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10/14/11

ANNUAL REPORT 2010 2011 FINANCIAL YEAR

Dr. Jeffrey MahachiActing CEOJeffreym@nhbrc.org.za

12 October 2011

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VISION AND MISSION

VISION• To be a world class organization that ensures that homebuilders

deliver sustainable quality homes

MISSION• Regulate the home building environment• Protect consumers• Promote innovative technology and compliance• Capacitate homebuilders

Through registrations, enrolments, inspections, training and

dispute resolutions

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MOTTO• Quality is our Priority

VALUE STATEMENTS• Customer service excellence• Good corporate governance• Research and innovation• Learning and caring organization• Commitment and moral integrity• Promoting technical excellence

MOTTO AND VALUE STATEMENTS

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STRATEGY AND COMMITMENT

STRATEGY• To improve visibility and accessibility in the market while enhancing

interaction with our stakeholders• To position the NHBRC as a leader in knowledge creation, technical

and technological building solutions through strategic partnerships• To provide diversified services and products in line with changing

building requirements and needs.

COMMITMENT• Serving you is our business

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PRODUCTS OFFERED The NHBRC offers the following Valuable Final Products:• Registration of homebuilders• Renewals of registration of homebuilders• Enrolment of homes• Late enrolment of homes• Inspections of homes for Subsidy and Non-Subsidy• Resolutions of Complaints• Remedial works• Conciliations between a homeowner and homebuilder• Suspensions and de-registrations of homebuilders• Training of homebuilders

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PERFORMANCE OF VFP

VFP 2009/10 2010/11 VARIANCE

Registration 3,616 11,115 207%

Renewal of registration 10,366 3,650 (65%)

Enrolment 26,903 31,458 17%

Late Enrolment 2,130 966 (55%)

Complaints 1,186 937 (21%)

Conciliations 374 536 43%

Homes inspected 76,337 15,631 (80%)6Page 6

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PERFORMANCE OF VFP

VFP

2009/10 2010/11 VARIANCE

Remedial works R13,400,000 R22,000,000 64%

Suspended homebuilders 452 512 13%

Project Enrolment 24,564 25,090 2%

Home Enrolment 41,616 49,929 20%

Training of homebuilders 7,555 1505 (80%)

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ACHIEVEMENTS OF THE NHBRC

Ensuring compliance to norms, standards and quality within the sector.

Assisting the public and private sector in improving programme and project management through training and skills transfer.

Assisting the state in the implementation of the rectification programme.

Improving the capacity of government to monitor and oversee human settlements development programmes and projects.

Assisting the Department in the improvement of governance and performance in the sector.

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ACHIEVEMENTS OF THE NHBRC cont…

Building and developing appropriate capacity at the provincial and municipal spheres to undertake human settlements development capacity for compliance and monitoring

Protection of the interests of the public within the human settlements sector.

The NHBRC has conducted assessments for rectification in KZN and Eastern Cape.

Assisting government in the development of appropriate norms and standards in the provision of services, infrastructure and housing.

The development of appropriate policy and legislative frameworks in ensuring compliance to norms and standards in human settlements development and protection of all stakeholders from poor workmanship.

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ACHIEVEMENTS OF THE NHBRC cont…

Improving coordination and cooperation with the Department, Provinces and Municipalities in monitoring, compliance and adherence to the norms and standards set for development.

Setting up Quality Assurance Systems in the Provinces and Municipalities

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Annual report ‘10/’11

FINANCE

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Value of plans passed declined by 5,1 % year on year to March 2011. (Statistics S.A.)

Recovery of residential home building market remains under pressure. Existing home cheaper than newly constructed home by 18%. (Absa

Property) Prospective Homeowners compliance with Financial Institutions lending

criteria. Decline in subsidy project enrolments.

Economic Analysis 2010/2011

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Financial Highlights 2010/11 Year-on-year comparison

Revenue Impact

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Premium Income 7,8% Fee and Technical income 9,7%Total income 0,07% (R326K)

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Premium Income

Total Premium IncomeTechnical Provisions

(20,3%)

(R 6,3 million)

Revenue

R 32,1 millionPremium Written

R 25,8 million7,8%+ 10,7%

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Fees and Technical Services year on year

Subsidy Project Enrolment Fees (20,3%) (R 20,3 million)

Technical Services 29,8% R 13,4 Million

Registration & Annual Fees 19,3% R 2,1 Million

Total including other (9,7 %) (R 9,2 Million)

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Investment Income

Interest earned -15.3% R 203 MillionRealised profit on available-for-sale investments +12,02% R 126,5 MillionTotal income from investments+ 32% R 329 MillionFund Manager costs -7% R 0,6 Million

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Investment Income, Premium and Fees R’ million

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Insurance Claims and loss adjustment 39,4 % R 11,5 million (R 7,5 million)

Operating 22,9 % R 86,7 million (R 25,7 million)

Asset Management 7,0 % R 8,7 million (R 0,6 million)

Administration 2,9 % R 330,6 million (R 9,9 million)

Financial Highlights 2010/11 Year-on-year Expenditure Impact

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Surplus for the year R’ million

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STATEMENT OF FINANCIAL PERFORMANCE

Restated

2011 2010

R R

Insurance premium revenue 356,560,296 330,713,305

Fee revenue 27,258,672 49,945,237

Technical services revenue 58,594,235 45,153,093

Investment income 203,122,057 239,914,989

Realised profit on sale of available-for-sale investments 126,472,192 9,711,932

Other income 881,299 17,156,326 Net income 772,888,751 692,594,882

Insurance claims and loss adjustment expenses 11,542,190 19,048,250

Operating expenses 86,742,492 112,470,022

Administration expenses 330,631,250 340,561,898

Asset management services 8,768,668 9,426,212

Expenses 437,684,600 481,506,382

Results from operating activities 335,204,151 211,088,500

Finance costs 255 8,785 Surplus for the year 335,203,896 211,079,715

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Actual Performance excluding Technical Provisions2011 Restated

2010

R R

Insurance premium revenue 331 933 736 299 798 722

Fee revenue 27 258 672 49 945 237

Technical services revenue 58 594 235 45 153 093

Other income 881 299 17 156 326

Net income 418 667 932 412 053 378

Insurance claims & loss adjustment expenses - -

Operating expenses 86 742 492 112 470 022

Administration expenses 330 631 250 340 561 898

Expenses 417 373 742 453 031 920

Finance costs 255 8 7 85

Results from operating activities 1 293 935 -40 987 327

Investment Income 329 594 249 249 626 921

Realised profit on sale of available-for-sale investments 126 472 192 9 711 932

Investment income 203 122 057 239 914 989

Investment Expenditure 8 768 668 9 426 212

Asset management services 320 825 582 240 200 709

Net investment income

Surplus for the year 322 119 516 19 213 382

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Reconciliation of Budgeted Surplus to Actual Surplus

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Net surplus per approved budget 95 814 348

Adjusted for

Movement in provisions and reserves (18 846 702)

Revenue (Increase) 80 025 406

Expenditure (Savings) 88 259 802

Realised profit on sale of financial assets 126 472 192

interest received (Decrease) (36 521 150)

Net Surplus per the statement of financial performance 335 203 896

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Claims R’ million

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Unearned Premium and Unexpired Provision R’ million

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Unearned Premium and Unexpired Provision R’ million

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Statement of Financial Position - Assets

Restated

2011 2010

R R

ASSETSNon-current assets

Property, plant and equipment 35 958 079 37 875 184 Intangible assets 22 552 514 33 906 332 Investments 1 252 132 156 1 775 427 363

1 310 642 749 1 847 208 879

Current assets

Investments 1 866 709 556 1 159 471 942 Inventories 120 264 99 215 Trade and other receivables 9 155 280 51 211 808 Cash and cash equivalents 354 256 747 30 665 352

2 230 241 847 1 241 448 317 TOTAL ASSETS 3 540 884 596 3 088 657 196

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Statement of Financial Position - Liabilities

EQUITY AND LIABILITIESEquity

Accumulated surplus 2 381 477 402 2 038 968 994 Emerging contractor reserve 36 721 269 44 025 781 Non-distributable reserve 5 647 629 61 984 292

2 423 846 300 2 144 979 067

LIABILITIESNon-current liabilities

Provision for outstanding claims 39 234 521 50 799 602 Provision for unearned premium 115 448 951 176 703 943 Provision for unexpired risk 422 685 227 319 894 396

577 368 699 547 397 941

Current liabilities

Trade and other payables 328 030 526 120 619 882 Provisions 1 368 898 65 000 Provision for outstanding claims 22 643 723 21 806 447 Provision for unearned premium 187 626 450 253 788 859

539 669 597 396 280 188 Total equity and liabilities 3 540 884 596 3 088 657 196

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Statement of Changes in net assets

Accumulated surplus

Emerging contractor

reserve

Non-distributable

reserve Total

R R R R

Balance at 31 March 2009 restated 1,831,009,300 40,905,760 63,029,144 1,934,944,204 Surplus for the year - restated (note 28) 211,079,715 - - 211,079,715 Transfer to reserve (note 8) (35,950,800) 35,950,800 - -

Reserve utilised (note 18) 32,830,779 (32,830,779) - -

Loss on available for sale investments taken to equity (note 4) - - (1,044,852) (1,044,852) Balance at 31 March 2010 restated 2,038,968,994 44,025,781 61,984,292 2,144,979,067 Surplus for the year 335,203,896 - - 335,203,896 Reserve utilised (note 18) 7,304,512 (7,304,512) - -

Gain on available for sale investments taken to equity (note 4) - - 70,135,529 70,135,529

Realised profit on sale of available-for-sale investments (note 4) - - (126,472,192) (126,472,192)Balance at 31 March 2011 2,381,477,402 36,721,269 5,647,629 2,423,846,300

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Financial Notes

Provision for Government debt R 29,8 million Technical provisions

– Short Term R 210,3 million– Long Term R 577,4 million

Income Receive in advance R 222,0 million Available for sale investments R 3,1 billion Vat deregistration – Contingent liability not

substantiated.

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Actuarial Report at March 2011

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Technical Provisions as at 31 March 2011

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Enrolment Fee Adequacy

All Houses Non-Subsidy Subsidy Utilisation Amount % Amount % Amount % Enrolments & inspections 3 435 78% 6 714 77% 1 270 84% Complaints conciliations 340 8% 469 5% 255 17% Remedial claims 75 2% 142 2% 31 2%

average 43 81 17 99.5% variation margin 32 61 13

Total Expenses & Claims 3 850 88% 7 325 84% 1 555 103% Average fee per enrolment 4 398 8 765 1 515 Surplus/(Deficit) 548.15 12% 1 439.64 16% (40.44) -2.7%

Prior year: (370.22) -9% (682.15) -8% (171.90) -12%

Enrolment fee adequacy for 2011

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Solvency of Warranty FundNHBRC Solvency Position

Mar-11 Mar-10

Assets 3 120 105 356 2 934 899 305

Equity Portfolio 325 605 366 -

Bond Portfolio 719 454 865 -

Money Market Portfolio 1 618 631 962 -

Structured Products Portfolio 454 289 004 -

Cash (Settlements Account) 2 124 159 -

Fixed Interest Portfolio - 2 251 282 808

Absolute Funds - 683 616 499

Provisions 787 638 872 822 993 247

Unearned Premium Provision 303 075 401 430 492 802

Outstanding Claims Provision 61 878 244 72 606 049

AverageMargin (99,5%)

54 909 5486 968 696

64 167 0738 438 977

Additional Unexpired Risk Provision 422 685 227 319 894 396

Actuarial Surplus 2 332 466 484 2 111 906 058

Surplus as % of Provisions 296% 257%

Table on left: NHBRC Solvency: The Actuarial Surplus has increased by 10.4% which is in line with declining provisions and increasing assets. The Surplus as a % of Provision has increased over the year.

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Conclusion on the Solvency

The results of the actuarial valuation indicates that the NHBRC as a whole, including both subsidy and non-subsidy houses, is solvent and in sound financial position as at 31 March 2011.

The actuarial liabilities are 396% funded.

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Interest Rate Sensitivity Analysis by 1%

Movement of (± 1 %)

R’ million

Cash ± 18,7 m

Bonds ± 6,2 m

Inflation linked Bonds ± 6,1 m

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THE ENDTHANK YOU

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