audited financial statements for the 9 month period … review (including...financial results the...

AMBER HOUSE FUND 2 (RF) LIMITED(Registration Number 2012/065316/06)(Previously "K2012/065316/07 (South Africa) Proprietary Limited")

AUDITED FINANCIAL STATEMENTSfor the 9 month period ended 31 December 2012

Preparer: F MacnamaraDesignation: Finance Manager

AMBER HOUSE FUND 2 (RF) LIMITEDAUDITED FINANCIAL STATEMENTSfor the 9 month period ended 31 December 2012

CONTENTS PAGE

Responsibility for and approval of the audited financial statements 1

Report of the audit, risk and compliance committee 2

Independent auditor's report 3 - 4

Report of the directors 5 - 7

Statement of financial position 8

Statement of comprehensive income 9

Statement of changes in equity 10

Statement of cash flows 11

Notes to the audited financial statements 12 - 30

CERTIFICATION BY COMPANY SECRETARY

______________________Ursula ScheiCompany Secretary29 March 2013

In terms of S88(2)(e) of the Companies Act of South Africa, I certify that the company has lodged withthe Registrar of Companies all such returns and notices as are required by a public company in terms ofthe Act and that all such returns are true, correct and up to date.

1

AMBER HOUSE FUND 2 (RF) LIMITEDRESPONSIBILITY FOR AND APPROVAL OF THE AUDITED FINANCIAL STATEMENTSfor the 9 month period ended 31 December 2012

Responsibility for the audited financial statements

The directors of the company are responsible for the maintenance of adequate accounting records and thepreparation and integrity of the financial statements and related information. The financial statements havebeen prepared in accordance with International Financial Reporting Standards and the requirements of theCompanies Act of South Africa. The company's independent external auditors, Deloitte & Touche, haveaudited the financial statements and their audit report appears on pages 3 to 4.

The directors are also responsible for the systems of internal control. These controls are designed to providereasonable, but not absolute, assurance as to the reliability of the financial statements, and to adequatelysafeguard, verify and maintain accountability for assets, to record all liabilities, and to prevent and detectmaterial misstatement and loss. The systems are implemented and monitored by suitably trained personnelwith an appropriate segregation of authority and duties. Nothing has come to the attention of the directors toindicate that any material breakdown in the functioning of these controls, procedures and systems hasoccurred during the period under review.

The financial statements are prepared on a going concern basis. Nothing has come to the attention of thedirectors to indicate that the company will not remain a going concern for the foreseeable future.

The directors endorse the Code of Governance Principles set out in the King III Report ("the code"). Bysupporting the code, the directors recognise the need to conduct the affairs of the company with integrity andaccountability.

The company is an insolvency remote entity operating in accordance with the requirements of transactiondocuments, with no employees and no administrative infrastructure of its own. Many of the requirements ofthe code are therefore not directly applicable. The company's affairs are managed, in terms of the ServicingAgreement, by SA Home Loans Proprietary Limited. Accordingly, compliance with the applicable sectionsof the code is undertaken by SA Home Loans Proprietary Limited and is disclosed in the consolidatedfinancial statements of its holding company SAHL Investment Holdings Proprietary Limited, including thegovernance principles that have not been applied and the reasons for non-application.

Approval of the audited financial statements

The financial statements set out on pages 5 to 30 were approved by the board of directors on 28 March 2013and are signed on its behalf by:

___________________DH LawranceDirector

___________________DP TowersDirector

2

AMBER HOUSE FUND 2 (RF) LIMITEDANNUAL FINANCIAL STATEMENTSfor the 9 month period ended 31 December 2012

Member Appointed ResignedRC Reddy (Chairman) 8 August 2012 -DH Lawrance 18 May 2012 -DP Towers 18 May 2012 -L McCarthy 18 May 2012 -K Mafora 18 May 2012 30 June 2012

__________________________

RC Reddy

Chairman

28 March 2013

The audit committee has reviewed the accounting policies and the financial statements of the companyand is satisfied that they are appropriate and comply with International Financial Reporting Standards.

Report of the Audit, Risk and Compliance Committee

The Audit, Risk and Compliance Committee "ARC Committee" is a sub-committee of the board ofdirectors of the company. The ARC Committee will perform the functions required of an audit committeein terms of section 94(2) of the Companies Act 2008.

The primary function of the ARC Committee will be to assist the board of directors in overseeing thatmanagement maintain adequate systems of internal control and the integrity of the financial statements ofall companies in the group and processes to ensure compliance by the group with all applicable legal andregulatory requirements and group policy. In addition, the ARC Committee will maintain an effective,open avenue of communication between the independent auditors, senior management and the board ofdirectors.

No meetings were held during the year, with the first meeting scheduled for March 2013. The members ofthe ARC Committee at year-end and to the date of this report were:

The ARC Committee has received reports and representations from management and external auditors,and has satisfied itself that there has been no material breakdown in controls during the year.

The ARC Committee has satisfied itself that the external auditor was independent of the company, as setout in section 94(8) of the Companies Act, 2008. Requisite assurance was sought and provided by theauditor that internal governance processes within the audit firm support and demonstrate its claim toindependence.

3

INDEPENDENT AUDITOR'S REPORTTO THE SHAREHOLDERS OF AMBER HOUSE FUND 2 (RF) LIMITED

We have audited the financial statements of Amber House Fund 2 (RF) Limited which comprise the statementof financial position as at 31 December 2012, and the statements of comprehensive income, changes in equityand cash flows for the period then ended, and a summary of significant accounting policies and otherexplanatory notes, as set out on pages 5 to 30.

Directors' Responsibility for the Financial Statements

The company’s directors are responsible for the preparation and fair presentation of these financial statementsin accordance with International Financial Reporting Standards and the requirements of the Companies Act ofSouth Africa, and for such internal control as the directors determine is necessary to enable the preparation offinancial 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 ouraudit in accordance with International Standards on Auditing. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgement, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

4

Opinion

Deloitte & Touche Registered Auditor

Per: Kumeshnee SinghPartner 28 March 2013

Deloitte & Touche PO Box 243

Registered Auditors Durban

2 Pencarrow Crescent 4000

Pencarrow Park Tel: +27 (0)31 560 7000

La Lucia Ridge Office Estate Fax: +27 (0)31 560 7194

La Lucia

4051

In our opinion, the financial statements present fairly, in all material respects, the financial position ofAmber House Fund 2 (RF) Limited at 31 December 2012, and its financial performance and cash flowsfor the period then ended in accordance with International Financial Reporting Standards and therequirements of the Companies Act of South Africa.

As part of our audit of the financial statements for the period ended 31 December 2012, we have read theReport of the Directors, for the purpose of identifying whether there are material inconsistencies betweenit and the audited financial statements.

The Report of the Directors is the responsibility of the preparer. Based on reading the Report of theDirectors we have not identified material inconsistencies between it and the audited financial statements.However, we have not audited the Report of the Directors and accordingly do not express an opinion on it.

Other reports required by the Companies Act

5

AMBER HOUSE FUND 2 (RF) LIMITEDREPORT OF THE DIRECTORSfor the 9 month period ended 31 December 2012

The directors have pleasure in presenting their report on the activities of the company for the period ended 31 December 2012.

General

The company was incorporated on 5 April 2012 as K2012/065316/07 (South Africa) Proprietary Limited. On21 August 2012, the company name was changed to Amber House Fund 2 (RF) Limited.

During the current year R800 million mortgage-backed securities were issued and mortgage assets valued atR800 million were purchased from The Thekwini Warehousing Conduit Proprietary Limited by the company.

Of the total mortgage-backed securities issued, 91.0% comprised class A mortgage-backed securities withAaa.za (Moody's) ratings, 4.4% class B mortgage-backed securities with A3.za (Moody's) ratings, and 4.6%class C mortgage-backed securities with Ba2.za (Moody's) ratings.

Nature of activities

The housing of a pool of home loans and issuance of secured floating rate notes funded through thesecuritisation process.

Financial results

The financial results of the company are set out in the attached financial statements and accompanying notes.

Interest of directors and officers

DP Towers is an employee of Maitland Group South Africa Limited. Maitland Trustees Proprietary Limitedis a subsidiary of Maitland Group South Africa Limited, and is the Trustee of the Amber House Fund 2Owner Trust and the Amber House Fund 2 Security SPV Owner Trust.

RC Reddy was during the financial year a member of the SAHL Investment Holdings Proprietary LimitedAudit, Risk and Compliance Committee ("the ARCC") and an employee of JP Morgan Chase Bank, N.A.,(Johannesburg branch). Amber House Fund 2 (RF) Limited is a controlled entity of SAHL InvestmentHoldings Proprietary Limited, whose substantial shareholders include JP Morgan International ConsumerHolding Inc. JP Morgan International Consumer Holding Inc is a wholly-owned subsidiary of JP MorganChase & Co., of which JP Morgan Chase Bank, N.A., (Johannesburg branch) is an international branch.

There are no other interests in contracts.

Directors' remuneration

Directors' fees amounting to R8 500 in favour of DH Lawrance were incurred during the period.

Authorised and issued share capital

Details of the authorised and issued share capital of the company appear in Note 5 to the financial statements.

6

AMBER HOUSE FUND 2 (RF) LIMITEDREPORT OF THE DIRECTORS (continued)for the 9 month period ended 31 December 2012

Controlled entities

The directors of the company during the period and to the date of this report were as follows:

Non executive Appointed Resigned

RI Kelso 28 March 2012 11 July 2012DH Lawrance 11 July 2012 -RC Reddy 11 July 2012 -DP Towers 11 July 2012 -

UL Schei 5 April 2012 -

In terms of SIC 12, Consolidations - Special Purpose Entities ("SPEs"), where a company, in substance, hasthe rights to obtain the residual benefits of the activities of an SPE and is exposed to the majority of therisks incident to the activities of the SPE, the SPE is a controlled entity and the enterprise shouldconsolidate the SPE. Amber House Fund 2 (RF) Limited is a controlled entity of SAHL InvestmentHoldings Proprietary Limited, and is consolidated in the SAHL Investment Holdings Proprietary LimitedGroup annual financial statements.

The Standard Bank of South Africa Limited

Dividends

Directors

Secretary

Events after the reporting date

There have been no material events after the reporting date that require adjustment to, or disclosure in thefinancial statements.

No preference dividends were paid during the period.

Deloitte & Touche

Auditor

Standby servicer:

Service providers

SA Home Loans Proprietary Limited

Servicer:

7

AMBER HOUSE FUND 2 (RF) LIMITEDREPORT OF THE DIRECTORS (continued)for the 9 month period ended 31 December 2012

Registered office and business address

No. 1 The Glades78 Armstrong AvenueLa Lucia Durban4051

Postal address

P O Box 3918Durban 4000

Country of incorporation

Amber House Fund 2 (RF) Limited is incorporated in the Republic of South Africa.

8

AMBER HOUSE FUND 2 (RF) LIMITEDSTATEMENT OF FINANCIAL POSITIONat 31 December 2012

31 December Notes 2012

R'000 ASSETSMortgage advances 2 799 488 Accounts receivable 3 104 Bank and call accounts 4 42 927

Total assets 842 519

EQUITY AND LIABILITIESCapital and reserves - Share capital 5 - Retained earnings -

LiabilitiesMortgage-backed securities 6 810 995 Start-Up loan 7 30 163 Derivative financial liabilities 8 326 Accounts payable 9 963 Accruals and provisions 10 72

Total equity and liabilities 842 519

9

AMBER HOUSE FUND 2 (RF) LIMITEDSTATEMENT OF COMPREHENSIVE INCOMEfor the 9 month period ended 31 December 2012

9 months ended 31 December

Notes 2012 R'000

Interest income 11 12 972

Interest expense 12 (12 272)

Net interest income 700

Other income 181

Net loss on financial instruments 13 -

881

Other expenses 14 (881)

Profit before taxation -

Taxation -

Profit for the period -

Other comprehensive income net of taxation -

Total comprehensive income for the period -

10

AMBER HOUSE FUND 2 (RF) LIMITEDSTATEMENT OF CHANGES IN EQUITYfor the 9 month period ended 31 December 2012

Sharecapital

Retained earnings

Total

R'000 R'000 R'000

Total comprehensive income for the period - - - Balance at 31 December 2012 - - -

11

AMBER HOUSE FUND 2 (RF) LIMITEDSTATEMENT OF CASH FLOWSfor the 9 month period ended 31 December 2012


Notes 2012 R'000

OPERATING ACTIVITIES

Cash generated from operations 15.1 12 527 Net mortgages acquired 2 (800 000) Net cash flows used in operations (787 473)

FINANCING ACTIVITIESMortgage backed securities issued 6 800 000 Start-Up loan issued 7 30 400 Net cash from financing activities 830 400

Increase in cash and cash equivalents 42 927 Cash and cash equivalents at the beginning of the period - Cash and cash equivalents at the end of the period 4 42 927

12

AMBER HOUSE FUND 2 (RF) LIMITEDNOTES TO THE AUDITED ANNUAL FINANCIAL STATEMENTSfor the 9 month period ended 31 December 2012

1. ACCOUNTING POLICIES

1.1

1.2 Adoption of new and revised standards

IFRS 7 Amendments to IFRS 7: Offsetting Financial Assets and Financial Liabilities -Applicable to annual periods beginning on or after 1 January 2013

IFRS 9 Financial Instruments - Applies to annual periods beginning on or after 1 January 2015

IFRS 13 Fair Value Measurement - Applicable to annual reporting periods beginning on or after1 January 2013

IAS 32 Amendments to IAS 32: Offsetting Financial Assets and Financial Liabilities -Applicable to annual periods beginning on or after 1 January 2014

1.3 Financial instruments

RecognitionFinancial assets and financial liabilities are recognised on the statement of financial position whenthe company becomes a party to the contractual provisions of the instruments.

The company has not adopted any new or amended IFRS requirements as of 1 January 2012, whichhas had an effect on the company’s financial statements.

At the date of authorisation of these financial statements, the following Standards andInterpretations which may have an impact on the company were in issue but not yet effective andhave not yet been adopted:

Management is in the process of assessing the impact of the new and revised standards.

Basis of presentation

The financial statements have been prepared in accordance with and comply with InternationalFinancial Reporting Standards ("IFRS") and the requirements of the Companies Act of SouthAfrica, and in accordance with the going concern principle under the historical cost basis, asmodified by the revaluation of financial instruments.

The significant accounting policies are set out below.

All monetary information and figures presented in these financial statements are stated in SouthAfrican rands rounded to the nearest thousand rand unless otherwise indicated.

13

AMBER HOUSE FUND 2 (RF) LIMITEDNOTES TO THE AUDITED ANNUAL FINANCIAL STATEMENTS (continued)for the 9 month period ended 31 December 2012

1. ACCOUNTING POLICIES (continued)

1.3

(i) acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

(ii) part of a portfolio of identified financial instruments that are managed together and for whichthere is evidence of a recent actual pattern of short-term profit-taking; or

(iii) a derivative that is not designated and effective as a hedging instrument.

(i) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different basis; or

(ii) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

(iii) it forms part of a contract containing one or more embedded derivatives and IAS 39 permits the entire combined contract (asset or liability) to be designated as held at fair value through profit or loss.

A financial asset or financial liability is classified as held for trading if it is:

A financial asset or liability, other than a financial asset or liability held for trading may be designated as held at fair value through profit or loss upon initial recognition if:

Financial assets or liabilities held at fair value are stated at fair value, with any resultant gain or loss recognised in the profit or loss. Fair value is determined with reference to quoted market prices or market related interest yield curves for the reporting period.

1.3.1 Mortgage advances

Mortgage advances are classified as loans and receivables. They are reflected at amortised cost andwritten down to their recoverable amount with the asset being reviewed for impairment at eachfinancial reporting date.

Financial instruments (continued)

MeasurementFinancial instruments are initially measured at fair value, including directly attributable transactioncosts, with the exception of financial instruments classified as held at fair value though profit andloss in respect of which transaction costs are recognised in the statement of comprehensive incomeimmediately. Subsequent to initial recognition these instruments are measured as set out below:

Financial assets or liabilities carried at amortised cost are measured at the amount on initialrecognition, net of any principal repayments and cumulative amortisation using the effective interestrate method (if applicable), and net of any write-down for impairment.Financial assets and financial liabilities are stated as held at fair value through profit or loss wherethe financial asset or liability is held for trading or designated as held at fair value through profit orloss.

14


1.

1.3 Financial instruments (continued)

1.3.3. Derivative financial instruments

The fair value of non-traded derivatives is based on discounted cash flow models. The companyrecognises derivatives as assets when the fair value is positive, and as liabilities when the fair value isnegative. Gains and losses arising from changes in fair value are included in profit or loss for theyear.

1.3.4. Receivables and accounts payable

Receivables and accounts payable are short-term in nature and are held at amortised cost.

1.3.5. Bank and cash balances

Bank and cash balances are recorded at nominal value.

1.3.6. Start-up loan

The Start-up loan is recorded at amortised cost.

1.4 Impairment of financial assets A financial asset can only be impaired if there is objective evidence that a loss event has occurredafter the initial recognition of the financial asset but before the statement of financial position date. Inrespect of such assets an impairment is raised if the carrying amount is greater than the estimatedrecoverable amount, and at each statement of financial position date the impairment of these financialassets is assessed on the basis of the present value of expected recoveries, using the original effectiverate (fixed rate assets) or the current effective rate (variable rate assets) to perform the discounting.When a loan carried at amortised cost has been identified as impaired, the carrying amount of theasset is reduced by the impairment amount through the use of an allowance account and the amountof the impairment is recognised in the statement of comprehensive income.

After initially recognising an impairment loss, the enterprise reviews the assets for furtherimpairment at subsequent financial reporting dates. The methodology and assumptions used forestimating future cash flows are reviewed regularly to reduce any differences between loss estimatesand actual loss experience.

In respect of mortgage advances, advances that are arrears in excess of 90 days are considered todisplay objective evidence that a loss event has occurred, which results in management assessing therecoverable amount for impairment. Loan impairments are also made against current loans whereadverse economic conditions exist in respect of a borrower at the statement of financial position date,which may impact future cash flows.

ACCOUNTING POLICIES (continued)

1.3.2 Mortgage-backed securities

Variable-rate notes are classified as financial liabilities and measured at amortised cost.

15


1.

1.5 Provisions

Provisions are recognised when the company has a present obligation as a result of a pastevent which results in a probable outflow of economic benefits that can be reliablymeasured. These are recognised at an amount equal to the expected cash outflow to settlethe obligation, present valued where the expected settlement date is greater than one year.

1.6 Interest income

Interest income is accrued on a time proportion basis, by reference to the principaloutstanding, and at an interest rate which takes into account the effective yield on theasset. Interest continues to be charged and capitalised to advances in default, until suchtime as the probability of rehabilitating such advance is considered unlikely. The grossadvances balance is included in the impairment model and, if there is objective evidenceof impairment, a provision will be raised against the advance.

1.7 Interest expense

Interest expense is recognised on a time proportion basis which takes into account the effective yield on the liability.

1.8 Taxation

The taxation charge is based on the results for the period as adjusted for items which arenon-assessable or disallowed. It is calculated using taxation rates that have been enactedor substantially enacted at the statement of financial position date. Deferred taxation isaccounted for in respect of temporary differences arising from differences between thecarrying amount of assets and liabilities in the financial statements and the correspondingtaxation bases used in the computation of taxable profit. Deferred taxation liabilities aregenerally recognised for all taxable temporary differences and deferred taxation assets arerecognised to the extent that it is probable that taxable profits will be available againstwhich deductible differences can be utilised.

1.9 Cash and cash equivalents

For the purpose of the statement of cash flows, cash includes cash on hand, deposits heldon call with banks and bank overdrafts.

1.10 Retirement fund benefits

1.11 Contingencies and commitments

Transactions are classified as contingencies where the company’s obligations depend onuncertain future events. Items are classified as commitments where the company commitsitself to future transactions or if the items will result in the acquisition of assets.


The company has no employees and therefore does not provide retirement benefits.

16


1.

1.12 Segmental information

1.13 Critical judgements

Mortgage Advances -

1.14 Key sources of estimation uncertainty

* Expected recoveries are assigned at a granular level based on type of exposure, with sequestrations assigned a finalrecovery of 54% of security value (net of previous cashflows), relative to other loans worked out through a mix of privatesale and public auction to which an average recovery rate of 65% is applied.

The impairment provision is in respect of loans and is the shortfall between the present value offuture expected cash flows and the carrying value of the loan, in respect of loans expected todefault. Key assumptions used in this calculation include expected time to recovery (discountperiod) and the expected percentage of the collateral securing the loan which will be recovered,which have been estimated as follows:

The company's primary function is to provide home loans to borrowers, and the company earnsinterest income from these borrowers. Due to the nature of its operations the company is notmanaged or internally structured for management reporting purposes on a segmented basis, and asa result no segmental information has been provided.

16 - 19 54% (net) to 70%

%2012R'000

** Sensitivity is based on the effect of a change of one percentage point in the value of the estimated recovery on thevalue of the impairment

There are no assumptions or other major sources of estimation uncertainty that have a significantrisk of resulting in a material adjustment to the carrying amounts of assets and liabilities within thenext financial year.


In the application of the accounting policies, management is required to make judgements,estimates and assumptions about the carrying amounts of assets and liabilities that are not readilyapparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered to be relevant and are disclosed in the notes andpolicies where applicable (refer to notes 1.3, 1.4 and 1.5). Actual results may differ from theseestimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate is revised if the revisionaffects only that period, or in the period of the revision and future periods if the revision affectsboth current and future periods.

Expected time to recover security

Expected recoveries as a percentage of

collateral valuation*Impairment loss

sensitivity **2012

Months2012

17


2. MORTGAGE ADVANCES 31 December

2012 R'000

Amortised cost variable loans 725 429 Notional balance hedged loans 74 571 Fair value adjustment hedged item 326 Impairment provision (838) Net carrying value 799 488

Reconciliation of movement in balanceAt the beginning of the period - Net advances 800 000 Impairment provision - loans at amortised cost (838)Fair value adjustment - fixed rate advances 326 Carrying value at period end 799 488

Reconciliation of impairment provisionOpening balance - Statement of comprehensive income charge (798) Interest suspended on non performing loans (40) Closing balance (838)

The bonds and loans of Amber House Fund 2 (RF) Limited are registered in the name of The SouthAfrican Home Loans Guarantee Trust and Amber House Fund 2 (RF) Limited respectively. TheSouth African Home Loans Guarantee Trust issues guarantees under the Common Terms GuaranteeAgreement for the due and punctual payment of all sums due by each Borrower to the relevant Lenderpursuant to each Borrower's individual Home Loan Agreement. The interests and rights of AmberHouse Fund 2 (RF) Limited in each Home Loan, Home Loan Agreement, Guarantee Trust Guarantee,Insurance Contract, Insurance Proceeds and other Related Security in respect of the portfolio ofGuaranteed Home Loans, whether actual, prospective or contingent, direct or indirect, common law orstatutory, whether a claim to payment of money or to performance of any other obligation, have beenceded in full to Amber House Fund 2 Security SPV Proprietary Limited as security for the due, properand timeous payment and performance of all the obligations by Amber House Fund 2 (RF) Limited interms of the transaction documents.

There are variable rate home loans in the mortgage book. Mortgage interest rates reset quarterly on18th January, April, July and October. The rate is calculated by adding a fixed margin of between1.5% and 3.7% to the 3-month JIBAR (2012: 5.1%).

18


2. MORTGAGE ADVANCES (continued)

31 December 2012

Years % 0 - 1 4.5%

> 1 - < 5 20.4%> 5 - <10 34.3%>10 - <15 37.1%>15 - <20 3.7%

100.0%

3. ACCOUNTS RECEIVABLE

South African Revenue Services VAT 19 Sundry debtors and prepayments 85

104

Accounts receivable are short term in nature, and due within 3 months.

4. BANK AND CALL ACCOUNTS

Current bank account 3 372 Cash on call 39 555

42 927

The net carrying value (after impairment provision) reflected above is considered toapproximate fair value.

All advances have a maximum repayment period of 19 years. The maturity analysis of advancesshows the contractual maturity period of the loans due to Amber House Fund 2 (RF) Limited.

These accounts are liquid assets available on demand, with the exception of R30 400 000 whichis held as collateral in respect of the start up loan.

In addition there are home loans ("Varifix loans") with a fixed rate element (2012: R74.6m),which have an initial fixed rate, which is reassessed semi-annually and adjusted downward ifmarket rates have declined. The rate does not increase for an increase in market rates. Theseadvances are hedged by a floating notional interest rate swap, which is designated as a fair valuehedge of the interest rate risk element of the fair value of the Varifix loans (refer to Note 8). Asthe hedge is effective, the Varifix loans are fair valued for their interest rate risk element, withthe resulting profit or loss being recognised in the statement of comprehensive income.

19


31 December 2012

R'000 5. SHARE CAPITAL

Authorised1 000 Ordinary shares of R1 each 1 100 Cumulative redeemable preference shares of R1.00 each -

1

Issued100 Ordinary share of R1 - 1 Cumulative redeemable preference share of R1.00 -

-

6.

Variable rate notes at amortised cost 810 995 Carrying value at year-end 810 995

Class of NoteA 1.50%B 2.25%C 3.25%

* 0.15% of the interest margin is subordinated to senior creditors and other noteholders in terms of the priorityof payments specified in the Transaction Documentation.

The mortgage-backed securities bear interest at the 3-month Jibar plus a specified margin, with the 3-monthJibar rate resetting quarterly on the 18th of January, April, July, October. Interest is settled quarterly onthese Interest Payment Dates.

MORTGAGE-BACKED SECURITIES

The mortgage-backed securities consist of the following:

The fair value of the mortgage-backed securities (net of accrued interest) is R800 047 553. The fair valuewas calculated using the clean price at year end as per JSE Limited. The clean price was multiplied by thenotional amount of the mortgage-backed securities.

Margin over 3-month Jibar *

The 3-month JIBAR applicable to the notes in issue at year end was 5.075%.

20


6.

MOVEMENT IN MORTGAGE-BACKED SECURITIES ("MBS")

Nominal Value MBS Issued

Payment of accrued interest

Accrued Interest

Notes Outstanding

December 2012 R'000 R'000 R'000 R'000 R'000Class A 728 000 728 000 - 9 835 737 835 Class B 35 200 35 200 - 530 35 730 Class C 36 800 36 800 - 630 37 430

800 000 800 000 - 10 995 810 995

7.

In terms of the Transaction Documentation the impairment of mortgage advances is effectively set-off against the subordinated start-up loan from SAHL Investment Holdings Proprietary Limited tothe extent that there is insufficient excess spread (after payment of Noteholders and Seniorexpenses) to absorb such impairment losses when incurred.

START-UP LOAN

This loan is provided by SAHL Investment Holdings Proprietary Limited and is subordinated tocreditors, including Noteholders, in terms of the Start-up loan Agreement. Interest is calculated atJIBAR plus a fixed margin of 12% (2012: 17.075%) but limited to available excess spread eachquarter in terms of the priority of payments, and is paid quarterly in terms of the Start-up loanagreement.

At period end the company was not in breach of any of the terms of the notes.

MORTGAGE-BACKED SECURITIES (continued)

Capital repayments on advances received during the period were not used to repay the capital onnotes outstanding, but were used to purchase additional home loans to maintain the capital value ofthe portfolio of mortgage advances in accordance with the priority of payments. This is permitted,subject to the various covenants and triggers set out in the Transaction Documents, until the end ofthe Subsitution Period on 18 October 2015, whereafter such amounts will be used to redeem thenotes in accordance with the priority of payments.

The Coupon Step-Up Date for the mortgage-backed securities is 18 October 2015, on which date thecompany has an option to call and redeem all securities. The final legal maturity date of themortgage-backed securities nominal value is 25.5 years from the Coupon Step-Up Date.

21


7. 31 December

2012 R'000

MOVEMENT IN START-UP LOAN

Reserve fund - initial amount 30 400 Accrued interest for the period 561 Adjustment to Start-up loan liability (798) Balance at the end of the period 30 163

8. DERIVATIVE FINANCIAL LIABILITIES

Interest rate swap - Designated hedging instrument 326

Interest rate swap - Designated hedging instrumentBalance at the beginning of the year - Interest rate swap mark to market 326 Balance at the end of the year 326

Interest rate swap notional balance 74 571

9. ACCOUNTS PAYABLE

SA Home Loans Proprietary Limited 615 Sundry creditors 348

963 Accounts payable are settled within 3 months.

10. ACCRUALS AND PROVISIONS

Accruals for audit fees 45 Provision for loyalty bonus refund 2 Accruals for trustees' fees 25

72

START-UP LOAN (continued)

The fixed rate ("Varifix") loans are hedged by a floating notional interest rate swap,which is designated as a fair value hedge of the interest rate risk element of the fairvalue of the Varifix loans. The interest rate swap is revalued to fair value at period end,with the resulting profit or loss being recognised in the statement of comprehensiveincome.

The Start-up loan will be repaid in accordance with the Priority of Payments afterredemption of the mortgage-backed securities.

22



2012 R'000

11. INTEREST INCOMEInterest income on mortgage assets 12 590 Other 382

12 972

12. INTEREST EXPENSE

Interest on Start-up loan held at amortised cost 562 Interest on Notes held at amortised cost 10 995 Interest on interest rate swap - designated hedge instrument 711 Loyalty bonus provision 4

12 272

13. NET LOSS ON FINANCIAL INSTRUMENTS

Impairment adjustment to mortgage advances (798) Adjustment to Start-up loan liability 798 Fair value adjustment of Varifix loans 326 Fair value adjustment of interest rate swap (326)

-

14. OTHER EXPENSES

Other expenses include the following:Audit fees - statutory audit 45 Management fees 474

Details of related party transactions are provided in Note 18.

Interest suspended on non performing loans for the current year amounted to R64.

23



2012 R'000

15. CASH GENERATED FROM OPERATIONS

15.1 Profit before taxation - Adjusted for non-cash items: Impairment adjustment to mortgage advances 798 Interest suspended on non performing loans 40 Adjustment to Start-up loan liability (798)

Closing accrued interest payable - mortgage-backed securities 10 995 Closing accrued interest payable - Start-up loan 561

Cash generated before working capital changes 11 596

Working capital changes 931 Increase in accounts receivable (104) Increase in accounts payable 963 Increase in accruals and provisions 72

Cash generated from operations 12 527

16. COMMITMENTS AND CONTINGENCIES

17. CAPITAL MANAGEMENT

There are no undisclosed commitments or contingent liabilities as at year-end.

The company is a thinly capitalised special purpose entity, with only nominal share capital.Mortgage assets are fully funded by mortgage backed securities which have been issued to external investors. As such there are no further capital management objectives, policies and proceduresapplicable to the company.

Although borrowers have a right to a readvance or prepayment, the loan agreement provides aright to the lender to refuse to readvance such funds under various scenarios, including in respectof clients in arrears or with revised credit profiles.

24


18. RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial and operating decisions. The company,in the ordinary course of business, enters into various transactions with related parties. Thesetransactions occur under terms and conditions that are no more favourable than those entered intowith third parties in arms-length transactions.

SA Home Loans Proprietary Limited is a related party as Amber House Fund 2 (RF) Limited is aspecial purpose entity, used to securitise loans originated within the SA Home Loans group, and SAHome Loans Proprietary Limited is the appointed service provider of Amber House Fund 2 (RF)Limited.

The following transactions took place between SA Home Loans Proprietary Limited and AmberHouse Fund 2 (RF) Limited.

Service provider contracts

SA Home Loans Proprietary Limited is the appointed servicer and administrator of Amber HouseFund 2 (RF) Limited. The fees accrued to SA Home Loans Proprietary Limited for the periodamounted to R473 630.

Bond preparation fee

Bond preparation costs are charged by SA Home Loans Proprietary Limited to Amber House Fund 2(RF) Limited. These costs are recovered by Amber House Fund 2 (RF) Limited from clients in theform of an initiation fee. The total fee paid to SA Home Loans Proprietary Limited for the periodamounted to Rnil.

Cession of loans

The net value of loans ceded from SPE's which are associated entities of SA Home Loans ProprietaryLimited during the period amounted to R806 524 688.

Default administration fee

Default administration costs are charged by SA Home Loans Proprietary Limited to Amber HouseFund 2 (RF) Limited. These costs are recovered by Amber House Fund 2 (RF) Limited from clients.The total fee paid to SA Home Loans Proprietary Limited for the period amounted to R215.

Monthly administration fee

Monthly administration costs are charged by SA Home Loans Proprietary Limited to Amber HouseFund 2 (RF) Limited. These costs are recovered by Amber House Fund 2 (RF) Limited from clients.The total fee paid to SA Home Loans Proprietary Limited for the period amounted to R180 421.

18.1 Related party transactions with SA Home Loans Proprietary Limited

25


18. RELATED PARTY TRANSACTIONS (continued)18.2 Related party transactions with SAHL Investment Holdings Proprietary Limited

FinancingSubordinated funding (refer Note 7) has been provided by SAHL Investment Holdings Proprietary Limited.Interest expense on subordinated funding amounted to R561 553.

18.3 Related party transactions with Amber House Fund 2 Security SPV Proprietary LimitedThe rights to and interests in the Account Monies, Bank Accounts, Permitted Investments, BusinessProceeds, and Transaction Documents, whether actual, prospective or contingent, direct or indirect, commonlaw or statutory, whether a claim to payment of money or to performance of any other obligation have beenceded in full by Amber House Fund 2 (RF) Limited to Amber House Fund 2 Security SPV ProprietaryLimited as security for the due, proper and timeous payment and performance of all the obligations byAmber House Fund 2 (RF) Limited in terms of the transaction documents.

18.4 Other related party transactionsDirectors' fees amounting to R8 500 in favour of DH Lawrance were incurred during the period.

Trustees' fees amounting to R24 516 payable to Maitland Trustees Proprietary Limited, the trustee of AmberHouse Fund 2 Security SPV Owner Trust, were incurred during the period.

18.5 Key management personnelThe company has no employees, and there were no other transactions with directors during the period.

19. RISK MANAGEMENT

In common with all other businesses, the company is exposed to financial risks. These risks are managed aspart of the normal operations of the company and the Board of Directors oversees the effectiveness of riskmanagement. In addition, the duties of the Audit, Risk and Compliance Committees of the company and ofSAHL Investment Holdings Proprietary Limited encompass the activities of the company. SAHL InvestmentHoldings Proprietary Limited has a Group Risk Management ("GRM") function and a group wide riskmanagement framework. In addition various internal audit procedures on credit granting and loss controlprocesses are performed by Standard Bank Group of South Africa Limited on a monthly basis, the results ofwhich are provided to management and GRM. The more important financial risks to which the company isexposed are described below.

Credit risk

Credit risk represents the financial risk to the company as a result of a default by a counterparty. Thecompany's primary exposure to credit risk is in respect of mortgage advances to borrowers. Exposures toother counterparties are limited to intercompany balances, financial assets and short term receivables withreputable counterparties with solid credit history with the company. Bank and call accounts are held withbanks with the highest short term credit rating on national scale basis, and counterparty concentration limitsare applied.

Credit risk in respect of mortgage advances is mitigated to an extent by the asset eligibility criteria andcovenants specified in the Transaction Documents which govern the nature of loans which can be acquiredby the company at inception and thereafter.

26


19. RISK MANAGEMENT (continued)

Credit risk (continued)

Furthermore, SAHL Investment Holdings Proprietary Limited has a group credit risk framework in placewhich defines and establishes the credit risk governance structures in the Group, as well as the credit riskenvironment (including credit risk policy) and the level and nature of credit risk reporting and monitoringin place within the group.

The Board of Directors of SAHL Investment Holdings has overall responsibility for credit riskmanagement in the group, and for defining credit risk appetite and approving the credit risk strategies andcredit policies of the group which includes Amber House Fund 2 (RF) Limited. The Board has delegatedresponsibility for oversight over the management of credit risk in the group to the group credit committee,which meets four times a year, and on which members of the Board and executive management arerepresented. The responsibilities and procedural governance of this committee are stipulated and definedin the credit committee charter established by the board.

The credit policies and procedures manual defines the credit risk appetite of the group and establishes thelimits of authority that are monitored by the credit committee of SAHL Investment Holdings ProprietaryLimited. The group's fundamental principles to manage credit risk include:

- Adherence to the group's lending philosophy;- A clear definition of the group's target market;

- Appropriate credit granting criteria;- An analysis of related risks, including those associated with concentration;- Proactive and regular monitoring of existing and potential exposures once the facilities have been approved, including active rehabilitation of defaulting borrowers, and timeous foreclosure to protect protect the security; and - Active management of defaulting borrowers, with a primary focus on rehabilitation, complemented by efficient realisation of collateral in the event of continuing default, such that collateral value is protected and potential loss minimised.

The primary measures used to identify, monitor and report on the level of exposure to credit risk in thegroup are: individual loan and loan portfolio ageing and performance analysis; analysis of impairmentadequacy ratios; analysis of loss ratio trends; and analysis of loan portfolio profitability.

The company's maximum exposure to credit risk in respect of mortgage loans is the balance ofoutstanding advances, before taking into account the value of collateral held as security against suchexposures and impairments raised (2012: R0.800bn). The collateral held as security for the mortgageasset exposures is in the form of first indemnity bonds over fixed residential property. An analysis of theexposure to and ageing of the mortgage assets exposure is presented below:

Credit risk measurement:

- A qualitative and quantitative assessment of the creditworthiness of the group's counterparties and security;

27


19.

Credit risk (continued)

Position at 31 December 2012Total < 30 days 30 - 60 days

past due60 - 90 days

past due> 90 days past due

R'000 R'000 R'000 R'000 R'000 Total mortgage assets 800 000 799 442 558 - - Value of collateral* 1 899 198 1 898 178 1 020 - - Loan to value 49.47% 49.47% 56.91% - -

Value of mortgage assets - unimpaired 799 725 799 167 558 - - Value of collateral* 1 898 798 1 897 778 1 020 - - Impairment provision raised 798 797 1 - -

Value of mortgage assets - impaired 275 275 - - - Value of collateral* 400 400 - - - Impairment provision raised 40 40 - - -

Geographic concentration of mortgage advances

The mortgage advances of the company are shown per province.

31 December 2012

Region Percentage

Eastern Cape 8.90%Free State 3.70%Gauteng 39.80%KwaZulu Natal 18.80%Limpopo 1.60%Mpumalanga 6.10%North West 2.50%Northern Cape 0.80%Western Cape 17.80%

100.00%

* The value of collateral is based on the latest current valuation.

RISK MANAGEMENT (continued)

In line with the conservative credit lending policy applied by the company, particularly with respect to thestringent loan-to-value and payment-to-income thresholds applied, the credit quality of the mortgage assets isconsidered to be sound.

28


19.

Liquidity risk

Maturity analysis (undiscounted) 2012Financial Liability <1 year 1 – 5 years >5 years TOTAL

Mortgage-backed securities 53 508 907 016 - 960 524 Start-up loan 5 191 40 782 - 45 973 Accounts payable and accruals 1 035 - - 1 035

Structural requirements

Interest rate risk


Liquidity risk is the risk that the company may have insufficient cash to meet its financial obligations,more specifically in the short-term. Cash flows are monitored on a weekly basis to ensure that cashresources are adequate to meet the necessary operational requirements. The liquidity risk related to thefunding of the mortgage assets is mitigated by the fact that the legal term of the structure, and legalmaturity of the mortgage backed securities exceed the maturity of the mortgage assets. The maturity ofderivative assets matches the maturity of the derivative liabilities resulting in no liquidity risk. Thecompany has a commited liquidity facility with The Standard Bank of South Africa Limited to fund certaincertain payments as defined in the Transaction Documents in the event of a shortfall of funds.

Defaults and breaches on loans payableThere have been no defaults or breaches on loans payable (i.e.debt securities and subordinated loans).

The contractual cash flow settlement dates of financial liabilities have been more fully disclosed in therelated notes.

The maturity analysis for financial liabilities represents the basis for effective management of exposure tostructural liquidity risk. The table above shows the undiscounted cash flows for all financial liabilities on acontractual basis based on the earliest date on which the company has the option to pay in respect ofmortgage-backed securities this is based on the Coupon-Step Up Date. This basis of disclosure differsfrom the statement of financial position carrying value of financial liabilities since those values aretypically disclosed on a discounted basis.

Interest rate risk will occur when the interest rates paid to Noteholders and the yields earned fromadvances change at different speeds through time with varying degrees of certainty.

The company’s exposure to interest rate risk is negligible as both advances and floating rate Noteholders'liabilities are priced off the 3-month JIBAR rate on the 18th day of each quarter (viz. January, April, Julyand October).

29


19.

Interest rate risk (continued)

Interest rate gap analysis

Position at 31 December 2012 Total Overnight 1 Month 2 Month 3 MonthMortgage assets 800 000 - 800 000 - - Bank and call accounts 42 927 12 527 30 400 - - Funding liability (incl Start-up loan) (841 395) - (841 395) - - Mismatch 1 532 12 527 (10 995) - - Impact of 1% rate change - profit &loss/equity (pretax) 6 6 - - -

Operational risk

Fair value measurement recognised in the statement of financial position


Operational risk is the risk of direct or indirect losses arising from inadequate or failed internalprocesses, employees and technology, and from external events.

Primary responsibility for operational risk is outsourced in terms of the Servicing Agreement to SAHome Loans Proprietary Limited. Amber House Fund 2 (RF) Limited directors and Security Trusteeare responsible for monitoring the performance of the Servicer.

- lack of understanding by key staff.

Interest rate reset date

Operational risk is the risk that internal practices, policies and systems are not rigorous or sophisticatedenough to cope with adverse external market events or human or technical errors.These include: - error, negligence or fraud;

The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Level 1 to 3 based on the degree to which the fair value isobservable: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in activemarkets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputsother than quoted prices included within Level 1 that are observable for the asset or liability, eitherdirectly (i.e. prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements arethose derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

- failure to correctly measure or report risk;

It is the responsibility of management and the Audit, Risk and Compliance Committees of the companyand of SAHL Investment Holdings Proprietary Limited to assess operational procedures and controlsand to ensure the adequacy thereof.

- lack of controls to prevent unauthorised or inappropriate transactions being made; and

One of the core objectives of the company is to establish and instil a culture of control, compliance andrisk consciousness appropriate to its business.

30


19. RISK MANAGEMENT (continued)

Fair value measurement recognised in the statement of financial position (continued)

Level 1 Level 2 Level 3 TotalR'000 R'000 R'000 R'000

Financial assets at fair value through profit or lossDerivative financial asset - - - - Financial assets designated at fair value through - - - - profit or lossTotal - - - - Financial liabilities at fair value through profit orlossDerivative financial liabilities - - 326 326 Financial liabilities designated at fair value through - - - - profit or lossTotal - - 326 326

Reconciliation of level 3 derivative financial instruments

2012Balance at the beginning of the year - - Fair value adjustment - 326 Balance at the end of the year - 326

31 December 2012

There were no transfers between the levels in the year. The movement in the level 3 derivative financial instrumentis equal to the fair value adjustment recognised in the statement of comprehensive income during the year. Refer tonote 8.

Varifix asset

Varifix liability