Presentation to CCA Conference on An Overview of African Capital ...

1

Presentation to CCA Conference onPresentation to CCA Conference on

An Overview of African An Overview of African Capital MarketsCapital Markets

New York City, 26 February 2004New York City, 26 February 2004

Colin ColemanColin ColemanManaging DirectorManaging Director

Goldman Sachs InternationalGoldman Sachs International

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Overview of African Capital MarketsOverview of African Capital Markets

Market Capitalisation Market Capitalisation ((US$US$ bn) bn) Average Daily Trading Volume (US$m)Average Daily Trading Volume (US$m)

7.9

6.1

4.1

1.5

0.6

0.3

0.2

0.3

South Africa

Egypt

Morocco

Zimbabwe

Nigeria

Kenya

Ghana

Tanzania

Zambia

Mauritius

Other

215.8

7.95

5.57

5.14

0.03

0.02

0.02

0.01

1.60

NA

South Africa

Egypt

Kenya

Morocco

Nigeria

Tanzania

Zambia

Mauritius

Zimbabwe

Ghana

Other

257.2

28.1

14.5

16.3

(a) (a)

(a)(a) Other: Swaziland, Namibia, Malawi, Cote d’Ivoire, and Tunisia.Other: Swaziland, Namibia, Malawi, Cote d’Ivoire, and Tunisia.

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TaiwanTaiwan 22.622.6 551.4551.4 310.6310.6 1,375.91,375.9

ChinaChina 1305.61305.6 7325.07325.0 306.4306.4 211.6211.6

KoreaKorea 47.947.9 843.3843.3 293.4293.4 1,511.31,511.3

BrazilBrazil 176.5176.5 1,363.31,363.3 231.9231.9 191.9191.9

South AfricaSouth Africa 44.344.3 455.4455.4 215.8215.8 257.2257.2

RussiaRussia 144.4144.4 1252.41252.4 212.5212.5 50.050.0

MexicoMexico 104.8104.8 607.7607.7 103.9103.9 32.332.3

PopulationPopulation GDPGDP Market Cap.Market Cap. ADTVADTV(m)(m) ($bn)($bn) ($bn)($bn) ($m)($m)

Africa in an Emerging Market PerspectiveAfrica in an Emerging Market PerspectiveComparative Market OverviewComparative Market Overview

Data as of 30 January 2003.Data as of 30 January 2003.

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Emerging Markets Fund Assets by GeographyEmerging Markets Fund Assets by Geography

In competing for the largest pool of investible capital, South African companies are competing primarily with Asian and In competing for the largest pool of investible capital, South African companies are competing primarily with Asian and South American companiesSouth American companies

During the last year, the Korean Won and the Taiwan Dollar has strengthened by 2% vs. the US dollar, the Brazilian Real During the last year, the Korean Won and the Taiwan Dollar has strengthened by 2% vs. the US dollar, the Brazilian Real 21% and the South African Rand 29% vs. USD21% and the South African Rand 29% vs. USD

In competing for the largest pool of investible capital, South African companies are competing primarily with Asian and In competing for the largest pool of investible capital, South African companies are competing primarily with Asian and South American companiesSouth American companies

During the last year, the Korean Won and the Taiwan Dollar has strengthened by 2% vs. the US dollar, the Brazilian Real During the last year, the Korean Won and the Taiwan Dollar has strengthened by 2% vs. the US dollar, the Brazilian Real 21% and the South African Rand 29% vs. USD21% and the South African Rand 29% vs. USD

(a)(a) As at December 2003.As at December 2003.

Assets by Country and RegionAssets by Country and Region Highest Weightings in MSCI Emerging Markets IndexHighest Weightings in MSCI Emerging Markets Index(a)(a)

Breakdown by CountryBreakdown by Country RankRank Security NameSecurity Name WeightWeight

Breakdown by RegionBreakdown by Region

11 SamsungSamsung 6.18%6.18%22 Anglo AmericanAnglo American 3.64%3.64%33 Taiwan SemiconductorsTaiwan Semiconductors 1.88%1.88%44 China Mobile China TeleChina Mobile China Tele 1.86%1.86%55 Teva Pharmaceutical IndTeva Pharmaceutical Ind 1.70%1.70%66 Telefonos Mexico Telefonos Mexico 1.49%1.49%77 Lukoil Holding (USD)Lukoil Holding (USD) 1.36%1.36%88 Kookmin BankKookmin Bank 1.35%1.35%99 America Movil America Movil 1.27%1.27%1010 Petrobras Petrobras 1.23%1.23%1111 PoscoPosco 1.12%1.12%1212 SasolSasol 1.01%1.01%1313 Petrobras Petrobras 0.98%0.98%1414 United MicroelectronicsUnited Microelectronics 0.88%0.88%1515 Surgutneftegaz Comn (USD)Surgutneftegaz Comn (USD) 0.87%0.87%1616 Petrochina Petrochina 0.81%0.81%1717 SK TelecomSK Telecom 0.81%0.81%1818 Standard Bank GroupStandard Bank Group 0.81%0.81%1919 Vale Do Rio Doce PnaVale Do Rio Doce Pna 0.79%0.79%2020 Hyundai MotorHyundai Motor 0.79%0.79%

TotalTotal 30.25%30.25%

Korea18.9%

South Africa13.6%

Taiwan13.4%

Mexico 7.9%Brazil 7.7%

China 7.0%

Malaysia 6.0%

Russia 4.9%

India 4.9%

E. Europe 3.1%

Other 12.6%

Asia54.0%

South America18.7%

Africa 14.2%

E. Europe (incl. Russia)8.0%

Middle East 5.1%

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South Africa: a Large and Concentrated Corporate SectorSouth Africa: a Large and Concentrated Corporate SectorTop Companies by Market Capitalisation and SectorTop Companies by Market Capitalisation and Sector

(a)(a) Not listed, GS estimate.Not listed, GS estimate.Source: Infocentre (excludes Lonmin $2.9bn and Xstrata $7.6bn) Source: Infocentre (excludes Lonmin $2.9bn and Xstrata $7.6bn) Note: As of January 2004 (7.01 ZAR/US$)Note: As of January 2004 (7.01 ZAR/US$)

4.05.56.4

9.09.910.4

20.1

33.2

2.12.32.53.24.06.46.97.6

5.97.18.0

3.35.1

9.8

14.5

An

glo

Am

eric

an p

lc

Bil

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n p

lc (

+B

HP

)

An

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Pla

tin

um

Sas

ol

An

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go

ld

Go

ld F

ield

s

Imp

ala

Pla

tin

um

Har

mo

ny

Sta

nd

ard

Ban

k

Fir

stR

and

Old

Mu

tual

plc

AB

SA

Gro

up

San

lam

Ned

cor

Inve

stec

Lib

erty

Lif

e

Vo

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(a)

MT

N G

rou

p

Tel

kom

Ric

hem

on

t

SA

BM

ille

r p

lc

Rem

gro

Sap

pi

Mar

ket

Cap

ital

isat

ion

(U

S$b

n)

(52.2)

Natural ResourcesNatural Resources Financial ServicesFinancial Services CMTCMT OtherOther

Total Top 20 Companies Total Top 20 Companies 186.2186.2Total Market Capitalisation of JSETotal Market Capitalisation of JSE 215.8215.8% of total% of total 86%86%

Total Top 20 Companies Total Top 20 Companies 186.2186.2Total Market Capitalisation of JSETotal Market Capitalisation of JSE 215.8215.8% of total% of total 86%86%

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Analysing Country RiskAnalysing Country RiskComparative Default Swap Levels – 2003Comparative Default Swap Levels – 2003

South African CDS levels have undergone recent tightening, which is in South African CDS levels have undergone recent tightening, which is in line with higher rated sovereign creditsline with higher rated sovereign credits

0

50

100

150

200

250

300

350

400

450

500

Dec-2002 Feb-2003 Mar-2003 May-2003 Jul-2003 Aug-2003 Oct-2003 Dec-2003

Sp

read

(b

ps)

Russia (BB)

Mexico (BBB-)

South Africa (BBB)

South Korea (A-)

Qatar (A-)

Poland (BBB+)

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Foreign Investor Performance Differs from Local Investor Foreign Investor Performance Differs from Local Investor PerformancePerformance

(a)(a) As at Dec-2003.As at Dec-2003.Source: DatastreamSource: Datastream

12M Index Performance (Local Currency)12M Index Performance (Local Currency) (a)(a) 12M Index Performance (USD Rebased)12M Index Performance (USD Rebased) (a)(a)

70%

90%

110%

130%

150%

170%

190%

210%

230%

250%

270%

Dec-2002 Apr-2003 Aug-2003 Dec-2003

Ind

exed

106%

39%

38%

19%8%6%

70%

90%

110%

130%

150%

170%

190%

210%

230%

250%

270%

Dec-2002 Apr-2003 Aug-2003 Dec-2003

Ind

exed

165%

27%

43%

19%

31%

50%

South African Investments have performed well from an international (USD based) perspective over the last yearSouth African Investments have performed well from an international (USD based) perspective over the last year 29% appreciation of ZAR vs. USD29% appreciation of ZAR vs. USD Investment decisions only driven by company specific issues to a certain extent, however macro issues are also very important Investment decisions only driven by company specific issues to a certain extent, however macro issues are also very important

from an international investor perspectivefrom an international investor perspective

South African Investments have performed well from an international (USD based) perspective over the last yearSouth African Investments have performed well from an international (USD based) perspective over the last year 29% appreciation of ZAR vs. USD29% appreciation of ZAR vs. USD Investment decisions only driven by company specific issues to a certain extent, however macro issues are also very important Investment decisions only driven by company specific issues to a certain extent, however macro issues are also very important

from an international investor perspectivefrom an international investor perspective

Europe STOXX 600 S&P 500 JSE All Share Mexico Bolsa Warsaw General Brazil Bovespa

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Currency Fluctuations are a Key Driver of Returns for Currency Fluctuations are a Key Driver of Returns for Foreign InvestorsForeign Investors

(a)(a) Goldman Sachs Research estimate of long-term over/under valuation of exchange rates.Goldman Sachs Research estimate of long-term over/under valuation of exchange rates.Source: Datastream, GS ResearchSource: Datastream, GS Research

ZAR vs. USDZAR vs. USD The Rand is Slightly Overvalued CurrentlyThe Rand is Slightly Overvalued Currently (a)(a)

5

7

9

11

13

15

17

Dec-1998 Mar-2000 Jun-2001 Sep-2002 Dec-2003

(70)%

(50)%

(30)%

(10)%

10%

30%

50%

70%

90%

1984 1987 1990 1993 1996 2000 2003

South African Rand Argentine Peso

Brazilian Real Mexican Peso

The Rand has shown substantial strength over the last year due to interest rate differentials and reversal of previous weaknessThe Rand has shown substantial strength over the last year due to interest rate differentials and reversal of previous weakness GS Research believe that the Rand is currently slightly overvalued but expect further strength in the short-term on the back of GS Research believe that the Rand is currently slightly overvalued but expect further strength in the short-term on the back of

weak US$ weak US$

The Rand has shown substantial strength over the last year due to interest rate differentials and reversal of previous weaknessThe Rand has shown substantial strength over the last year due to interest rate differentials and reversal of previous weakness GS Research believe that the Rand is currently slightly overvalued but expect further strength in the short-term on the back of GS Research believe that the Rand is currently slightly overvalued but expect further strength in the short-term on the back of

weak US$ weak US$

Dec-1998 to Dec-2001Dec-1998 to Dec-2001Dollar appreciates by Dollar appreciates by

112% vs. Rand 112% vs. Rand (rate Dec-2001: 14.44) (rate Dec-2001: 14.44)

Dec-1998 to Dec-2001Dec-1998 to Dec-2001Dollar appreciates by Dollar appreciates by


Dec-2001 to Dec-2003Dec-2001 to Dec-2003Dollar depreciates by Dollar depreciates by


Dec-2001 to Dec-2003Dec-2001 to Dec-2003Dollar depreciates by Dollar depreciates by


ZAR strength ZAR strength

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Emerging Markets Funds Flow Emerging Markets Funds Flow

Emerging Markets Growth FundEmerging Markets Growth Fund USUS 17,95017,950843843 4.7%4.7%GMO Emerging Markets FundGMO Emerging Markets Fund USUS 3,2193,219342342 10.610.6Templeton Developing Markets TrustTempleton Developing Markets Trust USUS 2,0492,049109109 5.35.3Templeton Instl. Funds Emerging Mkts. SeriesTempleton Instl. Funds Emerging Mkts. Series USUS 1,7191,7199191 5.35.3Vanguard Emerging Markets Stock Index FundVanguard Emerging Markets Stock Index Fund USUS 1,2601,260127127 10.110.1Batterymarch Global Emerging Markets FundBatterymarch Global Emerging Markets Fund LuxembourgLuxembourg 1,1111,1117777 7.07.0UBS Equity Fund UBS Equity Fund SwitzerlandSwitzerland 1,0451,0458686 8.38.3SEI Institutional International SEI Institutional International USUS 9359359090 9.69.6ABN AMRO Funds Global Emerging Markets Equity FundABN AMRO Funds Global Emerging Markets Equity Fund LuxembourgLuxembourg 9199195454 5.95.9Schroder Emerging Markets FundSchroder Emerging Markets Fund UKUK 9149147373 8.0%8.0%

Equity Assets Equity Assets AUM in South Africa AUM in South Africa % of % of Fund NameFund Name CountryCountry ($m)($m) ($m) ($m) TotalTotal

10 Largest Emerging Market Funds Globally10 Largest Emerging Market Funds Globally

Source: Carson/Thomson FinancialSource: Carson/Thomson Financial

As in most times of volatile or declining equity markets, emerging market funds have been experiencing net outflows as a result As in most times of volatile or declining equity markets, emerging market funds have been experiencing net outflows as a result of increased investor risk aversionof increased investor risk aversion

Investor selectivity is increasing and only funds that invest in widely believed growth stories experience inflowsInvestor selectivity is increasing and only funds that invest in widely believed growth stories experience inflows

As in most times of volatile or declining equity markets, emerging market funds have been experiencing net outflows as a result As in most times of volatile or declining equity markets, emerging market funds have been experiencing net outflows as a result of increased investor risk aversionof increased investor risk aversion

Investor selectivity is increasing and only funds that invest in widely believed growth stories experience inflowsInvestor selectivity is increasing and only funds that invest in widely believed growth stories experience inflows

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11 STANLIBSTANLIB 2,6252,625 84%84% 502502 16%16%

22 Sanlam Investment ManagementSanlam Investment Management 2,5032,503 79%79% 677677 21%21%

33 Old Mutual Asset ManagersOld Mutual Asset Managers 1,6021,602 79%79% 419419 21%21%

44 RMB AMRMB AM 1,1791,179 84%84% 227227 16%16%

55 Allan GrayAllan Gray 825825 92%92% 6969 8%8%

66 Investec Asset ManagementInvestec Asset Management 621621 72%72% 246246 28%28%

77 Standard Bank of South AfricaStandard Bank of South Africa 543543 100%100% 00 0%0%

88 Coronation Fund ManagersCoronation Fund Managers 451451 76%76% 141141 24%24%

99 FNT Investec Unit TrustsFNT Investec Unit Trusts 393393 100%100% 22 0%0%

1010 Templeton Asset ManagementTempleton Asset Management 366366 95%95% 1818 5%5%

1111 Marriott Asset ManagementMarriott Asset Management 346346 100%100% 11 0%0%

1212 ASAASA 327327 72%72% 129129 28%28%

1313 QuaystoneQuaystone 310310 78%78% 8888 22%22%

1414 African Harvest Fund ManagersAfrican Harvest Fund Managers 257257 85%85% 4646 15%15%

1515 Sage Life – Managed PensionSage Life – Managed Pension 153153 100%100% 00 0%0%

1616 PeregrineQuantPeregrineQuant 133133 66%66% 6868 34%34%

1717 Oasis Asset ManagementOasis Asset Management 9898 88%88% 1313 12%12%

1818 Metropolitan Asset ManagersMetropolitan Asset Managers 8080 68%68% 3838 32%32%

1919 Absa Asset ManagementAbsa Asset Management 7777 52%52% 7171 48%48%

2020 ABSA Share Incentive TrustABSA Share Incentive Trust 7373 100%100% 00 0%0%

MedianMedian 356356 84%84% 6969 16%16%

AverageAverage 648648 84%84% 138138 17%17%

RankRank InstitutionInstitution $m$m % of Total% of Total $m$m % of Total% of Total

Overview of Top South African InvestorsOverview of Top South African Investors

(a)(a) As at Dec-2003.As at Dec-2003.Source: CarsonSource: Carson

South African EquitySouth African Equity(a)(a) Non-South African EquityNon-South African Equity

Majority of investors in South Africa are heavily weighted in South African equity, largely due to exchange controlsMajority of investors in South Africa are heavily weighted in South African equity, largely due to exchange controls Majority of investors in South Africa are heavily weighted in South African equity, largely due to exchange controlsMajority of investors in South Africa are heavily weighted in South African equity, largely due to exchange controls

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Emerging Markets Financing EnvironmentEmerging Markets Financing Environment

Emerging Market Trading Flows (AMG Data)Emerging Market Trading Flows (AMG Data)

(60)

(40)

(20)

0

20

40

60

Dec-1999 Dec-2000 Dec-2001 Dec-2002

An

no

un

ced

Glo

bal

Val

ue

(1,000)

(800)

(600)

(400)

(200)

0

2004-Week Moving Average

Cum ulative from 01-Jan-2000

The Emerging Market continues to enjoy strong technical support with increasing investor demandThe Emerging Market continues to enjoy strong technical support with increasing investor demandThe Emerging Market continues to enjoy strong technical support with increasing investor demandThe Emerging Market continues to enjoy strong technical support with increasing investor demand

Total Quarterly Issuance (2001 – 2003YTD)Total Quarterly Issuance (2001 – 2003YTD)

0

5

10

15

20

25

Jan

-200

1F

eb-2

001

Mar

-200

1A

pr-

200

1M

ay-2

001

Jun

-200

1Ju

l-20

01

Au

g-2

001

Sep

-200

1O

ct-2

001

No

v-2

001

Dec

-200

1Ja

n-2

002

Feb

-200

2M

ar-2

002

Ap

r-2

002

May

-200

2Ju

n-2

002

Jul-

200

2A

ug

-20

02S

ep-2

002

Oct

-200

2N

ov

-200

2D

ec-2

002

Jan

-200

3F

eb-2

003

Mar

-200

3A

pr-

200

3M

ay-2

003

Jun

-200

3Ju

l-20

03

Au

g-2

003

Sep

-200

3O

ct-2

003

No

v-2

003

Glo

bal

An

no

un

ced

Vo

lum

e ($

bn

)

Primary Market by Region (2001Primary Market by Region (2001

4%16% 15% 10% 9% 7%

17% 11% 9%12%

16%5% 14% 18% 26% 11% 20% 27%

3% 3%

27%

28%

16%

37% 25%

36% 46% 40% 25%

66%80%

53%37%

58%

38%48%

22%26% 25% 37%

31%16%

4% 3% 6% 1% 1% 10% 4% 1%

Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03

Glo

bal

An

no

un

ced

V

olu

me

($b

n)

M iddle East Europe Asia Latin Am erica Others

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Longer Term Perspective on Emerging Market PerformanceLonger Term Perspective on Emerging Market PerformanceRelative Emerging Market Indices: 1995 to PresentRelative Emerging Market Indices: 1995 to Present

0

100

200

300

400

500

600

700

Jan-1995 Feb-1996 Mar-1997 Apr-1998 May-1999 Jun-2000 Jul-2001 Sep-2002 Oct-2003

JSE All Share

Brazil Bovespa

South Korea

S&P 500 Composite - Price Index

FTSE 100

Russian RTS

461.7 485.7 185.6

Source: FactsetSource: FactsetAs at Dec-2003As at Dec-2003

Since Since Jan-1996Jan-1996



389.5 332.5 229.5

96.7 (36.8) 39.3

88.0 (99.7) 12.0

22.5 (49.0) 14.3

(9.3) 21.9 15.6

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Largest South African Companies’ Listings Largest South African Companies’ Listings 15 Largest by Market Cap from JSE Top 40 Tradeable Index15 Largest by Market Cap from JSE Top 40 Tradeable Index

11 Anglo AmericanAnglo American 33.2 33.2 YesYes OTCOTC LSELSE

22 Billiton plcBilliton plc 20.1 20.1 YesYes YesYes AustraliaAustralia ASEASE

33 Financiere RichemontFinanciere Richemont 14.514.5 OTCOTC SwissSwiss SWXSWX

44 Anglo American PlatinumAnglo American Platinum 10.4 10.4 JSEJSE

55 SasolSasol 9.9 9.9 YesYes JSEJSE

66 SABMillerSABMiller 9.8 9.8 YesYes OTCOTC LSELSE

77 AngloGoldAngloGold 9.0 9.0 YesYes JSEJSE

88 Old MutualOld Mutual 6.4 6.4 JSEJSE

99 Standard Bank GroupStandard Bank Group 5.3 5.3 JSEJSE

1010 RemgroRemgro 5.1 5.1 YesYes LSE LSE 1111 FirstRandFirstRand 4.8 4.8 YesYes JSE JSE

1212 ABSAABSA 4.0 4.0 JSEJSE

1313 HarmonyHarmony 4.04.0 YesYes JSEJSE

1414 Gold FieldsGold Fields 3.8 3.8 OTCOTC JSEJSE

1515 Impala PlatinumImpala Platinum 3.0 3.0 YesYes JSEJSE

RankRank CompanyCompany Market Cap ($bn)Market Cap ($bn) PLC?PLC? ADR?ADR? OtherOther PrimaryPrimary

A significant portion of the largest South African companies have already pursued listings A significant portion of the largest South African companies have already pursued listings abroadabroad

A significant portion of the largest South African companies have already pursued listings A significant portion of the largest South African companies have already pursued listings abroadabroad

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Valuation DifferencesValuation DifferencesRolling 12 Month Forward P/E MultiplesRolling 12 Month Forward P/E Multiples

Source: DatastreamSource: Datastream

Overall Valuation DifferencesOverall Valuation Differences Missing Valuation DifferencesMissing Valuation Differences

0

10

20

30

40

50

60

May-1998 Sep-1999 Feb-2001 Jul-2002 Dec-2003

P/E Europe

P/E USA

P/E South Africa

US and European markets are trading at substantially higher valuation multiplesUS and European markets are trading at substantially higher valuation multiples Even within the mining industry, South African companies seem to trade at a discount to US peersEven within the mining industry, South African companies seem to trade at a discount to US peers

US and European markets are trading at substantially higher valuation multiplesUS and European markets are trading at substantially higher valuation multiples Even within the mining industry, South African companies seem to trade at a discount to US peersEven within the mining industry, South African companies seem to trade at a discount to US peers

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May-2002 Nov-2002 May-2003 Dec-2003

P/E Europe Mining

P/E US Mining

P/E South Africa Mining

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Market Cap$Market Cap$ 216216bnbn $11,328$11,328bnbn(a)(a) $2,426$2,426bnbn(b)(b)

Number of CompaniesNumber of Companies 162 162 2,055 2,055 697697

Avg. Market Cap.Avg. Market Cap. $1.0$1.0bnbn $6.2$6.2bnbn $2.6$2.6bnbn

2003 ADTV (Market)2003 ADTV (Market) $0.3$0.3bnbn $36$36bn bn $19$19bn bn

Div. YieldDiv. Yield 4.64.6%% 2.52.5%% 3.93.9%%

MarketMarket JSEJSE NYSE NYSE LSELSE

Overview of MarketsOverview of Markets

(a)(a) NYSE All-Share.NYSE All-Share.(b)(b) FTSE All-Share.FTSE All-Share.

The JSE is small and relatively illiquid in international termsThe JSE is small and relatively illiquid in international terms The JSE is small and relatively illiquid in international termsThe JSE is small and relatively illiquid in international terms

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The Index IssueThe Index Issue

The South African market is small in a global contextThe South African market is small in a global context Very little assets are tracking indices where South African companies can be includedVery little assets are tracking indices where South African companies can be included

The South African market is small in a global contextThe South African market is small in a global context Very little assets are tracking indices where South African companies can be includedVery little assets are tracking indices where South African companies can be included

Note: Highlighting denotes possible inclusion of South African companies.Note: Highlighting denotes possible inclusion of South African companies.

MSCI World Index WeightsMSCI World Index Weights Passive Index TrackingPassive Index Tracking

% Passively % Passively HeldHeld

Est. Passive Est. Passive Tracking ($bn)Tracking ($bn)IndexIndex

Europe – RegionalEurope – RegionalFTSE All ShareFTSE All Share 165165 9.399.39MSCI UKMSCI UK 2828 2.012.01DAXDAX 1414 3.233.23CAC 40*CAC 40* 9 9 1.261.26EuropeEuropeMSCI Europe ex UKMSCI Europe ex UK 4141 1.951.95Euro STOXX 50*Euro STOXX 50* 2828 1.811.81FT Europe ex UK**FT Europe ex UK** 1919 0.820.82STOXX50*STOXX50* 8 8 0.300.30USAUSAS&P 500S&P 500 770 770 7.487.48S&P SMALLCAPS&P SMALLCAP 13 13 3.693.69S&P MIDCAPS&P MIDCAP 2424 2.962.96RUSSELL 2000RUSSELL 2000 2121 2.772.77RUSSELL 3000RUSSELL 3000 185185 1.651.65GlobalGlobalMSCI EAFEMSCI EAFE 165 165 3.253.25FTSE PacificFTSE Pacific 20 20 1.011.01MSCI KokusaiMSCI Kokusai 5050 0.350.35MSCI WorldMSCI World 15 15 0.130.13MSCI World ex AustraliaMSCI World ex Australia 1515 0.130.13

1.1. USAUSA 14,173.014,173.0 55.23 55.23

2.2. JapanJapan 2,953.12,953.1 11.51 11.51

3.3. United KingdomUnited Kingdom 2,425.82,425.8 9.44 9.44

4.4. EuronextEuronext 2,076.42,076.4 8.09 8.09

5.5. GermanyGermany 1,079.01,079.0 4.20 4.20

……

9.9. Hong KongHong Kong 662.3662.3 2.58 2.58

12.12. TaiwanTaiwan 310.6310.6 1.21 1.21

13.13. ChinaChina 306.4306.4 1.19 1.19

19.19. BrazilBrazil 231.1231.1 0.90 0.90

20.20. South AfricaSouth Africa 215.8215.8 0.84 0.84

TotalTotal 23,030.923,030.9 100.00 100.00

Weight (%)Weight (%)Market Cap Market Cap

($bn)($bn)CountryCountry

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Benchmarking Benchmarking

MarketMarket AdditionalAdditional No. of No. of CompanyCompany Cap ($bn)Cap ($bn) Listing(s)Listing(s) Research AnalystsResearch Analysts

First RandFirst Rand 6.96.9 77

Standard Bank GroupStandard Bank Group 8.18.1 88

CommerzbankCommerzbank 12.212.2 ADR (OTC)ADR (OTC) 3131

SAB MillerSAB Miller 9.89.8 PLC, ADR (OTC)PLC, ADR (OTC) 88

Scottish & NewcastleScottish & Newcastle 7.17.1 1212

Telekom SATelekom SA 5.95.9 ADRADR 88

Telekom AustriaTelekom Austria 7.57.5 ADRADR 1515

Hellenic Telecom (OTE)Hellenic Telecom (OTE) 8.28.2 ADRADR 1515

SasolSasol 9.99.9 ADRADR 99

Norsk HydroNorsk Hydro 18.218.2 ADRADR 2626

Amerada HessAmerada Hess 5.55.5 1616

Liberty GroupLiberty Group 2.12.1 ADR (OTC)ADR (OTC) 77

Friends ProvidentFriends Provident 4.84.8 88

SkandiaSkandia 4.94.9 1010

Similar companies abroad tend to have a higher research followingSimilar companies abroad tend to have a higher research following Smaller difference for South African companies with ADR listings Smaller difference for South African companies with ADR listings

Similar companies abroad tend to have a higher research followingSimilar companies abroad tend to have a higher research following Smaller difference for South African companies with ADR listings Smaller difference for South African companies with ADR listings

Source: Infocentre (Jan-2004)Source: Infocentre (Jan-2004)

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Increasing Investor Reach Increasing Investor Reach

Goal is to appear in more investors’ “investible universe”Goal is to appear in more investors’ “investible universe” Leads to more diversified investor base, and increased demand tensionLeads to more diversified investor base, and increased demand tension

Goal is to appear in more investors’ “investible universe”Goal is to appear in more investors’ “investible universe” Leads to more diversified investor base, and increased demand tensionLeads to more diversified investor base, and increased demand tension

Pursuing additional listings allows and facilitates for foreign investors to Pursuing additional listings allows and facilitates for foreign investors to invest in South African companiesinvest in South African companies

— Average size of top 100 South African investors is $104m compared to Average size of top 100 South African investors is $104m compared to $48.6bn for US and $10.0bn for UK investors$48.6bn for US and $10.0bn for UK investors

— Median size of top 100 South African investors is $12m compared to Median size of top 100 South African investors is $12m compared to $27.9bn for US and $4.5bn for UK investors$27.9bn for US and $4.5bn for UK investors

— Furthermore, there are approximately 20 investors in South Africa with Furthermore, there are approximately 20 investors in South Africa with over $100m in AuM, compared to 1,752 in the US and 341 in the UKover $100m in AuM, compared to 1,752 in the US and 341 in the UK

Even if majority of liquidity might remain in home market, foreign listing Even if majority of liquidity might remain in home market, foreign listing improves international capital markets profileimproves international capital markets profile

““Stamp of approval” if complying with more stringent reporting requirementsStamp of approval” if complying with more stringent reporting requirements

Possibility of increased trading hours per dayPossibility of increased trading hours per day

Source: TF/CarsonSource: TF/Carson

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Exchange Control Regulatory Changes – for South African Exchange Control Regulatory Changes – for South African Companies Companies Pursuant to February 2004 Budget ReviewPursuant to February 2004 Budget Review

Proposed ChangeProposed Change Net ImpactNet Impact

No changes were announced to existing No changes were announced to existing system whereby retirement funds and system whereby retirement funds and investment managers are permitted to hold investment managers are permitted to hold only 15% of total assets in foreign only 15% of total assets in foreign investments, and unit trust 20%. However a investments, and unit trust 20%. However a task team is set to review these limitstask team is set to review these limits

South African companies remain able to use South African companies remain able to use local cash leverage reserves to buy foreign local cash leverage reserves to buy foreign assets for up to R1bn outside Africa and up to assets for up to R1bn outside Africa and up to R2bn in AfricaR2bn in Africa

In addition to the above they are now In addition to the above they are now permitted to finance up to 20% (formerly 10%) permitted to finance up to 20% (formerly 10%) of the excess cost of approved foreign direct of the excess cost of approved foreign direct investments from South African fundsinvestments from South African funds

Permissable repayment of offshore capital Permissable repayment of offshore capital commitments will be measured to the greater commitments will be measured to the greater of R1bn ( or R2bn in case of and African of R1bn ( or R2bn in case of and African Investment) or 20% of total outstanding Investment) or 20% of total outstanding commitment in any given yearcommitment in any given year

Most fund mangers in South Africa have long Most fund mangers in South Africa have long ago approached these limits:ago approached these limits:

Limiting ability to take up additional Limiting ability to take up additional foreign paper as a result of M&A activityforeign paper as a result of M&A activity

Restrictions on use of domestic cash/funds Restrictions on use of domestic cash/funds remainremain

Slight relaxation of use of domestic Slight relaxation of use of domestic cash/funds but still leaving large need for cash/funds but still leaving large need for foreign raised funds for larger acquisitionsforeign raised funds for larger acquisitions

Dual/Secondary/ADR listings important Dual/Secondary/ADR listings important means to raise off shore capitalmeans to raise off shore capital

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Exchange Control Regulatory Changes – for International Exchange Control Regulatory Changes – for International Investors/Companies Investors/Companies Pursuant to February 2004 Budget ReviewPursuant to February 2004 Budget Review

Proposed ChangeProposed Change Net ImpactNet Impact

Foreign companies can now be admitted to list Foreign companies can now be admitted to list on the Johannesburg Stock Exchange on the Johannesburg Stock Exchange allowing them to raise domestic equity and allowing them to raise domestic equity and debt capital and to use stock in acquisitions debt capital and to use stock in acquisitions

Local borrowings of majority (>75%) foreign Local borrowings of majority (>75%) foreign owned entities has increased from 100% to owned entities has increased from 100% to 300% of their total shareholder investment 300% of their total shareholder investment (equity or shareholder loans from abroad) (equity or shareholder loans from abroad)

Inward listing by African companies, Inward listing by African companies, institutions and government should be institutions and government should be encouraged through special allowance for encouraged through special allowance for institutional investors to invest up to an institutional investors to invest up to an additional 5% of their total retail assets in additional 5% of their total retail assets in African Securities listed on the JSE African Securities listed on the JSE

Ability to raise up to 75% of total Ability to raise up to 75% of total consideration locally through debt finance consideration locally through debt finance significantly reduces currency risk of South significantly reduces currency risk of South Africa investmentsAfrica investments and provides flexibility in and provides flexibility in acquisition consideration mixacquisition consideration mix

Ability to list locally further facilitates using Ability to list locally further facilitates using highly rated international paper to make local highly rated international paper to make local acquisitions acquisitions

Clarity needed on extent of local fund Clarity needed on extent of local fund managers ability to hold locally listed foreign managers ability to hold locally listed foreign stocks .stocks .

Presentation to CCA Conference on An Overview of African Capital ...

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