EFTA01091765.pdf

STRICTLY PRIVATE & CONFIDENTIAL Cagera Overview January 2011 EFTA01091765 Summary • Cagera is potentially world' s biggest financial data company - It is launching an industry owned governance Platform/Network "Byhiras" which will provide institutions with transparency and control over their investments • Cagera will generate returns through : - Providing data and technology to Byhiras for AuM-based fees - Commercialising the data aggregated through Byhiras • At inception, Cagera will own the beneficial interest in Byhiras - Minority interests in Byhiras will be placed and sold to institutional investors , turning Byhiras into a utility - Wider adoption of Byhiras will result in increase of AuM on the Platform and the data Cagera will aggregate - The capital raised through Byhiras will expand its infrastructure and pay Cagera to expand its services • Current Status: - The management team are experienced professionals in data technology, risk management and platforms - Pipeline of potential clients has been established - Over £700K has been spent developing the proposition including the alpha version of the risk and user modules • Cagera is raising £2-3.5m in equity capital (closing Jan 2011), in the next round (Q2/3 2011) Byhiras will be raising up to £20m Further capital will be raised as necessary through Byhiras which will reduce Financial Projections - Base Case shareholder dilution in Cagera GBP Millions Year 1 Year 2 Year 3 The consolidated financial projections are: Gross Income 1.1 14.9 49.6 Direct Costs (ex bonus) 4.5 11.3 22.5 EBITDA (3.1) 4.9 19.9 Average AuM 648 4,414 13.854 Full Time Employees 38 82 162 Cagera 2 Stric0y Private & Confidential EFTA01091766 Cagera - Aggregator of Buy Side's Enterprise-Wide Data • Through its unique and inalienable right to data collected through Byhiras, Cagera will harvest vast amounts of information on buy-side's holdings and transactions. - Cagera will eclipse the leading sell-side data aggregators (Bloomberg, Reuters, Markit) by volumes and type of data offered • Cagera will commercialise all Byhiras' data - Because it is based on exact positions and trade flows, Cagera will be able to provide a new range of high value data based services and replace many existing services that are less accurate, including: Valuations: based on actual positions Enterprise data management solution Indices: custom & bespoke based on actual assets Capital flows and pricing data: ability Performance and fees in funds & counterparties Market and sector data Cleaned security. product, OTC masters and identifiers Credit data: concentration, contagion measures Clean market & engineered data. e.g. liquidity. vols Disaster recovery Collateral management data and analytics Information on dark liquidity pools White label retail fund platform technology and data Risk management software with validated models • The value of a data firm is a function of its data (its quantum, uniqueness and detail) and distribution capabili y - Markit (market cap USD 3.3bn in 2009) was built aggregating credit derivatives data from banks — it was the first time this data was aggregated and Markit is now the market standard for this type of data - Bloomberg (USD 20bn) and Reuters Thomson (USD28bn) have extensive distribution networks and wide datasets, but there is little differentiation between them - Cagera will be able to aggregate wider and more detailed data than Markit that is not available to existing data firms or banks. Byhiras will also provide Cagera with a unique distribution network to buy-side institutions • Cagera's first client will be Byhiras — From the end of year 2 Cagera intends to sell direct to Byhiras clients and other institutions Cagera 3 Strictly Private & Confidential EFTA01091767 Byhiras is a utility offering regulator-proof transparency for institutional investors • Byhiras, launched by Cagera and subsequently divested to investors, is... - An independent platform/network, giving investors, managers and their counterparties transparency and control of their investments - A tumkey outsourcing solution, reducing investors' overheads and operating costs - Cost-transparent to all parties thereby offering investors the benefits of their combined scale • Byhiras solves a systemic problem in the financial services industry revealed during the credit crisis by - Addressing common infrastructure and data weaknesses of institutional investors - Giving investors a single consistent view of the value, performance and risks of their holdings with the controls to manage them - Enabling institutions to meet the new stringent regulations that are being imposed as a result of the crisis • Using Byhiras, institutions will be able to achieve - Compliance with regulations, e.g. Solvency II, UCITS III & IV, IFRS7, MiFID, new governance codes and investment mandates - Effective risk oversight on both the assets and their counterparties, i.e. managers, administrators, banks - Improved investment returns through superior fund selection and portfolio construction from a wider fund universe - Enhanced retail proposition through superior products, i.e. better data, investment choice, controls, and their delivery • Byhiras revenue stream is derived from - Charging institutional investors AuM-based fees for assets placed Neutral/Investors without any conflicts of • Institutional Clients on its Platform; the fees will fall as AuM increase interest • Financial Investors - Surplus income will be distributed to the equity owners in Byhiras 1 100% falling Cagera , torero Cagera 4 Strictly Private & Confidential EFTA01091768 The market needs an independent and verifiable solution The problem: • Investors are exposed due to the absence of transparency and control over their investments and market counterparties Key characteristics of the solution need to include • Authorities are forcing firms to use and disclose more detailed • Independent and demonstrably conflict free information, e.g. Solvency II (see Appendix D), MiFID, IFRS7 So that it can be trusted to protect sensitive and confidential information • No single investor has the necessary scale and expertise to monitor all funds, market counterparties, banks, managers • Low cost and give scale benefits So that all institutions will use it and so reduce fees for all • Institutions are in "data overload" and rely on mostly legacy participants systems ill-equipped to meet new data challenges • Open to all institutions • Investors generate and use data much of which is not and cannot To provide enterprise wide solutions and reduce costs to be made publicly available, e.g. OTC contracts, position users concentration, fee levels • Able to cover any asset type, geography • Existing market participants lack the independence and the To be a complete solution infrastructure to provide a solution • Completely reliable and dependable - Banks, custodians, administrators and fund managers are Give users proof that its process are appropriate for conflicted and could not offer a similar service without purpose and are implemented. So relieving firms and cannibalising their existing models. their management of the liability to produce appropriate - Risk platforms do not provide controls, data or network data and build expensive infrastructure effects to users Cagera 5 Strictly Private & Confidential EFTA01091769 Byhiras is a Governance Framework/Network combined with Cagera technology • Byhiras is an independent Platform/Network, owned and operated for the benefit of its users, institutional investors - Through Byhiras investors will be able to achieve complete transparency and control over their investments and counterparties - It will be a utility, open to all market participants, accommodate all asset types, regions and trading activity — It will be owned and controlled for the benefit of investors with funds on the Platform • Byhiras brings all parties (investors, managers, service provides etc) into one single venue - Byhiras will monitor all contracts and counterparties - It will be able to identify weaknesses and enable these to be re-collateralised and dynamically managed - All parties will be able to contact each other, set and determine their profile and how much information they share • Aggregationinew clients • Governance Investors • Demand for new services InSureeS. family of hoes. SWFs. • Regulatory compliance • The Platform will enable • Lower counterparty risks local aulhonlies. pensions • Cost savings • Using Byhiras will enable managers and institutions to meet all their counterparties to Service Providers Authorities regulatory requirements provide a wider range of Fund administrators RegUators. trade bodies. e.g. MiFID, Solvency Il, custodians. auditOiS tax. central banks services to a greater IFRS7, FAS 157 etc number of clients • Byhiras will help central • The Platform will enable Advisors banks satisfy concerns Counterparties firms to optimise their over counterparty risks P-1*-41 H Prime brokers. exchanges Actuarial services. investment and risk regulatory capital execution brokers management. compliance requirements • Aggregation/new clients • Free access to wide investor base Fund Managers • Demand for new services Traditional private equity. hedge • Counterparty management • Lower counterparty risk funds. pOnfOtfOS • Validation • Validation Cagera 6 Strictly Private & Confidential EFTA01091770 Byhiras is more than a platform in terms of scope, transparency, accountability • Client assets are held in a legal framework (the "Platform/Network"), access to which is through Byhiras — All parties given access to the Platform/Network are pre-approved by Byhiras, each client and the relevant managers - Managers are appointed under detailed mandates that define strategies, permitted counterparties securities and risk limits. Likewise the counterparties have mandates that set out permitted activities and risk limits - Byhiras reconciles and independently re-values all activities on the Platform and ensures these are compliant with the agreements between each party - Any multi-lateral information and control sharing agreement can be enshrined. At inception managers can determine the terms and data they offer each investor. t Is Custodians III LI L:dmInistratorsill Banks Brokers i ll 111 "T- Fund Pension Fund Insurance Co Institutions can segregate assets within the Framework orpool Investor assets sit within with others the Platform( Governance Framework Confidentiality Covenant • Managers and other service • Counterparties and managers can be • Byhiras provides credit data back to providers are 'Validated" by quickly and replaced at low cost it counterparties so that they can provide the Byhiras they breach agreements or risk best terms to clients and funds guidelines Cagera 7 Strictly Private & Confidential EFTA01091771 Byhiras is a network • Within the Byhiras framework - Institutions can connect directly with each other and transact - Institutions can set and determine the level of information they provide and make accessible to each party . For example a manager of a fund can allow one investor to see position level data but another just aggregated monthly data - Byhiras oversees all activities and ensures that data sets are accurate - Byhiras provides a safe environment for transactions and it is the mechanism through which transactions and agreements can be observed and enforced • The impact of this includes — Lower transactions costs - Elimination of counterparty and contagion risk .. ......... _ ,, ,, - Greater liquidity - Wider investment opportunities Through Byhiras institutions can enshrine any number and type of information and control sharing agreements with any number of parties ••• •••• ....... -• "' Cagera 8 Strictly Private & Confidential EFTA01091772 Byhiras is unique • The differences between Byhiras and potential competition are largely due to the difference purposes of each proposition - Data firms: provide extensive market and public data sets sometimes they also provide risk and other software — They can't access or distribute private data such as position level data in funds nor do they give investors any controls - Fund Platforms: a distribution model providing access and liquidity to a given universe of funds. Achieved by standardising the counterparties, terms, fee structures and liquidity. - Typically restricted universe of managers and funds, tied counterparties, set fees and no access to detailed data, no controls other than selling - Software Providers: provide process technology for client data. Some also aggregate and provide access to market data, others are aggregating their own data — Need to be implemented and maintained, don't provide either data or controls and are expensive • Byhiras is different because it is designed to meet the specific requirements of institutional investors - Transparent: Byhiras' positioning and neutrality enable it to aggregate all position and trade level data - Confidentiality: Byhiras can enshrine any multi-lateral information sharing agreement, - Give controls: investors can set terms, select and remove their assets and counterparties - Flexibility: assets are not required to be in any specific form or type - Inexpensive: easy to adopt and reduces both operating costs and overheads at institutional investors - Easy to adopt: Byhiras can be integrated to institutions' systems - Scale benefits: institutions can harness the cost and operating advantages of their combined strength Cagera 9 Strictly Private & Confidential EFTA01091773 Two entities Cagera and Byhiras to protect data and achieve control Cagera will have the permanent and inviolable right to aggregate and commercialise all the data through Byhiras Processed Data The value of the data is in its aggregation, it is not held or & Technology provided by any single user of Byhiras Processed Data & Technology Some of data that Cagera will aggregate is available to institutions RoW 4 Cagera individually, e.g. position and transaction level details of funds in which they are invested. However, no institution has access to all the data they will need. All data • Institutions do not want the burden of collecting, cleaning and 1 analysing this data themselves The Platform/ - It would require them to build and maintain costly new Governance Framework teams, systems and capabilities - They would be liable for the quality of the information Confidentiality Covenant • Separating ownership and control of the platform/network (Byhiras) from the rights to the data (Cagera) is key, it Re-insurer Family Office - Enables institutions to achieve scale benefits with, and Insurance Co SWF fr controls over managers and service providers by LODE Pension Fund Authority aggregating their commercial strength - It provides assurance to users that investors in Byhiras do not have preferential access to their data Cagera 10 Strictly Private & Confidential EFTA01091774 The Team Name Role Background SAM Lusty CEO & Founder Co-Founder and Director MSP (digital rights management for ISPs); Founder CEO Ryes Capital (fund platform); Global Co-Head, Alternative Investments Group DrKB; Executive Director, Global Equity Derivatives UBS. SAM started his career in the City as a bond trader at Salomon Brothers Inc. He qualified as a Chartered Accountant at PwC Mike Bedford Technology & Data Previously co-Founder and CTO of Markit Group responsible for taking the business from an idea to a professionally run and scalable platform across the data and valuations businesses. Prior to Markit: Head of Fixed Income & CDS Front Office Risk and Trading Solutions, TD Securities London; Development Lead Interest Rate and Asset Swap Desks, Merrill Lynch London and New York Predrag Popovic Technology & Currently Group CTO at GTECH G2, Predrag was previously Co-founder and CEO of Finsoft, builders Systems of the ECB bond database (CSDB — Central Statistics Database). In 2007, he lead the sale of iFinsoft's bookmaking division to GTECH Corporation (world leader in supply of lottery systems, with 70% market share) and oversaw Finsoft 's growth to 40+ customers, including 4 state lotteries and c. 250 employees). Previously head of Head of Risk Management IT at Nomura Wasim Rehman Non-Executive Managing Partner of FWE and formerly partner of Marshall Wace where he was responsible for risk Director - Byhiras management and worked in quantitative and portfolio management. Prior to this he worked at Goldman Sachs Atul Bali Non-Executive CEO of Xen, an integrated consumer facing digital media operation. Previously the President & CEO Director - Byhiras of the Digital E-commerce division and Group SVP for Corporate Development & Strategy for the Lottomatica — GTECH group. He built GTECH's Commercial Payments division from a break even $25M revenue business to $117M business with >$50M in EBIT by 2005; processing more transactions than Amex, Mastercard and Visa combined at c. 500M tx per day. He took GTECH into 14 new government lottery markets, set up 23 joint ventures in 19 countries, acquired and integrated 12 new businesses into the group. Cagera 11 Stric0y Private & Confidential EFTA01091775 The Team (cont.) Name Role Background Larry Kessler Senior Advisor/ Previously Chief Administrative Officer and General Counsel for Investcorp International (1991-09). He was a member of the Management Committee and responsibilities included: administration, HR, Non-Executive law, compliance/corporate governance, risk management, corporate communications, operations, Director Byhiras internal controls and audit. Prior to this he was Executive Vice President and General Counsel (1988 - 1991) at News Corporation. He was the Chief Legal Officer reporting to Rupert Murdoch (Chairman and Chief Executive) responsible for worldwide legal affairs and responsible for: originating, structuring and closing acquisitions, joint ventures, public and private financings, bank loans and recapitalizations. Julia Ashworth Senior Advisor Previously Global Finance Director and UK COO for Rothschild Investment Banking. Before this she was a corporate financier at Rothschild specialising in financial institution M, in particular, in insurance. She qualified as a Chartered Accountant at PwC Alan Morgan Senior Advisor Co-founder and Director of Olivant and Non-Executive Director of AXA Investment Management. Formerly McKinsey senior partner leading its Financial Services Practices in EME, and for 12+ years a Board member of the McKinsey Investment office which managed USD 4+ bn of staff funds Auditors Grant Thornton LLP Advisory Groups Ernst & Young LLP Commercial bankers HSBC Legal Advisors Macfarlanes LLP Cagera 12 Stric0y Private & Confidential EFTA01091776 Conclusion Cagera first round financing • GBP 2-3.5 mn is being raised in Cagera to build and launch Byhiras, this round of financing closes end of January 2011 • Further rounds of capital will be raised through Byhiras, this is consistent with establishing a utility and help binds users to the Platform/Network • Cagera will generate fees selling data and technology to Byhiras and to other clients. Cagera will also have a participation in Byhiras that it will sell in due course. Byhiras Adoption • A pipeline of potential customers has been established who have requirements Byhiras addresses - Byhiras has developed a close working relationship with E&Y who are introducing Byhiras to their life and pensions clients as a potential solution for a range of problems from risk management to Solvency II - The proposed services and fees have been tested with institutional investors and a range of other market participants - Fund managers and counterparties have indicated strong support for Byhiras as it will validate their services - Byhiras is consistent with the objectives of the authorities and regulators (Financial Reporting Council, FSA) Experienced team, proven software and low risk implementation • The management team are highly experienced and have track records in technology and data management • The initial core software and technology is industry proven and has been verified as suitable by an independent technology and integration firm Exit Strategy • Exits for investors in Cagera will include a trade sale to a data firm (Thomson Reuters, Markit, Bloomberg), listing or a private placement with institutional investors Cagera 13 Strictly Private & Confidential EFTA01091777 Contact Details To follow-up or request a PPM, please contact: SAM Lusty Founder & CEO Office Mobile Fax Email Cagera LLP 23 Austin Friars London EC2N 2QP Cagera 14 Strictly Private & Confidential EFTA01091778 Background & Appendices EFTA01091779 Background: investors lose transparency and control over their investments • By investing in funds institutions lose transparency and Current structure for fund investment control of their capital — Few firms even track their own internal funds Directors Manager Auditors --2 • Investors rely on managers for information, but $ - Manager appoints all counterparties Brokers Prospectus - Manager writes both prospectus and reports Custodians 4 - Investors rely on marketing literature and "headlines" Banks Admin. • Institutions are increasing allocations to third party funds Investor - Adoption of open architecture and wrap platforms increase the range of investments and funds available Consequences/impact - Single market (UCITS Ill & IV) increases the ability of providers to sell their products across the EU - No assurance of adherence to style/mandate - No knowledge of or control over risks taken - Institutions pass investment and selection risk to retail, and compensate through greater ranges of products - Unknown counterparties - No transparency into incentive structures and fees - No transparency into underlying costs - Only periodic reporting with little detail - Difficult to compare or measure performance - Expensive to sell or hedge Cagera 16 Strictly Private & Confidential EFTA01091780 Background: complex and changing underlying risk profiles in investments • Complex investment chain Shareholders — Financial instruments and relationships Authertdes extend across markets, counterparties, C.:rental:orly investments, making risk identification and control difficult C.:rental:orly Institutional Investor Tax. Risk Management.Product Developmert.Comphance.Assk • Multiple counterparties, managers, and Ceunterparty Fund Mgt. Financial Control. Sales & Marketing.Produci Control underlying securities — No standardisation of documentation, terms and data • Portfolios and products exacerbate the problem of opacity and illiquidity, — introduce concentration, correlation and Problems investors need to overcome include: contagion risks - Completeness accuracy of data Free - OTC Contracts • - Fees breakdown 0 Counter/party Assel - Definition maintenance Documentation? re-hypothecation? - Security identification Counlerpany - Documentation management OTC - Counterparty exposures and management Costrac - Collateral management - Consistent pricing and valuation across holdings - Measures of data quality Cagera 17 Strictly Private & Confidential EFTA01091781 Background: risks are inter-linked and require position level detail for identification • Risk identification requires complete and continuous trade and position level data, counterparty contracts, how and where assets are held and on what terms. Risk management requires controls over these • There are many sources of risk and most are inter-related and the crisis demonstrated that they impact each other — Effective risk management must identify all sources - Optimal fund selection and portfolio construction requires position level detail Counterparty failure, Asset re-hypothecation, box Credit, fixed income, equities, management, liquidity and gates, collateral FX, commodities, management, tax structure Settlement Market & concentration, liquidity, Risks Performance pricing, dividend, coupon, Risks correlation, volatilities , fund Reporting to investors (TCF etc), risk & and strategy selection Compliance & investment mandate compliance (style drift) and Reporting Risks service contracts, regulatory compliance: IFRS7, Solvency II, UCITS III, MIFID, UCITS III & IV • Portfolios and investment products compound the challenges of measurement (consistent use of models and price data) and identification (across funds, counterparties and products) adding further exposures including: - Contagion: between funds, counterparties and managers - Correlation: of investments impairing performance and risk - Concentration: of risks and exposures and dependence on counterparties and service providers - Consistent and consolidated reporting: completing IFRS7, Solvency II etc — Fee and cost identification Cagera 18 Strictly Private & Confidential EFTA01091782 Background: Byhiras services to clients • Adopting Byhiras will be straightforward and remove burdens from both managers and their investors - Clients replace fragmented delayed data sets with a single data 2 Poriciorund provider that can service multiple departments Onais 3 MM.:. — - Managers and counterparties will send existing files and pass much of their reporting burden to Byhiras • Services will be delivered as a web based "desk-top" application like Bloomberg or Reuters, but will be more easily customised to client requirements — It will be able to accommodate different levels of access for each group within each client as required, e.g. compliance, sales, investment and risk management departments all need different screens and applications but on the same data - Alternatively institutional clients can integrate Byhiras services and data direct into their existing MIS. It has a flexible API and client models can be integrated into Byhiras services, analytics and reports - Byhiras will be aggregate other data providers/sources and deliver "intelligent" and selected news/data feeds • Clients will be able to "upload" data on non-Platform assets to risk manage their portfolios or even outsource their enterprise wide risk management infrastructure - Byhiras will be able to provide reports and data to each client using their own valuation bases, models, time frames and accounting processes Cagera 19 Strictly Private & Confidential EFTA01091783  Appendix A: How Byhiras would have protected investors The absence of a transparent platform through which institutions can hold and manage their investments includes: unnecessary risk taking, high costs, and poorly constructed portfolios. Illustrations of some of the high profile failures include: Event What Went Wrong Impact Impact under Byhiras Amaranth Style Drift: Concentrated illiquid positions with high leverage Failure None — detailed risk & investment guidelines with Sept 2006 contravened"diversified" status. Despite warning not moderate risk or disclose Assets Lost manager monitors and enforced $6bn+ to investors Stanford Capital None — assets held separately and control not Failure 2009 Controls Breakdown: Fraud: ponzi scheme ceded, rehypothecation is controlled, counterparties Assets Lost monitored $8bn+ Standard Life Style Drift: £2.1 bn internal fund marketed as "cash" invested 44% of assets in Investment Loss None — Byhiras investment guidelines continuously Sterling One mortgaged backed securities. SL had to inject £104mm and paid FSA fine of Reputational loss monitored and controlled £100mm ++ GBP2.45mm Refco Controls Breakdown: Fraud/theft at PB. Insolvency from the repayment of Firm Failure None — Byhiras procedures prevent assets leaving 2006 debts by the CEO to Refco Inc. Assets Lost custodian Peloton Style Drift: Concentrated risk and illiquidity with high leverage — failurea month Fund Failure None — detailed risk & investment guidelines with Feb 2008 after it won "new fund of the year" Eurohedge. Investors were not aware of the AssetsLost manager monitors and enforced $2bn risk and leverage in the fund Lehman None — assets held separately and control not Controls Breakdown: Leveraged exposure to illiquid assets. client assets not Bank Failure Sept 2008 ceded, rehypothecation is controlled, counterparties segregated were lost, e.g. Olivant lost 2.78% of UBS AG Assets Lost $130 Billions monitored Medoff Controls Breakdown: Fraud. 'Ponzi" scheme losers include Banco Santander Fund &Manager None — assets held and validated separately and Dec 2008 ($3.1bn). Bank Medici ($2.1bn), Fortis Bank ($1.4bn). HSBC ($1bn) Failure control not ceded. counterparties monitored $50bn UBP($1bn), AIA($1.4bn) Assets lost Cagera 20 Stric0y Private & Confidential EFTA01091784 Appendix B: FSA Fines Standard Life GBP 2.45 million The Financial Services Authority has fi