Notes to the consolidated financials statements

for the year ended 30 June 2009

 

 

1.

REPORTING ENTITY
  Sasfin Holdings Limited (the “Company”) is a company domiciled in South Africa. The annual financial statements of the Company for the year ended 30 June 2009 comprise the Company and its subsidiaries, together referred to as the “Group”, and the Group’s interest in associates and jointly controlled entities. The Group is primarily involved in financial services.
   
  The principal accounting policies adopted in the preparation of the consolidated and separate financial statements are set out below. All references to “the Group” within the accounting policies, include “the Company” financial statements where applicable.
     
  1.1 STATEMENT OF COMPLIANCE
    The financial statements are prepared in accordance with, and comply with IFRS and the requirements of the South African Companies Act of 1973. The financial statements are prepared in accordance with the going concern principle under the historical cost basis except for certain financial assets and liabilities measured at fair value as discussed below.
     
  1.2 BASIS OF PREPARATION
    The accounting policies are consistent with those applied in the previous year.
     
    The financial statements are presented in South African Rands, which is Sasfin Holdings Limited’s functional currency, rounded to the nearest thousand.
     
    The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
     
    The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods (refer to note 2).
     
  1.3 BASIS OF CONSOLIDATION
    1.3.1 Subsidiaries
      Subsidiaries are those entities over whose financial and operating policies the Group has the power to exercise control, so as to obtain benefits from their activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.
       
      The Group financial statements incorporate the assets, liabilities and results of the Company and its subsidiaries. The results of the subsidiaries are included from the effective date that control commences until control ceases.
       
      Special purpose entities
      Special purpose entities are entities that are created to accomplish a narrow and well-defined objective such as the securitisation of particular assets, or the execution of a specific borrowing or lending transaction. A Special purpose entity is consolidated if, based on an evaluation of the substance of its relationship with the Group and the Special purpose entity’s risks and rewards, the Group concludes that it controls the Special purpose entity. The following circumstances may indicate a relationship in which, in substance, the Group controls and consequently consolidates a Special purpose entity:
     
  • The activities of the Special purpose entity are being conducted on behalf of the Group according to its specific business needs so that the Group obtains benefits from the Special purpose entity’s operation.
  • The Group has the decision-making powers to obtain the majority of the benefits of the activities of the Special purpose entity or, by setting up an ‘autopilot’ mechanism, the Group has delegated these decision-making powers.
  • The Group has rights to obtain the majority of the benefits of the Special purpose entity and therefore may be exposed to risks incident to the activities of the Special purpose entity.
  • The Group retains the majority of the residual ownership risks related to the Special purpose entity or its assets in order to obtain benefits from its activities.
      The assessment of whether the Group has control over a special purpose entity is carried out at inception and normally no further reassessment of control is carried out in the absence of changes in the structure or terms of the special purpose entity, or additional transactions between the Group and the special purpose entity. Day-to-day changes in market conditions normally do not lead to a reassessment of control. However, sometimes changes in market conditions may alter the substance of the relationship between the Group and the special purpose entity and in such instances the Group determines whether the change warrants a reassessment of control based on the specific facts and circumstances. Where the Group’s voluntary actions, such as lending amounts in excess of existing liquidity facilities or extending terms beyond those established originally, change the relationship between the Group and Special purpose entity, the Group performs a reassessment of control over the Special purpose entity.
       
      Accordingly, the Group’s securitisation vehicle, South African Securitisation Programme (Pty) Limited, the warehouse vehicle, Sasfin Warehouse No.1 (Pty) Limited and the Sasfin Share Incentive Trust have been consolidated.
       
      In the separate financial statements investments in subsidiaries are carried at cost less impairment.
       
    1.3.2 Associates
      An associate is an entity over which the Group has significant influence but not control over the financial and operating activities. Investments in associated companies are equity accounted in the Group financial statements, from the date that significant influence commences until significant influence ceases. Equity accounted income represents the Group’s proportionate share of profits or losses of these entities. The Group’s investment in an associate is written down when it is considered to be impaired. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil (inclusive of debt outstanding) and recognition of further losses is discontinued except to the extent that the Group has guaranteed obligations in respect of the associate. Goodwill is included in the investment balance.
       
      In the separate financial statements investments in associates are carried at cost less impairment.
       
    1.3.3 Joint ventures
      A joint venture is an entity controlled jointly by the Group and one or more other ventures in terms of a contractual arrangement. Investments in joint ventures are proportionately consolidated in the Group financial statements, from the date that joint control commences until the date that joint control ceases. In the separate financial statements investments in joint ventures are carried at cost less impairment.
       
    1.3.4 Transactions with minority shareholders
      The Group applies a policy of treating transactions with minority shareholders that do not result in the gain or loss of control, as transactions with equity owners of the Group, and accounted for directly in equity.
       
    1.3.5 Transactions eliminated on consolidation
      Intergroup balances and any unrealised gains and losses or income and expenses arising from intergroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent there is no evidence of impairment.
       
  1.4. INTANGIBLE ASSETS
    1.4.1 Goodwill
      Goodwill represents the cost of acquisition over the fair value of the Group’s share of net identifiable assets, liabilities and contingent liabilities of the acquiree on the acquisition date. Goodwill arises on the acquisition of subsidiaries net assets that constitute a business. Goodwill is stated at cost less accumulated impairment losses and is not amortised. Goodwill is allocated to cash-generating units and is tested at least annually or more frequently if required for impairment.
       
      “Negative goodwill” arising on an acquisition is recognised directly in the income statement.
       
    1.4.2 Software development
      Expenditure on internally developed software is recognised as an asset when the Group is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits, and can reliably measure the costs to complete the development.
       
      Direct software development costs that are clearly associated with an identifiable and unique system, which will be controlled by the Group and have a probable economic benefit exceeding one year, are recognised as intangible assets. Direct costs include software development, employee costs and an appropriate portion of overheads. Subsequent expenditure is capitalised only when it increases future economic benefits embodied in the asset.
       
      Direct software development costs recognised as intangible assets are amortised on the straight-line basis over the expected useful lives of the assets, being between two and five years from the date that it is available for use. Amortisation is recognised in profit or loss for the period. Capitalised computer software is carried at cost less accumulated amortisation and less accumulated impairment losses. Computer software is tested annually for impairment.
       
  1.5. FINANCIAL INSTRUMENTS
    Financial instruments, as reflected on the balance sheet, include all financial assets and financial liabilities, including derivative instruments, but exclude investments in subsidiaries, associated companies and joint ventures, employee benefit plans, property, plant and equipment, deferred taxation, taxation payable, intangible assets and goodwill. Financial instruments are accounted for in terms of the principles of IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement.
     
    Initial recognition
    Financial instruments are recognised on the balance sheet when the Group or Company becomes a party to the contractual provisions of a financial instrument. All purchases of financial assets that require delivery within the time frame established by regulation or market convention (‘regular way’ purchases) are recognised at trade date, which is the date on which the Group or Company commits to the purchase of the asset. Financial liabilities are recognised on trade date, which is when the Group or Company becomes a party to the contractual provisions of the financial instrument.
     
    Initial measurement
    Financial instruments are initially recognised at fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability.
     
    Subsequent measurement
    Subsequent to initial measurement, financial instruments are either measured at fair value or amortised cost, depending on their classification:
     
    Financial assets and financial liabilities at fair value through profit or loss
    Financial instruments at fair value through profit and loss consist of held for trading instruments and instruments that the Group or Company have elected, on initial recognition, to designate at fair value through profit or loss.
     
    The Group has designated financial assets and liabilities at fair value through profit and loss in the following circumstances:
   
  • The assets or liabilities are managed, evaluated and reported internally on a fair value basis.
  • The designation eliminates or significantly reduces an accounting mismatch which would otherwise arise.
  • The asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract.
    Financial assets and financial liabilities at fair value through profit or loss are measured at fair value, with fair-value gains and losses (excluding impairment losses, interest income and interest expense calculated on the amortised-cost basis relating to those interest-bearing instruments that have been designated as at fair value through the income statement) reported in non-interest revenue as they arise.
     
    Non-trading financial liabilities
    All financial liabilities, other than those at fair value through profit and loss, are classified as non-trading financial liabilities and are measured at amortised cost using the effective interest method.
     
    Held-to-maturity financial assets
    Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group or Company has the intent and ability to hold to maturity, other than those that meet the definition of loans and receivables or those that were designated as at fair value through profit and loss or available-for-sale. Held-to-maturity financial assets are measured at amortised cost using the effective interest method, with interest income and impairment losses recognised in the income statement.
     
    Any sale or reclassification of more than an insignificant amount of held-to-maturity investments not close to that maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying financial assets as held-to-maturity for the current and following two financial years.
     
    Loans and receivables
    Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified as at fair value through profit and loss or available-for-sale. Financial assets classified as loans and receivables are carried at amortised cost using the effective interest method, with interest income and impairment losses recognised in the income statement. The majority of advances are included in the loans and receivables category.
     
    Available-for-sale financial assets
    Financial assets are classified as available-for-sale, if designated as such, or where the intention with regard to the instrument and its origination and designation does not fall within the ambit of the other financial asset classifications. Available-for-sale instruments are typically assets that are held for a longer period and in respect of which short-term fluctuations in value do not affect the Group’s or Company’s hold or sell decision.
     
    Available-for-sale financial assets are measured at fair value, with fair-value gains and losses recognised directly in equity along with the associated deferred taxation. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss. Impairment losses, interest calculated on the effective interest rate method, foreign exchange gains or losses and dividends are recognised in profit or loss. When available-for-sale equity instruments are determined to be impaired to the extent that the fair value decline is prolonged and significant, the resultant losses are recognised in the income statement.
     
    Measurement basis of financial instruments
    Amortised cost
    Amortised-cost financial assets and financial liabilities are measured at the amount determined on initial recognition, minus principal repayments plus or minus the cumulative amortisation using the effective interest rate method determined on initial recognition and any difference between that initial amount and the maturity amount, less any cumulative impairment losses or uncollectability.
     
    Borrowings
    Borrowings are recognised initially at fair value, generally being their issue proceeds, net of directly attributable transactions costs incurred, and are subsequently stated at amortised cost and interest is recognised over the period of the borrowing using the effective interest rate method.
     
    Preference shares are classified as equity.
     
    Fair value
    Direct and incremental transaction costs are included in the initial fair value of financial assets and financial liabilities, other than those at fair value through profit and loss. The best evidence of the fair value of a financial asset or financial liability at initial recognition is the transaction price, unless the fair value of the instrument is evidenced by comparison with other current observable market transactions in the same instrument or based on a valuation technique whose variables include only market observable data.
     
    If quoted bid prices are unavailable, the fair value of financial assets and financial liabilities is estimated using pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate used is a market-related rate at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market-related measures at the balance sheet date.
     
    The fair value of a financial liability with a demand feature is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.
     
    Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, and derivatives that are linked to and have to be settled by delivery of such unquoted equity instruments, are not measured at fair value but at cost less impairment losses. Fair value is considered reliably measurable if:
   
  • the variability in the range of reasonable fair value estimates is not significant for that instrument; or
  • the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value.
     
    Derecognition
    All financial assets and financial liabilities are derecognised on trade date, which is when the Group or Company commits to selling a financial asset or redeeming a financial liability.
     
    The Group or Company derecognises a financial asset when and only when:
   
  • the contractual rights to the cash flows arising from the financial asset have expired or have been forfeited; or
  • it transfers the financial asset, including substantially all the risks and rewards of ownership of the asset; or
  • it neither transfers nor retains substantially all the risks and rewards of ownership of the asset, but no longer retains control of the asset.
    A financial liability is derecognised when and only when the liability is extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or has expired.
     
    The difference between the carrying amount of a financial asset or financial liability (or part thereof) that is derecognised and the consideration paid or received, including any non-cash assets transferred or liabilities assumed, is recognised in the income statement for the period.
     
    Offsetting financial instruments and related income
    Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to set off and there is an intention of settling on a net basis or realising the asset and settling the liability simultaneously. Income and expense items are offset only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.
     
  1.6 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
    A derivative is a financial instrument whose value changes in response to an underlying variable, requires little or no initial net investment and is settled at a future date. Derivatives are initially recognised at fair value on the date on which the derivatives are entered into and subsequently remeasured at fair value.
     
    All derivative instruments are carried as assets when the fair value is positive and as liabilities when the fair value is negative, subject to offsetting principles (refer to note 1.5).
     
    Embedded derivatives included in hybrid instruments are treated and disclosed as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative and the combined contract is not recognised at fair value with any gains or losses from the change in fair value recognised in the income statement. If it is not possible to determine the fair value of an embedded derivative, the hybrid instrument is measured at fair value with changes in profit or loss. The host contracts are accounted for and measured applying the rules of the relevant category of that financial instrument.
     
    The method of recognising fair value gains or losses depends on whether derivatives are held for trading or are designated as hedging instruments, and if so, the nature of the hedged item. All gains and losses from changes in the fair value of derivatives that are classified as held for trading are recognised in the income statement. When derivatives are designated in a hedging relationship, the Group designates them as either:
   
  • hedges of the fair value of recognised financial assets or liabilities or firm commitments (fair value hedge);
  • hedges of highly probable future cash flows attributable to a recognised asset or liability, a forecast transaction, or a highly probable forecast intergroup transaction in the consolidated financial statements (cash flow hedge); or
  • hedges of net investment in a foreign operation (net investment hedge).
    Hedge accounting is applied to derivatives designated in this way provided certain criteria are met. The Group documents, at the inception of the hedging relationship, the relationship between hedged items and hedging instruments, as well as its risk management objective and strategy for undertaking various hedging relationships. The Group also documents its assessment, both at the inception of the hedge and on an ongoing basis, of whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in fair values or cash flows of hedged items.
       
    1.6.1 Fair value hedges
      Where a hedging relationship is designated as a fair value hedge, the hedged item is adjusted for the change in fair value in respect of the risk being hedged. Gains or losses on the remeasurement of both the derivative and the hedged item are recognised in the income statement. Fair value adjustments relating to the hedging instrument are allocated to the same income statement category as the related hedged item. Any ineffectiveness is also recognised in the same income statement category as the related hedged item.
       
      If the derivative expires, is sold, terminated, exercised, no longer meets the criteria for fair value hedge accounting, or the designation is revoked, hedge accounting is discontinued prospectively. Any adjustment up to that point, to a hedged item for which the effective interest method is used, is amortised to the income statement as part of the hedged item’s recalculated effective interest rate over the period to maturity.
       
    1.6.2 Cash flow hedges
      The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in the cash flow hedging reserve. The ineffective part of any gain or loss is recognised immediately in the income statement.
       
      Amounts accumulated in equity are transferred to the income statement in the periods in which the hedged cash flows affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the cumulative gains or losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, hedge accounting is prospectively discontinued and the cumulative gains or losses recognised in equity remain in equity until the forecast transaction is recognised in the case of a non-financial asset or a non-financial liability, or until the forecast transaction affects the income statement in the case of a financial asset or a financial liability. If the forecast transaction is no longer expected to occur, the cumulative gains or losses recognised in equity are immediately transferred to the income statement.
       
    1.6.3 Net investment hedges
      Where considered appropriate, the Group hedges net investments in foreign operations using derivative instruments in its consolidated financial statements. For such hedges, the designated component of the hedging instrument that relates to the effective portion of the hedge is recognised directly in the Foreign Currency Translation Reserve. Any ineffective portion is immediately recognised in the income statement. On the partial disposal of a foreign operation, a proportionate share of those deferred gains and losses is recognised directly in profit or loss. On disposal of a foreign operation, all remaining deferred gains and losses are recognised directly in profit or loss.
       
    1.6.4 Derivatives that do not qualify for hedge accounting
      All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognised immediately in the income statement.
       
      Embedded derivatives
      Certain derivatives embedded in other financial and non-financial instruments, such as the conversion option in a convertible bond, are treated as separate derivatives and recognised on a stand-alone basis, when their risks and characteristics are not closely related to those of the host contract and the host contract is not carried at fair value, with unrealised gains and losses reported in the income statement and the statement would meet the definition of a derivative if it was contained in a separate contract.
       
      If it is not possible to determine the fair value of the embedded derivative, the entire hybrid instrument is categorised as at fair value through profit and loss and measured at fair value, with changes in fair value being recognised in profit and loss.
       
  1.7 PROPERTY, PLANT AND EQUIPMENT
    1.7.1 Owned assets
      Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. The cost of property, plant and equipment includes expenditure directly attributable to the acquisition of property, plant and equipment. Subsequent costs are included in the carrying amount of the asset, or recognised as a separate asset, when it is probable that future economic benefits are expected to flow to the Group. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
       
      Freehold buildings, comprising mainly offices, are generally owner-occupied properties and accounted for in terms of the cost method. The buildings are depreciated on the straight-line basis over the estimated useful lives to the current value of their estimated residual value. The freehold land portion is not depreciated. Owner occupied properties are held for use in the supply of services or for administration services.
       
       
      Repairs and maintenance of property, plant and equipment are recognised directly in the income statement. Gains or losses on disposal of property, plant and equipment are included in the income statement.
       
    1.7.2 Leased assets
      Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets which are leased in terms of financial lease agreements are capitalised at the lower of fair value and the present value of minimum lease payments at inception of the lease. The capital element of future obligations under the leases is included as a liability in the balance sheet. Lease payments are allocated between finance charges and capital repayment using the effective rate method.
       
      Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
       
      Other leases are classified as operating leases (refer to note 1.11).
       
    1.7.3 Depreciation
      Depreciation is calculated on the straight-line basis, at rates which are estimated to amortise the assets to their anticipated residual values over their useful lives. The assets’ residual values and useful lives are reviewed and adjusted annually if appropriate. Leased assets are depreciated over the shorter of the lease term and their useful lives and is not depreciated.
       
     
Buildings 50 years
Computer equipment 3 years
Computer software 2 – 3 years
Furniture and fittings 6 – 10 years
Motor vehicles 5 years
There has been no change to useful lives from those applied in the previous year.  
       
  1.8 INVESTMENT PROPERTY
    Investment properties are held to earn rental income or for capital appreciation or both. Investment property includes the cost of initial purchase, developments transferred from property under development, subsequent cost of development and fair value adjustments.
     
    Investment property is reflected at valuation based on fair value at the reporting date. If the valuation cannot be reliably determined, the Group uses alternative valuation methods such as discounted cash flow projections or recent prices on active markets. The fair values are the estimated amounts for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction. The fair value is determined annually by independent professional valuators.
     
    Fair value adjustments on investment property are included in the income statement as investment gains or losses in the period in which these gains or losses arise and are adjusted for any double counting arising from the recognition of lease income on the straight-line basis compared to the accrual basis normally assumed in the fair value determination. The deemed cost for any reclassification between investment property and owner-occupied property is at the property’s carrying value, at the date of reclassification.
     
  1.9 FOREIGN CURRENCIES
    1.9.1 Functional and presentation currency
      Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of the Company and the Group’s consolidated presentation currency is ZAR and all amounts unless otherwise indicated, are stated in thousands of ZAR (R’000).
       
    1.9.2 Group companies
      The results and financial position of all foreign operations that have a functional currency different from the group’s presentation currency are translated into the presentation currency as follows:
     
  • Assets and liabilities are translated at the closing rate on the balance sheet date; and
  • Income and expenses are translated at average exchange rates for the year, to the extent that such average rates approximate actual rates.
  • Equity is translated into the presentation currency at the spot rate on the date of issue of the equity instruments; and
  • Reserves are translated at the average exchange rate for the year, to the extent that such average rates approximate actual rates.
      On consolidation, exchange differences arising from the translation of the group’s net investment in foreign operations are accounted for directly in a separate component of equity, being the foreign currency translation reserve. On the partial disposal of a foreign operation, where control is not lost, a proportionate share of the balance of the foreign currency translation reserve is transferred to the same reserve in which the profit or loss on partial disposal is recognised. On disposal of a foreign operation, any gains and losses that remain deferred in equity are recognised in the income statement at the time at which the profit or loss on disposal of the foreign operation is recognised.
       
      Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operation and are translated at closing rates at the balance sheet date.
       
      Foreign currency gains and losses on intergroup loans are recognised in profit or loss unless settlement of the loan is neither planned nor likely to occur in the foreseeable future, in which case the foreign currency gains and losses are initially recognised in the foreign currency translation reserve in the consolidated financial statements. Those gains and losses are recognised in profit or loss at the earlier of settling the loan or at the time at which the foreign operation is disposed.
       
    1.9.3 Transactions and balances
      Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are recognised in the income statement except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
       
      Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to the functional currency using the exchange rate at the transaction date, and those measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Exchange differences on non-monetary items are accounted for based on the classification of the underlying items. Foreign exchange gains and losses on equities classified as available-for-sale financial assets are included in the available-for-sale reserve in equity whereas the exchange differences on equities held at fair value through profit or loss are reported as part of the fair value gain or loss in the income statement.
       
  1.10 PROVISIONS
    A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
     
    Contingent liabilities, which include certain guarantees other than financial guarantees, and letters of credit pledged as collateral security, are possible obligations that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the Group’s control.
     
    Contingent liabilities are not recognised in the financial statements but are disclosed in the Notes to the Consolidated Financial Statements unless they are remote.
     
  1.11 INSTALMENT FINANCE
    1.11.1 Group as the lessor
      Rental, lease and instalment sale contracts are regarded as financing transactions, with rentals and instalments receivable, less unearned finance charges, being included in advances on the balance sheet. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance charges.
       
      Where the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards of ownership of the asset to the lessee, the arrangement is classified as a finance lease.
       
      Finance income is recognised over the term of the lease using the net investment method, which reflects the periodic rate of return.
       
      All other leases are operating leases and operating lease income is recognised in the income statement on a straight-line basis over the term of the lease.
       
    1.11.2 Group as the lessee
      Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Penalties for early termination of operating lease contracts are recognised as an expense in the period in which termination took place.
       
      Payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a consistent periodic rate of interest on the liability outstanding.
       
  1.12 REVENUE AND EXPENDITURE
    Banking and Financial Services Activities
    Revenue is derived substantially from the business banking and related financial services activities and comprises net interest income and non-interest income and is recognised as set out below.
       
    1.12.1 Interest income and interest expense
      Interest is recognised on a time proportion basis, taking into account the carrying amount and the effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the carrying amount on the financial statements. When calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
       
      Where financial assets have been impaired, the accrual of interest income based on the original terms of the loan is discounted, any increase of the present value of impaired loans to the passage of time is recorded as interest income. The effective interest rate is established on initial recognition of the financial instrument and is not subsequently revised.
       
    1.12.2 Fees and commission
      Fee and commission income is recognised in the income statement as the services are performed in accordance with the terms of the relevant agreements.
       
    1.12.3 Other
      Income, other than interest, fees and commission, which includes fair value gains or losses, foreign exchange gains and dividends from investments, is recognised in profit or loss when the amount of income from the transaction or service can be measured reliably. Dividend income is recognised when the right to receive income is established.
       
  1.13 COMMITMENTS AND CONTINGENCIES
    Items are classified as commitments where the Group commits itself to future transactions or if the items will result in the acquisition of assets.
     
    Transactions are classified as contingencies where the Group’s obligations depend on uncertain future events or the amount of the obligation can not be measured with sufficient reliability and principally consist of third-party obligations underwritten by banking subsidiaries.
     
  1.14 FUNDS UNDER ADMINISTRATION
    Where Group companies hold and invest funds on behalf of clients and act as trustees in any fiduciary capacity, the assets and liabilities representing these activities are not reflected on the statement of financial position. Income relating to these activities is recognised in the income statement in the period in which the services are rendered.
     
  1.15 CASH AND CASH EQUIVALENTS
    For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, short-term negotiable securities, short-term interbank funds net of interbank funding and balances with central bank, all of which are available for use by the Group unless otherwise stated. Cash and cash equivalents are carried at amortised cost in the statement of financial position.
     
  1.16 IMPAIRMENT
    1.16.1. Impairment of financial assets
      The Group or Company assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. For an investment in an equity security, a significant or prolonged decline in its fair value below the cost is objective evidence of impairment. Objective evidence that a financial asset or group of assets is impaired includes observable data that has come to the attention of the Group or Company about the following loss events:
     
  • a breach of contract, such as a default or delinquency in interest or principal payments;
  • the Group or Company, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the Group or Company would not otherwise consider;
  • it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
  • the disappearance of an active market for that financial asset because of financial difficulties; or
  • observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:
    • adverse changes in the payment status of borrowers in the group; or
    • national or local economic conditions that correlate with defaults on the assets in the group.
       
      Assets carried at amortised cost
      If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement.
       
      The Group or Company first assesses whether there is objective evidence of impairment individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group or Company determines that there is no objective evidence of impairment for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.
       
      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 (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date on which the impairment is reversed. The amount of the reversal is recognised in the income statement for the period.
       
      Financial assets carried at cost
      If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value, because its fair value cannot be reliably measured, or on a derivative asset that is linked to and has to be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.
       
      Available-for-sale financial assets
      When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative net loss that has been recognised directly in equity is removed from equity and recognised in the income statement even though the financial asset has not been derecognised. The amount of the cumulative loss that is removed from equity and recognised in the income statement is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in the income statement.
       
      If, in a subsequent period, the fair value of debt instruments classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed, with the amount of the reversal recognised in the income statement for the period. Impairment losses recognised in the income statement for an investment in an equity instrument classified as available-for-sale are not reversed through the income statement.
       
    1.16.2. Impairment of non-financial assets
      The carrying amounts of the Group’s assets, other than deferred tax assets (see accounting policy 1.17) and financial instruments (see accounting policy 1.5), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment irrespective of whether impairment indicators are identified.
       
      An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.
       
      Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
       
      Calculation of recoverable amount
      The recoverable amount of other assets is the greater of their fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
       
      Reversals of impairment
      In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined net of depreciation, if no impairment loss had been recognised. Reversals of impairment are not recognised for goodwill.
       
  1.17 CAPITALISATION OF BORROWING COSTS
    Borrowing costs that relate to qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are neither measured at fair value nor capitalised.
       
  1.18 EMPLOYEE BENEFITS
    1.18.1 Defined contribution plan
      A defined contribution plan is a post-employments benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
       
      Payments to defined contribution plans are recognised as an employee benefit expense in the income statement as they fall due. All employees are required to be members of the defined contribution provident fund.
       
    1.18.2 Equity compensation plans
      The Group or Company operates equity-settled and cash-settled share-based compensation plans
       
      The Group has applied the requirements of IFRS 2 to share-based payments . In accordance with the transitional provisions, IFRS 2 has been applied to all grants of share options after 7 November 2002 that were not vested as of 1 July 2004, the effective date of transition to IFRS.
       
      The fair value of equity-settled options granted is recognised as an employee expense in the income statement, with a corresponding increase in equity. The fair value is measured at grant date and spread on a straight-line basis over the vesting period, based on the Group’s estimate of share options that will eventually vest. Share-based payments settled in cash are accounted for as liabilities at fair value until settled. The liability is recognised over the vesting period and is revalued at every balance sheet date. Any changes in the liability are accounted for through profit or loss.
       
      Fair value is measured by use of the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest.
       
  1.19 INCOME TAX
    Income tax and capital gains tax on the profit or loss for the year comprises current and deferred taxation. Income tax and capital gains tax are recognised in profit or loss except to the extent that they relate to items recognised directly to equity, in which case key are recognised in equity.
       
    1.19.1 Current tax
      Current tax comprises income tax payable, calculated on the basis of expected taxable income for the year using the tax rates enacted or substantially enacted at the balance sheet date, and any adjustment of tax payable for prior years.
       
    1.19.2 Deferred taxation
      Deferred income tax and deferred capital gains tax are provided for on the comprehensive basis using the balance sheet method, based on temporary differences at tax rates enacted at the balance sheet date. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of the asset or liability and is not discounted. Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that is no longer probable that the related tax benefit will be realised.
       
      Current and deferred tax relating to items which are charged or credited directly to equity, are also charged to equity and are subsequently recognised in the income statement when the related deferred gain or loss is recognised.
       
      Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction that is not a business combination, which affects neither accounting nor taxable profits and losses, investments in subsidiaries and joint ventures where the Group controls the timing of the reversal of temporary differences and it is probable that these differences will not reverse in foreseeable future.
       
      Deferred tax assets are recognised to the extent that it is probable that future profits will be available against which the associated unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent it is no longer probable that the related tax benefit will be realised.
       
    1.19.3 Secondary tax on companies
      Secondary taxation on companies (“STC”) that arises from the distribution of dividends is recognised at the same time as the liability to pay the related dividend. To the extent that it is probable that dividends will be declared against which unused STC credits can be utilised, a deferred tax asset is recognised for STC credits.
       
  1.20 SEGMENT REPORTING
    A segment is a distinguishable component of the Group that is engaged either in providing products or services whose operating results are regularly reviewed by management in order to make decisions about resources to be allocated to segments and assessing segment performance, which is subject to risks and rewards that are different from those of other segments. The Group’s primary format for segment reporting is based on business segments.
     
    Segment results include revenue, impairments, expenses and taxes directly attributable to a segment and the relevant portion of enterprise revenue and expenses that can be allocated on a reasonable basis to a segment, whether from internal transactions or from transactions with other Group segments. Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to a segment or can be allocated to the segment on a reasonable basis.
     
  1.21 FINANCIAL GUARANTEE CONTRACTS
    A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.
     
    These financial guarantee contracts are classified as insurance contracts as defined in IFRS 4 Insurance Contracts. A liability is recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle the contract and a reliable estimate can be made of the amount of the obligation. The amount recognised is the best estimate of the expenditure required to settle the contract at the balance sheet date. Where the effect of discounting is material, the liability is discounted. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
     
    The Company performs liability adequacy tests on financial guarantee contract liabilities to ensure that the carrying amount of the liabilities is sufficient in view of estimated future cash flows. When performing the liability adequacy test, the Company discounts all expected contractual cash flows and compares this amount to the carrying value of the liability. Where a shortfall is identified, an additional provision is made.
     
  1.22 SHARE CAPITAL
    Ordinary share capital
    Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
     
    Dividends are recognised as distributions within equity in the period in which they are payable to shareholders. When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity unless cancelled.
     
    Preference share capital
    Preference share capital is classified as equity if it is non-redeemable and any dividends are discretionary, or it is redeemable only at the Company’s option.
     
  1.23 EARNINGS PER SHARE
    The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

2.  

KEY ASSUMPTIONS AND ESTIMATES APPLIED BY MANAGEMENT
  In preparing the financial statements, estimates and assumptions are continually evaluated based on historical and other factors, including expectations of uncertain future events that are believed to be reasonable under the circumstances. The results of estimates and assumptions form the basis of making judgements about the carrying value of assets and liabilities. Actual results may differ from the estimates made that could affect the reported amounts of assets and liabilities in future years.
   
  CREDIT IMPAIRMENT OF LOANS AND ADVANCES
  Performing loans
  The Group assesses its loan portfolio for impairment on a yearly basis or at least at each balance sheet date.
   
  The Group adopts an incurred-loss approach to impairment. Impairment losses are incurred, only if there is objective evidence of impairment as a result of one or more past events that has occurred since initial recognition. This necessitates the establishment of ‘impairment triggers’ on the occurrence of which an impairment loss is recognised.
   
  Credit impairment is based on discounted estimated future cash flows on an asset or group of assets, where such objective evidence of impairment exists. The discount rate used to calculate the recoverable amount excludes consideration of any anticipated future credit losses. The impairment for performing loans is calculated on a portfolio basis, based on historical loss ratios, including industry and specific economic conditions and other indications present at the reporting date. The Group has created an allowance for incurred but not reported (“IBNR”) losses. The purpose of the IBNR allowance is to allow for latent losses on a portfolio of loans and advances that have not yet been individually evidenced. Generally, a period of time will elapse between the incurrence of an impairment event and objective evidence of the impairment becoming evident, which is known as the ‘emergence period’. The IBNR provision is based on the probability that loans that are ostensibly performing at the calculation date are impaired, and objective evidence of that impairment becomes evident during the emergence period.
   
  Non-performing loans
  Loans and advances are individually impaired if the amounts are due and remain unpaid and also take into account breaches of key loan covenants.
   
  Management estimates of future cash flows on individually impaired loans are based on historical loss experience for assets with similar credit risk characteristics, and the recoverability of security or collateral in our possession.
   
  The methodology and assumptions used for estimating both the timing and amount of future cash flows is based on the present value of estimated future cash flows and salvage value of securities held.
   
  Intangible assets and goodwill
  The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy disclosed. The recoverable amounts of cash-generating units (“CGU”) have been based on the higher of fair value less costs to sell and value-in-use calculations. The assumptions applied for these variables match those applied in the preparation of group budgets and forecasts. Assumptions are supported by past experience. The estimated impairment of intangibles and goodwill is RNil (2008: RNil). Please refer to note 11.
   
  Deferred taxation asset
  The deferred taxation asset is recognised based on the probability that sufficient future taxable profits will be available to realise the asset carried for assessed losses within a three- to five-year horizon.
   
  Private equity investment valuations
  Private equity investments are based on the underlying value of the net assets and unrecognised intangible assets within the investment vehicles concerned. These values are established by the directors and/or the trustees of those vehicles or prevailing market conditions. The basis of valuation is reviewed by the Investment committee of the Group.
   
  Fair value of financial instruments
  The fair value of financial instruments that are not quoted in active markets is determined by using valuation techniques. Where valuation techniques or models are used to determine fair values, they are validated and periodically independently reviewed by qualified senior personnel. All models are authorised before they are used, and models are calibrated and back tested to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data, however areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates (refer note 23).
   
        2009       2008    
        R’000       R’000    

3.

CASH AND CASH BALANCES

                
  Money on call   272 442       416 438    
  Fixed deposits maturing within three months   129 293       7 722    
  Balance with the South African Reserve Bank   21 936       25 155    
      423 671       449 315    
  The maturity analysis of the fixed deposits is based on the remaining period to contractual maturity from year-end Interbank deposits of South African Securitisation Programme (Pty) Limited ceded as security for the investment securities as per note 17   109 238       106 127    
                   
  Interbank deposits of Sasfin Asia Limited pledged as security for trade finance related facilities   66 803       20 809    

4.

SHORT-TERM NEGOTIABLE SECURITIES

                
  Held-to-maturity assets                
  Treasury and other bills maturing within three months   49 689       55 106    
                   
  The maturity analysis is based on the remaining period to contractual maturity from year-end.                

5.  

LOANS AND ADVANCES TO CUSTOMERS

                
  Originated loans and advances at amortised cost                
  5.1. Gross loans and advances                
    Instalment finance   1 233 168       1 116 076    
    Capital equipment finance   159 219       161 106    
    Debtor finance   79 510       113 562    
    Trade finance   276 993       359 166    
    Commercial property finance   93 770       75 948    
    Other loans   24 568       24 620    
    Investment in loans and advances   1 867 228       1 850 478    
    Credit impairments for loans and advances   (65 743)       (46 962)    
    Impairments for non-performing loans and advances   56 066       38 901    
    Impairments for performing loans and advances   9 677       8 061    
                     
    Net loans and advances   1 801 485       1 803 516    
    Comprising:                
    Gross investment in loans and advances   2 303 446       2 307 775    
    Less: Unearned finance charges   (436 218)       (457 297)    
    Investment in loans and advances   1 867 228       1 850 478    
                     
    Loans and advances are reflected at amortised cost which is a reasonable approximation of fair value.                
                     
    Trade finance loans are ceded as security for trade finance related facilities   204 309       271 538    
                     
    Included in instalment finance loans are securitised assets ceded as security for debt securities issued per note 17   928 351       736 850    
                     
    Gross loans and advances                
    Maturity analysis                
    Maturing within one year   510 342       572 179    
    Maturing after one year but within five years   1 353 669       1 276 875    
    Maturing after five years   3 217       1 424    
        1 867 228       1 850 478    
                     
    The maturity analysis is based on the remaining periods to contractual                
    maturity from year-end.                
    Sectoral analysis                
    Agriculture   12 348       14 363    
    Community, social and personal services   416 850       365 586    
    Construction   69 743       58 746    
    Electricity and water   27 011       13 611    
    Finance, real estate and business services   396 611       312 893    
    Manufacturing   242 174       300 154    
    Mining   76 277       48 289    
    Trade and accommodation   504 976       565 904    
    Transport and communication   121 238       170 932    
        1 867 228       1 850 478    
                     
    Geographic analysis                
    South Africa   1 845 213       1 783 929    
    Rest of Africa   20 402       31 361    
    Outside Africa   1 613       35 188    
        1 867 228       1 850 478    
        Capital     Commercial  
      Instalment equipment Debtor Trade property  
      finance finance finance finance and other Total
      R’000 R’000 R’000 R’000 R’000 R’000
  5.2 Credit impairments for loans and advances            
    A reconciliation of the allowance for impairment losses on loans and advances by class            
    2009            
    Non-performing loans            
    Balance at beginning of year 26 121 3 389 3 558 5 804 29 38 901
    Net impairments raised and released 9 488 1 741 (1 446) 7 411 (29) 17 165
    Balance at end of year 35 609 5 130 2 112 13 215 – 56 066
    Performing loans            
    Balance at beginning of year 7 104 – – 957 – 8 061
    Net impairments raised and released – 696 – 920 – 1 616
    Balance at end of year 7 104 696 – 1 877 – 9 677
    Total credit impairments 42 713 5 826 2 112 15 092 – 65 743
    2008            
    Non-performing loans            
    Balance at beginning of year 22 172 – 2 836 12 016 25 37 049
    Net impairments raised and released 3 949 3 389 722 (6 212) 4 1 852
    Balance at end of year 26 121 3 389 3 558 5 804 29 38 901
    Performing loans            
    Balance at beginning of year 7 104 – – – – 7 104
    Net impairments raised and released – – – 957 – 957
    Balance at end of year 7 104 – – 957 – 8 061
    Total credit impairments 33 225 3 389 3 558 6 761 29 46 962
         
      2009 2008
      R’000 R’000
    Sectoral analysis of impairments for non-performing loans and advances    
    Agriculture 72 2 633
    Community, social and personal services 11 742 9 994
    Construction 3 126 2 209
    Finance, real estate and business services 10 040 6 952
    Manufacturing 9 697 6 466
    Mining 2 795 97
    Trade and accommodation 18 594 10 550
      56 066 38 901

6.

OTHER RECEIVABLES

    
  Derivatives at fair value 2 813 6 343
  Freight forwarding and customs clearing 63 204 81 566
  Stock broking clients 153 812 176 535
  Loans to associates 2 201 5 825
  Other receivables 96 721 56 838
    318 751 327 107
       
  Where other receivables are not reflected at fair value, due to the short-term tenor, the carrying value is a reasonable approximate for fair value.    
       
  For further details on amounts due to the stock broking clients refer to note 16.    
       
  Premier Freight (Pty) Limited accounts receivable of R63,2 million (2008: R81,5 million) have been ceded to First National Bank, a division of FirstRand Bank Limited, to secure banking facilities granted to the company.    
       
  In addition to this, the Credit Guarantee Insurance policy over Premier Freight (Pty)    
  Limited’s accounts receivable has been ceded to the bank.    

7.

INVESTMENT SECURITIES

    
  Available-for-sale portfolio 14 858 11 408
  Financial instruments held at fair value through profit and loss 8 012 44 681
  Designated at fair value through profit and loss 238 341 176 688
    261 211 232 777
  Available-for-sale portfolio    
  Equity securities with readily determinable fair values 14 704 11 254
  Unquoted equities at cost 154 154
    14 858 11 408
  Financial instruments held at fair value through profit and loss    
  Equity securities with readily determinable fair values – 37 009
  Asset-backed securities 8 012 7 672
    8 012 44 681
  Designated at fair value through profit and loss    
  Asset-backed securities 238 341 176 688
    238 341 176 688
  Equity securities with readily determinable fair values are calculated on the basis of quoted market prices.    
       
  Included in investment securities that have been designated at fair value through profit or loss, are the Group’s equity investments in certain entities held by its private equity subsidiary. These investments of R238,3 million (2008: R176,7 million) represent equity holdings in investee companies that give the Group between 20 percent and 49 percent of the voting rights of these private equity ventures. The private equity subsidiary is managed on a fair value basis by the Group. No provision for impairment has been made on this portfolio.    
       
  Sectoral analysis:    
  Distribution 126 506 72 297
  Electronics and electrical/technology 15 435 15 074
  Finance, retail and telecommunications 22 255 16 222
  Real estate 43 871 50 826
  Security 30 274 22 269
    238 341 176 688
  Detailed information of all investments is obtainable from the Company Secretary.    

8.  

INVESTMENTS IN ASSOCIATED COMPANIES

    
  8.1 Investments in associated companies    
    Shares at book value 35 405 21 616
    Equity accounted earnings 21 302 14 580
      56 707 36 196
    Loans receivable are not included in the net investment above.
      NVest InnoVent
      Financial Investment
      Holdings Holdings
      (Pty) Limited (Pty) Limited
      R’000 R’000
    Summarised financial information of associated companies equity accounted:    
    2009    
    Carrying value 6 752 18 264
    Total assets 288 654 145 319
    Total liabilities 254 214 97 206
    Group’s proportionate share of total liabilities 50 843 32 661
    Equity 34 440 48 113
    Total revenue 57 395 272 826
    Total net profit after tax 14 659 17 930
    Share of income – current year 3 120 5 048
    Equity accounted earnings 3 120 18 182
      InnoVent Pioneer
      Investment Employee
      Holdings Benefits
      (Pty) Limited (Pty) Limited
    2008    
    Carrying value 19 084 647
    Total assets 109 316 2 689
    Total liabilities 52 185 533
    Equity 57 131 2 156
    Total revenue 176 103 3 304
    Total net profit after tax 14 511 128
    Share of income – current year 4 876 56
    Equity accounted earnings 13 933 647
    Loan to the Company 5 152 –
      2009 2008
      R’000 R’000
  8.2 Investments in joint ventures proportionately consolidated    
    Hecny Transportation South Africa (Pty) Limited    
    Effective shareholding in the joint venture 32% 32%
    Group’s proportionate share of assets and liabilities which is included in the figures of the consolidated financial statements:    
    Non-current assets 18 58
    Current assets 2 363 6 211
    Current liabilities 550 2 073
        Furniture   Land  
    Computer Computer and Motor and  
    equipment software fittings vehicles buildings Total
    R’000 R’000 R’000 R’000 R’000 R’000

9.

PROPERTY, PLANT AND EQUIPMENT

            
  2009            
  Movement            
  Cost 55 053 13 199 11 872 6 339 73 090 159 553
  Additions 15 777 330 14 354 464 102 377 133 302
  Disposals (1 100) (2 793) (897) (391) – (5 181)
  Revaluation gains – – – – 2 912 2 912
  Transfer to investment property – – – – (32 160) (32 160)
  Foreign exchange differences – – – (11) – (11)
  Cost at the end of the year 69 730 10 736 25 329 6 401 146 219 258 415
  Accumulated depreciation and impairment losses at the beginning of the year 38 670 11 224 8 672 2 703 3 657 64 926
  Depreciation charge for the year 3 711 2 214 7 376 735 504 14 540
  Disposals (973) (2 767) (568) (209) – (4 517)
  Transfer to investment property – – – – (4 161) (4 161)
  Foreign exchange differences – – – (11) – (11)
  Accumulated depreciation at the end of the year 41 408 10 671 15 480 3 218 – 70 777
  Carrying amount at the end of the year 28 322 65 9 849 3 183 146 219 187 638
  2008            
  Movement            
  Cost at the beginning of the year 53 216 12 841 11 010 6 165 29 211 112 443
  Additions 4 908 358 890 1 218 43 879 51 253
  Disposals (3 071) – (28) (1 044) – (4 143)
  Cost at the end of the year 55 053 13 199 11 872 6 339 73 090 159 553
  Accumulated depreciation and impairment losses at the beginning of the year 29 790 9 188 7 432 2,337 3,152 51 899
  Depreciation charge for the year 11,948 2 036 1 240 809 505 16 538
  Disposals (3 068) – – (443) – (3 511)
  Accumulated depreciation at the end of the year 38 670 11 224 8 672 2 703 3 657 64 926
  Carrying amount at the end of the year 16 383 1 975 3 200 3 636 69 433 94 627
  The land and buildings comprise the Group’s investment in its new premises which was completed on 30 June 2009. The Group took occupation on this date. The development includes the cost of land and development costs incurred to date and capitalised interest. The total cost of development amounts to approximately R170 million and is funded from the Group’s internal resources of R70 million and through external funding arrangements amounting to R100 million, see note 15.
   
  The Group’s investment in the property situated at 13 – 15 Scott Street, Waverley was reclassified from owner-occupied to investment property, see note 10, and is now carried at fair value. At year-end, this investment was transferred at fair value to investment property.
    2009 2008
    R’000 R’000

10.

INVESTMENT PROPERTY

    
  Transfer from property, plant and equipment 27 999 –
  Carrying value at 30 June 2009 27 999 –
  These premises are encumbered for unutilised interbank facilities provided to Sasfin Bank Limited.    

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