PUBLIC INVESTMENT COMMISSIONERS’ ISIBAYA FUND

1. PUBLIC INVESTMENT COMMISSIONERS’ ISIBAYA FUND Neill Maree: Portfolio Manager Fuad Cassim: Isibaya Fund Consultant Public Investment Commissioners

2. BACKGROUND • The PIC is not a Development Agency but acts as investment manager in terms of the PIC Act • The PIC manages funds on behalf of various clients, including the Government Employees Pension Fund • Investments have traditionally been made in listed securities, i.e. bonds and equities • These investments are not of a developmental nature Public Investment Commissioners

3. BACKGROUND(continued) • The PIC has, however, also been mandated to invest in “investments which promote social responsibility and infrastructure” • The Isibaya Fund has been created to house these investments • The PIC may utilise up to 3,5% of the assets under management for Isibaya Fund Investments Public Investment Commissioners

4. Which Investments or Asset Classes? • Private Equity • Privatisation • Infrastructure • The promotion of sustainable Black Economic Empowerment holds the key to the success of the Isibaya Fund Public Investment Commissioners

5. What kind of returns are targetted? • Bear in mind that the PIC acts on behalf of clients in a fiduciary capacity • All transactions should be financially viable to qualify. • Investments should have the potential to provide returns commensurate with the risks attached to the particular assets • A real return of 10% is therefore targetted Public Investment Commissioners

6. Does this mean that there is a possible conflict between investment return and socially responsible investments? • No • Some investments have a good change to provide higher than expected returns • Other investments could, however, underperform • In the long-term a well diversified portfolio of investments could provide both the required investment returns and the necessary social impact Public Investment Commissioners

7. How does the Isibaya Fund operate in practise? • Investment proposals are currently evaluated on a deal-by-deal basis • Investment proposals are submitted for consideration to the PIC’s Investment Committee • The Investment Committee then makes a recommendation to the PIC Board Public Investment Commissioners

8. Will the PIC consider partnerships with other market participants? • Yes • The PIC cannot operate in isolation in the South African Financial Markets as this could lead to a so-called “paper-chase” • Possible partners include the DBSA, the NEF, the IDC, the South African Infrastructure Fund and even other pension funds • The PIC already has sound working relationships with a number of other market participants Public Investment Commissioners

9. What has the PIC achieved? • The PIC has invested in, amongst others, the N3 Toll Road, the N4 Bakwena Toll Road and the Phamine Tin Mine • These investments have been structured to yield a return over the medium to longer term – success or failure can therefore not be determined immediately Public Investment Commissioners

10. Why Toll Roads? • In the first place it meets the Isibaya Fund’s requirement to invest in infrastructure • It creates an opportunity to finance HDI firms to enable ownership • Toll Roads create jobs and HDI firms can actively participate in not only the construction phase, but also in the ongoing maintenance program Public Investment Commissioners

11. Why Toll Roads?(continued) • HDI firms obtain cash flows from the work which in turn enable them to • Repay their financial commitments; and • Expand their business • At the same time investment returns are created for the PIC Public Investment Commissioners

12. FUTURE PLANS • Discussions are to be held with other parties to: • Strengthen existing relationships • Create the platform for future co-operation with other role-players • The Isibaya Fund is in the process of formulating policies with regard to BEE Charters Public Investment Commissioners

13. FUTURE PLANS(continued) • BEE Charters should provide guidance to the market in general on investment requirements • This may in turn lead to a revised investment strategy for the Isibaya Fund Public Investment Commissioners

14. QUESTIONS Public Investment Commissioners