Mvela Group

MVELAPHANDA GROUP LIMITED
Combining quality investments with cash-generative operations

2006 Annual Report
MVELAPHANDA GROUP LIMITED ANNUAL REPORT 2006
Contents, Vision and Values
1 Highlights of the 2006 Financial Year 2 Group at a Glance 4 A Decade of Successful Growth 6 Ten-year Financial Review 8 Executive Directors 9 Non-executive Directors 10 Chairmans Review 14 Chief Executives Review 26 Financial Review 30 Sustainability Report 36 Corporate Governance 40 Value Added Statement 41 Segmental Information 42 Report of the Independent Auditors 43 Directors Responsibility Statement 43 Statement of Compliance by the Company Secretary 44 Directors Report 47 Accounting Policies 52 Balance Sheets 53 Income Statements 54 Cash Flow Statements 55 Statements of Changes in Equity 56 Notes to the Financial Statements 78 Principal Subsidiaries 79 Principal Investments 80 Analysis of Ordinary Shareholders 81 Administration 82 Notice to Shareholders 87 Proxy Form for Ordinary Shareholders 89 Proxy Form for Preference Shareholders ibc Glossary of Terms
Vision
To be South Africas leading black-controlled, owned and managed diversied industrial group through the combination of quality investments and cashgenerative operations.
Values
Shareholder value
Balancing growth, risk and returns to strategies which sustain shareholder condence and meet investor expectations.
Customer value
Meeting or exceeding customer expectations at a price no higher than their perception of the services value.
People value
Satisfying human needs in the workplace to maximise the commitment of sta to corporate goals.
Registration number: 1995/004153/06
Highlights of the 2006 Financial Year
page one
Intrinsic net asset value per ordinary share at 30 June 2006 up 41% to R11,77 Total assets at 30 June 2006 exceed R6 billion Net profit attributable to ordinary shareholders of R1,145 billion Profit from operations up 30% to R262 million Cash distribution/dividend per ordinary share up 80% to 18 cents R547 million capital raising successfully concluded Acquisition of a further effective interest of 2,47% in Absa Disposal of interest in Mvelaphanda Resources for R1,183 billion in cash implemented on 28 August 2006
Mvelaphanda Group Limited Annual Report for the year ended 30 June 2006
Mvelaphanda Group Limited page two
Group at a Glance
Investments
Mvelaphanda Group is invested in a range of companies operating in the nancial services and industrial sectors.
MVELAPHANDA RESOURCES
Process 00c72m38b 00m91y
Process 100c72m38b 100m91y
4,47% effective interest in Absa, one of South Africas largest financial services groups and a subsidiary of Barclays Bank plc
18,1% effective interest in Life Healthcare, one of the largest providers of integrated healthcare and medical services in South Africa(1)
22,9% interest in Mvelaphanda Resources, a mining and resources investment company listed on the JSE(2)
10,8% interest in Group Five, a leading construction group listed on the JSE
1. Effective interest increased to 23,7% after 30 June 2006. 2. Disposal implemented after 30 June 2006.
Operations
Mvelaphanda Groups operations comprise a range of businesses in the areas of facilities management and professional services, food services and support services. Food Services
Facilities Management and Professional Services
Africas largest facilities management company
Asset management Monitoring services and consulting provided to the services gaming industry
Contract catering services
Distributor of dry goods and packaging
page three
MVELAPHANDA PRIVATE EQUITY
MVELAPHANDA CAPITAL MVELAPHANDA CAPITAL
4,5% effective interest in Unitrans Limited, a logistics group listed on the JSE
39,2% interest in Swissport South Africa, a provider of logistic services at major airports in South Africa and a subsidiary of Swissport International
30% effective interest in Abvest Associates, the institutional investment management business of the Absa Group(2)
Investment holding companies for the Groups investments in the transportation, information technology, engineering and property sectors
Support Services
Comprehensive Guarding and Contract cleaning International Opencast mining range of security technology-based services freight forwarding services services security services and clearing agent Franchisor of the Blacksteer and King Pie brands
Mvelaphanda Group Limited page four
A Decade of Successful Growth
Milestones
Rebhold listed on
the JSE on 16 October 1996
Acquisition of Acquisition of Royal

Food Services first services business Jumbo Cash and Carry
Acquisition of Coin Security,

and certain businesses from Molope Group
1996 1997
Acquisition of wholesale
Mineworkers Investment Company acquires 20% of Rebhold in a major BEE transaction
1998 1999
Acquisition of Browns Rebserve formed and Weirs cash and to hold the carry joint venture with Groups services Tiger Brands interests
2000
and distribution businesses in food and beverages sector
TFMC facilities
management contract with Telkom commences
page ve
Disposal of
H O L D I N G S L I M IT E D
wholesale division, name changed to Rebserve Holdings
Merger with Focus on operational

excellence and cash generation Mvelaphanda Holdings
Acquisition of
18,1% effective interest in Life Healthcare
Acquisition
of a further effective interest of 2,47% in Absa
Net profit after taxation exceeds R1 billion for the first time
2002 2001 2003
2004 2005
2006
Acquisition of Berco
Cleaning Services to form Rebserve Cleaning Services
Name changed to Mvelaphanda Group Limited on implementation of the Merger
Issue of preference shares to raise R547 million of new capital
Mvelaphanda Group Limited page six
Ten-year Financial Review year ended 30 June
2006 Revenue (R000) Profit from operations (R000) Fair value adjustments and profit from investments (R000) Cash generated from operations (R000) Net profit after taxation (R000) Headline net profit after taxation (R000) Headline attributable net profit (R000) Diluted headline earnings per ordinary share (cents) Headline earnings per ordinary share (cents) Distribution/dividend per ordinary share (cents) Dividend per preference share (cents) Net tangible asset value per ordinary share (cents) Intrinsic net asset value per ordinary share (rands) Number of employees Number of ordinary shares in issue (000) Annual compound growth rate in headline earnings per ordinary share since 1995 Operating margin Return on average shareholders funds 3 102 432 262 204 849 777 336 575 1 162 300 1 381 320 1 363 953 285,3 322,1 18,0 36,0 760,9 11,77 22 609 443 000 40,2% 8,5% 31,6%
(3)
2005 3 221 310 201 019 268 088 435 511 412 811 448 739 439 542 143,5 143,5 10,0 n/a 483,1 8,35 22 560 409 103 33,0% 6,2% 22,0%
2004 3 487 126 270 523 n/a 356 538 203 980 221 209 198 118 111,5 111,8 175,0(2) n/a 388,6 7,00 31 822 193 730 34,0% 7,8% 18,6%
Notes 1. Results for the years ended 30 June 2005 and 2006 have been prepared in accordance with IFRS. Results for the years ended 30 June 1997 to 2004 were prepared in accordance with SA GAAP. 2. Includes the special dividend of R1,10 per ordinary share and the capitalisation share award, equivalent in value to 50 cents per ordinary share, distributed to ordinary shareholders pursuant to the Merger. 3. Includes the cash distribution out of share premium in lieu of a final ordinary dividend, of 13 cents per ordinary share.
page seven
2003 3 189 576 276 394 n/a 288 363 218 889 233 913 208 724 114,0 116,2 35,0 n/a 355,7 n/a 35 810 193 730 41,0% 8,7% 21,5%
2002 2 911 107 255 232 n/a 269 088 218 184 232 136 208 589 109,6 110,6 30,0 n/a 295,3 n/a 33 327 193 730 46,0% 8,8% 22,0%
2001 5 559 588 352 221 n/a 303 761 353 113 299 802 260 740 134,6 134,6 20,5 n/a 256,7 n/a 30 764 193 730 61,0% 6,3% 40,0%
2000 4 496 959 307 241 n/a 240 118 274 268 274 268 247 467 133,0 137,0 20,0 n/a 197,4 n/a 30 521 180 630 77,0% 6,8% 40,5%
1999 3 374 182 190 036 n/a 169 367 520 292 211 673 191 500 105,6 110,2 17,0 n/a 326,4 n/a 5 579 173 818 94,0% 5,6% 74,6%
1998 1 471 250 96 241 n/a 94 499 95 762 95 762 94 508 62,0 64,9 13,0 n/a 172,9 n/a 3 243 163 070 103,0% 6,5% 19,2%
1997 870 025 50 107 n/a 86 486 38 105 38 105 37 852 n/a 33,1 8,0 n/a 102,0 n/a 2 152 133 215 106,0% 5,8% 21,0%
Mvelaphanda Group Limited page eight
Executive Directors
Tokyo Sexwale Executive Chairman Mark Willcox Chief Investment Ocer
Stephen Levenberg Chief Executive Ocer Mikki Xayiya Executive Deputy Chairman
Yolanda Cuba Deputy Chief Executive Ocer Brett Till Chief Financial Ocer Vusi Mavimbela Executive director Business strategy and African expansion
Jackie Mphafudi Chief Operating Ocer
Tokyo Sexwale
Cert Bus Studies (University Botswana, Lesotho, Swaziland)
Vusi Mavimbela
BSoc (Natal)
Mikki Xayiya
BA (Unisa), Cert of Defence Management (Wits), Emerging Market Leadership Programme (University of Pennsylvania)
Tokyo Sexwale has held various senior positions in the African National Congress and was elected as the rst Premier of Gauteng province in 1994. He left public political oce in 1998 for the corporate sector and established Mvelaphanda Holdings in late 1998. He also serves on the boards of various companies including, inter alia, Gold Fields, Absa and Mvelaphanda Resources.
Vusi Mavimbela is currently the director of Mvelaphanda Group with responsibility for business strategy and African expansion. Prior to joining Mvelaphanda Group he held various senior positions in the oce of the Deputy President, including having been special advisor to the President on intelligence and security matters.
Mikki Xayiya has served in various capacities in the African National Congress since 1977. In 1995, he was appointed as a Policy Advisor Oce of the Premier, Gauteng Provincial Government. He left public oce in 1998 and joined Mawenzi Asset Managers as Managing Director. In 1998 he co-founded Mvelaphanda Holdings.
Stephen Levenberg
BA, LLB, HDip Co Law (Wits)
Brett Till
BCom, BAcc (Wits), CA(SA)
Jackie Mphafudi
MBChB (Natal), DCH (SA), FCP (Paeds) (SA)
After qualifying as a chartered accountant in 1993, Brett Till spent 18 months working in London and became a partner of PKF in 1996. He joined Rebserve in 1998 and was appointed Financial Director in 1999.
Prior to founding Rebserve, Stephen Levenberg was a senior partner and head of corporate law at Werksmans Attorneys, having gained extensive experience in corporate nance, mergers and acquisitions and other transactions. He has served as a director of various companies, both listed and unlisted.
Dr Jackie Mphafudi is a paediatrician by training, having practised from 1989 to 1998. He has served on various boards, including being the founder member of Kilimanjaro Investments (Proprietary) Limited, which successfully listed on the JSE in 1994.
Mark Willcox
BA, LLB, Post-grad Dip (Tax) (UCT)
Yolanda Cuba
BCom (Statistics) (UCT), BCom Hons (Accounting) (Natal), CA(SA)
Upon completing his studies, Mark Willcox worked for an investment bank based in the USA. During this period he was exposed to various signicant mining and property transactions in the USA, the Far East and Africa. Mark is also the Chief Executive Ocer of Mvelaphanda Holdings.
Yolanda Cuba joined Mvelaphanda Holdings corporate nance division in January 2003. She has worked in a wide range of companies, including Robertsons Foods and Metropolitan Life, and has also been involved in a number of development companies where she gives assistance and advice on nancial matters and strategic investment.
Non-executive Directors
page nine
Kuseni Dlamini Independent non-executive director
Bryan Hopkins Independent non-executive director
John Moxon Independent non-executive director
Carl Stein Non-executive director
Ramesh Patel Independent non-executive director
Mpumi Mpofu Independent non-executive director
Oyama Mabandla Independent nonexecutive director
David Moshapalo Independent nonexecutive director
Kuseni Dlamini
MPhil (Oxford)
Mpumi Mpofu
BA (University of Coventry), Post-graduate Degree Town Planning (University of Coventry)
Oyama Mabandla
BA (University of California), Juris Doctor (Columbia University)
Kuseni Dlamini is the Executive Chairman of Richards Bay Coal Terminal. Previously he has held senior appointments at De Beers in South Africa and in the United Kingdom, and at AngloGold Ashanti. He is also a non-executive director of the National Business Initiative (NBI), Massmart Holdings Limited and Teba Limited, and sits on the council of the South African Institute of International Aairs (SAIIA).
Mpumi Mpofu is the Director-General in the Department of Transport and prior to that in the Department of Housing. She has also held a number of other senior positions including having been a member of the Gauteng Development Tribunal, a board member of the National Housing Finance Corporation and a board member of the South African Housing Trust.
Oyama Mabandla is Chairman of Vodacom Limited and also Executive Chairman of Langa Group (Proprietary) Limited, an investment holding company. He was previously Deputy Chief Executive of South African Airways. Prior to joining South African Airways, he held various positions within the legal and investment banking professions.
Ramesh Patel
Ramesh Patel is the Chairman and Chief Executive Ocer of the MLP group of companies which has interests in a range of businesses in the nancial services, tobacco, paint and plastics industries. He has also been instrumental in the formation of several BEE groups.
John Moxon
FCA, MBA (Cape Town)
Carl Stein
BCom, LLB, HDip Tax Law (Wits)
John Moxon is currently the Chairman of Meikles Africa Limited, a Zimbabwe-based company which is listed on the Harare and London Stock Exchanges, with interests in the hotel and retail sectors.
Bryan Hopkins
BCom (Hons), CA(SA)
Carl Stein is a practising attorney, being a director of the law rm Bowman Gilllan Inc, and is a non-executive director of several listed companies. He is regarded as one of South Africas leading corporate lawyers, specialising in mergers and acquisitions, stock exchange and crossborder transactions.
David Moshapalo
David Moshapalo is currently a member of Bombela Concession (Proprietary) Limited, Chairman of Gobodo Inc. and a board member of the Black Business Council. His previous positions include having been the convenor of the State Presidents Black Business Working Group, a member of Nedlac Council, an executive member of Business South Africa, Vice-chairperson of the Gauteng Tender Board and an alternate director of MTN Group Limited.
Bryan Hopkins is currently an independent nonexecutive director of Pangbourne Properties Limited and a member of its audit committee. He is also serving a three-year term on the Directorate of Market Abuse. He was previously an executive director and CIO of Abvest Associates and Old Mutual Asset Managers. Prior to that he was Professor of Accounting at the University of Cape Town.
Mvelaphanda Group Limited page ten
Chairmans Review
Tokyo Sexwale
Executive Chairman
Ten years after listing as Rebhold Limited in 1996, Mvelaphanda Group is today one of South Africas leading BEE groups. Good growth was achieved in all areas of activity in the nancial year ended 30 June 2006. The Groups investments and operations are well-positioned to benet from the favourable economic conditions and the positive economic outlook.
page eleven
A decade of success
The 2006 nancial year is Mvelaphanda Groups rst full nancial year since the Merger was implemented in December 2004. It is also the tenth year since Mvelaphanda Group listed on the JSE on 16 October 1996 as Rebhold Limited. It is a credit to all those who have been involved in the Groups ten-year history that the Group has grown and ourished over this period. The Group commenced operations in 1995 and rapidly expanded after its listing into a variety of wholesale and distribution activities. By October 1998 the Groups market capitalisation had reached R4 billion, only two years after listing with an initial market capitalisation of R250 million. This growth was driven mainly by the acquisition of businesses in the wholesale and distribution sectors. In 1999, the Group expanded into the services sector with the acquisition of Coin Security and certain businesses from the former Molope Group. By 2001 Mvelaserve, the Groups major operating subsidiary, had become one of South Africas leading services groups, providing a comprehensive range of facilities management, mining, food and support services to corporate South Africa. At its peak Mvelaserve employed over 35 000 employees. In 2004, Mvelaphanda Holdings merged certain of its assets and businesses with Rebserve to create Mvelaphanda Group. One of the main rationales for the Merger, and an important part of Mvelaphanda Groups strategy, is to combine quality investments with cash-generative operations, in order to avoid certain of the pitfalls which have caused many of the early BEE transactions to fail, including in particular a lack of access to liquidity on the part of certain of the BEE partners historically. Today Mvelaphanda Group is proud to be a leading BEE and truly South African group, comprising a microcosm of the diversity, opportunity and success which South Africa has to oer.
Economic environment
For most of the 2006 nancial year economic conditions remained favourable. The Governments monetary and scal disciplines have yielded good results, and notwithstanding recent concerns over ination levels and increases in interest rates, market conditions remain largely positive. Government has outlined its infrastructural development plans for the next four to ve years with hundreds of billions of rands to be spent on various projects. These projects will be the driving force behind the growth in our economy over the next few years and will present numerous opportunities for our operations and investment companies. Close cooperation between government and the private sector remains an imperative for South African business. Our operations and investment companies are already involved in public-private partnerships and we will continue to pursue such partnerships where possible. Much has already been said about the FIFA World Cup which will be hosted in South Africa in 2010. As the largest sporting event in the world, it will create opportunities for South African business on an unprecedented scale. Now is the time for making plans to harness the vast opportunities which the FIFA World Cup will bring to our country in 2010.
Mvelaphanda Group Limited page twelve
Chairmans Review (continued)
Financial results
The results for the year ended 30 June 2006 are very pleasing. Good growth was achieved in all areas of activity, particularly in our investments. Net prot after taxation exceeded R1 billion for the rst time in the Groups history. At 30 June 2006 the Groups total assets exceeded R6 billion, including R1,5 billion in cash (calculated on the assumption that the disposal of the Groups interest in Mvelaphanda Resources had been implemented on 30 June 2006). Intrinsic net asset value, which we regard as the primary measure of our success, increased 41%, from R8,35 at 30 June 2005, to R11,77 at 30 June 2006. Other highlights for the year include the raising of R547 million in new capital through the issue of preference shares, which allowed the Group to raise capital while still preserving its BEE shareholder credentials, and the acquisition of a further 2,47% eective interest in Absa. The total dividend/distribution to ordinary shareholders for the year was 18 cents per ordinary share, an increase of 80% compared to the previous nancial year, and a strong indicator of our condence in the future of the Group and its ability to sustain strong cash ows.
Governance
As a participant in the global community, South Africa has accepted the need to conduct itself in the highly regulated manner which has become the international norm. This has seen an increase over the past few years in the legislative and other regulatory requirements with which businesses are required to comply. The primary objective of our Group is to achieve sustained protability and increased returns for our shareholders. This is premised on the fundamental principle of good corporate governance. Good corporate governance is not merely about compliance with regulations, but rather a reection of our organisations approach to conducting business in the interests of all of its stakeholders. Mvelaphanda Group subscribes to the highest standards of corporate governance. Our governance structures are continually being evaluated in the context of the increasing expectations of the investment community and the business environment in which the Group operates.
Black Economic Empowerment

BEE is an evolving process with the broad-based BEE codes of practice in the process of being nalised by the Department of Trade and Industry. These BEE codes of practice address the challenges of BEE, in order to ensure that commercial and sustainable solutions are found. With less than 10% of companies listed on the JSE being black-controlled, there is still a long way to go to achieve the economic balance which the BEE initiatives were originally designed to do. Mvelaphanda Group remains committed to going beyond the minimum requirements of the BEE codes and the industry charters, but also to creating a truly non-racial South African company where opportunities exist for all stakeholders. Broad-based BEE is not an end in itself, but rather a means to an end. Our board is mindful that our practices and actions must be aimed at improving returns for all our stakeholders, not only our shareholders. Our BEE credentials remain a competitive advantage for the Group. Continued focus will be given to the areas of employment equity, training and development of our people, and targeted procurement from BEE suppliers, to broaden the inuence and eect which Mvelaphanda Group can have on the broader communities and other stakeholders who are critical to our overall success.
page thirteen
Acknowledgements
My thanks and appreciation go to all the directors, executives and employees of all our operations and investment companies. Without their hard work and dedication we would not have achieved the success we have, not only in the current nancial year, but also over the past decade.
Prospects
As a group we have much to be thankful for and a lot to look forward to. Our operations and investment companies are well-positioned to benet from the growing economy, which growth is expected to continue in the short to medium term. We have a strong balance sheet and the nancial resources to pursue the new opportunities which we are condent will arise as the Group expands within South Africa and across Africa. We look forward to the next decade of growth and success as Mvelaphanda Group.
Tokyo Sexwale
Executive Chairman
Mvelaphanda Group Limited page fourteen
Chief Executives Review
SIGNATURE
Stephen Levenberg
Chief Executive Ocer
The Groups investment strategy was rened to concentrate on the nancial and industrial sectors. A solid base for future growth and value creation has been established. Cash resources of R1,5 billion will allow Mvelaphanda Group to conclude major BEE and other corporate transactions.
page fteen
Overview
Mvelaphanda Group is pleased to report highly satisfactory results for the nancial year ended 30 June 2006, being the Groups rst full nancial year of activity since the merger of the businesses and assets of Mvelaphanda Holdings and Rebserve was implemented. While Mvelaphanda Group continued to rene its investment strategy to concentrate on the industrial and nancial sectors, signicant strides were made in establishing a solid base for future growth and value creation. This was achieved through major corporate activity during the year, including the raising of R547 million of preference share capital on favourable terms, the acquisition of a further material interest in Absa, the successful investment in Group Five, and the shedding of the Groups investment in the non-core mining and resources sector. Mvelaphanda Groups investments comprise a range of quality companies operating in the nancial and industrial sectors. The sound performance of the underlying companies in which Mvelaphanda Group is invested is reected in the increase in the value of these investments by R850 million in the year under review. The Groups operating businesses also performed well, increasing prot from operations by 30%, from R201 million for the year ended 30 June 2005, to R262 million for the year under review. Cash generated by the operating businesses for the year remained strong at R337 million. Intrinsic net asset value per ordinary share, which is considered to be the most insightful measure of the Groups overall performance, increased by 41% from R8,35 at 30 June 2005 to R11,77 at 30 June 2006. Details of the calculation of the intrinsic net asset value per share are set out in the nancial review. Following the disposal by Mvelaphanda Group of its investment in Mvelaphanda Resources referred to below, for a cash consideration of R1,183 billion, Mvelaphanda Group has approximately R1,5 billion in cash, making it one of very few companies in South Africa with strong BEE credentials, proven transactional and management expertise, and major nancial resources to conclude large-scale investment transactions. The results and activities of the Group, including segmental information, are presented for its two areas of activity operations and investments. This is in line with the manner in which Mvelaphanda Groups activities are now structured and managed, and the increased value and importance of the investment activities of the Group.
Investments
Mvelaphanda Groups investment strategy is to acquire meaningful strategic stakes (measured in terms of value to Mvelaphanda Group) in large South African corporates across a range of market sectors, which have good growth prospects in the medium term as a result of their strong market position, dynamic and entrepreneurial management, and industry fundamentals. Investment activities are focused on the management of investments and the provision of support, leadership and strategic guidance to these companies, rather than being involved in the day-to-day operations of these companies. Mvelaphanda Groups investment strategy was rened during the year to concentrate on the nancial and industrial sectors, as evidenced by the acquisition during the year ended 30 June 2006 of a further 2,47% eective interest in Absa and of a 10,8% interest in Group Five. Subsequent to the year ended 30 June 2006, the Group disposed of its 22,9% interest in Mvelaphanda Resources and acquired a further 5,6% eective interest in Life Healthcare. At 30 June 2006, Mvelaphanda Groups investments comprised a range of companies in the nancial services, mining and resources, property, healthcare and general industrial sectors. The largest of these investments were:

an eective 4,47% interest in Absa; an eective 18,1% interest in Life Healthcare; a 10,8% interest in Group Five; a 22,9% interest in Mvelaphanda Resources (which was sold after 30 June 2006); and an eective 30% interest in Abvest Associates (which was sold after 30 June 2006).
Mvelaphanda Groups investments performed extremely well in the year under review. Prot from investments, which includes the unrealised gains on the revaluation of investments (net of costs relating to the investment activities), increased by 218% from R268 million for the year ended 30 June 2005 to R850 million for the year under review. This performance was largely as a result of the performance of the Groups strategic investments in Absa, Life Healthcare and Group Five.
Mvelaphanda Group Limited page sixteen
Chief Executives Review Investments
100m91y Process 30 June 2006, Mvelaphanda Group owned an eective 44,7% interest in Batho Bonke, which At 100c72m38b 100m91y preference shares and options equating to an eective 10% stake in Absa. Mvelaphanda owns
100c72m38b Absa Group Limited
Process
Group therefore has an eective interest of 4,47% in Absa. Absa is one of South Africas largest nancial services groups and is a subsidiary of Barclays Bank plc. Barclays Bank is an international nancial services group engaged in retail and commercial banking, credit card issuing, investment banking, wealth management and investment management services. Absa oers a complete range of banking, bancassurance and wealth management products and services. Absas business is conducted primarily in South Africa and on the African continent, where it has equity holdings in banks in Mozambique, Angola, Tanzania, Namibia and Zimbabwe. At 30 June 2006, Absa had assets of R467 billion, more than 720 physical outlets, 8,1 million customers and approximately 34 700 employees. In December 2005, Mvelaphanda Group acquired a further 2,47% eective interest in Absa (an eective interest of 24,7% in Batho Bonke) for R461 million, which price represented a discount of approximately 30% (equivalent in value to R200 million) to the market value of the Batho Bonke shares at the time of concluding the acquisition. The purchase price was settled by the issue of 33,9 million new Mvelaphanda Group ordinary shares and the payment of R190 million in cash. Mvelaphanda Groups investment in Absa performed well during the year under review as a result of the increase in the Absa share price from R82 per share at 30 June 2005 to R100 per share at 30 June 2006, and the leveraged eect of this investment as a result of the Absa
options held by Batho Bonke. At 30 June 2006, Mvelaphanda Groups investment in Absa was valued at approximately R1,256 billion after providing for capital gains tax, making it the single largest investment held by Mvelaphanda Group. Positive forecasts in respect of the future performance of Absa suggest that there is strong upside potential in the performance of this investment for Mvelaphanda Group. This, coupled with the leverage that results from the Absa options held by Batho Bonke, makes Absa an attractive investment for the Group.
4,47% eective interest in Absa. Positive forecasts in respect of the future performance of Absa. Strong correlation between Absa and Mvelaphanda Group share prices.
page seventeen
Life Healthcare Life Healthcare is one of the largest private hospital operations outside the United States with its primary business being the provision of acute hospital care. High-tech private hospitals are complemented by related healthcare services businesses which provide an integrated healthcare delivery system covering the full range of medical care. Life Healthcare operates 62 acute care facilities across South Africa and enjoys the support of 2 700 doctors and specialists. Other services oered include providing long-term care to chronically ill patients (through the Life Esidimeni public-private partnership), physical and cognitive rehabilitation for patients disabled by strokes, brain, spinal and other disabling injuries, and occupational and primary healthcare services to over 120 000 employees of large employer groups through 186 clinics. Through the Partnership Health Group UK, a joint venture with London-listed Care UK, Life Healthcare provides a range of nursing and management services at treatment centres in the United Kingdom. At 30 June 2006, Mvelaphanda Group held an eective 18,1% interest in Life Healthcare and is one of only two listed entities which provide a signicant exposure to Life Healthcare for investors who wish to invest in the high-growth private healthcare sector. Since its delisting in March 2005, the Life Healthcare business has performed well, achieving strong growth in its operating performance and operating cash ows. Performance of the business is ahead of expectations at the time of the BEE-led leveraged buyout of the Life
Healthcare business from African Oxygen, which was implemented in March 2005. On 6 September 2006, Mvelaphanda Group acquired an additional 5,6% eective economic interest in Life Healthcare for a purchase price of R223 million (the Life Healthcare acquisition) pursuant to the exercise of an existing option held by Mvelaphanda Group and certain of the other shareholders in Life Healthcare. The purchase price of R223 million represents a discount of 37% to the Mvelaphanda Group directors valuation of Life Healthcare (calculated with reference to Mvelaphanda Groups valuation of its 18,1% eective interest in Life Healthcare at 30 June 2006) and was paid in cash on 29 September 2006 from Mvelaphanda Groups existing cash resources. Depending on the outcome of certain other transactions which Life Healthcare is currently considering, the 5,6% eective interest acquired by Mvelaphanda Group may be reduced to an eective interest of 4,4%, with a corresponding reduction in the purchase price payable by Mvelaphanda Group. Pursuant to the Life Healthcare acquisition, Mvelaphanda Groups eective interest in Life Healthcare will increase to 23,7%. Had the Life Healthcare acquisition been concluded on 30 June 2006, this would have resulted in an increase in Mvelaphanda Groups intrinsic net asset value per ordinary share at 30 June 2006 from R11,77 to R12,00. Mvelaphanda Group regards Life Healthcare as a strategic investment with substantial growth potential. Life Healthcare is expected to be a signicant contributor to Group performance in the future.
Mvelaphanda Group is one of only two listed groups which provide material exposure to Life Healthcare. Additional 5,6% eective interest in Life Healthcare acquired on 6 September 2006. Life Healthcare is expected to be a signicant contributor to Group performance in the future.
Mvelaphanda Group Limited page eighteen
Chief Executives Review Investments (continued)
Group Five In November 2005, Mvelaphanda Group acquired 10,4 million Group Five ordinary shares (an eective interest of 10,8% in Group Five) at par value. Mvelaphanda Group has an obligation to sell back to Group Five, also at par value, such number of Group Five shares (calculated based on the Group Five share price in 2011) as is equivalent in value to a notional loan amount in 2011. The notional loan amount is calculated based on an initial value per Group Five share of R14,43 plus notional interest at a rate of 12% per annum. The balance of the Group Five shares may be retained by Mvelaphanda Group. The Groups investment in Group Five is eectively equivalent to an option to acquire a 10,8% interest in Group Five. Group Five is a leading construction group listed on the JSE with operations in South Africa, the rest of Africa, the Middle East and Eastern Europe. Approximately 63% of Group Fives revenue is generated in South Africa. Group Fives principal activities include general construction (which encompasses commercial, industrial and domestic building, civil engineering and road, earthworks and engineering projects), manufacturing of a wide range of bre-cement building products and piping, and infrastructural developments, including large-scale public-private partnership infrastructure concessions. For its nancial year ended 30 June 2006, Group Five achieved its sixth consecutive year of double-digit earnings growth as a result of reorganising its operations into focused business streams under strong leadership, supported by solid service functions, risk management and continuous improvement projects. Total revenue for the year ended 30 June 2006 increased by 30% to R5,9 billion, with Group Fives net prot after tax from continuing operations for the year ended 30 June 2006 increasing by 57% to R169 million. Earnings per share from Group Fives continuing operations increased by 49% to 224 cents per share for the year ended 30 June 2006. The strong operational performance of Group Five underpinned the increase in the Group Five share price from R20 per share in November 2005, when the investment in Group Five was acquired by Mvelaphanda Group, to R29 per share at 30 June 2006. This has resulted in a substantial increase in the value of Mvelaphanda Groups investment in Group Five over the period. Prospects for Group Five remain good, particularly in the context of Governments planned R400 billion infrastructure programme, and the 2010 FIFA Soccer World Cup. Demand in the construction sector could well exceed supply over the next ve years, improving prospects for expansion, growth and strong job creation. Group Five is well-positioned and focused to benet from these favourable market conditions.
Mvelaphanda Groups interest in Group Five is eectively equivalent to an option to acquire a 10,8% interest is Group Five. Strong operational performance for the year ended 30 June 2006 by Group Five underpinned the increase in Group Fives share price. Group Five is well-positioned to benet from Governments infrastructure development programmes.
page nineteen
MVELAPHANDA RESOURCES
Mvelaphanda Resources Mvelaphanda Resources is a broad-based empowerment mining and minerals company with investments in mining assets in the gold, platinum and diamond sectors, as well as exploration and development joint ventures in sub-Saharan Africa, with a focus on South Africa. Mvelaphanda Resources primary assets consist of:
a 15% interest in GFI Mining South Africa (Proprietary) Limited (GFI), which owns the South African assets of Gold Fields Limited, the fourth largest gold producer in the world. The 15% interest in GFI is equivalent to an approximate 9% interest in Gold Fields Limited;
a 22,3% interest in Northam Platinum Limited, South Africas fourth largest producer of platinum group metals; and a 20,7% interest in Trans Hex Group Limited, an integrated diamond producer,
each of which is listed on the JSE. Mvelaphanda Resources also holds strategic interests in various joint ventures engaged in exploring for precious metals and minerals with partners, including GFL Mining Services Limited, De Beers Consolidated Mines Limited, Southern Era (Proprietary) Limited and Trans Hex Group Limited. As a result of, inter alia, the relatively illiquid nature of the investments held by Mvelaphanda Resources, the restrictions imposed on such investments, and the complex structuring of

certain of these investments, Mvelaphanda Resources shares have historically traded on the JSE at a discount to its underlying net asset value. Furthermore, the volatility of the nancial and share price performance of Mvelaphanda Resources is not consistent with Mvelaphanda Groups investment strategy. As a result of the abovementioned factors, the board of directors of Mvelaphanda Group concluded that it was in the best interests of Mvelaphanda Group to dispose of its interest in Mvelaphanda Resources. On 30 June 2006, Mvelaphanda Group received a written oer from Mvelaphanda Holdings to dispose of its 22,9% interest in Mvelaphanda Resources to Mvelaphanda Holdings (the Mvelaphanda Resources disposal). The purchase consideration payable by Mvelaphanda Holdings to Mvelaphanda Group amounted to R1,183 billion. The Mvelaphanda Resources disposal was approved by Mvelaphanda Group ordinary shareholders at a general meeting on 28 August 2006 and has been implemented. The purchase price payable in terms of the Mvelaphanda Resources disposal was received by Mvelaphanda Group in cash on 28 August 2006.
Financial and share price performance of Mvelaphanda Resources is not consistent with Mvelaphanda Groups investment strategy. 22,9% interest in Mvelaphanda Resources disposed of on 28 August 2006 for R1,183 billion. Sale proceeds received in cash on 28 August 2006.
Mvelaphanda Group Limited page twenty
Chief Executives Review Investments, Operations (continued)
Other investments
As part of the ongoing process of rening Mvelaphanda Groups investment strategy, certain of the smaller investments held by Mvelaphanda Group have been restructured and/or sold, and other new investments were acquired. Mvelaphanda Group holds an eective 4,5% interest in Unitrans Limited, a diversied transportation, distribution and logistics, motor retailing and car rental company, which is listed on the JSE. Unitrans has many diverse and complementary business interests in logistics and associated industries. These include freight and passenger transport, warehousing, distribution and logistics services, express freight, vehicle retailing, eet management, vehicle leasing and insurance, and car rental. Notwithstanding the increase in the Unitrans share price from R33 to R37 per Unitrans share between 30 June 2005 and 30 June 2006, the value of Mvelaphanda Groups investment in Unitrans remains relatively small due to the nature of the funding arrangements concluded to nance this investment. In July 2005, Mvelaphanda Group acquired an eective 39,2% interest in Swissport South Africa (Proprietary) Limited. Swissport South Africa provides logistics services at major airports in South Africa and is a subsidiary of Swissport International Limited, the leading service provider in the global ground and cargo handling sector, with operations in 41 countries, mainly in Europe, North America and Africa. The acquisition was nanced entirely with bank funding, supported by security and undertakings from Swissport International and Swissport South Africa. Mvelaphanda Groups other investments performed in line with expectations. In December 2005, Mvelaphanda Group disposed of its 5,5% eective interest in African Life to Sanlam Limited (Sanlam) as part of the takeover of African Life by Sanlam. The sale proceeds received by Mvelaphanda Group were in line with Mvelaphanda Groups valuation of the investment in African Life in the previous nancial year. The Groups investments in Arcus Gibb Holdings (Proprietary) Limited, Rewards Company (Proprietary) Limited and Fridge Foods Group (Proprietary) Limited were also disposed of during the year. Subsequent to 30 June 2006, Mvelaphanda Group disposed of its interests in Abvest Associates pursuant to the reorganisation and relocation of the Abvest Associates business from Cape Town to Johannesburg, and Broll Property Group (Proprietary) Limited, which was held jointly with Absa through Mvelaphanda Investments. The sale proceeds received by Mvelaphanda Group for the sale of these investments were in line with the valuations of these investments at 30 June 2006.
39,2% interest in Swissport South Africa acquired in July 2005. 5,5% eective interest in African Life sold to Sanlam in December 2005. 30% eective interest in Abvest Associates sold after 30 June 2006.
page twenty-one
Operations
Mvelaphanda Groups operating strategy is based on a decentralised operating structure with individual subsidiary directors having full responsibility for the operational performance and strategic development of their businesses. Intervention from head oce is assessed on a regular basis in terms of a balanced set of performance and development criteria to ensure that sucient attention is given to short-, medium- and long-term objectives. Mvelaphanda Group also provides assistance wherever necessary to ensure the achievement of the Groups objectives. The focus of the Groups operating businesses is in the services sector. Mvelaserve Limited, the major operating subsidiary of Mvelaphanda Group, is one of South Africas leading services businesses. The Groups services businesses operate in three broad areas facilities management and professional services, foods services and support services. Revenue for the year under review decreased by 4% from the prior year to R3,102 billion as a result of the disposal of the JIC Mining Services business in the second half of the 2005 nancial year. Prot from operations increased by 30% from R201 million for the year ended 30 June 2005 to R262 million for the year ended 30 June 2006. The operating margin increased to 8,5% from 6,2% in the prior year. Cash generated from operations for the year was R337 million and conrms the highly cash-generative nature of the Groups operations. Facilities management and professional services Total Facilities Management Company (TFMC) is the leading facilities management company in Africa. Its largest client is Telkom, to which comprehensive facilities management services are provided in respect of 6 500 properties, 14 000 masts and all ancillary telecommunications infrastructure, totalling in excess of 3 million square metres. Many of these facilities are mission critical for Telkom and are maintained on a 24-hour, 365-days per year basis. TFMC continued to perform well, having reached the halfway stage in its ten-year facilities management contract with Telkom. Negotiations between TFMC and Telkom on the possible extension of the Telkom facilities management contract beyond 2011 have commenced. In June 2006, TFMC completed the installation and implementation of a new SAP software system, substantially enhancing TFMCs already world-class operating systems. This new SAP system will assist in improving operating procedures and eciency, work ow and management of maintenance programmes, and will also increase the value of the intellectual property which has been developed by TFMC. During the year, Mvelaphanda Group exercised an existing option to acquire a further 25,1% interest in Novare Actuaries and Consultants (Proprietary) Limited and Novare Investments (Proprietary) Limited (the Novare companies) from the management shareholders in each of the Novare companies, thereby increasing the Groups interest in the Novare companies to 50,1%. The Novare companies have been incorporated into the Groups operating structures and are managed in accordance with the Groups operating procedures and policies.

Prot from operations increased 30% to R262 million. Cash generated from operations of R337 million. New SAP software system implemented by TFMC in June 2006 increases the value of TFMCs intellectual property.
Mvelaphanda Group Limited page twenty-two
Chief Executives Review Operations (continued)
Novare Actuaries and Consultants engineers and implements investment solutions for key South African clients, mainly retirement, pension, medical continuation and other trust funds, while assisting and supporting investment decision-makers in the execution of their duciary responsibilities regarding investments. The value of the assets of the various funds to which the Novare companies provide consulting services is approximately R10 billion. Novare Investments employs a dedicated team of professionals who specialise in the risk management, monitoring and reporting of local hedge funds and absolute return funds in South Africa. Novare Investments is also the asset manager to various funds of hedge funds, including the Mayibentsha Fund of Funds which was one of the rst funds of hedge funds launched in South Africa (in April 2003) and one of the leading funds in the alternative investment market in South Africa. These funds have grown substantially over the past three years and are being well-supported by the growing number of private banks and wealth management service providers. The Novare companies have achieved compound annual growth in prot from operations of more than 150% since Mvelaphanda Holdings originally invested in the Novare companies in 2002. Zonke Monitoring Systems (Proprietary) Limited (Zonke) is the sole provider of the Central Electronic Monitoring System (CEMS) for the limited payout machine (LPM) industry in South Africa. The monitoring of LPMs became eective in June 2003, with Mpumalanga being the rst province in South Africa to license LPMs. To date, two more provinces, namely Western Cape and Eastern Cape, are live on the CEMS, with three more provinces expected to start with the rollout of LPMs in the foreseeable future. Zonkes revenue is dependent mainly on the number of LPMs which are monitored by Zonke. Since 2003, the number of LPMs which have been licensed by the provincial gaming boards has increased to approximately 2 350, with the total number of LPMs which will eventually be licensed by the various provincial gaming boards estimated to be in excess of 25 000. Zonke has become a protable business in the current nancial year and is poised for substantial growth as the number of licensed LPMs continues to increase. Food Services RoyalSechaba, whose core business is to provide contract catering services to, inter alia, the healthcare, tertiary education, mining, industrial and corporate sectors across southern Africa, experienced competitive trading conditions, mainly as a result of delays in the awarding of new contracts, particularly in the mining sector.
Additional 25,1% interest in the Novare companies acquired. Compound annual growth in prot from operations of the Novare companies since 2002 of 150%. Zonke Monitoring Systems poised for substantial growth.
page twenty-three
RoyalSechabas focus for the year was on achieving operational excellence in all areas. New computerised management and operations systems were implemented to improve eciencies and operational controls at contracts. Improvements in procurement processes resulted in better buying and contributed positively to margins. More recently, a formalised programme to implement Hazard Analysis Critical Control Points (HACCP), an internationally recognised process to prevent food contamination, has been started and will be implemented at selected contracts. Stamford Sales, which specialises in the distribution of packaging, dry goods, bakery products and cleaning materials to the hospitality, food service, franchise and retail markets, returned to protability during the year under review after incurring a loss for the year ended 30 June 2005. Revenue growth, improved gross margins and operating eciencies, as well as signicant reductions in overhead and operating expenses, all contributed to this turnaround. Customer service levels have been improved such that most customer orders are delivered within 24 hours of receipt making Stamford Sales one of only a few operators in its market capable of such service levels. These improved service levels are attracting new customers, and revenue is increasing. In April 2006, Stamford Sales acquired an additional 26% of Ndlovu Corporate Supplies (Ndlovu), its former BEE joint venture, thereby increasing its eective interest in Ndlovu to 75%. Ndlovu has a national contract to supply tea, coee and related products to Government departments and is expected to provide new areas of growth for Stamford Sales. King Pie and Blacksteer, Mvelaphanda Groups two franchise operations, have been reorganised under a new holding company, Khuseti Holdings. With over 300 stores nationally, the King Pie franchise is relatively mature and provides a steady royalty income stream and cash ow to the Group. New King Pie stores were opened in Malaysia, Australia and Canada during the year under review. Following the rebranding of Blacksteer in the rst quarter of the nancial year, eight Blacksteer restaurants were opened during the year, increasing the total number of Blacksteer restaurants to 32. With a further 15 new Blacksteer restaurants planned to be opened in the 2007 nancial year, prospects for growth in Mvelaphanda Groups franchise operations are good. Support Services The Groups support services businesses comprise its security, cleaning, freight forwarding and mining services businesses. The performance of the security services businesses, namely Coin Security and Protea Security, was impacted by the three-month strike by security guards between April 2006 and June 2006, and the increase in the number of armed attacks on assets-in-transit vehicles. The estimated cost to Coin Security of these increased number of armed attacks is R15 million to R20 million for the year under review, which estimate includes the cost of replacing and repairing vehicles, increased cash losses and increased insurance costs. Trading conditions in the assets-in-transit industry remain very dicult.

HACCP processes to be implemented by RoyalSechaba. Stamford Sales business returns to protability. Eight new Blacksteer restaurants opened, with 15 further new restaurants planned for 2007.
Mvelaphanda Group Limited page twenty-four
Chief Executives Review Operations (continued)
In line with the strategies being followed by international asset-in-transit companies, Coin Security has expanded its range of activities to include a wider range of cash-processing services, including counting, sorting and reconciling of cash, packing of payrolls and wages, providing in-house cash-counting facilities for clients, vault and inventory maintenance, ATM services, electronic cash-deposit devices (drop-safes), electronic funds transfers, electronic cash reconciliation and real-time, secure, web-based electronic cash-management information. These activities have been bolstered by the acquisition during the year of a 74,9% interest in Coin-Cameos (Proprietary) Limited, which provides an all-inclusive electronic cash-handling, banking and transaction-tracking solution developed specically to meet the unique needs of cash-intensive businesses. The technology developed and utilised by Coin-Cameos will provide Coin Security with a competitive advantage and should be the catalyst for growth in the assetsin-transit division of Coin Security in the future. Coin Securitys risk management division acquired a 40% interest in Resolution Insurance Company (Proprietary) Limited during the year. Resolution Insurance will, inter alia, sell insurance cover to Coin Securitys clients as part of Coin Securitys strategy to cross-sell insurance products to clients of its assets-in-transit, guarding and armed response divisions. Protea Security is a security industry leader in the provision of integrated security solutions, including guarding and asset protection, canine and horse-mounted services, aviation security, critical-situation security, technology-based security solutions and VIP protection. The performance of Protea Security for the year ended 30 June 2006 was excellent. Revenue increased by 23% and prot from operations increased by 34% compared to the previous year. For the ve-year period ended 30 June 2006, Protea Security has achieved compound annual growth in prot from operations of 43%. Protea Security remains focused on its core business the provision of guarding services. Growth in the business has been driven by its strong reputation in the market for superior service levels, the integration of complementary security solutions into one service oering for its clients, and the expansion into technology-based security services. Included in the list of Protea Securitys clients are most of South Africas major mining houses in the gold, platinum and diamond sectors, major retail, industrial and commercial groups, and local and national government bodies. Rebserve Cleaning Services performed in line with expectations. Existing activities in the commercial, industrial, retail, hospitality and healthcare sectors have been supplemented with the establishment of a new laundry services division and an industrial cleaning division. These new divisions earn relatively attractive margins and will provide new areas for growth and diversication for Rebserve Cleaning Services. Contract Forwarding performed well, beneting from the stable rand exchange rate during the year. Improved credit control procedures and cash management added positively to the overall performance of the business. Contract Forwarding was also appointed as one of two representatives in South Africa of Feta Freight Systems International (FFSI), one of the
Estimated cost to Coin Security of increased attacks on its assets in transit vehicles of R15 to 20 million for the year. Excellent performance by Protea Security, increasing prot from operations by 30%. New laundry and industrial cleaning divisions started by Rebserve Cleaning Services.
page twenty-ve
leading international associations of independent freight forwarding and clearing agents. FFSI is based in Hong Kong and has strong ties to exporters in the Far East and Indian subcontinent. Trollope Mining Services, which is the Groups only remaining direct exposure to the mining sector, continued to experience dicult trading conditions. As a result of pressure on contract rates from clients, strict pricing policies were implemented. Several potential long-term contracts were turned down as a result of the unattractive returns which these contracts would have yielded for Trollope Mining Services.
Prospects
A solid platform has now been established to nurture and grow an industrial and nancial group of magnitude, which group, while possessing impeccable BEE credentials which aord the Group a competitive advantage, should be measured on its investment merits. The Groups cash resources of R1,5 billion (after receipt of the proceeds from the Mvelaphanda Resources disposal) will provide the necessary nancial resources to allow Mvelaphanda Group to conclude major BEE and other corporate transactions in pursuit of Mvelaphanda Groups strategy of investing in quality investments and cash-generative operations. Should such opportunities not present themselves within a reasonable period, the board of Mvelaphanda Group will review the use of such cash resources in the context of maintaining and enhancing shareholder value. Provided that the current favourable market conditions persist, Mvelaphanda Group is condent of its ability to continue to achieve sound and steady growth in its intrinsic net asset value per share.
Acknowledgements
My thanks and appreciation go to my co-directors for their support, the executives and management of the various operating businesses in the Group, and the investment companies who have chosen to partner with us, for their continued loyalty and diligence, and to the 22 609 employees of the Group for their hard work over the past year. Also, to our professional advisors, accountants, attorneys, bankers and all others who have played a role in the success of the Group over its ten years of existence as a successful listed company, your contributions are greatly appreciated.
Stephen Levenberg
Chief Executive Ocer
Solid platform established to nurture and grow an industrial and nancial group of magnitude. Groups BEE credentials are a competitive advantage. Investment merits remain solid.
Mvelaphanda Group Limited page twenty-six
Financial Review
Brett Till
Chief Financial Ocer
Intrinsic net asset value per ordinary share increased by 41%, from R8,35 at 30 June 2005 to R11,77 at 30 June 2006. Return on average shareholders funds for the year ended 30 June 2006 of 31,6%. Cash resources (after the Mvelaphanda Resources disposal) of R1,5 billion.
page twenty-seven
Mvelaphanda Groups results for the year ended 30 June 2006 have been prepared in accordance with IFRS. In accordance with IFRS1 First-time Adoption of IFRS, Mvelaphanda Group has prepared an opening IFRS balance sheet at the date of transition to IFRS, being 1 July 2004. Comparative gures for the year ended 30 June 2005 have been restated accordingly. Adjustments which reect the major dierences between SA GAAP and IFRS are contained in note 31 to the nancial statements.
Financial performance
Revenue for the year under review decreased by 4% from the prior year to R3,102 billion as a result of the disposal of the JIC Mining Services business in the second half of the 2005 nancial year. On a like-for-like basis, revenue increased by 13% for the year ended 30 June 2006 compared to the year ended 30 June 2005. Prot from operations increased by 30% from R201 million for the year ended 30 June 2005 to R262 million for the year ended 30 June 2006. The operating margin increased to 8,5% from 6,2% in the prior year. All operating businesses reported protable operating results for the year under review. Fair value adjustments and prot from investments increased by R582 million to R850 million for the year ended 30 June 2006. This amount comprises the revaluation gains and losses arising on marking to market the Groups investments (including associated debt where applicable), the discount of R112 million (calculated in terms of IFRS) arising on the acquisition of the additional 2,47% eective interest in Absa and prots/losses on disposal of investments. This substantial increase is mainly as a result of the performance of the Groups investments in Absa, Life Healthcare and Group Five. The results for Mvelaphanda Resources have been equity accounted in the period under review and comprise the major portion of the income from associates of R280 million. This amount is net of a provision for impairment of the carrying value of the investment in Mvelaphanda Resources at 30 June 2006 amounting to R334 million, such that the investment in Mvelaphanda Resources is carried at an amount equal to the net value realised (after deducting costs) in terms of the Mvelaphanda Resources disposal. Net prot attributable to ordinary shareholders increased by R741 million, from R404 million for the year ended 30 June 2005 to R1 145 million, mainly as a result of the performance of the Groups investments. Earnings per ordinary share and headline earnings per ordinary share increased by 105% and 124% to 270,4 cents and 322,1 cents respectively, as a result of the substantial increase in net prot attributable to ordinary shareholders. Net tangible asset value per ordinary share, which includes the investments at the directors valuations, increased by 58% from R4,83 at 30 June 2005 to R7,61 at 30 June 2006.
Intrinsic net asset value

Intrinsic net asset value per ordinary share is considered to be the most insightful measure of the Groups overall performance. Intrinsic net asset value per ordinary share, calculated based on the market value or directors valuation of investments (net of capital gains taxation and associated debt) and operations, increased by 41% from R8,35 at 30 June 2005 to R11,77 at 30 June 2006. Details of the calculation of the intrinsic net asset value per ordinary share at 30 June 2006 are set out in the table below: Before the Mvelaphanda Resources disposal Intrinsic net asset value Per ordinary share(1) R million R Absa Mvelaphanda Resources Life Healthcare Group Five Other investments Operations Net cash Total 1 256 1 097 812 102 26 2 081 474 5 848 2,53 2,21 1,63 0,21 0,05 4,19 0,95 11,77 After the Mvelaphanda Resources disposal(2) Intrinsic net asset value Per ordinary share(1) R million R 1 256 812 102 26 2 081 1 571 5 848 2,53 1,63 0,21 0,05 4,19 3,16 11,77
Notes 1. Based on 497 million ordinary shares assuming that all the preference shares will be converted into ordinary shares after 4 November 2009. 2. Calculated on the assumption that the Mvelaphanda Resources disposal had been implemented on 30 June 2006 and the net cash proceeds received on that date.
Mvelaphanda Group Limited page twenty-eight
Financial Review (continued)
In calculating the intrinsic net asset values above, the following valuation methodologies have been used: Investment/asset Absa Valuation methodology Option pricing model based on the closing Absa price of R100,30 per share on the JSE on 30 June 2006 (after deducting costs) in terms of the Mvelaphanda Resources disposal Life Healthcare Group Five Other investments Operations Net cash EBITDA multiple based on historic nancial results, less associated debt Option pricing model based on the closing Group Five price of R28,75 per share on the JSE on 30 June 2006 Market values of listed shares, discounted cash ow, PE multiple or net asset value methodologies, less associated debt PE multiple based on actual prot from operations for the year ended 30 June 2006, less debt in operating subsidiaries Cash balances at 30 June 2006 at fair value, less debt not associated with specic investments or operations
Mvelaphanda Resources Equity-accounted value less provision for impairment, such that the carrying value is equal to the net value realised
The intrinsic net asset value per ordinary share of R11,77 at 30 June 2006 includes 95 cents in cash. Following the disposal of Mvelaphanda Groups shareholding in Mvelaphanda Resources, the cash component of the Groups intrinsic net asset value per ordinary share has increased to R3,16 subsequent to year-end. This implies that the discount to intrinsic net asset value (excluding the cash component thereof ) at which Mvelaphanda Group ordinary shares traded on the JSE had increased to approximately 40%, calculated with reference to the Mvelaphanda Group ordinary share price of R8,40 on 1 September 2006 (being the last practicable date prior to the publication of the preliminary results for the year ended 30 June 2006).
Cash ow
Cash generated from operations for the year was R337 million and conrms the highly cash-generative nature of the Groups operations. The net investment in working capital of R23 million equates to 6% of the increase in revenue (calculated on a like-for-like basis) and is within acceptable limits. Net capital expenditure was R150 million and was funded largely from operating cash ow. Alternative methods of nancing this capital expenditure, including increased gearing, are being considered in order to increase the Groups free cash ow and reduce the Groups weighted average cost of capital. Proceeds from the disposal of investments relate mainly to the disposal of the Groups investment in African Life, as well as the investments in Fridge Foods, Arcus Gibb and Rewards Company which were disposed of during the year. Cash paid for new investments concluded during the year includes R190 million paid for the additional eective 2,47% interest in Absa, R30 million in relation to the 38,2% interest in Swissport South Africa, R15 million paid pursuant to the exercise of the option to acquire an additional 25,1% interest in the Novare companies, and the investments in the new ventures by certain of the Groups operating businesses. Net cash proceeds (after deducting share issue expenses) from the issue of new preference shares amounted to R524 million.
Capital structure
The weighted average number of ordinary shares in issue increased from 306,3 million ordinary shares for the year ended 30 June 2005 to 423,4 million ordinary shares, as a result of the inclusion of the ordinary shares issued pursuant to the Merger for the full period, and the issue of 33,9 million new ordinary shares in partial settlement of the purchase consideration for the acquisition of the additional eective interest of 2,47% in Absa in December 2005. In November 2005, Mvelaphanda Group issued 54,7 million convertible perpetual cumulative preference shares (the preference shares), raising R547 million (before costs) of permanent capital for Mvelaphanda Group on market-related terms, without prejudicing Mvelaphanda Groups BEE credentials. The preference shares earn dividends at a rate of 5,5% per annum until 4 November 2010. After 4 November 2010, the rate becomes a variable rate of 80% of the prime overdraft rate of interest. Each preference share is convertible at the instance of the holder into one ordinary share between 4 November 2009 and 4 November 2010. If not converted into ordinary shares by 4 November 2010, thereafter the preference shares are redeemable at the instance of Mvelaphanda Group or will remain as perpetual preference shares.
page twenty-nine
The net prot attributable to minority shareholders of R13 million, and the minority shareholders reected on the balance sheet of R218 million, relate to the minority shareholders in the Batho Bonke consortium where certain of the special-purpose entities comprising the Batho Bonke consortium have been consolidated pursuant to the acquisition of the further eective interest of 2,47% in Absa and in terms of IFRS, and the minority shareholders in certain of the operating subsidiaries. With total interest-bearing debt recognised on the balance sheet of R453 million, the Groups debt to equity ratio remains low at 9,5%. The Groups attributable share of the o-balance-sheet debt contained in special purpose entities relating to the nancing of certain of the Groups investments amounted to R535 million. The majority of this debt has no recourse to Mvelaphanda Group and has no short-term cash ow requirements.
Financial returns
Intrinsic net asset value per ordinary share is considered to be the most insightful measure of the Groups overall performance. As noted above, intrinsic net asset value per ordinary share increased by 41% from R8,35 at 30 June 2005 to R11,77 at 30 June 2006. Other nancial returns, as calculated by Mvelaphanda Group, are set out in the table below: 2006 Operating margin Cash generated from operations as a percentage of operating prot Cash earnings ordinary share (cents) Free cash ow (R000) Debt: equity ratio (%) Return on shareholders funds Return on net operating assets Return on net investments Weighted average cost of capital Economic value added Economic value added (R000) Earnings yield (based on ordinary share price at 30 June 2006) Dividend yield (based on ordinary share price at 30 June 2006) Dividend cover (times) Cash dividend cover (times) 8,5% 128,4% 58,4 106 417 9,5% 31,6% 19,8% 35,4% 13,0% 18,6% 673 967 35,6% 2,4% 15,0 3,2 2005 6,2% 216,7% 68,2 247 580 13,5% 22,0% 11,0% 34,7% 11,4% 10,6% 194 263 19,4% 1,5% 13,2 6,8
Cash distribution and dividends

For the year ended 30 June 2006, Mvelaphanda Group reverted to a policy of declaring an interim and a nal dividend. Total dividends/ distributions to ordinary shareholders for the year ended 30 June 2006 increased by 80% to 18 cents per ordinary share (comprising an interim ordinary dividend of 5 cents per ordinary share and a cash distribution out of share premium in lieu of a nal ordinary dividend of 13 cents per ordinary share), from 10 cents per ordinary share in the previous year. The total preference dividend for the period 4 November 2005 (being the date of issue of the preference shares) to 30 June 2006 was 36 cents per preference share.
Conclusion
Mvelaphanda Group is in a strong nancial position as a result of its highly protable and cash-generative operations and solid investments. With cash resources of R1,5 billion (after the Mvelaphanda Resources disposal), the Group has the necessary re-power to conclude major BEE and other transactions. The Group remains committed to maintaining a high level of nancial discipline, underpinned by strong working capital and cash ow management, and a conservative level of gearing.
Brett Till
Chief Financial Ocer
Mvelaphanda Group Limited page thirty
Sustainability Report
Mvelaphanda Group is one of South Africas leading black-owned, controlled and managed diversied industrial groups. The Groups ongoing development as a black-owned corporation takes cognisance of its responsibilities as a result of the legislative requirements, including those contained in the BEE charters being implemented throughout South African industry, as well as the Groups responsibilities to its stakeholders. Particular emphasis is given to the principles and objectives of broad-based black economic empowerment. The Groups sustainability reporting focuses on the activities of Mvelaphanda Group and its wholly owned subsidiaries. Detailed sustainability information for the companies in which Mvelaphanda Group holds investments can be obtained from the annual reports of the companies concerned.
Stakeholder relationships
Mvelaphanda Group has identied the following major groups as stakeholders in the Group:

Our shareholders and the investment community. Our customers. Our suppliers. Our people directors, executives and sta. Our investment companies. The communities which are impacted on by the activities of the Group, its investments and operations.
The Groups philosophy towards its shareholders, customers and people is embodied in its three values, which are: Shareholder value:
balancing growth, risk and returns to strategies that sustain shareholder condence and meet investor expectations;
Customer value:
meeting or exceeding customer expectations at a price no higher than their perception of the services value;
People value:
satisfying human needs in the workplace to maximise the commitment of sta to corporate goals.
The Group supports a policy of open communication with all stakeholders on matters of both a nancial and non-nancial nature. Regular communication sessions are held internally with management and senior executives, and externally with institutional shareholders and investment analysts. Information is also made available to stakeholders on the Groups website, which includes notication to stakeholders of corporate actions and public announcements via electronic communication media.
Shareholders and equity ownership

Mvelaphanda Holdings, the controlling shareholder of Mvelaphanda Group, has an inclusive philosophy towards empowerment and believes that community participation is critical to its future success. The shareholder prole of Mvelaphanda Holdings reects its commitment to ensuring that grassroots communities benet from its assets and investments. Direct and indirect shareholders of Mvelaphanda Holdings reect a broad base of historically disadvantaged South Africans, including womens groups and broad-based non-prot, communityorientated and charitable organisations. This inclusive philosophy is based on the principle that these organisations can improve their income by participating directly in the investment and other opportunities obtained by Mvelaphanda Holdings and Mvelaphanda Group. In this manner these organisations and the communities they serve benet directly from the investment gains achieved by Mvelaphanda Holdings and Mvelaphanda Group, rather than only from the charitable donations which may be made to them from time to time. This direct participation improves the sustainability of these organisations and is providing greater benets than if they were solely dependent on donations.
page thirty-one
In line with Mvelaphanda Groups stated intention of being a consolidator of BEE transactions, Mvelaphanda Group acquired a further 2,47% eective interest in Absa (an eective interest of 24,7% in Batho Bonke) for R461 million in December 2005. The purchase price was settled in part by the issue of 33,9 million new Mvelaphanda Group ordinary shares, which ordinary shares were issued to members of the Batho Bonke consortium, thereby enhancing Mvelaphanda Groups BEE shareholder credentials. Other major shareholders in Mvelaphanda Group comprise large nancial institutions, asset managers in South Africa and overseas, pension and retirement funds, public investment bodies and the general public. Details of the composition of these shareholders are given on page 80. Regular presentations are made to institutional shareholders and other members of the investment community including following the publication of the Groups interim and year-end nancial results, and as might otherwise be required in the context of corporate actions or other developments within the Group.
Human resources
Employment equity Mvelaphanda Group strives to be an employer of choice among workers and a leader in the development of human resources and human capital. This drive is underpinned by the development and training of employees from previously disadvantaged backgrounds so as to ensure that, over time, the Groups workforce, at all levels, will become representative of the demographics of South Africa. The Group remains committed to the principles and spirit of the Employment Equity Act. All Group subsidiaries are required to maintain upto-date employment equity plans which include specic goals for training and sta development, with compliance being monitored and reported on regularly. The companies in which the Group holds investments are encouraged to do the same. Particular emphasis is placed on the identication and accelerated development of previously disadvantaged individuals (PDIs) with the potential to rise to management and executive levels. On 30 June 2006 the number of PDIs in top management positions was 27% (2005: 26%) and senior management positions increased to 24% (2005: 20%). Training and development Businesses in South Africa continue to suer from the shortage of skills that has resulted from factors such as the brain-drain, crime and other socio-economic factors which are causing skilled workers at all levels to emigrate. It is anticipated that the supply of skilled labour will probably not meet demand for several years into the future, a situation which will be exacerbated by the demand which will arise from Governments infrastructure development programmes. Having the appropriately skilled people at all levels of the organisation is crucial to the Groups long-term success, while comprehensive and eective training also supports the fast-tracking of PDI employees up the management ladder. Several training initiatives are already under way, both at Group level and in individual operating companies across the Group. In previous years Mvelaphanda Group initiated various training and development programmes to address certain of these skills shortages and provide a new generation of managers with the necessary skills to full their roles. These training programmes include:
the Executive Development Programme for executives and senior managers, which is designed to teach a balanced approach to managing and developing businesses. This 18-month programme, which is accredited by the Wits Business School, incorporates subjects such as strategic and scenario planning, nance, marketing, human resource management and organisational behaviour; the Management Development Programme, which provides training to middle management on business processes and human behaviour in organisations, while upgrading management and decision-making skills; and the New Managers Programme, which is designed for emerging and newly appointed managers who need entry-level management skills such as business management and techniques for problem-solving, communications and teambuilding.
These training programmes continue to be run and are an integral part of the Groups human resources strategy.
Mvelaphanda Group Limited page thirty-two
Sustainability Report (continued)
The majority of Mvelaphanda Group companies oer vocational and specic skills-based training to their sta. This training is essential to maintaining the high quality of service and expertise that has made many of the Groups operating businesses leaders in their industries. These training initiatives include, inter alia, the operation of in-house training facilities, on-site training methodologies, participation in Group and industry training programmes, and numerous learnership programmes. HIV/Aids policy As a large-scale employer, the Group recognises that the HIV/Aids pandemic is likely to have an impact on Mvelaphanda Group, its businesses and operations. Certain of the Groups businesses are reporting increased levels of sta illness, absenteeism and employee deaths. This impacts negatively on occupational health/safety and employee productivity, employee benet costs and sta morale. The Group has accordingly adopted a life-threatening diseases policy aimed at preventing discrimination against HIV-positive employees in the workplace, who will be assisted to remain healthy and productive for as long as possible. This policy lays down universally accepted guidelines regarding HIV testing, condentiality of medical information, and disclosure of HIV status. All employees are briefed on the rights of those suering from HIV/Aids or other life-threatening diseases, and suerers of these illnesses are referred to independent medical and counselling service providers when needed.
Customers
The Groups operations provide services to a large number of customers. These customers cover businesses in most industry sectors, and are located in the most of the major centres in South Africa. In certain instances, services are provided to customers outside South Africa, mainly in southern Africa and the Middle East. Telkom SA Limited is the major client of TFMC, and the only customer of the Group which represents more than 10% of the Groups revenue or prot from operations. TFMC provides a comprehensive range of facilities management services to Telkom in terms of a ten-year contract which was concluded in August 2000 and runs until March 2011. TFMC and Telkom are currently engaged in negotiations regarding the possible extension of this contract beyond 2011. Senior directors and executives of Mvelaphanda Group and TFMC are responsible for managing the Groups relationship with Telkom. Specic forums have been established for this purpose, including a strategic management forum between TFMC and Telkom. These forums are supplemented with regular meetings between directors of TFMC and Telkom, and also between the respective CEOs of TFMC and Telkom together with senior directors of Mvelaphanda Group. In all other operating businesses, customer relationships and service levels are managed in terms of specic strategies and/or contracts between the service provider companies and the customers.
Suppliers and procurement

Given the nature of Mvelaphanda Groups operations and the services they provide, the largest providers of services to the Group are its employees. Other suppliers provide a variety of goods and services to be used by employees in the delivery of services to the Groups customers. None of the Groups suppliers are individually material to any of the operating companies to which they supply goods or services, or to the Group as a whole. Procurement policies and standards are determined by the individual operating companies, with due consideration being given to security of supply, quality of goods or services, price and the use/availability of alternative suppliers. Targeted procurement from BEE suppliers is equally important, and is a powerful and immediately eective tool for creating and sustaining BEE business opportunities, particularly among small, medium and micro enterprises (SMMEs). As part of each operating companys procurement strategy, consideration is given to utilising BEE suppliers wherever possible. Policies to measure and manage the total amount spent with BEE suppliers are currently being updated and reassessed. All Group companies will be tasked with complying with the BEE codes of conduct once nalised and released by the Department of Trade and Industry.
page thirty-three
Communities and corporate social investment (CSI)

As a diversied group with interests in a range of investments and operations, the CSI initiatives of the Group extend country-wide and touch the lives of numerous communities across South Africa. Most of the CSI activities of the Group are found in the projects undertaken by the Groups businesses and investment companies. The CSI activities of the Groups services operations provide nancial and non-nancial support to more than 75 organisations and associations. Many of these organisations operate in rural communities in which Group companies may operate contracts. The focus of this support remains in the areas of education and training, caring for children and abused women, and caring for those aected by HIV/Aids. In addition to the monetary donations which are made to these various organisations, further support is provided through the provision of goods and services normally provided by Group companies. In this regard, TFMC has assisted with the provision of maintenance services to various schools in rural areas, RoyalSechaba provides school feeding schemes with food and related services, and the Groups security businesses provide security services at schools. The total direct amount spent by the services operations on CSI initiatives for the year was R2,85 million, equivalent to approximately 1,5% of the prot after tax of the Groups operations for the year ended 30 June 2006. The Group also recognises the signicant role which the CSI programmes of its investment companies play in improving the lives of South Africans. By way of example, Life Healthcares CSI programme focuses around the principles of healthcare and education. CSI initiatives include, inter alia, community outreach projects from Life Healthcare hospitals, sponsorship and working associations with healthcare institutions, associations and non-governmental organisations (mainly in the areas of healthcare research), and programmes aimed at educating and empowering individuals to take charge of their individual and collective health. The Groups other major investments, Absa and Group Five, have comprehensive CSI programmes which provide resources and support in many areas. Details of these programmes are available from the companies concerned.
Risk management
Evaluating and managing risk in companies is an increasingly important role of the board of directors of a company. This has led Mvelaphanda Group companies to introduce systems which continuously evaluate their business strategies and processes in terms of a comprehensive risk management policy. Given the varied nature of the Groups businesses and activities, the nature of these risks are diverse. All Group companies are challenged with developing strategies to manage and mitigate these risks where possible. Progress and changes in this regard are monitored and reported on regularly. Operations In addition to the general risks associated with conducting and operating a business, the following risks are common to most of Mvelaphanda Groups operations: Labour risks At 30 June 2006, Mvelaphanda Groups operating subsidiaries employed 22 609 employees. As a result, the Group is exposed to a variety of risks specically associated with such a large workforce, including the risk of strikes, stay-aways and other actions which may aect productivity, retrenchments and loss of contracts, the impact of HIV/Aids, and the provision of post-retirement benets. Human resources management (which includes industrial relations, human capital management and succession planning) is a strategic imperative for Mvelaphanda Group. Each operating subsidiary employs its own dedicated team of human resources executives and managers to ensure that these functions are properly carried out. Progress on these issues is monitored on an ongoing basis. Mvelaphanda Groups operating subsidiaries are also actively involved in the various employer associations in their respective industries, which associations often play a signicant role in proactively addressing labour-related issues in their respective industries.
Mvelaphanda Group Limited page thirty-four
Sustainability Report (continued)
Credit risk The Groups customers are concentrated almost entirely in South Africa. Credit control is an integral part of the risk management process of each operating business. Goods and services are supplied to customers only once credit approval procedures have been followed and appropriate credit limits and terms are approved by management. Group companies establish an allowance for doubtful debts based upon factors surrounding the credit risk of specic customers, historical trends and other information. Details relating to risks associated with the concentration of suppliers and customers are dealt with elsewhere in this report. Investments Specic risks associated with Mvelaphanda Groups investments vary depending on the industry in which the particular investment company operates and the nature of the investment itself. The Groups investment strategy takes cognisance of the following risks: Market risk Market risk incorporates a broad spectrum of risks which are associated with investments in securities which are traded on recognised stock exchanges and the factors which may cause the market price of these investments to increase or decrease. The valuation of certain of Mvelaphanda Groups investments are directly related to changes in the listed share prices of the underlying investment companies. Liquidity risk Liquidity risk is the risk that an investor may not be able to dispose of an investment, either as a result of market circumstances or restrictions which may have been placed on the investor at the time that the investment was concluded. Certain of Mvelaphanda Groups investments are subject to selling restrictions. In terms of these selling restrictions, these investments may not be disposed of, or may only be sold to investors who meet the specic BEE requirements of the relevant investment companies, until specied future dates. Concentration risk Concentration risk is the risk that an investment portfolio may be too narrowly focused on a particular sector or that any one investment comprises too large a proportion of the total value of the investment portfolio. Mvelaphanda Groups investment strategy is to acquire meaningful stakes (measured in terms of value to Mvelaphanda Group) in large South African corporates across a range of market sectors. Concentration risk is evaluated at the time of concluding new investments. Default risk Default risk in this context is the risk that the performance of an investment is insucient to meet the repayment obligations incurred at the time of nancing the acquisition of the relevant investment. Wherever possible, Mvelaphanda Group has structured the nancing of its various investments on a non-recourse basis in special-purpose entities which are put in place specically for each investment transaction. The risks in relation to interest rates, described below, are also relevant to the Groups investments. Financial instruments Financial instruments which potentially subject the Group to concentrations of credit risk are primarily cash, liquid investments, nancial assets, long-term investments and interest-bearing borrowings. Credit risk As regards cash and liquid investments, the Group only deals with major nancial institutions in South Africa. Other long-term investments are secured where considered appropriate or necessary.
page thirty-ve
Interest rate risk The Group is exposed to interest rate risk through its cash, liquid investments, nancial assets, long-term investments and interestbearing borrowings. Interest rate risk is monitored and managed by Group treasury. In certain circumstances, the Group hedges its current interest exposure using interest rate swaps.
Environment, health and safety

Mvelaphanda Groups businesses and investments operate in a variety of industry sectors, and as such the responsibility for compliance with general and industry-specic environment, health and safety legislation has been devolved to individual Group companies. The Group encourages and supports compliance with all such legislation, which includes the Occupational Health and Safety Act, the Mine Health and Safety Act, and the implementation of Hazard Analysis and Critical Control Point procedures (HACCP). Mvelaphanda Group is not currently actively involved in operating businesses which have responsibility for the direct negative impact on the natural environments in which they operate. These responsibilities are largely retained by the clients of the Groups operating companies. Certain of the Groups indirect investments and customers are operators of mines. The specic environmental impact of these businesses is monitored and managed by their respective boards of directors. Of specic concern at present is the increased level of armed attacks on asset-in-transit vehicles operated by Coin Security. The psychological and physical trauma suered by the employees who are the victims of these attacks, and regrettably also the deaths of employees, are a major concern to the Group. Wherever possible, the Group provides trauma counselling to the employees and their families who have been aected by these attacks. Coin Security is also actively involved in the development of technologies to improve the safety and security of its assets-in-transit vehicles and the crews which operate these vehicles. This includes co-operation with other service providers in this market sector, major nancial institutions and the police, in combating the growing number of attacks and criminal incidents.
Going concern
At 30 June 2006, the consolidated share capital and reserves of the Group were R4,5 billion. The directors of Mvelaphanda Group are of the opinion that the Groups nancial resources will be adequate for ordinary business purposes for a period of 12 months after the date of the approval of the annual nancial statements for the year ended 30 June 2006. The annual nancial statements have accordingly been prepared on the going-concern basis.
Mvelaphanda Group Limited page thirty-six
Corporate Governance
The board of directors of Mvelaphanda Group endorses the Code of Corporate Practices and Conduct recommended in the King II Report. The board recognises that corporate governance is a developing process. Accordingly, it reviews the degree of compliance with the Code on an ongoing basis and implements procedures to ensure further compliance where appropriate.
Corporate structure
Mvelaphanda Group is South Africas leading broad-based, black-controlled, owned and managed diversied group, which holds investments in a range of companies in the nancial services, healthcare, mining and resources, property and general industrial sectors, and operates cash-generative businesses in the areas of facilities management and professional services, food services and support services. The Groups investment activities entail the management of investments and the provision of support, leadership and strategic guidance where appropriate to these companies, rather than being involved in the day-to-day operations of the companies. The Group encourages compliance by these companies with all appropriate corporate governance codes and principles. The Group is actively involved in the day-to-day operations of its services businesses. All operating businesses and subsidiaries have adopted the Groups code of corporate governance and practices. Compliance with this code of corporate governance and practices is monitored on an ongoing basis.
Board charter
The board of Mvelaphanda Group has adopted a board charter which covers, inter alia, the following:

the role and function of the board; the board structure; meeting procedures; monitoring of investment and operational performance; risk management and internal control; and code of ethics.
Directorate
Composition of the board of directors The board of directors comprises an Executive Chairman, an Executive Deputy Chairman, six executive directors (including a Chief Executive Ocer), and eight non-executive directors (seven of whom are independent). The roles of the Chairman and Chief Executive Ocer are separated. There is adequate division of responsibilities amongst board members to ensure a balance of power and authority. Appointment of new directors The appointment of new directors is considered by the board as and when the need arises, and from time to time. Recommendations for the appointment of new directors are made by the nomination committee of the board and approved by the full board of directors. If appropriate, external consultants are engaged to recommend candidates for appointment to the board. Executive directors are appointed to the board on the basis of functional expertise, experience and overall contribution to the Group. Non-executive directors are selected on the basis of industry knowledge, professional skills and experience. The nomination committee of the board comprises:

MSM Xayiya (Executive Deputy Chairman) who serves as the chairman of the nomination committee; SM Levenberg (Chief Executive Ocer); D Moshapalo (Independent non-executive director); MZ Mpofu (Independent non-executive director); and CD Stein (Non-executive director).
page thirty-seven
Rotation of directors In terms of the Companys articles of association, one-third of the directors (excluding the managing director and any director referred to below) shall retire from oce at every annual general meeting of the Company. The directors who retire in terms thereof shall be those directors who have been longest in oce since their last election. In addition to the aforementioned retiring directors, any director appointed as such after the conclusion of the Companys preceding annual general meeting shall retire from oce at the conclusion of the annual general meeting held immediately after his/her appointment. Any retiring director shall be eligible for re-election, and, if re-elected, shall be deemed not to have vacated his/her oce. Board meetings The board meets at least four times per annum together with senior management to examine the results of the Group, to ensure that delegated responsibilities are duly executed by management, and to consider important issues. Details of the directors attendance at board meetings are set out below: Ordinary board meetings Meetings held Meetings attended: Executive directors YZ Cuba SM Levenberg WV Mavimbela PJA Mphafudi TMG Sexwale BC Till MJ Willcox MSM Xayiya Non-executive directors KD Dlamini BD Hopkins OA Mabandla D Moshapalo JRT Moxon MZ Mpofu RM Patel CD Stein 4 Special board meetings 2 Total 6
3 4 1 4 3 4 4 2 3 4 3 3 4 4 4 2
2 2 1 2 2 2 1 2 2 2 2 1 1 2 1
5 6 2 6 5 6 5 4 5 6 5 4 4 5 6 3
Audit committee
The Group has an independent audit committee whose members are: BD Hopkins (Independent non-executive director) who serves as the chairman of the audit committee; YZ Cuba (Deputy Chief Executive Ocer); KD Dlamini (Independent non-executive director); OA Mabandla (Independent non-executive director); and MJ Willcox (Chief Investment Ocer). The audit committee has terms of reference which clearly set out its scope and objectives. The external auditors have unrestricted access to the audit committee. The audit committee meets three times per annum to:

review the eectiveness of internal controls in the Group with reference to the ndings of the internal and external auditors; review important accounting issues and specic disclosures in the nancial statements (including areas of management judgement and estimates); review major audit recommendations; and review risk management procedures across the Group.
The audit committee sets the principles for recommending the use of the external auditors for non-audit services.
Mvelaphanda Group Limited page thirty-eight
Corporate Governance (continued)
Remuneration policy and committee

The Groups remuneration policy aims to pay competitive salaries commensurate with the duties and responsibilities of each executive director or senior executive, including incentive bonuses where appropriate. Non-executive directors are remunerated for attendance and participation at board and board committee meetings. The remuneration committee comprises the following persons:

MZ Mpofu (Independent non-executive director) who serves as chairperson of the remuneration committee; SM Levenberg (Chief Executive Ocer); D Moshapalo (Independent non-executive director); CD Stein (Non-executive director); and MSM Xayiya (Executive Deputy Chairman).
The committee meets twice a year and is responsible for:

determining the conditions of employment; determining the remuneration packages and incentivisation; and the allocation of shares and options in terms of the Share Incentive Scheme,
primarily for executive directors and senior executives.
Transformation committee
The mandate of the transformation committee is to encourage, manage and monitor compliance by all Group subsidiaries with the Groups transformation goals, primarily in the areas of human resources, procurement, training and development, and corporate social responsibility. The members of the transformation committee are:

D Moshapalo (Independent non-executive director) who serves as the chairman of the transformation committee; KD Dlamini (Independent non-executive director); SM Levenberg (Chief Executive Ocer); MZ Mpofu (Independent non-executive director); CD Stein (Non-executive director); and MSM Xayiya (Executive Deputy Chairman).
Ethics
The board strives to ensure that the Group conducts its business with the utmost integrity towards all its stakeholders, including its shareholders, employees, customers, suppliers, and society at large. The majority of Group companies have documented codes of conduct for sta designed to provide guidance as to the ethical conduct of sta in all areas, appropriate policies in respect of the safeguarding of assets and information, and the appropriate corrective measures to enforce these policies. The Group provides, monitors and audits a safe system for employees to report any unethical behaviour by fellow employees, directors or shareholders of the Group.
Risk management
The board of directors is ultimately responsible for the management of risk. The audit committee is responsible for overseeing the risk management procedures within the Group. The committee has established the minimum standards required of each business in identifying, analysing and monitoring the risks which each business faces. The results of these procedures are communicated to the audit committee regularly or as circumstances change.
Internal audit
The Group has established internal audit departments in certain divisions and at Group level. These functions are performed by appropriately qualied and experienced personnel. In divisions where no internal audit department exists, internal audit functions are carried out by the Groups internal audit department or have been outsourced to specialists who are engaged to review and report on systems of internal controls.
page thirty-nine
Communication
The Group supports a policy of open communication with all stakeholders on matters of both a nancial and non-nancial nature. Regular communication sessions are held internally with management and senior executives, and externally with institutional shareholders and investment analysts.
Dealings in securities
The Group complies with the Listings Requirements of the JSE in relation to the restrictions applicable to trading in Mvelaphanda Group shares by directors and employees during closed periods. Closed periods endure from the end of a nancial reporting period until the publication of nancial results for that period. Additional closed periods, as dened in the JSE Listings Requirements, may be declared should such circumstances prevail. During non-closed periods, directors and employees may only deal in Mvelaphanda Group shares with the approval of the deal approval committee.
Management reporting
There are comprehensive management reporting disciplines in place, which include the preparation of annual budgets by all operating divisions. Individual operational budgets are approved by the boards of directors of the relevant companies. The Group budget is reviewed by the Mvelaphanda Group board of directors. Monthly results are reported against budgets. Budgets and prot projections are reviewed and updated regularly during the nancial year. Working capital and cash ow management are monitored on an ongoing basis.
Human resources
The Group is an equal-opportunity employer and there is no discrimination on any grounds. The Group supports the principles and objectives contained in the Employment Equity Act. There has been a continued emphasis across the Group on all matters relating to employment equity and BEE, including several training and learnership initiatives to assist employees from previously disadvantaged backgrounds. Plans are also in place to ensure that succession planning is adequately addressed in all Group companies.
HIV/Aids policy
The Group recognises that the HIV/Aids pandemic will aect every workplace, with prolonged sta illness, absenteeism and death impacting on productivity, employee benets, occupational health and safety, production costs and workplace morale. Consistent with the Groups concern for employees well-being, the Group has adopted a policy with regard to HIV/Aids and other life-threatening diseases. The policy sets out guidelines for Group companies in order to ensure that individuals with HIV/Aids are not unfairly discriminated against in the workplace. This includes creating a non-discriminatory work environment, dealing with HIV testing, condentiality and disclosure, providing equitable employee benets, dealing with dismissals and managing grievance procedures. In terms of this policy, Group companies endeavour to support those individuals who are infected or aected by HIV/Aids, so that they may continue to work productively for as long as possible. This is achieved by oering advice on the rights of aicted employees and their colleagues, educating employees and management on life-threatening diseases, referral of employees to medical and other resources (including counselling services), and consulting employees on conditions of employment in order to assist employees in managing their illness from an employment perspective.
Social responsibility
As an integral part of South African society, the Group strives to be a trusted and good corporate citizen, fullling its responsibilities to its stakeholders and the communities in which it operates. The Groups social responsibility programme seeks to identify and support groups which make a contribution to the upliftment and improvement of the quality of life of South Africans, mainly in education and other special programmes.
Mvelaphanda Group Limited page forty
Heading Heading Heading Heading (continued) Value Added Statement year ended 30 June 2006
Group IFRS restated 2006 2005 R000 R000 Revenue Cost of materials, services and other expenses Value added Investment income Exceptional items Total value added Applied as follows: Employees: Salaries, wages, bonuses, pension, medical aid and other benets Providers of capital Lenders Dividends paid Government: Taxation Reinvested in the Group Depreciation and amortisation Minority interest Net prot attributable to ordinary shareholders 3 102 432 (1 302 162) 1 800 270 1 158 003 2 958 273 3 221 310 (1 099 109) 2 122 201 405 725 (34 809) 2 493 117
1 031 127 101 977 34 661 67 316 564 206 1 260 963 103 444 12 586 1 144 933 2 958 273
1 238 908 226 772 31 714 195 058 502 953 524 484 111 673 9 197 403 614 2 493 117
Money exchanges with the Government Taxation on prot PAYE VAT RSC levies Rates and licences Skills development levy UIF and WCA
223 246 129 619 164 136 6 206 1 796 10 530 28 673 564 206
127 410 132 395 194 783 9 235 2 376 11 667 25 087 502 953
Segmental Information
page forty-one
Segmental information is presented for the Groups two areas of activity investments and operations. 2006 R000 Operations BALANCE SHEET INFORMATION Assets Property, plant and equipment Goodwill and other intangible assets Investments Deferred taxation Other current assets Cash and cash equivalents TOTAL ASSETS Liabilities Non-current interest-bearing liabilities Non-current non-interest-bearing liabilities Deferred taxation Current portion of interest-bearing borrowings Non-interest-bearing current liabilities TOTAL LIABILITIES NET ASSETS INCOME STATEMENT INFORMATION Revenue Net prot before interest, exceptional item and taxation Net prot before taxation Taxation expense Net prot after taxation 3 102 432 262 204 253 818 (73 292) 180 526 1 133 068 1 131 728 (149 954) 981 774 3 102 432 1 395 272 1 385 546 (223 246) 1 162 300 3 221 310 201 019 154 727 (83 654) 71 073 385 774 385 494 (43 756) 341 738 3 221 310 586 793 540 221 (127 410) 412 811 349 468 530 451 32 205 30 972 567 460 525 412 2 035 968 55 941 7 066 17 983 67 545 677 343 825 878 1 210 090 232 878 4 040 805 4 273 683 269 461 360 371 60 131 689 963 3 583 720 349 468 763 329 4 073 010 30 972 567 460 525 412 6 309 651 325 402 7 066 378 354 127 676 677 343 1 515 841 4 793 810 315 029 467 532 25 146 21 165 491 206 177 376 1 497 454 62 799 10 336 7 791 80 315 633 092 794 333 703 121 232 878 2 036 579 2 269 457 213 189 85 376 3 583 302 148 1 967 309 315 029 700 410 2 061 725 21 165 491 206 177 376 3 766 911 275 988 10 336 93 167 83 898 633 092 1 096 481 2 670 430 2006 R000 Investments 2006 R000 Total 2005 IFRS restated R000 Operations 2005 IFRS restated R000 Investments 2005 IFRS restated R000 Total
Mvelaphanda Group Limited page forty-two
Report of the Independent Auditors
TO THE MEMBERS OF MVELAPHANDA GROUP LIMITED We have audited the annual financial statements and Group annual financial statements set out on pages 41 to 80. These financial statements are the responsibility of the Companys directors. Our responsibility is to express an opinion on these financial statements based on our audit. SCOPE We conducted our audit in accordance with International Standards on Auditing. 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 Group at 30 June 2006 and the results of their operations and cash flows for the financial year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act in South Africa.
PKF (Jhb) Inc.

Chartered Accountants (SA) Registered Auditors Registration number 1994/001166/21
Johannesburg 5 September 2006
Directors Responsibility Statement
page forty-three
The directors are responsible for the preparation, integrity and fair presentation of the Groups and Companys financial statements and other financial information included in this report. The directors are also responsible for the Companys system of internal financial controls. The system of internal controls was developed to provide reasonable, but not absolute, assurance regarding the reliability of the financial statements, the safeguarding of assets, and to prevent and detect misrepresentation and losses. In presenting the accompanying financial statements, International Financial Reporting Standards have been followed, applicable accounting assumptions have been used, whilst prudent judgments and estimates have been made. The going concern basis has been adopted in preparing the financial statements. The directors have no reason to believe that the Group and Company will not be a going concern in the foreseeable future based on forecasts and available cash resources. The financial statements support the viability of the Group and the Company. The financial statements have been audited by the independent auditing firm, PKF (Jhb) Inc., which was given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors and committees of the board. The directors believe that all representations made to the independent auditors during the audit were valid and appropriate. The financial statements were approved by the directors on 5 September 2006 and are signed on their behalf by:
Tokyo Sexwale
Executive Chairman
Stephen Levenberg
Chief Executive Officer
Statement of Compliance by the Company Secretary

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, No 61 of 1973, and all such returns are true, correct and up to date.
For: Mvelaphanda Company Secretary
Management Services (Proprietary) Limited
Mvelaphanda Group Limited page forty-four
Directors Report
The directors have pleasure in submitting the nancial statements of the Company and the Group for the year ended 30 June 2006. NATURE OF BUSINESS Mvelaphanda Group is a broad-based, black-controlled, owned and managed diversied industrial group. The Group holds investments in a range of companies operating in the nancial services, healthcare, mining and resources, property, information technology and general industrial sectors. The Groups operating businesses provide a range of facilities management and professional services, food services and support services, extending countrywide. FINANCIAL RESULTS The audited results for the year ended 30 June 2006 have been prepared in accordance with International Financial Reporting Standards. In accordance with IFRS1 First-time Adoption of IFRS, Mvelaphanda Group has prepared an opening IFRS balance sheet at the date of transition to IFRS, being 1 July 2004. Comparative gures for the year ended 30 June 2005 have been restated accordingly. The results of the Company and the Group are set out in the nancial statements. The consolidated net prot after taxation attributable to ordinary shareholders amounted to R1 144 933 000 (2005: R403 614 000). The headline consolidated net prot after taxation attributable to ordinary shareholders amounted to R1 363 953 000 (2005: R439 542 000). SHARE CAPITAL Ordinary shares The following ordinary shares were issued during the year under review: Number of Eective date In issue at 30 June 2005 21 December 2005 ordinary shares 409 103 035 33 897 188 800 Acquisition of a further 24,7% eective interest in Batho Bonke In issue at Preference shares On 4 November 2005, 54 700 000 convertible perpetual cumulative preference shares of 0,1 cent each were issued at R10 per preference share. The terms of the preference shares are set out in note 7 to the nancial statements. SHARE INCENTIVE SCHEME On 30 June 2006 the Share Incentive Scheme held 680 057 (2005: 5 940 057) Mvelaphanda Group ordinary shares. Reconciliation of share options/scheme shares granted to directors and employees: 2006 Number Strike price (cents) Number of options/scheme shares outstanding at the beginning of the year New options/scheme shares granted Options/scheme shares exercised/sold Options/scheme shares cancelled/lapsed Number of options/scheme shares outstanding at the end of the year 3 269 173 479 880 5 156 254 479 975 5 156 254 (1 658 736) (228 345) 479 975 560 479 670 975 11 265 230 352 113 (4 493 589) (1 967 500) 479 975 710 479 800 650 880 Number 2005 Strike price (cents) 30 June 2006 443 000 223 Issue price (cents) Reason
Directors Report (continued)
page forty-ve
EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE There have been no events between 30 June 2006 and the date of this report which necessitate adjustment to the income statement or balance sheet at that date. On 30 June 2006, Mvelaphanda Group received a written oer from Mvelaphanda Holdings to dispose of Mvelaphanda Groups 22,9% interest in Mvelaphanda Resources to Mvelaphanda Holdings (the Mvelaphanda Resources disposal). The purchase consideration payable by Mvelaphanda Holdings to Mvelaphanda Group amounted to R1,183 billion. The Mvelaphanda Resources disposal was approved by Mvelaphanda Group ordinary shareholders at a general meeting on 28 August 2006 and was implemented on 28 August 2006. The purchase consideration payable in terms of the Mvelaphanda Resources disposal was received by Mvelaphanda Group in cash on 28 August 2006. DIRECTORATE AND SECRETARY The name and address of the Company Secretary appears on page 81, and the names of the directors appear on pages 8 and 9. In terms of clause 53.2 of the articles of association, Messrs Hopkins, Moshapalo, Till, Willcox, and Ms Cuba and Mrs Mpofu, retire at the forthcoming annual general meeting, but, being eligible, oer themselves for re-election. DIRECTORS INTERESTS On 30 June 2006, the directors of Mvelaphanda Group held, in aggregate, 127 380 760 (2005: 127 380 760) Mvelaphanda Group ordinary shares, representing 28,8% (2005: 31,2%) of the issued ordinary share capital of Mvelaphanda Group. The directors of Mvelaphanda Group had the following direct, indirect, benecial and non-benecial interests in Mvelaphanda Group ordinary shares and options/scheme shares at 30 June 2006: Mvelaphanda Group ordinary shares Direct Name YZ Cuba KD Dlamini BD Hopkins SM Levenberg OA Mabandla WV Mavimbela PJA Mphafudi D Moshapalo JRT Moxon MZ Mpofu RM Patel TMG Sexwale CD Stein BC Till MJ Willcox MSM Xayiya Total
Notes 1. Less than 0,1%. 2. Held via Mvelaphanda Holdings.
Mvelaphanda Group options/scheme shares Strike price Date granted 10/04/2002 02/09/2002
(1)
Indirect benecial 5 357 11 876 588 4 547 614 47 005 74 858 457 220 142 17 893 399
(2)
% of issued Total 100 32 530 11 876 800 100 4 547 614 47 005 74 858 557 10 814 220 242 17 893 499 1,0 16,9
(1)
benecial 100 27 173 212 100 100 10 814 100 100 100 38 799
share capital
(1)
(cents) 560 479 479
Number 62 500 1 181 250 125 000 1 368 750
(1)
2,7
(1)
02/09/2002
0,1 4,0 4,0 28,8
17 893 399(2) 17 893 499

(2)
127 341 961 127 380 760
Mvelaphanda Group Limited page forty-six
Directors Report (continued)
There have been no changes in the above shareholdings or options/scheme shares between 30 June 2006 and the date of this report. Details of Mvelaphanda Group share options/scheme shares exercised/sold by directors during the year are set out below: Number Date Name SM Levenberg BC Till granted 10/04/2002 02/09/2002 04/04/2001 02/09/2002 Strike price (cents) 560 479 650 479 Strike date 28/09/2005 28/09/2005 28/09/2005 28/09/2005 Number at 30 June 2005 125 000 2 362 500 37 500 250 000 2 775 000 exercised/sold on strike date (62 500) (1 181 250) (37 500) (125 000) (1 406 250) Number at 30 June 2006 62 500 1 181 250 125 000 1 368 750
SUBSIDIARIES Details of the Companys principal subsidiaries and changes therein are set out on page 78. The aggregate headline prot after taxation of subsidiaries attributable to the Company amounted to R589 591 000 (2005: R157 460 000). DIVIDENDS/DISTRIBUTION Ordinary shares The directors of Mvelaphanda Group resolved to declare a cash distribution out of share premium in lieu of a nal ordinary dividend for the year ended 30 June 2006, of 13 cents per ordinary share to ordinary shareholders. The last day to trade cum the cash distribution in order to participate in the cash distribution is Friday, 3 November 2006. The ordinary shares of Mvelaphanda Group will commence trading ex the cash distribution from the commencement of business on Monday, 6 November 2006 and the record date will be Friday, 10 November 2006. The cash distribution will be paid to ordinary shareholders on Monday, 13 November 2006. Ordinary share certicates may not be dematerialised or rematerialised between Monday, 6 November 2006 and Friday, 10 November 2006, both days inclusive. The cash distribution is subject to shareholder approval of an ordinary resolution authorising the return of share premium. A circular and notice of the general meeting regarding the cash distribution will be posted to shareholders on or about 9 October 2006. Preference shares The directors of Mvelaphanda Group have resolved to declare a cash preference dividend (No. 2) of 27,27397 cents per preference share for the period ended 30 June 2006 to preference shareholders. The last day to trade cum the preference dividend in order to participate in the preference dividend is Friday, 6 October 2006. The preference shares of Mvelaphanda Group will commence trading ex the preference dividend from the commencement of business on Monday, 9 October 2006 and the record date will be Friday, 13 October 2006. The preference dividend will be paid to preference shareholders on Monday, 16 October 2006. Preference share certicates may not be dematerialised or rematerialised between Monday, 9 October 2006 and Friday, 13 October 2006, both days inclusive. BORROWING LIMITATION In terms of the articles of association, the directors may exercise all powers of the Company to borrow money as they consider appropriate. The borrowing powers of the directors are unlimited. SPECIAL RESOLUTIONS On 25 October 2005, the authorised share capital of the Company was increased from R750 000 divided into 750 000 000 ordinary shares of 0,1 cent each to R850 000 by the creation of 100 000 000 convertible perpetual cumulative preference shares of 0,1 cent each. On 25 October 2005, the memorandum of association and the articles of association of the Company were amended to reect the new share capital structure of the Company pursuant to the creation of the convertible perpetual cumulative preference shares, and to embody the rights and privileges attached to the convertible perpetual cumulative preference shares therein. On 27 January 2006 the directors of Mvelaphanda Group were authorised to facilitate, inter alia, the acquisition by Mvelaphanda Group or a subsidiary of Mvelaphanda Group, from time to time, of the issued ordinary shares of Mvelaphanda Group upon such terms and conditions and in such numbers as the directors of Mvelaphanda Group may from time to time decide, but subject to the provisions of the Companies Act, and the Listings Requirements of the JSE.
Accounting Policies
page forty-seven
The nancial statements have been prepared in accordance with International Financial Reporting Standards and the South African Companies Act of 1973, as amended. The nancial statements incorporate the following principal accounting policies, which are consistent with those applied in the previous year, except for changes made as a result of the adoption of IFRS. In accordance with IFRS1 First-time adoption of IFRS, Mvelaphanda Group has prepared an opening IFRS balance sheet at the date of transition to IFRS, being 1 July 2004. Comparative amounts for the year ended 30 June 2005 have been restated accordingly. A reconciliation of the adjustments which reect the major dierences between SA GAAP and IFRS is presented in note 31 to the nancial statements. 1. BASIS OF PREPARATION The nancial statements are prepared on the historical-cost convention, modied by the restatement of nancial instruments to fair value where applicable. The preparation of the nancial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions that aect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the nancial statements, and the reported amounts of revenues and expenses during the reporting period, based on managements best knowledge of current events and actions and anticipated future events. The accounting estimates may, by denition, dier from the ultimate actual results. Estimates are continually evaluated and are based on historical experiences and other factors, including expectations of future events, which are considered to be reasonable in the circumstances. The most critical accounting estimates and assumptions relate to the valuation of the Groups investments. 2. BASIS OF CONSOLIDATION 2.1 Investments in subsidiaries The Group nancial statements incorporate the assets, liabilities and results of the activities of the Company and its subsidiaries. Subsidiaries are those enterprises, including unincorporated enterprises, controlled by the Group. Control exists when the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has the power to govern the nancial and operating policies of an enterprise so as to obtain benets from its activities. The results of subsidiaries acquired and disposed of during a nancial year are included from the eective dates of acquisition to the eective dates of disposal. Where the fair value of the consideration paid exceeds the fair value of the identiable assets acquired and liabilities and contingent liabilities assumed, the dierence is treated as purchased goodwill and is accounted for in terms of accounting policy 3. Where the fair value of the identiable assets acquired and liabilities and contingent liabilities assumed exceeds the fair value of the consideration given, the dierence is treated as negative goodwill and is recognised immediately in the income statement. The Groups Share Incentive Scheme is included in the consolidated nancial statements as a subsidiary. 2.2 Investments in associates An associate is an enterprise over whose nancial and operating policies the Group has the ability to exercise signicant inuence, but not control, and is neither a subsidiary nor a jointly controlled entity of the Group. Investments in associates are accounted for by the equity method of accounting. Equity accounting involves recognising, in the income statement, the Groups share of the associates earnings for the year. The results of associate companies acquired and disposed of during the year are included from the eective dates of acquisition to the eective dates of disposal. The Groups interest in associates is carried in the balance sheet at an amount that reects its share of the net assets of the associate and includes goodwill on acquisition of the associate. 2.3 Investments in jointly controlled entities Jointly controlled entities are those entities over which the Group exercises joint control in terms of a contractual agreement. Investments in jointly controlled entities are accounted for by way of the proportionate consolidation method whereby the Groups proportional share of the assets, liabilities, revenue and expenses of jointly controlled entities are combined on a line-byline basis, with similar items in the nancial statements of the Group. The results of jointly controlled entities are included from the eective dates when joint control commences to the eective dates when joint control ceases.
Mvelaphanda Group Limited page forty-eight
Accounting Policies (continued)
2.4
Transactions eliminated on consolidation Intragroup balances and transactions, and unrealised gains arising from intragroup transactions, are eliminated in preparing the consolidated nancial statements. Unrealised gains resulting from the transactions with associates and jointly controlled entities are eliminated to the extent of the Groups interest in the enterprise. Unrealised gains resulting from transactions with associates are eliminated against the investments in the associates. Unrealised losses on transactions with associates are eliminated in the same way as unrealised gains, except that they are only eliminated to the extent that there is no evidence of impairment.
3.
GOODWILL Goodwill arising from a business combination for which the agreement date is prior to 31 March 2004, is included on the balance sheet at its deemed cost, being its cost less accumulated amortisation up to 31 March 2004, as previously recorded under SA GAAP. Goodwill arising from a business combination for which the agreement date is on or after 31 March 2004, is not amortised but is carried at cost less accumulated impairment losses. Goodwill is tested annually for impairment. For the purpose of impairment testing, goodwill is allocated to the cash-generating unit(s) expected to benet from the business combination in which the goodwill arose. An impairment loss is recognised if the carrying amount of the cash-generating unit, including the associated goodwill, exceeds its recoverable amount.
4.
INTANGIBLE ASSETS 4.1 Trademarks Trademarks are classied as indenite useful-life intangible assets as they are inherent to the continuous operation of the businesses to which they relate, and are stated at cost less accumulated impairment losses. Trademarks are tested for impairment on an annual basis. 4.2 Computer software Direct software development costs that enhance the benets of computer software programmes and are clearly associated with an identiable and unique software system, which will be controlled by the Group and has a probable benet exceeding one year, are recognised as intangible assets. Computer software, including software development costs recognised as intangible assets, is amortised on the straight-line basis over the expected useful lives of the assets, being between three and ve years. Capitalised computer software is carried at cost less accumulated amortisation and impairment losses. Computer software is tested annually for impairment or changes in estimated future benets. 4.3 Contract development costs Development costs in relation to new contracts are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be measured reliably. Contract development costs are written o over the period of the contract from the year that the contract commences operation. Contract development costs are tested annually for impairment or whenever there is an indicator of impairment.
5.
PROPERTY, PLANT AND EQUIPMENT Plant and equipment, oce equipment, computer equipment, furniture and ttings, motor vehicles and improvements to leasehold premises are stated at cost less depreciation calculated on the component method, and on a straight-line basis, at the rates set out below, which rates are considered appropriate to write o the cost thereof to the estimated residual value over the estimated useful life of the asset. The estimated useful life and residual value are reviewed annually. The current rates used are: Plant and equipment Oce equipment Computer equipment Furniture and ttings Motor vehicles passenger Motor vehicles commercial Improvements to leasehold premises 15 20% 15% 33% 15% 20% 25% period of lease
Land and buildings owned and occupied by Group companies are classied as own-use property. Land is carried at cost. Buildings are carried at cost less depreciation calculated on a straight-line basis, at rates considered appropriate to write o the cost thereof to the estimated residual value over the estimated useful life of the buildings.
page forty-nine
6.
INVENTORIES Inventories are valued at the lower of cost and net realisable value. Cost is determined on a rst-in rst-out basis. The cost of nished goods includes direct expenditure and production overheads.
7.
FOREIGN CURRENCY TRANSACTIONS Foreign currency transactions are recorded at the exchange rate ruling on the transaction dates. Assets and liabilities designated in foreign currencies are translated at rates of exchange ruling at the balance sheet date. Exchange dierences are taken to income in the year in which they arise.
8.
DEFERRED TAXATION Deferred taxation is provided for on the liability method using the comprehensive basis in respect of income tax payable in future periods in respect of taxable temporary dierences. Deferred tax assets are recognised in respect of tax losses to the extent that it is probable that future tax benets will be available against which the losses can be utilised. Deferred tax assets are also recognised in respect of income taxes recoverable in future periods in respect of deductible temporary dierences.
9.
CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included in borrowings in current liabilities on the balance sheet. Cash and cash equivalents are carried on the balance sheet at fair value.
10.
REVENUE Revenue, which excludes value-added tax, comprises the net amounts invoiced to customers, after trade discounts, for goods supplied and services rendered. Under certain service contracts the Group manages customer expenditure and is obliged to purchase goods and services from thirdparty contractors and recharge them to the customer at cost. These ow through amounts charged by contractors and recharged to customers at cost are excluded from turnover and cost of sales. Debtor and creditor balances relating to these transactions are recorded in the balance sheet.
11.
REVENUE RECOGNITION Revenue from service-based activities is recognised when the service is completed. Revenue from the sale of merchandise and nished goods is brought to account when the risk in the goods passes to the customer. Interest earned is accrued on a time proportion basis. Dividends are recognised when the right to receive payment is established.
12.
LEASED ASSETS Lease contracts, where the Group has substantially all the risks and rewards of ownership of the leased assets, are classied as nance leases. Assets held under nance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments, and are depreciated over the shorter of the useful life of the asset or the lease term. The corresponding rental obligations, net of nance charges, are included in liabilities. Each lease payment is allocated between capital and nance charges. Finance charges are expensed using the eective-interest rate method. Leases of assets, where a signicant portion of the risks and rewards of ownership are retained by the lessor, are classied as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
13.
INVESTMENTS Investments in subsidiaries, associates and jointly controlled entities are recognised at cost less accumulated impairment losses. Other investments are designated as available for sale or fair value through prot or loss in accordance with IAS39 Financial Instruments: Recognition and Measurement, although these are held and structured as non-current investments. The classication depends on the purpose for which the investments were acquired. Management determines the classication of its investments at initial recognition and re-evaluates the classication at every reporting date. Other investments are initially recorded at cost on acquisition. After initial recognition, investments which are designated as available for sale or fair value through prot or loss are measured at fair value. Fair value gains and losses are accounted for in the income statement.
Mvelaphanda Group Limited page fty
14.
FAIR VALUE METHODS AND ASSUMPTIONS The fair value of nancial instruments not traded on an organised nancial market, is determined using a variety of methods and assumptions that are based on market conditions and risks existing at the balance sheet date, including independent appraisals, appropriate price-earnings multiple, net asset value and discounted cash ow methods.
15.
FINANCIAL INSTRUMENTS 15.1 Classication Originating loans Originating loans are assets not held for trading purposes. These include various long-term loans advanced by the Group. Trade and other receivables Financial assets that are balances from trade and other receivables are classied as originating loans and advances. Trade and other payables Financial liabilities that are not held for trading are balances due to trade and other creditors. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Derivative instruments Derivative instruments are classied as either trading or hedging instruments in accordance with managements intentions. 15.2 Recognition The Group recognises nancial assets and liabilities on the date it commits to purchase or sell such instruments. From this date any gains or losses in fair value of the assets or liabilities are recorded. 15.3 Measurement Financial instruments are measured initially at cost, including transaction costs. For nancial assets acquired, cost is the fair value of the consideration given. For nancial liabilities, cost is the fair value of the consideration received. Transaction costs included in the initial measurement are those incremental costs arising on the initial purchase of the asset or incurring of a liability. Originating loans are carried at amortised cost, being the original sums advanced less principal payments and amortisations. Trade and other receivables originated by the Group are stated at amortised cost less provision for doubtful debts. Cash and cash equivalents are carried at fair value. Financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisations. Derivative instruments are recognised at fair value and the corresponding adjustments reected in the income statement.
16.
IMPAIRMENT OF ASSETS The carrying amount of the Groups assets is reviewed at each balance sheet date to determine whether there is any indication of impairment. If there is an indication that an asset may be impaired, its recoverable amount is estimated. For goodwill, intangible assets that have an indenite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated annually. The recoverable amount of an asset is calculated as the higher of its net selling price and its value in use. In assessing the value in use, the expected future cash ows from the asset are discounted to their present value using a discount rate that reects current market assessments of the time value of money and the risks specic to the asset. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount. A previously recognised impairment loss is reversed if the recoverable amount of the asset increases as a result of a change in the estimates used to determine the recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. An impairment loss in respect of goodwill is not reversed.
page fty-one
17.
PROVISIONS A provision is recognised when, and only when, the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outow of resources embodying benets will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reect current best estimate. Where the eect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
18.
SEGMENT REPORTING A segment is a distinguishable component of the Group which is engaged in activities which are subject to risks and rewards that are dierent from those of other segments. Segment assets and liabilities comprise those assets and liabilities which are directly attributable to the segment or can be allocated to the segment on a reasonable basis.
19.
EMPLOYEE BENEFITS Post-retirement benets The Group provides for retirement benets for the majority of employees by payments to independently administered denedcontribution pension and provident funds. Current contributions are charged against income as incurred.
20.
DIVIDENDS DECLARED Dividends, and the related tax thereon, are recognised when the dividends are declared by the board of directors.
21.
SHARE CAPITAL 21.1 Equity/ordinary shares Ordinary shares are classied as equity. Issued share capital is stated at the amount of the proceeds received less directly attributable issue costs. 21.2 Preference shares Preference shares issued which are convertible at the instance of the holder into other equity instruments, or if not convertible are redeemable at the instance of the issuer, are classied as equity. Distributions to the holders of preference shares which are classied as equity are shown in the statement of changes in equity as part of transactions with equity holders. Preference shares which do not meet the denition of an equity instrument are classied as liabilities. Distributions to the holders of preference shares which are classied as liabilities are included in interest paid in the income statement. 21.3 Treasury shares Shares in the Company held by wholly owned Group companies, as well as shares held by the Groups Share Incentive Scheme, are classied as treasury shares. These treasury shares are treated as a deduction from the issued number of shares and are not taken into account in the calculation of the weighted average number of shares in the Group nancial statements. The cost price of the treasury shares is deducted from the Groups equity.
Mvelaphanda Group Limited page fty-two
Balance Sheets at 30 June 2006
Notes ASSETS Non-current assets Property, plant and equipment Goodwill Other intangible assets Investments in subsidiaries Investments in associates Other investments Deferred taxation Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Share premium Distributable reserves Minority interests Non-current liabilities Interest-bearing borrowings Non-interest-bearing borrowings Deferred taxation Current liabilities Trade and other payables Current portion of interest-bearing borrowings Current portion of non-interest-bearing borrowings Provisions Taxation liabilities Total equity and liabilities 8 9 11 8 9 10 7 6 5 1 2 3 4.1 4.2 4.3 10
Group IFRS restated 2006 2005 R000 R000
Company IFRS restated 2006 2005 R000 R000
5 216 779 349 468 679 433 83 896 1 174 396 2 898 614 30 972 1 092 872 52 508 514 952 525 412 6 309 651
3 098 329 315 029 639 483 60 927 899 552 1 162 173 21 165 668 582 40 930 450 276 177 376 3 766 911
3 430 852 101 251 1 965 717 764 243 599 641 6 641 1 596 5 045 3 437 493
2 458 843 101 251 1 153 578 764 365 439 649 10 096 7 451 2 645 2 468 939
4 793 810 497 2 203 559 2 372 214 217 540 710 822 325 402 7 066 378 354 805 019 651 071 127 676 3 219 23 053 6 309 651
2 670 430 403 1 408 279 1 260 673 1 075 379 491 275 988 10 336 93 167 716 990 600 940 83 898 2 800 5 182 24 170 3 766 911
3 371 812 498 2 234 239 1 137 075 57 585 57 585 8 096 7 936 160 3 437 493
2 425 823 409 1 438 959 986 455 32 688 32 688 10 428 10 428 2 468 939
Income Statements year ended 30 June 2006
page fty-three
Notes Revenue Cost of sales and direct expenses Gross prot Other operating prot Operating expenses Prot from operations Interest received Interest paid Dividends received Fair value adjustments and prot from investments Income from associates Exceptional item Net prot before taxation Taxation expense Net prot after taxation Attributable to: Ordinary shareholders Other shareholders Preference shareholders Minority interests 16 14 15 13 12
Group IFRS restated 2006 2005 R000 R000 3 102 432 (2 295 449) 806 983 72 495 (617 274) 262 204 24 935 (34 661) 3 575 849 777 279 716 1 385 546 (223 246) 1 162 300 3 221 310 (2 551 385) 669 925 82 706 (551 612) 201 019 19 951 (31 714) 1 064 268 088 116 622 (34 809) 540 221 (127 410) 412 811
Company IFRS restated 2006 2005 R000 R000 2 500 (1 035) 1 465 10 001 (59) 60 000 184 427 255 834 (37 373) 218 461 7 598 (2 222) 5 376 7 119 164 357 180 114 356 966 (35 180) 321 786
1 144 933 17 367 4 781 12 586 1 162 300
403 614 9 197 9 197 412 811 131,8 131,8
213 680 4 781 4 781 218 461
321 786 321 786
Basic earnings per ordinary share (cents) Fully diluted earnings per ordinary share (cents)
17.1 17.1
270,4 239,5
Mvelaphanda Group Limited page fty-four
Cash Flow Statements year ended 30 June 2006
Notes
2006 R000
Group IFRS restated 2005 R000
Cash ows from operating activities Cash received from customers Cash paid to suppliers and employees Cash generated from operations Net interest (paid)/received Investment income Taxation paid Dividends paid Cash ows from investing activities Acquisitions/(disposals) of subsidiaries and businesses Additions to property, plant and equipment, and other intangible assets Proceeds from disposal of property, plant and equipment Proceeds from disposal of investments Increase in investments Decrease in nancial assets Cash ows from nancing activities (Decrease)/increase in long-term borrowings Increase in short-term borrowings Decrease in minority interests Decrease in amounts due to vendors Proceeds from issue of shares/(share buybacks) Share issue costs Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 23 22 18 19 20
182 448 3 049 880 (2 713 305) 336 575 (9 726) 3 575 (80 660) (67 316) (375 877) (204 144) (200 004) 50 507 57 105 (79 341) 541 465 (44 262) 36 254 (3 866) 576 148 (22 809) 348 036 177 376 525 412
157 874 3 354 947 (2 919 436) 435 511 (9 525) 2 415 (75 469) (195 058) (393 413) (34 294) (147 364) 34 902 (251 034) 4 377 (27 874) 1 995 12 238 (976) (9 465) (13 820) (17 846) (263 413) 440 789 177 376
(5 387) 4 828 9 942 60 000 (12 316) (67 841) (516 404) 51 606 (568 010) 524 191 547 000 (22 809) 2 400 2 645 5 045
(41 247) 9 443 7 119 164 357 (9 063) (213 103) (118 137) (124 266) 6 129 (3 615) (9 465) 23 696 (17 846) (162 999) 165 644 2 645
Statements of Changes in Equity year ended 30 June 2006
page fty-ve
Share capital R000 GROUP Balance at 30 June 2004 as previously reported under SA GAAP IFRS adjustments: Trademarks previously written o Property, plant and equipment Balance at 30 June 2004 (IFRS restated) Ordinary shares issued Net movement on treasury shares Cash amounts paid to vendors Acquisitions/(disposals) of subsidiaries and businesses Net prot after taxation Dividends paid Transfer to current liabilities in a subsidiary Balance at 30 June 2005 (IFRS restated) Preference shares issued Acquisition of investments, subsidiaries and businesses Share issue expenses Net movement on treasury shares Net prot after taxation Dividends paid Balance at 30 June 2006 COMPANY Balance at 30 June 2004 Ordinary shares issued Treasury shares transferred to vendors Cash amounts paid to vendors Net prot after taxation Dividends paid Transfer to current liabilities in a subsidiary Balance at 30 June 2005 (IFRS restated) Preference shares issued Ordinary shares issued Share issue expenses Net prot after taxation Dividends paid Balance at 30 June 2006
Share premium R000
Nondistributable reserves R000
Distributable reserves R000
Amounts due to vendors R000
Total attributable to equity holders R000
Minority interests R000
Capital and reserves R000
177 177 215 11 403 55 34 5 497
23 146 23 146 1 385 133 1 408 279 546 945 271 144 (22 809) 2 203 559
49 045 (49 045)
899 185 91 045 (8 583) 981 647 70 470 403 614 (195 058) 1 260 673 29 143 1 149 714 (67 316) 2 372 214
31 905 31 905 (2 393) (9 465) (20 047)
1 003 458 42 000 (8 583) 1 036 875 1 385 348 68 088 (9 465) 403 614 (195 058) (20 047) 2 669 355 547 000 271 178 (22 809) 29 148 1 149 714 (67 316) 4 576 270
614 614 (7 760) 9 197 (976) 1 075 207 745 12 586 (3 866) 217 540
1 004 072 42 000 (8 583) 1 037 489 1 385 348 68 088 (9 465) (7 760) 412 811 (196 034) (20 047) 2 670 430 547 000 478 923 (22 809) 29 148 1 162 300 (71 182) 4 793 810
194 215 409 55 34 498
53 826 1 385 133 1 438 959 546 945 271 144 (22 809) 2 234 239
877 772 321 786 (213 103) 986 455 218 461 (67 841) 1 137 075
31 905 (2 393) (9 465) (20 047)
963 697 1 385 348 (2 393) (9 465) 321 786 (213 103) (20 047) 2 425 823 547 000 271 178 (22 809) 218 461 (67 841) 3 371 812
963 697 1 385 348 (2 393) (9 465) 321 786 (213 103) (20 047) 2 425 823 547 000 271 178 (22 809) 218 461 (67 841) 3 371 812
Mvelaphanda Group Limited page fty-six
Notes to the Financial Statements
Cost R000 1. PROPERTY, PLANT AND EQUIPMENT 2006 Land and buildings Plant and equipment Oce equipment Computer equipment Furniture and ttings Motor vehicles Improvements to leasehold premises
Accumulated depreciation R000
Net book value R000
3 231 305 612 14 567 119 282 28 770 181 431 12 773 665 666
(117 165) (8 096) (93 425) (17 427) (74 129) (5 956) (316 198) (125 282) (5 698) (79 027) (14 207) (56 434) (4 041) (284 689)
3 231 188 447 6 471 25 857 11 343 107 302 6 817 349 468 1 585 155 005 7 381 27 631 11 571 107 853 4 003 315 029
2005 (IFRS restated) Land and buildings Plant and equipment Oce equipment Computer equipment Furniture and ttings Motor vehicles Improvements to leasehold premises
1 585 280 287 13 079 106 658 25 778 164 287 8 044 599 718
Reconciliation of carrying value
IFRS restated net book value 30 June 2005 R000 1 585 155 005 7 381 27 631 11 571 107 853 4 003 315 029
Additions R000 3 231 113 135 1 536 13 650 3 459 41 794 4 825 181 630 133 762 47 868 181 630
Disposals R000 (1 585) (32 022) (33) (76) (69) (9 905) (57) (43 747)
Depreciation R000 (47 671) (2 413) (15 348) (3 618) (32 440) (1 954) (103 444)
Net book value 30 June 2006 R000 3 231 188 447 6 471 25 857 11 343 107 302 6 817 349 468
Land and buildings Plant and equipment Oce equipment Computer equipment Furniture and ttings Motor vehicles Improvements to leasehold premises
Analysis of additions Replacement of assets Expansion of businesses
Land and buildings comprise portion 135, Farm Waterval 273, Pretoria. The useful life of the buildings is estimated to be 50 years. No depreciation was provided for on land and buildings as the estimated residual value exceeds the carrying value. Certain of the Groups assets are encumbered by instalment sale agreements and capitalised nance leases as described in note 8.
Notes to the Financial Statements (continued)
page fty-seven
2006 R000 2. GOODWILL Cost Accumulated amortisation and impairments Net book value Reconciliation of net book value Balance at the beginning of the year Acquisitions/(disposals) of subsidiaries and businesses Impairment losses Balance at the end of the year
731 606 (52 173) 679 433 639 483 40 306 (356) 679 433
691 300 (51 817) 639 483 275 065 364 775 (357) 639 483
101 251 101 251 101 251 101 251
101 251 101 251 101 251 101 251
For purposes of impairment testing, goodwill is allocated to the cash-generating unit(s) expected to benet from the business combination in which the goodwill arose. The recoverable amount of the cash-generating unit(s) is determined using appropriate priceearnings multiple, net asset value and discounted cash ow valuation methodologies. Price-earnings multiple valuations are based on, inter alia, the prot before tax achieved by a cash-generating unit for the year ended 30 June 2006 and budgets and forecasts prepared by management. The price-earnings multiples used are determined with reference to the price-earnings multiples of comparable listed companies (both locally and overseas) and are adjusted for industry and other specic factors aecting the cash-generating unit. Net asset value-based valuations are calculated based on the audited net asset value of the cash-generating unit at 30 June 2006. Discounted cash ow valuations are based on cash ow budgets and forecasts prepared by management. Cash ows are discounted at an appropriate weighted average cost of capital determined for the cash-generating unit based on market interest rates and specic factors aecting the cash-generating unit. Group IFRS restated 2005 R000 Company IFRS restated 2006 2005 R000 R000
2006 R000 3. OTHER INTANGIBLE ASSETS 3.1 Trademarks Balance at the beginning of the year Additions Acquisitions/(disposals) of subsidiaries and businesses Net book value at the end of the year 3.2 Computer software Balance at the beginning of the year Additions Net book value at the end of the year 3.3 Contract development costs Balance at the beginning of the year Amortisation Amounts realised Net book value at the end of the year
60 927 612 61 539 22 357 22 357
60 000 927 60 927 6 687 (705) (5 982)
Trademarks comprise the trademarks used by the Coin Security, King Pie and Blacksteer operations. For purposes of impairment testing, the recoverable amount of the trademark is calculated using an appropriate trademark royalty rate and revenue budgets and forecasts prepared by management. Total other intangible assets 83 896 60 927
Mvelaphanda Group Limited page fty-eight
2006 R000 4. INVESTMENTS 4.1 Investments in subsidiaries Shares at cost Loans receivable Loans payable Goodwill and trademarks previously written o Carrying value of investments in subsidiaries Details of principal subsidiary companies are set out on page 78. 4.2 Investments in associates (i) 22,9% shareholding in Mvelaphanda Resources Limited (ii) 49% shareholding in Telesafe (Proprietary) Limited (iii) 40% shareholding in Resolution Insurance Company (Proprietary) Limited (iv) 48% shareholding in Experience Delivery Company (Proprietary) Limited (v) 49% shareholding in Al-Jaber Coin LLC Tangible assets Goodwill Shares at cost Groups share of post-acquisition reserves Loans Impairment of investments in associates Carrying value of investments in associates Directors valuation of shares 575 067 193 824 768 891 738 335 3 355 (336 185) 1 174 396 1 171 041
678 374 1 374 762 (3 240) (84 179) 1 965 717
239 696 1 000 640 (2 579) (84 179) 1 153 578
575 378 193 202 768 580 121 784 10 818 (1 630) 899 552 888 734
764 243 764 243 764 243
764 365 764 365 764 365
Mvelaphanda Resources is a mining and minerals investment company which is listed on the JSE. Telesafe provides security services to, inter alia, Telkom SA Limited, the South African Revenue Services and the City of Johannesburg. Resolution Insurance Company operates in the short-term insurance industry. Experience Delivery Company provides facilities management services for the DTI campus in Tshwane. Al-Jaber Coin provides security services in Dubai, United Arab Emirates. The impairment of investments in associates of R336 185 000 in the current year relates mainly to Mvelaphanda Resources. The investment in Mvelaphanda Resources has been impaired, such that the carrying value is equal to the net value realised (after deducting costs) in terms of the Mvelaphanda Resources disposal, details of which are given in note 30.1.
page fty-nine
2006 R000 4. INVESTMENTS (continued) 4.2 Investments in associates (continued) Summarised nancial information of associates Property, plant and equipment Non-current assets Goodwill Current assets Non-current assets classied as held for sale Total assets Equity holders funds Non-current liabilities Deferred taxation Current liabilities Liabilities directly associated with non-current assets classied as held for sale Total equity and liabilities Revenue Net prot before taxation Taxation expense Net prot attributable to equity holders
3 686 8 330 169 77 562 227 879 315 892 8 955 188 6 155 200 1 951 161 473 629 355 198 20 000 8 955 188 100 834 3 139 935 (485 473) 2 654 462
5 893 5 007 558 136 971 222 612 315 892 5 688 926 3 410 457 1 903 331 355 138 20 000 5 688 926 251 971 173 054 (28 656) 144 398
The summarised nancial information of associates has been extracted from the latest annual reports and/or nancial statements of the associates. Comparative amounts have been restated in accordance with the restatement/reclassication of certain balances by the associated companies. 4.3 Other investments Shares at cost Loans Total cost Net fair value gains arising on revaluation of other investments Carrying value of other investments Directors valuation Reconciliation of carrying value of other investments Balance at the beginning of the year Acquisitions/(disposals) of subsidiaries and businesses Net new investments/(disposals) Net fair value gains arising on revaluation of other investments Carrying value of other investments
1 524 840 168 030 1 692 870 1 205 744 2 898 614 2 898 614
655 525 238 560 894 085 268 088 1 162 173 1 162 173
247 809 247 809 351 832 599 641 599 641
259 535 259 535 180 114 439 649 439 649
1 162 173 868 972 14 276 853 193 2 898 614
2 800 530 435 360 850 268 088 1 162 173
439 649 (21 279) 181 271 599 641
257 320 2 215 180 114 439 649
Full details of investments are available for inspection by members or their nominees at the Companys registered oce. A list of principal investments is set out on page 79. Total investments at carrying value 4 073 010 2 061 725 3 329 601 2 357 592
Mvelaphanda Group Limited page sixty
4.
INVESTMENTS (continued) 4.3 Other investments (continued) The fair value of the other investments is determined using a variety of methods and assumptions which are based on market conditions and risks existing at the balance sheet date. Details of the methodology used to calculate the fair value of the Groups other investments is set out below: Investment Absa Life Healthcare Group Five Unitrans Limited Other investments Valuation methodology Option pricing model based on the closing Absa price of R100,30 per share on the JSE on 30 June 2006 EBITDA multiple based on historic nancial results, less debt in Life Healthcare Option pricing model based on the closing Group Five price of R28,75 per share on the JSE on 30 June 2006 Market value of Unitrans Limited shares at 30 June 2006, less debt and accumulated interest Market values of listed shares, discounted cash ow, PE multiple or net asset value methodologies Group IFRS restated 2005 R000 Company IFRS restated 2006 2005 R000 R000
2006 R000 5. INVENTORIES Raw materials Work in progress Consumables Merchandise and nished goods
9 817 264 6 158 36 269 52 508
8 354 300 7 576 24 700 40 930
6.
CASH AND CASH EQUIVALENTS Bank balances Term deposits
315 982 209 430 525 412
173 136 4 240 177 376
5 045 5 045
2 645 2 645
7.
SHARE CAPITAL Authorised 750 000 000 ordinary shares of 0,1 cent each 100 000 000 convertible perpetual cumulative preference shares of 0,1 cent each Issued Ordinary share capital 443 000 223 (2005: 409 103 035) ordinary shares of 0,1 cent each Less: 680 057 (2005: 5 940 057) ordinary shares held by the Share Incentive Scheme Preference share capital 54 700 000 convertible perpetual cumulative preference shares of 0,1 cent each. The preference shares earn dividends at a rate of 5,5% per annum until 4 November 2010. After 4 November 2010 the rate becomes a variable rate of 80% of the prime overdraft rate. Each preference share is convertible at the instance of the holder into one ordinary share between 4 November 2009 and 4 November 2010. If not converted into ordinary shares by 4 November 2010, thereafter the preference shares are redeemable at the instance of Mvelaphanda Group or will remain as perpetual preference shares.
750 100
750
750 100
750
443
409
443
409
(1)
(6)
55
55
497 Details of changes in the issued share capital are given in the directors report.
403
498
409
The unissued ordinary shares (subject to a maximum of 10% of the number of issued ordinary shares) are under the control of the directors until the next annual general meeting. The unissued preference shares are under the control of the directors until the next annual general meeting.
page sixty-one
2006 R000 8. INTEREST-BEARING BORROWINGS 8.1 Asset-based nance Secured Capitalised nance leases and instalment sale creditors Total amount owing Current portion included in current liabilities Secured by property, plant and equipment with a net book value of R160 189 000 (2005: R137 988 000). The liabilities bear interest at rates linked to the prime overdraft rate ranging between 8,5% and 11,5% per annum, and are repayable in equal monthly instalments of R6 874 000 (2005: R5 623 000). 8.2 Investment funding Secured Debentures issued to Absa Capital, a division of Absa Bank Limited Total amount owing Current portion included in current liabilities Secured by a cession and pledge of the ordinary shares and debentures held by Mvelaphanda Financial Services (Proprietary) Limited in Abvest Associates (Proprietary) Limited. The debentures have a coupon rate of 13,75% per annum compounded and capitalised annually on 1 April each year, and are repayable on 2 April 2008 or earlier to the extent that the debentures in Abvest Associates (Proprietary) Limited have been redeemed. Preference shares issued to Absa Capital, a division of Absa Bank Limited Total amount owing Current portion included in current liabilities Secured by a cession and pledge of the ordinary shares and debentures held by Mvelaphanda Financial Services (Proprietary) Limited in Abvest Associates (Proprietary) Limited. The preference shares have a coupon of 74% of the prime overdraft rate. The preference shares are redeemable on 2 April 2008. Preference shares issued to the Industrial Development Corporation of South Africa Limited Capital amount Dividends accrued and fair value adjustments Secured by a cession and pledge of the ordinary shares and claims held by Mvelaphanda Strategic Investments (Proprietary) Limited in/against Newshelf 776 (Proprietary) Limited. The preference shares have a coupon rate of the greater of an 8% real after-tax internal rate of return or 30% of the pro rata increase in the net asset value of the issuer company. The preference shares are redeemable at the option of the issuer company on or after 31 May 2010, but in any event by not later than 31 May 2012.
55 941 107 394 (51 453)
34 890 77 865 (42 975)
18 242 18 848 (606)
19 232 19 884 (652)
16 355 16 675 (320)
16 355 16 671 (316)
215 629 126 389 89 240
127 602 126 389 1 213
Mvelaphanda Group Limited page sixty-two
2006 R000 8. INTEREST-BEARING BORROWINGS (continued) 8.2 Investment funding (continued) Bank loan Total amount owing Current portion included in current liabilities Secured by property, plant and equipment and a cession of the trade receivables (limited to R20 000 000) in Swissport South Africa (Proprietary) Limited. The loan bears interest at a variable rate linked to the prime overdraft rate. The actual interest rate at 30 June 2006 was 10,25%. The loan is repayable in 36 equal monthly instalments of R890 000 each. 8.3 Other borrowings Unsecured Bank loans Total amount owing Current portion included in current liabilities The loans bear interest at variable rates linked to the JIBAR rate. The actual interest rate on 30 June 2005 was 8,86%. Interest is payable quarterly. Capital is repayable on or before 15 December 2005. Bank loan Total amount owing Current portion included in current liabilities The loan bears interest at variable rates linked to the JIBAR rate. Interest is payable quarterly. The actual interest rate on 30 June 2006 was 7,079% (2005: 9,25%). Capital is repayable on or before 1 May 2007. Term loan Total amount owing Current portion included in current liabilities The loan bears interest at variable rates linked to the JIBAR rate. Interest is payable quarterly. The actual interest rate on 30 June 2006 was 8,58% (2005: 8,16%). Capital is repayable on or before 3 July 2006. Other loans Total amount owing Current portion included in current liabilities The loans are unsecured, bear interest at varying rates and have no xed repayment terms. Net non-current interest-bearing borrowings 8.4 Reconciliation of total interest-bearing borrowings Net non-current interest-bearing borrowings Current portion of interest-bearing borrowings Total interest-bearing borrowings 36 (36) 50 963 (50 963) 16 056 (16 056)
19 235 27 477 (8 242)
33 732 (33 732)
27 361 29 961 (2 600)
50 000 52 615 (2 615)
548 1 556 (1 008)
325 402
275 988
325 402 127 676 453 078
275 988 83 898 359 886
The original acquisition of certain investments by Mvelaphanda Group, which investments are not classied as subsidiaries of Mvelaphanda Group, has been funded by non-recourse funding contained in special-purpose vehicles. Mvelaphanda Groups attributable share of the total outstanding capital balances in respect of these non-recourse funding obligations at 30 June 2006 is R503 million (2005: R571 million). The original acquisition of certain investments by Mvelaphanda Group, which investments are not classied as subsidiaries of Mvelaphanda Group, has been funded with secured external nance. Mvelaphanda Groups attributable share of the total outstanding capital balances in respect of these external nance obligations at 30 June 2006 is R32 million (2005: R32 million).
page sixty-three
2006 R000 9. NON-INTEREST-BEARING BORROWINGS 9.1 Unsecured Term loan Total amount owing Current portion included in current liabilities The loan is interest free, unsecured and is repayable in quarterly instalments of R700 000. Other loans Total amount owing Current portion included in current liabilities The loans are interest free, unsecured and have no xed repayment terms. Net non-current non-interest-bearing borrowings 9.2 Reconciliation of non-interest-bearing borrowings Net non-current non-interest-bearing borrowings Current portion of non-interest-bearing borrowings Total non-interest-bearing borrowings 10. DEFERRED TAXATION Balance at the beginning of the year Wear and tear Doubtful debts Prepayments Special taxation allowances Revaluation of investments Other Acquisitions/(disposals) of subsidiaries and businesses Revaluation of investments Other Charged to the income statement Wear and tear Doubtful debts Prepayments Special taxation allowances Revaluation of investments Other Balance at the end of the year Wear and tear Doubtful debts Prepayments Special taxation allowances Revaluation of investments Other Comprising Deferred taxation assets Deferred taxation liabilities 7 066 3 219 10 285 7 066 2 866 3 285 (419)
4 200 7 000 (2 800)
7 000 9 800 (2 800)
3 336 3 336
10 336
10 336 2 800 13 136
72 002 9 000 (1 368) 518 6 615 85 376 (28 139) 127 092 127 809 (717) 148 288 (124) (1 331) 1 153 3 551 147 186 (2 147) 347 382 8 876 (2 699) 1 671 10 166 360 371 (31 003) (30 972) 378 354 347 382
(17 285) 12 119 (1 291) 4 466 1 835 (34 414) 40 930 42 085 (1 155) 48 357 (3 119) (77) (3 948) 4 780 43 291 7 430 72 002 9 000 (1 368) 518 6 615 85 376 (28 139) (21 165) 93 167 72 002
32 688 32 688 24 897 24 897 57 585 57 585 57 585 57 585
6 571 6 571 26 117 26 117 32 688 32 688 32 688 32 688
Deferred taxation assets and liabilities are calculated at the rates of taxation at the balance sheet date.
Mvelaphanda Group Limited page sixty-four
2006 R000 11. PROVISIONS Balance at the beginning of the year Amounts utilised/settled during the year Balance at the end of the year Comprising Closure costs wholesale operations Post-retirement medical aid benets
5 182 (5 182)
18 789 (13 607) 5 182 3 012 2 170 5 182
12.
PROFIT FROM OPERATIONS Prot from continuing services businesses Loss from disposed mining services operations
262 204 262 204
239 120 (38 101) 201 019
1 465 1 465
5 376 5 376
Prot from operations is stated after charging: Auditors remuneration Audit fees current year underprovision prior years Other services
4 080 3 855 225 96 4 176
3 896 3 644 252 77 3 973 56 691 1 658 19 331 5 570 26 259 1 459 110 968 705 705 1 276 800 39 477 60 449 1 376 726
50 50 50
40 40 40
Depreciation Plant and equipment Oce equipment Computer equipment Furniture and ttings Motor vehicles Improvements to leasehold premises
47 671 2 413 15 348 3 618 32 440 1 954 103 444
Amortisation Contract development costs
Employee costs Salaries and bonuses Fringe benets Pension/provident fund contributions
1 074 172 31 176 64 636 1 169 984
page sixty-ve
Salaries, directors fees, allowances and fringe benets R000 12. PROFIT FROM OPERATIONS (continued) Directors emoluments paid by subsidiaries 2006 Executive directors YZ Cuba SM Levenberg WV Mavimbela PJA Mphafudi WJ Paskins TMG Sexwale BC Till MJ Willcox MSM Xayiya Non-executive directors MH Brodie KD Dlamini BD Hopkins OA Mabandla LM Mojela D Moshapalo JRT Moxon MZ Mpofu RM Patel CD Stein 83 96 83 55 55 83 83 55 18 385 2005 11 329
Bonus R000
Retirement benet and medical aid contributions R000
Total 2006 R000
Total 2005 R000
1 472 3 651 1 325 1 145 3 180 1 507 2 756 2 756
850 2 800 525 450 1 600 1 900 1 500 1 500 11 125 7 894
3 105 347 455 441
2 325 6 556 1 850 1 595 4 780 3 754 4 256 4 256 83 96 83 55 55 83 83 55 29 965 19 664
1 440 4 162 130 985 811 3 125 2 900 2 708 2 708 219 94 25 13 69 25 25 106 119 19 664
The remuneration of the executive directors is structured on the basis of a market-related guaranteed cost to company remuneration package (including current medical aid and retirement benet contributions), plus a discretionary bonus (with the maximum bonus in any one year not exceeding an amount equal to one years cost to company package) based on performance of the executive and merit. The allocation of the guaranteed cost to company package as between salary, allowances and fringe benets is not considered relevant. Messrs Levenberg, Sexwale, Till, Willcox and Xayiya, Ms Cuba and Dr Mphafudi have signed service and restraint agreements (for no monetary consideration in respect of such restraints) with Mvelaphanda Group. The salient terms of the service and restraint agreement are as follows: initial period of three years service from 1 April 2004; the service agreement can be terminated on three months written notice by either Mvelaphanda Group or the executive, provided such termination shall not take eect before 31 March 2007; restraint period of one year after termination of employment with no monetary consideration payable by Mvelaphanda Group in respect of such restraints; standard condentiality undertakings are given by each executive in favour of Mvelaphanda Group. Details of Mvelaphanda Group share options/scheme shares exercised/sold by directors during the year are set out below: Strike price (cents) 560 479 650 479 Number exercised/ sold on strike date 62 500 1 181 250 37 500 125 000 1 406 250 Sale price (cents) 790 790 790 790 Net proceeds (R000) 144 3 674 53 389
Name SM Levenberg BC Till
Date granted 10/04/2002 02/09/2002 04/04/2001 02/09/2002
Strike date 28/09/2005 28/09/2005 28/09/2005 28/09/2005
Mvelaphanda Group Limited page sixty-six
2006 R000 12. PROFIT FROM OPERATIONS (continued) Remuneration other than to employees for: Managerial services Technical services
552 4 860 5 412
4 007 5 554 9 561 24 865 13 154 6 433 71 44 523 46 8 726 2 189 1 403 9 646
2 500
2 500
Rentals under operating leases Land and buildings Equipment Motor vehicles Other
28 350 11 971 3 644 43 965
Foreign currency losses Losses on disposal of property, plant and equipment Losses on disposal of subsidiaries and businesses And after crediting: Administration fees received Foreign currency gains Prot on disposal of property, plant and equipment 13. INTEREST PAID Interest paid Preference dividends paid/accrued Finance charges
4 460 688 1 712 465 11 220
25 384 1 274 8 003 34 661
24 515 1 213 5 986 31 714
59 59
14.
INCOME FROM ASSOCIATES Groups share of retained income Impairment of investments in associates
615 901 (336 185) 279 716
118 252 (1 630) 116 622
15.
EXCEPTIONAL ITEM Goodwill impaired and written o on disposed mining services operations
34 809
page sixty-seven
2006 R000 16. TAXATION EXPENSE South African normal tax Current Overprovision prior years Deferred tax Normal Capital gains tax Capital gains tax Secondary tax on companies Foreign tax
61 172 64 417 (3 245) 148 288 1 102 147 186 4 149 9 281 356 223 246
53 871 57 201 (3 330) 48 357 5 066 43 291 2 388 22 509 285 127 410 156 664 (97 727) 6 141 (33 820) (95 081) (609) 29 711 (4 069) 58 937 45 679 22 509 285 127 410 116 502 33 786
1 307 3 612 (2 305) 24 897 24 897 2 770 8 399 37 373 74 192 (72 885) 304 (70 884) (2 305) 1 307 27 667 8 399 37 373
2 556 2 556 26 117 26 117 6 507 35 180 103 520 (100 964) 559 (99 897) (1 626) 2 556 26 117 6 507 35 180
Reconciliation of taxation amount South African normal tax amount Adjusted for: disallowable expenditure income from associates exempt income and exceptional items investment and other special allowances assessed losses other Total normal taxation Capital gains tax Secondary tax on companies Foreign tax Eective amount Net estimated tax losses available for utilisation against future taxable income Tax relief at current tax rates
401 808 (339 534) 1 062 (81 118) (250 924) (1 826) (1 299) (5 429) 62 274 151 335 9 281 356 223 246 110 773 32 124
Credits in respect of secondary tax on companies, available for seto by the Company against future dividends, amounted to Rnil (2005: R72 000).
Mvelaphanda Group Limited page sixty-eight
2006 Cents 17. EARNINGS PER ORDINARY SHARE AND DIVIDENDS 17.1 Earnings per ordinary share Basic Fully diluted Basic earnings per ordinary share is based on the consolidated net prot attributable to ordinary shareholders of R1 144 933 000 (2005: R403 614 000) and is calculated using the weighted average number of 423 407 424 (2005: 306 304 989) ordinary shares in issue during the year. Fully diluted earnings per ordinary share is based on the consolidated net prot attributable to ordinary shareholders of R1 144 933 000 (2005: R403 614 000) and is calculated using the weighted average number of 478 107 424 (2005: 306 304 989) ordinary shares, being the weighted average number of ordinary shares in issue during the year plus such further ordinary shares as are likely to be issued to preference shareholders on the basis that all preference shares will be converted into ordinary shares after 4 November 2009. 17.2 Headline earnings per ordinary share Basic Fully diluted Basic headline earnings per ordinary share is based on the consolidated headline net prot attributable to ordinary shareholders of R1 363 953 000 (2005: R439 542 000) and is calculated using the weighted average number of 423 407 424 (2005: 306 304 989) ordinary shares in issue during the year. Fully diluted headline earnings per ordinary share is based on the consolidated headline net prot attributable to ordinary shareholders of R1 363 953 000 (2005: R439 542 000) and is calculated using the weighted average number of 478 107 424 (2005: 306 304 989) ordinary shares, being the weighted average number of ordinary shares in issue during the year plus such further ordinary shares as are likely to be issued to preference shareholders on the basis that all preference shares will be converted into ordinary shares after 4 November 2009. 322,1 285,3
Group IFRS restated 2005 Cents
270,4 239,5
131,8 131,8
143,5 143,5
The dilutionary eect of options granted to directors and employees to subscribe for ordinary shares via the Share Incentive Scheme is not material.
page sixty-nine
Group IFRS restated 2006 2005 R000 R000 17. EARNINGS PER ORDINARY SHARE AND DIVIDENDS (continued) 17.3 Reconciliation between earnings and headline earnings Net prot attributable to ordinary shareholders Adjusted for: Goodwill impaired and written o Impairment of investments in associates Negative goodwill (discount) arising on acquisition of subsidiaries and investments Prot on sale of property, plant and equipment Headline net prot attributable to ordinary shareholders 17.4 Reconciliation of the weighted average number of ordinary shares in issue during the year and the fully diluted weighted average number of ordinary shares. Number of shares Weighted average number of ordinary shares in issue Weighted average number of ordinary shares held by a subsidiary Weighted average number of ordinary shares held by the Share Incentive Scheme Weighted average number of ordinary shares in issue during the year Ordinary shares to be issued on the basis that all preference shares will be converted into ordinary shares after 4 November 2009 Fully diluted weighted average number of ordinary shares 426 841 016 (3 433 592) 423 407 424 54 700 000 478 107 424 Number of shares 316 922 579 (7 208 141) (3 409 449) 306 304 989 306 304 989 1 144 933 356 336 185 (111 733) (5 788) 1 363 953 403 614 34 809 1 630 (511) 439 542
Company IFRS restated 2006 2005 R000 R000 17.5 Dividends paid Ordinary shares Final dividend of 10 cents per ordinary share for the year ended 30 June 2005 paid on 7 November 2005 Interim dividend of 5 cents per ordinary share for the year ended 30 June 2006 paid on 10 April 2006 Special dividend of 110 cents per ordinary share paid on 13 December 2004 Preference shares Dividend of 8,73973 cents per preference share for the period ended 31 December 2005 paid on 10 April 2006 Total dividends paid to equity holders 63 060 40 910 22 150 213 103 213 103
4 781 67 841
213 103
Details of the cash distribution to ordinary shareholders in lieu of a nal ordinary dividend for the year ended 30 June 2006 and the preference dividend for the period ended 30 June 2006 are disclosed in note 30.2.
Mvelaphanda Group Limited page seventy
2006 R000 18. CASH RECEIVED FROM CUSTOMERS Revenue Movement in trade and other receivables
3 102 432 (52 552) 3 049 880
3 221 310 133 637 3 354 947
19.
CASH PAID TO SUPPLIERS AND EMPLOYEES Revenue Prot from operations Depreciation Amortisation of contract development costs Impairment of goodwill Prot on disposal of property, plant and equipment, and subsidiaries and businesses Movement in inventories Movement in trade and other payables
3 102 432 (262 204) 2 840 228 (103 444) (356) 6 072 8 175 (37 370) 2 713 305
3 221 310 (201 019) 3 020 291 (110 968) (705) 920 (5 773) 15 671 2 919 436
20.
CASH GENERATED FROM OPERATIONS Prot from operations Depreciation Amortisation of contract development costs Impairment of goodwill Prot on disposal of property, plant and equipment, and subsidiaries and businesses Working capital changes
262 204 103 444 356 (6 072) (23 357) 336 575
201 019 110 968 705 (920) 123 739 435 511
1 465 3 363 4 828
5 376 4 067 9 443
21.
WORKING CAPITAL CHANGES Inventories Trade and other receivables Trade and other payables
(8 175) (52 552) 37 370 (23 357)
5 773 133 637 (15 671) 123 739
5 855 (2 492) 3 363
(4 145) 8 212 4 067
22.
TAXATION PAID Unpaid at the beginning of the year and on acquisitions/ (disposals) of subsidiaries and businesses Charged in the income statement Unpaid at the end of the year
28 755 74 958 (23 053) 80 660
20 586 79 053 (24 170) 75 469
12 476 (160) 12 316
9 063 9 063
page seventy-one
Group IFRS restated 2006 2005 R000 R000 23. ACQUISITIONS/(DISPOSALS) OF SUBSIDIARIES AND BUSINESSES Property, plant and equipment Trademarks Investments Inventory Trade and other receivables Cash and cash equivalents Trade and other payables Current interest-bearing liabilities Non-current interest-bearing liabilities Deferred taxation Taxation Net assets acquired Minority interest Goodwill Loss on disposal Negative goodwill (discount) arising on acquisition included in fair value adjustments and prot from investments Net purchase consideration Satised by: Ordinary shares issued/transferred Cash Loans
4 595 868 972 3 403 12 124 2 673 (7 579) (7 943) (2 119) (127 092) (4 585) 742 449 (207 745) 40 306 688 (111 733) 463 965 256 888 206 817 260 463 965
(26 769) 927 1 276 122 (5 462) (24 090) 13 290 16 611 (38 194) (40 930) 1 171 505 7 760 364 775 34 452 1 578 492 1 485 102 47 584 45 806 1 578 492 34 294
Net cash eect
204 144
The acquisitions/(disposals) of subsidiaries and businesses during the year relate mainly to the acquisition of a further 2,47% eective interest in Absa, the acquisition of the additional 25,1% of the Novare companies, and the acquisitions/(disposals) of businesses and subsidiaries in the food services and security services operations. 24. RELATED-PARTY TRANSACTIONS 24.1 Parent company Mvelaphanda Holdings is the controlling company of Mvelaphanda Group. Acquisition of a further eective 24,7% interest in Batho Bonke from Mvelaphanda Holdings On 27 September 2005, Mvelaphanda Group announced that it had reached agreement with Mvelaphanda Holdings and representatives of Batho Bonke to acquire from Mvelaphanda Holdings a further eective 24,7% interest in Batho Bonke (the Batho Bonke acquisition), equating to a further eective 2,47% interest in Absa. The purchase consideration paid by Mvelaphanda Group in terms of the Batho Bonke acquisition was R461 million, which price represented a discount of approximately 30% (equivalent in value to R200 million) to the market value of the Batho Bonke shares at the time of concluding the Batho Bonke acquisition. The purchase price was settled by the issue of 33,9 million new Mvelaphanda Group ordinary shares and the payment of R190 million in cash. The Batho Bonke acquisition was approved by Mvelaphanda Group ordinary shareholders, excluding Mvelaphanda Holdings and its associates, at a general meeting held on 30 November 2005, and was implemented on 20 December 2005. 24.2 Subsidiary companies Details of principal subsidiary companies are disclosed on page 78. All transactions between Mvelaphanda Group and/or subsidiary companies are concluded at arms length. On consolidation, intercompany transactions are eliminated. 24.3 Associated companies Details of investments in associated companies are disclosed in note 4.2. All transactions between Mvelaphanda Group and/or its subsidiaries, and the associated companies, are concluded at arms length.
Mvelaphanda Group Limited page seventy-two
24.
RELATED-PARTY TRANSACTIONS (continued) 24.4 Directors (i) The names of the directors of Mvelaphanda Group are disclosed on pages 8 and 9. (ii) Details of the directors emoluments are disclosed in note 12. Details of the directors interests in Mvelaphanda Group ordinary shares and options/scheme shares are disclosed in the directors report.
(iii) Mr Stein, a non-executive director of Mvelaphanda Group, was formerly a director of Werkmans Inc., the Groups attorneys. All fees paid to Werkmans Inc. are determined on an arms length basis. The total of all fees paid to Werkmans Inc. during the year ended 30 June 2006 amounted R3 078 000 (2005: R4 213 737). 24.5 Shareholders (i) A detailed analysis of shareholders is set out on page 80. (ii) Dividends paid to ordinary shareholders during the year ended 30 June 2006 amounted to R63 060 000. (iii) Dividends paid to preference shareholders during the year ended 30 June 2006 amounted to R4 781 000. Group IFRS restated 2005 R000 Company IFRS restated 2006 2005 R000 R000
2006 R000 25. CAPITAL COMMITMENTS Capital expenditure Commitments in respect of capital expenditure approved by the directors: Contracted for Not contracted for
3 128 33 090 36 218
6 163 46 400 52 563
The above commitments are to be nanced from cash and cash equivalents, and existing bank facilities. Operating leases The minimum commitments are: Land and buildings Equipment Motor vehicles Total operating lease commitments Less: Amounts accrued as a result of accounting for leases on the straight-line basis Net operating lease commitments not provided for Analysis of total operating lease commitments due in year one due in year two due in year three due in year four Thereafter
35 058 6 080 9 654 50 792 (387) 50 405 24 301 17 724 6 191 1 920 656 50 792
61 195 10 011 9 273 80 479 80 479 26 953 21 896 20 390 6 703 4 537 80 479
Material lease commitments relate mainly to immovable property, vehicles and equipment. Specic details and terms of the leases vary between dierent contracts. Renewal options, where these exist, are for between 1 and 5 years. Rentals on certain leases escalate annually. The majority of rentals under property lease renewal options are determined with reference to market rentals at the time of renewal. There are no contingent rental payments.
page seventy-three
26.
CONTINGENT LIABILITIES 26.1 Bank facilities Bank facilities of certain subsidiaries are secured by a negative pledge over certain assets and a cession of book debts of R105 389 000 (2005: R77 727 000). Bank facilities of certain subsidiary companies and long-term interest-bearing liabilities of R76 960 000 (2005: R110 062 000) incurred by certain subsidiary companies have been guaranteed by Mvelaphanda Group. 26.2 Other guarantees Group IFRS restated 2005 R000 13 466 14 425 Company IFRS restated 2006 2005 R000 R000
2006 R000 Bank guarantees to clients Bank guarantees to suppliers 8 991 9 740
26.3 Secondary tax on companies In the event that the Company were to declare a dividend equal to its distributable reserves, it would be liable for secondary tax on companies amounting to R126 342 000 (2005: R109 534 000). 26.4 Outstanding litigation Protea Aviation Security (Proprietary) Limited has been named as second defendant with KLM Royal Dutch Airlines (as rst defendant) in a claim relating to the alleged theft of approximately US$9,65 million in foreign currency and valuable cargo during an alleged robbery which took place at Johannesburg International Airport in December 2001. Investigations carried out to date and legal opinion obtained indicates that the Group is unlikely to be held liable for any amounts in respect of this case. 27. UNCOVERED FOREIGN LIABILITIES Group IFRS restated 2005 R000 104 22 57 126 Company IFRS restated 2006 2005 R000 R000
2006 R000 Foreign currency amounts (000) US dollars Sterling Euros Other (rand equivalent) (R000) 28. 131 20 80 205
FINANCIAL INSTRUMENTS Business and credit concentration Financial instruments which potentially subject the Group to concentrations of credit risk are primarily cash, liquid investments, nancial assets, long-term investments and trade receivables. As regards cash and liquid investments, the Group deals with major nancial institutions in South Africa. Other long-term investments are secured where considered appropriate or necessary. The Groups customers are concentrated almost entirely in South Africa. The Group establishes an allowance for doubtful debts based upon factors surrounding the credit risk of specic customers, historical trends and other information. Foreign currency risk The Group conducts certain transactions in various foreign currencies. As a result, it is subject to the transactional exposure that arises from foreign exchange rate movements between the dates that foreign currency transactions are recorded (foreign sales and purchases) and the dates upon which they are consummated (cash receipts and cash disbursements in foreign currencies). Where considered appropriate, the Group hedges its foreign currency exposure for either purchase or sale transactions using forward exchange contracts or similar products. In other instances, the risk arising from foreign exchange rate movements is priced into the cost of goods or services and recovered directly from customers. Market risk on listed investments Certain of the Groups investments are listed on the JSE. The valuation of these investments will uctuate as a result of changes in the share prices of these investment companies. The Groups investment strategy focuses on companies with strong market positions, excellent management, sound industry fundamentals and proven track records.
Mvelaphanda Group Limited page seventy-four
28.
FINANCIAL INSTRUMENTS (continued) Interest rate risk The Group is exposed to interest rate risk through its cash and cash equivalents, nancial assets, long-term investments and interestbearing borrowings. In certain circumstances the Group hedges its current interest rate exposure using interest rate swaps. The exposure to interest rate risk at the balance sheet date is: Floating interest rate R000 Assets Bank balances Term deposits Investments in associates Other investments 315 982 209 430 80 921 606 333 Liabilities Capitalised nance leases and instalment sale creditors Debentures and preference shares Bank loans Other loans 107 394 232 304 94 496 36 434 230 Fixed interest rate R000 18 848 18 848 Noninterestbearing R000 1 174 396 2 817 693 3 992 089 10 285 10 285
29.
RETIREMENT BENEFITS Approximately 94% (2005: 85%) of the Groups employees are members of various pension and provident funds. These funds include the Mvelaphanda Group Provident Fund, a dened-contribution fund which is governed by the Pension Funds Act No. 24 of 1956, various independently administered dened-contribution funds of the operating companies, and dened-contribution funds for the industries in which Group employees work. The Groups contributions to all retirement funds are charged against income when incurred. The Group contributed R64 936 000 (2005: R60 449 000) to dened-contribution plans during the year. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE 30.1 Disposal of 22,9% interest in Mvelaphanda Resources to Mvelaphanda Holdings On 30 June 2006, Mvelaphanda Group received a written oer from Mvelaphanda Holdings to dispose of its 22,9% interest in Mvelaphanda Resources to Mvelaphanda Holdings (the Mvelaphanda Resources disposal). The purchase consideration payable by Mvelaphanda Holdings to Mvelaphanda Group amounted to R1,183 billion. The Mvelaphanda Resources disposal was approved by Mvelaphanda Group ordinary shareholders at a general meeting on 28 August 2006 and was implemented on 28 August 2006. The purchase consideration payable in terms of the Mvelaphanda Resources disposal was received by Mvelaphanda Group in cash on 28 August 2006. 30.2 Cash distribution and dividend Ordinary shares The directors of Mvelaphanda Group have resolved to declare a cash distribution out of share premium in lieu of a nal ordinary dividend of 13,0 cents per ordinary share to ordinary shareholders. The last day to trade cum the cash distribution in order to participate in the cash distribution is Friday, 3 November 2006. The ordinary shares of Mvelaphanda Group will commence trading ex the cash distribution from the commencement of business on Monday, 6 November 2006 and the record date will be Friday, 10 November 2006. The cash distribution will be paid to ordinary shareholders on Monday, 13 November 2006. Ordinary share certicates may not be dematerialised or rematerialised between Monday, 6 November 2006 and Friday, 10 November 2006, both days inclusive. Preference shares The directors of Mvelaphanda Group have resolved to declare a cash preference dividend (No. 2) for the period ending 30 June 2006 of 27,27397 cents per preference share to preference shareholders. The last day to trade cum the preference dividend in order to participate in the preference dividend is Friday, 6 October 2006. The preference shares of Mvelaphanda Group will commence trading ex the preference dividend from the commencement of business on Monday, 9 October 2006 and the record date will be Friday, 13 October 2006. The preference dividend will be paid to preference shareholders on Monday, 16 October 2006. Preference share certicates may not be dematerialised or rematerialised between Monday, 9 October 2006 and Friday, 13 October 2006, both days inclusive.
30.
page seventy-ve
31.
INTERNATIONAL FINANCIAL REPORTING STANDARDS 31.1 Basis of preparation The nancial statements for the year ended 30 June 2006 have been prepared in accordance with IFRS. In accordance with IFRS1 First-time Adoption of IFRS, Mvelaphanda Group has prepared an opening IFRS balance sheet at the date of transition to IFRS, being 1 July 2004. Comparative gures for the year ended 30 June 2005 have been restated accordingly. 31.2 Elections applicable on 1 July 2004 In applying IFRS, Mvelaphanda Group has made an election in terms of IFRS1 First-time Adoption of IFRS that IFRS3 Business Combinations will only be applied to business combinations for which the agreement date is after 31 March 2004. In respect of business combinations for which the agreement date is prior to this date, goodwill is included on the balance sheet at the carrying value at 31 March 2004 as previously recorded under SA GAAP. The classication and accounting treatment of business combinations which occurred prior to 31 March 2004 have not been reconsidered in preparing the Groups opening IFRS balance sheet at 1 July 2004. 31.3 Material adjustments between SA GAAP and IFRS Adjustments which reect the major dierences between SA GAAP and IFRS are: Consolidation of special-purpose entities Certain special-purpose entities which were previously not consolidated under SA GAAP have been consolidated in accordance with the requirement of IAS27 Consolidated and Separate Financial Statements. These special-purpose entities relate to certain of Mvelaphanda Groups investments and were put in place to facilitate the non-recourse nancing of the relevant investments. Trademarks In accordance with IFRS1, as applicable to IAS38 Intangible Assets, trademarks which were previously written o under SA GAAP have been recognised on the balance sheet at their impaired carrying value at 1 July 2004 and are tested annually for impairment. Property, plant and equipment Depreciation of propery, plant and equipment has been calculated with reference to the estimated useful life and residual value of each part of an item of property, plant and equipment with a cost that is signicant in relation to the total cost of the item, in accordance with IAS16 Property, Plant and Equipment. Investments in associated companies The investments in and income from associated companies have been restated as a result of the restatement of the results of the associated companies on adoption of IFRS by the associated companies.
Mvelaphanda Group Limited page seventy-six
31.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued) 31.4 Reconciliation of SA GAAP to IFRS No adjustments are required to the Companys audited results for the year ended 30 June 2005 as a result of the adoption of IFRS. The nancial eects of the adjustments to the Groups audited results for the year ended 30 June 2005 as a result of the adoption of IFRS are set out below. BALANCE SHEET at 30 June 2005 As previously reported under SA GAAP R000 Eect of transition to IFRS R000 IFRS restated R000
Group ASSETS Non-current assets Property, plant and equipment Goodwill Other intangible assets Investments in associates Other investments Deferred taxation Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Share premium Non-distributable reserves Distributable reserves Minority interests Non-current liabilities Interest-bearing borrowings Non-interest-bearing borrowings Deferred taxation Current liabilities Trade and other payables Current portion of interest-bearing borrowings Current portion of non-interest-bearing borrowings Provisions Taxation liabilities Total equity and liabilities
2 886 010 333 140 616 983 927 902 615 995 240 37 105 668 582 40 930 450 276 177 376 3 554 592
212 319 (18 111) 22 500 60 000 (3 063) 166 933 (15 940) 212 319
3 098 329 315 029 639 483 60 927 899 552 1 162 173 21 165 668 582 40 930 450 276 177 376 3 766 911
2 610 185 403 1 408 279 49 045 1 151 383 1 075 228 130 148 386 10 336 69 408 716 277 600 227 83 898 2 800 5 182 24 170 3 554 592
60 245 (49 045) 109 290 151 361 127 602 23 759 713 713 212 319
2 670 430 403 1 408 279 1 260 673 1 075 379 491 275 988 10 336 93 167 716 990 600 940 83 898 2 800 5 182 24 170 3 766 911
page seventy-seven
31.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued) INCOME STATEMENT for the year ended 30 June 2005 As previously reported under SA GAAP R000 3 221 310 (2 545 535) 675 775 82 706 (551 612) 206 869 19 951 (29 476) 1 064 227 231 121 316 (36 439) 510 516 (124 533) 385 983 376 786 9 197 385 983 Basic earnings per ordinary share (cents) Fully diluted earnings per ordinary share (cents) 123,0 123,0 Eect of transition to IFRS R000 (5 850) (5 850) (5 850) (2 238) 40 857 (4 694) 1 630 29 705 (2 877) 26 828 26 828 26 828 8,8 8,8 IFRS restated R000 3 221 310 (2 551 385) 669 925 82 706 (551 612) 201 019 19 951 (31 714) 1 064 268 088 116 622 (34 809) 540 221 (127 410) 412 811 403 614 9 197 412 811 131,8 131,8
Group Revenue Cost of sales and direct expenses Gross prot Other operating prot Operating expenses Prot from operations Interest received Interest paid Dividends received Fair value adjustments and prot from investments Income from associates Exceptional items Net prot before taxation Taxation expense Net prot after taxation Attributable to: Ordinary shareholders Minority interests
RECONCILIATION OF TOTAL CAPITAL AND RESERVES Group Total capital and reserves at the beginning of the year as previously reported under SA GAAP Eect of transition to IFRS: Consolidation of special-purpose entities Trademarks previously written o Property, plant and equipment Investments in associated companies Total capital and reserves at the end of the year (IFRS restated) R000 2005 2 610 185 33 445 42 600 (12 737) (3 063) 2 670 430 R000 2004 1 004 072 42 000 (8 583) 1 037 489
Mvelaphanda Group Limited page seventy-eight
Principal Subsidiaries
DETAILS OF PRINCIPAL SUBSIDIARY COMPANIES at 30 June 2006 % holding INVESTMENT COMPANIES Directly held Business Venture Investments No 819 (Proprietary) Limited Business Venture Investments No 821 (Proprietary) Limited Business Venture Investments No 906 (Proprietary) Limited Lexshell 650 (Proprietary) Limited Mvelaphanda Capital (Proprietary) Limited Mvelaphanda Financial Services (Proprietary) Limited Mvelaphanda Private Equity (Proprietary) Limited Mvelaphanda Property Investments (Proprietary) Limited Mvelaphanda Strategic Investments (Proprietary) Limited Vulani Amasango Investments (Proprietary) Limited Indirectly held Dunrose Trading 108 (Proprietary) Limited Mvelaphanda Financial Asset 01 (Proprietary) Limited Newshelf 776 (Proprietary) Limited OPERATING COMPANIES Directly held Mvelaserve Limited Indirectly held Black Steer Holdings (Proprietary) Limited Coin Security Group (Proprietary) Limited King Pie Holdings (Proprietary) Limited Mvelaphanda Management Services (Proprietary) Limited Mvelaphanda Treasury and Financial Services (Proprietary) Limited Novare Actuaries and Consultants (Proprietary) Limited Novare Investments (Proprietary) Limited Protea Security Services (2000) (Proprietary) Limited Rebhold Distribution Services (Proprietary) Limited Rebhold Freight Services (2000) (Proprietary) Limited Rebserve Cleaning Services (Proprietary) Limited RoyalSechaba Holdings (Proprietary) Limited TFMC Holdings (Proprietary) Limited Total Facilities Management Company (Proprietary) Limited Trollope Mining Services (2000) (Proprietary) Limited Zonke Monitoring Systems (Proprietary) Limited Nature of business (refer to notes) Issued capital R000 Shares at cost R000 Loans R000
50,5 67,5 93,4 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0
1 1 1 1 1 1 1 1 1 1 1 1 1
# # # # # # # # # # # # #
94 864 126 681 113 942 25 150 17 117 27 736 53 794 15 724 103 191
105 288 14 819 255 555 (3 240) 111
100,0 100,0 100,0 100,0 100,0 100,0 50,1 50,1 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 73,0
1 2 3 2 4 4 5 5 3 6 7 8 9 10 10 11 10
# # # # # # # # # # # # 1 # # # #
100 175 678 374
786 678 296 909 20 297 1 371 522
The above details are given in respect of interests in subsidiaries, where material. A full list of subsidiaries is available to shareholders, on request, at the registered oce of the Company. All principal subsidiaries are incorporated in South Africa.
Notes 1. Intermediate/investment holding company 2. Franchising 3. Security services 4. Management and/or treasury services 5. Asset management and consulting services 6. Distribution services 7. Freight forwarding services 8. Cleaning services 9. Contract catering services 10. Facilities management, professional and technical services 11. Mining services # Less than R1 000
Principal Investments
page seventy-nine
DETAILS OF PRINCIPAL INVESTMENTS at 30 June 2006 Investment STRATEGIC INVESTMENTS Absa Group Limited Eective interest Sector Nature of business
4,47%
Financial services
Banking, insurance, nancial and property products and services group listed on the JSE. Institutional asset management business oering alternative investment solutions. Construction group listed on the JSE. Private healthcare service provider. Resources investment and operating company listed on the JSE.
Abvest Associates (Proprietary) Limited Group Five Limited Life Healthcare Group Holdings (Proprietary) Limited Mvelaphanda Resources Limited
30,0% 10,8% 18,1% 22,9%
Financial services Construction Healthcare Mining and resources
OTHER INVESTMENTS African Renaissance Holdings Limited Broll Property Group (Proprietary) Limited CHC Helicopters South Africa (Proprietary) Limited Mvelaphanda Investments 2,9% 20,0% 25,0% 50,0% Investment Property Transport Investment Investment holding company. Property management services. Held via Mvelaphanda Investments. Aviation contracting services. A trust which was established in conjunction with Absa to identify and acquire interests in companies. Currently holds the interest in Broll Property Group noted above. Property management and development company based in the Western Cape. Designs, builds and implements tailored information and telecommunications technologies. Part of the German-based Siemens Group of companies. Logistics service provider operating at major airports in South Africa. Logistics group listed on the JSE. Provider of courier and express delivery services. Part of the Unitrans Limited group. Provider of transport and logistic services to the fuel and chemicals industries of southern Africa. Part of the Unitrans Limited group.
Mvelaphanda Property Development Holding Company (Proprietary) Limited Siemens Business Services (Proprietary) Limited
37,5% 16,5%
Property Information technology
Swissport South Africa (Proprietary) Limited Unitrans Limited Unitrans Express Deliveries (Proprietary) Limited Unitrans Fuel and Chemicals (Proprietary) Limited
39,2% 4,5% 25,0% 25,0%
Transport Transport Transport Transport
The above details are given in respect of the eective interests held by the Group in the ultimate target investment companies, notwithstanding that individual investments may be held through special-purpose entities.
Mvelaphanda Group Limited page eighty
Analysis of Ordinary Shareholders at 30 June 2006
Size of holdings 1 1 000 1 001 10 000 10 001 100 000 100 001 1 000 000 Over 1 000 000 shares
Number of ordinary shareholders 1 034 1 371 402 176 59 3 042
% of total 34,0 45,1 13,2 5,8 1,9 100,0
Number of ordinary shares 363 978 5 091 986 13 102 224 63 240 870 361 201 165 443 000 223
% of total 0,1 1,1 3,0 14,3 81,5 100,0
Analysis of holdings Insurance companies, pension funds, corporate bodies and nominee companies Individuals 889 2 153 3 042 Beneficial shareholders holding more than 5% of share capital Direct Mvelaphanda Holdings(1) Indirect Mvelaphanda Empowerment Trust(2) Mvelaphanda Investment Trust TJS Family Trust(2) Number of shareholders 3 022 12 1 7 3 042
(2)
29,2 70,8 100,0
425 391 899 17 608 324 443 000 223 Number of shares
96,0 4,0 100,0 % of issued share capital
228 576 631
51,6
30 165 992 24 785 245 52 273 139 Number of shares 212 511 429 228 667 792 680 057 1 140 945 443 000 223
6,8 5,6 11,8 % of issued share capital 47,9 51,6 0,2 0,3 100,0
Public and non-public shareholders Public shareholders Non-public shareholders Directors(3) Share Incentive Scheme Employees
Notes 1. In the case of Mvelaphanda Holdings, the number of Mvelaphanda Group ordinary shares includes Mvelaphanda Group ordinary shares owned and/or controlled by Mvelaphanda Holdings and/or in respect of which Mvelaphanda Holdings holds the voting rights. Such voting rights include voting rights in respect of the Mvelaphanda Group ordinary shares held by TJS Family Trust, Mvelaphanda Empowerment Trust and Mvelaphanda Investment Trust. 2. Held via Mvelaphanda Holdings. 3. Includes directors and their associates, and Mvelaphanda Holdings.
Administration
page eighty-one
REGISTERED OFFICE Mvelaphanda House Hunts End 36 Wierda Road West Wierda Valley Sandton PO Box 1639, Rivonia, 2128
ATTORNEYS Bowman Gilfillan 165 West Street Sandton PO Box 785812, Sandton, 2146 Werkmans Inc. 155 5th Street Sandton Private Bag 10015, Sandton, 2146
COMPANY REGISTRATION NUMBER 1995/004153/06
TRANSFER SECRETARIES SHARE CODES Ordinary shares: MVG Preference shares: MVGP Computershare Investor Services 2004 (Proprietary) Limited 70 Marshall Street Johannesburg PO Box 61051, Marshalltown, 2107
ISIN CODES Ordinary shares: ZAE 000060737 Preference shares: ZAE 000073540
SPONSOR Deutsche Securities SA (Proprietary) Limited 3 Exchange Square 87 Maude Street Sandton Private Bag X9933, Sandton, 2146
WEBSITE www.mvelagroup.co.za
COMPANY SECRETARY Mvelaphanda Management Services (Proprietary) Limited Hunts End, 36 Wierda Road West Wierda Valley Sandton PO Box 1639, Rivonia, 2128
BANKERS The Standard Bank of South Africa Limited Nedbank, a division of Nedcor Bank Limited First National Bank, a division of FirstRand Bank Limited
SHAREHOLDERS DIARY Annual general meeting 26 January 2007 March 2007
AUDITORS PKF (Jhb) Inc. PKF House 15 Girton Road Parktown Johannesburg Private Bag X30500, Houghton, 2014
Interim results announcement Audited final results and dividend announcement Interim dividends paid Final dividends paid
September 2007 April 2007 October 2007
Mvelaphanda Group Limited page eighty-two
Notice to Shareholders
Notice is hereby given that the eleventh annual general meeting of shareholders of Mvelaphanda Group Limited (Mvelaphanda Group or the Company) will be held in the boardroom, Mvelaphanda House, Hunts End, 36 Wierda Road West, Wierda Valley, Sandton, at 11:00 on Friday, 26 January 2007 to conduct the following business: 1. 2. 3. 4. To receive and consider the annual nancial statements for the year ended 30 June 2006. To approve the remuneration of the directors for the year ended 30 June 2006. To conrm the reappointment of PKF (Jhb) Inc. as auditors. To re-elect the directors who retire in accordance with the provisions of the Companys articles of association. In terms of clause 53.2 of the articles of association, Messrs Hopkins, Moshapalo, Till, Willcox, Ms Cuba and Mrs Mpofu retire at the forthcoming annual general meeting, but, being eligible, oer themselves for re-election. Bryan Hopkins
BCom (Hons), CA(SA)
Bryan Hopkins is currently an independent non-executive director of Pangbourne Properties Limited and a member of its audit committee. He is also serving a three-year term on the directorate of Market Abuse. He was previously an executive director and CIO of Abvest Associates and Old Mutual Asset Managers. Prior to that he was Professor of Accounting at the University of Cape Town. David Moshapalo David Moshapalo is currently a member of Bombela Concession (Proprietary) Limited, Chairman of Gobodo Inc. and a board member of the Black Business Council. His previous positions include having been the convenor of the State Presidents Black Business Working Group, a member of Nedlac Council, an executive member of Business South Africa, Vice-chairperson of the Gauteng Tender Board and an alternate director of MTN Group Limited. Brett Till
BCom, BAcc (Wits), CA(SA)
After qualifying as a chartered accountant in 1993, Brett Till spent 18 months working in London and became a partner of PKF in 1996. He joined Rebserve in 1998 and was appointed Financial Director in 1999. Mark Willcox
BA, LLB, Post-grad Dip (Tax) (UCT)
Upon completing his studies, Mark Willcox worked for an investment bank based in the USA. During this period he was exposed to various signicant mining and property transactions in the USA, the Far East and Africa. Mark is also the Chief Executive Ocer of Mvelaphanda Holdings. Yolanda Cuba
BCom (Statistics) (UCT), BCom Hons (Accounting) (Natal), CA(SA)
Yolanda Cuba joined Mvelaphanda Holdings corporate nance division in January 2003. She has worked in a wide range of companies, including Robertsons Foods and Metropolitan Life, and has also been involved in a number of development companies where she gives assistance and advice on nancial matters and strategic investment. Mpumi Mpofu
BA (University of Coventry), Post-graduate Degree Town Planning (University of Coventry)
Mpumi Mpofu is the Director-General in the Department of Transport and prior to that in the Department of Housing. She has also held a number of other senior positions including having been a member of the Gauteng Development Tribunal, a board member of the National Housing Finance Corporation and a board member of the South African Housing Trust. 5. To consider and, if deemed t, to pass, with or without modication, the following ordinary resolution: Ordinary resolution number 1 Resolved that the authorised but unissued ordinary shares in the share capital of the Company be placed under the control of the directors of the Company in terms of sections 221 and 222 of the Companies Act, 1973 (Act No 61 of 1973), as amended (Companies Act), until the next annual general meeting, to enable them to allot and issue such ordinary shares at their discretion, subject to the provisions of the Companies Act and the Listings Requirements of the JSE Limited (JSE Listings Requirements), provided that the maximum number of ordinary shares which can be issued in terms of this authority in the aggregate in any one year shall not exceed 10% of the issued ordinary share capital of the Company, from time to time. This ordinary resolution number 1 is to be voted on by the holders of ordinary shares (ordinary shareholders) in the Company only.
Notice to Shareholders (continued)
page eighty-three
6.
To consider and, if deemed t, to pass, with or without modication, the following ordinary resolution: Ordinary resolution number 2 Resolved that the directors of the Company be and they are hereby authorised by way of a general authority to issue all or any of the authorised but unissued ordinary shares in the capital of the Company for cash, as and when they in their discretion deem t, subject to the JSE Listings Requirements, which currently provide, inter alia, that:
this authority shall be valid until the next annual general meeting of the Company, provided it shall not extend beyond 15 months from the date that this authority is given; a paid press announcement giving full details, including the impact on net asset value and earnings per ordinary share, will be published at the time of any issue of ordinary shares representing, on a cumulative basis within one year, 5% or more of the number of the Companys ordinary shares in issue prior to any such issue;
issues in the aggregate in any one year shall not exceed 15% of the number of ordinary shares in the Companys issued share capital from time to time; in determining the price at which an issue of ordinary shares may be made in terms of this authority, the maximum discount permitted will be 10% of the weighted average traded price determined over the 30 business days prior to the date that the price of the issue is determined or agreed by the directors; and
any such issue will only be made to public shareholders as dened in the JSE Listings Requirements;
provided that the maximum number of ordinary shares which can be issued in terms of this authority in the aggregate in any one year shall not exceed 10% of the issued ordinary share capital of the Company, from time to time. This ordinary resolution number 2 is to be voted on by the ordinary shareholders only. The approval of a 75% majority of the votes cast by ordinary shareholders present or represented by proxy at this annual general meeting is required for the authority in 6 above to become eective. 7. To consider and, if deemed t, to pass, with or without modication, the following ordinary resolution: Ordinary resolution number 3 Resolved that the authorised but unissued convertible perpetual cumulative preference shares (preference shares) in the share capital of the Company be placed under the control of the directors of the Company in terms of sections 221 and 222 of the Companies Act, until the next annual general meeting, to enable them to allot and issue such preference shares at their discretion, subject to the provisions of the Companies Act and the JSE Listings Requirements. This ordinary resolution number 3 is to be voted on by the ordinary shareholders only. 8. To consider and, if deemed t, to pass, with or without modication, the following ordinary resolution: Ordinary resolution number 4 Resolved that the directors of the Company be and they are hereby authorised by way of a general authority to issue all or any of the authorised but unissued preference shares in the capital of the Company for cash, as and when they in their discretion deem t, subject to the JSE Listings Requirements, which currently provide, inter alia, that:
this authority shall be valid until the next annual general meeting of the Company, provided it shall not extend beyond 15 months from the date that this authority is given; a paid press announcement giving full details, including the impact on net asset value and earnings per ordinary share, will be published at the time of any issue of preference shares representing, on a cumulative basis within one year, 5% or more of the number of the Companys preference shares in issue prior to any such issue;
issues in the aggregate in any one year shall not exceed 15% of the number of preference shares in the Companys issued share capital from time to time;
Mvelaphanda Group Limited page eighty-four
in determining the price at which an issue of preference shares may be made in terms of this authority, the maximum discount permitted will be 10% of the weighted average traded price determined over the 30 business days prior to the date that the price of the issue is determined or agreed by the directors; and
any such issue will only be made to the public shareholders as dened in the JSE Listings Requirements.
This ordinary resolution number 4 is to be voted on by the ordinary shareholders only. The approval of a 75% majority of the votes cast by ordinary shareholders present or represented by proxy at this annual general meeting is required for the authority in 8 above to become eective. 9. To consider and, if deemed t, to pass, with or without modication, the following special resolution: Special resolution number 1 Resolved that the directors of the Company be and are hereby authorised by way of a general approval pursuant, inter alia, to articles 13A and 13B of the Companys articles of association to facilitate, inter alia, the acquisition by Mvelaphanda Group or a subsidiary of Mvelaphanda Group (collectively the Group), from time to time, of the issued ordinary shares of Mvelaphanda Group upon such terms and conditions and in such numbers as the directors of the Company may from time to time decide, but subject to the provisions of the Companies Act and the JSE Listings Requirements from time to time, which general approval shall endure until the next annual general meeting of Mvelaphanda Group; provided that it shall not extend beyond 15 months from the date of the annual general meeting at which this special resolution is passed, it being recorded that the JSE Listings Requirements currently require, inter alia, in relation to a general approval of shareholders that:
acquisitions of securities be implemented through the order book operated by the JSE Limited trading system and done without any prior understanding or arrangement between Mvelaphanda Group and the counterparty; acquisitions in any one nancial year are limited to a maximum of 20% of Mvelaphanda Groups issued share capital of the relevant class; provided that acquisitions by subsidiaries of Mvelaphanda Group are limited to a maximum of 10% of Mvelaphanda Groups issued share capital of the relevant class;
an acquisition may not be made at a price more than 10% above the weighted average of the market value for the shares in question for the ve business days immediately preceding the date on which the acquisition is agreed; a paid press announcement containing details of such acquisitions must be published as soon as Mvelaphanda Group and/or any of its subsidiaries has/have acquired shares constituting, on a cumulative basis, 3% of the number of shares of the relevant class in issue at the date of the annual general meeting at which this special resolution is passed (initial number) and for each 3% in aggregate of the initial number acquired thereafter;
at any point in time, the Company may only appoint one agent to eect any repurchases; such repurchases may only be eected if, thereafter, the Company still complies with the spread requirements of the JSE Limited; and no repurchase may take place during prohibited periods stipulated by the Listings Requirements.
This special resolution number 1 is to be voted on by the ordinary shareholders and the holders of preference shares (preference shareholders) in the Company. The reason for this special resolution is to obtain, and the eect thereof is to grant the Company, a general approval in terms of the Companies Act for the acquisition by the Company, or a subsidiary of the Company, of ordinary shares in the capital of the Company, which general approval shall be valid until the next annual general meeting of the Company; provided that the general authority shall not extend beyond 15 months from the date of the annual general meeting at which this special resolution is passed. The board of directors (board) of Mvelaphanda Group, as at the date of this notice, has previously stated its intention to purchase ordinary shares in terms of the general authority granted at the annual general meeting held on 27 January 2006. It is, however, proposed, and the board believes it to be in the best interests of Mvelaphanda Group, that shareholders pass a special resolution granting Mvelaphanda Group and its subsidiaries a further general authority to acquire Mvelaphanda Group shares. Such general authority will provide Mvelaphanda Group and its subsidiaries with the exibility, subject to the requirements of the Companies Act and the JSE Limited, to purchase ordinary shares should it be in the interests of Mvelaphanda Group and/or its subsidiaries at any time while the general authority subsists.
page eighty-ve
After considering the eect of a purchase of the maximum number of shares which may be purchased, and subject to any signicant changes in market conditions, the board is satised that for a period of 12 months from the date of this notice:

the Company and the Group will be able, in the ordinary course of business, to pay their debts as they become due; the assets of the Company and the Group, measured in accordance with the accounting policies used in the latest audited annual nancial statements, will be in excess of the liabilities of the Company and the Group; the issued share capital and reserves of the Company and the Group are adequate for their ordinary business purposes; and the working capital of the Company and the Group will be adequate for a period of 12 months from the date of this notice to shareholders.
10.
To consider and, if deemed t, to pass, with or without modication, the following ordinary resolution: Ordinary resolution number 5 Resolved that the directors of the Company shall be entitled at their discretion to pay, by way of a pro rata reduction of share capital or share premium, in lieu of an ordinary dividend, an amount equal to the amount which the directors would have declared and paid out of prots in respect of the Companys interim and nal dividends for the nancial year ended 30 June 2007. In terms of paragraphs 5.86 of the JSE Listings Requirements, any such general payment will not exceed 20% of the Companys issued share capital or share premium. This general authority shall be valid until the Companys next annual general meeting, provided that is shall not extend beyond 15 (fteen) months from the date of the passing of this ordinary resolution number 5. Before eecting any general payment contemplated by this ordinary resolution number 5, the directors will consider the eect of the general payment and will ensure that for a period of 12 (twelve) months after the date of the notice of the general payment to be made:

the Company and the Group will be able, in the ordinary course of business to, pay their debts; the assets of the Company and the Group, measured in accordance with the accounting policies used in the latest audited annual nancial statements, will be in excess of the liabilities of the Company and the Group; the issued share capital and reserves of the Company and the Group are adequate for their ordinary business purposes; and the working capital of the Company and the Group will be adequate for a period of 12 months from the date of this notice to shareholders.
This ordinary resolution number 5 is to be voted on by the ordinary shareholders and the preference shareholders. 11. To consider and, if deemed t, to pass, with or without modication, the following ordinary resolution: Ordinary resolution number 6 Resolved that any director of the Company be and is hereby authorised to do all such things, sign all such documents and take all such actions as are necessary to give eect to the special and ordinary resolutions proposed at the annual general meeting at which this ordinary resolution is proposed, if it/they is/are passed (in the case of ordinary and special resolutions) and registered by the Registrar of Companies (in the case of special resolutions). This ordinary resolution number 6 is to be voted on by ordinary shareholders only. 12. To transact such other business as may be transacted at an annual general meeting of shareholders. Disclosure in terms of the JSE Listings Requirements For the purposes of considering special resolution number 1 and ordinary resolution number 5, and in compliance with Rule 11.26(b) of the JSE Listings Requirements, the information listed below has been included in the annual report, in which this notice to shareholders is included, at the pages indicated:

Directors and management (pages 8 to 9) Major shareholders (page 80) Material changes (page 45) Directors interests in securities (page 45) Share capital of the Company (pages 55 and 60) Litigation statement (page 73)
No acquisitions shall be eected in terms of special resolution number 1 unless the sponsor of Mvelaphanda Group provides a letter to the JSE Limited on the adequacy of Mvelaphanda Groups working capital in terms of the JSE Listings Requirements.
Mvelaphanda Group Limited page eighty-six
The directors whose names appear on pages 8 and 9 of the annual report, collectively and individually accept full responsibility for the accuracy of the information set out above for the purposes of considering special resolution number 1 and ordinary resolution number 5, and certify that, to the best of their knowledge and belief, there are no facts which have been omitted which will make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the information referred to above contains all the information required by law and the JSE Listings Requirements. In terms of the JSE Listings Requirements, Mvelaphanda Group shares held by the Share Incentive Scheme will not be entitled to vote at the annual general meeting. Proxies Shareholders who have not dematerialised their ordinary shares and/or preference shares (collectively shares) or who have dematerialised their shares with own name registration are entitled to attend and vote at the annual general meeting and may, in terms of section 189 of the Companies Act, appoint a proxy or proxies to attend the annual general meeting, speak and, on a poll, vote in their stead. A proxy need not be a shareholder of the Company. A proxy form is enclosed but is also obtainable from the Company secretarial services department, Mvelaphanda Management Services (Proprietary) Limited, at the address set out on page 81. Proxies must be received by Computershare Investor Services 2004 (Proprietary) Limited by not later than 11:00 on Wednesday, 24 January 2007. Shareholders who have dematerialised their shares, other than those shareholders who have dematerialised their shares with own name registration, should contact their Central Securities Depository Participant (CSDP) or broker in the manner and time stipulated in the relevant agreement to furnish them with voting instructions and, in the event that they wish to attend the annual general meeting, to obtain the necessary authority to do so. By order of the board
For: Mvelaphanda Company Secretary 7 December 2006
Management Services (Proprietary) Limited
Mvelaphanda Group Limited

(Incorporated in the Republic of South Africa) (Registration number 1995/004153/06) JSE code: MVG ISIN number: ZAE000060737
page eighty-seven
(Mvelaphanda Group or the Company)
FOR USE BY CERTIFICATED ORDINARY SHAREHOLDERS AND OWN NAME DEMATERIALISED ORDINARY SHAREHOLDERS
Form of Proxy
for use by ordinary shareholders for the 11th annual general meeting
I/We
(full name(s) in block letters)
of (address) being a member/members of Mvelaphanda Group and entitled to do hereby appoint votes or failing him/her or failing him/her the Chairman of the annual general meeting as my/our proxy to act for me/us at the annual general meeting of the Company to be held at 11:00 on Friday, 26 January 2007, and at any adjournment thereof, in the boardroom at Mvelaphanda House, Hunts End, 36 Wierda Road West, Wierda Valley, Sandton, and to vote for me/us on my/our behalf in respect of the undermentioned resolutions in accordance with the following instructions (see note 2): Number of votes (one vote per ordinary share) For 1. Adoption of annual financial statements 2. Approval of directors remuneration 3. Re-appointment of auditors 4. Election of directors Bryan Hopkins David Moshapalo Brett Till Mark Willcox Yolanda Cuba Mpumi Mpofu 5. Place unissued ordinary shares under the directors control 6. Authorise the directors to issue ordinary shares for cash 7. Place unissued preference shares under the directors control 8. Authorise the directors to issue preference shares for cash 9. Authorise Mvelaphanda Group and its subsidiaries to acquire ordinary shares 10. Authorise reduction of share capital or share premium 11. Authorise the directors to give effect to resolutions Signed at Signature on Assisted by me (where applicable see note 7) Please read the notes overleaf 2006/2007 Against Abstain
Mvelaphanda Group Limited eighty-eight
NOTES Shareholders holding certificated ordinary shares or dematerialised ordinary shares registered in their own name 1. Only shareholders who hold certificated ordinary shares and shareholders who have dematerialised their ordinary shares with own name registrations may use this form of proxy. 2. Each shareholder is entitled to appoint one or more proxies (none of whom need be a shareholder of the Company) to attend, speak and, on a poll, vote in place of that shareholder at this annual general meeting, by inserting the name of the proxy or the names of two alternate proxies of the shareholders choice in the space provided, with or without deleting the Chairman of the general meeting. The person whose name stands first on the form of proxy and who is present at this annual general meeting will be entitled to act as the proxy to the exclusion of those whose names follow. 3. A shareholders instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the Chairman of the annual general meeting, if he is the authorised proxy, to vote in favour of the resolutions at this annual general meeting, or any other proxy to vote or to abstain from voting at this annual general meeting, as he deems fit, in respect of all the shareholders votes exercisable thereat. 4. A shareholder or his proxy is not obliged to vote in respect of all the ordinary shares held or represented by him, but the total number of votes for or against the resolutions in respect of which any abstention is recorded may not exceed the total number of votes to which the shareholder or his proxy is entitled. 5. Forms of proxy must be lodged and/or posted to the Companys transfer secretaries (Computershare Investor Services 2004 (Proprietary) Limited) at 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), to be received by the transfer secretaries by no later than 11:00 on Wednesday, 24 January 2007. 6. The completion and return of this form of proxy in accordance with 5 above will not preclude the relevant shareholder from attending this annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. 7. A minor must be assisted by the minors parent or guardian, unless the relevant documents establishing the minors capacity are produced or have been registered by the Company. 8. Any alterations or corrections to this form of proxy must be initialled by the signatory(ies). 9. This form of proxy must be signed by all joint shareholders. If more than one of those shareholders is present at this annual general meeting either in person or by proxy, the person whose name stands first in the register shall alone be entitled to vote. 10. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the Companys transfer office or waived by the Chairman of this annual general meeting. 11. The Chairman of this annual general meeting may reject or accept any form of proxy which is completed and/or received other than in accordance with these instructions, provided that he is satisfied as to the manner in which a member wishes to vote.
Shareholders holding dematerialised ordinary shares 1. Shareholders who have dematerialised their ordinary shares through a Central Securities Depository Participant (CSDP) or broker (except those shareholders who have elected to dematerialise their ordinary shares in own name registrations) and all beneficial shareholders holding their ordinary shares (dematerialised or certificated) through a nominee should provide such CSDP, broker or nominee with their voting instructions in sufficient time to allow them to advise the transfer secretaries of the Company of their voting instructions before the closing time referred to in paragraph 5 above. 2. All such shareholders wishing to attend the annual general meeting in person may do so only by requesting their CSDP, broker or nominee to issue the shareholder with a letter of representation in terms of the custody agreement. Such letter of representation must be lodged with the transfer secretaries before the closing time referred to in paragraph 5 above.
Mvelaphanda Group Limited

(Incorporated in the Republic of South Africa) (Registration number 1995/004153/06) JSE code: MVGP ISIN number: ZAE000073540
page eighty-nine
(Mvelaphanda Group or the Company)
FOR USE BY CERTIFICATED PREFERENCE SHAREHOLDERS AND OWN NAME DEMATERIALISED PREFERENCE SHAREHOLDERS
Form of Proxy
for use by preference shareholders for the 11th annual general meeting
I/We
(full name(s) in block letters)
of (address) being a member/members of Mvelaphanda Group and entitled to do hereby appoint votes or failing him/her or failing him/her the Chairman of the annual general meeting as my/our proxy to act for me/us at the annual general meeting of the Company to be held at 11:00 on Friday, 26 January 2007, and at any adjournment thereof, in the boardroom at Mvelaphanda House, Hunts End, 36 Wierda Road West, Wierda Valley, Sandton, and to vote for me/us on my/our behalf in respect of the undermentioned resolutions in accordance with the following instructions (see note 2):
Number of votes (one vote per preference share) For 1. Authorise Mvelaphanda Group and its subsidiaries to acquire ordinary shares 2. Authorise reduction of share capital or share premium Against Abstain
Signed at
on
2006/2007
Signature
Assisted by me (where applicable see note 7) Please read the notes overleaf
Mvelaphanda Group Limited page ninety
NOTES Shareholders holding certificated preference shares or dematerialised preference shares registered in their own name 1. Only shareholders who hold certificated preference shares and shareholders who have dematerialised their preference shares with own name registrations may use this form of proxy. 2. Each shareholder is entitled to appoint one or more proxies (none of whom need be a shareholder of the Company) to attend, speak and, on a poll, vote in place of that shareholder at this annual general meeting, by inserting the name of the proxy or the names of two alternate proxies of the shareholders choice in the space provided, with or without deleting the Chairman of the annual general meeting. The person whose name stands first on the form of proxy and who is present at this annual general meeting will be entitled to act as the proxy to the exclusion of those whose names follow. 3. A shareholders instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the Chairman of the meeting, if he is the authorised proxy, to vote in favour of the resolutions at this annual general meeting, or any other proxy to vote or to abstain from voting at this annual general meeting, as he deems fit, in respect of all the shareholders votes exercisable thereat. 4. A shareholder or his proxy is not obliged to vote in respect of all the preference shares held or represented by him, but the total number of votes for or against the resolutions in respect of which any abstention is recorded may not exceed the total number of votes to which the shareholder or his proxy is entitled. 5. Forms of proxy must be lodged and/or posted to the Companys transfer secretaries (Computershare Investor Services 2004 (Proprietary) Limited) at 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), to be received by the transfer secretaries by no later than 11:00 on Wednesday, 24 January 2007. 6. The completion and return of this form of proxy in accordance with 5 above will not preclude the relevant shareholder from attending this annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. 7. A minor must be assisted by the minors parent or guardian, unless the relevant documents establishing the minors capacity are produced or have been registered by the Company. 8. Any alterations or corrections to this form of proxy must be initialled by the signatory(ies). 9. This form of proxy must be signed by all joint shareholders. If more than one of those shareholders is present at this annual general meeting either in person or by proxy, the person whose name stands first in the register shall alone be entitled to vote. 10. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the Companys transfer office or waived by the Chairman of this annual general meeting. 11. The Chairman of this annual general meeting may reject or accept any form of proxy which is completed and/or received other than in accordance with these instructions, provided that he is satisfied as to the manner in which a member wishes to vote.
Shareholders holding dematerialised preference shares 1. Shareholders who have dematerialised their preference shares through a Central Securities Depository Participant (CSDP) or broker (except those shareholders who have elected to dematerialise their preference shares in own name registrations) and all beneficial shareholders holding their preference shares (dematerialised or certificated) through a nominee should provide such CSDP, broker or nominee with their voting instructions in sufficient time to allow them to advise the transfer secretaries of the Company of their voting instructions before the closing time referred to in paragraph 5 above. 2. All such shareholders wishing to attend the annual general meeting in person may do so only by requesting their CSDP, broker or nominee to issue the shareholder with a letter of representation in terms of the custody agreement. Such letter of representation must be lodged with the transfer secretaries before the closing time referred to in paragraph 5 above.
Glossary of Terms
Throughout this annual report, the following terms shall have the meanings assigned to them below:
Absa Abvest Associates African Life Batho Bonke BEE The Group Group Five IFRS JSE Life Healthcare The Merger Mvelaphanda Group or the Company Mvelaphanda Holdings Mvelaphanda Resources Rebserve SA GAAP FINANCIAL RATIOS Cash earnings per ordinary share Free cash flow Debt: Equity ratio Return on shareholders funds Return on net operating assets Return on net investments Economic value added Earnings yield Dividend yield Dividend cover Cash dividend cover (Cash generated from operations taxation paid preference dividends paid cash paid to minority shareholders) / Weighted average number of ordinary shares in issue Cash generated from operations taxation paid net capital expenditure Total interest-bearing borrowings / Total capital and reserves Net profit attributable to equity holders / Average capital and reserves attributable to equity holders Net profit after taxation from operations / Average net operating assets Net profit after tax from investments / Average net investments Return on shareholders funds weighted average cost of capital Earnings per ordinary share / Ordinary share price at 30 June 2006 Dividend/distribution per ordinary share / Ordinary share price at 30 June 2006 Earnings per ordinary share / Dividend/distribution per ordinary share Cash earnings per ordinary share / Dividend/distribution per ordinary share Absa Group Limited Abvest Associates (Proprietary) Limited African Life Assurance Limited Batho Bonke Capital (Proprietary) Limited Black economic empowerment Mvelaphanda Group and its subsidiaries, associates and investments Group Five Limited International Financial Reporting Standards JSE Limited Life Healthcare Group Holdings (Proprietary) Limited The Merger of the businesses and assets of Mvelaphanda Holdings and Rebserve which was implemented on 13 December 2004 Mvelaphanda Group Limited Mvelaphanda Holdings (Proprietary) Limited Mvelaphanda Resources Limited Mvelaphanda Group prior to the Merger South African Statements of Generally Accepted Accounting Practice
BASTION GRAPHICS
We have a strong balance sheet and the nancial resources to pursue the new opportunities which we are confident will arise as the Group expands within South Africa and across Africa.
A solid platform has now been established to nurture and grow an industrial and nancial group of magnitude, which group, while possessing impeccable BEE credentials, should be measured on its investment merits.
Intrinsic net asset value per ordinary share, calculated based on the market value or directors valuation of investments (net of capital gains taxation and associated debt) and operations, increased by 41% from R8,35 at 30 June 2005 to R11,77 at 30 June 2006.

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MVELAPHANDA GROUP LIMITED

Combining quality investments with cash-generative operations

MVELAPHANDA GROUP LIMITED ANNUAL REPORT 2006

Contents, Vision and Values

MVELAPHANDA GROUP LIMITED

Registration number: 1995/004153/06

Highlights of the 2006 Financial Year

Mvelaphanda Group Limited page two

Process 00c72m38b 00m91y

Process 100c72m38b 100m91y

Facilities Management and Professional Services

Africas largest facilities management company

Contract catering services

Distributor of dry goods and packaging

MVELAPHANDA PRIVATE EQUITY

MVELAPHANDA CAPITAL MVELAPHANDA CAPITAL

Mvelaphanda Group Limited page four

A Decade of Successful Growth

Acquisition of Acquisition of Royal

Acquisition of Coin Security,

and distribution businesses in food and beverages sector

wholesale division, name changed to Rebserve Holdings

Merger with Focus on operational

2002 2001 2003

MVELAPHANDA GROUP LIMITED

Cleaning Services to form Rebserve Cleaning Services

Name changed to Mvelaphanda Group Limited on implementation of the Merger

Issue of preference shares to raise R547 million of new capital

Mvelaphanda Group Limited page six

Ten-year Financial Review year ended 30 June

Mvelaphanda Group Limited page eight

Tokyo Sexwale Executive Chairman Mark Willcox Chief Investment Ocer

Jackie Mphafudi Chief Operating Ocer

Kuseni Dlamini Independent non-executive director

Bryan Hopkins Independent non-executive director

John Moxon Independent non-executive director

Carl Stein Non-executive director

Ramesh Patel Independent non-executive director

Mpumi Mpofu Independent non-executive director

Oyama Mabandla Independent nonexecutive director

David Moshapalo Independent nonexecutive director

Mvelaphanda Group Limited page ten

Mvelaphanda Group Limited page twelve

Chairmans Review (continued)

Black Economic Empowerment

Mvelaphanda Group Limited page fourteen

Chief Executives Review

Mvelaphanda Group Limited page sixteen

Chief Executives Review Investments

100c72m38b Absa Group Limited

Mvelaphanda Group Limited page eighteen

Chief Executives Review Investments (continued)

Mvelaphanda Group Limited page twenty

Chief Executives Review Investments, Operations (continued)

Mvelaphanda Group Limited page twenty-two

Chief Executives Review Operations (continued)

Mvelaphanda Group Limited page twenty-four

Chief Executives Review Operations (continued)

Mvelaphanda Group Limited page twenty-six

Chief Financial Ocer

Intrinsic net asset value

Mvelaphanda Group Limited page twenty-eight

Financial Review (continued)