June GEPF invest R115-million in a private hospital. broader spectrum of South African society, added Badal.

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1 fundnews June 2013 The quarterly newsletter for pensioners of the Government Employees Pension Fund GEPF invest R115-million in a private hospital GEPF, through the Public Investment Corporation, has recently invested R115-million in the construction of the R233- million Kiaat Private Hospital in Mbombela, Mpumalanga. This is in line with the Fund s development investment (DI) policy that commits GEPF to invest in financially viable projects in affordable healthcare, education and other economic infrastructure projects. At the sod-turning ceremony, GEPF s Deputy Chairperson Prabir Badal said, This investment represents an important milestone in the implementation of the DI policy that seeks to invest in projects that make good investment sense while contributing to South Africa s developmental agenda. Private healthcare has become expensive in South Africa and unaffordable to low- and middle-income earners which includes most GEPF members. In fact, we need more initiatives such as Kiaat Private Hospital to make healthcare affordable to a broader spectrum of South African society, added Badal. The building of Kiaat Private Hospital will contribute to job creation both short and long term. An estimated 347 jobs will be created during the construction period and incrementally over a period of five years 290 nurses, porters and pharmacists will be employed. This investment will also give access to private healthcare to low- and middle-income earners, including GEPF members and pensioners residing in the Mbombela area. Through this investment, GEPF will contribute to new enterprise development by giving previously disadvantaged doctors and nurses the opportunity to own shares in the hospital as well as supporting small businesses in the catchment area through the awarding of various hospital management services contracts. PIC CIO Dr Dan Matjila and GEPF Deputy Chairperson Prabir Badal

2 GEPF declares 6% pension increase in 2013 The Board of Trustees has approved a monthly pension increase of 6% for all pensioners with effect from 1 April The April 2013 increase is 1.3% higher than the increase provided to pensioners in 2012 and is higher than the current inflation rate of 5.7%. The Board reaffirms that the well-being of all its valued GEPF pensioners remains its priority, which is why the increase has kept pace with inflation. This increase will be applied on a sliding scale starting at 6% for pensioners who retired on or before 1 April 2012, while those who retired after April 2012 will receive 0.5% for each month from their date of retirement up until 31 March Please remember that pensioners who qualify as tax payers will have the tax deducted from their pension and paid directly to SARS. The after-tax pension will be paid on the usual payment date. For more information on the increase and other important related matters, pensioners are advised to read the Frequently Asked Questions (FAQ) attached to their pension increase letters, or contact GEPF s Call Centre on Your future is secure The majority of us depend on our pensions as the major if not the single source of income. Any disruption to our pension fund will seriously impact on our daily lives. Given all the reports of international and local socio-economic disorder and uncertainty, it s understandable therefore that pensioners are concerned about their pension fund. Questions are asked about the security of our benefits; the stability and regularity of the payment of the benefits; and the longterm ability of the Government Employees Pension Fund (GEPF) to meet these commitments. Security In terms of GEPF s law and rules, the pension amount is based on a person s final salary at retirement as well as the number of years of service. The employer (the government) is bound to continue paying this amount (the pension promise) and thus your pension is secure. This promise has consistently been met since the Fund was established in In contrast, many other pension funds worldwide, due to the recent volatile economic conditions and resulting financial constraints, are reducing their payments to pensioners. It is important to note, however, that the annual pension increase is dependent on whether the Fund can afford to pay such an increase. This is dependent on the investment returns that the Fund earns and whether those returns are sufficient to afford the increases. Stability Since its establishment the Fund has succeeded in honouring the basic pension promise as well as awarding yearly increases. In the Frequently Asked Questions supplement to the pension increase letters sent to pensioners, it was shown that over the past 11 years these increases have kept up fully with price increases (inflation), thus providing protection against a deteriorating living standard. Few other defined benefit funds have been able to achieve this measure of stability. Stability was achieved through the Fund s judicious investments and the income they earned. The Fund actively seeks investments that are not only secure, but earn attractive 2 returns that benefit the pensioners and members. Elsewhere in this newsletter, three such exciting new investments are mentioned. In addition to earning good returns for the Fund, these projects will contribute to the economic Dr Frans Le Roux

3 Your future is secure...continued development of the country and play a role in protecting the environment. Viability GEPF is a large fund with assets exceeding R1-trillion. This is more or less the size of the national budget and a third of the value of South Africa s yearly production of goods and services or its gross domestic product. The Board of Trustees responsibility is to ensure that the Fund is managed in the best interests of its pensioners and active members and that the Fund continues to pay pensions to current and future pensioners over the long term. In addition to strict compliance with the requirements of the Government Employees Pension Law and associated rules, the Board has put in place comprehensive governance and administrative structures and associated policies to monitor and react to developments that might impact negatively on the Fund. The results speak for themselves: GEPF s actuaries certified that the Fund has been fully funded since This means that the Fund is able to honour all its current and future commitments. The Fund has achieved clean audit reports since 1996 demonstrating that the auditors are satisfied with the financial administration of the Fund. Locally and internationally the Fund is accepted as a leader in terms of responsible and developmental investing as well as for its governance and oversight structures. As your pensioner trustee on the Board of the Fund for the past three-and-a-half years, I am encouraged by these achievements and am confident that GEPF will continue to deliver on the abovementioned three requirements. In the current climate of widespread concern about deteriorating service delivery, GEPF is proof that there are exceptions. Of course, there will always be room for improvement, but I am optimistic that the Fund will continue to renew itself and remain a recognised leader in pension provision. The Board of Trustees, however, does not have all the answers, nor all the necessary wisdom. It therefore relies on guidance and advice from specialist service providers, and from its pensioners and members. The recent extension of the funeral and orphan benefits to all pensioners, the spouse s pension option and the scrapping of life certificates were, to a large extent, the result of representations by pensioners. While it is not possible to satisfy all pensioners all of the time, pensioner comments and complaints (and compliments) are important to the Fund and are taken seriously. After all, together with the active members we are the co-owners of the Fund and need to make our voices heard in the interest of our Fund. Dr Le Roux is a pensioner Trustee. R60-million investment set aside for quality education GEPF, its asset manager the Public Investment Corporation (PIC) and Old Mutual Investment Group SA (OMIGSA) have signed an agreement to finance BASA Educational Institute Trust schools. The agreement will see the renovation and expansion of Soweto-based BASA Protea Glen Primary School and the development and operation of a new high school, to be called the BASA Protea Glen High School, at a cost of R60-million. Collectively these schools aim to educate learners a year. The financing will be done through the R1.2-billion Schools and Education Investment Impact Fund of South Africa, to which GEPF has contributed R1-billion and Old Mutual R200-million. BASA is a non-profitorganisation founded in 1992 to establish and run low-fee independent primary and secondary schools to 3 address the shortage of such facilities in previously disadvantaged communities. GEPF Principal Officer, John Oliphant, said the Schools Fund reflected the Fund s focus on developmental investments. One of the four pillars of GEPF s developmental investment policy is investing in social infrastructure such as affordable housing, healthcare and, of course, education.

4 R60-million investment set aside for quality education...continued PIC Chief Investment Officer Dr Daniel Matjila echoed these sentiments. A key focus of our investments for GEPF is to support initiatives that have positive and long-term economic and social outcomes for South Africa. BASA Executive Director Luigi Sekoakoa said that the innovative financing partnership provides BASA with an opportunity to expand the provision of quality education. All stakeholders are solidly committed to ensuring the success of the Schools Fund. What is most pleasing about this investment is that it will directly impact the lives of the people of Soweto, including our own members, in a very tangible way as quality education is a very potent weapon against generational poverty, said Oliphant. In line with its developmental investment policy that seeks to invest in projects that deliver superior investment returns while contributing to economic growth and job creation, GEPF, through the Public Investment Corporation (PIC), has recently invested R325 million in two solar projects in Limpopo, Witkop Solar Park and Soutpan Solar Park. At the sod-turning ceremony recently to mark the commencement of construction of Witkop and Soutpan solar plants in the Capricorn District of Limpopo, Deputy Chairperson of the GEPF s Board of Trustees, Prabir Badal said, R325-million for solar energy We believe that our economy will not develop without a secure electricity supply. The performance of GEPF s investment portfolio is dependent on a well-functioning economy and a secure supply of energy is critical in this. During the 2008 power crisis, we saw a number of mines slowing production and this had an adverse effect on our investment portfolio due to our significant exposure in the mining industry. While we need to increase our generation capacity, we also realize that the first developmental goal of South Africa is to keep power flowing in the short to medium term, whilst investing in renewable energy projects such as these solar energy plants for the medium- to longterm, added Badal. GEPF believes that such largescale and long-term infrastructure investment opportunities are well suited to the needs of the Fund a large investor with long-term liabilities and an eye on the future. We want to set an example to other local and international institutional investors by leveraging our investments for the benefit of South Africa, said Badal. L to R, PIC s Dr Matjila, Limpopo Premier Cassel Mathale (middle) GEPF Deputy Chairperson Prabir Badal and Pashu Gopalan, Vice President: SunEdison 4

5 Keeping touch with our modernisation Mobile offices Many GEPF members live in rural areas in and around South Africa, far from a GEPF office. To provide the highest level of service to all members, no matter what their location, GEPF s mobile offices have been travelling countrywide to service members, pensioners and beneficiaries. Call Centre improvements GEPF is focusing on improving its Call Centre and is testing changes to its technology and training its staff to enable them to provide a higher level of customer service to callers. It is hoped that this project will improve the customer s experience by improving query escalation management; reducing customer complaints; and improving customer satisfaction. Taxation of divorce order related retirement benefits Various rules exist for the taxation of divorce benefits paid in terms of a divorce order by GEPF. These rules are broadly outlined below. Divorce orders issued before 13 September 2007 Rules were implemented as an interim measure to exempt amounts payable to a nonmember ex-spouse by private sector funds under divorce orders issued before 13 September 2007 from tax. However, the exemption only applied if the non-member ex-spouse claimed the benefit on or after 1 March The purpose of the exemption was to protect non-member ex-spouses from unanticipated tax consequences that would result if the nonmember ex-spouse was suddenly subject to tax on his/her portion of the lump sum benefit. Tax applicable from 1 March 2012 If an amount becomes payable by a retirement fund on or after 1 March 2012 to a non-member exspouse, that person (and not the member) will be subject to tax in respect of that amount. However no tax will be payable on any amount that becomes payable on or after 1 March 2012 in terms of a divorce order that was issued before 13 September

6 REPORT FRAUD! GEPF s fraud hotline is running at full steam and we encourage members, pensioners and the community at large to use it to report any corruption, fraud or unethical conduct relating to pensions and GEPF. Calls to the hotline are free and callers do not have to give their names when reporting a matter. The fraud hotline number is ( GEPF) and calls are answered 24 hours a day. UPDATE YOUR DETAILS Please remember to let us know about your latest postal address and contact details, including your cell phone number, so that we can stay in touch with you. This will assist us in processing your benefits efficiently and effectively, and will ensure that you continue to receive your fundnews newsletter regularly. Our toll free Call Centre ( ) will assist you in updating your contact details; alternatively you can send an to enquiries@gepf.co.za, or visit the GEPF Regional Office nearest to you. DO YOU LIKE FUNDNEWS? Please let us know if you like fundnews by sending us your comments. Your opinions and inputs are important to us, so please send your suggestions to: The Editor GEPF Communication Private Bag X63 Pretoria 0001 Alternatively, send an to: communication@gepf.co.za HEAD OFFICE (Gauteng: Pretoria) 34 Hamilton Street Arcadia Pretoria PROVINCIAL OFFICES Eastern Cape No. 12, Global Life Office Centre Circular Drive Bhisho Free State No. 2 President Brand Street Bloemfontein KwaZulu-Natal 3rd Floor, Brasfort House 262 Langalibalele Street Pietermaritzburg Limpopo 87(a) Bok Street Polokwane OUR OFFICES Mpumalanga 19 Hope Street Ciliata Building Block A, Ground Floor Mbombela North West Mmabatho Mega City Office No. 4/17 Ground Floor, Entrance 4 Mafikeng Northern Cape 11 Old Main Road Kimberley Western Cape 21st Floor, No. 1 Thibault Square Long Street Cape Town SATELLITE OFFICES Johannesburg: 2nd Floor, Lunga House, 124 Marshall Street (Cnr Marshall & Eloff Gandhi Square Precinct) Marshalltown Port Elizabeth Ground Floor, Kwantu Towers Sivuyile Mini-Square, next to City Hall Mthatha: 2nd Floor, PRD Building Cnr Sutherland & Madeira Streets Durban: 8th Floor, Salmon Grove Chambers 407 Anton Lembede Street OUR CONTACT DETAILS Toll free no: Fax: Web address: / enquiries@gepf.co.za Postal address: GEPF Private Bag X63 Pretoria 0001 DISCLAIMER The information provided in this document is protected by applicable intellectual property laws and cannot be copied, distributed or modified for commercial purposes. While every effort has been made to ensure that the information contained herein is current, fair and accurate, this cannot be guaranteed. The use of this information by any third party shall be entirely at the third party s discretion and is of a factual nature only. The information contained herein does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Service Act, GEPF does not expressly or by implication represent, recommend or propose that products or services referred to herein are appropriate to the particular needs of any third party. GEPF does not accept any liability due to any loss, damages, costs and expenses, which may be sustained or incurred directly or indirectly as a result of any error or omission contained herein. 6