PRESENTATIONTO

PUBLIC ENTERPRISESPORTFOLIO COMMITTEE

8 MARCH 2000

TRANSNETTRANSNETLIMITEDLIMITED

TRANSNET PENSION FUND

TRANSNET DEBT RESTRUCTURING PLAN

TRANSNET NET BORROWINGS

199419951996199719981999

Total in R’bn

22,61921,46722,62422,65123,84627,185

Pension Fund andMedical Aidas % of total

54%56%52%52%50%43%

43% of our net borrowings is the Pension Fund T11 Bond and Medical Aid Provision. Our focus is on

solving these two structural problems

HISTORY

PROCESS - AGREEMENTS

WAY FORWARD

TRANSNET PENSION FUNDRESTRUCTURING

PENSION FUNDHISTORY

1990 VALUATION

AssetsLiabilitiesShortfall

R5 billion R22 billion(R17 billion)

LIABILITIES - R22 BILLION

Statutory 2% =Social Liabilities 6,5% =

R11,835 billion R10,394 billion(R22,229 billion)

T11 BOND WAS R10,394 BILLION

31 MARCH 1990SOCIAL LIABILITY 6,5%

R10,394 BILLION

Increases already granted =Future Increases - Existing Pensioners =Future Increases - Members =TOTAL

R2,137 billion*

R4,635 billion*

R3,621 billionR10,394 billion

T11 BOND

R10,394 billion 20 years to Year 2010 16,5% fixed coupon

TRANSNETPENSION FUND DEBENTURES (R’MILLION)

ProvisionSupplementary

Benefits

ProvisionNon-

Pension Fundmembers

Capitaldiscount onsettlement

T011Debentures

Discount rate/Interest rate 12% 12% 16,50%

90/9101/04/90Provision created at company

formation31/03/91Partial settlement at discount

10 3944 462

5370 900 3 562

5 932 537 900 3 56291/9201/10/92Partial settlement at discount 5 932 0 1 191 4 741

0 537 2 091 8 30392/9331/03/93Settlement 537 0 537

0 2 091 8 84094/9501/04/94Repayment – V&A 249

8 59195/9601/08/95Repayment – Admin buildings 120

8 471

FUNDING LEVEL

LIABILITIES Transnet Active Members Transnet Pensioners SATS PensionersTOTAL LiabilitiesASSETS

Equities Fixed interest and cash T11 Property Loans to unlisted companies Foreign Equity investments Accrued Investment Income Net current assetsTOTAL AssetsDEFICIT

MARCH 1990

(R’bn)

22,0

MARCH 1998

(R’bn)

13,97,4

14,435,7

5,0

5,0R17 billion

19,03,37,32,30,10,40,40,1

32,9R3 billion

CHANGES IMPLEMENTED

SINCE 1997

REDUCTION TO THE PENSION FUND DEFICITR17 BILLION - 1990 TO R3 BILLION - 1998

DECISIONS POSITIVE EFFECT NEGATIVE EFFECT EXECUTIVE’S ACTIONSON THE PENSION ON THE COMPANY TO REVERSE (CORRECT)FUND SOME OF THE DECISIONS

1. 1990 - Creation of the T11 The Pension Fund had Transnet had a liabilityBond - R8,4 billion for an asset of R8,4 billion. in its balance sheet of20 years Funding level dramatic R8bn for 20 years. Debt/

increase Equity Ratio goes to 72%

2. 1990 - Coupon Rate of The Pension Fund receives Transnet has a fixed16,5% was fixed on the interest from the company commitment of R1,4bnT11 Bond of R1,4 bn per annum. Interest payment/year.

Accumulated to current Accumulated interest payment = R8 billion to current is R8bn out of its

income statement

3. 1993 - Additional contributions R500 m/year additional Transnet paid out of its cash Additional contributions by the company of 9% contributions received from flows R500m to the Pension reduced by 4,5% in

the company Fund. Accumulated additional 1997 to R250m/year Accumulated to current contribution to current= R3,0 billion = R3,0 billion

4. 1994 - V&A Waterfront property The V&A Waterfront Asset Valuable asset could have Company bought backsold by the Company to the is valued at ±R2bn in the been in the Transnet 26% controlling stake Pension Fund for R249 million Pension Fund Asset balance sheet effective 31 March 1999

5. 1995 - 3 valuable Transnet The Pension Fund tied the Transnet committed to lease Negotiating to buy back buildings sold to TPF for company to 20-25 year payments for full occupancy the buildingsR120 million lease payments with for 20-25 years and

unfair conditions maintenance

} Investment Strategy being} discussed with the } Government Actuary

PHASE 1SOLUTION

EFFECT OF THE CHANGE IN THE PENSION INCREASE POLICY

Investment earningsPension Increases

Valued at

AFTERTHE

CHANGE

12,0%5,0%

7,0%

BEFORE THE

CHANGE

12,0%7,5%

4,5%

ASSETS OF THE FUND - 31/03/99

Shares, Investment Policy & Foreign EquityFixed-interest StockTransnet T011 Stock (nominal value)PropertyLoans to Unlisted CompaniesDeposits and Promissory NotesCash at BankAccrued Investment IncomeDebtors

Creditors

TOTAL

MarketValue (R’m)

16792,21258,77327,02743,0

157,21699,1

224,5362,8294,7

30859,2(244,8)

30 614,4

ActuarialValue

R’m

16624,21258,79070,82743,0

157,21699,1

224,5362,8294,7

32435,0(244,8)

32190,2

FUNDING LEVEL - 31/03/1999A. PENSION FUND

LIABILITIES

SATS PensionersTransnet PensionersTransnet Active

Total Liabilities

B. PENSION FUND ASSETS

EquitiesFixed Interest and CashTIIPropertyLoans to unlisted companiesForeign equity investmentsAccrued investment incomeNet current assets

Total Assets

SURPLUS/(DEFICIT)

Actuarial Valuation 31/3/98

R’bn14,4}

7,4}13,935,7

17,23,39,12,30,10,40,40,1

32,9

(R3,0 billion)

Actuarial Valuation31/03/99

R’bn11,9

6,913,332,1

16,21,39,12,70,20,40,42,0

32,2

R88 million

TRANSNET PENSION FUND

22.7

66.5 64.274.6

82.4 84.9 89.5 90.3 91.4100.3

0

20

40

60

80

100

120

31/0

3/90

31/0

3/91

31/0

3/92

31/0

3/93

31/0

3/94

31/0

3/95

31/0

3/96

31/0

3/97

31/0

3/98

31/0

3/99

FUNDING LEVEL (%)

PENSION FUND ACTUARIAL SHORTFALL

-6786 -8516 -10472-6494 -4621 -3236 -3042 88-4209 -3248

-10394

-20000-18000-16000-14000-12000-10000

-8000-6000-4000-2000

02000

(R'm

)

Column 2 -10394

Column 1 -6786 -8516 -10472 -6494 -4621 -4209 -3248 -3236 -3042 88

31/03/90 31/03/91 31/03/92 31/03/93 31/03/94 31/03/95 31/03/96 31/03/97 31/03/98 31/03/99

PHASE 1

CONCLUDED PENSION FUND FULLY FUNDED

GOVERNMENT AND PARLIAMENTARY SUPPORT IS CRITICAL TO THE

SUCCESS OF THISNEXT PHASE OF THE SOLUTION

THANK YOU

TRANSNETTRANSNETLIMITEDLIMITED