vunani Limited i a r Integrated 12 annual report › content › JSEAnnualReportsItems...2013/05/22...

12Integrated annual report

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Integrated reportIng

VunanI lIMIted (“Vunani” or “the company” or “the group”)Incorporated in the Republic of South Africaregistration number 1997/020641/06JSe code VUN ISIn ZAE000163382Listed on AltX on the JSE Limited (“JSE”)

This integrated report of Vunani covers the financial year from 1 January 2012 to 31 December 2012 and follows the group’s first integrated report published for the year ended 31 December 2011. No change in the scope of the 2011 report was required.

Vunani’s scope of reporting remains focused on its reportable business segments. The content included in this integrated annual report is deemed to be useful and relevant to Vunani’s stakeholders. The content specifically aims to provide stakeholders with a clear understanding of the economic, environmental, social and governance matters pertaining to the group and their related impact to enable stakeholders to accurately evaluate the group’s ability to create and sustain value.

Scope and boundary

Statement of responsibilityThe board of directors acknowledges its responsibility to ensure the integrity of the integrated report. The board has accordingly applied its mind to the integrated annual report and, in its opinion, this report initiates a process to better address all material issues while endeavouring to fairly present the integrated performance of the group and its impact on all stakeholders.

annual financial statementsThe annual financial statements for the year ended 31 December 2012 were approved by the board of directors on 3 May 2013. KPMG Inc., the independent auditors, have audited the annual financial statements and their unmodified audit report is presented on page 37 of this integrated annual report.

The consolidated and separate annual financial statements have been prepared under the supervision of A Judin, CA (SA), the Group Chief Financial Officer.

Forward-looking statementsThis integrated annual report contains forward-looking statements that, unless otherwise indicated, reflect the company’s expectations at 31 December 2012. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate.

The company cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on any forward-looking statements. The company disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available as a result of future events or for any other reason, other than as required by the JSE Limited Listings Requirements.

Sustainability informationThe information relating to sustainability has not been assured in 2012. An overview of the group’s strategy and sustainability is presented on pages 12 and 13 of this integrated annual report.

about this reportThis is Vunani’s second integrated report. Integrated reporting aims to incorporate information ranging from strategy to risk management, financial reporting to social and environmental reporting. It aspires to meet the needs of a wider group of stakeholders.

We continue to use King III and the “Discussion Paper on the Framework for Integrated Reporting and the Integrated Report” issued by the Integrated Reporting Committee of South Africa in January 2011 in our integrated reporting process.

Vunani continues its journey towards providing a more holistic view of the group in one document and regards this process as a valuable opportunity to engage with its stakeholder groups. We welcome your feedback on this integrated annual report and any comments can be emailed to [email protected]

VunanI lIMIted

Vunani is a black-owned and managed diversified financial services group. The owner-managed culture is

complemented with an entrepreneurial passion and, through a series of acquisitions, Vunani has built a strong financial services platform and facilitated growth within the group.

Leadership statement 20

Operational reviews 22

Corporate governance report 24

Remuneration report 29

King III checklist 31

Stakeholder engagement 33

2RepoRts to

stakeholdeRs

Analysis of shareholders 114

Shareholders’ diary 116

Notice of annual general meeting 117

Form of proxy 123

General information IBC

4shaReholdeR infoRmation

Consolidated annual financial statements 34

Company annual financial statements 100

3annUal finanCial

statements

ConTenTs

Group snapshot 3

2012 highlights 4

Group structure 5

Business segments 6

Directorate 8

Six-year review 10

Intrinsic net asset value 11

Strategy and sustainability 12

Risk management 14

Transformation 18

1VUnani at a

glanCe

1

VUNANI LIMITED Integrated Annual Report 2012

1

Group snapshot 3

2012 highlights 4

Group structure 5

Business segments 6

Directorate 8

Six-year review 10

Intrinsic net asset value 11

Strategy and sustainability 12

Risk management 14

Transformation 18

VunAnI AT A glAnCe

2 VUNANI LIMITED

VUNANI AT A GLANCE

ANNUAL FINANCIAL

STATEMENTSSHAREHOLDER INFORMATION

3

REPORTS TO STAKEHOLDERS


Strong operating business focus with targeted strategic empowerment

equity investments.

Strong growth track record

Experienced management

team

group snapshot

Diversified financial service product offering

In the group’s early years, focus was placed on identifying unique investment opportunities that would ultimately translate into value for stakeholders. While operating businesses were included in this model, the emphasis was on value creation through investment holdings. In more recent years, the group’s focus has turned this approach around and significant efforts have been directed toward the growth in the operating businesses within the group.

The group operates out of offices in sandton and Cape Town in south Africa and Harare in Zimbabwe. The group has 86 employees. The group’s activities are categorised into the following segments:

¢¢ Asset management

¢¢ Advisory services

¢¢ securities broking

¢¢ Investment holdings

¢¢ Properties – investments and developments

¢¢ Properties – asset management

¢¢ group

With the final redemption of the legacy debt burden during the 2012 year, Vunani’s key objectives are centred on creating shareholder value through increased revenues from operational businesses through the established platforms.

emPloyee sTATIsTICs

The group regards its people as the most important element of its business. It is therefore important to make the best use of the human capital we have available. The group ascribes to and applies the principles of employment equity. The group’s human resources at 31 December 2012 are on page 13 of this report.

48%52%

4 VUNANI LIMITED

2012 HIgHlIgHTs

ReVenue pie charts (R millions)

Asset managementAdvisory servicessecurities brokingProperty investments and developmentsProperty asset managementgroup

�•��Profit�from�operations�of R61,9 million

compared to R34,3 million in 2011

•�Net�finance�costs� decreased by 24,8%

•��Profit�from�continuing�operations of R11,8 million

compared to loss of R24,9 million in 2011

increased to 191,2 cents•��Net�asset�value�per�share

oVeRVIeW

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8,6

44,6

7,32011

4,421,2

20,747,5

6,26,5

2012

5

VUNANI AT A GLANCE

ANNUAL FINANCIAL




operations

listed

unlisted

Asset management

Vunani Fund managers

Integrated managed Investments

securities broking

Vunani securities

Vunani Private Clients

Properties

Asset management – VPAm

Investments and Developments

Advisory services

Vunani Capital Zimbabwe

Vunani Capital

Investments

directly or through special purpose vehicle

L I M I T E D

6 VUNANI LIMITED

Asset ManagementVunani’s asset management operations comprise institutional and private wealth product offerings. Vunani Fund managers Proprietary limited (“Vunani Fund managers”) solely services the institutional market, while Vunani Private Clients Proprietary limited (“Vunani Private Clients”) and Integrated managed Investments Proprietary limited (“ImI”) (48% owned by the group) services private clients. The institutional offering provided by Vunani Fund managers comprises a product offering that spans the following three broad categories:

¢¢ single Asset Class – managed equity, Bonds, Inflation-linked Bonds and Property;

¢¢ multi-asset Class – Target Return (CPI+ range) and Absolute Return (capital protection); and

¢¢ smart beta – Fundamental Indexation, market Cap Indexation.

At 31 December 2012, Vunani Fund managers’ assets under management amounted to R11.4 billion.

ImI is a boutique asset management company focusing on private client discretionary portfolios, trusts, charities and pension funds. ImI’s investment offering provides a broad spectrum wealth management solution both in south Africa and offshore in respect of the following portfolio categories:

¢¢ ImI Conservative Portfolio;

¢¢ ImI moderate Portfolio; and

¢¢ ImI Aggressive Portfolio.

each of these portfolios provides a holistic portfolio management solution covering equities, bonds, cash and alternative investments. At 31 December 2012, ImI’s assets under management amounted to R1.3 billion.

subsequent to year-end the group disposed of its shareholding in ImI.

Securities BrokingVunani securities Proprietary limited (“Vunani securities”) is a registered financial services provider and full service stockbroker member of the Jse. The company has impeccable Bee credentials and actively contributes to skills development via the Vunani securities Training Academy. Vunani securities strives to become the foremost south African stockbroker, focusing on domestic stocks and boasts a particularly broad covering in the mid-cap segment of the market. Its research analysts and consultants offer clients top-down analysis, supplemented by company-specific bottom-up research on about 90 listed companies. The product offerings of analysts to institutional clients include daily, weekly and monthly reports and frequent road-show presentations. The front-end service to clients is handled from both its sandton and Cape Town offices by a dedicated team of dealers and sales traders who, between them, have more than 60 years of trading experience. It also offers trading in stocks listed on other African exchanges via trading agreements with selected stockbrokers in selected African countries.

Products traded:¢¢ equity Trading

¢¢ Index Futures

¢¢ single stock Futures

¢¢ yield-X (Currency and Interest Rate Futures)

¢¢ global Futures (stocks and Commodities)

¢¢ equity options

¢¢ oTC

¢¢ oTC options

The private client offering is accessible through Vunani Private Clients. Vunani Private Clients offers individuals wanting to trade their own portfolios, derivatives and hedging instruments, a trading platform and also manages portfolios on behalf of discretionary private clients. The wide range of products on offer includes geared derivatives (such as CFDs and single stock Futures) to money market accounts. In addition, it has a range of absolute, balanced and directional funds. It is also active in both the local and international spheres with a range of offshore trading and investment products.

The group’s goal is to become South Africa’s foremost boutique financial services group.

Business segments


7

The fixed interest and money market trading operations have been integrated into Vunani Capital markets Proprietary limited (“Vunani Capital markets”), which provides a trading platform for money market and fixed interest instruments on behalf of institutional and corporate clients, which complement the Vunani securities equity trading capabilities.

Properties – investments and developmentsBuilding on proven property development and financial structuring skills, Vunani Properties Proprietary limited (“Vunani Properties”) focuses on development and investment opportunities that generate fee income and provide participation in capital growth. Vunani Properties has proven its ability to combine these activities with black economic empowerment.

Vunani Properties’ developments consist of both greenfield property developments as well as the refurbishment of existing buildings. These developments include the commercial, industrial, retail and residential sectors of the market. The increased demand for property across all sectors of the market over the past few of years has seen growth in the property development sector, and Vunani Properties has developed R1.2 billion worth of property, either on its own or in joint ventures with partners such as Barrow Construction, earthspring Properties, sherratt Property Ventures, Tri star Construction, International Housing solutions and Abbeydale Construction.

Properties – asset managementVunani Property Asset management Proprietary limited (“VPAm”) is a wholly-owned subsidiary of Vunani Properties and is a property asset management company. Currently VPAm manages the Vunani Property Investment Fund limited (“Vunani Property Investment Fund”) in terms of a management contract.

Advisory servicesVunani is one of the oldest existing black-owned investment banking firms in south Africa, having started out as African Harvest

Capital in 1997. our vision is to be the pre-eminent independent investment banking boutique in southern Africa and the advisor of choice for the region.

Vunani is a trusted advisor to clients in south Africa and increasingly to clients in sub-saharan Africa. These clients include leading public sector entities, corporations, entrepreneurs, municipalities, financial sponsors and boards of directors.

The objective of the investment banking division is to build long-standing and enduring client relationships while delivering advice and capabilities across a full range of corporate finance and investment securities products. This is accomplished by delivering thoughtful strategic advice and superior client-friendly execution. The sustainability of our business depends on our value proposition. We use our entrepreneurial advantage to support our client relationships and recognise that our success is driven by being nimble and innovative.

We are also focused on providing capital-raising services which, in turn, enables our clients to achieve their strategic goals.

We also remain committed to a strategy of principal investing, including working alongside our clients.

Investment holdingsVunani has a broad investment mandate to acquire equity stakes in both listed and unlisted companies, principally as an active Broad-based Black economic empowerment (“BBBee”) partner.

Vunani has over 10 years’ experience in BBBee investments, and has played a strategic and active role in assisting investee companies to expand and grow their operations. Vunani is represented on the boards of directors of its investee companies to provide strategic direction.

As an investor, Vunani is in a unique position to offer a range of skills and services to investee companies including property development, stockbroking and economic analysis, debt structuring, mergers and

acquisitions and related advisory services, capital raising (both equity and debt), retirement fund and investment consultancy and offers strong relationships with both the public and private sectors.

Vunani is able to structure BBBee transactions to ensure sustainable value add. Thus, Vunani works closely with senior executives at investee companies to ensure the strategic objectives of the companies and its BBBee partners are aligned with those of the business.

With its broad range of corporate finance and investment skills, Vunani has successfully participated in a wide range of corporate advisory and investment banking deals since 1998.

GroupThe group segment comprises the revenues and expenses related to managing the corporate affairs of the group. Revenues are generated from services provided by directors to clients and opportunistic transactions, which may involve arbitrage opportunities and/or result in facilitation fees being earned.

Costs within the segment include:

¢¢ Fees for non-executive directors;

¢¢ salaries of the executive directors;

¢¢ Cost of the support divisions in the group such as information technology support services and group finance; and

¢¢ Professional fees associated with the management of group investments and affairs where these cannot be attributed to a specific segment.

VUNANI AT A GLANCE

ANNUAL FINANCIAL



8 VUNANI LIMITED

Directorate

Ethan Dube (53)

Chief executive officer MSc (Statistics), Executive MBA (Sweden)

ethan has extensive corporate finance and asset management experience gained at standard Chartered merchant Bank, southern Asset managers and Infinity Asset management. ethan was a founder and has been chief executive officer of Vunani Capital Holdings (previously African Harvest Capital) since its inception in the late 1990s.

Aphrodite Judin (36)

Chief financial officer BCom, BAcc, CA (SA)

Aphrodite joined Vunani in 2005, focusing on the stockbroking operations of the group. she was appointed financial director in August 2010. Before joining Vunani, Aphrodite worked at Deloitte as an audit manager.

Butana Khoza (46)

Managing director BCom, PG Dip (Accounting), CA (SA)

Butana established African Harvest Capital with ethan Dube and has served in a number of senior executive roles. He is currently the managing director of the group. Prior to joining Vunani, Butana worked at southern Asset management and then at Futuregrowth.

Mark Anderson (53)

Executive director CTA, CA (SA)

Having initiated a number of early Bee deals, mark formed a corporate finance boutique and then advised on the formation of African Harvest limited in 1997. mark is responsible for Vunani’s investment activities.

Evelyn Chimombe-Munyoro (40)

Executive director BA LLB, LLM (Commercial law/Maritime law)

evelyn is an admitted attorney of the High Court of south Africa and was appointed director and partner at Fairbridges Attorneys in 2004. originally a non-executive director of Vunani, evelyn joined as an executive director in 2006.

9


Willy Ross (68)

Independent non-executive chairman CTA, CA (SA)

Willy commenced his merchant banking career with the nedbank group in 1974 in corporate finance. He later became involved in project and structured finance and private equity. At the time of the merger of nedcor Investment Bank, he was an executive director with responsibility for infrastructure, project and structured finance, private equity, and risk and legal.

Dr Bongani Khumalo (60)

Independent non-executive director MA, AEP, Diploma in Management and MBA

Bongani is the chief executive of gidani Proprietary limited and Chairman of Bongani Rainmaker logistics and gravitas group. He is a patron of the south African Business Coalition on HIV/AIDs (sABCoHA) and Professor extraordinaire and Chairman of the Africa Centre for HIV/AIDs management (university of stellenbosch). He is also a member of the Boards of Anglo American Platinum and Afrika Tikkun and a scholar in economic and management sciences. Bongani resigned from his position as an independent director on 31 December 2012.

Nambita Mazwi (39)

Independent non-executive director BProc LLB, Dip Company Law, Programme in Business Leadership

nambita is an admitted attorney of the High Court of south Africa and a past Vice President for Africa of the International Association for Women in Aviation 2012/2013 slate. Her corporate legal experience gained over a number of years, includes time spent as legal counsel to the Ceo at sAeDF, a pan African venture capital fund; as Corporate legal Advisor at south African Airways soC. she is currently the general manager for legal services at PPC limited, the largest cement producer in south Africa.

Gordon Nzalo (47)

Independent non-executive director BCom, BAcc, CA (SA)

gordon has extensive experience in risk management, corporate governance, external and internal auditing and was previously a partner with both KPmg and PwC. He is a director of a number of companies.

John Macey (51)

Independent non-executive director B Bus Sci (Hons), BCom (Hons), CA (SA)

John studied at the university of Cape Town (“uCT”). He completed articles with Deloitte & Touche, after which he was a financial director of a manufacturing company for five years. He was a tenured member of the academic staff in the Department of Accounting, uCT, for nine years. since 2009, he has been involved in the private equity and investment banking industry, having structured investments in the textiles and hospitality industries.

VUNANI AT A GLANCE

ANNUAL FINANCIAL



10 VUNANI LIMITED

six-year review

2007 2008 2009 2010 20111 2012

Statement of comprehensive income

Total revenue (R’000) 239 480 223 065 125 046 195 801 106 755 107 892

Profit/(loss) from operations (R’000) 86 264 (777 728) 19 703 61 115 34 310 61 935

Attributable profit/(loss) (R’000) 557 622 (784 122) (164 157) (44 702) (58 835) 11 755

Headline earnings/(loss) (R’000) 329 955 (686 215) (140 440) (125 577) (27 378) (11 245)

Headline earnings/(loss) per share (cents)2 28.0 (58.8) (11.0) (2.9) (20.0) (11.2)

Statement of financial position

equity attributable to equity holders (R’000) 809 257 153 657 21 693 250 131 198 856 201 517

Total assets (R’000) 2 998 335 2 020 802 1 893 772 2 035 425 798 703 591 025

Total liabilities (R’000) 2 017 874 1 772 417 1 754 119 1 611 206 586 005 376 714

Tangible net asset value per share (cents)2 82.6 5.5 (1.4) 4.2 154.9 158.3

Share price statistics

number of shares in issue at 31 December (’000) 1 177 000 1 234 250 1 340 562 4 763 502 5 270 732 105 415

Closing price at 31 December (cents) 120 35 10 8 7 225

Closing high for the period (cents) 125 135 35 12 8 399

Closing low for the period (cents) 110 35 6 4 4 4

Volume traded during the period (’000) 4 793 106 067 16 433 77 593 68 920 12 875

Ratio of volume traded to shares in issue (%) 0.41 8.59 1.23 1.63 1.31 12.21

Notes1 For continuing operations only, where applicable.

2 Values at 31 December 2011 have been adjusted to show the effect of the 50:1 share consolidation that took place on 12 March 2012.

VUNANI AT A GLANCE

ANNUAL FINANCIAL


11



intrinsic net asset value

The value of Vunani’s assets are accounted for and reflected in the consolidated financial statements as required by International Financial Reporting standards (“IFRs”). on this basis, the net asset value attributable to equity holders of R201.5 million (2011: R198.9 million) is considered to be the book net asset value (“book nAV”).

on a per share basis, the book nAV is 191.2 cents (2011: 188.6 cents, adjusted for the effect of the share consolidation as described in note 27). At 31 December 2012, Vunani’s market capitalisation was R237.2 million based on the company’s closing share price of 225 cents per share on the Jse (2011: market capitalisation of R369.0 million based on the closing share price of 7 cents per share at 31 December 2011).

The intrinsic net asset value (“InAV”) of the group, based on the value of its underlying assets, will differ to book nAV as book nAV does not include the fair value of operating businesses that have been established and grown within the group. This is particularly the case where a company is a subsidiary and the value of its operation would be based on an earnings multiple or discounted cash flow valuation model.

Asset management

The group’s interests in entities operating in the asset management industry are held through Vunani Fund managers and ImI. The industry benchmark in valuing these businesses is based on a percentage of assets under management. The quantum of the percentage used to determine the value is based on a combination of variables, which include the average fee that is earned on the underlying assets, and the value attributable to the establishment and maintenance of the operating platform, the size and profitability of the company. Barriers to entry into this industry include the high level of regulatory supervision, capital maintenance requirements and system development and maintenance costs.

Securities broking

The institutional and retail securities broking operations are influenced largely by market forces. Barriers to entry within this market are similar to those facing the asset management market. The valuation of a securities broking operation is typically best performed through a combination of a discounted cash flow model and an earnings multiple, with the applicable discount rate reflecting a premium that would be attributable to the operating platform.

Properties asset management

VPAm is the entity that is responsible for the management of Vunani Property Investment Fund. VPAm earns its revenue based on the enterprise value of Vunani Property Investment Fund. similar to the asset management segment, the most appropriate valuation method would be a percentage of Vunani Property Investment Fund’s enterprise value.

Property investments and developments

The group’s interests in property investments and developments are typically held through significant minority holdings, which are either fair valued or equity accounted in terms of IFRs. As such, the net asset value included in the book nAV will approximate the InAV.

Investment holdings

The assets within the segment are fair valued in terms of IFRs. Financial liabilities are either carried at amortised cost or at fair value, depending on the election at initial recognition of the financial liability as required by IFRs. Financial liabilities carried either at fair value or amortised cost represent the best estimate of InAV.

Advisory services

Financial advisory services are provided to a diverse range of clients. While the services provided are regulated, the group’s niche is formed through existing client relationships and through the creation of value for these clients. The most significant barrier to entry in this segment is the human capital element with the appropriate skill set. This value is not contained in the book nAV of the segment and, therefore, the most appropriate valuation technique is a combination of a discounted cash flow model and an earnings multiple.

12 VUNANI LIMITED

strategy anD sustainaBility

StrategyThe year commenced with a few key strategic objectives that needed to be accomplished, notably:

¢¢ Finalising the redemption/restructuring of long-term debt;

¢¢ strengthening the group’s financial services platform;

¢¢ Reducing costs significantly;

¢¢ Returning the group to profitability; and

¢¢ starting to build a capital base that can facilitate the payment of dividends in the near future.

Achieving these milestones was key to moving the group forward and, although the final results reflect a small loss at year-end, there are strong positives that should enable the group to move forward, namely:

¢¢ legacy debt has been restructured or partly settled, leaving the group significantly lighter and relatively free to trade. Furthermore, this will enable the group to trade more freely as sustainability and going concern issues subside;

¢¢ The reduced level of interest-bearing debt will allow for a greater degree of profit to emerge;

¢¢ There is a core revenue stream being generated by the operating businesses, which suggests that sustainability is not likely to be a challenge. Whilst these may not be significant as yet, it is something on which to build;

¢¢ Costs have come down significantly, as infrastructure and costs were rationalised and natural attrition allowed the reduction of expensive head count.

¢¢ unlike in 2011, asset disposals did not yield losses;

¢¢ Fair value adjustments associated with unencumbered assets being retained by the group post the recent debt restructure, suggest there should be decent value creation and some cash flow investment holdings, which should aid growth of the balance sheet;

¢¢ events subsequent to year-end have seen further improvements in the financial position of the group; notably the redemption of R68 million of debt related to the Redefine Bee transaction;

¢¢ The operating businesses are recognised and reputable service providers in their respective sectors of the financial services industry, and are able to garner new business and attract highly-skilled individuals;

¢¢ group leadership is still young and hungry to succeed; and

¢¢ new business prospects are still very attractive in spite of projections of another year of poor domestic growth being forecast.

Issues that are key strategies:

¢¢ not to repeat past mistakes and be a learning organisation. There is enough institutional memory in the group to know where we can be successful;

¢¢ Increase rigour in looking at opportunities, particularly with respect to what will be complementary and what can be turned to account, given the group’s resources;

¢¢ Be extremely discerning in looking at who to partner, whether its in strategic investments or key executive appointments;

¢¢ Reward hard work and loyalty, subject to it being fair to all parties;

¢¢ Pay greater attention to capital preservation, given past experiences;

¢¢ offer a good financial services platform, underpinned by resilience, tenacity and a hunger to succeed and therefore make excellent partners for institutions looking to grow their businesses, particularly through exploiting new markets and opportunities;

¢¢ maintaining and growing a very good and diverse client base and long-standing relationships in both the private and public sectors;

¢¢ safeguarding and nurturing our relationships with banks, development finance institutions and the market, which will stand us in good stead going forward;

¢¢ maintaining a stable and manageable capital base, notwithstanding the fact that it has diminished substantially; and

¢¢ Keeping overheads as low as possible without stifling growth.

VUNANI AT A GLANCE

ANNUAL FINANCIAL


13



Sustainabilitysustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organisational performance towards the goal of sustainable development. The information in this report relates to Vunani’s sustainable business practices during 2012 and has not been assured.

Stakeholder relations

The group subscribes to the principles of objective, honest, balanced, relevant and understandable communication of financial and non-financial information to stakeholders. This is considered to be of such importance that the group managing director is involved with all stakeholder communication. The group acknowledges the role and responsibility of the various regulators and our relationships with them are maintained in a transparent and pro-active manner.

Training and development

The group provides training to its employees in a number of different ways and dependent on the individual employee’s training needs. The group sends employees on various external training courses facilitated by organisations governing the various sectors in which the group operates. The company pays for learnership

programmes embarked on by employees such as obtaining the Chartered Financial Analyst (“CFA”) qualification. The group also undertakes in-house training, facilitated by senior employees as a method of transferring knowledge and skills to junior employees. The Vunani securities Training Programme renders on-the-job training for selected young Bee graduates. The one-year programme looks to hone the skills of young analysts under the mentorship of experienced and rated analysts.

A number of candidates have proceeded to become rated analysts in their own right.

Safety, health and environment

The group is committed to ensuring that employees work in a safe, healthy and clean environment. our activities do not have an adverse effect on the environment.

The group has undertaken to prepare a formal safety and health policy. The policy will outline the responsibilities of the group and employees in terms of health and safety requirements. It will also detail procedures for first aid, emergency evacuation and exposure to environmental health risks.

The group in conjunction with its medical aid provider (Discovery Health) holds an annual wellness day. The purpose of this

day is for employee members to assess their overall health. This also helps increase health awareness amongst employees.

The group is committed to having a positive carbon footprint on the environment. The group is currently focused on paper usage and recycling. employees are encouraged to print responsibly. The group also has recycling boxes for paper, to encourage responsible use of paper. The group disposes of all old IT equipment in an environmentally friendly manner.

Employee participation

In order to retain and attract entrepreneurs, the group has a philosophy of encouraging management and key employees in the group to acquire a meaningful interest in the group and/or in its underlying businesses. A share incentive scheme was put in place during 2011 and employees are now co-owners of the business and are treated as such, with transparent communication a priority.

Human resources

The group regards its people as the most important element of its business. It is therefore important to make the best use of the human capital we have available. The group subscribes to and applies the principles of employment equity. The group’s human resources at 31 December 2012 are represented as follows:

Male Female Total

Number % Number % Number %

2012

White 19 43 10 25 29 33

African 14 31 17 41 31 36

Coloured 6 13 10 24 16 19

Indian 2 4 3 7 5 6

non-south African 4 9 1 3 5 6

45 41 86

2011White 31 49 20 34 51 42African 20 32 19 33 39 32Coloured 5 8 13 22 18 15Indian 1 2 3 5 4 3non-south African 6 10 3 5 9 7

63 58 121

14 VUNANI LIMITED

risk management

Vunani uses an enterprise risk management framework to assess and manage the risks and opportunities related to the achievement of its strategic objectives. The framework involves identifying particular events or circumstances that could impact the group’s ability to achieve its objectives, assessing the likelihood of their occurrence, the magnitude of their impact, determining a response strategy and monitoring progress.

given the complexity of the group’s business model, this approach is considered optimal as it enables the group to identify and pro-actively address risks and opportunities, whilst in the process creating value for all our stakeholders including owners, employees and clients.

It is Vunani’s view that this approach will best enable the group to embrace the principles recommended in King III, which co-exists with the Companies Act, 2008 and the Jse listing Requirements. In the board’s view this is appropriate because the Companies Act places legal responsibility for risk management on the board of directors. It also requires the adoption of a policy and plan for a systematic, disciplined approach to evaluate and improve the effectiveness of risk management.

Risk Assessment ApproachThe approach to assessing and then managing risks is based on the group’s organisational structure depicted on page 5, which highlights diverse operating businesses, most of which operate in a regulated environment where regulatory compliance is key. Accordingly, the risk management framework seeks to ensure that key risk-related information is available to the board of directors and that it enables them to meet the responsibility to exercise their duty of care, skill and diligence. The board acknowledges that it is accountable for the process of risk management and the systems of internal control and is assisted in this regard by the audit and risk committee.

Risk assessments are performed systematically throughout the group, with management focusing attention on the most significant risks – making informed risk decisions whilst being careful not to over control or stifle innovation. The key objective is to ensure capital is deployed effectively and that businesses are managed in a manner that reduces the potential occurrence and significance of negative events. The process does not follow a checklist approach, nor is it a process that is disconnected from business decision-making, but is integrated into the business process in order to provide timely and relevant risk information to management.

The risk assessment framework uses a two-tier approach (depicted below) to ensure the full range of risks is considered, that process is rigorous and requisite actions are taken.

❚▼Top down

n enterprise Wide Risk Assessment

▲❚Bottom up

n subsidiary/Divisional Risk Assessment

This is underpinned by a risk management governance structure comprising key divisional and subsidiary management and compliance officers, who meet regularly to assess status of process, findings, reports on analysis and monitoring. This has the following benefits:

i. There is a shared approach to risk assessment to facilitate an integrated assessment process;

ii. The board and audit and risk committee ensure risks facing the organisation are identified and adequately addressed; and

iii. line management is responsible for managing their key business risks, but the group monitors progress on the effective response to key risks.

VUNANI AT A GLANCE

ANNUAL FINANCIAL


15



Risk Assessment ProcessThe diagram below is a high level depiction of the process used to evaluate enterprise-wide risk.

evaluates the adequacy and effectiveness of the internal check and balances in place, providing reasonable

assurance that the likelihood and impact of an adverse event are brought down to an acceptable level

Assess residual likelihood and impact of risks

Critical success factors identified

Identity key business objectives

sWoT analysis performed Highlight key business objectives

❚▼❚▼ ❚▼

❚▼

Identify events that could impact achievement of the organisation’s objectives

Identify events that could affect objectives

❚▼

Consider the relative importance of business objectives

and align with risk appetite

Risk tolerance is the acceptable level of variation relative

to the achievement of a specific objective

Determine risk tolerance

❚▼

❚▼

evaluation based on the likelihood of occurrence and the significance of their

impact on the objectives

Assess inherent likelihood and impact of risks

events identified as potentially impeding the achievement of objectives are deemed to

be risks

evaluated on an inherent basis

❚▼ ❚▼

❚▼

Based on the defined risk tolerance and inherent risk assessment determines how to address

the identified risks

Evaluate the risks and determine risk responses

16 VUNANI LIMITED

risk management (continued)

The risk assessment process starts with the establishment of a scope and plan, considering objectives, responsibilities, timing, and input and output requirements. Responsibilities are assigned to executives who can provide meaningful perspective on relevant risks. once the scoping and

planning are agreed the risk assessment process commences, culminating in consolidating individual residual risk ratings into a portfolio view – identifying inter-dependencies and inter-connections between risks, as well as the effect of risk responses on multiple risks.

This allows management to decide on actions necessary to revise its risk responses or address design or effectiveness of controls. Action plans are assigned to individuals with the capability and authority to effect change, with specified milestones and timelines that are documented and tracked for completion.

Key Risks EvaluatedBased on the risk process applied, the group has identified the following key risk categories, associated business objectives and risk descriptions:

Risk category Key business objectives Risk description

Product and Service Risk

Product and services are market relevant; have a strong value proposition; are price competitive and clients are willing to buy/engage them.

The group’s products and services are insufficiently differentiated in the markets where businesses operate, are not price competitive or do not provide a compelling value proposition to clients.

Financial Risk The group’s capital structure is appropriate for a business of its complexity and size; it provides confidence to lenders, investors and other stakeholders; the group is solvent and a going concern; there are good prospects of sustained profitability; there are sufficient liquid assets for the group’s objectives; and operations are capable of generating free cash flow on a sustainable basis.

Vunani’s capital structure is sub-optimal for a group of its size and complexity and is therefore unable to raise funds from investors, shareholders, banks and other financiers, rendering the business unable to sustain or grow its operations.

Operational Risk The group employs adequate financial and operating systems; employs individuals with the appropriate competencies and experience for the tasks to be performed; applies business processes that will not compromise the integrity and accuracy of business and client information.

Risk of loss (including risks to financial performance and condition) resulting from inadequate or failed internal processes, people and systems, or from external events.

Compliance Risk Vunani’s bulk operations are managed under a number of regulatory agencies including the Financial services Board and the Jse. Accordingly, it is Vunani’s duty to ensure that there is consistent compliance with laws and regulations, including policies and procedures, ethics and business conduct standards.

Risk of financial loss due to penalties levied on the group and/or underlying business operations due to non-compliance with regulatory obligations, laws, policies and procedures, ethics, business conduct standards and contracts, as well as strategic voluntary standards and best practices to which the group has committed.

Corporate Risk Vunani has a number of different stakeholders who have interests in the activities, financial well-being and sustainability of the group and are of strategic importance. These stakeholders include, among others, the board of directors, shareholders, regulators, investment financiers, bankers and strategic partners.

ongoing stakeholder engagement is undertaken with these broad stakeholder groups to ensure that they are appraised of the performance and financial status of the group, as well as the group’s compliance with any relevant regulatory provisions. This is done on a regular basis or at least on the basis prescribed in relevant legislation.

Failing to achieve business and strategic objectives as a result of mis-alignment with key stakeholders, who are essential to the long-term sustainability of the group.

VUNANI AT A GLANCE

ANNUAL FINANCIAL


17



Risk category Key business objectives Risk description

Strategic Risk The group’s mission and strategic objectives should be consistently reviewed and applied by senior management teams with varying degrees of formality.

group working capital needs to be carefully managed to ensure that the group has sufficient capital to meet its operational needs, fund the expansion of underlying businesses, maintain the group as a going concern and retain sufficient capital to deploy in attractive investment opportunities and/or distribute to shareholders.

Business failure and financial loss emanating from the organisation’s mission and strategic objectives, particularly as a result of poor strategy formulation; bad tactics destroying good strategy; no measurable outcomes; lack of understanding of controllable and uncontrollable factors, as well as certain and uncertain future events.

The group has prepared detailed risk registers on a group and enterprise-wide basis. These registers outline the key objectives; inherent risks aligned with those objectives; risk mitigation and responses; and residual risk after applying those responses. The group is satisfied that the key risks associated with the risk categories and business objectives identified are sufficiently mitigated and that there are no uncontrollable risks currently facing the group.

The risk registers for the group and underlying subsidiaries are the subject of review and audit by the group’s internal auditors, nkonki Inc., who report their findings and recommendations to the audit and risk committee.

18 VUNANI LIMITED

transformation

As a black-owned group, transformation is an integral part of our vision and culture. Vunani is committed to transformation as a critical business practice and we acknowledge the reputational and operational risk inherent in failing to meet its BBBee objectives.

each operating entity within the group is rated by empowerlogic Proprietary limited, an independent verification agency. Verification audits are performed annually for each company. At 31 December 2012, the BBBee certificates of the group’s major operating subsidiaries were as follows:

Vunani Fund ManagersVunani Fund managers is a level 1 contributor, based on a qualifying small enterprise (“Qse”) scorecard. They are a value-adding vendor and therefore have a BBBee procurement recognition factor of 169%.

The company is 83.81% black owned and 25.98% black women-owned based on the application of the modified flow through principle at the date of verification. The entity’s points scored were as follows:

¢¢ equity ownership – 26.09 out of a possible 25 (bonus points earned for economic interest to which black women are entitled).

¢¢ management control – 27 out of a possible 25 (bonus points earned for black women represented at top management).

¢¢ Preferential procurement – 25 out of a possible 25.

¢¢ socio-economic development – 25 out of a possible 25.

Vunani SecuritiesVunani securities is a level 2 contributor, based on a Qse scorecard. They are a value-adding vendor and therefore have a BBBee procurement recognition factor of 156%.


¢¢ equity ownership – 24.61 out of a possible 25.

¢¢ employment equity – 24 out of a possible 25.

¢¢ skills development – 25 out of a possible 25


Vunani CapitalVunani Capital is a level 3 contributor, based on a generic scorecard. They are a value-adding vendor and therefore have a BBBee procurement recognition factor of 110%.



¢¢ management control – 4.5 out of a possible 10.

¢¢ employment equity – 10.91 out of a possible 15.

¢¢ skills development – 3.29 out of a possible 15.

¢¢ Preferential procurement – 17.86 out of a possible 20.

¢¢ enterprise development – 15 out of a possible 15.

¢¢ socio-economic development – 5 out of a possible 5.

Vunani PropertiesVunani Properties is a level 2 contributor, based on a Qse scorecard. They have a BBBee procurement recognition factor of 125%.



¢¢ employment equity – 25 out of a possible 25.


¢¢ socio-economic development – 14.55 out of a possible 25.

2

Leadership statement 20

Operational reviews 22

Corporate governance report 24

Remuneration report 29

King III checklist 31

Stakeholder engagement 33

RePoRTs TosTAKeHolDeRs


19

20 VUNANI LIMITED

leaDership statement

Introductionsurmounting incredible challenges, we are pleased to report that Vunani has turned the corner and is trading profitably. The business has now successfully been repositioned and we have entrenched economies of scale, the right people and an appropriate operating strategy to continue sustainable growth across all platforms.

In the reporting period, the last legacy issues following the 2008 global Financial Crisis were settled and – as the focus shifted – growth opportunities unlocked. our first priority for the financial year was the consolidation of share capital. At one stage, Vunani had in excess of 5 billion shares in issue, negatively impacting perceptions about the company as well as the share price. This has now been addressed, which lead to a market re-rating and a share price closer to net asset value.

The second important issue we successfully dealt with was the retirement of a substantial portion of outstanding debt through the partial sale of assets by a subsidiary. This means our balance sheet is substantially de-geared, which allows considerable manoeuvrability to act on opportunities to further develop the business. We are pleased to report that some of these efforts are starting to yield very encouraging results.

going forward, the board and management will focus on growing our operating businesses, in particular fund management, advisory, securities trading and private clients. The interlinked nature of these platforms allows a variety of opportunities to add complementary businesses, both in south Africa and eventually across the sub-continent.

The prudent and successful management of these businesses remain at the core of our strategy to create value for clients while ultimately unlocking value for shareholders. But does this mean Vunani will stop investing? The short answer to this is no. Having learned from the past, we will only

select investments where we can add value, even if these investments fall outside of the financial services sector. As the group is ultimately controlled by its senior management, shareholders’ interests are closely aligned with those of management. The senior management team remains committed to actively looking for opportunities to grow the business operations and unlock shareholder value.

Business conditionsglobally, economic uncertainty continued during the review year. In the united states, long-term fiscal problems continued with government debt still outgrowing the economy. This was not only driven by a combination of recession and stimulus spending – the us healthcare system now costs more than twice as much per person as the average for other wealthy countries. This ratio is projected to rise to three and four to one in decades ahead.

In europe, continued weakness in the single currency area was experienced with usually solid economies such as Austria and the netherlands posting quarterly declines. Whilst austerity measures in Italy were starting to ease, greece was still heading towards its pinnacle, which is expected to lead to a more pronounced recession.

locally, the country’s economic outlook deteriorated rapidly, especially in the latter part of 2012 with unrest in the mining sector and national transport strikes leading to job losses. A downgrade by international rating agencies and a heavy fall in the currency underlined the loss of confidence from an international perspective.

As a consequence, south Africa’s economy expanded at its slowest pace in the third quarter since the recession in 2009. unemployment rose to 25,5% quarter on quarter, weighing on consumer spending which makes up approximately two-thirds of expenditure in the economy.

nedbank group commented that the country’s growth rate is likely to remain

moderate in months ahead as weak consumer confidence and high debt make consumers cautious on spending on non-essential items, while high inflation erodes disposable incomes, offsetting the benefit of high wage settlements.

Weak retail sales numbers suggest that demand-push inflation is likely to remain contained and the banks expect that the monetary Policy Committee will keep monetary policy neutral over an extended period in order to balance weak growth prospects and rising inflationary pressures.

Against this backdrop, Corporate south Africa remained cautious about investment, with corporate deposits jumping to approximately R520 billion.

Operational highlightsDespite difficult trading and economic conditions, overall business divisions performed satisfactorily. A more in-depth discussion can be found in the operational reviews section of this integrated annual report.

ProspectsWe are bold and open in our aspirations to go beyond the borders of south Africa. This should however not be misconstrued as a scramble for Africa. The time to prudently replicate our business in south Africa across the sub-continent is right and we’ve done our homework.

Indicative of this is Vunani’s successful venture in Zimbabwe. What initially started as a consultancy business has led to a number of joint ventures being established in that country. At the time of writing, Vunani acquired a significant minority shareholding in Purpose Asset management, a Zimbabwean asset management company for a cash consideration. This acquisition – and Zimbabwe’s close proximity to south Africa – provides us with an opportunity to emulate the full gambit of our diversified financial services business in that country. even taking into account the political risk, Zimbabwe remains a good investment

21

“We aggressively restructured the balance sheet through asset sales and used the proceeds to redeem debt and strengthen

the cash-generating businesses.”

opportunity which will provide a platform for our expansion further into southern Africa.

since shareholders’ interests are closely aligned with those of management, ethan, Butana and the rest of the executive team remain intimately involved in the business and are actively looking for opportunities to unlock shareholder value.

The board and management are very clear on the growth we want to achieve going forward and have a blueprint to deliver us to our destination. We are currently considering a move from the Jse’s AltX to the main Board as one such milestone on this journey. Having earned our colours on the AltX, additional exposure to institutions and private client investors on the main Board will benefit Vunani in terms of liquidity, access to capital and long-term growth.

Corporate social responsibility and empowermentour main focus remains the development and empowerment of previously disadvantaged groupings and deserving institutions through various forms of contribution.

We foresee that these efforts will be escalated over time as the business continues to grow in profitability.

Governance and boardThis is our second integrated report aligned with the requirements of the Companies Act and the implementation of the King Report on governance for south Africa 2009 (“King III”). We remain committed to ensuring that all necessary checks and balances are in place to sustain Vunani as a responsible corporate citizen.

Currently the board comprises five executive and four independent non-executive directors. In line with King III recommendations, the remuneration committee is engaged with the appointment of a suitable independent non-executive director to the board.

grindrod Bank will continue to act as lead Designated Advisor (“DA”) with Vunani Corporate Finance as corporate advisor.

Appreciationon 31 December 2012 Dr Bongani Khumalo retired from the board as an independent non-executive director. on behalf of the board we would like to extend our sincere thanks to Dr Khumalo for his insights and valuable contributions in steering the company through some testing times.

We would furthermore like to thank our fellow board members for their continued support throughout the year and into the future, as we focus on a new era in Vunani’s evolution.

The efforts of our executive team and staff in delivering on our strategy have placed Vunani in a favourable position to sustain and manage its expected growth – for this we thank you.

lastly, a sincere thank you to our shareholders, who continued to support and believe in Vunani’s investment proposition through some challenging times. We look forward to celebrating our future successes with you.

Ethan DubeChief executive officer

WC RossChairman


VUNANI AT A GLANCE

ANNUAL FINANCIAL



22 VUNANI LIMITED

operational reviews

Asset management

since the appointment of Romeo makhubela as Ceo in August 2011, Vunani Fund managers has repositioned itself as a formidable team which continues to attract some of the industry’s top calibre names. Vunani Fund managers has expanded its assets under management by R2.8 billion during the year under review and at 31 December 2012, managed assets of R11.4 billion on behalf of pension funds and other institutions.

Vunani Fund managers has won a number of new mandates post the reporting date and we expect its growth trajectory to continue in the medium term.

The group’s key contributors to profits within the segment in 2012 are Vunani Fund managers and ImI. The asset management segment reported a profit of R1.3 million in 2012 compared to a profit of R5.9 million in 2011. Revenue achieved in 2012 was R25.0 million compared to R22.7 million in 2011.

In comparing revenue and profitability for 2012 and 2011, the following need to be taken into account:

¢¢ In July 2011, the group increased its shareholding in Vunani Fund managers from 51% to 100% and Vunani Fund managers was fully consolidated for the six months from July to December 2012. From January to June 2011, 51% of Vunani Fund managers’ results were consolidated into the group.

¢¢ The group previously had a 51% interest in ImI, however, 3% of the company was sold to management at the end of 2011. Consequently, in 2012 ImI was equity accounted and not consolidated. subsequent to year-end, the group disposed of the balance of its 48% holding to management for R10.2 million.

going forward, the results of Vunani Fund managers will contribute to the performance of this segment.

Vunani Fund managers’ assets under management increased by R2.8 billion to R11.4 billion during the year. Fees are earned as a percentage of assets under

management and vary across Vunani Fund managers’ client base.

Advisory services

Advisory services were provided through a division of Vunani Capital Proprietary limited (“Vunani Capital”) in south Africa, Vunani Capital Zimbabwe Private limited (“Vunani Capital Zimbabwe”) and Jala Consulting Proprietary limited, trading as Vunani Technology Ventures (“Vunani Technology Ventures”).

The segment was faced with a challenging business environment during the year. Within Vunani Capital, a decision was taken to terminate the designated advisor business that primarily serviced AltX clients. The group retains its ability to perform sponsor services for listed clients. Private sector mandates were sporadic, given the competitive environment in the tender process. The group’s approach to advisory mandates transformed into a pro-active one, where smaller mandates were sought out.

The segment showed a loss of R6.2 million in 2012 compared to a profit of R5.3 million in 2011. The segment’s revenues decreased by 58% from R22.2 million in 2011 to R9.3 million in 2012.

A large advisory mandate that had been secured by Vunani Technology Ventures in 2011 was completed in the first quarter of 2012, which led to the team being downsized. smaller advisory mandates secured cash flows for the operation until December 2012, where a decision was taken to close the business.

Investment holdings

The investment holdings segment reflected the effects of the balance sheet restructure undertaken by the group during 2012. The segment has no revenue as all inflows are classified separately as either investment revenue or interest received from investments. The segment result improved to a net profit of R3.3 million in 2012 from a net loss of R10.5 million in 2011. Interest received from investments is attributable to the distributions received from the group’s investments in Redefine Properties limited and in Vunani Property Investment Fund limited.

one of the group’s key strategies for the 2012 year was to restructure the balance sheet and to redeem the legacy debt burden. In order to achieve this, the following transactions took place during 2012:

¢¢ The 51% investment in Pahana Investments 93 Proprietary limited was disposed of and the corresponding liability to ABsA Bank limited was settled. Pahana Investments 93 Proprietary limited held an investment in Civils 2000 Proprietary limited;

¢¢ The investment in Wesizwe Platinum limited was disposed of and the corresponding liability to ABsA Bank limited was settled;

¢¢ The investment in Consolidated Infrastructure group limited was disposed of and the liability to Firefly Investments 61 Proprietary limited was settled;

¢¢ The group’s shareholding in Vunani Property Investment Fund limited was disposed of through a series of transactions. The proceeds on disposal were utilised to settle the group’s outstanding debt, which included amounts owing to Investec Bank limited and standard Bank group limited;

¢¢ A refinancing of the group’s investment in Workforce Holdings limited was concluded that enabled the group to release R9 million in cash, which was utilised to settle outstanding debt;

¢¢ In December 2012 a settlement agreement was entered into with Investec Bank limited that resulted in the full and final settlement of all amounts owing and guarantees provided to Investec Bank limited by the group (“the settlement agreement”), excluding the guarantee provided by Vunani Properties Proprietary limited (“Vunani Properties”) for a loan made by Investec Bank limited to greenstone Hill office Park Proprietary limited, in which Vunani Properties holds a 40% equity interest. The main terms of the settlement agreement were the payment of a cash amount of R60 million to Investec Bank limited, financed through the disposal of the

23


group’s shareholding in Vunani Property Investment Fund, and the transfer of the group’s shareholding in Brikor limited and PsV Holdings limited to Investec Bank limited;

¢¢ The group’s investment in Basil Read limited (held by the special purpose entity Anchor Park 81 Proprietary limited) was disposed of and the corresponding liability to Investec Bank limited was settled;

¢¢ The cession of dividends relating to the group’s investment in gidani Proprietary limited to Investec Bank limited remains in place until may 2015; and

¢¢ The terms and conditions relating to the debentures issued by the group to the Development Bank of south Africa (“DBsA”) were renegotiated. The group redeemed a portion of the DBsA debentures and has agreed to a payment schedule which will result in the balance being redeemed by 30 september 2020.

Investment holdings reflected a segment profit of R3.3 million to December 2012 (2011: loss of R10.5 million).The group is reflecting a tax charge of R19.6 million for the year; R13.2 million of this charge relates to the investment segment. The charge is attributable to the tax consequences of the transactions detailed above. In addition to accounting for the tax effect of the transactions, deferred tax assets relating to capital losses realised in special purpose entities were not raised as uncertainty exists regarding the utilisation of these losses going forward.

Securities broking

The integration of the Kagiso securities limited business and related costs which impacted this segment in the prior financial year have now been fully absorbed by the expected increased economies of scale. The institutional equities division ranked 21st out of 60 brokers on volume and value traded during 2012.

Vunani Private Clients performed exceptionally in the Business Day Investors’ monthly stockbroker of the year 2012 awards. The business was voted second in the customers’ choice award and scored

well on service, trading platform, cost and trading advice and research. In addition, the survey scored Vunani Private Clients four and a half stars out of a possible five for its range of instruments.

The Vunani Capital markets also received its share of accolades, with the team being awarded the honour of Best Cash Bonds House at the spire Awards in late 2012.

Revenue from this segment decreased by 5% from R50.7 million in 2011 to R48.1 million in 2012. Profitability deteriorated slightly with the reportable segment loss in 2011 amounting to R0.8 million, while in 2012 it amounted to a loss of R1.5 million.

Key challenges faced by institutional securities brokers include volatile markets, which has resulted in lower trading volumes and reduced margins resulting from charging clients competitive market rates, but while still being subjected to increased trade costs.

The group’s interests in retail securities broking services are in a developmental stage and are currently not reflecting a profit.

Properties

subsequent to the successful listing of Vunani Property Investment Fund limited in August 2011, the commercial office dominated fund has outperformed its sector and posted excellent results. Vunani Properties is the external asset manager to Vunani Property Investment Fund. The investment in Vunani Property Investment Fund was included in the investment holdings segment as they are a listed investment.

Prudent management and cost control by Rob Kane and his team has led to a decrease in vacancies across the portfolio. Vunani Property Investment Fund acquired two additional properties during the year, with further pipeline opportunities anticipated during the current financial year. The office sector remains impacted by low economic growth rates, which is expected to continue in the medium term.

Furthermore, Vunani Properties has access to prime commercial, retail and industrial

sites and a number of development projects are under consideration.

Property asset management

segment revenue increased from R6.3 million to R7.0 million. The segment reported a profit of R2.4 million compared to a loss of R0.7 million in 2011. The key revenue driver is the asset management fee based on the enterprise value of Vunani Property Investment Fund, which is defined as Vunani Property Investment Fund’s market capitalisation, plus liabilities, less cash. Vunani Property Investment Fund’s enterprise value at 31 December 2011 is R1.0 billion and at 31 December 2012 was R1.5 billion.

Property investments and developments

A number of development assets were approaching maturity by the conclusion of 2012. The segment reflected revenue of R7.9 million in 2012 from development management fees earned on completed portions of developments.

equity accounted earnings from associates increased as a result of revenue being recognised on completed developments and fair value adjustments on the investment property held within the associates.

Group

During the year, an extensive cost-cutting exercise was embarked on. This segment reflects the majority of the benefit of that process, with overall segment losses being reduced from R33.4 million in 2011 to R8.3 million in 2012.


VUNANI AT A GLANCE

ANNUAL FINANCIAL


24 VUNANI LIMITED

The board strives to ensure that the interests of all our stakeholders are properly protected and adherence to the principles of good corporate governance advocated by King III remains a group commitment. It is the intention of all directors that the principles of integrity and the highest ethical standards are upheld by all who serve the group and its stakeholders. The board is dedicated to ensuring that Vunani achieves the highest standards of corporate governance. The board is committed to governance processes based on integrity, transparency, independence and accountability and recognises that this is a developing process that serves all stakeholders alike.

During the year under review the board continued the process of improving the compliance with the recommendations as set out in King III and, as detailed below has complied with the Jse listing Requirements in regard thereto during the review period except as regards the appointment of a company secretary on an arm’s-length basis (refer to page 28).

In line with King III, the directors will continue to state the extent to which the company applies good corporate governance principles to create and sustain value for stakeholders over the short, medium and long term and to explain any instances of non-compliance. Please refer to pages 31 and 32 for a detailed review of King III as it applies to the group.

Board of directorsThe board composition reflects people with different skills, knowledge and experience. Details of the group’s directors are provided on pages 8 and 9 of this integrated report. The board met six times during the past year. The attendance of these meetings is set out in the table opposite. The executive directors meet more regularly to ensure there is effective and meaningful control exercised over the affairs of the group.

Vunani’s memorandum of Incorporation (“moI”) requires one-third of the directors of the company to retire by rotation and to offer themselves for re-election by shareholders at the annual general meeting, with the exception of the Chief executive officer and managing Director. In accordance with the company’s moI, eC Chimombe-munyoro and WC Ross retire by rotation at the company’s forthcoming annual general meeting. The re-election of directors will be dealt with via individual resolutions.

King III recommends that the majority of the non-executive directors be independent and, accordingly, all the Vunani non-executive directors are independent in terms of both the King III definition and the Jse listing Requirements. There are no service contracts for non-executive directors.

The non-executive directors do not participate in the share incentive scheme and none of them have served for a period longer than seven years. The board will continue to measure their independence, in line with policy. It was confirmed that the independent non-executive directors:

¢¢ were not representative of any shareholder with the ability to control or materially influence management or the board;

¢¢ were not employed by the group in any executive capacity in the last three financial years;

¢¢ were not members of the immediate family or of an individual who is, or has been in any of the past three financial years, employed by the group in an executive capacity;

corporate governance report

The board of directors endorses the Code of Corporate Practices and Conduct as contained and recommended in the King Report on Corporate Governance, the Companies Act, 71 of 2008, and the JSE Limited Listing Requirements as these apply to AltX-listed companies.

25


¢¢ were not professional advisors to the group, other than in the capacity as a director;

¢¢ were not suppliers to the group, or to clients of the group;

¢¢ did not have material contractual relationship with the group;

¢¢ did not have a business or other relationship which could be seen to materially interfere with their capacity to act in an independent manner.

The executive directors are involved in the day-to-day operations of the group and have service contracts with the group terminable upon one month’s written notice. no executive director has a fixed term contract.

The company has five executive directors. The executive directors are individually mandated and held accountable for, inter alia:

¢¢ the implementation of strategies and key policies determined by the board;

¢¢ managing and monitoring the business and affairs of the group in accordance with approved business plans and budgets;

¢¢ prioritising the allocation of capital and other resources; and

¢¢ establishing the best managerial and operational practices.

At year-end BA Khumalo resigned from his position as an independent non-executive director of the group.

Board CharterThe composition, scope of authority, responsibility and function of the board is contained in a formal charter, which is reviewed on a regular basis.

The main purpose of the Board Charter is to regulate the parameters within which the board operates and to ensure the application of principles of good corporate governance. The charter requires the board to represent and promote the legitimate interests of the group and its stakeholders in a manner that is both ethical and sustainable.

The charter states that directors are required to:

¢¢ exercise effective leadership;

¢¢ exercise integrity and judgement;

¢¢ act fairly;

¢¢ be accountable;

¢¢ take responsibility; and

¢¢ embrace transparency and ethical business conduct.

The Board Charter governs the level of authority and responsibilities of the board to ensure a balance of power is maintained.

All executive directors are shareholders in the company. The directors’ interests are disclosed in the directors’ report and note 41.

The board’s key roles and responsibilities are, inter alia, to:

¢¢ promote the interests of stakeholders;

¢¢ formulate and approve strategy;

¢¢ take into account corporate governance, risk management and internal control policies and structures;

¢¢ retain effective control;

¢¢ be ultimately accountable and take responsibility for the performance and affairs of the company.

Directors’ induction and trainingA Jse AltX induction programme is in place and it is mandatory for all new directors to attend this course. The cost of attending appropriate external training courses is paid by the company. As the Jse AltX induction training is wide-ranging, a programme specific to the group will be formulated and implemented during the course of the 2013 financial year to cater for further continuing education and training.

Board meetingsThe agenda and supporting papers for board meetings are distributed to all directors ahead of each meeting. explanations and motivations for items of business requiring decisions are provided in the meeting by the appropriate executive director. Discussions at board meetings are open and constructive, free of domination, and consensus is sought on items requiring decisions. no one director has unfettered powers of decision-making. When necessary, decisions are also made by directors between meetings by written resolution as provided for in the company’s moI and the Companies Act. When using written resolutions outside of meetings, directors receive complete background information and evaluations as would normally have been made available at

Directors

23 mar 2012

28 mar 2012

20 Jun 2012

29 aug 2012

29 sept 2012

5 dec 2012

Executive ✓ ✓ ✓ ✓ ✓ ✓

eg Dube ✓ ✓ ✓ ✓ ✓ ✓

Bm Khoza ✓ ✓ ✓ ✓ ✓ ✓

nm Anderson ✓ ✓ ✓ ✓ ✓ ✓

Ce Chimombe-munyoro ✓ ✓ ✓ ✓ ✓ ✗

A Judin ✓ ✓ ✓ ✓ ✓ ✓

Independent non-executive

WC Ross (Chairman) ✓ ✓ ✓ ✓ ✓ ✓

BA Khumalo ✓ ✓ ✓ ✓ ✓ ✓

ns mazwi ✓ ✓ ✓ ✓ ✓ ✗

g nzalo ✓ ✓ ✓ ✓ ✓ ✓

JR macey ✓ ✓ ✓ ✓ ✓ ✓

Board meeting attendance


VUNANI AT A GLANCE

ANNUAL FINANCIAL


26 VUNANI LIMITED

a board meeting. These resolutions are noted at the next formal board meeting. Directors are entitled to have access to all relevant company information, records, executive officers and senior management. Directors are apprised whenever relevant and kept abreast of any new legislation and changing commercial risks that may affect the business interests of the company. In fulfilling their responsibilities, directors may seek professional advice from external professional advisors at the company’s expense. The company’s Jse-registered Designated Advisor attends all board meetings.

Board evaluationIn view of the current priority of restoring the group to profitability and generating wealth for its shareholders, the board, while recognising the importance of conducting an evaluation of its performance, constitution, leadership and supporting structures, has temporarily decided to delay conducting a formal evaluation as recommended by King III. A comprehensive board evaluation will take place in the 2013 financial year.

Board appointments

A nomination committee has not been appointed. The functions of a nomination committee have historically been performed by the remuneration committee; however, these have not been formalised into the remuneration committee’s charter. During the 2013 financial year, a nomination committee will be formed and constituted according to the requirements of King III and the Jse listing Requirements.

Board sub-committeesThe board has appointed the following sub-committees to assist it in the performance of its duties:

¢¢ Audit and risk committee

¢¢ Remuneration committee

¢¢ Investment committee

¢¢ social and ethics committee

corporate governance report (continued)

Audit and risk committee meeting attendance

Directors

16 mar 2012

13 Jun 2012

23 aug 2012

21 nov 2012

g nzalo (non-executive chairman) ✓ ✓ ✓ ✓

JR macey ✓ ✓ ✓ ✓

ns mazwi ✓ ✓ ✓ ✓

Audit and risk committeeThis committee, established by the board, has specific responsibilities as set out in the audit and risk committee terms of reference approved by the committee and the board.

The committee consists of independent non-executive directors named below:

¢¢ g nzalo (chairman)

¢¢ JR macey

¢¢ ns mazwi

As recommended by King III and the Jse listing Requirements, the chairman of the board is not a member of the audit and risk committee.

The group’s managing director and chief financial officer, together with representatives from internal and external audit are invited to and attend all audit and risk committee meetings.

The audit and risk committee is responsible, inter alia, for:

¢¢ reviewing the effectiveness of risk management, controls and governance processes;

¢¢ setting the principles for recommending the use of the external auditors for audit services and other non-audit services;

¢¢ setting the principles for recommending the use of the internal auditors for internal audit services;

¢¢ satisfying itself, on an annual basis, of the appropriateness of the expertise and experience of the chief financial officer;

¢¢ performing an annual assessment of the independence of the external auditors;

¢¢ reviewing and approving external audit budgets and staffing to ensure critical risk areas of the business are effectively addressed;

¢¢ reviewing the effectiveness of the company’s systems of internal control, including internal financial control and business risk management and the maintenance of effective internal control systems;

¢¢ reviewing, approving and recommending to the board the approval of the internal audit charter, internal audit plans and internal audit’s conclusions with regard to internal control;

¢¢ reviewing the co-operation and co-ordination between the internal and external audit functions and co-ordinating the formal internal audit work plan with external auditors to avoid duplication of work;

¢¢ reviewing the accounts and financial statements taken as a whole to ensure they present a balanced and understandable assessment of the position, performance and prospects of the company;

¢¢ reviewing compliance matters that could have a significant impact on the financial statements;

¢¢ monitoring the ethical conduct of the company, its executives and senior officials; and

¢¢ reviewing compliance with the law and regulations of any other applicable statute and of controlling bodies.

As required in terms of the Jse listing Requirements, the company’s Designated Advisor attended all the audit and risk committee meetings.

Representatives from internal and external audit also attend all audit and risk committee meetings.

Attendance at the audit and risk committee meetings during the course of the current financial year was as follows:

27


Remuneration committeeThe remuneration committee is chaired by WC Ross and includes BA Khumalo. The committee meets at least annually and is responsible, inter alia, for:

¢¢ reviewing the performance of the executive directors;

¢¢ determining the remuneration strategy, conditions of employment and remuneration packages of executives;

¢¢ determining the remuneration structure for non-executive directors;

¢¢ the approval of cost of living adjustment, market-based salary adjustments and performance-based incentives; and

¢¢ the approval of the terms of and the allocation awards of any scheme providing performance-based incentives.

The board is of the opinion that the chairman’s role on the remuneration committee does not affect his independence, however, the position of chairman of the remuneration committee will be reviewed in 2013 to ensure compliance with King III.

Investment committeeThe investment committee has been established in terms of the investment committee charter approved by the board of directors and operates within the parameters set by the board, which are embodied within the investment committee charter. The primary purpose of the investment committee is to consider projects, acquisitions and the disposal of assets in line with the group’s overall strategy.

The committee members are:

¢¢ JR macey (non-executive chairman)

¢¢ WC Ross

¢¢ eg Dube

¢¢ nm Anderson

¢¢ nP Riley (representative of Investec Bank limited)

As part of the restructure agreement signed in 2010, Investec Bank limited, a significant shareholder of Vunani’s parent company, Vunani group Proprietary limited, is entitled to appoint one representative to the investment committee. This appointment provides additional expertise to the committee in its decision-making process.

The responsibilities and duties of the investment committee include, but are not limited to:

¢¢ the disposal or transfer of any business, share, asset or other investment within the limits of authority;

¢¢ the establishment of, or the acquisition or purchase of any business, either directly or indirectly by means of purchasing shares or an interest in or assets of the entity to which such business may belong, within the limits of authority;

¢¢ the encumbering of any assets in any manner whatsoever;

¢¢ any transactions or agreements with related parties as defined in the Jse listing Requirements;

¢¢ the liquidation or winding-up, de-registration or the discontinuance or suspension of any business activities;

¢¢ the implementation of any re-structuring, merger or any joint venture agreements;

¢¢ amendment of the moI of any designated group company;

¢¢ any variation to the authorised and/or issued share capital or rights attaching to any shares or class of shares of any designated group company;

¢¢ any matter relating to the financing of capital or borrowings which would have the effect of directly or indirectly reducing the proportionate shareholding of any ordinary shareholder in a designated group company;

¢¢ the issue of guarantees or other similar undertakings of any nature;

¢¢ a change in the business of any designated group company; and

¢¢ performing such other investment-related functions as may be designated by the board from time to time.

The committee’s limits of authority are as follows:

Category 1 investments – all investments up to and including R2 million are the sole responsibility of the executive management of Vunani and these investments do not require committee or board approval.

Category 2 investments – all investments in excess of R2 million and up to a maximum of R30 million require approval by the committee. These investments do not require board approval.

Category 3 investments – all investments relating to an exposure in excess of R30 million are reviewed by the committee. Any approved investment proposal is referred to the board together with the committee’s recommendation for the board’s final determination.

Attendance at the investment committee meetings during the year is reflected in the table at the foot of the page.

Social and ethics committee

The social and ethics committee was established in terms of the Companies Act during march 2012. The committee is chaired by ns mazwi and includes A Judin, Ce Chimombe-munyoro and A Zuma. The committee met once during the current financial year; however, going forward, the committee will meet at least three times annually. The social and ethics committee terms of reference was approved by the committee and by the board.

Investment committee meeting attendance

19 Jun 2012

11 nov 2012

21 nov 2012

14 dec 2012

JR macey (non-executive chairman) ✓ ✓ ✓ ✓

WC Ross ✓ ✓ ✓ ✓

eg Dube ✓ ✓ ✓ ✓

nm Anderson ✓ ✓ ✓ ✓

nP Riley ✓ ✓ ✓ ✓


VUNANI AT A GLANCE

ANNUAL FINANCIAL


28 VUNANI LIMITED

The committee assists the board in discharging its duties relating to:

¢¢ the group’s legal obligations;

¢¢ prevailing codes of good practice pertaining to social and economic development;

¢¢ good corporate citizenship;

¢¢ the environment;

¢¢ health and public safety;

¢¢ consumer relations;

¢¢ compliance with applicable laws and regulations.

Internal audit

During 2011, nkonki Inc. was appointed as an external provider of internal audit services to the group. An internal audit plan for the 2012 financial year was presented to and approved by the audit and risk committee in 2011. The internal audit plan is based on an assessment of risk areas identified by internal audit and management. The approved internal audit plan was executed in various stages during the 2012 financial year. The first step in this process was an assessment of the adequacy and effectiveness of the group’s system of internal controls and risk management, using a risk-based approach.

Internal audit is governed by a formal internal audit charter which is reviewed and approved by the audit and risk committee. The charter sets out the key responsibilities of the internal audit function as well as the scope of the function. The key responsibilities of the internal audit function are listed below:

¢¢ evaluating the group’s governance processes including ethics;

¢¢ performing an objective assessment of the effectiveness of risk management and the internal control framework;

¢¢ systematically analysing and evaluating business processes and associated controls; and

¢¢ providing a source of information, as appropriate, regarding instances of fraud, corruption, unethical behaviour and irregularities.

Internal audit reports directly to the audit and risk committee and nkonki Inc. representatives attended all audit and risk committee meetings during the year.

At each meeting, they provided feedback to the committee covering progress on the audit plan, areas of significant control weakness and recommendations to correct these weaknesses.

Dealing in securities

A formal policy has been adopted whereby directors, company secretary and employees are prohibited from trading in the group’s securities during defined closed periods. These closed periods run from the end of the interim and annual reporting periods, until the financial results are disclosed on the securities exchange news service (“sens”).

In terms of the Jse listing Requirements, the directors, the group company secretary and directors of major subsidiaries require advance approval from the chief executive officer or chief financial officer, for dealings in Vunani shares. once executed, appropriate disclosure is released on sens.

Governance of information technology

The group has an appointed information technology manager who is responsible for IT governance at group level. All the major subsidiary and associated companies are responsible for IT governance in their respective business environments. In terms of the Board Charter, the board assumes responsibility for the overall supervision of IT risk.

Financial reporting

The group provides financial reports to its shareholders twice a year. Details regarding significant transactions undertaken are reported as required by the Jse listing Requirements.

Company secretaryAphrodite Judin, the group chief financial officer, currently fulfils the role of company secretary for the group. The board recognises that in terms of King III and the Jse listing Requirements the company secretary should not be an executive director, so as to ensure an arm’s length relationship is maintained with the board. The board is reviewing the role of the company secretary and intends appointing a new company secretary in the 2013 financial year.

once a new company secretary has been appointed, the board will, in terms of the Jse listing Requirements, consider and satisfy itself, on an annual basis, of the competence, qualifications and experience of the company secretary and will report to shareholders in the integrated report as to how it has executed this responsibility.

Despite the above mentioned intended review, the board has satisfied itself as to the competence, qualifications and experience of the current company secretary.

Industry associationsVunani is represented at the following industry associations or organisations:

¢¢ Vunani securities, Vunani Capital markets and Vunani Fund managers are members of the Jse (www.jse.co.za)

Certain Vunani employees are members of the following professional associations:

¢¢ The south African Institute of Chartered Accountants (www.saica.co.za);

¢¢ The south African Institute of stockbrokers;

¢¢ Chartered Financial Analyst charter holders (www.cfasa.ac.za);

¢¢ The Investment Analysts society of southern Africa (www.iassa.co.za); and

¢¢ Registered with the Jse as Approved executives.

Certain Vunani group companies are:

¢¢ licensed as financial service providers by the Financial services Board (www.fsb.co.za);

¢¢ Registered with the Jse as a sponsor in terms of the Jse listing Requirements; and

¢¢ members of the Association for savings and Investment south Africa (www.asisa.co.za)

corporate governance report (continued)

29


remuneration report

Remuneration is key to the group as incentivising and retaining our employees is central to the group’s strategy. Vunani’s remuneration policy sets out the group’s intention to attract and retain critical talent as well as to motivate employees to perform in the best interests of the company and its stakeholders. The remuneration committee assists the board in ensuring that group remuneration and recruitment is aligned with overall business strategy.

Remuneration governance

The remuneration committee is chaired by WC Ross and includes BA Khumalo. At year-end BA Khumalo resigned from the committee and JR macey was appointed in his place. The committee meets at least annually, but more frequently if required.

The remuneration committee is an independent and objective body which is responsible for assessing non-executive and executive remuneration, as well as determining short-term and long-term remuneration for executives and staff.

The committee is responsible for determining the remuneration strategy and conditions of employment for executives.

Remuneration philosophy and policy

The group recognises that it operates in a competitive environment and that its performance depends on the quality of its people. The group wishes to provide a level of remuneration which attracts, retains and motivates employees of the highest calibre.

The group defines total remuneration as a combination of all types of rewards, including financial and non-financial, and direct and indirect. The group’s position is to pay for performance, while ensuring that there is a distribution of remuneration around the market median.

Summary of key remuneration philosophies¢¢ Performance conditions have

been determined to align with the business strategy and to maximise shareholder value;

¢¢ ensure remuneration arrangements are equitable;

¢¢ Total remuneration is set at levels that are relevant and competitive within the market;

¢¢ Consistency across the group;

¢¢ Fairness and transparency; and

¢¢ encourage a focus on long-term sustained performance.

Components of total remuneration

General remuneration

The levels of basic remuneration are reviewed and revised annually. The criteria that have been adopted for determining pay increases are as follows:

¢¢ CPI (Inflation);

¢¢ market comparison;

¢¢ Individual performance;

¢¢ Affordability based on group budgets; and

¢¢ group performance.

Remuneration consists of the following components:

¢¢ Basic salary;

¢¢ short- and long-term incentive plans;

¢¢ medical aid; and

¢¢ Provident fund.

Annual salary increases are approved by the remuneration committee. Provident fund contributions are based on scale of 10% to 20% of the annual total remuneration package, as elected by the individual employees. These contributions ensure monetary security and dignity to employees and their beneficiaries (on retirement, death or disability).


VUNANI AT A GLANCE

ANNUAL FINANCIAL


30 VUNANI LIMITED

Short-term incentive plan

Annual incentive bonuses are paid if key performance targets, including but not limited to financial targets, are met.

All employees participate in the group’s incentive bonus scheme. The bonus is conditional on performance and is paid annually, subject to the achievement of group and divisional targets combined with key performance indicators agreed to by the chief executive and the remuneration committee.

Long-term incentive plan

Share option scheme

The group has a share scheme in place which was introduced in June 2011, whereby employees were entitled to acquire shares in the company. At 31 December 2012, 20% of the shares issued in June 2011 had vested.

In December 2012 the board passed a resolution authorising the share trust to issue additional shares to employees. The shares were issued at the closing price of the company’s shares on the Jse on 13 December 2012.

The purchase price was funded by the Vunani share Incentive scheme Trust (“VsIsT”) and, in turn, the employees became indebted to the VsIsT for the value of the shares offered. The shares are pledged as security to the VsIsT until the employee has settled the debt. The employee’s debt includes interest which will be charged and rolled up with the outstanding debt at the official rate as published by the south African Revenue service from time to time.

employees are entitled to settle the outstanding debt though the sale of the shares once they have vested as set out below:

Vesting of shares

The shares vest in tranches as follows:

¢¢ 20% of the shares after the 1st anniversary of the acceptance date;

¢¢ 25% of the shares after the 2nd anniversary of the acceptance date;

¢¢ 25% of the shares after the 3rd anniversary of the acceptance date; and

¢¢ 30% of the shares after the 4th anniversary of the acceptance date.

employees may instruct the trustees to sell the shares once they have vested. The proceeds on disposal of shares and any dividends declared by the group shall firstly be used to settle debt.

Executive directors’ remuneration

The group aims to adhere to the broad guidelines of executive remuneration set out in King III. The overall principles applied consist of the following:

¢¢ establish appropriate and competitive balance between fixed and variable remuneration structure to achieve performance excellence;

¢¢ establish a performance-oriented culture with a pay-for-performance approach that aligns with sustainable shareholder value;

¢¢ Appropriately analyse market and industry benchmarks to ensure competitive remuneration aligned to market median; and

¢¢ Drive sustainable business results through short-term and long-term performance-driven incentives.

The executive directors have service contracts with the group terminable upon one month’s written notice. no executive director has a fixed term contract.

For details of the executive directors’ remuneration refer to note 41 to the annual financial statements.

Non-executive directors’ remuneration

The level of fees paid to non-executive directors is reviewed by the remuneration committee on an annual basis. For details regarding fees paid during the current and prior year, refer to note 41 to the annual financial statements.

There are no service contracts for non-executive directors.

non-executive directors do not participate in the group’s incentive bonus plan or share option scheme. There were no direct or indirect beneficial holdings in the current or prior year.

The fees paid to non-executive directors are approved annually in advance at the annual general meeting.

remuneration report (continued)

31


king iii checklist

King IIIThe Institute of Directors of south Africa (“IoDsA”) is the convener of the King Committee and the custodian of the King Reports. It is one of the main objectives of the IoDsA to promote corporate governance, and one of the best ways to do this is to enable application of the King Report on governance in south Africa, 2009 (“King III”).

Challenges with King IIIThere are two primary challenges for organisations when attempting to implement King III:

1. King III has to be interpreted and understood within the nature, size and complexity of an organisation.

2. There has been no credible and generally accepted national benchmark to measure and compare application of King III.

Challenges avertedTo assist with the above challenges, the IoDsA has developed the governance Assessment Instrument (“gAI”), an online tool that will assist in the following ways:

1. evaluating implementation of governance structures and processes as recommended in King III;

2. enabling ongoing tracking of progress on implementation of King III, understanding that its a process;

3. Providing a simplified framework to the board for a risk-based review of the application of King III, without voluminous reading;

4. Facilitating a meaningful scoring mechanism reflective of an organisation’s adoption of King III;

5. Providing a framework by which governance can be assured by independent service providers;

6. giving holding companies a concise view of their subsidiaries’ governance status;

7. Providing an audit programme for internal and external service providers; and

8. offering a reporting benchmark to stakeholders, that is fit for peer-to-peer comparison of organisations, enhancing confidence in governance reporting.

The gAI calculates an overall score indicating the status of application of King III as follows:

Ratings keyAAA – Highest applicationAA – High applicationBB – notable applicationB – moderate applicationC – Application to be improvedL – low application

Vunani made use of the gAI for the purposes of assessing the level of compliance with King III, which results in the scores per category as detailed below. Details of the full checklist have been included on our website www.vunanilimited.co.za. Vunani’s overall rating in terms of the gAI is AA. Vunani strives to improve its compliance with King III and additional information is provided on all scores below AA.

Category Category score

1. Board composition AAA

2. Remuneration AAA

3. governance office bearers AA

3.1 Chairman AAA

3.2 Ceo AA

3.3 Company secretary B

4. Board roles and duties BB

4.1 Focal point of corporate governance AAA

4.1.1 Fiduciary duties AAA

4.1.2 strategy AA

4.1.3 ethical leadership C

4.2 Corporate citizenship and leadership AA

4.2.1 Risk BB

4.2.2 IT governance C

4.2.3 Compliance AA

4.2.4 Internal audit AAA

4.2.5 Business rescue AAA

5. Accountability AAA

5.1 stakeholder relations AAA

5.2 Integrated reporting and disclosure AAA

6. Performance assessment l

7. Board committees AA

7.1 Audit committee AAA

7.2 Risk committee AAA

7.3 Remuneration committee AA

7.4 nomination committee l

7.5 social and ethics committee AAA

8. group boards C


VUNANI AT A GLANCE

ANNUAL FINANCIAL


32 VUNANI LIMITED

king iii checklist (continued)

Company secretary

King III and Jse listing Requirements require that the company secretary is an individual who is not an executive director. Currently, the role is filled by the group CFo, Aphrodite Judin. The board is in the process of reviewing the role of the company secretary, which includes appointing a company secretary who is not an executive director of the group. In addition, the role of the company secretary will become more prominent within the group. The roles and responsibilities of the company secretary will be amended and clearly based on the increased level of responsibility.

Ethical leadership

The board is responsible for ensuring that management endorses a culture of ethical conduct and sets the values to which the company should adhere. These values are to be incorporated in a code of conduct. The group is currently reviewing the code of conduct that exists to ensure that it adequately encapsulates the ethical conduct and culture which the board strives to achieve. It is anticipated that this process will be completed in the 2013 year.

Risk

Detailed risk assessments have been performed for the key operating subsidiaries within the group. While the boards of those subsidiaries have been involved in compiling the risk registers and monitoring the risks, the board is required to have oversight of the key risks within the group. While this has been performed at a strategic level, the board, through the audit and risk committee will be performing a detailed review of the risk registers during the 2013 financial year. The review will include the identification and description of the risk, potential impact, identified compensating controls, residual risk and corrective action required. Through this process, the board will set the levels of risk tolerance, which will be reviewed annually.

IT governance

The reliance on IT within the group varies from subsidiary to subsidiary based on the nature of their operations. Certain subsidiaries are much more dependent on IT while others are not so reliant. The board assumes responsibility for the group’s IT governance and a high level risk assessment relating to IT governance has been performed. IT governance is also a standing item on the audit and risk committee agenda. This area does, however, require improvement in order to comply with the requirement of King III from a group perspective. A manager responsible for IT governance has been appointed and he has regular interaction with senior executives in the group. In 2013, the following will be put in place:

¢¢ An IT governance framework that supports the effective and efficient management of IT resources within the group;

¢¢ An IT charter will be established and implemented;

¢¢ An IT strategy will be formally documented; and

¢¢ An updated IT risk register.

Performance assessment

In view of the current priority of restoring the group to profitability and generating wealth for its shareholders, the board, while recognising the importance of conducting evaluations of its performance, constitution, leadership and supporting structures, has temporarily decided to delay conducting a formal evaluation as recommended by King III. A comprehensive evaluation on the role, function and duties of the board, the board committees and individual directors will take place in the 2013 financial year.

Nomination committee

A nomination committee has not been appointed. The functions of a nomination committee have historically been performed by the remuneration committee; however, these have not been formalised into the remuneration committee’s charter. During the 2013 financial year, a nomination committee will be formed and constituted according to the requirements of King III and the Jse listing Requirements.

Group boards

King III requires that a documented governance framework is in place between the group and its subsidiaries. A formal governance framework between Vunani and its subsidiaries is not currently in place; however, the boards of all subsidiaries in the group include at least one Vunani executive director. The group’s interests in the subsidiary companies are represented through these appointments. Vunani directors are provided with feedback at all board meetings regarding developments and the performance of subsidiary companies.

sTAKeHolDeR engAgemenT

Funders

� stock exchange news service (sens)

� Interim and annual results publications

� Investor presentations

� In depth one-on-one presentations to various clients and prospective clients

� Facilitation of workshops� Advertising� Corporate website� newsletters

� Personal contact with regulatory and industry associations such as Jse, FsB, sARs and Department of labour

� Contact via compliance advisors

� open door policy to all employees

� Performance reviews� Bi-annual newsletters� staff training

� Personal contact with strategic service providers

� Distribution of press releases

� Interviews by key executives

To build positive relationships

with the media.To maintain a

positive profile in the media

aligned to the company’s

goals.effective

communication is fundamental

to the success

of the company

To ensure compliance

with all regulatory requirements

To obtain

feedback on our products and

services, promote our services

and obtain feedback on customer needs

� To ensure we can continuously service our clients’ needs

To present a transparent view of our business.

obtaining finance and

investment solutions

financial results, group

performance, strategy, risks

and opportunities

To keep stakeholders and the investor

community updated on our

To understand

any service provider’s

concerns and ensure

that service providers

adhere to the

company’s standards

To ensure that staff goals are

methods of engagem

ent

Reasons foR engagemen

t

Employees

Media

key stakehold

eRs

� Constant interaction with funders’ top executives

� specific funders attend board meetings and are represented on the investment committee

� ongoing discussions with investment analysts,

institutional investors and journalists in

south Africa

Suppliers and service

providers

Shareholdersand investor

community

ClientsRegulatory authorities


33

3

Directors’ statement of responsibilities and approval of annual financial statements 35

Report of the audit and risk committee 35

Directors’ report 36

Certification by company secretary 36

Independent auditor’s report 37

Consolidated statement of comprehensive income 38

Consolidated statement of financial position 39

Consolidated statement of changes in equity 40

Consolidated statement of cash flows 41

Notes to the consolidated financial statements 42

Company annual financial statements 100

The annual report has been audited in terms of section 30 of the Companies Act of South Africa, 2008.

The annual report was published on 21 May 2013.

The annual report has been prepared under the supervision of the Group Chief Financial Officer, Aphrodite Judin, CA(SA).

annual financial statements

34 VUNANI LIMITED


35

directors’ statement of responsibilities and approval of the annual financial statements

the directors are responsible for the preparation and fair presentation of the consolidated and separate annual financial statements of Vunani limited comprising the statements of financial position at 31 December 2012, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, in accordance with international financial Reporting standards and the requirements of the companies act of south africa. in addition, the directors are responsible for preparing the directors’ report.

the directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.

the directors have made an assessment of the ability of the company and its subsidiaries to continue as a going concern and have no reason to believe that the businesses will not be going concerns in the year ahead.

the auditor is responsible for reporting on whether the consolidated and separate annual financial statements are fairly presented in accordance with the applicable financial reporting framework.

ApprOVAL OF CONSOLIDATED AND SEpArATE ANNUAL FINANCIAL STATEMENTSthe consolidated and separate annual financial statements of Vunani limited, as identified in the first paragraph, were approved by the board of directors on 3 may 2013 and are signed by:

EG Dube A Judin

Chief Executive Officer Chief Financial Officer

authorised director authorised director

3 may 2013, sandton

report of tHe audit and risk committee

the audit and risk committee (“the committee”) reports that it has considered the matters set out in section 94(7)(f) of the companies act and is satisfied with the independence and objectivity of the external auditor, KPmG inc.

the committee has considered and approved the fees payable to the external auditor and is satisfied with the extent of non-audit-related services performed.

the committee consists of three members, each of whom are independent non-executive directors and who have the requisite financial skills and experience to contribute to the committee’s deliberations. the committee met four times during the year with the managing director, chief financial officer, group financial manager and representatives from external and internal audit attending each meeting by invitation.

the committee has satisfied itself that the financial function, including the chief financial officer, has the appropriate expertise, experience and resources, and is satisfied that the internal financial controls of the company and group are working effectively.

a board-approved audit and risk committee charter stipulating, inter alia, the committee’s composition, duties and responsibilities, has been adopted. the committee is satisfied that it complied with the responsibilities as set out in the audit and risk committee charter as well as relevant legal and regulatory responsibilities.

the audit and risk committee is satisfied that the external auditor is independent of the company. the audit and risk committee has approved a threshold for the external auditor providing non-audit services. this threshold has been capped at 15% of the approved audit fee.

Based on the information and explanations given by management and discussions with internal audit and the independent external auditor regarding the results of their audits, the committee is satisfied that there was no material breakdown in the internal financial controls during the financial year under review. the committee has evaluated the financial statements of Vunani limited and the group for the year ended 31 December 2012 and, based on the information provided to the committee, considers that the group and company complies, in all material respects, with the requirements of the companies act of south africa, 2008, the saica financial Reporting Guide issued by the accounting Practices committee and international financial Reporting standards.

G NzaloChairman of the audit and risk committee

3 may 2013, sandton

ANNUAL FINANCIAL

STATEMENTS

SHAREHOLDER INFORMATION


VUNANI AT A GLANCE

36 VUNANI LIMITED

directors’ report The directors submit their report

for the year ended 31 December 2012VUNANI LIMITED – Group

rEVIEW OF ACTIVITIESMain business and operationsthe company was incorporated on 1 December 1997 and carries on the business of a financial services company with certain strategic investments. it has investments in asset management security trading operations, investment banking, corporate advisory services, property development and investments, and property asset management.

the operating results and state of affairs of the group and company are fully set out in the attached financial statements and do not in our opinion require any further comment.

EVENTS AFTEr rEpOrTING DATE

Refer to note 44 to the annual financial statements.

SpECIAL rESOLUTIONS

the following special resolutions were passed by Vunani and its major subsidiaries:

1. On 8 february 2012, the company passed a special resolution to convert its share capital from par value share to no par value shares.

2. On 10 august 2012, remuneration payable to non-executive directors was approved by a special resolution at the company’s annual general meeting.

3. On 10 august 2012, the approval for the directors to acquire the company’s shares was approved by special resolution at the company’s annual general meeting.

4. On 10 august 2012, the provision of financial assistance (direct or indirect) by way of loan, guarantee or otherwise to the company’s future or present subsidiaries, and/or directors was approved by special resolution at the company’s annual general meeting.

5. On 10 august 2012, the approval of the adoption of the new memorandum of incorporation was approved by special resolution at the company’s annual general meeting.

6. On 2 October 2012, Vunani Properties Proprietary limited passed a special resolution authorising the disposal of certain assets in the company. the proceeds will be used to settle financial liabilities in the company and the balance will be distributed to shareholders.

DIrECTOrS IndependentExecutive directors non-executive directorseG Dube (chief executive officer) Wc Ross (chairman)Bm Khoza (managing director) G nzaloa Judin (chief financial officer) JR maceyce chimombe-munyoro ns mazwinm anderson Ba Khumalo (resigned 31 December 2012)

SECrETArY

a Judin

there have been no changes to the secretary, as well as her roles and responsibilities during the year.

in 2013 a new company secretary, who is not an executive director, will be appointed, in order to comply with Jse listings Requirements and the requirements of King iii.

SHArEHOLDING OF DIrECTOrS

the shareholding of directors in the issued share capital of the company at 31 December 2012 was as follows:

Number ofTotal number

of shares(000’s)

shareholding per director

beneficiallydirect

(000’s)

beneficiallyindirect (000’s)

eG Dube – 23 436 23 436nm anderson – 14 625 14 625Bm Khoza – 14 625 14 625a Judin 86 – 86

86 52 686 52 772

there have been no shares traded by the directors between year-end and the date of approval of the integrated annual report.

certification by tHe company secretaryin my capacity as company secretary, i hereby certify, that for the financial year ended 31 December 2012, Vunani limited has filed with the companies and intellectual Properties commission, all such returns and notices as are required in terms of the companies act of south africa, and that all such returns appear to be true, correct and up to date.

A Judin

Company Secretary

3 may 2013, sandton


37

independent auditor’s reportfor the year ended 31 December 2012

VUNANI LIMITED – Group

TO THE SHArEHOLDErS OF VUNANI LIMITEDWe have audited the consolidated and separate financial statements of Vunani limited, which comprise the statements of financial position as at 31 December 2012, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 38 to 112.

Directors’ responsibility for the financial statements

the company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with international financial Reporting standards and the requirements of the companies act of south africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our 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.

Opinion

in our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Vunani limited as at 31 December 2012, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with international financial Reporting standards, and the requirements of the companies act of south africa.

Other reports required by the Companies Act

as part of our audit of the financial statements for the year ended 31 December 2012, we have read the Directors’ Report, the audit and Risk committee’s Report and the company secretary’s certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. these reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

KpMG Inc.Registered Auditor

Per G Parkerchartered accountant (sa)Registered auditorDirector

3 may 2013

KPmG crescent85 empire Road, ParktownJohannesburg2193

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

38 VUNANI LIMITED

consolidated statement of compreHensive income

at 31 December 2012VUNANI LIMITED – Group

figures in Rand 000’s note 2012 2011

Continuing operations

revenue 5 107 892 106 755

Other income 6 8 620 9 360investment revenue 7 2 355 4 737 interest received from investments 8 22 557 24 316net profit/(loss) on disposal of assets 9 5 854 (6 099)fair value adjustments and impairments 10 43 786 48 448 Operating expenses 11 (129 129) (153 207)

results from operating activities 61 935 34 310

finance income 12 1 007 754finance costs 12 (48 845) (64 407)

Net finance costs (47 838) (63 653)

Results from operating activities after net finance costs 14 097 (29 343)equity accounted earnings (net of income tax) 18 17 218 5 715

profit/(loss) before income tax 31 315 (23 628)income tax expense 13 (19 560) (1 263)

profit/(loss) from continuing operations 11 755 (24 891)

Discontinued operations

loss from discontinued operations (net of taxation) 14 – (33 944)

profit/(loss) for the year 11 755 (58 835)

Total comprehensive income for the year 11 755 (58 835)

Profit/(loss) from continuing operations and total comprehensive income attributable to: Owners of the company (216) (21 760) non-controlling interest 11 971 (3 131)

11 755 (24 891)

Profit/(loss) and total comprehensive income attributable to: Owners of the company (216) (47 603) non-controlling interest 11 971 (11 232)

11 755 (58 835)

Earnings per share

Basic loss per share (cents)* 37 (0.2) (48.7)Diluted loss per share (cents)* 37 (0.2) (48.7)

* In March 2012, the company consolidated its share capital on a 50:1 basis. Comparative basic loss and diluted loss per share have been adjusted to reflect the effect of the consolidation.



39

consolidated statement of compreHensive income

at 31 December 2012VUNANI LIMITED – Group


AssetsPlant and equipment 15 2 611 4 191Goodwill 16 34 123 34 123intangible assets 16 489 1 466investment property 17 4 000 4 000investments in associates 18 80 073 98 093Other investments 19 73 728 237 981Deferred tax asset 20 40 917 93 886Other non-current assets 21 15 984 4 709

Total non-current assets 251 925 478 449

inventory 22 – 3 287Other investments 19 78 513 181 687Other current assets 21 3 994 –taxation pre-paid 254 154trade and other receivables 23 25 768 21 289accounts receivable from trading activities 24 199 629 95 638trading securities 25 1 564 1 030cash and cash equivalents 26 29 378 17 169

Total current assets 339 100 320 254

Total assets 591 025 798 703

Equitystated capital 27 610 088 –share capital 27 – 527share premium 27 – 609 561treasury shares 27 (14 899) (14 276)share-based payment reserve 32 5 906 2 524accumulated loss (399 578) (399 480)

Equity attributable to equity holders of Vunani Limited 201 517 198 856Non-controlling interest 12 794 13 842

Total equity 214 311 212 698

LiabilitiesOther financial liabilities 28 60 080 103 140Deferred tax liabilities 20 8 610 46 784

Total non-current liabilities 68 690 149 924

Other financial liabilities 28 68 646 298 585current tax payable 29 10 310 445trade and other payables 30 25 861 47 225accounts payable from trading activities 24 200 373 89 407trading securities 25 – 259Bank overdraft 26 2 834 160

Total current liabilities 308 024 436 081

Total liabilities 376 714 586 005

Total equity and liabilities 591 025 798 703

shares in issue (000’s)* 27 and 37 105 415 105 415net asset value per share (cents)* 37 191.2 188.6net tangible asset value per share (cents)* 37 158.3 154.9

* In March 2012, the company consolidated its share capital on a 50:1 basis. Comparative shares in issue, net asset value and net tangible asset value per share have been adjusted to reflect the effect of the consolidation.

consolidated statement of financial position

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

40 VUNANI LIMITED

figures in Rand 000’s note Share capital

Share premium

Stated capital

Treasury shares

Share- based

payment reserve*

Accumu-lated loss

Total attribu -

table to equity

holders

Non-controlling

interest Total

equity

Balance at 31 December 2010 476 601 532 – – – (351 877) 250 131 174 088 424 219total comprehensive income for the yearloss for the year – – – – – (47 603) (47 603) (11 232) (58 835)

Total comprehensive income for the year – – – – – (47 603) (47 603) (11 232) (58 835)

Transactions with owners, recorded directly in equity

issue of shares 27 51 8 029 – – – – 8 080 – 8 080share-based payments 32 – – – – 2 524 – 2 524 – 2 524treasury shares acquired – – – (14 276) – – (14 276) – (14 276)Disposal of subsidiaries – – – – – – – (149 014) (149 014)

Total transactions with owners 51 8 029 – (14 276) 2 524 – (3 672) (149 014) (152 686)

Balance at 31 December 2011 527 609 561 – (14 276) 2 524 (399 480) 198 856 13 842 212 698

* The share-based payment reserve is as a result of employees receiving shares of the company for services rendered. Refer to note 32 for additional information.

figures in Rand 000’s note Share capital

Share premium

Statedcapital

Treasury Shares

Share- based

payment reserve*

Accumu -lated loss

Total attribu -

table to equity

holders

Non-controlling

interest Total

equity

Balance at 31 December 2011 527 609 561 – (14 276) 2 524 (399 480) 198 856 13 842 212 698

total comprehensive income for the yearProfit for the year – – – – – (216) (216) 11 971 11 755

Total comprehensive income for the year – – – – – (216) (216) 11 971 11 755


share capital conversion to no par value shares 27 (527) (609 561) 610 088 – – – – – –

share-based payments 32 – – – 3 382 – 3 382 – 3 382

treasury shares acquired 27 – – – (623) – – (623) – (623)

Dividends paid – – – – – – – (12 901) (12 901)

acquisition of non-controlling interest 35 – – – – – 118 118 (118) –

Total transactions with owners (527) (609 561) 610 088 (623) 3 382 118 2 877 (13 019) (10 142)

Balance at 31 December 2012 – – 610 088 (14 899) 5 906 (399 578) 201 517 12 794 214 311

* The share-based payments reserve is as a result of employees being given the right to acquire shares of the company for services rendered. Refer to note 32 for additional information.

consolidated statement of cHanges in equity



41


Cash flows from operating activities

net cash (utilised)/generated by operating activities 33 (21 628) 8 717investment revenue 7 2 355 4 737finance income 8 and 12 22 084 25 322finance costs (61 304) (19 196)income tax paid 34 (1 914) (3 195)

Net cash (utilised)/generated by operating activities (60 407) 16 385

Cash flows from investing activities

acquisition of property, plant and equipment (486) (3 528)Proceeds on disposal of property, plant and equipment 128 21 117Proceeds on disposal of discontinued operation – 203 601Proceeds on disposal of businesses 3 300 15 600acquisition of business – (150)acquisition of investment property – (5 888)Proceeds on disposal of investment property – 85 040Decrease/(increase) in investments and loans to associates 8 296 (8 573)Proceeds on disposal of associates 2 732 –Proceeds on disposal of non-current assets held for sale – 9 000acquisition of other investments – (129 771)Proceeds on disposal of other investments 190 101 84 954acquisition of other non-current asset (3 950) (802)

Net cash inflow from investing activities 200 121 270 600

Cash flows from financing activities

increase in other financial liabilities 9 516 3 133Repayments of other financial liabilities (139 695) (280 819)

Net cash outflow from financing activities (130 179) (277 686)

net increase in cash and cash equivalents 9 535 9 299cash and cash equivalents at beginning of the year 17 009 7 710

Total cash and cash equivalents at end of the year 26 26 544 17 009

consolidated statement of casH flows


ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

42 VUNANI LIMITED

notes to tHe consolidated financial statements


rEpOrTING ACTIVITIESVunani limited (“the company”) is a company domiciled in south africa. the consolidated and separate financial statements of the company at and for the year ended 31 December 2012 comprise the company and its subsidiaries (together referred to as the “group”) and the group’s interest in special purpose entities and associated entities. the group operates in the financial services industry.

1. BASIS OF prEpArATION

1.1 STATEMENT OF COMpLIANCE

the consolidated and separate financial statements have been prepared in accordance with international financial Reporting standards (“ifRs”), its interpretations adopted by the international accounting standards Board and the requirements of the companies act of south africa, 2008, and the saica financial Reporting Guides issued by the accounting Practices committee.

1.2 BASIS OF MEASUrEMENT

the financial statements are prepared on the historical cost basis, except for certain financial instruments and investment property, which are measured at fair value and disposal groups held for sale, which are disclosed at the lower of the carrying amount and fair value less costs to sell.

1.3 FUNCTIONAL AND prESENTATION CUrrENCY

the financial statements are presented in south african Rand, which is the company’s functional currency.

all financial information presented in south african Rand have been rounded to the nearest thousand unless indicated otherwise.

1.4 USE OF ESTIMATES AND JUDGEMENTS

the preparation of financial statements in conformity with ifRs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. although estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, actual results may differ from these estimates.

the estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the period in which the estimate is revised, if revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

notes 19 and 28 – fair value of financial instruments

note 16 – impairments of goodwill and intangible assets

notes 18 and 42 – impairment losses on loans and advances

note 20 – utilisation of tax losses

1.5 CHANGES IN ACCOUNTING pOLICIES

the group has adopted all standards and interpretations which become effective during the current year. these have had no effect in the financial statements. there have been no changes in accounting policies in the current year.

2. ACCOUNTING pOLICIESthe accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by group entities:

2.1 BASIS OF CONSOLIDATION

the consolidated financial statements include the assets, liabilities and results of operations of the holding company, its subsidiaries, special purpose entities (“sPes”) and investments in associates.

2.1.1 Subsidiaries

subsidiaries are entities controlled by the group. the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. the accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the group.

the company accounts for subsidiaries at cost less accumulated impairment losses in the separate financial statements.

2.1.2 Special purpose entities

the group has established a number of sPes for trading and investment purposes. the group does not have any direct or indirect shareholdings in these entities. sPes are consolidated if, based on an evaluation of the substance of its relationship with the group and the sPes risks and rewards, the group concludes that it controls the sPes. sPes controlled by the group were established under terms that impose strict limitations on the decision-making powers of the sPes’ management and that result in the group receiving the majority of the benefits related to the sPes operations and net assets, being exposed to the majority of risks incident to the sPes’ activities, and retaining the majority of the residual or ownership risks related to the sPes or their assets.


43

2.1.3 Investments in associates

associates are those entities in which the group has significant influence, but not control, over the financial and operating policies. significant influence is presumed to exist when the group holds between 20% and 50% of the voting power of another entity.

investments in associates are accounted for using the equity method (“equity-accounted investees”) and are recognised initially at cost. the group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. the consolidated financial statements include the group’s share of the profit and equity movements of equity-accounted investees, after adjustments to align the accounting policies with those of the group, from the date that significant influence commences until the date that significant influence ceases.

When the group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued, except to the extent that the group has an obligation or has made payments on behalf of the investee.

When the group loses control of a subsidiary and as a result of that the remaining interest is accounted for as an associate, then such interest is measured at fair value at the date that control is lost. subsequently it is accounted for as an equity-accounted investee.

the company accounts for associates at cost less accumulated impairment losses in the separate financial statements.

2.1.4 Transactions eliminated on consolidation

intra-group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the group’s interest in the investee. unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.2 FINANCIAL INSTrUMENTS

2.2.1 Non-derivative financial assets

the group initially recognises loans and receivables and deposits on the date that they are originated. all other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.

the group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. any interest in transferred financial assets that is created or retained by the group is recognised as a separate asset or liability.

financial assets or liabilities are offset and the net amount presented in the statement of financial position when, and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

the group has the following non-derivative financial assets: financial assets at fair value through profit or loss and loans and receivables.

Financial assets at fair value through profit or loss

a financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. financial assets are designated at fair value through profit or loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the group’s documented risk management or investment strategy. upon initial recognition attributable transaction costs are recognised in profit or loss as incurred. financial assets at fair value through profit or loss are initially measured at fair value, and changes therein are recognised in profit or loss, through fair value adjustments and impairments.

Loans and receivables

loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. such assets are recognised initially at fair value plus any directly attributable transaction costs. subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

loans and other receivables comprise trade and other receivables, accounts receivable from trading activities and cash and cash equivalents.

loans to group companies are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.

cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management system are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

44 VUNANI LIMITED

notes to tHe consolidated financial statements (continued)


2. ACCOUNTING pOLICIES (continued)

2.2 FINANCIAL INSTrUMENTS (continued)

2.2.2 Non-derivative financial liabilities

financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.

the group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

the group has the following non-derivative financial liabilities: other financial liabilities at fair value through profit or loss; and other financial liabilities and trade and other payables.

Financial liabilities through profit or loss

the group designates certain financial liabilities at fair value through profit or loss on initial recognition. Ring-fenced special purpose entities have historically been used to house the group’s geared equity investments and any financial liabilities that relate to such investments. financial assets and liabilities that arise in terms of these ring-fenced structures are both fair valued through profit or loss in terms of ias 39.

the reason for the above designation was to reduce the measurement inconsistency on ring-fenced liabilities relative to the assets that they funded. Because the liability to lenders is limited to the value of the assets, if the assets were fair valued through profit or loss and the liabilities carried at amortised cost, inconsistency would arise that would not reflect the true liability of the group. in order to eliminate this inconsistency on ring-fenced structures, these specific liabilities are designated as fair value through profit or loss on initial recognition.

Financial liabilities at amortised cost

Other financial liabilities, accounts payable from trading activities, and trade payables are recognised initially at fair value less any directly attributable transaction costs. subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

2.2.3 Share capital

Ordinary shares

Ordinary shares are classified as equity. incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Preference share capital

Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the company’s option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the company’s shareholders.

Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Dividends thereon are recognised as interest expense in profit or loss as accrued.

Treasury shares

Where share capital is repurchased and held by a subsidiary or sPe, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.

2.3 prOpErTY, pLANT AND EQUIpMENT

2.3.1 recognition and measurement

items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

cost includes expenditure that is directly attributable to the acquisition of the asset. the cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within net profit or loss on disposal of assets.

2.3.2 Subsequent costs

the cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the group, and its cost can be measured reliably. the carrying amount of the replaced part is derecognised. the costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.


45

2.3.3 Depreciation

Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the lease term. land is not depreciated.

the estimated useful lives for the current and comparative periods are as follows:Buildings 20 years

leasehold improvements remaining lease periodmotor vehicles 4 yearsfurniture and fittings 6 yearsOffice equipment 3 – 5 yearscomputer equipment 3 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted, if appropriate.

2.4 BUSINESS COMBINATIONS

the acquisition method is used when a business is acquired. a business may comprise an entity, group of entities or an unincorporated operation including its operating assets and associated liabilities. On acquisition date, fair values are attributed to the identifiable assets, liabilities and contingent liabilities. a non-controlling interest at acquisition date is determined as the non-controlling shareholder’s proportionate share of the fair value of the net identifiable assets of the entity acquired.

fair values of all identifiable assets or liabilities included in the business combination are determined by reference to market values of those or similar items, where available, or by discounting expected future cash flows using the discount rate to present values. When an acquisition is achieved in stages (step acquisition), the identifiable assets or liabilities are recognised at their full fair value when control is obtained, and any adjustment to fair values related to these assets or liabilities previously held as an equity interest is recognised in profit or loss.

When there is a change in the interest in a subsidiary after control is obtained, that does not result in a loss in control, the difference between the fair value of the consideration transferred and the amount by which the non-controlling interest is adjusted is recognised directly in the statement of changes in equity.

the consideration transferred is the fair value of the group’s contribution to the business combination in the form of assets transferred, shares issued, liabilities assumed or contingent consideration at the acquisition date. transaction costs directly attributable to the acquisition are charged to profit or loss. On acquisition date, goodwill is recognised when the consideration transferred and the recognised amount of non-controlling interests exceeds the fair value of the net identifiable assets of the entity acquired. Goodwill is tested at each reporting date for impairment.

to the extent that the fair value of the net identifiable assets of the entity acquired exceeds the consideration transferred and the recognised amount of non-controlling interests, the excess is recognised in profit or loss on acquisition date as a gain on bargain purchase. the profit or loss realised on disposal or termination of an entity is calculated after taking into account the carrying amount of any related goodwill.

2.5 GOODWILL

Goodwill arises on the acquisition of business operations.

acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions.

Goodwill is measured at cost less accumulated impairment losses. in respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee.

2.6 INTANGIBLE ASSETS

2.6.1 recognition and measurement

intangible assets that are acquired by the group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

2.6.2 Subsequent expenditure

subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. all other expenditure, including expenditure on internally-generated goodwill and brands, is recognised in profit or loss as incurred.

2.6.3 Amortisation

amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

46 VUNANI LIMITED




2.6 INTANGIBLE ASSETS (continued)

2.6.3 Amortisation (continued)

amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. the estimated useful life for the current and comparative periods is as follows:

customer lists 3 years

amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted, if appropriate.

2.7 INVESTMENT prOpErTY

investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, nor use in the production or supply of goods or services or for administrative purposes. investment property is initially measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the property) is recognised in profit or loss.

2.8 LEASED ASSETS

leases in terms of which the group assumes as a lessee substantially all the risks and rewards of ownership are classified as finance leases. upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

finance lease obligations are recognised initially at fair value less any directly attributable transaction costs. subsequent to initial recognition they are measured at amortised cost using the effective interest method. minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability.

Other leases are operating leases and the leased assets are not recognised in the group’s statement of financial position.

2.9 INVENTOrY

inventories represent property developments under construction and are measured at the lower of cost and net realisable value. the cost of inventories includes expenditure

incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. Other costs include borrowing costs incurred on financing these property developments.

net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

2.10 IMpAIrMENT

2.10.1 Financial assets (including receivables)

a financial asset, not carried at fair value through profit or loss, is assessed at each reporting date to determine whether there is objective evidence that it is impaired. a financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the group on terms that the group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy and the disappearance of an active market for a security. in addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

the group considers evidence of impairment for receivables at both a specific asset and collective level.

an impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. losses are recognised in profit or loss and reflected in an allowance account against receivables. interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

2.10.2 Non-financial assets

the carrying amounts of the group’s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. if any such indication exists, then the asset’s recoverable amount is estimated. for goodwill, the recoverable amount is estimated each year at the same time.

an impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. impairment losses are recognised in profit or loss.


47

an impairment loss in respect of goodwill is not reversed. in respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not tested for impairment separately. instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

2.11 EMpLOYEE BENEFITS

2.11.1 Defined contribution plans

a defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Pre-paid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

2.11.2 Short-term employee benefits

short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

a liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

2.12 SHArE-BASED pAYMENT TrANSACTIONS

share-based payment arrangements in which the group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the group.

the grant date fair value of equity-settled share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. the amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. for share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

2.13 prOVISIONS

a provision is recognised if, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. the unwinding of the discount is recognised as finance cost.

2.14 rEVENUE

2.14.1 Services rendered

Revenue from services rendered, including property management and advisory services, is recognised in profit or loss in proportion to the stage of completion (based on services performed as a percentage of total services to be performed) of the transaction at the reporting date.

2.14.2 Commissions

commissions comprise brokerage fees and asset management fees, when the group acts in the capacity of an agent rather than as the principal in a transaction. the revenue recognised is the net amount of commission made by the group. this is recognised when the transaction giving rise to the commission is concluded.

2.14.3 proprietary trading revenue

Proprietary trading revenue consists of trading income earned from trading activities that the company carries out for its own account. trading income is recognised upon the successful conclusion of trades.

2.14.4 rental income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. lease incentives granted are recognised as an integral part of the total rental income on a straight-line basis, over the term of the lease.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

48 VUNANI LIMITED




2.14 rEVENUE (continued)

2.14.5 Dividends

Dividend income is recognised in profit or loss on the date that the group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

2.15 FINANCE INCOME AND FINANCE COSTS

finance income comprises interest income on funds invested. interest income is recognised as it accrues in profit or loss, using the effective interest method.

finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and dividends on preference shares classified as liabilities. Borrowing costs are recognised in profit or loss using the effective interest method.

2.16 DISCONTINUED OpErATIONS

classification as a discontinued operation occurs when a component of an entity is disposed or when the operation meets the criteria to be classified as held for sale, and:

¢ represents a separate major line of business or geographical area of operations; or

¢ is part of a co-ordinated single plan to dispose of a separate major line of business or geographical area of operations; or

¢ is a subsidiary acquired exclusively with a view to resale.

When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.

2.17 INCOME TAX

income tax expense comprises current and deferred tax. income tax expense is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised in equity or other comprehensive income.

current taxation comprises taxation payable calculated on the basis of the expected taxable income for the year, using the taxation rates enacted or substantively enacted at the reporting date, and any adjustment of taxation payable for previous years.

Deferred taxation is provided based on temporary differences. temporary differences are differences between the carrying amounts of assets or liabilities for financial reporting purposes and their tax base.

the amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets or liabilities using the taxation rate enacted or substantively enacted at the reporting date.

the carrying amount of investment property is presumed to be recovered through sale, except where it can be demonstrated that the economic benefits will be consumed entirely through use.

Deferred taxation is charged to profit or loss, except to the extent that it relates to a transaction that is recognised directly in equity or other comprehensive income, or a business combination that is an acquisition. the effect on deferred taxation of any changes in taxation rates is recognised in the profit or loss, except to the extent that it relates to items previously charged or credited directly to equity.

Deferred taxation is not recognised for the following temporary differences:

the initial recognition of goodwill, initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and associates to the extent that the parent is able to control the timing of the reversal of the temporary differences and they will not reverse in the foreseeable future.

a deferred taxation asset is recognised to the extent that it is probable that future taxable profits will be available against which the associated unused taxation losses and deductible temporary differences can be utilised. Deferred taxation assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related taxation benefit will be realised. Deferred tax assets or liabilities are offset if there is a legally enforceable right to offset current tax liabilities or assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, and they intend to settle current tax liabilities or assets on a net basis or their tax assets or liabilities will be realised simultaneously.

Secondary taxation on companies

secondary taxation on companies (stc) is provided for at a rate of 10% on the amount by which dividends declared by the company before 1 april 2012 exceeds dividends received before 1 april 2012. stc is recognised as part of the current tax charge in profit or loss when the related dividend is declared.

to the extent that it is probable that the entity with stc credits will declare dividends of its own before 1 april 2012, against which unutilised stc credits may be utilised, a deferred tax asset is recognised for such stc credits.

Dividends withholding tax

Dividends withholding tax is a tax on shareholders receiving dividends and is applicable to all dividends declared on or after 1 april 2012.


49

the company withholds dividend tax on behalf of its shareholders at a rate of 15% on dividends declared. amounts withheld are not recognised as part of a company’s tax charge but rather as part of the dividend paid recognised directly in equity.

Where withholding tax is withheld on dividends received, the dividend is recognised at the gross amount with the related withholdings tax recognised as part of tax expense unless it is otherwise reimbursable in which case it is recognised as an asset.

2.18 EArNINGS pEr SHArE

the group presents basic and diluted earnings per share (“ePs”), and headline earnings and diluted headline earnings per share data for its ordinary shares. Basic ePs is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted ePs is determined by adjusting the weighted average number of ordinary shares outstanding, adjusted for own shares held and profit or loss attributable to ordinary shareholders, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

Headline earnings per share is calculated by dividing headline earnings attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period adjusted for own shares held. Diluted headline earnings per share is calculated by dividing the headline earnings attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding for the period after an adjustment for the effects of all dilutive potential ordinary shares.

2.19 rELATED pArTY TrANSACTIONS

Related party transactions are transactions which result in a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Related parties refer to entities which the group, directly or indirectly, through one or more intermediaries controls or is controlled by with, which it is in common control or has significant influence over. these include the holding group, subsidiaries, fellow subsidiaries, associates and key management.

2.20 SEGMENT rEpOrTING

an operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues or expenses that relate to transactions with any of the group’s other components. all operating segments’ operating results are reviewed regularly by the group’s chief executive officer and managing director to make decisions about resources to be allocated to each segment and assess its performance, and for which discrete financial information is available.

the group has the following operating segments:

¢ asset management.

¢ advisory services.

¢ investments holding.

¢ securities broking.

¢ Properties – asset management.

¢ Properties – investments and developments.

¢ Group.

2.21 FOrEIGN CUrrENCIES

Foreign currency transactions

transactions in foreign currencies are translated into the functional currency at the exchange rate ruling at the date of the transaction. foreign exchange gains and losses resulting from the settlement of such transactions and from the translation, at year-end exchange rates, of monetary assets or liabilities denominated in foreign currencies, are recognised in profit or loss.

non-monetary assets or liabilities, measured at historical cost in a foreign currency, are translated using the exchange rate at the date of the transaction. non-monetary items that are measured at fair value in a foreign currency are translated using the foreign exchange rates at the dates the fair value were determined.

Foreign operations

the results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the group’s presentation currency are translated into Rand, as follows:

¢ assets and liabilities are translated at the foreign exchange rate ruling at the reporting date; and

¢ income and expenses are translated at average exchange rates for the year, to the extent that such average rates approximate rates ruling at the dates of the transactions.

exchange differences arising on the translation are recognised directly in other comprehensive income and presented in the equity foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognised in profit or loss as part of the gain or loss on sale.

2.22 NEW STANDArDS AND INTErprETATIONS NOT YET ADOpTED

in terms of ifRs, the group and company are required to include in their financial statements disclosure about the future impact of standards and interpretations issued but not yet effective at the issue date.

all standards and interpretations will be adopted at their effective dates (except for the effect of those standards and interpretations that are not applicable to the entity).

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

50 VUNANI LIMITED




2.22 NEW STANDArDS AND INTErprETATIONS NOT YET ADOpTED (continued)

amendments to ias 19, ifRic 20 and the newly issued ifRs 11 are not applicable to the business of the entity and will therefore have no impact on future financial statements. the directors are of the opinion that the impact of the application of the remaining standards and interpretations will be as follows:

IFrS 9

ifRs 9 will be adopted by the group and company for the first time for its financial reporting period ending 31 December 2015. the standard will be applied retrospectively, subject to transitional provisions.

ifRs 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections of ias 39.

under ifRs 9, there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost or at fair value.

financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. all other financial assets are measured at fair value.

Additions to IFrS 9

the additions to ifRs 9 will be adopted by the group and company for the first time for its financial reporting period ending 31 December 2015. the standard will be applied retrospectively, subject to transitional provisions.

under ifRs 9 (2010), the classification and measurement requirements of financial liabilities are the same as per ias 39, barring the following two aspects:

(i) fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, attributable to the changes in the credit risk of the liability will be presented in other comprehensive income (“Oci”). the remaining change is recognised in profit or loss. However, if the requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. the determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently re-assessed.

(ii) under ifRs 9 (2010) derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.

ifRs 9 (2010) incorporates the guidance in ias 39 dealing with fair value measurement and accounting for derivatives embedded in host contracts that are not financial assets, and the requirements of ifRic 9: Re-assessment of embedded Derivatives.

the impact on the financial statements for the group and the company has not yet been estimated, as the standard is incomplete and the group is waiting until it is finalised.

IFrS 10

ifRs 10 will be adopted by the group for the first time for its financial reporting period ending 31 December 2013. the standard will be applied retrospectively if there is a change in the control conclusion between ias 27/sic 12 and ifRs 10.

ifRs 10 introduces a single control model to assess whether an investee should be consolidated. this control model requires entities to perform the following in determining whether control exists:

¢ identify how decisions about the relevant activities are made;

¢ assess whether the entity has power over the relevant activities by considering only the entity’s substantive rights;

¢ assess whether the entity is exposed to variability in returns; and

¢ assess whether the entity is able to use its power over the investee to affect returns for its own benefit.

control should be assessed on a continuous basis and should be re-assessed as facts and circumstances change.

the group does not believe that the adoption of this standard will have a significant impact on the financial statements.

IFrS 12

ifRs 12 will be adopted by the group and company for the first time for its financial reporting period ending 31 December 2013.

ifRs 12 combines, in a single standard, the disclosure requirements for subsidiaries, associates and joint arrangements, as well as unconsolidated structured entities.

the required disclosures aim to provide information to enable user to evaluate:

¢ the nature of, and risks associated with, an entity’s interests in other entities; and

¢ the effects of those interests on the entity’s financial position, financial performance and cash flows.

the adoption of the standard will increase the level of disclosure provided for the entity’s interests in subsidiaries, associates and structured entities.


51

IFrS 13

ifRs 13 will be adopted by the group and company for the first time for its financial reporting period ending 31 December 2013. the standard will be applied retrospectively, subject to transitional provisions.

ifRs 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets or liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements. the key principles in ifRs 13 are as follows:

¢ fair value is an exit price.

¢ measurement considers characteristics of the asset or liability and not entity-specific characteristics.

¢ measurement assumes a transaction in the entity’s principle (or most advantageous) market between market participants.

¢ Price is not adjusted for transaction costs.

¢ measurement maximises the use of relevant observable inputs and minimises the use of unobservable inputs.

¢ the three-level fair value hierarchy is extended to all fair value measurements.

the adoption of this standard will increase the level of disclosure provided for the three-level fair value hierarchy in the financial statements.

Amendment to IAS 1

the amendment to ias 1 will be adopted by group and company for the first time for its financial reporting period ending 31 December 2013.

the group will present those items of other comprehensive income that may be reclassified to profit or loss in the future separately from those that would never be reclassified to profit or loss. the related tax effects for the two sub-categories will be shown separately.

this is a change in presentation and will have no impact on the recognition or measurement of items in the financial statements.

this amendment will be applied retrospectively, and the comparative information will be restated.

IAS 27

the amendment to ias 27 (2011) will be adopted by group and company for the first time for its financial reporting period ending 31 December 2013.

ias 27 (2011) supersedes ias 27 (2008). ias 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications.

the adoption of ias 27 (2011) will not have a significant impact on the company’s separate financial statements.

IAS 28

the amendment to ias 28 (2011) will be adopted by the group for the first time for its financial reporting period ending 31 December 2013.

ias 28 (2011) supersedes ias 28 (2008) and carries forward the existing accounting and disclosure requirements with limited amendments. these include:

¢ ifRs 5 is applicable to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale; and

¢ on cessation of significant influence or joint control, even if an investment in an associate becomes an investment in a joint venture or vice versa, the company does not re-measure the retained interest.


Amendment to IAS 32

the amendment to ias 32 will be adopted by group and company for the first time for its financial reporting period ending 31 December 2014.

the amendments clarify that an entity currently has a legally enforceable right to set-off if that right is:

¢ not contingent on a future event;and/or

¢ enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.


Amendment to IFrS 7

the amendment to ifRs 7 will be adopted by group and company for the first time for its financial reporting period ending 31 December 2013.

in terms of the amendments, additional disclosure will be provided regarding financial assets or financial liabilities that are offset in the statement of financial position.

the adoption of this amendment will result in additional disclosure for financial assets or financial liabilities that are offset in the statement of financial position.

3. DETErMINATION OF FAIr VALUESa number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets or liabilities. fair values have been determined for measurement and/or disclosure purposes based on the following methods: When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

52 VUNANI LIMITED



3. DETErMINATION OF FAIr VALUES (continued)

3.1 INVESTMENT prOpErTY

in the current year an external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, valued the group’s investment property portfolio. Valuations are performed annually.

the fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.

3.2 INVESTMENTS IN LISTED EQUITY AND DEBT SECUrITIES

the fair value of listed financial assets at fair value through profit or loss is determined by reference to their quoted closing bid price at the reporting date.

3.3 UNLISTED INVESTMENTS

unlisted investments are fair valued annually by the directors. total funds under management are used as the basis for valuing asset management businesses. Operating businesses are valued using the discounted cash flow method.

3.4 TrADE AND OTHEr rECEIVABLES

the fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. this fair value is determined for disclosure purposes.

3.5 NON-DErIVATIVE FINANCIAL LIABILITIES

fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. for finance leases the market rate of interest is determined by reference to similar lease agreements.

3.6 FINANCIAL LIABILITIES AT FAIr VALUE THrOUGH prOFIT Or LOSS

the group’s financial liabilities held at fair value through profit or loss are all linked to listed equity investments held by the group and are accounted for in special purpose entities. the fair value adjustments that relate to financial liabilities are not a result of the group’s inability to discharge its obligation, but rather in terms of the agreements with its lenders. the terms of the financial liability are such that, in the event that asset fair value falls below the face value of the liability, the group is not obligated to pay the full face of the debt, but rather a value that is directly linked to the value of the related asset. the full fair value adjustment is considered to be as a result of a change in market conditions.

4. FINANCIAL rISK MANAGEMENTthe group and company has exposure to the following risks from its use of financial instruments:

¢ liquidity risk.

¢ credit risk.

¢ market risk.

this note presents information about the group’s exposure to the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. further quantitative disclosures are included throughout these financial statements.

risk management framework

the board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework. the board is responsible for developing and monitoring the group’s risk management policies.

the group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the group’s activities.

the group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

the group audit committee oversees how management monitors compliance with the group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the group.

4.1 LIQUIDITY rISK

liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. the group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

4.2 CrEDIT rISK

credit risk is the risk of financial loss to the group and company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

the group and company manages this risk by transacting with customers that have good credit records and good standing in the markets.

financial assets, which potentially subject the group to concentrations of credit risk, consist principally of trade and other receivables and cash and cash equivalents.


53

loans are granted to group companies. the loans have no repayment terms. However, the company reviews all loan balances for recoverability annually and loans are impaired, if necessary.

the trade and other receivables relate to trade receivables and Vat due from the south african Revenue service. the group reviews accounts receivables monthly. unless customers have good payment records an impairment allowance is created for any accounts greater than 60 days.

the group deposits cash surpluses with major banks.

4.3 MArKET rISK

market risk is the risk that changes in the market prices, such as foreign exchange rates, interest rates and equity prices will affect the group’s income or value of its holdings of financial instruments. the objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return.

the group is exposed to cash flow interest rate risk as it borrows funds at variable interest rates. the group generally adopts a policy of ensuring that its exposure to changes in interest rates is limited by either fixing the rate or by linking the rate to the prime rate over the period of the respective loan. the group is not exposed to significant currency risk.

4.3.1 Equity price risk

the group is exposed to equity price risk on its BBBee-listed investments that are not ring-fenced through the underlying funding arrangements. the investments are not hedged and the pricing is reviewed on a daily basis. this risk is managed by linking the debt to the value of the underlying assets. this will ensure that the group will limit the amount payable on the underlying debt by limiting it to the value of the asset.

4.4 CApITAL MANAGEMENT

the board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidences and to sustain future development of the business. the board of directors monitors the return on capital, which the group defines as: result from operating activities divided by total shareholders’ equity and non-controlling interests. the board of directors also monitors the level of dividends to ordinary shareholders.

the board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

the capital structure of the group consists of debt, which includes the other liabilities, loans from shareholders and trade and other payables disclosed in notes 28 and 30 and equity as disclosed in the statement of financial position. the group monitors capital on the basis of the gearing ratio.

in all externally-regulated entities, there are capital adequacy requirements for the day-to-day operations. each entity has a compliance officer who is responsible for monitoring these requirements. the compliance officers report to the board of directors of each entity to ensure the requirements are met. there have been no instances of non-compliance reported to the board of directors throughout the reporting period.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

54 VUNANI LIMITED

figures in Rand 000’s 2012 2011

5. rEVENUEsales of property developments – 240Rental income – 19Proprietary trading revenue 15 281 12 580fees

advisory 22 595 34 099Brokerage 31 786 31 110asset management 36 789 28 707client service fees 1 441 –

107 892 106 755

6. OTHEr INCOMEBargain purchase on acquisition – 346sundry income – 387Directors’ fees for services rendered on external boards paid to the group 1 135 2 611Recognition of day one gain (refer to note 21) 3 571 3 573Rental guarantee reversal 1 662 2 000Purchase price adjustment on disposal of subsidiary 2 252 –client service fees – 443

8 620 9 360

7. INVESTMENT rEVENUEDividend income

Dividend income from listed shares 2 355 4 627Dividend income from unlisted shares – 110

2 355 4 737

8. INTErEST rECEIVED FrOM INVESTMENTSrecognised in profit and loss

interest received – investments 11 343 5 440interest received – loans and receivables 11 214 18 876

22 557 24 316

9. NET prOFIT/(LOSS) ON DISpOSAL OF ASSETSProfit/(loss) on disposal of businesses (refer to note 36) 5 907 (14 971)(loss)/profit on disposal of plant and equipment (53) 703Profit on disposal of non-current assets held for sale – 7 969Profit on disposal of other investments – 200

5 854 (6 099)




55


10. FAIr VALUE ADJUSTMENTS AND IMpAIrMENTSfair value adjustment on investment property – 810fair value adjustment on financial assets and liabilities – Held at fair value through profit or loss (refer below) 42 176 47 786impairment of investment in associate (933) –impairment of non-current assets held for sale – (201)impairment reversal of loans to associates 2 543 53

43 786 48 448

adjustments on financial assets and liabilities at fair value through profit or loss comprise the following:Other financial liabilities (refer to note 28) 19 552 96 666

15 009 (48 880)

Other investments – listed shares (refer to note 19) 35 536 (28 392) Other investments – unlisted shares (refer to note 19) (20 527) (20 488)

Other investments – options (refer to note 21) 7 615 –

42 176 47 786

Refer to notes 19 and 28 for details of assumptions used in determining the fair values of other investments and other financial liabilities, respectively.

11. OpErATING EXpENSESOperating expenses are arrived at after taking the following into account:amortisation of intangible assets 977 977Plant and equipment Depreciation 1 885 2 030external auditors’ remuneration 3 271 3 831

current year 2 707 2 974 Prior year 501 653 Other services 63 204

internal auditors’ remuneration current year 450 –Operating lease expense 6 449 5 477foreign currency translation 198 –

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

56 VUNANI LIMITED




11. OpErATING EXpENSES (continued)Directors’ remuneration and benefits (refer to note 41) 11 494 12 322

non-executive directors’ fees 710 716 salaries 8 849 8 004 Bonuses – 1 633 Provident fund and medical aid contributions 971 1 379 equity-settled share-based payment charge 964 590

staff costs (excluding directors’ emoluments) 57 151 61 920staff provident fund contributions 2 812 3 014Bad debt expense (18) 802equity-settled share-based payment charge (excluding directors) 2 418 1 934

12. FINANCE INCOME AND FINANCE COSTSrecognised in profit and loss

interest received – cash and cash equivalents 1 007 754

finance income 1 007 754

interest charge – bank overdraft (114) (408)interest charge – long-term borrowings (43 068) (40 618)interest charge – debentures (5 663) (4 054)Preference dividend – (19 327)

finance costs (48 845) (64 407)

net finance costs (47 838) (63 653)

interest expense on financial liabilities measured at amortised cost (7 400) (14 895)interest expense on financial liabilities measured at fair value through profit or loss (41 445) (49 512)

finance costs (48 845) (64 407)


57


13. INCOME TAX EXpENSECurrent tax expense

current year (5 010) (426)adjustment for prior periods – 89

(5 010) (337)

Deferred tax expense

current year (14 550) (728)

Origination and reversal of temporary differences (12 502) (5 576) Previously unrecognised deferred tax assets 576 4 848 change in capital gains tax rate (2 624) –

secondary tax on companies – (198)

(14 550) (926)

Total income tax expense recognised in profit and loss (19 560) (1 263)

reconciliation of effective tax rate: % %income tax rate 28.0 (28.0)Disallowed expenditure 55.9 130.0equity-accounted earnings (15.4) (6.9)tax exempt income (2.1) (11.1)fair value gains or losses at capital Gains tax rate (38.7) (70.0)capital Gains tax (5.3) (6.9)unrecognised deferred tax assets 45.2 12.3secondary tax on companies (current and deferred) (17.8) 4.8Prior period adjustments – 0.6assessed loss utilised – (14.3)schedule 8c interest allowance 4.3 (5.2)capital gains tax rate change 8.4 –

62.5 5.3

Basis of calculation

the above is a numerical reconciliation between the average effective tax rate and the applicable tax rate. the applicable tax rate is the national income tax rate of 28,0%. the effective capital Gains tax rate is 18.6%.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

58 VUNANI LIMITED



14. DISCONTINUED OpErATIONin 2011 a strategic decision was made early in the year to restructure the property assets of the group in order to reduce debt on the statement of financial position. this culminated in Vunani listing a significant portion of its investment property portfolio on the Jse limited on 11 august 2011. as these assets related to a major line of Vunani’s business, the related activities have been presented as a discontinued operation. the segment was not classified as held for sale or a discontinued operation at 31 December 2010 as the decision to dispose of the assets was made in the 2011 financial year.

in 2011 the group also disposed of its investment in Vunani Portfolio solutions Proprietary limited (“VPs”). this investment was previously classified in the asset management segment. it was considered a separate major line of business as it was the only business in the segment that provided a consultancy service to asset management businesses, whilst the remaining businesses provide asset management services basis as their main business. it was not classified as held for sale or a discontinued operation at 31 December 2010 as the decision to dispose of the assets was made in the 2011 financial year.

there were no discontinued operations for the year ended 31 December 2012.

figures in Rand 000’s Land Buildings Leasehold improvement

Motor vehicles

Furniture and fittings

Office equipment

Computer equipment Total

15. pLANT AND EQUIpMENTcostBalance at 31 December 2010 5 730 22 864 7 169 75 3 983 1 349 6 132 47 302additions – – 5 – 346 145 3 032 3 528Disposals (2 541) (22 864) (3 418) – (2 619) (231) (2 117) (33 790)transfer to investment property (3 189) – – – – – – (3 189)

Balance at 31 December 2011 – – 3 756 75 1 710 1 263 7 047 13 851

additions – – – – 34 1 451 486

Disposals – – (3) (41) (95) (220) (359)

Balance at 31 December 2012 – – 3 753 75 1 703 1 169 7 278 13 978

accumulated depreciation and impairment lossesBalance at 31 December 2010 – (4 591) (3 229) (69) (1 479) (1 160) (4 260) (14 788)Depreciation – (400) (644) (6) (156) (115) (709) (2 030)Disposals – 4 991 734 – 474 204 755 7 158

Balance at 31 December 2011 – – (3 139) (75) (1 161) (1 071) (4 214) (9 660)

Depreciation – – (431) – (130) (88) (1 236) (1 885)

Disposals – – 3 – 15 27 133 178

Balance at 31 December 2012 – – (3 567) (75) (1 276) (1 132) (5 317) (11 367)

carrying amountsat 31 December 2010 5 730 18 273 3 940 6 2 504 189 1 872 32 514

at 31 December 2011 – – 617 – 549 192 2 833 4 191

At 31 December 2012 – – 186 – 427 37 1 961 2 611


59

figures in Rand 000’s Goodwill Intangible

assets Total

16. GOODWILL AND INTANGIBLE ASSETSCost

Balance at 31 December 2010 99 789 28 001 127 790Disposal of discontinued operation (3 100) – (3 100)Disposal of subsidiary (9 635) – (9 635)

Balance at 31 December 2011 87 054 28 001 115 055


Accumulated amortisation and impairment

Balance at 31 December 2010 (52 931) (25 558) (78 489)amortisation – (977) (977)

Balance at 31 December 2011 (52 931) (26 535) (79 466)

amortisation (refer to note 11) – (977) (977)

Balance at 31 December 2012 (52 931) (27 512) (80 443)

Carrying amounts

at 31 December 2011 34 123 1 466 35 589

At 31 December 2012 34 123 489 34 612

the remaining goodwill and intangibles in the group arose from the historic business combinations of Vunani securities Proprietary limited and Vunani fund managers Proprietary limited.

it is the group’s policy to test the impairment of goodwill and intangibles on an annual basis, even if there are no indicators of impairment.

Assumptions applied in testing for the impairment of goodwill:

Vunani Fund Mangers proprietary Limited

the carrying amount of goodwill and intangibles that arose through the business combination is R27.7 million and R0.5 million, respectively.

the recoverable amount was determined as the fair value less costs to sell the company.

the fair value less costs to sell is determined using the funds under management at the date of disposal. an average fee percentage earned on the funds under management will then be multiplied by funds under management to determine the fair value.

An established industry benchmark for valuing fund management firms is to apply a percentage to funds under management. The percentage can be determined by a combination of factors, inter alia, quantum of funds under management; profitability; average term of the mandates; average management fees charged and growth prospects. As any or all these factors improve the higher the percentage applied. In applying the impairment test to goodwill and intangibles held in respect of the investment in Vunani Fund Managers a fair value has been determined on the basis of a percentage of funds under management. This percentage has been set at one per cent and applied to R11,4 billion of funds under management at 31 December 2012 to arrive at a fair value of R114 million. This value has been determined solely for the purposes of the impairment test.

as a result of the above, the group does not believe that the goodwill needs to be impaired.

funds under management would need to decrease by R8.4 billion for the fair value less costs to sell to equal the carrying amount of goodwill.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

60 VUNANI LIMITED



16. GOODWILL AND INTANGIBLE ASSETS (continued)Vunani Securities proprietary Limited

the carrying amount of goodwill that arose through the business combination is R6,4 million.

the recoverable amount was determined as the value in use of the company. the key assumptions used in the calculation of the recoverable amount are discount rates and eBitDa growth rate. the values assigned to the key assumption represented management’s assessments of future trends in the securities broking industries and were based on internal sources and historical data.

a pre-tax discount rate of 12,5% was used in the valuation, estimated based on past experience, which is consistent with previous periods.

four years of cash flows were included in the discounted cash flow model. the cash flows were adjusted to take into account the expected growth rate of the eBitDa. an eBitDa rate of 12% was used.

the significant driver of the expected growth in eBitDa is due to increased research offering and stock, bonds and money market dealing capability that arose from the acquisition of Kagiso securities limited in 2010. there are new business development initiatives that are currently in place which will helping in achieving targets. assumptions are supported by past experience.

as a result of the above the group does not believe that the goodwill needs to be impaired.

management has identified two key assumptions for which there could be a reasonably possible change that could cause the carrying amount to exceed the recoverable amount. the following table shows the amount by which these two assumptions would need to change individually in order for the estimated recoverable to equal the carrying amount.

Discount rate – 80%

eBitDa growth rate – 9%


17. INVESTMENT prOpErTYBalance at beginning of the year 4 000 915 623transfer from plant and equipment – 3 189Disposals arising from discontinued operation (refer to note 14) – (921 633)additions – 5 888fair value adjustments – 605Operating lease – straight lining – 328

Balance at end of the year 4 000 4 000

the investment property portfolio comprises a single piece of land that is held for capital appreciation purposes.

Details of valuation

the effective date of the revaluation was 31 December 2012. Valuations are performed annually. in the current year the valuation was performed independently by Wraypex Proprietary limited. in determining the fair value for financial accounting purposes, market values have been used. market values are defined as the estimated amount for which a property should be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Significant assumptions

the valuation for the investment property was based on current market conditions and property sales achieved recently in the Blair atholl area, between a willing buyer and a willing seller in an arm’s length transaction.

the investment property is situated at erf 562 Blair atholl, extension 3.


61

18. INVESTMENTS IN ASSOCIATES

figures in Rand 000’s Investment in

associatesLoans to

associates Total

Balance at 31 December 2010 55 840 37 594 93 434increase in investments in associates 4 688 – 4 688loans advanced – 3 885 3 885Reversal of impairments – 53 53equity-accounted earnings 5 715 – 5 715Dividends received (5 580) – (5 580)transfer from investment in subsidiaries (refer to note 35) 9 323 312 9 635transfer to other investments (refer to note 19) (13 404) (333) (13 737)Reclassification (169) 169 –


figures in Rand 000’s Investment in

associatesLoans to

associates Total


Reduction in investments in associates (623) – (623)

Disposal of associates * (27 728) (27 728)

loans advanced – 25 570 25 570

loans repaid – (4 067) (4 067)

(impairments)/impairment reversals (933) 2 543 1 610

equity-accounted earnings 17 218 – 17 218

Dividends received (30 000) – (30 000)


* Amount less than R1 000.

Impairments

the group reviews the recoverability of investments in associates and loans to associates annually. investments in associates and loans to associates are impaired if the investee is making losses and the cumulative losses are in excess of the carrying amount of the investment.

Disposals

the following investments in associates were disposed of in 2012:Blue age Properties 61 Proprietary limitedcivils 2000 Holdings Proprietary limitedstreet spirit trading 169 Proprietary limited

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

62 VUNANI LIMITED



figures in Rand 000’s

Blue Age properties 61

proprietary Limited

Civils 2000 Holdings

proprietary Limited

Street Spirit Trading 169 proprietary

Limited Total

18. INVESTMENTS IN ASSOCIATES (continued)investment in associate * – * –

loans to associates 1 273 24 996 1 459 27 728

Proceeds (1 273) (24 996) (1 459) (27 728)

Profit on disposal of associates – – – –

* Amount less than R1 000.

Credit quality


a breakdown of the credit quality of loans to associates not impaired is as follows:internal credit ratings four or more years trading history with the group 34 471 40 920

less than four years trading history with the group 3 527 760

37 998 41 680

figures in Rand 000’s Effective

ownership Current assets

Non-current assets

Total assets

Current liabilities

Non-current

liabilities Total

liabilities

at 31 December 2012

avram international llc 26.0% – – – – – – Baycove Properties 2 Proprietary limited* 35.1% 60 – 60 (59) – (59)Before sunset Properties 37 Proprietary limited 25.3% – – – (62) – (62)Black Wattle colliery Proprietary limited 37.5% 104 537 119 259 223 796 (141 729) (40 517) (182 246)Buttonwood Proprietary trading Proprietary limited 40.0% – – – – – – Glenhove fund managers Proprietary limited 29.6% 366 7 242 7 608 (698) (2 375) (3 073)Greenstone Hill Office Park Proprietary limited 31.2% 1 720 207 356 209 076 (552) (190 793) (191 345)integrated managed investments Proprietary limited 48.0% 2 480 85 2 565 – (2 517) (2 517)lexshell 638 investments Proprietary limited 39.0% 53 950 14 067 68 017 (7 830) (34 397) (42 227)loato Properties Proprietary limited 31.6% 16 057 – 16 057 (4 590) (9 711) (14 301)micawber 534 Proprietary limited* 47.6% 4 – 4 (10 680) – (10 680)Orion Properties 14 Proprietary limited 39.0% 89 994 27 90 021 (86 301) – (86 301)Papillon in flight Proprietary limited 26.0% – – – – – – Royal albatross Properties 379 Proprietary limited 39.0% 90 890 – 90 890 (20 012) (59 295) (79 307)Vunani capital Zimbabwe (Private) limited 49.0% 180 993 1 173 (3 705) – (3 705)Vunani Private client Holdings Proprietary limited 40.0% 3 223 169 3 392 (1 386) (1 286) (2 672)Vunani solar Power Proprietary limited (dormant) 26.0% – – – – – – Wisdom of africa Proprietary limited (dormant) 35.0% – – – – – –

363 461 349 198 712 659 (277 604) (340 891) (618 495)

* The company is in the process of being deregistered.


63

figures in Rand 000’s Effective

ownership Current assets

Non-current assets

Total assets

Current liabilities

Non-current

liabilities Total

liabilities

18. INVESTMENTS IN ASSOCIATES (continued)at 31 December 2011avram international llc 26.0% – – – – – – Basfour 558 Proprietary limited* 31.2% – – – – – – Baycove Properties 2 Proprietary limited 35.1% 1 452 – 1 452 (1 364) – (1 364)Black Wattle colliery Proprietary limited 37.5% 111 239 99 484 210 723 (182 390) (9 136) (191 526)Blue age Properties 61 Proprietary limited 26.0% 3 479 – 3 479 (3 678) – (3 678)Buttonwood Proprietary trading Proprietary limited 25.0% 1 964 361 2 325 (1 697) (123) (1 820)civils 2000 Holdings Proprietary limited 20.4% 54 427 3 028 57 455 (24 489) (32 819) (57 308)Glenhove fund managers Proprietary limited 29.6% 134 35 169 (215) – (215)Greenstone Hill Office Park Proprietary limited 31.2% 42 684 150 800 193 484 (3 078) (123 943) (127 021)lexshell 638 investments Proprietary limited 39.0% 268 67 117 67 385 (5 791) (39 634) (45 425)loato Properties Proprietary limited 31.6% 30 884 1 30 885 (33 446) (138) (33 584)Before sunset Properties 37 Proprietary limited 25.3% 1 – 1 (56) – (56)micawber 534 Proprietary limited 47.6% 1 – 1 (10 662) – (10 662)Orion Properties 14 Proprietary limited 26.5% 81 362 976 82 338 (42 617) (40 261) (82 878)Papillon in flight Proprietary limited 26.0% – – – – – – integrated managed investments Proprietary limited 48.0% 1 269 141 1 410 (1 358) – (1 358)Royal albatross Properties 379 Proprietary limited 39.0% 32 656 587 33 243 (17 442) (13 996) (31 438)street spirit trading 169 Proprietary limited# 19.5% 663 5 045 5 708 (5 751) – (5 751)Vunani capital Zimbabwe (Private) limited 49.0% 112 151 263 (760) (760)Vunani Private client Holdings Proprietary limited 40.0% 10 975 4 421 15 396 (4 913) – (4 913)Vunani solar Power Proprietary limited 26.0% 72 – 72 (52) – (52)Wisdom of africa Proprietary limited (dormant) 35.0% – – – – – –

373 642 332 147 705 789 (339 759) (260 050) (599 809)

* In the process of being deregistered.# The investment is equity accounted because the group has indirect interest through a subsidiary which the group owns less than 100% resulting in an effective

investment of less than 20%. The group is able to exercise significant influence at the subsidiary level.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

64 VUNANI LIMITED



figures in Rand 000’s revenue profit/

(loss) Cost of

investment Loans to

associates Impair-

ments

Cumulative equity

earnings net of

dividends

Net carrying amount

18. INVESTMENTS IN ASSOCIATES (continued)for the year ended 31 December 2012

avram international llc (note 1) – – 1 833 – – – 1 833

Baycove Properties 2 Proprietary limited 6 17 – 46 (46) – –

Before sunset Properties 37 Proprietary limited – (7) * – – – –

Black Wattle colliery Proprietary limited (refer to note 21) 460 479 22 352 – – – – –

Buttonwood Proprietary trading Proprietary limited – – 933 – (933) – –

Glenhove fund managers Proprietary limited 2 952 24 1 150 499 – (471) 1 178

Greenstone Hill Office Park Proprietary limited 48 036 27 105 * 20 460 – 7 093 27 553

integrated managed investments Proprietary limited 7 687 (4) 9 329 313 – 2 9 644

lexshell 638 investments Proprietary limited 5 305 3 811 * 850 – 12 899 13 749

loato Properties Proprietary limited – 4 447 1 3 748 – 528 4 277

micawber 534 Proprietary limited** – – * 5 160 (5 160) 72 72

Orion Properties 14 Proprietary limited 160 359 4 261 – 9 855 – 1 899 11 754

Papillon in flight Proprietary limited – – 3 191 – (3 191) – –

Royal albatross Properties 379 Proprietary limited 88 141 10 054 711 8 – 5 700 6 419

Vunani capital Zimbabwe (Private) limited 361 (3 184) 8 3 527 (1 241) – 2 294

Vunani Private client Holdings Proprietary limited 11 676 (1 625) – – – – –

Vunani solar Power Proprietary limited (note 1) – – 1 300 – – – 1 300

Wisdom of africa Proprietary limited (dormant) – – – – – – –

785 002 67 251 18 456 44 466 (10 571) 27 722 80 073

* Less than R1 000.** The company is in the process of being deregistered.

note 1 – acquired in terms of vendor finance transaction (refer to note 28 for corresponding liability).

Investment at cost

Loans to associates Total

investment at cost and loans to associates 18 456 44 466 62 922

impairments (4 103) (6 468) (10 571)

cumulative equity earnings net of dividends 27 722 – 27 722

42 075 37 998 80 073


65

figures in Rand 000’s revenue profit/

(loss) Cost of

investment Loans to

associates Impair-

ments

Cumulative equity

earnings net of

dividends

Net carrying amount

18. INVESTMENTS IN ASSOCIATES (continued)at 31 December 2011avram international llc (note 1) – – 1 833 – – – 1 833Basfour 558 Proprietary limited** – – * – – – – Baycove Properties 2 Proprietary limited – (1 311) * 35 – 39 74Before sunset Properties 37 Proprietary limited – (9) * – – – – Black Wattle colliery Proprietary limited 330 034 (7 795) * – – – – Blue age Properties 61 Proprietary limited – (40) * 1 273 (171) – 1 102Buttonwood Proprietary trading Proprietary limited 8 956 961 1 555 – – 200 1 755civils 2000 Holdings Proprietary limited 144 421 (10 717) 4 24 996 – (4) 24 996Glenhove fund managers Proprietary limited 2 868 (311) 1 150 499 – (1 150) 499Greenstone Hill Office Park Proprietary limited 12 224 14 418 * 33 – 26 732 26 765integrated managed investments Proprietary limited 6 946 11 9 323 312 – 5 9 640lexshell 638 investments Proprietary limited 9 263 (403) * 261 – 10 980 11 241loato Properties Proprietary limited – (710) * 3 626 (3 626) – – micawber 534 Proprietary limited** – (4) * 5 150 (5 150) 75 75Orion Properties 14 Proprietary limited 14 (1 352) * 8 200 – (189) 8 011Papillon in flight Proprietary limited – – 3 191 – (3 191) 3 159 3 159Royal albatross Properties 379 Proprietary limited 53 211 3 313 711 4 087 – 690 5 488street spirit trading 169 Proprietary limited – (3) * 1 438 (43) – 1 395Vunani capital Zimbabwe (Private) limited – (667) * 760 – – 760Vunani Private client Holdings Proprietary limited 6 169 567 * – – – – Vunani solar Power Proprietary limited 644 18 1 300 – – – 1 300Wisdom of africa Proprietary limited (dormant) – – * – – – –

574 750 (4 034) 19 067 50 670 (12 181) 40 537 98 093

* Less than R 1000.** The company is in the process of being deregistered.

note 1 – acquired in terms of vendor finance transaction (refer to note 28 for corresponding liability).

Investment at cost

Loans to associates Total

investment at cost and loans to associates 19 067 50 670 69 737impairments (3 191) (8 990) (12 181)cumulative equity earnings net of dividends 40 537 – 40 537

56 413 41 680 98 093

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

66 VUNANI LIMITED



18. INVESTMENTS IN ASSOCIATES (continued)all associates are incorporated in the Republic of south africa, with the exception of Vunani capital Zimbabwe (Private) limited. the carrying amounts of associates are shown net of impairment losses. the group cannot withdraw cash from the associates until such time as the funding to the associates has been repaid. the following associates have different year-ends to the group, and are equity accounted on the basis of the associates’ December 2012 management accounts: civils 2000 Holdings Proprietary limited (disposed of during 2012 financial year) Glenhove fund managers Proprietary limited

the group has accounted for losses incurred by associates to the extent of investments made. the group has not recognised losses relating to the following associates in 2012, since the group has no obligation in respect of these losses:

The group’s share of associates’ losses and cumulative losses in excess of the carrying value of the investment

Current year losses Cumulative losses

figures in Rand 000’s 2012 2011 2012 2011

Blue age Properties 61 Proprietary limited – 13 – 66Glenhove fund managers Proprietary limited – 92 – 1 242Kareebosch estate Proprietary limited – – – 20street spirit trading 169 Proprietary limited – * – 11Vunani capital Zimbabwe (Private) limited 436 – 436 –Vunani Private client Holdings Proprietary limited 650 – 650 –

1 086 105 1 086 1 339

* Less than R1 000.


67


19. OTHEr INVESTMENTSBalance at beginning of the year 419 668 560 808fair value adjustments 15 009 (48 880)additions – 146 713Disposals (190 101) (252 710)Other investments declared as in specie dividends to non-controlling shareholders (12 901) –Other investments used to settle other financial liabilities (79 434) –transfer to associates – 13 737


DisposalsDuring the year, the group disposed of a significant portion of its other investments. the proceeds from the disposals were used to repay debt within the group.

INVESTMENTS rELATED BOrrOWINGS


Number of shares held

(million)%

holding Listed Unlisted Fair value Total

borrowings

Secured by underlying investment

at 31 December 2012

Non-current

african legends limited 2.2 2.40% – * * – –

Bsi steel limited 20.2 2.80% 10 800 – 10 800 – –

esorfranki limited 7.7 1.94% 10 187 – 10 187 – –

Gidani Proprietary limited*** * 10.80% – 13 022 13 022 – –

Jse limited 0.2 0.30% 17 839 – 17 839 – –

Qphoto investment – 0.00% – – * – –

solethu investments Proprietary limited 15.9 15.00% – 2 2 – –

Workforce Holdings limited 42.9 17.90% 21 878 – 21 878 – –

60 704 13 024 73 728 – –

Current

arrowhead limited 0.5 0.20% 3 313 – 3 313 – –

Redefine Properties limited** 8.0 0.30% 75 200 – 75 200 (62 145) (62 145)

78 513 – 78 513 (62 145) (62 145)

139 217 13 024 152 241 (62 145) (62 145)

* Less than R1 000.** The proceeds on the disposal of the investment will be utilised to settle the corresponding liability.*** The proceeds from the investment have been pledged to Investec Bank Limited (refer to note 28.16).

the unlisted investments are fair valued annually by the directors. Operating businesses are valued using the discounted cash flow method. the cash flows are based on future dividends that will be paid by the businesses. an after-tax discount rate of 8.25% has been used in the valuation. this is arrived at using a prime rate, with a market premium of 2.46%. the market premium percentage is the premium that businesses pay on their debts above prime.the listed investment values are determined with reference to the share price at year-end. Both the listed and unlisted investments are designated at fair value through profit or loss.

the financial liabilities related to the investments are measured at fair value as reflected in notes 10 and 28. financial liabilities at fair value includes capitalised interest and attributable profit participation. Details of the financial liabilities are detailed in note 28.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

68 VUNANI LIMITED



INVESTMENTS BOrrOWINGS rELATED


Numberof shares

held (million)

%holding Listed Unlisted

Fairvalue

Total borrowings

Secured by underlying investment

Securedby group

19. OTHEr INVESTMENTS (continued)at 31 December 2011non-currentafrican legends limited 2.2 2.40% – * * – – – arrowhead limited 0.5 *** 2 456 – 2 456 – – – Bsi steel limited 20.2 3.00% 12 800 – 12 800 (20 584) (12 800) (7 784)esorfranki limited 7.7 1.94% 10 723 – 10 723 – – – Jse limited 0.3 0.30% 19 580 – 19 580 – – – Respiratory care africa Proprietary limited * 1.00% – 1 432 1 432 – – – Redefine Properties limited 8.0 0.30% 59 200 – 59 200 (57 660) (57 660) – solethu investments Proprietary limited 15.9 15.00% – 2 2 – – – iP equity fund * – – 1 099 1 099 – – – Vunani Property investment fund limited 18.2 15.00% 130 689 – 130 689 – – –

235 448 2 533 237 981 (78 244) (70 460) (7 784)

currentBrikor limited** 130.0 21.15% 15 600 – 15 600 (47 023) (15 600) (31 423)Basil Read limited 4.3 3.45% 60 183 – 60 183 (81 771) (60 183) (21 588)consolidated infrastructure Group limited (Previously Buildworks limited) 0.6 0.50% 5 700 – 5 700 (5 362) (5 362) – Wesizwe Platinum limited 29.8 1.83% 43 452 – 43 452 (43 450) (43 450) – Gidani Proprietary limited * 10.80% – 33 892 33 892 – – – PsV limited 47.5 19.16% 5 700 – 5 700 (14 212) (5 700) (8 512)Workforce Holdings limited 42.9 19.00% 17 160 – 17 160 (14 049) (14 049) –

147 795 33 892 181 687 (205 867) (144 344) (61 523)

383 243 36 425 419 668 (284 111) (214 804) (69 307)

* Less than R1 000.** The investment in Brikor is greater than 20% but the company does not have the ability to exercise significant influence.*** The percentage holding is less than 0.1%.


69


20. DEFErrED TAXDeferred tax comprises:Deferred tax assets 40 917 93 886Deferred tax liabilities (8 610) (46 784)

32 307 47 102

recognised deferred tax assets and liabilities arise on

fair value adjustments 5 647 7 904intangible assets (3 325) (3 598)trade and other receivables 112 639Provisions 3 704 6 162secondary tax on companies – (5 572)tax loss carry-forwards 26 228 41 619Pre-payments (59) (52)

32 307 47 102

reconciliation of movement in deferred tax

Balance at beginning of the year 47 102 (11 348)charge against profit and loss (14 550) (926)Disposals of subsidiaries (245) 10 336Disposal of discontinued operations – 49 022Other – 18


Unrecognised deferred tax assets

estimated tax losses available for utilisation against future taxable income 177 451 181 885applied to reduce deferred tax liabilities (93 671) (148 639)

unrecognised estimated tax losses carried forward not accounted for in deferred tax 83 780 33 246

the group has recognised certain deferred tax assets as they are expected to be realised against future taxable profits. the basis of future taxable profits has been established through a detailed budgeting process performed by the group. the group’s budgeting process is based on bottom up approach. each operating entity in the group has its own detailed monthly budget for the next year. the budgets also include forecasts for the next three years, which are adjusted for expected increases in revenues for the forecasted years. these are then incorporated to create a group budget.

the deductible temporary differences do not expire under current tax legislation. Deferred tax assets have in instances not been recognised in respect of estimated tax losses carried forward because it is uncertain that future taxable profit will be available against which the group can utilise the benefits therefrom.

no deferred tax assets have been recognised for unused stc credits.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

70 VUNANI LIMITED



21. OTHEr NON-CUrrENT ASSETS


Initial direct costs of

operating lease income Other loans

Black Wattle Option Total

2012

Balance at beginning of the year – 1 136 3 573 4 709

additions – 3 950 – 3 950

interest – 133 – 133

fair value adjustment (refer to note 10) – – 7 615 7 615

Recognition of day one gain – – 3 571 3 571

Balance at end of the year – 5 219 14 759 19 978

2011Balance at beginning of the year 2 989 170 – 3 159additions – 931 – 931interest – 35 – 35fair value adjustment – – – –Recognition of day one gain – – 3 573 3 573Disposals on discontinued operations (2 989) – – (2 989)

Balance at end of the year – 1 136 3 573 4 709


Non-current

Black Wattle Option 14 759 3 573Other loans 1 225 1 136

15 984 4 709

Current

Other loans 3 994 –

19 978 4 709

Other loans

C4Life proprietary Limited

the loan bears interest at the prime rate, is secured by a cession of book debts in the company and is repayable on 30 October 2013. 3 994 –

rrL Holdings proprietary Limited

the loan bears interest at the prime rate and is unsecured and is repayable on 30 July 2014. 1 225 1 136

5 219 1 136


71

21. OTHEr NON-CUrrENT ASSETS (continued)Black Wattle Option

During the 2010 financial year, Vunani mining Proprietary limited (“Vunani mining”), a subsidiary of Vunani limited, obtained a 37.5% interest in Black Wattle through a vendor financed transaction. the 37.5% shareholding consists of 22.5% “a ordinary shares” and 15.0% “ordinary shares”. Vunani mining has classified this investment as an associate as it has the ability to exercise significant influence in the company.

Vunani mining is not entitled to share in the economic benefits of ownership until such time as the debt associated with the acquisition is settled. the debt would be funded through dividends received on the a ordinary shares. cash flows relating to the 15.0% ordinary shares will be paid to Vunani mining. the risks and rewards of ownership have not passed to Vunani mining and, accordingly, Vunani limited equity accounts 0% of Black Wattle in profit or loss.

Vunani mining benefits from the upside of the investment being dividends and the capital growth; however, it does not bear the downside of the risk. the substance of the transaction is a call option with dividend rights. Vunani mining has therefore recognised an in-substance call option.

the option is a derivative financial instrument as defined by ifRs classified at fair value through profit or loss. the derivative is measured initially at fair value and subsequently at fair value, every six months, with changes in fair value recognised in profit or loss.

On day one in 2010, the fair value of the in-substance call option was significantly greater than the R375 that was paid. the fair value amounted to R17.9 million. since only R375 was paid, this would results in a day one gain of R17.9 million.

ias 39 does not permit a day 1 gain to be recognised in profit or loss if the fair value of the asset is not based on a valuation technique that uses data from only observable inputs. the valuation technique used was the monte-carlo simulation technique, which includes unobservable inputs. accordingly the day 1 profit of R17.9 million could not be recognised immediately in profit or loss. this resulted in an unrecognised day one gain of R17.9 million which is recognised in profit or loss over a five-year period.


fair value of option to acquire investment in Black Wattle colliery Proprietary limited 25 481 17 864 Day one fair value gain (10 720) (14 291)

carrying value at year-end 14 761 3 573

Day one fair value gain reconciliation:

Day one fair value gain 17 864 17 864

Day one fair value gain recognised – prior years (3 573) –

Day one fair value gain recognised – current year (3 571) (3 573)

Day one fair value gain at year-end 10 720 14 291

22. INVENTOrYinventory comprises work in progress on the following property development:southern spirit Properties 142 Proprietary limited (Hurlingham) – 3 287Reconciliation of movement in work in progress:Balance at beginning of the year 3 287 3 335expenses capitalised – 315impairments to net realisable value – (363)Disposal of subsidiary (3 287) –

Balance at end of the year – 3 287

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

72 VUNANI LIMITED




23. TrADE AND OTHEr rECEIVABLESsundry accounts receivable 27 707 24 995allowance for impairment (1 939) (3 706)

25 768 21 289

reconciliation of movement in allowance for impairment:

Balance at beginning of the year (3 706) (5 353)utilised 1 749 2 449Decrease/(increase) in impairment allowance 18 (802)

Balance at end of the year (1 939) (3 706)

Ageing of trade and other receivables

not past due 24 756 17 861Past due 1 – 30 days 348 2 884Past due 31 – 60 days 487 484Past due 61 – 90 days 354 120Past due 91 days and greater 1 762 3 646

27 707 24 995

Impairment allowance

Past due 61 – 90 days (177) (60)Past due 91 and greater (1 762) (3 646)

(1 939) (3 706)

Credit quality

an analysis of the credit quality of trade and other receivables not impaired is as follows:Internal credit ratings

four or more years trading history with the group 18 640 17 823

less than four years trading history with the group 7 128 3 466

25 768 21 289


73


24. ACCOUNTS rECEIVABLE AND pAYABLE FrOM TrADING ACTIVITIESAccounts receivable from trading activities

trading debtors 199 412 95 078

Pre-paid expenses 217 560

199 629 95 638

Accounts payable from trading activitiesaccounts payable 200 373 89 407

these amounts arise primarily from securities trading activities that the group, through its subsidiary Vunani securities Proprietary limited (“Vunani securities”), carries out on behalf of its clients.

the accounts receivable from stockbroking activities represents amounts due from clients for the purchases of equities and the accounts payable from stockbroking activities represents amounts due to clients for sales of equities. no set-off of receivables and payables is permitted as Vunani securities has no legal right to do so as the transactions are with different counterparties with differing settlement dates.

Vunani securities must ensure the settlement of all transactions executed by them on behalf of clients, the settlement authority (which is a separately established entity) is appointed by the Jse to manage the settlement of these transactions and the risks associated with such settlement.

the settlement authority monitors and ensures that the settlement obligation of members and their clients are met on settlement date. the settlement authority monitors uncommitted settlements (i.e. settlement where there is either insufficient cash or dematerialised scrip) and takes action when the settlement of a transaction in equity securities is unlikely to take place on settlement date. the settlement authority has the ability to buy and sell equity securities to meet obligations arising from the management of the settlement process and the risk associated with such processes as borrow as agent on behalf of a member to ensure settlement.

Vunani securities is protected by a clause in its controlled account mandate which states that, where the controlled client fails to put the member in a position before the required time to settle the transaction on settlement day, the controlled client will forfeit any rights the client may have had in respect of the said transaction. the clause also states that the client shall remain liable for any losses, costs and charges incurred or charge imposed by the member which affect the said transaction. this is covered in the material obligations section of the controlled account mandate signed by the client.

in addition Vunani securities ensures that no purchase transaction takes place unless the controlled client has the funds in their account, which is held at Jse trustees, hence mitigating the risk that receivable balances will not be settled and on the sell side the member ensures that the client has the equity securities in uncertificated form before a sale is executed.


25. TrADING SECUrITIEStrading securities receivable (held for trading) 1 564 1 030trading securities payable (held for trading) – (259)

1 564 771

26. CASH AND CASH EQUIVALENTScash and cash equivalents 29 378 17 169Bank overdraft (2 834) (160)

cash and cash equivalents in the statement of cash flows 26 544 17 009

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

74 VUNANI LIMITED




27. STATED CApITAL, SHArE CApITAL AND SHArE prEMIUMAuthorised

10 000 000 000 ordinary shares of R0.0001 each – 1 000200 000 000 ordinary shares of no par value – –99 000 redeemable preference shares of R0,01 each 1 1

1 1 001

Issued

5 270 732 462 ordinary shares at R0.0001 each – 527105 414 649 ordinary shares of no par value 610 088 –share premium – 609 561treasury shares (14 899) (14 276)

595 189 595 812

Treasury sharesthe group reacquired R0.62 million worth of shares that were issued in 2011 for the acquisition of an associate. accordingly, the group’s investment in the associate reduced by a corresponding amount.

reconciliation of movement in number of shares issued (000’s):

Reported at beginning of the year 5 270 732 4 763 502issue of shares (5 165 317) 507 230

Reversal of agterskot payment for acquisition of associate – (114 368) acquisition of other investments – 239 853 acquisition of associate – 31 104 employee share scheme trust – 237 957 increase in investment in subsidiary – 100 000 share-based payment – 12 684 share consolidation (5 165 317) –

Balance at end of the year 105 415 5 270 732

unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. this authority remains in force until the next annual general meeting.

the authorised share capital at 31 December 2012 was 200 million ordinary shares of no par value (2011: 10 billion ordinary shares with a par value of R0,001 per share). at the beginning of the period, 5 270 732 462 shares were in issue. On 12 march 2012, the share capital was consolidated on a 50:1 basis and the shares were converted to shares of no par value. after the consolidation, 105 414 649 shares of no par value were in issue.


75


27. STATED CApITAL, SHArE CApITAL AND SHArE prEMIUM (continued)reconciliation of movement in share capital:

Reported at beginning of the year 527 476issue of shares (527) 51

converted to no par value shares (527) – Reversal of agterskot payment for acquisition of associate – (11) acquisition of other investments – 24 acquisition of associate – 3 employee share scheme trust – 24 increase in investment in subsidiary – 10 share issue – 1

Balance at end of the year – 527

reconciliation of movement in share premium:

Reported at beginning of the year 609 561 601 532(609 561) 8 029

converted to no par value shares (609 561) – Reversal of agterskot payment for acquisition of associate – (27 740) acquisition of other investments – 14 375 acquisition of associate – 1 552 employee share scheme trust – 14 253 increase in investment in subsidiary – 4 990 share-based payment – 599


reconciliation of movement in stated capital:

Reported at beginning of the year – – converted from par value shares 610 088 –

Balance at end of the year 610 088 –

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

76 VUNANI LIMITED




28. OTHEr FINANCIAL LIABILITIESOther financial liabilities comprise:

carried at amortised cost 51 586 117 614

capital 50 710 101 951 accrued interest 876 15 663

carried at fair value through profit or loss 77 140 284 111

capital 52 055 401 655 accrued interest 5 559 90 930 fair value adjustments 19 526 (208 474)

128 726 401 725

reconciliation of other financial liabilities:

Balance at beginning of the year 401 725 1 234 838accrued interest 48 845 64 407advances 9 516 3 133Repayments (200 999) (280 819)Disposals (31 375) (523 168)settled (79 434) –fair value adjustments (19 552) (96 666)


reconciliation of cumulative fair value adjustments:

Balance at beginning of the year (208 474) (148 938)fair value adjustments (19 552) (96 666)settled 247 552 37 130

Balance at end of the year 19 526 (208 474)

Carried at amortised cost

ABSA BANK LIMITED28.1 cumulative redeemable participating preference shares in Pahana investments 93 Proprietary limited

attracting interest at a variable rate linked to JiBaR and treasury liquidity cost. capital and interest are repayable from dividends and loan repayments received from civils 2000 Holdings Proprietary limited. the preference shares were redeemed during the year. – 29 607

capital – 25 000 accrued interest – 4 607


77


28. OTHEr FINANCIAL LIABILITIES (continued)Carried at amortised cost (continued)

DEVELOpMENT BANK OF SOUTH AFrICA28.2 seven-year redeemable, cumulative debentures in Vunani capital Proprietary limited, with interest

at 13,75% and secured by the investment in lexshell 630 Proprietary limited, repayable on 30 september 2012. in October 2012 the debenture agreement matured and new loan terms were renegotiated. interest is at a fixed rate of 9,09% and secured by the investment in Pacific Heights investments 118 Proprietary limited. the debentures are redeemable in tranches up to 30 september 2020. – 34 795


renegotiated loan 32 459 –

capital 31 592 – accrued interest 867 –

FOrCE HOLDING LIMITED28.3 cumulative redeemable participating preference shares in Verbicept Proprietary limited. capital is

repayable from dividends from Workforce Holdings limited as and when dividends are declared by Workforce Holdings limited. no dividends are expected from Workforce Holdings limited in 2013 and the liability is therefore classified as non-current.

capital 9 000 –

rAND MErCHANT BANK LIMITED DEVELOpMENT BOND28.4 Bond over erf 562 Blair athol extension 3 over land (investment property) in selectria investments 49

Proprietary limited with interest at bank facility rate less 0.35% repayable in 20 years from 12 January 2009 on 12 January 2029. 2 466 2 622

capital 2 457 2 614 accrued interest 9 8

STANDArD BANK LIMITED28.5 five-year renewable loan in Vunani Properties Proprietary limited with interest fixed at 11,78%

secured by the investment in Vunani Property investment fund Proprietary limited, repayble on 31 October 2016. the loan was repaid during the year. – 45 815


28.6 Vendor – Avram International LLC

this loan relates to the cost of the investment in avram international llc. the terms of the liability is that the liability is unsecured, interest free and is to be repaid using dividends declared from avram international llc. no dividends are expected from avram international llc in 2013 and the liability is therefore classified as non-current. 1 833 1 833

28.7 Vendor – Vunani Solar power proprietary Limited

this loan relates to the cost of the investment in Vunani solar Power Proprietary limited. the terms of the liability is that the liability is unsecured, interest free and is to be repaid using dividends from Vunani solar Power Proprietary limited. no dividends are expected from Vunani solar Power Proprietary limited in 2013 and the liability is therefore classified as non-current. 1 300 1 300

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

78 VUNANI LIMITED




28. OTHEr FINANCIAL LIABILITIES (continued)Carried at amortised cost (continued)

Other financial liabilities 4 528 2 37228.8 loans are unsecured, interest free and have no fixed term of repayment. the amount consists of a

number of small loans.

28.9 loans are unsecured, bears interest at prime less 4% and have no fixed terms of repayment. – 570

capital – 570 accrued interest – –

Total carried at amortised cost 51 586 118 914

Designated as fair value through profit or loss on initial recognition

ABSA BANK LIMITED28.10 cumulative redeemable, participating (35% profit share) preference shares in camden Bay

investments 2 Proprietary limited with interest at 75% of prime, secured by the investment in Wesizwe Platinum limited. the preference shares were redeemed during the year. – 43 450

capital – 100 401 accrued interest – 48 590 fair value adjustment – (105 541)

FIrEFLY INVESTMENTS 61 prOprIETArY LIMITED 28.11 the loan in aquarella investments Proprietary limited has no fixed term of repayment, was secured

by the investment in consolidated infrastructure Group limited (previously Buildworks limited), and carried interest at prime and a profit participation of 80%. the loan was redeemed during the year. – 5 362


FIrST NATIONAL BANK LIMITED28.12 five-year term loan issued on 1 february 2008 in Pacific Heights investment 118 Proprietary limited

with interest equivalent to all dividend payments from Redefine Properties limited and secured by the investment in Redefine income fund limited, with a profit share of 23,33%. the liability was repaid on 22 february 2013. 52 043 48 475

capital 46 400 46 400 accrued interest 1 347 – fair value adjustment 4 296 2 075

INVESTEC BANK LIMITED28.13 Renewable term loan in anchor Park investments 42 Proprietary limited attracted interest at prime

with a profit participation of 30% and secured by the investment in Brikor limited. the loan was repaid during the year. – 47 023



79


28. OTHEr FINANCIAL LIABILITIES (continued)Carried at fair value through profit or loss on initial recognition

28.14 seven-year term loan in Wonderwall investments 36 Proprietary limited attracted interest at prime less 0,5% and secured by the investment in PsV limited. the loan was repaid during the year. – 14 212


28.15 Renewable term loan in anchor Park investments 81 Proprietary limited attracted interest at prime less 1% with a profit participation of 30% and secured by the investment in Basil Read limited. the loan was repaid during the year. – 81 771


28.16 this represents the value of the liability payable to investec Bank limited in respect of future proceeds from Gidani Proprietary limited. this liability is repayable on 31 may 2015. 13 022 –

capital – – fair value adjustment (refer to note 19) 13 022 –

the group issued a R40 million guarantee to investec Bank limited in 2010 as security for the financial liabilities of anchor Park investments 42 Proprietary limited, Wonderwall investments 36 Proprietary limited and anchor Park investments 81 Proprietary limited. Refer to notes 28.13, 28.14 and 28.15 for the terms of the loans. as part of the restructure of the investec Bank limited debt, the guarantee was increased to R60 million in the current financial year. in December 2012 investec Bank limited called on the guarantee and, as a result, Vunani limited paid R60 million in full and final settlement for its obligations in terms of the guarantee. the underlying assets in the companies were disposed of and the proceeds were used to settle the loans in anchor Park investments 42 Proprietary limited, anchor Park investments 81 Proprietary limited and Wonderwall investments 36 Proprietary limited. as part of the settlement agreement the proceeds from the investment in Gidani Proprietary limited were pledged to investec Bank limited.

rEDEFINE prOpErTIES LIMITED28.17 this represents the value of the liability payable to Redefine Properties limited in terms of the

unwinding of Pacific Heights investments 118 Proprietary limited loan agreement. the loan was repaid on 22 february 2013. 1 973 –

capital – – fair value adjustment 1 973 –

STANDArD BANK LIMITED28.18 three-year term loan secured by investment in Bsi limited and carried interest at prime and a 20%

profit participation. the loan was repaid during the year. – 20 584

capital – 19 488 accrued interest – 746 fair value adjustment – 350

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

80 VUNANI LIMITED




28. OTHEr FINANCIAL LIABILITIES (continued)Carried at fair value through profit or loss on initial recognition (continued)

28.19 five-year term loan in Pacific Heights investment 118 Proprietary limited with 90% of loan attracting interest at 11,74% and the balance at a floating rate of prime less 1,5% and secured by the investment in Redefine Properties limited. the loan was repaid on 22 february 2013. 10 102 9 185

capital 5 655 5 655 accrued interest 4 212 3 274 fair value adjustment 235 256

28.20 three-year term loan in Vunani capital Proprietary limited, attracted interest at prime and secured by the investment in Workforce limited (prime for first two years and prime plus 3% for the last year). the loan was repaid the during the year. – 14 049

capital – 12 134 accrued interest – 1 784 fair value adjustment – 131

Total carried at fair value through profit or loss 77 140 284 111

total financial liabilities 128 726 401 725Less: current financial liabilities (68 646) (298 585)

non-current financial liabilities 60 080 103 140

Fair value adjustments to other financial liabilities

Ring-fenced special purpose entities have historically been used to house the group’s geared equity investments and any financial liabilities that relate to such investments. financial assets and liabilities that arise in terms of these ring-fenced structures are both fair valued through profit or loss in terms of ias 39.

the fair value adjustments that relate specifically to financial liabilities are not as a result of the group’s inability to discharge its obligation, but rather in terms of the agreements with its lenders. the terms of the financial liability are such that, in the event that the asset fair value falls below the face value of the liability, the group is not obligated to pay the full face value of the debt, but rather a value that is directly linked to the value of the related asset. the full fair value adjustment is considered to be as a result of a change in market conditions and no portion relates to changes in the group’s own credit risk.

Assumptions

the liabilities have been fairly valued using a monte carlo simulation model, that replicates the terms of the liabilities. the model uses the following variables:

n Valuation date of the liability

n maturity date of the liability

n spot price of the related investment

n strike price as specified in the agreement

n Risk-free interest rate for discounting future cash flows

n Volatility of the related investment share price

n Dividend yield, over one-year period prior to valuation

29. CUrrENT TAX pAYABLE AND TAX prE-pAIDnormal tax 3 387 291 Dividends withholding tax 4 526 –security transfers tax 2 143 –

10 056 291


81


30. TrADE AND OTHEr pAYABLEStrade and other payables 23 510 45 276accrued leave pay 2 351 1 949

25 861 47 225

31. rETIrEMENT BENEFITSDefined contribution plan

it is the policy of the group to provide retirement benefits to all its employees through a defined contribution provident fund, which is subject to the Pension funds act of 1956. the group is under no obligation to cover any unfunded benefits. employees make an election to join the provident fund and their contributions to the fund are included with staff costs as detailed in note 11.

2012 2011

figures in Rand 000’sNumber of

optionsNumber of

options

32. SHArE-BASED pAYMENTSa group share scheme was introduced in June 2011, whereby employees were entitled to receive shares in the company upon vesting (which took place over a four-year service period). at 31 December 2012 20% of the shares issued in Grant 1 had vested. share-based payment reserve 5 906 2 524

at 29 June 2011 the company implemented the following share-based payment arrangements:share option programme (equity-settled)Grant 1

Grant date Vesting dates

29 June 2011 1st Tranche 2nd tranche 3rd tranche 4th tranche29 June 2012 29 June 2013 29 June 2014 29 June 2015(20% vesting) (25% vesting) (25% vesting) (30% vesting)

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

82 VUNANI LIMITED




32. SHArE-BASED pAYMENTS (continued)the options outstanding under Grant 1 at 31 December have a weighted average exercise price of R3.00 and a weighted average contractual life of four years.Balance at beginning of the year 219 228 –Granted during the year – 237 957forfeited during the year (26 206) (18 729)


Exercisable at 31 December 2012 42 064 –

Grant 2

at 28 December 2012 the company implemented the following share-based payment arrangements:

Grant date Vesting dates

28 December 2012 1st tranche 2nd tranche 3rd tranche 4th tranche28 December

201328 December

201428 December

201528 December

2016(20% vesting) (25% vesting) (25% vesting) (30% vesting)

the number and weighted average exercise price of the share options are as follows:

2012 2011

figures in Rand 000’sNumber of

optionsNumber of

options

Balance at beginning of the year – –Granted during the year 3 359 –forfeited during the year – –


Exercisable at 31 December 2012 – –

the options outstanding at 31 December 2012 have an exercise price of R1.48 and a weighted average contractual life of four years.


83


32. SHArE-BASED pAYMENTS (continued)Inputs for measurement of grant date fair value

the benefit payable per grant to an employee on exercise date under the share scheme is the difference between the spot share price at the time and the higher of the strike price and zero. the fair value of the benefits granted to an employee prior to exercise can be calculated using a call option model.Fair value of share options and assumptions

fair value at Grant date 1 (29 June 2011) 14 277 14 277fair value at Grant date 2 (28 December 2012) – –share price at Grant date 1 r3.00 R3.00share price at Grant date 2 r1.48 –expected volatility (weighted average volatility) – Grant date 1 152.23% 152.23%expected volatility (weighted average volatility) – Grant date 2 119.34% –Option life 4 years 4 yearsassumed dividends payable 0% 0%Risk-free interest rate (ZaR zero coupon swap curve) 5.52% 5.52%Employee expenses

share options granted in 2011 2 524 2 524share options granted in 2012 3 382 –

total expense recognised as employee costs 5 906 2 524

Volatility is determined based on the daily returns of the company’s share price under the assumption that the share price returns are log-normally distributed. the equally weighted volatility at 29 June 2011 was calculated as 152.23%. the amount of history preceding 29 June 2011 that was used to calculate the volatility equals the term of the option. the equally weighted volatility at 28 December 2012 was calculated as 119.34%. the amount of history preceding 28 December 2012 that was used to calculate the volatility equals the term of the option.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

84 VUNANI LIMITED




33. CASH UTILISED BY OpErATIONSProfit/(loss) before income tax expense from continuing operations 31 315 (23 628)loss before income tax expense from discontinuing operations – (33 682)adjusted for:Depreciation of property, plant and equipment 1 885 2 030loss/(profit) on disposal of plant and equipment 53 (703)Bargain purchase of subsidiary – (346)Profit/(loss) on disposal of businesses (5 907) 14 971loss on disposal of discontinued operation – 23 123fair value adjustments on investment property – (604)Operating lease accrual on investment property – (329)equity-accounted earnings (17 218) (5 715)impairment reversal of investments in and loans to associates (1 610) (53)fair value adjustments on other investments (15 009) 48 880fair value adjustment on options (7 615) –Profit on disposal of other investments – (200)Profit on disposal of non-current asset held for sale – (7 969)impairment of non-current asset held for sale – 201amortisation of other intangible assets 977 977Realisation of deferred income (3 571) (3 573)inventory written down to net realisable value – 363Rental guarantee reversal (1 662) (2 000)movement in impairment allowance (18) (1 978)share-based payments expense 3 382 2 524fair value adjustments on other financial liabilities (19 552) (96 666)investment revenue (2 355) (4 737)interest received from investments (22 557) (24 568)finance income (1 007) (754)finance costs 48 845 118 893foreign exchange loss 198 –

cash (utilised)/generated by operations before changes in working capital (11 426) 4 457

Changes in working capital

increase in inventories – (315)increase in trade and other receivables (3 379) (8 314)(Decrease)/increase in trade and other payables (19 674) 17 601increase in trading securities (793) (752)Decrease/(increase) in accounts receivable and payable from trading activities 13 644 (3 960)

cash (utilised)/generated by operations (21 628) 8 717


85


34. INCOME TAX pAIDPayable at beginning of the year 291 (3 149)current year tax charge (5 010) (337)Payable at end of the year (refer to note 29) 3 387 291

(1 914) (3 195)

35. INCrEASE IN INVESTMENT IN SUBSIDIArY2012

On 1 march 2012, the group acquired an additional 24% in Jala Group Proprietary limited trading as Vunani technology Ventures Proprietary limited for a notional consideration. this resulted in the group increasing its shareholding from 51% to 75%. the minority shareholders’ share of net assets at 1 march 2012 was R0,5 million. the acquisition of and additional 24% stake in the company resulted in a transaction between shareholders recognised directly in equity of R0,1 million for the group. the transaction arose because the group acquired the additional stake from shareholders who no longer wanted a stake in the company.

figures in Rand 000’s 2012

net assets acquired 118

Purchase price *

transaction between shareholders recognised directly in equity 118

* Less than R1 000.

there have been no changes in the group’s ownership of subsidiaries that resulted in a loss of control of subsidiaries.

36. BUSINESS DISpOSALSOn 22 february 2012 the group disposed of its entire interest in southern spirit Properties 142 Proprietary limited for R3,3 million.

On 10 October 2012 the group disposed of its entire interest in Pahana investments 93 Proprietary limited for a nominal amount.

these disposals were not considered to be discontinued operations as they did not represent the discontinuation of a major line of business in the group.

Disposal of investment


pahana Investments

93 proprietary Limited

Southern Spirit properties

142 proprietary Limited Total

Net assets/(liabilities) disposed

investment in associates 25 000 – 25 000

Deferred taxation 245 – 245

trade and other receivables – 265 265

inventory – 3 287 3 287

cash and cash equivalents – * –

Other financial liabilities (31 375) – (31 375)

trade and other payables (29) – (29)

(6 159) 3 552 (2 607)

Proceeds on disposal * (3 300) (3 300)

(Profit)/loss on disposal (6 159) 252 (5 907)

* Less than R1 000.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

86 VUNANI LIMITED



37. BASIC AND HEADLINE LOSS pEr SHArEShare consolidation

On 12 march 2012 the company successfully converted its ordinary shares to no par value shares and subsequently consolidated its share capital on a 50:1 basis. the number of issued shares after the consolidation amounted to 105 414 701 ordinary shares of no par value. the impact of the share consolidation is shown below:

2012 2011

post-share consolidation

previously presented

Basic and diluted loss per share (cents) (0,2) (48,7) (1,0)

continuing operations (0,2) (22,3) (0,5) Discontinued operations – (26,4) (0,5)

Headline and diluted headline loss per share (cents) (11,2) (28,0) (0,6)

continuing operations (11,2) (20,0) (0,4) Discontinued operations – (8,0) (0,2)

Basic and diluted loss per share

the calculation of basic and diluted loss per share at 31 December 2012 was based on the loss attributable to ordinary shareholders of R0,216 million (2011: R47,603 million), and a weighted average number of ordinary shares outstanding of 100,622 million (2011: 97,739 million), calculated as follows:

Weighted average number of ordinary shares (000’s)

2012

Including impact

of share consolidation

issued ordinary shares at beginning of the year 5 270 732

share consolidation (5 165 317)

effect of own shares held (4 793)

100 622

2011 post-share

consolidation previously presented

issued ordinary shares at beginning of the year 95 270 4 763 502effect of own shares held (2 425) (121 260)effect of cancelled shares (658) (32 900)effect of shares issued 5 552 277 612

97 739 4 886 954


87

2011

Including impact

of share consolidation

As previously presented

37. BASIC AND HEADLINE LOSS pEr SHArE (continued)potential dilutive shares

the shares issued as part of the employee share incentive could potentially dilute basic earnings in the future. in the current year the shares have an anti-dilutive effect.

the Grant 2 shares issued as part of the employee share incentive could potentially dilute basic earnings in the future. in the current year there is no dilutive effect.shares issued as part of the share incentive scheme (000’s) 4 759 237 957

2012 2011

post-share consolidation

previously presented

Net asset value per share (cents) 191.2 188.6 3.8 net asset value per share is the equity attributable to equity

holders per shares in issue at year-end.Net tangible asset value per share (cents) 158.3 154.9 3.1 net tangible asset value per share is the equity attributable to equity holders

(excluding goodwill and intangible assets) in issue.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

88 VUNANI LIMITED




37. BASIC AND HEADLINE LOSS pEr SHArE (continued)Headline loss

total comprehensive loss attributable to owners: (216) (47 603)adjust for:Revaluation of investment property

subsidiariesGross revaluation – (605)Deferred tax on revaluation – 86non-controlling interest in revaluation – 114

impact of tax rate changeDeferred tax on revaluation 38 –non-controlling interest on revaluation (8) –

associatesGross revaluation (10 866) (3 476)Deferred tax on revaluation 2 026 231Deferred tax on rate change 984 –non-controlling interest in revaluation 1 728 714

Disposals of investment propertyProfit on disposal – 23 206capital Gains tax – (77)non-controlling interest in revaluation – (5 088)

Disposal of plant and equipmentloss/(profit) on disposal 53 (703)tax (10) 99

Disposal of subsidiariesProfit/(loss) on disposal (5 907) 14 971tax – (2 096)

Profit on disposal of non-current assets held for saleProfit on disposal – (7 969)tax – 1 116

associatesimpairment 933 –tax – –

Business acquisitionsBargain purchase – (346)tax – 48

(11 245) (27 378)

Weighted average number of shares (000’s) 100 622 4 886 954Weighted average number of shares taking into account the share consolidation (000’s) 100 622 97 739


89


38. COMMITMENTSGuarantees and sureties provided

the group has provided guarantees and sureties for group companies (including investments in associates) in the amount of R146,7 million (2011: R296,5 million). the probability of the liability materialising in terms of these guarantees and sureties is dependent on the value of the underlying properties and equities that secure the underlying debt. the decrease in the guarantees and sureties is due to the group repaying a significant amount of debt during the year.Operating leases – as lessee (expense)minimum lease payments due

Within one year 4 176 4 023in second to fifth years inclusive 8 860 12 553

13 036 16 576

Operating lease payments represent rentals payable by the group for certain of its office premises and office equipment. leases are negotiated for an average term of four years. Rentals on the office and office equipment escalate at an average rate of 9,5% per annum.

39. OpErATING SEGMENTSthe group has seven reportable segments, being asset management, advisory services, investment holdings, Group, securities broking and Properties asset management and Properties investments and developments. the group’s strategic business segments, offering different products and services, are managed separately, requiring different skill, technology and marketing strategies. for each of the strategic business segments, the group’s ceO and mD review internal management reports on at least a monthly basis. the group ceO and mD are the chief operating decision-makers.

all segments are located in south africa, with the exception of advisory services, which also operates in Zimbabwe. the costs associated with geographical reporting and information concerning products and services would be excessive and the necessary information is not available. there are no single major customers.

the following summary describes the operations in each of the group’s reportable segments:Continuing operations 2012


Asset manage-

ment

Advisory services

(Note 1)Investment

holdingsGroup

(Note 2)Securities

broking

properties – asset

manage-ment

properties invest-

ments anddevelop-

ments(Note 3) Total

revenue 25 039 9 283 – 10 624 48 068 7 014 7 864 107 892

finance income and interest received from investments 238 842 18 123 1 788 611 – 1 962 23 564finance costs – (7) (48 583) (112) (30) – (113) (48 845)Depreciation (382) (135) – (1 214) (150) – (4) (1 885)amortisation of intangible assets (977) – – – – – – (977)impairment on assets – 101 2 488 – (933) – (46) 1 610equity accounted earnings/(loss) – – (1 361) – (200) – 18 779 17 218income tax income/(expense) 510 (1 112) (12 396) – 58 – (6 620) (19 560)

Reportable segment profit/(loss) after tax 1 248 (6 277) 3 282 (8 338) (1 513) 2 402 20 951 11 755

Reportable segment assets 49 440 2 045 221 071 8 117 220 449 690 89 213 591 025investment in associates 9 640 – 11 019 – – – 59 414 80 073capital expenditure 134 – – 254 98 – – 486Reportable segment liabilities (5 187) (1 592) (127 457) (10 724) (214 845) (28) (16 881) (376 714)

note 1: the advisory services segment was previously named “investment banking and advisory”. the name was amended in the current year. this segment now includes the information that only relates to the advisory component of the group’s operations. the comparative information for this segment has been adjusted to reflect this change.

note 2: the Group segment was previously named “Group overhead”. the segment name was changed in the current year.note 3: the Properties investments and developments segment was previously reported as two separate segments. in the current year,

these segments have been combined and reported as one segment.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

90 VUNANI LIMITED



39. OpErATING SEGMENTS (CONTINUED)continuing operations 2011


Asset manage-

ment

Advisoryservices(Note 1)

Investment holdings

Group (Note 2)

Securities broking

properties – asset

manage-ment

properties invest-

ments anddevelop-

ments(Note 3) Total

revenue 22 663 22 174 – 4 709 50 693 6 267 249 106 755

finance income and interest received from investments 286 162 6 126 876 569 – 17 051 25 070finance costs (2 034) (1 176) (53 565) (406) (161) – (7 065) (64 407)Depreciation (406) (1 468) – – (156) – – (2 030)amortisation of intangible assets (977) – – – – – – (977)impairment on assets (201) – (168) – (650) – (196) (1 215)equity accounted earnings/(loss) 5 – (897) – 200 – 6 407 5 715income tax income/(expense) 974 (140) 1 346 – 514 – (3 957) (1 263)

Reportable segment profit/(loss) after tax 5 916 5 298 (10 464) (33 444) (791) (671) 9 265 (24 891)

Reportable segment assets 34 895 9 418 540 545 – 129 273 398 84 174 798 703investment in associates 9 329 – 31 302 – 1 756 – 55 706 98 093capital expenditure 532 2 996 – – – – – 3 528Reportable segment liabilities (3 312) (99 695) (307 955) – (108 287) (41) (66 715) (586 005)

note 1: the advisory services segment was previously named “investment banking and advisory”. the name was amended in the current year. this segment now includes the information that only relates to the advisory component of the group’s operations. the comparative information for this segment has been adjusted to reflect this change.

note 2: the Group segment was previously named “Group overhead”. the segment name was changed in the current year.note 3: the Properties investments and developments segment was previously reported as two separate segments. in the current year,

these segments have been combined and reported as one segment.

Basis of measurement

the group uses the following principles to determine segment profit or loss, segment assets and segment liabilities:

n any transactions between segments are eliminated.

n all segment profits or losses and the group’s profits or losses are measured in the same manner, using the accounting policies described in notes 1 to 4.

n all segment assets and liabilities and the group’s assets and liabilities are measured in the same manner, using the accounting policies described in notes 1 to 4.

n there have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss, other than the adjustments to comparative information referred to above.


91

40. rELATED pArTIESrelationships

ultimate holding company/parent Vunani Group Proprietary limitedassociates Refer to note 18Directors Refer to note 41

Holding

Direct and indirect subsidiaries 2012 2011

Vunani Capital proprietary Limited 100% 100%anchor Park investments 42 Proprietary limited 100% 100%anchor Park investments 81 Proprietary limited 100% 100%aquarella investments 507 Proprietary limited 100% 100%Hyrode investments Proprietary limited 100% 100%imvuno fund managers Proprietary limited 55% 55%Jala Group Proprietary limited 75% 51%Vunani Private client stock Brokers Proprietary limited 100% 100%lexshell 630 investments Proprietary limited 100% 100%Onaghan investments 20 Proprietary limited 100% 100%Pacific Heights investments 118 Proprietary limited 100% 100%Pahana investments 93 Proprietary limited† –% 51%spaciros Proprietary limited 51% 51%tutuni investments Proprietary limited 100% 100%Vunani mining Proprietary limited 100% 100%Vunani corporate finance Proprietary limited 100% 100%Vunani Passenger logistics Proprietary limited (previously Vunani energy Proprietary limited) 100% 100%Vunani fund managers Proprietary limited 97,5% 97,5%Vunani metals and minerals Proprietary limited 100% 100%camden Bay investments 2 Proprietary limited 100% 100%Vunani mining and Resources Proprietary limited 75% 75%Quintofor investments Proprietary limited 100% 100%Verbicept Proprietary limited 100% –%Vunani sponsors Proprietary limited 100% 100%Vunani Resources Proprietary limited 100% 100%Wonderwall investments Proprietary limited 100% 100%

† The company was sold during the year.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

92 VUNANI LIMITED



40. rELATED pArTIES (continued) Holding

Direct and indirect subsidiaries 2012 2011

Vunani Securities proprietary Limited 100% 100%Vunani nominee Proprietary limited 100% 100%Vunani Capital Investments proprietary Limited (previously Vector equities Proprietary limited) 100% 100%Vector nominees Proprietary limited 100% 100%Vunani Capital Markets proprietary Limited 100% 100%Vunani properties proprietary Limited 78% 78%Dreamworks investments 125 Proprietary limited 85% 85%Kliprivier Property Development Proprietary limited (previously Vunani Property asset managers Proprietary limited) 100% 100%selectria investments 49 Proprietary limited 100% 100%southern spirit Properties 142 Proprietary limited† –% 100%Vunani Properties international Proprietary limited 100% 100%Vunani Property asset management Proprietary limited 100% 100%Vunani Property fund management trust 100% 51%Wolfsberg arch investments Proprietary limited 51% 51%

Vunani Share Incentive Scheme Trust 100% 100%

† The company was sold during the year.

related party balances and transactions

all related party balances and transactions were eliminated on consolidation, except for those balances and transactions with associates (refer to note 18) and directors (refer to note 41).

there were no transactions between the company and its ultimate holding company, Vunani Group Proprietary limited.


93

41. DIrECTOrS’ rEMUNErATION AND BENEFITSno loans were made to directors during the 2012 financial year (2011: Rnil). there were no material transactions with directors, other than the following:


Non-executivedirector’s

fees* Salary

provident fund and

medical aidcontributions Bonus

Current yearshare-based

paymentexpense# Total

2012

eG Dube – 2 853 248 – 287 3 388

nm anderson – 1 821 158 – 183 2 162

ce chimombe munyoro – 1 287 175 – 140 1 602

Bm Khoza – 1 839 250 – 194 2 283

a Judin – 1 049 140 – 160 1 349

Wc Ross (chairman) 250 – – – – 250

G nzalo 130 – – – – 130

JR macey 130 – – – – 130

Dr B Khumalo 100 – – – – 100

n mazwi 100 – – – – 100

Total 710 8 849 971 – 964 11 494

2011eG Dube – 2 575 386 517 176 3 654nm anderson – 1 609 281 330 112 2 332ce chimombe munyoro – 1 157 273 244 86 1 760Bm Khoza – 1 722 273 348 118 2 461a Judin – 941 166 194 98 1 399Wc Ross (chairman) 300 – – – – 300G nzalo 113 – – – – 113JR macey 113 – – – – 113Dr B Khumalo 95 – – – – 95n mazwi 95 – – – – 95

Total 716 8 004 1 379 1 633 590 12 322

* Fees for non-executives.# This expense represents the IFRS 2 costs for the year for any options or rights given.

there are no service contracts for non-executive directors. the executive directors have service contracts with the group terminable upon one month’s written notice. no executive director has a fixed term contract.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

94 VUNANI LIMITED




41. DIrECTOrS’ rEMUNErATION AND BENEFITS (continued)Aggregate amounts paid to directors amounts to:

for services as directors of the companytotal remuneration and benefits received from the company 710 716 total remuneration and benefits received from the company’s subsidiaries and fellow subsidiaries 12 417 11 606

13 127 12 322

prESCrIBED OFFICErS

the company does not have any prescribed officers.

42. FINANCIAL INSTrUMENTS42.1 Liquidity risk

31 December 2012

figures in Rand 000’sCarrying amount

Un-discounted contractual cash flows

Due inless than

1 yearDue in

1 – 5 years

Due ingreater

than 5 years

non-derivative financial liabilities (355 443) (373 563) (314 123) (33 022) (26 418)

non-interest-bearing (255 539) (255 539) (242 517) (13 020) –

fixed interest rate instruments (32 459) (50 418) (4 000) (20 000) (26 418)

Variable interest rate instruments (67 445) (67 606) (67 606) – –

31 December 2011

figures in Rand 000’sCarrying amount

Un-discounted contractual cash flows

Due inless than

1 yearDue in

1 – 5 years

Due ingreater

than 5 years

non-derivative financial liabilities (538 776) (792 287) (607 405) (181 457) (3 425)

non-interest-bearing (141 096) (144 948) (144 948) – – fixed interest rate instruments (80 610) (98 040) (48 216) (49 824) – Variable interest rate instruments (317 070) (549 299) (414 241) (131 633) (3 425)

Management of liquidity risk

the group’s approach to managing liquidity is by managing its working capital, capital expenditure and other financial obligations, and to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation. ultimate responsibility for liquidity risk management rests with the board of directors. typically, the group ensures that it has sufficient cash on hand to meet operational expenses, including the servicing of financial obligations. the group also has access to R5 million undrawn overdraft facilities, which may be used to manage its financial obligations, if necessary.


95


42. FINANCIAL INSTrUMENTS (continued)42.2 Market risk

Interest rate risk

the company’s interest rate exposure is as follows:fixed rate instruments

financial liabilities (32 459) (80 610)Variable rate instruments

financial assets 34 597 17 169financial liabilities (67 445) (317 070)

(65 307) (380 511)

Cash flow sensitivity analysis for fixed rate instruments

a sensitivity analysis has not been included for fixed rate instruments as they are not sensitive to interest rate risk.Cash flow sensitivity analysis for variable rate instruments

a change of 50 basis points in the interest rates at the reporting date would have increased/(decreased) profit or loss by the amount shown below. this analysis assumes that all other variables remain constant.

effect on statement of comprehensive income (profit or loss) and equity

50 bps increase (327) (1 903) 50 bps decrease 327 1 903

Management of interest rate risk

the group generally adopts a policy of ensuring that its exposure to changes in interest rates is limited by either fixing the rate or by linking the rate to the prime rate over the period of the respective loan.

Equity price risk

the company’s equity price risk is as follows:unlisted financial assets at fair value through profit or loss 38 505 –listed financial assets at fair value through profit or loss 139 217 383 243trading securities 1 564 –

179 286 382 243

the company’s listed equity investments are listed on the Jse limited stock exchange and are classified at fair value through profit and loss.

a change of 10% in the fair value of investment at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. this analysis assumes that all other variables remain constant.

effect on profit or loss and equity

10% increase 17 929 38 324 10% decrease (17 929) (38 324)

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

96 VUNANI LIMITED




42. FINANCIAL INSTrUMENTS (continued)42.3 Credit risk

the carrying amount of financial assets represents the maximum credit exposure. the maximum exposure of credit risk was:loans to associates 37 998 41 680Other loans 5 219 1 136accounts receivable from trading activities 199 629 95 638trade and other receivables 25 768 21 289cash and cash equivalents 29 378 17 169

297 992 176 912

Impairment losses

the ageing of gross financial assets before impairments at the reporting date was:

2012 Total Loans to

associates Otherloans

Trading and other

receivables

Cash and cash

equivalents

Accounts receivable

from trading activities

not past due 296 980 37 998 5 219 24 756 29 378 199 629

Past due 1 – 30 days 348 – – 348 – –

Past due 31 – 60 days 487 – – 487 – –

Past due 61 – 90 days 354 – – 354 – –

Past due 91 days and greater 1 762 – – 1 762 – –

299 931 37 998 5 219 27 707 29 378 199 629

2011 Total Loans to

associates Otherloans

Trading and other

receivables

Cash and cash

equivalents

Accounts receivable

from trading activities

not past due 173 484 41 680 1 136 17 861 17 169 95 638 Past due 1 – 30 days 2 884 – – 2 884 – – Past due 31 – 60 days 484 – – 484 – – Past due 61 – 90 days 120 – – 120 – – Past due 91 days and greater 3 646 – – 3 646 – –

180 618 41 680 1 136 24 995 17 169 95 638


97


42. FINANCIAL INSTrUMENTS (continued)42.3 Credit risk (continued)

reconciliation of movement in allowance for impairment:

Balance at beginning of the year (3 706) (5 353) utilised 1 749 2 449 Decrease/(increase) in allowance for impairment 18 (802)


Factors considered in impairment

the group reviews accounts receivable monthly. unless customers have good payment records an impairment allowance is created for any accounts greater than 60 days.

the group believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic payment behaviour and analysis of customer credit risk.

Concentration of credit riskthe group’s trade and other receivables are all located domestically. the group does not have a wide variety of counterparties.

42.4 Fair values 2012 2011

figures in Rand 000’sCarrying amount Fair value

Carrying amount Fair value

Financial assets

Designated as fair value through profit or loss on initial recognition 177 722 177 722 419 668 419 668loans and receivables 263 395 263 395 158 607 158 607trading securities 1 564 1 564 1 030 1 030cash and bank balances 29 378 29 378 17 169 17 169

472 059 472 059 596 474 596 474

Financial liabilities

Designated as fair value through profit or loss on initial recognition (77 140) (77 140) (284 111) (284 111)amortised cost (275 469) (275 469) (254 246) (254 246)trading securities – – (259) (259)Bank overdraft (2 834) (2 834) (160) (160)

(355 443) (355 443) (538 776) (538 776)

at 31 December 2012 the fair values of all the financial instruments are substantially equal to the carrying amount reflected in the statement of financial position.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

98 VUNANI LIMITED



42. FINANCIAL INSTrUMENTS (continued)42.5 Fair value hierarchy

level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

figures in Rand 000’s Level 1 Level 2 Level 3

31 December 2012

financial assets designated at fair value through profit or loss 139 217 – 38 505

financial liabilities designated at fair value through profit or loss – – (77 140)

139 217 – (38 635)

31 December 2011financial assets designated at fair value through profit or loss 383 243 – 36 425financial liabilities designated at fair value through profit or loss – – (284 111)

383 243 – (247 686)


level 3 comprises: Balance at beginning of the year (247 686) (487 533)

total gains or losses in profit or loss (975) (76 178) Proceeds from loan, interest and repayment (67 302) 35 941 Purchases, sales, issues and settlements 277 328 280 084


a change of 10% in the fair value of financial assets and liabilities at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. this analysis assumes that all other variables remain constant.effect on profit or loss and equity 10% increase (3 864) (24 769) 10% decrease 3 864 24 769

43. GOING CONCErNthe going concern principal requires that the group’s and company’s annual financial statements be prepared on the basis that Vunani limited will remain in business for the foreseeable future.

Prior to the approval of the annual financial statements the board undertook processes to ensure that the going concern principal applies. these processes included assessing:

n the group’s financial budgets and 12-month rolling cash flow forecast;

n the performance of underlying business operations and their ability to make a positive contribution to the group’s objectives;

n the capital structure, liabilities and quality of the assets underpinning the statement of financial position; and

n the banking facilities and the group’s assets to ensure that these are sufficient to fund imminent liabilities and meet the group’s working capital requirements.

the board is of the view that, based on its knowledge of the group, assumptions regarding the outcome of the key processes underway and specific enquiries it has made, the group has adequate resources at its disposal to settle obligations as they fall due and the group will continue as a going concern for the foreseeable future.


99

44. EVENTS AFTEr rEpOrTING DATEsubsequent to year-end the following events took place:On 21 february 2013, the group disposed of a portion of its Redefine Properties limited shares. the proceeds were used to settle the outstanding debt of R62,23 million relating to the investment. the balance of the units are required to be held by the group for a two-year period. any distributions from Redefine limited will flow to the group.

On 28 february 2013, the group disposed of its 48% investment in one of its associates, integrated managed investments Proprietary limited, for R10.2 million. the 48% was disposed to management.

On 12 april 2013 the group disposed of its 40% investment in one of its associates, Greenstone Hill Office Park Proprietary limited, for R34.5 million. the 40% was sold to Vunani Properties investment fund, subject to the fulfilment of certain conditions by Vunani Properties investment fund. these conditions have been detailed in a circular released by Vunani Properties investment fund on 2 may 2013.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

100 VUNANI LIMITED

statement of comprehensive income

for the year ended 31 December 2012VUNANI LIMITED – Company

Figures in Rand 000’s Note 2012 2011

Revenue 45 717 729Investment revenue 46 41 166 359Fair value adjustments and impairments 47 (336 420) (9)Operating expenses 48 (3 034) (3 044)

Loss from operating activities (297 571) (1 965)Finance income 49 928 47

Loss before income tax (296 643) (1 918)Income tax expense 50 – 83

Loss for the year (296 643) (1 835)

Total comprehensive income for the year (296 643) (1 835)


101

statement of financial position

at 31 December 2012VUNANI LIMITED – Company


AssetsInvestments in subsidiaries 51 19 203 15 821Other investments 52 – – Loan to subsidiary company 53 256 588 –Loan to share trust 53 15 251 14 323

Total non-current assets 291 042 30 144

Loan to subsidiary company 53 – 591 069Cash and cash equivalents * *

Total current assets * 591 069

Total assets 291 042 621 213

EquityStated capital 54 610 088 – Share capital 54 – 527Share premium 54 – 609 561Share-based payments reserve 5 906 2 524Accumulated loss (325 878) (29 235)

Equity attributable to equity holders 290 116 583 377

LiabilitiesOther financial liabilities 55 – 37 180 Trade and other payables 56 926 656

Current liabilities 926 37 836

Total equity and liabilities 291 042 621 213

* Less than R1 000.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

102 VUNANI LIMITED

statement of changes in equity


Figures in Rand 000’s Share capital

Share premium

Stated capital

Total share capital

Share- based

payment reserve

Accumu-lated loss

Total equity

Balance at 31 December 2010 476 601 532 – 602 008 – (27 400) 574 608Total comprehensive income for the yearLoss for the year – – – – – (1 835) (1 835)

Total comprehensive income for the year – – – – – (1 835) (1 835)


Issue of shares 51 8 029 – 8 080 – – 8 080Share-based payments – – – – 2 524 – 2 524

Total transactions with owners 51 8 029 – 8 080 2 524 – 10 604

Balance at 31 December 2011 527 609 561 – 610 088 2 524 (29 235) 583 377

Total comprehensive income for the year

Loss for the year – – – – – (296 643) (296 643)

Total comprehensive income for the year – – – – – (296 643) (296 643)


Share capital conversion to no par value shares (527) (609 561) 610 088 – – – –

Share-based payments – – – – 3 382 – 3 382

Total transactions with owners (527) (609 561) 610 088 – 3 382 – 3 382

Balance at 31 December 2012 – – 610 088 610 088 5 906 (325 878) 290 116


103

statement of cash flows



Cash flows from operating activities

Cash utilised by operations 57 (2 047) (2 244)Investment revenue 41 166 359Finance income – 47Income tax paid 58 – 26

Cash generated/(utilised) by operating activities 39 119 (1 812)

Cash flows from investing activities

Loans repaid by subsidiary 20 881 1 812

Cash inflow from investing activities 20 881 1 812

Cash flows from financing activities

Payment of guarantee (60 000) –

Cash outflow from financing activities (60 000) –

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the year * *

Total cash and cash equivalents at end of the year * *

* Less than R1 000.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

104 VUNANI LIMITED

notes to the financial statements


Figures in Rand 000’s 2012 2011

45. REVENUEFee income

Management fees 717 729

46. INVESTMENT REVENUEDividend received from subsidiary company 41 166 –Dividends received from other investments – 359

41 166 359

47. FAIR VALUE ADJUSTMENTS AND IMPAIRMENTSGuarantees of financial liabilities measured at fair value through profit or loss (22 820) (9)Impairment of loan to subsidiary (313 600) –

(336 420) (9)

48. OPERATING EXPENSESOperating expenses include:Auditors’ remuneration – current year 590 557Directors’ remuneration and benefits paid by company (refer note 41) 710 716

49. FINANCE INCOMERecognised in profit and loss:Interest income on loan to share incentive scheme trust 928 47

50. INCOME TAX EXPENSECurrent tax expensePrior year over provision – 83

No taxation is payable in the current year as the company has an estimated tax loss of R5 212 291 (2011: R3 823 729) available for set-off against future taxable income. A deferred tax asset is not recognised due to the realisation of this loss being uncertain in the foreseeable future. Unrecognised deferred tax asset 1 459 1 071

Reconciliation of effective tax rate: % %Income tax rate 28.0 28.0Tax exempt income 3.9 (0.1)Disallowable expenditure (31.8) – Prior year under provision – 4.3Deferred tax asset not recognised (0.1) (27.9)

– 4.3


105

Holding Cost of investment

Figures in Rand 000’s 2012 2011 2012 2011

51. INVESTMENTS IN SUBSIDIARIESInvestment in subsidiaries held at cost

Vunani Capital Proprietary Limited 100% 100% 2 498 1 045Vunani Securities Proprietary Limited 100% 100% 11 248 9 675Vunani Capital Markets Proprietary Limited 100% 100% 195 201Vunani Capital Investments Proprietary Limited (previously Vector Equities Proprietary Limited) 100% 100% 4 655 4 655Vunani Properties Proprietary Limited 78% 78% 607 245

19 203 15 821

Figures in Rand 000’s

Number of shares/% holding Unlisted Fair value

52. OTHER INVESTMENTS2012

African Legends Limited 2.2 m 1 870 1 870Impairment (1 870) (1 870)

– –

2011African Legends Limited 2.2 m 1 870 1 870Nqoba Gaming Proprietary Limited – – 129NE Corp Holdings Limited – – *Impairment (1 870) (1 999)

– –

* Less than R1 000.


Analysis of impairmentBalance at beginning of the year (1 999) (1 999)Impairment utilised 129 –


53. LOAN TO SUBSIDIARYVunani Capital Proprietary Limited 570 188 591 069Impairment (313 600) –

256 588 591 069

The loan to the subsidiary company is unsecured, interest free and has no fixed terms of repayment and is repayable on demand. The carrying amount approximates fair value.

The loan has been subordinated in favour of Vunani Capital Proprietary Limited’s creditors, to the extent that the liabilities exceed assets, fairly valued in Vunani Capital Proprietary Limited.

Loan to share trust

Vunani Share Incentive Scheme Trust 15 251 14 323

The loan to the subsidiary trust is unsecured, bears interest at the official SARS interest rate and has no fixed terms of repayment. The carrying amount approximates fair value.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

106 VUNANI LIMITED

notes to the financial statements (continued)



54. STATED CAPITAL, SHARE CAPITAL AND SHARE PREMIUMAuthorised

10 000 000 000 ordinary shares of R0.0001 each – 1 000200 000 000 ordinary shares of no par value – – 99 000 redeemable preference shares of R0,01 each 1 1

1 1 001

Issued

5 270 732 462 ordinary shares at R0,0001 each – 527105 414 649 ordinary shares of no par value 610 088 – Share premium – 609 561

610 088 610 088

Reconciliation of movement in number of shares issued (000s):

Balance at beginning of the year 5 270 732 4 763 502Issue of shares (5 165 317) 507 230

Reversal of agterskot payment for acquisition of associate – (114 368) Acquisition of other investments – 239 853 Acquisition of associate – 31 104 Employee share scheme trust – 237 957 Increase in investment in subsidiary – 100 000 Share-based payments – 12 684 Share consolidation (5 165 317) –

Balance at end of the year 105 415 5 270 732

Unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.

The authorised share capital at 31 December 2012 is 200 million ordinary shares of no par value (2011: 10 billion ordinary shares with a par value of R0,001 per share). At the beginning of the period, 5 270 732 462 shares were in issue. On 12 March 2012, the share capital was consolidated on a 50:1 basis and the authorised and issued shares were converted to shares of no par value. After the consolidation, 105 414 649 shares of no par value were in issue.


107


54. STATED CAPITAL, SHARE CAPITAL AND SHARE PREMIUM (continued)Reconciliation of movement in share capital (000s):

Balance at beginning of the year 527 476Issue of shares (527) 51

Reversal of agterskot payment for acquisition of associate – (11) Acquisition of other investments – 24 Acquisition of associate – 3 Employee share scheme trust – 24 Increase in investment in subsidiary – 10 Share-based payments – 1 Converted to no par value shares (527) –

Balance at end of the year – 527

Reconciliation of movement in share premium:

Balance at beginning of the year 609 561 601 532Issue of shares (609 561) 8 029

Reversal of agterskot payment for acquisition of associate – (27 740) Acquisition of other investments – 14 375 Acquisition of associate – 1 552 Employee share scheme trust – 14 253 Increase in investment in subsidiary – 4 990 Share-based payments – 599 Converted to no par value shares (609 561) –


Reconciliation of movement in stated capital:

Reported at beginning of the year Converted from par value shares 610 088 –


ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

108 VUNANI LIMITED




55. OTHER FINANCIAL LIABILITIESCarried at fair value through profit or loss (FVTPL):Investec Bank Limited

A guarantee in respect of the Investec Bank Limited SPV loan created as part of the restructure in 2009. The guarantee was in respect of the loans with Investec Bank limited in Anchor Park Investments 42 Proprietary Limited, Wonderwall Investments 36 Proprietary Limited and Anchor Park Investments 81 Proprietary Limited. Refer to notes 28.13, 27.14 and 28.15 for the terms of the loans.

During the year Investec Bank Limited called on the guarantee and, as a result, Vunani paid Investec Bank Limited R60 million in full and final settlement for its obligations in terms of the guarantee, and the loans in Anchor Park Investments 42 Proprietary Limited, Anchor Park Investments 81 Proprietary Limited and Wonderwall Investments 36 Proprietary Limited – 37 180

– 37 180

56. TRADE AND OTHER PAYABLESSundry payables 926 656

57. CASH UTILISED BY OPERATIONSLoss before income taxation (296 643) (1 918)Adjusted for:

Investment revenue (41 166) (359)Finance income (928) (47)Fair value adjustments and impairments 336 420 9

(2 317) (2 315)Changes in working capital:Increase in trade and other payables 270 71

Cash utilised by operations (2 047) (2 244)


109


58. INCOME TAX PAIDBalance pre-paid at beginning of the year – (57)Current tax charge – 83Balance at end of the year – –

– 26

59. RELATED PARTIESRelationships

Ultimate holding company/parent Vunani Group Proprietary Limited*Subsidiaries 40Directors 41

Related party balances

Investments in subsidiaries 51 19 203 15 821Loan to subsidiary company 53 256 588 591 069Loan to share trust 53 15 251 14 323

291 042 621 213

Related party transactions

Revenue – management fee 45 717 729Finance income – share trust 49 928 47

1 645 776

* The parent does not produce financial statements for public use.

Directors’ remuneration and benefits (refer to note 41).

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

110 VUNANI LIMITED



60. FINANCIAL INSTRUMENTS60.1 Liquidity risk

Figures in Rand 000’sCarrying amount

Undiscounted contractual cash flows

Less than 1 year 1 – 5 years

Greater than 5 years

2012

Non-derivative financial liabilitiesNon-interest-bearing (926) (926) (926) – –

2011Non-derivative financial liabilitiesNon-interest-bearing (37 836) (37 836) (37 836) – –

Management of liquidity risk

The company’s approach to managing liquidity by managing its working capital, capital expenditure and cash flows, is to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation. Ultimate responsibility for liquidity risk management rests with the board of directors. Typically, the company ensures that it has sufficient cash on hand to meet operational expenses, including the servicing of financial obligations. Vunani Limited has access to group undrawn overdraft facilities amounting to R5 million, which may be used to meet its financial obligations, if necessary.


60.2 Market risk

Interest rate risk

The company’s interest rate exposure is as follows:Variable rate instruments

Financial assets 15 251 14 323

Cash flow sensitivity analysis for variable rate instruments

A change of 50 basis points in the interest rates at the reporting date would have increased/(decreased) profit or loss and equity by the amounts shown below. This analysis assumes that all other variables remain constant.

Effect on statement of comprehensive income (profit or loss) and equity:

50 bps increase 76 72 50 bps decrease (76) (72)

Management of interest rate risk

The company generally adopts a policy of ensuring that its exposure to changes in interest rates is limited by either fixing the rate or by linking the rate to the prime rate over the period of the respective loan.


111


60. FINANCIAL INSTRUMENTS (continued)60.3 Credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure of credit risk was:Loan to subsidiary company 256 588 591 061Loan to share trust 15 251 14 323Cash and cash equivalents * *

271 839 605 392

Impairment losses

The ageing of financial assets at the reporting date was:

2012 Total

Loan to subsidiary company

Loan to share trust

Not past due 271 839 256 588 15 251

Past due 1 – 30 days – – –



Past due 91 days and greater – – –

271 839 256 588 15 251

2011 Total

Loan to subsidiary company

Loan to share trust

Not past due 605 392 591 069 14 323Past due 1 – 30 days – – – Past due 31 – 60 days – – – Past due 61 – 90 days – – – Past due 91 days and greater – – –

605 392 591 069 14 323

Factors considered in impairment

The company reviews the recoverability of loans to subsidiary and share trust on an annual basis. The company reviews the budgets of the subsidiary and share trust which include revenue, profit and cash flow forecasts. The valuations of the underlying assets of the subsidiary and share trust are also reviewed. Loans are impaired if the company believes it will not be able to recover loans in the future.

During the year the group repaid the liabilities due to Investec Bank Limited (refer to note 28.16). As part of the restructure agreement, the company lent R313.6 million to Vunani Capital Proprietary Limited, which then lent the R313.6 million to Anchor Park 42 Proprietary Limited, Anchor Park 81 Proprietary Limited and Wonderwall Investments 36 Proprietary Limited. After the repayment of the external liabilities, the remaining liabilities related to the inter-company loans. These liabilities were not deemed to be repayable as the subsidiaries had no assets. As a result of this an impairment of R313.6 million has been raised.


Impairment

Loan to subsidiary company (313 600) –

* Less than R1 000.

ANNUAL FINANCIAL

STATEMENTS



VUNANI AT A GLANCE

112 VUNANI LIMITED



60. FINANCIAL INSTRUMENTS (continued)

60.4 Fair values 2012 2011

Figures in Rand 000’sCarrying amount Fair value

Carrying amount Fair value

Financial assets

Loans and receivables 271 839 271 839 605 392 605 392Cash and cash equivalents * * * *

271 839 271 839 605 392 605 392

Financial liabilities

Designated at fair value through profit or loss on initial recognition – – (37 180) (37 180)Amortised cost (926) (926) (656) (656)

(926) (926) (37 836) (37 836)

At 31 December 2012 the fair values of all the financial instruments are substantially equal to the carrying amount reflected in the statement of financial position.* Less than R1 000.

60.5 Fair value hierarchy

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Figures in Rand 000’s

31 December 2012 Level 1 Level 2 Level 3

Financial liabilities designated at fair value through profit or loss – – –

31 December 2011Financial liabilities designated at fair value through profit or loss – – (37 180)


Level 3 comprises:

Balance at beginning of the year (37 180) (37 171)Total losses recognised in profit or loss (22 820) (9)

Payment (refer to note 55) 60 000 –

Balance at end of the year – (37 180)

4

Analysis of shareholders 114

Shareholders’ diary 116

Notice of annual general meeting 117

Form of proxy 123

General information IBC



113

114 VUNANI LIMITED

analysis of shareholders


Number ofshareholders

Percentage ofshares held

(%)

Number ofshares held

(000’s)

Percentage of shares held

(%)

Analysis of shareholding

Individuals and corporates 319 84.0 86 448 82.0

Investment and insurance companies 23 6.0 6 819 6.5Nominees and trusts 36 9.4 7 376 7.0Share schemes 1 0.3 4 759 4.5Pension and provident funds 1 0.3 13 0.0

Shareholding per share register 380 100.0 105 415 100.0

Range of shareholding

1 to 1 000 189 49.7 62 0.11 001 to 10 000 115 30.3 410 0.310 001 to 100 000 51 13.4 2 077 2.0100 001 to 1 000 000 17 4.5 6 532 6.2More than 1 000 000 8 2.1 96 334 91.4

380 100.0 105 415 100.0

Shareholders’ spread analysis

To the best knowledge of the directors and after reasonable enquiry, at 31 December 2012, the spread of shareholders, as defined in the JSE Listings Requirements, was as follows:Type of shareholder

Non-public 11 2.9 81 563 77.4

Directors and associates (direct holding) 5 1.3 304 0.3 Directors and associates (indirect holding) 4 1.1 53 083 50.4 Share schemes 1 0.3 4 759 4.5 Vunani Group (holders >10% excluding directors) 1 0.2 23 417 22.2

Public 369 97.1 23 852 22.6

380 100.0 105 415 100.0

Shareholding greater than 5%

Vunani Group Proprietary Limited 76 308 72.4



ANNUAL FINANCIAL

STATEMENTS

115

Analysis of directors and associates (direct and indirect) shareholdings – 31 December 2012

Number of shares held* Total numberof shares

held(000’s)Shareholdings per director

Beneficiallydirect(000’s)

Beneficially indirect

(000’s)

EG Dube – 23 436 23 436NM Anderson – 14 625 14 625BM Khoza – 14 625 14 625J Rossouw – 398 398A Judin 86 – 86M Moller 86 – 86RB Makhubela 67 – 67A Zuma 65 – 65

304 53 084 53 388

There has been no change in shareholdings between 31 December 2012 and the approval of the integrated annual report.

Analysis of shareholding – 31 December 2011

Number of shares held* Total numberof shares

held(000’s)Shareholdings per director

Beneficiallydirect(000’s)

Beneficially indirect

(000’s)

EG Dube – 1 169 867 1 169 867NM Anderson – 731 246 731 246BM Khoza – 731 246 731 246J Rossouw – 7 600 7 600CE Chimombe-Munyoro – 6 373 6 373WG Frawley 10 803 – 10 803A Judin 4 321 – 4 321RB Makhubela 3 333 – 3 333A Zuma 3 257 – 3 257

21 714 2 646 332 2 668 046

* Adjusted to take into account the 50:1 consolidation referred to in note 53


VUNANI AT A GLANCE

116 VUNANI LIMITED

shareholders’ diary

Financial year-end 31 December 2012

Announcement of results 25 March 2013

Annual report posted 21 May 2013

Annual general meeting 10 July 2013

Interim results release August 2013



117

notice of annual general meeting

(Incorporated in the Republic of South Africa)

(Registration number: 1997/020641/06)

JSE code: VUN

ISIN: ZAE000163382

(the “company”)

This document is important and requires your immediate attention.

If you are in any doubt about what action you should take, consult your broker, Central Securities Depository Participant (“CSDP”), legal advisor, banker, financial advisor, accountant or other professional advisor immediately.

If you have disposed of all your shares in the company, please forward this document, together with the attached form of proxy, to the purchaser of such shares or the broker, CSDP, banker or other agent through whom you disposed of such shares.

NOTICE IS HEREBY GIVEN to shareholders at 21 May 2013, being the record date to receive notice of the Annual General Meeting (“AGM”) for the year ended 31 December 2012 in terms of section 59(1)(a) of the Companies Act, 71 of 2008, as amended (the “Companies Act”), that the AGM of shareholders of the company will be held in the boardroom, Vunani Limited, 151 Katherine Street, Sandton at 10:00 on Wednesday, 10 July 2013 to: (i) deal with such other business as may lawfully be dealt with at the AGM and (ii) consider and, if deemed fit to pass, with or without modification, the following ordinary and special resolutions, in the manner required by the Companies Act, as read with the JSE Limited Listings Requirements (the “JSE Listings Requirements”), which meeting is to be participated in and voted by shareholders in terms of section 62(3)(a), read with section 59, of the Companies Act.

Salient dates applicable to the AGM

Last day to trade to be eligible to vote at the AGM 28 June 2013

Record date for determining those shareholders entitled to vote at the AGM 5 July 2013

Section 63(1) of the Companies Act – Identification of Meeting Participants

Meeting participants (including proxies) are required to provide reasonably satisfactory identification before being entitled to attend or participate in shareholders’ meetings. Forms of identification include valid identity documents, drivers’ licences and passports.

When reading the ordinary and special resolutions below, please refer to the explanatory notes for AGM resolutions on page 119 and pages 121 and 122.

1. Presentation of annual financial statements

The consolidated audited financial statements of the company and its subsidiaries (as approved by the board of directors of the company), including the directors’ report, the audit and risk committee report and the external auditor’s report for the year ended 31 December 2012 have been distributed as required and will be presented to shareholders. The complete annual financial statements are set out on pages 34 to 115 of the integrated annual report.


ANNUAL FINANCIAL

STATEMENTSREPORTS TO

STAKEHOLDERSVUNANI AT A GLANCE

L I M I T E D


118 VUNANI LIMITED

2. Ordinary resolution number 1

Re-election of WC Ross as chairman

“It is hereby resolved that the re-election of WC Ross, who retires as a director and chairman of the company by rotation in accordance with the company’s Memorandum of Incorporation, and being eligible, offers himself for re-appointment in this capacity, be approved.”

Please refer to page 9 of the integrated annual report for a brief biography.


Re-election of EC Chimombe-Munyoro as an executive director

“It is hereby resolved that the re-election of EC Chimombe-Munyoro, who retires as an executive director of the company by rotation in accordance with the company’s Memorandum of Incorporation, and being eligible, offers herself for re-appointment in this capacity, be approved.”

Please refer to page 8 of the integrated annual report for a brief biography.


Election of audit and risk committee: Section 94(2) of the Companies Act

“It is hereby resolved that G Nzalo be elected as a member and chairman of the audit and risk committee, with immediate effect, in terms of section 94(2) of the Companies Act.”



“It is hereby resolved that JR Macey be elected as a member of the audit and risk committee, with immediate effect, in terms of section 94(2) of the Companies Act.”



“It is hereby resolved that NS Mazwi be elected as a member of the audit and risk committee, with immediate effect, in terms of section 94(2) of the Companies Act.”


Appointment of auditor in terms of section 61(8)(c) of the Companies Act

“It is hereby resolved that, on the recommendation of the audit and risk committee, KPMG Inc. be and is hereby re-appointed as the independent auditor of the company (for its financial year ending 31 December 2013) and that their appointment be of full force and effect until the conclusion of the company’s next annual general meeting, and noted that the designated auditor, G Parker, meets the requirements of section 90(2) of the Companies Act.”


General authority to directors to allot and issue authorised but unissued ordinary shares

“It is hereby resolved that the directors be and are hereby authorised to allot and issue, at their discretion, the unissued share capital of the company and/or grant options to subscribe for unissued shares, for such purposes and on such terms and conditions as they may determine, provided that such transaction(s) has/have been approved by the JSE Limited as and when required, and are subject to the JSE Listings Requirements and the Companies Act and shareholders hereby waive any pre-emptive rights thereto.”

notice of annual general meeting (continued)


119


General authority to directors to allot and issue ordinary shares for cash

“It is hereby resolved that, in terms of the JSE Listings Requirements, the mandate given to the directors of the company in terms of a general authority to issue securities for cash, as and when suitable opportunities arise, be renewed subject to the following conditions:

¢¢ any such issue of shares shall be to public shareholders as defined by the JSE Listings Requirements and not to related parties;

¢¢ any such issue of equity securities be of a class already in issue, or where this is not the case, must be limited to such securities or rights as are convertible into an existing class of equity securities;

¢¢ the authority shall only be valid until the next AGM of the company, provided it shall not extend beyond 15 months from the date of this AGM;

¢¢ an announcement giving details including impact on net asset value and earnings per share, will be published at the time of any such allotment and issue of shares representing, on a cumulative basis within one financial year, 5% or more of the number of shares of that class in issue prior to any such issues;

¢¢ that issues of shares (excluding issues of shares exercised in terms of any company/group share scheme) in any one financial year shall not, in aggregate, exceed 50% of the number of shares of any class of the company’s issued share capital; and

¢¢ that, in determining the price at which an allotment and 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 the class of shares to be issued over the 30 business days prior to the date that the price of issue is determined or agreed between the company and the party/parties subscribing for the securities.”

VOTING

In terms of the JSE Listings Requirements, the approval of 75% majority of votes cast in favour of ordinary resolution number 8 by shareholders present or represented by proxy at this AGM, excluding the Designated Advisor and the controlling shareholders together with their associates, will be required for this authority to become effective.


Approval of remuneration policy

“It is hereby resolved that, through a non-binding advisory vote, the company’s remuneration policy (excluding the remuneration of non-executive directors and the members of board committees for their services as directors and members of committees) is not to remunerate its executive directors for attendance at meetings, but rather to remunerate them in terms of an employment contract. This policy is hereby endorsed.”

11. Special resolution number 1

Remuneration payable to non-executive directors

“It is hereby resolved as a special resolution in terms of section 66(9) of the Companies Act, as read with section 65(11)(h), and subject to the provisions of the company’s Memorandum of Incorporation that the company be and it is hereby authorised to pay remuneration to its non-executive directors for their service as directors as follows:

Chairman of the board R250 000 per annum

Chairman of the audit and risk committee R130 000 per annum

Chairman of the investment committee R130 000 per annum

Other non-executive directors R100 000 per annum.”

Special resolution number 1 is proposed in order to comply with the requirements of the Companies Act. The aforementioned rates have been recommended in order to ensure that the remuneration of non-executive directors remains competitive in order to enable the company to attract persons of the calibre, capability, skill and experience required in order to make a meaningful contribution to the company. The remuneration proposed is considered to be fair and reasonable and in the best interests of the company.


ANNUAL FINANCIAL



120 VUNANI LIMITED



Repurchase of company shares

“It is hereby resolved as a special resolution that, subject to the company’s Memorandum of Incorporation, the Companies Act and the JSE Listings Requirements in force from time to time, the company and/or a subsidiary of the company be and it is hereby authorised to repurchase or purchase, as the case may be, shares issued by the company from any person, upon such terms and conditions and in such manner as the directors of the company or the subsidiary may from time to time determine, including that such securities be repurchased or purchased from share premium or capital redemption reserve fund, subject to the following:

¢¢ that the repurchase of securities be effected through the order book operated by the JSE trading system and be done without any prior understanding or arrangement between the company and the counterparty;

¢¢ that this general authority be valid only until the next annual general meeting or the variation or revocation of such general authority by special resolution at any subsequent general meeting of the company, provided that it shall not extend beyond 15 months from the date of this resolution;

¢¢ that an announcement be made giving such details as may be required in terms of the JSE Listings Requirements when the company has cumulatively repurchased 3% of the initial number (the number of that class of security in issue at the time that the general authority is granted) of the relevant class of securities and for each 3% in aggregate of the initial number of that class acquired thereafter;

¢¢ at any point in time the company may only appoint one agent to effect any repurchase on the company’s behalf;

¢¢ repurchases may not be made by the company and/or its subsidiaries during a prohibited period as defined in the JSE Listings Requirements unless a repurchase programme is in place where the dates and quantities of securities to be traded during the relevant period are fixed and full details of the programme have been disclosed in an announcement over SENS prior to the commencement of the prohibited period;

¢¢ the repurchase of shares shall not, in the aggregate, in any one financial year, exceed 20% of the company’s issued capital and a maximum of 10% in aggregate of the company’s issued capital may be repurchased in terms of the Companies Act, by the subsidiaries of the company, at the time this authority is given;

¢¢ the repurchase of securities may not be made at a price greater than 10% above the weighted average of the market value of the securities as determined over the five business days immediately preceding the date on which the transaction is effected;

¢¢ the company may not enter the market to proceed with the repurchase of its securities until the company’s Designated Advisor has confirmed the adequacy of the company’s working capital for the purpose of undertaking a repurchase of securities in writing to the JSE; and

¢¢ the board of directors passing a resolution that they authorised the repurchase and that the company passed the solvency and liquidity test as set out in section 4 of the Companies Act and that, since the test was done, there have been no material changes to the financial position of the group.”

The directors of the company or its subsidiaries will only utilise the general authority set out in special resolution number 2 above to the extent that they, after considering the effect of the maximum repurchase permitted, and for a period of 12 months after the date of the notice of this AGM, are of the opinion that:

¢¢ the company and the group will be able, in the ordinary course of business, to pay their debts;

¢¢ the assets of the company and the group will be in excess of the liabilities of the company and the group, the assets and liabilities being recognised and measured in accordance with the accounting policies used in the latest annual financial statements;

¢¢ the ordinary share capital and reserves of the company and the group are adequate for ordinary business purposes;

¢¢ the working capital of the company and the group will be adequate for ordinary business purposes;

¢¢ the directors have passed a resolution authorising the repurchase, resolving that the company has satisfied the solvency and liquidity tests as defined in the Companies Act and resolving that since the solvency and liquidity test had been applied, there have been no material changes to the financial position of the group.

For the purpose of considering special resolution number 2 and in compliance with the JSE Listings Requirements, the information listed below has been included in the company’s integrated annual report, of which this notice of AGM forms part, at the places indicated below:

¢¢ directors and management – refer to pages 8 and 9 of this integrated annual report;

¢¢ major shareholders – refer to page 114 of this integrated annual report;

¢¢ directors’ interests and securities – refer to pages 36 and 115 of this integrated annual report; and

¢¢ share capital of the company – refer to pages 74 and 75 of this integrated annual report.


121

Directors’ responsibility

The directors, whose names are set out on pages 8 and 9 of this integrated annual report, collectively and individually, accept full responsibility for the accuracy of the information pertaining to special resolution number 2 and certify that, to the best of their knowledge and belief, there are no other facts that have been omitted which would make any statement false or misleading and that all reasonable enquiries have been made and that the aforementioned special resolution contains all the information required by the JSE.


Financial assistance

“It is hereby resolved as a special resolution that, subject to the company’s Memorandum of Incorporation and subject to the requirements of the Companies Act, that the board of directors of the company may authorise the company to provide direct or indirect financial assistance by way of loan, guarantee, the provision of security or otherwise to:

¢¢ any of its present or future subsidiaries and/or any other company or corporation that is or becomes related or inter-related to the company for any purpose or in connection with any matter, including but not limited to, the subscription of any option, or any securities issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company; and

¢¢ any of its present or future directors or prescribed officers (or any person related to any of them or to any company or corporation related or inter-related to any of them) or to any other person who is a participant in any of the company’s share or other employee incentive schemes, for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, where such financial assistance is provided in terms of any such scheme that does not satisfy the requirements of section 97 of the Companies Act,

such authority to endure until the next annual general meeting of the company.”


Directors’ authority to sign documentation

“It is resolved as an ordinary resolution that any director of the company be and hereby is authorised to sign any documents and to take any steps as may be necessary or expedient to give effect to all ordinary and special resolutions passed at this meeting, be and is hereby ratified and approved.”

VOTING PROCEDURES AND ELECTRONIC PARTICIPATION

On a show of hands, every shareholder present in person or represented by proxy and entitled to vote shall have only one vote, irrespective of the number of shares such shareholder holds. On a poll, every shareholder present in person or represented by proxy and entitled to vote shall be entitled to one vote for every share held or represented by that shareholder. On a poll taken at any such meeting the shareholder entitled to more than one vote need not, if he votes, use all of his votes, or cast all the votes he uses in the same way:

¢¢ to furnish the company with his voting instructions; or

¢¢ in the event that he wishes to attend the AGM, to obtain the necessary letter of representation to do so.

The directors have not made any provision for electronic participation at the AGM.

Litigation

The directors are not aware of any legal or arbitration proceedings (including any such proceedings that are pending or threatened of which the company is aware) which may have or have had, in the recent past, being at least the previous 12 months, a material effect on the group’s financial position.

Material change

Other than the facts and developments reported on in this integrated annual report, there have been no material changes in the financial or trading position of the group since the company’s financial year-end and the signature date of this integrated annual report.


ANNUAL FINANCIAL



122 VUNANI LIMITED


Threshold for resolution approval

For ordinary resolutions, with the exception of ordinary resolution number 8 as detailed above, to be approved by shareholders, each resolution must be supported by more than 50% of the voting rights exercised on the resolution concerned.

For special resolutions and ordinary resolution number 8 to be approved by shareholders, each resolution must be supported at least 75% of the voting rights exercised on the resolution concerned.

Proxies

A shareholder entitled to attend and vote at the AGM is entitled to appoint one or more proxies to attend, participate in and vote at the AGM in the place of the shareholder. A proxy need not also be a shareholder of the company.

Shareholders on the company share register who have dematerialised their ordinary shares through Strate, other than those whose shareholding is recorded in their “own name” in the sub-register maintained by their CSDP, and who wish to attend the AGM in person, will need to request their CSDP or broker to provide them with the necessary authority to do so in terms of the custody agreement entered into between the dematerialised shareholders and their CSDP or broker.

Shareholders who have not dematerialised their shares or who have dematerialised their shares with “own name” registration, and who are entitled to attend and vote at the AGM, are entitled to appoint one or more proxies to attend, speak and vote in their stead. A proxy need not be a shareholder and shall be entitled to vote on a show of hands or poll. It is requested that forms of proxy be forwarded so as to reach the transfer secretaries at least 48 hours prior to the AGM. If shareholders who have not dematerialised their shares or who have dematerialised their shares with “own name” registration and who are entitled to attend and vote at the AGM do not deliver forms of proxy to the transfer secretaries timeously, such shareholders will nevertheless at any time prior to the commencement of the voting on the ordinary and special resolutions at the AGM be entitled to lodge forms of proxy in respect of the AGM, in accordance with the instructions therein with the chairman of the AGM.

By order of the board

EG Dube

Chief Executive Officer

3 May 2013


form of proxy

(Incorporated in the Republic of South Africa)(Registration number: 1997/020641/06)

JSE code: VUNISIN: ZAE000163382

(“the company”)

To be completed by registered certificated shareholders and dematerialised shareholders with own name registration only.

For use in respect of the annual general meeting to be held at the company’s offices, Vunani House, Athol Ridge Office Park, 151 Katherine Street, Sandown, Sandton on Wednesday, 10 July 2013 at 10:00.

Ordinary shareholders who have dematerialised their shares with a CSDP or broker, other than with own name registration, must arrange with the CSDP or broker concerned to provide them with the necessary letter of representation to attend the annual general meeting or the ordinary shareholders concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the shareholder and the CSDP or broker concerned.

I/We (full names in BLOCK LETTERS)

of (address)

Telephone (work) ( ) Telephone (home) ( )

being the holder(s) of ordinary shares in the company, appoint (see note 1):

or failing him/her,

or failing him/her,

the chairman of the annual general meeting,as my/our proxy to act on my/our behalf at the annual general meeting which is to be held for the purpose of considering and, if deemed fit, passing, with or without modification, the ordinary and special resolutions to be proposed thereat and at any adjournment thereof and to vote for or against such resolutions or to abstain from voting in respect of such resolutions, in accordance with the following instructions (see note 2):

Number of votes (one vote per ordinary share)

For Against Abstain

Ordinary resolution number 1Re-election of WC Ross as director and chairman

Ordinary resolution number 2Re-election of EC Chimombe-Munyoro as an executive director

Ordinary resolution number 3Re-election of G Nzalo as a member and chairman of the audit and risk committee

Ordinary resolution number 4Re-election of JR Macey as a member of the audit and risk committee

Ordinary resolution number 5Re-election of NS Mazwi as a member of the audit and risk committee

Ordinary resolution number 6Re-appointment of KPMG Inc. as the auditor of the company

Ordinary resolution number 7General authority to directors to allot and issue authorised but unissued ordinary shares

Ordinary resolution number 8General authority to directors to allot and issue ordinary shares for cash

Ordinary resolution number 9Approval of remuneration policy (non-binding advisory vote)

Special resolution number 1Approval of remuneration payable to non-executive directors

Special resolution number 2Repurchase of company shares

Special resolution number 3Financial assistance

Ordinary resolution number 10Authority to sign documentation

(Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.)

Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder of the company) to attend, speak, and on a poll, vote in place of that shareholder at the annual general meeting.

Signed at on 2013

Signature(s)

Capacity

Please read the notes and summary on the reverse side hereof.

L I M I T E D

notes to the form of proxy

NOTES1. A member may insert the name of a proxy or the names of two alternate proxies

of the member’s choice in the space(s) provided, with or without deleting “the chairman of the annual general meeting”. The person whose name stands first on this form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

2. A member should insert an “X” in the relevant space according to how he wishes his votes to be cast. However, if a member wishes to cast a vote in respect of a lesser number of ordinary shares than he owns in the company, he should insert the number of ordinary shares held in respect of which he wishes to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he deems fit in respect of all the member’s votes exercisable at the annual general meeting. A member is not obliged to exercise all of his votes, but the total of the votes cast and abstentions recorded may not exceed the total number of the votes exercisable by the member.

3. The completion and lodging of this form of proxy will not preclude the relevant member from attending the annual general meeting and speaking and voting in person to the exclusion of any proxy appointed in terms hereof, should such member wish to so do.

4. The chairman of the annual general meeting may reject or accept any form of proxy, which is completed and/or received, other than in compliance with these notes.

5. Shareholders who have dematerialised their shares with a CSDP or broker, other than with own name registration, must arrange with the CSDP or broker concerned to provide them with the necessary letter of representation to attend the annual general meeting or the ordinary shareholders concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the shareholders and the CSDP or broker concerned.

6. Any alteration to this form of proxy, other than the deletion of alternatives, must be signed, not initialled, by the signatory/ies.

7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity (e.g. on behalf of a company, close corporation, trust, pension fund, deceased estate, etc.) must be attached to this form of proxy, unless previously recorded by the company or waived by the chairman of the annual general meeting.

8. A minor must be assisted by his/her parent or guardian, unless the relevant documents establishing his/her capacity are produced or have been recorded by the company.

9. Where there are joint holders of shares:

¢¢ any one holder may sign this form of proxy; and

¢¢ the vote of the senior joint holder who tenders a vote, as determined by the order in which the names stand in the company’s register of members, will be accepted.

10. To be valid, the completed forms of proxy must either: (a) be lodged so as to reach the transfer secretaries by no later than the relevant time or (b) be lodged with the chairman of the annual general meeting prior to the annual general meeting so as to reach the chairman by no later than immediately prior to the commencement of voting on the ordinary and special resolutions to be tabled at the annual general meeting.

11. The proxy appointment is revocable by the shareholders giving written notice of the cancellation to the company prior to the annual general meeting or any adjournment thereof. The revocation of the proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholders as of the later of: (i) the date stated in the written notice, if any or (ii) the date on which the written notice was delivered as aforesaid.

12. If the instrument appointing a proxy or proxies has been delivered to the company, any notice that is required by the Companies Act or the articles to be delivered by the company to shareholders must (as long as the proxy appointment remains in effect) be delivered by the company to: (i) the shareholder or (ii) the proxy or proxies of the shareholder has directed the company to do so, in writing and pay it any reasonable fee charged by the company for doing so.

SUMMARY OF THE RIGHTSEstablished in terms of section 58 of the Companies Act

For purposes of this summary, “shareholder” shall have the meaning ascribed thereto in the Companies Act.

1. At any time, a shareholder of a company is entitled to appoint an individual, including an individual who is not a shareholder of that company, as a proxy, to participate in, and speak and vote at, a shareholders’ meeting on behalf of the shareholder, or give or withhold written consent on behalf of such shareholder in relation to an decision contemplated in section 60 of the Companies Act.

2. A proxy appointment must be in writing, dated and signed by the relevant shareholder, and such proxy appointment remains valid for one year after the date upon which the proxy was signed, or any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in section 58(4)(c) of the Companies Act or expires earlier as contemplated in section 58(8)(d) of the Companies Act.

3. Except to the extent that the memorandum of incorporation of a company provides otherwise:

3.1 a shareholder of the relevant company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by such shareholder;

3.2 a proxy may delegate his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and

3.3 a copy of the instrument appointing a proxy must be delivered to the relevant company, or to any other person on behalf of the relevant company, before the proxy exercises any rights of the shareholder at a shareholders’ meeting.

4. Irrespective of the form of instrument used to appoint a proxy, the appointment of the proxy is suspended at any time and to the extent that the shareholder who appointed that proxy chooses to act directly and in person in the exercise of any rights as a shareholder of the relevant company.

5. Unless the proxy appointment expressly states otherwise, the appointment of a proxy is revocable. If the appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and the company.

6. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the relevant shareholder as of the later of the date: (a) stated in the revocation instrument, if any or (b) upon which the revocation instrument is delivered to the proxy and the relevant company as required in section 58(4)(c)(ii) of the Companies Act.

7. If the instrument appointing a proxy or proxies has been delivered to the relevant company, as long as that appointment remains in effect, any notice that is required by the Companies Act or the relevant company’s memorandum of incorporation to be delivered by such company to the shareholder, must be delivered by such company to the shareholder, or to the proxy or proxies, if the shareholder has directed the relevant company to do so in writing and paid any reasonable fee charged by the company for doing so.

8. A proxy is entitled to exercise, or abstain from exercising, any voting right of the relevant shareholder without direction, except to the extent that the memorandum of incorporation, or the instrument appointing the proxy provides otherwise.

9. If a company issues an invitation to shareholders to appoint one or more persons named by such company as a proxy, or supply a form of instrument for appointing a proxy:

9.1 such invitation must be sent to every shareholder who is entitled to notice of the meeting at which the proxy is intended to be exercised;

9.2 the invitation, or form of instrument supplied by the relevant company, must: (a) bear a reasonably prominent summary of the rights established in section 58 of the Companies Act; (b) contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alternative name of a proxy chosen by such shareholder and (c) provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour or against the applicable resolution/s to be put at the relevant meeting, or is to abstain from voting;

9.3 the company must not require that the proxy appointment be made irrevocable; and

9.4 the proxy appointment remains valid only until the end of the relevant meeting at which it was intended to be used, unless revoked as contemplated in section 58(5) of the Companies Act.

general InformatIon

Country of incorporation and country of domicile Republic of South Africa

Headquarters Sandton, South Africa

registration number 1997/020641/06

JSe code VUN

ISIn ZAE000163382

primary listing AltX on the JSE

listing date 27 November 2007

Shares in issue at 31 december 2012 105 414 648

Business address and registered office Vunani House

Athol Ridge Office Park

151 Katherine Street

Sandton

2196

postal address PO Box 652419

Benmore

2010

Website www.vunanilimited.co.za

telephone +27 11 263 9500

Fax +27 11 784 2550

designated advisor Grindrod Bank Limited

transfer secretaries Computershare Investor Services Proprietary Limited

70 Marshall Street

Johannesburg

2001

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