ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD PRESENTATION TO THE PORTFOLIO COMMITTEE: 7 NOVEMBER 2006

PRESENTATION OUTLINE  Introduction & Governance Report (Ms N D Shabalala, Board Chairperson)  Company Performance (Dr L C N Makuleni, Managing Director)  Human Resource Report (Ms S A Bokwe, GM: Human Resources)  Financial Performance for 2005/06 (Mr M P van Jaarsveld, GM: Finance)  Conclusion (Dr L C N Makuleni & Ms N D Shabalala)

THE OBP BOARD Front (LtR): Dr Linda Makuleni (Managing Director), Ms Nozibusiso Shabalala (Board Chair) Back (LtR) Mr Montwedi Seane, Ms Stefanie Burger (Company Secretary), Adv Dave Mitchell, Dr Ruth Forbes

THE OBP LTD EXECUTIVE TEAM Front (LtR) Dr Linda Makuleni (MD), Mr Willie Botha (National Sales Manager) Back (LtR) Mr Pieter Pieterson (GM: TQM), Dr Alfred Kgasi (Business Development Manager), Ms Siphokazi Bokwe (GM: HR), Dr Baty Dungu (GM: Ops, R & D) Mr Pierre v Jaarsveld (GM: Finance)

GOVERNANCE REPORT

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD  The Board retains full and effective control of the Company  To this end, the Board met 6 times  The Board is committed towards Good Corporate Governance:  Induction of Directors  Director Development Programme  Conducted assessment of Board and Board Committees

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD AND COMMITTEES  Annual Board Plan – considering Reporting requirements:  Quarterly Board Meetings  Three Meetings of Committees per annum  Two Strategy Planning & Review Sessions per annum

FUNCTIONING OF BOARD COMMITTEES  Remuneration Committee:  Board approved Committee Charter  3 Meetings to deal with 2005/06 matters  Membership:  Dr M Madikizela (Chairperson)  Adv D J Mitchell  Mr S S M Seane  Ms N D Shabalala  Ms S A Bokwe (GM: Human Resource)  MD, GM: Finance (by invitation)

FUNCTIONING OF BOARD COMMITTEES  Remuneration Committee Activities:  Remuneration of:  Directors  Executives  Employees  Performance Assessment of Executives  Human Resource Matters

FUNCTIONING OF BOARD COMMITTEES  Audit Committee:  Board approved Committee Charter  3 Meetings to deal with 2005/06 matters  Membership:  Adv D J Mitchell (Chairperson)  Dr R U Forbes  Ms N D Shabalala  Mr M P van Jaarsveld (GM: Finance)  MD, Internal Auditor, External Auditors (by invitation)

FUNCTIONING OF BOARD COMMITTEES  Audit Committee Activities:  Effectiveness of Internal Controls  Internal Audit  External Audit  Financial Matters  Management Accounts  Investments  Financial Policies  Annual Financial Statements and Annual Report

FUNCTIONING OF BOARD COMMITTEES  Risk Management Committee:  Board approved Committee Charter  3 Meetings to deal with 2005/06 matters  Membership:  Dr R U Forbes (Chairperson)  Adv D J Mitchell  Ms N D Shabalala  Dr L C Makuleni (Managing Director)

FUNCTIONING OF BOARD COMMITTEES  Risk Management Committee:  Membership (Continued):  Dr B Dungu (GM: Ops, R & D)  Mr P M Pieterson (GM: Total Quality)  GM: Finance, Internal Audit, EMU Manager (by invitation)  Risk Management Committee Activities  Annual Risk Assessment  Annual Risk Management Plan  Risk Management – Continuous monitoring and evaluation of Risk Management plan

FUNCTIONING OF BOARD COMMITTEES  Research and Development Committee:  Board approved Committee Charter  3 Meetings to deal with 2005/06 matters  Membership:  Mr S S M Seane (Chairperson)  Dr M Madikizela  Dr L C Makuleni (Managing Director)  Dr B Dungu (GM: Operations, R & D)  National Sales Manager (by invitation)

FUNCTIONING OF BOARD COMMITTEES  Research and Development Committee Activities:  R&D Strategy and Policy  Intellectual Property Management  Monitor and evaluate Strategic R&D Projects

OCCUPATIONAL HEALTH AND SAFETY COMMITTEE  Reports Quarterly to the Board  7 Meetings to deal with 2005/06 matters  Membership:  Ms S Burger (Company Secretary)  Mr P M Pieterson (GM: Total Quality)  Mr L Gcwensa (Labour Relations Manager)  Mr B Shandu (Manager: Engineering, Maintenance and Utilities)

OCCUPATIONAL HEALTH AND SAFETY COMMITTEE  Committee Activities:  Legal Compliance  Policy  Strategy

COMPANY PERFORMANCE: 2005/06

COMPANY PERFORMANCE:  FINANCIAL  OPERATIONS  RESEARCH AND DEVELOPMENT  TOTAL QUALITY MANAGEMENT

Onderstepoort Biological Products Ltd has become a respected leader in its niche market: the production and sale of animal vaccines and related biological products.

COMPANY PERFORMANCE  FINANCIAL  Sales History  Sales compared to budget & last year  Operational Profits

COMPANY PERFORMANCE: FINANCIAL Annual Sales History:

COMPANY PERFORMANCE: FINANCIAL

COMPANY PERFORMANCE: DOMESTIC SALES & MARKETING  Building partnerships with:  Provincial Departments of Veterinary Service  Veterinarians  Commodity Groups  Emerging and Commercial Farmers  Expert panel meeting  Customer Survey

COMPANY PERFORMANCE: DOMESTIC SALES & MARKETING  Sponsorships  Female farmer of the year  NERPO  SAVA congress  Farmers’ days  Extended distribution network  Major agreements with BEE companies

COMPANY PERFORMANCE: EXPORT SALES & MARKETING  Appointment of Business Development Manager  Interacted with existing and prospective Export Clients  Developed Strategies for different Export Regions

COMPANY PERFORMANCE: EXPORT SALES & MARKETING  Attended International Conferences and presented Technical Papers  Sponsorships:  FAO  Botswana & Namibian Veterinary Congresses

 License Technology & Strategic Partnerships  3 Research and Development Projects on Trans-Boundary Diseases  Other Strategic Projects  IP Management COMPANY PERFORMANCE: RESEARCH AND DEVELOPMENT

 Facility Upgrade  Physical Infrastructure Audit  Facility Upgrade Plan  Streamlining Production Processes  Production Planning Processes COMPANY PERFORMANCE: OPERATIONS

COMPANY PERFORMANCE: OPERATIONS

COMPANY PERFORMANCE: TOTAL QUALITY MANAGEMENT  Experimental Animals  Animal Ethics  Co-operation with other Government Departments for animal housing

COMPANY PERFORMANCE: TOTAL QUALITY MANAGEMENT  Quality Assurance:  Supplier Quality and BEE Audits  Plant Quality Audits  Planning of first external ISO audit  Regulatory Office:  Review of current registered product dossiers  Registration of OBP products Internationally

HUMAN RESOURCE REPORT: 2005/06

HUMAN RESOURCES  Employment Equity Report  Human Resource Development  HIV/ AIDS  Remuneration  Social Responsibility

EQUITY STATUS REPORT EMPLOYEE DISTRIBUTION BY RACE

EQUITY STATUS REPORT EMPLOYEMENT EQUITY 2005/06

EQUITY STATUS REPORT EMPLOYEE DISTRIBUTION BY GENDER: 2004/5 vs. 2005/6

EQUITY STATUS REPORT STAFF WITH DISABILITY

HUMAN RESOURCES DEVELOPMENT  Areas of focus  ABET  Bursaries  Multi-skilling  In-House Technical Training  Management Development Programme

TRAINING AND DEVELOPMENT

PERCENTAGE OF TRAINING COSTS PER OCCUPATIONAL CATEGORY

HIV/ AIDS  Launched company strategy on HIV/ AIDS  KAPB study conducted  OBP’s statement of intent was signed by the Managing Director on World Aids day in 2005

REMUNERATION  We strive to offer competitive salaries  Remuneration based on performance and scarcity of skills  Survey market yearly as part of 3 year agreement

RETENTION  Staff Complement: 207  Labour Turnover- 3%  Management Turnover – 0%  56 % of staff- employed longer than 10 years  Turnover in staff recruited since Corporatisation - 1%  Climate Survey conducted

OBP SOCIAL RESPONSIBILITY  Take a girl child to work  Participated in Cell C take a girl child to work

OBP SOCIAL RESPONSIBILITY  Internship Programme for Engineers  Two appointed within the Company, of which one received a better offer  Experiential training of Scientists (Landbank / OBP Collaboration)  Accommodated two graduates for experiential training for a period of twelve months  Partnerships with Service Providers:  Students placed with OBP Service Providers for experiential training (e.g. Stuart – Scott)

OBP SOCIAL RESPONSIBILITY  Tumeleng Mission (Klipgat)  Hospice  Crèche  Children’s home  Donated our time and money

FINANCIAL RESULTS OF ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD 2005/06

INDEX  Income Statement  Balance Sheet  Cash flow

INCOME STATEMENT  Sales  Cost of sales  Other income  Operating profit

LOCAL SALES vs. EXPORT SALES (R’m)

ANNUAL SALES GROWTH: (RAND MILLION)

LOCAL SALES & ANNUAL GROWTH (YEAR ON YEAR)

EXPORT SALES & ANNUAL GROWTH (YEAR ON YEAR)

COST OF SALES  2004/05: R41.2m  2005/06: R40.4m  Decrease: R0.8m  Improved production technology & quality implemented in the Viral Production Unit.

OPERATING INCOME  2004/05: R6.8m  2005/06: R3.3m  Decrease: R3.5m

OPERATING PROFIT vs. MARGIN

SALES vs. TOTAL COSTS

COS AND OVERHEADS AS A % OF SALES

INCREASE IN COST OF SALES  Depreciation: R1.1m  Production cost: R1.7m  Labour: R3.0m  Product losses: (-R2.2m)  Stock movement: (-R4.4m)

INCREASE IN OVERHEAD EXPENSES  R&D: R2.1m  Staff cost R4.8m  Marketing: R1.4m  Electricity: R0.7m  Bad debt: (-R6.1m)

BEE PROCUREMENT  OBP’s new Procurement Policy established end of 2004  Policy based on:  PPPF Act (Act No 5 of 2000)  AgriBEE ( BBBEE Framework for Agriculture) July 2004  DTI BEE Strategy (July 2004)  OBP BEE Procurement:  2004/05 = 48%  2005/06 = 56%

BALANCE SHEET  PPE (Fixed Assets)  Inventory  Trade receivables  Cash  Trade payables  Provisions

PROPERTY PLANT & EQUIPMENT  2004/05: R29.0m  2005/06: R88.0m  Increase: R60.0m  Acquisitions: +R65.5m  Depreciation: -R5.5m  Transfer of land and buildings to OBP R53.6m  Plant & equipment: R11.9m

INVENTORY  2004/05: R13.1m  2005/06: R12.5m  Decrease: R0.6m

TRADE RECEIVABLES  2004/05: R5.7m  2003/04: R8.9m  Increase: R3.2m

CASH  2004/05: R77.4m  2003/04: R80.7m  Increase: R3.3m  Increase due to operational cash flow.  Cash invested in three major banks.  Cash is retained for upgrade of the facilities

TRADE PAYABLES  2004/05: R5.8m  2003/04: R9.5m  Increase: R3.7m

CASH FLOW  Cash position of OBP  OBP’s Liquidity

CASH POSITION

ASSETS vs. LIABILITIES

CONCLUSION

VALUE OF OBP TO SA  Ensure domestic competencies in vaccine products  Farming community able to respond swiftly to disease outbreaks  Establish economic viable vaccine business  Develop and retain skills and expertise in vaccinology  Establish strong Research and Development capability in vaccinology

CONCLUSION CHALLENGES / OPPORTUNITIES:  Growing the Company:  Domestic market  International markets  International Strategic Partners  Funding for Upgrade

CONCLUSION CHALLENGES / OPPORTUNITIES:  Improve Product Line:  New / improved products  New technology  GMP / ISO accreditation  Intellectual Property management

CONCLUSION  Company in operation for six years:  Positive Growth: Financial, Human Resource, Operational Processes, Client Base (including export)  Significant role in NEPAD: Trans- boundary diseases