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Arab Private Equity Industry

Prepared for the AVCA 5th Conference in Kenya 6 – 9 November 2005

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I. Who we are?

Agenda

II. Private Equity in the Arab World

III. Private Equity in Egypt

IV. Challenges

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Who we are?I.

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EFG-Hermes has 400+ employees, up from 30 in 1994

Offices in Cairo, Dubai (2002) and Riyadh (2005)

Listed on the London and Cairo Stock Exchanges with a Market Cap of $1,053Mn (30.Oct.05)

Brokerage executed 40% of all transactions on CSE and UAE arm $211Mn in April alone

Investment Banking raised $ 4.1Bn in equity transactions and advised $ 11Bn M&A transactions

Asset Management manages 5 local and 3 off-shore funds with a total NAV of $ 750Mn

Securities Brokerage

Investment Banking

Asset Management

Private Equity

EFG-Hermes Egypt’s Premier investment banking firm

Structure

Who we Are

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Commercial International Investment Company

1994

US$ 189 Million

EFG-Hermes

US $ 54 Million

EFG-Hermes

Horus Private Equity Fund1997

US $ 25 Million

EFG-Hermes

Middle East Technology Fund2000

US$ 9 Million

EFG-Hermes

Technology Development Fund2004

US $ 4.5 Million

EFG-Hermes

Jordan IT Fund2000

Aggregate funds under managements US$ 543Mn (incl. US$ 61Mn proprietary investments)

EFG-Hermes Private Equity5 funds under management plus 2 closing in 2005

US $ 50 Million

EFG-Hermes

Horus Food & Agribusiness Fund2005

US $ 155 Million

EFG-Hermes

Horus Private Equity Fund II

2005

ClosingClosing

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II. Private Equity in the Arab World

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MENA Economic & Market Profile

Qatar4%

Bahrain2%

Oman4%

Morocco9%

Tunisia5%

Saudi Arabia37%

UAE13%

Palestine1%

Lebanon3%Jordan

2%

Kuwait8%

Egypt12%

GDP $ 619Bn Market Cap (28.Oct.05)

Market Cap $ 1,183Bn (192% of GDP)Roughly that of Spain

589

218

122

98

54

35

27

18

14

6

3

249%

255%

250%

417%

70%

318%

50%

184%

59%

34%

10%

Saudi Arabia

UAE

Kuwait

Qatar

Egypt

Jordan

Morocco

Bahrain

Oman

Lebanon

Tunisia

US$ BnMarket Cap/GDP

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MENA Stock Market Trends Significant growth in Regional Indices

Source: Zawya, 29 October 2005

Drivers: oil prices & market deregulation

Non-GCC Countries Market TrendsGCC Countries Market Trends

Drivers: economic reform and corporate profits

Abbreviations: ADI (Abu Dhabi), QSI (Qatar), MSI (Oman), SSI (Saudi Arabia), BAX (Bahrain), KUSI (Kuwait), MASI (Morocco), AMMAN (Jordan), HRMS (Egypt) and BLSI (Lebanon)

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MENA Private Equity Regional PE 2005

Source: Private Equity Monitor, EHPE

Bahrain, 17.80

Emirates, 26.00

Kuwait, 21.73

Oman, 18.87

Qatar, 34.30

Saudi Arabia, 36.40

Egypt, 17.19

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

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Source: EHPE, Zawya, October 2005

MENA Private Equity Players Sample of funds raised or being raised in 2005

Note: Does not include Citadel, an Egyptian buyouts boutique

Status Date Fund name Fund Manager Investment Focus Country Fund Size US$

Mn

Announced 2005 GCC Energy Fund L.P.

GCC Energy Fund Managers Ltd

Buyouts in the energy sector GCC 300

Fund Raising 2005 Jordan Dubai Capital

Dubai International Capital

Private Equity and Development projects

Jordan 272

Fund Raising 2005 Markaz Energy Fund

Markaz Buyouts, focus on energy sector GCC 165

Closing 2005 Horus Private Equity II

EHPE Buyouts, with no sector focus Egypt 155

Closed 2005 Oasis Oasis Buyouts, with no sector focus Egypt 150

Closing 2005 Horus Food & Agri

EHPE Buyouts, focus on agribusiness Egypt 50

Investing 2005 NTEC NTEC Venture capital, early and late stages, in technology sector

Kuwait 330

Investing 2005 Buyout Fund II Abraaj Capital Buyouts, with no sector focus MENA 300

Investing 2005 The Pre-IPO Fund

Global Investment House

Buyouts, in the IPO or Pre-IPO stages

GCC 300

Investing 2005 SHUAA Partners Fund I, L.P.

Shuaa Partners Buyouts, with no sector focus MENA 200

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MENA Private Equity PE Industry Size $ 3.4Bn (< 1% of GDP)

Industry grew at 41% CAGR over past 5 years and projected to grow at 25% in next 3 years $ 2.2Bn raised up to 2004 with > $ 3.4Bn raised or being raised in 2005

Source: Private Equity Monitor, EHPE

MENA Funds Raised

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1994 1997 1998 2000 2001 2002 2003 2004 2005

Fund Inception Year

US

$ M

illio

n

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Source: EHPE, Zawya, October 2005

Profiles of MENA PE Funds 60 Funds (1/3rd Buyouts by value and volume)

2,190

1,281

757

601

1,123

20

2

12

9

17

0

500

1,000

1,500

2,000

2,500

Buyouts Infrastructure Technology Real Estate Others

Valu

e U

S$ M

n

0

5

10

15

20

25

Vo

lum

e

Funds by investment focus

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Source: EHPE, Zawya, October 2005

Fund focus (All funds before 2005) Fund focus 2005

Trends in MENA PE Funds More focused on Buyouts

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5

9

1

9

0

200

400

600

800

1,000

1,200

Buyouts Real Estate Technology Infrastructure Others

Investment Focus

Val

ue

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2

4

6

8

10

12

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e

10

4

3

1

8

0

200

400

600

800

1,000

1,200

1,400

1,600

Buyouts Real Estate Technology Infrastructure Others

Investment Focus

Valu

e

0

2

4

6

8

10

12

Vo

lum

e

$ Mn $ Mn

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PE Country Focus

Egypt, 3

Kuwait, 2

Jordan, 1

Lebanon, 1

U.A.E., 1

MENA, 10

GCC, 9

Levant, 4

Geographic Focus of Fund 2005 and 2006 PE Funds

Shift in the geographic focus of funds. Prior to 2005, many funds were chasing opportunities in Levant and Egypt.

Today, the GCC and MENA, with its buyouts economies, is the focus of close to half of the funds being raised.

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MENA Private Equity Trends Wave of Funds being raised is different

Median fund sizes increased from US$ 55Mn to US$ 150Mn

Evolution of Mega funds – NTEC US$ 330Mn, GCC Energy Fund US$ 300Mn

Investment range increased to attract bigger deal sizes

More focus on funds with buyout profiles

More focus on growth and late stage rather than seed, start ups, and SMEs

Targeting Pre-IPO and trade sale

Adopting int’l industry reporting & valuation standards

Technology funds are quickly losing attraction, while energy is gaining momentum

Shift in the geographic focus of funds

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Private Equity in EgyptIII.

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Private Equity fund raising trends

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100

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800

900

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Herm es Financial Indes (US$) GDP Grow th (Basis Points , %100) Cicle

Recession Recovery Boom Slowdown Recession Recovery State of the Economy

Egypt Completed 1st Cycle & going thru 2ndPrivate Equity riding the Cycle

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Aggregate realizations 68

Aggregate proceeds US$ 504Mn(2000-2004)

No. of realizations by sector

Realizations routesSummary

Trading, 19, 28%

Buyback, 30, 44%

Strategic , 14, 21%

IPO, 5, 7%

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43 3 3 3 3 3

1

0

2

4

6

8

10

12

14

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Egypt PE ExitsEHPE Realizations (aggregate all funds)

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Private Equity Players in Egypt2005 PE Funds with buyout focus

Note: Does not include Citadel, an Egyptian buyouts boutique

Private Equity in Egypt

Status Fund Name Manager Investment Focus Inception Year

Size of Fund ($ MN)

Investing Oasis Oasis Buyouts, no sector focus 2005 150 Investing Turnaround Fund CIB Buyouts, no sector focus 2005 50 Closing Horus II EHPE Buyouts, no sector focus 2005 155 Closing Horus Agri EHPE Buyouts, agro sector 2005 50 Fund raising Direct Invest. Fund II Concord Buyouts, no sector focus 2005 100 Total 2005 505

Investing TDF EHPE Venture capital, IT sector focus 2004 9 Investing IT Ventures IT Ventures Venture capital, IT sector focus 2003 150 Fully vested Tech VC Fund Concord Venture capital, IT sector focus 2000 30 Fully vested Direct Invest. Fund I Concord Balanced, no sector focus 1998 35 Investing EK Holding EK Holding Balanced, no sector focus 1997 120 Fully vested Horus I EHPE Balanced, no sector focus 1997 54 Liquidating EgyCap Delta Balanced, no sector focus 1997 13 Fully vested ADI ADI Balanced, no sector focus 1995 50 Fully vested CIIC EHPE Balanced, no sector focus 1994 189 Total, pre-2005 650

Total Funds 1,155

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Private Equity in EgyptUS$ 1.2 billion in funds under management (<1% of GDP)

• Egypt had 9 PE funds managing $ 650Mn up to year-end 2004

• In 2005, 5 new funds were established targeting $ 505Mn ($ 405Mn or 80% raised to date)

Egypt Funds Raised

0

50100

150

200250

300

350

400450

500

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

US$ Mn

Source: EHPE

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Egypt Private Equity Trends SMEs PE Financing

10% of 2005 PE investments in Egypt are available for financing SMEs Majority of the Egyptian business are SMEs SMEs financing available totals $ 59Mn Sector Specific IT ($ 9Mn) and Food and Agri ($ 50Mn)

PE financing for SMEs in Egypt

Buyouts, no sector focus

91%

SMEs9%

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Egypt Private Equity Trends Larger funds with buyout perspective

Median fund sizes increased from $ 50Mn to $ 100Mn

Investment range increased (Horus I ceiling $ 10Mn verses $ 30Mn Horus II)

Majority control less emphasis on controlled minority

Focus on recapitalization, turnarounds and privatizations

Growth and late stages with less on start ups and SMEs

Size important for potential IPO

Building management teams to implement value-added strategy

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ChallengesIV.

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Challenges facing PE Industry EHPE Experience in the Region

Lack of PE financing for SMEs and Startups Int’l institutions not interested & local institutions will participate only if they do Difficult to exit

Regulatory Environment Setting up local funds Enforcing shareholder agreements Codification of law Foreign Ownership

Due-diligence Law firms and Auditors are catching up to develop

Human Capital PE requires a special reservoir of high caliber human capital

Investment Support Lack of strong management to implement investment strategy

Exit Mechanisms Volatile Capital Market in the region

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Arab Private Equity Association APEA Core Mission

Encourage cooperation between members in terms of providing resources, tools, and ensuring the fair pricing and high quality of materials in such a transaction

Enhance deal flow between member companies Encourage the exchange of information and experience between

members Increase opportunities for Cross-Country Investment Bringing PE concerns to the attention of governments and private

investors Support for research, business information, economic feasibility studies,

and statistics Providing the means for contacting Arab and foreign research groups Afford training, and knowledge for industry professionals on the technical,

financial, legal aspects of Direct Investments as well as Venture Capital Organizing conferences, workshops and networking opportunities

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EFG-Hermes Private Equity

9 Mohamed Fahmy Street, 14th Floor

Garden City

Cairo, Egypt.

Tel: (202) 7923875/6/7

Fax: (202)

Email: ciic.com.eg