1 Click to edit Master subtitle style PRESENTATION TO STANDING COMMITTEE ON FINANCE 23 NOVEMBER 2010.

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Click to edit Master subtitle style

PRESENTATION TO STANDING COMMITTEE ON FINANCE

23 NOVEMBER 2010

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PIC ATTENDEES

Non – Executive Board Members

Mr. Nhlanhla Nene ChairmanMr. Jan Strydom Chairman: Investment Committee Mr. Zakhele Sithole Chairman: HR & Remuneration Committee

Management

Dr. Daniel Matjila Acting CEO, PICMs. Albertinah Kekana COO, PICMs Kameshni Naidoo CFO

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CONTENT

Organisational Overview Review of performance of PIC Operations

Review of performance of Assets Under Management (AUM)

Growth in Assets Under Management

Investment Highlights of the year

Investment Performance

Socio-economic Impact of PIC Investments

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Vision, Mission, and Values

PIC successfully streamlined the Vision, Mission, and Values Vision:

To meet or exceed our clients' investment objectives and commitments to stakeholders Mission Statement:

The PIC – having been established as an Act of Parliament to provide for the investment by the Corporation of certain monies received or held by, for or on behalf of the Government of the Republic and certain bodies, councils, fund and accounts – will:

− Deliver investment returns in line with client mandates− Create a working environment that will ensure that the best skills are attracted and retained− Be a beacon of good corporate governance− Contribute positively to South Africa’s development

Values: We have integrity We are results driven We care for our people We are accountable We strive for financial sustainability

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PIC Structure

PIC is an investment management company focussing on public sector entities

PIC is registered with the Financial Services Board (FSB)

Its investments are governed through client mandates

In 2011 PIC will be 100 years

Government

Public Investment Corporation (PIC)

PIC Real Estate Asset Management (PIC REAM)

Division of the PIC

Harith Fund Managers an associate of the PIC (46% owned)

(Fund Manager for PAIDF)

Advent Asset Managers

(Discontinued into

PIC REAM)

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PIC Governance Structure

Board

PIC REAM Committee

Executive Committee

Audit and Risk Committee

Human Resources and Remuneration

Committee

Chief Executive Officer

Information Management

Steering Committee

Portfolio Management Committee

Investment Committee

Executive Investment Committee

Valuations Committee

TERMS

OF REFERENCE

Management Committee

DELEGATION

OF AUTHORITY

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Overview of PIC clients

PIC’s clients are 36 public sector pension, provident, social security, development and guardian funds in South Africa.

Collectively, the assets under PIC management as at 31 March 2010 were R910,9 billion.

GEPF is PIC’s largest client and as at 31 March 2010 had entrusted assets worth R819 billion to the Corporation.

TOP FIVE PORTFOLIOs AUM (%)

GOVERNMENT EMPOYEES PENSION FUND (GEPF) 90

UNEMPOYMENT INSURANCE FUND (UIF) 5

COMPENSATION COMMISSIONER: PENSION FUND (CC:PF) 1

COMPENSATION COMMISSIONER (CC) 1

ASSOCIATED INSTITUTIONS PENSION FUND (AIPF) 1

OTHER 2

TOTAL 100

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Growth in Assets Under Management (AUM) (R Bn)

Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10

221 253 293 308 377 461 598 719 786 739 910

0

2

4

6

8

10

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Assets under management increased by 23% from R739 billion to R910 billion

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Growth in Assets Under Management

31 March 2009 31 March 2010 YoY CHANGE

Asset Class R' bn AUM (%) R' bn AUM (%) R' bn AUM (%)

CAPITAL MARKET 270.5 37 329.3 36 58.8 7.95

EQUITY 289.9 39 436.7 48 146.8 19.85

MONEY MARKET 101.2 14 70 8 -31.2 -4.22

STRUCTUREDPRODUCTS 7.3 1 29.2 3 21.9 2.96

ISIBAYA 31.0 4 5.9 1 -25.1 -3.39

CASH 16.6 2 12.9 1 -3.7 -0.50

PROPERTY 23.4 3 26.9 3 3.5 0.47

TOTAL 739.7 100 910.9 100 171.2 23.14

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Operations Highlights for the year

Building Institutional Capacity

Focus on improving Investment Performance

Socio-Economic Impact

Implemented a revised organisational structureConsolidation of financial risk, operational risk and regulatory

compliance for seamless risk management Implementation of a comprehensive skills development planEnhanced graduate programmeOperational efficiencies from implementation of Fixed Income

Investment Management System

Consolidation of all properties businesses into one division Operational efficiency and better focus on investment

performanceRestructuring of Equities portfolio for better investment

performance

Revised Isibaya Fund strategy to align withDevelopmental Investment Strategy of the GEPFResponsible Investing Principles

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Financial Sustainability

Revenue No increase in fees charged to clientsFees below industry levelsDisposal of 54% of HarithOperating Expenses21%(35) increase in employee head count Net profit after tax amounted to R72 million (2009: R158 million), 55% lower

than in the previous periodDividend of R86 million (Excluding STC) paid to the shareholderNet profit expected to decline as PIC builds up its operations

Consolidated 2010 Consolidated 2009 Change Year On Year (%)

Revenue R310 million R390 million (20)

Operating Expenses R229 million R211 million 9

Net profit after tax R 72 million R158 million (55)

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Investments Highlights for the year

EQUITIES

PROPERTIES

ISIBAYA FUND

Equity portfolio increased by 62% from R270 billion to R437 billion

Core – Satellite investment strategy implemented resulting in 75% of funds managed internally and 25% managed externally by 16 asset managers

Property portfolio increased by 15% in value from R23,4 billion to R26,9 billion

Community Property Fund (CPF) was ranked #1 on an income return (10.6%) out of 21 funds in the Investment Property Databank survey for 2009

R740 million invested in Bridge City mall in KwaMashu

Unwind of MTN BEE transaction has yielded a R14 billion profit for GEPF and resulted in 3200 MTN’s BEE employees becoming shareholders of MTN

Black owned private equity fund manager commitments of R575 million

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Summary Fund Performance

The performance of the total Assets Under Management has provided a positive real return albeit the performance of the GEPF was below benchmark

SUMMARY Fund (%)

Benchmark (%)

Excess Returns (%)

GOVERNMENT EMPLOYEES PENSION FUND (GEPF) 23.41 26.83 -2.70

UNEMPLOYMENT INSURANCE FUND (UIF) 9.57 8.59 0.98

COMPENSATION COMMISSIONER: (CC) 9.49 8.81 0.68

COMPENSATION COMMISSIONER:PENSION FUND (CC:PF) 8.78 7.86 0.92

ASSOCIATED INSTITUTIONS PENSION FUND (AIPF) 9.38 8.79 0.59

12 Months Ending 31 March 2010

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Fund Performance GEPF Attribution

EQUITIES

The performance of the listed equities dropped from the previous year’s performance due to market movements as well as strategic buying up of equities over the period and consequently the composite portfolio underperformed the SWIX benchmark

Internally Managed tracker funds have underperformed the benchmark

The new Externally managed equity composite has outperformed the benchmark

PROPERTY

The conservative capitalization rate used in comparison with IPD

Concentration in high-grade properties which does not match the IPD property mix

The overweight position in the largest and most liquid listed stocks (GrowthPoint and SA Corporate)

ISIBAYA FUND

Isibaya Fund returned an IRR of 25% since inception, outperforming its benchmark by 11%

The R6 billion investment in AfriSam was materially impaired at R1.2 billion

Deterioration of market conditions affecting companies in the cement industry and the high gearing contributed to the impairment

PIC is actively managing the investment to protect and enhance value for the benefit of the GEPF

FIXED INCOME

This portfolio has outperformed across all the sub classes.

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Socio-economic Impact of PIC Investments [1]

Fixed Income RSA Government Debt

- R169.4 billion is invested through various forms of government debt- Supports government spending on its priorities

Municipalities- R2.6 billion invested directly and indirectly to municipalities (Cape Town Metro, Joburg Metro, and

INCA) supporting local infrastructure development and service delivery SOE Debt & Equity

- R97.3 billion is invested in SOE Bonds & Money Markets to support the building of the infrastructure necessary for development

- In addition to ACSA Bonds, R2.4 billion invested in ACSA equity- R2 billion to IDC from UIF funds for initiatives aimed at addressing impact of Global Recession

R3 billion supports African infrastructure development via AfDB bonds Equities

Driving Responsible Investment: GEPF & PIC play an active part in SA Network of the UNPRI ESG rating matrix finalised to include social and environmental issues R8 billion allocated to BEE asset managers

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Socio-economic Impact of PIC Investments [2]

Isibaya Fund focusing on implementing the GEPF developmental investment policy framework.

GEPF policy is aligned with the priorities set out in the MTSF and the IPAP

Allocation of 5% of GEPF AUM (R40 bn)

Economic Infrastructure

Social Infrastructure Environmental Sustainability

Job Creation & New Enterprise

Energy

Logistics Network

Water

Commuter Transport

Liquid Fuels

Broadband

Affordable Housing

Healthcare

Education

Renewable energy

Green buildings

Energy Efficiency

Recycling

Clean Technology

SMMEs

Small cap stock Exchanges

High Job Creation Section

BBBEE

Allocation: R20 bnPercentage: 50%

Allocation: R12 bnPercentage: 30%

Allocation: R4 bnPercentage: 10%

Allocation: R4 bnPercentage: 10%

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Name Sector Description Approved Amount (Rm)

Eduloan Educational Loans Education finance for tertiary education

130

TUHF Affordable Housing - Refurbished inner city buildings

Short and medium term finance to residential property entrepreneurs

317

BPCC Road infrastructure Toll road financing 400

Spartan Technology IT hardware and Software leasing to SMEs

Providing high-end technology rental solutions

48

South African Workforce Housing Fund

Affordable Housing Affordable housing 150

Old-Mutual Housing Impact Fund

Affordable Housing Housing units 1,000

Total 2,045

Isibaya Fund Approved Investments

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The Community Property Fund

Performance Highlights:#1 IPD Income Return – 2009 (10.6%)

Top Decile for Targeted Development Investments – (Alexander Forbes – Manager Watch)

CPF FACTS

Properties owned 27

Properties Developed 32 (5 sold)

Property Value R2.8bn

Other Holdings R0.5bn

GLA Value

Eastern Cape 7%

123,716,836

Western Cape 1%

25,350,000

Gauteng 38% 1,082,102,672

North West 17%

243,200,000

Mpumalanga 15%

290,338,654

Limpopo 9%

267,864,832

KwaZulu Natal 11%

748,203,234

Free State 2%

49,800,000

2,830,576,228

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Socio-Economic Impact

Created direct employment to date >11,000 people

Affected more than 57,000 people indirectly Based on simple multiplier – not inclusive of all downstream

activities

Developed local entrepreneurs Local cleaning, security, refuse suppliers Franchise outlets

Provided infrastructure to under-serviced areas Formalised bus/taxi commuter facilities

Created catalysts for other infrastructure development Nodal activity – create commuter critical mass enabling better

government service provision

Created Community Trust Funds Funding for: creches, old age homes, HIV prevention education

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Example of Social Impact: Bridge City

Our Role

Planning Phase: Facilitated acquisition of site Acquired retail development prior to construction to

facilitate commercial funding

Construction Phase: R650m direct construction spend R160m channeled to local contractors 4 000 people employed during construction

Developed Site: 20% retained for black empowerment group 10% retained for the BBBEE group Approximately 800 permanent jobs Catalyst for:

- New railway station by PRASA (R450m)- 450-bed Provincial Hospital- Regional Magistrates Court- Further retail and commercial opportunities in

precinct

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Harith Fund Managers and PAIDF

PAIDF was the winner of the Infrastructure Fund of the Year for the second year in a row Over 70% of PAIDF funds will be committed by the end of the Mar 2011

Investment Country Description Approved Amt (US$ m)

Seawolf Nigeria Oil & Gas: Nigerian sponsored company for the purpose of acquiring 3 jackup shallow water drilling oil rigs and provide oil drilling services to oil and gas producers in West Africa

24.0

Aldwych Kenya, South Africa, Zambia and Ghana

Energy: Independent power producer 22.8

ETKHL Kenya Telecoms: Essar Telecom Kenya Holdings Limited (ETKHL) trading as “Yu” is one of 4 GSM wireless telecommunications providers in Kenya

93.8

Main One Ghana, Nigeria and West Coast Region

Telecoms: Company finances, constructs and operates state of the art sub-sea broad band cable system

31.7

New GX South Africa and Sub-Saharan Africa

Power & Telecommunications: Installation, maintenance and operation of sub-terrain ducting infrastructure capable of dark fiber optic network services

37.2

TAV Tunis Tunisia Aviation: TAV Tunis was established to design, finance, construct, upgrade, own and operate 2 airports in Tunisia. Namely, an existing airport, Monastir and built a new Enfidha airport.

53.4

Total 263.8

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THANK YOU