2015 Integrated Annual Report

Financing Rental Housing in South

African Cities

INTEGRATED ANNUAL REPORT 2015

To the outsider, South Africa’s inner cities can seem big, impersonal, intimidating and run-down. But to those in the know, they all possess a complex character, a unique set of challenges and a fascinating history. The truth is, if you scratch beneath the surface, you’ll fi nd they’re alive with energy. They’re in a constant state of fl ux, and to those with a keen eye and an ear to the ground, they present opportunities around every corner.

FINANCING RENTAL HOUSING IN SOUTH AFRICAN CITIES

1

AT A GLANCE

12-year track record of enabling access to fi nance for

entrepreneurs, regenerating the inner cities of South Africa, fi nancing the

provision of affordable and decent rental accommodation, and enabling

the creation of jobs.

Signed a R200 million

grant agreement with the

National Treasury’s Jobs Fund in

January 2015. This is instrumental

in the long-term debt capital

funding strategy of the Group.

TUHF Holdings Proprietary

Limited and TUHF Proprietary

Limited converted to

public companies:

TUHF Holdings

Limited and TUHF

Limited respectively.

Jobs created

154 permanent and

463 short term

Growth in overall

profi t of 10%.

Achieved a record loan

book of over R2 billion

invested in South

Africa’s major cities.

2015 HIGHLIGHTS

Opened our Western Cape and

Bloemfontein branches, in addition to our

existing Gauteng, Eastern Cape and KwaZulu-Natal

branches.

TUHF / 2015 INTEGRATED ANNUAL REPORT

2

Although the TUHF Group (TUHF) has published annual

reports since 2005, this year, we are proud to present our

fi rst integrated report. Our integrated report is our primary

report for communicating with our stakeholders. The

purpose of our integrated report is to articulate and provide

insight into TUHF’s performance, strategy and future

prospects. This report covers the period from 1 April 2014

to 31 March 2015, with comparatives shown where

available.

Integrated thinkingIn preparing our fi rst integrated report, we were guided

by the Integrated Reporting <IR> Framework issued by the

International Integrated Reporting Committee (IIRC).

As we continue on the journey towards truly integrated

thinking, meaning more holistic, long-term thinking across

a comprehensive range of factors material to our long-term

value creation, we will continue to embed the guiding

principles and fundamental concepts contained in the

<IR> Framework to improve our communication with our

stakeholders.

This integrated report aims to provide insight about the

resources and relationships used and affected by our

organisation. These are collectively referred to as ‘the

capitals’. We recognise that the capitals are interrelated

and fundamental to the long-term viability of our business.

In the preparation of our report, all six of the capitals

referenced in the <IR> Framework have been considered,

namely fi nancial, manufactured, intellectual, human, social

and relationship capital and natural. After careful

consideration, the decision was made that only four of the

six capitals are material to TUHF’s ability to create value.

These capitals are:

Financial capital: This refers to the pool of

funds available to the Group, and includes debt

capital and equity funding.

Intellectual capital: Our intellectual capital

refers to our organisational, knowledge-based

intangibles, such as our in-depth knowledge of

the complexities of inner cities and our character-

based lending approach, which is supported by

our world-class loan cycle management process.

Human capital: This refers to our staff

complement, including our strong team of

professionals who offer a depth of insight into

the inner cities across our country and years of

experience in the market.

Social and relationship capital: This refers to

the institutions and the relationships that facilitate

the continued success of our business, including

our strong and interdependent relationships with

key role players across our inner cities and

industry.

In addition to the above <IR> Framework capitals,

manufactured and natural capital were also considered as

part of our value creation process. We have concluded that

these two capitals do not play a material role in our value

creation process. Our offi ce space is rented rather than

owned. Similarly, TUHF is not a signifi cant consumer of

natural capital and this capital is therefore not considered

material. However, the effect our clients have on natural

capital is considered as part of our reporting on our broader

impacts.

Scope and boundary

This report focuses on TUHF’s performance against our

strategy in the year under review, as well as our ability to

create value in the short, medium and long term. TUHF has

offi ces in Johannesburg, Durban, Port Elizabeth, Cape Town

and Bloemfontein. These offi ces also serve inner cities in the

surrounding areas, for example, Pretoria, Pietermaritzburg

and Uitenhage.

Assurance

PricewaterhouseCoopers (PwC) has externally assured the

annual fi nancial statements provided in this integrated

report. All information contained within this report is subject

to internal controls and strong management oversight.

TUHF is confi dent that other data, which has not been

audited, is an accurate refl ection of the business

performance and position.

Board responsibility

The board and its sub-committees are ultimately

responsible for overseeing the integrity and completeness

of the integrated report. The board has applied its collective

mind to the preparation and presentation of the integrated

report and has concluded that the completeness of the

material matters dealt with and the reliability of data and

information presented were taken into consideration and

have been materially presented according to the

International Integrated Reporting Council’s (IIRC) <IR>

Framework. On 30 July 2015, the board approved the

2015 integrated report.

ABOUT THIS REPORT

“ In a world in desperate need of more effective scalable approaches to address social problems, we are positioned to support broader socio-economic development in South Africa by supporting entrepreneurs” Samson Moraba – Chairman


3

Tab

le o

f conte

nts

Feedback

Feedback on the contents and presentation of the 2015 integrated

report will assist TUHF in improving the quality and relevance of

future reports. Stakeholders are invited to contact the TUHF Group

at 086 000 8843 or [email protected].

1 HIGHLIGHTS

2 ABOUT THIS REPORT

4 BUSINESS OVERVIEW

6 Business profi le

6 Business ethos

7 Group structure

8 History

10 Geographical footprint

12 HOW TUHF CREATES VALUE

14 Strategy

16 TUHF: A sound investment

18 Business model

20 Our stakeholders – Being an invested

partner

22 Case studies

32 PERFORMANCE REVIEW AND OUTLOOK

34 Chairman’s review

36 Chief executive offi cer’s review

38 Operational review

42 Our people

43 Our staff profi le

44 CORPORATE GOVERNANCE

46 Our board of directors

48 Our commitment

48 Governance framework

49 Board of directors

50 Governance structure

53 Remuneration review

56 ANNUAL FINANCIAL STATEMENTS

103 Glossary

104 Corporate information

IBC Gratitude to funders

Forward-looking statementsCertain statements in this document may constitute ‘forward-looking statements’. Such forward-looking statements involve

known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or

achievements of TUHF to be materially different from the future results, performance or achievements expressed or implied

by such forward-looking statements. The Group undertakes no obligation to update publicly or release any revisions to these

forward-looking statements to refl ect events or circumstances after the date of this document, or to refl ect the occurrence of

anticipated events. These have not been reviewed or reported by the Group’s auditors.

DataThe number of units, buildings, loans and entrepreneurs are reported for TUHF’s main activity company, TUHF Limited, for

active loans as at the end of the fi nancial year reported on. All rand value numbers, including loan book size and operating

profi t or related percentages, are reported for the TUHF Group as per the annual fi nancial statements and integrated report.

Years are measured in fi nancial years starting at 1 April and ending 31 March of the year reported on.


4

Business overview


5

At TUHF, our people are always digging deeper, looking further and seeing things from a different perspective.

PE Skyline


6

BUSINESS PROFILE

Who we are

At TUHF, we are passionate about spotting and unearthing potential. In

declining areas, we see thriving property markets. In run-down buildings,

we see the potential for families to live in a safe and secure environment.

In people, we see the entrepreneurial capability to create well-run

businesses, providing employment and multiplying our economy.

At our core, we are much more than a traditional bank or

non-bank fi nancial services company. We provide access to

fi nance for entrepreneurs, from all walks of life, to purchase,

and subsequently convert or refurbish buildings in the inner

cities of South Africa to affordable residential units available

for rental. We also provide support, guidance and risk

management for new entrepreneurs.

Our specialised knowledge, built collectively from our

12 years of operation in multi-sector economies in inner city

areas facing urban decline, enables us to offer expert

advice, make timely decisions and extend a wide range

of competitive products tailored to the diverse needs of

our clients.

To date, TUHF has fi nanced over 20 000 units, and we are

proud to say that in 2015, our loan book passed the

R2 billion mark.

Our approach is to concentrate on specifi c areas, creating

buoyant residential property markets in inner cities. As a

result, we have an unparalleled understanding of the inner

city property markets in which we operate.

What sets us even further apart is that, when considering

a project, we fi rst look at the person and then we consider

the project.

TUHF fi nances and supports people that are:

• entrepreneurial, with a fl air for business;

• prepared to contribute their hard-earned money;

• hard working and solutions oriented;

• familiar with the inner city;

• determined to make a better life for themselves and

others; and

• proud to own a clean and well-run building.

TUHF fi nances and supports projects that:

• are in city centres (close to schools, transport systems

and places of work) that are currently in decline;

• are economically sustainable, able to generate suffi cient

income to repay expenses, as well as service the loan

and make a profi t; and

• will upgrade buildings in the selected inner city area

providing affordable and decent residential rental units.

Business ethos

Our unique ability to spot potential in all kinds of people, areas, buildings and communities combined with our passion for

supporting, developing and growing with people to become successful entrepreneurs forms the basis of our business and sets

us apart. Our relational business ethos enables us to speak to anyone, on any level, which places us in the unique position to

connect and build relationships between different people, parties and communities. This allows us to create sustainable value

for our organisation and all of our stakeholders.

Business overview

GROUP STRUCTURE

TUHF Holdings Limited –

shareholder analysis

TUHF NPC

33,53%

National Housing

Finance Corporation

33,39%

Futuregrowth

14,62%

Public

Investment

Corporation

14,62%

TUHF

employee

share scheme

3,49%

TUHF Limited

0,35%

Intuthuko Equity Fund

Proprietary Limited

Core purpose:

Equity fund to enable previously

disadvantaged individuals who

have never owned investment

property before to access the

property market. The fund

requires interested entrepreneurs

to contribute of their own earnest

money towards the transaction.

This equity fund is subject to

senior debt fi nance from TUHF

Limited.

TUHF Holdings Limited

Core purpose:

This is the holding company,

where shareholders have invested

equity. While TUHF NPC owns

33,53% of the company, a voting

pool agreement is in place with

the NHFC, whereby TUHF NPC

has the casting vote.

TUHF Properties

Proprietary Limited

Core purpose:

To purchase properties that

become available for on-selling to

entrepreneurs under deferred sale

agreements. This is not TUHF’s

core business and is used as and

when opportunities arise from on-

selling of existing TUHF properties

with TUHF bonds registered.

100% 100% 33,53%

TUHF Limited

Core purpose:

This is our primary activity

company. The company provides

commercial property fi nance

in the form of long-term loans,

secured by mortgage collateral

and other fi nancial products,

to fi nance entrepreneurs and

landlords for the purchase,

construction and improvement

of property for the purpose

of regeneration of South

African inner city precincts and

surrounding areas.

TUHF Bridge

Proprietary Limited

Core purpose:

To provide short-term bridging

fi nance for a range of needs,

including the procurement of

rates clearance certifi cates,

the payment of the balance of

purchase prices, construction

loans and, in the medium term,

the rehabilitation of sectional title

projects.

100%100%

TRUST FOR

URBAN HOUSING

FINANCE NPCThe original not for profi t organisation,

established in 2003.


8

HISTORY

The history of TUHF

Our journey starts long before our commercial Company was founded in 2003. In the early 90s, at the peak of the exodus

out of Johannesburg’s city centre, our founding members and directors saw the potential in the abandoned infrastructure of

previously popular areas such as Hillbrow and Yeoville. This vision has multiplied over the past 12 years into fi ve branches

and a loan book of over R2 billion invested in the inner cities of South Africa.

TUHF was pioneered by leading South African development fi nance organisations, dedicated to providing effective cost-

effi cient solutions to the inner city improvement challenge. Today we continue working closely with these institutions, and

have also partnered with other asset managers and commercial banks.

0

100

200

300

400

500

600

151413121110090807060504

Number of clients and total number

of loans

Gauteng KwaZulu-Natal Eastern CapeTotal loans

Year

Nu

mb

er

0

100

200

300

400

500

600

151413121110090807060504

Number of buildings and total number

of loans

Year

Nu

mb

er

Gauteng KwaZulu-Natal Eastern CapeTotal loans

Nu

mb

er

Numbers of units

0

5 000

10 000

15 000

20 000

25 000

151413121110090807060504

Gauteng KwaZulu-Natal Eastern Cape

Year

Business overview continued

2000The Seven Buildings Project is

liquidated due to mismanagement by

the co-operative. Subsequently,

questions are raised around the

sustainability of ICHUT’s model.

2004Intuthuko Equity Fund is launched

through a R2 million capital injection

from the Gauteng Partnership Fund

(GPF). This constituted a major

development in South Africa for rental

property ownership for previously

disadvantaged individuals who had

not previously owned investment

property.

TUHF closes the financial year having

financed three buildings with a loan

book size of R2,5 million.

Early 90s Urban decline is caused by a mass exodus

out of Johannesburg CBD, leaving empty

office and residential spaces, at the same time

inviting in crime and grime.

90s 92 93 96 00 03 04

1992 A platform is created for government,

community and business to unite through the

Central Johannesburg Partnership to address

the rampant urban decline, as well as the

rising demand for housing as people flock to

Johannesburg to find work. ACTSTOP is a

community activist organisation that is closely

involved. Members of ACTSTOP include

Cas Coovadia – today the Deputy Chairman

of the TUHF board and Pressage Nyoni, today

TUHF’s Liaison Officer.

2001Revision of ICHUT’s model sees a

recommendation to combine

social housing and standard

residential property finance in the

form of a mortgage bank for

existing and new entrepreneurs

focused on inner city regeneration.

This recommendation is led by

Paul Jackson, then at the

Johannesburg Housing Company

(JHC), today, TUHF’s CEO.

The recommendation is met

favourably and a R10 million

loan is granted by the NHFC

for this purpose.

2003 In June, ICHUT is transformed into the

National Urban Housing Finance Trust

(NUHFT). NUHFT is renamed the Trust for

Urban Housing Finance NPC (TUHF NPC), a

not-for-profit company.

NHFC grants TUHF NPC an interest-free loan

of R10 million for start-up capital. NHFC

grants TUHF NPC a further R50 million

wholesale loan.

History is made as TUHF NPC proudly

finances their first project – Jozi Housing’s

Carhil Heights. This is Jozi Housing’s first

property investment in the Johannesburg inner

city. Today, Jozi Housing still owns Carhil

Heights and remain a valued client of TUHF.

01

1993 The Central Johannesburg

Partnership establishes the Inner

City Housing Upgrading Trust

(ICHUT). ICHUT is an organisation

that secures ownership of bad

buildings in the Johannesburg CBD.

After two years, South African

citizens who are tenants in these

buildings become the co-operative

owners through paying back a

subsidised loan to ICHUT.

98

1998 ICHUT appoints its first

full-time employee,

Nano Makwela. Later,

Makwela becomes one

of the founding

members of TUHF.

1996 The Seven Buildings project, a co-operative

housing initiative in the Johannesburg CBD,

obtains housing subsidies to the value of almost

R6 million – the largest project funded by ICHUT.

In the same year, the Department of Housing

establishes the National Housing Finance

Corporation (NHFC).


9

0

500

1 000

1 500

2 000

2 500

151413121110090807060504

R (

00

0 0

00

)

Loan book growth per annum

Year

-10

0

10

20

30

40

50

15141312111009080706050403

Year

R (000 0

00)

Operating Profit/Loss

Our objective to be the leading commercial property fi nancing company

in our market niche has been achieved and we look forward to

continuing to fi nance and support entrepreneurs to regenerate the

inner cities of South Africa.

2007Loan book reaches

R209,8 million, a 97%

increase.

Operating profits reach

R2,24 million and to date a

record of 7 373 units are

financed.

07

2015TUHF Holdings Proprietary

Limited and TUHF Proprietary

Limited converted into public

companies to facilitate the

process of accessing the

capital markets.

TUHF opens new branches

in Cape Town and

Bloemfontein.

Loan book surpasses

R2 billion mark.

An additional loan of

R5 million from Newhco

enables the Intuthuko Equity

Fund to further assist

emerging entrepreneurs with

equity funding.

15

2005A year of growth as TUHF NPC’s

loan book closes at R33,8 million,

a 1279% increase from the previous

year, covering 31 buildings, a 933%

increase from the previous year.

TUHF NPC’s first annual report

published.

2008Intuthuko Equity Fund

continues to strengthen, with

the capitalisation increased to

R10 million and the lending

threshold to R500 000.

The effects of the worldwide

financial crisis are felt, particularly

in the United States and Europe.

TUHF NPC’s business continues

to grow, however, but

unfortunately as a result efforts to

securitise part of TUHF NPC’s

loan book collapse.

TUHF NPC’s state-of-the-art IT

and management information

system is commissioned.

2011TUHF breaks the R1 billion mark in

loan book size, closing the year at

R1,17 billion.

TUHF takes a second step in

geographic expansion by opening

offices in Port Elizabeth, South Africa’s

fifth largest city.

TUHF is announced as the winner for

the Business Award in the Investing in

the Future and Drivers of Change

Awards supported by Drivers of

Change, Southern Africa Trust and

Mail & Guardian.

2013TUHF celebrates

10 years in operation and

are awarded the Mortgage

Bank of the Year Award for

2013/14 by the African

Banker Awards.

Operating profit achieved is

R31,5 million with over 18

000 units financed.

The Intuthuko Equity Fund

is made available to TUHF’s

clients outside of Gauteng,

thanks to a R5 million loan

from the New Housing

Company (Newhco).

2014Operating profit reaches

R40,2 million – a 27% increase in

profit from the prior year. A record

of over 20 000 units is financed.

National Treasury’s Jobs Fund

agrees to a grant of R200 million.

Fire affects TUHF’s head office in

Johannesburg. The TUHF team is

back up and running in one day

with business as usual. The team

relocates to temporary offices.

2009TUHF Proprietary Limited is

established as a commercial

entity, taking over TUHF NPC’s

loan book, staff and assets.

TUHF takes first step to

geographic expansion, opening

offices in Durban and and

closes the year with a 63%

increase in loan book size to

R622,4 million.

2006TUHF NPC’s loan book sees a 215%

increase and grows to R106,5 million.

TUHF NPC breaks even for the first

time showing an operating profit of

R1,83 million.

83 buildings arefinanced by the end of

2006 and almost two thirds of these

projects owned by previously

disadvantaged entrepreneurs.

05 06 08 09 11 13 14

2012Liquidity concerns are

lightened through

commitments from the

NHFC, Futuregrowth and the

Public Investment

Corporation.

Subsequently, TUHF’s

loan book grows to over

R1,35 billion and units

financed exceed 17 000.

12

2010TUHF Proprietary Limited

closes the year showing

R15,1 million in operating

profits and the total

number of units financed

exceeds 15 000.

10

Geographical footprint

Cape TownCape Town

EASTERN CAPEHistory Focus areas

Since 2011

2 employees

765 units

Loan book

R70 532 596

21 entrepreneurs

assisted

31 buildings

Korsten

North End

Port Elizabeth CBD

Port Elizabeth Central

Richmond Hill

Sidwell

Sydenham

Uitenhage

KWAZULU-NATALHistory Focus areas

Since 2009

4 employees

1 174 units

Loan book

R151 150 540

14 entrepreneurs

assisted

28 buildings

Albert Park

Durban Central

Overport

Pietermaritzburg Central

Pinetown Central

Umbilo

Warrick Avenue

GAUTENGHistory Focus areas

Since 2003

41 employees

20 875 units

Loan book

R1 858 752 897

190 entrepreneurs

assisted

448 buildings

Arcadia

Bertrams

Hillbrow

Joubert Park

Pretoria CBD

Rosettenville

Sunnyside

Turfontein

Yeoville

SOUTH

AFRICA

Bloemfontein

Durban

Johannesburg

Opened

April

2015

Opened

January

2015

We are passionate about ‘impacting

through scale’ in a responsible and

prudent manner. The TUHF Group

operates from its head offi ce located in

Johannesburg with offi ces in Durban and

Port Elizabeth. In 2015 we opened

offi ces in Cape Town and Bloemfontein.

We serve all the inner city areas in these

provinces from our regional offi ce base.

Port Elizabeth

TUHFEach new TUHF branch is carefully chosen based on the opportunities exhibited in the surrounding areas with regard to our market niche and based on a thorough assessment of the Group’s ability to provide necessary support to the new branch.


12

How TUHF creates value


13

We are more than fi nanciers. We position ourselves to support our entrepreneurs, understanding that their success not only contributes to our success, but result in tangible value for inner city communities and the local economy as a whole. Samson Moraba – Chairman


14

As a leading inner city fi nancier with a national presence, we strive to maximise our positive impact by

pursuing our strategic objectives:

Treasury Commercial growth

Develop and implement new ways of securing debt capital.

This includes diversifying our pool of debt providers,

implementing structures that will give us direct access to the

capital markets and improving our assets and liabilities

management to reduce scenario risk.

Enhance shareholder value by optimising liquidity and

profi tability through:

• further geographic expansion; and

• growth of a quality loan book (fi nanced through effi cient

capitalisation and funding structures) while maximising

economies of scale.

KPIs

• Completed series 1 of the domestic medium-term note

programme to the value of R350 million.

• Ensure competitiveness by offering interest rates that are no

higher than 1% than those offered by other industry players.

• Improved structured fi nancial instruments to capitalise on

volume and price.

• Maintain total arrears below 0,5% of total loan book.

• Secured R450 million of funding. Net interest margin (NIM)

of 3,25% on debt after loan loss provisions.

• Debt service cover ratio (DSCR) of 1.1X.

• R600 million approvals target.

• R450 million disbursements target.

• Maintain a healthy pipeline of at least R250 million at

all times.

• Maintain Cost to Income Ratio (CTI) below 55%.

Barriers

• Conservative and traditional perceptions of high-risk related

to inner city investment by potential debt capital providers.

• Constrained access to debt capital markets.

• Perceptions of risk of the inner city decreasing therefore

more industry players are entering the market.

• Increased competition for seasoned portfolios.

Enablers

• 12-year solid commercial track record of market related

return on investment.

• Sustainable and growing fi nancial and social return on

investment (ROI) offered through our impact.

• A long-term funding strategy that will give us direct access

to the capital markets.

• Growing global awareness around impact investment.

• Regulation 28 being passed by government ensuring that

retirement fund investors invest funds in ways that achieve

economic development and growth through diversifi cation

across various asset classes.

• Conversion to a public company.

• Collective understanding of market needs and area specifi c

nuances.

• Diverse competence of TUHF’s professional team.

• Deep demand for rental accommodation close to places

of work.

• Market strength – role of the inner city utilising existing

infrastructure.

• Expanding geographic footprint.

• Signifi cant national market potential.

Our strategic enablers are underpinned by our commitment to pursuing best practice in governance principles and

commercial property fi nance in order to sustain our business in a responsible manner while meeting our

stakeholder expectations.

STRATEGY

As we continue to work towards our vision of a R5 billion loan book, servicing every major city in South Africa, these are the

key strategic focus areas that have been identifi ed for 2015/16.

How TUHF creates value


15

Client growth Operational effi ciency

Enable our clients to grow from part-time property

entrepreneurs to full-time property investors, moving from their

fi rst to their second and further buildings while maintaining our

strong repeat business cycle.

Build on our existing staff complement by ensuring we have

the right human resource (HR) competence and capacity to

maintain a high standard of work, productivity and risk

mitigation by maximising the use of current systems,

procedures and resources, including information technology

(IT) systems.

Balanced loan concentration made up of:

• 40% starter entrepreneurs;

• 40% emerging entrepreneurs; and

• 20% established entrepreneurs.

• Roll out of improvements on our Loan Cycle Management

System (LCMS) - Phase 2

• Faster decision-making and reduced complexity in

processes.

• Integrating cross-departmental processes.

• Multiplying processes on a national level rather than a

centralised point.

• Maturing market in certain areas, resulting in increased

building prices and reduced profi t margins for entrepreneurs.

• Challenge for entrepreneurs to raise the equity required.

• Staying within regulatory compliance.

• Complex projects.

• Discipline in adhering to processes.

• Complexity that comes with the growth of the business.

• Deep understanding of the complexities of inner city

property investment.

• Ability to fi nd and unearth potential in people, buildings

and areas

• Confi dence through years of fi rst-hand experience in

supporting starter entrepreneurs to become emerging

and established property investors.

• Appeal to ordinary South Africans through success stories of

men and women just like them who have become successful

property investors.

• Established training and mentoring processes.

• Experience in supporting entrepreneurs throughout their

property investment lifecycle

• Strong client centric and entrepreneurial culture

• World class IT management system

• Strong existing systems and processes.

• Risk management.

• Competent staff complement empowered to make

decisions.

Underpinning our strategy for 2015/16 is our brand strategy review. TUHF has embarked on an exercise to evaluate and

improve the way in which we position ourselves both internally and externally. Success in the brand strategy review will see a

clear, concise articulation of who we are, why we do what we do and how we do it. This touches on every aspect of our

business and will form the golden thread fl owing through TUHF’s business.


16

12 years of results with impact

TUHF has a proven track record of commercial viability coupled with social

impact: we have shown ourselves to be a catalytic presence in the areas in

which we operate, while maintaining our fi nancial viability as a business.

Our solid track record of identifying potential in our inner cities began

at a time when investment in the inner cities was almost non-existent.

Today, the opposite is true. Men, women and families are fl ocking to these

areas, and we are proud of the role we have played in providing safe and

affordable housing for these individuals and families, and will continue to

work towards this end.

Sussed and savvy inner city knowledge

Our specialist knowledge and experience

of the complexities of South Africa’s

inner cities is our unique strength. Given

the rate of urbanisation, the demand for

these specialist skills is on the rise. We

are poised to meet this need.

TUHF: A SOUND INVESTMENT

12 years of results with

impact

Sussed and savvy inner city

knowledge

1 2

Connectivity3

Governance5

4Risk

management

Governance Responsibility is an integral part of

TUHF’s day-to-day operations and

business expertise, supporting the

Group’s profi tability and long-term

viability. In this regard, we are committed

to the pursuit of best practice in

governance principles in order to meet

stakeholder expectations and create

shared value for the future.

Our record speaks for itself, coming out

above industry standards in our audits

and compliance measures.

Risk management To the outsider, our work seems risky.

To us, it’s not only meaningful but also

logical. This insight comes as a result

of our expert knowledge in the areas

we operate in, as well as the people

we lend to. Our character-based

lending approach and world-class

risk management systems include

detailed credit approval processes and

loan administration, enabling us to

responsibly manage our risk.

Connectivity Being human, engaging and

approachable is in TUHF’s DNA. Our

relational business ethos and our team’s

diverse skills and experience set us apart

to facilitate meaningful engagement,

enabling us to truly understand our

stakeholders and meet their needs.

How TUHF creates value continued

TUHFWhile, over the years, many have viewed our organisation as a purely philanthropic entity, our commercial success and that of our clients is truly

challenging these perceptions. Samson Moraba – Chairman


18


18

Our resourcesHow we use

our resourcesB

usi

ness

mod

el

Financial capital Funds available to the Group, includes debt

capital, equity funding and loan fi nance.

Our service• Supporting entrepreneurs in inner city property

investment.

• Offering experience, knowledge and expertise

on property entrepreneurship and the areas in

which we operate.

• Acting as a connector between entrepreneurs

and our greater network of role players.

• On-boarding, training and mentoring for starter

entrepreneurs.

• Value-added services to clients such as

events where industry experts share industry

and market related trends and information

on challenges close to inner city property

entrepreneurship.

Our productsFinance for mixed use developments of which

the largest component should be residential up

to the value of R50 million.

Mortgage fi nance

• A single loan facility over 15 years for

acquisition and development.

• Prime linked interest rate.

• Once-off raising fee.

• No monthly service fees.

• Financial structuring such as grace periods

to accommodate the development and rent-up

stages.

Intuthuko Equity Fund

• Equity fund to enable previously disadvantaged

individuals who have never owned investment

property before to access the property market.

The fund requires interested entrepreneurs to

contribute of their own earnest money towards

the transaction. This equity fund is subject to

senior debt fi nance from TUHF Limited.

Bridging fi nance

• Providing short-term bridging fi nance for a

range of needs, including procurement of

rate clearance certifi cates, payment of balance

of purchase prices, construction loans and in

the medium term, rehabilitation of sectional

title projects.

Human capital Our diverse staff complement, including

our strong team of experienced professionals,

offer a depth of insight into the inner cities

across our country.

Intellectual capital Our character based lending approach,

which is supported by our world-class loan

cycle management process. This process

is customised to our market niche and

specialisation supported by our stable state-of-

the-art information technology (IT) system that

is integrated at multiple levels of our business.

Social and relationship capitalOur relational business ethos and our ability

to speak to anyone on any level enables us to

form strong and interdependent relationships,

placing us in the unique position to connect

different people, parties and communities.

In addition, our passion for supporting,

developing and growing with people to become

successful entrepreneurs is what forms the

basis of our business and sets us apart.


19


19

WHAT MAKES US DIFFERENT

HOW WE MANAGE OURSELVES

VALUE CREATED

Our valuesOur values are central to our culture and business style.

These values provide the framework of behaviours in which

all business engagements and relationships, both internally

and externally, are governed. Our values are:

• Integrity: being professional, acting with honesty and

responsibility and delivering on our promises.

• Commitment: working with pride and enthusiasm,

consistently working to our utmost, showing our passion.

• Excellence: doing it right the fi rst time, economically

and effi ciently.

• Innovation and resilience: being proactive and fl exible,

breaking new ground and never giving up.

• Teamwork: working as one with a common sense of

purpose.

Our corporate governanceWe are committed to continually strengthening and

enhancing our governance in pursuit of best practice.

We hold to the fact that effective corporate governance

is essential to securing the Group’s long-term success

and viability.

Our risk managementEffective risk management is a core element of

our business. Our board of directors has overall

accountability for ensuring that risk is effectively

managed across the Group.

ClientsShared realised vision for inner city regeneration through our

access to fi nance and their passion for property combined

with personal relationships and support.

InvestorsOpportunities for impact investment through generating

a sustainable and growing fi nancial and social return on

investment.

ShareholdersConsistent growth in return on investment through

dividends.

EmployeesCollective opportunity to contribute not only to an employer

but a ‘Good business doing good’. Our team has a strong

business style and culture valuing each member of the team

regardless of position.

Inner citiesConverting ‘bad buildings’ into safe, secure living spaces

results in regeneration. TUHF tenants stimulate and support

inner city economies through their consumer spending.

GovernmentFiscal contribution to municipal income through property

taxes and payment for services. Many of these buildings

were previously deemed ‘bad’ buildings and paid no rates

or service fees.

South AfricaUtilising existing infrastructure to address affordable housing

shortages in areas close to people’s places of work.

Our unique ability to spot potential in all kinds of people.

Our ability to support, develop and grow with people to become successful entrepreneurs.

Our unique position to connect and build relationships between different people,

parties and communities.

Our specialist and unparalleled knowledge of the complexities of our inner cities.

SEEING WHAT OTHERS DON’T – IN PEOPLE, BUILDINGS AND INNER CITIES.


20

Stakeholder group Why we engage

Clients We believe that when our clients succeed, we succeed. We share a vision for

the potential of inner cities. Through our access to fi nance and their passion

for property, we support our clients as they grow their property portfolios.

Our business shows that satisfi ed clients are likely to become return clients,

which benefi ts our long-term relationships and builds our book, as well as

the areas in which we operate. Satisfi ed clients also positively promote

our organisation, enhancing our credibility and building our brand equity in

the market.

Providers of capital Our business depends on our ability to provide affordable access to fi nance

to our clients. This fi nance is provided to us by our funders. As a result they

make up a key part in our business.

By understanding and complying with funders’ requirements, we are able to

grow our own and our clients’ businesses. This helps us to grow our loan

book and improve our social impact and ROI.

Employees One of the key enablers of TUHF’s strategy is a competent and motivated

team who are passionate about the work we do.

Our curious culture values our staff complement regardless of position in the

company. Our strength lies in our engaged and diverse team.

Government

and municipalities

A symbiotic relationship exists in the inner cities. We need the infrastructure,

protection and public services for ‘bad areas’ to be regenerated. Through the

engagement process, we develop relationships that facilitate this, assisting in

access to infrastructure and public services. Government, in turn, needs the

private sector, companies like TUHF, to invest in, ensuring the economy is

stimulated and the vast housing need is addressed.

Inner city communities and

organisations as well as

Property Owners’ Bodies

We are collectively invested in the inner cities and together committed to

making it a better space for all. We have a shared vision of safe, affordable

and decent living spaces in the city.

Through the process of rallying around these shared issues, which are close

to TUHF and close to our stakeholders, we are kept up to date with the

latest news in the city, build a network of people operating in the city and

potential clients come from these groups due to networking and engaging.

Service providers Our service providers enable us to add value to our stakeholders. Through

our contact with our suppliers, we create value for TUHF by communicating

our needs and ensuring these needs are met.

Regulators We engage to ensure our compliance with strict industry standards, as well

as to assist good governance within the Group. This in turn results in the

confi rmation of the legitimacy of our business, giving good credentials and

comfort in the national standards adhered to.

OUR STAKEHOLDERS – BEING AN INVESTED PARTNER

Our business is built around creating shared value in the areas that we operate in. We are committed to recognising and

unearthing potential in inner cities, buildings and people and cannot do so without being an invested stakeholder. Working

together with a broad range of role players, we are invested in the communities in which we operate and go further than

being a non-bank fi nancial services provider.



21

How we engage The value created for the stakeholder

Our business model is inherently relational and allows for multiple

contact points with our clients throughout their loan term with

us. The client has a single point of contact service, managed by

their portfolio manager, supported by the entire TUHF team.

We walk the streets in inner city areas and this is often the starting

point for a conversation that leads to someone becoming our client.

We engage in open dialogue, including personal meetings with

clients, informative events around issues inner city property

entrepreneurs face, such as property or utilities management, as

well as training and mentoring opportunities.

Growth in the entrepreneur’s business, which is infl uenced by

personal relationships with the TUHF team who support

entrepreneurs’ inner city property investment by offering experience,

knowledge and expertise on property entrepreneurship and the

areas in which we operate.

Enabling connections to be made between entrepreneurs and the

greater TUHF network of role players.

We engage our funders through quarterly updates on overall

performance, as well as their investments’ performance through

Funders’ packs and regular meetings with EXCO members

regarding updates and performance. In addition, we produce an

integrated report, which serves as the central communication tool to

all funders.

Opportunities for socially responsible investment through generating

a sustainable and growing fi nancial and social return on investment.

We engage with our staff every day as we conduct our operations.

Furthermore, we conduct staff surveys to ascertain the needs and

level of satisfaction of our employees.

We also conduct an annual mid-term review for the whole company

to come together under a common shared purpose. In addition,

regular staff meetings take place.

Through constant engagement, employees feel heard, and their

legitimate concerns can be met.

This supports a culture where each individual’s opinions and

contributions count, from the intern to the CEO, adding to job

satisfaction.

Ongoing meetings with council, provincial and local government, as

well as the Department of Human Settlements.

Through ongoing engagement, we are better placed to facilitate our

government’s goals. TUHF is uniquely positioned to play

a major role in helping government fulfi l its housing and

development objectives by encouraging entrepreneurship and

employment, facilitating improved urban planning and building safer

communities closer to people’s places of work.

Memberships and regular engagement with bodies such as the

Johannesburg Property Owners and Managers Association

(JPOMA) and the South African Property Owners Association

(SAPOA) and engaging, on a regular basis, with smaller community

bodies in the individual cities we operate in.

We are the largest lender in our market niche; as a result our large

loan book makes us a serious contender in the city and enables us

to put weight behind smaller bodies for support from government

for example. In this way, engagement enables the creation of shared

solutions and shared thinking.

Regular meetings, project engagements and joint/referred

consultation to clients’ businesses.

Through our engagement, service providers are better able to

position themselves to meet needs and thereby secure our ongoing

business.

Annual compliance criteria submission. TUHF is a proud member of these organisations, operating in

excellence and compliance to the regulations and laws.

Our business model is built on the concept of creating shared value for all our stakeholders. As TUHF raises its loan book,

hires more people and expands nationally, we continue to gear ourselves to create value for all stakeholders by

understanding their needs and expectations. This diverse group is composed of our clients, providers of capital, employees,

local government, inner city communities and organisations, as well as property owners’ bodies, service providers and

regulators.


22

Developing residential entrepreneurship in YeovilleYeoville prides itself on being a thoroughly

Pan-African community. Its residents hail from

various parts of the continent, including the

Democratic Republic of Congo, Nigeria, Angola

and Zimbabwe, to name a few. Its earlier

incarnation as a largely Jewish suburb also

contributes to today’s terrain, and a handful of

synagogues still operate in the area. This vibrant,

dynamic part of Johannesburg thrives as a

so-called ‘third economy’. Much commercial

activity takes place at street level while the suburb

as a whole is kept alive by its multi-cultural mix.

Soweto-born Sibusiso Maphisa believes in this

vibrancy. He has, with the assistance of TUHF,

acquired a building in Yeoville and, through his

new project, is sharpening his entrepreneurial

skills. Still under construction, the building lies in

the heart of St. George’s Street and is imbued

MO

RE

TH A N J U S T FI N

AN

CE

TH

E B

IGGER PICTU

RE

Case

stu

die

s with social and economic promise. It is located

just a few metres away from a Rea Vaya bus stop

and close to schools and shops.

Due to the popularity of the area, rooms are often

rented out in ‘illegal’ buildings, causing

overcrowding, with multiple families sharing small

spaces. This situation sparked Sibusiso’s social

foresight. He has embarked on a development

venture that will provide safe living conditions.

“The amazing thing about Yeoville is that I don’t

have to painstakingly look for clients,” Sibusiso

says. “There is always a supply of people in need

of accommodation.”

Sibusiso’s story is one of entrepreneurial tenacity

and offers inspiration for young entrepreneurs

wanting to get into the property business.

“I had aspirations to own a business while in high

school and went into repairing shoes for Sowetan

locals to gain enough money to acquire a driver’s

licence,” he says. “From there, I became a taxi

driver. I fi nally had the courage to apply for a job at

the City of Joburg. After landing the job, I bought

my fi rst property in Cosmo City. This led to a

deeper interest in property as a whole. I met with

a TUHF offi cial and voiced my interest in acquiring

space in Yeoville. Things took shape from there.”

“ The amazing thing about Yeoville is that I don’t have to

painstakingly look for clients. There is always a supply of

people in need of accommodation.”



23

“ One thing that I’ve come to

appreciate while working

with TUHF is that they require

brutal honesty from an

entrepreneur”

Sibusiso’s venture as a property owner has led to the

development of two separate dwellings on his St George’s

Street property. The original ‘main house’ has seven units

and a new built section at the back offers eight bachelor

units. The bachelor fl ats outside feature a clever separation

of the bedroom and kitchen. Rental for these units is

R2 500 per month, while the main house’s self-contained

units offer each tenant their own bathroom and kitchen, all

for an affordable R1 900 monthly rental.

Sibusiso’s partnership with TUHF has created a learning

curve for the new property entrepreneur, gaining knowledge

about the fi ne details of property ownership along the way.

Sibusiso has worked in active collaboration with TUHF

through interactions with structural engineers, City Power

and other stakeholders.

“One thing that I’ve come to appreciate while working

with TUHF is that they require brutal honesty from an

entrepreneur,” he says. “I have had to make my intentions

crystal clear and meet my TUHF loan manager halfway. I

have also had to make sure the residences are always safe

and secure, and TUHF’s standards and the promises we as

entrepreneurs make in the market are lived up to. This, for

me, is probably the most exciting part of the whole venture.”


24

Creating a place of light in the cityThe Maboneng Precinct, a fl agship initiative by

Propertuity and brainchild of Jonathan Liebmann,

is an internationally acclaimed urban

neighbourhood located on the east of

Johannesburg CBD. This thriving neighbourhood

is a unique complex of developments, gaining

international recognition as an attraction for locals

and foreigners alike.

Liebmann prefers to be known as an urbanist and

is driven by a desire to change inner city

Johannesburg into an eclectic place where people

can live, work and play safely, while creating a

connected community of young professionals,

creatives and entrepreneurs.

Only a few years ago, the area was an

unwelcoming light-industrial and offi ce district with

safety concerns. Now, on any given day of the

week there is a multicultural mix of people walking

and cycling in the street – international tourists,

young creatives, entrepreneurs, students and

MO

RE

TH A N J U S T FI N

AN

CE

TH

E B

IGGER PICTU

RE

Case

stu

die

s artists. “There is a sense of something exciting

happening here, and people want a part of that,”

says Liebmann. “Many of the residents work in the

city – some even work in the northern areas of

Johannesburg and still prefer calling Maboneng

their home,” he continues.

The Precinct has a number of restaurants,

collaborative work spaces, art galleries, an

independent cinema, retail stores and a coffee

roastery. Maboneng apartments have a modern

urban design, often including rustic fi nishes that

create remarkable textures.

Every building in the Precinct has a distinct

identity created through Propertuity’s unique

approach to development which aims to fi rst

establish the identity of the building through

developing its name and character, while also

working with artists to add an expressive

element to the building.

To date, TUHF, along with Futuregrowth, have

jointly funded a number of Propertuity mixed-use

properties on a 30%/70% basis respectively.

These include Remeds View, Urban Fox, Rocket

Factory, Living Moad and Situation East.

“ Now, on any given day of the week there is a multicultural

mix of people walking and cycling in the street – international

tourists, young creatives, entrepreneurs, students and artists.”



25

A few more are in the pipeline for the coming months

and will continue to add to the eclectic creation of what

has become Maboneng, such as Platinum House,

Transport Square, Aerial Empire, Old Trafford, 10 Erven

and Drivelines – which will be a revolutionary 10-story

residential and retail shipping container development.

“TUHF shares my vision for the inner city,” says Liebmann.

He commends TUHF for its dedication to inner city

Johannesburg, and adds that this shared vision has been

instrumental in his choice to partner with TUHF. Propertuity

now owns 50 properties in the city and Liebmann believes

that TUHF has assisted in supporting Propertuity to

progress from a company with 30 to 40 buildings to one

owning over 50 buildings.

Propertuity is on track to achieve its aim of having 20 000

residents living within the Maboneng Precinct by 2020.

“ TUHF shares my vision for the

inner city”


26

Providing safe and clean livingSolly Ramalamula’s belief in the importance of

safety, security and cleanliness, along with his

hard work, entrepreneurial tenacity and TUHF’s

assistance, has enabled him to leave his former

occupation as a policeman to become the proud

owner of fi ve TUHF-fi nanced properties,

purchasing the fi rst one in 2010.

Verena Court in Primrose is one such property.

Drawing on his policeman’s pension and funding

from TUHF, Solly’s company, Take Shape,

purchased Verena Court in 2012. Painted in Take

Shape’s signature blue and purple, Verena Court

stands cheerfully on a corner with the sounds of

children playing behind the secure fence and

neighbours happily chatting, content in the

knowledge that the building is well maintained

and a safe place to live.

MO

RE

TH A N J U S T FI N

AN

CE

TH

E B

IGGER PICTU

RE

Case

stu

die

s The property comprises several building

confi gurations, including a block of fl ats with

18 one-and-a-half bedroom units, a house and

two semi-detached buildings, which total

18 rooms. The block of fl ats also has a small

supermarket on the ground fl oor that provides

residents and neighbours with their daily needs.

In addition, Primrose Mall is only a short walk

away, allowing tenants the convenience of a mall

offering within their community. Solly employs an

on-site caretaker and a cleaner to maintain the

property, while the family-run supermarket

provides employment to four people.

After purchasing Verena Court, Solly repainted

the inside and outside of the fl ats and made other

minor changes to uplift the building. The house

and semi-detached buildings, however, needed

major development. Solly installed access control,

as well as a gate with remote control for tenants

who wish to park their cars on the property.

Solly met with residents before beginning

refurbishments to explain his vision for a clean and

“ Because of his success in managing his own properties to

such high standards, other property entrepreneurs looking

for advice have often approached Solly. Now, in addition to

Take Shape Properties, which owns his fi ve properties, he

also runs Take Shape Property Management, which assists a

number of property entrepreneurs, including some of TUHF’s

other clients, in managing their properties.”



27

secure living environment. Although this meant a substantial

increase in monthly rentals, Solly explained that most of the

tenants chose to stay on and appreciate the recently

installed access control and well-maintained environment.

As one resident said, “I like it here, it’s safe and clean.” The

rooms are rented out for between R800 – R1 300 per

month, while the apartments are let, mainly to families, for

R2 800 per month, with an additional levy for parking.

Because of his success in managing his own properties to

such high standards, other property entrepreneurs looking

for advice have often approached Solly. Now, in addition to

Take Shape Properties, which owns his fi ve properties, he

also runs Take Shape Property Management, which assists

a number of property entrepreneurs, including some of

TUHF’s other clients, in managing their properties.

“ Verena Court stands cheerfully

on a corner with the sounds

of children playing behind the

secure fence and neighbours

happily chatting, content in the

knowledge that the building is

well maintained and a safe place

to live.”


28

Seeing people’s value in JeppestownJeppestown is full of social and economic

contrasts. As a light-industrial area, Jeppestown

features a myriad of small factories, car

workshops and hostels. Hostel dwelling has been

the mainstay in this area since the days of the

gold rush, with the network of narrow streets

offering close contact and integration for the

multi-racial Jeppestown residents. Today,

alleyways have become a canvas for the city’s

graffi ti artists who express themselves on the

region’s walls. Jeppestown possesses the

MO

RE

TH A N J U S T FI N

AN

CE

TH

E B

IGGER PICTU

RE

Case

stu

die

s potential to be a genuinely integrated sphere of

development in Johannesburg as a result of its

good connectivity in terms of road networks and

rail, as well as proximity to important social

amenities.

Building Bjala Square

Bjala, meaning ‘to plant’ in Northern Sotho, was

founded in 2011 by JJ de Castro Maia as an

entrepreneurial venture. JJ saw the potential in

Jeppestown. “Looking at the buildings in the

area, I noticed that the human scale was

wonderful and not as intimidating as some other

areas in Johannesburg’s inner city. There are

green spaces and the area is close to places of

work and transport.” Bjala acquired buildings

centred around a park in Jeppestown. Bjala

Square became the fl agship project and hub from

which the Bjala team operates.


“ The global city landscape has changed sharply in recent

years thanks to the dynamics of rapid urbanisation. With

global urban populations set to increase by two billion within

20 years, communities, developers and governments alike

will face massive challenges to achieve socially positive living

environments. Interventions such as Bjala Square and Bjala’s

urban programme, which create affordable living spaces

that go well beyond the conventional paradigm of bricks and

mortar, are a necessity for Joburg to deliver on its aspirations

of being a ‘world class African city’.”


29

Bjala Square has four stories for residential living and an

extra two for community projects and parking, as well as

street-level retail space. Bjala has completed 67 high-

quality, affordable housing units as part of Phase 1. Phase 2

is nearing completion and offers value with spacious, bright

units, laminated fl ooring, porcelain tiles, granite kitchen

counters and bathroom vanities. The architectural plan

features a sustainable use of energy in the units and offers

space that enables socially positive human habitation

through the use of natural light and warm colours.

Despite quality fi nishes and spacious units being associated

with a more affl uent market, Bjala’s units are pitched for

low-income earners, and Bjala has a policy of fi rst

prioritising tenants from the local area who earn below a

certain threshold. Thereafter, tenants from outside the area

who earn above the threshold are considered, if they are

willing to give back to the community by running a

community upliftment initiative in the area. One such

project, the Jeppestown Photoclub, is run by resident

Rebecca Crook. The initiative seeks to amplify the voices of

children through photographing and storytelling. They meet

on a regular basis and develop their work related to

photography for exhibition.

Creating value beyond the tangible

What sets Bjala apart from traditional affordable housing

providers is their deep social concern to improve quality of

living through fostering community relationships and being

innovative. Bjala creates opportunities for residents to enjoy

dignifi ed space and social value beyond the bricks and

mortar of their immediate living space.

Partnering with Simanye Trust, a non-profi t organisation, a

part of the roof of Bjala Square has been utilised to house

an aquaponics farm. Malibongwe Sithole, a well-known

Jeppestown personality, is responsible for the rooftop farm

that generates produce, which will be sold locally and

possibly supply Streetlight Schools food feeding scheme.

Still in its infancy, the farming scheme hopes to grow and

ultimately create more local jobs and entrepreneurship

opportunities.

The aquaponics farm is a closed circuit integration of fauna

(fi sh) and fl ora (spinach, coriander and basil). According to

JJ, “Bjala wants this initiative to build community through

the shared tasks involved in looking after a farm and an

opportunity for city-dwellers to connect with nature. The

Simanye Trust is interested in social business modelling.

Both benefi t the community, making this a fantastic

partnership.” The farm also provides Streetlight Schools,

another programme housed at Bjala Square, with a

stimulating space for its extracurricular activities, effectively

creating an outdoor classroom for kids.

In addition to the farm, Streetlight Schools operates from

Bjala Square with the goal of addressing South Africa’s

education crisis through low-cost innovative primary

schooling. Bjala and Streetlight share the vision of creating

a completely integrated educational path starting with early

childhood development and moving on to primary,

secondary and tertiary levels.

Through Streetlight Schools and the payment of a nominal

fee of R60 per month, Bjala Square’s residents are able to

ensure that their children are equipped with skills that allow

them to advance. Streetlight was founded by Melanie

Smuts and has passionate caregivers at the helm, including

Dionne Mankazana and Anna Moi. The organisation’s

innovative layout marries curriculum and spatial design, and

Streetlight’s progressive curriculum approach strives to

build on what the urban environment has to offer.

Bjala Square is also the platform and incubator to several

Arts and Community projects such as Umuzi, a one-year

paid learnership preparing the next generation of creative

professionals in design, photography and copywriting.


30

With global urban populations set to increase by two billion

within 20 years, communities, developers and

governments alike will face massive challenges to achieve

socially positive living environments. Interventions such as

Bjala Square and Bjala’s urban programme, which create

affordable living spaces that go well beyond the

conventional paradigm of bricks and mortar, are a necessity

for Joburg to deliver on its aspirations of being a ‘world

class African city’.

Several arts initiatives such as graffi ti art shows are working

together with the people of Jeppestown to take care of the

park adjacent to Bjala Square.

Partnering with TUHF

“My involvement with TUHF started before I became a

client, while I was working with inner city buildings. I fi rst

met Nano, then a couple of people in the organisation and

spoke at length about buildings and the city in general.

Through our interactions, it became clear that we shared

a common interest in rejuvenating Jozi. Once I left my past

engagements, a more personal relationship with TUHF

began. Bjala could not carry on with its endeavours without

TUHF as a partner and I think an important distinction

between TUHF and other funders is that they engage on

a personal level, as part of our shared vision for the city,”

JJ explained.

The global city landscape has changed sharply in recent

years thanks to the dynamics of rapid urbanisation.


Seeing people’s value in Jeppestown continued


31

Changing perceptions and lives For many, working in the construction industry still

conjures up images of brawny men carrying heavy

equipment. Sheila Liu, who moved to South Africa

15 years ago, is challenging these perceptions.

With a 10-year track record in construction, Sheila

is inspiring the next generation while changing the

face of Kempton Park.

Sheila’s construction company has successfully

developed 10 blocks of fl ats and now employs

seven individuals from its offi ces.

In her initial projects, Sheila received fi nance from

banks. However, when their willingness to fi nance

developments decreased with the economic

recession, she turned to TUHF with her plans to

develop Citylink Court, a new building

development in Kempton Park, which is a decision

she has never regretted.

Sheila has lived in Kempton Park since coming to

South Africa and sees enormous potential in the

area.

In May 2012, Sheila bought the land that Citylink

Court now stands on. She began construction in

MO

RE

TH A N J U S T FI N

AN

CE

TH

E B

IGGER PICTU

RE

Case

stu

die

s July 2012 and by January 2013, residents were

already moving in.

Citylink Court consists of four one-bedroom and

eight two-bedroom units, with rent ranging from

R3 500 to R4 700 per month. The complex

provides affordable, secure homes close to

residents’ work, shopping centres and

entertainment. The location offers residents the

opportunity to live their lives within the Kempton

Park area, ensuring that the money that they earn

is fed back into their community, stimulating

further growth in the area.

The complex currently provides employment for

three people: a cleaner, a night-time security

guard and a building manager who works from

the Company’s offi ces.

Citylink Court is the fi rst TUHF-fi nanced building in

Kempton Park. Its success has helped forge the

way for TUHF to play a part in this rapidly

developing area.

Looking back on her experience with the Citylink

Court development, Sheila praises TUHF for their

effi ciency and their ability to understand and adapt

to each customer’s needs. For her, it is the people

of TUHF who make all the difference. She cannot

stress enough what a difference having a personal

relationship with her funder has made.

“ For many, working in the construction industry still conjures

up images of brawny men carrying heavy equipment. Sheila

Liu, who moved to South Africa 15 years ago, is challenging

these perceptions.”


32

Performance review and outlook


33

It is because of our mindset and our willingness to engage, our years of fi rst-hand experience and unconventional insight that we are able to recognise a real opportunity when we see it and to generate a sustainable and growing fi nancial and social return on investment.


34

“ Not only are we commercially

well-positioned in face of

the challenges listed above,

but in a world in desperate

need of more effective,

scalable approaches to

address social problems,

we are positioned to

support broader socio-

economic development in

South Africa by supporting

entrepreneurs.”

CHAIRMAN’S REVIEW

To the outsider, South Africa’s inner cities can seem big,

impersonal, intimidating and run-down. At TUHF, we see a

myriad of opportunities waiting to be explored. Our core

strength is seeing and growing the potential we spot in the

individuals, buildings and areas around us. We are more

than fi nanciers. We position ourselves to support our

entrepreneurs, understanding that their success not only

contributes to our success, but results in tangible value for

inner city communities and the local economy as a whole.

Our South African contextThe South African economy continues to face seemingly

insurmountable barriers to sustained economic growth,

including labour unrest, challenges in the electricity supply

and falling investor confi dence. In light of these factors,

it is likely that issues such as unemployment, contracted

business activity and decreased consumer demand will not

improve in the short to medium term.

We also acknowledge that within our South African context

we are faced with widespread social challenges, including

substantial housing shortages. This issue has been aptly

described as the ‘40 x 40 x 40 x 40’ problem. Small

houses, approximately 40 m2, have been built in

communities where as much as 40% of the community is

unemployed. These houses are often 40 km from where

employed individual’s work, resulting in 40% of these

individual’s income being assigned to transportation costs1.

In addition to these issues are the infl uences of rapid

urbanisation, increased economic and social pressure for

urban densifi cation resulting in a shift in policy at all levels of

government, the rising cost of transport (both time and

money) and the increasing importance of technology.

Our business is based on this prognosis for inner cities.

We believe that in this constrained environment, the work

we do at TUHF becomes increasingly important. TUHF is

making a difference by providing fi nancing and support to

entrepreneurs who are able to see opportunity amidst the

challenges and are excited about developing inner city

properties, close to people’s places of work, for use as

rental residential units. We see what others don’t, and it is

this insight that is turning our contextual challenges into

commercial opportunity.

Overall performanceDespite a constrained economic environment, TUHF

delivered yet another set of impressive results in the year

under review. We surpassed the R2 billion mark in the

growth of our loan book and continued to successfully

implement our geographic expansion objectives by

opening our Western Cape and Free State branches, in

addition to our existing Gauteng, Eastern Cape and

KwaZulu-Natal branches.

Building the Group purposefullyTUHF is on a journey to build on its successful 12-year

track record as the premier inner city property fi nancier,

providing access to fi nance to small and medium

businesses, ordinary men and women whose business

successes facilitate inner city rejuvenation and socio-

economic upliftment. Not only are we commercially

well-positioned in face of the challenges listed above,

but in a world in desperate need of more effective, scalable

Performance review and outlook


35

“ South Africa needs safe, low-cost rental housing in its inner cities, and

we believe TUHF is poised to meet this need on ever-increasing scales.”

Samson Moraba

Chairman

approaches to address social problems, we are positioned

to support broader socio-economic development in South

Africa by supporting entrepreneurs. While, over the years,

many have viewed our organisation as a purely

philanthropic entity, our commercial success and that of

our clients is truly challenging these perceptions.

We continue, however, to face challenges to our growth

ambitions. Not in the number of clients approaching us,

or concerns over the assets to be fi nanced or the

would-be borrowers’ risk profi les, but rather in the form of

constrained access to required funds. We are confi dent that

as we continue to diversify our funding base, most notably

through our domestic medium term note programme and

the Jobs Fund grant in the sum of R200 million, perceptions

will continue to change, as shown by the move of real

estate investment trusts into this space and generally

more positive perceptions of the inner city as a destination

for investment.

We remain committed to growing our Group in a deliberate

fashion, focusing on developing our loan book and

expanding geographically. We will do this by concentrating

on inner city areas facing urban decline that meet specifi c

requirements, such as being close to schools, transport

systems and places of work. Each new TUHF branch is

carefully chosen based on the opportunities exhibited in the

surrounding areas with regard to our market niche and

based on a thorough assessment of the Group’s ability to

provide necessary support to the new branch. By pursuing

growth in this measured and purposeful fashion, we are

ensuring that we maximise the scale of our impact in new

areas without compromising the quality of our offering to

our existing clients.

Corporate governanceWe are committed to the pursuit of best practice in

governance principles in order to meet stakeholder

expectations and create shared value for the future.

We apply the principles specifi ed in the King III Code of

Corporate Governance (King III), where these practices are

appropriate and add value to TUHF and our group of

Companies, as well as other regulatory and social and

ethics standards. Our governance policies and practices

are reviewed annually to ensure that we comply with legal

requirements, meet the expectations of our shareholders

and other stakeholders, as well as continually address the

needs of our business.

As the Group expands, we will continue to focus on

improving and strengthening our governance structures

and oversight to ensure that the Group grows in a manner

which is sustainable and that the management has the

support and guidance that it needs to make this possible.

Our stakeholdersOur relevance as an inner city specialist lies in keeping

up to date with the fundamental human drivers and desires

that make these economies and communities thrive.

We pride ourselves on operating in close proximity to our

clients and maintaining transparent, open communication

channels with all our stakeholders. We work closely with

our funders in order to meet their requirements and

maintain these relationships, which are the lifeblood of

our organisation, along with our dedicated employees.

We understand that our employees are our connection with

our clients and as such, we regularly engage with and seek

to address our employees’ concerns and needs, thereby

fostering employee satisfaction and productivity. We also

strive to employ a workforce that refl ects the diversity of

the population in which we operate in order to better

understand and relate to our broad and diverse client base.

We understand that as we grow and evolve, our

stakeholder groups are evolving too. We, therefore,

acknowledge that there is a continual need to evaluate

ourselves and our progress accordingly in the manner in

which we engage with and meet our stakeholder needs.

To better understand the importance of our stakeholder

relationships and for an overview of the progress we

have made in this regard in the year gone by, please see

page 20.

TUHF has a proven track record of commercial viability

coupled with signifi cant social impact. We have shown

ourselves to be a catalytic presence in the communities in

which we operate, but are far from satisfi ed with the

progress we have made thus far.

South Africa needs safe, low-cost rental housing in its inner

cities, and we believe TUHF is poised to meet this need on

ever-increasing scales.

AppreciationI would like to thank my fellow board members for their

leadership oversight, diligence and due care exercised

during the year, along with the TUHF executive team and

employees. I extend a special message of gratitude to

Paul Jackson and his executive team for their leadership

and the resilience during the year. To our employees, we

thank you for your commitment and effort during the year.

To our clients, you are the reason we exist and the reason

for our success.

Finally, we are grateful for the support of our funders, our

partners, who have assisted us in the rejuvenation of the

inner cities across South Africa. You continue to be agents

of change in our society, and we thank you for your

confi dence and support.

1 Francois Viruly, associate professor in the department of Construction Economics and Management at the University of Cape Town:

Banker SA edition 11, 2014.


36

“ We believe that the largest

impact our organisation

can have is by giving

passionate entrepreneurs

access to fi nance in

order to facilitate inner

city rejuvenation, thereby

optimising our commercial

return while enabling

socioeconomic upliftment.

In this way, we create value

for all our stakeholders.”

Performance review and outlook continued

CHIEF EXECUTIVE OFFICER’S REVIEW

As a South African property fi nancing company, TUHF’s

primary aim is to support entrepreneurs who see

opportunities in challenges and are interested in securing

fi nancing to develop inner city properties for use as rental

residential units. The 2015 fi nancial year was a milestone

for the Group as the loan book growth surpassed the

R2 billion mark and several key operational milestones were

achieved. TUHF’s property market remained buoyant during

the year, with rental demand persisting as individuals

continued to fl ock to the cities in order to live closer to their

places of work, despite the pressure placed on the

affordability of rental housing as a result of rising utility and

operations costs. We remain committed to our vision.

Creating shared valueWe believe that the largest impact our organisation can

have is by giving passionate entrepreneurs access to

fi nance in order to facilitate inner city rejuvenation, thereby

optimising our commercial return while enabling socio-

economic upliftment. In this way, we create value for all our

stakeholders.

TUHF ended the year under review with a loan book

that had increased to R2,02 billion, having raised some

R376 million in debt capital. Our success in sourcing this

funding was only due to TUHF’s solid record of returning

sustainable and growing returns in a market for which only

a few fi nanciers have an appetite.

Operating income reached R43,67 million and

disbursements stood at R308 million, up from the

R298 million averaged over the previous three years.

During the year, capital markets remained illiquid and

consequently expensive. Despite this challenge, it is our

strategic objective to source debt capital directly from the

capital markets. It is our intention to list our fi rst domestic

medium term note programme in the near future in order to

diversify our access to funding in the long term, both to

achieve suffi cient debt capital for growth and to improve

pricing of our loans to meet increasing competition.

We focus on operational effi ciency in order to more

effectively service client needs, grow the profi tability of

our business and therefore increase the funding available

to focus on our objective of impact through scale.

During the year under review, operating costs rose by

26,67%. This increase can be largely attributed to the

national expansion growth phase the business is currently

in. The board has correctly placed emphasis on balancing

increased capacity and cost with progress on capital

raising. Thus, the business expansion is underway within

the approved business plan.

During the year, a decision was taken to increase the

maximum loan value offered to our clients to R50 million,

up from R30 million. We are pleased with volume of client

interest that led to this decision, which points to fact that

TUHF holds appeal for a broad range of clients. It is also

worth noting that although a maximum loan value is set as

a standard, TUHF is about people and relationships and is

willing to increase this loan value based on the need and

relationship history we hold with our clients.


37

“ Being down-to-earth, engaging and approachable is in TUHF’s DNA and

is a core reason for the success of our business. Our on the ground

presence and in-depth knowledge of the inner cities are what attract

entrepreneurs to our business, as well as the connection and support

we offer them beyond our fi nancial obligations.”

Focusing on sustainable solutionsTUHF and our clients are alarmed by the continued rise in

administered prices, which have negatively affected the

affordability of rental housing while squeezing entrepreneurs’

profi t margins. Green is one mechanism to counter this. At

TUHF, we don’t do green fi nancing, we do green in all of our

fi nancing. We focus on the greening of buildings in the inner

cities in ways that produce cost-savings or in ways that are

cost-neutral so as to assist our entrepreneurs make smart

business choices that also contribute positively to preserving

our valuable natural capital. We fi nance improvements such

as heat pumps, solar panels, smart metering, energy-effi cient

lighting, dual fl ushing and enhanced showerheads. We also

encourage our developers to maximise the use of natural

light in TUHF buildings to reduce electricity consumption.

A further example is promoting the use of better insulation

in the design phase of development projects, which saves

money for the individuals who own and live in these

buildings as well as saving the natural resources used to

generate the electricity supply needed to heat or cool the

buildings.

In addition, by providing rental housing close to tenants’

places of work, people are required to travel less. This

helps create cost savings for the individuals living in TUHF

buildings while reducing fossil fuel consumption and

therefore air pollution.

Connecting with our clientsBeing down-to-earth, engaging and approachable is in

TUHF’s DNA and is a core reason for the success of our

business. Our on the ground presence and in-depth

knowledge of the inner cities is what attracts entrepreneurs

to our business, as well as the connection and support we

offer them beyond our fi nancial obligations.

We believe that incubating entrepreneurship is about so

much more than providing access to funding. It is about

the non-fi nancial support that is crucial to sustainable

business growth and a thriving entrepreneurial culture in

South Africa. An example of this is recently held TUHF Talk

events hosted by TUHF for our clients on utilities and

property management. This event was well attended, with

many of our clients commenting on the pertinence of the

talk, considering the issues they have been experiencing in

this regard.

Equipping our peopleOur employees’ specialist people skills, knowledge and

experience in dealing with the complexities of South Africa’s

inner cities is our unique strength and must therefore be

fostered and protected. We use a mentoring approach to

support and develop our staff, whereby more experienced

team members mentor less experienced staff.

This approach leverages off the depth of experience and

skill within the existing staff team while growing the team as

a whole. We believe that demand for these specialist skills

will increase in the years to come as the rate of urbanisation

increases and as a result of government’s struggle to meet

rising demands.

OutlookAs we seek to meet our strategic objectives, we will

continue to focus on building from the ground up. Getting

the essentials in place in a deliberate and measured way to

ensure our growth is sustainable. During the year ahead,

we will focus on establishing our Cape Town and

Bloemfontein branches. Furthermore, as we grow, we need

to maintain the corporate culture, our DNA, that sets TUHF

apart. Therefore, as part of our growth strategy, we are

undergoing a brand repositioning which is essential to

ensuring that the essence of who we are is effectually

captured and communicated in the same way in all our

branches, no matter which part of the country they are

located in.

We will continue to concentrate on improving our treasury

management, including completing our rating for the

domestic medium term note programme and look forward

to the benefi ts that this programme will afford TUHF with

regard to access to capital.

With a view to 2016 and beyond, our focus is on our

continued and deliberate national expansion and the

growth of our loan book to R5 billion. These growth

objectives do not change who we are. While the scale of

the organisation has increased and will continue to increase

in the years to come, I am confi dent that our passion for

the person on the street will remain strong, and it is this

passion that places us in good stead to continue to be a

commercially successful business that is changing the face

of South Africa’s inner cities for the better.

AppreciationI would like to take this opportunity to thank our partners

the National Housing Finance Corporation, Futuregrowth,

the Public Investment Corporation, Atlantic Asset

Management, Cadiz Asset Management, the Development

Bank of South Africa, the Gauteng Partnership Fund,

Mergence Investment Managers, New Housing Company

and Stanlib for their support and continued confi dence in

our organisation.

I would also like to extend my appreciation to the board for

their sound guidance and leadership during the year.

To the TUHF staff, thank you for your continued diligence,

passion and commitment to our organisation and the

purpose it serves. Your efforts are driving us forward and

changing the lives of many South Africans.

Paul Jackson

Chief executive offi cer


38


OPERATIONAL REVIEW

In our pursuit of the creation of shared value, we measure our business success in holistic terms, taking into consideration

our fi nancial and social measures on page 42.

Statement of Financial Position overview

The balance sheet or statement of fi nancial position shows the position of the Group’s assets, liabilities and equity at

31 March.

Group summarised statement of fi nancial position

Change

%

2015

R

2014

R

Cash and cash equivalents 84 46 121 017 25 138 644

Money market assets 20 32 664 698 27 206 286

Advances 8 2 019 405 280 1 867 468 406

Other assets 66 36 387 814 21 930 982

Total assets 10 2 134 578 809 1 941 742 318

Financial liabilities 9 1 878 209 773 1 716 852 833

Other liabilities 19 56 575 744 47 441 906

Total liabilities 10 1 934 785 517 1 764 294 739

Total equity capital and reserves 13 199 793 293 177 447 579

Total liabilities and reserves 10 2 134 578 809 1 941 742 318

For the full statement of fi nancial position, refer to page 63 of the annual fi nancial statements.

TUHF’s revenue is derived solely from its lending activities.

Thus growing our loan book in a responsible manner is key

to growing TUHF’s revenue. As we are not a deposit-taking

institution and as a non-banking fi nancial institution, our

ability to grow our advances is dependent on our ability to

access debt capital at appropriate interest rates.

During the year, TUHF raised R376 million in additional

funding from various asset managers, including

Futuregrowth, Atlantic, Cadiz and Mergence. A further

R280 million warehouse facility is currently being concluded

with Futuregrowth Asset Management that will enable

TUHF’s fi rst domestic medium-term note issuance. The

note issuance is a key milestone for the Group in

implementing our strategy to access the capital markets

directly. The Group is currently working with ratings agency

Global Credit Ratings to have the funding structure credit

risk assessed, and it is anticipated that TUHF’s fi rst debt

issuance will achieve investment grade status. The funding

structure and endorsement from a reputable agency will

mean that TUHF will shortly be in a position to raise funding

both at the volumes we require and at more effective rates.

The 84% increase in cash and cash equivalents during the

year was mainly attributed to funding raised and drawn

from Atlantic Asset Management in February 2015 to fund

the Group’s lending. It was a requirement that the full facility

be drawn down whereas the Group focus is usually on

funding immediate client commitments.

Money market assets increased by 20% to R32,7 million

during the period under review. The increase in money

market assets refl ects the slight increase in TUHF’s average

guarantees funded.

The growth of 66% to R36,4 million in other assets is

mainly attributed to TUHF’s investments in associated

business enterprises.

Advances represent the largest asset class on the Group’s

balance sheet, and TUHF ended the year under review with

a loan book that had increased to R2,019 billion

(2014: R1,867 billion). The growth in advances is a function

of our responsible lending processes and the Group’s

success in accessing the capital markets during the year.

Disbursements of R308 million and interest capitalised were

offset by collections and settlements, resulting in a net

growth of R152 million.

Financial liabilities increased by 9% to R1,878 billion. After

repayments of R316 million, net debt capital on a Group

basis increased by R161 million.

Other liabilities increased by 19%. This increase is attributed

to initiation fees raised on new advances. The fees are

earned over the average loan term of nine years with the

current portion contributing to other income and the

balance being deferred on balance sheet.


39

“ A further R280 million warehouse facility is currently being concluded

with Futuregrowth Asset Management that will enable TUHF’s fi rst

domestic medium-term note issuance. The note issuance is a key

milestone for the Group in implementing our strategy to access the

capital markets directly.”

Net interest income increased by 8% driven mainly by net

loan book growth of 8% and mitigated slightly by TUHF’s

increased cost of funds. Over the last fi nancial year, funding

facilities were concluded at prime or prime plus 0,20%

rates, an increase from the prior year where facilities were

concluded at prime less 0,5% or prime interest rates.

The net interest income represents the interest margin and

profi t margin between the interest rate earned on advances

made, and the interest rate paid on funding we receive.

Benchmark lending rates, such as the prime interest rate in

South Africa and available liquidity and perceived risk within

the capital markets, are key factors that cause variation in

the net interest margin.

Loan impairment charges of R12,6 million were incurred

during the year, 5% lower than the prior year, while gross

average loans and advances increased by 8%. This charge

represents the amount provided for possible loss, and the

decrease is mostly attributed to the decrease in amounts

provided for other companies in the Group. The

impairments relating to TUHF’s other lending activities

would depend on the specifi c circumstances such as the

specifi c loan impairment for a bridging fi nance transaction

in 2014. The mortgage book impairments increased in line

with net advances by 8%.

Statement of Comprehesive Income overview

The Statement of Comprehensive Income refl ects the revenue generated by the Group, as well as the expenses incurred in

the process of generating this revenue for the year ended 31 March.

Group summarised Statement of Comprehensive Income

Change

%

2015

R

2014

R

Net interest income 8 93 928 678 87 182 383

Loan impairment (5) 12 587 833 13 276 016

Income from lending activities 10 81 340 845 73 906 367

Non-interest income <100 13 588 269 6 693 155

Operating income 18 94 929 114 80 599 522

Operating expenditure 27 51 259 121 40 440 331

Profi t/(loss) before taxation 9 43 672 497 40 159 192

Taxation 7 12 407 365 11 599 410

Net profi t and loss 10 31 262 139 28 559 782

For the full Statement of Comprehensive Income, refer to page 64 of the annual fi nancial statements.

Change

%

2015

R

2014

R

Mortgage fi nance loans 8 12 295 224 11 415 021

Bridging fi nance loans (<100) (81 843) 1 334 429

Low interest rate – equity loans (30) 372 712 529 025

Other loans – deferred sale <100 1 740 (2 459)

Total (5) 12 587 833 13 276 016


40


OPERATIONAL REVIEW CONTINUED

To manage this risk, TUHF implements world-class credit

approval and loan administration processes and tracks the

collection of instalments on a monthly basis. The key ratios

that management track on arrears include the impaired

capital ratio, loan capital relating to loans in arrears and

impaired expressed as a percentage of the loan book and

the total arrears ratio, the rand amount of arrears expressed

as a percentage of the loan book.

Change

%

2015

%

2014

%

Total arrears >0,49 1,32 0,83

Capital impaired >1 9,21 8,50

Arrears are monitored closely, and although the arrears

levels remain relatively low, the increase in total arrears and

capital impaired is being managed. This increase is due in

large part to a single borrower that has defaulted on his

entire portfolio, and ongoing litigation is likely to result in

TUHF recovering all outstanding amounts due. A

conservative approach has been taken in providing for

possible impairments.

Non-interest income increased signifi cantly mainly due to a

bad debt recovered of R3,6 million. The loan of

approximately R5 million was written off in full and

agreement to recover most of the original capital was

concluded in the current year. R3,6 million was received in

March 2015, and the balance of R1,5 million was recovered

in April 2015.

The growth of 27% in operating costs is signifi cant for

TUHF. Historically, growth in expenditure has been offset by

an increase in revenue. During 2015, TUHF’s board

approved TUHF’s national growth and expansion plans to

formalise our national expansion programme. It is

anticipated that 2015 and 2016 will refl ect the impact of

this growth strategy but that 2017/18 income growth will

exceed operating costs as economies of scale are

achieved, and the additional regions generate

interest margin.

Looking ahead

The period ahead is set to be groundbreaking for TUHF in

terms of implementing a funding structure in 2016 that will

enable TUHF to list R800 million in debt over a three-year

period. Using this additional source of debt capital, TUHF

will, on a managed basis, implement our branch expansion

in new markets such as Bloemfontein, East London and

Cape Town and continue to expand our presence in

Gauteng near node areas and existing markets like Durban

and Port Elizabeth.


41

TUHFWith a view to 2016 and beyond, our focus is on our continued and deliberate national expansion and the growth of our loan book to R5 billion. While the scale of the organisation has increased and will continue to increase in the years to come, I am confi dent that our passion for the person on the street will remain strong, and it is this passion that places us in good stead to continue to be a commercially successful business that is changing the face of South Africa’s inner cities for the better.

Paul Jackson – CEO


42


OUR PEOPLE

Growing TUHF

TUHF has undergone signifi cant growth over the last year in

line with the strategic objective to invest and build TUHF

nationally. This has resulted in investments in two new

cities: Bloemfontein and Cape Town. TUHF has also

invested in building the capacity within its existing teams to

deal with the near nodes and the anticipated growth. The

approach that TUHF adopts in terms of recruitment is to

consider competence and values as part of the process.

Technical interviews are held with candidates to assess

their ability to meet the operational requirements of the

jobs. The CEO also interviews every candidate to assess

alignment and fi t within the TUHF culture and values. The

appointment decisions are supported through the use of

relevant psychometric assessment tools.

A key focus over the last year was to identify the key

competencies required in the TUHF environment and to

defi ne these. These competencies were then integrated into

job profi les to support recruitment and development of staff.

The specialist knowledge and experience of our people in spotting

potential everywhere and dealing with the complexities of South Africa’s

inner cities is one of our key differentiators. We actively create a culture

that values the unique contribution of each individual. We also

acknowledge that competitive remuneration and rewards for excellence,

engagement and commitment are key components to attracting and

retaining staff.

A set of career paths that leverages off the competencies

was developed for all positions. This initiative was

developed to support growing staff within TUHF.

The national expansion process also required the

development of a mentoring model and approach that will

support newly appointed staff in other cities. This approach

leverages off the depth of experience and skill within the

existing staff team. Senior staff members are partnered with

new staff members to support their growth into the TUHF

space. This approach has the dual benefi t of supporting new

staff members to integrate into the business and providing

job satisfaction to the experienced team members. The

implementation of this model will be tested in the new

fi nancial year with the new cities coming on board.


43

Location

79% | Johannesburg

9% | Durban

6% | Port Elizabeth

2% | Bloemfontein

4% | Cape Town

Age of our employees

33% | <30

31% | 31 – 40

25% | 41 – 50

11% | 51+

Racial profile

52% | Black

8% | Coloured

13% | Indian

27% | White

42%

58%

Gender profile of our staff

OUR STAFF PROFILE

Understanding our staff

Performance management

The TUHF approach to performance management is

driven from a strategic perspective. Key indicators and

objectives are set at a business level, through the Group’s

balanced scorecard, which is the CEO’s contract. The

CEO then delegates and oversees the execution of these

elements to managers who are responsible for

implementing them in their teams. These are then

integrated into plans at a departmental level and

performance contracts at an individual level. Monthly

performance discussions are held between each staff

member and his or her line manager. Every four months,

a performance review is held where performance is rated.

The ratings inform participation in the trimester incentive

awards. The overall annual rating informs participation in

the annual bonus award.

The culture and complexity we require at TUHF is built

through a diverse and skilled staff. TUHF has always

understood that diversity creates organisational strength.

Our recruitment policy focuses on appointing the best

candidate for the position and we have achieved

sophisticated diversity in this way.


44

Corporate governance


45

By pursuing growth in a measured fashion, we are ensuring that we maximise the scale of our impact without compromising quality. Samson Moraba – Chairman


46

OUR BOARD OF DIRECTORS

Mandu Mamatela, non-executive director

Associate Accountant Technician International Executive

Development Programme ((IEDP) UK at Wits Business School),

MBA (North-West University: Potchefstroom Campus)

Appointed to the board: 21 November 2006

Mandu Mamatela is the executive manager for Corporate Strategy

at the NHFC. She has worked in the fi nancial services, motor and

fuel industries and has obtained extensive experience in strategic

leadership, credit risk, project fi nance and fi nancial management.

She is also a member of the Institute of Directors South Africa.

Trustee: Housing Investment Partnership (HIP), Kurisani Trust,

NHFC Pension fund.

Samson Moraba, chairman

BCom (Unisa), Programme for Management Development

(Harvard Business School)

Appointed to the board: 21 May 2003

Samson Moraba is the chief executive offi cer of the NHFC

and has served as a member of the Licensing Committee of

the Financial Services Board since 2004. He currently serves on

numerous boards, including the Cape Town Community Housing

Company and Community Property Holdings Limited.

Samson was previously an executive director: IT at Standard

Corporate Merchant Bank, where he also served as a member

of the business prioritisation committee. Samson has also served

as a senior consultant at Gemini Consulting and manager within

the Corporate Finance Division of JCI. Furthermore, from 2004 to

2007, he served as the chairman of the African Union for Housing

Finance and was on the Standing Committee for the Revision of

the 1990’s Bank Act at the South African Reserve Bank.

Cas Coovadia, deputy chairman

BCom (University College – Durban), Housing Finance Course

(Wharton Real Estate Centre, University of Pennsylvania), effective

directors Programme (Kagiso School of Leadership)

Appointed to the board: 18 January 1993

Cas Coovadia is the managing director of The Banking

Association of South Africa and the deputy chairman of the

African Union for Housing Finance. Additionally, Cas is the

chairman for the National Business Initiative, president of the

International Union for Housing Finance and Chairperson of the

National Business Initiative.

Cas also serves as a Member of Council at the University of

Witwatersrand.

He has played a central role in the negotiations leading to the

signing of the Financial Services Charter (FSC) and is playing

a critical role in the implementation of agreements reached in

the Charter.

He also serves on the board of the Centre for Development and

Enterprise, Nepad Business Foundation, as well as serving on the

Management Committee of Business Unity South Africa.

Robert Emslie, non-executive director

CA(SA)

Appointed to the board: 1 August 2009

Robert Emslie has more than 30 years’ experience in the fi nancial

services sector and has held positions as the head of Absa

Business Banking, Absa Africa and Absa Corporate and Business

Bank. He has also been a member of the Absa Group EXCO and

during his time at Absa he was a board member of the following

listed companies: Paramount, Ambit and Commercial Bank of

Zimbabwe.

Robert retired from his career in the banking industry in 2008 and

is currently serving on the boards of several unlisted and listed

companies including SilverBridge Holdings Limited and Finbond

Group Limited.

Corporate governance


47

Taffy Adler, non-executive director

BA, BPhil in African Studies, MSc in Building Science (University

of the Witwatersrand)


Taffy Adler is the CEO of the Housing Development Agency, a

position he has held since the Agency’s inception in 2009. He

is also the chairman of Arrowhead Properties, a listed property

company, and chairman of the Apexhi Charitable Trust.

From 1976 to 1986, Taffy was a full time offi cial in the Non-Racial

Trade Union movement. In 1987 he became coordinator of the

Labour and Economic Research Centre, and in 1991, became

the founding CEO of the Land Investment Trust. Taffy was also

the founding CEO of the JHC, a position he held for 13 years.

The JHC was awarded the UN World Habitat Award in 2006.

Taffy has held directorships in at least 20 development-

orientated companies over the last 10 years. He has held several

appointments, including joint convener of the National Technical

Committee of Housing Subsidies, which developed the fi rst

housing subsidy scheme for a newly democratic South Africa,

membership of the World Economic Forum’s Global Council on

Urban Management, and, from 1994 to 2009, advisor to the

National Minister of Housing.

In 1999, Taffy was named Gauteng Housing Person of the Year

by the SA Housing Institute and in 2007 he was named South

African Social Entrepreneur of the Year. He is also a Fellow of the

Schwab Foundation. He has lectured at the Universities of the

Witwatersrand and Cape Town, and has written or edited

19 journal articles and books.

Jill Strelitz, non-executive director

BA(Hons) in Sociology, MSc in Town and Regional Planning,

Diploma in Financial Instruments, Executive Development

Programme (run jointly by the University of the Witwatersrand and

Harvard Business School)

Appointed to the board: 18 January 1993

Jill Strelitz is currently the executive director for the New Housing

Company, a non-profi t, public benefi t organisation.

Jill has been involved in housing since 1980 when she joined the

Urban Foundation, a private-sector non-profi t organisation. At

the time of closure of the Urban Foundation in 1994, she was the

executive director for Housing on the board. During this time, Jill

was honoured to receive the National Housing Person of the Year

Award in 1994.

Following her time at the Urban Foundation, Jill became a

senior manager in Special Projects at Anglo-American Property

Services. She later joined the National Urban Reconstruction

and Housing Agency as the executive director responsible for

operations and, later, business development.

She also holds a non-executive director position on the board of

the JHC.

Paul Jackson, chief executive offi cer

BSc in Agricultural Economics (University of Natal),

BSc Agricultural Economics (Hons) (University of Pretoria),

Property Development Programme (UCT)


Paul Jackson has been TUHF’s CEO since inception in 2003 and

has been involved in development fi nance since 1987.

Prior to his appointment as CEO at TUHF, Paul held positions

as senior operations manager at the JHC, general manager

for the Transitional National Development Trust (TNDT) and

divisional manager for Southern Africa at the Development Bank

of Southern Africa. While he was at the TNDT, the company was

awarded fi rst prize by the JSE/Deloitte and Touche for Corporate

Governance with a special acknowledgement for Excellent

Achievement.

Paul has held board directorships on the Mvula Trust, Alexander

Social Housing Company, Brickfi elds Housing Company,

Johannesburg Social Housing Company and Centre for

Affordable Housing Finance.


48

Corporate governance continued

OUR COMMITMENT

GOVERNANCE FRAMEWORK

We believe that good corporate governance not only

protects, but also adds value to the Group and its

stakeholders. We are committed to operating in an ethical

and transparent manner and are resolute about staying

accountable to our stakeholders.

In this endeavour, TUHF applies the principles specifi ed in

King III, where these practices are appropriate and add

value to TUHF and our Group of Companies. Our

governance policies and practices are reviewed annually to

ensure that we comply with legal requirements, meet the

expectations of our shareholders and other stakeholders,

as well as address the needs of our business. As such, we

remain committed to pursuing best practice in corporate

governance, which we consider essential to our business

integrity and performance.

King III sets international benchmarks and requires

organisations to adopt an “apply or explain” approach that

relates to all businesses. While compliance remains

essentially voluntary, the implication is that all organisations

should adopt good corporate governance principles,

identifying which aspects of the code are applicable, and

should disclose (apply or explain) those that are not. TUHF

embraces the relevant principles of King III in keeping with

our commitment to good governance and broader

stakeholder interests.

On a continuous basis, through sustainable and integrated

reporting, the governance framework requires that TUHF

observes its impact (both positive and negative) on the

communities that we serve. To this end our concerns are

related and involve the environment, social and other

governance issues. In the last 12 years we have had over

R2 billion actively invested in the refurbishment of rental

housing stock in the inner city, primarily in Johannesburg.

Nevertheless, our priority involves more than generating

positive returns for the property entrepreneur and investor.

Our aim is to assist in creating balanced and stable

communities in which many South Africans can live

and work.

From 2012, KPMG was appointed as internal auditor, its

staff working with management to build an organisation-

wide internal audit plan.

Annually reviewed and updated, the TUHF governance

framework is concerned with the:

• role of respective members/shareholders;

• board of directors – leadership responsibility/

accountability;

• separate responsibilities of the chairman and chief

executive offi cer;

• terms of reference of the TUHF board committees and

objectives;

• board and committee appointments, meetings, duties

and scope of authority; and

• governance, risk management and internal control

framework.

King III emphasises that a compliance-based approach

adds little value to the governance of a company as it

merely assesses the compliance of existing procedures and

processes without an evaluation of whether particular

procedures or processes represent adequate control

measures. With our appointment of an outsourced internal

audit function, an objective assessment of our risk-

management and internal control frameworks is now

achievable.

Over the past 12 years, TUHF has invested signifi cantly in

IT and has developed an in-house loan cycle workfl ow and

document management system. The robustness and

effi cacy of these systems have been put to the test on

numerous occasions through due diligence reviews

performed by funders and stakeholders.

Our external auditors, PricewaterhouseCoopers, performed

additional control reviews and were able to build on the

knowledge gained during the previous external audit. No

signifi cant weaknesses were identifi ed in the reviews, which

included an assessment of our national loan exposure and

our valuation methodology. All recommendations made by

our auditors have been implemented to enhance our

general control and IT environment.

We are mindful of the need to strike a healthy balance

between conformance and performance while maintaining

acceptable risk levels. We remain committed to adopting

best practices to improve the functioning of TUHF. Our

objective is to build a sustainable business to increase

shareholder value through consistent, profi table growth.

The board is satisfi ed that TUHF is compliant, that internal

controls relating to key business process are effective, and

that fi nancial controls as designed operate effi ciently. KPMG

has performed a review of key internal fi nancial controls and

disciplines and assigned the internal fi nancial controls

currently in place an overall rating of “good” as per the

<IR> framework. In addition, a King III Board workshop was

facilitated by KPMG to review and improve the governance

framework.


49

BOARD OF DIRECTORS

The board provides effective leadership based on an ethical

foundation. It strives to balance the interests of the Group

with those of its various stakeholders. The purpose of

TUHF’s board of directors is to ensure that management

best serves shareholders’ and stakeholders’ interests.

Ultimately responsible for corporate governance within

regulatory risk parameters, the board ensures that sound

governance is practiced as this benefi ts long-term equity

performance and enhances shareholder value.

A minimum of six meetings are scheduled per year (with

additional ad hoc meetings as required). Key roles of the

board include:

• the approval of strategic plans;

• monitoring management’s implementation of

strategic plans;

• delegation of powers and duties to management; and

• establishment of policy and processes to ensure the

integrity of management and related internal controls.

Board composition

The TUHF board is chaired by non-executive director,

SS Moraba, while Group CEO, PGN Jackson is tasked with

leading the management team, running the business and

implementing the strategies and policies adopted by

the board.

Independent and non-executive members of the board

include RR Emslie, C Coovadia, JS Strelitz and TM Adler.

Although certain of our directors are board members of

other companies that have granted wholesale funding

facilities to the Group, their independence remains

uncompromised. Hailing from the industry and sharing a

common vision for viable and sustainable inner city

regeneration, these directors, in association with the rest of

the board have, in accordance with the Group’s obligations

towards its shareholders, acted with integrity and diligence

in the performance of their duties and the exercise of

their powers.

Members: SS Moraba (group chairman), C Coovadia

(vice chairman and board member), PGN Jackson (CEO),

TM Adler (board member), RR Emslie (board member),

JK Mamatela (board member) and JS Strelitz (board

member).

Management approach

To facilitate prompt and effi cient decision-making in the

execution of its duties, the board is authorised to constitute

relevant committees to ensure the fulfi lment of its duties in

the time available. Although the board reviews the

retrospective committee minutes and reports, its members

are not absolved of their overall accountability towards

shareholders for determining strategy and for Group

conduct and performance.

Consequently the board delegates explicit responsibility to

six committees (credit committee, audit and risk committee,

risk management committee, remuneration committee

(REMCO), management committee and social and ethics

committee).

The group fi nancial manager manages the day-to-day

Group fi nancial affairs (including annual audits), ensuring

TUHF’s compliance with relevant legislation and regulation

and keeping the board informed of its legal responsibilities.

Company secretarial function

The company secretary, Ms IL Roodt, is required to provide

the directors of the Group, collectively and individually, with

guidance on their duties, responsibilities and powers. She is

also required to ensure that all directors are aware of

legislation relevant to, or affecting, the Company and to

report at any meetings of the shareholders of the Company

or of the Company’s directors any failure to comply with

such legislation. The company secretary is assisted in the

discharge of her duties through the consultation of external

service providers as required. The board is satisfi ed that the

company secretary maintains an arm’s length relationship

with the board of directors. The company secretary is not a

director of the Company.

The company secretary is required to ensure that minutes

of all shareholders’ meetings, directors’ meetings and the

meetings of any committees of the board are properly

recorded and that all required returns are lodged in

accordance with the requirements of the Companies Act

71, of 2008 as amended (the Companies Act).

IT governance

TUHF has developed a world-class, custom-made

Loan Cycle Management System and Accounts

Receivable Module.

The IT system has loan workfl ow capability plus integrated

default management and portfolio management

capabilities. Reporting has improved signifi cantly with

management striving for real-time fi nancial reporting.

The system will ensure that TUHF continues to meet

reporting and governance requirements and enhances its

product offering. Accountable and principled business

practices throughout the Group promote the ethical

behaviour and quick decision-making of the board,

managers and employees.

The restructured TUHF Group has established itself as a

more diverse, commercial enterprise. In accordance with

this restructuring, the remuneration of non-executive

directors, who were previously not remunerated, was

amended and as of September 2009, in line with accepted

commercial practice, non-executive board members are

now remunerated for their services and their remuneration

is reviewed annually by the REMCO. These remuneration


50


50

Board of directors

Roles and

responsibilities

• Provide effective

leadership

based on

an ethical

foundation

• It strives to

balance the

interests of

the Group

with those

of its various

stakeholders

• To ensure that

management

best serves

shareholders’

and

stakeholders’

interests

• Corporate

governance

within regulatory

risk parameters

• The practice

of sound

governance

Loan committee

Members: TM Adler (board member), PGN Jackson (committee chairman), C Coovadia (board member), RR Emslie (board member), JK Mamatela (board member).

By invitation: (refer to MANCO members).

Remuneration

committee

Members: SS Moraba (committee chairman and group chairman), C Coovadia (board member), RR Emslie (board member).

By invitation: PGN Jackson (CEO), IL Roodt (group fi nancial manager), S Blaine (human resources consultant).

Social and ethics

committee

Members: JS Strelitz (committee chairman and board member), P Magula (board member of TUHF Holdings Limited and TUHF Limited), PGN Jackson (CEO), IL Roodt (prescribed offi cer).

By invitation: S Blaine (human resources consultant).

Jobs fund committee

Members: RR Emslie (chairman), C Coovadia, PGN Jackson (CEO), (board member), JK Mamatela (board member).

By invitation: IL Roodt (group fi nancial manager), LN Netshifhefhe (development impact unit manager).

Audit and risk

committee

Members: C Coovadia (committee chairman and board member), SS Moraba (group chairman), RR Emslie (board member), JK Mamatela (board member).

By invitation: PGN Jackson (CEO), IL Roodt (group fi nancial manager).

Executive committee

(EXCO)

Members: PGN Jackson (CEO), B Cooke (loan administration manager), S Govender (KwaZulu-Natal regional manager),HL Makwela (senior loan offi cer), IL Roodt (group fi nancial manager), K Chikomo (Eastern Cape regional manager), LN Netshifhefhe (development impact unit manager), R Valloo (mortgage manager: Gauteng), S Webb (mortgage manager: regions).

By invitation: S Blaine (human resources consultant).

Members: IL Roodt (committee chairperson and group fi nancial manager), B Cooke (loan administration manager), K Chikomo (Eastern Cape regional manager), S Govender (KwaZulu-Natal regional manager), PGN Jackson (CEO), R Valloo (mortgage manager: Gauteng), S Webb (mortgage manager: regions).

Risk management

committee

Members: PGN Jackson (committee chairperson and CEO), B Cooke (loan administrationmanager), IL Roodt (group fi nancial manager), LN Netshifhefhe (development impact unitmanager), K Chikomo (Eastern Cape regional manager), S Govender (KwaZulu-Natalregional manager), R Valloo (mortgage manager: Gauteng), S Webb (mortgage manager:regions).By invitation: BN Mgqibi, BK Nkotswe, HL Makwela, JC Armer, J Labuschagne, LM Dotwana, MA Maredi, P Nel, T Nakedi, V Derrocks (loan offi cers) and MP Nyoni (liaison offi cer).

Management

committee

(MANCO)

Gove

rnance s

tructu

re


51


51

Roles and responsibilities

• review risk management policy and processes; • ensure risk management is integrated into business operations; • ensure management considers and implements appropriate risk responses; • evaluate the basis and adequacy of insurance cover; • ensure internal audit is aligned with risk management processes; • identify emerging areas of risk; • ensure compliance with legislation, regulation and governance codes, including King III; and • identify areas of governance non-compliance and propose remedial action.


The board has delegated the management of TUHF to the CEO and the other members of the EXCO. The CEO and, under his direction, the other members of EXCO, are responsible for the overall direction of the Group and the management of the business at a strategic level. Weekly meetings are scheduled to:

• assess and discuss key strategic business issues, including liquidity and stakeholder relationships; • review the Group’s balanced scorecard and implementation of strategic issues; • discuss progress on projects identifi ed as high risk, including litigation matters; • assess all operational aspects of projects, fi nancing, development and implementation, including procedures for project preparation and

approval; and• discuss any staff matters relevant to existing or new staff required.


• identifying and managing the Group’s credit exposure as well as trends and responses affecting this exposure; • review and recommend changes to the Group’s credit and loan policy, including the adequacy of allowances for credit losses; • evaluate and approve fi nancing and guarantees of projects within the established value band (above R10 million) delegated to the committee by the

board; and

• report approved projects to the board.


• support the attraction, development and retention of employees with specialised and critical skills that contribute to sustained business growth; • review employee earnings, including benefi ts, to maintain best practice and ensure competitive remuneration packages; • review, recommend and approve, on an individual basis, executive remuneration packages; • review, recommend and approve salary and performance increments; and • review and recommend annual incentive bonuses.


• monitor the Group’s activities having regard to legislation, best practice, social and economic development, good corporate citizenship, environment, health and public safety as well as labour and employment; and

• report to the board and to shareholders on any matters within its mandate.


• the jobs fund committee has been set up for a specifi c project and will provide an oversight role and act as a sounding board to TUHF’s CEO and management in respect of the National Treasury’s Jobs Fund grant; and

• the committee is set up for the duration of the grant, which is estimated to be at least 36 months plus an additional 12-month monitoring period.


• review Group accounting policies and practices and, when necessary, recommend changes;• review Group fi nancial, operational and internal control systems and when required, make recommendations to the board;• monitor management’s compliance with reporting best practice; and • oversee reporting by internal and external auditors.


• Approving fi nancing and guarantees of projects with a value of less than R10 million on a weekly basis.• Recommending projects of a value exceeding R10 million to the loan committee.

Board sub-committees Management committees


52

Corporate governance continued

levels are market related for small to medium institutions.

As TUHF continues to grow, the remuneration policy will

be reviewed.

Fully conversant with the specialist business environment

and market in which TUHF operates, the board shares a

clear vision for the Group. The board possesses expertise

across the development fi nance, banking and broader

credit and fi nancial institution spectrum. As the Group

grows, investment from new shareholders is anticipated.

As this occurs, the board intends to build its resources and

capability by appointing additional members with

development fi nance, asset and investment management

backgrounds.

Risk managementEffective risk management is key to the success of the

Looking ahead

The board will focus on the following areas relating to

governance during the next fi nancial year:

• review and evaluate the corporate governance structures

and arrangements to ensure they operate effectively;

• enhance the Group’s compliance with King III principles

and monitor the progress on sustainability and related

matters, stakeholder relations, good corporate citizenship

strategies and ensure that integrated reporting is

contained in key management reports and embedded in

the management report;

• evaluate and enhance the Group’s remuneration

processes;

• strengthen the Group’s IT governance to ensure

it supports the Group’s treasury management

objectives;

• monitor and evaluate systems and processes to measure

the Group’s social impact; and

Board committees

Meeting attendance

Group. Effective execution of our business strategy

depends on the ability to take calculated risks without

compromising stakeholders’ interests. The role of the risk

management function is to identify, assess, measure and

manage those risks that arise as a result of our business

activities. We are mindful of the need to strike a healthy

balance between performance and maintaining acceptable

risk levels.

The Group’s governance framework provides the

framework through which risk is managed. The board is

ultimately responsible for risk management in the Group

and is supported by the risk management committee.

Although the committee is accountable to the board, each

employee is responsible for risk management. While risks

are managed as a part of our daily operations, on a

quarterly basis the risk register is updated and submitted to

the risk management committee and the board for review

every quarter.

• owing to the growth of the organisation and the

specialised nature of the company secretary’s function,

TUHF is in the process of appointing Statucor (Pty) Ltd,

specialists in compliance, governance and secretarial

support, to perform the role of company secretary.

Committee members Board

Loan

committee*

Audit and

risk

committee

Remuneration

committee

Social and

ethics

committee

Job funds

committee

Number of meetings held 3 1 3 2 1 2

Samson Moraba (chairman) 3/3 N/A 3/3 2/2 N/A N/A

Cas Coovadia (deputy chairman) 3/3 1/1 3/3 2/2 N/A 1/2

Paul Jackson (CEO) 3/3 1/1 3/3 2/2 1/1 2/2

Taffy Adler 2/3 1/1 N/A N/A N/A 2/2

Robert Emslie 3/3 1/1 3/3 2/2 N/A 2/2

Mandu Mamatela 3/3 N/A 3/3 N/A N/A 1/2

Jill Strelitz 3/3 N/A N/A N/A 1/1 N/A

N/A: Not applicable as not a member of this committee.* This committee votes over emails and only sits for large deals.

BOARD OF DIRECTORS CONTINUED


53

Our people are a key resource and differentiator. Their

motivation, experience and integrity are essential in

delivering sustainable growth for all our stakeholders.

TUHF’s remuneration strategy aims to attract, retain and

incentivise high-quality employees to contribute to

long-term value creation for the Group.

The TUHF approach to remuneration is strongly focused on

market alignment and reward for excellence. To this end,

TUHF participates annually in salary surveys to ensure that

the salaries offered are aligned to the 50th percentile of the

market. In 2014, an independent review of the executive

remuneration was done by 21st Century, and this was

found to be aligned with the market.

TUHF has a strong performance-based remuneration

approach. Incentives are earned every four months in the

form of trimester incentive bonuses and annually in the form

of an annual bonus. The total bonus pool (including both

trimester incentives and the annual bonus) is approved by

the REMCO of the board. The factors that are considered in

the allocation of the incentive pool are:

• operating profi tability;

• fi nancial health;

• annuity growth; and

• other indirect factors such as our development

objectives, growth and learning, and staff and systems-

related matters.

Staff participation in the incentives is based on both the

team performance and their individual performance.

TUHF has an employee share scheme that allocates shares

to employees based on a number of factors. These include

length of tenure at TUHF, seniority and performance. More

senior employees are allocated shares that they have the

option of retaining or selling. Junior employees receive the

cash value of the shares that vest.

The overall remuneration philosophy of TUHF is to provide

competitive salaries and benefi ts to secure excellent staff

and to provide good incentive and bonus structures to

retain and reward staff. Banded salary scales are developed

each year linked to market related data. Staff are

remunerated in line with the banded salary scales for the

grade position that they occupy. They receive a wide range

of benefi ts including retirement, medical aid, disability, risk

and funeral benefi ts. They also have access to support for

skills development through a bursary scheme that supports

learning within the organisation.

Directors’ remuneration is also market related. Directors are

remunerated for both meeting attendance and their roles

e.g. chairperson of a sub-committee. They are paid a

portion of the fee as a retainer and a portion for attendance

at meetings. The market relatedness of this approach is

checked annually in line with data provided from relevant

surveys. This is to ensure that non-executive board

members are secured and retained to support leadership

of TUHF.

For more detailed information, refer to note 28 of the annual

fi nancial statements.

REMUNERATION REVIEW


54


55

Our people are a key resource and differentiator. Their motivation, experience and integrity are essential in delivering sustainable growth for all our stakeholders.


56

Annual Financial Statements


57

58 Directors’ responsibility statement

58 Company secretary’s certifi cate

59 Report of the directors

62 Report of the independent auditors

63 Statement of changes in Financial Position

64 Statement of Comprehensive Income

65 Statement of changes in equity

66 Statement of cash fl ows

67 Accounting policies

74 Notes to the fi nancial statements

103 Glossary

104 Corporate information

IBC Gratitude to funders

TUHF has a proven track record of commercial viability coupled with signifi cant social impact. We have shown ourselves to be a catalytic presence in the communities in which we operate.


58

In accordance with the Companies Act 71 of 2008

requirements, the directors are responsible for the preparation

of the annual fi nancial statements which conform with

International Financial Reporting Standards (IFRS) and which,

in accordance with those standards, fairly present the state

of affairs of the Company as at the end of the fi nancial year,

and the net income and cash fl ows for that period.

It is the responsibility of the independent auditors to report

on the fair presentation of the fi nancial statements.

The directors are ultimately responsible for the internal

controls. Management enables the directors to meet these

responsibilities. Standards and systems of internal control

are designed and implemented by management to provide

reasonable assurance as to the integrity and reliability of

the fi nancial statements in terms of IFRS and to adequately

safeguard, verify and maintain accountability for group

assets. Accounting policies supported by judgements,

estimates and assumptions which comply with IFRS,

are applied on a consistent and going concern basis.

Systems and controls include the proper delegation of

responsibilities within a clearly defi ned framework, effective

accounting procedures and adequate segregation of duties.

Based on the information and explanations given by

management, the directors are of the opinion that the controls

DIRECTORS’ RESPONSIBILITIES AND APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS

are adequate and that the fi nancial records may be relied

upon for preparing the fi nancial statements in accordance

with IFRS and maintaining the Company’s assets and liabilities.

Nothing has come to the attention of the directors to indicate

that any breakdown in the functioning of these controls,

resulting in material loss to the Company, has occurred

during the year and up to the date of this report.

The directors have a reasonable expectation that the

Company and the Group have adequate resources to

continue in operational existence for the foreseeable future.

For this reason, they continue to adopt the going concern

basis in preparing the fi nancial statements.

The Company fi nancial statements prepared in accordance

with IFRS which appear on pages 63 to 102, were reviewed

by the directors on 30 July 2015 who authorised the directors

to sign on their behalf.

PGN Jackson C Coovadia

Director Director

Johannesburg

30 July 2015

COMPANY SECRETARY’S CERTIFICATE

In accordance with the provisions of the Companies Act 2008, I certify that in respect of the year ended 31 March 2015 the

Company has lodged with the Registrar of Companies all returns prescribed by the Act and that all such returns are true,

correct and up to date.

IL Roodt

Johannesburg

30 July 2015


59

TO THE MEMBERS OF THE TRUST FOR URBAN

HOUSING FINANCE NPC

Your board of directors presents its report, together with

the audited fi nancial statements of the Company for the

year ended 31 March 2015.

DATE OF INCORPORATION

The Company was incorporated on 18 January 1993.

NATURE OF ACTIVITIES

The Company and TUHF Holdings Limited together with

its subsidiaries are development fi nance organisations that

provide short and long-term fi nance to landlords, social

housing institutions and tenant-based collectives for the

purchase, construction and improvement of property within

South African inner city precincts, where the objective is

to supply rental housing. The Company, TUHF Holdings

Limited and its subsidiaries offer loan funding for such

projects by way of different products secured by the

property asset or approved exit structures.

TRADING RESULTS

The results are fully disclosed in the attached fi nancial

statements.

LOAN IMPAIRMENT

It is the opinion of the board and management that the

realisable values of collateral held in respect of advances

exceed the book value of such advances. Advances always

contain certain balances, that although not yet identifi ed as

a problem, will prove to be irrecoverable. Similarly certain

clients and advances may display certain triggers such

as late or non payment and an assessment of the project

collateral must be considered. The Group does not have

suffi cient historical data to estimate with any accuracy what

these losses may be. Management has conservatively,

based on risk profi les, estimated the potential impairment

of advances on a collective basis. Applying management’s

methodology a total loan impairment of R12 587 833

(2014: R13 276 016) for the year under review has been

provided. A risk rating of certain products has resulted in

the general impairment provision of mortgage loans being

increased to R37 858 914 (2014: R30 443 793) and a slight

decrease to R12 320 570 (2014: R12 413 740) in respect

of specifi c provisions. In respect of bridging fi nance loans,

general impairment and specifi c provisions amounting to

R521 953 (2014: R3 121 745) have been provided. Note 26

of the notes to the fi nancial statements sets out how the

Group manages credit risk.

TAXATION

In terms of section 10(1)(cc) of the Income Tax Act, the

Company is exempt from taxation. However, with the

introduction of section 30, the Company needed to re-apply

for exemption as a public benefi t organisation.

The Company has submitted such an application. The

South African Revenue Services (SARS) has advised

that exemption will be granted in terms of paragraph 3(f)

subparagraph (a) and (b) of the Ninth Schedule of Income

Tax Act. However this exemption is subject to conditions

prescribed by the Minister of Finance which to date have

not been promulgated. Not withstanding this advice, the

Company has been in contact with SARS’ Tax Exemption

Unit to seek further clarifi cation on the Company’s status

concerning its changed business operations since the

application was submitted in October 2003. We await

fi nal confi rmation from SARS as to the requirements for

compliance. For years after 2010, the income earned by

the Company does not fall into the ambit of section 30

and consequently taxation is payable for years after 2010.

Income tax in the current period amounted to R953 653

(2014: R677 772).

The directors, however, believe that it would be prudent to

provide for tax where the Company has taxable income. To

this end some tax has been paid and the amount provided

in respect of the Company has increased to R9 185 829

(2014: R8 220 278). An amount of R12 090 907 was paid

by TUHF Limited in respect of provisional tax payments.

TUHF Limited incurred normal taxation of R13 670 269

(2014: R12 062 697) with the deferred taxation increasing

to R5 849 875 (2014: R3 608 949).TUHF Holdings Limited’s

normal tax amounted to R2 652 999 (2014: R2 433 788)

and TUHF Bridge Proprietary Limited incurred taxation

of R345 795 (2014: R340 546). Intuthuko Equity Fund

Proprietary Limited provided R0 (2014: R1 496) in respect

of normal tax and R83 570 (2014: R0) in respect of deferred

tax. TUHF Properties Proprietary Limited increased the

deferred tax provision by R242 (2014 reduced R688) leaving

an assessable loss of R419 083 (2014: R419 810).

FUNDING

During the year under review TUHF Limited secured the

following funding facilities:

• R300 million from Futuregrowth Asset Management

Proprietary Limited (acting on behalf of Old Mutual Life

Assurance Company (South Africa) Limited)

• R65 million from Atlantic Asset Management Proprietary

Limited

• R50 million from Cadiz Asset Management Proprietary

Limited

• R11 million from Mergence Asset Management

Proprietary Limited

• A grant of R200 million awarded from the National

Treasury’s Jobs Fund was formally contracted in

January 2015.

REPORT OF THE DIRECTORS


60

In addition the Group is presently in the process of

negotiating and setting up the following facility:

• ZAR 1 000 000 000 domestic medium term note

programme in respect of which contracting formal

remains outstanding.

SUPPORT PROGRAMME FOR SOCIAL HOUSING

In terms of an agency agreement entered into in July 2004

the Company was appointed by the National Housing

Finance Corporation as its agent and representative to

manage the implementation and operations of the support

programme for social housing, funding of which originated

from the Commission of the European Community

amounting to R23,1 million. The Company’s duties of agent

were concluded during June 2007. The Company, however,

continues to act as agent in ongoing social housing funding

transactions. Negotiations continue to extend the agency

agreement as well as increasing the agency funds.

EQUITY FUNDING

One of the principles of the Company’s lending approach

is to support emerging entrepreneurs and black economic

empowerment. To assist in the fi nancial gearing of their

projects, the Company provides emerging entrepreneurs,

who qualify for debt support, equity type fi nance in the form

of variable interest subordinated loans.

The initial R2 million received from the Gauteng Partnership

Fund for this purpose has been fully committed and drawn

down. Negotiations have been concluded for an additional

R8 million which is fully committed.

An additional R10 million was approved by the Gauteng

Partnership Fund during 2012. TUHF has concluded a

facility with The New Housing Company for R5 million and

is currently negotiating with other funders to increase our

equity funding on a national basis.

DIRECTORS AND SECRETARY

The following were directors during the period under review:

• SS Moraba (chairman)*

• TM Adler*

• C Coovadia*

• RR Emslie*

• PGN Jackson

• MJK Mamatela*

• JS Strelitz*

* Non-executive director

Company secretary during the period under review.

• IL Roodt

PREPARATION OF FINANCIAL STATEMENTS

The fi nancial statements have been prepared by Ilona

Roodt CA(SA) and audited in compliance with the

requirements of the Companies Act, 2008.

AUDITORS

PricewaterhouseCoopers Inc will continue in offi ce in

accordance with section 90 of the Companies Act of

South Africa with Mr. S Beyers as the designated auditor

responsible for performing the functions of auditor.

INVESTMENTS

The Company holds 100% of the issued share capital

of TUHF Properties Proprietary Limited and Intuthuko Equity

Fund Proprietary Limited.

33,56% of the issued share capital of TUHF Holdings

Limited is held by the Company. The Company exercises

control over the Group through a Voting Pool Agreement.

TUHF Limited and TUHF Bridge Proprietary Limited are

wholly owned subsidaries of TUHF Holdings Limited.

SPECIAL RESOLUTION


The following special resolutions were considered by the

shareholders during the fi nancial year ended 31 March 2015:

• The existing Memorandum of Incorporation (MOI) of the

Company was substituted for a new MOI to give effect to

the conversion of the Company from a private company

to a public company.

• The new MOI, authorised the increase in the Company’s

authorised share capital by the creation of 20 000 000

(twenty million) C Ordinary Shares of no par value.

• The Company allotted and issued 8 567 760

(eight million fi ve hundred and sixty seven thousand

seven hundred and sixty) and 2 977 130 (two million

nine hundred and seventy seven thousand one hundred

and thirty) C Ordinary Shares of no par value to the Trust

for Urban Housing Finance NPC and National Housing

Finance Corporation SOC Limited respectively.

• In the event that the Trust for Urban Housing Finance NPC

share issue and National Housing Finance Corporation

SOC Limited share issue occured before the C Ordinary

Shares were authorised in terms of the new MOI then, in

accordance with section 38(2)(a) as read with sections

36(2)(a) and 16(1)(c) of the Companies Act, the above

mentioned share issues were retroactively authorised.

• The allotment of the below ordinary par value Shares of

R0,0001 each to various employees, prescribed offi cers

and directors of the Company’s subsidiary TUHF Limited

in terms of the TUHF Conditional Share Plan was

approved, effective from 1 October 2013.

• The shareholders of the Company irrevocably and

unconditionally waived any and all rights which they may

have had as a result of the allotment and issue of the

ordinary par value Shares of R0,0001 each in terms of

the rules of TUHF Conditional Share Plan.

REPORT OF THE DIRECTORS CONTINUED


61

TUHF Limited

The following special resolutions were considered by the

shareholders during the fi nancial year ended 31 March 2015:

• The existing MOI of the Company was substituted for a

new MOI to give effect to the conversion of the Company

from a private company to a public company.

In terms of section 66(9) of the Companies Act No 71 of

2008, TUHF Limited was authorised to pay remuneration

to non-executive directors for their services an amount in

aggregate not exceeding R1 900 000.

GOING CONCERN

The fi nancial statements have been prepared using appropriate

accounting policies, supported by reasonable and prudent

judgements and estimates. The directors have a reasonable

expectation that the Group has adequate resources to

continue as a going concern in the foreseeable future.

POST BALANCE SHEET EVENTS

Subsequent to the year-end the following events are

anticipated to take place:

• TUHF Limited will move to its new Head Offi ce in

Johannesburg at 25 Ameshof Street, Braamfontein

with effect from August 2015.

Other than what is reported above, the directors are not

aware of any other matters arising since the end of the

fi nancial year to date and not dealt with in this report, that

would signifi cantly have any infl uence on the operations,

the results and fi nancial position of the Company.

SHARE-BASED PAYMENT SCHEME

TUHF Holdings Limited has a Conditional Share Plan (CSP)

from which conditional share and cash awards are granted

to employees of TUHF Limited.

All awards granted are subject to a performance

management system and is measured over a two or

three-year performance period. The performance condition

of the awards are determined by the management of the

employing companies (presently only TUHF Limited) for

each of the performance years by means of a performance

management assessment (Performance Contract).

For each of the fi nancial years covering the performance

period, the performance level of the Performance Contract

will be reviewed. At the end of the performance periods

the Performance Contract will be fi nalised. The Company’s

remuneration committee, together with the management

of TUHF Limited, will examine the extent to which

performance conditions have been satisfi ed and determine

the awards that employees will be entitled to. The awards

decided upon will be vested over a period of three years in

equal numbers.

During the year under review the following transactions

took place:

2015 2014

– Conditional awards

offered and accepted by

participants – 1 900 084

– Conditional awards to

which employees became

entitled to 296 165 322 064

– Conditional awards vested – 298 384

– Conditional awards

purchased by TUHF

Limited 250 238 23 700

As at 31 March 2015:

– Total shares vested 2 441 247 2 271 485

– Treasury shares held by

TUHF Limited 554 189 273 851

– Total unvested awards 2 039 478 2 202 638

– Total shares reverted back

to allocation pool 270 005 124 110

No awards have been forfeited during the period under

review. Management estimate that all awards granted will

be vested over the vesting periods. Conditional awards

amounting to 202 861 Ordinary Shares vested in the

fi nancial year ending March 2015.

MEMBERS’ FUNDS

The Company is a non profi t organisation and there are no

members’ funds in the Company.

MEMBERS’ GUARANTEE

The Company is a company without share capital and is

deemed to be incorporated as a non profi t company (NPC)

in terms of the transitional provisions of the Companies Act

71 of 2008. In terms of the Memorandum of Incorporation,

each member of the Company guarantees to contribute R1

(One Rand) in the event of the Company being wound up.

At the balance sheet date the guarantee value amounted to

R8 (2014: R8).

SUBSIDIARY COMPANIES

Information regarding the Company’s interest in companies

whose main business is to provide commercial property

fi nance to fi nancial entrepreneurs and landlords for the

purchase, construction and improvement of property for the

purpose of the regeneration of South African inner cities.


62

REPORT ON THE FINANCIAL STATEMENTS

We have audited the consolidated and separate fi nancial

statements of Trust for Urban Housing Finance set out

of pages 63 to 102, which comprise the Statement of

Financial Position as at 31 March 2015, and the Statement

of Comprehensive Income, statement of changes in equity

and statement of cash fl ows for the year then ended, and

the notes, comprising a summary of signifi cant accounting

policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE

FINANCIAL STATEMENTS

The Company’s directors are responsible for the

preparation and fair presentation of these consolidated

and separate fi nancial statements in accordance with

International Financial Reporting Standards and the

requirements of the Companies Act of South Africa, and

for such internal control as the directors determine is

necessary to enable to preparation of consolidated and

separate fi nancial statements that are free from material

misstatements, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these

consolidated and separate fi nancial statements based

on our audit. We conducted our audit in accordance with

International Standards on Auditing. Those standards

require that we comply with ethical requirements and plan

and perform the audit to obtain reasonable assurance

about whether the consolidated and separate fi nancial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the fi nancial

statements. The procedures selected depend on the

auditor’s judgment, including the assessment of the risks of

material misstatement of the fi nancial statements, whether

due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the

entity’s preparation and fair presentation of the fi nancial

statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose

of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE TRUST FOR URBAN HOUSING FINANCE

the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation

of the fi nancial statements.

We believe that the audit evidence we have obtained

is suffi cient and appropriate to provide a basis for our

audit opinion.

OPINION

In our opinion, the consolidated and separate fi nancial

statements present fairly, in all material respects, the

consolidated and separate fi nancial position of Trust for

Urban Housing Finance as at 31 March 2015, and its

consolidated and separate fi nancial performance and

consolidated and separate cash fl ows for the year then

ended in accordance with International Financial Reporting

Standards and the requirements of the Companies Act of

South Africa.

OTHER REPORTS REQUIRED BY THE COMPANIES

ACT

As part of our audit of the consolidated and separate

fi nancial statements for the year ended 31 March 2015,

we have read the Director’s Report and the Company

Secretary’s Certifi cate for the purpose of identifying whether

there are material inconsistencies between these reports

and the audited consolidated and separate fi nancial

statements. These reports are the responsibility of the

respective preparers. Based on reading these reports

we have not identifi ed material inconsistencies between

these reports and the audited consolidated and separate

fi nancial statements. However, we have not audited these

reports and accordingly do not express and opinion on

these reports.

PricewaterhouseCoopers Inc

Per: Stefan Beyers

Registered Auditors

Johannesburg

30 July 2015


63

GROUP COMPANY

Note

2015

R

2014

R

2015

R

2014

R

ASSETS

Cash and cash equivalents 1 46 121 017 25 138 644 4 017 453 117 739

Money market assets 2 32 664 698 27 206 286 – –

Advances 3 2 019 405 280 1 867 468 406 – –

Other assets 5 4 974 845 4 645 610 874 729

Taxation 12 – – – –

Deferred taxation 22 19 383 696 14 168 834 –

Investments and amounts owing by related parties 6 8 430 000 51 422 334 51 669 890

Equipment and intangible assets 8 3 599 273 3 114 539 – –

Total assets 2 134 578 809 1 941 742 318 55 440 661 51 788 359

LIABILITIES

Taxation 12 8 515 675 5 082 119 9 201 298 8 234 406

Trade payables 9 21 619 875 20 102 038 14 293 996 14 074 748

Deferred taxation 22 – – 204 204

Dividends accrued 10 5 755 654 5 330 007 – –

Amounts owing to related parties 7 – – 13 909 –

Raising fees deferred 11 17 346 026 15 000 644 – –

Financial liabilities at fair value – – – –

Financial liabilities 13 1 878 209 773 1 716 852 833 – –

Share-based payment reserve 14 3 338 515 1 927 099

Total liabilities 1 934 785 517 1 764 294 739 23 509 407 22 309 357

EQUITY CAPITAL AND RESERVES

Owners’ reserves 91 780 349 79 097 484 – –

Share scheme 4 843 184 4 660 651 – –

Non-controlling shareholders share of reserves 102 999 030 93 503 598 – –

Reserves – – 31 931 254 29 479 002

Share-based payment reserve – – – –

Equity development fund reserve 170 730 185 846 – –

Total liabilities and reserves 2 134 578 809 1 941 742 318 55 440 661 51 788 359

STATEMENT OF FINANCIAL POSITIONas at 31 March 2015


64

STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2015

GROUP COMPANY

Note

2015

R

2014

R

2015

R

2014

R

Interest income 18 245 800 536 204 329 288 862 582 822 087

Interest expenses 19 151 871 857 117 146 905 769 959 320 714

Net interest income 93 928 678 87 182 383 92 623 501 372

Loan impairment 4 12 587 833 13 276 016 – –

Income from lending activities 81 340 845 73 906 367 92 623 501 372

Non-interest income 20 13 588 269 6 693 155 5 126 327 1 501 500

Operating income 94 929 114 80 599 522 5 218 950 2 002 872

Operating expenditure 21 51 259 121 40 440 331 1 813 045 336 834

Profi t/(Loss) before taxation 43 669 994 40 159 192 3 405 905 1 666 038

Taxation 22 12 407 855 11 599 410 953 653 677 772

Net profi t for the year 31 262 139 28 559 782 2 452 252 988 266

Total income for the year 31 262 139 28 559 782 2 452 252 988 266


65

STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2015

Share

scheme

R

Owners’

reserves

R

Minority

interest

R

Total

equity

R

Balance at 31 March 2013 3 708 933 68 482 344 83 645 840 155 837 117

Changes in equity

Additional share capital issued 1 11 20 32

Dilution due to share capital issued – – – –

Share premium on additional share capital issued 19 923 193 325 356 905 570 153

Cost of investment in TUHF Holdings Limited – – – –

Total recognised income and expenses for the year 973 742 10 197 082 17 443 387 28 614 211

Intuthuko equity fund transfer of funder margin – 182 774 – 182 774

Sale of Consolidated Share Plan shares to TUHF Limited (41 949) 41 949 – –

Dividends accrued – – (7 942 555) (7 942 555)

Subsidiary share-based payment reserve – share issue – – – –

Subsidiary share-based payment reserve – cost

adjusted to equity settled – – – –

Balance at 31 March 2014 4 660 651 79 097 484 93 503 598 177 261 732

Additional share capital issued – – – –

Share premium on additional share capital issued – – – –

Total recognised income and expenses for the year 903 182 12 324 052 18 037 409 31 262 139

Intuthuko equity fund transfer of funder margin – 198 640 – 198 640

Sale of Consolidated Share Plan shares to TUHF Limited (720 649) 720 649 – –

Dividends accrued – – (8 541 977) (8 541 977)

Subsidiary share investment in Treasury shares –

additional investment written back – (560 476) – (560 476)

Subsidiary share-based payment reserve – adjustment

to equity settled – – – –

Balance at 31 March 2015 4 843 184 91 780 349 102 999 030 199 620 058

Members’

reserves

R

Total

R

COMPANY

Reserves

Opening Balance at 31 March 2013 28 490 736 28 490 736

Total recognised income and expenses for the year 988 266 988 266

Balance at 31 March 2014 29 479 002 29 479 002

Total recognised income and expenses for the year 2 452 252 2 452 252

Balance at 31 March 2015 31 931 254 31 931 254


66

STATEMENT OF CASH FLOWSfor the year ended 31 March 2015

GROUP COMPANY

Note

2015

R

2014

R

2015

R

2014

R

Cash fl ows from operating activities 25

Interest received 245 800 536 201 626 742 862 582 822 087

Interest paid (151 871 857) (117 146 905) (769 959) (320 714)

Taxation paid (8 974 299) (17 806 138) 13 239 (477 982)

Cash received from clients – – 5 126 327 –

Cash paid to suppliers and employees (43 118 283) (34 413 040) (1 594 086) (365 495)

Net cash (outfl ow)/infl ow from operating

activities (41 836 096) 32 260 659 3 638 103 (342 105)

Cash fl ows (utilised)/generated by

investing activities (176 752 251) (324 044 801) 145 –

Advances to customers (174 332 789) (322 667 475) 145 –

Purchase of property, plant and equipment (2 419 462) (1 377 326) – –

Cash fl ows from fi nancing activities 161 356 940 271 422 802 261 465 (13 712)

Proceeds from fi nancial liabilities 477 428 574 499 814 482 – –

Repayment of fi nancial liabilities (316 071 634) (228 391 712) – –

Repayments to/proceeds from related-party

borrowings – – 261 465 (13 712)

Proceeds from share issue – 32 – –

Cost of share investment – – – –

Net increase in cash and cash equivalents

for the period 26 440 785 (20 361 340) 3 899 713 (355 817)

Cash and cash equivalents at beginning of

the period 52 344 930 72 706 270 117 739 473 556

Cash and cash equivalents at 31 March 78 785 715 52 344 930 4 017 453 117 739

Made up as follows:

Cash and bank current accounts 46 121 017 25 138 644 4 017 453 117 739

Money market assets 32 664 698 27 206 286 – –

78 785 715 52 344 930 4 017 453 117 739


67

ACCOUNTING POLICIES

1 BASIS OF PREPARATION

The fi nancial statements have been prepared in

accordance with International Financial Reporting

Standards (IFRS). The fi nancial statements have

been prepared under the historical cost convention,

as modifi ed by the revaluation of land and buildings,

available-for-sale fi nancial assets, and fi nancial

assets and fi nancial liabilities (including derivative

instruments) at fair value through profi t or loss.

The preparation of fi nancial statements in conformity

with IFRS requires the use of certain critical accounting

estimates. It also requires management to exercise

its judgement in the process of applying the Group’s

accounting policies. The areas involving a higher

degree of judgement or complexity, or areas where

assumptions and estimates are signifi cant to the

consolidated fi nancial statements are disclosed in the

note 6.

2 BASIS OF CONSOLIDATION

Subsidiaries are all entities (including special purpose

entities) over which the Group has the power to

govern the fi nancial and operating policies generally

accompanying a shareholding of more than one half

of the voting rights. The existence and effect of the

potential voting rights that are currently exercisable or

convertible are considered when assessing whether

the Group controls another entity. Subsidiaries are

fully consolidated from the date on which control is

transferred to the Group. They are deconsolidated

from the date that control ceases.

The Group uses the acquisition method of

accounting to account for business combinations.

The consideration transferred for the acquisition of a

subsidiary is the fair values of the assets transferred,

the liabilities incurred and the equity interests issued

by the Group. The consideration transferred includes

the fair value of any asset or liability resulting from a

contingent consideration arrangement. On an

acquisition-by-acquisition basis, the Group recognises

any non-controlling interest in the acquiree either at fair

value or at the non-controlling interest proportionate

share of the acquiree’s net assets.

Investments in subsidiaries are accounted for at cost

less impairment. Cost is adjusted to refl ect changes

in consideration arising from contingent consideration

amendments. Cost also includes direct attributable

costs of investment.

The excess of the consideration transferred, the

amount of any non-controlling interest in the acquiree

and the acquisition-date fair value of any previous

equity interest in the acquiree over the fair value

of the Group’s share of the identifi able net assets

acquired is recorded as goodwill. If this is less

than the fair vale of the net assets of the subsidiary

acquired in the case of a bargain purchase, the

difference is recognised directly in the Statement of

Comprehensive Income.

Inter-company transactions, balances and unrealised

gains on transactions between Group companies

are eliminated. Unrealised losses are also eliminated.

Accounting policies of subsidiaries have been changed

where necessary to ensure consistency with the

policies adopted by the Group.

The Group treats transactions with non-controlling

interests as transactions with equity owners of the

Group. For purchases from non-controlling interests,

the difference between any consideration paid and

the relevant share acquired of the carrying value of

net assets of the subsidiary is recorded in equity.

Gains or losses on disposals to non-controlling

interests are also recorded in equity.

When the Group ceases to have control or signifi cant

infl uence, any retained interest in the entity is

remeasured to its fair value, with the change in

carrying amount recognised in profi t or loss. The fair

value is the initial carrying amount for the purposes

of subsequently accounting for the retained interest

as an associate, joint venture or fi nancial asset.

In addition, any amounts previously recognised

in other comprehensive income in respect of that

entity are accounted for as if the Group had directly

disposed of the related assets or liabilities. This may

mean that amounts previously recognised in other

comprehensive income are reclassifi ed to profi t or loss.

3 EQUIPMENT

The cost or subsequent cost of an item of equipment

is recognised as an asset when:

• it is probable that future economic benefi ts

associated with the item will fl ow to the Group; and

• the cost of the item can be measured reliably.

Costs include costs incurred initially to acquire

equipment and costs incurred subsequently to add

to and replace part of it. Equipment is stated at cost

less accumulated depreciation and any impairment

losses.

The carrying amount of replaced parts is derecognised.

All other repairs and maintenance are charged to the

profi t or loss during the fi nancial period in which they

are incurred.


68

ACCOUNTING POLICIES CONTINUED

Depreciation is calculated on the straight-line method

to write off the cost of assets to their residual values

over their estimated useful lives at the following rates:

• Computer hardware – 25% per annum;

• Offi ce furniture – 20% per annum; and

• Offi ce equipment – 25% – 33,33% per annum.

The residual value of an asset is defi ned as the higher of

an assets value in use, and fair value less costs to sell.

The residual value and the useful life of an asset are

reviewed on an annual basis and should expectations

differ from previous estimates, changes are accounted

for as a change in accounting estimates in accordance

with IAS 8.

The gain or loss arising from the derecognition of an

item of equipment is included in the Statement of

Comprehensive Income. The gain or loss arising from the

derecognition of an item of equipment is determined

as the difference between the net disposal proceeds,

if any, and the carrying amount of the item.

Impairment

Assets that have an indefi nite useful life – for example,

goodwill or intangible assets not ready to use – are

not subject to amortisation and are tested annually for

impairment. Assets that are subject to amortisation

are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying

amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s

fair value less costs to sell and value in use. For

the purpose of assessing impairment, assets are

grouped at the lowest levels for which there are

separately identifi able cash fl ows (cash generating

units). Non-fi nancial assets other than goodwill that

suffered impairment are reviewed for possible reversal

of the impairment at each reporting date.

4 INTANGIBLE ASSETS

An intangible asset is recognised when it is probable

that the expected future economic benefi ts that are

attributable to the asset will fl ow to the Group and the

cost of the asset can be measured reliably. Intangible

assets are initially recognised at cost.

An intangible asset arising from development is

recognised when:

• it is technically feasible to complete the software

product so that it will be available for use;

• management intends to complete the software

product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product

will generate probable future economic benefi ts;

• adequate technical, fi nancial and other resources

to complete the development and to use or sell the

software product are available; and

• the expenditure attributable to the software product

during its development can be reliably measured.

Intangible assets are carried at cost less any

accumulated amortisation and any impairment

losses. Amortisation is provided to write down the

intangible assets on a straight-line basis to their

residual basis as follows:

• Computer software – 20% per annum

Other development expenditures that do not meet

these criteria are recognised as an expense as

incurred. Development costs previously recognised

as an expense are not recognised as an asset in a

subsequent period.

5 FINANCIAL INSTRUMENTS

The Group classifi es fi nancial instruments on initial

recognition as a fi nancial asset or a fi nancial liability

in accordance with the substance of the contractual

arrangement. Financial assets and liabilities are

recognised on the Group’s Statement of Financial

Position when the Group becomes party to the

contractual provisions of the instrument. Financial

assets and liabilities are recognised initially at fair value.

Financial Assets

Cash and cash equivalents:

Cash equivalents are short-term highly liquid

investments that are readily convertible to known

amounts of cash and are subject to insignifi cant risk

in changing value. Cash and cash equivalents are

measured at fair value. Money market assets are

disclosed separately and not included in cash.

Cash held in trust are funds deposited into the

Group’s attorneys’ trust account to facilitate the

issue of purchase guarantees and payment of the

purchase price to the property seller on the bond

and transfer registration. Cash and cash equivalents

held in trust are initially measured at fair value and

subsequently measured at amortised cost.

Advances and receivables:

Advances and receivables are measured at initial

recognition at fair value, and are subsequently

measured at amortised cost using the effective interest

rate method. Appropriate allowances for estimated

irrecoverable amounts are recognised in profi t or loss.

Refer to accounting policy on impairment.


69

Amounts owing by/(to) related parties:

These loans are recognised initially at fair value plus

direct transaction costs. Subsequently these loans

are measured at amortised cost using the effective

interest rate method, less any impairment loss

recognised to refl ect irrecoverable amounts.

Fees earned on fi nancial assets are recognised in

accordance with the loan agreements. These are

capitalised to the value of the loan and credited to

non-interest income as the fee is earned.

Recognition:

Financial assets carried at fair value through profi t

or loss are initially recognised at fair value, and

transaction costs are expensed in the Statement of

Comprehensive Income.

Financial assets are derecognised when the right

to receive cash fl ows from the investments have

expired or have been transferred and the Group has

transferred substantially all risks and rewards

of ownership.

Loans and receivables are subsequently carried at

amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of

the fi nancial assets at fair value through profi t or loss

are presented in the Statement of Comprehensive

Income within other (losses)/gains – net in the period

in which they arise. Dividend income from fi nancial

assets at fair value through profi t or loss is recognised

in the Statement of Comprehensive Income as part

of other income when the Group’s right to receive

payments is established.

Offsetting of Financial Instruments

Financial assets and liabilities are offset and the

net amount reported in the Statement of Financial

Position when there is a legally enforceable right

to offset the recognised amounts and there is an

intention to settle on a net basis or realise the asset

and settle the liability simultaneously.

Impairment of Financial Assets

The Group assesses at the end of each reporting

period whether there is objective evidence that a

fi nancial asset or group of fi nancial assets is impaired.

A fi nancial asset or a group of fi nancial assets is

impaired and impairment losses are incurred only if

there is evidence of impairment as a result of one or

more events that occurred after the initial recognition

of the asset (a loss event) and that loss event (or

events) has an impact on the estimated future cash

fl ows of the fi nancial asset or group of fi nancial

assets that can be reliably estimated.

Derivative fi nancial instruments and hedging:

The Group initially recognises derivative instruments,

including interest rate swaps at fair value. Derivatives

are subsequently measured at fair value. The fair value

of non-traded derivatives is based on discounted

cash fl ow models. The Group recognises derivatives

as assets when the fair value is positive and as

liabilities when the fair value is negative. The effective

portion of changes in the fair value of derivatives that

are designated and qualify as cash fl ow hedges are

recognised in the cash fl ow hedging reserve in other

comprehensive income. The gain or loss relating to

the ineffective portion is recognised immediately as

part of fair value income in non-interest income in the

Statement of Comprehensive Income.

The Group documents, at the inception of the

transaction, the relationship between hedging

instruments and hedged items, as well as its risk

management objective and strategy for undertaking

various hedge transactions. The Group also

documents its assessment, both at hedge inception

and on an ongoing basis, of whether the derivatives

that are used in hedging transactions are highly

effective in offsetting changes in cash fl ows of

hedged items.

6 SIGNIFICANT JUDGEMENTS

In preparing the annual fi nancial statements,

management is required to make estimates and

assumptions that affect the amounts represented

in the annual fi nancial statements and related

disclosures. Estimates are made using available

information and the application of judgement. Actual

results in the future could differ from these estimates

which may be material to the fi nancial statements.

The only area of estimation uncertainty where there

is signifi cant risk of material adjustment to the

carrying value of assets and liabilities in the next

accounting period is the impairment of fi nancial

assets. This is more fully dealt with in Accounting

Policy Note 5 above.

Loans and advances:

Impairment of performing loans can only be

accounted for if there is objective evidence that a

loss event has occurred after the initial recognition

of the fi nancial asset but before the Statement of

Financial Position date. In order to provide for latent

losses in a portfolio of loans that have not yet been


70


individually identifi ed as impaired, a credit impairment

for incurred but not yet reported losses is recognised

based on management’s assessment of risk.

Management applies judgement to these balances

based on the value of the underlying loan balance,

the collateral held, arrears and past history.

Taxation:

The Group is subject to local income taxes and

signifi cant judgement is required in determining the

worldwide provisions for income taxes. There are

many transactions and calculations for which the

ultimate tax determination is uncertain. The Group

recognises liabilities for anticipated tax audit issues

based on estimates of whether additional taxes will

be due. Where the fi nal tax outcome of these matters

is different from the amounts that were initially

recorded, such differences will impact the current and

deferred income tax assets and liabilities in the period

in which such determination is made.

7 INTEREST INCOME AND EXPENSES

Interest income and expense are recognised in the

Statement of Comprehensive Income for all interest-

bearing instruments on a time apportionment basis

using the effective interest method. In terms of this

method, interest receipts and payments are brought

to account in proportion to the balance outstanding

on a time proportional basis. Disclosed separately

in the Statement of Comprehensive Income is the

notional interest on present valuing fi nancial assets

and liabilities carried at amortised cost.

8 NON-INTEREST INCOME:

Revenue from the provision of services is recognised

on an accrual basis, as the service is rendered by

reference to the stage of completion in accordance

with the substance of the relevant agreements.

9 TAXATION

The tax expense for the period comprises current

and deferred tax. Tax is recognised in the Statement

of Comprehensive Income, except to the extent that

it relates to items recognised in other comprehensive

income or directly in equity. In this case, the tax is

also recognised in other comprehensive income or

directly in equity, respectively.

The current income tax charge is calculated on

the basis of the tax laws enacted or substantively

enacted at the Statement of Financial Position date in

the countries where the Company and its subsidiaries

operate and generate taxable income. Management

periodically evaluates positions taken in tax returns

with respect to situations in which applicable tax

regulation is subject to interpretation. It establishes

provisions where appropriate on the basis of

amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability

method, on temporary differences arising between the

tax bases of assets and liabilities and their carrying

amounts in the consolidated fi nancial statements.

However, deferred tax liabilities are not recognised

if they arise from the initial recognition of goodwill.

Deferred income tax is not accounted for if it arises

from initial recognition of an asset or liability in a

transaction other than a business combination that at

the time of the transaction affects neither accounting

nor taxable profi t or loss. Deferred income tax is

determined using tax rates (and laws) that have been

enacted or substantially enacted by the Statement

of Financial Position date and are expected to apply

when the related deferred income tax asset is realised

or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to

the extent that it is probable that future profi t will be

available against which the temporary differences can

be utilised.

Deferred tax is provided on temporary differences

arising on investments in subsidiaries and associates,

except for deferred income tax liability where the

timing of the reversal of the temporary difference

is controlled by the Group and it is probable that

the temporary difference will not reverse in the

foreseeable future.

Deferred income tax assets and liabilities are offset

when there is a legally enforceable right to offset

current tax assets against current tax liabilities and

when the deferred income taxes assets and liabilities

relate to income taxes levied by the same taxation

authority on either the same taxable entity or different

taxable entities where there is an intention to settle

the balance on a net basis.

Deferred tax is calculated at the tax rates that are

expected to apply to the period when the asset is

realised or the liability is settled.


71

10 OPERATING LEASES – OFFICE RENTAL

Leases in which a signifi cant portion of the risks and

rewards of ownership are retained by the lessor are

classifi ed as operating leases. Payments made under

operating leases (net of any incentives received from

the lessor) are charged to the profi t or loss on a

straight-line basis over the period of the lease.

11 EMPLOYEE BENEFITS

Short-term employee benefi ts:

The costs of all short-term employee benefi ts are

recognised during the period in which the employee

renders the related service.

The accruals for employee entitlements to salaries,

annual and sick leave represent the amount which

the Group has a present obligation to pay as a result

of employees’ services provided up to the Statement

of Financial Position date. The accruals have been

calculated at undiscounted amounts based on

current wage and salary rates.

Retirement benefi ts:

Contributions to defi ned contribution funds are

charged against income as incurred.

A defi ned contribution plan is a pension plan

under which the Group pays fi xed contributions

into a separate entity. The Group has no legal or

constructive obligations to pay further contributions

if the fund does not hold suffi cient assets to pay all

employees the benefi ts relating to employee service

in the current and prior periods.

For defi ned contribution plans, the Group pays

contributions to publicly or privately administered

pension insurance plans on a mandatory, contractual

or voluntary basis.

The Group has no further payment obligations once

the contributions have been paid. The contributions

are recognised as employee benefi t expense when

they are due. Prepaid contributions are recognised

as an asset to the extent that a cash refund or a

reduction in the future payments is available.

12 SHARE-BASED PAYMENTS

The Group operates an equity-settled, share-based

compensation plan, under which the entity receives

services from employees as consideration for equity

instruments of the Group. The fair value of the

employee services received in exchange for the grant

of the shares is recognised as an expense. The total

amount to be expensed is determined by reference

to the fair value of the shares granted:

• including any market performance conditions;

• excluding the impact of any service and non-market

performance vesting conditions (for example);

• profi tability, sales growth targets and remaining

an employee of the entity over a specifi ed time

period);

• including the impact of any non-vesting conditions

(for example, the requirement for employees to save);

• Non-market vesting conditions are included in

assumptions about the number of shares that

are expected to be acquired. The total expense

is recognised over the vesting period, which is

the period over which all of the specifi ed vesting

conditions are to be satisfi ed. At the end of each

reporting period, the entity revises its estimates

of the number of shares that are expected to vest

based on the non-market vesting conditions. It

recognises the impact of the revision to original

estimates, if any, in the income statement, with a

corresponding adjustment to equity; and

• When the shares are acquired, the Company

issues new shares. The shares are acquired for

no consideration and the actual consideration

is compared to the amount provided over the

vesting period and any adjustment is made where

appropriate.

13 TRADE AND OTHER PAYABLES

Trade payables are obligations to pay for goods or

services that have been acquired in the ordinary

course of business from suppliers. Accounts payable

are classifi ed as current liabilities if payment is due

within one year or less (or in the normal operating

cycle of the business if longer) If not, they are

presented as non-current liabilities.

Trade payables are recognised initially at fair value

and subsequently measured amortised cost using

the effective interest method.


72


14 STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE

The following new standards, amendments and interpretations are not yet effective for the current fi nancial year. The

Group will comply with the new statements from the effective date or when the statement becomes applicable.

Title Executive summary Effective date

Amendment to IAS 19,

‘Employee benefi ts’, on defi ned

benefi t plans

These narrow scope amendments apply to

contributions from employees or third parties

to defi ned benefi t plans. The objective of the

amendments is to simplify the accounting for

contributions that are independent of the number of

years of employee service, for example, employee

contributions that are calculated according to a fi xed

percentage of salary.

1 July 2014

Amendments to IFRS 10,

‘Consolidated fi nancial

statements’ and IAS 28,

’Investments in associates

and joint ventures’ on sale or

contribution of assets

The IASB has issued this amendment to eliminate

the inconsistency between IFRS 10 and IAS 28. If

the non-monetary assets sold or contributed to an

associate or joint venture constitute a ‘business’,

then the full gain or loss will be recognised by the

investor. A partial gain or loss is recognised when

a transaction involves assets that do not constitute

a business, even if these assets are housed in a

subsidiary.

1 January 2016

Amendments to IFRS 10,

‘Consolidated fi nancial

statements’ and IAS 28,

’Investments in associates and

joint ventures’ on applying the

consolidation exemption

The amendments clarify the application of the

consolidation exception for investment entities and

their subsidiaries.

1 January 2016

Amendments to IAS 1,

‘Presentation of fi nancial

statements’ disclosure initiative

In December 2014 the IASB issued amendments

to clarify guidance in IAS 1 on materiality and

aggregation, the presentation of subtotals, the

structure of fi nancial statements and the disclosure

of accounting policies.

1 January 2016

Amendment to IAS 16,

‘Property, plant and equipment’

and IAS 38,’Intangible assets’,

on depreciation and

amortisation.

In this amendment the IASB has clarifi ed that the

use of revenue based methods to calculate the

depreciation of an asset is not appropriate because

revenue generated by an activity that includes the

use of an asset generally refl ects factors other than

the consumption of the economic benefi ts embodied

in the asset. The IASB has also clarifi ed that revenue

is generally presumed to be an inappropriate basis

for measuring the consumption of the economic

benefi ts embodied in an intangible asset.

1 January 2016

Amendments to IAS 27,

‘Separate fi nancial statements’

on equity accounting

In this amendment the IASB has restored the option

to use the equity method to account for investments

in subsidiaries, joint ventures and associates in an

entity’s separate fi nancial statements.

1 January 2016


73

Title Executive summary Effective date

IFRS 15 – Revenue from

contracts with customers.

The FASB and IASB issued their long awaited

converged standard on revenue recognition on

29 May 2014. It is a single, comprehensive revenue

recognition model for all contracts with customers

to achieve greater consistency in the recognition

and presentation of revenue. Revenue is recognised

based on the satisfaction of performance obligations,

which occurs when control of good or service

transfers to a customer.

1 January 2017

IFRS 9 – Financial

Instruments (2009 and 2010)

• Financial liabilities

• Derecognition of fi nancial

instruments

• Financial assets

• General hedge accounting

This IFRS is part of the IASB’s project to replace

IAS 39. IFRS 9 addresses classifi cation and

measurement of fi nancial assets and replaces the

multiple classifi cation and measurement models in

IAS 39 with a single model that has only two

classifi cation categories: amortised cost and fair value.

The IASB has updated IFRS 9, ‘Financial instruments’

to include guidance on fi nancial liabilities and

derecognition of fi nancial instruments. The accounting

and presentation for fi nancial liabilities and for

derecognising fi nancial instruments has been relocated

from IAS 39, ‘Financial instruments: Recognition and

measurement’, without change, except for fi nancial

liabilities that are designated at fair value through

profi t or loss.

1January 2018

Amendment to IFRS 9

‘Financial instruments’, on

general hedge accounting

The IASB has amended IFRS 9 to align hedge

accounting more closely with an entity’s risk

management. The revised standard also establishes

a more principles-based approach to hedge

accounting and addresses inconsistencies and

weaknesses in the current model in IAS 39.

Early adoption of the above requirements has

specifi c transitional rules that need to be followed.

Entities can elect to apply IFRS 9 for any of the

following:

• the own credit risk requirements for fi nancial

liabilities;

• classifi cation and measurement (C&M)

requirements for fi nancial assets;

• C&M requirements for fi nancial assets and

fi nancial liabilities; and

• the full current version of IFRS 9 (that is, C&M

requirements for fi nancial assets and fi nancial

liabilities and hedge accounting).The transitional

provisions described above are likely to change

once the IASB completes all phases of IFRS 9.

1 January 2018


74

NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2015

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

1 CASH AND CASH EQUIVALENTS

Cash 793 843 127 502 – –

Current and call accounts 45 327 173 25 011 142 4 017 453 117 739

46 121 017 25 138 644 4 017 453 117 739

2 MONEY MARKET ASSETS

Deposits for payment guarantees 32 325 803 26 365 697

Deposits pending property transfer registrations 338 895 840 589

32 664 698 27 206 286

3 ADVANCES

Loan advances 2 080 436 033 1 914 204 009

Loan impairment (see note 4) (50 344 149) (42 857 534)

Notional interest on present valuing advances – (30 517)

Suspended interest (10 686 604) (3 847 553)

2 019 405 280 1 867 468 406

Maturity analysis

Within 1 year 62 492 598 60 852 761

Within 2 to 5 years 285 318 677 265 418 866

Within 6 to 10 years 783 540 673 723 677 797

Within 11 to 15 years 949 084 085 864 254 585

2 080 436 033 1 914 204 009

Geographical analysis

Gauteng 1 858 752 897 1 710 030 359

Eastern Cape 70 532 596 62 124 985

KwaZulu-Natal 151 150 540 142 048 665

2 080 436 033 1 914 204 009

4 LOAN IMPAIRMENT

Balance at the beginning of the period: 42 857 534 32 189 303

Legal fees and loans written off against

impairment provision (5 101 218) (2 607 785)

Impairments raised during the year 12 587 833 13 276 016

Balance at the end of the year 50 344 149 42 857 534

Refer to Note 26 for further details


75

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

5 OTHER ASSETS

Interest on guarantee funds 1 521 176 661 180 – –

Fixed asset accrual account – – – –

Deferred and prepaid expenses 3 265 033 3 327 871 874 729

Other receivables – staff debtors and other

sundry debtors 188 635 656 559 – –

4 974 845 4 645 610 874 729

Terms: Amounts receivable are current

6 AMOUNTS OWING BY RELATED PARTIES

Balance at beginning of the year – 25 350 439 8 432 455

Advances to related parties 8 430 000 (261 638) 16 917 984

Net amount owing by related parties (Note 28) 8 430 000 25 088 801 25 350 439

7 AMOUNTS OWING TO RELATED PARTIES

Balance at the beginning of the year 14 082 13 712

Advance from subsidiaries (173) 370

Advance from holding company

Net amount owing to related parties (Note 28) 13 909 14 082

The loan is a current facility payable on demand.

Interest is charged at market-related rates.


76

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

for the year ended 31 March 2015

Offi ce furniture

and equipment

R

Intangible

assets/

computer

software

R

Computer

hardware

and fax

R

Total

R

8 EQUIPMENT, COMPUTER SOFTWARE AND

HARDWARE

Book value at 31 March 2014 399 817 2 233 073 481 649 3 114 539

Cost 1 237 363 7 371 190 1 570 994 10 179 547

Accumulated depreciation (837 546) (5 138 118) (1 089 345) (7 065 009)

Additions during the year 241 783 483 627 1 694 052 2 419 462

Disposals and scrapping during the year (132 896) – (298 831) (431 727)

Depreciation for the year (133 833) (1 072 007) (297 160) (1 503 000)

Book value at 31 March 2015 374 871 1 644 692 1 579 710 3 599 273

Cost 1 214 255 7 854 817 2 048 104 11 117 176

Accumulated depreciation (839 384) (6 210 125) (468 394) (7 517 903)


Cost 1 072 790 6 312 561 1 506 455 8 891 806

Accumulated depreciation (675 197) (4 001 767) (956 593) (5 633 557)

Additions during the year 164 574 1 058 629 154 123 1 377 326

Disposals and scrapping during the year – – (246) (246)

Depreciation for the year (162 349) (1 136 351) (222 089) (1 520 789)


Cost 1 237 363 7 371 190 1 570 994 10 179 547

Accumulated depreciation (837 546) (5 138 118) (1 089 345) (7 065 009)


77

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

9 TRADE PAYABLES

Derivative at fair value – (9 570) – –

Payroll accruals (2 852) – – –

Creditors 15 305 417 15 092 247 14 293 996 14 074 748

Operating lease accruals 127 565 73 033 – –

Bonus remuneration 5 638 942 3 797 923 – –

Leave pay 550 804 1 148 406 – –

21 619 875 20 102 038 14 293 996 14 074 748

Creditors are settled within 30 days of invoice date.

10 SHAREHOLDERS FOR DIVIDENDS

Dividends accrued 5 755 654 5 330 007

11 DEFERRED INCOME

Raising fees deferred over nine-year average

loan period 17 346 026 15 000 644

12 TAXATION

Amount owing to revenue authorities (8 314 854) (4 997 688) (9 185 829) (8 220 278)

Amount owing to revenue authorities: VAT (200 821) (84 431) (15 468) (14 128)

(8 515 675) (5 082 119) (9 201 298) (8 234 406)


78



GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

13 FINANCIAL LIABILITIES

The loan from the Gauteng Partnership Fund

(GPF) which has a nominal value of R2 million is

unsecured and interest free and to be repaid by

March 2015. The facility is to fund low collateral

projects identifi ed by the Group where emerging

entrepreneurs are involved. 2 000 000 2 000 000

Notional interest on present valuing fi nancial

liabilities. – (132 846)

2 000 000 1 867 154

The loan of R50 million from the National

Housing Finance Corporation SOC Limited is at

an interest rate of prime minus 2%. Interest and

capital is repaid over the remaining term and

will be repaid by September 2024. The loan is

secured by a cession of all the rights, title and/

or interests the Group holds or which it may

acquire in future, arising out of, or in connection

with the end user agreements which have been

fi nanced from this facility. 30 739 709 32 952 411


Housing Finance Corporation SOC Limited is at

an interest rate of prime minus 2%. Interest and

capital is repaid over the remaining term and will

be repaid by April 2028. The loan is secured by

a cession of all the rights, title and/or interests

the Group holds or which it may acquire in

future, arising out of, or in connection with the

end user agreements which are fi nanced from

this facility. 38 230 196 39 932 289

The loan of R150 million from the Standard Bank

of South Africa Limited is at an interest rate of

prime minus 0,8%. The loan is to be repaid in

full by 15 May 2020 with a repayment profi le

that matches that imposed on the end users

to whom this facility has been onward lent. The

loan is secured by a cession of all the rights,

title and/or interests the Group holds or which

it may acquire in future, arising out of, or in

connection with the end user agreements which

are fi nanced from this facility. 68 900 799 76 808 903


79

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

13 FINANCIAL LIABILITIES CONTINUED

The loan of R50 million from the Development

Bank of South Africa SOC Limited is at an

interest rate of prime minus 2%. Interest and

capital is repaid over the remaining term and

will be repaid by September 2022. The loan is

secured by a cession of all the rights, title and/



with the end user agreements which are

fi nanced from this facility. 29 695 555 32 586 293


Bank of South Africa Limited is at an interest rate

of prime minus 2%. Drawdowns

from the facility are made as and when the

collateral security in respect of the project is

registered. Interest and capital is repaid over

the remaining term and must be repaid in full

by 31 March 2023. The loan is secured by a

cession of all the rights, title and/or interests the

Group holds or which it may acquire in future,

arising out of, or in connection with the end user

agreements which are fi nanced from this facility. 70 089 254 75 255 419

The loan of R100 million from Futuregrowth

Asset Management is at an average interest rate

of prime minus 0,9%. Drawdowns are made as

and when the collateral security in respect of the

project is registered. Interest is payable on

the 15th of each month. Capital is repaid by

February 2022. The loan is secured by a cession

of all the rights, title and/or interests the Group

holds or which it may acquire in future, arising out

of, or in connection with the end user agreements

which are fi nanced from this facility. 66 672 149 73 476 991


Housing Finance Corporation is at an interest

rate of prime minus 2%. Drawdowns from the

facility are made as and when the collateral

security in respect of the project is registered.

Interest and capital repayments are made over

the remaining term. The loan is secured by a






80



GROUP COMPANY

2015

R

2014

R

2015

R

2014

R




rate of prime minus 2%. Drawdowns from the

facility are made as and when the collateral



the remaining term. The loan is secured by a







rate of prime minus 0,5%. Drawdowns from

the facility are made as and when the collateral



the remaining term and will be repaid in full

by December 2025. The loan is secured by a






Bank of South Africa Limited is at an interest rate of

prime minus 1,0%. Drawdowns from the facility are

made as and when the collateral security in respect

of the project is registered. Interest and capital is

repaid over the remaining term and must be repaid

in full by 31 December 2024. The loan

is secured by a cession of all the rights, title and/



with the end user agreements which are fi nanced

from this facility. 158 005 798 168 217 222


81

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R


The loan of R40 million from Cadiz Life and

R10 million from Cadiz Asset Management

is at an interest rate of prime minus 0,5%.

Drawdowns from the facility are made as and

when the collateral security in respect of the

project is registered. Interest and capital is repaid

over the remaining term and must be repaid

in full within 60 months by January 2015. The

loan is secured by a cession of all the rights,

title and/or interests the Group holds or which

it may acquire in future, arising out of, or in




Asset Management is at an interest rate of prime

plus 0,5%. The loan is secured by a cession of

all rights, title and/or interests the Group holds or

which it may acquire in future, arising out of, or in


are fi nanced from this facility. The facility is fully

drawn and interest and capital is paid monthly.

and is repayable in full by July 2021. 201 894 466 216 645 807

The loan of R15 million from Mergence

Investment Managers is at an interest rate of

prime less 0,5%. The facility is fully drawn and

interest and capital is paid monthly. The facility is

repayable in full by July 2025. 13 636 513 14 307 287

The loan of R300 million from The Public

Investment Corporation SOC Limited is at an

interest rate of prime minus 2%. Interest and

capital are repayable in monthly instalments

and is repayable in full by June 2027. The loan

is secured by a cession of all rights, title and/or

interests the Group holds or which it may acquire

in future, arising out of, or in connection with

the end user agreement which are fi nanced

from this facility. 276 347 636 290 070 609


82



GROUP COMPANY

2015

R

2014

R

2015

R

2014

R


The loan of R20 million from Standard Bank of

South Africa Limited is available over fi ve years.

The facility is at an interest rate of prime plus

0,2% and monthly capital and interest payments

commence from the commencement of the

loan. The loan is secured by a cession of rights,

title and/or interests the Group holds, or which in

may acquire in future, arising out of, or in

connection with the end user agreements

which are fi nanced from this facility. 17 740 361 18 635 579

The loan R300 million from Futuregrowth Asset

Management acting as facility agent on behalf of

Senior Lenders is at an interest rate of prime plus

0,2%. R200 million is repayable in equal monthly

instalments of capital and interest calculated

according to a 144-month amortisation profi le as

from 13 June 2013 and a fi nal single payment on

15 July 2023. R100 million is repayable in equal

monthly instalments of capital and interest

calculated according to a 144-month

amortisation profi le as from 15 January 2014

and a fi nal single payment on 15 January 2024.

The loan is secured by a cession of rights, title

and/or interests the Group holds, or which

in may acquire in future, arising out of, or in



The loan of R10 million from Stanlib Asset

Management Limited is at an interest rate of

prime minus 0,5%. The facility is fully drawn.

Interest is paid monthly and capital will be repaid

over a 15-year amortising profi le the balance to

be repaid by August 2018 9 830 714 10 072 192

Thirty direct, unconditional and unsubordinated

promissory notes issued by Cadiz Asset

Management at a nominal value of R2 million

each, ranking equally in security being loans

made to property developers funded by the issue

of the notes. The coupon is prime plus 0,25%

and the fi nal repayment date is 1 January 2019. 58 360 687 60 273 284


83

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R


The preference shares are issued to the

National Housing Finance Corporation Limited

are at an interest rate of prime less the corporate

tax rate, currently 6,72%. Dividend payments

have been accrued. The preference shares are

redeemable in 2017 and rank after secured

loans for repayment. 35 000 000 35 000 000

The loan of R8 million from the Gauteng

Partnership Fund is at an interest rate of prime

minus 4,16%. Interest payments are paid

monthly. The repayment of capital was due in

September 2013 but has been deferred to a

date still to be determined. The facility may

only be vested in equity funding projects. 6 729 359 7 805 722

The loan facility of R5 million from The New

Housing Company NPC is at an interest rate

of prime less 2%. Drawdowns from the facility

are made when an advance request has been

submitted in terms of the loan contractual

agreement. Security is by means of a second

mortgage bond. The repayment of the capital

will be made in November 2019. The facility may

only be vested in equity funding projects. 5 056 274 2 675 981

A R70 million short-term facility provided by

the National Housing Finance Corporation at

an interest rate of prime plus 2%. Interest is

serviced monthly and the repayment of capital

is being renegotiated to January 2016. 47 491 759 –

A R50 million promissory note issued by Cadiz

Asset Management at a nominal value of

R50 million each, made to property developers

funded by the issue of the notes. Interest is

serviced monthly and capital is redeemed on

maturity in a bullet payment. The coupon is

prime plus 0,25% and the fi nal repayment date

is 1 August 2015. 50 403 425 –


Asset Management is at an interest rate of

prime plus 0,2%. The facility is drawn as

funds are required and interest and capital is

paid monthly. The facility is repayable in full

by July 2025. 78 309 958 –


84



GROUP COMPANY

2015

R

2014

R

2015

R

2014

R


A R65 million promissory note issued by

Atlantic Asset Management at a nominal value of

R65 million each, made to property developers

funded by the issue of the notes. Interest is

serviced monthly and capital is redeemed on

maturity in a bullet payment. The coupon is

prime plus 0,2% and the fi nal repayment date is

1 January 2020 65 487 782 –

The loan of R11 million from Mergence

Investment Managers is at an interest rate of

prime. The facility is fully drawn and interest and

capital is paid monthly. The facility is repayable

in full by July 2030. 11 128 486 –

The loan from the National Housing Finance

Corporation Limited is at an interest rate of

prime plus 10%. Interest payments have been

deferred. The intention is that this loan is in place

for an indefi nite period and any repayment of

the facility within a fi ve-year period is subject

to TUHF Holdings Limited’s board approval.

The loan is subordinated in favour of all

unsecured loans. 6 533 403 6 533 403

The loan of R10 million from Gauteng

Partnership Fund is at an interest rate of prime

minus 2%. Drawdowns from the fund are made

as and when advance requests are submitted

in terms of the contractual agreement. Interest

is paid monthly. The repayment of capital will be

made in September 2020. The facility may only

be vested in equity funding projects. 7 322 090 3 682 742

1 878 209 773 1 716 852 833

Repayable within 12 months 204 228 531 140 483 164

Repayable 1 to 3 years 224 703 914 215 687 327

Repayable 3 to 5 years 378 676 681 244 054 552

Repayable >5 years 1 070 600 647 1 116 627 790

1 878 209 773 1 716 852 833


85

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

14 SHARE-BASED PAYMENT RESERVE

Capital contribution for ESS share issue

opening balance 1 927 099 1 922 734

Additional cost contribution 1 411 416 1 096 052

Cumulative consolidation cost adjustment – (1 091 687)

Closing balance 3 338 515 1 927 099

TUHF Conditional Share Plan

As an incentive for current and prospective

employees of TUHF Limited, a Conditional Share

Plan (CSP) has been established by its holding

company, TUHF Holdings Limited, to which

4 858 000 ordinary shares of a par value of

R0,0001 each has been allocated.

Conditional awards made are subject to the

TUHF Group’s Performance Management

System and are measured over a two or three-

year performance period. Conditional awards

that employees become entitled to as a result of

the remuneration committee and management’s

deliberations are vested into their name equally

over a three-year period.

Following the vesting of conditional awards,

TUHF Limited is required to procure the settlement

of the shares to be vested from TUHF Holdings

Limited. Such shares are allotted and issued at

the market value per share.

In terms of the rules of the CSP, if an employee

should leave the employment of TUHF Limited,

it will be entitled to be given the right of fi rst

refusal to purchase those shares registered

in the employee’s name at the current market

value.

During the year share awards granted amounted

to 296 165 (2014 – 322 084) of which 0

(2014 – 298,384) were exercised. The remaining

250 358 (2014 – 23 700) were sold to TUHF

Limited to fund certain employees’ tax obligations

or due to resignations from TUHF Limited.

At 31 March 2015, 2 441 247 (2014: 2 721 485)

shares had been vested while TUHF Limited held

553 487 (2014: 273 851 Treasury Shares).


86



GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

15 CONTINGENCIES

The rules of TUHF Holdings Limited’s Conditional

Plan require that all participants who leave

the employ of any Group company for any

reason whatsoever, will offer to sell their shares

to TUHF Limited.

Should TUHF Limited not accept this offer, the

participant must offer to sell the shares to other

participants in the Plan and failing this being

accepted, the offer must be extended to all other

shareholders in TUHF Holdings Limited.

Notwithstanding the fact that TUHF Limited

is not required to purchase all shares held by

participants on leaving the Group’s employ,

the Company has a potential contingency

amounting to R5 492 806 (2014: R5 442 570)

16 POST BALANCE SHEET EVENTS

Refer to the Directors’ Report for details.

17 COMMITMENTS

Advances

Advances for refurbishment of buildings 184 144 178 24 280 955 – –

Advances pending contractual compliances 385 682 280 230 269 733 – –

569 826 458 254 550 688 – –

Future aggregate minimum lease payments

under non-cancellable leases are as follows:

Operating leases

Offi ce rental payable within one year 653 552 992 726 – –

Offi ce rental payable between two to fi ve years 1 650 268 158 532 – –

2 303 820 1 151 258 – –

TUHF Limited is negotiating the extension of the

lease agreements.

18 INTEREST INCOME

Interest on advances 241 368 941 201 481 228 – –

Interest on advances to related company – – 850 261 813 833

Interest on tax refunds 504 137 614 – (22 980)

Interest on staff loans – 1 555 – –

Interest on guarantee deposits 2 408 460 1 707 406 – –

Interest on call deposits 2 032 738 988 828 12 320 31 234

Hedging costs offset against interest received (10 107) 12 657 – –

245 800 536 204 329 288 862 582 822 087


87

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

19 INTEREST EXPENSES

Interest on borrowings 151 870 179 117 145 895 769 959 320 704

Interest on advances from related company – – – –

Interest and fees on current account 1 678 1 009 – 11

151 871 857 117 146 905 769 959 320 714

20 NON-INTEREST INCOME

Agency fee income 1 574 716 1 501 500 1 501 500 1 501 500

Raising fee 6 072 103 4 253 209 – –

Profi t on sale of fi xed assets 938 661 4 192 – –

Sundry income 5 002 790 934 253 3 624 827 –

13 588 269 6 693 155 5 126 327 1 501 500

21 OPERATING EXPENDITURE

Auditors fees 1 233 873 1 482 214 – 102 215

Consulting fees 4 084 091 2 104 557 32 226 74 200

Depreciation 1 503 000 1 520 789 – –

Computer equipment 297 160 222 089 – –

Intangible assets 1 072 007 1 136 351 – –

Offi ce furniture and equipment 133 833 162 349 – –

Information technology costs 1 046 259 945 484 – –

Directors emoluments – executive director in

respect of services rendered 4 309 844 3 586 107 – –

– bonus 1 780 000 1 335 580 – –

– cash component 1 967 165 1 729 338 – –

– pension 371 465 346 630 – –

– other 191 214 174 559 – –

Marketing 1 692 668 921 813 – –

Non-executive directors emoluments 1 050 933 847 333 – –

Project management 390 488 805 258 – –

Share-based payment expense 1 145 782 797 305 – –

Staff costs 21 921 238 18 025 275 – –

Offi ce rental 965 689 1 159 435 – –

VAT written off 2 100 379 1 751 286 86 971 13 350

Valuations 754 323 284 337 – –

Other expenses 9 060 552 6 209 138 1 693 848 147 068

51 259 121 40 440 331 1 813 045 336 834


88



GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

22 TAXATION

South African normal tax – current 17 622 717 15 515 990 953 653 677 772

Other taxes: STT

South African deferred tax – current (5 214 862) (3 916 580) – –

12 407 855 11 599 410 953 653 677 772

Reconciliation between expected tax

charge to actual tax charge:

Profi t before tax 43 669 994 40 159 192 3 405 905 1 666 038

Tax at 28% on the above 12 227 598 11 244 574 953 653 466 491

Prior year – – – 190 153

Factors affecting the tax rate:

Disallowable expenditure 31 958 67 156 – –

Permanent differences 147 108 287 680 – 21 128

Actual tax current charge 12 407 855 11 599 410 953 653 677 772

The movement of deferred tax is as follows:

Balance transferred in/opening balance 14 168 834 10 253 654 (204) (204)

Deferred taxation timing differences 5 214 862 3 916 580 – –

Creation/(utilisation) of tax losses – (1 400) – –

Balance at end of period 19 383 696 14 168 834 (204) (204)

Comprising:

Provisions 1 115 156 766 999

Accelerated depreciation (256 558) (715 459)

Loan impairment 12 991 309 9 484 781

Rental equalisation 25 584 10 315

Deferred income 4 856 887 4 200 180

S 24 J accrual 982 256 803 664

Deferred and prepaid expenses (883 391) (917 808) 204 204

Share incentive reserve 552 453 536 162

19 383 186 14 168 834 204 204

23 EMPLOYEE BENEFITS

TUHF Limited has a defi ned contribution

provident plan governed by the Pensions Act,

1956, as amended, to which all permanent

employees are required to join.

Payments to the provident plan are charged as

an expense as they fall due. 2 737 022 2 203 330

The Company has no obligations for

post-retirement health.


89

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R

24 BORROWING CAPACITY

In terms of the Company’s memorandum of

incorporation the borrowing powers of the

Company and subsidiaries are unlimited except

for the Company where any indebtedness,

other than trade debt in the ordinary course of

business, is limited to R20 million. The Group has

also undertaken to certain lenders of maintaining

a debt to capital ratio of 90%.

25 CASH GENERATED FROM OPERATIONS

Reconciliation of profi t before tax to cash

generated from operations :

Profi t for the period 43 669 994 40 159 192 3 405 905 1 666 038

Adjusted for:

Bad debts – – – –

Depreciation of equipment 1 503 000 1 520 789 – –

Notional interest 102 329 125 719

Loan impairment 12 587 833 13 276 016 – –

– – – –

Raising fees (6 072 103) (4 253 209) – –

Other non-cash items (8 107 886) (18 891 270) 451 592 (2 011 192)

Operating profi t/(defi cit) before working capital

changes 43 683 168 31 937 236 3 857 497 (345 154)

Working capital changes (1 847 072) 323 422 (219 394) 3 049

(Increase)/decrease in accounts receivable (329 235) 112 713 (145) 4 257

Increase/(decrease) in accounts payable (1 517 837) 210 709 (219 249) (1 208)

Cash generated/(utilised) by operating activities 41 836 096 32 260 659 3 638 103 (342 105)

26 RISK MANAGEMENT

Financial risks

Financial risks are identifi ed and managed on a Group basis. These risks are identifi ed in the risk matrix which is

reported to the boards.

The responsibility for risk management resides at all levels, from members of the board to individuals throughout the

Group. Overall risk management policies and risk appetite are established on a comprehensive organisation-wide

basis by senior management and reviewed with, and where appropriate, approved by the boards of directors.

The main risks managed by the risk committee as described below include credit risk, liquidity risk, operational risk

and interest rate risk.

Capital management:

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern

in order to provide return’s for shareholders and benefi ts for other stakeholders and to maintain an optimal capital

structure and reduce the cost of capital.

The Group monitors capital on a gearing ratio basis together with a debt service cover ratio. The Group debt to

capital ratio must not exceed 90:10 and the debt service cover ratio, being the Group’s free cash fl ow divided by the

total sum of all amounts payable for all indebtedness, must be at least 1,1 times.

Capital as defi ned in the relevant agreements with shareholders is included in the calculation and may differ to the

IFRS defi nition of capital.

Total capital is calculated as equity shown in the Statement of Financial Position together with any subordinated

shareholders’ loans plus interest-bearing debt.


90



2015

R

2014

R

26 RISK MANAGEMENT CONTINUED

Interest-bearing debt

Loans 1 836 676 370 1 675 319 430

Equity 241 155 965 218 795 135

Tier 1 199 622 562 177 261 732

Tier 2 41 533 403 41 533 403

Total capital 2 077 832 335 1 894 114 565

Debt capital ratio 88% 88%

Credit risk:

Credit risk is the risk that one party to a fi nancial instrument will cause fi nancial loss for another party by failing to

discharge an obligation.

The credit risk that the Group faces arises mainly from commercial loans and advances. The Group has policies,

procedures and processes dedicated to controlling and monitoring risk from all such activities.

While credit exposures principally arise in loans and advances, the Group may be exposed to credit risk arising from

other fi nancial assets. These exposures comprise loan commitments and contingent liabilities. The risks are managed

in a similar way to those loans in loans and advances, and are subject to the same or similar approval and governance

processes.

The granting of credit is one of the Group’s major sources of income and is therefore one of the most signifi cant risks,

and the Group dedicates considerable resources to controlling it effectively.

A system-based loan workfl ow process is used to facilitate the loan approval process. The granting of credit is

considered on a project-by-project basis and various hurdle rates are considered in terms of our loan and credit policy,

fully compliant with the National Credit Act.

The following represents the maximum exposure, at Statement of Financial Position date, to credit risk taking into

account any collateral held and is stated after the allowance for impairment.


91

GROUP COMPANY

2015

R

2014

R

2015

R

2014

R


26.1 Assets: credit exposures

Balances with local banks 46 121 017 25 138 644 4 017 453 117 739

Cash and short-term assets (Note 1) 46 121 017 25 138 644 4 017 453 117 739

Deposits for payment guarantees 32 325 803 26 365 697 – –

Deposits for payment guarantees: legal fees

and transfer duty 338 895 840 589 – –

Money market assets (Note 2) 32 664 698 27 206 286 – –

Loans and advances to clients 2 080 436 033 1 914 204 009 – –

Loan impairment (50 344 149) (42 857 534) – –

Notional interest and other interest adjustments (10 686 604) (3 847 553) – –

Advances (Note 3) 2 019 405 280 1 867 498 923 – –

Deferred and prepaid expenses 3 265 033 3 327 871 874 729

Interest on guarantees 1 521 176 661 180 – –

Staff and sundry debtors 188 635 656 559 – –

Other assets (Note 5) 4 974 845 4 645 610 874 729

Gross amount owing: related parties (Note 6) 8 430 000 – 51 422 334 51 669 890

Total assets subject to credit risk 2 111 595 839 1 924 489 462 55 440 661 51 788 359

Assets not subject to credit risk 22 982 970 17 283 372 – –

Total assets 2 134 578 809 1 941 772 835 55 440 661 51 788 359

Undrawn commitments (Note 17)

Advances for refurbishment of building 184 144 178 24 280 955

Advances pending contractual compliances 385 682 280 230 269 733

569 826 458 254 550 688


92



Cash and

short-term

assets

Money

market Advances

Other

assets


26.2 Financial assets subject to credit risk –

Group: 2015

For the purpose of the Group’s disclosure

regarding credit quality the exposure to credit

risk has been analysed as follows:

Neither past due nor impaired 46 121 017 32 664 698 1 903 513 314 4 974 845

Past due but not impaired 82 432 354 –

Impaired 83 803 760 –

Carrying value before impairment 46 121 017 32 664 698 2 069 749 428 4 974 845

Less: Impairment allowance (50 344 149) –

Identifi ed impairments (12 485 234) –

Identifi ed Individual (12 485 234) –

Identifi ed collective – –

Unidentifi ed impairments (37 858 914) –

Carrying value of fi nancial assets per

note 26.1 46 121 017 32 664 698 2 019 405 280 4 974 845

Financial assets subject to credit risk –

Group: 2014

Neither past due nor impaired 25 138 644 27 206 286 1 743 907 689 4 645 610

Past due but not impaired 94 554 046 –

Impaired 71 894 721 –

Carrying value before impairment 25 138 644 27 206 286 1 910 356 456 4 645 610

Less: Impairment allowance (42 857 533) –

Identifi ed impairments (12 413 740) –

Identifi ed Individual (12 413 740) –

Identifi ed collective – –

Unidentifi ed impairments (30 443 793) –


note 26.1 25 138 644 27 206 286 1 867 498 923 4 645 610


Company: 2015

Neither past due nor impaired 4 017 453 – – 874


note 26.1 4 017 453 – – 874


Company: 2014

Neither past due nor impaired 117 739 – – 729


note 26.1 117 739 – – 729

Credit risk exposures relating to assets

Financial assets neither past due nor impaired are considered to be fully recoverable.

Financial assets renegotiated

In respect of fi nancial assets or advances to customers that have been renegotiated funds received are fi rst applied

to any past due amounts.


93

30 days 60 days > 90 days 120 days +


26.2 Financial assets subject to credit risk –

Group: 2015 continued

Financial assets that are past due but not

impaired – Group 2015

The mortgage loan amounts past due but not

impaired relate to the overdue instalment portion

in respect of loans amounting to R82 687 414.

The loan balances have not been impaired or

renegotiated as clients are part paying amounts

and the value of the collateral exceeds the

loan balance. 1 072 951 458 593 324 541 1 301 421

Financial assets that are past due but not

impaired – Group 2014

The mortgage loan amounts past due but not

impaired relate to the overdue instalment portion

in respect of loans amounting to R95 241 596.

The loan balances have not been impaired or

renegotiated as clients are part paying amounts

and the value of the collateral exceeds the

loan balance. 786 222 571 289 405 023 2 160 596

26.3 Analysis of assets

At each Statement of Financial Position date an assessment is made whether there is an indication that an asset may

be impaired.

Loans and advances are stated net of impairment. Where carrying values of individual loans and advances are less than

discounted amounts realisable or net of recoveries from collateral, a provision is made for the differences as loan

impairment. Advances are subject to a risk rating evaluation that takes into consideration inter alia the overall risk

profi le, collateral cover, payment record, past experiences, customers’ co-operation in abiding by loan conditions and

the economic climate. For further details regarding the company’s accounting policy refer to accounting policy note 6.

Carrying

amount Impairment

Revised

carrying

amount

a Analysis of assets individually assessed as impaired

Group – 2015

Mortgage loans 104 119 291 (12 112 522) 92 006 768

Bridging fi nance – – –

Equity loan fi nance 554 371 (372 712) 181 659

104 673 662 (12 485 234) 92 188 427

Group – 2014

Mortgage loans 71 431 197 (9 432 266) 61 998 931

Bridging fi nance 2 517 950 (2 517 950) –

Equity loan fi nance 463 524 (463 524) –

74 412 671 (12 413 740) 61 998 931

Company – 2015

No assets individually assessed as impaired

Company – 2014

No assets individually assessed as impaired


94



Carrying

amount Impairment

Loans

impaired

Revised

carrying

amount


26.3 Analysis of assets continued

b Reconciliation of total impairments (identifi ed

and unidentifi ed)

Group – 2015

Mortgage loans

Identifi ed individual 9 432 266 4 800 000 (1 911 696) 12 320 570

Unidentifi ed collective 29 809 557 7 495 224 – 37 304 781

39 241 823 12 295 224 (1 911 696) 49 625 351

Bridging fi nance

Identifi ed individual 2 517 950 – (2 517 950) –

Unidentifi ed collective 603 795 (81 842) 521 953

3 121 745 (81 842) (2 517 950) 521 953

Deferred sale loans

Identifi ed individual – – – –

Unidentifi ed collective 30 441 1 740 – 32 181

30 441 1 740 – 32 181

Equity fi nance loans

Identifi ed individual 463 725 372 712 (671 773) 164 664

Unidentifi ed collective – – – –

463 725 372 712 (671 773) 164 664

Total (per note 26.1) 42 857 734 12 587 834* (5 101 419) 50 344 149

Group – 2014

Mortgage loans

Identifi ed individual 6 660 826 4 850 000 (2 078 560) 9 432 266

Identifi ed collective 23 244 536 6 565 021 29 809 557

29 905 362 11 415 021 (2 078 560) 39 241 823

Bridging fi nance

Identifi ed individual 1 584 760 933 190 – 2 517 950

Identifi ed collective 202 556 401 239 – 603 795

1 787 316 1 334 429 – 3 121 745

Deferred sale loans

Identifi ed individual – – – –

Identifi ed collective 32 899 (2 458) – 30 441

32 899 (2 458) – 30 441

Equity fi nance loans

Identifi ed individual 463 725 529 025 (529 226) 463 524

Identifi ed collective – – – –

463 725 529 025 (529 226) 463 524

Total (per note 26.1) 32 189 302 13 276 017* (2 607 786) 42 857 533

* per Statement of Comprehensive Income


95


26.3 Analysis of assets continued

b Reconciliation of total impairments (identifi ed and unidentifi ed) continued

Company – 2015

No impairment (identifi ed or unidentifi ed)

Company – 2014

No impairment (identifi ed or unidentifi ed)

Valuation of collateral

The Group follows the principle of registering a mortgage bond to the value of 120% of the loan facility amount. In

addition, another 30% of this amount is provided for legal costs in the total bond registered. The amounts stated

below are stated exclusive of the legal costs provided for in the registered mortgage bond.

2015

R

2014

R

Group loans and advances

Mortgage loans

– neither past due or impaired 2 497 396 796 2 454 231 813

– loans past due and not impaired 123 648 531 144 374 769

– loans individually impaired 125 705 640 95 241 596

2 746 750 967 2 693 848 178

Bridging fi nance loans – unsecured lending – –

Deferred sale loans 25 572 361 28 246 896

Equity fi nance 2nd bond 15 934 227 11 907 271

Total 2 788 257 555 2 734 002 345

26.4 Market risk:

Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes

in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

Currency risk: the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes

in foreign exchange rates.

Interest rate risk: the risk that the fair value or future cash fl ows of a fi nancial instrument fl uctuate because of changes

in market interest rates.

Other price risk: The risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of

changes in market process (other than those arising from interest rate risk or currency risk), whether those changes

are caused by factors specifi c to the individual fi nancial instrument or its issuer, or factors affecting all similar fi nancial

instruments traded in the market.

The Group does not have exposure to currency risk as all transactions are rand denominated. Money market assets

do not bear price risk as they include mainly cash, call funds and deposits in interest-bearing accounts.

The Group is exposed to cash fl ow interest rate risk on both loan advances and interest-bearing borrowings that are

linked to the prime interest rate. Loans and advances, cash and cash equivalents and money market assets as well as

interest-bearing liabilities are stated at amortised cost derived from a fair rate of return or fair cost of borrowings.

Analysis of loan book advances interest rate risk exposure

The market risk exposure relates to the potential adverse effect of interest rate movements on net interest income.

The market risk exposure is further exacerbated by the fact that some loan advances have six monthly fi xed interest

rate periods delaying the impact of a change in interest rates on the positive margin. The Group has tried to match

this exposure in its loan profi le and the exposure in relation to the total book has declined to less than 10%.

Where clients request fi xed rates applicable to loans, the interest rate risk is mitigated by management entering into

an interest rate swap contract to swap the fi xed interest rate for a fl oating interest rate. In this way, the Group ensures

that no interest rate risk is taken on.


96



Currency Interest rate

2015

R

2014

R


26.4 Market risk continued

Hedge accounting applied in respect of

interest rate risk

As at 31 March 2015, the Group had the

following designated cash fl ow hedge interest

rate swap contract:

Fair value of asset – designated cash fl ow hedge

ZAR interest rate swap contract ZAR prime plus 4,5%

for fi ve months and

prime plus 3,5%

thereafter

– 511 325

Fair value of liability – designated cash fl ow hedge

ZAR interest rate swap contract ZAR 12,63% – (501 755)

The notional amount in respect of the prior

year swap of the contract at 31 March 2014 is

R6 341 492. The contract was for 24 months,

and matured in November 2014.

Total – 9 570

Gains and losses on interest rate swaps are

recognised in profi t and loss.

Revenue sensitivity

Interest rate sensitivity: Group

Increase in basis points (prime rate) 100 100

Sensitivity of annual net interest income 1 994 549 1 654 743

Loan balances and impairment: Group

Loan book balance and impairment provisions

differ by 10%

Sensitivity of net interest income (744 556) (693 336)

Income tax estimates sensitivity: Group

Cash fl ow estimates differ by 10%

Sensitivity of income tax liability 1 222 760 1 132 805


97


26.5 Liquidity risk:

Liquidity risk: the risk that the Group is unable to meet its payment obligations when they fall due and to replace

funds when they are withdrawn, the consequences of which may be the failure to meet its obligations to repay

commitments to funders.

The board is responsible for the management of the liquidity risk of the Group but they have delegated the day-to-

day board responsibility to the group fi nancial manager. The key focus in managing this risk is the use of a cash

fl ow model that monitors loan and funders cash fl ows for a 12-month window period.

A summary of the undiscounted liquidity profi le is refl ected in the following tables;

Within 1 year 1 to 5 years > 5 years Discounting Total

Liabilities: Group 2015

Other liabilities and accruals 27 375 530 – – – 27 375 530

Non-interest bearing liabilities – – – – –

Interest-bearing liabilities 359 977 062 1 193 540 567 1 148 897 126 (824 204 982) 1 878 209 773

Liabilities per Statement of

Financial Position 387 352 592 1 193 540 567 1 148 897 126 (824 204 982) 1 905 585 303

Liabilities: Group 2014


Non-interest bearing liabilities – – – – _

Interest-bearing liabilities 274 193 632 1 002 660 736 1 347 802 723 (907 804 258) 1 716 852 833


Financial Position 299 625 677 1 002 660 736 1 347 802 723 (907 804 258) 1 742 284 878

Liabilities: Company 2015



Interest-bearing liabilities – – – – _


Financial Position 14 293 996 – – – 14 293 966

Liabilities: Company 2014



Interest-bearing liabilities – – – – _


Financial Position 14 074 748 – – – 14 074 748


98



Group: 2015

Loans and

receivables

R

Other

R

Total carrying

amount

R

Fair value

R


26.6 Classifi cation of fi nancial assets and

fi nancial liabilities

Financial assets

Cash and short-term assets 46 121 017 – 46 121 017 46 121 017

Money market assets 32 664 698 – 32 664 698 32 664 698

Loan advances 2 019 405 280 – 2 019 405 280 2 019 405 280

Group companies 8 430 000 – 8 430 000 8 430 000

Other assets: excluding prepayments 1 709 811 – 1 709 811 1 709 811

2 108 330 806 – 2 108 330 806 2 108 330 806

Amortised

cost Other

Total

carrying

amount Fair value

Financial liabilities

Other liabilities 30 135 550 – 30 135 550 30 135 550

Dividends accrued 5 755 654 – 5 755 654 5 755 654

Related parties – – – –

Raising fees deferred 17 346 026 – 17 346 026 17 346 026

Interest-bearing liabilities 1 878 209 773 – 1 878 209 773 1 878 209 773

1 931 447 002 – 1 931 447 002 1 931 447 002

Group: 2014

Loans and

receivables Other

Total carrying

amount Fair value

Financial assets


Money market assets 27 206 286 – 27 206 286 27 206 286

Loan advances 1 867 468 406 – 1 867 468 406 1 867 468 406


Other assets: excluding prepayments 1 317 739 – 1 317 739 1 317 739

1 921 131 075 – 1 921 131 075 1 924 458 946

Amortised

cost Other

Total carrying

amount Fair value



Dividend accrued 5 330 007 – 5 330 007 5 330 007


Raising fees deferred 15 000 644 – 15 000 644 15 000 644

Interest-bearing liabilities 1 716 852 833 – 1 716 852 833 1 716 852 833

1 762 367 640 – 1 762 367 640 1 762 367 640


99

Company: 2015

Loans and

receivables

R

Other

R

Total carrying

amount

R

Fair value

R


26.6 Classifi cation of fi nancial assets and

fi nancial liabilities continued

Financial assets


Other assets 874 – 874 874

Related parties 51 422 334 – 51 422 334 51 422 334

55 440 661 – 55 440 661 55 440 661

Amortised

cost

R

Other

R

Total carrying

amount

R

Fair value

R



Dividend accrued – – – –

Related parties 13 909 – 13 909 13 909

Interest-bearing liabilities – – – –

23 509 203 – 23 509 203 23 509 203

Company: 2014

Loans and

receivables Other

Total carrying

amount Fair value

Financial assets

Cash and short-term assets 117 739 – 117 739 117 739

Other assets 729 – 729 729

Related parties 51 669 890 – 51 669 890 51 669 890

51 788 359 – 51 788 359 51 788 359

Amortised

cost Other

Total carrying

amount Fair value



Dividend accrued – – – –


Interest-bearing liabilities – – – –

Total liabilities 22 309 153 – 22 309 153 22 309 153


100

INVESTMENT

IN SHARES

INDEBTED-

NESS

2015

R

2014

R

2015

R

2014

R

27 INVESTMENTS IN SUBSIDIARIES

The Company owns 100% of TUHF Properties

Proprietary Limited and 100% of Intuthuko Equity

Fund Proprietary Limited. The Company owns

33,53% of TUHF Holdings Limited:

TUHF Holdings Limited 26 333 333 26 333 333 23 478 600 23 850 676

TUHF Properties Proprietary Limited 100 100 1 610 201 1 485 681

Intuthuko Equity Fund Proprietary Limited 100 100

26 333 533 26 333 533 25 088 801 25 336 357

Total investment and indebtedness 51 422 334 51 669 890

(Refer to note 6)

28 RELATED PARTIES: GROUP

Amount due to and from related parties:

(Refer to notes 6 and 7)

Trust for Urban Housing Finance NPC

Repayable within 12 months 13 909 14 082


Loan – interest paid at market call rates 10 745 652 2 702 217

Loan – interest paid at market call rates 731 610 –

Repayable within 12 months

TUHF Limited

Loan – no interest is charged 10 000 000 10 000 000

No repayment terms

Loan – interest received at 75% of the Prime Rate 57 808 912 53 974 028

No repayment terms

Loan – interest received at the Prime Rate

minus 2% 87 387 298 81 353 479

No repayment terms


No repayment terms 336 2 345 185

Current account payable within 30 days

Intuthuko Equity Fund Proprietary Limited

Loan – interest paid at market call rates 213 614 –


TUHF Properties Proprietary Limited



TUHF Bridge Proprietary Limited

Interest received at market call rates 8 985 436 9 536 793


TUHF MBS Proprietary Limited

No repayment terms (1) (1)

200 975 568 185 276 222




101

INDEBTED-

NESS

2015

R

2014

R

28 RELATED PARTIES: GROUP CONTINUED

Related parties:

Subsidiary companies as disclosed in note 27

Amount paid to and received Group companies

Trust for Urban Housing Finance NPC

Interest received 850 261 813 833

Interest paid – –

Management fees (146 578) (145 030)

TUHF Holding Limited

Interest received 9 868 703 9 688 754

Interest paid (373 065) (29 500)

National Housing Finance Corporation SOC Limited

Interest paid 25 231 867 20 870 431

Intuthuko Equity Fund Proprietary Limited: Subsidiary

Interest paid (3 762) –

TUHF Properties Proprietary Limited: Subsidiary

Interest paid (124 831) (118 191)

TUHF Limited: Sub Subsidiary


Interest paid (10 594 444) (10 136 564)

Management fees 146 578 145 030

TUHF Bridge Proprietary Limited: Sub Subsidiary

Interest paid (608 643) (1 170 002)


Key management:

All members of the board are considered key management. For remuneration refer

to note 21.

SS Moraba, a director of the Company, is the chief executive offi cer of the National

Housing Finance Corporation SOC Limited (NHFC). This Company has granted the

Company’s subsidiary wholesale loan facilities amounting to R386,5 million

(2014: R386,5 million).

Total NHFC debt facilities: capital advanced 386 533 400 337 003 305

Interest paid 25 231 867 20 370 432

Interest and capital repayments 38 666 622 34 272 030


102

28

RELATED PARTIES: GROUP

CONTINUED

Directors’ emoluments

Executive

2015

Cash

component Bonus

Pension

paid Other Total

PGN Jackson 1 976 127 1 780 000 371 465 182 252 4 309 844

2014

Cash

component Bonus

Pension

paid Other Total

PGN Jackson 1 729 338 1 335 580 346 630 174 559 3 586 107

Non-executive

2015 Directors’ fees Other fees Total

SS Moraba 209 666 – 209 666

TM Adler 100 167 – 100 167

C Coovadia 221 500 – 221 500

RR Emslie 230 000 – 230 000

JF Howard 81 667 – 81 667

P Magula 48 333 – 48 333

JK Mamatela 178 500 – 178 500

JS Strelitz 135 000 – 135 000

Other services accrued – (153 900) (153 900)

1 204 833 (153 900) 1 050 933

2014 Directors’ fees Other fees Total

SS Moraba 99 500 – 99 500

TM Adler 49 667 – 49 667

C Coovadia 99 500 – 99 500

RR Emslie 99 000 – 99 000

JF Howard 63 166 – 63 166

P Magula 79 267 – 79 267

JK Mamatela 82 000 – 82 000

JS Strelitz 65 500 – 65 500

Other services accrued – 209 733 209 733

637 600 209 733 847 333




103

GLOSSARY

Board TUHF board of directors

CBD Central business district

CEO Chief executive offi cer

CPA Credit Providers Association

CTI Cost to income ratio

DSCR Debt service cover ratio

Group The TUHF Group

GPF Gauteng Partnership Fund

HR Human resources

IAS International Accounting Standards

IASB International Accounting Standards Board

ICHUT Inner City Housing Upgrading Trust

IFRS International Financial Reporting Standards

IT Information technology

JHC Johannesburg Housing Company

JSE JSE Limited, the licensed securities exchange in Johannesburg

King Code The Code of Corporate Practices and Conduct set out in the King Report on Corporate Governance for

South Africa 2009

KPI Key performance indicator

LOANCO Loan committee

MANCO Management committee

NCR National Credit Regulator

NHFC National Housing Finance Corporation

NIM Net interest margin

NPC Not for profi t company

NUHFT National Urban Housing Finance Trust

PIC Public Investment Corporation

R South African rand

Rbn Rand billion

REMCO Remuneration committee

Rm Rand million


104

Corporate information

TUHF NPC is a registered credit provider

Registration number 1993/000217/08

NCR number NCRCP1709

Registered offi ces and business address* 17th Floor, 222 Smit Street, Braamfontein

Johannesburg, 2001

PO Box 30872, Braamfontein 2017

Tel: +27 (10) 595 9000

Sharecall: 086 000 TUHF (8843)

www.tuhf.co.za

[email protected]

Registered auditors PricewaterhouseCoopers Inc.

Primary banker The Standard Bank of South Africa Limited

Attorneys Cliffe Dekker Hofmeyr Inc.

* The Board has approved the address as the registered company address under contact details on 30 July 2015 for processing and registration

at CIPC.

“I would like to thank our funders for their support and continued confi dence in our organisation and for the part they play in the rejuvenation of the inner cities across South Africa.” Paul Jackson, CEO – TUHF

Regional offi cesGauteng17th Floor, 222 Smit Street, BraamfonteinJohannesburg, 2001Tel: +27 (10) 595 9000

From 11 August 201512th Floor, Libridge, 25 Ameshoff Street, BraamfonteinJohannesburg, 2001Tel: +27 (10) 595 9000

KwaZulu-Natal27th Floor, Embassy Building, 199 Anton Lembede Street, (ex Smith Street)Durban, 4001Tel: +27 (31) 306 5036

Eastern Cape2nd Floor, BCX Building, 106 Park Drive, St George’s ParkPort Elizabeth, 6000Tel: +27 (41) 582 1450

Western CapeUnit B4, 97 Durham StreetSalt River, 7925Tel: +27 (10) 595 8860

Free StateSuite 2, Business Suites, Preller Square Shopping Centre, C/O Louw Wepener and Graaff Reinet Streets, Dan Pienaar Bloemfontein, 9301 Tel: +27 (51) 431 8032

GREYMATTER & FINCH # 9404

www.tuhf.co.za

Documents

2015 Integrated Annual Report