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Decillion Limited - Trading Update And Cautionary Announcement
Decillion Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/011692/06)
Share code: DEC
ISIN: ZAE000017612
("Decillion" or "the company" or "the group")
TRADING UPDATE AND CAUTIONARY ANNOUNCEMENT
As announced in both the first and second interim results, the group implemented
AC133 (Financial instruments: Recognition and measurement) during the current
financial period. In accordance with the transitional provisions of AC133, any
adjustment arising from moving from one valuation method to a mark-to-market
valuation methodology should be made against opening retained income. The group
applied a mark-to-market approach for all its trading positions where the market
is well established. This resulted in a R26,3 million adjustment as announced in
the group"s first and second interim results.
In terms of AC133, it is allowable to apply a fair value methodology, other than
a mark-to-market approach, to derivative instruments, if, ".... the market is
not well established ... or small volumes are traded relative to the number of
trading units of a financial instrument to be valued...".
The group has previously applied a mark-to-model approach in respect of five
specifically structured and long-dated interest rate swaps, maturing between 30
September 2008 and 15 June 2016 as the market for these swaps is not well
established.
Subsequent to the financial year-end, Decillion has entered into an agreement
with its counter party in terms of which these transactions, together with
supporting hedges, will be ring-fenced and managed in an SPV until maturity on a
mark-to-model basis. The SPV will still be consolidated by the group in terms
of AC412 (Consolidations - Special purpose entities). Notwithstanding the
contractual agreement with regard to the valuation of the long dated interest
rate swaps, the Audit Committee of the group has recommended, and the Board has
approved, to apply a full mark-to-market approach in accordance with AC133 on
these trading positions for its financial year ended 29 February 2004 for
reasons of prudence and consistency in future reporting. This adjustment will
have no cash flow impact on the group, but will result in a further transitional
adjustment against the group"s opening retained income.
In terms of the Listings Requirements of the JSE Securities Exchange South
Africa ("JSE"), shareholders are advised that the directors anticipate that the
Group"s shareholders" funds and net asset value per share as at 29 February 2004
as a result of the additional transitional adjustment will be materially lower
than that reported as at 31 December 2003. (As defined in the JSE Listings
Requirements, "materially" denotes a change of between 10% and 30%). Income
statement results and ratios are not affected.
As the Net Asset Value per Share estimate has not been reported on by the
Group"s auditors, shareholders are advised to exercise caution when dealing in
the company"s shares until the company"s results for the period ended 29
February 2004 are published.
Enquiries:
Please contact:
Marius Mostert or Alwyn Smit
Tel: +27 11 217 9000
Johannesburg
11 May 2004
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Date: 12/05/2004 05:00:10 PM Produced by the JSE SENS Department
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