2015 annual report - mhc.mu · 06 mauritius housing company ltd company overview to offer a wide...
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Promoting Home Ownership for a Better Quality of Life
ANNUAL REPORTMAURITIUS HOUSING COMPANY LTD20
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Promoting Home Ownership for a Better Quality of Life
At the Mauritius Housing Company Ltd,we have been providing and will continue to provide smart and sustainable
creative housing finance solutions for a better Mauritius.
Since 1963www.mhc.mu
01 | Company Overview 3
02 | Milestones 9
03 | Business Overview 11 - Our Services 12 - Board of Directors 13 - Board Sub-Committees 13 - Senior Management 14
04 | Business Review 15 - Chairman’s Statement 16 - Financial Highlights 17 - Savings & Term Deposits 19 - Review of Operations 20 - Strategic Agenda 22 - Sales & Marketing 23 - Loan & Savings Products 24 - Service Quality 25 - Information Technology 25 - Our People 26
05 | Corporate Governance 27 - Corporate Governance 28 - Statement of Compliance
Mauritius Housing Company Ltd 36
06 | Risk Review and Management 37
07 | Management Discussion and Analysis 42
08 | Audited Financial Statements 45
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COMPANY OVERVIEWMAURITIUS HOUSING COMPANY LTD01
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Corporate Profile
Our Shareholders
The Mauritius Housing Company Ltd (MHC Ltd) emanates from the former Mauritius Housing Corporation, a parastatal body set up in 1963. The latter had taken over the housing loan business carried out by the Mauritius Agricultural Bank since 1951. The MHC Ltd was incorporated in 1989 to be a total solutions provider in respect of housing finance requirements and to better meet the challenges posed by the market. With more than 5 decades at the service of the nation, MHC Ltd is the only financial institution in Mauritius and Rodrigues that offers a variety of solutions with respect to the promotion of home ownership. Indeed, besides housing loans, MHC Ltd provides architectural, technical, legal and insurance services as well as deposit-taking and savings schemes.
SIC, 13.3%
SICOM, 13.3%
NPF, 13.3%
Govt. of Mauritius, 60.1%
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About Us
Our Vision To be the undisputed benchmark and the most preferred provider of housing
financial services in Mauritius and the region.
Innovation and Creativity
Staff Development and Welfare
Serviceability
Customer-Oriented
Teamwork and Team Spirit
Honesty and Integrity
Environment Care
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To offer a wide range of attractive housing financial services with respect to construction projects, renovation, extension, reimbursement, purchase and acquisition of lodging/apartments and refinancing of housing loans aiming at helping every Mauritian and Rodriguan family to own a house.
To professionally and continuingly delight our customers ranging from a newborn to a senior citizen with a wide spectrum of competitive products that better meet their needs and expectations whilst ensuring a better future.
With a view to fulfilling the MHC’s mandate, we shall maximize our share of the market in Mauritius and Rodrigues without disregarding the regional market by using tailor-made strategies and objectives.
To make full use of available, affordable and applicable technologies that will take the organisation to higher business excellence.
We shall always put our people, who are our most valued asset, at the core of our business operations through adequate training and performance management whilst ensuring quality at all times.
To leave no stone unturned in addressing the currently applicable Code of Corporate Governance, the Bank of Mauritius Guideline on Corporate Governance and any other established industry practices aiming at the enhancement of customer confidence and legal compliance.
Our Mission
PRODUCTS/SERVICES ASPECT
CUSTOMER ASPECT
GEOGRAPHY ASPECT
TECHNOLOGY ASPECT
PEOPLE ASPECT
GOOD GOVERNANCE ASPECT
Our Objects (as per the Company’s Constitution) To promote housing developments within the Republic of Mauritius both on our own or as an agent; To grant loans for the purchase of residential land; To set up such housing savings schemes as would be appropriate; To carry out business in the nature of insurance in respect of our clients and/or our guarantor/s and
client’s/s’ and/or guarantor’s/s’ properties. To promote property development within the Republic of Mauritius on our own or in partnership or as
agent or shareholder of a company.
177 at our Head Office in Port Louis;17 at Curepipe Office; 10 at Flacq Office;6 at Goodlands Office;7 at Triolet Office;6 at Bambous Office; and5 at Rodrigues Office
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Our Organisational StructureMHC is a non-bank deposit taking financial institution comprising the following business units:
Our Workforce Our total workforce comprises 228 employees posted as follows:
Commercial Business
Unit
Finance Business Unit
Corporate Services
Business Unit
Corporate Planning & Development Business Unit /
Money Laundering Reporting Officer
Technical Business Unit
Attorney Internal Auditor
Company Secretary
Information & Communication
Technology Business Unit
Board of Directors
Deputy Managing Director
Managing Director / Officer in Charge
Corporate InformationRegistered Office: Révérend Jean Lebrun Street,Port Louis, MauritiusTelephone: (230) 405 5555Fax: (230) 212 3325Postcode: 11328Email: [email protected]: http://www.mhc.mu
Company Status: Public Company Limited by shares
Incorporated on: 12 December 1989
Business Registration Number: C06008524
Our Branches
RODRIGUES
FLACQ
GOODLANDS
TRIOLET
PORT LOUIS
CUREPIPEBAMBOUS
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HEAD OFFICE Révérend Jean Lebrun Street,Port LouisTel: (230) 405 5555Fax: (230) 212 3325Postcode: 11328
BAMBOUS Royal Road Tel/Fax: (230) 452 0372Postcode: 90102
CUREPIPE Charles Lees StreetTel: (230) 676 0245/46/49Fax: (230) 676 0248Postcode: 74404
RODRIGUESCamp du RoiTel: (230) 831 1787Fax: (230) 831 1788Postcode: R5109
CENTRAL FLACQFrançois Mitterrand StreetTel: (230) 413 5139/40 Fax: (230) 413 5138Postcode: 40606
TRIOLET Royal Road, 8th MileTel: (230) 261 7623Fax: (230) 261 5324Postcode: 21503
GOODLANDSBlock A2, Corner Royal Road & Route Les PenséesTel: (230) 282 1460/42Fax: (230) 282 1461Postcode: 30406
MILESTONESMAURITIUS HOUSING COMPANY LTD02
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1963:Creation of the Mauritius Housing Corporation (a parastatal body)
1988:Launch of Plan Epargne Logement (PEL)
1990s:EDF Sites & Services:Sugar Camp Loans – eradication of sugar camps in Mauritius
1990:Opening of MHC Branch in Rodrigues
2001:Opening of Curepipe BranchLaunch of Housing Deposit Certificates
2014:Launch of MHC Housing Empowerment Loan Scheme
2004:Opening of Customer Service Offices at Triolet and Bambous
2012: ISO 9001:2008 certification Social Housing -
Dubreuil & Sottise Opening of Triolet Branch
2009:Launch of a new savings product, Junior PEL Saver Scheme (JPS)
2010:Implementation of a Quality Management System
1972:Exceptional Savings Scheme (ESS)
1970s:Launch of Estate Developments
1986:Launch of Government-Sponsored Loans
1989:Incorporation of the MHC as a state-owned public company
2002: Opening of Goodlands Branch Joint venture between BPML and MHC
in the Cybervillage project at Ebène Introduction of Land Purchase
2013: Golden Jubilee Celebration Winning the Business Excellence Award Hosting of the African Union for Housing
Finance AGM & Conference
2006:Home Loan Plus Scheme targeted at existing clients
2011:Vuillemin Housing Project (Phase III)
2015:Centralised Banking Information System (CBIS) project launch
1994:Opening of Flacq Branch
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Our Services Our products and services are accessible to all segments of the population of the Republic of Mauritius, whichever they choose, and whether through our Head Office, any of our branches or online.
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Housing Loan ProductsThe Company offers a range of attractive tailor-made housing loan products for land purchase, construction, completion, renovation and extension, purchase of residential property/apartments and refinancing of existing loans with other financial institutions.
Savings & DepositsThe Company offers a wide range of savings and investment products. These include the regular monthly savings (Plan Epargne Logement – PEL), children’s savings (Junior PEL Saver – JPS) and also term deposits (Housing Deposit Certificates – HDCs) with investments at attractive rates of interest and terms ranging from 6 to 60 months.
InsuranceMHC Ltd provides its clients with life and building insurance as part of the home loan package with a view to protecting their interests and safeguarding their properties against contingencies.
Architectural & TechnicalMHC Ltd undertakes the architectural design of houses and also offers technical assistance to its clients to enable them realise their housing projects, based on their financial capacities and also on practical advice for an optimal use of their land area for house construction. Free house plans are offered to clients, subject to applicable conditions.
Estate DevelopmentMHC’s assets (lands and buildings) are maintained and foreclosed properties are monitored through rental up to disposal. The Company has an impressive track record of Estate Development projects throughout the island starting in the early 1970s and catering for various income groups, with a dozen of residential projects (Harbour View, Clos Verger, Govinden Court, La Tour Koenig, Roches Brunes, Vuillemin and Cybervillage).
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Dr M.A. KODABACCUSChairman (wef 15/4/15) Independent Director
Mr A. AUMEERALLYIndependent Director (wef 20/3/15)
Mr L. GHOORAHActing Chairperson (up to 15/4/15) Non-Executive Director
Mr D. KHOOSYEIndependent Director (wef 20/3/15)
Mr S. K. PATHERNon-Executive Director (wef 20/3/15)
Mr M.T. DOOKYExecutive Director (wef 30/6/15)
Mr S. RAGENNon-Executive Director
Mr G.H. JEANNEIndependent Director (wef 20/3/15)
1. Audit Committee Composition:
• Mr A. Aumeerally (Chairperson)
• Mr G.H. Jeanne • Mr D. Khoosye
The Internal Auditor is in attendance at all Audit Committee meetings.
2. Corporate Governance and HR Committee Composition:
• Mr. S. Ragen (Chairperson)
• Dr M.A. Kodabaccus • Mr G.H. Jeanne • Mr D. Khoosye • Managing Director
3. Risk Management Committee Composition:
• Mr G.H. Jeanne (Chairperson)
• Mr L. Ghoorah • Mr A. Aumeerally • Managing Director
4. Conduct Review Committee Composition:
• Mr S.K. Pather (Chairperson)
• Mr G.H. Jeanne • Mr A. Aumeerally • Mr D. Khoosye • Managing Director
Board Sub-Committees
Board of Directors
Senior Management Team
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Mr A. NobaubOfficer in Charge
Mr R. AbeeluckHead – Technical
Mr N. MaudarbocusAg. Head – Information
& Communications Technology
Mr S.A. SookheeDeputy Managing Director
(assigned)
Dr R.K. BoolauckHead – Corporate Planning & Development / Money
Laundering Reporting Officer
Mr S. PuholooInternal Auditor (assigned,
up to 8/12/15)
Ag. Head – Finance (wef 9/12/15)
Mr K. NarrooCompany Secretary
Mr B.K. RamlaulHead – Corporate Services
(on contract up to 31/8/15)
Ms D. MohabeerAttorney
Mr R. BoojhawonInternal Auditor (acting)
Mr H.I. AbdoolHead Finance Business Unit
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Chairman’s Statement
I am pleased to present, on behalf of the Board of Directors, the Annual Report and Financial Statements for the year ended 31st December 2015.
In April 2015, a new Board of Directors was appointed for this state-owned company which has since its existence been fulfilling an important role in providing the nation with housing facilities, a basic necessity for mankind.
Despite the economic conditions and also the fierce competition from banks and other financial institutions in the housing finance market, MHC Ltd has achieved a fair share of the housing loans business, with an increase in its housing loans portfolio and also nearly the same profit level as for the previous year. The Company has maintained its dividend policy, with a total amount of Rs 39,820,400 being recommended as dividend for the year 2015, representing a dividend per share of Rs 1.99 compared to Rs 1.95 in 2014.
In line with our engagement vision, “Our commitment: Your satisfaction”,
MHC will continue to focus on products and services that support
families in their efforts to realise their dream of home ownership.
The Board is committed to comply with the principle of good corporate governance, ensuring that we balance and protect the long-term interests of our stakeholders, including shareholders, customers, the broader community and our team. In this connection, the Board would consider in priority the appointment of a Managing Director.
Apart from the challenges of uneven economic conditions which MHC has to face at times, 2016 will also be filled with opportunities for us to continue building an even better financial institution.
The implementation of the Centralised Banking Information System (CBIS) project is targeted to be completed during the year. Estate development was once our pride and new projects are in the pipeline, the first one being the launching of a new housing development at Le Hochet, Terre Rouge. These constitute two major developments that the Company will be delivering in the future.
I am thankful to my fellow Directors, Management and Staff for their contribution and support in bringing the Company to greater heights.
Dr Mahmad Aniff KODABACCUS
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Financial Highlights
December 2015 (Rs m)
December 2014 Restated
(Rs m)
December 2013 Restated
(Rs m)
Interest Income 531.9 516.0 500.3Interest Expense 219.2 207.3 207.9Net Profit 199.1 204.4 286.0Net Assets 2,996.1 2,805.1 2,666.3Retained Earnings 1,823.8 1,818.2 1,669.1Interest Cover (Times) 2.4 2.5 2.4Net Profit Margin (%) 32.1 33.4 47.3Housing Loan Assets 6,840.6 6,696.4 6,362.0Fixed Assets (Net of Depreciation) 505.5 449.7 457.2Total Assets 7,651.9 6,995.5 6,642.8Shareholders’ Funds 2,724.6 2,688.3 2,549.5Capital Employed 2,996.1 2,805.1 2,666.3PEL & JPS (Capital Deposited) 1,151.9 1,030.8 959.4HDC (Capital Deposited) 1,831.1 1,372.0 1,084.6Gearing (Times) 1.30 1.31 1.29Current Ratio 2.7 3.2 2.9ROCE (%) 6.6 7.3 10.7EPS (Rs) 9.96 10.2 14.30Total Income to Capital Employed Ratio 20.7 21.8 22.7Reserves 2,796.1 2,605.1 2,466.3Interest Income Growth (%) 3.1 3.2 (0.2)Total Income Growth (%) 1.5 1.3 (0.5)Interest Expense Growth (%) 5.7 (0.3) (2.3)Total Expense Growth (%) 1.2 2.3 11.0Operating Income to Operating Expense (%) 188.6 189.0 195.8Return on Shareholders’ Funds (%) 7.3 7.6 11.2Return on Total Assets (%) 2.6 2.9 4.3Portfolio Quality (%) 9.6 9.9 11.0
Net Interest Margin/Interest-Earning Assets (%) 4.1 4.3 4.3
Net Interest Income/Total Assets 4.2 4.7 4.8
The operating environment remained difficult during the period under review, characterised by low economic growth in the domestic economy at the rate of 3.4%. The challenge in 2015 was to maintain the same level of profit as in previous years, with cost reduction strategies and increase in revenue.
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The loan portfolio increased by 2.2% from Rs 6,696.4 m in 2014 to Rs 6,840.6 m in 2015.
Interest income generated by the housing loan business amounted to Rs 531.9 m in 2015 compared to Rs 516.0 m in 2014.
Net profit for the year under review stood at Rs 199.1 m compared to Rs 204.4 m for the year ended December 2014.
Earnings per share for the year under review decreased slightly from Rs 10.22 in 2014 to Rs 9.96.
NET PROFIT
YEAR
Rs
Mill
ion
0
50
100
150
200
250
300
2013 2014 2015
199.1204.4
286.0
EARNINGS PER SHARE
YEAR
Rs
2013 2014 2015
14.3
10.22 9.96
8
10
12
14
16
HOUSING LOAN ASSETS
YEAR
Rs
Mill
ion
2013 2014 2015
5,500.0
6,000.0
6,500.0
7,000.0
5,000.0
6,362.0
6,696.4 6,840.6
INTEREST INCOME
YEAR
Rs
Mill
ion
2013 2014 2015480 485 490 495 500 505 510 515 520 525 530 535
500.3
516.0
531.9
Financial Highlights (cont'd)
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The ROCE decreased from 7.3% in 2014 to 6.6% in 2015.
GearingThe gearing index (1.3 times) remained almost the same as for 2014 (1.31 times).
Interest CoverThe interest cover was 2.4 times for the year under review.
Current RatioThe current ratio for the year under review was 2.7 times (compared to 3.2 times for 2014).
Savings & Term DepositsSavings
The PEL portfolio increased from 113,128 accounts (for a total balance of Rs 1,515,630,731) in 2014 to 116,129 accounts for Rs 1,624,191,354 in 2015.
The Junior PEL Saver portfolio increased from 1,154 accounts for Rs 18,074,013 in 2014 to 1,301 accounts for Rs 22,870,245 in 2015.
RETURN ON CAPITAL EMPLOYED (ROCE)
YEAR
%
2013 2014 2015
10.7
6.67.3
3456789
101112
JUNIOR PEL SAVER
YEAR
Rs
Mill
ion
2013 2014 20150
5
10
15
20
25
22.9
18.115.1
PLAN EPARGNE LOGEMENT (PEL)
YEAR
Rs
Mill
ion
2013 2014 2015
1,452.9 1,515.61,624.2
- 200.0 400.0 600.0 800.0
1,000.0 1,200.0 1,400.0 1,600.0 1,800.0
Financial Highlights (cont'd)
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Housing Deposit Certificates increased by 35.5% for the year under review to reach Rs 1,831.1 m compared to Rs 1,372.0 m as at 31st December 2014.
HOUSING DEPOSIT CERTIFICATE
YEAR
Rs
Mill
ion
2013 2014 2015
1,831.1
1,372.01,084.6
- 200.0 400.0 600.0 800.0
1,000.0 1,200.0 1,400.0 1,600.0 1,800.0 2,000.0 2,200.0
Review of OperationsThe negative impact of economic conditions resulted in a significant decrease in demand for housing finance, especially from the middle and high income groups, which the Company normally targets. As such, there was an urgent need for the Company to review its interest margin and quality of loans being sanctioned in order to remain competitive and not take undue risks.
Amidst these adverse conditions, MHC forged its way to obtain a fair share of the housing loan business and for its loan products to remain attractive enough to match the commercial banks’ offering.
For the period under review, the net interest income decreased by 1.9% compared to last year. Interest expenses increased by 5.7% and profit fell by 2.6%.
The objectives for 2016 have been set taking into account the current market for housing loans and the probable economic conditions which affect same. As such, our aim for the year will be to achieve:
an increase in profit of more than 10%; an increase in earnings per share of 10%; and a growth in total assets of 5%.
Other Items affecting the Income StatementThere has been a reversal of impairment amounting to Rs 7.9 m for the current period while loss on sale of foreclosed property amounted to Rs 5.9 m. There was a fair value adjustment with regard to investment properties amounting to Rs 16.1 m. At the same time, a provision of Rs 12.5 m has been made for this item under Other Assets.
Savings & Term Deposits (cont'd)
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Profit attributable to shareholders decreased by 2.6% from Rs 204.4 m for the financial year ended 31st December 2014 to reach Rs 199.1 m for the current financial year.
The cost-to-income ratio for December 2015 stood at 70.5% against 70.6% as at December 2014.
Cash Flow PositionDuring the year under review, there was an excess of liquidity prevailing in the economy. This situation helped the organisation to extend more credit and funds in excess of our normal working capital requirements were judiciously placed in fixed deposits in order to secure a good return.
As at 31st December 2015, cash in hand and at bank balances amounted to Rs 809.7 m, out of which Rs 325.0 m have been placed in fixed deposits. Interest income receivable on these deposits contributed towards the total revenue of the Company.
Impairment on Financial Assets In our continued efforts to improve the recovery process, a reversal of net impairment on advances and other financial assets amounting to Rs 7.9 m was achieved compared to a reversal of Rs 1.1 m for the previous year.
Loans and Advances The loan portfolio increased by 2.2% to reach Rs 6,840.6 m as at 31st December 2015 (December 2014: Rs 6,696.4 m). This performance has been achieved through successful marketing initiatives undertaken during the year.
Impaired Advances and Allowance for Credit Impairment Portfolio Provision
Portfolio provisions are computed based on non-impaired loans at a rate of 1% to comply with the BoM Guideline on Credit Impairment Measurement and Income Recognition.
The portfolio’s general provision stood at Rs 53.3 m at December 2015 against Rs 55.6 m at December 2014.
DepositsPEL/JPS
Deposits from customers increased by 7.4% to reach Rs 1,647.1 m at December 2015 (December 2014: Rs 1,533.7 m) as a result of increased contributions from PEL/JPS holders.
Housing Deposit Certificates (HDCs)
HDCs increased by 35.5% over the review period to reach Rs 2,045.5 m as at 31st December 2015 compared to Rs 1,509.1 m for December 2014. Our interest rates on HDCs are among the most competitive on the market.
Borrowings Borrowings decreased by 24.3% to reach Rs 699 .1 m as a t 31 st December 2015 (December 2014: Rs 923.8 m). This is explained by the fact that the MHC has not availed itself of new loans and has made an early repayment of some expensive ones.
ProjectsDuring the year 2015, several important projects were completed and/or in progress.
As part of the Centralised Banking Information System (CBIS) project, the following sub-projects have been completed and successfully implemented:
ICT infrastructure; renovation of MHC Goodlands office; PABX system at MHC local branches; and Active Directory, Collaboration Suite,
Virtualization and SAN Storage
Centralised Banking Information System (CBIS) Project The kick-off meeting for the CBIS project took
place in May 2015. Implementation started in the following month and the first milestone, namely the Business Requirement Document (BRD) phase, has been completed.
Review of Operations (cont'd)
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Future ProspectsThe Mauritian economy is expected to pick up with the strategies being adopted by the Government as per the Vision 2030 Economic Mission Statement. Smart cities are expected to boost the construction sector and the setting up of MyBiz will provide a stimulus to entrepreneurship.
A slight economic recovery in the US and across Europe is likely to impact positively on the Mauritian economy. Accordingly, the Repo Rate is expected to be maintained at its level to encourage investment.
For the year 2016, the MHC will have to struggle in the midst of fierce competition from banks, insurance companies and other non-bank financial institutions offering mortgage loans, savings and deposits. The focus will be on reviewing our processes and procedures in order to offer a better service to our customers, which is a differentiating factor to acquire new loan business as well as retain existing customers. Estate development, which was once our pride, will be initiated anew with the first one being a housing development at Le Hochet, Terre Rouge.
Furthermore, the implementation of the Centralised Banking Information System as well as ISO certification of the remaining branches will contribute in achieving our objectives.
Review of Operations (cont'd) Strategic Agenda Align customer service and business
objectives:
We aim at consistently delivering an excellent customer experience by putting our customers at the centre of every decision and adopt a 360° approach to engage more effectively with our customers.
Better serve our customers, while reducing structural costs:
We aim to become more efficient and “low cost by design” to deliver a better customer experience and create good shareholder value over the long term.
Drive a digital transformation:
We are pursuing a comprehensive plan to digitize the Company since more flexible architectures are required to accomodate changing business needs. We will enhance our customers’ experience, make it easier for MHC to serve them and become a more efficient financial institution.
Achieve greater product and marketing mix:
More innovative products and services will be introduced to successfully meet customers' needs and foster value creation.
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Sales & MarketingCustomer RelationsA customer satisfaction survey is carried out each year to measure how the products and services offered by MHC meet or exceed customer expectations. It is a key performance indicator within the Company and is now a key element in designing our business strategy. This exercise gives MHC an insight into the parameters of customer satisfaction while enabling their measurement. It provides an easy way to monitor improvements and deciding upon corrective measures in order to improve customer satisfaction and maintain a competitive edge. Customer requirements are translated and a measurable target is provided to monitor improvements. Corrective actions are taken to improve customer satisfaction.
Complaints HandlingComplaints handling forms an integral part of business, both from a regulatory perspective and a customer service standpoint. It is a very crucial tool to enhance customer loyalty and customer relationship management. Complaints are handled independently and impartially, in a timely manner and taking care of customers’ best interest. They can opt to lodge their complaints by: (a) post; (b) e-mail; (c) telephone; or (d) in person at our complaints desk.
Customer complaints provide information to enhance the quality, selling proposition and performance of the service. To develop and utilize this source, the Company has designed and is constantly upgrading the strategies and systems.
Marketing StrategiesBrand awareness gives the Company the means to make customers aware of the added value that the Company offers. The avenues chosen are sponsoring special events, participating in trade fairs and organising roadshows at strategic points.
With a view to face the growing competition from banking institutions, the MHC has enhanced its products and services by offering a range of value-added Home Loan products and financial services through its network of offices situated at strategic locations.
The MHC has launched the “Feel-Good Housing Loan Promotional Campaign” to boost its housing loan business. The campaign lasted for 2 months and many clients took advantage of the benefits offered.
Corporate CitizenshipAt MHC, we are keen to engage positively with our clients to understand their needs and develop initiatives to address them wherever possible. Through these initiatives, we aim to add value to the products and services we offer. Another initiative taken by MHC is the sponsorship of programmes in the field of education and social development. Any sponsorship programme is closely monitored to ensure that the objectives are achieved within the specified timelines. In order to take these initiatives forward in a more strategic way, we are developing systems for assessing their overall impact.
Market ResearchA successful business must have extensive knowledge of its customers and competitors. Market research is the systematic gathering and interpretation of information to support decision making.
Market research is one amongst the most important components of the MHC’s business strategy. The Company conducts market intelligence and data analysis on a continual basis to keep up with market trends and maintain a competitive edge.
The goal of doing market research is to equip us with the information we need to make informed business decisions about innovation, growth and the 4 Ps:
Product – improve MHC’s products or services based on findings about what our customers really want and need as well as focus on customer service;
Price – set up a price taking into consideration on competitors’ prices, on profit margins and the price a customer is willing to pay;
Placement – how to distribute a product; and Promotion – figure out how to best reach
particular market segments through advertising and publicity, social media and branding.
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Loan ProductsThe following products are provided to clients:
Loan Schemes1. Home Loan Plus2. Home Loan Extra3. Land Loans4. Government-Sponsored Loans 5. Loan against HDC and PEL6. Loan to Housing Development Promoters7. Complete Your Construction Housing Loan8. Fast Loan9. Mixed Construction Loan10. MHC Housing Empowerment Loan Scheme 11. Dream Home Express Loan12. Agency Loans
Savings & Deposit ProductsPlan Epargne Logement (PEL)The Plan Epargne Logement (PEL) was launched in November 1988, in order to raise funds to finance housing loans for clients and also with a view to encourage people, especially the youth to save for the purpose of acquiring a house in the future.
The PEL has proved to be very popular with prospective homeowners. It carries an interest rate slightly higher than normal savings rates, and a bonus of about 3% p.a. is added to the attractive rate offered to PEL savers, on condition that they are regular savers and avail themselves of loan facilities from MHC.
Junior PEL Saver (JPS)The Junior PEL Saver scheme, launched on 18th March 2009, has a unique package of benefits especially designed for babies/children up to the age of 18 years. This scheme has been exclusively designed to ensure that a child has accumulated savings at the age of 18 and to encourage the new generation to grow with MHC while at the same time inculcating a monthly savings habit and the art of managing money responsibly. The JPS is a long-term savings and investment account for children.
Term DepositsLaunched in 2001, Housing Deposit Certificates (HDCs) target both individuals and institutional investors.
The Scheme is one of the most attractive investment opportunities offered to the Mauritian population with a deposit term ranging from 6 months to 5 years.
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Service QualityMHC Quality Management SystemThe MHC ISO 9001:2008 certified Quality Management System (QMS) is now well rooted in the daily operations and business culture of the organisation. Its adoption has established a sound internal control environment through the development, documentation and implementation of consolidation manual of procedures for all functional areas including limits and policies. The QMS integrates the various internal processes within the organisation to provide a process approach for planning and execution of tasks, activities and projects. Since its implementation in 2007, the QMS certification has helped the organisation to improve in terms of customer service, profit, excellence and vigilance as well as being more competitive.
The ISO 9001:2008 standards provide a set of principles to constantly satisfy customers’ requirements, and maintaining the certificate since 2007 indicates that the organisation is functioning effectively in a systematic and customer-oriented way, and at the same time providing comfort to our customers that our products, systems and procedures are safe and secure.
A QMS is imperative for a financial institution which takes deposits and gives loans to customers, and has become the norm in the industry and for compliance with regulatory bodies.
Information TechnologyAs a business imperative, the MHC is already in the implementation phase of a Centralised Banking Information System (CBIS) project which will provide an agile platform for growth. It is expected that the following benefits will be derived from the project:
alignment of business strategies with technology; integration of the MHC’s various operations across business units and branches; reduction in the time to market new products and services; enhancement of the customer experience; and addressing regulatory and compliance requirements.
As far as IT infrastructure is concerned, the setting up of a new Data Centre has already been initiated and implementation will start in the coming months.
With regard to information security, existing policies have been reviewed while new ones have been introduced. Furthermore, numerous projects are in the pipeline to strengthen the level of IT security within the Company.
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Our People
MHC’s corporate culture encourages employees to demonstrate professionalism, discipline, integrity and creativity. The Company has a workforce which is very diverse with a blend of young individuals and experienced employees with many years of devoted service. Coming from all sections of the community, they possess different skills, knowledge and abilities which allows a better response to the needs of our stakeholders.
MHC has strived to continuously enhance human resources competencies and capabilities so that the highest standard of performance is reached in line with the Company’s objectives. The workforce of the Company as at 31st December 2015 was 228 with no additional recruitment and four retirements for the year under review.
In line with MHC’s commitment to develop, motivate and retain the best available talents, the Company has sponsored staff to attend workshops and has conducted in-house training to upgrade their skills and knowledge in different operational areas.
The Company continues to focus on various initiatives in training and developing employees to improve productivity, service quality and personal effectiveness.
Furthermore, we continue to lay strong emphasis on programmes and schemes designed to increase commitment, engagement and well-being of employees such as:
Staff Welfare Programme – A staff get-together was organised at Le Méridien Hotel in November 2015. It served as a platform to recognise and thank the employees for their contribution and efforts.
Traineeship Scheme - As an employer, the MHC has the responsibility to provide traineeship to school-leavers, making them more work-ready and employable for companies recruiting staff. We have engaged two trainees under the Youth Employment Programme for a period of one year and more than fifteen trainees under the MHC Traineeship Scheme.
CORPORATE GOVERNANCEMAURITIUS HOUSING COMPANY LTD05
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Corporate Governance1. Statement on Corporate
GovernanceCorporate governance refers to the system by which companies are directed and controlled. The Board of Directors is responsible for the governance of the organisation. The Board’s actions are subject to laws, regulations and the shareholders in general meeting.
Corporate governance involves managing and controlling relations shared among different stakeholders, including shareholders, the Board of Directors, employees, customers, suppliers and the community at large. It is also about commitment to values and ethical business conduct.
The Board plays a key role in the setting up of the system of corporate governance within an organisation to assist in safeguarding policies and procedures. The Board sets the Company’s strategy, develops directional policy, provides the leadership to put them into effect, appoints and supervises the management, and ensures accountability of the organisation to its owners and relevant authorities.
2. The Code of Corporate Governance for MauritiusThe Code of Corporate Governance was published in 2003 and revised in 2004. The adoption of the Code was then recommended as best practice and was not mandatory. It aimed at improving ethical conduct of Directors and senior staff members in the management of companies.
However, as from July 2009, following amendments to the Financial Reporting Act, public entities are required to comply with the Code of Corporate Governance, and are also required to provide justification for not adopting any of the provisions of the Code in their financial statements or reports.
The Code of Corporate Governance has been completely reviewed and the new Code (amended) is expected to be published by mid-2016.
3. The Banking Act 2004 and the Bank of Mauritius GuidelineThe Banking Act 2004 sets out some corporate governance requirements (especially as regards the Board constitution and type of Directors as well as the Audit Committee). Moreover, the Bank of Mauritius Guideline lays down the good corporate governance principles to be followed by banks and non-bank financial institutions.
4. MHC Corporate Governance FrameworkThe MHC’s corporate governance framework comprises its Board of Directors, Board Committees, Management, management forums, employees, internal and external auditors, and other stakeholders.
This framework is crucial in developing and sustaining a successful business and the MHC requires all its employees to adopt the highest standard of business integrity, transparency, professionalism and ethical behaviour, and monitors compliance with policies as well as best practices, laws, rules and standards while conducting business.
5. Directors’ Statement of Compliance The Directors confirm that the Company has complied with the principles of the Code.
6. Board of DirectorsThe Board of Directors comprises elected Non-Executive, Executive and Independent Directors.
The Board oversees the activities of the Company and remains the focal point of contact between the shareholders and the Company.
The MHC Board has a unitary structure comprising 9 Directors, one of whom is an Executive Director and another one is representative of the MHC Staff Association.
All the Directors are appointed or reappointed annually by a separate resolution at the meeting of shareholders.
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6. Board of Directors (cont'd)The Board is responsible for the overall governance of the Company and discharges this responsibility through ensuring compliance with applicable laws, rules and regulations, Code, directives and guidelines.
6.1 Board CompositionThe composition of the MHC Board for the year 2015 was as follows:
Name of Directors Remarks
Dr Mahmad Aniff KODABACCUS Chairman (wef 15/4/15) Independent Director
Mr Latanraj GHOORAH Acting Chairperson (up to 15/4/15) Non-Executive Director
Mr Hoolas Chandra Singh SOOKRA Non-Executive Director (up to 6/4/15)
Mr Swaminathan RAGEN Non-Executive Director
Mr Rodny Kevin ALLAGAPEN Independent Director (up to 20/3/15)
Mr Vinash GOPEE Independent Director (up to 20/3/15)
Mr Soopramanien Kandasamy PATHER Non-Executive Director (wef 20/3/15)
Mr Georges Henry JEANNE Independent Director (wef 20/3/15)
Mr Azaad AUMEERALLY Independent Director (wef 20/3/15)
Mr Dunputh KHOOSYE Independent Director (wef 20/3/15)
Mr Mohammad Taslim DOOKY Executive Director (wef 30/6/15)
Note: There was one vacancy on the Board for Managing Director.
Corporate Governance (cont'd)
7. Board CommitteesThe Board has established Board Committees as well as various management committees/forums to assist it in the discharge of its duties and responsibilities.
The current Board Committees are as follows:
Audit Committee Corporate Governance & HR Committee Risk Management Committee Conduct Review Committee
Each Board Committee operates under approved terms of reference in line with the Code.
8. Separation of Powers between Chairman and Chief Executive
In accordance with the Code and the Bank of Mauritius Guideline on Corporate Governance, there is a clear demarcation of responsibility between the Chairman and the Chief Executive (Managing Director) to ensure balance of power and authority.
The MHC Board is led by its Chairman whilst the Chief Executive leads the executive management team responsible for the day-to-day running of the business and affairs of the Company.
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9. Directors’ OrientationNewly-appointed Directors are apprised on the Company and its operations, through Orientation Programmes, as well as their responsibilities as Directors. They are provided with a pack containing relevant documents.
10. Executive ManagementThe Board has delegated the day-to-day running of the business and affairs of the Company to the Executive Management. Issues are discussed and decisions are taken at different levels of management forums. In case of differences, the issues are escalated to the next higher level of decision-making.
11. Management MeetingsThe Management meets weekly, under the chairmanship of the Managing Director/Officer in Charge, to review and take decisions on the day-to-day business.
12. Loans Approval CommitteeThe Loans Approval Committee meets regularly for the approval of housing loan requests.
13. Board and Board Committee Attendance for Financial Year 2015The total number of Board and Sub-Committee meetings held during the year were:
Board: 13; Audit Committee: 6; CG & HR Committee: 5; Risk Management Committee: 1; and Conduct Review Committee: 1.
Corporate Governance (cont'd)
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13. Board and Board Committee Attendance for Financial Year 2015 (cont'd)Attendance at Board and Board Committee meetings for financial year 2015 was as follows:
Director Board Audit CG & HR Risk Mgmt. Conduct Review
KODABACCUS, M.A. (Chairman) 12 nm* 5 nm nm
GHOORAH, L. 11 nm nm - nm
RAGEN, S. 12 nm 5 nm nm
PATHER, S.K. 13 nm nm nm 1
JEANNE, G.H. 11 4 4 1 1
AUMEERALLY, A. 13 6 nm 1 (was overseas)
KHOOSYE, D. 13 6 5 nm 1
DOOKY, T. 8 nm nm nm nm
* nm: not member
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14. Shareholders’ Particulars
Name of Shareholder No. of Shares Held Nominal Value Rs
Shareholding (%)
Government of Mauritius 12,000,005 120,000,050 60.1
State Investment Corporation Ltd 2,666,665 26,666,650 13.3
State Insurance Company of Mauritius Ltd 2,666,665 26,666,650 13.3
National Pensions Fund 2,666,665 26,666,650 13.3
15. Dividend PolicyThe Company has a dividend policy of 20% of net profit. Payment of dividends is subject to the performance of the Company, cash flow, working capital and capital expenditure requirements.
16. Directors’ Profiles
Name of Director Occupation Age Remarks Other Directorship (Listed Companies)
Dr Mahmad Aniff KODABACCUS
Medical Practitioner 64 Chairman Independent Director None
Mr Latanraj GHOORAH Lead Analyst, Ministry of Finance & Economic Development
46 Non-Executive Director None
Mr Swaminathan RAGEN
Permanent Secretary, Ministry of Social Security 57 Non-Executive
Director None
Mr Soopramanien Kandasamy PATHER
Senior Chief Executive, Ministry of Housing & Lands 61 Non-Executive
Director None
Mr Georges Henry JEANNE
Permanent Secretary, Ministry of Local Government 60 Independent Director None
Mr Azaad AUMEERALLY
Actuary / Managing Director, Nest Invest Ltd 47 Independent Director None
Mr Dunputh KHOOSYE Self-employed 62 Independent Director None
Mr Mohammad Taslim DOOKY
IT Specialist, Representative of MHC Staff Association
45 Executive Director None
Mr Hoolas Chandra Singh SOOKRA (up to 06/04/15)
Senior Executive Assistant, Representative of MHC Staff Association
54 Executive Director None
Mr Rodny Kevin ALLAGAPEN (up to 20/03/15)
Senior Manager, DTOS Ltd 39 Independent Director Omicane
Mr Vinash GOPEE (up to 20/03/15)
Chief Executive Officer, N. Gopee Group 45 Independent Director None
Corporate Governance (cont'd)
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17. Profile of Senior Management Team
Name Position Age Qualifications Date JoinedMr Nobaub, Adith Officer in Charge 56 MSc Computer
Engineering 16/06/1994
Mr Sookhee, Seth Anand Assigned Deputy Managing Director 64 BA Economics 16/12/1976Mr Narroo, Kreshan Company Secretary 58 ACIS 12/05/1976Mr Abdool, Hassen Issop Head – Finance (up to 8/12/15)
Acting Head – Commercial (wef 9/12/15)
55 FCCA 1/7/1992
Mr Abeeluck, Rajeev Head – Technical 45 Bachelor in Architecture 2/7/2001
Dr Boolauck, Ranjivsingh K. Head – Corporate Planning & Development / Money Laundering Reporting Officer
38 PhD Finance and Risk Management 5/11/2007
Mr Ramlaul, Brij Kumar Head – Corporate Services (on contract up to 31/08/15) 57 ACIS; MSc: HRM 13/05/2009
Mr Maudarbocus, Naim Ag. Head – Information & Communication Technology (up to 15/12/15) Senior IT Specialist (wef 16/12/15)
46 Maîtrise en Informatique 6/11/1995
Mr Puholoo, Surendra Internal Auditor (assigned, up to 8/12/15) Ag. Head – Finance (wef 9/12/15)
49 FCCA 2/7/1990
Mrs Mohabeer, Deeya Attorney (on contract) 49 LLB (Hons) 6/1/2009
Mr Boojhawon, Rakeshsing Ag. Internal Auditor (wef 9/12/15) 42 FCCA 7/12/1994
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18. Material Clauses of the MHC’s ConstitutionObjects:
(1) To promote property development within the Republic of Mauritius on its own or in partnership or as agent or as shareholder of a company;
(2) To grant loans for the purchase of residential lands;
(3) To set up such housing saving schemes as would be appropriate;
(4) To carry on business in the nature of insurance in respect of its clients and/or its guarantor/s and client’s/s’ and/or guarantor’s/s’ property/ies; and
(5) To do all such other things as are incidental or conducive to the above objects.
Authorised Share Capital:
Rs 250 million, divided into 25,000,000 shares of Rs 10 each.
Directors:
The number of Directors shall not be fewer than FOUR (4) nor more than NINE (9).
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18. Material Clauses of the MHC’s Constitution (cont'd)Power to Sign Documents:
All deeds, instruments, contracts, or other documents, all cheques, promissory notes, drafts, bills of exchange and other negotiable instruments, and all receipts for money paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, by the Managing Director, if any, or the Chairman of Directors or in such manner as the Directors may from time to time determine.
19. Financial Year of CompanySince 2011, the Financial Year of the Company is the calendar year.
20. Shareholder Agreement and/or Third Party Agreement with the CompanyThere is no Shareholder Agreement/Third Party Agreement with the Company.
21. Directors’ EmolumentsDuring the year under review, the Executive Director received emoluments amounting to Rs 155,000 (Rs 6,093,587 for 2014).
Non-Executive Directors received total emoluments amounting to Rs 2,520,504 (2014: Rs 2,035,089).
Details about Directors’ remuneration have not been disclosed individually due to the sensitive nature of the information.
22. Service Contract of the Managing DirectorFollowing the resignation of Mr M. Seetohul as Managing Director on 30/12/14, Mr Adith Nobaub, an in-house officer who was assuming the duties/responsibilities of Deputy Managing Director of the Company was appointed as Officer in Charge, pending the appointment of a Managing Director.
On 21st January 2016, Mr Seth Anand Sookhee, who was the Deputy Managing Director (assigned), was appointed as Officer in Charge, in replacement of Mr Nobaub.
23. Statement of Remuneration PhilosophyThe Board as the employer decides on the appointment and remuneration of all the MHC employees. The Corporate Governance & HR Committee considers and recommends to the Board matters pertaining to remuneration of MHC employees.
The remuneration of the Chairman, Managing Director and other Directors is decided by the Shareholders.
24. Related Party TransactionsRelated party transactions are disclosed in Note 32 of the Financial Statements.
25. Directors’ Interests in SharesNone of the Directors has a direct or indirect share in the equity of the Company.
26. Main Terms of Reference of Board Committees(i) Audit Committee
1. reviews the audited financial statements before they are approved by the Directors;
2. analyses the Company’s yearly budget before submission to the Board;
3. requires management to implement and maintain appropriate accounting, internal control and financial disclosure procedures and reviews, evaluates and approves such procedures;
4. reviews such transactions as could adversely affect the sound financial condition of the Company as the auditors or any officers of the Company may bring to the attention of the Committee or as may otherwise come to its attention;
Corporate Governance (cont'd)
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26. Main Terms of Reference of Board Committees (cont'd)(i) Audit Committee (cont'd)
5. performs such additional duties as may be assigned to it by the Board of Directors; and
6. reports to the Directors on the conduct of its responsibilities, with particular reference to Section 39 of the Banking Act 2004.
(ii) Corporate Governance & HR Committee
1. ensures that the potential new Director is fully cognisant of what is expected from a Director in general, and from him or her in particular;
2. ensures that the right balance of skills, expertise and independence is maintained;
3. appraises and evaluates the Board as a whole and the Directors individually;
4. reviews the remuneration policy; and
5. ensures that the reporting requirements on Corporate Governance, whether in the Annual Report or on an ongoing basis, are in accordance with the principles of the Code of Corporate Governance and the Bank of Mauritius Guideline on Corporate Governance.
(iii) Risk Management Committee
This Committee is responsible for the ongoing integrity and upholding of the MHC’s risk management framework, including the following:
1. developing and recommending credit policies and credit risk management procedures for approval by the Board of Directors, and reviewing the principal risks;
2. reviewing portfolio limits in accordance with the MHC’s risk appetite;
3. reviewing the work plans and reports of Independent Credit Review and Internal Audit;
4. assessing the collectability, accuracy of credit ratings and adequacy of provisioning;
5. assessing and monitoring the overall portfolio quality and allocation of the mix;
6. maintaining and revising the credit rating system model in accordance with policy and to reflect market conditions;
7. ensuring that training programmes are held for the Directors and Senior Management to enable them to have a robust understanding of the nature of the business, nature of the risks and the consequences of risks being inadequately managed; and
8. providing endorsement for the appointment and removal of the Chief Risk Officer.
(iv) Conduct Review Committee
1. has the mandate to require Management of the financial institution to establish policies and procedures to comply with the requirements of the Guideline on Related Party Transactions;
2. reviews the policies and procedures periodically to ensure their continuing adequacy and enforcement in the best interests of the financial institution;
3. reviews and approves each credit exposure to related parties;
4. ensures that market terms and conditions are applied to all related party transactions;
5. reviews the practices of the financial institution to ensure that any transaction with related parties that may have a material effect on the stability and solvency of the financial institution is identified and dealt with in a timely manner; and
6. reports periodically and in any case not less frequently than on a quarterly basis to the Board of Directors on matters reviewed by it, including exceptions to policies, processes and limits.
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27. Assets & Liabilities Committee(ALCO)
The objectives of the ALCO are to:
manage the balance sheet within approved levels of risk and return for the MHC;
ensure that the risk is consistent with both the Company’s risk appetite and business strategy;
review new and existing products for acceptable risk and financial performance levels; and
ensure that sufficient consideration is given to the potential impact of risk decisions made within the Company.
The ALCO gives particular attention to the following potential situations:
growth objectives of the MHC and determining how they will be funded;
large gaps between asset and liability maturities; and
large projected expansion in assets and liabilities without an accompanying increase in capital levels.
28. Internal AuditThe Mauritius Housing Company Ltd has its own internal audit function.
The audit plan has been approved by the Audit Committee and Board.
Audit reports are circulated to the Management as well as to members of the Audit Committee of the Company.
29. Timetable of Important EventsFinancial Year: 1st January to 31st December
Financial Statements (FS) are audited by 20th March and submitted to the Bank of Mauritius by 31st March at the latest;
Dividends are recommended by the Board, subject to approval from the Bank of Mauritius, once audited FS are available. The dividend recommended is then submitted for approval to the Annual Meeting of Shareholders.
The Company’s Annual Meeting (for approval of FS, dividend and appointment of Directors) to be held by 30th June at the latest.
Quarterly, six-month and nine-month FS should be submitted to the Bank of Mauritius within 6 weeks at the latest.
Every company should report to its stakeholders on its policies and practices as regards: ethics, environment, health and safety, and social issues.
30. Policies and Practices regarding Social, Ethical, Safety, Health and Environmental IssuesCode of Ethics
The MHC Conditions of Service contain a Code of Ethics which must be followed by all MHC staff.
Corporate Social Responsibility
As it has been the practice for years, the Company responds to requests for assistance from NGOs within its Corporate Social Responsibility policy.
Safety and Health
In accordance with the provision of the Occupational Safety and Health Act, the MHC has a Health & Safety Officer who is responsible for monitoring and advising Management on all matters pertaining to health hazards and safety measures to be taken within MHC premises.
31. Charitable DonationsDuring the year, a total amount of Rs 314,000 has been granted as charitable donations.
Corporate Governance (cont'd)
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Statement of Compliance Mauritius Housing Company LtdStatement of Directors’ Responsibility Year ended 31st December 2015
(Section 75(3) of the Financial Reporting Act) Name of PIE: Mauritius Housing Company Ltd Reporting Period: Year ended 31st December 2015
We, the Directors of the Mauritius Housing Company Ltd, confirm that to the best of our knowledge, the Mauritius Housing Company Ltd has complied with the obligations and requirements of the Code of Corporate Governance except for Sections 2.2.3, 2.8.2, and 2.10.3.
Reasons for non-compliance are:
Section 2.2.3: Two Executive Directors
The post of Managing Director has been advertised and appointment has not yet been effected.
Section 2.8.2: Detailed Remuneration per Director
Details about Directors’ remuneration have not been disclosed individually due to the sensitive nature of information.
Section 2.10.3: Board and Director Appraisal
The appraisal of the Board and of Directors individually would be effected by the CG & HR Committee.
SIGNED BY:
M.A. KODABACCUS S.A. SOOKHEECHAIRMAN OFFICER IN CHARGE
Date: 30th March 2016
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Risk ManagementThe Risk Management Committee of the Company is also responsible for reviewing the effectiveness of the risk strategy of the MHC and monitoring the risk management process.
The Risk Management Unit gives an independent evaluation of the MHC’s risk exposures and therefore provides a vital management process for the Company.
Objectives
The purpose of the Risk Management Unit is to:
identify and prioritize potential risk events; help develop risk management strategies and
plans; use established risk management methods,
tools and techniques to assist in the analysis and reporting of identified risk events;
find ways to identify and evaluate risks; develop strategies and plans for lasting risk
management strategies; report to Management on the state of risk and
risk practices; and document strategies according to organisational
requirements.
The Risk Management Unit systematically and independently analyses the quality of the portfolio, the adequacy of provisions and credit risk ratings. It ensures the objectivity and comprehensiveness of the risk assessments and recommends corrective measures. The unit undertakes project activities in accordance with agreed project risk management plans and determines levels of risk in accordance with the risk matrix used by the organisation. As a secondary role, it is required to assess the credit policy, processes management and implementation of the Credit Risk Scoring System. Two manuals, i.e. the Risk Manual and the Compliance Manual are available on the MHC’s intranet for compliance and are updated regularly.
The Risk Management Framework
The MHC has an integrated and robust Risk Management Framework in place to identify, assess, manage, report risks and risk-adjusted returns in a reliable and consistent manner. The Risk Management Framework is based on transparency, management accountability and independent oversight.
We have a well-established Integrated Risk Management Framework (IRMF) which is a continuous, proactive and systematic process to understand, manage and communicate risk from an organisation-wide perspective. It is about making decisions that contribute to the achievement of an organisation’s overall corporate objectives.
The purpose of the IRMF is to:
provide guidance to advance the use of a more corporate and systematic approach to risk management;
contribute to building a risk-smart workforce and environment to allow for innovation and responsible risk-taking while ensuring legitimate precautions are taken to protect the public interest, maintain public trust and ensure due diligence; and
propose a set of risk practices that departments can adapt to their specific circumstances and mandate for a proactive and collaborative approach to risk management while maintaining constant vigilance at all times.
As outlined by the Basel Committee on Banking Supervision, the IRMF consists of five interrelated principles, which are:
management oversight and control culture; risk recognition and assessment; control activities and segregation of duties; information and communication; and monitoring risk management activities and
correcting deficiencies.
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The Risk Management Framework (cont'd)
The above principles have been adopted in developing the risk management framework for each of the following material risks as described in the following sections of the IRMF:
credit; liquidity; interest rate; market; and operational risk.
Credit Risk Management
Credit risk is the risk of loss resulting from the failure of a borrower or counterparty to honour its financial or contractual obligations to the MHC and as and when they fall due, the MHC needs to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions.
The Credit Risk Management Framework caters for regulatory requirements, as encompassed in key applicable Bank of Mauritius Guidelines such as the Guideline on Standardised Approach to Credit Risk, the Guideline on Credit Impairment Measurement and Income Recognition, and the Guideline on Credit Concentration Risk. Credit risk exposures are managed through the MHC’s robust credit assessment, structuring and monitoring process and the Credit Risk Scoring System.
Mitigation
All credit facilities are granted based on the credit scoring system, source of repayment and debt servicing ability of the borrower. As a fundamental credit principle, the MHC does not generally grant credit facilities solely on the basis of the collateral provided; the income assessment of the borrower is very essential together with the scorecard as per the Credit Risk Scoring System. The MHC has also joined the Mauritius Credit Information Bureau to assess the creditworthiness of the borrower.
Credit Approval Process
To maintain independence and integrity of credit decision-making, the credit approval function is segregated from loan origination. Credit approval authority is delegated within a structure that is tiered according to the borrower’s rating, exposure, credit risk type and facility type. Key parameters are periodically reviewed to improve turnaround time between origination and disbursement without compromising on the quality of credit being granted.
We have a well-established Credit Risk Management Framework in place which takes into consideration the credit risk evaluation process.
Operational Risk Management
Operational risk is defined as the risk of loss or costs resulting from inadequate or failed process, people and systems or from external events. It includes fraud and criminal activity, project risk, business continuity, information and IT risk. The MHC has established an Operational Risk Management Framework with an appropriate, comprehensive approach to the identification, measurement, monitoring and control of operational risk with the implementation of the IRMF in line with the Guidelines of the Bank of Mauritius and Basel II Requirements.
These diverse risks are explained as follows:
Processing Risk
The risk related to the execution and maintenance of transactions, and the various aspects of running a business, including products and services.
People Risk
The risk of a loss intentionally or unintentionally caused by an employee, e.g. employee error and fraud.
Risk Management (cont'd)
Systems Risk
The risk of loss caused by a piracy, theft, failure, breakdown or other disruption in technology, data or information; it also includes technology that fails to meet business needs.
External Risk
The risk of loss due to damage to physical property or assets from natural or non-natural causes. This category also includes the risk presented by actions of external parties, such as the perpetration of fraud, or in the case of regulators, the execution of change that would alter the organisation's ability to continue operating in certain markets.
Key Employee Risk
The risk of loss of key employees’ services due to death, disability or critical illness.
Other related risks are:
legal risk; reputational risk; compliance risk; and strategic risk.
Market Risk Management
Market risk is the potential that assets, liabilities and revenue or the ability to meet business objectives will be affected by adverse movements in prices or market rates, in particular changes in interest and currency rates. Market risk is often propagated by other forms of financial risk such as credit and liquidity risks. The MHC’s market risk framework comprises six principles which stipulate compliance with market risk policies and practices, including delegation of authority, market risk limits, risk models and methodologies to measure interest spread over various maturities, which are in line with regulatory guidelines and international best practices.
Liquidity Risk Management
Liquidity risk is the risk that a business will have insufficient funds to meet its financial commitments in a timely manner. The two key elements of liquidity risk are short-term cash flow risk and long-term funding risk. The long-term funding risk includes the risk that loans may not be available when the business requires them or that such funds will not be available.
Adequate, cost-effective funds are maintained. Funding capacity to honour all its financial commitments (both contractual and those determined on the basis of behavioural patterns), when they become due, are secured. Thus all the MHC’s commitments which are required to be funded are met out of readily available and secured sources of funding.
The principal sources of funds for the MHC are the Company’s self-revolving fund, deposits from business customers and borrowings from financial institutions.
The maturities between loans taken and granted are kept under constant review to limit liquidity risk.
The goal of liquidity management is to protect the financial strength of the Company and maintain its ability to withstand stressful events in financial markets.
The liquidity risk management framework, which is currently being implemented, incorporates the following eight principles: an agreed strategy for day-to-day management
of liquidity; identification of liquidity risk in the MHC’s
activities; an organisation structure for managing liquidity; adequate information systems for measuring,
monitoring, controlling and reporting liquidity risk;
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Liquidity Risk Management (cont'd) a process for the ongoing measurement and
monitoring of net funding requirements; internal controls that help ensure integrity of
liquidity risk management; diversification of liabilities and maintaining the
capacity to sell assets; and a contingency plan to address the strategy for
holding a liquidity crisis.
The above ensure:
maintenance of a sufficiently large liquidity buffer; assurance of a structurally sound statement of
financial position; management of short and long-term cash flow; preservation of a diversified funding base; regular liquidity stress testing and scenario
analysis; and maintenance of adequate contingency funding
plans.
Interest Rate Risk Management
The MHC manages the potential adverse effect of interest rate movements on net interest income and the economic value of capital.
Interest rate risk is the potential impact on the MHC’s earnings and net asset values of changes in interest rates. Changes in interest rates affect the MHC’s earnings by changing its net interest income and the level of other interest-sensitive income and expenses. Effective management of interest rate risk is essential for the safety and soundness of the MHC.
The MHC’s approach to managing interest rate risk is governed by the Bank of Mauritius Guideline on Measurement and Management of Market Risk and the Company’s internal policy.
Concentration of Credit Risk
The MHC seeks to diversify its credit risk by limiting exposure to a single borrower or group of related borrowers. Concentration of credit risk is governed by the Guideline on Credit Concentration Limits issued by the Bank of Mauritius.
The Assets & Liabilities Committee (ALCO) is mandated to look into credit risk. The Committee’s set-up prescribes that asset and liability management will deal with aspects related to credit risk as the purpose of this function is also to manage the impact of the entire credit portfolio (including cash, investments and loans) on the balance sheet. The MHC must perform one or a combination of the following to meet liquidity and lending needs of our customers:
dispose of liquid assets; increase short-term borrowing; decrease holdings of non-liquid assets; increase liabilities of a term nature; and increase capital funds.
Risk Management (cont'd)
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MANAGEMENT DISCUSSION AND ANALYSISMAURITIUS HOUSING COMPANY LTD
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ANNUAL REPORTMAURITIUS HOUSING COMPANY LTD20
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Annual Report 2015 43
Management Discussion and AnalysisSummarised Income Statement for year ended 31st December 2015
December 2015 (Rs m)
December 2014 (Rs m)
December 2013 (Rs m)
Net Interest Income 322.8 329.2 316.4Other Income 89.1 96.0 103.8Operating Income 411.9 425.2 420.2Non-Interest Expenses (218.5) (225.0) (214.6)Operating Profit before Impairment 193.4 200.2 205.6Provision on Other Assets (12.5) - -Impairment Losses 7.9 1.1 80.4(Loss)/Profit on Foreclosed Properties (5.8) 3.1Increase in Fair Value Adjustment of Investment Properties 16.1 - -Profit for the Period 199.1 204.4 286.0
MHC’s profit for the twelve months ended December 2015 amounted to Rs 199.1 m compared to Rs 204.4 m for the period ended December 2014, representing a 2.6% decline. The decrease in profit is the result of fierce competition from financial institutions, especially commercial banks, helped by the excess liquidity they have and the lower interest rates offered to attract demand for housing finance.
Earnings per share has decreased to Rs 9.96 for the twelve months to 31st December 2015 compared to Rs 10.22 as at 31st December 2014.
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Revenue The Company’s gross revenue for the 12 months ended 31st December 2015 was Rs 621.0 m compared to Rs 612.0 m as at December 2014, representing a 1.5% increase. Gross revenue consists of interest income generated from loan business, fees and commissions, rent and income from investments.
Net interest income decreased by Rs 6.4 m, representing a 1.9% decrease from the previous year while non-interest income fell by Rs 6.9 m, being a 7.2% drop over last year’s result.
Other income amounted to Rs 89.1 m as at 31st December 2015 (December 2014: Rs 96.0 m). The main components are income from insurance premiums, rent on investment properties and fee-based income collected from loan clients. This 7.2% reduction was mainly due to fee waivers granted in relation to a promotional campaign.
During the same period, reversal of interest suspended amounted to Rs 10.2 m compared to Rs 20.5 m as at 31st December 2014.
ExpensesInterest expenses amounted to Rs 219.2 m for the year ended 31st December 2015 compared to Rs 207.3 m for the year ended 31st December 2014.Interest expenses represent interest payable on MHC’s borrowings, savings and term deposit accounts.
Non-interest expenses amounted to Rs 218.5 m for the year ended 31st December 2015 compared to Rs 225.0 m for the year ended 31st December 2014, representing savings of 2.9%.
Depreciation and amortisation costs rose by 10.9%, mainly due to the capitalization of hardware expenses.
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Capital AdequacyThe capital adequacy ratio for the year was 60.1% compared to the restated ratio of 68.2% in December 2014, against the minimum 10% required by the Bank of Mauritius. This ratio aims at ensuring that an adequate amount of capital and reserves is maintained to safeguard solvency.
Capital Structure
Capital BaseDec. 2015
Rs mDec. 2014
Rs m Restated
Core Capital (Tier 1 Capital) Share Capital 200.0 200.0Statutory Reserve 200.0 200.0Other Reserves 1,823.7 1,818.2
2,223.7 2,218.2Deduct Other Intangible Assets (26.0) (2.3)Total Core Capital 2,197.7 2,215.9Supplementary Capital (Tier 2 Capital) Other Reserves 220.4 194.1Portfolio Provision 51.3 45.0Total Supplementary Capital 271.7 239.1Total Net Capital 2,469.4 2,455.0Risk-Weighted Assets Property, Plant & Equipment 505.5 449.7Housing Loans 2,678.7 2,618.8Cash in Hand 484.7 247.6Other Assets 441.3 284.0Total Risk-Weighted Assets 4,110.2 3,600.1Capital Adequacy Ratio (%) 60.1 68.2
Management Discussion and Analysis (cont'd)
AUDITED FINANCIAL STATEMENTSMAURITIUS HOUSING COMPANY LTD08
ANNUAL REPORTMAURITIUS HOUSING COMPANY LTD20
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Report from DirectorsThe Directors have the pleasure in submitting the Annual Report together with the audited financial statements of the Mauritius Housing Company Ltd (the "Company") for the year ended 31st December 2015.
Incorporation The Company was incorporated in the Republic of Mauritius on 12th December 1989 as a public company with limited liability.
Principal ActivitiesThe principal activities of the Company are to grant loans for the construction of houses and engage in deposit-taking.
Results and DividendsThe results for the year are as shown in the statement of comprehensive income.
For the year 2015, the Directors have recommended a dividend Rs 39,820,600 subject to Bank of Mauritius approval (year ended 31st December 2014: Rs 38,902,400 and year ended 31st December 2013: Rs 55,318,000).
DirectorsThe present membership of the Board is set out on page 13.
Directors’ Responsibilities in Respect of the Financial Statements Company law requires the Directors to prepare financial statements for each financial year which present fairly the financial position, financial performance and cash flows of the Company. The Directors are also responsible for keeping accounting records that:
correctly record and explain the transactions of the Company;
disclose with reasonable accuracy at any time the financial position of the Company; and
the financial statements comply with the Mauritius Companies Act 2001.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
Directors’ Share Interests
The Directors hold no share in the Company whether directly or indirectly.
Directors’ RemunerationRemuneration and other benefits received by the Directors from the Company are as follows:
31st December
2015 Rs
31st December
2014 Rs
31st December
2013 Rs
Executive Director 155,300 6,093,587 2,935,551
Non-Executive Directors 2,520,500 2,035,089 1,693,761
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Our financial statements gives detailed analysis of our statutory accounts, independently audited and providing in-depth disclosure and transparency on
the financial performance of the business.
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Significant ContractsNo contracts of significance existed during the period under review between the Company and its Directors. Loans to the Directors are granted in the normal course of business.
DonationsThe Company made a donation of Rs 314,300 during the year ended 31st December 2015 (year ended 31st December 2014: Rs nil and year ended 31st December 2013: Rs 61,000).
AuditorsFees, inclusive of VAT, payable to Deloitte for the year ended 31st December 2015 (Year ended 31st December 2014 and 2013 paid to BDO & Co.) are as follows:
31st December
2015 Rs
31st December
2014 Rs
31st December
2013 Rs
Audit fees 1,063,750 1,322,500 1,265,000
Other services - - 402,500
1,063,750 1,322,500 1,667,500
Fees paid for other services represent consultancy fees in respect of a reconciliation performed by BDO & Co.
________________________ ________________________ ________________________
CHAIRMAN DIRECTOR DIRECTOR
Date: 30th March 2016
Report from Directors (cont'd)
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Statement of Management Responsibility for Financial ReportingThe Company’s financial statements regarding its operations in Mauritius, duly presented in the Annual Report have been prepared by the Management Team, which is responsible for their integrity, consistency, objectivity and reliability. International Financial Reporting Standards, as well as the requirements of the Mauritius Companies Act 2001 and the Banking Act 2004 as applicable to the Company and the guidelines issued thereunder have been applied and the Management Team has exercised its judgement and made best estimates where deemed necessary.
The Company has designed and maintained its accounting systems, related internal controls and supporting procedures, to provide reasonable assurance that financial records are complete and accurate and that assets are safeguarded against losses from unauthorized use or disposal. These supporting procedures include careful selection and training of qualified staff, the implementation of organisation and governance structures providing a well-defined division of responsibilities, authorization levels and accountability for performance, and the communication of the Company’s policies, procedures manuals and guidelines of the Bank of Mauritius throughout the Company.
The Company’s Board of Directors, acting in part through the Audit Committee and Conduct Review and Risk Policy Committee, which comprise Independent Directors, oversees the Management’s responsibility for financial reporting, internal controls, assessment and control of major risk areas, and assessment of significant and related party transactions.
The Company’s Internal Auditor, who has full and free access to the Audit Committee, conducts a well-designed programme of internal audits. In addition, the Company’s compliance function maintains policies, procedures and programmes directed at ensuring compliance with regulatory requirements.
Pursuant to the provisions of the Banking Act 2004, the Bank of Mauritius makes such examination and inquiry into the operations and affairs of the Company, as it deems necessary.
The Company’s external auditors, Deloitte, have full and free access to the Board of Directors and its committees to discuss the audit and matters arising therefrom, such as their observations on the fairness of financial reporting and the adequacy of internal controls.
________________________ ________________________ ________________________
CHAIRMAN DIRECTOR DIRECTOR
Date: 30th March 2016
Report from Directors (cont'd)
Report from Company SecretaryReport from the Secretary to the Members of the Mauritius Housing Company Ltd
I certify that, to the best of my knowledge and belief, the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Mauritius Companies Act 2001, in terms of Section 166 (d) during the financial year ended 31st December 2015.
KRESHAN NARROO COMPANY SECRETARY
Date: 30th March 2016
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Report from the Auditors
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Independent Auditors' Report to the Shareholders of the Mauritius Housing Company LtdThis report is made solely to the Company’s shareholders, as a body, in accordance with Section 205 of the Mauritius Companies Act 2001. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.
Report on the Financial StatementsWe have audited the financial statements of the Mauritius Housing Company Ltd on pages 52 to 100 which comprise the Statement of Financial Position as at 31st December 2015 and the Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information.
Directors’ Responsibility for the Financial Statements
The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Mauritius Companies Act 2001, the Financial Reporting Act 2004 and the Banking Act 2004. They are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements on pages 52 to 100 give a true and fair view of the financial position of the Mauritius Housing Company Ltd as at 31st December 2015, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the requirements of the Mauritius Companies Act 2001, Financial Reporting Act 2004 and Banking Act 2004.
Other Matters
The financial statements of the Mauritius Housing Company Ltd for the year ended 31st December 2014, were audited by another auditor who expressed an unmodified opinion thereon on 20th April 2015.
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Report on Other Legal and Regulatory RequirementsIn accordance with the requirements of the Mauritius Companies Act 2001, we report as follows:
We have no relationship with, or interests in, the Company other than in our capacity as auditor.
We have obtained all information and explanations that we have required.
In our opinion, proper accounting records have been kept by the Company as far as appears from our examination of those records.
The Financial Reporting Act 2004The Directors are responsible for preparing the Corporate Governance Report. Our responsibility is to report on the extent of compliance with the Code of Corporate Governance as disclosed in the Annual Report and on whether the disclosure is consistent with the requirements of the Code.
In our opinion, the disclosure in the Corporate Governance Report is consistent with the requirements of the Code.
Banking Act 2004
In our opinion, the financial statements have been prepared on a basis consistent with that of the preceding year and are complete, fair and properly drawn up and comply with the Banking Act 2004 and the regulations and guidelines of the Bank of Mauritius.
The explanations or information called for or given to us by the officers or agents of the Company were satisfactory.
DELOITTEChartered Accountants
TWALEB BUTONKEE, FCALicensed by FRC
Date: 30th March 2016
Report from the Auditors (cont'd)
Audited Accounts
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Statement of Financial Position at 31st December 2015
Year ended 31st December
2015
Year ended 31st December
2014
Year ended 31st December
2013Rs’000 Rs’000 Rs’000
Note Restated RestatedASSETSCash at banks and in hand 809,692 460,189 472,953 Property development 13 2,413 4,861 14,651Loans to customers 14 5,933,027 5,770,788 5,386,068Investment property 15 104,240 88,174 88,174Property and equipment 16 505,484 449,657 457,213Intangible assets 17 26,026 2,316 2,183Other assets 18 271,000 219,477 221,557Total assets 7,651,882 6,995,462 6,642,799
LIABILITIES PEL and other savings accounts 19 1,647,062 1,533,704 1,467,988Housing Deposit Certificates 20 2,045,528 1,509,078 1,165,063Borrowings 21 699,081 923,833 1,124,705Retirement benefit obligations 22 135,738 104,426 90,999Other liabilities 23 52,161 46,169 57,670Total liabilities 4,579,570 4,117,210 3,906,425
Insurance funds 24 76,222 73,142 70,062
SHAREHOLDERS' EQUITYShare capital 25 200,000 200,000 200,000Revaluation reserves 489,743 431,225 431,225Building insurance reserve 27 116,810 116,810 116,810Life insurance reserve 33 (c) 154,642 - - Retained earnings 28 1,823,753 1,818,194 1,669,145Statutory reserve 200,000 200,000 200,000Other reserves 29 11,142 38,881 49,132Total equity 2,996,090 2,805,110 2,666,312
Total equity and liabilities 7,651,882 6,995,462 6,642,799
These financial statements have been approved and authorized for issue by the Board of Directors on 30th March 2016 and signed on its behalf by:
________________________ ________________________ ________________________ CHAIRMAN DIRECTOR DIRECTOR
The notes on pages 56 to 100 form an integral part of these financial statements. Auditors' Report on pages 50 and 51.
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Statement of Profit or Loss and Other Comprehensive Income for the year ended 31st December 2015
Year ended 31st December
2015
Year ended 31st December
2014
Year ended 31st December
2013Rs’000 Rs’000 Rs’000
Note Restated Restated
Interest income 531,905 516,044 500,290 Interest expense (219,222) (207,339) (207,907)Interest suspended 10,155 20,499 23,975 Net interest income 6 322,838 329,204 316,358
Fee and commission income 23,630 27,953 22,880 Rent received 7,153 6,997 7,223 Policy fees and charges on loan 4,038 4,562 4,971 Other operating income 7 54,308 56,457 68,776
89,129 95,969 103,850
Operating income 411,967 425,173 420,208
Personnel expenses 8 (143,195) (144,136) (128,077)Depreciation and amortisation (13,765) (12,411) (12,972)Other expenses 9 (61,498) (68,419) (73,594)Non-interest expense (218,458) (224,966) (214,643)
Operating profit 193,509 200,207 205,565
Release of allowance for credit impairment 14(b) 7,927 1,078 80,428 Gain/(Loss) on sale of foreclosed properties (5,899) 3,082 (2)Increase in fair value of investment property 15 16,066 - - Provision for other assets 18 (12,500) - - Profit for the year 199,103 204,367 285,991
Other comprehensive income 26Items that will not be reclassified to profit or loss:Remeasurement of post-employment benefit obligations 22(a)(iv) (27,739) (10,391) (49,157)Gains on revaluation of land & buildings 58,518 - - Gain on foreclosed properties - 140 - Other comprehensive income for the year 30,779 (10,251) (49,157)
Total comprehensive income for the year 229,882 194,116 236,834
Earnings per share (Rs) - as reported 9.96 9.73 13.83 Earnings per share (Rs) - as restated 12 9.96 10.22 14.30
The Notes on pages 56 to 100 form an integral part of these financial statements.Auditors' Report on pages 50 and 51.
Audited Accounts (cont'd)
Statement of Changes in Equity for the year ended 31st December 2015Building Life
Share Revaluation insurance Retained insurance Statutory Other Actuarialcapital reserves reserve earnings reserve reserve* reserves** reserves** TotalRs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000
At 1st January 2013- as previously stated 200,000 431,225 116,810 1,296,995 - 200,000 121,720 (23,431) 2,343,319 - impact of adjustment on account of
insurance (Note 33 (c)) - - - 156,482 - - - - 156,482 - impact of HDC bonus relating to
opening balance (Note 33 (b)) - - - 9,300 - - - - 9,300 - impact of additional interest and bonus
on PEL accounts (Note 33 (a)) - - - (18,790) - - - - (18,790) 200,000 431,225 116,810 1,443,987 - 200,000 121,720 (23,431) 2,490,311
Dividend (Note 11) - - - (60,833) - - - - (60,833)Profit for the year - - - 285,991 - - - - 285,991 Other comprehensive income - - - - - - - (49,157) (49,157)Total comprehensive income for the year - - - 285,991 - - - (49,157) 236,834
At 31st December 2013 200,000 431,225 116,810 1,669,145 - 200,000 121,720 (72,588) 2,666,312
At 1st January 2014- as previously stated 200,000 431,225 116,810 1,512,752 - 200,000 121,720 (72,588) 2,509,919 - impact of adjustment on account of
insurance - - - 159,378 - - - - 159,378 - impact of HDC bonus (Note 33 (b)) - - - 18,037 - - - - 18,037 - impact of additional interest and bonus
on PEL accounts (Note 33 (a)) - - - (21,022) - - - - (21,022) 200,000 431,225 116,810 1,669,145 - 200,000 121,720 (72,588) 2,666,312
Dividend (Note 11) - - - (55,318) - - - - (55,318)Profit for the year - - - 204,367 - - - - 204,367 Other comprehensive income - - - - - - 140 (10,391) (10,251)Total comprehensive income for the year - - - 204,367 - - 140 (10,391) 194,116
At 31st December 2014 200,000 431,225 116,810 1,818,194 - 200,000 121,860 (82,979) 2,805,110
At 1st January 2015- as previously stated 200,000 431,225 116,810 1,630,924 - 200,000 121,860 (82,979) 2,617,840 - impact of adjustment on account of
insurance - - - 154,642 - - - - 154,642 - impact of HDC bonus (Note 33 (b)) - - - 32,628 - - - - 32,628
200,000 431,225 116,810 1,818,194 - 200,000 121,860 (82,979) 2,805,110 Dividend (Note 11) - - - (38,902) - - - - (38,902)Profit for the year - - - 199,103 - - - - 199,103 Transfer to insurance reserve (Note 33 (c)) - - - (154,642) 154,642 - - - - Other comprehensive income - 58,518 - - - - - (27,739) 30,779 Total comprehensive income for the year - 58,518 - 44,461 154,642 - - (27,739) 229,882
At 31st December 2015 200,000 489,743 116,810 1,823,753 154,642 200,000 121,860 (110,718) 2,996,090
* As per the Banking Act 2004, 15% of the net profit for the year is transferred to statutory reserve until the balance is equal to the amount of stated capital (Share capital)
** See Note 29
The Notes on pages 56 to 100 form an integral part of these financial statements. Auditors' Report on pages 50 and 51.
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Audited Accounts (cont'd)
Statement of Cash Flows for the year ended 31st December 2015
Year ended 31st December
2015
Year ended 31st December
2014
Year ended 31st December
2013Rs’000 Rs’000 Rs’000
Restated RestatedCash flows from operating activitiesProfit for the year 199,103 204,367 285,991 Adjustments for:Allowance for credit impairment (7,927) (1,078) (80,428)Provision for other assets 12,500 - - Depreciation 11,621 11,058 11,773 Amortisation 2,144 1,353 1,199 Loss/(Gain) on sale of foreclosed properties 5,899 (3,082) 2 Profit on disposal of property development (452) (1,092) (5,979)Increase in fair value of investment property (16,066) - - Interest in suspense (10,155) (20,499) (23,975)Profit on disposal of property and equipment (210) (1,046) (435)Provision for retirement benefit obligation 3,573 3,036 1,088
200,030 193,017 189,236 Change in operating assets and liabilities(Increase)/Decrease in other assets (69,922) 5,302 (17,006)Increase/(Decrease) in other liabilities 5,992 (11,501) (14,618)Increase in accrued interest payable 69,460 50,926 13,726 Increase in loans to customers (144,157) (363,143) (347,593)Increase/(Decrease) in insurance funds 3,080 3,080 (5,116)Net cash used in operating activities (135,547) (315,336) (370,607)
Cash flows from investing activitiesPurchase of property and equipment (9,130) (5,043) (7,666)Purchase of intangible assets (25,854) (1,486) (3,274)Proceeds from disposal of Cybervillage apartment - - 2,000 Proceeds from disposal of property and equipment 410 2,587 435 Proceeds from disposal of property development 2,900 10,882 35,798 Payments for property development - - (2,670)Net cash (used in)/generated from investing activities (31,674) 6,940 24,623
Cash flows from financing activitiesHousing Deposit Certificates (HDC) 459,131 287,440 177,630 Plan Epargne Logement (PEL) savings 121,217 71,365 22,755 Repayment of borrowings (209,118) (199,864) (209,663)Dividends paid (38,902) (55,318) (60,833)Net cash generated from/(used in) financing activities 332,328 103,623 (70,111)Increase/(Decrease) in cash and cash equivalents 365,137 (11,756) (226,859)Movement in cash and cash equivalentsCash and cash equivalents at 1st January 435,365 447,121 673,980 Increase/(Decrease) in cash and cash equivalents 365,137 (11,756) (226,859)Cash and cash equivalents at 31st December 800,502 435,365 447,121
Cash and cash equivalentsCash at bank and in hand 809,692 460,189 472,953 Bank overdrafts (Note 21) (9,190) (24,824) (25,832)
800,502 435,365 447,121
The Notes on pages 56 to 100 form an integral part of these financial statements. Auditors' Report on pages 50 and 51.
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Audited Accounts (cont'd)
1. General InformationThe Maur i t ius Hous ing Company Ltd (the “Company”), was incorporated on 12th December 1989 as a public company with limited liability. The principal activities of the Company are to grant loans for the construction/purchase of houses and engage in deposit-taking. The registered office of the Company is MHC Building, Révérend Jean Lebrun Street, Port Louis, Mauritius.
2. Application of New and Revised International Financial Reporting Standards (IFRSs)In the current year, the Company has applied all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the “IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are effective for the accounting period beginning on 1st January 2015 and relevant to its operations.
2.1 New and revised IFRS applied with no material effect on financial statements
The following relevant new and revised IFRS have been applied in these financial statements. The application of these new and revised IFRS has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. However, they did not have any impact on the amounts reported for the current and prior periods but may impact the accounts for future transactions or arrangements.
IAS 16 Property, Plant and Equipment: Amendments resulting from Annual I m p r o v e m e n t s 2 0 1 0 - 2 0 1 2 C y c l e (proportionate restatement of accumulated depreciation on revaluation)
IAS 19 Employee Benefits: Amended to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service
IAS 24 Related Party Disc losures : Amendments resulting from Annual I m p r o v e m e n t s 2 0 1 0 - 2 0 1 2 C y c l e (management entities)
IAS 38 Intangible Assets: Amendments resulting from Annual Improvements 2010-2012 Cycle (proportionate restatement of accumulated depreciation on revaluation)
IAS 40 Investment Property: Amendments resulting from Annual Improvements 2011-2013 Cycle (interrelationship between IFRS 3 and IAS 40)
IFRS 13 Fa i r Va lue Measurement : Amendments resulting from Annual Improvements 2011-2013 Cycle (scope of the portfolio exception in paragraph 52)
2.2 "New and revised IFRSs in issue but not yet effective"
At the date of authorisation of these financial statements, the following relevant new and revised Standards were in issue but effective on annual periods beginning on or after the respective dates as indicated:
IAS 1 Presentation of Financial Statements: Amendments resulting from the disclosure initiative (effective 1st January 2016)
IAS 7 Statement of Cash Flows: Amendments as result of the Disclosure initiative (effective 1st January 2017)
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Notes to the Financial Statements for the year ended 31st December 2015
2. Application of New and Revised International Financial Reporting Standards (IFRSs) (cont'd)2.2 "New and revised IFRSs in issue but not
yet effective" (cont'd)
IAS 16 Property, Plant and Equipment: Amendments regarding the clarification of acceptable methods of depreciation and amortisation (effective 1st January 2016)
IAS 16 Property, Plant and Equipment: Amendments bringing bearer plants into the scope of IAS 16 (effective 1st January 2016)
IAS 19 Employee Benefits: Amendments resulting from September 2014 Annual Improvements to IFRSs (e f fec t i ve 1st January 2016)
IAS 38 Intangible Assets: Amendments regarding the clarification of acceptable methods of depreciation and amortisation (effective 1st January 2016)
IAS 39 Financial Instruments: Recognition and Measurement: Amendments to permit an entity to elect to continue to apply the hedge accounting requirements in IAS 39 for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities when IFRS 9 is applied, and to extend the fair value option to certain contracts that meet the 'own use' scope exception (effective 1st January 2018)
IFRS 7-Financial Instruments: Disclosures: Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures (effective 1st January 2018)
IFRS 7-Financial Instruments: Disclosures: Additional hedge accounting disclosures (and consequential amendments) resulting
from the introduction of the hedge accounting chapter in IFRS 9 (effective 1st January 2018)
IFRS 7-Financial Instruments: Disclosures: Amendments resulting from September 2014 Annual Improvements to IFRSs (effective 1st January 2016)
IFRS 9 Financial Instruments: Finalised version, incorporating requirements for classification and measurement, impairment, general hedge accounting and derecognition (effective 1st January 2018)
IFRS 15 Revenue from Contracts with Customers: Original issue (effective 1st January 2018)
IFRS 16 Leases: Original issue
The Directors anticipate that these amendments will be adopted in the Company’s financial statements at the above effective dates in future periods. The Directors have not yet assessed the potential impact of the application of these amendments.
3. Significant Accounting PoliciesThe principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
(a) Basis of preparation
The financial statements of the Company comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements are presented in Mauritian Rupees and all values are rounded to the nearest thousand (Rs000), except when otherwise indicated.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)(a) Basis of preparation (cont'd)
Where necessary, comparative figures have been amended to conform with change in presentation in the current year. The financial statements are prepared under the historical cost convention, except that land and buildings and investment properties are stated at their fair value, and relevant financial assets and liabilities are stated at their fair value or amortised cost.
(b) Property and equipment
1. Land and buildings are stated at their fair value, based on periodic valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.
2. All other property and equipment are stated at historical cost less depreciation and impairment losses, except housing estates which are not depreciated. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
3. Subsequent costs are included in the assets' carrying amount or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
4. Owned-used property is defined as property held for use in the supply of services or for administrative purposes.
5. Depreciation is calculated to write off the cost of each asset or its revalued amount to its residual value over its estimated useful life, with the exception of freehold land and housing estates.
6. Increases in the carrying amount arising on revaluation are credited to other comprehensive income and shown as revaluation reserves in shareholders' equity. Decreases that offset previous increases of the same assets are charged against the revaluation reserves; all other decreases are charged to profit or loss.
7. The annual rates and method used are as follows:
Freehold buildings
2% Straight line method
Furniture and equipment
10% and 33 1/3%
Straight line method
Motor vehicles 20% Straight line method
8. The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted prospectively if appropriate, at the end of each reporting period.
9. Where the carrying amount of an asset is greater than the estimated recoverable amount, it is written down immediately to its recoverable amount.
10. Gains and losses on disposal of property and equipment are determined by the difference between their carrying values and their net disposal proceeds and are included in profit or loss. On disposal of revalued assets, the amounts included in revaluation surplus are transferred to retained earnings.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)(c) Intangible assets
Computer software
Intangible assets consist of computer software. The computer software cost is amortised on a straight line basis over their estimated useful lives of 3 years.
Progress payments
Progress payments on computer software are recognized when they meet criteria relating to identifiability, probability that future economic benefits will flow to the enterprise, and the cost can be measured reliably. No depreciation is charged on progress payments.
(d) Foreclosed property
Foreclosed property is classified as assets acquired in satisfaction of debts and represents houses acquired through auction at the Master’s Bar following the default by clients. Foreclosed property is stated at the price paid at the Master’s Bar together with all related expenses incurred on the acquisition and reported within ‘Other assets’. If the acquisition value together with related costs is greater than the loan balance outstanding, the difference is reported as an unrealised gain in the Mortgage Insurance Reserve Account, if the property has a mortgage insurance. Where there is no mortgage insurance, the unrealised gain is credited to the Foreclosed Property Reserve.
Upon disposal of the foreclosed property, the realised loss/gain is taken to profit or loss.
It is the Company’s policy to maintain impairment loss on foreclosed property at a rate of 10% per annum.
(e) Investment property
Investment property are properties which are held to earn rental income and/or for capital appreciation and not occupied by the Company. They are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is carried at fair value determined by external valuers. Changes in fair value are included in profit or loss.
On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss.
(f) Financial assets
The Company classifies its financial assets in the following categories:
Secured loans to customers: these relate to loans originated by the Company and where the money is provided directly to the borrowers and they are recognized when cash is advanced to the borrowers. They are initially recorded at fair value, including any transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less any impairment.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Company has transferred substantially all risks and rewards of ownership.
Provision for credit losses
Allowance for credit losses is established if there is objective evidence that the Company will be unable to collect all amounts due according to the original contractual terms.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)(f) Financial assets (cont’d)
Provision for credit losses
Allowance for credit losses is reported as a reduction in the carrying value of a loan in the statement of financial position.
All impaired loans are reviewed and analysed at each reporting date. Any subsequent changes to the amounts and timing of the expected future cash flows compared to the prior estimates will result in a change in the allowance for credit losses and be charged or credited to profit or loss.
An allowance for an impairment is reversed only when the credit quality has improved such that there is reasonable assurance of timely collection of principal and interest in accordance with the original contractual terms of the loan agreement.
A write-off is made when all or part of a claim is deemed uncollectible. Write-offs are charged against provisions made for credit losses or directly to the profit or loss. Recoveries in part or full of amounts previously written-off are credited to profit or loss.
The Company has established the below-mentioned criteria for provision for credit losses and for adjustment in respect of interest income suspended and these criteria are in line with the spirit of ‘social mission’ which guides the Company:
(i) A loan is classified as non-performing when the contractual payments of principal and interest are in arrears and where legal action has not yet been initiated; the provision for such type of loan is the excess of balance of capital and interest outstanding over the recoverable amount of the collateral security. This is calculated on a case-to-case basis.
(ii) For loans where proper legal action in court for the realisation of collateral has been commenced, provision for credit loss is the difference between capital balance and valuation of the security reduced to 35-50% discounted to its present value using the loan’s effective interest rate.
(iii) For loans which are overdue by 90 days and up to 360 days and no proper legal action in court has been commenced, the limit is 50% discounted to its present value using the loan's effective interest rate.
(iv) For loans which are overdue by 360 days and up to 540 days and no proper legal action in court has commenced, the limit is 40% discounted to its present value using the loan’s effective interest rate.
(v) For loans which are overdue by more than 540 days, a full provision is effected for credit losses.
(vi) For all impaired loans as described in (ii) to (v), interest income is suspended at 100%.
Portfolio provision
A portfolio provision for credit impairment is maintained on the aggregate amount of all loans and advances to allow for potential losses not specifically identified but which experience indicates are present in the portfolio loans. The Bank of Mauritius Guideline on Credit Impairment Measurement and Income Recognition prescribes that the portfolio provision should be no less than 1 per cent of the aggregate amount of loan and advances excluding impaired advances, excluding loans granted to or guaranteed by the Government of Mauritius and excluding loans to the extent that they are supported by collateral of liquid assets held by the Company. The charge for portfolio provision is recognised in profit or loss.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)(g) Retirement benefit obligations
Defined benefit plans
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
Remeasurement of the net defined benefit liability, which comprises actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), is recognised immediately in other comprehensive income in the period in which they occur. Remeasurements recognised in other comprehensive income shall not be reclassified to profit or loss in subsequent period.
The Company determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(asset), taking into account any changes in the net defined liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense/(income) is recognised in profit or loss.
Service costs comprising current service cost, past service cost, as well as gains and losses on curtailments and settlements are recognised immediately in profit or loss.
Pension contributions
Contributions to the Family Protection Scheme (FPS) and contributions to the National Pension Scheme (NPS) are expensed to profit or loss in the period in which they fall due.
(h) Statutory reserve
As required by Section 21 of the Banking Act 2004, the Company has set up a Statutory Reserve in which 15% of the net profit is transferred annually to this reserve until the balance is equal to the stated capital. Such reserve is not distributable.
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, net of bank overdrafts. In the statement of financial position, bank overdrafts are included within borrowings.
(j) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as deduction from proceeds.
(k) Revenue recognition
Interest, other than bank interest, is recognised as income in profit or loss for the accounting period in which it is receivable.
Interest income is suspended when loans become non-performing.
Bank interest income is recognised on an accrual basis by reference to the principal outstanding and at the effective interest rate applicable.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)(l) Rental income
Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease.
(m) Fees and commission income
Fees and commissions are generally recognised on an accrual basis when the service has been provided.
Penalty on late payments
There is a surcharge equivalent to 10% per annum of the monthly repayment and 5% per annum on monthly unpaid capital for cases falling under the Borrowers Protection Act if payment is effected after fifteen days from the last day of the month when the payment falls due. This surcharge is accounted for in profit or loss as and when received.
(n) Life assurance and building insurance
The Mauritius Housing Company Ltd (MHC Ltd) is empowered by virtue of Section 4(b) of the Mauritius Housing Corporation (Transfer of Undertaking) Act 1989 to transact life assurance in connection with loans granted by the Company. Insurers have to comply with the provisions of the Insurance Act 2005 but the MHC Ltd does not fall within the scope of the Insurance Act. However, the provisions of the Mauritius Civil Code pertaining to insurance apply to the Company's insurance operations.
The Company operates the following insurance schemes:
Secured loan holders are required to make contribution to the Company to provide life assurance cover for a sum equal to the balance outstanding in their account. Premium is calculated on the basis of monthly reducing balances and credited to the statement of
profit or loss. Claims arising upon occurrence of the insured event are charged to the statement of profit or loss as Claims paid and include changes in the provision for outstanding claims including provision for claims incurred but not reported. It is the policy of the Company to appoint a qualified actuary to carry a liability adequacy test of the Life Assurance Fund every two years.
Building insurance premium is charged to those who have taken loans for construction purposes. The premium is based on the expected valuation of the building. Premium is calculated monthly and credited to the statement of profit or loss. Claims arising upon occurrence of the insured event are charged to the statement of profit or loss as Claims paid.
A mortgage insurance premium of 6% is charged on the excess of loan amount over 75% of the value of collateral to the borrowers as a Mortgage Insurance. The entire premium received is credited to the statement of profit or loss.
(o) Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flow estimates to settle the present obligation, its carrying amount is the present value of more cash flows.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)(p) Impairment of assets
At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there is objective evidence of impairment. If any such indication exists, the asset’s recoverable amount is estimated, being the higher of the asset’s fair value less costs to sell and its value in use, to determine the extent of the impairment loss, if any, and the carrying amount of the asset is reduced to its recoverable amount. The impairment loss is recognised in profit or loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
(q) Financial instruments
Financial assets and liabilities are recognized in the statement of financial position when the Company has become a party to the contractual provisions of the instrument.
The instruments are measured as set out below:
Borrowings
Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs incurred. Borrowings are subsequently stated at amortised cost: any difference between the proceeds and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
Other receivables
Other receivables are stated at amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts.
Loans
Loans are measured at amortised cost less allowance for credit losses.
Other payables
Other payables are stated at amortised cost using the effective interest method.
Deposits
Deposits are stated at amortised cost.
Offsetting
Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
(r) Leases
The Company as lessor
Assets leased out under operating leases are included in the statement of financial position as investment property. Rental income is recognised on a straight line basis over the lease term.
The Company as lessee
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(s) Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Board of Directors.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
3. Significant Accounting Policies (cont'd)
(t) Related parties
For the purposes of these financial statements, parties are considered to be related to the Company if they have the ability, directly or indirectly, to control the Company, or exercise significant influence over the Company in making financial and operating decisions (or vice versa), or if they and the Company are subject to common control. Related parties may be individuals or other entities.
(u) Amount receivable from Government
Amount receivable from Government comprises Government grants and interest differential refundable by the Government. Amounts are only recognised if they meet the conditions to qualify for the refund.
Gove r nment g ran t s pe r t a in ing to Government Sponsored Loan (GSL) scheme are recognised as an asset in the period the grants are paid to the GSL beneficiaries.
Interest differential refundable by the Government includes a 2 per cent interest bonus over and above the rate offered by the MHC on HDCs with maturity of 3 years or more refundable by the Government. It also includes amount refundable on a 3 per cent interest bonus over and above the rate offered by the MHC on PEL accounts for customers that make regular contributions and that have taken a housing loan from the MHC. The amount receivable is accounted on the basis of the interest accrued on those deposits.
Amount will be recognised in Net Interest Income - Others (Note 6) and Amount receivable from Government (Note 18).
4. Financial RisksIn its ordinary operations, the Company is exposed to various risks such as capital risk, interest rate risk, credit risk and liquidity risk. The Company has devised a set of specific policies for managing these exposures.
Strategy in using financial instruments
The use of financial instruments is a major feature of the Company’s operations. The Company accepts deposits from customers and secures borrowings from financial and non-financial institutions at variable rates and seeks to earn above-average interest margins by investing these funds.
In pursuance of its objectives of maximizing return on investments, the Company takes into account the maintenance of sufficient liquidity to meet all claims that might fall due and to provide loan facilities for housing purposes.
Capital risk management
The Company’s capital management objective is to ensure that adequate capital resources are available for sustained business growth as well as coping with adverse situations. The minimum capital adequacy ratio that has to be maintained by the Company is 10% of risk-weighted assets computed as follows:
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
31st December 2015 Rs’000
31st December 2014 Rs’000
Restated
31st December 2013 Rs’000
Restated
Tier 1 capital 2,197,727 2,215,878 2,066,962Tier 2 capital 271,762 239,052 237,584 Total capital base 2,469,489 2,454,930 2,304,546Risk-weighted assets 4,110,241 3,600,063 3,482,619Capital adequacy ratio 60.1 68.2 66.2
4. Financial Risks (cont'd)Fair value
Except where stated elsewhere, the carrying amounts of the Company’s financial assets and financial liabilities approximate their fair value.
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.
The inputs to valuation techniques used to measure fair value are categorised into three levels.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
Credit risk
Credit risk represents the loss the Company would suffer if a borrower failed to meet its contractual obligations. Such risk is inherent in traditional financial products such as loans and commitments. The credit quality of counterparties may be affected by various factors such as an economic downturn, lack of liquidity, an unexpected political event or death. Any of these events could lead the Company to incur losses.
All loans are secured loans and the Company has formulated policies for determining the stage where a loan becomes impaired. The Company has established procedures for the recovery of bad debts.
Additionally, customers are required to procure a life assurance and building and mortgage insurance in order to cater for any unforeseen event. Management believes that impairments in the portfolio at the reporting date are adequately covered by allowances and provisions.
The Company does not have any concentration of risk with any specific customers.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
Credit quality 31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Credit risk - exposure and past dueLoans that are neither past due nor impaired 4,992,425 4,851,331 4,535,875 Loans that are past due but not impaired 329,322 348,787 314,025 Impaired loans 1,518,840 1,496,312 1,512,105
6,840,587 6,696,430 6,362,005 Ageing of past due but not impaired:Less than 3 months 329,322 348,787 314,025
4. Financial Risks (cont'd)Non-performing loans
The carrying amount of impaired loans and specific allowance held is shown below:
31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Impaired loans 1,518,840 1,496,312 1,512,105 Specific provision in respect of impaired loans 656,942 662,537 699,189Gross fair value of collaterals of impaired loans 4,567,867 4,651,430 4,466,782
The collaterals mainly represent properties held by the Company as security against credit advances.
The security is usually in the form of fixed and floating charges on the properties.
Maximum exposure to Credit Risk before collaterals and other credit risk enhancements.
31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Cash and cash equivalents 809,692 460,189 472,953 Loans to customers 5,933,027 5,770,788 5,386,068 Other assets 206,820 171,205 189,455
6,949,539 6,402,182 6,048,476
Market risk
Market risk is the risk of loss arising from movement in observable market variables such as interest rates, exchange rates and equity markets. The Company's market risk management policies are set by and controlled by the Risk Committee.
Cash flow and interest rate risks
Cash flow risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Company exercises a close follow-up on the market interest rates and adapts its interest margins in response to changes in the rates. The Company sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily. The Company obtains credit facilities at favourable interest rates as these facilities are guaranteed by the Government of Mauritius.
The Company manages the interest rate risks by maintaining an appropriate mix between fixed and floating rate borrowings.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
4. Financial Risks (cont'd)Interest rate risk
The interest rate profile of the financial assets and financial liabilities of the Company as at 31st December was:
Currency: MUR Interest rate % per annum
31st December 31st December 31st December2015 2014 2013
Lowest Highest Lowest Highest Lowest Highest% % % % % %
Financial assetsDeposits with banks 3.25 6.15 3.25 6.15 3.25 6.70Loans and advances to customers 4.00 14.00 6.50 14.00 6.50 14.00
Financial liabilitiesSavings and fixed deposits 3.00 6.10 3.00 7.80 3.00 7.80Borrowings from Government of Mauritius
- 2.50 - 2.50 - 2.50
Borrowings from Bank of Mauritius - 3.00 - 3.00 - 3.00Borrowings - Commercial banks 5.50 7.40 5.72 7.40 5.72 7.65Borrowings - Financial institutions 5.00 6.58 5.00 9.00 5.00 9.15
The tables below analyse the Company’s financial assets and liabilities to the relevant maturity groupings based on the remaining years of repayment.
Interest rate risk
Less than 3 months
Between 3 months and 1 year
Over one year
Non-interest bearing Total
December 2015 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Assets- Cash and cash equivalent 484,004 325,000 - 688 809,692 - Loans and advances 8,035 33,683 6,798,869 - 6,840,587 - Other assets - 17,421 89,963 99,436 206,820
492,039 376,104 6,888,832 100,124 7,857,099 Liabilities- PEL - 332,358 1,314,704 - 1,647,062 - HDC 249,482 333,117 1,462,929 - 2,045,528 - Borrowings 15,569 114,200 558,150 11,162 699,081 - Other liabilities - - - 51,820 51,820
265,051 779,675 3,335,783 62,982 4,443,491
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
4. Financial Risks (cont'd)Interest rate risk (cont'd)
Less than 3 months
Between 3 months and 1 year
Over one year
Non-interest bearing Total
December 2014 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Assets- Cash and cash equivalent 159,577 300,000 - 612 460,189 - Loans and advances 22,434 70,298 6,603,698 - 6,696,430 - Other assets 14,993 87,236 68,976 171,205
182,011 385,291 6,690,934 69,588 7,327,824 Liabilities- PEL - 297,345 1,236,359 - 1,533,704 - HDC 22,947 193,244 1,292,887 - 1,509,078 - Borrowings 24,511 194,459 693,701 11,162 923,833 - Other liabilities - - - 45,828 45,828
47,458 685,048 3,222,947 56,990 4,012,443
Less than 3 months
Between 3 months and 1 year
Over one year
Non-interest bearing Total
December 2013 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Assets- Cash and cash equivalent 52,383 420,000 - 570 472,953 - Loans and advances 10,463 44,163 6,307,379 - 6,362,005 - Other assets - 25,598 91,473 72,384 189,455
62,846 489,761 6,398,852 72,954 7,024,413 Liabilities- PEL - 304,384 1,163,604 - 1,467,988 - HDC 80,767 99,069 985,227 - 1,165,063 - Borrowings 87,870 137,285 888,388 11,162 1,124,705 - Other liabilities - - - 57,329 57,329
168,637 540,738 3,037,219 68,491 3,815,085
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
4. Financial Risks (cont'd)Interest rate risk (cont'd)
The table shows the remaining contractual maturities of financial liabilities
Less than 3 months
Between 3 months and
1 year Over one year Total
Rs’000 Rs’000 Rs’000 Rs’000Financial Liabilities- PEL 1,647,062 - - 1,647,062 - HDC 249,482 333,117 1,462,929 2,045,528 - Borrowings 15,569 114,200 569,312 699,081 - Other liabilities 21,233 15,287 15,300 51,820 31st December 2015 1,933,346 462,604 2,047,541 4,443,491
31st December 2014 1,600,330 400,134 2,011,979 4,012,443
31st December 2013 1,650,586 262,247 1,902,252 3,815,085
Liquidity risk
Being a financial institution, the Company’s liquidity risk is subject to statutory obligation whereby it has to meet the Bank of Mauritius requirements in respect of liquidity ratio to be maintained at all times. The Company manages its liquidity risk by ensuring timely collection of receivables and also by availing credit facilities from banks and facilities which are guaranteed by the Government of Mauritius. For insurance contracts, the contractual maturity refers to the death/permanent incapacity of the policyholder and damages to the insured properties. The Company discharges its obligation towards the insured when the event occurs. Past experience shows that an average of 34% of the premium received in that particular period has been used to offset loan balances regarding life assurance; for Building insurance, claims average 5% of total premium.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
4. Financial Risks (cont'd)Liquidity risk (cont'd)
The tables below analyse the Company’s financial assets and liabilities to the relevant maturity groupings based on the remaining years of repayment.
Maturities of financial assets and liabilities at 31st December 2015:
Less than 3 months
Between 3 months and
1 year Over one year Total
Rs’000 Rs’000 Rs’000 Rs’000Assets- Cash and cash equivalents 484,692 325,000 - 809,692 - Loans and advances 8,035 33,683 6,798,869 6,840,587 - Other assets 99,436 17,421 89,963 206,820
592,163 376,104 6,888,832 7,857,099 Liabilities- PEL - 332,358 1,314,704 1,647,062 - HDC 249,482 333,117 1,462,929 2,045,528 - Borrowings 15,569 114,200 569,312 699,081 - Other liabilities 21,233 15,287 15,300 51,820
286,284 794,962 3,362,245 4,443,491 Liquidity gap before impairment for credit losses 305,879 (418,858) 3,526,587 3,413,608
Maturities of financial assets and liabilities at 31st December 2014:
Less than 3 months
Between 3 months and
1 year Over one year Total
Rs’000 Rs’000 Rs’000 Rs’000Assets- Cash and cash equivalents 160,189 300,000 - 460,189 - Loans and advances 22,434 70,298 6,603,698 6,696,430 - Other assets 68,976 14,993 87,236 171,205
251,599 385,291 6,690,934 7,327,824 Liabilities- PEL - 297,345 1,236,359 1,533,704 - HDC 22,947 193,244 1,292,887 1,509,078 - Borrowings 24,511 194,459 704,863 923,833 - Other liabilities 19,168 12,431 14,229 45,828
66,626 697,479 3,248,338 4,012,443 Liquidity gap before impairment for credit losses 184,973 (312,188) 3,442,596 3,315,381
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4. Financial Risks (cont'd)Liquidity risk (cont'd)
Maturities of financial assets and liabilities at 31st December 2013:
Less than 3 months
Between 3 months and
1 year Over one year Total
Rs’000 Rs’000 Rs’000 Rs’000Assets- Cash and cash equivalents 52,953 420,000 - 472,953 - Loans and advances 10,463 44,163 6,307,379 6,362,005 - Other assets 72,384 25,598 91,473 189,455
135,800 489,761 6,398,852 7,024,413 Liabilities- PEL - 304,384 1,163,604 1,467,988 - HDC 80,767 99,069 985,227 1,165,063 - Borrowings 87,870 137,285 899,550 1,124,705 - Other liabilities 13,961 25,893 17,475 57,329
182,598 566,631 3,065,856 3,815,085 Liquidity gap before impairment for credit losses (46,798) (76,870) 3,332,996 3,209,328
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
Insurance risk management
The Company accepts insurance risk through its insurance contracts where it assumes the risk of loss from persons or organisations that are directly subject to the underlying loss. The Company is exposed to the uncertainty surrounding the timing, frequency and severity of claims under these contracts. The Company manages its risk via its underwriting strategy within an overall risk management framework. Pricing is based on assumptions relating to trends and past experience. Exposures are managed by having documented underwriting limits and criteria.
Sensitivity analysis
The risks associated with insurance contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis.
Legal claims
Due to the nature of the business, the Company is exposed to claims, disputes and legal proceedings arising in the ordinary course of business. Such legal proceedings may result in monetary damages, legal defence costs and penalties. It is the policy of the Company to seek legal advice on each case.
Currency risk
The Company is not exposed to currency risk as all its financial assets and liabilities are denominated in Mauritian Rupees, the Company’s reporting currency.
5. Critical Accounting Estimates and JudgementsJudgements and estimates are continuously evaluated and are based on historical experience and other factors, including expectations and assumptions concerning future events that are believed to be reasonable under the circumstances. The actual results could, by definition therefore, often differ from the related accounting estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
(a) Pension benefits
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. Other key assumptions for pension obligations are based in part on current market conditions.
(b) Revaluation of property, plant and equipment and investment properties
The Company carries its investment properties at fair value, with changes in fair value being recognised in profit or loss. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The Company engaged an independent valuation specialist to determine fair value as at 31st December 2015.
(c) Limitation of sensitivity analysis
Sensitivity analysis in respect of market risk demonstrates the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be noted that these sensitivities are non-linear and larger or smaller impacts should not be interpolated or extrapolated from these results.
Sensitivity analysis does not take into consideration that the Company’s assets and liabilities are managed. Other limitations include the use of hypothetical market movements to demonstrate potential risk that only represent the Company’s view of possible near-term market changes that cannot be predicted with any certainty.
(d) Asset lives and residual values
Property, plant and equipment are depreciated over their useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.
(e) Depreciation policies
Property, plant and equipment are depreciated to their residual values over their estimated useful lives. The residual value of an asset is the estimated net amount that the Company would currently obtain from disposal of the asset, if the asset were already of the age and in condition expected at the end of its useful life.
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5. Critical Accounting Estimates and Judgements (cont'd)(e) Depreciation policies (cont'd)
The Directors therefore make estimates based on historical experience and use best judgement to assess the useful lives of assets and to forecast the expected residual values of the assets at the end of their expected useful lives.
(f) Impairment of credit losses
The Company makes a provision against its loan portfolio. It follows the guidance of IFRSs and the BOM Guidelines in order to determine its best estimate of the provision required. In making this estimate, the Company looks, among other factors, at future specific losses inherent in the credit facility, historical patterns of losses and the economic climate.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
6. Net Interest Income
31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Interest incomeLoan interest 470,586 458,823 440,564 Interest on bank deposits 29,442 33,586 42,075 Others 31,877 23,635 17,651
531,905 516,044 500,290 Interest expenseBank overdrafts (952) (129) (4)Bank loans (48,723) (63,993) (80,878)Plan Epargne Logement (PEL) (56,730) (53,337) (57,878)Housing Deposit Certificates (HDC) (112,787) (89,849) (69,037)Others (30) (31) (110)
(219,222) (207,339) (207,907)Interest suspended 10,155 20,499 23,975 Net interest income 322,838 329,204 316,358
7. Other Operating Income
31st December 2015
Rs’000
31st December 2014
Rs’000 Restated
31st December 2013
Rs’000 Restated
Insurance premium (net of claims paid and change in incurred but not reported claims) 48,180 51,968 58,222 Profit on disposal of property development 452 1,092 5,979 Profit on disposal of property and equipment 210 1,046 435 Others 5,466 2,351 4,140
54,308 56,457 68,776
8. Personnel Expenses
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Salaries and human resource development 128,686 130,691 116,742 Pension contributions and other staff benefits 14,509 13,445 11,335
143,195 144,136 128,077
9. Other Expenses
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Maintenance and repairs 5,721 6,019 6,035Travelling and transport 13,744 13,847 12,892 Staff welfare, training and study schemes 7,258 8,054 6,062 General expenses 3,393 3,170 2,565 Electricity 4,735 4,535 4,530 Passage benefits 5,599 5,426 4,196Printing and stationery 2,229 2,417 2,818Telephone 2,042 2,306 2,637 Motor vehicle running expenses 548 1,143 1,177 Directors’ emoluments 2,676 8,129 4,629 Audit fees 1,036 1,323 1,668 Professional fees 1,622 1,744 2,782 Family protection schemes’ contribution 1,693 1,627 1,246 Software maintenance costs 1,194 1,201 705 Rent of properties 1,716 1,289 1,252 Advertising 2,807 3,149 3,316 Postages 1,761 1,216 1,911 Legal fees and expenses 139 173 165 Golden Jubilee Expense - - 4,698 Sponsorship/CSR 222 486 6,143 Retirement benefits (Voluntary Early Retirement)
249 268 200
Donations 314 - 61 Others 800 897 1,906
61,498 68,419 73,594
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10. Profit for the Year
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Profit for the year is arrived at after charging/(crediting):Depreciation on property and equipment 11,621 11,058 11,773Amortisation on intangible asset 2,144 1,353 1,199 Staff costs Note (a) 145,137 146,031 129,523
(a) Analysis of staff costs Wages and salaries (Note 8) 128,686 130,691 116,742 Pension costs and other contributions (Note 8) 14,509 13,445 11,335 Retirement benefits (Voluntary Early Retirement)
249 268 200
Family protection schemes’ contribution 1,693 1,627 1,246 145,137 146,031 129,523
11. Dividends
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Dividends 39,821 38,902 55,318 Rs Rs Rs
Dividend per share 1.99 1.95 2.77
On 30th March 2016, the Directors proposed a dividend in respect of the year ended 31st December 2015 of Rs 1.99 per share amounting to a total dividend of Rs 39,820,600. This dividend has not been recognised as a liability at 31st December 2015 in accordance with IAS 10 and pending approval from the Bank of Mauritius.
On 20th April 2015, the Directors proposed a dividend in respect of the year ended 31st December 2014 of Rs 1.95 per share amounting to a total dividend of Rs 38,902,400.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
12. Earnings per Share
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Profit for the year as reported 199,103 194,512 276,590 Profit for the year as restated 199,103 204,367 285,991 No. of shares 20,000,000 20,000,000 20,000,000 Earnings per share as reported Rs. 9.96 9.73 13.83 Earnings per share as restated Rs. 9.96 10.22 14.30
13. Property Development
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
At 1st January 4,861 14,651 43,800 Movement during the year (2,448) (9,790) (29,149)At 31st December 2,413 4,861 14,651
During the year, one apartment at Vuillemin has been sold representing a reduction of Rs 2,448,000 in cost.
Pursuant to a Memorandum of Understanding of February 2004 between Business Parks of Mauritius Ltd (BPML), a locally incorporated company, and the Company, it was agreed that both companies will undertake a joint project for the development of an integrated residential and recreational complex at the Ebene Cybervillage site.
All the housing units at Ebene Cybervillage have been sold except for one where the deed of sale has not been finalised yet. At 31st December 2015, included in other liabilities is an amount of Rs 340,500 (2014 and 2013: Rs 340,500) representing deposits from potential buyers.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
14. Loans to Customers(a) Housing loans are granted to clients only after a well-defined pre-established sanctioning process
is completed.
The repayment terms vary from 1 to 35 years.
31st December 2015
Rs’000
31st December 2014
Rs’000 Restated
31st December 2013
Rs’000 Restated
Fast loans 4,492 5,173 8,918Secured loans 6,836,095 6,691,257 6,353,087Total loans advanced 6,840,587 6,696,430 6,362,005Provision for credit losses (Note (c) below) (710,224) (718,151) (747,947)Interest suspended (197,336) (207,491) (227,990)
5,933,027 5,770,788 5,386,068Analysed as follows:Current 421,973 422,288 422,452 Non-current 6,418,614 6,274,142 5,939,553
6,840,587 6,696,430 6,362,005
(b) Allowance for credit impairment
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Release of provision 7,927 29,796 80,428 Amount written off - (28,718) -
7,927 1,078 80,428
(c) Provision for credit losses
Specific Provision Rs’000
Portfolio Provision Rs’000
Total
Rs’000
At 1st January 2013 784,384 43,991 828,375 Movement during the year (85,195) 4,767 (80,428)At 31st December 2013 699,189 48,758 747,947 At 1st January 2014 699,189 48,758 747,947 Movement during the year (36,652) 6,856 (29,796)At 31st December 2014 662,537 55,614 718,151 At 1st January 2015 662,537 55,614 718,151 Movement during the year (5,595) (2,332) (7,927)At 31st December 2015 656,942 53,282 710,224
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14. Loans to Customers (cont'd)(d) Remaining term to maturity
31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Within 3 months 8,035 22,434 10,463 Over 3 months and up to 6 months 6,692 24,625 11,631 Over 6 months and up to 12 months 26,991 45,673 32,532 Over 1 year and up to 5 years 640,326 618,134 606,050 Over 5 years 6,158,543 5,985,564 5,701,329 Total 6,840,587 6,696,430 6,362,005
(e) Credit concentration of risk by industry sectors
31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Name of sectorConstruction 6,840,587 6,696,430 6,362,005
15. Investment Property
Valuation Freehold land Rs’000
Building Rs’000
Cybervillage land
Rs’000
Total
At 1st January 2013/2014/2015 and 31st December 2013/2014 4,115 54,059 30,000 88,174 Fair value adjustment - 8,066 8,000 16,066At 31st December 2015 4,115 62,125 38,000 104,240
On 22nd February 2016, the investment property were revalued by Mr & Mrs N. Jeetun, MSc, M.R.I.C.S, M.M.I.S, P.M.A.P.I of NP Jeetun, independent Chartered Valuation Surveyor. The properties have been valued using comparative method of valuation. This is based on comparison of sales of similar properties within close vicinity of the site and adjusted to reflect the characteristic of the subject properties, at the relevant date.
The Company has pledged its investment property to secure the borrowings.
The investment property are classified as Level 2 in terms of the fair value hierarchy.
31st December 2015 Rs’000
31st December 2014 Rs’000
31st December 2013 Rs’000
Rental income on investment property 5,934 5,595 5,305
No expenses on investment property were incurred during the year.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
16. Property and Equipment
Freehold land
Rs’000
Housing estates Rs’000
Buildings Rs’000
Furniture and
equipment Rs’000
Motor vehicles Rs’000
Total Rs’000
Cost or ValuationAt 1st January 2013 255,200 4,784 163,226 137,888 9,180 570,278 Additions - - - 6,694 972 7,666 At 31st December 2013 255,200 4,784 163,226 144,582 10,152 577,944 Additions - - - 5,043 - 5,043Disposals - - - (127) (7,492) (7,619)At 31st December 2014 255,200 4,784 163,226 149,498 2,660 575,368 Additions - - - 6,232 2,898 9,130 Fair Value Adjustment 31,440 - 17,284 - - 48,724 Disposals (200) - - (15) - (215)At 31st December 2015 286,440 4,784 180,510 155,715 5,558 633,007 DepreciationAt 1st January 2013 - - - 102,712 6,246 108,958 Charge for the year - - 3,265 7,063 1,445 11,773 At 31st December 2013 - - 3,265 109,775 7,691 120,731Disposal - - - (77) (6,001) (6,078)Charge for the year - - 3,264 7,407 387 11,058 At 31st December 2014 - - 6,529 117,105 2,077 125,711 Disposal - - (15) - (15)Charge for the year - - 3,265 7,582 774 11,621Fair value adjustment - - (9,794) - - (9,794)At 31st December 2015 - - - 124,672 2,851 127,523 Net Book ValueAt 31st December 2015 286,440 4,784 180,510 31,043 2,707 505,484 At 31st December 2014 255,200 4,784 156,697 32,393 583 449,657 At 31st December 2013 255,200 4,784 159,961 34,807 2,461 457,213
The land and buildings are classified as Level 2 in terms of the fair value hierarchy.
Revaluation of land and building
On 22nd February 2016, the land and buildings were revalued by Mr & Mrs N. Jeetun, MSc, M.R.I.C.S, M.M.I.S, P.M.A.P.I of NP Jeetun, independent Chartered Valuation Surveyor. The land and buildings have been revalued using comparative method of valuation. This is based on comparison of sales of similar properties within close vicinity of the site and adjusted to reflect the characteristic of the subject properties, at the relevant date.
16. Property and EquipmentRevaluation of land and building (cont'd)
The book values of the properties were adjusted to the revalued amounts and the resultant surplus was credited to revaluation reserves in shareholders’ equity. If land and buildings were stated on the historical cost basis, the net book value would be as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Cost 25,163 25,163 25,163Accumulated depreciation (7,663) (7,409) (7,155)Net book value 17,500 17,754 18,008
The Company has pledged its property and equipment to secure the borrowings.
17. Intangible Assets
Computer Software Rs’000
Progress Payments Rs’000
Total Rs’000
CostAt 1st January 2013 10,492 - 10,492Additions 3,274 - 3,274 At 31st December 2013 13,766 - 13,766Additions 784 702 1,486 At 31st December 2014 14,550 702 15,252Additions 2,376 23,478 25,854 At 31st December 2015 16,926 24,180 41,106AmortisationAt 1st January 2013 10,384 - 10,384Charge for the year 1,199 - 1,199At 31st December 2013 11,583 - 11,583Charge for the year 1,353 - 1,353At 31st December 2014 12,936 - 12,936Charge for the year 2,144 - 2,144At 31st December 2015 15,080 - 15,080Net Book ValueAt 31st December 2015 1,846 24,180 26,026At 31st December 2014 1,614 702 2,316 At 31st December 2013 2,183 - 2,183
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17. Intangible Assets (cont'd)The Directors have reviewed the carrying value of the intangible assets and are of opinion that at 31st December 2015, the carrying value has not suffered any impairment.
The progress payment refers to cost incurred for the implementation of a new Core Banking System.
18. Other Assets
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Non-banking assets acquired in satisfaction of debts
72,434 68,918 75,111
Staff loans 17,529 18,318 16,362Amount receivable from Government 76,315 47,068 31,048Instalments due from customers 99,436 68,976 72,384Other receivables and prepayments 17,786 16,197 26,652
283,500 219,477 221,557Less provision for impairment (12,500) - -
271,000 219,477 221,557
Non-banking assets acquired in satisfaction of debts
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Foreclosed properties 75,236 72,935 79,270Allowance for impairment on foreclosed property (7,524) (7,294) (7,927)Land and apartments repossessed 4,722 3,277 3,768At 31st December 72,434 68,918 75,111
The foreclosed properties represent houses acquired at the Masters’ Bar on default by clients and these are stated at their acquisition costs plus expenses, less any impairment. The properties are disposed as soon as possible. However, there are legal procedures that take much time before the sale can actually happen. Where clients are willing to buy and already occupying the properties, the MHC charged a rental fee until the sale is finalised.
Legal procedures normally take between 2 to 3 years. Where properties do have a potential buyer during the legal procedures, same is not rented.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
19. PEL and other Savings Accounts
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Capital 1,151,949 1,030,761 959,417Interest payable 493,312 501,171 506,820Other savings accounts 1,801 1,772 1,751
1,647,062 1,533,704 1,467,988
20. Housing Deposit Certificates
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Capital 1,831,129 1,371,998 1,084,558Interest payable 214,399 137,080 80,505
2,045,528 1,509,078 1,165,063
Analysed as follows:Current 368,200 83,346 99,331 Non-current 1,677,328 1,425,732 1,065,732
2,045,528 1,509,078 1,165,063
Analysed as follows:Individuals 1,744,785 1,438,078 1,149,749 Coporates 300,743 71,000 15,314
2,045,528 1,509,078 1,165,063
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
31st December 2015 31st December 2014 31st December 2013
Capital Interest Capital Interest Capital InterestRs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Within 3 months 185,205 64,277 21,421 1,526 74,691 6,076Over 3 months and up to 6 months 85,122 2,044 25,562 968 7,306 344 Over 6 months and up to 12 months 97,873 148,078 32,128 134,586 17,334 74,085 Over 1 year and up to 2 years 697,621 - 626,374 - 381,355 - Over 2 years and up to 5 years 765,308 - 666,513 - 603,872 -
1,831,129 214,399 1,371,998 137,080 1,084,558 80,505
21. Borrowings
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
CurrentBank overdrafts (Secured) 9,190 24,824 25,832 Loan capital (Note (a) below) 9,329 19,146 24,323Bank loans (Note (b) below) 111,250 175,000 175,000
129,769 218,970 225,155 Non-currentLoan capital (Note (a) below) 121,486 127,872 147,558 Bank loans (Note (b) below) 436,664 565,829 740,830 Loan - Government of Mauritius (Note (c) below) 11,162 11,162 11,162
569,312 704,863 899,550 Total borrowings 699,081 923,833 1,124,705
21. Borrowings (cont'd)(a) Loan capital - Government Guaranteed
Rate of interest Lenders
Terms of repayment Repayment period
31st December
2015 Rs’000
31st December
2014 Rs’000
31st December
2013 Rs’000
2.50%European Development
Fund Half-Yearly 30.12.1991 – 30.06.2021 10,160 11,861 13,520
8.50%Cargo Handling
Corporation Yearly 30.06.1998 – 30.06.2016 - 936 1,349
8.50%Cargo Handling
Corporation Yearly 01.04.2006 – 31.03.2018 - 729 877 6% Mauritius Marine Authority Yearly 30.04.1995 - 28.02.2014 - - 822 6% Mauritius Marine Authority Yearly 29.12.1996 - 29.12.2015 - 164 320 6% Mauritius Marine Authority Yearly 11.09.1998 - 11.07.2017 799 1,165 1,511 5% Mauritius Marine Authority Yearly 28.07.1999 - 28.07.2018 328 427 521 5% Mauritius Marine Authority Yearly 23.02.2001 - 23.02.2020 1,737 2,037 2,322 5% Mauritius Marine Authority Yearly 27.04.2002 - 27.04.2021 2,240 2,554 2,852 5% Mauritius Marine Authority Yearly 20.05.2002 - 20.05.2022 1,254 1,400 1,540 5% Mauritius Marine Authority Yearly 09.07.2002 - 19.07.2023 1,245 1,369 1,487 5% Mauritius Marine Authority Yearly 14.08.2009 - 14.08.2028 3,908 4,127 4,335 5% Mauritius Marine Authority Yearly 21.07.2012 - 21.07.2031 4,696 4,885 5,065 5% Mauritius Marine Authority Yearly Part of loan disbursed 3,634 3,634 3,634 8% The National Saving Fund Half Yearly 06.03.2000 - 06.09.2014 - - 5,333 9% The National Saving Fund Half Yearly 30.06.2001 - 31.12.2015 - 9,197 17,619
2.50%Government-Sponsored
Loan Yearly 17.10.1978 - 18.06.2024 3,864 4,580 5,279 6.58% Anglo-Mauritius Quarterly 29.02.2008 – 01.02.2028 61,250 66,250 71,250
3% Bank of Mauritius YearlyNo fixed repayment
terms 35,700 31,703 32,245 130,815 147,018 171,881
Less repayable within one year shown as short-term loans (9,329) (19,146) (24,323) 121,486 127,872 147,558
Repayable by instalments:- after one year and before five years 36,571 38,025 48,081 - after five years 45,581 54,511 63,598 Repayment terms not yet finalised 3,634 3,634 3,634 Repayable other than by instalments 35,700 31,702 32,245
121,486 127,872 147,558
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21. Borrowings (cont'd)(a) Loan capital - Government Guaranteed (cont'd)
Included in borrowings is the balance of housing loans for the Bank of Mauritius staff scheme amounting to Rs 35.7m (2014: Rs 31.7m and 2013: Rs 32.2m) which are managed by the Mauritius Housing Company Ltd in return for a payment of a six-monthly service charge on the outstanding balance.
(b) Bank loans
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
5.50% - 7.40% (31st December 2014: 5.72% - 7.40% and 31st December 2013: 5.72% - 7.40% ) per annum bank loans repayable by monthly/quarterly instalments 547,914 740,829 915,830 CurrentPortion repayable within one year 111,250 175,000 175,000 Non-currentPortion repayable after one year and before five years
333,335 405,833 457,500
Portion repayable after five years 103,329 159,996 283,330 436,664 565,829 740,830
Total 547,914 740,829 915,830
Included in the bank loans is an amount of Rs 113,333,333 (2014: Rs 126,666,666 and 2013: Rs 140,000,000) secured by the assets of the Company. The remaining loans are guaranteed by the Government of Mauritius.
(c) Loan – Government of Mauritius
The loan from the Government of Mauritius is interest-free, unsecured and will not be repaid within the next twelve months. The Directors are of opinion that the carrying amount of the loan reflects the fair value.
(d) The carrying amounts of borrowings are not materialy different from their fair values.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
22. Retirement Benefit ObligationsAmounts recognised in the statement of financial position:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Amounts recognised in the statement of financial position: - Defined pension benefits (note (a)(ii)) 125,178 93,866 80,439 - Funds kept within the Company (note (c)) 10,560 10,560 10,560
135,738 104,426 90,999
Amount charged to profit or loss: - Defined pension benefits (note (a)(iii)) 14,509 13,445 11,335 Amount charged to other comprehensive income: - Defined pension benefits (note (a)(iv)) 27,739 10,391 49,157
(a) (i) Defined pension benefitsThe plan is a defined benefit arrangement for the employees and it is wholly funded. The plan is a final salary plan, which provides benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service and their salary in the final years leading up to retirement.
The assets of the funded plan are held independently and are administered by the State Insurance Company of Mauritius Ltd.
(ii) The amounts recognised in the statement of financial position are as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Defined benefit obligations 417,999 382,023 351,360 Fair value of plan assets (292,821) (288,157) (270,921)Liability recognised at end of year 125,178 93,866 80,439
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
22. Retirement Benefit Obligations (cont'd)(iii) The amounts recognised in profit or loss are as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Current service cost 12,939 12,325 10,798 Fund expenses 408 315 241 Net Interest expense 7,018 6,357 2,347 Employee contributions (5,856) (5,552) (2,051)Total included in staff costs 14,509 13,445 11,335
Actual return on plan assets 21,635 21,752 24,765
(iv) The amounts recognised in other comprehensive income are as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Remeasurement Liabilities loss/(gain) 10,136 3,914 54,297 Assets loss/(gain) 17,603 6,477 (5,140)
27,739 10,391 49,157
(v) The reconciliation of the opening balances to the closing balances for the defined benefit liability is as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
At 1st January, 93,866 80,439 30,194 Charged to profit or loss 14,509 13,445 11,335 Contributions paid (10,936) (10,409) (10,247)Charged to other comprehensive income 27,739 10,391 49,157 At 31st December, 125,178 93,866 80,439
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
22. Retirement Benefit Obligations (cont'd)(vi) The movement in the defined benefit obligations over the year is as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
At 1st January, 382,023 351,360 274,642 Current service cost 12,939 12,325 10,798 Interest expense 28,652 28,109 21,971 Benefits paid (15,750) (13,685) (10,348)Liability experience losses/(gains) 10,135 3,914 54,297 At 31st December, 417,999 382,023 351,360
(vii) The movement in the fair value of plan assets of the year is as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
At 1st January, 288,157 270,921 244,448 Expected return on plan assets 21,634 21,752 19,624 Employer contributions 10,707 10,178 9,993 Employee contributions 5,856 5,552 2,051Benefits paid (15,930) (13,769) (10,335)Assets gain/(loss) (17,603) (6,477) 5,140 At 31st December, 292,821 288,157 270,921
(viii) Distribution of plan assets at end of year
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Percentage of assets at end of year/periodFixed securities and cash 58.1% 57.1% 59.1%Loans 4.3% 4.1% 4.9%Local equities 15.9% 21.1% 21.9%Overseas bonds and equities 21.0% 17.0% 13.4%Property 0.7% 0.7% 0.7%Total 100.0% 100.0% 100.0%
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
22. Retirement Benefit Obligations (cont'd)(ix) The cost of providing the benefits is determined using the Projected Unit method.
The principal assumptions used for the purpose of the actuarial valuation were as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Discount rate 7.50% 8.00% 8.00%Expected return on plan assets 8.00% 8.00% 8.00%Future salary growth rate 5.00% 5.50% 5.50%Future pension growth rate 3.00% 3.50% 3.50%
The discount rate is determined by reference to market yields on bonds.
(x) Sensitivity analysis on defined benefit obligations at end of the reporting date:Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based reasonably on possible changes of the assumptions occurring at the end of the reporting period.
If the discount rate would be 100 basis points (one percent) higher (lower), the defined benefit obligation would decrease by Rs 53.5m (increase by Rs 67.1m) if all other assumptions were held unchanged.
If the expected salary growth would increase (decrease) by 1%, the defined benefit obligation would increase by Rs 32.7m (decrease by Rs 28.1m) if all other assumptions were held unchanged.
If life expectancy would increase (decrease) by one year, the defined benefit obligation would increase by Rs 9.6m (decrease by Rs 9.5m) if all assumptions were held unchanged.
In reality one might expect interrelationships between the assumptions, especially between discount rate and expected salary increases, given that both depend to a certain extent on the expected inflation rates. The analysis above abstracts from the interdependence between the assumptions.
(xi) The plan is exposed to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
(xii) The expected employer contributions for 2016 amount to Rs 11,107,000. (xiii) The weighted average duration of the defined benefit obligation is 16 years.(xiv) The funding requirements are based on the pension fund’s actuarial measurement
framework set out in the funding policies of the plan.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
22. Retirement Benefit Obligations (cont'd)(b) State Pension Plan
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
National Pension Scheme contributions 981 889 716
(c) The funds pertain to provision made to cater for future obligations payable to the members of the Widows and Orphans Plan which existed before the Family Protection Scheme.
23. Other Liabilities
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Deposits against foreclosed properties 15,287 12,431 25,893Leave passage provision 15,300 14,229 12,222Accruals 8,760 6,998 6,949Provision for CSR - - 5,253Other payables 12,814 12,511 7,353
52,161 46,169 57,670
The Company has financial risk management in place to ensure that all payables are paid within the credit timeframe.
24. Insurance Funds
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Life assurance reserve (Note (a)) 71,947 68,867 65,787 Mortgage insurance reserve 4,275 4,275 4,275
76,222 73,142 70,062
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
24. Insurance Funds (cont'd)(a) The policy liabilities have been valued as at 31st December 2015 in respect of policies issued under the
Long-Term Insurance business by the Company, in accordance with the solvency rules and accepted actuarial practice, including selection of appropriate valuation assumptions and methods. The actuary concluded that the policy liabilities together with the capital requirement do not exceed the amount of the insurance fund. It is the Company’s policy to have independent Actuarial Valuation every two years. The Directors consider that at 31st December 2015 the fund is adequate.
The valuation of the decreasing term assurance book of business was performed using the Gross Premium valuation method. The reserves were established by discounting the future expected claims and expenses, less the future office premiums on a policy-by-policy basis.
The main assumptions used in 2015 to calculate these liabilities are:
- investment return: 4.51% per annum- renewal expenses: Rs 675.85 per policy per annum, increasing at 4.41% per annum- mortality: 82.5% of SA85/90 plus 2.8% HA2 AIDS allowance- total permanent disability: 110% of CSI skilled disability table- withdrawal rate: Nil- Commission: Nil
Contingency provision: 10% of basic reserve
There are no reinsurance arrangements in place in respect of the life assurance fund.
25. Share Capital
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Authorised25,000,000 ordinary shares of Rs10 each 250,000 250,000 250,000Issued and fully paid20,000,000 ordinary shares of Rs10 each 200,000 200,000 200,000
Fully paid ordinary shares, which have a par value of Rs10, carry one vote per share and a right to dividends.
26. Other Comprehensive Income
Revaluation reserve Rs’000
Actuarial gains (losses) Rs’000
Foreclosed property Rs’000
Items that will not be reclassified to profit or loss:2015Gain on revaluation of land & buildings 58,518 - - Remeasurement of defined benefit obligations - (27,739) -
2014Gain on foreclosed property - - 140 Remeasurement of defined benefit obligations - (10,391) -
- (10,391) - 2013Remeasurement of defined benefit obligations - (49,157) -
- (49,157) -
Revaluation reserve
The revaluation reserve arises on the revaluation of freehold land and buildings.
Actuarial gains (losses)
The actuarial gain (losses) reserve represents the cumulative remeasurement of defined benefit obligations recognised based on independent actuarial valuation.
Foreclosed property reserve
The foreclosed property reserve represents the unrealised profit arising on foreclosed properties acquired by the Company.
27. Building Insurance Reserve
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Building insurance reserve 116,810 116,810 116,810
Building insurance relates to fund kept for insurance of mortgaged houses over the loan period against fire, cyclone and structural damages.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
27. Building Insurance Reserve (cont'd)The policy liabilities as at 31st December 2015 have been valued in respect of policies issued in accordance with the solvency rules and accepted actuarial practice, including selection of appropriate valuation assumptions and methods. The policy liabilities together with the capital requirement do not exceed the amount of insurance funds of Rs 116.8m. It is the Company’s policy to have independent Actuarial Valuation every two years. The Directors consider that at 31st December 2015 the fund is adequate.
28. Retained Earnings
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
At 1st January 1,818,194 1,669,145 1,443,987 Profit for the year 199,103 204,367 285,991 Transfer to life insurance reserve (154,642) - - Dividends (Note 11) (38,902) (55,318) (60,833)At 31st December 1,823,753 1,818,194 1,669,145
29. Other Reserves
At 1st January Movement during the year At 31st December
2013 Rs’000
DR Rs’000
CR Rs’000
2013 Rs’000
Foreclosed property reserve 2,533 - - 2,533EDF revolving fund 12,068 - - 12,068Gervaise reserve 529 - - 529General reserve 106,590 - - 106,590Actuarial reserve (23,431) (49,157) - (72,588)
98,289 (49,157) - 49,132
At 1st January Movement during the year At 31st December
2014 Rs’000
DR Rs’000
CR Rs’000
2014 Rs’000
Foreclosed property reserve 2,533 - 140 2,673EDF revolving fund 12,068 - - 12,068Gervaise reserve 529 - - 529General reserve 106,590 - - 106,590Actuarial reserve (72,588) (10,391) - (82,979)
49,132 (10,391) 140 38,881
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
29. Other Reserves (cont'd)
At 1st January Movement during the year At 31st December
2015 Rs’000
DR Rs’000
CR Rs’000
2015 Rs’000
Foreclosed property reserve 2,673 - - 2,673EDF revolving fund 12,068 - - 12,068Gervaise reserve 529 - - 529General reserve 106,590 - - 106,590Actuarial reserve (82,979) (27,739) - (110,718)
38,881 (27,739) - 11,142
30. Commitments
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
(a) LoansLoans approved but not yet disbursed to individuals 143,095 240,930 129,423
(b) Capital commitments
The Company has the following capital commitment in respect of the new Core Banking System.
1. CBIS: Rs 59.4m
2. Consultancy fee: Rs 5.7m
(c) Operating lease
The Company as a lessorLeasing arrangementsOperating lease represents rental income from premises rented to outside parties. The leases are negotiated for an average term of ten years and rentals are fixed for an average term of five years. All operating contracts contain market review clauses in the event the lessee exercises its option to renew. The lessees do not have an option to purchase the property at the expiry of the lease.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
30. Commitments (cont'd)(c) Operating lease (cont'd)
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Rent received under operating lease recognised in statement of profit or loss. 5,934 5,595 5,305
There were no direct operating expenses incurred in respect of the investment property.
The future minimum lease payments receivable under non-cancellable operating leases are as follows:
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Within one year 5,688 5,690 5,406Between 2 and 5 years 21,623 23,840 21,623After more than 5 years 4,550 6,743 4,550
31,861 36,273 31,579
The Company as a lesseeLeasing arrangementsOperating lease payments represent rental for office buildings. The leases are negotiated for an average term of 3-5 years and rentals are fixed for an average of 3-5 years. The Company does not have an option to purchase the property at the expiry of the lease period.
Year ended 31st December
2015 Rs’000
Year ended 31st December
2014 Rs’000
Year ended 31st December
2013 Rs’000
Minimum lease payment 1,716 1,289 1,252
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
30. Commitments (cont'd)(c) Operating lease (cont'd)
At the reporting date, the Company had outstanding commitments under non-cancellable operating leases which fall due as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Within one year 1,529 1,521 1,271 Between 2 and 5 years 6,116 6,444 5,084
7,645 7,965 6,355
31. TaxationPursuant to the Mauritius Housing Company Corporation (Transfer of Undertaking) Act 1989, all rights and privileges of the Mauritius Housing Corporation have been transferred to the Mauritius Housing Company Ltd. The provisions of this Act have also dispensed the Company from any income tax/capital gain tax liability.
No deferred tax asset or liability has been provided in the financial statements due to the exempt income tax status of the Company.
32. Related Party TransactionsThe Company is making the following disclosures in accordance with IAS 24 (Related Party Disclosures):
Transactions during the year
Nature of transactions
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Shareholders of the CompanyGovernment of Mauritius Loans 1,560 2,358 2,303
Interest 263 461 517 Others Other transactions 17 33 31
Directors and key management personnel
Loans 3,280 1,584 215 Deposits capital (701) 1,786 27 Deposits interest 123 70 69
PEL capital 635 1,020 (548)PEL interest 22 34 (48)
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
32. Related Party Transactions (cont'd)Remuneration and other benefits relating to key management personnel, including Directors, were as follows:
31st December 2015
Rs’000
31st December 2014
Rs’000
31st December 2013
Rs’000
Salaries 2,576 5,110 3,740 Other Benefits 100 3,019 889
Nature of transactions
(Credit)/Debit balances
31st December 2015
Rs’000
(Credit)/Debit balances
31st December 2014
Rs’000
(Credit)/Debit balances
31st December 2013
Rs’000
Government of Mauritius Loans (14,024) (16,441) (18,799)Interest (76) (89) (102)
Directors and key management personnel Loans 13,160 9,351 10,641
Deposits capital 1,945 2,646 860 Deposits interest 304 181 111
PEL capital 3,738 3,103 2,083 PEL interest 158 136 102
The terms of the borrowings have been disclosed in Note 20(a).
The loans to Directors and key management personnel are secured by a first rank mortgage on their property bearing an interest rate ranging between 4% to 6% and has a maximum repayment capacity of 40% of monthly salary.
33. Prior Period Adjustments(a) Additional interest and bonus on PEL accounts
Some PEL accounts in the Company’s books were opened subject to certain terms and conditions. One of the terms and conditions was the guarantee of a minimum return should the client satisfy certain conditions. However, the interest accrued in prior years did not take into consideration the impact of additional interest and bonus payable on the relevant PEL accounts.
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
33. Prior Period Adjustments (cont'd)(a) Additional interest and bonus on PEL accounts (cont'd)
The impact of accounting for these additional interest and bonus at 31st December 2013 figures is as follows:
PEL & Other Savings Accounts
Rs'000Total Equity
Rs’000
Balance as reported as at 1st January 2013- as previously stated 1,445,090 2,343,319 - impact of additional interest and bonus 18,790 (18,790)- as restated 1,463,880 2,324,529
Balance as reported as at 31st December 2013- as previously stated 1,446,966 2,509,919 - impact of additional interest and bonus 21,022 (21,022)- as restated 1,467,988 2,488,897
(b) Adjustment in amount receivable for HDC Bonus from Government
As announced by the Government in its Budget for 2001, Government will provide a 2 per cent interest bonus over and above the rate offered by the MHC on HDC with maturity of 3 years or more. In prior years, the claim for bonus was accounted for on the basis of interest amounts paid/credited to the depositors during the reporting period and no accrual for claim was made where interest was payable upon maturity of the deposit or fell due for payment after the reporting date. The Company has from the current year accounted for this claim of interest bonus on deposits with maturity of 3 years or more on the basis of the interest accrued on those deposits.
Amount will be recognised in Net Interest Income – Others (Note 6) and Amount receivable from Government (Note 18).
Rs’000
Balance as reported at 1st January 2013- As previously reported 13,253- Impact of adjustments 9,300 As restated 22,553 Balance as reported at 31st December 2013- As previously reported 13,011 - Impact of adjustments 18,037 As restated 31,048 Balance as reported at 31st December 2014 - As previously reported 14,440 - Impact of adjustments 32,628 As restated 47,068
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Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
Notes to the Financial Statements for the year ended 31st December 2015 (cont'd)
33. Prior Period Adjustments (cont'd)(c) Change in accounting policy for accounting of insurance premium and claim settled:
The Company was hitherto charging 20% of the insurance premium received towards life cover taken by its secured loan borrowers to a Life Assurance Fund Account and the balance 80% premium, representing the Company’s charge for administration of the scheme, was credited to the statement of profit or loss. The claims settled were adjusted against the Life Assurance Fund. Any excess in the fund over the liability determined by the qualified actuary appointed by the Company was retained in the Life Assurance Fund Account. The Company has in the current year changed its policy and the entire premium received and claims settled are accounted in the statement of profit or loss. The impact of the change in policy is disclosed below:
Insurance fund Rs'000
Total equity Rs’000
Balance as reported at 1st January 2013- As previously reported 227,385 2,324,529 - Impact of adjustments (156,482) 156,482 As restated 70,903 2,481,011
Balance as reported at 31st December 2013- As previously reported 225,165 2,488,897 - Impact of adjustments (159,378) 159,378 As restated 65,787 2,648,275
Balance as reported at 31st December 2014- As previously reported 223,509 2,617,840 - Impact of adjustments (154,642) 154,642 As restated 68,867 2,772,482
During the current year, following revaluation performed by the actuary, the surplus fund relating to life insurance has been transferred to Life Insurance Reserve.
31st December 2014
Rs’000
31st December 2013
Rs’000
(Decrease)/Increase in insurance premium (4,736) 2,896 (Decrease)/Increase in profit (4,736) 2,896
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34. Reporting CurrencyThe financial statements are presented in thousands of Mauritian Rupees since this is the currency in which the Company’s transactions are denominated.
MAURITIUS HOUSING COMPANY LTDHead Office,
MHC Building,Révérend Jean Lebrun StreetPort Louis, Mauritius.
Tel: (230) 405 5555 / Fax: (230) 212 3325email: [email protected]
www.mhc.mu