Annual Financial Statements for the year ended 28 February 2010 These group annual financial statements were prepared by: Pierre R Retief & Co. Chartered Accountants (S.A.) Registered Auditors Issued 29 January 2015
General Information Country of incorporation and domicile Directors Registered office Business address South Africa MA Conradie CA(SA) AJ Herweg EE Visagie JV Carstens CN Joubert JS Boshoff Ground Floor Tygervalley Chambers Building 5 Willie van Schoor Drive Bellville 7530 Ground Floor Tygervalley Chambers Building 5 Willie van Schoor Drive Bellville 7530 Postal address PO Box 4166 Tygervalley 7536 Ultimate holding company Auditors Secretary City Capital SA Property Holdings Ltd incorporated in South Africa Pierre R Retief & Co. Chartered Accountants (S.A.) Registered Auditors MA Conradie registration number 2005/031237/06 Tax reference number 9304/051/16/3 Level of assurance These group annual financial statements have been audited in compliance with the applicable requirements of the Companies Act 71 of 2008. Published 29 January 2015 1
Index The reports and statements set out below comprise the group annual financial statements presented to the shareholders: Index Page Directors' Responsibilities and Approval 3 Independent Auditors' Report 4-5 Directors' Report 6-7 Statement of Financial Position 8 Statement of Comprehensive Income 9 Statement of Changes in Equity 10 Statement of Cash Flows 11 Accounting Policies 12-19 Notes to the Annual Financial Statements 20-35 The following supplementary information does not form part of the group annual financial statements and is unaudited: Detailed Income Statement 36 Supplementary Information 37 Published 29 January 2015 2
Directors' Report The directors have pleasure in submitting their report on the group annual financial statements of City Capital SA Property Holdings Limited and its Subsidiaries for the year ended 28 February 2010. 1. Review of financial results and activities The consolidated group annual financial statements have been prepared in accordance with International Financial Reporting Standards and the requirements of the Companies Act 71 of 2008. The accounting policies have been applied consistently compared to the prior year. The group recorded a net loss after tax for the year ended 28 February 2010 of R (12 735 969); (2009: R(125 966 283)). 2. Share capital 2010 2009 Authorised Number of shares Ordinary shares 1 000 000 000 1 000 000 000 Issued R R Number of shares Ordinary shares 304 570 564 304 570 564 304 570 564 304 570 564 There have been no changes to the authorised share capital during the year under review. 3. Directorate The directors in office at the date of issue of this report are as follows: Directors Changes MA Conradie CA(SA) Appointed 18 September 2009 AJ Herweg Appointed 18 September 2009 EE Visagie Appointed 18 September 2009 JV Carstens Appointed 18 September 2009 CN Joubert Appointed 18 September 2009 JS Boshoff Appointed 18 September 2009 4. Interests in subsidiaries, associates and joint arrangements Details of material interests in subsidiary companies, associates and joint arrangements are presented in the consolidated group annual financial statements in notes 5 and 7. The interest of the group in the profits and losses of its subsidiaries, associates and joint arrangements for the year ended 28 February 2010 are as follows: 2010 2009 R R Subsidiaries Total profits before income tax 6 462 978 - Total profits after income tax 6 372 428 - Total losses before income tax - (8 726 411) Total losses after income tax - (7 845 300) There were no significant acquisitions or divestitures during the year ended 28 February 2010. 5. Ultimate holding company 12 835 406 (16 571 711) The group's ultimate holding company is City Capital SA Property Holdings Limited which is incorporated in South Africa. 6
Directors' Report 6. Events after the reporting period The directors deem it appropriate and prudent to disclose the matters as set out below which, despite the devastating effect of the financial loss to the company as per 6.2 below, do not, in their opinion, materially impact on the going concern status of the company as at the date of this report. The objective is to ensure transparent disclosure of material events post the reporting date, which formed part of irregularities previously reported in terms of the Auditing Profession Act, 26 of 2005 which have not resulted in any action from either the Independent Regulatory Board for Auditors IRBA or any other regulatory institution; 6.1 The neglect to hold annual general meetings within the prescribed time limits, previously reported as a material irregularity, has not resulted in any action from either IRBA or the Companies and Intellectual Property Commission. However, the present directors remain duly committed to obtain and retain full compliance as legally prescribed. 6.2 The apparent contraventions of Sections 38 and 226 of the Companies Act, 61 of 1973 by certain former directors of the company, which was reported as a material irregularity to IRBA on 12 June 2008, did not result in any further action from the latter mentioned regulatory board. The subsequent liquidation of the company to which the loans were made in contravention of the Act as alleged, has however caused this company a financial loss of R 87 092 122 which has been duly provided for in these financial statements. After proper assessment of the facts hereto related, the directors have filed criminal charges against certain former directors under case number: 204-12-2011 at the Somerset West Commercial Crimes Branch, the investigation of which is still in progress, in conjunction with similar charges filed by a third party at the Bellville Commercial Crimes Branch under case number 1281/2009, at the date of this report. 7. Going concern The directors believe that the group has adequate financial resources to continue in operation for the foreseeable future and accordingly the consolidated group annual financial statements have been prepared on a going concern basis. The directors have satisfied themselves that the group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The directors are not aware of any new material changes that may adversely impact the group. The directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the group. 8. Auditors Pierre R Retief & Co. continued in office as auditors for the company and its subsidiaries for 2010. At the AGM, the shareholders will be requested to reappoint Pierre R Retief & Co. as the independent external auditors of the company and to confirm Mr Pierre R Retief as the designated lead audit partner for the 2011 financial year. 9. Secretary The company secretary is Mr MA Conradie CA(SA); Postal address Business address 27 Mountain View Drive Ridgeworth Bellville 7530 27 Mountain View Drive Ridgeworth Bellville 7530 7
Statement of Financial Position as at 28 February 2010 Note(s) R R R R Assets Non-Current Assets Investment property 2 216 250 000 216 300 560 - - Property, plant and equipment 3 1 938 397 7 404 365 20 111 5 831 206 Goodwill 4 15 917 132 15 917 132 - - Investments in subsidiaries 7 - - 32 107 208 32 107 205 Investment in property syndications 5 13 722 943 16 628 821 13 722 943 16 628 821 Loans to group companies 6 - - 98 199 348 105 096 741 Other financial assets 8 18 935 252 18 394 296 18 935 252 17 724 270 Deferred tax 9 1 012 363-1 611 300 - Operating lease asset 10 2 250 607 1 250 274 - - 270 026 694 275 895 448 164 596 162 177 388 243 Current Assets Current tax receivable 58 489 67 063 - - Operating lease asset 10 673 353 426 977 - - Trade and other receivables 11 2 887 124 430 117 (2) - Cash and cash equivalents 12 1 593 036 11 137 706 342 959 2 167 070 5 212 002 12 061 863 342 957 2 167 070 Total Assets 275 238 696 287 957 311 164 939 119 179 555 313 Equity and Liabilities Equity Share capital 13 304 570 564 304 570 564 304 570 564 304 570 564 Accumulated loss (146 506 621) (133 770 652) (146 932 563) (127 830 170) Liabilities 158 063 943 170 799 912 157 638 001 176 740 394 Non-Current Liabilities Loans from group companies 6 - - 240 120 Other financial liabilities 14 113 625 564 115 022 448 6 183 211 2 753 419 Deferred tax 9-603 185 - - 113 625 564 115 625 633 6 183 451 2 753 539 Current Liabilities Current tax payable 322 483 241 098 56 541 61 380 Trade and other payables 15 3 226 706 693 195 1 061 126 - Bank overdraft 12-597 473 - - 3 549 189 1 531 766 1 117 667 61 380 Total Liabilities 117 174 753 117 157 399 7 301 118 2 814 919 Total Equity and Liabilities 275 238 696 287 957 311 164 939 119 179 555 313 8
Statement of Comprehensive Income Note(s) R R R R Revenue 16 18 026 343 12 176 347 - - Other income 17 746 456 206 606 378 409 10 000 Operating expenses (26 314 190) (133 978 824) (27 274 659) (124 627 553) Operating loss 18 (7 541 391) (121 595 871) (26 896 250) (124 617 553) Investment revenue 19 5 109 018 6 473 832 6 422 437 6 786 540 Fair value adjustments 20 (50 560) (1 222 384) - - Finance costs 21 (11 772 818) (10 217 904) (238 916) (403) Loss before taxation (14 255 751) (126 562 327) (20 712 729) (117 831 416) Taxation 22 1 519 782 596 044 1 610 332 (288 067) Loss for the year (12 735 969) (125 966 283) (19 102 397) (118 119 483) Other comprehensive income - - - - Total comprehensive loss for the year (12 735 969) (125 966 283) (19 102 397) (118 119 483) 9
Statement of Changes in Equity Share capital Accumulated Total equity loss R R R Balance at 01 March 2008 196 537 835 (7 813 152) 188 724 683 Loss for the year - (125 966 283) (125 966 283) Other comprehensive income - - - Total comprehensive Loss for the year - (125 966 283) (125 966 283) Issue of shares 108 032 729-108 032 729 Total contributions by and distributions to owners of company recognised directly in equity 108 032 729-108 032 729 Balance at 01 March 2009 304 570 564 (133 770 652) 170 799 912 Loss for the year - (12 735 969) (12 735 969) Other comprehensive income - - - Total comprehensive Loss for the year - (12 735 969) (12 735 969) Balance at 28 February 2010 304 570 564 (146 506 621) 158 063 943 Note(s) 13 Balance at 01 March 2008 196 537 835 (9 710 683) 186 827 152 Loss for the year - (118 119 483) (118 119 483) Other comprehensive income - - - Total comprehensive Loss for the year - (118 119 483) (118 119 483) Issue of shares 108 032 729-108 032 729 Total contributions by and distributions to owners of company recognised directly in equity 108 032 729-108 032 729 Balance at 01 March 2009 304 570 564 (127 830 166) 176 740 398 Loss for the year - (19 102 397) (19 102 397) Other comprehensive income - - - Total comprehensive Loss for the year - (19 102 397) (19 102 397) Balance at 28 February 2010 304 570 564 (146 932 563) 157 638 001 Note(s) 13 10
Statement of Cash Flows Note(s) R R R R Cash flows from operating activities Cash used in operations 24 3 891 312 1 479 078 (6 610 645) (6 794 992) Interest income 19 4 867 107 6 473 832 6 180 526 6 456 200 Dividends received 19 241 911-241 911 330 340 Finance costs (11 772 818) (10 217 904) (238 916) (403) Tax (paid) received 25 (5 807) (716 693) (5 807) (337 915) Net cash from operating activities (2 778 295) (2 981 687) (432 931) (346 770) Cash flows from investing activities Purchase of property, plant and equipment 3 (1 498 787) (6 972 145) (660 311) (5 141 356) Purchase of investment property 2 - (156 706 488) - - Movement in investments (incl subs, JVs & Assoc) 2 905 878 4 637 530 2 905 878 4 637 530 Loans advanced to group companies (3 721 697) - (3 939 102) (42 398 960) Repayment of loans from group companies - 7 093 096 - - Net movement in loans and other receivables (2 457 412) (93 633 963) (3 127 438) (86 945 038) Net cash from investing activities (4 772 018) (245 581 970) (4 820 973) (129 847 824) Cash flows from financing activities Proceeds on share issue 13-108 032 729-108 032 729 Repayment of other financial liabilities 14 (1 396 884) 99 534 046 3 429 792 1 953 419 Net cash from financing activities (1 396 884) 207 566 775 3 429 792 109 986 148 Total cash movement for the year (8 947 197) (40 996 882) (1 824 112) (20 208 446) Cash at the beginning of the year 10 540 233 51 537 112 2 167 070 22 375 516 Total cash at end of the year 12 1 593 036 10 540 230 342 958 2 167 070 11
Accounting Policies 1. Presentation of Annual Financial Statements The group annual financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act 71 of 2008. The group annual financial statements have been prepared on the historical cost basis, and incorporate the principal accounting policies set out below. They are presented in South African Rands. These accounting policies are consistent with the previous period. 1.1 Consolidation Basis of consolidation The consolidated group annual financial statements incorporate the group annual financial statements of the group and all investees which are controlled by the group. The group has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the investor's returns. The results of subsidiaries are included in the consolidated group annual financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the group annual financial statements of subsidiaries to bring their accounting policies in line with those of the group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transaction and are recognised directly in the statement of changes in equity. The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent. Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest. 1.2 Significant judgements and sources of estimation uncertainty In preparing the group annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the group annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the group annual financial statements. Significant judgements include: Trade receivables, Held to maturity investments and Loans and receivables The group assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The impairment for trade receivables, held to maturity investments and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. 12
Accounting Policies 1.2 Significant judgements and sources of estimation uncertainty (continued) Impairment testing The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of valuein-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the [name a key assumption] assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets. The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including [list entity specific variables, i.e. production estimates, supply demand], together with economic factors such as [list economic factors such as exchange rates inflation interest]. Expected manner of realisation for deferred tax Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer note 9 Deferred tax. Taxation Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. 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 end of the reporting period could be impacted. 1.3 Investment property Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that are associated with the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably. Investment property is initially recognised at cost. Transaction costs are included in the initial measurement. Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised. Fair value Subsequent to initial measurement investment property is measured at fair value. A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises. 13
Accounting Policies 1.4 Property, plant and equipment The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits associated with the item will flow to the company; and the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. Property, plant and equipment are depreciated on the over their expected useful lives to their estimated residual value. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 1.5 Interests in subsidiaries group annual financial statements In the company s separate group annual financial statements, investments in subsidiaries are carried at. The cost of an investment in a subsidiary is the aggregate of: the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus any costs directly attributable to the purchase of the subsidiary. An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably. 1.6 Investments in associates group annual financial statements An investment in an associate is carried at cost less any accumulated impairment. 1.7 Financial instruments Classification The group classifies financial assets and financial liabilities into the following categories: Loans and receivables Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category. 14
Accounting Policies 1.7 Financial instruments (continued) Initial recognition and measurement Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments. The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets. For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument. Regular way purchases of financial assets are accounted for at. Subsequent measurement Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Fair value determination The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. Impairment of financial assets At each reporting date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired. For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment. Impairment losses are recognised in profit or loss. Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale. Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses. 15
Accounting Policies 1.7 Financial instruments (continued) Loans to (from) group companies These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs. Loans to group companies are classified as loans and receivables. Loans from group companies are classified as financial liabilities measured at amortised cost. Trade and other receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss. Trade and other receivables are classified as loans and receivables. Trade and other payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. Bank overdraft and borrowings Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group s accounting policy for borrowing costs. 1.8 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. 16
Accounting Policies 1.8 Tax (continued) Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or a business combination. Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income. Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity. 1.9 Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Operating leases - lessor Operating lease income is recognised as an income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. Income for leases is disclosed under revenue in profit or loss. Operating leases lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted. Any contingent rents are expensed in the period they are incurred. 17
Accounting Policies 1.10 Impairment of assets The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the group also: tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period. tests goodwill acquired in a business combination for impairment annually. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase. 1.11 Stated capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares are classified as equity. 1.12 Revenue When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the group; the stage of completion of the transaction at the end of the reporting period can be measured reliably; and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. 18
Accounting Policies 1.12 Revenue (continued) Contract revenue comprises: the initial amount of revenue agreed in the contract; and variations in contract work, claims and incentive payments: - to the extent that it is probable that they will result in revenue; and - they are capable of being reliably measured. Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Interest is recognised, in profit or loss, using the effective interest rate method. Dividends are recognised, in profit or loss, when the company s right to receive payment has been established. 1.13 Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows: Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings. Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred. The capitalisation of borrowing costs commences when: expenditures for the asset have occurred; borrowing costs have been incurred, and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation is suspended during extended periods in which active development is interrupted. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. All other borrowing costs are recognised as an expense in the period in which they are incurred. 19
Notes to the Annual Financial Statements R R R R 2. Investment property 2010 2009 Cost / Valuation Accumulated depreciation Carrying value Cost / Valuation Accumulated depreciation Carrying value Investment property 216 440 819 (190 819) 216 250 000 216 300 560-216 300 560 Reconciliation of investment property - - 2010 Opening Impairments Fair value Total balance adjustments Investment property 216 300 560 (12 200 000) 12 149 440 216 250 000 Reconciliation of investment property - - 2009 Opening Additions Disposals Fair value Total balance adjustments Investment property 61 761 455 156 706 488 (945 000) (1 222 383) 216 300 560 20
Notes to the Annual Financial Statements R R R R Details of property Malmesbury Industrial Property 1 (Pty) Lyd - Purchase price 4 126 639 4 126 639 - - - Additions since purchase or valuation 1 936 180 1 136 180 - - - Capitalised expenditure 37 181 37 181 - - 6 100 000 5 300 000 - - PBA Project Investments (Pty) Ltd - Purchase price 4 850 000 4 850 000 - - - Additions since purchase or valuation (850 000) (1 050 000) - - 4 000 000 3 800 000 - - Southern Spirit Properties 141 (Pty) Ltd - Purchase price 8 840 074 8 840 074 - - - Additions since purchase or valuation (440 074) 1 659 926 - - 8 400 000 10 500 000 - - Plasto Properties 9 (Pty) Ltd - Purchase price 11 072 920 11 072 920 - - - Additions since purchase or valuation 3 727 080 2 127 080 - - 14 800 000 13 200 000 - - Danie Properties Number 15 (Pty) Ltd - Purchase price 1 939 777 1 939 777 - - - Additions since purchase or valuation 50 000 (50 000) - - - Capitalised expenditure 160 223 160 223 - - 2 150 000 2 050 000 - - Red Coral 172 (Pty) Ltd - Purchase price 5 000 000 5 000 000 - - - Additions since purchase or valuation 727 648 627 648 - - - Capitalised expenditure 72 352 72 352 - - 5 800 000 5 700 000 - - Evening Shade Properties 109 (Pty) Ltd - Purchase price 15 000 000 15 000 000 - - - Additions since purchase or valuation 249 440 - - - - Capitalised expenditure 250 560 250 560 - - 15 500 000 15 250 560 - - 21
Notes to the Annual Financial Statements Plasto Properties 18 (Pty) Ltd R R R R - Purchase price 48 450 880 48 450 880 - - - Additions since purchase or valuation (6 950 880) 149 120 - - 41 500 000 48 600 000 - - Rainbow Beach Trading 211 (Pty) Ltd - Purchase price 20 284 000 20 284 000 - - - Additions since purchase or valuation 1 357 621 (1 242 379) - - - Capitalised expenditure 258 379 258 379 - - 21 900 000 19 300 000 - - Scarlet Ibis Investments 242 (Pty) Ltd - Purchase price 49 000 000 49 000 000 - - - Additions since purchase or valuation 6 540 748 (59 252) - - - Capitalised expenditure 459 252 459 252 - - 56 000 000 49 400 000 - - Wellvest 26 (Pty) Ltd - Purchase price 38 278 773 38 278 773 - - - Additions since purchase or valuation 1 921 227 4 921 227 - - 40 200 000 43 200 000 - - Various properties are encumbered in respect of mortgage bonds, refer to note 14 A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company. Details of valuation The effective date of the revaluations was 28 February 2010. Revaluations were performed by an independent valuer, Mr BJ Labuschagne, of Cassie Gerber Property Valuers CC, a registered professional valuator. Mr Labuschagne is not connected to the group and has recent experience in location and category of the investment property being valued. The valuation was based on open market value for existing use. 3. Property, plant and equipment 2010 2009 Cost / Valuation Accumulated depreciation Carrying value Cost / Valuation Accumulated depreciation Carrying value Computer software - - - 5 748 481-5 748 481 Furniture and fixtures 755 886 (165 350) 590 536 675 908 (47 399) 628 509 IT equipment - - - 82 725-82 725 Office equipment 626 819 (187 627) 439 192 551 331 (67 761) 483 570 Tenant installations 1 307 047 (398 378) 908 669 603 551 (142 471) 461 080 Total 2 689 752 (751 355) 1 938 397 7 661 996 (257 631) 7 404 365 22
Notes to the Annual Financial Statements R R R R 2010 2009 Cost / Valuation Accumulated depreciation Carrying value Cost / Valuation Accumulated depreciation Carrying value Computer software - - - 5 748 481-5 748 481 Furniture and fixtures 20 486 (375) 20 111 - - - IT equipment - - - 82 725-82 725 Total 20 486 (375) 20 111 5 831 206-5 831 206 Reconciliation of property, plant and equipment - - 2010 Opening balance Additions Disposals Depreciation Total Computer software 5 748 481 639 825 (6 388 306) - - Furniture and fixtures 628 509 79 978 - (117 951) 590 536 IT equipment 82 725 - (82 725) - - Office equipment 483 570 75 488 - (119 866) 439 192 Tenant installations 461 080 703 496 - (255 907) 908 669 Reconciliation of property, plant and equipment - - 2010 7 404 365 1 498 787 (6 471 031) (493 724) 1 938 397 Opening balance Additions Disposals Depreciation Total Computer software 5 748 481 639 825 (6 388 306) - - Furniture and fixtures - 20 486 - (375) 20 111 IT equipment 82 725 - (82 725) - - 4. Goodwill 5 831 206 660 311 (6 471 031) (375) 20 111 2010 2009 Cost Accumulated impairment Carrying value Cost Accumulated impairment Carrying value Goodwill 15 917 132-15 917 132 15 917 132-15 917 132 Reconciliation of goodwill - - 2010 Opening Total balance Goodwill 15 917 132 15 917 132 Reconciliation of goodwill - - 2009 Opening balance Disposals through business divesture Goodwill 16 059 776 (142 644) 15 917 132 Total 23
Notes to the Annual Financial Statements R R R R 5. Investment in property syndications Carrying amount Carrying amount Investment in property syndications 15.00 % 15.00 % 30 112 243 33 018 121 Impairment of investment in property syndications 6. Loans to (from) group companies Subsidiaries 30 112 243 33 018 121 54.40 % 49.60 % (16 389 300) (16 389 300) 13 722 943 16 628 821 African Cold Storage (Pty) Ltd - - (120) (120) Bonwit Malmesbury Holding (Pty) Ltd - - 903 360 903 360 Cedar Falls Properties 139 (Pty) Ltd - - (120) 2 350 173 Coral Lagoon Investments 226 (Pty) Ltd - - 2 013 857 2 021 634 Danie Properties Number Fifteen (Pty) Ltd - - 1 999 368 2 028 863 Evening Shade Props 109 (Pty) Ltd - - 15 253 124 15 259 185 Hidden Riches Trading 28 (Pty) Ltd - - 1 904 079 1 904 079 Malmesbury Industrial Property 1 (Pty) Ltd - - 418 633 934 215 N1 City Mews Block B Unit 3 Holding (Pty) Ltd - - - 715 220 PBA Projects Investments (Pty) Ltd - - 282 664 159 194 Plasto Properties 18 (Pty) Ltd - - 19 662 547 19 228 766 Plasto Properties 9 (Pty) Ltd - - 5 528 369 4 831 413 Rainbow Beach Trading 211 (Pty) Ltd - - 11 014 558 10 028 089 Red Coral Investments 172 (Pty) Ltd - - 2 563 368 2 367 626 Scarlet Ibis Investments 242 (Pty) Ltd - - 19 504 342 19 681 776 Southern Spirit Properties 141 (Pty) Ltd - - 5 787 650 6 881 529 Wellvest 26 (Pty) Ltd - - 22 881 454 20 204 725 Impairment of loans to subsidiaries - - (11 518 025) (4 403 106) - - 98 199 108 105 096 621 The loans are unsecured, interest free and has no fixed terms of repayment, other than not being repayable in the next twelve months. Non-current assets - - 98 199 348 105 096 741 Non-current liabilities - - (240) (120) - - 98 199 108 105 096 621 24
Notes to the Annual Financial Statements R R R R 7. Interests in subsidiaries including consolidated structured entities The following table lists the entities which are controlled directly by the company, and the carrying amounts of the investments in the company's separate financial statements. Name of company % voting power 2010 African Cold Storage (Pty) Ltd % Bonwit Malmesbury Holding (Pty) Ltd % Ceder Falls Properties 139 (Pty) Ltd % Coral Lagoon Investments 226 (Pty) Ltd % Danie Properties Number 15 (Pty) Ltd % Evening Shade Properties 109 (Pty) Ltd % Capital Investments (Pty) Ltd % Capital Investments Properties (Pty) Ltd % Capital Investments Special Projects (Pty) Ltd % Hidden Riches Trading 228 Ltd % Malmesbury Industrial Property 1 (Pty) Ltd % N1 City Mews Block B Unit 3 Holding (Pty) % % voting power 2009 % holding 2010 % Carrying Carrying holding amount 2010 amount 2009 2009 100.00 120 120 100.00 80 120 80 120 100.00 5 142 721 5 142 721 100.00 285 800 285 800 100.00 257 131 257 131 100.00 100 100-1 - - 1 - - 1-100.00 756 120 756 120 100.00 880 176 880 176 100.00 154 231 154 231 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 - % 100.00 % % 100.00 - % 100.00 % % 100.00 - % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % 100.00 100.00 % 100.00 % % Ltd N1 City Mews Block B Unit 3 Property 100.00 % 100.00 % 100.00 % 100.00 % 120 120 (Pty) Ltd PBA Project Investments (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 485 571 485 571 Plasto Properties 18 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 6 901 757 6 901 757 Plasto Properties 9 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 1 602 218 1 602 218 Rainbow Beach Trading 211 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 2 897 669 2 897 669 Red Coral Investments 172 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 100 100 Scarlet Ibis Investments 242 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 6 999 750 6 999 750 Southern Spirit Properties 141 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 80 120 80 120 Wellvest 26 (Pty) Ltd 100.00 % 100.00 % 100.00 % 100.00 % 5 583 381 5 583 381 8. Other financial assets At fair value through profit or loss - designated Loan - Capital Investments (Pty) Ltd This unsecured loan bears no interest and is not repayable within the next twelve months. Loan - Property Syndications The loans are unsecured, bears interest at the prime rate and are repayable on demand. Secured by mortgage bonds in the process of being registered over the property of the borrower. 32 107 208 32 107 205 89 386 987 87 762 148 89 386 987 87 092 122 42 582 849 37 634 351 42 582 849 37 634 351 131 969 836 125 396 499 131 969 836 124 726 473 Impairment of loan to Capital Investments (Pty) Ltd (89 386 987) (87 092 122) (89 386 987) (87 092 122) Impairment of loans to property syndications (23 647 597) (19 910 081) (23 647 597) (19 910 081) Total other financial assets 18 935 252 18 394 296 18 935 252 17 724 270 Non-current assets 18 935 252 18 394 296 18 935 252 17 724 270 25
Notes to the Annual Financial Statements R R R R 9. Deferred tax Deferred tax liability Accelerated capital allowances for tax purposes (2 683 950) (1 379 020) - - Doubtful debt allowance (240 920) - (240 920) - Fair value adjustment on investment property (2 342 410) (1 641 855) (18) - Lease receivable (833 213) (478 160) - - Total deferred tax liability (6 100 493) (3 499 035) (240 938) - Deferred tax asset Accrued Directors fees 21 013-7 280 - Tax losses available for set off against future taxable 7 091 843 2 895 850 1 844 958 - income Total deferred tax asset 7 112 856 2 895 850 1 852 238 - Deferred tax liability (6 100 493) (3 499 035) (240 938) - Deferred tax asset 7 112 856 2 895 850 1 852 238 - Total net deferred tax asset (liability) 1 012 363 (603 185) 1 611 300 - Reconciliation of deferred tax asset / (liability) At beginning of year (603 185) (1 754 317) - - Increases (decrease) in tax loss available for set off 4 195 993 2 814 786 1 844 958 - against future taxable income Taxable / (deductible) temporary difference movement (1 304 930) (1 309 692) (18) - on tangible fixed assets Taxable / (deductible) temporary difference on doubtful (240 920) - (240 920) - debt allowance Taxable / (deductible) temporary difference movement (700 555) 56 023 - - investment property at fair value Taxable / (deductible) temporary difference on accrual 21 013-7 280 - movements Lease receivables (355 053) (409 985) - - Recognition of deferred tax asset 1 012 363 (603 185) 1 611 300 - An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when: the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences; and the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates. 10. Operating lease asset (accrual) Non-current assets 2 250 607 1 250 274 - - Current assets 673 353 426 977 - - 2 923 960 1 677 251 - - 26