Alexander Forbes AFB

1
Alexander Forbes (AFB)

• Investor presentation
• 20 July 2004
• Financial Advisor

2
Overview

• Existing terms of the Bonds
• Salient terms of the deal
• Rationale
• Financial effects
• Conditions
• Conclusions
• Questions

3
Existing Terms of the Bonds

• Repayment of 118 million due on 15 Sept 2005
• Interest payments of 3 million bi-annually 15
  Mar 15 Sept
• Implied YTM at date of issue was 8.934 (NACS)
• VenFin has right to exchange into 53.7 million
  AFB shares at any time irrespective of share
  price
• VenFin also has right to use repayment proceeds
  on 15 Sept 2005 to subscribe for AFB shares at
  30 day VWAP
• Early repayment only catered for in the case of
  default or disagreement between AFB and VenFin,
  in which case the redemption price is the full
  118 million

4
Salient Terms of the Deal

• AFB issues 114.8m new shares to VenFin for
  R1.159bn
• Shares will not receive 67c dividend payable on
  10 August
• R10.10 per share represents a premium of 9.8
  over 30 day VWAP prior to cautionary adjusted for
  dividend (i.e. R9,20)
• Equates to 24.96 of enlarged share capital
• AFB buys back Bonds from VenFin for R1.159bn plus
  12.5m
• Equates to 115.1m accrued PV of Bonds and R11.30
  / 1 exchange rate
• Payment of 12.5 million from UK cash resources
• Limits earnings dilution
• Interest accrues at UK Base Rate (currently 4.5
  p.a.) from 1 August

5
Other Rights and Obligations

• VenFin has right to appoint 1 director so long as
  hold gt 10
• VenFin cannot sell shares for 1 year
• Other rights and conditions under Bonds eliminated

6
Valuation of Equity
Premium realised on issue of shares represents
a fair outcome
7
Valuation of Bonds

• Negotiated settlement
• No right to early redemption and thus no
  pre-determined value under existing bond terms
• Consideration paid of R1.159bn plus 12.5m
  equates to
• Accrued PV of Bonds of 115.1m
• Exchange rate of R11.30 / 1 (1 month forward
  rate)
• No value paid for subscription right
• Represents a fair outcome

8
Rationale

• Refinancing of international business has been a
  priority
• Represents unique opportunity to strengthen
  international and group balance sheet to support
  growth
• Greater operational and financial flexibility
• Can pursue appropriate international acquisitions
• Removal of risk regarding future dilution
• Fix share price and exchange rates
• Risk of greater dilution at maturity removed
• Full conversion at implied ex-div spot
• ? 29 ownership 17 dilution
• Resolution of uncertainty around resolution of
  Bonds

9
Rationale (continued)

• Earnings dilution mitigated by paying 12.5m of
  buy back consideration from UK cash resources
• Introduces supportive shareholder
• VenFin preferred equity to cash alternative
• Focus now solely on developing the business

10
Pro Forma Historical Financial Effects
11
Conditions

• Approval of 75 of AFBs shareholders
• Circular to be posted mid August
• Shareholders meeting early September
• Competition and other regulatory approvals to
  extent required
• SARB has approved the transactions
• VenFin shareholder approval not required

12
Conclusions

• Key milestone for the group
• Significant balance sheet capacity to explore
  value creating opportunities
• Risk eliminated and uncertainty resolved for
  Alexander Forbes and shareholders
• Introduction of a supportive shareholder
• Deal executed on fair terms

13
Questions