31/08/2001: Annual Report for the year ended 30 August 2001
31/08/2001: Annual Report for the year ended 30 August 2001
Corpcapital Limited
Culture and philosophy
Our philosophy and culture is the foundation on which our business is built. It is the common thread that binds us together and dictates the way we do things. It motivates us to think beyond the conventional, to constantly learn and to execute with commitment to achieve the extraordinary.
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Group evolution and structure
|1996 |Corpgro was born. |
| |Corpfood and Corpbuild were acquired. |
|1997 |Corpcom was created. |
| |Corpgro listing was transferred to industrial holdings sector. Corpcapital, a niche financial services |
| |company was established and listed, focused on investment banking. |
| |Corpcom was listed in the media sector of the JSE Securities Exchange. |
|1998 |Corpcapital acquired 49% of Fulcrum Science and Technology Bank. Corpgro acquired 26% of Macadams. |
|1999 |The Treasury and Financial Products divisions of Fulcrum Bank were established. |
| |The Corporate Finance division of Corpcapital was established. |
| |Fulcrum Bank was renamed Corpcapital Bank and the Property Asset Management and Finance |
| |division of Corpcapital Bank was established. |
| |The group announced its intention of positioning itself decisively in the financial services sector. |
| |The Cape operations of Corpcapital Bank were established. |
|2000 |Corpgro's listing was transferred to the financial services sector. |
| |Group operations were consolidated under one roof at 2 Arnold Road. |
| |Redefine Property Fund was listed. |
| |The group developed several innovative financial products including Satrix 40. |
| |The group committed to achieving one merged listed entity. |
|2001 |Corpcapital Bank acquired 65% of M Factors. |
| |Ministerial approval to acquire minority holdings in Corpcapital Bank was received. |
| |Corpgro, disposed of 67% of Corpcom, to an international consortium, retaining a one-third interest. |
| |The merger was completed with Corpcapital Limited (formerly Corpgro Limited) becoming the sole |
| |listed group company - listed in the financial services sector. |
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Group evolution and structure
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Key financial highlights
Year ended 31 August
|Group results |2001 |2000 |% change |
|Total income (R'000) |537 305 |440 867 |21.9 |
|Profit before tax and exceptional items (R'000) |387 723 |350 899 |10.5 |
|Headline earnings (R'000) |191 099 |151 714 |26.0 |
|Headline earnings per share (cents) |71.5 |60.3 |18.6 |
|Dividends per share (cents) |12.0 |10.5 |14.3 |
|Cost to income ratio (%) |27.2 |20.3 | |
|Annuity and fee % of total income (%) |53.5 |47.6 | |
|Ordinary shareholders' equity (Rm) |1 358 |578 |134.9 |
|ROE % |26 |26 | |
|Net tangible asset value per share (cents) |307 |230 |33.5 |
|Assets under management and joint management (Rm) |9 985 |4 782 |108.8 |
|Total assets (Rm) |4 998 |3 743 |33.5 |
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Five year review
at 31 August
| |2001 |2000 |1999 |1998 |1997 |
|Headline profit before tax and | | | | | |
|minorities (R'000) |387 723 |350 899 |260 661 |115 955 |44 935 |
|Headline earnings (R'000) |191 099 |151 714 |120 625 |69 381 |32 513 |
|Headline EPS (cents) |71.5 |60.3 |48.2 |30.1 |22.4 |
|DPS (cents) |12.0 |10.5 |9.0 |7.0 |5.3 |
|Return on equity % |26% |26% |24% |25% |40% |
|Cash and short term funds (R'000) |435 911 |460 548 |602 120 |571 431 |654 172 |
|Total assets (Rm) |4 998 |3 743 |3 692 |1 176 |157 |
|Ordinary shareholders' | | | | | |
|equity (Rm) |1 358 |578 |607 |427 |124 |
|NTAV per share (cents) |306.9 |229.8 |198.6 |153.6 |40.2 |
|Number of shares in issue | | | | | |
|and to be issued (000) |440 265 |251 588 |251 588 |245 882 |209 968 |
|Closing share price (cents) |225 |162 |350 |285 |250 |
|Market capitalisation* (R'000) |990 596 |407 573 |874 230 |698 404 |524 920 |
*includes shares to be issued in respect of the merger
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Income and expenditure analysis
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BENJI LIFBMANN (47)
∙∘∙WIN TRENGOVE (51), ∙∘∙NIC FRANGOS (60)
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MARTIN SACKS (31) Managing Director, ERROL GROLMAN (50), NEIL LAZARUS (43)
∙∘∙ERIC ELLERINE (67) Chairman, BARRY KALKHOVEN (51), JEFF LIEBESMAN (49) Chief Executive Officer.
∙Audit Committee ∘ Remuneration Committee ∙Non-executive Director
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Chairman’s statement
ERIC ELLERINE Chairman
I am pleased to introduce this first report oil the annual financial statements of Corpcapital Limited (formerly Corpgro Limited) following its merger with Corpcapital and Corpcapital Bank approved on 1 October this year. As a single listed entity the group is able to realise the value of its intellectual capital and unlock the potential to create significant wealth for all its stakeholders.
The merger, which flowed from receiving the long awaited ministerial approval for Corpcapital to increase its share of Corpcapital Bank to 100%, had been planned for several years. The dismantling of the tripartite legal structure is in alignment with the operationally seamless integrated investment banking and financial services business model adopted by management. As a result the merger was extremely smooth at the operational level.
The merged entity ranks as one of South Africa's top ten banking groups. The combined capital places Corpcapital amongst the medium capitalized companies listed on the JSE Securities Exchange. Significantly improved liquidity enhances prospects for participating in the inevitable recovery of financial stocks and attracting new investor interest in the counter.
Importantly the change in organisational structure has reduced investor entry points from three to one and has simplified our business model making it more easily understandable for our stakeholders.
Against the trend for small cap financial counters the group has produced good results every year since its inception. This year was no exception with yet another set of solid results being posted. We attribute this success to the single minded focus of our executive both in the conceptualisation and implementation of strategy coupled with tenacious commitment to our vision and corporate culture.
Corpcapital has embraced the principles of corporate governance promoted by the King Commission. We continue to invest our energies into delivering transparency and good governance.
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In five years Corpcapital laid the strategic foundations for an integrated investment banking and financial services business which balances ambition and conservative financial management. Given the relative youth of the group its achievements are remarkable.
OUTLOOK. The board is quietly confident for the year ahead although global and local economic instability makes prediction difficult. The group's corporate uncertainties have been addressed. The new group structure allows optimal deployment of capital and other resources. We will continue to deliver on our commitment to growing predictable income.
CHANGES TO THE BOARD. I thank Nic Frangos for his sterling job as my predecessor as chairman of the group. Nic remains a valuable non-executive director.
I welcome to the Corpcapital board Neil Lazarus and Barry Kalkhoven as executive directors and Wim Trengove SC as a non-executive director. They bring valuable expertise to the group adding significant value and weight to the Corpcapital board.
ACKNOWLEDGEMENTS. I wish to acknowledge the dynamic leadership provided by Jeff Liebesman and the executive directors as well as the energy and enthusiasm which they and the executives throughout the group have displayed in steering the group through difficult waters to successfully achieve the demanding goals set at the beginning of the year. My thanks also to the non-executive directors throughout the group for their counsel and diligent service.
Eric Ellerine
Chairman
23 October 2001
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Chief Executive Officer
JEFF LIEBERSMAN Chief Executive Officer
Since its inception five years ago Corpcapital has grown its capital base from R28 million to R1,4 billion. It is well positioned to perpetuate its growth, in particular through its strong balance sheet, skilled executive teams and the culture of excellence which is an essential tenet of our business.
The formative years of the group were marked by our strengths in investment banking. These earnings are not easily predictable since they are affected by market volatility. We have concentrated on building annuity, fee and other predictable income streams which, in the past year, contributed more than 50% of total earnings.
We have achieved our objective of earning annuity and fee income in excess of both our total overheads and our investing and trading income. These annuity and fee income streams will continue to grow both organically and acquisitively whilst overheads will be rigorously controlled, resulting in a sustainable increase in predictable income contribution to profits. This growth will be driven from the expansion of our deposit base and assets under management. We will continue to benefit from niche lending and the management of assets where our expertise and experience is proven. Advisory services and financial product development will expand off the extraordinary platforms we have established.
The diverse skills of our investing and trading teams will remain highly active but, the group is, and will increasingly be less dependent on their contribution. An ungeared balance sheet and the comfort provided by predictable income streams enhances our ability to research, originate and take full advantage of new investment and trading opportunities.
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B minus all costs = Small unexciting predictable profit and growth
B minus all costs + C + D = Above average profits and growth coupled with uncompromised solvency and liquidity
DELIVERY ON STRATEGY. The past year was eventful and challenging. It was also rewarding, with the realisation of many of the key objectives set at the beginning of the year. These include:
• Fulfilment of the merger.
• Continuing improvement in our income balance model through a 40% growth in predictable (annuity and fee) income and a 61% increase in realised income.
• Significant realisation of proprietary investments, in particular the milestone Corpcom transaction which provides substantial cash resources for the group and validates our investment strategy.
• Successful development of the Corpcapital brand.
• Expansion of hard currency earnings.
• Enhancement and development of networks and alliances, by way of example, through our partnership with Clear Channel International and Independent News in the restructured Corpcom, alliances with Standard Bank, BOE and others in the distribution of financial products and funding arrangements with BOE, Standard Bank and FNB in relation to our property asset management activities.
• Growing our predictable term deposits.
• Enhancing ROE to 26.4%.
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Our success is attributable to our commitment to excellence, our ability to learn and our willingness to undertake that which our competitors cannot or will not do or which they have not yet identified as opportunities. The year's performance is a tribute to the extraordinary quality of our people, their integrity and their passion.
IMPORTANT EVENTS. Significant resources were dedicated to achieving the merger.
The Corpcom transaction resulted in the disposal of half of our interest in Corpcom. The remaining interest in Corpcom is in partnership with Clear Channel Communications Inc and The Independent News Group, two of the world's leading media groups.
Corpcapital Bank acquired a controlling interest in M Factors, a leader in the disclosed factoring market, with effect from 1 April 2001. Through M Factors and Infinex we are developing insight and experience in niche lending markets which we will continue to expand.
The property asset management and finance division added the listing of ApexHi to its record of successful property investment initiatives.
The establishment of Corpcapital Life in January 2001 has enabled the group to provide effective long term investment solutions through a linked cell life licence.
FINANCIAL PERFORMANCE. The published results for the year include 100% of Corpcapital and Corpcapital Batik with effect from 31 July 2001.
The merged group achieved a 26% increase in headline earnings to R191,1 million translating into headline earnings per share of 71,5 cents per share, up 18.6% on last year. Profit before taxation and exceptional items increased by 10.5% to R387,7 million. 85% of the growth was organic.
Valuable contributions were made by Investment Banking, Property Asset Management and Finance, Specialised Finance, Financial Products and Corporate Finance. The Treasury, Trading and Arbitrage business underperformed relative to our expectation. Corrective measures have been implemented.
The results of Proprietary Consolidated Investments and Infinex have been consolidated in accordance with the requirements of AC 132.
The investment portfolio reflects increasing exposure to hard currency earnings, a trend we intend to encourage in the future. Realised profits represent 68% of the total income for the period, the remainder comprising unrealised revaluation of investments to fair value after taking the prevailing economic uncertainty into account.
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The lower interest rate environment, a conservative approach to provisioning on the legacy corporate book (taken over from Fulcrum Bank), lower trading income and further investment in processes and infrastructure to provide a solid platform for future growth, depressed the contribution to headline earnings from Corpcapital Bank to R82,6 million. The bank has been successful in establishing a retail deposit base, part of a significant increase in total deposits and interest bearing accounts to R1,1 billion excluding the term liabilities of Corpcapital Life.
The balance sheet has improved significantly. Cash and short-term funds and liquid and trading assets account for 46% of total assets at year end. Total assets have increased by 33.5% and assets under management and joint management are now R10 billion. Net tangible assets per share increased by 33.5% to 307 cents per share.
Corpcapital Bank's capital adequacy ratio, at 22%, remains comfortably in excess of statutory requirements of 15%.
188,7 million shares will. be issued at R2,30 per share in settlement of our obligations to minorities in terms of the merger. Ordinary shareholders' funds now amount to R1,4 billion.
These results perpetuated the group's growth trend yielding a five year compound annual growth rate of 34% in headline earnings per share; and 66% compound growth in net tangible assets per share.
PROSPECTS. Market conditions are challenging and it is too soon to predict the impact of current global events. Given that our corporate culture promotes responsiveness to change and willingness to learn we are confident that we will continue to succeed in these uncertain times. It is difficult to anticipate levels of income from investments and trading especially in the prevailing economic conditions. As annuity and fee income increasingly outgrows overheads, profitability will become more predictable.
We are confident of our ability to deliver acceptable real returns to all stakeholders in the year ahead.
ACKNOWLEDGEMENTS. I thank my colleagues on the board of directors for their valuable input throughout the year, to Our executive management team for their diligence and leadership, to our staff for their unfailing dedication to excellence and innovation and to our customers for the faith which they have shown in us.
Jeff Liebesman
Chief Executive Officer
23 October 2001
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Risk management
The board of directors is responsible for managing the risk inherent in the conduct of the group's business. Under their authority the group has established forums to identify understand, quantify limit, price, accept and manage risk. These are augmented by independent, comprehensive risk control systems. The group's corporate governance committee which is being established will be tasked with ensuring that tire group risk committees operate effectively and cover all inherent risks.
The bank has also established forums which report to its board and to group where necessary in order to achieve integrated risk management across the group.
The risk management processes address the major risks to which the group is exposed.
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MARKET RISK. Market risk is defined as the risk that the value of "on or off balance sheet positions" will be adversely affected by movements in equity, interest rate and derivative markets, currency exchange rates and commodity prices. Market risk exposures are quantified by performing sensitivity, stress testing and value-at-risk analyses.
The group's market risk exposure arises largely from the trading and arbitrage activities in Corpcapital Bank and the risk management function is established in the bank. The risk manager monitors market risk throughout the bank by means of automated risk management systems that comply with international standards. The internal auditors have reviewed the risk management process. The group is also exposed to longer term equity risk as a consequence of its investing activities. Risk management is being expanded to monitor these exposures.
The sensitivity analysis measures the change in the value of the financial instruments with a set of predefined movements in interest rates, equity and commodity prices and foreign exchange rates. This approach is very conservative since it assumes an adverse change of all the market prices simultaneously. Value-at-risk analysis predicts the worst-case loss at a specified confidence level over a certain period of time. The methodology provides an additional objective and independent assessment of market exposure that can be performed for the various trading portfolios as well as the market risk-related asset/liability managed portfolios.
|Bank value at risk (99% confidence over 10 days holding period) |2001 |2000 |
|Equity |1 962 |- |
|Interest rate and forex |1 191 |1 333 |
|Total value at risk at 31 August |3 153 |1 333 |
Corpcapital Bank's risk management function plays a fundamental role in defining a comprehensive set of limits to ensure that the calculated risk exposures remain within the agreed risk limits approved by the board of directors. Fundamental to the bank's approach to market risk is that the Bank's capital remains intact and that only limited profits are at risk.
The bank actively trades equities and equity derivatives, capital and money market securities, interest rate derivatives and currencies. The group's investment banking activities give rise to further equity market exposure which is managed by the investment committee. The Corpcapital board authorises all investments made over R50 million in value.
The notional principal and fair values of the banks derivative portfolio at year end are shown on page 68. Notional principal represents the aggregate of the absolute principal values of outstanding derivative contracts. Fair value represents the present value of the cash flows that would have occurred if the transactions had been settled in a normal market transaction at the year end.
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CREDIT RISK. Credit risk is the risk of counterparties defaulting on their loan commitment, settlement or other financial obligation thereby causing a material loss. This risk is managed through policies established by the Corpcapital board of directors and administered by the Credit Committee.
The board credit committee which includes non-executive directors and an internal credit committee, is responsible for credit risk. Board credit committee meetings are convened on an ad hoc basis as and when transactions require sanction, whilst the internal credit committee meets weekly. Strict prudential guidelines have been instituted to manage risk and control lending exposures, which are monitored on a daily basis. The board credit committee approves all facilities in excess of R50 million. All exposures have to be approved by the internal credit committee. No one individual has credit passing authority.
The function of credit is to analyse the different market sectors and counterparties with respect to credit risk. It sets the credit limits and monitors exposures against these limits. All types of exposures will be consolidated when measuring against the credit limits. It also reviews large exposures, levels of provisions, credit risk parameters and compliance with prudential criteria. All credit-related decisions are implemented through the credit function which ensures that security is perfected and proper documentation obtained before any payments are made or guarantees issued. A separate provisioning committee is responsible for considering the appropriate level of provisions against delinquent accounts and for monitoring the recovery process. The group takes a conservative approach to provisioning and the bank is fully compliant with the prudential provisioning guidelines implemented during the year by the S A Reserve Bank.
The group has no lending exposures outside South Africa. There are no significant industry or sector concentrations in the underlying loan books. All advances in arrear are monitored by the credit function and all arrears greater than 60 days will be brought to the attention of the provisioning committee.
|Analysis of group advances (R’000) |2001 |2000 |% |
|Individual |99 617 |- | |
|Corporate |382 714 |239 718 |60 |
|Share trusts |90 075 |82 243 |10 |
|Gross advances |572 406 |321 961 |78 |
|Less provisions |45 496 |6 490 | |
|Net advances |526 910 |315 471 |67 |
|Specific provisions % of net advances |3.6 |- | |
|General provisions % of net advances |5.1 |2.0 | |
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LIQUIDITY RISK. Liquidity risk is the risk of the group not being able to meet a financial or settlement obligation as a result of unmatched assets and liabilities. The group is fully cognisant of the impact the group's liquidity position can have on the bank and is therefore implementing liquidity risk management at the Corpcapital group level in the new financial year.
The bank's asset and liability management committee has established policies with regard to liquidity risk, and monitors this risk on an ongoing basis. The committee has adopted a prudent approach with regard to liquidity, and accordingly the bank is only allowed to mismatch assets and liabilities outside of the one month timeframe.
|Group liquidity analysis |Up to |1-3 |3-6 |Greater than |Balance |
|(R’000) |1 month |months |months |6 months |Sheet |
| |2 250 975 |297 806 |141 990 |2 307 669 |4 998 440 |
|Liabilities and capital | | | | | |
|employed |2057 011 |402 959 |87 161 |2 451 309 |4 998 440 |
|Liquidity gap |193 964 |(105 153) |54 829 |(143 640) |- |
|Cumulative liquidity gap |193 964 |88 811 |143 640 |- |- |
OPERATIONAL RISK. Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. Effective operational risk management enhances and protects shareholder value, specifically against unexpected or unwanted events. Operational risk includes the risk of loss due to system failures, fraud and weaknesses in internal controls, and incorporates regulatory, compliance and legal risk.
The management of operational risk is based on a system of internal controls and upon the vigilance of the group's employees who are the first level of operational risk management. It is founded on a culture and value system, which aims to foster and further a sound ethical climate. The careful selection, training and development of staff contribute to a risk monitoring and control culture.
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Stringent controls and procedures have been implemented to provide assurance that those transactions, records and management information are complete, valid and accurate and that business objectives will be achieved, as well as to ensure that the operational integrity of the business remains intact. These controls and procedures are reviewed and evaluated on a regular basis by the sub audit committee which ensures that corrective action is implemented where control breakdowns occur.
Internal audit independently monitors the adequacy, appropriateness and effectiveness of these internal controls on a continuous basis and reports its findings to executive management and the sub-audit committee. It operates independently from executive management with unrestricted access to the chairmen of the audit committees.
Where cost effective, the bank maintains insurance cover as an additional safeguard against material loss due to operational risk.
COMPLIANCE. In recognizing its accountability to all of its stakeholders under the legal and regulatory requirements applicable to business, together with a commitment to the highest standards of integrity, the group has established an independent compliance function as part of its risk management framework, to ensure that regulatory risk is continuously managed.
In fostering a culture of compliance, and optimizing relations with regulators, a multidisciplinary approach is required. The compliance function enjoys direct access to the bank managing director and the full support of all executives in the group. The function has adequate resources and stature to ensure that a compliance culture is fostered, accepted and practiced throughout the group.
The group not only accepts that the highest levels of compliance are an essential requirement of business, it more importantly regards compliance as good for business.
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Operational review
PROPRIETARY INVESTMENTS
|Proprietary Investments (R’000) |2001 |2000 |% Change |
|Total income |215 260 |133 442 |61.3 |
|Operating expenses |20 246 |10 877 |86.1 |
|Profit before tax |195 014 |565 |59.1 |
|Cost to income ratio |9.4 |8.1 | |
|Portfolio at fair market value* |649 556 |445 308 | |
|*2001 includes reinvestment into Corpcom of R153,6 million | | | |
Corpcapital's Proprietary Investments division invests in and manages investments that provide the group with superior returns. It has achieved geographic and industry diversity in its investment portfolio and will look to increase exposure to hard currency assets. The division follows a strategy of maximising the value of strategic significant investments through active management.
The division values each investment to fair market value which process has been validated by consistently realising more than the carrying value of the investment. Details of valuation bases may be found in the accounting policies on pages 50 to 53 and material investments are shown below.
| |% held |Turnover |Profit before |Employees |
| | |(R'000) |tax (R'000) | |
|Services | | | | |
|Aqua (listed e-commerce solutions provider) |30 |78 472 |21 316 |170 |
|Norman Bisset and Associates (credit | | | | |
|management services) |30 | | | |
|OneLogix (listed logistic solutions provider) |65 |134 565 |16 109 |715 |
|Servest (listed low-tech outsource services) |9.5 |779 351 |27 683 |12 500 |
|Retail | | | | |
|Forza (listed luxury leisure and lifestyle retailer) |25 |988 477 |32 957 |440 |
|Media | | | | |
|Corpcom (outdoor advertising) |33 |239 888 |61 549 |650 |
|Financial services | | | | |
|CFI (global online payment processing services) |50 | | | |
|Compensation Solutions (discounting of | | | | |
|Workmans Compensation claims) |35 | | | |
|GT247 (online spread trading) |13 | | | |
|Online leisure and entertainment | | | | |
|Netainment group (global operator of | | | | |
|online casinos and related services) |47.5 | | | |
|Details are only presented for listed investments where information is publicly available. Information has been |
|extracted from the latest published financial results. |
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Notwithstanding the difficult equity markets during the year, the division was successful in realising its 67% stake in Corpcom Limited. The group reinvested into a one-third partnership with Clear Channel and Independent in the restructured Corpcom.
Other disposal transactions concluded during the year were:
the partial disposal of the interest in Norman Bisset Associates to RMB/Corvest; and
the sale on market of the stake in SecureData ERP.
Volatile and weak equity markets are expected to continue for the foreseeable future. Nevertheless, depressed equity values in a relatively low interest rate environment present interesting opportunities to participate in undervalued, quality assets at attractive prices.
The division is not expected to match the current year's exceptional performance in 2002, given the investing environment and the profit contribution from Corpcom in these results. The division will continue to be a major contributor in absolute-terms to group profits.
PROPRIETARY CONSOLIDATED INVESTMENTS
|Proprietary Consolidated Investments (R’000) |2001 |2000 |% Change |
|Total income |71 337 |95 195 |(25.1) |
|Operating expenses |- |- | |
|Profit before tax |71 337 |95 195 |(25.1) |
|Total net asset value of investments |212 955 |267 250 |(20.3) |
The Proprietary Consolidated Investments division concentrates on investments where it is able to add value at executive level by leveraging the group's general business experience, professional expertise, strategic vision, market knowledge and financial discipline. The decline in the contribution of Proprietary Consolidated Investments is primarily due to the disposal of Corpcom, which was only included in the results until the end of June.
The division's portfolio comprises
• Corpbuild (100%) - a national distribution network of general building material and ironmongery products to the building industry;
• Macadams Baking Systems (70%) - South Africa's leading manufacturer of world-class baking systems for the retail market, with 45% of its sales originating in global markets; and
• Colcab (100%) - a major manufacturer of supermarket refrigeration, display cases and insulated panels to the retail and industrial food industries
Each business has independent highly skilled and experienced management appropriately incentivised to deliver optimum performance.
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The management of the group's interest in these investments is fully integrated into the investment banking division. Despite an extremely competitive environment, and relatively modest growth within the building industry Corpbuild produced excellent results. Colcab and Macadams have improved sales and manufacturing productivity and were able to bring about improved efficiencies with respect to costs and procurement. These initiatives are expected to reflect in improved trading results.
Going forward, the focus of this division's activities will be on harnessing the cash generated by these investments, leveraging the operating assets of the respective businesses and where appropriate, realising the investments through managed exits.
CORPORATE FINANCE
|Corporate Finance (R’000) |2001 |2000 |% Change |
|Total income |38 215 |23 266 |64.2 |
|Operating expenses |20 880 |11 563 |80.6 |
|Profit before tax |17 335 |11 703 |48.1 |
|Cost to income ratio |54.6 |49.7 | |
The Corporate Finance division provides corporate advisory services (including legal, financial, accounting and tax advice), transaction support for restructuring projects, mergers and acquisitions, listings, and the growing spectrum of governance requirements. The availability of multidisciplinary professional skills within the division provides a turnkey corporate finance offering, addressing the need for comprehensive services demanded by the market.
Corporate finance advice was given on transactions exceeding R8 billion in value during the year under review, including active participation in group-related deals.
The division played a key role in facilitating the successful merger of Corpcapital, Corpcapital Bank and Corpgro into a single entity.
The division also offers appropriate transaction and other support services to several group divisions, including Proprietary Investments, Property Asset Management and Finance and the Financial Products divisions as well as to the ongoing drive to develop innovative financial solutions.
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The depth and breadth of the division's activities during the review period confirms the rapid acceptance of Corpcapital's corporate finance expertise over the two years since the division's inception. At the end of the first full year of operation, a large part of its income is from third party clients and it has successfully completed significant cross border transactions, with over one-third of its revenues US dollar-based.
During the year ahead the division will concentrate on the origination of mergers and acquisitions, the penetration of debt markets, and increasing its capital-raising capacity.
PROPERTY ASSET MANAGEMENT AND FINANCE
|Property Asset Management and Finance (R’000) |2001 |2000 |% Change |
|Total income |68 226 |95 434 |(28.5) |
|Annuity and fee income |42 156 |28 079 |50.1 |
|Investing and trading income |26 070 |67 355 |(61.3) |
|Operating expenses |12 342 |6 249 |97.5 |
|Profit before tax |55 884 |89 185 |(37.3) |
|Cost to income ratio |18.2 |6.5 | |
|Assets under management and joint management (Rm) |3 609 |1 297 | |
The Property Asset Management and Finance division provides investment banking solutions for the property market. The division acts as asset manager for three funds (Redefine Income Fund, ApexHi Properties and Hyprop Investments) and consults with major corporate organisations and institutions on their property portfolios and lease agreements.
In the year under review the division achieved a further diversification of its properties under management through the listing of ApexHi Properties with a high yielding industrial, commercial and retail portfolio in select South African locations.
The creation and listing of ApexHi was of great significance for the division demonstrating Corpcapital's ability to utilise intellectual capacity in unlocking value.
Continuing its fine performance Redefine Income Fund has retained its Fitch A+ investment rating by consistently delivering above average yields. The fund has positioned itself for solid growth, through realigning its portfolio by the strategic disposal and acquisition of targeted properties designed to accommodate changing market conditions.
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The investment in Redefine is treated as an associate company in the financial statements and its market value is therefore not fully reflected in the group's net asset value. The market value of the holding at 31 August was approximately R168 million, against a carrying value of R123 million.
Hyprop Investments has retained its rating as the premier property loan stock company on the JSE Securities Exchange, reflecting the fund's consistent growth in distribution to unitholders and the steady appreciation in the value of its linked units. A highlight of the review period was the successful merger of K H Prop into Hyprop Investments, strengthening its market position.
The current R3,6 billion in assets under management within Redefine Income Fund, ApexHi Properties and Hyprop Investments is expected to grow to R5 billion by the end of new financial year through property acquisitions, leading to substantially higher annuity income for the bank.
The successful restructuring of leases for major corporates contributed to income growth and reinforced the division's reputation for specialised property related expertise.
SPECIALISED FINANCE
|Specialised Finance (R’000) |2001 |2000 |% Change |
|Total income |58 840 |11 107 |429.8 |
|Operating expenses |27 643 |974 |2 737.5 |
|Profit before tax |31 197 |10 133 |207.9 |
|Cost to income ratio |37.3 |6.7 | |
|Breakdown of advances | | | |
|Corpcapital Bank |239 603 |179 918* |33.2 |
|M Factors |233 186 |n/a | |
|Infinex |99 617 |n/a | |
|Total advances |572 406 |179 918 |218.2 |
|General and specific provisions |45 496 |6 490 | |
|Net advances |526 910 |173 428 |201.1 |
|Specific and general provisions % net advances |8.0 |2.0 | |
*This figure has been adjusted for the bank advance to Infinex which was not consolidated in 2000
The guiding principle in specialised finance is to operate in areas of mispriced credit risk, caused in the main through the complexity of the transaction or the process of cash flow managment of the transaction. The division provides a base for annuity income and an avenue for the growing deposit base.
29
The division acquired a 65% stake in Cape Town based disclosed invoice factoring business M Factors with effect from 1 April 2001. M Factors has an exceptional management team who have delivered good results in its first five months as part of the group.
Infinex, which was consolidated for the first time, operates in the emerging market financial services sector and is involved primarily in lower risk areas such as payroll advances to corporate employees, outsourced credit and debt collection services.
Strong growth was achieved in the lending books during the year under review, reflecting the group's focus on high margin niche products. Continued asset growth is planned, concomitant with growth in funding.
TREASURY, TRADING AND ARBITRAGE
|Treasury, Trading and Arbitrage (R’000) |2001 |2000 |% Change |
|Total income |4 236 |27 518 |(84.6) |
|Operating expenses |25 063 |18 094 |38.5 |
|Profit before tax |(20 827) |9 424 | |
|Cost to income ratio |- |65.8 | |
|Value at risk - equity |1 962 |- | |
|Value at risk - interest rate and forex |1 191 |1 333 | |
|Total value at risk at 31 August |3 153 |1 333 | |
The Treasury, Trading and Arbitrage division activities include deposit taking, agency securities and derivative trading, proprietary equity and derivative arbitrage, interest rate, equity, foreign exchange and credit structured products, and risk management strategies.
The retail deposit raising strategy has proved effective with current year growth to R70 million off a very small base in 2000. This is particularly pleasing in light of the continued problems in certain small banks during the year. The group concentrated on raising term deposits allowing it to commence effectively leveraging capital.
A difficult trading environment in bonds and forex resulted in a loss for the year. Adjustments to trading methodologies reduced risk and volumes in these areas. Performance in equity derivatives and areas supplementing structured products was satisfactory.
Amongst the division's highlights for the year was the successful introduction of equity arbitrage into its portfolio of services.
30
FINANCIAL PRODUCTS
|Financial Products (including structured | | | |
|products and structured finance) (R’000) |2001 |2000 |% Change |
|Total income |33 460 |2 193 |1 425.8 |
|Operating expenses |12 000 |7 500 |60.0 |
|Profit before tax |21 460 |(5 307) | |
|Cost to income ratio |35.9 |- | |
Financial Products has three primary lines of business: structured investment products for institutional and retail clients; single stock equity derivatives for high net worth individuals and corporates; and structured finance.
This year saw the expansion of the division's structured finance capability in Cape Town. Significant growth was also achieved in the distribution network, growing from two to six major agents in the form of institutions, including AIMS, BOE and Appleton.
In keeping with the integrated approach of Corpcapital, the Financial Products division played a key role in several group transactions. The most noteworthy of these was the launch of Satrix 40 - South Africa's first exchange traded index tracker fund - in collaboration with the JSE Securities Exchange and Gensec. Satrix 40 has performed well since its launch, and is currently one of the most liquid shares on the JSE Securities Exchange with a market capitalisation in excess of R3 billion.
The relationship with the JSE Securities Exchange and Gensec has been cemented during the course of the year, leading to the impending launch of two further exchange traded funds early in 2002.
CORPCAPITAL LIFE. Established in January 2001 as a vehicle for delivering investment products, the role of Corpcapital Life has since expanded to facilitate the effective delivery of structured finance transactions for the group, operating within a sound regulatory framework without excessive capital requirements.
After a good start, the division Corpcapital Life exceeded all expectations by achieving over R1,5 billion in premium in-flow by year-end.
31
CAPITAL AND GROUP SUPPORT
|Capital and Group Support (R’000) |2001 |2000 |% Change |
|Total income |47 731 |52 713 |(9.5) |
|Operating expenses |31 408 |34 711 |(9.5) |
|Profit before tax |16 323 |18 002 |(9.3) |
|Cost to income ratio |65.8 |65.9 | |
CAPITAL DIVISION. The Capital division's results represent the group's management of its capital base. The Finance and Administration division is responsible for the efficient allocation of capital between different areas of business, ensuring that the group has sufficient regulatory capital at all times and maximising the earnings on surplus capital.
GROUP SUPPORT. The integration of all support functions across the group has been completed. Group Support provides an effective operational infrastructure and consists of the following divisions:
Risk and Compliance, Finance and Administration, Company Secretarial and Audit, Information Technology, Human Resources and Marketing.
RISK AND COMPLIANCE. The roll-out of additional risk management processes during the year was successful. This involved the establishment of a deal forum which considers all risk relating to new products and deals; a provisioning committee responsible for recovering and provisioning on problem accounts; a bank sub-audit committee which monitors operational risk on a monthly basis.
The compliance function ensures that the group complies with all applicable legislation and regulatory requirements.
FINANCE AND ADMINISTRATION. This division provides finance and accounting services to the group. It ensures that the group adheres to best accounting practices and has effective processes for financial and management reporting. The division has the primary responsibility for monitoring and controlling operational risk, by ensuring that proper internal controls and procedures exist. It endeavours to automate processes where possible so that focus can be placed on adding value to operating divisions.
COMPANY SECRETARIAL AND INTERNAL AUDIT. This unit provides quality and cost effective company secretarial and internal audit services to the group. The company secretarial function contributed significantly to the successful implementation of the merger.
The internal audit function provides a risk based approach to the identification of and assessment of business risks and the controls used to mitigate these risks.
32
MARKETING. A complete review of the marketing effort led to the adoption of a strategic approach and a focus on brand building. Market research showed that this targeted strategy was very successful in raising awareness of the group.
Continued investment in the development of the Corpcapital brand took the form of focused campaigns aimed at selected market sectors, higher investment in one-on-one interaction with influential players and the strategic development of a retail deposit presence in the market.
INFORMATION TECHNOLOGY. The effective utilisation of technology is critically important to the group. The group has adopted an architectural approach to the implementation of technology. The definition of IT strategy and the systems application architecture was completed. The coming year will see continuing investment by the group and implementation of core systems building the platform for future growth.
HUMAN RESOURCES. Recognising the key role that talent plays in success, Corpcapital is committed to developing premier teams capable of fulfilling the group's strategy by attracting and retaining people who share the group's vision and values. They are provided with the opportunity of realising their goals in an enabling environment.
The approach to remuneration is to expect outstanding performance and to reward employees that deliver performance well. Remuneration for all employees has three elements, shares, basic remuneration and a performance based bonus.
The focus of the human resources function is to provide the group with an effective recruitment service, to co-ordinate the development and well-being of employees and to provide an efficient remuneration administration service.
33
Corporate governance
|[pic] |
34
The Corpcapital group is committed to the principles of openness, integrity and accountability as advocated in the King Report on Corporate Governance, and subscribes to its Code of Corporate Practices and Conduct. The group is in the process of evaluating and implementing the draft proposals of the second King Report on Corporate Governance.
The directors endorse the objective of conducting the affairs of the group in accordance with the highest standards of corporate practice.
BOARD OF DIRECTORS. The Corpcapital group board consists of 3 non-executive members and 6 executive members. The group is committed to increasing the number of non-executive members and is actively pursuing this objective. The board of directors has a non-executive chairman and all major board sub-committees are chaired by non-executive directors.
The board of directors of Corpcapital group is responsible to the shareholders for the adoption of group strategy, monitoring of operational performance and management of the group, determination of risk management policies and processes and is involved in all discussions that are material to the group. It is also responsible for ensuring the integrity of financial information and the quality of communication to stakeholders, including shareholders, depositors, employees and regulators, and for the selection of directors.
All group non-executive directors have direct access to senior financial executives and information on the group's affairs. All directors have access to the advice and service of the company secretary and are entitled, at the company's expense, to seek professional advice about the affairs of the group.
The board is supported in the discharge of its responsibilities by a number of sub committees. Details of the board and sub committee members are provided on pages 38 and 39 of this report.
The directors believe that the group has adequate resources to continue as a going concern in the year ahead and the financial statements have been prepared on this basis.
Corpcapital Bank has an independent board of directors which comprises a majority of non-executive directors as required by banking regulations. It is fully compliant with the group corporate governance framework shown above.
GROUP GOVERNANCE COMMITTEE. This committee is responsible for monitoring and evaluating the group's corporate governance practices.
GROUP EXECUTIVE COMMITTEE. The group executive committee (Exco) is constituted to assist the chief executive to manage the group. It meets weekly and consists of the executive directors of the group and senior financial executives. Exco is responsible for development and implementation of group strategies, monitoring of operational management, allocation of group resources and the establishment and implementation of group policies and practices.
35
AUDIT COMMITTEE. The audit committee convenes at least three times a year with the external auditors and the members of the group executive team that are responsible for finance, operations, risk management, internal audit and compliance to review accounting policies and practices, internal audit and external functions, information technology risks, financial reporting, the adequacy of internal controls and management information and compliance standards and issues.
The bank audit committee is supported by a sub-audit committee which markets on a monthly basis. This committee which was established during tie year deals with the assessment and implementation of financial and internal controls. The external auditors also participate in the sub-audit committee together with divisional management. The group will extend the operation of the sub-audit committee to the wider group during the coming year.
REMUNERATION COMMITTEE. Corpcapital is committed to leadership in corporate governance and the board is demonstrating this commitment by anticipating the disclosure of directors' remuneration before the mandatory deadline. The consolidation of the group led to the formation of a new remuneration committee consisting of three non-executive directors and the CEO.
The remuneration committee is responsible for determining appropriate principles and policies relating to remuneration of senior management and executive directors. The committee reviewed the recommendations for the executive directors and senior management with the help of independent consultants, P-E Corporate Services SA (Pty) Limited. The CEO recused himself from the meeting for the discussion of his personal remuneration package. Full disclosure has been made of director's remuneration in compliance with best corporate governance practice in the director's report on page 48.
The board is satisfied that the remuneration policy as applied in the remuneration packages reflects the group's strategic approach of expecting and rewarding outstanding performance. A major portion of director's and senior management's remuneration is performance based. The remuneration committee will continue to use independent consultants to review the performance criteria.
GROUP RISK COMMITTEES. These committees are responsible for ensuring the proper management of risks that are inherent in the group's business, other than operational risk which is monitored by the audit committee. Details of the scope of these committees can be found on pages 18 to 23.
INTERNAL AUDIT AND CONTROLS. The group maintains internal controls and systems designed to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard and maintain accountability for assets. The internal audit function is headed by a dedicated internal audit manager, who with the services of KPMG, provides assurances to the board of directors and the audit
36
committee regarding the effectiveness of the internal, financial and operational controls. The internal audit function performs regular independent reviews and appraisals of systems and controls. The function operates with the full authority of the group audit committees.
The internal, financial and operating controls are designed to provide assurance regarding: the safeguarding of assets against loss or unauthorised use; compliance with statutory laws and regulations; and the maintenance of proper accounting records and the adequacy and reliability of financial information.
The board of directors acknowledges its ultimate responsibility for the systems of internal, financial and operating controls and the monitoring of their effectiveness. These systems are designed to provide reasonable assurance against material misstatement and loss.
COMPLIANCE. The group has a dedicated independent compliance officer at the senior executive level who, together with risk management, internal audit and external resources, has implemented comprehensive compliance procedures and reporting at a standard which meets the requirements of the SA Reserve Bank.
CODE OF CONDUCT. Directors and employees are required to maintain the highest ethical standards to ensure that business practices are conducted in a manner that is beyond reproach. The group places considerable emphasis on its culture and values as the foundations of the manner in which it conducts business.
The group has comprehensive policies to prevent insider trading and restrict personal account trading. Employees are required to disclose all securities dealings to the group compliance officer. Employees who may have access to information are restricted from dealing in Corpcapital shares for a period of 30 days before the release of interim and final results.
Corpcapital Bank subscribes to the Code of Banking Practice endorsed by member banks of the Banking Council of Southern Africa. It has established an internal process for handling complaints and clients who remain dissatisfied after exhausting these procedures may approach the office of the Banking Adjudicator.
EMPLOYMENT EQUITY AND EMPLOYEE DEVELOPMENT. The group's success is dependent on the quality of people that it is able to attract. Its philosophy is that all employees should have an ownership stake as part of their remuneration package.
The group is also committed to the ongoing development of employees. It actively encourages employees through funding of education and on the job training to develop their skills and value to the organisation.
The group acknowledges the value that comes from diversity It is committed to achieving targets that have been set in the employment equity planning process.
37
|CORPCAPITAL ∙ Non-executive +Bank non-executive |
|BOARD |AUDIT |REMUNERATION |GROUP CORPORATE |GROUP |
|OF DIRECTORS |COMMITTEE |COMMITTEE |GOVERNANCE |EXCO |
|E Ellerine ∙ |N Frangos ∙ |N Frangos ∙ |W Trengove ∙ |J Liebesman |
|(Chairman) |(Chairman) |(Chairman) |(Chairman) |(Chairman) |
|N Frangos ∙ |E Ellerine ∙ |E Ellerine ∙ |N Frangos ∙ |R Credo |
|W Trengove ∙ |W Trengove ∙ |W Trengove ∙ |G Croock |E Grolman |
|E Grolman |Prof. E Calitz+ |J Liebesman |Z Gama+ |S Kidd |
|N Lazarus |INVITEES |INVITEES |A Grant |N Lazarus |
|J Liebesman |R Credo |E Grolman |N Lazarus |B Liebmann |
|(Group CEO) |G Croock |R Parker+ |E Moahloli+ |B Kalkhoven |
|B Liebmann |E Grolman | |R Parker+ |M Sacks |
|B Kalkhoven |S Kidd | |M Sacks | |
|M Sacks |J Liebesman | |Prof G Verhoef+ | |
|(Managing) |B Liebmann | | | |
| |M Sacks | | | |
| |FH PKF | | | |
|CORPCAPITAL BANK LIMITED ∙ Non-executive +Bank non-executive |
|BOARD |AUDIT |CREDIT |BANK |DEAL |
|OF DIRECTORS |COMMITTEE |COMMITTEE |EXCO MEMBERS |FORUM |
|E Grolman |Prof. E Calitz+ |Prof. G Verhoef+ |B Kalkhoven |B Kalkhoven |
|(Chairman) |(Chairman) |(Chairman) |(Chairman) |(Chairman) |
|Prof. E Calitz+ |E Ellerine+ |Z Gama+ |C Anderson |T Chidi Ofong |
|E Ellerine+ |E Moahloli+ |R Parker+ |W Cesman |R Credo |
|Z Gama+ |INVITEES |A Grant |T Chidi Ofong |G Croock |
|E Moahloli+ |R Credo |E Grolman |R Credo, |A Grant |
|R Parker+ |G Croock |B Kalkhoven |G Croock |B Goodman |
|Prof. G Verhoef+ |A Grant |INVITEES |A Grant |E Grolman |
|A Grant, |E Grolman |R Credo |E Grolman |F Lee |
|B Kalkhoven |B Kalkhoven |F Lee |M Kron |L Sanderson |
|(Managing) |A Van Niekerk | |F Lee |A Van Niekerk |
|M Sacks |PWC | |L Sanderson | |
| | | |J Testa | |
| | | |A Van Niekerk | |
38
| | | | |
|UNREGULATED |INVESTMENT |GROUP ALCO |SHAPE TRUST |
|EXCO |COMMITTEE |COMMITTEE |COMMITTEE |
|J Liebesman |E Ellerine ∙ |E Grolman |W Trengove ∙ |
|(Chairman) |(Chairman) |(Chairman) |(Chairman) |
|A Brooking |E Grolman |R Credo |E Moahloli+ |
|R Credo |J Hamburger |S Kidd |R Credo |
|E Grolman |S Kidd |B Kalkhoven |A Grant |
|J Hamburger |N Lazarus |J Liebesman |E Grolman |
|K Joselowitz |J Liebesman |B Liebmann | |
|S Kidd |B Liebmann |M Sacks | |
|N Lazarus |M Sacks |A Van Niekerk | |
|B Liebmann | | | |
|M Sacks | | | |
|D Shorrock | | | |
| |CORPCAPITAL LIFE INSURANCE |
|COMPANY LIMITED | |
|ALCO |BOARD |
|MEMBERS |OF DIRECTORS |
|E Grolman |E Grolman |
|(Chairman) |(Chairman) |
|R Credo |T Chidi Ofong |
|G Croock |B Kalkhoven |
|B Goodman |W Cesman |
|B Kalkhoven |N Lazarus |
|F Lee | |
|A Van Niekerk | |
|J. Testa | |
39
Corporate social investment
The Corpcapital Group has a very real commitment to corporate social investment. In line with its stated objectives of high degrees of performance and professionalism, the group has embarked on a small number of relatively large corporate responsibility investment projects where meaningful contributions can be made. Corporate social investments are managed by means of a trust fund established for this purpose.
During the year the group was pleased to record the successful opening of the Nelson Mandela sponsored project for the Emdibanisweni Community in Tsolo, Transkei. This project involved the development and construction of a community centre for the Tsolo Community and Mr Mandela inaugurated the project on 29 March 2001.
The group is a major sponsor of the CIDA City Campus initiative undertaken by Taddy Blecher. This project is going from strength to strength and the group is highly encouraged by the success being achieved in the vital area of tertiary education for South Africans for whom university education would otherwise not have been possible.
A number of additional initiatives are being pursued in terms of the group's policies, and contributions are allocated to a wide range of charitable causes.
41
Directors' responsibility for financial reporting
The directors of Corpcapital Limited are responsible for the preparation and integrity of the financial statements and other financial information included in this annual report. The independent auditors are responsible for reporting on the financial statements.
Corpcapital Limited is committed to achieving comprehensive and responsible reporting in order to facilitate the measurement of the group's performance in relation to the risks inherent in the industries in which it operates and to comparable entities. In line with this policy, in preparing the financial statements, South African Statements of Generally Accepted Accounting Practice and JSE requirements have been followed, suitable accounting policies have been used, and reasonable and prudent estimates have been made where required.
To help meet its responsibility with respect to financial information, the group maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded and transactions and events property recorded.
After appropriate investigation, the directors believe that the group has adequate resources to continue as a going Concern in the year ahead and the financial statements have therefore been prepared on this basis.
The financial statements for the year ended 31 August 2001 which are set out on pages 46 to 74 were approved by the board and have been signed oil its behalf by:
ERIC ELLERINE
Chairman
23 October 2001
JEFF LIEBESMAN
Chief Executive Officer
Declaration by the Company Secretary.
We declare that, to the best of our knowledge, the company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.
CORPCAPITAL COMPANY SECRETARIES (PTY) LIMITED
Company Secretary
23 October 2001
44
Report of the independent auditors
To the members of
CORPCAPITAL LIMITED
We have audited the annual financial statements and group annual financial statements of Corpcapital Limited set out on pages 46 to 74 for the year ended 31 August 200 1. These financial statements are the responsibility of the company's directors. Our responsibility is to express an opinion on these financial statements, based on our audit.
SCOPE. We conducted our audit in accordance with statements of South African Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement.
An audit includes:
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, evaluating the overall financial statement presentation, and assessing the accounting principles used and significant estimates made by management.
We believe, that Our audit provides a reasonable basis for our opinion.
AUDIT OPINION. In our opinion, the financial statements fairly present, in all material respects, the financial position of the company, and the group at 31 August 2001 and the results of their operations and cash flows for the year then ended in accordance with South African Statements of Generally Accepted Accounting practice, and in the manner required by the Companies Act.
FISHER HOFFMAN PKF (JHB) INC
Chartered Accountants (SA)
Registered Accountants and Auditors
Registration number 1994/001166/21
Johannesburg
23 October 2001
45
Directors' report
The directors have pleasure in presenting their report for the year elided 31 August 2001.
NATURE OF BUSINESS. The group's activities are detailed in the chief executive's report and the operational reviews.
FINANCIAL RESULTS. The results of the group's operations are set out in the financial statements. Commentary thereon is contained in the chief executive officer's report and the operational reviews.
SHARE CAPITAL. As at 31 August 2001, the authorised share capital comprised 1 322 279 778 ordinary shares of 0,09 cent each, of which 251 588 431 were issued. During October 2001 and subsequent to shareholders' and regulatory approval for the purchase of the businesses in Corpcapital Limited and Corpcapital Bank Controlling Company Limited - 188 676 509 shares were issued to the minorities of the aforementioned companies. The current issued share capital, at the date of this report, is 440 264 940 ordinary shares of 0,09 cent each.
The company's unissued shares have been placed under the control of the directors until the forthcoming annual general meeting.
SUBSIDIARIES. Details of subsidiary companies are set out on pages 72 to 73.
DIVIDEND. The directors have resolved to pay a cash dividend of 12,0 cents per share to ordinary shareholders registered in the books of the company at the close of business on Friday, 7 December 2001. The last date to trade cum dividend will be Friday, 30 November 2001 and the shares will trade ex dividend from Monday 3 December 2001. Payment will be made by cheque or electronic transfer on or about Monday, 10 December 2001.
EMPLOYEE SHARE INCENTIVE SCHEME. The group currently operates a group employee share incentive scheme, which combines the schemes of the Previously listed entities, being the Corpgro Limited Employee Share Incentive Scheme, the Corpcapital Limited Employee Share Incentive Scheme, and the Corpcapital Bank Controlling Company Limited Employee Share Incentive Scheme.
46
The awards relinquished relate to an offer to employees to cancel awards made previously in exchange for an award for a reduced number of shares and an increased vesting period. The new award was priced equivalently to other awards made at the same time, and the rules of the share trusts were complied with in respect of all awards made.
As Corpgro only issued shares to the minority shareholders in Corpcapital and Corpcapital Bank as part of the merger process, the overall capacity of share incentive schemes for employees was reduced by 15% of Corpgro's effective holding in the Corpcapital and Corpcapital's effective holding in Corpcapital Bank. The reduction was equivalent to 33.2 million shares or 7.6% of new Corpcapital's current issued share capital.
During the year under review the following changes took place:
| |Corpgro |Corpcapital |Corpcapital |
| |Limited |Limited |Bank Limited |
| |ordinary |ordinary |ordinary |
| |shares |shares |shares |
|Shares and options awarded | | | |
|at the beginning of the year. |14 997 669 |59 814 900 |8 817 500 |
|New awards/options issued to | | | |
|executives and staff |5 688 341 |25 062 350 |4 376 279 |
|Awards/options relinquished |(4 020 766) |(1 066 260) |(201 560) |
|Shares awarded and under option | | | |
|at the end of the year |16 665 244 |83 810 990 |12 992 219 |
|Awards/options to be converted | | | |
|in terms of merger | |(83 810 990) |(12 992 219) |
|Awards/options to be issued | | | |
|in terms of merger |49 317 459 | | |
|Pro-forma balance after merger |65 982 703 |- |- |
|Balance of shares available | | | |
|in terms of the scheme |57 047 | | |
47
DIRECTORS. The directors at the date of this report are: E Ellerine (Chairman), J Liebesman (Chief Executive Officer), M Sacks (Managing Director), N Frangos, F Grolman, B Kalkhoven, N Lazarus, B Liebmann and W Trengove.
In terms of the articles of association, E Ellerine and N Frangos retire at the forthcoming annual general meeting, and being eligible, offer themselves for re-election. In addition, in terms of the articles of association, W Trengove, N Lazarus and B Kalkhoven, who were appointed by the board of directors on 16 October 2001, retire at the forthcoming annual general meeting, and being eligible, offer themselves for re-election.
DIRECTORS' REMUNERATION
Remuneration for the year ended 31 August 2001 excluding share options awarded.
| |Services as |Basic |Fringe |Performance |Total |
| |director |remuneration |benefits |bonus* |remuneration |
|(R's) | | | | |expense |
|Non-executive directors | | | | | |
|E Ellerine |255 000 | | | | |
|N Frangos |305 000 | | | | |
|W Trengove |255 000 | | | | |
| |815 000 | | | | |
|Executive directors | | | | | |
|J Liebesman | |2 000 000 |99 021 |3 261 000 |5 360 021 |
|M Sacks | |1 200 000 |7 420 |2 250 000 |3 457 420 |
|E Grolman | |1 200 000 |10 953 |2 250 000 |3 460 953 |
|B Liebmann | |1 200 000 |10 953 |2 250 000 |3 460 953 |
|N Lazarus | |1 200 000 |10 953 |2 250 000 |3 460 953 |
|B Kalkhoven | |1 200 000 |10 812 |2 250 000 |3 460 812 |
| | |8 000 000 |150 112 |14 511 000 |22 661 112 |
*50% of the performance bonus vests and is paid in the following year.
DIRECTORS' SHAREHOLDINGS. As at 31 August 2001 the directors held 42 450 794 shares (16,70%) in the issued share capital of the company (2000: 36 855 952 shares (14,6%).
Subsequent to the appointment of the additional directors and as at 22 October 2001, being the date of the issue of ordinary shares by Corpcapital Limited (previously Corpgro) to the minorities of Corpcapital Limited and Corpcapital Batik Controlling Company Limited, the directors hold 63 147 114 shares (15%) in the issued share capital of the company.
48
Individual directors' shareholdings including directors' future entitlements under the share incentive trusts in terms of employee ownership initiatives are set out below:
| |Cumulative | |Shareholdings excluding incentive entitlements |
| |entitlements | | | | |
| |under | |Beneficial |Non-beneficial | |
| |employee |Average |holdings |holdings | |
| |incentive |strike |post merger |post merger |Pre merger |
|Directors' Interests |schemes |price |23 Oct 2001 |23 Oct 2001 |31 Aug 2000 |
|E Ellerine |- | |- |23 768 414 |12 949 537 |12 374 718 |
|N Frangos |- | |11 507 602 |- |11 338 144 |11 338 144 |
|J Liebesman |6 153 753 |1.80 |751 891 |8 316 373 |7 837 052 |7 255 502 |
|M Sacks |8 478 055 |2.26 |898 566 |940 000 |1 110 128 |1 110 128 |
|E Grolman |6 854 839 |2.37 |11 394 754 |- |7 896 064 |3 857 098 |
|B Liebmann |1 008 065 |2.48 |875 418 |1 105 815 |920 362 |920 362 |
|N Lazarus |1 008 065 |2.48 |1 928 539 |- |399 507 |- |
|W Trengove |- | |27 598 |- |- |- |
|B Kalkhoven |2 058 000 |2.16 |1 632 144 |- |- |- |
| |25 560 777 | |29 016 512 |34 130 602 |42 450 794 |36 855 952 |
|Directors' shareholdings | | | | | | |
|% of shares in issue |6% | |71% |8% |17% |15% |
Incentive scheme entitlements, must be paid for in cash on the exercise date, vest over a period of four years and are dependent upon the continued employment of the director.
There have been no other changes in directors' holdings since the financial year end and the date of this report.
Other than as disclosed above, no Corpcapital Limited director holds shares in Corpcapital Limited, either beneficially or non-beneficially.
SPECIAL RESOLUTIONS. During the year the company passed the following special resolutions:
1. To afford directors general authority to effect buybacks of the company's shares on the JSE.
2. To amend the Articles of Association to provide for electronic share transactions (STRATE).
3. To change the name of the company from Corpgro Limited to Corpcapital Limited.
4. To issue unlisted options to Corpcapital Bank Controlling Company Limited options holders.
49
Principal accounting policies
The financial statements have been prepared in accordance with the historic cost convention, except for the revaluation of certain investments to fair value. They incorporate the principal accounting policies set out below, which have been applied on a consistent basis except for the changes to the treatment of subsidiaries and goodwill described below. The policies comply in all respects with South African Statements of Generally Accepted Accounting Practice.
BASIS OF CONSOLIDATION. The group results include those of all Subsidiary undertakings. Subsidiaries are those entities in which the group is able to exercise control over the financial and operating policies. Investments where control is intended to be temporary are not consolidated, but are included with proprietary investments.
The results of subsidiaries are incorporated from the effective date of acquisition up to the effective date of disposal. All intra-group transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated.
PROPRIETARY CONSOLIDATED INVESTMENTS. The results of subsidiaries that are not considered part of the core financial services business are reflected as a separate line item on the groups income statement. The total assets and liabilities of these subsidiaries are shown separately in the assets and liabilities sections of the balance sheet. The net operating cash flow attributable to these businesses is shown as a separate line item in the cash flow statement. A detailed analysis of these items is included in the notes to the Financial statements.
Profits and losses relating to the disposal of these subsidiaries are inducted in investing income and headline earnings. A profit on disposal that reverses goodwill previously written off is excluded from headline earnings.
FOREIGN CURRENCIES.
Foreign entities. Foreign entity financial statements are translated into South African currency as follows: Assets and liabilities at rates of exchange ruling at the balance sheet date.
Income, expenditure and cash flow items at the weighted average rates of exchange during the period. Translation differences are taken to general reserves.
Foreign currency transactions and balances. Transactions in foreign currencies are converted into South African currency at the exchange rate ruling at the transaction date. Foreign currency assets and liabilities, including foreign currency trading positions, are translated using exchange rates ruling at the balance sheet date. Exchange differences are included in income.
50
PROPRIETARY INVESTMENTS. Investment securities are initially recognised at cost (which includes transaction costs). These securities are subsequently remeasured to fair value based on the latest traded prices or amounts derived from cash flow models. Fair values for unquoted equity instruments are estimated using applicable price/earnings or price/cash flow ratios refined to reflect the specific circumstances of the issuer. Unrealised and realised gains or losses on investment securities are recognised in investment income.
Purchases and sales of investment securities are recognised at trade date.
TRADING ASSETS AND SECURITIES. Trading securities are those securities which were either acquired for generating a profit from short-term fluctuations in price or dealer's margin, or are securities included in a portfolio in which a pattern of short-term profit taking exists. Trading securities are initially recognised at cost (which include transaction costs) and subsequently remeasured at fair value based on quoted bid prices. Purchases and sales of trading securities are recognised at trade date.
Realised and unrealised gains and losses are included in trading income. Interest and dividends earned whilst holding trading securities are reported as trading income. Trading income is stated net of funding costs.
Other trading assets are initially recognised at cost (which includes transaction costs) and subsequently re-measured to fair value based on estimated realisable values.
SALE AND REPURCHASE AGREEMENTS. Securities Sold subject to a linked repurchase agreement ("repos") are retained in the financial statements as trading securities and the counterparty liability is included in liabilities in the balance sheet. Securities purchased under agreements to resort ("reverse repos") are recorded as trading assets. Profits, losses or interest resulting from these transactions are included in trading income.
DERIVATES. Derivative instruments not designated as hedges are revalued to fair value based on market value, which includes provision for market risk where bid/offer spreads for long-dated derivatives are considered to be significant. The net surplus or deficit on the revaluation of such derivative instruments is included in trading income.
Profits and losses related to derivative instruments that are designated as hedges are recognised on the same basis as the hedged asset or liability.
SET OFF. Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
SPECIFIC AND GENERAL PROVISIONS FOR BAD AND DOUBTFUL DEBTS. Specific provisions represent the quantification of actual and expected losses from identified accounts. The amount of specific provisions raised is the group's conservative estimate of the amount needed to reduce the carrying value of an asset to the expected ultimate net realisable value, taking into account the financial status of the customer and any security for the loan. Specific provisions include amounts in respect of interest that is not serviced.
51
General provisions augment specific provisions and provide cover for loans which are impaired at the balance sheet date but which will not be identified as such until some time in the future. The general provision has been determined taking into account the structure and the risk characteristics of the loan portfolio, in accordance with regulatory requirements where applicable.
Advances are stated net of specific and general provisions.
ASSOCIATES. An associate is an entity in which the group has a long-term interest and over which it has the ability to exercise significant influence but not control. Results of associates are included from the effective dates of acquisition using the equity method.
The group's share of associates' earnings is based on:
Listed companies. The latest available audited annual financial statements, or interim results where the financial year-end of the company is more than six months prior to 31 August.
Unlisted companies. The latest available audited annual financial statements and, where such statements are not available for the period ended 31 August, unaudited management financial statements.
PROPERTY, PLANT AND EQUIPMENT. Equipment is stated at cost to the group and depreciated on the straight line basis over their estimated useful lives. The annual depreciation rates applied to categories of plant and equipment are:
|Office equipment and furniture |16,7% to 20% |
|Computer equipment |33,3% |
|Vehicles |20% to 25% |
Property is stated at cost. Buildings used for operating purposes are depreciated at 2% p.a. on a straight line basis.
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount.
GOODWILL AND INTANGIBLES. Goodwill, being the excess of the purchase price over the group's share of the fair value of the net assets of the subsidiaries or associates acquired, is shown as a separate asset on the balance sheet. Goodwill is amortised over its expected useful life, not exceeding 20 years. Goodwill arising prior to 1 September 2000 was written off directly to the share premium account.
Intangible assets are recognised as a separate asset, and amortised over their expected useful lives. Intangible assets identified before the 1 September 2000 were written off directly against the share premium account.
52
DEFERRED TAXATION. Deferred taxation is provided for temporary differences arising between the tax bases of assets and liabilities and their accounting carrying values. Deferred taxation assets are raised to the extent that future taxable income is probable. Deferred taxation is calculated at current rates using the liability method.
FINANCE LEASES. Assets acquired under finance lease agreements are capitalised at equivalent cash cost. Lease payments are allocated between capital and interest using the effective interest rate method.
REVENUE. Interest received and annuity product income is recognised using the effective yields on the underlying securities.
Investing income and trading and arbitrage profit are recognised as set out above under investments, trading assets and derivatives.
Commissions and fees include fees earned from providing advisory services and the arranging of financing for clients, and are recognised as revenue when the related services are performed.
Investing, trading and fee income is disclosed net of income-based profit sharing arrangements and deal costs.
RETIREMENT BENEFITS. It is the policy of the group to provide pension and provident fund benefits to employees as part of their cost to company package. All these funds are defined contribution funds. The group's portion of contributions to funds is charged against staff costs when incurred.
LIFE ASSURANCE. The group has sold unit linked products to individual investors. All liabilities are directly related to asset values and no mortality risk is assumed by the company.
The liabilities are valued on a basis consistent with the asset values and comply with the Financial Soundness Valuation basis. Provision has been made for future costs in respect of the policies.
Income from the long term assurance business comprises interest, dividends and rental income received on investments held, as well as premium income in respect of linked business. Gains and losses arising from the fluctuation in the market value of investments, whether realised or unrealised, are accounted for as movements in policyholder liabilities which are shown separately in the balance sheet.
53
Balance sheet
at 31 August
| | |GROUP |COMPANY |
|(R'000) |Notes |2001 |2000 |2001 |2000 |
|Assets | | | | | |
|Cash and short term funds |1 |435 911 |460 548 |535 |19 905 |
|Liquid assets and trading securities |2 |1 863 854 |1 184 009 |- |- |
|Assets of proprietary consolidated investments |31 |422 781 |573 745 |- |- |
|Investments |3 |817 463 |470 308 |153 600 |- |
|Preference shares |4 |522 729 |443 422 |- |- |
|Advances and other accounts |5 |755 801 |339 012 |156 491 |6 666 |
|Investment in subsidiaries |7 |- |- |598 101 |194 190 |
|Associates |8 |128 694 |229 225 |- |- |
|Goodwill |9 |6 809 |- |- |- |
|Property plant and equipment |10 |44 398 |43 170 |- |- |
| | |4 998 440 |3 743 439 |908 727 |220 761 |
|Equity and liabilities | | | | | |
|Share capital and premium |11 |598 341 |164 385 |598 341 |164 385 |
|Accumulated profit | |567 621 |217 200 |235 098 |1 049 |
|General reserves |12 |191 918 |196 660 |3 499 |3 499 |
|Ordinary shareholders' equity | |1 357 880 |578 245 |836 938 |168 933 |
|Minority shareholders' interest | |6 861 |639 436 |- |- |
|Total shareholders' equity | |1 364 741 |1 217 681 |836 938 |168 933 |
|Compulsorily convertible loan |13 |304 114 |304 114 |- |- |
|Total capital employed | |1 668 855 |1 521 795 |836 938 |168 933 |
|Policyholders' interests in Corpcapital Life | | | | | |
|Investments, interest bearing | | | | | |
|securities and term deposits | |1 654 958 |- | | |
|Life fund | |1 654 958 |- | | |
|Liabilities | | | | | |
|Long-term debt |14 |77 008 |115 668 |55 275 |50 622 |
|Deferred taxation |6 |109 014 |84 354 |- |- |
|Convertible loan interest |13 |219 845 |127 340 |- |- |
|Deposits and other interest bearing accounts |15 |1 100 175 |379 474 |- |- |
|Repurchase agreements and short positions | |1 445 051 |1 051 839 |- |- |
|Creditors, provisions and taxation |16 |175 666 |156 474 |16 514 |1 206 |
|Liabilities of proprietary consolidated | | | | | |
|investments |31 |202 826 |306 495 |- |- |
| | |4 998 440 |3 743 439 |908 727 |220 761 |
|Net tangible asset value per share (cents) | |307 |230 | | |
54
Income statement
for the year ended 31 August
| | |GROUP |COMPANY |
|(R'000) |Notes |2001 |2000 |2001 |2000 |
|Net interest income | |83 841 |46 358 |(3 435) |979 |
|Interest received |17 |149 200 |87 602 |1 129 |6 380 |
|Interest paid |18 |65 359 |41 244 |4 564 |5 401 |
|Non interest income | |558 702 |473 063 |266 207 |- |
|Investing, trading and fee income |19 |461 655 |353 622 |266 207 |- |
|Equity accounted income | |25 710 |24 246 |- |- |
|Contribution from proprietary consolidated | | | | | |
|investments |31 |71 337 |95 195 |- |- |
|Provisions for bad debts |20 |12 733 |2 200 |- |- |
|Convertible loan interest | |92 505 |76 354 |- |- |
|Total income | |537 305 |440 867 |262 772 |979 |
|Operating expenses |22 |149 582 |89 968 |1229 |1 492 |
|Profit before taxation and exceptional items | |387 723 |350 899 |261 543 |(513) |
|Exceptional items |23 |169 777 |- |- |- |
|Profit before taxation | |557 500 |350 899 |261 543 |(513) |
|Taxation |24 |74 405 |72 490 |1 077 |360 |
|Profit after taxation | |483 095 |278 409 |260 466 |(873) |
|Attributable to minority shareholders | |108 420 |126 695 |- |- |
|Attributable profit | |374 675 |151 714 |260 466 |(873) |
|Headline earnings adjustments |23 |(183 576) | | | |
|Headline earnings | |191 099 |151 714 |260 466 |(873) |
|Earnings per share (cents) | |140.2 |60.3 | | |
|Headline earnings per share (cents) | |71.5 |60.3 | | |
|Diluted earnings per share (cents) | |140.2 |60.3 | | |
|Diluted headline earnings per share (cents) | |71.5 |60.3 | | |
|Weighted average shares | | | | | |
|in issue and to he issued (000) | |267 311 |251 588 | | |
|Fully diluted weighted average | | | | | |
|shares in issue (000) | |267 311 |251 588 | | |
|Shares in issue and to be issued | | | | | |
|at year end (000) | |440 265 |251 588 | | |
55
Cash flow statement
for the year ended 31 August
| | |GROUP |COMPANY |
|(R'000) |Notes |2001 |2000 |2001 |2000 |
|Operating activities | |121 947 |152 108 |(27 135) |(26 347) |
|Cash generated from operations |25 |205 890 |246 650 |(718) |(335) |
|Taxation and dividends paid | |(83 943) |(94 542) |(26 417) |(26 012) |
|Financial services activities | |35 071 |47 269 |18 326 |13 572 |
|Liquid and trading assets | |(679 845) |229 759 |- |- |
|Preference shares | |(79 307) |(69 104) |- |- |
|Advances and other accounts | |(401 409) |(92 254) |- |- |
|Repurchase agreements | |393 212 |(319 077) |- |- |
|Deposits and funding activities | |774 546 |249 597 |18 326 |13 572 |
|Creditors | |27 874 |48 348 |- |- |
|Investing activities | |(61 058) |(189 502) |(10 561) |(9 627) |
|Investments acquired | |(311 734) |- |- |- |
|Property and equipment | |(3 231) |2 692 |- |- |
|Repayment of subsidiary loans | |- |- |24 501 |- |
|Business combinations |26 |12 5064 |(37 905) |- |- |
|Investment in subsidiaries | |(2 580) |- |(35 062) |(43 281) |
|Investment in associates | |126 242 |(145 852) |- |- |
|Advances to share trusts | |5 181 |(8 437) |- |33 654 |
|Proprietary consolidated investments | |(120 597) |(151 447) |- |- |
|Movement in assets | |(154 621) |(19 195) |- |- |
|Movement in liabilities | |34 024 |(132 252) |- |- |
|Net change in cash and short-term funds | |(24 637) |(141 572) |(19 370) |(22 402) |
|Opening cash and short-term funds | |460 548 |602 120 |19 905 |42 307 |
|Closing cash and short-term funds | |435 911 |1 460 548 |535 |19 905 |
56
Statement of changes in equity
for the Year ended 31 August
| |GROUP |COMPANY |
|(R'000) |Notes |2001 |2000 |2001 |2000 |
|Share capital and premium | | | | |
|Share capital at the beginning of the year |226 |226 |226 |226 |
|Shares issued and to be issued |170 |- |170 |- |
|Share capital at the end of the year |396 |226 |396 |226 |
|Share premium at the beginning of the year |164 159 |201 054 |164 159 |201 054 |
|Shares issued and to be issued |433 786 |- |433 786 |- |
|Share issue expenses |- |(116) |- |(116) |
|Goodwill and trademarks set off / written off |- |(36 779) |- |(36 779) |
|Share capital and premium at the end of the year |598 341 |164 385 |598 341 |164 385 |
|Accumulated profit | | | | |
|At the beginning of the year |217 200 |173 694 |1 049 |1 922 |
|Attributable profit |374 675 |151 714 |260 466 |(873) |
|Dividend paid |(26 417) | |(26 417) |- |
|Changes in holding in subsidiary companies |2 163 |(4 064) |- |- |
|Goodwill and trademarks written off |- |(104 144) |- |- |
|Accumulated profit at the end of the year |567 621 |217 200 |235 098 |1 049 |
|General reserves | | | | |
|At the beginning of the year |196 660 |232 004 |3 499 |3 499 |
|Foreign currency translation reserve |- |458 |- |- |
|Goodwill and trademarks written off |- |(33 978) |- |- |
|Change in accounting policy |- |5 663 |- |- |
|Changes in holding in subsidiary companies |(4 742) |(7 487) |- |- |
|General reserves at the end of the year |191 918 |196 660 |3 499 |3 499 |
57
Notes to the financial statements
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|1. Cash and short term funds | | | | |
|Cash |6 373 |11 040 |- |- |
|Balances with central bank |41 044 |43 516 |- |- |
|Balances with other banks |296 063 |194 338 |535 |19 905 |
|Money market placements |92 431 |211 654 |- |- |
| |435 911 |460 548 |535 |19 905 |
|2. Liquid assets and trading securities | | | | |
|Resale agreements |875 341 |916 342 | | |
|Equities and derivatives |27 591 |16 947 | | |
|Interest bearing securities and derivatives |913 692 |250 720 | | |
|Property assets and securities |47 230 |- | | |
| |1 863 854 |1 184 009 |- |- |
|3. Investments | | | | |
|Listed equities |231 033 |238 894 |- |- |
|Unlisted |586 430 |231 414 |153 600 |- |
|Equities |425 113 |231 414 |153 600 |- |
|Other investments |161 317 |- |- |- |
| |817 463 |470 308 |153 600 |- |
|4. Preference shares |522 729 |443 422 |- |- |
|The preference shares are redeemable within | | | | |
|a three year period and yield semi-annual | | | | |
|dividends at a rate of 175% per annum. | | | | |
58
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|5. Advances and other accounts | | | | |
|Corporate (secured and unsecured) |149 528 |219 171 |- |- |
|Micro-finance |99 617 |- |- |- |
|Factoring |233 186 |- |- |- |
|Share trusts |90 075 |71 731 |21 642 |5 835 |
|Total advances (SA only) |572 406 |290 902 |21 642 |5 835 |
|Provisions |(45 496) |(6 490) |- |- |
|Specific provision for doubtful debts |(18 668) |(2 000) |- |- |
|General provision for doubtful debts |(26 828) |(4 490) |- |- |
|Settlement debtors |174 788 | |- |- |
|Other receivables |54 103 |54 600 |134 849 |831 |
| |755 801 |339 012 |156 491 |6 666 |
|Maturity Analysis | | | | |
|On demand to one month |50 307 |- |- |- |
|One month to one year |319 978 |159 180 |- |- |
|One year to five years |177 764 |131 722 |21 642 |5 835 |
|Over five years |24 357 |- |- |- |
| |572 406 |290 902 |21 642 |5 835 |
|Provision for had debts | | | | |
|Opening balance |6 490 |3 170 | | |
|Income statement |12 733 |2 200 | | |
|Regulatory increase in provisions |10 000 |- | | |
|Provisions acquired |16 273 |1 120 | | |
| |45 496 |6 490 |- |- |
|6. Deferred taxation | | | | |
|Liability | | | | |
|Provisions |29 310 |5 136 | | |
|Unrealised profit on restatement of | | | | |
|investments and securities to fair value |70 198 |59 941 | | |
|Other temporary differences |9 506 |19 277 | | |
| |109 014 |84 354 |- |- |
59
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|Movement | | | | |
|Net balance at the beginning of the year |84 354 |38 118 | | |
|Business combinations |(15 519) |(8 266) | | |
|Income statement charge |40 179 |54 502 | | |
| |109 014 |84 354 |- |- |
|Future tax relief | | | | |
|Assessed losses available |146 300 |82 500 | | |
|7. Investments in subsidiaries | | | | |
|Carrying value of shares | | |511 697 |105 676 |
|Carrying value of equity loans | | |86 404 |88 514 |
| |- |- |598 101 |194 190 |
|Details of subsidiaries are set out on pages | | | | |
|72 and 73. | | | | |
|8. Associates | | | | |
|Carrying value of shares |117 603 |162 380 | | |
|Share of post-acquisition retained earnings |5 291 |7 200 | | |
| |122 894 |169 580 | | |
|Loans receivable |5 800 |59 645 | | |
| |128 694 |229 225 | | |
|Details of associates are set out on page 74. | | | | |
|9. Goodwill | | | | |
|Acquisition of subsidiary |81 757 | | | |
|Amortised during the year |74 948 | | | |
| |6 809 |- |- |- |
|Negative goodwill | | | | |
|Arising on restructure of the group |212 816 | | | |
|Written off in exceptional items |(212 816) |- |- |- |
60
| |2001 |Business |Dispo- |Depre- |Opening |
| | |combi- |sals |ciation |book |
|(R'000) | |nations | | |value |
|10. Property, plant and equipment | | | | | |
|Property |34 194 |- |(17) |(1 002) |35 213 |
|Cost |35 196 |- |(17) |- |35 213 |
|Accumulated depreciation |(1 002) |- |- |(1 002) |- |
|Office equipment and furniture, | | | | | |
|computer equipment and vehicles |10 204 |4 775 |(43) |(2 485) |7 957 |
|Cost |17 026 |4 775 |(1 569) |- |13 820 |
|Accumulated depreciation |(6 822) |- |1 526 |(2 485) |(5 863) |
| |44 398 |4 775 |(00) |(3 487) |43 170 |
|Total cost |52 222 | | | | |
|Total accumulated | | | | | |
|depreciation |(7 824) | | | | |
| |44 398 | | | | |
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|11. Share capital | | | | |
|Authorised share capital | | | | |
|1 322 279 778 ordinary shares of | | | | |
|0,09 cent each |1 190 |1 190 |1 190 |1 190 |
|Issued share capital | | | | |
|440 264 940 (2000: 251 588 431) ordinary | | | | |
|shares of 0,09 cent each |396 |226 |396 |226 |
|Number of shares (000's) | | | | |
|In issue at the beginning of the year |251 588 |249 780 |251 588 |249 780 |
|Issued during the year |- |1 808 |- |1 808 |
|In issue at the end of the year |251 588 |251 588 |251 588 |251 588 |
|To be issued |188 677 |- |188 677 |- |
|In issue and to be issued |440 265 |251 588 |440 265 |251 588 |
|12. General reserves | | | | |
|Investment surplus |2 189 |2 189 |2 189 |2 189 |
|Reduction in share capital |1 310 |1 310 |1 310 |1 310 |
|Arising on consolidation |188 419 |192 703 |- |- |
|Foreign currency translation reserve | |458 |- |- |
| |191 918 |196 660 |3 499 |34 991 |
61
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|13. Compulsorily convertible loan | | | | |
|Face value |304 114 |304 114 |- |- |
|Payable by Corpcapital Bank Limited. | | | | |
|The loan is convertible into Corpcapital | | | | |
|Bank Limited shares on 13 November 2003 | | | | |
|in a ratio to be determined by reference to | | | | |
|the net asset value of the company at the | | | | |
|time of conversion. Corpcapital Bank | | | | |
|Controlling Company Limited has | | | | |
|purchased the conversion rights attached to | | | | |
|the loan. The loan yields an effective | | | | |
|interest rate of 21,44% per annum. Interest | | | | |
|accrued on the loan is disclosed in the | | | | |
|balance sheet under liabilities. | | | | |
|14. Long-term debt | | | | |
|Secured |71 733 |39 905 |- |11 540 |
|Finance leases and instalment sales | |2 333 | |- |
|Term loans |71 733 |37 572 |- |11 540 |
|Unsecured | | | | |
|Term and call loans |- |66 681 |- |30 000 |
|Interest free loans |5 275 |9 082 |55 275 |9 082 |
| |77 008 |115 668 |55 275 |50 622 |
|Maturity analysis | | | | |
|On demand to one year |46 360 |101 926 |55 275 |45 347 |
|One year to five years |30 648 |13 742 |- |5 275 |
|Payable thereafter | | | | |
| |77 008 |115 668 |55 275 |50 622 |
|Encumbered assets | | | | |
|Book values of assets encumbered in | | | | |
|favour of secured lenders | | | | |
|Property, plant and equipment |- |2 147 |- |2 147 |
|Advances |67 753 |- |- |- |
|Listed-shares |175 000 |45 208 |175 000 |45 208 |
| |242 753 |47 355 |175 000 |47 355 |
|The average closing interest rate on long-term debt is 12% |
62
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|15. Deposits and other interest bearing | | | | |
|accounts | | | | |
|Fixed and notice deposits |390 895 |264 274 | | |
|Demand deposits |684 077 |115 200 | | |
|Other short-term liabilities |25 203 |- | | |
| |1 100 175 |379 474 |- |- |
|Maturity analysis | | | | |
|On demand to one month |594 281 |294 456 | | |
|One month to one year |347 279 |85 018 | | |
|One year to five years |158 615 |- | | |
| |1 100 175 |379 474 |- |- |
|Currency analysis | | | | |
|ZAR |977 634 |379 474 | | |
|Other |122 541 |- | | |
| |1 100 175 |379 474 |- |- |
|16. Creditors, provisions and taxations | | | | |
|Creditors |111 251 |100 054 |15 797 |1 206 |
|Taxation |4 007 |4 525 |- |- |
|Accruals |60 408 |51 895 |717 |- |
| |175 666 |1 156 474 |16 514 |1 206 |
63
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|17. Interest received | | | | |
|Cash and liquid assets |56 868 |39 783 |1 115 |880 |
|Advances |91 625 |42 834 |- |5 500 |
|Other |707 |4 985 |14 |- |
| |149 200 |87 602 |1 129 |6 380 |
|18. Interest paid | | | | |
|Interest on deposits |42 072 |35 510 |- |- |
|Other interest |23 287 |5 734 |4 564 |5 401 |
| |65 359 |41 244 |4 564 |5 401 |
|19. Investing, trading and fee income | | | | |
|Trading and arbitrage (loss)/profit |(10 893) |31 157 |- |- |
|Foreign exchange gains |479 |1 291 |- |- |
|Trading and arbitrage (loss)/profit |(11 372) |29 866 |- |- |
|Investing income |261 880 |201 026 |255 623 |- |
|Realised investing income |88 447 |(7 764) |122 662 |- |
|Unrealised investing income |173 433 |208 790 |132 961 |- |
|Dividends from investments and | | | | |
|preference shares |85 414 |69 104 |10 584 |- |
|Other income |2 460 |10 065 |- |- |
|Commissions and fees |122 794 |42 270 |- |- |
|Structured product fees and commissions |32 518 |3 118 | | |
|Corporate finance fees |35 792 |27 221 | | |
|Property consulting fees |20 901 |7 561 | | |
|Property management fees |10 828 |3 485 | | |
|Factoring fees |11 685 |- | | |
|Other banking fee income |11 070 |885 | | |
| |461 655 |353 622 |266 207 |- |
|20. Provision for doubtfull debts | | | | |
|Specific provisions (net of recoveries) |4 160 |- | | |
|Suspended interest |840 |- | | |
|General provisions |7 733 |2 200 | | |
| |12 733 |2 200 | | |
64
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|21. Group auditors' remuneration | | | | |
|Audit fees |1 711 |690 | | |
|Other fees |442 |482 | | |
| |2 153 |1 172 | | |
|Proprietary consolidated investments | | | | |
|Audit fees |2 385 |2 128 | | |
|Other fees |433 |- | | |
| |2 818 |2 128 |- |- |
| |4 971 |3 300 |- |- |
|22. Operating expenses | | | | |
|Personnel costs |67 010 |38 671 | | |
|Loss on disposal of property, plant | | | | |
|and equipment | |1 559 | | |
|Operating lease charges |4 777 |2 113 | | |
|Property |2 515 |2 000 | | |
|Other |2 262 |113 | | |
|Marketing |18 865 |8 668 | | |
|Depreciation |3 487 |1 692 | | |
|Amortisation of restraints |15 639 |12 279 | | |
|Premises and direct operational costs |10 077 |6 353 | | |
|IT costs |8 815 |6 544 |- |- |
|Other expenses* |20 912 |12 089 |1 229 |1 492 |
|* Includes directors' emoluments disclosed | | | | |
|in the directors' report on page 48 | | | | |
|Total operating expenses |149 582 |89 968 |1 229 |1 492 |
|23. Exceptional items | | | | |
|Regulatory increase in provisions |10 000 | | | |
|Recoupment of goodwill on disposal of | | | | |
|Corpcom |(41 909) | | | |
|Goodwill amortised |74 948 | | | |
|Negative goodwill written off |(212 816) | | | |
| |(169 777) | | | |
|Tax on regulatory increase in provisions |(3 000) | | | |
|Outside shareholders' share of | | | | |
|exceptional items |(10 799) | | | |
|Headline earnings adjustments |(183 576) |- |- |- |
65
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|24. Taxation | | | | |
|Taxation charge | | | | |
|South African normal taxation | | | | |
|current |21 938 |17 570 |(940) |360 |
|deferred |40 179 |54 502 |- |- |
|Excess of capital allowances over depreciation |1 597 |2 447 |- |- |
|Provisions |26 310 |- |- |- |
|Unrealised profit on restatement of | | | | |
|investments and securities |2 766 |58 135 |- |- |
|Other temporary differences |9 506 |(6 080) |- |- |
|Secondary tax on companies |12 288 |- |2 017 |- |
|Foreign taxes |- |418 |- |- |
| |74 405 |72 490 |1 077 |360 |
|Reconciliation of rate of taxation | | | | |
|Standard rate |30 |30 |30 |30 |
|Equity accounted earnings |1 |2 |- |- |
|Exempt income |(6) |(7) |(30) |- |
|Foreign tax rate |(7) |- |- |- |
|Goodwill |(10) |- |- |- |
|Disallowable items |2 |- |- |- |
|Other |3 |(4) |- |(100) |
|Effective rate |13 |21 |- |(70 |
|25. Cash flow information | | | | |
|Cash generated from operations | | | | |
|Income before taxation |557 500 |350 899 |261 543 |(513) |
|Depreciation |3 487 |1 692 |- |- |
|Unrealised profit on restatement of | | | | |
|investments and securities to fair value |(173 433) |(110 024) |(112 993) |- |
|Profit on disposal of investments |(93 220) |- |- |- |
|Disposal of investments |142 750 |- |- |- |
|Equity accounted earnings |(25 710) |(5 206) |- |- |
|Exceptional items |(169 777) | |- |- |
|Provision for bad and doubtful debts |12 733 |3 320 |- |- |
|Movement in intangible assets |(48 440) |- |- |- |
|Other non-cash movements |- |5 969 |- |- |
|Movement in working capital |- |- |(149 268) |178 |
| |205 890 |246 650 |(718) |(335) |
66
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|26. Business combinations | | | | |
|Acquisitions | | | | |
|Cash and short-term funds |(424) |3 336 | | |
|Assets of consolidated investments |- |12 402 | | |
|Advances and other accounts |(187 847) |10 734 | | |
|Trademarks |- |(30 529) | | |
|Property, plant and equipment |(4 775) |3 464 | | |
|Long-term debt |157 920 |(530) | | |
|Deferred taxation |- |(23) | | |
|Creditors, taxation and provisions |22 621 |(1 823) | | |
|Minority shareholders interest |4 377 |- | | |
|Net assets acquired |(8 128) |(2 969) | | |
|Goodwill |(19 985) |(68 637) | | |
|Total purchase price |(28 113) |(71 606) | | |
|Outstanding purchase consideration | |31 973 | | |
|Cash and short-term funds acquired |(424) |(3 336) | | |
|Group share issues | |5 064 | | |
|Purchase of businesses |(28 537) |(37 905) | | |
|Disposals | | | | |
|Assets of consolidated investments |306 358 |- |- |- |
|Liabilities of proprietary consolidated | | | | |
|investments |(157 662) |- | | |
|Minority shareholders' interest |(50 275) |- | | |
|Net assets sold |98 421 |- |- |- |
|Profit on disposal |197 929 | | | |
|Sale of businesses |296 350 |- |- |- |
|Purchase of business |(28 537) |(37 905) | | |
|Cash shown in operations |(142 749) |- |- |- |
|Net cash inflow (outflow) on business | | | | |
|combinations |125 064 |(37 905) |- |- |
|27. Contingent liabilities and guarantees | | | | |
|Guarantees and letters of credit |67 593 |104 533 | | |
|Suretyship for loan to share trust |75 800 |82 639 | | |
|Suretyship for loans to investment | |22 344 | | |
|Suretyship for warranties related to the | | | | |
|Corpcom sale |50 000 |- |- |40 340 |
| |193 393 |209 516 |- |40 340 |
67
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|28. Commitments | | | | |
|Operating leases | | | | |
|Property |109 379 |65 883 | | |
|Other |1 294 |3 228 | | |
| |110 673 |69 111 | | |
|Payable during the 12 months to | | | | |
|31 August 2001 | |17 797 | | |
|31 August 2002 |19 657 |18 399 | | |
|31 August 2003 |21 558 |14 546 | | |
|31 August 2004 |16 335 |8 997 | | |
|31 August 2005 |13 676 |9 372 | | |
|31 August 2006 |10 077 | | | |
|31 August 2007 |7 290 | | | |
|Payable thereafter |22 080 | | | |
| |110 673 |69 111 | | |
|29. Derivatives | |Notional |Positive |Negative |
|2001 | |principal |fair value |fair value |
|Forex derivatives | |239 643 |1 064 |(593) |
|Interest rate contracts | |1 821 000 |2 182 |(8 218) |
|Equity and stock index derivatives | |100 274 |3 702 |(54 337) |
|Total derivatives | |2 160 917 |6 948 |(63 148) |
|2000 | | | | |
|Forex derivatives | |53 391 |47 |(311) |
|Interest rate contracts | |1 620 000 |- |(5 007) |
|Equity and stock index derivatives | |79 515 |434 |- |
|Total derivatives | |1 752 906 |481 |(5 318) |
68
30. Related party transactions
The Corporate Finance division provided advisory services at market related fees to related parties being:
Proprietary investments owned and managed property - R4.5 million.
On the listing of Satrix40 - R1 million. Corpcapital Bank owns a one third share in the management company.
The Property division of Corpcapital Bank manages three listed property funds, in which the group has an interest.
The major transactions during the year were:
A fee of R11.1 million was charged in respect of the establishment of ApexHi.
The purchase of units in ApexHi from vendors of properties sold to ApexHi.
Participation in the joint portfolio management of ApexHi.
The division owns 25% of Redefine Ltd and is the sole asset manager, earning total fees of R12,5 million for the year.
The Property division acquired a property from two of its executives for R8.8 million. The transaction was independently approved by executive directors of the Bank.
69
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|31. Proprietary consolidated investments | | | | |
|Sales |1 154 841 |965 149 | | |
|Cost of sales |806 502 |646 692 | | |
|Gross Margin |348 339 |318 457 | | |
|Equity accounted income |2 339 |2 026 | | |
|Other income |7 588 |- | | |
|Operating expenses |290 926 |228 380 | | |
| |67 340 |92 103 | | |
|Net interest received |3 997 |3 092 | | |
|Income before taxation |71 337 |95 195 |- |- |
|Assets of proprietary consolidated investments | | | | |
|Property, plant and equipment |36 687 |149 418 | | |
|Debtors, prepayments and deferred expenses |178 324 |229 980 | | |
|Inventories |167 397 |127 677 | | |
|Investments and associates |3 984 |33 131 | | |
|Deferred tax |- |33 539 | | |
|Cash and short-term funds |36 389 |- | | |
| |422 781 |573 745 |- |- |
|Liabilities of proprietary consolidated | | | | |
|investments | | | | |
|Interest-bearing debt |38 511 |32 135 | | |
|Creditors and provisions |157 281 |142 505 | | |
|Purchase consideration payable |- |112 370 | | |
|Taxation |5 008 |8 984 | | |
|Deferred tax |2 026 |10 501 | | |
| |202 826 |306 495 |- |- |
|Encumbered assets | | | | |
|Property, plant and equipment |17 920 |- | | |
|Inventory and debtors |69 055 |- | | |
| |86 975 |- |- |- |
70
| |GROUP |COMPANY |
|(R'000) |2001 |2000 |2001 |2000 |
|Additional accounting policies | | | | |
|Inventories | | | | |
|Inventories are stated at the lower of cost and | | | | |
|net realisable value, with due provision made for | | | | |
|slow-moving items. Cost is determined on the | | | | |
|following bases: | | | | |
|Raw materials and merchandise are valued | | | | |
|at cost on the first-in first-out basis. | | | | |
|Work in progress and finished goods are valued | | | | |
|at raw material cost plus direct costs and a | | | | |
|proportion of manufacturing overhead expenses. | | | | |
|Property, plant and equipment. | | | | |
|The cost of advertising structures comprises | | | | |
|material and direct costs. The annual | | | | |
|depreciation rates applied to categories of | | | | |
|property, plant and equipment are: | | | | |
|Advertising structures |10% | | | | |
|Plant and equipment |12,5% to 20% | | | | |
|Foreign branches. | | | | |
|Foreign branch financial statements are | | | | |
|translated as follows: | | | | |
|Non-monetary assets at rates at the time of | | | | |
|acquisition by the group. Other assets | | | | |
|and liabilities at rates of exchange ruling at the | | | | |
|balance sheet date. income, expenditure | | | | |
|and cash flow items at the weighted average | | | | |
|rates of exchange during the period. | | | | |
|Translation differences are included in income. | | | | |
|32. Borrowing facilities | | | | |
|Total facilities, finance leases and | | | | |
|suspensive sales |93 275 |- |146 361 |45 000 |
|Utilised |55 275 |- |112 796 |41 540 |
|Available |38 000 |- |33 565 |3 460 |
These facilities do not include facilities of the banking group arranged in the normal course of business
71
| | | |INTEREST OF HOLDING COMPANY |
| | |Effective | |Net |
| |Issued |holding |Shares |indebtedness |
| |ordinary | | | | | | |
| |capital |2001 |2000 |2001 |2000 |2001 |2000 |
|Consolidated subsidiaries |R |% |% |R000 |R000 |R000 |R000 |
|FINANCIAL SERVICES | | | | | | | |
|Micawber (275) Ltd |6 610 436 |100 |58 |279 588 |65 426 |51 498 | |
|Corpcapital Bank Controlling | | | | | | | |
|Company Limited |115 |100 |28 |232 108 | | | |
|Corpcapital Bank Limited |330 |100 |28 | | | | |
|M Factors and Trade Finance | | | | | | | |
|(Pty) Limited |100 |65 | |- | | | |
|Corpcapital Investments | | | | | | | |
|(Pty) Limited |100 |100 |58 |64013 | | | |
|Infinex (Pty) Limited | |89 |58 | | | | |
|Corpcapital Company Secretaries | | | | | | | |
|(Pty) Limited |100 |100 |100 |0.1 |0.1 |(29 107) |4 501 |
|Corpcapital Limited B.V.I. (USD) |100 |100 |- | | | | |
|CONSOLIDATED INVESTMENTS | | | | | | | |
|Corpgro Industrial and Building | | | | | | | |
|Supplies (Pty) Limited |100 |100 |100 |0.1 |0.1 | |61 280 |
|Corpgro Food and Allied Industries | | | | | | | |
|(Pty) Limited |100 |100 |100 |0.1 |0.1 | |22 733 |
|Colcab (Pty Limited |100 |100 |100 | | | | |
|Macadams Baking Systems | | | | | | | |
|Holdings (Pty) Limited |1 000 |70 |25 |0.7 | | | |
|Corpcom Limited |348 368 |- |69 | |40 250 | | |
|Companhia Inter-Africa | | | | | | | |
|Publicidade (Mocambique) Lda (b) |1 187 |- |69 | | | | |
|Coupcom Cote D' Ivoire Limited |- |- |69 | | | | |
|Corpeom (Ghana) Limited |- |- |69 | | | | |
|Corpcom (Kenya) Limited |3 |- |69 | | | | |
|Corpcom (Uganda) Limited |455 |- |69 | | | | |
|Corpcom Outdoor (Pty) Limited |100 |- |69 | | | | |
|Inter Africa Outdoor Advertising | | | | | | | |
|(Botswana) Limited |13 170 |- |69 | | | | |
72
| | | |INTEREST OF HOLDING COMPANY |
| | |Effective |Net | |
| |Issued |holding |Shares |indebtedness |
| |ordinary | | | |
| |capital |2001 |2000 |2001 |2000 |2001 |2000 |
|Consolidated subsidiaries |R |% |% |R000 |R000 |R000 |R000 |
|Inter Africa Outdoor Advertising | | | | | | | |
|(Malawi) Limited |1 |- |69 | | | | |
|Inter Africa Outdoor Advertising | | | | | | | |
|(South Africa) Limited |2 |- |69 | | | | |
|Inter Africa Outdoor Advertising | | | | | | | |
|(Tanzania) Limited |11 137 |- |69 | | | | |
|Inter Africa Outdoor Advertising | | | | | | | |
|(Zambia) Limited |1 |- |69 | | | | |
|Inter Africa Outdoor Advertising | | | | | | | |
|(Zimbabwe) Pvt Limited |333 |- |69 | | | | |
|Inter Africa Outdoor Media | | | | | | | |
|Advertising (Pty) Limited (Namibia) |11 |- |69 | | | | |
|Inter Africa Publicidade | | | | | | | |
|(Angola) Lda (b) |2 820 |- |69 | | | | |
|Macprint Sp.z.o.o (Poland) |76 250 |- |69 | | | | |
|Media Management (Pty) | | | | | | | |
|Limited |100 |- |69 | | | | |
|Suburban & Industrial Sign Design | | | | | | | |
|(Pty) Limited |4 000 |- |69 | | | | |
|Supersigns (Bahamas) Limited |14 130 |- |69 | | | | |
|Supersigns Polska SPz.o.o. (Poland) |5 529 |- |52 | | | | |
|Tricor Marketing (Botswana) | | | | | | | |
|(Pty) Limited |132 |- |69 | | | | |
|Tricor Marketing (SA) (Pty) | | | | | | | |
|Limited |200 |- |69 | | | | |
|Total interest (note 7) |- |- |- |511 697 |105 676 |86 404 |88 514 |
|Analysis of income from subsidiaries | | | | | | | |
|Interest in attributable profit |215 852 |153 053 | | | | | |
|Share of losses |(8 134) |(466) | | | | | |
| |207 718 |152 587 | | | | | |
Information is set out for all material operating subsidiaries. Information in respect of other subsidiaries is available from the company secretary.
73
| |GROUP |COMPANY |
| |Effective holding % |Group carrying amount |
|Associates (R'000) |2001 |2000 |2001 |2000 |
|Redefine Income Fund Limited (note 8) |25 |11 |128 694 |229 225 |
|Group's share of aggregate net assets of associate | | | | |
|Deferred taxation |- |500 | | |
|Property plant and equipment |- |23 036 | | |
|Investments |1 214 232 |1 199 471 | | |
|Interest-bearing debt |(689 456) |(642 071) | | |
|Non interest-bearing debt |(34 726) |(82 354) | | |
|Net current assets |(16 627) |109 961 | | |
|Non-consolidated subsidiaries included in | | | | |
|investments and trading assets | | | | |
|Onelogix Limited has not been consolidated as |57 |44 | | |
|control is of a temporary nature | | | | |
|Details of non-consolidated subsidiaries | | | | |
|Onelogix Group Limited | | | | |
|Deferred taxation |1 857 |1 089 | | |
|Property, plant and equipment |7 830 |3 537 | | |
|Goodwill |50 455 |- | | |
|Cash |3 492 |- | | |
|Other net current assets |35 760 |122 186 | | |
|Vendor liabilities |(35 971) |(38 543) | | |
|Interest-bearing debt |(2 500) |(298) | | |
| |60 923 |87 971 | | |
74
Analysis of shareholders and JSE securities exchange performance
|Analysis of shareholders | | | | |
| |Shareholders |% |Shares (000) |% |
|Directors |6 |0,1 |42 051 |16,7 |
|Other individuals |4 310 |94,3 |18 131 |7,2 |
|Institutions and other corporates |257 |5,6 |191 406 |76,1 |
| |4 573 |100 |251 588 |100 |
|1 - 999 |3 834 |83,9 |661 |0,3 |
|1 000 – 9 999 |614 |13,4 |1 611 |0,6 |
|10 000 - 99 999 |88 |1,9 |2 021 |0,8 |
|100 000 units and over |37 |0,8 |247 295 |98,3 |
| |4573 |100 |251 588 |100 |
Beneficial holders in excess of 5%, as far as it is known, of the listed ordinary shares in the company at 31 August 2001:
|Old Mutual Life Assurance Company SA Limited |1 7298 725 |6,9% |
JSE Securities Exchange performance
| |2001 |2000 |
|Market price (cents) | | |
|Closing |225 |162 |
|High |245 |420 |
|Low |155 |155 |
|Closing market capitalisation (based on units in issue and to be issued)* |990 596 |407 573 |
|Closing price to 12 month earnings (times) |3,1 |2,7 |
|Closing number of shares in issue and to be issued (000) |440 265 |251 588 |
|Shares in issue (000) |251 588 |251 588 |
|Shares to be issued (000) |188 677 |- |
|Volume of shares traded (000) |89 352 |116 446 |
|Total value of transactions (000) |180 110 |331 702 |
|Average price per share (cents) |202 |285 |
|Volume traded to weighted number of shares (%) |33 |46 |
|*Includes shares to be issued in respect of the merger | | |
75
Notice of annual general meeting
Notice is hereby given that the annual general meeting of shareholders of Corpcapital Limited will be held at the offices of the company at 2 Arnold Road, Rosebank, Johannesburg on 30th January 2002 at 10h00 for the following purposes:
1. To consider the financial statements for the year ended 31 August 2001;
2. To reappoint Fisher Hoffman PKF (Jhb) Inc. as auditors and to authorise the directors to determine the remuneration of the company's auditors;
3. To transact such other business as may be transacted at an annual general meeting of a company;
4. To consider and, if deemed fit, pass, with or without modification, the special and ordinary resolutions set out below, in the manner required by the Companies Act 1973 (Act 61 of 1973), as amended ("the Act").
SPECLAL RESOLUTION NUMBER I. Resolved that the directors be authorised pursuant, inter alia, to Article 13.7 of the company's Articles of Association, until this authority lapses at the next annual general meeting of the company, unless it is then renewed at the next annual general meeting of the company and provided that this authority shall not extend beyond 15 months, for the company or any subsidiary of the company to acquire shares of the company, subject to the Rules and Requirements of JSE Securities Exchange South Africa ("JSE") on the following basis:
1. the acquisition of shares must be implemented on the open market of the JSE;
2. the number of shares which may be acquired pursuant to this authority in any financial year (which commenced 1 September 2001) may not in the aggregate exceed 20 percent of the company's share capital, as at the date of this notice of general meeting;
3. repurchases may not be made at a price more than 10 percent above the weighted average of the market value on the JSE of the shares in question for the five business days immediately preceding the repurchase;
4. repurchases may not take place within 40 days prior to the publication by the company of its annual or interim results or while the company is under cautionary announcement, and
5. prior to the effecting of any repurchase, the company will submit to the JSE the financial information and auditors' report required in terms of section 5.136 to section 5.140 of the JSE Listing Requirements.
76
In accordance with the requirements of section 5.94 of the JSE Listing Requirements, the directors record that:
although there is no immediate intention to effect a repurchase of securities of the company, the directors would utilise the general authority to repurchase securities as and when suitable opportunities present themselves which opportunities may require expeditious and immediate action;
the directors, after considering the maximum number of securities which may be purchased and the price at which the repurchases may take place pursuant to the buyback general authority are of the opinion that for a period of 12 months after the date of notice of the annual general meeting:
the company will be able to pay its debts in the ordinary course of business; and the consolidated assets of the company fairly valued in accordance with generally accepted accounting practice, will be in excess of the consolidated liabilities of the company after the buyback;
the share capital of the company will be adequate for the purposes of the business of the company and its subsidiaries;
the working capital available to the company and its subsidiaries will be adequate for the purpose of the business of the company an its subsidiaries.
REASONS AND EFFECTS OF SPECIAL RESOLUTION I. The reason for Special Resolution 1 is to afford directors of the company a general authority to effect a buyback of the companys shares on the JSE. The effect of the resolution will be that the directors will have the authority, subject to the Rules and Requirements of the JSE, to effect acquisitions of the company's shares on the JSE.
ORDINARY RESOLUTION NUMBER I. Resolved that the directors be authorised pursuant, inter alia, to Article 3 of the company's Articles of Association, until this authority lapses at the next annual general meeting of the company, unless it is then renewed at the next annual general meeting of the company, provided that it shall not extend beyond 15 months, to allot and issue any ordinary shares for cash subject to the rules and requirements of the JSE Securities Exchange South Africa ("JSE") on the following basis:
1. the allotment and issue of the shares must be made to persons qualifying as public shareholders and not to related parties as such terms are defined in the Listing Requirements of the JSE;
2. the number of shares issued for cash shall not in the aggregate in any one financial year exceed 15 percent of the company's issued share capital of ordinary shares. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares issued during the current financial year or current and preceding two financial years (as applicable), provided that any ordinary shares to be issued pursuant to a rights issue (announced and irrevocable and underwritten) or acquisition (concluded up to the date of application) may be included as though they were shares in issue at the date of application;
77
3. the maximum discount at which ordinary shares may be issued is 10 percent of the weighted average traded price on the JSE of those shares over 30 days prior to the date that the price of the issue is determined or agreed by the directors of the company;
4. after the company has issued shares for cash which represent, on a cumulative basis within a financial year, 5 percent or more of the number of shares in issue prior to that issue, the company shall publish an announcement containing full details of the issue, including the effect of the issue on net asset value and earnings per share.
In terms of the Listing Requirements of the JSE a 75 percent majority of the votes cast by shareholders present or represented by proxy at the general meeting must be cast in favour of Ordinary Resolution number 1 for it to be approved.
ORDINARY RESOLUTION NUMBER 2. Resolved that E Ellerine be and is hereby re-elected as a director of the company.
ORDINARY RESOLUTION NUMBER 3. Resolved that N Frangos be and is hereby re-elected as a director of the company.
ORDINARY RESOLUTION NUMBER 4. Resolved that B Kalkhoven be and is hereby re-elected as a director of the company.
ORDINARY RESOLUTION NUMBER 5. Resolved that N Lazarus be and is hereby re-elected as a director of the company.
ORDINARY RESOLUTION NUMBER 6. Resolved that W Trengove be and is hereby re-elected as a director of the company.
ORDINARY RESOLUTION NUMBER 7. Resolved that the authorised and unissued ordinary share capital of the company be and is hereby placed under the control of the directors of the company which directors are, subject to the rules and regulations of the JSE Securities Exchange South Africa ("JSE") and the provisions of section 221 and section 222 of the Companies Act (Act 61 of 1973) as amended, authorised to allot and issue any of such shares at such time or times, to such person or persons, company or companies and upon such terms and conditions as they may determine, such authority to remain in force until the next annual general meeting of the company.
78
ORDINARY RESOLUTION NUMBER 8. Resolved that any director of the company be and is hereby authorised to sign all such documentation and do all such things as may be necessary for or incidental to the implementation of Special Resolution number 1, Ordinary Resolution number 1, Ordinary Resolution number 2, Ordinary Resolution number 3, Ordinary Resolution number 4, Ordinary Resolution number 5, Ordinary Resolution number 6 and Ordinary Resolution number 7, which are passed by the members in accordance with and subject to the terms thereof.
VOTING AND PROXIES. A shareholder of the company entitled to attend and vote at the general meeting is entitled to appoint one or more proxies (who need not be a shareholder of the company) to attend, vote and speak in his/her stead.
On a show of hands, every shareholder of the company present in person or represented by proxy shall have one vote only. On a poll, every shareholder of the company present in person or represented by proxy shall have one vote for every share held in the company by such shareholder.
A form of proxy is attached for use by shareholders who are unable to attend the general meeting. Duly completed forms of proxy may be returned to the company's transfer secretaries at the address below, to reach them by not later than 17h00 on 28 January 2002.
By order of the board
CORPCAPITAL COMPANY SECRETARIES (PTY) LIMITED
Company Secretary
23 October 2001
REGISTERED OFFICE
2 Arnold Road
Rosebank
2196
TRANSFER SECRETARIES
Mercantile Registrars
8th Floor, 11 Diagonal Street
Johannesburg 2001
79
Shareholders' diary and administration details
|Shareholders' diary | |
|Financial year-end |31 August |
|Announcement of interim results |March |
|Announcement of annual results and dividend |October |
|Annual report |November |
|Dividend payment |December |
|Annual general meeting |30 January, 2002 |
|Administration details | |
|Corpcapital Limited |Corpcapital Bank Limited |
|Registration number 1983/011384/06 |Registration number 1998/008345/06 |
|Business address and registered office |Business address and registered office |
|2 Arnold Road, Rosebank, Johannesburg, 2196 |2 Arnold Road, Rosebank, Johannesburg, 2196 |
|P O Box 471917, Parklands, 2121 |P O Box 471917, Parklands, 2121 |
|Telephone 27 11 283 0000 |Telephone 27 11 283 0000 |
|Fax 27 11 283 0077 |Fax 27 11 283 0077 |
|e-mail: info@ |e-mail: mailbag@corpbank.co.za |
|Internet address http// |Internet address http//corpcapitalbank.co.za |
|Bankers |Bankers |
|First National Bank of Southern Africa Limited |Standard Bank of South Africa |
|Company secretary |Company secretary |
|Corpcapital Company Secretaries (Pty) Limited |Corpcapital Company Secretaries (Pty) Limited |
|Registration number 1996/003991/07 |Registration number 1996/003991/07 |
|Auditors |Auditors |
|Fisher Hoffman PKF (Jhb) Inc. |PriceWaterhouseCoopers Inc |
|Registration number 1994/001166/21 |Registration number 1998/012055/21 |
|15 Girton Road, Parktown, 2193 |2 Eglin road, Sunninghill 2157 |
|Telephone +27 11 480-2300 |Telephone +27 11 797-4000 |
|Telefax +27 11 484-1721 |Telefax +27 11 797-5800 |
|e-mail: info@fhpkfjhb.co.za |Internet address: |
|Transfer secretaries | |
|Mercantile Registrars Limited | |
|11 Diagonal Street, Johannesburg, 2001 | |
|PO Box 1053 Johannesburg, 2000 | |
|Telephone 27 11 370 5000 | |
|Fax 27 11 370 5271 | |
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