CAPRICORN PRIVATE EQUITY

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CAPRICORN PRIVATE EQUITY

• Institutional Investor Learning Journey
• October 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

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Introduction
4
Introduction

• Capricorn is raising a US300 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
Geoff Snelgar - Geoff founded Capricorn in 2003
and is Chairman of the Investment Committee.
Geoff is responsible for forming and implementing
Capricorns investment strategy and managing key
relationships with shareholders and portfolio
companies.  He is actively involved with the
pro-active management of all portfolio
investments. 
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 Funds 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.  
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Investment Highlights
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

Strong Track Record

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

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

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

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Investment Thesis
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
Consumer Demand
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
Infrastructure Spend
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
BEE
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
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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
Interest rates
Inflation (2000a 2010F)
Trade and Current Account
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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

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The Opportunity Consumer Spending

• One of South Africas 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

12
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.

13
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 Selected transactions and the BEE discount Selected transactions and the BEE discount Selected transactions and the BEE discount 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
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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 Africas largest private
insurance company, providing short-term and life
insurance products Value of 750
million Operations in 9 countries
Hollard
Investor based in the United Kingdom Private
equity investments in Nandos and Pizza
Express Value of 1.5 billion Ultimate holding
company of Hollard
Capricorn Ventures International
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Strong Track Record
Investment Sector Investment Date Size (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
  Directors 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 Hollards 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 sourcing
Transaction Structuring
Investment Committee
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 Hunt
Geoff Snelgar
Gavin Chadwick
Andrew Hunt
Highly disciplined and active investment approach
to sourcing, structuring, monitoring and exiting
investments Partners with managers of good
companies, providing capital and strategic
resources to accelerate growth and improve
operations
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Transaction Pipeline
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
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Conclusion
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Summary of Terms
Capricorn is raising a new Fund managed by
Capricorn Private Equity
US 300 million
Fund size
Mandate
Going private opportunities in South Africa and
sub-Saharan Africa
Term
10 years, with an option to extend
Structure
Limited liability partnership incorporated
offshore
Target returns
25 nominal per annum
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

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Appendix 1Selected Case Studies
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Case Study African Bank
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

• 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.

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Case Study Clientele Life
Transaction Summary Clientele Life Investment Date June 1997 Sector Insurance Invested Capital R187 million (41 million) IRR 51

• 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.

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Case Study Eurosteel
Transaction Summary Eurosteel Holdings Investment Date March 2006 Sector Steel Invested Capital R37 million (6 million) IRR 100

• 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. Capricorns 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 Directors valuations as at June 2007,
  Capricorn has realized a multiple of 1.8x times
  capital invested, and an IRR of 143.

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Disclaimer
Contacts

• Andrew Hunt Sean Meyersfeld
• Capricorn Private Equity Capricorn Private
  Equity
• Phone [phone] Phone 27 (0)11
  666 0746
• Mobile [phone] Mobile 27 (0)82
  901 7630
• Email andrewh_at_cpecapital.com Email
  seanm_at_cpecapital.com

• This 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