It gives me great pleasure to present Sasfin's 2009 Annual Report, the 22nd “since its listing on the JSE in 1987.“

RESULTS

Against the backdrop of the global economic crisis, Sasfin has produced satisfactory results for the year under review, with headline earnings, at R154 million, 2% down on the previous year, representing an acceptable return of 25% on average shareholders' equity.

CAPITAL INJECTIONS

After protracted negotiations and an extensive due diligence investigation, the IFC agreed to subscribe for 3,01 million shares in Sasfin at R24,81 per share, and to inject a further R82,45 million into the Bank by way of Tier ll capital. These agreements are subject to various conditions that are expected to be fulfilled by the end of September. The IFC has also provided a US$10 million guarantee for bank facilities for Sasfin Asia Limited. Sasfin is delighted with its association with the IFC, which, as part of the World Bank, is very influential and has already added real value to the Company.

CAPITAL ADEQUACY

The Group's Capital Adequacy Ratio at year end increased from 28% to 31%, compared with the minimum required ratio determined in accordance with Basel ll of 9,75%. With the injection of the Tiers I and ll capital referred to above, Sasfin's Capital Adequacy increases to approximately 36%. This represents a strong ‘war chest' for the Company in these times of interesting opportunities.

LIQUIDITY

During November 2008, which coincided with the peak of the global credit crunch, Sasfin succeeded in not only rolling its securitisation notes of R702 million, but in placing an additional R198 million of notes at attractive rates. This is a show of confidence by the debt capital market in the quality of Sasfin's securitised assets, its systems and its vanilla securitisation structure, which is the oldest such structure in South Africa. This structure maintained its excellent rating after the credit crunch, due to the quality and spread of its uncorrelated debtors, and its high yield, which results in strong embedded value for the protection of note holders.

Sasfin's liquidity, which is based on diverse funding from deposits (mainly from its private clients), securitisation, interbank facilities and a strong capital base, has in these volatile times proved to be robust.

CREDIT LOSSES

As a result of the deterioration in the economic environment, Sasfin's annual credit losses have increased significantly and now stand at 1% of average loan and advances. Whilst this compares favourably with most South African banks, the Company is constantly reviewing its credit granting processes in an endeavour to maintain an acceptable level of credit losses going forward.

ECONOMIC ENVIRONMENT

For the decade to 2007, the global economy had experienced a protracted period of benignity, during which there was a major migration of industry to various under developed economies, notably China and India. This created huge trade imbalances and reverse capital flows with economies in the western world. Part of this debt was employed by financial institutions in unsustainable sub-prime housing loans, credit cards and leverage buy-outs, using sophisticated financial structures.

As the money supply was tightened in response to increased inflation, these loans started to unravel, which in turn decimated theTier1capitalofmanyoftheworld'sgreatfinancial institutions, and the resultant credit crunch led to a collapse in the global economy, the severity of which has not been witnessed in living memory.

A number of countries in the developed world have resorted to quantitative monetary stimulation, including bank bailouts, involving trillions of dollars, the cost of which, in terms of taxation, inflation and interest, will be felt for years to come. Fortunately the main emerging economies are continuing to grow, albeit at much reduced rates.

Whilst South Africa has also moved into recession, it is fortunately in relatively good economic shape, with consumer credit, inflation and current account and fiscal deficits expected to reduce over time. For this we must compliment Government, and in particular, Trevor Manuel, our past Minister of Finance, Tito Mboweni, the Governor of the Reserve Bank and Errol Kruger, the Registrar of Banks, who in contrast to their counterparts in many developed economies, have maintained a disciplined economy in general and in the banking sector in particular.

However, South Africa's scourge of unemployment and violent crime remains endemic, with the labour unions' recent pyrrhic victories exacerbating the situation for all South Africans.

As a large exporter of primary products, South Africa has been badly affected by the sharp fall in commodity prices, which now appears to be recovering. The flight of capital brought about by the global credit crunch has caused a national liquidity shortage, which is now starting to ease. However, the recovery in the global economy remains fragile and another dip cannot be ruled out.

THE BANKING INDUSTRY

The implosion of some of the world's most illustrious banks and financial institutions in the financial services sector is widely expected to lead to a ‘back-to-basics' approach. Banks worldwide are focusing on strong capital ratios, prioritising solvency over profitability, cleaning up risky areas on group balance sheets and installing appropriate buffers that stand up to stress testing.

Increased government intervention is likely to become a way of life in the financial sector. Regulators have become far more mindful of the risks banks take and will be tempted to tighten the screws considerably, particularly for those banks that are deemed “too-big-to-fail”.

There has been a public outcry at the breaches of trust placed in many of the world's leading financial institutions by the investing public, inter alia for:

• investing client savings in questionable funds, on which institutions had received generous management and performance fees, justified by their claims of due diligence and sanitation, which, in hindsight was clearly lacking, and
• paying extraordinary performance bonuses to senior executives, which encouraged a cavalier approach to risk taking.

Swashbuckling financial structuring is a thing of the past. Banking has reverted to far more conservatism, which is vital for the health of the entire economic system.

SASFIN'S PROSPECTS

The major banks have come to realise that to appropriately manage their inherent risks, a management intensive service is necessary for the small and medium sized commercial market.

For this market to be viable, increased pricing is necessary, which improves the overall competitive position of Sasfin's Business Banking division. Sasfin's Wealth Management division also benefits from the general disillusionment with the larger financial institutions. The withdrawal from certain specialised areas by larger banks represents great opportunity for smaller more personalised financiers, like Sasfin.

With increased regulation, bank licences are becoming far more onerous and expensive to maintain. The flip side of this is that a bank licence now represents a huge barrier to entry, which Sasfin intends to leverage off more fully in future.

Sasfin has:

• high capital adequacy and strong liquidity,
  
• a good reputation,
  
• a solid base of depositors,
  
• excellent management, staff and systems
  
• products that meet the needs of its target market, and
  
• an excellent client base.
  

Whilst Sasfin recognises the need to improve in a number of its functions, it is well placed to not only continue to weather the storm, but to achieve strong growth, as and when the economy turns.

APPRECIATION

I extend my appreciation to my fellow directors and Sasfin's management and staff, who have excelled themselves in difficult conditions. In particular I would like to thank our executive directors, Roland Sassoon and Malcolm Segal for their continued valued contribution. I also thank our professional advisors, and the SARB for their invaluable guidance, our valued clients for their support and our shareholders for their faith in Sasfin. I take this opportunity of welcoming as the new Governor of the SARB, Gill Marcus, who is so well qualified to step into the very large shoes to be left by her esteemed predecessor, Tito Mboweni.

It is my intention to retire as Chairman and director during the course of the current year. I take this opportunity of thanking my colleagues for their loyalty and support during the 22 years of my chairmanship and of expressing my confidence in their ability to continue to take the Group to higher levels for the benefit of all its stakeholders.

I particularly commend Roland Sassoon on his achievements as Chief Executive Officer during this period and wish him further success.

Martin Glatt
Chairman

2 September 2009