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NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010

   
2010
  2009
   
R’000
  R’000

1.

INVESTMENT IN GROUP COMPANIES

 
   
  Joint-venture entity (refer detail below)
468 153
  468 153
  Subsidiary companies (refer below)
1 514 646
  27 440
   
1 982 799
  495 593
  Investment in joint-venture entity
 
   
  Assmang Limited
 
   
  1 774 103 (2009: 1 774 103) ordinary shares at cost
468 153
  468 153
  Directors’ valuation
19 265 766
  13 238 529
  Investment in subsidiary companies (refer note 13)
 
   
  Shares at cost
1 514 646
  27 440
  Amounts due by/(to) subsidiary companies
 
   
  Loan accounts receivable
635 932
  1 349 368
  Loan accounts payable
(628 039)
  (558 041)
  Current accounts payable
(3 522)
  (189)
  Refer note 13
4 371
  791 138
   
 
   

2.

AVAILABLE-FOR-SALE INVESTMENTS

 
   
  Listed – at market value
 
   
  Balance at beginning of year
415 066
  590 066
  Purchases at cost
20 690
  117 813
  Disposals at carrying value
  (3 584)
  Fair value adjustment
167 095
  (289 229)
  Balance at end of year (below)
602 851
  415 066
  Unlisted – at cost and directors’ valuation
125
  125
   
602 976
  415 191
  Listed – at cost
316 355
  295 665
  Cumulative fair value adjustment transferred to other reserves (refer note 5)
286 496
  119 401
  As above
602 851
  415 066
   
 
   

3.

SHARE CAPITAL

 
   
  Authorised
 
   
  40 000 000 (2009: 40 000 000) ordinary shares of 2,5 cents each
1 000
  1 000
  Issued
 
   
  Balance at beginning of year (27 571 653 (2009: 28 000 000) ordinary shares of 2,5 cents each)
689
  700
  Shares issued during the year (349 747 ordinary shares of 2,5 cents each) at a premium of R668,30 each in terms of the authority granted at a general meeting held on 19 January 2010
9
 
  Shares repurchased and cancelled during the year (428 347 ordinary shares of 2,5 cents each) in terms of the authority granted by shareholders at a general meeting held on 4 September 2008
  (11)
  Balance at end of year (27 921 400 (2009: 27 571 653) ordinary shares of 2,5 cents each)
698
  689
  Subsequent to the year-end, the share capital was subdivided on a five-for-one basis (refer directors’ report for more detail).
 
   
   
 
   

4.

SHARE PREMIUM

 
   
  Balance at beginning of year
30 358
  30 358
  Arising on shares issued during the year (refer note 3)
233 734
 
  Balance at end of year
264 092
  30 358
   
 
   

5.

OTHER RESERVES

 
   
  Surplus on the revaluation to fair value (after tax) of available-for-sale
 
   
  investments per note 2
286 496
  119 401
  Less: Deferred capital gains taxation
(39 893)
  (16 500)
   
246 603
  102 901
   
 
   

6.

DEFERRED TAXATION

 
   
  Balance at beginning of year
16 500
  56 992
  Revaluation of available-for-sale investments at year-end (refer note 5)
23 393
  (40 492)
  Balance at end of year
39 893
  16 500
   
 
   

7.

SHORT-TERM BORROWINGS

 
   
  220 cumulative, redeemable, variable rate preference shares issued to Standard Bank of South Africa Limited (SBSA) on 15 September 2008, which are required to be redeemed in tranches of at least R500 million annually, commencing on the last day of February in 2010. At 30 June 2010, 127 shares (2009: 77 shares) were redeemed in the amount of R1 252 million (2009: R752 million) of which 77 shares were voluntarily redeemed in the amount of R752 million, in terms of authority granted by shareholders in a general meeting on 3 February 2009. The shares have a par value of 1 cent each, and were issued and are redeemable at a premium of R9 999 999,99 each. The preference dividends accrue at a rate linked to the prime lending rate applied by SBSA.
930 000
  1 430 000
   
 
   

8.

REVENUE

 
   
  Revenue comprises:
 
   
  Dividends received
517 919
  2 171 396
  Interest received
66 695
  73 073
   
584 614
  2 244 469
   
 
   

9.

PROFIT BEFORE TAXATION

 
   
  Profit before taxation is stated after taking into account the following items of income and expenditure:
 
   
  Income
 
   
  Dividends received
517 919
  2 171 669
  – joint-venture entity
500 149
  2 151 366
  – available-for-sale investments
17 770
  20 303
  Interest received
66 695
  73 073
  Preference dividend accrual adjustment
2 955
 
  Expenditure
 
   
  Auditors’ remuneration
101
  92
  Directors’ remuneration – paid by subsidiary company
54 785
  62 406
  – directors’ fees
1 059
  944
  – other services
53 726
  61 462
   
 
   

10.

TAXATION

 
   
  South African normal tax
 
   
  – current year
18 970
  20 445
  – under/(over)provision relating to prior years
5 040
  (1)
  Capital gains tax
  2 672
   
24 010
  23 116
  The company has unused credits in respect of secondary tax on companies of
 
   
  R176,1 million (2009: R689,6 million). Deferred tax asset has not been raised
 
   
  on these amounts as there is no certainty that the credits will be utilised
 
   
  in the foreseeable future.
 
   
   
 
   
  Reconciliation of tax charge as a percentage of profit before taxation
 
   
  Statutory tax rate
28,00
  28,00
  Adjusted for:
 
   
  Dividend income
(14,29)
  (45,23)
  Exempt income
(11,63)
  (0,40)
  Capital gains tax on disposal of available-for-sale investments
  0,20
  Disallowable expenditure
  19,52
  Other
0,30
  (0,37)
  Effective tax rate
2,38
  1,72
   
 
   

11.

DIVIDENDS

 
   
  Dividends declared during the year
 
   
  Final dividend No 105 of 1 000 cents (2009: 1 000 cents) per share
 
   
  – declared on 26 August 2009
275 717
  280 000
  Interim dividend No 106 of
 
   
  – declared on 27 March 2010
139 607
  275 717
   
415 324
  555 717
  Per share (cents)
1 500
  2 000
  Dividends relating to the activities of the company for the year under review
 
   
  Interim dividend No 106 of 500 cents (2009: 1 000 cents) per share
 
   
  – declared on 27 March 2010
139 607
  275 717
  Final dividend No 107 of 1 200 cents (2009: 1 000 cents) per share
 
   
  – declared on 1 September 2010
335 057
  275 717
   
474 664
  551 434
  Per share (cents) 1 700   2 000
         

12.

NOTES TO THE STATEMENT OF CASH FLOW

     
 

12.1

Cash utilised in operations

     
    Profit before taxation 1 006 896   1 344 216
    Adjusted for:      
      (1 018 131)   (1 350 707)
    Dividends received (517 919)   (2 171 396)
    Interest received (66 695)   (73 073)
    Profit on disposal of available-for-sale investments   (19 086)
    Discount on redemption of preference shares   (18 000)
    (Reversal of impairment)/impairment of loan made to wholly owned subsidiary (539 718)   680 066
    Finance costs 106 201   250 782
           
      (11 235)   (6 491)
           
 

12.2

Investment income

     
    Credited to the income statements 517 919   2 171 669
           
 

12.3

Movements in working capital

     
    (Increase)/decrease in other receivables (2 750)   1
    Increase in amounts due to group companies 3 333   254
    (Decrease)/increase in other payables (17 219)   6 448
      (16 636)   6 703
           
 

12.4

Taxation paid

     
    Unpaid at beginning of year (4 952)   (3 117)
    Charged to the income statement (24 010)   (23 116)
    Unpaid at end of year 7 361   4 952
      (21 601)   (21 281)
           
 

12.5

Dividends paid

     
    Unpaid at beginning of year (95)   (68)
    Declared during the year (415 324)   (555 717)
    Unpaid at end of year 245   95
      (415 174)   (555 690)
           
               
   
Issued
share
capital
Direct
interest
in share
capital
Shares
at cost
Shares
at cost
Amounts due from/(to)
subsidiary companies
2010
and 2009
2010
and 2009
2010
2009
2010
2009
   
R
%
R’000
R’000
R’000
R’000

13.

INTEREST OF COMPANY IN ITS SUBSIDIARY COMPANIES

           
  Incorporated in South Africa            
  Ordinary shares            
  African Mining and Trust Company Limited
1 000 000
100
1 200
1 200
38 080
41 411
  Ceramox (Proprietary) Limited
100
100
1 124
1 124
  Erven 40 and 41 Illovo (Proprietary) Limited
100
100
  Erven 27 and 28 Illovo (Proprietary) Limited
100
100
  Erf 1263 Parkview Extension 1 (Proprietary) Limited
1
100
  General Nominees (Proprietary) Limited^
4
100
  Main Street 460 (Proprietary) Limited
100
100
1 987 828
  Ore & Metal Company Limited
100 000
105
105
(628 039)
(558 041)
  Rustenburg Minerals
 
 
 
 
 
 
  Development Company
 
 
 
 
 
 
  (Proprietary) Limited
232 143
56
  Wonderstone Limited
10 000
100
10
10
  Wonderstone 1937 Limited^
45 940
100
35
35
  Xertech (Proprietary) Limited
100
100
  Zeerust Chrome Mines Limited
1 300 000
100
1 114
1 114
  Preference shares
 
 
 
 
 
 
  Main Street 350 (Proprietary) Limited*
99
1 512 206
25 000
594 330
6
  Incorporated in Namibia
 
 
 
 
 
 
  Krantzberg Mines Limited^
500 000
100
  Incorporated in Mozambique
 
 
 
 
 
 
  Amhold Limitada^
2
100
  Incorporated in United States of America
 
 
 
 
 
 
  Minerais U.S. LLC
17 756 100
51
11 418
11 418
       
1 527 212
40 006
4 371
1 471 204
  Less: – held indirectly    
(11 452)
(11 452)
 
 
    – provided against    
(1 114)
(1 114)
(680 066)
  Per note 1    
1 514 646
27 440
4 371
791 138
 
 
               

14.

FINANCIAL RISK MANAGEMENT

  The company is exposed to various financial risks due to the nature and diversity of its activities and the use of various financial instruments. These risks include:
  – credit risk;
  – liquidity risk; and
  – market risk.
         
  Details of the company’s exposure to each of the above risks and its objectives, policies and processes for measuring and managing these risks are included specifically in this note and more generally throughout the company’s financial statements together with information regarding management of capital.
         
  The board of directors has overall responsibility for the establishment and oversight of the company’s risk management framework. The board is responsible for the development and monitoring of risk management policies within the company. The committee meets on an ad hoc basis and regularly reports to the board on its activities. The company’s risk management policies are established to identify and analyse the risks faced by the company, 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 company’s activities.
         
  The roles and responsibilities of the committee include:
  – approval of new instruments;
  – approval of the group’s foreign exchange transaction policy;
  – approval of the investment policy;
  – approval of treasury policy; and
  – approval of long-term funding requirements.
         
  The company also has an internal audit function, which undertakes regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit and Risk Committee.
         
 

14.1

Credit risk

   
    Credit exposure and concentrations of credit risk    
    The carrying amount of financial assets represents the maximum credit exposure at the reporting date and the following table indicates various concentrations of credit risk for all non-derivative financial assets held:
         
     
2010
2009
     
R’000
R’000
    Amounts due from group companies (refer note 1)
635 932
1 349 368
    Other receivables – local
2 883
133
     
638 815
1 349 501
    Amounts receivable by the company comprise loans to subsidiary companies and interest receivable. Loans to group companies have no fixed terms of repayment, and interest is receivable from a reputable financial institution. These amounts are unsecured, and are not overdue, and therefore are not impaired. In addition, the loans to group companies are interest free and have no fixed terms of repayment.
     
 

14.2

Liquidity risk

    The Executive Committee manages the liquidity structure of the company’s assets, liabilities and commitments so as to ensure that cash flows are sufficiently balanced within the company as a whole.
     
    Surplus funds are deposited in liquid assets (ie negotiable certificates of deposits and call deposits)
     
    Undrawn credit facilities
    In terms of its Articles of Association, the company has unlimited borrowing capacity. At year-end, external borrowings amounted to R930,0 million (2009: R1 430,0 million).
     
    Exposure to liquidity risk
    The following are the cash flows of the group’s financial assets and liabilities at year-end as determined by the contractual maturity date including interest receipts and payments but excluding the impact of any netting agreements with the third parties concerned.
     
            Total
cash
flows
Less than
4 months
Between
4 and 12
months
Between
1 and 5 years
More than
5 years
      R’000 R’000 R’000 R’000 R’000
   

2010

         
    Financial assets
 
 
 
 
 
    Investment in group companies
1 982 799
1 982 799
    Available-for-sale investments
602 976
602 976
    Loans to group companies
635 932
635 932
    Other receivables
2 883
2 883
    Cash resources
495 493
495 493
     
3 720 083
498 376
3 221 707
     
 
 
 
 
 
    Financial liabilities
 
 
 
 
 
    Loans from group companies
628 039
628 039
    Other payables
17 784
17 784
    Amounts due to group companies
3 522
3 522
    Short-term borrowings
930 000
930 000
     
1 579 345
951 306
628 039
     
 
 
 
 
 
   

2009

 
 
 
 
 
    Financial assets
 
 
 
 
 
    Investment in group companies
495 593
495 593
    Available-for-sale investments
415 191
415 191
    Loans to group companies
1 349 368
1 349 368
    Other receivables
133
133
    Cash resources
932 727
932 727
     
3 193 012
932 860
2 260 152
     
 
 
 
 
 
    Financial liabilities
 
 
 
 
 
    Loans from group companies
558 041
558 041
    Other payables
34 853
34 853
    Amounts due to group companies
189
189
    Short-term borrowings
1 430 000
1 430 000
     
2 023 083
1 465 042
558 041
               
 

14.3

Market risk

    Market risk is defined as the risk that movements in market risk factors will affect the company’s revenue and operational costs as well as the value of its holdings of financial instruments. The objective of the company’s market risk management policy is to manage and control market risk exposures to minimise the impact of adverse market movements with respect to revenue protection and to optimise the funding of the business operations.
     
    Market risk information is prepared and submitted to the Executive Committee where it is monitored and further analysed to be used in the decision-making process. The information submitted includes information on currency and interest rates and is used by the committee to determine the market risk strategy going forward. In addition, key market risk information is reported to the Executive Committee on a weekly basis and forecasts against budget are prepared on a monthly basis.
     
    Interest rate risk
    Interest rate risk arises due to adverse movements in domestic and foreign interest rates. The company is primarily exposed to downward interest rate movements on floating investments purchased and to upward movements on overdrafts and other borrowings. There is no other exposure to fair value interest rate risk as all fixed rate financial instruments are measured at amortised cost.
     
    The board determines the interest rate risk strategy based on economic expectations and recommendations received from the Executive Committee. Interest rates are monitored on a regular basis and the policy is to maintain short-term cash surpluses at floating rates of interest.
     
    At the reporting date, the interest rate profile of the company’s interest-bearing financial instruments was as follows:
     
           
2010
2009
     
R'000
R'000
    Variable rate instruments
 
 
    Liabilities
 
 
    Short-term borrowings
930 000
1 430 000
    Assets
 
 
    Cash and cash equivalents
495 493
932 727
     
 
 
    Fair value sensitivity analysis for fixed rate instruments
 
 
    The company does not account for any fixed rate financial assets and liabilities at fair value through profit and loss, therefore a change in interest rates at the reporting date would not affect profit or loss.
 
 
     
 
 
    Cash flow sensitivity analysis for variable-rate instruments
 
 
    An increase of 50 basis points in interest rates at the reporting date would have decreased profit after tax by the amounts shown below. This assumes that all other variables remain constant. There is no impact on the company’s equity.
 
 
    Variable-rate instruments
1 890
2 291
    Net effect on profit or loss is equal but opposite for a 50 basis points decrease on the financial instruments listed above.    
         
       

14.4

Fair value of financial assets and liabilities

    The categorisation of each class of financial asset and liability, including their fair values, is included below:
     
        Available-for-sale investments Loans and receivables Liabilities atamortised cost Other assets and liabilities Total carrying value Fair value
      Note R’000 R’000 R’000 R’000 R’000 R’000
   

2010

             
    Financial assets              
    Investment in group              
    companies 1
 
 
 
1 982 799
1 982 799
1 982 799
    Available-for-sale  
 
 
 
 
 
 
    investments 2
602 851
 
 
125
602 976
602 976
    Loans to group  
 
 
 
 
 
 
    companies 1
 
635 932
 
 
635 932
635 932
    Other receivables  
 
2 883
 
 
2 883
2 883
    Cash resources  
 
495 493
 
 
495 493
495 493
       
602 851
1 134 308
 
1 982 924
3 720 083
3 720 083
    Financial liabilities  
 
 
 
 
 
 
    Loans from group  
 
 
 
 
 
 
    companies  
 
 
628 039
 
628 039
628 039
    Other payables  
 
 
17 784
 
17 784
17 784
    Amounts due to group companies  
 
 
3 522
 
3 522
3 522
    Short-term borrowings 7
 
 
930 000
 
930 000
930 000
       
 
 
1 579 345
 
1 579 345
1 579 345
   

2009

 
 
 
 
 
 
 
    Financial assets  
 
 
 
 
 
 
    Investment in group companies 1
 
 
 
495 593
495 593
495 593
    Available-for-sale investments 2
415 066
 
 
125
415 191
415 191
    Loans to group companies 1
 
1 349 368
 
 
1 349 368
1 349 368
    Other receivables  
 
133
 
 
133
133
    Cash resources  
 
932 727
 
 
932 727
932 727
       
415 066
2 282 228
 
495 718
3 193 012
3 193 012
    Financial liabilities  
 
 
 
 
 
 
    Loans from group companies  
 
 
558 041
 
558 041
558 041
    Other payables  
 
 
34 853
 
34 853
34 853
    Amounts due from group companies  
 
 
189
 
189
189
    Short-term borrowings  
 
 
1 430 000
 
1 430 000
1 430 000
       
 
 
2 023 083
 
2 023 083
2 023 083
    Determination of fair values
    Quoted market prices at reporting date have been used to determine the fair value of available-for-sale investments. Where quoted market prices are not available, a valuation technique, most commonly discounted cash flows, was used. For other receivables and payables, the fair value was determined using the discounted cash flow method at market-related interest rate. Carrying amounts approximate fair value for all other financial assets and liabilities.
     
    Fair value hierarchy
    The company uses the following hierarchy for determining the fair value of financial instruments measured at fair value:
    Level 1: quoted prices in active markets for identical assets or liabilities;
    Level 2: other techniques using inputs that are observable, either directly or indirectly; and
    Level 3: techniques using inputs that are not based on observable market data.
       
               
2010
2009
     
R'000
R'000
    Available-for-sale investments, measured at Level 1
602 851
415 066
         

15.

CAPITAL MANAGEMENT

  The company holds interests in companies that own mineral rights over resources with remaining lines which vary in accordance with current prices (refer “Mineral Resources and Reserves”). Decisions to exploit resources would be made at board level and only following the completion of a bankable study based on the current life of mine and estimated capital cost, operating cost and cost of finance, where required, so that the deposit can be mined on a sustainable basis to the end of its estimated life.
   
  The board’s policy is therefore to maintain a strong capital base so as to maintain stakeholder confidence and to sustain future development of the business. The company considers its capital to comprise of total equity. The company may adjust its capital structure by way of issuing new shares and is dependent on its shareholders for additional capital as required. The company manages its capital structure in light of changes in economic conditions and the board of directors monitors the capital adequacy, solvency and liquidity of the company on a continuous basis.
   
  There were no changes in the company’s approach to capital management during the year.
   
                   
               
2010
2009
   
R’000
R’000

16.

CONTINGENT LIABILITIES

 
 
  Guarantees
 
 
  Guarantees of US dollars 50 million (2009: US dollars 50 million) issued to bankers as security for facilities provided to foreign subsidiary company
382 940
386 000
       
  Joint-venture entity
  The company has issued guarantees to bankers to secure a short-term export finance agreement facility of R180 million (2009: R180 million) provided to a subsidiary company. The facility is primarily utilised for and on behalf of Assmang in which the company holds a 50% interest and which in turn has provided a back-to-back guarantee to the company against any claims made by bankers in terms of this facility.
   
  BEE transactions
  Certain preference shares were issued as part of the BEE transaction entered into in 2006 (refer “Black economic empowerment” report). If an event of default, as defined in the contract, is triggered in relation to the preference shares, the provisions of the relevant put option and call agreements entered into will apply.
   
  The company has also provided a guarantee to secure the banking facility extended to Mampa (refer “Black economic empowerment” report) which at year-end amounted to R3,5 million (2009: R5,6 million). The company in turn holds a back-to-back pledge over Mampa’s interest in RMDC in the event that the guarantee is called up.
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