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Matodzi’s principal activities include:
•Sourcingandevaluatingnewmininginvestmentopportunities
• Investmentinprospectiveminingventures
Matodzi’s main assets include:
• A50%holding inLetšeng InvestmentHoldingsSouthAfrica(Proprietary)Limited(“Letšeng”)
•A9.5%shareholdinginJCI
• New order prospecting rights: applied for andgranted
Matodzi JCI
LesothoGovernment
Lets̆engDiamonds�
9.5%
57.7%50% 40%
76% 24%
BrakfonteinDiamante
100%
35%
Lets̆eng
WitnigelInvestments
ConsolidatedResources
EkuseniResources
GuildhallNo.22
IENInvestments
NewlandsMinerals
1 Proposeddisposalpostyearend.Refertopages2and15
2 A35%interestinWhiteWaterGold(Proprietary)Limitedpostyearend.Refertopage14.
DISCLAIMER AND FORWARD-LOOKING STATEMENTS
Certain statements in this report contain forward-looking statements regarding Matodzi’s activities, economic performance and financial position. This includes those concerning the economic outlook for the mining industry, expectations regarding commodity prices, the completion and commencement of commercial exploitation of certain of Matodzi’s exploration and production investments, its liquidity, and capital resources and expenditure.
Although Matodzi is of the opinion that the expectations will prove to be correct, actual results could differ materially from those set out in the forward-looking statements. Among other factors, this could be as a result of changes in economic and market conditions, the success of business and operating initiatives, changes in regulatory environment and other government actions, fluctuations in commodity prices and exchange rates, and business and operational risks.
PROFILE
Matodzi Resources Limited(“Matodzi”or“theCompany”),amininginvestmentcompanywithinterestsinSouthAfricaandtheKingdomofLesotho(SeedetailsontheproposeddisposalofLetšengDiamondmineonpages17and18).Matodziholdssomeprospectingrightsandapplicationsforotherprospectingrights,withtheintentionofexploringandacquiringothermineralinterestsinSouthernAfrica.
Matodzi was incorporated on 3 May 1933 as Witwatersrand Nigel Limited and changed its nameto New Mining Corporation Limited on 20January1999, and to Matodzi Resources Limited on4November2002.
MatodziisasubsidiaryofJCILimited(“JCI”).
COMPANy PROFILE AND DISCLAIMER
WhiteWaterGold
2
2
The proposed disposal of the Company’s effective interest in Letšeng Diamonds (Proprietary) Limited (“Letšeng Diamonds”)
Matodzi, through its 50% held subsidiary, LetšengInvestment Holdings South Africa (Proprietary) Limited(“Letšeng”),hasentered intoabinding legalagreementwithGemDiamondMiningCompanyofAfricaLimited(“Gem”) for the acquisition byGemof Letšeng’s entire76%equityinterestinLetšengDiamondsforapurchaseconsiderationofR879.5millionon27June2006.
Letšeng,GemandtheLesothoGovernmenthaveagreedthat, post-implementation of the proposed transaction,Gemwill dispose of 6% of the issued share capital ofLetšengDiamonds to theLesothoGovernment, therebyincreasingtheequityinterestoftheLesothoGovernmentin Letšeng Diamonds from 24% to 30%. The LesothoGovernmentacquisitionwillbeimplementedasfollows:
• Gemwill transfer 3% of the issued share capital ofLetšengDiamondstotheLesothoGovernmentatzeropurchaseconsideration.
• Gemwillsellafurther3%oftheissuedsharecapitalofLetšengDiamondstotheLesothoGovernmentforapurchaseconsiderationofR37.5million.ThisamountwillbeloanedtotheLesothoGovernmentbyGemonaninterestfreebasis,andwillberepaidbytheLesothoGovernmenttoGemoutofdividendsreceivedbytheLesothoGovernmentfromLetšengDiamonds.
Acircularincorporatingthefulltermsandconditionsofthe transactionwas posted toMatodzi shareholders on14September2006.Refertopage15forfurtherdetails.
Restructuring of the Witnigel preference shares (“Witnigel Prefs”) and the “B” preference shares (“B” Prefs”)
The 200million preference shares owned by JCI inWitnigel Investments (Proprietary) Limited “WitnigelPrefs”), a wholly-owned subsidiary of Matodzi, andthe 200million “B” Preference shares owned by JCIin Matodzi were reclassified as a compound financialinstrumentfromequitytodebtinthefinancialstatementsfortheyearended31March2005.
Inorder to resolve the technical insolvencyofMatodzicreated due to the reclassification, the followingtransactionswereimplemented:
•Matodzi acquired the Witnigel Prefs from JCI fora purchase consideration of R13.3 million settledthrough the issuance of 13.8 million new Matodziordinaryshares;
• The200million“B”Prefswereconvertedintoordinaryshares on a one-for-one basis. (“the Conversion”)(collectively,“therestructuring”).
TheeffectoftherestructuringonthefinancialpositionofMatodziwasasfollows:
• Matodziowns100%of theWitnigelordinary sharesandtheWitnigelPrefs.Witnigelwillhaveapreferenceshare obligation to Matodzi of R194.4million andowns83.3millionsharesinJCI.
• In terms of the conversion, the debt obligation ofR181.8 million relating to the “B” Prefs have beenredeemed on conversion of the “B” Prefs by issuing200millionordinarysharesinMatodzitoJCI.
The net effect of the restructuring was the eliminationof R376.2million debt from Matodzi’s balance sheet,thereby restoring Matodzi to a solvent position. Therestructuringwaseffectiveon30March2006.
Capital raising for the working capital
7460000newMatodziordinary shareswere listed intermsofanapplicationtoJSELimited(“JSE”)asageneralissuanceofsharesforcash.FollowingthedeclineinthesharepriceofMatodzi, theseshareswerenot takenupby the proposed investor, and as a resultwere held astreasurysharesbytheCompany.
JSEinformedtheCompanythatthiswasabreachofJSErulesunderwhichthelistingapprovaloftheshareswasgranted.The Company undertook to delist and canceltheseshareswhichhasbeendone.Asaconsequenceoftheaforesaid the sharecapital and sharepremiumwasadjustedaccordingly.
Subsequently,7460000Matodzishareshavebeenissuedand placed privately for cash. The proceeds receivedhavebeenutilisedtomeetexpenditureanddebtserviceobligationsofMatodzi.
Registration of prospecting right – Potential re-opening of the Witnigel Gold Mine
TheWitnigelprospectingrightswerenotariallyexecutedon 2May 2006, effective from 4November2005, andare in the process of being registered. An applicationto transfer the prospecting right toWhiteWater Gold,in terms of the agreement has been submitted to theDepartmentofMineralsandEnergy.
KEy FEATuRES
�
KEy FINANCIAL HIGHLIGHTS 2006 R000’s
2005 R000’s
% Change
Revenue 401 523 280085 43
Profit/(Loss)beforetaxation 226 474 (81342) 378
Netfinancecosts (58 714) (59560) (1)
Netprofit/(loss)fortheyear 179 292 (113989) 257
Cashgeneratedfromoperations 161 849 126489 28
Totalassets 528 417 433224 22
Investments 33 641 51461 (35)
Non-currentliabilities (46 773) (611076) (92)
SHARE PERFORMANCE (cents per share)
Basicearnings/(loss)pershare 86.6 (86.3) 200
Basicheadlinelosspershare (33.2) (89.2) (63)
Netassetvaluepershare 34.8 (169.1) 109
FINANCIAL ANALySIS
Groupoperatingmargin(%) 71.0 (7.8)
Returnoncapitalemployed(%) 53.9 (0.5)
SuMMARy OF RESuLTS
4
Matodzi is a listed entity with a mining investmentportfolio, mineral prospecting rights, an explorationprogramme, and minimal debt. The developments inour holding company, JCI Limited (“JCI”), has madedecision making more complex. This uncertainty hasmade it difficult for Matodzi to implement its strategyandbuildonitsBlackEconomicEmpowerment(“BEE”)credentials.
As previously stated in the 2005 annual report, theCompany has continued the programme to constrainthe financial expenditure with a view to reaching asustainable financing structure for investment projects,newopportunitiesandworkingcapitalrequirements.TheBoardhasapprovedathreeyearbusinessplanthatwillseeMatodzibuildingonthefollowing:
• An exploration programme for the new orderprospectingrights
• PartneringandacquiringprivateBEEcompanieswithneworderprospectingrights
•Usinginnovativewaysofraisingfundstoimplementtheexplorationprogrammefortheneworderprospectingrights
The 200million preference shares owned by JCI inWitnigel Investments (Proprietary) Limited (“WitnigelPrefs”),awholly-ownedsubsidiaryofMatodzi,and the200million“B”Preferenceshares(“B”Prefs”)ownedbyJCIinMatodziwerereclassifiedasacompoundfinancialinstrumentfromequitytodebtinthefinancialstatementsfortheyearended31March2005.
Inorder to resolve the technical insolvencyofMatodzicreated due to the reclassification, the followingtransactionswereimplemented:
•Matodzi acquired the Witnigel Prefs from JCI fora purchase consideration of R13.3 million settledthrough the issuance of 13.8 million new Matodziordinaryshares;
•The200million“B”Prefswereconvertedintoordinaryshares in Matodzi on a one-for-one basis. (“theConversion”)(collectively,“therestructuring”).
TheeffectoftherestructuringonthefinancialpositionofMatodziwasasfollows:
•Matodziowns100%of theWitnigelordinary sharesandtheWitnigelPrefs.Witnigelwillhaveapreferenceshare obligation to Matodzi of R194.4million andowns83.3millionsharesinJCI.
• In terms of the conversion, the debt obligation ofR181.8 million relating to the “B” Prefs have beeneliminatedonconversionofthe200million“B”PrefsintoordinarysharesinMatodzi.
The net effect of the restructuring was the eliminationof R376.2million debt from Matodzi’s balance sheet,thereby restoring Matodzi to a solvent position. Therestructuringwaseffectiveon30March2006.
On27June2006,theCompanyannouncedtheproposeddisposal by Letšeng Investment Holdings South Africa(Proprietary) Limited (“Letšeng”), inwhichMatodzi hasa50%equityinterestofits76%shareholdinginLetšengDiamonds.AbindinglegalagreementwithGemDiamondMining Company ofAfrica Limited, for the disposal ofLetšeng’sentire76%equityinterestinLetšengDiamonds,forapurchaseconsiderationofR879.5million,payableincashhasbeenconcluded.Furtherdetailsoftheproposeddisposalissetoutonpage15.
BrettKebble,aformerdirectoroftheGrouppassedawayduring the year under review. Our condolences to hisfamily,relativesandfriends.
Finally,Iwouldliketoextendmythankstothededicatedand committed staff and executives for ensuring thatMatodzicontinuestorealisevalueforallstakeholders.Thecontributionmadebythestaffofourholdingcompany,JCI,inadministration,financeandothersupportservicesishighlyappreciated.
Inclosing,Iwouldalsoliketoextendmythankstomyfellowboardmemberswhohave,throughtheirdedicationandcontributionledtoMatodzi’ssuccess. Iwouldalsoliketoextendthankstoourshareholders, investorsandotherstakeholderswhosharewithusourconfidenceandbeliefinthefutureofMatodzi.
WelookforwardtojoiningourshareholdersattheAnnualGeneralMeeting.Sojoinuson31October2006intheAuditoriumat28HarrisonStreet, Johannesburg forourannualgettogether.
Andrew Mlangeni
Independentnon-executiveChairman
Johannesburg
22September2006
TO THE SHAREHOLDERS OF MATODzI
CHAIRMAN’S REvIEW
5
CORPORATE GOvERNANCE REPORT
Principles of corporate governance and structures
The board of directors affirms its commitment to theprinciplesofopenness,integrity,accountability,timeous,relevantandmeaningfulreportingtoallstakeholders.
TheBoardofdirectors iscommitted to ensuring that theGroup’s business is conducted in accordance with thehigheststandardsofcorporategovernance.ThesestandardsareentrenchedintheGroup’ssystemofinternalcontrolbyitsproceduresandpoliciesgoverningbusinessconduct.
The directors endorse and are of the opinion that theGroupadheres to theCodeofCorporatePractices andConductassetoutintheKingIIReport.
The principles contained in King II are reflected inthe Group’s corporate governance structures, andare reviewed from time to time to take into accountorganisational changes. The Board and managementactively review and enhance the Group’s systems ofcontrolandgovernanceonacontinuousbasistoensurethattheGroup’sbusinessismanagedethicallyandwithinconservativelydeterminedriskparameters.
The Board of Directors
The Company has a unitary Board comprising oneindependentnon-executivedirector,threenon-executivedirectors,andoneexecutivedirector.
All the directors bring to the Board a wide range ofexpertise, as well as significant financial, commercialand technical experience, and business acumen thatallowthemtoexerciseindependentjudgementinboarddeliberationsanddecisions.
All directors have the requisite knowledge, experienceandability toproperlycarryout theirduties inmeetingtherequirementsoftheCompany.Allparticipateactivelyintheproceedingsatmeetingswhetherpresentpersonallyor by teleconference facility. The Board is responsiblefor setting the direction of the Group through theestablishmentofstrategicobjectivesandkeypolicies.
Itmonitorstheimplementationofstrategiesandpoliciesthroughastructuredapproachtoreportingonthebasisof agreed performance criteria and defined, writtendelegationstomanagementforthedetailedplanningandimplementationofsuchobjectivesandpolicies.
The Board meets periodically, or more frequently ifcircumstances so require, to reviewmatters specificallyreservedforitsdecision,includingfinancialresults,issuesof strategic direction,major acquisitions anddisposals,approval of major capital expenditure, and any othermattershavingamaterialeffectontheGroup.
The Board has a Charter setting out its mission, role,duties and responsibilities and, in particular, importantaspectsconcerningthefollowing:
•Thedirectors’fiduciaryresponsibilities
•LeadershipoftheBoard
•Inductionofnewdirectors
•TheBoard’srelationshiptostaffandexternaladvisors,aswellasaccesstoCompanyrecords
•Boardmeetingsandprocedures
Thedirectorshavearesponsibility,intermsoftheBoardCharter,tobecomeacquaintedwithalloftheirduties,aswellastheissuespertainingtotheoperationsandbusinessoftheGroup,toenablethemtofulfiltheirduties.Toassistnewdirectors,aninductionprogramme,whichincludesbackgroundmaterials,meetingswithseniormanagement,andvisitstotheCompanyandprojects.
IntermsoftheBoardCharter,thedirectorsareassessedannually,bothindividuallyandcollectivelyasaBoard.
The Board, as a whole approves the appointments ofnew directors on recommendation by the NominationCommittee,subjecttoshareholderratificationatthenextannualgeneralmeeting.
InaccordancewiththeCompany’sArticlesofAssociation,alldirectorsaresubjecttoretirementbyrotationandre-electionbyshareholderseverythreeyears.
All directors have access to the advice and services ofthelegaladvisorandcompanysecretaryandareentitledtoseekindependentprofessionaladviceconcerningtheaffairsoftheGroupattheexpenseoftheCompany.
The Board has established a number of committees,whichareultimatelyanswerabletotheBoard,namely:
• Theexecutivecommittee
• Theauditcommittee
• Thenominationcommittee
• Theremunerationcommittee
These committees operate within the definedTerms ofReferencelaiddownbytheBoard.Theaudit,nominationandremunerationcommitteesareeachchairedbyanon-executivedirectorandconsistentirelyofnon-executivedirectors.
Chairperson and Chief Executive Officer
IntermsofKingII,therolesofthechiefexecutiveofficerandthechairpersonareseparatedtofacilitatethesmoothandefficientfunctioningoftheBoard.
CORPORATE GOvERNANCE
6
Board Committees
The Board has established a number of committees toenableittoproperlydischargeitsdutiesandresponsibilitiesandtoeffectivelymanageitsdecision-makingprocess.
The following reflects the compositionandactivitiesofthesecommittees:
Executive Committee
The executive committee, comprising the executivedirector, and senior managers, meets periodically tomonitor strategic objectives and policies through astructuredapproach to reportingon thebasisofagreedperformance criteria and for the detailed planning andimplementationofsuchobjectives.
MembersofthecommitteecontributeadiverserangeofprofessionalskillsacrossthespectrumoftheCompany’sactivities. Certain non-executive directors attend byinvitation.
Audit Committee
The primary responsibility of the audit committee is toassist the board of Matodzi in carrying out its dutiesrelating to reviewing the financial results, accountingpolicies, internal controls, financial reporting practicesandidentificationofexposuretosignificantrisks.
The audit committee evaluates the performance,independenceandeffectivenessof theexternalauditorsand considers any non-audit services to determinewhetherornotsuchservicessubstantivelyunderminetheirindependenceasexternalauditors.Theauditcommitteediscusses and reviews with the external auditors theirengagementletterandtheterms,scopeandnatureoftheauditfunction,procedureandengagement,aswellastheauditfee.
Members comprising audit committee are MessrsTMosololi (chairman),MEMkwanazi,AMlangeni andPH Gray, who meet periodically, primarily to reviewresultsandanyfinancialreports,andatanyothertimeifrequired.Theexecutivedirectorattendsbyinvitation.
ThepurposeoftheauditcommitteeistoassisttheBoardin discharging its duties relating to the safeguarding ofassets, the operation of adequate systems, financialcontroland reportingprocesses,and thepreparationofaccurate financial reports and financial statements incompliancewith all applicable legal requirements andaccountingstandards.Theauditcommitteealsoprovidesaforumfordiscussingbusinessriskandcontrolissues,fordevelopingrelevantrecommendations forconsiderationby the Board, and for overseeing the activities of theGroup’sauditfunction.
Accountability and control
To enable the directors to meet their responsibilities,the Board sets standards and requires managementto implement systems of internal control aimed atreducingtheriskoferror,fraudorlossinacost-effectivemanner. These controls include the proper delegationof responsibilities within a clearly defined framework,effectiveaccountingproceduresandadequatesegregationofduties.
ThecontrolsaremonitoredthroughouttheGroup,andallemployees are required tomaintain the highest ethicalstandardsinensuringthattheGroup’sbusinesspracticesareconductedinamannerwhichisbeyondreproach.
Theauditapproachentailsathoroughcomprehensionofthe Group’s financial and accounting objectives, andanalysisof theunderlying systemsandprocedures.Theauditplanisdeterminedannually,basedontherelativedegrees of inherent risk of each function. The auditcommittee is in theprocessof outsourcing the internalauditfunctiontoasuitableauditfirm,takingintoaccountbenchmarks set for Black Economic Empowerment(“BEE”)procurement.
Allimportantfindingsarisingfromauditproceduresarebrought to the attention of the audit committee and, ifnecessary,totheBoard.
The directors are of the opinion, based on the informationand explanations given by management that the internalaccountingcontrolsareadequate,sothatthefinancialrecordsmaybereliedon forpreparing thefinancial statementsandmaintainingaccountabilityforassetsandliabilities.
Nomination Committee
The nomination committee has the responsibility ofmakingrecommendationstotheBoardontheappointmentofnewexecutive,independentnon-executive,andnon-executive directors, including the responsibility formaking recommendations on the size, structure andcompositionoftheBoardgenerally.
The nomination committee is also charged with theresponsibility of identifying and nominating suitablecandidates, for the approval of theBoard, to fill Boardvacancies as and when they arise. The nominationcommittee identifies candidates of a suitable calibre,possessing the skills required to act as directors andhavingtheexpertisetoenhancetheskillsandknowledgebaseoftheBoardasawhole.
The nomination committee is required to put in placesuccession plans for the chairperson of the Board andchiefexecutiveofficerofMatodzi.
CORPORATE GOvERNANCE (continued)
7
Members comprising the nomination committee areMessrs AMlangeni (chairman), ME Mkwanazi andPHGray.
REMuNERATION REPORT
Remuneration Committee
The remuneration committee sets and monitorsremuneration for theGroup.This isachieved throughaRemunerationPolicywhichhasasitsobjectivesto:
•attract, reward and retain staff and executivesof thehighestcalibre
•alignthebehaviourandperformanceofexecutivesandstaffwiththeGroup’sstrategicgoals,andtheinterestsofshareholders
•ensure the appropriate mix of short-, medium- andlong-term rewards and incentives, with the latterbeingcloselylinkedtoGroupperformancetargetsandstrategicobjectivesthatareinplace
Inparticular theremunerationcommittee isresponsiblefor:
•the remunerationpackages forexecutivedirectorsoftheCompany.
The following principles are applied in determiningexecutiveremuneration:
• Annual remuneration being a combination of basicsalaryandshort-,medium-andlong-termincentives,pensionandotherbenefits
• Salaries are targeted at the median for the relevantcomparablecompanies
• Incentive schemes to align performance targets withshareholderinterests
The executive directors and remuneration committeearedevelopingandwillsubmitforapprovalatthe2007AnnualGeneralMeeting,a long-termincentiveschemeandshare incentive scheme for theexecutivedirectors.The incentiveschemeswill take intoconsiderationpastperformance.
Members comprising the remuneration committeeare Messrs ME Mkwanazi (chairman), PH Gray andTMosololi.
Subsequenttoyearend,theremunerationcommitteemetononeoccasion.
Particulars relating to directors’ emoluments and theirinterestsintheissuedsharecapitaloftheCompanyaresetoutintheDirectors’Reportonpage17.
SuSTAINABILITy REPORT
Employment equity
TheBoardbelievesintheeliminationofalldiscriminatorypractices, direct or indirect, and all forms of unfairgender discrimination. Matodzi is also committed toremovinganybarriers thatunfairly restrict employmentand development opportunities, and to improvingrepresentationofallgroupsatalllevelstomeetitslong-term objective of reflecting the demographics of thecountryinwhichitoperates.Matodziiscommittedtotheemploymentandpromotionofallpeople.
Black Economic Empowerment (“BEE”)
Matodzi iscommitted to theeconomicdevelopmentofSouthAfricaanditspeopleandiscontinuallylookingatwaysofenhancingitscompliancewithBEErequirements.Matodzi is confident that its BEE partners will deriveeconomicbenefitsfromtheirpartnerships.
ENvIRONMENTAL POLICy
Health and safety
The Company complies with the relevantgovernmenthealthandsafetyregulations.
Environmental Policy
The Group complies with the relevant governmentenvironmental policies and regulations in the variousjurisdictionsinwhichitoperates.TheGroupperiodicallyrevisitsitspolicytoensurecompliancewiththerelevantlaws.
CORPORATE GOvERNANCE (continued)
8
SPONSOR
SasfinCapital,adivisionofSasfinBankLimited,actsassponsortotheCompanyincompliancewiththeListingsRequirementsofJSELimited(“JSE”).
Duringtheyearunderreview,RiverSponsors(Proprietary)Limited resigned as sponsor to Matodzi effective31October 2005 and Sasfin Capital were appointedeffective1November2005.
COMMuNICATIONS
Zanenza Communications (Proprietary) Limited, act ascommunications and public relations consultant to theCompany.
The Company communicates with institutional andprivate investors when appropriate. Communicationis on the basis of promptness, relevance, transparencyand substance over form, having due regard tostatutory, regulatory and other directives prohibitingthe dissemination of unpublished and price-sensitiveinformationbytheCompanyanditsofficers.
The Company also has a website containing the latestpublic information. The Company’s website address iswww.matodzi.co.za.
MARKET LISTINGS AND SHARE PRICES
TheprincipalmarketforMatodzi’ssharesisJSE.MatodzisharestradethroughtheSTRATEsystem.
Closing JSEsharepricesarepublished inmostnationalandregionalSouthAfricannewspapers.SharepricesarealsoavailableonI-NetBridge,ReutersandBloomberg.
SuPPLEMENTARy INFORMATION
Computershare Investor Services 2004 (Pty) Limited(“Computershare”)istheCompany’stransfersecretary.Allenquiriesandcorrespondenceconcerningshareholdingsshould be directed to the transfer secretaries.Computershare’s contact details are listed onthe inside back cover of the Corporate Directorysection of this report. Shareholders should notifyComputersharepromptlyinwritingofanychangeinaddress.
LEGAL ADvISOR AND COMPANy SECRETARy
The legaladvisorandcompanysecretary is required toprovide the directors of the Company, collectively andindividually, with detailed guidance as to their duties,responsibilitiesandpowers.
Directors’ attendance at board and committee meetings during the year under review
Director Board Audit
Number of meetings held during the year 7 2
AndrewMlangeni(IndependentNon-ExecutiveChairman)appointed22.01.2003(chairmanofthenominationcommitteeandamemberoftheauditcommittee) 7 1
SelloMashaoRasethaba(ChiefExecutiveOfficer)appointed31.03.2001 7 N/A
HendrikChristoffelBuitendag(Non-Executive)resigned24.08.2005 1/1 N/A
PeterHenryGray(Non-Executive)appointed24.08.2005(Memberofthenominationandremunerationcommittees) 5/6 2
RogerBrettKebble(Non-Executive)resigned24.08.2005 0/1 N/A
JohnChrisLamprecht(alternatetoPHGray)appointed24.08.2005resigned16.05.2006 6/6 N/A
KhangaleMakhado(Executive)resigned24.08.2005 1/1 N/A
LindaMakatini(Adv)(IndependentNon-Executive)appointed12.09.2005resigned09.03.2006 2/2 N/A
MafikaEdmundMkwanazi(Non-Executive)appointed22.01.2003(chairmanoftheremunerationcommitteeandamemberoftheauditandnominationcommittees) 6 2
ThaboMosololi(IndependentNon-Executive)(chairmanoftheauditcommitteeandamemberoftheremunerationcommittee)appointed14.04.2003 2 2
CORPORATE GOvERNANCE (continued)
9
Thelegaladvisorandcompanysecretaryisalsorequiredtoensurethatthedirectorsareawareofalllaws,legislation,regulations andmattersof ethics andgoodgovernancerelevantto,oraffectingtheCompany.
The legaladvisorandcompanysecretary is required toensurethatminutesofallshareholders’meetings,directors’meetingsandmeetingsofthevariouscommitteesoftheboardofdirectorsareproperly recorded inaccordancewiththeCompaniesAct.TheseminutesarecirculatedtoallmembersoftheBoard.
Alldirectorshaveaccesstotheadviceandservicesofthelegaladvisorandcompanysecretary,andwiththepriorapprovalofthenon-executiveChairman,areentitledtoseek independent professional advice concerning theaffairsof theCompanyat itsexpense.ThelegaladvisorandcompanysecretaryofMatodziisMsBEMorton.
CODE OF CONDuCTTheCompanyapprovedandadoptedaCodeofConduct,toenabletheCompany’sbusinesspracticestobeguidedbycorevaluesandethicalconsiderationsandcompliancewithlegislation.Itrequiresalldirectorsandemployeestoactwiththeutmostgoodfaith, integrityandinthebestinterests of the Group in all transactions and with allstakeholderswithwhomtheyinteract.
PRICE SENSITIvE INFORMATIONIn accordance with JSE’s guidelines on price-sensitiveinformation, the Company has a policy dealing withthe determination of information as price-sensitive,confidentiality undertakings and discussions with thepress,institutionalinvestorsandanalysts.
TheCompanyfollowsa‘closed-period’principle,duringwhich period employees, consultants, executive andnon-executive directors are prohibited from dealing intheCompany’sshares.
CORPORATE GOvERNANCE (continued)
DIRECTORS’ APPROvAL
ThefinancialstatementsarepreparedinaccordancewithInternationalFinancialReportingStandards,andincorporatefulldisclosureinlinewiththeaccountingpoliciesoftheGroup.
Thefinancialstatementsarebasedonappropriateaccountingpoliciesconsistentlyappliedandsupportedbyreasonableandprudentjudgementsandestimates.
TheauditcommitteemeetsperiodicallywiththeCompany’sexternalauditorsandexecutivemanagementtodiscussaccounting,auditing,internalcontrolandfinancialreportingmatters.Theexternalauditorshaveunrestrictedaccesstotheauditcommittee.
Theseannualfinancialstatementsfortheyearended31March2006setoutonpages12to48wereapprovedbytheboardofdirectorson22September2006andaresignedonitsbehalfby:
A Mlangeni SM Rasethaba
Chairman ChiefExecutiveOfficer
Johannesburg
APPROvAL OF ANNuAL FINANCIAL STATEMENTS
DECLARATION By THE LEGAL ADvISOR AND COMPANy SECRETARy
DECLARATION By THE LEGAL ADvISOR AND SECRETARy
Ideclarethat, tothebestofmyknowledge, intermsofSection268(G)(d)of theCompaniesAct,1973(Act61of1973),asamended,(“theCompaniesAct”)theCompanyhaslodgedwiththeCompaniesandIntellectualPropertyRegistrationOfficeallsuchreturnsasarerequiredofapubliccompanyintermsoftheCompaniesActandthatallsuchreturnsaretrue,correctanduptodateinrespectofthefinancialperiodreportedupon.
Ms BE Morton
LegalAdvisorandCompanySecretary
Johannesburg
22September2006
�0
��
To the members of
MATODzI RESOuRCES LIMITED
WehaveauditedtheannualfinancialstatementsandGroupannualfinancialstatementsofMatodziResourcesLimitedsetoutonpages12to48fortheyearended31March2006.ThesefinancialstatementsaretheresponsibilityoftheCompany’sdirectors.
Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.
SCOPE
WeconductedourauditinaccordancewithInternationalStandardsofAuditing.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassurancethatthefinancialstatementsarefreeofmaterialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements,assessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,andevaluatingtheoverallfinancialstatementpresentation.
Webelievethatourauditprovidesareasonablebasisforouropinion.
AuDIT OPINION
Inouropinion,thefinancialstatementsfairlypresent,inallmaterialrespects,thefinancialpositionoftheCompanyandtheGroupat31March2006,andtheresultsoftheiroperationsandcashflowsfortheyearthenended,inaccordancewithInternationalFinancialReportingStandardsandinthemannerrequiredbytheCompaniesActinSouthAfrica.
KPMG Inc.
RegisteredAuditors
Bridgette ModiseDirectorCharteredAccountants(SA)
RegisteredAuditor
Johannesburg22September2006
INDEPENDENT AuDITORS’ REPORT
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Thedirectorssubmittheirreportandtheauditedannualfinancialstatementsfortheyearended31March2006.
NATuRE OF BuSINESSThe Company’s main business is that of a mininginvestment company. Its subsidiaries are primarilyengagedintheresourcesector.
The Company’s principal activities include theidentification and evaluation of mining investmentopportunities as well as operational and executiveinvolvementinselectedminingventures.
Annual financial statements
The directors are required by the Companies Act toprepareannualfinancialstatementswhichfairlypresentthestateofaffairsoftheCompanyandoftheGroup,andthe resultsof theiroperations.Theexternalauditorsareresponsibleforindependentlyexamining,reviewingandreportingtheirfindingsonthesefinancialstatements.
The financial statements as set out in this report havebeen prepared by management in conformity withInternational Financial Reporting Standards and arebased on appropriate accounting policies which havebeen consistently applied andwhich are supported byreasonable and prudent judgment and estimates. Theindependentauditors’reportissetoutonpage11.
Thedirectorsareoftheopinionthattheannualfinancialstatements fairly present the financial position of theCompany and the Group at 31March2006, and theresults of the operations and cash flow information fortheyearthenended.
FINANCIAL RESuLTS
Theresultsfortheyeararesetoutintheincomestatementsonpage21ofthefinancialstatements.
The Group’s net profit/(loss) for the year amounted toR179292000(2005:(R113989000)).
DIvIDENDSAccording to the Memorandum and Articles ofAssociation,dividendsareproposedandapprovedbytheboardofdirectorsofMatodzi,basedontheinterimandyearendfinancialperformance.
Dividends are recognisedwhen declared by the boardofdirectors.Matodziexpectstopaydividends,althoughtherecanbenoassurancethatdividendswillbepaidinthefutureorastotheparticularamountsthatwillbepaidfromyeartoyear.
The payments of future dividends will depend uponthe Board’s ongoing assessment of Matodzi’s earnings,financialposition,includingitscashrequirements,futureearningsprospectsandotherrelevantfactors.
Nodividendsweredistributedfortheyearunderreview(2005:Rnil).
MATERIAL RESOLuTIONS
Details of special resolutions and other resolutionsof a significant nature passed by the Company and itssubsidiaries during the year under review, requiringdisclosure in terms of the Listings Requirements of JSELimited(“JSE”),wereasfollows:
Nature of resolutions
AttheAnnualGeneralMeetingheldon2November2005,shareholderspassedspecialresolutionsrelatingto:
Increase of authorised share capital of the CompanybyR125000000(onehundredandtwentyfivemillionRand)fromR62500000(sixtytwomillionfivehundredthousandRand),dividedinto250000000(twohundredandfiftymillion)ordinarysharesof25(twentyfive)centseach,and
200000000(twohundredmillion)unsecuredredeemableconvertibleparticipating“B”preferencesharesof1(one)cent each to R189500000 (one hundred and eightyninemillionfivehundred thousandRand),divided into750000000(sevenhundredandfiftymillion)ordinarysharesof25(twentyfive)centseach,and
200000000(twohundredmillion)unsecuredredeemableconvertibleparticipating“B”preferencesharesof1(one)centeach,bythecreationof500000000(fivehundredmillion) new ordinary shares of 25 (twenty five) centseach,rankingpari passuineveryrespectwiththeexistingordinarysharesoftheCompany;
Amendment to the Articles of Association oftheCompanybeandtheyareherebyamendedbythedeletion,inArticle9A.2ofthedate“31July2006”andbythesubstitutionthereforofthedate“31July2005”.
General approval for the repurchase by the Company of its own shares
AttheAnnualGeneralMeetingheldon2November2005,shareholderspassedordinaryresolutionsrelatingto:
• theadoptionoftheannualfinancialstatementsfortheyearended31March2005
• the re-election of Messrs PH Gray, JC Lamprecht,HG Geingob, MEMkwanazi, T Mosololi andAdv.LMakatiniasdirectorsoftheCompany
• The appointment of KPMG Inc. as auditors of theCompany for the 2006 financial year and authorityfor the directors to approve the remuneration of thepreviousauditorsCharlesOrbach&Companyforthe2005financialyear
• therenewalofageneralauthorityplacingtheunissuedordinarysharesoftheCompany,toallotandissuesuchordinarysharestosuchpersonsanduponsuchtermsasthey,intheirdiscretion,andunderthecontrolofthedirectors,and
DIRECTOR’S REPORT
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• the granting of a general authority to issue ordinarysharesinthecapitaloftheCompanyforcash,subjecttocertainlimitationsintermsoftheListingsRequirementsofJSE.
ANNuAL GENERAL MEETING
Notice of the next Annual General Meeting, which isto be held in Johannesburg at 10:00 on Tuesday,31 October 2006, is set out on page 51. AdditionalcopiesofthenoticeofmeetingmaybeobtainedfromtheCompany’scorporatecontacts,andtheshareregistrarsormaybeaccessedfromtheCompany’swebsite.
At this Annual General Meeting shareholders will berequested to pass ordinary resolutions relating to thefollowing:
Ordinary Resolutions
• theadoptionoftheauditedannualfinancialstatementsfortheyearended31March2006
• there-electionofMrAMlangeniandMrSMRasethabaasdirectorsoftheCompany
• the re-appointment of KPMG Inc. as auditor for theensuing financial year and authorise the directors toapprovetheirremuneration
• the granting of a general authority for the CompanytorepurchaseitssharesintermsofSection85(2)and89oftheCompaniesAct
• therenewalofageneralauthorityplacingtheunissuedordinarysharesoftheCompany,underthecontrolofthedirectors
• the granting of a general authority to issue ordinarysharesinthecapitaloftheCompanyforcash,subjecttothelimitationsintermsofListingsRequirementsofJSE
SHARE CAPITAL
TheauthorisedordinarysharecapitaloftheCompanywasincreased fromR62.5milliondividedinto250000000ordinary shares of 25cents to R187.5million dividedinto750000000ordinary shares of 25 cents eachon22March2006.
On 30 March 2006, JSE Limited (“JSE”) granted anadditional listing of 213 825 129 ordinary shares of25cents each.As a result of the listing, the authorisedsharecapitaloftheCompanywasamendedtoreflectthelistedordinarysharecapitalasR92636821.50dividedinto370547286ordinarysharesof25centseach.
In termsof theauthoritygrantedbyshareholdersat theAnnualGeneralMeetingheldon2November2005,theunissuedordinarysharecapitalremainingatthatdateareplacedunderthecontrolof thedirectors.Thisauthorityexpiresat the forthcomingannualgeneralmeeting.Theunissued shares under the control of the directors at31March2006wereasfollows:
unissued shares under the control of directors Shares Rand
Authorisedsharecapital 750000000 187500000
Sharesinissueat20November2005 149262157 37315539
Unissuedsharesat30March2006 600737843 150184461
Less:Sharesissued:–atthediscretionofthedirectorsforcash 7460000 1865000–conversion–MatodziPrefs 200000000 50000000–repurchase–WitnigelPrefs 13825129 3456282
Unissuedsharesunderthecontrolofthedirectorsat31March2006 379452714 94863179
IntermsoftheListingsRequirementsofJSE,shareholdersmay,subjecttocertainconditions,authorisethedirectorstoissuethesharesheldundertheircontrolforcashotherthanbymeansofarightsoffertoshareholders.
InorderthatthedirectorsoftheCompanymaybeplacedinapositiontotakeadvantageoffavourablecircumstanceswhichmay arise for the issue of such shares for cash,withoutrestriction,forthebenefitoftheCompany.
The Company has not exercised the general approvalto buy back shares from its issued ordinary sharecapital,grantedattheAnnualGeneralMeetingheldon2November2005.
BALANCE SHEET RESTRuCTuRING
As originally set out in the 2005 Annual Report, the200million cumulative redeemable preference sharesowned by JCI Limited (“JCI”) in Witnigel Investments(Proprietary) Limited (“Witnigel Prefs”), a wholly-ownedsubsidiary of Matodzi, and the 200 million unsecuredredeemableconvertibleparticipating“B”Preferenceshares(“B”Prefs”)ownedbyJCIinMatodziwerereclassifiedasacompoundfinancialinstrumentfromequitytodebtinthefinancial statements for the year ended 31March 2005,intermsofIAS32:FinancialInstruments–DisclosureandPresentationandIAS39:FinancialInstruments:RecognitionandMeasurement(“theRestatement”).
InordertoresolvethetechnicalinsolvencyofMatodzi,created due to the reclassification, the followingtransactionshavebeenimplemented:
•Matodzi acquired theWitnigel Prefs from JCI for apurchaseconsiderationofR13.3million,whichwastobesettledbyMatodzithroughtheissueof13.8millionMatodziordinaryshares,calculatedonthebasisofa30-dayweightedaveragesharepriceof94.4427centsperMatodzishare;and
DIRECTOR’S REPORT (continued)
•The200million“B”Prefswereconvertedintoordinaryshares in Matodzi on a one-for-one basis. (“theConversion”)(collectively,“therestructuring”).
The effect of the restructuringon thefinancial positionwasasfollows:
•Matodziowns100%oftheWitnigelordinarysharesandtheWitnigelPrefs.WitnigelwillhaveapreferenceshareobligationtoMatodziofR194.4millionandowns83,3millionsharesinJCI.Onaconsolidationbasistherefore,theneteffectoftheWitnigelacquisitionistoreflectthemarketvalueofthesharesheldinJCIofR13.3millionasWitnigel’spreferenceshareobligation iseliminatedagainstMatodzi’sinvestmentinWitnigel;and
• In terms of the conversion, the debt obligation ofR181.8 million relating to the “B” Prefs have beeneliminatedonconversionofthe“B”PrefsintoordinarysharesinMatodzi.
The net effect of the restructuring is the elimination ofR376.2milliondebt fromMatodzi’sbalance sheet, andtherefore restoring Matodzi’s to a technically solventposition.
Therestructuringwaseffectiveon30March2006.
EvENTS AFTER BALANCE SHEET DATE
Registration of prospecting right – Potential re-opening of the Witnigel Gold Mine
During July 2005, an agreement was entered betweenthe Company,WhiteWater Limited, Covenant Miningand Finance (SA) (Pty) Limited (“Covenant SA”) andWhiteWaterGold(Pty)Limited(“WWG”),wherebytheCompanysold its surface rightpermitsandprospectingrights in theWitnigel Gold Mine area toWWG for aconsiderationof35%oftheissuedsharesinWWG.ThesalewassubjecttoMinisterialconsentforthetransferofsuchrights.
TheCompanysubmittedanapplicationtotheDepartmentofMinerals andEnergy (“DME”) for consent to transferthe rights toWWG. Such consent was granted by theDME during May 2006. Pursuant to the conditions of
theagreement,MatodziappliedtotheMinister tocedetherightstoWWGinaccordancewiththeprovisionsofsection11of theMineralResourcesDevelopmentAct.UponreceiptoftheconsentoftheMinistertothecessionof the rights, the Company shall transfer toWWG thesurfacerightpermitsoncereregisteredbytheDME.
The Company is currently attending to the necessarystatutoryandregulatoryprocessestoensurethecessionofthesurfacerightpermitstoWWG.
On the successful cession of the rights toWWG, theCompanywill receive 35% of the issued share capitalinWWG.TheCompany’s35%shareholdinginWWGissubjecttothefollowingconditions:
1.Covenant SA is entitled in terms of a call option inthe agreement to purchase 10% of the Company’sshareholding inWWG at a total purchase price ofUS$1 428 571within 30-days of the cession of therightstoWWG.
2.In theeventofWWGexercising theaforementionedcall option in the prescribed period, in terms of theagreement, the Company shall then have an optionfor 30-days, to sell to Covenant SA the balance ofthe shares heldby theCompany inWWGat a totalpurchasepriceofUS$3571429.
3.The Company is held harmless of all rehabilitationobligations arising pursuant to the conduct ofprospectingactivitiesbyWWG.
THE PROPOSED DISPOSAL OF THE COMPANy’S EFFECTIvE INTEREST IN LETŠENG DIAMONDS (PROPRIETARy) LIMITED (“LETŠENG DIAMONDS”)
On27June2006,theCompanyannouncedtheproposeddisposal of Letšeng Diamonds, in which Matodzi hasan effective 38% shareholding and had entered into abinding legal agreement with Gem Diamond MiningCompanyofAfricaLimited,forthedisposalofLetšeng’sentire 76% equity interest in Letšeng Diamonds, for apurchase consideration of R879.5 million, payable incash(“theproposedtransaction”).
DIRECTOR’S REPORT (continued)14
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Letšeng,GemandtheLesothoGovernmenthaveagreedthat, post-implementation of the proposed transaction,Gemwill dispose of 6% of the issued share capital ofLetšeng Diamonds to the Lesotho Government (“theLesotho Government disposal”), thereby increasing theequity interest of the Lesotho Government in LetšengDiamonds from24%to30%.TheLesothoGovernmentacquisitionwillbeimplementedasfollows:
• Gemwill transfer 3% of the issued share capital ofLetšengDiamondstotheLesothoGovernmentatzeropurchaseconsideration;and
• Gemwillsellafurther3%oftheissuedsharecapitalofLetšengDiamondstotheLesothoGovernmentforapurchaseconsiderationofR37.5million.ThisamountwillbeloanedtotheLesothoGovernmentbyGemonaninterestfreebasis,andwillberepaidbytheLesothoGovernmenttoGemoutofdividendsreceivedbytheLesothoGovernmentfromLetšengDiamonds.
TheMatodziboard,withtheexceptionofMrPHGray,whorecusedhimselfdue toanypossibleconflictof interest,hasconsideredthetermsandconditionsoftheproposedtransactionandunanimouslyrecommendsthatMatodzishareholdersvote in favourof theproposed transactionat theMatodzigeneralmeeting tobeconvened for thepurposesofconsidering,andifdeemedfit,approvingtheproposed transaction.All thedirectors ofMatodziwhoown shares, directlyor indirectly, inMatodzi intend tovoteinfavouroftheproposedtransactionattheMatodzigeneralmeeting.
JSE Limited (“JSE”) and the Securities Regulation Panel (“SRP”) and circular to Matodzi shareholders
The proposed transaction is classified as a Category 1transaction in terms of JSE Listings Requirements, andaccordingly Matodzi is required to obtain shareholderapproval for the proposed transaction in a generalmeetingofMatodzi shareholders (“theMatodzigeneralmeeting”).
In terms of JSE Listings Requirements an independenttechnical valuation was to be performed on LetšengDiamonds by a Competent Person. The CompetentPerson’s Report (“CPR”) prepared by Venmyn Rand(Proprietary)LimitedhasbeenincludedinthecirculartoMatodzishareholders.
The proposed transaction further constitutes a disposalintermsofsection228oftheCompaniesAct,Act61of1973,asamended,andanaffectedtransactionintermsoftheSRPCodeonTake-oversandMergers(“theCode”)oftheSRPandrequiresanindependentopinionthereonbyanappropriateexternaladvisorintermsofRule3.1oftheCode.
Accordingly, Venmyn Rand (Proprietary) Limited hasbeen appointed as the independent professional expert(“the independent expert”) to determine that the termsandconditionsof theproposed transactionare fairandreasonabletoMatodziminorityshareholders.
Acircularincorporatingthefulltermsandconditionsoftheproposedtransaction,detailsofthepossibledistribution,theCPR, the independent fair and reasonable opinion,andthenoticeofgeneralmeetingwaspostedtoMatodzishareholderson14September2006.
Purchase consideration
The purchase consideration payable by Gem for theLetšenginterest isR879.5million,payableincash,andwill attract interest at a rate of 6.75%per annumwitheffect from theeffectivedateofpayment thereof,beingthefirstbusinessdayafterthefulfilmentofthelastoftheconditionsprecedent.
Inaddition, anamountequal to thedistributableprofitofLetšengDiamonds for the three-monthperiodended30June2006willbedistributedbyLetšengDiamonds,afterfundingitsshort-termworkingcapitalrequirements.ThequantumofsuchdistributionwillbedeterminedbytheauditorsofLetšengDiamondswithinaperiodof90-daysfromtheeffectivedate.
Rationale for the proposed transaction
Upon implementation of the proposed transaction, theboard of directors of Matodzi (“the Matodzi board”)intends utilising the net proceeds to be received byMatodzi to settle Matodzi’s term debt and thereafterto distribute a substantial portion of the remainingproceedsasadividend toMatodzi’s shareholders (referto the proposed dividend on pages 12), and to retainapproximatelyR10milliontofundtheexplorationoftheprospectingrightsitcurrentlyholds.
TheMatodziboardbelievesthattheproposedtransactionpresents Matodzi’s shareholders with the opportunityto realise value for their interest in Letšeng. Post-implementation of the proposed transaction, Matodziplanstoexploittheprospectingrightsitcurrentlyholds,aswellastopartnerwithBlackEconomicEmpowerment(“BEE”)recipientsofneworderprospectingrightstherebyaffording Matodzi’s shareholders the opportunity toparticipateinresourceprojectsgoingforward.
Effective date of the proposed transaction
The effective date of the proposed transaction is1July2006.
DIRECTOR’S REPORT (continued)
�6
GOING CONCERN
TheGroupreversedthelosspositionandreportedaprofitduring the year under review. Matodzi’s solvency hasbeenrestored.
Asaresultofthepreferencesharerestructuring,JCIhasbecomethemajorshareholderinMatodziwithaninterestof57.7%.
Post-implementation of the proposed Letšeng disposal,Matodziplanstoexploittheprospectingrightsitcurrentlyholds, as well as to build on existing BEE credentials,therebyaffordingMatodzi’sshareholderstheopportunitytoparticipateinresourceprojectsgoingforward.
Inlightoftheabove,thedirectorsareoftheopinionthatMatodziwillmeetitsobligationsinthenormalcourseofbusiness.Accordingly,thedirectorscontinuetoadoptthegoing concern basis in the preparation of the financialstatements.
DIRECTORATEDirectors in office at the date of this report are asfollows:
AndrewMlangeni (IndependentNon-ExecutiveChairman)
SelloMashaoRasethaba (ChiefExecutiveOfficer)
PeterHenryGray (Non-Executive)
MafikaEdmundMkwanazi (Non-Executive)
ThaboMosololi (Non-Executive)
Directors’detailsaresetoutonpage50.
During theyearunder review, the followingdirectoratechangesoccurred:
Name Date appointed Date resigned
Geingob,HG 12.09.2005 23.11.2005
Buitendag,HC 15.10.1987 24.08.2005
Kebble,RB 22.08.1996 24.08.2005
Makhado,K 01.11.2004 24.08.2005
Makatini,L 12.09.2005 09.03.2006
Gray,PH 24.08.2005 –
Lamprecht,JC 24.08.2005 *
*Subsequenttoyearend,MrJCLamprechtresignedasanon-executivedirector,on16May2006.
DIRECTORS’ SERvICE AND EMPLOyMENT CONTRACTS
No contract of significance with the Company, and inwhichadirectorwasmateriallyinterested,aroseduringtheyearunderreview.Thenon-executivedirectorsdonothaveservicecontractswiththeCompany.
Mr SM Rasethaba, has a service contract with theCompany,withterminationnoticeperiodof30-days.
DIRECTOR’S REPORT (continued)
17
DIRECTORS’ EMOLuMENTS
Thetablebelowprovidesananalysisofemolumentstoexecutiveandnon-executivedirectorsoftheCompanyasat31March2006.
Directors
fees Salaries
Total
2006
Total
2005Name R000’s R000’s R000’s R000’sExecutiveRasethaba,SM – 1153 1153 1399Makhado,K – – – 181Total executive – 1 153 1 153 1 580 Non-ExecutiveMlangeni,A 129 – 129 125Buitendag,HC(1) – – – –Gray,PH – – – –Kebble,RB(1) – – – –Lamprecht,JC – – – –Makatini,L 25 – 25 –Geingob,HG – – – –Mkwanazi,ME(2) 150 – 150 –Mosololi,T 15 – 15 52Total non-executive 319 – 319 177 TOTAL 319 1 153 1 472 1 757(1) Directors’feeswaivedfortheyearunderreview.(2) Directors’feeswaivedforprioryears,butpaidfortheyearunderreview.
Nootherbenefitsorbonuseswerepaidtoanydirectorduringtheyearunderreview.
DIRECTORS’ INTERESTS
At31March2006,thetotalinterestofdirectorsintheissuedsharecapitalofMatodzi,wereasfollows:
Name
2006Indirect
beneficial
2006Indirect non-
beneficial
2006Direct non-
beneficial
2006Direct
beneficial2006Total
2005Total
ExecutiveRasethaba,SM – 13146935 40800 – 13 187 735 11378135Non-ExecutiveBuitendag,HC – – – – – 7600Kebble,RB – – – – – 12400Gray,PH 50000 – – 100000 150 000 –Lamprecht,JC(1) – – – 100000 100 000 –Mlangeni,A – 6800 81000 87 800 1200Mkwanazi,ME – 9215573 – 9 215 573 9758218Mosololi,T – 9181573 – 9 181 573 9101868TOTAL 50 000 31 544 081 47 600 281 000 31 922 681 30 259 421(1)MrJCLamprechtresignedon16May2006,andhassubsequentlydisposedofhisentireinterest.
•Therewerenocontractsof any significance,duringor at theendof thefinancial year, inwhichanydirectorhadamaterial
interest.
Therehasnotbeenanymaterialchangeintheaboveholdingssincetheendofthefinancialyear.
DIRECTOR’S REPORT (continued)
18
Black Economic Empowerment (“BEE”) Shareholdings asat31March2006
No. of Shares % of Shares
BookmarkHoldings(Pty)Ltd 31,476,081 8.49
OrlyfuntHoldings(Pty)Ltd 170,000 0.05
KabushaMining&Finance(Pty)Ltd 30,600,000 8.26
JCIPledgeAccount* 25,977,724 7.01
SactwuMiningInvestmentsSPV(Pty)Ltd 4,193,289 1.13
Total 91,982,094 24.82
*Theownershipof these sharesare indisputeandhavebeenplacedinapledgeaccount,subsequenttoyearend.
There was an increase in the issued share capitalof Matodzi as a result of the Matodzi and Witnigelpreferencesharetransactionreferredtoonpages14.Initsapplicationforneworderprospectingrights,Matodzimade a declaration committing itself to BEE. Should itnotaddressthedilutioninBEEshareholdingflowingfromthesetransactionsmayaffecttheGroup’sapplicationforneworderprospectingrights.
TheCompanyisindiscussionwithitsholdingCompany,JCI,torectifythedilutionofitsBEEshareholding.Thesediscussionsincludethepossibilityofestablishingajointventure between Matodzi, JCI and Bookmark to takeadvantageofopportunitiesarisingoutofapplicationsforneworderprospectingrightsorthepossibleacquisitionbyBookmarkofJCI‘s57.7%stakeinMatodzi.DiscussionswithotherpotentialacquirersofJCI’sshareholdinghavealsobeenheld.
CONvERSION OF MINERAL RIGHTS
Matodzi held various old order prospecting permitsthroughoutSouthAfrica.Applications forconversionoftheoldorderrightstoneworderprospectingrightson43farmsarebeingsubmittedtotheDepartmentofMineralsandEnergy(“theDME”).
DetailsNo. of farms Ownership
ConsolidatedResourcesandExplorationLimited(“Corex”) 29 100%
Withoutsideparties 1 25%
Matodzi 13 100%
Total 43
Inpreparingtheannualreport,Matodzihasadoptedthefollowingpolicyinrespectofprospectingrights:
• Whereapplicationsforrightshavebeensubmittedandthesehaveeitherbeenapprovedorarecurrentlybeingprocessedanddiscussed,thesehavebeenrecognised;
• Whereapplications forconversionof rightshavenotyet been submitted, and the required deadline forsubmissionhasnotpassed,thesehavebeenrecognised;and
• Whererightshaveeffectivelybeenrelinquished,thesehavebeenwritten-off
The following isananalysisof thenumberof farmsbymineralcategoryforprospectingrightapplications:
CorexCrowned
Cormorant Matodzi
Diamonds 20 1 0
PlatinumGroupMetals 2 0 0
Preciousmetals 3 0 13
Coal 7 0 0
Uranium 1 0 13
Basemetals 14 0 0
Industrials 7 0 13
Matodziholdsa25%interestinCrownedCormorant,thebalanceisheldbyBEEentities.
BORROWINGS
The Group’s borrowing powers are unlimited. Asat 31March 2006 the Group’s borrowings totalledR274million(2005:R605million).
Letšeng repaid the loan to the Industrial DevelopmentCorporationofSouthAfricaLimitedfromtheproceedsofanewfacilitygrantedbyInvestecBankLimited.
SuBSIDIARy COMPANIES
Details of the Company’s subsidiaries are set out onpage47inAnnexure2.
LITIGATION
The directors are not aware of any legal or arbitrationproceedings (including any such proceedings that arependingorthreatened)whichmayhave,orhavehad,amaterial effect onMatodzi or its subsidiaries’ financialpositionduringthepast12monthsprecedingthedateofthisannualreport.
DIRECTOR’S REPORT (continued)
19
AuDITORSDuringtheyearunderreview,CharlesOrbach&CompanyresignedasauditorstotheCompanyon2November2005andKPMGInc.wasappointedonthesamedate.
SECRETARy AND REGISTERED ADDRESSMsBEMortonLegalAdvisorandCompanySecretary13thFloor,28HarrisonStreet,Johannesburg,2001(POBox11165,Johannesburg,2000)
Mrs PBBeale resigned as theCompany Secretarywitheffect from 10 January 2006, and MsBEMorton wasappointed legal advisor and company secretary on thesamedate.
DIRECTORS’ STATEMENTInpreparing the annualfinancial statements set outonpages12to48,theGrouphascompliedwithInternationalFinancial Reporting Standards (“IFRS”), and has usedappropriateaccountingpoliciessupportedbyreasonableandprudentjudgementsandestimates.
The directors are of the opinion that these financialstatements fairly present the financial position of theCompanyandtheGroupasat31March2006,andtheresultsoftheiroperationsandcashflowinformationfortheyearthenended.
The external auditors, KPMG Inc., are responsible forindependently auditing and reporting on the financialstatementsinconformitywithInternationalStandardsofAuditing and theCompaniesAct in SouthAfrica.Theirunqualifiedreportonthesefinancialstatementsappearsonpage11.
The design and effectiveness of the internal controls,including disclosure controls, are also included in thedeclaration. As part of the process, a declaration isalsomade that all significant deficiencies andmaterialweaknesses, fraud involvingmanagementoremployeeswho play a significant role in internal control andsignificant changes that could impact on the internalcontrolenvironment,aredisclosedtotheAuditCommitteeandtheBoard.
DIRECTOR’S REPORT (continued)
20 ANNuAL FINANCIAL STATEMENTS – CONTENTS
Incomestatements 2�
Balancesheets 22
Cashflowstatements 2�
Statementofchangesinequity 24
Notestotheannualfinancialstatements 25
Annexure1–Property,plantandequipment 45
Annexure2–Investmentinsubsidiaries 47
Segmentalanalysis 48
Page
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s Notes R000’s R000’s
– – Revenue 1 401 523 280085
– – CostofSales (212 283) (159962)
– – Gross profit 189 240 120123
4 – Otheroperatingincome – 6820
(22621) (8 523) Operatingexpenses (69 375) (94552)
27772 – Profitonrestructuringofdebt 181 143 27772
(49445) (10 154) Impairmentoflistedinvestments (16 820) (81945)
– 1 001Fairvalueadjustmentofinvestmentproperty 1 001 –
(19335) 444 Impairmentofinvestmentinsubsidiaries – –
(63625) (17 232) Operating profit/(loss) 2 285 189 (21782)
816 253 Investmentincome 3 11 703 2439
(20435) (27 306) Financecosts 4 (70 418) (61999)
(83244) (44 285) Profit/(loss) before tax 226 474 (81342)
– – Incometaxexpense 5 (47 182) (32647)
(83244) (44 285) Profit/(loss) for the year 179 292 (113989)
Attributable to:
–EquityholdersoftheCompany 130 678 (128831)
–Minorityinterest 48 614 14842
Earnings/(loss) per share (cents) 6
–Basicearnings/(loss)pershare 86.6 (86.3)
–Dilutedearnings/(loss)pershare 35.3 (35.6)
Weightedaveragenumberofordinarysharesinissue 150 887 597 149262157
Numberofordinarysharesinissue 370 547 286 149262157
2�INCOME STATEMENTS FOR THE yEAR ENDED 31 MARCH 2006
COMPANy GROuP
2005 2006 2006 2005
R000’s R000’s Notes R000’s R000’s
ASSETS
159764 163 503 Non-current assets 153 227 338962
172 95 Property,plantandequipment 7 96 282392
309 1 310 Investmentproperty 8 1 310 309
159283 162 098 Investments 9 33 641 51461
127822 141 790 –Investmentsinsubsidiaries 9.1 – –
30461 20 308 –Listedinvestments 9.2 33 641 50461
1000 – –Unlistedinvestments 9.3 – 1000
– – Loansreceivable 10 118 180 4800
610 5 940 Current assets 27 090 94262
– – Inventories 11 – 21082
395 5 651 Tradeandotherreceivables 12 6 735 14614
215 289 Cashandcashequivalents 20 355 58566
– – Disposal group held for sale 19 348 100 –
160374 169 443 TOTAL ASSETS 528 417 433224
EQuITy
(128869) 41 709 Capital and reserves attributable to equity holders of the Company 62 763 (282779)
37315 92 637 Ordinarysharecapital 13 92 637 37315
42010 201 552 Sharepremium 13 201 552 42010
(208194) (252 480) Accumulatedlosses (231 426) (362104)
12960 – Equitycomponentofpreferenceshares – 12960
– – Minorityinterest 66 036 17422
(115909) 41 709 Total equity 128 799 (252397)
LIABILITIES
274816 125 018 Non-current liabilities 46 773 611076
274816 125 018 Interestbearingloansandborrowings 14 46 773 569975
– – Provisions 15 – 14637
– – Deferredtaxliabilities 16 – 26464
1467 2 715 Current liabilities 231 566 74545
1385 2 076 Tradeandotherpayables 17 2 420 39781
– 558 Provisions 15 558 –
– – Taxation 887 773
82 82 Interest-bearingloansandborrowings 14 227 701 33991
– – Disposal group held for sale 19 121 279 –
276283 127 734 Total liabilities 399 618 685621
160374 169 443 TOTAL EQuITy AND LIABILITIES 528 417 433224
BALANCE SHEETS AS AT MARCH 200622
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s Notes R000’s R000’s
(3699) (11 440)
CASH FLOWS (uTILISED IN)/FROM OPERATING
ACTIvITIES 103 134 66897
15920 15 613 Cashgeneratedfromoperations 18.1 161 849 126489
(20435) (27 306) Financecosts (70 418) (61999)
816 253 Investmentincome 11 703 2439
– – Taxationpaid 18.2 – (32)
856 (13 286)
CASH FLOWS (uTILISED IN)/FROM INvESTING
ACTIvITIES (113 393) (21388)
(26) (13) Acquisitionofproperty,plantandequipment (13) (38572)
– – Proceedsondisposalofinvestments – 17184
(13 273) Purchaseofinvestments – –
882 – (Increase)/Decreaseinloansreceivable (113 380) –
2961 24 800
CASH FLOWS (uTILISED IN)/FROM FINANCING
ACTIvITIES (5 158) 3110
(123) (177 104)(Repaymentof)/Proceedsfromlong-termborrowings (400 772) 8067
– 201 904 Proceedsfromissueofshares 201 904 –
3084 –Proceedsfrom/(repayment)ofshort-termloansandborrowings 193 710 (4957)
118 74 NET (DECREASE)/INCREASE IN CASH AND CASH EQuIvALENTS (15 417) 48619
97 215 Cash,cashequivalentsandbankoverdraftsatbeginningoftheyear 58 566 97
– – Cashandcashequivalentsonacquisitionofsubsidiary – 9850
– – Reclassifiedtodisposalgroupheldforsale (22 794) –
215 289 CASH AND CASH EQuIvALENTS AT END OF THE yEAR 20 355 58566
2�CASH FLOW STATEMENTS FOR THE yEAR ENDED 31 MARCH 2006
Attributable to equity holders of the Company
Ordinary share capital
Share premium
Accumulated loss
Equity component
of preference
shares Minority
interest Total equity
GROuP
Balance at 31 March 2004 (restated) 37 315 42 010 (218 349) 12 960 2 580 (123 484)
IFRSadjustment–Property,plantand
equipment – – (5544) – – (5 544)
Adjustmentforcapitalisationof
preproductionexpenditure – – (3617) – – (3 617)
Adjustmentforunderstatementof
rehabilitationcosts – – (1682) – – (1 682)
Adjustmentfordepreciationonrighttomine – – (4081) – – (4 081)
Netlossfortheyear – – (128831) – 14842 (113 989)
Balance at 31 March 2005 (restated) 37 315 42 010 (362 104) 12 960 17 422 (252 397)
Sharesissued 55322 159542 – (12960) – 201 904
Netprofitfortheyear – – 130678 – 48614 179 292
Balance at 31 March 2006 92 637 201 552 (231 426) – 66 036 128 799
COMPANy
Balance at 31 March 2004 (restated) 37 315 42 010 (124 950) 12 960 – (32 665)
Netlossfortheyear – – (83244) – – (83 244)
Balance at 31 March 2005 (restated) 37 315 42 010 (208 194) 12 960 – (115 909)
Sharesissued 55322 159542 – (12960) – 201 904
Netlossfortheyear – – (44285) – – (44 285)
Balance as at 31 March 2006 92 637 201 552 (252 479) – – 41 710
STATEMENT OF CHANGES IN EQuITy FOR THE yEAR ENDED 31 MARCH 200624
Significant accounting policies
Matodzi is a company domiciled in South Africa. TheconsolidatedfinancialstatementsoftheCompanyfortheyear-ended31March2006comprisethecompanyanditssubsidiaries(togetherreferredtoasthe“Group”).
Statement of compliance
Theconsolidatedfinancialstatementshavebeenpreparedin accordance with International Financial ReportingStandards (“IFRS”) and Schedule 4 of the CompaniesAct,61of1973,asamended.ThesearetheGroup’sfirstconsolidatedfinancialstatementspreparedincompliancewithIFRSandhenceIFRS1–FirsttimeadoptionofIFRShasbeenappliedinpreparingthesefinancialstatements.
AnexplanationofhowthetransitiontoIFRShasaffectedthereportedfinancialpositionandperformanceoftheGroupisprovidedinthesupplementarynotesonpage31.
Basis of preparation
TheannualfinancialstatementsarepresentedinRands,roundedtothenearestthousand.Theyarepreparedonthehistoricalcostconvention,asmodifiedbytherevaluationofinvestments.
The preparation of financial statements in conformitywithIFRSrequiresmanagementtoexerciseitsjudgement,makecertainestimatesandassumptionsintheprocessofapplyingtheCompany’saccountingpoliciestoreportedamountsofassetsand liabilities, incomeandexpenses.Theestimatesandassociatedassumptions,arebasedonhistorical experience and various other factors that arebelieved tobe reasonableunder thecircumstances, theresultsofwhichformthebasisofmakingthejudgementsaboutcarryingvaluesofassetsandliabilitiesthatarenotreadilyapparentfromothersources.
Theestimatesandunderlyingassumptionsarereviewedonanongoingbasis.Changestoestimatesarerecognisedintheperiodinwhichtheestimateisrevisediftherevisionaffectsonly thatperiod,or in theperiodof the revisionandfutureperiodsiftherevisionaffectsbothcurrentandfutureperiods.
The areas involving a higher degree of judgement orcomplexity,orareaswhereassumptionsandestimatesaresignificant to the consolidated financial statements, aredisclosedinnote27ofthefinancialstatements.
Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheseconsolidatedfinancial statements and in preparing an opening IFRSbalance sheet at 1 April 2004 for the purpose of thetransitiontoIFRS.
TheaccountingpolicieshavebeenappliedconsistentlybyallGroupentities.
BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are entities controlled by the Company.ControlexistswhentheCompanyhasthepower,directlyorindirectly,togovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Theexistence and effect of potential voting rights that arecurrentlyexercisableorconvertibleareconsideredwhenassessing whether the Group controls another entity.Subsidiariesarefullyconsolidatedfromthedateonwhichcontrol is transferred to theGroupandde-consolidatedfromthedatethatcontrolceases.
Transactions eliminated on consolidation
Inter-companytransactions,balancesandunrealisedgainsontransactionsbetweenGroupcompaniesareeliminatedin preparing the consolidated financial statements.Unrealised losses are also eliminated, but only to theextentthatthereisnoevidenceofimpairment.
PROPERTy, PLANT AND EQuIPMENT
Owned assets
Itemsofproperty,plantandequipmentarestatedatcostless accumulated depreciation and impairment losses.The cost of self-constructed assets includes the cost ofmaterials,directlabourandothercostsincurreddirectlyintheconstructionoftheasset.
Subsequent costs are included in the asset’s carryingamountonlywhenitisprobablethatthefutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupand the cost of the item can bemeasured reliably.Allotherrepairsandmaintenancearechargedtotheincomestatementduring thefinancialperiod inwhich theyareincurred.
Gains and losses on disposals are determined bycomparing proceeds with carrying amounts and areincludedinoperatingprofit.
Depreciation
Landisnotdepreciated.Depreciationonotherassets ischargedtotheincomestatementonastraight-linebasisovertheestimatedusefullivesofeachpartofanitemofproperty,plantandequipment.Depreciationofanitemofproperty,plantandequipmentbeginswhenitisavailableforuseandceasesattheearlierofthedateitisclassifiedasheld for saleor thedate that it is derecognised.Theestimatedusefullivesareasfollows:
25NOTES TO THE ANNuAL FINANCIAL STATEMENTS FOR THE yEAR ENDED 31 MARCH 2006
PROPERTy, PLANT AND EQuIPMENT (continued)
Depreciation (continued)
Preproductioncosts 10yearsLeaseholdproperty 5to10yearsComputerequipment 3yearsFurnitureandfittings 5yearsOfficeequipment 5yearsMotorvehicles 5years
Mininglease 10years
Whereappropriate,and if significant,expectedresidualvalues are taken into account in determining thedepreciablevaluesofassets.
Wherepartsofanitemofproperty,plantandequipmenthave different useful lives, they are accounted for asseparate items of property, plant and equipment. Theassets’ residual values, methods of depreciation andusefullivesarereviewed,andadjustedifappropriate,ateachbalancesheetdate.
Leased assets
Leasesthattransfersubstantiallyalltherisksandrewardsof ownership are classified as finance leases. Property,plantandequipmentsubjecttofinanceleaseagreementsarecapitalisedattheloweroffairvalueandthepresentvalue of the minimum lease payments at inception ofthelease,andthecorrespondingliabilitytothelessorisraised.Leasepaymentsareallocatedusing theeffectiveinterestratemethodtodeterminetheleasefinancecost,whichischargedagainstoperatingprofit,andthecapitalrepaymentwhichreducestheliabilitytothelessor.Theseassetsaredepreciatedonthesamebasisasproperty,plantandequipmentownedbytheGroup.
DECOMMISSIONING AND REHABILITATION ASSETS
Groupcompaniesaregenerallyrequiredtorestoremineandprocessingsitesattheendoftheirproductionlivestoaconditionacceptabletotherelevantauthorities.
The expected cost of any committed decommissioningor restorationprogramme, discounted to its net presentvalue, is provided and capitalised at the beginning ofeach project. The capitalised cost is depreciated overthe expected life of the asset and the increase in thenetpresentvalueof theprovision for theexpectedcostis included infinancecosts.Subsequentchanges in theinitial estimates of rehabilitation and decommissioningcostsarecapitalisedaspartof thecostof the itemanddepreciatedprospectivelyover the remaining lifeof theitemtowhichtheyrelate.
NON-CuRRENT ASSETS HELD FOR SALE
Non-current assets (or disposal group) are classified asheld for sale if theircarryingamountwillbe recoveredprincipallythroughasaletransactionratherthanthroughcontinuing use.This condition is regarded asmet onlywhenthesaleishighlyprobable,theassets(ordisposalgroup) are available for immediate sale in its presentcondition and management is committed to the salewhich shouldbe expected to qualify for recognition asa completed salewithin one year from the date of theclassification.
Upon initial classification as held for sale, non-currentassets (or disposal group) are recognised at the lowerof carrying amount and fair value less cost to sell.Anyimpairment losses arisingare recognised in the incomestatement.Againforanysubsequentincreaseinthefairvaluelesscoststosellrecognisedinprofitorlosstotheextentthatitisnotinexcessofthecumulativeimpairmentlosspreviouslyrecognised.
INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the cost of anacquisitionoverthefairvalueoftheGroup’sshareofthenetidentifiableassetsoftheacquiredsubsidiaryatthedateofacquisition.Goodwillistestedannuallyforimpairmentandcarriedatcost lessaccumulatedimpairmentlosses.Impairmentlossesongoodwillarenotreversed.
Goodwill is allocated to cash generating units for thepurposeofimpairmenttesting.Theallocationismadetothosecashgeneratingunitsorgroupsofcashgeneratingunits that are expected to benefit from the businesscombinationinwhichthegoodwillarose.
Negative goodwill arising on acquisition is recogniseddirectlyinprofitorloss.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Assetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairment.Assetsthataresubjecttoamortisationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedinprofitorlossfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)26
Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Valueinuseisestimatedtaking into account future cash flows, forecast marketconditionsandexpectedlivesoftheassets.Suchcashflowsare discounted using pre-tax discount rates that reflectcurrentassessmentsofthetimevalueofmoneyandtherisksassociatedwiththespecificasset.
Forpurposesofassessingimpairment,anassetthatdoesnotgeneratelargelyindependentcashflows, therecoverableamountisdeterminedforthecash-generatingunittowhichtheassetbelongs.Non-financialassetsotherthangoodwillthat suffered an impairment are reviewed for possiblereversaloftheimpairmentateachreportingdate.
INvESTMENT PROPERTy
Investment properties are held to earn rentals or forcapitalappreciationorbothandarenotoccupiedbythecompaniesoftheGroup.
Investment properties comprise freehold land andbuildingandarecarriedatfairvalue.Thosethatarebeingredevelopedforcontinuinguseasinvestmentproperty,orforwhichthemarkethasbecomelessactive,continuetobemeasuredatfairvalue.Undevelopedpropertyisvaluedatestimatednetrealisablevalue.Selectedpropertiesarevalued externally every six months by an independentvaluationcompany.
Any gain or loss arising from a change in fair value isrecognisedinprofitorloss.Rentalincomefrominvestmentpropertyisrecognisedinprofitorlossonastraightlinebasisoverthetermofthelease.
When an item of property, plant and equipment istransferred to investment property following a changein its use, any difference arising at the date of transferbetween the carrying amount of the item immediatelypriortotransferanditsfairvalueisrecogniseddirectlyinequityifitisagain.Upondisposaloftheitemthegainistransferredtoretainedearnings.Anylossarisinginthismannerisrecognisedimmediatelyinprofitorloss.
INvESTMENT IN SuBSIDIARIES
Investments in subsidiary companies are stated at costlessprovisionforimpairmentloss.
BORROWING COSTS
Borrowingcoststhataredirectlyattributabletoqualifyingassets are capitalised up to the date that the assets aresubstantially ready for their intended use. Qualifyingassetsarethosethatnecessarilytakeasubstantialperiodoftimetopreparefortheirintendeduse.
Otherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.
FINANCIAL INSTRuMENTS
Initial recognition and measurement
Allfinancial instrumentsare recognisedon thebalancesheet.Financialinstrumentsareinitiallyrecognisedwhenthe Group becomes party to the contractual terms ofthe instruments and aremeasured at cost,which is thefair valueof the consideration given (financial asset) orreceived (financial liability or equity instrument) for it.Transactioncostsareincludedintheinitialmeasurementofthefinancialinstrument.
Subsequent to initial recognition these instruments aremeasuredassetoutbelow.
Financial assets
TheGroup’sprincipalfinancialassetsareinvestments,tradeandotherreceivablesandcashandcashequivalents:
Investments
Investmentsheldfortradingareclassifiedascurrentassetsandaremeasuredatfairvalue,withanyresultantgainorlossrecognisedinprofitorloss.
Other non-current investments held by the Group areclassifiedasbeingavailable-for-saleandaremeasuredatfairvalue,withanyresultantgainorlossbeingrecogniseddirectly in equity. When these investments are sold orimpaired,thecumulativegainorlosspreviouslyrecogniseddirectlyinequityisrecognisedinprofitorloss.
For investments that are actively traded in organisedfinancialmarkets,fairvalueisdeterminedbyreferencetoStockExchangequotedmarketbidpricesatthecloseofbusinessonthebalancesheetdate.Forinvestmentswherethereisnoquotedmarketprice,fairvalueisdeterminedby reference to the current market value of anotherinstrumentwhichissubstantiallythesameoriscalculatedbasedontheexpectedcashflowsof theunderlyingnetassetbaseoftheinvestment.
TheGroupassessesateachbalancesheetdatewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsisimpaired.Inthecaseofequitysecuritiesclassifiedasavailableforsale,asignificantorprolongeddeclineinthefairvalueofthesecuritybelowitscostisconsideredanindicatorthatthesecuritiesareimpaired.Ifanysuchevidenceexistsforavailable-for-salefinancial
27NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
assets, thecumulativeloss–measuredasthedifferencebetween theacquisitioncostand thecurrent fairvalue,lessanyimpairmentlossonthatfinancialassetpreviouslyrecognisedinprofitorlossis–removedfromequityandrecognised in the income statement. Impairment lossesrecognisedintheincomestatementonequityinstrumentsarenotreversedthroughtheincomestatement.
Trade and other receivables
TradeandotherreceivablesoriginatedbytheGrouparestatedat theirnominalvalue lessprovision fordoubtfuldebts.Anestimateofdoubtfuldebtsismadebasedonareviewof all outstanding amounts at the balance sheetdate.Baddebtsarewritten-offduringtheperiodinwhichtheyareidentified.
Cash and cash equivalents
Cashandcashequivalentsaremeasuredattheirfairvalue.Forthepurposeofthecashflowstatement,cashandcashequivalentscomprisecashonhand,depositsheldoncall,and investments in money market instruments, net ofbankoverdrafts,allofwhichareavailableforusebytheGroupunlessotherwisestated.
Financial liabilities and equity instruments
Financial liabilities and equity
Financial liabilities and equity instruments issued areclassified according to the substanceof the contractualarrangements entered into and the definitions of afinancialliabilityandanequityinstrument.
The accounting policies adopted for specific financialliabilitiesandequityinstrumentsaresetoutbelow.
The Group’s principal financial liabilities are interest-bearingdebt,non-interest-bearingdebt, tradeandotherpayables and bank overdrafts and other short-termborrowings:
Interest-bearing debt
Interest-bearing debt is recognised at amortised cost,namelyoriginaldebtlessprincipalpayments.
Non-interest-bearing debt
Non-interest-bearingdebt is recognisedat original debtlessprincipalpayments.
Trade and other payables
Trade and other payables are stated at their nominalvalue.
Equity
TheGroup’sprincipalequityinstrumentisordinarysharecapital.Ordinarysharecapitalisrecordedatoriginalcost.
Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromproceeds.
Whensharecapitalrecognisedasequityisrepurchased,theamountoftheconsiderationpaid,includingdirectlyattributablecosts,isdeductedfromequityuntilthesharesarecancelled,reissuedordisposedof.Repurchasedsharesare classified as treasury shares andwhere such sharesare subsequently sold or reissued, any considerationreceived,netofanydirectlyattributablecosts,netoftax,isincludedinequity.
Preference shares
Preference shares are regarded as a compound financial instrument
Atthedateofissuethefairvalueofthepreferencesharesisestimatedusing theprevailingmarket interest rate forsimilardebt.
Thedifferencebetween theproceedsof issue and theirfairvalueassignedtothepreferencesharesisrecognisedoverthetermofthepreferencesharesinaccordancewiththeprevailingmarketinterestrateforsimilardebt.
Theinterestexpenseonthepreferencesharesiscalculatedbyapplyingmarket interest rates for similardebt to theliabilitycomponentforpreferenceshares.
Derecognition
Financial assets (or a portion thereof) are derecognisedwhentheGrouprealisestherightstothebenefitsspecifiedinthecontract,therightsexpireortheGroupsurrendersor otherwise loses control of the contractual rights thatcomprise the financial asset. On derecognition, thedifferencebetweenthecarryingamountof thefinancialassetandproceedsreceivableandanyprioradjustmenttoreflectfairvaluethathadbeenreportedinequityareincludedintheincomestatement.
Financial liabilities (or a portion thereof) arederecognised when the obligation specified in thecontract is discharged, cancelled or expires. Onderecognition, the difference between the carryingamount of the financial liability, including relatedunamortised costs, and the amount paid for it areincludedintheincomestatement.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)28
Fair value methods and assumptions
The fair value of financial instruments traded in anorganisedfinancialmarketaremeasuredattheapplicablequotedprices,adjustedforanytransactioncostnecessarytorealisetheassetsorsettletheliabilities.
The fair value of financial instruments not traded in anorganisedfinancialmarket,isdeterminedusingavarietyof methods and assumptions that are based onmarketconditions and risk existing at balance sheet date,including independent appraisals and discounted cashflowmethods.The fairvaluedetermined isadjusted forany transaction costs necessary to realise the assets orsettletheliabilities.
The carrying amounts of financial assets and liabilitieswith a maturity of less than one year are assumed toapproximatetheirnominalamounts.
Set-off
Where a legally enforceable right to set-off exists forrecognised financial assets and financial liabilities, andthereisanintentiontosettletheliabilityandrealisetheassetsimultaneously,ortosettleonanetbasis,allrelatedfinancialeffectsareset-off.
INvENTORIES
Inventories,whichincluderoughdiamonds,arestatedatthelowerofcostofproductionorestimatednetrealisablevalue.Consumablestoresarestatedatthelowerofcostontheweightedaverageorestimatedreplacementvalue.
Netrealisablevalueis theestimatedsellingpriceintheordinarycourseofbusinesslessmarketingcosts.Thecostofproductionisbasedontheweightedaveragecostbasis,andincludesdirectlabour,otherdirectcostsandrelatedproductionoverheads.
PROvISIONS
Provisions represent liabilities of uncertain timing oramount.
ProvisionsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofpastevents,it is probable that an outflow of resources embodyingeconomicbenefitswillberequiredtosettletheobligation,anda reliable estimateof the amountof theobligationcanbemade.
Provisions are measured at the present value of theexpenditures expected to be required to settle theobligationusingapre-taxratethatreflectscurrentmarketassessments of the time value of money and the risksspecifictotheobligation.
TAXATION
Taxon theprofit or loss for the year comprises currentanddeferredtax.Taxisrecognisedinprofitorlossexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequity.
Currenttaxcomprisestaxpayablecalculatedonthebasisof theexpected income for theyear,using the tax ratesenactedatthebalancesheetdate,andanyadjustmentoftaxpayableforpreviousyears.
Deferred taxation is provided on all taxable temporarydifferences.Temporarydifferencesaredifferencesbetweenthe carrying amounts for financial reporting purposesand theamountsused for taxationpurposes,except fordifferencesrelatingtogoodwillwhicharenotdeductiblefortaxationpurposesandtheinitialrecognitionofassetsorliabilitieswhichaffectneitheraccountingnortaxableprofitorloss.
Adeferredtaxassetisrecognisedtotheextentthatit isprobablethatfuturetaxableprofitswillbeavailableagainstwhich the associated unused tax losses and deductibletemporarydifferencescanbeutilised.Deferredtaxassetsarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.
Secondarytaxationoncompaniesisprovidedinrespectofdividendpaymentsnetofdividendsreceivedorreceivableandisrecognisedasataxationchargefortheyear.
REvENuE
Revenuecomprisesof theinvoicedvalueforthesaleofdiamondsandroyaltiesreceived.
Revenue fromthesaleofdiamonds is recognisedwhensignificantrisksandrewardsofownershiparetransferredtothebuyer.
Revenue from royalties are recognised when the salewhichgivesrisetothisrevenuetakesplace.
OtherrevenuesearnedbytheGrouparerecognisedonthefollowingbases:
•Interestincome:asitaccruesunlesscollectabilityisindoubt
•Dividend income: when the shareholder’s right toreceivepaymentisestablished
29NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
LEASES
Leases where the lessor retains the risks and rewardsof ownership of the underlying asset are classified asoperatingleases.Paymentsmadeunderoperatingleasesarerecognisedinprofitorlossonastraight-linebasisovertheperiodofthelease.
FOREIGN CuRRENCy TRANSACTIONS
Transactions in foreign currencies are recorded at therateofexchangerulingatthetransactiondate.Monetaryassets and liabilities denominated in foreign currenciesaretranslatedattherateofexchangerulingatthebalancesheet date. Gains and losses arising on translation arecreditedtoorchargedagainstincome.
EMPLOyEE BENEFITS
Short term employee benefits
Thecostofallshort-termemployeebenefitsisrecognisedduring the period in which the employee renders therelatedservice.
COMPARATIvE FIGuRES
Wherenecessarycomparativefigureshavebeenadjustedto conformwith changes in presentation in the currentyear.
RESTATED FIGuRES
Figuresforthecomparativeyearhavebeenrestated.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)�0
Introduction
Asstatedintheaccountingpoliciessetoutonpages25to30, these are theGroup’sfirst consolidatedfinancialstatements prepared in accordance with InternationalFinancialReportingStandards(“IFRS”).
Previously the financial statements of the group wereprepared in accordance with South African GenerallyAcceptedAccountingPractice.ThedatefortransitiontoIFRSis1April2004,andthispresentstheearliestperiodofcomparativeinformation.
TheGroup’sopeningbalancesheeton1April2004andcomparative information for 2004 have been restatedtocomplywithall IFRSeffectiveasat31March2006,except for the exemptions applied in terms of IFRS 1First-timeAdoption of International Financial ReportingStandards.The impact of the transition to IFRS on thegroup’s financial position, financial performance andcashflowispresentedbelow.
Reconciliation of SA GAAP to IFRS
SA GAAP
restated
Effect of transition to
IFRS IFRS restated
Notes R’000 R’000 R’000
Balance Sheet (summarised) at 31 March 2005
Property,plantandequipment 1 276848 5544 278760
Accumulatedloss 3 (356560) (5544) (362104)
Income Statement (summarised) for the year ended 31 March 2005
Revenue 280085 – 280085
Costofsales (154418) (5544) (159962)
Grossprofit 125667 (5544) 120128
Operatingexpenses 3 (94552) – (94552)
Othernetexpenses (47353) – (47353)
Operating(loss)/profit (16238) (5544) (21782)
Netfinancecosts (59560) – (59560)
(Loss)/profitbeforetax (75798) (5544) (81342)
Incometaxexpense (32647) – (32647)
Netloss (108445) (5544) (113989)
Attributableto:
Equityholders (121315) (7516) (128831)
Minorityinterest 12870 1972 14842
Transitional provisions
IFRS 1 First-time Adoption of International FinancialReporting Standards requires restrospective compliancewithall IFRSeffectiveat thereportingdate.However, itcontainsanumberofexemptionstothisfullretrospectiveapplicationofIFRS.
TheGroup has elected to apply the following optionalexemptionsfromfullretrospectiveapplication:
Fair value or revaluation as deemed cost
The Group has elected not to measure the WitnigelPropertyatfairvalueasat1April2004.
Business combinations
The Group has elected not to apply IFRS 3 Businesscombinations retrospectively to business combinationsthatoccurredpriorto1April2004.
��TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
Cash flow statement for the year ended 31 March 2005
The IFRS adjustments reflected above do not have anyimpactoncashandcashequivalents,theonlyadjustmentsthatwouldhavebeenmade to thecashflowstatementis to reportedprofitsanda likeadjustment tonon-cashitems.
Notes on the transition to International Financial Reporting Standards
1. Property, plant and equipment
TheGrouphasappliedtheprovisionofIAS16–Property,plant and equipment, which requires that the Groupperformanannual reviewandassessmentof theusefullifeofitsassets,depreciationmethodandresidualvaluesattheendofeachfinancialyear.Whereitemsofproperty,plant and equipment comprise individual componentsforwhichdifferentdepreciationmethodsareused,eachcomponentisaccountedforseparately.
2. Available for sale investments
InaccordancewiththerequirementsofIAS39-Financialinstruments, the Group has adopted the subsequentmeasurement of available-for-sale assets. This requiresrecognition of gains and losses on remeasurementof available for sale assets directly in equity whereaspreviously under SA GAAP the Group accounted forthesechangesinfairvaluesthroughtheincomestatement.Under IAS39 a significant or prolongeddecline in thefair value of assets held for resale below its cost willbe considered objective evidence of impairment andan impairment loss will be recognised in the incomestatementand,consequentlynoadjustmentwaseffectedinboththeincomestatementandequity.
3. The movement in retained income can be summarised as follows:
Rm
Depreciationofcomponentassets (5544)
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued)�2
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
� REvENuE
Majorclassesofrevenuecomprise:
– – –Royalties 152 634
– – –Diamondsales 401 371 279451
– – 401 523 280085
2 OPERATING PROFIT/(LOSS)
Inarrivingatoperatingprofitthefollowingitemshavebeentakenintoaccount:
Income:
– – Profitonrestructuringofdebt 181 143 27772
Expenses:
333 128 Auditorsremuneration 648 639
333 67 –Feesforauditservices 552 527
– 61 –Feesforotherservices 96 112
80 – Consultingandmanagementfees – 13280
83 90 Depreciationofproperty,plantandequipment 36 435 27785
– – –Miningrights 8 161 4081
– – –Miningdevelopmentcosts 15 130 20487
– – –Leaseholdimprovements 5 484 2412
81 81 –Motorvehicles 470 255
– – –Officeequipment 6 459 259
2 9 –Computerequipment 464 68
– – –Furnitureandfittings 267 223
1757 1 472 Directorsemoluments 1 472 1757
Fairvalueadjustments
– – –Investmentproperty 1 001 –
17710 – Impairmentofpropertyplantandequipment 432 23426
49445 10 154 impairmanoflistedinvestments 16 820 81945
– – Foreignexchangeloss 6 670 2137
– – Lossondisposalofinvestments – 13439
5 5 Secretarialcosts 99 5
791 796 Staffcosts 13 641 13536
166 83 Operatingleaseexpenses 9 893 16880
166 83 –Buildings 254 166
– – –Minesiteandproperty 694 1047
– – –Equipment 8 945 15667
4 2 Numberofemployeesatyear-end 94 90
��NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
3 INvESTMENT INCOME
511 – Interestreceived 11 703 2439
305 253 Interestreceivedfromsubsidiarycompanies – –
816 253 11 703 2439
4 FINANCE COSTS
– Interestbearingborrowings
37 (3 889) –Other (27 662) (23075)
(20472) (23 417) –Preferenceshares (42 756) (38924)
(20435) (27 306) (70 418) (61999)
5 INCOME TAX EXPENSE
CurrentSAnormaltaxation
– – Currenttax (11 579) (202)
– – –Currentyear (52 037) (202)
– – –Utilisationofprioryearlosses 40 458 –
Deferredtax
– – –Currentyear (35 603) (32445)
– – (47 182) (32647)
% % Reconciliation of rate of tax % %
30.0 29.0 Statutorytaxrate 29.0 30.0
Adjustedfor(reduction)/increaseineffectivetaxrateasaresultof:
(7.4) 0.9 –Disallowableexpenditure 8.4 (13.1)
– (1.0) –Changeintaxrate (1.0) –
(21.1) 19.7 –Timingdifferences (7.0) 100.7
58.5 (29.0) –Utilisationofassessedlosses (8.2) (69.1)
60.0 19.6 Effectivetaxrate 21.3 48.5
TheCompanyandcertainsubsidiarieshavecomputedincometaxlossesinexcessoftheirtaxableincomeinthecurrentyear.
Othersubsidiarycompanieshaveincurredlosses.Anybenefitderivedfromincometaxlossescarriedforwardisdependenton
thecompaniesearningtaxableincomeinthefuture.During2005,abudgetedchangeinthecorporatetaxratefrom30%to
29%wasannouncedbytheMinisterofFinance.
6 EARNINGS/(LOSS) PER SHARE
The attributable earnings/(loss) per share has been calculated on the attributable profit/(loss) for the year of R130678000
(2005:R128831000)andaweightedaveragenumberof150887597(2005:149262157)ordinarysharesinissueduring
theyear.
Theheadline losspersharehasbeencalculatedonaheadline lossofR50033000 (2005:R133167000)andaweighted
numberof150887597(2005:149262157)ordinarysharesinissueduringtheyear.
Thedilutedearnings/(loss)persharehavebeencalculatedontheattributableprofit/(loss)fortheyearofR130678000(2005:
R128831000)andaweightedaveragenumberof370547286(2005:362262157)ordinarysharesinissueduringtheyear.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)34
COMPANy GROuP
2005 2006 2006 2005
R000’s R000’s R000’s R000’s
6 EARNINGS/(LOSS) PER SHARE (continued)
Reconciliationbetweenattributablelossandheadlineloss
Attributableloss 130 678 (128831)
Impairmentofmineralrightsandminingassets 432 23436
Profitonrestructuringofdebt (181 143) (27772)
Headlineloss (50 033) (133167)
Headlinelosspershare (33.2) (89.2)
7 PROPERTy, PLANT AND EQuIPMENT
– – Mineralrights 1 77537
– – –Atcost 86 618 5000
– – –Reclasificationofrighttomine – 81618
– – –Reclassifiedtodisposalgroupheldforsale (69 375) –
– – –Accumulateddepreciationandimpairment (17 242) (9081)
– – Miningdevelopmentcosts – 183201
– – –Atcost 213 788 203688
– – –Reclassifiedtodisposalgroupheldforsale (178 171) –
– – –Accumulateddepreciationandimpairment (35 617) (20487)
– – Miningassets – 432
18020 18 020 –Atcost 19 640 19949
– (309) –Reclassificationofinvestmentproperty – (309)
(18020) (17 711) –Accumulateddepreciationandimpairment (19 640) (19208)
– – Leaseholdimprovements – 15487
– – –Atcost 21 492 17899
– – –Reclassifiedtodisposalgroupheldforsale (13 596) –
– – –Accumulateddepreciationandimpairment (7 896) (2412)
148 68 Motorvehicles 68 1326
242 242 –Atcost 2 602 1594
– – –Reclassifiedtodisposalgroupheldforsale (1 795) –
(94) (174) –Accumulateddepreciationandimpairment (739) (268)
– – Officeequipment – 3170
– – –Atcost 7 794 3429
– – –Reclassifiedtodisposalgroupheldforsale (1 076) –
– – –Accumulateddepreciationandimpairment (6 718) (259)
24 27 Computerequipment 27 213
26 39 –Atcost 647 281
– – –Reclassifiedtodisposalgroupheldforsale (88) –
(2) (12) –Accumulateddepreciationandimpairment (532) (68)
– – Furnitureandfittings – 1026
– – –Atcost 3 028 1249
– – –Reclassifiedtodisposalgroupheldforsale (2 538) –
– – –Accumulateddepreciation (490) (223)
172 95 96 282392
Detailsofthemovementsinproperty,plantandequipmentaresetoutonpage45inAnnexture1tothesestatements.
�5NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
COMPANy GROuP
2005 2006 2006 2005
R000’s R000’s R000’s R000’s
8 INvESTMENT PROPERTy
– – Balanceatbeginningoftheyear 309 –
– – Reclassificationofinvestmentproperty – 309
– –Increaseonremeasurementofinvestmentpropertyatfairvalue 1 001 –
– – Balanceatendoftheyear 1 310 309
Theinvestmentpropertyrepresentsvariouspropertiessituated in Jameson Park, Klippoortjie and RensbergTownship.Thesepropertiesarefreeholdandareeitherheldtoearnrentalsorforcapitalappreciation.
External valuations have been obtained, for theabovementioned properties, and the valuationswere determined by reference to existing marketconditions.
9 INvESTMENTS
9.1 Investment in subsidiary companies
221308 234 580 Sharesatcosts – –
61103 61 354 Loans – –
282411 295 934 – –
(154589) (154 144) Accumulatedimpairment – –
127822 141 790 – –
Details of the subsidiary companies areset out on page 47 in Annexture 2 to thesestatements.
9.2 Listed investments
JCI Limited
Group:210168073(2005:210168073)ordinaryshares
Company:126834740(2005:126834740)
63417 63 417 Atcost 263 417 263417
– (32 956) Accumulatedimpairment (212 956) (134000)
63417 30 461 50 461 129417
(32956) (10 154) Impairment–current (16 820) (78956)
30461 20 307 Atfairvalue 33 641 50461
9.3 unlisted investments
Skygistics (Pty) Limited (formerly Startrack Communications Africa (Pty) Limited)
10%shareholdingatcost
1000 – Directors’valuationRNil(2005:R1000000) – 1000
– – – –
10 LOANS RECEIvABLE
– – GovernmentoftheKingdomofLesotho(1) 4 800 4800
– – JCILimited(2) 113 380 –
– – 118 180 4800(1)Theloanisunsecured,interestfreeandhasnofixedtermsofrepayment.(2)Theloanisunsecured,interestatvaryingratesandhasnofixedtermsofrepayment.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)�6
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
11 INvENTORIES
– – Diamondsonhand – 17545
– – Consumablestores – 3537
– – – 21082
12 TRADE AND OTHER RECEIvABLES
Includedintradeandotherreceivablesarethefollowing:
395 5 599 Tradeandotherreceivables 6 735 20065
– 52 Prepayments – 295
– – Deposits – 490
395 5 651 6 735 20850
13 ORDINARy SHARE CAPITAL AND SHARE PREMIuM
Authorised:
62500 187 500 750000000(2005:250000000)ordinarysharesof25centseach 187 500 62500
Issued:
37315 92 637 370547286(2005:149262157)ordinarysharesof25centseach 92 637 37315
NuMBER OF SHARES MOvEMENTS IN ISSuED SHARE CAPITAL NuMBER OF SHARES
149262157 149 262 157 Totalnumberofsharesinissueatbeginningoftheyear 149 262 157 149262157
– 7 460 000 Sharesissuedtopublicshareholders 7 460 000 –
– 213 825 129 SharesissuedtoJCIasaresultoftheprefshareredemption 213 825 129 –
149262157 370 547 286 Totalnumberofsharesinissueatendoftheyear 370 547 286 149262157
SHARE PREMIuM
42010 42 010 Atbeginningoftheyear 42 010 42010
– 159 542 Arisingfromsharesissuedduringtheyear 159 542 –
42010 201 552 201 552 42010
Theunsecuredredeemableconvertible“B”preferencesharesandredeemablecumulativepreferenceshareswereredeemedandpurchasedduringtheyearunderreviewbytheissueof200000000and13825129ordinaryshares,respectively.
37NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
14 INTEREST BEARING BORROWINGS
Long-termborrowings
68708 76 297 –AcquisitionofJCIshares(1) – 68708
– – –IndustrialDevelopmentCorporationLtd(2) – 162386
– – –InvestecBank(3) 227 620 –
– 4 656 –ConsolidatedMiningManagementServicesLimited(4) 46 773 35491
165 82 –FinanceLease(5) 82 165
162139 – –“B”Prefs(6) – 162139
– – –WitnigelPrefs(7) – 175077
43886 44 065 –Loanpayable–subsidiaries – –
274898 125 100 274 475 603966
(82) (82) Less:Currentportionincludedincurrentliabilities (227 702) (33991)
– – –IndustrialDevelopmentCorporationLtd(2) – (33909)
– – –InvestecBank(3) (227 620) –
(82) (82) –FinanceLease(4) (82) (82)
274816 125 018 46 773 569975(1 Secured loan entered into to acquire 126834740
ordinary shares in JCI. Letšeng repaid the loanfrom the proceeds of a new facility granted byInvestec Bank Limited. The loan accrues interestat the prime interest rate ,is secured by a pledge of126834740JCIsharestothevalueofR30.461million(2005: R30.461million) and has no fixed terms ofrepayment.
(2) LetšengrepaidtheloantotheIDCfromtheproceedsofanewfacilitygrantedbyInvestec.
(3) Theloanissecuredbyall thesharesheldinLetšengDiamonds, and bears interest at the prime interestrateplusone.UponthesaleofthesharesinLetšengDiamondstheloanbecomespayableinfull.
(4) Theloanisunsecured,bearsinterestatinterestratesasdeterminedfromtimetotimeandhasnofixedtermsofrepayment.
(5) Liabilities under instalment sale agreements payableinmonthly instalmentsofR7460bearing interest atthe prime overdraft rate and secured by equipmentand motor vehicles with a book value of R95 000(2005:172000).
6) Matodzi redeemed the 200million “B” preferencesharesbytheallotmentandissueof200millionnewMatodzi ordinary shares to JCI Investment Finance(Proprietary)Limitedatanissuepriceof104centspernewMatodzishare.
(7) Matodzi acquired 200million preference shares inWitnigelInvestments(Proprietary)LimitedfromJCIbytheallotmentandissueof13.8millionnewMatodziordinarysharesatanissuepriceof96.4427centsperMatodzishare.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)38
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
14 INTEREST BEARING BORROWINGS (Continued)
Reconciliation of finance lease
182 93 Totalminimumleasepayments 93 182
95 93 –Notlaterthanayear 93 95
87 – –Between1and5years – 87
(34) (11) Less:FinanceCharges (11) (34)
165 82 Presentvalueatbalancesheetdate 82 165
82 44 –Notlaterthanayear 44 82
83 38 –Between1and5years 38 83
15 PROvISIONS
Long-term provisons
ProvisionforenvironmentalrehabilitationatLetšeng-la-Tarae
Balanceatbeginningoftheyear 14 637 –
Recognisedinprofitorloss 2 010 –
Prioryearadjustment – 14637
Disposalgroupheldforsale (16 647) –
Balanceatendoftheyear – 14637
Short-term provisions
– 99 Provisionforleavepay 99 –
– 17 Provisionforbonuspayments 17 –
– 86 Provisionfordirectors’fees 86 –
– �20 Provisionforretrenchmentcosts �20 –
– �6 ProvisionforPAYE �6 –
– 558 558 –
16 DEFERRED TAXATION
– – Openingbalance 26 464 –
– – Acquisitionofsubsidiary – 20
– – Chargedtoincomestatement 35 603 26444
– – –Previouslyunrecognised – 8009
– – –Movementfortheyear 35 603 18435
Reclassifiedtodisposalgroupheldforsale (62 067) –
– – Closingbalance – 26464
Thebalancecomprises:
– – –Capitalallowances – 66922
– – –Estimatedassessedloss – (40458)
– – – 26464
39NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
17 TRADE AND OTHER PAyABLES
Includedintradeandotherpayablesarethefollowing:
726 2 076 Tradeandotherpayables 2 420 33680
659 – Accruedexpenses – 5894
1385 2 076 2 420 39574
18 CASH FLOWS uTILISED IN OPERATING ACTIvITIES
18.1 CASH GENERATED FROM OPERATIONS
(63625) (17 232) (Loss)/profitbeforeinterestandtaxation 285 189 (21732)
Adjustedfor:
83 90 –Depreciation 36 437 12507
49445 10 154 –Impairmentoflistedinvestments 16 820 81945
– (1 001) –Fairvalueadjustmentofinvestmentproperty (1 001) –
17710 – –Impairmentofmineralrightsandminingassets 432 24207
(27772) – –Profitonrestructuringofdebt (181 143) (27772)
– – –Lossondisposalofinvestments – 13439
20451 27 054 –Interestcapitalised 58 714 39207
– 1 507 –Othernon-cashitems (10 578) 15279
19335 – –Impairmentofinvestmentsinsubsidiaries – –
15627 20 573 204 869 137080
Working capital changes
– – –Increaseininventories (29 548) (21082)
(158) (5 651) –(Increase)/decreaseintradeandotherreceivables (7 211) (12277)
451 691 –Increase/(decrease)intradeandotherpayables (6 261) 22768
15920 15 613 161 849 126489
18.2 TAXATION PAID
– – Balanceowingatbeginningoftheyear (27 237) 5442
– – Chargetoincomestatement (47 182) (32647)
– – Currenttaxanddeferredtaxreclassifiedtodisposalgroupheldforsale 73 532 –
– – Balanceowingatendoftheyear 887 27237
– – Normaltaxationpaid – 32
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)40
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
18.3 SuBSIDIARy ACQuIRED
Letšenghasbeenconsolidatedwitheffectfrom1April2004
Netassetsandliabilitiesacquired:
– – Property,plantandequipment – (185532)
– – Loansreceivable – (4800)
– – Miningrights – (3838)
– – Tradeandotheraccountsreceivable – (7822)
– – Cashandcashequivalents – (11341)
– – Interestbearingborrowings – 136952
– – Noninterestbearingborrowings – 43299
– – Tradeandotheraccountspayable – 15228
– – Taxation – 20
– – Short-termloan – 1491
– – Outsideshareholders’interest – 12737
– – – (3606)
Investment previously stated as associate
– – –Investment – 74530
– – –Loan – 10102
– – Outsideshareholders’interest – (3248)
– – Miningrights – (77778)
– – CashOutflow – –
19 DISPOSAL GROuP HELD FOR SALE
The Group is currently in negotiations to disposeof its interest in Letšeng Diamonds (incorporatedin Lesotho), a subsidiary of the Company. LetšengDiamonds financial statements are consolidated intothoseofLetšeng.
The proposed disposal is subject to the fulfilmentof certain conditions precedent, including all andany necessary regulatory approvals in South Africaand Lesotho. The effective date of the disposal is1July2006. The disposal group is presented in theminingbusinesssegmentalanalysisonpage48.
Based on the requirements of IFRS 5 - Non-currentassetsheldforsaleandDiscontinuedOperations,theassetsandliabilitiesattributabletoLetšengDiamondshavebeenseparatelydisclosedonthebalancesheet.
Assets and liabilities comprising the disposal groupsclassifiedasheldforsaleareasfollows:
41NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
COMPANy GROuP
2006R000’s
19 DISPOSAL GROuPS HELD FOR SALE (Continued)
Non-currentassets 266 652
Property,plantandequipment 201 116
Miningrights 65 536
Currentassets 81 448
Inventory 43 959
Tradeandotherreceivables 14 290
Cashandcashequivalents 22 794
Currenttax 405
Totalassetsclassifiedasheldforsale 348 100
Non-currentliabilities (78 714)
Provision-environmentalprovision 16 647
Deferredtaxliabilities (62 067)
Currentliabilities (42 565)
Tradeandotherpayables (26 356)
Taxation (11 535)
Provision–leaveandseverancepay (4 674)
Totalliabilitiesclassifiedasheldforsale (121 279)
Netassetsofdisposalgroup 226 821
In accordance with the requirements of IFRS 5, nocomparative information has been disclosed. Theproposeddisposal isnotadiscontinuedoperationasdefined and therefore, the income statement has notbeen restated toseparatelydisclose the resultsof thedisposalgroups.Theproceedsoftheproposeddisposalareexpected toexceed thenetassetsof the relevantassets and liabilities and therefore, no impairment isconsiderednecessary.Theproposeddisposal hasnotyet been finalised and therefore an estimate cannotbemade.
20 COMPARATIvE INFORMATION
The comparative figures have been restated inaccordancewiththeprioryearadjustments.Theeffectoftheserestatementsareasfollows:
Netprofitbeforetax (17 092)
Incometaxexpense 3 101
Netprofitaftertax (13 991)
Attributableto:
–Minorityinterest 1 972
–Equityholders (15 963)
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)42
COMPANy GROuP
2005 2006 2006 2005R000’s R000’s R000’s R000’s
2� EvENTS AFTER THE BALANCE SHEET DATE
The Group’s post balance sheet events up to thedateofthisreportissetoutinnote19,regardingthedisposal of LetšengDiamonds, and also included inthedirectors’reportonpage14.The directors are not aware of any other fact orcircumstancearisingsincetheendofthefinancialyearnototherwisedealtwithinthesefinancialstatements,which would materially affect the operations of theGroup.
22 COMMITMENTS
22.1 Mining lease
TheminingleasewiththeLesothoGovernmentrunsfortenyearsfromApril1999,whereafteritisrenewablefor three 5 year terms. Estimated rental obligationsregarding the initial lease period, accepting stableinflationandexchangerates,isasfollows:
– – –Withinoneyear 543 800
– – –Betweenoneandfiveyears 2 397 2569
– – 2 940 3369
22.2 Future commitments
– – Miningcontract 4 135 961
– – Planttreatmentcontract 9 501 2208
– – 13 636 3169
These amounts represent amounts committed to asapproved by the directors of a subsidiary company,andwillbefundedfromfutureoperatingprofits.
2� CONTINGENT LIABILITIES
Decomissioningandrehabilitationofminedumpsandplant �50 3834
TheGroup, in theordinarycourseofbusinessentersintotransactionswhichexposetheGrouptotax,legaland business risks. Provisions are made for knownliabilitieswhichareexpected tomaterialise.Possibleobligations and known liabilities where non-reliableestimatescanbemadeoritisconsideredimprobablethatanoutflowwouldresult,arenotedascontingentliabilities.
24 BORROWING POWERS
The borrowing powers in terms of the Company’sArticlesofAssociationareunlimited.AttheaccountingdatetheactualborrowingsamountedtoR274475000(2005:R603966000).
43NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)
25 FINANCIAL INSTRuMENTCredit risk
Financialassetswhichpotentiallysubject theGrouptoconcentrationsofcredit riskconsistprincipallyofcashandtradereceivables.
TheGrouponlydepositscashsurpluseswithmajorbanksofhighqualitycreditstanding.
Tradereceivablesarepresentednetoftheallowancefordoubtfulreceivables.
Creditriskwithrespecttotradereceivablesislimitedduetoalargenumberofcustomerscomprisingthecustomerbaseandtheirdispersionacrossdifferentindustriesandgeographicalareas.
Interest rate risk
Fluctuations in interest rates impact on the value of short-term cash investments, and financing activities, giving rise tointerestraterisk.
TheGroup’sexposuretointerestrateriskatthebalancesheetdateis:
Assets Interest rate
Cash Varyingrates
Tradereceivables Non-interestbearing
Liabilities Interest rate
TradecreditorsVaryingrates
Interest bearing borrowings Varying rates
Liquidity risk
IntheordinarycourseofbusinesstheGroupreceivescashfromitsoperationsandisrequiredtofundworkingcapitalandcapitalexpenditurerequirements.Thecashismanagedtoensuresurplusfundsareinvestedtoachievemaximumreturnwhileminimisingrisks.
26 RELATED PARTIES
Identity of related parties
MatodziistheultimateholdingcompanyintheGroup.ThesubsidiariesoftheGroupareidentifiedonpage47inAnnexure2tothesestatements.
Thedirectorsandkeymanagementaresetoutinthedirectors’report.JCIisamajorityshareholderoftheCompany.
Transactions with directors
Remunerationispaidtodirectorsintheformoffeestonon-executivedirectorsandremunerationtoexecutivedirectors.ThedirectorsdidnothaveanymaterialinterestinanycontractofsignificancewiththeCompanyoranyofitssubsidiaries,whichmayhavegivenrisetoaconflictofinterestduringtheyear.MrSMRasethabahasaninterestinZanenzaCommunications,aninvestorrelationscompany,detailsofwhicharesetoutonpage8andtheinsidebackcover.Detailsrelatingtodirectorsemolumentsaresetoutinthedirectors’reportonpage17.
Transactions with entities within the Group
Duringtheyearunderreview,theCompanyanditssubsidiariesenteredintovariousloantransactionswithoneanotherintheordinarycourseofbusiness.Thesetranactionsoccurredatarm’slengthandhavebeeneliminatedonconsolidation.
Transactions with other related stakeholders
ConsolidatedMiningManagementServicesLimited,asubsidiaryof JCILimited,advancedanamountofR11282682totheGroupincludinginterestcapitalisedatprimeoverdraftrateduringthe2006yeartofundoperatingactivities.Refertonote14.
LoanreceivablefromJCIamountstoR113380336.Refertonote10.
27 CRITICAL ACCOuNTING ESTIMATES AND JuDGEMENT
TheGroupmakesestimatesandassumptionsconcerning the future.The resultingaccountingestimateswillbydefinition,seldomequaltherelatedactualresults.Estimatesareusedinassessingprovisionforassets,goodwill,inventories,doubtfuldebts,certaingeneralaccrualsandprovisions.TheestimatesusedareconsistentwiththeprioryearandareappropriatefortheindustryinwhichtheGroupoperates.Therewerenosignificantjudgementsmadethatwouldhaveamaterialimpactontheannualfinancialstatements.
NOTES TO THE ANNuAL FINANCIAL STATEMENTS for the year ended 31 March 2006 (continued)44
PROPERTy, PLANT AND EQuIPMENT
Mineral rights
Mining develop-
ment costs Mining
assets
Leasehold improve-
ments Motor
vehicles
Office equip-
ment
Computer equip-
ment Furniture
and fittings TOTAL
R000’s R000’s R000’s R000’s R000’s R000’s R000’s R000’s R000’s
GROuP 2006
Cost 86618 203688 19949 17899 1594 3429 281 1249 334 707
Accumulateddepreciationandimpairment (9081) (20487) (19517) (2412) (268) (259) (68) (223) (52 315)
Netbookamountatbeginningoftheyear 77537 183201 432 15487 1326 3170 213 1026 282 392
Additions – 10113 – 3593 1008 4365 366 1779 21 224
Depreciation (8161) (15130) – (5484) (470) (6459) (464) (267) (36 435)
Impairment* – – (432) – – – – – (432)
Reclassifiedtodisposalgroupheldforsale (69375) (178184) – (13596) (1796) (1076) (88) (2538) (266 653)
Net book amount at end of the year 1 – – – 68 – 27 – 96
GROUP2005
Cost 5000 – 19949 – 242 – – – 25191
Accumulateddepreciationandimpairment – – – – (13) – – – (13)
Netbookamountatbeginningoftheyear 5000 – 19949 – 229 – – – 25178
Acquisitionofsubsidiary – 184985 – – 179 74 134 160 185532
Additions – 18703 – 17899 1173 3355 147 1089 42366
Depreciation (4081) (20487) – (2412) (255) (259) (68) (223) (27785)
Reclassificationofrighttomine 81618 – – – – – – – 81618
Reclassificationofinvestmentproperty – – (309) – – – – – (309)
Impairment* (5000) – (19208) – – – – – (24208)
Netbookamountatendoftheyear 77537 183201 432 15487 1326 3170 213 1026 282392
COMPANy 2006
Cost – – 18020 – 242 – 26 – 18 288
Accumulateddepreciationandimpairment – – (18020) – (94) – (2) – (18 116)
Netbookamountatbeginningoftheyear – – – – 148 – 24 – 172
Additions – – – – – – 13 – 13
Depreciation – – – – (80) – (10) – (90)
Impairment* – – – – – – – – –
Net book amount at end of the year – – – – 68 – 27 – 95
COMPANY2005
Cost – – 18020 – 242 – – – 18262
Accumulateddepreciationandimpairment – – – – (13) – – – (13)
Netbookamountatbeginningoftheyear – – 18020 – 229 – – – 18249
Additions – – – – – – 26 – 26
Depreciation – – – – (81) – (2) – (83)
Reclassificationofinvestmentproperty – – (309) – – – – – (309)
Impairment* – – (17711) – – – – – (17711)
Netbookamountatendoftheyear – – – – 148 – 24 – 172
45ANNEXuRE 1
PROPERTy, PLANT AND EQuIPMENT (continued)
* Impairment
Mineral rights
Themineralrightswereimpairedduetotheconversionprocessof theoldordermineral rights,over43 farms,intonewformprospectingrightsasperlegislationpassedbytheDepartmentofMineralsandEnergy(“theDME”).The DME has accepted certain applications subjectto the Group submitting Environmental ManagementPlansandconsultingwithallaffectedpartiesincludinglandownersandcommunities.
Therecoverableamountwascalculatedusingthepresentvalueoffuturecashflowsmethod.
Mining assets
The mining assets that were impaired relates to one
of the Company’s subsidiaries, Witnigel Investments
(Proprietary) Limited (“Witnigel”). The historical value
of themining assets held byWitnigelwas determined
basedonanoptionagreement theCompanyhadwith
NewCovenantMining(Pty)Limitedforthepurchaseof
assets.This option agreement expired during the year
ended31March2005,thusleadingtoareassessmentof
thevalueoftheassetsandsubsequentimpairment.
Therecoverableamountwascalculatedusingthepresent
valueoffuturecashflowsmethod.
ANNEXuRE 1 (continued)46
INvESTMENT IN SuBSIDIARIES
Book value of Company’s interest
2006 and 2005 2006 2005
Issued
share
capital
Company
and Group
effective
holding
Date
acquired
Shares
R’000
Loans
R’000
Shares
R’000
Loans
R’000
BrakfonteinDiamante(Eiendoms)
Beperk R100 100% 01.07.1999 – 1 312 – 1182
ConsolidatedResourcesand
ExplorationLimited R90 100% 01.07.1999 * 10 030 * 10030
EkuseniResourcesLimited
(incorporatedinJersey) US$2 100% 01.07.1999 33 083 28 069 33083 28069
GuildHallNo22InvestmentHolding
Company(Pty)Limited R1000 100% 27.03.2002 56 717 (43 886) 56717 (43886)
IENInvestments(Pty)Limited R100 100% 01.07.1999 55 424 3 554 55424 3554
NewlandsMinerals(Pty)Limited R200 100% 01.07.1999 1 553 7 788 1553 7667
WitnigelInvestments(Pty)Limited R1000 100% 05.09.1997 13 273 499 1 499
LetsengInvestmentHoldingsSouth
Africa(Pty)Limited R100 50% 01.04.2004 74 530 10 102 74530 10102
234 580 17 468 221308 17217
Provisionforlosses/amounts
written-off (146 778) (7 366) (117127) (36962)
87 802 10 102 104181 (19745)
*LessthanR1000
AllsubsidiarieswereincorporatedinSouthAfricaexceptwherenotedotherwise.
47ANNEXuRE 2
Basedonthefactthattherisksandratesofreturnareaffectedpredominantlybydifferencesinproductsandservicesotherthanbythefactthatitoperatesindifferentgeographicalareas,thedirectorsconsiderthattheprimaryreportingformatisabusinesssegment.TheGroupiscurrentlyorganisedintotwodifferentbusinessunits.Thesebusinessunitsare the basis onwhich theGroup reports its primary segment information.The secondary reporting format is bygeographicsegmentbeing theRepublicofSouthAfricaand theKingdomofLesotho.Therisksandreturns for thegeographicsegmentareconsideredtobethesame.
TheprincipalbusinessunitsintheGroupareasfollows:
Business unit Scope of operations
Mining Involves theminingandprocessingofkimberlite rockandassociatedgravelsandtherecoveryofdiamondstherefrom,intheLetseng-la-TeraeMiningleaseareainthekingdomofLesothoforsalebytenderinAntwerp.
Other operations Represents the leasing of mineral rights owned by the Group and other non-reportablesegments.
Business segment information Mining Other operations Eliminations Group
2006 2005 2006 2005 2006 2005 2006 2005
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Revenue 401 371 279451 152 634 401 523 280085
Segmentresult 140 341 74197 144 848 (95979) 285 189 (21782)
Operatingprofit/(loss) 140 341 74197 144 848 (95979) 285 189 (21782)
Investmentincome 2 138 1926 9 565 513 11 703 2439
Financecosts (11 887) (23232) (58 531) (38767) (70 418) (61999)
Profit/(Loss)beforetax 130 592 52891 95 883 (134233) 226 475 (81342)
Incometaxexpense (47 138) (32445) (44) (202) (47 182) (32647)
Profit/(Loss)fortheyear 83 454 20446 95 838 (134435) 179 292 (113989)
Attributableto:
–Equityholders 130 678 (128831)
–Minorityinterest 48 614 14842
Otherinformation
Segmentassets 348 100 309016 180 317 124208 528 417 433224
Segmentliabilities 121 279 235381 278 339 450240 399 618 685621
Depreciation (28 186) (23621) (8 251) (4164) (36 437) (27785)
Impairmentlossonproperty,plant
andequipment – – – (24208) – (24208)
Netlossonremeasurementof
investmentsatfairvalue – – (16 820) (81945) (16 820) (81945)
Profitonrestructuringofdebt – – 181 143 27772 181 143 27772
Othersignificantnon-cashitems 6 670 959 (1 393) (13439) 5 278 (12480)
Capitalexpenditure 20 349 38546 �� 26 20 362 38572
Secondaryproductsegmentation
Revenuetoexternalcustomers 401 371 279451 �52 634 401 523 280085
Segmentassets 66 036 20421 462 381 412803 528 417 433224
Capitalexpenditure 20 349 38546 �� 26 20 362 38572
SEGMENTAL ANALySIS for the year ended 31 March 200648
Registerdate:31March2006Issuedsharecapital:370,547,286At31March2006morethan10%oftheCompany’sissuessharecapitalwasheldbythepublic.
SHAREHOLDER SPREAD
No. of share-
holders % No. of Shares %
1–1000shares 752 38.48 478,618 0.13
1001–10000shares 730 37.36 3,153,291 0.85
10001–100000shares 387 19.81 12,746,231 3.44
100001–1000000shares 64 3.28 16,541,782 4.46
1000001sharesandover 21 1.07 337,627,364 91.12
1,954 100.00 370,547,286 100.00
DISTRIBuTION OF SHAREHOLDERS
No. of share-
holders % No. of Shares %
Banks 43 2.20 6,278,278 1.70
CloseCorporations 13 0.67 492,885 0.13
EndowmentFunds 2 0.10 121,196 0.03
HoldingCompany 1 0.05 29,885,629 8.07
Individuals 1,694 86.69 28,076,550 7.58
InvestmentCompanies 3 0.15 1,114,704 0.30
MutualFunds 10 0.51 4,721,913 1.27
NomineesandTrusts 100 5.12 7,049,254 1.90
OtherCorporations 37 1.89 16,295,836 4.40
PrivateCompanies 47 2.41 276,333,127 74.57
PublicCompanies 4 0.21 177,914 0.05
1,954 100.00 370,547,286 100.00
PuBLIC / NON - PuBLIC SHAREHOLDERS
No. of share-
holdings % No. of Shares %
Non - Public Shareholders 10 0.51 273,382,904 73.78
DirectorsandAssociatesoftheCompanyholdings 6 0.31 31,922,681 8.62
RelatedHoldings 2 0.10 11,574,594 3.12
HoldingCompany 1 0.05 29,885,629 8.07
StrategicHoldings(morethan10%) 1 0.05 200,000,000 53.97
Public Shareholders 1,944 99.49 97,164,382 26.22
1,954 100.00 370,547,286 100.00
RESIDENT/NON-RESIDENT
No. of share-
holders % No. of Shares %
Resident 1,654 84.65 358,978,594 96.88
NonResident 300 15.35 11,568,692 3.12
1,954 100.00 370,547,286 100.00
Beneficial shareholders holding 5% or more No. of Shares %
JCIInvestmentFinance(Pty)Ltd 200,000,000 53.97
BookmarkHoldings(Pty)Ltd 31,476,081 8.49
KabushaMining&Finance(Pty)Ltd 30,600,000 8.26
JCIpledgeaccount 25,977,724 7.01
49SHAREHOLDER’S INFORMATION
INDEPENDENT NON-EXECuTIvE
Andrew Mlangeni (81) (Chairman)
BA (Pol Sci) Unisa, BA (Hons)Date of appointment: 22 January 2003
Born on 6 June 1925. Education: St Peter’s SecondarySchool.AndrewisanAfricanNationalCongress(“ANC”)Member of Parliament and a former member of theNationalExecutiveCommitteeoftheANC(1991–1997).HewasaprisoneronRobbenIslandfor26years.AndrewisalsoatrusteeoftheMahatmaGhandiMemorialFund.
EXECuTIvE DIRECTORSello Mashao Rasethaba (48) (Chief Executive Officer)
MPhil (Accounting) 1987, BA (Accounting and German)Date of appointment: 31 March 2001
Born on 19 February 1958. Sello’s interests includetransformation of both government and businessorganisationsresultingintransformationofrelationshipsandpartnerships.Sellohasexperienceintheformulation,development and implementation of informationtechnologystrategiesintheRepublicofSouthAfrica,theUnitedStatesofAmericaandtheUnitedKingdom.
NON-EXECuTIvE DIRECTORSPeter Henry Gray (58)
C.A.I.B (S.A)Date of appointment: 24 August 2005
Born on 30 October 1947. Educated at Carlton JonesHighSchool,Carletonville,wherePetermatriculated in1965asheadboyandcaptainoftherugbyandathleticsteams.HavingservedasanauditclerkatCharlesHewitt& Company, Peter joined the Advanced ManagementTraining Programme at Nedbank Limited before beingappointed Senior Credit Investigation Officer at HillSamuelMerchantBank.
PeterservednineyearswithFrenchBankofSALimited(Indosuez) (Now Credit Agricole), and held numerouspositions,includingthatofGeneralManagerandDeputyChief Executive. In 1982 Peter was appointed DeputyChairmanofFrenchMerchantBank.
During a 14 year spell with Societe Generale startingin 1988, he graduated from General Manager of TheInternationalBankofJohannesburgLimitedtoManagingDirectorofSocieteGeneralSouthAfricaLimited,votedtopforeignbankinSouthAfricain1996and1997.
He retired in 2002 to follow his own interests andthendecidedtoplayaguidingrole in thecreationofastructuredempowermentfinancialservicesgroup,Tlotlisa
HoldingsLimited.PeterservesonnumerousotherboardsandischiefexecutiveofficerofJCILimitedandRandgold&ExplorationCompanyLimited.
Mafika Edmund Mkwanazi (52)
BSc (Maths), BSc (Electrical Engineering)Date of appointment: 22 January 2003
Bornon31January1954.MafikaworkedatKrielColliery(AMCOAL) as a graduate junior engineer for two yearsandthenasunitmanager(Packaging)forSABIsando.Healsoworked forBristolMyersSquibbasplantmanager,followingwhichhejoinedBMWasaplantmanagerandthencorporatequalitymanager.
Mafika was appointed CEO of Metrorail on 1 January1995 andwas then appointed an executive director ofTransnetfrom1April1996.MafikaalsoheldthepositionofgroupchiefexecutiveofTransnetfromFebruary2001to December 2003. He is currently a director of thefollowing companies: Nedcor Bank Limited, Autopax(Pty) Limited, SAA (Pty) Limited, Letšeng InvestmentHoldingsSouthAfrica(Pty)LimitedandFreightLogisticsInternationalInc.
Thabo Mosololi (36)
BComm (Hons), UWC, CA (SA)Date of appointment: 14 April 2003
Born on 12 September 1969.Thabo joinedKPMGandbecame audit manager and senior consultant. AfterleavingKPMG,hethenformedTSIFinancial&InvestmentServices through which he provided managementconsultingservices.
Whileworkingonhisown,hewasinvolvedinnegotiationsto formGobodo Incorporated. He was later appointedChief OperatingOfficer responsible for the day to dayoperations of the company before being appointed theGroupCEOduringwhichtimehewas involvedinnewbusiness development, strategy, risk management andclientrelations.
Thabo isamemberofSAICA (SouthAfrican InstituteofCharteredAccountants), PAAB (PublicAccountants andAuditorsBoard),ABASA(AssociationfortheAdvancementofBlackCharteredAccountantsinSouthAfrica)andisalsotheTreasureroftheJohannesburgBranchandamemberof theBlackManagementForum.Thabowasappointedby theMinister of Finance in 1999 to be amember oftheFinancialServicesBoard’sInsiderTradingDirectorate.HeservesonnumerousotherboardsandisChairmanoftheEducationFoundation,andamemberoftheGautengProvince’sFinancialandFiscalCommission.
DIRECTORS’ DETAILS50
ORDINARy BuSINESS
1. Toadopttheauditedannualfinancialstatementsfortheyear-ended31March2006.
2.(a) Tore-electMrAMlangeniwhoretiresinaccordancewith the Company’s Articles of Association and,beingeligible,offershimselfforre-election.
(b)Tore-electMrSMRasethabawhoretiresinaccordancewiththeCompany’sArticlesofAssociationand,beingeligible,offershimselfforre-election.
4. To re-appoint KPMG Inc. as auditors of theCompany,andtoauthorisethedirectorstoapprovetheirremunerationfortheensuingfinancialyear.
SPECIAL BuSINESS
Inaddition,memberswillberequestedtoconsider,andifdeemedfit,topassthefollowingspecialandordinaryresolutions:
Ordinary resolution No. 1
Placing the unissued ordinary shares under the control of the directors
“RESOLvED,thattheunissuedordinarysharesof25centseach,intheissuedsharecapitaloftheCompanybeandtheyareherebyplacedunderthecontrolofthedirectorswho are hereby authorised, subject to the restrictionscontained in sections 221 and 222 of the CompaniesAct,1973(Act61of1973),asamended(“theCompaniesAct”),andtheListingsRequirementsofJSELimited(“JSE”),to allot and issue suchordinary shares to suchpersonsand upon such terms as they, in their discretion, maydetermine.”
Ordinary resolution No. 2
Authority to issue shares for cash
“RESOLvED, that subject to the passing of OrdinaryresolutionNo1,andintermsoftheListingsRequirementsof JSE including (without limitation) that this OrdinaryresolutionNo.2shallbeapprovedbynotlessthan75%of the votes cast by shareholders present and voting inperson or by proxy at the Annual General Meeting atwhichthisresolutionwillbeconsidered,thedirectorsbeand theyareherebyauthorised toallotand to issue (ortograntoptions to subscribe for)ordinary shares in theauthorisedbutunissuedsharecapitaloftheCompanyorsecuritieswhichareconvertibleintoordinarysharesinthecapital of the Company (collectively “ordinary shares”)forcashuponsuchtermsasthey,intheirdiscretion,maydetermine,subjecttotherequirementsthat:
• thisauthorityshallnotendurebeyondthenextAnnualGeneralMeetingof theCompanynor shall it endurebeyond15monthsfromthedateofthepassingofthisresolution;
• therewillbenorestrictionsinregardtothepersonstowhomtheordinarysharesintheissuedsharecapitaloftheCompanymaybeissued,providedthatsuchsharesaretobeissuedtopublicshareholders(asdefinedbyJSEinitsListingsRequirements)andnottorelatedparties;
• upon the issue forcashofanyordinaryshares in theCompany which, together with issues of ordinaryshares during the samefinancial year,will constitute5% or more of the ordinary shares of the Companythen in issue, the Company shall, by way of a paidpressannouncement,givefulldetailsthereof,includingtheeffectonthenetassetvalueoftheCompanyandearningspershare;
(IncorporatedintheRepublicofSouthAfrica)(Registrationnumber1933/004523/06)Sharecode:MTZISIN:ZAE000042412
(“Matodzi”or“theCompany”)
Notice isherebygiventhattheAnnualGeneralMeetingofMatodziwillbeheldintheAuditorium,GroundFloor,28HarrisonStreet,Johannesburg,onTuesday,31October2006at10h00forthefollowingpurposes:
5�NOTICE OF ANNuAL GENERAL MEETING
MATODZI RESOURCES LIMITED
• theCompanyshallnotallotandissueordinarysharesinitssharecapitalduringanyfinancialyearwhichshall,intheaggregate,exceed15%oftheordinarysharesoftheCompany in issueasdetermined inaccordancewiththe Listings Requirements of JSE (including securitieswhich are compulsorily convertible into ordinaryshares);and
• themaximumdiscountatwhichordinarysharesoftheCompanymaybeissuedshallbe10%oftheweightedaverage traded price of the ordinary shares of theCompanyonJSEduringtheperiodof30businessdaysimmediately prior to the date that the issue price ofsuch ordinary shares is determined or agreed by thedirectors.”
SPECIAL RESOLuTIONS
Special resolution No. 1
Repurchase by the Company of its shares
“RESOLvED, that the Company hereby approves, as ageneralapprovalcontemplated in section85and89oftheCompaniesAct,andintermsoftheCompany’sArticlesofAssociation, the acquisition by the Company and/orits subsidiaries from time to timeof the issuedordinarysharesoftheCompany,uponsuchtermsandconditionsandinsuchnumbersasthedirectorsoftheCompanymayfromtimetotimedetermine,but,subjecttotheArticlesofAssociationoftheCompany,theprovisionsoftheActandtheListingsRequirementsofJSE,providedthat:
•any such acquisition of ordinary shares shall beeffectedthroughtheorderbookoperatedbyJSEtradingsystem and done without any prior understandingor arrangement between the Company and/or itssubsidiaries and the counter party in respect of suchrepurchase;
•this general authority shall only be valid until theCompany’snextAnnualGeneralMeeting,providedthatitshallnotextendbeyond15(fifteen)monthsfromthedateofpassingofthisSpecialResolution;
•apaidpressannouncementwillbepublishedassoonastheCompanyand/oritssubsidiariesshallhaveacquiredordinarysharesconstituting,onacumulativebasis,3%(threepercent)oftheinitialnumberofordinarysharesof theCompany in issue, and thereafter in respect ofeachacquisitionbytheCompanyand/oritssubsidiariesofordinarysharesconstituting,onacumulativebasis,3% (three percent) of the initial number of ordinarysharesintheCompanyinissue,whichannouncementsshallcontainfulldetailsofsuchacquisitions;
•acquisitions by the Company and/or its subsidiariesof ordinary shares in any one financial yearmay notexceed20%(twentypercent)oftheCompany’sissuedordinarysharecapital;
•in determining the price at which the Company’sordinarysharesshallbeacquiredby theCompanyand/or its subsidiaries in terms of this general authority, themaximumprice atwhich suchordinary shares shall beacquiredbytheCompanyand/orthesubsidiariesshallbenotmore than10%above theweightedaverageof themarketvalueof theordinarysharesof theCompanyonJSE,asdeterminedoveraperiodof5(five)businessdaysimmediately preceding the date of repurchase of suchordinarysharesbytheCompanyand/oritssubsidiaries;
•theCompanymayatanytimeappointonlyoneagenttoeffectanyrepurchaseofordinarysharesonitsbehalf;
•theCompanyand/oritssubsidiariesmayonlyundertakearepurchaseofordinarysharesoftheCompanyif,aftersuch repurchase it shall still complywith JSE ListingsRequirementsinrelationtoshareholderspread;and
•theCompanyand/oritssubsidiariesmaynotrepurchasesecuritiesduringaprohibitedperiod,asdefinedinJSEListingsRequirements.
The purpose and effect of Special resolution No. 1 istoenable theCompanyand/or its subsidiaries, in termsof a general authority granted by the shareholders interms of Section 85 and 89 of theAct and the ListingsRequirements of JSE, to acquire ordinary shares in theissuedsharecapitaloftheCompany.
InformationrequiredintermsofJSEListingsRequirementswith regard to this general authority resolution for theCompany or any of its subsidiaries to repurchase theCompany’s securities appears in the annual financialstatements, to which this Notice of Annual GeneralMeetingisannexedasindicatedbelow:
•DirectorsoftheCompany:page16andontheinsidebackcover
•Majorshareholders:page49
•Directors’interestinsecurities:page17
•SharecapitaloftheCompany:page37
Thedirectors,whosenamesaregivenontheinsidebackcoverof the annual report collectively and individuallyacceptfullresponsibilityfortheaccuracyoftheinformationgivenandcertifythattothebestoftheirknowledgeandbelief there are no facts that have been omittedwhichwouldmakeanystatementfalseormisleading,andthatallreasonableenquiriestoascertainsuchfactshavebeenmadeandthattheannualreportandtheNoticeofAnnualGeneralMeetingcontainsallinformationrequiredbyJSEListingsRequirements.
NOTICE OF ANNuAL GENERAL MEETING (continued)52
There has been nomaterial change in the financial ortradingpositionoftheCompanyoranyofitssubsidiariesthathasoccurredsubsequenttotheyearended31March2006, save as disclosed in the circular to shareholdersdated 14 September 2006 regarding the disposal ofLetšengDiamonds(Proprietary)Limited.
There are no legal or arbitrations proceedings, eitherpending or threatened against the Company or itssubsidiaries, of which the directors are aware, whichmayhave,orhavehadinthelast12months,amaterialeffect on the financial position of the Company or itssubsidiaries.
PursuanttoandintermsoftheListingsRequirementsofJSE,thedirectorsoftheCompanyherebystatethat:
a)the intention of the Company and/or any of itssubsidiariesistoutilisetheauthorityifatsomefuturedatethecashresourcesoftheCompanyareinexcessof its requirements. In this regard the directors willtake account, inter alia, an appropriate capitalisationstructurefortheCompany,thelong-termcashneedsoftheCompany,andwillensurethatanysuchutilisationisintheinterestofshareholders;
b)themethodbywhich theCompanyand/oranyof itssubsidiariesintendstorepurchaseitssecuritiesandthedateonwhichsuchrepurchasewilltakeplace,hasnotyetbeendetermined;and
c)afterconsideringtheeffectofamaximumpermittedtorepurchasesecurities,theCompanyandtheGroup:
•Willbeableintheordinarycourseofbusinesstopayitsdebtsforaperiodof12monthsafterthedateofthenoticeoftheAnnualGeneralMeeting;
•The assets of theCompany and theGroupwill be inexcessoftheliabilitiesoftheCompanyandtheGroupforaperiodof12monthsafter thedateof thenoticeof theAnnualGeneralMeeting. For this purpose, theassetsandliabilitieswillberecognisedandmeasuredinaccordancewiththeaccountingpoliciesusedintheseauditedannualGroupfinancialstatements;
•ThesharecapitalandreservesoftheCompanyandtheGroupwillbeadequateforordinarybusinesspurposesforaperiodof12monthsafterthedateoftheNoticeoftheAnnualGeneralMeeting;
•TheworkingcapitaloftheCompanyandtheGroupwillbeadequateforordinarybusinesspurposesforaperiodof12monthsafterthedateoftheNoticeoftheAnnualGeneralMeeting.”
TheCompanywill provide its sponsor and JSEwith allthe documentation as required in Schedule 25 of theJSEListsingsRequirements,andwillnotcommenceany
repurchaseprogrammeuntilthesponsorhassignedoffontheadequacyofitsworkingcapital,advisedJSEaccordinglyandJSEhavingapprovedthisdocumentation.
voting and proxies
AmemberentitledtoattendandvoteattheAnnualGeneralMeetingmayappointoneormoreproxiestoattend,speakandvoteinhis/herstead.Aproxyneednotbeamemberof theCompany.Duly completed proxy formsmust bedepositedattheofficeoftheTransferSecretariesnotlessthan48hoursbeforethetimeappointedfortheholdingof the Annual General Meeting (excluding Saturdays,Sundaysandpublicholidays).
Shareholderswhohold their shares in certificated formor are “own-name” dematerialised shareholders andwho are unable to attend theAnnualGeneralMeetingbutwish to be represented thereat,must complete andreturn the form of proxy attached in accordance withthe instructionscontained therein tobereceivedby theTransfer Secretaries by no later than 10h00 on Friday,27October2006.
OthershareholderswhoholdtheirsharesindematerialisedformthroughaCentralSecuritiesDepositoryParticipant(“CSDP”) or brokerwhowish to vote byway of proxyattheAnnualGeneralMeeting,mustprovidetheirCSDPor brokerwith their voting instructions, in terms of thecustodyagreemententeredintobetweensuchshareholderand their CSDP or broker by the cut-off time and dateadvised by the CSDP or broker for instructions of thisnature.If,however,suchshareholderswishtoattendtheAnnualGeneralMeeting inperson, then theywillneedtorequesttheirCSDPorbrokertoprovidethemwiththenecessary authority in terms of the custody agreemententeredintobetweenthedematerialisedshareholderandtheirCSDPorbroker.
Byorderoftheboard
MatodziResourcesLimited
Ms BE MortonLegalAdvisorandCompanySecretary
Johannesburg22September2006
Transfer Secretaries ComputershareInvestorServices2004(Pty)Limited70MarshallStreetJohannesburg,2001(POBox61051,Marshalltown,2107)Tel:+27113705000Fax:+27116887721
5�NOTICE OF ANNuAL GENERAL MEETING (continued)
NOTES54
Only for use by shareholders of Matodzi in certificated or dematerialised “own-name” form.
Other dematerialised shareholders must inform their CSDP or broker of their intention to attend the Annual General Meeting to be held in the Auditorium, Ground Floor, 28 Harrison Street, Johannesburg on Tuesday, 31 October 2006 at 10h00, in order that their CSDP or broker may issue them with the necessary authorisation to attend, or provide their CSDP or broker of their voting instruction should they not wish to attend the Annual General Meeting in person.
I/Weof
(Nameinblocklettersplease)
Telephone(work)Telephone(home)(areacodeandnumber)(areacodenumber)
beingamemberofMatodziandtheholderofordinaryshares
herebyappointof
orfailinghim/herof
orfailinghim/hertheChairmanoftheAnnualGeneralMeetingasmy/ourproxytoattendandspeakforme/usandonmy/ourbehalfattheannualgeneralmeetingoftheCompanytobeheldonTuesday,31October2006at10h00andatanyadjournmentthereofandtovoteorabstainfromvotingasindicatedontheresolutionstobeconsideredatthesaidmeeting:
(Please indicate with an “X” or tick in the appropriate space below how you wish votes to be cast)
ORDINARy BuSINESSvote for
vote against Abstain
1.Toadopttheauditedannualfinancialstatementsfortheyear-ended31March2006
2.(a)Tore-electMrAMlangeniasadirectoroftheCompany
(b)ToelectMrSMRasethabaasadirectoroftheCompany
3.Tore-appointKPMGInc.asauditorsoftheCompanyandauthorisethedirectorstodeterminetheirremuneration,andtoholdofficefortheensuingyear
SPECIAL BuSINESS
4. Ordinary resolution No 1
Placingtheunissuedordinarysharesunderthecontrolofthedirectors
5. Ordinary resolution No 2
Authoritytoissuesharesforcash
6. Special resolution No 1 RepurchasebytheCompanyofitsshares
AnymemberoftheCompanyentitledtoattendandvoteattheAnnualGeneralMeetingmayappointaproxyorproxiestoattend,speakandvoteinhis/herstead.AproxyneednotbeamemberoftheCompany.EverypersonpresentandentitledtovoteattheAnnualGeneralMeetingshall,onashowofhands,haveonevoteonly,butintheeventofapoll,everyshareshallhaveonevote.Please read the notes and instructions appearing on the reverse hereof.
Signedat on 2006
NameSignature(s)
(inblocklettersplease)
Assistedby
(Whereapplicable)fullnamesofsignatoryifsigninginarepresentativecapacity.
(IncorporatedintheRepublicofSouthAfrica)(Registrationnumber1933/004523/06)Sharecode:MTZISIN:ZAE000042412
(“Matodzi”or“theCompany”)
MATODZI RESOURCES LIMITED
FORM OF PROXy
1. AMatodzishareholdermayinsertthenameofaproxyorthenamesoftwoalternativeproxiesoftheMatodzishareholder’schoiceinthespace/sprovided,withorwithoutdeleting“thechairmanoftheAnnualGeneralMeeting”, but any such deletion must be initialledby theMatodzi shareholder concerned.The personwhosenameappearsfirston the formofproxyandwho is present at theAnnual GeneralMeetingwillbeentitled toactasproxy to theexclusionof thosewhosenamesfollow.
2. Pleaseinsertan“X”intherelevantspacesaccordingtohowyouwishyourvotestobecast.However,ifyouwishtocastyourvotesinrespectofalessernumberofsharesthanyouowninMatodzi,insertthenumberofordinarysharesheldinrespectofwhichyoudesiretovote.Failuretocomplywiththeabovewillbedeemedtoauthorisetheproxytovoteortoabstainfromvotingat the Annual General Meeting as he/she deems fitin respect of all the shareholder’s votes exercisablethereat. A Matodzi shareholder or his/her proxy isnot obliged to use all the votes exercisable by theMatodzishareholderorbyhis/herproxy,butthetotalof the votes cast and in respectwhereof abstentionsare recorded may not exceed the total of the votesexercisablebytheshareholderorbyhis/herproxy.
3. Thedatemustbefilledinonthisproxyformwhenitissigned.
4. Thecompletionandlodgingofthisformofproxywillnotpreclude the relevantMatodzi shareholder fromattendingtheAnnualGeneralMeetingandspeakingandvoting inpersonthereat to theexclusionofanyproxy appointed in terms hereof. Where there arejoint holders of shares, the vote of the senior jointholderwhotendersavote,asdeterminedbytheorderinwhichthenamesappearintheregisterofmembers,willbeaccepted.
5. Documentaryevidenceestablishingtheauthorityofa
person signing this formofproxy ina representative
capacity must be attached to this form of proxy
unlesspreviouslyrecordedbythetransfersecretaries
or waived by the chairman of the Annual General
MeetingofMatodzishareholders.
6. Any alterations or corrections made to this form of
proxymustbeinitialledbythesignatory/ies.
7. Aminormustbeassistedbyhis/herparentorguardian
unless the relevant documents establishing his/her
legal capacity areproducedor havebeen registered
bythetransfersecretaries.
8. Forms of proxy must be received by the transfer
secretaries, Computershare Investor Services 2004
(Pty)Limitedat70MarshallStreet,Johannesburg,2001
(POBox61051,Marshalltown,2107)bynotlaterthan
48hoursbeforethetimeappointedfortheholdingof
themeeting,excludingSaturdays,Sundaysandpublic
holidays.
9. The chairman of the Annual General Meeting may
accept or reject any form of proxy, in his absolute
discretion, which is completed other than in
accordancewiththesenotes.
10. If required, additional formsofproxyare available
fromthetransfersecretaries.
11. Dematerialised shareholders, other than by “own-
name”registration,mustNOTcompletethisformof
proxyandmustprovidetheirCSDPorbrokeroftheir
votinginstructionsintermsofthecustodyagreement
entered into between such shareholders and their
CSDPorbroker.
INSTRuCTIONS FOR SIGNING AND LODGING THIS FORM OF PROXy