The Uganda Capital Markets African Alliance Uganda Investment

The Uganda Capital Markets African Alliance Uganda Investment Bank A Broker /Dealers Perspective

Contents • Introduction • Areas of Excellence • Uganda Country Report • Broker/ Dealer Firms • The Markets • The way forward

The African Alliance Group Structure • African Alliance Uganda forms part of the African Alliance International group. • African Alliance Uganda is 100% owned by African Alliance International • Africa Growth Advisors is a support team that provides technical assistance and advisory services to the domestic investment professionals. • The group is owned and managed by management and staff – this aligns the interests of our investment professionals with that of our clients. Our client’s come first, not external shareholders!

Areas of Excellence AAU Investment Banking Advisory & Corporate Finance Stock broking Trading and Execution Investment Management Research Money Fund Unit Trusts Pension Funds Balanced Investment Fund High-Yield Fund Institutional Clients

Uganda Country Report • • • Strong economic fundamentals and improving business conditions promises future growth Uganda’s strong economic growth, commitment to macroeconomic and political stability, flexible labour markets, access to international markets, abundant natural resources, and enabling regulatory environment make it an attractive destination for investors, though many challenges remain. Telecommunications, transport and power infrastructure, tourism, financial services, coffee, and horticulture sectors offer key investment opportunities. Some of the major challenges faced by foreign investors are inadequate physical and institutional infrastructure, uneducated workforce, political interference, non-transparent regulatory system, and high levels of corruption. Thus far, Uganda has shown resilience and has grown at a respectable 7% in FY 09. In next few years, the growth is expected to decelerate due to weak global demand the countries dependence on exports and donor funding.

Investment Prospects And Outlook • • • Uganda’s economy expected to decelerate in FY 09 and FY 10 driven by weak global demand Services sector continues to drive growth Growth of exports is expected to remain low; coffee exports present an exciting opportunity Expansion of the East African Community (EAC) customs union will drive further growth FDI inflows in 2009 and 2010 remain uncertain due to the global financial crisis Ratio of debt to GDP may increase marginally in FY 09 and FY 10 Inflation is expected to fall in 2009 and 2010 as the economy stabilizes and fuel prices fall Government initiatives to improve business climate continue to have a positive impact Government is expected to continue its focus on infrastructure development Increasing presence of micro-finance institutions will provide credit access to all sections of the society In Africa, Uganda is a leader in social development initiatives

Key Indicators Population, 2008 (m) GDP, FY 09 (USD bn) GDP (PPP) per capita, 2009 Intn’l $ 31. 7 15. 3 1, 340 Sector share, FY 09 (% GDP) Agriculture (%) 23. 7 Industry (%) 24. 2 Services (%) 46. 4 Headline Inflation, FY 09 (%) 14. 1 Exchange Rate, FY 09 (UGX/USD) 1, 885 Trade Balance, FY 09 (% of GDP) (6. 7) Reserves, May’ 09 (Eq. months of imports) 5. 3

Financial Markets • The financial services sector is underdeveloped with low penetration rates • Various structural changes are driving the banking sector growth. • Microfinance has witnessed steady growth and commercial banks have also started to expand their presence in this market • Insurance in Uganda is an underdeveloped sector with majority of the insurance companies offering non-life insurance • The collective investment scheme market is still in its nascent stage. Pension sector reforms in the future may drive growth. African Alliance is the only unit trust manager • Uganda’s social security system has limited scope and coverage. Liberalization of the pension sector is required • • Interest in the equity market has increased overtime Fully liberalized currency environment • However the market is still illiquid with majority of the trading restricted to only 2 stocks.

Market Environment • • Products: Equities, Corporate Bonds, Government Bonds Custodians – Barclays Bank, Stanbic Bank; Safekeeping for securities and trade settlement Securities Central Depository (SCD) replacing paper-based system Broker/dealer firms being given access to government securities market, enabling “one-stop-shop” access to range of available products in the local financial markets

List Of Brokers/Dealers On The USE Members Of The Uganda Securities Exchange : African Alliance (Uganda) Ltd * Baroda Capital Markets Ltd * Investment Advisor Broker/Dealer and member of USE Floors 1 st Workers House Pilkington Road Kampala Tel: 0414 235577 Fax: 0414 235575 E-mail: info@africanalliance. co. ug Contact: Mr. Kenneth Kitariko Broker/Dealer Investment Advisor and member of USE Plot 18 Kampala Road P. O. Box 7197 Kampala Tel: 0414 233 680/3 Fax: 0414 258263 E-mail: bob 10@calva. com Contact: Mr. Rajesh Khanna Crane Financial Services Ltd * Crested Stocks and Securities Ltd* Broker/Dealer Investment Advisor and member of USE Crane Chambers Plot 38 Kampala Road P. O. Box 22572 Kampala Tel: 0414 341414/345345 Fax: 0414 341414 E-mail: cfs@cranefinancialservices. com Contact: Mr. Hiren Busch Broker/Dealer Investment Advisor 6 th Floor Impala House Plot 13/15 Kimathi Avenue P. O. Box 31736 Kampala, Uganda Tel: 0414 230900 Fax: 0414 230612 E-mail: info@crestedsecurities. com Contact: Mr. Robert Baldwin

List Of Brokers/Dealers On The USE Members Of The Uganda Securities Exchange Dyer and Blair Uganda Ltd * Equity Stock Brokers Ltd * Broker/ Dealer Investment Advisor and member of USE P. O. Box 36620 Ground Floor Rwenzori House Tel: 0414 233050 Fax: 0414 231813 E-mail: shares@dyerandblair. com Contact: Mr. Njirwa Samuel Broker/Dealer Investment Advisor and member of USE Plot 6/6 a Orient Plaza P. O. Box 3072 Kampala Tel: 0414 236012/3/4/5 Fax: 0414 348039 E-mail: equity@orient-bank. com Contact: Mr. Mark Horwood MBEA Brokerage Services (Uganda) Ltd Re. Naissance Capital (U) Ltd* 44 Lumumba Avenue, Nakasero P. O. Box 24613 Kampala UGANDA Tel. : +256 -(0)-423 1960 / +256 -(0)31 -226 0011 Fax: +256 -(0)41 -434 2045 E-mail: info@mbea. net (General) Web Site: www. mbea. net Contact: Andrew Otengo Owiny Fund Manager, Investment Advisor Broker/Dealer and member of USE Plot 13, Kololo Hill Drive P. O. Box 893 Kampala Tel: 078 800494, 031 264 775/6 Fax: 0414 340016 E-mail: gwavamunno@renaissance. co. ug Contact: Mr. Godfrey Wavamunno

Pan African Trading Desk • Through this desk our clients have access to a centralised trading desk that provides access to all the stock exchanges across Africa. • Our pan-African trading desk trades in equities and bonds and we have execution capabilities in Africa in the following countries: Botswana, Egypt, Ghana, Kenya, Mauritius, Morocco, Namibia, Nigeria, Tunisia, BRVM (Covers 8 French speaking countries in West Africa), Uganda, Rwanda, Tanzania, Swaziland, Zambia, Zimbabwe and Malawi. • African Alliance currently has its own offices and licenses to operate in Kenya, Uganda, Swaziland, Botswana, Malawi, Ghana , Rwanda and has just been granted its license and stock exchange seat in Zambia where we are in the process of setting up offices. In all the other countries we have strategic alliances in place to trade through other brokers until such time as we have our own offices and licenses to trade in those countries. • As such, we are able to execute transactions in the above countries at present and this covers all but a few countries that have small stock exchanges at present, namely: - Cameroon, Algeria, Sudan and Mozambique but we are looking to operate in these fairly soon too. We do, however have relationships in these markets and would be able to execute the more bespoke trades. • We allow our clients to either deal through the international trading desk in the Johannesburg office or directly with the dealers in our own offices or those of our affiliate partners.

Equity Market • The USE index rose sharply by 21% in Q 2 2009 clawing back losses recorded in Q 1 2009. However the gains on the USE board need to be put into context. • Firstly, the USE index includes cross listed stock from Kenya. Secondly Stanbic Bank has a weighting of over 60% of the total market capitalization of local Ugandan stocks excluding the cross listed stocks. • All Kenyan cross listed stocks recorded strong gains in Q 2 2009 and hence helped skew the index. Further to this, despite all other domestic stocks recording big losses Stanbic Bank rose 33% during the quarter. The twin gains on the Kenyan cross listed stocks and Stanbic offset the big losses on all the other domestic Ugandan stocks to record the gain on the ALSI. Following the fall in prices of domestic counters on the USE board, the broad market ex Kenya is beginning to make sense and now looking comparable to other markets. We believe that a closer look at these counters may now be worthwhile. •

Uganda Securities Exchange • Source: Uganda Securities Exchange 20 1200 18 1000 16 14 800 12 10 600 8 400 6 4 200 2 0 0 Jan-08 Jul-08 Turnover (UGX bn) Jan-09 All Share Index (rhs) Jul-09

EAC Region Stock Exchanges (FY 09) • Source: African Securities Exchange Association 60 50 40 30 20 10 0 Listed companies Market capitalization (% of GDP) Kenya Tanzania Turnover rate Uganda

Fixed Income Market • Most of the trading on USE takes place in the fixed income market with foreign participation limited to this segment. As on June 2009, 30 fixed income securities were listed. The total outstanding stock of treasury bonds grew by 74% to UGX 1, 484 bn in June 2008. 1600 1400 1200 1000 800 600 400 200 0 FY 98 FY 00 FY 02 Treasury Bills FY 04 FY 06 FY 08

Unit Trusts-Uganda Funds 3 -year Annualised Return Current Uganda Money Fund 12. 82% 9. 80% Uganda Balanced Investment Fund 19. 23% 2. 49% Uganda High Yield Fund 14. 46% 17. 30%

The Uganda Money Fund -Capital Preservation Investor UGX 1, 000 Investment Universe • Banks • T-Bills • Bonds Units UGX 600, 000 UGX 200, 000 Bank Call Account UGX 200, 000 T-Bills/ CP Short-term Bonds

The Parties to the Unit Trust Funds Auditor KPMG Cash and Investment Manager African Alliance Uganda Unit Trust Funds Your Business (Separate legal entity) Trustee Custodian DFCU Bank Capital Markets Authority

The way forward Eight Broker Dealers Excellent Growth Opportunities Central Depository System Unit Trusts Corporate Bonds Strong Pan African Base Platform for Complementary Products Top Ranked Research with Local and Regional Penetration

Contact Details • Contact Details Kenneth Kitariko African Alliance Uganda 1 ST Floor Workers House Pilkington Road Tel : +256 414 235 577/8 Mobile: +256 755 000 043 E-mail : kitarikok@africanalliance. co. ug info@africanalliance. co. ug securities@africanalliance. ug