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A N N U A L R E P O R T 2 0 1 0

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I N N O V A T I V E R E L I A B L E P R O G R E S S I V E

S T R A T E G I C

Contents

Financial highlights 1

At a glance

Pro� le 2

Group structure 2

Board of directors 3

Letter to shareholders 5

Review of operations 10

Corporate governance 20

Annual fi nancial statements 21

Notice of annual general meeting 73

Administration 78

Shareholders’ diary 78

Form of proxy Attached

GREYMATTER & FINCH # 5262

1

Financial HigHligHts

i n n o v a t i v e r e l i a b l e p r o g r e s s i v e

Year ended 28/29 February 2010 2009 2008 2007

Headline earnings (Rm) 217,3 (18,0) 75,4 51,5

Headline earnings per share (cent) 43,9 (4,6) 22,5 49,7

Recurring headline earnings (Rm) 95,5 78,2 62,8 8,9

Recurring headline earnings per share (cent) 19,3 20,0 18,7 8,6

Net asset value (Rm) 1 009,8 603,7 633,6 314,6

Net asset value per share (cent) 175,7 151,9 165,6 113,7

Shares in issue (m)* 574,6 396,2 382,5 276,8

Weighted average shares in issue (m)* 495,4 390,6 335,9 103,6

* 2007 – 2009 figures adjusted for 1 to 10 share split

2 Paladin Capital Ltd Annual Report

at a glance

Paladin Capital Ltdis the preferred investment vehicle for the psg group in sectors other than agriculture, food and beverages. we invest in cash-generating companies with strong, incentivised management that have a passion to yield superior returns for shareholders.

Psg grouP ltd

Psg Financial services ltd 100%

PSG Konsult

73%

Paladin Capital

81%

PSG Fund Management

95%

Zeder

41%

Capitec Bank

35%

PSG Corporate Services

100%

Thembeka Capital

49%

CIC Holdings

50%

Petmin

9%

Erbacon

22%

Precrete-Nozala

22%

Curro Holdings

50%

African Unity Insurance

43%

Spirit Capital

20%

IQuad Group

43%

Lesotho Milling Company

25%

Protea Foundry

50%

Top Fix Holdings

28%

GRW Holdings

40%

investment principles

Businesses in growing industries

Businesses that are easily understoodBusinesses with

strong management, and large management shareholding

Businesses that have strong sustainable cash flows

Paladin’s share of profit after tax is greater than R10 million

3

board oF directors

non-executive directors

JF (Jannie) Mouton (63)

(Chairman)

BComm (Hons) CA(SA)After having completed his BComm (Hons) in 1969, Jannie qualified as a CA(SA) in 1973. He was co-founder and managing director of SMK, whereafter he founded PSG Group and later co-founded Capitec Bank. Jannie is chairman and director of various companies within the PSG Group and also serves on the boards of Zeder Investments, Pioneer Food

Group, Steinhoff International and KWV Holdings.

E de V (Enrico) Greyling (67)

BA (Hons) Business EconomicsPrior to becoming active at PSG, Enrico was a director of FBC Fidelity Bank which is now part of Nedcor. He also served on the board of RMB Holdings Ltd as an executive director prior to its merger with FirstRand Bank Ltd. During his career as a banker he was, for a time, a board member of the Banking Council of South Africa. Enrico also serves as a non-executive director of Petmin Ltd, PSG Fund Management and various other private companies.

PJ (Piet) Mouton (33)

BComm (Maths)Piet was appointed as an executive director of PSG Group early in 2009. In 1999 he started his career in investment banking in London and in 2004 he was the co-founder and financial director of Arch Equity, which listed later that year on the AltX until it was merged with PSG Group in 2006. Prior to his move to PSG Group, Piet was the managing director of Thembeka Capital, a BEE investment company. Piet also serves on the boards of various companies within the PSG Group, including Capitec Bank, Thembeka Capital and PSG Capital.

KP (Kevin) Harris (32)

BComm (Hons) (cum laude)Kevin has completed his Level III of the Chartered Financial Analyst exams. His previous work experience includes Old Mutual Specialised Finance (2000 – 2002) where he assisted in the managing of interest rates, repo trading and scrip lending books. Thereafter he spent the next four years with Rand Merchant Bank (2003 – 2008) in their equity proprietary trading unit in Johannesburg and London. Kevin currently manages a range of private investment portfolios in his personal capacity.

JD (Jacob) Wiese (29)

BA (Value and Policy Studies) LLB, MIEMJacob is a non-executive director of Shoprite Holdings Ltd, an alternate director of Primedia Ltd, and the marketing manager of Lourensford and the Lanzerac Wine Portfolio. Jacob obtained his BA (Value and Policy Studies) degree at the University of Stellenbosch after which he took part in a programme as an exchange student at the Sauder School of Business with the University of British Columbia. He also obtained his Master’s degree in International Economics and Management from Bocconi University in Italy. During 2008 Jacob graduated with a Bachelor of Law from the University of Cape Town and is currently doing his pupillage at the Cape Bar. He was admitted as an Advocate of the High Court on

8 May 2009.

JA (Johan) Holtzhausen (39)

BIuris (cum laude), LLB, H Dip TaxJohan is a qualified attorney with an HDip Tax degree and has been involved in corporate finance since 1995. He has assisted and executed various listings of companies on the JSE, mergers and acquisitions, opinions in respect of the Companies Act, the Listings Requirements of the JSE and SRP Code, circulars to shareholders, placing documentation, unbundlings, restructurings (including BEE advice), demutualisations, capital raisings as well as general corporate finance advice. Johan has been part of PSG Group’s private equity investment team for a number of years. Johan also serves as a non-executive director on the boards of various Paladin investment companies, including Erbacon and CIC Holdings.

FW (Francois) Swart (32)

(Chief executive officer) BAcc (Hons), CA(SA), CFAFrancois is a qualified Chartered Accountant and a CFA Charterholder. Prior to joining PSG, he was based in London for four years with Goldman Sachs International as an executive director in fixed income, currency and commodities. He joined PSG Capital in March 2007 and was primarily involved with new listings, capital raising exercises and general corporate finance consulting. Francois was appointed CEO of Paladin on 16 February 2009. Francois is a non-executive director on the boards of various Paladin investment companies, which include Top Fix Holdings, CIC Holdings and IQuad Group.

executive director


i n n o v a t i v e a n D r e l i a b l eP R O G R E S S I V E

5

Dear Shareholders,

PSG believes that, from the outset, companies should

operate independently. It needs to be structured

appropriately with an independent board of directors who

meet regularly to drive the company’s strategic plan, an

audit and risk committee to ensure that the company is

properly run from a fi nancial and risk management point of

view, as well as a remuneration committee to ensure that the

company remunerates directors and executives fairly and

responsibly. Such a company should then develop, over

time increase its shareholder base and normally progress

to listing at some later appropriate stage. We always use

the analogy of an athlete – it is easier to train behind the

pavilion out of sight, but to get the best out of that athlete,

he or she has to run under the spotlights in front of the

spectators. With the listing of Paladin in September 2009, it

is now there for everyone to see.

How we measure ourselves

Many analysts and investors value an investment company

by referring to its intrinsic value. In order to provide an

additional method that also provides a reasonability

indicator for the intrinsic value calculation, management

introduced the recurring headline earnings concept which

represents reportable headline earnings net of marked-to-

market adjustments and one-off items. Paladin’s recurring

headline earnings is the sum of its effective interest in that

of each of its underlying investee companies, regardless of

the percentage shareholding. Recurring headline earnings

is therefore measured on a see-through basis throughout

the group. Investors can now obtain a more accurate price

earnings multiple by dividing the intrinsic value per share by

recurring headline earnings per share.

Taking cognisance of the renounceable rights offer of

R150 million to PSG shareholders in October 2009, which

resulted in an additional 128,2 million shares in issue,

intrinsic value per share increased by 65,0% to R2,03, and

recurring headline earnings per share decreased by 3,5%

to 19,3 cents.

letter to sHareHolders

The renounceable rights offer also resulted in us adding

an additional 3 000 shareholders to our books. As Warren

Buffet says, we are all co-owners in the business and

it is important that all our owners understand Paladin’s

investment philosophy, its investments and goals.

Who we are

Paladin was established in November 2006. It emanated

from the grouping of most of PSG’s private equity type

investments. Paladin is the preferred investment vehicle for

PSG in sectors other than agriculture, food and beverages.

In short, our investment philosophy entails the following:

We invest in businesses:

• That are easily understood. In order for us to be able to

add value to our investee companies, it is essential that

we understand the business.

• That have strong sustainable cash fl ows. Cash fl ow is

king, and we prefer to have it on a sustained basis.

• With strong management, where they are large

shareholders. People are your most important asset and

the largest differentiator between businesses. In addition,

management needs to be aligned with shareholders. We

have always followed the adage that an owner will look

after his or her assets better than a renter.

• In growing industries. In order to reward stakeholders,

Paladin must grow. It is just so much easier to grow a

company if it is also in a growth industry. We expand on

Paladin’s growth prospects and the growth initiatives we

have taken on later.

• Paladin’s share of profi t after tax is greater than

R10 million. Investments, regardless of size, take time

to manage and therefore all new investments need to

make a signifi cant impact on intrinsic value and recurring

headline earnings.

Paladin backs companies with good businesses run by

exceptional individuals. We provide capital for further

expansion and/or grant an opportunity for the original


shareholders to realise some of their wealth locked up in the

company. Paladin is also a partner in the true sense of the

word. We provide expertise and strategic input to grow the

business of our investee companies and assist in taking it

to the “next level”. Paladin also works towards establishing

the appropriate structures to perpetuate the company’s

activities even if the founder is no longer involved. Our co-

shareholders see the benefit in partnering with Paladin by

having a stake in a much bigger future pie. In addition, the

greater PSG network provides attractive exposure and/or

networking opportunities to any company.

We believe that we need to practise what we preach.

PSG, the manager of Paladin by way of a management

agreement, is an 80,6% shareholder in Paladin. The

directors of Paladin in addition control 5,4% of Paladin.

Your managers therefore have a vested interest in your

company and will always act in the best interest of Paladin.

We are not

A traditional private equity fund, with a specific life span and

a predetermined exit strategy for our investments. As we

are listed we have perpetual capital and it is therefore highly

unlikely that we will be faced with the same liquidity risk.

As long as the investee company is growing and/or paying

out free cash flow in the form of dividends, we will remain

invested. We also do not make use of excessive gearing to

generate returns and we will never invest in businesses we

do not understand, no matter how exciting their products

may seem.

Our investments and growth opportunities

Our thirteen investments range in size and industry

exposure but have one common attribute, namely, strong

management. Paladin groups these investments into five

operational segments:

• Investment companies (Thembeka and Spirit)

• Services (CIC, IQuad and African Unity)

• Mining, construction and related services

(Precrete-Nozala, Petmin, Erbacon and Top Fix)

• Manufacturing (GRW, Lesotho Milling and Protea)

• Education (Curro)

Education

Without downplaying the other segments, education is an

industry in which Paladin believes above average potential

exists. This is where management sees significant growth in

the foreseeable future.

Education is one of the most basic needs of society. It falls

just below food and shelter in terms of importance and we

are of the opinion that an educated community will improve

the long-term sustainable wellbeing of society. Strain on the

public schooling system created by the deficient development

of facilities and inadequate training of teachers, is increasing.

These shortcomings have led to one of South Africa’s

greatest capacity constraints for growth – a lack of skills.

This has also led to growth in the private education sector.

Paladin entered this market by its recent investment in

Curro. It was established in 1998 by the current CEO, Chris

van der Merwe. He decided that the opportunities in public

education were limited and, together with his teacher wife,

decided to take 20 students each and give them intensive

attention on the foundation and intermediary phases

(primary school) in a private capacity. The community’s

interest was so overwhelming that he had to move into the

church building and then decided to build the Durbanville

campus in 2000 with a 100% loan from Absa. The rest, as

they say, is history.

We attach a letter from a former pupil. This bears testimony

to the quality of the entrepreneurs and the businesses that

Paladin invests in and backs with capital.

7

“I met Dr. Chris van der Merwe in a science class, January of 1997. I was 9 years of age and found myself completely enthralled by this wonderful man. He was (and I believe continues to be) a wonderful teacher – challenging, engaging and always encouraging his students. Not long after meeting Dr. van der Merwe my parents received a letter from him informing them of his intention to start a small private school in Durbanville. The letter promised a better education at this new Curro school and my parents were pleased to consider moving me to this new school. Perhaps the average person may have considered this move risky, but Dr. van der Merwe always spoke of this project with irrefutable passion and faith. This absolute conviction made it difficult to question Curro’s (inevitable) success. It was therefore promptly decided that my parents would place my education in Dr. van der Merwe’s hands. We have never looked back.

Needless to say, this act of faith and trust between Dr. van der Merwe and my parents bore several fruits. I matriculated from Curro in December of 2005 and enjoyed several rewards for my hard work in the field of music. Nothing can replace the eight years of education, care and guidance that Curro provided me, not only as a student but also as a young person. Curro afforded me the sort of education that allowed me to focus on what was to become my occupation and facilitated the kind of education structure that required me to be a fairly independent student. I believe that this structure is what made my transition to university less stressful than it perhaps may have been for my peers. Particularly in the field of music one is required to have a great deal of self-discipline, quiet confidence, humility, and the sort of persistent character that drives you to be better than your last performance. All of these things I learnt from Dr. van der Merwe.

My decision to attend Stellenbosch University was a very easy one. It is a wonderful, successful institution that is steeped in history and I was very well aware that the University has a very high and qualitative rate of successful graduate placements in occupations. The fact that Dr. van der Merwe had himself graduated from this institution was somewhat inspiring, but I was (and still am!) intimidated by the thought of having to write a massive doctoral thesis. My bachelor studies in Music commenced in January of 2006. Throughout my studies I felt it important to return to Curro to play for my previous music teachers. I always received constructive criticism from these individuals and for this I am always grateful. In December of 2009 I graduated with a bachelor’s degree in Music, specialising in the field of performance with piano as my main instrument. Currently I am completing an honours degree in the same field and hope to graduate in December of 2010. I plan to pursue a master’s degree in performance in 2011 – 2012.

It was not until two years ago that I considered the prospect of studying abroad. In all honesty my world did not include anything other than playing piano, my family and attending classes at Stellenbosch University. It was during a summer

school that I met Prof. Lecolion Washington, professor of bassoon at Memphis University in the USA. I was completely taken aback and humbled when he handed me his business card and promptly instructed me to contact him upon his return to the United States. I pursued Prof. Washington’s instructions and he informed me that he was intent on helping me find scholarships to support continuing my studies in America rather than South Africa. As much as I was humbled by this, I was not ready to face living without my support structure – my family. I respectfully declined Prof. Washington’s offer, but all of this certainly got me thinking about the possibilities of studying or living abroad.

Indeed an opportunity presented itself two years later. In August 2009 I applied for a position in an exchange programme facilitated by Stellenbosch University to study abroad. I specifically wanted to study at the Mozarteum University in Salzburg, Austria, as this is a revered school of music that is internationally recognised and equally steeped in history. One thing I had not learned from Dr. van der Merwe was patience. I became increasingly nervous about the status of my application due to the fact that I had not received any correspondence from the University for weeks and weeks. In the middle of January 2010, I eventually received news that I had been awarded a scholarship to study at Mozarteum University and that my studies would commence in March of this same year. This didn’t leave me with much time to prepare and even less time to spend with my family. It was exciting but got me equally anxious and nervous about going. I would be lying if I said I didn’t doubt myself at any point...

I currently find myself in Austria, studying piano with Prof. George Kern and enjoying the sights of the beautiful city of Salzburg. As much as I look forward to returning home at the end of June, my time here has been irreplaceable and enriching. I had not realised that I would learn more about myself (my own character in particular) than I would about playing the piano. Perhaps this is ironic. But as difficult and trying as it has been to be alone in a strange country, I’m equally proud to say that I am a Curro-Stellenbosch University-South African-exchange student. I am also proud about all the shocked and confused expressions I get when I tell the other students I am from South Africa!

I have always had immeasurable respect, esteem and admiration for Dr. van der Merwe. Perhaps it is needless to say then that I could not wait to tell him about my good news. Although I do not see Dr. van der Merwe often, I think of him often and do my best to inform him of our success. He has continually inspired me and I will happily admit that my success is just as much his success too. I would like to thank Curro; the teachers who were always patient with me; Dr. van der Merwe, Mr. Ungerer, Mr. Conradie, Mr. Franken; my lecturers at Stellenbosch University; my family and the good Lord for being a part of everything I have amounted to. I can only hope that it gets better after this!”

Jessica de Koker


Curro currently has four schools in operation with 3 034

pupils, and wishes to expand aggressively over time. With

fees up to 40% lower than those of its competitors, it aims

to be a high-quality, value-for-money alternative. We believe

demand for Curro’s services will continue to increase given

the following:

• Growing middle class in South Africa

• Very few schools being built in middle- and upper-

income areas

• Waiting lists at private schools are long

• Only approximately 3% of pupils attend private schools

compared to 22% of the population who receive private

healthcare

• More and more South Africans are subscribing to the

adage that the best investment is a good education

BEE

Black economic empowerment remains a noble cause

in a South African context, but has not delivered what it

set out to do. The favourable landscape caused by the

bull-run in the equity markets has long faded and so

have several BEE transactions and companies as well.

However, Thembeka has managed to grow intrinsic value

from R1 since inception in 2005 to more than R700 million

as it stands currently. Thembeka has created real value

for its broad-based shareholder group, which includes

more than 500 black shareholders with approximately

10 000 beneficiaries.

Today even more so than before, opportunities for BEE

investment companies such as Thembeka, which is black

managed and black controlled (51% ownership) abound.

It is our belief that there will be sustained pressure from

government to transform equity ownership. For South

Africa to succeed economically, something urgently needs

to be done to address the inequality in wealth distribution

that currently exists.

Thembeka is Paladin’s largest investment. Capitec

Bank, PSG Group and JSE Ltd form the cornerstone of

Thembeka’s investments. Thembeka currently has cash and

facilities of R150 million for new deals and will be specifically

targeting the agricultural sector. In addition, Thembeka is

contemplating the establishment of a BEE private equity

fund. This will provide it with significant additional capital

to invest.

Africa

Often referred to as the final frontier, given the fact that it

is so underdeveloped and perhaps the last continent to

find exponential future growth, Africa is the buzz word in

investment circles. Yet, it is undoubtedly the riskiest place

to conduct business and making money is easier said than

done. In CIC, Paladin has an investment that has managed

to grow in Africa and to make money. CIC’s management

are experienced in Africa matters and understand the risks

of doing business there. CIC is an agency business for blue-

chip manufacturers (“principals”) of fast-moving consumer

goods, alcohol and tobacco products. Principals include

Heineken, Diageo, BAT, Tiger Brands, Reckitt Benckiser,

Cadbury and Colgate-Palmolive to name a few. It is currently

operational in seven countries, namely, South Africa,

Namibia, Botswana, Mozambique, Swaziland, Tanzania

and Zambia, distributing, selling and merchandising the

principals’ products. It has a scalable business model that

can be expanded further north in partnership with its current

principals, who are driven to expand into Africa, but don’t

necessarily have the know-how or risk appetite. In CIC,

Paladin has exposure to the African consumer growth story.

More detail on the growth prospects for the individual

companies can be found under the review of operations.

9

Dividends and the snowball effect

Paladin is a growth company. The opportunities mentioned

above, especially private education, will require additional

capital investment to bring to fruition. We believe that by

reinvesting our cash flows in these opportunities instead of

declaring dividends will create a snowball effect on returns,

thereby increasing intrinsic value and recurring headline

earnings. Be assured that the moment we believe that we

can’t put your money to good use we will start declaring

dividends.

A word of thanks

We would like to welcome and thank all our new fellow

owners for their support. To our underlying investment

companies, Paladin is wholly dependent on you for its

performance. Thank you for your hard work and contribution

towards a successful year. To our fellow directors and

colleagues, thank you for your wisdom and insight over the

past year.

Jannie Mouton Francois Swart

Chairman Chief executive officer

Stellenbosch

21 May 2010


revieW oF oPerations

M e a s U r e , p e r F o r M a n D a C H i e v e

F O C U S

During the past year we revisited and fi ne-tuned this

methodology by now measuring recurring headline earnings

on a see-through basis throughout the group. Paladin’s

recurring headline earnings is the sum of its effective interest

in that of each of its underlying investees, regardless of its

percentage shareholding. The result is that investments in

which Paladin or an investee holds less than 20% and is not

allowed to equity account in terms of accounting standards,

are now included in the calculation of our recurring headline

earnings. This provides management and investors with a

more realistic and simple way of evaluating Paladin’s

fi nancial performance and provides a reasonability indicator

for Paladin’s intrinsic value calculation.

Paladin’s recurring headline earnings increased by 22,1% to

R95,5 million. This is predominantly due to an increase in

earnings from investee companies and the fi rst time

inclusion of Petmin’s results. However, recurring headline

earnings per share decreased by 3,5% from 20,0 cents to

19,3 cents, mainly as a result of the following:

• An additional 128,2 million shares in issue relating to

the aforementioned renounceable rights offer at

R1,17 per share

• A loss contribution from GRW, an aluminium and

steel road tanker manufacturer, which was severely

affected by the downturn in the economy. Recent

results have however improved signifi cantly, with

GRW returning to profi tability

Paladin’s reportable headline earnings increased to

R217,3 million (43,9 cents per share) as opposed to an

R18,0 million loss (4,6 cents per share) in the prior year. This

increase is mainly as a result of marked-to-market profi ts

incurred in Thembeka’s investment portfolio of listed shares

in the JSE Ltd, PSG Group and Capitec Bank.

Corporate action

• The acquisition of a 50% interest in Curro, a private

school group, for R50 million

• The acquisition of a 9,4% stake in Petmin for

R92 million from PSG Group

• The acquisition of an additional 17,5% stake in Top

Fix for R19,6 million, a provider of scaffolding and

scaffolding personnel. Paladin now holds 28,2%

• The acquisition of a 20,4% stake in Spirit Capital, a

leveraged buy-out specialist for R12,8 million

• The disposal of Paladin’s interest in Mainfi n and Axon

• Played a key negotiating role in the merger of

Erbacon with Civcontract Civils (Pty) Ltd (“Civcon”),

whereby Erbacon doubled in size

• Thembeka’s key transactions for the year was the

acquisition of 10% of Overberg Agri for R37,7 million,

and an additional 5 million PSG Group shares for

R77,9 million by way of a share swap and cash

In the spirit of consistent, clear and unambiguous communication to stakeholders,

management introduced the recurring headline earnings concept as the predominant

measure of Paladin’s fi nancial performance. Previously recurring headline earnings was

defi ned as reportable headline earnings in terms of accounting standards, excluding any

marked-to-market movements and one-off items.

11

intrinsic valuePaladin’s intrinsic value is calculated by using market values for listed investments and market-related multiples for unlisted

investments. While intrinsic value increased by 140.1% to R1.17 billion, on a per share basis the increase was 65.0% to

R2.03 per share as a result of a 45.0% increase in shares in issue.

28 Feb 2010 28 Feb 2009

Company Description%

held% of

portfolioValue

Rm%

held% of

portfolioValue

Rm

Investment companiesThembeka Capital BEE investment

company 49 23 272 49 19 110 Spirit Capital Leveraged buy-outs 20 1 15 0 0

24 287 19 110 Services

CIC Holdings Agency, sales & merchandising

50 18 213 49 15 87

IQuad Group Outsourcing services 43 2 24 42 4 24 African Unity Insurance Life and related

insurance 43 1 17 54 2 9 21 254 21 120

Mining, construction and related services

Precrete-Nozala Mine safety and support services 22 14 163 22 16 93

Petmin Diversified miner 9 10 120 0 0Erbacon Construction 22 8 100 26 14 85 Top Fix Holdings Construction support

services 28 4 48 11 2 10 36 431 32 188

ManufacturingGRW Holdings Tank manufacturer 40 4 49 40 6 38 Lesotho Milling Company Milling 25 3 38 25 6 36 Protea Foundry Non-ferrous foundry 50 3 33 50 7 39

10 120 19 113 Education

Curro Holdings Private school education 50 9 100 0 0

9 100 0 –

Other 9 59

Total investments 100 1 192 100 590 Net debt 2 (25) 18 (104)Total intrinsic value 1 167 486 Shares in issue (m) 575 396 Intrinsic value per share (cents) 203 123 Intrinsic value per share at the last practical

date (cents) 218


earnings also increased by 179% to R20,6 million, on the

back of strong growth in headline earnings from Capitec

Bank and PSG Group.

Prospects

Thembeka currently has cash and facilities of

R150 million for new deals and will be specifically

targeting the agricultural sector. In addition, Thembeka is

contemplating the establishment of a BEE private equity

fund. This will provide it with significant additional capital

to invest.

Financial highlights

Year ended February 2010 2009 2008

Headline earnings (Rm) 269,8 (185,7) 21,0

Recurring headline earnings (Rm) 20,6 7,4 (4,3)

Growth in recurring headline earnings (%) 178,9

Intrinsic value (Rm) 590,0 206,30 441,60

Intrinsic value per share (R) 43,73 17,67 43,04

Growth in intrinsic value per share (%) 147,5 (58,9) 30,4

CurrO HOlDinGS (PtY) ltD (50%)

Chief executive officer – Chris van der Merwe

www.curro.co.za

Curro is a provider of quality affordable private schooling

in South Africa. Curro establishes new private schools

and overseas each school with a solid management

team experienced in the field of education. This creates

the sustainability needed to ensure the ongoing level of

excellence in teaching. Subsequent to year-end Paladin

has increased its investment from 50% to 76%, subject to

regulatory approval.

Performance

Curro increased its number of learners enrolled from

2 070 in the 2009 academic year to 3 034 (47%) in the

2010 academic year. Curro currently has four schools in

operation, including Roodeplaat, which opened in January

2010. Current developments are Hermanus, Witbank and

Hazeldean high school, which will open in January 2011.

Curro has shown strong growth in revenue since 2007,

which is mainly attributable to the growing number of

learners in the increased number of schools. Profit after tax

will remain subdued while Curro is in a growth phase due to

the amount of leverage used.

Prospects

The continued decline in the public education system,

combined with a growing middle class where more and

more parents are subscribing to the adage that the best

investment is a good education, bodes well for Curro.

Paladin has assisted Curro in raising a ten-year loan facility

of R73 million with the International Finance Corporation,

a division of the World Bank. This, in conjunction with

Paladin’s backing, enables Curro to aggressively expand its

current network of schools.


Year ended December 2009 20082007

9 months

Headline earnings (Rm) 1,9 0,3 (0,3)

Growth in headline earnings (%) 533,3

tHEMBEKA CAPitAl ltD (49%)

Chief executive officer – KK Combi

www.thembekacapital.com

Thembeka is a broad-based black owned and

controlled investment holding company that focuses

on private equity investments and BEE transactions. It

has more than 500 black shareholders with more than

10 000 beneficiaries.

Performance

Thembeka’s intrinsic value increased along with the increase

in share prices of its largest investments namely PSG

Group, Capitec Bank and JSE Ltd. Thembeka’s intrinsic

value increased by 186% to R590,0 million at year-end. This

resulted in headline earnings of R269,8 million compared

to a prior year loss of R185,7 million. Recurring headline

13

CiC HOlDinGS ltD (50%)

CIC HOLDINGS LIMITED

Chief executive officer – trevor rodgers

www.cicholdings.co.za

CIC operates within the fast moving consumer goods,

tobacco and alcohol industries through agency agreements

with blue-chip manufacturers (“principals”), both locally

and internationally. CIC’s service offering includes selling,

merchandising, warehousing, distribution, debtors’

administration, and staffing and security solutions.

Principals include Diageo, Heineken, Tiger Brands, BAT,

Reckitt Benckiser, Colgate-Palmolive to name a few. CIC

currently operates in seven countries being Namibia,

Botswana, Swaziland, Mozambique, Zambia, Tanzania and

South Africa.

Performance

CIC increased headline earnings by 24,4% to R58,2 million.

This was on the back of a 12,0% increase in revenue

and an expansion in operating margins from 2,7% to

3,7%. The majority of the group’s income streams for

Thembeka’s investment portfolio consists of the following

investments at 28 February 2010:

listed investments Percentage holding

PSG Group Ltd 5,8%

Capitec Bank Holdings Ltd 3,6%

JSE Ltd 4,7%

Vox Telecom Ltd 1,6%

IQuad Group Ltd 8,2%

CIC Holdings Ltd 1,8%

unlisted investments Percentage holding

Greymatter & Finch (Pty) Ltd 43%

Bontebok Limeworks (Pty) Ltd 26%

Precrete (Pty) Ltd 26%

VMS Group (Pty) Ltd 26%

GRW Engineering (Pty) Ltd 25%

Spirit Capital (Pty) Ltd 25%

Access Freight Logistics (Pty) Ltd 25%

Overberg Agri Ltd 20%

MGK Business Investments Ltd 11%

KLK Landbou Ltd 10%

BKB Ltd 5%

the year emanated from its operations in South Africa’s

neighbouring countries. Revenue increased due to the first

time consolidation of a previous associate, VMS (Pty) Ltd.

Improved operating margins were attributable to a strong

focus on higher value, higher commission business.

Prospects

CIC has a scalable business model that can be expanded

further north in partnership with its current principals, who

are driven to expand into Africa, but don’t necessarily have

the know-how or risk appetite. CIC will continue to focus on

increasing its number of principals in current geographies

and on expanding its footprint into adjacent countries.


Year ended February 2010 2009

2008 June

year-end

Revenue (Rm) 2 531,0 2 259,0 1 905,2

Operating profit (Rm) 93,7 62,0 45,3

Operating margin (%) 3,7 2,7 2,4

Headline earnings (Rm) 58,2 46,8 32,3

Headline earnings per share (fully diluted) (cents) 23,1 18,6 12,8

Growth in fully diluted headline earnings per share (%) 24,2 45,3 45,5


PrECrEtE-nOzAlA (PtY) ltD (22%)

Chief executive officer – Piet du toit

Precrete specialises in the production and distribution

of premixed concrete for construction, support and

other related mining applications predominantly in the

platinum sector. Its wholly-owned subsidiary, GFC

Construction (Pty) Ltd (“GFC”), focuses on shotcreting,

which involves applying premixed concrete to reinforce

walls of mine shafts. Precrete is a leader in the field of

mine safety.

Performance

In a period where platinum producers cut production and

delayed major capital expansions, Precrete managed to

increase headline earnings by 10,1%. Precrete’s strategy to

PEtMin ltD (9%)

Chief executive officer – Jan du Preez

www.petmin.com

Petmin is a South African based, JSE and AIM listed

minerals, mining and processing company which services

the metallurgical and industrial sectors. It currently has two

operations, namely silica and anthracite mining. Paladin

acquired a 9,4% in Petmin in March 2009 for R92 million

from PSG Group by way of a share swap.

Performance

Despite the turmoil experienced in the financial markets and

its consequential impact on the commodity market, for the

six months ended 31 December 2009, Petmin generated

an operating profit of R64 million and cash from operating

activities of R113 million. Normalised headline earnings

per share from continuing operations (when excluding the

Springlake Colliery that was sold) increased by 10% from

7,6 cents to 8,3 cents. Operating margin achieved in the six

months to 31 December 2009 was 30% (2008: 19%). This

is as a result of effective cost management, improved prices

achieved at Somkhele and due to the disposal of the less

profitable Springlake Colliery.

Prospects

Petmin has quality operations with long life of mines

spanning between 40 to 50 years. It is also a low cost

producer. The outlook for the anthracite market has

significantly improved for the remainder of the financial

year. The demand for Petmin’s product in the inland market

is at production capacity and the outlook for the export

market has also improved. With the current sales profile,

the production for the 2010 calendar year is almost fully

committed.

Management is investigating various projects with a view to

expand the anthracite division and create new markets. This

may lead to a decision to build a second coal processing

plant in order to double the existing production capacity at

Somkhele to 1,2 million sales tonnes per annum.

The outlook for silica mining is also positive with

management expecting SamQuarz to maintain its current

profitability levels. With cash and facilities available of

approximately R400 million and with the appointment of Ian

Cockerill as executive chairman, Petmin is well positioned

to expand operations organically or by way of acquisitions.


Year ended June 2009 2008 2007

Revenue (Rm) 788,6 666,9 382,3




Headline earnings per share (diluted) (cents) 22,0 15,3 5,3

Growth in diluted headline earnings per share (%) 43,8 188,7 6,0

15

focus on mine safety paid off. Revenue increased by 4,2%

and operating margins improved from 17,6% to 20,6%. The

expansion in operating margins resulted from reduced input

costs and increased prices for premixed concrete. Strong

cash generation resulted in Precrete paying dividends of

R28 million for the year.

Prospects

Mine safety is still a number one priority for government

and the mining industry, providing Precrete with an annuity

income base. The increase in platinum prices should result

in platinum producers resuming their capital expansion

projects. Precrete will focus on these special projects as

they have the potential to significantly enhance Precrete’s

earnings. In addition, management is also pursuing

opportunities in the gold mining industry.



Revenue (Rm) 265,9 255,3 193,2




Growth in headline earnings (%) 10,1 17,4 51,7

ErBACOn inVEStMEnt

HOlDinGS ltD (22%)

Chief executive officer – Dave Erskine

www.erbacon.co.za

Erbacon is a construction company predominantly in infra-

structure (Erbacon Construction), general construction

(Armstrong Construction) and a tool hire division (Small

Plant).

During the year, Erbacon completed the acquisition of

Civcon, a company operating in the mining and heavy

industrial markets throughout Southern Africa. Its services

include general civil engineering, industrial and process

plants, mining infrastructure and support (both surface and

underground), and the design and construction of turnkey

industrial projects. As part of the Civcon transaction, Medu

Capital was introduced as a BEE shareholder.

Erbacon’s acquisition of Civcon has resulted in Paladin’s

stake initially diluting to 22%.

Performance

Erbacon recorded satisfactory results for the year ended

28 February 2010 with profits after tax increasing by 22,3%

year on year. Group revenue increased to R834,5 million

from R721,0 million in the prior year. Headline earnings per

share increased by 12,5% to 45,1 cents. The results were

mainly driven by Erbacon Construction’s increase in revenue

of 263% which, in turn, was driven by its involvement

in 2010 FIFA World Cup stadia and freeway contracts.

Cash and cash equivalents at year-end amounted to

R123,6 million.

Prospects

The acquisition of Civcon and the introduction of a BEE

shareholder has resulted in Erbacon becoming a tier

one construction company in South Africa. Erbacon is

now well placed to compete with the incumbents and to

tender directly for projects, instead of playing the role of

subcontractor.



Revenue (Rm) 834,5 721,0 224,7




Headline earnings per share (cents) 45,1 40,1 33,3

Growth in headline earnings per share (%) 12,5 20,4 169,9


tOP Fix HOlDinGS ltD (28%)

Chief executive officer – Webber Marais

www.topfixholdings.co.za

The Top Fix group has been in operation for the past

fifteen years and comprises the supply and leasing of

scaffolding and scaffolding personnel to industrial plants

and construction sectors, the supply of personnel to the

chemical, petro-chemical, power generation, construction

and coal mining industries, and the supply of safety

GrW HOlDinGS (PtY) ltD (40%)

Chief executive officer – Gerhard van der Merwe

www.grw.co.za

GRW is a manufacturer of stainless steel and aluminium

road tankers and specialised liquid containers. Its manu-

facturing facility in Worcester is a world-class robotics plant.

Apart from clients in South Africa, it also has clients in the

United Kingdom and Middle East. GRW also operates a

services division, which services GRW road tankers, and

has the agency for International Trucks.

Performance

The downturn in the world economy has had a significant

impact on profitability and cash flow during its 2009 financial

year. Margins were severely impacted due to the elevated

cost of raw materials in inventory. In order to reduce

inventory and improve cash flow, some products were sold

at reduced margins. Since July 2009 the company has

turned profitable driven by sales to the United Kingdom.

Local sales have also started to pick up. GRW restructured

operations during the year, which resulted in a reduction in

fixed overhead costs.

Prospects

The rebound in the global economy should result in a

sustainable increase in demand for GRW’s products, as is

currently being witnessed. In addition, GRW is busy with

numerous new initiatives that should keep its products

at the forefront of the tanker industry and substantially

increase the market for its products. These include a new

specialised welding technique to improve the durability and

life span of tankers, and the establishment of GRW Rail

and GRW Used. GRW Rail will manufacture rail tankers

for the rail industry. GRW are already in talks with key role

players regarding the replacement of their ageing fleet of rail

tankers. This market has the potential to exceed the current

road tanker market.



Revenue (Rm) 434,0 450,4 339,1

Operating (loss)/profit (Rm) (2,2) 40,6 37,4

Operating margin (%) (0,5) 9,0 11,0

Headline earnings (Rm) (13,3) 23,0 23,1

surveillance and access control equipment to chemical and

petro-chemical plants.

Paladin increased its stake in Top Fix from 10% to 28%

during the year.

Performance

Top Fix achieved earnings for the six months ended

31 December 2009 of R13,7 million and earnings per

share of 6,8 cents, a 12% increase on those achieved

for the corresponding period last year. This was driven by

the increase in operating margins from 11,3% to 12,2%,

resulting from increased margins earned by the personnel

outsourcing division.

17

Prospects

Top Fix is ideally positioned to take advantage of the

increased spend expected to take place in the power and

petrochemical industries.



Revenue (Rm) 322,5 227,2 192,6





Growth in headline earnings per share (%) 32,5 260,9

iQuAD GrOuP ltD (43%)

Chief executive officer – Dave Edwards

www.iquad.co.za

IQuad is a specialised outsourcing company, focused on

treasury management, investment incentives and BEE

verification services.

Performance

IQuad’s headline earnings decreased by 7,9% to

R13 million. The global economic downturn coupled

with the strong rand resulted in reduced revenues from

existing clients of the treasury management division. The

loss contribution from ESS (Pty) Ltd (“ESS”) also impacted

on headline earnings. ESS has subsequently been sold

back to the original vendors. The investment incentives

division posted satisfactory results due to a substantial

improvement in the DTI’s processing efficiencies. Cash

generation remained strong with IQuad declaring a final

dividend of 20 cents per share.

Prospects

IQuad is focused primarily on organic growth within its

business units for the year ahead and accordingly has

recently employed a number of new marketing resources

across most business units, with a specific emphasis on its

biggest market opportunity being Gauteng. Dave Edwards

was appointed as CEO of the group on 1 March 2010

and has relocated to Johannesburg from Port Elizabeth to

mine organic growth opportunities. The focus and sale of

smaller non-profitable businesses is already bearing fruit,

with IQuad’s net cash position for the year increasing by

R14,5 million.



Revenue (Rm) 80,0 80,1 62,4





Growth in headline earnings per share (%) (7,9) (22,9) 16,8


related accessories and provides solutions to the design

and development of aluminium systems, while Ascot

is a supplier of consumables, furniture and catering

equipment to remote and mass accommodation sites

throughout Africa.

Prospects

Spirit Capital’s investee companies have solid management,

strong balance sheets and are well positioned to benefit

from the expected upturn in the economy.


Year ended February 2010 2009

2008 14

months


Growth in headline earnings (%) (12,6) 17,6 598,8

Spirit’s investment portfolio consists of the following

unlisted investments at 28 February 2010:

Percentage holding

Spirit Corporate Finance (Pty) Ltd 100,0%

Big Box Containers (Pty) Ltd 70,0%

Ascot Catering Equipment (Pty) Ltd 60,0%

Tidy Files (Pty) Ltd 58,0%

Perspex South Africa (Pty) Ltd 50,0%

Xline Aluminium Solutions (Pty) Ltd 30,0%

Cerebos Ltd 11,7%

AFriCAn unitY inSurAnCE ltD (43%)

Chief executive officer – Carl Kirstein

www.africanunity.co.za

African Unity provides long-term insurance products with

the core focus on group funeral benefits and to a lesser

extent temporary disability (sickness) benefits.

Performance

The change in business to focus on group funeral

business away from temporary disability benefits resulted

in a significant increase in profitability. Combined with a

satisfactory performance from the investment portfolio,

headline earnings increased by 100% to R4,6 million.

Prospects

Management will continue to focus on growing group

funeral business.



Premium income (Rm) 42,0 22,3 15,5

Underwriting profit (Rm) 16,1 11,6 8,5

Underwriting margin (%) 38,3 52,1 54,8


Growth in headline earnings per share (%) 100,0 (34,3) (36,9)

SPirit CAPitAl (PtY) ltD (20%)

Chief executive officers – Kevin Homann and Darryl Horney

www.spiritcapital.co.za

Spirit Capital was established in 2002 as a niche corporate

advisory boutique providing specialist merger and

acquisition advice to listed and privately owned companies.

In 2006, Spirit Capital took a strategic decision to expand

its business focus beyond corporate advisory services into

proprietary listed and private equity investments, thereby

maximising its value creating opportunities. Spirit Capital is

now divisionalised into two strategic business units: Private

Equity and Corporate Finance.

Performance

Spirit Capital experienced a challenging year with a 12,6%

drop in headline earnings. This was principally due to their

investment in Perspex South Africa (Pty) Ltd, a manufacturer

of signage, baths and basins, which experienced a significant

decline in demand for its products. Big Box Containers (Pty)

Ltd continued to deliver strong results. Spirit also made two

new investments, namely Xline Aluminium Solutions (Pty) Ltd

(“Xline”) and Ascot Catering Equipment (Pty) Ltd (“Ascot”).

Xline stocks, trades and distributes aluminium profiles and

19

PrOtEA FOunDrY (50%)

Chief executive officer – Anthoon rheeders

Protea is a non-ferrous casting operation based in Gauteng.

Performance

Protea Foundry experienced a challenging year with a

29,2% decrease in revenue to R40,3 million. This resulted

from lower volumes caused by a decrease in demand for

Protea’s products. However, Protea managed to increase

operating margins to 30,5% by improving procurement.

This resulted in headline earnings decreasing by only 26,3%

to R8,7 million.

Prospects

Management is currently looking at ways to increase

capacity and services.



Revenue (Rm) 40,3 56,9 52,8




Growth in headline earnings (%) (26,3) 49,4 64,6

which resulted in a decrease in operating margins.

Prospects

Additional new areas of growth are being investigated with

possible exports to neighbouring countries pending the

strength of the ZAR.


Year ended September 2009 2008 2007

Revenue (Rm) 330,4 323,7 183,4




Growth in headline earnings (%) 1,0 27,4

lESOtHO MillinG

COMPAnY (PtY) ltD (25%)

Chief executive officer – Graham Gatcke

www.lesco.co.za

Lesotho Milling operates a wheat and maize mill in Lesotho

and Durban, and distributes branded food products in

Lesotho and South Africa.

Performance

Lesotho Milling generated satisfactory results given

increased competition from South African manufacturers,


Corporate governance

Paladin is managed by PSG Group Ltd in terms of a

management agreement and adheres to PSG Group’s

corporate governance policies. Paladin is committed to

the principles of transparency, integrity and accountability

as also advocated in the King Report on Corporate

Governance. Accordingly Paladin’s corporate governance

policies have in all respects been appropriately applied

during the period under review.

Board of directors

The Paladin board of directors remains autonomous,

albeit that there is a management agreement in place. Details

of Paladin’s directors are provided on page 3 of this

annual report.

The board met four times during the past year and had

close to a 100% attendance. There is a clear division of

responsibilities at board level to ensure a balance of power

and authority, such that no one individual has unfettered

powers of decision making. Mr. JF Mouton fills the role

of non-executive chairman and Mr. FW Swart that of chief

executive officer. The appointment of directors is formal and

transparent and is considered to be a matter for the board

as a whole.

The board’s key roles and responsibilities are:

• Promoting the interests of stakeholders;

• Formulation and approval of strategy;

• Retaining effective control; and

• Ultimate accountability and responsibility for the

performance and affairs of the company.

The board has appointed the following committees to assist

it in the performance of its duties:

• Executive committee; and

• Audit committee.

There is no remuneration committee as the remuneration of

the directors is determined and paid for by PSG Group in

terms of the aforementioned management agreement.

Executive committee

The Paladin Executive Committee comprises Messrs

JF Mouton (chairman), FW Swart, B van der Linde,

WL Greeff and PJ Mouton. This committee meets regularly,

at least twice a month, and is primarily responsible for

the allocation and investing of the company’s resources,

including capital.

Audit committee

A report by the Paladin audit committee has been provided

on page 22 of this annual report.

For more detail regarding Paladin’s Corporate Governance

policies, refer to PSG Group‘s annual report at

www.psggroup.co.za.

corPorate governance

21

A N N U A L F I N A N C I A L S TAT E M E N T S 2 0 1 0

Contents

report of the audit committee 22

Approval of the annual fi nancial statements 23

Declaration by the company secretary 23

independent auditor’s report 24

Directors’ report 25

Statements of fi nancial position 30

income statements 31

Statements of comprehensive income 32

Statements of changes in equity 33

Cash fl ow statements 34

Accounting policies 35

notes to the annual fi nancial statements 52

Annexure A – investments 69

Annexure B – Segment report 71

Share analysis 72


RepoRt of the audit committeein terms of Section 270a(1)(f) of the companies act (61 of 1973) as amended

The audit committee considered the matters set out in section 270A(5) of the Companies Act, as amended by the Corporate

Laws Amendment Act, and is satisfied with the independence and objectivity of the external auditors. The committee has

considered and recommended the fees payable to the external auditor and is satisfied with the extent of non-audit services

performed.

The audit committee is satisfied that there was no material breakdown in the internal accounting controls during the financial

year. We base this on the information and explanations provided by the Paladin Capital Ltd executive committee as well as

discussions with the independent external auditors on the results of their audit.

As required by JSE Listings Requirements 3.84(i) the audit committee has satisfied itself that the financial director who was

in office during the financial year had appropriate expertise and experience.

The audit committee has perused the financial statements of Paladin Capital Ltd and of the group for the year ended

28 February 2010 and, based on the information provided to the audit committee, the committee considers that Paladin

Capital Ltd has complied, in all material respects, with the requirements of the Companies Act (61 of 1973), as amended,

and International Financial Reporting Standards (IFRS).

E de V Greyling

Chairman

21 May 2010

Stellenbosch

23

appRoval of the annual financial StatementS

The directors are responsible for the maintenance of adequate accounting records and to prepare annual financial statements

that fairly represent the state of affairs and the results of the group. The external auditors are responsible for independently

auditing and reporting on the fair presentation of these annual financial statements. Management fulfils this responsibility

primarily by establishing and maintaining accounting systems and practices adequately supported by internal accounting

controls. Such controls provide assurance that the group’s assets are safeguarded, that transactions are executed in

accordance with management’s authorisations and that the financial records are reliable. The financial statements have been

prepared in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the South

African Companies Act of 1973. Appropriate and recognised accounting policies are consistently applied.

The audit committee of the group meets regularly with the external auditors, as well as senior management, to evaluate

matters concerning accounting policies, internal control, auditing and financial reporting. The external auditor has unrestricted

access to all records, assets and personnel as well as to the audit committee.

The financial statements are prepared on the going concern basis, since the directors have every reason to believe that the

group has adequate resources to continue for the foreseeable future.

The financial statements set out on pages 25 to 72 were approved by the board of directors of Paladin Capital Ltd and are

signed on its behalf by:

JF Mouton FW Swart

Chairman Chiefexecutiveofficer

21 May 2010

Stellenbosch

declaRation by the company SecRetaRy

We declare that, to the best of our knowledge, the company has lodged with the Registrar all such returns as are required

of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.

PSG Corporate Services (Pty) Ltd

Per CJ Siertsema

Companysecretary

21 May 2010

Stellenbosch


independent auditoR’S RepoRtto the members of paladin capital ltd

We have audited the group annual financial statements and annual financial statements of Paladin Capital Ltd, which

comprise the consolidated and separate statements of financial position as at 28 February 2010, and the consolidated and

separate income statements and consolidated and separate statements of comprehensive income, changes in equity and

cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes and

annexures, and the directors’ report, as set out on pages 25 to 72.

directors’ responsibility for the financial statementsThe company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance

with International Financial Reporting Standards and in the manner required by the Companies Act in South Africa. This

responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and

applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation

of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

opinionIn our opinion, the financial statements present fairly, in all material respects, the consolidated and separate financial position

of Paladin Capital Ltd as at 28 February 2010, and its consolidated and separate financial performance and its consolidated

and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and in the

manner required by the Companies Act of South Africa.

PricewaterhouseCoopers Inc.

Director: Peet Burger

Registeredauditor

21 May 2010

Cape Town

25

NATURE OF BUSINESSThe company is an investment company with a bias towards unlisted investments through its wholly owned subsidiary,

Paladin Capital Financial Services (Pty) Ltd.

REVIEW OF ACTIVITIESPaladin was a dormant shelf company, called Friedshelf 927 (Pty) Ltd, until the Paladin restructuring was undertaken in terms

of which all of the assets (and liabilities) of Paladin’s predecessor were transferred to such shelf company, which also

changed its name to “Paladin Capital Ltd”.

A summary of significant transactions throughout the year are as follows:

• Listing and renounceable rights issue of R150 million

• The acquisition of a 50% interest in Curro Holdings (Pty) Ltd, for R50 million

• The acquisition of a 9,4% stake in Petmin Ltd for R92 million from PSG Group Ltd

• The acquisition of an additional 17,5% stake in Top Fix Holdings Ltd for R19,6 million

• The acquisition of a 20,4% stake in Spirit Capital (Pty) Ltd for R12,8 million

• The disposal of Paladin’s interest in Mainfin (Pty) Ltd and Axon Xchange (Pty) Ltd

• Played a key negotiating role in the merger of Erbacon Investment Holdings Ltd with Civcontract Civils (Pty) Ltd

(“Civcon”), thereby doubling the size of Erbacon

• Thembeka Capital Ltd’s acquisition of 10% of Overberg Agri Ltd for R37,7 million and an additional 5 million

PSG Group Ltd shares for R77,9 million by way of a share swap and cash

OPERATING RESULTSThe operating results and the state of affairs of the company and the group are fully set out in the attached income

statements, statements of financial position and notes thereto. The group’s profit attributable to equity holders amounted to

R179,6 million (2009: loss R37,2 million).

SHARE CAPITALDetails of the authorised and issued share capital appear in note 8 to the financial statements.

During the year under review, the following changes to share capital were effected:

2010 2009Number

of shares

Number

of shares

Shares in issue at beginning of the year 39 622 418 38 247 403 Shares issued at R20 per share to the directors of Paladin Capital Ltd 250 000 Shares issued during private placement at R20 per share 1 125 015 Shares issued at R18 for a 9,4% stake in Petmin Ltd 5 111 111 Repurchase of shares issued to the participants of Paladin share incentive scheme at R20,26 per share (950 102)Disposal of investment in Mainfin (Pty) Ltd through repurchase of Paladin

Capital Ltd shares held by Mainfin (Pty) Ltd shareholders at R17,50 per share (1 011 600)Shares issued to PSG Financial Services Ltd at R12,10 per share in exchange

for shares in Thembeka Capital Ltd 1 821 492 Total shares prior to share split 44 593 319 39 622 418

Share split of 10 Paladin Capital Ltd shares issued for every 1 Paladin

Capital Ltd share held 445 933 190 Shares issued at R0,0001 per share 100 A renounceable rights offer to Paladin Capital Ltd shareholders at a subscription price of 117 cents per rights offer share, in the ratio of 1 rights offer share for every 3,47828 Paladin Capital Ltd shares held 128 205 128 Acquisition of additional stake in Top Fix Holdings Ltd for

0,42424 Paladin Capital Ltd shares for one Top Fix Holdings Ltd share 466 152 574 604 570 39 622 418

diRectoRS’ RepoRt


DIVIDENDSDetails of dividends appear in note 22 of the financial statements.

DIRECTORS AND COMPANY SECRETARY

DirectorsE de V Greyling Appointed as non-executive director 30 June 2009JA Grobbelaar Resigned 20 March 2009JA Holtzhausen Director since establishment in 2007P Malan Resigned 16 February 2009A Wiese Was employed on a contract basis and resigned on 13 June 2008JF Mouton Director since establishment in 2007PJ Mouton Appointed as non-executive director 1 April 2009FW Swart Appointed as executive director 16 February 2009J Bezuidenhout Appointed as executive director 7 April 2009, resigned 19 April 2010KP Harris Appointed as non-executive director 8 July 2009JD Wiese Appointed as non-executive director 14 July 2009

Directors’ emoluments incurred by the company and its subsidiaries:

Cash-based remuneration

Basic Company Performance Total TotalFees salaries contributions related 2010 2009R000 R000 R000 R000 R000 R000

ExecutiveFW Swart 808 68 233 1 109 J Bezuidenhout* 554 46 50 650 P Malan 3 440JA Grobbelaar 1 904A Wiese 269

Non-executiveE de V Greyling 50 50 JA Holtzhausen 2 498 KP Harris 35 35JD Wiese 35 35 Total 120 1 362 114 283 1 879 8 111

As from 1 March 2009, the directors of Paladin Capital Ltd are remunerated by a subsidiary of PSG Group Ltd and therefore

no remuneration charge appears in the income statement for the year ended 28 February 2010.

*Mr.JBezuidenhoutresignedasdirectoreffective19April2010.

diRectoRS’ RepoRt

27

Shareholding of directors

The shareholding of directors in the issued share capital of the company as at 28 February 2010 was as follows:

Beneficial Non-beneficial

Total

shareholding 2010

Total

shareholding 2009Direct Indirect Direct Indirect Number % Number %

JF Mouton 1 179 623 20 890 377 22 070 000 3,84 150 000 0,38JA Holtzhausen 4 292 491 4 292 491 0,75 581 100 1,47FW Swart 1 221 462 1 221 462 0,21 66 000 0,17PJ Mouton 1 000 000 2 030 000 3 030 000 0,53 190 000 0,48E de V Greyling 631 690 631 690 0,11 30 015 0,08J Bezuidenhout 19 059 19 059 0,00JA Grobbelaar 150 000 0,38Total 7 122 863 – – 24 141 839 31 264 702 5,44 1 167 115 2,96

Company secretary

The company secretary is PSG Corporate Services (Pty) Ltd whose business and postal addresses are as follows:

The business and postal addresses are shown on page 78.

HOLDING COMPANYThe holding company is PSG Financial Services Ltd that holds 80,6% of the issued ordinary shares. The ultimate holding

company is PSG Group Ltd.

SUBSIDIARIESDetails of the company’s interest in subsidiaries are set out in Annexure A.

SPECIAL RESOLUTIONS OF SUBSIDIARIESDetails of special resolutions passed by subsidiaries during the year under review, which are material to the group, are as

follows:

Paladin Capital Financial Services (Pty) Ltd

The company’s name was changed from “Uncial Investments (Pty) Ltd” to “Paladin Capital Financial Services (Pty) Ltd”.


diRectoRS’ RepoRt

The following main business and main objective to be incorporated in the new Memorandum of Association which will

include the following amendments:

1. Purpose describing main business:

• The main business, which the company is to carry on, is that of: “an investment company”.

2. Main objective:

• The main objective of the company is to:

“Carry on the business of making investments in listed and unlisted companies, corporations, funds, trusts, joint

ventures and any other similar entities, operations or structures, or any financial instruments relating thereto and all

other related activities required and ancillary to the implementation of such investments.”

The authorised share capital of the company currently comprising of R1 000 divided into 1 000 ordinary shares with a par

value of R1,00 each be subdivided into 10 000 000 ordinary par value shares of R0,0001 each. The authorised share capital

be increased by R99 000 to R100 000 by the creation of 990 000 000 ordinary shares with a par value of R0,0001 each.

This is required for the restructuring of Paladin Capital Ltd.

The authorised share capital of the company R100 000 consisting of 1 000 000 000 ordinary par value shares of R0,0001

each be increased by R60,00 to R100 060,00 by the creation of:

1. 1 000 (one thousand) A1 class redeemable preference shares with a par value of R0,01 and a premium of R99 999,99

each;


each:


each;


each


each; and


each,

the classes of A1, A2, A3, A4, A5 and A6 redeemable preference shares, shall have the rights and privileges, and be subject

to the conditions and restrictions, set out in the articles of association.

Amend the memorandum of association of the company to alter the provisions with respect to the main purpose, main

object and the share capital of the company, so as to reflect the increase in share capital and the issue of preference shares.

The articles of association of the company be amended to comply with the Listings Requirements of the JSE Ltd and which

make provision for the terms of the preference shares created.

To pledge and cede listed and unlisted shares and/or cash to PSG FutureWealth Ltd or its nominee or any of its successors

in title (“the Subscriber”) as security for the obligations of the company to the Subscriber arising from the issue by the

company of preference shares to the Subscriber from time to time on the terms set out in the cession agreement concluded

or to be concluded between the company and the Subscriber, the shareholder having confirmed that the board of directors

of the company are satisfied that the requirements of section 38(2A)(a) of the Companies Act are met in regard to the

furnishing of such security. This will obtain the prior approval of the sole shareholder of the company, as required in terms of

section 38(2A), for the company to furnish security to the Subscriber for its obligations arising from the issue of preference

shares to the Subscriber.

29

To repurchase any of the shares issued by the company, upon such terms and conditions and in such amounts as

the directors of the company or the subsidiary as the case may be, may from time to time determine, but subject to the

provisions of Section 85 to Section 88 of the Companies Act, the Articles of Association of the company, and the Listings

Requirements of the JSE Ltd (if applicable). This grant the directors of the company and of any subsidiary of the company

a general authority in terms of the Companies Act for the acquisition by the company or its subsidiary of shares issued by

the company on the basis reflected in the special resolution. To the extent applicable, in terms of the Listings Requirements

of the JSE Ltd any general repurchase by the company or its subsidiary must, interalia, be Ltd to a maximum of 20% of the

company’s issued share capital in anyone financial year of that class in issue at the time the authority is granted, subject to

a maximum of 10% in the event that the company’s share capital is repurchased by a subsidiary.

The acquisition by any subsidiary of the company of shares issued by such subsidiary, upon such terms and conditions and

in such amounts as the directors of such subsidiary may from time to time decide, but subject to the provisions of Section

85 to Section 89 of the Companies Act, the articles of association of the company and the Listings Requirements of the JSE

Ltd (if applicable). This grants the board of directors of any subsidiary of the company a general authority to acquire shares

issued by such subsidiary on the basis reflected in the special resolution. To the extent applicable, in terms of the Listings

Requirements of the JSE any general purchase by a subsidiary of listed shares must, inter alia, be Ltd to

a maximum of 20% of the issued share capital of the acquiree company in anyone financial year of that class in issue at the

time the authority is granted.

AUDITORSPricewaterhouseCoopers Incorporated will continue in office in accordance with section 270(2) of the Companies Act of

South Africa.

POST STATEMENT OF FINANCIAL POSITION EVENTSThe following were changes in the affairs or financial position of the company since the statement of financial position date:

• The company entered into a financing arrangement to raise R100 million by means of five-year, fixed-rate preference

shares with dividend and capital payable on maturity; and

• Purchased an additional 26% interest for a controlling stake in Curro Holdings (Pty) Ltd (subject to regulatory approval)

for a total consideration of R52 million, of which R43 million is payable in cash and the balance in Paladin Capital Ltd

shares.


StatementS of financial poSitionas at 28 february 2010

GROUP COMPANY

2010 2009 2010 2009

Notes R000 R000 R000 R000

AssetsInvestment in subsidiary 1 827 708 Investment in associated companies 2 1 052 125 709 804 Financial assets

Equity securities 3 2 600 Loans and advances 4 19 543 12

Deferred tax assets 5 2 770 1 110 1 790 Receivables 6 168 2 041 Cash and cash equivalents 7 2 303 55 Non-current assets classified as held for sale 28 36 677 Total assets 1 057 366 771 830 829 510 –

Capital and reserves attributable to the

company’s equity holders

Share capital 8 57 40 57 Share premium 846 596 504 520 846 596 Other reserves (103 966) (39 285)Retained earnings 267 087 97 361 18 830 Ordinaryshareholders’funds 1 009 774 601 921 826 198 – Minority interests 1 814 Totalequity 1 009 774 603 735 826 198 –

LiabilitiesFinancial liabilities

Borrowings 9 42 203 150 748 Trade and other payables 11 5 309 1 013 3 232 Current income tax liabilities 12 80 80 Liabilities directly associated with non-current

assets classified as held for sale 28 16 334 Totalliabilities 47 592 168 095 3 312 –

Total liabilities and shareholders’ funds 1 057 366 771 830 829 510 –

Note:At28February2009PaladinCapitalLtdwasadormantshelfcompany,calledFriedshelf927(Pty)Ltd,withissuedsharecapitalofR70.

31

income StatementSfor the year ended 28 february 2010

GROUP COMPANY

2010 2009 2010 2009

Notes R000 R000 R000 R000

IncomeInvestment income 14 20 982 23 975 25 455 Fee income 16 693 489 Other operating income 17 1 049 458 1 519 Total income 22 724 24 433 27 463 –

ExpensesFair value losses on financial instruments 15 2 172 Administration and other expenses 18 10 174 4 255 5 527Impairment charges 18 7 000 4 804 9Total expenses 17 174 11 231 5 536 –

Results of operating activities from

continuing operations 5 550 13 202 21 927 Finance costs 19 (13 638) (12 473) (4 807)Share of profits/(losses) of associated

companies 2 168 435 (43 596)Profit/(loss) before taxation from

continuing operations 160 347 (42 867) 17 120 –Taxation 20 1 580 (224) 1 710

Net profit/(loss) for the year from

continuing operations 161 927 (43 091) 18 830 Net profit for the year from discontinued

operations 17 702 8 628 179 629 (34 463) 18 830 –

Attributable to: 179 629 (34 463) – –

– minority interests 2 771 – equity holders of the company 179 629 (37 234)

Earnings/(loss) per share (cents) 21 Basic and diluted 36,3 (9,5)


StatementS of compRehenSive incomefor the year ended 28 february 2010

GROUP COMPANY

2010 2009 2010 2009

Notes R000 R000 R000 R000

Net profit/(loss) for the year 179 629 (34 463) 18 830

Other comprehensive incomeShare of other comprehensive income of

associated company 12 262 Total comprehensive income/(loss)

for the year 191 891 (34 463) 18 830 –

Attributable to:– Minority interests 2 771 – Equity holders of the company 191 891 (37 234) 18 830

191 891 (34 463) 18 830 –

33

GROUP

Attributable to owners of the parentShare

capital

Share

premium

Other

reserves

Retained

earnings

Minority

interests Total

R000 R000 R000 R000 R000 R000

Balance at 1 March 2008 38 477 823 (34 570) 190 263 1 075 634 629 Comprehensive incomeNet (loss)/profit for the year (37 234) 2 771 (34 463)

Transactions with ownersIssue of share capital 2 27 498 27 500 Shares issue cost (801) (801)Movement in interest in

subsidiaries (323) (323)Dividends paid (21 098) (1 709) (22 807)Other reserve movements 34 570 (34 570) Total transactions with

owners 2 26 697 34 570 (55 668) (2 032) 3 569 Balance at 28 February 2009 40 504 520 – 97 361 1 814 603 735 Comprehensive incomeNet profit for the year 179 629 179 629

Other comprehensive incomeShare of other comprehensive

income of associated

company 12 262 12 262

Transactions with ownersIssue of share capital (net of

repurchases) 17 344 070 344 087 Shares issue cost (1 994) (1 994)Disposal/dilution of subsidiaries (1 814) (1 814)Dividends paid (9 903) (9 903)Common control transaction

reserve* (116 228)

(116 228)Total transactions with

owners 17 342 076 (116 228) (9 903) (1 814) 214 148 Balance at 28 February 2010 57 846 596 (103 966) 267 087 – 1 009 774

COMPANY

Balance at 1 March 2009 – – – – – – Comprehensive incomeNet profit for the year 18 830 18 830 Transactions with ownersIssue of share capital 57 848 590 848 647 Shares issue cost (1 994) (1 994)Other reserve movements (39 285) (39 285)Total transactions with

owners 57 846 596 (39 285) – – 807 368 Balance at 28 February 2010 57 846 596 (39 285) 18 830 – 826 198

*ThecommoncontroltransactionreservearoseasaresultofthePaladinrestructuringreferredtointhedirectors’report.

StatementS of changeS in equityfor the year ended 28 february 2010


GROUP COMPANY

2010 2009 2010 2009

Notes R000 R000 R000 R000

Cash retained from operating activitiesCash generated/(utilised) by operating activities 25.1 29 184 (44 057) (1 806)Interest paid (13 638) (12 473) (4 807)Interest received 2 482 2 520 867 Taxation paid 25.2 (6 700)Net cash flow from operating activities 18 028 (60 710) (5 746) –

Cash flows from investing activitiesPurchase of financial assets (8 540)Proceeds from sale of financial assets 3 710 4 150 1 510 Dividend income 12 531 1 738 24 588 Additional shares in/loans to subsidiaries

acquired (5 013) (282 366)

Disposal of shares in associated company 4 000 Disposal of subsidiaries 25.3 21 128 Acquisition of and net advances to associates (201 980) (102 750)Acquisition of preference shares (3 581)Loans repaid/(advanced) 296 40 462 (12)Purchase of property, plant and equipment (302)Purchase of intangible assets (891)Net cash flow from investing activities (163 896) (71 146) (256 280) –

Cash flows from financing activitiesProceeds from issuance of ordinary shares

(net of issue cost) 262 026 26 699 262 026

Dividends paid (9 903) (21 098)Dividends paid to minorities (1 709)(Repayment of)/increase in borrowings (107 845) 127 505 Net cash flow from financing activities 144 278 131 397 262 026 –

Net decrease in cash and cash equivalents (1 590) (459) –Cash and cash equivalents at beginning

of year 3 893 4 352 Cash and cash equivalents at end of year 2 303 3 893 – –

Continued operations 2 303 55 Discontinued operations 3 838

caSh flow StatementSfor the year ended 28 february 2010

35

accounting policieS

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

These policies have been consistently applied to all the years presented.

BASIS OF PREPARATIONThe consolidated and company financial statements of Paladin Capital Ltd have been prepared in accordance with

International Financial Reporting Standards (“IFRS”) and the manner required by the Companies Act of South Africa. The

financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-

sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit

or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It

also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas

involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the

consolidated financial statements are disclosed further on in the accounting policies.

STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS THAT ARE EFFECTIVE FOR THE FIRST TIME IN 2010

New and amended standards adopted by the group

• IFRS 8 Operating Segments (effective January 2009)

IFRS 8 requires an entity to adopt the ‘management approach’ to reporting on the financial performance of its operating

segments. The Standard sets out requirements for disclosure of information about an entity’s operating segments and

also about the entity’s products and services, the geographical areas in which it operates, and its major customers. The

disclosure should enable users of its financial statements to evaluate the nature and financial effects of the business

activities in which it engages and the economic environments in which it operates. The group expanded its disclosure

on the reportable segments from three to six segments as disclosed in Annexure B. Comparative information has been

re-presented.

• IAS 1 Revised – Presentation of Financial Statements (effective January 2009)

The revised standard prohibits the presentation of items of income and expenses (that is, ’non-owner changes in

equity’) in the statement of changes in equity, requiring ’non-owner changes in equity’ to be presented separately from

owner changes in equity in a statement of comprehensive income. As a result the group presents in the statement of

changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement

of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the

revised standard. The change in accounting policy only impacts on presentation aspects.

• IAS 23 Revised – Borrowing Costs (effective January 2009)

In respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or

after 1 March 2009, the group capitalises borrowing costs directly attributable to the acquisition, construction or

production of a qualifying asset as part of the cost of that asset. In accordance with the transition provisions of the

standard; comparative figures have not been restated. The change in accounting policy had no material impact on the

group’s financial statements.

• Amendment to IAS 27 – Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary,

Joint Controlled Entity or Associate (effective January 2009)

The amendment removed the definition of the cost method from IAS 27 and replaced it with a requirement to present

dividends as income in the separate financial statements of the investor. The group adopted the amendment prospectively

from 1 March 2009. The change in accounting policy had no material impact on the group’s financial statements.

• Amendment to IFRS 2 – Share-based Payment Vesting Conditions and Cancellations (effective January 2009)

The amendment deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions

and performance conditions only. Other features of a share-based payment are not vesting conditions. These features

would need to be included in the grant date fair value for transactions with employees and others providing similar

services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date.


accounting policieS

All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The group

and company have adopted IFRS 2 (amendment) from 1 March 2009. The amendment does not have a material impact

on the group or company’s financial statements.

• Amendments to IFRS 7 Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments

(effective January 2009)

The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the

amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The change

in accounting policy only results in additional disclosures.

New and amended standards not currently relevant to the group’s operations

• Amendment to IAS 32 Financial Instruments – Presentation and IAS 1 Presentation of financial statements

– Puttable Financial Instruments and Obligations Arising on Liquidation (effective January 2009)

• IFRIC 13 Customer Loyalty Programmes (effective July 2008)

• IFRIC 15 Agreements for the Construction of Real Estate (effective January 2009)

• IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective October 2008)

• AC503 Revised – Accounting for Black Economic Empowerment Transactions (effective January 2009)

• Amendment to IFRS 2 – Share-based Payment Vesting Conditions and Cancellations (effective January 2009)

The implications of these statements have no impact on measurements of assets and liabilities or disclosures in the current

or prior years.

STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS THAT ARE NOT YET EFFECTIVECertain new standards, amendments and interpretations to existing standards have been published that are mandatory for

the group’s accounting periods beginning on or after 1 March 2010 or later periods, but which the group has not early

adopted are as follows:

• IFRS 3 Revised – Business Combinations (effective July 2009)

The revised standard continues to apply the acquisition method to business combinations, with some significant

changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with

contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on

an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree at fair value or at the non-

controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed.

The group will apply IFRS 3 (revised) prospectively to all business combinations from 1 March 2010.

• IAS 27 Revised – Consolidated and Separate Financial Statements (effective July 2009)

The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there

is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also

specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain

or loss is recognised in profit or loss. The group will apply IAS 27 (revised) prospectively to transactions with non-

controlling interests from 1 March 2010. This will result in a change in accounting policy, since the group currently treats

minorities as parties external to the group and subsequent to the revision will treat minorities as equity holders.

• IFRIC 17 Distribution of Non-cash Assets to Owners (effective July 2009)

This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to

shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets

are classified as held for distribution only when they are available for distribution in their present condition and the

distribution is highly probable. The group and company will apply IFRIC 17 from 1 March 2010.

• Amendments to IFRS 2: Group Cash-settled Share-based Payment Transactions (effective January 2010)

The amendment clarifies the accounting for group cash-settled share-based payment transactions. The entity receiving

the goods or services shall measure the share-based payment transaction as equity-settled only when the awards

granted are its own equity instruments, or the entity has no obligation to settle the share-based payment transaction.

The entity settling a share-based payment transaction when another entity in the group receives the goods or services

37

recognises the transaction as equity-settled only if it is settled in its own equity instruments. In all other cases, the

transaction is accounted for as cash-settled. The group will apply the amendments to IFRS 2 prospectively from

1 March 2010.

• IFRS 9: Financial Instruments (effective January 2013)

The new standard improves and simplifies the approach for classification and measurement of financial assets compared

with the requirements of IAS 39. IFRS 9 applies a consistent approach to classifying financial assets and replaces the

numerous categories of financial assets in IAS 39, each of which had its own classification criteria. IFRS 9 also results

in one impairment method, replacing the numerous impairment methods in IAS 39 that arise from the different

classification categories.

Management is in the process of assessing the impact of these amendments and standards on the reported results of the

group and the company.

Standards, amendments and interpretations to existing standards that are not yet effective or not relevant to the group’s

operations, are as follows:

• IFRIC 18 Transfers of Assets from Customers (effective July 2009)

• IFRIC 19 Extinguishing financial liabilities with equity instruments (effective July 2010)

• Amendment to IFRIC 9 – Reassessment of Embedded Derivatives and IAS 39 – Financial Instruments: Recognition

and Measurement (effective July 2009)

• AC504 – IAS 19 (AC116) – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their

Interaction in the South African Pension Fund Environment (effective April 2009)

• Amendments to IAS 32 – Classification of Rights Issues (effective February 2010)

• Amendments to IAS 39 – Financial Instruments: Recognition and Measurement Eligible Hedged Items

(effective July 2009)

GROUP FINANCIAL STATEMENTSThe group annual financial statements comprise those of the company, its subsidiaries and associated companies.

Subsidiaries

Subsidiaries are all entities (including special-purpose entities and collective investment schemes) over which the group has

the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the

voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered

when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control

is transferred to the group and are no longer consolidated from the date on which control ceases.

The group uses the purchase method of accounting to account for the acquisition of subsidiaries. The cost of an acquisition

is measured, as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date

of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent

liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of

the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s share of the

identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets

of the subsidiary acquired, the difference is recognised directly in the income statement.

If the initial accounting for business combinations has been determined provisionally, then adjustments to these values

resulting from the emergence of new information within twelve months after the acquisition date are made against goodwill.

In addition, the cost of the business combination and the subsequent goodwill is adjusted for changes in the estimated value

of contingent considerations given in the business combination when they arise.

Intra-group transactions, balances and unrealised gains on intra-group transactions are eliminated. Unrealised losses are

also eliminated but considered an impairment indicator of the asset transferred.


accounting policieS

Investment in subsidiaries in the company financials are carried at cost less provision for impairment.

Transactions with minorities

The group applies a policy of treating transactions with minority interests as transactions with parties external to the group.

Disposals to minority interests result in gains and losses for the group that are recorded in the income statement. Purchases

from minority interests result in goodwill being the difference between any consideration paid and the relevant share acquired

of the carrying value of net assets of the subsidiary.

Associated companies

Associated companies are all entities over which the group has significant influence but not control, generally accompanying

a shareholding of between 20% and 50% of the voting rights. Investments in associated companies are accounted for by

the equity method of accounting and are initially recognised at cost. The group’s investment in associated companies

includes goodwill (net of any accumulated impairment loss) identified on acquisition (see note 2).

The results of associated companies are accounted for according to the equity method, based on their most recent audited

financial statements or latest management information. Equity accounting involves recognising the group’s share of its

associated companies’ post-acquisition profits or losses in the income statement, and its share of post-acquisition

movements in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the

investment. When the group’s share of losses in an associated company equals or exceeds its interest in the associated

company, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred

obligations or made payments on behalf of the associated company.

Unrealised gains on transactions between the group and its associated companies are eliminated to the extent of the

group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence

of an impairment of the asset transferred. Cross-holdings between the group and its associates are eliminated in accordance

with normal consolidation procedure. Associates’ accounting policies have been changed where necessary to ensure

consistency with the policies adopted by the group.

Dilution gains and losses arising in investment in associated companies are recognised in the income statement.

For step acquisitions of investment in associated companies, the carrying value of pre-associate investments are restated

to cost through equity. The pre-associate interest in identifiable net assets is also stepped up to fair value through equity.

Goodwill is calculated at each stage of step acquisition. The step acquisition investment in associated companies is initially

carried at fair value of the group’s share of net assets plus goodwill arising from each stage of step acquisition.

Certain associated companies have year-ends that differ from that of the group. In such circumstances, the results of these

companies are either accounted for from the latest management accounts or the latest published results.

Loans to associated companies are disclosed as part of the carrying amount of the investment.

Investments in associated companies are carried at cost less provision for impairment in the company.

Accounting for the company’s acquisition of the controlling interest in subsidiaries and businesses under

common control

The IFRS on business combinations (IFRS 3) does not apply to business combinations effected between parties that are

ultimately controlled by the same entity, otherwise known as common control transactions. The company has elected to

apply the principle of “predecessor accounting”, as determined by the generally accepted accounting principles in the

United States of America, to such transactions.

39

The result of operations for the period is presented as though the acquisition of the company’s controlling interest through

a transaction under common control had occurred at the beginning of the comparative period. The effects of intercompany

transactions have been eliminated in determining the results of operations for the period prior to the acquisition of the

controlling interest, meaning that those are on substantially the same basis as the results of operations for the period after

the acquisition of the controlling interest. Similarly, the consolidated statement of financial position with related notes has

been presented as though the assets and liabilities, recorded at predecessor values, of the combining entities had been

transferred at the beginning of the comparative period. Therefore, no restatement of the acquiree’s assets and liabilities to

fair value was required.

Accordingly financial statements and financial information presented for prior periods are restated as if the transaction

occurred at the beginning of the comparative period.

The difference between the consideration given and the predecessor values is recognised directly in equity in a separate

reserve. As a result, no goodwill is recognised on acquisition.

SEGMENT REPORTINGOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-

maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the

operating segments, has been identified as the executive committee that makes strategic decisions.

FOREIGN CURRENCY TRANSLATIONFunctional and presentation currency

Items included in the financial statements of each of the company entities are measured using the currency of the primary

economic environment in which the entity operates (the “functional currency”).

The consolidated financial statements are presented in South African rand, which is the company’s functional and

presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of

the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement

of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognised in the income statement.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or

loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial

assets such as equities classified as available for sale are included in the fair value reserve in equity.

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at historical cost less accumulated depreciation and impairment. Cost includes

expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when

it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be

measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged

to the income statement during the financial period in which they are incurred.

Depreciation is calculated on the straight-line method at rates considered appropriate to reduce book values to estimated

residual values over the useful lives of the assets, as follows:


accounting policieS

Leasehold improvement Rental period

Office equipment 5 – 7 years

Computer equipment 3 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial

position date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater

than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the

income statement.

INTANGIBLE ASSETSGoodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable

assets of the acquired subsidiary/associated company undertaking at the date of acquisition. Goodwill is reported in the

statement of financial position as an intangible asset. Goodwill on acquisition of associated companies is included in

investments in associated companies. Goodwill is tested biannually for impairment and is carried at cost less accumulated

impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include

the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-

generating units or groups of cash-generating units that are expected to benefit from the business combination in which the

goodwill arose identified according to operating segment.

An excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities arises

where the net assets of a subsidiary at the date of acquisition, fairly valued, exceed the cost of the acquisition. This excess

arising on acquisitions is taken directly to income.

Computer software

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.

Costs that are directly associated with identifiable and unique software products controlled by the group and that will

probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs

include staff costs of the software development team and an appropriate portion of relevant overheads.

Expenditure that enhances or extends the performance of computer software programmes beyond their original specifications

is recognised as capital improvement and added to the original cost of the software. Computer software development costs

recognised as assets are amortised using the straight-line method over their useful lives not exceeding a period of two years.

Expenditure to acquire trademarks and licences is capitalised and amortised using the straight-line method over their useful

lives not exceeding a period of two years.

IMPAIRMENT OF NON-FINANCIAL ASSETSAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that

are subject to amortisation are tested for impairment whenever events or changes in circumstances indicate that the carrying

amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount

exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in

use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately

identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are

reviewed for possible reversal of the impairment at each reporting date.

41

FINANCIAL INSTRUMENTSFinancial instruments recognised on the statement of financial position include financial assets, receivables, cash and cash

equivalents, financial liabilities and trade and other payables. The particular recognition methods adopted are disclosed in

the individual policy statements associated with each item.

OFFSETTING FINANCIAL INSTRUMENTSFinancial assets and liabilities are offset and the net amount reported in the statement of financial position only when there

is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise

the asset and settle the liability simultaneously.

FINANCIAL ASSETSThe group classifies its financial assets into the following categories: financial assets at fair value through profit or loss, held-

to maturity financial assets, available-for-sale assets and loans and advances. The classification depends on the purpose for

which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition

and re-evaluates this at every reporting date.

Financial assets at fair value through profit or loss

This category has two subcategories: financial assets held for trading, and those designated at fair value through profit or

loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short

term or if so designated by management. Financial assets designated at fair value through profit or loss at inception are

those that are managed and whose performance is evaluated on a fair value basis. Information about these financial assets

is provided internally on a fair value basis to the group’s key management personnel. Derivatives are categorised as held for

trading.

Loans and advances

Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active

market other than those that the group intends to sell in the short term. Loans and advances are carried at amortised cost

using the effective interest method. Specific provisions are made against identified doubtful advances.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not

classified in any of the other categories. They are included in non-current assets unless the investment matures or

management intends to dispose of it within 12 months of the end of the reporting period.

Recognition and measurement of financial assets

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to

purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not

carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at

fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights

to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially

all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss

are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective

interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are

presented in the income statement within ‘other (losses)/gains – net’ in the period in which they arise. Dividend income from

financial assets at fair value through profit or loss is recognised in the income statement as part of other income when the

group’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are

analysed between translation differences resulting from changes in amortised cost of the security and other changes in the


accounting policieS

carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss; translation

differences on non-monetary securities are recognised in other comprehensive income. Changes in the fair value of monetary

and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in

equity are included in the income statement as ‘gains and losses from investment securities’.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement

as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statement as part

of other income when the group’s right to receive payments is established.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable

right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the

liability simultaneously.

RECEIVABLESReceivables are initially measured at fair value and subsequently recognised at amortised cost using the effective interest

rate method, less provision for impairment. A provision for impairment is established when there is objective evidence that

the group will not be able to collect all amounts due according to the original terms of receivables. Significant financial

difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency

in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between

the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest

rate. The movement in the amount of the provision is recognised in the income statement.

CASH AND CASH EQUIVALENTSCash and cash equivalents include cash in hand, other deposits held at call with banks, other short-term highly liquid

investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within

borrowings on the statement of financial position.

NON-CURRENT ASSETS HELD FOR SALENon-current assets held for sale are classified as held for sale if their carrying amount will be recovered principally through a

sale transaction, not through continuing use. These assets may be a component of an entity, a disposal group or an

individual non-current asset.

Non-current assets classified as assets held for sale are stated at the lower of their carrying amount and their fair value less

costs to sell. An impairment loss is recognised for any initial or subsequent writedown of non-current assets held for sale to

fair value less costs to sell, to the extent that it has not been recognised previously.

SHARE CAPITALOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of equity instruments are shown

in equity as a deduction from the proceeds, net of tax.

Where any group company purchases the company’s equity share capital (treasury shares), the consideration paid, including

any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the company’s equity

holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold, reissued or

otherwise disposed of, any consideration received is included in equity attributable to the company’s equity holders, net of

any directly attributable incremental transaction costs and the related income tax effects.

43

FINANCIAL LIABILITIESA financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity.

Financial liabilities include borrowings, policyholder liabilities under investment contracts and trade and other payables.

Financial liabilities are initially recognised at fair value less transaction costs that are directly attributable to the raising of the

funds, for all financial liabilities carried at amortised cost. All financial liabilities measured at fair value through profit or loss is

initially recognised at fair value. The best evidence of the fair value at initial recognition is the transaction price (i.e. the fair

value of the consideration received) unless the fair value of that instrument is evidenced by comparison with other observable

current market transactions in the same instrument or based on a valuation technique whose variables include only data

from observable markets.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at

amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in

the income statement over the period of the borrowings using the effective interest method.

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these

preference shares are recognised in the income statement as interest expense.

CURRENT AND DEFERRED INCOME TAXThe tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to

the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also

recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement

of financial position date in the countries where the group’s subsidiaries and associates operate and generate taxable

income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax

regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to

be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of

assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax

arises from initial recognition of an asset or liability in a transaction other than a business combination, that at the time of the

transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined

using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and

are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against

which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associated companies,

except where the group controls the timing of the reversal of the temporary difference and it is probable that the temporary

difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets

against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the

same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the

balances on a net basis.


accounting policieS

EMPLOYEE BENEFITSPension obligations

The group only has defined-contribution plans. A defined-contribution plan is a pension plan under which the group pays

fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the

fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior

periods. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are

recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Other post-retirement benefits

The group has no liabilities with regard to post-retirement medical benefits.

Annual leave

Employee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for the estimated

annual leave as a result of services rendered by employees up to statement of financial position date.

Profit sharing and bonus plans

The group recognises a liability and an expense for bonuses and profit sharing. The group recognises a provision where

contractually obliged or where there is a past practice that has created a constructive obligation.

PROVISIONSProvisions are recognised when:

• the group has a present legal or constructive obligation as a result of past events;

• it is more likely than not that an outflow of resources will be required to settle the obligation; and

• the amount has been reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a

pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The

increase in the provision due to passage of time is recognised as an interest expense. Provisions are not recognised for

future operating leases.

REVENUE RECOGNITIONRevenue comprises the fair value of the consideration received or receivable for services in the ordinary course of the group’s

activities. Revenue is shown net of value added tax, after eliminating revenue within the group. Revenue is recognised

as follows:

Fee income

Fee income is recognised when the related company is unconditionally entitled thereto. No profit is recognised when the

outcome of a transaction cannot be estimated reliably.

Interest income

Interest income for financial assets that are not classified as at fair value through profit or loss is recognised using the

effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount,

being the estimated future cash flow discounted at the original effective interest rate of the instrument and continues

unwinding discount as interest income. Interest income from financial assets that are classified as at fair value through profit

or loss is included in investment income.

Dividend income

Dividend income is recognised when the right to receive payment is established. Dividend income from financial assets that

are classified as at fair value through profit or loss is included in investment income.

45

Insurance premium income

Premium income from policies is accounted for when due and recognised in the income statement.

LEASESLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as

operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over

the period of the lease.

DIVIDEND DISTRIBUTIONSDividend distributions to the company’s shareholders are recognised as a liability in the period in which the dividends are

approved by the company’s board of directors.

SECONDARY TAX ON COMPANIESSouth African resident companies are subject to a dual corporate tax system, one part of the tax being levied on taxable

income and the other, a secondary tax (called STC), on distributed income. A company incurs STC charges on the

declaration or deemed declaration of dividends (as defined under tax law) to its shareholders. STC is not a withholding tax

on shareholders, but a tax on companies.

The STC tax consequence of dividends is recognised as a taxation charge in the income statement in the same period that

the related dividend is accrued as a liability. The STC liability is reduced by dividends received during the dividend cycle.

Where dividends declared exceed the dividends received during a cycle, STC is payable at the current STC rate on the net

amount. Where dividends received exceed dividends declared within a cycle, there is no liability to pay STC. The potential

tax benefit related to excess dividends is carried forward to the next dividend cycle as an STC credit. Deferred tax assets

are recognised on unutilised STC credits to the extent that it is probable that the group will declare future dividends to utilise

such STC credits.

CONTINGENCIESA contingent liability is either a possible obligation that arises from past events and whose existence will be confirmed only

by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company

or a present obligation that arises from past events but it is not probable that an outflow of resources embodying economic

benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

These contingent liabilities are not recognised in the statement of financial position but disclosed in the notes to the financial

statements.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. These

contingent assets are not recognised in the statement of financial position but are disclosed in the notes to the financial

statements if the inflow of financial benefits is probable.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIESEstimates and judgements are continually evaluated and are based on historical experience and other factors, including

expectations of future events that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next

financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors,

including expectations of future events that are believed to be reasonable under circumstances.

Revenue recognition

Fees are generally recognised on an accrual basis when the service has been provided.


accounting policieS

Equity accounting

The group accounts for certain investments as associates although the group holds less than 20 per cent of the issued share

capital. This is based on the group’s ability to exercise significant influence over the investments through its voting power

(both through its equity holding and its representation on the board of directors), its participation in the strategic, financial

and operational, decisions of the investments and the fact that the influence is also acknowledged by the investments.

Expense provisions

Management uses its discretion to make an estimate of the expenditure required to settle the present obligation at the

statement of financial position date of the amount it estimates that the group would rationally pay to settle the obligation or

to transfer it to a third party.

Directors’ valuation of unlisted associated companies

Directors valuation of unlisted associated companies are determined with reference to market prices, assessing the fair

value of underlying investments as well as the published net asset value or valuation techniques. Valuation techniques used

include applying a market-related price-earnings ratio to operational earnings or performing discounted cash flow models to

the expected cash flows. The following assumptions are used:

2010 2009

Growth rate 0% – 25% 0% – 25%Terminal growth rate 6% 5%Weighted average cost of capital range 14% – 19% 14% –16%Risk-free rate 8,34% 7,80%

Impairment of investments

An impairment of investments in associates is considered when the fair value is below its carrying value. In determining

whether the decline is significant or prolonged, the following factors may be considered: normal volatility in share price, the

financial health of the investee, sector performance, and changes in operational and financing cash flow.

An impairment loss is recognised for the amount by which the associate’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The value in use is calculated

with reference to the assumptions noted above. The underlying market values of investments in listed entities held by

associated companies are also considered in assessing the carrying values.

The directors are satisfied that the group’s investments are fairly stated.

Acquisition of associated companies

During the year under review, the group acquired a number of associated companies. In accounting for these transactions

management had to apply judgement in allocating the purchase price to the tangible and intangible assets of the associates

acquired, as well as to goodwill.

Equity accounting earnings of listed companies not yet published

The recognition of earnings for listed associated companies not yet published is based on management estimates.

Management has to apply judgement in estimating the earnings by using all relevant information, including results reported

to date, comparison to budget, most recent financial forecasts, discussions with management and company-specific

expectations.

FINANCIAL RISK MANAGEMENT The group’s activities expose it to a variety of financial risks: market risk (including price risk and cash flow and fair value

interest rate risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability

of financial markets and seeks to minimise potential adverse effects on the group’s financial performance.

47

Risk management is carried out by each major entity within the group under policies approved by its board of directors. Each

entity identifies, evaluates and hedges financial risks where applicable.

The sensitivity analyses presented below are based on reasonable, possible change in market variables for equity prices and

interest rates.

Financial instruments are grouped into the following classes in order to facilitate effective risk management and disclosure

in terms of IFRS 7 Financial Instruments – Disclosure.

GROUP COMPANY2010 2009 2010 2009R000 R000 R000 R000

Classes of financial assetsQuoted equity securities 2 600 Total equity securities – 2 600

Secured preference shares in associated companies 135 746 129 778 Unsecured preference shares in associated company 3 581 Secured loans to associated companies 6 822 16 200 Unsecured loans to associated companies 20 752 11 000 Total preference shares/loans 166 901 156 978

Secured loans – other 19 247 Unsecured loans – other 296 12 – Total loans and advances – 19 543 12 –

Prepayments and sundry debtors 168 2 041 Total receivables 168 2 041

Cash and cash equivalents 2 303 55

Total financial assets – IFRS 7 169 372 181 217 12 –

Classes of financial liabilitiesSecured loans 88 337 Unsecured loans 42 203 62 411 Total borrowings 42 203 150 748

Accounts payable and accruals 5 309 1 013 3 232 Total trade and other payables 5 309 1 013 3 232 –

Total financial liabilities – IFRS 7 47 512 151 761 3 232 –


accounting policieS

The accounting policies for financial instruments have been applied to the line items below:


Category of financial assetsAt fair value through profit or lossEquity securities 2 600 Total – At fair value through profit or loss – 2 600 – –

Loans and receivablesPreference shares in/loans to associated companies 166 901 156 978 Loans and advances 19 543 12 Receivables 168 2 041 Cash and cash equivalents 2 303 55 Total – Loans and receivables 169 372 178 617 12 –

Total financial assets – IFRS 7 169 372 181 217 12 –

Category of financial liabilitiesAmortised costBorrowings 42 203 150 748 Trade and other payables 5 309 1 013 3 232 Total financial liabilities at amortised cost 47 512 151 761 3 232 –

Total financial liabilities – IFRS 7 47 512 151 761 3 232 –

Market risk

Price risk

The group is exposed to equity securities price risk because of investments held by the group and classified on the

consolidated statement of financial position as at fair value through profit or loss. The group manages price risk by investing

in a portfolio of investments and monitoring securities prices on a regular basis.

Although the group follows a policy of diversification, some concentration of price risk towards certain sectors does exist

and is analysed in the following table:

GROUP2010 2009R000 R000

Sector compositionDiversified 2 600Total – 2 600

No market risk analysis were performed for the year ended 28 February 2010 as no financial instruments at fair value through

profit or loss were held.

Cash flow and fair value interest rate risk

The group’s financial instruments that expose it to cash flow interest rate risk is set out in note 2 (Preference shares and loans

to associated companies), note 4 (Loans and advances), note 7 (Cash and cash equivalents) and note 9 (Borrowings).

49

At 28 February 2010, if interest rates at that date had been 100 (2009: 300) basis points higher/lower, with all other variables

held constant, the group’s post-tax profit for the year would have been R0,8 million (2009: R0,4 million) higher/lower, arising

as a result of charges in interest rate income on floating rate investments.

The group and the company manage its cash flow interest rate risk by monitoring interest rates on a regular basis.

Consideration is given to hedging options which will be utilised if viable.

Foreign currency risk

The group and the company’s financial assets and liabilities are denominated in rand. The group does not have any financial

instruments denominated in foreign currency.

Credit risk

Financial assets which potentially subject the group to credit risk consist of preference shares held in associated companies,

loans and advances, deposits with banks and high-credit-quality financial institutions as well as outstanding receivables and

premium debtors.

The following table provides information regarding the aggregated maximum risk exposure for financial assets:

GROUP COMPANYBalance Collateral Rating Balance Collateral Rating

2010 R000 R000 R000 R000

Classes of financial assetsSecured preference shares in

associated companies 135 746 135 746 Unrated

Unsecured preference shares in associated company 3 581 Unrated

Secured loans to associated companies 6 822 6 822 Unrated

Unsecured loans to associated companies 20 752 Unrated

Total preference shares/loans 166 901 142 568

Unsecured loans – other 12 UnratedTotal loans and advances – – 12 –

Prepayments and sundry debtors 168 Unrated

Total receivables 168 –

Cash and cash equivalents 2 303 A-2*

Total 169 372 142 568 12 –

*Standard&Poor’screditrating


accounting policieS

GROUPBalance Collateral Rating

2009 R000 R000

Classes of financial assetsSecured preference shares in

associated companies 129 778 129 778 Unrated

Secured loans to associated

companies 16 200 16 200 Unrated

Unsecured loans to associated

companies 11 000 Unrated Total preference shares/loans 156 978 145 978

Secured loans – other 19 247 19 247 Unrated Unsecured loans – other 296 Unrated Total loans and advances 19 543 19 247

Prepayments and sundry

debtors 2 041 Unrated Total receivables 2 041 –

Cash and cash equivalents 55 A

Total 178 617 165 225

The unrated credit risk relating to preference shares to the amount of R139,3 million (2009: R129,8 million) is considered

moderate since it is secured by unlisted and listed equity. The group is actively involved in the management of the issuers of

the shares.

The unrated credit risk in respect of loans to associated companies and loans and advances is considered moderate since

it relates to related parties. All loans to associated companies are further managed by means of board representation at the

associated company.

Mostly all trade receivables and premium debtors were collected shortly after year-end with remaining customers’ accounts

within current terms and conditions.

GROUP2010 2009

Receivables R000 R000

Trade receivables– fully performing 168 2 041

51

Impairment history

The group impaired a loan to an associated company to the value of R7 million during the year under review. At

28 February 2009 the group impaired a loan to a third party held by one of its subsidiaries to the value of R4,8 million.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding

through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic

nature of the underlying businesses, each entity aims to maintain flexibility in funding by keeping credit lines available.

The table below analyses the group and company’s financial liabilities into relevant maturity groupings based on the remaining

period at statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the

contractual undiscounted cash flows. Balances due within 12 months equal their carrying value as the impact of discounting

is not significant.

2010

Financial liabilities

0 – 1

years

2 – 5

years

After

5 years

Carrying

valueR000 R000 R000 R000

GroupBorrowings 42 203 42 203 Trade and other payables 5 309 5 309

47 512 – – 47 512Company Trade and other payables 3 232 3 232

2009

Financial liabilities

0 – 1

years

2 – 5

years

After

5 years

Carrying

valueR000 R000 R000 R000

GroupBorrowings 115 648 39 824 150 748 Trade and other payables 1 013 1 013

116 661 39 824 – 151 761

The company will utilise existing cash resources and operating cash flow to service debt.

Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order

to provide returns for shareholders.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders,

return capital to shareholders or issue new shares.

Although there is no restriction on the level of gearing the group may utilise debt to a certain extent. If the need arose the

group will raise additional capital.

The group’s capital comprises total equity as shown in the statement of financial position.

Fair value

The carrying amount of all short-term financial instruments approximates their value. The fair value of other non-current

financial instruments are determined using a discounted cash flow model with market observable inputs, such as market

interest rates.


Notes to the aNNual FiNaNcial stateMeNtsfor the year ended 28 February 2010


1. INVESTMENTINSUBSIDIARYUnlisted shares at costPaladin Capital Financial Services (Pty) Ltd 827708

– – 827708 –

Refer Annexure A for further details.

2. INVESTMENTINASSOCIATEDCOMPANIESCarrying value of shares

Listed 417320 246 083 Unlisted 467904 306 743

885224 552 826

Loansandpreferenceshares–Unlisted 166901 156 978

Preference share investments (including accrued dividends)Thembeka Brand Holdings (Pty) Ltd 3581The preference shares are unsecured, carry a dividend rate of 11,85% fixed and capital and accrued dividends are redeemable on 16 January 2015.

Thembeka Crete Holdings (Pty) Ltd (Formerly Arch Equity Communications (Pty) Ltd) 97186 92 836 The preference shares are secured, carry a dividend rate of prime plus 4% and capital and accrued dividends are redeemable on 1 December 2012. The security is 25,83% of Precrete-Nozala (Pty) Ltd issued share capital.

8 Mile Investments 41 (Pty) Ltd 38560 36 942 The preference shares are secured, carry a fixed dividend rate of 22,2% payable annually on 1 June, and capital is redeemable on 5 November 2010. Security is provided through personal surety and shares in Erbacon Investment Holdings Ltd and Precrete-Nozala (Pty) Ltd.

LoansAIC Holding Company (Pty) Ltd 10286The loan is interest-free and repayment is done at each dividend cycle.

Spirit Capital (Pty) Ltd 6766Loans of R6,766 million of which R5 million is secured. The loan carries interest at prime plus 4%. Repayment date is 31 May 2011.Security is provided by means of a rights offer by Spirit Capital (Pty) Ltd if payment terms are not met.

53

GROUP2010 2009R000 R000

2. INVESTMENTINASSOCIATEDCOMPANIES (continued)

Target Investments (Pty) Ltd 7 000 An unsecured loan of R7 million to Target Investments (Pty) Ltd with no interest and no fixed repayment terms. The loan was fully impaired during 2010.

GRW Holdings (Pty) Ltd 10522 20 200 A secured, short-term loan of R1,8 million (R16 million in 2009) which carries interest at prime plus 2% and is repayable within 12 months and a unsecured loan of R8,7 million (R4 million in 2009) which carries interest at prime (2009 prime plus 2%) and is repayable within 12 months. The R1,8 million loan is secured by means of a rights offer by GRW Holdings (Pty) Ltd if payment terms are not met.

1052125 709 804

Loansandpreferenceshares–UnlistedNon-current 117819 129 778 Current portion 49082 27 200

166901 156 978

Reconciliation

Carrying value at beginning of year 552826 536 110Equity accounted earnings 168435 (43 596)

Share of profit/(loss) after tax 229305 (33 544)Impairment charges (60870) (10 052)

Movement in investment value 163963 60 312

Dividends received (34697) (17 757)Acquisitions: cash and borrowings 202263 78 069 Share of comprehensive income of associated company 12262Transferred from investment in subsidiary 5900Disposals (21765)

Carrying value at end of year 885224 552 826

Market value of listed investments 461225 169 315

Refer Annexure A for further information.




3. EQUITYSECURITIESAtfairvaluethroughprofitorlossQuoted 2 600

– 2 600

Current portion – 2 600

ReconciliationofmovementsCarrying value at beginning of year 2600 18 633

Additions 8 540 Disposals (2600) (4 150)Unrealised fair value net losses – continued operations (2 172)Unrealised fair value net losses – discontinued operations (1 878)Transferred to assets held for sale (16 373)

Carrying value at end of year – 2 600

4. LOANSANDADVANCESSecured loans – 19 247 – –

Paladin Share Incentive Trust 19 247

Unsecured loans – 296 12 –

Paladin Capital Financial Services (Pty) Ltd 12Friedshelf 957 (Pty) Ltd*Other 296

– 19 543 12 –

Current portion (less than 12 months) 19 543 12Non-current portion (more than 12 months)

– 19 543 12 –

The secured loans for 2009 consisted of employee loans from the Paladin Share Incentive Trust which were repayable on 31 May 2012 and carried interest at the official SARS interest rate for fringe benefits. These loans were secured by the shares acquired by the employees in the company with the loan advances of the trust. The Paladin board approved the termination of the Paladin Share Incentive Trust during the year under review.

The unsecured loans for 2009 carried interest at prime and had no fixed repayment terms.

* In the company, the loan of R6,9 million (2009: R6,9 million) has been fully impaired. The loan bears no interest and has no

repayment terms.

55

UnrealisedProvisions STC credits (profits)/loss Other Total

R000 R000 R000 R000 R000

5. DEFERREDTAXASSETSGROUPAt 1 March 2008 29 1 489 114 51 1 683 Credit/(charge) to income

statement 102 (225) 214 6 97 Transferred to non-current

assets held for sale (131) (154) (328) (57) (670)At28February2009 – 1 110 – – 1 110

At 1 March 2009 1110 1110Credit to income statement 680 980 1660At28February2010 – 1790 980 – 2770

COMPANY At 1 March 2009Credit to income statement 1790 1790At28February2010 – 1790 – – 1790


To be recovered within 12 months 2770 1 110 1790 –

Deferred tax on temporary differences relating to financial assets that are measured at fair value through profit or loss which forms parts of the group’s long-term investment strategy is calculated using the capital gains tax rate.

The deferred income tax assets and liabilities were calculated on all temporary differences under the liability method using an effective tax rate of 28% (2009: 28%). For STC credits the rate used was 10% (2009: 10%).

GROUP 2010 2009R000 R000

6. RECEIVABLESPrepayments and sundry debtors 168 2 041 Total trade and other receivables 168 2 041

Current portion (less than 12 months) 168 2 041 168 2 041

7. CASHANDCASHEQUIVALENTSCash at bank and in hand 2303 55

2303 55

The effective interest rate on short-term deposits was 9% in 2010 (11% in 2009). These deposits have an average maturity of three months or less.




8. SHARECAPITALAuthorised700 000 000 ordinary shares of 0,01 cent each 700 200 700

(2009: 200 000 000 ordinary shares of 0,1 cent each)

Issued574 604 570 ordinary shares of 0,01 cent each 57 40 57

(2009: 39 622 418 ordinary shares of 0,1 cent each)

Refer to the directors’ report for the details of shares issued. All shares issued are fully paid.

The unissued ordinary shares in the company are placed under the control of the directors until the next annual general meeting.


9. BORROWINGSSecured loans 88 337 Unsecured loans (Related parties – refer to

note 24) 42203 62 411 Totalborrowings 42203 150 748

Current portion 42203 115 648 Non-current portion 35 100

42203 150 748

Unsecured loans consist of a loan from PSG Corporate Services (Pty) Ltd (R47,4 million of which R5,2 million relates to management fees), which carries interest at prime plus 50 bps with no fixed repayment terms.

The 2009 secured loan relates to a loan granted by Investec Bank Ltd to the company, which was secured by all the listed and unlisted investments (refer to note 1 and 2) held by Paladin Capital Ltd. The loan carries interest at one- month JIBAR plus an additional rate of 3,25% on the first capital sum and interest of JIBAR plus 2,5% on the second capital sum. The loan amount has been fully repaid during the year under review.

57


10. PROVISIONSFOROTHERLIABILITIESANDCHARGESClientprofitshareprovisionofassurancesubsidiaryBalance at beginning of year 1 671 Utilised during the year (1 444)

– 227 EmployeebenefitsBalance at beginning of yearAdditional provisions 587

– 587

Balance at end of year 814 Transferred to non-current assets held for sale (814)

– –

11. TRADEANDOTHERPAYABLESAccounts payable and accruals 5309 1 013 3232

5309 1 013 3232 –

12. CURRENTINCOMETAXLIABILITIESBalance at beginning of periodIncome statement charge

Current period 80 80Balance at end of period 80 – 80 –

13. CONTINGENTLIABILITIESThe group has contingent liabilities in respect of performance fees payable to PSG Corporate Services (Pty) Ltd as part of a management agreement.

PSG Corporate Services (Pty) Ltd is entitled to a performance fee calculated annually, based on the appreciation of Paladin Capital Ltd’s share price, with the first measurement date on 28 February 2011. The appreciation in the share price is the difference between the 30-day volume weighted average price of Paladin Capital Ltd at year-end and the initial price, being R1,528. The liability can either be settled in cash or, if insufficient cash is available, can be settled by the issue of ordinary shares in Paladin Capital Ltd. Had the measurement date been 28 February 2010, the performance fee payable would have amounted to R10,8 million.




14. INVESTMENTINCOMEInterestincome

Equity securities – At fair value through profit or loss 736

Loans and advances 2276 1 393 770Cash and short-term funds 206 391 97

2482 2 520 867 –

DividendincomePreference shares 18500 21 455 11214Associated companies 13374

18500 21 455 24588 –

Investmentincome 20982 23 975 25455 –

15. FAIRVALUELOSSESONFINANCIALINSTRUMENTSNet fair value losses on financial assets at fair value through profit or loss:

– Unrealised fair value losses 2 172Net fair value losses on financial instruments – 2 172

16. FEEINCOMEFees received 693 489

693 – 489 –

17. OTHEROPERATINGINCOMETraining refunds 18 Profit on sale of fixed property 2 Profit on disposal of equity instruments 1110 1119(Loss)/profit on dilution/sale of investment in

associated company (61) 400Profit on dilution/sale of investment in subsidiary 438

1049 458 1519 –

59


18. ADMINISTRATIONANDOTHEREXPENSESExpensesbynatureDepreciation

Office equipment 111 Computer equipment 58 Land and buildings 14

– 183

Amortisation of intangible assets 441

Operating lease rentalsProperties 129 826 38Other 353

129 1 179 38 –

Audit feesCurrent year 583 Underprovision prior year 70 104 70Tax services 40

70 727 70 –

Employee benefit expensesSalaries, wages and allowances 9 417 Social security costs (e.g. UIF, medical

benefits) 382 Pension costs – defined-contribution plans 853

– 10 652 Directors’ remuneration

Executive 8 111 Non-executive 120

120 8 111 – –

Impairment charges Investment in subsidiary 9Loans and advances* 7000 4 804

7000 4 804 9 –

* An unsecured loan of R7 million to Target Investments (Pty) Ltd with no interest and no fixed repayment terms have been fully

impaired during the year under review.




18. ADMINISTRATIONANDOTHEREXPENSES(continued)Other expenses

Management fees 6130 3575Administration cost 1458 658Professional fees 1967 1186Loss on sale/dilution of subsidiaries and

associated companies 300Other 5 409

9855 5 409 5419 –

Discontinued operations (22 447)17174 9 059 5536 –

ExpensebyclassificationImpairment 7000 4 804 9Administration and other expenses 10174 4 255 5527

17174 9 059 5536 –

19. FINANCECOSTSFinance cost

Bank overdrafts 7 Secured loans 4462 8 487 Unsecured loans 9176 3 979 4807

13638 12 473 4807 –

20. TAXATIONCurrent taxation

Current year 80 111 8080 111 80 –

Deferred taxationCurrent year (980) (97)

(980) (97) – –

Secondary tax on companiesCurrent taxation 210 Deferred taxation (680) (1790)

(680) 210 (1790) –

(1580) 224 (1710) –

61


20. TAXATION(continued)Reconciliation of income tax charge:

Reconciliation of rate of taxation % % % % South African normal tax rate 28,0 28,0 28,0Adjusted for:

Non-taxable income (3,2) 14,0 (42,7)Non-deductible charges 2,9 (13,8) 15,2Share of profits from associated companies (29,4) (28,5)Secondary tax on companies (0,5) (10,5)Other 0,8 0,3

Effective rate of tax (0,9) (0,5) (10,0) –

There are no calculated tax losses at the end of the year available for utilisation against future taxable income.

R000 R000 R000 R000

STC credits available within the group for future utilisation for which a deferred taxation asset was not raised. 651 651

21. EARNINGSPERSHAREThe calculations of earnings per share are based on the following:

Total earnings/(loss) attributable to ordinary shareholders 179629 (37 234)

Adjustments (net of tax and minority interests):Net profit on sale/dilution of investments in

subsidiaries* (17402) (438)Net (profit)/loss on sale/dilution of associated

companies (8189) 3 284 Impairment of associated company 60870 10 052 Impairment of shareholders’ loans 6020 4 856 Impairment of intangible assets (including

goodwill) 1 668 Other investment activities (209)Non-headline items of associated companies (3604) 5

Headline earnings/(loss) 217324 (18 016)

* Includes loss of R0.3 million on dilution of AIC Holding Company (Pty) Ltd for the 2010 financial year.



GROUP2010 2009

Number Numberofshares of shares*

000 000

21. EARNINGSPERSHARE(continued)The calculation of the weighted average number of shares and diluted weighted average number of shares is as follows:

Number of shares at beginning of year 396224 382 474 Weighted number of shares issued in the year 99195 8 125

Weighted and diluted number of shares at end of year 495419 390 599

GROUP2010 2009

Basic/diluted/(loss)Earnings/(loss) attributable to ordinary

shareholders (R000) 179629 (37 234)Headline earnings/(loss) (R000) 217324 (18 016)Weighted average number of ordinary shares

in issue (000) 495419 390 599 Attributable earnings/(loss) per share (cents) 36,3 (9,5)Headline earnings/(loss) per share (cents) 43,9 (4,6)

R000 R000

22. DIVIDENDPERSHARENormal dividend 9903 21 098InterimNil cents per share (2009: 2,5 cents*)FinalNil cents per share (2009: 2,5 cents*)

Dividends are not accounted for until they have been approved by the company’s board.

23. BORROWINGPOWERSIn terms of the company’s articles of association, borrowing powers are unlimited. Details of actual borrowings are disclosed in note 9 to the financial statements.

* Adjusted for 1 to 10 share split

63

24. RELATED-PARTYTRANSACTIONSPaladin Capital Ltd and its subsidiaries enter into various financial services transactions with fellow subsidiary companies and associated companies of PSG Group Ltd. These transactions include a range of investment, administrative, advisory and corporate services in the normal course of business. These transactions are executed on terms no less favourable than those arranged with third parties.

GROUP 2010 2009R000 R000

IncludedinEquitysecuritiesCapitec Bank Holdings Ltd

(preference shares) 5 057 PSG Financial Services Ltd

(preference shares) 3 025 PSG Money Market Fund 8 125 Transferred to non-current assets held for sale (16 207)

– –

IncludedinLoansandadvancesEmployee loans from the Paladin Share Incentive Trust 19 247

– 19 247

IncludedinBorrowingsPSG Corporate Services (Pty) Ltd 42203 65 514 Transferred to non-current assets held for sale (3 103)

42203 62 411

SaleofsubsidiaryProfit on dilution/sale of investment in subsidiary 17702 8 628

Paladin Capital Ltd sold its 74,9% stake in PSG Capital (Pty) Ltd to PSG Group Ltd for a consideration of R25 million. The net asset value of PSG Capital (Pty) Ltd at the date of disposal was R7,3 million. Total profit recognised on the sale was R17,7 million.

PurchaseofinvestmentPaladin Capital Ltd purchased 9,4% stake in Petmin Ltd from PSG Group Ltd for a consideration of R92 million. The market capitalisation of Petmin Ltd at the date of acquisition was R925 million.




24. RELATED-PARTYTRANSACTIONS(continued)IncludedinContingentliabilitiesPerformance fees to PSG Corporate Services

(Pty) Ltd 10800 – – –

IncludedinTradeandotherpayablesPSG Corporate Services (Pty) Ltd 5189 – 3232 –

IncludedinInvestmentinassociated

companiesPaladin Capital Ltd increased its investment in Thembeka Capital Ltd through the issue of 1 821 492 ordinary shares to PSG Group Ltd at R12,10 per share.


Feesandinterestpaidtocompaniesin

thePSGGroupPSG Corporate Services (Pty) Ltd

Management fee 5189 3232Interest 9176 3 979 4807Office infrastructure 877 Shares issue cost 801

14365 5 657 8039 –

PSG Capital (Pty) LtdProfessional fees 1967 1186Share issue cost 1994 1994

3961 – 3180 –

KeymanagementcompensationSalaries and bonuses (excluding dividends) – 5 484 – –

65


25. NOTESTOTHECASHFLOWSTATEMENT25.1 Cashgenerated/(utilised)byoperating

activitiesProfit/(loss) before taxation 178049 (30 087) 17120Adjustments for:

Depreciation and amortisation 624 Profit on disposal/dilution of investments (18451) (322) (1519)Share of (profit)/losses from associates,

net of dividends (194608) 61 352 Dividend income (18500) (21 455) (24588)Unrealised fair value net gains 4 050 Impairment charges 67870 4 804 9Interest paid 13638 12 473 4807Interest received (2482) (2 520) (867)Change in working capital

Change in accounts receivable 1872 (11 159)Change in other liabilities and provisions (857)Change in trade and other payables 1796 (60 181) 3232

Change in insurance contracts (779)29184 (44 057) (1806)

25.2 TaxationpaidCredit/charge in income statement 1580 (4 376) 1710Movement in deferred tax (1660) (97) (1790)Movement in taxation liability 80 (2 227) 80

– (6 700) –

25.3 Disposalofsubsidiaries

2010DisposalsDuring the year ended 28 February 2010, the group had the following changes to its investments in subsidiaries:• Sold its 74,9% stake in PSG Capital (Pty) Ltd as part of an internal restructuring on 1 March 2009• AIC Holding Company (Pty) Ltd of which Paladin Capital Ltd’s share decreased from 54% to 43,2% as at

1 March 2009 and is now classified as an associate


25. NOTESTOTHECASHFLOWSTATEMENT(continued)25.3 Disposalofsubsidiaries(continued)

AIC Holding

Company

(Pty) Ltd

PSG Capital

(Pty) Ltd Total2010 2010 2010

GROUP R000 R000 R000

Net assets of subsidiaries sold 2 127 7 264 9391(Loss)/profit on sale of subsidiaries (300) 17 702 17402Transfer to investment in associated companies (1 827) (1827)Cash proceeds on sale – 24 966 24966Cash and cash equivalents of subsidiaries (2 211) (1 627) (3838)Net cash flow on disposal of subsidiaries (2 211) 23 339 21128

Land and Office Computer buildings equipment equipment Total

GROUP R000 R000 R000 R000

26. PROPERTY,PLANTANDEQUIPMENTYearended28February2010Balance at beginning of yearAdditionsDepreciationTransferred to non-current assets held for saleBalanceatendofyear – – – –

At28February2010CostAccumulated depreciationBalanceatendofyear – – – –

Yearended28February2009Balance at beginning of year 71 97 114 282 Additions 54 248 302 Depreciation (14) (58) (111) (183)Transferred to non-current assets held for sale (57) (93) (251) (401)Balanceatendofyear – – – –


67

Trademarks and other Goodwill Total

GROUP R000 R000 R000

27. INTANGIBLEASSETSYearended28February2010Balance at beginning of yearAcquisition of additional interest in subsidiariesAdditions – cashAmortisationBalanceatendofyear – – –

Yearended28February2009Balance at beginning of year 437 437 Acquisition of additional interest in subsidiaries 5 013 5 013 Additions – cash 891 891 Amortisation (441) (441)Transferred to non-current assets held for sale (5 013) (887) (5 900)Balanceatendofyear – – –

28. NON-CURRENTASSETSHELDFORSALEThe assets and liabilities of AIC Holding Company (Pty) Ltd and PSG Capital (Pty) Ltd have been presented as held for sale. PSG Capital (Pty) Ltd was sold on 1 March 2009, while Paladin’s interest in AIC Holding Company (Pty) Ltd decreased from 54% to 43,2% on the same date.

GROUP2010 2009R000 R000

Non-currentassetsclassifiedasheld

forsaleProperty, plant and equipment 401Intangible assets including goodwill 5 900Interest in subsidiariesEquity securities 16 373Deferred tax asset 670Receivables 9 496Cash and cash equivalents 3 837

– 36 677

Liabilitiesdirectlyassociatedwithnon-

currentassetsclassifiedasheldforsaleInsurance contracts 960Borrowings 9 766Provisions for other liabilities and charges 814Trade and other payables 3 775Current income tax payable 1 019

– 16 334


GROUP2010 2009R000 R000

28. NON-CURRENTASSETSHELDFORSALE(continued)Analysisoftheresultofdiscontinued

operationsasfollows:Insurance premium Income 22 942 Interest income 1 935 Investment income 1 614 Commission and other fees 21 461 Fair value adjustments (1 878)Insurance claims (10 673)Marketing and other expenses (22 447)Finance cost (174)Profitbeforetaxfromdiscontinued

operations – 12 780 Taxation (4 152)Profitfromdiscontinuedoperations – 8 628


69

aNNexure a – iNvestMeNtsfor the year ended 28 February 2010

Investmentsinsubsidiarycompanies Proportion held directly or indirectly Issued by holding company share capital

Name of company Nature of business 2010 2009 2010 2009% % R000 R000

Paladin Capital Financial Services (Pty) Ltd Investment company 100% 83

African Unity Insurance Ltd* Assurance company 43% 54% 10 PSG Capital (Pty) Ltd Advisory 75% 1

* A wholly owned subsidiary of AIC Holding Company (Pty) Ltd of which Paladin Capital Ltd’s share decreased from 54% to 43,2% as at 1 March 2009 and is now classified as an associate.

The subsidiaries are incorporated in the Republic of South Africa. Further details of investments are available at the registered office of the company.

Investmentsinassociatedcompanies

Proportion held directly or indirectly Group by holding companies carrying value

Name of company Nature of business 2010 2009 2010 2009% % R000 R000

ListedCIC Holdings Ltd*** Agency, sales &

merchandising 50 49 119986 89 507 Erbacon Investment

Holdings Ltd Construction 22 26 104707 91 292 IQuad Group Ltd Financial services 43 42 58155 54 412 Petmin Ltd** Mining 9 99814Top Fix Holdings Ltd Construction 28 11 34658 10 872

417320 246 083 UnlistedAfrican Unity Insurance Ltd Long-term insurance 43 4274Axon Xchange (Pty) Ltd Scrip lending 35 3 952 Curro Holdings (Pty) Ltd*** Education 50 51341GRW Holdings (Pty) Ltd Manufacturing 40 40 42150 96 886 Lesotho Milling

Company (Pty) Ltd and Target Investments (Pty) Ltd Milling 25 25 19269 17 144

Mainfin (Pty) Ltd Bridging and property finance 25 25 496

Precrete-Nozala (Pty) Ltd*

Mining-related construction 22 22 49085 46 237

Friedshelf 903 (Pty) Ltd*** Foundry non-ferrous 50 50 22512 20 649 Spirit Capital (Pty) Ltd Private equity 20 13012Thembeka Capital Ltd Private equity/BEE 49 49 262737 96 379 Other 3524

467904 306 743

* At 28 February 2010 Paladin Capital Ltd held a 31,9% (2009: 31,9%) stake in Thembeka Mining (Pty) Ltd, which owned 41% (2009: 41%) in Precrete-Nozala (Pty) Ltd. Paladin Capital Ltd thus held an effective 13,1% (2009: 13,1%) stake in Precrete-Nozala (Pty) Ltd through Thembeka Mining (Pty) Ltd at year-end. Paladin Capital Ltd also has a direct interest in Precrete-Nozala (Pty) Ltd of 9%, resulting in an effective 22,1% stake in Precrete-Nozala (Pty) Ltd.

** Significant influence exercised through, inter alia, board representation.

*** The investments constitute significant influence and not control.

Except for CIC Holdings Ltd which is incorporated in Namibia and Lesotho Milling Company (Pty) Ltd which is incorporated in the Kingdom of Lesotho, all of the above are incorporated in the Republic of South Africa. Further details of investments are available at the registered office of the company.


Financialinformationinrespectofprincipalassociatedcompanies

At28February2010

Fortheyearended

28February2010Assets Liabilities Revenues Profits

R000 R000 R000 R000

AIC Holding Company (Pty) Ltd 30117 23008 41957 4547CIC Holdings Ltd 680807 405123 2530972 60861Curro Holdings (Pty) Ltd*** 205650 77385 48564 1907Erbacon Investment Holdings Ltd 621796 252141 834532 65343GRW Holdings (Pty) Ltd* 378321 253577 434005 (9831)IQuad Group Ltd 172244 34277 79970 13328Lesotho Milling Company (Pty) Ltd and

Target Investments (Pty) Ltd** 143322 42344 330399 21578Petmin Ltd* 1473330 354229 788624 117986Precrete-Nozala (Pty) Ltd 147017 28125 265868 34944Friedshelf 903 (Pty) Ltd t/a Protea Foundry 46714 2059 40301 8467Spirit Capital (Pty) Ltd 164102 95633 200395 7823Thembeka Capital Ltd 1157072 564616 362677 290131Top Fix Holdings Ltd* 268108 88710 322500 22428

At 28 February 2009 For the year ended 28 February 2009

Assets Liabilities Revenues ProfitsR000 R000 R000 R000

Axon Xchange (Pty) Ltd 4 507 1 553 11 900 4 400CIC Holdings Ltd 614 617 381 498 2 258 977 48 913Erbacon Holdings Ltd 373 406 162 044 720 957 53 443GRW Holdings (Pty) Ltd* 265 219 130 436 450 338 27 668IQuad Group Ltd 175 004 38 896 80 051 10 088Lesotho Milling Company (Pty) Ltd and

Target Investments (Pty) Ltd** 146 948 57 501 323 696 21 371Mainfin (Pty) Ltd 214 447 136 044 31 800 9 400Precrete-Nozala (Pty) Ltd 450 996 35 144 255 268 32 157Friedshelf 903 (Pty) Ltd t/a Protea Foundry 50 990 9 802 56 900 11 800Thembeka Capital Ltd 659 359 450 996 (182 627) (186 748)Top Fix Holdings Ltd* 235 567 78 597 227 172 15 826

* GRW Holdings (Pty) Ltd, Top Fix Holdings Ltd and Petmin Ltd’s year-end is June. Information provided is for the year ended 30 June 2009 (2009: 30 June 2008).

** Lesotho Milling Company (Pty) Ltd and Target Investments (Pty) Ltd year-end is end September. Information provided is for the year ended 30 September 2009 (2009: 30 September 2008).

*** Curro Holdings (Pty) Ltd year-end is December. Information provided is for the year ended 31 December 2009.

aNNexure a – iNvestMeNtsfor the year ended 28 February 2010

71

aNNexure b – segMeNt reportfor the year ended 28 February 2010

The group is organised into six reportable segments, namely: investment companies, services, mining, construction and

related services, manufacturing, education and other. These segments represent the major investments of the group.

Recurring headline earnings are calculated on a see-through basis and include the proportional recurring headline earnings

of underlying investments, excluding marked-to-market adjustments and one-off items.

Recurring Non-recurringheadline headline Headline Netasset

Income earnings earnings earnings valueFortheyearended28February2010 R000 R000 R000 R000 R000

Investment companies 10306 122052 132358 275749Services 142 37486 37486 203047Mining, construction and

related services18351 56766 (2459) 54307 424000

Manufacturing 7338 7338 94453Education 1414 1414 51366Other 1749 (6616) 2193 (4423) (1696)BeforefundingandSTC 20242 106694 121786 228480 1046919

Funding and STC 2482 (11156) (11156) (37145)Total 22724 95538 121786 217324 1009774

Non-headline (37695)Attributableearnings 179629

Recurring Non-recurringheadline headline Headline Net asset

Income earnings earnings earnings valueFor the year ended 28 February 2009 R000 R000 R000 R000 R000

Investment companies 4 300 (96 244) (91 944) 96 424 Services 27 923 27 923 193 640 Mining, construction and

related services 21 490 42 750 42 750 278 180

Manufacturing 12 923 12 923 161 877 Other 423 3 320 3 320 3 628 BeforefundingandSTC 21 913 91 217 (96 244) (5 027) 733 749

Funding and STC 2 520 (12 985) (12 989) (130 014)Total 24 433 78 232 (96 244) (18 016) 603 735

Non-headline (19 218)Attributableloss (37 234)


share aNalysisas at 28 February 2010

Shareholders Sharesheldnumber % number %

RANGEOFSHAREHOLDING1 – 50 000 3 059 95,1 12 679 196 2,250 001 – 100 000 66 2,0 4 790 520 0,8100 001 – 500 000 59 1,8 12 317 656 2,2500 001 – 1 000 000 13 0,4 9 792 783 1,7Over 1 000 000 21 0,7 535 024 415 93,1

3 218 100,0 574 604 570 100,0

PUBLICANDNON-PUBLICSHAREHOLDINGNon-public

Directors 5 0,2 31 264 702 5,4Holding company 1 0,0 463 254 041 80,6

Public 3 213 99,8 80 085 827 14,03 218 100,0 574 604 570 100,0

INDIVIDUALSHAREHOLDERSHOLDING5%ORMOREASAT28FEBRUARY2010PSG Financial Services Ltd 463 254 041 80,6

463 254 041 80,6

73

Notice oF aNNual geNeral MeetiNg

Notice is hereby given that the annual general meeting of the shareholders of the Company will be held at the Venue

Webersburg, Webersburg Wines, Annandale Road, Stellenbosch on Friday, 18 June 2010, at 11:30 to consider, propose

and/or conduct the following business and to pass the following resolutions, with or without modification:

1. ordinary resolution Number 1 To receive, consider and, if deemed acceptable, approve the annual financial statements of the Company and the

reports of the directors and the auditors for the year ended 28 February 2010.

2. ordinary resolution Number 2 To re-elect E de V Greyling as director of the Company who retires by rotation in terms of the articles of association of

the Company and, being eligible, offers himself for re-election.

SummarycurriculumvitaeofMr.Greyling

Mr. Greyling was a director of FBC Fidelity Bank, now part of Nedcor. He also served on the board of RMB Holdings Ltd

as an executive director prior to its merger with FirstRand Bank Ltd. During his career as a banker he was, for a time, a

board member of the Banking Council of South Africa. Mr. Greyling also serves as a non-executive director of Petmin

Ltd, PSG Fund Management (Pty) Ltd and various other private companies.

3. ordinary resolution Number 3 To re-elect PJ Mouton as director of the Company who retires by rotation in terms of the articles of association of the

Company and, being eligible, offers himself for re-election.

SummarycurriculumvitaeofMr.Mouton

Mr. Mouton was appointed as an executive director of PSG Group Ltd early in 2009. In 1999 he started his career in

investment banking in London and in 2004 he was the co-founder and financial director of Arch Equity Ltd, which listed

later that year on the AltX until it was merged with PSG Group Ltd in 2006. Prior to his move to PSG Group Ltd,

Mr. Mouton was the managing director of Thembeka Capital Ltd, a BEE investment company. He also serves on the

board of Capitec Bank Holdings Ltd.

4. ordinary resolution Number 4 To approve the directors’ fees as stated in the financial statements.

5. ordinary resolution Number 5 To confirm the re-appointment of PricewaterhouseCoopers Inc. as auditors for the ensuing financial year on the

recommendation of the Company’s audit committee.

6. ordinary resolution Number 6 To confirm the auditors’ remuneration for the year ended 28 February 2010 as determined by the Company’s audit

committee.

7. ordinary resolution Number 7 – Directors’ control of unissued shares “RESOLVEDTHAT the unissued shares in the Company, be and are hereby placed under the control of the directors

until the next annual general meeting and that they be and are hereby authorised to allot, issue and otherwise dispose

of any such shares as they may deem fit, subject to the Companies Act, 1973 (Act 61 of 1973, as amended), the articles

of association of the Company, and the provisions of the Listings Requirements of the JSE Ltd.”

PALADINCAPITALLIMITED

(Incorporated in the Republic of South Africa)(Registration number: 2007/032836/06)

(“theCompany”)


8. ordinary resolution Number 8 – issue of shares for cash “RESOLVEDTHAT the directors of the Company be and are hereby authorised by way of a general authority, to allot

and issue any of its unissued shares for cash placed under their control as they in their discretion may deem fit, without

restriction, subject to the provisions of the Listings Requirements of the JSE Ltd (“JSE”), and subject to the proviso that

the aggregate number of ordinary shares able to be allotted and issued in terms of this resolution, shall be limited to 50%

of the issued share capital at 28 February 2010, provided that:

– the approval shall be valid until the date of the next annual general meeting of the Company, provided it shall not

extend beyond 15 months from the date of this resolution;

– the general issues of shares for cash in the aggregate in any one financial year may not exceed 50% of the applicant’s

issued share capital (number of securities) of that class. The securities of a particular class will be aggregated with the

securities that are compulsorily convertible into securities of that class; and, in the case of the issue of compulsorily

convertible securities, aggregated with the securities of that class into which they are compulsorily convertible. The

number of securities of a class which may be issued shall be based on the number of securities of that class in issue

at the date of such application less any securities of the class issued during the current financial year, provided that

any securities of that class to be issued pursuant to a rights issue (announced and irrevocable and underwritten) or

acquisition (concluded up to the date of application) may be included as though they were securities in issue at the

date of application;

– in determining the price at which an issue of shares will be made in terms of this authority, the maximum discount

permitted will be 10% of the weighted average traded price of such shares, as determined over the 30 trading days

prior to the date that the price of the issue is agreed between the issuer and the party subscribing for the securities.

The JSE should be consulted for a ruling if the applicant’s securities have not traded in such 30 business day period;

– any such issue will only be made to public shareholders as defined in paragraphs 4.25 to 4.27 of the Listings

Requirements of the JSE and not to related parties; and

– any such issue will only be securities of a class already in issue.”

At least 75% of the shareholders present in person or by proxy and entitled to vote at the annual general meeting must

cast their vote in favour of this resolution provided that the controlling shareholders and their associates shall not be

entitled to vote.”

9. special resolution Number 1 – share buy-back authority “RESOLVEDTHAT as a special resolution that the Company be and is hereby authorised, as a general approval, to

repurchase any of the shares issued by the Company, upon such terms and conditions and in such amounts as the

directors may from time to time determine, but subject to the provisions of section 85 to section 88 of the Companies

Act, 1973 (Act 61 of 1973, as amended), the articles of association of the Company, the Listings Requirements of the

JSE Ltd (“JSE”) and the requirements of any other stock exchange on which the shares of the Company may be quoted

or listed, namely that:

– the general repurchase of the shares may only be implemented on the open market of the JSE and done without any

prior understanding or arrangement between the Company and the counterparty;

– this general authority shall only be valid until the next annual general meeting of the Company, provided that it shall not


– an announcement must be published as soon as the Company has acquired shares constituting, on a cumulative

basis, 3% of the number of shares in issue prior to the acquisition, pursuant to which the aforesaid 3% threshold is

reached, containing full details thereof, as well as for each 3% in aggregate of the initial number of shares acquired

thereafter;

– the general authority to repurchase is limited to a maximum of 20% in the aggregate in any one financial year of the

Company’s issued share capital at the time the authority is granted;

– the general repurchase is authorised by the Company’s articles of association;

– repurchases must not be made at a price more than 10% above the weighted average of the market value of the

shares for five business days immediately preceding the date that the transaction is effected. The JSE should be

consulted for a ruling if the applicant’s securities have not traded in such five business day period;


75

– the Company will only effect a general repurchase if after the repurchase is effected it still complies with

paragraphs 3.37 to 3.41 of the Listings Requirements of the JSE concerning shareholder spread requirements;

– the Company may at any point in time only appoint one agent to effect any repurchase(s) on the Company’s behalf;

– the Company may not effect a repurchase during any prohibited period as defined in terms of the Listings Requirements

of the JSE unless there is a repurchase programme in place as contemplated in terms of 5.72(g) of the Listings

Requirements of the JSE; and

– the Company must ensure that its designated advisor provides the JSE with the required working capital letters before

it commences the repurchase of any shares.”

10. special resolution Number 2 – subsidiary share buy-back authority “RESOLVEDTHAT as a special resolution that the Company, insofar as it may be necessary to do so, hereby approves,

as a general approval, and authorises the acquisition by any subsidiary of the Company of shares issued by such

subsidiary and/or by the Company, upon such terms and conditions and in such amounts as the directors of

such subsidiary/ies may from time to time determine, but subject to the provisions of section 85 to section 89 of the

Companies Act, 1973 (Act 61 of 1973, as amended), the articles of association of the Company, the Listings

Requirements of the JSE Ltd (“JSE”) (if listed) and the requirements of any other stock exchange on which the shares

of the acquiree company may be quoted or listed, namely that:

– the general repurchase of shares may only be implemented on the open market of the JSE and done without any prior

understanding or arrangement between the Company and the other counterparty;

– this general authority shall only be valid until the next annual general meeting of the Company, provided that it shall not


– an announcement must be published as soon as the subsidiary has acquired shares constituting, on a cumulative

basis, 3% of the number of shares of the acquiree company in issue prior to the acquisition, pursuant to which the

aforesaid 3% threshold is reached, containing full details thereof, as well as for each 3% in aggregate of the initial

number of shares acquired thereafter;

– this general authority to repurchase is limited to a maximum of 20% in the aggregate in any one financial year of

the acquiree company’s issued share capital at the time the authority is granted, subject to a maximum of 10% in the

aggregate in the event that it is the Company’s share capital that is repurchased by a subsidiary;

– the general purchase is authorised by the Company’s articles of association;

– repurchases must not be made at a price more than 10% above the weighted average of the market value of the

shares for the five business days immediately preceding the date that the transaction is effected. The JSE should

be consulted for a ruling if the applicants’ securities have not traded in such five business day period;

– the subsidiary company will only effect a general repurchase if after the repurchase is effected the Company still complies

with paragraphs 3.37 to 3.41 of the Listings Requirements of the JSE concerning shareholder spread requirements;

– the Company and/or subsidiary may at any point in time only appoint one agent to effect any repurchase(s) on the

subsidiary company’s behalf;

– the subsidiary company may not effect a repurchase during any prohibited period as defined in terms of the Listings

Requirements of the JSE unless there is a repurchase programme in place as contemplated in terms of 5.72(g) of the

Listings Requirements of the JSE; and

– the Company must ensure that its designated advisor provides the JSE with the required working capital letters before

it commences the repurchase of any shares.”

11. ordinary resolution Number 9 – granting the directors of the company and/or the company secretary general authority to implement the aforesaid resolutions

“RESOLVED THAT any of the directors of the Company and/or Company Secretary or their duly appointed

representatives be and are hereby authorised to do all such things and sign all documents and take all such action as

they consider necessary to give effect to and implement the resolutions set out in the notice convening the annual

general meeting at which this Ordinary Resolution Number 9 will be considered.”



12. to transact such other business as may be transacted at an annual general meeting.

reasoN For aND eFFect oF the special resolutioNs1. The reason for and effect of Special Resolution Number 1 is to grant the directors a general authority in terms of

the Companies Act, 1973 (Act 61 of 1973, as amended) for the acquisition by the Company of shares issued by it on

the basis reflected in the Special Resolution.

In terms of the Listings Requirements of the JSE Ltd (“JSE”) any general repurchase by the Company must, inter alia,

be limited to a maximum of 20% of the Company’s issued share capital in any one financial year of that class at the time

the authority is granted.

2. The reason for and effect of Special Resolution Number 2 is to grant the board of directors of any subsidiary of the

Company a general authority to acquire shares issued by such subsidiary and/or by the Company on the basis reflected

in the Special Resolution.

In terms of the Listings Requirements of the JSE, any general purchase by a subsidiary of shares must, inter alia, be

limited to a maximum of 20% of the issued share capital of the acquiree company in any one financial year of that class

at the time the authority is granted, subject to a maximum of 10% in the event that it is the Company’s share capital that

is repurchased by a subsidiary.

3. The directors of the Company or its subsidiaries will only utilise the general authority to purchase shares of the Company

and/or the subsidiary as set out in Special Resolutions Number 1 and 2 to the extent that the directors, after considering

the maximum shares to be purchased, are of the opinion that the Company and its subsidiaries’ (“Paladin”) position

would not be compromised as to the following:

– Paladin’s ability in the ordinary course of business to pay its debts for a period of 12 months after the date of the notice

of the annual general meeting;

– the consolidated assets of Paladin will be in excess of the consolidated liabilities of Paladin. The assets and liabilities

should be recognised and measured in accordance with the accounting policies used in the latest audited annual

financial statements of Paladin;

– the ordinary capital and reserves of Paladin after the purchase will remain adequate for the purpose of the business

of Paladin for a period of 12 months after the date of the notice of the annual general meeting; and

– the working capital available to Paladin after the purchase will be sufficient for Paladin’s requirements for a period

of two months after the date of the notice of the annual general meeting.

iNForMatioN relatiNg to the special resolutioNs1. General information in respect of directors (page 3), major shareholders (page 72), directors’ interest in securities and

material changes (page 27) and the share capital of the Company (page 56) is contained in the annual report to which

this notice is attached.

2. The Company is not involved in any legal or arbitration proceedings, nor are any proceedings pending or threatened of

which the Company is aware that may have or have had in the previous 12 months, a material effect on the Company’s

financial position.

3. The directors, whose names are on page 3 of the annual report to which this notice is attached, collectively and

individually accept full responsibility for the accuracy of the information given and certify that to the best of their

knowledge and belief there are no facts that have been omitted which would make any statement false or misleading,

and that all reasonable enquiries to ascertain such facts that have been made and that the notice contains all information

required by the Listings Requirements of the JSE Ltd.

4. Special Resolutions Numbers 1 and 2 are renewals of resolutions taken at the previous annual general meeting on

12 August 2009.

77

votiNgShareholders entitled to attend and vote at the annual general meeting may appoint one or more proxies to attend, speak

and vote thereat in their stead. A proxy need not be a member of the Company. A form of proxy, in which are set out the

relevant instructions for its completion, is enclosed for the use of a certificated shareholder or own-name registered

dematerialised shareholder who wishes to be represented at the annual general meeting. Completion of a form of proxy will

not preclude such shareholder from attending and voting (in preference to that shareholder’s proxy) at the annual general

meeting.

The instrument appointing a proxy and the authority (if any) under which it is signed must reach the transfer secretaries of

the Company at the address given below by no later than 11:30 on Thursday, 17 June 2010.

Dematerialised shareholders, other than own-name registered dematerialised shareholders, who wish to attend the annual

general meeting in person, will need to request their Central Securities Depository Participant (“CSDP”) or broker to provide

them with the necessary authority in terms of the custody agreement entered into between such shareholders and the

CSDP or broker.

On a poll, ordinary shareholders will have one vote in respect of each share held. Dematerialised shareholders, other than

own-name registered dematerialised shareholders, who are unable to attend the annual general meeting and who wish to

be represented thereat, must provide their CSDP or broker with their voting instructions in terms of the custody agreement

entered into between themselves and the CSDP or broker in the manner and time stipulated therein.

By order of the board

PSGCorporateServices(Pty)Ltd

Company secretary

21 May 2010

Stellenbosch

Registeredoffice

Paladin Capital Ltd

Ou Kollege

35 Kerk Street

Stellenbosch, 7600

(PO Box 7403, Stellenbosch, 7599)

Transfersecretaries

Computershare Investor Services (Pty) Ltd

Ground Floor

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)


aDMiNistratioN

DetailsofPaladinCapitalLtd DetailsofultimateholdingcompanyRegistration number: 2007/032836/06 PSG Group LtdShare code: PLD Registration number: 1970/008484/06ISIN code: ZAE000138970 Share code: PSG

ISIN code: ZAE000013017SecretaryandregisteredofficePSG Corporate Services (Pty) Ltd Detailsofholdingcompany(Registration number: 1996/004840/07) PSG Financial Services Ltd1st Floor, Ou Kollege (Registration number: 1919/000478/06)35 Kerk Street 1st Floor, Ou KollegeStellenbosch, 7600 35 Kerk Street(PO Box 7403, Stellenbosch, 7599) Stellenbosch, 7600Telephone: +27 21 887 9602 (PO Box 7403, Stellenbosch, 7599)Facsimile: +27 21 887 9619

CorporateadvisorLegaladvisor PSG Capital (Pty) LtdCliffe Dekker Hofmeyr Inc

DesignatedadvisorTransfersecretaries Questco Sponsors (Pty) LtdComputershare Investor Services (Pty) Ltd(Registration number: 2004/003647/07) AuditorsGround Floor PricewaterhouseCoopers Inc.70 Marshall StreetJohannesburg, 2001 Principalbanker(PO Box 61051, Marshalltown, 2107) First National Bank

Websiteaddresswww.paladincapital.co.za

2010Financial year-end 28 FebruaryProfit announcement 13 April Annual general meeting 18 June

shareholDers’ Diary

ForM oF proxy – For use by certiFicateD aND oWN-NaMe DeMaterialiseD shareholDers oNly

A member who is entitled to attend and vote at the annual general meeting (“AGM”) is entitled to appoint a proxy to attend,

speak and vote thereat in his/her/its stead and that proxy need not also be a member of the Company.

I/We (name/s in block letters)

of (address)

being a member of Paladin Capital Ltd, hereby appoint

1 of or failing him/her



the chairman of the meeting as my/our proxy, to vote for me and on my behalf at the AGM of the Company to be held on

Friday, 18 June 2010 at 11:30 and at any adjournment thereof as follows:

NUMBER OF SHARES

FOR AGAINST ABSTAIN

1. OrdinaryResolutionNumber1To receive, consider and adopt the annual financial statements of the Company

and the reports for the year ended 28 February 20102. OrdinaryResolutionNumber2

To re-elect E de V Greyling as a director of the Company3. OrdinaryResolutionNumber3

To re-elect PJ Mouton as a director of the Company4. OrdinaryResolutionNumber4

To approve the directors’ fees as per the annual financial statements5. OrdinaryResolutionNumber5

To confirm the re-appointment of PricewaterhouseCoopers Inc. as auditors6. OrdinaryResolutionNumber6

To confirm the auditors’ remuneration for the year ended 28 February 20107. OrdinaryResolutionNumber7

Place unissued shares under directors’ control8. OrdinaryResolutionNumber8

To authorise the directors to issue shares for cash9. SpecialResolutionNumber1

Company share buy-back authority10. SpecialResolutionNumber2

Subsidiary share buy-back authority11. OrdinaryResolutionNumber9

Granting the directors and/or Company Secretary general authority to implement

the resolutions set out herein

(Indicateinstructiontoproxybywayofacrossinspaceprovidedabove)

Unlessotherwiseinstructed,myproxymayvoteashethinksfit.

Signed at this day of 2010.

Signature

Pleasereadthenotesonthereversesidehereof.

PALADINCAPITALLIMITED(Incorporated in the Republic of South Africa)

(Registration number: 2007/032836/06)(“theCompany”)

Notes1. A Paladin shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice

in the space(s) provided, with or without deleting “the chairman of the annual general meeting”. The person whose name

appears first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of

those whose names follow.

2. A Paladin shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of shares to

be voted on behalf of that shareholder in the appropriate box provided. Failure to comply with the above will be deemed

to authorise the chairman of the annual general meeting, if he/she is the authorised proxy, to vote in favour of the

resolutions at the meeting, or any other proxy to vote or to abstain from voting at the meeting as he/she deems fit, in

respect of all the shares concerned. A shareholder or his/her proxy is not obliged to use all the votes exercisable by the

shareholder or his/her proxy, but the total of the votes cast and in respect whereof abstentions are recorded may not

exceed the total of the votes exercisable by the shareholder or his/her proxy.

3. When there are joint registered holders of any shares, any one of such persons may vote at the meeting in respect of

such shares as if he/she was solely entitled thereto, but, if more than one of such joint holders be present or represented

at any meeting, that one of the said persons whose name stands first in the register in respect of such shares or his/her

proxy, as the case may be, shall alone be entitled to vote in respect thereof. Several executors or administrators of

a deceased member, in whose name any shares stand, shall be deemed joint holders thereof.

4. Forms of proxy must be completed and returned to be received by the transfer secretaries of the Company,

Computershare Investor Services (Pty) Ltd, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051,

Marshalltown, 2107), by no later than 11:30 on Thursday, 17 June 2010.

5. Any alteration or correction made to this form of proxy must be initialled by the signatory(ies).

6. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must

be attached to this form of proxy unless previously recorded by the company’s transfer secretaries or waived by the

chairman of the annual general meeting.

7. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual

general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof,

should such shareholder wish to do so.

I N N O V A T I V E R E L I A B L E P R O G R E S S I V E

S T R A T E G I C

Contents

Financial highlights 1

At a glance

Pro� le 2

Group structure 2

Board of directors 3

Letter to shareholders 5

Review of operations 10

Corporate governance 20

Annual fi nancial statements 21

Notice of annual general meeting 73

Administration 78

Shareholders’ diary 78

Form of proxy Attached

GREYMATTER & FINCH # 5262

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w w w . p a l a d i n c a p i t a l . c o . z a A N N U A ... · PJ (Piet) Mouton (33) BComm (Maths) Piet was appointed as an executive director of PSG Group early in 2009. In 1999