CAPRICORN PRIVATE EQUITY

Institutional Investor Learning JourneyOctober 2007

STRICTLY PRIVATE & CONFIDENTIAL

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Agenda

Introduction

Investment Focus

Capricorn Approach

Conclusion

Appendices

Selected Case Studies

Section 1

Section 2

Section 3

Section 5

Appendix 1

Introduction

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Introduction

Capricorn is raising a US$300 million buy-out fund focussing on middle market companies in the industrial and consumer sectors in South Africa (the “Fund”)

This is the third private equity fund raised by Capricorn, but the first in which unaffiliated third parties will be given the opportunity to participate

The Fund will be managed by Capricorn Private Equity.

Capricorn is facilitating the introduction of an anchor investor into the Fund who will commit to investing $45m or 15% of the targeted fund size

Capricorn will be compliant with the BEE Codes of Good Practice as issued by the Government of South Africa

The Fund will seek to achieve an internal rate of return (“IRR”) of 25% net of fees and expenses

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Core Management Team

Andrew Hunt - Andrew joined Capricorn in 2007 as Director and is responsible for day to day management of the Manager, the structuring and execution of all Portfolio Investments and is a member of the Investment Committee. Prior to joining CPE, Andrew was the Head of Investment Banking, Sub-Saharan Africa for HSBC Bank plc.

Sean Meyersfeld - Sean joined Capricorn in 2007 as a Director and is responsible for transaction origination and new business development He plays an active role in leading transaction teams, deal structuring and execution, and the management of Portfolio Investments. Sean is a member of the Investment Committee. Prior to joining CEP, Sean was a senior coverage and execution banker at HSBC Bank plc.

Gavin Chadwick - Gavin is the Managing Director of Capricorn. He is responsible for the day to day management of Capricorn, as well as identifying, analysing, and recommending investments, performing due diligence and leading transaction teams. He will actively assist the CPE team with a particular focus on adding value to the Fund’s investments.

Rob Fihrer - Rob is a Director of Capricorn and has been with the group for seven years. Rob was actively involved in setting up Capricorn Fund Managers which manages the Hollard Stable Hedge Fund with over R800m under management. Rob is also a key member of the private equity team where he sources and evaluates deals and performs due diligence investigations and manages investments. 

Geoff Snelgar - Geoff founded Capricorn in 2003 and is Chairman of the Investment Committee. Geoff is responsible for forming and implementing Capricorn’s investment strategy and managing key relationships with shareholders and portfolio companies.  He is actively involved with the pro-active management of all portfolio investments. 

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Attractive Region• South Africa has a stable political and economic environment• Good growth prospects on the back of emerging, consumer-driven middle class• Significant infrastructure investment over the next ten years

Investment Highlights

Strong Track Record

• Established track record of superior performance dating back to 1992• Average returns of 51% net of fees and expenses

Experienced Management Team

• Strong team with complimentary skill sets• Access to proprietary deal flow across a range of sectors• Full range of skills and knowledge necessary to make successful investments

Good Transaction Pipeline

• Strong pipeline of attractive and imminent investment opportunities

Under-serviced Market Niche

• Private equity share of the regional market remains low• Attractive investment opportunities exist in middle market• Middle market defined as companies with a EV of between $75 - $150 million

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Investment Thesis

Consumer Demand

BEE

Infrastructure Spend

South Africa currently has the 2nd largest purchasing power in the Emerging Europe, Middle East and Africa (EMEA) region

High GDP per capita and growth offers significant opportunities

South Africa plans to invest $50 billion in infrastructure over the medium term

Fund will not invest in the infrastructure but in companies that will benefit from the significant infrastructure spend

Capricorn sees BEE as an opportunity to facilitate transactions that may otherwise not be available to the private equity market

Capricorn has a strong track record of BEE investments

Middle Market

There are many attractive middle market investment opportunities that can be entered at lower multiples than their larger peers

Established private equity participants have all raised larger funds and are now chasing larger transactions

Investment Thesis

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The Opportunity – South Africa

South Africa is amongst the fastest growing economies globally, with medium-term GDP forecasted at 5.5% through 2010

South Africa has a stable political and economic environment South Africa is the portal for a developing Africa

GDP %

Inflation (2000a – 2010F) Trade and Current Account

Interest rates %

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The Opportunity – Middle Market

3-year average EV/EBITDA for companies with EV below $100 million averaged 4.2x, compared with 7.5x for values of $100 million to $250 million, and over 9.8x for companies valued above $500 million

Often a function of low free float, liquidity, or lack of broker coverage Pricing differential represents a significant opportunity to realise value by growing and preparing middle

market companies for exit in the larger capitalisation market Established private equity participants in South Africa have raised large ($1bn) funds and are now chasing

larger transactions

Size of Capital Size of Company

Large

Middle Market

Small

Cap

Most competitive space

Relatively Less Competitive

Very competitive space

$500m revenues

$100m to $500m revenues

$15m to $100m revenues

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The Opportunity – Consumer Spending

One of South Africa’s key characteristics in recent years has been the growing wealth of the previously disadvantaged, consumer-driven middle class

South Africa currently has the 2nd largest purchasing power in the Emerging Europe, Middle East and Africa region and a high GDP per capita

Despite historical growth, overall levels of house and car ownership remain low, and therefore the propensity to spend is expected to remain high

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The Opportunity - Infrastructure

The scale of public infrastructure spending is a key aspect of the South African growth story South Africa plans to boost investment in infrastructure by approximately $60 billion over the next ten years This includes investment in electricity generation, ports, roads, rail, housing, bulk and hospitals Cement, steel, electricity and fuel producers are currently operating at or near full capacity, with significant

capacity expansion expected in response to growing demand.

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The Opportunity – BEE

Capricorn sees BEE as an opportunity to facilitate transactions that may otherwise not be available to the private equity market

Capricorn has an extensive network of BEE partners and a track record of BEE investments Since BEE transactions are often executed at a discount to underlying value, Capricorn will use these

opportunities to deliver superior investment returns for the Fund

Selected transactions and the BEE discount

Target EconomicCost

Transaction Value

(Rm)

Cost as % of Value

Cost as % of Market

Cap

Nampak 250 981 25% 2.6%

Discovery 260 831 31% 2.1%

Murray & Roberts

175 494 35% 3.4%

Medi-Clinic 224 1,088 21% 3.5%

Old Mutual 799 3,448 23% 3.2%

Nedcor 968 3,085 31% 3.7%

Mutual & Federal

166 663 25% 3.1%

African Bank

350 600 58% 4.3%

Capricorn Approach

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Who We Are – Capricorn

Capricorn

Capricorn is a leading alternative-investment firm in South Africa which successfully manages a number of businesses:•Private Equity

•Hedge Fund

•Property Fund

Associate of the Hollard Group

Hollard is South Africa’s largest private insurance company, providing short-term and life insurance products

Value of $750 million

Operations in 9 countries

Investor based in the United Kingdom

Private equity investments in Nandos and Pizza Express

Value of $1.5 billion

Ultimate holding company of Hollard

Hollard

Capricorn Ventures International

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Strong Track Record Investment Sector Investment

DateSize (Rm) Exit value

(Rm)IRR Type of

Transaction

Baobab Solid Growth Micro-Finance 1993 R6m R3,300m 208% Industry Roll-up

Mustek Technology 1995 R45m R164m 122% Pre IPO Capital

Clientele Life Life Assurance 1997 R187m R2,433m 51% Buy-out

Mercantile Banking 1998 R174m R24m -3% Public Restructuring

FedCredit Life Life Assurance 2001 R29m - 100% plus Industry roll-up

FedSure General Short-term Insurance 2001 R42m R232m 50% Industry roll-up

NAIL Media 2003 R252m R355m 45% Public market restructuring

Mobile Holdings Telecoms 2006 R30m Unrealised 15% Growth Capital

Eurosteel Steel 2006 R37m Unrealised 143% Pre- IPO Capital/BEE

Westbrooke Retail 2006 R45m Unrealised 91% Growth Capital

Toolquip Industrial 2007 R38m Unrealised n/a BEE

Izwe Loans Financial Services 2007 R10m Unrealised n/a Pre-IPO Capital/BEE

Mining, Oil & Gas Services Energy & Mining 2007 R50m Unrealised n/a Industry roll-up

SAML Financial Services 2007 R50m Unrealised n/a Industry roll-up

Total R995m 51%Notes:• IRRs for unrealised investments based on Director’s valuations as at 30 June 2007;• Investments made in 2007 are valued at cost;• Hollard currently owns 47.6 million shares in Mercantile, with a market value at June 2007 of R15.7 million.• IRR calculations are gross of expenses and carried interest;• Fedsure Credit was integrated into Hollard Group where it currently provides a significant portion of Hollard’s credit life business. Fedsure Credit was purchased for R29 million, plus interest

over the period 1 January 2001 to 15 October 2001. However earnings from the business over that period exceeded the purchase price plus interest, with the result that the business was effectively acquired for free.

• The Fedsure General business was integrated into Hollard Group post acquisition, with the core commercial and industrial business becoming Hollard Commercial and General (HCG). In 2006 Hollard Group sold a stake in HCG to BEE investors for R160 million. The indicative value of the UMAs at June 2007 in R72 million.

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Investment Approach

Deal sourcingTransactionStructuring

InvestmentCommittee

Portfolio Management

Exit

• Proprietary deal flow

• Quickly assess multiple opportunities

• Rigorous analysis of risks, returns and strategy

• Structuring• Financing• Taxation• Management• Protections

• Geoff Snelgar• Andrew Hunt• Sean Meyersfeld• Gavin Chadwick• Rob Fihrer

• Business optimisation

• Operational efficiencies

• Strategic plan

• Exit Process• Value

maximisation

Sean Meyersfeld Andrew HuntGeoff Snelgar Gavin Chadwick Andrew Hunt

Highly disciplined and active investment approach to sourcing, structuring, monitoring and exiting investmentsPartners with managers of good companies, providing capital and strategic resources to accelerate growth and

improve operations

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Country Sector Transaction Size US$

Description

South Africa Diversified industrial

250 million Leveraged buy-out of a publicly traded industrial conglomerate in South Africa. Significant exposure to the domestic consumer market.

South Africa Sugar 150 million Acquisition and refinancing of sugar mills and cane land in South Africa, in partnership with BEE.

South Africa Waste management

30 million Acquisition of a leading independent waste management company with a view to consolidating a highly fragmented and historically public-sector managed industry.

South Africa Steel Merchant 15 million Acquisition of a stainless steel distributor with significant activities in downstream steel processing and aluminium distribution, in conjunction with BEE.

South Africa Household Goods 25 million Acquisition of a high-growth furniture retail business with a particular focus on the lower- and middle-income market.

Total: 460 million

Transaction Pipeline

Conclusion

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Summary of Terms

Capricorn is raising a new Fund managed by Capricorn Private Equity

Fund size US$ 300 million

Mandate Going private opportunities in South Africa and sub-Saharan Africa

Structure Limited liability partnership incorporated offshore

Target returns 25% nominal per annum

Term 10 years, with an option to extend

Target transaction size Equity investments of between US$ 25 million and US$ 40 million

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Next Steps

Capricorn is available for follow-up discussions and presentations, or to introduce additional members of the Capricorn management team

Due diligence can be performed on both the Fund and the Management Company at our offices in Johannesburg or London

Private placement memorandum and draft partnership agreement available Q1 2008

Appendix 1Selected Case Studies

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Case Study – African Bank

Description

Baobab Solid Growth was formed in 1994 with initial capital of R6 million ($2 million). The company was listed on JSE Securities Exchange (“JSE”) as an investment company controlled indirectly by the Hollard Group in 1995.

 

During the course of the next four years, Baobab began a process of consolidating the then fragmented micro-finance sector in South Africa, a process that saw the company change its name from Baobab Solid Growth to Theta Group Limited in 1997. The various acquisitions took the share price from R3.50 per share ($0.96 per share) to an effective R240.00 per share ($66.00 per share) over a four year period.

 

In 1999 Hollard Group sold its remaining 40% stake in Theta Group Limited to New Africa Investments Limited (“NAIL”) for R3,300 million ($%15 million). In the same year Theta Group was renamed African Bank Investments Limited, which remains listed to this day.

 

Hollard was able to achieve a multiple of 35 times its investment in Baobab. The IRR on the transaction was 208%.

Transaction Summary

Baobab Solid Growth

Investment Date: July 1994

Sector: Financial Services

Invested Capital: R6 million ($2 million)

Realised value: R3,300 million ($515 million)

IRR: 208%

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Case Study – Clientele Life

Description

Clientele Life was acquired by the Hollard Group in 1997 for R187 million ($41 million). Clientele Life is a stand-alone life insurer which markets through TV advertising, telesales and a multilevel marketing operation. It was the first brokerage to use this marketing method in South Africa. Once purchased, Clientele was reversed into the Crusader Insurance listed shell, which had been acquired for this purpose. This provided Clientele with the platform and license to grow rapidly in the direct life insurance market. Clientele now earns approximately R100m ($14 million) pre taxation profit per annum.

 

Clientele has accumulated substantial expertise in database management and cross-selling, providing a strong platform for future growth. CVI currently owns ±80% of the shares in Clientele.

 

Based on market prices as at June 2007, Capricorn has realized a multiple of 13.0x on its investment in Clientele. The IRR of the transaction is 51%.

Transaction Summary

Clientele Life

Investment Date: June 1997

Sector: Insurance

Invested Capital: R187 million ($41 million)

IRR: 51%

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Case Study – Eurosteel

Description

Eurosteel Holdings is the second largest stainless steel distributor in South Africa and has significant activities in aluminium distribution and downstream steel processing. Capricorn acquired an indirect 14% stake in Eurosteel in March 2006 when it facilitated a BEE transaction for the Company, whereby the Isitali Consortium acquired a 35% stake in Eurosteel. Capricorn owns 40% of the Isitali Consortium. Capricorn made a further direct investment of 10% in Eurosteel in August 2006. Capricorn’s total investment in Eurosteel is R37 million ($6 million). Capricorn plays an active role in supporting Eurosteel management in strategy development, corporate finance, organisational development and operational strategy.

 

Eurosteels’ turnover for the year ending February 2007 was R727 million ($100 million) with profits after tax of R68 million ($9.5 million). Capricorn remains invested in Eurosteel, and based on Director’s valuations as at June 2007, Capricorn has realized a multiple of 1.8x times capital invested, and an IRR of 143%.

Transaction Summary

Eurosteel Holdings

Investment Date: March 2006

Sector: Steel

Invested Capital: R37 million ($6 million)

IRR: 100%

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DisclaimerThis document has been prepared by Capricorn Private Equity (“Capricorn”) based on publicly available information. No independent verification of such information has been made by Capricorn.

Neither Capricorn nor their respective subsidiaries and affiliates, or any of their respective directors, officers, agents, advisers or employees makes any representation or warranty, expressed or implied, nor shall any of them have any responsibility or liabilities whatsoever in respect of the accuracy or completeness of, or omissions from, this presentation. Accordingly, no responsibility or liability is accepted, and any and all responsibility and liability is expressly disclaimed, by Capricorn and their respective directors, officers, agents, advisers and employees for any errors, misstatements, misrepresentations or omissions in this presentation and or any information or opinion contained therein.

This document does not constitute an offer to sell or the solicitation of an offer to purchase or subscribe for any investment, nor shall it form the basis of any contract or financial advice.

No part of this document may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Capricorn.

Capricorn Capital Partners (Pty) Ltd is incorporated in South Africa, registration number 2002/031449/07

Contacts

Andrew Hunt Sean MeyersfeldCapricorn Private Equity Capricorn Private Equity

Phone: +27 (0)11 666 0747 Phone: +27 (0)11 666 0746 Mobile: +27 (0)82 777 1025 Mobile: +27 (0)82 901 7630

Email: andrewh@cpecapital.com Email: seanm@cpecapital.com