INTERNATIONAL MARKETING COUNCIL OF SOUTH AFRICA

1. INTERNATIONAL MARKETING COUNCIL OF SOUTH AFRICA AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDING 31 MARCH 2007

2. Financial for the year ending 31 March 2007 • The Executive Authority, the Minister in the Presidency was reported to by the IMC’s Board Chairman, CEO, GCIS’s CEO and the Audit Committee Chairman on quarterly basis • The Exco and Board set in all the planned quarterly meetings to fulfill their fiduciary responsibility • The Audit Committee set quarterly in line with their responsibility • To review system of internal control • To review the audited financial statements • To review the Auditor General’s management letter and management responses

3. Financial for the year ending 31 March 2007 • The financial statements were prepared using appropriate accounting policies, supported by prudent judgement and estimates conforming to the Trust Deed, PFMA, GRAB and GAAP • Role of chairman and CEO are separate • The Board under the responsibility of the Chairman created sufficient space to maintain overview of IMC’s effectiveness, efficiency, Board performance and Board conformance • The CEO is delegated with the responsibility of day to day running of the organisation

4. Financial for the year ending 31 March 2007 • Internal Audit was outsourced from GCIS for 9 months and an independent organisation was contracted to render internal audit services • To monitor operations of internal control and report to management and Audit Committee • The Board through its Audit Committee sub committee provides oversight to the financial reporting process and internal control • The CEO attends meetings of the Board, Exco and Audit Committee by invitation and reports on the activities of the IMC

5. Financial for the year ending 31 March 2007 • Risk management workshop was held. • Assist management to strengthen adequacy and effectiveness of accounting system and internal control. • Fraud Prevention Plan was implemented. • Disaster Recovery Plan was implemented. • Materiality and Significant framework was developed, approved and implemented.

6. Financial for the year ending 31 March 2007 • REVENUE • Allocation from GCIS R83 425 000 • VAT claimed from SARS R5 555 000 • Corporate advertising R676 000 • TOTAL REVENUE R89 656 000

7. Financial for the year ending 31 March 2007 • EXPENDITURE • Admin R3 107 000 • Staff costs R14 727 000 • Operating costs R5 826 000 • Losses on disposal R 14 000 • Marketing costs R64 937 000 • Audit Fees R 309 000 • TOTAL EXPENDITURE R88 920 000

8. Financial for the year ending 31 March 2007 • Surplus from operations R736 000 • Interest received R1 128 000 • TOTAL SURPLUS FOR THE YEAR R1 864 000

9. Financial for the year ending 31 March 2007 • DEBTORS • There were no debtors that were written off for the year. One debt of a former employee seconded from GCIS has been handed over to the lawyers for recovery. • Awaiting Garnishee orders to be served • LITIGATION The litigation with CCMA by a former employee seconded by GCIS to IMC was ruled in favour of the IMC.

10. Financial for the year ending 31 March 2007 • Human Resources • 37 people • 3 Country Managers, in India, UK and USA • 5 Management team (Manco) • 6 middle management • 23 General staff • 83.78% is from the Previously Disadvantaged Individuals

11. Financial for the year ending 31 March 2007 • All accounting policies were recommended by the Audit Committee for approval by the Board • An irregular expenditure relating to Rakesh Skhudeo, the previous Financial Manager in 2002/2003 Financial Year • IMC opened a criminal case • He was convicted by the court of law for stealing the R798k • He was sentenced 12 years in prison with four being suspended

12. Financial for the year ending 31 March 2007 • Auditor Generals gave IMC a clean audit report on other matters relating to internal control: • The Minister in the Presidency has appointed a Board which report to him on quarterly basis, a requirement by PFMA. • The Board has set in all their planned meetings and they have reported to The Minister in the Presidency on quarterly basis. • The quarterly reports were discussed in a meeting attended by the CEO and GCEO of GCIS, the CEO of IMC, the Board Chairman as well as the Chairman of the Audit Committee. • The Minister in the Presidency with the CEO and DCEO of the GCIS interacts regularly with the IMC further to discuss amongst others matters related to the proper management and functioning of the IMC in terms of the provisions of the PFMA.

13. Financial for the year ending 31 March 2007 • The challenges identified at the IMC by the Auditor General in the 2006/7 financial year were addressed with the assistance of the Executive Committee of the Board of the IMC and the GCIS. The quarterly report ending September tabled by the Internal Audit at the Audit Committee meeting indicates that all identified weaknesses were addressed. • 1 The inadequate monitoring controls were mainly due to the vacant position of the Financial Manager from January to March a position which has been filled. • Systems of internal control are adequate and all reconciliations are being reviewed by the Financial Manager. • 2 The non compliance to Income Tax Act related to the taxation of the Country Managers

14. Financial for the year ending 31 March 2007 • IMC approached SARS for an opinion on the matter and the opinion exempted the United States of America’s Country Manager as well as the United Kingdom’s Country Manager. • The opinion was based on their citizenry as the US Country Manager is not a South African and the UK Country Manager has dual citizenship i.e. South Africa and UK. • The UK was considered his residential country therefore a country to which his tax need to be paid in. • Only the India’s Country Manager who is a South African was liable to tax. The issue has ever since been resolved with SARS therefore complying with the Income Tax Act, 1962.