free state development corporation group

FREE STATE DEVELOPMENT CORPORATION ANNUAL REPORT 2014/151

TABLE OF CONTENTS

PART A: GENERAL INFORMATION

1. Entity’s General Information

2. Acronyms

3. Foreword by the Chairperson

4. Chief Executive Officer’s Overview

5. Statement of Accuracy

6. Strategic Overview

7. Legislative and Other Mandates

8. Organisational Structure

9. Subsidiaries / Associates / Joint Ventures

PART B: PERFORMANCE INFORMATION

1. Statement of Responsibility for Performance Information

2. Overview of the FDC’s Performance

3. Strategic Outcome Orientated Goals

4. Performance Information by Programme

4.1 Programme 1: Administration

4.2 Programme 2: Business Support

4.3 Programme 3: Economic Development

PART C: GOVERNANCE

5. Introduction

6. Portfolio Committees

7. Executive Authority

8. Risk Management

9. Internal Audit and Audit Committees

10. Compliance with Laws and Regulations

11. Fraud and Corruption

12. Minimising Conflict of Interest

13. Code of Conduct

14. Health, Safety and Environmental Issues

15. Company Secretary

16. Board Audit and Risk Committee Report

PART D: HUMAN RESOURCE MANAGEMENT

1. Introduction

2. Overview of the Human Resources

3. Human Resources Oversight Statistics

PART E: FINANCIAL INFORMATION

1. Report of the Auditor General

2. Annual Financial Statements


PART A:GENERAL INFORMATION


PART A:GENERAL INFORMATION

ENTITY’S GENERAL INFORMATION

Company Secretary

Mr DSR Nkaiseng

Bankers Information

ABSA Bank Ltd

External Auditors

Auditor-General of South Africa

Business Address

Free State Development Corporation

33 Kellner Street

Corner Markgraaff Street

Westdene

Bloemfontein

9301

Postal Address

PO Box 989

Bloemfontein

9300

Contact Details

Telephone: +27 51 400 0800

Facsimile: +27 51 447 0929

Email: [email protected]

Website: www.fdc.co.za

ACRONYMS

AGSA Auditor-General of South Africa

BDS Business Development Support

CAE Chief Audit Executive

CEO Chief Executive Officer

CFO Chief Financial Officer

DESTEA Department of Economic, Small Business Development, Tourism and Environmental Affairs

FDC Free State Development Corporation

MAP-SEZ Maluti-A-Phofung Special Economic Zone

MEC Member of Executive Council

PFMA Public Finance Management Act

SAITEX Southern African International Trade Exhibition

SARCDA South African Retail International Trade Show

SMME Small, Medium and Micro Enterprise


FOREWORD BY THE CHAIRPERSON

The Board of FDC has pleasure of submitting its Annual Report for the Financial Year 2014/2015 to the MEC for Economic, Small Business and Economic Development, Tourism and Environmental Affairs (DESTEA), the Free State Legislature, the Provincial Treasury, as well as the Auditor-General of South Africa.

The FDC is a government owned company established under its own Act of the Free State Provincial Legislature. It is accorded Schedule 3D status by the Public Finance Management Act (PFMA) 1 of 1999. The FDC’s mandate is to facilitate the development of the Free State economy through the provision of funding to SMMEs and Cooperatives, Trade and Investment Promotion and Facilitation and the economic empowerment of Free State Black business. The FDC is guided in its vision and mission by the government’s economic development policies and strategies chiefly the National Development Plan and The Free State Growth and Development Strategy.

The Board’s focus has been to achieve financial stability, an improved audit outcome and improved performance through good governance, right-sizing of the entity, improved cash management and improving its internal system of controls. Our achievement on this strategy is outlined in this annual report.

Over the previous financial year the Board initiated the repositioning and the process of the FDC re-inventing itself as a cutting edge development institution to implement its mandate more effectively and efficiently. The FDC has over the last year secured working relationships with numerous provincial and national government departments that has and will continue to make contributions to the Free State economy. In this vain I can refer to our working relationships with the Department of Trade and Industry (DTI) on the Special Economic Zone initiative in the Maluti-A-Phofung Municipality (MAP-SEZ) and its funding of an arts and crafts initiative to assist stakeholders in that sector.

We have also established a grant funding arrangement with the Technology Innovation Agency (TIA). The FDC was appointed by the Provincial Departments of Agriculture and Rural Development (DARD) and Human Settlements to manage the Vrede Integrated Dairy Project and a Housing Initiatives respectively. The Free State Broadband Initiative also gained momentum during this year when the Premier’s Consultative Forum (PCF) resolved that the FDC manage the broadband roll-out for the Provincial and Local Governments.

The above clearly shows that the FDC is indeed actively implementing its mandate of government in business. There are more initiatives in the pipeline that will transform the FDC and the Free State provincial economy in the years to come.

We recognise that our achievements as FDC would not have been possible if it was not based on the fact that the Province of the Free State has embraced the principles of cooperative governance as enshrined in the constitution of the RSA. It is this spirit of cooperation between all provincial departments and local government sphere that has contributed to a successful year in 2014/15. We thank DESTEA for its on-going guidance and support.

The Board conveys its gratitude to our erstwhile Member of Executive Council (MEC), the Honourable Mr M. Zwane for his leadership and oversight over the entity during his term in office. We wish him well in his new role as MEC for Agriculture and Rural Development. The Board looks forward to working with the new MEC, Honourable Mr MS. Mashinini in taking FDC to greater heights.

Finally I wish to express my words of gratitude and thanks to fellow board and sub - committee members, management and staff of FDC for their commitment and contribution during the past financial year.

............................................

Ms HB Mayeza

CHAIRPERSON


CHIEF EXECUTIVE OFFICER’S OVERVIEW In the financial year under review the FDC embarked on a major organisational re-design in order to achieve its strategic objectives and mandates more effectively and efficiently.

The re-designing process which encompassed an integration, migration and placement process was completed by the end of November 2014. The organisation now boasts of an entirely new executive management team in a re-designed corporate structure. A direct result of the re-design is that we achieved an employment equity score of 87% against a target of 80% as more female employees were placed in management positions.

The organisation continues to improve on its cash flow management. The on-going challenges to collect debt, especially historical debt, and the withdrawal of government grants from DESTEA for SMME funding and Trade and Investment Promotion contributed to the FDC’s net cash position of R31m. However we can proudly report that we were able to reduce the deficit from R88.4m in 2013/14 to R19.4m in 2014/15. This points clearly to the fact that the FDC is a resilient and sustainable organisation well on its way to recovery.

Our vigorous marketing and improved processing of applications have resulted in an increase in the occupancy of our commercial and residential portfolios. As at end of March 2015 we had a number of applications in our rental pipeline which will increase in occupancy in our industrial estates at Botshabelo and Qwaqwa. The collection of our invoiced rentals stands at an average of 79% across our various portfolios which is a substantial improvement compared to prior years. It is this performance that ensures a steady cashflow that keeps the FDC liquid.

Free State entrepreneurs were granted business loans valued at R18, 8m during the past financial year. 10% of loan applications were granted to women owned entities and 17% to youth owned entities. Free State Businesses were promoted through our active participation at local and international trade exhibitions such as the Ficksburg Cherry Festival, SAITEX and SARCDA, and also on missions to China, India, Malaysia and Dubai.

FDC was granted R1.6 million by the Department of Trade and Industry (dti) to assist Free State crafters with training and market access and a further R5 million by the Technology Innovation Agency to fund businesses with a technology and innovation bias. These are clear examples of how the FDC forges partnerships that will benefit the Free State economy.

Our efforts to promote the Free State, locally and internationally, as a preferred investment destination continues vigorously. We have six committed investments, estimated at R7.3 billion in the MAP-SEZ that are at different stages of realisation. This investment will become a reality over the next two to three years but it is imperative that the work starts now and the pressure to realise them is kept up. This performance on attracting investments and our intensive management of the MAP-SEZ will without any doubt ensure it receives its designation from the Minister of Trade and Industry within a short time. The MAP-SEZ which is going to be a game-changer for the Free State economy is steadily progressing in its development. A customised 26.7 kilometer fence is being installed at the site and is expected to be completed by the end of June 2015.

During the period under review the FDC took over the management of the Vrede Integrated Dairy Farm Project on request from the Provincial Executive Committee. The farm is not yet operating at the optimum level but we are confident that with the measures we have put in place such as internal controls, supply chain, cost management controls and improved operations management, we will be able to see positive change within two years.

In line with its mandate the FDC initiated the establishment of the Free State Broadband business venture during the current year. This project will result in fast and efficient data connectivity and also contribute positively to economic growth. In conclusion I wish to thank the Board and its sub-committees for its leadership and good governance. I wish to extend my appreciation to Management and Staff for their continued commitment and contribution.

............................................

Mr I Osman

CHIEF EXECUTIVE OFFICER


STRATEGIC OVERVIEW

VISION

To be the development and investment agency of choice in contributing to the economic growth of the Free State Province.

MISSION

• ToprovidefinancialandbusinesssupportservicestoSMME’sandCooperatives;

• Toundertakethedevelopmentandmanagementofproperties;and

• TofacilitateandpromoteinvestmentsandexportsintheFreeStateProvince.

GOALS

• TocontributetotheeconomicgrowthoftheFreeStateProvincethroughpropertydevelopmentandmanagement,

SMME’sandCooperativesdevelopment,investmentpromotionandexportpromotion;and

• Tobuildasustainableorganisationthatstrivesforbusinessandservicedeliveryexcellence.

VALUES

• Integrity

• Honesty

• Customerfocused

• Commitmenttoexcellence

• Respect


LEGISLATIVE AND OTHER MANDATES

The Free State Development Corporation (FDC) was established by the Free State Development Corporation Act 6 of 1995 for the purpose of promoting urban and rural development in the Province, with special emphasis on small business development.

FDC is listed as a Schedule 3, Part D entity governed by a duly appointed Board of Directors which is the Accounting Authority of the FDC, as contemplated in Section 49(2) (a) of the PFMA.

In addition to its founding Act, the FDC’s functions and operations are also governed by other policy frameworks and guidelines such as:

• PublicFinanceManagementAct1of1999

• CompaniesAct71of2008

• NationalCreditAct34of2005

• NationalSmallBusinessEnterpriseAct102of1996

• BroadBasedBlackEconomicEmpowermentAct53of2003

• FrameworkforManagingPerformanceInformation

• PublicSectorRiskManagementFramework

• InternalAuditFramework

• KingCodeofGovernanceforSouthAfrica2009(KingIII)

ORGANISATIONAL STRUCTURE

The Executive team is responsible for the day-to-day business of the organisation and is led by the Chief Executive Officer. The profile of the Executive Team is depicted in the below table:

NAME OF OFFICIAL AND POSITION HELD QUALIFICATIONS Mr Ikhraam Osman (Chief Executive Officer) Bachelor of Commerce (UWC)

Hons. Bachelor of Commerce (UNISA)

Master of Business Administration (WITS)

Management Advancement Programme (WITS)

Chartered Marketer SA.

Advanced Certificate in Leadership (UCT)

Certificate In Directorship (IODSA)

Mr Shepherd Moyo (Chief Financial Officer) Bachelor of commerce (Accounting)

Hons. Bachelor of commerce (Accounting) / CTA

SAICA (CA) SA

Attended various leadership courses

Mr David Nkaiseng

(Divisional Executive: Corporate Secretariat and Affairs)

BUIRIS

LLB

Divisional Executive: Operations The post was vacant as at end of March 2015


17

THE FOLLOWING DEPICTS THE FDC TOP EXECUTIVE MANAGEMENT STRUCTURE:

MR I. OSMANCHIEF EXECUTIVE OFFICER

CEO’S OFFICE

MR D. NKAISENGDIVISIONAL EXECUTIVE

CORPORATE SECRETARIAT AND AFFAIRS

VACANTDIVISIONAL EXECUTIVE OPERATIONS

MR K. KGOKOTLICHIEF FINANCIAL OFFICER

1 April - 30 June 2014

MR S. MOYOCHIEF FINANCIAL OFFICER

CORPORATE SUPPORT SERVICES

KNOWLEDGE RESOURCESSERVICES

SECRETARIAT/LEGAL SERVICES

INVESTMENT AND ECONOMICDEVELOPMENT UNIT

PROFIT CENTRE UNIT

CREDIT MANAGEMENT

FINANCIAL SUPPORT SERVICES

SUPPLY CHAIN MANAGEMENT

CREDIT MANAGEMENT

FINANCIAL SUPPORT SERVICES

SUPPLY CHAIN MANAGEMENT

17



STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION FOR THE YEAR ENDED 31 MARCH 2015

I, Ikhraam Osman, Chief Executive Officer of the Free State Development Corporation (FDC), am responsible for the preparation of

the FDC performance information and for the judgements made in this information.

As the Chief Executive Officer, I am responsible for establishing and implementing a system of internal control designed to provide

reasonable assurance as to the integrity and reliability of performance information.

In my opinion, the performance information fairly reflects the actual achievements against planned objectives, indicators and targets

as per the strategic and annual performance plan of the FDC for the financial year ended 31 March 2015.

The FDC performance information for the year ended 31 March 2015 has been examined by external auditors and their report is

presented on page xxx.

The performance information of the FDC set out on page xxx to page xxx of the Annual Report was approved by the Board at its

meeting on xx May 2015.

_______________________ _______________

Mr I Osman Ms HB Mayeza

CHIEF EXECUTIVE OFFICER CHAIRPERSON


AUDITOR GENERAL’S REPORT: PREDETERMINED OBJECTIVES

The AGSA currently performs the necessary audit procedures on the performance information to provide reasonable assurance in

the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the report

to management, with material findings being reported under the Predetermined Objectives heading in the Report on other legal and

regulatory requirements section of the auditor’s report. Refer to page xxx of the Auditor General’s report published as Part E (Annual

Financial Statements) of the public entity’s annual report.

OVERVIEW OF FDC’S PERFORMANCE

3.1 SERVICE DELIVERY ENVIRONMENT

The execution of the FDC business model yielded positive developmental impact. The property portfolio created 17935 permanent and 2000 temporary jobs despite the decline in the manufacturing industry. 9 Cooperatives were established and provided with business development support and 130 potential exporters were promoted through various platforms in collaboration with other sectors. About 40 Business loans were granted to SMMEs and Cooperatives.

3.2 ORGANISATIONAL ENVIRONMENT

The re-engineering process which commenced in 2013/2014 was concluded during November 2014. Through the dedication of the management, all efforts were made to ensure continuous delivery of services to our clients as expected. However, FDC experienced a slight decline in terms of performance which could be attributed to the low morale of staff resulting from this process.

3.3 KEY POLICY DEVELOPMENTS AND LEGISLATIVE CHANGES

There were no policy developments or legislative changes during the period under review.

STRATEGIC OUTCOMES ORIENTATED GOALS

The below indicates the goal set by the FDC in the 2014/2015 Corporate Plan:

GOAL PROGRESS MADE TOWARDS ACHIEVEMENT OF THE GOAL

To grow the contribution of enterprises to the economic growth of the province.

FDC granted 40 enterprises with business loans to the value of R18, 762 million. Through its property portfolio, FDC provided rental space for commercial and industrial purposes and offered rental incentives in line with its policies.

PERFORMANCE INFORMATION PER PROGRAMME

5.1 PROGRAMME 1: ADMINISTRATION

PURPOSE

To provide strategic leadership in accordance with the legislation, regulations and policies and ensuring appropriate support service to all other programmes.

Programme Sub-Programme

Administration 1. Office of the CEO

2. Internal Audit

3. Risk Management and Fraud Prevention

4. Finance

5. Human Capital and Talent Management

6. Legal Services and Compliance

7. Corporate Secretariat


OFFICE OF THE CEO

STRATEGIC OBjECTIVE: ENSURE FDC SUSTAINABILITY

PROGRAMME 1 : ADMINISTRATION

SUB-PROGRAMME 1.1 OFFICE OF THE CEO

Measurable Objective

Performance Measure / Indicator

Target APP/ Corporate Plan Actual target achieved Reason (s) for Variations

Comply with governance imperatives

Timely submission of the approved Corporate Plan

Submission of the approved Corporate Plan by end of February 2015

Approved Corporate Plan was submitted to Treasury and Executive Authority by end February 2015


Timely submission of the approved consolidated financial statements

Submission of the approved consolidated financial statements by 31 May 2014

Approved consolidated financial statements were submitted by 31 May 2014


Timely submission of the approved Annual Report

Submission of the approved Annual Report by 31 August 2014

Approved Annual Report was submitted by the 31 August 2014


Percentage of qualification matters successfully resolved

80% of qualification matters successfully resolved by 31 March 2015

80% of the qualification matters successfully resolved by 31 March 2015


Number of audited performance monitoring reports submitted to Treasury

Submission of 4 x audited quarterly performance monitoring reports to Treasury within the stipulated timeframes

4 x audited quarterly performance monitoring reports were submitted to Treasury as per the stipulated timeframes

STRATEGIC OBjECTIVE: BUILD MUTUALLY BENEFICIAL RELATIONS WITH STAKEHOLDERS


SUB-PROGRAMME 1.1 OFFICE OF THE CEO



Target APP/ Corporate Plan Actual target achieved Reason (s) for Variations

Implement stakeholder engagement initiatives that lead to mutually beneficial relations

Number of interactions with the business community

4 x interactions with the business community by 31 March 2015

11 x interactions took place with the business community by 31 March 2015

More opportunities arose for the CEO to interact with the business community


Number of interactions with other spheres of government (including the legislature)

4 x interactions with other spheres of government (including the legislature) by 31 March 2015

4 x interactions took place with other spheres of government which included the provincial legislature by 31 March 2015


Number of interactions with DETEA and the rest of provincial government

4 x interactions with DETEA and the rest of the provincial government by 31 March 2015

11 x interactions took place with DETEA and other provincial government departments by 31 March 2015

More than anticipated platforms arose for the CEO to interact with DETEA and provincial government

INTERNAL AUDIT



SUB-PROGRAMME 1.2 INTERNAL AUDIT



Target APP/ Corporate Plan

Actual target achieved Reason (s) for Variations


Percentage of the operational audit plan implemented

100% of the operational audit plan implemented by 31 March 2015

100% of operational audit plan implemented


Reviewed annual strategic audit plan

Review annual strategic audit plan by 31 March 2015

The annual strategic audit plan was reviewed


RISK MANAGEMENT AND FRAUD PREVENTION



SUB-PROGRAMME 1.3 RISK MANAGEMENT AND FRAUD PREVENTION






Percentage of the risk management and fraud prevention plan achieved

100% of the risk management and fraud prevention plan achieved by 31 March 2015

100% of the risk management and fraud prevention plan achieved


Reviewed annual risk and fraud prevention plan

Review annual risk management and fraud prevention plan by 31 March 2015

Annual risk management and fraud prevention plan was reviewed

FINANCESTRATEGIC OBjECTIVE: ENSURE FDC SUSTAINABILITY


SUB-PROGRAMME 1.4 FINANCE





Implement sound financial management practices

Amount of cumulative net cash inflow

Cumulative net cash inflow of R20m by 31 March 2015

Net out flow of R15m Electricity bill, Voluntary severance packages and restructuring cost.


Percentage improvement in debt collection

10% increase in debt collection, year on year by 31 March 2015

5% increase in debt collection, year on year

Economic slowdown.


Percentage reduction in operating costs

5% reduction in operating costs year on year by 31 March 2015

40% reduction in operating costs year on year

Reduction in impairment amount and professional Services fees.


Percentage budget allocation to assets’ maintenance

5% of investment property allocated to assets’ maintenance and spent by 31 March 2015

5% of investment property was allocated to asset maintenance and the allocation has been spent

Revenue enhancement Percentage achievement of BBBEE procurement target

100% achievement of procurement targets by 31 March 2015

(65%toPDI;20%toCooperatives;12%towomen,2% to youth and 1% to people with disabilities)

62% to PDIs, 7% to women, 23% to youth

Big projects are still being dominated by Non PDIs.

Few co-operatives responded to our marketing campaign.

Women led companies are not doing big projects.

Strong emphasis on youth empowerment.

None of supplier with disability responded.


HUMAN CAPITAL AND TALENT MANAGEMENT

STRATEGIC OBjECTIVE: BUILD FDC CAPABILITY TO DELIVER


SUB-PROGRAMME 1.5 HUMAN CAPITAL AND TALENT MANAGEMENT




Actual target achieved

Reason (s) for Variations

Improve people capability

Performance Management System rolled out

Performance Management System rolled out and all employees trained

Target not achieved The process is still underway and will be finalised in the first quarter of 2015/16 financial year. Delays were experienced when negotiations took place on the performance agreements with the union.


Percentage of placed management employees with signed performance contracts

100% of placed management employees to have signed performance contracts by 31 March 2015

Target not achieved The performance contracts have been drafted and are still to be agreed and signed by Managers. This process will be finalised in the first quarter of 2015/16.


Percentage of workplace skills plan achieved

50% of the workplace skills plan achieved by 31 March 2015

Target not achieved The deviation was due to the delay in the finalisation of the restructuring process. The finalisation of the restructuring process only took place in November 2014 and there was not sufficient time in the current financial year to implement the workplace skills plan.

The workplace skills plan was approved by the BHRREC to be implemented in 2015/2016.


Percentage of total payroll spent on workplace training programs

1% of total payroll spent on workplace training programs by 31 March 2015

Target not achieved The deviation was due to the delay in the finalisation of the restructuring process. Training was targeted to companies which were offering it at no cost to FDC.


Percentage of the revised annual employment equity targets achieved

80% of the revised annual employment equity targets achieved by 31 March 2015

87,5% of the revised employment equity targets was achieved

The deviation was due to the placement process which placed some female employees in management positions.


Percentage of critical positions filled

100% critical positions filled by 31 March 2015

100% of critical positions were filled

Create a conducive work environment

Percentage of the occupational health and safety plan implemented

100% of the occupational health and safety plan implemented by 31 March 2015

100% of the occupational health and safety plan implemented

Create a conducive work environment

Percentage of the employee wellness plan implemented

100% of the employee wellness plan implemented by 31 March 2015

100% of the employee wellness plan implemented

LEGAL SERVICES AND COMPLIANCE



SUB-PROGRAMME 1.6 LEGAL SERVICES AND COMPLIANCE






Level of compliance with applicable legislation, rules, codes and standards

100% compliance with applicable legislation, rules, codes and standards by 31 March 2015

100% compliance with applicable legislation, rules, codes and standard attained


STRATEGIC OBjECTIVE: DELIVER SERVICE OFFERINGS THAT LEAD TO FREE STATE ECONOMIC GROWTH


SUB-PROGRAMME 1.6 LEGAL SERVICES AND COMPLIANCE





Deliver FDC service offerings that add value to customers

Percentage of legal documents concluded within agreed turnaround times

(i.e The agreed turnaround times are as follows:

1. Long-Term loans – 15 working days 2. Bridging Loans – 7 working days)

80% of legal documents concluded within agreed turnaround times by 31 March 2015

65.18% of the legal documents were concluded within the agreed turnaround time

Not all legal documents could be concluded within agreed turnaround times due to outstanding documents not being received timeously.

Deliver FDC service offerings that add value to customers

Percentage of commercial legal contracts reviewed

70% of commercial legal contracts reviewed by 31 March 2015

70% of the commercial legal contracts reviewed

CORPORATE SECRETARIAT



SUB-PROGRAMME 1.7 CORPORATE SECRETARIAT






Annual Board calendar developed and approved

Annual Board calendar developed and approved by 30 April 2014

Annual calendar for 2014/15 financial year developed and approved by the board


Board and Committee charters reviewed and approved

Board and Committee charters reviewed

Board and Committee Charters reviewed and approved provisionally for 2014/15


Board Resolution register and Board resolution monitoring system developed and kept

Board resolution register and resolution implementation monitor developed and kept by 30 September 2014

Board and Board Committee resolution register was maintained and updated. Dashboard reports presented to board.


Board, its members and Board Committees evaluated

Board, its members and Board Committees evaluated by 31 March 2015

Board and Committee members evaluated and a report submitted to the board chairperson


Level of compliance to corporate governance

Governance Assessment reported by 31 March 2015

Governance Assessment conducted


Board members and management inducted and trained on Directors’ responsibilities, governance and compliance requirements

Board members and management inducted and trained on Directors’ responsibilities, governance and compliance requirements by 30 September 2014

Board members and management inducted and trained on directors responsibilities, governance and compliance requirements


5.2 PROGRAMME 2: BUSINESS SUPPORT

PURPOSE

TO PROVIDE INFORMATION TECHNOLOGY AND MARKETING AND COMMUNICATIONS SERVICES TO ALL OTHER

PROGRAMMES.

PROGRAMME SUB-PROGRAMME

Business Support 1. Information Technology

2. Marketing and Communications

3. Export Promotions

4. Investment Promotions

PROGRAMME PERFORMANCE HIGHLIGHTSINFORMATION TECHNOLOGY

THE ICT DEPARTMENT OF FDC EMBARKED ON A MAjOR SERVER AND SOFTWARE PLATFORM UPGRADE PROjECT IN 2014/15 SPANNING ALL 4 QUARTERS OF THE ANNUAL PERFORMANCE PLAN. SETUP AND PREPARATION KICKED OFF ON 29/7/2014.

A high level overview of the successfully completed project is as follows:

Setup of Virtual environments on 2 x Physical servers

Transferred and converted email environments

Implemented Exchange email services and transfer clients

Setup and installation of 4 windows 2010 VM server systems

Implemented and the transfer of users to Active Directory

Moving the ESS and VIP environments to VM

Training of IT personnel on the new environment

VM System optimization

Setup and implemented a new backup environment

Exchange (email) System optimization

MARKETING AND COMMUNICATIONS

The Marketing and Communication unit commissioned an Awareness Survey that resulted in a 91.67% of brand awareness archived various media campaigns in a form of radio advertorials/newspaper advertising / advertorial where placed in newspapers and publications. The FDC partnered with various stakeholders at exhibitions and events to raise awareness of FDC products and services.

The team undertook rebranding of the FDC, the starting point was to re-design the Website that was successfully launched in the last quarter of 2014/15, other branding achievements where the redesigning of both FDC and the MAP-SEZ logos.

Various media relations programmes where undertaken including the Vrede Dairy Provincial and the MAP-SEZ media tours. The unit placed editorial in newspapers and publications and developed the MAP-ZET and FDC services brochures.

The FDC, partnered with Global Africa Network, to produce the publication Free State business as well as placing advertorial in their South African Business Publications. These publications outlined the services, programmes and initiatives of the Free State Province and the FDC in greater details and were distributed at all events at which the FDC participated. The team also handles all electronic enquiries, forwarding them to the relevant departments and ensuring that feedback is given.

The Marketing team undertook the branding the FDC at various SMMEs events, including the Mangaung Youth Week, Botshabelo

Bed Manufacturing Launch, 1st Inaugural Conference of Rouxville SMME’S and other local and national platforms.


STAKEHOLDER RELATIONS

FDC products and service presentations were also organised at various external stakeholder events including the NAFCOC Confer-

ence, Free State Accessible Transport Summit, Stockvel Cooperatives Events and other district SMME event.

The department was active in keeping internal stakeholders informed through their monthly newsletter and organising the FDC

Strategy plan and team building.

EXPORT & INVESTMENT PROMOTIONS

The FDC submitted an application to IDC via DTI for the craft fund, approval was granted of R1, 6M to assist Free State crafters with

training and market access, thus fare crafters have been exposed to SARCDA International, SARCDA Christmas, SAITEX and Cherry

Festival Exhibitions. The IFA LETHU FOUNDATION provided training in craft production (NQF level 2) March 2014 to 30 crafters

at the Thabo- Mofutsanyane district.

The FDC facilitated participation of 130 Free State potential exporters in export awareness and readiness workshops in partnerships

with the DTI and DESTEA. This assisted companies with insight knowledge on how to package their products for export purpose. 25

Free State Exporters were promoted and 1 company was assisted to apply for the DTI outbound mission in the Netherlands.

The Marketing team also amongst other plays a role in the FDC Investment and Export Promotions, various workshops, partnerships

and hosting of Inwards Delegations such as the Economic Diplomacy Workshop Asia & Middle East, the partnership with Mangaung

Chamber of Commerce and Industry and hosting of Delegation from JIANGXI Province of CHINA.

INFORMATION TECHNOLOGY

STRATEGIC OBjECTIVE: BUILD FDC CAPABILITY TO DELIVER

PROGRAMME 2 : BUSINESS SUPPORT

SUB-PROGRAMME 2.1 INFORMATION TECHNOLOGY





Implement enabling IT systems

Reviewed and updated IT and Management Information Systems (MIS) capacity plan

IT and MIS capacity plan reviewed and updated by 30 June 2014 and 30 November 2014

IT and MIS capacity plan reviewed and updated on the 30th of June 2014 and 30th of November 2014.

Implement enabling IT systems

Percentage implementation of approved Capacity Plan activities

100% implementation of approved Capacity Plan activities by 31 March 2015

100% of approved Capacity plan activities were implemented by 31 March 2015.


MARKETING AND COMMUNICATIONS

STRATEGIC OBjECTIVE: PROMOTE FDC AS A LEADING DEVELOPMENT AGENCY


SUB-PROGRAMME 2.2 MARKETING AND COMMUNICATIONS





Increase market awareness of FDC Brand and FDC service offerings

Percentage of FDC brand awareness rating achieved

70% of brand awareness rating achieved by 31 March 2015

91,67% brand awareness rating achieved

More awareness campaigns yielded positive results.


No of activities implemented in the FDC communication plan

20 activities in the FDC communication plan implemented by 31 March 2015

21 activities in the communication plan implemented

An extra activity was undertaken than originally planned.


No of activities implemented in the FDC marketing plan

14 activities in the FDC marketing plan implemented by 31 March 2015

29 activities in the marketing plan implemented (RESOLVED)

More marketing activities undertaken than originally planned.



SUB-PROGRAMME 2.2 MARKETING AND COMMUNICATIONS

Measurable Objective Performance Measure / Indicator




No of initiatives implemented in the stakeholder relations plan

14 initiatives in the stakeholder relations plan implemented by 31 March 2015

19 initiatives in the stakeholder relations plan implemented (RESOLVED)

More stakeholder initiatives undertaken than anticipated.

EXPORT PROMOTION

STRATEGIC OBjECTIVE: DELIVER FDC SERVICE OFFERINGS THAT LEAD TO FREE STATE ECONOMIC GROWTH


SUB-PROGRAMME 2.3 MARKETING AND COMMUNICATIONS – EXPORT PROMOTION

Measurable Objective Performance Measure / Indicator



Increase the number of exporters from the province

Number of trade missions/ exhibitions participated in

Participation at 4 trade missions / exhibitions by 31 March 2015

Participated at 4 trade missions / exhibitions


No of exporters promoted (i.e. The promotion of exporters occurs at trade missions and exhibitions held both locally and internationally. Exporters are promoted by holding of exhibition stands, presentations and/or issuing of broachers at such events)

Promotion of 25 exporters by 31 March 2015

32 (cumulative) FS Exporters promoted

More than anticipated number of exporters were promoted


No of potential exporters trained through workshops & seminars hosted*1

150 potential exporters trained through workshops & seminars by 31 March 2015

122exporters were trained through workshops & seminars

Some of the targeted exporters did not respond to the invitation for the workshop & Seminars as anticipated.


INVESTMENT PROMOTION



SUB-PROGRAMME 2.4 MARKETING AND COMMUNICATIONS – INVESTMENT PROMOTION





Increase market awareness of FS as a business destination and its investment opportunities

No of investment enquiries received**2

30 investment enquiries generated and handled by 31 March 2015

30 investment enquiries received as a result of promotion handled / referred

Increase market awareness of FS as a business destination and its investment opportunities

No of initiatives in the investment promotion plan implemented

5 Investment promotion initiative undertaken by 31 March 2015

5 investment promotion initiatives undertaken

5.3 PROGRAMME 3: ECONOMIC DEVELOPMENT

PURPOSE

TO PROMOTE AND FACILITATE ECONOMIC GROWTH IN THE PROVINCE THROUGH INVESTMENT FACILITATION, ENTERPRISE

DEVELOPMENT AND PROPERTY DEVELOPMENT AND MANAGEMENT.

Programme Sub-Programme

Economic Development 1. Investment Facilitation

2. Maluti-A-Phofung SEZ

3. Property Management

4. SMMEs and Cooperatives Funding

5. Business Development Support

6. Investments in Subsidiaries and Associates

PROGRAMME PERFORMANCE HIGHLIGHTSSMMES AND COOPERATIVES FUNDING

A total of 40 loans were approved for 2014/2015, of which 19 were long term loans and 21 were short term loans. They comprise 125% of the loans budget for SMMEs and Cooperatives against a target of 100%. The total value of approved loans was R18 762 17. 10% of approved loan applications were granted to women owned entities against a target of 10% and17% of approved loan

applications were granted to youth owned entities against a target of 10%.

BUSINESS DEVELOPMENT SUPPORT

Business Development Support services were provided to active and operational enterprises as well as Cooperatives.

PROPERTY MANAGEMENT

The FDC has a property portfolio that comprises of commercial, industrial as well as residential facilities. The bulk of the portfolio is located in the Eastern Free State and with a few in the Mangaung Metro. The property portfolio is the cash cow of the Corporation. During the year under review the occupancy rates for the property portfolio stood at 80.71% for commercial, 75% for industrial and

81.03% for residential.


INVESTMENT PROMOTION AND FACILITATION

INVESTMENT PROjECTS

Of the seven projects reported in the 2013-2014 pipelines, two projects were dropped off the pipeline. These are Meraki Foods and Bothaville Bio-fuel project. The investors could no longer continue with these projects as there were challenges with raising the required funding for projects implementation. The Bio-fuel project also ran into on-going regulatory delays and challenges. In the 2014-2015 reporting period, three new projects were added and one was dropped off the pipeline. Thus, the FDC Project pipeline

currently comprises of seven projects under different stages of facilitation.

INVESTMENT MISSIONS

FDC uses platforms such as inbound and outbound trade and investment missions as one of the effective tools for promoting invest-

ment opportunities in the Free State.

INVESTMENT PROjECT PIPELINE 2014-2015

Project Description of Project Implementing Agent / Facilitator

No. of Jobs estimated

Project Rand Value / Estimate

1. Maluti-A- Phofung Special Economic Zone (MAP SEZ)

This project is intended to position Eastern FS as a manufacturing hub by establishing a purpose-built industrial estate with a controlled customs area. This project is intended to take advantage of existing industrial capacity, promote integration with local industry and increase value-added production. The proposed MA SEZ is intended to complement Harrismith Logistics Gateway that is being developed 8 kilometres away. This project is being developed as part of the Durban–Gauteng Corridor. Targeted sectors include logistics integration hubs, Medical devices and pharmaceuticals manufacturing, automobile parts and components manufacturing, food processing, solar energy generation plants.

The FDC. Sponsored by the Free State provincial government, Maluti-A-Phofung Local Municipality and the dti

1000 R 4 billion

2. Food Processing Park, MAP SEZ

The building of a world class food processing park intended to host a number of companies in the food processing sector. This park would be an integrated food processing cluster providing for logistics service providers, warehousing, cold storage and manufacturing facilities to enhance production efficiencies.

FDC and key identified partners

600 R 250 m

3. Parts & Accessories Cross-docking Centre, MAP SEZ

This project is intended to position Harrismith as a Vehicle Parts & Accessories Distribution Centre to supply the after sales market. To attract automobile parts manufacturers and importers to set-up and to locate in the VDC.

Vehicle distributor 100 R 150 m

4. Medical Devices and Components Manufactur-ing (Mediquip Hub SA)

This entails the establishment of a medical devices and medi-cal components manufacturing company in the MAP SEZ that is under development.

Mediquip SA 200 R 500 m

5. Pegasus Aerospace (aircraft manufacturing)

The production and manufacturing of a vertical take-off sev-en (7) seater Aircraft.

Pergus Aerospace 50 R1 billion

6. Frankfort Kraft Paper Mill, Mafube Local Munici-pality.

The establishment of a Kraft paper factory that will predomi-nantly use waste container board paper and virgin pulp to produce kraft liner, liner board, and fluting and semi-extensi-ble sack kraft. Production capacity is about 180 000 tonnes per annum

Industrial Develop-ment Corporation

800 R 1.4 billion

Total 2750 R7.3 billion

For the past three financial years, the target for recruiting new investment projects into the FDC project pipeline was set at six projects. During that period we realised that it is difficult to attract Foreign Direct Investments (FDI) into Free State. Some of the reasons for this are the constrained domestic business environment, the prolonged global recession and the cyclical movement in commodity prices that has led to disinvestments in the mining sector. We are also subjected to increased competition from other global FDI locations, especially those in Asia. It is our considered view that the launching of the Special Economic Zones in the South Africa will counter the latter impact. We are indeed encouraged from our performance to date to secure commitment s from

potential investors to locate in the MAP SEZ.


PROGRAMME CHALLENGES

Lack of loan funding for SMMEs and Cooperatives as the demand for loans exceeds the supply.

Attracting potential SMMEs applications for funding especially entities from the rural areas, people with disabilities and Cooperatives.

The Free State Business Environment is less competitive compared to three provinces (Gauteng, Kwa-Zulu Natal and Western Cape that together contribute 70% to the GDP of the country.

The Investment Facilitation Unit needs to maintain its investment aftercare programme to ensure that businesses that are in distress are rescued before they close shop or disinvest from the Free State Province.

We need to develop more industrial estates, commercial properties and residential properties in parts of the province where the

FDC has not yet done so. This is a proven tool to act as a catalyst for long-term economic growth and development.

5.3.1 INVESTMENT FACILITATION


PROGRAMME 3 : ECONOMIC DEVELOPMENT

SUB-PROGRAMME 3.1 INVESTMENT FACILITATION





Implement service offerings that meet customer expectations

Number of investment projects successfully realized(i.e. Investment projects are successfully realised when agreements are entered into between FDC and potential investors. Furthermore FDC can facilitate agreements between potential investors and other national, provincial and local governmental stakeholders)

2 x investment projects successfully realized by 31 March 2015

1 x investment projects were successfully realized

DEVIATION One investment project was facilitated and was only successfully realised after year end.


Number of investment enquiries resolved within agreed turnaround time(i.e. The investment enquiries that FDC can resolve will be 15 working days and those referred to other spheres of government will be resolved within 180 working days). Extensions to turnaround times are agreed depending on challenges identified on enquiries.

24 x investment enquiries resolved within agreed turnaround time by 31 March 2015

15 enquiries successfully resolved The other enquiries required complex interventions with other stakeholders such as water and electricity utilities, land owners and licencing issues and EIAs. As such the enquiries are still being resolved after year end.


Number of new investments projects registered

6 x new investments projects registered by 31 March 2015

6 x investments projects were registered









Deliver service offerings that add value to customers

Number of business assisted through investment aftercare programme(i.e Aftercare programme refers to services rendered by FDC to existing businesses to for example: - Obtain business or work permits to operate in the country - Assist with relocation from foreign country - Assist with obtaining premises to operate in

12 x business assisted through investment aftercare programme by 31 March 2015

3 businesses assisted through investment aftercare

. Only 3 businesses requested aftercare assistance from FDC in the current which was a reduction from the 12 assisted in the prior year.









Number of investment policy advocacy engagement workshops conducted

5 x investment policy advocacy engagement workshops conducted by 31 March 2015

4 investment policy advocacy workshops were conducted in Fezile Dabi, Xhariep and Lejweleputswa

Challenges were experienced with holding the investment workshop with Mangaung Metropolitan Municipality during the financial year.

5.3.2 MALUTI-A-PHOFUNG SEZ



SUB-PROGRAMME 3.2 MALUTI-A-PHOFUNG SEZ






Number of MAP SEZ project preparation and planning studies facilitated

3 x project planning and preparation studies completed by 31 March 2015

3 x project planning preparation studies completed


Number of SEZ infrastructure plans completed

3 x infrastructure plans completed by 31 March 2015

3 x Infrastructure plans completed


Number of SEZ investment promotional events conducted

3 x MAP SEZ investment promotional events hosted by 31 March 2015

3 x MAP SEZ promotion events hosted (group presentations were made in India and in Dubai)


Number of communications published on SEZ Project locally and globally

12 x communications published on SEZ Project locally and globally by 31 March 2015

3 x communications published on SEZ project (2 x locally and 1x globally)

The publishing of the MAP SEZ publications were delayed due to the delay in the designation as a special economic zone.


Number of approved MAP SEZ Infrastructure Project Completed

1 x approved MAP SEZ Infrastructure Project completed by 31 March 2015

Target not achieved Fence project commenced but work in progress and estimated for completion in the next financial year.




SUB-PROGRAMME 3.2 MALUTI-A-PHOFUNG SEZ






Number of stakeholder briefing sessions facilitated

4 x stakeholder briefing session hosted by 31 March 2015

4 x stakeholder briefing sessions hosted (RESOLVED)

5.3.3 PROPERTY MANAGEMENT



SUB-PROGRAMME 3.3 PROPERTY MANAGEMENT





Increase FDC revenue Percentage collection on active3 commercial portfolio

An average of 90% of billings collected on active commercial portfolio (Current 12 month average: 83,95%)

99,48% of billings for the year on active commercial portfolio collected

The collection drive was intensified and some tenants paid their outstanding arrears.

Increase FDC revenue Percentage collection on active industrial portfolio

An average of 97% of billings collected in the year on active industrial portfolio (Current 12 month average: 95,54%)

90,63% of billings for the year on active industrial portfolio collected

Some industrial clients have not honoured payment arrangements.

Increase FDC revenue Percentage collection on active residential portfolio

An average of 90% of billings collected in the year on active residential portfolio (Current 12 month average: 84.86%)

90,55% of billings for the year on active residential portfolio collected

The collection drive was intensified for residential clients and some tenants paid their outstanding arrears.

Increase FDC revenue Percentage occupancy rate of residential portfolio

72% occupancy rate of residential portfolio at year end (Current 12 month average: 67,51%)

81,03% occupancy rate achieved for lettable residential portfolio

More residential applicants received and approved than anticipated.

Increase FDC revenue Percentage occupancy rate of lettable commercial portfolio

80% occupancy rate of lettable commercial portfolio (Current 12 month average: 77,94%)

80.71% occupancy rate achieved for lettable commercial portfolio

More commercial applicants received and approved than anticipated.

Increase FDC revenue Percentage occupancy rate of industrial portfolio

75% occupancy rate of industrial portfolio (Current 12 month average: 71,76%)

75% occupancy rate achieved for lettable industrial portfolio

Increase FDC revenue Percentage rental contracts reviewed in line with the current policy

75% rental contracts reviewed in line with the current policy by 31 March 2015

100% of the rental contracts for the 2014/15 reviewed in line with the rental policy

All new rental contracts submitted to service provider for review in the current year.

Increase FDC revenue Percentage rental expenses4 recovered active tenants

60% of rental expenses recovered from active tenants by 31 March 2015

60% of rental expenses were recovered from active tenants

Increase FDC revenue Percentage of approved properties disposed of

60% of approved properties sold and transferred by 31 March 2015

No properties were disposed of during the year

Disposal process only taking place after year end as compliance process took time to complete.

Increase FDC revenue One acquisition per area completed

Acquire two properties one each in Southern and Northern Free State by 31 March 2015

No properties acquired during the year

The acquisition of the two properties was dependent on the disposal of identified properties to fund the acquisition.




SUB-PROGRAMME 3.3 PROPERTY MANAGEMENT






Percentage of maintenance program implemented(i.e The above indicator refers to the percentage of the approved maintenance budget that is used on unscheduled maintenance that occurs on an ad hoc basis for the top 50 rental clients of the entity)

60% of maintenance budget to be focused on the top 50 rental clients maintenance program by 31 March 2015

146% of maintenance budget was focused on top 50 rental clients maintenance program

Additional unforeseen maintenance required for top 50 rental clients during the year resulting in overspending of approved maintenance budget.

5.3.4 SMMES AND COOPERATIVES FUNDING



SUB-PROGRAMME 3.4 SMMES AND COOPERATIVES FUNDING





Increase FDC revenue Percentage collection of billing of long term loans- Loans less than 12 months old

95% of total billing of long term loans granted during current year, collected

49% of total billing of long term loans granted during the 2014/15 was collected

The target was underachieved by 46% because some SMMEs have not started operating although they have been billed. Furthermore not all long term loans could be collected during the financial year.

Increase FDC revenue Percentage collection of arrears - Loans older than 12 months

40% of total billing collected by 31 March 2015

12.65% of total billing of arrears loans was collected

The target was underachieved by 27.35% because most SMMEs are not performing well & therefore failed to pay FDC.

Increase FDC revenue Percentage collection of due and payable bridging loans

100% of total billing collected from bridging loans that are due and payable by 31 March 2015

0.51% of total billing was collected from bridging loans that were due and payable

The target was underachieved by 99.49% because there is a lack of collection by FDC as client departments are paying borrowers directly even though loan has been ceded to FDC. Also there is a lack of collection as borrowers are not performing on contracts resulting in a cancellation of these contracts. Borrowers are then unable to fulfil obligations to FDC.


STRATEGIC OBjECTIVE: DELIVER FDC SERVICE OFFERINGS THAT LEAD TO DEVELOPMENT OF THE FREE STATE ECONOMY


SUB-PROGRAMME 3.4 SMMES AND COOPERATIVES FUNDING

Measurable Objec-tive





Percentage of loans’ budget approved to SMMEs and Cooperatives

100% of loans budget approved to SMMEs and Cooperatives by 31 March 2015

124% of loans budget was approved to SMMEs and Cooperatives

The target was overachieved by 24% points because of increased outreach efforts by the FDC.


Percentage disbursement of approved loans

80% of approved loans disbursed by 31 March 2015

44.99%% of approved loans were disbursed

The target was underachieved by 35.01% points because most loans are approved but still to be implemented & disbursed, some are awaiting security registration.


Percentage of approved loan amounts granted to women owned entities5

10% of approved loan amounts granted to women owned entities by 31 March 2015

10% of approved loan amounts were granted to women owned entities


Percentage of approved loan amounts granted to youth owned entities6

10% of approved loan amounts granted to youth owned entities by 31 March 2015

14.61% of approved loan amounts were granted to youth owned entities

The target was overachieved by 4.61% points because more applications from youth owned entities were received and approved.

Deliver service offering that add value to customers

Percentage of approved loan amounts granted to Cooperatives

20% of approved loan amounts granted to Cooperatives by 31 March 2015

2.71% of approved loan amounts granted to Cooperatives

The target was underachieved by 17.29% points because fewer applications from Cooperatives were received.


Percentage of approved loan amounts granted to qualifying people with disability owned entities7

2% of approved loan amounts granted to qualifying people with disability owned entities by 31 March 2015

0,4% of approved loan amounts granted to qualifying people with disability owned entities

The target was underachieved by 1,6% points because few applications from qualifying people with disability owned entities were received.


Number loans approved per each Local Municipality

20 Loans approved, 1per each Local Municipality by 31 March 2015

9 loans approved

(Loan applications were received and approved for businesses based in the following municipalities: 1. Mangaung Municipality 2. Maluti-A-Phofung local municipality 3. Nketoana local municipality 4. Dihlabeng local municipality 5. Matjhabeng local municipality 6. Nala local municipality 7. Tokologo local municipality 8. Moqhaka local municipality 9. Metsemanholo local municipality

The target was underachieved by 11 because more applications were received from developed areas despite our best efforts to attract applications from under-performing areas.


5.3.5 BUSINESS DEVELOPMENT SUPPORT



SUB-PROGRAMME 3.5 BUSINESS DEVELOPMENT SUPPORT





Deliver FDC service offering that add value to customers

Percentage of existing operational8 FDC SMMEs and Cooperatives portfolio customers receiving BDS services

(i.e BDS services refer to the portfolio management of active operating SMME businesses with loans obtained from FDC). Services are dependent on the needs of the SMME to ensure that loans granted are recovered).

100% of existing operational FDC SMMEs portfolio customers receiving BDS services by 31 March 2015

57% of existing operational FDC SMMEs portfolio customers received BDS services

Logistical challenges were experiences to make arrangements to meet all existing operational SMME’s with the FDC portfolio. BDS services not required by all existing operational SMME businesses that are within the FDC portfolio.

Deliver FDC service offering that add value to customers

Percentage of existing operational9 FDC SMMEs and Cooperatives portfolio customers receiving BDS services.

(i.e BDS services refer to the portfolio management of active operating Cooperative businesses with loans obtained from FDC). Services are dependent on the needs of the Cooperatives to ensure that loans granted are recovered).

100% of existing operational FDC cooperatives receiving BDS services by 31 March 2015

93.75% of existing operational FDC Cooperatives received BDS services

Logistical challenges were experienced to make arrangements to meet all existing operational Cooperatives with the FDC portfolio. BDS services not required by all existing operational Cooperative businesses that are within the FDC portfolio.

5.3.6 INVESTMENTS IN SUBSIDIARIES / ASSOCIATES



SUB-PROGRAMME 3.6 INVESTMENTS IN SUBSIDIARIES / ASSOCIATES





Increase FDC revenue Percentage of existing non- operating joint ventures / subsidiaries / associates portfolio disinvested from

100% of identified non- operating joint ventures / subsidiaries / associates portfolio disinvested from by 31 March 2015

100% of identified non-operating joint ventures/subsidiaries / associates portfolio disinvested from

RESOLVED WITH AG


5.4 STRATEGY TO DEAL WITH UNDERPERFORMANCE Name of the Programme

Summary on how to deal with under-performance

Programme 1: Administration

Implementation of the Performance Management System.Increase and continuous debt collection.Reduce operational expensesDevelopment of a procurement plan

Programme 2: Business Support

Continuous marketing of the FDC’s service offerings Introduce client portfolio management as continuous business development support will result in better relations with clients and improved repayment collections. Introduce client portfolio management

Programme 3: Economic Development

Improvement in Portfolio Management by District Operations personnel.Increase outreach programs to the identified target markets.Continue to forge strategic relations with strategic stakeholders especially where funding can be secured.Capacity building programmes in the implementation of trade and investment facilitation best practice.


PART C: GOVERNANCE


PART C: GOVERNANCE

6.1 INTRODUCTION

FDC is a Free State Province public business enterprise listed as a Schedule 3D of the Public Finance Management Act. The Corporation derives its enablement, powers and objectives from its enabling legislation, the Free State Development Corporation Act of 1995. The Corporation has governance responsibilities entrusted in the Board of Directors which accounts in turn to the provincial Member of the Executive for Economic, Tourism and Environment Affairs. In addition to legislative requirements based on FDC’s enabling legislation, the Companies Act of 2008, Protocol for Corporate Governance in Public Entities and Shareholder Compact are regulatory instruments directing governance.

Together with the above prescripts, King Codes of Corporate Governance apply in guiding the Board of Directors to good Corporate Governance. Good Corporate Governance is a pillar of the FDC’s drive to achieve its business objectives, stability accountability, transparency, responsibility, discipline, independence, fairness, social responsibility, service delivery, clean audits, oversight to man-

agement, potential investment, risk management, compliance, and to avoid business failures and corporate scandals.

THE PROVINCIAL LEGISLATURE AND EXECUTIVE ARE RESPONSIBLE FOR THE FDC’S CORPORATE GOVERNANCE OVERSIGHT.6.2 PORTFOLIO COMMITTEES

OVERSIGHT BY LEGISLATURE

The Constitution of the Republic of South Africa gives the National Assembly and Provincial Legislatures an oversight role over their respective Executives. The Provincial Legislature must maintain oversight over the Provincial Cabinet, and Members of the Provincial Cabinet must provide the Provincial Legislature with full and regular reports concerning matters under their control.

FREE STATE LEGISLATURE HAS ESTABLISHED THE FOLLOWING COMMITTEES TO FACILITATE ITS OVERSIGHT ROLE OVER FDC:

ThePortfolioCommitteeonPublicAccounts,(PROPAC);

The Portfolio Committee on Agriculture and Rural Development, Economic Development, Small Business, and Sport, Arts and

Culture.

PROPAC IS PRIMARILY RESPONSIBLE FOR FINANCIAL OVERSIGHT ADDRESSING:

IssuesraisedintheAuditor-Genera’sauditoutcomes;

Issues of financial probity as highlighted in the audit report or disclosed in the management report or notes to the financial statements;

CompliancewiththePFMAandTreasuryRegulations;

Financialperformance;

Instancesofunauthorized,irregularandfruitlessandwastefulexpenditure;

Thefunctioningofriskmanagementsystems;and

Corporate Governance.


MEETINGS DURING 2014/15

Consideration of Report of the Auditor General on Financial Statements for the Year Ending 31 March 2015.

Consideration of the 1st quarter Expenditure Report for 2014/15 financial year.

THE PORTFOLIO COMMITTEE ON AGRICULTURE AND RURAL DEVELOPMENT, ECONOMIC DEVELOPMENT, SMALL BUSINESS,

AND SPORTS, ARTS AND CULTURE IS PRIMARILY RESPONSIBLE FOR NON-FINANCIAL MATTERS THROUGH:

Monitoring the economy, efficiency and effectiveness of service delivery as measured by performance indicators presented in the pre-determined objectives.

Evaluating management’s explanation as to why the entity’s service delivery performance did not attain the targets set in the cor-porate plans.

Equity of service delivery.

Investigating the circumstances that led to financial under-performance and the impact this had on service delivery and the mea-

sures taken by management to rectify the situation.

MEETINGS DURING 2014/15

Consideration of Annual Report for 2013/14 Financial Year.

Consideration of the Annual Performance Plan for 2014/15 Financial Year.

Consideration of the 1st to 3rd Quarter Non-Financial Report for 2014/15 Financial Year.

6.3 CONSTITUTIONAL AND LEGISLATIVE FRAMEWORK

THE CONSTITUTION

ORGANS OF STATE AND PUBLIC ENTERPRISES ARE BOUND BY THE BASIC VALUES AND PRINCIPLES SET OUT IN SECTION 195

(1) OF THE CONSTITUTION. THE CONSTITUTION ENjOINS A PROVINCIAL LEGISLATURE TO PROVIDE MECHANISMS:

Toensurethatallprovincialexecutiveorgansofstateintheprovinceareaccountabletoit;and

To maintain oversight of provincial executive authority in the province and any provincial organ of state including FDC.

EXECUTIVE AUTHORITY

The executive authority vests in the Premier who exercises this provincial executive authority with other Members of the Executive Council (MECs). The MEC is responsible for the function of the executive assigned to him or her by the Premier. MEC’s are accountable collectively and individually to the provincial legislature for the exercise of their powers and the performance of their functions. Each MEC must provide the provincial legislature with full and regular reports concerning matters under their control. Boards of Directors of entities like the FDC must regularly provide their MEC’s with the above information. In the case of the FDC the MEC responsible for the Corporation is the MEC for the Department of Economic, Small Business Development, Tourism and Environmental Affairs

(DESTEA).

FDC ACT

In terms of the FDC Act, the FDC is a juristic person, subject to the relevant provisions of the PFMA. Main objects of FDC are set out

in Section 3, and the powers of the Board in section 4 and 4A.

NATURE OF THE FDC

The FDC is a juristic person under the ownership and control of a provincial executive through the Member of the Executive:

Economic, Small Business Development, Tourism and Environmental Affairs.


PUBLIC FINANCE MANAGEMENT ACT (PFMA)

THE PFMA SETS OUT THE FIDUCIARY DUTIES AND GENERAL FINANCIAL GOVERNANCE RESPONSIBILITIES OF THE BOARD. IT ALSO REGULATES CONFLICT OF INTEREST, AND MAKES PROVISION FOR OPERATIONAL AND MANAGERIAL AUTONOMY. IN ADDITION, THROUGH THE TREASURY REGULATIONS, IT MAKES PROVISION FOR THE FOLLOWING REPORTING AND OVER-

SIGHT MECHANISMS:

ShareholderCompact[TR29.2];

CorporatePlan[s.52(b)r/wTR29.1];

AnnualPerformancePlan(APP)i.e.predeterminedobjectives;

QuarterlyPerformanceReports(QPR’s);

AnnualReport[s.55(1)(d)r/wTR28.2];and

Audit Committee (r/w TR 27.

PROVINCIAL TREASURY

THE PROVINCIAL TREASURY’S ROLE IS TO EXERCISE FINANCIAL OVERSIGHT THROUGH:

Settingreportingguidelinestopromoteandenforcetransparencyinrespectofrevenue,expenditure,assetsandliabilitiesofFDC;

Oversightoverthefunding/borrowingprogrammersofFDC;

Controllingtheutilizationofcontingentliabilities;and

Effective treasury management models.

6.4 THE BOARD

THE POWERS/ROLES OF THE BOARD OF DIRECTORS ARE TO:

EnsurethattheexecutivemanagementimplementstheFDC’sstrategyasestablishedfromtimetotime;

EnsurethatFDChaseffective,efficientandtransparentsystemsofoperational,riskmanagementandfinancialinternalcontrols;

Monitortheactivitiesoftheexecutivemanagement;

ProvideinformationontheactivitiesofFDCtothoseentitledtoit;

Ensurethesuccessionandapprovetheappointment,ofseniorexecutives;

EnsurethatFDCoperatesethically;

Addresstheadequacyofretirementandhealthcarebenefitsandfundingthereof;

Ensure that FDC has and maintains a system of internal audit under the control and direction of an audit committee complying withandoperatinginaccordancewithregulationsandinstructionsprescribedintermsofsections76and77ofthePFMA;

Ensure that FDC has and maintains an appropriate procurement and provisioning system which is fair, equitable, transparent, competitiveandcost-effective;

Ensurethatallapplicableblackeconomicempowermentlegislativeframeworksandrequirementsarecompliedwith;and

Ensure that FDC has and maintains a system for properly evaluating all major capital projects prior to a final decision on the

project.


6.5 BOARD CHARTER

THE BOARD CHARTER IS A DOCUMENT THAT SERVES TO SET OUT THE HIGH LEVEL RESPONSIBILITIES OF FDC BOARD AND REGULATION OF ITS AFFAIRS, READ IN CONjUNCTION WITH THE FDC ACT, THE COMPANIES ACT, THE PFMA AND THE

APPLICABLE TREASURY REGULATIONS.

ACCORDING TO THE CHARTER, THE BOARD HAS THE FOLLOWING DUTIES AND RESPONSIBILITIES:

AbsoluteresponsibilityfortheperformanceofFDCandisfullyaccountabletotheExecutiveAuthority;

To retain full and effective control over FDC and monitor management closely in implementing FDC plans, strategies and resolutions.Thisincludesthemonitoringofmanagementandoperationalperformance;

To ensure that FDC is fully aware of and complies with applicable laws, regulations, policies and code of business practice and communicateswithitsstakeholdersopenlyandpromptlywithsubstanceprevailingoverform;

To ensure that there are effective policies, procedures, practices and systems of internal control in place that protect FDC’s assets, resourcesandreputation;

Toensurethatmanagementhasimplementedaneffectivesystemofriskmanagement;

To ensure that all Board members have unrestricted access to accurate, relevant and timely information on the FDC and act on a fully informed basis, in good faith, with diligence, skill and care and in the best interest of FDC, whilst taking into account the interestsofthevariousstakeholders,includingemployees,creditors,suppliersandlocalcommunities;

TocloselymonitortheprocessofdisclosureandcommunicationandexerciseobjectivejudgementontheaffairsofFDC;

TomonitorandmanagepotentialconflictsofinterestofBoardmembersandmanagement;

To develop a clear definition of the levels of materiality or sensitivity in order to determine the scope of delegation of authority and ensure that it reserves specific powers and authority to itself. Delegated authority must be in writing and evaluated on a regularbasis;

Toensurethatfinancialstatementsarepreparedforeachfinancialyear,whichfairlyrepresentsthefinancialpositionofFDC;and

To at least annually assess its performance and effectiveness as a whole and that of individual directors.


MS HB MAYEZABOARD CHAIRPERSON

MR LI. PHUNGOCHAIRPERSON - BOARD HUMAN RESOURCES,

REMUNERATION AND ETHICS COMMITTEE.

MEMBER OF BOARD INFORMATIONTECHNOLOGY AND INFRASTRUCTURE

COMMITTEE.

FROM 20 October 2014

MR MPB. CHUENEMEMBER OF BOARD INVESTMENT AND

FINANCE COMMITTEE.

FROM 20 October 2014

MR V. MAHARAjCHAIRPERSON - BOARD INVESTMENT AND

FINANCE COMMITTEE .


COMMITTEE.

MR MS. KHUMALOMEMBER OF BOARD HUMAN RESOURCES,

REMUNERATION AND ETHICS COMMITTEE.

MEMBER OF BOARD AUDIT ANDRISK COMMITTEE .

MRS ND. MOCHOCHOKOCHAIRPERSON - BOARD AUDIT AND

RISK COMMITTEE FROM 1 April -19 October 2014.

MEMBER OF BOARD INVESTMENT ANDFINANCE COMMITTEE.

MR TB. PHITSANECHAIRPERSON - BOARD HUMAN RESOURCES,

REMUNERATION AND ETHICS COMMITTEE.FROM 1 April -19 October 2014.


COMMITTEE.

MS HN. MKHUNGOCHAIRPERSON - BOARD INFORMATIONTECHNOLOGY AND INFRASTRUCTURE

COMMITTEEFROM 1 October 2014.

MEMBER OF BOARD HUMAN RESOURCE, REMUNERATION AND ETHICS COMMITTEE .

MS TN. SANDLANACHAIRPERSON - BOARD AUDIT AND

RISK COMMITTEEFROM 20 October 2014.

MEMBER OF BOARD INVESTMENT ANDFINANCE COMMITTEE.


COMMITTEE.

MR I. OSMANCHIEF EXECUTIVE OFFICER

FDC BOARD MEMBERS


6.6

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6.8 BOARD APPOINTMENTS

The board is appointed by the MEC for Department of Economic Small Business Development, Tourism and Environmental Affairs.

6.9 BOARD EVALUATION

Board has introduced instruments of self-evaluation and has evaluated itself in respect of performance and effectiveness of its

members collectively and individually.

6.10 BOARD INDEPENDENT EVALUATION

Board requires independent evaluation to assess its effectiveness and performance.

6.11 BOARD AUDIT AND RISK COMMITTEE (BARC)

THE BOARD AUDIT AND RISK COMMITTEE HAS BEEN CONSTITUTED IN TERMS OF REGULATION 27 OF THE TREASURY REGULATIONS TO PROVIDE ASSURANCE AND OVERSIGHT OVER FDC’S SYSTEM OF INTERNAL CONTROLS AND ENSURE

EFFECTIVE MANAGEMENT OF RISKS.

Name of Member Position Date of appointment Date of meeting Date of meeting Date of meeting

Ms. TN Sandlana Chairperson 19 September 2014 26 March 2015

Mrs N Mochochoko Member 04 October 2012 22 May 2014 25 July 2014 20 November 2014

Ms S Ntanjana Member 19 September 2014 20 November 2014 26 March 2015

Mr MN Ntshiea Member 01 March 2011 25 July 2014 20 November 2014 26 March 2015

Mrs J van Wyk Member 01 March 2011 22 May 2014

Mr ME Mohlahlo Member 01 March 2011 25 July 2014

Mr S Khumalo Member 04 October 2012

THE TABLED BELOW DISCLOSES RELEVANT INFORMATION ON THE AUDIT COMMITTEE MEMBERS:

Name of member Qualifications Internal or external

If internal, position in the public entity

Date appointed Date Resigned

Ms. TN Sandlana - Diploma in Management - B Comm - Higher Education Diploma - Master of Business Administration - Certificate in Quality Assessment

CQA- Certificate in Control Self-

Assessment

External 19 September 2014

Ms S Ntanjana - B PROC

- LLB

External 19 September 2014

Nthabeleng Mochochoko (Chairperson until 19 September 2014)

- Certified Internal Auditor (I,II)- B.Compt Honours - Certificate of Theory in Accounting- B. Com- B.Com Honours

External - 04 October 2012 Still a member

Julia Van Wyk, CA (SA) - B.Com- B. Compt (Hons)- Certificate in Theory of Accounting

External - 1 March 2011 25 July 2014

Ernest Mohlahlo - B.Com (Accounting) - B.Com (Hons) (Financial Accounting) - Masters of Business Administration

(MBA)

External - 1 March 2011 25 July 2014

Solomon Kumalo - Incomplete B.Com (Accounting) (until 2nd year)

External - 4 October 2012 20 October 2014

Mokone Ntshiea - B Com (Accounting) External - 1 March 2011 Still a member

6.12 BOARD INVESTMENT AND FINANCE COMMITTEE (BIFC)

The Board Investment and Finance Committee is a permanent Board committee to provide oversight, take financial and investment decisions on behalf of Board in terms of delegations of authority. The committee acts as bid adjudication committee in term of delegations of authority. The primary focus of the committee was to achieve financial sustainability and approve investments and

loans to SMMEs.


6.13 BOARD INFORMATION TECHNOLOGY AND INFRASTRUCTURE COMMITTEE (BITIC)

Board Information Technology and Infrastructure Committee is a permanent Board committee to provide IT oversight and take Information technology decisions on behalf of Board in terms of delegations of Authority. The primary focus for the 2014/2015

financial year was to ensure IT compliance.

6.14 BOARD HUMAN RESOURCES, REMUNERATION AND ETHICS COMMITTEE (BHRREC)

Board Human Resources, Remuneration and Ethics Committee is a permanent Board committee to provide human resources, remuneration and ethics oversight and take related decisions on behalf of Board in terms of delegations of Authority. The primary

focus for the 2014/2015 financial year was to conclude restructuring and appointment of new executive team.

REMUNERATION OF BOARD MEMBERS

Name RemunerationDirectors Fee

Other allowanceKilometres

Company contributions Total

Van Wyk, JH 7000.00 70.00 7070.00

Ntshiea, ME 7000.00 9058.08 70.00 16128.08

Mohlahlo, ME 3500.00 35.00 3535.00

Maharaj, V 75500.00 84044.10 621.16 160165.26

Mayeza, HB 52400.00 65956.26 423.44 118779.70

Mochochoko, N 27500.00 2679.60 258.72 30438.32

Phitsane, TB 15300.00 2000.40 153.00 17453.40

6.15 COMPLIANCE WITH LAWS AND REGULATIONS

FDC has compiled a compliance framework to ensure reference to compliance with major and mandatory legislation and regulations affecting it. In addition to the compliance framework, FDC relies on internal audit and company secretariat functions to assure

compliance with laws and regulations.

6.16 FRAUD AND CORRUPTION

Board has, as part of the corporate plan that was submitted to the executive authority and provincial treasury, adopted the antifraud and corruption plan. In addition to the antifraud and corruption plan, Board has put in place the anticorruption hotline. The hotline

has been placed in all visible places for all employees to see and make utilise should an incident of corruption take place.

6.17 MINIMISING CONFLICT OF INTEREST

Board has required all its members to declare any interest prior to transacting on business at each meeting of board or its committees. A conflict of interest register is kept in the office of the company secretary. Members of executive management annually declare

interest.

6.18 CODE OF CONDUCT

A code of conduct for compliance with ethics standards is in place.

6.19 HEALTH, SAFETY AND ENVIRONMENTAL ISSUES

At the time of reporting FDC was reviewing and updating its health and safety plans. The employee wellness’s officer was appoint-

ed to amongst others attend into health related issues affecting employees.

6.20 COMPANY SECRETARY

The Company Secretary is responsible for ensuring the optimum functioning of Board and its Committees in terms of relevant legislation and corporate governance principles. Board members have unrestricted access to the advice/guidance and services of the

FDC Company Secretary on issues relating to governance, legislative and regulatory requirements.

THE COMPANY SECRETARY PROVIDES SUPPORT TO THE BOARD IN RELATION TO THE COMPILATION OF THE ANNUAL

PLAN AND AGENDA FOR BOARD AND ITS COMMITTEE VARIOUS MEETINGS.

6.21 CORPORATE SOCIAL RESPONSIBILITY

Staff of FDC provided a wheel chair to a disabled resident in QwaQwa.



7.1 INTRODUCTION

Free State Development Corporation developed Human Resources Strategies with the intention to ensure achievement of the Corporation’s objectives. The key focus area has been to have a solid, skilled and productive workforce.

During the year under review, the Corporation had undergone a restructuring process which was concluded in November 2014. Besides this process, all efforts were made through leadership and clear communication to ensure that employees remain focus to

ensure delivery of services to our valued clients.

THE FOLLOWING WERE THE KEY PRIORITY AREAS:

7.0.1

EMPLOYEE WELLNESS PROGRAMME

The Employee Wellness Programme (EWP) is provided to all employees through the use of an External Service Provider. The plan was fully implemented as planned and it offers employee access to various services which includes amongst others professional counselling. Various wellness days were held and employees fully participated and had opportunities to go for screening for

cholesterol, hypertension, diabetes as well as HIV. Communications and posters were issued for health awareness.

7.0.2

INTERNSHIPS

At least seven (07) Interns were placed in various sections in the FDC and the intention is to afford graduates with on the job

training and experience that might be beneficial for them to enter into the job market.

7.0.3

LABOUR RELATIONS

The working relationship with NEHAWU which is the majority labour organisation in the FDC remains stable. The recognition agreement is in place and all parties engage in a professional manner. This was evidenced during the restructuring process which

was tedious and finally concluded by the parties.

7.2 PROGRAMME ACHIEVEMENTS

In the financial year 2014/15, we have achieved 87.5% on the employment equity target which is 7.5% more than the targeted 80%. We have also achieved 100% on the planned target of filling critical positions.

To comply with the Health and Safety Act, we achieved 100% on the health and safety plan as it was targeted for the 2014/15 fi-

nancial year.

7.3 PROGRAMME CHALLENGES

The delay in the finalisation of the restructuring and the placement process had a negative effect on our ability to implement the

performance management system, which resulted in our inability for conclude performance agreements with employee especially

managers as it was targeted. This impacted on the compliance with the Skills Development Act in terms of developing and imple-

mentation of the Workplace Skills Plan i.e. we were unable to identify training interventions which will be suitable for employee’s

new roles and responsibilities.


7.4 HUMAN RESOURCE OVERSIGHT STATISTICS

PERSONNEL COST BY PROGRAMME

Programme Total Expenditure for the Entity (R’000)

Personnel Expenditure (R’000)

Personnel Expenditure as a % of total Expenditure (R’000)

Number of Employees

Average personnel cost per employee

Administration

70 632 101

26 231 091 37,137% 42 624 549

Business Support 3 409 620 4,827% 9 378 846

Economic Development 40 991 390 58,035% 59 694 769

* Personnel cost for purposes of reporting are defined as all forms of remuneration excluding subsistence and travel claims.

PERSONNEL COST BY SALARY BAND

Level Total Expenditure for the Entity (R’000)


Personnel Expenditure as a % of total Expenditure (R’000)

Number of Employees

Average personnel cost per employee

Executive Directors 2 810 704 3,979% 2 1 405 352

Top Management 7 548 689 10,687% 8 943 586

Senior Management 943 049 1,335% 4 235 762

Professional qualified 19 375 571 27,431% 15 1 291 704

Skilled23 149 467 32,774% 25 925 978

Semi-skilled14 522 558 20,560% 27 537 872

Unskilled882 005 1,248% 20 44 100

Contract Employees1 400 058 1,982% 9 155 562

TOTAL 70 632 101 99.996% 110 5 539 916

PERFORMANCE REWARDS

NO PERFORMANCE REWARDS WERE AWARDED DURING THE PERIOD UNDER REVIEW.

TRAINING COSTS

Directorate/ Business Unit


Training Expenditure (R’000)

Training Expenditure as % of Personnel Cost (R’000)

No. of Employees Trained

Average Training Cost per Employee

Entire Entity 70 632 101 237 207 0.34% 23 10 313.34


EMPLOYMENT AND VACANCIES

Explanations: Detail the attempts made to fill the posts of senior management and highly skilled supervision and explain why there are no appropriate internal staff to fill the vacancies. Explain how long, at a minimum, vacancies have remained unfilled and the

reasons for this. Explain measures taken to successfully attract and retain staff.

Level 2013/2014

No. of Employees

2014/2015

Approved Posts

2014/2015

No. of Employees

2014/2015 Vacancies

% of Vacancies

Top Management 1 1 1 0 0%

Senior Management 3 6 3 3 50%

Professional Qualified 16 18 16 5 23.8%

Skilled 28 27 28 -1 -3.70%

Semi-skilled 32 54 30 24 44.4%

Unskilled 24 8 19 -11 -137.5%

Contract Employees 6 0 13 -13 0%

TOTAL 110 117 110 7 5.9%

EMPLOYMENT CHANGES

Guideline – provide information on changes in employment over the financial year. Turnover rates provide an indication of trends

in employment profile of the public entity.

Salary Band Employment at beginning of period

Appointments Terminations Employment at end of period

Top Management 1 0 0 1

Senior Management 3 2 2 3

Professional qualified 23 0 7 16

Skilled 42 0 14 28

Semi-skilled 42 0 12 30

Unskilled 12 8 1 19

Contract Employees 7 23 17 13

TOTAL 130 33 53 110

REASONS FOR STAFF LEAVING

Reason Number % of total no. of staff leaving

Death1 1.88%

Resignation 2 3.77%

Dismissal 2 3.77%

Retirement 4 7.54%

Ill health 0 0

Expiry of contract 10 18.86%

Other (Retrenched) 2 1.88%

Other (VSP) 30 56.6%

Other (Early Retirement) 3 5.66%

TOTAL 53 99.96%


EXPLANATIONS: PROVIDE EXPLANATIONS FOR STAFF LEAVING AND WHAT ATTEMPTS ARE MADE TO REPLACE THESE STAFF.

LABOUR RELATIONS: MISCONDUCT AND DISCIPLINARY ACTION

Nature of disciplinary action Number

Verbal Warning 0

Written Warning 0

Final Written Warning 0

Dismissal 2

EQUITY TARGET AND EMPLOYMENT EQUITY STATUS

Levels

Female

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top Management 0 0 0 0 0 0 0 0

Senior Management 1 2 0 0 0 0 0 0

Professional qualified 6 8 0 1 0 0 0 1

Skilled 11 11 0 1 0 0 1 1

Semi-skilled 21 22 1 1 0 0 2 2

Unskilled 18 20 0 0 0 0 0 0

TOTAL 57 63 1 3 0 0 3 4

Levels

Male

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top Management 0 0 0 0 1 1 0 0

Senior Management 2 2 0 0 0 0 0 0

Professional qualified 9 9 0 0 0 0 1 1

Skilled 15 15 0 2 0 2 1 1

Semi-skilled 4 4 1 1 0 0 1 1

Unskilled 2 2 0 2 0 2 0 2

TOTAL 32 32 1 5 1 5 3 5

Levels

Disabled

Male Female

Current Target Current Target

Top Management 0 0 0 0

Senior Management 0 0 0 0

Professional qualified 1 1 0 0

Skilled 0 0 0 0

Semi-skilled 0 0 0 0

Unskilled 0 0 0 0

TOTAL 1 1 0 0

PART E: ANNUAL FINANCIAL STATEMENTS

ANNUAL FINANCIAL STATEMENTS PROVIDED SEPARATELY.

CONTENTS

STATEMENT OF RESPONSIBILITY

GROUP COMPANY SECRETARY’S CERTIFICATION

REPORT OF THE CHIEF EXECUTIVE OFFICER

REPORT OF THE BOARD AUDIT & RISK COMMITTEE

REPORT OF THE AUDITOR GENERAL

ANNUAL FINANCIAL STATEMENTS


PART E: ANNUAL FINANCIAL STATEMENTS


Free State Development Corporation GroupFinancial Statements for the year ended 31 March 2015

General Information

Country of incorporation and domicile South Africa

Nature of business and principal activities The Free State Development Corporation (FDC) is a specialisteconomic development agency formed to offer the Free State peopleand potential investors a wide selection of services. These servicesinclude :Small Medium and Micro Enterprise support both through financial (loans) and non financial.Property development and management.Providing investors with a comprehensive service in setting up abusiness.Providing export ready Free State companies with assistance inidentifying new markets and export opportunities for their products.

Directors Osman I

Maharaj V

Mayeza HB

Mochochoko N

Chuene MPB

Mkhungo HN

Phungo LI

Sandlana TN

Registered office 33 Kellner Street

Westdene

Bloemfontein

9301

Business address 33 Kellner Street

Westdene

Bloemfontein

9301

Postal address PO Box 989

Bloemfontein

9300

Holding company Free State Development Corporation

Bankers ABSA Bank

Standard Bank

Auditors Auditor - General of South Africa

Secretary Mr D Nkaiseng

1

FREE STATE DEVELOPMENT CORPORATION GROUPFINANCIAL STATEMENT FOR THE YEAR END 31 MARCH 2015



Index

The reports and statements set out below comprise the financial statements presented to the board:

Index Page

Directors' Responsibilities and Approval 3

Audit Committee Report 4 - 5

Independent Auditors' Report 6 - 10

Directors' Report 11 - 13

Statement of Financial Position 14

Statement of Comprehensive Income 15

Statement of Changes in Equity 16 - 17

Statement of Cash Flows 18

Accounting Policies 19 - 34

Notes to the Financial Statements 35 - 107

Published

31 August 2015

2




Directors' Responsibilities and Approval

The directors are required in terms of the Free State Development Corporation Act to maintain adequate accounting recordsand are responsible for the content and integrity of the financial statements and related financial information included in thisreport. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the group as at the endof the financial year and the results of its operations and cash flows for the period then ended, in conformity with South africanStatements of Generally Accepted Accounting Practice (SA GAAP). The external auditors are engaged to express anindependent opinion on the financial statements.

The financial statements are prepared in accordance with SA GAAP and are based upon appropriate accounting policiesconsistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by thegroup and place considerable importance on maintaining a strong control environment. To enable the directors to meet theseresponsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effectivemanner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accountingprocedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughoutthe group and all employees are required to maintain the highest ethical standards in ensuring the group’s business isconducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group ison identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot befully eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethicalbehaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internalcontrol provides reasonable assurance that the financial records may be relied on for the preparation of the financialstatements. However, any system of internal financial control can provide only reasonable, and not absolute, assuranceagainst material misstatement or loss.

The directors have reviewed the group’s cash flow forecast for the year to 31 March 2016 and, in the light of this review and thecurrent financial position, they are satisfied that the group has or has access to adequate resources to continue in operationalexistence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the group's financial statements. Thefinancial statements have been examined by the group's external auditors and their report is presented on page s 6 to 10.

The financial statements set out on pages 11 to 107, which have been prepared on the going concern basis, were approved bythe board on 29 May 2015 and were signed on its behalf by:

Osman I

3




Audit Committee Report

We are pleased to present our report for the financial year ended 31 March 2015.

1. Members of the Audit Committee

The members of the audit committee are all independent non-executive directors of the group and include:

NameN Mochochoko Mrs J Van WykMr NE MohlahloMr NE NtshieaMr S KhumaloMs TN Sandlana (Chairperson)ME SP Ntanjana

The committee is satisfied that the members thereof have the required knowledge and experience as set out in Section 94(5) ofthe Free State Development Corporation Act and Regulation 42 of the Companies Act.

4


Mr NE Mhlahlo

Ms N MochochokoMs J Van Wyk

Ms SP Ntanjama



Audit Committee Report

2. Meetings held by the Audit Committee

The audit committee performs the duties laid upon it by Section 94(7) of the Free State Development Corporation Act byholding meetings with the key role players on a regular basis and by the unrestricted access granted to the external auditors.

3. External auditor

The committee satisfied itself through enquiry that the external auditors is independent as defined by the Free StateDevelopment Corporation Act and as per the standards stipulated by the auditing profession. Requisite assurance was soughtand provided by the Free State Development Corporation Act that internal governance processes within the firm support anddemonstrate the claim to independence.

The audit committee in consultation with executive management, agreed to the terms of the engagement. The audit fee for theexternal audit has been considered and approved taking into consideration such factors as the timing of the audit, the extent ofthe work required and the scope.

4. Financial statements

Following the review of the financial statements the audit committee recommend board approval thereof.

5. Accounting practices and internal control

Describe any details of significant accounting practices and internal control that have occurred in the year.

On behalf of the audit committee

Sandlana TNChairman Audit Committee

Bloemfontein

5




Independent Auditor’s Report



Directors' Report

The directors of the Free State Development Corporation (FDC) take pleasure in submitting the consolidated financialstatements for the year ended 31 March 2015.

1. Constitution

The FDC is a Provincial Development Agency constituted in terms of the Free State Development Corporation Act of 1995 (asamended) effective from 15 September 1995.

2. Main business and operations

The objectives of the FDC are:

Promotion and development of small, medium and micro enterprises;

Assist Free State Based small, medium and micro enterprises with funding by advancing loans.

Assist Free State Based small, medium and micro enterprises in financial distress.

Promote investment in and trade with the Province and identify, analyse, publicise and market investment and tradeopportunities in the provincial economy, in such manner and by such means as the Board may from time to timedeem appropriate; and

Undertake, at the request of the responsible member or other stakeholders or agencies, activities for which thenecessary resources can be raised and which in the opinion of the Board, will contribute to the strengthening of theProvincial economy.

The operating results and state of affairs of the FDC and its subsidiaries and associates are fully set in the attachedconsolidated financial statements and in our opinion do not require any further comment.

The FDC has initiated new business ventures during the year which include managing the Vrede Dairy, Special EconomicZone and Broadband.

3. Directorate

The MEC of the Department of Economic Development, Tourism and Environmental Affairs (DETEA) appoints directors of theBoard in terms of section 5 (2) of the Free State Development Corporation Act, and the following persons were on the Boardduring the year under review.

Directors Status ChangesOsman I ExecutiveKumalo MS Non-executive Resigned 20 October 2014Maharaj V Non-executiveMayeza HB Non-executiveMochochoko N Non-executivePhitsane TB Non-executive Resigned 20 October 2014Chuene MPB Executive Appointed 20 October 2014Mkhungo HN Executive Appointed 20 October 2014Phungo LI Executive Appointed 20 October 2014Sandlana TN Executive Appointed 20 October 2014

4. Directors' interests in contracts

During the year under review, the directors' or officers of the FDC had no interest in any material contracs.

11




Directors' Report

5. Interests in subsidiaries

The financial report in respect of the interests of the FDC in its subsidiaries and associates for the current year, listed below, isset out in the consolidated financial statements of the FDC:

Cross Point Trading 23 (Pty) Ltd**Highlands Furniture Factory (Pty) Ltd**Mafube Risk and Insurance Brokers (Pty) Ltd*Phiritona Plastics (Pty) Ltd**Twin Cities Trading 129 (Pty) Ltd**

* Associated companies

** Subsidiary companies

Details of material interests in subsidiary companies, associates and joint arrangements are presented inthe consolidated financial statements in notes 6 and 7.

Subsidiary Audit Opinion

Cross Point Trading 23 (Pty) Ltd Under liquidation-no opinionHighlands Furniture Factory (Pty) Ltd UnqualifiedPhiritona Plastics (Pty) Ltd QualifiedTwin Cities Trading 129 (Pty) Ltd Surrendered to FDC - no opinion

There were no significant acquisitions or divestitures during the year ended 31 March 2015.

6. Relations with stakeholders

There are no events recorded that occurred with stakeholders that could materially affect the reported results and financialposition of the FDC.

7. Events after the reporting period

The directors are not aware of any material event which occurred after the reporting date and up to the date of this report thathave a material effect on the consolidated annual financial statements.

8. Going concern

The directors believe that the group has adequate financial resources to continue in operation for the foreseeable future andaccordingly the consolidated financial statements have been prepared on a going concern basis. The directors have satisfiedthemselves that the group is in a sound financial position and that it has access to sufficient borrowing facilities to meet itsforeseeable 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 pendingchanges to legislation which may affect the group.

9. Remuneration of directors

Refer to note 36.

10. Auditors

The Auditor - General of South Africa is the external auditor of the Free State Development Corporation.

11. Secretary

The company secretary is Mr D Nkaiseng.

12




Directors' Report

12. Date of authorisation for issue of financial statements

The consolidated financial statements have been authorised for issue by the directors on 29 May 2015. No authority was givento anyone to amend the financial statements after the date of issue.

13




Statement of Financial Position as at 31 March 2015Group Corporation

2015 2014 2013 2015 2014 2013Note(s) R R R R R R

Assets

Non-Current Assets

Investment property 3 640 238 345 611 961 572 583 635 530 640 238 345 611 961 572 583 635 530

Property, plant and equipment 4 44 543 483 17 434 497 19 143 335 42 972 662 15 759 302 16 314 580

Intangible assets 5 971 132 1 216 571 1 520 999 971 132 1 216 571 1 520 999

Investments in subsidiaries 6 - - - 100 99 100

Investments in associates 7 1 242 743 859 331 857 349 49 001 49 001 49 000

Loans receivable 9 46 119 571 53 915 793 82 706 870 46 172 408 57 108 096 87 766 264

Operating lease asset 10 1 439 873 459 044 230 157 1 439 873 459 044 230 157

Other investments 12 54 250 54 250 54 250 54 250 54 250 54 250

734 609 397 685 901 058 688 148 490 731 897 771 686 607 935 689 570 880

Current Assets

Inventories 13 330 648 413 049 1 175 997 165 101 165 101 360 170

Loans receivable 9 73 733 383 81 584 358 98 007 372 73 733 382 78 444 891 99 460 676

Operating lease asset 10 252 818 244 398 402 122 252 818 244 398 402 122

Trade and other receivables 14 36 925 561 37 445 982 43 849 658 36 329 092 36 795 507 40 725 959

Other investments 12 8 387 178 5 953 139 13 287 847 8 387 178 5 953 139 13 287 847

Cash and cash equivalents 15 31 625 835 94 287 123 66 116 149 31 553 730 93 969 199 65 762 901

151 255 423 219 928 049 222 839 145 150 421 301 215 572 235 219 999 675

Non-current assets held for sale - - 169 280 - - 169 280

Total Assets 885 864 820 905 829 107 911 156 915 882 319 072 902 180 170 909 739 835

Equity and Liabilities

Equity

Equity Attributable to EquityHolders of Parent

Reserves 3 069 031 867 579 867 579 3 378 296 1 176 844 1 176 844

Retained income 649 519 785 673 020 689 764 176 202 647 203 070 667 892 339 759 594 141

652 588 816 673 888 268 765 043 781 650 581 366 669 069 183 760 770 985

Non-controlling interest (1 795 545) (2 415 116) (4 473 022) - - -

650 793 271 671 473 152 760 570 759 650 581 366 669 069 183 760 770 985

Liabilities

Non-Current Liabilities

Other financial liabilities 17 1 496 014 1 508 557 1 506 622 1 445 302 1 457 845 1 497 665

Retirement benefit obligation 11 42 498 000 41 629 000 35 010 000 42 498 000 41 629 000 35 010 000

Deferred income 18 168 300 176 967 196 244 168 300 176 967 196 244

Long Service Awards Provision 19 699 013 699 013 699 013 699 013 699 013 699 013

44 861 327 44 013 537 37 411 879 44 810 615 43 962 825 37 402 922

Current Liabilities

Other financial liabilities 17 3 738 819 3 399 217 3 477 076 3 477 667 3 399 217 3 477 076

Trade and other payables 20 186 449 292 186 907 634 109 668 512 183 427 313 185 713 378 108 060 163

Deferred income 18 22 111 35 567 28 689 22 111 35 567 28 689

190 210 222 190 342 418 113 174 277 186 927 091 189 148 162 111 565 928

Total Liabilities 235 071 549 234 355 955 150 586 156 231 737 706 233 110 987 148 968 850

Total Equity and Liabilities 885 864 820 905 829 107 911 156 915 882 319 072 902 180 170 909 739 835

14




Statement of Comprehensive IncomeGroup Corporation

2015 2014 2015 2014Note(s) R R R R

Continuing operations

Revenue 21 214 363 065 200 295 235 210 423 485 196 153 762

Cost of sales 22 (139 043 473) (153 441 000) (133 720 041) (148 245 421)

Gross profit 75 319 592 46 854 235 76 703 444 47 908 341

Other income 23 18 519 309 12 016 199 18 333 317 8 916 602

Operating expenses (67 336 996) (99 782 843) (66 934 450) (98 039 351)

Administrative expenses 24 (8 453 211) (7 067 112) (8 336 063) (6 964 826)

Employee related costs 25 (66 019 842) (73 748 976) (65 433 101) (73 444 765)

Operating (loss) profit 26 (47 971 148) (121 728 497) (45 666 853) (121 623 999)

Investment revenue 27 1 724 234 1 978 381 1 723 925 2 625 057

Fair value adjustments 28 29 856 772 29 161 042 29 856 772 29 161 042

Income from equity accounted investments 383 412 648 662 - -

Finance costs 29 (815 563) (1 793 975) (535 113) (1 508 092)

(Loss) profit from continuing operations (16 822 293) (91 734 387) (14 621 269) (91 345 992)Derecognition of subsidiaries

Loss with derecognition of subsidiaries (812 280) (6 813 519) - -

(Loss) profit for the year (17 634 573) (98 547 906) (14 621 269) (91 345 992)

Other comprehensive income:

Items that will not be reclassified to profit or loss:

Remeasurements on net defined benefit liability (6 068 000) 119 000 (6 068 000) 119 000

Other comprehensive income for the year net oftaxation

31 (6 068 000) 119 000 (6 068 000) 119 000

Total comprehensive (loss) income for the year (23 702 573) (98 428 906) (20 689 269) (91 226 992)

Attributable to:

Owners of the parent

Continuing operations (16 620 624) (90 942 234) (14 621 269) (91 345 992)

Loss with derecognition of subsidiaries (812 280) (6 813 519) - -

(Loss) profit for the year attributable to owners ofthe parent

(17 432 904) (97 755 753) (14 621 269) (91 345 992)

Non-controlling interest:

Non-controlling interest - Continuing operations (201 669) (792 153) - -

Total comprehensive (loss) income attributable to:

Owners of the parent (23 500 904) (97 636 753) (20 689 269) (91 226 992)

Non-controlling interest (201 669) (792 153) - -

(23 702 573) (98 428 906) (20 689 269) (91 226 992)

15



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17



Statement of Cash FlowsGroup Corporation

2015 2014 2015 2014Note(s) R R R R

Cash flows from operating activities

Cash generated from (used in) operations 32 (45 682 083) 20 236 156 (45 471 392) 19 023 805

Interest income 1 603 358 1 976 808 1 603 049 1 976 805

Dividends received 120 876 1 573 120 876 648 252

Finance costs (815 563) (1 793 975) (535 113) (1 508 092)

Net cash from operating activities (44 773 412) 20 420 562 (44 282 580) 20 140 770

Cash flows from investing activities

Purchase of property, plant and equipment 4 (26 412 514) (1 108 747) (26 397 697) (1 077 002)

Sale of property, plant and equipment 4 (1 319 096) 3 592 007 (1 317 774) 307 321

Sale of investment property 3 1 580 000 835 000 1 580 000 835 000

Purchase of other intangible assets 5 (487 520) (392 106) (487 520) (392 106)

Net movement on loans 14 601 652 - 14 601 652 -

Receipt of loans granted - 2 706 785 - 9 166 650

Derecognition of fair value adjustment - (545 943) - -

Other comprehensive income - 545 943 - -

Non-cash item from sale of property, plant andequipment

- (2 738 292) - -

Disposal of investment in subsidiaries - 5 588 344 - -

Net cash from investing activities (12 037 478) 8 482 991 (12 021 339) 8 839 863

Cash flows from financing activities

Repayment of other financial liabilities 339 602 (60 579) 78 450 (102 335)

Post retirement benefit obligation (6 190 000) (672 000) (6 190 000) (672 000)

Net cash from financing activities (5 850 398) (732 579) (6 111 550) (774 335)

Total cash movement for the year (62 661 288) 28 170 974 (62 415 469) 28 206 298

Cash at the beginning of the year 94 287 123 66 116 149 93 969 199 65 762 901

Total cash at end of the year 15 31 625 835 94 287 123 31 553 730 93 969 199

18




Accounting Policies

1. Presentation of Financial Statements

The consolidated financial statements have been prepared in accordance with South African Generally Accepted AccountingPractices (SA GAAP) . The consolidated financial statements have been prepared on the historical cost basis, except forinvestment properties that are measured at fair value and incorporate the principal accounting policies set out below. They arepresented in South African Rands ,figures are rounded off to the nearest Rand.

These accounting policies are consistent with the previous period.

1.1 Consolidation

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Corporation and all entities, including specialpurpose entities, which are controlled by the company.

Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtainbenefits from its activities.

The results of subsidiaries are included in the consolidated financial statements from the effective date of acquisition to theeffective date of disposal.

Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting policies in line withthose 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 thegroup's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests areallocated 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 afterthe 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 suchtransactions is recognised in equity attributable to the owners of the parent.

Where a subsidiary is disposed, and a non-controlling shareholding is retained, the remaining investment is measured at fairvalue with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controllinginterest.

19




Accounting Policies

1.1 Consolidation (continued)

Business combinations

The group accounts for business combinations using the acquisition method of accounting. The cost of the businesscombination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equityinstruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issuedebt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequentchanges to the assets, liability or equity which arise as a result of the contingent consideration are not affected againstgoodwill, unless they are valid measurement period adjustments.

The acquiree's identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3(Business combinations) are recognised at their fair values at acquisition date, except for non-current assets (or disposalgroup) that are classified as held-for-sale in accordance with IFRS 5 (Non-current assets held-for-sale and discontinuedoperations), which are recognised at fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligationat acquisition date.

On acquisition, the group assesses the classification of the acquiree's assets and liabilities and reclassifies them where theclassification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whoseclassification remains as per their inception date.

Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assetsand liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for eachindividual business combination, and disclosed in the note for business combinations.

In cases where the group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest ismeasured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year.

Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plusnon-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree.

Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, thatimpairment is not subsequently reversed.

Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill istranslated to the functional currency of the group at the end of each reporting period with the adjustment recognised in equitythrough to other comprehensive income.

20




Accounting Policies

1.1 Consolidation (continued)

Investment in associates

An associate is an entity, including an unincorporated entity such as a partnership, over which the group has significantinfluence and that is neither a subsidiary nor an interest in a joint venture.

An investment in associate is accounted for using the equity method, except when the investment is classified as held-for-salein accordance with IFRS 5 (Non-current assets held-for-sale and discontinued operations). Under the equity method,investments in associates are carried in the consolidated statement of financial position at cost adjusted for post acquisitionchanges in the group's share of net assets of the associate, less any impairment losses.

Losses in an associate in excess of the group's interest in that associate are recognised only to the extent that the group hasincurred a legal or constructive obligation to make payments on behalf of the associate.

Any goodwill on acquisition of an associate is included in the carrying amount of the investment, however, a gain on acquisitionis recognised immediately in profit or loss.

Profits or losses on transactions between the group and an associate are eliminated to the extent of the group's interesttherein.

When the group reduces its level of significant influence or loses significant influence, the group proportionately reclassifies therelated items which were previously accumulated in equity through other comprehensive income to profit or loss as areclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value, with the fairvalue adjustment being recognised in profit or loss as part of the gain or loss on disposal.

1.2 Significant judgements and sources of estimation uncertainty

In preparing the financial statements, management is required to make estimates and assumptions that affect the amountsrepresented in the financial statements and related disclosures. Use of available information and the application of judgementis inherent in the formation of estimates. Actual results in the future could differ from these estimates which may result indifferences that are material to the financial statements. Significant judgements include:

Trade receivables and Loans and receivables

The group assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end ofeach reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makesjudgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from afinancial asset.

Other financial assets

The group assesses its other financial assets for impairment at the end of each reporting period. Impairment is onlyrecognised up until the fair value of any securities held by the group. Fair value of securities is determined annually byexternal valuers/directors. Fair value is based on active market prices, adjusted, if necessary, for any differences in the nature,location or condition of the specific asset. If this information is not available, the company uses alternative valuation methods.

Allowance for slow moving, damaged and obsolete stock

The group makes an allowance for slow moving, damaged and obsolete stock to write stock down to the lower of cost or netrealisable value. Management have made estimates of the selling price and direct cost to sell on certain inventory items. Thewrite down is included in the operating profit note.

21




Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty (continued)

Fair value estimation

The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) isdetermined by using valuation techniques. The group uses a variety of methods and makes assumptions that are based onmarket conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instrumentsare used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value forthe remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimatedfuture cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates atthe end of the reporting period.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at thecurrent market interest rate that is available to the group for similar financial instruments.

Impairment testing

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It isreasonably possible that the assumption may change which may then impact our estimations and may then require a materialadjustment 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 carryingamount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at thelowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there areindications 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 andcould materially change over time.

Provisions

Provisions were raised and management determined an estimate based on the information available.

Classification of leases

The group uses the guidance in IAS 17 (Leases) to classify leases as either operating leases or finance leases.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are manytransactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Thegroup recognises liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome of thesematters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred taxprovisions in the period in which such determination is made.

Property, plant and equipment

A professional valuer is engaged every five years to determine the market values relating to Property. For the remaining fourfinancial periods, fair value will be assessed by management with the relevant income, expenses and capitalisation ratesobtained from a professional valuer. When the fair value of a revalued asset differs materially from its carrying amount, aprofessional valuation is obtained.

Investment property

Fair value is determined annually by external valuers/directors. Fair value is based on active market prices, adjusted, ifnecessary, for any differences in the nature, location or condition of the specific asset. If this information is not available, thecompany uses alternative valuation methods.The following methods were deemed the most applicable to the investment properties:

Direct Comparable Sales Capitalisation of Income Approach Depreciated Replacement Value Approach

22




Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty (continued)

Retirement benefit obligation

The present value of the retirement benefit obligation depends on a number of factors that are determined on an actuarialbasis using a number of assumptions. The assumptions used in determining the net cost (income) include the discount rate.Any changes in these assumptions will impact the carrying amount of medical obligations. Additional information is disclosedin note 19.

1.3 Investment property

Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that areassociated with the investment property will flow to the enterprise, and the cost of the investment property can be measuredreliably.

Investment property is initially recognised at cost. Directly attributable 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.

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.

Investment properties are held for a long term rental yields or for capital appreciation and are not occupied by the group.Investment properties are treated as long term investments and are carried at fair value representing open market value.

Fair value is determined annually by external valuators. Fair value is based on active market prices, adjusted, if necessary, forany differences in the nature, location or condition of the specific asset. If this information is not available, the company usesalternative methods.

The following methods were deemed the most applicable to the investment properties:

Direct Comparable Sales Capitalisation of Income Approach Depreciated Replacement Value Approach

A professional valuator shall be engaged every five years to determine the market values. For the remaining four financialperiods, fair value will be assessed by management with the relevant income, expenses and capitalisation rates obtained fromthe professional valuator. When the fair value of a revalued asset differs materially from its carrying amount, a professionalvaluation is obtained.

If the fair value cannot be reliably determined on a continuous basis, the investment property is to be measured using the costmodel.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate , only when itis probable that the future economic benefits associated with the item will flow to the group and the cost of the item can bereliably measured. The carrying amount of the replaced part is derecognised . All repairs and maintenance are charged to thestatement of profit and loss and other comprehensive income during the financial period in which they are incurred.

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 incurredsubsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item ofproperty, plant and equipment, the carrying amount of the replaced part is derecognised.

23




Accounting Policies

1.4 Property, plant and equipment (continued)

Subsequent measurement

Property

Property is carried at the revalued amount, being the fair value at the date of revaluation less any subsequent accumulateddepreciation and subsequent accumulated impairment losses. Revaluations are made with sufficient regularity such that thecarrying amount does not differ materially from that which would be determined using fair value at the end of the reportingperiod.

Owner-occupied properties, whose fair value can be measured reliably, are carried at a revalued amount, being its fair value atdate of the revaluation less accumulated depreciation and impairment. A professional valuer shall be engaged every five yearsto determine the market values. For the remaining four financial periods, fair value will be assessed by management with therelevant income, expenses and capitalisation rates obtained from a professional valuer.

When the fair value of a revalued asset differs materially from its carrying amount, a professional valuation will be obtained. Ifan item of property is revalued, the entire class of property to which that asset belongs is revalued.

If a property’s carrying amount is increased as a result of a revaluation, the increase shall be recognised in othercomprehensive income and accumulated in equity under the heading of revaluation surplus. However, the increase shall berecognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised inprofit or loss.

If a property’s carrying amount is decreased as a result of a revaluation or impairment the decrease shall be recognised inprofit or loss. However, the decrease shall be recognised in equity (comprehensive income) to the extent of any credit balanceexisting in the revaluation surplus in respect of that asset.

When the use of a property changes from owner-occupied to investment property, the property is re-measured to fair value andreclassified as investment property. Property that is being constructed for future use as investment property is accounted for atfair value. Any gain arising on re-measurement is recognised in profit or loss to the extent the gain reverses a previousimpairment loss on the specific property, with any remaining gain recognised and presented in the revaluation reserve inequity. Any loss is recognised in the revaluation reserve in equity to the extent that an amount had previously been included inthe revaluation reserve relating to the specific property, with any remaining loss recognised immediately in profit or loss.

Upon disposal, any revaluation reserve relating to the particular asset being disposed is transferred to retained earnings.

Plant and equipment

Plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

Furniture and fixtures, machinery and equipment, motor vehicles and computer hardware are stated at historical cost lessaccumulated depreciation and impairment losses. These assets are depreciated, on a straight line basis to their expectedresidual values, over the estimated useful lives of the assets concerned.

The assets expected residual values and estimated useful lives are reviewed, and adjusted if appropriate, on an annual basis.

Change in the estimated useful life are accounted for by changing the depreciation period or method, as appropriate, and aretreated as changes in accounting estimates.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when itis probable that future economic benefits associated with the item will flow to the group and cost of the item can be reliablymeasured. The carrying amount of any replaced part is de-recognised. All repairs and maintenance are charged to thestatement of profit or loss and other comprehensive income during the financial period in which they are incurred.

Item Average useful lifeOwner occupied properties 20 yearsFurniture and fixtures, machinery and equipment 15 yearsMotor vehicles 4 to 9 yearsComputer Hardware 1 to 10 yearsPlant 15 to 25 years

24




Accounting Policies

1.4 Property, plant and equipment (continued)

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when theitem is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determinedas the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Land is not depreciated and as such will have no useful life

1.5 Intangible assets

An intangible asset is recognised when: it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeablelimit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for theseintangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may beimpaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed every period-end.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator thatthe asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised overits useful life.

Intangible assets are derecognised when the asset is disposed of or when there are no further economic benefits or servicepotential expected from the use of the asset. The gain or loss arising on the disposal or retirement of an intangible asset isdetermined as the difference between the sales proceeds and the carrying value and is recognised in profit or loss.Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised asintangible assets.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful lifeComputer Software 1 to 7 years

1.6 Investments in subsidiaries

Corporation financial statements

In the Corporation’s audited consolidated financial statements, investments in subsidiaries are carried at cost less anyaccumulated impairment.

1.7 Investments in associates

Corporation financial statements

An investment in an associate is carried at cost less any accumulated impairment.

25




Accounting Policies

1.8 Financial instruments

Classification

The group classifies financial assets and financial liabilities into the following categories: Financial assets at fair value through profit or loss - held for trading Loans and receivables Financial liabilities at fair value through profit or loss - designated Financial liabilities measured at amortised cost

Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initialrecognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fairvalue through profit or loss, which shall not be classified out of the fair value through profit or loss category.

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 liabilityor 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 notdeterminable, which are measured at cost.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initialmeasurement of the instrument.

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation orconvention in the market place (regular way trades) are recognised on the trade date, i.e., the date the group commits topurchase or sell the asset.

Subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arisingfrom changes in fair value being included in profit or loss for the period.

Net gains or losses on the financial instruments at fair value through profit or loss dividends and interest.

Dividend income is recognised in profit or loss as part of other income when the group's right to receive payment is established.

Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulatedimpairment losses.

Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have beentransferred and the group has transferred substantially all risks and rewards of ownership.

Financial liabilities (or a part of a financial liability) are derecognised when it is extinguished - i.e. when the obligationspecified in the contract is discharged or cancelled or expires.

26




Accounting Policies

1.8 Financial instruments (continued)

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 forunlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’slength transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and optionpricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

Impairment of financial assets

At each reporting date the group assess all financial assets, other than those at fair value through profit or loss, to determinewhether 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 anddefault of payments are all considered indicators of impairment.

Impairment losses are recognised in profit or loss.

Impairment is only recognised up until the fair value of any securities held by the group.

Fair value of securities is determined annually by external valuers/directors. Fair value is based on active market prices,adjusted, if necessary, for any differences in the nature, location or condition of the specific asset. If this information is notavailable, the company uses alternative valuation methods.

Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to anevent occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset atthe date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment notbeen recognised.

Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in profit or losswithin 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.

Loans to (from) group companies

These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and arerecognised 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.

Loans to shareholders, directors, managers and employees

These financial assets are classified as loans and receivables.

Trade receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using theeffective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or losswhen there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that thedebtor 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 differencebetween the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interestrate computed at initial recognition.

Trade and other receivables are classified as loans and receivables.

27




Accounting Policies

1.8 Financial instruments (continued)

Trade payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effectiveinterest rate method.

Trade payables are classified as financial liabilities measured at amortized cost.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments thatare readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

For the purpose of the cash flow statement, cash and cash equivalent comprise of cash on hand, deposits held on call withbanks and collateral investments, net of bank overdrafts. Cash and cash equivalents are classified as receivables originatedby the enterprise and are measured at amortized cost.

Cash and cash equivalents are classified as loans and receivables.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, usingthe effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement orredemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy forborrowing costs.

Derivatives

Derivative financial instruments, which are not designated as hedging instruments, consisting of foreign exchange contractsand interest rate swaps, are initially measured at fair value on the contract date, and are re-measured to fair value atsubsequent reporting dates.

Derivatives embedded in other financial instruments or other non-financial host contracts are treated as separate derivativeswhen their risks and characteristics are not closely related to those of the host contract and the host contract is not carried atfair value with unrealised gains or losses reported in profit or loss.

Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.

Derivatives are classified as financial assets at fair value through profit or loss - held for trading.

Held to maturity

These financial assets are initially measured at fair value plus direct transaction costs.

At subsequent reporting dates these are measured at amortised cost using the effective interest rate method, less anyimpairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there isobjective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount andthe present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can berelated objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amountof the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had theimpairment not been recognised.

Financial assets that the group has the positive intention and ability to hold to maturity are classified as held to maturity.

28




Accounting Policies

1.9 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 respectof 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 (recoveredfrom) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of thereporting period.

Deferred tax assets and liabilities

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxableprofit will be available against which the unused tax losses 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 isrealised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the endof 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 theextent 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 arecredited 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.

The Parent entity is exempt from taxation in terms of section 10(1) (CA) (I) of the Income Tax Act.

1.10 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease isclassified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair valueof the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor isincluded in the statement of financial position as a finance lease obligation.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability.The finance chargeis allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of theliability.

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 assetand 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.

29




Accounting Policies

1.10 Leases (continued)

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference betweenthe amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This assetis not discounted.

Any contingent rents are expensed in the period they are incurred.

1.11 Inventories

Inventories are measured at the lower of cost and net realisable value on the first-in-first-out basis.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion andthe estimated costs necessary to make the sale.

The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing theinventories to their present location and condition.

Inventory includes properties that were repossessed and will be sold to recover losses on impaired debtors.These propertieswere held as security for loans granted.

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which therelated revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventoriesare recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down ofinventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventoriesrecognised as an expense in the period in which the reversal occurs.

1.12 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 anysuch 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 theannual 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 notpossible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit towhich 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 inuse.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to itsrecoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately inprofit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, orgroups of cash-generating units, that are expected to benefit from the synergies of the combination..

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carryingamount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the followingorder:

first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

30




Accounting Policies

1.12 Impairment of assets (continued)

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods forassets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amountsof those assets are estimated.

Impairment on goodwill is never reversed.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceedthe 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 isrecognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluationincrease.

1.13 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of itsliabilities.

1.14 Employee benefits

Short-term employee benefits

The Corporation recognises a liability and an expense for bonuses, based on the approved policy. The Corporation recognisesa provision where contractually obliged or where there is a past practice that has created a constructive obligation.

Defined contribution plans-Pension and Benefit Fund Contributions

The Parent has a defined contribution plan. A defined contribution plan is a post-employment benefit plan under which theCorporation pays fixed contributions into a separate entity / fund. The Parent has no legal or constructive obligations to payfurther contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service inthe current and prior periods

For defined contribution plans, the Corporation pays contributions to privately administered pension insurance plans on acontractual basis . The Corporation has no further payment obligations once the contributions have been paid. Thecontributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as anasset to the extent that a cash refund or a reduction in the future payments is available.

Defined benefit plans-Post retirement medical obligation

The Parent provides post-retirement healthcare benefits to their retirees. The entitlement to these benefits is conditional on theemployee remaining in service up to retirement. The expected costs of these benefits are accrued over the period ofemployment. The liability recognised in respect of the post-retirement healthcare benefit is the present value of the definedbenefit obligation at the financial year end date. The defined benefit obligation is calculated annually by independent actuariesusing the projected unit credit method.

The present value of the defined benefit obligation is determined by using the fixed real medical inflation method indiscounting the estimated future cash outflows by considering the yield on government bonds.

Actuarial gains and losses are recognised in the year in which they arise, in other comprehensive income.

1.15 Provisions and contingencies

Provisions are recognised when: the group has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the obligation.

31




Accounting Policies

1.15 Provisions and contingencies (continued)

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, thereimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entitysettles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursementshall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as aprovision.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, whenappropriate, the risks specific to the liability. When discounting is used, the increase in the provisions due to the passage oftime is recognised as finance cost. A constructive obligation to restructure arises only when an entity:

has a detailed formal plan for the restructuring, identifying at least:- the business or part of a business concerned;- the principal locations affected;- the location, function, and approximate number of employees who will be compensated for terminating their

services;- the expenditures that will be undertaken; and- when the plan will be implemented; and

has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement thatplan or announcing its main features to those affected by it.

After their initial recognition contingent liabilities recognised in business combinations that are recognised separately aresubsequently measured at the higher of:

the amount that would be recognised as a provision; and the amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 34.

1.16 Government grants

An unconditional government grant is recognised in profit or loss as other income when the grant becomes receivable.

Other government grants are recognised initially as deferred income at fair value when there is reasonable assurance thatthey will be received and the Corporation will comply with the conditions associated with the grant.

Grants that compensate the Corporation for expenses incurred are recognised in profit or loss as other income on asystematic basis in the same periods in which the expenses are recognised.

Grants that compensate the Corporation for the cost of an asset are recognised in profit or loss on a systematic basis over theuseful life of the asset.

When the Group receives non-monetary grants, the asset and the grant are recorded at nominal amounts and released toprofit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset by equal annualinstalments. When loans or similar assistance are provided by governments or related institutions, with an interest rate belowthe current applicable market rate, the effect of this favourable interest is regarded as a government grant.

The loan or assistance is initially recognised and measured at fair value and the government grant is measured as thedifference between the initial carrying value of the loan and proceeds received.

1.17 Revenue

Revenue from the sale of goods is recognised when all the following conditions have been satisfied: the group has transferred to the buyer the significant risks and rewards of ownership of the goods; the group retains neither continuing managerial involvement to the degree usually associated with ownership nor

effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the group; and

32




Accounting Policies

1.17 Revenue (continued) the costs incurred or to be incurred in respect of the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with thetransaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. Theoutcome 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 berecognised only to the extent of the expenses recognised that are recoverable.

The group uses the percentage-of-completion method to determine the stage of completion of transactions involving therendering of services

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable forgoods and services provided in the normal course of business, net of trade discounts and volume rebates, and value addedtax.

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.

1.18 Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which therelated revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventoriesare recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down ofinventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventoriesrecognised as an expense in the period in which the reversal occurs.

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

1.19 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalisedas part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligiblefor capitalisation is determined as follows:

Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less anytemporary investment of those borrowings.

Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose ofobtaining 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 saleare complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

33




Accounting Policies

1.20 Bad debts written off

Bad debts are written off, directly against the debtors account, after a comprehensive collection process, all legal steps havebeen taken and it is considered that the Corporation will be unable to recover the debt. The collection processes include debtorvisits, consultations with debtors, rework of debtors business plans and the rescheduling of debts. If the debtors cannot payafter collection process they will be handed over to the legal department for the legal collection of debts. Bad debts are writtenoff after the legal process has been exhausted and recognised as an expense in profit or loss. Subsequent recoveries ofamounts previously written off are credited against other income in profit or loss.

1.21 Irregular expenditure

Irregular expenditure is expenditure that is contrary to any applicable legislation, or is in contravention of the group's supplychain management policies. Irregular expenditure is accounted for as expenditure, and where recovered, it is subsequentlyaccounted for as revenue in the statement of financial performance.

1.22 Fruitless and wasteful expenditure

Fruitless and wasteful expenditure means expenditure which is made in vain and would have been avoided had reasonablecare been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in thestatement of financial performance in the year that expenditure was incurred. The expenditure is classified in accordance withthe nature of the expense, and when it is recovered, it is subsequently accounted for as revenue in the statement of financialperformance.

34




Notes to the Financial StatementsGroup Corporation

2015 2014 2013 2015 2014 2013R R R R R R

2. New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year

No standards and interpretations relevant to the group became effective for the current financial year.

2.2 Standards and Interpretations early adopted

The group has not early adopted any standards and interpretations.

2.3 Standards and interpretations not yet effective

The Group has historically applied Statements of Generally Accepted Accounting Practice (GAAP) as issued by the AccountingPractices Board (APB). The statements of GAAP were withdrawn by the APB from 1 December 2012.

For those Government Business Enterprises that apply Statements of GAAP, the APB agreed that as an interim measure,these entities should continue to apply Statements of GAAP ( as issued on 1 April 2012) until such a time the APB hasundertaken extensive research to identify the most appropriate reporting framework.

Statements of GAAP are drawn from International Financial Reporting Standards (IFRS), International Accounting Standards(IASs), Interpretations by the Interpretations Financial Reporting Interpretations Committee (IFRICs and SICs). Directive 5, asissued by the APB outlines which of these pronouncements constituted the Statements of GAAP ( called the "GAAP ReportingFramework") at 1 April 2012.

The Statements of GAAP as 1 April 2012 comprise the IFRSs, IASs, IFRICs and SICs, and any amendments thereto, issuedby the International Accounting Standards Board (IASB) or the IFRIC up until May 2011.

At year end the APB has not yet identified the most appropriate reporting framework and therefore there are no "standards andinterpretations not yet effective".

35



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2015 2014 2013 2015 2014 2013R R R R R R

Details of property

Permission-To-Occupy (PTOs)

Commercial and residential PTO properties of R8,326,000 (2014: R 8,162, 000), (2013: R 7, 694, 000) are included in the fairvalue amount of the investment property in the consolidated annual financial statements.

In the previous dispensation in South Africa, certain areas were allocated to tribes. In these tribal areas ownership of propertywas limited to PTO. The system was administered on behalf of the tribal leader by the administration of that area. It wasenvisaged that after 1994 the system of PTOs would be converted to free hold properties and that the owners of PTOs wouldreceive full title of their PTOs. This has not materialised but the system of PTOs was abandoned leading to a vacuum regardingthe administration and ownership of PTOs.

Currently PTO properties cannot be transferred to a third party due to the lack of legislation regulating these transfers. Norenewal certificates for PTOs can be issued by government either.

Effectively this means the ownership of PTOs cannot be proven. Although none of the PTOs held by the Corporation have beendisputed in the past, it is emphasised that the above facts should be considered when interpreting the consolidated annualfinancial statements of the group

Commercial and residential PTO properties of R8,326,000 (2014: R8,162,000), (2013: R7,694,000) are included in the fairvalue amount of the investment property in the consolidated annual financial statements.

The rental generated by these PTOs amount to R1,984,972 (2014: R1,692, 425), (R2013: R1 706 223).

Properties let in terms of Notarial Deed of Lease

Included in investment properties are the following properties which the Corporation has let in terms of the Notarial Deed ofLease:

Reahola Shopping Centre, Botshabelo, Erf 139 & 161 Setsing Shopping Centre, Phuthaditjaba, Farm 1922/19 & 20

The fair values of the above properties are as follows: R56 090 000 (2014: R53, 500, 000), (2013: R49, 537, 000)

Details of all the investment properties

Fair Value Group 2015 Group 2014 Group 2013 Corporation2015

Corporation2014

Corporation2013

Commercial/Industrial properties 590 417 345 563 974 072 539 085 230 590 417 345 563 974 072 539 085 230Residential properties 49 821 000 47 987 500 44 550 300 49 821 000 47 987 500 44 550 300

Subtotal 640 238 345 611 961 572 583 635 530 640 238 345 611 961 572 583 635 530

640 238 345 611 961 572 583 635 530 640 238 345 611 961 572 583 635 530

39





2015 2014 2013 2015 2014 2013R R R R R R

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available forinspection at the registered office of the Corporation situated at 33 Kellner Street, Bloemfontein.

Properties included in the investment property asset register but not registered in the name of the FDC or itspredecessors

The Corporation has started and is currently in the process of reviewing its property asset register. This process should becompleted in the 2016 financial year. During this process it was discovered that there were 32 properties included in theinvestment property register where the FDC or any of its predecessors were not the registered owners in the records of theRegistry of Deeds.

Where it can be established that the FDC is the rightful owner of such property, the property will be transferred into the name ofthe FDC. Where no such proof exists, the property will be removed from the investment property asset register. This will affectthe value of investment property as disclosed in the financial statements.

The value of the investment properties not registered in the name of the FDC is as follows:

Commercial and Industrial 2015 2014 2013Fair value 13 869 000 13 314 000 12 432 000

ResidentialFair value 2 519 000 1 745 000 1 626 000

40





2015 2014 2013 2015 2014 2013R R R R R R

Details of valuation

The effective date of Fair Value Valuation was March 2015. Valuations were performed by an independent valuer, Mr THMyburgh a registered Professional Valuer, (Certificate 4980) with the South African Council of Property Valuers Profession(SACPVP). Mr Myburgh is not connected to the group and has recent experience in location and categories of the investmentproperty being valued. The group's complete last valuation was performed by independent valuators in May 2015.

For the current year the properties in the portfolio have been valued based on a desktop valuation using methods prescribed bySACPVP as well as the SAIV (South African Institute of Valuers). The basis for the desktop valuation was the full inspection asperformed in the prior year. The valuations are therefore subject to the properties being in the same condition as at that time.The 2014 valuations have been adjusted based on changes in the current year’s market conditions, location of the propertiesand our professional judgement on the factors affecting specific properties.

The methods are in accordance with Generally Accepted Accounting Practice (GAAP) as well as the Public FinanceManagement Act No 1 of 1999 (PFMA) as amended and Treasury Regulations promulgated.

The following methods were deemed the most applicable to the investment properties:

Direct Comparable Sales Capitalisation of Income approach Depreciated Replacement Value Approach

41





2015 2014 2013 2015 2014 2013R R R R R R

Full valuations of specific properties were done where required. The FDC’s investment properties are located in the Central andEastern Regions of the Free State. These regions were subdivided into various areas. For commercial properties valued aspart of the desktop valuation the average movement per area was 3,50% for properties located in the Central Region and4,67% for the Eastern Region.

Deviations from these averages on the individual property values occurred due to changes in the current year’s marketconditions in the areas where these properties are located and on the factors affecting these specific properties.

Commercial properties that were in a bad state of repair and not suitable for letting were further depreciated. Vacant standswere assessed according to the area in which they are located as some areas have very little, or no demand. The residentialproperties were valued based on sales in the area and the general demand in those areas. The value of these propertiesincreased by between 4% and 8% during the past year based on the market conditions where these properties are located andour knowledge of physical condition of these properties, based on last year’s inspections.

The full valuation report, with assumptions and methods used, is available at the offices of the Corporation at 33 Kellner Street,Bloemfontein.

The valuers determined the market value of the investment property of the Corporation for the statement of financial positionpurposes on the effective date of 31 March 2015.

Industrial and commercial properties as used during the full and physical verification and valuation performed forpurposes of the 31 March 2014 financial statements.

The FDC's industrial and commercial properties are situated in the following areas:

Thabo Mofutsanyane District Municipality

The Maluti-a-Phufong and Dihlabeng Local Municipality is situated within the boundaries of Thabo Mofutsanyane DistrictMunicipality in the Eastern Free State. The Municipality consists of towns Harrismith, Kestell, Phuthaditjhaba, Bethlehem (inclBohlokong and Bakenpak) Clarens (incl Kgubetswana, Fouriesburg (incl Mashaeng) , Paul Roux (incl Fateng Tse Ntsho) andRosendal incl Mautse). The subject investment properties owned by the FDC are located in mostly the previouslydisadvantaged rural township areas with the majority in the following towns : Bohlokong, Phuthaditjhaba, Industriqua andTshiame

Mangaung Metropolitan Municipality

The Mangaung Metropolitan Municipality was formed at the end of 2000 by amalgamating the Transitional Local Councils ofBloemfontein, Botshabelo, Thaba Nchu and two Rural Councils. The majority of our investment properties are located in ThabaNchu and Botshabelo.

The FDC is one of the most prominent property owners of industrial and commercial properties in the above rural areas.Because of their mandate as a development agency not all of the actual rentals can be seen as market related. Unfortunatelythis also has an effect on privately owned properties in the different areas as prospective tenants will mostly prefer to lease atthe lowest prices

The following factors have an effect on market rentals: The size of the accommodation on offer The accommodation on offer Vacancies in the area Proximity to the markets/ customers Tenant profile in the area Availability of skilled labour in the area Crime / Safety in the area Lease period

42





2015 2014 2013 2015 2014 2013R R R R R R

Most rentals are however below market if the highest and best use is considered. Comparable properties were used,information from tenants , as well as rent rolls in other areas where the FDC owns property. Industrial areas such Welkom,Hamilton, Old East End, as well as the rural towns were used to determine the market rentals.

The area in square meters of the properties was determined by the FDC. The reasonableness thereof was evaluated by thevaluators and new measurements of properties were performed if deemed necessary.

If one compares the rentals/ square meters with more centralized industrial and commercial areas e.g. Bloemfontein,Uitenhage etc., most of these rentals currently achieved are 50% to 75% lower. This can be attributed to the fact that most ofthe industrial developments were done to attract new investments in the area and supply jobs.

The buildings have minimal values as the structures can be removed and relocated. It was determined that if a rental asdetermined in the valuator’s report is not fetched, leasing is not the highest and best use. In these cases especially inSelosesha, the depreciated replacement method was preferred to determine the market value.

The office buildings were graded according to age, finishes etc. The office buildings are mostly located in the CBD areas of thedifferent towns. The office accommodation on offer in the industrial areas normally form part of the total of accommodation onoffer and was not allocated separate rental square meters. The offices of the FDC at 111 Zastron Street are of a betterstandard.

More than 90% of all income producing assets are industrial.

The majority of the properties can be classified as Low Grade Industrial Property (older buildings or poor quality).

ExpensesThe outgoings were calculated as a percentage of gross income using industry / market related norms, as well as thereplacement value of the properties. The following outgoings were taken into consideration:

Municipal costs (assessment rates, sewerage and refuse removal. Management Costs (Insurance, rent collection fees and accounting costs). Maintenance (general maintenance, air conditioning and gardens) Other expenditure

Expenditure in the Mangaung Metropolitan District had an increase of more than 10% on gross income on a year on year basisand the sole reason is escalation in municipal costs. The new municipal valuation roll was implemented from August 2013 andproperty values have increased by more than 300% in certain cases. Operating costs continued to increase above inflation forthe first half of 2015, however the good news for tenants is that the ratio of operating costs to gross rent paid has stabilisedsince the last increase. That is to say since some costs are still incurred on vacant buildings, the landlord must absorb the costas it cannot be passed to the tenant. Therefore as vacancies are filled there are more tenants paying cost recoveries, so theimpact on an individual tenant cannot be deducted from the change in total costs as a proportion of rent receivable.

According to the calculations performed the Income/Expense ratio of most of the properties in the Mangaung MetropolitanMunicipality are not in line with similar type properties located in the Thaba Mofutsanyane Municipality. This can be directlyattributed to the following facts:

Most of the properties located in the Mangaung Metropolitan District were valued higher than market price. This hasa knock on effect on the rates that must be paid on a monthly basis.

The replacement value of the properties is relatively high in comparison to their market value Most of the buildings are in need of maintenance, over and above the normal maintenance, that increases the

maintenance bill over a year period. Some of these buildings are in a poor state of repair. Income from the properties is low if construction cost is considered and this has a direct effect on the expense ratio

as municipal costs, maintenance and insurance cost are fixed in the market

Vacancies

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A slowdown in development activity has helped to attenuate the rising vacancy situation. The reassessment and deferment ofprojects has avoided intensifying the problems of a somewhat over supplied property market. The limited availability of capitaland current construction cost will also curtail new projects, which will assist in muting the supply pipeline coming online overthe next few years.

Most of the subject properties are located in unique industrial areas. This area of Botshabelo, Selosesha and Phuthaditjhabawere established during the previous dispensation as part of a decentralisation program. Botshabelo and Phuthadithjabafactories are still operational. Selosesha is however redundant. After inspection almost 10% of the Botshabelo andPhuthaditjhaba properties are vacant. Actual rentals are however very low and in many cases not feasible and it is expectedthat the vacancy ratio should rise should rentals be adjusted to market. Most of the steel structures can be removed andestablished elsewhere which ensures the properties have a bottom value

Capitalisation Rates

The capitalisation rate is best determined by referring to the market transactions of comparable properties as it is based oninformation derived from market analysis. The risk inherent in income producing properties is the degree of certainty that theincome stream will be realised despite the uncertainty of the future, and therefore the higher the risk factor the better return theinvestor will require.

The net income capitalisation method of valuation was used to determine the value of the property. This method determines thenet normalised annual income of the property, assuming the property is fully let at market related rentals, and marketescalations, with an allowance made for vacancies (where applicable). Market related operating expenses are incurredresulting in a net annual income which is then capitalised at a market related rate. The capitalisation rate is determined fromthe market (i.e. rate at which similar assets have traded recently), and is influenced in general by: rates of return of similarproperties, risk , obsolescence, inflation, market rental growth rates, rates of return on the other investments, as well asmortgage rates.

In determining the rate of capitalisation the following was taken into account:

Demand experienced in the particular node. Vacancies in the area. Conditions of the building. Security

The Rode Quick calculation was used to measure the rate used with an industry average and the calculations are as follows:

Industrial cap rate= 12.473 - ( 0.0694* Gross rental income per square meter) % This equation expresses the relationship between the capitalisation rate and the gross market rentals of prime

stand-alone non-leaseback, secondary stand-alone industrial buildings, as well as industrial parks. The industrialregression equation are based on 30 observations. The correlation coefficient r =-0.8, the standard error (SE) is 0.4and n =30 (Rode's report 2015:1)

Office cap rate =14.677%- (0.0463* Gross Rental income per square meter) %. This equation expresses the relationship between the capitalisation rate and the gross market related rental rates of

grade A, B and C office buildings. The correlation coefficient r is =-0.8, the standard error (SE) is 0.7 and n=60(Rode's Report 2015:1).

Sensitivity of carrying amounts to the methods, assumptions and estimates underlying the fair value of investmentproperty calculation

Since the values represent anticipated benefits to be received from the property ownership, there are certain factors thatinfluence sensitivity of the carrying amounts used to determine market value. Certain assumptions and estimates were made todetermine a market value of the subject investment properties. Some factors considered when these assumptions andestimates were made, specifically the capitalisation rate, were:

Physical factors (location, construction, size, shape etc) Economic factors (population changes, direction of growth, functionality of the buildings, rentals, vacancies,

expenses, union attitudes, location of labour, transportation costs).

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Price level and building costs (building costs are escalating and will definitely influence future demand for similarbuildings with relocation potential. This ensures a minimum value.)

Business Cycles. Government (The new Government proposed Development Plan. to create economic growth as well as jobs will

have a positive influence on the subject properties. The subject properties might become an essential area ofimplementation of the Development Plan as most characteristics can be identified.)

Demand. Financing. Current interest rate and short term expectations. Inflation rate.

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After these factors were considered and based on experience, lack of information, the fact that no "real " market exist (FDCowns most of the property in the subject areas) the approach was based on various factors which the valuers are of the opinionwill have a direct impact on values in the area. These estimated market amounts are based on industry norms and adjustedaccordingly

The capitalisation rate is best determined by referring to market transactions of comparable properties as it is based oninformation derived from market analysis. The risk inherent in income producing properties is the degree of certainty that theincome stream will be realised despite the uncertainty of the future, and therefore the higher the risk factor, the better the returnthe investor will require.

Research indicated very little market evidence or sales in the specific area of subject properties. The main reason is that theFDC is the owner of most of these properties and therefore determines the market rates in these areas. Using all the factorsmentioned above the capitalisation rate was determined. Industry norms for similar properties range from 11% to 14%.

A 1% increase in the capitalisation rate or decrease in the growth rate applied to the property values, will cause the value of theproperties to decrease by approximately 11% or R69 533 655, (2014: +/- 7%, R37 409 440, 2013: +/- 7%, R35 741 911).

A 1% decrease in the capitalisation rate or increase in the growth rate applied to the property values, will cause the value of theproperties to increase by approximately 14% or R88 933 841, (2014: +/- 8%, R42 753 646, 2013: +/- 8%, R40 847 898).

In the short term, namely the next financial year, no dramatic increase or decrease is expected.

Residential properties

1. Phuthaditjhaba

Macro Locality:Phuthaditjhaba is an urban town located about 80 kilometres(km) to the east of Bethlehem in the Free State Province. Themain economic driver in the area is the manufacturing industry located in the Industrial Area of Phuthaditjhaba. There is gooddemand in the area for residential accommodation

Micro Locality

Phuthaditjhaba comprise of eight residential suburbs, namely Phuthaditjhaba A, B, D, J, K, L and N as well as PTOs(Permission To Occupy sites) located outside of the border town. The property market has shown good appreciation over thelast three years in this urban town. As mentioned above there is a good demand for property and in our opinion, there is ashortage of properties.

2) Matwabeng

Macro Locality:

Matwabeng is a suburb located on the Southern Boarder of Senekal. Senekal is a rural town located on the N5 betweenWinburg and Bethlehem. The main economic driver in the area is farming.

Micro Locality:

The subject properties are located in the central area of Matwabeng. Access and exposure is good. There is reasonabledemand for residential accommodation in the area; however there are only few residential sales.

Market Analysis and Comparable sales:

In our market research, we found that there is limited supply of sales in the area. Thus we compared the property withThabong Welkom.

3) TshiameMacro Locality: Tshiame is located about 12 km outside Harrismith next to the Industriqua industrial area. Tshiame consists of two suburbs

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namely Tshiame A and B. The main economic drivers in the area are the industrial node, but this has decreased in the lastcouple of years.

Micro Locality:Tshiame A can be seen as much better as compared to Tshiame B, as it is located near Industriqua. The type of housesoffered by Tshiame A can be seen as more exclusive compared to houses offered by Tshiame B. Tshiame A had a goodappreciation over the last 3 years. The houses in Tshiame B are mostly low cost housing.

4) RheederparkMacro Locality:Rheederpark is located to the west of Welkom CBD. This is a low income area with many illegal miners. There are also manyvacant stands, making it attractive to squatters.

Micro Locality:

The locality can be seen as below average.

Market Analysis and Comparable Sales:We did not find any comparable sales in Rheederpark that compares with the subject property. In our market research, wefound the following properties in other areas that were comparable in size and type of improvements offered. We will make adownward adjustment because of the location, demand and lack of sales.

5) Welkom

Macro Locality:Welkom is an urban town located approximate 165 km to the north of Bloemfontein on the R30 in the Free State. Mining can beseen as the main economic driver in the area. There is reasonable demand in the area. The property market is stable in ouropinion

Micro Locality:The subject property is located in the residential suburb Bedelia. Bedelia is located to the western side of the CBD. Theproperty is located in a close proximity of schools, churches, shopping centres etc. The suburb segment caters for the lowerincome segment of Welkom.

6) Thaba Nchu

Macro Locality:Thaba Nchu is located approximate 65 km to the east of Bloemfontein, located on the N8, towards Ladybrand and Maseru.Direct access from the N8 is via a new fly-over that has been completed in 2013

Micro Locality:

These properties are located on the North Eastern side of the town boundary. This area is known as a better more upmarketextension of Thaba Nchu. The surrounding properties compare well with the subject properties and are above averageproperties when compared to the majority of the residential properties in Thaba Nchu.

Market Analysis and Comparable Sales:

In our market research, it was evident that there is a lack of direct comparable sales in Thaba Nchu. Market research was thuswidened to other comparable area in the Mangaung Metro Municipality.

From the valuations done by the valuer two facts are evident:

the residential properties of Free State Development Corporation consist mainly of entry level properties which werenot significantly affected by the global credit crunch when compared to luxury and even middle class residentialproperty; and

it is considered that the professional valuation was done rather conservatively

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Amounts recognised in profit and loss for the year

Rental income from investmentproperty

75 296 987 73 037 877 72 110 322 75 170 987 72 917 991 70 652 801

Direct operating expenses fromrental generating property

(48 049 296) (60 735 169) (30 084 113) (48 049 296) (60 735 169) (30 084 113)

Fair value adjustment 26 259 273 29 241 443 45 475 323 26 259 273 29 241 443 45 475 323

53 506 964 41 544 151 87 501 532 53 380 964 41 424 265 86 044 011

4. Property, plant and equipment

Group 2015 2014

Cost /Valuation

Accumulateddepreciation

Carrying value Cost /Valuation


Carrying value

Owner occupied land andbuilding

19 264 550 (4 096 453) 15 168 097 17 063 098 (3 288 314) 13 774 784

Plant and machinery 850 000 (43 437) 806 563 850 000 (932) 849 068Furniture and Fixtures 7 660 531 (5 795 648) 1 864 883 8 344 637 (6 286 782) 2 057 855Motor vehicles 1 687 720 (1 518 369) 169 351 1 932 245 (1 718 265) 213 980Computer Equipment 3 629 711 (3 073 664) 556 047 3 694 747 (3 155 937) 538 810Assets under construction 25 978 542 - 25 978 542 - - -

Total 59 071 054 (14 527 571) 44 543 483 31 884 727 (14 450 230) 17 434 497

Group 2013

Cost /Valuation


Carrying value

Owner occupied land and building 17 563 097 (2 482 358) 15 080 739

Plant and machinery - - -Furniture and Fixtures 9 279 076 (6 313 217) 2 965 859Motor vehicles 3 021 275 (2 739 934) 281 341Computer Equipment 3 841 519 (3 026 123) 815 396Assets under construction - - -

Total 33 704 967 (14 561 632) 19 143 335

Company 2015 2014

Cost /Valuation




Carrying value

Owner occupied land andbuilding

18 296 180 (3 756 180) 14 540 000 16 094 728 (2 949 212) 13 145 516

Plant and machinery 850 000 (43 437) 806 563 850 000 (932) 849 068Furniture and fixtures 3 898 822 (2 812 290) 1 086 532 3 919 421 (2 718 408) 1 201 013Motor vehicles 938 985 (934 006) 4 979 1 183 510 (1 158 614) 24 896Computer Equipment 3 573 511 (3 017 465) 556 046 3 638 547 (3 099 738) 538 809Assets under construction 25 978 542 - 25 978 542 - - -

Total 53 536 040 (10 563 378) 42 972 662 25 686 206 (9 926 904) 15 759 302

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Company 2013

Cost /Valuation


Carrying value

Owner occupied land and building 16 094 727 (2 144 475) 13 950 252

Plant and machinery - - -Furniture and fixtures 3 980 139 (2 469 752) 1 510 387Motor vehicles 2 349 347 (2 298 473) 50 874Computer Equipment 3 769 721 (2 966 654) 803 067Assets under construction - - -

Total 26 193 934 (9 879 354) 16 314 580

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015





2015 2014 2013 2015 2014 2013R R R R R R

5. Intangible assets

Group 2015 2014

Cost /Valuation

Accumulatedamortisation



Carrying value

Computer software, other 5 617 073 (4 645 941) 971 132 5 129 553 (3 912 982) 1 216 571

Group 2013

Cost /Valuation


Carrying value

Computer software, other 4 737 447 (3 216 448) 1 520 999

Company 2015 2014

Cost /Valuation




Carrying value

Computer software, other 5 617 073 (4 645 941) 971 132 5 129 553 (3 912 982) 1 216 571

Company 2013

Cost /Valuation


Carrying value

Computer software, other 4 737 447 (3 216 448) 1 520 999

Reconciliation of intangible assets - Group - 2015

Openingbalance

Additions Amortisation Total

Computer software, other 1 216 571 487 520 (732 959) 971 132


Openingbalance


Computer software, other 1 520 999 392 106 (696 534) 1 216 571


Openingbalance



Reconciliation of intangible assets - Company - 2015

Openingbalance


Computer software, other 1 216 571 487 520 (732 959) 971 132

53





2015 2014 2013 2015 2014 2013R R R R R R


Openingbalance




Openingbalance



Other information

Included in the above figures are intangible assets with an initial cost price of R1 879 708 (2014: R443 052), (2013: R215 845)which are fully depreciated and are still in use.

54





2015 2014 2013 2015 2014 2013R R R R R R

6. Interests in subsidiaries including consolidated structured entities

The following table lists the entities which are controlled by the group, either directly or indirectly through subsidiaries.

Subsidiary Date acquiredCanton Trading 123 (Pty) Ltd April 2008Classic Number Trading 45 (Pty) Ltd March 2007Confram Harrismith Properties (Pty) Ltd October 1996Copper Moon Trading (Pty) Ltd February 2007Cross Point Trading 23 (Pty) Ltd March 2007Golden Pond Trading 663 (Pty) Ltd-(Deregistration final). April 2008Highlands Furniture Factory (Pty) Ltd January 2002Orofino Africa Jewellery Manufacturing (Pty) Ltd-(Deregistration final)* October 2007Phiritona Plastics (Pty) Ltd October 2007Rumar Manufacturing (Pty) Ltd February 2007Satinsky167 (Pty) Ltd October 2007Scopeful 21 (Pty) Ltd- (Investment transferred on 1 October 2012) August 2000Synthpro Holdings (Pty) Ltd July 2007Twin Cities Trading 129 (Pty) Ltd March 2007Welkom Diamond Cutting Works (Pty) Ltd - (Investment transferred on 29 May 2011). July 2007Free State Agri SOC RF** February 2015Free State Investments SOC RF** February 2015Free State Publishers SOC RF** February 2015Maluti-A-Phofung IDZ SOC RF** February 2015

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2015 2014 2013 2015 2014 2013R R R R R R

6. Interests in subsidiaries including consolidated structured entities (continued)

Group

Name of company Held by % votingpower2015

% votingpower2014

% votingpower2013

Canton Trading 123 (Pty) Ltd (Deregistration final) %49,00 %49,00 %49,00Classic Number Trading 45 (Pty) Ltd- Liquidation filed on 10 June 2010 %40,00 %40,00 %40,00Confram Harrismith Properties (Pty) Ltd -deregistration final) %100,00 %100,00 %100,00Cooper Moon Trading (Pty) Ltd- (Liquidated February 2011) %55,00 %55,00 %55,00Cross Point Trading (Pty) Ltd %25,00 %25,00 %25,00Golden Pond Trading 663 (Pty) Ltd %49,00 %49,00 %49,00Highlands Furniture Factory (Pty) Ltd %100,00 %100,00 %100,00Orofino Africa Jewellery Manufacturing (Pty) Ltd- Deregistration final %49,00 %49,00 %49,00Phiritona Plastics (Pty) Ltd %38,00 %38,00 %38,00Rumar Manufacturing (Pty) Ltd- (Liquidation filed 1 December 2010) %30,00 %30,00 %30,00Scopeful 21 (Pty) Ltd %50,00 %50,00 %50,00Sythpro Holdings (Pty) Ltd- (Liquidation filed March 2011) %33,00 %33,00 %33,00Twin Cities Trading 129 (Pty) Ltd %30,00 %30,00 %30,00Satinsky 167 (Pty) Ltd - liquidation filed 11 March 2011 %26,00 %26,00 %26,00Free State Agri SOC RF %100,00 %- %-Free State Investments SOC RF %100,00 %- %-Free State Publishers SOC RF %100,00 %- %-Maluti-A-Phofung IDZ SOC RF %100,00 %- %-

Name of company %holding

2015

%holding

2014

%holding

2013

Canton Trading 123 (Pty) Ltd (Deregistration final) %49,00 %49,00 %49,00Classic Number Trading 45 (Pty) Ltd- Liquidation filed on 10 June 2010 %40,00 %40,00 %40,00Confram Harrismith Properties (Pty) Ltd -deregistration final) %100,00 %100,00 %100,00Cooper Moon Trading (Pty) Ltd- (Liquidated February 2011) %55,00 %55,00 %55,00Cross Point Trading (Pty) Ltd %25,00 %25,00 %25,00Golden Pond Trading 663 (Pty) Ltd %49,00 %49,00 %49,00Highlands Furniture Factory (Pty) Ltd %100,00 %100,00 %100,00Orofino Africa Jewellery Manufacturing (Pty) Ltd- Deregistration final %49,00 %49,00 %49,00Phiritona Plastics (Pty) Ltd %38,00 %38,00 %38,00Rumar Manufacturing (Pty) Ltd- (Liquidation filed 1 December 2010) %30,00 %30,00 %30,00Scopeful 21 (Pty) Ltd %50,00 %50,00 %50,00Sythpro Holdings (Pty) Ltd- (Liquidation filed March 2011) %33,00 %33,00 %33,00Twin Cities Trading 129 (Pty) Ltd %30,00 %30,00 %30,00Satinsky 167 (Pty) Ltd - liquidation filed 11 March 2011 %26,00 %26,00 %26,00Free State Agri SOC RF %100,00 %- %-Free State Investments SOC RF %100,00 %- %-Free State Publishers SOC RF %100,00 %- %-Maluti-A-Phofung IDZ SOC RF %100,00 %- %-

Corporation

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2015 2014 2013 2015 2014 2013R R R R R R


Name of company Held by

Canton Trading 123Classic Number 45 (Pty) Ltd Confram Harrismith Properties (Pty) LtdCooper Moon Trading (Pty) LtdCross Point Trading (Pty) LtdGolden Pond 663 (Pty)) LtdHighlands Furniture Factory Pty) LtdOrofino Africa Jewellery Manufacturing (Pty) LtdPhiritona Plastics (Pty) LtdRumar Manufacturing (Pty) LtdSatinsky 167 (Pty) LtdScopeful 21 (Pty) LtdSynthro Holdings (Pty) LtdTwin Cities Trading (Pty) LtdClassic Number Trading 45 (Pty) LtdTwin Cities Trading 129 (Pty) LtdOrofino Manufacturing (Pty) Ltd

Impairment of investment in subsidiaries

Name of company Carryingamount 2015

Carryingamount 2014

Carryingamount 2013

Canton Trading 123 49 49 49Classic Number 45 (Pty) Ltd 40 40 40Confram Harrismith Properties (Pty) Ltd 520 000 520 000 520 000Cooper Moon Trading (Pty) Ltd 51 51 51Cross Point Trading (Pty) Ltd 25 25 25Golden Pond 663 (Pty)) Ltd 49 49 49Highlands Furniture Factory Pty) Ltd 100 100 100Orofino Africa Jewellery Manufacturing (Pty) Ltd - - 49Phiritona Plastics (Pty) Ltd 380 380 380Rumar Manufacturing (Pty) Ltd 300 300 300Satinsky 167 (Pty) Ltd 26 26 26Scopeful 21 (Pty) Ltd - - 40Synthro Holdings (Pty) Ltd 33 33 33Twin Cities Trading (Pty) Ltd 30 30 30Classic Number Trading 45 (Pty) Ltd 2 992 200 2 992 200 2 992 200Twin Cities Trading 129 (Pty) Ltd 520 000 520 000 520 000Orofino Manufacturing (Pty) Ltd 49 49 -

4 033 332 4 033 332 4 033 372Impairment of investment in subsidiaries (4 033 232) (4 033 233) (4 033 272)

100 99 100

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2015 2014 2013 2015 2014 2013R R R R R R


The carrying amounts of the investments in subsidiaries are shown net of impairment losses. Investments in subsidiaries areimpaired due to liquidation, deregistration or due to the fact that the subsidiaries are not operational.

* For the liquidated and deregistered companies the Board of Corporation's approval for the write off of the investment is stillpending.

**These entities have no impact on the current year figures.

The mission and mandate of the FDC is to provide financial and business development services that result in theestablishment of sustainable SMMEs for economic growth and development in the Free State Province.

Based on the above, the entity acquired an interest in various SMMEs which are generally start-up companies and disburseshareholder loans (unsecured and interest free) as well as business loans (secured and bears interest) to them.

Restrictions relating to subsidiaries

Up until such a time as the commercial loans and all interest thereon, as well as the shareholder's loan have been repaid to theparent entity, no dividends will be declared to shareholders.

Reporting period

Subsidiary Year endCanton Trading 123 (Pty) Ltd* MarchClassic Number Trading 45 (Pty) Ltd* MarchConfram Harrismith Properties (Pty) Ltd* MarchCopper Moon Trading (Pty) Ltd* MarchCross Point Trading 23 (Pty) Ltd FebruaryGolden Pond Trading 663 (Pty) Ltd MarchHighlands Furniture Factory (Pty) Ltd MarchOrofino Africa Jewellery Manufacturing (Pty) Ltd* FebruaryPhiritona Plastics (Pty) Ltd FebruaryRumar Manufacturing (Pty) Ltd* MarchSatinsky167 (Pty) Ltd* FebruaryScopeful 21 (Pty) Ltd FebruarySynthpro Holdings (Pty) Ltd* FebruaryTwin Cities Trading 129 (Pty) Ltd MarchWelkom Diamond Cutting Works (Pty) Ltd MarchFree State Agri SOC RF** MarchFree State Investments SOC RF** MarchFree State Publishers SOC RF** MarchMaluti-A-Phofung IDZ SOC RF** March

The management accounts for the entities with year ends that are different to that of the Corporation were obtained. The effectof the transactions that occurred between the entities year end dates and the Corporation's year end date were assessed at agroup level. The impact was found to be insignificant. Minor adjustments were processed to eliminate intergroup transactionsand balances during the consolidation process.

7. Investments in associates

The group accounts for it's investment in associates by using the equity method. The group has one associate with detailsbelow

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2015 2014 2013 2015 2014 2013R R R R R R

7. Investments in associates (continued)

Group

Name of company Listed/Unlisted

%ownership

interest2015

%ownership

interest2014

%ownership

interest2013

Carryingamount 2015

Carryingamount 2014

Carryingamount 2013

Mafube Risk and InsuranceConsultants (Pty) Ltd

Unlisted %24,50 %24,50 %49,00 - - -

Mafube Risk and Insurance Consultants Carryingamount 2015

Carryingamount 2014

Carryingamount 2013

Cost 49 000 49 000 49 000Accumulated profits 810 331 808 349 772 136Share of profit of associate 383 412 648 662 (28 468)Less dividends paid - (646 680) -

1 242 743 859 331 792 668

Corporation

Name of company Held by Carryingamount 2015

Carryingamount 2014

Carryingamount 2013

Ligia Paper Industries (Pty) Ltd 1 1 -Mafube Risk and Insurance Consultants (Pty) Ltd 49 000 49 000 49 000

49 001 49 001 49 000

59





2015 2014 2013 2015 2014 2013R R R R R R

7. Investments in associates (continued)

Summarised financial information of material associates

Summarised Statement of Comprehensive Income Mafube Risk and InsuranceConsultants (Pty) Ltd

2015 2014

Revenue 4 507 527 3 272 776Other income and expenses (2 544 032) (625 178)

Profit before tax 1 963 495 2 647 598Tax expense (552 136) (1 029 621)

Profit (loss) from continuing operations 1 411 359 1 617 977

Total comprehensive income 1 411 359 2 264 657

Dividends received from associate - 646 680

Summarised Statement of Financial Position Mafube Risk and Insurance Consultants(Pty) Ltd

2015 2014 2013

AssetsNon current 16 311 - -Current 11 482 976 9 433 107 8 832 181

Total assets 11 499 287 9 433 107 8 832 181

LiabilitiesCurrent 6 592 640 5 945 533 5 352 699

Total liabilities 6 592 640 5 945 533 5 352 699

Total net assets 4 906 647 3 487 574 3 479 482

Mafube Risk and Insurance Consultants (Pty) Ltd

Nature of the business: Insurance and employee brokerYear end 31 DecemberGroup shareholding 24.5%

Associates with different reporting dates

The management accounts of Mafube Risk and Insurance were obtained for the period that differs to the year of the group. Thetransactions that occurred during this period were assessed and found to be insignificant to the group. The managementaccounts were however consolidated to a period ending 28th of February 2015.

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2015 2014 2013 2015 2014 2013R R R R R R

8. Loans from shareholder

Canton Trading 123 (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 1 832 172 1 832 172 1 832 172

Twin Cities Trading (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 302 000 302 000 302 000

Synthpro Holdings (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 1 500 000 1 500 000 1 500 000

Shareholders OtherThe amount consists of asset advances to OrofinoAfrica Jewellery Manufacturing (Pty) Ltd. The amounthas no fixed terms of repayment and no interest.

- - - 5 315 905 5 315 905 5 315 905

Classic Number Trading 45 (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 1 462 918 1 462 918 1 462 918

Confram Harrismith Properties (Pty) LtdThe loan is long term in nature, bears no interest, isunsecured and has no fixed terms of repayment.

- - - 11 166 626 11 166 626 11 166 626

Copper Moon Trading 29 (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 705 895 705 895 705 895

Cross Point Trading 23 (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 737 756 737 756 737 756

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2015 2014 2013 2015 2014 2013R R R R R R

8. Loans from shareholder (continued)Highlands Furniture Factory (Pty) LtdThe loan is long term in nature, bears no interest, isunsecured and has no fixed terms of repayment

- - - 4 299 675 4 299 675 4 299 675

Orofina Africa Jewellery Manufacturers (Pty) LtdThis loan is secured by a notarial bond over themoveable assets of the company and bears nointerest. The loan will not be payable for a period oftwo years from October 2007; thereafter the loan isrepayable on demand subject to six months writtennotice to the company.

- - - 16 371 000 16 371 000 16 371 000

Phiritona Plastics (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 451 163 451 163 451 163

Rumar Manufacturing (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 214 286 214 286 214 286

Satinsky 167 (Pty) LtdThe loan according to the agreement, is obligated tocede with an equivalence of shares in favour of theCorporation and continues until such time as thebusiness loan and the shareholder's loan are repaid.This amount is long term in nature, bears no interestand is repayable on demand.

- - - 253 240 253 240 253 240

- - - 44 612 636 44 612 636 44 612 636Impairment of loans to shareholders - - - (44 612 636) (44 612 636) (44 612 636)

- - - - - -

Loan to subsidiaries impaired

As of 31 March 2015, loans to subsidiaries of R44,612,636 (2014: R44,612,636; 2013: R44,612,636) were impaired andprovided for due to the fact that the subsidiaries are not operational anymore.

The carrying amounts of loans to and from subsidiaries are denominated in Rand.

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2015 2014 2013 2015 2014 2013R R R R R R

9. Loans receivable

Loans and receivablesBridging Loans These are short term loanssecured by instalment saleagreements, special and generalnotarial bonds, key maninsurance and comprehensiveinsurance. Interest is charged atthe prime lending rate andrepayment is over the length ofthe project.

119 986 516 100 783 435 85 762 222 102 146 483 100 783 435 99 521 950

Business LoansBusiness loans are secured byinstalment sale agreements,special and general notarialbonds, key man insurance andcomprehensive insurance. Theseloans are repayable over amaximum period of 5 years andthe interest is equal to the primelending rate.

171 807 628 164 366 576 177 285 930 205 267 930 212 527 444 212 195 379

Housing LoansThe Corporation holds collateralin the form of first bonds over theproperties of the clients. Theseloans have a maximumrepayment period of 20 yearsand the interest is equal to theprime lending rate.

64 890 891 71 678 058 76 933 620 64 890 891 71 678 058 76 933 620

Personnel LoansSee terms and conditions below.

14 144 967 18 133 223 22 359 213 14 144 967 18 133 223 22 359 213

Other loans - 20 853 515 918 - 20 853 515 867

370 830 002 354 982 145 362 856 903 386 450 271 403 143 013 411 526 029Loans and receivables(impairments)

(250 977 048)(219 481 994)(182 142 661)(266 544 481)(267 590 026)(224 299 089)

119 852 954 135 500 151 180 714 242 119 905 790 135 552 987 187 226 940

Non-current assetsLoans and receivables 46 119 571 53 915 793 82 706 870 46 172 408 57 108 096 87 766 264

Current assetsLoans and receivables 73 733 383 81 584 358 98 007 372 73 733 382 78 444 891 99 460 676

119 852 954 135 500 151 180 714 242 119 905 790 135 552 987 187 226 940

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2015 2014 2013 2015 2014 2013R R R R R R

9. Loans receivable (continued)

Fair value hierarchy of financial assets at fair value through profit or loss

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of theinputs used to make the measurements.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie asprices) or indirectly (ie derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial instrument is classified is determined based on the lowest level of significant input to the fairvalue measurement.The financial assets measured at fair value in the statement of financial position are as follows:

Level 3Financial assets at fair valuethrough profit or loss

8 387 178 5 953 140 13 287 847 8 387 178 5 953 140 13 287 847

The group's financial assets classified in Level 3 uses valuation techniques based on significant inputs that are not based onobservable market data. The financial instruments within this level can be reconciled from beginning to ending balances asfollows:

Personnel loans

At 31 March 2015, included in personnel loans are loans to former-employees to the amount of R4 087 072 (2014: R5 384 048,2013: R5 019 917).

Personnel loans consist of housing, motor vehicle, computer and personal loans.

The housing loans are secured by a first mortgage bond over the properties and are repayable over a maximum period of 30years at the South African Revenue Services official rate.

Motor vehicle loans are secured by instalment sale agreements and are repayable over a maximum period of 5 years. Forcomputers and personal loans the security is the net salary of the employee and is repayable over a maximum period of 2years. All personnel loans carry interest at the South African Revenue Services official rate.

Bursary and dependent study loans are secured by the net salary of the employee, repayable within 12 months and carryinterest at the South African Revenue Services official rate. Study bursaries are expensed and recognised as loans ifemployees fail their studies.

Loan to subsidiaries impaired

As of 31 March 2015, loans to subsidiaries of R44,612,636 (2014: R44,612,636; 2013: R44,612,636) were impairedand provided for due to the fact that the subsidiaries are not operational anymore.

The carrying amounts of loans to and from subsidiaries are denominated in Rand.

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2015 2014 2013 2015 2014 2013R R R R R R


Loans past due, but not impaired - Group 2015 31-60 days 61-90 days 91-120 days 120+Bridging loans 411 341 59 142 50 392 6 990 298Home loans (410 782) 83 589 6 841 21 275 441Business loans 527 840 391 442 267 768 24 114 771Staff loans 2 208 154 892 (2 607) 526 137

Subtotal 530 607 689 065 322 394 52 906 647

530 607 689 065 322 394 52 906 647

Loans past due, but not impaired - Corporation 2015 31-60 days 61-90 days 91-120 days 120+Bridging loans 411 341 59 142 50 392 6 990 298Home loans (410 782) 83 589 6 841 21 275 441Business loans 527 840 391 442 267 768 24 167 606Staff loans 2 208 154 892 (2 607) 526 137

Subtotal 530 607 689 065 322 394 52 959 482

530 607 689 065 322 394 52 959 482

Loans past due, but not impaired - Group 2014 31-60 days 61-90 days 91-120 days 120+Bridging loans 182 827 121 697 112 891 7 062 369Home loans 630 023 290 328 355 829 21 574 746Business loans 1 100 327 557 729 389 130 27 342 215Staff loans 50 026 19 857 18 038 480 979

Subtotal 1 963 203 989 611 875 888 56 460 309

1 963 203 989 611 875 888 56 460 309

Loans past due, but not impaired - Corporation 2014 31-60 days 61-90 days 91-120 days 120+Bridging loans 182 827 121 697 112 891 7 062 369Home loans 630 023 290 328 355 829 21 574 746Business loans 1 100 327 557 729 389 130 27 342 215Staff loans 50 026 19 857 18 038 480 979

Subtotal 1 963 203 989 611 875 888 56 460 309

1 963 203 989 611 875 888 56 460 309

Loans were individually assessed to evaluate the movement on the loan. Movement was evaluated based on the significanceof the value of the movement in relation to the instalment and whether there was a pattern of regularity in payments made.

Loans were not impaired beneath the fair value of the securities provided to the loan.

The carrying amount reported in the statement of financial position for other financial assets approximate fair value.

Valuations

65





2015 2014 2013 2015 2014 2013R R R R R R


The valuation of immovable securities over other financial assets was performed by an independent valuer, Ms. E Roos, aProfessional valuer, in accordance with the provisions of the Property Valuers Profession Act. The market valuations for theimmovable securities of FDC were determined based on valuation methods, principles and techniques approved by the SouthAfrican Council for the Property Valuers Profession (SACPVP)

The valuation of moveable securities were performed by an independent valuer, Mr W Welgemoed, a Moveable Asset RegisterSpecialist. The market valuations for movable securities of FDC were determined based on valuation methods, principles andtechniques accepted as best practice and in compliance with the Generally Recognised Accounting Practices and theInternational Financial Reporting Standers.

The valuators determined the fair value of the securities for statement of financial position purposes on the following effectivedates: 31 March 2014 and 2015. The effective date of the valuation was March 2015.

Immovable Property Valuations

Method of valuation

The value indicated is established by comparing the subject property with similar properties, called comparable sales.Comparable sales are recent property transactions of property that were sold in accordance with the definition of market value.These comparable sales are judged as being the most comparable to the subject property to indicate a range of values inwhich the subject property's value could be determined. The subject property is then measured against the comparable sales,in various elements of comparison that might influence and ultimately determine the value of the subject property.

Factors considered in direct comparison

The factors considered in direct sales comparisons are sometimes referred to as elements of comparison. The objective was tointerpret from sales of similar properties to the probable market value of the property being appraised. A comprehensive marketfile, augmented by current research, provided a variety of market information as a basis for the comparison process. Since notwo properties are identical in all respects, the attributes of the potentially comparable sale properties were reconciled withthose of the property being appraised.

In making comparisons, the appraiser identified similarities and dissimilarities. The most dependable conclusions are based oncomparisons of the most similar factors and conditions. The valuer considered the extent of the dissimilarities and estimatesthe amounts these add to or subtract from the known price of the sold property in order to obtain an adjusted figure reflectingthe probable sale price of the property being valued.

Elements of comparison used include:

Time: The length of time for which specific sale comparisons may be useful varies with the character of the market,the rate and extent of market change and the type of property.

Physical characteristics: Similar properties may differ regarding to site qualities- frontage, size of land, soil type andtopography. Improvements although comparable may differ not only in size of improvements but also in quality ofamendments and finishing.

Location: Similar properties might sell for more in one neighbourhood than in another sales data used forcomparison is most meaningful when confined to the neighbourhood of the property being appraised.

Institutional attributes: Legal and management scheme influences on use application of the property. Present use of the propert Highest and best use of property.

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2015 2014 2013 2015 2014 2013R R R R R R


Moveable Asset Valuations

Assumptions and principles

Relevant markets

Type Comments Value reduction over lifespan

Catering equipment Not within industry. Private use and start-up Yescompany - "Always looking for a bargain".

Production/manufacturing equipment Only in industry if business is sold. Mostly Yesprivate use and hobbyist - "Always lookingfor a bargain"

Vehicles General used markets and spare parts Yes, limited to scrap value.dealers/scrap metal.

Carrying value sensitivity/alignment

The carrying value of equipment directly relates to the market value in the case of liquidation. Meaning, the general trend is thatvery little or any "price" can be negotiated on a consistent and reliable basis outside the lifespan reduction of assets. Theseitems are mostly purchased by private users or hobbyist as novelty items, resulting in no certainty on the saleability of the item.

In the case of vehicles, an official market exists, even on assets which are no-longer in a functioning condition, due to the scrapmetal and spare parts embedded within such vehicles. As a result vehicles have been allocated an industry accepted scrap /residual value, which once again correlates with the carrying value when residual values are considered within the calculation.

10. Operating lease asset (liability)

Non-current assets 1 439 873 459 044 230 157 1 439 873 459 044 230 157Current assets 252 818 244 398 402 122 252 818 244 398 402 122

1 692 691 703 442 632 279 1 692 691 703 442 632 279

Non Current Assets

Operating Lease assets

In terms of IAS17 (leases) par 50, lease income from operating leases shall be recognised in income on a straight line basisover the lease term. The differences between the contractual payments and the straight lining are recognised as an operatinglease asset.

Current Liability

Operating lease liability

In terms of IAS17 (leases) par 34 lease payments under operating leases shall be recognised as an expense on a straight linebasis over the lease term. The differences between the contractual payments and the straight lining are recognised as anoperating lease liability

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11. Retirement benefits

Defined benefit plan

The benefit is in terms of current and retired employees of the parent entity (employees of FDC) who are currently members ofmedical schemes or continue to belong to a medical scheme after retirement. Pensioners include retired employees or theirwidow(er)s. The liability is in respect of pensioners who continue to belong to a medical scheme after retirement. In respect ofthese employees, 67% of the medical aid contribution is paid by the group (Corporation) while the pensioners pay theremaining 33%. Valuation is undertaken every year. Currently there is no funding arrangement in place to meet the liabilitiesthat have occurred to date or that will occur in the future.

Carrying value

Present value of the definedbenefit obligation-whollyunfunded

(41 629 000) (35 010 000) (26 349 000) (41 629 000) (35 010 000) (26 349 000)

Contributions to Actuarial Gain /(Loss)

(6 068 000) 119 000 (4 974 000) (6 068 000) 119 000 (4 974 000)

Post retirement benefit costsincluded in employee costs

5 199 000 (6 738 000) (3 687 000) 5 199 000 (6 738 000) (3 687 000)

(42 498 000) (41 629 000) (35 010 000) (42 498 000) (41 629 000) (35 010 000)

The fair value of plan liabilities includes:

Contributions to Actuarial Gain / (Loss)

Actuarial gains and (losses)arising from changes in financialassumptions

(6 068 000) 258 000 (3 596 000) (6 068 000) 258 000 (3 596 000)

Actuarial gains and (losses)arising from experienceadjustments

- (139 000) (1 378 000) - (139 000) (1 378 000)

(6 068 000) 119 000 (4 974 000) (6 068 000) 119 000 (4 974 000)

Post retirement benefit costs included in employee costs (Note 25)

Current service cost (3 265 000) (3 975 000) (1 724 000) (3 265 000) (3 975 000) (1 724 000)Interest cost (3 940 000) (3 435 000) (2 576 001) (3 940 000) (3 435 000) (2 576 001)Benefits paid 6 190 000 672 000 613 001 6 190 000 672 000 613 001Curtailment 6 214 000 - - 6 214 000 - -

5 199 000 (6 738 000) (3 687 000) 5 199 000 (6 738 000) (3 687 000)

Key assumptions used

Assumptions used on last valuation on 31 May 2015.

Discount rates used %8,84 %9,80 %8,26 %8,84 %9,80 %8,26Health cost inflation %8,48 %8,36 %7,68 %8,48 %8,36 %7,68Expected increase in salaries %6,00 %6,00 %5,11 %6,00 %6,00 %5,11

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11. Retirement benefits (continued)

The discount rate used in the current year is based on government bonds. The discount rates used in prior years were basedon the ALBI Index.

Other assumptions:

Pre-retirement mortality rate: SA85/90: rated down 3 years for female lives.

Post-retirement mortality rate: PA (90): ultimate with a one year age reduction.

The effect of an increase of a 0.5% (2014: 1%) point in the medical cost trend rate and the effect of a decrease of onepercentage point on the following would be:

Group / Corporation Group / Corporation 2015 2014Increase Decrease Increase Decrease

Effect on the aggregate of the service cost and 3 710 000 4 245 000 10 561 358 9 810 453interest costBenefit obligation at end of the year 38 788 000 46 743 000 45 690 358 25 318 547

The expected retirement age for both males and females is 60.

In general resignation rates are age dependent and for the purposes of the valuation age-related resignation rates have beenassumed.

It is assumed that active employees would experience the following rates of resignation per annum prior to retirement at thespecific ages. The resignation rates between the ages indicated have been smoothed between the rates indicated below:

Age Rate20 16%30 10%40 6%50 2%+55 Nil

It is assumed that 90% of male retirees and 60% of female retirees will be married at retirement and that the husband will be 3years older than the wife.

The closing balance and experience adjustments arising on the plan liabilities for the current and past four years are as follows:

Year Closing balance Experience Adjustments

2015 R42 498 000 R -6 214 0002014 R41 629 000 R 139 0002013 R35 010 000 R 1 378 0002012 R26 349 000 R 372 0002011 R22 718 000 R 266 000

Retirement benefit obligation

The Corporation and members contribute to a fixed contribution pension fund and an associated employee benefit scheme. It isa self-funded scheme governed by the Pension Fund Act, 1956 and managed by a Board of Trustees. The fund had 88 (2014:115) members at year end. The fund was registered on 1 April 1997. At present the total employer contribution, includingcontributions to associated schemes, are made at 15% of pension funding salaries, while the members contribute 7.55% ofpension funding salaries.

The expected contribution to the retirement benefit contribution for the year ending 31 March 2016 is R6 714 912.

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12. Other investments (continued)

Non- currentQwaqwa Datnis* 54 250 54 250 54 250 54 250 54 250 54 250Current - - - - - -Ligia Paper Industries (Pty) Ltd** - - - 1 1 1Corporate Money managers*** 8 387 178 5 953 139 13 287 847 8 387 178 5 953 139 13 287 847

Subtotal 8 441 428 6 007 389 13 342 097 8 441 429 6 007 390 13 342 098

8 441 428 6 007 389 13 342 097 8 441 429 6 007 390 13 342 098

* The Corporation holds 18% of the issued share capital.

** The Corporation holds 10% of the issued share capital.

The Corporation, which holds a 10% shareholding, in consultation with the two major shareholders responsible for operatingthe business, have agreed that due to the poor performance results, the company Ligia Paper Industries (Pty) Ltd (Ligia)should be sold. An unanimous resolution was adopted by the Board of Ligia sanctioning the sale of the business subject tocertain terms and conditions. It was envisaged that the shares in Ligia Paper Industries (Pty) Ltd would be sold during the2009/2010 financial year. This sale did not realise by 31 March 2015. The company ceased treading on 10 January 2012 andits liabilities exceed its assets.

From a Group perspective, the investment in Ligia Paper Industries (Pty) Ltd is deemed to be impaired. No movement in theequity of the investment has been recorded in equity of the Group and thus the entire investment has been impaired throughprofit and loss.

Equity investments are carried at cost.

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*** Corporate Money Managers Investment

In April 2009 the investment management company (Corporate Money Managers) with which the Corporation had investedencountered liquidity problems. It was subsequently placed under curatorship on 28th April 2009 and is currently involved inextensive investigation into the affairs of the investment management company, Corporate Money Managers (CMM) andothers. Through communication with the liquidators it was determined that the anticipated ultimate recovery on behalf of theinvestors will in all probability amount to no more than 25% of the capital invested. The investment held with CMM amounts toR29,388,829. In March 2011 an amount of R1,381,586 was received from CMM as an interim payment of the outstandingamount. No amount has been received in respect of the capital investment. 50% of the value of R14,669,415 was impaired inMarch 2011. During the 2014 financial year a further R7,334,707 was impaired. The carrying amount of the investmentrepresents the best estimate of the amount recoverable and approximate fair value as per discussions with the liquidators.

The Curators from Corporate Money Managers confirmed on 18 May 2015 that their best estimate as at 31 March 2015 of therecoverable amount is 30 cents in the rand. At the end of the previous financial year, the estimate was at 25 cents in the rand.The impairment of the investment was therefore adjusted with the amount of R2 434 038,94.

Fair value hierarchy of financial assets at fair value through profit or loss

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of theinputs used to make the measurements.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie asprices) or indirectly (ie derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial instrument is classified is determined based on the lowest level of significant input to the fairvalue measurement.The financial assets measured at fair value in the statement of financial position are as follows:

Level 3Financial assets at fair value throughother comprehensive income

5 953 140 5 953 140 13 287 847 5 953 140 5 953 140 13 287 847

Subtotal 5 953 140 5 953 140 13 287 847 5 953 140 5 953 140 13 287 847

5 953 140 5 953 140 13 287 847 5 953 140 5 953 140 13 287 847

The group's financial assets classified in Levael 3 uses valuation techniques based on significant inputs that are not based onobservable market data. The financial instrument within this level can be reconciled from beginning to ending balances asfollows:

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Reconciliation of financial assets at fair value through profit or loss measured at level 3

Reconciliation of financial assets at fair value through profit or loss measured at level 3 - Group - 2015

Openingbalance

Gains orlosses in

profit or loss

Total

Financial assets at fair value through profit or loss 5 953 140 2 434 038 8 387 178


Openingbalance

Impairmentrecognised inprofit or loss

Total

Financial assets at fair value through profit or loss 13 287 847 (7 334 707) 5 953 140


Openingbalance

Total

Financial assets at fair value through profit or loss 13 287 847 13 287 847

Reconciliation of financial assets at fair value through profit or loss measured at level 3 - Company - 2015

Openingbalance

Gains orlosses in

profit or loss

Total

Financial assets at fair value through profit or loss 5 953 140 2 434 038 8 387 178


Openingbalance

Impairmentrecognised inprofit or loss

Total

Financial assets at fair value through profit or loss 13 287 847 (7 334 707) 5 953 140


Openingbalance

Total

Financial assets at fair value through profit or loss 13 287 847 13 287 847

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2015 2014 2013 2015 2014 2013R R R R R R

13. Inventories

Raw materials, components - 30 844 - - - -Work in progress 53 925 159 719 233 291 - - -Finished goods 111 622 57 385 582 536 - - -Consumables 1 1 1 1 1 1Equipment held for resale 1 1 1 1 1 1Stands held for resale 165 099 165 099 360 168 165 099 165 099 360 168

330 648 413 049 1 175 997 165 101 165 101 360 170

Included in inventory is 2098 properties relating to the Human Settlement Project. Based on agreement with the FDC theseproperties are to be transferred to the tenants having an agreement with the FDC. If these tenants cannot be traced, then theproperty will be transferred to the current tenant. Due to outstanding levies FDC is currently unable to transfer the properties tothe new owners and subsequently still hold the title deed to the properties. It is however unlikely that the FDC will receive anyfuture economic benefit from the properties or the arrangements.

14. Trade and other receivables

Trade receivables 10 329 129 12 562 672 18 129 737 9 814 208 11 912 197 15 954 380Prepayments 6 234 264 6 183 823 5 567 089 6 234 264 6 183 823 5 567 089Deposits 462 483 382 766 382 766 382 766 382 766 382 766VAT receivable - 1 502 949 2 352 769 - 1 502 949 2 220 781Sundry debtors 2 170 266 1 890 232 1 288 915 2 168 435 1 890 232 472 561Creditors with debit balances 17 758 24 399 29 960 17 758 24 399 29 960Accrued income 17 711 661 14 899 141 16 098 422 17 711 661 14 899 141 16 098 422

36 925 561 37 445 982 43 849 658 36 329 092 36 795 507 40 725 959

Trade receivables is shown net of provision for impairment.

Credit quality of trade and other receivables

The carrying amount reported in the statement of financial position for trade and other receivables approximate fair value dueto the short time period between initiation and settlement thereof. The effect of discounting is not material.

Impairment losses can be attributed to the current economic environment which is being characterised by an increase in thedefaulting of payments.

The credit quality of trade receivables that are neither past due nor impaired can be assessed by reference to historicalinformation about counterparty default rates.

The total trade receivables that are neither past due nor impaired amounted to R2 624 119 (2014: R6 346 401, 2013: R7 555657) for the Corporation.

The total trade receivables that are neither past due nor impaired amounted to R2 624 119 (2014: R6 996 876, 2013: R9 731014) for the Group.

Trade receivables

Trade and other receivables which would have been past due or impaired, but which have been renegotiated are asfollows:

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14. Trade and other receivables (continued)

Trade and other receivables past due but not impaired

The ageing of amounts past due but not impaired is as follows:

31 to 60 days 2 308 294 4 614 827 5 715 296 2 308 294 4 614 827 5 715 29661 to 90 days 583 723 2 460 868 3 380 677 583 723 2 460 868 3 380 67791 to 120 days 151 449 72 418 - 151 449 72 418 -More than 120 days 38 724 7 508 - 38 724 7 508 -

Trade and other receivables impaired

The amount of the provision was (R110 020 433) as of 31 March 2015 (2014: (R93 281 335); 2013: (R72 349 093)).

The ageing of these loans is as follows:

1 to 30 days 2 142 366 84 603 - 2 142 366 84 603 -31 to 60 days 1 877 496 96 707 - 1 877 496 96 707 -61 to 90 days 1 892 203 1 300 083 197 691 1 892 203 1 300 083 197 69191 to 120 days 3 803 030 3 492 053 3 595 447 3 803 030 3 492 053 3 595 447More than 120 days 100 305 339 88 307 889 68 555 955 100 305 339 88 307 889 68 555 955

Reconciliation of provision for impairment of trade and other receivables

Opening balance 93 281 335 72 349 093 61 171 325 93 281 335 72 349 093 61 171 325Provision for impairment 15 966 390 20 932 242 11 177 768 16 739 098 20 932 242 11 177 768

109 247 725 93 281 335 72 349 093 110 020 433 93 281 335 72 349 093

The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The groupdoes not hold any collateral as security.

15. Cash and cash equivalents

Cash and cash equivalents consist of:

Cash on hand 27 000 18 282 17 000 17 000 17 000 17 000Bank balances 13 745 693 69 207 882 24 393 790 13 683 588 68 970 957 24 040 542Call investments 17 853 142 24 981 242 41 705 359 17 853 142 24 981 242 41 705 359Short term deposits - 79 717 - - - -

31 625 835 94 287 123 66 116 149 31 553 730 93 969 199 65 762 901

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15. Cash and cash equivalents (continued)

Included in our cash and cash equivalents are the following third party balances

Free State Department of Health 643 259 6 747 823 10 994 197 643 259 6 747 823 10 994 197Free State Department of HumanSettlements

6 742 273 51 473 508 - 6 742 273 51 473 508 -

Department of Trade andIndustry

- 4 500 000 - - 4 500 000 -

MTN SA Foundation Fund - - 6 000 000 - - 6 000 000Maluti Bus Employees and Trust - - 14 560 393 - - 14 560 393Technology Innovation Agency 5 000 000 5 000 000 - 5 000 000 5 000 000 -Vrede Dairy Farm 3 063 761 - - 3 063 761 - -

15 449 293 67 721 331 31 554 590 15 449 293 67 721 331 31 554 590

The carrying amount reported in the statement of financial position for cash and cash equivalents approximate fair value.

16. Revaluation reserve

The revaluation reserve arises on the revaluation of properties. When revalued properties are sold, the portion of therevaluation reserve that relates to that asset is transferred directly to retained earning.

Items of other comprehensive income included in the revaluation reserve will not be reclassified subsequently to profit or loss.

The transfer to retained earnings relates to a building which was transferred from property, plant and equipment to investmentproperty in 2013.

Opening balance 1 176 844 1 176 844 3 644 204 1 176 844 1 176 844 3 644 204Transfer to retained earnings 2 201 452 - (2 467 360) 2 201 452 - (2 467 360)

Closing balance 3 378 296 1 176 844 1 176 844 3 378 296 1 176 844 1 176 844

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17. Other financial liabilities

Held at amortised costShell South Africa (Pty) LtdThe Corporation has twoagreements with Shell SouthAfrica (Pty) Ltd. Shell advancedloans to the Corporation to erecta service station each inAborishable and Hothead. Theseloans are redeemed by means ofa monthly fuel rebate per litre ofpetrol purchased from Shell forresale at these service stations.The service stations arededicated Shell service stationsfor which Shell has sole right ofuse and only Shell products aresold.

Aborishable Service stationThe agreement will endure forthe longer of 20 years and 32,280, 000 of Shell petrol havebeen purchased for resale on thepremises. Effective date:December 1985. The FDC is stillpaying off the loan by means ofrebates as per initial agreement.

Hothead service stationThe agreement will endure thelonger of 20 years and 77, 220,000 litres of Shell petrol havebeen purchased for resale on thepremises. Effectivedate:December 1991. The FDCis still paying off the loan bymeans of rebates as per initialagreement.

742 047 754 590 783 998 742 047 754 590 783 998

Total South AfricaTotal advanced an interest freeloan to the Corporation to erect aservice station in Hothead. Theloan is redeemed by means ofmonthly credit per litre payable inrespect of each litre of Totaldiesel purchased from Total forresale at the service station. Theagreement will endure the longerof 20 years and 161, 460, 000litres of Total petrol and dieselpurchased for resale. FDC is stillpaying off the loan by means ofrebates as per initial agreement.

703 255 703 255 713 667 703 255 703 255 713 667

Other financial liabilities 3 738 819 3 399 217 3 477 076 3 477 667 3 399 217 3 477 076

5 184 121 4 857 062 4 974 741 4 922 969 4 857 062 4 974 741

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17. Other financial liabilities (continued)

Held at amortised costOther loans 50 712 50 712 8 957 - - -

5 234 833 4 907 774 4 983 698 4 922 969 4 857 062 4 974 741

Non-current liabilitiesAt amortised cost 1 445 302 1 457 845 1 497 665 1 445 302 1 457 845 1 497 665At amortised cost 50 712 50 712 8 957 - - -

1 496 014 1 508 557 1 506 622 1 445 302 1 457 845 1 497 665

Current liabilitiesAt amortised cost 3 738 819 3 399 217 3 477 076 3 477 667 3 399 217 3 477 076

5 234 833 4 907 774 4 983 698 4 922 969 4 857 062 4 974 741

The carrying amount reported in the statement of financial position for other financial liabilities approximate fair value.

18. Deferred income

Financial service fees are levied when an application for financing is approved. These services are amortised over the loanterm. Financial service fees are realised in full when the loan is settled.

Non-current liabilities 168 300 176 967 196 244 168 300 176 967 196 244Current liabilities 22 111 35 567 28 689 22 111 35 567 28 689

190 411 212 534 224 933 190 411 212 534 224 933

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2015 2014 2013 2015 2014 2013R R R R R R

19. Long Service Awards Provision

Reconciliation of long service awards provision - Group - 2015

Openingbalance

Total

Long Service Awards 699 013 699 013


Openingbalance

Total



Openingbalance

Total


Reconciliation of long service awards provision - Company - 2015

Openingbalance

Total



Openingbalance

Total



Openingbalance

Total


Benefit StructureThe Company has a policy to provide a long service award to employees who have been in the service of the Company for acertain period of time. The awards are cash lump sums that depend on the employees’ length of service. Unauthorisedabsence from work or unpaid leave for at least one month is not regarded as service for purposes of calculating this award.

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The assumptions used are based on statistics and market data as at 31 March 2015. We have used the following valuationassumptions:

Discount rate

The discount rate required by IAS19 should be set with reference to a high quality corporate bond. In countries where there isno deep market in such bonds, the market yield on government bonds should be used. We have set the discount rate by usingthe best fit discount rate at 31 March 2015 based on the yields from the zero coupon government bond curve. The best fit hasbeen determined taking into account the cash-flow weighted duration of the liabilities, which is approximately 6.0 years. Therecommended discount rate is 6,0%.

Pre-retirement mortality

We have assumed that the pre-retirement mortality will be in line with SA85-90 (Light) table rated down by 3 years for femaleemployees. This is a table reflecting mortality experience in South Africa.

Withdrawal ratesWe have provided for rates of withdrawal as follows:Age Withdrawal Rate20 16%25 12%30 10%35 8%40 6%45 4%50 2%55 0

Assumed Retirement Age

We have assumed employees will retire at age 60.

Methodology

The liabilities are valued using the Projected Unit Credit Method. The liability has been calculated as the accrued serviceliability. The accrued service liability is calculated by valuing all future leave and payments expected to be made in respect ofbenefits accrued up to the valuation date. Allowance has been made in these calculations for salary increases and investmentreturns up to the date that the benefit is received.

20. Trade and other payables

Trade payables 112 361 271 68 373 798 56 012 646 110 878 061 67 950 433 54 614 111Debtors with credit balances 12 378 551 5 915 970 5 088 389 11 803 668 5 345 237 5 036 605VAT payable 905 103 118 057 66 480 619 532 - -Sundry creditors 6 750 261 6 829 073 6 746 709 6 750 261 6 746 972 6 746 709Vrede Dairy Project 3 063 761 - - 3 063 761 - -Accruals 25 224 146 25 850 911 18 852 885 24 570 621 25 850 911 18 771 151Maluti Bus Employees and Trust - - 14 560 393 - - 14 560 393Deposits received 8 889 950 8 378 521 7 731 194 8 889 950 8 378 521 7 731 194Other payables 16 876 249 71 441 304 609 816 16 851 459 71 441 304 600 000

186 449 292 186 907 634 109 668 512 183 427 313 185 713 378 108 060 163

Deposits received relates to deposits paid by tenants for renting of property.

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21. Revenue

Sale of inventory 3 813 580 4 021 587 - -Rendering of services 95 239 869 89 404 787 95 239 869 89 404 787Rental Income 75 296 987 73 037 877 75 170 987 72 917 991Interest income 12 447 133 14 054 668 12 447 133 14 054 668Government grants 27 565 496 19 776 316 27 565 496 19 776 316

214 363 065 200 295 235 210 423 485 196 153 762

The Government Grant is granted to FDC to focus on the sustainable development of SMMEs. The Chief Executive Officer ofFDC needs to provide the DESTEA annually, at least three months before the start of the financial year, with written assuranceas contemplated in section 38 (1)(i) of the Public Finance Management Act, 1999. Within 30 days from the effective date of thetransfer payment agreement, FDC is expected to provide the department with a corporate plan document. FDC has to providethe department within 15 days following the end of the month with monthly financial reports and submit quarterly financialreports within 30 days following the end of the quarter.

FDC has received a grant from IDC to fund part of the operational costs of the Agency Development and Support Department("ADS") programme. The programme has been implemented to assist municipal entities and/or Municipalities to fulfil theirmandate (the "ADS Programme") on the development and job potential inherent in various municipal areas through, but notlimited to, integrated rural development, tourism, infrastructure provision, urban renewal strategies and other initiatives on asustainable basis. FDC is expected to provide monthly reports on the utilization of the Grant according to the template providedby IDC.

FDC also received a grant from the Department of Trade and Industry in order to plan and prepare for the establishment of anSpecial Economic Zone (SEZ) in the Free State Province (Maluti-A-Phofung) and to develop a suitable business organisationthat successful attracts investors for such a SEZ. In accordance with the grant agreement, FDC has to perform and achieve theset of activities within the time frames and budgets set out in the agreement. FDC is solely accountable for use, for theintended purpose, of the funds granted in accordance with the budget stipulated in the agreement. FDC is also responsible tocommence and / or continue carry out project management including environmental impact assessment, socio economicimpact analysis, skills assessment & training model, investment opportunity packaging and facilitation and documenting reportsfor the Maluti-A-Phofung SEZ business plan proposal and application.

22. Cost of sales

Sale of goodsCost of goods sold 5 323 432 5 192 598 - -

Rendering of serviceService expense 85 670 745 87 513 233 85 670 745 87 510 252

Rental ServicesRental costs 48 049 296 60 735 169 48 049 296 60 735 169

139 043 473 153 441 000 133 720 041 148 245 421

23. Other income

Profit on sale of assets - 2 961 549 - 223 257Administration and management fees 1 541 296 383 544 1 541 296 383 544Fees earned 240 580 201 938 240 580 201 938Bad debt recoveries and impairment reversal 109 348 44 202 91 707 32 943Debt recoveries 2 599 873 3 679 983 2 432 378 3 679 983Insurance Claims 11 938 694 4 539 347 11 938 694 4 539 347Fuel rebates 12 543 39 820 12 543 39 820Sundry Income 2 076 975 165 816 2 076 119 (184 230)

18 519 309 12 016 199 18 333 317 8 916 602

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24. Administrative expenses

Group Corporation2015 2014 2015 2014

Bank charges 152 197 135 365 116 213 102 867Legal expenses 294 459 295 957 294 459 295 957Consumables 489 095 330 039 489 095 330 039Entertainment 259 335 134 607 257 318 134 607Flowers 10 944 10 771 10 944 10 321Printing and stationery 325 090 307 379 317 397 297 289Security 1 567 935 1 196 813 1 560 049 1 188 031Subscriptions 45 456 78 813 45 456 78 813Telephone and fax 1 716 911 2 139 402 1 667 670 2 105 796Training 541 898 605 079 541 898 605 079Cleaning 341 845 349 807 337 120 342 477Debt collection 630 773 327 213 630 773 327 213Assessment rates and municipal charges 325 507 315 851 325 506 315 851Recruitment fees 971 104 459 693 971 104 459 693Licenses 780 662 380 323 771 061 370 793

8 453 211 7 067 112 8 336 063 6 964 826

25. Employee cost

Direct employee costsBasic 53 365 318 48 882 430 53 051 993 48 578 219Bonus 121 188 - - -Other payroll levies 19 453 - - -Leave provision 2 724 252 1 021 226 2 591 477 1 021 226Other employee benefits 451 260 480 618 451 260 480 618Annual bonus 2 641 986 2 901 900 2 641 986 2 901 900Other short term costs 11 895 385 13 724 802 11 895 385 13 724 802Post-employment benefits - Pension - Definedcontribution plan

(5 199 000) 6 738 000 (5 199 000) 6 738 000

66 019 842 73 748 976 65 433 101 73 444 765

Total employee costs

Direct employee costs 66 019 842 73 748 976 65 433 101 73 444 765

26. Operating (loss) profit

Operating (loss) profit for the year is stated after accounting for the following:

Income from subsidiariesDividends 120 876 1 573 120 876 648 252

Operating lease chargesLease rentals on operating lease Contractual amounts 1 344 290 1 129 372 1 344 290 1 129 372

Profit on sale of Property, plant and equipment (1 325 444) 2 961 549 (1 325 444) 223 257Depreciation on property, plant and equipment 2 207 352 2 367 489 2 111 377 2 244 749Employee costs 66 019 842 73 748 976 65 433 101 73 444 765

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2015 2014 2013 2015 2014 2013R R R R R R

27. Investment revenue

Dividend revenueSubsidiaries - Local 120 876 1 573 120 876 648 252

Interest revenueBank 1 603 358 1 976 808 1 603 049 1 976 805

1 724 234 1 978 381 1 723 925 2 625 057

28. Fair value adjustments

Investment property (Fair value model) 29 856 772 29 161 042 29 856 772 29 161 042

29. Finance costs

Group companies 261 152 279 021 - -Bank 7 898 665 7 898 665Other interest paid 546 513 1 514 289 527 215 1 507 427

815 563 1 793 975 535 113 1 508 092

30. Auditors' remuneration

Fees 3 875 054 4 856 270 3 830 054 4 804 270

31. Other comprehensive income

Components of other comprehensive income - Group - 2015

Gross Tax Net

Items that will not be reclassified to profit or loss

Remeasurements on net defined benefit liabilityRemeasurements on net defined benefit liability (6 068 000) - (6 068 000)

Components of other comprehensive income - Group - 2014

Gross Tax Net


Remeasurements on net defined benefit liabilityRemeasurements on net defined benefit liability 119 000 - 119 000

Components of other comprehensive income - Company - 2015

Gross Tax Net


Remeasurements on net defined benefit liabilityRemeasurements on net defined benefit liability (6 068 000) - (6 068 000)

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31. Other comprehensive income (continued)

Components of other comprehensive income - Company - 2014

Gross Tax Net


Remeasurements on net defined benefit liabilityRemeasurements on net defined benefit liability 119 000 - 119 000

32. Cash (used in) generated from operations

(Loss) profit before taxation (16 822 293) (91 734 387) (14 621 269) (91 345 992)Adjustments for:Depreciation and amortisation 2 207 352 2 367 489 2 111 377 2 244 749Loss (profit) on sale of assets 1 325 444 (2 961 549) 1 325 444 (223 257)Income from equity accounted investments (383 412) (648 662) - -Dividends received (120 876) (1 573) (120 876) (648 252)Interest received - investment (1 603 358) (1 976 808) (1 603 049) (1 976 805)Finance costs 815 563 1 793 975 535 113 1 508 092Fair value adjustments (29 856 772) (29 161 042) (29 856 772) (29 161 042)Movements in operating lease assets and accruals (989 249) (71 163) (989 249) (71 163)Movements in retirement benefit assets and liabilities 991 000 7 410 000 991 000 7 410 000Net impairment loss / (reversal) (9 198 264) 64 910 843 (9 198 264) 64 910 843Non cash movement on assets - 211 099 - 211 099Theft of property, plant and equipment - 537 612 - -Deregistration of property, plant and equipment - 11 555 - -Fuel rebate (12 543) (15 345) (12 543) (15 345)Other non-cash items - (83 165) - -Changes in working capital:Inventories 82 401 762 947 - 195 068Trade and other receivables 10 797 428 (14 640 725) 10 709 923 (17 118 972)Other investments (2 434 039) 7 334 708 (2 434 039) 7 334 708Trade and other payables (458 342) 76 202 746 (2 286 065) 75 782 473Deferred income (22 123) (12 399) (22 123) (12 399)

(45 682 083) 20 236 156 (45 471 392) 19 023 805

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2015 2014 2013 2015 2014 2013R R R R R R

33. Commitments

Authorised capital expenditure

Describe the events and circumstances that led to therecognition or reversal of the impairment loss. Therecoverable amount of the asset was based on its fairvalue less costs to sell or [its value in use.]

Group2015

Group2014

Company2015

Company2014

The following capital project has been authorisedand contracted for: Refurbishment of Ratlou Shopping Complex 3 501 487 - 3 501 487 - Tshiame Projectfor security being the SEZ fence 43 170 155 - 43 170 155 - Bolata Clinic - 6 747 823 - 6 747 823

The following capital project has been authorised but not yet contracted for:

Refurbishment of Ratlou Shopping Complex for R15 248 513 (2014: R32 250 000).Tshiame Projects for R204 550 000 on our three year budgeting plan (2014: R263 550 000).Upgrading of security fence aroundBotshabelo industrial Area for R20 250 000 (2014: R20 250 000).

The Corporation is involved in constructing the N8 Office Park. The project is estimated to cost R474 960 000 (2014: 474 960000) and will be financed through loans from lending institutions

Operating leases – as lessee (expense)

Minimum lease payments due - within one year 192 396 180 853 192 396 180 853 - in second to fifth year inclusive 7 670 99 710 7 670 99 710

200 066 280 563 200 066 280 563

Operating leases – as lessor (income)

Minimum lease payments due - within one year 22 209 746 21 591 147 22 209 746 21 591 147 - in second to fifth year inclusive 41 957 152 39 350 652 41 957 152 39 350 652 - later than five years 3 929 394 4 398 324 3 929 394 4 398 324

68 096 292 65 340 123 68 096 292 65 340 123

The group is under operating lease agreements for properties. These lease agreements have escalations between 8% and10% per year with the agreements terms varying between 3-5 years.

85





2015 2014 2013 2015 2014 2013R R R R R R

34. Contingencies

Free State Transformation Consultants (FTC) R1 732 500The Free State Transformers claims the Department of Human Settlements paid fees to the FDC that were due to them(FTC).A claim was put in against the FDC for marketing and sales of properties in Botshabelo. An amount of R1 732 500together with interest theron at a rate of 15.5% per annum calculated from the day the FDC received the money until the dateof full payment. The FDC is opposing the claim and the matter is yet to be resolved.

Metsimaholo Local Municipality R729 918This matter relates to a dispute between the FDC and the Metsimaholo Local Municipality. The muncipality claims that theFDC owes outstanding electricity rates and taxes. Judgement in this matter is still pending although the management's legalcouncil is of the opinion that the judgement against the FDC is unlikely.

MC Moranyane R100 000This individual was evicted and claims the house should not have been sold. A claim for damages of R100 000 for selling thehouse in execution was lodged against the Corporation. The plaintiff argues the selling and the execution was null and void.The FDC reverted to counsel for advice and is opposing the claim. The case is in trial and has been postponed.

Mangaung Urban Renewal Company R32, 790, 945The Department of Public Works (Public Worsks) appointed Mangaung Urban Renewal (Mangaung) as managementconsultants for the construction of an office park, known as the N8 corridor development. Public Works paid Mangaung foservices provided. An agreement was reached with the FDC that the FDC will take over the project and costs from PublicWorks and will be liable for costs. Mangaung claimed the value of the outstanding invoices from the FDC, the total value valueof the claim is R32 790 945

The Rental Company Trust (TRCT) R 438,094Contractor provided a service to FDC however the FDC was not satisfied with the service and cancelled and the contractorsued them with regards to contract for R438 094. The matter was set for trial on the 17 & 18th of March 2015 and waspostponed for a possible settlement between the two parties.

PKX R12,441,164PKX is a financial services company based in Johannesburg that the FDC was introduced by the Department of EconomicDevelopment and Tourism. PKX was instructed by the Department of Economic Development to get financiers or investors onbehalf of the FDC. In terms of the agreement entered into between the FDC, Department of Economic Development and PKX,the Department of Economic Development was supposed to pay disbursements limited to 5% of finance raised. PKX is suingthe FDC for services rendered.The matter is set for possible settlement between the Department of Economic Developmentand Tourism and the contractor.

Dihlabeng Local Municipality R428,785The Dihlabeng Municipality is suing the FDC for the recovery of water, refuse, sanitation and rates. The matter was heard on5th of March 2015 and judgement was made in favour of the said local municipality.The FDC is however appealing thejudgement.

Claim by former employee R969,486A matter of a former employee who refused placement in an alternative position during a restructuring process and wassubsequently retrenched from the employ of the FDC and their matter is now at the CCMA.The former employee is claimingreinstatement and R969,486 being 12 months salary and compensation.A settlement could not be reached during conciliationprocess and the matter has been referred to the Labour Court.

Claim by former employee R8,190,742The matter relates to a former employee who was dismissed after being found guilty during a disciplinary hearing process. Thematter was referred to the CCMA for conciliation but a settlement could not be reached.

86





2015 2014 2013 2015 2014 2013R R R R R R

35. Related parties

`

RelationshipsHolding company Free State Development CorporationSubsidiaries Refer to note 6Associates Refer to note 7Directors Refer to directors' reportMembers of key management Refer to Note 36Government entities with significant influence Department of Economic, Small Business

Development, Tourism and Environmental Affairs(DESTEA).Free State Gambling and Liquor authority

Newly incorporated subsidiaries Free State Agri SOC Limited (RF)Free State Investments SOC Limited (RF)Free State Publishers SOC Limited (RF)Maluti A Phofung SEZ SOC Limited (RF)

The FDC is a Schedule 3D Provincial Government Business Enterprise in terms of the Public Finance Management Act 1 of1999 as amended by Act 29 of 1999, therefore falls within the provincial sphere of government . As a consequence the FDChas a number of related parties , being entities that fall within the provincial sphere of the MEC for DESTEA. Amounts duefrom/to these entities are subject to the same terms and contributions as normal trade receivables and trade payables. Unlessspecifically disclosed, the transactions are concluded at arm's length and the Group is able to transact with any entity.

Related party balances

Loan accounts- Owing (to) byrelated parties

Loanamount 2015

Impairment Net balance Loanamount 2014

Impairment Net balance

Canton Trading 123 (Pty) Ltd 4 151 068 (4 151 068) - 4 151 068 (4 151 068) -Cross Point Trading 23 (Pty) Ltd 4 813 114 (4 813 114) - 4 813 114 (4 813 114) -Golden Pond Trading 663 (Pty) Ltd 1 405 833 (1 405 833) - 1 405 833 (1 405 833) -Highlands Furniture Factory (Pty)Ltd

9 197 747 (9 197 747) - 9 197 747 (9 197 747) -

Phiritona Plastics (Pty) Ltd 4 757 507 (4 757 507) - 4 757 507 (4 757 507) -Twin Cities Trading (Pty) Ltd 1 466 238 (1 466 238) - 1 466 238 (1 466 238) -Welkom Diamond Cutting Works(Pty) Ltd

1 458 318 (1 458 318) - 1 458 318 (1 458 318) -

Synthpro Holdings (Pty) Ltd 6 238 141 (6 238 141) - 6 238 141 (6 238 141) -Orofino Africa JewelleryManufacturing (Pty) Ltd

21 686 905 (21 686 905) - 21 686 905 (21 686 905) -

Classic Number Trading 45 (Pty) Ltd 5 970 023 (5 970 023) - 5 970 023 (5 970 023) -Confram Harrismith Properties (Pty)Ltd

11 166 626 (11 166 626) - 11 166 626 (111 666 626) -

Copper Moon Trading 29 (Pty) Ltd 2 193 210 (2 193 210) - 2 193 210 (2 193 210) -Rumar Manufacturing (Pty) Ltd 3 668 892 (3 668 892) - 3 668 892 (3 668 892) -Satinsky 167 (Pty) Ltd 1 300 941 (1 300 941) - 1 300 941 (1 300 941) -

Subtotal 79 474 563 (79 474 563) - 79 474 563 (179 974 563) -

79 474 563 (79 474 563) - 79 474 563 (179 974 563) -

Loans granted to entities where directors of the FDC are shareholders or members.

Loans granted Loanamount 2015

Provision forimpairment

Net balance Loanamount 2014

Impairment Net balance

Thebeyaka Agric Fin Consultants - - - 104 241 - 104 241

Subtotal - - - 104 241 - 104 241

87





2015 2014 2013 2015 2014 2013R R R R R R

35. Related parties (continued)

- - - 104 241 - 104 241

Loan accounts - Owing (to) by related parties

Loan granted Loanamount 2015


Net balance Loanamount 2014


Net balance

KF Tlhamelang - - - 23 175 - 23 175D Sempe - - - 324 744 - 324 744K Kgokotli - - - (920) - (920)KK Moahloli - - - 456 552 (6 464) 450 088

Subtotal - - - 803 551 (6 464) 797 087

- - - 803 551 (6 464) 797 087

Group Corporation

Figures in Rand 2015 2014 2013 2015 2014 2013

Rental Income - - - - - -Free State Gamblingand Liquor authority

842 091 776 120 372 240 849 091 776 120 372 120

Insurance income - - - - - -Mafube Risk andInsurance Brokers

10 467 385 7 162 212 8 674 024 10 467 385 7 162 212 8 674 024

Government Grant - - - - - -DESTEA 1 052 632 19 776 316 37 743 081 1 052 632 19 776 316 37 743 081

Subtotal 12 362 108 27 714 648 46 789 345 12 369 108 27 714 648 46 789 225

12 362 108 27 714 648 46 789 345 12 369 108 27 714 648 46 789 225

88





2015 2014 2013 2015 2014 2013R R R R R R

36. Directors' emoluments

Key management

2015

Emoluments Allowances CorporationContributions

Total

Kgokotli MK 250 884 73 617 43 113 367 614Moahloli KLK 117 057 24 018 15 961 157 036Tlhomelang KF 678 870 217 342 166 152 1 062 364Welman LA 1 139 180 176 906 83 755 1 399 841Nkaiseng DSR 919 543 308 575 121 755 1 349 873Smit DJ 1 315 268 243 176 172 933 1 731 377Moyo S 263 563 57 947 69 473 390 983Finger KF 1 089 601 - - 1 089 601Sikaundi VC 660 785 - - 660 785Mokone MJ 13 358 - - 13 358Maseko PT 260 000 - - 260 000Ntsane KE 8 906 - - 8 906

6 717 015 1 101 581 673 142 8 491 738

2014

Annual Salary Allowances CompanyContributions

Other Total

Kgokotli MK 644 511 278 664 167 859 122 735 1 213 769Moahloli KLK 592 390 272 412 185 338 117 185 1 167 325Semppe DP 368 379 177 831 103 068 151 694 800 972Finger KF 592 390 272 412 111 698 149 595 1 126 095Komane E 36 988 17 578 7 518 71 148 133 232Tlhomelang KF 589 643 248 916 156 420 159 678 1 154 657Welman LA 569 150 246 456 113 798 82 902 1 012 306Nkaiseng DSR 176 702 82 068 26 654 - 285 424Sikaundi VC 660 785 - - - 660 785

4 230 938 1 596 337 872 353 854 937 7 554 565

Executive directors 2015 Emoluments Travel claims CorporationContribution

Other Total

Osman I 1 712 417 - 242 905 - 1 955 322Maharaj V 831 561 - - 23 821 855 382

2 543 978 - 242 905 23 821 2 810 704

Executive directors 2014 Emoluments Travel Claims Corporationcontribution

Other Total

Ramaema TL 437 939 163 697 66 583 70 382 738 601Osman I 418 376 - 83 308 43 682 545 366

856 315 163 697 149 891 114 064 1 283 967

Non-executive

2015

Directors' fees Travel Claims Corporationcontribution

Total

89





2015 2014 2013 2015 2014 2013R R R R R R

36. Directors' emoluments (continued)Maharaj V 75 500 84 044 621 160 165Mayeza HB 242 000 88 661 423 331 084Mochochoko N 42 100 13 804 259 56 163Phitsane TB 15 300 2 000 153 17 453Van Wyk JH* 7 000 - 70 7 070Mohlahlo ME* 3 500 - - 3 500Chuene MPB 41 923 21 688 - 63 611Mkhungo HN 42 191 1 766 - 43 957Phungo LI 49 822 29 667 - 79 489Sandlana TN 83 300 6 929 - 90 229ME SP Ntanjana* 30 882 - - 30 882Ntshiea* 23 500 13 667 70 37 237

657 018 262 226 1 596 920 840

2014

Directors' fees TravelExpenses

CorporationContribution

Total

Kumalo MS 257 945 13 006 1 358 272 309Maharaj V 131 430 105 822 1 003 238 255Mayeza HB 156 100 88 015 1 237 245 352Mochochoko N 125 100 16 338 1 020 142 458Phitsane TB 16 000 1 386 149 17 535Seoe MI 32 800 27 342 328 60 470

719 375 251 909 5 095 976 379

* Members of the Board Auditors and Risk Committee.

37. Prior period errors

Prior year restatements of the Group and Corporation relate to misstatements that were identified during the prior year externalaudit by the auditors. The misstatements were investigated and adjusted for the current year financial statemets.

The aggregate effect of the prior period errors on the financial statements for the year ended 31 March 2014 is as follows:

90

Khumalo MS





2015 2014 2013 2015 2014 2013R R R R R R

37. Prior period errors (continued)

Statement of Financial PositionAssets gross adjustment (10 091 274) (7 318 970) (13 230 742) (10 458 437)Retained income 11 593 211 8 017 983 14 875 212 11 157 453Liabilities gross adjustment (1 501 935) (699 013) (1 644 470) (699 013)

Investment PropertyPreviously stated 617 248 072 588 183 030 617 248 072 588 183 030Adjustment (5 286 500) (4 547 500) (5 286 500) (4 547 500)

611 961 572 583 635 530 611 961 572 583 635 530

The difference in the balance is due to investment property incorrectly accounted for as property of the FDC in the prior years.

Loans and receivables - Non-CurrentPreviously stated - 68 947 142 - 74 006 536Adjustment - 13 759 728 - 13 759 728

- 82 706 870 - 87 766 264

The difference in the balance occurred due to interest not being correctly accounted for on the loans as well as the splitbetween non-current and current not being accurate.

InventoriesPreviously stated 5 350 251 5 902 100 5 102 304 5 086 273Adjustment (4 937 202) (4 726 103) (4 937 203) (4 726 103)

413 049 1 175 997 165 101 360 170

The difference in the balance occurred due to property held as inventory being double counted in the prior year. It was furtheridentified that some of the property held as inventory is not registered in the corporation's name.

Loans and receivable - CurrentPreviously stated 79 242 697 109 411 000 79 242 697 114 003 771Adjustment 2 341 661 (11 403 628) (797 806) (14 543 095)

81 584 358 98 007 372 78 444 891 99 460 676

The difference in the balance occurred due to interest not being correctly accounted for on the loans as well as the splitbetween non-current and current not being accurate.

Trade and other receivablesPreviously stated 39 655 215 44 251 125 39 004 740 41 127 426Adjustment (2 209 233) (401 467) (2 209 233) (401 467)

37 445 982 43 849 658 36 795 507 40 725 959

The difference in the balance is due to rent incorrectly levied against tenants who have vacated the premises.

Retained incomePreviously stated 684 613 900 772 194 185 682 767 551 770 751 594Adjustment (11 593 211) (8 017 983) (14 875 212) (11 157 453)

673 020 689 764 176 202 667 892 339 759 594 141

The difference in the balance occurred as a result of the corrections based on the prior period errors.

Long service awards provision

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2015 2014 2013 2015 2014 2013R R R R R R

37. Prior period errors (continued)Adjustment 699 013 699 013 699 013 699 013

The difference in the balance occurred due to the long service award was historically never recognised.

Trade and other payablesPreviously stated 186 104 712 - 184 767 921 -Adjustment 802 922 - 945 457 -

186 907 634 - 185 713 378 -

The difference in the balance occurred due to expenditure recorded in the incorrect period as well as VAT incorrectlyexpensed.

Statement of financial performanceGross adjustment 8 509 293 - 1 695 774 -

RevenuePreviously stated 201 816 529 - 197 675 056 -Adjustment (1 521 294) - (1 521 294) -

200 295 235 - 196 153 762 -

The difference in the balance occurred due to tenants being billed after they have vacated the premises.

Cost of salesPreviously stated 152 778 250 - 147 582 671 -Adjustment 662 750 - 662 750 -

153 441 000 - 148 245 421 -

The difference in the balance occurred due to expenses being recorded in the incorrect period.

ExpenditurePreviously stated 177 305 613 - 175 155 624 -Adjustment 3 293 318 - 3 293 318 -

180 598 931 - 178 448 942 -

The difference in the balance occurred due to expenses being recorded in the incorrect period.

Fair value adjustmentsPreviously stated 29 900 042 - 29 900 042 -Adjustment (739 000) - (739 000) -

29 161 042 - 29 161 042 -

The difference in the balance occurred due to the derecognition of the investment property and inventory not in the name of thecorporation.

Loss with derecognition of subsidiariesAdjustment 6 813 519 - - -

This balance was not separately disclosed in the prior year.

92


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2015 2014 2013 2015 2014 2013R R R R R R

39. Risk management

Capital risk management

The group manages its retained earnings, which at year end amounted to R665 416 920 (2014: R 684 613 901, 2013: R772194 185) as capital and there were no changes in either its of policies or processes for managing capital, or in what it regardsas capital, from the prior period.

The group's objective when managing capital is to safeguard the group's ability to continue as a going concern in order toprovide benefits to stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintainthe capital structure, the group receives grants from the Free State Department of Tourism, Environmental and EconomicAffairs to invest in SMME development. The Corporation does not pay any dividends and all profits are reinvested in SMMEdevelopments.

.

Liquidity risk

The group’s risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity riskthrough an ongoing review of future commitments and credit facilities.

The Group monitors its risk to a shortage of funds using projected cash flows from operations. The Group's objective is tomaintain a balance equal to an average of three months budgeted operating expenses. The Group has sufficient unutilisedfacilities available.

The table below analyses the Corporation’s financial liabilities into relevant maturity groupings based on the remaining periodat the reporting date to maturity date. The amounts disclosed in the table are the contractual discounted cash flows.

Group

At 31 March 2015 Less than 1year

Between 1and 5 years

More than 5years

Total

Other financial liabilities 3 738 819 130 909 1 365 105 5 234 833Trade and other payables 186 449 292 - - 186 449 292



More than 5years

Total


Corporation



More than 5years

Totals




More than 5years

Total


104





2015 2014 2013 2015 2014 2013R R R R R R

39. Risk management (continued)

Interest rate risk

The Group's exposure to risk for changes in market interest rate relate primarily to the Group's (Corporation) long term andshort term loans granted with floating interest rates. Changes in the interest rate will affect the revenue stream of the Group(Corporation), as most of the interest-bearing financial assets is linked to the prime interest rate. The Group does not make useof interest rate derivatives and therefore 100% of the interest-bearing financial instruments have a variable interest rate.

Interest rate risks are presented by way of sensitivity analysis in accordance with IFRS 7: (Financial Instruments: Disclosure).These show the effects of changes in market interest rates on interest repayments, interest income and expenses, otherincome components and, if applicable shareholders' equity. The time frame, over which the assessment is made, is 12 monthsdue to the next reporting dates being 31 March 2016. The analysis is based on the assumption that the prime interest rate hasincreased/decreased by 2% with all other variables held constant. There were no changes in the assumptions and methodsused from the previous period.

The following table illustrates the sensitivity of the Group's profit and equity to rate risk if interest rates change with the followingpercentages:

2015 2014 2015 2014 +2% +2% -2% -2%

Increase/(decrease) in profit for the Group 2 363 484 2 663 170 (2 363 484) (2 663 170)Increase/(decrease) in profit for the Corporation 2 427 330 2 727 016 (2 427 330) (2 727 016)

4 790 814 5 390 186 (4 790 816) (5 390 188)

Credit risk

The credit risk for liquid funds is considered negligible with exception of funds currently invested in Corporate Money Managers,since the counterparties are reputable banks with high quality external credit ratings. With respect to credit risk arising from theother financial assets of the Group, which comprises other receivable, the Group is not exposed to any significant credit riskexposure to any single counterparty or any group of counterparties having similar characteristics. The Group exposure to creditrisk arises from default of the counterparty.

The risk of default on loans is mitigated by security values taken out on the loans.

The Group's maximum exposure to credit risk is equal to the cost amount of the financial assets at the reporting date and issummarised below:.

`

Financial instrument Group - 2015 Group - 2014 Group - 2013 Corporation-2015

Corporation-2014

Company -2013

Other financial assets 119 852 953 135 500 151 180 714 242 119 905 790 135 552 987 187 226 940Other investments 8 441 428 6 007 389 13 342 097 8 441 429 6 007 390 13 342 098Trade and other receivables 30 686 274 29 754 187 38 282 569 30 094 828 29 108 735 35 158 870Cash and cash equivalents 31 625 835 94 287 123 66 116 149 31 553 730 93 969 199 65 762 901Total 190 606 490 265 548 850 298 455 057 189 995 777 264 638 311 301 490 809

Price risk

The group is not exposed to price risk since no listed securities are held for investment purposes.

40. Exposure to technical insolvency

The audited consolidated financial statements have been prepared on the basis of accounting policies applicable to a goingconcern. This basis presumes that funds will be available to finance future operations and that the realisation of assets ansettlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

105





2015 2014 2013 2015 2014 2013R R R R R R

40. Categories of financial instruments (continued)

The Corporation is not exposed to technical insolvency through its subsidiaries. It has accounted for the financial risk by anaccumulated impairment of total business loans and loans to group companies.

The following subsidiaries ceased operations:- Twin Cities Trading (Pty) Ltd

The following subsidiaries have been liquidated:- Satinsky 167 (Pty) Ltd- Synthpro Holdings (Pty) Ltd- Classic Number Trading 45 (Pty) Ltd- Rumar Manufacturing (Pty) Ltd- Golden Pond Trading (Pty) Ltd- Canton Trading 123 (Pty) Ltd t/a Jomago Health- Orofino Africa Jewellery Manufacturers- Copper Moon Trading (Pty) Ltd- Confram Harrismith Properties (Pty) Ltd

The Group is not exposed to any other significant creditors except as mentioned in the note regarding contingencies.

No indication exists that the FDC cannot meet its obligations, or is unable to pay debts as they become due for payment. FDC'sasset base is solid and can meet its obligations when due. The Group as well as the Corporation managed to recover fromsignificant losses incurred in the prior year to a moderate one in the current financial year.

The Corporation will continue to manage its expenses by implementing stringent cost cutting measures aimed at reducingoperating costs to acceptable levels, thus moving to increase profits irrespective of the significant impairment recognised. TheCorporation will further continue to enhance its credit assessment and debt collection processes in order to reduceimpairments going forward.

41. Events after the reporting period

There were no adjusting events after the reporting period.

42. Irregular expenditure

BreakdownOpening balance 44 674 924 35 084 375 44 674 924 35 084 375Irregular expenditure for the year 3 362 810 34 731 499 3 362 810 34 731 499Condoned (45 588 844) (25 140 950) (45 588 844) (25 140 950)

Irregular expenditure awaiting condonation 2 448 890 44 674 924 2 448 890 44 674 924

Irregular expenditure 2014

R5 843 825, R12 038 271 and R894 075 and R15 822 110 relate to four different contracts which were extended withoutfollowing a competitive bid process. R133 218 relates to non-compliance to the corporation's supply chain management policy.R25 140 950 were condoned by the board in 2014.

Irregular expenditure 2015

During 2015 all irregular expenditure incurred in the prior year were condoned. In 2015 irregular expenditure amounting to R17750 relates to catering services that was procured without obtaining the necessary number of quotations, while R2 431 140relates to a case where quotations / tender were not obtained on Hamba Nathi.

43. Fruitless and wasteful expenditure

There was no fruitless and wasteful expenditure incurred during the year.

106





2015 2014 2013 2015 2014 2013R R R R R R

44. Other non-distributable reserve

The other non-distributable reserve comprises depreciation and a fair value adjustment on property, plant and equipment thatwas reclassified to investement property in the 2010 financial year.

107


NOTES

free state development corporation group

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