Statutory Actuarial Valuation Report: PICBEL Groepvoorsorgfonds

Statutory Actuarial Valuation
PICBEL Groepvoorsorgfonds
Produced: October 2005 and revised October 2010 By: A Lester B.Sc., F.I.A. Actuarial valuation report as at 1 July 2004

Table of Contents

1. Introduction .......................................................................................................... 3
2. Membership data ................................................................................................. 5
3. Funding method and valuation assumptions ........................................................ 6
4. Market value of assets ......................................................................................... 7
5. Minimum benefits and statutory liabilities ............................................................. 9
6. Contingency reserves ........................................................................................ 13
7. Results ............................................................................................................... 15
8. Appropriateness of investment strategy ............................................................. 17
9. Summary and conclusion ................................................................................... 18
10. Annexure I – Consolidated Income Statement ................................................... 19
11. Annexure II – Summary of benefit structure ....................................................... 20

EXECUTIVE SUMMARY
Purpose of report
The purpose of this valuation is to assess the overall solvency of the PICBEL Groepvoorsorgfonds (hereafter “the Fund”) by considering:
(i) the extent to which the value of the assets of the Fund is sufficient to meet the value of the liabilities in respect of pensionable service completed prior to the valuation date; and (ii) the extent to which the total contributions support the current benefit structure of the Fund. This report is addressed to the Liquidator of the Fund. Membership summary Notable features of the membership data are:
(i) The Fund has 63 pensioners in receipt of a pension as at 1 July 2004 and there were 18 paid-up members. (ii) There were some former members with unclaimed benefits. Summary of results The financial position of the Fund is shown below at the previous and current valuation dates:
Item 1 July 2001
R’000
1 July 2004
R’000
Member liabilities 3 702 694
Pensioner liabilities - 8 403
Provision for future full CPI increases for pensioners* - 2 050 Contingency reserves Surplus apportionment, ongoing and termination expense reserve - 16 964 Total liabilities 3 702 28 111 Market value of Fund assets 10 232 12 777 Amounts recovered from third parties - 41 090 Pensioner annuity policy - 8 403 Total assets 10 232 62 270 Surplus 6 530 34 159 Funding level 276% 222%

• Strictly this is not a liability of the Fund as the pension increase policy does not provide for
  guaranteed increases in line with inflation and we have assumed that the Liquidator would like to provide such a guarantee prospectively.

The Fund is therefore in a very sound financial position and has a surplus to apportion in terms of section 15B the Pension Funds Second Amendment Act. Future service contributions No employer contributions are required because the Fund has no active members. Conclusion Based on the current benefit and membership structure I certify that the Fund will remain financially sound until the next triennial valuation with no employer contributions since this a paid-up Fund. A Lester Valuator to the PICBEL Groepvoorsorgfonds October 2010

1. Introduction
   1.1 Purpose of report
   1.1.1 This report sets out the results of an actuarial valuation of the PICBEL
   Groepvoorsorgfonds as at 1 July 2004. I was appointed as the valuator to the Fund in November 2003.
   1.1.2 The previous statutory valuation was done as at 1 July 2001.
   1.1.3 The report has been prepared for the Liquidator of the Fund. This is the first report
   following the enactment of the Pension Funds Second Amendment Act (hereafter “the Act”).
   1.1.4 This report does not comply in full with the professional guidelines of the Actuarial
   Society of South Africa (PGN201). The main reasons for the non-compliance are that the fund is “paid-up” (i.e. no further service benefits accrue after 1 November 2001 and the Fund is now defined contribution in nature obviating the need for any actuarial funding method and assumptions) and the membership is small.
   1.2 History of the Fund
   1.2.1 The Financial Services Board (FSB) has investigated a transaction the Fund entered into
   in September 1996 the net effect of which was to transfer part of the surplus that existed in the Fund at that time (circa R30 million) to the Lifecare retirement fund arrangements. As a consequence of legal action taken by the Liquidator part of this R30 million has been recovered and the effect of such recoveries is reflected in this valuation report.
   1.2.2 With effect from 1 July 1996 the Fund’s pensioners were “outsourced” to the SANLAM
   Bonus Pensions product – the Fund is the owner of this insurance policy and so the pensioners are in effect still pensioners of the Fund. The pensions were purchased from SANLAM with the reasonable benefit expectation that pensioners would receive increases in line with inflation. However, the Fund did not provide any guarantee that it would top-up the increases if the SANLAM Bonus Pension increases were lower than inflation.
   1.2.3 In late 2001 the Trustees resolved to put the Fund into liquidation and this was approved
   by the FSB with effect from 18 April 2008.
   1.2.4 With effect from 30 November 2001 the Fund was made “paid-up”, meaning that
   members would not accrue any further benefits in the Fund.
   1.2.5 Given this financial history the purpose of the actuarial valuation is simply to assess
   whether the Fund has sufficient assets to meet its obligations in terms of the Fund Rules.

Disclaimer
Fifth Quadrant has prepared this report for the Liquidator of the Fund in the context of assessing the financial soundness of the Fund. The assessment of financial soundness is based on the methodology and assumptions described in the report. This report is provided to the Fund solely for its use, for the specific purpose indicated. We accept no liability in respect of any matter outside the scope and limitation of this report and the purpose for which it has been prepared. The report may not be modified or provided by the Fund to any other party without Fifth Quadrant’s prior written permission, except as may be required by law. In the absence of our express written agreement to the contrary, Fifth Quadrant and its directors, officers and employees accept no responsibility and will not be liable for any consequences howsoever arising from any third party's use of or reliance on this report or the opinions we have expressed.

2. Membership data
   2.1 Sources of data
   2.1.1 We obtained membership data from SANLAM (the administrator) as at 1 July 2004. We
   performed various consistency checks on the data, the consequence of which was that SANLAM made some amendments to the pensioner data.
   2.1.2 We have accepted the paid-up values as calculated by the previous actuary as at 30
   November 2001 as correct. We have, however, checked the amounts for reasonability and confirm that the values are within an acceptable range.
   2.2 Membership detail
   2.2.1 According to the information supplied by SANLAM the Fund has 55 pensioners in receipt
   of a pension as at 1 July 2004 and there were 18 paid-up members. At this date there were some former members with unclaimed benefits.
   2.3 Pension increases
   2.3.1 The table below shows the SANLAM Bonus Pension bonus rates set out below since

3. The increase granted is calculated as (1 + bonus rate declared) ÷ (1.05) -1, with
   the 1.05 representing the 5% interest rate at which the pensions were purchased. Date of increase Bonus declared Pension increase Year on year inflation 1 July 1997 17.60% 12.0% 8.8% 1 July 1998 14.50% 9.0% 5.2% 1 July 1999 6.50% 1.4% 7.2% 1 July 2000 13.00% 7.6% 5.2% 1 July 2001 10.25% 5.0% 6.3% 1 July 2002 9.75% 4.5% 8.0% 1 July 2003 5.00% 0.0% 6.7% 1 July 2004 6.6% 1.5% 1.2% Average over period 5.1% 6.1% The Fund’s actual increases have thus lagged inflation by some 1% p.a. over the 8 years since the Bonus Pensions were purchased.
   2.4 Employer contributions
   2.4.1 The employer did not contribute at any time during the inter-valuation period in effect
   using the surplus to fund a contribution holiday up to 1 November 2001 when the Fund became paid-up and members did not accrue any future service benefits.

4. Funding method and valuation assumptions
   3.1 Valuation method
   3.1.1 Given that historically only the pension increase declared by SANLAM in respect of its
   Bonus Pension product is passed onto the pensioners, no contingency reserves are required to be held in respect of pensioners.
   3.1.2 In theory there is a contingent liability on the Fund if SANLAM were to fail to pay at least
   the current pension over the remaining lifetime of the pensioners and their dependents. Based on the SANLAM Capital Adequacy Reserve position we are of the view that it not necessary for the Fund to hold a contingency reserve against such default risk.
   3.1.3 The benefits due as per the 1 July 2004 audited financials have not included any late
   payment interest since 1 July 2002. We do not believe this to be equitable and have thus made a provision for late payment interest equal to the fund return from 1 July 2002 in respect of unclaimed benefits.
   3.2 Valuation assumptions – pensioners
   3.2.1 For the purposes of this valuation we have taken the liability in respect of the pensioners
   to be equal to the policy at the insurer’s value.
   3.2.2 Our understanding is that the pension increase policy of the Fund is to pass on the
   increases declared by SANLAM in full to the pensioners.
   3.2.3 We highlighted in 2.3.1 that historically the increases granted to pensioners have lagged
   inflation and the Liquidator may wish to guarantee inflationary increases to pensioners given that their reasonable benefit expectation was 100% of inflation increases.
   3.2.4 We have estimated the cost to the Fund of SANLAM providing a guarantee of inflation
   increases to pensioners by comparing the value of the current pensions at 1 July 2004 valued at an interest rate of 5% p.a. (the interest rate at which the pensions were purchased) with the value of the current pensions calculated at an interest rate of 2% p.a. (this is the interest rate that we assume SANLAM would use in their calculations for inflation-linked annuities). The lower interest rate also allows for a margin for any termination costs that the insurer may apply to the Fund in terminating the existing with￾profits annuity policy for an inflation-linked annuity policy.
   3.2.5 We have assumed that the pensioner mortality is expected to follow the PA (90) mortality
   tables.
   3.2.6 The cost to the Fund to guarantee future inflation increases to pensioners as at 1 July
   2004 is estimated to be some R2 million in respect of the 55 pensioners. Please note that the final figure may differ from this depending on interest rates and the mortality rates SANLAM uses at the time such guaranteed increases are bought.

5. Market value of assets
   4.1 Market Value of Assets excluding recovered assets
   4.1.1 As at 1 July 2004 the Fund assets were invested in the Prescient Positive Return
   Quantplus Fund.
   4.1.2 The breakdown of the market value of Fund assets as at 1 July 2004 is outlined below:
   Item R ‘000
   Prescient Positive Return Quantplus Fund 12 941 Plus: Current assets 12 Minus: Current liabilities excluding benefits due (176) Total assets 12 777
   4.1.3 A build-up of the assets over the inter-valuation period is included in Annexure I.
   4.2 Amounts recovered
   4.2.1 The Fund made the following recoveries (see paragraph 1.2.1 above) and the Fund’s
   Liquidator has indicated that the improper use of surplus by the Employer (see 5.5 below) is included in the amounts shown below (as per the Liquidator). Date received by Fund Amount recovered R’000 23 May 2008 19 300 2 June 2008 6 464 24 November 2008 200 17 July 2009 10 399 13 September 2010 60 645 Total recoveries 97 008
   4.2.2 We have discounted the amounts recovered from date of receipt to 1 July 2004 using the
   investment returns that would have been earned on these amounts had they been invested in the Fund over this period. The discounted value of the recoveries amounts to R41.1 million and should be added to the market value of assets in order to calculate the amount of surplus in the Fund as at 1 July 2004.
   4.2.3 We have not allowed for any amounts that may be recovered after September 2010 as
   the quantum of these recoveries cannot be reasonably estimated.

4.3 Fund investment returns
4.3.1 The investment returns (net of investment management fees and Retirement Fund Tax
where applicable) that we have used in our calculations have been determined as follows:
Period Method
1 January 1980 to 31 March 1997 As determined by the previous valuator of the Fund 1 April 1997 to 30 June 2001 Weighted average of the investment return as determined by the previous valuator of the Fund and the investment return as determined by the Liquidator of the Fund 1 July 2001 to 30 September 2010 Weighted average of the investment return as derived from the financial statements of the Fund and the investment return as determined by the Liquidator of the Fund
4.3.2 It is important to note that the investment returns determined from the financial
statements for the period 18 April 2008 to 30 September 2010 have been calculated from unaudited trial balances. The last audit was completed at the date of liquidation.
4.3.3 The investment returns after 1 July 2004 are used to determine the Surplus
apportionment, ongoing and termination expense reserve as at 1 July 2004 as indicated in Section 6.3 below.

5. Minimum benefits and statutory liabilities
   5.1 Minimum individual reserve
   5.1.1 On exit from the Fund for any reason the benefit must be not less than the value of the
   Minimum Individual Reserve (MIR), together with a share of the investment reserve account, the member surplus account and such contingency reserve accounts as the trustees determine should be included.
   5.1.2 For a defined benefit member, the MIR is the greater of the present value of the accrued
   deferred pension (based on prescribed assumptions), and the accumulated member contributions (including any vested employer contributions) plus investment returns (which may be positive or negative).
   5.1.3 The Rules must provide for the payment of the statutory minimum benefit for all exits
   after a date no later than 30 June 2005, 12 months after the surplus apportionment date. Since there are no in-service members in the Fund as at 1 July 2004 and the Fund is paid-up, there is no requirement on the Fund to amend the Rules for this requirement, nor do any members qualify for such a benefit.
   5.2 Former members
   5.2.1 Former members of the Fund who left the Fund between 1 January 1980 and 1 July
   2004, and who received less than the MIR on exit, are entitled in terms of section 15B(5) of the Act to have the actuarial surplus applied to increase their benefits to the MIR at exit date, adjusted in line with net investment return since that date, provided that the Fund has sufficient money to do so.
   5.3 Prescribed assumptions for MIR calculation for former members
   5.3.1 Whilst the choice of assumptions for the MIR for members with a normal retirement date
   after 30 June 2004 does not directly impact on the valuation result, it affects the calculation of the MIR for defined benefit former members, and therefore impacts on the surplus apportionment.
   5.3.2 Board Notice 37/2007 allows a choice between two different measures of net investment
   return for the calculation of the fair value equivalent of the present value of the member’s accrued deferred pension:

• Index-linked bond basis: The yield on index-linked bonds plus 0.05% p.a.
• Earnings yield basis: 40% of the earnings yield of the FTSE / JSE All Share
  Index.
  5.3.3 For the purpose of the surplus apportionment, in calculating the MIR to be paid to former
  members of the Fund, we propose to apply the “earnings yield basis”. Our reasoning is that the assets of the Fund have a larger weighting in equities (albeit that the equity exposure is “protected” using derivatives) versus index-linked bonds.

5.3.4 The level of assumed investment return and inflation is priced off the market. In this
regard we have assumed a long term investment return gross of retirement fund tax, but net of investment manager fees of 9.75% p.a. and inflation of 4.75% p.a. Pensions will therefore be valued on retirement at a net interest rate of 5.0% per annum. The difference between the actual investment return and 5.0% represents a provision for pension increases.
5.3.5 The pensioner mortality is expected to follow the PA (90) mortality tables.
5.4 Notional pensioner accumulation account
5.4.1 Section 15B(4)(b) of the Act defines the notional pensioner accumulation account as the
amount that would have accumulated to date for pensioners taking into account:

• the capital accumulated in the Fund for each pensioner at retirement, adjusted to
  an equivalent fair value of assets;
• less commutation and pension payments made to pensioners and pensioner
  expenses;
• plus or minus the net investment returns;
• plus the liability in respect of special increases granted to pensioners which were
  funded otherwise than through the net investment return earned by the Fund on pensioner assets.
  5.4.2 The notional account must then be compared to the value of the pensioner liabilities. If
  the notional pensioner account exceeds the value of the liabilities, then, to the extent that this is affordable, the difference should be used to bring all pensions in line with inflation since retirement. Any remaining amount should be held as a contingency reserve to ensure that the statutory minimum increase requirements can be met in future.
  5.4.3 In the case of this Fund the pensions are secured by a policy and Fund holds no further
  assets in respect of the pensioners. As such the concept of a notional pensioner account is not applicable for this Fund.
  5.4.4 However, in the surplus apportionment, the historical pension increases need to be
  reviewed to ensure that pensioners have received increases linked to the CPI. If not, then the required top-up will rank with the former members’ top-up to MIR.
  5.4.5 Based on the membership data supplied to us, we have calculated the amount required
  to top up pensioners to the minimum pension prescribed by the Act as shown in the table below – please note this cost uplifts the pension with inflation since date of retirement prospectively only and that this calculation is provided for information only and does not a Fund liability at this time. Number of pensioners Top-up as at 1 July 2004 Rands Number of pensioners eligible for a top-up 55 R799 625 22

5.5 Improper use of surplus in the past
5.5.1 Section 15B(6) of the Act specifies that the employer may need to compensate the Fund
if in the past surplus has been used improperly. Improper use of surplus is defined as:
(a) The cost of benefit improvements for executives in excess of equivalent improvements for members at large; (b) The cost of any additional pensions or deferred pensions granted to selected members in lieu of the employer’s subsidy of post-retirement medical costs; (c) The cost to recognise prior pensionable service for selected members or for members transferred into the fund in excess of any amount paid into the fund in respect of such prior service; and (d) The value of any employer contribution holiday after 7 December 2001.
5.5.2 Based on information available to us, including a report on improper use of surplus by the
previous valuator of the Fund we identified the following sources of improper use:
(i) With effect from 1 April 1980 senior nominated members’ accrual rate was increased from 2% ( we have assumed this to be the effective date as we have not been provided with the 1 August 1979 valuation report) to 3% per year for the first 10 years and 2% per year thereafter (ii) With effect from 1 November 1983 senior executive members’ accrual rate was increased from 3% per year for the first 10 years and 2% per year thereafter to 3% per year for the first 15 years and 2% per year thereafter. (iii) With effect from 1 November 1983 the extra five years service granted to senior executives on retirement is not reduced on early retirement if these members retire within 5 years of their normal retirement date. (iv) With effect from 1 November 1983 the withdrawal benefit for senior executive directors was increased from a return of the member contributions plus 4.50% p.a. compound to the member’s actuarial reserve. This is on condition that the member retains the benefit as paid-up pension in the Fund on withdrawal. (v) With effect from 1 December 1987 the chairman’s normal retirement age is increased from 60 to the age between 60 and 70 that he actually retires. The effect of this does not result in an enhanced benefit to the member and hence no strain on the Fund arises.
5.5.3 The 1 July 1997 valuation report indicates that the cost of granting extra service to
selected members that was funded from Fund surplus was R36 000. It is unclear who these members are (i.e. senior members, executives, etc.).
5.5.4 The improper use quantified at each of these dates as per the relevant valuation reports
are as follows:
Valuation date Improper use
Rands
1 April 1980 99 907
1 November 1983 128 315
1 July 1997 36 000

5.5.5 The improper use of surplus accumulated with investment return totalled R9 290 213 as
at 1 July 2004. This amount is included in the amounts recovered shown in 4.2.1 above.

6. Contingency reserves
   6.1 Background
   6.1.1 Regulation 35 of the Act provides for the trustees (or in the case of this Fund, the
   liquidator) to set up such contingency reserves as they deem prudent based on the advice of the actuary. The establishment and quantum of any contingency reserve must be soundly motivated based on an objective assessment of the specific risks.
   6.1.2 In deciding on appropriate contingency reserves the liquidator should be aware of:

• the competing interests of different groups of members; and
• the inter-dependence of the risks involved and the possibility of double-counting.
  Overall the quantum of contingency reserves must not be greater than the provisions reasonably required for such contingencies.
  6.1.3 Circular PF No. 117 sets out the standard for valuations to determine the actuarial
  surplus at the surplus apportionment date. The Circular also states that the existence of any contingency reserve accounts prior to the surplus apportionment date does not mean that such accounts may continue to exist after the surplus apportionment date. However, the Circular specifies certain contingency reserves that may be established provided that the need is fully justified and does not result in a deficit.
  6.2 Proposed contingency reserves
  6.2.1 In our opinion considering the particular circumstances of the Fund at the surplus
  apportionment date, the requirements of the Fund for contingency reserves at that date is as follows:
  (i) Surplus apportionment, ongoing and termination expenses reserve – the Fund must provide for the expenses of the surplus apportionment exercise and all costs associated with the project. The Fund is in the process of being liquidated which we anticipate will be completed by July 2013. We therefore recommend that a further allowance is made for known expenses actually incurred after 1 July 2004 to 30 September 2010 and expenses that are expected to be incurred until the liquidation of the Fund is completed as the Fund has no recourse to the Employer to meet these costs. (ii) It highlighted that where the section 15B(5)(b)/(c) enhancement can be calculated for a former member, but such former member cannot be traced, the corresponding amount can be placed into a contingency reserve specific for this purpose. As part of the surplus apportionment exercise the necessary provision should be made against the surplus. In future such payment can only be made to the former member on identification, or to the Guardian’s Fund or unclaimed benefits fund.

6.3 Surplus apportionment, ongoing and termination expenses reserve
6.3.1 We have determined the reserve based on the actual expenses incurred from 1 July
2004 to 30 September 2010 as extracted from the Fund’s financial statements (for the period 1 July 2004 to 18 April 2008), unaudited trial balances (for the period 18 April 2008 to 30 September 2010) and from fee and expense estimates put forward by the administrator, the actuaries, and the liquidator that is expected to cover their expenses after 30 September 2010 (estimated to be for a further 3 years).
6.3.2 The make-up of the incurred to date and expected expenses is set out in the following
table. Costs are shown at values applying at the valuation date.
Item R’000
Actuarial costs
Administration (including advertising and cost of data extracts) Communication to stakeholders Curator's fees Liquidator's fees Tracing costs Substantiation costs Former member representative Legal fees Cost of making payment to former members 614 1 354 91 198 7 419 447 27 29 5 372 1 413 Total 16 964
6.3.3 It is important to note that roughly R7.4 million of the provision of R17 million set aside in
this reserve has been determined on the assumption that the Fund will continue to exist for a further estimated 3 years after the date of this report and should this assumption prove to be materially incorrect, and the liquidation process takes longer, there is the risk of a deficit in this contingency reserve.
6.3.4 It is obviously very difficult to estimate future expenses accurately and the Liquidator
should thus be aware of our provision for future expenses, which as we highlight is a best estimate and thus may be under-stated or over-stated.

7. Results
   7.1 Financial position
   7.1.1 The table below sets out the financial position of the Fund as 1 July 2001 and 2004 using
   the market value of assets adjusted for the recoveries made by the Fund. Item 1 July 2001 R’000 1 July 2004 R’000 Member liabilities 3 702 694 Pensioner liabilities - 8 403 Provision for future full CPI increases for pensioners* - 2 050 Contingency reserves Surplus apportionment, ongoing and termination expense reserve - 16 964 Total liabilities 3 702 28 111 Market value of Fund assets 10 232 12 777 Amounts recovered - 41 090 Pensioner annuity policy - 8 403 Total assets 10 232 62 270 Surplus 6 530 34 159 Funding level 276% 222%

• Strictly this is not a liability of the Fund as the pension increase policy does not provide for
  guaranteed increases in line with inflation and we have assumed that the Liquidator would like to provide such a guarantee prospectively.
  7.1.2 A build-up of the surplus from the previous to the current valuation is as follows:
  Item R’000
  Previous surplus at 1 July 2001 (based on actuarial value of assets) 5 437 Write up to market value of assets 1 093 Interest on surplus 3 639 Surplus arising on exit of members 1 914 Amounts recovered 41 090 Set-up of contingency reserves (16 964) Provision for future full CPI increases (2 050) Surplus at 1 July 2004 34 159
  7.1.3 The Fund is therefore in a very sound financial position and has a surplus to apportion in
  terms of Section 15B of the Pension Funds Second Amendment Act.

7.2 Employer contribution rate
7.2.1 No employer contribution rate is required because the Fund has no active members.

8. Appropriateness of investment strategy
   Circular PF71 issued by the Registrar of Pension Funds requires that the actuary comment on the appropriateness of the Fund’s investment strategy in relation to the nature and term of the liabilities. The Prescient Positive Return product is a conservatively managed portfolio which aims to provide a positive return over 12 month periods. The Fund generally has some equity exposure, but the risk of large losses on the equity investments is mitigated via the use of derivatives. I certify that the investment strategy is an appropriate one given the paid-up nature of the Fund and the fact the surplus will be distributed in due course.

9. Summary and conclusion
   9.1 Summary
   9.1.1 The Fund is in a very sound financial position with assets exceeding the value of the
   liabilities by some R34.2 million. The actuarial surplus of R34.2 million must be apportioned in terms of the prescriptions of section 15B(5) of the Pension Funds Act.
   9.1.2 The employer is not required to contribute to the Fund as the Fund has no active
   members.
   9.2 Certification
   Based on the current benefit and membership structure I certify that the Fund will remain financially sound until the next triennial valuation with no employer contributions since this a paid-up Fund. A. Lester B.Sc., F.I.A. In my capacity as the Actuary to the Fund and a Director of Fifth Quadrant Actuaries & Consultants

10. Annexure I – Consolidated Income Statement
    The consolidated income statement for the period 1 July 2001 to 1 July 2004 is set out below:
    Item Rand Rand
    Opening balance on 1 July 2001 10 236 852
    Income 5 432 471
    Contributions - Members -

• Employer -
  Reinsurance premium recovery 127 282
  Investment Income (net of RFT and investment manager fees) 977 429 Unrealised capital appreciation 4 327 760 Expenses (2 335 256) Administration expenses (305 139) Benefits Paid Pensions Paid (750) Withdrawal Benefits (1 715 979) Adjustments (1 173 506) Transfers to Other Funds (1 173 506) Market Value for valuation as at 1 July 2004 12 160 561 The market value for valuation as at 1 July 2004 above is net of the benefits due as at 1 July 2004 but before any adjustment in respect of the proceeds from the recoveries made.

11. Annexure II – Summary of benefit structure
    A summary of the benefit structure of the Fund before it became paid-up can be found below:
    11.1 Membership
    Permanent staff of the Participating Employer who are not older than 50 years, qualify for membership of the Fund.
    11.2 Definitions
    11.2.1 Normal Retirement Age
    The Chairman can elect to retire between age 60 to 70. For the current valuation, the Chairman not present in the member data. Senior Executive : 60 Other Members : 65
    11.2.2 Final Salary - Final Pensionable Salary for any member refers to the annualised average
    of his Pensionable Salary over any 24-month period of his Pensionable Service that will produce the highest average.
    11.2.3 Pensionable Service - For a Chairman and Senior Executives the Pensionable Service is
    increased by 5 years. For every month by which such a Member’s retirement commences earlier than the normal retirement age minus 5 years, the abovementioned extra period is reduced by one month.
    11.3 Normal Retirement Benefits
    11.3.1 Members who retire receive the cash equivalent of an annual pension equal to:

• In the case of the Chairman and Senior Executives, 3% multiplied by t/12 where t
  equals the full number of months in the first 15 years of Pensionable Service plus 2% multiplied by n/12 where n equals the full number of months in the remaining period of Pensionable Service, multiplied by Final Salary.
• In the case of a Specially Nominated Member, 3% multiplied by t/12 where t
  equals the full number of months in the first 10 years of Pensionable Service plus 2% multiplied by n/12 where n equals the full number of months in the remaining period of Pensionable Service, multiplied by Final Salary.
• In the case of any other Member, 2% multiplied by t/12 where t equals the full
  number of months of Pensionable Service, multiplied by Final Salary.
  11.4 Voluntary Early Retirement
  11.4.1 Subject to the approval of the Employer, a Member may commence early retirement at
  any time during the 10 years preceding his Normal Retirement Age. He will qualify for a cash benefit, as calculated in 11.3.1 above, reduced by 0.25% for every month by which his early retirement date precedes his Normal Retirement Date.
  11.4.2 The above reduction can be waived if the early retirement date precedes the Normal
  Retirement Date by less then 5 years and the Employer agrees to this waiver.

11.5 Late Retirement
Subject to the approval of the Employer, a Member may delay his retirement until after his Normal Retirement Date. Contributions to the Fund will cease on his Normal Retirement Date and upon retirement the Member will qualify for a benefit as set out in
11.3.1 above, increased by 1% for every month by which the Member’s service exceeds
his Normal Retirement Date.
11.6 Death in Service before or at the Normal Retirement Date
Upon the death of an in-service Member before or on his Normal Retirement Age, the following benefits will be payable:
11.6.1 Lump Sum

• 3 x Pensionable Salary upon death if the Member is survived by a spouse or
  children
• 4x Pensionable Salary in the case of any other Member
  11.6.2 Spouse’s and children’s Pension - 50% of the Pensionable Salary of the Member; 15% of
  the Member’s Pensionable Salary per child (maximum 45%). This children’s pension will double if and when there is no spouse’s pension payable.
  11.6.3 Return of contributions - the value of the Member’s Transfer Credit including interest (if
  applicable), deemed contributions (which are 7.5% of pensionable salary) and voluntary contributions including interest.
  11.7 Termination of Service except due to Downsizing or Redundancy
  11.7.1 When a Member’s service is terminated before his Normal Retirement Age due to any
  reason other than downsizing or redundancy, he will qualify for a lump sum benefit equal to his Transfer Credit (if any), deemed contributions (which are 7.5% of pensionable salary) and voluntary contributions including interest plus a percentage of the deemed contributions (including interest) according to the following table Years of Service Percentage Less than 1 0% 1 and more but less than 2 10% 2 and more but less than 3 20% 3 and more but less than 4 30% 4 and more but less than 5 40% 5 and more but less than 6 50% 6 and more but less than 7 60% 7 and more but less than 8 70% 8 and more but less than 9 80% 9 and more but less than 10 90% 10+ 100%

This cash benefit may not exceed the Actuarial Reserve Value of the Member .
11.7.2 If the Member elects to receive a deferred pension, the value thereof will be equal to the
cash benefit multiplied by the following scale:
Years of Pensionable Service Percentage
10 – 15 50%
15 – 20 75%
20+ 100%
11.8 Contributions
Members Non-contributory
Employer: The costs of the benefits as calculated by the Actuary.