Proof18:26.1.10

TRANSNET LIMITED (Registration number 1990/000900/06) (incorporated with limited liability in the Republic of South Africa)

U.S.$2,000,000,000 Global Medium Term Note Programme Under the Global Medium Term Note Programme described in this Base Prospectus (the ‘‘Programme’’), Transnet Limited (‘‘Transnet’’, the ‘‘Company’’ or the ‘‘Issuer’’), subject to compliance with all relevant laws, regulations and directives, may from time to time issue medium term notes (the ‘‘Notes’’). The aggregate principal amount of Notes outstanding will not at any time exceed U.S.$2,000,000,000 (or its equivalent in other currencies). This Base Prospectus has been approved by the Financial Services Authority (the ‘‘FSA’’) in its capacity as competent authority for the purposes of Directive 2003/17/EC (the ‘‘Prospectus Directive’’) and relevant implementing measures in the United Kingdom as a base prospectus issued in compliance with the Prospectus Directive and relevant implementing measures in the United Kingdom for the purposes of giving information with regard to the issue of the Notes described in this Base Prospectus for the period of 12 months from the date of this Base Prospectus. Application has been made for such Notes to be admitted to the official list (the ‘‘Official List’’) of the FSA and to the London Stock Exchange plc (the ‘‘London Stock Exchange’’) for such Notes to be admitted to trading on the London Stock Exchange’s regulated market (the ‘‘Market’’). References in this Base Prospectus to Notes being ‘‘listed’’ (and all related references) shall mean that such Notes have been admitted to the Official List and have been admitted to trading on the Market. The Market is a regulated market for the purposes of Directive 2004/39/EC on markets in financial instruments. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by a competent authority, stock exchange and/or quotation system or that they will be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer. The relevant Final Terms (the ‘‘Final Terms’’) in respect of the issue of any Notes will specify whether or not such Notes will be listed on the Official List and admitted to trading on the Market (or any other stock exchange or quotation system). Notes may also be issued that are not traded on any exchange. Investing in the Notes involves substantial risks. Prospective investors should have regard to the risks described under the section captioned ‘‘Risk Factors’’ in this Base Prospectus. In general, the Notes of each Series (as defined in ‘‘Overview – Overview of the Programme – Method of Issues’’) issued in bearer form (‘‘Bearer Notes’’) will initially be represented by a temporary global note in bearer form, without interest coupons (each a ‘‘Temporary Global Note’’), and will be sold in ‘‘offshore transactions’’ within the meaning of Regulation S (‘‘Regulation S’’) under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’). Interests in Temporary Global Notes generally will be exchangeable for interests in permanent global notes (each a ‘‘Permanent Global Note’’ and, together with the Temporary Global Notes, the ‘‘Global Notes’’), or if so stated in the relevant Final Terms, definitive Notes (‘‘Definitive Notes’’), after the date falling 40 days after the completion of the distribution of the relevant Tranche of Notes upon certification as to non-U.S. beneficial ownership. Interests in Permanent Global Notes will be exchangeable for Definitive Notes in whole but not in part in the limited circumstances described under ‘‘Summary of Provisions Relating to the Notes While in Global Form’’. Global Notes may be deposited on the issue date with a common depositary (the ‘‘Common Depositary’’) on behalf of Euroclear Bank S.A./N.V. (‘‘Euroclear’’) and Clearstream Banking, socie´te´ anonyme (‘‘Clearstream, Luxembourg’’) or such other clearing systems as shall be agreed between the Issuer and the relevant Dealers (as defined herein). Bearer Notes are subject to U.S. tax law requirements. The Notes of each Tranche (each a ‘‘Tranche’’) to be issued in registered form (‘‘Registered Notes’’) will be represented by registered certificates (each a ‘‘Certificate’’), one Certificate being issued in respect of each Noteholder’s entire holding of Registered Notes of one Tranche and may be represented by a Global Certificate (as defined below) and Certificates may, and Global Certificates will, be deposited on the relevant issue date either with (a) a Common Depositary or (b) such other clearing system as shall be agreed between the Issuer and the relevant Dealers (as defined herein). Registered Notes which are sold in an ‘‘offshore transaction’’ within the meaning of Regulation S will initially be represented by a permanent registered global certificate (each a ‘‘Regulation S Global Certificate’’) without interest coupons, which may be deposited on the relevant issue date (a) in the case of a Series intended to be cleared through Euroclear and/or Clearstream, Luxembourg, with a Common Depositary and (b) in the case of a Series intended to be cleared through a clearing system other than, or in addition to, Euroclear and/or Clearstream, Luxembourg, or delivered outside a clearing system, as agreed between the Issuer and the relevant Dealers. Registered Notes which are sold in the United States to ‘‘qualified institutional buyers’’ (each a ‘‘QIB’’) within the meaning of Rule 144A (‘‘Rule 144A’’) (the ‘‘Rule 144A Notes’’) under the Securities Act will initially be represented by a permanent registered global certificate (each a ‘‘Rule 144A Global Certificate’’ and, together with the Regulation S Global Certificates, the ‘‘Global Certificates’’), without interest coupons, which may be deposited on the relevant issue date with a custodian (the ‘‘Custodian’’) for, and registered in the name of Cede & Co. as nominee for, the Depository Trust Company (‘‘DTC’’). The provisions governing the exchange of interests in the Global Certificates for individual Certificates in certain limited circumstances are described in ‘‘Summary of Provisions relating to the Notes while in Global Form’’. In the case of any Notes which are to be admitted to trading on a regulated market within the European Economic Area (the ‘‘EEA’’) or offered to the public in a Member State of the EEA in circumstances which require the publication of a Prospectus under the Prospectus Directive, the minimum specified denomination (each a ‘‘Specified Denomination’’) shall be e50,000 (or its equivalent in any other currency as at the date of issue of the relevant Notes). Rule 144A Notes may only be offered in a minimum denomination of U.S.$100,000 (or its equivalent in any other currency as at the date of issue of the relevant Notes). Any sale or transfer of Rule 144A Notes after the issue date of such Notes may only be made in a minimum denomination of U.S.$100,000 (or its equivalent in another currency). Tranches of Notes to be issued under the Programme may be rated or unrated. Where a Tranche of Notes is to be rated, such rating will not necessarily be the same as the ratings assigned to the Programme. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. The Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, pledged or otherwise transferred except (1) in accordance with Rule 144A to a person that the holder and any person acting on its behalf reasonably believes is a QIB that is acquiring the Notes for its own account or for the account of one or more QIBs, (2) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, (3) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder, if available, or (4) pursuant to any effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. No representation can be made as to the availability of the exemption provided by Rule 144 under the Securities Act for resales of the Notes. For a description of these and certain further restrictions on offers, sales and transfers of Notes and distribution of this Base Prospectus, see ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions.’’ This Base Prospectus should be read and construed together with any amendment or supplement hereto. Further, in relation to any Series of Notes, this Base Prospectus should be read and construed together with the relevant Final Terms. As described further in this Base Prospectus, the prior written approval of the Financial Surveillance Department (‘‘ExCon’’) of the South African Reserve Bank (the ‘‘SARB’’) will be required for each Tranche of Notes issued under this Programme.

Arrangers Barclays Capital Goldman Sachs International Dealers Barclays Capital Goldman Sachs International Goldman, Sachs & Co.

The date of this Base Prospectus is 26 January 2010 This Base Prospectus comprises a base prospectus for the purposes of the Prospectus Directive and for the purpose of giving information with regard to the Issuer and its subsidiaries (the ‘‘Group’’) and the Notes which, according to the particular nature of the Issuer and of the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer and the Group. The Issuer accepts responsibility for the information contained in this Base Prospectus. To the best of the knowledge and belief of the Issuer (which has taken all reasonable care to ensure that such is the case) the information contained in this Base Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. No person has been authorised to give any information or to make any representation other than those contained in this Base Prospectus in connection with the issue or sale of the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer or any Arranger or Dealer (each as defined in ‘‘Overview – Overview of the Programme’’). Neither the delivery of this Base Prospectus or any Final Terms nor the offering, sale, or delivery of any Note shall, under any circumstances, create any implication that the information contained in this Base Prospectus is accurate subsequent to the date hereof or that there has been no change in the affairs of the Issuer or the Group since the date hereof or the date upon which this Base Prospectus has been most recently amended or supplemented or that there has been no adverse change in the financial position of the Issuer or the Group since the date hereof or the date upon which this Base Prospectus has been most recently amended or supplemented or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same. In the case of any Notes which are to be admitted to trading on a regulated market within the EEA or offered to the public in a Member State of the EEA in circumstances which require the publication of a prospectus under the Prospectus Directive, the minimum specified denomination shall be c50,000 (or its equivalent in any other currency as at the date of issue of the Notes). The distribution of this Base Prospectus and any Final Terms and the offering, sale or delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Base Prospectus or any Final Terms comes are required by the Issuer, the Arrangers and the Dealers to inform themselves about and to observe any such restriction. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Base Prospectus and any Final Terms and other offering material relating to the Notes, see ‘‘Subscription and Sale’’. In particular, Notes have not been and will not be registered under the Securities Act, and Bearer Notes are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or, in the case of Bearer Notes, delivered within the United States or to U.S. persons. Notes may be offered and sold outside the United States in reliance on Regulation S and in the United States to QIBs in reliance on Rule 144A. Prospective purchasers of Notes are hereby notified that sellers of Notes may be relying on the exemption from registration requirements of Section 5 of the Securities Act provided by Rule 144A. This Base Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Arrangers or the Dealers to subscribe for, or purchase, any Notes. The Arrangers and the Dealers have not separately verified the information contained herein. None of the Arrangers or the Dealers makes any representation, express or implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the information in this Base Prospectus. Neither this Base Prospectus nor any Final Terms nor any financial statements are intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by any of the Issuer, the Arrangers or the Dealers that any recipient of this Base Prospectus or any Final Terms or any financial statements should purchase the Notes. Each potential purchaser of Notes should determine for itself the relevance of the information contained in this Base Prospectus and any Final Terms and its purchase of Notes should be based upon such investigation as it deems necessary. None of the Arrangers or the Dealers undertakes to review the financial condition or affairs of the Issuer during the life of the arrangements contemplated by this Base Prospectus and any Final Terms nor to advise any investor or potential investor in the Notes of any information coming to the attention of any of the Arrangers or the Dealers.

i c101680pu007Proof18:26.1.10B/LRevision:0OperatorDavS In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the stabilising manager(s) (the ‘‘Stabilising Manager(s)’’) (or persons acting on behalf of any Stabilising Manager(s)) in the relevant Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager(s)) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.

This Base Prospectus has been prepared by the Issuer for use in connection with the offer and sale of the Notes outside the United States, the resale of the Notes in the United States in reliance on Rule 144A under the Securities Act and the admission of the Notes to the Official List and to trading on the Market. The Issuer, the Arrangers and the Dealers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Base Prospectus does not constitute an offer to any person in the United States or to any U.S. person other than any QIB to whom an offer has been made directly by one of the Dealers or its U.S. broker-dealer affiliate. Distribution of this Base Prospectus by any non- U.S. person outside the United States or by any QIB in the United States to any U.S. person or to any other person within the United States, other than any QIB and those persons, if any, retained to advise such non-U.S. person or QIB with respect thereto, is unauthorised and any disclosure without the prior written consent of the Issuer of any of its contents to any such U.S. person or other person within the United States, other than any QIB and those persons, if any, retained to advise such non-U.S. person or QIB, is prohibited.

THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER U.S. REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF NOTES OR THE ACCURACY OR THE ADEQUACY OF THIS BASE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

NOTICE TO SOUTH AFRICAN INVESTORS The Notes may not be and, accordingly, are not being offered or sold to prospective investors in the Republic of South Africa. Accordingly, any offer of Notes will not be an ‘‘offer to the public’’ as defined in section 142 of the South African Companies Act, 1973 as amended (the ‘‘SA Companies Act’’) and this Base Prospectus does not, nor is it intended to, constitute a prospectus prepared and registered under the SA Companies Act.

ii c101680pu007 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS NOTICE TO UK INVESTORS This Base Prospectus is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’) or (iii) persons falling within Article 49(2)(a) to (d) (‘‘high net worth companies, unincorporated associations, etc’’.) of the Order (all such persons together being referred to as ‘‘relevant persons’’). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this Base Prospectus or any of its contents.

NOTICE TO EEA INVESTORS This Base Prospectus has been prepared on the basis that, except to the extent sub-paragraph (ii) below may apply, any offer of Notes in any Member State of the EEA which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly, any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of an offering contemplated in this Base Prospectus as completed by the Final Terms in relation to the offer of those Notes may only do so (i) in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer, or (ii) if a prospectus for such offer has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and (in either case) published, all in accordance with the Prospectus Directive, provided that any such prospectus has subsequently been completed by final terms which specify that offers may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State and such offer is made in the period beginning and ending on the dates specified for such purpose in such prospectus or final terms, as applicable. Except to the extent sub-paragraph (ii) above may apply, neither the Issuer nor any Dealer has authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer or any Dealer to publish or supplement a prospectus for such offer.

NOTICE TO INVESTORS Because of the following restrictions, prospective investors are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the Notes offered hereby. Each purchaser of Notes offered hereby will be deemed to have represented, agreed and acknowledged that: 1. It is either (i)(a) a QIB within the meaning of Rule 144A, (b) acting for its own account, or for the account of one or more QIBs and (c) aware, and each beneficial owner of such Notes has been advised, that the sale of such Notes to it is being made in reliance on Rule 144A or (ii) purchasing the Notes in an offshore transaction pursuant to Regulation S. 2. It understands that the Notes have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of one or more QIBs, (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder, if available, or (d) pursuant to any effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any State or another jurisdiction of the United States. 3. The purchaser of the Notes will be deemed to represent, warrant and agree that either (A) it is not and for so long as it holds a Note (or any interest therein) will not be (i) an ‘‘employee benefit plan’’ as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (ii) a ‘‘plan’’ as defined in and subject to the Code, (iii) an entity whose underlying assets include the assets of any such employee benefit plan subject to ERISA or other plan subject to Section 4975 the Code, or (iv) a governmental or other benefit plan which is subject to any

iii c101680pu007 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS U.S. federal, state or local law, that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code, or (B) its purchase and holding of the Notes will not result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of such a governmental or other employee benefit plan, any such substantially similar U.S. federal, state or local law) for which an exemption is not available. 4. It understands that the Rule 144A Notes, unless otherwise determined by the Issuer in accordance with applicable law, will bear a legend substantially to the following effect: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A ‘‘QIB’’), THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QIBS, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (4) PURSUANT TO ANY EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THE NOTES. 5. It understands that the Issuer, the Registrar (as defined in ‘‘Terms and Conditions of the Notes’’ (the ‘‘Conditions’’)), the relevant Arranger(s) and Dealer(s) and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. If it is acquiring any Rule 144A Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each of those accounts and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each account. 6. It understands that Rule 144A Notes will be evidenced by a Rule 144A Global Certificate. Before any interest in a Rule 144A Global Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in a Regulation S Global Certificate, it will be required to provide a Transfer Agent (as defined in the Conditions) with a written certification (in the form provided in the Agency Agreement executed in respect of the Notes (the ‘‘Agency Agreement’’)) as to compliance with applicable securities laws.

iv c101680pu007 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS CONTENTS

Page

OVERVIEW ...... 2 RISK FACTORS ...... 14 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ...... 32 PRESENTATION OF FINANCIAL AND OTHER INFORMATION...... 34 SUPPLEMENTARY PROSPECTUS ...... 39 AVAILABLE INFORMATION ...... 40 USE OF PROCEEDS...... 41 CAPITALISATION AND INDEBTEDNESS ...... 42 SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION ...... 43 OPERATING AND FINANCIAL REVIEW ...... 47 BUSINESS...... 79 MANAGEMENT ...... 118 OVERVIEW OF SOUTH AFRICA AND THE SOUTH AFRICAN ECONOMY ...... 127 SHAREHOLDER...... 139 REGULATION ...... 140 RELATED PARTY TRANSACTIONS ...... 142 EXCHANGE CONTROLS...... 144 TERMS AND CONDITIONS OF THE NOTES ...... 145 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM..... 167 CLEARING AND SETTLEMENT ...... 171 TAXATION...... 175 ERISA AND CERTAIN OTHER U.S. CONSIDERATIONS ...... 185 SUBSCRIPTION AND SALE...... 186 TRANSFER RESTRICTIONS...... 191 SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES ...... 194 LEGAL MATTERS...... 196 INDEPENDENT AUDITORS...... 197 DESCRIPTION OF CERTAIN INDEBTEDNESS ...... 198 FORM OF FINAL TERMS ...... 204 GENERAL INFORMATION ...... 213 INDEX TO FINANCIAL STATEMENTS...... F-1 OVERVIEW

This overview should be read as an introduction to, and is qualified in its entirety by reference to, the more extensive information contained elsewhere in this Base Prospectus. This overview may not contain all the information that prospective investors should consider before deciding to invest in the Notes. Accordingly, any decision by a prospective investor to invest in the Notes should be based on a consideration of this Base Prospectus as a whole. Prospective investors should read this entire Base Prospectus carefully, including the financial statements and related notes and the information set forth under the headings ‘‘Risk Factors’’ and ‘‘Cautionary Note Regarding Forward- Looking Statements’’.

Transnet’s Business Transnet is a public company with the Government of the Republic of South Africa (the ‘‘Government’’) as its sole shareholder (the ‘‘Shareholder’’) and is the operator and custodian of a major portion of the Republic of South Africa’s transport infrastructure. Transnet is responsible for ensuring that a significant part of the country’s bulk freight transportation system operates according to world-class standards and as an integral part of the overall economy. Transnet is a focused freight transport company with a goal of delivering integrated, efficient, safe, reliable and cost-effective services. Transnet’s key mandate, as defined by its Shareholder Compact with its Shareholder (the ‘‘Shareholder Compact’’), is to assist in lowering the cost of doing business and to enable economic growth in the Republic of South Africa. Transnet seeks to promote economic growth in the Republic of South Africa by providing its customers with access to world-class integrated logistics solutions and by creating transport capacity ahead of demand. Transnet is funded through reserves and borrowings and does not receive cash subsidies from the Government. Transnet’s borrowings are based on the strength of its own balance sheet. Going forward, Transnet intends to borrow without Government subsidies and the Notes are not guaranteed by the Government. As a result, Transnet is required to earn an appropriate return on assets that will allow for the maintenance and expansion of the rail, port and pipeline infrastructure that it owns and operates, while maintaining a strong balance sheet. Substantially all of Transnet’s revenues are generated in the Republic of South Africa. Over the past four financial years, Transnet has transformed from a diversified conglomerate into a focused rail, port and pipeline operator. Transnet has accomplished this through the sale, closure or transfer of non-core assets and businesses, which have been treated as discontinued operations for accounting purposes. Transnet’s continuing operations are grouped into divisions according to major transport modes, with central support services unified under one brand. For operational and International Financial Reporting Standards (‘‘IFRS’’) reporting purposes, Transnet is organised into the following five core business divisions: Freight Rail (‘‘Transnet Freight Rail’’), Rail Engineering (‘‘Transnet Rail Engineering’’), the National Ports Authority (‘‘Transnet National Ports Authority’’), Port Terminals (‘‘Transnet Port Terminals’’) and Pipelines (‘‘Transnet Pipelines’’). The ‘‘Other’’ segment includes Transnet Property, Transnet Fuel Solutions, Transnet Capital Projects, Transnet Corporate Centre, and Transnet Heritage Foundation. Transnet Freight Rail is focused on transporting bulk and containerised freight. Transnet Freight Rail transported 177 million tonnes of freight during Financial Year 2009 and 86.9 million tonnes of freight during the six months ended 30 September 2009. Transnet Rail Engineering consists of eight product-focused business units that provide services ranging from refurbishment, conversion and upgrades, to the manufacturing and assembly of rail- related rolling stock. Most of Transnet Rail Engineering’s sales are generated from sales to Transnet Freight Rail and the Passenger Rail Agency of the Republic of South Africa (‘‘PRASA’’) (a separate state owned entity and accordingly a related party under IFRS). Transnet National Ports Authority is responsible for the safe, efficient and effective economic functioning of the national ports system of South Africa, which Transnet National Ports Authority owns and manages in a landlord capacity on behalf of the Government. Transnet National Ports Authority is also a provider of port infrastructure and marine services at all seven fully operational commercial ports in the Republic of South Africa, and plans to provide the same services for the Port of Ngqura when it becomes fully operational. Transnet Port Terminals manages 16 cargo terminals situated across seven South African ports. It provides cargo handling services for container, bulk, break-bulk and automotive cargos.

2 c101680pu010Proof18:26.1.10B/LRevision:0OperatorDavS Transnet Pipelines transports a range of petroleum and gas products through approximately 3,000 km of underground pipelines traversing five provinces in the Republic of South Africa. For Financial Year 2009 the Group generated revenue of R 33,592 million, operating profit (as defined) of R 8,602 million and profit for the year of R 4,528 million. For Financial Year 2008, the Group generated revenue of R 30,091 million, operating profit of R 11,083 million and profit for the year of R 4,530 million. In the six months ended 30 September 2009, the Group generated revenue of R 17,335 million, operating profit of R 3,353 million and profit for the period of R 1,274 million. In the six months ended 30 September 2008, the Group generated revenue of R 16,849 million, operating profit of R 3,922 million and profit for the period of R 1,661 million. Transnet’s current capital expenditure programme (the ‘‘Capital Expenditure Programme’’) provides for Transnet’s continuing operations to invest R 80.5 billion over the next five Financial Years commencing with Financial Year 2010 (excluding capitalised borrowing costs of R 7.1 billion) on key corridors and sectors. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. The Group’s spending under the Capital Expenditure Programme for the six months ended 30 September 2009 (excluding capitalised borrowing costs) amounted to R 8.3 billion, with R 4.3 billion spent to maintain current infrastructure and equipment and R 4.0 billion spent on expanding capacity.

Business Strengths Transnet’s business strengths include the following:

Focus on Customer Relationships Transnet focuses on developing and maintaining long-term relationships with strategic customers.

Financial Strength Transnet believes that its financial strength gives it the resources to implement its strategies and to pursue its Capital Expenditure Programme to upgrade and increase capacity in its network. As at 31 March 2009, the Group had cash and cash equivalents of R 5.9 billion and as at 30 September 2009, the Group had cash and cash equivalents of R 6.5 billion which, together with the Group’s low gearing and historic profitability, makes the Group financially strong in the opinion of management.

Country-wide Reach and Scale Transnet’s integrated system of freight rail, ports and pipelines covers the most economically important corridors in the Republic of South Africa. Its substantial operations and market share in freight rail and its ownership and operation of all the commercial ports in the Republic of South Africa also provide country-wide reach and facilitate an international focus. Transnet owns and leases rolling stock in excess of 2,000 locomotives and 77,000 freight wagons. Transnet National Ports Authority owns and manages, in a landlord capacity on behalf of the Government, the port system of South Africa. Transnet National Ports Authority is also a provider of port infrastructure and marine services at all seven fully operational commercial ports in the Republic of South Africa, and plans to provide the same services for the Port of Ngqura when it becomes fully operational. Transnet Port Terminals manages 16 cargo terminal operations within seven South African ports, providing a range of cargo-handling and warehouse services to a wide variety of customers, including shipping lines, freight forwarders and cargo owners in the container, bulk, break-bulk and automotive cargo sectors. Transnet also owns over 3,000 km of pipelines. The Centre for Supply Chain Management at the University of Stellenbosch estimates that Transnet’s integrated freight transport system carried freight having a value approaching 7 per cent. of the total value of freight transported in South Africa in Financial Year 2009.

Ability to Capitalise on International Growth in Container Transport The geographic location of the Republic of South Africa at the southern tip of Africa between two oceans and on major shipping routes means that Transnet’s ports, port terminals and rail network leading from those ports are well-positioned to capture economic benefits from any international growth in container traffic. Transnet believes that intermodal container traffic will become

3 c101680pu010 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS increasingly important to the Republic of South Africa’s economy, based on the increasing importance of container supply chains within global production-sharing arrangements. The cost, speed, predictability, reliability, flexibility and connectivity of container supply chains are key determinants of competitiveness for manufacturers, and accordingly Transnet believes that its geographic location on the African continent, coupled with its integrated container transportation strategy, puts it in a strong position to benefit from growth in container transport.

Well Positioned to Capitalise on the Republic of South Africa’s Abundance of Metals and Minerals The integration of Transnet’s freight rail network with the ports of Transnet National Ports Authority allows Transnet to capture a significant portion of the transportation revenues associated with the export of the Republic of South Africa’s metal and mineral resources as well as imports of manufactured goods. According to South Africa: A Country Study prepared by the Federal Research Division of the Library of Congress under the Country Studies Area Handbook Programme sponsored by the U.S. Department of the Army, the Republic of South Africa is believed to have the largest known deposits of chromium, manganese and vanadium. It is also among the largest producers of platinum, gold and chromium and has significant deposits of iron ore, coal, manganese, antimony, copper, nickel, lead, titanium, fluorspar, zinc and zirconium. Transnet’s network has been able to respond to some of this demand and is geographically positioned to do so on a cost-effective basis. Most of these commodities are exported, although iron ore is also used by the Republic of South Africa’s steel industry. Transnet Freight Rail has a largely dedicated coal line and a dedicated iron ore line to transport coal and iron ore products for export and handles the rail transportation of all other metals and minerals.

Strategy In 2004, Transnet adopted a turnaround plan (the ‘‘Turnaround Plan’’). See ‘‘– History and Development ’’. The Turnaround Plan was intended to refocus the core operating divisions into an integrated freight transport company with the primary objectives of improving operating efficiencies and growing the business. The investment plan that was developed as part of the Turnaround Plan was designed to support the integrated freight transport company model, improving existing services as well as creating future capacity for growth. Although this was a significant challenge in light of the backlog of maintenance and capital investment that needed to be made prior to the execution of the Turnaround Plan, Transnet was able to increase investment significantly during the period from 2005 to 2007, principally as a result of the improvement in Transnet’s financial condition and strong improvement in operating cash flows and ability to raise debt financing. In addition, all non-core businesses were identified for disposal, and as of 30 September 2009, Transnet had substantially completed its disposals as part of the Turnaround Plan. Transnet believes that it has made substantial progress in achieving the goals of the Turnaround Plan since it was instituted in 2004 and is now positioning itself for the next phase of its development. Accordingly, in August 2007, Transnet adopted a new growth strategy (the ‘‘Growth Strategy’’), which represents the evolution of the Turnaround Plan. The Growth Strategy is intended to build on the progress made under the Turnaround Plan to accelerate profitable and sustainable volume growth, improve service delivery to clients and enhance long-term financial performance. Under the Growth Strategy, Transnet seeks to operate its businesses in a more customer-focused manner, continue to realise improvements in productivity and efficiency, invest in additional capacity to grow the business, increase the sustainability of its financial performance, improve its safety record, enhance corporate governance and accelerate the development of its human capital. The Growth Strategy is focused on the following four key areas:

Reengineering: Profitability, Productivity and Efficiency Transnet seeks to enhance the productivity and efficiency of its rail, port and container freight businesses by focusing its efforts on priority freight corridors in the Republic of South Africa such as the Gauteng-Durban corridor (‘‘NatCor’’), the Gauteng-Richards Bay corridor (the ‘‘Richards Bay Corridor’’) and the Sishen-Saldanha Corridor (‘‘Iron Ore Line’’). Transnet is targeting continued improvement in moves per gross crane hour as well as reducing ship turnaround time at ports, improving locomotive and wagon availability and reliability in its freight rail operations and reducing the number of external interruptions to its pipelines. Transnet’s volumes of freight are concentrated in five principal land corridors, each with a port interface and rail network, and Transnet believes that future growth in demand for freight transport

4 c101680pu010 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS within the Republic of South Africa will largely arise in these corridors. Transnet seeks to further integrate its rail and port operations in key corridors, which Transnet believes will enable its freight rail business to compete more effectively against road transportation companies and provide opportunities for additional port terminal business in these priority corridors. Integration and coordination of infrastructure planning and investment across the Group is a key part of this strategy and is designed to focus infrastructure investment on priority corridors to access concentrated customer demand for freight services and create high-density rail corridors linked to ports. Transnet also plans to simplify its interfaces with customers by developing an integrated port-to-customer pricing strategy and by expanding its service delivery to customers who seek full end-to-end supply chain solutions across rail and port operations, which Transnet believes will provide it with additional opportunities to develop business with key customers. Transnet plans to follow this initiative with a targeted marketing campaign aimed at shipping lines, freight forwarders and large shippers that represent a substantial portion of the existing South African freight market.

Capital Optimisation and Financial Management Transnet estimates it will invest R 80.5 billion in capital expenditure over the next five financial years, beginning in Financial Year 2010 (excluding capitalised borrowing costs of R 7.1 billion), of which R 57.7 billion is estimated will be spent in the next three financial years, beginning in Financial Year 2010 (excluding capitalised borrowing costs) across all operating divisions. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. The majority of this expenditure over the next five financial years is expected to be spent on the expansion of capacity in priority corridors with a particular focus on Transnet Freight Rail and Transnet Port Terminals. Transnet believes that successful execution of this Capital Expenditure Programme is critical to its future financial performance and that the capital investment will allow Transnet to address further the historical backlog of maintenance projects that are needed to sustain its existing businesses and freight transportation assets, fund the expansion of its freight rail, port and container terminal operations and increase capacity in advance of anticipated demand. See ‘‘– Capital Expenditure Programme’’. Transnet believes that selection, sequencing and execution of investments through integrated planning and operations pursuant to the Capital Expenditure Programme should enable it to sustain its existing infrastructure and support future growth in capacity and demand. Transnet has developed a detailed funding strategy designed to enable it to fund these expenditures on a timely and cost-effective basis. See ‘‘– Capital Expenditure Programme’’ and ‘‘Operating and Financial Review – Liquidity and Capital Resources – Capital Expenditure’’.

Improved Safety, Risk Management and Effective Governance Transnet has established a single enterprise risk management strategy and framework (the ‘‘ERM Framework’’) for managing all material risks across the Group. The ERM Framework aims to improve the practice of risk management throughout the Group’s day-to-day business activities, aligning strategy, processes, people, technology and knowledge so as to evaluate and manage the uncertainties faced by the Group. The ERM Framework, which has been aligned with the Growth Strategy and specifically linked to operational efficiency, is informed by global leading practices such as the International Organization for Standardization’s risk management standard 31000:2009. Transnet believes that its risk management processes have reached a mature stage and consist of strong oversight, management and reporting and escalation of business critical risks to the appropriate governance levels including the Board of Directors and the Shareholder if necessary. The risks identified by the Group are monitored and evaluated by the various governance structures of the Group. These structures are as follows: Board of Director Committees: Group Audit Committee: The Group Audit Committee mandate includes the review and approval of the Group Audit Plan with internal and external audit. Group Risk Committee: The Board has delegated the responsibility for providing assurance on the integrity, quality and reliability of the Group’s risk management to the Group Risk Committee. Remuneration Committee: The Group Remuneration Committee considers and approves policy frameworks and best practice standards in respect of remuneration in the Group. Corporate Governance and Nominations Committee: The Corporate Governance and Nominations Committee sets the criteria for the nomination of Directors to the Board, Board Committees, the

5 c101680pu010 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet Second Defined Benefit Fund Board of Trustees and subsidiary Boards and ensures that succession planning policies are implemented in respect of non-Executive Directors and members of the Group Executive Committee. Group Executive Committee Subcommittees: Public Policy and Regulation Committee: The Public Policy and Regulation Committee ensures that the Group proactively manages public policy and economic regulation risk impacting the Group. Finance Committee: The Finance Committee reviews overall governance procedures, monitors all financial risks, monitors all shared service, procurement, supply chain and ICT associated risks and ensures appropriate financial management frameworks, policies, procedures and reporting are adopted throughout the Group. Risk Management Committee: The Risk Management Committee ensures the quality, integrity and reliability of the Group’s risk management. Human Resources Committee: The Human Resources Committee ensures good governance in respect of remuneration policies and practices (with the concurrence of the Remuneration Committee) and identifies and manages human capital risks. Operations Committee: The Operations Committee designs and implements operational risk management measures (including those related to safety). Capital Investment Committee: The Capital Investment Committee ensures the resources that the Group invests for the development of capital projects are strategically managed and that such projects comply with applicable risk management processes. Commercial Committee: The Commercial Committee is established to provide leadership for the Group’s commercial strategy and initiatives and ensures the maintenance of adequate standards and practices for the Group’s commercial interests. Transnet strives to operate and maintain a safe and healthy workplace and is committed to comply with the Occupational Health and Safety Act, 1993 (‘‘OHSA’’). Transnet’s current initiatives to improve its safety record include training skilled safety personnel, implementing safety management systems, providing ongoing safety awareness and complying with all safety-related regulations.

Human Capital Strategy In light of the significant shortage of skilled workers, the difficulty in attracting and retaining talented management, engineers and other employees and Transnet’s large, widely dispersed and aging workforce, Transnet plans to continue to devote significant resources to the training and development of existing and new employees, the establishment and implementation of career development programmes as part of the talent management process and the development of future leaders through succession planning initiatives. As part of its strategy, Transnet currently plans to hire approximately 17,800 skilled employees over the next six years. This hiring goal assumes an attrition rate of approximately 20 per cent. per year. Transnet also seeks to strengthen and further embed its corporate culture and values (focused on safety, effective communication, respect and dignity, empowerment to perform jobs, business focus, recognising and rewarding good work, and delivering on promises) with employees through internal branding campaigns and other initiatives. Transnet believes that effective management of its human capital is a critical factor in its success.

6 c101680pu010 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Overview of The Programme Issuer: Transnet Limited. Description: Global Medium Term Note Programme. Initial Programme Up to U.S.$2,000,000,000 (or its equivalent in other currencies at the date Amount: of issue) aggregate principal amount of Notes outstanding at any one time. Arrangers: Barclays Bank PLC and Goldman Sachs International. Dealers: Barclays Bank PLC, Barclays Capital Inc., Goldman Sachs International and Goldman, Sachs & Co. The Issuer may from time to time terminate the appointment of any dealer under the Programme or appoint additional dealers either in respect of one or more Tranches of Notes or in respect of the whole Programme. References in this Base Prospectus to ‘‘Permanent Dealers’’ are to the persons listed above as Dealers and to such additional persons that are appointed as dealers in respect of the whole Programme (and whose appointment has not been terminated) and references to ‘‘Dealers’’ are to all Permanent Dealers and all persons appointed as a dealer in respect of one or more Tranches of Notes. Fiscal Agent, Exchange The Bank of New York Mellon. Agent and Calculation Agent: Paying Agents and The Bank of New York Mellon (Luxembourg) S.A., and The Bank of New Transfer Agents: York Mellon, New York Branch (in relation to Rule 144A Notes). Registrar: The Bank of New York Mellon, New York Branch. Method of Issue: The Notes will be issued on a syndicated or non-syndicated basis. The Notes will be issued in series (each a ‘‘Series’’) having one or more issue dates and on terms otherwise identical (or identical other than in respect of the first payment of interest), the Notes of each Series being intended to be interchangeable with all other Notes of that Series. Each Series may comprise one or more tranches of notes (each, a ‘‘Tranche’’) issued on the same or different issue dates. The specific terms of each Tranche (which will be completed, where necessary, with the relevant terms and conditions and, save in respect of the denominations, issue date, issue price, first payment of interest and nominal amount of the Tranche, will be identical to the terms of other Tranches of the same Series) will be completed in the Final Terms. Issue Price: Notes may be issued at any price and either on a fully or partly paid basis, as specified in the Final Terms. The price and amount of the Notes to be issued under the Programme will be determined by the Issuer and the relevant Dealer(s) at the time of issue in accordance with prevailing market conditions. Partly Paid Notes (as defined herein) may be issued, the issue price of which will be payable in two or more instalments. Form of Notes: The Notes may be Bearer Notes or Registered Notes. Each Tranche of Bearer Notes will be represented on issue by a Temporary Global Note if (i) definitive Notes are to be made available to Noteholders following the expiry of 40 days after their issue date or (ii) such Notes have an initial maturity of more than one year and are being issued in compliance with the D Rules (as defined in ‘‘– Selling Restrictions’’). Otherwise such Tranche will be represented by a Permanent Global Note. Registered Notes will be represented by Certificates, one Certificate being issued in respect of each Noteholder’s entire holding of Registered Notes of one Series. Certificates representing Registered Notes that are registered in the name of a nominee for one or more clearing systems are referred to as ‘‘Global Certificates’’.

7 c101680pu010Proof18:26.1.10B/LRevision:0OperatorDavS Registered Notes sold in an ‘‘offshore transaction’’ within the meaning of Regulation S will initially be represented by a Regulation S Global Certificate. Registered Notes sold in the United States to QIBs within the meaning of Rule 144A will initially be represented by a Rule 144A Global Certificate. Clearing Systems: Euroclear and Clearstream, Luxembourg for Bearer Notes. Euroclear, Clearstream, Luxembourg and DTC for Registered Notes or as may be specified in the relevant Final Terms. Currencies: Notes may be denominated in U.S. Dollars, Euros or in any other currency or currencies, subject to compliance with all relevant laws, regulations, directives and central bank requirements. Payments in respect of Notes may, subject to such compliance, be made in and/or linked to, any currency or currencies other than the currency in which such Notes are denominated if so specified in the Final Terms. Maturities: Subject to compliance with all relevant laws, regulations, directives and/or central bank requirements, any maturity. Specified Denomination: Definitive Notes will be in such denominations (each a ‘‘Specified Denomination’’) as may be specified in the relevant Final Terms save that (i) in the case of any Notes which are to be admitted to trading on a regulated market, or offered to the public, within the EEA in circumstances which require the publication of a prospectus under the Prospectus Directive, the minimum Specified Denomination shall be c50,000 (or its equivalent in any other currency as at the date of issue of the Notes); (ii) in the case of any Notes to be sold in the United States to QIBs, the minimum Specified Denomination shall be U.S.$100,000 (or its equivalent in any other currency as at the date of issue of the Notes); and (iii) unless otherwise permitted by then current laws and regulations, Notes (including Notes denominated in Sterling) which have a maturity of less than one year and in respect of which the issue proceeds are to be accepted by the Issuer in the United Kingdom or whose issue otherwise would constitute a contravention of section 19 of the FSMA will have a minimum denomination of £100,000 (or its equivalent in another currency). Fixed Rate Notes: Fixed interest will be payable in arrears on the date or dates in each year specified in the relevant Final Terms. Floating Rate Notes: Floating Rate Notes (as defined in the Conditions) will bear interest determined separately for each Series as follows: (i) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant specified currency governed by an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc.; or (ii) by reference to LIBOR, LIBID, LIMEAN or EURIBOR (or such other benchmark as may be specified in the relevant Final Terms) as adjusted for any applicable margin. Interest periods will be specified in the relevant Final Terms. Zero Coupon Notes: Zero Coupon Notes (as defined in the Conditions) may be issued at their nominal amount or at a discount to it and will not bear interest. Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes (as defined in the Conditions) will be made in such currencies, and based on such rates of exchange as may be specified in the relevant Final Terms. Index Linked Notes: Payments of principal in respect of Index Linked Redemption Notes (as defined in the Conditions) or of interest in respect of Index Linked Interest Notes (as defined in the Conditions) will be calculated by reference to such index and/or formula as may be specified in the relevant Final Terms.

8 c101680pu010Proof18:26.1.10B/LRevision:0OperatorDavS Interest Periods and The length of the interest periods for the Notes and the applicable interest Interest Rates: rate or its method of calculation may differ from time to time or be constant for any Series. Notes may have a maximum interest rate, a minimum interest rate, or both. The use of interest accrual periods permits the Notes to bear interest at different rates in the same interest period. All such information will be set out in the relevant Final Terms. Redemption: The relevant Final Terms will specify the basis for calculating the redemption amounts payable. Unless otherwise permitted by then current laws and regulations, Notes (including Notes denominated in Sterling) which have a maturity of less than one year and in respect of which the issue proceeds are to be accepted by the Issuer in the United Kingdom or whose issue otherwise would constitute a contravention of section 19 of the FSMA will have a minimum redemption amount of £100,000 (or its equivalent in the relevant currency). Redemption by The Final Terms issued in respect of each issue of Notes that are Instalments: redeemable in two or more instalments will set out the dates on which, and the amounts in which, such Notes may be redeemed. Other Notes: Terms applicable to high interest Notes, low interest Notes, step-up Notes, step-down Notes, reverse dual currency Notes, optional dual currency Notes, Partly Paid Notes (as defined herein) and any other type of Note that the Issuer, the Fiscal Agent and any Dealer or Dealers may agree to issue under the Programme will be set out in the relevant Final Terms and a supplementary prospectus (if applicable). Optional Redemption: The Final Terms issued in respect of each issue of Notes will state whether such Notes may be redeemed prior to their stated maturity at the option of the Issuer (either in whole or in part) and/or the holders (in addition to the option described in ‘‘– Noteholder Put Option upon Change of Control ’’ below), and if so the terms applicable to such redemption. Tax Redemption: Except as described in ‘‘Optional Redemption’’ above, and subject as described in ‘‘Redemption’’ above, early redemption will only be permitted for tax reasons as described in Condition 6(c) (Redemption for Taxation Reasons). Noteholder Put Option If the Government ceases to own (directly or indirectly) more than 50 per upon Change of cent. of the issued share capital of the Issuer or ceases to control (as Control: contemplated in Condition 6(e)(ii)), directly or indirectly, the Issuer, save for any such change of control as will not lead to a Negative Rating Event (as defined in Condition 4(b)) or as is otherwise approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders, then each Note in respect of which the relevant Final Terms specifies that the Change of Control Put Option is applicable will be redeemable at the option of the holder at the Change of Control Redemption Amount set out in the relevant Final Terms, together with (if applicable) interest accrued to but excluding the relevant Put Date (as defined in the Conditions) if such option is exercised within the period of 30 days after the relevant Change of Control Notice (as defined in the Conditions) is given. Status of the Notes: Subject as set out in ‘‘Negative Pledge’’ below, the Notes are unsecured obligations of the Issuer which rank pari passu, without any preference among themselves and, subject as aforesaid, with all other outstanding present and future unsecured and unsubordinated obligations of the Issuer. Negative Pledge: The Notes will have the benefit of a negative pledge as described in Condition 4(a) (Negative Pledge). Change of Principal The Notes contain a covenant providing that the Issuer will not effect a Business: Business Change (as defined in Condition 4(b) (Change of Principal Business)), save for any cessation of business arising as a result of

9 c101680pu010Proof18:26.1.10B/LRevision:0OperatorDavS Government intervention and save for any such Business Change as will not lead to a Negative Rating Event, as defined in Condition 4(b) (Change of Principal Business), or as is otherwise approved by an Extraordinary Resolution (as defined in the Agency Agreement). Cross-Default: The Notes contain a cross-default provision in respect of other Material Indebtedness (as defined in Condition 10 and including for this purpose any guarantee or indemnity in respect of the relevant indebtedness) or a failure by the Issuer or any Material Subsidiary to pay when due (or when capable of being declared due and payable), or within any applicable grace period, any Material Indebtedness. Ratings: Tranches of Notes may be rated or unrated. Where a Tranche of Notes is to be rated, such rating will be specified in the relevant Final Terms. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Early Redemption: Except as provided in ‘‘– Optional Redemption’’ above, Notes will be redeemable at the option of the Issuer prior to maturity only for tax reasons. See ‘‘Terms and Conditions of the Notes – Redemption, Purchase and Options’’. Taxation: All payments of principal and interest in respect of the Notes will be made free and clear of withholding taxes of the Republic of South Africa, unless the withholding is required by law. In that event, the Issuer will (subject to the exceptions in Condition 8 (Taxation)) pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding been required. ERISA: In general, Benefit Plan Investors (as defined in ‘‘ERISA and Certain Other U.S. Considerations’’) will be eligible to purchase (or hold any interest in) the Notes. See ‘‘ERISA and Certain Other U.S. Considerations’’. Governing Law: English. Enforcement of Notes in In the case of Global Notes and Global Certificates, individual investors’ Global Form: rights against the Issuer will be governed by a deed of covenant dated on or around 26 January 2010 (the ‘‘Deed of Covenant’’), a copy of which will be available for inspection at the specified office of the Fiscal Agent. Listing and Trading: Applications have been made for the Notes to be admitted during the period of twelve months after the date hereof to listing on the Official List of the FSA and to trading on the Market or as otherwise specified in the relevant Final Terms and references to listing shall be construed accordingly. As specified in the relevant Final Terms, a Series of Notes may be unlisted. Selling Restrictions: For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of offering material in the United States, the EEA, the United Kingdom, the Republic of South Africa, the Republic of Italy and Japan, see ‘‘Subscription and Sale’’. Bearer Notes will be issued in compliance with United States Treasury Regulations §1.163-5(c)(2)(i)(D) unless (i) the relevant Final Terms states that the Notes are issued in compliance with United States Treasury Regulations §1.163-5(c)(2)(i)(C) (the ‘‘C Rules’’) or (ii) the Notes are issued other than in compliance with the D Rules or the C Rules but in circumstances in which the Notes will not constitute ‘‘registration required obligations’’ under the United States Tax Equity and Fiscal Responsibility Act of 1982 (‘‘TEFRA’’), which circumstances will be referred to in the relevant Final Terms as a transaction to which TEFRA is not applicable.

10 c101680pu010Proof18:26.1.10B/LRevision:0OperatorDavS Risk Factors Investing in Notes issued under the Programme involves certain risks. The principal risk factors that may affect the ability of the Issuer to fulfil its obligations under the Notes are discussed under ‘‘Risk Factors’’ below.

Summary Consolidated Financial and Other Information The summary financial information set forth below has been prepared in accordance with IFRS and has been derived, with respect to information as at and for Financial Years 2009, 2008 and 2007, from the Group’s audited consolidated financial statements as at and for Financial Years 2009, 2008 and 2007 (the ‘‘Consolidated Financial Statements’’) and, with respect to the information as at and for the six months ended 30 September 2009 and 2008, from the unaudited condensed consolidated financial statements as at and for the six months ended 30 September 2009 and 2008 (the ‘‘Interim Consolidated Financial Statements’’). The Consolidated Financial Statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (‘‘IASB’’) and the Interim Consolidated Financial Statements have been prepared in accordance with IAS 34 (as defined below). The summary financial data set forth below should be read in conjunction with ‘‘Presentation of Financial and Other Information,’’ ‘‘Capitalisation and Indebtedness,’’ ‘‘Operating and Financial Review,’’ ‘‘Selected Consolidated Financial and Other Information’’ and the Group’s Consolidated Financial Statements and the Interim Consolidated Financial Statements and the accompanying notes thereto included elsewhere in this Base Prospectus.

Consolidated Income Statement Data Six months ended 30 September Year ended 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Continuing operations Revenue...... 17,335 16,849 33,592 30,091 26,899 Net operating expenses excluding depreciation and amortisation ...... (10,694) (10,299) (20,392) (17,281) (16,232)

Profit from operations before depreciation, amortisation and items listed below...... 6,641 6,550 13,200 12,810 10,667 Depreciation and amortisation ...... (2,925) (2,303) (4,779) (3,798) (2,952)

Profit from operations before items listed below...... 3,716 4,247 8,421 9,012 7,715 Post-retirement benefit obligation (costs)/income ...... (19) 67 (436) 686 (218) Impairment of assets ...... (187) (110) (324) (153) (232) Dividends received...... — — — 122 36 Fair value adjustments...... (157) (282) 941 1,416 2,462

Profit before income/(loss) from associates and joint ventures and net finance costs(1)...... 3,353 3,922 8,602 11,083 9,763 Income/(loss) from associates and joint ventures...... — — 82 (59) 2 Finance costs...... (1,634) (1,089) (2,233) (2,692) (2,472) Finance income...... 263 89 267 761 185

Profit before taxation...... 1,982 2,922 6,718 9,093 7,478 Taxation ...... (695) (861) (1,674) (2,642) (1,742)

Profit for the period after taxation from continuing operations...... 1,287 2,061 5,044 6,451 5,736 Discontinued operations (Loss)/profit from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments ...... (13) (400) (516) (1,921) 921

Profit for the period...... 1,274 1,661 4,528 4,530 6,657

Attributable to equity holder ...... 1,274 1,661 4,528 4,526 6,640 Attributable to minority interests ...... ——— 417

(1) Profit before income/(loss) from associates and joint ventures and net finance costs is referred to throughout this document as operating profit.

11 c101680pu010Proof18:26.1.10B/LRevision:0OperatorDavS Extract from the Consolidated Balance Sheet

As at 30 September As at 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Property, plant and equipment...... 105,844 85,543 96,459 78,256 53,908 Investment properties ...... 5,742 4,514 5,961 4,515 3,223 Other investments and long-term financial assets. 327 451 287 452 460 Inventories ...... 2,495 2,617 2,589 2,319 1,798 Trade and other receivables ...... 5,103 4,314 5,503 4,074 3,992 Cash and cash equivalents...... 6,512 2,561 5,880 5,980 3,847 Assets classified as held-for-sale ...... 321 1,311 374 1,131 3,570 Total assets...... 129,301 102,949 118,534 98,686 77,358 Total equity ...... 61,662 53,562 58,334 50,961 36,818 Post-retirement benefit obligations ...... 2,228 2,144 2,324 2,181 2,422 Long-term borrowings ...... 39,005 19,407 29,758 16,890 17,535 Deferred taxation liabilities...... 9,768 7,598 8,589 6,695 1,726 Trade payables and accruals...... 6,693 7,118 6,491 6,988 5,875 Short-term borrowings ...... 3,952 7,330 7,255 8,382 7,615 Short-term provisions...... 2,224 2,119 2,279 2,533 2,376 Liabilities directly associated with assets classified as held-for-sale ...... 16 692 14 676 453 Total current liabilities ...... 13,853 18,105 17,002 19,517 17,012 Total liabilities and equity ...... 129,301 102,949 118,534 98,686 77,358

Extract from Consolidated Cash Flow

Six months ended 30 September Year ended 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Cash flows from operating activities ...... 5,278 3,176 7,400 10,287 8,941 Cash flows used in investing activities ...... (10,611) (8,580) (19,084) (8,250) (10,345) Cash flows from financing activities...... 5,963 1,417 11,587 9 3,669

Net increase/(decrease) in cash and cash equivalents ...... 630 (3,987) (97) 2,046 2,265

Cash flows from discontinued operations Cash flows from operating activities ...... — 17 36 634 995 Cash flows used in investing activities ...... — (77) (193) (466) (374) Cash flows from/(used in) financing activities...... — 58 154 (376) 198

Net (decrease)/increase in cash and cash equivalents from discontinued operations ...... — (2) (3) (208) 819

12 c101680pu010 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Other Consolidated Financial and Operating Data

As at or for the six months ended As at or for the year ended 30 September 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

EBITDA (R millions)(1) ...... 6,278 6,225 13,463 14,822 12,717 Adjusted EBITDA (R millions)(1) ...... 6,641 6,550 13,200 12,810 10,667 EBITDA margin (per cent.)(2) ...... 36 37 40 49 47 Adjusted EBITDA margin (per cent.)(2) ...... 38 39 39 43 40 Operating profit margin (per cent.)(3) ...... 19 23 26 37 36 Return on average total assets (per cent.)(4)...... n/a n/a 8 13 13 Gearing ratio (per cent.)(5) ...... 37 33 36 30 40 Interest cover (times)(6)...... 2.4 3.9 4.4 5.7 4.3 Cash interest cover (times)(6) ...... 4.2 3.9 4.0 6.7 5.5

(1) The Group defines EBITDA as profit for the period after tax from continuing operations before net finance costs, taxation, depreciation and amortisation. The Group defines adjusted EBITDA as EBITDA adjusted to exclude the impact of impairment of assets, dividends received, fair value adjustments, post-retirement benefit obligation costs/income and income/loss from associates and joint ventures. The Group excludes these items because it considers them to be non-recurring or not reflective of the ongoing activities of the Group. The Group defines adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of revenue. For further information on management’s use of these measures, including the limitations of these measures, see ‘‘Presentation of Financial and Other Information’’. These measures are reconciled to the measures in the Consolidated Financial Statements as follows: Six months ended Year ended 30 September 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

Profit for the period after taxation from continuing operations ...... 1,287 2,061 5,044 6,451 5,736 Add back: Net financial costs...... 1,371 1,000 1,966 1,931 2,287 Taxation ...... 695 861 1,674 2,642 1,742 Depreciation and amortisation ...... 2,925 2,303 4,779 3,798 2,952

EBITDA...... 6,278 6,225 13,463 14,822 12,717 Add back: Impairment of assets ...... 187 110 324 153 232 Dividends received...... — — — (122) (36) (Income)/loss from associates and joint ventures.... — — (82) 59 (2) Post-retirement benefit obligation (income)/costs .... 19 (67) 436 (686) 218 Fair value adjustments...... 157 282 (941) (1,416) (2,462)

Adjusted EBITDA ...... 6,641 6,550 13,200 12,810 10,667

(2) The Group defines EBITDA margin and adjusted EBITDA margin as EBITDA and adjusted EBITDA, respectively, expressed as a percentage of revenue. (3) The Group defines operating profit margin as profit before income/(loss) from associates and joint ventures, and net finance costs, expressed as a percentage of revenue. (4) The Group defines return on average total assets as its operating profit for a period expressed as a percentage of average total assets for such period. The Group defines operating profit as profit before income/(loss) from associates and joint ventures and net finance costs. The Group defines average total assets for the Financial Year as the sum of the total assets at the begining of the Financial Year plus the total assets as at the end of the Financial Year, divided by two. (5) The Group defines and computes gearing ratio as net debt (defined as long-term borrowings, short-term borrowings, post- retirement benefit obligations, derivative financial liabilities, and overdrafts, less other short-term investments and cash and cash equivalents) expressed as a percentage of the sum of net debt and shareholder’s equity. (6) The Group defines interest cover (times) as its operating profit divided by net finance costs expressed as a ratio. The Group defines cash interest cover (times) as cash generated from operations after working capital changes, divided by net finance costs (which includes capitalised borrowing costs) expressed as a ratio. For these purposes, net finance costs (including capitalised borrowing costs) consist of finance costs and finance income from the cash flow statement.

13 c101680pu010 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS RISK FACTORS

An investment in the Notes involves a high degree of risk. Prospective investors should carefully read and review this entire Base Prospectus and in particular should consider all the risks inherent in making such an investment, including the risk factors set forth below, before making a decision to invest. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes that could have a significant or material adverse effect on its business, results of operations, financial condition and prospects and/or the repayment of principal and interest under the Notes to the Noteholders. Words and expressions defined in the Conditions or elsewhere in this Base Prospectus have the same meanings in this section. This Base Prospectus contains forward-looking statements that involve risks and uncertainties. Transnet’s actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Base Prospectus. See ‘‘Cautionary Note Regarding Forward-Looking Statements’’.

Risks Relating to the Republic of South Africa Risks relating to Emerging Markets Investing in an emerging market country such as the Republic of South Africa carries economic risks. These risks include economic instability, including destabilising effects from global economic instability, that may affect the Republic of South Africa’s economic position. Economic instability in the Republic of South Africa in the past and in other emerging market countries has been caused by many different factors, including the following: * general economic and business conditions; * high interest rates; * changes in exchange rates; * high levels of inflation; * exchange controls; * wage and price controls; * foreign currency reserves; * changes in economic or tax policies; * the imposition of trade barriers; * changes in investor confidence; and * perceived or actual security issues and political changes. Any of these factors, as well as volatility in the markets for securities similar to the Notes, may adversely affect the value or liquidity of the Notes. See ‘‘Overview of the Republic of South Africa and the South African Economy’’. The global financial crisis and economic downturn could continue to adversely affect the South African economy and financial markets The global financial system has been experiencing difficulties since August 2007 and the financial markets have deteriorated dramatically since September 2008. These conditions have resulted in high volatility, less liquidity or no liquidity, widening of credit spreads and a lack of price transparency in credit and other markets. These conditions may be exacerbated by persisting volatility in the financial sector and the capital markets, or concerns about, or a default by, one or more financial institutions, which could lead to significant market-wide liquidity problems, losses or defaults by other financial institutions. Furthermore, it is not possible to predict what structural and/ or regulatory changes may result from the current market conditions or whether such changes may be materially adverse to the South African economy and financial system. Although the Republic of South Africa’s bank and exchange control regulations (the ‘‘Exchange Control Regulations’’) (discussed below) and well regulated financial services sector have shielded South African banks from direct exposure to many of the toxic assets at the centre of the current crisis, the South African economy remains vulnerable to external shocks, including the global economic crisis. The deterioration in global growth prospects has negatively affected fixed inward investment into the Republic of South Africa, as well as export growth. A significant decline

14 c101680pu020Proof18:26.1.10B/LRevision:0OperatorDavS in the economic growth of any of the Republic of South Africa’s major trading partners, such as the European Union, could have a material adverse impact on the Republic of South Africa’s balance of trade and adversely affect the Republic of South Africa’s economic growth. The European Union is the Republic of South Africa’s largest export market. A decline in demand for imports from the European Union could have a material adverse effect on South African exports and the Republic’s economic growth. The Republic of South Africa’s real gross domestic product (‘‘GDP’’) growth slowed from approximately 5.1 per cent. in 2007 to 3.1 per cent. in 2008. According to Statistics South Africa, the South African economy experienced a 6.4 per cent. decline in output in the first quarter of 2009, reflecting the worst quarterly performance since the third quarter of 1984.According to Statistics South Africa, South Africa’s real GDP continued to contract in the second quarter of 2009 at an annualised rate of 3.0 per cent. compared with the first quarter of 2009. A decrease in global demand for commodities and reduced domestic demand has resulted in decreasing commodities prices and export volumes of commodities produced in the Republic of South Africa. Amidst global economic uncertainties, between 1 January 2009 and 31 December 2009 the Rand traded between R 7.2269 and R 10.716 against the U.S. Dollar and as at 31 December 2009 the Rand/Dollar exchange rate was R 7.3996 = US$1.00. Weakness of the Rand may make the financing of the Republic of South Africa’s current account deficit more difficult. In addition, because international investors’ reactions to the events occurring in one emerging market country sometimes appear to demonstrate a ‘‘contagion’’ effect, in which an entire region or class of investment is disfavored by international investors, the Republic could be adversely affected by negative economic or financial developments in other emerging market countries. There can be no assurance that any crises such as those described above or similar events will not negatively affect investor confidence in emerging markets. Transnet’s business and operations are closely related to the South African economy and are materially affected by conditions in the South African economy that are outside of its control, such as interest rates, inflation rates, sovereign credit ratings, economic uncertainty, changes in laws (including laws relating to taxation) and national and international political circumstances. Any event adversely affecting the Republic of South Africa generally or the South African freight transportation industry specifically, such as reduced volumes of coal, iron ore and other mineral exports from the Republic of South Africa, an increase in energy prices, fluctuations in the prices of commodities or raw materials, adverse shifts in interest rates or foreign exchange rates and changes in Government policies (including environmental regulation) or infrastructure spending, could materially adversely affect Transnet’s business, results of operations, financial condition and prospects and may cause Transnet to re-evaluate, and possibly reduce, its anticipated spending in relation to the Capital Expenditure Programme.

Capital flows to and from the Republic of South Africa are limited by exchange controls South African law provides for Exchange Control Regulations that restrict the export of capital from the Republic of South Africa without approval from the SARB. These regulations limit the extent to which Transnet can borrow funds from non-South African sources for use in the Republic of South Africa. While Transnet determines and proposes its own borrowing needs, it is the SARB that ultimately approves the total amount that Transnet may borrow from non-South African sources. In 1995, the South African Government began relaxing certain Exchange Control Regulations and has recently stated that it intends to continue this gradual relaxation, as evidenced by proposed reforms contained in the Government’s Medium Term Budget Policy Statement, released on 27 October 2009, which are intended to lower the costs of doing business in South Africa. The extent to which the Government may further relax such exchange controls cannot be predicted with certainty. Further relaxation or immediate elimination of current exchange controls may precipitate a change in the capital flows to and from the Republic of South Africa. If the net result of this were to cause large Rand-denominated capital outflows, this could adversely affect the Republic of South Africa’s economy through possible depreciation of the Rand or an increase in interest rates.

HIV/ AIDS poses risks to Transnet in terms of lost productivity and increased costs Statistics South Africa has estimated that by the middle of 2009, 5.2 million or 10.6 per cent. of the South African population was living with HIV. The socio-economic impact of this pandemic on the Republic of South Africa is and will continue to be significant. The incidence of HIV/AIDS in the Republic of South Africa will likely lead to increasing absenteeism, increasing deaths from AIDS- related illnesses, increasing medical and other costs and decreasing productivity. It may also

15 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS contribute to other human resources challenges, such as difficulty in recruiting and retaining employees. The potential impact of HIV/AIDS on Transnet’s operations and financial condition will be determined by a variety of factors, including the cost and effectiveness of the HIV/AIDS programme deployed by Transnet for the benefit of its employees, the incidence of HIV infection amongst Transnet’s employees, the progressive impact of HIV/AIDS on infected employees’ health and productivity and the medical and other costs associated with infection. Based on numbers compiled for use in Transnet’s pension fund report, Transnet estimates that approximately 10 per cent. of its workforce may be infected by HIV, although Transnet can give no assurances as to the accuracy of this percentage. While it is not possible to determine with certainty Transnet’s costs of managing HIV/AIDS or the impact that HIV/AIDS may have on Transnet in general, the incidence of HIV/AIDS amongst Transnet’s workforce could adversely impact its business, results of operations, financial condition and prospects.

Risks Related to Transnet’s Business Transnet may not be able to maintain or increase its volumes or its revenues Transnet’s ability to achieve and maintain future growth depends on a number of factors, including its ability to maintain or increase both the volume of goods transported through its network and its revenue. Transnet’s revenue is determined principally by the volume of goods transported and its tariffs. Transnet’s ability to maintain or increase its volumes of goods transported has been and is expected to continue to be adversely affected by the global financial crisis and economic downturn. Transnet’s volumes of goods transported are influenced by several factors, some of which are beyond Transnet’s control. In particular, reduced domestic and international demand for commodities and consumer products led to volume decreases in Financial Year 2009. Volumes in Transnet Freight Rail have been negatively impacted due to declining production of coal (for export and domestic use), and of the minerals, metals and cement industries, although export iron ore volumes increased during Financial Year 2009. Transnet National Ports Authority and Transnet Port Terminals have experienced volume decreases as a result of a decline in container volumes following reduced economic growth and decreasing vehicle and other imports and exports. Volumes in Transnet Pipelines have been negatively affected by the current economic climate. There can be no guarantee that conditions will improve or will not deteriorate further and, should volumes stay at current reduced levels or continue to decline, it could have a material adverse effect on Transnet’s business, results of operations, financial condition or prospects. Transnet’s volumes and revenue also depend upon its ability to maintain, expand and develop relationships with its customers, suppliers, contractors, lenders and other third parties and expand its operating capacity in a timely and reasonable manner. Revenue growth will also depend upon Transnet’s ability to renew, win or negotiate favourable terms on future contracts with key clients, such as iron ore and coal producers. Many of the factors that affect Transnet’s revenue are beyond Transnet’s control, and Transnet is unable to provide any assurances that it will maintain its recent rate of revenue growth in the future. Transnet is exposed to risks associated with the economic regulation of its business The tariffs charged by Transnet Pipelines and Transnet National Ports Authority for their services and facilities are subject to annual approval by the National Energy Regulator of the Republic of South Africa (‘‘NERSA’’) and the Ports Regulator (the ‘‘Ports Regulator’’), respectively. In determining proposals for both tariffs, Transnet uses a revenue requirement model. The intended effect of the model is to permit Transnet Pipelines and Transnet National Ports Authority to earn an appropriate return on investment and recover operating expenditures through the regulatory tariff approval mechanism, to provide revenue streams that are sufficient to fund the requirements of the respective businesses and to provide a regulated rate of return on those assets engaged in the respective business that are included within the regulatory asset base. While the revenue requirement model is intended to reduce income risk and facilitate a predictable capital expenditure programme, the model requires both complex calculations and the application of judgement regarding those assets to be included in the model, the valuation of assets, depreciation rates, variations between actual and forecasted capital and operating expenditures, inflation levels and indexation, the impact of acquisitions and dispositions and the timing of implementation of tariff adjustments. No assurance can be given that tariff proposals by Transnet Pipelines or Transnet National Ports Authority will be approved by their respective regulators. What’s more, the Department of Transport may institute tariff controls or approvals in the future through the establishment of a rail regulator. Failure to receive approval for proposed tariff increases in the

16 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS amounts and at the times proposed could materially adversely affect Transnet’s business, results of operations, financial condition and prospects.

Transnet Pipelines tariffs In accordance with the Petroleum Pipelines Act, 2003 (the ‘‘Petroleum Pipelines Act’’), NERSA, is mandated to set or approve petroleum pipeline tariffs and arrange storage tariffs. In Transnet Pipelines’ 2008/2009 tariff application, Transnet Pipelines applied for a 15 per cent. increase in its pipeline tariffs. NERSA approved an average annualised increase of 4.6 per cent. In its 2009/2010 tariff application Transnet Pipelines sought a tariff increase of 82.5 per cent., which it subsequently reduced to 74.42 per cent. to reflect revisions to its New Multi-Product Pipeline (‘‘NMPP’’) construction schedule. The tariff proposal included an allowance to maintain its cash interest cover ratio at 3 (three) times. On 30 April 2009, NERSA decided to institute an average tariff reduction of 10.38 per cent. for Financial Year 2010. Because NERSA’s decision came one month into Transnet Pipelines’ financial year, the tariff reduction will be spread over eleven months, rather than twelve months, resulting in an effective tariff reduction of 11.17 per cent. NERSA announced that the principal factor contributing to its decision in rejecting Transnet Pipelines’ proposed tariff was its interpretation of the law, which does not authorise it, when computing tariffs, to include an ‘‘F-Factor’’ in relation to assets that are still in the process of being constructed and which are not yet operational. An ‘‘F-Factor’’ is an allowance to an applicant to maintain a reasonable debt service cover ratio. As of the date of this Base Prospectus, NERSA is considering a ‘‘security of supply’’ levy as an alternative mechanism for receiving this shortfall. This reduction in tariffs could decrease Transnet’s revenues for the current financial year, and could therefore adversely affect its business, results of operations, financial condition and prospects. Furthermore, there can be no assurance that Transnet Pipelines will be able to secure future tariff increases in the amounts and at the times requested or avoid further reductions, or that NERSA will approve future proposals relating to the calculation of tariffs. As at the date of this Base Prospectus, Transnet is in discussions with NERSA to amend Transnet’s petroleum pipeline construction license to allow for a delay in the completion schedule and an increase in construction costs.

Transnet National Ports Authority tariffs Sections 30 and 72 of the National Ports Act, 2005 (the ‘‘National Ports Act’’) requires that Transnet National Ports Authority submit annual tariff proposals to the Ports Regulator for approval and that, prior to substantial alteration of a tariff, Transnet National Ports Authority consult with the National Ports Consultative Committee, created by section 82 of the National Ports Act. As at the date of this Base Prospectus, this committee has not yet been established. In addition, while the board of the Ports Regulator was appointed by the Minister of Transport in calendar year 2006, the chief executive officer of the Ports Regulator began work only in calendar year 2008. Transnet National Ports Authority submitted its tariff application for Financial Year 2010 for approval to the Ports Regulator on 1 August 2008. On 6 August 2009, the Ports Regulator (the ‘‘Ports Regulator’’) issued the Port Directives (the ‘‘Directives’’) in relation to the National Ports Act. The Directives contained provisions capping Transnet Port Authority’s tariffs at ‘‘CPIX-X’’, where ‘‘CPIX’’ is the consumer price index for all urban areas in South Africa and ‘‘X’’ is an efficiency factor determined by the Ports Regulator after consulting Transnet National Ports Authority, other Government stakeholders and those port users that the Port Regulator deems necessary. The Directives also indicate that the Ports Regulator will perform a tariff level rebasing every five years to set the baseline tariff structure to assess Transnet National Ports Authority’s tariff applications. The Directives further give the Port Regulator discretion as to whether it is desirable that the tariffs which it approves enable Transnet National Ports Authority to recover its investments and costs and to make a profit commensurate with the risk of owning, managing, controlling and administering ports and providing port services and facilities. Transnet subsequently obtained legal advice from a South African law firm that these and other aspects of the Directives are unlawful. Transnet advised the Government of this legal advice, and prepared an urgent court application in October 2009 in order to challenge the Directives. On 20 October 2009, the Ports Regulator agreed to withdraw or amend the relevant Directives, including the cap on tariffs, rebasing and the discretionary provisions. As of 31 December 2009, the Government has not yet published the agreed amendments. In line with the timeframes set out in the Directives for tariff submissions, Transnet National Ports Authority re-submitted its tariff application for Financial Year 2010 to the Ports Regulator on 1 September 2009, proposing a

17 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 10.26 per cent. increase over three years or a 19.13 per cent. increase in one year. On 19 January 2010, the Ports Regulator issued its decision to approve a 4.42 per cent. increase in Transnet National Ports Authority’s tariffs for the Financial Year 2010. No reasons were given for the decision.

The potential corporatisation of Transnet National Ports Authority poses risks to Transnet The National Ports Act provides for the corporatisation of Transnet National Ports Authority. On 17 June 2008, the Government informed Transnet in writing that neither it nor the relevant Ministers (the Minister of Transport and the Minister of Public Enterprises) intended to initiate the corporatisation process, however, as of the date of this Base Prospectus, the Government is still considering the matter at a policy level. However, if Transnet National Ports Authority is corporatised, it could have a material adverse impact on Transnet, both financially and strategically, and could trigger a default under one or more of Transnet’s financing agreements including, but not limited to, Transnet’s Domestic Medium Term Note Programme (defined below) and the Notes.

Transnet risks losing substantial assets to the Government should the National Environmental Management: Integrated Coastal Management Act, 2008 be fully enacted, in its current form The main objective of the South African National Environmental Management: Integrated Coastal Management Act, 2008 (the ‘‘ICM’’), is to provide for the coordinated and integrated management of the coastal zone by the Government in order to preserve, protect, extend and enhance South African coastal public property. The ICM seeks to achieve this objective by requiring that the ownership of all assets located in the coastal property zone be transferred to the Government, to be held in trust on behalf of all South Africans. Initially, it was unclear whether the ICM would apply to Transnet’s approximately R 31 billion of assets (at book value) that lie within the coastal property zone. Following the approval of the ICM by the President of the Republic of South Africa, Transnet appealed to the Department of Water and Environmental Affairs to amend the ICM, or alternatively, to exclude Transnet from the application of the ICM, before it came into effect. Transnet subsequently obtained a letter from the Minister of Environmental Affairs and Tourism that acknowledges that the ICM creates unintended consequences for Transnet. The letter further advises that sections of the ICM will be amended to ensure that Transnet’s assets and operations within the ports are secure, and that Transnet is able to properly fulfil its port authority functions. When the ICM came into operation on 1 December 2009, certain sections that could have otherwise required Transnet to transfer assets to the Government were specifically excluded from coming into operation. The purpose of excluding those sections was to provide both Transnet and the Government with the opportunity to address those sections of the ICM that would impact Transnet’s port assets, specifically any transfers into state ownership. Any changes to the ICM, however, will need to be formulated and proposed to the South African Parliament. It is expected that amendments to the ICM to address these issues for the long term will be recommended to the South African Parliament at some point in 2010. As a result, Transnet can make no assurances that the problematic sections of the ICM will be permanently amended or that Transnet will be excluded from its remit. Should Transnet be required to transfer any of its ports assets to the Government, it could have a material adverse affect on Transnet’s business, results of operations, financial condition and prospects.

Transnet is exposed to funding risk as a result of its significant capital expenditure plans and the need to repay or refinance outstanding indebtedness Transnet’s businesses require a substantial amount of capital and other long-term expenditures, including those relating to the replacement and refurbishment of locomotives and rolling stock, construction of the NMPP, the construction of new ports and container terminal facilities, the expansion of existing ports, container terminal facilities, railway lines and other infrastructure projects and the maintenance of Transnet’s existing infrastructure. As a result, Transnet is dependent on access to domestic and international capital markets and lenders in order to meet its funding needs. As of 31 March 2009, Transnet had approximately R 80.5 billion of capital expenditures planned for the next five financial years commencing with Financial Year 2010 (excluding capitalised borrowing costs of R 7.1 billion) under its Capital Expenditure Programme and approximately R 26.0 billion of short- and long-term debt maturing in the next five financial years (commencing with Financial Year 2010) that will need to be repaid or refinanced. In the past, Transnet has financed capital expenditures through a variety of means, including retained earnings, third party indebtedness and leasing transactions. In the future, Transnet expects

18 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS to utilise a combination of these sources, along with project finance and international and domestic capital markets transactions, to meet its financing requirements. Transnet does not receive or rely upon subsidies or funding from the Government, and there can be no assurance that the Government would contribute capital or other funds to Transnet in the future. As a result of the global financial crisis, widening of credit spreads and yields on South African and other government debt and increased domestic and international competition for funding (including competition from the Republic of South Africa and other state-owned enterprises), Transnet expects that funding may be more scarce and expensive than in the past, and although Transnet believes it will be able to fund its needs appropriately, there is no guarantee that Transnet will be able to secure funding to meet its needs in a timely basis or on commercially reasonable terms, if at all. Transnet’s ability to arrange external financing and the cost of such financing are dependent on numerous factors, including its future financial condition, general economic and capital market conditions, interest rates, the availability of credit generally from banks and other lenders, competition for funding in domestic and international markets, investor confidence in Transnet, applicable provisions of tax and securities laws and political and economic conditions in the Republic of South Africa and other relevant jurisdictions. Transnet’s ability to raise funds in international markets is also subject to approval by South African Exchange Control Regulations. See ‘‘Exchange Controls’’. If Transnet is unable to generate or obtain funds sufficient to make, or is otherwise restricted from making, necessary or desirable capital expenditure and other investments, it may be unable to maintain or grow its business and may be required to revise its Capital Expenditure Programme. These circumstances, or an inability to obtain funding to repay or refinance maturing indebtedness, could have a material adverse effect on Transnet’s credit rating, business, results of operations, financial condition and prospects.

Transnet is subject to risks associated with the impaired performance of its equipment and infrastructure due to their age and required maintenance Transnet’s business and operations depend upon the performance of its equipment and other working assets, such as its locomotives, wagons and other infrastructure. Transnet’s success also depends on the successful operations of its infrastructure, including its network of ports, rails and freight lines. As its equipment and infrastructure age, their performance or effectiveness become impaired, often leading to decreased productivity as well as delays and costly maintenance. In recent years Transnet has incurred substantial costs and devoted significant time and resources to replacing outdated equipment. Any decrease in asset performance could negatively impact Transnet’s business. In the past, however, Transnet did not adequately invest in replacing impaired or underperforming assets, or in the scheduled maintenance that its business required. This lack of maintenance has been a particular problem for both rail lines and rolling stock of Transnet Freight Rail and as a result assets may not perform at the required level. Transnet also has a backlog of maintenance work for rail lines, wagons and locomotives, together with other railway infrastructure such as depots and signalling systems. In recent years, Transnet has improved its maintenance programmes and has budgeted substantial amounts for infrastructure maintenance under its Capital Expenditure Programme. In the event that Transnet does not replace, maintain or repair its infrastructure in a timely manner it will face decreased asset performance as well as increased maintenance costs, delays and lost revenue due to unscheduled stoppages and derailments. Asset impairment and inadequate maintenance may reduce Transnet’s competitive position and could have an adverse impact on Transnet’s business, results of operations, financial condition and prospects.

Transnet faces a number of risks relating to its ability to deliver its capital projects on time and within budget Capital expansion and construction projects, including those currently in Transnet’s Capital Expenditure Programme, typically require substantial capital expenditure throughout the development phase, and may take months or years before they become operational, during which time Transnet is subject to a number of construction, financing, operating and other risks, many of which are beyond its control, including but not limited to: * shortages or unavailability of materials, equipment and skilled and unskilled labour; * increases in capital costs (including materials, engineering and construction costs) and/or operating costs (including costs of staff, services, utilities and supplies), including as a result of foreign exchange rate movements;

19 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * adverse weather conditions and natural disasters; * changes in demand for Transnet’s services; * labour disputes and disputes with contractors and sub-contractors; * inadequate infrastructure, including as a result of failure by third parties to provide utilities and transportation links that are necessary or desirable for the successful completion of a project; * inadequate engineering, poor project management, or inadequate capacity; * failure to complete projects according to specification; * environmental regulations, including the need to perform feasibility studies and conduct remediation activities; * accidents; * political, social and economic conditions; * changes in laws, rules, regulations and governmental priorities; and * an inability to obtain and maintain project development permission or requisite governmental licenses, permits or approvals. Transnet manages some of these risks by entering into Engineering, Procurement and Construction Management contracts, which provide Transnet with access to specialised skills in its capital projects delivery. Furthermore, Transnet is also subject to the risk that in the current adverse financial environment it may be unable to obtain necessary financing on commercially reasonable terms or on terms as favorable as those budgeted, if at all. If one or more of these risks materialises, it could negatively affect Transnet’s ability to complete its current or future projects on schedule, if at all, or within the estimated budget, and may prevent Transnet from achieving the projected revenues, internal rates of return or capacity expected from such projects. Failure to complete the capital projects according to currently estimated timetables and budgets could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects. Transnet is dependent upon key personnel, skilled and highly-skilled employees Transnet’s continued success is dependent, in part, on the ongoing services of its senior officers and employees, many of whom have significant experience within Transnet and may be difficult to replace, and on its ability to attract and retain top quality management and key staff. During Financial Year 2009, Transnet’s Chief Executive Officer resigned effective 28 February 2009 and her position has been temporarily filled by the Chief Financial Officer. The Chief Operating Officer resigned effective 31 March 2009. Transnet’s Chairman resigned on 11 August 2009 and his position has been temporarily filled by Professor Geoff Everingham. Transnet’s success is also dependent upon skilled employees and, in common with similar businesses in the Republic of South Africa, Transnet has experienced shortages of such employees in the past and expects it will do so in the future. The loss of senior officers and skilled employees or the inability to recruit and retain skilled employees could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects. Transnet may be required to incur significant costs in order to comply with environmental laws and regulations Transnet’s operations are subject to extensive international, national and local laws and regulations governing, among other things, the loading, unloading and storage of hazardous materials and the protection of the environment, which laws and regulations change from time to time and are generally becoming more restrictive. The cost of compliance with environmental laws and regulations has been significant and is expected to continue to be significant, and Transnet may be liable for damages should an environmental violation occur. While Transnet has begun to implement the ISO 14001 environmental management systems in its operating divisions in order to institutionalise international best practices and develop a standardised approach to environmental safety, Transnet has experienced instances of non-compliance with environmental laws. Although Transnet believes that to date its non-compliance with environmental laws has not had a material adverse impact on it, no assurance can be given that the costs of complying with environmental laws, the imposition of civil or criminal liability for violations of environmental laws and/or liability for damages arising under environmental lawsuits or proceedings would not have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects. Furthermore,

20 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS while Transnet maintains insurance coverage for environmental accidents, there is no guarantee that its insurance will be adequate to cover the possible costs of environmental matters, including the costs of litigation (including damages, fines and penalties) and remediation.

Transnet is subject to risks associated with the availability and cost of key inputs to its business and the business of its key clients Key input items to Transnet’s cost base, including salaries and other personnel costs, energy costs, material costs, maintenance costs, operating lease costs and equipment costs are sensitive to increases in general price levels in the Republic of South Africa and elsewhere. Transnet’s business and profitability could be adversely affected if the costs of its basic inputs materially increase and these costs cannot be recovered from customers.

Electricity Transnet’s expenditure on electricity increased significantly in Financial Year 2009 (to 6% of total operating expenditure) as compared to the previous year, and are likely to continue to increase in the foreseeable future. Eskom, the state owned generator of electricity in the Republic of South Africa, increased its electricity tariff by 27 per cent. in the year ended March 2009 and has obtained a further increase for the year ending March 2010 of 31.3 per cent. Increases in energy costs will result in increases in operating costs both for Transnet and for its clients, some of which are substantial consumers of electricity. Such increases could adversely impact the profitability of Transnet’s clients, which could in turn result in reductions in volumes of goods transported by Transnet and downward pressure on Transnet’s revenues. Furthermore, Transnet’s operations and the operations of its key customers could be adversely affected by electricity shortages. During 2007 and 2008, the Republic of South Africa experienced electricity shortages that resulted in rolling blackouts and load shedding by Eskom. During some of these rolling blackouts, Transnet’s operations and the operations of its key customers slowed due to the disruption of electricity. While slower economic growth has reduced demands for electricity, if demand for electricity were to increase prior to increases in electricity generation capacity that are planned for the medium-term, future load shedding and rolling blackouts could occur. Such blackouts could severely disrupt or delay Transnet’s operations and the businesses of its key customers, which could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects.

Fuel Transnet’s fuel expense represented approximately 9.5 per cent. of its total operating expenditure in Financial Year 2009 and Transnet has budgeted for approximately R 2.0 billion in fuel expenses for Financial Year 2010, which is equal to 8.3 per cent. of total operating expenses. Instability caused by imbalances in the worldwide supply and demand for oil, and the global economic downturn, has resulted in significant fluctuations in fuel prices. As at 30 September 2009, a significant majority of the customer contracts relating to Freight Rail’s general freight business (‘‘GFB’’) contain price adjustment clauses to account for changes in fuel prices. Price adjustments under these contracts are typically made monthly and reflect both increases and decreases in fuel prices. Freight Rail therefore shares the risk associated with fuel price volatility with clients that are party to such contracts. The coal and iron-ore contracts however are subject to an annual price escalation. The coal contracts’ fuel price is adjusted on the basis of a formula comprising of PPI and CPIX inputs and as such no correlation exists between the monthly fuel price changes and what Transnet’scustomers are charged. The iron-ore contracts annual price adjustments are based on a composite escalation index linked to PPI, CPIX, Steel Price Index, Electricity Price Index and Diesel Price Index. In addition, each contract provides for a tariff review every five years. Furthermore, the electric/diesel fleet currently used on the Iron-ore Line is planned to be converted to primarily an electric fleet, which would reduce exposure to fuel price fluctuations. Any future volatility in the cost of fuel could however negatively impact Transnet’s business, results of operations, financial condition and prospects. It is important to note, however, that the number of contracts containing price adjustment clauses and the impact of such clauses does not necessarily match Transnet’s exposure to volatility in fuel prices nor equal the percentage of revenue or expenses. Although Transnet has a fuel hedging policy under which it may hedge up to 75 per cent. of annual budgeted consumption, as at 30 September 2009, Transnet did not have any derivative fuel hedges in place to hedge it’s budgeted fuel exposure for Financial Year 2010 against either currency and/or commodity price fluctuations. Consequently, there can be no assurance that

21 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet will continue to have adequate access to fuel, that Transnet’s hedging policies will succeed in limiting its exposure to fluctuations in the fuel price or that Transnet will succeed in passing on fuel price increases to its customers. See ‘‘Operating and Financial Review – Qualitative and Quantitative Disclosures about Market Risk – Commodity Price Risk’’.

Steel and other materials Recently, the cost of steel, cement and other materials critical to projects that are part of Transnet’s Capital Expenditure Programme have decreased. However, no assurance can be given that these trends will continue, and the cost of these items may increase. Any increase in the costs of these key inputs may negatively impact Transnet. To the extent that Transnet must import these materials, Transnet endeavours to price these contracts in Rand. Whenever possible, Transnet immediately enters into hedging agreements if the contracts for imported materials are priced in foreign currencies. However, Transnet is exposed to the risk of foreign exchange rate fluctuations until Transnet contracts for such purchases and enters into related hedging agreements.

Inflation Consumer price inflation in the Republic of South Africa, as measured by the consumer price index (‘‘CPI’’), averaged 11.5 per cent. for calendar year 2008. Consumer price inflation was 13.7 per cent. in August 2008 and subsequently moderated to 6.1 per cent. in September 2009. As of January 2009, the SARB replaced the consumer price index for all urban areas (‘‘CPIX’’) with CPI (Headline) as its targeted measure. The Bureau for Economic Research at the University of Stellenbosch has forecasted that CPI in calendar year 2010 will reach 5.7 per cent. The South African Bureau for Economic Research stated that it expects consumer price CPI inflation to average 7.1 per cent. during calendar year 2009. A return to significant inflation in the Republic of South Africa could significantly increase Transnet’s operating costs and have a material adverse effect on its business, results of operations, financial condition and prospects. Inflation, as well as the scarcity of qualified personnel, has contributed to escalating wage costs in the Republic of South Africa in the past several years, which may increase further in the future. Transnet’s salary costs have increased at or above inflation levels in the Republic of South Africa, in large part as a result of collective bargaining agreements with unions and routine, performance- based salary increases, and these salary costs are likely to continue to increase. Transnet may not be able to pass along increased costs to its customers as a result of competitive pressures, contractual provisions, regulatory limits on tariffs and other factors. Accordingly, if the recent downward inflationary trend reverses, or if the costs of fuel, electricity and labour continue to increase, there can be no assurance that Transnet will be able to maintain or increase its margins. Furthermore, many of Transnet’s suppliers may seek to pass on increases in material or other costs to Transnet. Any increases in the prices of materials or other goods or services purchased by Transnet could impair Transnet’s ability to complete new infrastructure and other projects on time and within budget. The occurrence of any of the foregoing could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects.

Transnet is exposed to risks associated with exchange rate fluctuations Transnet has foreign currency denominated debt and payment obligations in foreign currencies under its Capital Expenditure Programme and for other expenditures within the normal course of business. As a policy matter, Transnet seeks to hedge all foreign currency payment obligations at the time the contractual agreements are entered into. Accordingly, Transnet is exposed to the risk of cost increases for capital expenditures in currencies other than Rand until such time as such expenditures are contracted and hedged into Rand. Fluctuations in foreign currency exchange rates also may lead to fluctuations in the valuations of financial assets and liabilities and related derivative financial instruments, which could result in significant losses or volatility in Transnet’s income statement. Fluctuations in foreign currency exchange rates could adversely affect Transnet’s results of operations, financial condition and prospects. See ‘‘Operating and Financial Review – Qualitative and Quantitative Disclosures about Market Risk – Foreign Currency Risk’’.

Transnet is subject to risks associated with interest rate changes Transnet is exposed to fluctuations in interest rates, which historically have fluctuated significantly in the Republic of South Africa. As of 30 September 2009, the aggregate principal amount of Transnet’s variable interest rate indebtedness was R 13.94 billion. Transnet seeks to manage

22 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS interest rate risk through the use of financial hedging instruments within the parameters of its Board of Directors approved policy, although no assurance can be given that hedging transactions will be fully effective. Notwithstanding hedging transactions, interest rate fluctuations could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects. See ‘‘Operating and Financial Review – Qualitative and Quantitative Disclosures about Market Risk – Interest Rate Risk’’.

Transnet is subject to risks associated with a unionised workforce and may be adversely affected by changes in labour laws Most of the major industries in the Republic of South Africa are unionised, and approximately 81 per cent. of Transnet’s workforce are unionised through two principal unions. Union recognition and wage agreements are negotiated annually. There is a risk that strikes or other types of conflict may occur at Transnet’s operations. See ‘‘Business – Employees’’. Transnet is also subject to South African labour laws that provide for mandatory compensation to employees in the event of termination of employment for operational reasons and administrative and reporting requirements in respect of employment equity compliance. Non-compliance with labour law could result in large monetary penalties. Changes to existing regulations or the introduction of new regulations or licensing requirements may adversely affect Transnet’s business.

Licenses necessary for Transnet’s businesses may expire, be revoked or not be renewed Transnet conducts its operations pursuant to licences granted to it by a number of government agencies. Transnet believes that it currently holds all of the material licences required for the legal operation of its businesses. However, there can be no assurance that Transnet’s licenses will be renewed, that they will be extended or that they will not be revoked. In addition, it is currently unclear whether Transnet Port Terminals’ deemed license under the National Ports Act, which allows Transnet Port Terminals to operate its current ports, also enables it to operate the new Port of Ngqura, which is being built by Transnet pursuant to the terms and authorization provided in the Port of Ngqura Establishment Act. The loss of any of Transnet’s material licenses or a finding that Transnet’s licenses do not cover all of its current or proposed operations could have a material adverse effect on Transnet’s business, financial condition, results of operations and prospects. See ‘‘Regulation’’.

Transnet’s business is exposed to the adverse effects of operational risks Transnet’s businesses, like all similar businesses, are subject to operational risks including but not limited to the following, which could result in losses, delays and business interruption, and could adversely impact Transnet’s ability to provide services to its customers or ensure the timely delivery of customer cargo: * inadequate or failed internal systems and processes, including those for identifying, managing and controlling risks and those related to information technology; * inadequate documentation or failure to document or authorise transactions properly; * human error of employees or third-party contractors or fraud, including corruption; * equipment failures due to, among other things, the age of Transnet’s infrastructure, demand in excess of capacity or inadequate maintenance; * failure to comply with regulatory requirements; * theft of copper cable and other infrastructure; * natural disasters or the failure of external systems and controls outside of Transnet’s control, including those of its suppliers and counterparties; and * other operational risks specific to the transportation industry, including land disaster, mechanical failure, collisions, loss of life, injury, property losses to fixed assets, decreases or disturbances in commodity production, cargo loss or damage. Although Transnet has implemented risk controls and mitigation programmes, and substantial resources are devoted to developing efficient and effective procedures and to staff training, it is not possible to be certain that such procedures will be effective in identifying, managing and controlling each of the operational risks faced by Transnet. The operation of any transportation related activity carries with it an inherent risk of catastrophe, collision and loss of life or property as a result of equipment failure, natural disasters, severe

23 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS weather, human error, acts of terrorism and other circumstances or incidents that are outside of Transnet’s control. Collisions, spills or other environmental mishaps, or other accidents can result in business interruption, damage to or loss of Transnet’s assets or cargoes and serious bodily injury, death and extensive property damage, particularly when such accidents occur in heavily populated areas. In such circumstances, Transnet may not be able to rebuild or repair its property or restore operations in a timely manner or at all.

Transnet maintains insurance that it believes is consistent with industry practice within the Republic of South Africa against the accident-related risks involved in the conduct of its business. However, this insurance may not be sufficient to cover, in whole or in part, damages to Transnet or others and this insurance may not continue to be available on similar terms or at commercially reasonable rates. In addition, the severity or frequency of events may result in losses or expose Transnet to liabilities in excess of its insurance cover. Transnet does not fully insure against certain risks. Should an incident occur in relation to which Transnet has no insurance cover or inadequate insurance cover, it may be financially liable for related losses. Losses or third party claims for damages could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects.

If any of these risks materialise, it could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects.

Notwithstanding anything in this risk factor, this risk factor should not be taken to imply that either the Issuer or the Group will be unable to comply with its obligations as a company with securities admitted to the Official List.

Transnet is exposed to risks and costs related to health and safety Transnet’s operations are subject to health and safety laws and regulations designed to improve and to protect the safety and health of employees and the public. Although Transnet believes it complies in all material respects with national and international safety regulations, in Financial Year 2009 there were fatalities and injuries at some of Transnet’s operations. Safety incidents may lead to business interruptions, loss of assets, harm to employees and the public, damage to the environment and adverse publicity resulting in damage to Transnet’s reputation. The costs of complying with health and safety laws and regulations, and the imposition of civil or criminal liability for violations and/or liability for damages arising under personal injury or other legal actions could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects. In addition, if these laws and regulations were to change and if material expenditure were then required in order to comply with such new laws and regulations, this could adversely affect Transnet’s business, results of operations, financial condition and prospects. See ‘‘Business – Health and Safety’’ and ‘‘Regulation’’.

Additional security requirements may increase Transnet’s operating costs and restrict its ability to conduct its business In recent years, various international bodies and governmental agencies and authorities have implemented numerous security measures that affect Transnet’s ports and container terminal operations and the costs associated with such operations. Failure on Transnet’s part to comply with the security requirements applicable to it or to obtain relevant security-related certifications may, among other things, prevent certain shipping line customers from using its facilities or result in higher insurance premiums. In addition, new security measures or updated regulatory compliance requirements may be introduced at any time. Ensuring Transnet’s compliance with such measures or requirements may involve considerable time, cost and resources on its part. The costs associated with existing and any additional or updated security measures may negatively affect Transnet’s results of operations to the extent that it is unable to recover the full amount of such costs from its customers, who generally have also faced increased security-related costs. Similarly, additional security measures that require Transnet to increase the scope of its operating procedures may effectively reduce the capacity of, and increase congestion at, its terminals and other facilities. Continued or increased costs of compliance with freight transportation and other security requirements applicable to Transnet may negatively affect Transnet’s business, results of operations, financial condition and prospects.

24 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet’s customer concentration and dependence on a few large industrial companies and their suppliers expose it to risks Transnet’s ten largest customers in Financial Year 2009 generated approximately 26 per cent. of its revenue. Transnet’s volumes and revenues in its Freight Rail division are primarily dependent on Transnet’s relationships with a core group of customers, most of whom operate in the mining sector. Transnet’s twelve most significant customers comprised 46 per cent. of the trade receivables carrying amount in Financial Year 2009, 43 per cent. in Financial Year 2008 and 33 per cent. in Financial Year 2007. In Financial Year 2009, Arcelor Mittal S.A., Sishen Iron Ore Company (Pty) Limited (‘‘Sishen Iron Ore’’), Assmang Limited. (‘‘Assmang’’), Anglo American, BHP Billiton and Xstrata generated. 6.44 per cent., 3.94 per cent., 2.91 per cent., 2.83 per cent., 2.5 per cent. and 1.91 per cent, respectively, of Transnet’s total revenue. Transnet’s ten largest general freight customers generated almost half of the revenue for GFB in Financial Year 2009. Arcelor Mittal S.A. alone accounted for 18 per cent. of general freight revenue in Financial Year 2009. Transnet’s dependency upon core clients exposes it to risks associated with a slowdown or downturn in a particular sector and the risk that such a slowdown or downturn in the economy at large will similarly affect most of its core customers at the same time. Transnet is seeking to establish long-term contracts across its divisions with a number of its customers. As part of this strategy, Transnet has allowed agreements with certain clients to expire, with the intention of entering into a single agreement covering all of the services offered to a particular customer across Transnet’s divisions. As of the date of this Base Prospectus Transnet has entered into new contracts with most of its major export coal customers. Although Transnet has enjoyed good working relationships with these customers to date, there can be no assurance that, in the absence of signed contracts, Transnet can rely on ongoing business from these customers. There can be no assurance that Transnet will retain its current customers’ business, or that their business, if lost, could be replaced by that of other customers on comparable terms and/ or at comparable volumes, and prices if at all. The loss of, or failure to replace, one or more of Transnet’s larger customers could materially and adversely affect Transnet’s business, results of operations, financial condition and prospects. In addition, Transnet is exposed to credit risk with respect to its customers. While Transnet seeks to limit its credit risk by setting credit limits for individual customers, obtaining financial guarantees from some customers and monitoring outstanding receivables, its customers may default on their obligations to Transnet due to bankruptcy, lack of liquidity, operational failure or other reasons. Transnet’s credit risk is increased by the fact that many of its largest customers operate in the same industry and therefore may be similarly affected by changes in economic and other conditions. Delayed payment, non-payment or non-performance on the part of one or more of Transnet’s larger customers, or a number of its smaller customers, could have a material adverse effect on its business, results of operations, financial condition and prospects.

The interests of Transnet’s controlling shareholder may conflict with those of the Noteholders As at 30 September 2009, the Government owns 100 per cent. of Transnet’s issued share capital. See ‘‘Shareholder – Shareholder Compact ’’. The Government is therefore able to determine the outcome of all matters concerning Transnet that may be decided by shareholders. The interests of the Government may conflict with the interests of the Noteholders and the Government may require Transnet to take actions that may adversely affect the Noteholders’ investment. See ‘‘Shareholder ’’.

Transnet is subject to a wide variety of laws and regulations and may incur material costs or face substantial liabilities if it fails to comply with existing or future laws or regulations Transnet’s operations are subject to extensive laws and regulations governing, among other things, anti-competitive behaviour, economic transformation, procurement practices, employment equity and equity participation matters. Transnet’s failure to interpret correctly or comply with all applicable laws and regulations could lead to civil liabilities, administrative or other penalties and/or increased regulatory scrutiny. For the most serious violations, Transnet could be forced to suspend operations until it obtains necessary certifications, permits or licences or otherwise brings its operations into compliance. In addition, changes to existing regulations or the introduction of new regulations or licensing requirements could adversely affect its business by reducing its revenue, increasing its operating costs, or both, and Transnet may be unable to effectively mitigate the impact of such changes. See ‘‘Regulation’’.

25 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Competition could adversely affect Transnet Transnet faces competition from a number of other domestic and international freight transportation and logistics providers. Although Transnet believes that it has been able to compete successfully to date, there can be no assurance that it will be able to do so in the future, and any failure to do so could have a material adverse effect on Transnet’s business, results of operations, financial condition and prospects. See ‘‘Business – Competition’’.

Risks Related to the Structure of a Particular Issue of Notes A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of certain such features:

The Notes may be subject to optional redemption by the Issuer An optional redemption feature is likely to limit the market value of Notes. During any period when Transnet may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. Transnet may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.

Index Linked Notes and Dual Currency Notes are subject to additional market risks Transnet may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or to other factors (each, a ‘‘Relevant Factor’’). In addition, the Issuer may issue Notes with principal or interest payable in one or more currencies that may be different from the currency in which the Notes are denominated. Potential investors should be aware that: * the market price of such Notes may be volatile; * they may receive no interest; * payment of principal or interest may occur at a different time or in a different currency than expected; * the amount of principal payable at redemption may be less than the nominal amount of such Notes or even zero; * a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices; * if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and * the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield.

Partly Paid Notes are subject to additional risks Transnet may issue Notes where the issue price is payable in more than one instalment. Failure to pay any subsequent instalment could result in an investor losing all of its investment.

Variable Rate Notes with a multiplier or other leverage factor are subject to increased volatility Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.

Inverse Floating Rate Notes are subject to increased volatility Inverse floating rate notes (‘‘Inverse Floating Rate Notes’’) have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of such Notes

26 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes. Fixed/Floating Rate Notes are subject to additional risks Fixed/Floating Rate Notes may bear interest at a rate that Transnet may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Transnet’s ability to convert the interest rate will affect the secondary market and the market value of such Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then-prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If Transnet converts from a floating rate to a fixed rate, the fixed rate may be lower than then-prevailing rates on its Notes. Notes issued at a substantial discount or premium are subject to increased volatility The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. The Notes may be redeemed prior to their final maturity date for tax or other reasons In the event that Transnet would be obliged to increase the amounts payable in respect of any Tranche due to certain changes affecting taxation in the Republic of South Africa or any political subdivision thereof, it may redeem all but not some of the outstanding Notes of such Tranche in accordance with the Conditions. The Notes contain provisions that permit Transnet to amend the Conditions without the consent of all Noteholders The Notes contain provisions regarding acceleration and voting on amendments, modifications, changes and waivers, which are commonly referred to as ‘‘collective action clauses’’. Under these provisions, certain key provisions of the Notes may be amended, including the maturity date, interest rate and other payment terms, with the consent of the holders of 75 per cent. of the aggregate principal amount of the outstanding Notes. See ‘‘Terms and Conditions of the Notes – Meetings of Noteholders and Modification’’.

Risks Related to the Notes Generally Set out below is a brief description of certain risks relating to the Notes generally. European Monetary Union may cause certain Notes to be re-denominated If the United Kingdom joins the European Monetary Union prior to the maturity of the Notes, there is no assurance that this would not adversely affect investors in the Notes. It is possible that prior to the maturity of the Notes the United Kingdom may become a participating Member State and that the Euro may become the lawful currency of the United Kingdom. In that event (i) all amounts payable in respect of any Notes denominated in Sterling may become payable in Euro, (ii) the law may allow or require such Notes to be re-denominated into Euro and additional measures to be taken in respect of such Notes; and (iii) there may no longer be available published or displayed rates for deposits in Sterling used to determine the rates of interest on such Notes or changes in the way those rates are calculated, quoted and published or displayed. The introduction of the Euro in the United Kingdom could also be accompanied by a volatile interest rate environment, which could adversely affect investors in the Notes. The EU Savings Directive may result in withholding tax on the Notes Under EC Council Directive 2003/48/EC on the taxation of savings income (the ‘‘EU Savings Directive’’), Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a

27 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other counties). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland) with effect from the same date. Belgium has replaced this withholding tax with a regime of exchange of information with the Member State of residence as from 1 January 2010. If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or an amount in respect of, tax were to be withheld from that payment, neither Transnet nor any Paying Agent or Transfer Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. If a withholding tax is imposed on payment made by a Paying Agent or Transfer Agent, Transnet will be required to maintain a Paying Agent and a Transfer Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Directive.

Change of law may adversely affect the Notes The Conditions are based on English law in effect as at the date of issue of the relevant Notes. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the relevant Notes.

Definitive Notes will not be issued in integral multiples of less than f50,000 In relation to any issue of Notes that has a denomination consisting of the minimum Specified Denomination of c50,000 plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts in excess of c50,000 (or its equivalent) that are not integral multiples of c50,000 (or its equivalent). In such a case a Noteholder who, as a result of trading such amounts, holds a principal amount of less than the minimum Specified Denomination will not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more Specified Denominations.

Risks Related to the Market Generally Set out below is a brief description of certain market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk.

There has been no prior market for the Notes and Transnet cannot assure investors that an active, stable or liquid secondary market for the Notes will develop Prior to the issuance of Notes under the Programme, there has been no established trading market for the Notes. As a result, Transnet cannot predict whether an active trading market will develop. Even after Notes are issued, if a market does develop, it may not be liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes. Consequently, there can be no assurance that holders of the Notes will be able to resell their Notes at or above the applicable Issue Price.

The Notes may be subject to exchange rate risks and exchange controls Transnet will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the ‘‘Investor’s Currency’’) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease (1) the Investor’s Currency-equivalent yield on the Notes, (2) the Investor’s Currency-equivalent value of the principal payable on the Notes and (3) the Investor’s Currency- equivalent market value of the Notes.

28 c101680pu020Proof18:26.1.10B/LRevision:0OperatorDavS Fixed rate notes are subject to interest rate risks An investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of Fixed Rate Notes.

Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk- based capital or similar rules.

Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg or DTC, investors will have to rely on their procedures for transfer, payment and communication with the Issuer The Notes may be represented by one or more Global Notes (in the case of Bearer Notes) or Global Certificates (in the case of Registered Notes). Such Global Notes and Global Certificates will be deposited with a Common Depositary, and in the case of Global Certificates, with the Custodian and registered in the name of a nominee of DTC. Except in the circumstances described in the relevant Global Note, investors will not be entitled to receive Definitive Notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. While the Notes are represented by one or more Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg. While the Notes are represented by one or more Global Notes or Global Certificates, as the case may be, the Issuer will discharge its payment obligations under the Notes by making payments to the Common Depositary for distribution to their account holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear, Clearstream, Luxembourg or DTC to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. Holders of beneficial interests in the Global Notes or Global Certificates, as the case may be, will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear, Clearstream, Luxembourg or DTC to appoint appropriate proxies.

Credit ratings may not reflect all risks One or more independent credit rating agencies may assign credit ratings to an issue of Notes. The ratings may not reflect the potential impact of all risks related to structure, market factors, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be suspended, revised or withdrawn by the rating agency at any time.

The Notes may not be a suitable investment for all investors Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: * have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained in this Base Prospectus or any applicable supplement; * have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio; * have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including where principal or interest is payable in one or more currencies, or where the currency for principal or interest payments is different from the Investor’s Currency; * understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and

29 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some Notes are complex financial instruments and such instruments may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor’s overall investment portfolio. There has been no prior market for the Notes and there is no assurance that an active, stable or liquid market for the Notes will develop The Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes. The trading market for debt securities may be volatile and may be adversely impacted by many events The market for the Notes is influenced by economic and market conditions and, to varying degrees, interest rates, currency exchange rates and inflation rates in the United States and European and other industrialised countries. There can be no assurance that events in the Republic of South Africa, the United States, Europe or elsewhere will not cause market volatility or that such volatility will not adversely affect the price of Notes or that economic and market conditions will not have any other adverse effect. Transfer of the Notes will be restricted, which may adversely affect the value of the Notes The Notes have not been and will not be registered under the Securities Act or any U.S. state securities laws and Transnet has not undertaken to effect any exchange offer for the Notes in the future. Investors may not offer the Notes in the United States except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act and applicable U.S. state securities laws, or pursuant to an effective registration statement. The Notes and the Agency Agreement will contain provisions that will restrict the Notes from being offered, sold or otherwise transferred except pursuant to the exemptions available pursuant to Rule 144A and Regulation S, or other exceptions, under the Securities Act. Furthermore, Transnet has not registered the Notes under any other country’s securities laws. It is each investor’s obligation to ensure that its offers and sales of the Notes within the United States and other countries comply with applicable securities laws. See ‘‘Transfer Restrictions’’. Investments in emerging markets are subject to greater risk than investments in more developed markets Investors in emerging markets should be aware that these markets are subject to greater risks than more developed markets, including in some cases significant legal, economic and political risks. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in the light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risk involved.

30 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Base Prospectus are not historical facts but constitute ‘‘forward-looking statements’’. This Base Prospectus contains certain forward-looking statements in various sections, including, without limitation, under the headings ‘‘Overview’’, ‘‘Risk Factors’’, ‘‘Operating and Financial Review’’ and ‘‘Business’’. Transnet may from time to time make written or oral forward- looking statements in reports to its shareholder, holders of debt securities and in other communications. Examples of such forward-looking statements include, but are not limited to: * statements of Transnet’s plans, objectives or goals, including those related to its strategy, products and services; * statements of future economic performance and financial position and results of operations; * statements of assumptions underlying such statements; and * any other statements other than statements of historical fact. Forward-looking statements that may be made by Transnet from time to time (but that are not included in this Base Prospectus) may also include projections or expectations of revenues, income (or loss), earnings (or loss) per share, dividends, capital structure or other financial items or ratios. Words such as ‘‘aim,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘continue,’’ ‘‘could,’’ ‘‘estimates,’’ ‘‘expects,’’ ‘‘forecast,’’ ‘‘guidance,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘plans,’’ ‘‘potential,’’ ‘‘predict,’’ ‘‘project,’’ ‘‘targets,’’ ‘‘will,’’ ‘‘would,’’ and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward- looking statements will not be achieved. Prospective investors should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include: * the effects of, and changes in, the policy of the Government; * availability of funding in domestic and international capital markets and in particular, Transnet’s ability to raise sufficient capital to fund its current and future capital expenditure plans, including the Capital Expenditure Programme; * Transnet’s ability to operate its business and carry out its current and future capital expenditure plans and other obligations; * Transnet’s ability to project that the planned expenditures under the Capital Expenditure Programme are sufficient to meet the goals of the Capital Expenditure Programme or that actual costs will be as anticipated; * the ability of Transnet’s current rail lines, container terminals, port facilities and pipelines to satisfy current and ongoing demand; * Transnet’s ability to upgrade and/or expand its existing rail lines, container terminals, port facilities and pipelines and to develop new facilities; * Transnet’s ability to develop, enhance and implement strategies to adapt to changing conditions in the freight rail, port, container terminal and pipeline industry and segments; * Transnet’s ability to adjust tariffs set by government agencies to reflect changing market conditions; * expectations regarding the future of the freight transportation industry in the Republic of South Africa; * competition from road freight and other transportation logistics providers; * the effects of domestic and international political events on Transnet’s business; * the impact of regulatory initiatives including labour laws, taxation, health and safety regulations, environmental laws, security requirements adopted by various international bodies and governmental agencies and the National Ports Act, among others; * Transnet’s competitive strengths and weaknesses; * the effects of electricity shortages and load shedding on Transnet’s business and that of its customers;

31 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * the effects of economic conditions in the Republic of South Africa, including GDP growth, increases or decreases in inflation or changes to interest rates or foreign exchange rates; * worldwide economic conditions, inflation and deflation, monetary conditions and policies of central banks, interest rates, exchange rates and financial market conditions generally; * acts of war, terrorist acts, geopolitical events, pandemic or other such events, natural and other disasters, adverse weather and similar events; * the ability to hedge risk economically; and * Transnet’s success at managing the risks of the aforementioned factors. Additional factors that could cause actual results, performances or achievements to differ materially include, but are not limited to, those discussed under the heading ‘‘Risk Factors’’. Forward-looking statements speak only as of the date of this Base Prospectus and, except as required by applicable law, rule or regulation, Transnet expressly disclaims any obligation or undertaking to publicly update or revise any forward-looking statements in this Base Prospectus to reflect any change in its expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. This list of important factors is not exhaustive. When relying on forward-looking statements, prospective investors should carefully consider the aforementioned factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which Transnet operates. Such forward-looking statements speak only as at the date on which they are made and are not subject to any continuing obligations under any guidelines issued by the London Stock Exchange. Accordingly, except as required by applicable law, rule or regulation, Transnet does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise, provided that the Issuer will update this Base Prospectus as required by, and in accordance with, the Prospectus Rules, Listing Rules and Disclosure and Transparency Rules. Transnet does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.

32 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Fiscal and calendar years The Group’s financial year ends on 31 March. In this Base Prospectus, in order to distinguish between financial years and calendar years, the following conventions are adopted: (i) calendar years are referred to as ‘‘calendar year [YEAR]’’ or simply ‘‘[YEAR]’’ and (ii) the Group’s financial year is referred to as the ‘‘year ended or year ending 31 March [YEAR]’’ or as ‘‘Financial Year [YEAR]’’. For example, the 12 month period ended 31 March 2009 is referred to as Financial Year 2009.

Presentation of Financial Information Financial information This Base Prospectus contains audited consolidated financial statements for the Group as at, and for Financial Years 2009, 2008 and 2007, which have been prepared in accordance with IFRS as issued by IASB and unaudited condensed consolidated financial statements as at, and for the six months ended 30 September 2009 and 2008 which have been prepared in accordance with International Accounting Standards No. 34, Interim Financial Reporting (‘‘IAS 34’’). The Group’s financial statements are presented in Rand which is the Group’s functional currency. The financial information for Financial Years 2007 and 2008, as presented in the Group’s financial statements for Financial Year 2009, has been restated. The restatement is principally to reflect the following corrections and adjustments: * IAS 12: Income Taxes: In Financial Year 2008, management estimated the split between taxable depreciable assets and non-taxable depreciable assets in respect of Transnet Pipelines, assets for the purposes of calculating the deferred taxation liability. This split was reviewed in Financial Year 2009, which resulted in a decrease in the proportion of taxation depreciable assets to non-taxation depreciable assets. Accordingly an adjustment was required in Financial Year 2008. In addition, deferred taxation relating to a finance arrangement in Financial Year 2008 was over-estimated in the prior year, and has been corrected subsequently. Accordingly, deferred taxation decreased by R 84 million in the restated 2008 financial information as well as by R 147 million in the restated 2007 financial information and a corresponding adjustment was required in the financial statements for the six months ended 30 September 2008. * IAS 23: Borrowing Costs: All borrowing costs incurred on qualifying assets are capitalised to the cost of property, plant and equipment. However in Financial Year 2008 this was incorrectly applied and this has resulted in a reduction in finance costs of R 16 million and an increase in the deferred taxation charge of R 4 million. This restatement also resulted in an increase in property, plant and equipment of R 54 million in Financial Year 2008. For the six months ended 30 September 2008, this restatement resulted in an increase in property, plant and equipment of R 54 million and an increase in deferred taxation charge of R 15 million. Financial Year 2007 was also impacted by this restatement resulting in a decrease in finance costs of R 38 million and an increase in the deferred taxation charge of R 11 million. * IAS 21: The Effects of Changes in Foreign Exchange Rates: An assessment of foreign exchange gains and losses on derivative financial instruments resulted in a restatement of fair value gains for Financial Year 2008. The financial effect of this restatement has resulted in a reduction in fair value gains by R 64 million and a reduction in the current taxation charge of R 18 million with respect to Financial Year 2008. For the six months ended 30 September 2008, this restatement resulted in an increase in property, plant and equipment of R 64 million and an increase in deferred taxation charge of R 18 million. * IAS 19: Employee Benefits: An assessment of the manner in which transfers from the funds were treated resulted in a reduction of the actuarial gains and losses in the disclosure in the restated 2008 financial information, of R 151 million, and a deferred taxation charge reduction of R 42 million. * IAS 16: Property Plant and Equipment: In terms of an approved incentive bonus scheme, certain contractors that are engaged to construct assets were entitled to an incentive payment. This payment in terms of IAS 16 should have been recognised as part of the carrying value of the asset but was incorrectly expensed in Financial Year 2008. Consequently, in the restated 2008 financial information an adjustment of R 50 million was

33 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS recorded to reduce the incentive bonus expense with an increase in the deferred taxation charge of R 14 million. For the six months ended 30 September 2008, this restatement resulted in an increase in property, plant and equipment of R 50 million and an increase in deferred taxation charge of R 14 million. * IAS 37: Provisions, Contingent Liabilities and Contingent Assets: The Group has had a legal obligation as defined in terms of IAS 37 for the rehabilitation caused by asbestos contamination since the enactment of certain legislation in 1998, and accordingly a provision has been recorded for the estimated costs of the restoration in Financial Year 2008. The Group recognised a R 110 million decrease in the provision expense and a subsequent increase in the deferred taxation charge of R 31 million in the restated 2008 financial information. This has also resulted in the recognition of a provision of R 700 million, an increase in the depreciation charge of R 3 million and a reduction in the deferred taxation charge of R 197 million recorded against the restated 2007 financial information. This resulted in an increase in the provision of R 567 million, a subsequent decrease in deferred taxation liability of R 166 million and a decrease of R 26 million in property plant and equipment for the six months ended 30 September 2008. In addition to the restatements described above, the Group adopted IFRS 8 Operating Segments (IFRS 8) in Financial Year 2009. IFRS 8 replaces IAS 14 Segment Reporting (IAS 14). The core principle of IFRS 8 is that an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. IFRS 8 is a disclosure standard and consequently has not impacted reported results. There were no changes to the operating segments upon adoption of IFRS 8 compared to the operating segments disclosed under IAS 14. The Consolidated Financial Statements have been audited by Deloitte & Touche, who have expressed unqualified opinions on the Group’s Consolidated Financial Statements.

Operating Divisions and Segment Reporting The Group operates and manages its business principally by division, and its current divisions are: Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority Transnet Port Terminals and Transnet Pipelines. The Group’s principal business segments were, for the periods under review, Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority, Transnet Port Terminals, Transnet Pipelines and other. Unless otherwise specified herein, references to segment revenue are to segment total revenue, including external and internal revenue.

Presentation of Non-IFRS Measures This Base Prospectus contains certain non-IFRS measures, including ‘‘EBITDA’’ and ‘‘EBITDA margin,’’, ‘‘adjusted EBITDA’’ and ‘‘adjusted EBITDA margin’’, ‘‘return on average total assets,’’ ‘‘gearing ratio,’’ ‘‘total debt-to-total capital employed,’’ ‘‘interest cover (times),’’ ‘‘cash interest cover (times),’’ and ‘‘operating cash flow to total debt’’. The Group has presented EBITDA, adjusted EBITDA and the associated margin and the other non-IFRS measures noted above as it believes that they enhance investors’ understanding of the Group’s financial performance and because it uses these measures in its business operations to evaluate the performance of its operations. These measures are not a measure of a company’s financial performance or earnings under IFRS and as such should not be viewed as an alternative to profit, operating profit or other measures of earnings under IFRS. Nor should these measures be viewed as an alternative to cash flow from operating activities or as a measure of liquidity. Transnet uses these measures as supplemental measures of operating performance because they are internationally recognised measures that are regularly used by security analysts, rating agencies, investors and other parties to evaluate a company’s operating performance. Transnet also believes that these measures serve as a useful indicator of Transnet’s ability to incur and service its indebtedness. EBITDA and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing EBITDA as reported by the Group to EBITDA of other companies. The Group defines EBITDA as profit for the period after tax from continuing operations before net finance costs, taxation, depreciation and amortisation. The Group defines adjusted EBITDA as

34 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS EBITDA adjusted to exclude the impact of impairment of assets, dividends received, fair value adjustments, post-retirement benefit obligation costs/income and income/(loss) from associates and joint ventures. The Group excludes these items because it considers them to be non-recurring or not reflective of the ongoing activities of the Group. The Group defines EBITDA margin as EBITDA expressed as a percentage of revenue. The Group defines adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of revenue. For further information on the reconciliation of these measures to measures disclosed in the Consolidated Financial Statements and Interim Consolidated Financial Statements, see ‘‘Summary Consolidated Financial and Other Information’’. EBITDA and adjusted EBITDA should not be considered an indication of the Group’s performance or as an alternative to cash flows as a measure of the Group’s liquidity as determined in accordance with IFRS and should not be considered in isolation, because their ability to convey meaningful information is limited in various respects. For example, EBITDA and adjusted EBITDA, among other things: * do not reflect any cash capital expenditure requirements for the assets being depreciated and amortised that may have to be replaced in the future; * do not reflect any impairments of assets, such as property, plant, and equipment, subsidiaries and associates, loans and advances, and trade and other receivables; * do not reflect changes in, or cash requirements for, the Group’s working capital needs; and * do not reflect the significant financial cost of, or the cash requirements necessary to service interest payments on, the Group’s debts. The Group defines ‘‘operating profit’’ as profit before income/(loss) from associates and joint ventures and net finance costs. The Group defines ‘‘operating profit margin’’ as profit before income/(loss) from associates and joint ventures, and net finance costs, expressed as a percentage of revenue. The Group defines ‘‘return on average total assets’’ as its operating profit for a period expressed as a percentage of average total assets for such period. ‘‘Average total assets’’ for the period is defined as the sum of the total assets (consisting of current and non-current assets) at the beginning of Financial Year plus the total assets as at the end of the last two Financial Years, divided by two. The Group defines ‘‘gearing ratio’’ as net debt (as defined below) expressed as a percentage of the sum of net debt and shareholders’ equity. Net debt is defined as interest-bearing borrowings (both short and long term), post-retirement benefit obligations, derivative financial liabilities (both short and long term) plus bank overdrafts, all less short term investments and cash and cash equivalents. The Group defines ‘‘interest cover (times)’’ as its operating profit divided by net finance costs. The Group defines ‘‘cash interest cover (times)’’ as cash generated from operations after working capital changes, divided by net finance costs expressed as a ratio. For these purposes, net finance costs consist of finance costs (including capitalised borrowing costs) and finance income from the cash flow statement. These non-IFRS measures, including EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, return on average total assets, gearing ratio, interest cover (times) and cash interest cover (times) have important limitations as analytical tools and investors should not consider them in isolation or as substitutes for analysis of the Group’s results as reported under IFRS. These and similar measures are used by different companies for different purposes and are often calculated in ways that reflect the circumstances of those companies. Investors should exercise caution in comparing these measures as reported by Transnet to the measures as reported by other companies.

Currency In this Base Prospectus, the following currency terms are used: * ‘‘South African Rand’’, ‘‘Rand’’, ‘‘R’’ or ‘‘ZAR’’ refers to the lawful currency of the Republic of South Africa; * ‘‘$,’’ ‘‘U.S. Dollar,’’ ‘‘USD’’ or ‘‘U.S.$ ‘‘ refers to the lawful currency of the United States; * ‘‘£’’, ‘‘Pounds’’ or ‘‘British Pounds’’ refers to the lawful currency of the United Kingdom;

35 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * ‘‘e’’, ‘‘Euro’’ or ‘‘EUR’’ refers to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended; * ‘‘AUD’’ or ‘‘Australian Dollars’’ refers to the legal currency of Australia; and * ‘‘JPY,’’ ‘‘Japanese Yen,’’ ‘‘Yen’’ or ‘‘¥’’ refers to the legal currency of Japan.

Exchange Rates The table below sets forth, for the periods and dates indicated, certain information regarding the exchange rate between the Rand and the U.S. Dollar, based on the exchange rate quoted by the I-Net Bridge (Pty) Limited. Fluctuations in the exchange rates between the Rand and the U.S. Dollar in the past are not necessarily indicative of fluctuations that may occur in the future. The rates may differ from the actual rates used in the preparation of the Group’s Consolidated Financial Statements and Interim Consolidated Financial Statements and other financial information appearing in this Base Prospectus. The Issuer makes no representation that the Rand or U.S. Dollar amounts referred to in this Base Prospectus have been, could have been or in the future could be converted to Rand or U.S. Dollars at any particular rate, or at all. On 31 December 2009, the official exchange rate quoted by I-Net Bridge (Pty) was R 7.3996 to $1. Period Period High(1) Low(2) average(3) end(4)

(Rand per U.S. Dollar) Month ended January 2010 (through 20 January)...... 7.5733 7.2269 7.3682 7.5363 31 December 2009 ...... 7.7644 7.2469 7.4792 7.3996 30 November 2009 ...... 8.1487 7.2878 7.4959 7.4034 31 October 2009 ...... 7.89 7.1925 7.4701 7.809 30 September 2009 ...... 7.9264 7.2697 7.4947 7.514 31 August 2009...... 8.2110 7.6700 7.9271 7.7690 31 July 2009 ...... 8.3578 7.5838 7.9350 7.7725 30 June 2009 ...... 8.2684 7.7756 8.0529 7.7756 29 May 2009 ...... 8.6961 7.9795 8.3750 7.9795 30 April 2009...... 9.5260 8.4291 9.0248 8.4291 31 March 2009...... 10.5948 9.4816 10.0060 9.6266 27 February 2009...... 10.2298 9.6721 10.2298 9.9498 30 January 2009 ...... 10.2549 9.3163 9.9055 10.1333 Year ended 31 December 2008 ...... 11.474 6.7211 7.6305 9.3035 2007 ...... 7.5233 6.4639 7.0543 6.7862 2006 ...... 7.953 5.968 6.7671 6.9737 2005 ...... 6.9186 5.6497 6.3623 6.3205 2004 ...... 7.5197 5.6148 6.4499 5.6356

(1) The highest daily average of the exchange rates recorded on each business day of the relevant month or year as applicable. (2) The lowest daily average of the exchange rates recorded on each business day of the relevant month or year as applicable. (3) The average exchange rate for each relevant month or year as applicable calculated using the daily average exchange rate. (4) The average daily exchange rate on the last business day of each relevant month or year as applicable.

See also ‘‘Operating and Financial Review – Significant Factors Affecting the Group’s Financial Condition and Results of Operations – Volatility of the Rand ’’.

Rounding Rounding adjustments have been made in calculating some of the financial information included in this Base Prospectus. As a result, numerical figures shown as totals in some tables may not be exact arithmetic aggregations of the figures that precede them.

36 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Market Data The Issuer has obtained certain statistical and market information that is presented in this Base Prospectus on such topics as the South African transportation industry, the South African economy in general and related subjects from the following third-party sources: * the Government; * the SARB; and * Statistics South Africa This third-party information is presented in the following sections of this Base Prospectus: ‘‘Overview’’, ‘‘Risk Factors,’’ ‘‘Operating and Financial Review’’ and ‘‘Business’’. The Issuer takes responsibility for the accurate reproduction of such information and, as far as the Issuer is aware and is able to ascertain from information published by such third parties, no facts have been omitted that would render the reproduced information inaccurate or misleading. Nevertheless, prospective investors are advised to consider this data with caution. Market studies are often based on information or assumptions that may not be accurate or appropriate, and their methodology is inherently predictive and speculative. Prospective investors should note that the Issuer’s estimates are based on such third-party information. None of the Issuer, the Arrangers or the Dealers has independently verified the figures, market data or other information on which third parties have based their studies.

Industry Measures The Issuer employs a number of metrics to quantify volume, throughput and other industry-related measures. In this Base Prospectus, the following terms used have the following definitions: * GTK: means gross tonne kilometres: it is a unit of measurement of the total gross weight (in metric tonnes) of general freight loaded and empty active wagons multiplied by the distance (in kilometres) travelled by the general freight locomotives; * km: means kilometre; * m: means metre; * mt: means metric tonne (also called long tonne); it is a measure commonly used for bulk; * mtpa: means metric tonne per annum; * ml.km: means million litre kilometres; * mV: means million volumes; * TAT: means turnaround time (in days); * TEU: means twenty-foot equivalent unit: it is an inexact unit of cargo capacity used to describe the capacity of container ships and terminals. The TEU corresponds to a standard shipping container measuring 20 feet long and 8 feet wide, the height of which can vary; * Tonne kilometre: is a unit of measurement of the freight transportation performed by a railroad during a given period, usually a year, the total of which consists of the sum of the products obtained by multiplying the aggregate weight of each shipment in metric tonnes during the given period by the number of kilometres for which it is carried; * mt/h: means metric tonnes per hour; and * Vol: means volume.

37 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS SUPPLEMENTARY PROSPECTUS

If at any time the Issuer shall be required to prepare a supplementary prospectus pursuant to section 87G of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’), the Issuer will prepare and make available an appropriate amendment or supplement to this Base Prospectus or a further Base Prospectus which, in respect of any subsequent issue of Notes to be listed on the Official List and admitted to trading on the Market, shall constitute a supplementary prospectus as required by the UK Listing Authority and section 87G of the FSMA. The Issuer has given an undertaking to the Arrangers and the Dealers that if at any time during the duration of the Programme there is a significant new factor, material mistake or material inaccuracy relating to information contained in this Base Prospectus which is capable of affecting the assessment of any Notes and whose inclusion in, or removal from, this Base Prospectus is necessary for the purpose of allowing an investor to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer, and the rights attaching to the Notes, then the Issuer shall prepare an amendment or supplement to this Base Prospectus or publish a replacement Base Prospectus for use in connection with any subsequent offering of the Notes and shall supply to each Arranger and each Dealer such number of copies of such supplement hereto as such Arranger or Dealer may reasonably request.

38 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS AVAILABLE INFORMATION

The Issuer has agreed that, for so long as any Notes are ‘‘restricted securities’’ as defined in Rule 144(a)(3) under the Securities Act, it will, during any period that it is neither subject to Sections 13 or 15(d) of the United States Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, furnish, upon request, to any holder or beneficial owner of Notes or any prospective purchaser designated by any such holder or beneficial owner, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

39 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS USE OF PROCEEDS

The net proceeds from the issue of each Tranche of Notes will be used by Transnet Limited to fund its Capital Expenditure Programme and for its general corporate purposes. If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the relevant Final Terms.

40 c101680pu020Proof18:26.1.10B/LRevision:0OperatorDavS CAPITALISATION AND INDEBTEDNESS

The following table sets out Transnet’s historical capitalisation as at 30 September 2009. Prospective investors should read this information in conjunction with ‘‘Use of Proceeds,’’ ‘‘Operating and Financial Review’’ and the Consolidated Financial Statements and Interim Consolidated Financial Statements and the Notes thereto included elsewhere in this Base Prospectus. Save as disclosed in the footnotes below, there has been no material change in the capitalisation of Transnet since 30 September 2009.

As at 30 September 2009 (unaudited)

(R millions) Total short-term debt(1)...... 3,952 Long-term debt(2)...... 39,005

Total indebtedness ...... 42,957

Shareholders’ equity Issued share capital ...... 12,661 Reserves ...... 49,001

Total capital and reserves ...... 61,662

Total capitalisation(3)(4) ...... 100,667

(1) Consists of: short-term borrowings and bank overdrafts. (2) Consists of: long-term borrowings. (3) Consists of: long-term borrowings and capital and reserves. (4) Since 30 September 2009 to 22 January 2009, the Group has issued a total of R 2.3 billion in domestic bonds, raised R 600 million in commercial paper, secured R 287 million in domestic loans and R 1.3 billion in foreign loans and repaid R 1.4 billion of commercial paper, R 92 million of domestic loans and R 19 million of foreign loans.

41 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The selected income statement, balance sheet and cash flow information as at and for Financial Years 2009, 2008, and 2007 and as at and for the six months ended 30 September 2009 and 2008 of the Group has been derived from the Group’s Consolidated Financial Statements and Interim Consolidated Financial Statements, respectively, which are included elsewhere in this Base Prospectus. The selected consolidated financial information has been derived from, and should be read in conjunction with, the Consolidated Financial Statements and Interim Consolidated Financial Statements and the related notes thereto included elsewhere in this Base Prospectus, as well as the section entitled ‘‘Operating and Financial Review’’. For a discussion of the restatement of the Group’s financial statements for Financial Years 2008 and 2007 please see ‘‘Presentation of Financial and Other Information’’. The selected non-IFRS consolidated income statement, balance sheet and cash flow information and operating data presented under the caption ‘‘Other Consolidated Financial and Operating Data’’ has been calculated using information from the Consolidated Financial Statements and the Interim Consolidated Financial Statements included elsewhere in this Base Prospectus.

42 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Consolidated Income Statement Data

Six months ended Year ended 30 September 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Continuing operations Revenue ...... 17,335 16,849 33,592 30,091 26,899 Net operating expenses excluding depreciation and amortisation ...... (10,694) (10,299) (20,392) (17,281) (16,232)

Profit from operations before depreciation, amortisation and items listed below...... 6,641 6,550 13,200 12,810 10,667 Depreciation and amortisation (2,925) (2,303) (4,779) (3,798) (2,952)

Profit from operations before items listed below .... 3,716 4,247 8,421 9,012 7,715 Post-retirement benefit obligation (costs)/income ...... (19) 67 (436) 686 (218) Impairment of assets ...... (187) (110) (324) (153) (232) Dividends received ...... — — — 122 36 Fair value adjustments ...... (157) (282) 941 1,416 2,462

Profit before income/(loss) from associates and joint ventures and net finance costs ...... 3,353 3,922 8,602 11,083 9,763 Income/(loss) from associates and joint ventures ...... — — 82 (59) 2 Finance costs ...... (1,634) (1,089) (2,233) (2,692) (2,472) Finance income ...... 263 89 267 761 185

Profit before taxation ...... 1,982 2,922 6,718 9,093 7,478 Taxation...... (695) (861) (1,674) (2,642) (1,742)

Profit for the period after taxation from continuing operations ...... 1,287 2,061 5,044 6,451 5,736 Discontinued operations (Loss)/profit from discontinued operations, including (loss)/ profit on disposal of discontinued operations and impairments ...... (13) (400) (516) (1,921) 921

Profit for the period...... 1,274 1,661 4,528 4,530 6,657

Attributable to equity holder.... 1,274 1,661 4,528 4,526 6,640 Attributable to minority interests ...... ——— 417

43 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Extract from the Consolidated Balance Sheet

As at 30 September As at 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Property, plant and equipment...... 105,844 85,543 96,459 78,256 53,908 Investment properties...... 5,742 4,514 5,961 4,515 3,223 Other investments and long-term financial assets ...... 327 451 287 452 460 Inventories...... 2,495 2,617 2,589 2,319 1,798 Trade and other receivables ...... 5,103 4,314 5,503 4,074 3,992 Cash and cash equivalents...... 6,512 2,561 5,880 5,980 3,847 Assets classified as held-for-sale...... 321 1,311 374 1,131 3,570 Total assets ...... 129,301 102,949 118,534 98,686 77,358 Total equity ...... 61,662 53,562 58,334 50,961 36,818 Post-retirement benefit obligations...... 2,228 2,144 2,324 2,181 2,422 Long-term borrowings ...... 39,005 19,407 29,758 16,890 17,535 Deferred taxation liabilities ...... 9,768 7,598 8,589 6,695 1,726 Trade payables and accruals...... 6,693 7,118 6,491 6,988 5,875 Short-term borrowings...... 3,952 7,330 7,255 8,382 7,615 Short-term provisions...... 2,224 2,119 2,279 2,533 2,376 Liabilities directly associated with assets classified as held-for-sale ...... 16 692 14 676 453 Total current liabilities ...... 13,853 18,105 17,002 19,517 17,012 Total Liabilities and Equity ...... 129,301 102,949 118,534 98,686 77,358

Extract from Consolidated Cash Flow Six months ended Year ended 30 September 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Cash flows from operating activities .... 5,278 3,176 7,400 10,287 8,941 Cash flows used in investing activities. (10,611) (8,580) (19,084) (8,250) (10,345) Cash flows from financing activities..... 5,963 1,417 11,587 9 3,669

Net increase/decrease in cash and cash equivalents ...... 630 (3,987) (97) 2,046 2,265

Cash flows from discontinued operations Cash flows from operating activities .... — 17 36 634 995 Cash flows used in investing activities. — (77) (193) (466) (374) Cash flows from/(used in) financing activities ...... — 58 154 (376) 198

Net (decrease)/increase in cash and cash equivalents from discontinued operations...... — (2) (3) (208) 819

44 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Other Consolidated Financial and Operating Data

As at or for the six months ended As at or for the year ended 30 September 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

EBITDA (R millions)(1)...... 6,278 6,225 13,463 14,822 12,717 Adjusted EBITDA (R millions)(1)...... 6,641 6,550 13,200 12,810 10,667 EBITDA margin (per cent.)(2) ...... 36 37 40 49 47 Adjusted EBITDA margin (per cent.)(2) 38 39 39 43 40 Operating profit margin (per cent.)(3) ... 19 23 26 37 36 Return on average total assets (per cent.)(4)...... n/a n/a 8 13 13 Gearing ratio (per cent.)(5) ...... 37 33 36 30 40 Interest cover (times)(6) ...... 2.4 3.9 4.4 5.7 4.3 Cash interest cover (times)(6)...... 4.2 3.9 4.0 6.7 5.5

(1) The Group defines EBITDA as profit for the period after tax from continuing operations before net finance costs, taxation, depreciation and amortisation. The Group defines adjusted EBITDA as EBITDA adjusted to exclude the impact of impairment of assets, dividends received, fair value adjustments, post-retirement benefit obligation costs/income and income/loss from associates and joint ventures. The Group excludes these items because it considers them to be non-recurring or not reflective of the ongoing activities of the Group. The Group defines adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of revenue. For further information on management’s use of these measures, including the limitations of these measures, see ‘‘Presentation of Financial and Other Information’’ and for the reconciliation of these measures to measures in the Consolidated Financial Statements, see the reconciliations below.

For the six months ended For the year ended 30 September 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Profit for the period after taxation from continuing operations ...... 1,287 2,061 5,044 6,451 5,736 Add back: Net financial costs...... 1,371 1,000 1,966 1,931 2,287 Taxation ...... 695 861 1,674 2,642 1,742 Depreciation and amortisation...... 2,925 2,303 4,779 3,798 2,952

EBITDA...... 6,278 6,225 13,463 14,822 12,717 Add back: Impairment of assets...... 187 110 324 153 232 Dividends received...... — — — (122) (36) (Income)/loss from associates and joint ventures ...... — — (82) 59 (2) Post-retirement benefit obligation (income)/costs...... 19 (67) 436 (686) 218 Fair value adjustments...... 157 282 (941) (1,416) (2,462)

Adjusted EBITDA ...... 6,641 6,550 13,200 12,810 10,667

(2) The Group defines EBITDA margin and adjusted EBITDA margin as EBITDA and adjusted EBITDA, respectively, expressed as a percentage of revenue. (3) The Group defines operating profit margin as profit before income/(loss) from associates and joint ventures and net finance costs, expressed as a percentage of revenue. (4) The Group defines return on average total assets as its operating profit for a period expressed as a percentage of average total assets for such period. The Group defines operating profit as profit before income/(loss) from associates and joint ventures and net finance costs. The Group defines average total assets for the Financial Year as the sum of the total assets at the beginning of the Financial Year plus the total assets as at the end of the Financial Year, divided by two. (5) The Group defines and computes gearing ratio as net debt (defined as long-term borrowings, short-term borrowings, post- retirement benefit obligations, derivative financial liabilities, and overdrafts, less other short-term investments and cash and cash equivalents) expressed as a percentage of the sum of net debt and shareholder’s equity. (6) The Group defines interest cover (times) as its operating profit divided by net finance costs expressed as a ratio. The Group defines cash interest cover (times) as cash generated from operations after working capital changes, divided by net finance costs (which includes capitalised borrowing costs) expressed as a ratio. For these purposes, net finance costs consist of finance costs (including capitalised borrowing costs) and finance income from the cash flow statement.

45 c101680pu020 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS OPERATING AND FINANCIAL REVIEW

The following discussion and analysis of the Group’s financial condition and results of operations is based on the Consolidated Financial Statements prepared in accordance with IFRS and the Interim Consolidated Financial Statements prepared in accordance with IAS 34. This discussion should be read in conjunction with the information in ‘‘Selected Consolidated Financial and Other Information’’, ‘‘Presentation of Financial and Other Information,’’ the Consolidated Financial Statements and Interim Consolidated Financial Statements and the notes thereto appearing elsewhere in this Base Prospectus. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. The Group’s actual results could differ materially from those expressed or implied in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Base Prospectus, particularly under the headings ‘‘Risk Factors’’ and ‘‘Cautionary Note Regarding Forward-looking Statements’’.

Overview Transnet is a public company with the Government as its sole Shareholder. As the operator and custodian of a major portion of the Republic of South Africa’s transport infrastructure, Transnet is responsible for ensuring that a significant part of the country’s bulk freight transportation system operates according to world-class standards and as an integral part of the overall economy. Transnet is a focused freight transport company with a goal of delivering integrated, efficient, safe, reliable and cost-effective services. Transnet’s key mandate, as defined by the Shareholder Compact, is to assist in lowering the cost of doing business and to enable economic growth in the Republic of South Africa. Transnet seeks to promote economic growth in the Republic of South Africa by providing Transnet’s customers with access to world-class integrated logistics solutions and by creating transport capacity ahead of demand. Transnet is funded through reserves and borrowings and does not receive cash subsidies from the Government. Transnet’s borrowings are based on the strength of its own balance sheet, and going forward, Transnet intends to borrow without Government subsidies. As a result, Transnet is required to earn an appropriate return on assets that will allow for the maintenance and expansion of the rail, port and pipeline infrastructure that it owns and operates, while maintaining a strong balance sheet. Substantially all of Transnet’s revenues are generated in the Republic of South Africa. Over the past four financial years, Transnet has transformed from a diversified conglomerate into a focused rail, port and pipeline operator. Transnet has accomplished this through the sale, closure or transfer of non-core assets and businesses, which have been treated as discontinued operations for accounting purposes. Transnet’s continuing operations are grouped into divisions according to their operational activity, with central support services unified under one brand. For operational and IFRS reporting purposes, Transnet is organised into the following five core business divisions: Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority, Transnet Port Terminals and Transnet Pipelines. The ‘‘Other’’ segment includes Transnet Property, Transnet Fuel Solutions, Transnet Capital Projects, Transnet Corporate Centre and Transnet Heritage Foundation. Transnet Freight Rail is focused on transporting bulk and containerised freight. Transnet Freight Rail transported approximately 177 million tonnes of freight during Financial Year 2009, and 86.9 million tonnes of freight during the six months ended 30 September 2009. Transnet Rail Engineering consists of eight product-focused business units that provide services ranging from refurbishment, conversion and upgrades, to the manufacturing and assembly of rail- related rolling stock. Most of Transnet Rail Engineering’s sales are generated from sales to Transnet Freight Rail and PRASA (a separate state owned entity and accordingly a related party under IFRS). Transnet National Ports Authority is responsible for the safe, efficient and effective economic functioning of the national ports system of South Africa, which Transnet National Ports Authority owns and manages in a landlord capacity on behalf of the Government. Transnet National Ports Authority is also a provider of port infrastructure and marine services at all seven fully operational commercial ports in the Republic of South Africa, and plans to provide the same services for the Port of Ngqura when it becomes fully operational. Transnet Port Terminals manages 16 cargo terminals situated across seven South African ports. It provides cargo handling services for container, bulk, break-bulk and automotive cargos.

46 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet Pipelines transports a range of petroleum and gas products through approximately 3,000 km of underground pipelines traversing five provinces in the Republic of South Africa.

Significant Factors Affecting the Group’s past Financial Condition and Results of Operations Economic Review Global output and trade decreased significantly in the final months of calendar year 2008 and remain at low levels in comparison to global output and trade in 2007. The continuation of the financial crisis has caused equity values to fall sharply across both advanced and emerging economies. This, in turn has generally decreased household wealth and placed downward pressure on consumer demand. In addition, the associated high level of uncertainty has largely prompted households and businesses to reduce or postpone certain expenditures, reducing demand for consumer and capital goods. At the same time, stricter credit funding criteria are constraining household spending and curtailing production and trade. World gross domestic product growth is estimated by IHS Global Insight to have slowed to 2.4 per cent. in 2008 from 4 per cent. in 2007. In response to decreasing demand and hence decreasing economic growth and inflation, the SARB has lowered interest rates by 500 basis points since December 2008. Transnet and Transnet’s principal customers’ businesses and operations are closely related to the South African economy and may be materially affected by conditions in the South African economy, such as interest rates, inflation rates, commodity price movements and general economic conditions. Inflation and certain commodity price movements had a significant impact on Transnet’s revenues and net operating expenses in Financial Year 2009 as compared to Financial Year 2008. However, South African real GDP expanded at a noticeably slower pace in calendar year 2008 and the South African economy recorded its lowest rate of growth in nominal GDP in ten years, consistent with slower global economic growth. This was primarily driven by a substantial contraction in the mining sector which was directly affected by weaker international demand, falling commodity prices and interruptions due to maintenance, safety procedures and strikes. Despite tightening economic conditions, there has been an increasing contribution to South African growth from investment, in part reflecting an increase in public infrastructure spending led by outlays to expand electricity-generation capacity and to upgrade the Republic of South Africa’s airports. The world economic outlook has further weakened since 30 September 2008 due to the credit crunch caused by the subprime mortgage crisis in the United States, which quickly spread to the European Union and beyond. The Republic of South Africa is exposed to considerable inflationary pressures from rising food and energy prices, import price pass-through from the recent weakness of the Rand, and electricity tariffs. The South African economy is generally reacting to the global economic crisis in much the same way as many other countries’ economies. GDP growth figures for the second quarter of 2009 confirmed that South Africa is officially in recession. Sharp contractions in mining (33 per cent.) and manufacturing (22 per cent.) production as compared to the first quarter of 2008 are partly reflected in the decline in freight volumes handled by Transnet. According to the SARB South African GDP growth slowed to 3.1 per cent. in 2008, from 5.1 per cent. in 2007, with year-on-year exports and imports declining by 5.8 per cent. and 7.8 per cent. respectively. Volume and pricing The Group’s revenue is dependent to a significant extent on pricing and volume in terms of the throughput at its ports and container and other terminals, the tonne kilometres covered on its freight rail network and the volume of liquids transported through its pipelines. Factors that can impact these volume measures include (i) the levels of global and regional trade and the degree of globalisation of world trade, (ii) competition, including from other regional and global terminal operators (in the case of the Group’s container terminal business with respect to transhipment) and (iii) the Group’s capacity to handle increased volumes. Transnet Group Financial Planning calculates a weighted average volume growth and revenue per unit increase (year-on-year actual) for each major commodity line reported within a division, and then weights the growth or increases/decreases per commodity line to its revenue as a percentage of the total commodity revenue in that division. The results represent the weighted average growth in volumes and revenue per unit for a division. A Group weighted volume and revenue per unit increase is also calculated by weighting the divisional weighted averages (as calculated above) against the divisional commodity revenue as a percentage of the cumulative Group commodity revenue. This practice is designed to ensure that volume growth and revenue per commodity unit

47 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS increases are directly linked and reconcilable with increases per commodity line to its revenue. The calculations to determine volume growth and increases in revenue per unit increases excludes growth in other revenue sources such as storage, marine services, and property rentals. In Financial Year 2008, volumes transported increased by 0.8 per cent. and tariffs increased by 9.2 per cent., in each case as compared to Financial Year 2007, and these increases resulted in an overall revenue increase of 11.9 per cent. year-on-year from Financial Year 2007. All operating divisions experienced volume increases in Financial Year 2008 compared to Financial Year 2007, except for Transnet Freight Rail, which experienced a slight decline in volumes as a result of coal freight decreases resulting from product unavailability at Transnet’s customers as well as operational problems, including derailments and cable theft on Transnet’s network. Tariff increases were seen across all operating divisions in Financial Year 2008 compared to Financial Year 2007 except that Transnet Pipelines’ tariffs did not increase to the extent applied for in Financial Year 2008 as a result of the tariff increase applied for by Transnet Pipelines not being approved by the regulator. In Financial Year 2009, volumes decreased by 2.9 per cent. and tariffs increased by 13.0 per cent., in each case as compared to Financial Year 2008; the net effect of which was an overall revenue increase of 11.6 per cent. year-on-year from the prior period. All operating divisions experienced volume decreases in Financial Year 2009 compared to the prior period, except for Transnet Pipelines which experienced a 5.6 per cent. increase in volume. These decreases in volume, particularly in the second half of Financial Year 2009, were in large part due to the global economic crisis. In line with Transnet’s expectations, volumes continued to drop during the six months ended 30 September 2009 compared to the same period in 2008. The Group’s operating results are significantly impacted by tariff levels. Tariffs with respect to the National Ports Authority and Transnet Pipelines are subject to approval by the regulatory authorities, which may limit the Group’s flexibility in pricing and could reduce its revenue and operating results. See ‘‘Risk Factors – Risks Related to Transnet’s Business – Transnet’s business, financial condition and results of operations are dependent on tariffs set by various governmental agencies’’.

Capital Expenditure Programme and maintenance needs Under the Capital Expenditure Programme, Transnet estimates it will invest at least R 80.5 billion in capital expenditure over the next five Financial Years, beginning in Financial Year 2010 (excluding capitalised borrowing costs of R 7.1 billion), of which R 57.7 billion is estimated will be made in the next three financial years beginning in Financial Year 2010 (excluding capitalised borrowing costs). The Capital Expenditure Programme is reviewed and updated annually by the Board of Directors and as such, is subject to change. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. The Capital Expenditure Programme takes cognisance of Transnet’s Growth Strategy and focuses on key corridors and sectors to harness growth opportunities. Approximately R 22.5 billion is expected to be invested in projects relating to Transnet Port Terminals and Transnet National Port Authority, R 45.6 billion in Transnet Freight Rail and Transnet Rail Engineering (including R 24.0 billion in the GFB) and R 12.4 billion in Transnet Pipelines and Specialist Units, over the next five Financial Years beginning in Financial Year 2010. Transnet’s plan is focused on expanding and creating new capacity ahead of demand for its customers. Transnet expects such expenditures to be made both on replacing and expanding ports, pipeline and rail freight assets. The Capital Expenditure Programme is already under way and has resulted in increased spending by Transnet, much of it funded by new indebtedness. As a result, finance costs have increased and are expected to increase further with increased spending under the programme, although a significant portion of borrowing costs are expected to be capitalised under IAS 23. Depreciation and amortisation have also increased significantly year-on-year in Financial Years 2007, 2008 and 2009 as a result of initial spending under projects included in the previous years’ programmes. Depreciation and amortisation for Financial Years 2007, 2008 and 2009 was R 3.0 billion, R 3.8 billion and R 4.8 billion, respectively. Depreciation and amortisation for the six months ended 30 September 2009 increased to R 2,925 million compared to R 2.3 billion for the six months ended 30 September 2008. Depreciation and amortisation are expected to increase further in line with increased spending as a result of the Capital Expenditure Programme.

48 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Power shortages and energy costs At the end of 2007 and early in 2008, the Republic of South Africa experienced an electricity crisis as state power supplier Eskom’s aging power plants were not always able to supply enough power to meet demand. This necessitated rolling blackouts, or load shedding, which affected residents and businesses in major cities. In particular, it affected the ability of the Group’s coal mining customers to mine and also affected the Group’s electric locomotives and electricity-dependent equipment at port terminals, all of which had an adverse effect on volumes transported by Transnet. Profitability was also impacted adversely as revenues in affected areas declined while fixed costs continued to be incurred even during load shedding. Although as at the date of this Base Prospectus the problem has abated, aided by lower demand, there still remains a risk to electricity supply until new generation capacity is installed, and accordingly the Group expects the problem to recur and possibly adversely affect revenue and profitability in future periods. Transnet’s energy costs decreased in Financial Year 2008 compared to the prior year, predominantly as a result of lower usage. Energy costs increased by 22.62 per cent. in Financial Year 2009 as compared to Financial Year 2008, which principally reflected the increase in the price of diesel fuel used by the locomotives and machinery as well as oil and the increase in electricity tariffs. In the six months ended 30 September 2009, however, energy costs decreased by 8.33 per cent. predominantly due to oil prices decreasing when compared to 30 September 2008. Transnet cannot predict future oil prices and therefore cannot predict what effect, if any, volatility in such oil prices will have on its business and operations.

Volatility of the Rand The value of the Rand as measured against the U.S. Dollar has historically fluctuated significantly. The value of the Rand as measured against the U.S. Dollar fluctuated between R 7.2697 per U.S.$1.00 and R 10.59 per U.S.$1.00 between 1 January 2009 and 30 September 2009. See also ‘‘Presentation of Financial and Other Information – Exchange Rates’’. Decreases in the value of the Rand as measured against other currencies could increase the cost in Rand terms of foreign denominated debt, foreign denominated financing costs and foreign denominated operating and capital expenditures. The Group estimates that its non-Rand funding requirements over the next three Financial Years (and especially with respect to the U.S. Dollar, Euro and Yen) will amount to approximately R 9.2 billion. Future exchange rate and financial market volatility may continue to materially impact the Group’s results. Although it is Transnet’s policy to hedge its foreign currency denominated debt and operating and capital expenditures, currency exchange hedges are not always available on commercially acceptable terms.

Discontinued operations As discussed above, over the past three financial years, Transnet has disposed of certain non-core businesses and assets including the disposal of V&A Waterfront, freightdynamics (Transnet’s discontinued road business segment) and South African Express Airways (Pty) Limited pursuant to the Turnaround Plan. See ‘‘Business – History and Development.’’ The historical results of operations of these entities have been reported as discontinued operations under IFRS. The disposal of non-core assets has largely been completed. The results of these discontinued operations have been excluded from the results of continuing operations of the Group for the periods presented. In Financial Year 2007, key disposals included South African Airways (Pty) Limited (‘‘South African Airways’’) (although no cash flowed in this transaction), Transnet’s 26 per cent. interest in V&A Waterfront Holdings (Pty) Limited for R 1.8 billion, Transnet’s 49 per cent. share in Equity Aviation (Pty) Limited for R 70 million, the Transnet Pension Fund Administrator’s business for R 23 million and assets of Transtel Full Services Network for R 251 million. In Financial Year 2008, key disposals included freightdynamics, Transnet’s discontinued road business segment, for R 1 million, Viamax (Pty) Limited for R 1.2 billion, Transnet’s homeowners loan book, a portfolio consisting of loans to Transnet employees to fund the purchase of their houses and secured by mortgages over the houses (the ‘‘Homeowners Loan Book’’), for R 1.4 billion, Transtel DEVI assets for R 231 million and Transnet’s 35 per cent. interest in VAE Perway (Pty) Limited for R 30 million. In Financial Year 2009, key disposals included the disposal of Transnet’s interest (indirectly held) in Neotel for R 135 million (plus a R 198 million settlement payment for loans owed by Neotel to Transnet), South African Express Airways (Pty) Limited for R 140 million (plus a R 336 million

49 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS settlement payment for loans owed by South African Express Airways (Pty) Limited to Transnet), the disposal of the Shosholoza Meyl passenger rail business for R 100 (included in this disposal was a R 500 million reimbursement payment to Transnet for costs incurred by Transnet for the operation of the business for Financial Year 2009), and the disposal of Autopax Passenger Services (Pty) Limited, the bus line business for R 1. The financial information for Financial Years 2007 and 2008, as presented in the Group’s financial statements for Financial Year 2009, has been restated. For further information on this restatement, please see ‘‘Presentation of Financial and Other Information’’.

Seasonality External market forces on commodities and products serviced by the Group may be affected by seasonality and can impact revenue significantly.

Descriptions of Principal Income Statement Items Descriptions of the principal items in the Group’s consolidated income statements are set out below. Revenue: Revenue consists of amounts earned through the rendering of freight transportation and other services, rental income, finance income from lending activities, and through construction contracts, and excludes revenues from discontinued operations. Depreciation and amortisation: Depreciation from continuing operations consists of depreciation of owned assets at historic cost (which principally relates to rolling stock and containers, port facilities, buildings and structures, machinery, equipment and furniture, and permanent way and works), depreciation on the revalued portion of owned assets (which relates principally to port facilities and pipeline networks) and depreciation on leased assets. Amortisation consists of amortisation with respect to software and licences. Impairment of assets: Impairment of assets consists principally of impairments with respect to Rail segment property, plant and equipment and trade and other receivables for Transnet Freight Rail’s assets. Dividends received: Dividends received are those received, as the case may be, from associates, from investments and from the redemption of the C-Class Preference Share in Newshelf 664 (Pty) Ltd held by Newshelf 697 (Pty) Limited, a wholly owned subsidiary of Transnet. Fair value adjustments: Fair value adjustments consist principally of fair value adjustments of investment property, revaluations of the C-Class Preference Share (which has since been sold), derivative fair value adjustments, fair value adjustments of treasury bonds, gains on hedging instruments, and other fair value adjustments. Income/(Loss) from associates: Income/(Loss) from associates reflects income or loss from equity-accounted for investees. At 31 March 2009 and 30 September 2009, Transnet had eight associates and one joint venture. Finance costs: Finance costs consist principally of interest costs, discounts on bonds amortised and net foreign exchange translation gains and losses, less borrowing costs capitalised. Finance income: Finance income consists principally of interest received on loans and receivables. Taxation: Taxation consists principally of South African normal taxation, capital gains taxation and deferred taxation. (Loss)/profit from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments: This represents the results of the discontinued operations during each period and the profit or loss on disposal.

50 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Results of Operations for the six months ended 30 September 2009 and 2008 Summary The following table sets forth the Group’s principal consolidated income statement items for the six month periods indicated.

Six months ended 30 September

Variation 2009 2008 2008/09

(R millions) (R millions) (per cent.) Revenue 17,335 16,849 2.88 Net operating expenses excluding depreciation and amortisation (10,694) (10,299) 3.84

Profit from operations before depreciation and amortisation and items listed below 6,641 6,550 1.39 Depreciation and amortisation (2,925) (2,303) 27.01

Profit from operations before items listed below 3,716 4,247 (12.50) Post-retirement benefit obligation (costs)/income (19) 67 (128.36) Profit on sale of interests in businesses and dividends received — — — Impairment of assets (187) (110) (70.00) Fair value adjustments (157) (282) 44.33

Profit from operations before income/(loss) from associates and net finance costs 3,353 3,922 (14.51) (Loss)/income from associates — — — Finance costs (1,634) (1,089) (50.05) Finance income 263 89 195.51

Profit before taxation 1,982 2,922 (32.17) Taxation (695) (861) (19.28)

Profit after taxation 1,287 2,061 37.55

Profit for the period from continuing operations 1,287 2,061 37.55 Discontinued operations (Loss)/profit from discontinued operations, including (loss)/ profit from disposal of discontinued operations and impairments (13) (400) (96.75)

Net profit for the period 1,274 1,661 23.30

Attributable to the shareholder 1,274 1,661 23.30 Attributable to minority interests — — —

51 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The following table sets forth the Group’s principal consolidated income statement items as a percentage of revenue for each of the six-month periods indicated.

Six months ended 30 September

2009 2008

(as percentage of revenue) Revenue(1) 100.00 100.00 Net operating expenses excluding depreciation and amortisation (61.69) (61.13)

Profit from operations before depreciation and amortisation and items listed below 38.31 38.87 Depreciation and amortisation (16.87) (13.67)

Profit from operations before items listed below 21.44 25.20 Post retirement benefit obligation (costs/income) expenses (0.11) 0.40 Impairment of assets (1.08) (0.65) Fair value adjustments (0.91) (1.67)

Profit from operations before income/(loss) from associates and net finance costs 19.34 23.28 (Loss)/income from associates — — Finance costs (9.43) (6.46) Finance income 1.52 0.53

Profit before taxation 11.43 17.35 Taxation (4.01) (5.11)

Profit after taxation 7.42 12.23

Profit for the period from continuing operations 7.42 12.23 Discontinued operations Loss from discontinued operations, including (loss)/profit from disposal of discontinued operations and impairments (0.07) (2.37)

Net profit for the period 7.35 9.86

Attributable to the shareholder 7.35 9.86 Attributable to minority interests — —

(1) The per cent. contributions of revenue presented in the above table include only external revenues.

Results of Operations for the six months ended 30 September 2009 and 2008

Revenue Revenue increased by 2.88 per cent. from R 16,849 million in the six months ended 30 September 2008 to R 17,335 million in the six months ended 30 September 2009. This increase was principally attributable to a weighted average tariff increase of 10.10 per cent., off-set in part by an average volume decrease of 10.60 per cent. as well as other non-commodity revenue increases such as marine services and lease rentals. Transnet Freight Rail made the most significant contribution to the Group’s external revenue in the six months ended 30 September 2009 (56.48 per cent.), followed by Transnet National Ports Authority (19.27 per cent.), Transnet Port Terminals (14.35 per cent.), Transnet Rail Engineering (4.64 per cent.), and Transnet Pipelines (3.91 per cent.).

Transnet Freight Rail’s total segment revenue increased by 7.38 per cent. from R 9,210 million in the six months ended 30 September 2008 to R 9,890 million in the six months ended 30 September 2009. The increase in revenue was mainly attributable to price increases for general

52 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS freight. These price increases reflected Transnet Freight Rail’s continuing operational improvement, investment in assets, improved traffic mix and prioritisation of higher yield volumes. These price increases were off-set in part by an 17.59 per cent. decrease in general freight tonnages transported as compared to the six months ended 30 September 2008. This decrease in general freight tonnages was due largely to the effect of the economic downturn on global demand for the products transported by Transnet Freight Rail. Iron ore export tonnes increased by 32.70 per cent. from 15.9 mt in the six months ended 30 September 2008 to 21.1 mt in the six months ended 30 September 2009. General freight tonnes, which make up a significant portion of Transnet Freight Rail’s revenue, decreased by 17.59 per cent. from 43.2 mt in the six months ended 30 September 2008 to 35.6 mt in the six months ended 30 September 2009. This decrease was largely due to the effect of the economic downturn. Volumes increased slightly on the coal line by 1.00 per cent. from 29.9 mt in the six months ended 30 September 2008 to 30.20 mt the six months ended 30 September 2009, primarily due to a reduction in derailments at Transnet Freight Rail, compared to the prior comparative period. Transnet Rail Engineering’s total segment revenue decreased by 5.08 per cent. from R 3,958 million in the six months ended 30 September 2008 to R 3,757 million in the six months ended 30 September 2009. This decrease was principally attributable to the decrease in orders for refurbishment of coaches for PRASA as well as decreased internal work performed for Transnet Freight Rail’s operations. Transnet National Ports Authority’s total segment revenue decreased by 3.24 per cent. from R 3,765 million in the six months ended 30 September 2008 to R 3,643 million the six months ended 30 September 2009. This decrease was principally attributable to lower than anticipated volumes on container import, break-bulk exports, dry-bulk import and export, and automotive sectors. The decrease was also attributable to the continued decline in coal exports due mainly to a softening of demand for commodities on world markets. Transnet Port Terminals’ total segment revenue decreased by 8.53 per cent. from R 2,720 million in the six months ended 30 September 2008 to R 2,488 million in the six months ended 30 September 2009. This decrease was principally attributable to a decline in the volume of goods transported on all major cargo segments (with the exception of the bulk sector). Transnet Pipelines’ total segment revenue decreased by 10.44 per cent. from R 757 million in the six months ended 30 September 2008 to R 678 million in the six months ended 30 September 2009. This decrease in revenue resulted principally from NERSA’s decision to reduce tariffs by 10.38 per cent. per annum on 30 April 2009. Total segment revenue from those divisions covering all activities other than those listed above (the ‘‘Other division’’) which encompasses all of Transnet’s remaining assets, increased by 3.76 per cent. from R 1,118 million in the six months ended 30 September 2008 to R 1,160 million in the six months ended 30 September 2009. This increase was principally attributable to increased revenue at the Capital Projects and Property divisions. Transnet Capital Projects is responsible for the oversight and management of all large capital expansion projects for the Group, and the increase in its revenue reflects the increased activity under the Turnaround Plan and the Growth Strategy.

53 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Net Operating Expenses Excluding Depreciation and Amortisation The table below sets forth the principal components of the Group’s net operating expenses excluding depreciation and amortisation for the six month periods indicated. Six months ended 30 September

2009 2008 Variation

(R millions) (per cent.) Net operating expenses excluding depreciation and amortisation Personnel costs ...... 5,002 4,878 2.54 Energy costs ...... 1,497 1,633 (8.33) Operating leases...... 657 691 (4.92) Material costs...... 669 815 (17.91) Managerial and technical consulting fees ...... 276 434 (36.41) Other...... 2,593 1,848 40.31

Total ...... 10,694 10,299 3.84

Net operating expenses excluding depreciation and amortisation increased by 3.84 per cent. from R 10,299 million in the six months ended 30 September 2008 to R 10,694 million in the six months ended 30 September 2009. This increase was principally attributable to an increase in labour costs. The increase was partially off-set, however, by decreases in material costs, energy costs, managerial and technical consulting fees. Material costs decreased by 17.91 per cent. from R 815 million in the six months ended 30 September 2008 to R 669 million in the six months ended 30 September 2009. This decrease was principally attributable to the decreasing cost of steel used for maintenance as well as cost reduction measures initiated by the Group. Energy costs decreased by 8.33 per cent. from R 1,633 million in the six months ended 30 September 2008 to R 1,497 million in the six months ended 30 September 2009. This decrease was principally attributable to lower diesel and oil prices in the Republic of South Africa and decreased consumption by Transnet due to lower volumes of goods being transported. Personnel costs increased by 2.54 per cent. from R 4,878 million in the six months ended 30 September 2008 to R 5,002 million in the six months ended 30 September 2009. This increase was mainly a result of salary increases given to non-management employees. This increase was partially off-set, however, by a decrease in overtime costs as a result of cost reduction measures initiated by the Group. Expenses related to operating leases decreased by 4.92 per cent. from R 691 million in the six months ended 30 September 2008 to R 657 million in the six months ended 30 September 2009. This decrease was principally attributable to fewer operating leases being contracted.

Depreciation and Amortisation The table below sets forth the principal components of the Group’s depreciation and amortisation for the six month periods indicated. Six months ended 30 September

2009 2008 Variation

(R millions) (per cent.) Depreciation and amortisation Depreciation – Owned assets at historic cost...... 2,487 1,878 32.43 Depreciation – Owned assets including revalued portion ..... 295 351 (15.95) Depreciation – Leased assets...... 72 21 242.86 Amortisation of intangible assets (software and licences) .... 71 53 33.96

Total ...... 2,925 2,303 27.01

54 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Depreciation and amortisation increased by 27.01 per cent. from R 2,303 million in the six months ended 30 September 2008 to R 2,925 million in the six months ended 30 September 2009. This increase was principally attributable to the increased depreciation associated with increased spending in relation to the Capital Expenditure Programme, as well as the revaluation of port facilities and the pipeline networks at 31 March 2009.

Impairment of Assets Impairment of assets increased by 70.00 per cent. from R 110 million in the six months ended 30 September 2008 to R 187 million in the six months ended 30 September 2009. The increased impairment of assets was principally attributable to derailments and certain accounts receivable at Transnet Freight Rail.

Fair Value Adjustments Fair value adjustments amounted to R 282 million in the six months ended 30 September 2008 and R 157 million in the six months ended 30 September 2009. The movement in fair value adjustments during the periods under review was principally attributable to an improvement in the ‘mark to market’ of derivative financial instruments which the Group holds to hedge foreign exchange risks emanating from the Capital Investment Programme. The ‘mark to market’ of these instruments resulted in losses of R 188 million in the six months ended 30 September 2009.

Finance Costs Finance costs increased by 50.05 per cent. from R 1,089 million in the six months ended 30 September 2008 to R 1,634 million in the six months ended 30 September 2009. This increase was principally attributable to increased amounts of borrowing to fund the Capital Expenditure Programme and current period capital expenditures.

Finance Income Finance income increased by 195.51 per cent. from R 89 million in the six months ended 30 September 2008 to R 263 million in the six months ended 30 September 2009. This increase is directly attributable to the increase in cash that has been generated from operations as well as an increase in the amount of funds raised through domestic debt pursuant to Transnet’s R 30 billion domestic medium term note programme (the ‘‘Domestic Medium Term Note Programme’’) as part of the Group’s pre-funding strategy in response to the global liquidity crisis.

Taxation The taxation charge for the six-month period amounted to R 695 million, comprising a current taxation charge of R 352 million (R 364 million as at 30 September 2008) and deferred taxation charge of R 343 million (R 497 million as at 30 September 2008). The effective taxation rate for the Group (continuing operations) at 35.07 per cent. (29.47 per cent. as at 30 September 2008) is above the corporate taxation rate of 28 per cent. (29 per cent. as at 30 September 2008) primarily as a result of items not deductible for taxation purposes, mainly depreciation on port assets.

Loss from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments Loss from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairment decreased from R 400 million in the six months ended 30 September 2008 to R 13 million in the six months ended 30 September 2009. This decrease was principally attributable to Transnet disposing of South African Express Airways (Pty) Limited, Shosholoza Meyl and Autopax Passenger Services (Pty) Limited in Financial Year 2009. No further disposals were made for the six months ended 30 September 2009. The loss from discontinued operations of R 13 million in the six months ended 30 September 2009 resulted from an operating loss of R 17 million from Luxrail, which was partially off-set by Transnet recognizing an impairment reversal of R 4 million.

Profit for the six-month period The profit of R 1,274 million for the six months ended 30 September 2009 was a decrease of 23.30 per cent. when compared to the R 1,661 million profit for the six months ended 30 September 2008.

55 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Results of Operations for the Years ended 31 March 2009, 2008 and 2007 Summary The following table sets forth the Group’s principal consolidated income statement items for each of the Financial Years indicated.

Year ended 31 March

2008 Variation 2007 Variation 2009 (Restated) 2008/09 (Restated) 2007/08

(R millions) (R millions) (per cent.) (R millions) (per cent.) Revenue(1) ...... 33,592 30,091 11.6 26,899 11.9 Net operating expenses excluding depreciation and amortisation...... (20,392) (17,281) 18.0 (16,232) 6.5

Profit from operations before depreciation, amortisation and items listed below ...... 13,200 12,810 3.0 10,667 20.1 Depreciation and amortisation ...... (4,779) (3,798) 25.8 (2,952) 28.7

Profit from operations before items listed below...... 8,421 9,012 (6.6) 7,715 16.8 Impairment of assets ...... (324) (153) (111.8) (232) (34.1) Post-retirement benefit obligation (costs)/income...... (436) 686 (163.6) (218) (414.7) Dividends received...... — 122 (100.0) 36 238.9 Fair value adjustments...... 941 1,416 (33.5) 2,462 (42.5)

Profit before income/(loss) from associates and joint ventures and net finance costs...... 8,602 11,083 (22.4) 9,763 13.5

Income/(loss) from associates and joint ventures ...... 82 (59) 239.0 2 (3,050.0) Finance costs...... (2,233) (2,692) (17.1) (2,472) 8.9 Finance income ...... 267 761 (64.9) 185 311.4

Profit before taxation ...... 6,718 9,093 (26.1) 7,478 21.6 Taxation ...... (1,674) (2,642) (36.6) (1,742) 51.7

Profit for the year after taxation from continuing operations...... 5,044 6,451 (21.8) 5,736 12.5 (Loss)/profit from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments...... (516) (1,921) 73.1 921 (308.6)

Profit for the year ...... 4,528 4,530 0.0 6,657 (31.9)

Attributable to equity holder...... 4.528 4,526 0.0 6,640 (32.0) Attributable to minority interests .... — 4 (100.0) 17 (76.5)

(1) The per cent. contributions of revenue presented in the above table include only external revenues.

56 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The following table sets forth the Group’s principal consolidated income statement items as a percentage of revenue for each of the Financial Years indicated.

Year ended 31 March

2008 2007 2009 (Restated) (Restated)

(as percentage of revenue) Revenue(1)...... 100 100 100 Net operating expenses excluding depreciation and amortisation...... (60.7) (57.4) (60.3)

Profit from operations before depreciation, amortisation and items listed below...... 39.3 42.6 39.7 Depreciation and amortisation...... (14.2) (12.6) (11.0)

Profit from operations before items listed below ...... 25.1 29.9 28.7 Impairment of assets...... (1.0) (0.5) (0.9) Post-retirement benefit obligation (costs)/income...... (1.3) 2.3 (0.8) Fair value adjustments ...... 2.8 4.7 9.2 Dividends received ...... 0.0 0.4 0.1

Profit before income/(loss) from associates and joint ventures and net finance costs ...... 25.6 36.8 36.3 Income/(loss) from associates and joint ventures ...... 0.2 (0.2) — Finance costs ...... (6.6) (8.9) (9.2) Finance income ...... 0.8 2.5 0.7

Profit before taxation ...... 20.0 30.2 27.8 Taxation...... (5.0) (8.8) (6.5)

Profit for the year after taxation from continuing operations ...... 15.0 21.4 21.3 Profit/(loss) from discontinued operations, including profit/ (loss) on disposal of discontinued operations and impairments (1.5) (6.4) 3.4

Profit for the year ...... 13.5 15.1 24.7

Attributable to equity holder ...... 13.5 15.1 24.7 Attributable to minority interests...... ———

(1) The per cent. contributions of the revenue presented in the above table include only external revenues.

57 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Results of Operations for the Years Ended 31 March 2009 and 2008 Revenue Revenue increased by 11.6 per cent. from R 30,091 million in Financial Year 2008 to R 33,592 million in Financial Year 2009. This increase was principally attributable to a weighted average tariff increase of 13.0 per cent., off-set by an average volume decrease of 2.9 per cent. Transnet Freight Rail made the most significant contribution in Financial Year 2009 to the Group’s external revenue (55 per cent. of the total), followed by Transnet National Ports Authority (20 per cent.), Transnet Port Terminals (15 per cent.), Transnet Pipelines and Transnet Rail Engineering (each with 4 per cent.). Transnet Freight Rail’s segment total revenue increased by 12.6 per cent. from R 16,598 million in Financial Year 2008 to R 18,683 million in Financial Year 2009. This increase was principally attributable to tariff increases for the export coal line, renegotiation of iron ore contracts as well as general freight increases and volume improvements on the iron ore line (which resulted from increased contractual commitments to iron ore exporters due to increased demand for iron ore). These increases were off-set in part by volume decreases in GFB as a consequence of customer cancellations, internal operational issues on the coal line, and a general slowdown in the international commodities markets. General freight revenue accounted for 63.7 per cent. of Transnet Freight Rail total segment revenue in Financial Year 2009, while the export coal line, the export iron ore line and other non-freight revenue accounted for 23.2 per cent., 9.1 per cent. and 4 per cent., respectively of Transnet Freight Rail total segment revenue. Transnet Rail Engineering’s segment total revenue increased by 0.9 per cent. from R 8,156 million in Financial Year 2008 to R 8,228 million in Financial Year 2009. This increase was principally attributable to increased orders for refurbishment of coaches for PRASA and increased internal work performed for Transnet Freight Rail’s operations. Transnet National Ports Authority’s segment total revenue increased by 3.9 per cent. from R 6,842 million in Financial Year 2008 to R 7,110 million in Financial Year 2009. This increase was primarily due to tariff increases, but was off-set in part by a decline in break-bulk and vehicle import volumes due to the downturn in the local economy. Further partial off-sets were attributable to the continued decline in coal exports due mainly to derailments in the rail corridor and a softening of demand for commodities on world markets. Transnet Port Terminals’ segment total revenue increased by 3.9 per cent. from R 4,844 million in Financial Year 2008 to R 5,037 million in Financial Year 2009. This moderate increase in revenue has been impacted by container volumes which have declined by 0.2 per cent. during Financial Year 2009, the first decline in five financial years. Container volumes, which reflected strong growth as of 30 June 2008, declined sharply over the last six months of Financial Year 2009, particularly during the final three months of Financial Year 2009. Transnet Pipelines’ segment total revenue increased by 13.2 per cent. from R 1,292 million in Financial Year 2008 to R 1,463 million in Financial Year 2009. This increase in revenue resulted from a 6 per cent. increase in the mega litre kilometre of petroleum products transported through the pipelines, as well as an average annual tariff increase of 4.6 per cent. from August 2008. Segment total revenue from the Other division, which encompasses all of Transnet’s remaining assets, increased by 25.4 per cent. from R 2,327 million in Financial Year 2008 to R 2,917 million in Financial Year 2009. This increase was principally attributable to Transnet’s Capital Projects and Property divisions. Transnet’s Capital Projects is responsible for the oversight and management of all large capital expansion projects of the Group, which is reflective of the increased activity under the Group’s Turnaround Plan and subsequent strategy pursuant to the Growth Strategy.

58 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Net Operating Expenses Excluding Depreciation and Amortisation The table below sets forth the principal components of the Group’s net operating expenses excluding depreciation and amortisation for the Financial Years indicated.

Year ended 31 March

2008 2009 (Restated) Variation

(R millions) (per cent.) Net operating expenses excluding depreciation and amortisation Personnel costs...... 9,440 7,938 18.9 Energy costs ...... 3,144 2,564 22.6 Operating leases ...... 1,338 1,179 13.5 Material costs ...... 1,745 1,098 58.9 Managerial and technical consulting fees ...... 988 1,014 (2.6) Other ...... 3,737 3,488 7.1

Total...... 20,392 17,281 18.0

Net operating expenses excluding depreciation and amortisation increased by 18.0 per cent. from R 17,281 million in Financial Year 2008 to R 20,392 million in Financial Year 2009. This increase was principally attributable to increases in material costs, energy costs and personnel costs. This percentage increase was greater than the percentage increase in Group revenue (11.6 per cent.). Material costs increased by 58.9 per cent. from R 1,098 million in Financial Year 2008 to R 1,745 million in Financial Year 2009. This increase was principally attributable to the cost of steel used for rolling stock and equipment, which, in turn, also impacted the cost of maintenance materials, together with the increased maintenance programme initiated by the Group. Energy costs increased by 22.6 per cent. from R 2,564 million in Financial Year 2008 to R 3,144 million in Financial Year 2009. This increase was principally attributable to increases in the cost of electricity, diesel and oil in the Republic of South Africa which were in line with global increases in Financial Year 2009. In the second half of Financial Year 2009, however, the Group benefited from worldwide decreases in oil prices. Personnel costs increased by 18.9 per cent. from R 7,938 million in Financial Year 2008 to R 9,440 million in Financial Year 2009. This increase was broadly in line with the rate of inflation, as measured by CPI in the Republic of South Africa. Expenses related to operating leases increased by 13.5 per cent. from R 1,179 million in Financial Year 2008 to R 1,338 million in Financial Year 2009. This increase was principally attributable to diesel and operating leases being adjusted, at renewal, to reflect inflation.

59 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Depreciation and Amortisation The table below sets forth the principal components of the Group’s depreciation and amortisation for the Financial Years indicated. Year ended 31 March

2008 2009 (Restated) Variation

(R millions) (per cent.) Depreciation and amortisation Depreciation – Owned assets at historic cost ...... 4,037 3,370 19.8 Depreciation – Owned assets including revalued portion ...... 563 342 64.6 Depreciation – Leased assets ...... 64 64 0.0 Discontinued operations ...... — (72) 100.0 Amortisation of intangible assets (software and licences)...... 115 94 22.3

Total depreciation and amortisation – continuing operations ...... 4,779 3,798 25.8

Depreciation and amortisation from continuing operations increased by 25.8 per cent. from R 3,798 million in Financial Year 2008 to R 4,779 million in Financial Year 2009. This increase was principally attributable to the increased depreciation associated with increased spending with respect to the Capital Expenditure Programme as well as the revaluation of port facilities and the pipeline networks.

Impairment of Assets Impairment of assets increased by 111.8 per cent. from R 153 million in Financial Year 2008 to R 324 million in Financial Year 2009. The increased impairment of assets was principally attributable to damage to rolling stock as a result of derailments in Transnet Freight Rail in Financial Year 2009.

Dividends Received Dividends received decreased from R 122 million in Financial Year 2008 to nil in Financial Year 2009. In Financial Year 2008, Transnet received a dividend from its investment in the C-class Preference Shares which did not recur in Financial Year 2009.

Fair Value Adjustments Fair value adjustments amounted to R 1,416 million in Financial Year 2008 and R 941 million in Financial Year 2009. This change was principally attributable to the mark-to-market of certain derivative instruments used to manage the risks relating to imports of locomotives, port cranes and dredgers as well as fair value adjustments in respect of investment properties.

Income/(loss) from Associates and Joint Ventures There was a loss of R 59 million from associates and joint ventures in Financial Year 2008 which related primarily to the investment in Transpoint Properties (Pty) Limited. The amount was recovered in Financial Year 2009 resulting in income from associates and joint ventures of R 82 million.

Finance Costs Finance costs decreased by 17.1 per cent. from R 2,692 million in Financial Year 2008 to R 2,233 million in Financial Year 2009. This decrease was principally attributable to the capitalisation of borrowing costs under IAS 23 Borrowing Costs despite the effect of increased amounts of borrowing to fund projects included in the prior capital expenditure programme. Borrowing costs for Financial Year 2009 amounted to R 764 million compared to R 303 million in Financial Year 2008.

Finance Income Finance income decreased by 64.9 per cent. from R 761 million in Financial Year 2008 to R 267 million in Financial Year 2009. This decrease is directly attributable to the decrease in cash that has been used to fund projects included in the Capital Expenditure Programme.

60 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Taxation The Group’s taxation from continuing operations decreased by 36.6 per cent. from R 2,642 million in Financial Year 2008 to R 1,674 million in Financial Year 2009. This decrease in taxes paid was primarily attributable to a year on year increase in taxation exempt income. The Group’s effective tax rate for continuing operations decreased to 24.9 per cent. in Financial Year 2009, compared to 29.1 per cent. in Financial Year 2008. The decrease in effective tax rate can be attributed to the decrease in the statutory tax rate from 29 per cent. in Financial Year 2008 to 28 per cent. in Financial Year 2009, a 1.7 per cent. decrease in rate due to an increase in non-taxable income, and adjustments for prior year deferred taxation charges, partially off-set by increased capital gains tax.

(Loss)/profit from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments Loss from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairment decreased from R 1,921 million in Financial Year 2008 to R 516 million in Financial Year 2009. This was principally attributable to the disposal of freightdynamics, Viamax (Pty) Limited and VAE Perway (Pty) Limited in Financial Year 2008 compared to South African Express Airways (Pty) Limited, Shosholoza Meyl and Autopax Passenger Services (Pty) Limited in Financial Year 2009. These disposals were part of Transnet’s planned divestment of non-core businesses.

Profit for the Year The profit of R 4,528 million for Financial Year 2009 is a decrease of 0.04 per cent. when compared to the R 4,530 million for Financial Year 2008.

Results of Operations for the Years Ended 31 March 2008 and 2007 Revenue Revenue increased by 11.9 per cent. from R 26,899 million in Financial Year 2007 to R 30,091 million in Financial Year 2008. This increase was principally attributable to a weighted average tariff increase of 9.2 per cent. and a weighted average volume increase of 0.8 per cent. for the Group. Transnet Freight Rail made the most significant contribution in Financial Year 2008 to the Group’s external revenue (53 per cent. of the total), followed by Transnet National Ports Authority (21 per cent.), Transnet Port Terminals (16 per cent.), Transnet Pipelines and Transnet Rail Engineering (each with 4 per cent.). All of these divisions had increases in revenue year-on-year, but the principal contributing factors to the Group-wide increase in revenue were the increase in iron ore volumes transported by Transnet Freight Rail, the growth in container volume throughput and increased vessel calls at the ports, and increased operational efficiency at the Durban and Cape Town container terminals. Transnet Freight Rail’s segment total revenue increased by 13.9 per cent. from R 14,574 million in Financial Year 2007 to R 16,598 million in Financial Year 2008. This increase was principally attributable to an average increase of 8.5 per cent. in tariffs in the latter period which were off-set in part by marginal decreases in volumes transported. These volume decreases were due principally to lack of availability of coal for transport because of coal mine production problems and power outages at the mines and lower than contracted volumes of iron ore principally attributable to Sishen Iron Ore’s failure to deliver product to the rail network. Transnet Rail Engineering’s segment total revenue increased by 11.5 per cent. from R 7,317 million in Financial Year 2007 to R 8,156 million in Financial Year 2008. This increase was principally attributable to the increase in revenue from external customers, namely PRASA, for the refurbishment of its coaches. The increase also reflected the first full-year effect of the inclusion within Transnet Rail Engineering of revenue associated with the maintenance depots. Increased revenue in this division was principally attributable to an increase in activity by the division but was also supported by a year-on-year increase in the average tariff received. Transnet National Ports Authority’s segment total revenue increased by 12.0 per cent. from R 6,107 million in Financial Year 2007 to R 6,842 million in Financial Year 2008. This increase was principally attributable to an increase in container export and import volumes (which are the object of port tonnage charges) in Financial Year 2008 as well as the increased number of vessel calls at Transnet National Ports Authority’s ports. The increase was also aided by a year-on-year increase in the tariff received.

61 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet Port Terminals’ segment total revenue increased by 18.2 per cent. from R 4,097 million in Financial Year 2007 to R 4,844 million in Financial Year 2008. This increase was principally attributable to increased container volume throughput and storage revenue, increased operational efficiency at the Durban and Cape Town container terminals, as well as the part-year effect in Financial Year 2008 of the new Pier 1 container terminal in Durban, which became fully operational in November 2007. The impact of these items was off-set in part by decreases in break-bulk (particularly steel and cement) and automotive (principally attributable to delays in a customer’s export plans) volumes year-on-year. In addition to volume increases year-on-year, Transnet Ports Terminals also benefited from an increase in the average tariff in Financial Year 2008. Transnet Pipelines’ segment total revenue increased by 6.1 per cent, from R 1,218 million in Financial Year 2007 to R 1,292 million in Financial Year 2008. This increase was principally attributable to the volume increase in Financial Year 2008. The increase was off-set in part by lower real prices in Financial Year 2008 because the proposed tariff increase (reflecting inflation and other increases) was not granted by the regulator. The Other division’s segment total revenue increased by 39.0 per cent. from R 1,674 million in Financial Year 2007 to R 2,327 million in Financial Year 2008. This increase was principally attributable to increased rental income from the properties division.

Net Operating Expenses Excluding Depreciation and Amortisation The table below sets forth the principal components of the Group’s net operating expenses excluding depreciation and amortisation for the Financial Years indicated. Year ended 31 March 2008 2007 (Restated) (Restated) Variation (R millions) (per cent.) Net operating expenses excluding depreciation and amortisation Personnel costs...... 7,938 7,663 3.6 Energy costs ...... 2,564 2,524 1.6 Operating leases ...... 1,179 991 19.0 Material costs ...... 1,098 319 244.2 Managerial and technical consulting fees ...... 1,014 765 32.5 Other ...... 3,488 3,970 (12.1) Total...... 17,281 16,232 6.5

Net operating expenses from continuing operations (excluding depreciation and amortisation) increased by 6.5 per cent. from R 16,232 million in Financial Year 2007 to R 17,281 million in Financial Year 2008. This percentage increase was less than the percentage increase of 11.9 per cent. in Group revenue, reflecting principally the implementation of cost-cutting measures pursuant to the Group’s strategy. Personnel costs increased by 3.6 per cent. from R 7,663 million in Financial Year 2007 to R 7,938 million in Financial Year 2008, which was broadly in line with inflation as measured by CPI in the Republic of South Africa. Energy costs increased by 1.6 per cent. from R 2,524 million in Financial Year 2007 to R 2,564 million in Financial Year 2008, which was principally attributable to the rising cost of oil, gas and diesel fuel over the same period and the increased reliance on diesel fuel for locomotives in the second half of Financial Year 2008. This increase was off-set in part by lower usage due to improved efficiency. Expenses related to operating leases increased by 19.0 per cent. from R 991 million in Financial Year 2007 to R 1,179 million in Financial Year 2008. This increase was principally attributable to increased pricing related to operating leases and additional operating leases contracted for. Material costs increased by 244.2 per cent. from R 319 million in Financial Year 2007 to R 1,098 million in Financial Year 2008. This increase was principally attributable to increased prices of steel and increased activity levels and backlog maintenance on rolling stock and infrastructure.

62 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Depreciation and amortisation The table below sets forth the principal components of the Group’s depreciation and amortisation for the Financial Years indicated. Year ended 31 March

2008 2007 (Restated) (Restated) Variation

(R millions) (per cent.) Depreciation and amortisation Depreciation – Owned assets at historic cost ...... 3,370 2,618 28.7 Depreciation – Owned assets including revalued portion ...... 342 244 40.1 Depreciation – Leased assets ...... 64 80 (20.0) Total depreciation from discontinued operations...... (72) (71) 1.4 Amortisation of intangible assets (software and licences)...... 94 81 16.0

Total depreciation and amortisation – continuing operations ...... 3,798 2,952 28.7

Depreciation and amortisation from continuing operations increased by 28.7 per cent. from R 2,952 million in Financial Year 2007 to R 3,798 million in Financial Year 2008. The increase was principally attributable to spending under projects included in the Group’s Capital Expenditure Programme and revaluations of the Group’s port facilities and pipeline networks. The Group expects depreciation from continuing operations to increase further with the increased spending and capitalised borrowing costs associated with the Group’s Capital Expenditure Programme. See ‘‘Business – Capital Expenditure Programme,’’ ‘‘– Liquidity and Capital Resources – Capital Expenditure’’ and ‘‘– Significant Factors Affecting the Group’s Financial Condition and Results of Operations – Capital Expenditure Programme’’. Impairment of assets Impairment of assets decreased by 34.1 per cent. from R 232 million in Financial Year 2007 to R 153 million in Financial Year 2008. This decrease was principally attributable to the impairment of rolling stock and containers which did not recur in Financial Year 2008. Dividends received Dividends received increased from R 36 million in Financial Year 2007 to R 122 million in Financial Year 2008. This increase was principally attributable to dividends received on redemption of the C-Class Preference Share. Fair Value Adjustments Fair value adjustments from continuing operations decreased by 42.5 per cent. from R 2,462 million in Financial Year 2007 to R 1,416 million in Financial Year 2008. In Financial Year 2007, the fair value adjustment of R 2,462 million arose mainly from the marking-to-market of the C-Class Preference Share (marked-to-market at an increase of R 1.7 billion). This share was redeemed in Financial Year 2008, contributing to the significant decrease year-on-year. The decrease was off-set in part by the fair value adjustment of investment property held by the Group and which increased in value year-on-year in line with property prices. Income/(loss) from associates and joint ventures There was income of R 2 million from associates and joint ventures in Financial Year 2007 and a loss of R 59 million from associates and joint ventures in Financial Year 2008. Finance Costs Finance costs increased by 8.9 per cent. from R 2,472 million in Financial Year 2007 to R 2,692 million in Financial Year 2008. This increase reflected increased levels of borrowing which were off- set in part by borrowing costs which were capitalised. Finance Income Finance income from continuing operations increased by 311.4 per cent. from R 185 million in Financial Year 2007 to R 761 million in Financial Year 2008. This increase reflected the increase in interest received on loans and receivables in the latter period as well as interest received on the

63 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS proceeds of R 5.6 billion from the disposal in the latter period of the C-class Preference Share of Newshelf 697 (Pty) Limited. Taxation The Group’s taxation from continuing operations increased by 51.7 per cent. from R 1,742 million in Financial Year 2007 to R 2,642 million in Financial Year 2008. The effective tax rate for the Group increased to 29.1 per cent. in Financial Year 2008, compared to 23.3 per cent. in Financial Year 2007. The increase in the effective tax rate is primarily due to a 7.0 per cent. decrease in non-taxable income in 2008. (Loss)/profit from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments There was a profit of R 921 million from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments in Financial Year 2007, while there was a loss of R 1,921 million in Financial Year 2008. This change was principally attributable to the profit realised on the disposal of the V&A Waterfront in Financial Year 2007 and the losses from discontinued rail services (Shosholoza Meyl and Luxrail) and the impairments in the discontinued rail and road segments (Shosholoza Meyl and freightdynamics) in Financial Year 2008. Profit for the Year Profit for the year decreased by 32.0 per cent. from R 6,657 million in Financial Year 2007 to R 4,530 million in Financial Year 2008.

Liquidity and Capital Resources Liquidity The Group’s principal sources of liquidity over the last three years have been operating cash flows, borrowings and proceeds from the sale of non-core assets and discontinued operations. Over the next three years, the Group anticipates that it will continue to rely on operating cash flows and borrowings for liquidity, with a potential increased reliance on borrowings. Transnet believes that its operating cash flows and borrowings will be sufficient to meet its foreseeable requirements in Financial Year 2010. Working Capital and Indebtedness The Group’s funding base is comprised principally of short- and long-term borrowings as well as equity. The Group’s outstanding borrowings at 31 March 2009 were as follows: As at Total borrowings by lender 31 March 2009

(R millions) South African lending banks ...... 10,875 International lending banks ...... 390 Various holders of Transnet bonds and commercial paper, widely held, and traded(1).... 25,619 Other...... 129

Total borrowings...... 37,013

(1) As at 31 March 2009, includes bonds held at amortised cost of R 18,814 million, bonds held at fair value of R 466 million, and commercial paper of R 6,339 million. The aggregate total borrowings at 30 September 2009 were R 42,957 million.

64 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Bonds The Transnet borrowings listed above include the following bonds in issue as at 31 March 2009:

Coupon Carrying Nominal Bond Maturity Date Rate value value

(per cent.) (R millions) Domestic Rand Bonds T011(1) ...... 1 April 2010 16.50 1,089 1,050 T018(1) ...... 15 July 2014 10.75 6,086 6,000 TN17...... 14 November 2017 9.25 4,829 5,042 TN23...... 6 November 2023 10.80 1,062 1,050 TN27...... 14 November 2027 8.90 2,772 2,942

15,838 16,084

Eurorand Bonds Euro 42(1)...... 18 April 2028 13.50 1,952 2,000 Euro 42A(1) ...... 30 March 2029 10.00 1,024 1,500

2,976 3,500

Total bonds ...... 18,814 19,584

(1) These domestic Rand bonds and Eurorand bonds are guaranteed by the Government and Transnet paid R 19.2 million in guarantee fees (2008: R 19.2 million). The TN17, TN23 and TN27 bonds are not guaranteed. The aggregate total nominal value of bonds as at 30 September 2009 was R 24,870 million.

Short-term borrowings Short-term borrowings decreased by 45.5 per cent. from R 7,255 million as at 31 March 2009 to R 3,952 million as at 30 September 2009. This decrease was principally attributable to the repayment of Transnet’s short-term commercial paper borrowings that matured during the six months ended 30 September 2009.

65 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Long-term borrowings Long-term borrowings increased by 31.07 per cent. from R 29,758 million as at 31 March 2009 to R 39,005 million as at 30 September 2009. The increase was principally attributable to the issuance of Rand denominated bonds, funds from the Domestic Medium Term Note Programme and domestic club loans, the proceeds of which were principally used to fund the Capital Expenditure Programme. The following table summarises the Group’s long-term and short-term borrowings as at 30 September 2009 and 30 September 2008:

As at 30 September

2009 2008

(R millions) Unsecured Rand denominated bonds ...... 23,734 15,481 Other unsecured liabilities ...... 9,833 — Unsecured foreign currency denominated loan...... 1,976 67 Secured loans and capitalised leases ...... 3,537 3,927

Total long-term borrowings including current portion ...... 39,080 19,475

Current portion of long-term borrowings redeemable within one year transferred to short-term borrowings ...... 75 68 Short-term borrowings ...... 3,877 7,262

Total short-term borrowings ...... 3,952 7,330

Future funding The Group has planned capital expenditure of R 80.5 billion (excluding capitalised borrowing costs of R 7.1 billion) from the beginning of Financial Year 2010 over the next five financial years that will require the raising of substantial amounts of additional funding/borrowings. Management expects capital commitments to be financed by cash from operations, together with domestic and international issues of commercial paper, bonds and loans, export credit agency-backed finance and project financing. See ‘‘– Capital Expenditure’’ and ‘‘Business – Capital Expenditure Programme’’. Currently, Transnet plans to fund a portion of this capital expenditure through indebtedness, a large part of which is planned to be borrowed in the domestic market under the Domestic Medium Term Note Programme. Transnet also plans to fund a portion of this capital expenditure through issuances under the global medium term note programme established by this Base Prospectus. See ‘‘– Use of Proceeds’’. Transnet has also established a loan facility with Export Credit Agencies to facilitate cost-effective and flexible funding for imported plant and equipment. As at 30 September 2009, Transnet had undrawn borrowing facilities of R 36.2 billion, of which R 3.6 billion was committed and available to fund working capital.

66 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Cash Flows Cash flows for the six months ended 30 September 2009 and 2008 and for Financial Years 2009, 2008 and 2007 The following table sets forth the Group’s cash flow activity for the six months ended 30 September 2009 and 2008 and for Financial Years 2009, 2008 and 2007.

Six months ended 30 September Year ended 31 March

2008 2007 2009 2008 2009 (Restated) (Restated)

(R millions) Cash flows from operating activities ...... 5,278 3,176 7,400 10,287 8,941 Cash flows used in investing activities ...... (10,611) (8,580) (19,084) (8,250) (10,345) Cash flows from financing activities ...... 5,963 1,417 11,587 9 3,669

Net increase/(decrease) in cash and cash equivalents...... 630 (3,987) (97) 2,046 2,265 Cash and cash equivalents at the beginning of the year...... 5,905 6,589 6,002 3,956 1,691

Total cash and cash equivalents at the end of the period ...... 6,535 2,602 5,905 6,002 3,956

Cash flows from discontinued operations Cash flows from operating activities...... — 17 36 634 995 Cash flows used in investing activities...... — (77) (193) (466) (374) Cash flows from/(used in) financing activities ...... — 58 154 (376) 198

Net decrease in cash and cash equivalents from discontinued operations...... — (2) (3) (208) 819

Cash flows from operating activities Net cash flows from operating activities for the six months ended 30 September 2009 were R 5,278 million, an increase of 66.18 per cent. from R 3,176 million for the six months ended 30 September 2008. This increase was principally attributable to a decrease in working capital outflows resulting from improved working capital management in the six months ended 30 September 2009 compared to the six months ended 30 September 2008. The working capital management in the periods under review improved in part because the Group’s trade receivables reduced, due to tighter debtor repayment deadlines, which, in turn, resulted in faster repayment periods for trade receivables. Net cash flows from operating activities for Financial Year 2009 amounted to R 7,400 million, a decrease of 28.1 per cent. from R 10,287 million for Financial Year 2008. This decrease was principally attributable to an increase in working capital in the latter period resulting mainly from increased trade and other receivables, and decreased payables. The increase in trade receivables was due to Transnet Freight Rail’s recognition of a coal tariff increase subsequent to the signing of contracts with customers of R 912 million and a R 500 million reimbursement of operating costs from PRASA. These accounts were settled post year end. The focus on maintenance programmes, especially in the Transnet Freight Rail division, also resulted in increased holding of inventories.

67 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Net cash flows from operating activities for Financial Year 2008 amounted to R 10,287 million, an increase of 15.1 per cent. from R 8,941 million in Financial Year 2007, due mainly to the increase in adjusted EBITDA and the positive impact of changes in working capital, reflecting the improvement in the Group’s productivity, cost control and working capital management.

Cash flows used in investing activities Cash used in investing activities for the six months ended 30 September 2009 was R 10,611 million, an increase of 23.67 per cent. from R 8,580 million for the six months ended 30 September 2008. This increase was due to increased capital expenditure in relation to the Capital Expenditure Programme. In both periods, capital expenditure was incurred pursuant to projects included in the Capital Expenditure Programme.

Cash used in investing activities for Financial Year 2009 amounted to R 19,084 million, an increase of 131.3 per cent. from R 8,250 million for Financial Year 2008. In both periods, capital expenditure was made pursuant to projects included in Transnet’s Capital Expenditure Programme but in the earlier period, this expenditure was off-set in part by proceeds from the early redemption by Newshelf 697 (Pty) Limited (a subsidiary of Transnet) of the C-class Preference Share for R 5,622 million and the sale of Transnet’s Homeowners Loan Book of R 1.4 billion. In Financial Year 2009, R 8,498 million was spent to maintain infrastructure and equipment and R 10,884 million was spent to expand capacity. See ‘‘Capital Expenditure Programme’’ below.

Cash flows used in investing activities amounted to R 8,250 million for Financial Year 2008 as compared to R 10,345 million in Financial Year 2007. In both years, cash was principally used for the expansion of operations as well as for the maintenance of existing infrastructure as part of an earlier capital expenditure programme (see ‘‘Capital Expenditure Programme’’). Cash used in investment activities in Financial Year 2008 was off-set in part by cash from the early redemption by Newshelf 697 (Pty) Limited (a subsidiary of Transnet) of the C-Class Preference Share for R 5,622 million as well as by the disposal of non-core assets which resulted in less cash used in investing activities in Financial Year 2008 than in Financial Year 2007.

Cash flows from financing activities Cash from financing activities for the six months ended 30 September 2009 was R 5,963 million, an increase of 320.82 per cent. from R 1,417 million for the six months ended 30 September 2008. This increase is principally attributable to increased borrowings under the Domestic Medium Term Note Programme to support the funding of projects included in the Capital Expenditure Programme and reduced repayments of borrowings.

Cash from financing activities for Financial Year 2009 amounted to R 11,587 million, while R 9 million was used for financing activities for Financial Year 2008. This change was principally attributable to a substantial increase in net borrowings under the Domestic Medium Term Note Programme to support the funding of projects included in the Capital Investment Programme.

Net cash flows from financing activities were R 9 million in Financial Year 2008 as approximately equal amounts of borrowings were raised as were repaid in that period. In Financial Year 2007, net cash flows from financing activities amounted to R 3,669 million. The cash flows from financing activities in Financial Year 2007 was principally attributable to the increase in borrowings under Transnet’s commercial paper programme.

Capital Expenditure Programme Capital expenditure amounted to R 11,674 million in Financial Year 2007 and R 15,780 million in Financial Year 2008. A further R 19,382 million was spent in Financial Year 2009. Of the R 19,382 million in Financial Year 2009, R 8,498 million was spent to maintain infrastructure and equipment and R 10,884 million was spent to expand capacity.

The Capital Expenditure Programme is currently focused on the following key projects:

Rail: Expansion of the iron ore export channel and coal export line; acquisition of 406 locomotives and the upgrading of rolling stock and infrastructure; and the acquisition of locomotives for general use;

68 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Ports: Widening and deepening of the Durban harbour entrance channel; reconstruction of Maydon Wharf in Durban; equipping and reengineering Durban Container Terminal and expanding and equipping the Cape Town Container Terminals; upgrade of equipment for the Saldanha iron ore terminal; construction of the Ngqura Container Terminal; increase capacity at the Durban Car Terminal; and Pipeline: Construction of the NMPP from Durban to Jameson Park in Gauteng. The NMPP is anticipated to consist of 550 kilometres of 24 inch pipeline between Durban and Jameson Park in Gauteng and 170 kilometres of 16 inch pipeline for the inland network. Through the NMPP, Transnet Pipelines aims to decrease the volume of road traffic and improve security of petroleum product supply to the inland market. Transnet’s current Capital Expenditure Programme provides for Transnet’s continuing operations to invest R 80.5 billion over the next five Financial Years commencing with Financial Year 2010 (excluding capitalised borrowing costs of R 7.1 billion) on key corridors and sectors. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. R 57.7 billion is planned to be spent in the three financial years ending 31 March 2012 and relates mainly to the upgrade and expansion of rail, port facilities and pipeline networks. Management expects capital commitments to be financed by cash from operations, together with domestic and international issues of commercial paper, bonds and loans, export credit agency-backed finance and project financing. See also ‘‘Business – Capital Expenditure Programme’’. As a result of the Group’s Capital Expenditure Programme, the Group expects its funding requirements over the three financial years from Financial Year 2010 to Financial Year 2012 to amount to approximately R 30.3 billion.

Contractual Obligations and Commercial Commitments The following table sets forth the Group’s contractual obligations and commercial commitments, excluding ordinary course trade payables, other payables and pension obligations, as at 31 March 2009.

Payments due by period

Less than More than Total 1 year 1-3 years 3-5 years 5 years

(R millions) Bonds(1)(5) ...... 43,295 2,200 5,309 3,814 31,972 Secured bank loans(1)(5) ...... 7,468 (190) 1,199 2,508 3,951 Unsecured bank loans(1)(5)...... 10,607 444 8,045 547 1,571 Commercial paper(1)(5) ...... 7,568 6,640 928 — — Other borrowings(5) ...... 49 49 — — — Derivative financial liabilities(3)(5).... 192 149 43 — — Capital commitments(3)(5)...... 25,634 10,372 12,031 2,927 304 Finance leases(5) ...... 73 7 4 2 60 Operating lease obligations(5) ...... 1,532 487 573 216 256

Total(2)(3)(4)(5) ...... 96,418 20,158 28,132 10,014 38,114

(1) These borrowings include interest costs. For debt obligations with variable interest rates, future interest payments have been estimated using the current interest rate at 31 March 2009. Certain of these borrowings require the group to comply with restrictive debt covenants. These covenants include, but are not limited to, negative pledge and cross-default covenants as well as limitations on the incurrence of future indebtedness. While the Group does not anticipate a violation of these covenants, any violation of such covenants could result in the acceleration of these payments. (2) This table does not reflect: (i) outstanding purchase orders for products or services entered into in the normal course of business and (ii) pension obligations, due to the unpredictability of the timing of the payment. (3) Some of the amounts reflected in this table are denominated in a currency other than South African Rand, whereas this table is reflected in South African Rands translated at the 31 March 2009 exchange rate. As a result, any change in exchange rate between the currency of the underlying contract and the South African Rand will result in a change in these payments. (4) The table above does not include additional borrowings and contractual commitments entered into by the Group since 31 March 2009. As of 1 July 2009, the Group had incurred R7 billion of additional debt. (5) These amounts are undiscounted amounts of future cash flows and not carrying amounts.

69 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS It is anticipated that these contractual commitments will be financed by net cash flow from operations, together with domestic and international issues of commercial paper, bonds and loans, export credit-agency backed finance and project financing.

Contingent Liabilities Judicial Proceedings While no assurance can be given, Transnet does not expect to incur material losses in connection with existing legal proceedings to which Transnet is a party. As at 30 September 2009, Management estimated that contingent liabilities related to judicial proceedings involving Transnet as either defendant or plaintiff could amount to approximately, R 95 million. See also ‘‘Business – Litigation and Other Proceedings.’’

Provisions Short-term and long-term provisions include provisions for third-party claims, customer claims, leave pay, onerous contracts, decommissioning and other environmental liabilities, incentive bonuses, restructuring and other matters. Long-term provisions increased by 9.57 per cent. from R 2,509 million as at 31 March 2009 to R 2,749 million as at 30 September 2009. This increase was mainly attributable to an increase in the long term accumulated leave pay provision. Short-term provisions decreased by 2.41 per cent from R 2,279 million as at 31 March 2009 to R 2,224 million as at 30 September 2009. This increase was attributable to a decrease in the short-term portion of Transnet’s incentive bonus scheme.

Guarantees As of 30 September 2009, Transnet had provided guarantees of third-party liabilities in the amount of R 2,967 million. The most significant guarantee relates to a R 2.4 billion guarantee pertaining to a sale and leaseback with respect to Transnet Freight Rail locomotives used in the Republic of South Africa.

Off-Balance Sheet Arrangements Other than the contingent liabilities and guarantees discussed above, the Group does not have any off-balance sheet arrangements.

Qualitative and Quantitative Disclosure about Market Risk In the ordinary course of business, the Group is exposed to a variety of market risks arising from fluctuations in interest rates, commodity prices, exchange rates and other prices. The Group monitors and manages these risks as an integral part of its overall risk management programme, which recognises the unpredictability of financial markets and seeks to reduce their potentially adverse effects on its results. The Group has a centralised treasury function that controls all decisions and commitments regarding cash management, arrangement of borrowing facilities, banking relationships and foreign currency commitments. It is responsible for the management of financial risks and has responsibility for funding of the Group. Financial risk assessment and analysis are disclosed on a monthly basis to the Group Finance Committee and the Group Executive Committee. These committees are responsible for reporting financial risk exposures to the Board of Directors on a bi-monthly basis. The Group’s treasury policies are contained in a Board of Directors-approved financial risk management framework designed to identify, monitor and appropriately manage the financial, operational, and strategic risks applicable to the Group’s funding, trading and investment activities and to monitor its compliance with the Group Enterprise-wide Risk Management Framework, the Public Finance Management Act 1 of 1999, as amended (the ‘‘Public Finance Management Act’’) and other applicable regulations. Given the nature of the Group’s business and its Capital Expenditure Programme, it is not always possible to avoid risk. However, the Group does not use financial instruments for trading or speculative purposes.

70 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Foreign Currency Risk Foreign currency risk arises mainly as a result of the Group’s imports under capital and operational expenditure programmes, where goods are imported from foreign countries and the Group is exposed to currency fluctuations as a result of its payment obligations in foreign currencies. Indirect foreign currency risk arises as a result of imports by local suppliers, resulting in fluctuating Rand payments, as well as the inherent foreign currency component in fuel risk exposures. It is the Group’s preference to enter into Rand-based financing contracts, if this can be achieved at an acceptable cost. Transnet seeks to hedge all foreign currency risk exposures arising from its supply contracts or other contracts within the framework approved by The Board of Directors. The Group’s net foreign currency position is monitored on a monthly basis by obtaining the net foreign currency position in all the major currencies (including U.S. Dollar, Euro, Pounds Sterling and Japanese Yen). Foreign currency risk exposures are fully hedged until maturity after careful consideration and analysis of the tax and accounting implications. Hedge accounting is applied wherever possible to minimise income statement volatility. The Group’s net long (short) foreign currency risk exposures as at 31 March 2009 and 31 March 2008 are as follows (expressed in notional amounts). 31 March 2009 31 March 2008

Other Other currencies currencies expressed expressed USD(1) JPY(2) EUR(3) AUD(4) in USD USD(1) JPY(2) EUR(3) AUD(4) in USD

(in millions of currency) Secured bank loans ...... (11) — — — — (17) — — — — Unsecured bank loans ...... — — — — — — (355) — — — Brazil equity investment .... 16————16———— Gross balance sheet exposure ...... 5 — — — — (1) (355) — — — Exposures for future expenditure ...... (25) (27,634) (159) (2) — (116) (27,462) (190) — (5) Gross foreign currency exposure ...... (20) (27,643) (159) (2) — (117) (27,817) (190) — (5) Forward exchange contracts and currency options...... 13 27,643 127 — — 2 27,817 166 — 4 Cross currency swaps...... 11————17————

Net uncovered exposure 4 9 (32) (2) — (98) — (24) — (1)

(1) The mid-rates of exchange of the U.S. Dollar against the Rand used for conversion purposes were 9.5187 at 31 March 2009 and 8.1085 at 31 March 2008. (2) The mid-rates of exchange of the Japanese Yen against the Rand used for conversion purposes were 10.2817 at 31 March 2009 and 12.3019 at 31 March 2008. (3) The mid-rates of exchange of the Euro against the Rand used for conversion purposes were 12.8274 at 31 March 2009 and 12.6355 at 31 March 2008. (4) The mid-rates of exchange of the Australian Dollar against the Rand used for conversion purposes were 6.6450 at 31 March 2009 and 7.3958 at 31 March 2008.

The table below shows the impact on profit and loss of a stronger and weaker Rand for the Group as a result of fair value movements of cross currency interest rate swaps and forward exchange contracts as at 31 March 2009 and 31 March 2008.

71 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 31 March 2009 31 March 2008

Impact Impact of Impact of Impact of Currency of Rand Rand Currency Rand Rand Currency exposure Fair value strengthening weakening exposure Fair value strengthening Weakening

(in millions (in millions of currency) (R millions) (R millions) (R millions) of currency) (R millions) (R millions) (R millions) EUR...... 50 6 (182) 182 67 148 (121) 121 JPY...... 9 120 (0.5) 0.5 1,651 118 (28) 28 USD Group 13 (23) (55) 55 21 (55) (28) 28

The table below shows the impact on profit and loss of a stronger and weaker Rand for the Group as a result of fair value movements of foreign currency options as at 31 March 2008 and 31 March 2009. Weaker Rand and higher volatilities are based on a 95 per cent. confidence level, with a 100-basis point (bp) increase in interest rates. Stronger Rand and lower volatilities are based on a 95 per cent. confidence level, with a 100-basis point (bp) decrease in interest rates.

31 March 2009 31 March 2008

Nominal Weaker Stronger Nominal amount of Rand: Rand: amount of options Fair market Impact of Impact of options Fair market Impact of Impact of Currency currency/m value profit (loss) profit (loss) currency/m value profit (loss)(1) profit (loss)(2)

(R millions)(R millions) AUD...... ———— 2 2 1(1) EUR...... 21 43 60 (61) 64 153 51 (49)

Total...... 21 43 60 (61) 66 155 52 (50)

Value-at-risk Transnet uses Value-at-risk (‘‘VaR’’) to calculate the maximum pre-taxation loss expected on a position held over a 90-day horizon given a 95 per cent. confidence level. The methodology is a statistically defined, probability-based approach that takes into account market volatilities relative to a position held. The value at risk as at 30 September 2008 was R 116.4 million and as at 30 September 2009 was R 18.7 million. The calculation of VaR involves a number of assumptions and approximations. While management believes that these assumptions and approximations are reasonable, there is no uniform industry methodology for estimating VaR, and different assumptions and/or approximations could produce materially different VaR estimates. The Group uses historical simulation and the model assumes that historical patterns will repeat into the future. Given the Group’s reliance on historical data, VaR is most effective in estimating risk exposures in markets in which there are no sudden fundamental changes or shifts in market conditions. An inherent limitation of VaR is that past changes in market risk factors, even when weighted toward more recent observations, may not produce accurate predictions of future market risk. VaR should be evaluated in light of the methodology’s limitations. Commodity price risk Commodity price risk refers to the potential variability in the Group’s financial condition owing to changes in commodity prices such as Brent crude oil, steel, iron ore and others. Only fuel risk exposures are actively monitored on a regular basis and are hedged in terms of the Board- authorised frameworks.

72 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The table below shows the cash flow at-risk scenarios against budget at various levels of Brent crude and USD/ZAR ($/Rand) exchange rates for the Financial Year 2009.

Cash flow at risk (negative: excess against budget)

Fuel price in dollars per barrel $/R 5.26 $/R 7.50 $/R 9.52 $/R 13.76 $/R 15.00

(R millions) Brent @ $28 ...... 817 719 630 444 390 Brent @ $53 ...... 612 426 259 (94) (196) Brent @ $78 ...... 406 133 (113) (633) (782) Brent @ $100 ...... 223 (128) (445) (1,112) (1,304)

Interest rate risk The Group’s cash flow interest rate risk arises from long-term borrowings issued at variable rates. The Group measures interest rate risk using repricing/maturity gaps and by analysing the impact of standardised interest rate shocks. The Group manages its exposure to interest rate risk by maintaining Board of Directors-approved ratios of floating rate exposures versus fixed rate exposures and seeking to reduce the weighted average cost of debt. The Group’s exposures to fixed and floating interest rates on its domestic financial liabilities as at 31 March 2009 and 31 March 2008 were as follows: 31 March

2009 2008

(R millions) Fixed rate liabilities ...... (27,764) (19,225) Floating rate liabilities ...... (10,088) (5,218)

Total ...... (37,852) (24,443)

The above table excludes liabilities carried at fair value of R 611 million as at 31 March 2009 and R 1,701 million as at 31 March 2008.

In addition, the Group was exposed to floating interest rates on its foreign currency financial liabilities in the amount of R 100 million as at 31 March 2009 compared to an exposure of R 140 million as at 31 March 2008. The full foreign currency loan portfolio has been swapped to a fixed Rand interest rate exposure.

The sensitivity analysis below has been determined based on the exposure to floating interest rates for both derivatives and non-derivative financial instruments as at the balance sheet dates shown. The analysis illustrates the possible impact on finance cost and profit and (loss) in the financial year commencing immediately after the balance sheet dates (i.e. Financial Years 2010 and 2009) as a result of changes in domestic interest rates. Similar shifts are used internally when reporting interest rate risk to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. The sensitivities show the impact on profit and loss as a result of fair value movements at higher and lower domestic interest rates for the Group as at 31 March 2009 and 31 March 2008.

As at 31 March 2009 As at 31 March 2008 (with respect to Financial Year 2010) (with respect to Financial Year 2009)

Market Market Market Market Market Market Market Market value value value value value value value value shift at shift at shift at shift at shift at shift at shift at shift at 100 bp 100 bp 200 bp 200 bp 100 bp 100 bp 200 bp 200 bp Financial instrument increase decrease increase decrease increase decrease increase decrease

Finance cost impact (increase) for the remainder of the financial year against budget for new and existing debt ...... (68) 68 (135) 137 (35) 35 (70) 71 Fair value movements on floating rate debt...... (9) 10 (16) 21 (3) 4 (5) 8

73 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The impact on profit and loss of higher and lower foreign interest rates on the Group at 31 March 2009 was not significant. The sensitivity analysis was performed by doing non-parallel shifts of the swap curve (plus/minus 100 and 200 basis points). The sensitivity ranges utilised are based on historical trends. The above tables assume no change in other variables.

Other price risk The Group is exposed to equity price risk. At 31 March 2009, the quoted value of the Group’s equity investment in Spoornet DO Brazil Limited. was R 149 million compared to R 126 million as at 31 March 2008. Management believes that the foreign exchange exposures on this investment are significantly greater than that of equity price risk and as such the sensitivity for this investment has been included in the foreign currency risk net position and VaR calculations.

Critical Accounting Policies The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of equity, assets and liabilities, revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Judgements made by management in the application of IFRS that have a significant effect on the Group’s financial statements and estimates with a significant risk of material adjustment in the next year are discussed below. Critical judgements made by Transnet’s Board of Directors in applying accounting policies and key sources of estimation or uncertainty are detailed below:

Property, plant and equipment (PPE)

Revaluation and impairment of PPE Port operating assets (Transnet Port Terminals), pipeline networks (Transnet Pipelines) and port infrastructure assets (Transnet National Ports Authority) are carried at revalued amounts. Formal revaluations are performed every three years by independent experts for all asset classes. Appropriate indices as determined by the independent experts continue to be applied in the intervening periods to confirm that the assets are carried at fair value at the balance sheet date. Fair value as determined by the independent experts is derived by applying internationally acceptable and appropriately benchmarked valuation techniques such as depreciated optimised replacement cost or modern equivalent asset valuation methods which are dependent on the asset class being revalued.

IAS 16: Property Plant and Equipment requires that the carrying value of PPE exceed its recoverable amount based on the future cash flows. Consequently all asset classes that are subject to a revaluation was tested against a discounted cash flow model to confirm that the carrying value of assets were recoverable.

In addition as required by IAS 36: Impairment of Assets an entity is required to assess at each reporting period whether there is any indication that an asset is impaired and if so the recoverable amount of these assets must be determined. In the current year the global economic crisis lead to indicators of impairment being identified with respect to rail assets (Transnet Freight Rail) and consequently the recoverable amount of these assets were determined by using a discounted cash flow model.

As with all discounted cash flow models various assumptions were made in order to derive the net present value of future cash flows. These assumptions were arrived at after wide consultation with subject matter experts, both internal and external, benchmarked with peer companies, compared to international trends and adjusted for local market conditions. The more critical assumptions made were as follows:

* Future cash flows were based on the five-year approved budgets, and operational plans and were amended for the latest available volume and pricing indicators as well as economic indicators;

74 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * The rate used to discount cash flows for purposes of determining value in use was the individual operating divisions post-tax weighted average cost of capital (‘‘WACC’’) as this could verify that the appropriate risk profile of the business was incorporated into the asset valuation; * The WACC rates used were 11.86 per cent. for Transnet National Ports Authority and Transnet Port Terminals, Transnet Pipelines 11.21 per cent. and Transnet Freight Rail 11.80 per cent. respectively; and * The cash flows utilised in the discounted cashflow analysis were estimated into perpetuity based on varying terminal year growth rates after year 15. The elements considered in developing the discounting period for the operating divisions were the long term use and asset life, long term funding arrangements and long term customer contracts. Based on the above, the carrying value of port infrastructure would have been adjusted from R 25.1 billion to R 40.2 billion (estimated replacement cost) at 31 March 2009, a proposed revaluation amount of R 15.1 billion. However this amount was limited to R 3.1 billion based on the recoverable amount of port infrastructure assets. In the case of all other classes of revalued assets their recoverable amount exceeded the carrying value. In addition no impairment of rail assets was recoded as the recoverable amounts exceeded the carrying value of these assets.

Sensitivities The table below sets forth the Group’s sensitivity analysis as of 31 March 2009:

Sensitivity Analysis

Port Port Infrastructure Operating Pipeline Assets Assets Network Rail Assets

Carrying value of assets per audited consolidated financial statements...... R 28.2 billion R 10.2 billion R 4.5 billion R 34.8 billion WACC 0.5 per cent. impact* ...... R 1.4 billion R 1.9 billion R 300 million R 1.2 billion Revenue 0.5 per cent. impact* ...... R 196 million R 370 million R 62 million R 1.5 billion

*Increasing/decreasing WACC or revenue by 0.5 per cent. will result in the carrying value of assets being adjusted by these values.

Useful lives and residual values In terms of IAS 16 the useful lives of property, plant and equipment must be reviewed at each balance sheet date. The useful lives are estimated by management based on historic analysis, benchmarking and other available information. In the current year, based on the recommendation of independent experts and international benchmarking the useful lives of certain port infrastructure assets were increased from 50 to 100 years. The residual values of property, plant and equipment are reviewed at each balance sheet date. The residual values are based on the assessment of useful lives and other available information.

Provisions Various assumptions are applied in arriving at the carrying value of provisions that are recognised in terms of the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. A provision for the estimated cost of rehabilitating the contamination caused by asbestos has been raised. This obligation arises from certain legislation that governs asbestos contamination. Transnet engaged external consultants to perform a countrywide asbestos risk assessment on areas affected by the historical spillage of asbestos and its related pollution liability. A number of factors were considered in determining the obligation which included: * the cost of remediation per running line kilometre; * the cost of yard remediation per hectare;

75 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * the estimated yard area to be remediated; * project administration and monitoring costs; * follow-up maintenance and inspection costs; and * the costs estimated for the removal and replacement of asbestos roof sheeting and cladding.

Fair value assumptions – investment properties The services of internal experts are used to arrive at the fair value of investment properties. Assumptions used in these valuations are in line with the Property Valuers Profession Act, 47 of 2000.

Special purpose entities Management has applied significant judgement in determining whether the substance of the relationship between the Group and a special purpose entity, SUBCO/Newshelf 697, indicates that the special purpose entity is controlled by the Group.

Valuation of C-class Preference Share The carrying value of the C-class Preference Share has been arrived at after utilising a model developed by an external valuer. Management has further applied judgement to the valuation obtained, taking into account factors pertaining to the realisation of the asset.

Qualifying hedge relationships The Group has fair value hedges in place. In designating financial instruments as qualifying hedge relationships, the Group has determined that it expects the hedge to be highly effective over the life of the hedging instrument. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in off-setting changes in fair values or cash flows of the hedged item.

Taxation Income taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current taxation The charge for current taxation is the amount of income taxes payable in respect of the taxable profit for the current period and any adjustment to taxation payable in respect of previous years. It is calculated using taxation rates that have been enacted or substantially enacted by the balance sheet date.

Deferred taxation Deferred taxation is provided using a balance sheet liability method on all temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and their taxation bases. The following temporary differences are not provided for: * the initial recognition of goodwill; * the initial recognition of assets and liabilities (other than in a business combination), which affect neither accounting nor taxable profit or loss; and * differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities and is calculated using the taxation rates that have been enacted or substantively enacted at the balance sheet date. Deferred taxation is charged or credited in the income statement except where it relates to items charged or credited directly to equity, in which case the deferred taxation is also dealt with in equity. A deferred taxation asset is recognised to the extent that it is probable that future taxable profits will be available to be utilised against the associated unused taxation losses and deductible temporary differences. Deferred taxation assets are reduced to the extent that it is no longer probable that the related taxation benefit will be realised.

76 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Deferred taxation liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and joint ventures, except where the Group is able to control the timing of the reversal of the temporary differences and it is probable that it will not reverse in the foreseeable future. Deferred taxation assets and liabilities are off-set when they relate to income taxes levied by the same taxation authority and the Group has the legal right to and intends to settle its current taxation assets and liabilities on a net basis. In terms of the measurement criteria set out in IAS 12: Income Taxes, Transnet has assessed their intention at balance sheet date on recovering an asset or liability to the extent that this intention influences the rate of tax to be applied in calculating deferred tax. In this regard, Transnet has recognised deferred tax as follows: Land As land is deemed to be realised through sale, there is no deferred tax effect on the difference between the Tax Base and the Original Cost of the land. Deferred tax is calculated on the difference between the Carrying Amount and the Capital Gains Tax (‘‘CGT’’) Base Cost at the CGT rate. Asset In Respect of Which No Tax Allowances Are Granted No deferred tax is raised in the case where neither the accounting nor tax profit are effected. Where the asset is revalued, deferred tax affects are calculated based on the intention of the entity. Where the intention is to sell the asset, deferred tax is raised at the CGT rate on the difference between the CGT Base Cost and the Revalued Carrying Amount. Where the intention is to use to asset, deferred tax is raised at the usage rate on the difference between the Tax Base and the Revalued Carrying Amount. Asset (Other Than Land) Recorded at Cost Where an asset is recorded using the cost model, and a tax allowance is available to be claimed against the asset, deferred tax is calculated on the excess of the Carrying Amount over the Tax Base at the full income tax rate. Asset (Other Than Land) Recorded at Revalued Amount – Intention to Use Assets recorded at revalued amounts, with the intention to use, are taxed in accordance with their intention. As the future benefits expected to flow from the use of the asset, deferred tax is calculated at the full income tax rate on the difference between the Tax Base and the Revalued Carrying Amount. Asset (Other Than Land) Recorded at Revalued Amount – Intention to Sell Where the intention is to recover the benefits of the asset through sale, deferred tax is calculated at the usage rate on the difference between the Tax Base and the Original Cost, and at the CGT rate on the difference between the CGT Base Cost and the Revalued Carrying Amount. Asset (Other Than Land) Recorded at Revalued Amount – Intention to both Use and Sell Where the intention is to recover the benefits of the asset through both use and sale, deferred tax is calculated to reflect this intention. Deferred tax is calculated at the usage rate (29 per cent.) on the difference between the Tax Base and the Original Cost, at the CGT rate (14.5 per cent.) on the difference between the CGT Base Cost and the Future Selling Price (residual value), and at the usage rate on the difference between the Future Selling Price and the Revalued Carrying Amount. Post-retirement benefit obligations Various assumptions, including those relating to mortality, demographics, discount rate, rate of return on assets and salary increases have been applied by management and the actuaries in the calculation of the post-retirement benefit obligations. Provisions Various assumptions are applied in arriving at the carrying value of provisions that are recognised pursuant to the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets. Management further relies on input from the Group’s lawyers in assessing the probability of matters of a contingent nature.

77 c101680pu030 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS BUSINESS

Overview Transnet is a public company with the Government as its sole Shareholder. As the operator and custodian of a major portion of the Republic of South Africa’s transport infrastructure Transnet is responsible for ensuring that a significant part of the country’s bulk freight transportation system operates according to world-class standards and as an integral part of the overall economy. Transnet is a focused freight transport company with a goal of delivering integrated, efficient, safe, reliable and cost-effective services. Transnet’s key mandate, as defined by the Shareholder Compact, is to assist in lowering the cost of doing business and to enable economic growth in the Republic of South Africa. Transnet seeks to promote economic growth in the Republic of South Africa by providing its customers with access to world-class integrated logistics solutions and by creating transport capacity ahead of demand. Transnet is funded through reserves and borrowings and does not receive cash subsidies from the Government. Transnet’s borrowings are based on the strength of its own balance sheet. Going forward, Transnet intends to borrow without Government subsidies and the Notes are not guaranteed by the Government. As a result, Transnet is required to earn an appropriate return on capital that will allow for the maintenance and expansion of the rail, port and pipeline infrastructure that it owns and operates while maintaining a strong balance sheet. Substantially all of Transnet’s revenues are generated in the Republic of South Africa. Over the past four financial years, Transnet has transformed from a diversified conglomerate into a focused rail, port and pipeline operator. Transnet has accomplished this through the sale, closure or transfer of non-core assets and businesses, which have been treated as discontinued operations for accounting purposes. Activities have been grouped into divisions according to major transport modes, with central support services unified under one brand. For operational and IFRS reporting purposes, Transnet is organised into the following five core business divisions: Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority, Transnet Port Terminals and Transnet Pipelines. The ‘‘Other’’ segment includes Transnet Property, Transnet Fuel Solutions, Transnet Capital Projects, Transnet Corporate Centre and Transnet Heritage Foundation. Transnet Freight Rail is focused on transporting bulk and containerised freight. Transnet Freight Rail transported 177 million tonnes of freight during Financial Year 2009 and 86.9 million tonnes of freight during the six months ended 30 September 2009. Transnet Rail Engineering consists of eight product-focused business units that provide services ranging from refurbishment, conversion and upgrades, to the manufacturing and assembly of rail- related rolling stock. Most of Transnet Rail Engineering’s sales are generated from sales to Transnet Freight Rail and PRASA (a separate state-owned entity and accordingly a related party under IFRS). Transnet National Ports Authority is responsible for the safe, efficient and effective economic functioning of the national ports system of South Africa, which Transnet National Ports Authority owns and manages in a landlord capacity on behalf of the Government. Transnet National Ports Authority is also a provider of port infrastructure and marine services at all seven fully operational commercial ports in the Republic of South Africa, and plans to provide the same services for the Port of Ngqura when it becomes fully operational. Transnet Port Terminals manages 16 cargo terminals situated across seven South African ports. It provides cargo handling services for container, bulk, break-bulk and automotive cargos. Transnet Pipelines transports a range of petroleum and gas products through approximately 3,000 km of underground pipelines traversing five provinces in the Republic of South Africa. For Financial Year 2009, the Group generated revenue of R 33,592 million, operating profit of R 8,602 million and profit for the year of R 4,528 million. For Financial Year 2008, the Group generated revenue of R 30,091 million, operating profit of R 11,083 million and profit for the year of R 4,530 million. In the six months ended 30 September 2009, the Group generated revenue of R 17,335 million, operating profit of R 3,353 million and profit for the period of R 1,274 million. In the six months ended 30 September 2008, the Group generated revenue of R 16,849 million, operating profit of R 3,922 million and profit for the period of R 1,661 million. Transnet’s current Capital Expenditure Programme provides for Transnet’s continuing operations to invest R 80.5 billion over the next five Financial Years commencing with Financial Year 2010

78 c101680pu040Proof18:26.1.10B/LRevision:0OperatorDavS (excluding capitalised borrowing costs of R 7.1 billion) on key corridors and sectors. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. The Group’s spending under the Capital Expenditure Programme for the six months ended 30 September 2009 (excluding capitalised borrowing costs) amounted to R 8.3 billion, with R 4.3 billion spent to maintain current infrastructure and equipment and R 4.0 billion spent on expanding capacity.

History and Development Transnet was formed in 1990 as a result of the transfer of the commercial enterprise of the South African Transport Services to Transnet as the country’s railway, harbour, road transport, aviation and pipeline operator. For Financial Year 2004, the Group recorded a consolidated loss of R 6,332 million under South African generally accepted accounting principles. In August 2004, Transnet adopted a Turnaround Plan focused on stabilising the business and creating a platform for growth. The stated goals of the Turnaround Plan were to: (i) redirect and reengineer the business in order to increase the efficiency and effectiveness of the core business units and realise synergies between the business units; (ii) focus on core business units, with non-core businesses sold or transferred to the Government; (iii) establish and adhere to high standards of corporate governance and improve the risk management framework; and (iv) introduce talent management as well as leadership development programmes, and performance and reward-based compensation initiatives with a view to transforming the culture and behaviour of employees. In August 2007, Transnet approved the Growth Strategy designed to build on the success of the Turnaround Plan. The four pillars of the Growth Strategy are (i) capital optimisation and financial management; (ii) human resource strategy, (iii) risk management with an emphasis on safety and effective governance; and (iv) re-engineering, integration, productivity and efficiency. See ‘‘– Strategy’’ below for further details regarding the Turnaround Plan and the Growth Strategy. Disposal of Non-core Assets and Discontinued Operations As part of the Turnaround Plan, Transnet identified non-core assets for disposal in areas including aviation (including Transnet’s shares in South African Airways), passenger rail services, telecommunications, pension fund obligation management, fleet management and housing loans. In Financial Year 2009, Transnet disposed of non-core assets with a carrying value at the time of sale of R 816 million. No non-core assets were disposed of in the six months ended 30 September 2009. Of the non-core assets originally identified for disposal, Transnet still retains ownership of non-core assets in information technology services and passenger rail services, which Transnet intends to dispose of in Financial Year 2010, and which have been classified as discontinued operations for accounting purposes and have an immaterial impact on the financial performance of the Group. See ‘‘Risk Factors – Transnet may be unable to divest itself of certain discontinued operations and related obligations’’ and ‘‘Operating and Financial Review – Significant Factors Affecting the Group’s Financial Condition and Results of Operations – Discontinued and divested operations’’.

79 c101680pu040Proof18:26.1.10B/LRevision:0OperatorDavS Current Structure of Transnet Transnet is 100 per cent. owned by the Government. The diagram below illustrates Transnet’s business divisions:

Transnet Core Operating Divisions

Rail Ports Pipelines

National Ports Freight Rail Rail Engineering Port Terminals Pipelines Authority

Discontinued Operations Specialist Units

•Transnet Corporate Centre •Transnet Capital Projects •Luxrail •Transnet Property •Transnet Fuel Solutions •Transnet Foundation

Business Strengths Transnet’s business strengths include the following:

Focus on Customer Relationships Transnet focuses on developing and maintaining long-term relationships with strategic customers.

Financial Strength Transnet believes that its financial strength gives it the resources to implement its strategies and to pursue its Capital Expenditure Programme to upgrade and increase capacity in its network. As at 31 March 2009, the Group had cash and cash equivalents of R 5.9 billion and as at 30 September 2009, the Group had cash and cash equivalents of R 6.5 billion which, together with the Group’s relatively low gearing and historic profitability, makes the Group financially strong in the opinion of management.

Country-wide Reach and Scale Transnet’s integrated system of freight rail, ports and pipelines covers the most economically important corridors in the Republic of South Africa. Its substantial operations and market share in freight rail and its ownership and operation of all the commercial ports in the Republic of South Africa also provide country-wide reach and facilitate an international focus. Transnet owns and leases rolling stock in excess of 2,000 locomotives and 77,000 freight wagons. Transnet National Ports Authority owns and manages, in a landlord capacity on behalf of the Government, the port system of South Africa. Transnet National Ports Authority is also a provider of port infrastructure and marine services at all seven fully operational commercial ports in the Republic of South Africa, and plans to provide the same services for the Port of Ngqura when it becomes fully operational. Transnet Port Terminals manages 16 cargo terminal operations within eight South African ports (including the Port of Ngqura), providing a range of cargo-handling and warehouse services to a wide variety of customers, including shipping lines, freight forwarders and cargo owners in the container, bulk, break-bulk and automotive cargo sectors. Transnet also owns over 3,000 km of pipelines. The Centre for Supply Chain Management at the University of Stellenbosch estimates that its integrated freight transport system carried freight having a value approaching 7 per cent. of the total value of freight transported in South Africa in Financial Year 2009.

Ability to Capitalise on International Growth in Container Transport The geographic location of the Republic of South Africa at the southern tip of Africa between two oceans and on major shipping routes means that Transnet’s ports, port terminals and rail network

80 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS leading from those ports are well-positioned to capture economic benefits from the international growth in container traffic. Transnet believes that intermodal container traffic will become increasingly important to the Republic of South Africa’s economy, based on the increasing importance of container supply chains within global production-sharing arrangements. The cost, speed, predictability, reliability, flexibility and connectivity of container supply chains are key determinants of competitiveness for manufacturers, and accordingly Transnet believes that its geographic location on the African continent, coupled with its integrated container transportation strategy, puts it in a strong position to benefit from growth in container transport. Well Positioned to Capitalise on the Republic of South Africa’s Metal and Mineral Resources The integration of Transnet’s freight rail network with the ports of Transnet National Ports Authority allows Transnet to capture a significant portion of the transportation revenues associated with the export of the Republic of South Africa’s metal and mineral resources as well as imports of manufactured goods. According to South Africa: A Country Study, prepared by the Federal Research Division of the Library of Congress under the Country Studies/Area Handbook Programme sponsored by the U.S. Department of the Army, the Republic of South Africa is believed to have the largest known deposits of chromium, manganese and vanadium. It is also among the largest producers of platinum, gold and chromium and has significant deposits of iron ore, coal, manganese, antimony, copper, nickel, lead, titanium, fluorspar, zinc and zirconium. Transnet’s network has been able to respond to some of this demand and is geographically positioned to do so on a cost-effective basis. Most of these commodities are exported, although iron ore is also used by the Republic of South Africa’s steel industry. Transnet Freight Rail has a largely dedicated coal line and a dedicated iron ore line to transport coal and iron ore products for export and handles the rail transportation of all other metals and minerals.

Strategy In 2004, Transnet adopted the Turnaround Plan. See ‘‘– History and Development’’. The Turnaround Plan was intended to refocus the core operating divisions into an integrated freight transport company with the primary objectives of improving operating efficiencies and growing the business. The original investment plan that was developed as part of the Turnaround Plan was designed to support the integrated freight transport company model, improving existing services as well as creating future capacity for growth. Although this was a significant challenge in light of the backlog of maintenance and capital investment that needed to be made prior to the execution of the Growth Strategy, Transnet was able to increase investment significantly during the period from 2005 to 2007, principally as a result of the improvement in Transnet’s financial condition and strong improvement in operating cash flows and ability to raise debt financing. Accordingly, all non-core businesses were identified for disposal, and as of 30 September 2009, Transnet had substantially completed its disposals as part of the Turnaround Plan. Transnet believes that it has made substantial progress in achieving the goals of the Turnaround Plan since it was instituted in 2004 and is now positioning itself for the next phase of its development. Accordingly, in August 2007, Transnet adopted the Growth Strategy, which represents the evolution of the Turnaround Plan. The Growth Strategy is intended to build on the progress made under the Turnaround Plan to accelerate profitable and sustainable volume growth, improve service delivery to clients and enhance long-term financial performance. Under the Growth Strategy, Transnet seeks to operate its businesses in a more customer-focused manner, continue to realise improvements in productivity and efficiency, invest in additional capacity to grow the business, increase the sustainability of its financial performance, improve its safety record, enhance corporate governance and accelerate the development of its human capital. The Growth Strategy is focused on the following four key areas: Reengineering: Profitability, Productivity and Efficiency Transnet seeks to enhance the productivity and efficiency of its rail, port and container freight businesses by focusing its efforts on priority freight corridors in the Republic of South Africa such as the NatCor, the Richards Bay Corridor and the Iron Ore Line. Transnet is targeting continued improvement in moves per gross crane hour as well as reducing ship turnaround time at ports, improving locomotive and wagon availability and reliability in its freight rail operations and reducing the number of interruptions to its pipelines. Transnet’s volumes of freight are concentrated in five principal land corridors, each with a port interface and rail network, and Transnet believes that future growth in demand for freight transport within the Republic of South Africa will largely arise in these corridors. Transnet seeks to further

81 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS integrate its rail and port operations in key corridors, which Transnet believes will enable its freight rail business to compete more effectively against road transportation companies and provide opportunities for additional port terminal business in these priority corridors. Integration and coordination of infrastructure planning and investment across the Group is a key part of this strategy and is designed to focus infrastructure investment on priority corridors to access concentrated customer demand for freight services and create high-density rail corridors linked to ports. Transnet also plans to simplify its interfaces with customers by developing an integrated port-to-customer pricing strategy and by expanding its service delivery to customers who seek full end-to-end supply chain solutions across rail and port operations, which Transnet believes will provide it with additional opportunities to develop business with key customers. Transnet plans to follow this initiative with a targeted marketing campaign aimed at shipping lines, freight forwarders and large shippers that represent a substantial portion of the existing South African freight market. Capital Optimisation and Financial Management Transnet estimates it will invest R 80.5 billion in capital expenditure over the next five financial years, beginning in Financial Year 2010 (excluding capitalised borrowing costs of R 7.1 billion), of which R 57.7 billion is estimated will be spent in the next three financial years, beginning in Financial Year 2010 (excluding capitalised borrowing costs) across all operating divisions. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. The majority of these expenditures over the next five financial years is expected to be spent on the expansion of capacity in priority corridors with a particular focus on Transnet Freight Rail and Transnet Port Terminals. Transnet believes that successful execution of this capital expenditure programme is critical to its future financial performance and that the capital investment will allow Transnet to address further the historical backlog of maintenance projects that are needed to sustain its existing businesses and freight transportation assets, fund the expansion of its freight rail, port and container terminal operations and increase capacity in advance of anticipated demand. See ‘‘– Capital Expenditure Programme’’. Transnet believes that selection, sequencing and execution of investments through integrated planning and operations pursuant to the Capital Expenditure Programme should enable it to sustain its existing infrastructure and support future growth in capacity and demand. Transnet has developed a detailed funding strategy designed to enable it to fund these expenditures on a timely and cost-effective basis. See ‘‘– Capital Expenditure Programme’’ and ‘‘Operating and Financial Review – Liquidity and Capital Resources – Capital Expenditure’’. Improved Safety, Risk Management and Effective Governance Transnet has established the ERM Framework for managing all material risks across the Group. The ERM Framework aims to improve the practice of risk management throughout the Group’s day-to-day business activities, aligning strategy, processes, people, technology and knowledge so as to evaluate and manage the uncertainties faced by the Group. The ERM Framework, which has been aligned with the Growth Strategy and specifically linked to operational efficiency, is informed by global leading practices such as the International Organization for Standardization’s risk management standard 31000:2009. Transnet believes that its risk management processes have reached a mature stage and consist of strong oversight, management and reporting and escalation of business critical risks to the appropriate governance levels including the Board of Directors and the Shareholder if necessary. The risks identified by the Group are monitored and evaluated by the various governance structures of the Group. These structures are as follows: Board of Director Committees: Group Audit Committee: The Group Audit Committee mandate includes the review and approval of the Group Audit Plan with internal and external audit. Group Risk Committee: The Board has delegated the responsibility for providing assurance on the integrity, quality and reliability of the Group’s risk management to the Group Risk Committee. Remuneration Committee: The Group Remuneration Committee considers and approves policy frameworks and best practice standards in respect of remuneration in the Group. Corporate Governance and Nominations Committee: The Corporate Governance and Nominations Committee sets the criteria for the nomination of Directors to the Board, Board Committees, the Transnet Second Defined Benefit Fund Board of Trustees and subsidiary Boards and ensures that succession planning policies are implemented in respect of non-Executive Directors and members of the Group Executive Committee.

82 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Group Executive Committee Subcommittees: Public Policy and Regulation Committee: The Public Policy and Regulation Committee ensures that the Group proactively manages public policy and economic regulation risk impacting the Group. Finance Committee: The Finance Committee reviews overall governance procedures, monitors all financial risks, monitors all shared service, procurement, supply chain and ICT associated risks and ensures appropriate financial management frameworks, policies, procedures and reporting are adopted throughout the Group. Risk Management Committee: The Risk Management Committee ensures the quality, integrity and reliability of the Group’s risk management. Human Resources Committee: The Human Resources Committee ensures good governance in respect of remuneration policies and practices (with the concurrence of the Remuneration Committee) and identifies and manages human capital risks. Operations Committee: The Operations Committee designs and implements operational risk management measures (including those related to safety). Capital Investment Committee: The Capital Investment Committee ensures the resources that the Group invests for the development of capital projects are strategically managed and that such projects comply with applicable risk management processes. Commercial Committee: The Commercial Committee is established to provide leadership for the Group’s commercial strategy and initiatives and ensures the maintenance of adequate standards and practices for the Group’s commercial interests. Transnet strives to operate and maintain a safe and healthy workplace and is committed to complying with the OHSA. Transnet’s current initiatives to improve its safety record include training skilled safety personnel, implementing safety management systems, providing ongoing safety awareness and complying with all safety-related regulations. Human Capital Strategy In light of the significant shortage of skilled workers, the difficulty in attracting and retaining talented management, engineers and other employees, coupled with Transnet’s large, widely dispersed and aging workforce, Transnet plans to continue to devote significant resources to the training and development of existing and new employees, the establishment and implementation of career development programmes as part of the talent management process and the development of future leaders through succession planning initiatives. As part of its strategy, Transnet currently plans to hire approximately 17,800 skilled employees over the next six years. This hiring goal assumes an attrition rate of approximately 20 per cent. per year. Transnet also seeks to strengthen and further embed its corporate culture and values (focused on safety, effective communication, respect and dignity, empowerment to perform jobs, business focus, recognising and rewarding good work, and delivering on promises) with employees through internal branding campaigns and other initiatives. Transnet believes that effective management of its human capital is a critical factor to its success.

Operations Transnet is organised into five core business divisions: Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority, Transnet Port Terminals and Transnet Pipelines, each of which is discussed below. Transnet Freight Rail Transnet Freight Rail is Transnet’s largest division by revenue. Transnet Freight Rail offers rail freight transport services to customers in the mining, manufacturing, agriculture, forestry, intermodal and automotive industries as well as cross-border trade with six African countries, to which a variety of commodities are transported. Transnet Freight Rail is focused on transporting bulk and containerised freight. Recently, Transnet disposed of its intercity passenger rail service to another state-owned enterprise to enable Transnet to focus on providing freight services. Transnet maintains an extensive rail network across the Republic of South Africa that connects with other rail networks in the geographic region including Botswana, Lesotho, Namibia, South Africa and Swaziland (‘‘Southern Africa’’). Transnet owns all of the Republic of South Africa’s freight rail networks. Transnet’s rail network of 20,953 route kilometres as of 31 March 2009 includes a core mainline network of 12,801 route kilometres of which 565 kilometres are comprised of an export coal line and 861 kilometres are comprised of an export iron ore line. The balance of the network consists of feeder (or branch) lines that connect customers to the mainlines which in turn connect

83 c101680pu040Proof18:26.1.10B/LRevision:0OperatorDavS to main port hubs (e.g. Gauteng to Cape Town and to Durban port). The railway network uses over 2,000 locomotives and 77,000 freight wagons to transport its general freight, export coal and export iron ore resources. Transnet Freight Rail had total segment revenue of R 18,683 million in Financial Year 2009, an increase of 12.6 per cent. as compared to Financial Year 2008. In Financial Year 2009, its segment external revenues accounted for 55 per cent. of the Group’s total external revenue. Transnet’s volume of iron ore transported increased from Financial Year 2008 to Financial Year 2009, but volumes decreased over the same period for both coal and GFB due to the global economic downturn. Transnet Freight Rail generated revenue of R 9,890 million in the six months ended 30 September 2009, an increase of 7.38 per cent as compared to revenue of R 9,210 million in the six months ended 30 September 2008. This increase was principally attributable to Transnet Freight Rail’s continuing operational improvement, investment in assets, better traffic mix and prioritisation of higher yield volumes and was achieved despite a substantial decrease of 18.2 per cent in general freight tonnages transported due to the effect of the economic downturn. Transnet Freight Rail made the most significant contribution to the Group’s total external revenue in the six months ended 30 September 2009, contributing 56.48 per cent. of the Group’s external revenue for that period. The current downturn in the global economy has had a negative impact on the South African mining, manufacturing and production sectors. While Transnet Freight Rail’s management has noted a recent improvement in these sections, Transnet Freight Rail’s management believes that if this negative impact continues or becomes more severe, future volumes transported by Transnet Freight Rail could also decrease. Strategy Transnet Freight Rail’s strategic objectives are designed to support the overall Growth Strategy. The division aims to create a reliable and profitable business which Transnet seeks to grow and expand in the coming years through the increase of rail freight volumes. In response to the global economic downturn, Transnet has reduced its volume forecasts for Financial Year 2010. Transnet Freight Rail is currently focusing on cost reduction and improving operating margins during this period of expected lower growth as well as enhancing service levels and resource optimisation. Transnet Freight Rail’s strategic objectives also include: increasing revenue; improving safety; enhancing leadership and employee capability; improving customer service, improving efficiency and asset utilisation for scheduled freight railway; and continuing to maintain the railway infrastructure. In order to meet these objectives, Transnet Freight Rail plans to utilise ‘‘MultiRail’’, a new computerised operational planning tool, to help to optimise underutilised rail yards and improve labour productivity in rail yards. Services Transnet Freight Rail provides the railway infrastructure for the transport of goods in the Republic of South Africa including lines, yards and goods sheds as well as rolling stock, depots and storage. Transnet Freight Rail is focused on three key segments: general freight (which includes coal and iron ore for domestic use in the Republic of South Africa), export coal and export iron ore. General freight consists of both imports and exports, and Transnet Freight Rail transports general freight along the national main line corridors between economic and mining hubs in the Republic of South Africa and the country’s major ports. GFB is the largest of Transnet Freight Rail’s business units, accounting for approximately 63.7 per cent. of its total freight revenue and handling approximately 44 per cent. of its freight tonnage in Financial Year 2009 and accounting for approximately 63 per cent. of its total freight revenue and handling approximately 41.0 per cent. of its freight tonnage in the six months ended 30 September 2009, as measured by freight, iron ore exports and coal exports. Approximately 85 per cent. of general freight revenue in Financial Year 2009 and the six months ended 30 September 2009, respectively was generated by the transportation of coal, iron ore, manganese, ferrochrome and eight other commodities for domestic use in the Republic of South Africa. Transnet Freight Rail manages the flow of material and information between suppliers and customers along sections of their supply chains. It integrates the rail component of the supply chain with adjoining components in order to increase supply chain efficiency and reliability and help reduce costs. The export coal line accounted for 23.2 per cent. and 26.1 per cent. of Transnet Freight Rail’s total segment revenue in Financial Year 2009 and in the six months ended 30 September 2009,

84 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS respectively. The export coal line is a specialist business unit within Transnet Freight Rail that provides transport (predominantly via electric trains) for the Republic of South Africa’s export coal from the Mpumalanga coalfields to the Richards Bay coal terminal. Transnet provides transportation to the terminal at Richards Bay but does not operate the coal terminals. The export Iron Ore Line (the ‘‘Orex Line’’) is a specialist business unit within Transnet Freight Rail that provides transport of export iron ore over the 861 km railway line from Sishen to the port at Saldanha Bay. The Orex Line accounted for 9.1 per cent and 11.1 per cent. of Transnet Freight Rail’s total segment revenue for Financial Year 2009 and for the six months ended 30 September 2009, respectively. In response to increasing demand for ore in the export markets, Transnet began improving the Orex Line in 1998. Transnet has increased the capacity of the Orex Line from 29 million tonnes per annum in Financial Year 2008 to 45 million tonnes per annum in Financial Year 2009 and from 36 million tons per annum for the six months ended 30 September 2008 to 46 million tons per annum for the six months ended 30 September 2009. Actual volumes handled in Financial Year 2009 amounted to 36.8 million tonnes as compared to 31.9 million tonnes in Financial Year 2008, and actual volumes handled in the six months ended 30 September 2009 amounted to 21.1 million tonnes as compared to 15.9 million tonnes in the six months ended 30 September 2008. Transnet plans to further expand the capacity of Orex Line, where the capital spend on the Ore Export Line is underpinned by committed contracts for 60 million tonnes per annum. Other non-freight revenue amounted to 4.0 per cent of total revenue for the six months ended 30 September 2009. In addition to these main categories of goods, Transnet also transports containers between inland depots and major ports. In order to focus solely on freight rail growth Transnet has recently disposed of its small intercity passenger rail service (Shosholoza Meyl) to another State-owned enterprise. Transnet is in the process of disposing of The Blue Train, another passenger rail service operated by its Luxrail unit. Customers Freight Rail’s major customers in each business segment include:

General Freight: Transnet Freight Rail operations over 14 strategic mainline corridors between economic hubs and ports. Major General Freight customers include: Afrisam SA (Pty) Limited, Arcelor Mittal SA, Assmang, Eskom, Foskor Limited, Highveld Steel & Vanadium, PPC Cement Pty Limited, Samancor Chrome Limited, Samancor Manganese Limited, and Sasol. Intermodal traffic extends between main industrial hubs and ports or cross-border. Major customers include Cargo Movers SA (Pty) Limited, Grindrod Intermodal Limited, Maersk SA (Pty) Limited, Mediterranean Shipping Company Logistics S.A (‘‘MSC’’) and South African Container Depot (Pty) Limited (‘‘SACD’’). Export Coal Line: This line extends from the Mpumalanga coal fields to the Port of Richards Bay. Customers include ARM Coal, Anglo American, BECSA, BHP Billiton, Exxaro, Kangra Coal, Main Street 432, Optimum Coal, Sasol Mining, Total Coal SA, and Xstrata plc. GFB is also transported on this line. Export Iron Ore Line: This line extends from Sishen to the Port of Saldanha Bay, serving two main customers, namely Assmang and Sishen Iron Ore. Transnet Freight Rail’s main customers fall into three categories, which correspond to the type of freight transported: coal exporters, iron ore exporters and general freight customers, which generated revenue representing 12.9 per cent., 5 per cent., and 35 per cent., respectively, of the Group’s total revenue in Financial Year 2009. Transnet Freight Rail’s principal coal export customers are Anglo American, BHP Billiton and Xstrata, all of which operate in the Mpumalanga province. These three customers accounted for approximately 70.0 per cent. and 67.5 per cent. of the total volume of coal transported in Financial Year 2009 and the six months ended 30 September 2009, respectively. Principal iron ore exporter customers are Sishen Iron Ore, whose operations are in Limpopo and the Northern Cape near Sishen, and Assmang, whose operations are also in the Northern Cape near Sishen. Within GFB, Transnet Freight Rail’s top ten customers accounted for almost half of Transnet’s revenue from general freight in Financial Year 2009 and

85 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS the six months ended 30 September 2009. Arcelor Mittal S.A. alone accounted for 18 per cent. and 14.0 per cent. of general freight revenue in Financial Year 2009 and the six months ended 30 September 2009, respectively. Commodities transported by general freight customers include coal and iron ore for domestic use, minerals, chemicals, containers and vehicles. Transnet has renewed and/or concluded key transportation contracts for export coal that became effective as of June 2008. Iron ore customers generally have long-term contracts in place, which are typically for initial terms of 20 years or more. The typical general freight contract is for a term of one year or on a best endeavour basis. Source of Revenue and Pricing Transnet Freight Rail’s primary source of revenue is generated by the bulk transportation of coal, iron ore, and other commodities together with general container freight business. Any other revenue sources are incidental to the division’s business. Pricing has, on average, increased since 2005 for each of export coal, export iron ore and general freight. See also ‘‘Operating and Financial Review – Significant Factors Affecting the Group’s Financial Condition and Results of Operations – Volume and Pricing’’. Freight rail tariffs currently are not subject to approval by any external agencies. However, the Department of Transport may institute tariff controls or approvals in the future through the potential establishment of a rail regulator. Export coal is currently transported under ‘‘take or pay’’ contractual arrangements between Transnet and coal exporter customers. These contracts provide for payments to Transnet if the volume of transportation contracted is not provided to Transnet. Reciprocal arrangements in favour of coal exporters also exist. Reciprocal arrangements work in the following way. First, export coal parties guarantee that they will make available a certain level of export coal for Transnet Freight Rail to transport. If the customer does not supply the required coal, Transnet Freight Rail is entitled to receive a penalty payment equivalent to 80 per cent. of the average coal export tariff per tonne applicable to that customer for coal not provided to be transported. Second, if Transnet Freight Rail is not able to transport the minimum guaranteed tonnages it will pay a penalty equal to 80 per cent. of the average coal export tariff per tonne not transported. Third, Transnet Freight Rail must offer transportation capacity to export coal customers in proportion to their contractual rights. Should a customer not receive their equitable share, then the prejudiced party is entitled to receive a penalty payment equal to 100 per cent. of the applicable export tariff. Assets, Capacity and Development Transnet Freight Rail owns most of the tracks it uses for transport, the underlying land, the overhead lines used for distributing the electricity from Eskom and all of the rolling stock that it currently uses. Rolling stock capacity has generally grown with volume transported. Volumes carried and number of rolling stock are reflected for the three main categories of freight carried as set out below.

86 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The following table sets forth certain business performance statistics relating to Transnet Freight Rail’s operations for Financial Years 2007, 2008 and 2009 and for the six months ended 30 September 2008 and 2009.

As at or for the six months ended As at or for the Year ended 30 September 31 March

2009 2008 2009 2008 2007

Customer General Freight departing times (per cent. on time) ...... 40.78 40.58 45.5 51.8 45.0 General Freight arrival times (per cent. on time)...... 29.96 28.68 30.8 30.2 27.9 Operational General freight Volumes (mt) ...... 35.6 43.45 78.4 84.5 84.3 Price (Rand/tonne)...... 165.94 153.73 151.3 134.0 118.1 Locomotives (number) ...... 1,369 1,624 1,574.0 1,704.0 1,730.0 Locomotive productivity (GTK (000)/month)...... 5,118 5,072 4,720.0 4,654.0 4,620.0 Wagons (number) ...... 64,607 66,660 65,714.0 64,423.0 67,572.0 Wagon productivity (wagon TAT) days ...... 14.91 12.91 13.8 12.6 13.1 Export coal line Volumes (mt) ...... 30.20 29.90 61.9 63.5 67.0 Price (Rand/tonne)...... 81.24 51.51 70.1 51.4 49.0 Locomotives (number) ...... 295 273 281.0 295.0 289.0 Wagons (number) ...... 7,321 7,080 7,121.0 7,324.0 7,094.0 Export iron ore line Volumes (mt) ...... 21.09 15.91 36.8 31.9 30.0 Price (Rand/tonne)...... 49.57 45.40 46.4 38.2 34.9 Locomotives (number) ...... 126 104 119.0 105.0 105.0 Wagons (number) ...... 4,589 4,429 4,509.0 3,887.0 3,309.0 Safety Derailments (rate/mkm) – Freight .. 2.23 3.18 3.4 3.2 3.3 Derailments (rate/mkm) – Shunting 132 157 147.0 157.0 145.0 Collisions (rate/mkm) ...... 0.07 0.19 0.2 0.2 0.2 Signals passed at ‘‘danger’’ without authority ...... 32 64 113 117 95 Human capital Number of full time employees (period end) ...... 24,330 25,705 24,177 24,577 24,811

In recent years, Transnet Freight Rail has not always been able to meet the high customer demand for freight carriage by Transnet’s customers seeking to take advantage of high commodity prices by increasing export volumes. This increase in demand for freight carriage has been compounded by internal disruptions caused by derailments and theft. In order to better meet customer demand for freight carriage, Transnet’s Capital Expenditure Programme is focused on both increasing capacity and maintaining and replacing infrastructure and rolling stock, particularly with respect to general freight. See also ‘‘Business – Capital Expenditure Programme – Planned capital expenditure by operating division and sector’’.

87 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet Rail Engineering Transnet Rail Engineering provides rolling stock engineering and maintenance services to Transnet Freight Rail, PRASA and other rail operators in Southern Africa. The division comprises the following eight product focused businesses: * Locomotive; * Coach; * Wagon; * Rotating machines; * Rolling stock equipment; * Wheel; * Auxiliary equipment; and * Foundry. Transnet Rail Engineering had total segment revenue of R 8,228 million in Financial Year 2009, an increase of less than 1 per cent. as compared to Financial Year 2008. In Financial Year 2009, its segment external revenues accounted for 4.2 per cent. of the Group’s total external revenue. The eight product-focused businesses operate from six centres, namely Cape Town, Uitenhage, Bloemfontein, Durban, Germiston and Pretoria. These centres are supported by approximately 120 maintenance depots close to the main rail corridors, providing in-service maintenance and out-of- service refurbishing, repair, upgrade, conversion and new build on locomotives, wagons and coaches as well as the re-manufacturing of major sub-components. The division’s competency is based on its technological knowledge relating to its ongoing product research and development and its product application experience. The division seeks to establish a comprehensive ‘total service’ solution for railway operators in order to achieve optimum fleet availability and reliability by applying a high standard of precision, combined with integrated maintenance and lifecycle management. Together, these businesses have the capacity to support a fleet size of 75,000 freight wagons, 2,500 locomotives and 5,000 coaches. Upgrade, conversion and build capacity extends to approximately 2,000 new wagons, 250 locomotives and 800 coaches per year. Work is performed in accordance with railway standards and codes of practice, and all Rail Engineering depots are ISO 9001:2000 accredited.

Strategy Transnet Rail Engineering’s strategic objectives are designed to support the overall Growth Strategy. To this end, Transnet Rail Engineering focuses on improving availability and reliability of rolling stock. By the end of Financial Year 2010, the division aims to have increased efficiencies and helped to lower rail transport costs in the Republic of South Africa by investing in skills development, employee retention and safety programmes. Transnet Rail Engineering plans to continue to integrate planning with its national operating centre and develop and execute maintenance plans to address reliability and availability of rolling stock. Transnet Rail Engineering plans to pay particular attention to quality control and quality-assurance systems, non-conformance reporting and the introduction of timely corrective measures to increase product reliability.

Services Transnet Rail Engineering comprises eight product-focused businesses, each dedicated to a specific group of railway rolling stock equipment. While distinct in their operations, the businesses complement one another to enable the division to supply a wide range of specialised products. Transnet estimates it has significant market share in the Republic of South Africa for new and remanufactured locomotives and for locomotive repair work. It also provides maintenance and refurbishment services in the Republic of South Africa on rolling stock from other African countries that is sent to the Republic of South Africa for service. Transnet’s locomotive business equips vehicles with microprocessor controls, high-level adhesion, glass-screen control panels, and ergonomic cabs. Transnet Rail Engineering established an assembly line in conjunction with an original equipment manufacturer and delivered 18 new diesel locomotives to Transnet Freight Rail in calendar year 2009, and expects to deliver 32 new diesel locomotives by 31 March 2010.

88 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS In previous financial years, the wagon build business supplied approximately 500 new wagons a year to domestic and foreign customers, including 100 per cent. of the rolling stock, excluding locomotives, supplied to Transnet Freight Rail. In the future, however, Transnet anticipates that the wagon build business will start to supply a decreasing number of new wagons for the coal and iron ore lines as the expansion projects to ramp up iron ore and export coal capacity come to an end. It is anticipated that this will limit the requirement for new wagons to those required for normal end of life replacement. Currently wagons for total expansion capacity and replacement capacity are being produced. The coach business refurbishes, converts, upgrades and provides repair services for a wide range of passenger coaches, guards’ vans, motor-wagons and steam-heated vehicles. Transnet Rail Engineering also services components, and has production lines for rolling stock equipment, rotating machinery and wheels. Transnet also manufactures PVC-coated fabric tarpaulins to the highest international standards. Tarpaulins are also repaired, cleaned and leased to rail and road transport operators throughout Africa. Transnet Rail Engineering also manufactures a range of auxiliary products including lashing chains. Transnet Rail Engineering’s performance is assessed in terms of locomotive reliability and availability. A locomotive is considered unavailable for service during the time it is not under the control of the operating department. An unavailable locomotive will be either undergoing or awaiting service, maintenance or repair in a maintenance facility such as a depot, shed or workshop or it will be broken down outside maintenance facilities. Conversely, a locomotive is considered available for service during the time it is not deemed unavailable. Availability is typically measured in locomotive hours. Reliability is measured in failure per million kilometres. These metrics are set out below, broken down for the three principal categories of freight transported by Transnet Freight Rail for Financial Years 2007, 2008 and 2009 and for the six months ended 30 September 2008 and 2009. Six months ended 30 September Year ended 31 March

2009 2008 2009 2008 2007

Efficiency Locomotive reliability General freight (faults per million km)...... 16.5 27.2 26.3 30.3 48.0 Coal (faults per million km)...... 49.9 27.8 32.2 55.6 43.0 Iron ore (faults per million km)...... 32.8 50.5 50.5 37.6 57.0 Locomotive availability General freight (available locomotive hours as a percentage of total locomotive hours) ...... 89.9 88.3 88.3 86.0 85.0 Coal (available locomotive hours as a percentage of total locomotive hours)...... 89.2 89.3 89.6 89.0 85.2 Iron ore (available locomotive hours as a percentage of total locomotive hours) ...... 87.5 84.9 86.1 86.0 85.9

Customers Transnet Rail Engineering is the major provider of services in the South African market for maintenance, repair, refurbishment, conversion, and new build of locomotives, wagons and coaches for use in freight and passenger rail operations. Further, Transnet Rail Engineering is responsible for the availability and reliability of Transnet Freight Rail’s rolling stock. The principal customer of Transnet Rail Engineering is Transnet Freight Rail, the only domestic mainline freight railway operator, which provided 83 per cent. and 79 per cent. of the segment total revenue for Transnet Rail Engineering for Financial Year 2009 and for the six months ended 30 September 2009, respectively. Transnet Rail Engineering’s principal external customer is PRASA, which provided 17 per cent. and 21 per cent. of the total segment revenue for the division in Financial Year 2009 and for the six months ended 30 September 2009, respectively.

89 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet Rail Engineering also provides refurbishment services to customers located outside of the Republic of South Africa primarily in the member states of the Southern Africa Development Community, who send their rolling stock to the Republic of South Africa for servicing.

Source of Revenue and Pricing Rail engineering tariffs are not subject to approval by any external agencies. Tariffs are currently set on a cost-recovery basis to assist Transnet Rail Engineering in generating a reasonable commercial return on work performed for other divisions in the Group. In Financial Year 2008, decisions were taken at the Group level to provide Transnet Rail Engineering’s services to Transnet Freight Rail at reduced internal pricing margins.

Intellectual Property and Technology Technology is fundamental to Transnet Rail Engineering’s business. Transnet has established relationships with original equipment manufacturers and railway engineering specialists across the globe. Transnet is working with original equipment manufacturers and others to address obsolescence in rolling stock manufacturing and refurbishment. These range from technologies to replace single components to major upgrades of locomotives in collaboration with original equipment manufacturers. Transnet Rail Engineering incorporates leading practices in engineering into its product portfolio. Transnet Rail Engineering has its own in-house design office, which was also enhanced by the integration with the maintenance department of Transnet Freight Rail on 1 April 2006.

Transnet National Ports Authority Transnet National Ports Authority is responsible for the safe and efficient and effective economic functioning of the national ports system which it manages, controls and administers on behalf of the Government. The Division owns and manages seven ports within South Africa: Richards Bay, Durban, Saldanha Bay, Cape Town, Port Elizabeth, East London and Mossel Bay. The Port of Ngqura, which became operational at the end of 2009 (save for certain sections which are partially operational) is the eighth port managed by Transnet National Ports Authority. The National Ports Authority’s business is divided into two service segments: the provision of Port Infrastructure; and Maritime Services which include dredging, navigation aids, ship repair and marine operations. The following map indicates the locations of Transnet National Ports Authority’s seven fully operational ports and the Port of Ngqura as well as the key corridors in which Transnet operates:

Transnet National Ports Authority offers a combination of complementary port facilities and services. Each port has a natural geographic territory with a defined market, which drives the nature of services, facilities and the types of cargo handled at each port. A fundamental factor that links these ports is the backdrop of rapidly increasing trade resulting from the country’s economic

90 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS growth and globalisation. See ‘‘Operating and Financial Review – Significant Factors Affecting the Group’s Financial Condition and Results of Operations – International Trade’’. South African ports have experienced compound annual growth in volume of 2.3 per cent. from Financial Year 2005 to Financial Year 2009. Further, South African ports experienced a 9.5 per cent. increase in cargo handled from the ports over this period. To meet the volume demand resulting from economic growth, ports were under pressure to create capacity and increase efficiencies. Transnet National Ports Authority contributed approximately 20 per cent. to the Group’s total external revenue in Financial Year 2009, with container, break-bulk, automotive, dry bulk and liquid bulk contributing R 3,002 million, R 180 million, R 500 million, R 542 million and R 455 million, respectively, of external revenues in Financial Year 2009. Transnet National Ports Authority had total segment revenue of R 7.1 billion in Financial Year 2009, an increase of 3.9 per cent. as compared to R 6.8 billion in Financial Year 2008. This increase was primarily due to tariff increases. In Financial Year 2009, Transnet National Ports Authority received an average tariff increase of 4.9 per cent. as compared with the previous year. Overall cargo volumes decreased during Financial Year 2009, in large part due to the global economic downturn which has to a large extent negatively affected external revenue, particularly for cargo dues. Transnet National Ports Authority’s total segment revenue decreased by 3.24 per cent. from R 3,765 million in the six months ended 30 September 2008 to R 3,643 million in the six months ended 30 September 2009. This decrease was principally attributable to lower than anticipated volumes on container imports, break-bulk exports, dry-bulk imports and exports, and in the automotive sector. The decrease was also attributable to a continued decline in coal exports due mainly to derailments in the rail corridor and a softening of demand for commodities on world markets.

Strategy Transnet National Ports Authority’s strategic goal is to enable the safe, efficient and effective economic functioning of the South African port system, and to create a ports system that will lead economic growth for the Republic of South Africa. The division’s three-part strategy focuses on creating port infrastructure capacity ahead of demand, improving the efficiency of port and port operations (as evidenced by vessel and cargo turnaround time) and enhancing the ports’ positions as gateways for trade.

Port Infrastructure Durban: The Port of Durban has a total land and water area of 1,854 hectares. The port has 57 berths and over 4,000 commercial vessels call at the port each year. It was developed primarily for import cargo. However, over the years cargo flows have changed significantly and exports have become more important. The Port of Durban is the Republic of South Africa’s main general cargo, bulk liquid and container port and handled 40.0 million metric tonnes of cargo and 2.6 million TEUs in Financial Year 2009. In the six months ended 30 September 2009, it handled 18.34 million metric tonnes of cargo and 1.2 million TEUs. In Financial Year 2009 an average of 213,411 TEUs per month were handled at the Port of Durban Container Terminal, the largest in Africa based on TEUs processed. The port also has a drydock for ship repair. In the six months ended 30 September 2009 an average of 199,304 TEUs per month were handled at the Port of Durban Container Terminal. The Port of Durban has generally experienced growth in volumes since the development of the Durban Container Terminal in 1977. The port has two container terminals that handle automobiles and petrochemicals. Cape Town: The Port of Cape Town is a full service, general cargo port, operating 24 hours a day, 7 days a week. Marine services include port navigation, pilotage, towage, mooring, pollution control, security and a 200 tonne floating crane. Bunkers are supplied at most berths. Two dry docks and a synchrolift are available for ship repairs. Conventional cargo is worked in the Duncan dock where undercover, open and cold storage is available. Extensive pre-cooling facilities at the fruit terminal cater for deciduous fruit exports, whilst the port also has one of the few cold stores in the world that can hold products down to -60˚C with a capacity of 10,000 tonnes. A container terminal is situated at the Ben Schoeman dock. All quays are equipped with modern cranes and mechanical lifting equipment. The Port of Cape Town is fully equipped to handle all types of general break-bulk and containerised cargo via its specialised terminals. It has the benefit of a wide variety of well-equipped cargo terminals linked to a significant inland transport infrastructure.

91 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The port is well positioned to serve as a hub for cargoes between Europe, the Americas, Africa, Asia and Oceania. Regular interport feeder services benefit the container terminal which is regarded as a gateway for African countries. The container terminal also benefits from direct rail links with the Gauteng area, which can decrease transit time for some containers. This is made possible by the direct railage of containers which eliminates the sailing time to other ports in the Republic of South Africa. Richards Bay: The port at Richards Bay was initially built as a bulk port to export 26 million tonnes of coal over the first ten years. The port has since diversified and now handles other types of cargoes. Currently, Richards Bay handles in excess of 82 million tonnes annually. This makes it the Republic of South Africa’s leading port in terms of volume handled. The port is also the largest in the Republic of South Africa in terms of surface area, with total land and water surfaces of 2,174 hectares and 1,443 hectares respectively. To date, only half of that land has been developed. The port has six cargo handling terminals including a dry bulk terminal for imports and exports of ores, minerals and woodchips; a multi-purpose terminal for break-bulk cargoes, including ferrochrome, pig iron, steel, forest products, granite, aluminium, bagged cargo, containers, heavy and abnormal loads; a coal terminal (one of the largest export coal terminals in the world with a current capacity to export 71 million tonnes per annum), as well as a chemical tank farm for liquid bulk products stored in tanks. Port Elizabeth: Port Elizabeth is the fifth largest port in the Republic of South Africa, based on tonnage handled, and the fourth largest in terms of revenue earned, based on information for Financial Year 2009. The port has one of the Republic of South Africa’s five container terminals, as well as a car terminal and bulk, dry bulk, liquid bulk, general cargo and cold storage facilities. Most of the cargo flowing through Port Elizabeth is generated in, or is destined for, the greater Algoa Bay area, reaching up to the Sundays River and Langkloof Valleys. Some cargo is transported by rail and road to and from the Free State and Gauteng. The Port Elizabeth area is heavily industrialised and intensively farmed. Traditionally, Port Elizabeth and nearby Uitenhage, which is part of the Nelson Mandela Metropolitan Municipality, have been the centre of the South African automotive industry. As a result, the port imports large volumes of containerised components and raw materials for this industry. The bulk of exports consist of agricultural products: timber, wool, textiles, skins and hides in containers, as well as palletised citrus and deciduous fruit. Manganese ore, motor vehicle industry related products and steel are also exported. Saldanha: The Port of Saldanha is the only iron ore handling port in the Republic of South Africa. It exports iron ore from the mines at Sishen (some 861 km north-east of Saldanha). The port also handles base metals, and serves as an import port for a crude oil storage facility situated near the port. Although the Port of Saldanha was originally constructed during the early 1970s to facilitate the export of iron ore, bulk crude oil and break-bulk terminals were subsequently added to the facilities in the port. Port facilities consist of a 990 m long jetty with two iron ore berths and one crude oil berth joined to the north shore of the harbour by a 3,100 m causeway. In addition, an 874 m multi- purpose terminal quay facilitates break-bulk cargo handling. East London: The East London port is the only river-based port in the Republic of South Africa and is serviced by a national rail network system providing access to all major cities within the borders of the Republic of South Africa and neighbouring states. There are a total of 11 commercial berths that offer container, automotive, break-bulk, bulk grain and bulk liquid (refined petroleum products) handling facilities. In addition, the port has a drydock and modern car terminal with real time tracking and monitoring of units that is linked directly to an adjacent automobile production plant via a private road and bridge that was commissioned by the port. Mossel Bay: Mossel Bay has historically been a fishing port with limited commercial cargo activity. The port is unique as it provides off-shore handling facilities that enable import and export of refined products from a refinery situated close to the port. A road and rail network connects Mossel Bay to the consumer markets and industrial zones of the Republic of South Africa and other parts of Southern Africa. Ngqura: The Port of Ngqura was largely operational as of 31 December 2009, although its berths were only partly operational as of the same date. The port will be a deepwater port capable of

92 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS handling the larger new generation container vessels, such as the Super Post-Panamax container vessel. The Port, once operational, will consist of basic port infrastructure, i.e. breakwater, entrance channels, sand bypass system and appropriate landside infrastructure. The Port is planned to have five berths and back-up areas. There are plans to build two berths for containers, two berths for multi-purpose/bulk cargo and a liquid bulk berth. The Port is planned to provide increased capacity for the national ports system. The Ngqura container terminal is a greenfield project of a full service container terminal, with inland rail links. Two berths are expected to be operational and the container terminal is expected to be fully equipped with rubber-tyre gantries and ship-to-shore cranes, by the second half of calender year 2009. Tug boats have been ordered for the Port.

Services Each of the Republic of South Africa’s major ports serves the market of its adjacent hinterland. To a large extent, these markets determine the nature and types of cargo handled by each port. Transnet National Ports Authority’s core services include: * planning, providing, maintaining and improving port infrastructure; * providing and coordinating marine related services; * providing port services, including managing port activities and the port regulatory function at all South African ports; and * providing navigation aids to assist the navigation of vessels within port limits and along the coast. Cargo imported and exported through South African ports is categorised into containers, break- bulk, bulk (including liquid bulk and dry bulk) and automotive. The volume of each of these categories handled at the seven ports operated by the National Ports Authority (excluding the Port of Ngqura) is set out below for Financial Years 2007, 2008 and 2009 and for the six months ended 30 September 2008 and 2009: Six months ended 30 September Year ended 31 March

2009 2008 2009 2008 2007

Volume Dry bulk (mt)...... 63.6 55.6 122.8 122.0 116.2 Liquid bulk (mt) ...... 22.2 26.7 49.1 43.9 42.6 Break-bulk (mt) ...... 4.3 4.7 7.5 10.4 10.4 Automotive (‘000 units) ...... 163.3 298.9 527.4 580.4 566.5 Containers (‘000 TEUs) ...... 1,764.5 2,025.1 3799.7 3738.0 3551.2

Bulk Cargo: The bulk segment consists of dry bulk and liquid bulk. The major commodities in the dry bulk segment are coal, iron ore and manganese. Iron ore contributed approximately 29 per cent. of dry bulk export volumes in Financial Year 2009 and approximately 37.55 per cent. in the six months ended 30 September 2009. Coal contributed approximately R 158.6 million and R 76.7 million for Financial Year 2009 and for the six months ended 30 September 2009, respectively and 55 per cent. and 46.23 per cent. of dry bulk export volumes, respectively. The chemical industry contributes the majority of volumes in the liquid bulk segment, with petrochemicals and the oil industries/sectors being the two major contributors. Transnet’s ports handled 45.9 million kilolitres and 20.48 million kilolitres of petroleum products in Financial Year 2009 and in the six months ended 30 September 2009, respectively. Bulk cargo handled by the seven ports totalled 171.9 million metric tonnes and 85.8 million metric tonnes for Financial Year 2009 and for the six months ended 30 September 2009, respectively, of which the export tonnage was over twice as great as the import tonnage. Richards Bay handled 45.7 per cent. and 40.53 per cent. for Financial Year 2009 and for the six months ended 30 September 2009, respectively. The Port of Durban accounted for 19.9 per cent. and 18.81 per cent. for Financial Year 2009 and for the six months ended 30 Septembe 2009, respectively. Saldanha handled 28.8 per cent. and 34.71 per cent. of these totals for Financial Year 2009 and for the six months ended 30 September 2009, respectively. Cape Town accounted for 1.5 per cent. and 1.46 per cent. of the total bulk cargo handled by the seven ports for Financial Year 2009 and for the six months ended 30 September 2009, respectively, while Port Elizabeth handled 2.2 per cent and 2.48 per cent. for Financial Year 2009 and for the six months ended 30 September 2009,

93 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS respectively. The breakdown of bulk landed (both imported and coastwise), shipped (both exported and coastwise) and transhipped at the seven ports in the Republic of South Africa in Financial Year 2009 and in the six months ended 30 September 2009 are set out below (coastwise means any cargo moving between two South African coastal cities). Year ended 31 March 2009

Richards East Port Bay Durban London Elizabeth Mossel Bay Cape Town Saldanha Total

(in metric tonnes) Bulk Cargo Handled Landed Imports ...... 5,718,934 26,768,424 105,213 213,356 598,891 1,317,289 13,164,861 47,886,968 Coastwise ...... 220,369 300,162 836,604 897,147 63,902 507,817 801,382 3,627,383

Total Bulk Landed...... 5,939,303 27,068,586 941,817 1,110,503 662,793 1,825,106 13,966,243 51,514,351 Shipped Exports...... 72,471,097 5,496,419 354,116 2,711,533 160,963 153,048 34,017,504 115,364,680 Coastwise ...... 26,831 1,554,485 — — 958,114 661,182 — 3,200,612

Total Bulk Shipped ...... 72,497,928 7,050,904 354,116 2,711,533 1,119,077 814,230 34,017,504 118,565,292 Transhipment Cargo ...... — 81,898 — — — — 1,707,374 1,789,272

Total Bulk Handled ...... 78,437,231 34,201,388 1,295,933 3,822,036 1,781,870 2,639,336 49,691,121 171,868,915

Six months ended 30 September 2009

Richards East Port Mossel Cape Bay Durban London Ngqura Elizabeth Bay Town Saldanha Total

(in metric tonnes) Bulk Cargo Handled Landed Imports ...... 1,809,654 12,640,846 30,998 — 104,043 376,076 658,033 4,291,638 19,683,556 Coastwise...... 140,632 71,769 462,084 — 410,420 18,456 150,911 134,727 1,388,969

Total Bulk Landed... 1,950,286 12,712,615 493,052 — 514,463 394,532 808,945 4,426,365 21,072,525 Shipped Exports ...... 32,801,107 2,937,499 230,435 — 1,611,577 89,147 81,160 23,432,577 61,183,507 Coastwise...... 6,968 674,087 — — — 520,078 362,024 — 1,563,157

Total Bulk Shipped . 32,808,075 3,611,586 230,435 — 1,611,577 609,227 443,184 23,438,577 63,020,443 Transhipment Cargo.. — 32,367 — — — — — 1,905,307 1,837,674

Total Bulk Handled . 34,758,361 16,128,835 723,487 — 2,126,040 1,003,759 1,252,129 29,764,250 85,756,863

Break-bulk Cargo and Automotive: The main commodity contributors for break-bulk (excluding automotives) are steel, ferrochrome, fruit and granite. These commodities collectively represented 68 per cent. and 76.4 per cent. of break-bulk volumes at the ports (excluding automotives) in Financial Year 2009 and the six months ended 30 September 2009, respectively.

94 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The breakdown of break bulk cargo landed (both imported and coastwise), shipped (both exported and coastwise) and transhipped at the seven ports in the Republic of South Africa in Financial Year 2009 and the six months ended 30 September 2009 are set out below: Year ended 31 March 2009

Richards East Port Bay Durban London Elizabeth Mossel Bay Cape Town Saldanha Total

(in metric tonnes) Break-bulk Cargo Handled Landed Imports ...... 135,690 2,619,003 224,154 328,493 (846) 76,392 47,414 3,430,300 Coastwise ...... — 288 — — 28,488 199 — 28,975

Total Break-bulk Landed...... 135,690 2,619,291 224,154 328,493 27,642 76,591 47,414 3,462,275 Shipped Exports...... 3,776,300 2,925,110 397,444 520,575 — 159,860 544,460 8,323,749 Coastwise ...... — 37,378 — — 42,621 3,217 — 83,216

Total Break-bulk Shipped..... 3,776,300 2,962,488 397,444 520,575 42,621 163,077 544,460 8,406,965 Transhipment Cargo ...... 109 189,445 1,346 4,579 — 87,026 — 282,505

Total Break-bulk Handled..... 3,912,099 5,771,224 622,944 853,647 70,263 326,694 591,874 12,151,744

Six months ended 30 September 2009

Richards East Port Mossel Cape Bay Durban London Ngqura Elizabeth Bay Town Saldanha Total

(in metric tonnes) Break-bulk Cargo Handled Landed Imports ...... 27,295 928,806 50,022 720 190,942 — 28,928 1,661 1,228,374 Coastwise...... 24,386 5,705 — — — 15,566 3,953 — 49,610

Total Break-bulk Landed ...... 51,681 934,511 50,022 720 190,942 15,566 32,881 1,661 1,277,984 Shipped Exports ...... 2,016,689 1,189,359 151,170 — 132,229 — 147,470 289,748 3,926,665 Coastwise...... — 14,671 — — — 18,525 895 — 34,091

Total Break-bulk Shipped ...... 2,016,689 1,204,030 151,170 — 132,229 18,525 148,365 289,748 3,960,756 Transhipment Cargo.. — 69,708 — — 44 — 78,228 — 147,980

Total Break-bulk Handled ...... 2,068,370 2,208,249 201,192 720 323,215 34,091 259,474 291,409 5,386,720

95 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Total 398,620 390,818 1,764,560 31117,895 Total 194,996 691,980 168,617 653,075 238,262 902,708 209,333 861,852 Empty Total 430,346 1,887,089 638,463 1,913,580 301,572 1,454,935 516,946 1,478,517 Total 1,068,809 3,800,669 9,184 6,339 15,523 158,877 34,377 193,254 159,878 32,955 192,833 16,579 24,757 41,336 5,574 17,507 18,936 36,443 Cape Town Full Empty Total Full Empty 17,371 63,060 296,039 102,581 17,392 60,132 286,801 104,017 4,2077,26011,4677,58410, National Ports Authority’s ports handled a 36,1098,66744,776 273,046 107,300 380,346 1,316,965 447,595 Cape Town Of this total, Durban handled 2.6 million TEUs Full Empty Total Full 623 1,732 939 2,671 74,225 77,597 55,110 132,707 496,984 72,545 116,955 26,935 143,890 484,458 86,178 117,913 71,037 188,950 664,446 83,756 155,133 36,263 191,396 652,519 523,317 251,710 775,027 2,731,860 226,783 158,721 385,504 1,456,743 296,534 92,989 389,523 1,275,117 175,460 123,696 299,156 1,153,363 246,764 74,125 320,889 961,571 million TEUs (67.74 per cent.), Cape Town handled shipped, coastwise and transhipped for each port in 581 10,588 36,446 8,389 44,835 2,261 8,583 17,633 26,216 Port Elizabeth 2,163 2,344 4,081 1,493 Total Full Empty Total Port Elizabeth 008905391,429 0010,24627810,524 Ngqura 0 22,187 2,646 24,833 45,689 0 21,556 1,760 23,316 42,740 (TEUs) 0 0 0 53,402 20,823 0 0 0 40,627 31,918 0 0 0 115,281 54,653 169,934 0 0 0 64,538 21,640 0 0 0 50,743 33,013 0 0 0 10,007 0 0 0 109 514 Total Full Empty Total 56,767 279,922 118,785 398,707 28,684 186,566 26,596 213,162 28,083 93,356 92,189 185,545 28,272 163,268 24,317 187,585 28,063 70,988 87,380 158,368 Year ended 31 March 2009 0 0 0 412 1,742 519 Six months ended 30 September 2009 East London 0 0 0 20 20 181 412 East London 0000 Full Empty Total Full Empty 2009 is set out below. a total of 3.8 million TEUs of containers in Financial Year 2009. 307,343 per cent.) and Port Elizabeth handled 398,707 (10 per cent.). Transnet ended 30 September 2009. Of this total, Durban handled 1.2 8 28,453 12,169 0 60 60 479,059 9,207 31 9,238 622,925 9,207431,994 31 694 9,238 7,252 7,946 583,211 702 7,412 8,114 138,864 139,048 8 100 108 1,206,136 9,909 7,443 17,352 82,549 310,622 Empty Total Full Empty handled 170,642 (9.58 per cent.). The number of containers landed, 237,987 1,255,664 24,052 4,632 666,132 2,560,937 27,618 29,149 146,517 935,874 23,640 4,632 428,145 1,305,273 3,566 24,517 330,388 966,198 3,566 24,497 ,5155,0020000 Durban Durban 0 5,842 6,605 12,447 Total Full Empty Total 0 27 222,478 84,865 0 Richards Bay 0002,4872 0 0 0 114,847 24,017 0 0 0 7,343 4,826 0 0 0 113,741 25,307 Richards Bay 203 410 613 359,076 119,983 203 410346 613 141 476,410 146,515 487 328,425 103,569 346 141 487 449,509 133,702 549 551 1,100 925,919 280,217 0 0 52 52 13,245 15,20 27 90 15 105 228,073 Full Empty Total Full 1,665 2,410 4,075 1,017,677 4,533 623 5,156 877,128 6,198 3,033 9,231 1,894,805 1,638 2,410 4,048 789,357 4,443 556 4,999 635,810 ...... : : : : Containers Invoiced Transhipped Landed Deep sea Total Landed Shipped Deep sea Transhipped Total Shipped Grand Total Containers Invoiced Full Empty Landed Deep sea Coastwise Coastwise Coastwise Transhipped Total Landed Shipped Deep sea Coastwise (67 per cent.), while Cape Town handled 775,027 TEUs (20 Containers: Transnet National Ports Authority’s ports handled Total Shipped Transhipped total of 1.76 million TEUs of containers in the six months 385,270 TEUs (21.63 per cent.) and Port Elizabeth Financial Year 2009 and the six months ended 30 September Grand Total

96 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Customers Transnet National Ports Authority’s customers include terminal operators, shipping lines, ship agents, cargo owners and the clearing and forwarding industry. No single customer contributed more than 9 per cent. and 11 per cent. of the division’s segment external revenues in Financial Year 2009 and in the six months ended 30 September 2009, respectively. Transnet National Ports Authority’s largest customers are Bidvest Group (Pty) Limited and Grindrod Limited which accounted for approximately 8 per cent. and 7 per cent. of Transnet National Ports Authority’s external revenue in Financial Year 2009, respectively, and for approximately 9 per cent. and 8 per cent., respectively, of external revenue in the six months ended 30 September 2009.

Source of Revenue, Pricing and Tariffs Transnet National Ports Authority earns the majority of its revenue by charging tariffs for the provision of three basic services: marine services, provision and maintenance of port infrastructure and leasing of port land to terminal operators. Marine services include the provision of pilot services to bring vessels into port (basic fee plus an amount per 100 tonnes gross tonnage ‘‘GT’’), tug services to vessels in the port (per service based on vessel GT plus an amount per 100 tonnes as part thereof) and berthing services to vessels tying-up alongside the berth in port (basic fee per service plus an amount per 100 tonnes or part thereof). The provision and maintenance of port infrastructure, port terminals and port facilities generates revenues through port dues (basic fee per 100 tonnes or part thereof plus per 100 tonnes or part thereof per 24 hour period) for the provision and maintenance of entrance channels, breakwaters, basins, navigational aids and maintenance dredging inside port limits, cargo dues for the provision and maintenance of port infrastructure and berth dues for vessel occupying quays or repair quays while not engaging in the loading or unloading of cargo. In addition, Transnet National Ports Authority generates revenue by leasing port land to terminal operators for a rental fee. Finally, Transnet National Ports Authority also generates revenue through vessel traffic service charges (per vessel GT per port call) and light dues for the provision of navigational aids alongside the coast of the Republic of South Africa and within ports (per 100 tonnes GT or part thereof).

Regulation of Transnet National Ports Authority Transnet National Ports Authority operates within a ports regulatory environment that is regulated by, amongst other pieces of legislation, the National Ports Act. The National Ports Act was signed into law by the President of the Republic of South Africa on 31 July 2005 and thereafter published in the Government Gazette on 4 August 2005. It became effective on 26 November 2006. The main purpose of the National Ports Act is to provide for the establishment of the National Ports Authority and a Ports Regulator. Section 11 of the National Ports Act prescribes the core function of Transnet National Ports Authority as the National Ports Authority, which is to own, manage, control and administer ports to ensure their efficient and economic functioning. In fulfilling its function Transnet National Ports Authority must, inter alia: * plan, provide, maintain and improve port infrastructure; * provide or arrange marine-related services; * ensure the provision of port services, including the management of port activities and the port regulatory function at all South African ports; and * provide navigation aids to assist the navigation of vessels within port limits and along the coast. Apart from setting out the functions of Transnet National Ports Authority, the National Ports Act authorises Transnet National Ports Authority to enter into agreements with persons, whereby that person is authorised to design, construct, rehabilitate, develop, finance, maintain or operate a port terminal or port facility in the Republic of South Africa. Transnet National Ports Authority is then required to monitor and review the performance of that person in accordance with the agreement. Section 29 of the National Ports Act establishes an independent ports regulatory body to be known as the Ports Regulator. The main functions of the Ports Regulator will be to: * exercise economic regulation of the ports system in line with the Government’s strategic objectives, which includes the annual approval of National Ports Authority’s tariffs; * promote equity of access to ports and to facilities and services provided in ports; and

97 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * monitor the activities of the National Ports Authority to ensure that it performs its functions in accordance with the Act. The National Ports Act creates a dual role for Transnet National Ports Authority. As the manager, controller and administrator of ports, Transnet National Ports Authority must, amongst other things, control port services through licensing or entering into agreements with operators, and as a regulated entity, it must have its tariffs approved by the Ports Regulator and may have its decisions overturned by the Ports Regulator. The National Ports Act has had a significant impact on Transnet National Ports Authority. In its preparation to comply with the provisions of the Act, Transnet National Ports Authority has: * drafted Port Rules, which have been approved by the Minister of Transport. These Port Rules aim to ensure proper control and management of ports, the regulation and control of navigation with the approaches to ports and the maintenance of safety, security and good order in ports as well as the protection of the environment; * prepared guidelines, approved as Transnet policy, for the issuing of agreements, licences and permits; * submitted a tariff application for Financial Year 2009/10 for approval to the Ports Regulator on 1 August 2008 and received a response from the Ports Regulator on 19 January 2010 that the Ports regulator approved a 4.42 per cent. increase in Transnet National Ports Authority’s tariffs for the Financial Year 2010; and * commenced the provision of a framework for conversion of deemed licences to deal with the transitional arrangement for existing port service providers (i.e. parties that provided port services on or before 26 November 2006 are deemed to hold licenses to provide such services and must apply to Transnet National Ports Authority for new licenses within six months of a date to be set by the Minister of Public Enterprises). Although provision for the establishment of a ports regulator was made at the inception of the National Ports Act in 2006, the Ports Regulator only became operational in 2008, and for this reason the impact of regulation on Transnet National Ports Authority’s operations and finances has yet to be assessed. However, from an operational perspective, the Port Rules, approved at ministerial level, provides each harbour master with a recognised framework for decision-making, compliance and control. New security measures that affect Transnet National Ports Authority’s business include the International Ship and Port Facility Security Code (‘‘ISPS Code’’), which was implemented in 2004, and, to the extent that Transnet’s terminals handle cargo destined for the United States, the global security initiatives emanating from the US Safe Ports Act of 2006, specifically the Container Security Initiative and the Secure Freight Initiative.

Assets Transnet National Ports Authority owns all port land, port infrastructure (such as breakwaters, seawalls and jetties), marine fleet and equipment utilised to serve vessels calling at its ports. The ICM, as originally drafted and ratified, contained certain sections that would have required Transnet to transfer ownership of all assets located in the coastal property zone to the Government. Before the ICM came into operation on 1 December 2009, the Government excluded these provisions, specifically, sections 11, 65, 66, 95, 96 and 98, from coming into operation with the rest of the ICM. Section 11 of the ICM provides for the ownership of coastal public property to vest in the citizens of the Republic of South Africa and to be held in trust by the Government on their behalf. It further prohibits the sale, alienation and transfer of coastal public property. Sections 65 and 66 of the ICM prevent, among other things, persons from occupying any part of, constructing, or erecting any building, road, barrier or structure on or in coastal public property without being awarded a lease by the Minister of Environmental Affairs and Tourism. Section 96 of the ICM provides for the demolition of any structure constructed unlawfully on coastal public property prior to the implementation of the Act. Finally, Section 98 of the ICM provides for the repeal of certain legislation that currently governs the use of coastal property, including the Sea Shore Act, 1935, which legislation now continues in effect in parallel with the remaining provisions of the ICM. See ‘‘Risk Factors – Transnet risks losing substantial assets to the Government should the National Environmental Management: Integrated Coastal Management Act, 2008 be enacted, in its current form’’.

98 c101680pu040Proof18:26.1.10B/LRevision:0OperatorDavS Transnet Port Terminals Transnet Port Terminals was established in 2000 when Transnet’s then existing port division, Portnet, was divided into operations and landlord businesses, namely what is now Transnet Port Terminals and Transnet National Ports Authority. Since its inception, Transnet Port Terminals has played a key role in supporting the South African government’s export-led growth strategy. Transnet Port Terminals contributed 15.0 per cent. and 14.35 per cent. to the Group’s total external revenue in Financial Year 2009 and in the six months ended 30 September 2009, respectively. As a result of the world economic crisis, Transnet Port Terminals’ volumes in Financial Year 2009 in all sectors (with the exception of the bulk sector) were down or on par with the prior financial year. Transnet Port Terminals’ revenue increased by 4 per cent. from Financial Year 2008 to Financial Year 2009. The marginal increase in revenue for Financial Year 2009 was assisted by improved commercial agreements in iron ore and manganese. Personnel costs were contained below inflation. Energy costs increased by 26.5 per cent. due to escalating fuel prices and higher electricity tariffs. The increase in other operating costs was due to land rentals as a result of the expansion programme. Transnet Port Terminals’ revenue for the six months ended 30 September 2009 decreased by 8.5 per cent. compared to the six months ended 30 September 2008. South African import and export commodities are handled through the Republic of South Africa’s six largest ports: Richards Bay, Durban, Saldanha, Cape Town, Port Elizabeth and East London. The division not only handles these cargoes but also implements logistics management solutions for its container, bulk, break-bulk (multi-purpose) and car terminal operations. The largest of these is the container sector, which contributed 58 per cent. of Transnet Port Terminals’ revenue and 63 per cent. of its EBITDA in Financial Year 2009.

Strategy Transnet Port Terminals’ strategic objectives under the Growth Strategy include the following: (i) increase revenues by developing new business opportunities, strategic partnerships and realising corridor synergies; (ii) create capacity ahead of demand in line with Transnet’s commitments; (iii) grow market position by ensuring that Transnet Port Terminals is recognised as an efficient, safe, reliable and cost competitive operator; and (iv) contain operating costs per unit of volume to an increase less than CPIX cost increases.

Services Transnet Port Terminals provides a range of cargo-handling and warehouse services to a wide variety of customers, including shipping lines, freight forwarders and cargo owners in the container, bulk, break-bulk and automotive cargo sectors. It provides these services at the 16 cargo terminals it operates across seven South African ports. Bulk Terminals: Transnet Port Terminals has five bulk terminals located at Richards Bay, Saldanha, Durban, East London and Port Elizabeth that handle a variety of commodities including iron ore, manganese, magnetite, anthracite and steam coal. The Saldanha Iron Ore Terminal is the country’s only iron ore terminal and has the largest iron ore export facility in Africa as measured by volume passing through the terminal. Between Financial Year 2007 and Financial Year 2009, expansions to the Saldanha Iron Ore Terminal increased the terminal’s iron ore export offloading capacity from 31 million tonnes a year in Financial Year 2007 to 45 million tonnes per year in Financial Year 2009. Expansions to increase the terminal’s export capacity from 45 million tonnes a year in Financial Year 2009 to 58 million tonnes per year in Financial Year 2012 are underway. The Richards Bay dry bulk terminal handles a variety of commodities such as magnetite and steam coal through its conveyor system. A high volume woodchip loader commissioned in 2004 has made this terminal one of the world’s most efficient woodchip loading facilities. Break-Bulk Terminals: Transnet Port Terminal’s break-bulk or multi-purpose terminals are located in Cape Town, Durban, East London, Port Elizabeth, Richards Bay and Saldanha. Cargoes at those terminals range from fresh produce, grains and animal feed, to woodchip, metals and coal. Automotive Terminals: Transnet Port Terminals operates automotive terminals at the ports of Durban, Port Elizabeth and East London, which were involved in the export and import of 521,475 vehicles in Financial Year 2009 and 160,574 vehicles in the six months ended 30 September 2009. See also ‘‘– Transnet National Ports Authority – Services – Break-Bulk Cargo and Automotive’’. The Durban automotive terminal handles approximately two-thirds of all the seaborne vehicles leaving or entering the Republic of South Africa.

99 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Container Terminals: Transnet Port Terminals includes five container terminals, with two in Durban, and one in each of Cape Town, Port Elizabeth and East London. A sixth container terminal at the Port of Ngqura became operational in October 2009. Durban, Africa’s busiest port as measured by capacity and throughput has Africa’s largest container terminal as measured by volume passing through. Transnet plans to increase its capacity of approximately 2.3 million TEUs a year over the next three financial years to 2.9 million TEUs a year by 2013 to cope with the anticipated global growth in container traffic. Cape Town’s container terminal is a well-located hub for traffic from the west of the Northern hemisphere and to South America and the Far East. The container-handling facility at Port Elizabeth handles approximately 400,000 TEUs a year and specialises in cargoes for the vehicle manufacturing and vehicle components industries. See also ‘‘– Transnet National Ports Authority – Services – Containers’’.

Customers Transnet Port Terminals’ major customers represent a broad spectrum of the economy and include the shipping industry, vehicle manufacturers, the agriculture, timber and forest industries, the mining industry and exporters of minerals, metals and granite. Transnet Port Terminals’ major customers are Maersk and Mediterranean Shipping Company, which accounted for 22 per cent. and 19 per cent., respectively, of Transnet Port Terminals’ segment total revenue for the year ended 31 March 2009.

Source of Revenue, Pricing and Tariffs Transnet Port Terminals earns revenues through the levying of charges for loading, offloading and other cargo handling charges as well as for the storage of cargo.

Assets Transnet Port Terminals operates each of its terminals, and owns all equipment used in the transportation of cargo from the ships to the stacking areas, including cranes.

Regulation The regulations and directives for Transnet Port Terminals were published by the Ports Regulator on 6 August 2009 and Transnet currently intends to challenge the new tariff directives, particularly as they relate to mathematical caps applied to Transnet National Ports Authority’s tariffs and discretion given to the Ports Regulator to prohibit Transnet National Ports Authority from recovering its investments and costs in ports and making a profit commensurate with the risk of owning, managing, controlling and administering ports and providing port services and facilities.

Transnet Pipelines Transnet Pipelines owns and operates the Republic of South Africa’s 3,000 kilometres of strategic petroleum and gas pipeline infrastructure, transversing five provinces: KwaZulu-Natal, Free State, Gauteng, North West and Mpumalanga. Transnet Pipelines contributes significantly to the South African economy as it is charged with securing the supply of liquid fuels in the country, especially to Gauteng, the Republic of South Africa’s economic heartland. South African pipelines are regulated by NERSA. The regulator is responsible for, among other things, establishing tariffs as well as technical regulation. Transnet Pipelines’ total segment revenue decreased by 10.44 per cent. from R 757 million in the six months ended 30 September 2008 to R 678 million in the six months ended 30 September 2009. This decrease in revenue resulted principally from NERSA’s decision to reduce tariffs by 10.40 per cent. per annum. The pipeline system transported approximately 17 billion litres of liquid fuel and over 490 million cubic metres of gas in Financial Year 2009 and approximately 8.9 billion litres of liquid fuel and 234.9 million cubic metres of gas in the six months ended 30 September 2009. Volume distribution of liquids in the pipeline system, measured according to megalitre kilometre (ml.km) increased by 6.1 per cent. in Financial Year 2009 compared to Financial Year 2008 and increased by 7.1 per cent. in the six months ended September 2009 compared to the six months ended 30 September 2008.

Strategy The strategic objective of Transnet Pipelines under the Growth Strategy is to ensure the secure supply of petroleum products to the inland market, notably through the timely completion and commissioning of the NMPP.

100 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS In the Financial Year 2010, Transnet Pipelines plans to focus on managing its relationship with NERSA and facilitating the achievement of the requirements of the Energy Security Master Plan for Liquid Fuels of the then South African Department of Minerals and Energy (now the Department of Energy). In addition, Transnet Pipelines plans to reinforce the importance of safety within its depots and for petroleum products in transit, as well as manage the limited capacity in the existing pipeline network.

Services Transnet Pipelines currently transports gas, crude oil, aviation turbine fuel, diesel and various grades of petrol. Transnet’s petroleum network covers the provinces of KwaZulu-Natal, Free State, Gauteng, North West and Mpumalanga. Transnet’s gas network runs between Secuda and Durban via Newcastle and Empangeni. The table below sets out key statistics for Transnet Pipelines for Financial Year 2009, 2008 and 2007 and the six months ended 30 September 2009 and 2008: Six months ended 30 September Year ended 31 March

2009 2008 2009 2008 2007

Infrastructure Capital expenditure (R millions)..... 1,252 584 2,772 865 315 Efficiency Total operating costs per million litres km of product conveyed (in Rand)(Nominal) ...... 47.97 48.88 53.60 42.20 38.63 Volume Total petroleum volumes (billion litres km) ...... 3,694 3,449 7,023 6,619 6,466 Total gas volumes (million m3) ...... 235 237 494 473 399

Customers Transnet Pipelines’ customers include the Republic of South Africa’s largest fuel companies: British Petroleum, Chevron, Engen, Sasol Oil, Sasol Gas, Shell and Total. Transnet Pipelines’ customers also include smaller local South African companies, the largest of which is Vuyo Petroleum. These customers together accounted for 98 per cent. of Transnet Pipelines’ segment external revenues in Financial Year 2009.

Sources of Revenue and Pricing Transnet Pipelines’ petroleum pipeline tariffs are set by NERSA pursuant to the Petroleum Pipelines Act. NERSA is empowered, under the Petroleum Pipelines Act, to license petroleum pipelines and storage facilities and to set and approve tariffs as a condition of licence. Under the Gas Act 2001 (the ‘‘Gas Act’’), NERSA is authorised to regulate prices and to monitor and approve, and, if necessary, regulate gas transmission and storage tariffs. NERSA has adopted a rate of return approach for the regulation of the petroleum pipelines industry. This approach requires the determination of the allowable revenue and then the use of this figure to set tariffs such that the total revenue from those tariffs equals the allowable revenue. In November 2008, Transnet applied to NERSA for a petroleum revenue requirement of R 2,043.4 million, which translated into an average petroleum pipeline tariff increase of 74.42 per cent. for Financial Year 2010. Transnet Pipelines intended to use the proceeds from the requested tariff increase to fund the operation of its existing pipeline network and support the construction of the NMPP which is to replace parts and increase the capacity of the existing pipeline network. However, NERSA set tariffs only for the operation of the existing (assets in use) system and approved an allowable revenue of R 1,093.03 million, which has translated into a tariff decrease of 10.38 per cent. over a 12 month period for Financial Year 2010. One of the main reasons for the decrease in tariffs is NERSA’s rejection of the ‘‘F-Factor’’, which is an allowance for Transnet Pipelines to maintain a reasonable debt service cover ratio. NERSA’s interpretation of the applicable legislative framework is that such a factor cannot be included in

101 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Financial Year 2010 allowable revenue. However, Transnet’s view is that NERSA’s rejection of the F-factor postpones the recovery of such amount to some future date.

Assets Transnet Pipelines currently owns approximately 3,000 kilometres of pipeline infrastructure with a current volume distribution of 7.023 billion litre kilometres per annum. Transnet Pipelines’ network consists of four main lines, including the refined product network, the crude oil pipeline, the gas pipeline and the Avtur pipeline. Transnet Pipelines also has 13 intake and delivery depots and a storage facility in the form of a tank farm with a capacity of approximately 29.4 million litres which is primarily used for the distribution of petroleum into Botswana. Transnet expects that the NMPP, which is currently scheduled for completion in late 2011, will replace ageing assets and increase Transnet Pipelines’ current capacity and refined petroleum product transportation market share. The NMPP is anticipated to consist of 550 kilometres of 24 inch pipeline between Durban and Jameson Park in Gauteng and 170 kilometres of 16 inch pipeline for the inland network. Transnet’s current pipelines range from six inches to 20 inches in diameter. Through the NMPP, Transnet Pipelines aims to decrease the volume of road traffic and improve security of petroleum product supply to the inland market.

Capital Expenditure Programme Introduction The Group’s capital investment strategy consists of a five-year Capital Expenditure Programme for Financial Years 2010 to 2014. The Capital Expenditure Programme is focused on key corridors and sector investments. The five-year Capital Expenditure Programme, as reflected in the 2010 Corporate Plan, amounts to R 80.5 billion, excluding the capitalisation of borrowing costs, which amounts to an additional R 7.1 billion. Transnet currently estimates that of the R 80.5 billion, R 39 billion will be spent on expanding capacity and R 41.5 billion will be spent on maintaining existing infrastructure and equipment. Although the Capital Expenditure Programme has been reviewed and revised in the context of the economic downturn and the impact the downturn has had on volumes as well as capacity requirements, Transnet is still committed to investing in infrastructure to provide capacity ahead of demand, provided that such investment is commercially viable. All priority, strategic and sustaining capital projects that are currently under way are provided for within the current scope of the Capital Expenditure Programme. Transnet’s commitment to the Capital Expenditure Programme underscores its intention to support its infrastructure and services in order to assist the manufacturing, petroleum and mining sectors to take advantage of future economic growth or demand. Given the current economic downturn and the slowdown in volumes experienced in the first nine months of calendar year 2009, the Group will continue to reprioritise its focus in accordance with current business requirements and growth expectations for key corridors. Capital Planning and Execution The capital investment planning process has been aligned with the Government’s National Infrastructure Plan, and the projects identified are part of the Transnet rolling five-year capital planning cycle. The proposal for a capital project may arise from a number of areas which include business needs, safety requirements, client requests, revenue opportunities identified through market research, a necessity to refurbish a facility that has reached the end of its useful life and investments that are considered strategic. Divisions are expected to identify opportunities and present their proposals to the governing structures to obtain approval to commence with the capital project. Transnet has adopted an integrated approach to the planning and execution of capital projects to create capacity throughout the value chain and across the divisions. In this way, all divisions contribute cumulatively to the growth strategy. A specialist unit, Transnet Capital Projects, executes centrally focused projects that cross multiple divisions within the Group, in addition to a number of mega-projects on behalf of individual divisions. It is Transnet Capital Projects’ responsibility to roll out projects within its control from the initial feasibility phase to the eventual handover to the operating divisions. This enables divisions to focus on their core activities. The economic downturn has necessitated that Transnet reprioritises projects to be aligned with the scaled down volume requirements of major clients. This has primarily resulted in a reallocation of the planned capital expenditure over the five Financial Years commencing with Financial Year

102 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 2010. Transnet will closely monitor and control spending of the planned amount during the year to help limit spending to the set Group financial parameters and funding thresholds. Where business opportunities identified during the year require further investments, these will be subject to additional evaluations and governance processes. This process aims to meet all the set criteria and mitigate financial and operational risks in future. Transnet is committed to both sustaining the current infrastructure and to expanding the business. Cumulatively, R 39.0 billion (48 per cent. of the Investment Plan) will be spent on the expansion of the business and R 41.5 billion on maintaining infrastructure over the five Financial Years commencing with Financial Year 2010. Of the total R 39.0 billion expected to be spent on the expansion of the business, Transnet expects that approximately R 33.3 billion of this amount will be spent over the three Financial Years commencing with Financial Year 2010. This expenditure will mainly serve to increase capacity in the ports (R 16.1 billion), rail infrastructure and rolling stock (R 11.2 billion) and to increase pipeline throughput (R 11.1 billion) over the period. Of the planned R 80.5 billion investment, R 57.2 billion (71 per cent.) relates to existing projects while R 23.3 billion (29 per cent.) relates to new projects. The approval and governance process of capital investments is as follows: Capital Investment Proposals Capital investment proposals submitted to Transnet Capital Projects generally indicate whether the project is an expansionary or maintenance project. The proposal also generally includes a description of business trends and the benefits that the new capital project are expected to yield. The estimated total cost together with the project plan and key milestones are drafted in the submission. The various asset classes involved (for example rolling stock and equipment infrastructure) and the result of the financial evaluation model (net present value, internal rate of return and discounted payback period) are key inclusions generally contained in the capital investment proposals. Other criteria included in the business cases are cost, time, quality, local content, safety and risk. Divisional Investment Committees Divisions may approve projects with an estimated total cost of up to R 100 million to the extent the projects have been included in the Capital Expenditure Programme. Group Capital Investment Committee The Capital Expenditure Programme is overseen by the Capital Investment Committee (‘‘CAPIC’’), a committee of the Transnet Limited Group Executive Committee. CAPIC is responsible for: (i) ensuring that capital investment projects are consistent with the strategic focus of the Group; (ii) ensuring that capital expenditure decisions are in accordance with budget and business plans approved by the Board of Directors; (iii) prioritising capital expenditure projects; (iv) monitoring the implementation of project plans to ensure approved capital expenditure projects are carried out with minimal or no delays; (v) reviewing and amending expenditure plans in the event of any unforeseen and unavoidable circumstances, subject to Group limits of authority and the limitations of the Board-approved budget; (vi) ensuring proper compliance with applicable processes such as risk management and making sure that such projects reflect value for money; and (vii) conducting post-implementation reviews to determine whether value has indeed been derived by Transnet from the relevant capital investment. Construction and infrastructure maintenance projects with a value of between R 20 million and R 300 million (‘‘major projects’’) and construction type projects with a value greater than R 300 million (‘‘mega projects’’) are also overseen and project managed by Transnet Capital Projects (‘‘TCP’’), a support unit to Transnet’s business units. TCP assists Transnet’s divisions in the implementation of the Capital Expenditure Programme, and focuses on prioritising rehabilitation, maintenance and emergency projects to ensure sustainability and proper functioning of Transnet’s assets. CAPIC may approve projects that have been supported by the divisional investment committees up to an estimated total cost of R 400 million. Other responsibilities of CAPIC include: * approval of capital projects within the delegated authority; * monitoring capital expenditure against the budget and business plans, as approved by Transnet’s Board of Directors; * determining criteria for the prioritisation of capital investments; and

103 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * monitoring the physical progress of projects to prevent delays and cost overruns and completion of projects on time and within budget. Board of Directors The Board of Directors considers and approves the annual capital expenditure budget and the four- year projections of capital expenditures of the Group. Furthermore the Board of Directors evaluates and approves the nature and scope of a proposed variation to any previously approved capital expenditure project in excess of R 700 million. The Board of Directors also approves capital expenditure funding for the Group, subject to shareholder approval as may be required by law. In addition, the Board of Directors aims to ensure that an adequate capital planning process is put in place and that performance is measured against set criteria, including budgets and project plans. Planned Capital Expenditure by Operating Division and Sector The following table summarises the Group’s planned capital expenditures, by operating division, for each Financial Year 2010 through 2014. See ‘‘Cautionary Note Regarding Forward Looking Statements’’ and ‘‘Risk Factors – Risks Related to Transnet’s Business’’.

Year ended 31 March

Five-year Division 2010 2011 2012 2013 2014 plan

(Budget) (Projections) (Projections) (Projections) (Projections) (R millions) Transnet Freight Rail ...... 10,063 10,482 8,277 7,869 6,840 43,531 Transnet Rail Engineering ...... 487 345 341 428 495 2,096

Total Rail ...... 10,550 10,827 8,618 8,297 7,335 45,627

Transnet National Ports Authority. 3,974 3,144 3,815 3,742 1,576 16,251 Transnet Port Terminals ...... 2,743 1,526 1,298 563 144 6,274

Total Ports...... 6,717 4,670 5,113 4,305 1,720 22,525

Transnet Pipelines...... 4,356 3,722 2,368 491 189 11,126

Total Pipeline ...... 4,356 3,722 2,368 491 189 11,126

Specialist units...... 289 223 237 238 236 1,223

Total capital expenditure ...... 21,912 19,442 16,336 13,331 9,480 80,501

Capitalised borrowing costs...... 1,850 1,854 2,212 663 489 7,068

Total...... 23,762 21,296 18,548 13,994 9,969 87,569

In response to the effects of the global economic downturn, Transnet has re-prioritised some of its investment projects to reflect decreasing volume requirements of its major clients. Transnet closely monitors and controls spending of planned amounts during each year to help ensure that spending remains within the set financial parameters and funding thresholds. If business opportunities identified during the year require further investments, CAPIC subjects any related request to robust evaluations and governance processes. This approach is designed to assist in meeting all the set criteria and help mitigate and protect against increased financial and operational risks in the future.

104 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The following table summarises how much of the Group’s planned capital expenditures (excluding capitalised borrowing costs) are anticipated to be applied to maintenance projects and expansion projects, for Financial Years 2010 through 2014. See ‘‘Cautionary Note Regarding Forward Looking Statements’’ and ‘‘Risk Factors – Risks Related to Transnet Business’’.

Expansion Maintenance Year Ended 31 March Projects Projects Total

(R millions) (R millions) (R millions) 2010 (Budgeted)...... 12,841 9,071 21,912 2011 (Projections) ...... 11,321 8,121 19,442 2012 (Projections) ...... 9,156 7,180 16,336 2013 (Projections) ...... 3,892 9,439 13,331 2014 (Projections) ...... 1,762 7,718 9,480

Total for five years ...... 38,972 41,529 80,501

The following table summarises the Group’s planned capital expenditures (excluding capitalised borrowing costs) by major asset class for Financial Years 2010 through 2014.

Five-year Capital Investment Split per Major Asset Class Rail

(R millions) Land and buildings ...... 1,611 Infrastructure...... 16,842 Machinery and equipment ...... 1,424 Rolling stock and containers...... 25,750

Total ...... 45,627

Ports

(R millions) Land, buildings and infrastructure...... 1,317 Machinery and equipment ...... 1,461 Port facilities ...... 16,743 Floating craft...... 3,004

Total ...... 22,525

Pipelines and Specialist Units

(R millions) Pipeline networks...... 10,576 Buildings and structures ...... 419 Machinery and equipment ...... 131 Specialist Units ...... 1,223

Total ...... 12,349

Under its Growth Strategy, Transnet intends to concentrate its efforts on the following commodities during Financial Year 2010: containers, export coal, export iron ore, and liquid bulk. Transnet also intends to invest a substantial amount under the Capital Expenditure Programme to service all other commodities and to maintain existing services.

105 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The following table summarises the Group’s planned capital expenditures (excluding capitalised borrowing costs) by commodity for Financial Year 2010 to Financial Year 2014:

Five-year capital Commodity expenditure

(R billions) Containers...... 12.7 Export coal...... 8.8 Export iron ore ...... 10.2 Bulk (Ports) ...... 2.4 Break-bulk (Ports) ...... 0.9 General freight ...... 24.0 Manganese ...... 0.4 Petroleum...... 11.1 Other* ...... 10.0

Total ...... 80.5

* The category ‘‘Other’’ includes non-commodity specific investments in addition to Transnet’s investments in other commodities.

Based on the different strategies and initiatives applicable to each corridor, Transnet’s planned investment in the key corridors is set out below: * Richards Bay corridor – predominantly Coal Line investments; * NatCor – Container (Durban container terminal, Pier 1 and Salisbury Island) and bulk liquid (NMPP) investments; * Port Elizabeth/Ngqura/East London Corridor – investments pertain mainly to the new container terminal at Ngqura; * Cape Corridor investments – predominantly investments at the Cape Town Container Terminal; and * Investment on the Sishen to Saldanha corridor – predominantly export iron ore investments.

Western corridor development plans Planned development relates mainly to iron ore and containers for the western corridor. Iron ore capacity on the channel and through the Port of Saldanha is expected to increase to 93mtpa, while container capacity at the Port of Cape Town is expected to increase to 1.4 million TEUs per annum.

Central corridor development plans Central corridor investments relate mainly to the manganese, container and automotive sectors. General freight investments will be undertaken to support activities of the Coega Industrial Development Zone and influence development at the Port of Ngqura. Planned expansions at the East London and Port Elizabeth car terminals are intended to support the development plans of the motor industry. Additional container capacity at the Ngqura Container Terminal are intended to support and contribute to the South African ports system and will be reviewed as part of the container hub strategy. Plans at the Port of Ngqura include provisions for new cargoes, namely dry and liquid bulk type, generated by the Coega Industrial Development Zone, and a potential privately funded refinery.

Eastern corridor development plans The entrance channel of the Port of Durban is in the process of being expanded and, once complete, is planned to facilitate safer navigation and allow larger vessels to enter the port. Investments in containers (Durban container terminal and Pier 1), automotive (Point Car Terminal) and bulk liquid (Island View) are also being rolled out to address capacity increases and to

106 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS accommodate the trend in vessel size growth. Transnet is currently pursuing the acquisition of Salisbury Island for future container development. Work on the NatCor is ongoing, with the objective of creating capacity through efficiency improvements and the elimination of bottlenecks. Construction of the NMPP has commenced and a bridging plan is in place to ensure the security of the petroleum and gas supply while construction and commissioning of the NMPP takes place. Expansion at the Port of Richards Bay relates mainly to the dry and liquid bulk sector. Expansion of the Richards Bay Corridor is ongoing, with upgrades planned for the infrastructure and acquisition of 110 dual voltage locomotives and wagon building to support the growth in coal exports.

Gauteng and interior corridor plans The container terminal at City Deep has reached capacity; a major refurbishment is therefore planned. A rail freight ring is planned to be constructed around Gauteng, which is intended to enable better access to destinations inside Gauteng from all directions, facilitate better flows through Gauteng and contribute to more efficient operations. The Waterberg and Botswana regions are expected to develop significantly over the next 20 years, with coal being the main commodity to be transported.

Major Capital Projects This section outlines anticipated major capital projects in the Capital Expenditure Programme and the estimated total cost and planned spending for these projects over the next five financial years. The economic downturn has necessitated that Transnet reprioritises certain projects to be reflect the reduced volume requirements of Transnet’s principal clients. Transnet will closely monitor and control spending on the approved projects, to ensure that Transnet remains within the set financial parameters and funding thresholds. Cash requirements will also be reallocated accordingly.

Coal Export Line Coal Line capacity expansion: This project is intended to increase capacity on the coal export line to more than 71 mtpa. The project includes locomotives upgrades, running line upgrades and improvements in infrastructure and signalling. This project also provides the platform for further expansionary programmes should future exports exceed planned capacity. The additional coal berth constructed at the Port of Richards Bay has been completed and has been operating since July 2008. This additional berth has provided capacity for volume increases, indicating that the port is ready to handle the projected future volumes in the rail component of the supply chain. The estimated cost for the entire project is R 3.9 billion. The estimated spending for the next five financial years, commencing from the end of Financial Year 2010 is R 1.6 billion. Coal Line acquisition of 110 Dual Voltage Locomotives: Additional locomotives are required for the increased volumes on the Coal Line. Direct current (‘‘DC’’) traction is used on the route to Ermelo. From Ermelo to Richards Bay, alternating current (‘‘AC’’) is used. The dual voltage locomotives are capable of traversing both sections rather than having to change locomotive types at the Ermelo changeover yard. The aim of this project is to provide sufficient tractive capacity to accommodate volume increases, improve the reliability and availability of the locomotive fleet, free up locomotives to be used in GFB, and reduce maintenance and fuel costs. The estimated cost for the entire project is R 3.4 billion. Estimated spending for the next five financial years commencing from the end of Financial Year 2010 is R 2.8 billion.

Iron Ore export Iron Ore Line capacity expansion to 41mtpa: This iron ore export project includes expanding the rail line from Sishen to the Port of Saldanha that will continue through the port terminal onto export carrier vessels. Recent increases in global demand for mining commodities has led to increases in production capacities at the Sishen Iron Ore and Assmang mines, which, in turn, has resulted in an increase in volumes of goods transported to Saldanha for export. The expansion project includes acquiring rolling stock and upgrading existing infrastructure. This capacity expansion project will impact several of Transnet’s operating divisions, including Transnet Freight Rail, Transnet National Ports Authority and Transnet

107 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Port Terminals. The estimated cost for the entire project is R 5.1 billion. Estimated spending for the next five financial years commencing in 2010 year end is R 2.2 billion. Iron Ore Line capacity expansion to 47mtpa: This project is the second phase of the Iron Ore expansion programme discussed above. This iron ore expansion project aims to increase the capacity of existing infrastructure to accommodate transportation of 47mtpa on the iron ore line. This project is the second phase of the Iron Ore expansion programme discussed above. This project is in large part driven by increases in production of iron ore by the mines. The project includes the acquisition of rolling stock; alterations to crossing loops; and the construction of a new loop; and upgrades to rolling stock workshops and the power supply. The expansion project will affect the National Ports Authority and Port Terminals and is expected to be completed by Financial Year 2012. The estimated cost for the entire project is R 3.4 billion. Estimated spending for the next three financial years is R 1 billion. Acquisition of 50 Electromotive Diesel (‘‘EMD’’), Diesel Electric Locomotives: This project entails purchasing of 50 ‘‘like new’’ locomotives to be built by EMD in conjunction with Rail Engineering. The body, underframe, bogies and all other components are brand new, with the exception of the diesel engines and related equipment which have been refurbished to original equipment manufacturer standards. These locomotives will be operated on the GFB lines. Project benefits include the improvement in fuel consumption; savings on maintenance; and flexibility of using these locomotives over the entire network. The estimated cost for the entire project is R 0.9 billion. Total spending in the current financial year 2009/10 is R 0.3 billion. Acquisition of 100 new Diesel Electric Mainline Locomotives: The aging nature of Transnet Freight Rail’s fleet of rolling stock has impacted service reliability and predictability. Transnet Freight Rail intends to reverse this trend through the acquisition of new locomotives to be deployed on the Richards Bay (GFB), Steelpoort, South African Development Communityy and Maputo routes to transport magnetite, copper, vermiculite and rock phosphate. The estimated cost for the entire project is R 2.3 billion. Estimated spending for the next three financial years is R 2.36 billion.

Ngqura investments Construction of the Port of Ngqura: This project entails the provision and construction of basic port infrastructure for the Port of Ngqura, consisting of breakwater construction; the dredging of basin and channels; construction of a sand bypass system, five berths and back-up areas; and the provision of the initial landside infrastructure, pilot boat and tug boats. Benefits from this project should include the establishment of an additional commercial port and increased capacity in the national ports system. Ngqura is intended to be a deepwater port capable of handling the larger new generation container vessels, such as the Super Post Panamax container vessel. The estimated cost for the entire project is R 3.5 billion. Estimated spending in the next five financial years commencing from Financial Year 2010 is R 0.5 billion. Ngqura Container Terminal development: The Ngqura Container Terminal is a greenfield project with the objective of providing a full-service container terminal together with rail links to the Port of Ngqura. The rail component of the project consists of road access at Ngqura station; a container rail terminal; the construction of the Ngqura station; connection to the main line, hinterland infrastructure, bridges and structures; as well as the acquisition of rolling stock. The National Ports Authority component of the project involves developing a four-berth container terminal in two stages and further extending the port infrastructure to include a small craft basin, tugs, and buildings. The provision of the associated landside infrastructure required for a functional container terminal and other future operations is also within the current scope of the project. The ultimate objective for the project is to increase capacity in the national port system. The project is being run across the operating divisions. The estimated cost for the entire project is R 7.9 billion. Estimated spending for the next five financial years commencing from Financial Year 2010 is R 3.7 billion. Maintenance Projects Wagon maintenance Part of Transnet Freight Rail’s operating policy is to ‘lift’ wagons at two-year intervals for heavy haul wagons and at five-year intervals for GFB wagons. The body of the wagon is lifted off the

108 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS bogies for inspection, maintenance and replacement as required. This is a safety-related procedure to enable access to components of the wagons that would normally not be visible. The estimated cost for the next five financial years, commencing in Financial Year 2010, is R 4.6 billion. This project is ongoing and the estimated total cost is represented by the 5 year spend.

Infrastructure maintenance The project entails periodic heavy maintenance or replacement of the essential infrastructure components (ballast, sleepers and rail lines) so that the integrity of the track remains intact. The estimated cost for the next five financial years, commencing in Financial Year 2010, is R 7.8 billion. This project is ongoing and the estimated total cost is represented by the 5 year spend.

Locomotive maintenance The project entails maintenance intervention capitalisation during the life of the locomotive. These interventions typically include a ‘mini overhaul’ every six years and a ‘general overhaul’ every 12 years. The estimated cost for the next five financial years, commencing in Financial Year 2010, is R 4.2 billion. This project is ongoing and the estimated total cost is represented by the five year spend. Port of Durban projects Durban container sector Durban Harbour entrance channel widening and deepening: The project entails dredging, deepening and widening of the channel on the north side, with the provision of a new northern groyne; the improvement and strengthening of the south breakwater; and construction of a fixed sand bypass system. Project benefits include drastically reducing the risk of vessels grounding in the entrance channel; increasing the availability of the channel, resulting in reduced waiting times for vessels at the port due to adverse weather; accommodating larger vessels in the entrance channel, thereby enabling development of berths inside the port for larger vessels; and increasing the efficiency of port operations with lower costs to the port and the national economy. This will also enable the port to accommodate the projected container growth and the ability to accommodate larger vessels which increases the prospects of developing Durban as a hub port for the region. The estimated cost of the entire project is R 3.0 billion. Estimated spending for the next five financial years commencing in Financial Year 2010 is R 1.8 billion. Durban Container Terminal reengineering: The project entails reconfiguring the stacking area; installing automated gate access; relocating workshops to increase the quayside stacking area; and creating a greater truck staging area for the smoother flow of vehicles. The objective is to increase capacity of the Durban Container Terminal to 2.9 million TEUs by 2009. This is a joint project by National Ports Authority and Port Terminals. The estimated cost for the entire project is R 1.5 billion. Estimated spending for the next two financial years is R 0.7 billion. Acquisition of 60 replacement straddle carriers for Durban Container Terminal: The 60 replacement straddle carriers should facilitate the handling of the eventual capacity of the terminal of 2.9 million TEUs per annum. The straddles are ‘‘1-over-3’’ type, as opposed to the current ‘‘1-over-2’’ type fleet. The new straddles will enable containers to be stacked ‘three high’ as opposed to the current method of stacking containers ‘two high’. This facilitates more efficient use of the stacking area, thereby improving volumes handled at the terminal. The estimated cost for the next five financial years, commencing in Financial Year 2010, is R 0.5 billion. Ship-to-Shore Crane replacements at Durban Container Terminal: The Durban Container Terminal plans to phase in the replacement of nine Ship-to-Shore Cranes, spread over three years commencing in 2011. These cranes are required to maintain existing and planned operations in the foreseeable future. The estimated cost for the entire project is R 0.7 billion. The estimated cost for the next five financial years commencing from Financial Year 2010 is R 70 million.

Durban – break-bulk Reconstruction of sheet-pile quay walls at Maydon Wharf in Durban: The results of a feasibility study and other inspections conclude that the steel sheet-piled quay walls have deteriorated severely and are reaching the end of their serviceable lifecycle. Severe

109 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS loading and equipment restrictions were placed on the quayside for safety purposes, which increases the time needed for vessel loading and unloading. The possible collapse of one or more quay walls is a serious risk. Transnet intends to reconstruct the steel sheet-pile berths commencing in Financial Year 2010. The key benefits include safe berths, protection of current and future revenue streams, and construction of berths that will accommodate long-term future generation vessels, with the flexibility to accommodate future changes in types of cargo handled in this precinct, including container handling. The estimated cost for the the entire project is R 1.6 billion. Estimated spending for the next four financial years commencing in the 2010 financial year is R 0.5 billion.

Port of Cape Town Expansion and reconfiguration of Cape Town Container Terminal: The project entails the increase of stacking capacity and the deepening of container berths to meet new vessel depth requirements. It further provides for additional container handling equipment suitable for servicing larger vessels and handling higher stacks. Through this project, National Ports Authority and Port Terminals will be well positioned to continue facilitating container trade in the Port of Cape Town as well as establish a foundation for future growth. When the project is completed, the Port will be able to handle 1.4 million TEUs. The estimated total cost is R 4.1 billion. The estimated cost for the next five financial years commencing in 2010 financial year is R 3.7 billion.

Transnet Pipelines New Multi-Products Pipeline: The aim of this project is to build a 550 kilometre new trunk line from Durban to Gauteng, that is 24-inches in diameter and addresses the increased demand for fuel in Gauteng and surrounding areas. The trunk line will connect an inland and a coastal terminal with significant haulage capacity for optimising operational capacity. The existing pipeline is 40 years old and is due to be replaced. It also does not have the capacity to meet future demand. With the front-end engineering design phase completed, NERSA granted Transnet the licence to construct the NMPP. The project also entails the replacement of two northern network pipelines that have outlived their sustainable life. Given the energy challenges facing South Africa, the Board of Directors granted unconditional approval to commence construction in February 2008. This project is considered a strategic project for the Group and is of national importance and is anticipated to be completed within the licence timeframe of December 2011. The estimated cost of the NMPP is R 12.6 billion. Estimated spending for the next four financial years commencing with Financial Year 2010 is R 9.6 billion.

Competition Transnet believes that it holds a strong market position among South African bulk freight transportation companies because of its integrated platform. Transnet Freight Rail faces competition from a number of companies providing bulk commodity transport by road instead of rail and in particular from trucking companies on the corridor between Durban and Gauteng. Transnet’s three principal freight and logistics competitors on this corridor are Grindrod Limited, Barloworld Logistics and Imperial Logistics. Although, Transnet Rail Engineering faces competition in maintenance and fabrication, there is a significant backlog of maintenance and construction work at Transnet Freight Rail, which Transnet Rail Engineering believes will continue to provide it with work. Pursuant to the Legal Succession to the South African Transport Services Act, 1989 (subsequently amended in 1995 and in 2002) and the National Ports Act, Transnet National Ports Authority currently serves as landlord for all commercial ports within the Republic of South Africa. Hence, Transnet National Ports Authority faces no competition within the Republic of South Africa in terms of the management and provision of port infrastructure and marine services for the seven major commercial ports operating in the country (excluding the Port of Ngqura which will become the eighth port once it becomes fully operational). There is a possibility Transnet may face competition regionally or globally, i.e. in cases where shipping companies, freight forwarders and other port customers use other nearby ports, such as Maputo, Mozambique, instead of the South African ports. Transnet Port Terminals faces domestic competition from some smaller private ports with respect to break-bulk cargo. It also faces competition from other terminal operators at the seven ports

110 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS operated by Transnet National Ports Authority. At Richards Bay, for example, the coal terminal is owned and operated by the coal mining exporters rather than Transnet. Regionally, Transnet faces limited competition from port terminals operated by Dubai Ports World in Mozambique and Djibouti, and Transnet recently experienced the loss of some granite export business to the port at Maputo, Mozambique. Competition is most acute in the break-bulk sector in which private entities operate. Transnet Pipelines faces some competition from road transport providers, specifically on the Durban – Gauteng corridor.

Property The following table sets out information on Transnet’s real property as at 30 June 2009. Number of Total Area Type of Property Location Title Deeds in Hectares

Transnet Freight Rail Land Owned Eastern Cape, Free State, 15,853 69,691 Gauteng, KwaZulu-Natal, Northern Cape, Mpumalanga, Limpopo, North West and Western Cape Transnet Rail Engineering Land Owned Bloemfontein, Germiston, 26 63 Soutriver and Uitenhage Transnet Property Land Owned Eastern Cape, Free State, 1,844 3,892 Gauteng, KwaZulu-Natal, Northern Cape, Limpopo, North West, Mpumalanga and Western Cape Transnet National Ports Authority Land Owned Cape Town, Durban, East 179 66,119 London, Mossel Bay, Port Nolloth, Port Elizabeth, Richards Bay and Saldanha Transnet Foundation Land Owned Eastern Cape and Western Cape 77 160 Transnet Pipelines Land Owned Gauteng and KwaZulu-Natal 64 35

18,043 139,960

111 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Employees The table below presents the number of actual employees employed by each operating division of Transnet as at 31 March 2009, 2008 and 2007 and 30 September 2009 and 2008.

As at 30 September As at 31 March

20092008 2009 2008 2007

Operating Division Transnet Freight Rail ManagerialPPPPPPPPPPPPPPPPPPP 1,6311,708 3,423 1,547 1,765 Non-managerial PPPPPPPPPPPPPP 20,87623,269 20,754 23,030 23,046 Transnet Rail Engineering ManagerialPPPPPPPPPPPPPPPPPPP 861829 873 806 719 Non-managerial PPPPPPPPPPPPPP 12,10612,855 12,749 12,680 13,010 Transnet National Ports Authority ManagerialPPPPPPPPPPPPPPPPPPP 679678 682 679 908 Non-managerial PPPPPPPPPPPPPP 2,5102,539 2,572 2,494 2,343 Transnet Port Terminals ManagerialPPPPPPPPPPPPPPPPPPP 343327 363 311 292 Non-managerial PPPPPPPPPPPPPP 4,8225,023 5,206 5,084 4,757 Transnet Pipelines ManagerialPPPPPPPPPPPPPPPPPPP 10193 103 98 91 Non-managerial PPPPPPPPPPPPPP 404371 374 368 392 Other* PPPPPPPPPPPPPPPPPPPPPPPP 1,5931,292 1,679 1,676 1,255

45,92648,984 48,778 48,773 48,578

* Other includes Corporate Centre; Transnet Fuel Solutions; Transnet Capital Projects; Transnet Heritage Foundation and Transnet Property.

A significant feature of Transnet’s workforce is a high level of unionisation. Union recognition and contracts are renegotiated annually. Transnet currently recognises two unions, the members of which account for approximately 81 per cent. of Transnet’s workforce. In the past, Transnet’s relationship with its formally recognised unions was poorly managed. However, Transnet believes that its pursuit of progressive labour relations policies and practices has improved its relationships with its formally recognised unions. Transnet has a rapidly aging workforce. As at 31 March 2009, the average age of Transnet’s freight rail engineers was 44.5. Transnet estimates that it will need approximately 17,800 new employees over the next six years. This figure also takes into account an attrition rate of approximately 20 per cent. per year. The Group operates several defined benefit funds and a defined contribution fund. The assets of each scheme are held separately from those of the Group and are administered by the schemes’ trustees. The defined benefit funds are actuarially valued by professional independent consulting actuaries on an annual basis. In addition, the Group provides post-retirement medical benefits to qualifying employees and pensioners.

Health and Safety Transnet believes that health and safety is a critical foundation for reliable operations and effective service delivery to customers. The unreserved commitment by Transnet’s management and labour leadership is essential in leading, facilitating and demonstrating appropriate behaviour at all levels of Transnet. Transnet has consequently established a single framework for the management of health and safety risks across the Group. The Group Risk Committee, nominated by the Board of Directors, is responsible for reviewing and assessing the risk control processes and systems of Transnet and ensuring that health and safety policies are effectively communicated throughout the Group. Transnet has established a mandatory incident reporting process and believes that its stringent safety, health, environment and quality performance targets are aligned with international best practices.

112 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Operating in a heavily industrialised industry, Transnet’s operations are not without risk. However, Transnet aspires to achieve a zero injury and fatality rate in all of its operations. The number of employee fatalities dropped from 26, five of which were principally attributable to road accidents on public roads, for Financial Year 2007 to 11, of which three were the result of traffic accidents on public roads, for Financial Year 2008 and 13 in respect of Financial Year 2009. Transnet is seeking to reduce the number of public fatalities, most of which are attributable to rail related incidents, by educating the public about the dangers of railroad level crossings. For Financial Year 2009, there were 197 such fatalities involving members of the public compared with 151 for Financial Year 2008. Transnet’s employee wellness programmes aim to reduce workplace absenteeism and improve productivity. Transnet established its Lifestyle Management Programme on HIV/AIDS in July 2001 to provide resources, training and education to its employees. Transnet continues to provide health management to HIV-positive employees and provides them with access to appropriate medication regardless of whether they are eligible for Transnet’s medical insurance schemes. See ‘‘Risk Factors – Risks Related to Transnet’s Business – Transnet is exposed to risks related to health and safety considerations’’.

Security Fraud Risk Management Plan Treasury Regulations (Regulation 29.1.1) prescribed under the Public Finance Management Act require companies operating in the Republic of South Africa to establish a fraud prevention plan to mitigate the risk of economic crimes and acts of dishonesty. Transnet has implemented a Fraud Risk Management Plan from Financial Year 2008 in order to effectively manage and combat the fraud risk to which it may be exposed. Transnet emphasised the development and implementation of fundamental fraud risk management initiatives, which were used to create the foundation for a robust fraud risk management strategy aligned with Transnet’s Forensic Maturity Model. Some of these initiatives included the formation of the relevant governance reporting structures; the development of several fraud related policies; the development of an electronic case management database; and the identification of high fraud risk areas through the fraud risk assessment process. This plan was enhanced in Financial Year 2009 to have a multi-dimensional focus of being strategic, tactical and operational. As part of such focus, and in order to address the root causes of fraud, greater attention has been given to fraud risks emanating from people, processes and systems. To ensure the effective implementation of the 2009 Fraud Risk Management Plan, focus has also been placed on fraud prevention and detection of fraud elements categorised as high and medium priority for Financial Year 2009. During this period, Transnet developed and rolled out a Supplier Code of Conduct. This code informs Transnet’s suppliers of Transnet’s expectations in respect of the behaviour and conduct of entities that do business with Transnet. Further ongoing and enhanced fraud awareness and anti-fraud training was conducted and forensic data analytics was also performed. In addition, as part of its fraud prevention plan, Transnet has established a Tip-Offs Anonymous Hotline for reporting fraud and has established a committee to investigate and report to the Group’s internal control committee on the results of its investigations.

Security Management During Financial Year 2009, Transnet developed the Transnet Security Management (‘‘TSM’’) strategy through an interactive process that incorporated input from key internal and external stakeholders, such as the South African Police Service (‘‘SAPS’’) and the National Intelligence Agency. The overall strategy development took into consideration applicable legislative requirements and international codes, including the International Ship and Port Facilities Security Code (‘‘ISPS Code’’) of 2004 and the National Ports Act, both of which are applicable to the ports, and the National Key Points Act, 1980 (‘‘National Key Points Act’’), which is applicable to the pipelines. Other key drivers in the security environment are the ERM Framework and the Transnet Freight Corridor strategy. The TSM strategy aims to protect Transnet’s customers and employees, as well as to secure Transnet’s assets, income and infrastructure. This is achieved by integrating and focusing TSM through intelligence based operations; the application of technology; and the collective inputs of

113 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet’s internal and external stakeholders. In implementing the TSM strategy, operational frameworks have been developed in all the operating divisions in line with the security strategy. Transnet Freight Rail is particularly vulnerable to theft and has instituted a plan to convert copper cables in high-risk areas to cables comprising other materials in order to reduce theft, and has engaged railway police to patrol its lines of track. In addition, Transnet Pipelines’ pump stations have been declared national key points and Transnet is in the process of upgrading these facilities in line with the prescribed standards. Furthermore, all security service providers and Transnet’s security staff deployed at these sites are accredited as national key point service providers and guards, respectively. In line with the National Ports Act and the ISPS Code, Transnet National Ports Authority and Transnet Port Terminals are in the process of security upgrade projects at all of Transnet’s ports. The ISPS Code came into being as a result of a resolution by the United Nations Security Council in response to vulnerabilities in the maritime sector. Transnet National Ports Authority believes it has been fully compliant with the ISPS Code since 29 June 2004. In order to become compliant, Transnet upgraded its security, retrained its security personnel, refenced port boundaries and installed advanced security features including closed-circuit television for some of its terminals and automatic identification systems that allow for remote ship identification by port control.

Environment The responsibility for environmental management within Transnet rests with the respective operating divisions and specialist units, all of which apply Transnet’s ERM Framework. There has been a standardisation of rolling out environmental initiatives across Transnet, reporting on various environmental indicators, including operational incidents. Transnet plans to streamline this roll-out going forward. Transnet’s operational activities occur in a variety of sensitive environments. As a result, Transnet seeks to promote environmental awareness among its employees as well as the communities in which it operates. Transnet has begun to implement the ISO 14001 environmental management systems and principles in its operating divisions in order to institutionalise international best practices and to ensure a standardised approach throughout the Group to environmental safety. Transnet launched several initiatives in 2008 to strengthen relationships with the communities around the ports it operates, to mitigate dust at the Port of Saldanha and to research ways to reduce its carbon footprint. Transnet conducts annual environmental audits and is currently investigating the effects of ballast water discharge on the waters of its ports. Some of these audits have established that Transnet has not complied with certain environmental laws. In response, Transnet is in the process of taking measures to rectify the non-compliances. It is Transnet’s intention that all of its operating divisions work progressively toward achieving internationally accepted standards of environmental management. Transnet Pipelines experienced only one oil spill in Financial Year 2009 where more than 1,000 litres of oil was spilled due to a technical failure. In Financial Year 2010 to date, Transnet Pipelines experienced one oil spill where more than 1,000 litres of oil was spilled. Transnet is working to avoid future oil spills by improving early detection of such incidents. In addition, Transnet is currently involved in the voluntary clean-up of asbestos dust along its Cape Corridor rail lines.

Information Technology Transnet’s information technology (‘‘IT’’) strategy is designed to enable local IT groups at its operating divisions to meet their requirements with all common services driven by the Company- wide IT infrastructure. Transnet aligns multiple business applications across the Group through its enterprise-wide information and communication technology strategy. The strategy establishes frameworks for information management and responsible use of technology at the operational level. Transnet’s central IT department is involved in strategic planning, enterprise architecture and governance and provides guidance, consulting and reviews for each of the divisions. As part of Transnet’s strategy to dispose of its non-core operations, Transnet intends to outsource some of its IT services to a third party provider. Transnet’s information and communication technology (‘‘ICT’’) strategy provides the framework for enterprise-wide system integration, ultimately aimed at tangible performance improvements and business results. It is a strategic

114 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS imperative for Transnet to integrate enterprise architecture to promote a virtual computing environment and a ‘services oriented’ approach to the operating divisions’ adoption of processes and systems. To achieve this, Transnet adopted a services architecture to drive standardisation.

Governance and Controls In response to a growing demand for technology, it has become essential for Transnet to govern its ICT environment through sound monitoring and controls. Transnet has prioritised the following ICT governance areas for Financial Year 2010: * ICT general controls; * critical financial reporting controls; * Transnet electronic communication policy; and * Transnet information security policy.

Transnet Business Intelligence Programme The Transnet business intelligence programme facilitates the availability of relevant, timely and accurate information by enhancing the processes and systems that enable information management. During the year, Transnet introduced several business intelligence initiatives in order to standardise information access and knowledge sharing across Transnet, including: * deploying a shared SAP system pilot project across Transnet Capital Projects, Transnet Property, Transnet Corporate Centre and the Transnet Foundation; * establishing a Business Intelligence Working Group with the mandate to focus on high quality information for key performance indicators across Transnet. In the year ahead this Working Group will mature into a formal centre of excellence; and * establishing the Enterprise Content Management Working Group, laying the foundation for enhanced knowledge management across Transnet. This working group will evolve to a formal centre of excellence during the year ahead. The business intelligence, furthermore, focused on providing systems for contract lifecycle management, treasury management, investment and project management, real estate management, asset management and risk and safety management.

ICT Infrastructure Programme In order to address some of the challenges relating to reducing its carbon footprint Transnet has initiated the Virtual Footprint Platform, which is intended to provide the basis for future Wintel (Intel and Windows) deployments. The first phase of the project was implemented at the Transnet Corporate Centre in Financial Year 2009. This involved the consolidation of the active directory and email environments into the virtual platform where Transnet achieved a significant reduction in the carbon footprint of its platforms. Transnet intends to implement other, similar projects in the future.

Insurance Transnet’s operations are subject to normal hazards of operational and geographic risks, including accidents, fire and weather-related perils. Transnet maintains insurance policies necessary to reasonably protect against the financial impact arising from unexpected events when the amount of the potential loss would be significant enough to prevent normal business operations. The purchase of these policies is coordinated by an internal insurance department, with applicable limits, coverage, scope and deductibles that Transnet, with the advice of its insurance advisers, believes is reasonable and prudent after all means of controlling or preventing the risk have been considered. Transnet cannot, however, assure purchasers of the Notes that this insurance will be adequate to protect it from expenses related to potential future claims for personal injury and property damage or that these levels of insurance will be available in the future at commercially reasonable prices. Transnet does not fully insure against certain risks to the extent that such risks may not be fully insurable or related coverage is unavailable at what Transnet considers to be appropriate price levels.

Litigation and Other Proceedings Transnet is involved in legal proceedings, including commercial arbitration, employment matters, disputes with customers, concessionaires and partners and general commercial disputes that arise from time to time in the ordinary course of business.

115 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet is currently the subject, along with 26 other parties, of an investigation into air freight charges by the Commission of the European Communities. Transnet has been named solely based on its previous ownership of South African Airways. The Commission of the European Communities may impose a fine on South African Airways of as much as 10 per cent of South African Airways’ worldwide group revenue. However, based on consultation with its legal advisers, Transnet believes that any fine that may be imposed on South African Airways would be unlikely to exceed EUR 30 million. In addition, Transnet has sought the advice of counsel who believes that the risk of liability for Transnet is remote. Furthermore, should any penalty be levied against Transnet Limited, it believes, based on discussions with counsel, that it would have a claim to recover such amounts from South African Airways. Judgment has been awaited since the middle of calendar year 2009. Transnet’s lawyers have advised that judgment can be expected around March 2010.

116 c101680pu040 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS MANAGEMENT

Board of Directors The Board of Directors of Transnet has delegated the responsibility for running the operations of Transnet to the Group Chief Executive. However, the Board of Directors has reserved responsibility for the following matters: recommending amendments to the Articles of Association of Transnet to its shareholder; approving Transnet’s strategy, business plans, annual budgets and borrowing strategy; approving the annual financial statements and interim reports; and evaluating the performance of the Group Chief Executive. Transnet’s Articles of Association provide that there shall be not less than 10 and not more than 18 directors of whom at least eight must be non-executive directors and two must be executive directors. The Board of Directors is currently comprised of 11 directors of whom two serve in an executive capacity. There are currently seven vacant seats. Nine of these directors, including the acting Chairman, believe that they are independent, non-executive directors free from any business relationship that could hamper their objectivity or independent judgement on the business of Transnet. Transnet’s directors are elected to three-year terms. At the 2009 Annual General Meeting on 11 August 2009 all directors were re-elected, with the exception of three directors who retired. The following table sets forth the 11 members of the Transnet Board of Directors at the date of this Base Prospectus. Member of the Year of Board Name Birth Current Position Since

Professor Geoffrey Everingham 1949 Acting Chairman of the Board of Directors 2004 Mr. Christopher Wells...... 1949 Director and Acting Chief Executive Officer 2005 Mr. Anoj Singh...... 1973 Director and Acting Chief Financial Officer 2009 Ms. Nunu Ntshingila ...... 1963 Non-executive Director 2006 Mr. Peter Joubert ...... 1933 Non-executive Director 2004 Mr. Michael Hankinson...... 1949 Non-executive Director 2008 Ms. Nolwazi Gcaba ...... 1970 Non-executive Director 2004 Dr. Norman Haste OBE 1944 Non-executive Director 2006 Ms. Christine Ramon...... 1967 Non-executive Director 2004 Ms. Nomgando Matyumza ...... 1963 Non-executive Director 2004 Mr. Peter Moyo...... 1962 Non-executive Director 2008

The previous Group Chief Executive Officer, Ms. Maria Ramos, left the Group at the end of February 2009. Transnet’s Board of Directors plans to make an announcement regarding the successor to Ms. Ramos in the near future. The Issuer is not aware of any potential conflicts of interest between the duties to the Issuer of the directors listed below and their private interests or duties.

Professor Geoffrey Everingham – Acting Chairman of the Board of Directors Professor Everingham assumed the role of acting Chairman of the Board of Directors on 11 August 2009. As of the date of this Base Prospectus, Professor Everingham was still the acting Chairman of the Board of Directors. Previously, Professor Everingham served as a non-executive member of the Board of Directors from 27 August 2004 to 10 August 2009. He is currently acting in capacity as the Chairman of the Board of Directors until an announcement relating to a successor is made by the Shareholder. He also serves on the Board of Governors, Pathcare Group, director of GK Everingham Investments (Pty) Limited and Motifprops 199 (Pty) Limited. He is also the Chairman of the Council of Diocesan College (Bishops school) and of the Investment Committee of the Anglican Church of SA Pension Fund Advisory Board, Frater Asset Management. He is currently a member of the Accounting Principles Board and a member of King III working group on accounting and auditing. He is a past member of the Public Accountants and Auditors Board, the Independent Regulatory Board for Auditors, the GAAP Monitoring Panel of the JSE Securities Exchange, past chairman of the Accounting Practices Committee of the SA Institute of Chartered Accountants. Professor Everingham graduated with a Bachelor of Commerce degree from the

117 c101680pu050Proof18:26.1.10B/LRevision:0OperatorDavS University of Port Elizabeth, Bachelor of Commerce Honours from the University of Cape Town, Master of Arts in American Studies from the University of Illinois, he is also a qualified chartered accountant and is a Professor of Accounting (since 1986) and Emeritus professor (from 2009) at the University of Cape Town.

Mr. Christopher Wells Mr. Wells assumed the role of acting Group Chief Executive Officer on 6 March 2009. Previously, Mr. Wells served as the Chief Financial Officer from 24 January 2005 to 5 March 2009 after which he assumed the position of acting Group Chief Executive Officer. He has been an executive member of the Board of Directors since January 2005. He is currently acting in capacity as Chief Executive Officer until an announcement relating to a successor is made by the Shareholder. He serves on the boards of directors of Sethani Limited, South African Airline Holdings (Pty) Limited and Transpoint Properties (Pty) Limited. Mr Wells is also a member of Debchris CC and Charis Trading CC. Mr. Wells graduated from the University of Cape Town and brings more than 15 years of management experience to Transnet. Prior to joining Transnet Mr. Wells worked for Rainbow Chicken Limited, McCarthy Limited and Deloitte & Touche.

Mr. Anoj Singh Mr. Singh is currently acting in the capacity of Chief Financial Officer and as an executive member of the Board of Directors since March 2009. He also serves on the boards of directors of Freight Logistics International, Owner-Driver Management (Pty) Limited, Transhold Properties (Pty) Limited, Protekon (Pty) Limited, Crosskeys Security Services (Pty) Limited, Comazar (Pty) Limited and is a Trustee of the Transnet Retirement Fund. He is a member of Even Grand Trading 173 CC and Spring Green Trading 199 CC. He has served as Transnet’s General Manager: Group Finance since 2005. Mr. Singh graduated with a Bachelor of Accounting from the University of KwaZulu- Natal and brings more than 12 years of financial experience to Transnet. He is also a qualified chartered accountant.

Ms. Nunu R. Ntshingila Ms. Ntshingila was appointed as an independent non-executive member of the Board of Directors in May 2006. In addition, Ms. Ntshingila serves on the boards of directors of Ogilvy South Africa, PriceWaterhouseCoopers Corporate Social Investment Committee, Ntinta Investment, Old Mutual Life Assurance Company (SA) Limited, Old Mutual Life Holdings (SA) Limited, Golden Dividend 456 (Pty) Limited, and Kantar South Africa (Pty) Limited. She has been Chief Executive Officer of Ogilvy South Africa since 2005. Ms. Ntshingila graduated from the University of Swaziland and received a Masters of Business Administration with a Bachelor of Arts degree from Morgan State University and a diploma in Advertising from AAA School of Advertising.

Mr. Peter G. Joubert Mr. Joubert was appointed as an independent non-executive member of the Board of Directors in August 2004. Mr. Joubert is the Chairman of the Boards of BDFM Publishers (Pty) Limited, Sandvik (Pty) Limited and a member of the boards of Sandvik Mining and Construction RSA (Pty) Limited, Sandvik Mining and Construction Delmas, Telkom SA Limited, Cycad Financial Holdings Limited, the South African Brain Research Institute and the South African Institute of Race Relations. Mr. Joubert has more than 35 years of management experience. He graduated from Rhodes University with a Bachelor of Arts degree and completed the Advanced Management Programme at Harvard University.

Mr. Michael Hankinson Mr. Hankinson was appointed as an independent non-executive member of the Board of Directors in July 2008. In addition, Mr. Hankinson is Chairman for The Spar Group Limited, Brand Corp Holdings Pty Limited and Brand Corp (Pty) Limited and also serves on the boards of directors of Illovo Sugar Limited, Pollock and Aiken (Pty) Limited, Main Street 63 (Pty) Limited, Sovereign Food Investments Limited, Grindrod Limited and Apollo Tyres Limited. Mr. Hankinson was appointed a non-executive member at Grindrod Limited on 15 December 2009. He is a qualified chartered accountant with more than 15 years of executive experience.

118 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Ms. Nolwazi B. P. Gcaba Ms. Gcaba was appointed as an independent non-executive member of the Board of Directors in August 2004. In addition, she is a Trustee of the Transnet Retirement Fund Property Trust and the Transnet Second Defined Benefit Fund. Ms. Gcaba has been a partner of the law firm Spoor & Fischer Attorneys for nine years. Ms. Gcaba graduated from the University of Fort Hare and received an LLB from the University of Natal.

Dr. Norman D. Haste OBE Dr. Haste OBE was appointed as an independent non-executive member of the Board of Directors in June 2006. Dr. Haste was awarded an OBE in 1996 for services to Civil Engineering. In addition, Dr. Haste has served as the Chief Executive Officer of the Aldar/Laing O’Rourke joint venture and has served as the Chief Operating Officer for Laing O’Rourke Middle East. Dr. Haste serves on the Board of Directors of DLF-Laing O’Rourke (India) Private Limited.

Ms. Christine K. Ramon Ms. Ramon was appointed as an independent non-executive member of the Board of Directors in August 2004. Ms. Ramon is currently Chief Financial Officer and executive director of Sasol Limited, where she also serves as director of several Sasol group companies. Ms. Ramon is a director at Melanini Investment (Pty) Limited and at Melanini Wohens’ Investment (Pty) Limited. Ms. Ramon was the former Chief Executive of Johnnic Holdings Limited. Prior positions include Acting Chief Operating Officer and Financial Director at Johnnic Holdings Limited and senior positions at Coopers & Lybrand both in South Africa and in Italy. Ms. Ramon also formerly served on the Standing Advisory Committee to the International Accounting Standards Board.

Ms. Nomgando N. A. Matyumza Ms. Matyumza was appointed as an independent non-executive member of the Board of Directors in August 2004. Ms. Matyumza also serves on the boards of directors of Wilson Bayly Homes – Ovcor Limited, COASAD Southern Africa (Pty) Limited, KZN Growth Fund Managers (Pty) Limited, Khula Enterprise Finance Limited, Camden Bay Investment (Pty) Limited and Born Free Investments 42 (Pty) Limited. Ms. Matyumza is also a member of Imvusa Trading 1253 CC. She graduated from the University of Transkei, received a Bachelor of Laws degree from the University of Natal and is a qualified chartered accountant.

Mr. Peter M Moyo Mr. Moyo was appointed an independent non-executive member of the Board of Directors in July 2008. In addition, Mr. Moyo currently serves as an executive director of Amabhubesi Group. He is also a director of Worldwide Capital Limited, Pinnacle Technology Holdings, Liberty Holdings Limited, Liberty Group Limited, Vodacom Group (Pty) Limited, Bulawayo Electrical Supplies (Pty) Limited, Utafutaji Trading 36 (Pty) Limited, RZT Zelpy 4972 (Pty) Limited (Chariman), Lexshell 713 Investments (Pty) Limited, Clorpique 149 (Pty) Limited, Corridor Infrastructure Development Holdings, Mtha-We-Mpumalelo Investments, Plexus Fundamental – Funds (Pty) Limited, STS Trust and Darting Trading 161 (Pty) Limited. Mr. Moyo has more than 15 years of experience, including as the CEO of Alexander Forbes. Mr. Moyo is a qualified chartered accountant. The business address of each Director is Carlton Centre, 150 Commissioner Street, Johannesburg 2001, Republic of South Africa.

119 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Senior Management The following table sets forth certain information on the members of Transnet’s senior management as of the date of this Base Prospectus. Year Year of Joined Name Birth Current Position Transnet

Mr. Christopher Wells ...... 1949 Acting Chief Executive Officer 2005 Mr. Anoj Singh ...... 1973 Acting Chief Financial Officer 2003 Mr. Vuyo Kahla ...... 1970 Group Executive, Office of the Group Chief 2004 Executive Mr. Pradeep Maharaj...... 1962 Group Executive, Human Resources 2004 Mr. Khomotso Phihlela...... 1961 Chief Executive Officer, Transnet National Ports 2003 Authority Mr. Charl A. Mo¨ller ...... 1951 Chief Executive Officer, Transnet Pipelines 1975 Mr. Tau Morwe ...... 1956 Acting Chief Executive Officer, Transnet Freight 1997 Rail Mr. Siyabonga I. Gama(1) ... 1967 Chief Executive Officer, Transnet Freight Rail 1994 Mr. Richard Vallihu ...... 1964 Chief Executive Officer, Transnet Rail 1995 Engineering Mr. Karl-Bart X. T. Socikwa 1969 Acting Chief Executive Officer, Transnet Port 1995 Terminals Ms. Moira Moses ...... 1965 Group Executive, Transnet Capital Projects 2005 Ms. Virginia Dunjwa...... 1965 Chief Risk Officer 1998 Mr. Mark Gregg-Macdonald 1960 Acting Group Executive, Commercial and 2001 Freight Corridors (1) Mr. Gama was suspended as Chief Executive Officer of Transnet Freight Rail on 1 September 2009. Information regarding the senior management of the Group as at the date of this Base Prospectus is set out below to the extent that they are not members of the Board of Directors of Transnet described above. The Issuer is not aware of any potential conflicts of interest between the duties to the Issuer of the senior managers listed below and their private interests or duties.

Mr. Vuyo Kahla Mr Kahla was appointed to the Group Executive Committee in 2004 and held the position of Group Executive: Legal and Risk until his appointment as the Group Executive: Office of the Group Chief Executive in January 2007. In addition, Mr Kahla currently serves as the Chairman of the Transnet Retirement Fund Board of Trustees and Transpoint Properties (Pty) Limited He is the Chairman of the Council of St John’s College, Houghton and the Audit & Enterprise Risk Committee of the University of South Africa. He is also a member of the Audit Committee of the South African Revenue Services. Mr Kahla has more than five years five years of experience with Transnet. Mr Kahla’s previous experience includes positions as director of corporate governance and legal services at the African division of the Standard Bank Group, and has served the Government in numerous positions, including as Assistant Legal Advisor to President Nelson Mandela, Special Advisor to the National Director of Public Prosecutions, Chief Legal Advisor to the Minister of Finance and to the National Treasury and Director of Corporate Strategy and Transformation at the Department of Justice and Constitutional Development. Mr Kahla also previously held a Research position at the University of the Western Cape’s Community Law Centre. Mr Kahla graduated from Rhodes University where he obtained BA and LLB degrees.

Mr. Pradeep Maharaj Mr. Maharaj was appointed as the Group Executive: Strategy and Transformation in July 2004 and appointed as Group Executive: Human Resources in July 2006. Mr Maharaj currently serves on the boards of directors of Autopax Passenger Services (Pty) Limited, Southern African Airline Holdings (Pty) Limited, HSA Management Systems (Pty) Limited and Viamax Logistics (Pty) Limited. Mr. Maharaj has more than 25 years of experience, including ten years with the Gauteng Provincial Government in the Department of Finance and Economic Affairs and ten years in the audit profession. Mr. Maharaj graduated from the University of South Africa where he studied Accounting Science.

120 c101680pu050Proof18:26.1.10B/LRevision:0OperatorDavS Mr. Khomotso Phihlela Mr. Phihlela was appointed as the Chief Executive Officer of Transnet National Ports Authority in July 2004. In addition, Mr. Phihlela currently serves on the Finance Committee of the Education Africa Investment Committee and on the boards of directors of Marine Data Systems (Pty) Limited, B2B Africa (Pty) Limited and Tru-South Group. Mr. Phihlela has more than five years of experience with Transnet including Transnet’s Group Executive Portfolio Management as well as experience in other companies including as managing director of Telcon and as an operations executive director of the African Bank Limited, and as a board member of South Africa Express Airways (Pty) Limited, VAE Perway South Africa and the Council for Scientific and Industrial Research. Mr. Phihlela graduated from Northwestern University where he studied engineering, business administration (MBA) and executive development.

Mr. Charl A. Mo¨ ller Mr. Mo¨ller was appointed as the Chief Executive Officer of Transnet Pipelines in September 1992. Mr. Mo¨ller has almost 33 years of experience with Transnet, including as assistant regional manager in the then Spoornet (now Transnet Freight Rail) and as general manager at the then Autonet (which has been discontinued). Mr. Mo¨ller graduated with a Bachelor of Science degree from Stellenbosch University where he studied civil engineering and with a Bachelor of Commerce Honours from the University of Johannesburg. He also holds a degree in Transport Economics.

Mr. Tau Morwe Mr. Morwe was appointed as the Chief Executive Officer of Transnet Port Terminals in May 2000. In November 2009, Mr. Morwe was transferred to the position of Chief Executive Officer of Transnet Freight Rail, in an Acting Capacity. Mr. Morwe has more than 25 years of experience, including as a board member on several bodies including KwaZulu-Natal Trade and Investment, the Durban Chamber of Commerce, Commercial Cold Storage (Pty) Limited, Agriport Partnership (with Viamax (Pty) Limited), Durban Africa (eThekweni Unicity’s Tourism Authority), Durban Events Corporation, and the Transnet Heritage Foundation Board of Trustees and has worked for Nampak Management Services, Shell South Africa and Apron Services in senior positions. Mr. Morwe graduated from Howard University where he studied Economics, and holds an Advanced Programme for Chief Executive Officers and an Executive Programme in Logistics and Transportation Management from the National University of Singapore and the Chartered Institute of Logistics and Transport in Singapore.

Mr. Siyabonga I. Gama Mr. Gama was appointed as the Chief Executive Officer of Transnet Freight Rail in May 2005. In addition, Mr. Gama currently serves on the boards of Italtile, Matumbuka Investment Holdings, Emerald Sky Trading 736 (Pty) Limited, Sales Affiliates 89 (Pty) Limited and is a trustee to the Phithikeza Trust. Mr Gama is also Chairman of the Centre for Logistic and Transport at the University of Johannesburg. Mr. Gama has more than 20 years of management experience including with Standard Bank as a consumer manager. Mr. Gama graduated from University of Swaziland where he received a certified associate of the Institute of Bankers, New York, attended the City University of New York’s Advanced Executive Programme and the Delft Institute, Singapore University’s Port Manager Programme. Mr. Gama was suspended from the position of Chief Executive Officer of Transnet Freight Rail. Transnet is currently pursuing internal disciplinary hearings against Mr. Gama on 1 September 2009.

Mr. Richard Vallihu Mr. Vallihu was appointed as the Chief Executive Officer of Transnet Rail Engineering in September 2005. Mr. Vallihu has more than 14 years of experience, including as a Project Manager at Standard Bank. Mr. Vallihu is also an activist for community work assisting on the World Alliance Civicus. Mr. Vallihu graduated from Loughborough University of Technology in the UK, having attained a BSc Honours degree, as well as from the University of Southern Queensland, Australia, where he attained an MBA.

Mr. Karl-Bart X.T. Socikwa Mr. Socikwa was appointed to the Executive Committee as the Head of Restructuring of Transnet’s commercial division in 2007 until his current appointment as Group Executive, Commercial. In

121 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS November 2009, Mr. Socikwa was transferred to the position of Chief Executive of Transnet Port Terminals in an Acting Capacity. In addition, Mr. Socikwa currently serves as member of the Board of Directors of Investec Bank Limited, RAM Hand-to-Hand Couriers, The Brand Union SA (Pty) Limited, Southern Palace Investments, Seasoned Investments (Pty) Limited, Square One Group Limited, Mkhande Pianands (Pty) Limited, Umlibo Group (Pty) Limited, Dembhula Resources (Pty) Limited and Proudafrique Trading 66 (Pty) Limited. Mr. Socikwa has more than 13 years of experience, including with Deneys Reitz, Coopers & Lybrand and Kelly Stores Pty Limited. Mr. Socikwa graduated from Rhodes University with a Bachelor of Commerce and Bachelor of Law.

Ms. Moira Moses Ms. Moses was appointed as the Group Executive of Transnet Capital Projects in March 2007. In addition, Ms. Moses currently serves as a Non-Executive director of the Board of the Public Investment Corporation. Ms. Moses is also a trustee of the Thusang Trust. Ms. Moses has more than 12 years of experience, including as head of Re-Engineering at Transnet, and has held executive management positions in the motor industry including Limited, Jaguar Cars Limited and Volvo Group. Ms. Moses graduated from the University of Witwatersrand with a Bachelor of Arts and completed the Management Advancement Programme.

Ms. Virginia Dunjwa Ms. Dunjwa was appointed as the Group Chief Risk Officer in January 2007. In addition, Ms. Dunjwa currently serves on Transnet’s Risk Committee and Transnet’s Acquisition Council. Ms. Dunjwa has more than 15 years of experience, including senior and executive management positions at Transnet National Ports Authority, Transnet Port Terminals and Transnet Freight Rail. Ms. Dunjwa graduated from the College of Saint Rose, USA where she studied Chemistry and the University of Witwatersrand, where she studied engineering.

Mr. Mark D. Gregg-Macdonald Mr. Gregg-Macdonald was appointed Acting Group Executive, Commercial and Freight Corridors in 2009, having joined Transnet in 2001 as the Chief Financial Officer for Transnet Port Terminals. Mr. Gregg-Macdonald graduated from the University of South Africa with a ‘‘B Compt’’ (Honors) degree and qualified as a Chartered Accountant (SA) in 1984 and has held executive positions in the manufacturing, construction and cellular communications industries. The business address for each member of senior management is Carlton Centre, 150 Commissioner Street, Johannesburg 2001, Republic of South Africa.

122 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Compensation The following table sets out the remuneration for the Group’s senior management for Financial Year 2009. Post-retirement benefit fund Other Other Name Salary contributions Contributions payments Total

(in thousands of Rand) Mr. Christopher Wells(1)... 3,621 385 — 8 4,014 Mr. Vuyo Kahla...... 2,915 229 40 4 3,188 Mr. Pradeep Maharaj...... 2,973 231 — 2 3,206 Mr. Khomotso Phihlela .... 2,654 206 — 3 2,863 Mr. Charl A. Mo¨ller ...... 2,152 207 102 8 2,469 Mr. Tau Morwe ...... 2,811 223 56 2 3,092 Mr. Siyabonga I. Gama ... 3,443 272 62 29 3,806 Mr. Richard Vallihu ...... 2,709 252 42 21 3,024 Mr. Karl-Bart X.T. Socikwa...... 2,575 274 — 3 2,852 Ms. Maria Ramos(2) ...... 4,882 441 — 5 5,328 Mr. Anoj Singh(1)(3) ...... 1,534 145 42 13 1,734 Mrs. Moira Moses...... 2,991 152 15 10 3,168 Ms. Virginia Dunjwa...... 2,196 201 — 7 2,404 Mr. LL van Niekerk ...... 3,935 356 — 87 4,378

Total...... 41,391 3,574 359 202 45,526

(1) Group Executives who are members of the Board of Directors (2) Resigned during Financial Year 2009 (3) Appointed during Financial Year 2009 In addition to the above amounts, Group executives are eligible for performance-based bonuses at the discretion of the Board of Directors. The following table sets out the bonuses of the Group executives for Financial Year 2009, which will be paid during Financial Year 2010.

Name 2009

(in thousands of Rand) Mr. Christopher Wells(1)...... 2,825 Mr. Vuyo Kahla...... 2,151 Mr. Pradeep Maharaj...... 1,971 Mr. Khomotso Phihlela ...... 1,779 Mr. Charl Mo¨ller...... 1,551 Mr. Tau Morwe ...... 1,438 Mr. Siyabonga I. Gama ...... 2,380 Mr. Richard Vallihu ...... 2,119 Mr. Karl-Bart X.T. Socikwa ...... 1,924 Ms. Maria Ramos(2) ...... — Mr Anoj Singh(1)(3) ...... 1,188 Ms. Moira Moses ...... 2,180 Ms. Virginia Dunjwa...... 1,619 Mr. LL van Niekerk ...... 2,796

Total ...... 25,921

(1) Group Executives who are members of the Board of Directors (2) Resigned during Financial Year 2009 (3) Appointed during Financial Year 2009 The compensation for the non-executive members of the Board of Directors is approved by Transnet’s shareholder representative, the Minister of Public Enterprises, after a recommendation is

123 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS made by the Remuneration committee and approved by the Board of Directors. The following table sets out the total compensation for the non-executive directors for Financial Year 2009. Other Total Name of Board members Fees payment 2009

(in thousands of Rand) Mr. Frederick Phaswana (Chairman) ...... 1,049 — 1,049 Ms. Nunu Ntshingila ...... 394 — 394 Mr. Peter Joubert ...... 638 — 638 Ms. Nolwazi Gcaba ...... 569 — 569 Dr. Norman Haste OBE...... 450 — 450 Ms. Christine Ramon...... 379 — 379 Mr. Bulelani Ngcuka ...... 377 — 377 Ms. Nomgando Matyumza ...... 484 — 484 Professor Geoffrey Everingham ...... 600 — 600 Mr Peter Moyo(2) ...... 263 — 263 Mr. Stavros Nicolaou(1)...... 125 — 125 MJ Hankinson(2) ...... 263 — 263

Total...... 5,591 — 5,591

(1) Resigned during the current financial year (2) Appointed during the year

None of the members of the Board of Directors or the senior management hold shares of Transnet or have share-based incentive plans. Employment contracts with directors and members of senior management do not provide for special benefits upon termination and they did not provide for any such benefits in Financial Years 2007, 2008 and 2009.

Corporate Governance Transnet subscribes to the principles of good corporate governance outlined in the King Report on Corporate Governance for the Republic of South Africa from 2002 (King II). Consistent with that report, the Board has established four committees: Group Audit, Group Risk, Remuneration and Corporate Governance and Nominations. The members of the committees are non-executive directors and the committees are chaired by independent non-executive directors. Transnet is in the process of implementing corporate governance practices that are in line with the ambit of King III, which was released in September of 2009. Group Audit Committee The audit committee meets five times during the year and is currently chaired by Ms. Ramon, with Mr. Moyo, Mr. Joubert and Ms. Matyumza making up its membership. In line with the Corporate Laws Amendment Act, 2006, the Group Audit Committee assess financial risk reviews and approves the Group’s audit plan (both internal and external) with its auditors after considering the proposed audit’s scope and approach, its effectiveness and the audit fees. The Group Audit Committee is also responsible for, among other matters: (i) receiving and reviewing reports on adequacy of capital, impairment of receivables and other assets and the determination of provisions; (ii) reviewing all accounting policies adopted by the Group and proposed changes to those policies; (iii) recommending changes to the Group’s accounting policies as may be considered appropriate under IFRS; (iv) reviewing reports on any forensic investigation and ensuring implementation of appropriate action; (v) evaluating the independence and effectiveness of the internal audit function annually; and (vi) monitoring ethical conduct of the Group. Group Risk Committee The Group Risk Committee meets throughout the year at the various operating sites of the Group in order to review the major risks facing operations at each site as well as the progress achieved in improving risk management throughout the Group. The committee is currently chaired by Mr. Joubert and its membership is made up of Mr. Hankinson, Ms. Matyumza, Ms. Ramon and

124 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Professor Everingham. The committee is responsible for reporting on the quality and reliability of the Group’s risk management procedures and formally reviewing the Group’s risk management policies annually. Remuneration Committee The Remuneration Committee meets three times each year and is currently chaired by Dr. Haste. Its membership is made up of Ms. Gcaba, Mr. Joubert and Ms. Ntshingila. The committee considers and approves policy frameworks and practice standards in respect of remuneration in the Group. In particular the committee is responsible for: (i) approving compulsory employee benefits applicable to all levels and categories of the Group; (ii) reviewing the design and management of salary structures, policies and incentive schemes; and (iii) recommending the level of non-executive directors’ fees to the Board of Directors. Corporate Governance and Nominations Committee The Corporate Governance and Nominations Committee establishes the criteria for the nomination of directors to be recommended to Transnet’s shareholder representative for appointment. The committee is currently chaired by Professor Everingham and consists of Ms. Gcaba, Mr. Hankinson and Ms. Matyumza. In addition to establishing the criteria for the nomination of directors, the committee is responsible for ensuring that an annual assessment of the performance of the Board of Directors and a periodic review of the effectiveness of the Board’s committees occurs.

125 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS OVERVIEW OF SOUTH AFRICA AND THE SOUTH AFRICAN ECONOMY

The below description is extracted from an exhibit to the Republic of South Africa’s annual report on Form 18-K (the ‘‘Form 18-K’’) for the Financial Year ended 31 March 2009 filed with the U.S. Securities and Exchange Commission on 7 December 2008 with respect to the Financial Year ended 31 March 2009, a prospectus supplement relating to a debt offering by the Republic of South Africa filed with the U.S. Securities and Exchange Commission pursuant to rule 424(b)(3) on 27 August 2009 and the June 2009 Quarterly Bulletin of the South African Reserve Bank. References in this section to Financial Years are to the Republic of South Africa’s Financial Year beginning 1 April and ending 31 March. For example, 2009 refers to the Financial Year beginning 1 April 2008 and ending 31 March 2009. Unless otherwise stated herein, references in this description to the 2009-2010 Budget are to the 2009-2010 National Budget as released in February 2009 and not as amended by the Medium Term Budget Policy Statement (‘‘MTBPS’’) 2009 released on October 27, 2009. References to the 2009-2010 Consolidated Budget, which includes the 2009-2010 National Budget as part thereof, shall be construed accordingly. The Issuer assumes responsibility for the accurate extraction of information, but neither the Issuer, the Dealers nor the Arrangers have verified the accuracy thereof or updated the information.

Introduction The Republic of South Africa has been an established constitutional democracy since 1994, when it held its first fully democratic national elections. The Republic of South Africa has the most developed economy in Sub-Saharan Africa, and accounts for one-third of the aggregate GDP of Sub-Saharan Africa. The South African economy is diverse and supported by a well developed legal system and a sophisticated financial system. The major strengths of the South African economy are its services and manufacturing sectors, its strong physical and economic infrastructure and its abundant natural resources, including gold, platinum, metals and coal. The Republic of South Africa is situated on the southern tip of the African continent, with the Atlantic Ocean to the west and the Indian Ocean to the east. The north of the country shares common borders with Namibia, Botswana and Zimbabwe and, to the northeast, the country shares a border with Mozambique. The Republic of South Africa also shares common borders with the kingdoms of Lesotho and Swaziland. The total surface area of the Republic of South Africa is approximately 1,219,090 square kilometres, with over 3,000 kilometres of coastline. According to the mid-year population estimates of 2009, the Republic of South Africa’s population is estimated by Statistics South Africa to be approximately 49.3 million people, of which 25.5 million people, representing 52 per cent. of the population, are female. Approximately 79.3 per cent. were Black, 9.0 per cent. were Coloured, 2.6 per cent. were Indian/Asian and 9.1 per cent. were White. The Republic of South Africa’s most recent phase of economic growth, which was its longest expansionary period on record, began in September 1999 and came to an end in the fourth quarter of 2008, when the economy experienced a seasonally adjusted and annualized contraction in real GDP for the quarter. Interruptions in electricity supply in 2008, together with a general cooling off of consumption by households, partly related to high debt levels, tighter interest rate policies and reduced consumer confidence, contributed to a loss of economic momentum, which was exacerbated by the global downturn. As a result, the Republic of South Africa experienced further quarterly annualized contractions in real GDP and its first recession in 17 years, with real GDP contracting by an annualized 4.5 per cent. in the first half of calendar year 2009. According to Statistics South Africa, the Republic of South Africa’s real GDP contracted at an annualised rate of 3.0 per cent. in the second quarter of 2009. The 2009 MTBPS South African real GDP growth projections estimate a contraction of 1.9 per cent. in 2009, 1.5 per cent. growth in 2010, and 3.2 per cent. growth in 2012. This period of economic contraction is likely to be characterized by rising unemployment, declining business profitability and the closure of some companies. As in many other economies, the Government has taken steps to mitigate the impact of the global crisis on the economy through more expansionary fiscal and monetary policies and measures to support ailing industries. Healthy public finances and strong partnerships with business and labor have facilitated the Government’s actions to reduce the impact of the crisis. Short-term initiatives included R 6.1 billion set aside to assist distressed companies in combating the effect of the economic turmoil, and an additional R 2 billion being allocated to support rural development. The

126 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS principal aim of these interventions is to assist labor intensive industries (including agriculture, clothing, manufacturing and services industries) in an attempt to preserve jobs. The Government had, prior to the global crisis, embarked on an extensive infrastructure development programme, which has mitigated the impact of the global crisis on the Republic of South Africa’s economy although it could not fully offset the dramatic decline in external demand. In a continuation and expansion of its infrastructure development programme, infrastructure investments totaling R 872 billion between Financial Year 2010 and Financial Year 2012 are planned to stimulate growth and development and reduce bottlenecks in the economy. The investment will mainly be used to finance public transportation, roads and rail networks, provincial infrastructure projects as well as municipal infrastructure and bulk water systems. Gross fixed capital formation by the public sector increased from 5.9 per cent. of GDP in the second quarter of calendar year 2007 to 9.4 per cent. in the same period of calendar year 2009. In addition, the Government plans to shift resources to higher priorities, including job creation, education, health, rural development and fighting crime and corruption. The contraction in GDP negatively impacted total employment, which declined by 5.3 per cent. in the third quarter of calendar year 2009 compared with the previous year. Job creation is expected to lag the return to economic growth. A declining inflation rate, coupled with deteriorating domestic economic conditions, prompted the Monetary Policy Committee of the SARB to lower interest rates by 500 basis points between December 2008 and August 2009. In September 2009, inflation was 6.1 per cent., remaining outside of the SARB’s target range of 3-6 per cent. However, in October 2009, the CPI, for the first time in 31 months fell within the SARB’s inflation target range at 5.9 per cent. The Republic of South Africa’s response to the global downturn takes account of several factors including (i) slowing export demand is leading to a contraction of production and employment in certain sectors, (ii) the extent of the drop in global demand is such that it cannot easily be off-set in a relatively small economy such as the Republic of South Africa’s, (iii) a substantial infrastructure spending increase is already built into the Government’s expenditure plans and (iv) it is costly to raise financing in the present circumstances as global capital markets strongly favor reserve currencies such as the U.S. dollar and the euro. However, steps taken since 1996 to reduce public debt, and hence debt interest costs, have provided the required flexibility to manage the effects of the present downturn. In February 2009, the Government, mindful of the deteriorating economic environment, and the need to bolster confidence, improve infrastructure and combat the negative impact of the slowdown, announced an expansionary budget (‘‘2009-2010 National Budget’’), which provided for a national government deficit of 3.8 per cent of GDP in Financial Year 2010. Concurrently, the borrowing requirement of the non-financial public sector was projected to rise to 7.5 per cent of the GDP, almost double its value in Financial Year 2009. While recently expansionary policies have been embraced by fiscal authorities in most parts of the world, the Republic of South Africa was in a favourable position because it did not first need to design and gear up for new expenditure programmes, having already embarked on a much needed infrastructure drive that was gaining momentum. The improvement in the trade deficit and in the negative balance on the services account (principally as a result of lower dividend payments to non-resident investors in South African equity securities) resulted in a narrowing of the deficit on the current account of the balance of payments from 7.8 per cent. of GDP for the third quarter to 5.8 per cent. of GDP for the fourth quarter. Notwithstanding this improvement, the current account deficit for 2008 as a whole edged slightly higher to 7.4 per cent. compared with 7.3 per cent. recorded in 2007. The deficit on the current account of the balance of payments deteriorated from 5.8 per cent. of GDP in the fourth quarter of 2008 to 7.0 per cent. in the first quarter of 2009. The deficit on the current account continued to be financed through savings from abroad amid less favorable conditions in world financial markets. Tax reforms designed to decrease income tax rates while broadening the tax base have led to significant tax revenue growth in recent years, with general Government tax revenue increasing every year from Financial Year 1995 to Financial Year 2007. However, since peaking in Financial Year 2008, tax revenue has fallen, with the greatest declines in value added tax receipts, company taxes and trade taxes. The main budget revenue outcome of R 608.3 billion for Financial Year 2009 was R 17 billion lower than the original budget estimate of R 625.4 billion, and R 2.8 billion lower than the revised estimate of R 611.1 billion published in the 2009-2010 Budget.

127 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS However, tax revenue is expected to reach 26.2 per cent. of GDP by Financial Year 2013, driven by a recovery in household consumption and corporate profits, and supported by measures to broaden the tax base and improve tax compliance. Prior to the economic downturn, strong revenue growth resulted in a rising tax-to-GDP ratio. The slowdown in economic activity has meant a significant reversal of cyclical revenue income and a widening of the budget deficit for Financial Year 2010. Over the next three years, the deficit is expected to recover along with the recovery in revenue and the economy. The Government continues to strike a balance between the sustainability of financing government priorities and the impact of the tax burden and changes in debt stock on economic activity. The budget deficit is expected to increase from 1.0 per cent. of GDP in Financial Year 2009 to 7.6 per cent. of GDP in Financial Year 2010. The deficit is projected to fall gradually after Financial Year 2010, resulting in an average budget deficit of 5.5 per cent. of GDP across Financial Years 2010, 2011 and 2012. The budget deficits is expected to be financed primarily through increased domestic and international borrowing. Against this background, the Republic of South Africa continues to address a legacy of great divisions within the population, largely along racial lines, which have taken a heavy toll on human development and the economy. These divisions are evidenced by the chronically high formal sector unemployment rate (which the official estimate puts at 23.6 per cent. as of June 2009) and the widely divergent nature of the economy, in which vast sections of the populace still suffer significant inadequacies in areas such as housing, sanitation, healthcare and education, while a minority enjoys the benefits associated with a highly developed society. The Government has expressed its firm intent to continue to address South Africa’s social and developmental challenges within a consistent, growth-oriented fiscal and budgetary framework. The economic challenges facing South Africa are to support the economy in a sustainable fashion through the economic downturn while continuing to meet the Government’s commitments and spending priorities, which include broadening participation, increasing service delivery, minimizing the effects of the global recession, extending opportunities to all, strengthening industrial development and trade performance and accelerating the pace of job creation and employment. These challenges are planned to be met, in part, through sound tax policy and the stabilization of public spending within a fiscal framework that takes international and domestic risks into account.

Government and Political Parties Under the Constitution, the executive authority of the Government is vested in the President, who serves as both Head of State and Head of Government. The President must be elected by a majority vote of the members of the National Assembly following which the President must resign his or her seat in the National Assembly. Thabo Mbeki of the African National Congress (‘‘ANC’’) succeeded Nelson Mandela as President after the June 1999 elections and served as President following the 2004 elections until September 2008. On 20 September 2008, after the ANC announced its decision to recall President Thabo Mbeki from office, President Mbeki resigned and Cabinet member Kgalema Motlanthe was sworn in as president on 25 September 2008. On 9 May 2009, following the ANC’s victory in the April 2009 national elections, Jacob Zuma was inaugurated as the fourth democratically elected President of the Republic of South Africa, with Kgalema Motlanthe as his deputy. Although the newly-elected administration has repeatedly indicated that there will be no shift in economic policy, the impact of the change in administration on Transnet’s business is uncertain.

Broad Based Black Economic Empowerment Broad based black economic empowerment (‘‘BBBEE’’) is a core tenet of the Government’s initiative to address the economic exclusion of previously disadvantaged South Africans by encouraging the redistribution of wealth and opportunities to such persons. As part of this initiative, the Government enacted the Broad Based Black Economic Empowerment Act of 2003 (‘‘BBBEE Act’’), which became effective in April 2004. For purposes of the BBBEE Act, ‘‘black people’’ is a generic term which means Africans, coloureds and Indians. On June 18, 2008, the High Court of South Africa ordered that South African Chinese be included within the ambit of the BBBEE Act. The BBBEE Act aims to facilitate BBBEE by promoting economic transformation to allow meaningful participation by black people in the economy; changing the racial composition of ownership and management structures in enterprises; promoting investment programmes that lead to BBBEE; enabling access to economic activities, infrastructure and skills for black women and

128 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS rural and local communities; increasing the extent in which workers, communities, cooperatives own and manage enterprises; and promoting access to finance for black economic empowerment. The Department of Trade and Industry has, as empowered by the BBBEE Act, issued Codes of Good Practice (Codes) on Black Economic Empowerment (BEE). The Codes, which were promulgated on February 9, 2007, must, as far as is reasonably possible, be applied by every organ of the Government and local government and every public entity in issuing licenses, implementing procurement policies, determining qualification criteria for the sale of state-owned enterprises and developing criteria for entering into public private partnerships. The Codes cover concepts such as the measurement of ownership and management control, preferential procurement, employment equity, skills development, enterprise development, residual (industry specific and corporate social investment initiatives), and also qualifying small enterprise sections. Other issues covered include fronting practices, specified verification issues relating to the complex structures, multinationals and state-owned/public entities. These Codes, which are subject to review by the Minister of Finance in 2017, are intended to encourage both public and private entities, through the issuing of licenses, concessions, sale of assets and preferential procurement, to implement appropriate BEE initiatives. The BBBEE Act places a legal obligation on state agencies to contribute to BBBEE, including when developing and implementing their preferential procurement policies. The existing Preferential Procurement Policy Framework Act No. 5 of 2000 (‘‘PPPFA’’) has had to be amended in order to align it with the BBBEE Act and the Codes. The draft amended PPPFA was gazetted for public comment on August 20, 2009. The draft PPPFA provides that all spheres of government must have a mechanism in place that would bring about categories of preference in contract allocation when procuring goods and services to advance previously disadvantaged individuals.

Land Reform Land reform in South Africa is a complex issue, due both to the apartheid era’s legacy of dispossessing black South Africans of their land and to current human development challenges. The Government seeks to, within the framework of the judicial process and the Constitution’s protection of private property rights, facilitate the equitable transfer of land to South Africans who were previously dispossessed of their land as a result of the land dispossession policies of the previous regime in South Africa.

Mining Industry Reform Mining in the Republic of South Africa has historically been undertaken largely by the private sector. The most important mining houses in the Republic of South Africa include Anglo American plc, De Beers Corporation, Anglovaal Mining Limited, BHP Billiton SA, Gold Fields Limited, Impala Platinum Holdings Limited, Xstrata plc and Rand Mines. These corporations, together with their affiliates, are responsible for the majority of the gold, diamond, uranium, zinc, lead, platinum, coal and silver production in the Republic of South Africa. As of June 2009, over 494,000 people were directly employed by the mining sector, of which over 169,000 were employed in the gold mining industry. As of December 2007, there were 1,515 registered mines and quarries in the Republic of South Africa. The Government enacted the Mineral and Petroleum Resources Development Act (‘‘MPRDA’’)in 2002. The MPRDA recognizes the state’s sovereignty and custodianship over the country’s mineral resources. The MPRDA also provides for equitable access to mineral resources, expands opportunities for historically disadvantaged individuals, and promotes economic growth, employment and socio-economic welfare, and security of tenure. The function of processing and finalizing applications and monitoring the evaluations of rights under the MPRDA is entrusted to the Minister of Mineral Resources. In granting rights to historically disadvantaged individuals, the Minister’s objective for Financial Year 2009 was to grant 27 such rights. The actual number of rights granted was 152. In the case of rights granted to women-led entities, the Minister granted 34 rights, far exceeding its original target of 18. By the end of March 2009, the Department of Mineral Resources had received 20,163 applications, of which 16,190 were accepted, 3,653 were rejected and 5,805 were issued. The success of the MPRDA is demonstrated by the fact that by mid-2008, employment figures in the industry reached the half million mark for the first time in many years and, whereas only one junior mining company existed at the time the MPRDA was passed, by mid-2008 there were 21 junior mining companies.

129 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The Minister of Mineral Resources (formerly the Minister of Minerals and Energy) and representatives of certain mining companies and the National Union of Mineworkers developed the Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry in October 2002 (the ‘‘Mining Charter’’), as required in terms of the MPRDA. The Mining Charter required that by August 2009, 40 per cent. of management should consist of historically disadvantaged individuals, and that, within the same timeframe, women should comprise 10 per cent. of the overall labor force in the mining industry. The Mining Charter further mandates that 26 per cent. of industry assets be transferred to historically disadvantaged individuals by 2014. To ensure that substantive progress is made, the industry aimed to achieve 15 per cent. of this target by August 2009. As a result, several large BBBEE mining deals were concluded by various mining companies in the gold, platinum and coal sectors. The Mining Charter is presently under review, as is required by its terms. The process is expected to be concluded by the end of Financial Year 2010. The Department of Mineral Resources (formerly the Department of Minerals and Energy) has passed the MPRDA Amendment Act, 49 of 2008 on 21 April 2009 which will come into effect on a date still to be determined by the President by proclamation in the Government gazette, including the extent to which the aims and targets of the MPRDA have been achieved thus far. The MPRDA Amendment Act brings about improvements to the MPRDA framework aimed at policy certainty as well as promoting investments in the mining sector. The MPRDA Amendment Act also deals with the challenges of implementing the MPRDA, and has, as its main objective, implementing technical improvements to the MPRDA to improve efficiency in the management of the country’s mineral resources. The MPRDA Amendment Act also seeks to improve the handling of residual stockpiles and residue deposits. It also streamlines the process of getting ministerial approval for concessions, transfers and other grants aimed at promoting and protecting new entrants into the mining industry. In addition, the Government will evaluate the mining industry’s performance in achieving the various targets set out in the Mining Charter. On 29 April 2009, Codes of Good Practice for the South African Minerals Industry together with Housing and Living Standards for the Minerals Industry were gazetted.

Crime Prevention Reduced levels of criminal violence are expected to continue to be important determinants of private sector confidence, foreign direct investment and sustainable economic growth in the Republic of South Africa. The fight against crime has been identified as one of the five key priorities of the Government. Crime prevention and internal security in the Republic of South Africa are primarily the responsibility of the South African Police Service. Reducing the levels of serious and violent crime remains a top priority of the Government. The budget allocation was R 31 billion in Financial Year 2006, R 34.6 billion in Financial Year 2007, R 38.7 billion in Financial Year 2008, and R44.4 billion in Financial Year 2009. The Financial Year 2010 budget allocation is R 49.4 billion and is expected to reach R 59.1 billion by Financial Year 2012. To improve the capacity of the South African Police Service to perform its functions at ports of entry and exit, sector policing at station level and the 2010 FIFA World Cup, security personnel numbers have been increasing and are expected to reach 192,000 by March 2010, and approximately 201,000 by the end of March 2011. An additional 22,447 police personnel are planned to be recruited by Financial Year 2013, primarily to strengthen the detective services and crime intelligence. This would increase the number of police personnel from 185,313 at present to 207,760 in Financial Year 2013. The fight against organised crime previously fell within the mandate of the Directorate of Special Operations (‘‘DSO’’), also known as the Scorpions. In 2001, the DSO was established as a division of the National Prosecuting Authority in order to act as a multidisciplinary agency in the investigation and prosecution of organized crime and corruption. Their mandate was focused on the four strategic areas of organized crime, organized corruption, serious and complex financial crime, racketeering and money laundering.

130 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS International Relations After becoming a republic in 1961, the Republic of South Africa became increasingly politically isolated from other nations and subject to economic, cultural and political sanctions by the international community because of the apartheid system. With the transition to democracy, the Republic of South Africa has re-established its links with the outside world. The Republic of South Africa was a founding member of the United Nations (‘‘UN’’) in 1945. In 1994, it resumed its seat in the UN General Assembly, from which it had been prevented from participating since 1974. The Republic of South Africa was elected as a non-permanent member of the UN Security Council for a two-year period, which ended on 31 December 2008. The Republic of South Africa is also a founding member of the World Trade Organization, the International Monetary Fund and the World Bank, and joined the World Bank’s private investment arm, the International Finance Corporation, in 1957. The Republic of South Africa is a member, and the first chair, of the New Partnership for Africa’s Development, a policy framework for Africa’s development approved by several African leaders in 2001. The Republic of South Africa promotes the interests of developing countries with regard to poverty reduction, debt relief and the democratisation of international relations through its work at the G-20, participation in the IMF and discussions with the Group of Eight Industrialised Countries (G-8) at their summits.

HIV and AIDS The socio-economic impact of the HIV and AIDS epidemic on the Republic of South Africa is significant and the Government has made the curtailment and treatment of this disease a high priority. This is part of the multi-pronged strategy to improve public health services which also includes hospital revitalization, increasing the numbers of public health workers and levels of remuneration of such workers, the introduction of new-generation child vaccines as well as improved infectious disease and tuberculosis control Programmes. The strategic focus of the Department of Health is to strengthen HIV prevention and AIDS-related disease management and control, which remains one of the priorities of the National Government. A multi-sectoral strategic approach is adopted in dealing with the spread of HIV and mitigating the impact of AIDS-related morbidity and mortality. TIhis approach is intended to ensure that all relevant stakeholders play an active role in combating HIV and AIDS. Accordingly, during calendar 2007, the National Strategic Plan (‘‘NSP’’) was launched. The NSP covers the period of 2007 to 2011. The plan consists of 18 high level goals and hundreds of sub- objectives. The broad groups of intervention are: * prevention; * treatment, care and support; * research, monitoring and surveillance; and * human rights and access to justice. The NSP spells out clear, quantified targets and places a high priority on monitoring and evaluation. The primary goals are to reduce the rate of new HIV infections by 50 per cent. by 2011 and to mitigate the impact of AIDS on individuals, families and communities. It provides a package of treatment, care and support services, which include counseling and testing services, healthy lifestyle intervention and nutritional support in order to meets these targets. HIV rates are declining due to prevention and an increase in treatment, which is primarily attributed to a recent increase in the number of facilities providing antiretroviral therapy. Statistics South Africa has estimated that by mid-year in 2009, 5.2 million or 10.6 per cent. of the population was living with HIV in the Republic of South Africa. According to the National HIV and Syphilis Antenatal Sero-Prevalence Survey (2008), the Department of Health estimates that there were an estimated 5.3 million HIV positive people in the Republic of South Africa. By 2009, 96 per cent. of public health facilities offered voluntary counseling and testing services which is a marked improvement from the 64 per cent. of facilities offering these services in 2005. The NSP states that the epidemics of tuberculosis and HIV are linked, with 50-80 per cent. of tuberculosis patients being HIV positive in Southern Africa. The high overall prevalence of HIV in the Republic of South Africa has thus contributed to an increasing incidence of active tuberculosis, including multi drug resistant tuberculosis and extreme multi-drug resistant tuberculosis.

131 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS South African Economy The South African economy accounts for a third of sub-Saharan Africa’s GDP. The South African economy varies widely, ranging from ‘‘first-world’’ levels of development to an informal sector typical of developing countries, and to urban shantytowns and subsistence agriculture. Inequality in the economy is a primary legacy of the apartheid era, in which Government expenditures were channelled to whites in preference to other racial groups. For example, as of June 30, 2009, unemployment among the economically active white population was 4.6 per cent., whereas the unemployment rate among the economically active blacks was 27.9 per cent. In the period from 1995-2008, there was a 52.8 per cent. rise in employment of blacks between the ages of 15 to 65 years, being the largest percentage increase of any racial group. There is a small but rapidly growing black middle class. Research indicates that the number of black middle class households has risen by 30 per cent. with their numbers increasing from 2 million to 2.6 million. Their collective spending power has increased from R 130 billion to R 180 billion. Nevertheless, the Government continues to seek measures to redress imbalances in the economy through various initiatives, including its policy of BBBEE.

GDP After 40 quarters of uninterrupted economic growth, the Republic of South Africa’s real GDP contracted at a seasonally adjusted and annualized rate of 1.8 per cent. in the fourth quarter of 2008. In the first half of 2009, real GDP contracted further at an annualized rate of 4.5 per cent. This could be attributed to the sharp and synchronized decline in global economic activity during the second half of calendar year 2008, which continued into the first half of calendar year 2009. The 2009 MTBPS South African real GDP growth projections estimate a contraction of 1.9 per cent. in 2009, 1.5 per cent. growth in 2010, and 3.2 per cent. growth in 2012. Prior to the current downturn, real GDP had increased at an annualized rate of about 4 per cent. from the final quarter of 1999 to the final quarter of 2007, the longest upward trend identified since the dating of business cycles began in 1945. This was notably higher than the growth rate of 3.1 per cent. registered in the upward phases from 1986 to 1989 and 3.7 per cent. registered from 1993 to 1996, but less than the growth rate of 5.3 per cent. attained in the upward phases from 1978 to 1981 and 6.4 per cent. from 1983 to 1984. Real growth ran out of steam in the first three quarters of 2008, falling below trend and signaling the onset of a downswing, which intensified as growth subsequently turned negative. On balance, the level of real GDP in the second quarter of 2009 shrank by 3 per cent. compared with its recent peak in the third quarter of 2008, reflecting the negative impact of the deep recession in the world economy. A sectoral analysis shows that during the prolonged 1999 to 2007 upward trend, the growth in real GDP was widely spread among the main sectors, with the exception of the mining industry where production, on balance, rose very little. By contrast, real value added by the secondary and tertiary sectors increased at average annualized rates of 4.5 per cent. and 4.7 per cent., respectively. The onset of the current downward phase of the business cycle mainly manifested itself in declines in real value added by the manufacturing and commerce sectors, and in the further deterioration in mining production in the course of 2008. By the early months of 2009, the adverse impact of the recession was clearly evident as the declines in real value added became broad-based. Consequently, with the exception of construction, and community, social and personal services, all other sectors of the economy contracted in the first half of 2009 when compared with their counterparts in the second half of 2008.

132 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS The following table sets forth nominal and real GDP and expenditures for the periods indicated.

GDP Summary As of and for the six-month As of and for the year ended period December 31, ended 30 June 2005 2006 2007 2008 2009(1)

Nominal GDP (R millions) at market prices ...... 1,543,976 1,745,217 1,999,086 2,283,777 2,328,668 Real GDP (R millions) at 2000 prices ...... 1,114,758 1,174,078 1,233,930 1,271,717 1,245,732 Real GDP Growth (percentages)... 5.0 5.3 5.1 3.1 (1.8) Population (million) ...... 47.4 48.0 48.6 49.1 49.5 Per Capita GDP (nominal)...... 32,604 36,381 41,173 46,507 47,050 Per Capita GDP (real) ...... 23,540 24,475 25,414 25,897 25,170 (1) First half of 2009, seasonally adjusted and annualized. Source: SARB and Statistics South Africa.

Principal Sectors of the Economy The following table sets forth real gross value added (GVA) for the periods indicated.

Real Gross Value Added By Sector (at basic prices) For the year ended December 31, Contribution 2006 2007 2008 2009(1) in 2009

(R millions) Manufacturing...... 191,234 199,785 202,116 177,957 15.6 Finance, insurance, real estate and business services...... 227,598 243,118 255,378 256,044 22.5 General government ...... 148,399 153,961 160,013 164,199 14.4 Wholesale and retail trade, catering and accommodation...... 165,804 174,479 175,436 171,299 15.1 Transport, storage and communication ...... 116,232 122,705 127,552 128,270 11.3 Mining and quarrying...... 68,591 68,570 64,145 58,472 5.1 Agriculture, forestry and fishing...... 27,493 28,283 33,592 34,988 3.1 Electricity, gas and water.... 24,926 25,683 25,376 24,748 2.2 Construction (contractors) ... 35,494 41,552 47,322 51,802 4.6 Other producers and services (personal services) 63,170 65,703 68,382 70,161 6.2

Gross value added at basic prices ...... 1,068,941 1,123,839 1,159,312 1,137,940 100.0

Mining and Quarrying The Republic of South Africa’s mineral wealth is found in diverse geological formations, some of which are unique and very extensive by world standards. In terms of mining production, the most important of these formations is the Witwatersrand Basin in Gauteng, which yields approximately 93 per cent. of the Republic of South Africa’s gold output as well as much of its uranium, silver, pyrite and osmiridium. The Transvaal Supergroup, also in Gauteng Province, contains large deposits of manganese and iron ore and the Bushveld Complex of the Gauteng, Mpumalanga and

133 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS North West provinces holds a large percentage of the world’s reserves of a number of important minerals, including platinum-group metals, chromium, vanadium, nickel, copper, fluorspar and andalusite. The Republic of South Africa holds approximately 72.4 per cent. of the world’s chrome ore reserves and 87.7 per cent. of the world’s platinum-group metals reserves. The Republic of South Africa’s reserves of platinum, chromite and gold constitute an important global mineral source. The deposits of manganese ore in the Northern Cape are the largest proven reserve bases in the world, totalling approximately 4 billion tonnes. The Republic of South Africa also has substantial reserves of other important industrial metals and minerals, including alumino-silicates, antimony, coal, fluorspar, lead, nickel, phosphates, titanium, uranium, vanadium, vermiculite, zinc and zirconium. The Republic of South Africa’s total primary mineral sales increased by 15.4 per cent. to R 224.3 billion in calendar year 2007 compared to calendar year 2006 and increased again to a total of R 300.3 billion in calendar year 2008 compared to calendar year 2007. As a result of its reserve base, the Republic of South Africa is a large-scale mineral producer and to a large degree self-sufficient with respect to the supply of minerals. However, some minerals and mineral products need to be imported. The country is the leading world supplier, and contributes in excess of 30 per cent. of the world’s total, of chrome ore, manganese, ferrochrome, platinum-group metals, titanium, vanadium, vermiculite and zirconium. The Republic of South Africa is the world’s sixth largest producer of natural diamonds, measured in carats, after Russia, the Democratic Republic of Congo, Botswana, Australia and Canada. A high percentage of the country’s production is of gem and near-gem quality. During calendar year 2008, the mining sector directly employed 518,519 workers, an increase of 23,369 from the 495,150 employees in 2007. As of June 2009, the mining and quarrying sector directly employed 494,000 workers, a decrease from the number of employees employed in 2008. In calendar year 2008 approximately 53 different minerals were produced from 1,515 mines and quarries, of which 52 produced gold, 35 produced platinum-group minerals (‘‘PGMs’’), 100 produced coal and 394 produced diamonds. The Republic of South Africa’s mineral industry is export-oriented. The South African mining industry is a leading exporter of vanadium, PGMs, gold, ferrochromium, chrome ore and manganese ore. Other important export commodities include ferro-manganese, fluorspar, coal and titanium minerals. Mineral export sales accounted for approximately 30.8 per cent. of total export revenues in calendar year 2008. The most important export destination for the Republic of South Africa’s primary minerals remained Europe with 79.3 per cent., while Pacific Rim countries exceeded all other destinations and accounted for 42.6 per cent. of the selected processed minerals. The real value added by the mining sector declined in both calendar year 2006 and 2007, and contracted at a seasonally adjusted annualized rate of 11.6 per cent. in the first half of calendar year 2008, despite record high international commodity prices. The sizeable decline in real output by the mining sector occurred predominantly in the sub-sectors for platinum, gold and diamond mining. Production volumes were directly affected by rolling electricity blackouts and rationing in early calendar year 2008, which gave rise to a one week shutdown of mining operations in the first quarter of the calendar year. The mining sector was exposed to rising input costs, occasional flooding, industrial action and skills shortages, all of which were exacerbated by the demand for skilled labor arising from other capital projects, including those geared towards the 2010 FIFA World Cup. In addition, certain gold mines were subject to sporadic shutdowns due to safety audits. The unadjusted real value added by the mining and quarrying industry for the second quarter of 2009 decreased by 9.5 per cent. compared to the second quarter of 2008, while the seasonally adjusted real value added by the mining and quarrying industry increased at an annualized rate of 5.5 per cent. during the second quarter of 2009 compared to the first quarter of 2009. The increase in the seasonally adjusted real value added by the mining and quarrying industry was mainly due to the increase reflected in the mining of other metal ores (including platinum) and other mining and quarrying (including diamonds). By contrast, real value added by the coal mining industry advanced partly due to increased demand from Eskom’s power stations to replenish severely depleted coal stockpiles. The coal

134 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS mining industry is also less electricity intensive compared to other sub-sectors in the mining industry. The gold sector has been declining steadily since calendar year 1994, mainly due to falling grades and the challenges of aging infrastructure in deep mines, a unique phenomenon for South African mines. In calendar year 2008 the electricity crisis was also blamed for the output reduction. In calendar year 2008, the Republic of South Africa’s gold production totaled 213 tons, a 16 per cent. decline when compared to the 254 tons produced in calendar year 2007. Solutions including new ways to mine the country’s remaining gold are planned to be investigated. South Africa’s PGMs (which include platinum, palladium, rhodium, ruthenium and osmium) production also decreased from 311 tons in calendar year 2007 to 276 in calendar year 2008, mainly due to the energy crisis in the Republic of South Africa. The diamond industry was also affected severely by the global economic recession as demand for luxury goods decreased drastically. This prompted mining companies to reduce production severely and even close mines in late-2008 and early-2009. De Beers, the primary producer of rough diamonds in the Republic of South Africa, cut production by 60 per cent.

Monetary and Financial System The South African financial system consists of banks and non-bank financial institutions such as investment funds, portfolio management companies, securities investment firms, insurance companies, development funding institutions and pension funds.

South African Reserve Bank (SARB) The SARB is the central bank of the Republic of South Africa. The SARB’s independence is enshrined in the Constitution and is subject only to acts of Parliament and to regular consultation with the Minister of Finance. The principal responsibilities of the SARB include: formulating and implementing monetary policy; issuing banknotes and coins; acting as banker to the Government; acting as a bank to banks licensed under the Banks Act, 1990; providing facilities for the clearing and settlement of claims between banks; acting as custodian of the country’s gold and other foreign reserves; acting as a lender of last resort; conducting open-market operations; supervising banks; supervising large primary co-operative banks, secondary and tertiary co-operative banks collecting, processing and interpreting economic statistics and related information; and formulating and implementing exchange rate policies in cooperation with the Minister of Finance and the National Treasury. Unlike many other central banks, shares in the SARB are held privately, with none held by the Government.

Monetary Policy The main objective of the SARB’s monetary policy has been the pursuit of price stability. This policy forms part of broader macroeconomic policies of the Government by creating a stable financial environment and improving the standard of living of all inhabitants of the country. The SARB does not have fixed exchange rate targets and allows the Rand to float freely against international currencies. Having reached a plateau at a level of 12 per cent. from early June to early December 2008, the repurchase rate was reduced by 50 basis points on December 12, 2008, and by a further 100 basis points each at four of the meetings of the Monetary Policy Committee (‘‘MPC’’) that took place in the first half of 2009. The improved medium-term outlook for inflation and the widening output gap were a key motivation underlying the decisions taken during the MPC meetings. After leaving it unchanged in its July meeting, the MPC lowered the repurchase rate by 50 basis points to 7.0 per cent. in August 2009 and kept at that level in the ensuing three MPC meetings to November 2009. Although cost-push pressures in the economy continued to pose risks to the inflation outlook, the MPC decided to keep the monetary policy stance unchanged because the risks to the inflation outlook appeared to be fairly evenly balanced. The frequency of the meetings for most of 2009 changed from bi-monthly to monthly (excluding July 2009) in order to monitor and respond appropriately to the rapidly changing economic environment. However, in the MPC meeting held on November 17, 2009, the MPC, in its first meeting under the newly appointed Governor Gill Marcus, decided to revert back to its policy of meeting every alternate month, as the global economic environment appeared to have stabilized.

135 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS During the calendar year 2009, monetary policy has been faced with new challenges. For the first time since the introduction of the inflation-targeting framework in 2000, monetary policy had to be implemented in the context of a domestic recession against a backdrop of the severe synchronized downturn in the world economy. At the same time inflation remained well above the upper end of the inflation target range, and despite the downside pressures, targeted inflation was only moderating at a very slow rate. CPIX inflation (the year-on-year change in the headline CPI excluding mortgage interest cost) peaked at 13.6 per cent. in August 2008 and declined to 10.3 per cent. by December 2008. With the publication in March 2009 of the reweighed and rebased inflation measure, headline CPI inflation for all urban areas was adopted as the new inflation targeting measure, with the target range remaining at 3 per cent. to 6 per cent. CPI measured 8.1 per cent. in January 2009, but increased to 8.6 per cent. in February 2009 and declined gradually thereafter. By August 2009, the year-on-year CPI inflation was 6.4 per cent.; in September 2009, it was 6.1 per cent. and in October 2009, the CPI, for the first time in 31 months fell within the SARB’s inflation target range at 5.9 per cent. In its role of implementing monetary policy, the SARB monitors and influences conditions in the South African money and credit markets and affects interest rates, growth in lending and growth of deposits. The SARB uses open-market operations to determine the amount of liquidity made available to banks on a weekly basis in repurchase transactions. The interest rate for such repurchase transactions is set by the SARB’s Monetary Policy Committee (‘‘MPC’’) and has a significant impact on all short-term interest rates in the economy. The monetary policy stance is decided at the bi-monthly meetings of the MPC. There exists, however, a continuous process of review that takes new information and developments into consideration.

Foreign Trade The Republic of South Africa’s imports and exports (including gold) accounted for roughly 63.2 per cent. of GDP in calendar year 2008. The Republic of South Africa’s trade deficit narrowed from 2.0 per cent. in 2007 to 1.6 per cent. in 2008.

Exports The Republic of South Africa’s exports have traditionally consisted largely of primary products, especially mining products, with gold, diamonds, platinum group metals, coal and iron exported in large quantities. The value of the Republic of South Africa’s merchandise exports, which had experienced an upward trend between calendar year 1997 and 2002, decreased by 12.5 per cent. in calendar year 2003 before increasing again in the following years up to the second half of calendar year 2008. The upward trend was reversed in the fourth quarter of 2008 when the value of the republic of South Africa’s merchandise exports declined by 6.3 per cent., after which it declined further by 19.8 per cent. and 6.3 per cent. in the first and second quarters of 2009, respectively. The increases in the value of merchandise exports were boosted by increased export volumes of 8.3 per cent. in calendar 2007 and 4.0 per cent. in 2008. For the first half of 2009, export volumes were sharply down from the levels recorded in 2008. This was mostly due to the weak economic activity experienced in the wake of the global financial crisis. Export prices, expressed in Rand, increased by 13.9 per cent. in calendar year 2007, 28.4 per cent. in calendar year 2008 and by a 2 per cent. in the first quarter of 2009. For 2007 as a whole, net proceeds from gold exports increased by 12.5 per cent., although export volumes declined by 5.5 per cent. This is a result of a combination of difficult gold mining conditions limiting supply, strong price growth caused by dollar weakening and the associated increase in the global appetite to hedge investments in secure commodities.

Imports Firm and sustained growth in domestic expenditure and high oil volumes contributed to the physical quantity of imports rising by a sizeable 11.1 per cent. in calendar year 2005, 20.6 per cent. in calendar year 2006 and a further 11 per cent. in calendar year 2007. Volumes increased further by almost 4 per cent. in the first half of 2008 as a result of ongoing infrastructural investment. Volumes started to decline in the last quarter of 2008. Subdued domestic demand conditions alongside weak business and consumer confidence levels gave rise to the third consecutive quarterly decline in the volume of merchandise imports in the second quarter of 2009. The contraction in the physical quantity of merchandise imports gained further momentum as various

136 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS private-sector capital expenditure projects were postponed in view of the fall in global demand. Consistent with the slowdown in gross fixed capital formation, the imports, especially machinery and electrical equipment, and those of vehicles and transport equipment receded strongly in the second quarter of 2009. In addition, the imports of intermediate and consumer goods also tapered off. Overall, the volume of imported goods shrank for the third consecutive quarter, declining by 15.5 per cent. in the second quarter of 2009. Relative to gross domestic expenditure, the volume of merchandise imports decreased from 24.4 per cent. in the first quarter of 2009 to 21.4 per cent. in the second quarter, significantly lower than the most recent peak of 28.1 per cent. recorded in the third quarter of 2008. Over the same period, the strengthening of the exchange value of the Rand more than offset the moderate increase in the international price of crude oil and other import commodities, leading to a decline of 7 per cent. in the Rand price of merchandise imports. The value of imported goods accordingly dropped by 21.4 per cent. from R 643 billion in the first quarter of 2009 to R 505 billion in the second quarter.

Public Enterprises The Government owns a number of public enterprises (otherwise known as state-owned entities). The Ministers under whose departments these enterprises fall act as the ‘‘Executive Authority’’ over these entities, taking up the role of shareholder on behalf of government. The Ministers that act as the Executive Authority include the Minister of Public Enterprises, the Minister of Communications, the Minister of Energy, the Minister of Transport and various other Ministers of the National Government. The relevant Executive Authority oversees the affairs of the public enterprise, including the appointment of board members, the entering into of shareholder compacts with the public enterprise, approving major transactions, and the monitoring of performance. The National Treasury is responsible for financial oversight over all the public enterprises, including the review of major transactions, funding requests and applications for guarantees. The infrastructure investment programmes of the public enterprises, in addition to delivering infrastructure to enhance economic growth and alleviate poverty are a key component of the government stimulus package aimed at mitigating the effects of the global economic recession on the South African economy. Public enterprises are expected to invest a total of R 652.0 billion over the next five Financial Years in infrastructure.

Debt Record On 1 September 1985, in response to a foreign currency liquidity crisis, the Republic of South Africa prohibited repayments of certain foreign indebtedness to foreign creditors, while interest payments were made as they became due. Final settlement of affected indebtedness was agreed in 1993. Other than this situation, the Republic of South Africa has not defaulted in the payment of principal or interest on any of its internal or external indebtedness since becoming a Republic in 1961.

137 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS SHAREHOLDER

The Government of the Republic of South Africa is the sole shareholder of Transnet, owning its entire issued share capital of 12,660,986,310 ordinary shares as at 30 September 2009. Transnet is defined as a Schedule 2 state-owned enterprise as envisaged by the Public Finance Management Act and consequently reports to its shareholder through the Department of Public Enterprises. Shareholder Compact The Shareholder Compact between Transnet and the Government was signed in August 2009 in respect of Financial Year 2010. The Shareholder Compact is required by Treasury Regulation 29. The Shareholder Compact confirms Transnet’s mandate to assist in lowering the cost of doing business in the Republic of South Africa and enabling economic growth through providing appropriate ports, rail and pipeline infrastructure and operations in a cost effective and efficient manner and within acceptable benchmark standards. The key performance areas include capital and financial efficiency, operational efficiency and effectiveness, infrastructure investments as well as developmental objectives. The targets set are measured quarterly and are reported quarterly to the shareholder.

138 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS REGULATION

Set out below is a summary of material information concerning the regulation of Transnet’s business. This description does not purport to be a complete description of all applicable laws and regulations and should not be read as such. Transnet is a public company whose sole shareholder is the Government. As a public entity, Transnet is governed by many laws and regulations. This section discusses certain material laws and regulations that govern the everyday activities of Transnet.

Legislation Affecting Public Entities Two significant laws applicable to Transnet are the Legal Succession to the South African Transport Services Act, 1989 (the ‘‘LSSATSA’’) and the Public Finance Management Act. Transnet is established under the terms of the LSSATSA as a company that is owned by the Government, and its financial affairs are governed by the Public Finance Management Act. The object of the Public Finance Management Act is to secure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities of the institutions to which it applies. Section 66(3)(a) of the Public Finance Management Act allows Transnet, as a Schedule 2 public entity, to borrow money, issue a guarantee, indemnity or security, or enter into any other transaction that binds Transnet, via its accounting authority. However, Transnet may not delegate such a power without the prior written approval of the Minister. Section 56(1)(a) of the Public Finance Management Act allows Transnet to delegate, via its accounting authority, any of its functions such as granting its group chief executive the authority to sign certain documents on behalf of Transnet. The accounting authority for Transnet is its Board of Directors or the chief executive officer.

Occupational Safety and Environmental Regulation Transnet and its operating divisions are subject to a number of safety and environmental regulations. These include OHSA, the National Environmental Management Act, 1998 (the ‘‘NEMA’’), the National Railway Safety Regulator Act, 2002 (the ‘‘National Railway Safety Act’’) and the Hazardous Substances Act, 1973 (the ‘‘Hazardous Substances Act’’). See ‘‘Risk Factors – Transnet is subject to a wide variety of laws and regulations and may incur material costs or face substantial liability if it fails to comply with existing or future laws or regulations applicable to its businesses’’. Transnet’s operating divisions employ tens of thousands of employees. Some activities carried out by these operating divisions expose employees to various health and safety risks. As a result, Transnet is required to comply with various regulations that are aimed at protecting the health and safety of its employees while at work against hazards to their health and safety arising out of or in connection with their activities at work. Under the OHSA, Transnet is required to have health and safety representatives in the workplace. The National Railway Safety Act requires railway operators to implement and maintain adequately resourced and documented safety measures that are consistent with the South African Standard for Railway Safety Management. Under the terms of the Hazardous Substances Act, Transnet is required to obtain a license to use certain hazardous substances in its operations. A license is also required in order for Transnet to keep or install some groups of hazardous substances in any premises of Transnet. The Hazardous Substances Act categorises hazardous substances into different groups. Under the terms of the NEMA, Transnet is required to submit environmental assessment reports for carrying on certain activities that affect the environment. The NEMA provides for co-operative environmental governance by establishing principles for decision-making on matters affecting the environment.

Employment Legislation Transnet, as an employer, is required to comply with the Labour Relations Act, 1995 (the ‘‘LRA’’), the Basic Conditions of Employment Act, 1997 (the ‘‘BCEA’’) and the Employment Equity Act, 1998 (the ‘‘EEA’’). The LRA aims to advance economic development, social justice, labour peace and democratisation of the workplace. The LRA further aims to give effect to and regulates the fundamental rights (including the right to food, water and social security) conferred by section 27 of the Constitution of the Republic of South Africa.

139 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet is expected to comply with the requirements of affirmative action in employing all levels of employees. Furthermore, Transnet is required to comply with the basic conditions of employment as determined in the BCEA. As a Government owned company, Transnet is also required to fully comply with the BBBEE Act and its codes in all its activities, and is required to promote economic transformation in its activities in order to enable meaningful participation of black people in the economy as required by the BBBEE Act. See ‘‘Risk Factors – Transnet’s operations and financial condition may be adversely affected by labour disputes or changes in labour laws’’.

Transnet Pipelines Transnet Pipelines operates under the regulatory framework of the Petroleum Pipelines Act, the Gas Act and the National Energy Regulator Act, 2004 (the ‘‘National Energy Regulator Act’’). The aim of the Petroleum Pipelines Act is to establish a national regulatory framework for petroleum pipelines; to establish a Petroleum Pipelines Regulatory Authority as the custodian and enforcer of the national regulatory framework and to provide for matters that are ancillary thereto. The Gas Act aims to promote the orderly development of a piped gas industry, establish a national regulatory framework; establish a National Gas Regulator as custodian and enforcer of the national regulatory framework and provide for matters that are ancillary thereto. The National Energy Regulator Act endeavours to establish a single regulator to regulate the electricity, piped gas and petroleum pipeline industries and to provide for matters that are ancillary thereto. More specifically, section 3 of the National Energy Regulator Act provides for the establishment of NERSA. Under section 4 of the National Energy Regulator Act, NERSA is mandated, inter alia, to undertake the functions of the Petroleum Pipelines Regulatory Authority and the Gas Regulator, set out in section 4 of the Petroleum Pipelines Act and the Gas Act, respectively. In achieving its mandate, NERSA assumes the role of custodian and enforcer of the national regulatory framework in the petroleum pipelines and piped-gas industries. Under the Petroleum Pipelines Act, Transnet Pipelines is required to obtain licenses for construction and operation of petroleum pipelines, loading facilities and storage facilities, which licences are issued by NERSA. A license issued under the Petroleum Pipelines Act is valid for a period of 25 years and may be renewed. Transnet has been granted a petroleum pipeline operating licence as well as a construction licence for the NMPP. In November 2009, NERSA granted Transnet a licence for its gas transmission pipeline.

National Key Points Act Under the terms of the National Key Points Act, the Minister of Defence may at any time declare any place or area a National Key Point if, in the opinion of the Minister of Defence, such place or area is so important that its loss, damage, disruption or immobilisation may prejudice the country or whenever he considers it necessary or expedient for the safety of the Republic of South Africa or in the public interest. On receipt of a notice of such declaration by the Minister of Defence, the owner of the National Key Point concerned shall after consultation with the Minister of Defence, at his own expense take steps to the satisfaction of the Minister of Defence in respect of the security of the said National Key Point. Transnet is required to comply with a Minister of Defence notice in relation to Transnet Pipelines, as it has been declared a National Key Point. Transnet would also be required to comply with any additional Minister of Defence notices should any of its other properties be declared National Key Points.

140 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS RELATED PARTY TRANSACTIONS

In the ordinary course of business the Group enters into transactions with companies controlled by its controlling shareholder, its directors and managers and associated parties. Services rendered to related parties comprise principally transportation (aviation, rail and road) services. Services purchased from related parties comprise principally energy, telecommunications, information technology and property related services. The Group believes that these transactions are entered into on an ‘‘arm’s length’’ basis and their terms do not substantially differ from standard market terms. Furthermore, neither the Group nor any of its related parties is obligated to procure from or render services to their related parties.

Public Enterprises The following table sets forth the Group’s transactions with public enterprises, Government entities and associates of Transnet for Financial Years 2009, 2008 and 2007.

As at or for the year ended 31 March

2008 2007 2009 (Restated) (Restated)

(R millions) Services rendered Major public enterprises ...... 1,020 904 1,045 Other public enterprises ...... 112 119 370 National Government business enterprises...... 1,673 1,255 908 Associates ...... 56 70 348

2,861 2,348 2,671

Services received Major public enterprises ...... 849 904 1,529 Other public enterprises ...... 210 174 475 National Government business enterprises...... 890 1,519 983 Associates ...... 203 261 357

2,152 2,858 3,344

Amount due from/(to) Major public enterprises ...... (249) 257 309 Other public enterprises ...... 30 20 6 National Government business enterprises(1) ...... (6,407) (6,150) (6,782) Associates ...... 143 68 (39)

(6,483) (5,805) (6,506)

(1) Includes R 6,720 million relating to bonds issued to National Government business enterprises at 31 March 2009 (31 March 2008: R 6,467million).

The Group expects that related party transactions similar to the ones disclosed above have continued from Financial Year 2009 until the date of this Base Prospectus. The Group expects that these transactions are entered into on an ‘‘arm’s length’’ basis and their terms do not substantially differ from standard market terms.

Loans to Subsidiaries As at 31 March 2009 the Group had no subordinated loans to subsidiaries compared to subordinated loans of R 289 million as at 31 March 2008.

141 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS South African Airways and South African Express Airways (Pty) Limited South African Airways and South African Express Airways (Pty) Limited conduct a number of transactions via intermediaries who act as their agents. Services rendered by these companies to related parties are measured with reference to their frequent flyer corporate contracts. These contracts qualify for rebates on reaching a specified qualifying limit, which are similar to other third parties who participate in this frequent flyer programme.

Employee Loans In Financial Year 2008 the Group provided R 470,000 in secured loans bearing a variable interest rate linked to the prime interest rate to its senior executives. As at 31 March 2009, R 470,000 had been repaid leaving a zero balance. None of the members of the Board of Directors or the senior managers has or had significant influence in any entity with which the Group had significant transactions during Financial Year 2009. In addition, as at 31 March 2009 the Group had R 71 million in outstanding employee housing and other loans compared with R 85 million as at 31 March 2008. See, ‘‘Transactions with key management personnel’’ in footnote 37 of the Consolidated Financial Statements included in this Base Prospectus.

Other Transnet also provides guarantees for certain debt of affiliates. As of 31 March 2009, Transnet had provided guarantees of liabilities of affiliates to third parties in the amount of R 3,005 million. The most significant guarantee relates to a R 2.4 billion guarantee to MacQuarie Bank (amongst others in a syndicate of lenders) pertaining to a sale and leaseback with respect to Transnet Freight Rail locomotives used in the Republic of South Africa.

142 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS EXCHANGE CONTROLS

The information below is not intended as legal advice and it does not purport to describe all the considerations that may be relevant to a prospective investor in the Notes. Prospective investors in the Notes who are non-South African residents or emigrants from the Common Monetary Area (as defined below) are urged to seek further professional advice with regard to the purchase of Notes. Exchange controls restrict the export of capital from the Republic of South Africa, Namibia and the Kingdoms of Swaziland and Lesotho (collectively the ‘‘Common Monetary Area’’). These exchange controls are administered by ExCon and regulate transactions involving South African residents. The purpose of exchange controls is to mitigate the decline of foreign capital reserves in the Republic of South Africa. The Issuer expects that South African exchange controls will continue to operate for the foreseeable future. The Government has, however, committed itself to relaxing exchange controls gradually and significant relaxation has occurred in recent years. It is the stated objective of the South African authorities to achieve equality of treatment between South African residents and non-South African residents in relation to inflows and outflows of capital. This gradual approach towards the abolition of exchange controls adopted by the Government is designed to allow the economy to adjust more smoothly to the removal of controls that have been in place for a considerable period of time. Transnet has obtained the written blanket approval from ExCon to borrow a maximum of R 14 billion in the foreign financial markets without the prior reference to ExCon. The approval in this regard is granted conditional upon, amongst others, the Issuer furnishing ExCon with copies of all loan agreements entered into with foreign lenders within 30 days of signing such agreement. In addition, non South African residents and/or their offshore subsidiaries may, without the prior written approval of ExCon, subscribe for or purchase any Note or beneficially hold or own any Note. ExCon may (and is currently expected to) impose certain conditions on the issue of each Tranche of Notes under the Programme, for example, with regard to maturity, issue size and listing.

143 c101680pu050 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions that, subject to completion and amendment and as supplemented or varied in accordance with the provisions of Part A of the relevant Final Terms, which will be incorporated by reference into each Global Note or Global Certificate, shall be applicable to the Notes in definitive form (if any) issued in exchange for the Global Note(s) or Global Certificate(s) representing each Series. Either (i) the full text of these terms and conditions together with the relevant provisions of Part A of the final Terms or (ii) these terms and conditions as so completed, amended, supplemented or varied (and subject to simplification by the deletion of non-applicable provisions), shall be endorsed on such Bearer Notes or on the Certificates relating to such Registered Notes. All capitalised terms that are not defined in these terms and conditions will have the meanings given to them in Part A of the relevant Final Terms. Those definitions will be endorsed on the definitive Notes or Certificates, as the case may be. References in these terms and conditions to ‘‘Notes’’ are to the Notes of one Series only, not to all Notes that may be issued under the Programme. The Notes are issued pursuant to an Agency Agreement (as amended or supplemented as at the Issue Date, the ‘‘Agency Agreement’’) dated on or around 26 January 2010 between the Issuer, The Bank of New York Mellon, London Branch as fiscal agent, The Bank of New York Mellon (Luxembourg) S.A. as paying agent and transfer agent and The Bank of New York Mellon, New York Branch as registrar, paying agent and transfer agent and with the benefit of a Deed of Covenant (as amended or supplemented as at the Issue Date, the ‘‘Deed of Covenant’’) dated on or around 26 January 2010 executed by the Issuer in relation to the Notes. The fiscal agent, the paying agents, the registrar, the transfer agents and the calculation agent(s) for the time being (if any) are referred to below respectively as the ‘‘Fiscal Agent’’, the ‘‘Paying Agents’’ (which expression shall include the Fiscal Agent), the ‘‘Registrar’’, the ‘‘Transfer Agents’’ and the ‘‘Calculation Agent(s)’’, and which expressions include any successor fiscal agent, registrar, paying agent, transfer agent and calculation agent or additional agent appointed from time to time in connection with the Notes and, together, the ‘‘Agent(s)’’. References herein to the ‘‘Agents’’ are to the Registrar, the Fiscal Agent, the Paying Agents, the Transfer Agents and any references to an ‘‘Agent’’ is to any one of them. The Noteholders (as defined below), the holders of the interest coupons (the ‘‘Coupons’’) relating to interest bearing Notes in bearer form and, where applicable in the case of such Notes, talons for further Coupons (the ‘‘Talons’’) (the ‘‘Couponholders’’) and the holders of the receipts for the payment of instalments of principal (the ‘‘Receipts’’) relating to Notes in bearer form of which the principal is payable in instalments are bound by, and deemed to have notice of, all of the provisions of the Agency Agreement and the Deed of Covenant applicable to them. In these Conditions, ‘‘Noteholder’’ means the bearer of any Bearer Note and the Receipts relating to it or the person in whose name a Registered Note is registered (as the case may be), ‘‘holder’’ (in relation to a Note, Receipt, Coupon or Talon) means the bearer of any Bearer Note, Receipt, Coupon or Talon or, as the case may be, the person in whose name a Registered Note is registered in the register, as defined below (or, in the case of a joint holding, the first named thereof). Capitalised terms have the meanings given to them hereon, the absence of any such meaning indicating that such term is not applicable to the Notes. As used in these Conditions, ‘‘Tranche’’ means Notes which are identical in all respects (including as to listing) and ‘‘Series’’ means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Date, Interest Commencement Date and/or Issue Price. Copies of the Agency Agreement and the Deed of Covenant are available for inspection at the specified offices of each of the Paying Agents, the Registrar and the Transfer Agents, the initial specified offices of which are set out in the Agency Agreement.

1. Form, Denomination and Title The Notes may be issued in bearer form (‘‘Bearer Notes’’) or in registered form (‘‘Registered Notes’’) as specified hereon in each case in the Specified Denomination(s) shown hereon provided that in the case of any Notes which are to be admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a Prospectus under Directive 2003/71/EC

144 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS (the ‘‘Prospectus Directive’’), the minimum Specified Denomination shall be c50,000 (or its equivalent in any other currency as at the date of issue of the relevant Notes). All Registered Notes shall have the same Specified Denomination.

This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index-Linked Interest Note, an Index-Linked Redemption Note, an Instalment Note, a Dual Currency Note or a Partly Paid Note, a combination of any of the foregoing or any other kind of Note, depending upon the Interest and Redemption/Payment Basis shown hereon.

Bearer Notes are serially numbered and are issued with Coupons (and, where appropriate, a Talon) attached, save in the case of Zero Coupon Notes in which case references to interest (other than in relation to interest due after the Maturity Date), Coupons and Talons in these Conditions are not applicable. Instalment Notes are issued with one or more Receipts attached.

Registered Notes are represented by registered certificates (‘‘Certificates’’) and, save as provided in Condition 2 (Transfers of Registered Notes), each Certificate shall represent the entire holding of Registered Notes by the same holder. Each Certificate will be numbered serially with an identifying number which will be recorded in the register which the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the ‘‘Register’’).

Title to the Bearer Notes, the Receipts, the Coupons and the Talons shall pass by delivery. Title to the Registered Notes shall pass by registration in the Register maintained by the Registrar in accordance with the provisions of the Agency Agreement. Except as ordered by a court of competent jurisdiction or as required by law, the holder of any Note, Receipt, Coupon or Talon shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on it (or on the Certificate representing it) or its theft or loss (or that of the related Certificate), other than the endorsed form of transfer, in the case of Registered Notes, and no person shall be liable for so treating the holder.

2. Transfers of Registered Notes (a) Transfer of Registered Notes: Subject to Conditions 2(e) (Regulations Concerning Transfers and Registration) and 2(f) (Closed Periods), Registered Notes may be transferred upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the relevant Certificate representing such Registered Notes to be transferred, together with the form of transfer endorsed on such Certificate (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer), duly completed and executed and any other evidence as the Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided, however, that a Registered Note may not be transferred unless the principal amount of Registered Notes transferred and (where not all of the Registered Notes held by a holder are being transferred) the principal amount of the balance of Registered Notes not transferred are Specified Denominations. In the case of a transfer of part only of a holding of Registered Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding.

(b) Exercise of Options or Partial Redemption in respect of Registered Notes: In the case of an exercise of an Issuer’s or Noteholders’ option in respect of, or a redemption of, some only of a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Registered Notes of the same holding having different terms, separate Certificates shall be issued in respect of those Notes of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent.

145 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (c) Delivery of New Certificates: Each new Certificate to be issued pursuant to Conditions 2(a) (Transfer of Registered Notes) or (b) (Exercise of Options or Partial Redemption in respect of Registered Notes) shall be available for delivery within five business days of receipt of the request for exchange, form of transfer or Exercise Notice (as defined in Condition 6(e) (Redemption at the Option of Noteholders)) and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such request for exchange, form of transfer, Exercise Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant request for exchange, form of transfer, Exercise Notice or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 2(d), ‘‘business day’’ means a day, other than a Saturday or Sunday, on which banks are open for business (including dealings in foreign currencies) in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be). (d) Exchange and Transfer Free of Charge: The exchange and transfer of Registered Notes and Certificates on registration, transfer, exercise of an option or partial redemption shall be effected without charge by or on behalf of the Issuer, the Registrar or the Transfer Agents, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require). (e) Regulations Concerning Transfers and Registration: All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfers of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Noteholders. A copy of the current regulations will be made available by the Registrar to any Noteholder upon request. (f) Closed Periods: No Noteholder may require the transfer of a Registered Note to be registered (i) during the period of 15 days ending on the due date for redemption of, or payment of any Instalment Amount in respect of, that Note, (ii) during the period of 15 days prior to any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 6(d) (Redemption at the Option of the Issuer), (iii) after any such Note has been called for redemption by the Issuer pursuant to Condition 6(d) (Redemption at the Option of the Issuer) or (iv) during the period of seven days ending on (and including) any Record Date (as defined in Condition 7(b) (Registered Notes)).

3. Status The Notes and the Receipts and Coupons relating to them constitute direct, unconditional and (subject to Condition 4(a) (Negative Pledge)) unsecured obligations of the Issuer which will at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes, the Receipts and the Coupons relating to them shall, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application and subject to Condition 4(a) (Negative Pledge), at all times rank at least pari passu with all other unsecured and unsubordinated indebtedness and other monetary obligations of the Issuer, present and future.

4. Covenants (a) Negative Pledge: So long as any Note, Receipt or Coupon remains outstanding (as defined in the Agency Agreement), the Issuer shall not, and shall ensure that none of its Material Subsidiaries shall, create, or permit to create, any Encumbrance, other than a Permitted Encumbrance, upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness (save for those that have been accorded preferential rights by law), or any guarantee or indemnity in respect of any Relevant Indebtedness, without at the same time or prior thereto securing the Notes, the Receipts and the Coupons equally and rateably with any such Relevant Indebtedness, guarantee or indemnity or providing such other security for the Notes, the Receipts and the

146 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Coupons as shall be approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders, unless the provision of any such security is waived by an Extraordinary Resolution of the Noteholders. In these Conditions: ‘‘Encumbrance’’ means any mortgage, pledge, hypothecation, assignment, deposit by way of security or any other agreement or arrangement (whether conditional or not and whether relating to existing or to future assets), having the effect of providing a security interest to a creditor or any agreement or arrangement to give any form of security to a creditor but excluding statutory preferences and any security interest arising by operation of law. ‘‘Group’’ means the Issuer and its Subsidiaries. ‘‘Indebtedness’’ means any indebtedness in respect of monies borrowed and (without double counting) guarantees (other than those given in the ordinary course of business) given, whether present or future, actual or contingent, excluding any intra-Group indebtedness. ‘‘Material Subsidiary’’ means any Subsidiary of the Issuer which represents more than 15 per cent. of the total consolidated assets of the Issuer as reflected in the Issuer’s most recent consolidated audited financial statements, or accounts for more than 15 per cent. of the Issuer’s total consolidated attributable income before tax, as reflected in the Issuer’s most recent consolidated audited financial statements. ‘‘Permitted Encumbrance’’ means: (a) any Encumbrance existing as at the date hereof; or (b) any Encumbrance with respect to the receivables of the relevant entity which is created pursuant to any securitisation or like arrangement in accordance with normal market practice and whereby the Indebtedness is limited to the value of such receivables; or (c) any Encumbrance with respect to inter-company Indebtedness incurred between the Issuer and its Subsidiaries; or (d) any Encumbrance created over any asset owned, acquired, developed or constructed by the relevant entity, being an Encumbrance created for the sole purpose of financing or refinancing that asset owned, acquired, developed or constructed, provided that the Indebtedness so secured shall not exceed the bona fide market value of such asset or the cost of that acquisition, development or construction (including all interest and other finance charges, adjustments due to changes in circumstances and other charges reasonably incidental to such cost, whether contingent or otherwise) and where such market value of costs both apply, the higher of the two; or (e) any Encumbrance over deposit accounts securing the loan to the relevant entity of funds equal to the amounts standing to the credit of such deposit accounts; or (f) any Encumbrance created in the ordinary course of the relevant entity’s business over stock-in-trade, inventory, accounts receivable or deposit accounts including any cash management system; or (g) any Encumbrance subsisting over any asset of any Subsidiary of the Issuer prior to the date of such entity becoming a Subsidiary of the Issuer and not created in contemplation of such entity becoming a Subsidiary of the Issuer and any substitute Encumbrance created over that asset (but in any such case the amount of the Indebtedness secured by such Encumbrance, may not be increased). ‘‘Relevant Indebtedness’’ means any Indebtedness which is in the form of, or represented or evidenced by, bonds, notes, debentures, loan stock or other securities which for the time being are, or are intended to be or capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the counter or other securities market. ‘‘Subsidiary’’ means, in relation to any Person (the ‘‘first Person’’) at any particular time, any other Person (the ‘‘second Person’’): (a) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or remove members of the governing body of the second Person or otherwise; or (b) whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first Person.

147 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (b) Change of Principal Business: So long as any of the Notes remains outstanding, the Issuer will not cease to carry on any of the principal businesses carried on by it at the date hereof (being the business divisions of the Issuer comprising Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority, Transnet Port Terminals and Transnet Pipelines), nor will it enter into any agreement to do so (a ‘‘Business Change’’), save for any cessation of business arising as a result of Government Intervention and save for any such Business Change as will not lead to a Negative Rating Event or as is otherwise approved by an Extraordinary Resolution.

In these Conditions: ‘‘Government Intervention’’ means any administrative, executive or legislative act, whether of a commercial, legal or political nature, of the Government of the Republic of South Africa or any administrative authority, department, political subdivision or taxing authority thereof or therein;

‘‘Investment Grade Rating’’ means BBB- or better by S&P or Baa3 or better by Moody’s.

‘‘Negative Rating Event’’ means the Issuer failing to maintain an Investment Grade Rating on a global rating scale from both Rating Agencies.

‘‘Rating Agency’’ means each of Standard & Poor’s Rating Services and its successors (‘‘S&P’’) and Moody’s Investors Service, Inc. and its successors (‘‘Moody’s’’) and their successors or any other rating agency of equivalent international standing specified from time to time by the Issuer.

5. Interest and Other Calculations (a) Interest on Fixed Rate Notes: Each Note paying a fixed rate of interest (a ‘‘Fixed Rate Note’’) bears interest on its outstanding principal amount from the Interest Commencement Date at the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The amount of interest payable shall be determined in accordance with Condition 5(h) (Calculations).

(b) Interest on Floating Rate Notes and Index-Linked Interest Notes:

(i) Interest Payment Dates: Each Note paying a floating rate of interest (a ‘‘Floating Rate Note’’) and each Note the interest in respect of which is linked to an index (an ‘‘Index- Linked Interest Note’’) bears interest on its outstanding principal amount from the Interest Commencement Date at the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The amount of interest payable shall be determined in accordance with Condition 5(h) (Calculations).

(ii) Business Day Convention: If any date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a Business Day, then, if the Business Day Convention specified is (A) the Floating Rate Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event (x) such date shall be brought forward to the immediately preceding Business Day and (y) each subsequent such date shall be the last Business Day of the month in which such date would have fallen had it not been subject to adjustment, (B) the Following Business Day Convention, such date shall be postponed to the next day that is a Business Day, (C) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding Business Day or (D) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding Business Day.

(iii) Rate of Interest for Floating Rate Notes: The Rate of Interest in respect of Floating Rate Notes for each Interest Accrual Period shall be determined in the manner specified hereon and the provisions below relating to either ISDA Determination or Screen Rate Determination shall apply, depending upon which is specified hereon.

148 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (A) ISDA Determination for Floating Rate Notes Where ISDA Determination is specified hereon as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period shall be determined by the Calculation Agent as the sum of the Margin and the relevant ISDA Rate. For the purposes of this sub-paragraph (A), ‘‘ISDA Rate’’ for an Interest Accrual Period means a rate equal to the Floating Rate that would be determined by the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting as a Calculation Agent for that interest rate swap transaction under the terms of an agreement incorporating the ISDA Definitions and under which: (x) the Floating Rate Option is as specified hereon; (y) the Designated Maturity is a period specified hereon; and (z) the relevant Reset Date is the first day of that Interest Accrual Period unless otherwise specified hereon. For the purposes of this sub-paragraph (A), ‘‘Floating Rate’’, ‘‘Floating Rate Option’’, ‘‘Designated Maturity’’ and ‘‘Reset Date’’ have the meanings given to those terms in the ISDA Definitions. (B) Screen Rate Determination for Floating Rate Notes (x) Where Screen Rate Determination is specified hereon as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period will, subject as provided below, be either: (1) the offered quotation; or (2) the arithmetic mean of the offered quotations, (expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at either 11.00 a.m. (London time in the case of LlBOR or Brussels time in the case of EURlBOR) on the Interest Determination Date in question as determined by the Calculation Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean of such offered quotations. If the Reference Rate from time to time in respect of Floating Rate Notes is specified hereon as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided hereon. (y) If the Relevant Screen Page is not available or if sub-paragraph (x)(l) applies and no such offered quotation appears on the Relevant Screen Page or if sub-paragraph (x)(2) applies and fewer than three such offered quotations appear on the Relevant Screen Page in each case as at the time specified above, subject as provided below, the Calculation Agent shall request, if the Reference Rate is LIBOR, the principal London office of each of the Reference Banks or, if the Reference Rate is EURIBOR, the principal Euro- zone office of each of the Reference Banks, to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate at approximately 11.00 a.m. (London time, if the Reference Rate is LIBOR or Brussels time, if the Reference Rate is EURIBOR) on the Interest Determination Date in question. If two or more of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest for such Interest Period shall be the arithmetic mean of such offered quotations as determined by the Calculation Agent. (z) If paragraph (y) above applies and the Calculation Agent determines that fewer than two Reference Banks are providing offered quotations, subject as provided below, the Rate of Interest shall be the arithmetic mean of the rates per annum (expressed as a percentage) as communicated to (and at the

149 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such banks were offered at approximately 11.00 a.m. (London time, if the Reference Rate is LIBOR or Brussels time, if the Reference Rate is EURIBOR) on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, or, if fewer than two of the Reference Banks provide the Calculation Agent with such offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, at approximately 11.00 a.m. (London time, if the Reference Rate is LIBOR or Brussels time, if the Reference Rate is EURIBOR), on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Issuer suitable for such purpose) informs the Calculation Agent it is quoting to leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin or Maximum or Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period, in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period).

(iv) Rate of Interest for Index-Linked Interest Notes: The Rate of Interest in respect of Index- Linked Interest Notes for each Interest Accrual Period shall be determined in the manner specified hereon and interest will accrue by reference to an Index or Formula as specified hereon.

(c) Zero Coupon Notes: If the Redemption Amount of a Note the Interest Basis of which is specified to be Zero Coupon is repayable prior to the Maturity Date and is not paid when due, or improperly withheld or refused, the amount due and payable prior to the Maturity Date shall be the Early Redemption Amount of such Note. As from the Maturity Date, the Rate of Interest for any overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as defined in Condition 6(b)(i) (Zero Coupon Notes)).

(d) Dual Currency Notes: In the case of Dual Currency Notes, if the rate or amount of interest falls to be determined by reference to a rate of exchange or a method of calculating a rate of exchange, the rate or amount of interest payable shall be determined in the manner specified hereon.

(e) Partly Paid Notes: In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up principal amount of such Notes and otherwise as specified hereon.

(f) Accrual of Interest: Interest shall cease to accrue on each Note from the due date for redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which event it shall continue to bear interest in accordance with Condition 5 (Interest and Other Calculations) (after as well as before judgement) at the Rate of Interest in the manner provided in this Condition 5 (Interest and Other Calculations) to the Relevant Date (as defined in Condition 8 (Taxation)).

150 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (g) Margin, Maximum/Minimum Rates of Interest, Instalment Amounts and Redemption Amounts and Rounding: (i) If any Margin is specified hereon (either (x) generally, or (y) in relation to one or more Interest Accrual Periods), an adjustment shall be made to all Rates of Interest, in the case of (x), or the Rates of Interest for the specified Interest Accrual Periods, in the case of (y), calculated in accordance with Condition 5(b) (Interest on Floating Rate Notes and Index-Linked Interest Notes) by adding (if a positive number) or subtracting the absolute value (if a negative number) of such Margin, subject always to the next paragraph. (ii) If any Maximum or Minimum Rate of Interest, Instalment Amount or Redemption Amount is specified hereon, then any Rate of Interest, Instalment Amount or Redemption Amount shall be subject to such maximum or minimum, as the case may be. (iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwise specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with halves being rounded up), (y) all figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all currency amounts that fall due and payable shall be rounded to the nearest unit of such currency (with halves being rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these purposes ‘‘unit’’ means the lowest amount of such currency that is available as legal tender in the country or countries, as the case may be, of such currency. (h) Calculations: The amount of interest payable in respect of each Note for any Interest Accrual Period shall be equal to the product of the Rate of Interest, the Calculation Amount specified hereon, and the Day Count Fraction for such Interest Accrual Period, rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of such note divided by the Calculation Amount. For this purposes, a ‘‘sub- unit’’ means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent. provided that where an Interest Amount (or a formula for its calculation) is applicable to such Interest Accrual Period, in which case the amount of interest payable per Calculation Amount in respect of such Note for such Interest Accrual Period shall equal such Interest Amount (or be calculated in accordance with such formula). Where any Interest Period comprises two or more Interest Accrual Periods, the amount of interest payable per Calculation Amount in respect of such Interest Period shall be the sum of the Interest Amounts payable in respect of each of those Interest Accrual Periods. In respect of any other period for which interest is required to be calculated, the provisions above shall apply save that the Day Count Fraction shall be for the period for which interest is required to be calculated. (i) Determination and Publication of Rates of Interest, Interest Amounts, Final Redemption Amounts, Early Redemption Amounts, Optional Redemption Amounts and Instalment Amounts: The Calculation Agent shall, as soon as practicable on each Interest Determination Date, or such other time on such date as the Calculation Agent may be required to calculate any rate or amount, obtain any quotation or make any other determination or calculation, determine such rate and calculate the Interest Amounts for the relevant Interest Accrual Period, calculate the Final Redemption Amount, Early Redemption Amount, Optional Redemption Amount or Instalment Amount, obtain such quotation or make such determination or calculation, as the case may be, and cause the Rate of Interest and the Interest Amounts for each Interest Accrual Period and the relevant Interest Payment Date and, if required to be calculated, the Final Redemption Amount, Early Redemption Amount, Optional Redemption Amount or any Instalment Amount to be notified to the Fiscal Agent, the Issuer, each of the Paying Agents, the Noteholders, any other Calculation Agent appointed in respect of the Notes that is to make a further calculation upon receipt of such information and, if the Notes are listed on a stock exchange and the rules of such exchange or other competent authority so require, such exchange or other competent authority as soon as possible after their determination but in no event later than (i) the commencement of the relevant Interest Period, if determined prior to such time, in the case of notification to such exchange of a Rate of Interest and Interest Amount, or (ii) in all other cases, the fourth Business Day after such

151 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS determination. Where any Interest Payment Date or Interest Period Date is subject to adjustment pursuant to Condition 5(b)(ii) (Business Day Convention), the Interest Amounts and the Interest Payment Date so published may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. If the Notes become due and payable under Condition 10 (Events of Default), the accrued interest and the Rate of Interest payable in respect of the Notes shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Rate of Interest or the Interest Amount so calculated need be made. The determination of any rate or amount, the obtaining of each quotation and the making of each determination or calculation by the Calculation Agent(s) shall (in the absence of manifest error) be final and binding upon all parties. (j) Definitions: In these Conditions: ‘‘Business Day’’ means: (i) in the case of a currency other than euro, a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments in the principal financial centre for such currency and/or (ii) in the case of euro, a day on which the TARGET system is operating (a ‘‘TARGET Business Day’’) and/or (iii) in the case of a currency and/or one or more Business Centres a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in such currency in the Business Centre(s) or, if no currency is indicated, generally in each of the Business Centres. (iv) ‘‘Day Count Fraction’’ means, in respect of the calculation of an amount of interest on any Note for any period of time (from and including the first day of such period to but excluding the last) (whether or not constituting an Interest Period of Interest Accrual Period, the ‘‘Calculation Period’’): (v) if ‘‘Actual/365’’ or ‘‘Actual/Actual-ISDA’’ is specified hereon, the actual number of days in the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365); (vi) if ‘‘Actual/365 (Fixed)’’ is specified hereon, the actual number of days in the Calculation Period divided by 365; (vii) if ‘‘Actual/360’’ is specified hereon, the actual number of days in the Calculation Period divided by 360; (viii) if ‘‘30/360’’, ‘‘360/360’’ or ‘‘Bond Basis’’ is specified hereon, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows:

[360 6 (Y2 –Y1)] + [30 6 (M2 –M1)] – (D2 –D1) Day Count Fraction = 360 where:

‘‘Y1’’ is the year, expressed as a number, in which the first day of the Calculation Period falls;

‘‘Y2’’ is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;

‘‘M1’’ is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;

‘‘M2’’ is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;

‘‘D1’’ is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and

‘‘D2’’ is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31, in which case D2 will be 30;

152 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS if ‘‘30E/360’’ or ‘‘Eurobond Basis’’ is specified hereon, the number of days in the Calculation Period divided by 360 , calculated on a formula basis as follows:

[360 6 (Y2 –Y1)] + [30 6 (M2 –M1)] – (D2 –D1) Day Count Fraction = 360 where:

‘‘Y1’’ is the year, expressed as a number, in which the first day of the Calculation Period falls;

‘‘Y2’’ is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;

‘‘M1’’ is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;

‘‘M2’’ is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;

‘‘D1’’ is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and

‘‘D2’’ is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30. (ix) if ‘‘30E/360 (ISDA) ‘‘ is specified hereon, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows:

[360 6 (Y2 –Y1)] + [30 6 (M2 –M1)] – (D2 –D1) Day Count Fraction = 360 where:

‘‘Y1’’ is the year, expressed as a number, in which the first day of the Calculation Period falls;

‘‘Y2’’ is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;

‘‘M1’’ is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;

‘‘M2’’ is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;

‘‘D1’’ is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D2 will be 30; and

‘‘D2’’ is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30; and (x) if ‘‘Actual/Actual-ICMA’’ is specified hereon, (A) if the Calculation Period is equal to or shorter than the Determination Period during which it falls, the number of days in the Calculation Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Periods normally ending in any year; and (B) if the Calculation Period is longer than one Determination Period, the sum of: (x) the number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Periods normally ending in any year; and (y) the number of days in such Calculation Period falling in the next Determination Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Periods normally ending in any year,

153 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS where: ‘‘Calculation Amount’’ means the amount, if any, specified hereon. ‘‘Determination Date’’ means the date specified as such hereon or, if none is so specified, the Interest Payment Date. ‘‘Determination Period’’ means the period from and including a Determination Date in any year to but excluding the next Determination Date. ‘‘Euro-zone’’ means the region comprising member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended. ‘‘Fixed Coupon Amount’’ means the amount, if any, specified hereon. ‘‘Fixed Interest Payment Date’’ means the date, if any, specified hereon. ‘‘Instalment Amount’’ means the amount (if any) specified as such hereon. ‘‘Instalment Date’’ means the date (if any) specified as such hereon. ‘‘Interest Accrual Period’’ means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Period Date and each successive period beginning on (and including) an Interest Period Date and ending on (but excluding) the next succeeding Interest Period Date. ‘‘Interest Amount’’ means: (i) in respect of an Interest Accrual Period, the amount of interest payable per Calculation Amount for that Interest Accrual Period and which, in the case of Fixed Rate Notes, and unless otherwise specified hereon, shall mean the Fixed Coupon Amount or Broken Amount specified hereon as being payable on the Interest Payment Date ending the Interest Period of which such Interest Accrual Period forms part; and (ii) in respect of any other period, the amount of interest payable per Calculation Amount for that period. ‘‘Interest Commencement Date’’ means the Issue Date or such other date as may be specified hereon. ‘‘Interest Determination Date’’ means, with respect to a Rate of Interest and Interest Accrual Period, the date specified as such hereon or, if none is so specified, (i) the first day of such Interest Accrual Period if the Specified Currency is Sterling or (ii) the day falling two Business Days in London for the Specified Currency prior to the first day of such Interest Accrual Period if the Specified Currency is neither Sterling nor euro or (iii) the day falling two TARGET Business Days prior to the first day of such Interest Accrual Period if the Specified Currency is euro. ‘‘Interest Payment Date’’ means the First Interest Payment Date and any date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is specified in the relevant Final Terms: (i) as the same may be adjusted in accordance with the relevant Business Day Convention; or (ii) if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention and an interval of a number of calendar months is specified in the relevant Final Terms as being the Specified Period, each of such dates as may occur in accordance with the FRN Convention, Floating Rate Convention or Eurodollar Convention at such Specified Period of calendar months following the Interest Commencement Date (in the case of the first Interest Payment Date) or the previous Interest Payment Date (in any other case). ‘‘Interest Period’’ means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the First Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date. ‘‘Interest Period Date’’ means each Interest Payment Date unless otherwise specified hereon.

154 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS ‘‘ISDA Definitions’’ means the 2006 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the relevant Series (as specified hereon)) as published by the International Swaps and Derivatives Association, Inc., unless otherwise specified hereon.

‘‘Principal Financial Centre’’ means, in relation to any currency, the principal financial centre for that currency provided, however, that:

(i) in relation to euro, it means the principal financial centre of such Member State of the European Communities as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent; and

(ii) in relation to Australian dollars, it means either Sydney or Melbourne and, in relation to New Zealand dollars, it means either Wellington or Auckland; in each case as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent.

‘‘Rate of Interest’’ means the rate or rates (expressed as a percentage per annum) of interest payable in respect of this Note and that is either specified hereon or calculated or determined in accordance with the provisions hereon.

‘‘Reference Banks’’ means, in the case of a determination of LIBOR, the principal London office of four major banks in the London inter-bank market and, in the case of a determination of EURIBOR, the principal Euro-zone office of four major banks in the Euro-zone inter-bank market, and, in the case of any other determination, four major banks in the market most closely connected with the Reference Rate, in each case selected by the Calculation Agent or as specified hereon.

‘‘Reference Rate’’ means the rate specified as such hereon.

‘‘Relevant Financial Centre’’ has the meaning specified hereon.

‘‘Relevant Screen Page’’ means such page, section, caption, column or other part of a particular information service (including, without limitation, Reuters) specified as the Relevant Screen Page hereon, or such other page, section or other part as may replace it on that information service or such other information service, in each case, as may be nominated by the Person providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Reference Rate.

‘‘Relevant Time’’ has the meaning specified hereon.

‘‘Specified Currency’’ means the currency specified as such hereon or, if none is specified, the currency in which the Notes are denominated.

‘‘TARGET System’’ means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System or any successor thereto.

(k) Calculation Agent: The Issuer shall procure that there shall at all times be one or more Calculation Agents if provision is made for them hereon and for so long as any Note is outstanding (as defined in the Agency Agreement). Where more than one Calculation Agent is appointed in respect of the Notes, references in these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its respective duties under the Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Rate of Interest for an Interest Accrual Period or to calculate any Interest Amount, Instalment Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, or to comply with any other requirement, the Issuer shall appoint a leading bank or investment banking firm engaged in the inter-bank market (or, if appropriate, money, swap or over-the-counter index options market) that is most closely connected with the calculation or determination to be made by the Calculation Agent (acting through its principal London office or any other office actively involved in such market) to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as aforesaid.

155 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 6. Redemption, Purchase and Options (a) Redemption by Instalments and Final Redemption: (i) Final Redemption: Unless previously redeemed, or purchased and cancelled, each Note will be finally redeemed on the Maturity Date specified hereon at its Final Redemption Amount or, in the case of a Note falling within paragraph (ii) below, its final Instalment Amount. (ii) Redemption by Instalments: Unless previously redeemed, purchased and cancelled as provided in this Condition 6, each Note that provides for Instalment Dates and Instalment Amounts shall be partially redeemed on each Instalment Date at the related Instalment Amount specified hereon. The outstanding principal amount of each such Note shall be reduced by the Instalment Amount (or, if such Instalment Amount is calculated by reference to a proportion of the principal amount of such Note, such proportion) for all purposes with effect from the related Instalment Date, unless payment of the Instalment Amount is improperly withheld or refused, in which case, such amount shall remain outstanding until the Relevant Date relating to such Instalment Amount.

(b) Early Redemption: (i) Zero Coupon Notes: (A) The Early Redemption Amount payable in respect of any Zero Coupon Note, the Early Redemption Amount of which is not linked to an index and/or a formula, upon redemption of such Note pursuant to Condition 6(c) (Redemption for Taxation Reasons) or upon it becoming due and payable as provided in Condition 10 (Events of Default) shall be the Amortised Face Amount (calculated as provided below) of such Note unless otherwise specified hereon. (B) Subject to the provisions of sub-paragraph (C) below, the Amortised Face Amount of any such Note shall be the scheduled Final Redemption Amount of such Note on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is shown hereon, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their issue price on the Issue Date) compounded annually. (C) If the Early Redemption Amount payable in respect of any such Note upon its redemption pursuant to Condition 6(c) (Redemption for Taxation Reasons) or upon it becoming due and payable as provided in Condition 10 (Events of Default) is not paid when due, the Early Redemption Amount due and payable in respect of such Note shall be the Amortised Face Amount of such Note as defined in sub- paragraph (B) above, except that such sub-paragraph shall have effect as though the date on which the Note becomes due and payable were the Relevant Date. The calculation of the Amortised Face Amount in accordance with this sub- paragraph shall continue to be made (both before and after judgement) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Final Redemption Amount of such Note on the Maturity Date together with any interest that may accrue in accordance with Condition 5(f) (Accrual of Interest). Where such calculation is to be a made for a period of less than one year, it shall be made on the basis of the Day Count Fraction shown hereon. (ii) Other Notes: The Early Redemption Amount payable in respect of any Note (other than Notes described in (i) above), upon redemption of such Note pursuant to Condition 6(c) (Redemption for Taxation Reasons) or upon it becoming due and payable as provided in Condition 10 (Events of Default), shall be the Final Redemption Amount unless otherwise specified hereon. (c) Redemption for Taxation Reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part, on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index-Linked Note or a Dual Currency Note) or at any time (if this Note is neither a Floating Rate Note, an Index-Linked Note nor a Dual Currency Note), on giving not less than

156 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 15 nor more than 30 days’ notice to the Noteholders (which notice shall be irrevocable) at their Early Redemption Amount (as described in Condition 6(b)(ii) (Other Notes)) (together with interest accrued to the date fixed for redemption), if: (i) the Issuer has or will become obliged to pay additional amounts as described under Condition 8 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the Republic of South Africa or any authority therein or thereof having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date of issue of the first Tranche of the Notes; and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that: (A) where the Notes may be redeemed at any time, no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due, or (B) where the Notes may be redeemed only on an Interest Payment Date, 60 days prior to the Interest Payment Date occurring immediately before the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due. Before the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Fiscal Agent a certificate signed by two duly authorised officers of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. (d) Redemption at the Option of the Issuer: If Call Option is specified hereon, the Issuer may, on giving not less than 15 nor more than 30 days’ irrevocable notice to the Noteholders (or such other notice period as may be specified hereon) redeem all or, if so provided, part of the Notes on any Optional Redemption Date (Call). Any such redemption of Notes shall be at their Optional Redemption Amount (Call) together with interest accrued (if any) to such date. All Notes in respect of which any such notice is given shall be redeemed on the date specified in such notice in accordance with this Condition. In the case of a partial redemption the notice to Noteholders shall also contain the certificate numbers of the Bearer Notes, or, in the case of Registered Notes, shall specify the principal amount of Registered Notes drawn and the holder(s) of such Registered Notes to be redeemed, which shall have been drawn in such place and in such manner as it deems appropriate, subject to compliance with any applicable laws and stock exchange or other relevant authority requirements. (e) Redemption at the Option of Noteholders: (i) Put Option: If Put Option is specified hereon, the Issuer shall, at the option of the holder of any such Note, upon the holder of such Note giving not less than 15 nor more than 30 days’ notice to the Issuer (or such other notice period as may be specified hereon), redeem such Note on the Optional Redemption Date(s) (Put) specified in the relevant Put Option Notice at its Optional Redemption Amount together (if applicable) with interest accrued (if any) to the date fixed for redemption. (ii) Change of Control: If a Change of Control Event occurs, the Issuer shall, at the option of the holder of any such Note, upon the holder of such Note giving notice to the Issuer at any time during the Redemption Period, redeem such Note on the Redemption Date at its principal amount (or such other amount as may be specified hereon) together (if applicable) with interest accrued to the date fixed for redemption. Immediately upon the Issuer becoming aware that a Change of Control Event has occurred, the Issuer shall give notice (a ‘‘Change of Control Notice’’) to the Noteholders in accordance with Condition 14 (Notices) specifying the nature of the Change of Control Event.

157 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS For the purpose of this paragraph (ii): a‘‘Change of Control Event’’ will occur if at any time the Government of the Republic of South Africa ceases to own, directly or indirectly, more than 50 per cent. of the issued share capital of the Issuer or ceases to control, directly or indirectly, the Issuer, save for any such change of control as will not lead to a Negative Rating Event or as is otherwise approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders. For the purpose of this Condition, the Government of the Republic of South Africa will be deemed to ‘‘control’’ the Issuer if (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract, trust or otherwise) it has the power to appoint and/or remove all or the majority of the members of the Board of Directors or other governing body of the Issuer or otherwise controls, or has the power to control, the affairs and policies of the Issuer. ‘‘Redemption Date’’ means, in respect of any Redemption Period, the date which falls 14 days after the date on which the relevant holder exercises its option in accordance with Condition 6(e)(iii) (Exercise Notice). ‘‘Redemption Period’’ means, in relation to any Change of Control Event, the period from and including the date on which a Change of Control Event occurs (whether or not the Issuer has given the notice referred to in the second paragraph of this Condition 6(e)(ii) in respect of such event) to and including the date falling 60 days after the date on which any such notice is given, provided that if no such notice is given, the Redemption Period shall not terminate. (iii) Exercise Notice: In order to exercise the option contained in Condition 6(e)(i) (Put Option) or (ii) (Change of Control), the holder must, not less than 15 nor more than 30 days before the relevant Option Redemption Date (Put) deposit (in the case of a Bearer Note) such Note (together with all unmatured Receipts and Coupons and unexchanged Talons) with any Paying Agent or (in the case of a Registered Note) the Certificate representing such Note(s) with the Registrar or any Transfer Agent at its specified office, together with a duly completed option exercise notice (‘‘Exercise Notice’’) in the form obtainable from any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the relevant period. No Note, Receipt, Coupon or Certificate so deposited and option so exercised may be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. (f) Partly Paid Notes: Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the provisions specified hereon. (g) Purchases: The Issuer and any Subsidiary may at any time purchase Notes (provided that all unmatured Receipts and Coupons and unexchanged Talons relating thereto are attached thereto or surrendered therewith) in the open market or otherwise at any price. Notes so purchased, while held by or on behalf of the Issuer or any Subsidiary, shall not entitle the holder to vote at any meeting of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating the quorum at any meeting of Noteholders or for the purposes of Conditions 10 (Events of Default) and l1(a) (Meetings of Noteholders). (h) Cancellation: All Notes purchased by or on behalf of the Issuer or any Subsidiary may be surrendered for cancellation, in the case of a Bearer Note by surrendering such Note together with all unmatured Receipts and Coupons and all unexchanged Talons to the Fiscal Agent and, in the case of a Registered Note, by surrendering the Certificate representing such Notes to the Registrar and, in each case, if so surrendered, shall, together with all Notes redeemed by the Issuer, be cancelled forthwith (together with all unmatured Receipts and Coupons and unexchanged Talons attached thereto or surrendered therewith). Any Notes so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer in respect of any such Notes shall be discharged.

7. Payments and Talons (a) Bearer Notes: Payments of principal and interest in respect of Bearer Notes shall, subject as mentioned below, be made against presentation and surrender or, in the case of part payment of any sum due, endorsement, of the relevant Receipts (in the case of payments of Instalment Amounts other than on the due date for redemption and provided that the Receipt

158 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS is presented for payment together with its relative Note), Notes (in the case of all other payments of principal and, in the case of interest, as specified in Condition 7(f)(vi)) or Coupons (in the case of interest, save as specified in Condition 7(f)(ii)), as the case may be, at the specified office of any Paying Agent outside the United States by a cheque payable in the relevant currency drawn on, or, at the option of the holder, by transfer to an account denominated in such currency with, a bank. For the purpose of this Condition 7, ‘‘bank’’ means a bank in the Principal Financial Centre for such currency. (b) Registered Notes: (i) Principal: Payments of principal (which for the purposes of this Condition 7(b) shall include final Instalment Amounts but not other Instalment Amounts) in respect of Registered Notes shall be made against presentation and surrender or, in the case of part payment of any sum due, endorsement, of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in paragraph (ii) below. (ii) Interest: Interest (which for the purpose of this Condition 7(b) shall include all Instalment Amounts other than final Instalment Amounts) on Registered Notes shall be paid to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the ‘‘Record Date’’). Payments of interest on each Registered Note shall be made in the relevant currency by cheque drawn on a Bank and mailed to the holder (or to the first named of joint holders) of such Note at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a Bank. (c) Payments in the United States: Notwithstanding the foregoing, if any Bearer Notes are denominated in U.S. dollars, payments in respect thereof may be made at the specified office of any Paying Agent in New York City in the same manner as aforesaid if (i) the Issuer shall have appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents will be able to make payment of the amounts on the Notes in the manner provided above when due, (ii) payment in full of such amounts at all such offices is illegal or effectively precluded by exchange controls or other similar restrictions on payment or receipt of such amounts and (iii) such payment is then permitted by United States law, without involving, in the opinion of the Issuer, any adverse tax consequence to the Issuer. (d) Payments subject to laws: All payments are subject in all cases to any applicable laws, regulations and directives in the place of payment, but without prejudice to the provisions of Condition 8 (Taxation). No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of such payments. (e) Appointment of Agents: The Agents initially appointed by the Issuer and their respective specified offices are listed below. The Agents act solely as agents of the Issuer and do not assume any obligation or relationship of agency or trust for or with any Noteholder or Couponholder. The Issuer reserves the right at any time to vary or terminate the appointment of any of the Agents and to appoint additional or other Paying Agents or Transfer Agents, provided that the Issuer shall at all times maintain (i) a Fiscal Agent, (ii) a Registrar in relation to Registered Notes, (iii) a Transfer Agent in relation to Registered Notes, (iv) one or more Calculation Agent(s) where the Conditions so require, (v) a Paying Agent having its specified offices in London so long as the Notes are admitted to the Official List of the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 and admitted to trading on the London Stock Exchange’s Regulated Market, (vi) such other agents as may be required by any other stock exchange on which the Notes may be listed and (vii) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any law implementing European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000. In addition, the Issuer shall forthwith appoint a Paying Agent in New York City in respect of any Bearer Notes denominated in U.S. Dollars in the circumstances described in paragraph (c) above.

159 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notice of any such change or any change of any specified office shall promptly be given to the Noteholders.

(f) Unmatured Coupons and Receipts and unexchanged Talons: (i) Upon the due date for redemption of Bearer Notes which comprise Fixed Rate Notes (other than Dual Currency Notes or Index-Linked Notes) they should be surrendered for payment together with all unmatured Coupons (if any) relating thereto, failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon that the sum of principal so paid bears to the total principal due) shall be deducted from the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, due for payment. Any amount so deducted shall be paid in the manner mentioned above against surrender of such missing Coupon within a period of 10 years from the Relevant Date for the payment of such principal (whether or not such Coupon has become void pursuant to Condition 9 (Prescription)). (ii) Upon the due date for redemption of any Bearer Note comprising a Floating Rate Note, Dual Currency Interest Note or Index-Linked Note, unmatured Coupons relating to such Note (whether or not attached) shall become void and no payment shall be made in respect of them. (iii) Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon. (iv) Upon the due date for redemption of any Bearer Note that is redeemable in instalments, all Receipts relating to such Note having an Instalment Date falling on or after such due date (whether or not attached) shall become void and no payment shall be made in respect of them. (v) Where any Bearer Note that provides that the relative unmatured Coupons are to become void upon the due date for redemption of those Notes is presented for redemption without all unmatured Coupons, and where any Bearer Note is presented for redemption without any unexchanged Talon relating to it, redemption shall be made only against the provision of such indemnity as the Issuer may reasonably require. (vi) If the due date for redemption of any Note is not a due date for payment of interest, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Note. Interest accrued on a Note that only bears interest after its Maturity Date shall be payable on redemption of such Note against presentation of the relevant Note or Certificate representing it, as the case may be. (g) Talons: On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Bearer Note, the Talon forming part of such Coupon sheet may be surrendered at the specified office of the Fiscal Agent in exchange for a further Coupon sheet (and if necessary another Talon for a further Coupon sheet) (but excluding any Coupons that may have become void pursuant to Condition 9 (Prescription)). (h) Non-Business Days: If any date for payment in respect of any Note, Receipt or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this paragraph, ‘‘business day’’ means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in the relevant place of presentation, in such jurisdictions as shall be specified as ‘‘Financial Centres’’ hereon and: (i) (in the case of a payment in a currency other than euro) where payment is to be made by transfer to an account maintained with a bank in the relevant currency, on which foreign exchange transactions may be carried on in the relevant currency in the principal financial centre of the country of such currency; or (ii) (in the case of a payment in euro) which is a TARGET Business Day.

160 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 8. Taxation All payments of principal and interest by or on behalf of the Issuer in respect of the Notes, the Receipts and the Coupons shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the Republic of South Africa or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer shall pay such additional amounts as shall result in receipt by the Noteholders and Couponholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable with respect to any Note, Receipt or Coupon:

(a) to, or to a third party on behalf of, a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Note, Receipt or Coupon by reason of his having some connection with the Republic of South Africa other than the mere holding of the Note, Receipt or Coupon; or

(b) presented or (if applicable) surrendered (or (if applicable) in respect of which the relevant Certificate is presented or (if applicable) surrendered) for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such additional amounts on presenting or, as the case may be, surrendering it for payment on such thirtieth day; or

(c) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or

(d) presented or (if applicable) surrendered (or (if applicable) in respect of which the relevant Certificate is presented or (if applicable) surrendered) for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting or, as the case may be, surrendering the relevant Note, Receipt or Coupon (or (if applicable) the relevant Certificate) to another Paying Agent in a Member State of the European Union.

If the Issuer becomes subject generally at any time to any taxing jurisdiction, authority or agency other than or in addition to the Republic of South Africa, references in this Condition 8 and in Condition 6(c) (Redemption for Taxation Reasons) to the Republic of South Africa shall be read and construed as references to the Republic of South Africa and/or to such other jurisdiction, authority or agency.

As used in these Conditions, ‘‘Relevant Date’’ in respect of any Note, Receipt or Coupon means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Noteholders that, upon further presentation or, as the case may be, surrender of the Note, Receipt or Coupon (or (if applicable) the relevant Certificate) being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon such presentation. References in these Conditions to (i) ‘‘principal’’ shall be deemed to include any premium payable in respect of the Notes, all Instalment Amounts (except as provided in Condition 7(a) (Bearer Notes)), Final Redemption Amounts, Early Redemption Amounts, Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of principal payable pursuant to Condition 6 (Redemption, Purchase and Options) or any amendment or supplement to it, (ii) ‘‘interest’’ shall (except as provided in Condition 7(a) (Bearer Notes) be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 5 (Interest and Other Calculations) or any amendment or supplement to it and (iii) ‘‘principal’’ and/or ‘‘interest’’ shall be deemed to include any additional amounts that may be payable under this Condition.

9. Prescription Claims against the Issuer for payment in respect of the Notes, Receipts and Coupons (which, for this purpose, shall not include Talons) shall be prescribed and become void unless made within 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.

161 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS 10. Events of Default If any of the following events (‘‘Events of Default’’) occurs, the holder of any Note may by written notice addressed by the holder thereof to the Issuer and delivered to the Issuer or to the specified office of the Fiscal Agent, declare that such Note is immediately due and repayable, whereupon the Early Redemption Amount of such Note together with accrued interest to the date of redemption shall become immediately due and payable, unless such event of default shall have been remedied prior to the receipt of such notice by the Fiscal Agent: (a) Non-Payment: default is made in the payment on the due date of principal in respect of any of the Notes, or default is made for more than five Business Days in the payment on the due date of interest in respect of any of the Notes; or (b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its other obligations in the Notes which default is incapable of remedy or is not remedied within 30 calendar days after written notice of such default addressed to the Issuer shall have been delivered to the Issuer or the Fiscal Agent at its specified office by any Noteholder; or (c) Cross-Default: (i) any other present or future indebtedness of the Issuer or any Material Subsidiary for or in respect of Material Indebtedness becomes due and payable (or becomes capable of becoming due and payable) prior to its stated maturity by reason of any event of default or the like (howsoever described), or (ii) any such Material Indebtedness is not paid when due or, as the case may be, within any applicable grace period, or (iii) the Issuer or any Material Subsidiary fails to pay when due or, as the case may be, within any applicable grace period any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised, save in each case where the liability in respect of the relevant indebtedness, guarantee or indemnity is being contested by the Issuer or such Material Subsidiary, as the case may be, in good faith and by all appropriate means; or (d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against the whole or a material part of the property, assets or revenues of the Issuer or any Material Subsidiary and is not discharged, withdrawn or stayed within 30 calendar days; or (e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Issuer or any Material Subsidiary in respect of all or a material part of the property, assets or revenues of the Issuer or such Material Subsidiary, as the case may be, becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, administrative receiver, manager or other similar person); or (f) Insolvency: the Issuer or any Material Subsidiary (i) is (or is deemed by a court to be) insolvent or bankrupt or unable to, or admits inability to, pay its debts (or any class of its debts) as they fall due, (ii) stops, suspends or threatens to stop or suspend payment of its debts, (iii) proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts, or (iv) a moratorium is agreed or declared in respect of or affecting all or any part of the debts of the Issuer, or any Material Subsidiary; or (g) Winding-up: (i) the Issuer or any Material Subsidiary is placed in liquidation, dissolved or wound up, whether provisionally or finally or is placed under judicial management, whether provisionally or finally, or any process similar thereto, or an order is made or an effective resolution is passed for the winding-up, dissolution or liquidation of the Issuer or any Material Subsidiary, or (ii) the Issuer or any Material Subsidiary ceases or threatens to cease, or is required to cease, to carry on the whole or a substantial part of its business or operations or disposes of the whole or a substantial part of its business or operations, in each case except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an Extraordinary Resolution of the Noteholders or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in another Subsidiary; or (h) Judicial Proceedings: the Issuer or any Material Subsidiary initiates or consents to judicial proceedings relating to itself under any applicable compromise with creditors, liquidation, winding-up or insolvency or other similar laws or compromises or attempts to compromise,

162 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS with its creditors generally (or any significant class of creditors) or any meeting of creditors is convened by the Issuer or any Material Subsidiary to consider a proposal for an arrangement of compromise with its creditors generally (or any significant class of creditors); or

(i) Authorisation and Consents: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under the Notes, (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Notes admissible in evidence in the courts of the Republic of South Africa is not taken, fulfilled or done; or

(j) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Notes; or

(k) Analogous Events: any event occurs which under the laws of the Republic of South Africa has an analogous effect to any of the events referred to in paragraphs (d)-(h) above.

For the purpose of this Condition,

‘‘Material Indebtedness’’ means any Indebtedness amounting in aggregate to an amount which equals or exceeds 0.5 per cent. of the total assets of the Issuer as set out in the Issuer’s most recent published financial statements from time to time (or its equivalent in other currencies) at the time of the relevant Event of Default.

11. Meetings of Noteholders and Modification (a) Meetings of Noteholders: The Agency Agreement contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Agency Agreement) of a modification of any of these Conditions. Such a meeting may be convened by the Issuer and shall be convened by it upon the request in writing of Noteholders holding not less than 10 per cent. of the aggregate principal amount of the Notes for the time being outstanding. The quorum for any meeting convened to consider an Extraordinary Resolution shall be two or more persons holding or representing a clear majority in aggregate principal amount of the Notes for the time being outstanding, or at any adjourned meeting, two or more persons being or representing Noteholders whatever the principal amount of the Notes held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to amend the dates of maturity or redemption of the Notes, any Instalment Date or any date for payment of interest or Interest Amounts on the Notes, (ii) to reduce or cancel the principal amount of, or any Instalment Amount of, or any premium payable on redemption of, the Notes, (iii) to reduce the rate or rates of interest in respect of the Notes or to vary the method or basis of calculating the rate or rates or amount of interest or the basis for calculating any Interest Amount in respect of the Notes, (iv) if a Minimum and/or a Maximum Rate of Interest, Instalment Amount or Redemption Amount is shown hereon, to reduce any such Minimum and/or Maximum, (v) to vary any method of, or basis for, calculating the Final Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount, including the method of calculating the Amortised Face Amount, (vi) to vary the currency or currencies of payment or denomination of the Notes, (vii) to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass an Extraordinary Resolution, (viii) to approve a Business Change pursuant to Condition 4(b) (Change of Principal Business), or (ix) to change the governing law of the Notes, in which case the necessary quorum shall be two or more persons holding or representing not less than 75 per cent., or at any adjourned meeting not less than 25 per cent., in principal amount of the Notes for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Noteholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders.

These Conditions may be amended, modified or varied in relation to any Series of Notes by the terms of the relevant Final Terms in relation to such Series.

163 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS In addition, a resolution in writing signed by or on behalf of all Noteholders who for the time being are entitled to receive notice of a meeting of Noteholders will take effect as if it were an Extraordinary Resolution. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders. (b) Modification: The Notes, these Conditions and the Deed of Covenant may be amended without the consent of the Noteholders or the Couponholders to correct a manifest error. The parties to the Agency Agreement shall only agree to any modification of the Agency Agreement (including any waiver or authorisation of any breach of proposed breach of or any failure to comply with, the Agency Agreement) which is of a formal, minor or technical nature, or is made to correct a manifest error, or which, in the opinion of such parties, could not reasonably be expected to be prejudicial to the interests of the Noteholders.

12. Replacement of Notes, Receipts, Coupons and Talons If a Note, Certificate, Receipt, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws and stock exchange or other relevant authority regulations, at the specified office of the Fiscal Agent in London (in the case of Bearer Notes, Receipts, Coupons or Talons) and of the Registrar (in the case of Certificates) or such other Paying Agent or Transfer Agent, as the case may be, as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Noteholders, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Note, Certificate, Receipt, Coupon or Talon is subsequently presented for payment or, as the case may be, for exchange for further Coupons, there shall be paid to the Issuer on demand the amount payable by the Issuer in respect of such Notes, Certificate, Receipts, Coupons or further Coupons) and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes, Certificate, Receipts, Coupons or Talons must be surrendered before replacements will be issued.

13. Further Issues The Issuer may from time to time, without the consent of the Noteholders or Couponholders, create and issue further notes having the same terms and conditions as the Notes in all respects (so that, for the avoidance of doubt, references in the conditions of such notes to ‘‘Issue Date’’ shall be to the first issue date of the Notes) and so that the same shall be consolidated and form a single series with such Notes, and references in these Conditions to ‘‘Notes’’ shall be construed accordingly.

14. Notices Notices to the Noteholders shall be valid if published in a leading English language daily newspaper published in London (which is expected to be the Financial Times). If any such publication is not practicable, notice shall be validly given if published in another leading daily English language newspaper with general circulation in Europe. The Issuer shall also ensure that notices are duly published in a manner that complies with any other relevant rules of any stock exchange or other relevant authority on which the Notes are for the time being or by which they have for the time being admitted to trading. Any such notice shall be deemed to have been given on the date of such publication or, if required to be published more than once or on different dates, on the first date on which publication is made in all required newspapers. Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Noteholders in accordance with this Condition.

15. Currency Indemnity If any sum due from the Issuer in respect of the Notes or the Coupons or any order or judgment given or made in relation thereto has to be converted from the currency (the ‘‘first currency’’) in which the same is payable under these Conditions or such order or judgment into another currency (the ‘‘second currency’’) for the purpose of (a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnify each Noteholder, on

164 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action.

16. Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

17. Governing Law and Jurisdiction (a) Governing Law: The Notes, the Receipts, the Coupons and the Talons and any non- contractual obligations arising out of or in connection with the Notes, the Receipts, the Coupons and the Talons are governed by, and shall be construed in accordance with, English law. (b) Jurisdiction: The Courts of England have jurisdiction to settle any disputes that may arise out of or in connection with any Notes, Receipts, Coupons or Talons (including any dispute relating to their existence, validity or termination or any non-contractual obligations arising out of or in connection with them) and accordingly any legal action or proceedings arising out of or in connection with any Notes, Receipts, Coupons or Talons (‘‘Proceedings’’) may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of the courts of England and waives any objection to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is made for the benefit of each of the holders of the Notes, Receipts, Coupons and Talons only, and shall not affect the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not). (c) Service of Process: The Issuer appoints TMF Corporate Services Limited of Pellipar House, 1st Floor, 9 Cloak Lane, London EC4R 2RU, United Kingdom as its agent in England to receive, for it and on its behalf, service of process in any Proceedings in England. Such service shall be deemed completed on delivery to such process agent (whether or not, it is forwarded to and received by the Issuer). If for any reason such process agent ceases to be able to act as such or no longer has an address in London, the Issuer irrevocably agrees to appoint a substitute process agent and shall immediately notify Noteholders of such appointment in accordance with Condition 14 (Notices). Nothing shall affect the right of any Noteholder to serve process in any manner permitted by law. (d) Waiver: The Issuer irrevocably agrees that, should any Proceedings be taken anywhere (whether for any injunction, specific performance, damages or otherwise), no immunity (to the extent that it may at any time exist, whether on the grounds of sovereignty or otherwise) in relation to those Proceedings (including without limitation, immunity from the jurisdiction of any court or tribunal, suit, service of process, injunctive or other interim relief, any order for specific performance, any order for recovery of land, any attachment (whether in aid of execution, before judgment or otherwise) of its assets, any process for execution of any award or judgment or other legal process) shall be claimed by it or on its behalf or with respect to its assets, any such immunity being irrevocably waived. The Issuer irrevocably agrees that it and its assets are, and shall be, subject to such Proceedings, attachment or execution in respect of its obligations under the Notes. (e) Consent: The Issuer irrevocably and generally consents in respect of any Proceedings anywhere to the giving of any relief or the issue of any process in connection with those Proceedings including, without limitation, the making, enforcement or execution against any assets whatsoever (irrespective of their use or intended use) of any order or judgment which may be made or given in those Proceedings.

165 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM

Initial Issue of Notes Upon: (a) in the case of Bearer Notes, the initial deposit of a Global Note with a Common Depositary; or (b) in the case of Registered Notes, the registration of Registered Notes in the name of any nominee for Euroclear and Clearstream, Luxembourg and delivery of the relevant Global Certificate to the Common Depositary, Euroclear or Clearstream, Luxembourg will credit each subscriber with a nominal amount of Notes equal to the nominal amount thereof for which it has subscribed and paid. Upon the initial deposit of a Global Certificate in respect of, and registration of, Registered Notes in the name of a nominee for DTC and delivery of the relevant Global Certificate to the Custodian for DTC, DTC will credit each participant with a nominal amount of Notes equal to the nominal amount thereof for which it has subscribed and paid. Notes that are initially deposited with the Common Depositary may also be credited to the accounts of subscribers with (if indicated in the relevant Final Terms) other clearing systems through direct or indirect accounts with Euroclear and Clearstream, Luxembourg held by such other clearing systems. Conversely, Notes that are initially deposited with any other clearing system may similarly be credited to the accounts of subscribers with Euroclear, Clearstream, Luxembourg or other clearing systems.

Relationship of Accountholders with Clearing Systems Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg, DTC or any other clearing system as the holder of a Note represented by a Global Note or a Global Certificate must look solely to Euroclear, Clearstream, Luxembourg, DTC or such clearing system (as the case may be) for its share of each payment made by the Issuer to the bearer of such Global Note or the holder of the underlying Registered Notes, as the case may be, and in relation to all other rights arising under the Global Notes or Global Certificates, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg, DTC or such clearing system (as the case may be). Such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are represented by such Global Note or Global Certificate and such obligations will be discharged by payment to the bearer of such Global Note or the holder of the underlying Registered Notes, as the case may be, in respect of each amount so paid.

Exchange Temporary Global Notes Each Temporary Global Note will be exchangeable free of charge to the holder, on or after its exchange date (the ‘‘Exchange Date’’): (i) if the relevant Final Terms indicate that such Global Note is issued in compliance with the C Rules or in a transaction to which TEFRA is not applicable (see ‘‘Subscription and Sale – Selling Restrictions’’), in whole, but not in part, for the Definitive Notes defined and described below; and (ii) otherwise, in whole but not in part and on a day after the expiry of 40 days after its issue upon certification as to non-U.S. beneficial ownership in the form set out in the Agency Agreement for interests in a Permanent Global Note or, if so provided in the relevant Final Terms, for Definitive Notes.

Permanent Global Notes Each Permanent Global Note will be exchangeable, free of charge to the holder, on or after its Exchange Date in whole but not in part (except as provided under ‘‘– Partial Exchange of Permanent Global Notes’’), for Definitive Notes if the Permanent Global Note is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an ‘‘Alternative Clearing System’’) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or in fact does so.

166 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be issued in Specified Denomination(s) only. A Noteholder who holds a principal amount of less than the minimum Specified Denomination will not receive a Definitive Note in respect of such holding and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more Specified Denominations.

Regulation S Global Certificates If the applicable Final Terms state that the Notes are to be represented by a Regulation S Global Certificate on issue, the following will apply in respect of transfers of Notes held in Euroclear or Clearstream, Luxembourg or an Alternative Clearing System. These provisions will not prevent the trading of interests in the Notes within a clearing system whilst they are held on behalf of such clearing system, but will limit the circumstances in which the Notes may be withdrawn from the relevant clearing system. Transfers of the holding of Notes represented by any Global Certificate pursuant to Condition 2(a) (Transfer of Registered Notes) may only be made: (i) in whole, but not in part, if the relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or (ii) in whole, or in part, with the Issuer’s consent, provided that, in the case of any transfer pursuant to (i) above, the Registered Noteholder has given the relevant Registrar not less than 30 days’ notice at its specified office of the Registered Noteholder’s intention to effect such transfer.

Rule 144A Global Certificates If the Final Terms state that the Rule 144A Notes are to be represented by a Rule 144A Global Certificate on issue, the following will apply in respect of transfers of Notes held in DTC. These provisions will not prevent the trading of interests in the Notes within a clearing system whilst they are held on behalf of DTC, but will limit the circumstances in which the Notes may be withdrawn from DTC. Transfers of the holding of Notes represented by that Rule 144A Global Certificate pursuant to Condition 2(a) (Transfer of Registered Notes) may only be made: (i) in whole, but not in part, if such Notes are held on behalf of a Custodian for DTC and if DTC notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depositary with respect to that Rule 144A Global Certificate or DTC ceases to be a ‘‘clearing agency’’ registered under the Exchange Act or is at any time no longer eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days of receiving notice of such ineligibility on the part of DTC; or (ii) in whole, or in part, with the Issuer’s consent, provided that, in the case of any transfer pursuant to (i) above, the relevant Registered Noteholder has given the relevant Registrar not less than 30 days’ notice at its specified office of the Registered Noteholder’s intention to effect such transfer. Individual Certificates issued in exchange for a beneficial interest in a Rule 144A Global Certificate shall bear the legend applicable to such Notes as set out in ‘‘Transfer Restrictions’’.

Partial Exchange of Permanent Global Notes For so long as a Permanent Global Note is held on behalf of a clearing system and the rules of that clearing system permit, such Permanent Global Note will be exchangeable in part on one or more occasions for Definitive Notes if so provided in, and in accordance with, the Conditions (which will be set out in the relevant Final Terms) relating to Partly Paid Notes.

Delivery of Notes On or after any due date for exchange the holder of a Global Note may, in the case of an exchange in whole, surrender such Global Note or, in the case of a partial exchange, present it for endorsement to, or to the order of, the Fiscal Agent. In exchange for any Global Note, or the part thereof to be exchanged, the Issuer will (i) in the case of a Temporary Global Note exchangeable for a Permanent Global Note, deliver, or procure the delivery of, a Permanent Global Note in an aggregate nominal amount equal to that of the whole or that part of a Temporary Global Note that is being exchanged or, in the case of a subsequent exchange, endorse, or procure the endorsement of, a Permanent Global Note to reflect such exchange or (ii) in the case of a Global Note exchangeable for Definitive Notes or (in the case of a Permanent Global Note) Registered

167 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes, deliver, or procure the delivery of, an equal aggregate nominal amount of duly executed and authenticated Definitive Notes and/or Certificates, as the case may be. Global Notes and Definitive Notes will be delivered outside the United States and its possessions. In this Base Prospectus, ‘‘Definitive Notes’’ means, in relation to any Global Note, the definitive Bearer Notes for which such Global Note may be exchanged (if appropriate, having attached to them all Coupons and Receipts in respect of interest or Instalment Amounts that have not already been paid on the Global Note and a Talon). Definitive Notes will be security printed and Certificates will be printed in accordance with any applicable legal and stock exchange requirements in or substantially in the form set out in the Schedules to the Agency Agreement. On exchange in full of each Permanent Global Note, the Issuer will, if the holder so requests, procure that it is cancelled and returned to the holder together with the relevant Definitive Notes.

Exchange Date Exchange Date means, in relation to a Temporary Global Note, the day falling after the expiry of 40 days after its issue date and, in relation to a Permanent Global Note, a day falling not less than 60 days, or in the case of an exchange for Registered Notes five days, after that on which the notice requiring exchange is given or, where applicable, after the 15th day on which a clearing system is closed for business, and on which banks are open for business in the city in which the specified office of the Fiscal Agent is located and in the city in which the relevant clearing system is located.

Amendment to Conditions The Temporary Global Notes, Permanent Global Notes and Global Certificates contain provisions that apply to the Notes that they represent, some of which modify the effect of the terms and conditions of the Notes set out in this Base Prospectus. The following is a summary of certain of those provisions:

Payments No payment falling due after the Exchange Date will be made on any Global Note unless exchange for an interest in a Permanent Global Note or for Definitive Notes is improperly withheld or refused. Payments on any Temporary Global Note issued in compliance with the D Rules will only be made against presentation of certification as to non-U.S. beneficial ownership in the form set out in the Agency Agreement. All payments in respect of Notes represented by a Global Note will be made against presentation for endorsement and, if no further payment falls to be made in respect of the Notes, surrender of that Global Note to or to the order of the Fiscal Agent or such other Paying Agent as shall have been notified to the Noteholders for such purpose. A record of each payment so made will be endorsed on each Global Note, which endorsement will be prima facie evidence that such payment has been made in respect of the Notes. Condition 7(f)(vi) and Condition 8(d) will apply to the Definitive Notes only.

Record Date Each payment in respect of a Global Certificate will be made to the person shown as the Noteholder in the Register at the opening of business on the Clearing System Business Day before the due date for such payment (the ‘‘Record Date’’), where ‘‘Clearing System Business Day’’ means a day on which each clearing system for which the Global Certificate is being held is open for business.

Prescription Claims against the Issuer in respect of Notes that are represented by a Permanent Global Note will become void unless it is presented for payment within a period of 10 years (in the case of principal) and 5 years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 8 (Taxation)).

Meetings The holder of a Permanent Global Note or of the Notes represented by a Global Certificate shall (unless such Permanent Global Note or Global Certificate represents only one Note) be treated as being two persons for the purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, the holder of a Permanent Global Note shall be treated as having one vote in respect of each integral currency unit of the Specified Currency of the Notes. All holders of

168 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Registered Notes are entitled to one vote in respect of each Note comprising such Noteholder’s holding, whether or not represented by a Global Certificate.

Cancellation Cancellation of any Note represented by a Permanent Global Note that is required by the Conditions to be cancelled (other than upon its redemption) will be effected by a reduction in the nominal amount of the relevant Permanent Global Note or its presentation to or to the order of the Fiscal Agent for endorsement in the relevant schedule of such Permanent Global Note or, in the case of a Global Certificate, by a reduction in the aggregate principal amount of the Certificates in the register of the Certificateholders, whereupon the principal amount thereof shall be reduced for all purposes by the amount so cancelled and endorsed.

Purchase Notes represented by a Permanent Global Note or a Global Certificate may only be purchased by the Issuer or any of its subsidiaries if they are purchased together with the rights to receive all future payments of interest and Instalment Amounts (if any) thereon.

Issuer’s Option Any option provided to the Issuer in the Conditions of any Notes while such Notes are represented by a Permanent Global Note or a Global Certificate shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Notes drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required. In the event that the Issuer’s option is exercised in respect of some but not all of the Notes of any Series, the rights of accountholders with a clearing system in respect of the Notes will be governed by the standard procedures of Euroclear, Clearstream, Luxembourg, DTC or any other clearing system (as the case may be).

Noteholders’ Option Any option of the Noteholders provided for in the Conditions of any Notes while such Notes are represented by a Permanent Global Note or a Global Certificate may be exercised by the holder of the Permanent Global Note or Global Certificate, as the case may be, by giving notice to the Fiscal Agent within the time limits relating to the deposit of Notes with a Paying Agent or Transfer Agent set out in the Conditions substantially in the form of the notice available from any Paying Agent or Transfer Agent, as the case may be, except that the notice shall not be required to contain the serial numbers of the Notes in respect of which the option has been exercised, and stating the nominal amount of Notes in respect of which the option is exercised and at the same time presenting the Permanent Global Note to the Fiscal Agent, or to a Paying Agent acting on behalf of the Fiscal Agent, for notation or, in the case of a Global Certificate, by reduction in the aggregate principal amount of the Certificate in the register of the Certificateholders.

Notices So long as any Notes are represented by a Global Note or a Global Certificate and such Global Note or Global Certificate is held on behalf of a clearing system, notices to the holders of Notes of that Series may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for publication as required by the Conditions or by delivery of the relevant notice to the holder of the Global Note or Global Certificate.

Partly Paid Notes The provisions relating to Partly Paid Notes are not set out in this Base Prospectus, but will be contained in the relevant Final Terms and thereby in the Global Notes. While any instalments of the subscription moneys due from the holder of Partly Paid Notes are overdue, no interest in a Global Note representing such Notes may be exchanged for an interest in a Permanent Global Note or for Definitive Notes (as the case may be). If any Noteholder fails to pay any instalment due on any Partly Paid Notes within the time specified, the Issuer may forfeit such Notes and shall have no further obligation to their holder in respect of them.

169 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS CLEARING AND SETTLEMENT

Book-Entry Ownership Bearer Notes The Issuer may make applications to Euroclear and/or Clearstream, Luxembourg for acceptance in their respective book-entry systems in respect of any Series of Bearer Notes. In respect of Bearer Notes, a Temporary Global Note and/or a Permanent Global Note in bearer form without coupons may be deposited with the Common Depositary for Euroclear and/or Clearstream, Luxembourg or an Alternative Clearing System as agreed between the Issuer and the Dealer. Transfers of interests in such Temporary Global Notes or Permanent Global Notes will be made in accordance with the normal Euromarket debt securities operating procedures of Euroclear and Clearstream, Luxembourg or, if appropriate, the Alternative Clearing System.

Registered Notes The Issuer may make applications to Euroclear and/or Clearstream, Luxembourg for acceptance in their respective book-entry systems in respect of the Notes to be represented by a Regulation S Global Certificate. Each Regulation S Global Certificate deposited with the Common Depositary for, and registered in the name of, a nominee of Euroclear and/or Clearstream, Luxembourg will have an ISIN and a Common Code. The Issuer, and a relevant U.S. agent appointed for such purpose that is an eligible DTC participant, may make application to DTC for acceptance in its book-entry settlement system of the Registered Notes represented by a Rule 144A Global Certificate. Each such Rule 144A Global Certificate will have a CUSIP number. Each Rule 144A Global Certificate will be subject to restrictions on transfer contained in a legend appearing on the front of such Global Certificate, as set out under ‘‘Transfer Restrictions’’. In certain circumstances, as described below in ‘‘Transfer of Registered Notes,’’ transfers of interests in a Rule 144A Global Certificate may be made as a result of which such legend may no longer be required. In the case of a Tranche of Registered Notes to be cleared through the facilities of DTC, the Custodian, with whom the Rule 144A Global Certificates are deposited, and DTC, will electronically record the nominal amount of the Rule 144A Notes held within the DTC system. Investors may hold their beneficial interests in a Rule 144A Global Certificate directly through DTC if they are participants in the DTC system, or indirectly through organisations which are participants in such system. Payments of the principal of, and interest on, each Rule 144A Global Certificate registered in the name of DTC’s nominee will be to, or to the order of, its nominee as the registered owner of such Rule 144A Global Certificate. The Issuer expects that the nominee, upon receipt of any such payment, will immediately credit DTC participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the nominal amount of the relevant Rule 144A Global Certificate as shown on the records of DTC or the nominee. The Issuer also expects that payment by DTC participants to owners of beneficial interests in such Rule 144A Global Certificate held through such DTC participant will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such DTC participants. Neither the Issuer, the Fiscal Agent or any Paying Agent or any Transfer Agent will have any responsibility or liability for any aspect of the records relating, to or payments made on account of, ownership interests in any Rule 144A Global Certificate or for maintaining, supervising or reviewing any records relating to such ownership interests. All Registered Notes will initially be in the form of a Regulation S Global Certificate and/or a Rule 144A Global Certificate. Individual Certificates will only be available, in the case of Notes initially represented by a Regulation S Global Certificate, in amounts specified in the relevant Final Terms, and, in the case of Notes initially represented by a Rule 144A Global Certificate, in minimum amounts of U.S.$100,000 (or its equivalent rounded upwards as agreed between the Issuer and the relevant Dealer(s), or higher integral multiples of U.S.$1,000, in certain limited circumstances described below.

Payments through DTC Payments in U.S. Dollars of principal and interest in respect of a Rule 144A Global Certificate registered in the name of a nominee of DTC will be made to the order of such nominee as the

170 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS registered holder of such Note. Payments of principal and interest in a currency other than U.S. Dollars in respect of Notes evidenced by a Rule 144A Global Certificate registered in the name of a nominee of DTC will be made or procured to be made by the Paying Agent in such currency in accordance with the following provisions. The amounts in such currency payable by the Paying Agent or its agent to DTC with respect to Notes held by DTC or its nominee will be received from the Issuer by the Paying Agent who will make payments in such currency by wire transfer of same day funds to the designated bank account in such currency of those DTC participant entitled to receive the relevant payment who have made an irrevocable election to DTC, in the case of payments of interest, on or prior to the third business day in New York City after the Record Date for the relevant payment of interest and, in the case of payments of principal, at least 12 business days in New York City prior to the relevant payment date, to receive that payment in such currency. The Paying Agent will convert amounts in such currency into U.S. Dollars and deliver such U.S. Dollar amount in same day funds to DTC for payment through its settlement system to those DTC participants entitled to receive the relevant payment that did not elect to receive such payment in such currency. The Agency Agreement sets out the manner in which such conversions are to be made.

Transfer of Registered Notes Transfers of interests in Global Certificates within Euroclear, Clearstream, Luxembourg and DTC will be in accordance with the usual rules and operating procedures of the relevant clearing system. The laws of some states in the United States require that certain persons take physical delivery in definitive form of securities. Consequently, the ability to transfer interests in a Rule 144A Global Certificate to such persons may be limited. Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having an interest in a Rule 144A Global Certificate to pledge such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest. Beneficial interests in a Regulation S Global Certificate may only be held through Euroclear or Clearstream, Luxembourg. In the case of Registered Notes to be cleared through Euroclear, Clearstream, Luxembourg and/or DTC, transfers may be made at any time by a holder of an interest in a Regulation S Global Certificate to a transferee who wishes to take delivery of such interest through a Rule 144A Global Certificate for the same Series of Notes provided that any such transfer made on or prior to the expiration of the distribution compliance period (as used in ‘‘Subscription and Sale’’) relating to the Notes represented by such Regulation S Global Certificate will only be made upon receipt by any Transfer Agent of a written certificate from Euroclear or Clearstream, Luxembourg, as the case may be, (based on a written certificate from the transferor of such interest) to the effect that such transfer is being made to a person whom the transferor, and any person acting on its behalf, reasonably believes is a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States. Any such transfer made thereafter of the Notes represented by such Regulation S Global Certificate will only be made upon request through Euroclear or Clearstream, Luxembourg by the holder of an interest in the Regulation S Global Certificate to the Fiscal Agent of details of that account at DTC to be credited with the relevant interest in the Rule 144A Global Certificate. Transfers at any time by a holder of any interest in the Rule 144A Global Certificate to a transferee who takes delivery of such interest through an Regulation S Global Certificate will only be made upon delivery to any Transfer Agent of a certificate setting forth compliance with the provisions of Regulation S and giving details of the account at Euroclear or Clearstream, Luxembourg, as the case may be, and DTC to be credited and debited, respectively, with an interest in each relevant Global Certificate. Subject to compliance with the transfer restrictions applicable to the Registered Notes described above and under ‘‘Transfer Restrictions,’’ cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream, Luxembourg accountholders, on the other, will be effected by the relevant clearing system in accordance with its rules and through action taken by the Custodian, the Registrar and the Fiscal Agent. On or after the Issue Date for any Series, transfers of Notes of such Series between accountholders in Euroclear and/or Clearstream, Luxembourg and transfers of Notes of such Series between participants in DTC will generally have a settlement date three business days after the trade date. The customary arrangements for delivery versus payment will apply to such transfers.

171 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Cross-market transfers between accountholders in Euroclear or Clearstream, Luxembourg and DTC participants will need to have an agreed settlement date between the parties to such transfer. Because there is no direct link between DTC, on the one hand, and Euroclear and Clearstream, Luxembourg, on the other, transfers of interests in the relevant Global Certificates will be effected through the Fiscal Agent, the Custodian, the relevant Registrar and any applicable Transfer Agent receiving instructions (and where appropriate certification) from the transferor and arranging for delivery of the interests being transferred to the credit of the designated account for the transferee. Transfers will be effected on the later of (i) three business days after the trade date for the disposal of the interest in the relevant Global Certificate resulting in such transfer and (ii) two business days after receipt by the Fiscal Agent or the Registrar, as the case may be, of the necessary certification or information to effect such transfer. In the case of cross-market transfers, settlement between Euroclear or Clearstream, Luxembourg accountholders and DTC participants cannot be made on a delivery versus payment basis. The securities will be delivered on a free delivery basis and arrangements for payment must be made separately. For a further description of restrictions on transfer of Registered Notes, see ‘‘Transfer Restrictions’’. DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Registered Notes (including, without limitation, the presentation of Rule 144A Global Certificates for exchange as described above) only at the direction of one or more participants in whose account with DTC interests in Rule 144A Global Rule 144A are credited and only in respect of such portion of the aggregate nominal amount of the relevant Rule 144A Global Certificates as to which such participant or participants has or have given such direction. However, in the circumstances described above, DTC will surrender the relevant Rule 144A Global Certificates for exchange for Individual Certificates (which will, in the case of Rule 144A Notes, bear the legend applicable to transfers pursuant to Rule 144A). DTC has advised the Issuer as follows: DTC is a limited purpose trust company organised under the laws of the State of New York, a ‘‘banking organisation’’ under the laws of the State of New York, a member of the U.S. Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic computerised book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to DTC is available to others, such as banks, securities brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC direct participant, either directly or indirectly. Although Euroclear, Clearstream, Luxembourg and DTC have agreed to the foregoing procedures in order to facilitate transfers of beneficial interests in the Global Certificates among participants and accountholders of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, any Paying Agent nor any Transfer Agent will have any responsibility for the performance by Euroclear, Clearstream, Luxembourg or DTC or their respective direct or indirect participants or accountholders of their respective obligations under the rules and procedures governing their operations. While a Rule 144A Global Certificate is lodged with DTC or the Custodian, Restricted Notes represented by Individual Certificates will not be eligible for clearing or settlement through Euroclear, Clearstream, Luxembourg or DTC.

Individual Certificates Registration of title to Registered Notes in a name other than a depositary or its nominee for Clearstream, Luxembourg and Euroclear or for DTC will be permitted only (i) in the case of Rule 144A Global Certificates in the circumstances set forth in ‘‘Summary of Provisions Relating to the Notes while in Global Form – Exchange – Rule 144A Global Certificates’’ or (ii) in the case of Regulation S Global Certificates in the circumstances set forth in ‘‘Summary of Provisions Relating to the Notes while in Global Form – Exchange – Regulation S Global Certificates’’. In such circumstances, the Issuer will cause sufficient individual Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant Noteholder(s). A person having an interest in a Global Certificate must provide the Registrar with:

172 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (i) a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Individual Certificates; and (ii) in the case of a Rule 144A Global Certificate only, a fully completed, signed certification substantially to the effect that the exchanging holder is not transferring its interest at the time of such exchange, or in the case of a simultaneous resale pursuant to Rule 144A, a certification that the transfer is being made in compliance with the provisions of Rule 144A. Individual Certificates issued pursuant to this paragraph (ii) shall bear the legends applicable to transfers pursuant to Rule 144A.

Pre-issue Trades Settlement It is expected that delivery of Notes will be made against payment therefore on the relevant Issue Date, which could be more than three business days following the date of pricing. Under Rule 15c6-1 of the Exchange Act, trades in the U.S. secondary market generally are required to settle within three business days (‘‘T+3’’), unless the parties to any such trade expressly agree otherwise. Accordingly, in the event that an Issue Date is more than three business days following the relevant date of pricing, purchasers who wish to trade Registered Notes in the United States between the date of pricing and the date that is three business days prior to the relevant Issue Date will be required, by virtue of the fact that such Notes initially will settle beyond T+3, to specify an alternative settlement cycle at the time of any such trade to prevent a failed settlement. Settlement procedures in other countries will vary. Purchasers of Notes may be affected by such local settlement practices and, in the event that an Issue Date is more than three business days following the relevant date of pricing, purchasers of Notes who wish to trade Notes between the date of pricing and the date that is three business days prior to the relevant Issue Date should consult their own adviser.

173 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS TAXATION

The following summary of certain South African, United States, and European Union consequences of ownership of Notes is based upon laws, regulations, decrees, rulings, income tax conventions, administrative practice and judicial decisions in effect at the date of this Base Prospectus. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may be retroactive and could affect the tax consequences to holders of the Notes. This summary does not constitute a legal opinion or tax advice. In addition this summary does not purport to address all tax aspects that may be relevant to a holder of Notes. Each prospective holder is urged to consult its own tax adviser as to the particular tax consequences to such holder of the ownership and disposition of Notes, including the applicability and effect of any other tax laws or tax treaties, and of pending or proposed changes in applicable tax laws as of the date of this Base Prospectus, and of any actual changes in applicable tax laws after such date.

The Republic of South Africa Withholding Tax Under current taxation law in the Republic of South Africa, all payments made under the Notes to resident and non-resident Noteholders will be made free of withholding or deduction for or on account of any taxes, duties, assessments or governmental charges in the Republic of South Africa.

Securities Transfer Tax No securities transfer tax is payable on the issue or transfer of the Notes in terms of the Securities Transfer Tax Act, 2007.

Income Tax Under current taxation law effective in the Republic of South Africa a ‘‘resident’’ (as defined in section 1 of the South African Income Tax Act, 1962 (the ‘‘Income Tax Act’’) is subject to income tax on his/her world-wide income. Accordingly, all Noteholders who are tax resident in the Republic of South Africa will generally be liable to pay income tax, subject to available deductions, allowances and exemptions, on any interest earned in relation to the Notes. Non-residents of the Republic of South Africa are subject to income tax on all income derived from a South African source (subject to applicable double taxation treaties). Interest income is deemed to be derived from a South African source if it is derived from the utilisation or application in the Republic of South Africa by any person of funds or credit obtained in terms of any form of ‘‘interest-bearing arrangement’’. The Notes will constitute an ‘‘interest-bearing arrangement’’. The place of utilisation or application of funds will, unless the contrary is proved, be deemed, in the case of a juristic person, to be that juristic person’s place of effective management. The Issuer has its place of effective management in the Republic of South Africa as at the date of this Base Prospectus. Accordingly, if the funds raised from the issuance of any Tranche of Notes are applied by the Issuer in the Republic of South Africa, the interest earned by a Noteholder will be deemed to be from a South African source and subject to South African income tax unless such interest income is exempt from South African income tax under section 10(1)(h) of the Income Tax Act (see below). Under section 10(1)(h) of the Income Tax Act, interest received by or accruing to a Noteholder who, or which, is not a resident of the Republic of South Africa during any year of assessment is exempt from income tax, unless that person: (a) is a natural person who was physically present in the Republic of South Africa for a period exceeding 183 days in aggregate during that year of assessment; or (b) at any time during that year of assessment carried on business through a permanent establishment in the Republic of South Africa. If a Noteholder does not qualify for the exemption under section 10(1)(h) of the Income Tax Act exemption from or reduction of any South African tax liability may be available under an applicable double taxation treaty. Furthermore, certain entities may be exempt from income tax. Purchasers are advised to consult their own professional advisers as to whether the interest income earned on the Notes will be exempt under section 10(1)(h) of the Income Tax Act or under an applicable double taxation treaty.

174 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS In terms of section 24J of the Income Tax Act, broadly speaking, any discount or premium to the nominal amount of a Note is treated as part of the interest income on the Note. Interest income which accrues (or is deemed to accrue) to a Noteholder is deemed, in accordance with section 24J of the Income Tax Act, to accrue on a day-to-day basis until that Noteholder disposes of the Note or until maturity unless an election has been made by the Noteholder (if the Noteholder is entitled under Section 24J of the Income Tax Act to make such election) to treat its Notes as trading stock on a mark-to-market basis. This day-to-day basis accrual is determined by calculating the yield to maturity (as defined in Section 24J) and applying this rate to the capital involved for the relevant tax period. The premium or discount is treated as interest for the purposes of the exemption under section 10(1)(h) of the Income Tax Act.

Capital Gains Tax Capital gains and losses of residents of the Republic of South Africa on the disposal of Notes are subject to capital gains tax unless the Notes are purchased for re-sale in the short term as part of a scheme of profit making, in which case the proceeds will be subject to income tax. Any discount or on acquisition which has already been treated as interest for income tax purposes under section 24J of the Income Tax Act will not be taken into account when determining any capital gain or loss. Under section 24J(4A) of the Income Tax Act a loss on disposal will, to the extent that it has previously been included in taxable income (as interest), be allowed as a deduction from the taxable income of the holder when it is incurred and accordingly will not give rise to a capital loss. Capital gains tax under the Eighth Schedule to the Income Tax Act will not be levied in relation to Notes disposed of by a person who is not a resident of the Republic of South Africa unless the Notes disposed of are attributable to a permanent establishment of that person through which a trade is carried on in the Republic of South Africa during the relevant year of assessment. Purchasers are advised to consult their own professional advisers as to whether a disposal of Notes will result in a liability to capital gains tax.

Definition of interest The references to ‘‘interest’’ above mean ‘‘interest’’ as understood in South African tax law. The statements above do not take any account of any different definitions of ‘‘interest’’ or ‘‘principal’’ which may prevail under any other law or which may be created by the Terms and Conditions of the Notes or any related documentation.

United States The discussion of tax matters in this Base Prospectus is not intended or written to be used, and cannot be used by any person, for the purpose of avoiding U.S. federal, state or local tax penalties, and was written to support the promotion or marketing of the Programme. Each prospective investor should seek advice based on such person’s particular circumstances from an independent tax adviser. The following summary discusses the principal U.S. federal income tax consequences of the acquisition, ownership and disposition of the Registered Notes issued pursuant to Rule 144A. Except as specifically noted below, this discussion applies only to: * Registered Notes purchased on original issuance at their ‘‘issue price’’ (as defined below); * Registered Notes held as capital assets; and * U.S. holders (as defined below). This discussion does not describe all of the tax consequences that may be relevant in light of a holder’s particular circumstances or to holders subject to special rules, such as: * financial institutions; * insurance companies; * dealers in securities or foreign currencies; * persons holding Registered Notes as part of a hedging transaction, ‘‘straddle,’’ conversion transaction or other integrated transaction; * U.S. holders whose functional currency is not the U.S. Dollar; or * partnerships or other entities classified as partnerships for U.S. federal income tax purposes.

175 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS This summary is based on the Internal Revenue Code of 1986, as amended to the date hereof (the ‘‘Code’’), administrative pronouncements, published rulings, judicial decisions and final, temporary and proposed U.S. Treasury Regulations, changes to any of which subsequent to the date of this Base Prospectus may affect the tax consequences described below. Persons considering the purchase of the Registered Notes should consult the applicable pricing supplement for any additional discussion regarding U.S. federal income taxation and should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. The tax treatment of certain Registered Notes, such as Index Linked or other variable linked Notes, Dual Currency Notes, high interest Notes, low interest Notes, step-up Notes, step-down Notes, reverse dual currency Notes, optional dual currency Notes, Partly Paid Notes and any Notes that are not principal protected, will be specified in the applicable pricing supplement. Moreover, this summary does not discuss Bearer Notes. In general, U.S. federal income tax law imposes significant limitations on U.S. holders of Bearer Notes. U.S. holders should consult their tax advisers regarding the U.S. federal income and other tax consequences of the acquisition, ownership and disposition of Bearer Notes. As used herein, the term ‘‘U.S. holder’’ means a beneficial owner of a Registered Note that is for United States federal income tax purposes: * a citizen or individual resident of the United States; * a corporation (or any other entity treated as a corporation) created or organised in or under the laws of the United States or any state thereof (including the District of Colombia); * an estate the income of which is subject to U.S. federal income taxation regardless of its source; or * a trust over which administration a court within the United States is able to exercise primary supervision and all of the substantial decisions of which one or more U.S. persons have the authority or control. The term ‘‘U.S. holder’’ also includes certain former citizens and residents of the United States. If an entity that is classified as a partnership for U.S. federal income tax purposes holds Registered Notes, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partners of partnerships holding Registered Notes should consult with their tax advisers.

Payments of Stated Interest Interest paid on a Registered Note will be taxable to a U.S. holder as ordinary interest income at the time it accrues or is received in accordance with the holder’s method of accounting for U.S. federal income tax purposes, provided that the interest is ‘‘qualified stated interest’’ (as defined below). Interest income earned by a U.S. holder with respect to a Registered Note will constitute foreign source income for U.S. federal income tax purposes, which may be relevant in calculating the holder’s foreign tax credit limitation. The rules regarding foreign tax credits are complex and prospective investors should consult their tax advisers about the application of such rules to them in their particular circumstances. Special rules governing the treatment of interest paid with respect to original issue discount Registered Note, and foreign currency Registered Notes (‘‘foreign currency Registered Notes’’) are described under ‘‘– Original Issue Discount,’’ ‘‘– Contingent Payment Debt Instruments’’ and ‘‘– Foreign Currency Registered Notes’’.

Original Issue Discount A Registered Note that has an ‘‘issue price’’ that is less than its ‘‘stated redemption price at maturity’’ will be considered to have been issued at an original discount for U.S. federal income tax purposes (and will be referred to as an ‘‘original issue discount Registered Note’’) unless the Registered Note satisfies a de minimis threshold (as described below) or is a short-term Registered Note (a ‘‘short-term Registered Note’’) (as defined below). The ‘‘issue price’’ of a Registered Note generally will be the first price at which a substantial amount of the Registered Notes are sold to the public (which does not include sales to bond houses, brokers or similar persons or organisations acting in the capacity of underwriters, placement agents or wholesalers). The ‘‘stated redemption price at maturity’’ of a Registered Note generally will equal the sum of all payments required to be made under the Registered Note other than payments of ‘‘qualified stated interest’’.

176 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS ‘‘Qualified stated interest’’ is stated interest unconditionally payable in cash or in property (other than in debt instruments of the issuer) at least annually during the entire term of the Registered Note and equal to the outstanding principal balance of the Registered Note multiplied by a single fixed rate of interest. In addition, qualified stated interest includes, among other things, stated interest on a ‘‘variable rate date instrument’’ that is unconditionally payable in cash or in property (other than in debt instruments of the issuer) at least annually at a single qualified floating rate of interest or at a rate that is determined at a single fixed formula that is based on objective financial or economic information. A rate is a qualified floating rate if variations in the rate can reasonably be expected to measure contemporaneous fluctuations in the cost of newly borrowed funds in the currency in which the Registered Note is denominated. If the difference between a Registered Note’s stated redemption price at maturity and its issue price is less than a de minimis amount, i.e., 1/4 of 1 per cent. of the stated redemption price at maturity multiplied by the number of complete years to maturity, the Registered Note will not be considered to have original issue discount. U.S. holders of Registered Notes with a de minimis amount of original issue discount will include this original issue discount in income, as capital gain, on a pro rata basis as principal payments are made on the Registered Note. A U.S. holder of original discount Registered Notes will be required to include any qualified stated interest payments in income in accordance with the holder’s method of accounting for U.S. federal income tax purposes. U.S. holders of original issue discount Registered Notes that mature more than one year from their date of issuance will be required to include original issue discount in income for U.S. federal tax purposes as it accrues in accordance with a constant yield method based on a compounding of interest, regardless of whether cash attributable to this income is received. A U.S. holder may make an election to include in gross income all interest that accrues on any Registered Note (including stated interest, acquisition discount, original issue discount, de minimis original issue discount, market discount, de minimis market discount and unstated interest, as adjusted by any amortisable bond premium or acquisition premium) in accordance with a constant yield method based on the compounding of interest, and may revoke such election only with the permission of the IRS (a ‘‘constant yield election’’). A Registered Note that matures one year or less from its date of issuance, a short-term Registered Note, will be treated as being issued at a discount and none of the interest paid on the Registered Note will be treated as qualified stated interest. In general, a cash method U.S. holder of a short- term Registered Note is not required to accrue the discount for U.S. federal income tax purposes unless it elects to do so. Holders who so elect and certain other holders, including those who report income on the accrual method of accounting for U.S. federal income tax purposes, are required to include the discount in income as it accrues on a straight-line basis, unless another election is made to accrue the discount according to a constant yield method based on daily compounding. In the case of a U.S. holder who is not required and who does not elect to include the discount in income currently, any gain realised on the sale, exchange, or retirement of the short-term Registered Note will be ordinary income to the extent of the discount accrued on a straight-line basis (or, if elected, according to a constant yield method based on daily compounding) through the date of sale, exchange or retirement. In addition, those U.S. holders will be required to defer deductions for any interest paid on indebtedness incurred to purchase or carry short-term Registered Notes in an amount not exceeding the accrued discount until the accrued discount is included in income. The Issuer may have an unconditional option to redeem, or U.S. holders may have an unconditional option to require the Issuer to redeem a Registered Note prior to its stated maturity date. Under applicable regulations, if the Issuer has an unconditional option to redeem a Registered Note prior to its stated maturity date, this option will be presumed to be exercised if, by utilising any date on which the Registered Note may be redeemed as the maturity date and the amount payable on that date in accordance with the terms of the Registered Note as the stated redemption price at maturity, the yield on the Registered Note would be lower than its yield to maturity. If the U.S. holders have an unconditional option to require the Issuer to redeem a Registered Note prior to its stated maturity date, this option will be presumed to be exercised if making the same assumptions as those set forth in the previous sentence, the yield on the Registered Note would be higher than its yield to maturity. If this option is not in fact exercised, the Registered Note would be treated solely for purposes of calculating original issue discount as if it were redeemed, and a new Registered Note were issued, on the presumed exercise date for an

177 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS amount equal to the Registered Note’s adjusted issue price on that date. The adjusted issue price of an original issue discount Registered Note is defined as the sum of the issue price of the Registered Note and the aggregate amount of previously accrued original issue discount, less any prior payments other than payments of qualified stated interest. Market Discount If a U.S. holder purchases a Registered Note (other than a short-term Registered Note) in the secondary market for an amount that is less than its stated redemption price at maturity or, in the case of an original issue discount Registered Note, its adjusted issue price, the amount of the difference will be treated as market discount for U.S. federal income tax purposes, unless this difference is less than a specified de minimis amount. A U.S. holder will be required to treat any principal payment (or, in the case of an original issue discount Registered Note, any payment that does not constitute qualified stated interest) on, or any gain on the sale, exchange, retirement or other disposition of a Registered Note, including disposition in certain non-recognition transactions, as ordinary income to the extent of the market discount accrued on the Registered Note at the time of the payment or disposition unless this market discount has been previously included in income by the U.S. holder pursuant to an election by the holder to include market discount in income as it accrues, or pursuant to a constant yield election by the holder as described under ‘‘– Original Issue Discount’’ above. In addition, the U.S. holder may be required to defer, until the maturity of the Registered Note or its earlier disposition (including certain non-taxable transactions), the deduction of all or a portion of the interest expense on any indebtedness incurred or maintained to purchase or carry such Registered Note. If a U.S. holder makes a constant yield election (as described under ‘‘– Original Issue Discount’’) for a Registered Note with market discount, such election will result in a deemed election for all market discount bonds acquired by the holder on or after the first day of the first taxable year to which such election applies. Acquisition Premium and Amortisable Bond Premium A U.S. holder who purchases a Registered Note for an amount that is greater than the Registered Note’s adjusted issue price but less than or equal to the sum of all amounts payable on the Registered Note after the purchase date other than payments of qualified stated interest will be considered to have purchased the Registered Note at an acquisition premium. Under the acquisition premium rules, the amount of original issue discount that the U.S. holder must include in its gross income with respect to the Registered Note for any taxable year will be reduced by the portion of acquisition premium properly allocable to that year. If a U.S. holder purchases a Registered Note for an amount that is greater than the amount payable (other than payments of qualified stated interest) at maturity, or on the earlier call date, in the case of a Registered Note that is redeemable at the Issuer’s option, the holder will be considered to have purchased the Registered Note with amortisable bond premium equal in amount to the excess of the purchase price over the amount payable at maturity. The holder will not be subject to the original issue discount rules and may elect to amortise this premium, using a constant yield method, over the remaining term of the Registered Note (where the Registered Note is not optionally redeemable prior to its maturity date). If the Registered Note may be optionally redeemed prior to maturity after the holder has acquired it, the amount of amortisable bond premium is determined by substituting the call date for the maturity date and the call price for the amount payable at maturity only if the substitution results in a smaller amount of premium attributable to the period before the redemption date. A holder who elects to amortise bond premium must reduce his tax basis in the Registered Note by the amount of the premium amortised in any year. An election to amortise bond premium applies to all taxable debt obligations then owned and thereafter acquired by the holder and may be revoked only with the consent of the IRS. If a U.S. holder makes a constant yield election (as described under ‘‘– Original Issue Discount’’) for a Registered Note with amortisable bond premium, such election will result in a deemed election to amortise bond premium for all of the holder’s debt instruments with amortisable bond premium. Sale, Exchange or Retirement of the Registered Notes Upon the sale, exchange or retirement of a Registered Note, a U.S. holder will recognise taxable gain or loss equal to the difference between the amount realised on the sale, exchange or

178 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS retirement and the holder’s adjusted tax basis in the Registered Note. A U.S. holder’s adjusted tax basis in a Registered Note generally will equal the acquisition cost of the Registered Note increased by the amount of OID and market discount included in the Holder’s gross income and decreased by the amount of any payment received from the Issuer other than a payment of qualified stated interest and the amount of any amortisable bond premiums that the U.S. holder took into account. Gain or loss, if any, will generally be U.S. source income for purposes of computing a U.S. holder’s foreign tax credit limitation. For these purposes, the amount realised does not include any amount attributable to accrued interest on the Registered Note. Amounts attributable to accrued interest are treated as interest as described under ‘‘– Payments of Stated Interest’’. Except as described below, gain or loss realised on the sale, exchange or retirement of a Registered Note will generally be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange or retirement the Registered Note has been held for more than one year. Exceptions to this general rule apply to the extent of any accrued market discount or, in the case of a short-term Registered Note, to the extent of any accrued discount not previously included in the holder’s taxable income. See ‘‘– Original Issue Discount’’ and ‘‘– Market Discount’’. In addition, other exceptions to this general rule apply in the case of foreign currency Registered Notes, and contingent payment debt instruments. See ‘‘– Foreign Currency Registered Notes’’ and ‘‘– Contingent Payment Debt Instruments’’.

Contingent Payment Debt Instruments If the terms of the Registered Notes provide for certain contingencies that affect the timing and amount of payments (including Registered Notes with a variable rate or rates that do not qualify as ‘‘variable rate debt instruments’’ for purposes of the original issue discount rules) they will be ‘‘contingent payment debt instruments’’ for U.S. federal income tax purposes. Under the rules that govern the treatment of contingent payment debt instruments, no payment on such Registered Notes qualifies as qualified stated interest. Rather, a U.S. holder must account for interest for U.S. federal income tax purposes based on a ‘‘comparable yield’’ and the differences between actual payments on the Registered Note and the Registered Note’s ‘‘projected payment schedule’’ as described below. The comparable yield is determined by the Issuer at the time of issuance of the Registered Notes. The comparable yield may be greater than or less than the stated interest, if any, with respect to the Registered Notes. Solely for the purpose of determining the amount of interest income that a U.S. holder will be required to accrue on a contingent payment debt instrument, the Issuer will be required to construct a ‘‘projected payment schedule’’ that represents a series of payments the amount and timing of which would produce a yield to maturity on the contingent payment debt instrument equal to the comparable yield. Neither the comparable yield nor the projected payment schedule constitutes a representation by the Issuer regarding the actual amount, if any, that the contingent payment debt instrument will pay. For U.S. federal income tax purposes, a U.S. holder will be required to use the comparable yield and the projected payment schedule established by the Issuer in determining interest accruals and adjustments in respect of an optionally exchangeable Registered Note, unless the holder timely discloses and justifies the use of a different comparable yield and projected payment schedule to the IRS. A U.S. holder, regardless of the holder’s method of accounting for U.S. federal income tax purposes, will be required to accrue interest income on a contingent payment debt instrument at the comparable yield, adjusted upward or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on the contingent payment instrument (as set forth below). A U.S. holder will be required to recognise interest income equal to the amount of any net positive adjustment, i.e., the excess of actual payments over projected payments, in respect of a contingent payment debt instrument for a taxable year. A net negative adjustment, i.e., the excess of projected payments over actual payments, in respect of a contingent payment debt instrument for a taxable year: * will first reduce the amount of interest in respect of the contingent payment debt instrument that a holder would otherwise be required to include in income in the taxable year; and

179 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS * to the extent of any excess, will give rise to an ordinary loss equal to so much of this excess as does not exceed the excess of the amount of all previous interest inclusions under the contingent payment debt instrument over the total amount of the U.S. holder’s net negative adjustments treated as ordinary loss on the contingent payment debt instrument in prior taxable years. A net negative adjustment is not subject to the two per cent. floor limitation imposed on miscellaneous deductions. Any net negative adjustment in excess of the amounts described above will be carried forward to off-set future interest income in respect of the contingent payment debt instrument or to reduce the amount realised on a sale, exchange or retirement of the contingent payment debt instrument. Where a U.S. holder purchases a contingent payment debt instrument for a price other than its adjusted issue price, the difference between the purchase price and the adjusted issue price must be reasonably allocated to the daily portions of interest or projected payments with respect to the contingent payment debt instrument over its remaining term and treated as a positive or negative adjustment, as the case may be, with respect to each period to which it is allocated. Upon a sale, exchange or retirement of a contingent payment debt instrument, a U.S. holder generally will recognise taxable gain or loss equal to the difference between the amount realised on the sale, exchange or retirement and the holder’s adjusted basis in the contingent payment debt instrument. A U.S. holder’s adjusted basis in a Registered Note that is a contingent payment debt instrument generally will be the acquisition cost of the Registered Note, increased by the interest previously accrued by the U.S. holder on the Registered Note under these rules, disregarding any net positive and net negative adjustments, and decreased by the amount of any non-contingent payments and the projected amount of any contingent payments previously made on the Registered Note. A U.S. holder generally will treat any gain as interest income, and any loss as ordinary loss to the extent of the excess of previous interest inclusions in excess of the total net negative adjustments previously taken into account as ordinary losses, and the balance as capital loss. The deductibility of capital losses is subject to limitations. In addition, if a holder recognises loss above certain thresholds, the holder may be required to file a disclosure statement with the IRS (as described under ‘‘– Reportable Transactions’’). A U.S. holder will have a tax basis in any property, other than cash, received upon the retirement of a contingent payment debt instrument including in satisfaction of a conversion right or a call right equal to the fair market value of the property, determined at the time of retirement. The holder’s holding period for the property will commence on the day immediately following its receipt. Foreign Currency Registered Notes The following discussion summarises the principal U.S. federal income tax consequences to a U.S. holder of the ownership and disposition of Registered Notes that are denominated in a specified currency other than the U.S. Dollar or the payments of interest or principal on which are payable in a currency other than the U.S. Dollar (foreign currency Registered Notes). The rules applicable to foreign currency Registered Notes could require some or all gain or loss on the sale, exchange or other disposition of a foreign currency Registered Note to be recharacterised as ordinary income or loss. The rules applicable to foreign currency Registered Notes are complex and may depend on the holder’s particular U.S. federal income tax situation. For example, various elections are available under these rules, and whether a holder should make any of these elections may depend on the holder’s particular U.S. federal income tax situation. U.S. holders are urged to consult their own tax advisers regarding the U.S. federal income tax consequences of the ownership and disposition of foreign currency Registered Notes. A U.S. holder who uses the cash method of accounting and who receives a payment of qualified stated interest in a foreign currency with respect to a foreign currency Registered Note will be required to include in income the U.S. Dollar value of the foreign currency payment (determined on the date the payment is received) regardless of whether the payment is in fact converted to U.S. Dollars at the time, and this U.S. Dollar value will be the U.S. holder’s tax basis in the foreign currency. A cash method holder who receives a payment of qualified stated interest in U.S. Dollars pursuant to an option available under such Registered Note will be required to include the amount of this payment in income upon receipt. An accrual method U.S. holder will be required to include in income the U.S. Dollar value of the amount of interest income (including original issue discount or market discount, but reduced by acquisition premium and amortisable bond premium, to the extent applicable) that has accrued and

180 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS is otherwise required to be taken into account with respect to a foreign currency Registered Note during an accrual period. The U.S. Dollar value of the accrued income will be determined by translating the income at the average rate of exchange in effect during the accrual period or, with respect to an accrual period that spans two taxable years, at the average rate for the partial period within the taxable year. The U.S. holder will recognise ordinary income or loss with respect to accrued interest income on the date the income is actually received. The amount of ordinary income or loss recognised will equal the difference between the U.S. Dollar value of the foreign currency payment received (determined on the date the payment is received) in respect of the accrual period (or, where a holder receives U.S. Dollars, the amount of the payment in respect of the accrual period) and the U.S. Dollar value of interest income that has accrued during the accrual period (as determined above). Rules similar to these rules apply in the case of a cash method taxpayer required to currently accrue original issue discount or market discount. An accrual method U.S. holder may elect to translate interest income (including original issue discount) into U.S. Dollars at the spot rate on the last day of the interest accrual period (or, in the case of a partial accrual period, the spot rate on the last day of the taxable year) or, if the date of receipt is within five business days of the last day of the interest accrual period, the spot rate on the date of receipt. A U.S. holder that makes this election must apply it consistently to all debt instruments from year to year and cannot change the election without the consent of the IRS. Original issue discount, market discount, acquisition premium and amortisable bond premium on a foreign currency Registered Note are to be determined in the relevant foreign currency. Where the taxpayer elects to include market discount in income currently, the amount of market discount will be determined for any accrual period in the relevant foreign currency and then translated into U.S. Dollars on the basis of the average rate in effect during the accrual period (or portion thereof within the U.S. holder’s taxable year). Exchange gain or loss realised with respect to such accrued market discount shall be determined in accordance with the rules relating to accrued interest described above. If an election to amortise bond premium is made, amortisable bond premium taken into account on a current basis shall reduce interest income in units of the relevant foreign currency. Exchange gain or loss is realised on amortised bond premium with respect to any period by treating the bond premium amortised in the period in the same manner as on the sale, exchange or retirement of the foreign currency Registered Note. Any exchange gain or loss will be ordinary income or loss as described below. If the election is not made, any loss realised on the sale, exchange or retirement of a foreign currency Registered Note with amortisable bond premium by a U.S. holder who has not elected to amortise the premium will be a capital loss to the extent of the bond premium. A U.S. holder’s tax basis in a foreign currency Registered Note, and the amount of any subsequent adjustment to the holder’s tax basis, will be the U.S. Dollar value amount of the foreign currency amount paid for such foreign currency Registered Note, or of the foreign currency amount of the adjustment, determined on the date of the purchase or adjustment. A U.S. holder who purchases a foreign currency Registered Note with previously owned foreign currency will recognise ordinary income or loss in an amount equal to the difference, if any, between such U.S. holder’s tax basis in the foreign currency and the U.S. Dollar fair market value of the foreign currency Registered Note on the date of purchase. Gain or loss realised upon the sale, exchange or retirement of a foreign currency Registered Note that is attributable to fluctuation in currency exchange rates will be ordinary income or loss which will not be treated as interest income or expense. Gain or loss attributable to fluctuations in exchange rates will equal the difference between (i) the U.S. Dollar value of the foreign currency principal amount of the Registered Note, determined on the date the payment is received or the Registered Note is disposed of, and (ii) the U.S. Dollar value of the foreign currency principal amount of the Registered Note, determined on the date the U.S. holder acquired the Registered Note. Payments received attributable to accrued interest will be treated in accordance with the rules applicable to payments of interest on foreign currency Registered Notes described above. The foreign currency gain or loss will be recognised only to the extent of the total gain or loss realised by the holder on the sale, exchange or retirement of the foreign currency Registered Notes. The source of the foreign currency gain or loss will be determined by reference to the residence of the holder or the ‘‘qualified business unit’’ of the holder on whose books the Registered Note is properly reflected. Any gain or loss realised by these holders in excess of the foreign currency gain or loss will be capital gain or loss except to the extent of any accrued market discount or, in the case of short-term Registered Note, to the extent of any discount not previously

181 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS included in the holder’s income. Holders should consult their own tax advisor with respect to the tax consequences of receiving payments in a currency different from the currency in which payments with respect to such Registered Notes accrue. A U.S. holder will have a tax basis in any foreign currency received on the sale, exchange or retirement of a foreign currency Registered Note equal to the U.S. Dollar value of the foreign currency, determined at the time of sale, exchange or retirement. A cash method taxpayer who buys or sells a foreign currency Registered Note is required to translate units of foreign currency paid or received into U.S. Dollars at the spot rate on the settlement date of the purchase or sale. Accordingly, no exchange gain or loss will result from currency fluctuations between the trade date and the settlement date of the purchase or sale. An accrual method taxpayer may elect the same treatment for all purchases and sales of foreign currency obligations provided that the Registered Notes are traded on an established securities market. This election cannot be changed without the consent of the IRS. Any gain or loss realised by a U.S. holder on a sale or other disposition of foreign currency (including its exchange for U.S. Dollars or its use to purchase foreign currency Registered Notes) will be ordinary income or loss.

Backup Withholding and Information Reporting Information returns may be filed with the IRS in connection with payments on the Registered Notes and the proceeds from a sale or other disposition of the Registered Notes. A U.S. holder may be subject to U.S. backup withholding on these payments if it fails to provide its tax identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle them to a refund, provided that the required information is furnished to the IRS.

Reportable Transactions A U.S. taxpayer that participates in a ‘‘reportable transaction’’ will be required to disclose its participation to the U.S. IRS. The scope and application of these rules is not entirely clear. A U.S. holder may be required to treat a foreign currency exchange loss from the Registered Notes as a reportable transaction if the loss exceeds U.S.$50,000 in a single taxable year, if the U.S. older is an individual or trust, or higher amounts for other U.S. holders. In the event the acquisition, ownership or disposition of Registered Notes constitutes participation in a ‘‘reportable transaction’’ for purposes of these rules, a U.S. holder will be required to disclose its investment by filing Form 8886 with the IRS. A penalty in the amount of U.S.$10,000 in the case of a natural person and U.S.$50,000 in all other cases is generally imposed on any taxpayer that fails to timely file an information return with the IRS with respect to a transaction resulting in a loss that is treated as a reportable transaction. In addition, the Issuer and its advisors may also be required to disclose the transaction to the IRS, and to maintain a list of U.S. holders, and to furnish this list and certain other information to the IRS upon written request. Prospective purchasers should consult their tax advisers regarding the application of these rules to the acquisition, ownership or disposition of Registered Notes. The United States federal income tax discussion set forth above is included for general information only and may not be applicable depending upon a holder’s particular situation. Holders should consult their own tax advisers with respect to the tax consequences to them of the ownership and disposition of the Registered Notes, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in U.S. federal or other tax laws.

European Union EU Savings Directive Under the EU Savings Directive, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments. Under such withholding system, tax will be deducted unless the recipient of the payment elects instead for an exchange of information procedure. The current rate of withholding is 20% and it will be increased to 35% with effect from 1 July 2011. Belgium had previously operated a withholding system in relation to such payments, but has elected to apply the provision of information provisions that apply to the

182 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Member States (other than Austria and Luxembourg during the transitional period), with effect from 1 January 2010. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to exchange of information procedures relating to interest and other similar income. A number of non-EU countries and certain dependent or associated territories of certain Member States have adopted or agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within their respective jurisdictions to, or collected by such a person for, an individual resident in, or certain limited types of entity established in, a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those countries and territories in relation to payments made by a person in a Member State to an individual resident in, or certain limited types of entity established in, one of those countries or territories. On 13 November 2008, the European Commission published a proposal for amendments to the EU Savings Directive. The proposal included a number of suggested changes which, if implemented, would broaden the scope of the rules described above. The European Parliament approved an amended version of this proposal on 24 April 2009. Prospective investors in the Notes should consult their professional advisers if they have concerns about the potential impact of the EU Savings Directive.

183 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS ERISA AND CERTAIN OTHER U.S. CONSIDERATIONS

The U.S. Employee Retirement Income Security Act of 1974, as amended (‘‘ERISA’’), imposes certain requirements on ‘‘employee benefit plans’’ (as defined in Section 3(3) of ERISA) subject to ERISA, including entities such as collective investment funds and separate accounts whose underlying assets include the assets of such plans (collectively, ‘‘ERISA Plans’’) and on those persons who are fiduciaries with respect to ERISA Plans. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such an ERISA Plan or the management or disposition of the assets of such an ERISA Plan, or who renders investment advice for a fee or other compensation to such an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan. In considering an investment in the notes of a portion of the assets of any Plan, as defined below, a fiduciary should determine, among other things, whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any federal, state, local, non-U.S. or other laws, rules or regulations that are similar to such provisions of ERISA or the Code (collectively, ‘‘Similar Laws’’) relating to a fiduciary’s duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws. Section 406 of ERISA and Section 4975 of the Code which are among the ERISA and Code fiduciary provisions governing plans, prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, ‘‘Plans’’)) and certain persons (referred to as ‘‘parties in interest’’ or ‘‘disqualified persons’’) having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction. Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if any Notes are acquired by a Plan with respect to which any of the Issuer, the Arrangers or the Dealers or any of their respective affiliates are a party in interest or a disqualified person. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be applicable, however, depending in part on the type of Plan fiduciary making the decision to acquire Notes and the circumstances under which such decision is made. There can be no assurance that any exemption will be available with respect to any particular transaction involving the Notes, or that, if an exemption is available, it will cover all aspects of any particular transaction. By its purchase of any Notes (or any interest in a Note), each purchaser (whether in the case of the initial purchase or in the case of a subsequent transfer) will be deemed to have represented and agreed either that (i) it is not and for so long as it holds a Note (or any interest therein) will not be an ERISA Plan or other Plan, an entity whose underlying assets include the assets of any such ERISA Plan or other Plan (each of the foregoing, a‘‘Benefit Plan Investor’’), or a governmental or other employee benefit plan which is subject to any U.S. federal, state or local law, that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code, or (ii) its purchase and holding of the Notes will not result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of such a governmental or other employee benefit plan, any such substantially similar U.S. federal, state or local law) for which an exemption is not available. Governmental plans and certain church and other U.S. plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state or other federal laws that are substantially similar to ERISA and the Code. Fiduciaries of any such plans should consult with their counsel before purchasing any Notes. The foregoing discussion is general in nature and not intended to be all-inclusive. Any Plan fiduciary who proposes to cause a Plan to purchase any Notes should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code to such an investment, and to confirm that such investment will not constitute or result in a prohibited transaction or any other violation of an applicable requirement of ERISA. The sale of Notes to a Plan is in no respect a representation by the Issuer, the Arrangers or the Dealers that such an investment meets all relevant requirements with respect to investments by Plans generally or any particular Plan, or that such an investment is appropriate for Plans generally or any particular Plan.

184 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS SUBSCRIPTION AND SALE

Subject to the terms and on the conditions contained in a dealer agreement dated on or about 26 January 2010 (the ‘‘Dealer Agreement’’) between the Issuer, the Permanent Dealers and the Arrangers, from time to time the Notes will be offered by the Issuer to the Permanent Dealers, and the Permanent Dealers may agree to purchase such Notes. However, the Issuer has reserved the right to sell Notes directly on its own behalf to Dealers that are not Permanent Dealers. The Notes may be resold at prevailing market prices, or at prices related thereto, at the time of such resale, as determined by the relevant Dealer. The Notes may also be sold by the Issuer through the Dealers, acting as agents of the Issuer. The Dealer Agreement also provides for Notes to be issued in syndicated Tranches that are jointly and severally underwritten by two or more Dealers. The Issuer will pay each relevant Dealer a commission as agreed between them in respect of Notes subscribed by it. The Issuer has agreed to reimburse the Arrangers for certain of its expenses incurred in connection with the establishment of the Programme and the Dealers for certain of their activities in connection with the Programme. The Issuer has agreed to indemnify the Dealers against certain liabilities in connection with the offer and sale of the Notes. The Dealer Agreement entitles the Dealers to terminate any agreement that they make to subscribe Notes in certain circumstances prior to payment for such Notes being made to the Issuer. Certain of the Dealers and their respective affiliates have, in the past, performed investment banking and advisory services for, and provided credit facilities to, the Issuer for which they have received customary fees and expenses. Each of the Dealers and their respective affiliates may, from time to time, engage in further transactions with, and perform services for, the Issuer in the ordinary course of their respective businesses. The Issuer may apply all or part of the proceeds of any Notes issued pursuant to the Programme in repayment of all or part of any such credit facilities. The Dealer Agreement makes provision for the resignation or termination of appointment of existing Dealers and for the appointment of additional or other Dealers either generally in respect of the Programme or in relation to a particular Tranche.

Selling Restrictions United States The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S. Each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that, except as permitted by the Dealer Agreement, it will not offer or sell Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of an identifiable tranche of which such Notes are a part, as determined and certified to the Fiscal Agent by such Dealer (or, in the case of an identifiable tranche of Notes sold to or through more than one Dealer, by each of such Dealers with respect to Notes of an identifiable tranche purchased by or through it, in which case the Fiscal Agent shall notify such Dealer when all such Dealers have so certified), within the United States and it will have sent to each Dealer to which it sells Notes during the distribution compliance period (other than resales pursuant to Rule 144A) a confirmation or other notice setting out the restrictions on offers and sales of the Notes within the United States. Terms used in the preceding sentence have the meanings given to them by Regulation S. The Notes are being offered and sold outside the United States to non-U.S. persons in reliance on Regulation S. The Dealer Agreement provides that the Dealers may directly or through their respective U.S. broker-dealer affiliates arrange for the offer and resale of Notes within the United States only to QIBs in reliance on Rule 144A. Bearer Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a U.S. person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder.

185 c101680pu060Proof18:26.1.10B/LRevision:0OperatorDavS (A) Where the D Rules are specified in the relevant Final Terms as being applicable in relation to any Tranche of Notes, each Dealer will be required to represent, undertake and agree (and each additional Dealer appointed under the Programme will be required to represent, undertake and agree) that: (i) except to the extent permitted under the D Rules (a) it has not offered or sold, and will not offer or sell, any Bearer Notes to a person who is within the United States or its possessions or to a U.S. person, and (b) it has not delivered and will not deliver within the United States or its possessions Bearer Notes in definitive form that are sold during the restricted period; (ii) it has, and throughout the restricted period will have, in effect procedures reasonably designed to ensure that its employees and agents who are directly engaged in selling Bearer Notes are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a U.S. person, except as permitted by the D Rules; (iii) if it is a U.S. person, it is acquiring the Bearer Notes for purposes of resale in connection with their original issuance and, if it retains Bearer Notes for its own account, it will only do so in accordance with the requirements of United States Treasury Regulations §1.163-5(c)(2)(i)(D)(6); (iv) with respect to each affiliate (if any) that acquires from such Dealer Bearer Notes for the purposes of offering or selling such Notes during the restricted period, such Dealer either repeats and confirms the representations, undertakings and agreements contained in sub-clauses (i), (ii), (iii) and (v) on such affiliate’s behalf or agrees that it will obtain from such affiliate for the benefit of the Issuer the representations, undertakings and agreements contained in such sub-clauses (i), (ii), (iii) and (v); and (v) shall obtain for the benefit of the Issuer the representations, undertakings and agreements contained in sub-clauses (i), (ii), (iii), (iv) and (v) of this paragraph from any person other than its affiliate with whom it enters into a written contract (a ‘‘distributor’’ as defined in United States Treasury Regulations §1.163-5(c)(2)(i)(D)(4)), for the offer or sale during the restricted period of the Bearer Notes. (B) In addition, where the C Rules are specified in the relevant Final Terms as being applicable in relation to any Tranche of Notes, such Notes must in their original issuance, be issued and delivered outside the United States and its possessions and, accordingly, each Dealer will be required to represent, undertake and agree (and each additional Dealer will be required to represent, undertake and agree) that, in connection with the original issuance of the Notes: (i) it has not offered, sold or delivered, and will not offer, sell or deliver, directly or indirectly, any Bearer Notes within the United States or its possessions; and (ii) it has not communicated, and will not communicate, directly or indirectly, with a prospective purchaser if either such purchaser or such Dealer is within the United States or its possessions and will not otherwise involve the United States office of such Dealer in the offer and sale of Bearer Notes. Terms used in sub-clauses (A) and (B) have the meanings given to them by the Code and the regulations thereunder, including the C Rules and the D Rules. In addition, until 40 days after the commencement of the offering of any identifiable tranche of Notes, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering of such tranche of Notes) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A. This Base Prospectus has been prepared by the Issuer for use in connection with the offer and sale of the Notes outside the United States and for the resale of the Notes in the United States. The Issuer and the Dealers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Base Prospectus does not constitute an offer to any person in the United States or to any U.S. person, other than any QIB within the meaning of Rule 144A to whom an offer has been made directly by one of the Dealers or its U.S. broker-dealer affiliate. Distribution of this Base Prospectus by any non-U.S. person outside the United States or by any QIB in the United States to any U.S. person or to any other person within the United States, other than any QIB and those persons, if any, retained to advise such non-U.S. person or QIB with respect thereto, is unauthorised and any disclosure without the prior written consent of the Issuer

186 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS of any of its contents to any such U.S. person or other person within the United States, other than any QIB and those persons, if any, retained to advise such non-U.S. person or QIB, is prohibited. Public Offer Selling Restriction Under the Prospectus Directive In relation to each Relevant Member State, each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’) it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Base Prospectus as completed by the Final Terms in relation thereto to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State: (i) if the Final Terms in relation to the Notes specify that an offer of those Notes may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant member State (a ‘‘Non-exempt Offer’’), following the date of publication of a prospectus in relation to such Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently been completed by the final terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or Final Terms, as applicable; (ii) at any time to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; (iii) at any time to any legal entity which has two or more of (a) an average of at least 250 employees during the last financial year; (b) a total balance sheet of more than c43,000,000 and (c) an annual net turnover of more than c50,000,000, as shown in its last annual or consolidated accounts; (iv) at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or (v) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (ii) to (v) above shall require the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression an ‘‘offer of Notes to the public’’ in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. Selling Restrictions Addressing Additional United Kingdom Securities Laws Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree that: (i) in relation to any Notes which have a maturity of less than one year: (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business; (b) it has not offered or sold and will not offer or sell any Notes other than to persons: (A) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses; or (B) who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses; where the issue of the Notes would otherwise constitute a contravention of section 19 of the FSMA by the Issuer;

187 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. The Republic of South Africa In relation to the Republic of South Africa, each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree, that it will not make an ‘‘offer to the public’’ (as such expression is defined in the SA Companies Act) of Notes (whether for subscription, purchase or sale) in the Republic of South Africa. Accordingly, no offer of Notes will be made to any person in the Republic of South Africa and, accordingly, this Base Prospectus does not, nor is it intended to, constitute a base prospectus prepared and registered under the SA Companies Act.

Republic of Italy Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to acknowledge that the offer of the Notes has not been registered with the Commissione Nazionale per le Societa` e la Borsa (‘‘CONSOB’’) (the Italian Securities and Exchange Commisison) pursuant to Italian securities legislation and, accordingly, Notes may not be offered, sold or delivered, nor may copies of this Base Prospectus or any other document relating to the Notes be distributed in the Republic of Italy in a public offer at large (offerta al pubblico) within the meaning of Article 1, paragraph 1, letter (t) of Legislative Decree no. 58 of 24 February 1998, unless an exemption applies. Accordingly, in the Republic of Italy, the Notes: (a) shall only be offered or sold to qualified investors (operatori qualificati), as defined in Article 2(1)(e) paragraphs of the Prospectus Directive, pursuant to Article 100 of Legislative Decree No. 58 of 24th February 1998, as amended (‘‘Financial Services Act’’); or (b) shall only be offered or sold in circumstances which are exempted from the rules on public offer pursuant to Article 100 of the Financial Services Act and Article 34-ter, of CONSOB Regulation No. 11971 of 14 May 1999, as amended (‘‘Regulation No. 11971’’). Moreover, and subject to the foregoing, any offer, sale or delivery of the Notes or distribution of copies of this Base Prospectus or any other document relating to the Notes in the Republic of Italy under (a) or (b) above must be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, Legislative Decree No. 385 of 1 September 1993 (the ‘‘Banking Act’’), CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws and regulations; (ii) in compliance with any other applicable laws and regulations including any relevant notification or limitations which may be imposed by CONSOB or the Bank of Italy.

Provisions relating to the secondary market Any investor purchasing the Notes should also note that in connection with the subsequent distribution of Notes (with a minimum denomination lower than c50,000 or its equivalent in another currency) in Italy, in accordance with Article 100-bis of Financial Services Act, where no exemption from the rules on solicitation applies under (a) and (b) above, the subsequent distribution of the Notes on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under the Financial Services Act and Regulation No. 11971. Failure to comply with such rules may result in the sale of such Notes being declared null and void and in the intermediaries transferring the Notes being liable for any damages suffered by potential purchasers.

Japan The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as amended, the ‘‘FIEA’’) and each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it has not, directly or indirectly, offered or sold and will not, directly or indirectly,

188 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5 Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Control Law (Law No. 228 of 1949, as amended)) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and other relevant laws, regulations and ministerial guidelines of Japan.

General These selling restrictions may be modified by the agreement of the Issuer and the Dealers following a change in a relevant law, regulation or directive. Any such modification will be set out in the Final Terms issued in respect of the issue of Notes to which it relates or in a supplement to this Base Prospectus. No representation is made that any action has been taken in any jurisdiction that would permit a public offering of any of the Notes, or possession or distribution of this Base Prospectus or any other offering material or any Final Terms, in any country or jurisdiction where action for that purpose is required. Each Dealer has agreed (and each further Dealer appointed under the Programme will be required to agree) that it will comply with all relevant laws, regulations and directives in each country or jurisdiction in which it purchases, offers, sells or delivers Notes or has in its possession or distributes or publishes this Base Prospectus, any other offering material or any Final Terms (in all cases at its own expense) and neither the Issuer nor any other Dealer shall have responsibility therefor. Other persons into whose hands this Base Prospectus or any Final Terms comes are required by the Issuer and the Dealers to comply with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Base Prospectus or any Final Terms or any related offering material, in all cases at their own expenses.

189 c101680pu060 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS TRANSFER RESTRICTIONS

Rule 144A Notes Each purchaser of Rule 144A Notes, by accepting delivery of this Base Prospectus, will be deemed to have represented, agreed and acknowledged that: 1. It is (a) a QIB, (b) acquiring such Notes for its own account, or for the account of one or more QIBs and (c) aware, and each beneficial owner of such Notes has been advised, that the sale of such Notes to it is being made in reliance on Rule 144A. 2. The Rule 144A Notes have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of one or more QIBs or (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), in each case in accordance with any applicable securities laws of any State of the United States. 3. The purchaser of the Notes will be deemed to represent, warrant and agree that either (A) it is not and for so long as it holds a Note (or any interest therein) will not be (i) an ‘‘employee benefit plan’’ as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (ii) a ‘‘plan’’ as defined in and subject to the Code, (iii) an entity whose underlying assets include the assets of any such employee benefit plan subject to ERISA or other plan subject to Section 4975 the Code, or (iv) a governmental or other benefit plan which is subject to any U.S. federal, state or local law, that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code, or (B) its purchase and holding of the Notes will not result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of such a governmental or other employee benefit plan, any such substantially similar U.S. federal, state or local law) for which an exemption is not available. 4. The Rule 144A Notes, unless the Issuer determines otherwise in compliance with applicable law, will bear a legend substantially to the following effect: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A ‘‘QIB’’), THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QIBS, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THE NOTES. EACH PURCHASER OF THIS NOTE WILL BE DEEMED TO REPRESENT, WARRANT AND AGREE THAT EITHER (A) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS NOTE (OR ANY INTEREST THEREIN) WILL NOT BE (I) AN ‘‘EMPLOYEE BENEFIT PLAN’’ AS DEFINED IN SECTION 3(3) OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (‘‘ERISA’’) THAT IS SUBJECT TO TITLE I OF ERISA, (II) A ‘‘PLAN’’ AS DEFINED IN AND SUBJECT TO THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE ‘‘CODE’’), (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR OTHER PLAN SUBJECT TO SECTION 4975 THE CODE, OR (IV) A GOVERNMENTAL OR OTHER BENEFIT PLAN WHICH IS SUBJECT TO ANY U.S. FEDERAL, STATE OR LOCAL LAW, THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR (B) ITS PURCHASE AND HOLDING OF THIS NOTE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406

190 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF SUCH A GOVERNMENTAL OR OTHER EMPLOYEE BENEFIT PLAN, ANY SUCH SUBSTANTIALLY SIMILAR U.S. FEDERAL, STATE OR LOCAL LAW) FOR WHICH AN EXEMPTION IS NOT AVAILABLE. 5. It understands that the Issuer, the Registrar, the relevant Dealer(s) and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. If it is acquiring any Notes for the account of one or more QIBs, it represents that it has sole investment discretion with respect to each of those accounts and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each account. 6. It understands that the Rule 144A Notes will be evidenced by a Rule 144A Global Certificate. Before any interest in the Rule 144A Global Note may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Regulation S Global Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Agency Agreement) as to compliance with applicable securities laws. Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

Regulation S Notes Each purchaser of Notes outside the United States pursuant to Regulation S and each subsequent purchaser of such Notes pursuant to resales prior to the expiration of the distribution compliance period, by accepting delivery of this Base Prospectus and the Notes, will be deemed to have represented, agreed and acknowledged that: (i) It is, or at the time Notes are purchased will be, the beneficial owner of such Notes and is purchasing the Notes in an offshore transaction pursuant to Regulation S. (ii) It understands that such Notes have not been and will not be registered under the Securities Act and that, prior to the expiration of the distribution compliance period, it will not offer, sell, pledge or otherwise transfer such Notes except (a) in accordance with Rule 144A under the Securities Act to a person that it and any person acting on its behalf reasonably believes is a QIB purchasing for its own account or the account of a QIB or (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, in each case in accordance with any applicable securities laws of any State of the United States. (iii) The purchaser of the Notes will be deemed to represent, warrant and agree that either (A) it is not and for so long as it holds a Note (or any interest therein) will not be (i) an ‘‘employee benefit plan’’ as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (ii) a ‘‘plan’’ as defined in and subject to the Code, (iii) an entity whose underlying assets include the assets of any such employee benefit plan subject to ERISA or other plan subject to Section 4975 the Code, or (iv) a governmental or other benefit plan which is subject to any U.S. federal, state or local law, that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code, or (B) its purchase and holding of the Notes will not result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of such a governmental or other employee benefit plan, any such substantially similar U.S. federal, state or local law) for which an exemption is not available. (iv) It understands that such Notes, unless otherwise determined by the Issuer in accordance with applicable law, will bear a legend substantially to the following effect: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. EACH PURCHASER OF THIS NOTE WILL BE DEEMED TO REPRESENT, WARRANT AND AGREE THAT EITHER (A) IT IS NOT AND FOR SO LONG AS IT HOLDS THIS NOTE (OR ANY INTEREST THEREIN) WILL NOT BE (I) AN ‘‘EMPLOYEE BENEFIT PLAN’’ AS DEFINED IN SECTION 3(3) OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (‘‘ERISA’’) THAT IS SUBJECT TO TITLE I OF ERISA, (II) A

191 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS ‘‘PLAN’’ AS DEFINED IN AND SUBJECT TO THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE ‘‘CODE’’), (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR OTHER PLAN SUBJECT TO SECTION 4975 THE CODE, OR (IV) A GOVERNMENTAL OR OTHER BENEFIT PLAN WHICH IS SUBJECT TO ANY U.S. FEDERAL, STATE OR LOCAL LAW, THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR (B) ITS PURCHASE AND HOLDING OF THIS NOTE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF SUCH A GOVERNMENTAL OR OTHER EMPLOYEE BENEFIT PLAN, ANY SUCH SUBSTANTIALLY SIMILAR U.S. FEDERAL, STATE OR LOCAL LAW) FOR WHICH AN EXEMPTION IS NOT AVAILABLE. (v) It understands that the Issuer, the Registrar, the Dealers and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. (vi) It understands that the Notes offered in reliance on Regulation S will be represented by the Regulation S Global Certificate. Prior to the expiration of the distribution compliance period, before any interest in the Rule 144A Global Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Regulation S Global Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Agency Agreement) as to compliance with applicable securities laws.

192 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

Transnet is a limited liability company incorporated in the Republic of South Africa and the majority of its assets and the assets of its subsidiaries are currently located outside the United States and the United Kingdom. In addition, the majority of Transnet’s directors and executive officers are residents of countries other than the United States and the United Kingdom. As a result, it may be impossible for Noteholders to: * effect service of process within the United States or the United Kingdom upon Transnet or any of its directors or executive officers named in this Base Prospectus; or * enforce, in the U.S. or English courts, judgments obtained outside U.S. or English courts against Transnet or any of Transnet’s directors and executive officers named in this Base Prospectus, including actions under the civil liability provisions of the U.S. securities laws or any state or territory of the United States. In addition, it may be difficult for Noteholders to enforce, in original actions brought in courts in jurisdictions located outside the United States or the United Kingdom, liabilities predicated upon U.S. securities laws or upon English laws.

Choice of law In any proceedings for the enforcement of the obligations of the Issuer, the South African courts will generally give effect to the choice of foreign law as contemplated in the Notes as the governing law thereof.

Jurisdiction Subject to what is set out below, the Company’s (i) irrevocable submission under the Notes to the jurisdiction of a foreign court; and (ii) agreement not to claim any immunity to which it or its assets may be entitled, is generally legal, valid, binding and enforceable under the laws of the Republic of South Africa, and any judgment obtained in the foreign jurisdiction will be recognised and be enforceable by the courts of the Republic of South Africa without the need for re-examination of the merits. The appointment by the Company of an agent within the jurisdiction of a foreign court to accept service of process in respect of the jurisdiction of the foreign courts is generally valid and binding on the Company. Under South African law, a court will not accept a complete ouster of jurisdiction, although generally it recognises party autonomy and gives effect to choice of law provisions. However, jurisdiction remains within the purview of the court and a court may, in certain instances, assume jurisdiction provided there are sufficient jurisdictional connecting factors. South African courts may, in rare instances, choose not to give effect to a choice of jurisdiction clause, if, for example, such choice is contrary to public policy. Proceedings before a court of the Republic of South Africa may be stayed if the subject of the proceedings is concurrently before any other court.

Recognition of foreign judgments In cases connected with the mining, production, importation, exportation, refinement, possession, use or sale of or ownership to any matter or material, of whatever nature, whether within, outside, into or from the Republic of South Africa the permission of the South African Minister of Trade and Industry is required in terms of the Protection of Businesses Act, 1978, before a South African Court will give effect to a foreign judgment. Even if permission from the Minister of Trade and Industry is obtained, a South African Court will not enforce a foreign judgment for multiple or punitive damages. Subject to these qualifications, an authenticated judgment obtained in a court of competent jurisdiction other than the Republic of South Africa will be recognised and enforced by ordinary action in accordance with procedures ordinarily applicable under South African law for the enforcement of foreign judgments; provided that the process is properly served, judgment was pronounced by a proper court of law, was final and conclusive (in the case of a judgment for money, on the face of it), has not become stale, and has not been obtained by fraud or in any manner opposed to natural justice or contrary to the international principles of due process and procedural fairness, the enforcement thereof is not contrary to South African public policy and the foreign court in question had jurisdiction and competence according to the applicable rules on conflict of laws. South African courts will not enforce foreign revenue or penal law and South African courts have, as a matter of public policy, generally not enforced awards for multiple or punitive damages.

193 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Where obligations are to be performed in a jurisdiction outside the Republic of South Africa they may not be enforceable under the laws of the Republic of South Africa to the extent that such performance would be illegal or contrary to public policy under the laws of the Republic of South Africa, or the foreign jurisdiction or to the extent that the law precludes South African courts from granting extra territorial orders. Under the Recognition and Enforcement of Foreign Arbitral Awards Act, 1977 (the ‘‘Enforcement Act’’), any foreign arbitral award may, subject to the provisions of sections 3 and 4 thereof, be made an order of court by any court. Any such award which has been made an order of court pursuant to the provisions of the Enforcement Act may be enforced in the same manner as any judgment or order to the same effect (subject to the provisions of the Protection of Business Act, 1978, which apply mutatis mutandis to foreign arbitral awards).

Effect of liquidation on civil proceedings In general and subject to certain exceptions, civil proceedings (including arbitration proceedings) instituted by or against an insolvent entity are automatically stayed on the liquidation of the insolvent entity’s estate until the appointment of a liquidator. A plaintiff/creditor wishing to continue with such proceedings against the insolvent entity must give notice of its intention to do so within a period of three weeks from the date of the first meeting of creditors, in accordance with the provisions of the Insolvency Act, 1936, failing which the proceedings lapse. In circumstances where the court finds that there was a reasonable excuse for a failure to give the requisite notice, it has a discretion to allow a plaintiff/creditor to continue with proceedings on such conditions as it thinks fit. Execution against the insolvent entity’s assets is similarly stayed.

194 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS LEGAL MATTERS

Certain matters of U.S. law will be passed on for Transnet by Clifford Chance LLP, Transnet’s English and U.S. counsel and certain matters of South African law will be passed on for Transnet by Deneys Reitz Inc, Transnet’s South African counsel. Certain matters of English law and U.S. law will be passed on for the Arrangers and the Dealers by Latham & Watkins (London) LLP, the Arrangers’ and the Dealers’ English and U.S. counsel and certain matters of South African law will be passed on for the Arrangers and the Dealers by Webber Wentzel, the Arrangers’ and the Dealers’ South African counsel.

195 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS INDEPENDENT AUDITORS

Transnet’s Consolidated Financial Statements as at and for the years ended 31 March 2009, 2008 and 2007 included in this Base Prospectus have been audited by Deloitte & Touche, independent auditors as stated in their audit report appearing herein. The registered office of Deloitte & Touche is The Woodlands, 20 Woodlands Drive, Woodmead 2196, Republic of South Africa.

196 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS DESCRIPTION OF CERTAIN INDEBTEDNESS

The following summary of certain provisions of Transnet’s indebtedness does not purport to be complete and is subject to, and qualified in its entirety by reference to, the underlying documents. As of 30 September 2009, Transnet had outstanding total financial indebtedness of approximately R 42,957 million.

2010 Bonds On or about 1 April 1990, Transnet issued approximately R 2.007 billion Open-Ended Issue Size TO11 16.50 per cent. bonds due 1 April 2010 (the ‘‘2010 Bonds’’). The 2010 Bonds are guaranteed by an unconditional and irrevocable guarantee of the Government. Covenants, Representations and Warranties The 2010 Bond documentation contains customary operating and financial covenants common to agreements of this type which include covenants that restrict Transnet’s ability to dispose of the whole or substantially the whole of its undertaking or the whole or the greater part of its assets.

2014 Bonds On 2 July 2004, Transnet issued R 4.0 billion 10.75 per cent. bonds due 15 July 2014 (the ‘‘2014 Bonds’’). On 27 October 2004, Transnet issued an additional R 2.0 billion of new 2014 Bonds, subject to the same terms as the original issuance. Both issuances were subscribed to by the Public Investment Corporation Limited (PIC). The 2014 Bonds are guaranteed by an unconditional and irrevocable guarantee of the Government. Covenants, Representations and Warranties The 2014 Bond documentation contains customary operating and financial covenants common to agreements of this type which include covenants that restrict Transnet’s ability to dispose of its whole or substantially the whole of its undertaking or the whole or the greater part of its assets. The indenture relating to the 2014 Bonds contains customary events of default, including, but not limited to, non-payment, breach of other obligations set forth in the agreement, misrepresentation of or material non-compliance with a representation or warranty, and certain insolvency, winding-up and related events.

Euro Medium Term Note Programme On 15 April 1998, Transnet established a U.S.$1.0 billion Euro Medium Term Note Programme (the ‘‘1998 Programme’’). On 17 April 1998, Transnet issued R2 billion 13.5 per cent. notes due 18 April 2028 under (the ‘‘1998 Programme’’). On 29 March 1999, Transnet issued a further R 1.5 billion 10 per cent. notes due 30 March 2029 under the 1998 Programme. The notes issued under the 1998 Programme are guaranteed by an unconditional and irrevocable guarantee of the Government. Covenants, Representations and Warranties and Events of Default The 1998 Programme documentation contains representations and warranties and undertakings common to agreements of this type and include customary operating and financial covenants, subject to certain agreed exceptions, including covenants that restrict Transnet’s ability and the ability of its principal subsidiaries (being subsidiaries of Transnet whose profit before tax, gross assets or net tangible worth represents 10 per cent. or more of the consolidated profits before tax of the Transnet Group, or consolidated net tangible worth of the Transnet Group) to create or permit the creation of any encumbrances other than in certain circumstances including, but not limited to: those created in the ordinary course of business as security only for indebtedness under export, credit or trade finance facilities relating to those goods or documents of title; those otherwise prohibited but arising in the ordinary course of business but not exceeding U.S.$50 million, those granted to secure project finance indebtedness granted, and those incumberances arising out of rights of the consolidation, combination or set-off of any bank or financial institution created in the course of a foreign exchange, swap or derivative transaction in the ordinary course of business. The 1998 Programme documents contain customary events of default, including, but not limited to, non-payment, breach of other obligations set forth in the terms and conditions of the notes and the trust deed, ceasing to carry on or threatening to cease to carry on the whole or a substantial part

197 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS of its business operations, unlawfulness or repudiation of obligations, certain insolvency, winding-up or related events, any default in relation to certain indebtedness not being paid when due or becoming due and payable before its specified maturity, denial, revocation or failure to receive any necessary governmental authorisation, permit or license, failure of the guarantee to be in full force and effect or repudiation of the guarantee by the guarantor, and repossession of any asset leased, hired or purchased by the Issuer with a value in excess of US$10,000,000 due to failure to pay under such lease or purchase agreement.

Domestic Medium Term Note and Commercial Paper Programme On 13 September 2007, Transnet established its R 30.0 billion Domestic Medium Term Note and Commercial Paper Programme. Pursuant to the establishment of the Commercial Paper Programme, Transnet issued several series of notes (collectively the ‘‘Programme Notes’’), and various commercial paper issuances under the Commercial Paper Programme. The issue date, description of the Programme Notes and the maturity dates for each of the Programme Notes and the issue date range, description of the commercial paper and the maturity dates for each of the commercial paper issuances appear below:

Notes Issues

ISSUE DATE DESCRIPTION OF NOTES MATURITY DATE

12 December 2008 R 300,000,000.00 9.81% Senior Unsecured Unlisted 15 December 2011 Fixed Rate Note

ISSUE DATE DESCRIPTION OF NOTES MATURITY DATE

29 July 2008 R 500,000,000.00 Senior Unsecured Floating Rate Notes 29 July 2011 Between 14 R 7,000,000,000.00 9.25% Senior Unsecured Fixed Rate Notes 14 November 2017 November 2007 and 3 September 2009 Between 17 R 1,948,000,000.00 10.50% Senior Unsecured Fixed Rate Notes 17 September 2020 September 2009 and 21 January 2010 Between 6 November R 2,885,000,000.00 10.80% Senior Unsecured Fixed Rate Notes 06 November 2023 2008 and 21 January 2010 Between 14 November R 7,463,000,000.00 8.90% Senior Unsecured Fixed Rate Notes 14 November 2027 2007 and 21 January 2010 Commercial Paper Issues

ISSUE DATE DESCRIPTION OF NOTES MATURITY DATE

05 February 2009 R 20,000,000.00 Senior Unsecured Zero Coupon Notes 04 February 2010 05 March 2009 R 113,000,000.00 Senior Unsecured Zero Coupon Notes 04 March 2010 19 March 2009 R 79,000,000.00 Senior Unsecured Zero Coupon Notes 18 March 2010 02 April 2009 R 20,000,000.00 Senior Unsecured Zero Coupon Notes 01 April 2010 23 April 2009 R 100,000,000.00 Senior Unsecured Zero Coupon Notes 22 April 2010 15 October 2009 R 100,000,000.00 Senior Unsecured Zero Coupon Notes 22 April 2010 20 May 2009 R 335,000,000.00 Senior Unsecured Zero Coupon Notes 06 May 2010 19 June 2009 R 280,000,000.00 Senior Unsecured Zero Coupon Notes 10 June 2010 16 July 2009 R 200,000,000.00 Senior Unsecured Zero Coupon Notes 08 July 2010 06 August 2009 R 131,000,000.00 Senior Unsecured Zero Coupon Notes 11 February 2010 19 November 2009 R 30,000,000.00 Senior Unsecured Zero Coupon Notes 11 February 2010 06 August 2009 R 369,000,000.00 Senior Unsecured Zero Coupon Notes 05 August 2010 11 September 2009 R 160,000,000.00 Senior Unsecured Zero Coupon Notes 11 March 2010 11 September 2009 R 40,000,000.00 Senior Unsecured Zero Coupon Notes 09 September 2010 15 October 2009 R 20,000,000.00 Senior Unsecured Zero Coupon Notes 14 October 2010 19 November 2009 R 220,000,000.00 Senior Unsecured Zero Coupon Notes 20 May 2010 19 November 2009 R 50,000,000.00 Senior Unsecured Zero Coupon Notes 18 November 2010

198 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Covenants, Representations and Warranties The programme documents contain representations and warranties and undertakings common to agreements of this type and include customary operating and financial covenants, subject to certain agreed exceptions, including covenants that restrict Transnet’s ability and the ability of its material subsidiaries to: create or permit to the creation of any encumbrances other than those permitted under the programme, and form or procure the formation of a trust or appoint or procure the appointment of an agent to hold any security rights for the benefit or on behalf of noteholders. The programme documents contain customary events of default, including, but not limited to, non- payment, breach of other obligations set forth in the agreement, failure to obtain any necessary consent, license, approval or authorization, disposition of or ceasing to carry on the whole or a substantial part of its business or assets, certain insolvency, winding-up or related events.

FNB Corporate Facility On 31 August 2004, Transnet, as borrower, and FNB Corporate, as lender, entered into a facility agreement which provides for limited types of borrowing by Transnet to fund certain types of activities as detailed in the table below. Original Principal Amount Facility (R millions)

Asset Based Finance Facility ...... 107 Business Card Facility...... 100 Working Capital ...... 140 Guarantees...... 10 Forward Exchange Contracts ...... 398* Derivative Products ...... 250* Forward Exchange Contracts ...... 400* Bond Trading...... 20* Electronic Funds Transfer ...... 500*

Total...... 1,835

* Margined Interest Net credit balances attract interest at FNB Corporate’s corporate base rate as quoted from time to time plus 4.25 per cent. Interest accrues on the debit balances of any of the draft not forming part of the cash management group. Such interest is levied at the FNB Corporate’s prime rate, compounded monthly. Interest is calculated on a daily outstanding balance and capitalised monthly in arrears. Interest due on any form of utilisation that is subject to the completion of a transaction annexure is paid in accordance with the terms set forth in each transaction annexure. In the absence of terms and conditions relating to interest in a transaction annexure, the terms and conditions relating to interest as set forth in the facility agreement apply. Covenants, Representations and Warranties and Events of Default The facility agreement contains representations and warranties and undertakings common to agreements of this type and include customary operating and financial covenants, subject to certain agreed exceptions, including covenants that restrict Transnet’s ability and the ability of its subsidiaries to: create or permit to exist any security or preference (other than one created by operation of law) for any indebtedness or contingent indebtedness of Transnet; create or permit to subsist any encumbrances, sell or dispose of its assets, incur or have outstanding certain borrowings, guarantees, loans or hedges, and reduce share capital. The facility agreement contains customary events of default, including, but not limited to, non- payment, breach of other obligations set forth in the agreement, misrepresentation, certain insolvency, winding-up or related events, and any cross default in relation to certain indebtedness not being paid when due or becoming due and payable before its specified maturity.

199 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS FORM OF FINAL TERMS

The form of Final Terms that will be issued in respect of each Tranche, subject only to the deletion of non-applicable provisions, is set out below:

Final Terms dated [*]

Transnet Limited Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the U.S.$2,000,000,000 Global Medium Term Note Programme

PART A – CONTRACTUAL TERMS Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions of the Notes (the ‘‘Conditions’’) set forth in the Base Prospectus dated 26 January 2010 [and the supplemental Base Prospectus dated [*]] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the ‘‘Prospectus Directive’’). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with such Prospectus [as so supplemented]. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Base Prospectus [as so supplemented]. The Base Prospectus [and the supplemental Prospectus] [is] [are] available for viewing at [address] [and] [website] and copies may be obtained from [address].

The following alternative language applies if the first tranche of an issue which is being increased was issued under a Prospectus with an earlier date. Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Prospectus dated [original date] [and the supplemental Prospectus dated [*]]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive (Directive 2003/71/EC) (the ‘‘Prospectus Directive’’) and must be read in conjunction with the Prospectus dated [current date] [and the supplemental Prospectus dated [*]], which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive, save in respect of the Conditions which are extracted from the Prospectus dated [original date] [and the supplemental Prospectus dated [*]] and are attached hereto. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Prospectuses dated [original date] and [current date] [and the supplemental Prospectuses dated [*] and [*]]. The Prospectuses [and the supplemental Prospectuses] are available for viewing at [address] [and] [website] and copies may be obtained from [address].

[Include whichever of the following apply or specify as ‘‘Not Applicable’’ (N/A). Note that the numbering should remain as set out below, even if ‘‘Not Applicable’’ is indicated for individual paragraphs or sub- paragraphs. Italics denote guidance for completing the Final Terms.] [When completing final terms or adding any other final terms or information consideration should be given as to whether such terms or information constitute ‘‘significant new factors’’ and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.]

1. Issuer: Transnet Limited 2. [(i)] Series Number: [*] [(ii) Tranche Number: [*] (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible).] 3. Specified Currency or Currencies: [*] 4. Aggregate Nominal Amount of Notes: [(i)] Series: [*] [(ii) Tranche: [*]]

200 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS 5. Issue Price: [*] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)] 6. (i) Specified Denominations: [*] (ii) Calculation Amount: [If only one Specified Denomination, insert the Specified Denomination. If more than one Specified Denomination, insert the highest common factor.] [Note: There must be a common factor in the case of two or more Specified Denominations] 7. (i) Issue Date: [*] (ii) Interest Commencement Date: [*] 8. Maturity Date: [Specify date or (for Floating Rate Notes) Interest Payment Date falling in or nearest to the relevant month and year] 9. Interest Basis: [[*] per cent. Fixed Rate] [[Specify reference rate] +/- [*] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Other (specify)] (further particulars specified below) 10. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency] [Partly Paid] [Instalment] [Other (specify)] [(N.B. If the Final Redemption Amount is less than 100 per cent. of the nominal value, the Notes will constitute derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation No. 809/2004 will apply and the Issuer will prepare and publish a supplement to the Base Prospectus.)] 11. Change of Interest or Redemption/ [Specify details of any provision for convertibility of Payment Basis: Notes into another interest or redemption/payment basis] 12. Put/Call Options: [General Put Option] [Change of Control Put Option] [Call Option] [(further particulars specified below)] 13. [(i)] Status of the Notes: [Senior] [(ii)] [Date approval for issuance of Notes [*] [and [*], respectively] obtained: [(N.B. Only relevant where authorisation is required for the particular tranche of Notes)] 14. Method of distribution: [Syndicated/Non-syndicated]

201 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 15. Fixed Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Rate[(s)] of Interest: [*] per cent. per annum [payable [annually/semi- annually/quarterly/monthly/other (specify)] in arrear] (ii) Interest Payment Date(s): [*] in each year [adjusted in accordance with [specify Business Day Convention and any applicable Business Centre(s) for the definition of ‘‘Business Day’’]/not adjusted] (iii) Fixed Coupon Amount[(s)]: [*] per Calculation Amount (iv) Broken Amount(s): [[*] per Calculation Amount payable on the Interest Payment date falling [in/on] [*]] [Insert particulars of any initial or final broken interest amounts which do not correspond with the Fixed Coupon Amount[(s)]] (v) Day Count Fraction: [30/360 / Actual/Actual (ICMA/ISDA) / other] (vi) [Determination Dates: [*] in each year (insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon. N.B. only relevant where Day Count Fraction is Actual/ Actual (ICMA))] (vii) Other terms relating to the method of [Not Applicable/give details] calculating interest for Fixed Rate Notes: 16. Floating Rate Note Provisions: [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Interest Period(s): [*] (ii) Specified Interest Payment Dates: [*] (iii) First Interest Payment Date: [*] (iv) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/other (give details)] (v) Business Centre(s): [*] (vi) Manner in which the Rate(s) of [Screen Rate Interest is/are to be determined: Determination/ISDA Determination/other (give details)] (vii) Party responsible for calculating the [*] Rate(s) of Interest and Interest Amount(s) (if not the Calculation Agent): (viii) Screen Rate Determination: – Reference Rate: [*] – Interest Determination Date(s): [*] – Relevant Screen Page: [*] (ix) ISDA Determination: – Floating Rate Option: [*] – Designated Maturity: [*] – Reset Date: [*]

202 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (x) Margin(s): [+/-][*] per cent. per annum (xi) Minimum Rate of Interest: [*] per cent. per annum (xii) Maximum Rate of Interest: [*] per cent. per annum (xiii) Day Count Fraction: [*] (xiv) Fall back provisions, rounding [*] provisions, denominator and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: 17. Zero Coupon Note Provisions: [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Amortisation Yield: [*] per cent. per annum (ii) Any other formula/basis of [*] determining amount payable: 18. Index Linked Interest Note/other variable- [Applicable/Not Applicable] linked interest Note Provisions (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Index/Formula/other variable: [give or annex details] (ii) Party responsible for calculating the [*] Rate(s) of Interest and/or Interest Amount(s) (if not the [Agent]): (iii) Provisions for determining Coupon [*] where calculated by reference to Index and/or Formula and/or other variable: (iv) Interest Determination Date(s): [*] (v) Provisions for determining Coupon [*] where calculation by reference to Index and/or Formula and/or other variable is impossible or impracticable or otherwise disrupted: (vi) Interest Period(s): [*] (vii) Specified Interest Payment Dates: [*] (viii) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/other (give details)] (ix) Business Centre(s): [*] (x) Minimum Rate of Interest: [*] per cent. per annum (xi) Maximum Rate of Interest: [*] per cent. per annum (xii) Day Count Fraction: [*] 19. Dual Currency Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Rate of Exchange/method of [give details] calculating Rate of Exchange: (ii) Party, if any, responsible for [*] calculating the principal and/or interest due (if not the [Agent]):

203 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS (iii) Provisions applicable where [*] calculation by reference to Rate of Exchange impossible or impracticable: (iv) Person at whose option Specified [*] Currency(ies) is/are payable:

PROVISIONS RELATING TO REDEMPTION 20. Call Option [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Optional Redemption Date(s): [*] (ii) Optional Redemption Amount(s) of [*] per Calculation Amount each Note and method, if any, of calculation of such amount(s): (iii) If redeemable in part: (a) Minimum Redemption Amount: [*] per Calculation Amount (b) Maximum Redemption Amount: [*] per Calculation Amount (iv) Notice period: [*]

21. General Put Option: [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Optional Redemption Date(s): [*] (ii) Optional Redemption Amount(s) of [*] per Calculation Amount each Note and method, if any, of calculation of such amount(s): (iii) Notice period: [*]

22. Change of Control Put Option: [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Put Date: [*] (ii) Change of Control Redemption [*] per Calculation Amount Amount: (iii) Put Period: [*]

23. Final Redemption Amount of each Note: [*] per Calculation Amount In cases where the Final Redemption [If the Final Redemption Amount is linked to an Amount is Index Linked or other variable- underlying reference or security, the Notes will linked: constitute derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation No. 809/2004 will apply and the Issuer will prepare and publish a supplement to the Prospectus which shall constitute a supplementary prospectus pursuant to Prospectus Rule 3-4 and Section 87G of the FSMA.] (i) Index/Formula/variable: [give or annex details] (ii) Party responsible for calculating the [*] Final Redemption Amount (if not the [Agent]):

204 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS (iii) Provisions for determining Final [*] Redemption Amount where calculated by reference to Index and/or Formula and/or other variable: (iv) Determination Date(s): [*] (v) Provisions for determining Final [*] Redemption Amount where calculation by reference to Index and/ or Formula and/or other variable is impossible or impracticable or otherwise disrupted: (vi) Payment Date: [*] (vii) Minimum Final Redemption Amount: [*] per Calculation Amount (viii) Maximum Final Redemption Amount: [*] per Calculation Amount 24. Early Redemption Amount Early Redemption Amount(s) per [*] Calculation Amount payable on redemption for taxation reasons or on event of default or other early redemption and/or the method of calculating the same (if required or if different from that set out in the Conditions):

GENERAL PROVISIONS APPLICABLE TO THE NOTES 25. Form of Notes: Bearer Notes: [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes in the limited circumstances specified in the Permanent Global Note]. [Temporary Global Note exchangeable for Definitive Notes on [*] days’ notice] [Permanent Global Note exchangeable for Definitive Notes in the limited circumstances specified in the Permanent Global Note] Registered Notes: [Global Note Certificate exchangeable for Individual Note Certificates on [*] days’ notice/at any time/in the limited circumstances specified in the Global Note Certificate] [Note: The exchange upon notice at any time options as specified above and in the Conditions should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 6 includes language to the following effect: [‘‘EUR50,000 and integral numbers of EUR1,000 in excess thereof up to and including EUR99,000]. 26. Financial Centre(s) or other special [Not Applicable/give details. Note that this provisions relating to payment dates: paragraph relates to the date and place of payment, and not interest period end dates, to which sub-paragraphs 15(ii), 16(v) and 18(ix) relate] 27. Talons for future Coupons or Receipts to [Yes/No. If yes, give details] be attached to Definitive Notes (and dates on which such Talons mature):

205 c101680pu070 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS 28. Details relating to Partly Paid Notes: [Not Applicable/give details] amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences (if any) of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment: 29. Details relating to Instalment Notes: [Not Applicable/give details] amount of each instalment, date on which each payment is to be made: 30. Redenomination, renominalisation and [Not Applicable/See Annex] reconventioning provisions: 31. Consolidation provisions: [Not Applicable/The provisions [in Condition [*]] apply] 32. Other final terms: [Not Applicable/give details] (When adding any other final terms consideration should be given as to whether such terms constitute a ‘‘significant new factor’’ and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.)

DISTRIBUTION 33. (i) If syndicated, names of Managers: [Not Applicable/give names] (ii) Stabilising Manager(s) (if any): [Not Applicable/give name] 34. If non-syndicated, name of Dealer: [Not Applicable/give name] 35. U.S. Selling Restrictions: [Reg S Compliance Category: TEFRA C/TEFRA D/not applicable] 36. Additional selling restrictions: [Not Applicable/give details]

[PURPOSE OF FINAL TERMS These Final Terms comprise the final terms required for issue and admission to trading on the [specify relevant regulated market] of the Notes described herein pursuant to the U.S.$[*] Global Medium Term Note Programme of Transnet Limited].

RESPONSIBILITY The Issuer accepts responsibility for the information contained in these Final Terms. [[*] has been extracted from [*]. The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by [*], no facts have been omitted which would render the reproduced information inaccurate or misleading].

Signed on behalf of the Issuer:

By: ______Duly authorised

By: ______Duly authorised

206 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS PART B – OTHER INFORMATION

1. LISTING (i) Admission to trading: [Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market] with effect from [*]] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market] with effect from [*].] [Not Applicable.] (ii) Estimate of total expenses related to [*] admission to trading:

2. RATINGS Ratings: The Notes to be issued have been rated: [S & P: [*]] [Moody’s: [*]] [[Other]: [*]] (The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)

3. [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE [ISSUE/OFFER] Need to include a description of any interests, including conflicting ones, that are material to the issue/ offer, detailing the persons involved and the nature of the interest. May be satisfied by the inclusion of the following statement:

‘‘So far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer’’.]

4. [REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES] [(i) Reasons for the offer: [*] (See [‘‘Use of Proceeds’’] wording in Prospectus – if reasons for offer different from making profit and/ or hedging certain risks will need to include those reasons here.)] [(ii)] Estimated net proceeds: [*] (If proceeds are intended for more than one use will need to split out and present in order of priority. If proceeds insufficient to fund all proposed uses state amount and sources of other funding.) [(iii)] Estimated total expenses: [*] [Include breakdown of expenses.] (Only necessary to include disclosure of net proceeds and total expenses at (ii) and (iii) above where disclosure is included at (i) above.)]

5. [Fixed Rate Notes only – YIELD Indication of yield: [*] Calculated as [includes details of method of calculation in summary form] on the Issue Date. As set out above, yield is calculated as at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.]

207 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS 6. [Index Linked or other variable-linked Notes only – PERFORMANCE OF INDEX/FORMULA/ OTHER VARIABLE AND OTHER INFORMATION CONCERNING THE UNDERLYING] Need to include details of where past and future performance and volatility of the index/ formula/other variable can be obtained. Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained. Where the underlying is not an index need to include equivalent information. Include other information concerning the underlying required by Paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.]* [(When completing this paragraph, consideration should be given as to whether such matters described constitute ‘‘significant new factors’’ and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.)] The Issuer [intends to provide post-issuance information [specify what information will be reported and where it can be obtained]] [does not intend to provide post-issuance information].*

7. [Dual Currency Notes only – PERFORMANCE OF RATE[S] OF EXCHANGE Need to include details of where past and future performance and volatility of the relevant rate[s] can be obtained.]

8. OPERATIONAL INFORMATION ISIN: [*] Common Code: [*] CUSIP Number: [*] Any clearing system(s) other than [Not Applicable/give name(s) and number(s) [and Euroclear Bank S.A./N.V., Clearstream address(es)]] Banking, socie´te´ anonyme and/or DTC and the relevant identification number(s): Delivery: Delivery [against/free of] payment Names and addresses of initial Paying and [*] Transfer Agent(s): Names and addresses of additional Paying [*] and Transfer Agent(s) (if any):

* Required for derivative securities to which Annex XII to the Prospectus Directive Regulation applies.

208 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS GENERAL INFORMATION

1. Listing: The listing of the Notes on the Official List will be expressed as a percentage of their nominal amount (exclusive of accrued interest). It is expected that each Tranche of the Notes which is to be admitted to the Official List and to trading on the Market will be admitted separately as and when issued, subject only to the issue of one or more Certificates in respect of each Tranche. The listing of the Programme in respect of the Notes is expected to be granted on or about 28 January 2010. Prior to official listing and admission to trading, however, dealings will be permitted by the London Stock Exchange in accordance with its rules. Transactions on the Market will normally be effected for delivery on the third working day after the day of the transaction. However, unlisted Notes may be issued pursuant to the Programme. 2. Authorisations: The Issuer has obtained all necessary consents, approvals and authorisations in connection with the establishment of the Programme. The establishment of the Programme was authorised by a resolution of the Board of Directors of the Issuer passed on 18 June 2009. The Issuer has obtained or will obtain from time to time all necessary consents, approvals and authorisations in connection with the issue of the Notes and the performance of its obligations under the Notes. 3. Significant/Material Change: There has been no material adverse change in the prospects of the Issuer or the Issuer and its subsidiaries (taken as a whole) since 31 March 2009 nor, since 30 September 2009, any significant change in the financial or trading position of the Issuer or of the Issuer and its subsidiaries (taken as a whole). 4. Legal and Arbitration Proceedings: Neither the Issuer nor any of its subsidiaries has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) which may have or has had during the 12 months preceding the date of this Base Prospectus a significant effect on the financial position or profitability of the Issuer or the Group. 5. Clearing Systems: The Notes have been accepted for clearance through the Euroclear, Clearstream, Luxembourg and/or DTC systems (which are the entities in charge of keeping the records). The appropriate Common Code, the ISIN and/or the CUSIP Number (and, where applicable, the identification number, together with any further appropriate information, for any other relevant clearing system) for each Series of Notes will be specified in the relevant Final Terms. The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium. The address of Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, L-1855 Luxembourg. The address of the DTC is 55 Water Street, New York, NY 10041. The address of any alternative clearing system will be specified in the relevant Final Terms. 6. Bearer Notes: Each Bearer Note with an original maturity of more than one year issued in compliance with the D Rules, Receipt, Coupon and Talon will bear the following legend: ‘‘Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code of 1986, as amended’’. 7. Issue Price: The issue price and the amount of the relevant Notes will be determined, before filing of the relevant Final Terms of each Tranche, based on the prevailing market conditions. The Issuer does not intend to provide any post-issuance information in relation to any issues of Notes. 8. Documents Available: For so long as Notes may be issued pursuant to this Base Prospectus, the following documents will be available, during usual business hours on any weekday (Saturdays and public holidays excepted), for inspection at the office of the Issuer: (i) the Agency Agreement (which includes the form of the Notes, Receipts, Coupons, Talons and Certificates); (ii) the Dealer Agreement; (iii) the Deed of Covenant; (iv) the constitutional documents of the Issuer;

209 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS (v) the Consolidated Financial Statements of the Issuer at and for the three years ended 31 March 2009, 2008 and 2007 and the Interim Consolidated Financial Statements of the Issuer at and for the six months ended 30 September 2009 and 2008; (vi) each Final Terms (save that Final Terms relating to a Note which is neither admitted to trading on a regulated market within the EEA nor offered in the EEA in circumstances where a Prospectus is required to be published under the Prospectus Directive will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Issuer and the Fiscal Agent as to its holding of Notes and identity); (vii) a copy of this Base Prospectus together with any Supplement to this Base Prospectus or further Prospectus; and (viii) the most recently prepared memorandum containing the disclosure requirements of the Commercial Paper Regulations published in Government Notice 2172 in Government Gazette 16167 of 14 December 1994 under section 90 of the South African Banks Act, 1990 to the extent they are applicable. This Base Prospectus and each Final Terms for Notes that are listed on the Official List and admitted to trading on the Market will be published on the website of the Regulatory News Service operated by the London Stock Exchange at www.londonstockexchange.com/prices- and-news/prices-news/home.htm. 9. Financial Statements: Copies of the Issuer’s Consolidated Financial Statements and the Interim Consolidated Financial Statements may be obtained, and copies of the Agency Agreement will be available for inspection, at the specified offices of each of the Paying Agents during normal business hours, so long as any of the Notes is outstanding. 10. Auditors: The Consolidated Financial Statements of the Issuer have been audited without qualification for the years ended 31 March 2009, 2008 and 2007 by Deloitte & Touche, independent auditors, The Woodlands, 20 Woodlands Drive, Woodmead 2196, Republic of South Africa. Deloitte & Touche has given, and not withdrawn, its written consent to the inclusion of its auditors’ report in this Base Prospectus in the form and content in which it is included. For the purposes of Prospectus Rule 5.5.4R(2)(f) Deloitte & Touche has authorised the contents of its auditors’ report referred to above as part of this Base Prospectus, has stated that it is responsible for that report and has declared that it has taken all reasonable care to ensure that the information contained in that report is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in this Base Prospectus in compliance with Annex IX item 1.2 in Appendix 3 to the Prospectus Rules. A written consent under the Prospectus Rules is different from a consent filed with the US Securities and Exchange Commission under Section 7 of the Securities Act. As the Notes have not and will not be registered under the Securities Act, Deloitte & Touche has not filed a consent under Section 7 of the Securities Act. 11. Registered and Telephone Number: Transnet Limited’s registered number is 1990/000900/06. Transnet Limited’s telephone number is +27 11 308 2600.

210 c101680pu070Proof18:26.1.10B/LRevision:0OperatorDavS INDEX TO FINANCIAL STATEMENTS

Audited Consolidated Financial Statements for Financial Year 2009, 2008 and 2007 Independent auditors’ report...... F-2 Consolidated balance sheets...... F-3 Consolidated income statements...... F-4 Consolidated statement of recognised income and expense ...... F-5 Reconciliation of movement in reserves...... F-6 Consolidated cash flow statements ...... F-7 Notes to the consolidated financial statements ...... F-8

Unaudited condensed consolidated financial statements for the six month periods ended 30 September 2009 and 2008 ...... F-120 Unaudited condensed consolidated statements of financial position...... F-120 Unaudited condensed consolidated statements of income...... F-121 Unaudited condensed consolidated statements of comprehensive income ...... F-122 Unaudited condensed consolidated statement of changes in equity...... F-123 Unaudited condensed consolidated statements of cash flows ...... F-123 Notes to the unaudited condensed consolidated financial statements ...... F-124

F-1 c101680pu080Proof18:26.1.10B/LRevision:0OperatorDavS INDEPENDENT AUDITORS’ REPORT

To the Board of Directors Transnet Limited Johannesburg, South Africa

We have audited the accompanying consolidated financial statements of Transnet Limited and subsidiaries (the ‘‘Company’’), which comprise the consolidated balance sheets as at 31 March 2009, 2008 and 2007, and the consolidated income statements, consolidated statements of recognised income and expenses, consolidated reconciliations of movement in reserves and consolidated cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used, and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at 31 March 2009, 2008 and 2007, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. As discussed in Note 8, the accompanying consolidated financial statements as of and for the years ended 31 March 2008 and 2007 have been restated.

Deloitte & Touche Registered Auditors

Per T Kalan Partner 26 January 2010

Deloitte Place The Woodlands 20 Woodlands Drive Woodmead 2199

National Executive: GG Gelink Chief Executive AE Swiegers Chief Operating Officer GM Pinnock Audit DL Kennedy Tax & Legal and Risk Advisory L Geeringh Consulting L Bam Corporate Finance CR Beukman Finance TJ Brown Clients & Markets NT Mtoba Chairman of the Board CR Qually Deputy Chairman of the Board

A full list of partners and directors is available on request

F-2 c101680pu080 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Transnet Limited

Consolidated balance sheets as at 31 March

31 March 2008 2007 2009 Restated Restated Note R million R million R million Assets Non-current assets Property, plant and equipment 19 96,459 78,256 53,908 Investment properties 20 5,961 4,515 3,223 Intangible assets 21 431 326 207 Investments in associates and joint ventures 22 24 48 47 Derivative financial instruments 24 178 533 321 Long-term loans and advances 25 77 90 123 Other investments and long-term financial assets 23 287 452 460

103,417 84,220 58,289

Current assets Inventories 26 2,589 2,319 1,798 Trade and other receivables 27 5,503 4,074 3,992 Derivative financial instruments 24 335 412 5,658 Other short-term investments 23 436 550 204 Cash and cash equivalents 28 5,880 5,980 3,847 Assets classified as held-for sale 32 374 1,131 3,570

15,117 14,466 19,069

Total assets 118,534 98,686 77,358

Equity and liabilities Capital and reserves Issued capital 33 12,661 12,661 12,661 Reserves 45,673 38,300 24,035

Attributable to the equity holder 58,334 50,961 36,696

Minority interests - - 122 Non-current liabilities Post-retirement benefit obligations 34 2,324 2,181 2,422 Long-term borrowings 29 29,758 16,890 17,535 Derivative financial instruments 24 18 453 240 Long-term provisions 35 2,509 1,989 1,605 Deferred taxation liabilities 18 8,589 6,695 1,726

43,198 28,208 23,528

Current liabilities Trade payables and accruals 30 6,491 6,988 5,875 Short-term borrowings 29 7,255 8,382 7,615 Current taxation liability 854 803 502 Derivative financial instruments 24 109 113 165 Short-term provisions 35 2,279 2,533 2,376 Bank overdrafts 28 - 22 26 Liabilities directly associated with assets classified as held-for-sale 32 14 676 453

17,002 19,517 17,012

Total equity and liabilities 118,534 98,686 77,358

The accompanying notes form an integral part of these consolidated financial statements.

F-3 Transnet Limited

Consolidated income statements for the three years ended 31 March 2009

31 March 2008 2007 2009 Restated Restated Note R million R million R million Continuing operations Revenue 9 33,592 30,091 26,899 Net operating expenses excluding depreciation and amortisation 11 (20,392) (17,281) (16,232)

Profit from operations before depreciation, amortisation and items listed below 13,200 12,810 10,667 Depreciation and amortisation 12 (4,779) (3,798) (2,952)

Profit from operations before the items listed below 8,421 9,012 7,715 Impairment of assets 16 (324) (153) (232) Post-retirement benefit obligation (costs)/income 15 (436) 686 (218) Dividends received - 122 36 Fair value adjustments 13 941 1,416 2,462

Profit before income/(loss) from associates and joint ventures and finance costs 8,602 11,083 9,763

Income/(loss) from associates and joint ventures 22 82 (59) 2 Finance costs 17 (2,233) (2,692) (2,472) Finance income 10 267 761 185

Profit before taxation 6,718 9,093 7,478 Taxation 18 (1,674) (2,642) (1,742)

Profit for the year after taxation from continuing operations 5,044 6,451 5,736

Discontinued operations (Loss)/profit from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments 32 (516) (1,921) 921

Profit for the year 4,528 4,530 6,657

Attributable to equity holder 4,528 4,526 6,640 Attributable to minority interests - 4 17

The accompanying notes form an integral part of these consolidated financial statements.

F-4 Transnet Limited

Consolidated statements of recognised income and expenditure for the three years ended 31 March 2009

At 31 March 2008 2007 2009 Restated Restated R million R million R million Gains on revaluations Net realisation of the equity accounted non-distributable reserves relating to V&A Waterfront Holdings (Pty) Ltd - - (119) Net gain on revaluation of port facilities 3,506 13,622 963 Net gain on revaluation of pipeline networks 657 324 658 Decommissioning provision adjustment relating to Transnet Pipelines* 193 (103) - Net gain on revaluation of land, buildings and structures 67 58 - Gain/(loss) on revaluation of other investments 23 (5) 72

Total gains on revaluations before taxation** 4,446 13,896 1,574

Taxation effect from rate change - 182 - Taxation effect of revalued items (1,124) (3,994) (43)

Net gains on revaluation reserves 3,322 10,084 1,531

Net movement on foreign currency translation reserves (22) 51 (36)

Actuarial (loss)/gain related to post-retirement benefit obligations - Actuarial loss on the Transport Pension Fund: Transnet Sub-Fund (208) (362) (167) - Actuarial loss on the Transnet Second Defined Pension Fund (191) (638) 1,646 - Actuarial gains on the Transnet Top Management Pension Fund 3 27 4 - Actuarial loss on the Transnet Workmen’s Compensation Act Pensioners (93) (43) - - Actuarial loss on the Transnet Black Widows’ Pension Fund - (3) 3 - Actuarial (loss)/gains on the Transnet SATS Pensioners medical benefits (117) 204 134 - Actuarial (loss)/gains on the Transnet employees medical benefits (20) 145 87

(626) (670) 1,707 Taxation effect from rate change - 41 - Taxation effect of net actuarial losses/(gains) 175 192 (495)

Net actuarial (loss)/gains on post-retirement benefit obligations (451) (437) 1,212

Net income recognised directly in equity 2,849 9,698 2,707 Transferred from other reserves - - (857) Transferred (from)/to accumulated profit (4) 41 857 Profit for the year 4,528 4,530 6,657

Total recognised income for the year 7,373 14,269 9,364

Attributable to equity holder 7,373 14,265 9,347 Attributable to minority interests - 4 17

7,373 14,269 9,364

* Relates to the decommissioning provision raised directly in equity pertinent to Transnet Pipelines. ** Includes R4 million in 2009 that is transferred into distributable reserves (2008: nil, 2007: nil).

The accompanying notes form an integral part of these consolidated financial statements.

F-5 Transnet Limited

Reconciliation of movement in reserves for the three years ended 31 March 2009

Foreign currency Actuarial Accumu- Issued Revaluation reserve gains and lated Minority capital reserves translation losses Other profit Total interests Total R million R million R million R million R million R million R million R million R million Opening balances as at 1 April 2006 14,710 5,623 28 2,070 1,106 5,861 29,398 113 29,511 Shares redeemed (2,049) - - - - - (2,049) - (2,049) Total recognised income and expenditure as previously reported - 1,574 (36) 1,707 - 7,387 10,632 17 10,649 Investment properties adjustment - - - - - 52 52 - 52 Borrowing costs adjustment - - - - - 71 71 - 71 Taxation effect of the above adjustments - - - - - (26) (26) - (26) Impairment of Viamax (Pty) Limited - - - - - (365) (365) - (365) Taxation effect of items recorded in equity - (190) - (495) - - (685) - (685) Dividends paid ------(8) (8) Transfers into distributable reserves - - - - (857) 857 - - -

Opening balance as at 1 April 2007 as previously reported 12,661 7,007 (8) 3,282 249 13,837 37,028 122 37,150 Borrowing costs adjustment - - - - - 38 38 - 38 Deferred taxation adjustment - 147 - - - - 147 - 147 Decommissioning and environmental adjustment - - - - - (703) (703) - (703) Taxation effect of the above adjustments - - - - - 186 186 - 186

Restated opening balances as at 1 April 2007 12,661 7,154 (8) 3,282 249 13,358 36,696 122 36,818

Total recognised income and expenditure as previously reported - 13,937 51 (519) - 4,307 17,776 4 17,780 Restatements Deferred taxation adjustments - - - - - (63) (63) - (63) Borrowing costs adjustments - - - - - 16 16 - 16 Fair value foreign exchange adjustment - - - - - 64 64 - 64 Pension fund adjustment - - - (151) - 151 - - - Decommissioning and environmental provision adjustment - - - - - 110 110 - 110 Capital work in progress adjustment - - - - - 50 50 - 50 Taxation effect of the above adjustments - - - - - (109) (109) - (109) Taxation effect of items recorded in equity as previously reported - (3,812) - 191 - - (3,621) - (3,621) Taxation adjustment restatement - - - 42 - - 42 - 42 Minorities repurchased ------(126) (126) Transfers into distributable reserves - (41) - - - 41 - - -

Restated opening balances at 1 April 2008 12,661 17,238 43 2,845 249 17,925 50,961 - 50,961 Total recognised income and expenditure - 4,442 (22) (626) - 4,528 8,322 - 8,322 Transfers into distributable reserves - 4 - - - (4) - - - Taxation effect of items recorded in equity - (1,124) - 175 - - (949) - (949)

Balances at 31 March 2009 12,661 20,560 21 2,394 249 22,449 58,334 - 58,334

The accompanying notes form an integral part of these consolidated financial statements.

F-6 Transnet Limited

Consolidated cash flow statements for the three years ended 31 March 2009

2008 2007 2009 Restated Restated R million R million R million

Cash generated from operations (see Note 41) 13,498 13,159 13,578 Changes in working capital (see Note 41) (2,647) 273 133

Cash generated from operations after working capital changes 10,851 13,432 13,711 Finance costs (2,996) (2,782) (2,791) Finance income 269 768 304 Taxation paid (703) (928) (1,961) Settlement of post-retirement benefit obligations (317) (227) (453) Derivatives raised and settled 296 24 139 Dividends paid to minorities - - (8)

Cash flows from operating activities 7,400 10,287 8,941

Replacements to property, plant and equipment (8,498) (8,729) (8,176) Expansions - property, plant and equipment (10,884) (7,051) (3,498) Additions to intangible assets (27) (34) (108) Borrowing costs capitalised (764) (303) (90) Proceeds on the disposal of investment property 7 - - Proceeds on the disposal of property, plant and equipment 222 519 315 Proceeds on the disposal of intangible assets - 11 3 Net proceeds on the disposal of subsidiaries/division 135 878 (1,922) C-Class preference shares redeemed - 5,622 - Proceeds on the disposal of associates - 47 1,854 Minorities acquired - (150) - Dividend income 19 9 36 Acquisition of associates (6) (1) (4) Net loans to subsidiaries and associates 426 (69) 4 Net (payments)/receipts of long-term loans and advances (7) 1,291 522 Decrease/(increase) in other investments 293 (290) 719

Cash flows used in investing activities (19,084) (8,250) (10,345)

Borrowings raised 30,479 8,952 6,465 Borrowings repaid (18,892) (8,943) (2,796)

Cash flows from financing activities 11,587 9 3,669

Net (decrease)/increase in cash and cash equivalents (97) 2,046 2,265 Cash and cash equivalents at the beginning of the year 6,002 3,956 1,691

Total cash and cash equivalents at the end of the year 5,905 6,002 3,956

Cash and cash equivalents at the end of the year 5,880 5,958 3,821 Disclosed as assets held-for-sale 25 44 135

Cash flows from discontinued operations Cash flows from operating activities 36 634 995 Cash flows used in investing activities (193) (466) (374) Cash flows from/(used in) financing activities 154 (376) 198

Net (decrease)/increase in cash and cash equivalents from discontinued operations (3) (208) 819

The accompanying notes form an integral part of these consolidated financial statements.

F-7 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

1. General information Transnet Limited ("Transnet" or "Transnet Ltd" or the "Company") is a company domiciled in South Africa. The consolidated financial statements for the three years ended 31 March 2009 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group’s interest in associates and joint ventures. Transnet Limited is responsible for the operation of South Africa’s freight transportation system according to world-class standards and as an integral part of the overall economy. Transnet Limited is a freight transport company that aims to provide efficient, safe, reliable and cost-effective services in line with industry standards. Transnet seeks to promote economic growth in South Africa by providing Transnet’s customers with access to integrated logistics solutions and creating transport capacity ahead of demand. Substantially all of Transnet’s business and its revenues are generated in South Africa. Over the past four years, Transnet Limited has transformed from a diversified conglomerate into a focused operator of ports, rail and pipelines in South Africa. Activities have been grouped along major transport modes, with central support services grouped under one unifying brand. Transnet is currently organised into five core business divisions: Transnet Freight Rail, Transnet Rail Engineering, Transnet National Ports Authority, Transnet Port Terminals and Transnet Pipelines. Transnet Freight Rail (Freight Rail) is focused on transporting bulk and containerised freight along its 20,824 kilometre route rail network, of which 1,500 kilometres comprises heavy haul export lines. During Financial year 2009, Freight Rail transported approximately 177 million tonnes of freight for export and domestic customers. Its main business lines are the coal line, iron-ore export channel and the general freight business. Transnet Rail Engineering (Rail Engineering) consists of eight product focused business units which provide services ranging from refurbishment, conversion and upgrades, to the manufacturing of rail related rolling stock. Whilst this division is largely focused on supporting Freight Rail, it now also boasts a growing external client base. Transnet National Ports Authority (National Ports Authority) is responsible for the safe, efficient and effective economic functioning of the national ports system, which it manages in a landlord capacity. National Ports Authority is also a provider of port infrastructure and marine services at all seven fully operational commercial ports in South Africa, and will provide the same services for the Ngqura when it become fully operational. Transnet Port Terminals (Port Terminals) manages 16 cargo terminal operations situated across seven South African ports (including the Port of Ngqura). It provides cargo handling services for container, dry bulk, break-bulk and automotive cargoes. Port Terminals is gearing itself to operate the Port of Ngqura when the terminal is commissioned in 2009. Transnet Pipelines (Pipelines) transports a range of petroleum products and gas through 3,000 kilometres of underground pipelines traversing five provinces, thereby ensuring the secure supply of petroleum products in the country. 2. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). 3. Basis of preparation The consolidated financial statements of the Group ("financial statements") are presented in South African Rands, rounded to the nearest million.

F-8 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

3. Basis of preparation (continued) The financial statements are prepared on the historical cost basis, except for the following assets and liabilities that are stated at their fair value: unlisted investments, derivative financial instruments, financial instruments held for trading, financial instruments classified as available-for-sale, investment properties and non-current assets, which are classified as held-for-sale. Certain classes of property, plant and equipment are carried at revalued amounts. The accounting policies have been applied consistently by Group entities. 4. Summary of significant accounting policies Revenue Recognition Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amounts of revenue can be reliably measured. Revenue is net of value added taxation. Transportation and other related services Revenue from transportation and other related services is recognised by reference to the stage of completion of transactions at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due and associated costs. Rental income Revenue arising from the rental of property is recognised on a straight-line basis over the term of the lease in accordance with the substance of the relevant agreements. Lease incentives granted are recognised as an integral part of the total rental income. Construction contracts Construction contracts represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity. Construction work in progress is presented as part of trade and other receivables in the balance sheet. If payments received from customers exceed the income recognised, then the difference is presented as deferred income in the balance sheet. As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognised in profit or loss in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed to in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable in the period in which they are incurred. An expected loss on a contract is recognised immediately in the income statement. Expected revenues and costs pertinent to a contract can change in terms of a variation order. Variation orders are negotiated with customers and upon consensus, the variation order is executed. Dividend income Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established, which in the case of quoted securities is usually the ex-dividend date.

F-9 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Finance income Finance income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset’s net carrying amount. Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all suspensive conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset on a straight- line basis. Transactions giving rise to adjustments to revenue/purchases The Group accounts for cash discounts and rebates received (given) as follows: • In the case of the Group as a purchaser, cash discounts and rebates received are estimated upfront and deducted from the cost of inventories purchased; and

• In the case of the Group as a seller, cash discounts and rebates given are estimated upfront and deducted from the amount of revenue recognised.

Where extended payment terms are granted by the Group, whether explicitly or implicitly, the effect of the time value of money is taken into account irrespective of other factors such as the cash selling prices of the goods. Taxation Income taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current taxation The charge for current taxation is the amount of income taxes payable in respect of the taxable profit for the current period and any adjustment to taxation payable in respect of previous years. It is calculated using taxation rates that have been enacted or substantially enacted by the balance sheet date. Deferred taxation Deferred taxation is provided using a balance sheet liability method on all temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and their taxation bases. The following temporary differences are not provided for: • the initial recognition of goodwill;

• the initial recognition of assets and liabilities (other than in a business combination), which affect neither accounting nor taxable profit or loss; and

• differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities and is calculated using the taxation rates that have been enacted or substantively enacted at the balance sheet date.

F-10 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Deferred taxation is charged or credited in the income statement except where it relates to items charged or credited directly to equity, in which case the deferred taxation is also dealt with in equity. A deferred taxation asset is recognised to the extent that it is probable that future taxable profits will be available to be utilised against the associated unused taxation losses and deductible temporary differences. Deferred taxation assets are reduced to the extent that it is no longer probable that the related taxation benefit will be realised. Deferred taxation liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and joint ventures, except where the Group is able to control the timing of the reversal of the temporary differences and it is probable that it will not reverse in the foreseeable future. Deferred taxation assets and liabilities are off-set when they relate to income taxes levied by the same taxation authority and the Group has the legal right to and intends to settle its current taxation assets and liabilities on a net basis. Secondary taxation on companies (STC) STC is provided in respect of the expected dividend payments net of STC credits and is recognised as a taxation charge in the year in which the dividend is declared. STC credits on dividends received are recorded as deferred taxation assets in the period that they arise limited to the reserves available for distribution. The STC asset is only recognised to the extent that it is likely that it will be settled through the payment of dividends.

Basis of consolidation Subsidiaries Subsidiaries (including special purpose entities, such as trusts) are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Typically, this will be where the Group has more than 50% of the voting power. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. The consolidated financial statements include the results of the Company and its subsidiaries, from the effective dates of acquisition to the effective dates of disposal. The purchase method of accounting in terms of IFRS 3: Business Combinations is applied to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured, initially, at their fair values at the acquisition date, irrespective of the extent of any minority interest. Non-current assets acquired in a business combination that are classified as held-for-sale are measured in accordance with IFRS 5: Non-current Assets Held-for-Sale and Discontinued Operations and are measured at the lower of carrying value and fair value less costs to sell. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is recognised directly in the income statement. The interest of the minority shareholders is stated at the minority’s proportion of the fair value of the assets, liabilities and contingent liabilities recognised. On subsequent disposal of a subsidiary, the profit or loss on disposal is the difference between the selling price and the lower of the fair value less cost to sell and carrying value of the net assets and liabilities disposed of. On disposal, the amount attributed to goodwill is included in the determination of the profit or loss on disposal.

F-11 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Special purpose entities are consolidated when the substance of the relationship between the Group and the special purpose entity indicates that it is controlled by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies of the Group. Associates (equity accounted investees) Associates are entities over which the Group is in a position to exercise significant influence, but not control or joint control of the financial and operating policies. Investments in associates are equity accounted in the consolidated financial statements for the period in which the Group exercises significant influence, except when the investment is classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held-for-Sale and Discontinued Operations. In terms of IFRS 5, the investment in the associate will be recognised and measured at the lower of carrying value and fair value, less costs to sell. Significant influence is presumed in instances where the Group has an equity stake greater than 20% but less than 50% in an entity. Equity accounted income represents the Group’s proportionate share of the post-acquisition profits of these entities and the share of taxation thereon. Losses incurred by associates (including impairment losses where such indications exist) are brought to account in the consolidated financial statements until the investment in such associates is written down to a nominal value. Thereafter, losses are accounted for only insofar as the Group is committed to providing financial support to such associates. The carrying amount of such investments is reduced to recognise any decline in the value of the investment. Long-term loans to associates, which in fact are part of the long-term investment, are treated as a part of the investment in the associates. The excess of cost of the acquisition over the fair value of the associate’s net assets is recorded as goodwill. Goodwill is included in the carrying value of the investment and is assessed for impairment as part of the investment. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is recognised directly in the income statement. The Group’s interest in an associate is carried in the balance sheet at an amount that reflects its share of the cost, post-acquisition reserves, plus goodwill, less an impairment loss, if applicable. Where the Group transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred. Joint ventures (equity accounted investees) A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. Joint venture agreements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interest in jointly controlled entities using the equity method except when the investment is classified as held-for-sale, in which case it is accounted for in accordance with IFRS 5: Non-current Assets Held-for-Sale and Discontinued Operations.

F-12 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Equity accounted income represents the Group’s proportionate share of the post-acquisition profits of these entities and the share of taxation thereon, net of the Group’s proportionate share of intergroup profits. Losses incurred by joint ventures (including impairment losses where such indications exist) are brought to account in the consolidated financial statements until the investment in such joint ventures is written down to a nominal value. Thereafter, losses are accounted for only insofar as the Group is committed to providing financial support to such joint ventures. The carrying amount of such investments is reduced to recognise any decline in the value of the investment. The excess of the cost of the acquisition over the fair value of the joint venture’s net assets is recorded as goodwill. Goodwill is included in the carrying value of the investment and is assessed for impairment as part of the investment. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is recognised directly in the income statement. Where the Group transacts with a joint venture of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant joint venture, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred.

Foreign currency Functional and presentation currencies Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are prepared in South African rands, which is the Company’s functional currency and the Group’s presentation currency. Foreign currency transactions Transactions in currencies other than the entity’s functional currency are defined as foreign currency transactions. Transactions in foreign currencies are translated at exchange rates ruling on transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange ruling at the balance sheet date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rates ruling at the original transaction date. Non-monetary assets and liabilities that are carried at fair value denominated in the foreign currency are translated into South African rands at the exchange rate ruling when the fair value was determined. Exchange differences are recognised in profit or loss in the period in which they arise except for: • Exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency borrowings.

• Exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below for hedging accounting policies).

• Exchange differences on monetary items receivable from or payable to a foreign operating entity for which a settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of net investment.

F-13 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Financial statements of foreign entities

The financial statements of foreign entities are translated into South African rands as follows: • Assets and liabilities, at rates of foreign exchange ruling at the balance sheet date.

• Revenue and expenses at rates approximating the foreign exchange rates ruling at the dates of the transactions or appropriate average rates.

• Goodwill and fair value adjustments arising on acquisition, at rates of foreign exchange ruling at balance sheet date.

• Equity at historical rates.

Any foreign exchange differences arising on translation are recognised as a separate component of equity. Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges are taken to the translation reserve. On disposal, such translation differences are recognised in the income statement as part of the gain or loss on disposal. Inventories Inventories are stated at the lower of cost and estimated net realisable value. Net realisable value represents the estimated selling price in the ordinary course of business, less all estimated costs of completion and selling. Cost is determined as follows: • Raw materials and consumable stores are stated at weighted average cost.

• Manufactured goods and work in progress are stated at weighted average cost valued at raw material cost, plus direct labour cost, and an appropriate portion of related manufacturing overhead cost, based on normal capacity.

Write-downs to net realisable value and inventory losses are expensed in the period in which the write-downs or losses occur. Property, plant and equipment Recognition and measurement Port operating assets, pipeline networks and port infrastructure assets are carried at revalued amounts. Revaluations are carried out every three years and appropriate indices are applied in the intervening periods to ensure that the assets are carried at fair value at the balance sheet date. Revaluation surpluses that arise are taken directly to the revaluation surplus in equity, except to the extent that they reverse a revaluation decrease for the same asset previously recognised as an expense, in which case the surplus is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of an asset is charged as an expense to the extent that it exceeds the balance, if any, held in the asset’s revaluation surplus relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus in the revaluation reserve is transferred to retained earnings. Cost includes expenditure that is directly attributable to the acquisition of the asset and borrowing costs which are capitalised to qualifying assets (see borrowing costs).

F-14 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Assets under construction, including capital work in progress, are stated at cost, less any impairment losses where the recoverable amount of the asset is estimated to be lower than its carrying amount. The cost of self- constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads. Firm commitments on hedge accounted transactions are included in capital work in progress (see derivative instruments and hedging). Where components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment and depreciated separately over their respectful useful lives. Property, plant and equipment are stated at cost, or revalued amounts, less accumulated depreciation where appropriate and any accumulated impairment losses. Spare parts, stand-by and servicing equipment held by the Group are classified as property, plant and equipment if they are expected to be used in more than one period. If not, they are classified as inventory. Spare parts and servicing equipment that can be used only in connection with a specific item of property, plant or equipment are also accounted for as property, plant and equipment. Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as expenses as incurred. Exchangeable units, such as aircraft engines, are classified as property, plant and equipment. Costs of major repair and overhauls of those units are capitalised as separate components. Depreciation Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Land and assets in the course of construction are not depreciated. All other property, plant and equipment, including capitalised leased assets, are depreciated on a straight-line basis over their estimated useful lives or the term of the lease, if shorter. Major repairs and overhauls are depreciated over the remaining useful life of the related asset or to the date of the next major repair or overhaul, whichever is shorter. Depreciation commences when the asset is available for its intended use by management. Owned assets are depreciated over the following periods: Rate per annum Years Buildings and structures 10 – 50 Buildings and structures components 5 – 25 Permanent way and works 3 – 95 Aircraft including components 8 – 15 Pipelines including network components 6 – 60 Port infrastructure 12 – 100 Floating craft including components 10 – 40 Port operating equipment including components 3 – 40 Rolling stock 30 – 60 – Rolling stock components 25 – 60 Containers 10 – 20 Motor vehicles 3 – 15 Machinery, equipment and furniture 3 – 50

F-15 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) The useful lives, depreciation method and the residual values of assets are reviewed and adjusted annually, if appropriate. Changes resulting from this review are accounted for prospectively as changes in estimates. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying value exceeds its estimated recoverable amount (refer Note 16). The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Investment properties Investment properties are properties held to either earn rentals and/or for capital appreciation and are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Gains and losses arising from changes in the fair value of investment properties are recognised in the income statement. Rental income from investment properties is accounted for in Revenue. Intangible assets

Software and licenses are assessed as having a finite life and are amortised on a straight-line basis over a period of three to five years. The estimated useful lives are as follows: Software - five years Licences - term of the licence

Software and licenses Software and licences are recognised and measured at cost less accumulated amortisation and any impairment losses. Costs associated with researching or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable software products controlled by the Group, and that will probably generate economic benefits beyond one year, as well as for which the costs can be measured reliably, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads. Costs relating to the acquisition of licences are capitalised and amortised on a straight-line basis when available for use in the manner intended by management. Research and development Research costs, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are charged against operating income as incurred. Development costs, arising from the application of the research findings to a plan or design for the production of new or substantially improved products and processes, are also charged against operating income as incurred, except where: • an asset is created that can be identified; • the development cost of the asset can be reliably measured; • the development is evaluated as being technically or commercially feasible; • the Group has sufficient resources to complete development; and • the Group can demonstrate how the development will generate future economic benefits in which event the development costs are capitalised. The expenditure capitalised includes the cost of materials, direct labour and an appropriate portion of overheads.

F-16 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Capitalised development costs are stated at cost less accumulated amortisation and any accumulated impairment losses. Development costs that have finite useful lives are amortised on a straight-line basis over their useful lives. Development costs with indefinite useful lives are not amortised, but tested at each balance sheet date for impairment. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodies in the specific asset to which it relates. All other expenditure is expensed as incurred. Impairment of tangible and intangible assets The carrying amounts of the Group’s tangible and intangible assets with a definite life, other than financial assets, investment property, non-current assets classified as held-for-sale, inventories and deferred taxation assets are reviewed at each balance sheet date to determine if there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where an asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. For goodwill and intangible assets that have an indefinite useful life, the recoverable amount is estimated at each balance sheet date, and whenever there is an indication that the asset may be impaired. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Calculation of recoverable amount The recoverable amount of an asset is the higher of the asset’s fair value less costs to sell and its value-in-use. Fair value less costs to sell is determined by ascertaining the current market value of an asset and deducting any costs relating to the realisation of the asset. In assessing the value-in-use, the expected future cash flows from the asset are discounted to their net present values using a post-taxation discount rate that reflects current market assessments of the time value of money and the risks specific to the asset and the business unit to which that asset belongs. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of goodwill is not reversed. In respect of other assets, a previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates previously used to determine the recoverable amount, to an amount not higher than the carrying amount that would have resulted, net of depreciation or amortisation, had no impairment loss been recognised. A reversal of an impairment loss is recognised as income immediately, if the impairment was recognised previously as an expense, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

F-17 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued)

Borrowing costs The Group capitalises borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, as part of the cost of that asset, until such time that the asset is substantially ready for its intended use. The Group identifies a qualifying asset as one that necessarily takes six months or more to get ready for its intended use. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the Group capitalises the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of these borrowings. To the extent that the qualifying asset is funded via general borrowings, the Group determines borrowing costs eligible for capitalisation by applying the weighted average cost of borrowings for the period, to the expenditures on that asset. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Assets classified as held-for-sale Non-current assets and disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Immediately before classification as held-for-sale, the measurement of the assets (and all assets and liabilities in a disposal group) is brought up-to-date in accordance with applicable IFRS. Then, on initial classification as held-for-sale, non-current assets and disposal groups are recognised at the lower of carrying amount and the fair value less costs to sell. Impairment losses on initial classification as held-for-sale are included in the income statement, even when the assets have been recorded at revalued amounts. The same applies to gains and losses on subsequent measurement. A gain or subsequent increase in fair value less costs to sell may not exceed the cumulative impairment losses previously recognised in terms of IFRS 5 or IAS 36. Non-current assets classified as held-for-sale are not depreciated or amortised whilst classified as such. A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resell.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held-for-sale, if earlier. A disposal group that is to be abandoned may also qualify as a discontinued operation. Post-retirement benefit obligations Transnet has three pension funds, two defined benefit pension funds and one defined contribution fund, namely the Transport Pension Fund: Transnet Sub-Fund, the Transnet Second Defined Benefit Fund and the Transnet Retirement Fund. Except for the Transnet Retirement Fund, which is a defined contribution fund, the IAS 19 Employee Benefits actuarial valuations for the funds are performed annually. The Transnet Pension Funds are governed by the Transnet Pension Fund Act, 62 of 1990, as amended. The Group also offers post-retirement medical benefits to its employees. Specific retirement benefits are offered to top management and under the Workmen’s Compensation Act.

F-18 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Defined contribution fund The Group’s contributions to the defined contribution fund are charged to the income statement during the year to which they relate. Defined benefit funds The benefit costs and obligations under the defined benefit funds are determined separately for each fund using the projected unit credit method. The benefit costs are recognised in the income statement. All actuarial gains and losses are recognised in the period in which they occur outside of the income statement, in the statement of recognised income and expenditure. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by the employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefit becomes vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. With regard to the defined benefit funds, the expected return on plan assets has been calculated based on market expectations at the beginning of the period for returns over the entire life of the related obligation, except where settlements have occurred during the year. In these instances the return on assets is adjusted immediately before settlement. The estimated return is determined in conjunction with actuaries and market analysts based on the underlying asset base within each fund. The post-retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost and reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognised past service cost plus the present value of available refunds and reductions in the future contributions to the plan. Post-retirement medical benefits Post-retirement medical benefits are provided by the Group to qualifying employees and pensioners. The medical benefit costs are determined through annual actuarial valuations by independent consulting actuaries using the projected unit credit method. Actuarial gains or losses are recognised in line with the policy described above. Short- and long-term benefits The cost of all short-term employee benefits, such as salaries, bonuses, housing allowances, medical and other contributions is recognised during the period in which the employee renders the related service. The Group’s net obligation in respect of long-term service benefits, other than pension plans and post- retirement medical benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it has demonstrated its commitment to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

F-19 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Leases Group as a lessee Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance lease liabilities and leased assets are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Benefits received as an incentive to enter into an operating lease are recorded on a straight-line basis over the lease term. Group as a lessor When assets are leased out under a finance lease, the present value of the lease payments, as well as the initial direct costs, are recognised as a lease receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return. Assets leased to third parties under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to the lessee) is recognised on a straight-line basis over the lease term. Sale and leaseback Where a sale and leaseback agreement is classified as a finance lease, any excess of the sale proceeds over the carrying values is deferred and recognised in the income statement over the period of the lease. Where a sale and leaseback agreement is classified as an operating lease and the transaction took place at fair value, any excess or deficit of the sale proceeds over the carrying values of the assets sold is recognised in the income statement in the year in which it arises. If the deficit is compensated for by future lease payments at below market price, the deficit is deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value shall be deferred and amortised over the period for which the asset is expected to be used. Determining whether an arrangement contains a lease The Group ensures that the following two requirements are met, in order for an arrangement transacted by the Group to be classified as a lease in terms of IAS 17: • Fulfilment of the arrangement is dependent on the use of an asset or assets, and this fact is not necessarily explicitly stated by the contract but rather implied; and • The arrangement conveys a right to use the asset, if one of the following conditions is met: – The purchaser has the ability or right to operate the asset or direct others to operate the asset, (while obtaining or controlling more than an insignificant amount of the output of the asset); or

F-20 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) – the purchaser has the ability or right to control physical access to the asset, (while obtaining more than an insignificant amount of the output of the asset); or – there is only a remote possibility that parties other than the purchaser will take more than an insignificant amount of the output of the asset, and the price that the purchaser will pay is neither fixed per unit of output nor equal to the current market price at the time of delivery. The Group’s assessment of whether an arrangement contains a lease is made at the inception of the arrangement, with reassessment occurring in the event of limited changes in circumstances as specified by IFRIC 4. Share capital

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of taxation, from the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are included in the cost of a business acquisition.

When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is deducted from equity. Repurchased shares are classified as treasury shares and presented as a deduction from the total equity until they are cancelled, reissued or disposed of.

Dividends are recognised as a liability in the period in which they are declared.

Provisions

Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation, as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-taxation rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Warranties

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

Restructuring

A provision for restructuring costs is recognised when the Group has a detailed formal plan for the restructuring and the Group has raised a valid expectation with those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. Restructuring provisions only include those direct expenditures which are necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Future operating costs are not provided for.

Environmental rehabilitation

In accordance with the Group’s environmental policy and applicable legal requirements, a provision for environmental rehabilitation in respect of clean-up costs is recognised when it meets the recognition requirements for provisions. The provision also includes the estimated rehabilitation costs for the historical contamination caused by asbestos as well as other environmental costs.

F-21 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

Other provisions

Other provisions, for example third-party claims, freight insurance, customer claims and leave pay provisions are recognised when they meet the recognition criteria per IAS 37: Provisions, Contingent Liabilities and Contingent Assets.

Segment disclosure

Segment disclosure is reported in terms of the requirements of IFRS 8 and is based on the components of the entity that management monitors in making decisions. Such components (operating segments) are identified on the basis of internal reports that the entity’s chief operating decision-maker reviews regularly in allocating resources to segments and in assessing their performance. Reportable segments are identified based on quantitative thresholds of revenue, profit or loss and assets.

Financial instruments Financial assets and financial liabilities are recognised on the balance sheet when the Group has become party to the contractual provisions of the instruments. Measurement Financial instruments are initially recognised at fair value plus transaction costs for a financial asset or financial liability that is not carried at fair value through profit or loss. Subsequent to initial recognition these instruments are measured as set out below. Recognition The Group applies trade date accounting for "regular way" purchases and sales and settlement date accounting is applied to the Transnet bonds. Financial instruments recognised on the balance sheet include: • Investments, including subsidiaries, jointly controlled entities and associates.

Trade and other receiveables Trade and other receivables, which generally have 30 to 90-day terms, are recognised and carried at amortised cost using the effective interest rate method. Allowances for irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The allowance accounts in respect of trade and loan receivables are used to record impairment losses unless the Group is satisfied that no recovery of the amount is possible. At that point, the amount is considered irrecoverable and is written off against the financial asset directly. The Group renegotiates terms for financial assets that would otherwise be past due or impaired in instances where the debtor provides evidence of ability to meet the obligations in terms of the renegotiated terms. The impact of renegotiated terms will be accounted for in the allowances for impairment amounts for these financial assets.

F-22 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued)

Long-term loans and advances Long-term loans and advances are measured at amortised cost, using the effective interest rate method, less any impairment recognised. Amortised cost is calculated by taking into account any transaction costs, and any discount or premium on settlement.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, and instruments which are readily convertible, within 90 days, to known amounts of cash and are subject to an insignificant risk of change in value. Cash and cash equivalents are measured at amortised cost. For the purposes of the consolidated cash flow statements, cash and cash equivalents include bank overdrafts.

Investments

After initial recognition, investments in the Group’s market-making portfolios in both bonds and money market instruments, which are classified as held for trading, as well as those classified as available-for-sale, are measured at fair value. Fair value is the market value (listed investments) or either the market price of a substantially similar investment or the present value of expected future cash flows of the net asset base (unlisted investments). Gains or losses on investments held for trading are recognised in the income statement. Other long-term investments that the Group is able to and intends to hold to maturity are subsequently measured at amortised cost using the effective interest rate method less any impairment losses recorded to reflect irrecoverable amounts. Amortised cost is calculated by taking into account any discount or premium on acquisition over the period to maturity. Listed investments are held at market value, which is determined with reference to quoted share prices from the stock exchange at the balance sheet date. Impairment of financial assets An assessment is made at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of the asset is determined and an impairment loss is recognised for the difference between the recoverable amount and the carrying amount as follows: • For financial assets held at either cost or amortised cost – the carrying amount of the asset is reduced to its discounted estimated recoverable amount (present value of estimated future cash flows, discounted at the original effective interest rate), and the resulting loss is recognised in the income statement for the period. Receivables with a short duration are not discounted. Assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. • For available-for-sale financial assets – where a loss has been recognised directly in equity as a result of a previous downward fair value adjustment, the cumulative net loss recognised in equity is transferred to the income statement for the period.

F-23 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) An impairment loss in respect of a held-to-maturity security or receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss has been recognised. An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed through profit or loss. An impairment loss in respect of a debt instrument classified as available-for- sale is reversed through profit and loss if its fair value increases and the increase can be objectively related to an event occurring after the impairment loss was originally recognised in profit or loss. Financial liabilities and equity Financial instruments issued by the Group are classified according to their substance and definitions of financial liabilities and equity. Financial liabilities After initial recognition, financial liabilities other than financial liabilities at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any transaction costs, and any discount or premium on settlement. Financial liabilities at fair value through profit or loss are measured at fair value and the resultant gains and losses are included in profit or loss. Buy-backs on bonds are performed on a FIFO basis. Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less related transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

Financial liabilities designated as at fair value through profit or loss The financial liabilities designated as fair value through profit or loss represent a percentage of the Transnet bonds that otherwise would have been classified as financial liabilities measured at amortised cost. Transnet makes a market in its bonds to ensure that the bonds remain attractive to investors. Positions in Transnet bonds are hedged with opposite positions in government or corporate bonds. These bonds are managed and their performance evaluated on a fair value basis in accordance with Transnet’s risk management strategy.

Trade payables and accruals

Liabilities for trade and other amounts payable which are settled within normal terms are stated at amortised cost.

Off-set

Where a legally enforceable right of off-set exists for recognised financial assets and financial liabilities, and there is an intention to settle the liability and realise the asset simultaneously, or settle on a net basis, all related financial effects are off-set.

F-24 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the value of the proceeds received, net of direct issue costs. Financial guarantees A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of the debt instrument. The Group recognises financial guarantee contracts initially at fair value. Subsequently these are recognised at the higher of:

• the amount determined in accordance with IAS 37: Provisions, Contingent Liabilities and Contingent assets; and

• the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with IAS 18: Revenue. Derivative instruments and hedging Both the Company and the Group use approved financial instruments, in particular forward exchange contracts, cross-currency swaps and interest rate swaps to hedge the financial risks associated with underlying business activities. All derivative financial instruments have been recorded at fair value with the resulting gains or loss taken to the income statement.

The Group uses derivative financial instruments, which include futures, forward exchange and currency option contracts, cross currency and interest rate swaps and interest rate options to hedge its exposures arising from operational, financing and investment activities. In accordance with its Treasury policy, the Group does not speculate in the trading of derivative instruments. Subsequent to initial recognition, derivative financial instruments are measured at fair value. The fair value changes are recognised directly in the income statement (even if the derivative is designated a hedging instrument (refer below). The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of the forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. The Group designates certain derivatives as hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges). At the inception of the hedge relationship, the relationship between the hedging instrument and the hedged item is documented, along with its risk management objectives and its strategy for undertaking various hedge transactions. At the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in the hedging relationship is highly effective in off-setting changes in fair values of cash flows of the hedged item. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged items that is attributable to the hedged risk. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to the income statement from that date.

F-25 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Derivatives embedded in other financial instruments or non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the income statement. The Group assesses whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the Group first becomes a party to the contract. Subsequent reassessment is only performed by the Group if there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract. Qualifying hedge relationships

The Group has fair value hedges in place. In designating financial instruments as qualifying hedge relationships, the Group has determined that it expects the hedge to be highly effective over the life of the hedging instrument. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in off-setting changes in fair values or cash flows of the hedged item. Derecognition Financial assets (or a portion thereof) are derecognised when the Group’s rights to the cash flow expire or when the Group transfers substantially all the risks and rewards related to the financial asset or when the entity loses control of the financial asset. On derecognition, the difference between the carrying amount of the financial asset and proceeds receivable and any prior adjustment to reflect fair value that had been reported in equity are included in the consolidated income statement. Financial liabilities (or a portion thereof) are derecognised when the obligations specified in the contract are discharged, cancelled or expired. On derecognition, the difference between the carrying value of the financial liability, including related unamortised costs, and settlement amounts paid is included in the consolidated income statement. Fair value methods and assumptions The fair value of financial instruments traded in an active financial market is measured at the applicable quoted prices. The fair value of financial instruments not traded in an active financial market, is determined using a variety of methods and assumptions that are based on market conditions and risks existing at balance sheet date, including independent appraisals and discounted cash flow methods. The carrying amounts of financial assets and liabilities with a maturity of less than six months are assumed to approximate their fair value. Gains and losses on financial instruments Net gains or net losses on: Financial liabilities designated as fair value through profit and loss represent fair value adjustments and arise as a result of the mark to market on the bonds using prices quoted on the Bond Exchange of South Africa, and as a result of derecognition. Interest is included in the fair value adjustments. These net gains or net losses are recognised directly in profit or loss for the period. Financial liabilities at amortised cost represent the amortisation of discounts on or premiums given/received, interest costs as well as any derecognition gains or losses on these liabilities. Gains or losses on liabilities held at amortised cost are recognised directly in profit or loss.

F-26 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

4. Summary of significant accounting policies (continued) Available for sale financial assets are determined with reference to quoted share prices on the stock exchange and represent fair value adjustments that are recognised directly in equity. Dividends are recognised in profit or loss when the right to receive payment is established. When a decline in the fair value of an available-for- sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in profit or loss even though the financial asset has not been derecognised. Loans and receivables represent impairment losses or reversal of impairment losses, interest earned on outstanding balances, as well as gains or losses recognised on derecognition of the asset. These gains or losses are recognised in profit or loss for the period. Financial assets and liabilities held for trading represent fair value adjustments and arise as a result of the mark to market of these instruments using market curves and as a result of derecognition. Interest is included in the fair value adjustments. These gains or losses are recognised directly in profit or loss for the period. Special purpose entities

Management has applied significant judgement in determining whether the substance of the relationship between the Group and a special purpose entity, SUBCO/Newshelf 697, indicates that the special purpose entity is controlled by the Group. Valuation of C-class Preference Share

The carrying value of the C-class Preference Share was arrived at after utilising a model developed by an external valuer. Management further applied judgment to the valuation obtained, taking into account factors pertaining to the realisation of the asset. The C-class Preference Share was redeemed by Newshelf 697 in September 2007 for total proceeds of R5,692 million. At this date, the carrying value of the C-class Preference Share was determined to be R5,500 million. The total proceeds of R5,692 million were made up of R5,622 million in cash, of which R122 million related to dividend income receivable, and R70 million in interest.

5. Key sources of estimation uncertainty and critical judgements in applying accounting policies The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of equity, assets and liabilities, revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of IFRS that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

F-27 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

5. Key sources of estimation uncertainty and critical judgements in applying accounting policies (continued) Property, plant and equipment (PPE)

Revaluation and impairment of PPE Port operating assets (Transnet Port Terminals), pipeline networks (Transnet Pipelines) and port infrastructure assets (Transnet National Ports Authority) are carried at revalued amounts. Formal revaluations are performed every three years by independent experts for all asset classes. Appropriate indices as determined by the independent experts continue to be applied in the intervening periods to ensure that the assets are carried at fair value at the balance sheet date. Fair value as determined by the independent experts is derived by applying internationally acceptable and appropriately benchmarked valuation techniques such as depreciated optimised replacement cost or modern equivalent asset valuation methods which are dependent on the asset class being revalued. All asset classes that are subject to a revaluation are tested against a discounted cash flow model to ensure that the carrying value of the assets is recoverable and exceeds its recoverable amount based on future cash flows. In addition the Group assesses at each reporting period whether there is any indication that an asset is impaired and if so, determines the recoverable amount of these assets. In Financial Year 2009 the global economic crisis lead to indicators of impairment being identified with respect to rail assets (Transnet Freight Rail) and consequently the recoverable amount of these assets were determined by using a discounted cash- flow model. As with all discounted cash flow models various assumptions were made in order to derive the net present value of future cash flows. These assumptions were arrived at after wide consultation with subject matter experts, both internal and external, benchmarked with peer companies, compared to international trends and adjusted for local market conditions. The more critical assumptions made were as follows: • Future cash flows were based on the five-year approved budgets, and operational plans and were amended for the latest available volume and pricing indicators as well as economic indicators.

• The rate used to discount cash flows for purposes of determining value in use was the individual operating divisions post-tax weighted average cost of capital (WACC) as this would ensure that the appropriate risk profile of the business was incorporated into the asset valuation.

• The WACC rates used were 11.86% for Transnet National Ports Authority, Transnet Pipelines 11.21% and Transnet Freight Rail 11.80% respectively.

• The cashflows utilised in the discounted cash-flow analysis were estimated into perpetuity based on varying terminal year growth rates after year 15. The elements considered in developing the discounting period for the operating divisions were the long-term use and asset life, long-term funding arrangements and long-term customer contracts.

Based on the above the carrying value of port infrastructure would have been adjusted from R25.1 billion to R40.2 billion (estimated replacement cost) at 31 March 2009, a proposed revaluation amount of R15.1 billion. However this amount was limited to R3.2 billion based on the recoverable amount of port infrastructure assets. In the case of all other classes of revalued assets their recoverable amount exceeded the carrying value. No impairment of rail assets was recorded as the recoverable amounts exceeded the carrying value of these assets.

F-28 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

5. Key sources of estimation uncertainty and critical judgements in applying accounting policies (continued) Sensitivities: Port Infrastructure Port Operating Pipeline Assets Assets Network Rail Assets

Carrying value of assets R28.2 billion R10.2 billion R4.5 billion R34.8 billion

WACC 0.5% impact* R1.4 billion R1.9 billion R300 million R1.2 billion

Revenue 0,5% impact* R196 million R370 million R62 million R1.5 billion

* Increasing WACC by 0.5% will result in the carrying value of assets decreasing by these values. The useful lives of property, plant and equipment are reviewed at each balance sheet date. The useful lives are estimated by management based on historic analysis, benchmarking and other available information. In Financial Year 2009, based on the recommendation of independent experts and international benchmarking the useful lives of certain port infrastructure assets were increased from 50 to 100 years.

Fair value assumptions – investment properties

The services of internal experts are used to arrive at the fair value of investment properties. Assumptions used in these valuations are in line with the Property Valuers Profession Act, 47 of 2000. The fair value of the Group’s investment properties was arrived at on the basis of valuations carried out at that date by Transnet Property valuers. The valuations, which conform to the Property Valuers Profession Act, 47 of 2000, were arrived at by capitalising the first year’s normalised net operating income at a market derived capitalisation rate. During the valuation of the properties, certain assumptions were made. The location and condition of the properties were also considered when performing the valuation. As a result a range of valuation parameters was used when applying the income capitalisation valuation method. The parameters used were as follows: 1. Capitalization rate 10% - 15%, 2. The rental income achieved per investment property, and 3. Period of the lease relevant to each investment property.

In limited circumstances where the income capitalisation method was not appropriate market related information was applied to determine the value of the respective investment property. Post-retirement benefit obligations

The Group provides several post-retirement benefit plans for its employees. The cost of providing benefits, including actuarial gains and losses and past service costs, is determined on a regular basis by independent actuaries and recognised in the appropriate accounting periods as required by IAS 19: Employee Benefits. The post-retirement benefit obligations recognised in the balance sheet represent the present value of the defined benefit obligations as adjusted for unrecognised past service costs and reduced by the fair value of plan assets.

F-29 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

5. Key sources of estimation uncertainty and critical judgements in applying accounting policies (continued) The main assumptions made in accounting for the Group’s post-retirement benefit plans relate to the mortality rate of plan members, the discount rate applied in discounting liabilities, the rate of return on assets and investments, and the rate of increase in the salaries of pensionable employees as well as other demographics. For each of these assumptions, there is a range of possible values and, in consultation with their actuaries, management decides which values most appropriately reflect the circumstances of the Group. Small changes in these assumptions can have a significant impact on the post-retirement obligation calculated under IAS 19. More details have been disclosed in more detail in note 34. Provisions Various assumptions are applied in arriving at the carrying value of provisions that are recognised pursuant to the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets. Management further relies on input from the Group’s lawyers in assessing the probability of matters of a contingent nature. In accordance with the Group’s environmental policy and applicable legal requirements, provisions for environmental rehabilitation in respect of clean-up costs are recognised when they meet the recognition requirements for provisions. The provision also includes the estimated rehabilitation costs for the historical contamination caused by asbestos as well as other environmental costs, which has been calculated by discounting the future expected costs, which have been determined by experts. Transnet engaged external consultants, to perform a countrywide asbestos risk assessment on areas affected by the historical spillage of asbestos and its related pollution liability. A number of factors were considered in determining the obligation which included: • The cost of remediation per running line kilometre;

• The cost of yard remediation per hectare;

• The estimated yard area to be remediated;

• Project administration and monitoring costs;

• Follow-up maintenance and inspection costs; and

• The costs estimated are for the removal and replacement of asbestos roof sheeting and cladding. The decommissioning and environmental liabilities provision for the dismantling and removal of an asset as a result of the requirements to restore the site on which the asset is located have been computed by discounting future cash flows, using a long-term inflation rate consistent with that used for the valuation of the pension funds and discount rates appropriate to the useful economic lives of the various assets being provided for. Provisions for restructuring costs in terms of strategic plans are recognised in the balance sheet when the Group has a present legal or constructive obligation, as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-taxation rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

F-30 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

6. Accounting Standards adopted in Financial Year 2009 During Financial Year 2009, the Group adopted IFRS 8 Operating Segments (IFRS 8). IFRS 8 replaces IAS 14 Segment Reporting ("IAS 14"). The core principle of IFRS 8 is that an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. IFRS 8 is a disclosure standard and consequently has not impacted reported results. There were no changes to the operating segments upon adoption of IFRS 8 compared to the operating segments disclosed under IAS 14. Furthermore, interpretations issued by the International Financial Reporting Interpretations Committee are applicable to the Group for the current period. The only one impacting the Group is IFRIC 14: IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction (IFRIC 14). The adoption of this interpretation has had an insignificant impact on the Group’s results.

F-31 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

7. Accounting Standards issued but not yet effective The following accounting standards have been issued but are not yet effective for the Group. This list has been obtained from the SAICA and IAS Plus websites.

Standard Annual periods beginning on or after IFRS 2 (AC 139) – Share-Based Payments 01-Jan-09 IFRS 3 (AC 140) - Business Combinations 01-Jul-09 IFRS 8 (AC 145) - Operating Segments 01-Jan-09* IAS 1 (AC 101) - Presentation of Financial Statements 01-Jan-09 IAS 23 (AC 114) - Borrowing Costs 01-Jan-09* IAS 27 (AC 132) - Consolidated and Separate Financial Statements 01-Jul-09 IAS 28 (AC 110) - Investments in Associates 01-Jul-09 IAS 31 (AC 119) - Interests in Joint Ventures 01-Jul-09 IAS 39 (AC 133) - Financial Instruments: Recognition and Measurement 01-Jul-09 IFRIC 13 - Customer Loyalty Programs 01-Jul-08 IFRIC 15 - Agreements for the Construction of Real Estate 01-Jan-09 IFRIC 16 - Hedges of a Net Investment in a Foreign Operation 01-Oct-08 IFRIC 17 - Distributions of Non-cash Assets to Owners 01-Jul-09 IFRIC 18 - Transfers of Assets from Customers Transfers received on or after 1 July 2009 On 22 May 2008, the International Accounting Standards Board (IASB) issued its latest Standard, titled Improvements to International Financial Reporting Standards 2008. IFRS 1 (AC 138) - First-time Adoption of International Financial Reporting Standards 01-Jan-09 IFRS 5 (AC 142) - Non-current Assets Held for Sale and Discontinued Operations 01-Jul-09 IAS 1 (AC 101) - Presentation of Financial Statements 01-Jan-09 IAS 16 (AC 123) - Property, Plant and Equipment 01-Jan-09 IAS 19 (AC 116) - Employee Benefits 01-Jan-09 IAS 20 (AC 134) - Accounting for Government Grants and Disclosure of Government 01-Jan-09 Assistance IAS 27 (AC 132) - Consolidated and Separate Financial Statements 01-Jan-09 IAS 28 (AC 110) - Investments in Associates 01-Jan-09 IAS 29 (AC 124) - Financial Reporting in Hyperinflationary Economies 01-Jan-09 IAS 31 (AC 119) - Interests in Joint Ventures 01-Jan-09 IAS 32 (AC 125) - Financial Instruments: Presentation 01-Jan-09 IAS 36 (AC 128) - Impairment of Assets 01-Jan-09 IAS 38 (AC 129) - Intangible Assets 01-Jan-09 IAS 39 (AC 133) - Financial Instruments: Recognition and Measurement 01-Jan-09 IAS 40 (AC 135) - Investment Property 01-Jan-09 IAS 41 (AC 137) - Agriculture 01-Jan-09 * Early adopted by Transnet.

F-32 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

7. Accounting Standards issued but not effective (continued)

The following amendments were issued by the IASB during March 2009. IFRS 7 – Financial Instruments: Disclosure 01-Jan-09 IAS 39 – Financial Instruments: Recognition and Measurement 01-Jul-09

IFRS 2 (AC 139) - Share-based Payment - Amendments resulting from April 2009 Annual 01-Jul-09 Improvements to IFRSs

IFRS 2 (AC 139) - Share-based Payment - Amendments relating to group cash-settled share- 01-Jul-10 based payment transactions

IFRS 5 (AC 142) - Non-current Assets Held for Sale and Discontinued Operations - 01-Jan-10 Amendments resulting from April 2009 Annual Improvements to IFRSs

IFRS 8 (AC 145) - Operating Segments - Amendments resulting from April 2009 Annual 01-Jan-10 Improvements to IFRSs

IAS 1 (AC 101) - Presentation of Financial Statements - Amendments resulting from April 01-Jan-10 2009 Annual Improvements to IFRSs

IAS 7 (AC 118) - Statement of Cash Flows - Amendments resulting from April 2009 Annual 01-Jan-10 Improvements to IFRSs

IAS 17 (AC 105) - Leases - Amendments resulting from April 2009 Annual Improvements to 01-Jan-10 IFRSs

IAS 36 (AC 128) - Impairment of Assets - Amendments resulting from April 2009 Annual 01-Jan-10 Improvements to IFRSs

IAS 38 (AC 129) - Intangible Assets - Amendments resulting from April 2009 Annual 01-Jul-09 Improvements to IFRSs

IAS 39 (AC 133) - Financial Instruments: Recognition and Measurement - Amendments 01-Jan-10 resulting from April 2009 Annual Improvements to IFRSs

F-33 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

8. Restatements of previously issued financial statements During the reporting and closing process relating to the preparation of the 31 March 2009 consolidated financial statements, the Company determined that it had certain errors in the application of its accounting policies. As a result, the Company has restated its consolidated financial statements for Financial Years 2008 and 2007 herein. The nature and effects of these restatements on the consolidated financial statements for Financial Years 2008 and 2007 are as follows: 31 March 31 March 2008 2007 Balance sheet R million R million

Equity attributable to equity holder as previously reported 51,183 37,028

(1)(2)(5)(6) Deferred taxation liabilities 221 333 (2)(3)(5)(6) Property, plant and equipment 142 12 (3) Current taxation liability (18) - (6) Long-term provisions (567) (677)

Net effect of restatements (222) (332)

Restatement equity attributable to equity holder 50,961 36,696

Income statement

Net profit attributable to equity holder, as previously reported 4,307 7,119

(1) Taxation (63) - (2) Finance costs 16 38 (3) Fair value adjustments 64 - (4) Post-retirement benefit obligation (costs)/income 151 - (5)(6) Net operating expenses excluding depreciation and amortisation 160 (700) (6) Depreciation and amortisation - (3)

Gross effect of restatements 328 (665) (2)(3)(4)(5)(6) Taxation effect of restatements (109) 186

Net effect of restatement on net profit attributable to equity holder 219 (479)

Restated net profit attributable to equity holder 4,526 6,640

(1) Income Taxes: In the prior year management estimated the split between taxable depreciable assets and non-taxable depreciable assets in respect of Transnet Pipelines assets for the purposes of calculating the deferred taxation liability. This split was reviewed in the current financial year, which resulted in a decrease in the proportion of taxation depreciable assets to non-taxation depreciable assets. Accordingly an adjustment was required in the prior year. Deferred taxation was duplicated on a finance arrangement in the prior year and was subsequently corrected. As a result, deferred taxation liabilities were lower by R84 million and R147 million in Financial Year 2008 and 2007 respectively, which resulted in an additional deferred taxation charge of R63 million being recognised in Financial Year 2008.

F-34 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

8. Restatements of previously issued financial statements (continued) (2) Borrowing Costs: In accordance with IAS 23, all borrowing costs incurred on qualifying assets should be capitalised to the cost of the qualifying asset. The Group incorrectly applied IAS 23 which resulted in an overstatement of finance costs and an understatement of the property, plant and equipment balance. Additionally, the misstatement of finance costs also affected the related taxation charges and corresponding profit for the year. The effect of this restatement resulted in a reduction in finance costs recognised in Financial Years 2008 and 2007 of R16 million and R38 million, respectively with a corresponding increase in the related deferred taxation charge of R4 million and R11 million for Financial Years 2008 and 2007, respectively. Additionally, this restatement generated an increase in property, plant and equipment of R54 million in Financial Year 2008 and R38 million in Financial Year 2007 with related increases in deferred taxation liabilities of R15 million and R11 million, respectively.

(3) The effects of changes in foreign exchange rates: An assessment of foreign exchange gains and losses on derivative financial instruments resulted in a restatement of fair value gains for Financial Year 2008. The financial impact of this restatement resulted in a reduction in the fair value gains in Financial Year 2008 of R64 million, an increase to property, plant and equipment of R64 million, a reduction in the current taxation charge of R18 million and a corresponding increase in the current taxation liabilities of R18 million.

(4) Employee Benefits: A reassessment of the manner in which transfers of members from the funds were treated resulted in a reduction of the actuarial gains and losses recognised in the statement of recognised income and expenditure for the 2008 Financial Year, of R151 million and a deferred taxation charge reduction of R42 million.

(5) Property, plant and equipment: In terms of an approved incentive bonus scheme, certain contractors that are engaged to construct assets were entitled to an incentive payment. This payment in terms of IAS 16 should have been recognised as part of the carrying value of the asset but was incorrectly expensed in Financial Year 2008. This misstatement resulted in an understatement of property, plant and equipment and an overstatement of net operating expenses excluding depreciation and amortisation in Financial Year 2008. Consequently, an adjustment of R50 million was recorded in Financial Year 2008 to property, plant and equipment with related increases in the deferred taxation charge and deferred taxation liabilities of R14 million and an adjustment of R50 million to net operating expenses excluding depreciation and amortisation.

(6) Provisions, contingent liabilities and contingent assets: The Group has had a legal obligation for the rehabilitation caused by asbestos contamination since the enactment of certain legislation in 1998, and accordingly a provision has been recorded for the estimated costs of the restoration. This restatement resulted in a reduction of R110 million in net operating expenses excluding depreciation and amortisation for Financial Year 2008 and an increase of R700 million in net operating expenses excluding depreciation and amortisation for Financial Year 2007, with a related deferred taxation charge for each financial year of R31 million and R197 million, respectively. Additionally, this resulted in a decrease in property, plant and equipment of R26 million in Financial Years 2008 and 2007 and an increase in long-term provisions of R567 million and R677 million for Financial Years 2008 and 2007 respectively, decreases in deferred taxation liabilities of R166 million and R197 million for Financial Years 2008 and 2007, respectively, and R3 million adjustment to depreciation and amortisation for Financial Year 2007.

F-35 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

9. Revenue 2008 2007 2009 Restated Restated R million R million R million

Rendering of services 31,382 28,369 25,610 Rental income 911 683 515 Finance income from lending activities 29 34 236 Construction contracts (refer note 31) 1,270 1,005 538

Continuing operations 33,592 30,091 26,899

10. Other income and expenses

2008 2007 2009 Restated Restated Dividend income R million R million R million

Dividends from associate - - 23 Dividend received on redemption of C - class preference share - 122 - Dividends from other investments - - 13 Discontinued operations - - -

Continuing operations - 122 36

2008 2007 2009 Restated Restated Finance income R million R million R million

Interest received on disposal of C-class preference share - 70 - Interest received - Loans and receivables 269 698 304

269 768 304 Discontinued operations (2) (7) (119)

Continuing operations 267 761 185

F-36 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

11. Net operating expenses excluding depreciation and amortisation 2008 2007 2009 Restated Restated R million R million R million

Accommodation and refreshments 314 169 94 Electronic data costs 417 419 809 Energy costs 3,144 2,564 2,524 Health and sanitation 200 148 129 Insurance 188 192 170 Maintenance 159 386 460 Managerial and technical consulting fees 988 1,014 765 Material costs 1,745 1,098 319 Operating leases 1,338 1,179 991 Personnel costs 9,440 7,938 7,663 Printing and stationery 60 53 46 (Profit)/loss on disposal of property plant and equipment (44) 60 (16) Profit on sale of interest in divisions/subsidiaries - (40) - Promotions and advertising 117 98 49 Security 399 323 262 Telecommunications 223 8 28 Transport 69 3 34 Other 1,635 1,669 1,905

Net operating costs excluding depreciation and amortisation from continuing operations 20,392 17,281 16,232

Included within other operationg costs are research and development costs of R46 million (2008: R84 million, 2007: R67 million). 2008 2007 2009 Restated Restated Operating lease charges R million R million R million

Aircraft 1 4 - Land, buildings and structures 610 568 590 Other 727 607 401

1,338 1,179 991

2008 2007 2009 Restated Restated Auditors’ remuneration R million R million R million

Group auditors Audit fees 57 49 39 Audit fees – prior year under provision/(over provision) 4 5 (2) Fees for other services 2 14 4 Expenses 1 1 3

Other auditors Audit fees 2 2 -

Continuing operations 66 71 44

Managerial and technical consulting fees 988 1,014 765

F-37 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

11. Net operating expenses excluding depreciation and amortisation (continued) 2008 2007 2009 Restated Restated R million R million R million Directors’ and executives’ emoluments Executive Directors 20 22 18 Non-Executive Directors 2 6 5 Senior Executives 65 63 32

87 91 55

12. Depreciation and amortisation

2008 2007 2009 Restated Restated R million R million R million

Depreciation and derecognition Depreciation – owned assets at historic cost Aircraft 9 63 42 Land, buildings and structures 353 311 304 Machinery, equipment and furniture 350 281 295 Permanent way and works 417 220 240 Pipeline networks 134 132 119 Port facilities 509 510 405 Rolling stock and containers 2,230 1,812 1,188 Vehicles 35 41 25

4,037 3,370 2,618

Depreciation – owned assets revalued portion Pipeline networks 112 111 118 Port facilities 451 231 126

563 342 244

Depreciation – leased assets at historic cost Aircraft - 10 25 Rolling stock and containers 48 35 16 Machinery, equipment and furniture 11 16 39 Permanent way and works 5 3 -

64 64 80

Total depreciation 4,664 3,776 2,942

F-38 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

12. Depreciation and amortisation (continued) 2008 2007 2009 Restated Restated R million R million R million

Continuing operations 4,664 3,704 2,871 Discontinued operations - 72 71

4,664 3,776 2,942

Amortisation of intangible assets (note 21) Software and licenses – continuing operations 115 94 81

Total depreciation and amortisation Continuing operations 4,779 3,798 2,952 Discontinued operations - 72 71

4,779 3,870 3,023

13. Fair value adjustments

2008 2007 2009 Restated Restated R million R million R million

Fair value adjustments Derivative fair value adjustments (145) 135 245 Revaluation of C-Class preference share - - 1,713 Fair value adjustment of investment property 1,376 1,151 561 Fair value adjustments to treasury bonds (9) (59) (86) Gains on hedging instruments 21 215 94 Other fair value adjustments (299) (52) (2)

Total fair value adjustments 944 1,390 2,525

Continuing operations 941 1,416 2,462 Discontinued operations 3 (26) 63

944 1,390 2,525

Reconciliation of fair value adjustments to note 24 Fair value adjustments as per above 944 1,390 2,525 Fair value adjustment of investment property (note 20) (1,376) (1,151) (561) Treasury bonds 9 59 - Fair value adjustments of firm commitments 408 101 86 Other realised fair value adjustments (19) (6) - Fair value adjustments relating to disposal groups classified as held-for-sale - - (69)

Fair value adjustments per note 24 (34) 393 1,981

F-39 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

14. (Loss)/profit on disposal of discontinued operations, net of taxation 2008 2007 2009 Restated Restated R million R million R million

Loss on sale of interest in freightdynamics - (298) - Loss on sale of interest in Viamax (Pty) Limited - (24) - Profit on sale of interest in VAE Perway (Pty) Limited - 6 - Loss on sale of interest in Equity Aviation (Pty) Limited - - (12) Profit on sale of interest in South African Airways (Pty) Limited* - - 938 Profit on sale of interest in V&A Waterfront Holdings (Pty) Limited 115 17 711 Loss on sale of interest in South African Airways Express (Pty) Limited (227) - - Loss on sale of interest in Shosholoza Meyl (71) - - Loss on sale of interest in Autopax Passenger Services (Pty) Limited (42) - - Taxation on disposal of discontinued operations (32) 33 (204)

Net (loss)/profit on disposal of discontinued operations (257) (266) 1,433

* Excluding the effects of the share buy back of R2,049 million. The total effect for the Group is a R1,011 million decrease in net equity.

15. Post-retirement benefit obligation cost 2008 2007 2009 Restated Restated R million R million R million

Transport Pension Fund (Formerly the Transnet Pension Fund) (182) (263) (34) Transnet Second Defined Benefit Fund (191) (638) 18 Top Management Pension Fund 7 11 9 Workmen’s Compensation Act Pensioners 25 18 18 Black Widows’ Pension Fund - 1 1 SATS Pensioners’ Post-retirement Medical Benefits 108 112 117 Transnet Employees Post-retirement Medical Benefits 64 67 81 SATS Pensioner’s Post-retirement Medical Subsidy 500 - - Other 105 - -

Net post-retirement benefit obligation cost 436 (692) 210

Continuing operations 436 (686) 218 Discontinued operations - (6) (8)

Net post-retirement benefit obligation cost 436 (692) 210

16. Impairment/(reversal of impairment) of assets 2008 2007 2009 Restated Restated R million R million R million

Property, plant and equipment 205 (1) 154 Loss-making subsidiaries and associates 3 1 - Loans and advances 20 - 31 Trade and other receivables 95 160 31

323 160 216 Discontinued operations - impairment/(reversal of impairment) 1 (7) 16

Continuing operations - impairment 324 153 232

F-40 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

16. Impairment/(reversal of impairment) of assets (continued) An entity is required to assess at each reporting period whether there is any indication that an asset is impaired and if so the recoverable amount of these assets must be determined. In Financial Year 2009 the global economic crisis lead to indicators of impairment being identified with respect to rail assets (Transnet Freight Rail), Port operating assets (Transnet Port Terminals), pipeline networks (Transnet Pipelines) and port infrastructure assets (Transnet National Ports Authority) and consequently the recoverable amount of these assets were determined by using a discounted cash flow model. As with all discounted cash flow models various assumptions were made in order to derive the net present value of future cash flows. These assumptions were arrived at after wide consultation with subject matter experts, both internal and external, benchmarked with peer companies, compared to international trends and adjusted for local market conditions. 17. Finance costs 2008 2007 2009 Restated Restated Financing costs R million R million R million

Finance costs Net foreign exchange losses/(gains) on translation 45 15 (32) (Premium)/discounts on bonds amortised (25) 242 303 Finance lease obligations 12 21 40 Interest cost - financial liabilities at amortised cost 2,984 2,761 2,751

Gross finance costs 3,016 3,039 3,062 Borrowing costs capitalised (764) (303) (90)

Finance costs 2,252 2,736 2,972 Discontinued operations (19) (44) (500)

Continuing operations 2,233 2,692 2,472

Financing costs comprise interest payable on borrowings calculated using the effective interest rate method, dividends on redeemable preference shares, amortisation of discounts on bonds and foreign exchange gains and losses, less amounts capitalised to qualifying assets.

F-41 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

18. Taxation Current taxation 2008 2007 2009 Restated Restated R million R million R million South African normal taxation - Current year 739 1,237 1,004 - Release of current tax provision - - 41 Deferred taxation - Current year 1,057 1,322 874 - Prior year (33) 122 (36) - Rate change - (18) - Secondary taxation on dividends - Current year - - 3 Capital gains taxation - Current year 15 - 150 Foreign taxation - Current year 7 5 7

1,785 2,668 2,043 Discontinued operations (111) (26) (301)

Continuing operations 1,674 2,642 1,742

Reconciliation of tax rate % % % Standard rate - South African normal taxation 28.00 29.00 29.00 Expenses/(income) not included for taxation purposes (2.81) (1.08) (8.07) Capital gains taxation 0.22 - - Exempt local dividends (secondary taxation on dividends) - - 0.04 Deferred taxation not provided - - 3.19 Rate change - (0.20) - Release of current tax provision - - 0.55 Adjustment to prior year deferred taxation charge (0.49) 1.34 (0.48) Assessed loss utilised - (0.94)

Effective rate of taxation 24.92 29.06 23.29

Continued operations 24.92 29.06 23.68 Discontinued operations (27.41) 1.37 24.63

Total effective rate of taxation for continuing and discontinuing operations 28.27 37.07 23.48

R million R million R million

Total estimated taxation losses - 608 552 Discontinued operations - (489) (95)

Continuing operations - 119 457

F-42 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

18. Taxation (continued) Deferred taxation 2008 2007 2009 Restated Restated R million R million R million Deferred taxation liabilities Opening balance 6,695 1,726 378 Income statement charge 1,024 1,426 838 Raised in reserves 949 3,802 510

Total deferred taxation liability 8,668 6,954 1,726 Effect of rate change recorded in equity - (223) - Disposal of division/subsidiaries - - - Transferred to liabilities directly associated with assets classified as held-for-sale (79) (36) -

8,589 6,695 1,726

Analysis of major categories of temporary differences Deferred taxation assets Provisions 1,351 970 1,271 Estimated taxation loss - 133 148 Post-retirement benefit obligation 650 608 702 Income received in advance 46 69 18 Capitalised lease liability 1,247 1,182 1,031 Derivatives - - 93 Revaluation of assets - 52 147 Other - 1 4

3,294 3,015 3,414

Deferred taxation liabilities Deferred expenditure 194 3 14 Property, plant and equipment 11,429 9,618 5,076 Future expenditure allowance 19 10 25 Doubtful debts 80 82 35 Other 161 - 56

11,883 9,713 5,206

Net deferred taxation liability (8,589) (6,698) (1,792) Deferred taxation assets not raised* - (33) (29) Transferred to liabilities directly associated with assets classified as held-for-sale - 36 95

Total deferred taxation liability (8,589) (6,695) (1,726)

Estimated taxation losses available for off-set against future taxable income - 608 552

* The subsidiaries have not raised deferred taxation assets in the current and prior year. The probability of there being sufficient taxable profit against which the deferred taxation asset can be utilised is uncertain. As the capital losses arising on the sale of SA Express (Pty) Limited and Autopax (Pty) Limited to the Government and PRASA respectively, will not be available for set off against capital gains realised on the sale of assets to non-Government third parties, the deferred taxation asset arising on the sales has not been recognised. No deferred taxation asset has been raised in respect of Secondary Tax on Companies credits available as they are unlikely to be utilised given the capital requirements of the company and the change in regime from Secondary Taxation on Companies to a Dividend Tax, from which the company is exempt.

F-43 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment Property, plant and equipment reconciliation at 31 March 2009 Land, buildings Machinery, Permanent Rolling Capital and equipment way and Pipeline Port stock and work in Group Aircraft structures and furniture works networks facilities containers Vehicles progress Total R million R million R million R million R million R million R million R million R million R million

Historical cost and revaluation 65 11,219 4,039 9,036 12,482 41,306 21,958 671 11,417 112,193 Accumulated depreciation (29) (1,966) (2,158) (2,535) (8,420) (11,026) (6,495) (418) - (33,047) Accumulated impairment - (201) (42) (20) (57) (527) - (1) (42) (890)

Restated opening net carrying value at 1 April 2008 36 9,052 1,839 6,481 4,005 29,753 15,463 252 11,375 78,256

Additions - 434 360 9 57 45 129 2 18,250 19,286 Disposals - (9) (3) (1) - (8) (110) (1) (35) (167) Depreciation (9) (350) (361) (317) (246) (960) (1,952) (35) - (4,230) Derecognition - (3) - (105) - - (326) - - (434) Revaluation - 67 - - 636 3,522 - - - 4,225 (Impairment)/reversal – historical cost and revaluation - 19 2 16 (25) 24 (216) - (25) (205) Transferred to intangible assets ------(193) (193) Transfers to non-current assets classified as held- for-sale - (106) (7) - - - (216) (1) (20) (350) Transfer (to)/from investment property - (85) ------(85) Transfers within categories - 27 (3) 1 (21) 1 - - (5) - Borrowing cost capitalised - 1 5 - - - - - 758 764 Release of firm commitment to income statement* ------(138) (138) Transfer from derivative assets and liabilities ------(270) (270) Transfer from capital work in progress to assets - 642 431 4,027 76 987 3,865 85 (10,113) -

(9) 637 424 3,630 477 3,611 1,174 50 8,209 18,203

Closing carrying value 27 9,689 2,263 10,111 4,482 33,364 16,637 302 19,584 96,459

F-44 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued) Land, buildings Machinery, Permanent Rolling Capital and equipment way and Pipeline Port stock and work in Aircraft structures and furniture works networks facilities containers Vehicles progress Total Group R million R million R million R million R million R million R million R million R million R million

Made up as follows: Historical cost and revaluation 65 12,120 4,672 12,961 13,365 47,499 24,874 728 19,651 135,935 Accumulated depreciation (38) (2,251) (2,374) (2,849) (8,801) (13,628) (8,143) (426) - (38,510) Accumulated impairment - (180) (35) (1) (82) (507) (94) - (67) (966)

Closing carrying value at 31 March 2009 27 9,689 2,263 10,111 4,482 33,364 16,637 302 19,584 96,459

* Provided the relevant hedge accounting conditions are met, when a firm commitment transaction is entered into to acquire property, plant or equipment that has been hedged, the initial carrying amount of that asset is adjusted to include the cumulative changes in the fair value of the firm commitment and recognised in profit or loss. This has been defined as "release of firm commitment to income statement". Gains and losses on the hedging instrument that were recognised in equity are taken to the initial cost or carrying amount of the asset (defined as "transferred from cash flow hedge").

F-45 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued) Property, plant and equipment reconciliation at 31 March 2008 Land, Machinery, Permanent Rolling buildings and equipment way and Pipeline stock and Capital work Group Aircraft structures and furniture works networks Port facilities containers Vehicles in progress Total R million R million R million R million R million R million R million R million R million R million

Historical cost and revaluation 1,123 9,937 3,533 7,830 10,376 21,485 17,715 585 9,524 82,108 Accumulated depreciation (536) (1,696) (1,991) (2,313) (6,648) (8,084) (5,415) (407) - (27,090) Accumulated impairment - (135) (41) - (153) (451) (127) (1) (202) (1,110)

Restated opening net carrying value at 1 April 2007 587 8,106 1,501 5,517 3,575 12,950 12,173 177 9,322 53,908

Current year movements Additions 217 534 446 319 10 235 261 - 13,596 15,618 Disposals (1) (10) (23) (11) - (40) (184) - (44) (313) Depreciation (73) (311) (297) (223) (243) (741) (1,490) (41) - (3,419) Derecognition ------(357) - - (357) Revaluation - 58 - - 324 13,568 - - - 13,950 (Impairment)/reversal – historical cost and revaluation - (88) (4) (20) 87 (37) 127 - (64) 1 Disposal of division - - (3) ------(3) Transferred to intangible assets ------(182) (182) Transfers to non-current assets classified as held- for-sale (727) 59 (111) - - 1 (295) (1) 1 (1,073) Transfer to investment property - (140) ------(140) Transfers with categories - 8 (8) - (5) - 67 - (62) - Borrowing cost capitalised - 1 1 - - 15 - - 286 303 Release of firm commitment to income statement* ------(37) (37) Transfer from derivative assets and liabilities ------Transfer from capital work in progress to assets 33 835 337 899 257 3,802 5,161 117 (11,441) -

(551) 946 338 964 430 16,803 3,290 75 2,053 24,348

Closing carrying value 36 9,052 1,839 6,481 4,005 29,753 15,463 252 11,375 78,256

F-46 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued) Land, Machinery, Permanent Rolling buildings and equipment way and Pipeline stock and Capital work Group Aircraft structures and furniture works networks Port facilities containers Vehicles in progress Total R million R million R million R million R million R million R million R million R million R million Made up as follows: Historical cost and revaluation 65 11,219 4,039 9,036 12,482 41,306 21,957 671 11,417 112,193 Accumulated depreciation (29) (1,966) (2,158) (2,535) (8,420) (11,026) (6,494) (418) - (33,047) Accumulated impairment - (201) (42) (20) (57) (527) - (1) (42) (890)

Closing carrying value at 31 March 2008 36 9,052 1,839 6,481 4,005 29,753 15,463 252 11,375 78,256

* Provided the relevant hedge accounting conditions are met, when a firm commitment transaction is entered into to acquire property, plant or equipment that has been hedged, the initial carrying amount of that asset is adjusted to include the cumulative changes in the fair value of the firm commitment and recognised in profit or loss. This has been defined as "release of firm commitment to income statement". Gains and losses on the hedging instrument that were recognised in equity are taken to the initial cost or carrying amount of the asset (defined as "transferred from cash flow hedge").

F-47 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued) Property, plant and equipment reconciliation at 31 March 2007 Land, Machinery, Permanent Rolling buildings and equipment and way and Pipeline stock and Capital work in Group Aircraft structures furniture works networks Port facilities containers Vehicles progress Total R million R million R million R million R million R million R million R million R million R million

Historical cost and revaluation 1,045 9,552 3,914 7,515 9,340 18,995 13,142 445 7,482 71,430 Accumulated depreciation (469) (1,447) (2,542) (2,096) (6,094) (7,296) (4,836) (374) - (25,154) Accumulated impairment - (300) (39) - (152) (442) (54) (1) (182) (1,170)

Restated opening net carrying value at 1 April 2006 576 7,805 1,333 5,419 3,094 11,257 8,252 70 7,300 45,106

Current year movements Additions 78 267 682 (48) (12) 48 513 1 9,568 11,097 Disposals - (33) (190) (6) - (110) (56) (1) (10) (406) Depreciation (67) (283) (319) (226) (237) (531) (839) (25) - (2,527) Derecognition - (21) (13) (14) - - (365) - - (413) Revaluation - - - - 662 1,072 - - - 1,734 (Impairment)/reversal – historical cost and revaluation - (19) (5) - - (9) (73) - (20) (126) Transferred to intangible assets - - (20) - - - (142) - (103) (265) Transfers to non-current assets classified as held- for-sale - (127) (126) - - (1) (198) - - (452) Transfer to investment property - 18 ------18 Transfers with categories - - - 52 - - 73 - (125) - Borrowing cost capitalised ------90 90 Release of firm commitment to income statement* ------Transferred from cash flow hedge - - - 52 - - - - - 52 Transfer from capital work in progress to assets - 499 159 288 68 1,224 5,008 132 (7,378) -

11 301 168 98 481 1,693 3,921 107 2,022 8,802

Closing carrying value 587 8,106 1,501 5,517 3,575 12,950 12,173 177 9,322 53,908

F-48 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued) Land, Machinery, Permanent Rolling buildings and equipment and way and Pipeline stock and Capital work in Group Aircraft structures furniture works networks Port facilities containers Vehicles progress Total R million R million R million R million R million R million R million R million R million R million Made up as follows: Historical cost and revaluation 1,123 9,937 3,533 7,830 10,376 21,485 17,715 585 9,524 82,108 Accumulated depreciation (536) (1,696) (1,991) (2,313) (6,648) (8,084) (5,415) (407) - (27,090) Accumulated impairment - (135) (41) - (153) (451) (127) (1) (202) (1,110)

Closing carrying value at 31 March 2007 587 8,106 1,501 5,517 3,575 12,950 12,173 177 9,322 53,908

* Provided the relevant hedge accounting conditions are met, when a firm commitment transaction is entered into to acquire property, plant or equipment that has been hedged, the initial carrying amount of that asset is adjusted to include the cumulative changes in the fair value of the firm commitment and recognised in profit or loss. This has been defined as "release of firm commitment to income statement". Gains and losses on the hedging instrument that were recognised in equity are taken to the initial cost or carrying amount of the asset (defined as "transferred from cash flow hedge").

F-49 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued) 2009 2008 2007 Restated Restated R million R million R million Aircraft

Included in aircraft are capitalised leased assets with a net carrying value of - 186 9 These capitalised aircrafts were encumbered as security for the repayment of lease commitments. Land, building and structures A register of land, buildings and structures is open for inspection at the Company. During the year, the Group transferred R85 million (2008: R140 million, 2007: R662 million) from property, plant and equipment to investment properties. The carrying values of these properties were fair valued in accordance with IAS 16. These properties ceased being owner occupied and consequently the fair value adjustments have been recognised in reserves. Rolling stock Included in rolling stock are locomotives that were leased and leased back. The locomotives are leased to a third party, refurbished and then leased to a financier who in turn leases the assets back to the Company. This has been treated as a structured loan. The loan is secured by lease agreements and a collateral covering bond over the refurbished locomotives. 2009 2008 2007 Restated Restated R million R million R million

Book value of refurbished locomotives which are encumbered 1,491 1,477 1,390

Carrying value of capitalised leased assets included in rolling stock 463 426 405 Pipeline networks An external revaluation was performed in the current year by an independent firm of professional valuers on the basis of the modern equivalent asset value. The current year’s revaluation resulted in a net increase of R636 million (2008: R324 million, 2007: R662 million) to the carrying value of the Group’s pipeline networks. 2009 2008 2007 Restated Restated R million R million R million

Historic cost carrying values of revalued pipeline assets 2,267 2,231 2,032 Port infrastructure assets

The estimated replacement cost of port infrastructure assets that are subject to revaluation amounts to R40.2 billion (2008: R38 billion, 2007: R11.7 billion) as determined by independent valuation experts, however the revaluation was limited to the present value of future discounted cash flows, amounting to R28.2 billion in the current year. 2009 2008 2007 Restated Restated R million R million R million

Historic carrying values of port infrastructure assets 11,345 10,168 7,614 Included in Port facilities are incumbered assets of R1,179 million (2008: R1,061 million, 2007: R525 million) as security for the repayment of the finance arrangement of these assets.

F-50 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

19. Property, plant and equipment (continued)

Useful lives and residual values

In the current year, based on the recommendation of independent experts and international benchmarking, the useful lives of certain port infrastructure assets were increased from 50 to 100 years, resulting in a decrease in depreciation of R142 million. 20. Investment properties 2009 2008 2007 Restated Restated R million R million R million

Fair value at the beginning of the year 4,515 3,224 2,662 Transferred from property, plant and equipment 85 140 - Recognised in income statement 1,376 1,151 561 Disposal (7) - - Transferred to assets held-for-sale (8) - -

Fair value at the end of the year 5,961 4,515 3,223

The gross property rental income earned by the Group from its investment properties, which are leased out under operating leases amounted to R911 million (2008: R683 million, 2007: R387 million). Direct operating expenses arising on the investment properties during the year amounted to R245 million (2008: R184 million, 2007: R169 million).

21. Intangible assets 2009 2008 2007 Restated Restated R million R million R million

Finite life intangible assets

Cost

Balance at the beginning of the year 829 623 600 Additions 27 34 6 Disposals (11) (4) (49) Transferred to assets classified as held-for-sale - (6) (36) Transfers in from property, plant and equipment 193 182 102

Balance at the end of the year 1,038 829 623

Accumulated amortisation and impairment

Balance at the beginning of the year (503) (416) (428) Disposals 11 4 48 Amortisation (115) (94) (81) Transferred to assets classified as held-for-sale - 3 25 Transfers in from property, plant and equipment - - 20

Balance at the end of the year (607) (503) (416)

F-51 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

21. Intangible assets (continued) 2009 2008 2007 Restated Restated R million R million R million

Carrying amount

At the beginning of the year 326 207 172

At the end of the year 431 326 207

Finite intangible assets relate to software and licenses.

22. Investments in associates and joint ventures 2009 2008 2007 Restated Restated R million R million R million

Balance at the beginning of the year 48 47 98 Acquisitions 6 1 4 Equity accounted earnings/(losses) 82 (59) 4 Dividends received (19) (9) - (Repayments)/advances of loans (90) 69 19 Impairments (3) (1) - Transferred to assets classified as held-for-sale - - (78)

Balance at the end of the year 24 48 47

Directors’ valuation of unlisted investments in associates and joint ventures 24 48 47

Total income/(loss) from associates and joint ventures Discontinued operations 82 (59) 4 Continuing operations - - (2)

82 (59) 2

Aggregated amounts relating to associates Assets - 837 691 Liabilities - (345) (285) Revenues - 1,552 1,356 Profit/(loss) before taxation - 119 (29) Income tax (expense)/credit - 37 12 Net profit/(loss) for the year - 82 (7) The aggregated amounts relating to associates in the table above relate to Arivia.kom (Pty) Limited which was impaired and disclosed as assets classified as held-for-sale at 31 March 2009.

F-52 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

22. Investments in associates and joint ventures (continued) List of associates and joint ventures* Interest of holding Accumulated Share of post- Principal activity Effective holding Cost company indebtedness impairment and losses acquisition reserves Total 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 % % R million R million R million R million R million R million R million R million R million R million Associates Arivia.kom (Pty) Ltd** IT service provider 42 42 214 214 - - 219 141 5 5 - 78 Commercial Cold Storage (Ports) (Pty) Ltd Storage and bondage 30 30 - - 1 1 - - 14 14 15 15 Comazar (Pty) Ltd Transport logistics 32 32 13 13 8 8 21 21 - - - - Mossel Bay Waterfront Property Development (Pty) Ltd† development and management 15 15 2 2 - - 2 2 - - - - Cape Town Bulk Storage (Pty) Ltd # Port operations 50 50 1 1 2 2 - - - 1 3 4 Belldev Properties (Pty) Ltd Port operations 50 50 ------AllPort Logistic Port operations ------Terminal (Ghana)+ - - - - RainProp (Pty) Ltd Property development and management 20 20 3 3 - - 3 - - (2) - 1 Gaborone container Terminal Container terminal 36 - 6 ------6 - Joint ventures Transpoint Properties (Pty) Ltd # Telecommunication 50 50 - - - 90 - 62 - (62) - 28

239 233 11 101 245 226 19 (44) 24 126 Investments in associates classified as held-for-sale (214) (214) - - (219) (141) (5) (5) - (78)

25 19 11 101 26 85 14 (49) 24 48

F-53 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

22. Investments in associates and joint ventures (continued) 2007 Interest of holding Share Effective company Provision for acquisition Associates and joint ventures* Principal activity holding Cost indebtedness losses reserves Total % R million R million R million R million R million Associates Arivia.kom (Pty) Ltd** IT service provider 42 214 - 141 5 78 VAE Perway (Pty) Ltd@ Refurbishment of Perway 35 6 - - 17 23 Commercial Cold Storage (Ports) (Pty) Ltd Storage and bondage 30 - 1 - 18 19 Comazar (Pty) Ltd Transport logistics 32 13 8 20 - 1 Mossel Bay Waterfront Development (Pty) Ltd † Property development and management 15 2 - 2 - - Cape Town Bulk Storage (Pty) Ltd # Port operations 50 1 - - 3 4 Belldev Properties (Pty) Ltd Property development and management 50 - - - - - AllPort Logistic Terminal (Ghana) + Port operations ------RainProp (Pty) Ltd Property development and management 20 2 - - (2) - Joint ventures Transpoint Properties (Pty) Ltd # Telecommunication 50 - 23 - - 23

238 32 163 41 148 Investments in associates classified as held-for-sale (220) - (141) (22) (101)

Total 18 32 22 19 47

* Incorporated in the Republic of South Africa, unless stated otherwise. ** Impaired and disclosed as assets classified as held-for-sale † Dormant and in the process of winding up. # Transnet does not have the power to govern the financial and operating policies of these associates. @ sold in October/November 2007.

F-54 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

23. Other investments and long and short term financial assets 2009 2008 2007 Restated Restated R million R million R million

Listed investments at market value 149 126 131 Other financial assets 138 326 329

Total long-term investments and long-term financial assets 287 452 460

Short-term portion of other investments including market making positions held-for- trading 436 550 204

Total short-term investments 436 550 204

24. Derivative financial instruments 2009 2008 2007 Restated Restated R million R million R million Derivative financial assets Opening balance 945 5,979 4,091 Income statement credit 85 761 1,954 Redemption of "C" class preference share - (5,500) - Transferred to property, plant and equipment (147) - - Derivative raised and settled (370) (295) (66)

Closing balance 513 945 5,979

Derivative financial liabilities Opening balance 566 405 561 Income statement debit/(credit) 119 368 (27) Transferred to property, plant and equipment (417) - - Derivatives raised and settled (141) (207) (129)

Closing balance 127 566 405

Comprise the following financial instruments: Non-current assets Forward exchange contracts 178 352 166 Cross-currency swaps and options - 181 147 Interest rate swaps and options - - 8

178 533 321

Current assets Forward exchange contracts 292 290 84 Cross-currency swaps and options 43 114 58 Interest rate swaps and options - 8 16 C-class preference share* - - 5,500

335 412 5,658

Total derivative assets 513 945 5,979

F-55 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

24. Derivative financial instruments (continued) 2009 2008 2007 Restated Restated R million R million R million Current liabilities Forward exchange contracts 93 111 77 Cross-currency swaps and options 16 2 88

109 113 165

Non-current liabilities Forward exchange contracts 11 258 45 Cross-currency swaps and options 7 195 195

18 453 240

Total derivative liabilities 127 566 405

Net income statement (credit)/debit (34) 393 1,981

* Included in the Group’s assets being an investment in a "C" class preference share which is owned by Newshelf 697 (Pty) Limited in Newshelf 664 (Pty) Limited. The share was subscribed for at a cost of R1,511 million as part of the sale process of the 309 million MTN Group Limited shares. The value of these preference shares moved in concert with movements in the MTN Group Limited’s share price in terms of a gain share redemption formula. The share was valued by a professional valuer in 2007. The shares were redeemed in the 31 March 2008 financial year for R5,692 million. The difference between the proceeds and the carrying value at 31 March 2008 has been disclosed in note 4. The effects of the fair valuation are disclosed in note 13. The Group entered into fair value hedges of the foreign exchange risk on firm commitments of the Group to imported items of equipment (i.e. locomotives and port equipment). The Group is settling the contract price of these items by making pre-determined progress payments (in foreign currency) to the relevant suppliers as specified milestones are achieved. At 31 March 2009, the Group held a series of forward exchange contracts as hedging instruments for this purpose. These hedges were assessed to be effective. The ineffective portion of the hedge has been recorded in the income statement. The fair values of these forward exchange contracts at 31 March were as follows: 2009 2008 2007 Restated Restated R million R million R million

Currency bought forward – Japanese yen – gain/(loss) 367 409 (36) Currency bought forward – Euros (loss)/gain (3) 217 49

The net fair value gain recognised in the income statement on these fair value hedges during the year was R22 million (2008: R48 million, 2007: R13 million). This net fair value gain comprised a loss of R201 million (2008: R435 million, 2007: R214 million) with respect to foreign exchange risk on the firm commitments, and a gain of R179 million (2008: R483 million, 2007: R201 million) on the forward exchange contracts.

F-56 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

24. Derivative financial instruments (continued) The nominal values of these forward exchange contracts at 31 March were as follows: 2009 2008 2007 Restated Restated R million R million R million

Currency bought forward – Rand

Japanese yen 2,407 2,080 2,139 Euros 987 983 501

3,394 3,063 2,640

Currency bought forward – foreign currency

Japanese yen 27,643 27,454 28,608 Euros 74 93 56

25. Long term loans and advances 2009 2008 2007 Restated Restated R million R million R million

Balance at the beginning of the year 90 123 2,019 Advances 11 37 772 Capitalised interest 29 34 - Repayments (33) (104) (1,294) Impairment (20) - (95) Transferred to non-current assets classified as held-for-sale - - (1,258) Less: Short-term portion transferred to trade and other receivables - - (21)

77 90 123

Comprising: Directors’ and managers’ loans Balance at the beginning of the year - 1 3 Repayments - (1) (2)

- - 1

Employee housing and other loans Balance at the beginning of the year 85 117 2,002 Advances 10 37 772 Capitalised interest 29 34 - Payments (33) (103) (1,252) Impairment (20) - (126) Transferred to non-current assets classified as held-for-sale - - (1,258) Less: Short-term portion - - (21)

71 85 117

Other loans and advances Balance at the beginning of the year 5 5 14 Advances 1 - - Repayments - - (40) Reversal of impairment - - 31

6 5 5

F-57 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

25. Long term loans and advances (continued) Included in Directors’ and managers’ loans are the following loans to senior executives: Capitalised Total Total Opening interest/ Total 2008 2007 balance advances Repaid 2009 Restated Restated R thousand R thousand R thousand R thousand R thousand R thousand

Mr S Gama 317 - (317) - 317 318 Mr T Morwe 146 - (146) - 146 226 Mr KXT Socikwa 7 - (7) - 7 209

470 - (470) - 470 753

These loans are secured and bear variable interest that is linked to the prime interest rate. The current rates are 15% to 16.5% and relate to housing loans. Housing loans are secured by first mortgage bonds over the related property and other guarantees. During the 2009 financial year these loans were repaid. 26. Inventories 2008 2007 2009 Restated Restated R million R million R million

At weighted average cost

Maintenance material 2,175 1,716 1,101 Consumables 91 105 86 Finished goods 51 70 164 Work in progress* 135 86 169 Provision for stock obsolescence (443) (417) (272)

2,009 1,560 1,248

At net realisable value

Maintenance material 631 852 547 Consumables 26 33 59 Provision for stock obsolescence (70) (82) (55)

587 803 551

Transferred to assets classified as held-for- sale (7) (44) (1)

2,589 2,319 1,798

* Included in work in progress are costs for construction contacts in progress.

F-58 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

26. Inventories (continued) 2008 2007 2009 Restated Restated Provisions for stock obsolescence: R million R million R million

At weighted average cost

Opening balance (417) (272) (335) Raised (45) (165) (186) Utilised 19 20 249

Provision for stock obsolescence (443) (417) (272)

At net realisable value

Opening balance (82) (55) (188) Raised (5) (33) (10) Utilised 17 6 143

Provision for stock obsolescence (70) (82) (55)

Total

Opening balance (499) (327) (523) Raised (50) (198) (196) Utilised 36 26 392

Provision for stock obsolescence (513) (499) (327)

27. Trade and other receivables 2009 2008 2007 Restated Restated R million R million R million

Trade receivables – net of allowances for credit losses 4,653 3,440 3,170 Prepayments and other amounts receivable 850 900 818 Short-term portion of loans and advances 1 2 180

5,504 4,342 4,168 Transferred to assets classified as held-for-sale (1) (268) (176)

5,503 4,074 3,992

F-59 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

27. Trade and other receivables (continued)

Reconciliation of allowance account for credit losses 2009 2008 2007 Restated Restated R million R million R million Low risk* Opening balance (3) (16) (15) Raised (4) - (3) Utilised 2 13 2

Closing balance (5) (3) (16)

Medium risk **

Opening balance (83) (48) (50) Raised (38) (35) (11) Utilised 2 - 13 Disposal 2 - -

Closing balance (117) (83) (48)

High risk *** Opening balance (125) (128) (127) Raised (53) (15) (21) Utilised 9 18 19 Transferred to assets held-for-sale - - 1

Closing balance (169) (125) (128)

Total provisions Opening balance (211) (192) (192) Raised (95) (50) (35) Utilised 13 31 34 Transferred to assets held-for-sale 2 - 1

Closing balance (291) (211) (192)

* No guarantee is required from the customer. ** 50% – 75% guarantee required by the customer. *** Customers are required to provide 100% guarantee on transaction on a cash basis only.

F-60 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

28. Cash and cash equivalents 2008 2007 2009 Restated Restated R million R million R million Cash and cash equivalents Cash and cash equivalents 5,880 5,986 3,847 Transferred to assets classified as held-for-sale - (6) -

5,880 5,980 3,847

Bank overdrafts - (22) (26)

- (22) (26)

29. Borrowings 2009 2008 2007 Restated Restated R million R million R million Long-term borrowings Total long-term borrowings at the beginning of the year 16,890 17,535 19,352 Raised 14,595 6,763 1,222 Repaid (512) (1,328) (997) Foreign exchange movement 15 22 27 Amortisation of discount (25) 242 303 Current portion of long-term borrowings redeemable within one year transferred to short-term borrowings (1,205) (6,282) (2,372) Transferred to liabilities directly associated with assets classified as held-for-sale - (62) -

29,758 16,890 17,535

Unsecured liabilities Rand denominated Bonds at nominal value 19,584 17,987 15,486 Unamortised discounts (770) (396) (638)

Bonds at carrying value 18,814 17,591 14,848 Other unsecured liabilities 7,795 - 5

26,609 17,591 14,853

Unsecured foreign currency denominated - 30 44

Secured loans and capitalised leases Rand denominated 4,252 3,018 2,623 Foreign currency denominated 102 144 177 Transferred to liabilities directly associated with assets classified as held-for-sale - (62) -

4,354 3,100 2,800

Rand denominated promissory notes* - 2,451 2,210

Total long-term borrowings 30,963 23,172 19,907 Current portion of long-term borrowings redeemable within one year transferred to short-term borrowings (1,205) (6,282) (2,372)

29,758 16,890 17,535

*The promissory notes were redeemed on 23 December 2008.

F-61 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

29. Borrowings (continued)

The Rand denominated unsecured local guaranteed bonds were the T004 bond which was redeemed on 1 April 2008 and the rest are redeemable between 1 April 2010 and 15 July 2014 and bear interest at rates ranging between 10.5% and 16.5%. Rand denominated unsecured Eurorand bonds bear interest between 10% and 13.5% and are repayable in 2028 and 2029. The rand denominated unsecured and non guaranteed bonds are redeemable between 15 December 2011 and 14 November 2027 and bear interest at a rate between 8.9% and 10.8%. Rand denominated capitalised finance lease liabilities bear interest at rates ranging between 11.00% and 16.93% with all rates linked to prime. These liabilities are repayable over periods between 2009 and 2027. Rand denominated domestic loans bear interest rates ranging between 8.81% and 15.33%. These liabilities are repayable over periods between 17 April 2009 and 20 December 2021. Foreign currency secured loans are denominated in Japanese Yen and United States Dollars and bear interest between 3.00% and 6.02%. One USD loan was redeemed on 24 November 2008 and the rest are repayable between 24 March 2009 and 24 November 2010. Interest-bearing borrowings are recognised initially at fair value less related transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. 2008 2007 2009 Restated Restated R million R million R million Short-term borrowings Current portion of long-term interest-bearing borrowings 1,205 6,282 2,372 Other short-term borrowings 6,050 2,248 5,243 Transferred to liabilities directly associated with assets classified as held-for-sale - (148) -

7,255 8,382 7,615

The promissory notes were redeemed on 23 December 2008. Other short-term borrowings relate to the market making portfolio and comprises the Group’s position on bonds and other financial instruments. The short-term borrowings bear interest at rates between 9.745% and 13.08%, is repayable between 2 May 2009 and 2 April 2010 and are not guaranteed.

F-62 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

30. Trade payables and accruals 2008 2007 2009 Restated Restated R million R million R million

Trade payables 1,212 2,398 1,259 Accruals Accrued expenditure 3,000 2,263 2,119 Deposits received 42 37 41 Deferred income 4 88 56 Interest 1,083 900 922 Personnel costs 378 743 614 Public creditors 529 690 528 Revenue received in advance 199 76 50 South African Revenue Services - value added taxation 58 41 354

5,293 4,838 4,684 Transferred to liabilities directly associated with assets classified as held-for-sale (14) (248) (68)

6,491 6,988 5,875

Liabilities for trade and other amounts payable which are settled within normal terms are stated at amortised cost. 31. Construction contracts 2008 2007 2009 Restated Restated R million R million R million

Contracts in progress at the balance sheet date:

Construction costs incurred plus recognised profits less losses to date 303 190 122

Less: progress billings (7) (1) - Less: Probable losses due to onerous contracts - - (7)

296 189 115

Recognised and included in the financial statements:

Income statement Contract revenue 1,270 1,005 538

Balance sheet Amounts due from customers under construction contracts 240 96 199

Advances received - 18 1

Retention debtors 33 13 20

Retention creditors - - 13

Contract revenue for coaches is recognised when the completed stage has been signed off as proof of quality satisfaction by the external customer.

F-63 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

32. Non-current assets classified as held-for-sale and discontinued operations Discontinued operations

The loss from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments comprises:

2008 2007 2009 Restated Restated R million R million R million

Loss from discontinued operations (refer below) (146) (661) (145) (Loss)/profit on disposal of discontinued operations, net of taxation (257) (266) 1,433 Impairments – Lower of carrying value and fair value less costs to sell (113) (994) (367)

(516) (1,921) 921

Loss from discontinued operations Revenue 2,294 2,980 23,402 Net operating expenses excluding depreciation and amortisation (2,348) (3,440) (23,079)

Loss from operations before depreciation and amortisation and items listed below (54) (460) 323 Depreciation and amortisation - (72) (71)

Loss from operations before the items listed below (54) (532) 252 Impairment/(reversal of impairment) of assets 1 (7) 16 Fair value adjustments 3 (26) 63

Loss from operations before net finance costs (50) (565) 331 Income from associates - - 2 Finance costs (19) (44) (500) Finance income 2 7 119

Loss before taxation (67) (602) (48) Taxation (79) (59) (97)

Net loss for the year after taxation (146) (661) (145)

Attributable to the shareholder (146) (665) (162) Attributable to minority interests - 4 17

In the 2007 financial year, South African Airways (Pty) Limited (the national airline of South Africa), V&A Waterfront Holdings (Pty) Limited (the commercial property development situated in Cape Town) and Equity Aviation (Pty) Limited (an airport baggage handling company) were disposed off by the Transnet Group. The disposal of South African Airways (Pty) Limited was done in terms of a share sale agreement and included a Transnet share buy back of R2,049 million. The disposal of Equity Aviation (Pty) Limited was a complete share sale agreement for a purchase consideration of R70 million, which required the final settlement of the existing R113.5 million loan owed by Equity Aviation (Pty) Limited to Transnet. In the 2008 financial year, Viamax (Pty) Limited (motor vehicle rental fleet business), freightdynamics (a trucking business), and VAE Perway (Pty) Limited (involved in the business of providing rail infrastructure and associated products to Transport companies) were disposed off by the Transnet Group.

F-64 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

32. Non-current assets classified as held-for-sale and discontinued operations (continued) The disposal of V&A Waterfront Holdings (Pty) Limited was done in terms of a complete share sale agreement for a purchase consideration of R1.8 billion. The disposal of Viamax (Pty) Limited was done in terms of a complete share sale agreement, for a purchase consideration of R1.2 billion. The disposal of the interest in VAE Perway was complete disposal of Transnet’s interest in VAE Perway, for a purchase consideration of R30 million. The disposal of freightdynamics was done as transfer of a going concern, for a purchase consideration of R1 million. In the 2009 financial year, South African Express Airways (Pty) Limited (a commercial passenger airline business), Autopax Passenger Services (Pty) Limited (a passenger bus transport business), Shosholoza Meyl (a passenger rail transport business), and the Group’s interest in Neotel (a telecommunications business) were disposed of by the Transnet Group. The disposal of South African Express Airways (Pty) Limited was a complete share sale agreement for a purchase consideration of R140 million, which included a final loan repayment of the loan extended to South African Express (Pty) Limited of R328 million. The disposal of Autopax Passenger Services (Pty) Limited was a complete share sale agreement for a purchase consideration of R1 million. The disposal of Shosholoza Meyl was a transfer of business agreement for a purchase consideration of R1, and included a R500 million reimbursement payment for costs incurred by Transnet for the operation of the business for the 2009 financial year. The Group disposed of its interest in Neotel for R135 million (including a R196 million settlement payment for loans owed by Neotel to Transnet).

Assets classified as held-for-sale and liabilities directly associated with assets classified as held-for-sale

2008 2007 2009 Restated Restated R million R million R million

Non-current assets classified as held-for-sale

Property, plant and equipment 331 37 251 Investment properties 8 - 10 Intangible assets and goodwill - - - Investments in subsidiaries - - - Investments in associates - 78 101 Loans and advances - - 1,258 Inventory - - 171

339 115 1,791

F-65 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

32. Non-current assets classified as held-for-sale and discontinued operations (continued)

Assets classified as held-for-sale and liabilities directly associated with assets classified as held-for-sale (continued)

2009 2008 2007 Restated Restated R million R million R million

Effect of the sale of disposal groups

Non-current assets classified as held-for-sale

Luxrail 82 80 29 Shosholoza Meyl - 472 178 Autopax Passenger Services (Pty) Limited - 78 75 freightdynamics - - 341 Freight Dynamics Guardrisk 25 25 21 South African Express Airways (Pty) Limited - 1,096 - Viamax (Pty) Limited - - 963 Effect of intercompany eliminations and impairment of disposal groups (72) (735) 172

35 1,016 1,779

Total assets transferred to non-current assets classified as held-for-sale 374 1,131 3,570

2009 2008 2007 Restated Restated R million R million R million Liabilities directly associated with assets classified as held-for-sale

Post-retirement benefit obligations - 3 - Borrowings - 210 - Provisions 1 30 55 Deferred taxation liabilities - 36 95 Trade payables and other payables 12 392 274 Current taxation liability 1 5 (8)

14 676 430

Trade and other payables - - 41

Effect of the sale of disposal groups

Luxrail 10 9 7 Shosholoza Meyl - 119 37 Autopax Passenger Services (Pty) Limited - 181 124 freightdynamics - - 626 Freight Dynamics Guardrisk 4 7 8 South African Express Airways (Pty) Limited - 1,025 - Viamax (Pty) Limited - - 591 Effect of intercompany eliminations and impairment of disposal groups - (665) (981)

14 676 412

Total liabilities transferred to liabilities directly associated with assets classified as held-for-sale 14 676 453

F-66 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

33. Share capital 2008 2007 2009 Restated Restated R million R million R million Authorised 30,000,000,000 ordinary par value shares of R1 each 30,000 30,000 30,000

Issued 12,660,986,310 ordinary par value shares of R1 each (2008: 12,660,986,310) 12,661 12,661 12,661*

*During the year ended 31 March 2007, Transnet repurchased a total of 2,049,000,000 of its issued shares at par value or R1 each as part of the sale of South African Airways (Pty) Limited.

The unissued share capital is under the control of the South African Government, the sole shareholder of the Company.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of taxation, from the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are included in the cost of a business acquisition. When share capital is repurchased, the amount of the consideration paid, including directly attributable costs, is deducted from equity. Repurchased shares are classified as treasury shares and presented as a deduction from the total equity until they are cancelled, reissued or disposed of. Dividends are recognised as a liability in the period in which they are declared. 34. Employee benefits The Group operates several defined benefit funds and a defined contribution fund. The assets of each scheme are held separately from those of the Group and are administered by the schemes’ trustees. The defined benefit funds are actuarially valued for accounting purposes by professional independent consulting actuaries on an annual basis. 2008 2007 2009 Restated Restated R million R million R million

Balance at the beginning of the year 2,181 2,422 4,348 Income statement (credit)/debit (169) (686) 218 Settlements during the year (317) (225) (419) Actuarial loss/(gain) 626 670 (1,725) Transfers from assets held-for-sale 3 - -

2,324 2,181 2,422

Comprising:

Transport Pension Fund (formerly the Transnet Pension Fund) - - - Transnet Second Defined Benefit Fund - - - Top Management Pension 84 89 113 Workmen’s Compensation Act pensioners 368 280 238 Black Widows’ Pension - - (4) SATS pensioners’ post-retirement medical benefits 1,240 1,223 1,369 Transnet employees post-retirement medical benefits 632 589 706

2,324 2,181 2,422

F-67 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Transnet retirement fund The fund was structured as a defined contribution fund from 1 November 2000. All employees of the Group are eligible members of the fund. There were 61,407 members at 31 March 2009 (2008: 63,039, 2007: 63,165). Actuarial valuations are done at intervals not exceeding three years to determine the financial position. An actuarial valuation was performed as at 31 March 2008. The actuaries were satisfied with the status of the members’ credit account then. The total contributions to this fund constitute member contributions of R677 million (2008: R604 million, 2007: R577 million) and employer contributions of R669 million (2008: R605 million, 2007: R578 million). The employer contributions were expensed in the corresponding year. Transport pension fund: Transnet Sub-Fund The fund is a defined benefit pension fund and is a closed fund. The fund has been closed to new members since 1 December 2000. Members are current employees of Transnet who elected to remain as members of the fund at 1 November 2000 and pensioner members who retired subsequent to that date. The Transnet Pension Fund Amendment Act, promulgated in the latter part of 2007, changed the name of the fund with effect from 11 November 2005 to the Transport Pension Fund. This Act restructured the Transport Pension Fund (formerly the Transnet Pension Fund) into a multi-employer pension fund. From the date this Act came into operation, all existing members, pensioners, dependant pensioners, liabilities, assets, rights and obligations, of the Transport Pension Fund, were attributable to a Sub-Fund, with Transnet as the principal employer. In terms of these Act amendments a Sub-Fund in the name of South African Airways (Pty) Limited was also established as at 1 April 2006, with South African Airways (Pty) Limited as the principal Employer of that Sub-Fund, and a further Sub-Fund in the name of the South African Rail Commuter Corporation Limited was established with effect from 1 April 2006, with the South African Airways (Pty) Limited as the principal employer of that Sub-Fund. All active members and pensioners members relating to South African Airways (Pty) Limited and the Passenger Rail Agency of South Africa (previously SARCC) have therefore been assigned to these new Sub- Funds. The Transport Pension Fund therefore comprises three independent and separate Sub-Funds, each with their own principal employer. An employer’s liabilities to the Transport Pension Fund are limited to those attributable to its members, pensioners and dependant pensioners assigned to its Sub-Fund. There were 5,583 members and pensioners at 31 March 2009 (2008: 6,401, 2007: 11,420). The fund gives members the option to transfer to the Transnet Retirement Fund twice a year. Approximately 463 members opted to transfer to the Transnet Retirement Fund in the current year. The effect of this transfer is noted below. An actuarial valuation was done as at 31 March 2009 based on the projected unit credit method. The principal actuarial assumptions used are as follows:

F-68 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Transnet retirement fund 2008 2007 2009 Restated Restated R million R million R million

Discount rate (%) 9.03% 9.07% 7.75%

Salary increases - Inflation (%) 5.77% 6.15% 4.50% - Promotional (%) 1.00% 1.50% 1.50%

Expected return on plan assets (%) 9.74% 11.50% 10.15% Pension increases (%) 2.00% 2.00% 2.00%

The results of the actuarial valuation are as follows:

Benefit liability Present value of obligation (2,957) (3,192) (4,456) Fair value of plan assets 3,658 4,924 5,610

Surplus 701 1,732 1,154 Unrecognised surplus (701) (1,732) (1,154)

Net liability per the balance sheet - - -

The surplus was not recognised as the rules of the fund do not provide for the surpluses to be distributed.

Credit/(charge) to the income statement Expected return on assets 499 560 645 Current return on assets (36) (106) (166) Settlement (loss)/gain (18) 151 - Interest cost (263) (342) (460)

Net credit recognised in the income statement 182 263 19

F-69 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Transnet retirement fund 2008 2007 2009 Restated Restated R million R million R million The actual return on plan assets for the period amounted to R677 million (2008: return of R487 million, 2007: return of R1,844 million). Actuarial loss recognised in statement of recognised income and expense - Actuarial (loss)/gain (1,239) 224 1,179 - Net surplus not recognised 1,031 (578) (991) - Disposal of businesses - (8) (355)

Net actuarial (loss)/gain recognised in the statement of recognised income and expense (208) (362) (167)

Cumulative actuarial losses recognised in the statement of recognised income and expense (1,078) (870) (511) Disposal of businesses - - 2

(1,078) (870) (509)

Movements in the net asset/(liability) recognised in the balance sheet Opening net asset 1,732 1,154 163 Income as above 182 263 19 Actuarial (loss)/gain recognised in equity (1,239) 224 1,179 Disposal of businesses - (8) (355) Contributions paid 26 99 148

Surplus 701 1,732 1,154 Surplus not recognised (701) (1,732) (1,154)

Closing net asset - - -

Reconciliation of movement in benefit liability Opening benefit liability (3,192) (4,456) (5,405) Current service cost (36) (106) (166) Contributions by employer and members (18) - - Interest cost (263) (342) (460) Actuarial gain/(loss) recognised in equity (63) 297 (20) Benefits paid 323 268 225

(3,249) (4,339) (5,826) Disposal of businesses - 22 1,370 Transfer to the retirement fund 292 1,125 -

Closing benefit liability (2,957) (3,192) (4,456)

Reconciliation of movement in fair value of plan assets Opening fair value of plan assets 4,924 5,610 5,568 Expected return 499 560 645 Actuarial (loss)/gain (1,176) (73) 1,199 Contributions by employer and members 44 99 148 Benefits paid (323) (268) (225)

3,968 5,928 7,335 Disposal of businesses - (30) (1,725) Transfer to the retirement fund (310) (974) -

Closing fair value of plan assets 3,658 4,924 5,610

F-70 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Transnet Transport Pension Fund: Sub-Fund (continued) Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million

Present value of defined benefit obligation (2,957) (3,192) (4,456) (5,405) (4,950) (4,199) Fair value of plan assets 3,658 4,924 5,610 5,568 4,818 4,034

Surplus/(deficit) 701 1,732 1,154 163 (132) (165) Asset not recognised (701) (1,732) (1,154) (163) - -

Net liability - - - - (132) (165)

The estimated contributions by both employer and members for the year beginning 1 April 2009 amount to R44 million (2008: R99 million, 2007: R148 million).

The major category of plan assets as a % of total plan assets are: Equity - Local and international 67% 65% 65% Property 2% 10% 10% Bonds 30% 20% 20% Cash 1% 5% 5%

Total 100% 100% 100%

Transnet Second Defined Benefit Fund The fund was established on 1 November 2000 for the benefit of existing retired members and qualifying beneficiaries, as of the current financial year, the fund included the spouses of black pensioners who retired from Transnet, between 16 December 1974 and 1 April 1986 (as previously reported as the Black Widows’ Pension Fund). There were 32,521 members at 31 March 2009 (2008: 36,846, 2007: 39,533). This excludes widows and children of pensioners, as well as the black widows. The all inclusive membership is 78,780 at 31 March 2009 (2008: 79,467, 2007: 81,263). The entire obligation relates to Transnet Limited. The actuarial valuation was based on the projected unit credit method. The principal actuarial assumptions used are as follows: 2008 2007 2009 Restated Restated R million R million R million

Discount rate (%) 8.49% 9.36% 7.30-8.91% Expected return on assets (%) 7.29% 9.00% 7.07-11.12% Inflation (%) 5.42% 6.25% 5.00% Pension increases (%) 2.00% 2.00% 2.00%

The results of the actuarial valuation are as follows:

Benefit liability Present value of obligation (17,550) (17,194) (19,548) Fair value of plan assets 20,316 19,966 21,477

Surplus 2,766 2,772 1,929 Unrecognised surplus (2,766) (2,772) (1,929)

Net liability per the balance sheet - - -

F-71 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Transnet Second Defined Benefit Fund (continued) 2008 2007 2009 Restated Restated R million R million R million Credit/(charge) to the income statement Interest cost (1,512) (1,427) (1,496) Expected return on plan assets 1,703 2,065 1,478

191 638 (18)

The actual return on plan assets for the period amounted to R2,615 million in 2009 (2008: R757 million, 2007: R4,490 million).

Actuarial (loss)/gain recognised in statement of recognised income and expense - Actuarial (loss)/gain (214) 205 3,575 - Net surplus not recognised 23 (843) (1,929)

Net actuarial (loss)/gain recognised in the statement of recognised income and expense (191) (638) 1,646

Cumulative actuarial gains recognised in equity were R4,559 million for the period (2008: R4,734 million, 2007: R5,372 million). The current period movement includes the loss for the period, and a transfer of the Black Widows Pension Fund cumulative loss of R17 million.

Movements in the net liability recognised in the balance sheet Opening net asset/(liability) 2,772 1,929 (1,628) Transfer from Black Widows Pension Fund 17 - - Income as above 191 638 (18) Actuarial (loss)/gain recognised in equity (214) 205 3,575

Surplus 2,766 2,772 1,929 Surplus not recognised (2,766) (2,772) (1,929)

Net asset per balance sheet - - -

In the current year, the surplus was not recognised as the rules of the find do not provide for surpluses to be distributed.

Reconciliation of movement in benefit liability Opening benefit liability (17,194) (19,548) (20,887) Transfer from Black Widows’ Pension Fund (59) - - Interest cost (1,512) (1,427) (1,496) Actuarial (loss)/gain (1,126) 1,513 563 Benefits paid 2,341 2,268 2,272

Closing benefit liability (17,550) (17,194) (19,548)

Reconciliation of movement in fair value of plan assets Opening fair value of plan assets 19,966 21,477 19,259 Transfer from Black Widows’ Pension Fund 76 - - Expected return 1,703 2,065 1,478 Actuarial gain/(loss) 912 (1,308) 3,012 Benefits paid (2,341) (2,268) (2,272)

Closing fair value of plan assets 20,316 19,966 21,477

F-72 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Transnet Second Defined Benefit Fund (continued) Major categories of plan assets as a % of total plan assets: Equity (%) 21% 21% 35% Property 1% 2% 1% Bonds 73% 74% 57% Cash and net current assets 5% 3% 7%

Total assets at market value 100% 100% 100%

Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million

Present value of defined benefit obligation (17,550) (17,194) (19,548) (20,887) (20,405) (18,463) Fair value of plan assets 20,316 19,966 21,477 19,259 16,090 15,024

Surplus/(deficit) 2,766 2,772 1,929 (1,628) (4,315) (3,439) Asset not recognised (2,766) (2,772) (1,929) - - -

Net liability - - - (1,628) (4,315) (3,439)

Top Management Pensions and Workmen’s Compensation Act pensioners The Top Management Pensions are additional benefits to top up pensions received to eliminate the effects of any early retirement and resignation penalties applied under the Group’s existing pension fund schemes to management appointed prior to 1 April 1999. There were 424 members at 31 March 2009 (2008: 458, 2007: 530). The entire obligation relates to Transnet Limited. The Workmen’s Compensation Act benefit related to the pension benefits that the Company pays to current and former employees who were disabled whilst in service prior to the corporisation of Transnet in 1990. There were 1,537 members at 31 March 2009 (2008: 1,612, 2007: 1,925). Actuarial values for both benefits were performed to determine the present value of the obligations. Similar valuations were done at the previous balance sheet date. The projected unit credit method was used to value the obligations. There are no plan assets held to fund these obligations. The following summarises the components of expense and liability recognised in the financial statements together within the assumptions adopted.

F-73 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Top Management Pension Fund and Workmen’s Compensation Act Pensioners (continued) The principal assumptions in determining the benefits are as follows: 2008 2007 2009 Restated Restated R million R million R million

Discount rate (%) 8.49% 9.36% 7.75% Salary increases Inflation (%) 5.42% 6.25% 4.75% Promotional (%) 1.00% 1.50% 1.50% Pension increase (%) 2.00% 2.00% 2.00%

Benefit liability Present value of obligations (84) (89) (113)

Liability recognised in the balance sheet (84) (89) (113)

Interest charge to the income statement Interest cost (6) (9) (10) Current service cost (1) (2) (1)

(7) (11) (11)

Actuarial gain recognised in the statement of recognised income and expense 3 27 4

The cumulative actuarial gains recognised in equity 35 32 5

Reconciliation movement in benefit liability Opening benefit liability (89) (113) (116) Expense as above (7) (11) (11) Actuarial gain 3 27 4 Contribution 9 8 10

Benefit liability at year-end (84) (89) (113)

Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million

Present value of defined benefit obligation (84) (89) (113) (116) (99) (99)

Deficit (84) (89) (113) (116) (99) (99)

The estimated contributions (based on current year contributions) for the year beginning 1 April 2009 amounted to R9 million (2008: R8 million, 2007: R9 million).

F-74 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Workmen’s Compensation Act pensioners Principal assumptions in determining the benefits are as follows: 2008 2007 2009 Restated Restated R million R million R million

Discount rate (%) 9.03% 9.36% 7.75% Pension increase (%) 5.77% 6.25% 4.75% Inflation rate (%) 5.77% 6.25% 4.75%

Benefit liability Present value of obligations (368) (280) (238)

Liability recognised in the balance sheet (368) (280) (238)

Interest charge to the income statement Interest cost (25) (18) (18)

(25) (18) (18)

Actuarial gain recognised in the statement of recognised income and expense (93) (43) -

The cumulative actuarial gains recognised in equity (155) (62) (19)

Reconciliation movement in benefit liability Opening benefit liability (280) (238) (247) Interest cost (25) (18) (18) Actuarial loss (93) (43) - Benefits paid 30 19 27

Benefit liability at year-end (368) (280) (238)

Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million

Present value of defined benefit obligation (368) (280) (238) (247) (224) (204)

Deficit (368) (280) (238) (247) (224) (204)

The estimated contributions (based on current year contribution) for the year beginning 1 April 2009 amount to R30 million (2008: R19 million, 2007: R27 million).

F-75 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Black Widows’ Pension Benefit The benefit related to payments (not pensions) that the Group during 2000 voluntarily elected to make payable to the widows of black pensions who retired from Transnet during the period 16 December 1974 to 1 April 1986, subsequently died prior to 1 November 2000, and whose spouses are currently not entitled to a spouse’s pension from either the Transport Pension Fund or the Transnet Second Defined Benefit Fund or just the period within which these benefits could be claimed, is now closed. During the current financial year, this obligation was transferred into the Transnet Second Defined Benefit Fund. The actuarial valuation was based on the projected unit credit method. The principal actuarial assumptions used are as follows: 2008 2007 2009 Restated Restated R million R million R million Discount rate (%) - 9.36% 7.75% Inflation rate (%) - 6.25% 4.75% Expected return on assets (%) - 6.36% 4.75% Pension increase (%) - 2.00% 2.00% Benefit liability Present value of obligations - (59) (73) Fair value of plan assets - 76 77

Surplus - 17 4 Unrecognised surplus - (17) -

Net asset per the balance sheet - - 4

Charge to the income statement Expected return on assets - 4 5 Interest cost - (5) (5)

- (1) -

Actual return on plan assets - 7 7 Actuarial loss recognised in the statement of recognised income and expense - Actuarial gains - 14 3 - Net asset not recognised - (17) -

- (3) 3 Cumulative actuarial gains recognised in equity - 16 19

Movements in the net asset recognised in the balance sheet Opening net asset - 4 1 Expenses as above - (1) - Actuarial gain recognised in equity - 14 3

Surplus - 17 4 Surplus not recognised - (17) -

Net asset per balance sheet - - 4

Reconciliation movement in benefit liability Opening benefit liability (59) (73) (78) Transfer to Transnet Second Defined Benefit Fund 59 - - Interest cost - (5) (5) Actuarial gain - 11 1 Benefits paid - 8 9

Closing benefit liability - (59) (73)

F-76 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Black Widows’ Pension Benefit (continued) 2009 2008 2007 Restated Restated R million R million R million

Reconciliation of movement in fair value of plan assets Opening fair value of plan assets 76 77 79 Transfer to Transnet Second Defined Benefit Fund (76) - - Expected return on assets - 4 5 Actuarial gains - 3 2 Benefits paid - (8) (9)

Closing fair value of plan assets - 76 77

Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million Present value of defined benefit obligation - (59) (73) (78) (75) (64) Fair value of plan assets - 76 77 79 83 55

Surplus - 17 4 1 8 (9) Surplus not recognised - (17) - - - -

Net asset - - 4 1 8 (9)

HIV/Aids benefits Transnet Group offers certain assistance to employees diagnosed with Aids. The related data is not sufficient to actuarially value any liability the Group may have in this regard. Post-retirement medical benefits SATS Pensioners’ post-retirement medical benefits The SATS pensioners are the retired employees of the former South African Transport Services (SATS) and their dependants. The liability is in respect of pensioners and their dependants who have elected to belong to the Transnet in-house medical scheme, Transmed, whose membership is voluntary. A post-retirement medical aid benefit liability was created at the corporisation of Transnet. With effect from 1 April 2000, the liability has been actuarially valued at each balance sheet date. Actual benefits contributed on behalf of the pensioners are settled against the provision. Transnet subsidises members by way of a lump sum subsidy each year. The amount of the subsidy is calculated based on the number of SATS families as at 31 December of each year multiplied by a flat R800 per month for each family. The entire obligation relates to Transnet Limited. During the 2009 fiscal year the Company took a decision to enhance the subsidy values. The consultation process was still in progress as at 31 March 2009 and accordingly a provision of R500 million has been raised in long term provisions.

F-77 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Post-retirement medical benefits (continued) Transnet employees post-retirement medical benefits This includes the current and past employees of Transnet who are members of Transnet’s in-house medical aid, Transmed Medical Fund. Membership is voluntary. Transnet subsidies members at a flat contribution of R213 per month per member family. To enable the Company to fully provide for such post-retirement medical liabilities, since April 2000 actuarial valuations are obtained annually. There are no assets held to fund the obligation. Analysis of benefit expense The following summarises the components of the net benefit expense recognised in both the income statement and balance sheet as at 31 March for both SATS pensioners and Transnet Employees. The projected unit credit method has been used for the purposes of determining the actuarial valuation for both the funds. SATS pensioners 2009 2008 2007 Restated Restated R million R million R million

Closing benefit liability based on changes in discount rate (%) 8.44% 9.36% 7.75%

Benefit liability Present value of obligations (1,240) (1,223) (1,369)

Liabilities recognised in the balance sheet (1,240) (1,223) (1,369)

Charge to the income statement Interest cost (108) (112) (117)

(108) (112) (117)

Actuarial (loss)/gain recognised in the statement of recognised income and expense (117) 204 134

Cumulative actuarial gains recognised in equity (199) (82) (286)

Reconciliation of movement in benefit liability Opening benefit liability (1,223) (1,369) (1,607) Expense as above (108) (112) (117) Member and Company contributions 208 54 221 Actuarial (loss)/gain (117) 204 134

Closing benefit liability (1,240) (1,223) (1,369)

Transnet subsidises members by way of a lump sum subsidy every year. The amount of the subsidy is calculated based on the number of SATS families as at 31 December of each year multiplied by a flat R800 per month for each family. The medical inflation has no impact on the aggregate current service cost and the benefit liability. However, the assumed discount rate has an impact. The sensitivity of the obligation to a change in the assumed discount rate of 8.44% on the present value of the obligation is as follows: 2009 2008 2007 Restated Restated R million R million R million Closing benefit liability based on changes in discount rate: 7.44% (2008: 8.36%, 2007: 6.75%) (1,304) (1,286) (1,453) 9.44% (2008: 10.36%, 2007: 8.75%) (1,181) (1,166) (1,296)

F-78 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued)

Post-retirement medical benefits (continued) Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million

Benefit liability (1,240) (1,223) (1,369) (1,607) (1,629) (1,751)

Deficit (1,240) (1,223) (1,369) (1,607) (1,629) (1,751)

The estimated contribution (based on current year contribution) for the year beginning 1 April 2009 is R208 million (2008: R221 million, 2007: R221 million). Transnet employees 2008 2007 2009 Restated Restated R million R million R million

Closing benefit liability based on changes in discount rate (%) 8.44% 9.36% 7.75%

Benefit liability Present value of obligations (632) (592) (720)

Liabilities recognised in the balance sheet (632) (592) (720)

The liability recognised for this fund relating to the Company amounts to R632 million (2008: R589 million, 2007: R706 million)

Charge to the income statement Current service cost (11) (12) (14) Interest cost (53) (55) (63)

(64) (67) (77)

The charge to the income statement relating to the Company amounts to R64 million (2008: R67 million, 2007: R72 million).

Actuarial (loss)/gain recognised in the statement of recognised income and expense (20) 145 87

Cumulative actuarial gains recognised in equity 165 185 40

Reconciliation movement in benefit liability Opening benefit liability (592) (720) (812) Expense as above (64) (67) (77) Member and Company contributions 44 45 41 Actuarial (loss)/gain (20) 145 87

Closing benefit liability (632) (597) (761) Disposal of businesses - 5 41

Net benefit liability (632) (592) (720)

Discontinued operations - 3 14 Continuing operations (632) (589) (706)

Transnet subsidises members at a flat contribution of R213 per month per member family. The medical inflation has no impact on the aggregate current service cost and interest cost and the benefit liability.

F-79 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

34. Employee benefits (continued) Post-retirement medical benefits (continued) However, the assumed discount rate has an impact. The sensitivity of the obligation to changes in the assumed discount rate of 8.44% on the present value of the obligation is as follows: 2008 2007 2009 Restated Restated R million R million R million Closing benefit liability based on changes in discount rate: 7.44% (2008: 8.36%, 2007: 6.75%) (699) (658) (852) 9.44% (2008: 10.36%, 2007: 10.36%) (575) (549) (686)

Summary of actuarial valuation results for past periods: 2009 2008 2007 2006 2005 2004 R million R million R million R million R million R million

Benefit liability (632) (592) (720) (812) (808) (741)

Deficit (632) (592) (720) (812) (808) (741)

The estimated contribution (based on current year contribution) for the year beginning 1 April 2009 is R44 million (2008: R45 million, 2007: R41 million).

F-80 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

35. Provisions 2008 2007 2009 Restated Restated R million R million R million Comprising Total provisions at the beginning of the year 1,989 1,605 2,546 Provisions raised during the year and unwinding of discounts 3,684 3,853 3,499 Provisions utilised (3,411) (3,305) (2,047) Decrease/(increase) in short-term provisions classified as current liabilities 254 (157) (2,376) Transferred to liabilities directly associated with assets classified as held-for-sale (7) (7) (17)

2,509 1,989 1,605

Third-party claims Balance at the beginning of the year 129 96 109 Provisions made during the year 289 418 142 Utilised during the year (279) (385) (155)

139 129 96

Customer claims Balance at the beginning of the year 38 60 36 Provisions reversed during the year - (5) 31 Utilised during the year (12) (17) (7)

26 38 60

Leave pay Balance at the beginning of the year 973 1,030 928 Provisions made during the year 686 802 748 Utilised during the year (586) (853) (631) Transferred to liabilities directly associated with assets classified as held-for-sale (6) (6) (15)

1,067 973 1,030

Onerous contracts Balance at the beginning of the year 219 43 37 Provisions reversed during the year 39 201 6 Utilised during the year (109) (25) -

149 219 43

Decommissioning and environmental liabilities Balance at the beginning of the year 1,087 974 252 Provisions made during the year and unwinding of discounts 69 119 738 Utilities during the year (250) (6) (16)

906 1,087 974

Incentive bonuses Balance at the beginning of the year 1,511 1,232 643 Provisions reversed during the year 1,366 1,387 1,182 Utilised during the year (1,419) (1,107) (593) Transferred to liabilities directly associated with assets classified as held-for-sale (1) (1) -

1,457 1,511 1,232

F-81 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

35. Provisions (continued) 2008 2007 2009 Restated Restated R million R million R million Restructuring Balance at the beginning of the year 127 237 471 Provisions reversed during the year - 117 81 Utilised during the year (49) (227) (315)

78 127 237

Other Balance at the beginning of the year 438 309 70 Provisions reversed during the year 1,235 814 571 Utilised during the year (707) (685) (330) Transferred to liabilities directly associated with assets classified as held-for-sale - - (2)

966 438 309

Total provisions 4,788 4,522 3,981

Less: Short-term provisions classified as current liabilities Third-party claims 139 129 96 Customer claims 26 37 34 Leave pay 602 555 548 Onerous contracts 149 207 20 Decommissioning liability 63 32 41 Incentive bonuses 907 1,174 1,102 Restructuring 23 62 235 Other 371 344 309 Transferred to liabilities directly associated with assets classified as held-for-sale (1) (7) (9)

Short term provisions 2,279 2,533 2,376

Total long-term provisions 2,509 1,989 1,605

Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation, as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-taxation rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Third-party claims The provision represents the best estimate of known third-party claims together with an allowance for claims incurred but not yet reported based on historical experience. Customer claims Provisions for claims made by customers arising from non-performance on contracts or damage to goods in transit. Settlement of claims is expected in the following year. Leave pay This is a provision for unutilised leave at year-end. The leave is expected to be taken over the next two financial years and is calculated based on employee total cost to company.

F-82 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

35. Provisions (continued) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Provision for the maintenance and repairs of buildings and structures in terms of a lease agreement. Estimated costs for the refurbishment and general overhaul of locomotives and coaches. Provision for access and haulage costs on the Transnet rail network in terms of the sale agreement. Decommissioning and environment liabilities Provision for the dismantling and removal of an asset as a result of the requirements to restore the site on which the asset is located. The provision has been computed by discounting future cash flows. The provision also includes the estimated rehabilitation costs for the historical contamination caused by asbestos and other environmental costs. Incentive bonuses Provision for incentive bonuses in terms of the incentive bonus scheme. Restructuring A provision for restructuring costs is recognised when the Group has a detailed formal plan for the restructuring and the Group has raised a valid expectation with those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. Restructuring provisions only include those direct expenditures which are necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Future operating costs are not provided for. Warranties A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. Environmental rehabilitation In accordance with the Group’s environmental policy and applicable legal requirements, a provision for known environmental rehabilitation in respect of clean-up costs is recognised when it meets the recognition requirements for provisions. The provision also includes the estimated rehabilitation costs for the historical contamination caused by asbestos as well as other environmental costs. Other provisions Other provisions, for example, freight insurance, are recognised when they meet the recognition requirements as per IAS 37: Provisions, Contingent Liabilities and Contingent Assets.

F-83 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

36. Segmental Analysis Transnet’s reportable segments represent the core businesses of Transnet for which information is reported internally to the chief operating decision maker (the "CODM") for purposes of allocating resources and assessing performance. These businesses are managed separately and each of the segment managers report directly to the CODM. Discrete financial information is available for each operating segment identified. The services offered by each of these segments differ, and they do not have similar economic characteristics, customers or methods to provide their services The following are the services from which each reportable segment derives its revenue: • TFR: Operates freight trains and is focused on transporting bulk and containerised freight. Its business comprises the coal and iron ore export channels and the general freight business. • TRE: Consists of eight product-focused business units which provide services ranging from refurbishment, conversion and upgrades, to the manufacturing of rail related rolling stock mainly for TFR and the Passenger Rail Agency of South Africa (PRASA). • TNPA: Responsible for the safe, efficient and effective economic functioning of the national ports system which it manages in a landlord capacity. TNPA is also the provider of port infrastructure and marine services at all seven fully operational commercial ports in South Africa, and will provide the same services for the Port of Ngqura when it becomes fully operational. • TPT: Manages 16 cargo terminal operations across seven South African Ports (including the Port of Ngqura). It provides cargo handling services for container, dry-bulk, break-bulk, and automotive cargoes. • TPL: Transports a range of petroleum products and gas through 3 000 km of underground pipelines traversing five provinces. Measurement The accounting policies of the operating segments (including those applied to intersegment transactions) are the same as those described in the summary of significant accounting policies on pages F-9 to F-27, hence there are no differences in the measurement of profit or loss, assets and liabilities by the reportable segments and Transnet. There have been no changes in the measurement of profit and loss from the previous reporting period. Transnet conducts intersegment sales transactions at arms length, and intersegment transfers of property, plant and equipment at net book value. In terms of geographical split, South Africa accounts for 100% of the Transnet Group’s revenue. Revenues from one customer of the Transnet Freight Rail operating segment represents approximately 6% (2008: 7%, 2007: 7%) of the Group’s total revenue.

F-84 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

36. Segmental Analysis (continued) Segmental information For the year ended 31 March 2009 National Total for Elimination of Freight Rail Ports Port reportable All other intersegment Total Rail Engineering Authority Terminals Pipelines segments segments transactions Transnet R million R million R million R million R million R million R million R million R million External revenues* 18,427 1,405 6,573 5,036 1,462 32,903 629 60 33,592 Internal revenues 256 6,823 537 1 1 7,618 2,288 (9,906) -

Total revenue 18,683 8,228 7,110 5,037 1,463 40,521 2,917 (9,846) 33,592 Energy costs (2,434) (108) (151) (215) (107) (3,015) (125) (4) (3,144) Maintenance (2,513) (181) (195) (144) (29) (3,062) (97) 3,000 (159) Materials (453) (3,276) (62) (203) (12) (4,006) (383) 2,644 (1,745) Personnel cost (5,449) (3,250) (969) (1,593) (164) (11,425) (852) 2,837 (9,440) Other costs (2,161) (649) (482) (1,194) (103) (4,589) (1,161) (154) (5,904)

Adjusted EBITDA 5,673 764 5,251 1,688 1,048 14,424 299 (1,523) 13,200 Depreciation and amortisation (3,036) (128) (649) (632) (268) (4,713) (53) (13) (4,779) Fair value adjustments, impairments and post-retirement benefit obligations (620) (42) 1,075 (7) (24) 382 236 (437) 181 Dividends received and income from associates 23 18 - - - 41 7 34 82 Finance cost (1,805) (310) (1,175) (419) (170) (3,879) (190) 1,836 (2,233) Finance income 6 2 10 120 4 142 221 (96) 267

Profit before taxation 241 304 4,512 750 590 6,397 520 (199) 6,718

Total assets 40,996 6,145 44,686 11,088 9,183 112,098 3,636 2,426 118,160 Total liabilities 24,470 4,059 22,894 6,920 5,284 63,627 235 (3,676) 60,186 Capital expenditure 8,593 568 4,237 3,144 2,772 19,314 48 (76) 19,286

* Revenues from segments below the quantitative thresholds are attributable to two operating segments of the Group. These segments include Transnet Property that manages internal commercial and residential property and Transnet Capital Projects.

F-85 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

36. Segmental Analysis (continued) Segmental information For the year ended 31 March 2008 (restated) National Total for Elimination of Freight Rail Ports Port reportable All other intersegment Total Rail Engineering Authority Terminals Pipelines segments segments transactions Transnet R million R million R million R million R million R million R million R million R million

External revenue* 16,044 1,057 6,373 4,842 1,290 29,606 410 75 30,091 Internal revenue 554 7,099 469 2 2 8,126 1,917 (10,043) -

Total revenue 16,598 8,156 6,842 4,844 1,292 37,732 2,327 (9,968) 30,091 Energy costs (1,945) (79) (115) (170) (61) (2,370) (99) (95) (2,564) Maintenance (2,189) (158) (142) (126) (24) (2,639) (54) 2,307 (386) Materials (258) (3,320) (51) (195) 5 (3,819) (317) 3,038 (1,098) Personnel cost (4,929) (2,865) (830) (1,516) (143) (10,283) (747) 3,092 (7,938) Other costs (2,167) (538) (513) (1,032) (87) (4,337) (950) (8) (5,295)

Adjusted EBITDA 5,110 1,196 5,191 1,805 982 14,284 160 (1,634) 12,810 Depreciation and amortisation (2,311) (129) (527) (500) (266) (3,733) (53) (12) (3,798) Fair value adjustments, impairments and post-retirement benefit obligations 192 129 779 53 87 1,240 242 467 1,949 Dividends received and income from associates - - - 9 - 9 - 54 63 Finance cost (1,725) (132) (694) (244) (271) (3,066) (196) 570 (2,692) Finance income 5 5 107 85 47 249 243 269 761

Profit before taxation 1,271 1,069 4,856 1,208 579 8,983 396 (286) 9,093

Total assets 34,865 5,183 36,734 7,939 5,810 90,531 3,308 3,716 97,555 Total liabilities 23,264 3,187 14,693 4,458 3,033 48,635 381 (1,967) 47,049 Capital expenditure 9,177 764 2,736 1,976 865 15,518 140 (90) 15,568

* Revenues from segments below the quantitative thresholds are attributable to two operating segments of the Group. These segments include Transnet Property that manages internal commercial and residential property and Transnet Capital Projects.

F-86 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

36. Segmental Analysis (continued) Segmental information For the year ended 31 March 2007 (restated) National Total for Elimination of Freight Rail Ports Port reportable All other intersegment Total Rail Engineering Authority Terminals Pipelines segments segments transactions Transnet R million R million R million R million R million R million R million R million R million

External revenue* 14,350 604 5,686 4,094 1,216 25,950 207 742 26,899 Internal revenue 224 6,713 421 3 2 7,363 1,467 (8,830) -

Total revenue 14,574 7,317 6,107 4,097 1,218 33,313 1,674 (8,088) 26,899

Materials (460) (3,081) (46) (171) (12) (3,770) (244) 3,695 (319) Energy costs (1,778) (64) (101) (128) (51) (2,122) (70) (332) (2,524) Personnel cost (4,686) (2,350) (769) (1,295) (123) (9,223) (493) 2,053 (7,663) Maintenance (1,770) (178) (118) (110) (25) (2,201) (41) 1,782 (460) Other costs (2,730) (715) (582) (832) (75) (4,934) (489) 157 (5,266)

Adjusted EBITDA 3,150 929 4,491 1,561 932 11,063 337 (733) 10,667 Depreciation and amortisation (1,704) (117) (418) (336) (259) (2,834) (38) (80) (2,952) Fair value adjustments, impairments and post-retirement benefit obligations 104 (29) 275 125 - 475 24 1,513 2,012 Dividends received and income from associates 23 - - 2 - 25 (1) 14 38 Finance cost (1,221) (56) (470) (32) (295) (2,074) (1) (397) (2,472) Finance income 6 8 337 28 73 452 39 (306) 185

Profit before taxation 358 735 4,215 1,348 451 7,107 360 11 7,478

Total assets 27,083 3,239 20,305 5,823 4,561 61,011 2,502 10,275 73,788 Total liabilities (17,818) (1,436) (2,108) (1,687) (1,060) (24,109) (1,391) (14,587) (40,087) Capital expenditure 7,402 623 1,026 1,764 315 11,130 88 456 11,674

* Revenues from segments below the quantitative thresholds are attributable to two operating segments of the Group. These segments include Transnet Property that manages internal commercial and residential property and Transnet Capital Projects.

F-87 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

37. Related party transactions The Transnet Group is a Schedule 2 Public Entity in terms of the Public Finance Management Act (PFMA). It therefore has a significant number of related parties including other State-owned entities, Government Departments and all other entities within the national sphere of Government. The Group has utilised the database maintained by the National Treasury to identify related parties. A list of all related parties is available at the National Treasury website at www.treasury.gov.za.

South African Airways (Pty) Limited and South African Express Airways (Pty) Limited conduct a number of transactions via intermediaries who act as agents. Services rendered by these companies to related parties are measured with reference to their frequent flyer corporate contracts. These contracts qualify for rebates on reaching a specified qualifying limit, which are similar to other third parties who participate in this frequent flyer programme. These transactions are included in the disclosure of transactions below. Transactions between related parties that are not reported in terms of these contracts are not disclosed as such.

The Group has related party relationships with its associates (see note 22) and with its directors and senior executives (key management).

Unless otherwise disclosed, all transactions with the above related parties are concluded on an arm’s length basis.

Furthermore, neither the Group nor any of its related parties is obligated to procure from or render services to their related parties.

Transactions with related entities

Services rendered to related parties comprise principally transportation (aviation, rail and road) services. Services purchased from related parties comprised principally energy, telecommunications, information technology and property related services.

F-88 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

37. Related party transactions (continued) The following is a summary of transactions with related parties during the year and balances due at year-end according to Transnet’s records:

2008 2007 2009 Restated Restated R million R million R million

Services rendered Major public enterprises 1,020 904 1,045 Other public enterprises 112 119 370 National Government business enterprises 1,673 1,255 908 Associates 56 70 348

Total services rendered 2,861 2,348 2,671

Services received Major public enterprises 849 904 1,529 Other public enterprises 210 174 475 National Government business enterprises 890 1,519 983 Associates 203 261 357

Total services received 2,152 2,858 3,344

Amounts due from/(to) Major public enterprises (249) 257 309 Other public enterprises 30 20 6 National Government business enterprises* (6,407) (6,150) (6,782) Associates 143 68 (39)

Net amounts due to related parties (6,483) (5,805) (6,506)

*includes R6,720 million relating to bonds issued to National Government business enterprises (2008: R6,467 million, 2007: R7,023 million).

During the year the Group expensed R nil (2008: R1 million, 2007: R3 million) in relation to bad debts on related parties and at year-end the Group had a provision of R nil (2008: R11 million, 2007: R34 million) against bad debts in relation to related parties.

Transactions with key management personnel

Loans to key management are included in "Long-term loans and advances" (refer note 25).

Details of key management compensation are set out below.

None of key management has or had significant influence in any entity with whom the Group had significant transactions during the year.

F-89 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

37. Related party transactions (continued) Key management personnel Executive remuneration - guaranteed Post- retirement benefit fund Other Other Total Total Name Salary contributions contributions payments 2009 2008 2007 R thousand R thousand R thousand R thousand R thousand R thousand R thousand C F Wells** 3,621 385 - 8 4,014 3,717 3,501 V Dunjwa 2,196 201 - 7 2,404 1,971 - S Gama 3,443 272 62 29 3,806 3,833 3,436 V Kahla 2,915 229 40 4 3,188 3,112 2,783 P Maharaj 2,973 231 - 2 3,206 3,131 2,873 C Möller 2,152 207 102 8 2,469 2,425 2,152 T Morwe 2,811 223 56 2 3,092 3,190 2,762 M Moses 2,991 152 15 10 3,168 2,925 - K Phihlela 2,654 206 - 3 2,863 2,983 2,613 M Ramos + 4,882 441 - 5 5,328 5,411 5,056 A Singh **# 1,534 145 42 13 1,734 - - K X T Socikwa 2,575 274 - 3 2,852 2,133 - R Vallihu 2,709 252 42 21 3,024 2,897 2,640 L L van Niekerk 3,935 356 - 87 4,378 3,922 3,704

Total 41,391 3,574 359 202 45,526 41,650 31,520

+ Resigned during the 2009 financial year. ** Group Executives who are members of the Board of Directors. # Appointed during the 2009 financial year.

F-90 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

37. Related party transactions (continued) Executive remuneration – non-guaranteed: Performance bonus (TSTI) The performance bonuses (excluded from guaranteed remuneration) reflected below are according to the principles of the approved bonus scheme for 2009 and will be paid during the 2010 financial year. Name 2009 2008 2007 R thousand R thousand R thousand

CF Wells ** 2,825 4,053 2,100 V Dunjwa 1,619 1,945 - S Gama 2,380 3,655 1,877 V Kahla 2,151 3,083 1,570 P Maharaj 1,971 3,243 1,610 C Möller 1,551 2,458 1,040 T Morwe 1,438 2,896 1,434 M Moses 2,180 3,127 - K Phihlela 1,779 2,419 1,313 M Ramos † - 5,790 2,938 A Singh **# 1,188 - - KXT Socikwa 1,924 2,978 - R Vallihu 2,119 3,136 1,479 LL van Niekerk 2,796 4,285 2,266

Total 25,921 43,068 17,627

† Resigned during the 2009 financial year. ** Group Executives who are members of the Board of Directors. # Appointed during the 2009 financial year. Non-executive Directors Non-executive Directors are appointed by the Shareholder for a three-year term. The Articles of Association of the Company, however, require that the Directors be submitted for re-election for each of the three years at the Company’s Annual General Meeting. Among the issues considered by the Shareholder prior to re-election is the individual Director’s performance. The Shareholder approves, in advance, the fees payable to non-executive Directors. Fees paid to non-executive Directors vary based on their appointments to the various committees of the Transnet Board. Total Total Total 2009 2008 2007 Name of Board members R thousand R thousand R thousand

FTM Phaswana (Chairman) 1,049 1,050 1,050 I Abedian 614 579 510 GK Everingham 600 725 593 NBP Gcaba 569 557 560 MJ Hankinson ** 263 - - ND Haste OBE 450 300 300 PG Joubert 638 601 488 NNA Matyumza 484 376 484 MP Moyo ** 263 - - S Nicolaou † 125 427 459 BT Ngcuka 377 514 442 NR Ntshingila 394 451 376 KC Ramon 379 376 466 SE Jonah KBE - 429 451

Total 6,205 6,385 6,179

† Resigned during the 2009 financial year. ** Appointed during the 2009 financial year.

F-91 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

37. Related party transactions (continued) Subsidiary Directors’ remunerations Executive Directors

Post-retirement benefit fund Other Total Total Total Name Salary contributions payments 2009 2008 2007 R thousand R thousand R thousand R thousand R thousand R thousand

South African Express Airways (Pty) Ltd S Mzimela 3,635 - 1,267# 4,902 3,068 2,361 S Zulu 2,231 - - 2,231 1,761 939 Autopax Passenger Services (Pty) Ltd M Bester* 547 - 2,321† 2,868 4,269 2,086 Viamax (Pty) Ltd** N Hariparsad - - - - 650 1,512 South African Airways (Pty) Ltd G Griffiths - - - - - 2,285 N Ngqula - - - - - 5,000 T Ramano - - - - - 3,056 SAA City Centre (Pty) Limited T J Nzima - - - - - 1,082 SAA Technical (Pty) Limited J Blake - - - - - 1,101 Airchefs (Pty) Limited J September - - - - - 1,094

Total 6,413 - 3,588 10,001 9,748 20,516

* Retired 31 July 2008 ** Subsidiaries disposed of in prior financial year. # Payment in terms of a long-term incentive scheme. † Comprises a retention and incentive bonus of R2,067 million and the payment of accumulated leave.

F-92 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

Non-Executive Directors

Other Fees payments Total 2009 2008 2007 Name of Board members R thousand R thousand R thousand R thousand R thousand

Autopax Passenger Services (Pty) Ltd V Jack 21 21 42 32 39 South African Express Airways (Pty) Ltd L Boyle 613 - 613 13 - E Bunyenyezi 186 - 186 13 - C Christodoulou 269 - 269 13 20 G van Heerden 179 - 179 13 - N Madalane 204 - 204 13 - B Mohale 206 - 206 48 70 S Nicolaou 181 - 181 38 60 L Nyhonyha* - - - 33 70 A Richman* - - - 19 55 B Ssamula 186 - 186 13 - M Vuso 242 - 242 43 45 Viamax (Pty) Limited F Leppan - - - 78 76 S Y U Nhlapo - - - 64 84 South African Airways (Pty) Limited T J Dikgale - - - - 20 F du Plessis - - - - 75 J G Gerwel - - - - 500 P G Joubert - - - - 300 K P Kalyan - - - - 75 B Modise - - - - 75 M Moerane - - - - 230 L M Mojela - - - - 400 M V Moosa - - - - 150 N Moyo - - - - 75 A Ngwezi - - - - 310 P Nkuna - - - - 160 C Okeahalam - - - - 210 J Schrempp - - - - 75 I A M Semenya - - - - 20 M Whitehouse - - - - 75

Total 2,287 21 2,308 171 3,269

* Resigned during the prior year.

38. Minority interests 2008 2007 2009 Restated Restated R million R million R million

Balance at the beginning of the year - 122 113 Transfer from the income statement - 4 17 Dividends paid to minorities - - (8) Minorities repurchased - (126) -

Total minority interests - - 122

F-93 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

39. Commitments 2008 2007 2009 Restated Restated Capital commitments R million R million R million

Contracted for in US Dollars 53 33 489 Contracted for in Japanese Yen 2,432 7,848 909 Contracted for in Euros 1,667 406 1,545 Contracted for in SA Rands 21,475 20,953 20,086 Contracted for in various other currencies 7 3 7

Total capital commitments contracted for 25,634 29,243 23,036

Authorised by the Directors but not yet contracted for 54,867 51,100 55,950

80,501 80,343 78,986 Commitments directly associated with assets classified as held-for-sale - - (804)

80,501 80,343 78,182

Total capital commitments are expected to be incurred as follows: Within one year 21,912 19,965 17,906 Within two to five years 58,589 60,378 61,080

80,501 80,343 78,986 Commitments directly associated with assets classified as held-for-sale - - (804)

80,501 80,343 78,182

These capital commitments will be financed by the net cash flow from operations, debt capital markets, through project finance and the use of operating leases.

F-94 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

39. Commitments (continued) Operating lease commitments 2008 2007 2009 Restated Restated Future minimum rentals under non-cancellable leases are as follows: R million R million R million

Aircraft Within one year 1 35 33 Within two to five years - 1 182 After five years - - 50

1 36 265 Commitments directly associated with assets classified as held-for-sale - (34) -

1 2 265

Land, buildings and structures Within one year 62 48 56 Within two to five years 157 131 168 After five years 245 271 323

464 450 547 Commitments directly associated with assets classified as held-for-sale - (12) (28)

464 438 519

Machinery, equipment, furniture and motor vehicles Within one year 327 267 256 Within two to five years 544 508 232 After five years 11 8 -

882 783 488 Commitments directly associated with assets classified as held-for-sale - - (82)

882 783 406

Security and maintenance contracts Within one year 77 25 11 Within two to five years 77 9 2 After five years - - -

154 34 13

Other Within one year 20 17 11 Within two to five years 11 36 16 After five years - 2 2

31 55 29 Commitments directly associated with assets classified as held-for-sale - (9) -

31 46 29

F-95 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

39. Commitments (continued) Finance lease commitments Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows: 2008 2007 2009 Restated Restated R million R million R million Aircraft, machinery, equipment and furniture Within one year 7 179 195 Within two to five years 6 51 257 After five years 60 166 177

73 396 629 Commitments directly associated with assets classified as held-for-sale - (171) (64)

73 225 565

Lease rentals receivable 2008 2007 2009 Restated Restated Future minimum rentals under operating leases are as follows: R million R million R million

Property Within one year 739 656 581 Within two to five years 1,957 1,843 2,826 After five years 2,736 4,517 4,489

5,432 7,016 7,896

Other Within one year 114 105 89 Within two to five years 360 360 436 After five years 720 810 810

1,194 1,275 1,335

40. Contingent liabilities and guarantees

2008 2007 2009 Restated Restated R million R million R million

95 95 - Various contingent liabilities where no material losses are expected to materialise

F-96 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

41. Cash flow information 2008 2007 2009 Restated Restated R million R million R million Cash generated from operations

Profit/(loss) before taxation: Continuing operations 6,718 9,093 7,478 Discontinued operations (67) (602) (50)

Profit before taxation 6,651 8,491 7,428 Adjustment for: Finance costs (refer note below) 2,996 2,782 2,791 Finance income (269) (768) (304) Dividend income - (122) (36) Depreciation, amortisation and derecognition 4,779 3,870 3,023 Increase in provision for post-retirement benefit obligation (169) (692) 395 (Reversal of impairment)/impairment of loss making subsidiaries and associates 3 1 - Impairment/(reversal of impairment ) of trade and other receivables and loans and advances 115 160 64 Impairment of property, plant and equipment 205 (1) 154 Movement in provisions 602 305 1,408 Fair value adjustments of Treasury bonds 9 59 86 Earnings from associates (82) 59 (2) Fair value adjustments on derivatives (34) (393) (2,050) Unrealised foreign exchange losses /(gains) 1 22 356 (Profit)/loss on sale of property, plant and equipment (53) 62 (27) Write-off of loan accounts - - (23) (Profit)/loss on disposal of the division/subsidiary - (40) - Discount on bonds amortised (25) 242 303 Provision for inventory obsolescence 14 172 573 Release of firm commitments 138 101 - Fair value adjustment of investment property (1,376) (1,151) (561) Other non-cash items (7) - -

Cash generated from operations 13,498 13,159 13,578

Changes in working capital Increase in inventories (323) (747) (885) Increase in receivables (1,860) (483) (335) (Decrease)/increase in payables (464) 1,503 1,353

Net changes in working capital (2,647) 273 133

F-97 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

41. Cash flow information (continued)

2008 2007 2009 Restated Restated R million R million R million Finance costs Gross finance costs before capitalisation of borrowing costs 3,016 3,039 3,062 Net foreign exchange (gains)/losses on translation (45) (15) 32 Discounts on bonds amortised 25 (242) (303)

Finance costs 2,996 2,782 2,791

Taxation paid Balance at the beginning of the year (803) (494) (1,320) Taxation as per income statement (754) (1,237) (1,205) Taxation liabilitites disposed of - - 70 Balance at the end of the year 854 803 494

Taxation paid (703) (928) (1,961)

Disposal of subsidiary Property, plant and equipment 708 1,289 8,577 Intangible assets and goodwill 3 - 108 Derivative financial assets - - 47 Other investments - - 1,123 Inventory 67 12 515 Accounts receivable and prepayments 668 300 3,305 Cash and cash equivalents/(bank overdraft) 5 108 1,922 Employee benefits - (6) (248) Borrowings (54) - (5,903) Deferred taxation liability (115) (95) - Provisions (51) (39) (518) Trade and other payables (415) (272) (7,831) Current taxation liability - (29) (70)

Net asset value 816 1,268 1,027

Selling Price 476 986 - Net cash (disposed of)/acquired (5) (108) (1,922) Loans repaid by the subsidiary (336) - -

Net proceeds 135 878 (1,922)

F-98 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence; to support future growth of the business. Capital efficiency is measured in terms of returns on equity and the asset base, and the gearing ratio. This is monitored by the Board. The capital structure of the Group consists of equity attributable to the equity holder, the South African Government, comprising issued capital, reserves and retained earnings as disclosed in the "Reconciliation of movement to reserves". Other than loan covenants, Transnet Limited is not subject to any other externally imposed capital requirements.

The Board seeks to maintain a balance between higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by sound capital position. Based on the risk profile of the Company and its revenue generating ability, the Group’s target debt to equity ratio is less than 50% and forms part of the Shareholders’ Compact with the Shareholder.

There were no changes to the Group’s approach to capital management during the year.

The Group has a centralised treasury function which performs a supporting role to the Transnet Business Units. It has the responsibility for the management of treasury and financial risks, which the Group is exposed to in pursuit of its business. Treasury is also charged with ensuring that Transnet is optimally funded. The Financial Risk Management policies are contained in a Board approved Financial Risk Management Framework (FRM). The objectives of the FRM are to ensure that the financial, operational, and strategic risks applicable to the funding, trading and investment activities are identified, monitored and appropriately managed in compliance with the Group Enterprise Wide Risk Management Framework (ERM), Public Finance Management Act 1 of 1999 (as amended) (PFMA) and other applicable legislation and regulations. Risk philosophy The overall risk management philosophy of Transnet is to the extent possible, avoid undue risks and manage business risks. However, given the nature of Transnet’s business and its major capital investment programme, it is not always possible to avoid risk. Transnet accepts, reduces or transfers risks (particularly financial risks) provided that the residual exposure accepted is within the risk appetite or tolerance limits of Transnet as determined by the Board from time to time. Integral to Transnet’s risk management philosophy and process, is the ERM, which was developed by Transnet Management and approved by the Board. In pursuit of its business, the Group is exposed to a myriad of risks, including but not limited to market, credit, liquidity, and operational risks. The long term viability, continued success and reputation of Transnet are critically dependent on the credibility of risk management, and commitment to applying leading practice in risk management. Risk profile and risk management Financial risk assessment and analysis are disclosed on a monthly basis to the Group Finance Committee (Finco) and the Group Executive Committee (Exco). These committees are responsible for reporting financial risk exposures to the Transnet Board of Directors on a bi-monthly basis. The Group’s business operations expose it to liquidity, credit, and market risk (comprising foreign currency, commodity, interest rate and other price risk), which are discussed under the headings below. Transnet does not envisage unmanageable change to risks, but given the level of volatility in the market, Treasury will continuously manage all risks closely so as to implement mitigating initiatives timeously when required. The Board approved an updated FRM during October 2008, which is an enhancement of the previous policy, but it does not incorporate any major changes.

F-99 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Liquidity risk Liquidity risk at Transnet refers particularly to the risk of the Group’s inability, to advance funds for capital expenditure, redeem and service loans in money and capital markets, finance operational costs and generate sufficient cash for unanticipated financial commitments. Liquidity risk is managed by spreading the maturity profiles of new debt issues, doing prefunding for all major rollover risk exposures and by ensuring that daily operational cash requirements are adequately funded by means of cash on hand and/or commercial paper issues and/or bank facility utilisation. During the past financial year, Transnet’s commercial paper was extensively used under the DMTN programme as a bridging financing instrument, mainly as a result of the global credit crisis and risk aversion profile of Investors. A new fifteen year bond TN23 was issued in November 2008 to continue building a Transnet yield curve without a Government guarantee. Certain thresholds, which are a combination of available cash and unutilised credit facilities, are minimum requirements of the approved policy to ensure effective liquidity risk management. The maximum tenor of money market investments may not exceed 120 days. The focal points in managing liquidity risk include the following: • Measuring and managing the contractual maturity mismatch gap between assets and liabilities, and management of current and projected cash flows; and • Managing the level of reliance on particular funding sources by ensuring there are various diverse sources of funding that can be utilised at any point in time. Transnet also produces a “five year cash flow projection” as part of the annual corporate planning process. These provide Treasury with an estimate of the Group’s future cash positions. Credit risk Credit Risk is the risk of an economic loss arising from the failure of the counterparty to fulfil its contractual obligations. Its effect is measured by the cost of replacing cash flows if the other party defaults resulting in a capital loss if the counterparty is unable to meet its obligation. The credit risk policy of the Group is aligned with the detailed requirements of the Treasury Regulations as referred to in the PFMA: • Selection of counterparties through credit risk analysis. • Establishment of investment limits per institution. • Establishment of investment limits per investment instrument. • Monitoring of investments against limits. • Reassessment of investment policies on a regular basis. • Reassessment of counterparty credit risk based on credit ratings. • Assessment of investment instruments based on liquidity requirements.

Financial assets that potentially subject the Group to concentrations of credit risk consist primarily of cash, short-term deposits, government and public corporations bonds listed on the Bond Exchange of South Africa and the market value of derivatives and trade receivables. The Group’s exposures to credit risks in respect of all Treasury related transactions are confined to credible counterparties and are managed within Board approved credit limits. Limits are reviewed and approved by the Board on an annual basis. Trade receivables are presented net of impairments. It is Treasury’s policy to perform ongoing credit evaluations of the financial position of its counterparties. Guarantees are issued under specific powers granted in terms of the PFMA, and in accordance with an approved Delegations of Authority Framework (DF).

F-100 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Investments are only allowed with international counterparties with a minimum international long term credit rating of A- and domestic counterparties with a minimum national long term credit rating of A- (zaf) as rated by a recognised rating agency and approved by the Board as an approved counterparty. In addition to this the counter party must have a minimum short term credit rating of A-1 (F1 zaf) to qualify for cash type of investments. Market risk This will be discussed under the following headings: Foreign currency, Commodity, Interest rate and other price risk. Foreign currency risk Foreign currency risk arises mainly as a result of the Group’s imports capital and operational expenditure programmes, where goods are imported from foreign countries and are exposed to currency fluctuations. Indirect foreign currency risk arises as a result of imports by local suppliers, resulting in fluctuating Rand payments as well as the inherent foreign currency component in fuel risk exposures. Transnet does not take foreign currency risk and all foreign currency risk exposures are hedged within the approved FRM and DF as soon as the supplier agreements are signed. It is Transnet’s preference to enter into Rand based financing contracts, if this can be achieved at an acceptable cost, with no FX risk recourse to Transnet. The net foreign currency position is monitored on a monthly basis, by obtaining the net foreign currency position in all the major currencies i.e. US Dollar (USD), EURO, Pound Sterling (GBP) and Japanese Yen (JPY) and other foreign currencies. Foreign currency risk exposures are fully hedged until maturity with vanilla hedging instruments after careful consideration and analysis of the tax and accounting implications. Hedge accounting is applied wherever possible to minimise income statement volatility. Commodity risk Commodity risk refers to the potential variability in Transnet’s financial condition owing to the changes in commodity prices such as Brent crude oil, steel, iron ore and others. Only fuel risk exposures are actively monitored on a regular basis and are hedged in terms of the approved FRM and DF. At the reporting date, no hedges have been entered into to hedge fuel risk exposures. Major customer agreements are structured in such a way that tariffs can be adjusted to compensate for changes in fuel prices and does provide an amount of natural risk off-set. Interest rate risk This refers to the potential variability in Transnet’s financial condition owing to changes in interest rate levels. The Group’s borrowings and investments in interest-bearing instruments creates an exposure to this risk. The Group’s objectives in managing interest rate risk are as follows: • Manage the ratio of floating rate exposures versus fixed rate exposures. • Reduce the weighted average cost of debt to ensure the gap to prevailing market rates is reduced. • Take advantage of interest rate cycles. • Support the business strategy in so far as interest rates are concerned. • Minimise the negative impact of adverse interest rate movements on the Group’s net income to within an acceptable risk profile. • Minimise the basis risk exposure where interest rate risk is netted between investments and borrowings. • Manage the duration of the debt portfolio to try and achieve alignment with the duration of the average payback periods of assets. The Group measures interest rate risk by calculating the impact of standardised interest rate shocks on the annual external finance cost budget.

F-101 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Other price risks The only other market risk the Group is exposed to, is equity price risk. Equity price risk is the risk of fair value changes in future cash flows of a financial instrument as a result of changes in the underlying share price. Transnet do not trade in equities and the only exposure of this nature at report date was a small exposure in Brazil.

Liquidity risk Bonds at carrying and nominal values: Domestic Rand bonds Transnet Ltd issues domestic bonds listed on the Bond Exchange of South Africa. The following Rand bonds were in issue at 31 March 2009: 2009 2008 2007 Bond Redemption Coupon Carrying Nominal Carrying Nominal Carrying Nominal date rate value value value value value value % Rm Rm Rm Rm Rm Rm T004* 1-Apr-08 7.50 Redeemed Redeemed 4,122 4,128 4,343 4,661 T011* 1-Apr-10 16.50 1,089 1,050 1,399 1,325 1,431 1,325 T018* 15-Jul-14 10.75 6,086 6,000 6,100 6,000 6,107 6,000 TN17 14-Nov-17 9.25 4,829 5,042 1,722 1,750 - - TN23 06-Nov-23 10.8 1,062 1,050 - - - - TN27 14-Nov-27 8.9 2,772 2,942 1,277 1,284 - - Euro 42* 18 –Apr-28 13.50 1,952 2,000 1,951 2,000 1,950 2,000 Euro 42A* 30-Mar -29 10.0 1,024 1,500 1,020 1,500 1,017 1,500

Total Bonds 18,814 19,584 17,591 17,987 14,848 15,486

* These domestic Rand bonds and Eurorand bonds are reflected on the balance sheets of the Group. The Bonds are guaranteed by the Government of the Republic of South Africa, and the Company paid R19.2 million in guarantee fees (2008: R19.2 million) (2007: R19million). The TN17, TN23 and TN27 bonds are not guaranteed. The amounts in the above tables are only in respect of bonds held at amortised cost, as the bonds designated at fair value through profit and loss are disclosed elsewhere in this annexure. Concentration of liquidity risk The Group’s sources of funding are tabled below. Seventy percent of the Group’s borrowings are widely held. (2008: eighty seven percent), (2007: eighty two percent). 2009 2008 2007 Rm Rm Rm

Standard Bank 4,023 1,725 1,573 Rand Merchant Bank 3,177 1,417 1,258 Absa Capital 1,000 - - Investec Bank 150 - - China Construction Bank 140 - - Citi Group 250 - - Nedbank 1,775 - - Momentum 100 - - Omsfin 650 - - Various holders of Promissory Notes, widely held, and traded - 2 451 2,210 Various holders of Transnet Bonds and Commercial Paper, widely held, and 25,619 19,460 18,340 traded* Cash and cash equivalents held on behalf of SAA (Pty) Limited - - 1,588 Other 129 219 181

37,013 25,272 25,150

F-102 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued)

*Includes Bonds held at amortised cost R18,814 million, Bonds held at fair value R466 million, and commercial paper R6,339 million (*2008: Includes Bonds held at amortised cost R17,591 million, Bonds held at fair value R1,223 million, and commercial paper R645 million). (*2007: Includes Bonds held at amortised cost R14,848 million, Bonds held at fair value R1,492 million, and commercial paper R2,000 million) Funding plan As a result of the Group’s major capital expenditure programme, the funding requirements over the next five years will amount to R25,984 billion and is reflected below. 2009/10 2010/11 2011/12 2012/13 2013/14 budget projection Projection Projection Projection Total total total total total total projection Funding option Rm Rm Rm Rm Rm Rm

Total funding requirement 14,830 10,349 6,837 201 (6,233) 25,984

The following schedule indicates the probable sources of funding that will be utilised by Transnet during the 2009/2010 financial year. Q1 Q2 Q3 Q4 Totals Funding option Rm Rm Rm Rm Rm

Commercial Paper 500 500 500 330 1,830 Domestic Bonds 1,250 1,250 1,250 1,250 5,000 Bank Loans 250 250 250 250 1,000 ECA Supported 500 500 500 500 2,000 Development Funds - 2,000 - - 2,000 Other foreign market instruments - 3,000 * - - 3,000

Total funding 2,500 7,500 2,500 2,330 14,830

* Note: If foreign market bond issuance is too expensive, additional domestic bonds will be issued.

The Group has access to financing facilities of R34.4 billion (2008: R31.1 billion, 2007: R28.4 billion) of which R3.6 billion (2008: R2.7 billion, 2007: R2.4 billion) are available at the balance sheet date.

F-103 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Contractual maturity analysis The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting arrangements for the Group. 2009 2009 Carrying Contractual 0 to 12 1 to 2 2 to 3 More than 5 value cash flows months years years 3 to 4 years 4 to 5 years years Rm Rm Rm Rm Rm Rm Rm Rm Non derivative financial liabilities 19,280 43,295 2,200 3,402 1,907 1,907 1,907 31,972 Bonds 3,548 7,468 (190) 625 574 766 1,742 3,951 Secured bank loans 7,795 10,607 444 970 7,075 276 271 1,571 Commercial paper 6,339 7,568 6,640 76 852 - - - Other short term borrowings 51 49 49 - - - - -

Total borrowings Group 37,013 68,987 9,143 5,073 10,408 2,949 3,920 37,494

Trade payables and accruals 6,491 6,491 6,491 - - - - - Derivative financial liabilities Cross Currency Swap 24 29 17 12 - - - - Forward Exchange Contracts used for hedging - Outflow 99 1,923 1,642 281 - - - - - Inflow - (1,769) (1,519) (250) - - - - Other Forward Exchange - Outflow 4 357 357 ------Inflow (348) (348) - - - - -

Total derivative financial liabilities 127 192 149 43 - - - -

F-104 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Contractual maturity (continued) 2008 2008 Carrying Contractual 0 to 12 1 to 2 2 to 3 More than 5 value cash flows months years years 3 to 4 years 4 to 5 years years Rm Rm Rm Rm Rm Rm Rm Rm Non derivative financial liabilities Bonds 18,814 38,889 5,551 1,745 3,228 1,478 1,478 25,409 Secured bank loans 5,755 11,533 1,977 (412)** 975 837 1,526 6,630 Unsecured bank loans 30 29 29 - - - - - Commercial paper 645 645 645 - - - - - Other short term borrowings 28 28 28 - - - - -

Total borrowings Group 25,272 51,124 8,230 1,333 4,203 2,315 3,004 32,039

Trade payables and accruals 6,988 6,988 6,988 - - - - -

Derivative financial liabilities Cross Currency Swap 197 245 111 69 65 - - - Forward Exchange Contracts used for hedging - Outflow 349 2,559 1,147 811 489 112 - - - Inflow - (2,510) (1,032) (802) (543) (133) - - Other Forward Exchange - Outflow 20 135 135 ------Inflow - (107) (107) - - - - -

Total derivative financial liabilities 566 322 254 78 11 (21) - -

**In the period zero months to two years, drawdowns on certain structured loans exceed the repayments on all loans. Hence payments in those periods are shown as net inflows.

F-105 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Contractual maturity analysis (continued) 2007 2007 Carrying Contractual 0 to 12 1 to 2 2 to 3 More than 5 value cash flows months years years 3 to 4 years 4 to 5 years years Rm Rm Rm Rm Rm Rm Rm Rm Non derivative financial liabilities Bonds 16,341 32,422 1,750 7,028 1,338 2,858 1,065 18,403 Secured bank loans 4,952 10,773 (78) 2,125 (131) 659 997 7,201 Unsecured bank loans 227 252 90 80 41 41 - - Commercial paper 2,000 2,059 2,059 - - - - - Other short term borrowings 1,630 1,632 1,632 - - - - -

Total borrowings 25,150 47,158 5,453 9,233 1,248 3,558 2,062 25,604

Trade payables and accruals 5,875 5,875 5,875 - - - - -

Derivative financial liabilities Cross Currency Swap 283 263 74 71 60 58 - - Forward Exchange Contracts used for hedging - Outflow 36 2,140 162 660 720 481 117 - - Inflow - (1,757) (150) (566) (587) (369) (85) - Other Forward Exchange Contracts - Outflow 86 318 260 57 - - 1 - - Inflow - (223) (197) (25) - - (1) -

Total derivative financial liabilities 405 741 149 197 193 170 32 -

F-106 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Credit risk Maximum exposure and analysis of exposures to credit risk The following maximum exposures to credit risk existed at 31 March 2009 date in respect of financial assets: 2009 2008 2007 Neither Neither Neither past due Past due past due Past due past due Past due Carrying nor but not Carrying nor but not Carrying nor but not value impaired impaired Impaired value impaired impaired Impaired value impaired impaired Impaired Group Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Trade and other receivables: - Low risk 3,633 3,335 298 (5) 1,980 1,879 101 (3) 1,868 1,696 172 (19) - Medium risk 637 616 21 (117) 790 567 223 (83) 695 646 49 (45) - High risk 183 154 29 (169) 249 237 12 (125) 223 212 11 (205) - Other 200 200 - - 198 198 - - 384 384 - (46) Trade receivables**** 4,653 4,305 348 (291) 3,217 2,881 336 (211) 3,170 2,938 232 (315) Miscellaneous receivables** 654 615 39 (167) 514 476 38 (74) 488 468 20 - Prepayments** 196 - - - 386 - - - 310 - - - Investments - current 285 285 - - 550 550 - - 704 704 - - Other investments shareholders loan - - - - 198 198 - - 227 227 - - Long & short short-term loans and advances* 76 76 - - 92 4 88 - 303 172 131 (95) Guarantees issued 3,005 - - - 4,746 - - - 5,696 - - - Investments (call and fixed deposits, including cash) and price risk*** 7,540 - - - 8,115 - - - 3,830 - - - Bond risk - - - - 9 - - - 17 - - -

*** The high investment risk exposure for 2009 is as a result of pre-funding done to minimise liquidity risk to fund the capital expenditure programme. * Long term R76 million (2008: R90 million, 2007: R123 million) Short term R nil million (2008: R2 million, 2007: R180 million) ** Miscellaneous receivables R654 million (2008: R514 million, 2007: R488 million) Prepayments R196 million (2008: R386 million, 2007: R310 million) Total prepayments and miscellaneous receivables R850 million (2008: R900 million, 2007: R818 million) **** Trade and other receivables as per above R4 653 million (2008: R3,217 million, 2007: R3,170 million) Transferred to non current assets held for sale R nil (2008: R223 million, 2007: Rnil) Group debtors R nil million (2008: R nil million, 2007: nil) Total trade and other receivables R4,653 million (2008: R3,440 million, 2007: R3,170 million) F-107 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Credit risk (continued) Low risk: No guarantee is required from the customer. Medium risk: 50% – 75% guarantee required by the customer. High risk: In such instances, customers are required either to provide 100% guarantee or transact on a cash basis only. The balances for other receivables and loans and advances are not disaggregated for internal reporting purposes. Bond risk: The risk that an issuer of bonds will not be able to fulfil its financial obligations on maturity date in accordance with the terms and conditions of the bond issues. IFRS 7 Financial Instruments: Disclosure, defines credit risk as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. As such Transnet will suffer financial losses on guarantees issued as the Group would be required to make good the failure by a third party to discharge an obligation. Credit enhancements in the form of title deeds and pension fund cessions for loans and advances and deposits and guarantees in respect of amounts included in trade and other receivables and loans and advances, are held by the Group. The Group did not take possession of any collateral during the current financial year (2008 and 2007: less than R1 million). Transnet is a registered credit provider in terms of section 40 of the National Credit Act, No 34 of 2005 ("The Act") and ensures compliance thereto. Trading on credit with a customer only commences when a fully executed credit agreement, as defined in the Act, is established with the customer. Before accepting any new customer a full credit assessment is conducted. The Group ensures credit checks from an independent source are performed. Customers are assigned a credit risk profile based on the outcome of the credit risk assessment. Customers who are assessed to be a credit risk are required to provide security. Based on this process, Transnet are comfortable with the value of unimpaired trade receivables.

F-108 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Credit risk (continued) The following represents the ageing of the carrying value of financial assets past due but not impaired at 31 March 2009 for the Group and Company: 1-30 days 31-60 days Greater than 60 days Low Medium High Low Medium High Low Medium High 2009 Past due risk risk risk Past due risk risk risk Past due risk risk risk

Trade receivables 252 210 24 18 18 19 (1) - 78 70 (2) 10 Other receivables 8 - - - 8 - - - 23 - - - Loans and advances ------2008 Trade receivables 162 51 109 2 22 6 16 152 44 98 10 Other receivables 7 - - - 6 - - - 25 - - - Loans and advances ------2007 Trade receivables 56 28 22 6 55 49 5 1 120 95 22 3 Other receivables 10 - - - 2 - - - 8 - - - Loans and advances ------131 - - - Guarantees and deposits to the value of R 91 million were held as collateral (2008: R78 million), (2007: R29 million).

F-109 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Credit risk (continued) The following financial assets have been specifically impaired for the Group at 31 March 2009: 2009 2008 2007 Trade Other Trade Other Trade Other Loans and receivables receivables receivable receivables receivable receivables advances

Low risk 267 1 80 - 31 - - Medium risk 158 - 150 - 29 - - High risk 18 - 405 2 72 46 455

Financial assets have been impaired based on the age of the debt and the inability to recover these specified assets. Guarantees and deposits amounting to R119 million (2008: R1 million and 2007: less than R1 million) are held with respect to these. Payment terms were renegotiated with certain counterparties in respect of trade receivables during the year.

F-110 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued)

Concentration of credit risk The Group’s twelve most significant customers (South African Industrial enterprises) comprise 46% of the trade receivables carrying amount at 31 March 2009 (2008: 43%), (2007: 33%). The following table reflects the distribution of credit risk, expressed in terms of long-term credit ratings, excluding guarantees and trade receivables. The non- rated banks are financial institutions situated in Africa where rated banks are not available. These accounts are monitored on a regular basis to ensure that credit limits are not breached. The exposures below include cash investments (call and fixed deposits), price risk exposures, operational bank balances as well as long positions in bonds in the market making portfolio (bond issuer risk) as at 31 March 2009: 2009 2008 2007 Transnet Ltd risk per long term rating R million R million R million

A+ 287 91 522 A 256 142 - AA+ - 3,177 1,015 AA 3,586 1,482 1 AA- 1,693 1,245 1,237 AAA 1,714 1,986 1,072 Unrated - 2 1 Bond Exchange 4 - -

Total 7,540 8,125 3,848

Bond Exchange Exposures are guaranteed by the Bond Exchange of South Africa.

F-111 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Concentration of credit risk (continued) The table below reflects the distribution of credit risk per financial instrument per long term credit rating category, excluding guarantees and receivables. 2009 2008 2007 Transnet Ltd risk per instrument per long term rating R million R million R million

Investments A+ 240 91 522 A 251 101 - AA+ - 2,685 1,015 AA 3,221 1,399 - AA- 1,674 1,190 1,233 AAA 1,714 1,930 1,072 Unrated - 2 1 Bond exchange 4 - -

Total investments 7,104 7,398 3,843

Derivatives A+ 47 - - A 5 40 - AA+ - 492 - AA 364 83 - AA- 20 55 4 AAA - 56 - Unrated - - - Bond exchange - - -

Total derivatives 436 726 4

F-112 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Market risk Foreign currency risk The Group’s net long (short) foreign currency risk exposures at 31 March 2009 report date are reflected below (expressed in notional amounts). 2009 2008 Other Other currencies exp currencies exp Group USD JPY EUR AUD in USD USD JPY EUR AUD in USD US$/m Y/m €m AU$m US$m US$/m Y/m €M Au$/M Us$/M

Secured bank loans (11) - - - - (17) - - - - Unsecured bank loans ------(355) - - - Brazil equity investment 16 - - - - 16 - - - -

Gross balance sheet exposure 5 - - - - (1) (355) - - -

Exposures for future expenditure (25) (27,634) (159) (2) - (116) (27,462) (190) - (5)

Gross foreign currency exposure (20) (27,643) (159) (2) - (117) (27,817) (190) - (5)

Forward exchange contracts and Currency Options 13 27,643 127 - - 2 27,817 166 - 4 Cross currency swaps 11 - - - - 17 - - - -

Net uncovered exposure 4 9 (32) (2) - (98) - (24) - (1)

F-113 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Market risk (continued) Foreign currency risk (continued) 2007 USD Group JPY EUR AUD m m m m

Secured bank loans (25) - - - Unsecured bank loans - (887) - - Brazil equity investment 18 - - - Gross balance sheet exposure (7) (887) - - Exposures for future expenditure (36) (28 491) (152) (10) Gross foreign currency exposure (43) (29 378) (152) (10) Forward exchange contracts and Currency Options 17 29 378 145 10 Cross currency swaps 24 - - - Net uncovered exposure (2) - (7) -

Sensitivity analysis The table below shows the impact on profit and loss of a stronger and weaker Rand for the Group, as a result of fair value movements of cross currency interest rate swaps and forward exchange contracts. 2009 2008 Currency Currency exposure exposure in in millions Fair Impact of Impact of millions Fair Impact of Impact of of value Rand Rand of value in Rand Rand Currency currency in Rm strengthening weakening currency Rm strengthening weakening

EUR* 50 6 (182) 182 67 148 (121) 121 JPY* 9 120 (0.5) 0.5 1,651 118 (28) 28 USD 13 (23) (55) 55 21 (55) (28) 28

2007 Currency exposure Impact of Impact of in millions of Fair value Rand Rand Currency currency in Rm strengthening weakening

EUR* 63 49 4 (4) JPY* 770 90 (7) 7 USD 44 (145) (46) 46

*Transactions in these currencies are designated as fair value hedges as detailed in note 24. The sensitivity analysis above includes the impact of fair value movements on derivative instruments that are part of effective fair value hedge accounting. The sensitivity analysis was calculated using a 95% confidence interval over a 90 day horizon, and assumes all other variables remain unchanged. There has been no change in the methods used since the previous financial year to calculate the sensitivities.

F-114 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Sensitivity analysis (continued) The table below shows the impact on profit and loss of a stronger and weaker Rand for the Group as a result of fair value movements of foreign currency options. The numbers for the Group are: 2009 2008 Nominal Nominal Fair Impact of Fair Impact of Impact of Impact of amount amount of market profit market profit profit Currency profit (loss) of options value (loss) value (loss) (loss) Rm* options CCY/m Rm Rm** Rm Rm* Rm** CCY/m AUD - - - - 2 2 1 (1) EUR 21 43 60 (61) 64 153 51 (49) Total 21 43 60 (61) 66 155 52 (50)

2007 Nominal Fair Impact of Impact of amount of market profit profit Currency options value (loss) (loss) CCY/m Rm Rm* Rm** AUD 9 1 5 - EUR 79 31 33 (18)

Total 32 38 (18)

* Weaker Rand and higher volatilities are based on a 95% confidence level, with a 100 basis point (bp) increase in interest rates. ** Stronger Rand and lower volatilities are based on a 95% confidence level, with a 100 basis point (bp) decrease in interest rates.

Value at risk (fx) The value at risk (VaR) for direct committed and uncommitted capital and operational exposures and the Brazilian equity investment is R94 million (2008: R183 million), (2007: R19 million). VaR calculates the maximum pre-tax loss expected (or worst case scenario) on a position held, over a 90 day horizon given a 95% confidence level. The VaR methodology is a statistically defined, probability-based approach that takes into account, inter alia, market volatilities relative to a position held. The Group uses historical simulation and the model assumes that historical patterns will repeat into the future.

Foreign exchange rates

The mid rates of exchange against Rand used for conversion purposes were:

2009 2008 2007

US dollar 9.5187 8.1085 7.2160 Pound Sterling 13.8784 16.1894 14.1838 Japanese Yen 10.2817 0.0813 0.0614 Euro 12.8274 12.6355 9.6132 Australian Dollar 6.6450 7.3958 5.8208

F-115 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Interest rate risk The Group’s exposure to fixed and floating interest rates on domestic financial liabilities is as follows:

Group 2009 2008 2007 Rm Rm Rm

Fixed rate liabilities (27 764) (19 225) (16 701) Floating rate liabilities (10 088) (5 218) (6 725) Totals (37 852) (24 443) (23 426) (The above table excludes liabilities held at fair value of R485 million (2008: R1,248million), (2007: R1,492 million). The exposure to floating interest rates on foreign financial liabilities is R100 million (2008: R140 million), (2007: R232 million) for the Group. The full foreign currency loan portfolio has been swapped to a fixed rand interest rate risk exposure by means of cross currency interest rate swaps. The Board approved a targeted range of fixed interest rates that may be managed to enable management to utilise interest rate yields. Sensitivity analysis The sensitivity analyses below have been determined based on the exposure to floating interest rates for both derivatives and non-derivative financial instruments at the balance sheet date. The analysis covers the 2009/2010 financial year and illustrates the possible impact on finance cost and profit and loss as a result of changes in domestic interest rates. Similar shifts are used internally when reporting interest rate risk to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

2009 2008 Impact Shift + Shift - Shift + Shift - Shift + Shift - Shift + Shift - 100bp 100bp 200bp 200bp 100bp 100bp 200bp 200bp R Million R Million R Million R Million R Million R Million R Million R Million Finance Cost impact (Increase) (68) 68 (135) 137 (35) 35 (70) 71

Impact on profit and (loss) as a result of fair value movements on market making bonds, designated funding bonds and repo’s (9) 10 (16) 21 (3) 4 (5) 8

2007 Financial Market value Market value Market value Market value instrument shift at 100bp shift at 100bp shift at 200bp shift at 200bp increase decrease increase decrease Rand loans 37 (37) 70 (75)

Promissory notes 26 (27) 52 (54)

Liabilities designated as held at fair value 18 (18) 35 (37)

F-116 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) The impact on profit and loss of higher and lower foreign interest rates on the Group is in significant as all foreign debt has been swapped to a fixed Rand interest rate risk. The sensitivity analysis was performed by doing non parallel shifts of the swap curve (plus/minus 100 and 200 basis points). The sensitivity ranges utilized are based on historical trends. The above tables assume no change in other variables. Other price risk The Group has an exposure to equity price risk the risk of price movements on the Brazilian Stock Exchange. At year end, the quoted value of the Group’s investment in Brazil was R149 million (2008: R126 milion), (2007: R131 milion). Management believes that the foreign exchange exposure on this investment is significantly greater than that of equity price risk and as such the sensitivity for this investment has been included in the foreign currency risk net position and Var calculations. Commodity price risk The table below shows the cash flow at risk scenarios against budget at various levels of Brent crude and USD/ZAR ($/R) exchange rates as at 31 March 2009: Fuel price in dollars per barrel Cash flow at risk in Rm: (negative: excess against budget) $/R5.26 $/R7.50 $/R9.52 $/R13.76 $/R15.00 Brent @ $28 817 719 630 444 390 Brent @ $53 612 426 259 (94) (196) Brent @ $78 406 133 (113) (633) (782) Brent @ $100 223 (128) (445) (1 112) (1 304)

The table below shows the cash flow at risk scenarios against budget at various levels of Brent crude and $/R exchange rates, as at 31 March 2008: Fuel price in dollars per barrel Cash flow at risk in Rm: (negative: excess against budget) $/R6.87 $/R7.49 $/R8.11 $/R8.73 $/R9.35 Brent @ $71 108 40 (29) (97) (166) Brent @ $100 (208) (305) (402) (500) (597) Brent @ $120 (419) (535) (652) (768) (884) Brent @ $130 (524) (650) (776) (902) (1 028)

The table below shows the cash flow at risk scenarios against budget at various levels of Brent crude and $/R exchange rates, as at March 2007: Fuel price in dollars per barrel Cash flow at risk in Rm: (negative: excess against budget) $/R6.25 $/R6.75 $/R7.25 $/R7.75 $/R8.25 Brent @ $44 438 363 321 279 194 Brent @ $64 238 137 80 23 (94) Brent @ $77 106 (14) (82) (149) (285) Brent @ $84 39 (90) (162) (234) (381)

F-117 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Analysis, classification and fair values of financial instruments

Categories of Financial Instruments Group 2009 2008 2007 Rm Rm Rm Financial assets Loans and receivables (including bank and cash, trade and other receivables) 11,460 10,122 8,189 Held to maturity investments - - - Available for sale financial assets 149 126 131 Fair value through profit and loss - - - Held for trading 949 1,495 6,183 Designated as at fair value through profit and loss - - -

Financial liabilities Liabilities measured at amortised cost (including trade 43,019 31,400 29,070 and other payables) Fair value through profit and loss - - - Held for trading 224 453 629 Designated as at fair value through profit and loss 387 1,248 1,268 Other – Finance lease liabilities 78 225 489

Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values: Group 2009 2008 2007 Fair value Carrying Fair value Carrying Fair value Carrying Rm value Rm value Rm value Rm Rm Rm

Loans and advances 77 77 203 90 176 123 Borrowings 38,837 36,936 26,139 25,204 22,450 24,879 Finance lease obligations 36 77 21 68 1,487 271

F-118 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Analysis, classification and fair values of financial instruments (continued) The net gains and losses on financial instruments are detailed below: 2009 2008 Liabilities Liabilities designated designated at fair value Liabilities Available at fair value Liabilities Available Liabilities through measured at for sale Liabilities through measured at for sale held for profit and amortised Loans and financial Assets held held for profit and amortised Loans and financial Assts held Group trading loss cost receivables assets for trading trading loss cost receivables assets for trading

Net gain (loss) * (47) (2,972) 183 23 - - (39) 2,717 642 (5) - Less: Discontinued operations - 19 (1) - - - - 44 7 - - Continuing operations (47) (2,953) 182 23 - - (39) 2,673 635 (5)

2007 Liabilities designated at fair value Liabilities Available Liabilities through measured at for sale Assets held for profit and amortised Loans and financial held for Group trading loss cost receivables assets trading

Net gain (loss * 88 (3,042) 476 72 * Less: Discontinued operations *** - (500) 67 - *** Continuing operations 88 (2,542) 409 72

*The net gain on Group financial assets and financial liabilities held for trading is R40 million (2008: R214 million, 2007: R2,052 million). ***The net gain on financial assets and financial liabilities held for trading pertinent to Discontinued Operations is R nil million (2008: R26 million, 2007: R75 million).

F-119 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

42. Financial instruments (continued) Basis for determining fair values Bonds Bonds are fair valued by applying BESA closing rates on the SA Bond formula. This is in respect of bonds held for trading, and for bonds designated as held at fair value. Other non derivative assets and liabilities The fair values of other non derivative financial assets and liabilities are calculated by determining the net present value of all future cash flows, discounted at prevailing market curves of the different currencies at reporting date. Derivatives Black and Scholes principles are used for valuing options. No estimates are used as all market rates are sourced from Bloomberg and all are market related. Other financial instruments The carrying amounts of financial assets and liabilities with a maturity of less than six months are assumed to approximate their fair value. Reconciliation of liabilities designated at fair value through profit and loss for the Group Contractual value payable Accrued Fair value Carrying on maturity interest movements value

2009 333 26 30 389 2008 1,153 56 39 1,248 2007 1,153 56 59 1,268

Based on the fact that the above liabilities are guaranteed by the South African Government and the fact that Transnet’s credit rating has not changed from the previous financial year, there has been no element of the change in the fair value that is attributable to credit risk.

F-120 Transnet Limited

Notes to the consolidated financial statements for the three years ended 31 March 2009

43. Subsequent Events The following significant issues have occurred since 31 March 2009. Sale of Autopax Passenger Services (Pty) Ltd Autopax Passenger Services (Pty) Ltd was sold to Passenger Road Agency of South Africa (PRASA) for R1 effective 31 March 2009, as this was the date on which risks and reward of ownership passed. The Sale of Shares agreement was signed on 1 April 2009. The sale of this business was recorded at 31 March 2009. Sale of Shosholoza Meyl The long distance commuter passenger service known as Shosholoza Meyl was sold to PRASA for R100 effective 31 March 2009, as this was the date on which risks and reward of ownership passed. A Sale of Business agreement was signed on 7 May 2009. As part of the transaction, PRASA paid an amount of R500 million to Transnet on 22 May 2009. This amount related to the reimbursement for operating expenditure incurred by Transnet prior to transfer date. The sale of this business was recorded at 31 March 2009. Pipelines tariff application The Transnet Pipelines tariff application for the 2010 financial year was rejected by NERSA. Instead NERSA decreased tariffs by 11%. This decrease is of a temporary nature due to the methodology used by the Regulator in the determination of tariffs by excluding assets under construction in the regulatory asset base (RAB) until they are brought into use, which is expected to occur progressively until 2012; the project completion date. In the interim the Company is in discussion with Government regarding an appropriate funding model for assets under construction. The following significant issues have occurred since 30 June 2009: Borrowings Subsequent to the quarter-ended 30 June 2009, Transnet finalised the following funding initiative: An additional R920 million in Transnet bonds were issued during July 2009. Subsequent to 30 September 2009, Transnet entered into a sale agreement for the disposal of its share in arivia.kom (Pty) Limited to T-Systems South Africa. All conditions precedent were met by the 4th of Janaury 2010. Subsequent to the period ended 30 September 2009, Transnet finalised the following funding initiatives: ● An additional R2.3 billion in Transnet bonds were issued. ● An additional R600 million of commercial paper was secured and R1.4 billion repaid. ● An additional R287 million in domestic loans was secured and R92 million repaid. ● An additional R1.3 billion in foreign loans was secured and R19 million repaid. These funding initiatives were completed on the strength of Transnet’s balance sheet without Government guarantees. Changes in Directors Dr I Abedian (resigned 11 August 2009) BT Ngcuka (resigned 11 August 2009) FT Phaswana (resigned 11 August 2009) Professor GK Everingham (appointed Acting Chairman 11 August 2009)

F-121 Condensed consolidated statement of financial position as at 30 September 2009, 31 March 2009 and 30 September 2008 Unaudited Unaudited and restated 30 September 31 March 30 September 2009 2009 2008 Notes R million R million R million ASSETS Non-current assets Property, plant and equipment 4 105,844 96,459 85,543 Investment properties 5,742 5,961 4,514 Intangible assets and goodwill 407 431 330 Investments in associates and joint ventures 24 24 48 Derivative financial instruments 66 178 197 Long-term loans and advances 75 77 111 Other investments and long-term financial assets 327 287 451

112,485 103,417 91,194 Current assets Inventories 2,495 2,589 2,617 Trade and other receivables 5,103 5,503 4,314 Derivative financial instruments 81 335 273 Other short-term investments 2,304 436 679 Cash and cash equivalents 5 6,512 5,880 2,561 Assets classified as held-for-sale 6 321 374 1,311

16,816 15,117 11,755

Total assets 129,301 118,534 102,949

EQUITY AND LIABILITIES Capital and reserves Issued capital 12,661 12,661 12,661 Reserves 49,001 45,673 40,901

Attributable to the equity holder 61,662 58,334 53,562 Non-current liabilities Post-retirement benefit obligations 9 2,228 2,324 2,144 Long-term borrowings 8 39,005 29,758 19,407 Derivative financial instruments 36 18 129 Long-term provisions 2,749 2,509 2,004 Deferred taxation liabilities 7 9,768 8,589 7,598

53,786 43,198 31,282 Current liabilities Trade payables and accruals 6,693 6,491 7,118 Short-term borrowings 3,952 7,255 7,330 Current taxation liability 817 854 780 Derivative financial instruments 150 109 66 Short-term provisions 2,224 2,279 2,119 Bank overdraft 1 — — Liabilities directly associated with assets classified as held-for-sale 6 16 14 692

13,853 17,002 18,105

Total equity and liabilities 129,301 118,534 102,949

F-122 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Condensed consolidated statement of income for the six month period ended 30 September 2009

Unaudited Unaudited 1 April 2009 1 April 2008 to 30 to 30 September September 2009 2008 Note R million R million Continuing operations Revenue 17,335 16,849 Net operating expenses excluding depreciation and amortisation (10,694) (10,299)

Profit from operations before depreciation and amortisation and items listed below 6,641 6,550 Depreciation and amortisation (2,925) (2,303)

Profit from operations before items listed below 3,716 4,247 Post-retirement obligation expenses 9 (19) 67 Impairment of assets (187) (110) Fair value adjustments (157) (282)

Profit from operations before income/(loss) from associates and net finance costs 3,353 3,922 (Loss)/income from associates — — Finance costs (1,634) (1,089) Finance income 263 89

Profit before taxation 1,982 2,922 Taxation (695) (861)

Profit after taxation 1,287 2,061

Profit for the period from continuing operations 1,287 2,061 Discontinued operations (Loss)/profit from discontinued operations, including profit on disposal of discontinued operations and impairments 6 (13) (400)

Net profit for the period 1,274 1,661

Attributable to the equity holder 1,274 1,661

F-123 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Condensed consolidated statement of comprehensive income for the six month period ended 30 September 2009

Unaudited Unaudited 1 April 2009 1 April 2008 to 30 to 30 September September 2009 2008 R million R million Profit for the period 1,274 1,661 Other Comprehensive Income Gains on revaluations 2,877 1,524 Actuarial loss on post-retirement benefit obligation (28) (179) Movement in hedging reserves 41 — 2,890 1,345 Income tax relating to other components of Comprehensive Income (836) (405)

Other Comprehensive Income, net of tax 2,054 940

Total Comprehensive Income for the period 3,328 2,601

Attributable to equity holder 3,328 2,601

Headline earnings reconciliation

Unaudited Unaudited 1 April 2009 1 April 2008 to 30 to 30 September September 2009 2008 R million R million Net Profit for the period 1,274 1,661 (Loss)/profit on disposal of property, plant and equipment (24) 15 (Reversal of impairment) impairments on discontinued operations (4) 32 Impairment of property, plant and equipment 59 137 Total remeasurements 55 169 Total taxation effects of adjustments (9) (38)

Headline earnings 1,296 1,807

F-124 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Condensed consolidated statement of changes in equity for the six month period ended 30 September 2009 (unaudited)

Foreign currency Actuarial Issued Revaluation translation gains/ Hedging Accumulated capital reserves reserve (losses) Other reserves profit Total Restated opening balances as at 1 April 2008 12,661 17,238 43 2,845 249 — 17,925 50,961 Total recognised comprehensive income and expenditure — 1,069 — (129) — — 1,661 2,601

Restated balances at 30 September 2008 12,661 18,307 43 2,716 249 — 19,586 53,562 Total recognised comprehensive income and expenditure — 2,253 (22) (322) — — 2,863 4,772

Balances at 31 March 2009 12,661 20,560 21 2,394 249 — 22,449 58,334 Total recognised comprehensive income and expenditure — 2,033 — (20) — 41 1,274 3,328

Balances at 30 September 2009 12,661 22,593 21 2,374 249 41 23,723 61,662

F-125 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Condensed consolidated statement of cash flows for the six month period ended 30 September 2009 Unaudited Unaudited 1 April 2009 1 April 2008 to 30 to 30 September September 2009 2008 R million R million Cash flows from operating activities Cash generated from operations 7,473 6,254 Changes in working capital 571 (1,104)

Cash generated from operations after working capital changes 8,044 5,150 Finance costs (2,157) (1,399) Finance income 263 89 Taxation paid (389) (381) Settlement of retirement obligations (144) (148) Derivatives raised and settled (339) (135) 5,278 3,176 Cash flows from investing activities Replacement to property, plant and equipment (4,737) (3,862) Expansion – property, plant and equipment (4,008) (4,433) Changes in investments, and loans and advances (1,866) (285) (10,611) (8,580) Cash flows from financing activities Borrowings raised 13,038 7,545 Borrowings repaid (7,075) (6,128) 5,963 1,417 Net increase/(decrease) in cash and cash equivalents 630 (3,987) Cash and cash equivalents at the beginning of the period 5,905 6,589

Total cash and cash equivalents at the end of the period 6,535 2,602

Cash flows from discontinued operations Cash flows from operating activities — 17 Cash flows used in investing activities — (77) Cash flows from financing activities — 58

Net decrease in cash and cash equivalents from discontinued operations — (2)

F-126 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

1. Basis of preparation The condensed consolidated interim financial statements of Transnet Limited (the ‘‘Group’’) (the ‘‘financial statements’’) are presented in South African Rands, rounded to the nearest million. These financial statements comply with IAS34, Interim Financial Reporting (‘‘IAS 34’’) and the South African Companies Act 1973 (as amended). These financial statements do not include all of the information and footnotes required by IFRS for complete financial statements. In the opinion of the Group, all adjustments considered necessary for a fair presentation have been included. Results of operations for the period ended 30 September 2009 are not necessarily indicative of results that may be expected for the full year. The 31 March 2009, consolidated statement of financial position amounts are derived from the audited consolidated financial statements but do not include all disclosures herein required by IFRS. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, included in this offering circular. The Group’s Financial Year end is 31 March.

2. Group accounting policies The abridged report has been prepared using accounting policies that comply with International Financial Reporting Standards. The accounting policies are consistent with those applied in the consolidated financial statements for the year ended the 31 March 2009, except for the following change: IAS 1 Presentation of Financial Statements has been amended to require the disclosure of a ‘‘Statement of Comprehensive Income’’ (i.e., changes in equity during a period, other than those changes resulting from transactions with owners in their capacity as owners), which is presented either in: * one statement (i.e. a statement of comprehensive income); or * two statements (i.e. an income statement and a statement beginning with profit or loss and displaying components of other comprehensive income). As a result certain income/(expense) items previously reported in the Statement of Recognised Income and Expense will now be included in the Statement of Comprehensive Income. The revised Standard also requires disclosure of the income tax relating to each component of comprehensive income in the notes to the financial statements. The revised standard also requires the disclosure of a Statement of Changes in Equity (previously this information could be presented in the notes to the financial statements if a Statement of Recognised Income and Expense was presented). Transnet has elected the two statement approach in terms of IAS 1 (revised). A condensed version of the statement of comprehensive income is required for interim purposes in accordance with IAS 34. Furthermore, other new standards and interpretations issued by the International Accounting Standards Board which are effective for the current period will have no impact on the Group’s financial results.

3. Restatements During the reporting and closing process relating to the preparation of the 31 March 2009 consolidated financial statements, the Group determined that it had certain errors in the application of its accounting policies. As a result, the Group restated its consolidated financial statements for the Financial Years 2008 and 2007 in the consolidated financial statements for the year ended 31 March 2009. As such, the restatements as disclosed in Note 8 to the 31 March 2009 annual financial statements, have been reflected in the condensed consolidated statement of financial position as at 30 September 2008 and the condensed consolidated statement of income for the six month period ended 30 September 2008, herein.

F-127 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

4. Property, plant and equipment Revaluation assessment: The Group assessed the revaluation of its pipeline networks in line with its accounting policy, which requires an independent valuation every three years as well as index valuations in the intervening periods. Accordingly, a devaluation of R141 million was recognised as at 30 September 2009 (2008: R636 million). Based on the applicable valuation methodology, the carrying value of port infrastructure required a revaluation adjustment of R2.9 billion in accordance with IAS 16 Property, plant and equipment (2008: R1.4 billion).

Impairment assessment: As a result of the downturn in the global economy, the demand for logistics requirements has been adversely affected, giving rise to an indicator of potential impairment. Accordingly impairment calculations for all assets were performed in accordance with International Financial Reporting Standards for the period ended 30 September 2009. The impairment calculations were performed in accordance with IAS 36 Impairment of Assets and based on a number of assumptions. Based on the results of the impairment calculations no impairment was required, as the value in use of the assets exceed their book value.

Capital expenditure: The capital investment expenditure for the six month period, excluding capitalised borrowing costs, amounted to R8.3 billion compared to R8.2 billion in the 30 September 2008 period, with an amount of R4.3 billion being spent on maintaining current infrastructure and equipment, while R4.0 billion was spent on expanding capacity. The capital investment programme continued to focus on the following key projects: Rail – Expansion of the Iron Ore and Coal Lines; acquisition of locomotives; and the upgrading of rolling stock and infrastructure. Despite early production and design delays, significant progress has been made in the locomotive acquisition programme with 6 of 110 coal line locomotives having been brought into service in October 2009. It is estimated that a further 15 locomotives will be brought into use over the remainder of this financial year. The delivery of the first locomotive of the 50 ‘like new’ locomotive programme for deployment in the general freight business is imminent with the delivery of all 50 locomotives expected by March 2010. The first of 44 iron ore locomotives has been delivered for testing. The current aging locomotive fleet will be augmented by approximately 150 new locomotives in the next 18 months, which will improve service levels to customers. These service levels will further improve with the commissioning of a further 100 locomotives over a 36 month period. Ports – The widening and deepening of the Durban harbour entrance channel; expansion of Durban Container Terminal; construction of the new Port of Ngqura and related rail infrastructure, Cape Town Container Terminals and acquisition of new equipment; as well as the upgrading of the Saldanha Terminal and equipment. On 4 October 2009, history was made when the MSC Catania sailed into the new deepwater Port of Ngqura to become the Ngqura Container Terminal’s first commercial vessel. The Port of Ngqura and its 60 000 hectare container terminal provides future container capacity in recognition of the considerable growth in container traffic in recent years.

F-128 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

4. Property, plant and equipment (continued) To date, Transnet has invested in excess of R6.7 billion to develop the state-of-the-art port and associated infrastructure, which will include the world-class two berth container terminal (with a further two berths under construction), a two birth multi-purpose terminal and a one-berth liquid bulk terminal. The Port of Ngqura’s advantage over other ports in Africa is that it is a deepwater port with a depth of between 16 and 18 metres, which can accommodate the new generation container vessels, carrying 6 000 to 10 000 TEUs. It will be able to have sufficient stack and berth capacity to cater for future growth up to 2 million TEUs. The terminal also boasts good inland connectivity for import and export traffic, currently able to handle 300 000 TEU’s via rail to the hinterland. Pipeline – Construction of the New Multi-Product Pipeline (NMPP) from Durban to Johannesburg. The development and construction of the NMPP project is proceeding according to schedule. The project has continued with the engineering of the two terminals and the three pumpstations along the 24 inch trunkline. The two 16 inch pipelines are nearing completion and the project remains on target for December 2011, in line with license conditions issued by NERSA. Capital investment plans for the next five years amount to R80.5 billion and relate mainly to the upgrade and expansion of rail infrastructure, port facilities and pipeline networks. Transnet is committed to both sustaining the current infrastructure and to expanding the business. The capital investment plan will be continuously reviewed in the context of the global economic downturn, as well as the associated impact of the economy on the volume levels of commodities and capacity requirements of all major customers over the next five years.

5. Cash and cash equivalents Cash generated from operations amounted to R7.5 billion, an increase of 19.49 per cent. compared to the prior period. The significant focus on working capital management has resulted in an inflow of R3.2 billion since 31 March 2009, which resulted in cash generated from operations after working capital changes increasing by 56.19 per cent. to R8.0 billion. The cash interest cover ratio at 4.2 times (30 September 2008: 3.9 times) remains strong and, importantly, it is above the target of 3.0 times. It is expected that this target will be maintained over the medium term. The Group continues to demonstrate its ability to generate strong cash flows from operations. The cash and cash equivalents per the cash flow includes discontinued operations cash balances of R24 million for the period ended 30 September 2009 (2008: R41 million).

F-129 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

6. Non-current assets classified as held-for-sale and discontinued operations

Discontinued operations The loss from discontinued operations, including (loss)/profit on disposal of discontinued operations and impairments comprises: Total Disposal groups* Other**

30 September 30 September 30 September 30 September 30 September 30 September 2009 2008 2009 2008 2009 2008 (R millions) Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Loss for the period (17) (368) (17) (463) — 95 (Loss)/profit on disposal of discontinued ops —————— Impairments – lower of cost and fair value less costs to sell 4 (32) 4 (32) — —

(Loss)/profit from discontinued operations (13) (400) (13) (495) — 95

Revenue 14 1,346 14 1,353 — (7) Net operating expenses excluding depreciation and amortisation (31) (1,681) (31) (1,674) — (7)

Loss from operations before depreciation and amortisation and items listed below (17) (335) (17) (321) — (14) Depreciation and amortisation — — — (58) — 58

(Loss)/profit from operations before items listed below (17) (335) (17) (379) — 44 Impairment of assets —————— Fair value adjustments — 5 — 5 — —

(Loss)/profit from operations before net finance costs (17) (330) (17) (374) — 44 Finance costs — (6) — (57) — 51 Finance income ——————

(Loss)/profit before taxation (17) (336) (17) (431) — 95 Taxation — (32) — (32) — —

(Loss)/profit after taxation (17) (368) (17) (463) — 95

(Loss)/income from associates —————— Net (loss)/profit for the period (17) (368) (17) (463) — 95

Attributable to the shareholder (17) (368) (17) (463) — 95 Attributable to minority interests ——————

* Disposal groups comprise Luxrail, Shosholoza Meyl, Autopax Passenger Services (Pty) Limited and South African Express Airways (Pty) Limited ** Includes inter-company eliminations

F-130 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

6. Non-current assets classified as held-for-sale and discontinued operations (continued) Businesses and investments meeting the criteria set out in IFRS 5 Non-current Assets Held-for- Sale and Discontinued Operations, are classified as ‘‘non-current assets held-for-sale’’ and are reported as discontinued operations. These entities reported revenue of R14 million in the period ended 30 September 2009, compared to R1.346 million in the prior comparative period. These entities reported a loss of R13 million in the six month period, having reduced from R400 million due to the disposal of South African Express Airways (Pty) Limited, Autopax Passenger Services (Pty) Limited and Shosholoza Meyl in the prior financial year. The Group loss from discontinued operations of R13 million comprises an operating loss of R17 million and impairment reversal of R4 million; with no profit or loss from disposals being recognised in the period ended 30 September 2009.

Assets classified as held-for-sale and liabilities directly associated with assets classified as held-for-sale

Total Disposal groups* Other**

30 September 31 March 30 September 31 March 30 September 31 March 2009 2009 2009 2009 2009 2009 (In Rand million) Unaudited Unaudited Unaudited Assets classified as held-for- sale Property, plant and equipment 288 339 79 8 209 331 Investment property 8 8 — — 8 8 Intangible assets —————— Investment in associates and joint ventures —————— Inventories — — 1 — (1) — Trade and other receivables 1212—— Cash and cash equivalents 24 25 — 25 24 —

321 374 81 35 240 339

Liabilities associated with assets classified as held-for- sale Employee benefits —————— Borrowings —————— Provisions 1111—— Deferred taxation liability —————— Trade and other payables 15 12 12 12 3 — Current taxation liability — 1 — 1 — —

16 14 13 14 3 —

* Disposal groups comprise Luxrail, Shosholoza Meyl, Autopax Passenger Services (Pty) Limited and South African Express Airways (Pty) Limited ** Includes inter-company eliminations

F-131 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

7. Deferred taxation liabilities The deferred taxation liability increased to R9.8 billion, primarily due to the revaluation of property, plant and equipment which has been recorded directly in equity (31 March 2009: R8.6 billion).

8. Borrowings The funding strategy and funding plan sets out funding objectives as well as Transnet’s funding requirements over the next three years amounting to R32.0 billion. It was estimated that the funding requirement for the year excluding refinancing of maturing commercial paper amounting to R7.0 billion would be approximately R15.0 billion. Funding raised up until September 2009 amounts to R13.0 billion which is approximately 87 per cent. of the funding requirement for the year. The commercial paper programme and long-term bonds continues to be a significant portion of the funding programme with an amount of R9.1 billion being raised in the domestic markets. An amount of R600 million has been raised from Finnvera, an export credit agency (ECA), and a further draw down of R1.9 billion has been raised from the Japan Bank for International Co- operation. The Club loan facility put in place in the prior year allowed the Group to raise an amount of R1.1 billion as well. The weighted average cost of debt (WACD) of the Group is 10.29 per cent. as at 30 September 2009, which has reduced since the prior period (31 March 2009: 11.24 per cent.). It reflects the cost-effective manner in which the required borrowings are being raised. In addition, Transnet repaid loans amounting to R7.0 billion, which related predominantly to commercial paper and domestic unsecured floating rate loans that matured in the six month period. The gearing ratio increased to 37.22 per cent. compared to 36.23 per cent. as at 31 March 2009, which is below the Group’s target range of 50.0 per cent., reflecting the significant debt capacity to fund future capital expenditure. The Company has cash on hand and deposits of R8.0 billion and adequate banking facilities to meet its current commitments (31 March 2009: 5.9 billion).

9. Post-retirement benefit obligations The Group provides various post-retirement benefits to its active and retired employees, including pension, post-retirement medical and other benefits. The two defined benefit funds, namely the Transnet Second Defined Benefit Fund (TSDBF) and the Transport Pension Fund (TPF), are fully funded with actuarial surpluses of R2.8 billion and R752 million, respectively. Transnet has not recognised any portion of the surplus on these funds as the fund rules at present do not allow for the distribution of a surplus. The post-retirement medical benefit obligation for the medical funds has remained at approximately R1.8 billion as at 30 September 2009 (31 March 2009: R1.9 billion). The post-retirement benefit obligation has decreased since 31 March 2009 to R2.2 billion as a result of benefit obligation payments made, offset by the insignificant income statement expense of R19 million for the six month period ended 30 September 2009.

F-132 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS — 263 (669) (320) (363) Total 17,335 Transnet 128,980 8 17,335 (1) (1,497) (12) (21) (2,925) 140 154 8,306 335 (1,634) (692) 1,982 (509) (3,206) es internal and external transactions intersegment Elimination of 7 (1,134) 6,641 78 18 (16) (62) 1,187 (50) (65) 1,226 (94) 1,157 67,623 (54) (20) (27) 934 (4,289) 226 (430) 1,244 (5,002) (546) Segments All Other 45 (331) 8,134 segments Total for reportable 1 3,355 (7) (1,794) (7) — (85) (5,816) (67) (1,446) (31) (2,151) (15) (1,481) (52) (1,915) 241 2,690 473 7,768 678 20,456 1,160 (4,281) 677 17,101 TPL (173) (2,877) 5,988 66,560 10,103 119,575 3,297 6,108 nsnet. Those segments include Transnet Property that manag 1 3 26 (98) (59) 316 860 TPT (791) (106) (574) (224) (349) 2 (6) (22) (87) (67) 302 (499) (182) (647) (375) TNPA 11 (53) (69) (64) 160 2,786 106 2,038 1,239 1,252 805 3,341 2,487 TRE (219) 1,760 (294) (205) (121) Projects. 6 sholds are attributable to two operating segments of Tra 99 2,952 592 TFR (177) (1,490) (787) (257) 9,890 3,757 3,643 2,488 3,489 3,499 9,791 (2,750) (1,691) (1,133) (1,070) (1,271) (1,859) 41,551 6,015 49,694 12,212 23,529 3,756 26,218 7,069 commercial and residential property and Transnet Capital External Revenues* * Revenues from segments below the quantitative thre Total Revenue Materials Segmental information For the six month period ended 30 September 2009 Internal Revenues Maintenance Energy costs Labour Other costs Total liabilities Total assets Finance Income Capital expenditure Finance cost Adjusted EBITDA Depreciation and amortisation Profit before taxation Fair value adjustments, impairments and post-retirement benefit obligations Notes to the consolidatedended interim 30 financial September statements 2009 for (unaudited) 10. the period Segmental Analysis

F-133 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS — 89 — (815) (328) (325) Total 16,849 Transnet (2) (1,633) (6) (2,303) 18 16,849 (18) (95) 2,922 (88) (15) 8,218 251 101,638 900 (1,089) 118 (200) (2,645) es internal and external transactions intersegment Elimination of 29 — (24) (14) (1,001) 6,550 (55) (29) 1,303 (95) (26) 111 933 (4,697) 185 270 5,248 48,695 (464) 1,339 (4,878) (133) 1,238 (451) Segments All Other 8— 66 (443) segments Total for reportable 2 1 3,764 (6) (1,920) — (79) (5,753) (48) (1,576) (36) (1,994) (11) (1,602) (99) (1,894) 332 3,041 577 7,565 757 20,410 1,118 (4,679) 584 8,204 756 16,646 TPL (148) (2,271) 6,265 98,146 3,241 3,169 53,673 nsnet. Those segments include Transnet Property that manag 1 60 (73) (18) 557 994 TPT (843) (100) (129) (581) (185) (294) 1 (33) (80) (71) (15) 264 (466) (257) (359) (393) TNPA 89 2,092 18———1 — (50) (86) (71) (76) 348 2,858 216 2,105 1,510 564 3,501 2,719 TRE (236) (130) tal Projects. 3 sholds are attributable to two operating segments of Tra — (29) 104 3,394 TFR (884) (259) (1,522) (334) 2,788 9,210 3,958 3,765 2,720 3,789 9,106 (2,649) (1,716) (1,269) (1,121) (1,361) (1,365) 36,891 5,586 39,725 9,679 25,748 3,524 15,476 5,756 commercial and residential property and Transnet Capi Finance Income Finance cost Maintenance Energy costs Total assets Total liabilities Capital expenditure Profit before taxation Adjusted EBITDA Dividends received and incomeassociates from External Revenues* * Revenues from segments below the quantitative thre Labour Other costs Fair value adjustments, impairments and post-retirement benefit obligations Total Revenue Materials Depreciation and amortisation Segmental information For the six month period ended 30 September 2008 (restated) Internal Revenues Notes to the consolidatedended interim 30 financial September statements 2009 for (unaudited) 10. the period Segmental Analysis (continued)

F-134 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

10. Segmental information (continued)

Operating segment performance: Transnet Freight Rail Revenue increased by 7.38 per cent. to R9.9 billion compared to the prior period due to an increase in iron ore volumes railed as a result of the Sishen expansion project, higher coal prices in accordance with newly negotiated contracts and a better yield mix from the general freight business. Service levels at Freight Rail are showing signs of improvement with the implementation of the corridor view of the business that allows for integrated planning and execution. This has resulted in the iron ore export corridor achieving a weekly tonnage record of 955 800 tons, and the Natal corridor achieving a record 32 592 TEUs (twenty foot equivalent units) transported. The challenge going forward is to ensure the sustainability of this performance. The continuation of a strict cost containment programme in the first six months of this financial year and the focus on key operational efficiencies has improved operating yields and reduced overhead costs resulting in a 25.14 per cent. improvement in EBITDA to R3.5 billion when compared to the prior period.

Transnet Rail Engineering Transnet Rail Engineering’s internal revenue decreased by 13.02 per cent. to R3.0 billion compared to the prior period due to reduced back log maintenance that is being performed for Transnet Freight Rail. Maintenance and refurbishment programmes for locomotives and wagons continue to focus on the availability and reliability of rolling stock, which continues to improve, impacting positively on the service delivery of Transnet Freight Rail. The external revenue of Rail Engineering reflected an increase of 42.73 per cent. to R805 million mainly due to the increased number of coach upgrades for the Passenger Rail Agency of South Africa even though the number of coach upgrades were lower than anticipated. The operating division has identified numerous cost reduction and service-optimisation initiatives to target savings, particularly from lean manufacturing. Quality enhancements, the containment of losses and skills-optimisation are important imperatives for the remainder of the year.

Transnet National Ports Authority Revenue reflected a decrease of 3.24 per cent. to R3.6 billion. This decline is due predominantly to negative growth in container and vehicle cargo volumes. Container volumes and vehicle volumes declined by 12.90 per cent. and 45.40 per cent. respectively when compared to the prior period. Operating costs decreased by 5.51 per cent. compared to the prior period due to cost saving initiatives implemented in the first half of the 2010 financial period. EBITDA decreased by 2.52 per cent. to R2.8 billion.

Transnet Port Terminals The continuing effect of the global economic crisis has negatively impacted container volumes and consequently, revenue for the period decreased by 8.53 per cent. to R2.5 billion. Container volumes declined by 12.0 per cent. compared to the prior period. Operating expenditure decreased by 5.68 per cent. to R1.6 billion. This decrease is mainly as a result of a reduction in overtime costs and other cost saving initiatives adopted. Consequently, EBITDA decreased by 13.48 per cent. to R860 million.

F-135 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS Notes to the consolidated interim financial statements for the period ended 30 September 2009 (unaudited)

10. Segmental information (continued)

Transnet Pipelines Revenue has decreased by 10.44 per cent. to R678 million for the six month period following a decision by the National Energy Regulator of South Africa (NERSA) to impose a 10.40 per cent. tariff decrease for the current financial year. Volumes transported increased by 5.0 per cent. When compared to the prior period, despite the economic conditions and the pipeline operating at capacity. Notwithstanding the focus on cost reduction programmes operating costs increased by 13.89 per cent. resulting in EBITDA of R473 million a decrease of 18.02 per cent.

11. Contingencies and related commitments There have been no material movements in contingencies and commitments since 31 March 2009.

12. Guarantees The sole Shareholder in Transnet Ltd, namely the South African Government, has guaranteed certain borrowings of the Group to the amount of R12.3 billion as at 30 September 2009, compared to R11.7 billion as at 31 March 2009.

13. Changes in directors Dr I Abedian (resigned 11 August 2009); B T Ngcuka (resigned 11 August 2009); and F T Phaswana (resigned 11 August 2009). Professor G K Everingham (appointed Acting Chairman).

14. Post balance sheet events The following significant issues have occurred since 30 September 2009: Subsequent to the period ended 30 September 2009, Transnet finalised the following funding initiatives: * An additional R2.3 billion in Transnet bonds were issued (interest rates ranging from 10.63% to 11.07%). * An additional R600 million of commercial paper was secured (interest rates ranging from 7.18% to 8.35%) and R1.4 billion repaid. * An additional R287 million in domestic loans was secured (interest rates ranging from 7.69% to 10.32%) and R92 million repaid. * An additional R1.3 billion in foreign loans was secured (interest rates ranging from 2.7% to 12.22%) and R19 million repaid. Subsequent to 30 September 2009, Transnet entered into a sale agreement for the disposal of its share in Arivia.kom (Pty) Limited to T-Systems South Africa. All conditions precedent were met by the 4th of January 2010.

F-136 c101680pu100 Proof 18: 26.1.10 B/L Revision: 0 Operator DavS PRINCIPAL OFFICE OF THE ISSUER Transnet Limited (Registration number 1990/000900/06) Carlton Centre 150 Commissioner Street Johannesburg, 2001 South Africa

ARRANGERS Barclays Bank PLC Goldman Sachs International 5, The North Colonnade Peterborough Court Canary Wharf 133 Fleet Street London E14 4BB London EC4A 2BB United Kingdom United Kingdom

DEALERS Barclays Bank PLC Goldman Sachs International 5, The North Colonnade Peterborough Court Canary Wharf 133 Fleet Street London E14 4BB London EC4A 2BB United Kingdom United Kingdom

Barclays Capital Inc. Goldman, Sachs & Co. 745 Seventh Avenue 85 Broad Street New York, New York 10019 New York, New York 10004 United States United States

FISCAL AGENT, EXCHANGE AGENT, PAYING AGENT, TRANSFER AGENT AND CALCULATION AGENT The Bank of New York Mellon One Canada Square London E14 5AL United Kingdom

PAYING AGENT AND TRANSFER AGENT REGISTRAR, PAYING AGENT AND TRANSFER AGENT The Bank of New York Mellon, The Bank of New York Mellon, New York Branch (Luxembourg) S.A. 101 Barclay Street Aerogolf Center 22nd Floor 1A, Hoehenhof New York, NY10286 L-1736 Senningerberg Luxembourg

LEGAL ADVISERS TO THE ISSUER As to English and United States law As to South African law Clifford Chance LLP Deneys Reitz Inc. 10 Upper Bank Street 82 Maude Street Canary Wharf Sandton 2196 London E14 5JJ South Africa United Kingdom LEGAL ADVISERS TO THE ARRANGERS AND DEALERS As to English and United States law As to South African law Latham & Watkins (London) LLP Webber Wentzel 99 Bishopsgate 10 Fricker Road London EC2M 3XF Illovo Boulevard United Kingdom Johannesburg 2196 South Africa

AUDITORS OF THE ISSUER Deloitte & Touche The Woodlands 20 Woodlands Drive Woodmead, 2196 South Africa

imprima — C101680