Carlos Perry EMPEA

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An Overview of Private Equity Investingin Emerging Markets

Carlos PerryChief Operating OfficerEmerging Markets Private Equity Association (EMPEA)

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EM PE OVERVIEW:FUNDRAISING, INVESTMENTS,PERFORMANCE, KEY MARKETS

EMPEA AFRICAWHY EMERGINGMARKETS?

AGENDA FOR TODAYS DISCUSSION

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Founded in 2004

EMPEA IS THE ONLY INDUSTRY ASSOCIATION REPRESENTINGPRIVATE EQUITY INVESTORS ACROSS GLOBAL EMERGING MARKETS

Latin America /Caribbean 16%

Africa23%

MENA 11%

CEE and CIS 15%

Asia19%

Global Emerging Markets 19%

15%

26% 59%

Who We Are

Service Providers +Limited PartnersFund Managers

Today representing nearly 300 leading fund managers, institutionalinvestors and other industry stakeholders managing >US$900b AUM.

13 full-time staff based in Washington, DC and Hong Kong

EMPEA

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Our membership is diverse globally and by type of organization.

EMPEAS BOARD OF DIRECTORS CONSISTS OF MANY OF THE

LEADING PLAYERS IN EMERGING MARKETS PRIVATE EQUITY

EMPEA

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What We Do EMPEA supports a broad portfolio of exclusive members-only research , including published reports, proprietarydata and other content.

Through our membership and partner networks,EMPEA nurtures a large global community of EMPE investors, on display at our three major annualconferences.

EMPEAs advocacy initiatives serve as a crediblevoice for the industry to educate policy-makersand investors about the unique value and roleof private equity investing in emerging markets.

EMPEA = CONTENT + NETWORK + MISSION

EMPEA

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A different kind of private equity and venture capital association.

EMPEA PUBLISHES MORE PROPRIETARY RESEARCH THAN ANYOTHER PRIVATE EQUITY/VENTURE CAPITAL ASSOCIATIONIncluding a free weekly EM PE news digest, NewsWatch register at www.empea.net

EMPEA

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What We Believe EM PE can provide superior returns for investors; EM PE represents value-added growth finance for companies; EM PE contributes positively to a countrys economic growth; and, EM PE enhances communities by improving environmental, social

and governance standards.

EMPEAS MISSION IS TO PROMOTE THE ASSET CLASS BROADLY

RECENT ISSUES ON WHICH EMPEA HAS TAKEN A PUBLIC POSITION

EU AIFM Legislation

U.S. Dodd Frank Legislation

The Future of CDC (UK House of Commons Parliamentary Subcommittee)

Investment Regulations in the United Arab Emirates and Impact on PE

EMPEA

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EMPEA IS INTENSIVELY ENGAGED IN PROMOTING AFRICA PE

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Members w/Africa InterestBIOAbraaj CapitalActisAltira GroupAureosCDC GroupChayton CapitalCVCIThe Carlyle GroupCordiant CapitalDEGDenham Capital ManagementEuropean Investment BankFinnfundGlobal Environment FundFMOIFCIFC AMCMVisionOPICPROPARCOSeedRock CapitalSilk InvestSEAFTechnoserveThe Rohatyn GroupWambia CapitalWhite & Case

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Absa Capital Private EquityAFIGAfrican Capital AllianceAfrican Development BankAllan Gray LimitedAngola Capital PartnersAssetswise CapitalBeltone Private EquityBlackthorn Capital PartnersBrait Private EquityCapital InvestCapitalworks Equity PartnersCatalyst Principal PartnersCICapital Private EquityCitadel CapitalCEDAConstant CapitalDBSADevelopment Partners International

East Africa Capital PartnersEFG-Hermes Private EquityEmerging Capital Partners (ECP)Ethos Private Equity

Fanisi Venture Capital ManagementFidelity Capital Partners LimitedHarith Fund ManagersHelios Investment PartnersHorizon Equity PartnersI&P ManagementInternational Housing SolutionsInvestec Asset ManagementKaizen Venture PartnersKingdom Zephyr Africa ManagementLereko Metier Capital Growth FundMadagascar Development PartnersMarlow CapitalMedu CapitalPan Africa Capital GroupPublic Investment CorporationRMA CapitalStandard Bank Private EquitySAVCA

South SuezSwicorpTrans-Century LimitedTuninvest-Africinvest GroupUdo Udoma & Belo-OsagieVantage Mezzanine IIVenture Capital Trust Fund

Members Exclusively Focused on Africa

25% OF EMPEA MEMBERS ARE EITHER EXCLUSIVELYFOCUSED ON AFRICA OR HAVE A STRONG INTEREST

BOLD = EMPEA Africa Council




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82% 81% 80% 79% 78% 77%

23%22%

3720%

2005

3619%

2004

3518% 100%

OECD Countries

Emerging Markets

2009

38

2008

39

2007

3921%

2006

0.9 0.9 1.01.1 1.1 1.1

2.4 2.62.9

3.2 3.5 3.7

2.6

0.5

2006

7.3

0.6

2.5

0.5

2005

6.8

0.5

2.3

0.4

2004

6.4

0.5

2.2

0.5

2008

8.5

0.6

2.7

0.5

2007

8.0

0.6

0.4

+6%

MENALatin America

CEE/CIS

Asia

Africa

2009

8.6

0.6

2.7

OECD Countries

Emerging Markets

2009 REAL GDP(US$ trillions)

$38

$30

$9

EM ECONOMIES ARE GROWING 3X THE RATE OF DEVELOPEDECONOMIES, REACHING $9 TRILLION OR 23% OF GLOBAL GDP IN 2009

% SHARE OF GLOBAL ECONOMY

GDP CAGR, 2004-2009

WHY EM?

AND 60%OF THE

WORLDSPOPULA-

TION!

-6

-4

-2

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sub-Saharan AfricaOECD Countries World

MENALatin America

CEE/CISAsia

ASIA, THE MIDDLE EAST AND AFRICA GDP GROWTH RATES ARE

SIGNIFICANTLY OUTPERFORMING GLOBAL AVERAGES

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WHY EM?

G D P G r o w t h

( % )


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EM PE INVESTORS SEEK TO DIVERSIFY AND ACCESS THE HIGHESTGROWTH MARKETS (OFTEN INACCESSIBLE VIA PUBLIC EQUITIES)

Why? Comparatively lower entry valuations, greater impact onmultiple expansion from organic growth, value creation drivers, exitopportunities...

Attractive economic and demographic fundamentals, includinghigher GDP growth per annum, younger populations and risingincome levels.

Exposure beyond developed markets beyond thin exposure offeredby EM equities positions (noteChina).

Naked swimmers phenomenon (exposure tied to leverage, over-

levered economies, etc shows theres no such thing as a safe assetor market (i.e. EMs looking better because developed markets lookworse)

Outperformancepotential

Access tohigher growthmarkets

Portfoliodiversification

Changing viewson developedmarket risk

1

2

3

4

13

WHY EM?

ACCESSING HIGH-GROWTH MARKETS IS THE PRIMARY REASON WHY

2/3RDS OF INSTITUTIONAL INVESTORS GROW THEIR EM PE EXPOSURE

3%

54%

58%

67%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

Skills/experience of EM GPs improving

EM risk-return improvedvs. developed markets

Greater PE exposure tohigh-growth markets

Source: EMPEA/Coller Capital Survey .

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WHY EM?


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BRIEFLYTHE BASIC STRUCTURE OF THE PRIVATE EQUITY INDUSTRYCONSISTS OF LPs, GPs AND PORTFOLIO COMPANIES

InstitutionalInvestors

Endowments

Pensions (publicand private)

Family offices

High Net WorthIndividuals

Funds of Funds

DevelopmentFinanceInstitutions (DFIs)

PE Fund

(Fund Manager)

InvestmentCommittee

Company A

Company B

Company C

Company D

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LPs(Limited Partners)

GPs(General Partners)

Portfolio Companies(Investee Companies)

EM PE


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PE IN EMERGING MARKETS IS IN MANY IMPORTANT WAYS VERYDIFFERENT TO PRIVATE EQUITY IN WESTERN, DEVELOPED MARKETS.

There is little to no leverage available to finance transactions.

Returns are therefore generated through value creation and the underlyingEM macro growth story.

Majority control/buyout deals are the exception, not the rule.

Most PE investments in EMs involve acquisition of minority/non-controllingstakes, so GPs can only influence change/improved corporate performance inmore subtle/cooperative ways.

Market inefficiencies mean limited transparency, sub-optimal governancestandards, inconsistent protection of minority shareholders and fewer exit routes.

1

2

3

Fund manager differentiation to a great deal lies in their local knowledgeand networks, and their ability to skillfully navigate EM business cultures.

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EM PE

MacquarieCiti Venture Capital InternationalAbraaj CapitalWarburg PincusKohlberg Kravis & RobertsActisTPGThe Carlyle GroupBaring Private Equity AsiaCitadel Capital

GP InvestmentsCVC Capital PartnersIFC AMCCapital InternationalAdvent International

Goldman SachsBlackstone GroupCarlyle GroupTPGKohlberg Kravis RobertsOaktree Capital ManagementBain CapitalCVC Capital PartnersWarburg PincusApax PartnersMorgan StanleyMacquarieAdvent InternationalPermiraFirst Reserve Corporation

Top 15 Global PE Firms(by US$ Assets Under Management)

Top 15 Emerging Markets PE Firms(by US$ Assets Under Management)

MANY OF THE TOP EM GPs ARE SPECIALISTS IN THEIR MARKETS

BOLDED firms are both global and emerging markets leaders

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EM PE


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LIKE IN OTHER GEOGRAPHIES AND WITH OTHER ASSET CLASSES, EMPE IS STILL RECOVERING FROM THE GLOBAL FINANCIAL CRISIS

2323

67

59

3329

22

4853

35

-40%-66%

20102009200820072006

EM PE Capital InvestedEM PE Funds Raised

US$ billions

Source: EMPEA

EM PE FUNDRAISING

STILL, EM PE FUNDRAISING HAS COME A LONG WAY, NOW

REACHING 13% OF GLOBAL TOTALS IN 2010 (FROM 4% IN 2004)

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2323675933277

187220

550559

466

309

155

2010200920082007200620052004

Developed Market Funds RaisedEM PE Funds Raised

13%18%

14%

7%8%

5%4%

2010200920082007200620052004

EM PE FUNDRAISING

EM PE as % of Global PE Fundraising


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THIS TREND CONTINUES, AS LPs KEEP SAYING THEIR EM PECOMMITMENTS WILL INCREASE, FROM 6-10% IN 2010, TO 11-15% IN2012, TO 16-20% BY 2013.

Source: EMPEA/Coller Capital Survey *Excludes DFIs and EM-dedicated Fund-of-Funds.

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14%17%

12%

18%

38%

12%

26%

13%

24%24%

30%28%

15%18%

7%

>30%16-30%11-15%6-10%1-5%

20122010

2013

% of total PE exposure allocated to EM PE

EM PE FUNDRAISING

(median proportion)

66% of LPs in 2011 expect to slightly or significantly increase theircommitments to EM PE in the near term (up from 59% in 2010)

TOTAL EM PE INVESTMENTS ARE GROWING AGAIN AFTER A BIG DROPIN 2009, WITH MUCH OF THE CAPITAL GOING TO THEBRICS

7

7 2

6

3

14

18

28

2009

22

121

2008

48

33

-23%

Asia

MENA

Latin America

CEE/CIS

Sub-Saharan Africa 1

29

1

2010

22

US$ Billions

Source: EMPEA

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117

22

1222

Other

BRICs

2010

29

2009

22

2008

48

EM PE INVESTMENTS


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TOTAL EM PE INVESTMENTS ARE FAR BELOW US TOTALS BUT NOTFAR BEHIND WESTERN EUROPE

23

2922485335

132

61

215

595

301

453274

10994

2006 2007 2008 20102009

W. Europe PE InvestmentsUS PE InvestmentsEM PE Investments

EM PE INVESTMENTS

US$ billions

AVERAGE PE DEAL SIZE IN EMERGING MARKETS IN MANY MARKETS

COMPARES SIMILARLY TO DEALS IN DEVELOPED MARKETS

97

7786

36

156

92

63

46 45

62

4549

148

49

68

37

88

159

46

19

8896

4440

Sub-SaharanAfrica

EM Overall UK USMENALatin AmericaCEE/CISAsia

201020092008Average deal size, US$M

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EM PE INVESTMENTS


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AMONG THE LARGEST EMERGING MARKETS (THE BRICs), AVERAGEDEAL SIZE IS LARGEST IN BRAZIL (2011s MOST ATTRACTIVE FOR LPs)

79

3847

174

1727

34

99

56

29

44

121

ChinaBrazil

-30%

Russia

-29%

-6%-24%

India

2008 20102009

Average deal size, US$M

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EM PE INVESTMENTS

EMERGING MARKETS OFFER THE POTENTIAL FOR SUPERIOR

RETURNS FOR BOTH LISTED AND UNLISTED ASSETSComparative End-to-End Returns (as of 30 September 2010)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

S&P 500 MSCIEmergingMarkets

EmergingMarkets PE

&VC

WesternEurope PE &

VC Index(US$)

U.S. PrivateEquity Index

% I

R R

, n e t

1-year

5-year

Source: Cambridge Associates, LLC.

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EM PE PERFORMANCE


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IN THE NEXT 3-5 YEARS, 77% OF LPs EXPECT 16%+ NET IRRS FROMTHEIR EM PE PORTFOLIOS

LPs Annual Net Return Expectations from PEPortfolios Next 3-5 Years

*CollerCapitals Global PE Barometer . **EMPEA/CollerCapital Survey .

Net returns less than 16%

Net returns of 16%+

0%

20%

40%

60%

80%

100%

Global PE Portfolio* EM PE Portfolio**

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EM PE PERFORMANCE

71%

29%

23%

77%




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HOW THE AFRICA PE OPPORTUNITY IS STARTING TO BE SEENHigh Economic Growth Potential: 5-6% GDP growth estimates for 2011 Home to some of the fastest-growing economies in the

world (Ghana, Angola, DRC) Improving political stability (N Africa excepted for now)

Strong Demographics: Population of 1 billion Rise of the middle class consumer by 2020, more

than half of Africas households will have discretionary spending power (McKinsey Global Institute)

Opportunities in Many Sectors: Infrastructure: World Bank estimates that US$93

billion required over next 10 years to meet regionsinfrastructure gap

Telecoms: Current mobile voice market penetration

only 50% Energy: Regions vast mining and energy resources areunderdeveloped

2929

AFRICA

AFRICA HAS REACHED 6% OF TOTAL EMERGING MARKETS PRIVATEEQUITY FUNDS RAISED AND IS EXPECTED TO CONTINUE TO GROW

AFRICA

EM PE Fundraising Totals by Region (US$B)

12%

10%9%

10%

7%8%

5%

2%

Latin America

6%Multi-Regional

2009

5%

Asia

2010

CEE/CIS

61%

2%Sub-Saharan Africa

24%

100%

MENA

100

6%

10%

58%

8%

48%

100

8%

100

25%

2006

7%7%

4%

100

60%

3%

2007

3%

100

4%

10%

7%

71%

2008


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INVESTORS ARE TAKING NOTE OF AFRICAS ATTRACTIVEFUNDAMENTALS AND INVESTING MORE AGGRESIVELY IN THE REGION

LPs Viewing Africa as Attractiveor Very Attractive (%)

AFRICA

67

37

42 2009

2010

2011 38

15

16

LPs Planning to Begin or ExpandAfrica Commitments (%)

THE PACE OF PE INVESTMENTS IS ACCELERATING IN AFRICA, ANDSTRONG BRANDS ARE GETTING STRONGER WITH HELP FROM PE

25 investmentsUS$3.6B

59 investmentsUS$2.8B

19 investmentsUS$405m

13 investmentsUS$721m

Sampling of Africa PE Investment 20082010

AFRICA


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SOUTH AFRICAN INSTITUTIONAL INVESTORS ARE THE MOST ACTIVEAFRICAN INVESTORS IN THEIR DOMESTIC PE INDUSTRY

US$256 billion in pension fund assets under management Fastest compound annual growth in pension assets in 2010, rate of 28% per

annum (Towers Watson; USD terms) Current average pension fund exposure to private equity in South Africa is

less than 1% --> recently released draft regulations allow pension funds toallocate up to 10% to the asset class

South Africas endowment funds, foundations, insurance companies and banksare also active investors in PE

Where are South Africa-focused fund managers lookingto raise capital in the next 12 months - Geography?

South Africa

Europe

U.S.Other

Source: Deloitte/SAVCA : The South African Private Equity Confidence Survey, 2009.

Eskom Pension and Provident Fund Public Investment Corporation (GEPF) FNB Pension Fund Mittal Steel South Africa Pension and Provident Funds ExxaroPension and Provident Fund Kumba Iron Ore Selector Pension and Provident Fund ABSA Group Pension Fund Limited Anglo American Corporation Pension Fund Engineering Industries Pension Fund Iscor Pension Fund Metal Industries Pension Fund Transnet Retirement Fund Transport Pension Fund Sentinel Mining Industry Retirement Fund Mines Employees Pension Fund

South Africa LPs Active in South African PE Funds

SOUTH AFRICA: GEPF (Government Employees Pension Fund ), AFRICASLARGEST PENSION FUND, CAN INVEST 3-9% OF ITS PORTFOLIO IN PE.

Africas largest pension fund 1.2 million active members, 318,000 pensioners and beneficiaries Assets totaling R790 billion (US$115B) The assets of GEPF are primarily managed by the Public Investment Corporation

(PIC), wholly owned by the South African government (and EMPEA member)

Private equity allocation: Lower limit 3% (~US$4 billion)

Strategic 6-8% Upper limit 9% (~US$12 billion) Private equity investments are aimed at infrastructure, socially desirable

investments and BEE financing Isibaya Fund, Pan African Infrastructure Development Fund, etc.

AFRICA


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IN 2010, EVEN AS WE CONTINUED TO RECOVER FROM THEDOWNTURN, AFRICA GPs RAISED IMPRESSIVE PE FUNDS

84

109

135

155

207

238

286

381

457

492

613

Sanlam

GEF

Investec

Phatisa

Tuninvest-AfricInvest

Aureos

Helios

ACA

ABSA

K.Zephyr

ECPUS$m

AFRICA

INCREMENTAL AND FINAL FUND CLOSES

TO LEARN MORE, PLEASE VISIT US AT

www.empea.net

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Carlos Perry EMPEA