CIDA EMPOWERMENT TRUST
(Trust number: IT5016/04)
ANNUAL FINANCIAL STATEMENTS

CIDA Empowerment Trust Annual Financial Statements
28 February 2009


Report of the independent auditors to the trustees of CIDA Empowerment Trust

We have audited the annual financial statements and group annual financial statements of CIDA Empowerment Trust which comprises the Trustees’ report, the income statement, the balance sheet as at 28 February 2009, the statement of changes in equity and cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out below.

Trustees’ Responsibility for the Financial Statements

The trust’s Trustees 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 Trustees, 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.

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 trust at 28 February 2009, and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.

Supplementary information

The schedule of administration costs and list of bursary recipients set out on pages 29 - 31 do not form part of the financial statements and is presented as additional information. We have not audited this schedule and accordingly we do not express an opinion on it.

 

Deloitte & Touche
 
 
Per: T Abdool-Samad
 Partner - Assurance
 8 October 2009

 

 

CIDA EMPOWERMENT TRUST REPORT OF THE TRUSTEES 28 February 2009

The Trustees have pleasure in presenting their report on the activities of the group and trust for the year ended 28 February 2009.

General review

CIDA Empowerment Trust is an investment trust which was established to fund higher level education in the accredited higher education institution, CIDA City Campus. To achieve this objective, the Trust pursues investment opportunities related to broad-based Black Economic Empowerment.

The primary objectives of the CIDA Empowerment Trust and that of its subsidiary, CIDA Empowerment (Pty) Limited, are:

  • To fund the education of its beneficiaries, the current and future black students of the CIDA Education Group, 60% of whom must be black women students (in accordance with the specifications of its Trust Deed) in perpetuity.
  • To develop, educate and train Black persons (as defined in the Broad-Based Black Empowerment Act (“the Act”), Black women and Black Designated Groups (as defined in the Act.).

In its role as a Black Economic Empowerment investor, the principle activity of the Trust is to build and manage a high-yielding investment portfolio which will generate a continuous flow of income thus enabling the Trust to fulfil its stated objectives.

Financial results

The results of the group and trust are set out in the attached annual financial statements.

The Trustees comment as follows.

Interest Income

Interest Income is generated from Diamond Fund donation income that was raised during the previous financial year. Given the very challenging economic environment, no new funding has been raised during the current year.

Administrative expenses

The administrative costs, comprising audit and legal fees, are in line with those of the previous years. Operational costs are typically carried by the Trust’s investment vehicle, CIDA Empowerment.

Corporate Social Investment

During the year, the Trust made a Corporate Social Investment donation of R150 000 to CIDA City Campus.

Trust distribution

In keeping with its deed and mandate, the Trust awarded 30 bursaries to CIDA City Campus BBA students, valued at R30 000 per bursary.  While the R900 000 allocation was provided for in the current year, payment was only made in May 2009. The list of funded bursary recipients is attached in the notes to the annual financial statements.  

Subsequent events

Trust distribution

In keeping with its trustee deed and mandate, the trust made the following distributions in the form of Bursary Wards to CIDA City Campus BBA students post financial year-end:

  • R600 000 was paid to CIDA City campus (in October 2009), to cover the cost of 15 CIDA student bursaries (at a cost of R40 000 per student).
  • R360 000 was paid to CIDA City campus (in November 2009), to cover the cost of 9 CIDA student bursaries (at a cost of R40 000 per student).

Dividend received

On the 4th of November 2009, the Trust received a dividend of R360 000 from its ABSA Batho Bonke investment.  This dividend was immediately distributed in the form of bursary awards to CIDA City Campus students.

Trustees

The trustees of the trust during the year under review and up to the date of this report were as follows:

A P Blecher (Resigned 24 May 2008)
M E Davids
N P Khumalo
J Kogl
D M Lawrence (Resigned 13 November 2009)
L  Y Mashologu 
N N Mazwai
S S Ndlungwane (Resigned 24 May 2008)
D Skwambane
J Madavo (Appointed 15 October 2009)

The business and postal address is as follows

  

Registered office

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

Postal address

Postnet Suite 218
Private Bag X31
Saxonwold
2132

  

CIDA EMPOWERMENT TRUST INCOME STATEMENT for the year ended 28 February 2009

  
    Group Trust
  Notes 2009 2008 2009 2008
    R R R R
Revenue 5 2 444 563 30 522 994 - 10 173 643
Administration costs   (2 777 939) (3 119 290) (197 336) (132 504)
Net fair value gains (losses) 6 14 517 937 34 094 162 (4 708 601) (4 510 800)
Profit (loss) from operations 7 14 184 561 61 497 866 (4 905 937) 5 530 339
Equity accounted profit from joint venture   - 39 124 - -
Net finance (costs) income 8 (6 373 607) (3 933 003) 1 317 585 964 509
Profit before taxation   7 810 954 57 603 987 (3 588 352) (6 494 848)
Taxation 9 (2 970 205) (7 789 561) - -
Profit for the year   4 840 749 49 814 426 (3 588 352) 6 494 848
  

CIDA EMPOWERMENT TRUST BALANCE SHEETS 28 FEBRUARY 2009

    Group Trust
  Notes 2009 2008 2009 2008
    R R R R
Assets          
           
Non-current assets          
Property, plant and equipment 10 48 976 26 391 - -
Investments 11 149 124 674 130 583 930 3 031 399 7 740 000
Investment in joint venture 12 1 39 174 - -
Investment in subsidiary 13 - - 100 100
Loans receivable 14 6 542 437 6 466 419 - -
    155 716 088 137 115 914 3 031 499 7 740 100
Current assets          
Other receivables 15 388 449 110 839 6 587 -
Affiliated account receivable 16 - - 4 431 -
Cash and cash equivalents   36 411 671 36 014 404 12 457 852 11 140 656
Total current assets   36 800 120 36 125 243 12 468 870 11 140 656
Total assets   192 516 208 173 241 157 15 500 369 18 880 756
           
Funds and liabilities          
           
Funds          
Founding donation 17 100 100 100 100
Accumulated surplus   107 962 754 104 022 005 14 264 591 18 752 943
Total funds and reserves   107 962 854 104 022 105 14 264 691 18 753 043
           
Non-current liability          
Preference share capital   1 1 - -
Long-term loan 18 61 254 839 50 666 133 - -
Total non-current liabilities   61 254 840 50 666 134 - -
           
Dererred capital gains taxation 19 15 451 671 12 750 636 - -
           
Current liabilities          
Trade and other payables 20 2 087 474 345 337 1 235 678 -
Provision for leave pay 21 56 004 22 750 - -
Affiliated account payable 22 - - - 127 713
Taxation   5 703 365 5 434 195 - -
Total current liabilities   7 846 843 5 802 282 1 235 678 127 713
Total funds and liabilities   192 516 208 173 241 157 15 500 369 18 880 756

CIDA EMPOWERMENT TRUST STATEMENTS OF CHANGES IN EQUITY for the year ended 28 February 2009

  Founding donation Accumulated surplus Total
  R R R
Group      
Balance at 28 February 2007 100 12 258 095 12 258 195
Add opening balance for Empowerment (Pty) Ltd Group - 41 949 484 49 814 426
Profit for the year - 49 814 426 41 949 484
Balance at 29 February 2008 100 104 022 005 104 022 105
Distribution declared - (900 000) (900 000)
Profit for the year - 4 840 749 4 840 749
Balance at 28 February 2009 100 107 962 754 107 962 854
       
Trust      
       
Balance at 28 February 2007 100 12 258 095 12 258 195
Profit for the year - 6 494 848 6 494 848
Balance at 29 February 2008 100 18 752 943 18 753 043
Distribution declared - (900 000) (900 000)
Loss for the year - (3 588 352) (3 588 352)
Balance at 28 February 2009 100 14 264 591 14 264 691

CIDA EMPOWERMENT TRUST CASH FLOW STATEMENTS for the year ended 28 February 2009

    Group Trust
  Notes 2009 2008 2009 2008
    R R R R
Operating activities:          
Cash generated from operations 23 1 214 940 27 720 026 899 611 10 173 283
Interest received   4 215 098 4 353 123 1 317 585 964 509
Interest paid   (10 588 705) (8 286 126) - -
Trust distribution   (900 000) - (900 000) -
Net cash (utilised in) from
operating activities
  (6 058 667) 23 787 023 1 317 196 11 137 792
           
Investing activities:          
Additions to property, plant and equipment   (37 592) (41 190) - -
Proceeds on disposal of property,
plant and equipment
  3 597 - - -
Investments during the year   (4 022 759) (31 933 288) - -
Net cash utilised in investing activities   (4 056 754) (31 975 198) - -
           
Financing activities:          
Long-term loan raised   10 588 706 51 146 015 - -
Increase in loan receivable   (76 018) (6 946 301) - -
Preference share capital   - 1    
Net cash from financing activities   10 512 688 44 199 715 - -
           
Net increase in cash and cash equivalents   397 267 36 011 540 1 317 196 11 137 792
Cash and cash equivalents at beginning of the year   36 014 404 2 864 11 140 656 2 864
Cash and cash equivalents at the end of the year   36 411 671 36 014 404 12 457 852 11 140 656

CIDA EMPOWERMENT TRUST NOTES TO THE ANNUAL FINANCIAL STATEMENTS 28 February 2009

1. Presentation of financial statements

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

2. Adoption of new and revised standards

Accounting Standards applicable for 28 February 2009 year ends

This document summarises the accounting standards issued and effective for 2009 year ends as well as those accounting standards issued but not yet effective. This list has been obtained from the SAICA and IAS Plus websites.

Table 1 lists all standards and interpretations that should have been adopted by groups/companies with a June 2009 year end, while table 2 lists all standards and interpretations that have been issued but are not yet effective. Table 3 lists the amendments to various standards.

Table 1

Standard Annual periods
beginning on or after
IFRIC 14 - IAS 19 – The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
1 January 2008

Table 2

Standard Annual periods
beginning on or after
IFRS 2 (AC 139) - Share Based Payments 1 January 2009
IFRS 3 (AC 140) - Business Combinations 1 July 2009
IFRS 8 (AC 145) - Operating Segments 1 January 2009
IAS 1 (AC 101) -  Presentation of Financial Statements 1 January 2009
IAS 23 (AC 114) - Borrowing Costs 1 January 2009
IAS 27 (AC 132) - Consolidated and Separate Financial Statements 1 July 2009
IAS 28 (AC 110) - Investments in Associates 1 July 2009
IAS 31 (AC 119) - Interests in Joint Ventures 1 July 2009
IAS 39 (AC 133) - Financial Instruments: Recognition and
Measurement - Amendments for eligible hedged items
1 July 2009
IFRIC 15 - Agreements for the Construction of Real Estate 1 January 2009
IFRIC 16 - Hedges of a Net Investment in a Foreign Operation 1 October 2008
IFRIC 17 - Distributions of Non-cash Assets to Owners 1 July 2009
IFRIC 18 - Transfers of Assets from Customers Transfers received on
or after 1 July 2009

Table 3

On 22 May 2008, the International Accounting Standards Board (IASB) issued its latest Standard, titled Improvements to International Financial Reporting Standards 2008.  The Standard included 35 amendments to various Standards.

 
Standard Annual periods
beginning on or after
IFRS 1 (AC 138) - First-time Adoption of International Financial
Reporting Standards
1 January 2009
IFRS 5 (AC 142) - Non-current Assets Held for Sale and                     Discontinued Operations 1 July 2009
IAS 1 (AC 101) -   Presentation of Financial Statements 1 January 2009
IAS 16 (AC 123) - Property, Plant and Equipment 1 January 2009
IAS 19 (AC 116) - Employee Benefits 1 January 2009
IAS 20 (AC 134) - Accounting for Government Grants and Disclosure
of Government Assistance
1 January 2009
IAS 27 (AC 132) - Consolidated and Separate Financial Statements 1 January 2009
IAS 28 (AC 110) - Investments in Associates 1 January 2009
IAS 31 (AC 119) - Interests in Joint Ventures 1 January 2009
IAS 32 (AC 125) - Financial Instruments: Presentation 1 January 2009
IAS 36 (AC 128) - Impairment of Assets 1 January 2009
IAS 38 (AC 129) - Intangible Assets 1 January 2009
IAS 39 (AC 133) - Financial Instruments: Recognition and Measurement 1 January 2009
IAS 40 (AC 135) - Investment Property 1 January 2009
IAS 41 (AC 137) - Agriculture 1 January 2009
 

The following amendments were issued by the IASB during March 2009.

 
Standard Annual periods
beginning on or after
IFRS 7 (AC 144) – Financial Instruments: Disclosures - Amendments
enhancing disclosures about fair value and liquidity risk
1 January 2009
 

The following amendments were issued by the IASB during April and June 2009.

 
Standard Annual periods
beginning on or after
IFRS 2 (AC 139) - Share-based Payment - Amendments resulting from
April 2009 Annual Improvements to IFRSs
1 July 2009
IFRS 2 (AC 139) - Share-based Payment - Amendments relating to group
cash-settled share-based payment transactions
1 July 2010
IFRS 5 (AC 142) - Non-current Assets Held for Sale and Discontinued
Operations - Amendments resulting from April 2009 Annual Improvements
to IFRSs
1 January 2010
IFRS 8 (AC 145) - Operating Segments - Amendments resulting from
April 2009 Annual Improvements to IFRSs
1 January 2010
IAS 1 (AC 101) - Presentation of Financial Statements - Amendments
resulting from April 2009 Annual Improvements to IFRSs
1 January 2010
IAS 7 (AC 118) - Statement of Cash Flows - Amendments resulting from
April 2009 Annual Improvements to IFRSs
1 January 2010
IAS 17 (AC 105) - Leases - Amendments resulting from April 2009 Annual Improvements to IFRSs 1 January 2010
IAS 36 (AC 128) - Impairment of Assets - Amendments resulting from
April 2009 Annual Improvements to IFRSs
1 January 2010
IAS 38 (AC 129) - Intangible Assets - Amendments resulting from April 2009 Annual Improvements to IFRSs 1 July 2009
IAS 39 (AC 133) - Financial Instruments: Recognition and Measurement - Amendments resulting from April 2009 Annual Improvements to IFRSs 1 January 2010
 

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 South African Statements of Generally Accepted Accounting Practice. 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 Trust and entities (including special purpose entities) controlled by the Trust (its subsidiaries). Control is achieved where the Trust 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.

Goodwill

Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

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 Trust 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.

Financial instruments (continued)

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 Trust'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 22.

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 Trust 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 Trust neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Trust recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Trust retains substantially all the risks and rewards of ownership of a transferred financial asset, the Trust continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

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.

 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.

Revenue recognition

Impairment of goodwill

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 (continued)

In the process of applying the group and company'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 company 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 company 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 company 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 company operates could limit the ability of the company 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.

    Group Trust
    2009 2008 2009 2008
    R R R R
5. Revenue comprises:        
  - Interest received from shareholders loan 674 062 - - -
  - Consulting fees 486 981 632 623 - 10 173 643
  - Donations - 10 422 943 - -
  - Grants 81 714 81 714 - -
  - Distribution income - 18 700 000 - -
  - Licensing fee - 150 000 - -
  - Dividend Income 1 201 806 535 714 - -
    2 444 563 30 522 994 - 10 173 643
           
6. Net fair value gains (losses)        
  Fair value gain (losses) comprise of:        
  - ABSA Batho Bonke Investment (Pty) Ltd (4 708 601) (4 510 800) (4 708 601) (4 510 800)
  - BCE Foodservices Equipment (Pty) Ltd 12 215 498 12 294 395 - -
  - Interwill Holdings (Pty) Ltd (49)      
  - Ownership Solutions (Pty) Ltd - 336 881 - -
  - Sasol Inzalo Groups Limited (2 499 999)      
  - SOMA Initiative (Pty) Ltd (1 046 527) 2 552 125 - -
  - Trans Union Credit Bureau (Pty) Ltd 10 979 975 23 857 900 - -
  - Via Capital (Pty) Ltd (422 360) (436 339) - -
    14 517 937 34 094 162 (4 708 601) (4 510 800)
           
7. Profit (loss) from operations        
  This is arrived at after taking the following
into account:
       
           
  Expenses:        
  Auditors remuneration        
  - Audit fees 454 772 231 557 46 960 57 889
           
  Depreciation:        
  - Office equipment 1 235 314 - -
  - Furniture and fittings 1 546 754 - -
  - Computer equipment 10 136 11 847 - -
    12 917 12 915 - -
           
  - (Profit) loss on disposal of property, plant
   and equipment
(1 507) 661 - -
  - Consulting fees 52 240 258 175 - -
  - Operating lease - property rental 121 788 130 755 - -
           
  The group does not have any obligations under future non-cancellable leases.
           
8. Net finance (costs) income        
  Interest received 4 215 098 4 353 123 1 317 585 964 509
  Interest paid (10 588 705) (8 286 126) - -
    (6 373 607) (3 933 003) 1 317 585 964 509
           
9. Taxation        
  South African normal taxation        
  - Current - normal 269 170 328 186 - -
  Capital gains taxation realised in the current year - 2 711 500 - -
  - Deferred taxation 2 701 035 5 025 763 - -
  - Rate change - (275 888) - -
    2 970 205 7 789 561 - -
           
  Taxation rate reconciliation        
           
  Operating (losses) profit (6 706 983) 23 509 825 - -
  Fair value gain (losses) 14 517 937 34 094 162 - -
    7 810 954 57 603 987 - -
           
  Taxation at statutory rate Operating (loss)
profit at 28% (2008: 29%)
(1 877 955) 6 817 849 - -
  Fair value gain (loss) at 14% (2008: 14,5%) 2 032 511 4 943 653 - -
    154 556 11 761 503 - -
           
  Capital gain realized in the current year - (2 711 500) - -
  Change in taxation rate - (662 329) - -
  Deferred tax asset not raised 2 970 207 654 076 - -
  Dividends received (359 386) (155 357) - -
  Grants received - (23 697) - -
  Non-deductible expenses 3 521 052 2 118 503 - -
  Trust income not taxable (1 004 731) (3 191 638) - -
  Reconciled balance 2 970 205 7 789 561 - -
           
10. Property, plant and equipment        
  Group and trust Office
equipment
Furniture
and fittings
Computer
equipment
Total
    R R R R
  2009        
           
  Cost        
  At 1 March 2008 12 346 5 044 23 695 41 085
  Additions - - (23 695) (23 695)
  Disposals - 12 323 25 269 37 592
  At 28 February 2009 12 346 17 367 25 269 54 982
           
  Accumulated depreciation        
  At 1 March 2008 (314) (672) (13 708) (14 694)
  Disposals - - 21 605 21 605
  Depreciation (1 235) (1 546) (10 136) (12 917)
  At 28 February 2009 (1 549) (2 218) (2 239) (6 006)
           
  Carrying value        
  At beginning of the year 12 032 4 372 9 987 26 391
  At end of the year 10 797 15 149 23 030 48 976
           
  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 fo the period 12 032 4 372 9 987 26 391
           
    Group Trust
    2009 2008 2009 2008
11. Investments R R R R
  Stated at fair value through profit and loss        
  ABSA Batho Bonke Investment 3 031 399 7 740 000 3 031 399 7 740 000
  BCE Food Services (Pty) Ltd 1 175 345 - - -
  BCE Food Services Equipment (Pty) Ltd 37 952 231 27 913 933 - -
  Yebo Yethu Limited 347 240 - - -
  KN Tsepisa (Pty) Ltd 174 - - -
  Ownership Solutions (Pty) Ltd 336 908 336 908 - -
  Preference share capital 23 421 009 21 243 809 - -
  Sasol Inzalo Groups Limited 1      
  Scatterings of Africa (Pty) Ltd 13 333 13 333 - -
  SOMA Iniatiative (Pty) Ltd 3 834 558 4 881 085 - -
  Transunion Credit Bureau (Pty) Ltd 78 671 175 67 691 201 - -
  Via Capital Financial Services (Pty) Ltd 341 301 763 661 - -
    149 124 674 130 583 930 3 031 399 7 740 000
           
12. Investment in joint venture        
           
  MRX 78 Investment Holdings (Pty) Ltd        
  Cost 50 50 - -
  Equity share of profit 39 124 39 124 - -
  Impairment (39 173) - - -
    1 39 174 - -
           
  The investment comprises a 100% holding in the
issued share capital of R100 (2008: R100).
       
           
  A summary of the financial position and results of
operations are as follows
       
           
  Current assets 139      
  Current liabilities -      
  Accumulated loss (9 345 551)      
  Non-distributable reserve 905 000      
           
           
13. Investment in subsidiary        
  CIDA Empowerment (Pty) Ltd - - 100 100
           
  The investment comprises of 100% holding in the
issued share capital of R100 (2008: R100).
       
           
14. Loans receivable        
           
  - Ownership Solutions (Pty) Ltd 1 710 120 2 308 164 - -
  - BCE Foodservices Equipment (Pty) Ltd 4 822 317 4 158 255 - -
    6 542 437 6 466 419 - -
           
15. Other receivables        
           
  VAT receivable 6 587      
  Trade receivables 381 862 110 839 6 587 -
    388 449 110 839 6 587 -
           
16. Affiliated account receivable        
           
  CIDA Empowerment (Pty) Ltd - - 4 431 -
           
  The account receivable is short-term in nature.
The Trustees consider that the carrying amount
of affiliated account receivables approximates
its fair value.
       
           
17. Founding donation        
           
  Trust funds 100 100 100 100
           
18. Long-term loan        
           
  Investec Bank Limited 61 254 839 50 666 133 - -
           
  The loan bears interest at prime plus 4% and the
redemption date of the loan is 1 December 2011
       
           
19. Deferred capital gains taxation        
           
  Balance at the beginning of the year 12 750 636 7 287 616 - -
  Charge to the income statement 2 701 035 5 025 763 - -
  Change in rate   (275 888)    
  Opening balance for CIDA BCE - 713 145 - -
    15 451 671 12 750 636 - -
           
20. Trade and other payables        
           
  Trade payables 1 616 990 165 337 1 235 678 -
  Other payabless and accruals 470 484 180 000 - -
    2 087 474 345 337 1 235 678 -
           
21. Provision for leave pay        
           
  Group        
           
  Balance at the beginning of the year 22 750 - - -
  Charge to the income statement 33 254 22 750 - -
  Balance at the end of the year 56 004 22 750 - -
           
22. Affiliated account payable        
           
  CIDA Empowerment (Pty) Ltd - - - 127 713
           
23. Cash generated from operations        
           
  Profit (loss) before taxation 7 810 954 57 603 987 (3 588 352) 6 494 848
  Adjustments for:        
  - Net fair value (gains) losses (14 517 985) (34 094 162) 4 708 601 4 510 800
  - Impairment of investment in joint venture 39 173 - - (964 509)
  - Depreciation 12 917 14 858 - -
  - (Profit) loss on disposal of property, plant
  and equipment
(1 507) 661 - -
  - Interest received (4 215 098) (4 353 123) (1 317 585) -
  - Interest paid 10 588 705 8 286 126 - -
  - Increase in provision for leave pay 33 254 22 750 - -
           
  Cash flow from operations before adjustments
for changes in working capital
(249 587) 27 481 097 (197 336) 10 041 139
           
  Adjustments for working capital:        
  - Increase in other receivables (277 610) (110 839) (6 587) -
  - Decrease (increase) in affiliated account receivables - 4 431 (4 431) 4 431
  - Increase in trade and other payables 1 742 137 345 337 1 235 678 -
  - Decrease in affiliated account payable - - (127 713) 127 713
    1 464 527 238 929 1 096 947 132 144
    1 214 940 27 720 026 899 611 10 173 283

24. 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 2009
Carrying
value 2008
  R R
250 Ordinary shares in HCS (Honey & Catering Supplies) 1 175 345  
250 Ordinary shares in BCE Foodservices Equipment (Pty) Ltd 37 952 231 27 913 933
250 Cumulative redeemable preference shares in
BCE Foodservices Equipment (Pty) Ltd
23 421 009 21 243 809
Total 62 548 585 49 157 742

Collateral pledged by the Trust

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 trust. The trust only transacts with entities that are rated the equivalent of investment grade and above.

The trust is not vulnerable to credit risk, as the trust does not hold any receivables that could result in financial loss for the trust.

  Group
  R
   
Trade receivables 388 449
Loans receivable 6 542 437
Total 6 930 886

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 trust’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 trust 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 2008 (comparative year) is the actual 250 basis points movement in interest rates that occurred over the 2009 financial year.

Interest rate sensitivity analysis - Group

Loan to BCE Foodservices Equipment (Pty) Ltd 2009 2008
     
RSA prime rates    
Basis point (decrease) increase (400) 150
     
  R R
Profit after taxation 4 840 749 49 814 426
Potential movement 22 516 62 374
Profit after taxation 4 864 265 49 876 800
     
Loan from Investec Bank Ltd    
     
RSA prime rates    
Basis point increase (decrease) (400) 150
     
  R R
Profit after taxation 4 840 749 49 814 426
Potential movement 2 224 976 (752 992)
Profit after taxation 7 065 725 49 054 434

Price risk

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

The volatility of this market index has been used for the volatility of the investment held by this trust.  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 20.00% (2008 15.29%).  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 2009 2008
     
Investment in BCE Foodservice Equipment (Pty) Ltd    
     
Movement in P/E ratio 20% 7%
  R R
Profit after taxation 4 840 749 49 814 426
Potential movement 7 590 446 3 072 638
Profit after taxation 12 431 195 52 887 064
     
Investment in Transunion Credit Bureau    
     
Movement in P/E ratio 20% 7%
  R R
Profit after taxation 4 840 749 49 814 426
Potential movement 766 912 (5 368 348)
Profit after taxation 5 608 661 44 446 078
     
Investment in SOMA    
     
Movement in P/E ratio 20% 7%
  R R
Profit after taxation 4 840 749 49 814 426
Potential movement 15 734 235 834 037
Profit after taxation 20 574 984 50 648 463
     
Investment in Ownership Solutions    
     
Movement in P/E ratio 20% 7%
  R R
Profit after taxation 4 840 749 49 814 426
Potential movement 67 382 20 282
Profit after taxation 4 908 131 50 668 745

Price risk sensitivity analysis - Group and Trust

Investment in ABSA Batho Bonke Group Trust
  2009 2008 2009 2008
ALSI Index Increase 16% 7% 16% 7%
  R R R R
Profit after taxation 4 840 749 49 814 426 (3 588 352) 6 494 848
Potential movement 606 280 1 440 000 606 280 1 440 000
Profit after taxation 5 447 029 51 254 426 2 982 072 7 934 848

Liquidity risk management

Liquidity risk is the risk that the trust will not be able to meet its financial obligations as they fall due.

The trust is not vulnerable to liquidity risk, since the trust does not have any long-term commitments.

CIDA EMPOWERMENT TRUST SCHEDULE OF ADMINISTRATION COSTS
for the year ended 28 February 2009

  Group Trust
  2009 2008 2009 2008
  R R R R
         
Accounting fees 60 000 130 252 - -
Audit fees 454 772 231 557 46 960 57 889
Advertising and promotion - 199 900 - -
Asset disposal (1 507) 661 - -
Bank charges 2 252 2 332 376 360
Communication and internet 17 653 9 219 - -
Computer expenses 21 189 9 614 - -
Consulting fees 52 240 258 175 - -
Cleaning - 130 - -
Conference fees - 5 300 - -
Courier and postage 2 477 5 036 - -
Depreciation 12 917 14 858 - -
Donations 300 000 - 150 000 -
Gifts 691 975 - -
Insurance 5 869 - - -
Impairment 39 123 - - -
Leave pay 33 254 22 750 - -
Legal fees 63 096 173 727 - 74 255
Office admin 12 960 20 520 - -
Office consumables 2 388 55 200 - -
Office expense - 999 - -
Printing and stationery 896 34 525 - -
Rent paid 121 788 130 755 - -
Salaries and wages 1 408 731 1 456 522 - -
Secretarial 10 450 2 530 - -
Skills development levy 14 063 15 725 - -
Staff training 5 734 3 700 - -
Staff refreshment 3 076 8 555 - -
Subscription 325 4 256 - -
Telephone and fax 10 131 47 439 - -
Travel and accommodation 116 725 122 950 - -
Travel allowance - 140 000 - -
UIF company contribution 2 926 5 978 - -
Web expenses 3 720 5 150 - -
  2 777 939 3 119 290 197 336 132 504

CIDA EMPOWERMENT TRUST LIST OF BURSARY RECIPIENTS for the year ended 28 February 2009

Surname Name ID number Student number Amount
Thobetane Brenda 8804050602082 850027 R 30 000
Seleka Tebogo 8810060563081 850017 R 30 000
Molefe Lebogang 8811190322083 850179 R 30 000
Zwane Nomalungelo 8107120236083 850139 R 30 000
Ncume Nomfundiso 771120696084 850227 R 30 000
Nene Sphindile Catherine 8412070657084 750100 R 30 000
Siluma Phindile 8903270529081 750273 R 30 000
Lehupela Busisiwe Kessie 9010260292081 950024 R 30 000
Magana Lesego 8605190986081 950027 R 30 000
Majola Nontobeko 8803040974080 950171 R 30 000
Maseli Lebohang Agnes 9011290273083 950177 R 30 000
Mashigo Mpho 9012070606088 950015 R 30 000
Banda Mathapelo Catoya 8712100454083 850158 R 30 000
Choeu Sejabaledi Vinniter 8806130897087 850026 R 30 000
Gcwensa Noluthando 8906240733089 850074 R 30 000
Mbhele Noxolo 8705310740085 850157 R 30 000
Kandonga Eufemia 8711220273084 850221 R 30 000
Mantyi Lukanyiso 8811130713086 750062 R 30 000
Mapeshoane Lerato 8310170884089 750063 R 30 000
Mavuso Sheila 8701290523088 750092 R 30 000
Nkosi Nkosinathi 8305305542081 850191 R 30 000
Moorosi Mohau, Frans 8906255164089 850084 R 30 000
Shoyisa Muziwokuphila 8710175231089 850137 R 30 000
Mashaba Vincent 8802095390085 850100 R 30 000
Tau Sam 8812275294080 750237 R 30 000
Ximba Thulane 8401075452088 750241 R 30 000
Hlungwane Bongani 8802075589086 750183 R 30 000
Madonsela Sihle Eddie 9201055339084 950176 R 30 000
Makau Teboho 9003125426085 950180 R 30 000
Buthelezi Sibekezelo 8603050536088 850046 R 30 000
Hermans Tsobotsi Magret 8907311101081 950088 R 40 000
Khumalo Busisiwe 8702190968084 950004 R 40 000
Khumalo Nobuhle 8312231270084 950080 R 40 000
Majozi Siziwe 8409151064081 950144 R 40 000
Menze Nosibusiso 9001200580081 950142 R 40 000
Mondlane Nhlamulo 8807145744082 950050 R 40 000
Msimango Bonginkosi 8911235497088 950087 R 40 000
Serarile Ezekiel 8802015710081 950105 R 40 000
Buso Thandiwe Eubatha 8611050317086 850156 R 40 000
Choeunyane Omphemetse 8503255857083 850018 R 40 000
Dlamini Phumzile 8810230232088 850028 R 40 000
Dlamini Jabulani 7801245331081 850038 R 40 000
Dlodlo Nkululeko 8908045338080 850053 R 40 000
Fortuin Sandra Boitumelo 8903150178082 850030 R 40 000
Kekana Leebana Naom 8901110758084 850064 R 40 000
Moeng Merlyn 8811150875088 950157 R 40 000
Morwe Brian 8810035698087 950159 R 40 000
Mosala Mpho 8901050308080 950160 R 40 000
Nkabinde Nonhlanhla 8901190400086 950096 R 40 000
Managa Mpho Evans 8812246258081 850077 R 40 000
Mariti Maletsatsi Innocentia 8711280168083 850040 R 40 000
Ndlazi Collette Chamine 8802110330082 850058 R 40 000
Ngcetshu Sandile 8212315574080 850063 R 40 000
Sambo Ntebaleng 8709160689087 850153 R 40 000

 


“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

 


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