Introduction to frontier markets and AfricaJanuary 2011

Page 3

Frontier markets

Africa in perspective

3

Contents

4

Welcome to the Silk Road Frontier regions

o Sub-Saharan Africa – Emergence and a rapidly developing middle classo North Africa – Convergence to its full potentialo Middle East – Diversification benefiting from competitive advantageso Frontier Asia – Rediscovery using its infrastructure and human capital

Increasingly Relevant Regions

5

20.5%

7.9%

1.5%

22.1%

7.8%

3.2%

23.0%

7.8%

1.2%

24.6%

8.7% 8.7%

25.5%

9.4%

13.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Population GDP FDI

Share of world in terms of Population, GDP & FDI

1990

1995

2000

2005

2010e

o FDI flows are not dominated by Chinese investments but are coming from all regionso Portfolio flows are less significant although frontier markets market cap is close to $1

trillion

Source: Silk Invest; UNCTAD; World Bank; IMF; Silk Invest

6

Deep market universe across regions

Source: Bloomberg; African Alliance; MSCI World; Silk Invest

8 9

18 18

28 32

52 53

67 82 87

114 129

298

- 50 100 150 200 250 300 350

Tunisia

Kenya

Bahrain

Oman

Vietnam

Pakistan

Nigeria

Kazakhstan

Morocco

Egypt

Qatar

Kuwait

United Arab Emirates

Saudi Arabia

Market capitalization (USD, Billion)

Close to $1 trillion and is comparable with BRIC countries

7

Frontier markets have historically outperformed

7.1%

8.3%

8.4%

9.1%

11.4%

12.9%

13.1%

14.1%

15.4%

16.3%

18.3%

18.8%

21.5%

31.8%

12.0%

0.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Vietnam

Nigeria

Kenya

UAE

Saudi Arabia

Oman

Tunisia

Botswana

Ghana

Mauritius

Pakistan

Kuwait

Qatar

Kazakhstan

Emerging Markets

World

Annualized 10 Year USD returns (%)

Source: Various Sources; Silk Invest; Bloomberg;Note: Data as of January 2012

Equally weighted portfolio in Kuwait, Pakistan and Nigeria delivered investors 4x (15% annualized)

8

Valuation differential is a key return catalyst

10.4 10.1 11.012.5

16.0

19.4

14.2

4.4%4.7%

4.3%

2.6%

2.0%

1.2%

2.2%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

0.0

5.0

10.0

15.0

20.0

25.0

Silk African Universe

Silk Arab Universe

Silk Frontiers Universe

US Japan India EM

Estimated Price earnings (PE) and Dividend Yields (DY) multiples

PE '11e

DY '11e

o 2010 has proven that valuations are important and 2011 will probably further focus investor’s attention on this reality

o Frontier portfolios with forward PE multiples of around 11x vs. 14x for EM universeo Sharper contrast when comparing expected dividend yields of 4-5% with global levels

9

The bond party is over but not for frontiers

9.6

5.7

3.9

4.9

5

6.3

0 2 4 6 8 10 12

Silk Debt Universe

EMBI PLUS

EMBI + Africa

EMBI+ Asia

EMBI+Europe

EMBI+LATAM

Expected Yields to maturity (%)

Source: Silk Invest, IMF, DB, CS, JPM and regional research houses

o The low interest rates cycle, which began in the eighties, seems to be finally brokeno EM spreads have significantly tightened over the last few yearso Frontier markets with average YTM of around 10% remain very attractive

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Frontier markets

Africa in perspective

10

Contents

11

The unknown continent

Source: UNCTAD; IMF: World Bank; Bloomberg; Silk Invest

14.5%

23.2%

3.1%

6.8%

9.1% 9.0%

13.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

World Population

World Surface Global GDP Emerging Markets GDP

Emerging Markets FDI

S&P Emerging Markets Index

Weighting

S&P Frontier Markets

Weighting

Africa Represents (%)

12

Africa’s place in the world

Source: African Alliance; IMF; World Bank; Silk InvestNote: Market Cap as of July 2010; Average FDI in 200-2008; Population and GDP numbers as of 2008

2% 4%

16%

4%

25%

3% 2%

17%

5%

28%

4% 6%

20%

11%

57%

0%

10%

20%

30%

40%

50%

60%

70%

Share of World Market Cap

Share of Average World FDI

Share of World Population

Share of World GDP, PPP

Share of World Average GDP per

capita, PPP

Share of World

Africa India China

Twice the level of FDI of India

13

Africa’s growth engines

Source: UNCTAD; IMF: World Bank; Bloomberg; Silk Invest

2.5% 2.8%4.9%

7.5%

24.8%

32.0%

43.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Population Labor productivity

GDP per capita

Total GDP Stock price of top 40 African

firms

FDI Mobile Phone Subscribers

10 Year annualized growth (%)

•More people•More productive•Spending more•Highly entrepreneurial• Increasingly connected

14

Forget commodities…Profit from the consumer

Source: World Bank; IMF; Silk Invest

194 243 272 318 322 312 293 267 230 181

264 291 340

379 456 545 654 775 911 1,051

35 35

43 46

63 85

105 129

152 185

-

200

400

600

800

1,000

1,200

1,400

1,600

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

African middle class on the rise (Population by income group)

Below Poverty Line Above Poverty Line & Below 5k GDP per capita Above 5K GDP per capita

•2010: 760 million above poverty line•2025: 1.23 billion above poverty line•475 million new consumers in 15 Years

15

A wealthier and urbanizing consumer

Source: Mc Kinsey; IMF; UN; World Bank; Silk Invest

1.9

2.4

3.1

0

0.5

1

1.5

2

2.5

3

3.5

1999 2009 2014

GDP PPP per Capita (xK, USD)

3040 45

51

73

7060 55

49

27

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

India Africa 2010 China Africa 2020 Europe

Breakdown of Population (%)

Urban Rural

Number of cities with 1 million + people

48 50 109 66 52

16

Great opportunity as perception is not reality

Source: World Bank; WEF; IMF; Silk InvestNote: 1 is bad and 10 is extremely strong

3.9

7.06.7

5.4

3.3

6.6

5.9

5.0

2.8

6.6

7.3

5.6

2.7

6.3

5.4

4.3

2.5

6.3

5.6 5.9

2.2

5.9

6.6

3.9

2.2

4.6

5.3

3.9 3.6

6.1 6.7

5.6

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Corruption Protection of minority shareholders’ interests

Strength of auditing and reporting standards

Judicial Independence

Institutional Strength Ratings

Ghana Morocco Egypt Ethiopia Nigeria Kenya Russia China

• All Silk selected countries rank better than Russia

Page 1717

Low leveraged economies

Source: IMF 2007 dataNote: Debt is total of public and private debt; Reserves are IFS Reserves ex. Gold

146%

180%

216% 210%

60% 58%

8% 15%12%2% 0%

22%40%

12%22% 26%

0%

50%

100%

150%

200%

250%

World EU US Japan Asia Latam Middle East Africa

Financial reserves and total debt as % of GDP (%)

Debt as % of GDP Reserves as % of GDP

18

Key Countries

Source: African Alliance; IMF; World Bank; Silk InvestNote: Market Cap as of July 2010; Average FDI in 200-2008; Population and GDP numbers as of 2008

CountryMarket

cap (x USD Billion)

% of Africa’s average

GDP, PPP (x USD Billion)

% of Africa’s

total

FDI (x USD Billion)

% of Africa’s

total

Population (x million)

% of Africa’s

total

GDP per capita, PPP

(x USD)

% of Africa’s average

Angola 0% 97 3% 13.1 22% 18 2% 5,820 220%

Botswana 4.4 1% 24 1% 0.2 0% 2 0% 13,574 513%

Egypt 46.8 6% 409 15% 6.7 11% 80 8% 5,425 205%

Ethiopia 0% 65 2% 0.1 0% 85 8% 869 33%

Ghana 6.8 1% 32 1% 1.7 3% 25 2% 1,463 55%

Kenya 15.1 2% 56 2% 0.1 0% 41 4% 1,551 59%

Mauritius 5 1% 14 1% 0.3 0% 1 0% 12,356 467%

Morocco 65.9 8% 126 5% 1.3 2% 32 3% 4,263 161%

Nigeria 45.8 6% 293 11% 5.9 10% 158 15% 2,099 79%

South Africa 603 74% 455 16% 5.7 10% 48 5% 10,116 382%

Tunisia 11.8 1% 76 3% 1.7 3% 11 1% 7,956 300%

Silk Invest countries 805 98% 1,646 59% 36.8 63% 501 48% 3,288 124%

Total Africa 819 2,786 58.56 1,052 2,648

Nigeria – Dangote Cement

o Largest cement company in Africa. Market capitalisation of N1.86bn ($13 billion).

o Jewel in Alhaji Aliko Dangote’s $20bn commercial empire.

o Merger between Benue Cement and Dangote Cement. Combined 70% of Nigerian market.

o Also in South Africa, Zambia, Senegal, Ethiopia and Sierra Leone.

o Plans to raise Nigerian capacity fivefold by 2015, gaining sales from imports and expanding market.

o 2011 PE – 9.2xo 2011 Div Yield – 6.2%

19

First purchased as BCC 4th May 2009 +325%

0

10

20

30

40

50

60

70

80

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11

Historical Price in Local Currency

Kenya – Equity Bank

o With over 5.7 million accounts, accounting for over 57% of all bank accounts in Kenya, Equity Bank is the largest bank in the region in terms of customer base

o It operates also in Uganda and Southern Sudan.

o Micro-lender with rural distribution and technology edge (MPESA).

o Kenyan remittances tripled in 2010 to $ 1.9 bn.

o 2010 EPS up 52%o 2011 Dividend Yield - 3.1%o 2011 PE - 10.6

20

First purchased 24h April 2009 +105%

0

5

10

15

20

25

30

35

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11

Historical Price in Local Currency

Private firms have limited access to capital

1%

3%

8%

9%

11%

11%

14%

20%

UK

Morocco

Egypt

South Africa

Ethiopia

Ghana

Nigeria

Kenya

0% 10% 20% 30%

Interest Rate Spread (%)

Source: World bank; Silk InvestNote: Interest Rate spread is defined as lending rate minus deposit rate

212%

96%

78%

172%

38%

33%

27%

40%

UK

Morocco

Egypt

South Africa

Ethiopia

Ghana

Nigeria

Kenya

0% 100% 200% 300%

Credit provided by banks (% of GDP)

21

Page 2222

Food industry is growing and very profitable

Source: Silk Invest

21.1

23.8

19.8

0

5

10

15

20

25

Egypt South Africa Rest of Africa

Average 4yr annual Net Earnings growth of listed food companies (%)

11.3 12.213.7

40.3

25.6

34.3

0

5

10

15

20

25

30

35

40

45

Egypt South Africa Rest of Africa

EBITDA Margin of listed companies

Average Top

o Formalization of African food sector:o Retail distribution: Retail sector in

Africa is rapidly growing from a low base but currently accounts for less than 20% of market

o Branded products: Rapid transformation from non-packaged non-branded to packaged and branded food products

o Import substitution: Local branded products are replacing more expensive imported products

o New products: Expanding middle class demanding new product categories (e.g. Baby food, and different types and flavours of yoghurts and cheeses)

o Growth of the Supermarket Trend:Local supermarket chains in collaboration with foreign partners are increasingly making their way into Africa.

23

Long term changing consumer patterns

17

3835

57

48

64

36

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sub-Saharan Africa

North Africa South Africa

Breakdown of Food sales channels

Supermarkets Small grocery shops Traditional Markets

Source: Various sources; Silk InvestNote: Estimate as of 2009

Meat Processing

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

- 10 20 30 40 50 60

5YR

CA

GR

futu

re g

row

th

By Capita Consumption

Annual Meat Consumption (KG)

Morocco

Egypt

Nigeria

South Africa

24

Beverages

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0 10 20 30 40 50 60 70

5YR

CA

GR

futu

re g

row

th

By Capita Consumption

Soft Drink Consumption (L)

Angola

Cameroon

Nigeria

South Africa

Kenya

25

Conclusions

26

o The world is turning upside down with a major shift of economic power to the regions on the original Silk trade routes

o The main investment themes throughout Africa are better infrastructure, the upcoming consumer and the new entrepreneurs

o Sub-Saharan Africa is coming from a low base but has shown tremendous changes in the last few years

o North Africa is converging to the level of middle class countries and is following the route of countries like Turkey

o Capital markets in Africa are ready for international investors and represent a unique low valuation window of opportunity

o Food industry is among the most attractive sectors in Africa and is expected to grow by 20% annually in the coming years

27

Thank you

Dr. Heinz HockmannChairman

Murray WhiteDirector

Hajar MouatassimDirector

Zin BekkaliCEO

Daniel BrobyCIO

Chris MullerInvestment Director

Hesham SaadInvestment Director

Funmi AkinluyiInvestment Director

Youssef LahlouPortfolio Manager

Abdeltif StitouChief Operating Officer

SUPERVISORY & ADVISORY COMMITTEE

EXECUTIVEMANAGEMENT

EQUITIES & FIXED INCOME TEAM

BUSINESS DEVELOPMENT & OPERATIONS

Baldwin BergesMD Business Dev.

Waseem KhanMD Private Equity

John BatesDirector FI

Gohou DanonQuant Analyst

Mohamed AbdeenPortfolio Manager

Gary RichardsonMarketing Manager

Patrick LandiInvestment Director

PRIVATE EQUITYTEAM

Jamil AkhundovInvestment Director

Nigel BannermanInvestment Director

Laolu AlabiInvestment Analyst

Marc FossExecutive Director

Ari-Pekka HildenDirector

Alexandre CantacuzèneDirector

Bridie LaplaceInvestment Analyst

Ryan Lalloesingh Trading Manager

Alexandra FlechsigBusiness Manager

Thank you

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Tel: +44 207 933 8610www.silkinvest.com

28

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Disclaimer

Silk Invest Limited is regulated by the Financial Services Authority.

All information herein must be treated as confidential or legally privileged information that is intended for theaddressee(s) only.You are advised to exercise caution in relation to its contents. If you are in any doubt about any of the contents ofthe document, you should obtain independent professional advice.This document does not constitute an offer forsale of any security or fund mentioned herein and is for information purposes only on Silk Invest funds.Silk Invest has a number of funds (“funds”) on its platform. Information on these funds should be read in conjunctionwith the Offering Memorandum or Prospectuses.Silk Invest funds may invests in speculative investments and involve a high degree of riskAn investor could lose all or a substantial portion of his/her investments in frontier marketsAn investment in the frontier markets is not suitable for all investors.Some Silk Invest funds may be leveraged and performance could be volatile.Silk Invest funds may execute a substantial portion of trades on poorly regulated emerging market stock exchangesas well as OTC products.Silk Invest funds may be illiquid and there may be significant restrictions on transferring interests in such the funds.Silk Invest’s fees are higher than fees for mutual funds as they include a performance incentive.The contents of this document have been approved by Silk Invest’s compliance officer.This summary is not a complete list of the risks and other important disclosures involved in investing in any Silk Investfund, details of which can be found in the Offering Memorandum or prospectus.

29