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PRESENTATION TO PUBLIC ENTERPRISES PORTFOLIO COMMITTEE 8 MARCH 2000

PRESENTATION TO PUBLIC ENTERPRISES PORTFOLIO COMMITTEE 8 MARCH 2000. TRANSNET LIMITED. TRANSNET PENSION FUND. TRANSNET DEBT RESTRUCTURING PLAN. TRANSNET NET BORROWINGS. 1994 1995 1996 1997 1998 1999. Total in R’bn 22,619 21,467 22,624 22,651 23,846 27,185. Pension Fund and

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PRESENTATION TO PUBLIC ENTERPRISES PORTFOLIO COMMITTEE 8 MARCH 2000

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  1. PRESENTATION TO PUBLIC ENTERPRISES PORTFOLIO COMMITTEE 8 MARCH 2000 TRANSNET LIMITED

  2. TRANSNET PENSION FUND

  3. TRANSNET DEBT RESTRUCTURING PLAN TRANSNET NET BORROWINGS 1994 1995 1996 1997 1998 1999 Total in R’bn 22,619 21,467 22,624 22,651 23,846 27,185 Pension Fund and Medical Aid as % 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

  4. TRANSNET PENSION FUNDRESTRUCTURING • HISTORY • PROCESS - AGREEMENTS • WAY FORWARD

  5. PENSION FUNDHISTORY

  6. 1990 VALUATION Assets Liabilities Shortfall 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

  7. 31 MARCH 1990 SOCIAL 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 billion R10,394 billion

  8. T11 BOND • R10,394 billion • 20 years to Year 2010 • 16,5% fixed coupon

  9. FUNDING LEVEL LIABILITIES Transnet Active Members Transnet Pensioners SATS Pensioners TOTAL Liabilities MARCH 1990 (R’bn) 22,0 MARCH 1998 (R’bn) 13,9 7,4 14,4 35,7 ASSETS Equities Fixed interest and cash T11 Property Loans to unlisted companies Foreign Equity investments Accrued Investment Income Net current assets TOTAL Assets DEFICIT 5,0 5,0 R17 billion 19,0 3,3 7,3 2,3 0,1 0,4 0,4 0,1 32,9 R3 billion

  10. CHANGES IMPLEMENTED SINCE 1997

  11. REDUCTION TO THE PENSION FUND DEFICITR17 BILLION - 1990 TO R3 BILLION - 1998 DECISIONSPOSITIVE EFFECT NEGATIVE EFFECT EXECUTIVE’S ACTIONS ON THE PENSION ON THE COMPANY TO REVERSE (CORRECT) FUNDSOME OF THE DECISIONS 1. 1990 - Creation of the T11 The Pension Fund had Transnet had a liability Bond - R8,4 billion for an asset of R8,4 billion. in its balance sheet of 20 years Funding level dramatic R8bn for 20 years. Debt/ increase Equity Ratio goes to 72% }Investment Strategy being } discussed with the } Government Actuary 2. 1990 - Coupon Rate of The Pension Fund receives Transnet has a fixed 16,5% was fixed on the interest from the company commitment of R1,4bn T11 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 back sold 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 buildings R120 million lease payments with for 20-25 years and unfair conditions maintenance

  12. PHASE 1SOLUTION

  13. EFFECT OF THE CHANGE IN THE PENSION INCREASE POLICY Investment earnings Pension Increases Valued at BEFORE THE CHANGE 12,0% 7,5% 4,5% AFTER THE CHANGE 12,0% 5,0% 7,0%

  14. ASSETS OF THE FUND - 31/03/99 Shares, Investment Policy & Foreign Equity Fixed-interest Stock Transnet T011 Stock (nominal value) Property Loans to Unlisted Companies Deposits and Promissory Notes Cash at Bank Accrued Investment Income Debtors Creditors TOTAL Market Value (R’m) 16792,2 1258,7 7327,0 2743,0 157,2 1699,1 224,5 362,8 294,7 30859,2 (244,8) 30 614,4 Actuarial Value R’m 16624,2 1258,7 9070,8 2743,0 157,2 1699,1 224,5 362,8 294,7 32435,0 (244,8) 32190,2

  15. FUNDING LEVEL - 31/03/1999 A.PENSION FUND LIABILITIES SATS Pensioners Transnet Pensioners Transnet Active Total Liabilities B. PENSION FUND ASSETS Equities Fixed Interest and Cash TII Property Loans to unlisted companies Foreign equity investments Accrued investment income Net current assets Total Assets SURPLUS/(DEFICIT) Actuarial Valuation 31/3/98 R’bn 14,4} 7,4} 13,9 35,7 17,2 3,3 9,1 2,3 0,1 0,4 0,4 0,1 32,9 (R3,0 billion) Actuarial Valuation 31/03/99 R’bn 11,9 6,9 13,3 32,1 16,2 1,3 9,1 2,7 0,2 0,4 0,4 2,0 32,2 R88 million

  16. TRANSNET PENSION FUND

  17. PHASE 1 • CONCLUDED • PENSION FUND FULLY FUNDED

  18. GOVERNMENT AND PARLIAMENTARY SUPPORT IS CRITICAL TO THE SUCCESS OF THISNEXT PHASE OF THE SOLUTION

  19. THANK YOU TRANSNET LIMITED

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