Sanlam Limited – Notes to the financial statements

for the year ended 31 December 2010
 
1. Accounting policies
  View the accounting policies of the Sanlam Group financial statements are also applicable to Sanlam Limited except for investments in subsidiary companies which are reflected at cost or at a lower value if there is an impairment in value. 
 
Additional accounting policy
  Financial guarantee contracts
'Financial guarantees' are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees are initially accounted for at fair value, and are not designated as at fair value through profit or loss. Subsequently, the amount is measured at the higher of the amount determined according to IAS 37 Provisions, or the initial fair value less cumulative amortisation in accordance with IAS 18 Revenue
  Dividends
Dividends are shown as income. There is no allocation of pre-acquisition reserves to cost. We consider impairment when the dividend exceeds the total comprehensive income of the subsidiary or associate in the period the dividend is declared and the carrying amount of the investment exceeds the carrying amount of the investee's net assets, including associated goodwill. 
 
  R million
2010
2009
2. Group companies  
 
Investments in Group companies – shares at lower of cost or market value
14 308
14 113
 
Current loans with Group companies
1 530
1 477
  Loans to Group companies
1 530
1 488
  Loans from Group companies
(11)
 
 
Book value of interest in Group companies
15 838
15 590
 
Net reversal of impairment of investments in Group companies
 
  Genbel Securities Limited
78
259
  Sanlam Netherlands Holding BV
120
(685)
 
Total net impairment of investments in Group companies
198
(426)
 
Fair value of net investment in Group companies
 
  Investments in subsidiaries
47 266
43 169
  Investment in associated company
29
 
Total fair value of net investment in Group companies
47 266
43 198
 
Loans: Group companies
 
  The loans to/from Group companies are unsecured and payable on demand. No interest is charged but these arrangements are subject to revision from time to time. Details regarding the principal subsidiaries of Sanlam Limited.  
 
Loans to Group companies
 
  Sanlam Spec (Pty) Limited
509
1 063
  Genbel Securities Limited
110
110
  Sanlam Life Insurance Limited
911
315
 
Loans from Group companies
 
  Gensec Properties Services Limited
(11)
 
Impairment of loans
 
  Sanlam Spec (Pty) Limited
(88)
(628)
  Real Futures (Pty) Limited
19
Total
(69)
(628)
3. Share capital and premium  
Details of the share capital and premium are reflected in note 11 of the Sanlam Group financial statements.    
4. Investment surpluses  
Investment surpluses relate to the profit on the sale of investment in associate during the 2010 financial year.    
5. Administration costs include:  
 
Directors’ remuneration
 
  Details of the directors’ remuneration is reflected in note 24 of the Sanlam Group financial statements.  
 
Auditors’ remuneration
 
  Audit fees: statutory audit
4
4
Total auditors’ remuneration
4
4
6. Dividends  
Details of the dividends declared are disclosed in note 29 of the Sanlam Group financial statements.    
7. Borrowing powers  
In terms of the Articles of Association of Sanlam Limited, the directors may at their discretion raise or borrow money for the purpose of the business of the company without limitation.    
8. Commitments and contingencies  
Details of commitments and contingencies are reflected in note 34 of the Sanlam Group financial statements. The maximum utilisation under all of the guarantees granted in favour of Sanlam Capital Markets is R8,5 billion (2009: R7 billion).    
9. Related parties  
Details of related parties are reflected in note 35 of the Sanlam Group financial statements.    
10. Notes to the cash flow statement  
 
Cash utilised in operations
 
  Profit before tax
4 010
3 850
  Non-cash flow items  
  Net impairment of investments in Group companies
(198)
426
  Items disclosed separately  
  Dividends received
(3 843)
(4 855)
  Investment surpluses
(24)
  Increase in net working capital liabilities
45
111
Cash utilised in operations
(10)
(468)
11. Capital and risk management  
  The main financial instrument risk that Sanlam Limited is exposed to, is credit risk in respect of its loans to Group companies. These loans are tested for impairment, by establishing whether the net asset value of the underlying Group company is sufficient to cover the outstanding loan amount. Where the net asset value (including any impairments recognised in that company), is less than the carrying value of the loan, an impairment loss is recognised, as disclosed in note 2. The credit quality of each loan has been assessed as acceptable within the parameters used to measure and monitor credit risk.     
  Sanlam Limited’s maximum exposure to credit risk is calculated as follows:     
  Carrying value of loans granted
1 530
1 488
  Further details of risk management are disclosed in the Capital and Risk Management Report.