CIDA EMPOWERMENT (PROPRIETARY) LIMITED
(Registration Number : 2004/025068/07)
ANNUAL FINANCIAL STATEMENTS

CIDA Empowerment Annual Financial Statements Empowerment (Pty) Ltd
Annual Financial Statements
Empowerment Fund
28 February 2008

Report of the independent auditors the members of CIDA Empowerment (Proprietary) Limited

We have audited the annual financial statements and group annual financial statements of CIDA Empowerment (Proprietary) Limited which comprises the directors’ report, the income statement, the balance sheets as at 29 February 2008, the statements of changes in equity and cash flow statements for the period then ended, a summary of significant accounting policies and other explanatory notes, as set out below.

Directors’ Responsibility for the Financial Statements

The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.  This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. 

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant estimates made by the directors, as well as evaluating the overall financial statement presentation and disclosures.

We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

Emphasis of matter

As detailed in the director's report, the 2007 Group Comparatives comprise only the Company's results as no consolidation was prepared.

Opinion

In our opinion, except for the impact of the above, the financial statements present fairly, in all material respects, the financial position of the group and company at 29 February 2008, and of its financial performance and its cash flows for the period then ended in accordance with International Reporting Standards and in the manner required by the Companies Act of South Africa.  

Deloitte & Touche
Per: B G C Fannin
Partner - Assurance
15 October 2008

REPORT OF THE DIRECTORS 29 February 2008

The directors have pleasure in presenting their report on the activities of the company for the period ended 29 February 2008.

General review

The business and operations of CIDA Empowerment (Proprietary) Limited are geared towards the generation of educationally directed annuity income, through a high-yielding portfolio of Black Economic Empowerment (“BEE”) related investments in a mixture of high-growth, highly cash generative entities.  CIDA Empowerment (Proprietary) Limited positions itself as a BEE partner of choice for companies operating within South Africa, seeking suitable empowerment credentials.

Nature of business

The company pursues highly cash generative BEE related investments, in order to build a high-yielding investment portfolio which will generate annuity income to fund the delivery of education of financially disadvantaged black South African students, through CIDA City Campus.

Group comparative figures

In 2007, the Company did not prepare consolidated financial statements, therefore the Group 2007 details disclosed in the financial statements comprise only the Company's results.

Statement of directors’ responsibility

The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information.  The auditors are responsible for reporting on the fair presentation of the annual financial statements.  The financial statements have been prepared in accordance with International Financial Reporting Standards and in the manner required by the Companies Act in South Africa.

The directors are also responsible for the company’s systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements, and to adequately safeguard, verify and maintain accountability of the company’s assets, and to prevent and detect misstatement and loss.  Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the period under review. The annual financial statements have been prepared on a going concern basis, since the directors have every reason to believe that the company has adequate resources in place to continue in operation for the foreseeable future.

Share capital

The company’s authorised share capital consists of 1 000 ordinary shares of R1 each.

Holding company

The company’s holding company is CIDA Empowerment Trust.

Dividends

No dividends were paid during the period under review.

Subsequent events

Investments

In line with both the executive management and CIDA Empowerment Investment committee’s recommendation, the company invested in 136 612 ordinary shares amounting to R2 500 000 in the proposed SASOL BEE transaction.

Auditors

Deloitte & Touche are the appointed auditors of the company in accordance with section 270(2) of the Company’s Act.

Directors

The directors of the company during the period under review and up to the date of this report were as follows:

J Kogl
ZK Nzimande
PL Heinamann (Resigned: 13 December 2006)
T Chiappini - Young
LY Mashologu (Resigned: 31 July 2007)
I Dlamini (Appointed: 18 October 2006)
D Skwambane (Appointed: 9 July 2007) 

Registered office

3 on Glenhove
Corner of Glenhove and Tottenham roads
Melrose Estate
2196

Postal address

Postnet Suite 218
Private Bag X31
Saxonwold
2132

INCOME STATEMENTS for the 18 month period ended 29 February 2008

    Group Company
  Notes 18 months
ended
29/02/2008
31/08/2006 18 months
ended
29/02/2008
31/08/2006
    R R R R
           
Revenue 5 20 349 351 10 535 799 20 349 351 10 535 799
Administration costs   (2 986 786) (1 379 548) (2 917 319) (1 379 548)
Net fair value gains 6 38 604 962 50 259 418 23 564 796 50 259 418
Profit from operations 7 55 967 527 59 415 669 40 996 828 59 415 669
Equity accounted profit from joint venture 8 39 124 - - -
Net finance costs 9 (4 897 512) (87 614) 2 672 529 (87 614)
Profit before taxation   51 109 139 59 328 055 43 669 357 59 328 055
Taxation 10 (7 789 561) (9 682 125) (6 087 460) (9 682 125)
Profit for the period   43 319 578 49 645 930 37 581 897 49 645 930

BALANCE SHEETS 29 February 2008

    Group Company
  Notes 29/02/2008 31/08/2006 29/02/2008 31/08/2006
    R R R R
Assets          
           
Non-current assets          
Property, plant and equipment 11 26 391 14 982 26 391 14 982
Loans receivable 12 6 466 419 - 2 308 164 -
Investments 13 122 843 980 46 162 261 73 686 188 46 162 261
Investment in joint venture   39 174 - 50 -
Investment in subsidiary 14 - 4 097 301 1 351 430 4 097 301
    129 375 914 50 274 544 77 372 223 50 274 544
           
Current assets          
Receivables 15 110 839 153 085 110 839 153 085
Affiliated accounts receivable 16 127 713 - 197 180 -
Cash and cash equivalents   24 873 748 10 233 692 24 873 748 10 233 692
Total current assets   25 112 300 10 386 777 25 181 767 10 386 777
Total assets   154 488 214 60 661 321 102 553 990 60 661 321
           
Equity and liabilities          
           
Capital and reserves          
Share capital 17 100 100 100 100
Accumulated profits   85 269 062 48 834 221 86 416 118 48 834 221
Total capital and reserves   85 269 162 48 834 321 86 416 218 48 834 321
           
Non-current liability          
Preference share capital 18 1 - - -
Long-term loan 19 50 666 133 1 317 063 - 1 317 063
Total non-current liabilities   50 666 134 1 317 063 - 1 317 063
           
Deferred capital gains taxation 20 12 750 636 7 287 616 10 335 390 7 287 616
           
Current liabilities          
Trade and other payables 21 345 337 462 812 345 437 462 812
Provisions 22 22 750 - 22 750 -
Short-term loan 23 - 365 000 - 365 000
Taxation   5 434 195 2 394 509 5 434 195 2 394 509
Total current liabilities   5 802 282 3 222 321 5 802 382 3 222 321
Total equity and liabilities   154 488 214 60 661 321 102 553 990 60 661 321
 

STATEMENTS OF CHANGES IN EQUITY for the 18 month period ended 29 February 2008


  Share
capital
Accumulated
profits
Total
  R R R
Group      
Balance at 31 August 2006 100 (811 709) (811 609)
Profit for the period - 49 645 930 49 645 930
Balance at 1 September 2007 100 48 834 221 48 834 321
Profit for the period - 43 319 578 43 319 578
Less: Cost of investment in subsidiary - (4 097 101) (4 097 101)
Less: Subsidiary losses as at February
2007 not consolidated
- (2 787 636) (2 787 636)
Balance at 31 August 2008 100 85 269 062 85 269 162
 
Company      
       
Balance at 31 August 2006 100 (811 709) (811 609)
Profit for the period - 49 645 930 49 645 930
Balance at 1 September 2007 100 48 834 221 48 834 321
Profit for the period - 37 581 897 37 581 897
Balance at 31 August 2008 100 86 416 118 86 416 218

CASH FLOW STATEMENTS for the 18 month period ended 29 February 2008

    Group Company
   Notes 18 month
period
ended

29/02/2008
31/08/2006 18 month
period
ended

29/02/2008
31/08/2006
    R R R R
Operating activities:          
Cash generated from operations 24 17 235 073 8 932 377 17 196 049 8 932 377
Interest received   3 388 615 23 008 2 806 856 23 008
Finance costs   (8 286 127) (110 622) (134 327) (110 622)
Taxation paid 25 - - - -
           
Net cash from operating activities   12 337 561 8 844 763 19 868 578 8 844 763
           
Investing activities:          
Movement in investments during the period   (40 190 172 ) - (1 213 310) -
Additions to property, plant and equipment   (24 985) (16 925) (24 985) (16 925)
           
Net cash utilised in investing activities   (40 215 157) (16 925) (1 238 295) (16 925)
           
Financing activities:          
Long-term loan raised (paid)   49 828 953 913 562 (1 317 063) 913 562
Increase in loan receivable   (6 946 301) - (2 308 164) -
Short-term loan (paid) raised   (365 000) 268 928 (365 000) 268 928
           
Net cash from financing activities   42 517 652 1 182 490 (3 990 227) 1 182 490
           
Net increase in cash and cash equivalents   14 640 056 10 010 328 14 640 056 10 010 328
           
Cash and cash equivalents at beginning of the period   10 233 692 223 364 10 233 692 223 364
           
Cash and cash equivalents at end of the period   24 873 748 10 233 692 24 873 748 10 233 692

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the 18 month period ended 29 February 2008

1. Presentation of financial statements

    These financial statements are presented in Rands since this is the currency in which the majority of the Group’s transactions are denominated.

2. Adoption of new and revised standards

2.1 Standards and Interpretations effective in the current period

    In the current year, the Group has adopted IFRS 7 Financial Instruments: Disclosures which is effective for annual reporting periods beginning on or after 1 January 2007, and the consequential amendments to IAS 1 Presentation of Financial Statements.

2.2  Standards and Interpretations in issue not yet adopted

    At the date of authorisation of these financial statements the following Interpretations were in issue but not yet effective:

    - IAS 23 (Revised) Borrowing Costs (effective for accounting periods beginning on or after 1 January 2009);
    - IFRIC 8 Scope of IFRS 2
    - IFRIC 9 Reassessment of embedded derivatives

    The directors anticipate that all of the above Interpretations will be adopted in the Group’s financial statements for the period commencing 1 January 2008 and that the adoption of those Interpretations will have no material impact on the financial statements of the Group in the period of initial application.

3. Summary of significant accounting policies

    The annual financial statements have been prepared under the historical cost convention with the exception of certain assets that are carried at fair value, and in accordance with International Financial Reporting Standards. The principal accounting policies adopted in the preparation of these annual financial statements are set out below and are consistent in all material respects with those applied in the previous period.

    Basis of consolidation

    The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

    The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

    Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

    All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

    Business combinations

    Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

    Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

    Interests in joint ventures

    A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control.

    Where a group entity undertakes its activities under joint venture arrangements directly, the Group's share of jointly controlled asets and any liabilities incurred jointly with other ventureers are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group's share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.

    Joint venture arrangements that involve the establishment of a seperate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entites using proportionate consolidation, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The Group's share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis.

    Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group's interest in the joint venture.

    Revenue recognition 

Revenue comprises the invoiced value of sales and services rendered to customers, excluding Value Added Taxation, customer returns and rebates in respect of trading operations and is recorded at the date services are rendered.

    Licensing fee

    Income from licensing fee is recognised when the Group becomes legally entitled to the income.

    Consulting income

    Income from consultation is recognised when the services which give rise to this income takes place.

    Dividend income

    Dividend revenue from investments is recognised when the shareholder's right to receive payment has been established.

    Grants and donations

    Grants and donation income are recognised when the Group becomes legally entitled to the income.

    Interest received

    Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity.

    Borrowing costs

    All borrowing costs are dealt with in income in the period in which they are incurred.

    Taxation

    Income tax expense represents the sum of the tax currently payable and deferred tax.

    Current tax

    The tax currently payable is based on taxable profit for the year.  Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Group’s liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

    Deferred tax

    Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit not the accounting profit.

    Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

    Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

    The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.  

    Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

    Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

    Property, plant and equipment

    Property, plant and equipment is stated at historical cost less accumulated depreciation rates.  Appropriate annual depreciation are applied to reduce book values over their useful lives to estimated residual values using the straight line method.

Furniture & fittings
    10%
Computer equipment
    33.33%
Ofiice equipment
    10%

    The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.

    Provisions

    Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

    The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

    When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

    Financial instruments

Financial assets

    Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value

    Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’.

    The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

    Effective interest method

    The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

    Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.

    Financial assets at FVTPL

    Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL.

    A financial asset is classified as held for trading if:

    • it has been acquired principally for the purpose of selling in the near future; or
    • it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
    • it is a derivative that is not designated and effective as a hedging instrument.

    A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

    • such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
    • the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
    • it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments:
    • Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
    • Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in note 26.

    Loans and receivables

    Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.  Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

    Impairment of financial assets

    Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

    Derecognition of financial assets

    The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

    Financial liabilities and equity instruments issued by the Group

    Classification as debt or equity

    Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

    Equity instruments

    An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

    Compound instruments

    The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

    Financial liabilities

    Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

    Other financial liabilities

    Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

    Derecognition of financial liabilities

    The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

    Leased assets

    Rentals under operating leases are charged to income on the straight line basis over the term of the relevant lease.

4. Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that  management has made in the process of applying the entity’s accounting policies and that have the  most significant effect on the amounts recognised in financial statements.

    Judgements

    In the process of applying the group and Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

    Income Taxes

    The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the balance sheet date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods.

    Contingent liabilities

    Management applies its judgment to the fact patterns and advice it receives from its attorney, advocates and other advisors in assessing if an obligation is probable, more likely than not, or remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability.

    Fair value of derivatives and other financial instruments

    As described in note 26, the directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. Other financial instruments are valued using a price earnings analysis based on assumptions supported, where possible, by observable market prices or rates. The estimation of fair value of unlisted shares includes some assumptions not supported by observable market prices or rates. The carrying amount of the shares for the Group is R122 843 930 (2007: R46 162 261). Details of the assumptions used and of the results of sensitivity anlyses regarding these assumptions are provided in note 26.

  Group Company
  18 month
period
ended

29/02/2008
31/08/2006 18 month
period
ended

29/02/2008
31/08/2006
  R R R R
         
5. Revenue        
         
Revenue comprises:        
- Conference fees - 275 878 - 275 878
- Consulting fees 632 623 71 630 632 623 71 630
- Donations 249 300 10 003 194 249 300 10 003 194
- Fundraising services - 100 000 - 100 000
- Recoupments - 85 097 - 85  097
- Grants 81 714 - 81 714 -
- Capital profit on sale of donated shares 18 700 000 - 18 700 000 -
- Licensing fee 150 000 - 150 000 -
- Dividend income 535 714 - 535 714 -
  20 349 351 10 535 799 20 349 351 10 535 799
         
6.  Net fair value gains        
         
Fair value gains comprise of:        
- SOMA Initiative Investment 2 552 125 2 328 926 2 552 125 2 328 926
- Trans Union Credit Bureau Investment 23 857 900 43 833 291 23 857 900 43 833 291
- CIDA BCE Investments (Pty) Ltd - 4 097 201 (2 745 771) 4 097 201
- Via Capital (Pty) Ltd (436 339)   (436 339) -
- Ownership Solution (Pty) Ltd 336 881   336 881 -
- BCE Foodservices Equipment 12 294 395 - - -
  38 604 962 50 259 418 23 564 796 50 259 418
         
7. Profit from operations        
         
This is arrived at after taking the following into account:        
         
Expenses:        
Auditors remuneration        
- Audit fees 173 668 195 000 104 200 195 000
         
Depreciation:        
- Office equipment 314 - 314 -
- Furniture and fittings 754 82 754 82
- Computer equipment 11 847 1 861 11 847 1 861
  12 915 1 943 12 915 1 943
- Consulting fees 258 175 290 003 258 175 290 003
- Loss on disposal of assets 661 - 661 -

- Operating lease - property rental

130 755 78 184 130 755 78 184
 
 
  The company does not have any obligations under future non-cancellable leases.

8. Joint venture

  The following amounts are included in the financial statements:
Group Issued
Share
Capital
% Held Cost Share of
Net Profit
Total
    % R R R
           
MRX 78 Investment Holdings (Pty) Ltd 100 50 50 39 124 39 124
 
  A summary of the financial position and
results of operations are as follows:
 
  Current
assets
Current
liabilities
Accumulated
(loss)
Non-
Distributable
Reserve
  R R   R
MRX 78 Investment Holdings (Pty) Ltd 454 - (172 753) 252 000
         
 

  Group Company
  18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
9. Net finance costs        
Interest received 3 388 615 23 008 2 806 856 23 008
Interest paid (8 286 127) (110 622) (134 327) (110 622)
  (4 897 512) (87 614) 2 672 529 (87 614)
         
10.  Taxation        
South African normal taxation        
- current taxation - normal 328 186 2 394 509 328 186 2 394 509
 - capital gain 2 711 500 - 2 711 500 -
- deferred taxation 5 020 286 7 287 616 3 299 071 7 287 616
- rate change (275 888) - (251 297) -
  7 789 561 9 682 125 6 087 460 9 682 125
         
Taxation rate reconciliation        
         
Profit before taxation 51 109 139 59 328 055 43 669 357 59 328 055
Taxation at the statutory rate 14 821 650 17 205 136 12 664 113 17 205 136
         
Permanent differences        
         
Dividends received (155 357) - (155 357) -
Grants received (23 687)   (23 687)  
Non-deductible expenses 2 315 365 - 99 907 -
Capital gains taxation on fair value gains (5 794 581) (7 287 616) (3 299 071) (7 287 616)
Capital gain realized in current year (2 711 500) - (2 711 500) -
Change in taxation rate (662 329) - (486 945) -
Assessed loss utilized - (235 395) - (235 395)
Reconciled taxation balance 7 789 561 9 682 125 6 087 460 9 682 125

11. Property, plant and equipment

Group and company Office
equipment
Furniture
and fittings
Computer
equipment
Total
  R R R R
         
2008        
         
Cost        
At 1 September 2007 - 825 16 100 16 925
Disposals - (825) - (825)
Additions 12 346 5 044 7 595 24 985
         
At 29 February 2008 12 346 5 044 23 695 41 085
         
Accumulated depreciation        
At 1 September 2007 - 82 1 861 1 943
Disposals - (164) - (164)
Depreciation 314 754 11 847 12 915
         
At 29 February 2008 314 672 13 708 14 694
         
Carrying value        
At beginning of the period - 743 14 239 14 982
         
At end of the period 12 032 4 372 9 987 26 391
         
2007        
         
Cost        
At 1 September 2006 - - - -
Additions - 825 16 100 16 925
         
At 31 August 2007 - 825 16 100 16 925
         
Accumulated depreciation        
At 1 September 2006 - - - -
Depreciation - 82 1 861 1 943
         
At 31 August 2007 - 82 1 861 1 943
         
Carrying value        
At beginning of the period - - - -
         
At end of the period - 743 14 239 14 982


         
  Group Company
  18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
         
12.  Loans receivable        
         
- Ownership solutions 2 308 164 - 2 308 164 -
- BCE Foodservices Equipment (Pty) Ltd 4 158 255 - - -
  6 466 419 - 2 308 164 -
         
13. Investments        
         
Stated at fair value through profit and loss        
         
Unlisted        
- Transunion Credit Bureau 67 691 201 43 833 301 67 691 201 43 833 301
 - SOMA Initiative 4 881 085 2 328 960 4 881 085 2 328 960
- Via Capital 763 661 - 763 661 -
- Ownership Solutions 336 908 - 336 908 -
- Scatterings of Africa 13 333 - 13 333 -
- BCE Foodservices Equipment 49 157 742 - - -
  122 843 930 46 162 261 73 686 188 46 162 261
 

14.  Investment in subsidiary Issued
share capital
Percentage
held
   
  R %    
         
Unlisted        
         
Stated at fair value through profit and loss        
         
- CIDA BCE Investments (Pty) Ltd 100 100 1 351 430 4 097 201
      1 351 430 4 097 201
 
15. Receivables        
         
Other receivables 110 839 153 985 110 839 153 085
         
The directors consider that the carrying
amount of trade and other receivables
approximates their fair value.
       
 
  Group Company
16. Affiliated accounts receivable 18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
         
CIDA BEE Investments (Pty) Ltd - - 69 467 -
CIDA Empowerment trust 127 713 - 127 713 -
  127 713 - 197 280 -
         
17. Share capital        
         
Authorised        
1 000 ordinary shares of R1 each 1 000 1 000 1 000 1 000
         
Issued        
100 ordinary shares of R1 each 100 100 100 100
         
18. Preference share capital        
         
Authorised and issued        
1 ‘B’ preference share with a par value of R1 1 - - -
         
19. Long-term loan        
         
Investec Bank Limited 50 666 133 1 317 063 - 1 317 063
         
The loan bears interest at prime
plus 4% and is by intent long-term
in nature.
       
         
20. Deferred capital gains taxation        
         
Balance at the beginning of the period 7 287 616 - 7 287 616 -
Charge to the income statement 5 025 763 7 287 616 3 299 071 7 287 616
Change in rate (275 888) - (251 297) -
Opening balance – CIDA BCE 713 145 - - -
Balance at the end of the period 12 750 636 7 287 616 10 355 390 7 287 616
         
 

  Group Company
21. Trade and other payables 18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
         
Trade payables 165 337 42 214 165 437 42 214
Other payables and accruals 180 000 180 598 180 000 180 598
  345 337 222 812 345 437 222 812
         
The directors consider the
carrying amounts of the trade
and other payables approximate
their fair value.
       
         
 
  Group Company
22. Provisions 18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
         
 Group and company Leave pay      
         
Balance at the beginning of the year -      
Charge to the income statement 22 750      
Balance at the end of the year 22 750      
 
 
  Group Company
23. Short-term loan 18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
Unsecured        
Connectivity (Proprietary) Limited - 365 000 - 365 000
The loan bears interest at prime
less 3% and does not have a
repayment date.
       
 
  Group Company
24.  Cash generated from  operations 18 month
period ended
29/02/2008
31/08/2006 18 month
period ended
29/02/2008
31/08/2006
  R R R R
Profit before taxation 51 109 139 59 328 055 43 669 357 59 328 055
Adjustments for:        
- Depreciation 12 915 1 943 12 915 1 943
- Loss on disposal of assets 661 - 661 -
- Fair value adjustments (38 604 962) (50 259 418) (23 564 796) (50 259 418)
- Net finance costs 4 897 512 87 614 (2 672 529) 87 614
         
Operating income before working capital changes 17 415 265 9 158 194 17 445 608 9 158 194
         
Adjustments for working capital changes:        
 - Decrease in receivables 42 246 (153 185) 42 246 (153 185)
 - Increase in affiliated accounts receivable (127 713) - (197 180) -
 - Increase in trade  and other payables 122 525 (257 632) 122 625 (257 632)
 - (Decrease) increase in  provisions (217 250) 185 000 (217 250) 185 000
  (180 192) (225 817) (249 559) (225 817)
Cash generated from (utilised in) operations 17 235 073 8 932 377 17 196 049 8 932 377
         
25.  Taxation paid        
         
Amount unpaid at the beginning of the period 2 394 509 - 2 394 509 -
Charge to the income statement (Excl Deferred taxation) 3 039 686 2 394 509 3 039 686 2 394 509
Amount unpaid at the end of the period (5 434 195) (2 394 509) (5 434 195) (2 394 509)
Taxation paid - - - -
         
 

26. Financial instruments        

Collateral pledged by Group

In the event of default on repayment of the loan from Investec Bank Ltd when due, the following pledged assets become the property of Investec Bank Ltd:


Financial assets pledged Carrying
value 2008
Carrying
value 2007
     
250 Ordinary shares in BCE Foodservices Equipment (Pty) Ltd 27 913 933 17 303 443
250 Cumulative redeemable preference shares in BCE Foodservices Equipment (Pty) Ltd 21 243 809 19 559 904
Total 49 157 742 36 863 347

A preference share was issued to Investec together with the loan from them to finance the shares purchased in BCE Foodservices Equipment (Pty) Ltd. The preference share issued to Investec are redeemable at the discretion of the preference shareholder. The preference shareholder is entitled to 49% of the amount which is distributable to the ordinary shareholders of the company on the date at which such amount becomes available. The preference share is also redeemable at any time after 3 years from the date of issue which was 1 December 2005.

Collateral pledged by the Company

There were no financial assets pledged as collateral by the company in the current year.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company.  The company only transacts with entities that are rated the equivalent of investment grade and above. 

The carrying amounts of the loans included in the balance sheet represent the company’s maximum exposure to credit.

    Group   Company
Trade receivables   110 839   110 839
Loans receivable   6 466 419   2 308 164
Total   6 577 258   2 419 003

These loans are not considered to be neither past due nor impaired.  Refer to note 12 for details on these loans.

Credit quality

The Group has two types of financial assets that could be exposed to credit risk: Loans receivable from investment companies and other receivables. 

Loans to investment companies – prior to acquisition of any investment, the company’s risk profile, company strategy and performance is evaluated.  The loans to BCE Foodservices Equipment and Ownership Solutions are therefore considered to have a low credit risk and hence good credit quality.

The other receivables in the current year are considered to be immaterial.

Market risk management

Interest rate risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Price risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices other than those arising from interest rate risk or foreign currency risk.

Foreign currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The company’s activities expose it primarily to the financial risks of fluctuations in equity prices due to the fact that investments are valued using P/E ratio’s, as well as fluctuations in interest rates due to the loan from Investec Bank Ltd bearing interest at prime plus 4% and a loan issued to BCE Foodservices Equipment (Pty) Ltd which bears interest at the prime rate.  The company is not vulnerable to foreign currency risk, as none of its transactions have been done in a foreign currency.

Market risk exposures are measured using sensitivity analyses.  A sensitivity analysis shows how profit or loss before taxation and equity would have been affected by changes in the relevant risk variable that were reasonably possible at the reporting date.

Interest rate

The sensitivity analyses below have been determined based on the relevant financial instruments’ exposure to interest rates at the balance sheet date.  In the current year the exposure to the interest rates can be linked to the long term loan from Investec Bank Ltd which bears interest at prime rate plus 4% as well as the loan issued to BCE Foodservices Equipment (Pty) Ltd which bears interest at the prime interest rate.  The analysis is prepared assuming the amount of the liability outstanding at the balance sheet date was outstanding for the whole year.  The following basis points increases or decreases is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.  The change for 2007 (comparative year) is the actual 250 basis points increase in interest rates that occurred over the 2008 financial year.

Interest rate sensitivity analyses


Loan to BCE Foodservices Equipment (Pty) Ltd   2008   2007
    %   %
RSA prime rates        
Basis point increase   150   250
         
    R   R
Potential movement in profit after taxation   62 374   101 409
 
Loan from Investec Bank Ltd   2008   2007
    %   %
RSA prime rates        
Basis point increase   150   250
         
    R  
    R
Potential movement in profit after taxation   (759 992)   (1 074 855)

Price risk

The sensitivity analysis below has been determined based on the average volatility of the JSE Securities Exchange All Share Index (ALSI), over the preceding 5 years.

This is a specific risk at this entity, since fair value adjustments to the investments are calculated using Price/Earnings valuation model. The Price/Earnings ratio's of similar listed companies were used in the valuations performed and as a result the volatility of the JSE Securities Exchange All Share Index (ALSI) were used to assess other price risk of this entity.

The volatility of this market index has been used for the volatility of the investment held by this company.  It was decided to use the movement in the ALSI as a representative movement of all investments, given that the ALSI broadly represents the market and the South African economy as a whole.

The effect on the profit after taxation is based on an upward movement in the ALSI of 15.29% (2007 13.55%).  A positive number below indicates an increase in profit after taxation and a negative number represents a decrease in profit after taxation.

Price risk sensitivity analysis - Group


Investment in BCE Foodservice Equipment (Pty) Ltd   2008   2007
         
Movement in P/E ratio   7%   13.55 %
         
Potential movement in profit after taxation   3 072 638   5 711 500

Price risk sensitivity analysis – Group and company


Investment in Transunion Credit Bureau   2008   2007
         
Movement in P/E ratio   7%   13.55 %
         
Potential movement in profit after taxation   5 368 348   7 965 199
 
Investment in SOMA   2008   2007
         
Movement in P/E ratio   7%   13.55 %
         
Potential movement   834 037   472 413
         
Investment in Ownership solutions   2008    
         
Movement in P/E ratio   7%    
         
Potential movement   20 282    

27. Reclassification of prior year comparatives

Where considered more appropriate, amounts from the prior year were reclassified for better presentation.

 

 

“The education offered at CIDA City Campus is designed to make students relevant, truly empowered, integrated citizens and leaders that are skilled and equipped to build the South African economy and society.”

- President Thabo Mbeki, addressing Parliament, 2001

 

“I believe the students at CIDA are using creativity and lateral thinking skills to a remarkable degree.”

- Edward De Bono

 

CIDA
view print-ready
version of this page

or