1. ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD PRESENTATION TO THE PORTFOLIO COMMITTEE: 8 MARCH 2006

2. PRESENTATION OUTLINE:  Introduction (Ms N D Shabalala, Board Chairperson)  Business Plan (Dr L Makuleni – Managing Director)  Budget 2006/07 (Mr M P van Jaarsveld – Chief Financial Officer)  Conclusion (Dr L Makuleni)

3. INTRODUCTION

4. OBP FUNCTIONING BOARD COMMITTEES Board Audit Committee (Adv D J Mitchell) Remuneration Committee (Ms N D Shabalala) Risk Management Committee (Dr R U Forbes) R & D Committee (Mr S S M Seane)

5. FUNCTIONING OF BOARD COMMITTEES  Remuneration Committee:  Remuneration:  Directors  Executives  Employees  Assessment of Performance  Human Resource Matters

6. FUNCTIONING OF BOARD COMMITTEES  Audit Committee:  Controls:  Internal Audit  External Audit  Financial Matters  Management Accounts  Investments  Financial Policies

7. FUNCTIONING OF BOARD COMMITTEES  Risk Management Committee:  Annual Risk Assessment  Risk Management – mitigating risks

8. FUNCTIONING OF BOARD COMMITTEES  Research and Development Committee:  Monitor and assess R & D projects  Intellectual Property Management

9. BUSINESS PLAN 2006/07:

10. Business Plan  OBP Mandate  Market Definition  Situation Analysis  Primary Strategic Objectives  Primary Strategic Initiatives

11. COMPANY MANDATE “To play a pivotal role in the management and prevention of animal diseases in the Country, SADC, and Africa”

12. MARKET DEFINITION :  Biotechnology, Animal Health, Veterinary Vaccines  Geographic Focus  Domestic  Commercial  Emerging sector  Government Tender Business  International:  SADC, East Africa, North Africa, West Africa  EU  Middle East  South America  India, China

13. MARKET DEFINITION :  Target Species:  Cattle, Sheep, Goats, Horses  Other possible species (e.g. poultry, rabies, camel)  50 Products:  Bacterial, Viral, protozoa and diagnostic  Produce vaccines unique to African disease (tick- borne and insect-borne, African Horse Sickness, Bluetongue, Lumpy Skin Disease, Rift valley Fever, CBPP)  Sole / main producer of eight vaccines  Broad product range (Clostridial, Neo-natal, reproductive, respiratory etc.)  Local Strains

14. MARKET DEFINITION: SOUTH AFRICAN ANIMAL HEALTH MARKET SIZE FOR THE 2005 CALENDAR YEAR  Total Market R843 million  Antibiotics R241 million  Ectos R161 million  Endectos R76 million  Endos R65 million  Vet. Vaccines R70 million (excluding Intervet) (OBP Ltd R 38.8 million)

15. SITUATION ANALYSIS:  Well established competitors  Well trained sales, marketing, and technical staff  Broader Animal Health Product Range  Distribution channels established and profit margin driven  Stringent Regulatory requirement Internationally, Local Regulatory requirement less stringent  International Markets Requirement - GMP Accreditation  Well informed customers  Outbreaks of Trans-Boundary Diseases

16. STRATEGIC OBJECTIVES :  Financial objectives  Sales Revenue  2006/07 = R113.65m  2007/08 = R136.48m  2008/09 = R164.18m  Obtain gross profit margin of 35%

17. STRATEGIC OBJECTIVES: 2005/6  Financial  Capex spend of R33 million  R&D operational expenses 5% of Sales Revenue  BEE: 40% x Procurement

18. STRATEGIC OBJECTIVES 2005/6  Non – Financial  Upgrade of Packaging Department  Production Success Rate 90%  ISO Accreditation Audit Review  Release 2 products per year  EE & Skills Plan  Implement Succession Plan  Ensure Good Corporate Governance:  Risk Assessment  Three year rolling Internal Audit Plan

19. STRATEGIC OBJECTIVES HRD BUDGET 2005/06 OCCUPATIONAL LEVELSTARGET 2005/6TOTAL NO. OF BENEFICIARIES Amount allocatedR1,354,730.00 (incl. skills levy) 211 Top ManagementR213 000.007 Professionally qualified and experienced specialist and middle management R188 366.0019 Skilled technical and academically qualified workers, supervisors, foremen R300 000.0033 Semi skilled and discretionary decision making R300 000.0094 Unskilled and defined decision making R200 000.0058 Total211

20. STRATEGIC OBJECTIVES HRD BUDGET 2006/7 Occupational levelsTarget 2006/7Total no. of beneficiaries Amount allocated1742641.00 ( incl. skills levy) 204 Top Management208792.00147 Professionally qualified and experienced specialist and middle management 256571.0019 Skilled technical and academically qualified workers, supervisors, foremen 500261.6633 Semi skilled and discretionary decision making 264487.6694 Unskilled and defined decision making 152527.6658 Total204

21. EMPLOYMENT EQUITY TARGETS 2005/6 Occupational levelsBlackColoredIndianWhiteFemaleMale Disabled Top Management4325 Professionally qualified and experienced specialist and middle management 8119811 Skilled technical and academically qualified workers, supervisors, foremen and superintended 113118 151 Semi skilled and discretionary decision making 662842522 Unskilled and defined decision making 5162563 Total1414264721396

22. EMPLOYMENT EQUITY ACTUAL TO DATE

23. EMPLOYMENT EQUITY ACTUAL VS. TARGET FOR 2006/7 Occupational levels AfricanColouredIndianWhiteTotalDisabled ActualTargetActualTargetActualTargetActualTargetActualTargetActualTarget Top Management 553377 Professionally qualified and experienced specialist and middle management 7711129918 11 Skilled technical and academically qualified workers, supervisors, foremen 6123503212034381 Semi skilled and discretionary decision making 41421222927717455 Unskilled and defined decision making 72 006678 11

24. EMPLOYMENT EQUITY TARGET STATS 2006/7

25. EMPLOYMENT EQUITY TARGET 2006/7 ActualTargetActualTarget Female Male Top Management2255 Professionally qualified and experienced specialist and middle management771112 Skilled technical and acedemically qualified workers, supervisors, foremen and superintended19241516 Semi skills and discretionary decision making35343639 Unskilled and defined decision making27 51

26. GENDER ACTUAL VS TARGET 2006/7 ActualTarget Occupational LevelsFemaleMaleFemaleMale Top Management2525 Professionally qualified and experienced specialist and middle management711712 Skilled technical and academically qualified workers, supervisors, foremen and superintended19152416 Semi skilled and discretionary decision making35363439 Unskilled and defined decision making27512751 Total9011894123

27. GENDER ACTUAL VS TARGET 2006/7

28. STRATEGIC INITIATIVES 2005/6  OBP Strategic Initiatives - - National Imperatives  Investment in Infrastructure  Skills Development  Accelerated Growth: Livestock Sector

29. OBP Strategic Initiatives 2005/6  OBP Strategic Initiatives - - National Imperatives  Investment in Infrastructure  Upgrade of Facility and Equipment - GMP  Improve Production Processes  Improve Production Planning System  Preventative Maintenance of Facility and Equipment

30. OBP Strategic Initiatives 2005/6  OBP Strategic Initiatives - - National Imperatives :  Skills Development  OBP Technical, Sales & Marketing Dept  Farmers days ( NB OBP, Provincial Dept – AHT & State vets,)  Disease management program  OBP/ UP /ARC-OVI : Collaboration  Expert Panel Meetings

31. OBP Strategic Initiatives 2005/6  OBP Strategic Initiatives - - National Imperatives :  Build Expertise  Production Process Technology  IP management  Learnership Program - Process Engineers in Biotechnology  Building R&D capacity & capability  Succession Planning

32. OBP Strategic Initiatives 2005/6  OBP Strategic Initiatives - - National Imperatives  Accelerated Growth:  Marketing and Distribution  Vaccine manufacturing facilities within the Continent  R&D on Trans boundary diseases – vaccines  CBPP, Rinderpest, PPR, Sheep & Goat Pox

33. OBP Strategic Initiatives 2005/6  OBP Strategic Initiatives - - National Imperatives  Accelerated Growth:  New / Improved Products  Master Seed Management  Total Quality Management  Experimental Animal Facility  International Registration of OBP Product Line

34. BUDGET: 2006/07

35. PROFIT BEFORE INTEREST & TAX Budget 2006/07 Budget 2005/06 Variance R5.2m-R3.7mR8.9m (+100%)

36. PROFIT BEFORE INTEREST & TAX R8.9m Improvement due to: Increase in Sales 22% In spite of Increase in Cost of Sales (- 10%) Increase in Overheads (-15%)

37. INCREASE IN SALES Budget 2006/07 Budget 2005/06 Variance Local Sales R55.8mR40.8mR15.0m (37%) Export Sales R57.8mR52.4mR5.4m (10%) Total Sales R113.6mR93.2mR20.4m (+22%)

38. COST OF SALES Budget 2006/07 Budget 2005/06 Variance R66.8mR60.8mR6.0m (-10%)

39. COST OF SALES R6.0m Increase due to: Increased repair & maintenance R1m Increased Depreciation R5m

40. OVERHEAD EXPENSES Budget 2006/07 Budget 2005/06 Variance R41.6mR36.1mR5.5m (-15%)

41. OVERHEAD EXPENSES R5.5m Increase due to: New positions & vacancies R3.7m Market related salary adjustment R3.1m Contractors (Work study, Audits, etc.) R0.6m Increased Travel: R0.8m

42. OVERHEAD EXPENSES R5.5m Increase due to: Increased Marketing: R0.9m Other R0.4m Higher salary recovery in COS (-R4.0m)

43. CASH FLOW 2006/07 Cash flow from operations R13.2m CapexR33.1m Cash flow for the year-R19.8m Opening bank balanceR75.9m Closing bank balanceR56.1m

44. CAPITAL EXPENDITURE Upgrade PackagingR15.0m Packaging EquipmentR4.0m Bacterial Prod. EquipmentR3.4m Other EquipmentR5.5m ERP & Computer EquipmentR2.9m Land & Building (excl Pack.)R1.4m Furniture & FittingsR0.4m VehiclesR0.4m TotalR33.1m

45. GRAPHICAL COMPARISON OF BUDGET TO PREVIOUS YEARS Sales (Local & Export) Expenses Expenses as % of sales

56. CASH FLOW FOR 2006/07 Retained income6 112 Plus Depreciation12 939 Operating Capital needed - 5 786 Capital Expenditure-33 052 Net Cash flow-19 787 Opening Bank Balance75 952 Closing Bank Balance56 165 R’000

57. BALANCE SHEET FOR 2006/07 Fixed Assets (PPE)49 095 Current Assets94 773 Total Assets143 868 Capital & reserves114 568 Long term Liability (Def. Tax) 1 424 Current Liabilities27 876 Total Equity & Liabilities143 868 R’000

58. BALANCE SHEET & CASH FLOW Land & Buildings transferred in 2005/06 – Valued at R47m Increase in Operating Capital R5 786 needed as Sales increase Negative cash flow mainly due to Capital expenditure: R33.1m

59. CONCLUSION:

60. VALUE ADDING ACTIVITIES  Ensure a domestic capacity in vaccine production which will enable DoA to respond to disease outbreak.  Address disease problem specific to the region  Produce market driven products

61. VALUE ADDING ACTIVITIES  Establish an economically viable Business Enterprise  Develop & retain local vaccine production related skills & expertise.  Establish strong R&D capabilities

62. CONCLUSION: “To play a pivotal role in the management and prevention of animal diseases in the Country, SADC, and Africa”

63. CONCLUSION:  Sincere Appreciation  Shareholder  OBP Ltd BOD  OBP Ltd Exco  OBP Ltd Manco  OBP Ltd Staff  WE CANNOT SPELL SCCESS WITHOUT U