The Australian Government's Innovation Report

Pooled Development Funds
The Pooled Development Funds (PDF) programme aims to increase the supply of patient equity capital, including
venture capital, for Australian small to medium-sized enterprises. Under the programme, private sector investment
companies are registered as PDFs.
The programme provides both PDFs and their shareholders with concessional tax treatment on returns from
eligible investments.
Broadly, PDF companies can invest in Australian businesses with total assets of not more than $50 million. PDF
investments are generally by way of purchasing newly issued shares in the investee companies, which are raising
money to either establish or substantially expand their businesses. Property development and retail sales
operations are the only excluded activities.
During 2005-06 13 companies registered as PDFs and PDFs reported over $46 million invested into Australian
businesses. At 30 June 2006, there were a total of 101 companies registered as PDFs.
A comprehensive review by an expert group of the Australian venture capital industry was completed and
provided to the Australian Government in December 2005 (see section on the Venture Capital Review).
In response to the review of the Australian venture capital industry, the Australian Government announced in
the 2006-07 Budget that the PDF programme would be closed to new registrations after 31 December 2006. PDFs
registered at this time will be able to continue under the existing arrangements.
More information about PDF can be found at: www.ausindustry.gov.au
Innovation Investment Fund
The Innovation Investment Fund (IIF) Programme is designed to promote the commercialisation of Australian
R&D by providing venture capital to high-tech companies at the seed, start-up or early expansion stages of their
development.
The Australian Government has contributed approximately $221 million for the first two rounds of the IIF, which
is matched by private sector investment up to a 2:1 basis, resulting in $358 million being available to support the
commercialisation of early stage R&D. Nine licensed fund managers currently administer the pool of investment
capital and make all investment decisions relating to their funds.
In 2005-06, $17.4 million was invested in 18 investee companies (not including co-investments) of which
$10.47 million was provided by the Australian Government. Five of the 18 companies were new investments.
Since the programme’s inception, the nine funds have invested in 77 individual companies in the bioscience (18),
business systems (three), communications (10), engineering (six), health (six), IT (25), materials technology (one),
medical devices (two), mining (five) and transport (one) sectors.
In 2005-06, the Australian Government received returns of $5.19 million. As at 30 June 2006, the total returns
were $286.2 million of which the Australian Government had received $64.56 million. This was from the full
sale of five companies, the partial sale of three companies, the sale of residual value of four companies, and
dividends and loan repayments from five companies.
In the 2006-07 Budget, the Australian Government committed $200 million in capital for a third round of
10-year funding for the IIF. This third round will involve appointing up to two new managers each year over
five consecutive years, with $40 million a year in funding available for successful fund managers. The
programme will result in 10 new funds being introduced to the market. Government funding will be matched
at least dollar-for-dollar with private sector funds. It is expected three new fund managers (under the first
round) will be appointed in 2006-07 and become operational in 2007-08.
More information about the IIF can be found at: www.ausindustry.gov.au
58 Backing Australia’s Ability