J.P. Morgan Emerging Markets Learning Forums

Transcription

1 J.P. Morgan Emerging Markets Learning Forums Forum 6: General Market Nuances: Sub-Saharan Africa and Market Expansion S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L August 24, 2010

2 J.P. Morgan Emerging Markets Learning Forums J.P. Morgan Network Management has launched a series of Emerging Markets Learning Forums consisting of monthly client dial-in sessions covering key topics around investing in emerging and developing markets. Forums will address general nuances of emerging markets, such as market entry, account structure, trade settlement, foreign exchange and regulations. Alongside these general forums will be specific market forums, which will provide clients with the key characteristics on the mechanics of markets such as India and China along with expanding regions such as the Middle East and Africa. TODAY S FORUM: August 24, 2010 at 9 a.m. London / 4 p.m. Hong Kong and 3 p.m. London / 10 a.m. New York Key Market Nuances: Sub-Saharan Africa and Market Expansion This forum will provide clients with an overview of our Sub-Saharan markets by providing key nuances on market entry, trading & settlement, FX and recent and future developments. UPCOMING FORUMS: September 28, 2010 at 9 a.m. London / 4 p.m. Hong Kong and 3 p.m. London / 10 a.m. New York Key Market Nuances: Russia This session will provide an overview of the Indian market covering topics such as market entry and account structure, Trading & FX, settlement including margin requirements and recent developments. October 26, 2010 at 9 a.m. London / 4 p.m. Hong Kong and 3 p.m. London / 10 a.m. New York Key Market Nuances: China This session will cover the various types and nuances of Corporate Actions in Emerging Markets as well as tax requirements and characteristics. PAST FORUMS: Market Entry, Account Structure & Regulations ; Key Nuances of the Middle East ; Trading, Settlements & FX in Emerging Markets ; Key Nuances of India ; Corporate Actions and Tax in Emerging Markets FUTURE FORUMS will cover the following topics: Russia, China, Brazil Materials and conference numbers will be distributed approximately 1 week before each session. Sessions will be recorded and a replay will be available for 14 days after each forum. We welcome and encourage you to submit suggestions for future forum topics. Should you have any questions or suggestions, please contact network.client.consulting@jpmorgan.com. 1

3 Agenda Introduction and Regional Overview Market Overviews Botswana, Ghana, Kenya, Namibia, Nigeria, Uganda, WAEMU, Zambia & Zimbabwe J.P. Morgan s Market Expansion Plans 2 I N G F O R U M: S U B S A H A R A N A F R I C A & M A R K E T E E X P A N S I O N

4 Introduction and Regional Overview Key Facts Challenges Most actively traded African markets: South Africa, Egypt & Morocco. Nigeria and Kenya have seen a trend for more clients to enter in the last year following a flight from these markets in late 2008/2009. Investors tend to trade in small volumes in other African markets. However interest is increasing. Increased interest in Government Debt across the emerging African markets through Primary Auctions Ghana, Kenya and Zambia. Limited opportunities for secondary trading Government debt in many markets. Investors tend to have a buy and hold strategy. Barclays sale of its subcustodian services to Standard Chartered has been approved by the regulators in most countries (Zimbabwe still pending). Standard Chartered already has a significant footprint in Africa for Commercial Banking Services and globally for subcustodian services. Transitions to the Standard Chartered custody platform should commence in Q FX Liquidity: Small markets; big trades have literally "moved" the market. Securities liquidity challenges: Many markets have limited listings and due to the requirement of local pension funds to invest the majority of their fund locally, this results in a severe lack in availability of equities and debt. Limited infrastructure: Limited options for local brokers & subcustodians. Market regulatory framework and corporate governance still emerging. Automatic Trading Systems (ATS) & Central Securities Depository (CSD) infrastructure being implemented across the region with differing impact to investors per market. Most Sub-Saharan markets remain frontier markets with challenges around servicing big foreign institutions. WAEMU & Zimbabwe are restricted markets by J.P. Morgan. 3

5 Africa Emerging / Frontier Markets MOROCCO TUNISIA WESTERN SAHARA THE GAMBIA GUINEA BISSAU SENEGAL SIERRA LEONE MAURITANIA GUINEA LIBERIA J.P. Morgan Live Markets J.P. Morgan Markets under investigation COTE D IVOIRE West African Economic and Monetary Union (WAEMU) consists of Benin; Burkina Faso; Cote d'lvoire; Guinea-Bissau; Mali; Niger; Senegal; Togo) MALI WAEMU BURKINA FASO GHANA ALGERIA BENIN TOGO EQUATORIAL GUINEA NIGER NIGERIA CAMEROON GABON 4 LIBYA CHAD REP. OF THE CONGO ANGOLA NAMIBIA CENTRAL AFRICAN REPUBLIC EGYPT SUDAN DEMOCRATIC REPUBLIC OF THE CONGO (ZAIRE) RWANDA BURUNDI ZAMBIA BOTSWANA LESOTHO SOUTH AFRICA ZIMBABWE ERITREA ETHIOPIA UGANDA KENYA TANZANIA MOZAMBIQUE SWAZILAND DJIBOUTI SOMALIA MALAWI MADAGASCAR MAURITIUS

6 Agenda Introduction and Regional Overview Market Overviews Botswana, Ghana, Kenya, Namibia, Nigeria, Uganda, WAEMU, Zambia & Zimbabwe J.P. Morgan s Market Expansion Plans 5 I N G F O R U M: S U B S A H A R A N A F R I C A & M A R K E T E E X P A N S I O N

7 Botswana Market Entry Segregated securities account structure; account name at the CSD: subcustodian nominee / safekeeping acct number. Omnibus Account Structure allowed but not recommended due to potential trading issues when an ATS is launched in Nominee Concept recognised. There are no documentation requirements. Market opening timing is around 1 week. Depository account ID will be obtained by J.P. Morgan and must be quoted when trading. Instruments Tradable Foreign investors can participate in any listed Equity / Bond issue with the exception of Bank of Botswana Certificates (BoBCs) issued by the Bank of Botswana. Equities & Corporate Bonds settle on a T+4 basis; Government Debt settles on a T+3 basis Equity market is now dematerialised; dematerialisation of Equities commenced with the implementation of the Central Securities Depository of Botswana (CSDB) on 22 May 2008 and completed in December 2008 for local listings. Foreign dual listings have also commenced. There is now a DVP/RVP system for Equities. Securities are transferred by the CSDB via book-entry transfer upon confirmation of cash settlement by the settlement bank (Standard Chartered Bank Botswana). Corporate Bonds remain physical until legislation is amended to allow them to be transferred electronically at the CSD. Government Debt is dematerialized. 6 Foreign Exchange Agent FX only Third Party FX is not supported by J.P. Morgan. FXs must have an underlying securities trade. Liquidity can be poor at times. Market Summary & Developments 32 listed companies as of August 2010 with USD 4.4 billion (BWP 30 billion) of held Equities. Liquidity is a major issue in the securities market. There are limited listed equities particularly of interest to Foreign Investors. Local Funds tend to hoard positions (Equity & Debt) due to local regulatory requirements to invest locally (Pension Funds 35%). Botswana Stock Exchange (BSE) implemented the Central Securities Depository of Botswana (CSDB) on 22 May 2008 for the clearing and settlement of equities. Government Bonds continue to be held via the Bank of Botswana and will not be held with the CSDB. Corporate Bonds continue to be held physically. The BSE has issued a tender for the implementation of an Automated Trading System (ATS) which closed last week. BSE plans to implement the ATS by the end of T-Bills were launched in 2008 as a new Government Debt instrument. Regulatory structure of the market has been changed since April New organisation formed by Ministry of Finance (MoF): Non-Bank Financial Institutions Regulatory Authority (NBFIRA).

8 Ghana Market Entry Segregated securities account structure; account name at the CSD: subcustodian nominee / safekeeping acct number. There are no documentation requirements. Market opening timing is around 1 week. Depository account ID will be obtained by J.P. Morgan and must be quoted when trading. Clients need to open trading accounts with brokers which are linked to the custody account held with the agent. Instruments Tradable Equities & Corporate Bonds settle on a T+3 basis; Government Bonds settle on a T+0 or negotiable OTC) Buy-ins are enforced by the Ghana Stock Exchange (GSE) on SD+3 Equities and Corporate debt are held in the GSE Securities Depository Company (GSD) in dematerialised form. Securities must be dematerialised to trade on the GSE. The Bank of Ghana Central Securities depository (CSD) holds Government debt securities in dematerialised form which are listed on the GSE and traded OTC. DVP / RVP occurs on the books of the GSD for equities and corporate debt and on the books of the CSD for Government Bonds. Equities and corporate debt need to be transferred to a client s trading account with a broker before 9:00 a.m. on trade date to enable the broker to sell securities. FOP Transfers: The GSE must grant permission for a Free of Payment (FOP) transfers to be effected. FOP transactions will only be permitted if there is no change of beneficial owner. 7 Foreign Exchange There are no central bank currency controls, however due to the liquidity and difficulty in moving money around in the market only Agent FX is supported by J.P. Morgan. There are no repatriation restrictions. Currency liquidity remains an issue. Market Summary & Developments 35 listed companies, 3 corporate bonds & 131 Government bonds (August 2010). Equities: USD 4.1 billion (GHS 5.9 billion) (August 2010) Zero GGT, 8% WHT on Equities, 10% WHT on Fixed Income The GSE introduced a new Automated trading system in March 2009, along with a new depository (GSD) for equities and corporate debt. From March 2009, Government Securities were no longer traded on the GSE and reverted to OTC trading format. The market is slowly moving to a dematerialised state but many positions remain physical. Foreign investors are not permitted to invest in Government securities with a tenor of less than 3 years.

9 Kenya Market Entry Segregated securities account structure is now recommended following the implementation of the new ATS system at the NSE; account name at the CSD: subcustodian nominee / safekeeping acct number. There are no documentation requirements. Market opening timing is around 1 week. Depository account ID will be obtained by J.P. Morgan and must be quoted when trading. Nominee Concept recognised. Instruments Tradable Equity & Corporate Debt settle on a T+4 basis, Government Debt settles on a T+3 basis. Equity & Corporate Debt securities are immobilized; Government debt is dematerialized. Settlement limits introduced by market (NSE, CDSC & CMA) in January If breached by subcustodians, 20% of purchase value must be pre-funded by clients on T+2 with settlement bank. No Formal Matching Informally via the Subcustodian Buy-ins are enforced on T+5 by the exchange if the selling broker fails to deliver securities by the morning of T+5 (SD+1) There are no laws restricting the free transfer of client s assets, however this is restricted to NCBO transactions. According to Exchange Control Regulations, all free of payment trades have to be approved by the NSE and the Capital Markets Authority. 8 Agent FX market Foreign Exchange Proof of inward remittance of foreign currency is a prerequisite for the repatriation of funds from a sale transaction. Clients should be aware that delays could potentially be experienced when remitting large amounts out of the country due to the relatively illiquid nature of the Kenyan Shilling. Market Summary & Developments 42 listed companies as of August 2010 with a capitalisation of USD 14.2 billion (KES 1,143 billion). Investors should be aware that the central depository established by the CBK is not supported by a separate legal framework or independent capitalization. As such, any systemic failures or risk exposures would fall under the jurisdiction of the CBK (Central Bank of Kenya). Plans to merge together the East African Bourses have been approved, which will involve the Dar es Salaam Stock Exchange (DSE) of Tanzania, the NSE of Kenya and the Uganda Securities Exchange (USE), however this has stalled during 2009 and the focus at present is on an order routing system for Kenya, Tanzania, Uganda & Rwanda. Demutualization of the Nairobi Stock Exchange (NSE): Draft regulation has been completed and is expected to be fast tracked through Parliament in the coming months. Plan is initially to give 20% stake to the Government and leave brokers with 80%. Following this a Private placement is likely to reduce the brokers stake to 40%. Minimum capital requirements have recently been significantly increased for local banks and brokers by CBK & CMA.

10 Namibia Market Entry Omnibus accounts structure is operated in the market. Nominee concept is recognised in the market No documentation required. Estimated 2-3 days lead time to open accounts. There are no laws restricting the free transfer of client s assets, however this is restricted to NCBO transactions. All free of payment trades have to be approved by the regulator NAMFISA Equity (T+5) Instruments Tradable Physical securities market. Re-registration is required through the market s registrars upon settlement No Formal Matching Informally via the Subcustodian Buy-ins are enforced by the exchange Govt Debt (Negotiable T+3 standard for FIs) 9 The Namibian Dollar (NAD) is a pegged 1:1 to the South African Rand (ZAR) and is not a freely tradable currency. Agent FX funding model Foreign Exchange Third Party FX is not permitted Market Summary & Developments The market is dominated by dual listings which inflate the market capitalisation, but in reality result in all foreign investors trading away from the local market at the JSE or LSE 7 local stocks with a market capitalisation of USD 1 billion as at August FNB accounts for 43% of the value. Namibia Stock Exchange (NSX) launched a DEVX market in 2008, where they list mining exploration project companies. They plan to re-brand this segment to ExploreX in the future. T-Bonds are held physically and would require a change in the finance act to be held electronically. T-Bills are held on an electronic registrar by BoN as a defacto CSD. Although legislation does not allow for a CSD at present, this is market practice.

11 Nigeria Market Entry Segregated securities account structure Market opening timing is around 1 week. Clients have to provide minimal market entry documentation. J.P. Morgan s subcustodian requires a list of brokers that the client plans to trade with. While no particular format, this letter allows local brokers to place trades across the omnibus Stanbic Trading Account in order to facilitate broker to subcustodian settlement. Instruments Tradable Equities & Corporate Debt (T+3) Government Bonds (T+2 OTC) Informal matching by subcustodian Buy-ins are performed on T+5 by the Nigerian Stock Exchange (NSE). Cash moves before securities within the Central Securities Depository (CSCS) resulting in intra-day exposure to the appointed cash clearing bank. Shares must be available in the subcustodian s trading account before a sale trade can be executed on the exchange, where they are held until SD. All equities trading must be executed across the Nigerian Stock Exchange. Government bonds are listed on the NSE, but mainly traded OTC. 10 Agent FX Market Foreign Exchange A Certificate of Capital Importation (CCI) tracks the use of funds as well as any income received from investments, and is required for any repatriation The Central Bank of Nigeria (CBN) introduced Foreign Exchange controls at the end of 2008 due to high demands for USD and temporarily closed the interbank FX market until May Foreign investors who invest in government bonds and sell government securities to local investors within one year of acquiring the relevant securities, are not allowed to repatriate the proceeds from the sale until one year from acquiring the relevant securities has expired (funds can be reinvested). 260 Listed Companies Market Summary & Developments Equities: USD 39.7 Billion Assets (August 2010) 10% WHT (except Govt Debt 0%) 10% CGT (though share transactions are exempt) Foreign investors cannot invest in government securities that possess a maturity period of less than 1 year Overdrafts are not permitted.

12 Uganda Market Entry Segregated Account Structure is required for equities and fixed income instruments. Nominee Concept recognised, however financial stocks have to be held at beneficial owner level and 5 of 7 stocks listed fall into this category. PoA required at the point entry to the market only. Estimated 2-3 days lead time to open accounts. There are no laws restricting the free transfer of client s assets, however this is restricted to NCBO transactions. According to Exchange Control Regulations, all free of payment trades have to be approved by the Capital Markets Authority (CMA). Equity (T+5) Instruments Tradable Settlement is now via the CDS in dematerialised form. Negative affirmation of matching is utilised by the CDS on T+1 for the subcustodian to become liable for settlement Standard Chartered act as the settlement bank No Formal Matching Informally via the Subcustodian Govt Debt (T+3) 11 Foreign Exchange The Ugandan Shilling (UGX) is a freely tradable currency. The market is funded via the J.P. Morgan Treasury Desk model Third Party FX is not permitted at present, although under investigation. Currency liquidity can be a challenge if sizeable flows (US$5mn+) are required Market Summary & Developments 7 Listed Companies as of August 2010 with a market capitalisation of USD 760 Million. Stanbic Bank accounts for 68% of the market cap. The CDS was launched in February 2010 with dematerialisations commencing from March An ATS is planned to be launched following the successful dematerialisation of the listed securities. Following this the equity settlement cycle is expected to be shortened to T+3. Plans to merge together the East African Bourses have been approved, which will involve the Dar es Salaam Stock Exchange (DSE) of Tanzania, the NSE of Kenya and the Uganda Securities Exchange (USE), however this has stalled during 2009 and the focus at present is on an order routing system for Kenya, Tanzania, Uganda & Rwanda led by the NSE.

13 West African Economic & Monetary Union (WAEMU) Market Entry There are no market documentation requirements, however due to the political & economic situation in the WAEMU region, the market is currently restricted by J.P. Morgan and requires a side letter to the CGA to be acknowledged before market entry is approved. J.P. Morgan operates a segregated account structure. Lead time 1-2 weeks. West African Economic and Monetary Union consists of Benin, Burkina Faso, Cote d'lvoire, Guinea-Bissau, Mali, Niger, Senegal, Togo) Instruments Tradable Equity, Corporate Debt, & Government Bonds (T+3) Trading sessions Monday Friday from 8:30 to 10:30 with 15 minute fixing session. The price of securities is determined via a quotation process calculated during the fixing period. Settlement is compulsory on settlement date. No Formal matching Subustodians confirm trades booked with the Central Depository. Unconfirmed trades by T+1 are realigned back to the broker to settle. Buy-ins initiated on SD by the Central Depository (DCBR) Not true DVP / RVP - The Clearing Bank is credited with net funds on SD from participants. The DCBR instructs the Settlement Bank to make net payment at the same time securities are transferred for value SD. Settlement confirmation and account balance statement issued by the DCBR after each settlement cycle is taken as proof of ownership. Free of Payment is not permitted in the market. Market is dematerialised. 12 Agent FX Market Foreign Exchange XOF is primarily concluded against the Euro, which has a fixed exchange rate of :1 Lack of liquidity in the market may bring about delays in repatriating currency. Market Summary & Developments 38 equities and 28 Corporate & Government bonds Market Capitalisation: Equities USD 6 billion (XOF 3,083 billion) (August 2010); Debt USD 1.03 billion (XOF 491 billion ) (March 2010) 10% WHT for Equities, 12% WHT for Corporate Bonds, 0% WHT for Government Bonds; 0% CGT The Bourse Regionale des Valeurs Mobilieres (BRVM) and the Central Depository (DCBR) was established at the end of 1996 as a regional stock exchange & depository in the eight countries of the West African Monetary Union (WAEMU) - Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo. The BRVM began executing trades in September The Union Monetaire Ouest Africaine (UMOA) is the overall regulator of the market participants, while the UMOA's appointed Regional Council is responsible for the creation, organization, functioning, and control of the regional financial market including the exchange and the central depository. The Banque Centrale de l'afrique de l'ouest (BCAO), based in Senegal, is the central bank for the UMOA countries, while the Commission Bancaire, a pan-umoa banking commission, overseas banking institutions.

14 Zambia Market Entry Segregated securities account structure; account name at the CSD: subcustodian nominee / safekeeping acct number. Omnibus Account Structure allowed but not recommended due to potential trading issues following launch of ATS. Nominee Concept recognised. CSD (Depository) ID Code introduced August 2009 required when instructing the trade with the Broker. Market entry is relatively quick (around 2 days) There are no restrictions on Free of Payment (FOP) transfers. However, these trades must be agreed by the LuSE prior to going across the appropriate accounts at the LuSE Central Securities Depository. Instruments Tradable The LuSE settlement for Equities is on a T+3 basis. Zambia Treasury Bonds: Monthly Primary Auctions. Secondary Market in Treasury Bonds (T+0 settlement) is LuSE listed but very illiquid and most trades are done via Primary Auction level. Zambia Treasury Bills: Weekly Primary Auctions. Secondary Market in Treasury Bills is limited to local Commercial Banks. LuSE CSD: For Equities there is a non simultaneous DVP / RVP system, where the movement of securities takes place on T+3 9 a.m. and payment is received via real time gross settlement system T+3 11 a.m. 13 Agent FX Market. Foreign Exchange Liquidity is very poor at times with several sessions being needed to fulfil larger orders Small FX Market within the country Third Party FX is permitted but not recommended due to delays in payments being received Market Summary & Developments 21 Listed Companies as of August 2010 with a capitalisation of USD 2.7 billion The Zambia regulatory structure is such that the Lusaka Stock Exchange (LuSE), its CSD, the brokers, fund managers and custodian banks are regulated by the Securities Exchange Commission (SEC). The SEC also oversees and monitors local collective investment schemes. The LuSE CSD operates on an immobilised share certificate basis. However, the authorising legislation for both the LuSE CSD and that managed by the Bank of Zambia for Treasury Bills is yet to complete its passage through Parliament and become law. New legislation expected with the new ATS and CSD Developments The Lusaka Stock Exchange has implemented ID numbers from August 1, 2009 onwards. Zambian Brokers will now only accept trade orders with the ID numbers quoted. IPO regulation unclear on Foreign Investor participation. 15% WHT +1% medical levy tax applicable of interest derived from Treasury Bills and Treasury Bonds. 0% CGT.

15 Zimbabwe Market Entry Segregated securities account structure Omnibus Account Structure allowed but not recommended due to potential trading issues when an ATS is launched. Nominee Concept recognised. There are no market documentation requirements, however due to the Political & Economic situation in Zimbabwe, the market is currently restricted by J.P. Morgan and requires a side letter to the CGA to be acknowledged before market entry is approved. Equity transfers Free of Payment (FOP) are only allowed if there is no change in beneficial owner Market entry / exit via the cross border route with a multi listed security requires Stock Exchange approval (i.e. Old Mutual) no longer required due to liberalisation of the repatriation of funds. Instruments Tradable Equities only. Govt Debt is limited and only available to local investors only Following the change in the settlement currency from ZWD to USD in February, 2009, the Zimbabwe Stock Exchange (ZSE) moved the settlement cycle for equities from T+3 to T+5 with effect from 2 March Market does not operate a true DVP / RVP system: physical certificates versus RTGS payments. The market remains physical and re-registration is still required. Registration takes 1 day to 1 week under normal circumstances. 14 Foreign Exchange Settlement is in USD. There is no settlement or pricing in ZWD. In February 2009, the Reserve Bank of Zimbabwe (RBZ) introduced a phased program of liberalisation of the country s trade and exchange controls. As such, the remittance of proceeds of income-related transactions such as dividends, profit, and capital appreciation shall no longer require prior Exchange Control/RBZ approval. Market Summary & Developments 81 Listed Companies with market capitalisation of USD 3.1 billion Hyperinflation brought under control with introduction of USD - currently running at 6.5%. Market settles securities transactions vs. USD but systems market wide cannot support USD at present. Indigenisation Bill is still pending and has not yet been revoked CSD introduced for T-Bills in T-Bills are not available to Foreign Investors. Political and Economic situation remains uncertain.

16 Agenda Introduction and Regional Overview Market Overviews Botswana, Ghana, Kenya, Namibia, Nigeria, Uganda, WAEMU, Zambia & Zimbabwe J.P. Morgan s Market Expansion Plans 15 I N G F O R U M: S U B S A H A R A N A F R I C A & M A R K E T E E X P A N S I O N

17 Market Expansion Plans J.P. Morgan s network expansion agenda for 2010 and beyond has been developed based on a commitment to providing our clients with coverage of all markets where both sufficient infrastructure exists and there is investor interest. J.P. Morgan has done extensive research and developed expertise in emerging and frontier markets. Many of these frontier markets are in the early stages of development, making them very interesting yet challenging places to invest, especially for foreign investors. J.P. Morgan is focused on providing our clients with the support they need for new markets to create the best experience possible. The lack of well-established foreign investor activity often means that there is a need to educate local participants on the requirements of foreign investors as well as work with the local regulators and infrastructures to enhance the operating environment. J.P Morgan closely monitors a large number of new markets and is continually identifying opportunities for future expansion and prioritising these opportunities based on our clients markets of interest. Ultimately, it is our clients who drive our agenda for expansion as we embrace New Horizons. 16

18 New Horizons Markets On Watch Algeria Angola Libya Malawi Tanzania Foreign investors not permitted to invest in equities at present (only 2 listed on Exchange); Reform of the market is planned but has been for some time; No recognised international banks providing subcustodial services in the market to date; Stock Exchange (BVDA) still awaiting launch, no confirmation of dates; 2011 likely; Challenges with strict controls of currency flows by Bank of Angola (CCIs Required); Lack of secondary market for Government debt instruments (T-Bills & T-Bonds); Stock Exchange (LSM) & CSD in place with 10 local listings to date; Issues with repatriation of funds are evident although not prescribed in the regulations; No recognised international banks providing subcustodial services in the market to date; Physical securities market no CSD in place at present. New Securities Bill passed in July 2010; Strict exchange controls exist in the market with all approvals via the Reserve Bank. Seasonal FX liquidity driven by local Tobacco harvest; Currency is fixed to the US$, however this is approx. 35% above the un-official market rate; Foreign investor limits (60%) already reached in 7 of top 10 stocks on the Exchange (DSE); Liquidity extremely thin in the equities market, with minimal daily turnover; Pre-funding market, though brokers have agreed for local subcustodians to hold funds until settlement; 17

19 This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered (including such client s subsidiaries, the Company ) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan. S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L The information in this presentation is based upon any management forecasts supplied to us and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. J.P. Morgan s opinions and estimates constitute J.P. Morgan s judgment and should be regarded as indicative, preliminary and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. In addition, our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or any other entity. J.P. Morgan makes no representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting effects of consummating a transaction. Unless expressly contemplated hereby, the information in this presentation does not take into account the effects of a possible transaction or transactions involving an actual or potential change of control, which may have significant valuation and other effects. J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging, financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities Inc., J.P. Morgan plc, J.P. Morgan Securities Ltd. and the appropriately licensed subsidiaries of JPMorgan Chase & Co. in Asia-Pacific, and lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank, N.A. J.P. Morgan deal team members may be employees of any of the foregoing entities. This presentation does not constitute a commitment by any J.P. Morgan entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services. 18