DEVELOPMENTS

During the year under review, the Group took the following significant steps:

• It negotiated, subject to various conditions, for the injection of US$10 million each of Tier l and Tier ll capital from the IFC. This follows the US$10 million bank guarantee that was provided by the IFC last year. Apart from the increase in capital adequacy and liquidity that this brings, having the IFC as a partner has strategic significance, in view of the enormous influence in international financial circles that the IFC, as a member of the World Bank, wields.
  
• At financial year end Sasfin moved into its newly developed premises in Waverley, with excellent modern facilities,
  

including best of breed infrastructure for banking storage, security and business continuity. This new facility will enable the Group to continue to expand strongly.

• Sasfin has invested considerable human and financial resources in upgrading its IT systems, which is expected to result in a significant improvement in efficiency.
• Sasfin has refined its stress testing models in terms of Basel ll in respect of capital adequacy as well as liquidity, which are now continuously applied.
• Subsequent to the departure of the Group Managing Director, the following significant staff appointments were made:
  • Malcolm Segal took on the added role of Group Financial Director and, together with the Chief Executive Officer, assumed the “four eye” responsibilities in terms of SARB regulations.
  • Maston Lane was promoted to Group Chief Operations Officer
  • Gavin Came was promoted to Head of Wealth Management Division

These developments are all designed to open the way for Sasfin's next expansion phase.

PROSPECTS

The banking industry is feeling the effects of the economic contraction, in both volumes and credit losses, which are likely to persist, albeit on a reduced scale, for most of the current financial year.

As the big banking groups shy away from Sasfin's target market of small to medium sized businesses, Sasfin expects to attract a bigger share of this market. However, it should be emphasised that, although Sasfin has the capacity for strong growth, it will remain very conservative in its lending activities during these difficult times.

CAPITAL ADEQUACY

On 30 June 2009, the Group capital adequacy was 31% (2008: 28%), and that of the Bank 32% (2008: 22%), which is well above the prescribed minimum requirement. With the injection of capital by the IFC, the Group capital adequacy is expected to increase to 36%, which will enable continued expansion.

OPERATING DIVISIONS:

BUSINESS BANKING

Contribution to profit for the year: 2009: R65,5 million (2008: R61,4 million).

The Business Banking division houses the lending activities of the Group.

EQUIPMENT RENTAL FINANCE UNIT

This unit finances office automation and allied equipment through operating rentals. By providing excellent service, this unit has increased its market share and is benefiting from improved margins which have offset the increased costs of funding and credit losses. This unit is confident of continuing to operate at these enhanced levels.

BUSINESS FINANCE UNIT

This unit houses the Group's trade, debtor and capital equipment financing activities. Resulting from the global credit crunch in late 2008, this unit experienced a contraction in activity and a rise in credit losses. The void of financing available to SMEs has opened up opportunities to grow this business at acceptable margins and the pipeline of new applications for the current financial year is encouraging.

CAPITAL

Contribution to profit for the year: 2009: R28,1 million (2008: R43,4 million).

Sasfin Capital undertakes the Group's proprietary private equity and third party fund management activities and also houses the Corporate Finance unit.

As might be expected in the current economic environment, results for the year were down by 35% on the prior year.

PRIVATE EQUITY UNIT

Given the economic climate, the Group adopted a conservative stance to this asset class and the focus of management was on the performance of the existing portfolio investments as opposed to originating and executing new investments.

Together with 3rd party funds, the Group has R238 million in proprietary and managed private equity investments.

The mark to market revaluation surplus of the private equity portfolios was adversely affected by:

• the general slowdown in economic conditions which generally impacted on the trading performance of portfolio companies,
  
• the downward adjustment of proxy price earnings multiples of equivalent companies listed on the JSE by reference to which the portfolios are valued, and
  
• the softening of the real estate market.

There has recently been evidence of a revival in the demand for growth and development capital as entrepreneurs start to focus beyond the immediate difficult trading conditions.

CORPORATE FINANCE UNIT

This unit provides merger and acquisition origination and execution support services as well as the full range of JSE Sponsor and AltX Designated Advisor services to a sizeable portfolio of listed companies. It generally focuses on companies with a market capitalisation of less than R5 billion and also provides corporate advisory services to the Group.

The unit failed to achieve its budget for the year, mainly as a result of delays caused by the economic slowdown.

The team has a good blend of youth and experience and is well positioned in its target market and is thus expected to deliver improved performance in the year ahead.

TREASURY

Contribution to profit for the year: 2009: R60,5 million (2008: R34,3 million)

This division undertakes the Group's Domestic and International treasury services.

DOMESTIC TREASURY

This unit manages the funding of the Group, which is mainly through equity, including preference shares, securitisation, deposits and interbank facilities.

Despite the effects of the global credit crisis, Group Treasury not only refinanced R702 million of securitisation notes falling due in November 2008, but also issued an additional R198 million of notes. This achievement is indicative of the outstanding performance of the Group's securitisation vehicle, as well as the confidence that the market has in it, which is the oldest active securitisation vehicle in South Africa, having been incorporated in 1991.

Whilst deposits declined by 20% during the year under review, there are clear indications of a rise in deposits in the current financial year.

In line with developments in the banking industry since the Global Credit Crunch, margins charged out to divisions on loans have increased.

Future focus will be to broaden the depositor base by offering a wider range of products to individuals and SME's.

INTERNATIONAL TREASURY

The Bank, as an Authorised Foreign Exchange Dealer, provides a full range of foreign exchange services through this unit.

This unit was established to complement the Group's modular range of banking products and financial services focused on the needs of corporate, commercial and individual clients.

In order to facilitate import and export transactions for the Group's clients, the Bank offers spot and foreign exchange contracts and related swaps, as well as Customer Foreign Currency accounts, and advising of letters of credits anywhere in the world, while individual clients can avail of the Bank's ability to transfer discretionary or foreign investment allowances in all major currencies across the globe.

This unit went through a period of systems development, having invested heavily in state of the art Treasury IT systems and is now poised for solid growth.

WEALTH MANAGEMENT

Contribution to profit for the year: 2009: R21,3 million (2008: R32,9 million).

This division comprises SasSec's domestic 120 year old stock broking and portfolio management unit, the newly launched asset management subsidiary, SAM and the Financial Advisory and Asset Consulting units.

Apart from offering a full range of independent advisory services through Sasfin Financial Planning, SAM and Sasfin Asset Consultancy, Sasfin now offers a range of unit trusts and multi-managed Retirement Investment Funds, with assets now comfortably exceeding R5 billion.

STOCK BROKING AND PORTFOLIO MANAGEMENT UNIT

The global credit crunch and consequent market collapse, initially felt in the latter part of 2008, had an impact on SasSec, with assets under administration down by 14% to end the year at R25 billion.

During the year, the East London Branch of SasSec was sold to a broad-based financial consulting business, NVest Financial Holdings Limited, in exchange for a 20% interest.

ASSET MANAGEMENT UNIT

The asset-managed products, previously housed elsewhere in this division, are being transferred to SAM. These include the Sasfin Twenty Ten and Sasfin Equity Funds, the Sasfin International Fund and the Group's Managed Funds, as well as certain bespoke portfolios managed for third party institutional clients. Two additional funds, The Sasfin Wealth Preserver Fund and the Sasfin Balanced Fund, were promoted for the first time under the Sasfin banner. SAM also houses portfolios constructed specifically for pension and provident fund assets. A focused team is now dedicated to promote this growing range of retail and wholesale funds.

FINANCIAL PLANNING UNIT

SFAS has maintained its client-facing focus by continuing to appoint new planners which now number over 20. This business grew its top line revenue by about 17% in difficult market conditions. In a new development, planners from this unit are now physically placed within all the divisions of Sasfin, allowing for a deeper focus on the joint promotion of the respective services of each division. This unit is expected to steadily increase its support for SAM and SasSec.

ASSET CONSULTING UNIT

Assets under mandate now exceed R4 billion. This unit is benefiting from the governance that is emerging from the roll out of SAM and has in turn commenced placing a proportion of its funds with SAM.

LOGISTICS AND RISK MANAGEMENT

Contribution to profit for the year: 2009: R13,6 million (2008: R12,4 million).

This division comprises the Group's Freight Services, Healthcare Consulting and Short-term Insurance Broking units.

FREIGHT SERVICES UNIT

The restructuring of Premier's sales and marketing department has been successfully completed, resulting in good growth despite the economic slowdown.

Premier produced an excellent result and in fact achieved an all time record in its 32 year history. Premier traded strongly in the first six months of its financial year, with a slowdown in the second six months, but still managed to produce a stellar performance.

Management continues to focus strongly on cost containment to ensure that Premier remains profitable during the economic downturn, whilst being poised to take advantage when the economy turns.

SHORT-TERM INSURANCE BROKING UNIT

The short-term insurance broking business that was housed in Sasfin Insurance Brokers (Pty) Limited is now a division of SFAS. This operation, which was previously outsourced, is managed in house and is on target and poised to grow significantly as the Group's divisions continue to provide support.

HEALTHCARE CONSULTING UNIT

This unit continued to make a solid contribution especially since its revenues are only marginally negatively affected by economic downturns.

CORPORATE SERVICES:

MARKETING AND BUSINESS DEVELOPMENT

Sasfin's marketing department is involved in articulating the Group's value offering to its staff, clients, shareholders, stakeholders and the investment community at large, through a strategic integrated communications-based programme. A highlight in the past year's marketing activities was a full-scale communications programme for Sasfin's move to its new premises in Johannesburg. The internal programme was aimed at enthusing staff about the new move to mark a fresh start and to ensure staff buy-in for a smooth relocation. The external leg of the programme facilitated the introduction of clients, media and external stakeholders to the new building and showcasing its state of the art features.

The Group has strengthened its marketing strategy in line with its theme of “Growth in Progress”. A new advertising agency has been appointed to infuse Sasfin's corporate advertising programme with a fresh creative strategy that will reinforce the Group's positioning as a growing contender in the financial services sector.

Sasfin has also continued with a robust media relations campaign, maintaining relationships with key journalists by keeping them informed of major group announcements and newsworthy activities. The Group continues to follow the strictest protocol when engaging media, ensuring that information is accurate and timeous and that media have full access to Sasfin's executive management for direct comment.

Marketing support is also extended to the Group's various business units by packaging and promoting new products, facilitating business development processes and brokering stakeholder contact.

The marketing department continues to keep abreast of emerging communication tools and technologies that will hone the organisation's ability to engage its internal and external target audiences effectively.

INFORMATION TECHNOLOGY

The past year was one filled with excitement and opportunity in the technology arena. With a move to the new Head Office, it was opportune to start preparing and streamlining the infrastructured environment to achieve uninterrupted services during the move, and improved efficiencies afterwards. Under the auspices of the architecture team, the end of July 2009 saw the IT environment in the Group migrate to the new data centre, and running at even higher efficiency and reliability than has ever been the case.

With the pressures of the contracting economy worldwide weighing heavily, Sasfin's Group IT has also been able to improve levels of service, whilst spending less in the operations area than projected. Furthermore, with the improved environment put in place during the migration process, operating costs are forecast to reduce in the coming financial year.

FINANCE AND ADMINISTRATION

During the year, this department was involved in major upgrades necessary in terms of the Basel II Capital Accord, including a working ICAAP model. It is responsible for Group accounting and reporting, including statutory reporting to the SARB, with whom it maintains open and constructive communication channels. It is also responsible for Group administration. It continues to discharge its responsibilities with integrity and efficiency.

COMPLIANCE

This independent department, established and operational inter alia in terms of Section 47 of the Banks Act and Regulation 49 of the Banking Regulations as well as other key regulatory legislation covering the broader group, including FAIS, the Securities Services Act and FICA, continues to act as a key interface with the regulatory authorities and is an essential component of the Group's risk management framework. Further details are provided in the expanded Compliance Report.

GROUP INTERNAL AUDIT

Group Internal Audit is an independent risk management function, whose purpose and responsibilities are governed by standards of the Institute of Internal Auditors. Its independence is assured through its functional reporting to the Chairman of the Group Audit and Compliance Committee, who is an independent non-executive director of Sasfin. The Head of Group Internal Audit reports administratively to the Chief Executive Officer.

In the year under review, the audit methodology was brought in line with international best practice, the staff skills capability was strengthened and a new audit management system was introduced to ensure consistency of the application of the audit methodology.

RISK AND CREDIT

Sasfin's credit and risk policies are well established, with principles that have been tried and tested over many years within the Group. Adherence to these policies are monitored by a Credit Review Committee which meets monthly, and a Risk and Capital Management Committee which meets quarterly, both of which report to the Board with recommendations to ensure relevance in an ever-changing financial and regulatory environment.

Policies include set standards of presentation of credit proposals, acceptable financial criteria, delegated mandates, security standards, review frequencies, risk monitoring and recovery of accounts in default.

Given the current tighter economic conditions, clients showing early signs of financial distress are closely monitored with a view to taking swift action, by providing the necessary financial assistance where the risk remains acceptable, failing which, the most effective exit strategy is planned and executed. Tools such as asset and financial audits, interim reviews and regular client visits are used for this purpose.

Credit decisions are made by two or more credit managers according to a delegated mandate structure, with all new facility approvals being debated at daily credit meetings, which include senior executive management.

Where Sasfin is likely to incur a loss on a specific account, an independent analysis is made of the events and circumstances that led to this position, in order to gain full value from the experience and to make any appropriate changes in policy.

HUMAN RESOURCES

The HR department provides comprehensive human resource management services across the Group and serves as a strategic partner alongside the various business units and departments, facilitating employees' commitment and success through positive human relationships.

The Group's transformation objectives are progressing in line with targets. A mentorship programme has been developed for talented employees from disadvantaged backgrounds, in order to retain their talent, and help them achieve greater levels of success within the organisation. All appointments are made with due consideration being paid to employment equity commitments.

Staff development and growth is continually enhanced and employees are encouraged to pursue further education and training, ranging from basic adult literacy programmes and learnerships to post-graduate degrees. Formal learning is complemented by on-the-job training.

Sasfin's study loan scheme enables employees to manage the cost of higher education. Once more, the Workplace Skills Plans and Implementation Reports met the requirements of the relevant authorities, from whom a full rebate of Skills Development Levies was received.

Performance management initiatives are well received within the Group, where both management and employees benefit from regular feedback and review.

Employee Wellness remains a priority, with on-site consultants being available to assist employees with their healthcare needs. HIV training is provided to employees, and annual wellness days are arranged for staff to avail themselves of free medical screening.

Among the new initiatives introduced this past year, are the Cell C Take-a-girl-child-to-work Day, the publication of a quarterly HR newsletter and an induction video for all new employees.

The HR department remains sensitive to the needs of the Group's most important asset: its people, in achieving the Group's business objectives and helping them realise their personal growth and career ambitions.

BLACK ECONOMIC EMPOWERMENT

Whilst there is continuing uncertainty about the status of the FSC, Sasfin has consistently improved its scorecard and has again been awarded an “A” rating for BEE by the FSC Council during the year under review.

In order to maintain the impetus of the broad based BEE imperative and monitor its compliance in this regard, Sasfin has established a Transformation committee.

APPRECIATION

I am grateful to each of Sasfin's dedicated and extremely competent directors, general managers and staff members for their wonderful service to the Group. In particular, I thank Malcolm Segal, Maston Lane and Gavin Came for taking on expanded roles in the Company.

I also thank Sasfin's clients for their loyalty and support, and our professional advisors and the Registrar of Banks and his office, for their sound guidance.

I would like to pay tribute to Martin Glatt, who after 22 years as our chairman, will be retiring. It was during the 1987 stock exchange boom that Martin decided to back Sasfin for a listing on the Development Capital Market of its shares at 60 cents a share. No sooner had the prospectuses been printed, the stock market collapsed and we were faced with the prospect of an aborted listing. Fortunately, Martin came to the rescue by taking up a larger issue of shares. It is that level of commitment that has characterised Martin's involvement with the Company, for which he will be sorely missed.

I look forward in the year ahead to further enhancing the “win-win” relationships that exist with all Sasfin's stakeholders.

Roland Sassoon
Chief Executive Officer

2 September 2009