ANNUAL FINANCIAL STATEMENTS NAME OF RETIREMENT …€¦ · Maphuti Lisbeth Mothata [email protected] E 25 November 2011 28 February 2018 Andries van den Berg [email protected]

ANNUAL FINANCIAL STATEMENTS

NAME OF RETIREMENT FUND: MUNICIPAL GRATUITY FUND

FINANCIAL SECTOR CONDUCT AUTHORITYREGISTRATION NUMBER: 12/8/29256/2

FOR THE PERIOD: 1 JULY 2017 to 30 JUNE 2018

CONTENTS

Schedule Page

A

B

C

D

E

F

G

Regulatory Information *

Statement of responsibility by the Board of Fund *

Statement of responsibility by the Principal Officer *

Report of the Independent Auditors

Report of the Board of Fund *

Statement of net assets and funds

Statement of changes in net assets and funds

2 - 8

9 - 10

11

12 - 14

15 - 26

27

28

HA

HB

I

IA

IB

Notes to the Annual Financial Statements

Report of the Valuator *

Report of the Independant Auditor of the Municipal Gratuity Fund of factual findings to the Board ofFund and the Authority

Investment schedule pertaining to the Annual Financial Statements *

Assets held in compliance with Regulation 28

Independent Auditor's report on assets held in compliance with Regulation 28 to the Board of Fund

29 - 49

50

51 - 71

72 - 85

86 - 94

95 - 96

* Not subject to any engagement by an auditor

MUNICIPAL GRATUITY FUND

SCHEDULE AREGULATORY INFORMATIONFOR THE YEAR ENDED 30 JUNE 2018

REGISTERED OFFICE OF THE FUND

Postal address: Private Bag X 1190Bedfordview2008

Physical address: Block 14Bedfordview Office Park3 Riley RoadBedfordview2007

FINANCIAL REPORTING PERIODS

Current year: 1 July 2017 to 30 June 2018Prior year: 1 July 2016 to 30 June 2017

BOARD OF FUND

Full name E-mail Address Capacity Date appointed /elected

Date resigned /expired

Pieter Johannes Venter [email protected] MAVC

24 June 199610 March 200427 July 201131 October 2012

31 October 2012

Lesiba Johannes Modiga [email protected] MAV

14 November 200827 July 201121 September 2016

Edward Charles Alberts [email protected] EIAVC

9 October 19967 July 19997 July 19997 July 199923 August 2002

7 July 1999

16 November 200723 August 200216 November 2007

Jan Dirk Grobler Venter [email protected] MAVIA

12 September 199920 October 20004 September 20024 March 200412 October 2016

28 February 200428 February 200428 February 2004

Johannes Hendrikus Grobbelaar [email protected] MMIA

8 November 200220 March 200729 March 201710 May 2017

17 February 200631 December 2016

Roja Elvis Ramare [email protected] M 5 May 2010Modise Daniël Mogakabe [email protected] M 26 November 2010Maphuti Lisbeth Mothata [email protected] E 25 November 2011 28 February 2018Andries van den Berg [email protected] M 25 November 2015Aaron Ngubeni [email protected] E 25 November 2016Neville Rudman [email protected] M 25 November 2016Linda Jennifer Spyder [email protected] M 29 March 2017Nkhensani Harmony Pretty Ndaba [email protected] E 18 April 2018

- 'M' denotes member elected- 'E' denotes employer appointed- 'A' denotes Executive Committee Member- 'C' denotes Chairperson- 'V' denotes Vice-chairperson- 'I' denotes independent- '#' The Chairperson and Vice-chairperson are also members of the Executive Committee

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SCHEDULE AREGULATORY INFORMATION (continued)FOR THE YEAR ENDED 30 JUNE 2018 Governance note: schedule of meetings* held by the Board of Fund in terms of the rules of the FundMeeting date Place of meeting Quorum

(yes/no)2 August 2017 Farm Inn Hotel, Silverlakes Road, Tshwane Yes20 September 2017 Farm Inn Hotel, Silverlakes Road, Tshwane Yes25 October 2017 Farm Inn Hotel, Silverlakes Road, Tshwane Yes6 December 2017 Farm Inn Hotel, Silverlakes Road, Tshwane Yes7 February 2018 Farm Inn Hotel, Silverlakes Road, Tshwane Yes14 March 2018 Farm Inn Hotel, Silverlakes Road, Tshwane Yes18 April 2018 Farm Inn Hotel, Silverlakes Road, Tshwane Yes20 June 2018 Zebula Lodge, Bela Bela, Limpopo Yes* Only meetings held by the Board of Fund and does not include meetings held by the sub-committees.

FUND OFFICERSPrincipal Officer Monitoring Person*

Full name: Marthinus Jacobus Dewald Jacobsohn Christine Seierlein Postal address: Private Bag X 1190

Bedfordview2008

Private Bag X 14Highveld Park0169

Physical address: Block 14Bedfordview Office Park3 Riley RoadBedfordview2007

Lords Office EstateBlock 5276 West AvenueCenturion0157

Date of appointment: 01 July 1999 01 July 2016Telephone number: +27 (11) 450 1224/5 +27 12 683 3823

Email address: [email protected] [email protected]*(In terms of Section 13A of the Pension Funds Act)

PROFESSIONAL SERVICE PROVIDERSActuary Auditor

Full name: Alexander Forbes Financial Services (Ms. GerdaGrobler)

Deloitte & Touche

Postal address: PO Box 2435Pretoria0001

Private Bag X 6Gallo Manor2052

Physical address: 189 Clark StreetBrooklynPretoria0181

Deloitte PlaceBuilding 8The Woodlands20 Woodlands DriveWoodmead2052

Date of appointment: 01 October 2011 01 January 1994Telephone number: +27 (12) 452 7107 +27 (11) 806 5200

Email address: [email protected] [email protected]

Benefit administrator Investment advisorFull name: Sanlam Life Insurance Ltd Sanlam Multi Manager International (Pty) Ltd

Postal address: Private Bag X 14Highveld Park0169

Private Bag X8Tygervalley7536

Physical address: Lords Office EstateBlock 5276 West AvenueCenturion0157

55 Willie van Schoor AvenueBellville7530

Date of appointment: 01 October 2002 17 August 2006Telephone number: +27 (12) 683 3900 +27 (21) 950 2596

Registration no. in termsof Section 13B: 24/85

FAIS registration no.: 845

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SCHEDULE AREGULATORY INFORMATION (continued)FOR THE YEAR ENDED 30 JUNE 2018 PROFESSIONAL SERVICE PROVIDERS (continued)

Investment administrator Investment administratorFull name: ABSA Asset Management (Pty) Ltd Allan Gray South Africa (Pty) Ltd

Postal address: Private Bag X 291509Melville2109

PO Box 51318V & A Waterfront8002

Physical address: Sandton South Campus, 2nd Floor15 Alice LaneSandton2196

1 Silo SquareV & A WaterfrontCape Town8001

Date of appointment: 01 February 2012 01 March 2001Telephone number: +27 (11) 480 5344 +27 (21) 415 2300

FAIS registration no.: 522 27146

Investment administrator Investment administratorFull name: Aluwani Capital Partners (Pty) Ltd Argon Asset Management (Pty) Ltd

Postal address: EPPF Office Park24 Georgian Crescent EastBryanston EastJohannesburg2152

PO Box 23254Claremont7735

Physical address: EPPF Office Park24 Georgian Crescent EastBryanston EastJohannesburg2152

1 Oakdale Road, The Oval1st Floor, Colinton HouseNewlandsCape Town7700

Date of appointment: 01 June 2004 01 August 2009Telephone number: +27 (11) 505 1555 +27 (21) 670 6570


Investment administrator Investment administratorFull name: Abax Investments Brandywine Global Investment Management, LLC

Postal address: PO Box 23851ClaremontCape Town7735

Riverside TwoSir John Rogerson’s Quay Grand Canal Dock Dublin 2Ireland

Physical address: 1 Oakdale Road, The Oval2nd Floor, Colinton HouseNewlandsCape Town7700

Riverside TwoSir John Rogerson’s Quay Grand Canal Dock Dublin 2Ireland

Date of appointment: 12 August 2016 01 August 2015Telephone number: +27 (21) 670 8960 1-800-822-5544

FAIS registration no.: 856 Not applicable, compliant, see note 1

Note 1: The Fund is invested in a product managed by Brandywine Global Investment Management LLC. It is administered by BNYMellon Investment Servicing (International) Ltd and BNY Mellon Trust & Depositary (Ireland) Limited is the appointed Custodian.

Investment administrator Investment administratorFull name: Cadiz Asset Management (Pty) Ltd Coronation Fund Managers Ltd

Postal address: PO Box 44547Claremont7735

PO Box 44684Claremont7735

Physical address: The Terraces, 4th Floor25 Protea RoadClaremont7708

MontClare Place, 7th FloorCnr Campground & Main RoadsClaremont7708

Date of appointment: 01 September 2015 01 August 2005Telephone number: +27 (21) 657 8300 +27 (21) 680 2000


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Investment administrator Investment administratorFull name: Coronation GEM Drakens Capital Fund Managers (Previously

Renasset Africa Fund)Postal address: JP Morgan House

International Financial Services CentreDublin 1, Ireland

191 Jan Smuts AvenueParktown NorthJohannesburg2193

Physical address: JP Morgan HouseInternational Financial Services CentreDublin 1, Ireland

191 Jan Smuts AvenueParktown NorthJohannesburg2193

Date of appointment: 01 August 2014 01 June 2014Telephone number: +353 1 612 4200 +27 (10) 140 6600

FAIS registration no.: Not applicable, compliant, see note 2 45511 - see note 3

Note 2: The Fund is invested in a product managed by Coronation Global Opportunities Fund through the Coronation GlobalEmerging Markets Fund registered as an open-ended umbrella unit trust established in Ireland and authorised by the Central Bankof Ireland as a UCITS pursuant to the UCITS regulations. It is administered by J.P. Morgan Hedge Fund Services (Ireland) Limitedand J.P. Morgan Bank (Ireland) plc is the appointed Custodian.

Note 3: Following the MGF’s investment with RenAsset Management in June 2014, Renaissance Asset Managers was sold. InJanuary 2016, the business was acquired by Sven Richter and the name changed to Drakens Capital Pty Ltd. Drakens Capital islicensed by the South African Financial Sector Conduct Authority (FSCA) {formally known as FSB} as a discretionary fund managerand has authority from the Irish Central Bank to manage European domiciled funds.

Investment administrator Investment administratorFull name: Edge Capital (Pty) Ltd Fairtree Capital (Pty) Ltd

Postal address: PO Box 4188Tygervalley7536

PO Box 4124Tygervalley7536

Physical address: Edge House3 Heuwelkruin CloseTyger Valley7536

Willowbridge PlaceCnr Carl Cronje Drive & Old Oak RoadBellville7530

Date of appointment: 01 October 2007 05 January 2017Telephone number: +27 (21) 976 1012 +27 (21) 943 3760


Investment administrator Investment administratorFull name: First Avenue Investment Management (Pty) Ltd Foord Asset Management

Postal address: 21 Fricker RoadGround FloorTurner & Townsend HouseIllovo2196

P O Box 135Howard Place7450

Physical address: 21 Fricker RoadGround FloorTurner & Townsend HouseIllovo2196

8 Forest MewsForest DriveCnr Lonsdale WayPinelands7450

Date of appointment: 01 January 2014 01 May 2013Telephone number: +27 (11) 772 2480 +27 (21) 532 6988


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Investment administrator Investment administratorFull name: Franklin Templeton Investment Funds Futuregrowth Asset Management (Pty) Ltd

Postal address: PostNet Suite #12Private Bag X1005Claremont7735

Private Bag X6Newlands7725

Physical address: 1 Oakdale Road, The Oval1st Floor, Kildare HouseNewlandsCape Town7700

3rd FloorGreat Westerford240 Main RoadRondebosch7700

Date of appointment: 01 October 2004 01 March 2011Telephone number: +27 (21) 831 7400 +27 (21) 659 5300


Investment administrator Investment administratorFull name: Hosking & Co. Limited Investec Asset Management (Pty) Ltd

Postal address: 7 St James’s TerraceMalahideDublin 2, Ireland

PO Box 1655Cape Town8000

Physical address: 7 St James’s TerraceMalahideDublin 2, Ireland

36 Hans Strijdom AvenueForeshoreCape Town8001

Date of appointment: 01 August 2014 01 April 1994Telephone number: +353 1 845 8160 +27 (21) 416 2000

FAIS registration no.: 45612 - see note 4 587

Note 4: Hosking Global Fund Plc. Operates under UCITS (Undertakings for Collective Investment in Transferable Securities inEurope). The investment is administered by Hosking & Co Ltd., the appointed Custodian is Phoenix Financial Services Ltd.

Investment administrator Investment administratorFull name: Morgan Stanley Investment Management Prudential Investment Managers (SA) (Pty) Ltd

Postal address: 25 Cabot SquareCanary Wharf, Floor 06LondonE14 4QA

P O Box 44813Claremont7735

Physical address: 25 Cabot SquareCanary Wharf, Floor 06LondonE14 4QA

7th Floor, Protea Place40 Dreyer StreetClaremont 7708

Date of appointment: 01 August 2017 01 December 2013Telephone number: +44 20 7425-3943 +27 (21) 670 5100


Investment administrator Investment administratorFull name: Sanlam Investment Management (Pty) Ltd Sanlam Asset Management Ireland

Postal address: Private Bag X8Tygervalley7536

Beech House, Beech Hill Office CampusBeech Hill RoadClonskeaghDublin 4Ireland

Physical address: 55 Willie van Schoor AvenueBellville7530

Beech House, Beech Hill Office CampusBeech Hill RoadClonskeaghDublin 4Ireland

Date of appointment: 01 October 2001 01 October 2015Telephone number: +27 (21) 950 2500 +353 1 2053 526

FAIS registration no.: 579 42837 - see note 5

Note 5: Sanlam Asset Management (Ireland) Limited is authorised and regulated by the Central Bank of Ireland as a UCITS IVManagement Company and as an Alternative Investment Fund Manager, and is licensed as a Financial Service Provider in terms ofSection 8 of the South African FAIS Act of 2002.

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Investment administrator Investment administratorFull name: Sanlam Multi Manager International (Pty) Ltd Sesfikile Capital (Pty) Ltd

Postal address: Private Bag X8Tygervalley7536

Postnet Suite 334Private Bag X1 Melrose Arch2076

Physical address: 55 Willie van Schoor AvenueBellville7530

1st Floor30 Melrose Boulevard Melrose Arch Johannesburg2076

Date of appointment: 01 February 2012 01 April 2015Telephone number: +27 (21) 950 2596 +27 (11) 684 2679


Investment administrator Investment administratorFull name: Vantage Capital Group Veritas Asset Management LLP

Postal address: PO Box 280ParklandsJohannesburg2121

Citibank Europe Plc1 North Wall QuayDublin 1

Physical address: 3 Melrose Boulevard1st Floor, Unit 9BMelrose ArchJohannesburg2076

Citibank Europe Plc1 North Wall QuayDublin 1

Date of appointment: 01 December 2013 01 December 2013Telephone number: +27 (11) 530 9134 +44 1624 645150

FAIS registration no.: Vantage Capital Fund Managers (Pty) Ltd - 28711Vantage GreenX Fund Advisors (Pty) Ltd - 44668

Not applicable, compliant, see note 6

Note 6: The Fund is invested in a product managed by Veritas Asset Management LLP through Nedgroup Investments Plc (the Fundwas re-demociled from the Isle of Man to Ireland on 14 May 2014 and converted to a European Union approved “undertakings forCollective Investment in Transferable Securities” or “UCITS” vehicle also approved by the FSCA). It is administered by NedgroupInvestments Fund Plc (NIF) and Citibank, N.A. is the appointed Custodian.

Risk insurerFull name: Camarque Underwriting Managers (Pty) Ltd

Postal address: Postnet Suite 250Bedfordview2008

Physical address: Camargue House33 Glenhove RoadMelrose EstateJohannesburg2196

Date of appointment: 01 December 1998Telephone number: +27 (11) 778 9140

FSP approval no.: 6344

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Custodian CustodianFull name: Standard Chartered Bank (SCB) Allan Gray Nominees (Pty) Ltd

Postal address: PO Box 782080Sandton2146

PO Box 51318V & A WaterfrontCape Town8002

Physical address: 5th Floor4 Sandown Valley CrescentSandton2196

No 1 SiloSilo SquareV & A Waterfront8001

Date of appointment: 01 December 2013 01 March 2001Telephone number: +27 (11) 217 6600 +27 (21) 415 2300

FSP approval no.: 9101 24/436

PARTICIPATING EMPLOYERS

The list of participating employers is available upon request from the Fund's registered office.

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SCHEDULE BSTATEMENT OF RESPONSIBILITY BY THE BOARD OF FUNDFOR THE YEAR ENDED 30 JUNE 2018

Responsibilities

The Board of Fund hereby confirm to the best of their knowledge and belief that, during the year under review, in the executionof their duties they have complied with the duties imposed by Pension Funds Act legislation and the rules of the Fund, includingthe following:

� ensured that proper registers, books and records of the operations of the fund were kept, inclusive of proper minutes of allresolutions passed by the Board of Fund;

� ensured that proper internal control systems were employed by or on behalf of the Fund;� ensured that adequate and appropriate information was communicated to the members of the Fund, informing them of

their rights, benefits and duties in terms of the Fund Rules;� took all reasonable steps to ensure that contributions, where applicable, were paid timeously to the Fund or reported where

necessary, in accordance with section 13A and regulation 33 of the Pension Funds Act in South Africa;� obtained expert advice on matters where they lacked sufficient expertise;� ensured that the rules and the operation and administration of the fund complied with the Pension Funds Act and

applicable legislation;� ensured that fidelity cover was maintained and that this cover was deemed adequate and in compliance with the Fund

Rules; and� ensured that investments of the Fund were implemented and maintained in accordance with the Fund's investment

strategy.

Approval of the annual financial statements

The annual financial statements of Municipal Gratuity Fund are the responsibility of the Board of Fund. The Board of Fundfulfils this responsibility by ensuring the implementation and maintenance of accounting systems and practices adequatelysupported by internal financial controls. These controls, which are implemented and executed by the fund and/or its benefitadministrators, provide reasonable assurance that:� the Fund's assets are safeguarded;� transactions are properly authorised and executed; and � the financial records are reliable.

The annual financial statements set out on pages 15 to 49 have been prepared for regulatory purposes in accordance with theRegulatory Reporting Requirements for Retirement Funds in South Africa, the Fund Rules and the Pension Funds Act. Otherthan the instances reported below, the Board of Fund is not aware of any instances of non-compliance during the financial yearnor during the year up until the signature of these financial statements.

These annual financial statements have been reported on by the independent auditors, Deloitte & Touche, who was givenunrestricted access to all financial records and related data, including minutes of all relevant meetings. The Board of Fundbelieves that all representations made to the independent auditors in the management representation letter during their auditwere valid and appropriate. The report of the independent auditors is presented on page 12 - 14.

Instances of non-compliance

The following instances of non-compliance with Acts, Legislation, Regulations and Rules, including the provisions of laws andregulations that determine the reported amounts and disclosures in the financial statements came to our attention and wererectified before the Board of Fund�s approval of the financial statements:

Nature and cause of non-compliance

Impact of non-compliance matter onthe Fund

Corrective course of action taken toresolve non-compliance matter

The non-compliance by somemunicipalities of section 13A of thePension Funds Act, 1956 regardingthe payment of contributions and latepayment interest is becoming a greatconcern for the Fund. During thereporting period the municipalities ofAlbert Luthuli, Ba-Phalaborwa, Bela-Bela, Blouberg, Bojanala Platinum,Dipaliseng, Fetakgomo, GreaterTubatse, Kgetleng River, LekwaTeemane, LIM 345, LIM 368,Madibeng, Mamusa, Mbombela,Mkhondo, Mopani, Mussina, Naledi,Ngaka Modiri Molema, RamotshereMoiloa, Thaba Chweu, Thabazimbi,Tswaing, Victor Khanye and WestRand fell in arrears.

Members with arrear contributions forfeittheir risk benefits if in arrears for longerthan 3 months.

Through concerted efforts by the FundAdministrator and in some instances withintervention of the Fund�s attorneys alloutstanding contributions in respect of thereporting period have been collected,except from Naledi Municipality which hastwo Fund members. All outstanding latepayment interest has been accrued for inthe financial statements. Great difficulty isbeing experienced to collect the interest.

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SCHEDULE BSTATEMENT OF RESPONSIBILITY BY THE BOARD OF FUND (continued)FOR THE YEAR ENDED 30 JUNE 2018

Approval of the annual financial statements

These annual financial statements:

� were approved by the Board of Fund on 24 October 2018;� are to the best of the Board members knowledge and belief confirmed to be reasonable in material respect; � fairly represent the net assets of the fund at 30 June 2018 as well as the results of its activities for the year then ended; and� are signed on behalf of the Board of Fund by:

PJ VenterCHAIRPERSON

LJ ModigaVICE-CHAIRPERSON

JDG VenterEXECUTIVE COMMITTEE MEMBER

24 October 2018

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SCHEDULE CSTATEMENT OF RESPONSIBILITY BY THE PRINCIPAL OFFICERFOR THE YEAR ENDED 30 JUNE 2018

I confirm that for the year under review the Municipal Gratuity Fund has timeously submitted all regulatory and otherreturns, statements, documents and any other information as required in terms of the Pension Funds Act and to the bestof my knowledge all applicable legislation except for the following:

Specific instances of non-compliances Remedial action takenThe non-compliance by some municipalities of section 13Aof the Pension Funds Act, 1956 regarding the payment ofcontributions and late payment interest is becoming a greatconcern for the Fund. During the reporting period themunicipalities of Albert Luthuli, Ba-Phalaborwa, Bela-Bela,Blouberg, Bojanala Platinum, Dipaliseng, Fetakgomo,Greater Tubatse, Kgetleng River, Lekwa Teemane, LIM 345,LIM 368, Madibeng, Mamusa, Mbombela, Mkhondo,Mopani, Mussina, Naledi, Ngaka Modiri Molema,Ramotshere Moiloa, Thaba Chweu, Thabazimbi, Tswaing,Victor Khanye and West Rand fell in arrears.

Through concerted efforts by the Fund Administrator and insome instances with intervention of the Fund�s attorneys alloutstanding contributions in respect of the reporting periodhave been collected, except from Naledi Municipality whichhas two Fund members. All outstanding late paymentinterest has been accrued for in the financial statements.Great difficulty is being experienced to collect the interest.

Marthinus Jacobus Dewald JacobsohnPrincipal Officer24 October 2018

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SCHEDULE EREPORT OF THE BOARD OF FUNDFOR THE YEAR ENDED 30 JUNE 2018

1. DESCRIPTION OF FUND

1.1. Type of fund in terms of the Income Tax Act, 1962

The Fund is a defined contribution multi-employer pension fund for municipal employees registered in terms of thePension Funds Act, 1956, under registration number 12/8/29256/2. The Fund is registered with the South AfricanRevenue Services in terms of paragraph (a)(iii) of the definition of "pension fund" in section 1 of the Income Tax Act,1962, under approval number 18/20/4/40276.

1.2. Benefits

1.2.1 Benefits are as follows:

1.2.1.1. Retirement benefits

Retirement benefits accrue as an annuity, but may be converted up to 100% in a lump sum, equal to the member’sfund credit being the total of the member’s and employer’s contributions towards retirement provision and the netinvestment earnings (positive and negative).

Retirement age:• Normal retirement age is 65• Early retirement age is 50• Late retirement may vary between 65 and 69; subject to consent by the employer.

1.2.1.2. Resignation benefits

Resignation benefits are lump sums equal to the member’s fund credit being the total of the member’s and employer’scontributions towards retirement provision and the net investment earnings (positive and negative).

1.2.1.3. Medical disability

A member who qualifies for a medical disability benefit is entitled to four times annual salary or member's fund creditwhichever is the greater up to the age of 60 after which the benefit scales down monthly pro rata up to the age of 65 totwo times annual salary or fund credit whichever is the greater; but

a member who has less than five years’ service and qualifies for a medical disability benefit due to an injury, illness orcondition which the member

- knew about, or could reasonably be expected to know about;- was diagnosed with;- was treated for; or- displayed symptoms of

within twelve months preceding the commencement of his membership of the Fund shall only be entitled to the greaterof two times annual salary or member's fund credit.

A member joining the Fund after 25 April 2013 after attaining the age of 60 shall only be entitled to the greater of onetime annual salary or member's fund credit.

A member on late retirement, that is exceeding 65 years of age, is entitled only to the member's fund credit.

The disability benefit accrues as an annuity, but may be converted up to 100% in a lump sum payment.

1.2.1.4. Death benefits

A member with less than 5 years’ service:Unnatural causes: Fund credit plus risk benefit calculated at four times annual salary.Natural causes: Fund credit plus risk benefit calculated at two times annual salary.

A member with more than 5 years’ service:Fund credit plus risk benefit calculated at four times annual salary.

A member joining the Fund after 25 April 2013 after attaining the age of 60 shall only be entitled to fund credit plus riskbenefit calculated at one time annual salary.

A member on late retirement, that is exceeding 65 years of age, is entitled only to the member's fund credit.

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SCHEDULE EREPORT OF THE BOARD OF FUND (continued)FOR THE YEAR ENDED 30 JUNE 2018

1.2.1.5. Family funeral plan

The following family funeral cover is paid to members and their families:

Details Until June 2018 From July 2018Member R 30 000 R 40 000 Spouse R 20 000 R 30 000 Children 14 years and older R 16 000 R 20 000 Children 1 to 13 years R 6 000 R 10 000 Children stillborn or under 1 year R 3 000 R 5 000

All active contributing members qualify for the family funeral plan irrespective of age. Deferred non-contributingmembers do not qualify for the funeral plan.

1.2.1.6. Termination as a result of reorganisation

The members’ fund credit plus an enhanced benefit payable by the relevant local authority. The enhanced benefit onlyvests upon receipt of the additional amount from the local authority.

1.2.2. Unclaimed benefits

The members’ fund credit plus an enhanced benefit payable by the relevant local authority. The enhanced benefit onlyvests upon receipt of the additional amount from the local authority.

Unclaimed benefits are processed in terms of the Pension Funds Act as well as the Income Tax Act. The PensionFunds Act defines an unclaimed benefit as a benefit not paid within 24 months of the date it became legally due andpayable.

Accordingly in terms of the Fund Rules a period of two years is allowed to claim any benefits payable where-after theunclaimed money is classified as an unclaimed benefit and can be transferred to an unclaimed benefit preservationfund. If so transferred, the member, former member or beneficiary will be paid from such unclaimed benefitpreservation fund. Unclaimed death benefits are not currently classified as unclaimed benefits.

Currently the Fund does not exercise the option to transfer unclaimed benefits to a separate unclaimed benefitpreservation fund, but ring fence these benefits in the Fund.

1.2.3. Beneficiary benefits

Death benefits payable to minor beneficiaries of deceased members are paid to a registered beneficiary fund if andwhen deemed in the best interest of the minor beneficiaries. Such benefits are invested and monthly payments aremade to the guardians for the maintenance of the minor beneficiaries.

1.3. Contributions

Members' contributions

Members contribute to the Fund at a minimum rate of 7.5% of pensionable salary. Members may make additionalvoluntary contributions as per the Fund Rules.

Employers' contributions

The standard employer's contribution rate for those members joining until 31 July 2012 is 22% of pensionable salaryand for those members joining from 1 August 2012 the standard employer's contribution rate is 18%.

Currently 5% (4.25% from 1 July 2018) of pensionable salary is allocated towards the cost of risk benefits andadministration. 4.4% (3.65% from 1 July 2018) of salary is allocated to fund the risk benefits and 0.6% of salary isapplied to administrative expenses. The balance of the employer contribution is allocated to the member’s fund credit.

No cost for risk benefits is recovered from members on late retirement (exceeding 65) because such members do notenjoy death and disability benefits.

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1.4. Rule Amendments

Ruleamendment

No.Description and motivation

Date ofBoard of Fund

resolution

Effectivedate

Date registered bythe Financial

Sector ConductAuthority

MGF09 Section 33(1): To provide for thedisinvestment of the risk death benefit fromthe Risk Account, so that it can be investedin the Exit Portfolio. •Section 34(2): Tocorrect the reference to paragraph (ii).

25 October 2017 1 December 2017 22 November 2017

All rule amendments are available for inspection at the Fund’s registered office.

1.5. Fund Accounts in terms of Section 30 of the Fund Rules

1.5.1. Share Account

The Share Account comprises the total of all the individual members' interests in the Fund. The following transactionsare recorded in this account:

(a) Credits

(i) An opening balance comprising the member's transfer value as at the commencement date;

(ii) the member’s contributions in terms of section 26;

(iii) a portion of the local authority’s contributions in respect of the member in terms of section 31(1)(b), determined by the committee in consultation with the actuary, towards the provision of retirement benefits;

(iv) transfer values received in respect of a member in terms of section 42: Provided that for purposes of section 34(2)(b), the transfer value as contemplated in section 42 shall not be credited to the share account;

(v) investment earnings transferred from the Processing Account in terms of section 30(2)(b)(ii) from time to timeat a rate to be determined by the committee in consultation with the actuary. Such investment earnings shall

be based on the investment yield achieved by the Fund on the underlying investment portfolio as contemplatedin section 16A in respect of the member concerned during the period for which the said earnings are creditedto the Share Account;

(vi) interest on housing loans granted under section 16(2) and payments relating to housing loans; and

(vii) amounts allocated from the Employer Reserve Account in terms of section 30(5)(b)(i) and from the MemberReserve Account in terms of section 30(6)(b)(i).

(b) Debits

(i) Attributable valuation losses as determined by the actuary in terms of section 23(2);

(ii) the portion of the local authority's contributions contemplated in section 30(3)(a)(i) deducted from the member'sfund credit for the period of the default referred to in section 27(2)(b);

(iii) retirement benefits paid to the member in terms of section 32;

(iv) withdrawal payments in terms of section 34;

(v) transfers of the members' fund credit in respect of medical disability payments in terms of section 35 and deathpayments in terms of section 33 to the risk account;

(vi) transfers of the members’ unclaimed benefits after two years to an unclaimed benefits preservation fund established in terms of the Act to receive such unclaimed benefit, together with the interest referred to in section30(1)(vii) thereon, in the event of the committee directing that the unclaimed benefits be so transferred in termsof section 41.

(vii) the amount due to the financial institution in respect of a housing loan guarantee where the financial institutioncalls for settlement of the outstanding amount of the guarantee or a part thereof, or the outstanding amountdue to the Fund or a part thereof if the Fund provided the housing loan;

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1.5.2

1.5.3

(viii) the amount assigned from a member's pension interest to his non-member spouse in terms of a divorce orderas set out in section 37D(1)(d) of the Act and/or the amount payable in terms of a maintenance order, togetherwith tax thereon, if legislation allows for it;

(ix) the amount payable to a member's local authority as compensation for damages caused to the local authorityby reason of any theft, dishonesty, fraud or misconduct by the member in terms of section 37D(1)(b)(ii) of theAct;

(x) any amount which the Fund has paid or will pay by arrangement with, and on behalf of, a member or his beneficiary, as referred to in section 37D(1)(c) of the Act.

(xi) such asset management costs in terms of section 30(2)(b)(i) and administration costs and expenses in terms ofsection 30(4)(b)(i) as determined by the committee in consultation with the ACTUARY, in respect of deferredmembers and members in respect of whom no contributions are received;

(xii) in respect of each deceased member, the costs incurred in tracing and verifying that member’s beneficiary orestablishing the financial dependency of the member’s beneficiary; and

(xiii) any expenses not elsewhere provided for, determined by the committee in consultation with the actuary

The balance of the Share Account as at year-end 2018 is 22,578,395,832.

Processing Account

The Processing Account is established to provide for mismatching and timing differences between investments and theallocation of investment returns to members. The balance in the Processing Account shall be maintained at a leveldeemed prudent by the committee in consultation with the actuary. The balance in the Processing Account will becredited or debited from time to time with such amounts as may be determined by the committee, in consultation withthe actuary. The following additional transactions shall be recorded in this account:

(a) Credits

(i) all investment earnings earned by the Fund;

(ii) valuation losses debited to the Share Account in terms of section 30(1)(b)(i);

(iii) interest paid in terms of section 31(2)(a)(i);

(iv) interest paid in terms of section 31(2)(a)(ii); and

(v) amounts allocated from the Employer Reserve Account in terms of section 30(5)(b)(i).

(b) Debits

(i) All costs relating to the management of the assets of the Fund as contemplated in section 19(2);

(ii) investment returns transferred to the Share Account in terms of section 30(1)(a)(v);

(iii) investment returns transferred to the Risk Account in terms of section 30(3)(a)(iii);

(iv) investment returns transferred to the Data and Operational Account in terms of section 30(4)(a)(ii);

(v) investment returns transferred to the Employer Reserve Account in terms of section 30(5)(a)(ii);

(vi) investment returns transferred to the Member Reserve Account in terms of section 30(6)(a)(ii);

(vii) investment returns transferred to the Reverted Unclaimed Benefits Account in terms of section 30(7)(a)(iii); and

(viii) investment returns added to the late payment of benefits, unclaimed benefits and other liabilities due in termsof the Rules.

The balance of the Processing Account as at year-end 2018 is R 7,351,500.

Risk Account

The Risk Account is established for the funding of the death and disability benefits that are not reinsured in terms ofsection 33(2) and to absorb the impact of any adverse experience in such risk benefits. The balance in the RiskAccount shall be maintained at a level deemed prudent by the committee in consultation with the actuary. The balance

Page 18



1.5.4

1.5.5

in the Risk Account will be credited or debited from time to time with such amounts as may be determined by thecommittee, in consultation with the actuary. The following additional transactions shall be recorded in this account:

(a) Credits

(i) A portion of the local authority's contributions in respect of the member in terms of section 31(1)(b), determinedby the committee in consultation with the actuary, towards the death, disability and funeral benefits. It is specifically provided that these contributions will not be utilised for the purpose of funding any transfers to theReverted Unclaimed Benefits Account as contemplated in section 30(3)(b)(v);

(ii) transfers of the members' fund credit in respect of medical disability payments in terms of section 35 and deathpayments in terms of section 33 from the Share Account;

(iii) investment returns transferred from the Processing Account in terms of section 30(2)(b)(iii);

(iv) any reinsurance payments made to the Fund by an insurer in terms of section 33(2)(a);

(v) transfers from the Reverted Unclaimed Benefits Account in terms of section 30(7)(b)(iii); and

(vi) amounts allocated from the Employer Reserve Account in terms of section 30(5)(b)(i).

(b) Debits

(i) Lump sum death benefits referred to in section 33;

(ii) lump sum disability benefits referred to in section 35(4);

(iii) any reinsurance premiums in respect of death and funeral benefits as contemplated in section 33(2) and 33(4);

(iv) any costs in relation to medical examinations as contemplated in section 35(2); and

(v) transfers to the Reverted Unclaimed Benefits Account in terms of section 30(7)(a)(ii).

The balance of the Risk Account as at year-end 2018 is R 299,240,247.

Data and Operational Account

The Data and Operational Account is established to provide for data errors and expenses relating to the administrationof the Fund and other unforeseen contingencies. The balance in the Data and Operational Account shall bemaintained at a level deemed prudent by the committee in consultation with the actuary. The balance in the Data andOperational Account will be credited or debited from time to time with such amounts as may be determined by thecommittee, in consultation with the actuary. The following additional transactions shall be recorded in this account:

(a) Credits

(i) A portion of the local authority's contributions in respect of the member in terms of section 31(1)(b), determined by the committee in consultation with the actuary, towards the cost of the administration expenses;

(ii) investment returns transferred from the Processing Account in terms of section 30(2)(b)(iv); and

(iii) amounts allocated from the Employer Reserve Account in terms of section 30(5)(b)(i).

(b) Debits

(i) All costs and expenses referred to in section 19(2) relating to the administration of the Fund; and

(ii) any other payments by the Fund not authorised elsewhere in the Rules.

The balance of the Data and Operational Account as at year-end 2018 is R 18,734,283.

Employer Reserve Account

The Employer Reserve Account is established to provide for the allocation of any valuation profits to the localauthorities, by the committee after consultation with the actuary. The following transactions are recorded in thisaccount:

Page 19



1.5.6

1.5.7

(a) Credits

(i) Amounts as defined in the definition of ‘employer surplus account’ in the Act, allocated by the committee foruse of the local authorities concerned; and

(ii) investment returns transferred from the Processing Account in terms of section 30(2)(b)(v).

(b) Debits

(i) Amounts allocated to the Share Account or any of the other accounts as determined by the committee;

(ii) amounts required to meet a deficit as provided for in section 15H of the Act;

(iii) amounts applied on the liquidation of the Fund as provided for in section 15I of the Act.

The balance of the Employer Reserve Account as at year-end 2018 is nil.

Member Reserve Account

The Member Reserve Account is established to provide for the allocation of any valuation profits to the members andformer members, by the committee after consultation with the actuary. The following transactions are recorded in thisaccount:

(a) Credits

(i) Amounts as defined as credits in the definition of 'member surplus account' in the Act, allocated by the committee for the benefit of members or former members; and

(ii) transferred from the Processing Account in terms of section 30(2)(b)(vi).

(b) Debits

(i) Amounts as defined as debits in the definition of ‘member surplus account’ in the Act, utilised for the benefit ofmembers or former members;

(ii) any expenses which would otherwise reduce benefits payable to members;

(iii) amounts allocated to members who cease to be members of the Fund in terms of section 15G of the Act;

(iv) amounts required to meet a deficit as provided for in section 15H of the Act; and

(v) amounts applied on the liquidation of the Fund as provided for in section 15I of the Act.

The balance of the Member Reserve Account as at year-end 2018 is nil.

Reverted Unclaimed Benefits Account

The Reverted Unclaimed Benefits Account is established to provide for the old unclaimed benefits that reverted to theFund prior to 1 January 2009 in terms of section 41 as it read then. The following transactions are recorded in thisaccount:

(a) Credits

(i) Provision for the old unclaimed benefits that reverted to the Fund prior to 1 January 2009, as determined bythe committee on recommendation of the Actuary;

(ii) transfers from the Risk Account in the event of an under-provision for these old unclaimed benefits; and

(iii) investment returns transferred from the Processing Account in terms of section 30(2)(b)(vii).

(b) Debits

(i) Payment of the old unclaimed benefits that reverted to the Fund prior to 1 January 2009 in the event that themembers concerned or their beneficiaries are traced;

Page 20



(ii) relevant tracing fees incurred in tracing the members concerned or their beneficiaries; and

(iii) transfers to the Risk Account in the event of an over-provision for these old unclaimed benefits.

The balance of the Reverted Unclaimed Benefit Account as at year-end 2018 is R 111,428.

2. INVESTMENTS

2.1 Investment Policy Statement (IPS)

The Management Committee (Board of Fund), introduced the Investment Policy Statement (IPS) during the 2004/5financial year. The goal of the IPS is to create sufficient returns over 35 contribution years in order that the lump sumpayment (fund credit) of a member will be sufficient to enable a member to purchase a monthly pension equal toapproximately 75% of salary at retirement. This is commonly referred to as income replacement ratio (IRR) of 75%.

The result of the IPS is that the Fund moved away from balanced mandates during the 2004/5 financial year. Theinvestment mandates to asset managers were instead allocated as specialist mandates in the respective asset classesfrom August 2004.

The IPS is reviewed when any major events occurs that may have an effect on the investment strategy of the Fund, butat least once a year. The IPS review for this reporting period was done during July 2017.

2.2 Life Stage Model (LSM)

Three life stage portfolios as contemplated by the initial IPS were implemented during July 2005 and a forth life stagewas added in 2011. At the time the members’ fund credits, excluding those invested in the Guaranteed Portfolio, weretransferred to the four life stage portfolios according to age groupings. The daily values of the investments are electronically imported from the investment administrators’ records to theunitisation platform of the benefit administrator. The fund credit of each member is accordingly adjusted daily to thedaily market value of the units in the four life stage portfolios. The IPS is reviewed at least annually and adjustments are being made if necessary to align the investment strategywith the changing investment environment as well as with new legislation. During the 2015 IPS review, theadjustments included a change in the age brackets of the life stage portfolios whereby the members’ fund credits arekept longer in the more aggressive end of the scale, mainly to enhance the potential to create sufficient wealth to reachthe overall goal of the LSM to render a 75% salary replacement ratio.

The four life stage portfolios are as follows:

2.2.1 Stage One: Aggressive Portfolio (AP): 16 years to <55 years

The Aggressive Portfolio contains a bigger equity component, which entails a higher investment risk but renders anopportunity for greater returns. This portfolio is for younger members who can usually tolerate a higher risk. In theevent of the risk of under- performance materialising, the investment term is usually long enough to recover suchlosses and to obtain out performance of the long term Investment objective.

2.2.2 Stage Two: Moderate Portfolio (MP): 55 years to 60 years

The Moderate Portfolio contains a smaller component of equities and is aimed at a moderate risk with consequentmoderate returns. The Moderate Portfolio is a transfer phase from the Aggressive Portfolio to the ConservativePortfolio.

2.2.3 Stage Three: Conservative Portfolio (CP): 61 years to 63 years

The Conservative Portfolio contains no direct investment in equities (shares) and is aimed more at capital protectionthan at real capital growth. The Conservative Portfolio may be invested in fixed income investments, cash, structuredproducts, hedge funds and absolute return products. It should be noted that structured products, hedge funds andabsolute return products may have exposure to equities albeit that downside is limited to a certain extent.

2.2.4 Stage Four: Protected Portfolio (PP): >63 years

The Protected Portfolio is aimed at capital protection rather than at real capital growth and assets are invested inmoney market products including corporate bonds. Although the PP is structured to avoid investment risk it is nottotally risk free and limited downside over short periods is not excluded.

2.3 Exit Portfolio (EP)

An Exit Portfolio, invested in cash, is used to protect the members' fund credits upon termination of membership until

Page 21



payment of benefits. As soon as an exit form is received for a member, the fund credit of such member is transferred tothe Exit Portfolio. This is a low risk portfolio although not totally risk free.

2.4 Default and Member Investment Choices

Members are automatically without prior notice, transferred from one life stage to the next as they reach the relevantage. This transfer is however not done at once when reaching the relevant age as the investment markets may be verylow on such one specific day with negative results for a member migrating from the more aggressive to the moreconservative next phase portfolio. To prevent such single day event, members are switched from one life stageportfolio to the following in four quarterly batches starting one year ahead.

As alluded to below, a member may always exercise in writing, a choice contrary to the automatic Life Stage Modeldefault. Although the fund credits and monthly contributions of members are automatically invested in the relevant lifestage portfolio according to age, members may, subject to certain conditions, exercise a written choice if they wish toinvest contrary to the applicable life stage (AP, MP, CP or PP). Investment according to the life stage portfolios ishowever an integrated investment model in accordance with the IPS (Investment Policy Statement). The probability isgood to obtain the targeted return over a long term. Members should therefore be very cautious to chase short termreturns by electing contrary to the life stage portfolios, with possible disastrous results. Younger members should becareful not to be over conservative and forfeit returns in the long run.

A member may exercise a member investment choice whereby the fund credit is split between various investmentportfolios. Until 19 September 2017 such split was limited to two portfolios at any given time. This restriction waslifted with effect from 20 September 2017 and unrestricted member investment choices across the four investmentportfolios are allowed, in respect of the fund credit as well as the contributions subject to the following conditions:(i) The contributions shall follow the investment choice in respect of the fund credit unless a specific choice is exercised

that the contributions be invested in a specific investment portfolio in which event 100% of the monthly contributionshall be invested in that specific chosen investment portfolio, in other words a contribution member investmentchoice may not be split over various investment portfolios.

(ii) Once a member investment choice is exercised, be it in respect of the fund credit or the contributions or both, itshall at all times be maintained and shall not automatically revert to the default position when reaching the defaultage bracket or for any other reason whatsoever and the only manner to get back to the default arrangement is tomake a written selection accordingly on the prescribed form.

Members who exercised a member investment choice will remain invested accordingly until written notification issubmitted to the Fund otherwise. If a member elects to split her/his investment between portfolios, the different returnsof each investment portfolio will cause a drift from the chosen percentages split. Members’ fund credits will notautomatically be rebalanced to the original chosen percentage split between the portfolios. A new option form must besubmitted when a member wants such rebalance.

Member investment choices may be done at any time in respect of the AP, MP, CP and PP. One choice per a rolling 12months is free of charge but subsequent choices within such 12 month period require a switching fee. A memberinvestment choice is usually implemented within three to five business days from receipt of the switch instruction form.

2.5 Derivative Instruments

The Board of Fund utilises derivative instruments as part of their investment strategy. The Board of Fund ensures thatthe following have been complied with:

• The exposure of the asset class does not exceed the maximum percentages as prescribed to the underlying assetas set out in Regulation 28 of the Pension Fund Act.

• The investment mandate is in place and reviewed by the Board of Fund on a regular basis to ensure compliance with the requirements as prescribed by Regulation 28 and the relevant Notice.

• The investments are monitored for compliance with the provisions of Regulation 28 and adherence to the investment mandate.

2.6 Hedge funds

The Board of Fund utilises hedge funds as part of their investment strategy. The Board of Fund ensures that thefollowing have been complied with:

• The exposure of the asset class does not exceed the maximum percentages as prescribed to the underlying assetas set out in Regulation 28.

• The investment mandate is in place and reviewed by the Board of Fund on a regular basis to ensure compliancewith the requirements as prescribed by Regulation 28 and the relevant Notice.

• The investments are monitored for compliance with the provisions of Regulation 28 and adherence to the

Page 22



investment mandate.

2.7 Private Equity Funds

The Board of Fund utilises private equity funds as part of their investment strategy. The Board of Fund ensures that thefollowing have been complied with:

• The exposure of the asset class does not exceed the maximum percentages as prescribed to the underlying asset as set out in Regulation 28.

• The investment mandate is in place and reviewed by the Board of Fund on a regular basis to ensure compliance with the requirements as prescribed by Regulation 28 and the relevant Notice.

• The investments are monitored for compliance with the provisions of Regulation 28 and adherence to theinvestment mandate.

2.1. Management of investments

The Fund's investments consist of specialist managed portfolios with the various investment administrators (assetmanagers) listed below. All investment administrators (asset managers) have fixed mandates as to the composition oftheir share of the portfolio within the limits allowed by the Pension Funds Act in South Africa. The Board of Fund,together with Sanlam Multi Manager International (Pty) Ltd, the Fund's investment advisor, meet at least eight timesper year to discuss and review investment strategy and to monitor the asset allocation and performance of theinvestment administrators (asset managers) against the investment strategy of the Fund.

The majority of investment administrators are remunerated at a fixed fee based on the asset value under managementand the majority are paid monthly and some quarterly. A few investment administrators are remunerated on aperformance fee basis.

The fair value of the Fund's investment, administered by the investment administrators at the end of the year was:

30 June 2018R

30 June 2017R

Abax Investments 498,789,856 452,551,507ABSA Asset Management (Pty) Ltd 1,266,414,807 1,045,945,619ABSA Joint Venture (direct property) 45,000,000 57,000,000ABSA Settlement account * - 336,247,052Allan Gray Orbis Investment Management Limited 920,335,380 855,293,283Allan Gray South Africa (Pty) Ltd 1,441,842,462 1,289,567,768Argon Asset Management (Pty) Ltd 1,033,203,491 900,811,974Brandywine Global Investment Management 174,321,798 169,045,121Cadiz Asset Management (Pty) Ltd 3,819,857 3,234,981Coronation Fund Managers Ltd 1,307,228,388 1,368,888,956Drakens Capital Fund Managers (Previously Renasset Africa Fund) 262,656,176 130,689,979Edge Capital (Pty) Ltd 685,855,534 671,205,431Fairtree Capital (Pty) Ltd 525,267,201 437,805,251First Avenue Investment Management (Pty) Ltd 885,618,118 851,558,114Foord Asset Management 1,013,706,376 1,022,958,302Franklin Templeton Investment Funds 634,252,455 787,260,815Futuregrowth Asset Management (Pty) Ltd 3,769,267,813 3,345,545,910Hosking & Co. Limited 862,573,450 813,626,231International Cash Holding * - 1,137,011Investec Asset Management (Pty) Ltd 1,609,686,917 1,163,135,264Aluwani Capital Partners (Pty) Ltd 1,082,745,726 904,923,312Morgan Stanley Investment Management 277,097,800 -Prudential Investment Managers (SA) (Pty) Ltd 954,074,158 931,568,599Sanlam Investment Management (Pty) Ltd 2,585,179,660 2,205,782,137Sesfikile Capital (Pty) Ltd 354,545,929 310,556,486Vantage Capital Group 515,856,892 457,254,957Veritas Asset Management LLP 823,793,385 838,058,566

Total value of investments managed 23,533,133,629 21,351,652,626

* ABSA Settlement account and International Cash Holding are highly liquid investments with original maturities ofthree months or less. In prior years, this was disclosed as part of Investments, with effect from June 2018, this will bedisclosed as part of Cash and cash equivalents.

Page 23



3. MEMBERSHIP

Activemembers

Unclaimedbenefits

Number at the beginning of year 30,460 206Adjustments- Late entrants to 2017- Late exits from 2017

(165)11

(176)

---

Additions 1,246 4Withdrawals (392) (3)Retirements (607) (5)Deaths (224) -

Disability (29) -

Number at the end of the year 30,289 202

Number at end of year(South African citizen)

30,285 202

Number at end of year(non-South African citizen)

4 -

Adjustments:The downward adjustment in the opening balance of active members is due to members who exited in prior years, butthe administrator only received the exit form after the 2017 year-end. The increase in the opening balance of activemembers is new members that joined the employer during the 2017 financial year, but the administrator received theapplication forms after the 2017 year-end.

4. ACTUARIAL VALUATION

The financial statements summarise the transactions and net assets of the Fund. It does not constitute an investigationto the financial condition of the Fund with relation to future liabilities as contemplated by section 16 of the PensionFunds Act, 1956. In accordance with the Rules of the Fund, the actuarial position of the Fund, which does take accountof such liabilities, if any, is examined and reported on by the actuary as contemplated by section 16 of the PensionFunds Act at three years intervals.

The previous statutory actuarial valuation was done as at 30 June 2017 reflecting that the Fund was financially sound. The statutory valuation was submitted to the FSCA on 15 February 2018, currently await confirmation of approval. TheActuary also conducts an interim actuarial valuation on an annual basis for the intervening two years. This is doneaccording to the full scope as for a statutory valuation.

The latest interim statutory actuarial valuation was completed as at 30 June 2018 and will be considered by the Boardof Fund upon release of the valuation report by the actuary.

Refer to Schedule HB for the report of the valuator which reflects the financial condition of the Fund as at 30 June2018, to be sound.

5. SURPLUS APPORTIONMENT OR NIL SCHEME

Nil schemeThe surplus apportionment date of the Fund was 30 June 2002. The Fund has submitted a nil return as there was nosurplus to be distributed. The nil return was submitted to the Authority (formally known as Registrar of Pension Funds)on 26 July 2005 and noted on 22 December 2006.

Future surplusThe Fund, being a defined contribution fund, allocates all net investment returns to the members on a daily basis anddoes not accrue any surpluses. Surplus apportionment allocations are therefore not applicable, except in the event ofSection 15C of the Act.In terms of Section 15C of the Act subsequent surpluses were determined after surplus apportionment date by theFund’s actuary, as per the relevant actuarial valuations. These surpluses were due to excess in the Risk Accounteminating from contributions in respect of risk benefits. The following surplus distributions were made to qualifyingmembers:30 June 2012 R 75,000,00030 June 2014 R 60,000,00030 June 2015 R 150,000,00030 June 2016 R 69,895,24430 June 2017 R 150,000,000

Page 24



6. HOUSING LOAN FACILITIES

Direct housing loans to members have been granted until 31 May 2007 in terms of section 16(3) of the Fund Rules andthe provisions of section 19(5) of the Pension Funds Act. Such direct housing loans were financed from members'individual fund credits. Interest is payable on all direct housing loans and such interest minus the loan administrationfee, is directly allocated to a member’s fund credit and does not form part of the growth of the Fund. With effect from28 January 2011 the minimum prescribed interest rate is the repo rate as determined by the South African ReserveBank from time to time plus 5.5% per annum. In the previous financial year, the repo rate, resulting in decreases in thetotal interest rate on housing loans financed directly from a member’s fund credit: with effect from 21 July 2017, therepo rate decreased to 6.75% (12% interest rate on housing loans) and with effect from 28 March 2018, the reporate decreased to 6.50% (11.50% interest rate on housing loans).

This direct home loan scheme has been replaced from 1 June 2007 by a pension-backed home loan scheme.Standard Bank and First National Bank (FNB) have been appointed as service providers in this regard. A member mayapply for a home loan with Standard Bank or First National Bank up to a maximum of 50% of the member’s fundcredit. The loan is granted against the security of the member’s fund credit. Members must comply with all therequirements of the National Credit Act to qualify for such loan. Members with existing housing loans granted directlyfrom their fund credits in terms of the previous dispensation may maintain such direct loans or transfer them toStandard Bank or FNB. A member may only have a pension-backed home loan with either Standard Bank or FNB andnot with both. Loans may be transferred between Standard Bank or FNB.

The current rates and fees of the said banks are as follows:

Standard Bank charges an application fee of R499.34, a monthly admin fee of R33.24 and interest at prime minus 1% .

FNB charges no application fee, a monthly admin fee of R11.50 (increase to R23 with effective 1 November 2018) andinterest at prime minus 1.25%.

7. INVESTMENTS IN PARTICIPATING EMPLOYERS

Investments in terms of section19 (4A) of the Pension Funds Act.

Details of investments held in participating employers are provided in Schedule IA to the financial statements. Therewere no investments held in participating employers as at the end of the current reporting period.

8. RISK MANAGEMENT

In compliance with Circular PF130, the Fund implemented a risk management policy whereby the Board of Fundidentified the risk areas of the Fund. The risk areas are recorded in a risk register, together with the cause(s),consequence(s) and mitigating control(s) relating to each risk. The impact and likelihood of each risk is considered inorder to arrive at a risk rating for each risk area.

The Board of Fund reviews the risk management policy and the risk register on an annual basis. The highest riskareas are monitored by the Board of Fund on a monthly basis. The Board of Fund also considers the key findings frominternal and external audit reports.

The additional proposals included in the recently released King IV report, are expected to be tailor made by the office ofthe Authority for application by retirement funds and be included in a revised Circular PF130. In the interim the Fundoperates in accordance with the 17 principles of King IV in respect of the ethical corporate requirements, performanceand reporting requirements, governance structure and shareholder relationships.

Page 25



9. SIGNIFICANT MATTERS

A new valuation was obtained for the Nelspruit property (refer to note 3.3.1). The new valuation indicated a value ofR45 million, compared to the previous R57 million, which was adopted by the Board of Fund on 25 October 2017,effective 1 November 2017. The reason for the decreased value is that the rentals for commercial use decreased dueto the declining economy as well as a shift of commercial activities and demand from the central business district tothe prestigious Riverside Park CID to the north of Nelspruit.

A member may exercise a member investment choice whereby the fund credit is split between various investmentportfolios. Until 19 September 2017 such split was limited to two portfolios at any given time. This restriction waslifted with effect from 20 September 2017 and unrestricted member investment choices over the four investmentportfolios are allowed, in respect of the fund credit as well as the contributions subject to specific conditions.

The so called Default Regulations were promulgated by Government on 25 August 2017. These regulations 37, 38 and39 to the Pension Funds Act deal with the requirements of a default investment portfolio, default preservation andportability and an annuity strategy. Funds are given until 1 March 2019 to comply with these regulations. The Fundcomplies already with most of the requirements. More particulars in this regard will soon be communicated tomembers.

There are no other significant matters to report in respect of the period under review.

10. SUBSEQUENT EVENTS

No subsequent events that is material to the financial affairs of the Fund, has taken place between 30 June 2018 andthe date of approval of the financial statements.

Page 26


SCHEDULE FSTATEMENT OF NET ASSETS AND FUNDSAS AT 30 JUNE 2018

Note30 June 2018

R30 June 2017

R

ASSETS

Non-current assets 23,567,333,317 21,396,095,563Plant and equipment 2 308,567 42,735Investments 3 23,533,133,629 21,351,652,626Housing loans 4 33,891,121 44,400,202

Current assets 170,811,871 205,416,533Accounts receivable 5 1,772,686 1,159,085Arrear contributions 10 53,376,653 56,384,755Cash and cash equivalents 115,662,532 147,872,693

Total assets 23,738,145,188 21,601,512,096

FUNDS AND LIABILITIES

Members’ funds and surplus account 22,656,571,167 20,571,966,502Members’ individual accounts 22,578,395,832 20,476,176,568Amounts to be allocated 16 78,175,335 95,789,934

ReservesReserve accounts 15 325,437,458 340,500,868

Total funds and reserves 22,982,008,625 20,912,467,370

Non-current liabilitiesUnclaimed benefits 8 6,503,339 6,720,581

Current liabilities 749,633,224 682,324,145Benefits payable 7 736,434,107 664,209,242Accounts payable 9 13,199,117 18,114,903

Total funds and liabilities 23,738,145,188 21,601,512,096

Page 27


SCHEDULE GSTATEMENT OF CHANGES IN NET ASSETS AND FUNDSFOR THE YEAR ENDED 30 JUNE 2018

Members’ individualaccounts & Amounts

to be allocated

Reserve accountsRefer note 15

Current year2018

Previous year2017

Note R R R R

Contributions received and accrued 10 1,576,079,194 332,723,936 1,908,803,130 1,748,071,900Net investment income 11 3,304,483 1,988,819,169 1,992,123,652 878,620,459Allocated to unclaimed benefits 8 (426,158) (131,130) (557,288) (658,710)

Less: (1,267,618) (47,896,851) (49,164,469) (45,630,834)Re-insurance premiums - (10,863,193) (10,863,193) (10,944,946)Administration expenses 12 (1,267,618) (37,033,658) (38,301,276) (34,685,888)

Net income before transfers and benefits 1,577,689,901 2,273,515,124 3,851,205,025 2,580,402,815

Transfers and benefits (1,323,338,126) (458,325,644) (1,781,663,770) (1,545,761,305)Transfer from other funds 6 1,180,914 - 1,180,914 20,900,219Benefits 7 (1,324,519,040) (458,325,644) (1,782,844,684) (1,566,661,524)

Net income after transfers and benefits 254,351,775 1,815,189,480 2,069,541,255 1,034,641,510

Funds and reservesBalance at the beginning of the year 15 20,571,966,502 340,500,868 20,912,467,370 19,877,825,860Transfers between reserve accounts 15 (250,921,781) 250,921,781 - -Investment return allocated Current members 1,931,174,671 (1,931,174,671) - -Member Reserve Distribution 15 150,000,000 (150,000,000) - -

Balance at the end of the year 22,656,571,167 325,437,458 22,982,008,625 20,912,467,370

Page 28


SCHEDULE HANOTES TO THE ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2018

1. PRINCIPLE ACCOUNTING POLICIES

The following are the principle accounting policies used by the Fund. These policies have been applied consistently to allyears presented, unless otherwise specifically stated.

1.1. PURPOSE AND BASIS OF PREPARATION OF ANNUAL FINANCIAL STATEMENTS

The annual financial statements are prepared in accordance with the Regulatory Reporting Requirements for RetirementFunds in South Africa, the Fund Rules and the provisions of the Pension Funds Act.

The annual financial statements are prepared on the historical cost and going concern bases, except where specificallyindicated otherwise in the accounting policies below:

1.2. PLANT AND EQUIPMENT

All plant and equipment are initially recorded at cost and subsequently stated at historical cost less depreciation.Depreciation is charged to the income statement.

Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over theirestimated useful lives as follows:Electronic equipment 4 yearsVehicles 5 yearsFurniture 10 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately toits recoverable amount. Impairment losses are recognised.

Gains and losses on disposal of plant and equipment are determined by reference to their carrying amount and are takeninto account in determining the net surplus or deficit.

Maintenance and repairs, which neither materially add to the value of assets nor appreciably prolong their useful lives, arecharged against income.

1.3. FINANCIAL INSTRUMENTS

A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equityinstrument of any other entity. A financial asset or a financial liability is recognised when its contractual arrangementsbecome binding and is derecognised when the contractual rights to the cash flows of the instrument expire or when suchrights are transferred in a transaction in which substantially all risks and rewards of ownership of the instrument aretransferred.

Financial instruments carried on the statement of net assets and funds, include cash and bank balances, investments,housing loans, receivables and accounts payable.

Financial instruments are recognised on acquisition using trade date accounting, which includes transaction costs. Uponinitial recognition financial instruments are designated at fair value through the statement of changes in net assets andfunds as the assets or liabilities are managed, evaluated and reported internally on a fair value basis and/or thedesignation eliminates or significantly reduces an accounting mismatch which would otherwise arise.

Subsequent to initial recognition, these instruments are measured as set out below.

1.3.1. Investments

Investments are classified at fair value through the statement of changes in net assets and funds and are measured at fairvalue.

Loans (other than housing loans) – loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determined payments that are not quoted in anactive market other than those that the fund intends to sell in the short term or that is designated as at fair value throughthe statement of changes in net assets and funds. Loans and receivables are measured at fair value.

Debentures

Debentures comprise investments in listed and unlisted debentures.

Page 29


SCHEDULE HANOTES TO THE ANNUAL FINANCIAL STATEMENTS (continued)FOR THE YEAR ENDED 30 JUNE 2018

1.3.1. Investments (continued)

Listed debentures

The fair value of listed debentures traded on active liquid markets is based on regulated exchange quoted ruling closingprices at the close of business on the last trading day on or before the statements of net assets and funds date.

Unlisted debentures

Unlisted debentures are financial assets with fixed or determinable payments and fixed maturity. Fair value is estimatedusing pricing models or by applying appropriate valuation techniques such as discounted cash flow analysis or recentarm’s length market transactions in respect of the unlisted debenture.

Bills and bonds

Bills and bonds comprise investments in government or provincial administration, local authorities, participatingemployers, subsidiaries or holding companies and corporate bonds.

Listed bills and bonds

The fair value of listed bills and bonds traded on active liquid markets is based on regulated exchange quoted rulingclosing prices at the close of business on the last trading day on or before the statements of net assets and funds date.

Unlisted bills and bonds

A market yield is determined by using appropriate yields of existing bonds and bills that best fit the profile of the instrumentbeing measured and based on the term to maturity of the instrument. Adjusting for credit risk, where appropriate, adiscounted cash flow model is then applied, using the determined yield, in order to calculate the fair value.

Investment property

A property held for long-term yields or capital appreciation that is not occupied by the Fund is classified as investmentproperty. Investment properties comprise investments in commercial properties. Investment properties are carried at fairvalue.

Investment properties are reflected at valuation on the basis of open-market fair value at the statement of net assets andfunds date. In the open-market valuation information cannot be reliably determined; the fund uses alternative valuationmethod such as discounted cash flow projections or recent prices on active markets for transactions of similar nature. Thefair values are the estimated amounts for which a property could be exchanged on the date of valuation between a willingbuyer and a willing seller in an arm’s length transaction.

The open-market fair value is determined annually by independent professional valuators.

Changes in fair value are recorded by the fund in the statement of changes in net assets and funds.

Equities

Equity instruments consist of equities with primary listing on the Johannesburg Stock Exchange, equities with secondarylisting on the Johannesburg Stock Exchange, foreign listed equities and unlisted equities.

Equity instruments designated as fair value through the statement of changes in net assets and funds by the fund areinitially recognised at fair value on trade date.

Listed equitiesEquity instruments are subsequently measured at fair value and the fair value adjustments are recognised in the statementof changes in net assets and funds. The fair value of equity instruments with standard terms and conditions and traded onactive liquid markets is based on regulated exchange quoted ruling closing prices at the close of business on the lasttrading day on or before the statements of net assets and funds date.

Unlisted equitiesIf a quoted closing price is not available i.e. for unlisted instruments, the fair value is estimated using pricing models, or byapplying appropriate valuation techniques such as discounted cash flow analysis or recent arm’s length markettransactions in respect of equity instruments.

Preference shares

Listed preference sharesThe fair value of listed preference shares traded on active liquid markets is based on regulated exchanged quoted rulingclosing prices at the close of business on the last trading day on or before the statement of net assets and funds date.

Page 30




Unlisted preference sharesIn respect of unlisted preference shares, the fair value is determined by applying appropriate valuation techniques such asdiscounted cash flow analysis or recent arm’s length market transactions in respect of preference shares.

Insurance policies

Non - linked insurance policiesNon - linked insurance policies with insurers are valued on the basis of the policyholder’s retrospective contribution toassets (i.e. accumulation at the actual investment return achieved on gross premiums.)

Linked or market-related policiesIf the policy is unitised, the value is equal to the market value of the underlying units. Other linked or market-relatedpolicies are valued at the market value of the underlying assets for each policy, in line with the insurer’s valuationpractices.

Collective investment scheme

Investments in collective investment schemes are valued at fair value which is the quoted unit values, as derived by thecollective investment scheme manager with reference to the rules of each particular collective investment scheme,multiplied by the number of units.

Derivative Market Instruments

Derivative market instruments consist of options, equity linked instruments, futures/forwards – SAFEX/foreign, currencyswaps and interest rate swaps.

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and aresubsequently re-measured at their fair value. Fair values are obtained from regulated exchange quoted market prices inactive markets, including discounted cash flow models and option pricing models, as appropriate. All derivatives arecarried as assets when fair value is positive and as liabilities when fair value is negative. The fund does not classify anyderivatives as hedges in a hedging relationship.

The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of theconsideration given or received) unless the fair value of that instrument is evidence by comparison with other observablecurrent market transactions in the same instrument (i.e. without modification or repackaging) based on a valuationtechnique whose variables include only data from observable markets.

OptionsOptions are valued using option pricing modules.

Futures/forward contractsThe fair value of publicly traded derivatives is based on quoted closing prices for assets held or liabilities issued, andcurrent offer prices for assets to be acquired and liabilities held.

SwapsSwaps are valued by means of discounted cash flow models, using the swap curve from a regulated exchange (BESA) todiscount fixed and variable rate cash flows, as well as to calculate implied forward rates used to determine the floatinginterest rate amounts. The net present values of the fixed leg and variable leg of the swap are offset to calculate the fairvalue of the swap.

Investment in participating employers

Investments in participating employer(s) comprise loans, investments in listed and unlisted equities and other investments.Refer to respective policies for basis of accounting.

Hedge funds

Hedge fund investments are designated as fair value through the statement of changes in net assets and funds by the fundand are initially recognised at fair value on trade date.

Listed hedge fundsHedge fund investments are subsequently measured at fair value and the fair value adjustments are recognised in thestatement of changes in net assets and funds. The fair value of hedge fund investments traded on active liquid markets isbased on regulated exchange quoted ruling closing prices at the close of business on the last trading day on or before thestatement of net assets and funds date.

Page 31




Unlisted – where investor (fund) has no right to the underlying instrument - investment partnersHedge fund investments are subsequently measured at fair value and the fair value adjustments are recognised in thestatement of changes in net assets and funds. The value of the financial asset owned by the fund is measured in relationto the percentage holdings by each investment partner in the total fair value of the hedge fund. The fair value is estimatedusing pricing models or by applying appropriate valuation techniques such as discounted cash flow analysis or recentarm’s length market transactions in respect of hedge fund instruments.

Unlisted – where investor (fund) has a right to the underlying instrumentHedge fund investments are subsequently measured at fair value and the fair value adjustments are recognised in thestatement of changes in net assets and funds. As the fund has the right to the underlying instrument, a look throughprinciple is applied, and the underlying instrument are separately measured and disclosed. The fair value is estimatedusing pricing models or by applying appropriate valuation techniques such as discounted cash flow analysis or recentarm’s length market transactions in respect of the hedge fund instrument.

Structured products

Investments in structured products are valued at the gross total fair value of all the underlying instruments included in thestructure and/or arrangement. If there are instruments within the structured product that require different treatment, thesemay need to be treated separately.

1.3.2. Housing loans

Housing loans are measured at fair value. Housing loans are derecognised when the right to receive cash flows from themember has expired or been transferred and the fund has also transferred substantially all risks and rewards of ownership.

1.3.3. Accounts receivable

Accounts receivable are financial assets measured initially at fair value and subsequently measured at amortised costusing the effective interest rate method, less any allowance for impairment.

1.3.4. Cash and cash equivalents

Cash and equivalents comprise cash in hand, deposits held at call with banks, and other short-term highly liquidinvestments with original maturities of three months or less. Cash and cash equivalents are measured at fair value.

1.3.5. Accounts payable

Accounts payable are financial liabilities measured initially at fair value, net of transaction costs that are directlyattributable to the liability and subsequently measured at amortised cost using the effective interest rate method.

1.4. RESERVES

Reserve accounts comprise particular amounts of designated income and expenses as set out in the Fund Rules and arerecognised in the year in which such income and expenses accrue to the Fund.

Page 32



1.5. IMPAIRMENT

Financial assets carried at amortised cost

The fund assesses at each statement of net assets and funds date whether there is objective evidence that a financialasset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairmentlosses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurredafter the initial recognition of the asset (a loss event) and that loss event has an impact on the estimated future cash flowsof the financial asset or group of financial assets that can be reliably estimated.

The fund first assesses whether objective evidence of impairment exists individually for financial assets that areindividually significant. If the fund determines that no objective evidence of impairment exist s for an individually assessedfinancial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses them for impairment.

If there is objective evidence that an impairment loss has been incurred on loans and receivables or held to maturityinvestments carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carryingamount and the present value of the estimated future cash flow (excluding future credit losses that have been incurred)discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and theamount of the loss is recognised in the statement of changes in net assets and funds. If a loan has a variable interest rate,the discount rate for measuring any impairment loss is the current effective interest rate determined under contract. As apractical expedient, the fund may measure impairment on the basis of an instrument’s fair value using an observablemarket price.

If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to anevent occurring after the impairment was recognised (such as improved credit rating), the previously recognisedimpairment loss is reversed in the statement of changes in net assets and funds.

Impairment of non-financial assets

Assets that have an indefinite useful life, for example land, are not subject to amortization and are tested annually forimpairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amountby which the asset’s net carrying amount exceeds its recoverable amount. The recoverable amount is the higher of anasset’s fair value less costs to sell and value in use. For this purpose of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows.

Impairment of loans and receivables

A provision for impairment of loans and receivables is established when there is objective evidence that the fund will notbe able to collect all amounts due according to their original terms.

1.6. CONTRIBUTIONS

Contributions are measured at the fair value of the consideration received or receivable.

Contributions are accrued and recognised as income in accordance with the actuarial recommendations and the FundRules. Contributions received are apportioned between retirement funding and funding for risk and other expenses. Theapportionment is governed by the Fund Rules and actuarial recommendations.

Voluntary contributions are recognised when they are received from annual payments or accrued where monthly recurringpayments are made.

Any contributions outstanding at the end of the reporting year are recognised as a current asset – contribution receivable.Any contributions received in advance at the end of the reporting year are recognised as a current liability – accountspayable.

Interest charged on late payment of contributions

Compound interest on late payments or unpaid amounts and values shall be calculated for the year from the first day ofthe month following the expiration for the year in respect of which the relevant amounts or values are payable ortransferable until the date of receipt by the Fund.

Page 33



1.7. FOREIGN CURRENCIES

Transactions in foreign currencies are accounted for at the ruling rate of exchange on the transaction date. Assets andliabilities in foreign currencies are converted at the ruling rate of exchange on the statements of net assets and funds date.

Gains and losses on conversion are dealt with in the statement of changes in net assets and funds.

Income and expenditure relating to foreign investments are converted to South African currency at appropriate weightedaverage exchange rates, for the period.

1.8. INVESTMENT INCOME

Investment income comprises of the following:

Dividends

Dividend income is recognised in the statement of changes in net assets and funds when the right to receive payment isestablished – this is the last date to trade for equity securities. For financial assets designated at fair value through thestatement of changes in net assets and funds, the dividend income forms part of the fair value adjustment.

Interest

Interest income in respect of financial assets held at amortised cost is accounted for in the statement of changes in netassets and funds using the effective interest rate method.

Rentals

Rental income is accounted for in the statement of changes in net assets and funds on a straight-line basis over the yearof the rental agreement, unless another systematic basis is more representative of the time pattern in which use benefitderived from the leased asset is diminished. Property expenses shall be recognised in the statement of changes in netassets and funds under net investment income.

Collective investment schemes’ distribution

Distribution from collective investment schemes are recognised when the right to receive payment is established.

Income from policies with insurance companies

Income from investment policies from insurance companies is included in the adjustment to the movement of the financialasset.

Interest on late payment of contributions, surplus improperly utilised and / or loans and receivables

Interest on late payment of contributions, surplus improperly utilised and / loans and receivables is accounted for in thestatement of changes in net assets and funds using the effective interest rate method.

Adjustment to fair value

Gains or losses arising from changes in the fair value of financial assets at fair value through the statement of changes innet assets and funds are presented in the statement of changes in net assets and funds in the year in which they arise.

Expenses incurred in managing investments

Expenses in respect of the management of investments are recognised as the service is rendered.

1.9. BENEFITS

Benefits payable and pensions are measured in terms of the Fund Rules.

Benefit payments and monthly pension payments are recognised as an expense when they are due and payable in termsof the Fund Rules. Any benefits not paid at the end of the reporting year are recognised as a current liability – benefitspayable / due.

Page 34



1.10. TRANSFERS TO AND FROM THE FUND

Section 14 and 15B transfers to or from the Fund are recognised on the date of approval of the scheme/arrangement oftransfer of business by the Financial Services Board, as contained in the approval certificate from the Authority.

Individual transfers (Section 13A(5) transfers) are recognised on the earlier of receipt of the written notice of transfer(Recognition of Transfer) or receipt of the actual transfer value.

All the above transfers are measured at the values as per the section 14 application or the value of the transfer at effectivedate of transfer adjusted for investment return or late payment interest as guided by the application.

1.11. ADMINISTRATION EXPENSES

Expenses incurred in the administration of the Fund are recognised in the statement of changes in net assets and funds inthe reporting year to which they relate.

In the event that an expense has not been paid at the end of a reporting year the liability will be reflected in the accountspayable note. If the expense was paid in advance or overpayment occurred, the applicable amount will be disclosed underthe accounts receivable note.

1.12. RELATED PARTIES

In considering each possible related-party relationship, attention is directed to the substance of the relationship and notmerely the legal form.

If there have been transactions between related parties, the Fund shall disclose the nature of the related party relationshipas well as the following information for each related party relationship:• the amount of the transactions;• the amount of outstanding balances;• their terms and conditions, including whether they are secured, and the nature of the consideration to be provided in

the settlement;• details of guarantees given or received;• provisions for doubtful debts related to the amount of outstanding balances; and• the expense recognised during the year in respect of bad or doubtful debts due from related parties.

1.13. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

The Fund applies adjustments arising from changes in accounting policies and errors prospectively. The adjustmentrelating to a change in the accounting policy or error is therefore recognised in the current and future years affected by thechange.

Page 35



2. PLANT AND EQUIPMENT

2.1. Current year

Gross carrying amount

Furniture andEquipment

R

VehiclesR

Total

RCost at beginning of year 281,825 398,602 680,427Additions 72,100 296,420 368,520

At end of year 353,925 695,022 1,048,947Accumulated depreciation and impairmentAt beginning of year (281,807) (355,885) (637,692)Depreciation charges (10,565) (92,123) (102,688)

At end of year (292,372) (448,008) (740,380)

Net carrying amount at end of year 61,553 247,014 308,567

2.2. Prior yearGross carrying amount Furniture and

EquipmentR

VehiclesR

Total

RCost at beginning of period 281,825 398,602 680,427

At end of year 281,825 398,602 680,427Accumulated depreciation and impairmentAt beginning of period (281,807) (304,620) (586,427)Depreciation charges - (51,265) (51,265)At end of year (281,807) (355,885) (637,692)

Net carrying amount at end of period 18 42,717 42,735

Page 36



3.

3.1.

INVESTMENTS

Investment summary

Note Local

R

Foreign

R

Total currentyear

R

Total previousyear

R

Fair valuecurrent year

RCash 2,425,922,198 20,737,123 2,446,659,321 2,645,306,723 2,446,659,321Commodities 23,471,259 1,657,984 25,129,243 43,477,433 25,129,243Debt instruments including Islamic debt instruments 2,549,171,358 26,310,670 2,575,482,028 2,146,681,598 2,575,482,028Investment properties and Owner occupied properties 3.3. 45,000,000 - 45,000,000 57,000,000 45,000,000Equities 6,896,428,306 77,249,110 6,973,677,416 6,174,589,734 6,973,677,416Insurance policies 721,050,553 247,254,373 968,304,926 1,755,753,614 968,304,926Collective investment schemes 4,948,873,879 4,502,869,700 9,451,743,579 7,621,271,292 9,451,743,579Hedge funds 856,261,700 - 856,261,700 791,093,023 856,261,700Private equity funds 111,176,780 88,512,034 199,688,814 134,160,002 199,688,814Derivative market investments (20,698,065) - (20,698,065) (20,440,546) (20,698,065)Investment in participating employer(s) 3.2. - - - 4,254,195 -Other 7,885,380 3,999,287 11,884,667 (1,494,442) 11,884,667

Total 18,564,543,348 4,968,590,281 23,533,133,629 21,351,652,626 23,533,133,629

3.2. Investment in participating employer/s

At beginning ofyear

R

Repaid/DisposalsR

At end of year

RCity Of Johannesburg Metropolitan Municipality 4,254,195 (4,254,195) -

Total 4,254,195 (4,254,195) -

* At fair value through statement of changes in net assets and funds.

Page 37



3.3. Investment properties and owner occupied investments

3.3.1. Current yearInstrument Valuation

methodDate of lastvaluation

At beginningof year

R

RevaluationReserve

R

At end ofyear

RInvestment PropertiesABSA Square Mbombela Refer to the

note below01/11/2017 57,000,000 (12,000,000) 45,000,000

Total of properties 57,000,000 (12,000,000) 45,000,000

During August 2015, the investment property held directly by the Fund was valued based on market research done by an independent registered valuator who specializes in commercialproperty valuation. That valuation indicated a market value of R57 million which was adopted by the Board of Fund with effect from 1 October 2015. Since then a new valuation wasobtained, indicating a value of R45 million which was adopted by the Board of Fund on 25 October 2017, effective 1 November 2017. The reason for the decreased value is that therentals for commercial use decreased due to the declining economy as well as a shift of commercial activities and demand from the central business district to the prestigious RiversidePark CID to the north of Nelspruit.

Page 38



4. HOUSING LOAN FACILITIES

4.1. Housing loans

A B C D E A+B-C+D+/-EAt beginning

yearGranted Repaid Interest

capitalisedOther

adjustmentsAt end of year

R R R R R RLoans granted in terms of the rules of the fund and section 19(5) of the PensionFunds Act

44,400,202 - (14,708,863) 4,199,782 - 33,891,121

Total 44,400,202 - (14,708,863) 4,199,782 - 33,891,121

Direct housing loans to members have been granted until 31 May 2007 in terms of section 16(3) of the Fund Rules and the provisions of section 19(5) of the Pension Funds Act. Suchdirect housing loans were financed from members' individual fund credits. With effect from 28 January 2011 the minimum prescribed interest rate is the repo rate as determined by theSouth African Reserve Bank from time to time plus 5.5% per annum. In the previous financial year, the repo rate, resulting in increases in the total interest rate on housing loans financeddirectly from a member’s fund credit: with effect from 21 July 2017, the repo rate decreased to 6.75% (12% interest rate on housing loans) and with effect from 28 March 2018, the reporate decreased to 6.50% (11.50% interest rate on housing loans).The amount included in other adjustments relates to administration expenses and overpayments received.

4.2. Housing loan guarantees

The Fund has granted guarantees to the following institutions for loans granted to members:

Institution Current year Prior yearStandard Bank R 678,565,910 R 690,581,971FNB R 120,721,318 R 117,693,691Participating Employers R 1,890,269 R 2,141,127

The amount of the guarantee, may not exceed 50% of the cash benefit that a member would receive if he or she had to terminate membership with the Fund.The guarantees in respect ofthe participating employers are in the form of endorsements to the members' records for collateral investments made by the participating employers with the financial institutions to supportthe granting of housing loan facilities between the individual member and these institutions. No such endorsements have been made since inception of the final phase of the NationalCredit Act with effect from 1 June 2007.

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5. ACCOUNTS RECEIVABLE

30 June 2018R

30 June 2017R

Operational losses - 3,885Prepaid expenses 27,953 27,710Sundry debtors 42,351 -Outstanding late payment interest 1,702,382 1,127,490

Total 1,772,686 1,159,085

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6. TRANSFERS FROM OTHER FUNDS

A B C D A+B+C-DEffective

dateNo. of

membersAt beginning of

yearTransfersapproved

Return onTransfers

Assetstransferred

At end ofyear

R R R R RIn terms of Section 14Government Employee Pension Fund 01/12/2010 1 - 300,389 334 (300,723) -Government Employee Pension Fund 13/12/2013 1 - 533,632 21,305 (554,937) -Erwat Provident Fund 01/07/2013 3 - 325,254 - (325,254) -

Total 5 - 1,159,275 21,639 (1,180,914) -

Transfers approved (B) 1,159,275Return on transfers (C) 21,639

Statement of changes in net assets and funds 1,180,914

Transfers approved values include investment growth from effective date up to transfer date.

Although the Pension Funds Act is clear that any transferor and transferee fund must comply with section 14 of the Act, the GEPFdisregards the provisions of the Pension Funds Act because it is regulated by its own Government Employees Pension Law, 21 of 1996.The GEPF continues to deposit transfer values into the Fund’s bank account in respect of members who transfer from GEPF to MGF,without prior FSCA approval. The Fund is taking all possible steps to comply with Section 14 by initiating and completing the FSCAapproval process on behalf of and without the co-operation of the GEPF. To date the Fund’s administrator was successful to obtainSection 14 approvals for all such transfers, albeit retrospectively. Due to the non-compliance by the GEPF, Section 14 transfer approvalswill never be obtained in advance. The only alternative is to return the deposits to the GEPF which is not regarded to be in the best interestof the relevant members. The Board of Fund took a decision that the cash deposits received must be invested in the members’ fund creditaccounts upon receipt to ensure that the member receives optimum investment growth and not be prejudiced by this irresponsiblebehaviour of the GEPF.

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On 23 December 2014 the Authority approved the section 14 transfer of 275 members from the ERWAT Provident Fund to The MunicipalGratuity Fund ("The MGF") with effect from 1 July 2013. ERWAT Provident Fund transferred cash to The Municipal Gratuity Fund ("TheMGF") on 26 June 2015 which represented transfer values for 265 members. The transfer values of the remaining 10 members were paidby ERWAT Provident Fund to the members and not to The MGF since these members exited prior to 26 June 2015. During July 2015, thetransferred values were invested for 245 members who were active at the time in The MGF and an amount of R64,384,079 wasrecognised as transfers from other funds in the June 2015 annual financial statements.

At the time of investment, 20 members already exited MGF and became entitled to follow up benefits. During the 2018 financial yearfollow up benefits were paid to former members to the value of R487,393 for 3 members; (2017: R183,853: 4 members); (2016:R2,037,904: 10 members) and these values are recognised as transfers from other funds in the current financial year.

As at 30 June 2018, 3 follow up benefits to the value of R845,966 still have to be paid to former members (refer to note 9 AccountsPayable).Subsequent to year-end 1 member (R447,048) was paid on 3 July 2018 and the remaining 2 members (R398,919) were sent toGreystone for tracing.

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7. BENEFITS

7.1. Benefits - current members

A B C D E A+B+C-D-EAt beginning of

yearBenefits for

current periodReturn allocated Payments Transferred to

unclaimed benefitsAt end of year

R R R R R RLump sums on retirements - Full benefit 101,104,004 982,372,517 534,736 (970,693,124) (918) 113,317,215Lump sums before retirement - Disability benefits 6,135,960 50,294,337 34,107 (40,263,997) - 16,200,407 - Death benefits 502,004,567 375,885,906 30,929,603 (342,767,300) - 566,052,776 - Withdrawal benefits 53,197,218 287,709,435 129,070 (301,494,669) (23,245) 39,517,809 - Divorce payments 513,224 48,303,790 - (48,655,458) - 161,556OtherReverted Unclaimed Benefits - 14,427 - (14,427) - -

Total 662,954,973 1,744,580,412 31,627,516 (1,703,888,975) (24,163) 735,249,763

Benefits for current year (B) 1,744,580,412Return allocated (C) 31,627,516

Statement of changes in net assets and funds 1,776,207,928

7.2. Benefits in terms of surplus distribution

A B C D E A+B+C+D+EAt beginning of

yearSurplus allocated Return allocated Payments Transferred to

unclaimed benefitsAt end of year

R R R R R REnhancements to former members 1,254,269 6,636,756 - (6,706,681) - 1,184,344

Total Benefits 1,254,269 6,636,756 - (6,706,681) - 1,184,344

Surplus allocated (B) 6,636,756Return allocated (C) -

Statement of changes in net assets and funds 6,636,756

Total benefits (7.1 + 7.2) 664,209,242 1,751,217,168 31,627,516 (1,710,595,656) (24,163) 736,434,107

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8. UNCLAIMED BENEFITS

30 June 2018R

30 June 2017R

Balance at the beginning of the year 6,720,581 4,577,207Transferred from benefits payable 24,163 2,451,765Investment income allocated 557,288 658,710Less:• Benefits paid (798,693) (967,101)

Balance at the end of the year 6,503,339 6,720,581

9. ACCOUNTS PAYABLE

30 June 2018R

30 June 2017R

Accrual for audit fees 707,250 684,000Reinsurance premiums 901,708 905,246Administration fees 2,126,028 2,009,977Sundry Creditors 530,685 112,481Asset management fees 6,548,574 7,726,539Capital trade timing difference between investment values per asset manager andadministration system - subsequently cleared

- 4,474,296

Sundry participating employers (contribution overpayments) 665,029 799,320Refunds due - direct housing loan overpayments 106,187 231,512Profit on benefit trades to be invested 767,690 -Follow up benefits payable (ERWAT transfer) 845,966 1,171,532

Total 13,199,117 18,114,903

10. CONTRIBUTIONS

At beginning ofyear

Towardsretirement

Towards re-insurance and

expenses

Contributionsreceived

At end ofyear

R R R R RMember contributions received andaccrued

13,695,992 519,922,536 - (520,259,859) 13,358,669

Employer contributions received andaccrued

42,688,763 1,054,272,843 332,723,936 (1,389,667,558) 40,017,984

Additional voluntary contributions -members

- 1,883,815 - (1,883,815) -

Total 56,384,755 1,576,079,194 332,723,936 (1,911,811,232) 53,376,653

Towards retirement 1,576,079,194Towards reinsurance and expenses 332,723,936

Statement of changes in net assets and funds 1,908,803,130

Page 44



11. NET INVESTMENT INCOME

30 June 2018R

30 June 2017R

Income from investments 927,094,026 760,927,870• Dividends 241,295,275 196,143,788• Interest 456,989,940 350,576,806• Rentals 3,537,800 5,006,974• Collective investment schemes distribution 133,318,647 133,543,378• Income from insurance policies 91,952,364 75,656,924Interest on late payment of contributions 1,032,094 926,741Adjustment to fair value 1,163,791,736 215,941,691

2,091,917,856 977,796,302Less: Expenses incurred in managing investments (99,794,204) (99,175,843)

Total 1,992,123,652 878,620,459

12. ADMINISTRATION EXPENSES

30 June 2018R

30 June 2017R

Actuarial fees 614,115 573,420Administration fees 25,656,248 23,153,334Audit fees 1,085,837 1,011,209Audit fees - Audit services 724,350 684,000Audit fees - Internal 361,487 327,209Depreciation 102,689 51,265Other Expenses 1,981,274 1,898,003Communication expenses 1,077,821 1,014,687FSCA Levy 578,110 566,721Post retirement medical contributions 44,114 40,574Medical assessment cost 281,229 276,021Office expenses 1,735,522 1,634,635Board of Fund expenses 12.1 1,728,148 1,451,737Staff expenses 3,475,403 3,008,365Principal Officer expenses 1,922,040 1,903,920

Total 38,301,276 34,685,888

12.1. Board of Fund expenses30 June 2018

R30 June 2017

RMeeting allowances 964,166 777,339Training expenses 763,982 674,398

Total 1,728,148 1,451,737

Page 45



13. RISK MANAGEMENT POLICIES

Risk management framework

The Board of Fund has overall responsibility for the establishment and oversight of the Fund’s risk management policies.

The Board of Fund has established the Executive Committee, which is responsible for developing and monitoring the Fund’srisk management policies. The committee reports regularly to the Board of Fund on its activities.

The Fund’s risk management policies are established to identify and analyse the risks faced by the Fund, to set appropriaterisk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewedregularly to reflect changes in market conditions and the Fund’s activities.

• Solvency risk

Solvency risk is the risk that the investment returns on assets will not be sufficient to meet the funds contractualobligations to members.

Continuous monitoring by the Board of Fund and the Fund's Actuary takes place to ensure that appropriate assets areheld where the Fund's obligation to members are dependent upon the performance of specific portfolio assets andthat a suitable match of assets exists for all other liabilities.

• Credit risk

Credit risk is the risk that a counter-party to a financial instrument will fail to discharge an obligation, and cause thefund to incur a financial loss.

The Board of Fund determines the restrictions applicable to bond investments, cash investments and to other creditexposure for the Fund and specifies the minimum credit rating and the maximum limit per specific issuer dependingon the issuer's credit rating.

Only well established counterparties of an acceptable credit standing are used and the portfolios' investmentinstruments are well diversified to limit the impact of a counterparty default.

The restrictions applicable and the permissible investments are included in the mandate of the appointed InvestmentAdministrators and monitored against the approved limits and reported on by the Investment Consultant and theInvestment Administrators on a monthly basis.

• Legal risk

Legal risk is the risk that the fund will be exposed to contractual obligations which have not been provided for.

Legal representatives of the Board of Fund monitor the drafting of contracts to ensure that rights and obligations of allparties are clearly set out.

• Cash flow risk

Cash flow risk is the risk that future cash flows associated with monetary financial instrument will fluctuate in amount.In thecase of a floating rate debt instrument, for example, such fluctuations result in a change in the effective interestrate of the financial instrument, usually without a corresponding change in its fair value.

The Board of Fund monitors cash flows by using monthly cash flow projections.

• Currency risk

Currency risk is the risk that the value of an instrument will fluctuate in Rands owing to changes in foreign exchangerates. The Fund’s exposure to currency risk is mainly in respect of foreign investments made on behalf of members ofthe fund for the purpose of seeking desirable international diversification of investments.

The Board of Fund ensures that the foreign investments of the Fund are monitored and limits these investments to30% of total assets. Where the limit of 30% is exceeded, the Board of Fund ensures that it is acceptable to theAuthority.

• Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in raising funds to meet commitments associated withfinancial instruments.

The Fund’s liabilities are backed by appropriate assets and it has significant liquid resources.

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13. RISK MANAGEMENT POLICIES (continued)

• Market risk

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices ormarket interest rates.

Investments in equities are valued at fair value and therefore susceptible to market fluctuations.

Investments are managed with the aim of maximising the Fund's returns while limiting risk to acceptable levels withinthe framework of statutory requirements.

The Board of Fund ensures that continuous monitoring takes place to ensure that appropriate assets are held wherethe liabilities are dependent upon the performance of specific portfolios of assets and that a suitable match of assetsexists for all non-market related liabilities.

• Investment risk

Investments in equities are valued at fair value and therefore susceptible to market fluctuations. Investments aremanaged with the aim of maximising the fund’s returns while limiting risk to acceptable levels within the framework ofstatutory requirements.

Continuous monitoring takes place to ensure that appropriate assets are held where the liabilities are dependent uponthe performance of specific portfolios of assets and that a suitable match of assets exists for all non–market relatedliabilities.

• Price risk

Price risk is the risk that the value and/ or future cash flows of a financial instrument will fluctuate as a result ofchanges in market prices.

• Interest rate risk

Interest rate risk is the risk that the value and /or future cash flows of financial instruments will fluctuate as a result ofchanges in interest rates.

The Board of Fund monitors exposures to interest rate risk by using monthly cash flow projections.

• Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Fund'sactivities and from external factors other than credit, market and liquidity risks, such as those arising from legal andregulatory requirements and generally accepted standards of corporate behaviour.The Fund ensures that for all significant contractual obligations, as provided for in terms of the Rules, provisions havebeen raised in the financial statements and complies with all legislation, regulations and contracts. The responsibilitylies with the Board of Fund predominantly as well as with the Fund's service providers where agreed to.

Details of the Fund's Risk Management Policy are available for inspection at the registered office of the Fund.

• Inflationary risk

Inflationary risk is the uncertainty over the future real value (after inflation) of investments. The risk that the returnfrom an investment will be eroded by the negative impact of inflation on the value of investments. It is one of themajor risks in fixed income securities.

The Board of Fund continuously monitors the performance of investments against investment return benchmarks asper the Fund's investment strategy.

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14. RELATED PARTY TRANSACTIONS

Related party transactions for the period under review are as follows:

14.1. Participating employers

The following transactions between the participating employers and the Fund occurred during the period: Theparticipating employers made contributions to the Fund for members' retirement to the value of R1,054,272,843 (2017:R967,209,215) and towards the Fund's risk reserve and administration expenses to the value of R332,723,936 (2017:R303,436,970) respectively (refer to note 10 of the financial statements).

14.2. Board of Fund

During the year under review a total amount of R1,152,776 (2017: R869,843) was contributed to the Fund on behalf of themember elected Board of Fund in respect of their individual pension contributions in terms of the provisions of the FundRules. This amount consists of contributions by the member elected Board of Fund as well as their employers. Of thetotal amount R990,144 (2017: R780,182) was contributed towards the member elected Board of Funds' retirementprovision and R162,632 (2017: R89,661) was contributed towards the Fund's risk benefits and administration expenses.These contributions are the standard member and employer contributions in terms of the Fund Rules made in respect ofthe Board of Fund in their capacity as employees and are disclosed merely for transparency reasons. This is notremuneration to the Board by the Fund.

Page 48



15. SURPLUS AND RESERVE ACCOUNTS

ReserveAccounts Total

MemberReserveAccount

RevertedUnclaimed

Benefit Account

ProcessingAccount

Risk Account Data andOperational

AccountR R R R R R

At beginning of year 340,500,868 - 412,085 6,083,323 323,546,802 10,458,658Contributions received and accrued 332,723,936 - - - 289,483,122 43,240,814Net investment income 1,988,819,169 - 25,856 1,955,264,938 32,720,674 807,701Allocated to unclaimed benefits (131,130) - - (131,130) - -Less: (47,896,851) - - - (11,149,916) (36,746,935)- Re-insurance premiums (10,863,193) - - - (10,863,193) -- Administration costs (37,033,658) - - - (286,723) (36,746,935)Net income before transfers and benefits 2,614,015,992 - 437,941 1,961,217,131 634,600,682 17,760,238Transfers and benefits (458,325,644) - (14,428) (22,690,960) (435,620,256) -Transfers from other funds - - - - - -Benefits (458,325,644) - (14,428) (22,690,960) (435,620,256) -Net income after transfers and benefits 2,155,690,348 - 423,513 1,938,526,171 198,980,426 17,760,238Transfer between reserve accounts - - (312,085) - (661,960) 974,045Death and Disability 250,921,781 - - - 250,921,781 -Transfer from Risk Account - 150,000,000 - - (150,000,000) -Distribution to Members (150,000,000) (150,000,000) - - - -Investment Return Allocated to Member Share Account (1,931,174,671) - - (1,931,174,671) - -

At end of year 325,437,458 - 111,428 7,351,500 299,240,247 18,734,283

16. AMOUNTS TO BE ALLOCATED

30 June 2018R

30 June 2017R

Investment return allocated after year-end (50,475,475) (17,314,597)Contributions allocated to members after year-end 127,553,692 111,777,528Housing loan installments allocated to members after year-end 1,097,118 1,327,003

Total amounts to be allocated 78,175,335 95,789,934

Page 49


REPORT OF THE VALUATORFOR THE YEAR ENDED 30 JUNE 2018

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Page 71


SCHEDULE IA - SCHEDULES PERTAINING TO THE ANNUAL FINANCIAL STATEMENTSAT 30 JUNE 2018

INVESTMENTSNotes Direct

InvestmentsNon-compliant

CollectiveinvestmentschemesNote M1

Non-compliantInsurance

policesNote M2

Derivativepositionswithout

residual riskNote G1

CompliantInvestments

Note L

Total Local Foreign Total Foreign Total % offoreign exposure

Reconcilingitems between

Schedule IB andSchedule F

R R R R R R R R R %Cash (including cash at bank) A 2,562,321,854 675,121,490 205,775,215 - - 3,443,218,559 3,064,664,548 378,554,011 378,554,011 10.99Commodities B 25,129,243 43,816,522 - - - 68,945,765 35,076,042 33,869,723 33,869,723 49.13Housing loans 33,891,121 - - - - 33,891,121 33,891,121 - - -Debt instruments including Islamicdebt Instruments

C 2,575,482,027 1,663,195,392 759,722,133 - - 4,998,399,552 4,489,419,227 508,980,325 508,980,325 10.18

Investment and owner occupiedproperties

D 961,531,736 109,481,229 - - - 1,071,012,965 1,030,511,570 40,501,395 40,501,395 3.78

Equities E 6,057,145,680 5,995,404,221 435,835 - - 12,052,985,736 7,503,487,978 4,549,497,758 4,549,497,758 37.75Derivative Market instruments G - (26,211,370) - (20,698,065) - (46,909,435) (46,909,435) - - -Investments in participatingemployers

H - 8,972,355 325,910 - - 9,298,265 9,298,265 - - -

Other assets I 11,884,667 27,889,583 2,045,832 - - 41,820,082 21,536,315 20,283,767 20,283,767 48.50Hedge Funds J 856,261,700 - - - - 856,261,700 856,261,700 - - -Private Equity Funds K 199,688,814 - - - - 199,688,814 111,176,780 88,512,034 88,512,034 44.32Collective Investment Schemes - - - - 954,074,158 954,074,158 706,819,785 247,254,373 247,254,373 25.92Entities regulated ito Reg28(8)(b)(ii)

- - - - - - - - - -

Total investments 13,283,336,842 8,497,669,422 968,304,925 (20,698,065) 954,074,158 23,682,687,282 17,815,233,896 5,867,453,386 5,867,453,386 24.78

Page 72


SCHEDULE IA - SCHEDULES PERTAINING TO THE ANNUAL FINANCIAL STATEMENTS (continued)AT 30 JUNE 2018

A CASH

Instrument

LocalFair Value

RLocal notes, deposits, money market instruments issued by a South African Bank, margin accounts,settlement accounts with an exchange and Islamic liquidity management financial instrumentsList issuers/ entities which exceeds 5% of total assets

2,541,584,730

Notes and coins, any balance or deposit in an account held with a South African bank - exceeding 5% oftotal assets

372,742,781

Total of issuers exceeding 5% -

A money market instrument issued by a South African bank including an Islamic liquidity managementfinancial instrument - exceeding 5% of total assets

2,196,558,172

Any positive net balance in a margin account with an exchange - exceeding 5% of total assets (45,292,548)Any positive net balance in a settlement account with an exchange, operated for the buying and selling ofassets - exceeding 5% of total assets

17,576,325

ForeignForeign balances or deposits, money market instruments issued by a foreign bank including Islamicliquidity management financial instrumentsList issuers/entities which exceeds 5% of total assets

20,737,124

Any balance or deposit held with a foreign bank - exceeding 5% of total assets 20,737,124

Total 2,562,321,854

B COMMODITIES

Instrument Holding number Holding%

Fair valueR

LocalGold (including Kruger Rands)Gold - local - 0.03 7,671,659Gold - foreign - 0.01 1,657,984

9,329,643

Other Holding%

Palladium - local - 0.04 10,090,720Platinum - local - 0.02 5,708,880

15,799,600

25,129,243

Total 25,129,243

Page 73



C DEBT INSTRUMENTS INCLUDING ISLAMIC DEBT INSTRUMENTS

Instrument Local or foreign Secured/ Unsecured Issued/Guaranteed

Redemptionvalue

R

Fair value

RGovernment debt:Debt instruments issued by an loans to the government of the Republic and anydebt or loan guaranteed by the RepublicRepublic Of South Africa Local Secured Guaranteed 796,796,197

Total 796,796,197

Debt instruments issued or guaranteed by the government of a foreign country:None 8,776,366

Total 8,776,366Bank debt :Debt instruments issued or guaranteed by a South African Bank against its balance sheet:-Listed on an exchange with an issuer market capitalisation of R20 billion ormore, or an amount or conditions as prescribedTotal Local Secured Issued 544,134,153

Total 544,134,153Not listed on an exchangeTotal N/A N/A N/A (71,049)

Total (71,049)

Public debt:Debt instruments issued or guaranteed by a public entity under the PublicFinance Management Act, 1999 (Act No. 1 of 1999) as prescribed:-Airports Company of South Africa Limited (ACSA) Local Secured Guaranteed 1,444,753Development Bank of South Africa Local Secured Issued 97,786,113Eskom Holdings Ltd Local Secured Issued 50,731,321Industrial Development Corporation of South Africa Local Secured Issued 46,649,120Land and Agricultural Development Bank of South Africa Local Secured Issued 60,088,657Transnet Limited Local Secured Issued 38,592,214The South African National Roads Agency Limited Local Secured Issued 38,138,546Rand Water Local Secured Issued 1,443,862

Total 334,874,586Corporate debt (excluding debentures):Debt instruments issued or guaranteed by an entity that has equity listed on anexchangeListed on an exchangeTotal Local Secured Issued 234,450,640

Total 234,450,640Not listed on an exchangeNone N/A N/A N/A 83,730,865

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Corporate debt (excluding debentures) - continued:

Total 83,730,865

Debentures:Listed on an exchange

N/A N/A N/A 214,612,689

Total 214,612,689Not listed on an exchangeOtherNot listed on an exchangeVantage Green X Fund (RF) (Pty) Ltd 306,094,076Blend Securitisation Snr Class B 11,045,890Clover Ltd 16,978,795SA Taxi Finance Solutions (Pty) Ltd 5,100,872SA Taxi Securitisation (Pty) Ltd 18,957,947

Total 358,177,580Total debt instruments including Islamic debt instruments

2,575,482,027

Page 75



D INVESTMENT AND OWNER OCCUPIED PROPERTIES

Instrument

Shares and linked units in property companies, or units in acollective investment scheme in property, listed on an exchange:

Local/ Foreign Issued shares Holding number Ordinary/Preference

shares

Holding%

Fair valueR

Issuer market capitalisation of R10 billion or more, or an amount orconditions as prescribedTotal N/A - - 3.35 792,520,247

Total of issuers exceeding 5% 792,520,247

Issuer market capitalisation of between R3 billion and R10 billion, oran amount or conditions as prescribedTotal N/A - - 0.43 102,379,395


Issuer market capitalisation of less than R3 billion, or an amount orconditions as prescribedTotal N/A - - 0.09 21,632,094


Total 916,531,736

Total - - Ordinary 0.19 45,000,000

Total 45,000,000

Total of Investment and Owner Occupied Property 961,531,736

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E EQUITIES

Instrument Fair valueR

Listed equities

Issuer market capitalisation of R20 billion or more, or an amount or conditions as prescribedNo issuers/entities exceeds 5% of total assets 5,628,113,065

Total 5,628,113,065

Issuer market capitalisation of between R2 billion and R20 billion, or an amount or conditions as prescribedNo issuers/entities exceeds 5% of total assets 408,330,941

Total 408,330,941

Issuer market capitalisation of less than R2 billion, or an amount or conditions as prescribedNo issuers/entities exceeds 5% of total assets 20,645,454

Total 20,645,454

Unlisted equitiesNo issuers/entities exceeds 5% of total assets 56,220

Total 56,220

Total equities 6,057,145,680

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G DIRECT DERIVATIVE MARKET INSTRUMENTS

G1 DERIVATIVE POSITIONS WITHOUT RESIDUAL RISK

Instrument Local orForeign

Listed orUnlisted

Fair value Effective Economic Exposure Counterparty Expiry date

R Gross NetOptions

Futures/Forwards/SAFEX

Sep 18 DTOP Local Listed (3,654,080) (3,311,360) (3,311,360) Safex 20/09/2018Apr 19 DTOX 12636 C Local Listed (3,828,909) (3,828,909) (3,828,909) Safex 23/04/2019Apr 19 XS22 9831 P Local Listed (975,147) (975,147) (975,147) Safex 23/04/2019Aug 18 DTOX 13857 C Local Listed (10,690) (10,690) (10,690) Safex 17/08/2018Aug 18 XS12 11110 P Local Listed (2,092,639) (2,092,639) (2,092,639) Safex 17/08/2018Feb 19 DTOX 12898 C Local Listed (1,635,254) (1,635,254) (1,635,254) Safex 08/02/2019Feb 19 XS19 10482 P Local Listed (756,409) (756,409) (756,409) Safex 08/02/2019Jul 18 XS17 11427 P Local Listed (1,677,777) (1,677,777) (1,677,777) Safex 25/07/2018Mar 19 DTOX 13146 C Local Listed (1,121,086) (1,121,086) (1,121,086) Safex 14/03/2019Mar 19 XS21 10642 P Local Listed (528,424) (528,424) (528,424) Safex 14/03/2019Sep 18 DTOX 13302 C Local Listed (120,842) (120,842) (120,842) Safex 11/09/2018Sep 18 XS13 10612 P Local Listed (2,910,373) (2,910,373) (2,910,373) Safex 11/09/2018Oct 18 NPNX 4152 C Local Listed (646,990) (646,990) (646,990) Safex 23/10/2018Oct 18 XS09 2782 P Local Listed (739,445) (739,446) (739,446) Safex 23/10/2018

Currency swaps

Interest rate swaps

Forward rate agreements

Equity linked instruments

Other

Total (20,698,065)

Page 78



H INVESTMENTS IN PARTICIPATING EMPLOYER/S

I OTHER ASSETS

Instrument Holding number Holding Fair value

% RLocalFirstrand Alternative Investments 7,885,380 %0.03 7,885,380

Total local portfolio assets 7,885,380

ForeignEEECash JP Morgan 3,999,287 %0.02 3,999,287

Total foreign portfolio assets 3,999,287

Total portfolio assets 11,884,667

J HEDGE FUNDS

Instrument Period intocontract

Total value ofcommitment

Current valueof

commitmentR R

Hedge FundsCoronation Presidio Hedge Fund 01 December

20178,680,625 8,680,625

Funds of Hedge fundsBlue Ink Fixed Interest FoHF 01 February

2013348,758,262 348,758,262

Edge RCIS Absolute Return RHF Class D 01 December2017

285,023,795 285,023,795

Edge RCIS Matador RHF Class E 01 December2017

213,799,018 213,799,018

Total Hedge funds commitment 856,261,700 856,261,700

Page 79



K PRIVATE EQUITY FUNDS

Instrument Structure

Private Equity FundVantage Mezzanine III Southern African Sub Fund PartnershipsVantage Mezzanine III Pan African Sub Fund Partnerships

Total Private Equity Funds commitment

Page 80



L CERTIFIED REGULATION 28 COMPLIANT INVESTMENTS

Instrument Fair valueR

Collective Investment Schemes – regulation 28(8)(b)(i)LocalPrudential Inflation Plus Fund 954,074,158


Total 954,074,158

Total certified Regulation 28 compliant investments 954,074,158

M REGULATION 28 NON-COMPLIANT INVESTMENTS

M1 NON-COMPLIANT COLLECTIVE INVESTMENT SCHEMESInstrument

Local

Holding%

Fair valueR

ABAX Equity Fund 2.11 498,789,856Cadiz Money Market Fund 0.02 3,819,857Foord Equity Fund 4.28 1,013,706,376Investec Triple Alpha Fund 4.68 1,108,993,665Investec Target Return Fund 0.72 169,381,382Sanlam Global Absolute Return Fund 2.08 493,221,147

3,287,912,283

ForeignAll Seasons Specialist Fund 0.79 187,032,721Allan Gray Orbis Funds 3.89 920,335,380Brandywine Global Investment Management Fund 0.74 174,321,798Coronation Global Emerging Markets Fund 2.00 473,483,459Franklin Mutual Global Discovery Fund 2.68 634,252,456Hosking Global Fund 3.64 862,573,451Investec Global Franchise I 1.40 331,311,869Morgan Stanley Global Opportunity Fund 1.17 277,097,800Veritas (Nedgroup Global Equity Fund) 3.48 823,793,386RAAF - MGF Drakens Africa EX UCITS FUND USD (previously Renasset Africa X SA FundClass C)

1.11 262,656,176

Sanlam Africa Frontiers Fund 1.11 262,898,643

5,209,757,139

Total Non-compliant collective investment schemes 8,497,669,422

M2 NON- COMPLIANT INSURANCE POLICIESInstrument

Linked policiesLocal

Holding%

Fair valueR

Futuregrowth Pooled High Yield Money Market Fund 3.06 724,654,455Futuregrowth Pooled Enhanced Stefi Fund 1.03 243,650,470

968,304,925

Total linked policies 968,304,925

Total certified Regulation 28 non-compliant investments 9,465,974,347

The classification of “non-compliant” does not suggest that the Fund is contravening any requirements of Regulation28 of thePension Funds Act. The Fund has obtained the look-through information to the underlying investments and that is reported assuch in Schedule IB. These investments do not exceed the limits allowed in terms of Regulation 28.

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O ENTITY / COUNTERPARTY EXPOSURE

Credit / Counterparty riskCounterparty Direct investment

in counterparty

R

Deposit/liquidasset with

counterparty

R

Any otherinstrument

R

Total percounterparty

R

Exposure tocounterparty

as a % of the fair value of the

assets of thefund

Banks

ABSA Bank Ltd 176,219,058 107,922,658 1,090,195,749 1,374,337,465 5.80%

Asset managers - localABAX Investments (Pty) Ltd - - 498,789,856 498,789,856 2.11%Allan Gray Life Ltd - - 1,441,842,462 1,441,842,462 6.09%Aluwani Capital Partners - - 1,082,745,726 1,082,745,726 4.57%Argon Asset Mangement (Pty) Ltd - - 1,033,203,491 1,033,203,491 4.36%Blue Ink Fixed Interest FoHF - - 348,758,262 348,758,262 1.47%Cadiz Collective Investments Ltd - - 3,819,857 3,819,857 0.02%Coronation Fund Managers 83,702,451 - 750,042,478 833,744,929 3.52%Edge Capital (Pty) Ltd - - 498,822,813 498,822,813 2.11%Fairtree Capital (Pty) Ltd - - 525,267,201 525,267,201 2.22%First Avenue Investment Managers - - 885,618,118 885,618,118 3.74%Foord Unit Trusts (RF) (Pty) Ltd - - 1,013,706,376 1,013,706,376 4.28%Futuregrowth Asset Management (Pty) Ltd - - 968,304,926 968,304,926 4.09%Investec Ltd 113,272,134 - 1,165,102,913 1,278,375,047 5.40%Old Mutual Plc 30,282,368 - 2,770,680,519 2,800,962,887 11.83%Princess Properties - - 45,000,000 45,000,000 0.19%Prudential Portfolio Managers Unit Trusts Ltd - - 954,074,158 954,074,158 4.03%Sanlam Investment Management (Pty) Ltd 16,890,329 - 1,956,632,427 1,973,522,756 8.33%Sesfikile Capital (Pty) Ltd - - 354,545,929 354,545,929 1.50%Vantage Green X Renewable Energy Fund - - 316,168,078 316,168,078 1.34%Vantage Mezzanine III Southern African Sub Fund - - 111,176,780 111,176,780 0.47%

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Asset managers - foreignAll Seasons Specialist Fund - - 187,032,721 187,032,721 0.79%Allan Gray Orbis Funds - - 920,335,380 920,335,380 3.89%Brandywine Global Investment Management Fund - - 174,321,798 174,321,798 0.74%Coronation Global Emerging Markets Fund - - 473,483,459 473,483,459 2.00%Franklin Mutual Global Discovery Fund - - 634,252,456 634,252,456 2.68%Hosking Global Fund - - 862,573,451 862,573,451 3.64%Investec Global Franchise I - - 331,311,869 331,311,869 1.40%JP Morgan Chase - 7,739,874 - 7,739,874 0.03%Morgan Stanley Global Opportunity Fund - - 277,097,800 277,097,800 1.17%Veritas (Nedgroup Global Equity Fund) - - 823,793,386 823,793,386 3.48%RAAF - MGF Drakens Africa EX UCITS FUND USD (previously Renasset Africa X SA FundClass C)

- - 262,656,176 262,656,176 1.11%

Sanlam Africa Frontiers Fund - - 262,898,642 262,898,642 1.11%Vantage Mezzanine III Pan African Sub Fund - - 88,512,034 88,512,034 0.37%

Other fundsHousing loans - 33,891,121 - 33,891,121 0.14%

420,366,340 149,553,653 23,112,767,291 23,682,687,284 %100.00

Definition of 'Counterparty Risk':The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk is a risk to both parties and should be considered when evaluating acontract. In most financial contracts, counterparty risk is also known as "default risk".

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Market risk

EQUITY HOLDINGS

Investment

Fair value at end ofyear

R

Total fair valueequity holdings andopen instruments

R

Market movementby 5%

RNaspers Ltd 953,975,246 953,975,246 47,698,762Sasol Ltd 406,144,433 406,144,433 20,307,222British American Tobacco Plc 330,730,223 330,730,223 16,536,511Standard Bank Group Ltd 318,038,532 318,038,532 15,901,927BHP Billiton Plc 305,327,604 305,327,604 15,266,380Cie Financiere Richemont SA 281,523,688 281,523,688 14,076,184Anglo American Plc 194,744,915 194,744,915 9,737,246Old Mutual Plc 176,219,058 176,219,058 8,810,953FirstRand Ltd 170,257,628 170,257,628 8,512,881Mondi Ltd 147,484,814 147,484,814 7,374,241

Total value of 10 largest equity holdings 3,284,446,141 3,284,446,141 164,222,307

Total movement as % of non-current assets plus bank %0.69

OTHER FINANCIAL INSTRUMENTS

Instrument

Holding

R


R


RInvestec Triple Alpha Fund 1,108,993,665 1,108,993,665 55,449,683Foord Equity Fund 1,013,706,376 1,013,706,376 50,685,319Prudential Inflation Plus Fund 954,074,158 954,074,158 47,703,708Republic Of South Africa - Government Bonds 796,796,197 796,796,197 39,839,810Futuregrowth Pooled High Yield Money Market Fund 724,654,455 724,654,455 36,232,723Nedbank Ltd 591,827,825 591,827,825 29,591,391Firstrand Bank Ltd, Incl RMB 534,074,094 534,074,094 26,703,705Standard Bank of SA Ltd 514,591,380 514,591,380 25,729,569ABAX Equity Fund 498,789,856 498,789,856 24,939,493Sanlam Global Absolute Return Fund 493,221,147 493,221,147 24,661,057

Total value of 10 largest other instruments 7,230,729,153 7,230,729,153 361,536,458


Foreign currency exposure

Foreign instruments


R


RAllan Gray Orbis Fund 920,335,380 46,016,769Hoskings Global Fund 862,573,451 43,128,673Veritas (Nedgroup Global Equity Fund) 823,793,386 41,189,669Franklin Mutual Global Discovery Fund 634,252,456 31,712,623

Page 84



Coronation Global Emerging Markets Fund 473,483,459 23,674,173Investec Global Franchise I 331,311,869 16,565,593Morgan Stanley Global Opportunity Fund 277,097,800 13,854,890Sanlam Africa Frontiers Fund 262,898,642 13,144,932RAAF - MGF Drakens Africa EX UCITS FUND USD (previously Renasset Africa X SA Fund Class C) 262,656,176 13,132,809Prudential Inflation Plus Fund 247,254,373 12,362,719All Seasons Specialist Fund 187,032,721 9,351,636Brandywine Global Investment Management Fund 174,321,798 8,716,090Investec Target Return Fund 169,490,198 8,474,510Sanlam Global Absolute Return Fund 112,004,941 5,600,247Coronation Abs Return Global 110,939,715 5,546,986

Total value of 10 largest foreign instruments 5,849,446,365 292,472,319


P RECONCILIATION BETWEEN THE INVESTMENTS IN SCHEDULE HA AND SCHEDULE IA

Fair valuecurrent period

(as perSchedule HA

3.1)

Cash at bank Property split(Schedule IAD)

Non-compliantCIS

Non-compliantInsurancePolicies

Other Total

R R R R R R RCash 2,446,659,321 115,662,532 - 675,121,490 205,775,216 - 3,443,218,559Commodities 25,129,243 - - 43,816,522 - - 68,945,765Housing loans - - - - - 33,891,121 33,891,121Debt instruments including Islamic debt instruments 2,575,482,028 - - 1,663,195,391 759,722,133 - 4,998,399,552Investment properties and Owner occupied properties 45,000,000 - 916,531,736 109,481,229 - - 1,071,012,965Equities 6,973,677,416 - (916,531,736) 5,995,404,221 435,835 - 12,052,985,736Investment in participating employer(s) - - - 8,972,355 325,910 - 9,298,265Hedge funds 856,261,700 - - - - - 856,261,700Private equity funds 199,688,814 - - - - - 199,688,814Derivative market investments (20,698,065) - - (26,211,370) - - (46,909,435)Collective investment schemes 9,451,743,579 - - (8,497,669,421) - - 954,074,158Insurance policies 968,304,926 - - - (968,304,926) - -Other assets 11,884,667 - - 27,889,583 2,045,832 - 41,820,082

Total investments 23,533,133,629 115,662,532 - - - 33,891,121 23,682,687,282

Page 85


SCHEDULE IB - ASSETS HELD IN COMPLIANCE WITH REGULATION 28AS AT 30 JUNE 2018

Fair valueR

A Total assets (Schedule IA -Total investments) 23,729,596,717

B1 Less: Reg 28 compliant investments(certificate received from issuing entity):-

(954,074,158)

B.1.1 Collective Investment Schemes (Reg 28(8)(b)(i)) (954,074,158)B.1.2 Linked Policies (Reg 28(8)(b)(ii)) -B.1.3 Non-Linked policies (Reg 28(8)(b)(iii)) -B.1.4 Entity regulated by FSCA (Reg 28(8)(b)(iv))) -

B2 Less: Reg 28 excluded investmentsB2.1 Insurance Policies ( Reg 28(3)(c)) -

C Less: Investments not disclosed /data not available for disclosure[Refer to schedule IAN]

-

D TOTAL ASSETS FOR REGULATION 28 DISCLOSURE 22,775,522,559

Categories of kinds of assets Fair valueR

Fair value%

1 CASH 3,443,218,559 15.12%

1.1 Notes, deposits, money market instruments issued bya South African Bank, margin accounts, settlementaccounts with an exchange and Islamic liquiditymanagement financial instruments

100%

3,064,664,550 13.46%(a) Notes and coins; any balance or deposit in an account

held with a South African bank; 296,434,810 1.30%ABSA Bank Ltd 25% 266,946,193 1.17%Standard Bank of SA Ltd 25% 49,440,132 0.22%Standard Chartered Bank 25% 46,368,234 0.20%Nedbank Ltd 25% 37,427,889 0.16%Vantage Green X Fund (RF) (Pty) Ltd 25% 10,074,002 0.04%Other 25% (113,821,640) (0.50)%

(b) A money market instrument issued by a South Africanbank including an Islamic liquidity management financialinstrument 2,610,033,968 11.46%Nedbank Ltd 25% 703,551,306 3.09%Standard Bank of SA Ltd 25% 625,375,880 2.75%Firstrand Bank Ltd, Incl RMB 25% 622,377,757 2.73%ABSA Bank Ltd 25% 546,221,642 2.40%Investec Bank Ltd 25% 86,774,787 0.38%Other 25% 25,732,596 0.11%

(c) Any positive net balance in a margin account with anexchange 125,601,944 0.55%Yield X Exchange 25% 152,326,773 0.67%Investec GBF Target Return Bond Fund 25% 1 0.00%SAFEX Margin 25% (26,724,830) (0.12)%

(d) Any positive net balance in a settlement account with anexchange, operated for the buying and selling of assets 32,593,828 0.14%Standard Chartered Bank 25% 20,167,096 0.09%Coronation Global Emerging Markets 25% 7,105,237 0.03%Investec GBF Target Return Bond Fund 25% 4,096,287 0.02%Nedbank Ltd 25% 947,549 0.00%Standard Bank of SA Ltd 25% 277,659 0.00%

1.2 Balances or deposits, money market instrumentsissued by a foreign bank including Islamic liquiditymanagement financial instruments

SARBmax.limits 378,554,009 1.66%

(a) Any balance or deposit held with a foreign bank 380,163,868 1.67%Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

5% 197,227,872 0.87%

Veritas (Nedgroup Global Equity Fund) 5% 76,025,195 0.33%Investec GBF Target Return Bond Fund 5% 32,467,611 0.14%Foreign Currencies 5% 30,105,474 0.13%Hosking Global Funds 5% 26,126,616 0.11%

Carried forward 3,426,617,318 15.02%Page 86




Fair value%

Brought forward 3,426,617,318 15.02%Other 5% 18,211,100 0.08%

(b) Any balance or deposit held with an African bank - 0.00%(c) A money market instrument issued by a foreign bank

including an Islamic liquidity management financialinstrument (1,609,859) (0.01)%Ishares Exchange Traded Funds 5% 139,412 0.00%Investec GBF Target Return Bond Fund 5% (1,749,271) (0.01)%

2 DEBT INSTRUMENTS INCLUDING ISLAMIC DEBTINSTRUMENTS 4,998,399,552 21.95%

2.1 Inside the Republic 100% 4,489,419,232 19.71%(a) Debt instruments issued by, and loans to, the government

of the Republic, and any debt or loan guaranteed by theRepublic 100% 1,411,036,162 6.20%Republic Of South Africa - Government Bonds 100% 1,411,036,162 6.20%

(b) Debt instruments issued or guaranteed by the governmentof a foreign country 75% - 0.00%

(c) Debt instruments issued or by a South African bankagainst its balance sheet 75% 857,424,783 3.76%

c(i) Listed on an exchange with an issue market capitalisationof R20 billion or more, or an amount or conditions asprescribed 75% 843,047,814 3.70%Standard Bank of SA Ltd 25% 269,236,003 1.18%Firstrand Bank Ltd, Incl RMB 25% 213,789,881 0.94%Nedbank Ltd 25% 165,092,686 0.72%ABSA Bank Ltd 25% 130,675,202 0.57%Investec Bank Ltd 25% 45,243,043 0.20%Other 25% 19,010,999 0.08%

c(ii) Listed on an exchange with an issuer market capitalisationof between R2 billion and R20 billion, or an amount orconditions as prescribed 75% - 0.00%

c(iii) Listed on an exchange with an issuer market capitalisationof less than R2 billion, or an amount or conditions asprescribed 75% 11,452,896 0.05%African Bank Ltd 10% 11,452,896 0.05%

c(iv) Not listed on an exchange 25% 2,924,073 0.01%African Bank Ltd 5% 2,709,264 0.01%ABSA Bank Ltd 5% 302,546 0.00%Nedbank Ltd 5% 15,558 0.00%Investec Bank Ltd 5% 43 0.00%Firstrand Bank Ltd, Incl RMB 5% (103,338) 0.00%

(d) Debt instruments issued or guaranteed by an entity thathas equity listed on an exchange, or debt instrumentsissued or guaranteed by a public entity under the PublicFinance Management Act, 1999 (Act No. 1 of 1999) asprescribed 50% 938,782,292 4.12%

d(i) Listed on an exchange 50% 816,409,069 3.58%Eskom Ltd 10% 129,479,710 0.57%Development Bank of SA 10% 114,635,976 0.50%Land & Agricultural Bank of SA 10% 70,243,694 0.31%Mercedes-Benz South Africa (Pty) Ltd 10% 65,178,020 0.29%Industrial Development Corporation 10% 63,358,313 0.28%Other 10% 373,513,356 1.64%

d(ii) Not listed on an exchange 25% 122,373,223 0.54%Land and Agricultural Development Bank of SA 5% 79,097,084 0.35%Transnet Ltd 5% 26,182,901 0.11%Industrial Development Corporation 5% 7,997,224 0.04%MTN Group Ltd 5% 5,086,301 0.02%Redefine Properties Ltd 5% 3,522,532 0.02%Other 5% 487,181 0.00%

(e) Other debt instruments:- 25% 1,282,175,995 5.63%e(i) Listed on an exchange 25% 377,535,325 1.66%

Toyota Financial Services (SA) Ltd 5% 62,479,545 0.27%SuperDrive Investments (Pty) Ltd 5% 24,705,265 0.11%





Fair value%

Brought forward 6,737,646,606 29.55%Amber House Fund 3 (RF) Ltd 5% 23,417,546 0.10%Nitro Securitisation 5% 22,022,582 0.10%Old Mutual Life Assurance Company (South Africa) Ltd 5% 21,235,827 0.09%Other 5% 223,674,560 0.98%

e(ii) Not listed on an exchange 15% 904,640,670 3.97%Vantage Green X Fund (RF) (Pty) Ltd 5% 306,094,076 1.34%Clover Ltd 5% 41,043,558 0.18%Melrose Arch Investment Holdings 5% 32,817,015 0.14%Trust for Urban Housing Finance (Pty) Ltd 5% 32,368,964 0.14%Scatec Solar SA 166 (Pty) Ltd 5% 29,451,874 0.13%Other 5% 462,865,183 2.03%

2.2 Foreign

SARBmax.limits

508,980,320 2.23%(a) Debt instruments issued by, and loans to, the government

of the Republic, and any debt or loan guaranteed by theRepublic

SARBmax.limits

- 0.00%

(b) Debt instruments issued or guaranteed by the governmentof a foreign country

SARBmax.limits

178,346,315 0.78%

Investec GBF Target Return Bond Fund 10% 110,300,355 0.48%Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

10% 59,269,598 0.26%

Government of Namibia 10% 11,274,586 0.05%Largest issuer: US T-BILL 0.000% 230818 10% 2,776,863 0.01%Other 10% (5,275,087) (0.02)%

(c) Debt instruments issued or guaranteed by a South AfricanBank against its balance sheet:-

SARBmax.limits

853,479 0.00%

c(i) Listed on an exchange with an issuer market capitalisationof R20 billion or more, or an amount or conditions asprescribed

SARBmax.limits 853,479 0.00%

Largest issuer: INVPLN 6.75% 291249 25% 603,853 0.00%Other 25% 249,626 0.00%

c(ii) Listed on an exchange with an issuer market capitalisationof between R2 billion and R20 billion, or an amount orconditions as prescribed

SARBmax.limits - 0.00%

c(iii) Listed on an exchange with an issuer market capitalisationof less than R2 billion, or an amount or conditions asprescribed

SARBmax.limits

- 0.00%

c(iv) Not listed on an exchange - 0.00%(d) Debt instruments issued or guaranteed by an entity that

has equity listed on an exchangeSARBmax.limits

22,664,287 0.10%

d(i) Listed on an exchange SARBmax.limits

21,974,803 0.10%

Investec GBF Target Return Bond Fund 10% 3,231,302 0.01%Growthpoint Properties Ltd 10% 2,476,162 0.01%Largest Issuer: Remgro 2.625% 220321 10% 1,502,768 0.01%Other 10% 14,764,571 0.06%

d(ii) Not listed on an exchange 25% 689,484 0.00%Investec GBF Target Return Bond Fund 5% 448,671 0.00%Largest Issuer: Citigroup 0.0000% 291118 5% 221,069 0.00%Other 5% 19,744 0.00%

(e) Other debt instruments 25% 307,116,239 1.35%e(i) Listed on an exchange 25% 304,539,303 1.34%

Brandywine Global Investment Management 5% 174,321,798 0.77%Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

5% 105,102,300 0.46%

Investec GBF Target Return Bond Fund 5% 24,791,530 0.11%Largest issuer: IFC 2.3975% 090119 5% 151,001 0.00%Other 5% 129,844 0.00%

5% 42,830 0.00%





Fair value%

Brought forward 8,439,041,175 36.99%e(ii) Not listed on an exchange 15% 2,576,936 0.01%

Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

5% 2,576,936 0.01%

3 EQUITIES 12,052,985,736 52.92%

3.1 Inside the Republic 75% 7,503,487,978 32.95%(a) Preference and ordinary shares in companies, excluding

shares in property companies, listed on an exchange:-75%

7,502,995,922 32.94%a(i) Issuer market capitalisation of R20 billion or more, or an

amount or conditions as prescribed 75% 6,942,695,760 30.48%Naspers Ltd 15% 1,209,094,754 5.31%Sasol Ltd 15% 506,483,094 2.22%British American Tobacco Plc 15% 460,025,773 2.02%BHP Billiton PLC 15% 393,822,621 1.73%Standard Bank Group Ltd 15% 386,111,319 1.70%Other 15% 3,987,158,199 17.51%

a(ii) Issuer market capitalisation of between R2 billion and R20billion, or an amount or conditions as prescribed 75% 530,107,921 2.33%Omnia Holdings Ltd 10% 40,352,972 0.18%Italtile Ltd 10% 39,266,884 0.17%Super Group Ltd/South Africa 10% 38,384,218 0.17%Northam Platinum Ltd 10% 35,189,338 0.15%Impala Platinum Holdings Ltd 10% 27,505,324 0.12%Other 10% 349,409,185 1.53%

a(iii) Issuer market capitalisation of less than R2 billion, or anamount or conditions as prescribed 15% 30,192,241 0.13%Grand Parade Investments Ltd 5% 5,120,359 0.02%All Seasons Specialist Fund 5% 4,003,015 0.02%Hulamin Ltd 5% 3,895,853 0.02%RECM & Calibre Ltd 5% 3,830,307 0.02%Adcorp Holdings Ltd 5% 2,863,506 0.01%Other 5% 10,479,201 0.05%

(b) Preference and ordinary shares in companies, excludingshares in property companies, not listed on an exchange 15% 492,056 0.00%Q400 Leasing Facility 2.5% 435,835 0.00%Mobile Industries (Pty) Ltd 2.5% 56,221 0.00%

3.2 Foreign 4,549,497,758 19.98%

(a) Preference and ordinary shares in companies, excludingshares in property companies, listed on an exchange:-

SARBmax.limits 4,548,467,993 19.97%

a(i) Issuer market capitalisation of R20 billion or more, or anamount or conditions as prescribed

SARBmax.limits

4,329,371,670 19.01%

Hosking Global Funds 15% 803,776,202 3.53%Nedgroup Global Equity Fund 15% 747,768,191 3.28%Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

15% 634,252,456 2.78%

Coronation Global Emerging Markets 15% 502,779,218 2.21%Investec Global Franchise I 15% 399,139,912 1.75%Other 15% 1,241,655,691 5.45%

a(ii) Issuer market capitalisation of between R2 billion and R20billion, or an amount or conditions as prescribed

SARBmax.limits

26,268,770 0.12%

Largest Issuer: Eminence Fd Long Cl A 10% 8,680,583 0.04%Coronation Global Emerging Markets 10% 4,360,483 0.02%Largest Issuer: Samsung Electronics Co Ltd 10% 217,825 0.00%Other 10% 13,009,879 0.06%

a(iii) Issuer market capitalisation of less than R2 billion, or anamount or conditions as prescribed

SARBmax.limits

192,827,553 0.85%

All Seasons Specialist Fund 5% 181,316,699 0.80%Largest issuer: Ishares Exchange Traded Funds 5% 9,678,332 0.04%Other 5% 1,832,522 0.01%





Fair value%

Brought forward 20,493,574,082 89.92%(b) Preference and ordinary shares in companies, excluding

shares in property companies, not listed on an exchange10%

1,029,765 0.00%Largest Issuer: Blackrock Unit Trusts 2.5% 226,399 0.00%Other 2.5% 803,366 0.00%

4 IMMOVABLE PROPERTY 1,071,012,965 4.70%

4.1 Inside the Republic 25% 1,030,511,570 4.52%(a) Preference shares, ordinary shares and linked units

comprising shares linked to debentures in propertycompanies, or units in a Collective Investment Scheme inProperty, listed on an exchange 25% 985,511,570 4.33%

a(i) Issuer market capitalisation of R10 billion or more, or anamount or conditions as prescribed 25% 853,148,077 3.75%Growthpoint Properties Ltd 15% 119,988,032 0.53%Redefine Properties Ltd 15% 95,325,057 0.42%Nepi Rockcastle Plc 15% 93,836,021 0.41%Fortress Income Fund Ltd - B 15% 78,165,630 0.34%Capital & Counties Properties Plc 15% 71,937,760 0.32%Other 15% 393,895,577 1.73%

a(ii) Issuer market capitalisation of between R3 billion and R10billion, or an amount or conditions as prescribed 25% 110,766,078 0.49%Equites Property Fund Ltd 10% 35,646,970 0.16%Arrowhead Properties Ltd - A 10% 24,182,304 0.11%Stor-Age Property Reit Ltd 10% 14,431,123 0.06%Hospitality Property Fund Ltd 10% 7,809,786 0.03%Emira Property Fund 10% 5,845,393 0.03%Other 10% 22,850,502 0.10%

a(iii) Issuer market capitalisation of less than R3 billion or anamount or conditions as prescribed 25% 21,597,415 0.09%Fairvest Property Holdings Ltd 5% 7,332,602 0.03%Dipula Income Fund-A 5% 6,292,572 0.03%Texton Property Investment Fund 5% 3,605,909 0.02%Tower Property Fund Ltd 5% 2,117,200 0.01%Dipula Income Fund-B 5% 1,647,152 0.01%Other 5% 601,980 0.00%

(b) Immovable property, preference and ordinary shares inproperty companies, and linked units comprising shareslinked to debentures in property companies, not listed onan exchange 15% 45,000,000 0.20%Princess Properties 5% 45,000,000 0.20%

4.2 Foreign 25% 40,501,395 0.18%(a) Preference shares, ordinary shares and linked units

comprising shares linked to debentures in propertycompanies, or units in a Collective Investment Scheme inProperty, listed on an exchange 25% 40,439,487 0.18%

a(i) Issuer market capitalisation of R10 billion or more, or anamount or conditions as prescribed 25% 40,020,031 0.18%Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

15% 21,167,714 0.09%

Largest Issuer: Fonciere Des Regions 15% 1,050,311 0.00%Largest Issuer: Intu Properties Plc 15% 939,716 0.00%Other 15% 16,862,290 0.07%

a(ii) Issuer market capitalisation of between R3 billion and R10billion, or an amount or conditions as prescribed 25% 309,132 0.00%Largest Issuer: Sakura Sogo Reit Investment 10% 263,741 0.00%Largest Issuer: Armada Hoffler Properties Inc 10% 45,391 0.00%

a(iii) Issuer market capitalisation of less than R3 billion or anamount or conditions as prescribed

25%110,324 0.00%

Largest Issuer: Aspen Group 5% 96,633 0.00%Largest Issuer: Liberty Property Trust 5% 10,050 0.00%Other 5% 3,641 0.00%





Fair value%

Brought forward 21,565,554,904 94.62%(b) Immovable property, preference and ordinary shares in

property companies, and linked units comprising shareslinked to debentures in property companies, not listed onan exchange 15% 61,908 0.00%Merlin Properties Socimi Sa 5% 61,908 0.00%

5 COMMODITIES 68,945,765 0.30%

5.1 Inside the Republic 10% 35,076,043 0.15%(a) Kruger Rands and other commodities on an exchange,

including exchange traded commodities 10% 35,076,043 0.15%a(i) Gold (including Kruger Rands) 10% 19,249,921 0.08%

New Gold Issuer Ltd 10% 19,249,921 0.08%a(ii) Other commodities 5% 15,826,122 0.07%

New Gold Platinum ETF 5% 5,672,715 0.02%New Palladium ETF 5% 5,566,065 0.02%Africa Palladium Debenture 5% 4,524,655 0.02%Firstrand Platinum Linked Note 5% 62,687 0.00%

5.2 Foreign 10% 33,869,722 0.15%(a) Gold and other commodities on an exchange, including

exchange traded commodities 10% 33,869,722 0.15%a(i) Gold 10% 1,657,984 0.01%

Gold Bullion Securities 5% 1,657,984 0.01%a(ii) Other commodities 5% 32,211,738 0.14%

Orbis SICAV Global Balanced Fund, Core RRF ShareClass M-14

5% 32,211,738 0.14%

6 INVESTMENTS IN THE BUSINESS OF APARTICIPATING EMPLOYER INSIDE THE REPUBLICIN TERMS OF:- 9,298,265 0.04%

(a) Section 19(4) of the Pension Funds Act 9,298,265 0.04%

(b) To the extent it has been allowed by an exemption interms of section 19(4A) of the Pension Funds Act - 0.00%

7 HOUSING LOANS GRANTED TO MEMBERS INACCORDANCE WITH THE PROVISIONS OF SECTION19(5)

95% 33,891,121 0.15%

8 HEDGE FUNDS, PRIVATE EQUITY FUNDS AND ANYOTHER ASSET NOT REFERRED TO IN THISSCHEDULE 1,097,770,596 4.82%

8.1 Inside the Republic 15% 988,974,795 4.34%(a) Hedge fund 10% 856,261,700 3.76%a(i) Funds of hedge funds 10% 847,581,075 3.72%

Blue Ink Fixed Interest FoHF 5% 348,758,262 1.53%Edge RCIS Absolute Return RHF Class D 5% 285,023,795 1.25%Edge RCIS Matador RHF Class E 5% 213,799,018 0.94%

a(ii) Hedge funds 10% 8,680,625 0.04%Coronation Presidio Hedge Fund 2.5% 8,680,625 0.04%

(b) Private equity funds 10% 111,176,780 0.49%b(i) Funds of private equity funds 10% - 0.00%b(ii) Private equity funds 10% 111,176,780 0.49%

Vantage Mezzanine III Southern African Sub Fund 2.5% 111,176,780 0.49%(c) Other assets not referred to in this schedule and excluding

a hedge fund or private equity fund 2.5% 21,536,315 0.09%Firstrand Alternative Investments 2.5% 19,490,483 0.09%Futuregrowth Pooled High Yield Money Market Fund 2.5% 1,819,594 0.01%Futuregrowth Pooled Enhanced Stefi Fund 2.5% 226,238 0.00%

8.2 Foreign 15% 108,795,801 0.48%(a) Hedge fund 10% - 0.00%a(i) Funds of hedge funds 10% - 0.00%





Fair value%

Brought forward 22,657,428,493 99.41%a(ii) Hedge funds 10% - 0.00%(b) Private equity funds 10% 88,512,034 0.39%b(i) Funds of private equity funds 10% - 0.00%b(ii) Private equity funds 10.0% 88,512,034 0.39%

Vantage Mezzanine III Pan African Sub Fund 2.5% 88,512,034 0.39%(c) Other assets not referred to in this schedule and excluding

a hedge fund or private equity fund 2.5% 20,283,767 0.09%Hosking Global Funds 2.5% 16,283,480 0.07%EEECash JP Morgan 2.5% 3,999,287 0.02%All Seasons Specialist Fund 2.5% 1,000 0.00%

TOTAL ASSETS – REGULATION 28 22,775,522,559 100.00%

Page 92



INVESTMENT SUMMARY (Regulation 28)Local Fair value Foreign

(Excluding Africa)Fair value Africa Fair value Total

R % R % R % R1 Balances or deposits, money market instruments

issued by a bank including Islamic liquiditymanagement financial instruments 3,064,664,550 12.91 378,554,009 1.60 - - 3,443,218,559

2 Debt instruments including Islamic debt instruments 4,489,419,232 18.92 508,980,320 2.14 - - 4,998,399,5523 Equities 7,503,487,978 31.62 4,549,497,758 19.17 - - 12,052,985,7364 Immovable property 1,030,511,570 4.34 40,501,395 0.17 - - 1,071,012,9655 Commodities 35,076,043 0.15 33,869,722 0.14 - - 68,945,7656 Investment in the business of a participating

employer 9,298,265 0.04 - - - - 9,298,2657 Housing loans granted to members - section 19(5) 33,891,121 0.14 - - - - 33,891,1218 Hedge Funds, private equity funds and any other

assets not referred to in this schedule 988,974,795 4.17 108,795,801 0.46 - - 1,097,770,5969 Fair value of assets to be excluded

in terms of sub-regulation (8)(b) of Regulation 28 706,819,785 2.98 247,254,373 1.04 - - 954,074,158

TOTAL 17,862,143,339 75.27 5,867,453,378 24.73 - - 23,729,596,717

Page 93



BREACHES IN TERMS OF SUB REGULATION 3 OF REGULATION 28

Table 1items

Asset Limits in terms of sub regulation 3(f) Total (Inside &Foreign)

R

Percentage ofFair value

%

Regulation 28limits

2.1(e)(ii) Other debt instruments not listed 907,217,609 3.82 3.1(b) Equities not listed 1,521,822 0.01 4.1(b) Immovable properties not listed 45,061,908 0.19 8 Hedge funds , Private Equity funds and other assets 1,050,861,162 4.43

TOTAL 2,004,662,501 8.45 35

Table 1items

Asset Limits in terms of sub regulation 3(g) Fair valueR

Fair value%

Regulation 28limits

3.1(b) Equities not listed 1,521,822 0.01 8.1(b) Private Equity funds 199,688,814 0.84

TOTAL 201,210,636 0.85 15

Table 1items

Asset Limits in terms of sub regulation 3(h) Fair valueR

Fair value%

Regulation 28limits

1.1 Item 1.1 Cash and deposits with a South African Bank 3,064,664,548 12.91 2.1(c) Item 2.1(c) Debt instruments guaranteed by a South

African Bank 271,945,268 1.15

TOTAL 3,336,609,816 14.06 25

The Fund had no breaches in terms of Regulation 28.

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ANNUAL FINANCIAL STATEMENTS NAME OF RETIREMENT …€¦ · Maphuti Lisbeth Mothata [email protected] E 25 November 2011 28 February 2018 Andries van den Berg [email protected]