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ANNUAL FINANCIAL STATEMENTS

NAME OF THE RETIREMENT FUND: Municipal Gratuity Fund

FINANCIAL SERVICES BOARDREGISTRATION NUMBER: 12/8/29256/2

SOUTH AFRICAN REVENUE SERVICESAPPROVAL NUMBER: 18/20/4/40276

FOR THE PERIOD: 1 July 2011 to 30 June 2012

CONTENTS

Schedule Page Schedule Page

A Regulatory information* 2 - 8 G Statement of changes in net assetsand funds

26

B Statement of responsibility by theBoard of Trustees*

9 HA Notes to the annual financialstatements

27 - 43

C Statement of responsibility by thePrincipal Officer*

10 HB Report of the Valuator* 44

D Report of the Independent Auditors 11 - 12 I Report of the Independent Auditorsto the Registrar of Pension Fundson factual findings

45 - 51

E Report of the Board of Trustees 13 - 24 IA Schedules pertaining to the annualfinancial statements

52 - 63

F Statement of net assets and funds 25 IB Assets held in compliance withRegulation 28Assurance report of theIndependent Auditors to theRegistrar of Pension Funds

63 - 68

69 - 70

* (Not subject to audit)

MUNICIPAL GRATUITY FUND

SCHEDULE AREGULATORY INFORMATIONfor the period ended 30 June 2012

REGISTERED OFFICE

Postal address Private Bag X 1190Bedfordview2008

Physical address Block 14Bedfordview Office Park3 Riley RoadBedfordview2007

FINANCIAL REPORTING INFORMATION

Financial reporting periods

Current 1 July 2011 to 30 June 2012

Previous 1 July 2010 to 30 June 2011

BOARD OF TRUSTEES Full name Capacity Date appointed Date resignedBolton Gerald Fourie M

VC

24 June 19964 March 200416 November 2007

16 November 2007

Pieter Johannes Venter MAV

24 June 19964 March 200427 July 2011

Lesiba Johannes Modiga MA

14 November 200827 July 2011

Mirriam Masabata Welheminah Molubi EIVE & A

8 November 200219 April 200616 November 200725 November 2011

22 March 200619 May 201119 May 2011

Edward Charles Alberts EIC

9 October 19966 September 200023 August 2002

6 September 2000

16 November 2007Jan Dirk Grobler Venter M

I12 September 19974 March 2004

11 February 2004

Johannes Hendrikus Grobbelaar MM

8 November 200220 March 2007

17 November 2006

Speed Katishi Mashilo E (SALGA)E (SALGA)

1 October 200313 October 2009

30 June 2009

Roja Elvis Ramare M 5 May 2010Erné Charles Smal M

M4 March 20045 May 2010

14 November 2008

Dan Mogakabe M 26 November 2010Gideon van Zyl I 27 July 2011Lisbeth Mothata E 25 November 2011

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


SCHEDULE AREGULATORY INFORMATION (continued)For the period ended 30 June 2012

FUND OFFICERS

Principal Officer Monitoring person*Full Name: Marthinus Jacobus Dewald Jacobsohn Estie Redelinghuys

Postal Address: Private Bag X 1190Bedfordview2008

Private Bag X 14Highveld Park0169

Physical Address: Block 14Bedfordview Office Park3 Riley RoadBedfordview, 2007

Lords Office Estate, Office Block 8276 West AvenueCenturion0157

Date of appointment: 1 July 1999 1 August 2011

Telephone number: +27 (11) 450 1224/5 +27 (12) 683 3490

Email address: [email protected] [email protected]

*(In terms of Section 13A of the Pension Funds Act in South Africa)

PROFESSIONAL SERVICE PROVIDERS

Actuary/Valuator AuditorsFull Name: Alexander Forbes Financial Services (Ms.

Gerda Grobler)Deloitte & Touche

Postal Address: PO Box 2435Pretoria0001

Private Bag X 6Gallo Manor2052

Physical Address: 189 Clark StreetBrooklynPretoria0181

Deloitte Place, Building 8The Woodlands20 Woodlands DriveWoodmead, 2052

Telephone number: +27 (12) 452 7107 +27 (11) 806 5200

Qualifications: B.Comm Hons, FASSA, FFA Registered Auditors

Benefit Administrator

Full Name: Coris Capital (Pty) Ltd

Postal Address: Private Bag X 14Highveld Park0169

Physical Address: Lords Office Estate, Block 5276 West AvenueCenturion0157

Telephone number: +27 (12) 683 3900

Benefit administrator's registration no. in terms ofsection 13B 24/245

Investment AdvisorsFull name: Sanlam Multi Manager International (Pty) Ltd

Postal Address: Private Bag X8Tygervalley7536

Physical Address: Tyger Park V, 1st FloorWillie van Schoor AvenueBellville7530


Investment advisor'sFAIS application

number: 24/435



Investment AdministratorsFull name: Coronation Fund Managers Limited

Postal Address: PO Box 44684Claremont7735

Physical Address: 7th Floor, MontClare PlaceCnr Campground & Main RoadsClaremont7708


Investment administrator's registration no. in terms ofsection 13B: 24/31

Full name: Cadiz Asset Management (Pty) Ltd


Physical Address: The Terraces, 4th Floor25 Protea RoadClaremont7708



Full name: Brait South Africa Limited

Postal Address: Postnet Suite 80Private Bag X1005Claremont7735

Physical Address: The Terraces, 2nd Floor25 Protea RoadClaremont7708



Full name: ABSA Capital Alternative Asset Management(Pty) Ltd

Postal Address: PO Box 4110Tygervalley7536

Physical Address: 163 Hendrik Verwoerd DrivePlattekloof7500



Full name: Investec Asset Management (Pty) Ltd

Postal Address: PO Box 1655Cape Town8000

Physical Address: 36 Hans Strijdom AvenueForeshoreCape Town8001





Full name: Sanlam Investment Management (Pty) Ltd

Postal Address: Private Bag X8TygervalleyBellville7536

Physical Address: 55 Willie van Schoor AvenueTygervalleyBellville7530



Full name: Allan Gray South Africa (Pty) Ltd

Postal Address: PO Box 51318V & A Waterfront8002

Physical Address: Granger Bay CourtBeach RoadV & A Waterfront8001



Full name: Old Mutual Investment Group South Africa(Pty) Ltd

Postal Address: PO Box 878Cape Town8000

Physical Address: Entrance 1, West Campus buildingJan Smuts Drive, Mutual parkPinelands7405


Investment administrator's registration no. in terms ofsection 13B: 24/126 *

Full name: Momentum Asset Management (Pty) Ltd

Postal Address: Private Bag 9959Sandton2146

Physical Address: 7 Merchant Place9 Fredman DriveSandton2196


Investment administrator's registration no. in terms ofsection 13B: 24/34 ****

Full name: Edge Capital (Pty) Ltd

Postal Address: PO Box 4188Tygervalley7536

Physical Address: 3 Heuwelkruin CloseDurbanville7550





Full name Afena Capital (Pty) Ltd


Physical Address: Mont Clare Place, 5th FloorCnr Campground & Main RoadsClaremont7708


Investment administrator's registration no. in terms ofsection 13B:

24/422

Full name Argon Asset Management (Pty) Ltd


Physical Address: Colinton House, 1st FloorThe Oval, 1 Oakdale RoadNewlands7700



Full name Mondrian Investment Partners Ltd

Postal Address: 3rd FLoor80 CheapsideLondonEC2V 6EE

Physical Address: 3rd Floor80 CheapsideLondonEC2V 6EE

Telephone number: 44 (0)20 7477 7000

Investment administrator's registration no. in terms ofsection 13B: **

Full name Franklin Templeton Investment Funds(SICAV)

Postal Address: The Adelphi Building1-11 John Adam StreetLondonWC2N 6HT

Physical Address: The Adelphi Building1-11 John Adam StreetLondonWC2N 6HT

Telephone number: 0800305306

Investment administrator's registration no. in terms ofsection 13B: ***

Full name Futuregrowth Asset Management (Pty) Ltd

Postal Address: Private Bag X6Newlands7725

Physical Address: 3rd Floor, Great Westerford240 Main RoadRondebosch7700





Full name Sanlam Multi Manager International (Pty) Ltd

Postal Address: Private Bag X8Tygervalley7536

Physical Address: Tyger Park V, 1st FloorWillie van Schoor AvenueBellville7530


Investment administrator's registration no. in terms ofsection 13B:

24/435

Full name Absa Asset Management (Pty) Ltd

Postal Address: Private Bag X 291509Melville2109

Physical Address: Block A Ground FloorParkridge Office Park65 Empire Road2193



Full name RMB Asset Management (Pty) Ltd

Postal Address: Private Bag 9959Sandton2146

Physical Address: 4 Merchant Place1 Fredman DriveSandton2196


Investment administrator's registration no. in terms ofsection 13B: 24/34 ****

Risk insurers

Full name: Camarque Underwriting Managers (Pty) Ltd

Postal Address: Postnet Suite 250Private Bag X4Bedfordview2008

Physical Address: 1st Floor, Eton House15 Eton RoadParktown, Johannesburg2000


FSB approval no.: 6344

Custodian NomineeFull name: ABSA Bank Limited Allan Gray Nominees (Pty) Ltd

Postal Address: PO Box 61218Marshall Town2107

PO Box 51318V & A WaterfrontCape Town8002

Physical Address: 180 Commissioner StreetJohannesburg2000

Granger Bay CourtBeach RoadV & A WaterfrontCape Town, 8001

Telephone number: +27 (11) 350 5000 +27 (21) 415 2300

FSB approval no.: 26/10/292 24/436



OTHER

* - Old Mutual Investment Group.

The equity mandate with Old Mutual was terminated with effect 31 January 2012, but the cash mandate continues. The cashportfolio, is however managed by Futuregrowth Asset Management, a member of OMIGSA Group.

** - Mondrian Investment Partners Ltd: FAIS registration number: 14140.

The agreement with Mondrian Investment Partners Ltd was terminated with effect 30 April 2011 and cash accounts were closed inJuly 2011.

*** - Franklin Templeton Investment Funds (FTIF):

The MGF is invested in the Franklin Templeton Investment Funds (FTIF). FTIF is a SICAV (Société d'Investissement CapitalVariable), incorporated in Luxembourg under the laws of the Grand Duchy of Luxembourg to be a collective investment scheme inLuxembourg. A SICAV is an open-ended investment company with an authorized share capital that is structured in such a mannerthat it provides for the issuing of different classes of shares to investors, each class representing a separate portfolio (a sub-fund)with a distinct investment policy, as defined in the Collective Investment Schemes Control Act 24 of 2002 (CISCA).

FTIF is not part of the rankling Templeton Investments company group. As is required under the statute governing a SICAV, FTIFis an independent company with an independent board of directors. Although FTIF has a board of directors and is a self managedSICAV, it does not employ any staff or have and physical business premises in South Africa or elsewhere.

A collective investment scheme in general, including a SICAV, and including in particular FTIF, is not set up to have thewherewithal to be an administrator as contemplated in Section 13B(1), and is not in a position to comply with the requirementssetout in Section 13B(B).

**** - RMB Asset Management.

During the year RMB Asset Management changed its name to Momentum Asset Management.

PARTICIPATING EMPLOYERS

The list of participating employers is available for inspection at the fund's registered office.

SCHEDULE D REPORT OF THE INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES OF THE MUNICIPAL GRATUITY FUND AND THE REGISTRAR OF PENSIO N FUNDS

We have audited the annual financial statements of the Municipal Gratuity Fund which comprise the report of the board of trustees, and the statement of net assets and funds as at 30 June 2012, and the statement of changes in net assets and funds for the year then ended, and the notes to the financial statements, which include the principal accounting policies and other explanatory notes, as set out on pages 13 to 43.

Board of Trustees' Responsibility for the Financial Statements The board of trustees is responsible for the preparation and presentation of these financial statements for regulatory purposes, in accordance with the Regulatory Reporting Requirements for Retirement Funds in South Africa, and for such internal control as the board of trustees determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditor's Responsibility Our responsibility is to express an opinion on these 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 misstatement.

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 judgment, including the assessment of the risks of material misstatement 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 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 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.


SCHEDULE EREPORT OF THE BOARD OF TRUSTEESFor the period ended 30 June 2012

1. DESCRIPTION OF FUND

1.1 Type of Fund

The Municipal Gratuity Fund is a defined contribution pension fund for municipal employees registered in terms of thePension Funds Act, 1956, under registration number 12/8/29256/2. The Fund is registered with the South African RevenueServices in terms of paragraph (a)(iii) of the definition of “pension fund” in section 1 of the Income Tax Act, 1962, underapproval number 18/20/4/40276.

1.2 Benefits

1.2.1 Summary in terms of the Rules of the Fund

Benefits are as follows:

1.2.1.1. Retirement benefits

Accrue as an annuity, but may be converted up to 100% in a lump sum, equal to the member’s fund credit being the total ofthe member’s contributions, employer’s contributions towards retirement provision and net investment earnings (positive andnegative).

1.2.1.2. Resignation benefits

Lump sum equal to the member’s fund credit being the total of the member’s contributions, employer’s contributions towardsretirement provision and net investment earnings (positive and negative).

1.2.1.3. Medical disability

• A member who qualifies for a medical disability benefit is entitled to four times annual salary or fund credit whichever is the greater up to the age of 55 after which the benefit scales down monthly pro rata

up to the age of 65 to two times annual salary or fund credit whichever is the greater; but

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

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

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

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

1.2.1.4. Death benefits

• Members with less than 5 years’ service: Unnatural causes: Four times annual salary plus fund credit. Natural causes: Two times annual salary plus fund credit.

• Members with more than 5 years’ service: Four times annual salary plus fund credit.

1.2.1.5. Termination as a result of reorganisation

The member’s fund credit, plus an amount payable by the relevant local authority.Payment of this benefit is subject to prior receipt of the additional employer’s contribution.


SCHEDULE EREPORT OF THE BOARD OF TRUSTEES (continued)For the period ended 30 June 2012

1.2.2 Unclaimed benefits

Unclaimed benefits are processed in terms of the Pension Funds Act as well as the Income Tax Act. The Pension Funds Actdefines an unclaimed benefit as a benefit not paid within 24 months of the date it became legally due and payable.Accordingly in terms of the Fund Rules a period of two years is allowed to claim any benefits payable where-after theunclaimed monies can be classified as an unclaimed benefit and be transferred to an unclaimed benefit preservation fund. Ifso transferred the member, former member or beneficiary will be paid from such unclaimed benefit fund. Currently the Funddoes not exercise the option to transfer the unclaimed benefit to a separate unclaimed benefit fund, but ring fence thesebenefits in the Fund. In terms of tax legislation the unclaimed benefits are taxed at the rates applicable to resignationsaccording to the tax tables issued by Government from time to time.

1.3 Contributions

1.3.1 Members' contributions

Members contribute to the Fund at a minimum rate of 7.50% of pensionable salary.

1.3.2 Employers' contributions

Employers contribute at a rate of 22% of pensionable salary or any lower or higher rate agreed upon by the employer and member but subject to a minimum equal to the cost of administration and risk benefits, which is currently 5% of salary.

1.4 Rule amendments

Ruleamendment

No.

Descriptionand

motivation

Date of board oftrustees

resolution

Effectivedate

Date registered bythe

Financial ServicesBoard

MGF09 1. Various amendmentsregarding the Fund accounts tocomply with the requirements ofthe Chief Actuary of theFinancial Services Board. Refer to paragraph 1.5 of thisSchedule E.2. Amendment of variousdefinitions.3. Provision that a death benefitmay be transferred to aretirement annuity if elected bythe beneficiary of a deceasedmember.4. Provision that an unclaimedbenefit can still be claimed aftertwo years.

12/09/2012 01/07/2011 03/10/2012

MGF10 Provision of immediate needsdeath benefit to members

16/05/2012 22/06/2012 22/06/2012



1.5 Fund Accounts

1.5.1 Share Account

The Share Account shall comprise the total of all the individual members' interests in the Fund. The following transactions shall be recorded in this account:

(a) Credits

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

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

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

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

(v) investment earnings transferred from the Processing Account in terms of section 30(2)(b)(ii) from time to time at a rate to be determined by the committee in consultation with the actuary. Such investment earnings shall be based on the investment yield achieved by the Fund on the underlying investment portfolio as contemplated in section 16A in respect of the member concerned during the period for which the said earnings are credited to the Share Account;

(vi) interest on housing loans granted under section 16(3) and payments relating to housing loans; and

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

(b) Debits

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

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

(iii) withdrawal payments in terms of section 34;

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

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

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

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

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



1.5.2 Processing Account

The Processing Account is established to provide for mismatching and timing differences between investments and the allocation of investment returns to members. The following transactions shall be recorded in this account:

(a) Credits

(i) all investment earnings earned by the Fund;

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

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

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

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

(b) Debits

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

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

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

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

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

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

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

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

1.5.3 Risk Account

The Risk Account is established for the funding of the death and disability benefits that are not reinsured in termsof section 33(2) and to absorb the impact of any adverse experience in such risk benefits. The following transactions shall be recorded in this account:

(a) Credits

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

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

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

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

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

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



(b) Debits

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

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

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

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

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

1.5.4 Data and Operational Account

The Data and Operational Account is established to provide for data errors and expenses relating to the administration of the Fund and other unforeseen contingencies. The following transactions shall be recorded in this account:

(a) Credits

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

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

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

(b) Debits

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

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

1.5.5 Employer Reserve Account

The Employer Reserve Account is established to provide for the allocation of any valuation profits to the local authorities, by the committee after consultation with the actuary. The following transactions shall be recorded in this account:

(a) Credits

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

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

(b) Debits

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

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

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



1.5.6 Member Reserve Account

The Member Reserve Account is established to provide for the allocation of any valuation profits to the members and former members, by the committee after consultation with the actuary. The following transactions shall be recorded in this account:

(a) Credits

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

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

(b) Debits

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

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

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

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

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

1.5.7 Reverted Unclaimed Benefits Account

The Reverted Unclaimed Benefits Account is established to provide for the old unclaimed benefits that reverted to the Fund prior to 1 January 2009 in terms section 41 as it read then. The following transactions shall be recorded in this account:

(a) Credits

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

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

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

(b) Debits

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

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

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

.



2. INVESTMENTS

2.1 Investment Policy Statement (IPS)

The Management Committee (Board of Trustees), introduced the first phase of the Investment Policy Statement (IPS) duringthe 2004/5 financial year. The goal of the IPS is to create sufficient returns over a 35-year membership term in order that thelump sum payment (fund credit) of a member will be sufficient to enable a member to purchase a monthly pension equal toapproximately 75% of salary at retirement. This is commonly referred to as income replacement ratio (IRR) of 75%.

The result of the IPS is that the Fund moved away from balanced mandates during the 2004/5 financial year. The investmentmandates to asset managers were instead allocated as specialist mandates in the respective asset classes from August2004.

The IPS is reviewed when any major event occurs that may have an effect on the investment strategy of the Fund, but at leastonce a year. The IPS review for this reporting period was done during November 2011.

2.1.1 Life Stage Model

The three life stage portfolios as contemplated by the initial IPS has been implemented during July 2005 with an additional category added in 2011. The members’ fund credits, excluding those invested in the Guaranteed

Portfolio, were transferred to the four life stage portfolios according to age groupings. The daily values of the investments are electronically imported from the investment administrators’ records to the unitisation platform ofthe benefit administrator. The fund credit of each member is accordingly adjusted daily to the daily market valueof the units in the three life stage portfolios. The IPS is reviewed regularly and adjustments are being made if necessary to align the investment strategy with the changing investment environment as well as with newlegislation.

The four life stage portfolios are currently as follows:

2.1.1.1 Stage One: Aggressive Portfolio (AP): 16 years to <50 years

The Aggressive Portfolio contains a bigger equity component, which entails a higher investment risk but renders an opportunity for greater returns. This portfolio is for younger members who can usually tolerate a higher risk. In the event of the risk of under performance materialising, the investment term is usually long enough to recoversuch losses and to obtain out performance over the long term.

2.1.1.2 Stage Two: Moderate Portfolio (MP): 50 years to <60 ye ars

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

2.1.1.3 Stage Three: Conservative Portfolio (CP): 60 years to <62 years

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

2.1.1.4 Stage Four: Protected Portfolio (PP): 63 years to 65 yea rs

A fourth life stage was included from July 2011, called the Protected Portfolio (PP). This is an ultra conservative portfolio for members from 63 to 65 years. Therefore the age band of the CP has been changed accordingly to 60 years to <62 years effective July 2011. The Protected Portfolio is aimed at capital protection rather than a realcapital growth and assets are invested in cash products.



2.1.2 Guaranteed Portfolio (GP)

The GP is being operated separately from the life stage portfolios. The GP is available to all members but theyhave to notify the Fund by means of the completion of the applicable form before or on 31 May of every financial year, that they want to transfer to or from the GP. Once members are transferred to the GP they remain in the GP until they notify the Fund in writing before or on 31 May of the changes they want. Changes can be made by completing a new option form. Changes can only be implemented annually during July due to annual fixed financial instruments which are purchased to underwrite the GP.

Fund credits invested in the GP are being awarded an annual guaranteed growth allocated on daily interim growth. The possible additional capped growth vesting on 30 June is being allocated as an additional final bonus subsequent to year-end.

The fund credits of members, split between the GP and another portfolio, will not automatically be re-balanced to the original chosen percentage split between the two portfolios unless specifically requested by submitting a new option form before or on 31 May of every financial year.

Members invested in the GP will not be switched to any of the life stage portfolios unless requested by them on the prescribed form.

The underlying investment for the GP is usually purchased in the first week of July and implementation is effected approximately the second week of July. This may however vary from year to year.

2.1.3 Exit Portfolio (EP )

An Exit Portfolio, invested in cash, is used to protect the members' fund credits upon termination of membership until payment of benefits. As soon as a Termination of Membership form (MGF - D8) is received for a member, the fund credit of such member is transferred to the Exit Portfolio. Up to 31 July 2011 members were allowed to use the Exit Portfolio as an investment choice portfolio.

2.1.4 Default and Member Investment Choices

Members are automatically without prior notice, transferred from one life stage to the next as they reach the relevant age. This transfer is however not done at once when reaching the relevant age as the investment markets may be very low on such one specific day with negative results for a member migrating from the more aggressive to the more conservative next phase portfolio. To prevent such single day event, members are switched from one life stage portfolio to the following in four quarterly batches starting one year ahead. As alluded to below, a member may always exercise in writing, a choice contrary to the automatic Life Stage Modeldefault.

Although the fund credits of members are automatically invested in the relevant life stage portfolio according to age, members may, subject to certain conditions, exercise a written choice if they wish to invest contrary to the applicable life stage (AP, MP, CP or PP) or if they wish to invest in the GP. Investment according to the life stage portfolios is an integrated investment model in accordance with the IPS (Investment Policy Statement). The probability is good to obtain the targeted return over a long term. Members should therefore be very cautious to chase short-term returns by electing contrary to the life stage portfolios, with possible disastrous results. Younger members should be careful not to be over conservative and forfeit returns in the long run. Member fund credits may be split between the five portfolios (AP, CP, MP, PP and GP) to a maximum of two portfolios. Members are therefore not allowed to be invested in more than two investment portfolios at any one stage. Members who exercised a member investment choice will remain invested accordingly until written notification to the Fund otherwise. If a member elects to split her/his investment between two portfolios, the different returns of each investment portfolio will cause a drift from the chosen percentages split. Members’ fund credits will not automatically be rebalanced to the original chosen percentage split between the two portfolios. A new option form must be submitted when a member wants such rebalance.

Member investment choices may be done at any time in respect of the AP, MP, CP and PP. Member investment choices in respect of the GP can only be done once a year, usually not later than 31 May of each year. The exact date may change slightly from year to year. One choice per year is free of charge but subsequent choices require a switching fee.

A member investment choice is usually implemented within three business days from receipt, except in the eventof the GP. The underlying investment for the GP is usually purchased in the first week of July and implementation is effected approximately the second week of July. This may however vary from year to year.



2.2 Investment guidelines

2.2.1 Asset Management

2.2.1.1 All the assets of the Fund are allocated to external asset managers, but not more than 25% of the total investment portfolio to one single asset manager.

2.2.1.2 The Fund allocates assets to domestic asset managers to invest according to specialist mandates, for example bonds, structured products, equity, hedge funds and absolute return funds.

2.2.1.3 Offshore investments are allocated either as specialised offshore investment portfolios or as balanced portfolios.

2.2.1.4 The investment mandates are subject to compliance with the limitations of Regulation 28 to the Pension Funds Act, 1956, and any other relevant legislation.

2.2.1.5 Preference is given to fixed fees expressed as a percentage of the asset value under management. In exceptional cases where an asset manager would not accept an investment mandate without a performance-linked fee such performance is measured against a prior agreed benchmark. The manager will then receive a percentage (typical 15% to 20%) of the outperformance of the benchmark as an additional fee.

2.2.1.6 If an asset manager’s services are terminated during the course of the year and he is remunerated at a performance-linked fee, his fee will be determined pro rata according to his pro rata performance.

2.2.1.7 Asset managers must submit monthly reports about all transactions and performance as well as complete written quarterly reports. In addition they have to make investment presentations to the Fund at least twice per annum.

2.2.1.8 The risk control measures as determined by Regulation 28 and amended from time to time will always be applicable to any mandate given to an asset manager; provided that any restriction laid down by the

Fund which is more restrictive than Regulation 28, will prevail.

2.2.2 Structured Products

2.2.2.1 Structured products are recorded at market value. If the products are utilised for the Guaranteed Portfolio, which is one of the members’ choices, the products will be held until maturity date and are reflected at market value.

2.2.2.2 The structured products are used to obtain capital protection by virtue of total or partial capital guarantees and even a fixed but limited guaranteed return above the capital invested and also possible further returns capped at a certain level by means of equity exposure through derivative instruments. The latter is not guaranteed and depends on the equity returns.

2.2.2.3 The CADIZ and ASP structured products are applied as underlying investments to underwrite the benefits of the Guaranteed Portfolio.

2.2.3. Properties

2.2.3.1 The investment in properties is done to generate an income stream from the rental income and are therefore valuated according to the standard commercial practice. This means that the future rental income stream is calculated for a certain period and that such future cash flows are then

discounted back to the present value of money. The rate at which it is discounted, is known as the capitalisation rate. The relevant capitalisation rate is calculated taking into account various market indicators. The lower the capitalisation rate the greater the value. The bricks-and-mortar value is not relevant when an income generating property is valued and the valuation method of a commercial property therefore differs from the method applied to the valuation of a residential property.

2.2.3.2 The Fund is mainly a long-term investor in property. However the possibility to acquire and sell properties over shorter periods are investigated regularly to ensure an active asset management.

However, due to the implementation of unitisation where daily values of assets are essential, the direct property exposure of the Fund has been decreased.



2.2.3.3 The Management Committee (Board of Trustees) of the Fund takes all decisions with regards to the buying and selling of property investments. The external property manager is responsible for the

management of the property portfolio.

2.3 Surplus Apportionment Allocations

The Fund, being a defined contribution fund, allocates all net investment returns to the members on a daily basis and does not accrue any surpluses. Surplus apportionment allocations are therefore not applicable, except in the event of Section 15C of the Act.

2.3 Reserve Accounts

The assets pertaining to all the reserve accounts, are invested in money market or similar low risk investment instruments.

2.5 Management and Performance of Investments

The Fund's investments consist of a guaranteed portfolio and specialist managed portfolios with the variousinvestment administrators (asset managers) listed below. All investment administrators (asset managers) have fixed mandates as to the composition of their share of the portfolio within the limits allowed by the Pension Funds Act in South Africa. The Board of Trustees meets at least eight times per year to discuss investment policy and to monitor the asset allocation and performance of the investment administrators (asset managers) against the investment strategy of the Fund.

With the assistance of its asset advisor, the Fund also invests directly in Exchange Traded Funds (ETF's).ETF's are index tracker funds and apart from an initial fee and brokerage of about 0.25% no management fee is payable. There are various indices to choose from. During the reporting period the Fund invested in two international Exchange Traded Funds, namely iSHARES S&P 500 and iSHARES MSCI.

The investment administrators are remunerated on a fixed fee based on the asset value under management and the majority are paid monthly and some quarterly. Certain investment administrators are remunerated on a performance fee basis.

The fair value of the Fund's investment, administered by the investment administrators and the Fund at the end of the periodwas as follows:

2012R

2011R

ABSA Asset Management (Pty) Ltd 608,949,872 -ABSA Capital Alternative Asset Management (Pty) Ltd 622,060,938 597,679,563ABSA Joint Venture (Direct Property) 40,000,000 40,000,000ABSA Settlement Account 478,745,093 158,628,114Afena Capital (Pty) Ltd 104,390,802 99,960,687Allan Gray South Africa (Pty) Ltd 1,984,593,762 1,678,822,561Argon Asset Management (Pty) Ltd 106,156,368 97,251,935Brait South Africa Limited 253,275,561 227,150,593Cadiz Asset Management (Pty) Ltd 994,060,207 1,148,909,280Coronation Fund Managers Limited 1,205,826,053 1,179,374,733Edge Capital (Pty) Ltd 421,412,292 371,395,540Franklin Templeton Investment Funds (SICAV) 347,485,503 234,064,794Futuregrowth Asset Management (Pty) Ltd 355,551,369 310,274,393International Cash Holdings 8,627,441 39,843,015Investec Asset Management (Pty) Ltd 1,917,295,273 1,816,488,516Momentum Asset Management (Pty) Ltd 730,425,516 -Mondrian Investment Partners Ltd - 40,120Old Mutual Investment Group South Africa (Pty) Ltd 1,100,299,944 1,306,374,815RMB Asset Management (Pty) Ltd - 627,585,285Sanlam Investment Management (Pty) Ltd 1,285,897,944 1,192,284,254Sanlam Multi Manager International (Pty) Ltd (ETF's) 276,086,673 249,508,955

Total value of investments managed 12,841,140,611 11,375,637,153



3. MEMBERSHIPActive

membersUnclaimed

benefitsNumber at the beginning of period 30,018 148 Adjustments - Late exits from 2011 - Late entrants to 2011

(212)(303)

91

---

Additions 1,940 - Withdrawals (497) - Retirements (534) - Deaths (260) - Unclaimed benefits paid - (3)

Number at the end of the period 30,455 145

The downward adjustment in the opening balance is due to members who exited in prior years, but the administrator onlyreceived the exit form after the date the member fund credit was extracted to provide for exits. The increase in the openingbalance is new members that joined the employer during the 2011 financial year, but the administrator received theapplication forms after the 2011 year end.

4. ACTUARIAL VALUATION

The financial statements summarise the transactions and net assets of the Fund. It does not constitute an investigation to thefinancial condition of the Fund with relation to future liabilities as contemplated by section 16 of the Pension Funds Act, 1956.In accordance with the Rules of the Fund, the actuarial position of the Fund, which does take account of such liabilities, if any,is examined and reported on by the actuary as contemplated by section 16 of the Pension Funds Act at three years intervals. The last such statutory actuarial valuation was done as at 30 June 2011 reflecting the solvency of the Fund. The Actuary alsoconducts an interim actuarial valuation on an annual basis for the intervening two years. This is done according to the fullscope as for a statutory valuation, the last being done for the current reporting period ending 30 June 2012.

Refer to the report of the valuator on page 44.

5. HOUSING LOAN FACILITIES

5.1 Direct Housing loans to members have been granted until 31 May 2007 in terms of section 16(3) of the Rulesof the Fund and the provisions of section 19(5) of the Pension Funds Act, and have been secured by members’ withdrawal benefits subject to affordability criteria. Interest is payable on all direct housing loans and such interest minus the loan administration fee, is directly allocated to a member’s fund credit and does not form part of the growth of the Fund. With effect 28 January 2011 the minimum prescribed interest rate is the repo rate as determined by the South African Reserve Bank from time to time plus 5.5% per annum. The repo rate during thereporting period was 5.5% resulting in a total interest rate of 11%. Since the repo rate cut of 0.5%, effective 19 July 2012 the total interest rate is 10.5% on housing loans financed directly from a member’s fund credit.

5.2 This direct home loan scheme has been replaced from 1 June 2007 by a pension-backed home loan scheme. Standard Bank and First National Bank (FNB) have been appointed as service providers in this regard. A member may apply for a home loan with Standard Bank or First National Bank up to a maximum of 50% of the member’s fund credit. The loan is granted against the security of the member’s fund credit. Members must comply with all the requirements of the National Credit Act to qualify for such loan. Members with existing housing loans granted directly from their fund credits in terms of the previous dispensation may maintain such direct loans or transfer them to Standard Bank or FNB. A member may only have a pension-backed home loan with either Standard Bank or FNB and not with both. Loans may be transferred between Standard Bank or FNB. The current rates and fees of the said banks are as follows:

Initial fee Monthly admin fee Interest rate Standard Bank R450 R27.50 PrimeFNB Nil R5.70 Prime minus 1.25%



6. INVESTMENTS IN PARTICIPATING EMPLOYERS

The Fund does not invest in any of the participating employers.

7. SUBSEQUENT EVENTS

During the financial year under review, the investment property held directly by the Fund was revalued based on marketresearch done by an independent registered valuator who specializes in commercial property valuation. The new valuationindicated a market value of R37.4 million which was adopted by the Board of Trustees with effect 1 July 2012. The previousvaluation was done during 2011. (Refer to note 3.2)

The Fund became aware of one potentially fraudulent benefit payment made during the financial year under review.Investigation confirmed compliance by the fund administrator to all internal control measures and no breach of such controlswas identified. Circumstantial evidence suggested collusion within the municipality. Investigation by the South African PoliceServices is pending.

No other matter that is material to the financial affairs of the Fund, has taken place between 30 June 2012 and the date of approval of the financial statements.

8. SIGNIFICANT MATTERS

Regulation 28 in terms of Section 36 of the Pension Funds Act was completely revised and promulgated by GovernmentGazette notice No. R183 of 4 March 2011. The transition period for the implemention of Regulation 28 was determined to be1 July 2011 to 31 December 2011, in terms of Board Notice 1 issued on 10 June 2011.

The purpose of the transition period was to enable funds to adjust their monitoring and reporting systems and investments toensure full compliance with Regulation 28 by 31 December 2011. During this transition period, investments held by the fundsmust not become less compliant with any of the limits set out in Regulation 28.

Board Notice 3 of 2011 was issued by the Financial Services Board on 19 December 2011 to stipulate the financial reportingrequirements of the new Regulation 28. Schedule IB of these financial statements are based on the revised Regulation 28reporting requirements as per instructions issued by the Financial Services Board.


SCHEDULE FSTATEMENT OF NET ASSETS AND FUNDSAs at 30 June 2012

30 June 30 June2012 2011

Notes R R

ASSETS

Non-current assets 13,004,629,951 11,587,525,281Property, plant and equipment 2 39,804 47,253Investments (including investment property) 3 12,841,140,611 11,375,637,153Housing loan facilities 4 163,449,536 211,840,875

Current assets 197,033,565 197,306,834Accounts receivable 5 25,165,027 42,979,948Contributions receivable 10 32,680,207 19,471,829Cash at bank 139,188,331 134,855,057

Total assets 13,201,663,516 11,784,832,115

FUNDS AND LIABILITIES

Members' fundsMembers' individual accounts 12,460,385,094 11,165,675,955Amounts to be allocated 16 76,676,309 92,045,189

12,537,061,403 11,257,721,144

ReservesReserve accounts 15 273,805,780 198,557,221

Total funds and reserves 12,810,867,183 11,456,278,365

Non-current liabilities 1,673,333 1,667,057Provisions: Audit fees 513,000 513,000Unclaimed benefits 8 1,160,333 1,154,057

Current liabilities 389,123,000 326,886,693Benefits payable 7 380,285,755 313,762,841Accounts payable 9 8,837,245 13,123,852

Total funds and liabilities 13,201,663,516 11,784,832,115


SCHEDULE GSTATEMENT OF CHANGES IN NET ASSETS AND FUNDSFor the period ended 30 June 2012

NotesA

Members' individualaccounts & amounts

to be allocated

BReserve accounts

Refer note 15

A+BTotal

Current PeriodTotal

Previous Period

R R R R

Contributions received and accrued 10 1,039,260,459 212,247,544 1,251,508,003 1,161,479,355Net investment income 11 21,356,474 1,011,464,621 1,032,821,095 1,344,181,401Less: - (31,798,919) (31,798,919) (30,427,130)Re-insurance premiums - (6,954,081) (6,954,081) (6,852,794)Administration expenses 12 - (24,844,838) (24,844,838) (23,574,336)Net income before transfers and

benefits1,060,616,933 1,191,913,246 2,252,530,179 2,475,233,626

Transfers and benefits (627,659,563) (270,281,798) (897,941,361) (793,128,823)Transfer from other funds 6 43,829,556 - 43,829,556 20,944,229Benefits 7 (671,489,119) (270,281,798) (941,770,917) (814,073,052)

Net income after transfers and benefits 432,957,370 921,631,448 1,354,588,818 1,682,104,803

Funds and reservesBalance at beginning of period 11,257,721,144 198,557,221 11,456,278,365 9,774,173,562

Transfer between reserve accounts 15 846,382,889 (846,382,889) - -

Balance at end of period 12,537,061,403 273,805,780 12,810,867,183 11,456,278,365


SCHEDULE HANOTES TO THE ANNUAL FINANCIAL STATEMENTSFor the period ended 30 June 2012

1. PRINCIPAL ACCOUNTING POLICIES

The following accounting principles, which are consistent with those of the previous period, are used by the Fund:

1.1 PURPOSE AND BASIS OF PREPARATION OF ANNUAL FINANCIAL STATEMENTS

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

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

1.2 FINANCIAL INSTRUMENTS

MEASUREMENT

A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability orequity instrument of any other entity. A financial asset or a financial liability is recognised when its contractualarrangements become binding and is derecognised when the contractual rights to the cash flows of the instrumentexpire or when such rights are transferred in a transaction in which substantially all risks and rewards of ownership ofthe instrument are transferred.

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

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

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

1.2.1 INVESTMENTS

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

Loans (other than housing loans) – loans and receiv ables

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

Debentures

Debentures comprise investments in listed and unlisted debentures.

Listed debentures

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

Unlisted debentures

Unlisted debentures are financial assets with fixed or determinable payments and fixed maturity. Fair value isestimated using pricing models or by applying appropriate valuation techniques such as discounted cash flowanalysis or recent arm’s length market transactions in respect of the unlisted debenture.


SCHEDULE HANOTES TO THE ANNUAL FINANCIAL STATEMENTS (continued)For the period ended 30 June 2012

Bills and bonds

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

Listed bills and bonds

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

Unlisted bills and bonds

A market yield is determined by using appropriate yields of existing bonds and bills that best fit the profile of theinstrument being measured and based on the term to maturity of the instrument. Adjusting for credit risk, whereappropriate, a discounted cash flow model is then applied, using the determined yield, in order to calculate the fairvalue.

Investment property

A property held for long-term yields or capital appreciation that is not occupied by the Fund is classified asinvestment property. Investment properties comprise investments in commercial properties, residual properties,industrial properties and hospitals. Investment properties are carried at fair value.

Investment properties are reflected at valuation on the basis of open-market fair value at the statement of net assetsand funds date. In the open-market valuation information cannot be reliably determined; the Fund uses alternativevaluation method such as discounted cash flow projections or recent prices on active markets for transactions ofsimilar nature. The fair values are the estimated amounts for which a property could be exchanged on the date ofvaluation between a willing buyer and a willing seller in an arm’s length transaction.

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

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

Equities

Equity instruments consist of equities with primary listing on the JSE, equities with secondary listing on the JSE,foreign listed equities and unlisted equities.

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

Listed equities

Equity instruments are subsequently measured at fair value and the fair value adjustments are recognised in thestatement of changes in net assets and funds. The fair value of equity instruments with standard terms andconditions and traded on active liquid markets is based on regulated exchange quoted ruling closing prices at theclose of business on the last trading day on or before the statements of net assets and funds date.

Unlisted equities

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

Preference shares

Listed preference shares

The fair value of listed preference shares traded on active liquid markets is based on regulated exchanged quotedruling closing prices at the close of business on the last trading day on or before the statement of net assets andfunds date.



Unlisted preference shares

In respect of unlisted preference shares, the fair value is determined by applying appropriate valuation techniquessuch as discounted cash flow analysis or recent arm’s length market transactions in respect of preference shares.

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

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

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

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

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and aresubsequently re-measured at their fair value. Fair values are obtained from regulated exchange quoted marketprices in active markets, including discounted cash flow models and option pricing models, as appropriate. Allderivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The Funddoes not classify any derivatives as hedges in a hedging relationship.

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

OptionsOptions are valued using option pricing modules.

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

Investment in participating employers

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

Hedge funds

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

Listed hedge fundsHedge fund investments are subsequently measured at fair value and the fair value adjustments are recognised inthe statement of changes in net assets and funds. The fair value of hedge fund investments traded on active liquidmarkets is based on regulated exchange quoted ruling closing prices at the close of business on the last trading dayon or before the statement of net assets and funds date.



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

Unlisted – where investor (fund) has a right to the underlying instrumentHedge fund investments are subsequently measured at fair value and the fair value adjustments are recognised inthe statement of changes in net assets and funds. As the Fund has the right to the underlying instrument, a lookthrough principle is applied, and the underlying instrument are separately measured and disclosed. The fair value isestimated using pricing models or by applying appropriate valuation techniques such as discounted cash flowanalysis or recent arm’s length market transactions in respect of the hedge fund instrument.

Structured products

Investments in structured products are valued at the gross total fair value of all the underlying instruments included inthe structure and/or arrangement. If there are instruments within the structured product that require differenttreatment, these may need to be treated separately.

1.2.2 HOUSING LOANS

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

1.2.3 ACCOUNTS RECEIVABLE

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

1.2.4 CASH AND CASH EQUIVALENTS

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

1.2.5 ACCOUNTS PAYABLE

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

1.2.6 PROPERTY, PLANT AND EQUIPMENT

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

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

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

Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amountand are taken into account in determining the net surplus or deficit.

Maintenance and repairs, which neither materially add to the value of assets nor appreciably prolong their usefullives, are charged against income.



1.3 RESERVES

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

1.4 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions

Provisions are recognised when the Fund has a present legal or constructive obligation as a result of past events, forwhich it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliableestimate of the amount of the obligation can be made. Where the effect of discounting to present value is material,provisions are adjusted to reflect the time value of money.

Contingent liabilities

A contingent liability is not recognised in the statement of net assets and funds, but disclosed in the notes to thefinancial statements, unless the possibility of an outflow of resources embodying economic benefits is remote.

Contingent assets

A contingent asset is not recognised in the statement of net assets and funds, but disclosed in the notes to thefinancial statements when an inflow of economic benefits is probable.

1.5 CONTRIBUTIONS

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

Contributions are accrued and recognised as income in accordance with the actuarial recommendations, and theRules of the Fund. Contributions received are apportioned between retirement funding and funding for risk and otherexpenses. The apportionment is governed by the Rules of the Fund and actuarial recommendations.

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

Any contributions outstanding at the end of the reporting year are recognised as a current asset – contributionreceivable. Any contributions received in advance at the end of the reporting year are recognised as a current liability– accounts payable.

Interest charged on late payment of contributions

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

1.6 FOREIGN CURRENCIES

Transactions in foreign currencies are accounted for at the ruling rate of exchange on the transaction date. Assetsand liabilities in foreign currencies are converted at the ruling rate of exchange on the statements of net assets andfunds date.

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

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



1.7 INVESTMENT INCOME

Dividends

Dividend income is recognised in the statement of changes in net assets and funds when the right to receivepayment is established – this is the last date to trade for equity securities. For financial assets designated at fairvalue through the statement of changes in net assets and funds, the dividend income forms part of the fair valueadjustment.

Interest

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

Collective investment schemes’ distribution

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

Income from policies with insurance companies

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

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

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

Adjustment to fair value

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

Expenses incurred in managing investments

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

1.8 BENEFITS

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

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

1.9 TRANSFERS TO AND FROM THE FUND

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

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

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



1.10 ADMINISTRATION EXPENSES

Expenses incurred in the administration of retirement funds are recognised in the statement of changes in net assetsand funds in the reporting year to which they relate.

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

1.11 RELATED PARTIES

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

If there have been transactions between related parties, the Fund shall disclose the nature of the related partyrelationship as well as the following information for each related party relationship:

• The amount of the transactions;

• The amount of outstanding balances;

• Their terms and conditions, including whether they are secured, and the nature of the consideration to be provided inthe settlement;

• Details of guarantees given or received;

• Provisions for doubtful debts related to the amount of outstanding balances; and

• The expense recognised during the year in respect of bad or doubtful debts due from related parties.

1.12 ACCOUNTING POLICIES, CHANGING IN ACCOUNTING ESTIMATES AND ERRORS

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



2. PROPERTY, PLANT AND EQUIPMENT

2.1 Current period

Gross carrying amount

Furniture andequipment

R

VehiclesR

Total

RCost at beginning of period 251,544 280,485 532,029Additions 30,281 - 30,281

At end of period 281,825 280,485 562,310

Accumulated depreciation and impairmentAt beginning of period (235,118) (249,658) (484,776)Depreciation charges (9,274) (28,456) (37,730)

At end of period (244,392) (278,114) (522,506)

Net carrying amount at end of period 37,433 2,371 39,804

2.2 Prior period

Gross carrying amount

Furniture andequipment

R

VehiclesR

Total

RAt beginning of period 251,544 280,485 532,029At end of period 251,544 280,485 532,029

Accumulated depreciation and impairmentAt beginning of period (230,892) (195,556) (426,448)Depreciation charges (4,226) (54,102) (58,328)At end of period (235,118) (249,658) (484,776)Net carrying amount at end of period 16,426 30,827 47,253



3. INVESTMENTS

3.1 Investment summaryA B A+B

Notes Local

R

Foreign

R

Total currentperiod

R

Total previousperiod

R

Fair valuecurrent period

RCash and deposits 2,711,285,083 15,018,242 2,726,303,325 2,528,247,475 2,726,303,325Debentures 502,494,000 - 502,494,000 451,537,032 502,494,000Bills, bonds and securities 1,189,339,238 - 1,189,339,238 973,361,002 1,189,339,238Investment Properties 3.2 40,000,000 - 40,000,000 40,000,000 40,000,000

4,878,954,022 - 4,878,954,022 4,635,376,532 4,878,954,022- Equities with primary listing

on JSE3,399,703,200 - 3,399,703,200 3,485,267,558 3,399,703,200

- Equities with secondarylisting on JSE

1,432,402,470 - 1,432,402,470 1,021,232,386 1,432,402,470

- Foreign listed equity - - - 128,850,634 -- Unlisted equity 46,848,352 - 46,848,352 25,954 46,848,352

Preference shares 85,176,897 - 85,176,897 43,771,386 85,176,897

Insurance policies 768,221,925 - 768,221,925 - 768,221,925- Market related insurance

policies768,221,925 - 768,221,925 - 768,221,925

Collective investment scheme 1,062,784,761 1,588,622,449 2,651,407,210 2,490,652,685 2,651,407,210Derivative market investments (756,006) - (756,006) (36,817,914) (756,006)Other - - - 249,508,955 -

11,237,499,920 1,603,640,691 12,841,140,611 11,375,637,153 12,841,140,611

3.2 Investment properties

Description

At beginning ofperiod

R

Additions

R

Disposals

R

Fair valueadjustments

R

Transfer to/fromowner occupied

propertiesR

Other

R

At end of period

RABSA Square Nelspruit 40,000,000 - - - - - 40,000,000

40,000,000 - - - - - 40,000,000

Refer to paragraph 7. Subsequent Events under Schedule E.



4. HOUSING LOAN FACILITIES


Repaid Interest capitalised Otheradjustments

At end of period

R R R R RLoans granted in terms of the

fund and section 19(5) ofthe Pension Funds Act inSouth Africa

211,840,875 (69,747,805) 20,515,198 841,268 163,449,536

211,840,875 (69,747,805) 20,515,198 841,268 163,449,536

Housing loans granted to members are secured by cession of member's fund credit. With effect 28 January 2011 the minimum prescribed interest rate is the repo rate asdetermined by the South African Reserve Bank from time to time plus 5.5% per annum (previously the minimum prescribed interest rate was 15% per annum).The amount included in other adjustments relates to administration expenses and the overpayments received.

Housing loan guarantees

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

Institution

Fair valuecurrent period

R

Fair value prior period

RStandard Bank 665,878,879 538,724,546FNB 10,819,678 -Participating Employers 5,508,213 5,728,677

682,206,770 544,453,223

The total pension backed lending facility at Standard Bank amounts to R750,000,000 and at FNB amounts to R150 000 000. The renewal dates for the Standard Bank facility andthe FNB facility are 30 September 2012 and 30 June 2012 respectively.

The guarantees in respect of the Participating Employers are in the form of endorsements to the members' records for collateral investments made by the Participating Employerswith the financial institutions to support the granting of housing loan facilities between the individual member and these institutions. No such endorsements have been made sinceinception of the final phase of the National Credit Act with an effective date of 1 June 2007.

The amount of the guarantee, may not exceed 50% of the cash benefit that a member would receive if he or she had to terminate membership to the Fund.



5. ACCOUNTS RECEIVABLE

2012 2011R R

Coris Capital (Pty) Ltd - overpayment of PAYE to SARS 42 7,265Outstanding penalty interest 468,557 419,077Capital trade timing difference 24,638,190 42,553,606Overpayment of expense, refund received after year-end 58,238 -

25,165,027 42,979,948



6. TRANSFERS FROM OTHER FUNDS

A B C D A+B+C-D

Effectivedate

No. ofmembers

Applied for notyet approved(contingent)

At beginning ofthe period

Transfersapproved

Return onTransfers

Assetstransferred

At end of period

R R R R R RIn terms of section 14Government Employees Pension Fund 31/10/2011 21 - - 4,501,614 - (4,501,614) -Government Employees Pension Fund 31/08/2011 1 - - 332,414 4,562 (336,976) -Government Employees Pension Fund * 30/03/2012 3 - - 41,230 - (41,230) -Government Employees Pension Fund * 29/02/2012 61 - - 21,066,963 - (21,066,963) -Government Employees Pension Fund * 31/05/2012 21 - - 8,302,896 - (8,302,896) -Government Employees Pension Fund * 31/05/2012 10 - - 3,660,186 - (3,660,186) -Magalies Water Retirement Fund 24/03/2009 5 - - 942,036 - (942,036) -Fundsatwork Umbrella Provident Fund 03/06/2011 2 - - 215,183 - (215,183) -LGPF 03/05/2011 3 - - 33,021 - (33,021) -Boshelo Water Provident Fund 25/04/2012 2 - - 405,726 - (405,726) -Individual transfers 10 - - 4,323,725 - (4,323,725) -Total 139 - - 43,824,994 4,562 (43,829,556) -

Transfers approved (B) 43,824,994Return on transfers (C) 4,562Statement of changes in net assets and funds 43,829,556

As at year-end the Financial Services Board approval has not yet been received in respect of the four section 14 transfers from the Government Employees Pension Fund (GEPF)indicated with an *. The GEPF has already transferred the money to the Fund on the effective dates indicated and the Fund has invested the money accordingly in order to ensureoptimal returns for the affected members. All relevant documents have been submitted to the Financial Services Board and approval was received subsequent to year-end.



7. BENEFIT PAYMENTS

7.1 Benefits - current membersA B C D E A+B+C-D-E


Benefits for currentperiod

Return allocated Payments Transferred tounclaimed benefits

At end of period

R R R R R RLump sums on retirements - Full benefit 92,784,696 463,735,253 33,244 (471,973,361) - 84,579,832Lump sums before retirement - Disability benefits 6,221,365 13,676,999 9,104 (18,212,790) - 1,694,678 - Death benefits 168,608,933 245,486,157 5,768,382 (162,448,896) - 257,414,576 - Withdrawal benefits 46,143,509 207,710,224 15,718 (217,272,782) - 36,596,669 - Retrenchment benefits 4,338 (5,320) - 982 - -Other - Reverted Unclaimed Benefits - 5,341,156 - (5,341,156) - -

313,762,841 935,944,469 5,826,448 (875,248,003) - 380,285,755

Benefits for current period (B) 935,944,469Return allocated (C) 5,826,448Statement of changes in net assets and funds 941,770,917



8. UNCLAIMED BENEFITS

2012 2011R R

At beginning of the period 1,154,057 1,740,282Less:- Interest provision and other adjustments 21,437 (586,225)- Benefits paid (15,161) -Balance at the end of the period 1,160,333 1,154,057

9. ACCOUNTS PAYABLE

2012 2011R R

Reinsurance premiums 578,865 569,256Receiver of Revenue-PAYE - 56,606Administration costs and loan administration fees 3,096,264 6,599,349Sundry Creditors - 3,625Asset management fees 4,174,476 3,881,356Unallocated housing loan repayment 78,135 63,320Sundry participating employers (contribution overpayments) 909,505 1,950,340

8,837,245 13,123,852

10. CONTRIBUTIONSA B C D A+B+C-D

At beginning ofthe period

Towardsretirement

Towards re-insurance and

expenses

Contributionsreceived

At end of theperiod

R R R R RMember contributions -received and accrued 5,160,431 334,302,737 - (331,113,191) 8,349,977Employer contributions -received and accrued 14,311,398 704,928,948 212,247,544 (907,157,660) 24,330,230Additional voluntarycontributions - members - 28,774 - (28,774) -

19,471,829 1,039,260,459 212,247,544 (1,238,299,625) 32,680,207

Towards retirement 1,039,260,459Towards reinsurance and expenses 212,247,544Statement of changes in net assets and funds 1,251,508,003

11. NET INVESTMENT INCOME

2012 2011R R

Income from investments 564,445,880 521,465,504�� Dividends 198,978,743 177,268,941�� Interest 354,836,422 337,620,465�� Rentals 10,630,715 6,576,098Adjustment to fair value 531,577,829 886,883,555

1,096,023,709 1,408,349,059Less: Expenses incurred in managing investments (63,202,614) (64,167,658)

1,032,821,095 1,344,181,401



12. ADMINISTRATION EXPENSES

2012R

2011R

Actuarial fees 365,940 397,376Administration fees 17,129,315 16,236,657Audit fees 566,637 581,759- Audit fees - Audit services 513,000 552,170- Audit fees - Trustee training 17,100 -- Audit fees - Overrun on prior year audit 33,687 29,589- Audit fees - Internal audit fees 2,850 -Depreciation 37,729 58,328Other expenses 1,696,414 1,319,281Communication expenses 890,441 790,073FSB Levy 403,831 380,830Post retirement medical contributions 25,113 21,854Medical assessment costs 377,029 126,524Office expenses 1,283,744 1,314,259Principal officer expenses 1,179,235 1,102,077Staff expenses 1,805,339 1,665,369Trustees' expenses 12.1 780,485 899,230

24,844,838 23,574,336

12.1 Trustees' expenses

2012R

2011R

Trustees' fees - Subsistance and travel allowances forattendance of meetings

623,079 643,803

Trustees' fees - Subsistance and travel allowances andincidental costs for training

157,406 255,427

780,485 899,230

13. RISK MANAGEMENT POLICIES

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

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

Credit risk

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

The Board of Trustees ensures that the Fund monitors receivable balances on an ongoing basis with the result thatthe Fund's exposure to bad debts is not significant. An appropriate level of provision is maintained.

Legal risk

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

The Board of Trustees ensures that legal representatives of the Fund monitor the drafting of contracts to ensure thatrights and obligations of all parties are clearly set out.



Cash flow risk

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

The Board of Trustees ensures that cash flows are monitored by using monthly cash flow projections.

Currency risk

Currency risk is the risk that the value of an instrument will fluctuate in Rands owing to changes in foreign exchangerates.

The Fund's exposure to currency risk is mainly in respect of foreign investments made on behalf of the Fund for thepurpose of seeking desirable international diversification of investments.

The Board of Trustees ensures that the foreign investments of the Fund are monitored and limits these investments to25% of total assets. Where the limit of 25% is exceeded, the board of trustees ensures that it is acceptable to theRegulator.

Liquidity risk

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

The Board of Trustees ensures that the Fund's liabilities are backed by appropriate assets and it has significant liquidresources.

Market risk

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

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

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

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

Investments

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

14. RELATED PARTIES

The following transactions between the participating employers and the Fund occurred during the period:

The participating employers made contributions to the Fund for members' retirement to the value of R704,928,946 andtowards the Fund's risk reserve and administration expenses to the value of R212,247,544 respectively (refer to note11 of the financial statements).

During the year under review a total amount of R977,495 was contributed to the Fund on behalf of the membertrustees in respect of their individual pension contributions in terms of the provisions of the Fund Rules. This amountconsists of contributions by the member trustees as well as their employers. Of the total amount R818,583 wascontributed towards the member trustees' retirement provision and R158,912 was contributed towards the Fund's riskbenefits and administration expenses. These contributions are the standard member and employer contributions interms of the Fund Rules and are disclosed merely for transparency reasons.`



15. SURPLUS AND RESERVESReserve Accounts Processing

AccountRisk Account Data and

OperationalAccount

R R R RAt beginning of period 198,557,221 - 193,716,852 4,840,369Contributions received andaccrued

212,247,544 - 184,655,363 27,592,181

Net investment income 1,011,464,621 1,011,464,621 - -Less: (31,798,919) - (7,385,624) (24,413,295)- Reinsurance premiums (6,954,081) - (6,954,081) -- Administration expenses (24,844,838) - (431,543) (24,413,295)Net income before transfers and benefits 1,390,470,467 1,011,464,621 370,986,591 8,019,255Transfers and benefits (270,281,798) - (270,281,798) -Benefits (270,281,798) - (270,281,798) -Net income after transfers andbenefits

1,120,188,669 1,011,464,621 100,704,793 8,019,255

Transfer between reserveaccounts

(846,382,889) (986,105,249) 139,722,360 -

Net investment return - (25,147,324) 25,147,324 -Interest on Data and OperationalReserve

- (212,048) - 212,048

At end of period 273,805,780 - 265,574,477 8,231,303

16. AMOUNTS TO BE ALLOCATED

2012R

2011R

Investment return to be allocated 10,697,622 (8,124,962)Asset management fees to be recovered from members - (3,881,000)Contributions allocated to members subsequent to year-end 35,832,449 61,497,545Capital trade timing differences - 42,553,606Excess balance in bank 30,146,238 -Total amounts to be allocated 76,676,309 92,045,189

SCHEDULE I REPORT OF THE INDEPENDENT AUDITORS OF THE MUNICIPAL GRATUITY FUND TO THE REGISTRAR OF PENSION FUNDS ON FACTUAL FINDINGS

Scope

We have performed the procedures agreed with you and enumerated below with respect to the accounting records of the Municipal Gratuity Fund for the period ended 30 June 2012 as required by you in terms of section 15 of the Pension Funds Act of South Africa, (the Act). Our engagement was undertaken in accordance with the International Standard on Related Services (4400) Engagements to perform agreed-upon procedures regarding financial information. The responsibility for determining the adequacy or otherwise of the procedures agreed to be performed is that of the Registrar of Pension Funds.

Procedures and Findings

Our procedures and the corresponding findings thereon are set out in the table below. Procedures Findings

1 By Trustee request we selected a sample of the lesser 50 or 10% of participating employers and for the following three months: June 2012, April 2012 and September 2012, performed the following procedures:

We selected 12 participating employers.

1.1 We agreed, in total, the data received by the administrator to the cash received by the fund.

The data received by the administrator agreed to the cash received by the fund.

1.2 We inspected the bank statements as appropriate, for the date on which the cash was received to determine whether the contributions were deposited with a registered bank in accordance with section 13A of the Act and whether late payment interest has been raised in terms of regulation 33, where applicable.

Contributions were deposited with a registered bank in accordance with section 13A of the Act and that late payment interest had been raised in terms of regulation 33 where applicable.

1.3 We inspected the accounting records of the fund to determine whether amounts disclosed as arrear contributions at period-end have been paid to the fund in accordance with the requirements of section 13A of the Act.

Amounts disclosed as arrear contributions at period-end have been paid to the fund in accordance with the requirements of section 13A of the Act, for the sample selected.

2 We inspected the list of investments held by the fund for any investments prohibited interms of section 19 (4) of the Act.

The fund does not hold investments prohibited in terms of section 19(4) of the Act.

2.1 Where investments held in the participating employer exceeded 5%, we inspected the appropriate Financial Services Board approval.

Not applicable as the fund does not hold investments in the participating employers.

2.2 We obtained written confirmations of investment balances and agreed details of the confirmations received to the investment balances reflected in the general ledger.

The details of the confirmations received agreed to the investment balances reflected in the general ledger.

3 We obtained the list of housing loans granted to members by the fund in terms of section 19(5) of the Act by the fund as at 30 June 2012 and performed the following procedures:

3.1 We agreed the loans on the above list to the corresponding account in the general ledger.

The loans on the list reconciled to the corresponding account in the general ledger. Reconciling items of R1 515 894 is due to timing differences between the report and the general ledger.

Procedures Findings

3.2 From the above list, we selected a sample of the lesser 25 or 10% housing loans. We determined whether the selected housing loans were granted in terms of the requirements of section 19(5) of the Act, in terms of the security provided and the interest rates applied to the loans.

For the 25 housing loans tested, the loans were granted in terms of section 19(5) of the Act, in terms of the security provided and the interest rates applied to the loans. We noted that there were no new direct housing loans granted during the period.

3.3 If the fund issued more than 100 loans or the total principal debt of all outstanding loans exceeded R500 000, we determined whether the fund was registered as a credit provider under the National Credit Act, 2005 (the NCA) and whether an assurance report had been issued to the National Credit Regulator in terms of section 16(1)(b) of the NCA and regulation 67 and 68 to the NCA.

The fund was registered as a Credit Provider under the NCA and an assurance report was issued to the National Credit Regulator in terms of section 16(1)(b) of the NCA and regulations 67 and 68 to the NCA for the current financial year.

4 We obtained a list of the housing loan guarantees granted to members by the fund in terms of section 19(5) of the Act as at 30 June 2012. We selected a sample of the lesser of 25 or 10% of housing guarantees from the list. For the sample selected, we compared the total for guarantees issued on behalf of the members to the total of member individual fund credits, to determine whether the total guarantees issued exceeded the total member individual fund credits allowed in terms of the Act and/or the rules of the fund.

The total guarantees issued did not exceed the total member individual fund credits for the sample selected.

5 We obtained a list of other loans as at 30 June 2012 and determined whether these loans were granted in terms of the requirements of section 19(5)B.

Not applicable as no other loans were granted to members during the period ended 30 June 2012.

6 We obtained a written confirmation from the fund’s insurer that fidelity insurance cover was in place throughout the period ended 30 June 2012.

Fidelity insurance cover was in place throughout the period ended 30 June 2012.

7 We obtained the list of section 14 transfers to and from the fund throughout the period ended 30 June 2012 selected a sample of the lesser of 25 or 10% transfers in and the lesser of 25 or 10% transfers out, and performed the following procedures:

The section 14 transfers to and from the fund agreed to the approved section 14 documentation received from the Financial Services Board.

Section 14 transfers were received into the fund during the period; however Financial Services Board approval was not obtained before the following transfers were received. Refer to Schedule D – Independent Auditors Report

Transfers Value of Section 14

Transfers In (per GL)

Government Employees Pension Fund (GEPF)

41 230.41 21 066 962.99 8 302 896.12 3 660 185.66

Procedures Findings

7.1 We agreed the section 14 transfers to and from the fund to the approved section 14 documentation received from the Financial Services Board in respect of each transfer.

The section 14 transfers to and from the fund agreed to the approved section 14 documentation received from the Financial Services Board.

7.2 We agreed the above list of section 14 transfers to the corresponding account in the general ledger.

The list of section 14 transfers agreed to the corresponding account in the general ledger.

7.3 We determined by inspection whether the transfers were received/paid within 60 days of approval and whether the growth and interest return has been allocated from date of receipt/payment.

The transfers were not received within 60 days threshold. Investment return has been allocated to the date of receipt.

Transfers Date of

Approval

Date of

Receipt

Value of

Section 14

Transfers

In (per GL)

Magalies

Water

24/03/2009 13/07/2011 276 256.19

Magalies

Water

24/03/2009 19/07/2011 177 886.86

Magalies

Water

24/03/2009 15/07/2011 320 190.91

Magalies

Water

24/03/2009 15/07/2011 138 298.71

Magalies

Water

24/03/2009 15/07/2011 288 769.45

GEPF 03/03/2012 41 230.41

GEPF 29/02/2012 21 066

962.99

GEPF 31/05/2012 8 302

896.12

GEPF 31/05/2012 3 660

185.66

7.4 In respect of unitised funds, we selected a sample of the lesser of 25 or 10% of the members transferred and recalculated the purchase of units for the amount received using the unit price per the administration system on the date of receipt. (Whether units were purchased after date of receipt investment return was included from the date of receipt to the date of purchase).

The conversion of transfers was correctly calculated and where units purchased after date of receipt investment return was added from date of receipt to date of purchase.

8 We obtained a list of accumulated member credits as reflected on the administrator’s member register as at 30 June 2012 and performed the following procedures:

Procedures Findings

8.1 We agreed the closing balance on the list to the corresponding account in the annual financial statements as at 30 June 2012.

The closing balance on the list agreed to the corresponding account in the financial statements as at 30 June 2012. Unallocated amounts of R76 676 309 were identified as disclosed in note 16 to the annual financial statements

8.2 We selected a sample of the lesser 25 or 10% of the members from the list and performed the following procedures:

Per special request from the Trustees we selected a sample of the lesser 50 or 10% of the members from the list and performed the following procedures:

8.2.1 We agreed the member and employer contributions received for the selected members per the administrator’s system to information supplied by the participating employers for a sample of 3 months.

The member and employer contributions received for the selected member per the administrator’s system agreed to information supplied by the participating employers for the months selected.

8.2.2 In respect of unitised investments products, we recalculated the conversion of the selected contributions at the unit price per the administration system on the dates that the contributions were invested and determined whether these units were correctly calculated and added to the existing units for the full period.

The conversion of contributions into units was correctly calculated and was correctly added to the members existing units.

8.2.3 In respect of unitised investments products, we recalculated the conversion units at the end of the period at the period end unit price and agreed the amount to the member’s record on the member register.

The conversion of units was correctly calculated and agreed to the amount on the member’s record on the member register.

8.2.4 In respect of unitised investments products, we agreed to the period end unit price as authorised in terms of the rules of the fund to the unit prices on the administration system used to calculate the member credits.

The unit prices agreed to the unit prices on the administration system. .

8.2.5 In respect of non-unitised investments products, we agreed the return allocated to the member’s fund credit on the administrator’s records to the return approved in accordance with a resolution of the Board of Trustees or the rules of the fund.

Not applicable as the Fund is unitised.

8.3 Per special request from the Trustees we selected a sample of the lesser 50 or 10% of members who switched between investment portfolios, ensuring that all portfolios are represented in the sample, during the period and determined whether the portfolios were correctly switched and that the correct amount was switched in accordance with notification of the member’s election. We inspected whether any fees deducted were approved by the Board of Trustees.

The portfolios were correctly switched and the correct amount was switched in accordance with notification of the member’s election. Fees deducted were approved by the Board of Trustees.

Procedures Findings

8.4 If a surplus apportionment scheme was approved by the FSB in the current period, we selected a sample of the lesser of 25 or 10% from the surplus schedules and we agreed the allocation of the fund surplus of the scheme to the individual allocation in the member records per the administration system.

Not applicable as there was no approved surplus apportionment for the period ended 30 June 2012.

8.5 For unitized investment products where member portfolios are backed by specific portfolios, we agreed the values of investments specified by the members investment choice to the members liabilities per product for that choice and inspected the accuracy of reconciling items.

The Fund had direct investments in various portfolios with various asset managers and utilises a multi-manager. We agreed the total value per Asset Manager Investment confirmations to the total value per Interlink. The values of investments reconciled to the members liabilities and unreconciled items amounting to R630,000 were noted.

9 We inspected the most statutory valuation report to determine whether the fund was under-funded. For under-funded funds we determined whether a scheme, as required in terms of section 18 of Pension Funds Act in South Africa, has been implemented to remedy the shortfall.

In accordance with the last statutory valuation report as at 30 June 2011, the fund was not underfunded. The valuation as at 30 June 2012 also reflects that the fund is financially sound.

10. We obtained the analysis of the movements in the fund’s reserve accounts from the financial statements and performed the following procedures

10.1 We agreed the opening balance to the prior period financial statements.

The opening balance agreed to the prior period financial statements.

10.2 We inspected the rules of the fund to determine whether the movements in the fund’s reserve accounts were in terms of the rules of the fund and the Act.

The movements in fund’s reserve accounts were in terms of the rules of the fund. Included in the operational reserve account is medical aid contributions awarded as a post retirement benefit to a former MGF employee of R 25,113. The trustees approved the determination and practise. According to the rules of the fund, this transaction falls outside the ambit of their discretion with regards to inflows and outflows allowed against the reserve accounts. The rules of the fund have been amended to align the reserve accounts with the practice and this rule amendment was approved subsequent to year end.

11. We obtained a list of lump sum benefits reflected as expenses in the fund’s Statement of Changes in Net Assets and Funds and performed the following procedures:

11.1 We agreed the list to the respective general ledger benefit expense accounts.

The list agreed to the respective general ledger benefit expense accounts.

11.2 Per special request from the Trustees we selected a sample of the lesser 50 benefits or 10% of the total benefit expenses from the list and performed the following procedures:

11.2.1 We agreed the claim to the applicable, authorised supporting documentation.

The claim agreed to the applicable, authorised supporting documentation.

Procedures Findings

11.2.2 For death benefits, where a portion of the benefit was reinsured by the fund, we determined whether the recovery from the insurer was received by the fund.

The recovery from the insurer was received by the fund.

11.2.3 We agreed the opening fund credit for the member to the opening fund credit report and determined whether contributions were added every month until the date of exit. [either by R amount or in case of unitised funds, by units] We agreed the balance paid out to member to the fund credit report or administration system as at the date of exit.

We found that the opening fund credit for the member agreed to the opening fund credit report and the contributions were added every month until the date of exit. We found that the balance paid out to member agreed to the fund credit report or administration system as at date of exit, except for one death benefit where there was a difference of R1 138 915 identified. This difference relates to the remaining 50% benefit that will be paid after one year of the members’ death this is per section 37C of the pension funds act.

11.2.4 We inspected whether the payments agreed to relevant authorisation.

The payments agreed to relevant authorisation.

12. We obtained a copy of the listing of pensioners and performed the following procedures:

12.1 We agreed the total pensions paid to the corresponding account in the general ledger.

Not applicable as there were no pensioners for the period ended 30 June 2012.

12.2 We selected a sample of the lesser of 25 or 10% of pensions from the above list and performed the following procedures:

12.2.1 We agreed the pensioner increases to authorisation by the Board of Trustees or other relevant supporting documentation.


12.2.2 We inspected the evidence supporting the fact that the pensioners selected were still alive.


13. Where the fund has reinsured its pensioners with an insurer, we obtained a written confirmation of the pensions paid from the insurer including assets and liability balances and agreed this to the fund’s general ledger pension expense, asset and liability accounts.


MUNICIPAL GRATUITY FUNDSCHEDULE IA - SCHEDULES PERTAINING TO THE ANNUAL FI NANCIAL STATEMENTSFor the period ended 30 June 2012

INVESTMENTS

A B C DA+B+C+D

=X+Y X Y

NotesDirect

InvestmentsNon-market

related insurancepolicies

Market relatedinsurancepolicies

Collectiveinvestmentschemes

Total Local Foreign Total percentageof foreignexposure

R R R R R R RCash and deposits A 2,865,491,656 - 17,683,210 216,031,873 3,099,206,739 2,868,156,624 231,050,115 7.46 %Loans B 163,449,536 - - - 163,449,536 163,449,536 - - %Debentures C 502,494,000 - - - 502,494,000 502,494,000 - - %Bills, bonds and securities C 1,189,339,238 - 750,318,277 1,140,721,607 3,080,379,122 2,903,917,531 176,461,591 5.73 %Properties D 40,000,000 - - - 40,000,000 40,000,000 - - %Equities E 4,878,954,022 - 220,438 987,075,039 5,866,249,499 4,879,174,460 987,075,039 16.83 %- Equities with primary

listing on JSEE1 3,399,703,200 - - - 3,399,703,200 3,399,703,200 - - %

- Equities with secondarylisting on JSE

E2 1,432,402,470 - - - 1,432,402,470 1,432,402,470 - - %

- Foreign listed equities - - - 986,918,333 986,918,333 - 986,918,333 100.00 %- Unlisted equities E5 46,848,352 - 220,438 156,706 47,225,496 47,068,790 156,706 0.33 %Preference shares F 85,176,897 - - - 85,176,897 85,176,897 - - %Derivative market

investmentsG (756,006) - - 307,578,691 306,822,685 97,768,739 209,053,946 68.14 %

Total investments 9,724,149,343 - 768,221,925 2,651,407,210 13,143,778,478 11,540,137,787 1,603,640,691 12.20 %

MUNICIPAL GRATUITY FUNDSCHEDULE IA - SCHEDULES PERTAINING TO THE ANNUAL FINANCIAL STA TEMENTSFor the period ended 30 June 2012

A DIRECT CASH AND DEPOSITS

Fair valueR

ABSA Bank - Current account 139,188,331ABSA Bank Ltd 8.75% 010912 10,337,804ABSA Call Account - Current Accounts 37,647,168ABSA Call MUNGBA - Nett Liquidity 11,342,374ABSA Capital Structured Product 622,060,828ABSA NCD 5.475% 02072012 7,475,539ABSA NCD 5.7% 13082012 10,120,871ABSA NCD 5.725% 03092012 10,121,348ABSA NCD 5.875% 13082012 10,273,341ABSA NCD 6.265% 20062012 5,036,398ABSA NCD 6.35% 02072012 123,139,651ABSA Sett Account MGFDYN - Current Accounts 813,766ABSA Sett Account MGFSE - Nett Liquidity 1,966,610ABSA Sett Account MUNARF - Nett Liquidity 13,583,876ABSA Sett Acountc ELCA99 - Current Accounts 180,206African Bank DLI 6.0% 10082012 5,191,252African Bank DLI 6.6% 08012013 20,687,146African Bank DLI 6.7% 13072012 4,255,599African Bank PNO 22032013 10,236,551African Bank PNO 22032013 10,083,828AFRJBL13 6.775 28082012 11,065,578AFRJBL20 FRN 10052013 6,054,773BAYA03 FRN 30062012 23,980,115BESA Fees control - Deposit Account (30)BIDC22 27072012 8,961,672Bluetita Com 21082012 3,967,395Bluetita Com 22082012 19,833,836Bluetita Com 23072012 996,366BMA Control Account - Nett Liquidity (700)BOC FXD 6.45 210513 10,106,979BOC FXD 6.45 22052013 10,105,288BOE USD Call Account (foreign) 1,372Capitec Bank Limited CBL05 10.979% 02112012 4,059,200Capitec Bank NCD 6.455% 14112012 10,421,695CASH 7,844,681Cash Offset (3,510,102)Cash on call 136,449Coronation Active Cash Account 36,633,599Daily Settlements Capital (ABSA) 34,509,321Daily Settlements Capital (Nedbank) 539,910DB STAGL 250912 2,004,102Development Bank VF12 13102012 21,336,242EUR Settlement Acct - Current Accounts 3,877,584FirstRand F/R 30092012 7,078,381FirstRand NCD 5.705 17072012 8,151,588FirstRand NCD 6.35% 02072012 123,139,651FNB Call - Current Accounts 3,313,765GBP Settlement Acct - Current Accounts 5,830,949Gijima FRN04 30062012 8,169,995HSBC CALL (SIM) - Current Accounts 11,748,946IBL09 08122012 14,057,466Iinvestec NCD 6.10% 31052013 15,094,398Iinvestec NCD 6.30% 18042013 4,061,551IND235 28082012 19,814,949International Cash Holding (JP Morgan Chase) (fore 8,631,795Investec FXD 5.75% 15102012 5,011,850Investec NCD 4.8% 04092012 15,136,998Investec NCD 5.5% 02072012 2,222,564Investec NCD 6.40% 02072012 153,305,778IShares MSCI Emerging Market Income Account (forei 2,622,437JD Group 012 23082012 10,082,110


Landbank PNO 25092012 19,733,409Landbank PNO 26092012 1,973,039Landbank PNO 26092012 3,946,079Landbank PNO 29112012 4,884,327Multi Manager Cash 479,794,773NATTREAS TBL 08082012 14,910,502Nedbank Call Account - Deposit 3,668Nedbank F/R 05112012 4,041,851Nedbank F/R 19042013 3,876,452Nedbank JBL34 FRN 08052013 4,035,332Nedbank NCD 6.35% 02072012 122,288,945Nedcor FXD 6.36% 22022013 30,732,674Nedcor NCD 5.95% 28062013 10,001,537Nedcor NCD 6.0% 30052013 3,015,603Nedcor NCD 6.1% 23102012 51,366,362Nedcor NCD 6.11% 10082012 37,760,948Nedcor NCD 6.225% 01022013 10,270,682Nedcor NCD 6.25% 06022013 5,132,438Nedcor NCD 6.25% 140513 10,105,678Nedcor NCD 6.275% 02052013 15,192,219Nedcor NCD 6.275% 16052013 12,121,722Nedcor NCD 6.275% 18042013 1,014,820Nedcor NCD 6.3% 02082012 10,574,039Rand CAPITAL ACCOUNT 50,554,561Rand Merchant Bank B Call Account 803,337Rand SETTLEMENT ACCOUNT 1,645,940Rand SETTLEMENT ACCOUNT - DIV 90,208SAFEX Margin Account - Current Accounts 1,303,342SAFEX Margin Account - Current Accounts 5,394,801Sanlam Capital Markets PN 6.545% 02072012 30,900,129SATFRN13 02072012 11,261,183SETTLEMENT ACCOUNT ZAR 19,278,486Stabdard Bank Prime Link 7,013,161Standard Bank FXD 5.75% 30082012 10,091,853Standard Bank FXD 6.35% 12032013 20,433,286Standard bank NCD 5.70% 02082012 19,294,578Standard Bank NCD 6.325% 02072012 60,598,460STDJBL67 FRN 13072012 1,012,266STDJBL69 FRN 03082012 10,087,849STDJBL74 FRN 11042013 10,131,425Sundry Amount (ZAR) - Nett Liquidity (220)SYNTHESIS 20082012 1,984,011TBill 01/08/12 2,985,600THKWHCSN NCD 5.78 13072012 2,024,565TRASNOT SOC 26072012 995,898USD Settlement Account - Current Accounts (foreign 3,762,639Yield Zar Call Account 263,460YPNOSC2 26072012 13,329,529YPNOSC3 07022013 15,130,253YPNOSC4 07052013 24,200,974Total 2,865,491,656


B DIRECT LOANS

Secured by Fair value

R

Housing loans Members' fund credit 163,449,536Total 163,449,536

C DIRECT BONDS AND DEBENTURES

C1 Bills, bonds and securities

Secured Fair valueDIRECT HOLDINGS by/unsecured RGovernment or provincial administration SA Government 254,323,167Corporate Bonds - Eskom ESKOM (Parastatal) 38,442,749Corporate Bonds - Landbank Landbank (Parastatal) 22,228,769Corporate Bonds - Other SA Corporates 871,473,845Corporate Bonds - Rand Water Board Rand Water Board

(Parastatal)2,870,708

Total bills, bonds and securities 1,189,339,238

C2 Debentures

Listed debentures Fair valueR

Brait Hedge Fund 252,280,494Edge Iconic Absolute Return Fund 250,213,506Total listed debentures 502,494,000


D DIRECT PROPERTIES

Fair valueDIRECT HOLDING RCommercial properties 40,000,000Total properties 40,000,000

List properties

Investment properties Valuation method Date of lastvaluation

Fair Value

R

% of non-currentassets

includingbank

ABSA Square Nelspruit Market related capitalisation rate 01/06/2011 40,000,000 0.30%

E DIRECT EQUITIES

TotalR

E1 Primary listing on JSE 3,399,703,200E2 Secondary listing on JSE 1,432,402,470E5 Unlisted Equities 46,848,352Total equities 4,878,954,022


E1 Primary listing on JSE

Direct Holdings Issued shares Holding number Holding F air value

% RABSA Group Ltd 718,210,043 797,428 0.11 112,596,834Acucap 177,473,043 98,169 0.06 4,221,267Adcock Ingram Holdings Ltd 174,702,484 651,738 0.37 39,136,867Adcorp Holdings Ltd 78,139,101 700,592 0.90 19,007,061AECI Ltd 128,241,140 258,916 0.20 20,648,551Afgri Ltd 375,503,580 1,801,432 0.48 10,448,306African Bank Investments Ltd 804,175,200 135,760 0.02 4,929,446African Oxygen Ltd 342,852,910 27,218 0.01 496,729African Rainbow Minerals Ltd 214,847,896 100,546 0.05 16,692,647Alexander Forbes Linked Unit 236,715,741 715,423 0.30 7,154,230Allied Electronics Corp 105,669,131 586,600 0.56 13,511,672Altech Ltd 106,098,593 180,051 0.17 8,730,673Amalgamated Appliance Holdings Ltd 212,189,689 452,924 0.21 1,136,839Anglo American Platinum Ltd 269,681,886 196,971 0.07 95,489,571Anlgo Gold Ashanti Ltd 382,788,311 620,481 0.16 173,114,199Aquarius Platinum Ltd 470,167,206 690,313 0.15 4,141,878ArecelorMittal South Africa Ltd 445,752,132 577,276 0.13 30,249,262Argent Industrial Ltd 96,490,605 1,297,240 1.34 9,054,735Arrowhead Properties Ltd-A 100,566,849 486,742 0.48 2,988,596Arrowhead Properties Ltd-B 100,566,849 40,550 0.04 207,616Aspen Pharmacare Holdings Ltd 472,379,457 188,948 0.04 23,779,106Astral Foods Ltd 42,148,885 50,883 0.12 5,749,779Astrapak Ltd 135,131,250 37,800 0.03 257,040Aveng Ltd 401,588,097 1,668,876 0.42 59,745,761AVI Ltd 342,144,990 143,185 0.04 7,159,250Avusa Opco Ltd 124,376,714 233,900 0.19 5,555,125B&W Instrumentation and Electronics Ltd 212,168,959 123,100 0.06 80,015Barloworld Ltd 230,937,323 68,312 0.03 5,533,272Basil Read Holdings Ltd 123,811,038 185,650 0.15 2,274,213Bidvest Group Ltd 327,734,929 238,909 0.07 43,481,438Blue Label Telecoms 674,509,042 1,283,085 0.19 7,685,679Business Connexion Group Ltd 404,972,468 713,199 0.18 3,273,583Business Connexion Grp A 100,133,334 568 - 346Cadiz Holdings Ltd 253,227,828 95,413 0.04 176,514Capital & Counties Properties Ltd 684,470,211 232,315 0.03 6,272,505Capital Property Fund 1,606,986,279 747,689 0.05 7,476,890Cashbuild Ltd 25,189,811 51,339 0.20 7,033,443Caxton & CTP Publishers 461,648,254 653,400 0.14 9,964,350City Lodge Hotels Ltd 42,988,803 51,422 0.12 4,368,299Clicks Group Ltd 276,123,498 62,300 0.02 3,348,625Comair Ltd 489,176,471 5,811,747 1.19 7,729,624Compagnie Financiere Richemont SA 5,220,000,000 854,669 0.02 38,323,358Coronation Fund Managers 314,819,192 365,994 0.12 10,127,054Datacentrix Holdings Ltd 205,265,683 854,285 0.42 4,228,711Datatec Ltd 189,270,060 332,184 0.18 15,529,602Delta EMD Ltd 49,165,553 36,027 0.07 235,256Digicor Holdings Ltd 247,669,272 824,358 0.33 2,225,767Dipula Income Fund A 105,556,893 531,400 0.50 5,154,580Discovery Holdings Ltd 591,872,390 164,792 0.03 8,569,184Distell Group Ltd 202,838,012 20,100 0.01 1,809,201Distribution and Warehousing Network

Ltd240,242,904 493,339 0.21 3,034,035

DRD Gold Ltd 385,383,767 275,700 0.07 1,474,995Emira Property Fund Ltd 500,864,482 266,107 0.05 3,392,864Enaleni Ltd 446,461,759 2,538,364 0.57 18,783,894Eqstra Holdings Ltd 428,668,392 1,191,200 0.28 8,278,840Esorfranki Ltd 395,185,430 4,235,859 1.07 5,845,485Evraz Highv Steel& Vanad 99,150,098 3,902 - 93,648Exxaro Resources Ltd 357,611,115 141,033 0.04 26,806,142Firstrand Ltd 5,637,941,690 1,843,217 0.03 48,642,497


Fortres Income Fund Ltd 293,084,493 548,798 0.19 7,370,357Fountainhead Property Trust 1,162,709,748 756,070 0.07 5,594,918Gold Fields Ltd 724,553,127 1,166,046 0.16 121,093,877Grand Parade Investments Ltd 462,753,981 76,893 0.02 196,077Grindrod Ltd 599,515,314 831,741 0.14 11,228,504Group Five Ltd 110,645,521 181,032 0.16 4,120,288Growthpoint Properties Ltd 1,743,080,918 548,462 0.03 12,614,626Harmony Gold Mining Company Ltd 431,564,236 333,058 0.08 25,478,937Holdsport Ltd 43,150,220 12,868 0.03 553,324Hospitality Property Fund A 124,761,391 1,272,846 1.02 16,865,210Hospitality Property Fund Ltd 124,761,391 1,090,715 0.87 3,708,431Howden Ltd 65,729,109 43,100 0.07 1,012,850Hudaco Industries Ltd 34,153,531 168,138 0.49 19,176,139Hulamin Ltd 317,155,472 1,156,668 0.36 6,928,441Iliad Africa Ltd 138,217,794 557,340 0.40 2,909,315Illovo Sugar Ltd 460,011,157 748,124 0.16 21,134,503Impala Platinum Holdings Ltd 631,714,020 693,112 0.11 93,743,398Imperial Holdings Ltd 209,843,029 127,384 0.06 21,910,048Investec Ltd 279,639,164 162,267 0.06 7,790,439Italtile Ltd 1,033,332,822 2,813,362 0.27 15,754,827JCI Limited 3,780,509,210 5,805,526 0.15 116,111JD Group Ltd 219,830,000 286,545 0.13 12,321,435Kagiso Media Ltd 133,791,854 164,066 0.12 3,199,287KAP International Holdings Ltd 2,337,254,670 7,952,185 0.34 25,844,601Kelly Group Ltd 100,000,000 7,800 0.01 19,656Kumba Iron Ore Ltd 322,058,624 2,709 - 1,486,103Lewis Group Ltd 98,057,959 153,184 0.16 10,768,835Liberty Holdings Ltd 286,202,373 323,615 0.11 28,057,421Life Healthcare Group Ltd 1,042,209,750 223,830 0.02 6,967,828Mediclinic International Ltd 652,315,341 414,149 0.06 15,509,880Merafe Ltd 2,493,221,390 8,926,132 0.36 7,140,906Metair Investments Ltd 152,531,875 9,458 0.01 219,899Metmar Ltd 232,440,480 228,637 0.10 685,911MMI Holdings Ltd 1,570,132,231 2,176,626 0.14 39,179,268Mobile Industries Ltd 1,068,039,676 7,141,328 0.67 56,220Mondi Ltd 118,312,975 212,436 0.18 14,774,924Mondi Packaging SA Ltd 164,046,476 446,746 0.27 7,701,901Mr Price Group Ltd 250,550,410 69,144 0.03 7,738,596MTN Group Ltd 1,884,968,549 1,179,679 0.06 166,240,365Murray and Roberts Holdings Ltd 444,736,118 790,424 0.18 19,531,377Mustek Ltd 108,677,165 1,260,000 1.16 7,497,000Nampak Ltd 696,432,046 1,531,010 0.22 38,275,250Naspers Ltd 411,711,353 257,164 0.06 111,863,768Nedbank Group Ltd 507,509,491 201,364 0.04 35,015,186Netcare Ltd 1,454,424,266 3,536,812 0.24 56,588,992New Gold Ltd 133,236,300 102,978 0.08 13,593,096Northam Platinum Ltd 382,451,990 296,754 0.08 6,899,531Nuworld Ltd 22,646,465 413,108 1.82 7,642,498Oceana Group Ltd 119,364,157 143,518 0.12 7,032,382Omnia Holdings Ltd 67,249,825 271,816 0.40 28,812,496PBT Group Ltd 281,826,818 35,950 0.01 48,533Peregrine Holdings Ltd 228,128,764 831,806 0.36 10,148,033Pick n Pay Holdings Ltd 527,249,082 787,007 0.15 14,953,133Pick 'n Pay Stores Ltd 480,397,321 337,619 0.07 14,821,474Pioneer Food Group Ltd 230,180,962 239,500 0.10 14,130,500PPC Group Ltd 586,170,372 647,090 0.11 17,309,658PSG Group Ltd 202,724,410 153,571 0.08 9,077,582Rainbow Chicken Ltd 346,168,823 180,130 0.05 2,620,892Randgold 74,585,065 135,631 0.18 306,526Raubex Group Ltd 184,535,946 401,900 0.22 5,373,403Rebosis Property Fund Ltd 249,147,699 364,822 0.15 3,903,595Redefine Properties Ltd 2,690,172,100 2,977,241 0.11 25,514,955Reinet Investments SA 1,959,412,860 8,403,555 0.43 126,893,681Remgro Ltd 481,106,370 1,455,858 0.30 191,430,768Reunert Ltd 199,866,685 181,028 0.09 12,309,904RMB Holdings Ltd 1,411,703,218 190,484 0.01 6,644,082


RMI Holdings Ltd 1,485,688,346 2,467,157 0.17 42,854,517Royal Bafokeng Platinum Ltd 165,548,067 69,761 0.04 3,732,911Sanlam Life Assurance Company Ltd 2,100,000,000 2,337,038 0.11 83,549,109Santam Ltd 119,346,417 5,100 - 838,950Sappi Ltd 541,446,223 2,687,316 0.50 73,766,824Sentula Mining Ltd 586,559,181 3,370,644 0.57 6,067,159Shoprite Ltd 570,579,460 102,250 0.02 15,406,008South Ocean Holdings Ltd 156,378,794 243,994 0.16 385,511Spar Group Ltd 172,372,704 150,120 0.09 17,059,637Spur Corporation Ltd 97,632,833 171,900 0.18 3,075,291Standard Bank Group Ltd 1,592,595,617 1,735,277 0.11 191,817,520Stefanutti Stock Holdings Ltd 188,080,746 645,000 0.34 6,869,250Steinhoff Group Ltd 1,769,701,344 4,731,283 0.27 116,626,126Sun International Ltd 113,487,165 504,223 0.44 45,052,325Super Group Ltd 315,334,081 594,110 0.19 9,054,236Telkom SA Ltd 520,783,898 688,674 0.13 13,077,919The Foschini Group Ltd 240,498,241 85,935 0.04 11,000,539Tiger Brands Ltd 191,093,438 118,384 0.06 29,052,934Tongaat-Hulett Ltd 105,143,181 262,108 0.25 32,792,332Tradehold 138,566,911 700,952 0.51 4,345,902Trans Hex Group Ltd 106,051,275 2,393 - 7,538Transaction Capital Ltd 584,338,861 1,384,400 0.24 10,576,816Trencor Ltd 177,068,011 1,058,632 0.60 53,947,887Tsogo Sun Holdings Ltd 1,182,765,988 719,127 0.06 15,101,667Vividend Income Fund Ltd 191,075,436 1,096,267 0.57 5,700,588Vodacom Ltd 1,487,954,000 126,780 0.01 11,777,862Vukile Property Fund Ltd 410,515,219 645,907 0.16 10,980,419Vunani Property Investments Ltd 120,618,080 484,100 0.40 3,993,825Wilson Bayly Hlm-Ovcon Lt 66,000,000 43,921 0.07 5,676,350Woolworths Holdings Ltd 835,378,333 592,749 0.07 29,779,710York Timber Holdings Ltd 331,240,597 629,193 0.19 2,453,853Zeder Investments Ltd 978,088,517 2,597,500 0.27 7,324,950Zurich Insurance Company SA Ltd 12,179,500 51,168 0.42 13,047,835Total 3,399,703,200

E2 Secondary listing on JSE

Direct Holdings Issued shares Holding number Holding F air value

% RAnglo American Plc 1,405,454,933 898,515 0.06 243,767,119BHP Billiton Plc 2,136,185,454 870,638 0.04 204,599,930Brait SA Ltd 506,200,693 134,200 0.03 3,486,516British American Tobacco Plc 2,025,986,670 241,987 0.01 101,757,953British American Tobacco Plc 2,025,986,670 238,710 0.01 100,379,942Capital Shopping Centres Group Plc 865,193,730 643,316 0.07 27,097,146Investec Plc 605,338,615 1,192,911 0.20 57,021,146Lonmin Plc 202,657,369 282,920 0.14 28,212,782Mondi Plc 367,240,805 171,417 0.05 12,004,332Old Mutual Plc 4,871,143,720 4,764,489 0.10 92,907,536Pan African Resources Plc 1,448,262,361 1,129,100 0.08 2,235,618SABMiller Plc 1,664,649,120 582,678 0.04 192,225,473Sasol Group Plc 644,723,316 1,070,990 0.17 366,706,977Total 1,432,402,470


E5 Unlisted equities

Direct Holdings Fair valueR

Anglo American Certificate DB AGL7 25/09/12 4,997,967Anglo American Certificate DB AGL9 25/09/12 19,831,841Capevin Investments Ltd 8,234,928DB STUBNPN 030812 5,542,614DB STUBNPN 301112 440,022Nedbank STUB AGL 27072012 7,796,464Venfin DD Holdings Ltd 4,516Total 46,848,352

F DIRECT PREFERENCE SHARES

Direct Holdings Fair valueR

ABSA Bank 6.62% Non-Cumulative Preference Shares 16,983,150Allied Electronics Corporate Preference Shares 16,506,014Clover Preference Shares 1,909,780Discovery Holdings Ltd Preference Shares 8,933,294Firstrand Preference Shares 6,459,264Investec Bank Limited Preference shares 75% 391,600Investec Ltd Non-Redeemable Non-Cumulative Non-Par 12,924,503Nedbank Non-Redeemable Non-Cumulative Non-Particip 11,253,195PSG Preference Shares 1,930,008RECM & Calibre Preference Shares 3,847,410Standard Bank Group Preference Shares 4,038,680Total 85,176,897

DIRECT COLLECTIVE INVESTMENT SCHEMES

Fair valueR

PropertyAllan Gray Orbis Fund 6,311,748Bills, bonds & securitiesAllan Gray Orbis Fund 20,977,752Cadiz Money Market Fund Class B 372,230,975Coronation Absolute Bond Fund 362,344,570Sanlam Balanced Fund Ins Balanced Fund 6,677,588Sanlam Universal Bond Fund Class B 5,227,770Investec Corporate Bond Fund 212,658,205Investec Global Bond Fund 150,256,068Other collective investment schemesAllan Gray Orbis Fund 446,774,302All Seasons Specialist Fund 170,081,044Coronation Absolute World Opportunity Fund 6,386,930Coronation Absolute Fixed Income Fund 10,348,678Coronation Eiger Fund 19,379,895Coronation Global Equity Fund of Fund 82,161,466Coronation Redwood USD Fund 19,593,008Franklin Mutual Global Discovery Fund 347,485,503IShares S&P 500 160,639,724IShares MSCI EAFE 119,373,477IShares Plc -MSCI Europe 5,441,692SIM Absolute Return Income Fund 88,110,446Sanlam Institutional Special Opportunities Fund 10,414,299Sanlam Universal Equity Fund 8,073,664Sanlam Global Liquidity Fund 8,416,362Sanlam World Equity Tracker Fund 12,042,045Total 2,651,407,211


G DIRECT DERIVATIVE MARKET INSTRUMENTS

Options

Direct holdings Expiry date Put/Call Full exposure(notionalamount)

RJul 12 XUVQ 6955.03 Call 31/07/2012 Call (19,780)X1TQ Call 6960.5 221112 22/11/2012 Call (136,950)XXOQ Call 6994.83 200912 20/09/2012 Call (38,320)X6KQ Put 5928.13 19072012 19/07/2012 Put (257,439)X9HQ Put 5952.49 20092012 20/09/2012 Put (78,048)XB1Q 5837.45 Put 22112012 22/11/2012 Put (99,781)Total options (630,318)

Futures/forward - SAFEX/foreign

Direct holdings Put/call Expiry Date Full exposure(notional amount)

RSeptember 2012 DTOP Future 20/09/2012 Put 20/09/2012 (125,688)Total futures (125,688)

MUNICIPAL GRATUITY FUNDSCHEDULE IA - SCHEDULES PERTAINING TO THE ANNUAL FI NANCIAL STATEMENTSFor the period ended 30 June 2012

J RISK MANAGEMENT

Credit / Counter party risk

Counter party Direct investmentin counter party

Deposit/liquidasset with

counter party

Guarantees Total per CounterParty

Exposure tocounter party as a

% of the fairvalue of the

R R R R assets of the fund

Banks 331,806,022 795,066,647 676,698,557 1,803,571,226 13.66%ABSA 331,806,022 795,066,647 - 1,126,872,669 8.54%Standard Bank - - 665,878,879 665,878,879 5.04%First National Bank - - 10,819,678 10,819,678 0.08%

Asset managers - local 290,751,065 - - 290,751,065 2.20%Cadiz Holdings Ltd 176,514 - - 176,514 -%Coronation Fund Managers 10,127,054 - - 10,127,054 0.08%Investec Ltd 64,811,584 - - 64,811,584 0.49%Old Mutual Plc 92,907,536 - - 92,907,536 0.70%MMI Holdings Ltd 39,179,268 - - 39,179,268 0.30%Sanlam Ltd 83,549,109 - - 83,549,109 0.63%

Asset managers - foreign 1,554,862,608 15,018,241 - 1,569,880,849 11.89%Allan Gray Orbis 474,063,802 - - 474,063,802 3.59%All Seasons Specialist G Fund 170,081,044 - - 170,081,044 1.29%BOE USD Call Account - 1,372 - 1,372 -%Coronation International Absolute Return Fund 127,521,298 - - 127,521,298 0.97%Franklin Mutual Global Discovery Fund 347,485,503 - - 347,485,503 2.63%International Cash Holding - 12,394,432 - 12,394,432 0.09%Investec Ltd (Investec Global Bond Fund) 150,256,068 - - 150,256,068 1.14%IShares S&P 500 160,639,724 - - 160,639,724 1.22%IShares MSCI EAFE 119,373,477 - - 119,373,477 0.90%IShares Plc -MSCI Europe 5,441,692 2,622,437 - 8,064,129 0.06%Sanlam Ltd (Offshore Collective Investment Funds) 33,759,842 - - 33,759,842 0.06%

Other funds 163,449,528 - - 163,449,528 1.24%MGF Direct Housing Loans 163,449,528 - - 163,449,528 1.24%

2,340,869,223 810,084,888 676,698,557 3,827,652,668 28.99%


Market riskInvestment Fair value at end of

period

R

Total fair valueequity holdings andopen instruments

R

Market movement by5%

RSasol Group Plc 214,837,510 214,837,510 10,741,876Anglo American Plc 201,239,488 201,239,488 10,061,974BHP Billiton Plc 165,507,680 165,507,680 8,275,384SABMiller Plc 78,852,368 78,852,368 3,942,618Standard Bank Group Ltd 116,893,839 116,893,839 5,844,692Remgro Ltd 82,751,259 82,751,259 4,137,563Anlgo Gold Ashanti Ltd 125,423,892 125,423,892 6,271,195MTN Group Ltd 156,289,581 156,289,581 7,814,479Reinet Investments SA 75,649,324 75,649,324 3,782,466Gold Fields Ltd 103,702,948 103,702,948 5,185,147Total value of 10 largest equity holdings 1,321,147,889 1,321,147,889 66,057,394Total movement as % of non-current assets plus bank 0.50%

Instrument Fair value at end ofperiod

R

Market movement by5%R

Multi Manager Cash Account 479,794,773 23,989,739Cadiz Money Market Fund Class B 372,230,975 18,611,549Coronation Absolute Bond Fund 362,344,570 18,117,229Brait Hedge Fund 252,280,494 12,614,025Edge Iconic Absolute Return Fund 250,213,506 12,510,675Investec Corporate Bond Fund 212,658,205 10,632,910Housing loans 163,449,528 8,172,476Investec NCD 6.40% 02072012 153,305,778 7,665,289ABSA Bank - Current account 139,188,331 6,959,417ABSA NCD 6.35% 02072012 123,139,651 6,156,983Total value of 10 largest other instruments 2,508,605,811 125,430,292

Total movement as % of non-current assets plus bank 0.95%

Foreign currency exposure

Foreign instruments Fair value at end ofperiod

R

Market movement by5%R

Allan Gray Orbis Fund 474,063,802 23,703,190Franklin Mutual Global Discovery Fund 347,485,503 17,374,275All Seasons Specialist Fund 170,081,044 8,504,052IShares S&P 500 160,639,724 8,031,986Investec Global Bond Fund 150,256,068 7,512,803IShares MSCI EAFE 119,373,477 5,968,674Coronation Global Equity Fund of Fund 82,161,466 4,108,073Coronation Redwood USD Fund 19,593,008 979,650Coronation Eiger Fund 19,379,895 968,995Sanlam World Equity Tracker Fund 12,042,045 602,102Total value of 10 largest other instruments 1,555,076,032 77,753,800

Total movement as % of non-current assets plus bank 0.59%

MUNICIPAL GRATUITY FUNDSCHEDULE IB - ASSETS HELD IN COMPLIANCE WITH REGULATION 28For the period ended 30 June 2012

R R

A Total assets of the fund as per Statement of Net Assets and Funds 13,201,663,516

B Less: Non-investment items of Statement of Net Assets and Funds: (57,885,038)B.1 Property Plant and Equipment (39,804)B.2 Current assets (excluding cash at bank) (57,845,234)

C Value of corresponding assets per Statement of funds and net assets 13,143,778,478

Categories of kinds of assets Limit % Fair valueR

Fair value%

1 CASH 2,955,076,913 22.5%

1.1 Local notes, deposits, money market instruments issuedby a South African Bank, margin accounts, settlementaccounts with an exchange and Islamic liquiditymanagement financial instruments

100%

2,724,026,798 20.7%(a) Notes and coins; any balance or deposit in an account

held with a South African bank; 777,632,054 5.9% ABSA Ltd 25% 684,336,896 5.2% Other 25% 93,295,158 0.7%

(b) A money market instrument issued by a South Africanbank including an Islamic liquidity management financialinstrument

1,858,186,157 14.1%

ABSA Ltd 25% 622,060,828 4.7% Other 25% 1,236,125,329 9.4%

(c) Any positive net balance in a margin account with anexchange 7,627,909 0.1% SAFEX Margin Account - Current Accounts 25% 5,394,801 -% Other 25% 2,233,108 -%

(d) Any positive net balance in a settlement account with anexchange, operated for the buying and selling of assets 80,580,678 0.6% ABSA Ltd 25% 70,332,266 0.5% Other 25% 10,248,412 0.1%

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

SARBmax.limits 231,050,115 1.8%

(a) Any balance or deposit held with a foreign bank 5% 231,050,115 1.8%

2 DEBT INSTRUMENTS INCLUDING ISLAMIC DEBTINSTRUMENTS 3,223,752,937 24.5%

2.1 Inside the Republic 100% 3,068,269,099 23.3%(a) Debt instruments issued by, and loans to, the government

of the Republic, and any debt or loan guaranteed by theRepublic 100% 272,219,269 2.1% RSA 208 6.75% 310322 25% 57,712,260 0.4% Other 25% 214,507,009 1.6%

(b) Debt instruments issued or guaranteed by the governmentof a foreign country 10% 20,977,752 0.2% Allan Gray Orbis 25% 20,977,752 0.2%

(c) Debt instruments issued or by a South African bankagainst its balance sheet 75% 471,023,265 3.6%

c(i) Listed on an exchange with an issue market capitalisationof R20 billion or more, or an amount or conditions asprescribed 75% 376,424,467 2.9% ABL12B 08032015 25% 33,318,682 0.3% Other 25% 343,105,785 2.6%

Carried forward 3,624,698,401 27.6%



Fair value%

Brought forward 3,624,698,401 27.6%c(iii) Listed on an exchange with an issuer market capitalisation

of less than R2 billion, or an amount or conditions asprescribed 75% 19,693,300 0.1% CBL11 06052016 10% 18,079,095 0.1% Other 10% 1,614,205 -%

c(iv) Not listed on an exchange 25% 74,905,498 0.6%

STDJBL71 FRN 11072014 5% 25,345,760 0.2% Other 5% 49,559,738 0.4%

(d) Debt instruments issued or guaranteed by an entity thathas equity listed on an exchange, or debt instrumentsissued or guaranteed by a public entity under the PublicFinance Management Act, 1999 (Act No. 1 of 1999) asprescribed 50% 444,752,785 3.4%

d(i) Listed on an exchange 50% 324,123,133 2.5%

Development Bank VF12 13102012 10% 21,336,242 0.2% Other 10% 302,786,891 2.3%

d(ii) Not listed on an exchange 25% 120,629,652 0.9%

YPNOSC4 07052013 5% 24,200,974 0.2% Other 5% 96,428,678 0.7%

(e) Other debt instruments:- 25% 1,859,296,028 14.1%e(i) Listed on an exchange 25% 1,249,902,081 9.5%

Cadiz Money Market Fund 5% 372,230,975 2.8% Other 5% 877,671,106 6.7%

e(ii) Not listed on an exchange 15% 609,393,947 4.6%

Coronation Absolute Bond Fund 5% 362,344,570 2.8% Other 5% 247,049,377 1.9%

2.2 Outside the Republic


(e) Other debt instruments 155,483,838 1.2%e(i) Listed on an exchange 150,256,068 1.1%

Investec Global Bond Fund 5% 150,256,068 1.1%e(ii) Not listed on an exchange 5,227,770 -%

Sanlam Universal Bond Fund Class 5% 5,227,770 -%

3 EQUITIES 5,782,684,430 44.0%

3.1 Inside the Republic 75% 4,801,921,138 36.5%(a) Preference and ordinary shares in companies, excluding

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

4,669,675,451 35.5%a(i) Issuer market capitalisation of R20 billion or more, or an

amount or conditions as prescribed 75% 3,639,886,535 27.7% Sasol Group Plc 15% 214,837,510 1.6% Other 15% 3,425,049,025 26.1%

a(ii) Issuer market capitalisation of between R2 billion and R20billion, or an amount or conditions as prescribed 75% 938,788,132 7.1% Trencor Ltd 10% 53,947,887 0.4% Other 10% 884,840,245 6.7%

a(iii) Issuer market capitalisation of less than R2 billion, or anamount or conditions as prescribed 15% 91,000,784 0.7% Nuworld Ltd 5% 7,642,498 0.1% Other 5% 83,358,286 0.6%

Carried forward 10,848,505,301 82.5%



Fair value%

Brought forward 10,848,505,301 82.5%(b) Preference and ordinary shares in companies, excluding

shares in property companies, not listed on an exchange 15% 132,245,687 1.0% Anglo American Certificate DB AGL9 25/09/12 2.5% 19,831,841 0.2% Other 2.5% 112,413,846 0.9%

3.2 Outside the Republic 980,763,292 7.5%

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


a(i) Issuer market capitalisation of R20 billion or more, or anamount or conditions as prescribed 578,071,225 4.4% Franklin Mutual Global Discovery Fund 15% 347,485,503 2.6% Other 15% 230,585,722 1.8%

a(iii) Issuer market capitalisation of less than R2 billion, or anamount or conditions as prescribed 402,535,361 3.1% IShares S&P 500 5% 160,639,724 1.2% Other 5% 241,895,637 1.8%

(b) Preference and ordinary shares in companies, excludingshares in property companies, not listed on an exchange 156,706 -% Allan Gray Orbis 2.5% 156,706 -%

4 IMMOVABLE PROPERTY 195,148,870 1.5%

4.1 Inside the Republic 25% 188,837,122 1.4%(a) Preference shares, ordinary shares and linked units

comprising shares linked to debentures in propertycompanies, or units in a Collective Investment Scheme inProperty, listed on an exchange 25% 148,837,122 1.1%

a(i) Issuer market capitalisation of R10 billion or more, or anamount or conditions as prescribed 25% 78,976,122 0.6% Capital Shopping Centres Group Plc 15% 27,097,146 0.2% Other 15% 51,878,976 0.4%

a(ii) Issuer market capitalisation of between R3 billion and R10billion, or an amount or conditions as prescribed 25% 27,338,558 0.2% Vukile Property Fund Ltd 10% 10,980,419 0.1% Other 10% 16,358,139 0.1%

a(iii) Issuer market capitalisation of less than R3 billion or anamount or conditions as prescribed 25% 42,522,442 0.3% Hospitality Property Fund A 5% 16,865,210 0.1% Other 5% 25,657,232 0.2%

(b) Immovable property, preference and ordinary shares inproperty companies, and linked units comprising shareslinked to debentures in property companies, not listed onan exchange 15% 40,000,000 0.3% Princess Properties 5% 40,000,000 0.3%

4.2 Outside the Republic 6,311,748 -%(a) Preference shares, ordinary shares and linked units

comprising shares linked to debentures in propertycompanies, or units in a Collective Investment Scheme inProperty, listed on an exchange

SARBmax.limits 6,311,748 -%

a(i) Issuer market capitalisation of R10 billion or more, or anamount or conditions as prescribed 6,311,748 -% Allan Gray Orbis 15% 6,311,748 -%

5 COMMODITIES 13,593,096 0.1%

5.2 Outside the Republic 10% 13,593,096 0.1%

Carried forward 12,156,663,150 92.4%



Fair value%

Brought forward 12,156,663,150 92.4%(a) Gold and other commodities on an exchange, including

exchange traded commodities 10% 13,593,096 0.1%

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

95% 163,449,528 1.2%

8 HEDGE FUNDS, PRIVATE EQUITY FUNDS AND ANYOTHER ASSET NOT REFERRED TO IN THISSCHEDULE 810,072,704 6.2%

8.1 Inside the Republic 15% 601,018,745 4.6%(a) Hedge fund 10% 502,494,000 3.8%a(i) Funds of hedge funds 5% 502,494,000 3.8%

per issuer 502,494,000 3.8%(c) Other assets not referred to in this schedule and excluding

a hedge fund or private equity fund 2.5% 98,524,745 0.7% per issuer 98,524,745 0.7%

8.2 Outside the Republic 15% 209,053,959 1.6%(a) Hedge fund 10% 209,053,959 1.6%a(i) Funds of hedge funds 5% 170,081,047 1.3%

All Seasons Specialist Fund 170,081,047 1.3%a(ii) Hedge funds 2.5% 38,972,912 0.3%

Coronation Redwood USD Fund 19,593,016 0.1% Coronation Eiger Fund 19,379,896 0.1%

TOTAL (equal to the fair value of assets) 13,143,778,478 100.0%

MUNICIPAL GRATUITY FUNDSCHEDULE IB - ASSETS HELD IN COMPLIANCE WITH REGULA TION 28For the period ended 30 June 2012

INVESTMENT SUMMARY (Regulation 28)

Local Fair valueForeign (Excluding

Africa) Fair value Africa Fair value TotalR % R % R % R

1 Balances or deposits, money marketinstruments issued by a bank includingIslamic liquidity management financialinstruments 2,724,026,798 92.2 231,050,115 7.8 - - 2,955,076,913

2 Debt instruments including Islamic debtinstruments 3,068,269,099 95.2 155,483,838 4.8 - - 3,223,752,937

3 Equities 4,801,921,138 83.0 980,763,292 17.0 - - 5,782,684,4304 Immovable property 188,837,122 96.8 6,311,748 3.2 - - 195,148,8705 Commodities - - 13,593,096 100.0 - - 13,593,0967 Housing loans granted to members - section

19(5) 163,449,528 100.0 - - - - 163,449,5288 Hedge Funds, private equity funds and any

other assets not referred to in this schedule 601,018,745 74.2 209,053,959 25.8 - - 810,072,704TOTAL 11,547,522,430 87.9 1,596,256,048 12.1 - - 13,143,778,478

Asset Limits in terms of sub regulation 3(f) Fair value Fair value%

Item 2.1(e)(ii) 609,393,947 4.6%Item 3.1(b) 132,245,688 1.0%Item 4.1(b) 40,000,000 0.3%Item 8 810,072,692 6.2%TOTAL 1,591,712,327 12.1%

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

Item 3.1(b) 132,245,688 1.0%TOTAL 132,245,688 1.0%

MUNICIPAL GRATUITY FUND INDEPENDENT AUDITOR’S REPORT ON ASSETS HELD IN COMP LIANCE WITH REGULATION 28TO THE BOARD OF TRUSTEES AND REGISTRAR OF PENSION FUNDS. We have audited the attached Schedule IB “Assets held in compliance with Regulation 28 (“the “Schedule”) of the Municipal Gratuity Fund (the “Fund”) as at 30 June 2012 for compliance with the requirements of Regulation 28 of the Pension Funds Act of South Africa (the Regulation), as set out on pages 64 to68. Our engagement arises from our appointment as auditor of the Fund and for the purpose of assisting the Trustees to report to the Registrar of Pension Funds (the “Registrar”). The information contained in Schedule IB has been extracted from the Fund’s underlying accounting records that were the subject of our audit engagement on the annual financial statements and forms the subject matter of this engagement. Our audit of the annual financial statements of the fund for the year ended 30 June 2012 was conducted in accordance with International Standards on Auditing and in our report dated 31 October 2012 we expressed an unmodified opinion on the financial statements that they were prepared, in all material respects, in accordance with the Regulatory Reporting Requirements for Retirement Funds in South Africa. The BoardofTrustees'ResponsibilityfortheSchedule The BoardofTrusteesis responsible forthepreparation ofthe Scheduleinaccordance with theRegulatory ReportingRequirements forRetirementFundsinSouthAfricaandin compliancewiththeRegulation,and forsuchinternalcontrolasthe BoardofTrustees determinesisnecessary toenablethepreparationoftheSchedulethatis free from material misstatements,whether due tofraud orerror. Auditor’s Responsibility Our responsibility is to express an opinion on Schedule IB based onconducting the audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Schedule is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Schedule. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Schedule, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the Schedule 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. 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 Schedule IB ‘Assets held in compliance with Regulation 28’ of the Municipal Gratuity Fundat 30 June 2012has been prepared in all material respects in accordance with the Regulatory Reporting Requirements for Retirement Funds in South Africa and in compliance with the Regulation.

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