2011 / 2012 ANNUAL REPORT - FDC · FREE STATE DEVELOPMENT CORPORATION ANNUAL REPORT 2011 / 2012...

A N N U A L R E P O R T

2 0 1 1 / 2 0 1 2

YOUR PARTNER IN DEVELOPMENT

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F R E E S T A T E D E V E L O P M E N T C O R P O R A T I O N A N N U A L R E P O R T 2 0 1 1 / 2 0 1 2

FDC MANDATE 2

SECTION 1: 3

1.1. VISION, MISSION AND GOALS 4

1.2. CORPORATE STRATEGIC OBJECTIVES 5

1.3. HIGH LEVEL STRUCTURE 6

1.4 CHAIRPERSON’S FOREWORD 8

1.5. OVERVIEW BY THE CEO 9

SECTION 2: 11

2. DEPARTMENTAL REPORTS 12

2.1 OficeoftheCEO 12

2.2 CorporateServices 13

2.3 InvestmentPromotionandPropertyManagement 22

2.4 EnterpriseDevelopment 28

2.5 GovernanceReport 29

SECTION 3: 36

3. REPORT ON PREDETERMINED OBJECTIVES 37

SECTION 4: 72

DirectorsReport 76

Audit&RiskCommittees,AuditorsReport&AnnualFinancialStatements 79

C O N T E N T S

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TheFDCActwasamendedtorelectthe incorporationofFIPAaftertheexecutivecommitteedecision.Thisamendment

Actwaspromulgatedandbecameeffectiveasof8June2010.TheActsetsoutthemainobjectsofthecorporationas

follows:

(a) thepromotionanddevelopmentofsmall,mediumandmicroenterprises;

(b) toassistFreeStatebasedsmall,mediumandmicroenterpriseswithfundingbyadvancingloans;

(c) toassistFreeStatebasedsmall,mediumandmicroenterprisesininancialdistress;

(d) toinitiateeconomicempowermentprojectsthatwouldbeneittheFreeState;

(e) topromoteinvestmentinandtradewiththeProvinceandtoidentify,analyse,publicizeandmarketinvestment

andtradeopportunitiesintheprovincialeconomy,insuchmannerandbysuchmeansastheboardofdirectors

mayfromtimetotimedeemappropriate;and

(f) toundertake,attherequestoftheresponsibleMemberorotherstakeholdersoragencies,activitiesforwhich

thenecessaryresourcescanberaisedandwhich,intheopinionoftheboardofdirectors,willcontributetothe

strengtheningoftheprovincialeconomy.

F D C M A N D AT E

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• VISION,MISSIONANDGOALS

• CORPORATESTRATEGICOBJECTIVES

• ORGANISATIONALSTRUCTURE

• CHAIRPERSON’SFOREWORD

• OVERVIEWBYTHECEO

FDC GENERAL INFORMATION

SEC TI ON

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1.1. VISION, MISSION AND GOALS

VisionTo be the development and investment agency of choice in contributing to the

economic growth of the Free State Province

Mission • ToprovidefinancialandbusinesssupportservicestoSMME’sand

Cooperatives

• Toundertakethedevelopmentandmanagementofproperties

• TofacilitateandpromoteinvestmentsandexportsintheFreeState

Province

Goals• TocontributetotheeconomicgrowthoftheFreeStateProvince

throughpropertydevelopmentandmanagement,SMME’sand

Co-operativesdevelopment,investmentpromotionandexport

promotion

• Tobuildasustainableorganisationthatstrivesforbusinessand

servicedeliveryexcellence

1 . FDC GE NERA L INF ORMATI ON

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1.2. CORPORATE STRATEGIC OBJECTIVES

FDChassetthefollowingstrategicobjectives:

• Todevelopandreviewpoliciesandprocedurestoensurecompliancewithalllegislationinordertoachieve

operationaleficiency

• Toachievebusinesssustainability

• Todevelopanorganisationthatpromoteshighperformance,capacitatedstaff,innovativecultureand

harmoniousemployeerelations

• TobuildandmaintainFDC’sinformationmanagementsystemsinordertoenhanceorganisationaleficiency

andintellectualcapability

• ToincreaseandmanagemarketawarenessofFDCserviceofferingsandtheFreeStateasapreferred

businessdestination

• Tocreateaconducivebusinessandeffectivecollaborativeenvironmenttoattractinvestment,promote

exportsanddevelopenterprises

• Todevelop,facilitateandpromoteviableforeignandlocalinvestmentsfortheFreeStateProvince

• Todevelop,manageandexpandpropertyportfoliotoachieveandmaintainsustainabilitythereof

• ToeffectivelydevelopsustainableSMME’sandCooperativesthroughinancialassistance

• ToeffectivelyprovidebusinessdevelopmentsupportservicestoSMME’sandCooperativestoensure

sustainability

• TopromoteandincreasethenumberofexportersfromtheProvince

• Toinancehomeloansforlow/middleincomeearners

• Tofacilitateandproject-manageprovincialsocialinfrastructureproject

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HIGH LEVEL STRUCTURE

Manager:Projects & Infrastructure

BOARD

Company Secretary

Chief Audit Executive

BOARD AUDITChief Executive Oficer

(CEO)

Chief Operations Oficer (COO)

Chief Financial Oficer (CFO)

General Manager:Corporate Services

General Manager:Grow Free State

General Manager:Regional Operations

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FDC FUNCTIONS

• Ofice of the CEO

FocusAreas:StrategicLeadership,LegalSectionandPDMSfunction

• Finance FocusAreas:Finance,SCM,CreditRisk&AssetManagement

• Corporate Services FocusAreas:Marketing&Communication,HR,&IT

• Free State Profects & Infrastructure (FPI) FocusAreas:ProjectFinance&SocialInfrastructure

• Enterprise Free State (EFS) FocusAreas:SMMEandCo-operativesFunding,Aftercare&Export

• Grow Free State (GFS) FocusAreas:IndustrialDevelopmentPropertyManagement&Development,InvestmentPromotion&Portfolio

Investment

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1.4 CHAIRPERSON’SFOREWORDThe Board of Directors of the Free State DevelopmentCorporation have the pleasure of submitting this AnnualReport for theinancialyear2011/2012 to theMemberof the Executive Council for the Department of EconomicDevelopment, Tourism and Environmental Affairs, Ms MMQabathe, as well as the Free State Legislature and theAuditorGeneral.

In his State of the Nation Address at the opening ofparliament, President JG Zuma expressed concern thatunemployment and poverty persisted despite economicgrowthexperiencedinthepast10years.Toaddresstheseconcerns,thepresidentsaidthegovernmenthaddeclared2011ayearofjobcreationthroughmeaningfuleconomictransformationandinclusivegrowth.HealsostressedthattheprogrammesofStateOwnedEnterprisesanddevelopmentinanceinstitutionsshouldalsobemorestronglyalignedtothejobcreationagenda.

The FDC has therefore aligned its programmes tocomplement the job creation agenda of the nationaland provincial government. The corporation has alsoimplementedorganisationalre-designinordertomeettheneedsofthenewstrategicthrustoftheinstitution.

WhiletheFDCwasoriginallyresponsibleforenterpriseandpropertydevelopment,theincorporationoftheinvestmentandexportfacilitationserviceshaspositionedtheFDCasadrivingforcebehindtheeconomicgrowthoftheprovince.This has necessitated striking partnerships with severaldevelopment agencies in order to leverage maximumbeneitsforFreeStateenterprises.

Informal partnerships have been concluded with theIndustrialDevelopmentCorporation(IDC),andtheNationalEmpowerment Fund, while a collaboration agreementwasstruckwiththeTechnologyInnovationAgency(TIA), inaddition toexistingpartnershipswith theSmallEnterpriseDevelopment Agency (SEDA) and business chambers andassociations.

Thiscorporation,incollaborationwiththeFreeStateProvincialgovernment,have identiiedkeysectorswith thepotentialtocontributetotheprovince’seconomicdevelopmentgoals:AgricultureandAgro-processing;BeneiciationofMinerals;

Information and CommunicationTechnology(ICT);Manufacturing;Renewable Energy; BusinessProcess Outsourcing & Off-shoring (BPO&O) and TourismDevelopment.

A number of initiatives intendedto exploit and beneit the valueaddingcapacityof theprovincehavebeenconceptualized.

Details of these importantprojectsareoutlinedintheChiefExecutive’sOverviewofthisReport.

We as the FDC Board wish to extend our most heartfeltthanks to the management and staff of the corporationunder thestewardshipofCEOThusoRamaemaforhittingthegroundrunningundertryingcircumstances.Wewillbetheirsttoacknowledgethatitwasnoteasytoimplementprogrammesthatnecessitatedfar-reachingchanges.

The Board and Management of the FDC are committedto the principles of good corporate governance and ofmaintaining high standards of integrity, accountabilityand transparency in accordance with best practices. ThepositiveevaluationofFDCcompliancepracticesbytheFreeStateTreasurysignalsaneweraforthecorporation.Itisasigniicantmilestone in thepursuitofacleanauditby theBoardofthisinstitution.

It is our expectation as the Board and management thatourstaffwillexceedallourexpectations inpursuitofthecorporation’snoblegoals.

AnevenbiggerthankyougoestotheFreeStateprovincialgovernmentfortheirunstintingsupportfortheFDC.

_________________

MS.HANTSIMAYEZACHAIRPERSON(AssumedOfice20/07/2012)

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1.5.OVERVIEWBYTHECEOTheinancialyear2011/2012shouldberegardedasaperiodwhereadeliberateattemptwasmadebythecorporationtointrospectandobjectivelyreviewinternalbusinessprocesses.

TheperformanceoftheFreeStateDevelopmentCorporationinthepastyearwasinformedbycomprehensiveCorporateStrategicObjectivesthatsetthestageforasigniicantlyimprovedsetofresultsforthecorporation.

Amongtheseobjectiveswasthedeterminationtoachieveoperationaleficiencyandorganisationalsustainability.Thisnecessitatedthedevelopmentandreviewofpoliciesandproceduresaswellasthesharpeningofthecorporategovernanceenvironment.

TheFreeStateTreasuryhasinalisedandissuedareportofitsevaluationoftheFDC’scompliancewith its Key Performance Indicators in line with the Public Finance Management Act (PFMA),TreasuryRegulationsandPublicSectorRiskManagementFramework.

TheFDC’sRiskManagementunithasachieved75%complianceascomparedto18%inMarch2011.TheRiskManagementCommitteehasachieved83%compliancecomparedto81%inSeptember2011.OnSupplyChainManagement,AssetManagementandInformationTechnologytheFDCachieved89%ineach,and85%inFraudManagement.

TheseresultsservedasaspringboardtowardtheFDC’sgoalofacleanauditbytheyear2014;atargetsetbytheFreeStateprovincialgovernmentforallprovincialinstitutions.

WehavebeenimpatienttoimplementthePerformanceandDevelopmentManagementSystemintheFDCand,asreportedinmoredetailinthisreport,wearesettoinallyputthiscrucialmechanisminplaceinthe2012/2013inancialyear.

Another important corporate strategic objective is to develop an organisation that promotes high performance whichcapacitatesstaff.AnimportantmilestonethattheFDCissettoachieveintheshorttomediumtermisEmploymentEquity,especiallyasitaffectsfemalerepresentationatseniormanagementlevel.TheFDChasachievedatotalof51%femaleemployeesagainstatargetof53%intheorganisation,and30%atseniormanagementlevelagainstoursettargetof53%.Improvingtheseratiosisakeypriorityforourmanagementteam.

Aprocessoforganisationalredesignisunderwayinordertomeettheneedsofthenewstrategicthrustoftheinstitution.The FDC has also adopted a new strategy for enterprise development, which focuses on incubation, emphasise skillstransfer,assistwithmarketingandpromoteexports.Thecorporationwillonlyfund,goingforward,crediblebusinessesthathavethepotentialtomakeameaningfuleconomicimpact.

Duringthe2011/2012inancialyear,thecorporationwasabletospend17%oftheloansbudgetwithmostapplicationsstillunderconsideration.Therewasasigniicantdeclineinapplicationsforinancialsupport,notablyamongbridgingloanclients.

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TheFDChasnotmadeprovisionforbusinessdevelopmentsupportasinformedbythecorporation’snewstrategicthrust.Businessesthatneeddevelopmentsupportwillbereferredtoother,specialistpublicentitieslikeSEDA.DuringthenextinancialyeartheFDCwillcollaboratewiththesespecialistinstitutionsaswellasotherdevelopmentinanceinstitutionstoaccelerateenterprisegrowthandensuresustainabilityforenterpriseswhichhavethepotentialtocontributetotheeconomicgrowthoftheFreeState.

ThiscorporationisontracktoplayanincreasinglyprominentroleintheprovincethroughthepromotionofFDC’sserviceofferingsandtheFreeStateasapreferredbusinessdestination.Ascapturedmoresuccinctlyinthelatersectionsofthisannualreport,someoftheaimsofFDCprogrammesincludegraduatingenterprisesintoexporters.

FeasibilitystudiesandbusinessplansfortheestablishmentoftheFoodProcessingParkandtheVehicleDistributionCentre,bothinHarrismith,andaPotatoCrispManufacturingproject,alsointheThaboMofutsanyanedistrict,havebeencompletedandprocessesareunderwaytoinalisetheseventures.Theglobaleconomicdownturnintheprecedingyearshassigniicantlyaffectedanddelayed,albeittemporarily,theparticipationofpotentialinvestorsintothesegreenieldprojects.

TheFDCisintheprocessofstreamliningitssubstantialpropertyportfoliowhichisfacedwithchallengesoflocationandage.TheCorporationwill,therefore,beoff-loadingthosepropertieswhicharealiabilitytotheFDC,suchasvacantlandandnon-viablecommercialandindustrialpropertiesinareasexperiencingminimaleconomicactivityandgrowth.TheFDCmayinvestinthepropertymarketinareasthathavethepotentialforgrowth.

Theexpandedmandateoftheorganisation,especiallyinsocialinfrastructure,presentsopportunitiesfortheFDCtoventureintootherareasofpropertydevelopment.

Thecorporation’slegalstatusmayallowittoexploreotherfundingmodelsinordertoacceleratekeyoutputsinpursuitofthenationalandprovincialgrowthplan.

_____________________

TL RAMAEMA

CHIEF EXECUTIVE OFFICER

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SEC TI ONDEPARTMENTAL REPORTS

• OFFICEOFTHECEO- CorporateSecretariat

• BUSINESSSUPPORT- HumanResources- InformationTechnology- MarketingandCorporateCommunications

• INVESTMENTPROMOTIONANDPROPERTY MANAGEMENT

- InvestmentPromotion- PropertyPortfolioManagement

• ENTERPRISEDEVELOPMENT- SMME’sandCo-operativesLoanFunding- ExportPromotion

• GOVERNANCEREPORT- RiskManagementReport

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2. DEPAR TMENTAL REPOR TS

2.1 OFFICE OF THE CEO

2.1.1. Corporate SecretariatThe Corporate Secretary provides support and guidance to the Board in matters relating to governance as well aslegislativeandregulatoryrequirements.

a) Overview of the Performance of the Unit

DuringtheyearunderreviewtheCorporateSecretariatcontinuedwiththeimplementationofitsexistingobjectives.

Theseare,inter alia,thefollowing:

• CorporateGovernanceprincipleshavebeendevelopedandimplementedintermsoftheIODSAToolkit.• ACorporateGovernanceManualhasbeendevelopedandimplemented.• TheAnnualYearPlannerfortheBoardanditsCommitteeshasbeendeveloped.• Anup-to-dateMinuteResolutionsRegisterhasbeendeveloped.• Anup-to-dateAnnualDeclarationofInterestsRegisterhasbeendeveloped.• ARemunerationReportforBoardMembersisinplace.• Anup-to-dateRegisterforOriginalBoardPackshasbeendeveloped.• AreviewofBoardandBoardCommitteeChartersisundertakenannually.

b) Strategic Issues for Reporting

• Plansareunderwaytohaveanelectronicdocumentmanagementsysteminstalled.• ThissystemwouldenabletheSecretariat,asthecustodianofthecorporation’srecords,tohaveareliable, eficientandeffectiverecord-keepingfacilitywhichwouldenabletheunittokeepandtracedocuments.• InstallationofanelectronicBluePrintBoardpack,whichisanelectronic,paperlessBoardpack.The implementationofthesystemwouldattracthugeinancialimplications,butisvalueformoneyinthelongterm.• ThedevelopmentofaStatutoryComplianceChecklistisanecessarytooltobeconsideredforimplementation bytheunit.

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2.2 CORPORATE SERVICES

2.2.1 Human Resources

a) Staff Complement

At theendofMarch2012, theCorporation’s staff complement stoodat118 (116 -permanentand2 - Fixed TermContract)employees,comparedtoastaffcomplementof122(121-Permanentand1-FixedTermContract)employeesatthebeginningoftheinancialyear(01April2011).

Duringthereportingperiodlabourturnoverwas4.13%.

Twocriticalappointmentsweremade,namely thatof theChiefExecutiveOficer (FixedTermContract)andCompanySecretary(Permanent).

b) Employment Equity

TheBoardsetthefollowingemploymentequitytargetsfortheinancialyear:

• DesignatedgroupsfortheentireCorporation: 90%• FemalesfortheentireCorporation: 53%• FemalesinpositionsgradedP8andabove: 44%

AttheendofMarch2012,theCorporationhadexceededthetargetof90%designatedgroupsby1.53%fortheentireCorporation,whichstoodat91.53%.

Therearestillshortcomingsregardingtheachievementoffemaletargetsinallareasoftheplanwhichstoodat50.85%(2.15%belowtarget)oftotalfemalesand29.87%(14.13%belowtarget)offemalesinpositionsgradedP8andabove(totalmanagerialpositions),butseriouseffortsarebeingmadetoaddresstheshortcomings.

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TheemploymentequityiguresasattheendofMarch2012wereasfollows:

Table 1: Employment Equity (females and designated groups)

Table 2: Breakdown of actual composition by broad employment levels

Designatedgroups

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

FemalesinFDC Femalesin+P8

Target

Actual

53.0%

44%50.9%

29.87%

90.0% 91.5%

Total

Gender

Female

Male

Race

African

Asian

Colored

White

Disabled

Target

50%

50%

-

Senior

Management

P1-P5 Actual

21

6(28.57%)

15(71.43)

19(90.47%)

-

-

2(9.53%)

-

Middle

Management

P6-P8 Actual

56

17(30.35%)

39(69.65%)

52(92.85%)

-

-

4(7.15%)

2

Total

Management

P1-P8 Actual

77

23(29.87%)

54(70.13%)

71(92.20%)

-

-

6(7.80%)

Administrative,

Clerical and

Support Staff

P9-P12 Actual

41

37(90.25%)

4(9.75%)

35(85.36%)

-

2(4.87%)

4(9.77%)

-

Total

118 (100%)

60(50.85%)

58(49.15%)

106(89.83%)

-

2(1.70%)

10(8.47%)

2(1.70%)

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c) Training and Development

AsrequiredbytheSkillsDevelopmentLeviesAct,theFDCbudgetedR1189672(1%ofthepayroll)totrainanddevelopemployees.Thefollowingtrainingprogrammeswereattendedbyemployees:

Table 3: Training conducted for the 2011-2012 inancial year

CertiiedInternationalProjectManager

Remunerationconference

FirstAidTraining

27thSouthAfricanLabourLawSeminar

GovernanceforAfrica

SARSCapacitationSession

Training attended Number of employees

1

1

10

1

1

1

Oficials who attendedInvestmentpromotionmanager

HRManager

AllOccupationalHealthandSafetyRepresentatives/CommitteeMembers

GM:CorporateServices

ChiefAuditExecutive

HRAdministrator

d) Industrial Relations

i. Disciplinary Hearings

Two(2)DisciplinaryEnquiriestookplaceandbothwereresolvedinternallywithoutreferraltoexternal conciliation/mediation.

Twoemployeesweresuspendedformisconductandtheirdisciplinaryenquiriesareinprogressover- lappingintothe2012/13reportingperiod.

ii. Grievances

Two(2)formalGrievanceswerelodgedandone(1)wasresolvedduringtheinancialyear.Thesecond grievancewasreferredtotheCCMAbytheemployeeandthematterwasresolved.

iii. External Disputes

WagenegotiationsweredeadlockedandthematterwasreferredtotheCCMAformediation.A settlementwasreachedattheirstconciliationmeeting.

iv. Industrial Action

Noindustrialactiontookplaceduringtheinancialyear.

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Table 4: Union and Membership

e) Challenges and Responses

i. Non-implementationofWorkplaceSkillsPlan(WSP): TheWSPwasnotimplementedduetoresourceconstraints,althoughitwasbudgetedfor.

ii. Out-datedHumanResourcesPoliciesandProcedures: Thepolicieswerereviewedandupdatedinconsultationwithallstakeholdersinordertoalignthemwith changesinlabourlegislation.TheyweresubsequentlysubmittedtotheBoard,afterconsiderationand recommendationforapprovalbytheBoardHumanResourcesRemunerationCommittee.

iii. ImplementationofPerformanceManagementSystem: Thepolicywasdevelopedandallstakeholderswereconsultedonthepolicy.Thecorporationisinthe processofappointingaprofessionalserviceprovidertoimplementaweb-basedevaluationand monitoringsystemtobelinkedtoperformanceagreements.

2.2.2 Information Technology

ITExecutiveSummary:

SigniicantprogresswasmadeduringthepastyearonimplementingandupdatingtheITgovernanceframeworkofFDC.Theapprovedpoliciescovereddisasterrecovery,security,backups,changecontrolandprovisionofservices. AmajorprojectundertakenandsuccessfullydeliveredbytheITdepartmentwastherelocationofHeadOficeserverroomtonewpremises.Thisprojectalsoincludedthebuildingofanewnetworkbackboneforbetterdataservicedelivery.

Highendpointsecurityforuserswasmaintainedduringtheyear.Thisresultedinnobreachesofsecurityorlossofdataduetovirusoutbreaksormalware.

Theoperationalcostof thedepartmentwaskept lowby thecreativeuseofopensourcesolutionsandremotecontroltechnologies.

Members April 2011 % March 2012 %

NEHAWU 95 78% 94 80%

Non-Union 27 22% 24 20%

Total 122 100% 118 100%

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Someofthechallengesfacedduringtheyearincluded:

• ThenewapprovedITdepartmentstructurewasnotilled.• Extendingtheusefullifeofageingequipmentwithlimitedresources.• Copingwitheconomicconstraintsandchangesinoperationalbusinessfocus.

Duringthe2012/13inancialyearthedepartmentwillbefocusingonupgradingandreplacingoutdatedtechnologyonthephysicalnetworklevel.Anotherfocusareawillbetoimplementvirtualizedtechnologyasameansofcostsavingandtoincreaseeficientuseofresources.

2.2.3 Marketing and Corporate Communications

TheMarketingandCorporateCommunicationsDepartmentisresponsibleforthepositioning,brandingandmarketingoftheFDCanditsserviceofferings,theFreeStateasabusinessdestinationaswellasitstradeandinvestmentopportunities.

WiththeFreeStateDevelopmentCorporation’sexpandedmandateitbecameimperativetore-positionthecorporationandincreaseawarenessofthenewFDCserviceofferings.Thisnecessitatedthedevelopmentofacomprehensivemarketingandcommunicationsstrategyforthecorporation.

MarketingandCorporateCommunicationsactivitiesundertakenduringtheperiodunderreviewinclude:

i. Marketing Tools/ Publications

Thefollowingmarketingtoolsandpublicationsweredeveloped:

FDCServicesbrochure(SMMEbrochure)

FreeStateAgricultureandAgroprocessingbrochure

DoingBusinessintheFreeStatepublication(inpartnershipwithGlobalAfricaNetwork)

Banners

FDCFolders

ii. Media Activities

TheMarketingandCommunicationsDepartmentwasactiveindevelopingmediastatementsandplacingadvertorialsinnewspapersandpublicationsinordertoraiseawarenessoftheFDCservices,itsactivitiesandthebusinessopportunitiesavailable in the Free State Province. Editorial content was also provided for a number of provincial speeches andpublications.

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Thefollowingtableindicatesthebroadcast,printandon-linecommunicationschannelsutilisedduring2010/11

FDC contributed articles for an on-line electronic newsletter TradeInvestSA, for a 12 month period where Free Stateinvestmentopportunitieswerepromoted.Duringtheperiodunderreviewatotalofonehundredandsix(106)enquirieswerereceivedelectronically.Alargenumberoftelephonicenquireswerealsoreceivedasaresultoftheseon-linearticles.

InternalcommunicationwasimprovedwithregulararticlesandannouncementsbeingplacedontheFDCintranet.

iii. Advertising

Thedevelopmentofanadvertisingawarenesscampaignwaspostponedduetothepossiblere-brandingofFDC.

iv. Events

ThedepartmentdevelopedanannualeventscalendarandthecorporationparticipatedinandorganizedanumberofeventsenablingfurtherpromotionoftheFDC,itsservices,andFreeStateopportunities.

Broadcast(Radio)

Print(Newspapers)

Print(Publications)

OnlineElectronicNewsletter

ElectronicBillboard-TriStarPOD

OFM,LesediFM,QwaqwaRadio,MotheoFM

FreeStateBusinessBulletin,Volksblad&VolksbladBulletin,TheWeekly,Express,BusinessDay,NewAge,PublicEye

NewEuropeanEconomy

ProfessionalManagementReview(PMR)

SANECDirectory

NewAgenda

SABusiness

SawubonaMagazine

TradeInvestSAx12

DigitalbillboardadvertisingatO.R.TamboAirport(Destination,InvestmentandProperty)

Media Type Medium

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Event Name

Kraftpaperfactory

AsiaOutboundMission

SANEC/FDC

DTI/SEDA/FDCWorkshop

SAITEX/AFRICA BIG SEVEN

OpportunityAfricanConvention

DECOREX

BCCISMMEWorkshop

FDC/TIA MOU

UnitedNationsProcurementWorkshop

KraftPaperMillDelegation

SustainableTransport&MobilityConference

Transnet/DETEAMOU

IndonesianInwarddelegation/Exhibition

SMMEWorkshop(ThaboMofutsanyana)

SMMEWorkshop(Motheo)

FloridaUSAInwardMission

JiangxiProvinceInwardMission

BrandSAWorkshop/Training

DevelopmentFundingandSupport

SARCDA

SeminarMotheo

Co-operativesBusinessBreakfastMotheo

Event Type

Launch

OutboundMission

SigningofMOU–MediaEvent

ExportAwarenessWorkshop

Exhibition(Export)

Conference&Exhibition

Exhibition(Trade)

Workshop

SigningofMOU–MediaEvent

ExportWorkshop

Inwarddelegation

Conference&Exhibition

SigningofMOU–Mediaevent

Exhibition

Workshop

Workshop

InwardMission

InwardMission

Workshop

InformationWorkshop

Exhibition(Trade)

BusinessBreakfast

ServicesPresentation

Date

21stApril2011

12th-22ndApril2011

13thMay2011

27thMay2011

17th-19thJuly2011

27th-28thJuly2011

5th-9thAugust2011

19thAugust2011

29thAugust2011

2ndSeptember2011

6thSeptember2011

20th-21stSeptember2011

2ndSeptember2011

17thOctober2011

1stOctober2011

5thNovember2011

6thNovember2011

12thNovember2011

17th/18thNovember2011

2ndFebruary2012

8th-11thFebruary2012

25thFebruary2012

24th-25thFebruary2012

Inaddition,theFDCtookpartinthemonthlyBloemfonteinChamberofCommerceandIndustries(BCCI)NetworkingsessionsandotherrelevantbusinessrelatedeventsorganisedbytheChamber.

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v. Partnerships

TheFreeStateDevelopmentCorporationfacilitatedanumberofcollaborativepartnershipswithkeystakeholdersintheprivateandpublicsectorinanefforttoleveragekeypartneractivities.

Fortheyearunderreview,thefollowingcollaborativepartnershipswereinitiatedandarebeingimplemented.

FDCandtheSouthAfricaNetherlandsChamberofCommerce(SANEC).

The MOU signed between the FDC and the Netherlands Chamber of Commerce was conceived with the intention ofpromotingbilateraltrade,exploringinvestmentopportunitiesandthetransferoftechnology,servicesandproductsbetweentheFreeStateProvinceandtheNetherlands.

FDCandtheSouthAfricaNetherlandsChamberofCommerce(SANEC)

The MOU signed between the FDC and the Netherlands Chamber of Commerce was conceived with the intention ofpromotingbilateraltrade,exploringinvestmentopportunitiesandthetransferoftechnology,servicesandproductsbetweentheFreeStateProvinceandtheNetherlands.

FDCandTechnologyInnovationAgency(TIA)

TheobjectiveofthisMOUistoestablishaworkingrelationshipbetweenTIAandtheFDCandtosetoutthemechanismsfortheimplementationandmonitoringofthisrelationship.TheMOUwillenablebothorganisationstojointlyundertakeinitiativestopromoteacultureofinnovationintheFreeState,andplacetheFreeStateinthenationalinnovationlandscape.

DETEAandTransnet(facilitatedbyFDC)

TheDepartmentofEconomicDevelopment,TourismandEnvironmentalAffairsandTRANSNETFreightRailsignedanMOUwiththeintentionofestablishingfreighthubsintheFreeState,takingadvantageofexistingbranchlines.TheFDChasbeentaskedwiththejobofimplementingthisMOU.

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vi. Awareness Survey

AnawarenesssurveytomeasureboththebrandawarenessoftheFDCandtheawarenesswasallofFDCservicesandproductswasconductedduringtheperiodunderreview.Theinalresultsofthissurveyareasfollows:

TotalAwarenessoftheFDCbrand 57.9%

AwarenessofFDCServicesandIndividualProducts 14.77%

Theintentionistoincreasetheawarenessonanannualbasisthroughmarketingandcommunicationsactivitiesaswellasanintensivemarketingawarenesscampaign.

The Way Forward

• Inordertore-positiontheFDCandtoincreaseawarenessoftheFDCbrandanditsserviceofferings,an

intensivemarketingcampaignwillbeconducted.

• StakeholderRelationswillbeimprovedthroughthedevelopmentandimplementationofastakeholder

relationsmanagementstrategyandplan.

• Bestpracticeactivitiesforinvestmentandexportpromotionneedtobeincreased

• Communicationactivitieswillbeincreased

• DuetotheinabilityforFDCtoi)fullymeasuremediaexposureandii)toreacttimeouslytonegativearticlesin

themedia,amediamonitoringsystemwillbeinvestigatedandimplemented.

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2.3 INVESTMENTPROMOTIONANDPROPERTY MANAGEMENT

2.3.1 Investment Promotion

ThepurposeofInvestmentPromotionDepartmentistopackage,facilitate,promote,andprovideaftercareofinvestmentopportunitiesintheFreeState.Duringthe2011-2012inancialyear,theinvestmentpromotionunitfocusedonthefollowingfoursectorstopromoteinvestmentintheprovince,namely;resources,services,manufacturingandrenewableenergy.

a) Investment Projects:

ThecurrentFDCprojectpipelineincreasedfromR850min2010/2011tooverR1,3BillionbytheendofMarch2012.Thenumberofprojectsbeingpromotedhaddecreasedfrom9projectsto7projectsinNovember2011whentheKraftPaperandOdendaalsrusPoultryprojectsweretransferredtotheHighImpactProjectsunitoftheDepartmentofEconomicDevelopment,Tourism&EnvironmentalAffairs(DETEA).

Inthe2011-2012inancialyear,detailedfeasibilitystudiesandbusinessplanswerecompletedfortheFoodProcessingPark,VehicleDistributionCentreandPotatoCrispManufacturingprojectswhichwereconceptualisedinthe2010-2011inancialyear.Expressionsofinterestwerereceivedforallthesethreeprojects,whichwerecontinuouslypromotedinvariousplatformsinthecurrentinancialyear.TheFDCiscommittedtoconvertingpipelineprojectsintotangibleinvestmentsinthenextinancialyear.Anumberofleadsarecurrentlybeingscreenedandnegotiatedwithprospectiveinvestors.

The portfolio of projects that the FDC is facilitating are mainly green-ields, which require signiicant developmentalinterventionsbeforeactualcommitmentscanbeundertakenbyinvestors.Duetothedificultbusinessoperatingenvironment,someinvestorsarecurrentlyreviewingearlierinvestmentdecisions.TheapprovalsofnewdevelopmentplansandproposalsiscentralisedthroughFreeStateTownshipBoard,exceptforMangaungMetropolitanMunicipality.AllthesefactorshaveanegativeimpactontheabilityofFDCtospeedilyconvertpipelineprojectstocommittedinvestments.

Itmustbenotedthatinadditiontothat,theinvestmentunitoftheFDCwasunabletoimplementFreeStateinvestmentpromotional plans due to budgetary and capacity constraints. Currently the unit comprises of 2 x personnel and anAdministrationOficer.

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Project

1. Food Processing Park, Industriqwa, Harrismith, Thabo Mofutsanyana

2. Vehicle Distribution Centre, Industriqwa, Harrismith, Thabo Mofutsanyana

3. Parts & Accessories Centre, Industriqwa, Harrismith, Thabo Mofutsanyana

4. The proposed Xhariep Solar Hub, Xhariep District

5. Mangaung Bio-Medical Park (N8 Corridor, Bloemfontein)

Project Rand

Value /

Estimate

R226m

R200m

R100m

R850m

R400m

No. of Jobs

estimated

626Jobs

80Jobs

50jobs

240jobs

120jobs

Implementing

Agent /

Facilitator

FDCandkeyidentiiedpartners





Description of Project

Thebuildingofaworldclassfoodprocessingparkintendedtohostanumberofcompaniesinthefoodprocessingsector.Thisparkwouldbeanintegratedfoodprocessingparkprovidingforlogisticsserviceproviders,warehousing,coldstorageandmanufacturingfacilitiestoenhanceproductioneficiencies.

ThisprojectisintendedtopositionHarrismithasaVehicleDistributionCentre(VDC).StudiesbylogisticsintegrationserviceprovidershaveindicatedthatFreeStatehasthebestpotentialtobeawarehousingandlogisticscentreduetoitsproximitytoGautengmarketsandlinksthroughN3toDurbanPortandCoegaPortthroughN1andN6.

ThisprojectisintendedtopositionHarrismithasaVehicleParts&AccessoriesDistributionCentretosupplytheaftersalesmarket.ToattractautomobilepartsmanufacturersandimporterslocateintheVDC.

ThisprojectisintendedtoharnesstheexcellentsolarradiationinSouthernFreeStatethatissuitableforthedeploymentofsolarpowergenerationtechnologies.(Solargenerationplants,thebusinesspark,manufacturingpark,research&development,andtechnologydemonstration).Theplanistoestablish250MWsolarhubwithanoptiontoexpanditto1GW.

Todevelopaworldclass-bio-medicalfacilitydesignedtohostmedicalbiotechnologyresearchcompanies,pharmaceuticalcompaniesandtheUniversityofFreeStatebio-technologyandmedicalresearchteammigratingresearchpatentsintocommercialmedicalsolutions.

b) Investment Project Pipeline 2011-2012:

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Project

6. Mangaung SEZ (Special Economic Zone)

7. Eastern Free State SEZ (Special Economic Zone)

Project Rand

Value /

Estimate

No. of Jobs

estimated

Implementing

Agent /

Facilitator

FreeStateprovincialgovernment,MangaungLocalMunicipalitytheDTI

FreeStateprovincialgovernment,MangaungLocalMunicipalitytheDTI

Description of Project

ThisprojectisintendedtopositionMangaungasamanufacturinghubbyestablishingapurposebuiltindustrialestatewithacontrolledcustomsarea.Thisprojectisintendedtotakeadvantageofexistingindustrialcapacity,promoteintegrationwithlocalindustryandincreasevalue-addedproduction.TheproposedMangaungSEZisintendedtoenhanceindustrialisation,particularlymanufacturing,andtoserveasacatalysttounlockeconomicpotentialwithintheN8Corridor.ThisprojecthasthepotentialtoenhancetheattractivenessofMangaungMetroasaninvestmentdestination.ThisproposedSEZisintendedtohostmanufacturingclustersinpharmaceuticals,metalfabrication,whitegoodssectorandagro-processing.

ThisprojectisintendedtopositionEasternFreeStateasamanufacturinghubbyestablishingapurposebuiltindustrialestatewithacontrolledcustomsarea.Thisprojectisintendedtotakeadvantageofexistingindustrialcapacity,promoteintegrationwithlocalindustryandincreasevalue-addedproduction.TheproposedEasternFreeStateSEZisintendedtocomplementtheHarrismithLogisticsHubthatisbeingdevelopedinthearea.ThisprojectisdevelopedaspartoftheDurban–GautengCorridor.Targetedsectorsincludelogisticsintegrationhubs,fertilisermanufacturing,automotivepartsandcomponentsmanufacturing,foodprocessingandsolarenergygenerationplants.

Tobeestimatedatfeasibility


R 1,8 Billion



Total

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c) Investment Missions:

FDCusesplatformssuchasinboundandoutboundtradeandinvestmentmissionsasoneoftheeffectivetoolsforpromotinginvestmentopportunitiesintheFreeState.

d) Inbound and Outbound Mission

Duringtheyearunderreview,theFDChostedfactindingmissions,businessmeetingsanddelegationstoandfromdifferentcountries:

Delegation Focus

TopromoteFreeStatetradeandinvestmentopportunities

PromotingvariousFreeStatetradeandinvestmentofferings

TopromoteFreeStatetradeandinvestmentopportunities

ToconductinvestmentlocationassessmentwithintheN8Corridor

Country

Indonesia,MalaysiaandSingapore

HosteddelegationsfromvariousAfricanandAsiancountries,Bloemfontein.

India,IndonesiaandTaiwan

VeroLubbefromCanada

Date

12thto22ndofApril2011

15July2011

11thto22ndofOctober2011

27January2012and20thofMarch2012

OUTCOME

Receivedleadsonthefollowingpotentialopportunities:-• CollaborationwiththeIndonesianCentrefor FurnitureManufacturingtoestablishanincubation programmeforfurnituremanufacturing• JointfeasibilitystudywithMultistradatoinvestigate thepossibilityofsettingupatyremanufacturing plantinHarrismith,• Exportleadsforwheat,oil,sugar,dates,dryand cannedcereal,juices,frozenfoods,tinnedvegetables andfruits

• FreeStatetrade&investmentofferingswere forwardedtothemandtheyindicatedthatthe provinceshouldworktogetherwithDIRCO (DepartmentofForeignRelationsEconomic DiplomacyDesk).

Receivedleadsonthefollowingpotentialopportunities:-• Technicalsupportforthelatexcondommanufacturing plant,• Scraptyrerecyclingplant,• LEDlightmanufacturingplant

• VEROLubbeexpressedinteresttoset-upand operatedausedoilpuriicationplantin BloemfonteinandtheaquaponicsparkinThabaNchu,• Conducteddetailedfactoryassessmentin ThabaNchufortheproposedaquaponicsprojects andFDCprovidedVeroLubbeandVGBFoodswith detailedfactorylayout.

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2.3.2 Property Portfolio Management

a) Properties

ThepropertymanagementunitfocusesmainlyonpropertyandfacilitiesmanagementofcommercialpropertiessituatedintheMotheoandThaboMofutsanyanedistricts.Thecorporationownsa800000m²portfoliothatincludesindustrialestates,retailandcommercialpremises,andahousingportfolioofmorethan400units.TheFDCpropertyportfolioisaleadingagentforstimulatingeconomicdevelopmentintheProvince.

b) Industrial Development

Duringtheyearunderreviewindustrialareasshowedaslightdecreaseinoccupancy,withanaverageofaround73%.TheloweroccupancycanbeattributedtocompetingtextileimportsfromtheFarEastandlegalprocessesimplementedbyvariousBargainingCouncilsagainstemployersnotpayingdeterminedwagerates.

TheTshiameindustrialarearemainsverypopularandmaintainsanoccupancyrateofmorethan92%.Thelogisticshub,foodprocessingandvehicledistributionparksplannedfortheHarrismithareamaycontributetothefutureexpansionofnewsectorsinthearea.

TheFDCpropertyportfoliosupportsapproximately10000permanentjobopportunitiesintheprovinceandtheaimistocreatemoresustainablejobswithtechnology-driveninvestments,especiallyinthesolarandphotovoltaicsectors.

OCCUPANCY RATES – 31 MARCH 2012

Industrial Commercial Residential

Botshabelo 90,42% 95,57% 57%

ThabaNchu 39,09% 27,43% 99,00%

Phuthaditjhaba 69,54% 86,35% 74,64%

Industriqwa 92,24% 58,89% -

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FINANCIAL PERFORMANCE

Income

DuringtheperiodunderreviewtheannualrentalincomeamountedtoR61378729forthecorporationandR60763129forthegroup,fromthestreamscapturedbelow:

64%

29%

7%

Industrial

Commercial

Residential

Cleaning

Rates

Sanitation

Levies

Security

Maintanance

Fireequipment

23%

38%

4% 8%

1%1%

25%

Expenses

RentalexpensesforthecorporationamountedtoR44494884andforthegroupR44641753andcanbebrokendownasdepictedbelow:

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2.4 ENTERPRISE DEVELOPMENT

2.4.1 SMME’s and Co-operatives Loan Funding/Export Promotion

EnterpriseDevelopment isaprogrammemadeupof twoof thecorebusinessunitsof thecorporation inSMME’sandCooperativesaswellasExportPromotion.TheSMME’sandCooperatives’functionistoprovideinancialandnon-inancialassistancetoSMME’sandCooperatives.TheExportPromotionfunctionassistslocalcompaniestopromotetheirproductsnationallyandinternationally.TheEnterpriseDevelopmentProgrammethussupportsoverallobjectivesofthegovernmentrelatingtoeconomicdevelopment,jobcreationandpovertyalleviation.

During the 2011/12 inancial year, the enterprise development unit’s performance was constrained mainly by theorganisational restructuringprocesses in the FDC. The restructuringwas carriedout to improveeficiencies in order toachievequickerturnaroundtimesinrespondingtoloanapplicationsandotherenterprisedevelopmentactivities.WhiletherestructuringhadanimpactontheturnaroundtimesfortheFDC’sresponsestoapplications,manyapplicationsreceivedremainedunderinvestigationduetoincompleteness.

During2011/12,thecorporationwasabletospend17%oftheloansbudgetwithmostapplicationsstillunderinvestigation.Thecorporationexperiencedasteepdeclineinloanapplicationsduringtheinancialyearwiththemostaffectedbeingthebridgingloanapplications.Asaresultofthefewerloanapplicationsreceived,districtoficesconcentratedonparticipatinginoutreachprogrammestocreateawarenessofthecorporation’sSMMEsupportservicesthatincludeinancialsupport.Duringthelastquarteroftheinancialyear,thecorporationstartedfocusingonbuildingrelationswithotherDevelopmentFinancingInstitutionsoperatingintheProvincetostrengthenenterprisedevelopmentsupportintheProvince.

Aspartofrestructuringofprocesses,theFDCisreviewingitsbusinessdevelopmentsupportapproach.TheaimistoassistthoseentrepreneursthatrequirebusinessdevelopmentsupporttobestexploitservicesalreadyofferedbyotherpublicentitiessuchasSEDA.

DuringthenextinancialyearthecorporationwillstartusingcollaborationwithkeystakeholdersasalevertoachieveenterprisedevelopmentgoalsintheProvince.

UndertheExportPromotionProgramme,thecorporationwasabletoassist21localcompanies to promote their products at various trade exhibitions the corporationparticipated in.FreeStatecompanieswereassistedwithparticipationatSAITEX/Africa Big7, DECOREX and SARCDA. These areannual international trade events organised in SouthAfrica that provide companies that participate withthe opportunity to exhibit their products to potentialbuyers.

As part of the corporation’s restructuring, districtoficeswillbeofferingexport facilitation services tobusinessesintheirrespectivedistricts.Theaimistotakeservices closer to the localbusinesses for the FDC tobeabletocreateexportopportunitiesawarenessthatwouldhelpinincreasingthenumberofexportersintheProvince.Focuswillalsobeoncontinuedcollaborationwithkeystakeholderstoachievethisobjective.

TheFDChasalsostartedworkingcloselywithmoredivisionsoftheDepartmentofTradeandIndustry(thedti)toleverageonallresourcesavailabletopromoteenterprisedevelopmentintheProvince.Theseincludeareasdealingwithincentivesandinternationaltrade,especiallywithinSADCregion.

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2.5 GOVERNANCE REPORT

2.5.1 Board and Board Committees

TheFreeStateDevelopmentCorporation(FDC) iscommittedtotheprinciplesofopenness, integrityandaccountabilityandcontinuallyreviewsitsprocessestoensurecompliancewithKingIIIReportonCorporateGovernanceandProtocolonCorporateGovernanceinthePublicSector.

The Board was established to provide strategic support, operational guidance and advice to FDC management. On14September2010theMECforEconomicDevelopment,TourismandEnvironmentalAffairsappointedtheFDC’sBoardofDirectors,justbeforethecommencementofthe2010-2011inancialyear.TheBoardwasmadeupofmemberswithdiverseskillsandsectorinsightwithwhichtoprovideleadershiptotheprovince’sdevelopmentinitiatives.TheBoard,underthestewardshipofMsSibongileMazibuko,metive(5)timesduringtheinancialyearunderreview.

TheBoard,inexecutingitsiduciaryresponsibilities,actsinaccordancewithlegalprovisionsassetoutintheFreeStateDevelopmentCorporationAct(Actno.6of1995),asamended,thePublicFinanceManagementAct(Actno.1of1999)asamended;theProtocolonCorporateGovernanceinthePublicSectorandtheKingIIIReportonCorporateGovernance.

TOP (LEFT TO RIGHT): MsSMMazibuko-BoardChairperson;MrMSKumalo-BoardMember;ProfEPAbabio-BoardMemberMIDDLE (LEFT TO RIGHT): Mr LR Mutsi - Board Member; Mr MD Mofoti - Board Member; Mr BC Stoile - Board MemberBOTTOM (LEFT TO RIGHT):MrsMJNtshingila-BoardMember;Mr IOsman-BoardMember;MrMISeoe-BoardMember

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2.5.2 Governance Structures

The following Committees were successfully established to ensure implementation of good Corporate Governance.

i. Board Executive Committee (EXCO)

TheBoardEXCOconsistsoftheBoard’sChairpersonandChairpersonsofvariousotherBoardCommittees.TheBoardEXCO’sprimaryfunctionwastoprocessreportsfromthedifferentcommitteesoftheFDCBoard.Becauseofitscongestedschedule,theBoarddispensedwiththefunctioningoftheEXCO,andcommitteereportsweresubmitteddirectlytotheBoard.

ii. Board Audit Committee (BAC)

The Board Audit Committee was composed of three (3) external independent members who are responsible foroverseeingindependentassessmentsoftheCorporation’saccountingsystemsonbehalfoftheBoard.TheBACisundertheChairmanshipofMrsJvanWykwhohasvastexperienceintheprivateinanceandaudit.Thecommitteeisalsochargedwithoverseeingriskmanagementonacontinuousbasis.

TheChairpersonoftheBACandtwoofitsmemberswerenon-membersoftheFDC’sBoardtoensureobjectivityandtostrengthencorporategovernanceintheCorporation.

iii. Board Finance Committee (BFC)

TheBoardFinanceCommitteewasestablishedinDecember2010toensurethepropermanagementoftheFinancialResourcesofFDCandtooverseetheprocurementofgoodsandservicesinlinewithapprovedpoliciesandproceduresandtheawardingofcontracttoserviceproviders.

TheBoardFinanceCommitteeregularlyreviewsFDCinancialreportsonbehalfoftheBoardinordertoadvisetheBoardonanymattersofinancialsigniicance.ThisincludesareviewofallinancialstatementsandthebudgetpriortoconsiderationandapprovalbytheBoard.

TheBFCisalsoresponsibleforassessingmanagement’sprogrammesthatdealwiththeeffectivenessofcontroloverthecorporation’saccountingandinancialreportingsystems.

Amaximumofive(5)non-executivedirectorsandtheChiefExecutiveOficerareappointedbytheBoard.

Furthermore,theCommitteeischargedwiththeprocurementofgoodsandservicesforandonbehalfoftheFDCinlinewithapprovedpoliciesandprocedures;aswellasenforcementofagreementsconcludedintermsofitsdecisions.

iv. Board Human Resources and Remuneration Committee (BHRRC)

TheBoardHumanResourcesandRemunerationCommitteemonitorshumanresourceprogrammes,policiesandproceduresinrespectoforganizationalclimate,personneldevelopment,trainingandadvancement,labourpeace,aswellasinternalandexternalequityofremuneration.

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TheresponsibilityoftheBHRRCistooverseeallhumanresourcesrelatedmattersintheFDC,todevelophumanresourcespoliciesandstrategiesfortheFDC,andtoconsidersuitablemeasurestoimplementthem.

ThechairpersonoftheBHRRCwasappointedbytheBoard.Inhis/herabsence,theBHRRCshallappointoneofitsmembersastheactingchairperson.

v. Board Investment Committee (BIC)

Thepurposeof theBoard InvestmentCommittee is tooverseematters related toinancialassistanceandnon-inancialsupportServicesintheFDCandtoadvisetheBoardinthisrespectincludingbutnotlimitedtothefacilitationofInvestmentsandExportpromotion.

Thecommitteecanco-optandinviteexpertiseifandwhenneeded.ThechairpersonoftheBICisappointedbytheBoard.

vi. Applicable Board Charters and Codes of Ethics

ThefollowingChartersandCodesrelatedtotheBoardanditsCommitteesareinplace:

• TheFDCBoardCharter

• TheBoardCodeofEthicsandConduct

• TheBoardCommittees’TermsofReferences

• TheBoardAUDITCommitteeCharter

vii. Chief Executive Oficer (CEO)Theday-to-daymanagementoftheFDCistheresponsibilityoftheChiefExecutiveOficerinlinewithapplicabledelegatedauthority. TheCEO isalso chargedwithassisting theBoard inproviding strategicandpolicydirection in linewith themandateoftheFreeStateprovincialgovernment.

viii. Corporate Secretary

TheresponsibilityoftheCorporateSecretaryistoensurethesmoothfunctioningoftheBoardanditsCommitteesintermsofrelevantlegislationandcorporategovernanceprinciples.

AllCommitteemembershaveunrestrictedaccesstotheadviceandservicesoftheFDCCorporateSecretary.

TheCorporateSecretaryprovidessupportandguidancetotheBoardinmattersrelatingtogovernance,legislativeandregulatoryrequirements.

TheSecretariatalsoassists theChairpersonof theBoardandChief ExecutiveOficer indetermining theannual yearplannerandagendasofvariousmeetings.

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FDC Board Audit EXCO Finance Human Resource & Remuneration

Business Investment

Joint BAC & BFC

Members

1. MsSMMazibuko

2. ChiefExecutiveOficer

3. ProfEPAbabio

4. Mr.MSKumalo

5. Mr.MDMofoti

6. Mr.LRMutsi

7. MrsMJNtshingila

8. Mr.IOsman

9. Mr.MISeoe

10.Mr.BCStoile

11.MrsJHvanWyk§

12.Mr.MEMohlahlo§

13.Mr.MENtshiea§

No *

5

5

5

5

5

5

5

5

5

5

5

A *

5

3

3

5

5

5

3

5

0

4

0

No *

4

4

4

4

4

4

A *

4

4

3

4

4

4

No *

1

1

1

1

A *

1

0

1

1

No *

6

6

6

6

6

6

A *

0

4

6

6

2

5

No *

3

3

3

3

3

A *

1

2

3

2

1

3

No*

10

10

10

10

10

10

A*

2

5

9

10

9

3

No*

1

1

1

1

1

1

1

1

1

1

1

A*

1

0

1

1

1

0

1

1

0

1

1

LEGEND

1. No*:Numberofmeetings

2. A*:NumberofMeetingsAttended

3. §-MrsvanWykisnotadirector,butChairpersonoftheBoardAuditCommitteeappointedfrom01March2011

4. §-MrMEMohlahloisnotadirectorbuthasbeenamemberoftheBoardAuditCommitteefrom01March2011

5. §-MrMENtshieaisnotadirectorbuthasbeenamemberoftheBoardAuditCommitteefrom01March2011

Recordofmeetingsandattendancethereof:1April2011-31March2012

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BOARD EXCO BOARD HUMAN RESOURCES AND REMUNERATION COMMITTEE

BOARD FINANCE COMMITTEE

BOARD AUDIT COMMITTEE

BOARD INVESTMENT COMMITTEE

SM MAZIBUKO (MS)

EPABABIO(PROF)

LR MUTSI

BC STOFILE

4

BC STOFILE

MSKUMALO

LR MUTSI

SMMAZIBUKO(MS)(Ex Oficio)

ChiefExecutiveOficer)

5

EP ABABIO (PROF)

MSKUMALO

MJNTSHINGILA(MRS)

I OSMAN


ChiefExecutiveOficer

6

JH VAN WYK (MRS)

MD MOFOTI

ME MOHLAHLO

I OSMAN

ME NTSHIEA

5

LR MUTSI

EPABABIO(PROF)

MJNTSHINGILA(MRS)

MI SEOE


ChiefExecutiveOficer

6

C H A I R P E R S O N O F C O M M I T T E E

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RISK MANAGEMENT

Inthe2011-2012inancialyeartheFDC’sreceived75%ontheriskmanagementassessmentconductedbytheProvincialTreasury.ThispercentageisonparwiththesetProvincialTreasury’sperformancetargetinriskmanagementforFreeStateDepartmentsandPublicEntities.

• TheEffectivenessoftheRiskManagementSystem

TheCorporation’sBoardhasaspeciiccommittee,theBoardAuditCommittee(BAC),whichassiststheBoardto carryoutitsriskmanagementresponsibilities.TheBACperformsriskmanagementfunctionsaslaiddowninthe KingIIIReportonCorporateGovernanceandintheCompaniesActof2008.

TheBoard,astheultimatecustodianofriskintheFDC,requiresquarterlyreportstobesubmittedtotheBAC. Thesereportsareusedtoassesstheimplementationoftheriskmanagementfunction,itseffectivenessand whetherornotrisksbeingidentiiedareproperlymitigated.

• RiskManagementFramework

~ Review of the Policies and Strategy

TheriskmanagementphilosophyoftheFDCissetoutinitsriskmanagementpolicyandrisk managementstrategy.ThesedocumentsarereviewedannuallytomeettherequirementsofPublic SectorRiskManagementFrameworkandotherlatestdevelopmentsonriskmanagement.Inthis inancialyear,thesedocumentswerereviewedagainandapprovedbytheBoard.

AFraudpreventionstrategy,asanintegralpartoftheriskmanagementframework,wasalsoreviewed andapprovedbytheBoard.

~ Risk identification and Assessment

RiskswhichmayhaveanimpactonachievementofFDC’sobjectiveswereidentiiedthrougharisk identiicationsessionandquestionnaires.FDCemployeesweregivenanopportunitytoidentifyrisksin theirareaofwork.Theseriskswereobtainedthroughariskidentiicationquestionnaire.Ariskslistwas thendevelopedbasedonidentiiedrisks.

Asessionwasheldbasedontherisklisttoproperlydescribeandreinetherisks.Theriskswerealso assessedintermsoftheirlikelihoodandtheirimpact.

Anactionplanindicatingthecontrolmeasuresforaddressingtherisks,theduedatesandoficials responsibleforaddressingthetoptenoperationalriskswasdevelopedwiththemanagerswherethese risksarose.Thesemanagersarerequiredtoreportontheimplementationofmitigatingtaskstoreduce oreliminatetherisksintheirunits.

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~ Communication

Riskmanagementandawarenesshastoformpartofacultureofanorganizationandtoinculcatethis cultureintheFDC,riskandfraudawarenesssessionswereheldandemployeeswerealsoprovided withinternal“RiskandFraudNewsletters”.

~ Reporting on the Risk Management Function

Managershavetoprovidemonthlyreportsonimplementationofactionplanandquarterlyreportson implementationofriskactionplansandtheseriskmanagementreportsaresubmittedtotheBACto enablethecommitteetoadequatelyperformitsriskmanagementfunctionsetinKingIIIreporton CorporateGovernanceandCompaniesActof2008.

• RiskToleranceLevels

FDChassetrisktolerancelevels,whichhavebeenapprovedbytheBoardasrequiredbytheKingIIIReport onCorporateGovernance.TheserisktolerancelevelsarelinkedtotheMaterialityandSigniicance FrameworkoftheCorporation.

• InternalAudit

TheriskmanagementunitoftheCorporationworkshandinhandwiththeinternalauditdivisionasthisdivision mustbaseitsauditplanonkeyriskareasandmustevaluatetheeffectivenessoftheentireriskmanagement functionandrecommendremedialaction.

Theinternalauditdivisionconductsauditoftheriskmanagementfunction.

Theauditunitannuallyconductsanauditoftheeffectivenessandadequacyoftheriskmanagementfunction andthelastauditwasconductedinNovember2011.Theinadequaciesidentiiedbytheauditreportwere addressed.

• TheLevelofMaturity

RiskmanagementhasbeenimplementedintheFDCfromtheyear2007,andriskmanagementsystemsand frameworksareinplace.Inaddition,theboardandallstaffmembersareawareoftheirresponsibilitieswith regardtoriskmanagement.

Alotofworkisstillrequiredtoensurethatrisksidentiiedareadequatelymitigatedandlessonsarelearned sothatrisksdonotresurfaceorrecurandriskmanagementbecomespartoftheFDCculture.

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SEC TI ON

REPORT ON PREDETERMINED OBJECTIVES

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Strategic

Objective

Developandreviewpoliciesandprocedurestoensurecompliancetoalllegislationinordertoachieveoperationaleficiency

Linkage to the

FSGDS

Eficientgovernanceandadministration

Measurable

Objective

ToimplementtheCorporation’sstrategicplan

Performance

Measure Indicator

AchievementofallstrategicobjectivesandmeasurableobjectivesintheCorporation’sCorporatePlanfor2011-2014

Performance

Target 2011/12

100%achievementofallstrategicandmeasurableobjectivesintheCorporation’sCorporatePlanfor2011-2014by31March2012

Actual Annual

Performance

Deviation

TheCorporationachieved55.03%ofthestrategicandmeasurableobjectivesinlinewiththeAPPsforthe2011-12.

Delaysintheinalisationoftherestructuringprocess.DelaysintheimplementationofthePerformanceManagementSystem.Thesteepdeclineinthenumberofloanapplications(mostlythebridgingloans).PortfolioofprojectsthatFDCisfacilitatinginaremainlygreenieldsthusrequiressigniicantdevelopmentalinterventionsbeforeactualcommitmentsbyinvestors.

Programme: AdministrationSub-Programme: Ofice of the CEO Strategic Goal: To build a sustainable organization

that strives for business and service excellence

3. REPOR T ON PREDE TERMINED OB JEC TIVE SFDC’SREPORTONPREDETERMINEDOBJECTIVESFOR2011-2012

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Strategic

Objective

Developandreviewpoliciesandprocedurestoensurecompliancetoalllegislationinordertoachieveoperationaleficiency

Linkage to the

FSGDS

Eficientgovernanceandadministration

Measurable

Objective

TomonitorandreportimplementationoftheCorporation’sstrategicplan

ToensurecompliancewithCorporateGovernancePrinciples

ToensurecompliancewithCorporateGovernancePrinciples

Toensurecompliancewithapplicablelegislation,FDCpoliciesandprocedures

Performance

Measure Indicator

NumberofquarterlyperformanceinformationreportssubmittedtimelytotheProvincialTreasuryandtheDETEA

CorporateGovernancemanualandtooldeveloped

PercentageoftheCorporateGovernancemanualandtoolimplemented

Compliancemanualandmonitoringtooldeveloped

Percentagecompliancewithapplicablelegislation,policiesandprocedures

Performance

Target 2011/12

4quarterlyperformanceinformationreportssubmittedintimetotheProvincialTreasuryandtheDETEAby31March2012

CorporateGovernancemanualandtooldevelopedby30June2011

100%oftheCorporateGovernancemanualandtoolimplementedby31March2012

Compliancemanualandmonitoringtooldevelopedby30June2011

100%compliancewithapplicablelegislation,policiesandproceduresby31March2012

Actual Annual

Performance

Deviation

4quarterlyreportsweresubmittedintimetotheProvincialTreasury

CorporateGovernanceManualdeveloped

95%oftheCorporateGovernancetoolandmanualimplemented

Compliancemanualandmonitoringtoolhasbeendeveloped

97.8%compliancewithlegislation,policiesandprocedures

HealthandSafetypolicyhasnotbeenapprovedbytheBoard.

Programme: AdministrationSub-Programme: Ofice of the CEO Strategic Goal: To build a sustainable organization


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Objective

Achievebusinesssustainability

Linkage to the

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Ensuringimprovementininancialmanagement

Measurable

Objective

ToincreaseownrevenueinordertoensuresustainabilityToensureeffectivecreditmanagement

Performance

Measure Indicator

Ownrevenuegrowth

PortfolioinvestmentstrategyandpolicyforalltypesofinvestmentsdevelopedandapprovedbytheBoard

Non-performingassetsdisposed

Stringentcollection,creditassessmentpolicyandrepaymentstrategydevelopedandapprovedbytheBoard

Performance

Target 2011/12

Ownrevenueincreasedby50%by31March2012

Portfolioinvestmentstrategyandpolicydevelopedandapprovedby31March2012

Disposedallnon-performingassetsbyendofMarch2012

Stringentcollection,creditassessmentpolicyandrepaymentstrategydevelopedandapprovedbytheBoardby30September2011

Actual Annual

Performance

Deviation

Ownrevenueincreasedby15.3%

PortfolioinvestmentstrategyandpolicyhasbeenapprovedbytheBoard

Theannualperformancetargetwasnotachieved

Stringentcollection,creditassessmentpolicyandrepaymentstrategywasdevelopedandapprovedbytheBoardby30September2011

-Highrateofbusinessfailures,leadingtoliquidations.-Declineinthetextileindustryleadingtohugelossesonutilities

Theprocessofgrantingcurrenttenantsirstrightrefusalistakinglongerthanexpectedastherearedisputeswithregardtoprices

Programme: AdministrationSub-Programme: Finance

Strategic Goal: To build a sustainable organization


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Linkage to the

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Measurable

Objective

Toensureeffectivecreditmanagement

Toensureeffectivecreditmanagement

Performance

Measure Indicator

Percentageofthestringentcollection,creditassessmentpolicyandrepaymentstrategyimplemented

Percentageofmonthlybillingv/smonthlycollectionorrepayments

Debtmanagementpolicyandplandeveloped

Percentageofthedebtmanagementpolicyandplanimplemented

Performance

Target 2011/12

100%ofthestringentcollection,creditassessmentpolicyandrepaymentstrategyimplementedby31March2012

Collected50%ofamountbilledfortheyearbyendofMarch2012

DebtmanagementpolicyandplandevelopedandapprovedbytheBoardbySeptember2011

100%ofthedebtmanagementpolicyandplanimplementedby31March2012

Actual Annual

Performance

Deviation

100%ofthestringentcollection,creditassessmentpolicyandrepaymentstrategyhasbeenimplemented

Collected54.16%ofamountbilled

DebtmanagementpolicyandplanwasdevelopedandapprovedbytheBoardbySeptember2011

100%ofthedebtmanagementpolicyandplanhasbeenimplemented




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Linkage to the

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Measurable

Objective

Toimplementfair,transparentandequitableprocurementprocesses

Toobtainacleanaudit

Performance

Measure Indicator

Supplychainmanagementpolicyreviewed

Percentageofthesupplychainmanagementpolicyimplemented

Timelysubmissionofconsolidatedinancialstatements

Percentageofqualiicationmattersaddressed

Performance

Target 2011/12

Supplychainmanagementpolicyreviewedby31March2012

100%ofthesupplychainmanagementpolicyimplementedby31March2012

Submissionofconsolidatedinancialstatementsby31May2011

50%ofqualiicationmattersaddressedby31March2012

Actual Annual

Performance

Deviation

Supplychainmanagementpolicyhasbeenreviewed

100%ofthesupplychainmanagementpolicyhasbeenimplemented

Theannualperformancetargetachieved

Noauditreportfor2011

Auditreporthasnotbeenissuedtherefore,noqualiicationsmatterstoaddress




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Objective

Todevelopanorganisationthatpromoteshighperformance,capacitatestaff,innovativecultureandharmoniousemployeerelations

Linkage to the

FSGDS

EnsuringeffectiveHumanResourceDevelopmentandManagement

Measurable

Objective

ToensurethattheFDChascompetentemployeeswhoperformtotheirmaximumabilityandmaintainssoundemployeerelations

Performance

Measure Indicator

Percentageofemployeesperformingaboveaverage

Percentageofemployeessignedperformancecontractsandreviewsdoneforthem

Performance

Target 2011/12

50%ofemployeesperformingaboveaverageby31March2012

100%ofemployeessignedperformancecontractsandreviewsdoneforthemby31March2012

Actual Annual

Performance

Deviation



TheannualperformancetargetwasnotachievedbecauseHRdepartmentisawaitingthecompletionoftheprocurementprocessfortheappointmentoftheserviceproviderwhohastodevelopPDMS(BidAdjudicationhasnotbeenconcluded)

Theannualperformancetargetwasnotachievedbecause,HRDepartmentisawaitingthecompletionoftheprocurementprocessfortheappointmentoftheserviceproviderwhohastodevelopPDMS(BidAdjudicationhasnotbeenconcluded)

Programme: AdministrationSub-Programme: Human Resources Management



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Objective

Linkage to the

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Measurable

Objective

Performance

Measure Indicator

Performance

Target 2011/12

Actual Annual

Performance

Deviation







Employeeswithdevelopmentplans

Percentageofemployeesparticipatingintheemployeewellnessprogramme

HRstrategy,policiesandproceduresreviewedandareasofthepolicyimplemented

Percentageofdisciplinaryproceduresconcludedwithinaspeciiedtime

Drawnup&signed-offindividualdevelopmentplansbyDec11

40%ofemployeesparticipatingintheemployeewellnessprogrammeby31March2012

HRstrategy,policiesandproceduresreviewedandallareasofthepolicyimplementedby31March2012

100%ofthedisciplinaryproceduresconcludedwithinthreemonths


68.5%ofemployeesparticipatedintheemployeewellnessprogramme


TwodisciplinaryactionswereinstitutedinMarch2012andwouldbeconcludedwithinthreemonths(whichwillbetheendofJune2012)

Theannualperformancetargetwasnotachievedbecause,HRDepartmentisawaitingthecompletionoftheprocurementprocessfortheappointmentofaserviceproviderwhohastodevelopPDMS(BidAdjudicationhasnotbeenconcluded)

TherewasanoverachievementbecauseofaconcertedeffortbetweenFDCandamedicalaid

TheannualperformancetargetwasnotachievedbecausereviewedpoliciesandprocedureshavenotyetbeenapprovedbytheBoard




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Objective

Linkage to the

FSGDS

Measurable

Objective

Performance

Measure Indicator

Performance

Target 2011/12

Actual Annual

Performance

Deviation



Effectiveperformancemanagementsystem

Numberofreportsonmonitoringofbalancescorecardforallemployeesandbusinessunitssubmitted

3quarterlyreportsonmonitoringofbalancescorecardforallemployeesandbusinessunitssubmitted


TheannualperformancetargetwasnotachievedbecausetheHRDepartmentisawaitingthecompletionoftheprocurementprocessfortheappointmentofaserviceproviderwhohastodevelopPDMS(BidAdjudicationhasnotbeenconcluded)




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Objective

Linkage to the

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Measurable

Objective

Performance

Measure Indicator

Performance

Target 2011/12

Actual Annual

Performance

Deviation

TobuildandmaintainFDC’sinformationmanagementsystemsinordertoenhanceorganisationaleficiencyandintellectualcapability

Accelerationofeconomicgrowthanddevelopment

Toensureaneffectiveinformationandmanagementinformationsystems

SAPassetmanagement&procurementmodulesinstalledandSAPsystemupgradedtointerfacewithMDA,VIPandABSA(Swift).

MDA,VIPandABSAsystem(Swift)interfacedby31Dec2011.

BatchElectronicInterfacesweredevelopedandimplementedforMDA, ABSA, VIP

TheannualperformancetargetwaspartiallyachievedbecauseeventhoughthebatchElectronicInterfacesweredevelopedandimplementedforMDA,ABSA,VIPtheyarenotworkingasanticipated.Newdevelopmentiscurrentlyinprogresstorectifythis

Programme: Business SupportSub-Programme: Information Technology



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Objective

Linkage to the

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Measurable

Objective

Performance

Measure Indicator

Performance

Target 2011/12

Actual Annual

Performance

Deviation

CurrentFDCITPolicyreviewedandthepolicybeingimplementedinallitsareas

PercentageoftheFDCreviewedITpolicyimplemented

SAPassetmanagement&procurementmodulesinstalledby31ofDec2011

FDCITpolicytobereviewedby30June2011

100%oftheFDCreviewedITpolicyimplementedby31March2012


FDCITpolicywasreviewed

100%oftheFDCreviewedITpolicywasimplemented

TheannualperformancetargetwasnotachievedbecauseFDCcouldnotagreewithserviceprovideronimplementationtermsforassetmodule.FDCwaitingforserviceprovidertoavailitsresourcesforimplementation.Onprocurementmodule,FDChadadisagreementonprice




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Objective


Linkage to the

FSGDS


Measurable

Objective

Toensureeffectiveinformationandmanagementinformationsystems

Performance

Measure Indicator

Currentpropertysystem(MDADB&Server)upgraded

AnautomatedpersonalbackupsysteminstalledforallnotebookandPCusers

DiginettechnologyreplacedwithADSLtechnologyfora%ofFDCofices

Performance

Target 2011/12

Currentpropertysystem(MDADBandServer)upgraded30June2011

Anautomatedpersonalbackupsystemforallnotebookusersinstalledby30June2011.

DiginettechnologyreplacedwithADSLtechnologyforallofFDCoficesby31March2012

Actual Annual

Performance

Deviation


20Clientsand1serverlicenseimplemented

DiginettechnologyreplacedwithADSLtechnologyatHeadOficeandIndustriqwa

Theannualperformancetargetwasnotachievedbecausetheupgradeprojectwasputonholdasoperationallythenewfunctionality(propertypictures&CommercialMSSQL)wasnotessentialatthatstage

Theannualperformancetargetwaspartiallyachievedbecausecashlowconstraintsputtheprojectonhold

TheannualperformancetargetwaspartiallyachievedduetocommunicationtechnologychangesandredeploymentofoficestonewpremiseswhereADSLtechnologyisnotavailable




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Objective


Linkage to the

FSGDS


Measurable

Objective

Toensureeffectiveinformationandmanagementinformationsystems

Performance

Measure Indicator

Outofoficeconnectivityto:MDA, SAP, ESS, Intranetinstalled

Percentageoftheinformationmanagementpolicyandplandeveloped

Percentageoftheinformationmanagementpolicyandimplemented

Performance

Target 2011/12

Outofoficeconnectivityto:MDA, SAP, ESS, Intranetinstalledby31March2012

Percentageoftheinformationmanagementpolicydeveloped30September2011

100%oftheinformationmanagementpolicyimplementedby31March2012

Actual Annual

Performance

Deviation

Outofoficeconnectivityto:MDA, SAP, ESS, Intranethasbeeninstalled

Percentageoftheinformationmanagementpolicywasdeveloped

100%oftheinformationmanagementpolicywasimplemented




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Objective

IncreaseandmanagemarketawarenessofFDCserviceofferingsandtheFreeStateProvinceasapreferredbusinessdestination

Linkage to the

FSGDS


Measurable

Objective

MarketawarenessofFDCserviceofferingsandFreeStateaspreferredbusinessdestination

Performance

Measure Indicator

SurveytomeasuremarketawarenessofFDCserviceofferingsconducted

Percentageincreaseinmarketawarenessfrom2011base

NumberofwebsitevisitorsrecordedasaresultofmarketingFDCserviceofferingsandFreeStateasabusinessdestination

Atooltorecordwalkinandtelephonicenquiriesdeveloped

Percentageofthetooltorecordwalkinandtelephonicenquiriesimplemented

DevelopedandimplementedanFDCcommunicationplan

Performance

Target 2011/12

ConductmarketawarenesssurveybyApril2011

20%increaseinmarketawarenessby31March201

2,000websitevisitorsrecordedbyendMarch2012

Atooltorecordwalkinandtelephonicenquiriesdevelopedby30June2011

100%ofthetooltorecordwalkinandtelephonicenquiriesimplementedby31March2012

DevelopedandimplementedFDCcommunicationsplanbyendofMarch2012

Actual Annual

Performance

Deviation

Notachieved


139,860websitevisitorstoFDCwebsiterecorded

Atoolhasbeendevelopedtorecordwalkinandtelephonicenquiries

100%ofthetooltorecordwalkinandtelephonicenquiriesimplemented

FDCcommunicationplandevelopedand100%oftheplanwasimplemented

ReportforawarenesssurveywasonlyissuedatthebeginningofJune.

Theannualperformancetargetwasnotachievedbecauseofpossiblere-brandingofFDC

MorevisitorsthananticipatedvisitedtheFDCwebsite

Programme: Business SupportSub-Programme: Marketing and Communications



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Objective

Linkage to the

FSGDS

Measurable

Objective

Performance

Measure Indicator

Noofnewwalkinandtelephonicenquiriesrecorded

NoofelectronicenquiriesreceivedandhandledinresponsetoFDCwebsite,advertisementsandelectronicadvertorials

Noofunsolicitedexportandinvestmentenquiriesreceivedandhandled.

LocalandinternationalmarketingstrategyforallFDCactivitiesdeveloped

Performance

Target 2011/12

300newwalkinandtelephonicenquiriesrecorded

50electronicenquiriesreceivedandhandledbyendMarch2012

30unsolicitedexportinvestmentandotherenquiriesreceivedandhandledbyendofMarch2012

LocalandinternationalmarketingstrategyforallFDCactivitiesdevelopedby31September2011

Actual Annual

Performance

Deviation

1,847newwalkinandtelephonicenquiriesrecorded

105electronicenquiriesreceivedandhandled

748unsolicitedexportandinvestmentandotherenquiresreceivedandhandled

LocalandinternationalmarketingstrategyforallFDCactivitiesdevelopedby31September2011

Theannualperformancetargetwasexceededbecauseofgreaternumberofwalkinenquiriesthananticipated Theannualperformancetargetwasexceededbecauseofgreaterresponsethananticipated

TheannualperformancetargetwasexceededbecauseofgreaterresponsethananticipatedatFDC’sparticipationatSATEX/AfricaBigSeven,DecorexandSARCDAexhibition




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Linkage to the

FSGDS


Measurable

Objective


Performance

Measure Indicator

LocalandinternationalmarketingstrategyforallFDCactivitiesimplemented

ImplementanintensiveFDCmarketingawarenesscampaign

Performance

Target 2011/12

LocalandinternationalmarketingstrategyforallFDCactivitiesimplementedby31March2012

ImplementedanintensivemarketawarenesscampaigntoestablishbrandawarenessofFDCactivitiesbyendJune11

Actual Annual

Performance

Deviation

Achieved:Theplanforimplementingthestrategycomprisedofthefollowingactivities:Developmentofpublicationsandmarketingtools,implementationofannualeventsplan,advertisingplanandcommunicationsplanThesearereportedingreaterdetailunderspeciicperformancetargetsinthemarketingandcommunicationsectionofthisreport


Theannualperformancetargetwasnotachievedbecauseawarenesscampaignwaspostponedduetopossiblere-brandingofFDC




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Objective


Linkage to the

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Measurable

Objective


Performance

Measure Indicator

Advertisingcampaigndeveloped

Percentageoftheadvertisingcampaignimplemented.

Numberofmarketingtoolsandpublicationsdeveloped

Performance

Target 2011/12

Advertisingcampaigndevelopedby30June2011

100%oftheadvertisingcampaignimplementedby31March2012

3marketingtoolsand4xpublicationsdevelopedby31March2012

Actual Annual

Performance

Deviation


96.4%ofadvertisingcampaignimplemented

3marketingtoolsand3publicationsdeveloped

Theannualperformancetargetwasnotachievedbecauseadvertisingmaterialwerenotdevelopedduetopossiblere-brandingofFDC

Theannualperformancetargetwasnotfullyachievedbecauseaplannedactivitywasnotapprovedontime

TheannualperformancetargetwaspartiallyachievedbecausethereprintofSMMEbrochurewasdelayedduetouncertaintyofMotheooficerelocation




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Objective

Linkage to the

FSGDS

Measurable

Objective

Performance

Measure Indicator

Annualeventsplandeveloped

Percentageoftheannualeventsplanimplemented

LocalandinternationalFDCcommunicationsplandeveloped

LocalandinternationalFDCcorporatecommunicationsplanimplemented

PercentageofthelocalandinternationalmarketingstrategyforallFDCactivitiesimplemented

NumberofFDCnewslettersproduced

Performance

Target 2011/12

Annualeventsplandevelopedby30April2011

100%oftheannualeventsplanimplementedby31March2012

DevelopedFDCCorporateCommunicationsPlans

ImplementedFDCCorporateCommunicationsPlan

PercentageofthelocalandinternationalmarketingstrategyforallFDCactivitiesimplementedby31March2012

4FDCnewsletterproduced(eitherprintofelectronic)byendofMarch2012

Actual Annual

Performance

Deviation

Annualeventsplanhasbeendeveloped

100%ofannualeventsplanwereimplemented

FDCCorporateCommunicationsPlansweredeveloped

100%ofFDCCorporateCommunicationsPlanwasimplemented 100%ofthelocalandinternationalmarketingstrategyforallFDCactivitiesimplemented


Draftnewsletterswerenotsignedoff




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Objective

Createaconducivebusinessandeffectivecollaborativeenvironmenttoattractinvestment,promoteexportsanddevelopenterprises

Linkage to the

FSGDS

Tocontributetoeconomicgrowthanddevelopment

Measurable

Objective

Toincreasethenumberofnewinvestments,exportersandcommerciallyviableenterprisesyieldedthroughpartnershipinterventions

Performance

Measure Indicator

Cumulativenumberofnewinvestmentsyieldedthroughpartnerships

Aftercarestrategydeveloped

Cumulativenumberofbusinessassistedthroughtheaftercareprogramme

Performance

Target 2011/12

4newinvestmentsyieldedthroughpartnershipsbyendofMarch2012

Aftercarestrategydevelopedby31March2012

15businessassistedthroughtheaftercareprogramme31March2012

Actual Annual

Performance

Deviation

FDCfacilitatedthepartnershipbetweenTransnetFreightRailandDepartmentofEconomicDevelopment&Tourism(DETEA)thatyieldedaninvestmentofR220minphase1ofManganeseCargoConsolidationHub

Aftercarestrategyhasbeendeveloped

7businesseswereassistedthroughtheaftercareprogramme

TheannualperformancetargetwasnotachievedbecausemostofprojectsFDCisfacilitatingaregreen-ieldsandrequiressigniicantinvestmentfacilitationeffortsbeforetheyaremigratedintocommittedinvestments.

TheannualperformancetargetwaspartiallyachievedbecausetheFDCAftercareProgrammecouldnotbeeffectivelyimplementedasthepositionforanaftercareoficercouldnotbeilledduetothereviewofexistingFDCstructure.Placementprocessnotconcluded

Programme: Investment Promotion and Property DevelopmentSub-Programme: Investment Promotion



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Objective

Createaconducivebusinessandeffectivecollaborativeenvironmenttoattractinvestment,promoteexportsanddevelopenterprises

Linkage to the

FSGDS

Tocontributetoeconomicgrowthanddevelopment

Measurable

Objective

Toincreasethenumberofnewinvestments,exportersandcommerciallyviableenterprisesyieldedthroughpartnershipinterventions

Performance

Measure Indicator

FreeStatespeciicincentivesinvestigatedandadvocated

CumulativenumberofcompaniesthatreceiveFreeStatespeciicinvestmentincentives

Performance

Target 2011/12

FreeStatespeciicinvestmentincentivesinvestigatedandadvocatedby31March2012

4companiesthatreceiveFreeStatespeciicinvestmentincentivesby31March2012

Actual Annual

Performance

Deviation

AFreeStateMunicipalIncentivesGuideFrameworkwasdevelopedandincentivesvisioningworkshopswerehostedwithallthefourDistrictMunicipalitiesandMangaungMetropolitanMunicipality


N/A

TheannualperformancetargetwasnotachievedbecausenoMunicipalityinFreeStateimplementedMunicipalIncentivesPolicytosupportinvestmentattraction




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Objective

Develop,facilitateandpromoteviableforeignandlocalinvestmentsfortheFSProvince

Linkage to the

FSGDS


Measurable

Objective

Foreignandlocaldirectinvestmentsfacilitated

Performance

Measure Indicator

Randvalueofdirectinvestmentsfacilitated

Cumulativenumberofinvestmentopportunitiesidentiiedandpackaged

Performance

Target 2011/12

R150mofdirectinvestmentfacilitatedbyMarch2012

Investmentopportunitiesidentiiedandpackagedby31March2012

Actual Annual

Performance

Deviation


3xProjectsPackagedwhichare:-• Potatocrisp manufacturing,• Vehicle Distribution Centre• Foodprocessing park

TheannualperformancetargetwasnotachievedduetothefactthatmostofprojectsFDCisfacilitatingaregreen-ieldsandrequiresigniicantinvestmentfacilitationeffortsbeforetheyaremigratedintocommittedinvestments




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Objective

Develop,facilitateandpromoteviableforeignandlocalinvestmentsfortheFSProvince

Linkage to the

FSGDS


Measurable

Objective

Foreignandlocaldirectinvestmentsfacilitated

Performance

Measure Indicator

Investmentstrategyreviewed

Cumulativenumberoftheinvestmentprojectspromoted

AninvestmentplanforpromotinginvestmentopportunitiesintheFSdeveloped

Performance

Target 2011/12

Investmentstrategyreviewedby30June2011

15investmentprojectspromotedby31March2012

AninvestmentplanforpromotinginvestmentopportunitiesintheFSdevelopedby31December2011

Actual Annual

Performance

Deviation


Atotalof15projectswerepromotedthroughvariousplatforms

InvestmentplanforpromotinginvestmentopportunitiesintheFSdevelopedby30June2011

TheannualperformancetargetwasnotachievedbecausethestrategycouldnotbereviewedastheProvincialGrowthandDevelopmentStrategy,whichissupposedtoinformthestrategy,hasnotbeeninalized

N/A




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Strategic

Objective

Linkage to the

FSGDS

Measurable

Objective

Performance

Measure Indicator

Cumulativenumberofoutboundinvestmentmissionsexecuted/participated

Performance

Target 2011/12

4outboundinvestmentmissionsexecuted/participatedby31March2012

Actual Annual

Performance

Deviation

3investmentmissionswereexecuted;- Indonesia,- Malaysiaand- Singaporein April2012

TheannualperformancetargetwaspartiallyachievedbecausetheFDCwasunabletoparticipateintheplannedSouthAfrica-ChinaExpoinBeijingfrom24-26November2011and28-30November2011,duetoapoorresponsefromFreeStateCompaniesinvited




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Develop,manageandexpandpropertyportfoliotoachieveandmaintainsustainabilitythereof

Linkage to the

FSGDS


Measurable

Objective

Yearonyearchangeinproitability

Performance

Measure Indicator

Percentageincreaseinproitabilityofpropertyportfolio

Percentageincreaseinoccupancyrateofportfolio

Percentageofapproved/declinedrentalapplicationswithinprocessguidelines

Percentageofactualbillingsreceivedfromtenants

Performance

Target 2011/12

5%increaseinproitabilityofpropertyportfolioby31March2012

2.5%increaseinoccupancyrateofportfolioby31March2012

90%approvedrentalapplicationswithinprocessguidelinesby31March2012

87.5%billingsreceivedfromtenantsby31March2012

Actual Annual

Performance

Deviation

48.76%increaseinproitabilityofpropertyportfolio

2.17%increaseinoccupancyincreased(from72.67%to74.84%)

92.86%approvedrentalapplicationswithinprocessguidelines(201of212)

90.45%ofbillingsreceivedfromclients

Expendituredidnottakeplaceasplanned

0,33negativevariance,fewernewtenantswereestablishedthananticipated

2.86%positivedeviation,morenewtenantswereestablishedthananticipated

2,95%positivevariancebecauseofthespecialcollectioneffortsyieldedpositiveresults

Programme: Investment Promotion and Property DevelopmentSub-Programme: Property Development



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Linkage to the

FSGDS


Measurable

Objective

Yearonyearchangeinproitability

Performance

Measure Indicator

Numberofjobscreatedthroughnewtenantsforcommercialandindustrial

Percentageoftenantturnoverrateforvoluntarycancelations

Valueofnewpropertyinvestments

Performance

Target 2011/12

150commercial,550industrialbyof31March2012

Notmorethan10%fortheinancialperiod31March12

R10minvestedinnewpropertyinvestmentsby31March2012

Actual Annual

Performance

Deviation

1129commercial,1093industrialasatendofMarch2012

2,86%oftenantturnoverrateforvoluntarycancellations(53of1851tenantsvacated)

InvestmentofR6.5mwasmade.65%achieved

979morejobscreatedinthecommercialand543morejobscreatedintheindustrialsector

Theannualperformancetargetwasoverachievedbecauseoflowerrentalratesandcostoflabour.

Only65%oftheannualperformancetargetwasachievedbecauseonlyoneinvestmentwasmadeandtheFDCisstillinvestigatingotherinvestments




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Objective



Linkage to the

FSGDS



Measurable

Objective

EffectivemanagementofFDC’sproperties

EffectivemanagementofFDC’sproperties

Performance

Measure Indicator

Investmentstrategyforpropertydeveloped

Percentageofthepropertyinvestmentstrategyimplemented

Propertymaintenanceplandeveloped

Percentageofthemaintenanceplanimplemented

Timely(numberofdays)processingofratesandtaxes

Performance

Target 2011/12

Investmentstrategyforpropertydevelopedby30June2011

25%ofthepropertyinvestmentstrategyimplementedby31March2012

Propertymaintenanceplandevelopedby30June2011

10%ofthemaintenanceplanimplementedby31March2012

Processingofratesandtaxespaidwithin5daysofreceiptofinvoicesby31March2012

Actual Annual

Performance

Deviation

Investmentstrategyforpropertywasdeveloped




75%ofthetargethasbeenachieved

Theimplementationofthestrategywasdelayedduetothecorporation’srestructuring

TheannualperformancetargetwasnotachievedbecauseofdelaysasaresultoftheplannedmigrationofthefunctiontoSAP

DelayedasaresultoftheplannedmigrationofthefunctiontoSAP

Nineinvoicesoutoftwelvereceivedhavebeenpaidwithin5daysofreceipts.

ThedateofreceiptofthelastthreeinvoicescouldnotbeveriiedMarch2012




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Objective

ToeffectivelydevelopsustainableSMME’sandCooperativesthroughinancialassistance

Linkage to the

FSGDS

EmphasizingSMMEdevelopment

Measurable

Objective

ToProvideinancialassistancetoSMME’sandCooperatives

Performance

Measure Indicator

ValueofloansgrantedtoSMME’sandCooperativesasapercentageofloanfundsavailable

Amountdisbursedasapercentageofapprovedloansperdistrictspergenderandsectorclassiication

Performance

Target 2011/12

100%ofloanfundsavailablegrantedtoSMME’sandCooperativesby31March2012

100%disbursementofapprovedloansperbyendofMarch2012

Actual Annual

Performance

Deviation

17%ofloanfundsavailablegranted

89%ofapprovedloansweredisbursed

FDCrestructuringresultedintransferagreementwithDETEAbeingconcludedlateandthusfundsbeingtransferredlate.FDCalsoexperiencedfewerloanapplicationsduringthesecondperiodoftheinancialyear.

Majorityoftheloanswereapprovedattheendoftheinancialyearandthereforenotabletobedisbursedby31stMarch2012

Programme: Enterprise Development Sub-Programme: SMME’s and Cooperatives



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Linkage to the

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Measurable

Objective

TodevelopandimplementSMMEandCo-operativesDevelopmentStrategy

ToreviewandidentifytargetmarketanddeveloprelatedSMME’sandCooperativesassessmentpolicies

ToreviewandreineSMME’s&Cooperativesfundingpolicy

Performance

Measure Indicator

SMMEandCo-operativesdevelopmentstrategydevelopedandapprovedbytheBoard

SMME’sandCooperativesassessmentpoliciesdeveloped

ApprovedandreinedSMMEandCooperativesfundingpolicy

Performance

Target 2011/12

SMMEandCo-operativesdevelopmentstrategydevelopedandapprovedbytheBoardby28February2012

SMME’sandCooperativesassessmentpoliciesdevelopedby31March2012

ApprovedandreinedSMMEandCooperativesfundingpolicyby31March2012

Actual Annual

Performance

Deviation


Theannualperformancetargetwasnotachieved.

SMMEfundingpolicyreviewedandreined

SMMEandCooperativesstrategywasnotdevelopedasFDCisdevelopingrelationswithstakeholdersintheSMEdevelopmentield(i.e.SEDA,ILOandthedti)forSMMEandCooperativesdevelopmentintheProvince

SMMEandCooperativesassessmentpoliciescouldnotbedevelopedasthedevelopmentstrategywasnotdeveloped




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Objective


Linkage to the

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Measurable

Objective

ToreviewandreineSMME’s&Cooperativesfundingpolicy

Performance

Measure Indicator

Studyonfundingofagriculture,agro-processing,mineralbeneiciationandruraldevelopmentprojectscompleted

Performance

Target 2011/12

Studyonfundingofagriculture,agro-processing,mineralbeneiciationandruraldevelopmentprojectscompletedby30June2011

Actual Annual

Performance

Deviation


FDCdidnotcommissionthestudytofocusonbuildingrelationswithotherdevelopmentinancialinstitutionstoinanceprojectsinagriculture,agro-processing,mineralbeneiciation,ruraldevelopmentandotherprojectsthecorporationisunabletoinance




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Objective

ToeffectivelyprovidebusinessdevelopmentsupportservicestoSMME’sandCooperativestoensuresustainability

ToeffectivelyprovidebusinessdevelopmentsupportservicestoSMME’sandCooperativestoensuresustainability

Linkage to the

FSGDS



Measurable

Objective

ToimplementbusinessdevelopmentsupportservicesforSMME’sandCooperatives

TodevelopandImplementbusinessdevelopmentsupportstrategy

Performance

Measure Indicator

NumberofSMME’sandCooperativesparticipatinginthebusinessdevelopmentsupportprogramme

Numberofbusinessdevelopmentprogrammesinitiated

Businessdevelopmentsupportstrategydeveloped

Performance

Target 2011/12

45SMMEandCooperativesparticipatinginprogrammeby31March2012

5Businessdevelopmentprogrammesinitiatedby31March2012

Businessdevelopmentsupportstrategydevelopedby30June2011

Actual Annual

Performance

Deviation


3existingclientswereputundermentoringandmonitoringprogrammeforbookkeeping/inancialmanagement


FDCfocusedlargelyonvisitationsformonitoringofexistingclientportfolioandalsoonoutreachprogrammestocreateawarenessofFDCSMMEsupportservices

Nomoreclientsvolunteeredforbusinessdevelopmentsupport

BusinessDevelopmentSupportstrategywasnotdevelopedastheFDCisreviewingitsbusinessdevelopmentsupportapproach




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Objective

Linkage to the

FSGDS

Measurable

Objective

Performance

Measure Indicator

Percentageofthebusinessdevelopmentsupportstrategyimplemented

Businessdevelopmentsupportmanualdeveloped

Performance

Target 2011/12

100%ofthebusinessdevelopmentsupportstrategyimplementedby31March2012

Businessdevelopmentsupportmanualdevelopedby31March2012

Actual Annual

Performance

Deviation



BusinessDevelopmentSupportstrategywasnotdevelopedastheFDCisreviewingitsbusinessdevelopmentsupportapproach–corporationtoapproachotherDFI’smandatedtoprovidebusinessdevelopmentsupportservices

FDCisreviewingitsbusinessdevelopmentsupportapproach–corporationtoapproachotherDFI’smandatedtoprovidebusinessdevelopmentsupportservices




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Strategic

Objective

TopromoteandincreasethenumberofexportersfromtheProvince

Linkage to the

FSGDS


Measurable

Objective

Toincreasethenumberofexportersfacilitated

Performance

Measure Indicator

NumberofFreeStateexporterspromoted

Exportstrategyimplementationplanreviewed

Percentageoftheexportimplementationplanimplemented

Numberofcollaborativeagreementsestablished

Performance

Target 2011/12

10FreeStateexporterspromotedby31March2012

Exportstrategyimplementationplanreviewedby30June2012

100%oftheexportimplementationplanimplemented.

10collaborativeagreementsestablishedby31March2012

Actual Annual

Performance

Deviation

21FreeStateexporterspromotedby31March2012

Exportstrategyimplementationplanhasbeenreviewed

60%oftheimplementationplanwasachieved

3Collaborativeagreementsestablished

FDChadmorelocalcompaniesrespondingtoinvitationstoparticipateinlocallyorganizedinternationaltradeexhibitions

Thetargetwasnotachievedinfullduetotoinsuficientresources(personnelandbudget)

FDCcouldnotidentifymorerelevantcollaborativeagreementstoestablishandfocusedirstonimplementingtheinitial3agreementsestablished

Programme: Enterprise Development Sub-Programme: Export Promotion



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Objective

TopromoteandincreasethenumberofexportersfromtheProvince

Linkage to the

FSGDS


Measurable

Objective

Toincreasethenumberofexportersfacilitated

Performance

Measure Indicator

Numberofexportawarenessandreadinessworkshopsfacilitatedandparticipatingin

Participationatthenumberlocaltradeexhibitions

Participationatanumberinternationaltradeexhibitions

Subscriptiontodata&informationsourcesformarketintelligenceanalysis

Performance

Target 2011/12

5exportawarenessandreadinessworkshopsfacilitatedandparticipatedinby31March2012

Participateat4localtradeexhibitionsby31March2012

Participateat3internationaltradeexhibitionsby31March2012

Subscribeto2information&datasourcesby31March2012

Actual Annual

Performance

Deviation

FDCfacilitatedand/participatedin5Exportawarenessandreadinessworkshops

FDCparticipatedat3localtradeexhibitions


FDCsubscribedto1data/informationsource

1tradeexhibitionwascancelledbytheorganisers

FDCdidnothavesuficientresources(personnelandbudget)toparticipateatinternationaltradeexhibitionsabroad

Thetargetwasnotachievedduetobudgetconstraints

Programme: Enterprise Development Sub-Programme: Export Promotion



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Strategic

Objective

Financehomeloansforlowincome/incomeearners

Linkage to the

FSGDS


Measurable

Objective

Loansgrantedagainstavailablebudget

Performance

Measure Indicator

Percentageofloansapprovedagainstavailablebudget

Housinginancingpolicyandproceduresreviewed

Performance

Target 2011/12

90%loansapprovedby31March2012

FDChousinginancingpolicyandproceduresreviewed30June2011

Actual Annual

Performance

Deviation



Theannualperformancetargetwasnotachievedbecausetherewasnobudgetallocationforlowcosthousing

Housinginancingpolicyandprocedureswerenotapplicableduringtheinancialyearduetounavailabilityofhomeloansbudget.PolicyandprocedurestobereviewedwhentheFDChasbudgettoallocateforinancinghomeloans

Programme: Housing Finance and Social InfrastructureSub-Programme: Housing Finance



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Objective

Linkage to the

FSGDS

Measurable

Objective

Performance

Measure Indicator

Percentageoftheinancingpolicyandproceduresimplemented

Needsanalysisforhousingconducted

Performance

Target 2011/12

Percentageoftheinancingpolicyandproceduresimplementedby31March2012

Needsanalysisforhousinginanceconductedby30June2011

Actual Annual

Performance

Deviation



Housinginancingpolicyandprocedureswerenotapplicableduringtheinancialyearduetounavailabilityofhomeloansbudget.Policyandprocedurestobereviewedwhenthecorporationhasbudgettoallocateforinancinghomeloans

TheFDChadnoresourcestoconducttheneedsanalysis

Programme: Housing Finance and Social InfrastructureSub-Programme: Housing Finance



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Strategic

Objective

Facilitateandprojectmanageprovincialsocialinfrastructureprojects

Linkage to the

FSGDS


Measurable

Objective

Numberofinfrastructureprojectscompleted

Performance

Measure Indicator

Numberofprojectscompleted

SignedMOUwithrelevantgovernmentdepartmentsandSLAforindividualprojects

Socialinfrastructuredevelopmentstrategydeveloped

Percentageofthesocialinfrastructuredevelopmentstrategyimplemented

Performance

Target 2011/12

2projectscompletedbyendMarch2012

SignedMOUwithrelevantgovernmentdepartmentsandSLAforindividualprojectsbyendJune2011

Socialinfrastructuredevelopmentstrategydevelopedby30June2011

100%ofthesocialinfrastructuredevelopmentstrategyimplemented31March2012

Actual Annual

Performance

Deviation

OneprojectwiththeDepartmentHealthisinprogress.

MOUwithrelevantgovernmentdepartmentsandSLAforindividualprojectshavebeensigned



Theannualtargetwasnotachievedbecausethedurationoftheprojectstakesmorethanayeartocomplete(i.e.15months).

ManagementdecidedagainstastrategyastheCorporationisonlydeemedanimplementingagentonbehalfoftheclientdepartments/municipalitiesfortheseprojects

SocialInfrastructuredevelopmentstrategyhasnotyetbeenapproved

Programme: Housing Finance and Social InfrastructureSub-Programme: Social Infrastructure



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P A G E 7 2

SEC TI ON

DEPARTMENTAL REPORTS

• DIRECTORSREPORT

• AUDIT&RISKCOMMITTEES,AUDITORSREPORT

&ANNUALFINANCIALSTATEMENTS

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P A G E 7 3


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:•SMME support – both financial (through loans) and non-financial

support•Property development and management•Providing investors with a comprehensive service in setting up

business •Providing export ready Free State companies with assistance in

identifying new markets and export opportunities for their products.

Chief Executive Officer Mr. T.L. Ramaema

Registered office 33 Kellner Street

Westdene

Bloemfontein

9301

Business address 33 Kellner Street

Westdene

Bloemfontein

9301

Postal address P.O. Box 989

Westdene

Bloemfontein

9300

Bankers ABSA

Corporate Secretary Ms. K.S. Mahlangu

Free State Development Corporation GroupFinancialStatementsfortheyearended31March2012

General Information

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P A G E 7 4


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

Index Page

Directors Approval 3

Director's Report 4 - 6

Draft Report of the Board Audit Committee

Report of the Auditor-General

7

Statement of Financial Position 8 - 9

Statement of Comprehensive Income 10

Statement of Changes in Equity

11 - 12

Statement of Cash Flows

13

Accounting Policies

13 - 28

Notes to the Financial Statements

29 - 83

The following supplementary information does not form part of the financial statements and is unaudited:

Detailed Income Statement

84 - 85


Index

75

76

79

80-86

87-88

89

90-91

92

93-107

108-162

164

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P A G E 7 5


The financial statements set out on pages 80 to 164, which have been prepared on the going concern basis, were approved bythe Chief Executive Officer as per Section 49(2)(b) of the PFMA on 28 June 2012 and signed by him:

Mr. T.L. Ramaema


Director’s Approval

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P A G E 7 6


The Directors of the Free State Development Corporation (FDC) take pleasure in submitting the Consolidated Financialstatements for the year ended 31 March 2012. The report outlines the performance of FDC during the year under review incompliance with the South African Generally Accepted Accounting Practice (SA GAAP), Public Finance Management Act(PFMA) and other legislation, as well as other Corporate Governance guidelines.

1. Constitution

The Free State Development Corporation is a provincial development agency constituted in terms of the Free StateDevelopment Corporation Act 6 of 1995 (as amended), effective from 15 September 1995.

2. Review of activities

Main business and operations

The objectives of FDC are:

a) the promotion and development of small, medium and micro enterprises;

b) to assist Free State based small, medium and micro enterprises with funding by advancing loans;

c) to assist Free State based small, medium and micro enterprises in financial distress;

d) to initiate economic empowerment objects that would benefit the Free State;

e) to promote investment in and trade with the Province and to identify, analyse, publicize, and market investment and tradeopportunities in the provincial economy, in such manner and by such means as the board of directors may from time to timedeem appropriate; and

f) to undertake, at the request of the responsible Member or other stakeholders or agencies activities for which the necessaryresources can be raised and which, in the opinion of the board of directors, will contribute to the strengthening of the provincialeconomy.

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

3. Going concern

The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basispresumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities,contingent obligations and commitments will occur in the ordinary course of business.

4. Directors interest in contracts

No contracts in which directors or officers of the Corporation had an interest have been entered into during the financial year.

5. Director

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 Act, and the following were on the Board during the year underreview:

Ms. S.M. Mazibuko (Chairperson), Mr. S.C.T. Makweya (Acting CEO until 15 November 2011), Mr. T.L. Ramaema (CEO from15 November 2011 to date), Prof. E.P. Ababio, Mr. M.S. Kumalo, Mr. M.D. Mofoti, Mr. L.R. Mutsi, Mrs. M.J. Ntshingila, Mr. I.Osman, Mr. M.I. Seoe, Mr. B.C. Stofile.

6. Corporate Secretary

Adv. K.L.K. Moahloli was the Acting Corporate Secretary of FDC from 10 October 2010 to 18 July 2011. Ms. K.S. Mahlanguwas the Corporate Secretary of FDC from 18 July 2011 to date.


Director’s Report

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P A G E 7 7


7. Interest in subsidiaries

The financial report in respect of the interests of the FDC in its subsidiaries and associates, listed below, is set out in theConsolidated Financial Statements of the Corporation:

- Canton Trading 123 (Pty) Ltd t/a Jomago Health** - Classic Number Trading 45 (Pty) Ltd** - ConframHarrismith Properties (Pty) Ltd** - Copper Moon Trading 429 (Pty) Ltd** - Cross Point Trading 23 (Pty) Ltd** - Golden Pond Trading 663 (Pty) Ltd** - Highland Furniture Factory (Pty) Ltd** - Mafube Risk and Insurance Brokers (Pty) Ltd* - Orofino Africa Jewellery Manufacturers (Pty) Ltd** - Phiritona Plastics (Pty) Ltd** - Rumar Manufacturing (Pty) Ltd** - Satinsky 167 (Pty) Ltd** - Scopefull 21 (Pty) Ltd** - Synthpro Holdings (Pty) Ltd** - Twin Cities Trading 129 (Pty) Ltd** - Welkom Diamond Cutting Works (Pty) Ltd** - QwaqwaDatnis* - Ligia Paper Industries (Pty) Ltd*

* Associated companies** Subsidiaries companies

Details of the Corporation's investment in subsidiaries are set out in note 5.

Subsidiary Audit OpinionCanton Trading 123 (Pty) Ltd t/a Jomago Health DisclaimerClassic Number Trading 45 (Pty) Ltd N/A - LiquidatedConfram Harrismith Properties (Pty) Ltd N/A - DeregisteredCopper Moon Trading 429 (Pty) Ltd DisclaimerCross Point Trading 23 (Pty) Ltd DisclaimerGolden Pond Trading 663 (Pty) Ltd QualifiedHighlands Furniture Factory (Pty) Ltd UnqualifiedOrofino Africa Jewellery Manufacturers (Pty) Ltd N/A - DeregisteredPhiritona Plastics (Pty) Ltd Awaiting opinionRumar Manufacturing (Pty) Ltd N/A - LiquidatedSatinsky 167 (Pty) Ltd N/A - LiquidatedScopefull 21 (Pty) Ltd Awaiting opinionSynthpro Holdings (Pty) Ltd N/A - LiquidatedTwin Cities Trading 129 (Pty) Ltd Awaiting opinionWelkom Diamond Cutting Works (Pty) Ltd N/A - Shares sold

8. Auditors

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

9. Relations with Stakeholders

There are no events recorded that have occurred with stakeholders that could materially affect the reported results andfinancial position of the FDC.


Director’s Report

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P A G E 7 8


10. Remuneration of Directors and Senior Management for the year ended 31 March 2012

Executive Management AnnualRemuneration

Annual Salary Allowances CorporationContribution

Other Total

Kgokotli MK - 173 561,180 250,615 140,530 64,795 1,017,120Moahloli KLK - 151 515,654 239,371 156,472 42,971 954,468Mahlangu K.S. - 190 364,231 168,032 73,305 16,029 621,597Kunene NI - 152 183,983 97,335 35,557 124,122 440,997Semppe DP - 153 427,466 210,592 117,590 35,622 791,270Finger KF - 166 515,654 305,726 100,387 42,971 964,738Komane E - 184 501,795 161,488 60,033 19,206 742,522Thlomelang KF - 182 568,621 211,957 70,664 7,131 858,373Welman LA - 183 595,363 161,921 70,687 6,883 834,854Mazibuko GG - 181 761,593 235,011 78,972 - 1,075,576Makweya SCT 677,040 261,034 998 115,434 1,054,506Ramaema TL - 191 343,431 177,202 56,552 - 577,185

6,016,011 2,480,284 961,747 475,164 9,933,206

Annual Directors' Remuneration for Non-ExecutiveDirectors

ExtendedDirectors fees

Travel Claims CorporationContribution

(UIF)

Total

Seoe MI - 931 15,800 2,061 158 18,019Ntshingila MJ - 935 88,400 5,916 725 95,041Stofile BC - 936 57,500 1,155 515 59,170Ababio EP - 939 94,200 7,848 825 102,873Kumalo MS - 940 98,000 13,607 906 112,513Osman I - 941 45,900 1,517 558 47,975Mutsi LR - 942 150,100 71,973 1,072 223,145Mazibuko SM - 943 86,500 - 566 87,066Mofoti MD 61,400 6,759 576 68,735Van Wyk JH - 946 13,000 - 130 13,130Ntshiea ME - 947 14,000 739 140 14,879Mohlahlo ME - 948 14,000 14,854 140 28,994

738,800 126,429 6,311 871,540


Director’s Report

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P A G E 7 9


The Free State Development Corporation Audit Committee is pleased to present their report for the financial year ended31 March 2012.

Audit Committee Responsibility

The function of the Audit Committee is primarily to assist the Head of the Corporation in discharging his duties relating to thesafeguarding of assets, effective management of liabilities and working capital, the operation of adequate systems and processof internal control, and the preparation of financial reports and annual statements.

The committee reports that it has complied with its responsibilities arising from Section 50 (1) of the PFMA and TreasuryRegulation 27.1.7.

The Audit Committee also reports that it has adopted appropriate formal terms of reference as its audit committee charter, hasregulated its affairs in compliance with this charter in discharging its responsibilities as contained therein.Audit Committee Members and Attendance:

The audit committee consists of the members listed hereunder and should meet five (5) times per annum as per its approvedterms of reference. During the current year five (5) meetings were held.

Name of Member Number of Meetings Attended

Mrs J van Wyk (Chairperson) 3Mr ME Mohlahlo 3Mr MD Mofoti 5Mr ME Ntshiea 4Mr I Osman 4

The effectiveness of internal control

The system of controls is designed to provide cost effective assurance that assets are safeguarded and that liabilities andworking capital is efficiently managed. In line with the PFMA and the King III Report on Corporate Governance requirements,Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate andeffective. This is achieved by means of the risk management process, as well as the identification of corrective actions andsuggested enhancements to the controls and processes.

Based on the work that was undertaken as part of the annual internal audit plan and Auditor General’s report, the system ofinternal control was found to be ineffective. During the year under review, several deficiencies in the system of internal controlsand deviations were reported by the internal auditors. In certain instances, the matters reported previously have not been fullyand satisfactorily addressed.

Evaluation of Annual Financial Statements

Lack of appropriate policies, procedures, control mechanisms, especially over the companies where the Corporation hasinvested monies and lack of capacity in certain strategic areas within the Corporation makes it difficult for the Corporation togenerate reliable, accurate and complete set of financial statements. Conclusion

My sincere appreciation is extended to all audit committee members for their valuable contribution and to the Chief ExecutiveOfficer and management as a whole for their support during the year under review.

Mrs Julia van Wyk


Draft Report of the Board Audit Committee

Chairperson of the Audit Committee

Mrs Julia van Wyk

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REPORT OF THE AUDITOR-GENERAL TO THE FREE STATE LEGISLATURE ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE FREE STATE DEVELOPMENT CORPORATION

REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

Introduction

1. IwasengagedtoaudittheconsolidatedandseparateinancialstatementsoftheFreeStateDevelopment Corporationanditssubsidiaries,whichcomprisetheconsolidatedandseparatestatementofinancialposition asat31March2012,theconsolidatedandseparatestatementsofcomprehensiveincome,changesinequity andcashlowsfortheyearthenended,andasummaryofsigniicantaccountingpoliciesandother explanatoryinformationassetoutonpages87to163.

Accounting authority’s responsibility for the consolidated inancial statements2. Theaccountingauthority is responsible for thepreparationandfairpresentationof theseconsolidatedand separateinancialstatementsinaccordancewithSouthAfricanStatementsofGenerallyAcceptedAccounting Practice(SAStatementsofGAAP)andtherequirementsofthePublicFinanceManagementActof SouthAfrica,1999(ActNo.1of1999)(PFMA),andforsuchinternalcontrolastheaccountingauthoritydetermines isnecessarytoenablethepreparationofconsolidatedandseparateinancialstatementsthatarefreefrom materialmisstatement,whetherduetofraudorerror.

Auditor-General’s responsibility

3. My responsibility is to express an opinion on the consolidatedand separate inancial statements basedon conductingtheauditinaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA), theGeneralNotice issued in terms thereofand InternationalStandardsonAuditing.Becauseof thematters describedintheBasisfordisclaimerofopinionparagraphs,however,Iwasunabletoobtainsuficient appropriateauditevidencetoprovideabasisforanauditopinion.

Basis for disclaimer of opinion

Investment property

4. Includedininvestmentpropertyinnote2totheconsolidatedandseparateinancialstatementsareproperties tothevalueofR9386113,whichwerefoundnottoberegisteredinthenameofthecorporation.Investment property,disclosed in note2 to the consolidatedand separateinancial statements, is thereforeoverstated byR9386113and retainedearningsare understatedby the sameamount. Inaddition, inmeasuring the fairvalueof investmentproperty,SAStatementofGAAP, IAS40 (AC135), Investmentpropertyparagraph 38requiresanentity todetermine thefairvalueof investmentpropertybasedonmarketconditionsat the endof thereportingperiod.Contrary to this requirement, thecorporationhasnotassessed theassumptions used in the valuation calculation of investment property for the past two inancial years. Alternative procedures indicated that the corporation’s assumptions are inaccurate. Therefore the assumptions used to assess the fair value of investment property by the corporation do not adhere to the requirements of the standard. Consequently, I was unable to determine the adjustment required on investment property of R262 951 336 (2011: R255 210 980) disclosed in note 2 as well as the fair value adjustment to be recognised in the statement of inancial position in the consolidated and separate inancial statements.

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Other inancial assets 5. SA Statement of GAAP, IAS 39 Financial Instruments: Recognition and measurement requires an entity to assess at the end of each reporting period whether there is any objective evidence that a inancial asset or group of inancial assets is impaired. Contrary to this requirement, the entity only impaired loans with outstanding balances of 90 days and more without including loans aged between 0 to 90 days. The corporationhasnotassessedtheimpactofsecuritiesamountingtoR45236993ontheimpairmentcalculation. The fair value of securities held by the corporation for inancial loans granted, amounting to R215 759 652, had not been assessed by a professional valuator for the past two inancial periods. An unexplaineddifferenceofR3234655was identiiedbetween thedetailed loan listingsand the separate inancial statements. In addition, the corporation did not impair long outstanding business loans amounting toR12344529,whichwereprovidedtosubsidiarycompaniesofthecorporationinprioryearsandinwhich the corporation has previously fully impaired its investment and shareholder loans in these companies. Alternativeauditprocedurescouldnotbeperformedduetothese limitations.Consequently, Iwasunableto determinetheadjustmentrequiredonotherinancialassetswithcarryingamountsofR154710599(2011: R208 383 324) and R165 109 369 (2011: R213 404 079) and accumulated impairments amounting to R270750480(2011:R236599177)asdisclosedinnote8totheconsolidatedandseparateinancial statements.

6. Paragraphs 60 and 61 of SA Statement of GAAP, IAS 1 (AC 101) Presentation of Financial Statements require an entity to present current and non-current assets as separate classiications in its statement of inancialpositionbasedonamounts tobesettledor recoveredwithin12monthsafter the reportingperiod andmore than12monthsafter the reportingperiod.Contrary to this requirement, the corporation has not separatelydisclosedtheinstalmentamountstoberepaidonloanswithinthenext12monthsrelatedtoother inancial assets disclosed in note 8 to the consolidated and separate inancial statements. Consequently, other inancial assets disclosed under non-current assets in the consolidated and separate statement of inancialpositionareoverstatedandotherinancialassetsdisclosedundercurrentassets intheconsolidated andseparatestatementofinancialpositionareunderstatedbyR24078260.

7. Paragraphs43and46ofSAStatementofGAAP,IAS39FinancialInstruments:Recognitionandmeasurement require an entity to initially recognise loans at fair value and subsequently at amortised cost using the effective interest rate method. Contrary to the above the corporation has granted an interest-free loan amountingtoR10002850whichisrepayableiniveequalinstalmentsofwhichtheirstinstalmentispayable in2021.Furthermore, this loanhasnotbeen initiallyandsubsequentlymeasuredusingtheeffective interest ratemethod.Consequently,otherinancialassetsdisclosedinnote8totheconsolidatedandseparateinancial statementsareoverstatedbyR6715852and the fair valueadjustment in the consolidatedand separate statementofcomprehensiveincomeisunderstatedbyR6715852.

Trade and other receivables

8. SA Statement of GAAP, IAS 39 Financial Instruments: Recognition and measurement requires an entity to assess at the end of each reporting period whether there is any objective evidence that a inancial asset or group of inancial assets is impaired. The corporation did not impair receivables with a balance of R5849936whichhavebeenoutstandingfor longerthan90days,resultingintradeandotherreceivables beingoverstatedandimpairmentsunderstatedbyR5849936innote14oftheconsolidatedandseparate inancial statements. Furthermore, contrary to this requirement, the corporation only impaired receivables withoutstandingbalancesof90daysandmore,without includingreceivablesagedbetween0to90days. Alternativeprocedurescouldnotbeperformedtodeterminewhetheranyadjustmentswererequiredontrade and other receivables amounting to R35 201 048 (2011: R34 072 776) and R27 368 087 (2011: R22 429 258). In addition, service income transactions amounting to R2 757 443 relating to the current inancial year were only recorded after the inancial year-end. Consequently, service income in note 21

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isunderstatedandtradeandotherreceivablesinnote14areunderstatedbyR2757443intheconsolidated andseparateinancialstatements.

9. AsaresultofthetothesigniicanceofthemattersdescribedintheprecedingparagraphsaboveindingsI wasunabletoobtainsuficientappropriateauditevidencefortheriskmanagementdisclosuresassetout in note41totheinancialstatements.Consequently, Iwasunabletodeterminewhetheranyadjustmentstothe amounts disclosed in the riskmanagement note in the separateand consolidatedinancial statementswere necessary.

Retained earnings

10. BaddebtsrecoveredandsundryincomeamountingtoR5614258wereincludedinotherincomeasdisclosed innote23totheconsolidatedandseparateinancialstatementsforthecurrentyear.However,theseamounts werereceivedinthepriorinancialyear.Service-relatedexpensesamountingtoR2228751wereincluded in the cost of sales as disclosed in note 22 to the consolidated and separate inancial statements for the currentyear; however, theseexpenseswere incurred in thepriorinancialyear.Consequently, other income is overstated by R5 614 258, cost of sales is overstated by R2 228 751 and retained earnings are understated by R3 385 507 in the consolidated and separate inancial statements. In addition, suficient appropriate audit evidence was not available for consolidated retained earnings amounting to R420811750(2011:R479854921)asdisclosedintheconsolidatedstatementofchangesinequityasa resultofdisclaimerauditopinionsbeingissuedonconsolidatedsubsidiarycompanieswithretainedearnings amountingtoR26769920(2011:R39166593).Alternativeauditprocedurescouldnotbeperformeddue totheselimitations.Consequently,Iwasunabletodeterminewhetheranyadjustmentstoconsolidatedretained earningswerenecessary.

Trade and other payables

11. Iwasunabletoobtainsuficientappropriateauditevidencefortradeandotherpayablesintheconsolidated inancialstatementsamountingtoR101919938(2011:R75750914)asaresultofdisclaimerauditopinions being issued on consolidated subsidiary companies with trade and other payable balances amounting to R1 505 581 (2011: R6 377 294). Alternative audit procedures could not be performed due to these limitations.Consequently, Iwasunable todeterminewhetheranyadjustments to theconsolidated tradeand otherpayableswerenecessary.

Statement of cash lows12. I was unable to obtain suficient appropriate audit evidence for the consolidated and separate statement of cash lows and the related notes due to the material effect of the above misstatements and scope limitationsontheconsolidatedandseparatestatementofcashlowsandrelatednotes.

Statement of changes in equity

13. Iwasunabletoconirmthattheconsolidatedandseparatestatementsofchangesinequityandtherelated noteswerefairlystateddue to thematerialeffectof theabovemisstatementsandscope limitationson the consolidatedandseparatestatementsofchangesinequity.Disclaimer of opinion

14. BecauseofthesigniicanceofthemattersdescribedintheBasisfordisclaimerofopinionparagraphs,Ihave not been able to obtain suficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly,Idonotexpressanopinionontheseinancialstatements.

Emphasis of matters

15. Idrawattentiontothemattersbelow.

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Signiicant uncertainties 16. Withreferencetonote36totheinancialstatements,thecorporationisthedefendantinalawsuitamounting toR6500000.ThecorporationisopposingthecontractofsaleofapropertyforR6500000.Itopposed theapplicationandthecourtruled infavourof theotherparty.NoticeofApplicationforLeavetoAppeal was iled in theHighCourt on30March2010and leave toappealwasgrantedby theHighCourt. The corporation is awaiting thedate of the hearing of theappeal. The ultimate outcomeof thematter cannot currently be determined and no provision for any liability that may result has been made in the inancial statements.

Restatement of corresponding igures17. Asdisclosed in notes39and40 to theinancial statements, the correspondingigures for the statement of inancialposition,thestatementofcomprehensiveincomeandthenotestotheinancialstatementshavebeen restated as a result of errors discovered during the current inancial year in respect of errors originating duringtheyearended31March2011.

Material losses and impairments

18. Asdisclosedinnote8totheseparateinancialstatements,material impairmentsrecognisedduringtheyear onotherinancialassets totheamountofR34151303(2011:R37249152)were incurredasaresultof irrecoverableloans.

19. Asdisclosed in note14 to the separateinancial statements, cumulativematerial impairmentson tradeand other receivables to the amount of R8 675 073 (2011: R11 521 632) were incurred as a result of irrecoverabledebtors.

Irregular and fruitless and wasteful expenditure

20. Asdisclosed in note45 to the consolidatedand separateinancial statements, the corporationhas incurred irregularexpenditureduringthecurrentyearamountingtoR2216995(2011:R1919854)asaresultof non-compliancewiththecorporation’ssupplychainmanagementregulations.

21. Asdisclosed in note46 to the consolidatedand separateinancial statements, the corporationhas incurred fruitlessandwastefulexpenditureduringthecurrentyearamountingtoR1139901(2011:R70478)asa result of compensationpaid toanoficial notmappedwithin the corporation’s organisational structureand latepaymentofaninvoice.

REPORTONOTHERLEGALANDREGULATORYREQUIREMENTS22. In accordancewith the PAAand theGeneralNotice issued in terms thereof, I report the followingindings relevanttoperformanceagainstpredeterminedobjectives,compliancewithlawsandregulationsandinternal control,butnotforthepurposeofexpressinganopinion.

Predetermined objectives

23. IperformedprocedurestoobtainevidenceabouttheusefulnessandreliabilityoftheinformationintheReport onpredeterminedobjectivesfor2011-2012assetoutonpages37to71oftheannualreport.

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24. The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability. The usefulness of information in the annual performance report relates to whetheritispresentedinaccordancewiththeNationalTreasuryannualreportingprinciplesandwhetherthe reportedperformanceisconsistentwiththeplannedobjectives.Theusefulnessofinformationfurtherrelatesto whether indicators and targets are measurable (i.e. well deined, veriiable, speciic, measurable and time bound) and relevant as required by the National Treasury Framework for managing programme performanceinformation.)

25. Thereliabilityof the information in respectof theselectedprogrammes isassessedtodeterminewhether it adequatelyrelectsthefacts(i.e.whetheritisvalid,accurateandcomplete).

26. Therewere nomaterial indingson theReport onpredeterminedobjectives for2011-2012 concerning the usefulnessandreliabilityoftheinformation.

Additional matter

27. Althoughnomaterialindingsconcerning theusefulnessandreliabilityof theperformance informationwere identiiedintheReportonpredeterminedobjectivesfor2011-2012,Idrawattentiontothefollowingmatter below.Thismatterdoesnothaveanimpactonthepredeterminedobjectivesauditindingsreportedabove.

Achievement of planned targets

28. Ofthetotalnumberofplannedtargets,only51wereachievedduringtheyearunderreview.Thisrepresents 52%oftotalplannedtargetsthatwerenotachievedduringtheyearunderreview.Thiswasmainlyduetothe factthatindicatorsandtargetswerenotsuitablydevelopedduringthestrategicplanningprocess.

Compliance with laws and regulations

29. Iperformedprocedurestoobtainevidencethattheentityhascompliedwithapplicablelawsandregulations regardinginancialmatters,inancialmanagementandotherrelatedmatters.Myindingsonmaterialnon- compliancewithspeciicmattersinkeyapplicablelawsandregulationsassetoutintheGeneralNoticeissued intermsofthePAAareasfollows:

Strategic planning and performance management

30. Theaccountingauthoritydidnot,inconsultationwithitsexecutiveauthority,concludeashareholder’scompact, whichdocumentsthemandatedkeyperformancemeasuresandindicatorstobeattainedbythecorporation, fortheyearunderreviewasrequiredbyTreasuryRegulation29.2.1.and29.2.2.

31. Theaccountingauthoritypreparedacorporateplanthatdidnotincludethekeyperformancemeasuresand indicatorsforassessingthepublicentity’sperformanceindeliveringthedesiredoutcomesandobjectivesofits subsidiaryundertakingsasrequiredbyTreasuryRegulations29.1.1(c).

Annual inancial statements, performance and annual report32. Theinancialstatementssubmittedforauditingwerenotpreparedinaccordancewiththeprescribedinancial reporting frameworkand supportedby fullandproper recordsas requiredby section55(1)(a)and (b)of the PFMA. Material misstatements identiied by the auditors in the submitted inancial statements were not adequatelycorrectedandthesupportingrecordscouldnotbeprovidedsubsequently,whichresulted in the inancialstatementsreceivingadisclaimerofauditopinion.

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33. The Member of Executive Committee (MEC) of the Department Economic Development, Tourism and EnvironmentalAffairs(DETEA)didnottablethe2010-11annualreportintheprovinciallegislaturewithinone monthafter theaccountingoficer received theaudit report, as requiredby section65(1)(a) of thePFMA.

34. Theaccountingauthoritydidnotsubmittheinancialstatementsforauditingwithintwomonthsaftertheendof inancialyear,asrequiredbysection55(1)(c)(i)ofthePFMA.

Revenue management

35. Theaccountingauthoritydidnottakeeffectiveandappropriatestepstocollectallmoneydue,asrequiredby section51(1)(b)(i)ofthePFMAandTreasuryRegulations31.1.2(a)and31.1.2(e).

Internal control

36. Iconsideredinternalcontrolrelevanttomyauditoftheinancialstatements,andtheReportonpredetermined objectives for 2011-2012 and compliance with laws and regulations. The matters reported below under the fundamentals of internal control are limited to the signiicant deiciencies that resulted in the basis for disclaimerofopinionandtheindingsoncompliancewithlawsandregulationsincludedinthisreport.

Leadership

37. The accounting authority was not able to fully exercise effective and eficient oversight responsibility over inancialandperformancereporting,aswellascompliancewithlawsandregulations,asaresultofchanges inthecompositionofitsleadership.

38. Theaccountingauthorityandmanagement havenot implementedeffectiveandeficientmonitoring controls over theoperationsof theentityaswellas the subsidiariesandassociates.Asa result, theauditoutcomes oftheentityanditssubsidiaries’andassociates’inancialoperationsimpactednegativelyontheconsolidated inancialresultsoftheentity.

39. Theentityincurredmaterialimpairmentlossesonloansandaccountsreceivableduringthecurrentandprior inancialyear.Themonitoringoftheperformanceoftheloanandtheinvestmentpropertyportfolioandthe assessmentofthereasonsfortheimpairmentswerenotadequatelyperformed,whichhadanegativeimpact onthesafeguardingoftheentity’sinancialassets.

40. The accounting authority has not prioritised the appointment of additional technically competent inance staffmemberswhoareexperiencedinapplyingthetechnicalrequirementsoftheaccountingstandardsand who will oversee technical accounting transactions and processes within the corporation, including valuation of investmentproperty,assessmentof impairmentonotherinancialassetsandtradeandotherreceivables. These staffmemberswillalsoassistwith thecompilationof consolidatedandseparateinancial statements.

Financial and performance management

41. Manual or automated controls were not designed to ensure that the transactions occurred, had been authorised,andwerecompletelyandaccuratelyprocessed.Theconsolidatedinancial statements contained material misstatements, which were identiied during the audit process. Appropriate communication on signiicant transactionsdid notalways takeplaceona timelybasisbetween the corporation’sdepartments andsenioroficials,whichresultedinmaterialmisstatements.

42. Thecorporationhasmultipleinancialaccountingsystemsandmanagementdidnotimplementandadhereto controls over daily and monthly processing and reconciling of transactions and accounting records.

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43. Externalvaluationson loansecuritiesand investmentpropertyportfolios, includingowner-occupiedpremises, havenotbeenprioritisedtoensurethatfairvaluesarebeingaccuratelydeterminedandtoassessthechange intheapplicableassumptionsusedinthevaluation.

Governance

44. Materialmisstatementswereidentiiedonmultiplelineitemsduringtheauditprocess.Theseshortcomingswere notidentiiedandaddressedinthereviewprocessesofthecorporationandthegovernanceprocesseswere notthoroughenoughtopreventtheoccurrenceofthesemisstatements.

45. Management did not implement appropriate risk management activities to ensure that regular risk assessments,includingITrisksandfraudprevention,areconductedandthatariskstrategytoaddresstherisks ismonitored.

46. Internalauditandmanagementhavenotbeenabletoassessprogressmadeinaddressingprioryearaudit indingsandduetolateinalisationofpriorauditstheseprocesseshavenotbeenprioritised.

OTHER REPORTS

Investigations

47. AninvestigationisbeingconductedregardinglostcashattheThaboMofutsanyanaDistrict.Thereportisinthe process of being inalised between the internal audit unit and the respective management units and once completeditwillbetabledtomanagement,theauditcommitteeandtheboard.

48. Aninvestigationisbeingconductedregardinghomeandvehicleloansgrantedtoemployees.Thedraftreport isbeingreviewedbytheinternalauditunitandoncecompleteditwillbetabledtomanagement, theaudit committeeandtheboard.

49. An investigation isbeing conductedbya serviceprovider regarding theusageofpetrol cards. Theperiod under review is 1 November 2008 to 30 April 2012. Once completed the report will be tabled to management,theauditcommitteeandtheboard.

50. Aninvestigationbyaserviceprovider,whichcommencedsubsequenttoyear-end,iscurrentlybeingconducted intocertainirregularitieswhichwereidentiiedforrentalproperties.

51. Aninvestigationbyinternalaudit,whichcommencedsubsequenttoyear-end,iscurrentlybeingconductedinto theappointmentofaserviceproviderforprojectmanagement.

Auditor-GeneralBloemfontein10October2012

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Group Corporation

Figures in Rand Note(s) 2012 2011 2010 2012 2011 2010

Assets

Non-Current Assets

Investment property 2 262,951,336 255,210,980 259,653,660 262,951,336 255,210,980 257,303,286

Property, plant and equipment 3 42,889,470 42,701,063 30,220,946 23,934,061 22,474,729 11,337,088

Intangible assets 4 2,408,362 3,018,672 4,198,548 2,408,362 3,018,672 4,198,548

Investments in subsidiaries 5 - - - 57 61 2,271,805

Investments in associates 6 792,683 821,151 726,899 49,000 49,000 49,000

Other financial assets 8 115,689,063 166,681,613 211,655,219 126,087,833 171,702,368 218,538,069

Deferred Income 10 4,347,843 3,935,473 3,923,845 4,347,843 3,935,473 3,923,845

Other investments 12 58,805 482,418 1,236,470 54,250 54,250 54,250

429,137,562 472,851,370 511,615,587 419,832,742 456,445,533 497,675,891

Current Assets

Inventories 13 5,217,342 4,946,931 4,935,906 2,678,180 2,678,180 4,785,438

Other financial assets 8 39,021,536 41,701,711 35,033,079 39,021,536 41,701,711 37,089,558

Trade and other receivables 14 35,201,048 34,072,776 27,627,650 27,368,087 22,429,258 18,610,010

Other investments 12 - - - 1 1 236,000

Cash and cash equivalents 15 55,630,910 29,020,639 57,384,235 52,177,237 25,846,923 48,473,406

135,070,836 109,742,057 124,980,870 121,245,041 92,656,073 109,194,412

Non-current assets held for saleand assets of disposal groups

16 2,400,000 - - 2,400,000 - -

Total Assets 566,608,398 582,593,427 636,596,457 543,477,783 549,101,606 606,870,303

Equity and Liabilities

Equity

Equity Attributable to EquityHolders of Parent

Reserves 17 2,706,816 3,130,429 4,729,129 3,644,204 3,644,204 3,644,204

Retained income 420,811,750 476,724,492 543,350,202 410,448,838 454,214,367 528,046,870

423,518,566 479,854,921 548,079,331 414,093,042 457,858,571 531,691,074

Non-controlling interest 2,593,377 (9,137,488) (15,147,632) - - -

426,111,943 470,717,433 532,931,699 414,093,042 457,858,571 531,691,074

Liabilities

Non-Current Liabilities

Other financial liabilities 18 1,795,078 4,611,120 4,683,803 1,487,712 1,517,806 1,590,826

Finance lease obligation 19 13,757 429,815 433,795 - - -

Deferred expense 10 435,144 435,144 435,144 435,144 435,144 435,144

Retirement benefit obligation 11 26,349,000 22,718,000 19,745,752 26,349,000 22,718,000 19,745,752

Deferred tax 9 4,245,653 4,533,680 5,026,144 - - -

32,838,632 32,727,759 30,324,638 28,271,856 24,670,950 21,771,722

Current Liabilities

Other financial liabilities 18 5,101,001 2,808,043 77,000 5,101,001 2,808,043 77,000

Current tax payable 626,987 116,621 - - - -

Finance lease obligation 19 - 3,984 - - - -

Operating lease liability 10 9,545 46,637 68,697 9,545 46,637 68,697

Trade and other payables 20 101,919,938 75,750,914 72,947,210 96,002,339 63,717,405 53,261,810

Bank overdraft 15 352 422,036 247,213 - - -

107,657,823 79,148,235 73,340,120 101,112,885 66,572,085 53,407,507


Statement of Financial Position

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Group Corporation

Figures in Rand Note(s) 2012 2011 2010 2012 2011 2010

Total Liabilities 140,496,455 111,875,994 103,664,758 129,384,741 91,243,035 75,179,229

Total Equity and Liabilities 566,608,398 582,593,427 636,596,457 543,477,783 549,101,606 606,870,303


Statement of Financial Position

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Group Corporation

Figures in Rand Note(s) 2012 2011 2012 2011

Revenue 21 210,338,185 189,250,920 156,392,718 130,038,418

Cost of sales 22 (105,340,757) (88,443,578) (102,180,261) (78,851,556)

Gross profit 104,997,428 100,807,342 54,212,457 51,186,862

Other income 23 21,448,842 14,116,522 14,084,352 4,458,939

Operating expenses 26 (112,680,608) (109,374,107) (68,570,086) (91,388,744)

Administrative Expenses 25 (13,986,236) (26,910,560) (7,460,145) (10,953,126)

Employee related cost 24 (77,017,456) (69,556,490) (60,197,586) (54,659,145)

Operating loss 27 (77,238,030) (90,917,293) (67,931,008) (101,355,214)

Interest received 28 26,548,804 30,319,456 26,483,169 29,500,712

Income from equity accounted investments 6 (28,468) 94,252 - -

Finance costs 29 (2,793,656) (2,453,774) (2,317,690) (1,978,000)

(Loss) profit before taxation (53,511,350) (62,957,359) (43,765,529) (73,832,502)

Taxation (320,265) (1,195,440) - -

(Loss) profit for the year (53,831,615) (64,152,799) (43,765,529) (73,832,502)

Other comprehensive income:

Available-for-sale financial assets adjustments (423,613) (1,386,730) - -

Gains and losses on property revaluation - (211,970) - -

Other comprehensive (loss) income for the year netof taxation

32 (423,613) (1,598,700) - -

Total comprehensive (loss) income (54,255,228) (65,751,499) (43,765,529) (73,832,502)

(Loss) profit attributable to :

Owners of the parent (55,912,744) (66,625,703) (43,765,529) (73,832,502)

Non-controlling interest 2,081,129 2,472,904 - -

(53,831,615) (64,152,799) (43,765,529) (73,832,502)

Total comprehensive (loss) income attributable to:

Owners of the parent (56,336,357) (68,224,403) (43,765,529) (73,832,502)

Non-controlling interest 2,081,129 2,472,904 - -

(54,255,228) (65,751,499) (43,765,529) (73,832,502)


Statement of Comprehensive Income

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Figures in Rand

Revaluationreserve

Fair valueadjustment

assets-available-for-sale reserve

Other NDR Total reserves Retainedincome

Totalattributable toequity holdersof the group /corporation

Non-controllinginterest

Total equity

Group

Opening balance as previously reported 3,856,174 632,678 (309,265) 4,179,587 518,386,963 522,566,550 (15,147,632) 507,418,918AdjustmentsPrior period error - 549,542 - 549,542 24,963,239 25,512,781 - 25,512,781

Balance at 01 April 2010 as restated 3,856,174 1,182,220 (309,265) 4,729,129 543,350,202 548,079,331 (15,147,632) 532,931,699Changes in equityTotal comprehensive income for the year (211,970) (1,386,730) - (1,598,700) 7,829,045 6,230,345 2,472,904 8,703,249Disposal of interest - - - - - - 3,537,240 3,537,240

Total changes (211,970) (1,386,730) - (1,598,700) 7,829,045 6,230,345 6,010,144 12,240,489

Opening balance as previously reported 3,644,204 (204,510) (309,265) 3,130,429 551,179,247 554,309,676 (9,137,881) 545,171,795AdjustmentsPrior period errors - - - - (74,454,753) (74,454,753) 393 (74,454,360)

Balance at 01 April 2011 as restated 3,644,204 (204,510) (309,265) 3,130,429 476,724,494 479,854,923 (9,137,488) 470,717,435Changes in equityTotal comprehensive income for the year - (423,613) - (423,613) (55,912,744) (56,336,357) 2,081,129 (54,255,228)Disposal of interest - - - - - - 9,649,736 9,649,736

Total changes - (423,613) - (423,613) (55,912,744) (56,336,357) 11,730,865 (44,605,492)

Balance at 31 March 2012 3,644,204 (628,123) (309,265) 2,706,816 420,811,750 423,518,566 2,593,377 426,111,943

Note(s) 17 & 32 32 32



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Corporation

Opening balance as previously reported 3,644,204 - - 3,644,204 503,083,631 506,727,835 - 506,727,835AdjustmentsPrior period error - - - - 24,963,239 24,963,239 - 24,963,239

Balance at 01 April 2010 as restated 3,644,204 - - 3,644,204 528,046,870 531,691,074 - 531,691,074Changes in equityTotal comprehensive income for the year - - - - (843,393) (843,393) - (843,393)

Total changes - - - - (843,393) (843,393) - (843,393)

Opening balance as previously reported 3,644,204 - - 3,644,204 527,203,477 530,847,681 - 530,847,681AdjustmentsPrior period errors - - - - (72,989,110) (72,989,110) - (72,989,110)

Balance at 01 April 2011 as restated 3,644,204 - - 3,644,204 454,214,367 457,858,571 - 457,858,571Changes in equityTotal comprehensive income for the year - - - - (43,765,529) (43,765,529) - (43,765,529)

Total changes - - - - (43,765,529) (43,765,529) - (43,765,529)

Balance at 31 March 2012 3,644,204 - - 3,644,204 410,448,838 414,093,042 - 414,093,042

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Group Corporation


Cash flows from operating activities

Cash generated from operations 33 2,333,523 (31,432,189) 3,904,035 (47,314,529)

Interest income 26,548,804 30,319,456 26,483,169 29,500,712

Dividends received 464,132 869,593 464,132 869,593

Finance costs (2,793,656) (2,453,774) (2,317,690) (1,978,000)

Net cash from operating activities 26,552,803 (2,696,914) 28,533,646 (18,922,224)

Cash flows from investing activities

Purchase of property, plant and equipment 3 (3,144,000) (12,922,477) (3,020,570) (12,475,519)

Sale of property, plant and equipment 3 698,361 6,938,363 38,362 47,006

Purchase of investment property 2 (7,740,355) (2,350,374) (7,740,356) (2,350,374)

Sale of investment property 2 - 4,371,454 - 2,021,080

Purchase of other intangible assets 4 - (33,000) - (33,000)

Net loans redeemed and granted 13,609,147 (21,345,471) 11,463,232 9,586,549

Acquisition of non-current assets held for sale (2,400,000) - (2,400,000) -

Net cash from investing activities 1,023,152 (25,341,505) (1,659,332) (3,204,258)

Cash flows from financing activities

Net movement in financial assets (544,000) (500,000) (544,000) (500,000)

Net cash from financing activities (544,000) (500,000) (544,000) (500,000)

Total cash movement for the year 27,031,955 (28,538,419) 26,330,314 (22,626,482)

Cash at the beginning of the year 28,598,603 57,137,022 25,846,923 48,473,405

Total cash at end of the year 15 55,630,558 28,598,603 52,177,237 25,846,923


Statement of Cash Flows

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1. Presentation of Financial Statements

Reporting Entity

Free State Development Corporation establishes and develops sustainable SMME's in the Free State through providingfinancial and business development services.

The objectives of FDC are:

a) the promotion and development of small, medium and micro enterprises;

b) to assist Free State based small, medium and micro enterprises with funding by advancing loans;

c) to assist Free State based small, medium and micro enterprises in financial distress;

d) to initiate economic empowerment objects that would benefit the Free State;

e) to promote investment in and trade with the Province and to identify, analyse, publicize, and market investment and tradeopportunities in the provincial economy, in such manner and by such means as the board of directors of directors may fromtime to time deem appropriate; and

f) to undertake, at the request of the responsible Member or other stakeholders or agencies activities for which the necessaryresources can be raised and which, in the opinion of the board of directors, will contribute to the strengthening of the provincialeconomy.

The Corporation was established in terms of the Free State Development Act 6 of 1995 (as amended by Act 5 of 2010) by theFree State Provincial Government. The address of its registered office is: 33 Kellner Street, Westdene, Bloemfontein, 9301.

The consolidated financial statements of the Group as at and for the year ended 31 March 2012 comprise the Free StateDevelopment Corporation (referred to as the “Parent entity” or “Corporation”) and its subsidiaries (together referred to as the“Group”) and the Group’s interest in associates and jointly controlled entities.

Basis of preparation

Statement of compliance

The consolidated financial statements have been prepared in accordance with South African Statements of Generally AcceptedAccounting Practice.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis and going concern basis, except whereindicated otherwise in the accounting policies below:

Functional and presentation currency

These consolidated financial statements are presented in South African Rand (R), which is the Group’s functional currency.

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with South African Statements of Generally AcceptedAccounting Practice requires management to make judgments, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from theseestimates. Estimates and underlying assumptions are reviewed on an on going basis. Revisions to accounting estimates arerecognised in the period in which the estimates are revised and in any future periods affected.

Changes in accounting policies

These accounting policies are consistent with the previous period.

Overview

The Board of Directors decided that consolidated financial statements of the Group as at and for the year ended 31 March2012 should be prepared in conformity with South African Statements of Generally Accepted Accounting Practice.


Accounting Policies

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With reference to the above, the Group has changed its accounting policies in the following areas:

• Accounting for business combinations;• Accounting for acquisitions of non-controlling interests.

Accounting for business combinations

The Group has adopted early IFRS 3 Business Combinations (2008) and IAS 27 Consolidated and Separate FinancialStatements (2008) for all business combinations occurring in the financial year starting 1 April 2007. All business combinationsoccurring on or after 1 January 2007 are accounted for by applying the acquisition method.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Inassessing control, the Group takes into consideration potential voting rights that currently are exercisable. The acquisition dateis the date on which control is transferred to the acquirer. Judgment is applied in determining the acquisition date anddetermining whether control is transferred from one party to another.

The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired andliabilities assumed, all measured as of the acquisition date.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previousowners of the acquiree, and equity interests issued by the Group.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a presentobligation and arises from a past event, and its fair value can be measured reliably.

The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree.Transaction costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, duediligence fees, and other professional and consulting fees are expensed as incurred.

The change in accounting policy was applied prospectively and had no material impact on the consolidated financialstatements.

Accounting for acquisitions of non-controlling interests

The Group has adopted early IFRS 3 Business Combinations (2008) and IAS 27 Consolidated and Separate FinancialStatements (2008) for acquisitions of non-controlling interests occurring in the financial year starting 1 April 2007.

Under the new accounting policy, acquisitions of non-controlling interests are accounted for as transactions with equity holdersin their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions.

The change in accounting policy was applied prospectively and had no material impact on the consolidated financialstatements.

New Standards and Interpretations

The following are new and amended standards and interpretations that are not yet effective and have not been early adoptedby the Corporation:

Standard: Details of amendment: Annual periodsbeginning on or after:

IFRS 7 • Amendments require entities to disclose gross amounts subject to rights 1 January 2013of set-off, amounts set off in accordance with the accounting standardsfollowed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off its balance.sheet and the effects of rights of set-off on the entity's rights and obligations.

IFRS 9 • New standard that forms the first part of a three-part project to replace 1 January 2015IAS 39 Financial Instruments: Recognition and Measurement.


Accounting Policies

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IFRS 10 • New standard that replaces the consolidation requirements in SIC-12 1 January 2013Consolidation - Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. Standards build on existing principles by identifying the concept of control as the determining factor in whether anentity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess.

IFRS 11 • New standard that deals with the accounting for joint arrangements and 1 January 2013focuses on the rights and obligations of the arrangement, rather than its legal form. Standard requires a single method for accounting for interest in jointly controlled entities.

IFRS 12 • New and comprehensive standard on disclosure requirements for all 1 January 2013forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

IAS 16 • Annual Improvements 2009-2011 Cycle: Amendments to the recognition 1 January 2013and classification of servicing equipment.

IAS 39 • Amendments to the accounting for current and future obligations resulting 1 January 2013from the provision of defined benefit plans.

IAS 27 • Consequential amendments resulting from the issue of IFRS 10,11 and 1 January 201312.

IAS 28 • Consequential amendments resulting from the issue of IFRS 10, 11 and 1 January 201312.

IAS 32 • Amendments require entities to disclose gross amounts subject to rights 1 January 2013of set-off, amounts set off in accordance with the accounting standardsfollowed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balancesheet and the effects of rights of set-off on the entity's rights and obligations.

Annual Improvements 2009 - 2011 Cycle: Amendments to clarify the tax effectof distribution to holders of equity instruments.

IAS 34 • Annual Improvements 2009 - 2011 Cycle: Amendments to improve the 1 January 2013disclosures for interim financial reporting and segment information fortotal assets and liabilities.

The following interpretations are effective in 2010 but not relevant:

Interpretation Details of amendments Annual periods beginning on or after

IFRIC 9 • Scope of IFRIC 9 and revised IFRS 3. 1 July 2009

IFRIC 13 • Clarification on the intended meaning of the term “fair value” in respect of 1 January 2011award credits.

IFRIC 16 • Amendment to the restriction on the entity the entity that can hold hedging 1 July 2009instruments.

IFRIC 17 • Distribution on Non-cash Asset to Owners. 1 July 2009

IFRIC 18 • Transfers of Assets from Customers. 1 July 2009

IFRIC 19 • Extinguishing Financial Liabilities with Equity Instruments. 1 April 2010


Accounting Policies

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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 Corporation.

Subsidiaries

Subsidiaries are defined as entities in which the Corporation, directly or indirectly, has an interest of more than one half of thevoting rights or otherwise has power to govern the financial and operating policies of the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that controlcommences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary toalign them with the policies adopted by the Group.

The cost method is used to account for the acquisition of subsidiaries. All intercompany transactions, balances and unrealisedgains/losses on transactions between Group companies are eliminated.

Investment in associates and jointly controlled entities (equity accounted investees)

Associates are those entities in which the Group has significant influence, but not control, over the financial and operatingpolicies.

Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of anotherentity, but is not eligible to exercise control over the entity.

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement andrequiring unanimous consent for strategic financial and operating decisions.

Investments in associates and jointly controlled entities are accounted for using the equity method (equity accounted investees)and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulatedimpairment losses.

The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equityaccounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significantinfluence or joint control commences until the date that significant influence or joint control ceases.

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest,including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extentthat the Group has an obligation or has made payments on behalf of the investee.

Jointly controlled operations

A jointly controlled operation is a joint venture carried on by each venturer using its own assets in pursuit of the joint operations.

The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course ofpursuing the joint operation and the expenses that the Group incurs and its share of the income that it earns from the jointoperation.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, areeliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extentof the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to theextent that there is no evidence of impairment.


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1.2 Significant judgements and sources of estimation uncertainty

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect theamounts represented in the consolidated financial statements and related disclosures. Use of available information and theapplication of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimateswhich may be material to the consolidated financial statements.

Significant judgement include

Loans and receivables

Entity assesses its loans and receivables for impairment at each reporting date. In determining whether an impairment lossshould be recorded in the statement of financial performance, Entity makes judgments as to whether there is observable dataindicating a measurable decrease in the estimated future cash flows from a financial asset.

Fair value estimation

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

Useful lives and residual values

The Corporation re-assesses the useful lives and residual values of property, plant and equipment on a yearly basis. Theseassessments require judgments and assumptions to be made by management which includes the asset's technologicalinnovation, maintenance programmes and physical condition.

Investment property and Property, plant and equipment

A professional valuator shall be engaged every five years to determine the market values relating to Investment property andProperty, plant and equipment. For the remaining four financial periods, fair value will be assessed by management with therelevant income, expenses and capitalization rates obtained from a professional valuator. When the fair value of a revaluedasset differs materially from its carrying amount, a professional valuation is obtained.

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. Transaction costs are included in the initial measurement.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If areplacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part isderecognised.

Fair value

Subsequent to initial measurement investment property is measured at fair value.

Investment properties are held for long-term rental yields and are not occupied by the Group. Investment properties are treatedas long term investments and are carried at fair value; representing open market value. A professional valuator shall beengaged every five years to determine the market values. For the remaining four financial periods, fair value will be assessedby management with the relevant income, expenses and capitalization rates obtained from a professional valuator. When thefair value of a revalued asset differs materially from its carrying amount, a professional valuation is obtained. A gain or lossarising from a change in the fair value of investment property shall be recognised in profit or loss for the period in which itarises.

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 future economic benefits associated with the item will flow to the Corporation and cost of the item can bereliably measured. The carrying amount of the replaced part is de-recognised. All repairs and maintenance are charged to theStatement of Comprehensive Income during the financial period in which they are incurred.


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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 group; 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.

Property

Property is carried at revalued amount, being the fair value at the date of revaluation less any subsequent accumulateddepreciation and subsequent accumulated impairment losses.

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 valuator shall be engaged every fiveyears to determine the market values. For the remaining four financial periods, fair value will be assessed by management withthe relevant income, expenses and capitalization rates obtained from a professional valuator.

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 directly in equity andaccumulated in equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss tothe extent that it reverses a revaluation decrease of the same asset previously recognised in profit 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.

Plant and equipment

Furniture, fittings, equipment, vehicles and computer equipment are stated at historical cost less accumulated depreciation andimpairment. These assets are depreciated, on a straight line basis to their expected residual values, over the estimated usefullives 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 Comprehensive Income during the financial period in which they are incurred.

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

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful lifeOwner-occupied properties 10 to 20 yearsOffice machinery, furniture and equipment 4 to 15 yearsMotor vehicles 4 to 9 yearsIT equipment 1 to 10 years


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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.

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.

1.5 Intangible assets

An intangible asset is an identifiable non-monetary asset without physical substance. The Group recognises an intangible assetonly when it is probable that the expected future economic benefits or service potential that are attributable to the asset will flowto the Group and the cost or fair value of the asset can be measured reliably.

Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets.

Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holdersand therefore no goodwill is recognised as a result of such transactions. Goodwill is measured at cost less accumulatedimpairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amountof the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that formspart of the carrying amount of the equity accounted investee.

Computer software

Computer software for a computer controlled machine that cannot operate without that specific software is an integral part ofthe related hardware and it is treated as property, plant and equipment. Internally generated intangible assets are subject tostrict recognition criteria before they are capitalised.

Research expenditure is never capitalised, while development expenditure is only capitalised to the extent that:

• the Group intends to complete the intangible asset for use or sale;• it is technically feasible to complete the intangible asset;• the Corporation has the resources to complete the project; and• it is probable that the Corporation will receive future economic benefits or service potential.

Intangible assets are initially recognised at cost.

Intangible assets are subsequently carried at cost less accumulated amortisation and impairments. The cost of an intangibleasset is amortised over the useful life where that useful life is finite. Where the useful life is indefinite, the asset is notamortised but is subject to an annual impairment test.

Amortisation is charged so as to write off the cost or valuation of intangible assets over their estimated useful lives using thestraight line method.

The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at eachreporting date and any changes are recognised as a change in accounting estimate in the Statement of comprehensiveincome.

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 the Statement ofComprehensive Income.

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


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1.5 Intangible assets (continued)

Item Useful lifeComputer software 1 to 4 years

1.6 Investments in subsidiaries

Corporation financial statements

In the Corporation’s separate financial statements, investments in subsidiaries are carried at cost less any accumulatedimpairment.

1.7 Investments in associates

Corporation's financial statements

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

1.8 Financial instruments

Classification

The Group has the following financial instruments: Long term loans and Short term loans (loans granted) trade and otherreceivables, cash and cash equivalents, available-for sale financial assets and trade and other payables.

The classification of financial instruments depends on the nature of the instrument and managements intention in respectthereof.

Initial recognition and measurement

Financial assets and liabilities are recognised on the trade date, the date on when the Group becomes a party to thecontractual provisions of the instrument. Financial instruments are initially recorded at fair value, including transaction costs.Subsequent measurement is made in accordance with the specific instrument provisions of IAS39 Financial Instruments:

Recognition and Measurement. Financial instruments are derecognised immediately on the date that the right to the instrumentare either realized, expires or transferred by the Corporation.

Financial assets are reviewed annually for any evidence of impairment and any impairment loss is recognised immediately inthe Statement of Comprehensive Income.

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. Any derecognition gain/loss isrecorded in profit and loss in the period of derecognition.

Fair value determination

Short term loans, trade and other receivables, cash and cash equivalents and trade and other payables are of such a shortterm nature that their carrying amounts approximate fair value due to the short time period between initiation and settlementthereof.

Impairment of financial assets

Financial assets are reviewed annually for any evidence of impairment. Provision is made for impairment if there is objectiveevidence of impairment as a result of one or more events that occurred after initial recognition of the asset and that event hasan impact on the estimated future cash flows of the financial instrument that can be reliably measured. The carrying amount ofthe asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the Statement ofComprehensive Income within other operating expenses. If in a subsequent period, the amount of impairment loss decreasesand the decrease can be objectively related to an event occurring after the impairment was recognised the previouslyrecognised impairment loss is reversed in the Statement of Comprehensive Income.


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1.8 Financial instruments (continued)

Financial instruments designated as available-for-sale

Available-for-sale financial assets are classified as ‘Other Investments’ and are non-derivative financial assets that aredesignated as available-for-sale and that are not classified in any of the previous categories.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment, are recognisedin other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, thecumulative gain or loss in other comprehensive income is transferred to profit or loss.

Loans granted (long and short term loans)

Loans granted are financial assets with fixed or determinable payments that are not quoted in an active market.

Loans granted are loans created by the Parent entity by providing finance to clients with specified repayments at fixed ordeterminable periods and at interest rates that are linked to the bank overdraft prime rate of ABSA. Upon initial recognition,loans granted are managed as part of a portfolio or category of loans granted determined by the type of product.

The categories defining the types of loans provided by the Parent entity includes Business loans, Bridging loans and Housingloans. All categories of loans provided by the Parent entity are classified as originated loans and receivables and are carried atamortised cost.

Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initialrecognition loans and receivables are measured at amortised cost using the effective interest method, less any impairmentlosses.

Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group's prior to the end of the financialyear which are unpaid. The amounts are unsecured. Trade and other payables are recognised initially at fair value andsubsequently at amortised cost using the effective interest rate method.

Employee entitlements to annual leave and pro rata bonuses are recognised when they accrue to employees. Provision ismade for the estimated liability for annual leave rendered by employees and bonuses up to the balance sheet date.

Trade and other receivables

Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market.

Receivables should be recognized initially at fair value and subsequently at amortised cost using the effective interest method,namely the original invoice amount plus associated costs and interest charged to date, less impairment allowances foruncollectible amounts.

Provision for impairment is made when there is objective evidence that the Group will not be able to collect all amounts dueaccording to the original terms.

Accounts handed over to the legal unit; significant financial difficulties of the debtors and defaults or delinquency in paymentsare considered indicators that the trade receivables are impaired. The carrying amount of the asset is reduced through the useof an allowance account, and the amount of the loss is recognised within other operating expenses.

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 originated bythe enterprise and are measured at amortised cost.


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1.9 Tax

Tax expenses

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

The consolidated entities apply the following policy in terms of income tax:

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except tothe extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted orsubstantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in atransaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differencesrelating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse inthe foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initialrecognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based onthe laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset ifthere is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the sametax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets ona net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that itis probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed ateach reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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 - lessor

The Corporation recognises finance lease receivables in the statement of financial position.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the Corporation's netinvestment in the finance lease.

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.

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 liabilityis not discounted.

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


Accounting Policies

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1.11 Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-outprinciple, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costsincurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in theordinary course of business, less the estimated costs of completion and selling expenses.

When inventories are sold, the carrying amounts 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 to the write-down or loss occurs. The amount of any reversal of a write-down ofinventories, arising from any 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 Non-current assets held for sale (and) (disposal groups)

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a saletransaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and theasset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale,which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets held for sale (or disposal group) are measured at the lower of its carrying amount and fair value less coststo sell.

A non-current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a disposal groupclassified as held for sale.

Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised in profitor loss.


Accounting Policies

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1.13 Impairment of assets

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there isany indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For goodwill, and intangible assets that have indefinite useful lives, the recoverable amount is estimated each year at the sametime.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose ofimpairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets thatgenerates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets.

For the purposes of goodwill impairment testing, groups of assets to which goodwill has been allocated are aggregated so thatthe level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes.Goodwill acquired in a business combination is allocated to groups of Cash Generating Units that are expected to benefit fromthe synergies of the combination.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first toreduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assetsin the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for anyindications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in theestimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’scarrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, ifno impairment loss had been recognised.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore isnot tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as asingle asset when there is objective evidence that the investment in an associate may be impaired.

De-recognition of a non-financial asset takes place upon disposal or when it is no longer expected to generate any furthereconomic benefits. Any de-recognition gain/loss is recorded in the Statement of Comprehensive Income in the period of de-recognition. The revaluation surplus included in equity in respect of owner-occupied property is transferred directly to retainedearnings when the asset is derecognised.

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 - Retirement benefits

Pension and Benefit Fund contributions

The Parent has a defined contribution plan. A defined contribution plan is a pension plan under which the Corporation paysfixed contributions into a separate entity / fund. The Parent has no legal or constructive obligations to pay further contributionsif the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and priorperiods.

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.


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1.14 Employee benefits (continued)

Defined benefit plans - Medical benefits

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 discounting the estimated future cash outflows byconsidering the yield on the All Bond Index (ALBI) of the Bond Exchange of South Africa index, comprising the most liquidsovereign and non-sovereign bonds.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or creditedand are accounted for under loss on post-retirement medical aid benefit in the period in which they arise. These obligations arevalued annually by independent qualified actuaries.

1.15 Provisions and contingencies

Provisions are recognised when: the parent 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.

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.

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 36.


Accounting Policies

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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 that theywill 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 a systematicbasis 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.

1.17 Revenue

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinarycourse of the Corporation’s activities. Revenue is shown net of value added tax, rebates and discounts and after eliminatingsales within the Corporation. The Corporation recognises revenue when the amount of revenue can be reliably measured, it isprobable that future economic benefits will flow to the Corporation and specific criteria have been met for each of theCorporation’s activities described below:

Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration receivedor receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists thatthe significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, theassociated costs and possible return of goods can be estimated reliably, there is no continuing management involvement withthe goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amountcan be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

Rendering of services

Service income comprise of the sale of water and electricity. Service charges relating to electricity and water are based onconsumption. Meters are read on a monthly basis and are recognized as revenue when invoiced.

Rental income

Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operatingleases. Payments made under operating leases (net of incentives received from the lessor) are charged to the Statement ofComprehensive Income on a straight-line basis over the period of the lease.

Interest income

Interest income is recognised as it accrues (taking into account the effective yield on the asset) unless collectability is in doubt.Financial services fees directly related to the granting of loans are deferred over the period of the loans as required by IAS 18(AC111).

Dividend income

Dividends are recognised, in profit or loss, when the Corporation’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.


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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.

1.20 Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business orgeographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a viewto resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to beclassified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement ofcomprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period.

1.21 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 debtor, rework of debtor’s business plans and the rescheduling of debts. If debtors cannot pay afterthe 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. Subsequent recoveries of amounts previously written off are credited againstother income in the Statement of Comprehensive Income.

1.22 Fruitless and wasteful expenditure

Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care beenexercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement offinancial performance the year that the expenditure was incurred. The expenditure is classified in accordance with the nature ofthe expense, and when it will be recovered, it is subsequently accounted for as revenue in the statement of financialperformance.

1.23 Irregular expenditure

Irregular expenditure is expenditure that is contrary to the Public Finance Management Act (Act no 1 of 1999), or is incontravention of the group's supply chain management policy. Irregular expenditure is accounted for as expenditure, and whererecovered, it is subsequently accounted for as revenue in the statement of financial performance.


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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

2. Investment property

Group 2012 2011

Cost /Valuation

Accumulateddepreciation

Carrying value Cost /Valuation


Carrying value

Investment property 262,951,336 - 262,951,336 255,210,980 - 255,210,980

Group 2010

Cost /Valuation


Carrying value

Investment property 259,653,660 - 259,653,660

Corporation 2012 2011

Cost /Valuation




Carrying value

Investment property 262,951,336 - 262,951,336 255,210,980 - 255,210,980

Corporation 2010

Cost /Valuation


Carrying value

Investment property 257,303,286 - 257,303,286

Reconciliation of investment property - Group - 2012

Openingbalance

Additions Total

Investment property 255,210,980 7,740,356 262,951,336


Openingbalance

Additions Disposals Impairments Total

Investment property 259,653,660 2,350,374 (4,371,454) (2,421,600) 255,210,980


Openingbalance


Investment property 257,896,498 5,529,442 (158,156) (3,614,124) 259,653,660

Reconciliation of investment property - Corporation - 2012

Openingbalance

Additions Total

Investment property 255,210,980 7,740,356 262,951,336



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

2. Investment property (continued)


Openingbalance


Investment property 257,303,286 2,350,374 (2,021,080) (2,421,600) 255,210,980


Openingbalance

Additions Disposals Total

Investment property 253,227,000 4,234,442 (158,156) 257,303,286

Pledged as security

No Investment property is pledged as security:

Other disclosures

Freehold rights, deeds of transfer and concessions of occupancy in respect of Permission - To - Occupy properties to theamount of R4.8 million, included above, have as yet not been issued by the relevant government authorities. There are PTO'sincluded in the R4.8 millon for which no agreements are available

Encumbered Assets amounting to R5 249 700 are included in Investment Property.

Details of property

Commercial / Industrialproperties

- Cost 381,295,023 375,438,331 377,036,157 381,295,023 375,438,331 377,036,157 - Accumulated fair valueadjustment

(154,086,863)(155,970,527)(153,425,153)(154,086,863)(155,970,527)(155,775,527)

227,208,160 219,467,804 223,611,004 227,208,160 219,467,804 221,260,630

Residential properties

- Cost 18,689,757 18,689,757 18,895,551 18,689,757 18,689,757 18,895,551 - Accumulated fair valueadjustment

17,053,419 17,053,419 17,147,105 17,053,419 17,053,419 17,147,105

35,743,176 35,743,176 36,042,656 35,743,176 35,743,176 36,042,656

A register containing the detail information regarding the properties are available at the Corporation's head offices, situated at33 Kellner Street, Bloemfontein.



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

2. Investment property (continued)

Details of valuation

The effective date of the fair value revaluation was February 2010 to assess the reasonability of the fair value of the investmentproperty. Revaluations were performed by an independent valuer, Mr G.J.D. du Plessis (B.Com, MBL111), of Libertas BusinessGroup CC trading as Capgrow Business Group. Mr du Plessis is not connected to the Corporation and have recent experiencein location and category of the investment property being valued. The group's complete last revaluation were performed on 31March 2009 by independent valuators.

The valuations of Investment properties were carried out by independent valuators. The method used in assessing the value ofResidential properties and farm land was the Direct Comparison Method, which includes the analysis of two comparableproperties. The method used of asserting the Commercial and Industrial properties was the Income Capitalised Method. Thefull valuation report, with assumptions and method used, and a detail asset register of Investment properties is available at theCorporation's head offices, situated at 33 Kellner Street, Bloemfontein.

In brief, there is no or little external statistical information available to benchmark the bulk of the FDC portfolio against marketmovements and or comparable sales that took place during the financial year. The Free State Development Corporationportfolio is unique and can only be compared to other similar portfolios situated close to Metro's in other provinces. The generaleconomic recovery that was expected in the 2011 financial year did not materialise and as a result therefore the increase incommercial rentals also slowed down. The gross rentals of the Free State Development Corporation portfolio also indicatesthat there was very little growth in rentals. It was therefore considered appropriate not to adjust the market rental rates used inthe previous valuations. In order to assess the market indicators management used internal information to determine if therewere significant changes in respect of gross income, expenses and occupancy rates. Possible reasons to decrease the value(increase the capitalisation rate) of the portfolio were considered. Variances in respect of income and the occupancy rate areless than 5% and do not represent a significant change in the market value of the portfolio. The vacancy rate at yearend wasslightly higher (2.86%) compared to the previous year. It was concluded that at year-end the economic environment that itwould still be possible to find informed buyers at the current used capitalisation rates due to the large difference between thecurrent interest rate on an investment and the capitalisation rate used. No increase in the capitalisation rate was thereforeintroduced.

The Free State Development Corporation was in the past, due to its location, age and limited market movement (rental andselling) valued at a capitalisation rate of about 20%. For the 2010 financial year the vast majority of Free State Development'sindustrial properties were capped at 19%. It was therefore considered prudent not to adjust the capitalisation rate as there wereno external indicators that indicated that an increase in valuations would be appropriate. The commercial properties that arecapped at a lower rate can be motivated by a type tenant, location of property and higher demand for letting space.

Expenses were higher than the previous year. Should this be proven not be once off and the tendency continues in the2011/2012 financial year, the assumption of 30% of rentals as expenses should be revisited and the impairment of theInvestment Property Portfolio should then be considered. It is believed that the high cap rate compared to other centres,already discounts the lower demand for the properties due to their locality, age and tenant type.

Residential Properties

From the valuations done by the valuator two facts are evident: - That the residential properties of Free State Development Corporation consist mainly of entry level properties which were notas much affected by the world wide credit crunch as luxury and even middle class residential property.- Secondly, it is considered that the professional valuation was done rather conservatively.

Management is of the opinion that both the above factors did not change and that the values of the residential properties neednot be adjusted for the 2012 financial year.

Amounts recognised in profit and loss for the year

Rental income from investmentproperty

60,763,129 56,343,853 54,489,418 61,378,729 56,586,190 54,176,750

Direct operating expenses fromrental generating property

(44,641,753) (33,505,681) (19,950,390) (44,494,884) (33,505,681) (19,950,390)

16,121,376 22,838,172 34,539,028 16,883,845 23,080,509 34,226,360



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

3. Property, plant and equipment

Group 2012 2011

Cost /Valuation




Carrying value

Buildings 23,439,011 (1,028,704) 22,410,307 21,190,073 (740,347) 20,449,726Furniture and fixtures,machinery and equipment

10,933,577 (8,701,506) 2,232,071 15,610,026 (13,407,107) 2,202,919

Motor vehicles 28,898,732 (11,492,048) 17,406,684 30,820,136 (11,932,415) 18,887,721Computer hardware 3,849,894 (3,009,486) 840,408 3,612,887 (2,452,190) 1,160,697

Total 67,121,214 (24,231,744) 42,889,470 71,233,122 (28,532,059) 42,701,063

Group 2010

Cost /Valuation


Carrying value

Buildings 10,806,112 (2,942,942) 7,863,170Furniture and fixtures,machinery and equipment

48,240,354 (46,592,330) 1,648,024

Motor vehicles 34,209,172 (14,319,420) 19,889,752Computer hardware 4,200,310 (3,380,310) 820,000

Total 97,455,948 (67,235,002) 30,220,946


Cost /Valuation




Carrying value

Buildings 21,190,641 (1,028,760) 20,161,881 18,704,604 (503,248) 18,201,356Furniture and fixtures,machinery and equipment

3,927,803 (1,854,204) 2,073,599 3,521,572 (1,516,660) 2,004,912

Motor vehicles 2,349,347 (1,451,513) 897,834 2,349,347 (1,221,391) 1,127,956Computer hardware 3,621,884 (2,821,137) 800,747 3,275,281 (2,134,776) 1,140,505

Total 31,089,675 (7,155,614) 23,934,061 27,850,804 (5,376,075) 22,474,729

Corporation 2010

Cost /Valuation


Carrying value

Buildings 7,494,800 - 7,494,800Furniture and fixtures,machinery and equipment

2,537,815 (1,062,619) 1,475,196

Motor vehicles 2,349,347 (1,098,733) 1,250,614Computer hardware 2,990,403 (1,873,925) 1,116,478

Total 15,372,365 (4,035,277) 11,337,088



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3. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment - Group - 2012

Openingbalance

Additions Disposals Openingbalance

adjustments

Otherchanges,

movements

Depreciation Impairmentloss

Impairmentreversal

Total

Buildings 20,449,726 2,543,782 - (57,745) (237,099) (525,456) - 237,099 22,410,307Furniture and fixtures, machinery andequipment

2,202,919 304,712 (38,361) (234,901) (3,863,150) (344,098) (1,983,836) 6,188,786 2,232,071

Motor vehicles 18,887,721 79,000 (660,000) - (347,636) (901,921) (141,083) 490,603 17,406,684Computer hardware 1,160,697 216,506 - - (79,586) (541,133) (11,245) 95,169 840,408

42,701,063 3,144,000 (698,361) (292,646) (4,527,471) (2,312,608) (2,136,164) 7,011,657 42,889,470


Openingbalance

Additions Disposals Otherchanges,

movements

Depreciation Impairmentloss

Impairmentreversal

Total

Buildings 7,863,170 11,487,340 (390,013) 57,745 (504,627) - 1,936,111 20,449,726Furniture and fixtures, machinery and equipment 1,648,024 1,027,747 (6,005,934) (40,339) (618,707) - 6,192,128 2,202,919Motor vehicles 19,889,752 - (403,846) - (195,031) (403,154) - 18,887,721Computer hardware 820,000 407,390 (138,570) (785) (379,239) (4,758) 456,659 1,160,697

30,220,946 12,922,477 (6,938,363) 16,621 (1,697,604) (407,912) 8,584,898 42,701,063



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Openingbalance

Additions Disposals Revaluations Otherchanges,

movements

Depreciation Total

Buildings 7,864,370 - - - (1,200) - 7,863,170Furniture and fixtures, machinery and equipment 1,841,283 80,000 (17,354,000) 21,265,741 - (4,185,000) 1,648,024Motor vehicles 13,796,624 2,649,000 (501,000) 579,128 - 3,366,000 19,889,752IT equipment 1,492,001 111,000 (245,000) 100,999 - (639,000) 820,000

24,994,278 2,840,000 (18,100,000) 21,945,868 (1,200) (1,458,000) 30,220,946

Reconciliation of property, plant and equipment - Corporation - 2012

Openingbalance

Additions Disposals Openingbalance

adjustments

Depreciation Total

Buildings 18,201,356 2,543,782 - (57,745) (525,512) 20,161,881Furniture and fixtures, machinery and equipment 2,004,912 304,712 (38,361) - (197,664) 2,073,599Motor vehicles 1,127,956 - - - (230,122) 897,834Computer hardware 1,140,505 172,076 - - (511,834) 800,747

22,474,729 3,020,570 (38,361) (57,745) (1,465,132) 23,934,061



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Openingbalance

Additions Disposals Otherchanges,

movements

Depreciation Total

Buildings 7,494,800 11,152,059 - 57,745 (503,248) 18,201,356Furniture and fixtures, machinery and equipment 1,475,196 916,070 (18,832) (40,339) (327,183) 2,004,912Motor vehicles 1,250,614 - - - (122,658) 1,127,956Computer hardware 1,116,478 407,390 (28,174) (785) (354,404) 1,140,505

11,337,088 12,475,519 (47,006) 16,621 (1,307,493) 22,474,729


Openingbalance

Additions Disposals Revaluations Depreciation Total

Buildings 7,496,000 - - (1,200) - 7,494,800Furniture and fixtures, machinery and equipment 1,652,000 46,855 (4,000) - (219,659) 1,475,196Motor vehicles 1,430,000 - (14,000) - (165,386) 1,250,614IT equipment 1,492,000 75,000 - - (450,522) 1,116,478

12,070,000 121,855 (18,000) (1,200) (835,567) 11,337,088

Pledged as security

No assets are pledged as security.

There are no restrictions on the distribution of the revaluation reserve to the equity holders of the Corporation.



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

4. Intangible assets

Group 2012 2011

Cost /Valuation

Accumulatedamortisation



Carrying value

Computer software, other 4,702,629 (2,294,267) 2,408,362 4,931,107 (1,912,435) 3,018,672Other intangible assets - - - 117,500 (117,500) -

Total 4,702,629 (2,294,267) 2,408,362 5,048,607 (2,029,935) 3,018,672

Group 2010

Cost /Valuation


Carrying value

Computer software, other 5,224,970 (1,026,422) 4,198,548Other intangible assets - - -

Total 5,224,970 (1,026,422) 4,198,548


Cost /Valuation




Carrying value

Computer software, other 4,701,129 (2,292,767) 2,408,362 4,910,098 (1,891,426) 3,018,672

Corporation 2010

Cost /Valuation


Carrying value

Computer software, other 5,179,420 (980,872) 4,198,548

Reconciliation of intangible assets - Group - 2012

Openingbalance

Amortisation Total

Computer software, other 3,018,672 (610,310) 2,408,362


Openingbalance

Additions Otherchanges,

movements

Amortisation Total

Computer software, other 4,198,548 33,000 (563,256) (649,620) 3,018,672


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movements

Amortisation Total

Computer software, other 3,739,000 537,000 521,548 (599,000) 4,198,548Other intangible assets 522,000 - (522,000) - -

4,261,000 537,000 (452) (599,000) 4,198,548



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

4. Intangible assets (continued)

Reconciliation of intangible assets - Corporation - 2012

Openingbalance

Amortisation Total

Computer software 3,018,672 (610,310) 2,408,362


Openingbalance


movements

Amortisation Total

Computer software 4,198,548 33,000 (563,256) (649,620) 3,018,672


Openingbalance


movements

Amortisation Total

Computer software, other 3,739,000 537,000 521,548 (599,000) 4,198,548Other intangible assets 522,000 - (522,000) - -

4,261,000 537,000 (452) (599,000) 4,198,548

5. Investments in subsidiaries

Name of company DateAcquired

Canton Trading 123 (Pty) Ltd April 2008Classic Number Trading 45 (Pty) Ltd - ( Liquidation filed 10 June 2010) * March 2007Confram Harrismith Properties (Pty) Ltd - (Deregistration final) * October 1996Copper Moon Trading (Pty) Ltd February 2007Cross Point Trading 23 (Pty) Ltd March 2007Golden Pond Trading 663 (Pty) Ltd April 2008Highland Furniture Factory (Pty) Ltd January 2002Orofino Africa Jewellery Manufacturers - (Deregistration final) * October 2007Phiritona Plastics (Pty) Ltd October 2007Rumar Manufacturing (Pty) Ltd - (Liquidation filed 26 August 2010) * February 2007Satinsky 167 (Pty) Ltd - (Liquidation filed 1 December 2010) * October 2007Scopefull 21 (Pty) Ltd August 2000Synthpro Holdings (Pty) Ltd - (Liquidation filed 11 March 2011) * July 2007 Twin Cities Trading 129 (Pty) Ltd March 2007Welkom Diamond Cutting Works (Pty) Ltd - (Investment sold 29 May2012)

July 2007

Classic Number Trading 45 (Pty) Ltd - Pref Shares - ( Liquidation filed 10June 2010) *

March 2007

Twin Cities Trading 129 (Pty) Ltd - Pref shares March 2007

Impairment of investment in subsidiaries



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

5. Investments in subsidiaries (continued)

Name of company Carryingamount 2012

Carryingamount 2011

Carryingamount 2010

Canton Trading 123 (Pty) Ltd 49 49 49Classic Number Trading 45 (Pty) Ltd - ( Liquidation filed 10 June 2010) * 40 40 40Confram Harrismith Properties (Pty) Ltd - (Deregistration final) * 10,000,000 10,000,000 10,000,000Copper Moon Trading (Pty) Ltd 55 55 55Cross Point Trading 23 (Pty) Ltd 25 25 25Golden Pond Trading 663 (Pty) Ltd 49 49 49Highland Furniture Factory (Pty) Ltd 100 100 100Orofino Africa Jewellery Manufacturers - (Deregistration final) * 49 49 49Phiritona Plastics (Pty) Ltd 380 380 380Rumar Manufacturing (Pty) Ltd - (Liquidation filed 26 August 2010) * 300 300 300Satinsky 167 (Pty) Ltd - (Liquidation filed 1 December 2010) * 26 26 26Scopefull 21 (Pty) Ltd 50 50 50Synthpro Holdings (Pty) Ltd - (Liquidation filed 11 March 2011) * 33 33 33Twin Cities Trading 129 (Pty) Ltd 30 30 30Welkom Diamond Cutting Works (Pty) Ltd - (Investment sold 29 May2012)

- 36 36

Classic Number Trading 45 (Pty) Ltd - Pref Shares - ( Liquidation filed 10June 2010) *

2,992,200 2,992,200 2,992,200

Twin Cities Trading 129 (Pty) Ltd - Pref shares 520,000 520,000 520,000

13,513,386 13,513,422 13,513,422Impairment of investment in subsidiaries (13,513,329) (13,513,361) (11,241,617)

57 61 2,271,805



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010


* For the liquidated companies Board approval is awaited for write-off of investments.

The carrying amounts of subsidiaries are shown net of impairment losses.

The mission and mandate of the Free State Development Corporation (Parent entity) is to provide financial and businessdevelopment services that result in the establishment of sustainable SMME’s for economic growth and development in the FreeState Province.

Based on the above, the Parent entity acquires an equity interest in various SMME’s which are generally start-up companiesand disburse Shareholder Loans (unsecured and interest-free) as well as Business Loans (secured and bears interest) tothem.

Subsidiaries with less than 50% voting powers held

Although the Corporation holds less than 50% of the voting powers in the entities listed above, the investment is considered asubsidiary because of additional voting powers granted to the parent company as a result of its loan to the investee.

Restrictions relating to subsidiaries

Up until such times as the Commercial loan and all interest thereon, as well as the Shareholder's loan has been repaid to theParent entity (FDC), no dividends shall be declared to shareholders. The Corporation has sold it shares in Welkom DiamondCutting Works (Pty) Ltd for R36.



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010


Reporting period

Subsidiary Year End

Canton Trading 123 (Pty) Ltd MarchClassic Number Trading 45 (Pty) Ltd MarchConframHarrismith Properties (Pty) Ltd MarchCopper Moon Trading 429 (Pty) Ltd MarchGolden Pond Trading 663 (Pty) Ltd MarchHighland Furniture Factory (Pty) Ltd MarchRumar Manufacturing (Pty) Ltd MarchTwin Cities Trading 129 (Pty) Ltd MarchWelkom Diamond Cutting Works (Pty) Ltd MarchCross Point Trading 23 (Pty) Ltd FebruaryOrofino Sales Affiliates (Pty) Ltd FebruaryPhiritona Plastics (Pty) Ltd FebruarySatinsky 167 (Pty) Ltd FebruarySynthpro Holdings (Pty) Ltd FebruaryScopefull 21 (Pty) Ltd February

Associate

Mafube Risk Insurance Consultants (Pty) Ltd December

Changes in ownership interest

The following schedule represents the impact of changes in ownership interest

Subsidiary Nature Date % Shares Consideration (cash)

Copper Moon Trading 429 (Pty) Ltd Control October ‘07 12% R 12Copper Moon Trading 429 (Pty) Ltd Control July ‘08 14% R 14Copper Moon Trading 429 (Pty) Ltd Control July ‘08 4% R 4Synthpro Holdings (Pty) Ltd ** Control October’08 3% R 3Twin Cities Trading 129 (Pty) Ltd Control May ‘08 4% R 4

Subsidiary Nature Date % Shares Consideration (Value)

Scopefull 21 (Pty) Ltd Control April ‘06 10% R253 732

** Synthpro Holdings (Pty) Ltd filed for liquidation 11 March 2011.

Subsidiaries and associates



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The cash amount paid for each acquisition is regarded as the acquisition-date fair value of consideration transferred.

Nature of activities

The entities above are engaged in a diverse range of production activities and rendering of services as illustrated below:

- Canton Trading 123 (Pty) Ltd: trading of pharmaceutical products;- Classic Number Trading 45 (Pty) Ltd: manufacturing and selling of shoe soles and footwear;- ConframHarrismith Properties (Pty) Ltd: leasing of fixed property;- Copper Moon Trading 429 (Pty) Ltd: food preparation and hospitality;- Golden Pond Trading 663 (Pty) Ltd: retail and trade of food products;- Highland Furniture Factory (Pty) Ltd: manufacturing and selling of furniture;- Rumar Manufacturing (Pty) Ltd: construction and selling of truck trailers;- Twin Cities Trading 129 (Pty) Ltd: general trading in all aspects;- Welkom Diamond Cutting Works (Pty) Ltd: dealership in diamonds;- Cross Point Trading 23 (Pty) Ltd: manufacturing and selling of vehicle accessories;- Orofino Sales Affiliates (Pty) Ltd: manufacturing of gold jewellery;- Phiritona Plastics (Pty) Ltd: manufacturing and selling of plastics and related products;- Satinsky 167 (Pty) Ltd: manufacturing and selling of springs and suspensions;- Synthpro Holdings (Pty) Ltd: manufacturing and selling of synthetic products;- Mafube Risk Insurance Consultants (Pty) Ltd: insurance and employee benefit brokers;- Scopefull 21 (Pty) Ltd: public transport services.

Control

Start-up companies

Control was obtained by the Parent entity (FDC) through the right to appoint the majority, or a significant number, of the boardof directors and having a veto right on the decisions regarding significant financial and operating policies and activities and themanagement thereof.

In support to the element of control above, the Shareholders Agreements for the following companies stipulates that acomplete cession of shares in favour of the Parent entity will be enforced until such time that all amounts owing to the Parententity by the entity have been settled in full. The effect is that the Parent entity currently holds potential voting rights equalling100%.

A technical opinion was also obtained from a renowned consulting firm which is in line with the above.

The companies in which potential voting rights of 100% exists are as follows:

- Canton Trading 123 (Pty) Ltd;- Classic Number Trading 45 (Pty) Ltd - (Liquidation filed 10 June 2010);- Copper Moon Trading 429 (Pty) Ltd;- Golden Pond Trading 663 (Pty) Ltd;- Rumar Manufacturing (Pty) Ltd - (Liquidation filed 26 August 2010);- Twin Cities Trading 129 (Pty) Ltd;- Welkom Diamond Cutting Works (Pty) Ltd - (Investment sold 29 May 2012);- Cross Point Trading 23 (Pty) Ltd;- Phiritona Plastics (Pty) Ltd;- Satinsky 167 (Pty) Ltd - (Liquidation filed 1 December 2010);- Synthpro Holdings (Pty) Ltd - (Liquidation filed 11 March 2011).

Entities where control was obtained by the Parent entity through the right to appoint the majority, or a significant number, of theboard of directors and having a veto right on the decisions regarding significant financial and operating policies and activitiesand the management thereof are as follows:



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- Orofino Sales Affiliates (Pty) Ltd * ;- Scopefull 21 (Pty) Ltd.

* (Company was de-registered in the 2011 financial year)

Existing companies

The following companies were obtained through a 100% equity interest:

- ConframHarrismith Properties (Pty) Ltd **;- Highland Furniture Factory (Pty) Ltd.

** Company was de-registered in the 2011 financial year.

Identifiable assets acquired and liabilities assumed and goodwill

The majority of the companies were start-up companies and thus there were no identifiable assets acquired and liabilitiesassumed at the acquisition-date.

The identifiable assets acquired and liabilities assumed of entities which were in operation at the acquisition-date and for whichgoodwill was recognised are as follows:

Identifiable assets acquired and liabilities assumedHighlands Furniture Confram Harrismith PropertiesFactory (Pty) Ltd (Pty) Ltd2002 1996

R R

Property, plant and equipment 560 216 16 375 131Inventory 1 777 613 -Trade and other receivables 1 124 566 17 300Cash and cash equivalents 467 425 -Loans and borrowings ( 4 299 675) (6 586 411)Trade and other payables (979 493) (75 500)

Total net identifiable assets (1 349 348) 9 730 520

Gross trade receivables 1 124 566 17 300Recoverable amount included above 1 124 566 17 300

Goodwill

Total consideration transferred 100 10 000 000Value of identifiable (assets)/liabilities 1 349 348 (9 730 520)

Goodwill 1 349 448 269 480



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010


The goodwill was attributable mainly to the skills and technical talent of the work force.

Fair values at date of acquisition

According to IFRS 3: Business Combinations assets acquired and liabilities assumed at date of acquisition should bemeasured at fair values.

The majority of the subsidiaries were start-up entities and thus no assets or liabilities existed at the acquisition-date.For the fair value of identifiable assets acquired and liabilities assumed at the acquisition-date of existing companiesmanagement accepted the balance sheet values of the identifiable assets acquired and liabilities assumed at that date to bereflective of their fair values.

Business combinations achieved in stages

The details of step-acquisitions which took place are as follows:

Copper Moon Trading 429 (Pty) Ltd

During October 2007 the Group acquired an additional 12% interest in Copper Moon Trading 429 (Pty) Ltd for R12 in cashincreasing its ownership from 25% to 37%. The carrying amounts of Copper Moon Trading 429 (Pty) Ltd.’s net assets in theconsolidated financial statements on the date of the acquisition was (R82 905). The Group recognised a decrease in non-controlling interest and reserves of R39 795.

During July 2008 the Group acquired an additional 14% interest in Copper Moon Trading 429 (Pty) Ltd for R14 in cashincreasing its ownership from 37% to 51%. The carrying amounts of Copper Moon Trading 429 (Pty) Ltd.’s net assets in theconsolidated financial statements on the date of the acquisition was (R264 598). The Group recognised a decrease in non-controlling interest of (R115 162) and a decrease in reserves of (R115 176).

During July 2008 the Group acquired an additional 4% interest in Copper Moon Trading 429 (Pty) Ltd for R14 in cashincreasing its ownership from 51% to 55%. The carrying amounts of Copper Moon Trading 429 (Pty) Ltd.’s net assets in theconsolidated financial statements on the date of the acquisition was (R33 814). The Group recognised a decrease in non-controlling interest of (R33 818) and a decrease in reserves of (R115 176).

Scopefull 21 (Pty) Ltd

During April 2006 the Group received an additional 10% interest in Scopefull 21 (Pty) Ltd for its value of its previous interestworth R253 772 increasing its ownership from 40% to 50% and resulting in Scopefull 21 (Pty) Ltd being a subsidiary and nolonger an associate. The carrying amounts of Scopefull 21 (Pty) Ltd.’s net assets in the consolidated financial statements onthe date of the acquisition was R253 732. The Group recognised a decrease in non-controlling interest of R63 443.

The following summarises the effect of changes in the Group’s (parent) ownership interest in Scopefull 21 (Pty) Ltd:

Scopefull 21 (Pty) Ltd 2007 Rand

Parent’s ownership interest at beginning of period 253 772Effect of increase in parent’s ownership interest 63 443Share of comprehensive income 1 163 051

Parent’s ownership interest at end of period R1 480 266

Revenue and profit contributed by subsidiaries

The table below represents the revenue and profit contributed by each subsidiary acquired during the2009 financial years aswell as the profit and revenue of the group if the subsidiary had been acquired at the beginning of each financial year. No newacquisitions were made during 2010 and 2011.



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Group Corporation

Figures in Rand 2012 2011 2010 2012 2011 2010

5. Investments in subsidiaries (continued)2009 Months Revenue (subsidiary) Profit (subsidiary) Revenue (group)* Profit

(group)*R’000 R’000 R’000 R’000

Canton Trading 123 12 3 125 (138) 254 842 (21 994)(Pty) LtdGolden Pond Trading 12 1 267 (463) 254 842 (21 994)663 (Pty) Ltd

* Calculated by grossing-up the revenue and profit of the subsidiary to 12 months and incorporating it into the group revenueand profit.

Year ends

The management accounts for the entities with different year ends were obtained and the effect of transactions that occurredafter year end was assessed at a Group level. The impact was found to be insignificant. Minor adjustments were made to inter-group transactions and balances in order to eliminate the transactions and balances during the consolidation process.

Loss of Interest in Subsidiaries due to liquidation:

SynthPro Holdings (Pty) LtdGroup Group

2012 2011

Revenue R0 R0Expenses R0 R0Profit before tax R0 R0Income Tax expense R0 R0Loss after tax R0 R0

(Loss)/ Profit on disposal of interest in SynthPro Holdings (Pty) Ltd R2 320 125

Satinsky 167 (Pty) LtdGroup Group

2012 2011


(Loss)/ Profit on disposal of interest in Satinsky 167 (Pty) Ltd R417 986

Rumar Manufacturing (Pty) LtdGroup Group

2012 2011


(Loss)/ Profit on disposal of interest in Rumar Manufacturing (Pty) Ltd R3 473 521

R0 R0

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Group Corporation

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Confram Harrismith Properties (Pty) LtdGroup Group

2012 2011

Revenue R0 R1 609 845Expenses R0 (R1 609 845)Profit before tax R0 R0Income Tax expense R0 R0Loss after tax R0 R0

(Loss)/ Profit on disposal of interest in Confram Harrismith Properties (Pty) Ltd R0 R0

Orofino Africa Jewellery Manufacturers (Pty) LtdGroup Group

2012 2011

Revenue R0 R0Expenses R0 (R593 212)Profit before tax R0 (R593 212)Income Tax expense R0 R0Loss after tax R0 (R593 212)

(Loss)/ Profit on disposal of interest in Orofino Africa JewelleryManufacturers (Pty) Ltd (R395 542)

Classic Number Trading45 (Pty) Ltd (Pty) LtdGroup Group

2012 2011

Revenue R0 R18 969 793Expenses R0 (R4 498 050)Profit before tax R0 R14 471 743Income Tax expense R0 R0Loss after tax R0 R14 471 743

(Loss)/ Profit on disposal of interest in Classic Number Trading 45 (Pty) Ltd R3 932 389



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6. Investments in associates

Name of company Listed /Unlisted

%holding

2012

%holding

2011

%holding

2010

Carryingamount 2012

Carryingamount 2011

Carryingamount 2010

Fair value2012

Fair value2011

Fair value2010

Mafube Risk and Insurance Consultants (Pty)Ltd

Unlisted %49.00 %49.00 %49.00 49,000 49,000 49,000 49,000 49,000 49,000

49,000 49,000 49,000 49,000 49,000 49,000Accumulated share of retained earnings %24.50 %24.50 %24.50 - - - 743,683 772,151 677,899

49,000 49,000 49,000 792,683 821,151 726,899

Earnings recognised in profit and loss -28 468 94 252 111 782

Summary of financial information of associates

Total assets 9,086,001 10,255,251 5,659,000Total liabilities 5,872,399 6,923,576 2,712,000Revenue 3,430,208 4,880,325 2,370,000Profit or loss (116,195) 384,703 456,000

Mafube Risk and Insurance Consultants (Pty) Ltd

Nature of the business: Insurance and employee brokersYear end: Last day of DecemberGroup shareholding: 24,50%

Associates with different reporting dates

The management accounts of Mafube Risk and Insurance Consultants (Pty) Ltd was obtained for the period that differs to theyear end of the Group. The transactions that occurred during this period were assessed and found to be insignificant to theGroup. The financial statements for the period ended 31 December were thus used for consolidation purposes.



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7. Loans to (from) shareholders

Canton Trading 123 (Pty) Ltd

This loanee, according to the agreement, is obligated to cede in

and out-and-out cession their shares and loans to the Corporation until such time as

the business loan as well as the

shareholder's loans have been repaid.

This amount, which is by intent of a

long nature, carries no interest

and is repayable on demand.

- - - 1,832,172 1,832,172 1,832,098

Twin Cities Trading (Pty) Ltd - - - 302,000 302,000 302,000

This loanee according to theagreement, is obligated to cedein and out-and-out cession theirshares and loans to theCorporation until such timeas the business loan as well asthe shareholder's loans havebeen repaid. This amount, whichis by intent of a long nature,carries no interest and isrepayable on demand.

- - - - - -

SynthPro Holdings (Pty) Ltd - - - 1,500,000 1,500,000 1,500,000

This loanee according to theagreement, is obligated to cedein and out-and-out cession theirshares and loans tothe Corporation until such timeas the business loan as well asthe shareholder's loans havebeen repaid. This amount, whichis by intent of a long nature,carries no interest and isrepayable on demand.

- - - - - -

Shareholders Other

The amount consist of assetsadvances to Orofino AfricaJewellery Manufacturing (Pty)Ltd. The amount has no fixedterms of repayment and nointerest.

- - - 5,315,905 5,315,905 5,484,407

- - - - - -



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7. Loans to (from) shareholders (continued)

Classic Number Trading 45 (Pty)Ltd

The loanee according to the agreement, is obligated to cede in and out-and-out cession their shares and loans to the Corporation until such timeas the business loan as well as the

shareholder's loan have been repaid. This amount, which is by intent of a long nature, carries

no interest and is repayable

on demand.

- - - 1,462,918 1,462,918 1,462,918

Confram Harrismith Properties(Pty) Ltd

This loan, which is by intent of a long nature, carries no interest, is unsecured and not subject to anyterms of repayment.

- - - 11,166,626 11,166,626 13,517,000

Copper Moon Trading 29 (Pty)Ltd

The loanee, according to the agreement, is obligated to cede in

and out-and-out cession their shares and loans to the Corporation until such time as the business

loan as well as the shareholder's

loan have been repaid. This loan, which is by intent of a long nature,

carries no interest and is repayable

on demand.

- - - 705,895 705,895 705,895

Cross Point Trading 23 (Pty) Ltd

The loanee, according to the agreement, is obligated to cede in

and out-and-out cession their shares and loans to the Corporation

until such time as the business

loan as well as the shareholder's

loans have been repaid. This loan,which is by intent of a long nature,

carries no interest and is repayable

on demand.

- - - 737,756 737,756 737,756



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7. Loans to (from) shareholders (continued)

Harrismith Furniture Factory(Pty) Ltd

This loan, which is by intent ofa long nature, carries no interest,is unsecured and is not subject toany terms of repayment.

- - - 4,299,675 4,299,675 4,299,675

Orofino Africa JewelleryManufacturers (Pty) Ltd

This loan is secured by a notarialbond over the movable assets ofthe company and bears nointerest. The loan will not be repayable for a period of two years from October 2007; and thereafter the loan is repayableon demand subject to six monthswritten notice to the company.

- - - 16,371,000 16,371,000 16,371,000

Phiritona Plastics (Pty) Ltd

The loanee, according to the agreement, is obligated to cede in and out-and-out cession their shares and loans to the Corporation until such time as the business loan as well as the shareholder's loans have been repaid. This loan, which is by intent of a long term nature, carries no interest and is repayable on demand.

- - - 451,163 451,163 451,163

Rumar Manufacturing (Pty) Ltd - - - 214,286 214,286 214,286

The loanee, according to the agreement, is obligated to cede in and out-and-out cession their shares and loans to the Corporation until such time as the business loan as well as the shareholder's loans have been repaid. This loan, which is by intent of a long term nature, carries no interest and is repayable on demand.



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7. Loans to (from) shareholders (continued)Satinsky 167 (Pty) Ltd

The loan, according to theagreement, are obligated to cedein and out-and-out cession theirshares and loans according tothe Corporation until such timeas the business loans as well asthe shareholder's loans havebeen repaid. This loan which areby intent of a long term nature,carry no interest and arerepayable on demand.

- - - 253,240 253,240 253,240

- - - 44,612,636 44,612,636 47,131,438Impairment of loans toshareholders

- - - (44,612,636) (44,612,636) (47,131,438)

- - - - - -

Loans to shareholders impaired

As of 31 March 2012, loans to shareholders of R44 612 636 (2011: R44 612 636) were impaired and provided for.

The carrying amount of loans to and from shareholders are denominated in Rand.

Reconciliation of provision for impairment of loans to shareholders

Opening balance - - - 44,612,636 47,131,438 40,367,747Provision for impairment - - - - (2,350,374) 6,763,691Other - - - - (168,428) -

- - - 44,612,636 44,612,636 47,131,438

The creation and release of provision for impaired receivables have been included in operating expenses in the statement ofcomprehensive income . Amounts charged to the allowance account are generally written off when there is no expectation ofrecovering additional cash.

The shareholder loans form part of Note 36 relating to related parties



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8. Other financial assets

Loans and receivables

Business Loans

Business 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 prime rate related.

188,163,303 220,850,934 179,598,937 198,611,765 226,010,448 215,749,292

Housing loans

The Corporation holds collateralin the form of first bonds over theproperties of the clients. Theseloans have a maximumrepayment period of 20 yearsand interest is prime rate related.

83,316,928 92,550,943 112,627,833 83,316,928 92,550,943 112,627,833

Personnel loans

Personnel loans consist out ofhousing, motor vehicle, computerand personal loans. The housingloans are secured by a firstmortgage bond over theproperties and are repayableover a maximum period of 30years at the South AfricanRevenue Services official rate.

Motor vehicle loans are securedby instalment sales agreements,and are repayable over amaximum period of 5 years. Forcomputers and personal loansthe security is the net salary ofthe employee and is repayableover a maximum period of 2years. All personnel loans carryinterest at the South AfricanRevenue Services official rate.

22,050,479 28,094,296 32,485,438 22,050,479 28,094,296 32,485,438

Other loans

Consist of various loans.

49,692 193,796 1,793,580 - 55,037 1,793,580



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8. Other financial assets (continued)

Bridging loans

These loans are by intent, of ashort term nature, are secured byinstalment sale agreements,special and general notarialbonds, key man insurance andcomprehensive insurance,interest is charged at prime andrepayment is over the length ofthe project.

128,232,716 102,356,390 90,236,739 128,232,716 102,356,390 92,018,975

Personnel loans

Personnel loans consist ofbursary and dependent studyloans which are secured by thenet salary of the employee,repayable within 12 months andcarry interest at the SouthAfrican Revenue Services officialrate.

An amount of R837 093 wasincluded under personnel loanswhich relate to study loans forstaff members. A percentage willbe expensed once the employeethat submitted proof that theyhave passed the courses thatthey are registered for.

3,647,961 936,142 302,534 3,647,961 936,142 302,534

425,461,079 444,982,501 417,045,061 435,859,849 450,003,256 454,977,652Loans and receivables(impairments)

(270,750,480)(236,599,177)(170,356,763)(270,750,480)(236,599,177)(199,350,025)

154,710,599 208,383,324 246,688,298 165,109,369 213,404,079 255,627,627

Non-current assetsLoans and receivables 115,689,063 166,681,613 211,655,219 126,087,833 171,702,368 218,538,069

Current assetsLoans and receivables 39,021,536 41,701,711 35,033,079 39,021,536 41,701,711 37,089,558

154,710,599 208,383,324 246,688,298 165,109,369 213,404,079 255,627,627

For debt securities classified as available-for-sale, the maximum exposure to credit risk at the reporting date is the fair value.

The maximum exposure to credit risk at the reporting date is the carrying amount of the held to maturity financial assets.



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Figures in Rand 2012 2011 2010 2012 2011 2010

9. Deferred tax

Deferred tax asset

Accelerated capital allowancesfor tax purposes

(4,245,653) (4,533,680) (5,026,144) - - -

Origin

Deferred tax is a result of the subsidiaries not being exempt from income tax such as the Parent (FDC)

10. Deferred Income and (Expenditure)

Non-current assets 4,347,843 3,935,473 3,923,845 4,347,843 3,935,473 3,923,845Non-current liabilities (435,144) (435,144) (435,144) (435,144) (435,144) (435,144)Current liabilities (9,545) (46,637) (68,697) (9,545) (46,637) (68,697)

3,903,154 3,453,692 3,420,004 3,903,154 3,453,692 3,420,004

Non-current assets

Deferred rental income

In terms of IAS 17 (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 deferredrental income.

Non-current liability

Deferred operating rental expense

In terms of IAS 17 (Leases) par. 34, lease payments under operating leases shall be recognised as an expense on a straightline basis over the lease term. The differences between the contractual payments and the straight lining are recognised asdeferred rental expense.

Deferred financial service fee

Financial service fees are levied when an application for financing is approved. These service fees are amortised over the loanterm. Financial service fees are realised in full when the loan is settled

11. Retirement benefits

Defined benefit plan

The benefit is in respect of current and retired employees of the Group (employees of FDC) who are currently members ofmedical schemes. Pensioners include retired employees or their widow(er)s. The liability is in respect of pensioners whocontinue to belong to a medical scheme after retirement. In respect of these employees, 67% of the medical aid contribution ispaid by the Group (Corporation) while the pensioners pay the remaining 33%. Valuation is undertaken every year. Currentlythere is no funding arrangement in place to meet the liabilities that have occurred to date or that will occur in the future.

Carrying value

Present value of the definedbenefit obligation-partially orwholly funded

(26,349,000) (22,718,000) (19,745,752) (26,349,000) (22,718,000) (19,745,752)



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Figures in Rand 2012 2011 2010 2012 2011 2010

11. Retirement benefits (continued)

Movements for the year

Opening balance 22,718,000 19,746,000 16,926,000 22,718,000 19,746,000 16,926,000Current Service Cost 1,504,000 1,128,000 1,068,752 1,504,000 1,128,000 1,068,752Benefits paid (544,000) (500,000) (425,000) (544,000) (500,000) (425,000)Actuarial Loss 372,000 366,000 406,000 372,000 366,000 406,000Other 2,299,000 1,978,000 1,770,000 2,299,000 1,978,000 1,770,000

26,349,000 22,718,000 19,745,752 26,349,000 22,718,000 19,745,752

Key assumptions used

Assumptions used on last valuation on 31 March 2012:

Average retirement rate 60 60 60 60 60 60Medical aid inflation rate %6.78 %7.23 %7.20 %6.78 %7.23 %7.20Discount rate %8.92 %9.37 %9.30 %8.92 %9.37 %9.30Salary increase rate %5.75 %6.18 %6.10 %5.75 %6.18 %6.10

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 one percentage point and the effect of a decrease of one percentage point on the following wouldbe:

Group / Corporation Group / Corporation2012 2011

Increase Decrease Income DecreaseEffect on the aggregate of the service cost and 5 551 000 4 249 000 4 482 000 3 518 000interest cost Benefit obligation at end of the year 31 900 000 22 100 000 27 200 000 19 200 000

Retirement Benefit obligation

The Corporation and members contribute to a fixed contribution pension fund and associated employee benefit schemes. It is aself-funded scheme governed by the Pension Fund Act, 1956 and managed by a Board of Trustees. The fund had 108(2011:127) members at year end. The fund was registered on 1 April 1997. At present the total employer contributions,including contributions to associated schemes, are made at 15% of pension funding salaries, while the members contribute7,55% of pension funding salaries.

12. Other investments

* The Corporation holds 18% of the issued share capital.

** The Corporation holds 10% of the issued share capital

The Corporation, which has a 10% shareholding and the other two shareholders responsible for operating the business, hasdue to the poor performance of Liga proposed that Ligia be sold. A unanimous resolution was adopted by the Board of Ligiasanctioning the sale of the business subject to certain terms and conditions. It was envisaged that the shares in Ligia PaperIndustries (Pty) Ltd will be sold during the 2009/2010 financial year. This sale has not yet realised by 31 March 2012. Thecompany ceased trading 10 January 2012 and its liability 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.



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12. Other investments (continued)

Non-current QwaQwa Dantis (Pty) Ltd* 58,805 482,418 1,236,470 54,250 54,250 54,250Ligia Paper Industries (Pty) Ltd**

- - - - - -

CurrentLigia Paper Industries (Pty) Ltd**

- - - 1 1 236,000

58,805 482,418 1,236,470 54,251 54,251 290,250

13. Inventories

Raw materials, components - 201,861 150,468 - - -Work in progress 173,886 76,287 - - - -Finished goods 840,290 924,663 - - - -Consumables 1,584,173 1,125,127 142,922 59,187 59,187 142,922Equipment Held for re-sale 1 1 2,107,250 1 1 2,107,250Stands held for re-sale 2,618,992 2,618,992 2,535,266 2,618,992 2,618,992 2,535,266

5,217,342 4,946,931 4,935,906 2,678,180 2,678,180 4,785,438

14. Trade and other receivables

Trade receivables 18,373,647 16,396,865 9,591,865 10,498,018 5,053,427 2,456,301Prepayments (if immaterial) 7,885,174 7,221,721 6,109,643 7,885,174 7,221,721 6,099,841Deposits 119,789 119,789 141,011 119,789 119,789 119,789VAT 1,195,394 2,872,634 32,806 666,265 2,588,074 32,806Sundry Debtors 6,934,914 6,790,849 11,752,325 7,506,711 6,775,329 9,901,273Creditors with debit balances 692,130 670,918 - 692,130 670,918 -

35,201,048 34,072,776 27,627,650 27,368,087 22,429,258 18,610,010

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 are mainly due to difficult economic circumstances resulting in defaulting of payments.

Trade and other receivables impaired

As of 31 March 2012, trade and other receivables of R55 182 486 - (2011: R 46,507,413 ; 2010: R 34 985 781) were impairedand provided for on the Corporation, and R55 513 753 (2011: R47 856 721); (2010: R35 181 781) were impaired and providedfor on the group.

The ageing of these debtors are as follows:

Over 6 months 55,513,753 47,856,721 35,181,781 55,182,486 46,507,413 34,985,781

Reconciliation of provision for impairment of trade and other receivables

Opening balance 47,856,721 35,181,781 23,628,781 46,507,413 34,985,781 23,690,781Provision for impairment 7,657,032 12,674,940 11,553,000 8,675,073 11,521,632 11,295,000

55,513,753 47,856,721 35,181,781 55,182,486 46,507,413 34,985,781

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. Thegroup does not hold any collateral as security.



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Figures in Rand 2012 2011 2010 2012 2011 2010

15. Cash and cash equivalents

Cash and cash equivalents consist of:

Cash on hand 28,426 24,070 36,622 17,000 17,000 15,000Bank balances 32,401,706 13,924,234 49,682,934 29,039,176 12,352,788 48,236,622Short-term deposits 79,717 1,595,200 7,442,895 - - -Collateral investments 23,121,061 13,477,135 221,784 23,121,061 13,477,135 221,784Bank overdraft (352) (422,036) (247,213) - - -

55,630,558 28,598,603 57,137,022 52,177,237 25,846,923 48,473,406

Current assets 55,630,910 29,020,639 57,384,235 52,177,237 25,846,923 48,473,406Current liabilities (352) (422,036) (247,213) - - -

55,630,558 28,598,603 57,137,022 52,177,237 25,846,923 48,473,406

In April 2009 the investment management company with which the Corporation has invested encountered liquidity problems. Itwas subsequently placed under curatorship on 28th of April 2009 and is currently involved in extensively investigating theaffairs of CMM and others; they are unable to pronounce themselves on any outcomes at this stage. The investment held withthe Corporate Money Managers amounts to R29 388 829. In March 2011 an amount of R1 381 568.37 was received from CMMas an interim payment of the outstanding amount. No amount has been received in respect of the capital investment. 50% tothe value of R14 669 415 have been impaired.

Furthermore included in the bank account balances are amounts to the value of R31 104 026 held in favour of the followingthird parties, Free State Department of Health, Maluti Bus Services and MTN Foundation Fund.

16. Non-current assets held for sale

These assets were acquired from Synthpro, which was liquidated. As the assets are of a specialised nature, the Free StateDevelopment Corporation decided to sell these assets. The non-current assets are to be sold piecemeal.

Assets and liabilities

Non-current assets held forsaleProperty, plant and equipment 2,400,000 - - 2,400,000 - -

17. Revaluation reserve

Opening Balance 3,644,204 3,644,204 3,248,499 3,644,204 3,644,204 3,036,529Gain on Revaluation of Property - - 607,675 - - 607,675Adjustment to equity investment (937,388) (513,775) 872,955 - - -

2,706,816 3,130,429 4,729,129 3,644,204 3,644,204 3,644,204



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18. Other financial liabilities

At fair value through profit orlossShell South Africa (Pty) Ltd

The Corporation has twoagreements with Shell SouthAfrican (Pty) Ltd. Shell advanceloans to the Corporation to erecta service station each inBotshabelo and Phuthaditjhaba.These loans are redeemed bymeans of a monthly fuel rebateper litre, payable in respect ofeach litre of petrol purchasedfrom Shell for re-sale at theseservice stations. The servicestations are dedicated Shellservice stations which Shell hasthe sole right to use the servicestation to sell Shell products.

Botshabelo service stationThe agreement shall endure forthe longer period of 20 years oruntil 39 280 000 litres of Shellpetrol have been purchased forresale on the premises. Effectivedate: December 1985.

Phuthaditjhaba service stationThe agreement shall endure forthe longer period of 20 years oruntil 77 220 000 litres of Shellpetrol have been purchased forresale on the premises. Effectivedate: December 1991.

779,725 782,722 827,854 779,725 782,722 827,854

Total South Africa (Pty) Ltd

TOTAL advanced an interest freeloan to the Corporation to erect aservice station in Phuthaditjhaba.The loan is redeemed by meansof a monthly credit per litre,payable in respect of each litre ofTOTAL diesel purchased fromTOTAL for re-sale at the servicestation. The agreement shallendure for the longer period of20 years or until 161 460 000litres of TOTAL petrol andTOTAL diesel have beenpurchased. Effective date:January 1992.

707,987 735,084 762,972 707,987 735,084 762,972

Other financial liabilities 5,101,001 2,808,043 77,000 5,101,001 2,808,043 77,000

6,588,713 4,325,849 1,667,826 6,588,713 4,325,849 1,667,826



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Figures in Rand 2012 2011 2010 2012 2011 2010

18. Other financial liabilities (continued)

Held at amortised costOther loans 307,366 3,093,314 3,092,977 - - -

6,896,079 7,419,163 4,760,803 6,588,713 4,325,849 1,667,826

Non-current liabilitiesFair value through profit or loss 1,487,712 1,517,806 1,590,826 1,487,712 1,517,806 1,590,826At amortised cost 307,366 3,093,314 3,092,977 - - -

1,795,078 4,611,120 4,683,803 1,487,712 1,517,806 1,590,826

Current liabilitiesFair value through profit or loss 5,101,001 2,808,043 77,000 5,101,001 2,808,043 77,000

6,896,079 7,419,163 4,760,803 6,588,713 4,325,849 1,667,826

The carrying amounts of financial liabilities at fair value through profit or loss are denominated in Rand.

19. Finance lease obligation

Non-current liabilities 13,757 429,815 433,795 - - -Current liabilities - 3,984 - - - -

13,757 433,799 433,795 - - -

Liabilities under instalment sale agreement payable from 10/08/2008 to 10/07/2013 bearing interest at 18% and secured overfixed assets with a book value of R1 (2011:R1).

In the 2011 year a further liability under instalment sale agreement payable over 5 years, bearing interest at 14% and securedover assets. This subsidiary was liquidated in 2012.

20. Trade and other payables

Trade payables 59,986,591 40,781,822 39,530,000 56,727,058 31,776,118 28,518,000VAT 489,997 882,516 1,035,000 - - -Sundry Payables 7,582,486 8,000,655 8,562,688 7,075,217 7,077,320 478,961Debtors with credit balances 5,197,686 5,736,937 4,103,235 5,209,033 5,748,284 4,103,000Maluti Bus Employees andCommunity Trust

12,800,000 7,950,000 6,850,000 12,800,000 7,950,000 6,850,000

Accruals 6,966,344 5,448,686 7,228,000 5,335,376 4,258,816 7,708,562Deposits received 6,310,812 5,422,455 5,024,397 6,310,812 5,379,024 4,989,397Other payables 2,586,022 1,527,843 613,890 2,544,843 1,527,843 613,890

101,919,938 75,750,914 72,947,210 96,002,339 63,717,405 53,261,810

Funds received on behalf of the Maluti Bus Employees and Community to be paid over into a trust that FDC is awaiting thecreation of.



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Figures in Rand 2012 2011 2012 2011

21. Revenue

Sale of inventory 26,491,872 34,939,882 234,535 457,887Rendering of services 62,812,086 48,387,924 65,832,086 51,237,924Rental Income 60,763,129 56,343,853 61,378,729 56,586,190Government grant 60,271,098 49,579,261 28,947,368 21,756,417

210,338,185 189,250,920 156,392,718 130,038,418

22. Cost of sales

Sale of goodsInventory 3,013,627 9,982,616 - 390,594

Rendering of servicesService expense 57,685,377 44,955,281 57,685,377 44,955,281

Rental expensesRental expenses 44,641,753 33,505,681 44,494,884 33,505,681

105,340,757 88,443,578 102,180,261 78,851,556

23. Other income

Administration and legal cost recovered 232,583 312,159 162,106 312,159Fees earned 1,288,709 969,324 1,288,709 969,324Directors fees - 7,000 - 7,000Bad debts recovered 6,301,377 1,042,564 6,174,740 916,564Loans written off - 9,097,994 - -Sundry income 349,064 665,963 25,999 457,374Insurance 4,803,535 10,437 4,401,835 (214,563)Dividends received 464,132 869,593 464,132 869,593Cost Recoveries 1,479,594 - 1,479,594 -Fuel rebates 79,601 73,020 79,601 73,020Profit on sale of asset 6,450,247 - 7,636 -Housing loan settlement receipts - 1,068,468 - 1,068,468

21,448,842 14,116,522 14,084,352 4,458,939

24. Employee related cost

Basic salary 64,222,633 58,561,435 47,472,526 43,664,090Performance bonuses - 52,897 - 52,897Non-Pensionable allowances 12,794,823 10,942,158 12,725,060 10,942,158

77,017,456 69,556,490 60,197,586 54,659,145



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Figures in Rand 2012 2011 2012 2011

25. Administrative expenses

Bank charges 375,202 363,873 87,457 106,681Advertising 11,511 47,412 - -Administration and other fees 12,640 99,345 - -Cleaning 139,728 127,791 - -Legal expenses 528,832 582,005 127,737 239,645Consumables 269,535 182,086 228,622 182,086Donations 313,884 335,420 - -Entertainment 342,180 363,392 256,001 339,965Fines and penalties 513,481 14,485 - -Flowers 2,623 6,918 2,623 6,918Levies - 18,140 - -Packaging 2,116 2,245 - -Printing and stationery 640,355 772,381 349,672 396,476Protective clothing 191,942 8,259 - -Refurbishments - 586,485 - -Security 949,975 1,242,735 404,181 909,817Subscriptions 409,627 430,043 224,820 286,175Telephone and fax 3,870,975 3,643,006 2,894,474 2,707,463Cost Recoveries - 751,416 - 751,416BEE Rating 1,867 4,878 - -Conference and training expenses 374,731 502,569 334,855 456,880Sundry expenses 832,107 426,855 - -Cash Shortages 152 13,608 152 9,265Licenses 163,377 760,505 161,585 336,676Loss on sale of assets 660,000 12,560,492 - 1,841,155Directors remuneration 3,192,783 2,401,811 2,202,187 1,746,955Placement fees 49,509 15,615 49,509 15,615Debt collection 137,103 646,790 136,269 619,940

13,986,236 26,910,560 7,460,145 10,953,126

26. Operating expenses

Actuarial losses 372,000 366,000 372,000 366,000Accounting fees 340,494 307,292 - -Auditors remuneration - internal audit 595,815 855,161 595,815 855,161Auditors remuneration - external audit 5,149,783 4,132,852 4,946,942 3,975,213Assessment rates & municipal charges 13,138 1,320,782 - -Bad debts 2,146,911 1,445,392 1,472,186 1,198,616Marketing commission 1,577,259 695,702 1,577,259 677,326Computer expenses 257,243 137,288 122,431 22,050Consulting and professional fees 4,164,253 7,770,775 3,949,426 7,574,697Discount allowed 63,820 44,464 - -Insurance 1,909,244 1,359,991 - -Impairment losses 59,226,337 55,237,009 44,133,286 66,707,812Rent paid 2,488,652 2,116,175 1,639,691 1,392,906Motor vehicle expenses 12,817,989 9,233,916 - -Personnel reallocation fees 87,462 70,360 87,462 70,360Repairs and maintenance 7,164,668 10,550,827 - -Service Costs 1,504,000 1,147,502 1,504,000 1,147,502Travel - local 4,490,162 3,823,521 4,112,904 3,415,493Water and Electricity 3,279,512 3,025,839 1,863,079 2,021,914Management fee 1,980,000 2,850,000 - -Depreciation and amortisation 3,051,866 2,883,259 2,193,605 1,963,694

112,680,608 109,374,107 68,570,086 91,388,744



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27. Operating loss

Operating loss for the year is stated after accounting for the following:

Operating lease chargesPremises Contractual amounts 2,488,652 2,116,175 1,639,691 1,392,906

Loss on sale of property, plant and equipment (660,000) (6,068,675) - (168,469)Profit (loss) on sale of investment property 7,636 (1,672,685) 7,636 (1,672,685)Profit (loss) on sale of businesses (or subsidiaries, jointventures and associates)

6,442,611 (4,819,132) - -

Depreciation and amortisation 3,051,866 2,883,259 2,193,605 1,963,694Employee costs 77,017,456 69,556,490 60,197,586 54,659,145

28. Interest received

Interest revenueLoans Granted 20,438,630 26,305,899 20,438,630 25,590,840Financial Institutions 1,826,074 1,730,780 1,760,439 1,637,840Trade and other receivables 4,284,100 2,282,777 4,284,100 2,272,032

26,548,804 30,319,456 26,483,169 29,500,712

29. Finance costs

Group companies 2,665 452,343 - -Trade and other payables - 1,162 - -Post-retirement medical benefit 2,790,991 1,978,000 2,317,690 1,978,000Interest paid other - 22,269 - -

2,793,656 2,453,774 2,317,690 1,978,000

30. Auditors' remuneration

External audit 5,149,783 4,132,852 4,946,942 3,975,213Internal audit 595,815 855,161 595,815 855,161

5,745,598 4,988,013 5,542,757 4,830,374



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31. Operating lease

Lessee

The Group has properties under operating lease agreements. Rental income to the amount of R61 million (2011: R57 million)has been recognized in the Statement of Comprehensive Income as turnover during the year.

The cumulative future minimum rental repayments are as follows:

Group Corporation 2012 2011 2012 2011

Payable within 1 year R10 000 R90 440 R10 000 R90 440Payable within 1 – 5 years R0 R0 R0 R0Payable within 5 – 10 years R0 R0 R0 R0

Lessor

The Group is under operating lease agreements for properties. These lease agreements have escalations between 8 – 10%per year with the agreement terms varying between 3 – 5 years. Rental expenses, for these agreements, to the value ofR90 441 and (2011: R229 645) have been recognized as other operating expenses in the Statement of Comprehensive Incomeduring the year under review.

The cumulative future minimum rental repayments are as follows:

Group Corporation 2012 2011 2012 2011

Receivable within 1 year R25 477 000 R23 448 000 R25 477 000 R23 448 000Receivable within 1 – 5 years R47 153 000 R41 790 000 R47 153 000 R41 790 000Receivable within 5 – 10 years R0 R 1 965 000 R0 R 1 965 000

32. Other comprehensive income

Components of other comprehensive income - Group - 2012

Gross Tax Net

Available-for-sale financial assets adjustments Gains and losses arising during the year (423,613) - (423,613)


Gross Tax Net

Available-for-sale financial assets adjustments Gains and losses arising during the year (1,386,730) - (1,386,730)

Movements on revaluation Gains (losses) on property revaluation (211,970) - (211,970)Total (1,598,700) - (1,598,700)



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32. Other comprehensive income (continued)


Gross Tax Net

Available-for-sale financial assets adjustments Gains and losses arising during the year 172,688 - 172,688

Movements on revaluation Gains (losses) on property revaluation 609,061 - 609,061Total 781,749 - 781,749

Components of other comprehensive income - Corporation - 2010

Gross Tax Net

Movements on revaluation Gains (losses) on property revaluation 607,675 - 607,675

33. Cash generated from (used in) operations

Profit (loss) after taxation (44,181,878) (60,615,564) (43,765,529) (73,832,502)Adjustments for:Depreciation and amortisation 2,922,918 2,910,480 2,075,442 1,957,113Actuarial loss 372,000 366,000 372,000 366,000Deferred tax (288,027) (492,464) - -Interest received (26,548,804) (30,319,456) (26,483,169) (29,500,712)Finance Charges 2,793,656 2,453,774 2,299,000 409,830Interest 2,299,000 1,978,000 2,317,690 1,978,000Impairment adjustments 29,695,439 54,226,343 34,151,303 42,178,495Deferred income (449,462) (33,688) (412,370) (11,628)Income from associates 28,468 (94,252) - -Provisions 510,366 116,621 (30,094) (73,020)Provisions for service cost 1,504,000 1,128,248 1,504,000 1,128,248Loss on Disposal of assets - - - 1,568,170Dividends received (464,132) (869,593) (464,132) (869,593)Deferred Expenses - - (37,092) (22,060)Other non-cash items 9,369,637 (5,133,992) 5,030,882 (1,334,475)Changes in working capital:Inventories (270,411) (11,025) - 2,107,258Trade and other receivables (1,128,272) 154,677 (4,938,829) (3,819,248)Trade and other payables 26,169,025 2,803,702 32,284,933 10,455,595

2,333,523 (31,432,189) 3,904,035 (47,314,529)



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34. Business combinations

Aggregated business combinations

Property, plant and equipment - 1,003,000 - 1,003,000Intangible assets - 20,000 - 20,000Trade and other receivables - 4,000 - 4,000Cash and cash equivalents - 570,000 - 570,000Finance lease obligation - (47,000) - (47,000)Provisions - (105,000) - (105,000)Financial Lease Obligation - (39,000) - (39,000)Trade and other payables - (1,341,000) - (1,341,000)Total identifiable net assets

- 65,000 - 65,000Impairment Goodwill - (65,000) - (65,000)

- - - -

Net cash outflow on acquisitionCash acquired - 570,000 - 570,000

Free State Investment Promotion Agency (FIPA)

On 24 February 2010, the Free State Provincial Government Executive Council resolved to incorporate the Free StateInvestment Promotion Agency (FIPA) into the Free State Development Corporation (FDC). As a result of this resolution theFDC Act was amended to be in line with the resolution of the Provincial Executive Council and the amended FDC Act becameeffective on 08 June 2010. However, the actual transfer of FIPA functions, assets, liabilities and employees became effectiveon 01 July 2010.

Fair value of assets acquired and liabilities assumed

Property, plant and equipment - 1,003,000 - 1,003,000Intangible assets - 20,000 - 20,000Trade and other receivables - 4,000 - 4,000Cash and cash equivalents - 570,000 - 570,000Finance lease obligation - (47,000) - (47,000)Provisions - (105,000) - (105,000)Financial Lease Obligation - (39,000) - (39,000)Trade and other payables - (1,341,000) - (1,341,000)Total identifiable net assets

- 65,000 - 65,000Impairment Goodwill - (65,000) - (65,000)

- - - -

Receivables acquired

Receivables acquired per major class are as follows, as at acquisition date:

Staff Debtor R48 000

Prepayments R4 000 R4 000

Acquisition related costs

No acquisition related costs were incurred by the FDC, as the incorporation was due to decision taken by the ProvincialExecutive Committee that become effective on 08 June 2010.



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Group Corporation

Figures in Rand 2012 2011 2012 2011

35. Capital Commitments

Authorised capital expenditure

Already contracted for but not provided for Investment property 471,026,000 471,026,000 471,026,000 471,026,000 Other financial assets 12,600,587 - 12,600,587 -

The Corporation is involved in constructing the N8 Office Park. The project is estimated to cost R474 960 000 and will befinanced through loans from lending institutions.

The Corporation is involved in contructing the Bolata Clinic. The project is estimated to cost R12 600 587.

36. Contingencies

The Group has contingent liabilities and contingent assets in respect of legal claims arising in the ordinary course of business.

Contingent liabilities

It is not anticipated that any material liabilities will arise from the contingent liabilities other than those provided for.

Claim by Pegma 21 Investments (Pty) Ltd (PEGMA) against the Corporation in High Court Free State Provincial division basedon an alleged unlawful attachment on leased premises of the Corporation for arrears rentals, thus preventing PEGMA fromselling attached assets and suffering a loss of R1 497 305 alternatively preventing PEGMA from utilising attached assets formanufacturing purposes resulting in a loss of profit amounting to R448 995.FDC has entered appearance to defend and interalia raised special pleas one of which has been successfully partially upheld.

Legal action taken by Fery’s Quality Meats (Pty) Ltd against the Corporation in the High Court for payment of damagesamounting to R2 million during 2006. The Corporation has entered appearance to Defend and Pleadings have beenexchanged. As Frey’s Quality Meats could have long since set the matter down for trial, which they have not, it appears asthough they have lost their aptitude for pursuing this matter. FDC is cautiously confident of being successful in defending theaction taken against it.

Legal action was taken by Halevy Heritage Hotel CC against the Corporation in the High Court for an order declaring clause40.6 of the lease agreement to contain an option in favour of Halevy Hotel and upon acceptance would give rise to a validcontract of sale of the hotel for R6 500 000. The Corporation opposed the application and the Court ruled in favour of HalevyHotel. Notice of Application for Leave to Appeal was filed in the High Court on 30 March 2010. Leave to appeal was granted bythe High Court. The Corporation is awaiting the date for the hearing of the appeal.

Legal action was taken by WAECO Investment (Pty)Ltd against the Corporation in the High Court for payment of R229 345 ascompensation in respect of improvements effected on the leased property. The Corporation has entered appearance to Defend

and Plea will be filed with the court in due course. The original lease agreement was entered into between WAECO Investment

(Pty)Ltd and North West Development Corporation.

Legal action was taken by S&S Tarpaulin against the Corporation in the High Court for damages amounting to R981 225. TheCorporation is awaiting the court date for the matter to be heard.

Contingent asset

Legal action taken against FDC by MK Makhubalo in the High Court for payment of damages and outstanding benefitsamounting to R5 314 335. The claim was withdrawn by MK Makhubalo, however FDC has entered appearance to Defend andfile a Counter Claim for R3 542 367.



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Group Corporation

Figures in Rand 2012 2011 2012 2011

37. Related parties

`

RelationshipsSubsidiaries Refer to note 5Associates Refer to note 6Shareholder with significant influence Refer to note 7Members of key management and Non-executive directors M.I. Seoe

T.L. RamaemaK.S. MahlanguL.R. MutsiM.J. NtshingilaB.C. StofileE.P.AbabioM.S. KumaloI. OsmanS.M. MazibukoM.D. MofotiJ.H. van WykM.E. Ntshiea M.E. MohlahloM.K. KgokotliK.L.K. MoahloliN.I. KuneneD.P. SemppeK.F. FingerE. KomaneG.G. MazibukoS.C.T. MakweyaL. WelmanF. Tlhomelang

Related party balances

Long term commercial loans - Owing by relatedpartiesCanton Trading (Pty) Ltd - - 2,285,798 2,281,743Classic Number Trading 45 (Pty) Ltd - - 5,211,442 5,879,638Golden Pond Trading (Pty) Ltd - - 1,326,593 1,308,308Copper Moon Trading (Pty) Ltd - - 1,442,734 1,387,089Cross Point Trading (Pty) Ltd - - 4,063,035 3,848,732Highlands Furniture Factory (Pty) Ltd - - 4,898,072 4,898,071Phiritona Plastics (Pty) Ltd - - 3,517,292 2,945,888Rumar Manufacturing (Pty) Ltd - - 3,442,992 3,437,044Satinsky 167 (Pty) Ltd - - 1,066,248 1,066,247Synthpro Holdings (Pty) Ltd - - 4,634,163 6,289,242Twin Cities Trading (Pty) Ltd - - 2,216,038 2,198,523Welkom Diamond Cutting Works (Pty) Ltd - - 314,557 1,143,218

Impairment on commercial loansImpairment provision at year end - - (25,617,653) (33,415,415)Impairment on shareholders loansImpairment provision at year end - - (44,612,636) (44,612,636)

AssociatesPrepaid insurance expenseMafube Risk and Insurance Brokers (Pty) Ltd 3,546,761 2,728,793 3,546,761 2,728,793

Directors



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37. Related parties (continued)Transactions with entities where directors of theFDC Board are a shareholder or member in theentityLoans grantedInkokhulu Trading (Pty) Ltd 668,706 618,976 668,706 618,976Matjhabeng Filling Station * - 163,279 - 163,279Tats Electrical Services (Pty) Ltd * 8,048 8,048 8,048 8,048Mr & Mrs AT Ntshingila * 435,504 469,473 435,504 469,473* These loans have been granted to Boardmembers and their respectable entities before theywere elected as Board members of the Corporation.

Related party transactions

Interest received from related partiesHighland Furniture Factory (Pty) Ltd - - - 167,896

Rent received from related partiesScopeful 21 (Pty) Ltd - - 635,600 450,580Qwa Qwa Datnis 324,424 264,696 324,424 264,696

Administration fees received from related partiesScopeful 21 (Pty) Ltd - - 3,020,000 2,850,000

AssociatesInsurance PaidMafube Risk and Insurance Brokers (Pty) Ltd 3,546,761 2,728,793 3,546,761 2,728,793

Grant receivedDETEA 28,947,368 21,756,417 28,947,368 21,756,417Free State Investment Promotion Agency operatesfrom a building leased by the Free StateDevelopment Corporation, at no charge to theentity. This represents related party transactionsnot at arm's length.

DirectorsTransactions with entities where directors of theFDC board are a shareholder or member in theentityInterest receivedInkokhulu Trading (Pty) Ltd 40,758 41,799 40,758 41,799Matjhabeng Filling Station * 1,120 14,016 1,120 14,016Mr & Mrs AT Ntshingilia * 37,968 46,571 37,968 46,571* These loans have been granted to Board membersand their respectable entities before they were electedas Board members of the Corporation

- - - -

Rental receivedKatushya Security 20,225 142,547 20,225 142,547

Compensation to key managementShort-term employment benefitsBasic salaries 6,016,011 5,731,919 6,016,011 5,731,919Allowances 2,480,284 2,252,424 2,480,285 2,252,424Bonuses - 266,973 - 266,973Other 475,164 120,375 475,165 120,375Company Contributions 961,747 767,319 961,748 767,319



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Group Corporation

Figures in Rand 2012 2011 2012 2011

37. Related parties (continued)

9,933,206 9,139,010 9,933,209 9,139,010

38. Director's emoluments

Executive

2012 EmolumentsFor services as management 9,933,206



Non-executive

2012 EmolumentsFor services as directors 871,540

2011 EmolumentsFor services as directors 933,706

2010 EmolumentsFor services as directors 2,299,000



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Group Corporation

Figures in Rand 2012 2011 2012 2011

39. Prior period errors

Summary of the net effect of the corrections of the prior year errors on Corporation level:

Corporation

Decrease in Retained Income: (48 025 871)Decrease in Investment Property 134 480Decrease in Property, Plant and Equipment 218 634Decrease in Intangible assets 53 995Decrease in Investments in Subsidiaries 2 271 742Decrease in Other Financial Assets 43 190 705Decrease in Deferred Income 937 438Decrease in Receivables 6 000 686Decrease in Other Investments 235 999Decrease in Cash and cash equivalents 6Decrease in Payables (2 097 197) Decrease in Provisions (2 920 617)

Summary of the net effect of the corrections of the prior year errors on Group level:

Group

Decrease in Retained Income: (49 491 514)Decrease in Investment Property 134 480Increase in Property, Plant and Equipment (1 661 366)Decrease in Intangible assets 53 995Decrease in Other Financial Assets 43 190 705Decrease in Deferred Income 937 438Increase in Other Investments (214 408)Decrease in Receivables 6 000 686Decrease in Cash and cash equivalents 929 280Decrease in Non-current Assets held for sale 1 880 000Increase in Reserves 214 408Decrease in Non-Controlling Interest 3 536 847Decrease in Current tax payable (46 288)Decrease in Payables (2 543 646) Decrease in Provisions (2 920 617)

The details of the above corrections of prior period error are:

a) In the prior year the investment in Welkom Diamond Cutting was disclosed at R30, however according to the sharecertificate, the investment amount should be R36. The effect is as follows:

Increase in Investments in Shareholders 6Decrease in Cash and Cash Equivalents (6)

b) In the prior period there was depreciation which was not recorded on the financial system. The effect is as follows:

Increase in Depreciation 93 963Increase in Accumulated Depreciation for PPE (39 968)Increase in Accumulated Amortisation for Intangible Assets (53 995)

c) FIPA leave provision was recorded twice and was reversed retrospectively. The effect is as follows:

Decrease in Leave Provision: 221 000Decrease in Employee Cost (221 000)



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Group Corporation

Figures in Rand 2012 2011 2012 2011

39. Prior period errors (continued)

d) Depreciation was not charged for Buildings in the prior year. The effect of the correction is as follows:

Increase in Depreciation 503 248Increase in Accumulated Depreciation: Buildings (503 248)

e) There was an overprovision for the debtor of Malut Bus Services. The effect of the correction is as follows:

Decrease in Rates and Taxes 719 535Decrease in Sundry Debtors (719 535)

f) Accruals were incorrectly raised in the prior year. The effect of the correction is as follows:

Decrease in the VAT Control Account (31 267)Decrease in Accruals 255 699Decrease in Operating Expenses (224 432)

g) The leave provision of FDC was overstated in the prior year. The effect of the correction is as follows:

Decrease in Leave Provision 95 319Decrease in Employee Cost (95 319)

h) The deferred income was overstated. The effect of the correction is as follows:

Decrease in Deferred Income (937 438)Decrease in Rental Income 937 438

i) The VAT apportionate percentage was updated due to prior year audit findings. The effect of the correction is as follows:

Increase in VAT Control Account 423 529Decrease in Operational Expenses (423 529)

j) The transfer of houses were incorrectly classified under Pre-paid expenses. The effect ot the correction is as follows:

Decrease in Pre-Paid Expenses (620 000)Increase in Sundry Payables 620 000

k) The conditions regarding the provision for performance bonuses lapsed and the provision was reversed. The effect is asfollows:

Decrease in Provisions 2 920 617Decrease in Employee cost (2 920 617)

l) VAT was incorrectly claimed on PPE. The effect of the correction is as follows:

Increase in PPE 294 617Decrease in VAT Control Account (294 617)

m) The investments in subsidiaries were not tested for impairment in the prior year. The effect of the correction is as follows:

Increase in Accumulated Impairments of Investments in Subsidiaries (2 271 748)Increase in Accumulated Impairments of Investments in Associates (235 999)Increase in Impairments 2 507 747



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Group Corporation

Figures in Rand 2012 2011 2012 2011

39. Prior period errors (continued)n) The impairment calculations of long-term loans receivables were updated to include the considerations of the prior year auditfindings. The effect of the corrections made are as follows:

Increase in Accumulated Impairment - 2010 (338 550)Increase in Accumulated Impairment - 2011 (42 852 154)Increase in Impairments - 2010 338 550Increase in Impairments - 2011 42 852 154

o) The impairment calculations of receivables were updated to include the considerations of the prior year audit findings. Theeffect of the corrections made are as follows:

Increase in Accumulated Impairment - 2010 (5 021 671) Increase in Accumulated Impairment - 2011 (587 203)Increase in Impairments - 2010 5 021 671Increase in Impairments - 2011 587 203

p) Accruals were reversed in the prior financial year, The effect of the corrections made are as follows:

Decrease in Payables 1 491 638Decrease in VAT control account (165 776)Decrease in Administrative Expenses (1 325 862)

q) Correction of prior period audit finding (Ex.250) resulted in the following adjustments that were made:

Increase in Receivables 160 877Decrease in Operating Expenses (160 877)

r) Capital expenditure was incorrectly expensed in the prior year. The reclassification of the expenses had the following effect:

Increase in Property, Plant and Equipment 29 965Decrease in Operating Expenses (29 965)

s) Prior year debtor regarding the final liquidation of Classic Number was not recognised. The effect of the corrections madeare as follows:

Increase in Receivables 669 476Increase in Fees Earned (669 476)

t) Prior year accruals were reversed in the prior year. The effect of the corrections made are as follows:

Decrease in Operating Expenditure 1 305 761Decrease in Accruals (1 305 761)

u) Sundry debtors, which relates to salaries and wages of FIPA, werer paid in the prior year, however the transaction was neverrecorded. The effect of the correction is as follows:

Decrease in Sundry Debtors 534 034Increase in Employee Cost (534 034)

v) Some houses were disposed of on MDA in the prior year, which was not accounted for in SAP. The effect of the correctionsmade are as follows:

Decrease in Cost: Residential Properties (Investment Property) 134 480Increase in Profit/Loss on disposal of assets (134 480)



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Group Corporation

Figures in Rand 2012 2011 2012 2011

39. Prior period errors (continued)

The following prior year adjustments were made on Group level only:

w) The assets held incorrectly as "Non-Current Assets held for sale" were reclassified. The effect of the correction is as follows:

Increase in Property, Plant and Equipment 1 880 000Decrease in Non-Current Assets held for sale (1 880 000)

x) Classic Number was incorrectly consolidated into the Group in the prior year, as it was liquidated. The effect of thecorrections made are as follows:

Decrease in Cash and cash equivalents (901 542)Increase in the net effect of Revenue and Expenditure (4 468 026)Increase in Non-Controlling Interest (B/S) 3 932 389Increase in Current Tax Payable 46 288Decrease in Payables 319 617

y) Orofino was incorrectly consolidated into the Group in the prior year, as it was liquidated. The effect of the corrections madeare as follows:

Decrease in Cash and Cash Equivalents (27 732)Increase in the net effect of Revenue and Expenditure (494 638)Increase in the Non-Controlling Interest (B/S) 395 542Decrease in Payables 126 828

z) The percentage that was used to calculate the amount for Investment in Associates for Qwa-Qwa Datnis was 10%, insteadof 18%. The calculations were updated and the effect of the adjustment made to the Investments in Associates is as follows:

Increase in Investments in Associates: Qwa-Qwa Datnis 214 408Increase in Income received form Investments in Associates (214 408)



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Group Corporation

Figures in Rand 2012 2011 2012 2011

40. Comparative figures

Certain comparative figures have been reclassified.

The reclassification of items could have an effect on the cash flow statement for the comparative year also.

The effects of the reclassification can be seen below:

1. Impairment reversals were grouped together with Impairments, as the nature of the transactions relates to fair valueadjustments made to the loans. The grouping does not have an effect on the profit/(loss) for the period. The net effect onStatement of Financial Performance is zero. The effect of the reclassificaiton is as follows:

Decrease in Bad Debts Recovered and Impairment Reversal - Corporation level 41 225 909Decrease in Bad Debts Recovered and Impairment Reversal - Group level 52 788 532

Decrease in Impairment Losses on Non-financlia assets - Corporation level (4 528 849)Decrease in Impairment Losses on Non-financlia assets - Group level (11 128 652)

Decrease in Impairment Losses - Corporation level (36 697 060)Decrease in Impairment Losses - Group level (41 659 880)

2. The short-term portion of loans impairments were reclassified to be in line with the new impairment schedules. The effect ofthe reclassification is as follows:

Decrease in Long-term Accumulated Impairment: Business Loans 62 553 808Decrease in Long-term Accumulated Impairment: Personnel Loans 25 780Increase in Short-term Accumulated Impairment: Bridging Loans (62 553 808)Increase in Short-term Accumulated Impairment: Personnel Loans (25 780)

- - - - - - - -



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Group Corporation

Figures in Rand 2012 2011 2012 2011

41. Risk management

Capital risk management

The Group manages its retained earnings, which at year end amounted to R420 811 750 (2011: R476 724 492) as capital andthere were no changes in either its policies or processes for managing capital, or in what it regards as capital, from the priorperiod.

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 doesn't pay any dividends and all profits are reinvested in SMME developments.

Group

Categories of financial assets and liabilities for the year ended 31 March 2012:

Loans and Available Financial Non-financial Total Carryingreceivables for sale liabilities instrument amount

subsequentlymeasured atamortised cost

Financial assetsOther investment - 58 805 - - 58 805Other Financial assets 115 689 063 - - - 115 689 063Deferred income - - 4 347 843 - 4 347 843Trade and other receivables 35 201 048 - - - 35 201 048Current portion of other financial 39 021 536 - - - 39 021 536assetsCash and cash equivalents 55 630 910 - - - 55 630 910Total 245 542 557 58 805 4 347 843 - 249 949 205

Loans and Financial Financial Non-financial Total Carryingreceivables liabilities liabilities instrument amount

subsequently subsequentlymeasured at measured atfair value amortised cost

Financial liabilitiesFinancial liabilities - 1 487 712 307 366 - 1 795 078 Trade and other payables - - 101 919 937 - 101 919 937Total - 1 487 712 102 227 303 - 103 715 015



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Group Corporation

Figures in Rand 2012 2011 2012 2011

41. Risk management (continued)

Group




Financial assetsOther investment - 482 418 - - 482 418Other Financial assets 166 681 613 - - - 166 681 613Deferred income - - 3 935 473 - 3 935 473Trade and other receivables 34 072 776 - - - 34 072 776Current portion of other financial 41 701 711 - - - 41 701 711assetsCash and cash equivalents 29 020 639 - - - 29 020 639Total 271 476 699 482 418 3 935 473 - 275 894 630

Financial liabilitiesFinancial liabilities - - 4 611 120 - 4 611 120Trade and other payables - - 75 750 912 - 75 750 912Total - - 80 362 032 - 80 362 032

Corporation




Financial assetsOther investment - 54 250 - - 54 250 Other Financial assets 126 087 833 - - - 126 087 833Deferred income - - 4 347 843 - 4 347 843Trade and other receivables 27 368 087 - - - 27 368 087Current portion of other financial 39 021 536 - - - 39 021 536assetsCash and cash equivalents 52 177 237 - - - 52 177 237 Total 244 654 693 54 250 4 347 843 - 249 056 786

Loans and Financial Financial Non-financial Total Carryingreceivables liabilities liabilities instrument amount

subsequently subsequentlymeasured at measured atfair value amortised cost

Financial liabilitiesFinancial liabilities - 1 487 712 - - 1 487 712Trade and other payables - - 96 002 338 - 96 002 338 Total - 1 487 712 96 002 338 - 97 490 050



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Group Corporation

Figures in Rand 2012 2011 2012 2011


Corporation




Financial assetsOther investment - 54 250 - - 54 250Other Financial assets 171 702 368 - - - 171 702 368Deferred income - - 3 935 473 - 3 935 473Trade and other receivables 22 429 258 - - - 22 429 258Current portion of other financial 41 701 711 - - - 41 701 711assetsCash and cash equivalents 25 846 923 - - - 25 846 923 Total 261 680 260 54 250 3 935 473 - 265 669 983

Financial liabilitiesFinancial liabilities - - 1 517 806 - 1 517 806Trade and other payables - - 63 717 405 - 63 717 405 Total - - 65 235 211 - 65 235 211

There are no externally imposed capital requirements.

There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposedcapital requirements from the previous year.



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Group Corporation

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Liquidity risk

The Group's risk to liquidity is a result of the funds available to cover future commitments. The Group's manages liquidity riskthrough an on going 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 analysis the Corporation's financial liabilities into relevant maturity groupings based on the remaining periodsat the balance sheet to maturity date. The amount disclosed in the table are the contractual discounted cash flows.

Group31 March 2012 30 days 60 - 90 days >90 days Total

Trade and other payables 306 559 - 101 613 378 101 919 937

Corporation31 March 2012 30 days 60 - 90 days >90 days Total

Trade and other payables 306 559 - 95 695 779 96 002 338


Trade and other payables 2 660 083 - 73 090 831 75 750 914


Trade and other payables 2 660 083 - 61 057 322 63 717 405



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Free State Development Corporation GroupFinancial Statements for the year ended 31 March 2012

Notes to the Financial StatementsGroup Corporation

Figures in Rand 2012 2011 2012 2011


Credit risk

It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. TheGroup continuously monitors defaults of customers and other counterparties, identified either individually or by group, andincorporate this information in its credit risk controls.

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 fromthe other financial assets of the Group, which comprises available for sale assets and other receivables, the Group is notexposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similarcharacteristics. The Group exposure to credit risk arises from default of the counterparty.

The Group's maximum exposure to credit risk is equal to the cost amount of the financial assets at the balance sheet date andis summarised below:

Group Corporation 2012 2011 2012 2011Other Financial Assets 115 689 063 166 681 613 126 087 833 Deferred income 4 347 843 3 935 473 4 347 843 3 935 473Short term: Other Financial assets 39 021 536 41 701 711 39 021 536 41 701 711Trade and other receivables 35 201 048 34 072 776 27 368 087 22 429 258Cash and cash equivalents 55 630 910 29 020 639 52 177 237 25 846 923Maximum exposure to credit risk 249 890 400 275 412 212 249 002 536 265 615 733

As at 31 March 2012, loans granted, shareholders loans, short term loans and trade and other receivables of CorporationR325 932 966, Group R326 264 233 were impaired and provided for. The individually impaired accounts may relate tocustomers, which are in unexpectedly difficult economic situations. The aging of these classes are as follows:


Loans granted - - 270 750 480 270 750 480 Trade and other receivables - - 55 513 753 55 513 753Total - - 326 264 233 326 264 233


Loans granted - - 270 750 480 270 750 480 Trade and other receivables - - 55 182 486 55 182 486 Total - - 325 932 966 325 932 966

171 702 368

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Group Corporation

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The following table indicates the age analysis of financial assets that are passed due as at reporting date but not impaired forthe Group and Corporation:


Loans and receivables 192 553 820 2 590 876 - 195 144 696







Foreign exchange risk

The Group's only operates locally and therefore is not exposed to currency risk.



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Group Corporation

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Price risk

Group / Corporation

The Group is not exposed to price risk since no listed securities are held for investment purposes and the financial assetsavailable for sale assets consist of investments in unquoted shares.

Cash flow and fair value interest rate risk

The Group's exposure to risk for changes in market interest rates 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 overdraft rate. The Group does not makeuse of interest rate derivatives and therefore 100% of the interest-bearing financial instruments have a variable interest rate.

Sensitivity analysis

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 shareholder's equity. The time frame, over which the assessment is made, is 12 monthsdue to the next reporting date being 31 March 2013. 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 inherent rate risk if interest rates change with thefollowing percentages

Group 2012 2011 2012 2011

+2% -2% R R R R

Increase / (decrease) in profit for the year 10 241 255 10 081 455 (10 241 255) (10 081 455)Increase/ (decrease) in equity 10 241 255 10 081 455 (10 241 255) (10 081 455)

Corporation 2012 2011 2012 2011

+2% -2% R R R R

Increase / (decrease) in profit for the year 10 136 296 10 184 919 (10 136 296) (10 184 919)Increase/ (decrease) in equity 10 136 296 10 184 919 (10 136 296) (10 184 919)



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Group Corporation

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42. Exposure to Technical Insolvency

The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basispresumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities,contingent obligations and commitments will occur in the ordinary course of business.

The Group (Corporation) is exposed to technical insolvency through its subsidiaries. It has accounted for the financial risk byan accumulated impairment of total Business Loans and Shareholders loans.

The following subsidiaries ceased operations

Golden Pond Trading (Pty) LtdOrofino Africa Jewellery ManufacturersCopper Moon Trading (Pty) LtdConfram Harrismith Properties (Pty) Ltd

The following subsidiaries are under Liquidation / Provisional Liquidation:

Satinsky 167 (Pty)LtdSynthpro Holdings (Pty)LtdClassic Number Trading 45 (Pty) LtdRumar Manufacturing (Pty) Ltd

The Group is not exposed to any other significant creditors except as mentioned in the note regarding contingencies.

The Free State Development Corporation's asset base is solid and can meet its obligations when due. However theCorporation did not perform well as it made huge losses which may pose a going concern if not attended to. The huge lossesare mainly as a result of the impairment which are very high. These impairments are extraordinary transactions in that they arehuge as a result of impairment back logs as the Corporation started impairments in the 2008/09 financial year thus making thecurrent year the third year, however, impairments are expected to decrease over the period. If the effects of impairments areeliminated the Corporation makes good profit.

The Corporation on the other hand is managing its expenses by implementing stringent cost cutting measures aimed atreducing operating costs to acceptable levels thus moving towards making profits irrespective of the impairments. TheCorporation is also enhancing its credit assessment and debt collection processes in order to reduce impairments goingforward but also to increase revenue thus making losses.

43. Events after the reporting period

No subsequent events occurred.

44. 2010 World Cup Expenditure

No expenditure relating to the 2010 Soccer World Cup was incurred by the Corporation for the financial years 31 March 2012and 31 March 2011.

45. Irregular Expenditure

BreakdownOpening balance 7,488,854 5,569,000 7,488,854 5,569,000Irregular expenditure - relating to current year 2,216,965 1,919,854 2,216,965 1,919,854

9,705,819 7,488,854 9,705,819 7,488,854

Irregular expenditure of R5 569 million was incurred from 2005 in relation to a contract with former employees (Lehakoe). Thecontract is on a month to month basis and this is purportedly not in line with the SCM regulations. The matter is currently underinvestigation.



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Figures in Rand 2012 2011 2012 2011

46. Fruitless and Wasteful Expenditure

BreakdownOpening balance 70,478 70,000 70,478 70,000Fruitless and wasteful expenditure - relating to currentyear'

1,139,901 478 1,139,901 478

1,210,379 70,478 1,210,379 70,478

Advertisement placed for vacancies at the Corporation but have still not been filled.

The January 2011 invoice was received late and as such submitted late to finance department for payment resulting in interestbeing charged on the account.

Salary of R1,075,576 was paid to an official which is deemed to be fruitless, as the position is not mapped into a specific role orfunctional position within FDC.

47. Unauthorised Expenditure

No unauthorised expenditure was incurred by the Corporation.



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Revenue

Sale of inventory 26,491,872 34,939,882 234,535 457,887

Rendering of services 62,812,086 48,387,924 65,832,086 51,237,924

Rental Income 60,763,129 56,343,853 61,378,729 56,586,190

Government grant 60,271,098 49,579,261 28,947,368 21,756,417

21 210,338,185 189,250,920 156,392,718 130,038,418

Cost of sales 22 (105,340,757) (88,443,578) (102,180,261) (78,851,556)

Gross profit 104,997,428 100,807,342 54,212,457 51,186,862

Other income

Administration and legal cost recovered 232,583 312,159 162,106 312,159

Fees earned 1,288,709 969,324 1,288,709 969,324

Housing loan settlement receipts - 1,068,468 - 1,068,468

Directors fees - 7,000 - 7,000

Dividends 464,132 869,593 464,132 869,593

Bad debt recovered and Impairment reversal 6,301,377 1,042,564 6,174,740 916,564

Debt recoveries 1,479,594 - 1,479,594 -

Insurance claims 4,803,535 10,437 4,401,835 (214,563)

Fuel rebates 79,601 73,020 79,601 73,020

Sundry income 349,064 2,093,020 25,999 457,374

Interest received 28 26,548,804 30,319,456 26,483,169 29,500,712

Gains on disposal of assets 6,450,247 - 7,636 -

Loans written off - 7,670,937 - -

Income from equity accounted investments - 94,252 - -

47,997,646 44,530,230 40,567,521 33,959,651

Expenses (Refer to page 85) (203,684,300) (205,841,159) (136,227,817) (157,001,016)

Operating (loss) profit 27 (50,689,226) (60,503,587) (41,447,839) (71,854,503)

Finance costs 29 (2,793,656) (2,453,774) (2,317,690) (1,978,000)

Income from equity accounted investments (28,468) - - -

(2,822,124) (2,453,774) (2,317,690) (1,978,000)

(Loss) profit before taxation (53,511,350) (62,957,361) (43,765,529) (73,832,503)

Taxation 320,265 1,195,440 - -

(Loss) profit for the year (53,831,615) (64,152,801) (43,765,529) (73,832,503)



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Operating and Administrative expenses

Accounting fees (340,494) (307,292) - -

Administration and management fees (12,640) (99,345) - -

Advertising (11,511) (47,412) - -

Assessment rates & municipal charges (13,138) (1,320,782) - -

Auditors remuneration 30 (5,745,598) (4,988,013) (5,542,757) (4,830,374)

Bad debts (2,146,911) (1,445,392) (1,472,186) (1,198,616)

Bank charges (375,202) (363,873) (87,457) (106,681)

Cleaning (139,728) (127,791) - -

Commission paid (1,577,259) (695,702) (1,577,259) (677,326)

Computer expenses (257,243) (137,288) (122,431) (22,050)

Consulting and professional fees (4,164,253) (7,770,775) (3,949,426) (7,574,697)

Consumables (269,535) (182,086) (228,622) (182,086)

Collection fees (137,103) (646,790) (136,269) (619,940)

Depreciation and amortisation (3,051,866) (2,883,259) (2,193,605) (1,963,694)

Discount allowed (63,820) (44,464) - -

Donations (313,884) (335,420) - -

Employee costs (80,210,240) (71,958,301) (62,399,773) (56,406,100)

Entertainment (342,180) (363,392) (256,001) (339,965)

Actuarial loss (372,000) (366,000) (372,000) (366,000)

Management fee (1,980,000) (2,850,000) - -

BEE Rating fees (1,867) (4,878) - -

Conferences, courses and training (374,731) (502,569) (334,855) (456,880)

Sundry expenses (832,107) (426,855) - -

Cash shortages (152) (13,608) (152) (9,265)

Licenses (163,377) (760,505) (161,585) (336,676)

Fines and penalties (513,481) (14,485) - -

Flowers (2,623) (6,918) (2,623) (6,918)

Impairment losses (59,226,337) (55,237,009) (44,133,286) (66,707,812)

Insurance (1,909,244) (1,359,991) - -

Lease rentals on operating lease (2,488,652) (2,116,175) (1,639,691) (1,392,906)

Legal expenses (528,832) (582,005) (127,737) (239,645)

Levies - (18,140) - -

Loss on disposal of assets (660,000) (12,560,492) - (1,841,154)

Debt recoveries - (751,416) - (751,416)

Motor vehicle expenses (12,817,989) (9,233,916) - -

Packaging (2,116) (2,245) - -

Personnel reallocation cost (87,462) (70,360) (87,462) (70,360)

Placement fees, staff appointments and transfer cost (49,509) (15,615) (49,509) (15,615)

Printing and stationery (640,355) (772,381) (349,672) (396,476)

Protective clothing (191,942) (8,259) - -

Repairs and maintenance (7,164,668) (10,550,827) - -

Refurbishment - (586,485) - -

Service cost (1,504,000) (1,147,502) (1,504,000) (1,147,502)

Security (949,975) (1,242,735) (404,181) (909,817)

Subscriptions and membership (409,627) (430,043) (224,820) (286,175)

Telephone and postage (3,870,975) (3,643,006) (2,894,474) (2,707,463)

Transport and freight (30,453) - - -

Transport and travelling cost (4,459,709) (3,823,523) (4,112,905) (3,415,493)

Utilities (3,279,512) (3,025,839) (1,863,079) (2,021,914)

(203,684,300) (205,841,159) (136,227,817) (157,001,016)



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N O T E S

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2011 / 2012 ANNUAL REPORT - FDC · FREE STATE DEVELOPMENT CORPORATION ANNUAL REPORT 2011 / 2012...

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