25 Sauer St. Extension,

Johannesburg, 2001 South Africa;

27-11-378-3000; fax: 27-11-378-4222

www.alexanderforbes.com

1999/00 1998/99

Gross revenues $370,872,000 $299,985,200

Brokerage revenues $330,076,998 $275,991,200

Brokerage: Retail 46% 45%

Wholesale 14% 14%

Reinsurance 1% 3%

Personal 19% 16%

Services 9% 14%

Investment income 2% 3%

Other 9% 5%

Employees 4,758 4,228

Rev./employee $69,373 $65,277

Employee benefits 49% 46%

Offices 55 52

Converted at applicable exchange rates. Fiscal year ends March 31.

Since it launched itself into the league of the world's top brokers with its 1997 acquisition of London-based Nelson Hurst Ltd., Alexander Forbes Ltd. has sought to expand its international presence. Still, according to Chief Executive Officer Graeme Kerrigan, the Johannesburg, South Africa-based broker harbors no desire to be ubiquitous.

"We describe ourselves as an international business, not a global business," Mr. Kerrigan said. "We have a process of growing our business outside of Africa, where we started from, but we don't intend to be in every country in the world. We are not interested in being in a territory, for example, if it is not possible to make money for our shareholders."

This rationale, Mr. Kerrigan said, explains the company's decision not to set up shop in Australia, which he describes as "one of the traditional markets" but "very difficult . . .to make money in."

Similarly, although the company's London-based risk services division derives much of its reinsurance business from the United States, Alexander Forbes owns no U.S. companies. "We do not have a presence in the U.S. right now, although it is something we look at on a constant basis," Mr. Kerrigan said.

Alexander Forbes recently entered into discussions about acquiring a U.S. company, according to Quintin Heaney, the group's international development director. "But we concluded that, while the U.S. is very attractive because it is undoubtedly the largest marketplace in the world, it is also the largest graveyard in the world for U.K. companies. I think, as far as the U.S. is concerned, we would like to build up relationships, rather than go out and acquire."

1999 was a good year for Alexander Forbes, whose brokerage revenues increased an impressive 34%, to 2.16 billion rand. In dollars, that translated to a 19.6% increase, to $330.1 million, keeping Alexander Forbes firmly in its position as the eighth-largest broker in the world. The broker's revenue increase was fueled, in part, by several acquisitions it made in 1999 as well as by strong returns in specialty and alternative risk transfer business.

One of Alexander Forbes' goals is to further boost the revenues it derives from outside of its home market.

Before its acquisition of Nelson Hurst, a United Kingdom-based broker with international operations, Forbes derived about 95% of its revenues from South African business; last year, international revenue made up 43% of the group's total.

"Our medium-term target -- and the medium term could be anywhere from 12 to 18 months -- will be to get that revenue split down to about 30% African, 70% non-African. Once we have achieved that, then I think we can honestly say we are an international business," Mr. Kerrigan said. The company has between 100 million ($152 million) and 200 million ($304 million) in credit available to make acquisitions to meet this target, he said.

One area in which Alexander Forbes has a strong presence is Continental Europe, despite the dissolution last year of the Luxembourg-based European broker network FDG S.A., of which it was a partner. In April, Alexander Forbes became a member of EOS RISQ N.V., an alliance of four brokers and risk consultants headquartered in Brussels. In addition to Alexander Forbes, the group's members are Diot S.A. of Paris; GrECo International A.G. of Vienna, Austria; and J. Van Breda & Co. G.V.C. of Antwerp, Belgium. Each member holds a 25% stake in the venture, which is represented in 22 countries across Europe. In May, the alliance announced the formation of a London-based specialist risk financing organization, EOS RISQ FINANCE, which offers alternative risk transfer solutions.

The EOS RISQ partnership is an important one for Alexander Forbes, according to John Percy-Davis, chairman and CEO of the company's London-based risk services arm.

"This alliance, I think, can give us exactly what we need. . .we can provide a lot of risk management, risk finance, ART products for (EOS RISQ's) client base and, therefore, get access to their customers without commensurate investment. It is beneficial to both parties. It is more than a network; it is a strategic alliance where we are looking quite carefully at ways of working together on marketing a product or to an affinity group without actually tying ourselves up with an equity investment," he explained.

On April 1, the company gained a stronger foothold in the United Kingdom with the acquisition of Croydon, Surrey-based employee benefits company Johnstone Douglas. Alexander Forbes intends to use this acquisition to take advantage of U.K. legislation that will create new pension plans, the so-called stakeholder pensions, starting in 2001. Stakeholder pensions, which the U.K. government hopes will eventually replace state-provided earnings-related pensions, must be offered by all employers with five or more employees by April of next year.

In its last fiscal year, which ended March 31, commercial retail brokerage accounted for a significant portion -- 46% -- of the company's income, slightly up from 45% a year previously. Wholesale brokerage operations represented 14% of the broker's income, the same figure as the previous year. Of these brokerage revenues, the vast majority, 97.5%, were generated from clients not based in the United States. A year previously, the figure was 97.7%. Of Alexander Forbes' commercial brokerage revenue, 70% is commission-based, while 30% is fee-based.

The company made several acquisitions last year, including Statsure (Pty.) Ltd., a South Africa-based claims management company; and Ginsburg, Malan & Carson, a actuarial and consulting firm that also is based in South Africa. In May 1999, Alexander Forbes increased its stake in the Mexican retail broker Codissa Nelson Hurst to 100% from 20%.

Alexander Forbes is in the process of reorganizing its business geographically rather than by line of business. This move was motivated by a desire to better cater to the needs of the small and midsized clients the company targets, according to Mr. Kerrigan.

"Our focus is on looking after clients in countries. Historically, businesses like ours have been run on a line-of-business approach, but we have taken the fairly radical decision to focus on a country-head approach," he explained. "We think that suits us better than the line-of-business approach adopted by the big players."

The company relies on its two divisions to serve clients' risk management and financial services needs.

Alexander Forbes Risk Services Ltd., the London-based risk services division that includes the broker's reinsurance operations, is headed by Mr. Percy-Davis, who describes his unit as the "part of the business with the widest global spread."

"We have got strong networks in Asia and Latin America and a very big business in South Africa and the U.K.," Mr. Percy-Davis said.

In the United Kingdom, the risk services business is divided between retail and wholesale business; elsewhere, the risk services arm concentrates mainly on the retail side.

"In the U.K., we have had a very strong year on the retail side," Mr. Percy-Davis said. He said the company will be ready to take advantage of the demand for professional indemnity coverage when the Solicitors Mutual Indemnity Fund is disbanded in September. Previously, the U.K. Law Society required attorneys to obtain their coverage from the fund. The Sole Practitioners Group of the Law Society has appointed Alexander Forbes subsidiary Nelson Hurst Professional Indemnity as its recommended provider of professional liability coverage to members.

"We have picked up a number of large solicitors already in that process, and we will be placing their primary insurances," he said.

Mr. Percy-Davis said that the group would be looking to make acquisitions on the retail side in the United Kingdom. "We think we have got a lot of skills and a lot of products, but we have not got a big enough client base in the U.K. We are looking at a couple of acquisitions -- some in traditional insurance, and some outside the traditional areas."

Mr. Percy-Davis said that, on the wholesale side, Alexander Forbes was particularly strong in U.K. specialty business. He cited political and credit risk and products such as sports, liability, construction and aviation as the U.K. risk services arm's areas of expertise.

"They have had a tremendous year. About 25% of their book comes from our own offices, and the rest is from independent intermediaries. We are pretty optimistic about this business going forward because, while some people believe they can handle risks internally and electronically, they still need us to help with their specialist risks," he said.

Mr. Percy-Davis said that he is looking to Asia as an area for growth. "The economics have been difficult for the past couple of years, but now there are signs of recovery. We are expecting an upturn this year in our businesses there," he said.

In the area of financial services, the acquisition of employee benefits company Johnstone Douglas has shifted some of the focus of Alexander Forbes Financial Services away from South Africa, according to Dick Wood, managing director of Alexander Forbes Financial Services. In the wake of the acquisition, Mr. Wood will relocate to London in September to direct the financial services operation from there.

The Johnstone Douglas business focuses on small and midsized companies, according to Mr. Wood. "It is a combination of an advisory business and an individual financial planning business. It is very well-placed to market the new stakeholder pension, which all employers with more than five employees will have to offer from April 2001."

Johnstone Douglas has a software arm -- Chambers, Townsend Consultancy -- which Mr. Wood says will allow the company to offer stakeholder pensions at a cost below the government's stipulated charge of 1% of the assets per annum.

In South Africa, the financial services arm places an emphasis on a range of consulting and advisory services primarily for retirement funds, explained Mr. Wood. One project the company is carrying out in South Africa is the rollout of a system called First Connect.

"We acquired First Connect in 1998. In its first phase, it is just a software system that links a company's payroll system to all of the third parties to whom it has to make payments -- for example, tax to the receiver or medical contributions," he explained. "What is unique about it is that it works across the Internet and it doesn't just transfer the money; it also transfers the information. It is the first of its kind in South Africa," he said. "Phase two is where you take it to the next step and provide every single employee of the companies that use it with what you might call a payday account, so they can perform all their business and transactions using it. It is quite an exciting business growth."

Technology remains an important area of focus for the group, according to Mr. Kerrigan. He said that the company has three major technology initiatives under way at present. First, Alexander Forbes would like to streamline the maintenance of its legacy systems -- the obsolete information technology systems inherited from the companies it has acquired. Currently, an internal technology unit in Johannesburg that employs more than 200 people takes care of the old systems, and Mr. Kerrigan would like to see that unit sold off in the next six months.

Second, he said, the company is trying to create what he called an "e-culture."

"It is quite difficult for a business like us, because we have never genuinely had that culture. We want to transform the business to a more-technological interface with customers and make technology acquisitions."

Third, Mr. Kerrigan said, he aims for the company to come to grips with its legacy systems. "We want to refocus IT investment from the maintenance of historical systems to the development of new systems," he said.

Alexander Forbes shares, which are listed on the Johannesburg Stock Exchange, closed July 12 at 15.70 rand ($2.30).