental, bottom up approach to investment selection Focus on absolute long term returns not relative short term returns

Avenir has an attractive fee structure aligning the interests of investors and the fund manager and providing some protection for investors in periods of lower returns

Avenir is managed by an experienced and successful investor and manager of third party money

3

The Model

Private Equity Public Market

Greater opportunity set

Liquidity

Deep discounts to intrinsic value

Lower transaction costs

Focus on investment analysis not ‘deal process’

Conviction investing

Concentrated portfolio

Longer term investment horizon

In depth due diligence

Focus on low risk investing

Transparency

Active investment selection

Lower leverage

Liquidity

Current Market Sentiment

Avenir Capital

Avenir Capital applies the best elements of private equity and public market investing to identify and invest in significantly mispriced assets

Focus on fundamentals

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3 Underlying Pillars

Think About Downside First

• Focus on minimising risk of permanent loss of capital

• What is probability of loss; how much can we lose?

• Don’t view volatility as risk

• Worry more about what we can lose than what we might make

• Margin of safety – Always!

Focus on Absolute Returns

• Longer term absolute return focus not short term relative returns

• Avoid closet indexing

• Avoid asset gathering behaviour

• Patient investing to benefit from ‘time arbitrage’

• Not afraid to invest in ‘unloved’ companies

Bottom Up not Top Down

• Fundamental analysis

• Company specific investment decisions

• Don’t try to guess short term market direction

• Look for materially mispriced assets

5

Consistent with Private Equity Heritage

Much of the investment approach and risk management of Avenir Capital is consistent with the Principal’s private equity investing heritage

• Concentrated portfolio investing in only the best opportunities• Intense focus on downside risk minimisation• Simple businesses: Avoid single product, technology or resource risk• Medium/long term investment horizon• Patience, patience, patience

Investment Framework

/ Risk Manageme

nt

• Extensive investigative due diligence and financial analysis experience• Deep experience in assessing competitive position, industry structure and

management team• Operational experience in assessing strategy viability, timeframes and

operational capability• Extensive experience in assessing capital structure, financial viability and bank

pressure points

Due Diligence

Margin of Safety Low Risk, High Uncertainty Investing Event Driven/Special Situation Opportunities

Key Elements Added

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Principal’s Background

• 17 years in third party investment management• Managing Director/part owner of $1B Australian PE firm• Managing Director of leading pan-Asian PE firm• US and Australian investment management• Large cap and small/mid cap public market investments

Investment Management

• Extensive operational and board level experience• First hand insight into management and company capability• Extensive debt and capital market experience• Deep and varied due diligence and financial analysis

Business Insight

• Excellent and consistent investment track record• 3.7x money return on investments

Track Record

The Principal is an experienced professional investor and manager of third party money

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Principal: Private Equity Returns

(1) Includes co-investments(2) Before expenses, fees and carried interest

Transaction Investment(1) IRR Money Multiple

Return Measurement(2)

Exit Value

NOTE: Mr Warner does not claim to have been responsible for any portion of the above track record or whether this would be representative of Mr Warner’s investment performance. The results above are the work of teams of professionals and no single individual was responsible for any investment.

($m)Waters 40 309 225% 7.7x

Pacific Brands 236 1,216 129% 5.2x

Tech Pacific 138 506 122% 3.7x

Mettler Toledo 224 805 91% 3.6x

Vertex 15 51 100% 3.4x

Affi nity Health 247 782 124% 3.2x

Frucor 50 155 57% 3.1x

Manchester Tank 28 86 55% 3.1x

Valley Longwall 88 8 n/a 0.1x

Total 1,066 3,918 n/a 3.7x

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Performance: Avenir Value Fund

Avenir Value Fund Performance (Net of Fees and Expenses)

100.0 101.0

96.0

101.2 101.1

96.5

102.1 104.5 104.6

101.1

97.5

93.7 92.5

98.5

102.4

80.0

85.0

90.0

95.0

100.0

105.0

110.0In

dex

= 10

0 at

Ince

ption

All Ords Accumulation Avenir Value Fund

Monthly Performance (Net of Fees/Expenses since Inception 1 August 2011)*Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD All Ords^2012 5.8% 2.4% 0.1% -3.3% -3.6% -3.9% -1.3% 6.5% 4.0% 6.1% 11.3%2011 1.0% -5.0% 5.4% -0.1% -4.5% -3.5% -7.9%

* Results are unaudited.

All Ordinaries Accumulation Index

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Investment Framework

Margin of Safety – Always!

Special Situations

Focus on our Best Ideas

Low Risk, High

Uncertainty

Simple Businesses

The Search for Mispriced assets

“The market is normally efficient but it is not always efficient. The difference between those two propositions is like night and day”

Warren Buffett

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Investment Framework

Search for safe and remarkably cheap investment opportunities Buy at <60% of intrinsic value (Margin of Safety); Sell when price returns to near intrinsic value When we buy an asset for substantially less than it is worth we reduce downside risk and increase the

prospect for higher return All discounts to intrinsic value eventually close

Avenir invests in simple businesses with a durable competitive advantage (the Moat)

Our investments are generally in industries with slow rates of change

We only invest in companies and industries we understand The businesses we invest in don’t have to be great businesses but they have to be bought at great prices

Margin of Safety

Simple Business/Durable Moats

“The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future”

Benjamin Graham

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Investment Framework

Demergers, spin-offs, restructurings, recapitalisations, rights offerings, asset sales, liquidations, etc Value can often be found in complex situations, poorly followed/’unloved’ companies, ‘hidden’ assets Often the most mispriced assets are to be found in stressed or distressed opportunities

Special Situations

Most investors measure risk as volatility or deviation from a benchmark Avenir fixates solely on minimising the risk of permanent loss of capital

Avenir also differentiates between an uncertain outcome (i.e. a range of possible outcomes) and the risk of loss of capital

Low risk, high uncertainty is a great combination for finding investment value as it can lead to severely depressed prices for businesses – the market hates uncertainty

We seek to invest only in “Heads I win; tails, I don’t lose much” investment propositions

Low Risk, High Uncertainty

Our approach is to bet heavily when the odds are overwhelmingly in our favour; at other times, we don’t bet! We fixate on minimising permanent loss of capital so we only invest in assymetric opportunities when

downside risk is very low The non-market risk of owning one stock is reduced by ~80% with 8 stocks and over 90% with 16 stocks

Focus on Our Best Ideas

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Portfolio Construction

Total portfolio approximately 15-25 positions Focus only on the best investment opportunities when

the odds are overwhelmingly in our favour High conviction/concentrated portfolio (consistent with

private equity heritage)

Portfolio structure: 3%, 5%, 10% framework No position in excess of 15% of net fund assets

Top 10-15 holdings roughly 60-70% of net fund assets

Cash position is a function of opportunities rather than policy Cash will grow in times of few compelling opportunities

and decline when opportunities are plentiful

Avenir Capital’s portfolio construction is derived from a fundamental belief that low risk, high return investments are rare and that risk is adequately managed with a moderately diversified portfolio

Portfolio Construction ‘Representative’ PortfolioHolding Investment Return $ Return %Holding 1 $50 $10 -80%Holding 2 $50 $20 -60%Holding 3 $50 $40 -20%Holding 4 $50 $50 0%Holding 5 $50 $50 0%Holding 6 $50 $60 20%Holding 7 $50 $60 20%Holding 8 $50 $70 40%Holding 9 $50 $70 40%Holding 10 $50 $75 50%Holding 11 $50 $75 50%Holding 12 $50 $80 60%Holding 13 $50 $90 80%Holding 14 $50 $90 80%Holding 15 $50 $100 100%Holding 16 $50 $100 100%Holding 17 $50 $100 100%Holding 18 $50 $120 140%Holding 19 $50 $150 200%Holding 20 $50 $150 200%Total $1,000 $1,560 56%

Portfolio Internal Rate of Return (IRR)1 year 56.0%2 years 24.9%3 years 16.0%

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Benefits of Allocation to Avenir Capital

Avenir Capital provides exposure to alternative investment opportunities and an alternative risk management philosophy

test

• Access ‘unloved’ part of market

• Ex ‘mainstream’ stocks

• Increase exposure to special situations

• Focused international exposure

• Experienced high conviction investment manager

• Provides exposure to different risk management philosophy

• Minimise risk of permanent capital loss rather than risk of deviation from benchmark or annual volatility

• Margin of safety investing

• Avoid opportunity cost of market moving ‘sideways’ for prolonged period

• Benefit from active stock selection

• Reduced market correlation

• Avenir targets above market rates of return

• Focus on absolute returns not benchmark relative returns

• Patient disciplined investing in only low risk, high return opportunitiesBroaden

Investment Exposure

Above Market Returns

Risk Management

Avoid cost of ‘Sideways’

Market

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Risk Management

Risk management flows through every element of the Avenir operating model

Philosophy

Fund Structure

Investment Framework

Investment discipline – patience, patience, patience Invest in simple companies and simple industries Low Risk, High Uncertainty opportunities Manage correlations within portfolio

Margin of safety - Always! Buy at well below intrinsic value Fixate on minimising permanent loss of capital Private equity heritage

No single investment over 15% of net fund assets Leverage not used to drive returns Sufficient diversification in portfolio

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Key Fund Terms

0% management fee (other than to cover administrative costs of fund including accounting, audit, rent, etc)

25% of annual increase in fund profit- Only paid if returns above 6% (catch up in place above 6%)- High watermark

Monthly

Quarterly update; annual meeting; high level of access for investors

Management Fee:

Performance Fee:

Redemption:

Reporting:

Avenir Capital’s fund terms are designed to maximise alignment of interest between investors and the fund manager. There is no management fee so the Fund Manager only earns income based on return performance above a threshold

Gross ReturnReturn to Investors 6% 8% 10% 12% 15% 20%Index fund (0.5%) 5.5% 7.5% 9.5% 11.5% 14.5% 19.5%Mutual Fund (1.5%) 4.5% 6.5% 8.5% 10.5% 13.5% 18.5%Hedge Fund (2%/20%) 3.2% 4.8% 6.4% 8.0% 10.4% 14.4%Avenir Capital (0%/25%) 6.0% 6.0% 7.5% 9.0% 11.3% 15.0%(no performance fee <6%)

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Summary

Avenir Capital specialises in fundamental, value –based and special-situation investments in global equity and debt markets

We invest in materially mispriced securities which we can buy well below intrinsic value (a large margin of safety) and that offer the potential for superior returns with limited risk of permanent loss of capital

Our investment program applies private equity style disciplines to the public market with the 3 underlying pillars being:

Focus on the downside first – fixate on avoiding permanent loss of capital Fundamental, bottom up approach to investment selection Focus on absolute long term returns not relative short term returns

Avenir has an attractive fee structure aligning the interests of investors and the fund manager and providing some protection for investors in periods of lower returns

Avenir is managed by an experienced and successful investor and manager of third party money

17

Appendix:

Investment Sourcing and Examples

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Investment Idea Sourcing

Newspapers WSJ, FT, AFR, SMH, etc

Magazines Barrons, Forbes, Fortune

Websites Value Investor Insight Tickerspy Motley Fools Marketwatch Seekingalpha Bloomberg CNBC, etc

Read widely with antenna tuned to market overreaction

The key insight to sourcing investment ideas is the ongoing search for irrational or misguided sellers

Poorly covered or unloved stocks Spin offs Restructurings / Reorganisations Companies or industries out of favour Overleveraged situations Post bankruptcy equities Focus on Margin of safety and

minimising downside risk

Investigate situations/ opportunities others avoid

52 week low lists

Company screens Low P/E Low price to book value High equity free cash flow yield

Value investor forums Value Investors Club SumZero Gurufocus Valueforum

Value investing conferences Value investors congress

Hedge fund SEC filings and investor newsletters

Stay close to sources of value investing ideas

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Investment Example: International Coal (US)

ICO provided the opportunity to buy into an underfollowed coal business with sizeable natural resources and backed by renowned value investor Wilbur Ross

ICO had a messy and confusing beginning: formed by the bringing together of 3 previously bankrupt

companies underwent a major debt to equity recapitalisation Issued new equity to further paydown debt Confusing financials due to complex formation and short life

The underfollowed and unloved company, however, had several attributes

highly contracted medium term sales a low cost position increasingly shifting output to higher margin metallurgical

coal in an environment of rising prices >1bn tons of coal reserves backed by a well formed and

financed development capital plan significant recent capital expenditure and excess plant

capacity We bought at an average price of $4.55 per share which was just

over TBV and, we estimated, at approx. 50% of intrinsic value As is often the case when we buy cheaply, ‘good things happen’

Investment Thesis

Arch Coal Inc. made an offer at $14.50 per share We sold post announcement at ~$14.43 (IRR 365%)

Outcome

Estimated 2011 EBITDA ($m) 285Estimated 2011 EBITA ($m) 185

Pro Forma Plus Tygart No. 1 mineIncreased volume 3.5 m tonnesAvg margin($/t) 15 *Increased margin ($m) 52.5

MultiplePF 2011 EBITDA ($m) 338 3.3 x PF for Tygart mine no. 1PF 2011 EBITA ($m) 238 4.6 x PF for Tygart mine no. 1

Target EBITA multiple 8.0 x AssumedTarget Enterprise Value ($m) 1900Target Market cap ($m) 1729Target share price ($) 8.48Current share price ($) 4.55Discount to 'intrinsic' value 46%

* Conservative as management s tated $40/t margin

Buy

Sell

Source: Bloomberg

A$

International Coal (ICO US)

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Investment Example: Village Roadshow

VRL provided a prime opportunity to buy high quality, cash generative assets at 50-60 cents on the dollar when management making clear efforts to simplify the business

VRL has historically had a very complicated corporate and capital structure leading to market aversion

Austereo stake confused market as to underlying value and provided value creation opportunity

Key insiders increasing their economic control highlighted the material undervaluation (as did share buybacks below intrinsic value)

Proposed take private in 2009; 26% share buyback in Nov 2009; 21% proposed share buyback Sep/Oct 2010

Company was poorly covered and materially undervalued with continued share buybacks or full privatisation attempts likely

At our entry price of $2.45, we estimated VRL was trading at a 40-50% discount to intrinsic value

LTM P/E = 6.3x (current shares outstanding); pro forma for announced buyback = 5.1x

LTM price to FCF (post tax) = 1.6x (current shares outstanding); 0.4x (pro forma for announced share buyback)

Investment Thesis

Austereo business sold; $1 special dividend paid and market better realised underlying value

Current value ~$3.20 plus $1.20 dividend (IRR 91%)

Outcome

Buy

Currentvalue

Source: Bloomberg

A$

Village Roadshow (VRL AU)

20c div$1.00

Special div

Pre- Post-(A$m) Buyback BuybackFY10 EBITDA (incl 100% Austereo) 255 255Austereo EBITDA 89 89Net FY10 EBITDA (excl Austereo) 166 166

Assumed EBITDA Multiple 6.0 6.0Enterprise value (excl Austereo) 996 996

Net Debt (pre- and post- buyback) 827 914Less: Austereo debt 209 209Net debt (excl Austereo) 618 705

Equity value (excl Austereo) 378 291Plus: value of 52% stake in Austereo 298 298Total VRL equity value 676 589# shares (m) (Pre- and post- buyback) 166 131

Equity value per share 4.06 4.48Average share price 2.45 2.45% discount to intrinsic value 40% 45%

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Investment Example: Oaks Hotels and Resorts

The company found itself amidst great noise and confusion as the Founder/CEO’s personal 35% stake was placed into receivership and he was removed from board

The ex-CEO subsequently sought to overturn the board and instate his own nominees

A mysterious Chinese investor appeared as a material holder on the register and gained a board seat

Amidst the chaotic activity and negative press, the market lost sight of the fact that the business owned stable, long term and separable assets and was generating record revenue/earnings

We acquired shares at an average of $0.26 per share (less than 60% of NAV and 4x FCF) with our estimated intrinsic value being $0.60-0.70 per share

An overseas listed leisure and hospitality operator launched an initial $0.32 per share hostile bid during the confusion

We expressed our view of value to the board and ultimately sold into the revised offer of $.52 per share (IRR 462%)

While our view of intrinsic value was significantly higher than $.52 per share we did not have the financial firepower to join the battle so grudgingly accepted the revised offer

Outcome

Investment Thesis

Buy

Sell

Source: Bloomberg

A$

Oaks Hotels and Resorts (OAK AU)

NET ASSET VALUE CASH FLOW MULTIPLE 2010 2011(1)

30 June 10 Net asset value 70.8 'Core' EBITDA 25.8 30.0

Plus: October placement 6.5 Capex/Depreciation 5.2 5.2

30 Oct 10 Adj NAV 77.3 'Core' EBITA 20.6 24.8

Less

# shares 173.8 Cash finance costs 8.8 8.8

NAV per share 0.44 Tax 4.0 4.0

Average entry share price 0.26 Free cash flow 7.8 12.0

Discount to NAV 42%

Current share price 0.26 0.26

# shares 173.8 173.8

Equity value 45.2 45.2

Equity / FCF 5.8 3.8

FCF yield (%) 17% 27%

(1) Based on mgmt guidance of $30-32m.