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ANNUAL REPORT
Low-cost
Simplifi edAccessible
Affordable
Convenient
Paperless
Innovative
Fina
ncia
l St
atem
ents
Statutory Information
Notice of Annual General Meeting
Form of ProxyNotes to the Form of Proxy
Shareholders’ Calendar
Administration and Addresses
CO
NTE
NTS 03
04
06
10
16
18
20
28
29
31
79
84
89
92
The Market Reality
The Capitec Bank Revolution
Letter to Shareholders
Directorate and Executive
Management Committee
Corporate Governance and Risk Management Review
ANNEXURE A Attendance of Meetings by Directors
ANNEXURE BComposition of Board
and Board Committees
Key Performance Indicators
Low-cost
Simplifi edAccessible
Affordable
Convenient
Paperless
Innovative
Fina
ncia
l St
atem
ents
Statutory Information
Notice of Annual General Meeting
Form of ProxyNotes to the Form of Proxy
Shareholders’ Calendar
Administration and Addresses
CO
NTE
NTS 03
04
06
10
16
18
20
28
29
31
79
84
89
92
The Market Reality
The Capitec Bank Revolution
Letter to Shareholders
Directorate and Executive
Management Committee
Corporate Governance and Risk Management Review
ANNEXURE A Attendance of Meetings by Directors
ANNEXURE BComposition of Board
and Board Committees
Key Performance Indicators
Affordable banking – lowest fees
available.
253 branches countrywide, accessible
from at least 8am to 5pm weekdays and
8am to 1pm Saturdays.
Convenient cash withdrawals from
retailers and ATMs.
Simplifi ed paperless transacting.
Affordable banking – lowest fees
available.
253 branches countrywide, accessible
from at least 8am to 5pm weekdays and
8am to 1pm Saturdays.
Convenient cash withdrawals from
retailers and ATMs.
Simplifi ed paperless transacting.
2004 2005 2006SALES
Loans
• Value of loans advanced Rm 1 904 2 259 2 863
• Number of loans advanced ‘000 2 617 2 486 2 650
• Average loan amount R 728 909 1 080
• Interest from loans
advanced Rm 393 534 768
• Net loan impairment
expense Rm 29 39 96
• Net impairment % of
repayments % 1.43 1.45 2.85
DEPOSITS
• Number of savings clients ‘000 18 143 375
• Value of savings deposits Rm 4 74 314
• Net fee income Rm - 4 15
PROFITABILITY
• Attributable earnings Rm 45 67 115
• Headline earnings Rm 47 70 116
• Total expenditure Rm 307 392 506
• Cost to income ratio –
banking activities % 76 73 66
• Return on equity % 12 16 23
Earnings per share
• Attributable cents 67 98 163
• Headline cents 70 101 165
• Diluted attributable cents 63 92 155
• Diluted headline cents 65 95 156
Proposed dividend per share cents 20 30 45
2004 2005 2006ASSETS
• Total assets Rm 512 805 1 251
• Net loans and advances Rm 135 208 455
• Cash and cash equivalents Rm 160 363 582
• Capital expenditure Rm 44 84 72
LIABILITIES
• Total liabilities Rm 86 332 687
• Deposits Rm 49 281 595
EQUITY
• Shareholders’ funds Rm 426 473 564
• Capital adequacy ratio % 98 84 56
• Net asset value per share cents 619 672 784
• Share price at 28 February cents 580 1 490 3 105
• Market capitalisation at
28 February Rm 399 1 072 2 233
• Number of share options
outstanding ‘000 7 860 6 753 5 841
• Average share option
strike price cents 153 271 648
• Average share option time
to maturity months 22 25 28
• Charge on settlement of
share options Rm 2 16 31
Number of shares
• At year end ‘000 68 743 70 442 71 928
• Weighted average ‘000 67 028 68 860 70 555
• Diluted weighted average ‘000 71 868 73 536 74 534
HE
AD
LINE
EA
RN
ING
S
30
47
70
‘03 ‘04 ‘05 ‘06
RM116
RE
TU
RN
ON
EQ
UIT
Y
8
12
16
%23
‘03 ‘04 ‘05 ‘06
KEY PERFORMANCE INDICATORS
19
cents
DIV
IDE
ND
PE
R S
HA
RE
45
70
101 16
5
‘03 ‘04 ‘05 ‘06
20
30
45
HE
AD
LINE
EA
RN
ING
S P
ER
SH
AR
E
cents
Sout
hern
Afr
ica
253Branches
210ATMs
1901Employees
5
RM
TR
AIN
ING
SP
EN
D
1180
1402
1708
NO
. OF
STA
FF
1901
‘03 ‘04 ‘05 ‘06
10
18
NATIONALNETWORK
18
03
2004 2005 2006SALES
Loans
• Value of loans advanced Rm 1 904 2 259 2 863
• Number of loans advanced ‘000 2 617 2 486 2 650
• Average loan amount R 728 909 1 080
• Interest from loans
advanced Rm 393 534 768
• Net loan impairment
expense Rm 29 39 96
• Net impairment % of
repayments % 1.43 1.45 2.85
DEPOSITS
• Number of savings clients ‘000 18 143 375
• Value of savings deposits Rm 4 74 314
• Net fee income Rm - 4 15
PROFITABILITY
• Attributable earnings Rm 45 67 115
• Headline earnings Rm 47 70 116
• Total expenditure Rm 307 392 506
• Cost to income ratio –
banking activities % 76 73 66
• Return on equity % 12 16 23
Earnings per share
• Attributable cents 67 98 163
• Headline cents 70 101 165
• Diluted attributable cents 63 92 155
• Diluted headline cents 65 95 156
Proposed dividend per share cents 20 30 45
2004 2005 2006ASSETS
• Total assets Rm 512 805 1 251
• Net loans and advances Rm 135 208 455
• Cash and cash equivalents Rm 160 363 582
• Capital expenditure Rm 44 84 72
LIABILITIES
• Total liabilities Rm 86 332 687
• Deposits Rm 49 281 595
EQUITY
• Shareholders’ funds Rm 426 473 564
• Capital adequacy ratio % 98 84 56
• Net asset value per share cents 619 672 784
• Share price at 28 February cents 580 1 490 3 105
• Market capitalisation at
28 February Rm 399 1 072 2 233
• Number of share options
outstanding ‘000 7 860 6 753 5 841
• Average share option
strike price cents 153 271 648
• Average share option time
to maturity months 22 25 28
• Charge on settlement of
share options Rm 2 16 31
Number of shares
• At year end ‘000 68 743 70 442 71 928
• Weighted average ‘000 67 028 68 860 70 555
• Diluted weighted average ‘000 71 868 73 536 74 534
HE
AD
LINE
EA
RN
ING
S
30
47
70
‘03 ‘04 ‘05 ‘06
RM116
RE
TU
RN
ON
EQ
UIT
Y
8
12
16
%23
‘03 ‘04 ‘05 ‘06
KEY PERFORMANCE INDICATORS
19
centsD
IVID
EN
D P
ER
SH
AR
E
45
70
101 16
5
‘03 ‘04 ‘05 ‘06
20
30
45
HE
AD
LINE
EA
RN
ING
S P
ER
SH
AR
E
cents
Sout
hern
Afr
ica
253Branches
210ATMs
1901Employees
5
RM
TR
AIN
ING
SP
EN
D
1180
1402
1708
NO
. OF
STA
FF
1901
‘03 ‘04 ‘05 ‘06
10
18
NATIONALNETWORK
18
03
0302
0302
Complex and paper-drivenPaper-driven applications, deposits, withdrawals and transfers
are confusing and cumbersome. Administration and control
procedures restrict the delivery of convenient and effi cient
service to clients. Simplicity does not exist in banking and “fi ne
print” often takes more space than the “large print”. Clients refer
to banks as confusing, complex and requiring long periods for
approval. Technology must be used to simplify banking processes
and remove administrative procedures, to deliver banking services
that are real time and paperless.
Financial controlBetween 8% and 10% of bank clients have cheque facilities. Whilst
this payment instrument is outdated, costly and high risk, it is the
one account for which banks provide a monthly statement. Roughly
90% of bank clients use savings accounts as the transaction facility
through which salary deposits, debit orders and stop orders are
processed. Few of these clients ever receive a statement and
normally must pay for this information when requested.
Access to financeResearch shows that less than 15% of all bank clients receive
any form of funding. Access to loan facilities is regarded by
clients as cumbersome, complicated and time consuming. The
average client is in need of fi nance to take advantage of business
opportunities, facilitate home improvements and pay for the
education of family members.
EVERYDAY BANKING. At Capitec Bank we believe
that the present bank offering does not adequately
address the needs of our target market. The Capitec
Bank Revolution addresses each of these needs.
BANK STATUSADULT POPULATION
Currently Banked
Never Banked
Previously Banked
12 %
41 %47 %
AccessPeople are time constrained due to the nature of their work. They
work fi xed hours from 8am to 5pm. This means that clients cannot
get to a bank, as most banks are only open from 8:30am to 3:30pm
on weekdays, and 8:30am to 11am on Saturdays. The mobility of
clients is limited due to the use of public transport and this further
restricts access to banking. This is why long queues over month
end and on Saturdays are synonymous with banking. Access to
banking is therefore not comparable to access to retail shopping in
South Africa.
Dependency on cashSouth Africans are dependent on cash, as information on and
the use of electronic transacting platforms are limited. People
therefore still carry large amounts of cash, particularly over month
end. This poses a serious risk to clients and to retailers receiving
this cash. Money transfers to family members are often done by
drawing cash and purchasing a money order at the Post Offi ce.
In a society where crime is commonplace, banking services are
not adequately structured to protect clients from the risks of
carrying cash.
Why save?Banks do not offer real returns on daily savings accounts. Annual
fees often exceed interest earned in a savings account. The
average South African therefore does not save. Greater incentives
are needed to encourage clients to save, regardless of the amount
a client can afford to sacrifi ce on a monthly basis.
Costly and confusing When it comes to banking fees, people are confused by ad
valorem charges, administration costs and complex transaction
fees. People are seldom sure what their bank charges will be at the
end of a month. The high cost of ATM withdrawals, debit orders,
enquiries, reversed debit orders and account administration
make everyday banking unaffordable. Banking fees need to be
simplifi ed and reduced to attract clients to use the full range of
banking services, regardless of income level.
* A
ll st
ats
quo
ted
orig
inat
ed fr
om t
he F
insc
ope
rep
ort
39 %
39
%
56
73 73 75 CORE PERCEPTIONSABOUT BANKS
Their technology is diffi cult
Must pay service fees
Fill in complex forms
Money doesn’t grow quickly
Don’t qualify for loan
facilities
Finscope 2005
Finscope 2003
05
THE MARKETREALITY
Capitec Bank is a retail bank for anyone who requires
accessible, simplifi ed and low-cost banking,
delivered via personalised service. The bank
has acquired over 600 000 clients to date.
Market
04
Complex and paper-drivenPaper-driven applications, deposits, withdrawals and transfers
are confusing and cumbersome. Administration and control
procedures restrict the delivery of convenient and effi cient
service to clients. Simplicity does not exist in banking and “fi ne
print” often takes more space than the “large print”. Clients refer
to banks as confusing, complex and requiring long periods for
approval. Technology must be used to simplify banking processes
and remove administrative procedures, to deliver banking services
that are real time and paperless.
Financial controlBetween 8% and 10% of bank clients have cheque facilities. Whilst
this payment instrument is outdated, costly and high risk, it is the
one account for which banks provide a monthly statement. Roughly
90% of bank clients use savings accounts as the transaction facility
through which salary deposits, debit orders and stop orders are
processed. Few of these clients ever receive a statement and
normally must pay for this information when requested.
Access to financeResearch shows that less than 15% of all bank clients receive
any form of funding. Access to loan facilities is regarded by
clients as cumbersome, complicated and time consuming. The
average client is in need of fi nance to take advantage of business
opportunities, facilitate home improvements and pay for the
education of family members.
EVERYDAY BANKING. At Capitec Bank we believe
that the present bank offering does not adequately
address the needs of our target market. The Capitec
Bank Revolution addresses each of these needs.
BANK STATUSADULT POPULATION
Currently Banked
Never Banked
Previously Banked
12 %
41 %47 %
AccessPeople are time constrained due to the nature of their work. They
work fi xed hours from 8am to 5pm. This means that clients cannot
get to a bank, as most banks are only open from 8:30am to 3:30pm
on weekdays, and 8:30am to 11am on Saturdays. The mobility of
clients is limited due to the use of public transport and this further
restricts access to banking. This is why long queues over month
end and on Saturdays are synonymous with banking. Access to
banking is therefore not comparable to access to retail shopping in
South Africa.
Dependency on cashSouth Africans are dependent on cash, as information on and
the use of electronic transacting platforms are limited. People
therefore still carry large amounts of cash, particularly over month
end. This poses a serious risk to clients and to retailers receiving
this cash. Money transfers to family members are often done by
drawing cash and purchasing a money order at the Post Offi ce.
In a society where crime is commonplace, banking services are
not adequately structured to protect clients from the risks of
carrying cash.
Why save?Banks do not offer real returns on daily savings accounts. Annual
fees often exceed interest earned in a savings account. The
average South African therefore does not save. Greater incentives
are needed to encourage clients to save, regardless of the amount
a client can afford to sacrifi ce on a monthly basis.
Costly and confusing When it comes to banking fees, people are confused by ad
valorem charges, administration costs and complex transaction
fees. People are seldom sure what their bank charges will be at the
end of a month. The high cost of ATM withdrawals, debit orders,
enquiries, reversed debit orders and account administration
make everyday banking unaffordable. Banking fees need to be
simplifi ed and reduced to attract clients to use the full range of
banking services, regardless of income level.
* A
ll st
ats
quo
ted
orig
inat
ed fr
om t
he F
insc
ope
rep
ort
39 %
39
%
56
73 73 75 CORE PERCEPTIONSABOUT BANKS
Their technology is diffi cult
Must pay service fees
Fill in complex forms
Money doesn’t grow quickly
Don’t qualify for loan
facilities
Finscope 2005
Finscope 2003
05
THE MARKETREALITY
Capitec Bank is a retail bank for anyone who requires
accessible, simplifi ed and low-cost banking,
delivered via personalised service. The bank
has acquired over 600 000 clients to date.
Market
04
SimplicityThe Global One Banking Facility is a single facility that includes
savings accounts, various loan options and transacting such as
transfers, debit and stop orders, all in a single facility accessed via
a debit card – the Global One Gold Card.
Paperless account opening
Opening a Global One Banking Facility takes 10 minutes and the
process is paperless. We capture the client’s details and photo on
our system. All clients do is sign for their Global One Gold Card,
which is the key to accessing all the products and services of the
Global One Banking Facility.
Quick and easy transacting
Clients never fi ll in any forms when they make a deposit, a
withdrawal or a transfer. All clients need for any transaction is their
card and PIN. It’s that simple.
Fixed fees and charges
This ensures a simplifi ed fee structure that clients easily
understand. There are no hidden or tiered fees that result in
unexpected costs for clients.
Global One Gold Card
A Maestro-linked debit card, which provides access to all accounts
in the Global One Banking Facility. This includes transacting at
Capitec Bank branches and Saswitch-linked ATMs, purchases at
all point-of-sale terminals at retailers and cash withdrawals from
Shoprite, Checkers and Pick ‘n Pay.
Personal serviceClients’ choice of language
As we always employ consultants from the community or area in
which we place our branches, clients are assured that we are able
to attend to their needs in the language of their choice.
24-hour service
Our 24-hour Client Care Centre ensures that clients have access to
their bank accounts and our personal service, 24-hours per day.
We come to you
As part of our sales drive, our mobile consultant is able to go to
a client’s place of work, open a Global One Banking Facility and
issue a Global One Gold Card immediately.
Simplicity
Free balance enquiries and statements.
We understand the importance for clients to
track transactions and to know the balance on
their accounts. This is why we offer this service
free of charge.A single Global One Banking Facility
that includes savings accounts, loan facilities,
ATM and point-of-sale transacting, stop/debit
orders, interbank transfers and retail purchases,
all packaged in one facility and accessed via
a single Global One Gold Card.
Th
e C
ap
itec
Ba
nk
Re
vo
lutio
n
0908
SimplicityThe Global One Banking Facility is a single facility that includes
savings accounts, various loan options and transacting such as
transfers, debit and stop orders, all in a single facility accessed via
a debit card – the Global One Gold Card.
Paperless account opening
Opening a Global One Banking Facility takes 10 minutes and the
process is paperless. We capture the client’s details and photo on
our system. All clients do is sign for their Global One Gold Card,
which is the key to accessing all the products and services of the
Global One Banking Facility.
Quick and easy transacting
Clients never fi ll in any forms when they make a deposit, a
withdrawal or a transfer. All clients need for any transaction is their
card and PIN. It’s that simple.
Fixed fees and charges
This ensures a simplifi ed fee structure that clients easily
understand. There are no hidden or tiered fees that result in
unexpected costs for clients.
Global One Gold Card
A Maestro-linked debit card, which provides access to all accounts
in the Global One Banking Facility. This includes transacting at
Capitec Bank branches and Saswitch-linked ATMs, purchases at
all point-of-sale terminals at retailers and cash withdrawals from
Shoprite, Checkers and Pick ‘n Pay.
Personal serviceClients’ choice of language
As we always employ consultants from the community or area in
which we place our branches, clients are assured that we are able
to attend to their needs in the language of their choice.
24-hour service
Our 24-hour Client Care Centre ensures that clients have access to
their bank accounts and our personal service, 24-hours per day.
We come to you
As part of our sales drive, our mobile consultant is able to go to
a client’s place of work, open a Global One Banking Facility and
issue a Global One Gold Card immediately.
Simplicity
Free balance enquiries and statements.
We understand the importance for clients to
track transactions and to know the balance on
their accounts. This is why we offer this service
free of charge.A single Global One Banking Facility
that includes savings accounts, loan facilities,
ATM and point-of-sale transacting, stop/debit
orders, interbank transfers and retail purchases,
all packaged in one facility and accessed via
a single Global One Gold Card.
Th
e C
ap
itec
Ba
nk
Re
vo
lutio
n
0908
INSTANT GRATIFICATION. At Capitec Bank we believe a client comes to a bank to solve problems,
not to create paperwork. A client never leaves Capitec Bank with unfi nished business. When a client walks
into a branch with her identity document and proof of address, she walks out with an open and active
account and with her new Global One Gold Card in her pocket.
If she is also shopping for a loan and has her payslip and
other documents available, the loan is approved (or declined),
paid into her new account and is immediately accessible.
There is no waiting period and she is not required to wait for
the decision of a credit committee.
LETTER TOSHAREHOLDERS
Accessibility253 branches are located where clients work, shop and commute,
with minimum hours from eight to fi ve and often from seven
to seven on weekdays and eight to one on Saturdays.
A client never fi lls in a form to open an account or to apply for
a loan, or even to make a deposit. Capturing information is
our job. We do it from the original documents and thereby
minimise mistakes.
This is instant gratifi cation on a scale unachievable even by a
private bank.
Focus on technologyHow do we achieve this? We focus relentlessly on basic banking
products. The best efforts of our top team go into designing
products that satisfy the exact needs of our clients. An example:
the fi rst thing most of our clients do when they visit an ATM is to
make a balance enquiry. Most of our competitors charge R2 per
enquiry. At our ATMs, the client’s balance appears on the screen
automatically, and it costs nothing.
Every service provided to a client must produce immediate
results. For instance: we capture a photograph of every client
on the system and this photograph appears on the screen with
the account details whenever a consultant serves that client.
When a dormant account is re-activitated, a new photograph
is taken. The business support centre in Bellville compares the
old photograph with the new one and authorises access to the
account immediately. At Capitec this is automatically assumed to
be a real-time process.
As a result of this approach there is no administrative back room
at a Capitec Bank branch. There are no transactions to reconcile
or to follow up. Everything is done once only. Incidentally, there
is no branch manager’s offi ce either, because the branch manager
works as a consultant and acts as the team leader.
Three hundred thousand bank clientsWe have more than doubled the number of savings clients during
the year to 374 700. The total value of retail deposits has increased
fourfold to R314 million. We expect continued growth. To be a
serious player in the market for basic banking we aim to attract
two million clients, so we still have a long way to go.
The growth in client numbers has not been as a result of growth
in the number of branches. At year end we had only two more
branches than a year ago, but we are in the process of adding 50
new branches.
We make our profi t on our loan products. Five years ago we
started with small, one month loans. We have now added loans
with a fi xed term of up to twelve months. The value of all loans
made during the year increased by 27% to R2.9 billion. The value
of one month loans has declined slightly and all our growth has
been derived from the three, six and twelve month loans. Because
of the longer average term of our loans, our net loan book has
increased from R208 million a year ago to R455 million.
Micro-loans are expensiveIt is expensive to grant small, unsecured personal loans and our
costs inevitably result in high fees for our clients. It is one of
Capitec Bank’s ambitions to continue making micro-credit more
111110
INSTANT GRATIFICATION. At Capitec Bank we believe a client comes to a bank to solve problems,
not to create paperwork. A client never leaves Capitec Bank with unfi nished business. When a client walks
into a branch with her identity document and proof of address, she walks out with an open and active
account and with her new Global One Gold Card in her pocket.
If she is also shopping for a loan and has her payslip and
other documents available, the loan is approved (or declined),
paid into her new account and is immediately accessible.
There is no waiting period and she is not required to wait for
the decision of a credit committee.
LETTER TOSHAREHOLDERS
Accessibility253 branches are located where clients work, shop and commute,
with minimum hours from eight to fi ve and often from seven
to seven on weekdays and eight to one on Saturdays.
A client never fi lls in a form to open an account or to apply for
a loan, or even to make a deposit. Capturing information is
our job. We do it from the original documents and thereby
minimise mistakes.
This is instant gratifi cation on a scale unachievable even by a
private bank.
Focus on technologyHow do we achieve this? We focus relentlessly on basic banking
products. The best efforts of our top team go into designing
products that satisfy the exact needs of our clients. An example:
the fi rst thing most of our clients do when they visit an ATM is to
make a balance enquiry. Most of our competitors charge R2 per
enquiry. At our ATMs, the client’s balance appears on the screen
automatically, and it costs nothing.
Every service provided to a client must produce immediate
results. For instance: we capture a photograph of every client
on the system and this photograph appears on the screen with
the account details whenever a consultant serves that client.
When a dormant account is re-activitated, a new photograph
is taken. The business support centre in Bellville compares the
old photograph with the new one and authorises access to the
account immediately. At Capitec this is automatically assumed to
be a real-time process.
As a result of this approach there is no administrative back room
at a Capitec Bank branch. There are no transactions to reconcile
or to follow up. Everything is done once only. Incidentally, there
is no branch manager’s offi ce either, because the branch manager
works as a consultant and acts as the team leader.
Three hundred thousand bank clientsWe have more than doubled the number of savings clients during
the year to 374 700. The total value of retail deposits has increased
fourfold to R314 million. We expect continued growth. To be a
serious player in the market for basic banking we aim to attract
two million clients, so we still have a long way to go.
The growth in client numbers has not been as a result of growth
in the number of branches. At year end we had only two more
branches than a year ago, but we are in the process of adding 50
new branches.
We make our profi t on our loan products. Five years ago we
started with small, one month loans. We have now added loans
with a fi xed term of up to twelve months. The value of all loans
made during the year increased by 27% to R2.9 billion. The value
of one month loans has declined slightly and all our growth has
been derived from the three, six and twelve month loans. Because
of the longer average term of our loans, our net loan book has
increased from R208 million a year ago to R455 million.
Micro-loans are expensiveIt is expensive to grant small, unsecured personal loans and our
costs inevitably result in high fees for our clients. It is one of
Capitec Bank’s ambitions to continue making micro-credit more
111110
The scourge of a bank: bad debtsWe have extensive experience of short-term loans. When we make
a one or three month loan, we make a provision for the expected
loss over the term of that loan: 1.2% for one month and 2.6%
for three month loans. This rate is adjusted from time to time to
accurately refl ect our actual experience. All arrears are provided
for and all short-term debt older than 90 days is written off.
Managing the six and twelve month loans is more complicated.
We track the repayment history of each type of loan separately
for each month and provide for expected write-offs. If the actual
payment performance of a particular loan category for a given
month deviates from the expected performance, we immediately
increase (or, in the case of good news, decrease) the provisions
for that loan category. These products are less than a year old
and our expected repayment rates are based on industry norms,
adjusted for our initial experience. The
biggest number of defaults occur in the
early stages of a longer-term loan, so the
provision against our term loans is large.
We expect the payment performance of
term loans to improve as we gain more
experience in managing them.
Le
tter to
Sh
are
ho
lde
rs
ProfitWe earned R115 million for the year. Our return on equity
increased to 23% from 16% last year, which is pleasing. Our
profi t increased by 71% and for the third consecutive year our
attributable earnings increased by 50% or more. Bear in mind,
however, that we came off a low base of R30 million three years
ago and that conditions are currently very favourable. We are still
building an organisation, so we invested heavily in training and
systems. Our total expenditure increased by 29%. This trend will
continue in the new year, when sales and marketing expenses will
grow signifi cantly. Our model requires effi ciency, but is not cheap
and we are building to serve large numbers of clients. Even so, our
cost as a percentage of income declined to 66% (from 73%).
We carried a tax loss and R17 million of the tax recorded as an
expense was actually written off against the tax asset. In short,
Le
tter to
Sh
are
ho
lde
rs
illustrated by the fact that we have ten branches in downtown
Johannesburg and three in Soweto, but none in Sandton.
Many branches are in remote areas. Our branches are open
from at least 8am in the morning until 5pm in the afternoon,
but often from 7am to 7pm. The physical outlay is modern but
unintimidating. Clients are seated while being attended to by a
consultant and there are no glass partitions between the client
and the consultant.
Do affordable bank products exist?The mass market is the market for basic, affordable bank products.
Our savings accounts have the lowest cost and pay the highest
interest rates in South Africa. An ATM withdrawal costs only
R2, and we pay 10% interest on savings accounts with balances
up to R10 000. We are the only bank that offers the small investor
more interest than the big investor. Our international gold card,
we generated R17 million more in cash than our profi t fi gure
indicates. Our tax loss has now been fully utilised.
DividendThe directors propose a 50% increase in dividend to 45 cents
per share, subject to shareholders’ approval at the AGM on
Wednesday, 24 May 2006 at Spier, Stellenbosch. Last year the
dividend was 30 cents per share. As a growing company we need
to conserve our capital for further growth, but at the same time
we wish our shareholders to share in the company’s success.
With a dividend cover of 3.7 times we think we are achieving the
right balance between these two goals. This cover has increased
slightly from last year.
Sandton or Soweto?We currently have 253 branches. Our branches are where our
clients are: at train stations and taxi ranks. Our philosophy is
which carries the Maestro mark from MasterCard, gives our clients
access to all South African ATMs and can be used for purchases
and cash withdrawals at all major retail groups in South Africa.
We don’t offer foreign currency or cheque accounts, although our
cards operate internationally and we accept cheques as deposits.
At Capitec Bank a debit order costs only R2. We have few products,
but those we have are the best and cheapest of their kind.
Boring but important: liquidityTo the big banks, liquidity is a given. Jointly they represent
the whole banking industry: if a client withdraws money to pay
a creditor, the creditor puts the money into his bank and the
banking system remains in balance. At a small bank liquidity
management is one of the two most important “bank” things
to be done (the other is the management of bad debts). Other
people may forget the small banks crisis of fi ve years ago, but
at Capitec Bank it left a deep impression. A small bank must
One month loans
Three month loansLOANS
Our branches are where our customers are: at a
train station or near a taxi rank. Many branches
are in remote areas where no other banks are
represented.
accessible by reducing the cost of lending while offering more
products designed to meet the exact needs of the market.
In a brief* on micro-fi nance, the Consultative Group to Assist
the Poorest, a World Bank organisation, explains the higher
rates charged for small loans as follows: “Why are micro-credit
interest rates higher than bank interest rates? Because the costs
of making a small loan are higher in percentage terms than the
costs of making a larger loan. If the actual cost per loan is $25, the
percentage cost is 0.25 percent for a $10 000 loan, but 25 percent
for a $100 loan.”
*Donor Brief No 6, September 2002.
During the year we granted a total of 2.7 million loans with an
average size of R1 080 (2005: 2.5 million loans with an average
size of R909). The interest we charge decreased further to an
average of 14.9% a month (from 17.8% per month). We make a
profi t of R44 per loan. Like all averages, these fi gures hide more
than they reveal because of our new term loans. The percentage
cost of a twelve month loan is lower than that of a one month
loan for two reasons: the cost of granting the loan is split over
more payments, and the loans are bigger. However, the risk of
default increases as the loan period increases. Our charge for a
one month loan varies between 15% and 21.5% per month and
for a twelve month loan our charge is 6.5% per month.
Six month loans
Twelve month loans
2005 2006 2005 2006 2005 2006 2005 2006 2005 2006Number of loans ‘000 2 163 2 079 323 453 - 62 - 56 2 486 2 650
Value of loans Rm 1 602 1 501 657 913 - 204 - 245 2 259 2 863
Average loan size R 741 722 2 034 2 012 - 3 287 - 4 392 909 1 080
Average monthly rate % 20.3 19.3 11.8 11.2 - 9.5 - 6.5 17.8 14.9
Gross bad debt % 1.5 1.2 3.6 2.6 - 17.3 - 24.0 2.1 3.5
Gross write off Rm 29 21 29 32 - 26 - 37 58 116
Recoveries Rm -18 -21
Net bad debt % 1.45 2.85
AllLoans
111312
The scourge of a bank: bad debtsWe have extensive experience of short-term loans. When we make
a one or three month loan, we make a provision for the expected
loss over the term of that loan: 1.2% for one month and 2.6%
for three month loans. This rate is adjusted from time to time to
accurately refl ect our actual experience. All arrears are provided
for and all short-term debt older than 90 days is written off.
Managing the six and twelve month loans is more complicated.
We track the repayment history of each type of loan separately
for each month and provide for expected write-offs. If the actual
payment performance of a particular loan category for a given
month deviates from the expected performance, we immediately
increase (or, in the case of good news, decrease) the provisions
for that loan category. These products are less than a year old
and our expected repayment rates are based on industry norms,
adjusted for our initial experience. The
biggest number of defaults occur in the
early stages of a longer-term loan, so the
provision against our term loans is large.
We expect the payment performance of
term loans to improve as we gain more
experience in managing them.
Le
tter to
Sh
are
ho
lde
rs
ProfitWe earned R115 million for the year. Our return on equity
increased to 23% from 16% last year, which is pleasing. Our
profi t increased by 71% and for the third consecutive year our
attributable earnings increased by 50% or more. Bear in mind,
however, that we came off a low base of R30 million three years
ago and that conditions are currently very favourable. We are still
building an organisation, so we invested heavily in training and
systems. Our total expenditure increased by 29%. This trend will
continue in the new year, when sales and marketing expenses will
grow signifi cantly. Our model requires effi ciency, but is not cheap
and we are building to serve large numbers of clients. Even so, our
cost as a percentage of income declined to 66% (from 73%).
We carried a tax loss and R17 million of the tax recorded as an
expense was actually written off against the tax asset. In short,
Le
tter to
Sh
are
ho
lde
rs
illustrated by the fact that we have ten branches in downtown
Johannesburg and three in Soweto, but none in Sandton.
Many branches are in remote areas. Our branches are open
from at least 8am in the morning until 5pm in the afternoon,
but often from 7am to 7pm. The physical outlay is modern but
unintimidating. Clients are seated while being attended to by a
consultant and there are no glass partitions between the client
and the consultant.
Do affordable bank products exist?The mass market is the market for basic, affordable bank products.
Our savings accounts have the lowest cost and pay the highest
interest rates in South Africa. An ATM withdrawal costs only
R2, and we pay 10% interest on savings accounts with balances
up to R10 000. We are the only bank that offers the small investor
more interest than the big investor. Our international gold card,
we generated R17 million more in cash than our profi t fi gure
indicates. Our tax loss has now been fully utilised.
DividendThe directors propose a 50% increase in dividend to 45 cents
per share, subject to shareholders’ approval at the AGM on
Wednesday, 24 May 2006 at Spier, Stellenbosch. Last year the
dividend was 30 cents per share. As a growing company we need
to conserve our capital for further growth, but at the same time
we wish our shareholders to share in the company’s success.
With a dividend cover of 3.7 times we think we are achieving the
right balance between these two goals. This cover has increased
slightly from last year.
Sandton or Soweto?We currently have 253 branches. Our branches are where our
clients are: at train stations and taxi ranks. Our philosophy is
which carries the Maestro mark from MasterCard, gives our clients
access to all South African ATMs and can be used for purchases
and cash withdrawals at all major retail groups in South Africa.
We don’t offer foreign currency or cheque accounts, although our
cards operate internationally and we accept cheques as deposits.
At Capitec Bank a debit order costs only R2. We have few products,
but those we have are the best and cheapest of their kind.
Boring but important: liquidityTo the big banks, liquidity is a given. Jointly they represent
the whole banking industry: if a client withdraws money to pay
a creditor, the creditor puts the money into his bank and the
banking system remains in balance. At a small bank liquidity
management is one of the two most important “bank” things
to be done (the other is the management of bad debts). Other
people may forget the small banks crisis of fi ve years ago, but
at Capitec Bank it left a deep impression. A small bank must
One month loans
Three month loansLOANS
Our branches are where our customers are: at a
train station or near a taxi rank. Many branches
are in remote areas where no other banks are
represented.
accessible by reducing the cost of lending while offering more
products designed to meet the exact needs of the market.
In a brief* on micro-fi nance, the Consultative Group to Assist
the Poorest, a World Bank organisation, explains the higher
rates charged for small loans as follows: “Why are micro-credit
interest rates higher than bank interest rates? Because the costs
of making a small loan are higher in percentage terms than the
costs of making a larger loan. If the actual cost per loan is $25, the
percentage cost is 0.25 percent for a $10 000 loan, but 25 percent
for a $100 loan.”
*Donor Brief No 6, September 2002.
During the year we granted a total of 2.7 million loans with an
average size of R1 080 (2005: 2.5 million loans with an average
size of R909). The interest we charge decreased further to an
average of 14.9% a month (from 17.8% per month). We make a
profi t of R44 per loan. Like all averages, these fi gures hide more
than they reveal because of our new term loans. The percentage
cost of a twelve month loan is lower than that of a one month
loan for two reasons: the cost of granting the loan is split over
more payments, and the loans are bigger. However, the risk of
default increases as the loan period increases. Our charge for a
one month loan varies between 15% and 21.5% per month and
for a twelve month loan our charge is 6.5% per month.
Six month loans
Twelve month loans
2005 2006 2005 2006 2005 2006 2005 2006 2005 2006Number of loans ‘000 2 163 2 079 323 453 - 62 - 56 2 486 2 650
Value of loans Rm 1 602 1 501 657 913 - 204 - 245 2 259 2 863
Average loan size R 741 722 2 034 2 012 - 3 287 - 4 392 909 1 080
Average monthly rate % 20.3 19.3 11.8 11.2 - 9.5 - 6.5 17.8 14.9
Gross bad debt % 1.5 1.2 3.6 2.6 - 17.3 - 24.0 2.1 3.5
Gross write off Rm 29 21 29 32 - 26 - 37 58 116
Recoveries Rm -18 -21
Net bad debt % 1.45 2.85
AllLoans
111312
Le
tter to
Sh
are
ho
lde
rs
Le
tter to
Sh
are
ho
lde
rs
manage its money conservatively and must always be in a
position to pay its depositors in a crisis. The crisis may well be
caused by something completely outside the control of the small
bank – such as a default by Russia – and will probably come without
warning. (Amidst the euphoria about South Africa’s economic
performance, it is easy to forget how dependent we as a country
have become on short-term fl ows of foreign currency.)
South Africa has a highly sophisticated equity market that can
value any share, no matter how high its risk. The debt market
is completely different: risky borrowers struggle to get access
to fi nance and the market seems to be unable to price for risk,
preferring to serve only low risk clients. During our fi rst few
years, we felt that the debt market was practically closed to us.
During the past year this has changed signifi cantly. It is not that
the market has become more fl exible. It is that we have gained
suffi cient credibility to reduce the perceived risk of lending to
us. In January 2006 Capitec Bank obtained an investment grade
rating from Moody’s Investors Service, an international rating
agency (Baa1.za long-term and Prime-2.za short-term). As a fi rst
rating this is quite satisfactory as we are still a small organisation.
Our wholesale deposits have increased from R200 million to
R276 million. This includes a R60 million loan from Sanlam. All
the wholesale deposits are medium to long-term deposits. Our
retail deposits increased from R74 million to R314 million. At year
end we had R582 million cash on hand. We have more cash than
retail deposits, in other words we are in a position to repay all our
savings clients immediately. We have monitored the withdrawal
behaviour of our retail clients in order to establish which deposits
can be considered a core holding that will not be withdrawn, even
in the event of a crisis. Carrying lots of cash is expensive because
of low interest rates and the increased exposure to robberies. (In
the past year we lost R9 million in 26 thefts and robberies.)
As our banking business increases, our use of cash increases.
In December 2005, we paid out R470 million through our ATM
network. Although small beer in the banking industry, this is a
massive amount for us.
Black economic empowermentIn September 2004 we issued 1.4 million new shares at market price
to Arch Equity Limited, a listed black company. In December 2005
Arch Equity Limited announced their decision to restructure the
company in order to comply with the new codes of good practice
for broad based black economic empowerment. This entailed the
creation of a new company, Arch Equity Investment Holdings (Pty)
Limited. The original Arch Equity Limited would hold 49.9% of the
shares of the new company and black shareholders would hold
the balance of 50.1% of the shares. Desmond Lockey, the driving
force behind Arch Equity Limited, would be a main shareholder
and the chief executive offi cer of the new Arch Equity Investment
Holdings Pty Limited. It was agreed with Capitec Bank that
the new company would hold at least 2.9 million Capitec Bank
Holdings shares, giving us a direct BEE shareholding of 4%.
Since then, Arch Equity Limited and PSG Group have announced
an agreement in principle to merge. This means that PSG Group
will become the largest shareholder in Capitec Bank Holdings,
with a direct holding of more than 17% of our shares and an
indirect holding of 2% through its stake in Arch Equity Investment
Holdings Pty Limited.
High quality peopleWe appointed 746 new employees, resulting in a net increase of
193 people. We now employ 1 901 people. We invest heavily in
our people. All new branch employees attend an intensive (and
expensive) two week training course at Stellenbosch immediately
after joining Capitec Bank. We spent R18 million on training
during the past year, an unheard of 10% of our salary bill.
The bank subsidises the purchase price of Capitec Bank shares
bought by employees through our empowerment share purchase
scheme by 10%. At the moment 318 people participate in the
scheme. Everybody is encouraged to participate and some invest
in as little as one share per month. It is our dream that all our
employees will eventually own Capitec Bank shares.
The bank has a strong and loyal management team under the
leadership of Riaan Stassen. Those employees who are in a position
to infl uence the growth of the bank as a whole, participate in a
share option scheme. The rise in our share price means that those
who exercised options during the year, made a good paper profi t.
During the year 2.5 million options were exercised by members
of management. They paid R3.6 million for shares of which the
market price was R53.7 million in total. We have 5.8 million options
outstanding with a difference between option price and market
price at year end of R144 million. Capitec Bank share options
represent a signifi cant cost to the company and we account for
this cost according to international fi nancial reporting standards.
We believe in options as an instrument to reward management for
the wealth they help to create for shareholders.
In February we paid a bonus equal to 50% of a month’s salary to
all our employees to thank them for their contribution to a good
year for the company. The board also paid a special bonus of R7
million to Riaan Stassen to thank him for his leadership during the
fi rst fi ve years of the bank.
Another good year ahead?The National Credit Act was passed by parliament during the
year. The Act regulates the consumer lending industry, requires
registration of lenders and proposes sensible ways of protecting
borrowers, such as transparency of terms. It also empowers the
minister of trade and industry to issue regulations limiting lending
rates. We support the principles of the Act, but are opposed to
price caps in a competitive market. We have been a leader in
reducing the high rates charged to borrowers. The solution to high
rates is a reduction in the high cost of making small loans, which
we achieve through technology and increased throughput. We
are in discussion with the department to try and ensure that the
new regulations are realistic and not utopian. We expect the new
Act and regulations not to be implemented immediately. They will
therefore probably have a modest impact on the new fi nancial
year, but will obviously be crucial for the future of the bank.
In the new fi nancial year we will be launching a campaign to
double the number of clients who deposit their salaries with us. A
mobile sales force has been set up to visit employers and enroll
clients at their place of employment. We are also planning to add
about 50 new outlets. As always, we remain careful in planning
and aggressive in execution.
We believe that we are creating a business model with international
potential. After fi ve years our foundations in South Africa are well
established and we have started looking at the potential in other
countries.
Our bank is going through a continuous revolution and, as with all
revolutions, real risks remain.
Jannie Mouton
Chairman
We appointed 746 new employees, resulting in a
net increase of 193 people. Our total complement is
1 901. We invest heavily in our people. All new branch
employees attend an intensive (and expensive) two
week training course in Stellenbosch immediately
after joining Capitec Bank.
111514
Le
tter to
Sh
are
ho
lde
rs
Le
tter to
Sh
are
ho
lde
rs
manage its money conservatively and must always be in a
position to pay its depositors in a crisis. The crisis may well be
caused by something completely outside the control of the small
bank – such as a default by Russia – and will probably come without
warning. (Amidst the euphoria about South Africa’s economic
performance, it is easy to forget how dependent we as a country
have become on short-term fl ows of foreign currency.)
South Africa has a highly sophisticated equity market that can
value any share, no matter how high its risk. The debt market
is completely different: risky borrowers struggle to get access
to fi nance and the market seems to be unable to price for risk,
preferring to serve only low risk clients. During our fi rst few
years, we felt that the debt market was practically closed to us.
During the past year this has changed signifi cantly. It is not that
the market has become more fl exible. It is that we have gained
suffi cient credibility to reduce the perceived risk of lending to
us. In January 2006 Capitec Bank obtained an investment grade
rating from Moody’s Investors Service, an international rating
agency (Baa1.za long-term and Prime-2.za short-term). As a fi rst
rating this is quite satisfactory as we are still a small organisation.
Our wholesale deposits have increased from R200 million to
R276 million. This includes a R60 million loan from Sanlam. All
the wholesale deposits are medium to long-term deposits. Our
retail deposits increased from R74 million to R314 million. At year
end we had R582 million cash on hand. We have more cash than
retail deposits, in other words we are in a position to repay all our
savings clients immediately. We have monitored the withdrawal
behaviour of our retail clients in order to establish which deposits
can be considered a core holding that will not be withdrawn, even
in the event of a crisis. Carrying lots of cash is expensive because
of low interest rates and the increased exposure to robberies. (In
the past year we lost R9 million in 26 thefts and robberies.)
As our banking business increases, our use of cash increases.
In December 2005, we paid out R470 million through our ATM
network. Although small beer in the banking industry, this is a
massive amount for us.
Black economic empowermentIn September 2004 we issued 1.4 million new shares at market price
to Arch Equity Limited, a listed black company. In December 2005
Arch Equity Limited announced their decision to restructure the
company in order to comply with the new codes of good practice
for broad based black economic empowerment. This entailed the
creation of a new company, Arch Equity Investment Holdings (Pty)
Limited. The original Arch Equity Limited would hold 49.9% of the
shares of the new company and black shareholders would hold
the balance of 50.1% of the shares. Desmond Lockey, the driving
force behind Arch Equity Limited, would be a main shareholder
and the chief executive offi cer of the new Arch Equity Investment
Holdings Pty Limited. It was agreed with Capitec Bank that
the new company would hold at least 2.9 million Capitec Bank
Holdings shares, giving us a direct BEE shareholding of 4%.
Since then, Arch Equity Limited and PSG Group have announced
an agreement in principle to merge. This means that PSG Group
will become the largest shareholder in Capitec Bank Holdings,
with a direct holding of more than 17% of our shares and an
indirect holding of 2% through its stake in Arch Equity Investment
Holdings Pty Limited.
High quality peopleWe appointed 746 new employees, resulting in a net increase of
193 people. We now employ 1 901 people. We invest heavily in
our people. All new branch employees attend an intensive (and
expensive) two week training course at Stellenbosch immediately
after joining Capitec Bank. We spent R18 million on training
during the past year, an unheard of 10% of our salary bill.
The bank subsidises the purchase price of Capitec Bank shares
bought by employees through our empowerment share purchase
scheme by 10%. At the moment 318 people participate in the
scheme. Everybody is encouraged to participate and some invest
in as little as one share per month. It is our dream that all our
employees will eventually own Capitec Bank shares.
The bank has a strong and loyal management team under the
leadership of Riaan Stassen. Those employees who are in a position
to infl uence the growth of the bank as a whole, participate in a
share option scheme. The rise in our share price means that those
who exercised options during the year, made a good paper profi t.
During the year 2.5 million options were exercised by members
of management. They paid R3.6 million for shares of which the
market price was R53.7 million in total. We have 5.8 million options
outstanding with a difference between option price and market
price at year end of R144 million. Capitec Bank share options
represent a signifi cant cost to the company and we account for
this cost according to international fi nancial reporting standards.
We believe in options as an instrument to reward management for
the wealth they help to create for shareholders.
In February we paid a bonus equal to 50% of a month’s salary to
all our employees to thank them for their contribution to a good
year for the company. The board also paid a special bonus of R7
million to Riaan Stassen to thank him for his leadership during the
fi rst fi ve years of the bank.
Another good year ahead?The National Credit Act was passed by parliament during the
year. The Act regulates the consumer lending industry, requires
registration of lenders and proposes sensible ways of protecting
borrowers, such as transparency of terms. It also empowers the
minister of trade and industry to issue regulations limiting lending
rates. We support the principles of the Act, but are opposed to
price caps in a competitive market. We have been a leader in
reducing the high rates charged to borrowers. The solution to high
rates is a reduction in the high cost of making small loans, which
we achieve through technology and increased throughput. We
are in discussion with the department to try and ensure that the
new regulations are realistic and not utopian. We expect the new
Act and regulations not to be implemented immediately. They will
therefore probably have a modest impact on the new fi nancial
year, but will obviously be crucial for the future of the bank.
In the new fi nancial year we will be launching a campaign to
double the number of clients who deposit their salaries with us. A
mobile sales force has been set up to visit employers and enroll
clients at their place of employment. We are also planning to add
about 50 new outlets. As always, we remain careful in planning
and aggressive in execution.
We believe that we are creating a business model with international
potential. After fi ve years our foundations in South Africa are well
established and we have started looking at the potential in other
countries.
Our bank is going through a continuous revolution and, as with all
revolutions, real risks remain.
Jannie Mouton
Chairman
We appointed 746 new employees, resulting in a
net increase of 193 people. Our total complement is
1 901. We invest heavily in our people. All new branch
employees attend an intensive (and expensive) two
week training course in Stellenbosch immediately
after joining Capitec Bank.
111514
Non-executiveJohannes Fredericus Mouton (59) BComm (Hons), CA(SA), AEP
Jannie is chairman of Capitec Bank Holdings and Capitec Bank
as well as chairman of PSG Group Limited. He is non-executive
director of Remgro Limited and Steinhoff International Holdings
Limited. He also serves as a trustee of trusts and investment funds
of Stellenbosch University. Prior to the establishment of PSG
Group, Jannie co-founded and served as managing director of
the stockbroking fi rm SMK.
Michiel Scholtz du Pré le Roux (56) BComm LLB
Michiel has 30 years’ experience in commerce and banking. He was
managing director of Distillers Corporation (SA) Limited (Distillers)
from 1979 to 1993, and from 1995 to 1998 managing director of
Boland Bank Limited, NBS Boland Limited and BoE Bank Limited.
Michiel was one of the founding members of the Capitec Bank
group and resigned from his position as chief executive offi cer
effective 31 March 2004.
Desmond Lockey (44) BA (Hons) Business Management
and Administration
Desmond is the executive chairman of Arch Equity Investment
Holdings (Pty) Limited and Arch Equity Limited black empowerment
investment companies and a director of PSG Group Limited. The
last two are listed companies. He is also a director of various other
companies. He was a representative at the multiparty negotiating
forum that negotiated the transition to democracy in South Africa
and served as a member of Parliament from 1984 to 2004.
Chris Adriaan Otto (56) BComm LLB
Chris has been an executive director of PSG Group Limited since
its formation and currently serves as chief executive offi cer of PSG
Capital Limited, the private equity and corporate fi nance division of
PSG Group. He has been directly involved in the establishment of
PSG’s investment in micro-fi nance and subsequent establishment
of Capitec Bank of which he has been a non-executive director
since establishment.
Independent non-executiveMerlyn Claude Mehl (Prof) (63) PhD (Physics)
Merlyn serves on the boards of various companies. He was
previously chancellor of Peninsula Technikon and chief executive
of the Independent Development Trust. He is presently executive
chairman of Triple L Academy (Pty) Limited.
Nonhlanhla Sylvia Mjoli-Mncube (47) MA City and Regional
Planning
Nonhlanhla is economic adviser to the deputy president of the
Republic of South Africa, chairperson of Nurcha, the National
Urban Reconstruction and Housing Agency in South Africa, and
director of Mjoli Development group. She was Nurcha’s executive
director from 1994 until 2003. She sits on several boards in the
housing fi nance sector.
Jan Georg Solms (51) BAcc, CTA, CA(SA)
Johnnie has been a member of the JSE since 1981 and is
stockbroker and executive director of stockbrokers Independent
Securities Holdings (Proprietary) Limited.
Jacobus van Zyl Smit (Dr) (64) BComm LLB, CTA, CA(SA),
DComm
Jacobus is a director of PSG Group Limited and BAT Holdings SA
(Proprietary) Limited. He was previously a partner of Coopers &
Lybrand Chartered Accountants. He is chairman of the Capitec
Bank Holdings audit and risk committees.
ExecutiveRiaan Stassen (52) BComm (Hons), CA(SA)
Chief executive offi cer
Riaan was managing director of Boland PKS, a division of BoE
Bank Limited from 1997 to 2000. Previous positions include head
of operations of Boland PKS (1995 – 1997), operations director of
Distillers (1992 – 1995) and group fi nancial manager of Distillers
(1989 – 1992). He joined Capitec Bank as Managing Director in 2000
and was appointed chief executive offi cer effective 31 March 2004.
André Pierre du Plessis (44) BComm (Hons), CA(SA)
Financial director
André has over 20 years’ business advisory, fi nancial consulting
and strategic and fi nancial management experience. He was a
partner at Arthur Andersen where he worked from 1986 to 1996,
and was the chief executive – fi nancial management of Boland
PKS from 1996 to 2000.
DIRECTORATEAND EXECUTIVE
Dire
cto
rate
an
d E
xe
cu
tive
THE BOARDS OFCAPITEC BANK HOLDINGS AND CAPITEC BANK
Personal ServiceOur banking system provides a paperless and cashless environment
resulting in an open, friendly atmosphere where clients are seated at a
consulting desk with no glass or metal barriers.
1716
Non-executiveJohannes Fredericus Mouton (59) BComm (Hons), CA(SA), AEP
Jannie is chairman of Capitec Bank Holdings and Capitec Bank
as well as chairman of PSG Group Limited. He is non-executive
director of Remgro Limited and Steinhoff International Holdings
Limited. He also serves as a trustee of trusts and investment funds
of Stellenbosch University. Prior to the establishment of PSG
Group, Jannie co-founded and served as managing director of
the stockbroking fi rm SMK.
Michiel Scholtz du Pré le Roux (56) BComm LLB
Michiel has 30 years’ experience in commerce and banking. He was
managing director of Distillers Corporation (SA) Limited (Distillers)
from 1979 to 1993, and from 1995 to 1998 managing director of
Boland Bank Limited, NBS Boland Limited and BoE Bank Limited.
Michiel was one of the founding members of the Capitec Bank
group and resigned from his position as chief executive offi cer
effective 31 March 2004.
Desmond Lockey (44) BA (Hons) Business Management
and Administration
Desmond is the executive chairman of Arch Equity Investment
Holdings (Pty) Limited and Arch Equity Limited black empowerment
investment companies and a director of PSG Group Limited. The
last two are listed companies. He is also a director of various other
companies. He was a representative at the multiparty negotiating
forum that negotiated the transition to democracy in South Africa
and served as a member of Parliament from 1984 to 2004.
Chris Adriaan Otto (56) BComm LLB
Chris has been an executive director of PSG Group Limited since
its formation and currently serves as chief executive offi cer of PSG
Capital Limited, the private equity and corporate fi nance division of
PSG Group. He has been directly involved in the establishment of
PSG’s investment in micro-fi nance and subsequent establishment
of Capitec Bank of which he has been a non-executive director
since establishment.
Independent non-executiveMerlyn Claude Mehl (Prof) (63) PhD (Physics)
Merlyn serves on the boards of various companies. He was
previously chancellor of Peninsula Technikon and chief executive
of the Independent Development Trust. He is presently executive
chairman of Triple L Academy (Pty) Limited.
Nonhlanhla Sylvia Mjoli-Mncube (47) MA City and Regional
Planning
Nonhlanhla is economic adviser to the deputy president of the
Republic of South Africa, chairperson of Nurcha, the National
Urban Reconstruction and Housing Agency in South Africa, and
director of Mjoli Development group. She was Nurcha’s executive
director from 1994 until 2003. She sits on several boards in the
housing fi nance sector.
Jan Georg Solms (51) BAcc, CTA, CA(SA)
Johnnie has been a member of the JSE since 1981 and is
stockbroker and executive director of stockbrokers Independent
Securities Holdings (Proprietary) Limited.
Jacobus van Zyl Smit (Dr) (64) BComm LLB, CTA, CA(SA),
DComm
Jacobus is a director of PSG Group Limited and BAT Holdings SA
(Proprietary) Limited. He was previously a partner of Coopers &
Lybrand Chartered Accountants. He is chairman of the Capitec
Bank Holdings audit and risk committees.
ExecutiveRiaan Stassen (52) BComm (Hons), CA(SA)
Chief executive offi cer
Riaan was managing director of Boland PKS, a division of BoE
Bank Limited from 1997 to 2000. Previous positions include head
of operations of Boland PKS (1995 – 1997), operations director of
Distillers (1992 – 1995) and group fi nancial manager of Distillers
(1989 – 1992). He joined Capitec Bank as Managing Director in 2000
and was appointed chief executive offi cer effective 31 March 2004.
André Pierre du Plessis (44) BComm (Hons), CA(SA)
Financial director
André has over 20 years’ business advisory, fi nancial consulting
and strategic and fi nancial management experience. He was a
partner at Arthur Andersen where he worked from 1986 to 1996,
and was the chief executive – fi nancial management of Boland
PKS from 1996 to 2000.
DIRECTORATEAND EXECUTIVE
Dire
cto
rate
an
d E
xe
cu
tive
THE BOARDS OFCAPITEC BANK HOLDINGS AND CAPITEC BANK
Personal ServiceOur banking system provides a paperless and cashless environment
resulting in an open, friendly atmosphere where clients are seated at a
consulting desk with no glass or metal barriers.
1716
InnovationAn innovative, paperless, advanced banking
system uses biometric access control to
minimise administrative requirements and costs. Capitec Bank
is able to offer banking facilities that are very secure, easy to
operate, fast and at less than half the cost of other banks.
Christiaan Oosthuizen (51)
Chief executive – Information technology
Chris held the position of chief executive – information technology
at Boland PKS, where he was employed from 1976 to 2000.
Christian George van Schalkwyk (50) BComm LLB, CA(SA)
Chief executive – Risk management and company secretary
Christian was chief executive – credit risk and legal services at
Boland PKS from 1997 to 2000. Previous positions include being
a partner at attorneys Jan S de Villiers (1987 – 1996) and tax
consultant at Arthur Andersen (1985).
Leonardus Venter (44) BA (Hons), MA (Industrial Psychology)
Chief executive – Human resources
Leon was a human resources manager at Iridium Africa from 1998
to 1999. Previous positions include manager – human resources
and support at Telkom SA (1993 – 1997) and area personnel
manager at Iscor Limited (1986 – 1992).
Ma
na
ge
me
nt C
om
mitte
e
CAPITEC BANK HOLDINGS AND CAPITEC BANK
MANAGEMENT COMMITTEE
Riaan Stassen (52) BComm (Hons), CA(SA)
Chief executive offi cer
André Pierre du Plessis (44) BComm (Hons), CA(SA)
Financial director
Carl Gustav Fischer (49) BComm (Hons), MBA
Chief executive – Marketing and corporate affairs
Carl was chief executive of marketing and support services of
Boland PKS from 1999 to 2000. Previous positions include group
marketing and sales director (1996 – 1998) and group production/
operations director of Stellenbosch Farmers’ Winery Limited
(1993 – 1996).
Gerhardus Metselaar Fourie (42) BComm (Hons), MBA
Chief executive – Operations
Gerrie was area general manager of Stellenbosch Farmers’ Winery
(1997 – 2000), focusing on distribution and sales.
André Olivier (38) BComm (Hons), CA(SA)
Chief executive – Business development
André was a fi nancial risk manager at Boland PKS from 1997 to
2000, after which he was head of operations of PEP Bank, the
micro-lending division of BoE Bank Limited. He gained extensive
audit and business advisory experience with Arthur Andersen
(1990 – 1997).
MANAGEMENT COMMITTEE
1918
InnovationAn innovative, paperless, advanced banking
system uses biometric access control to
minimise administrative requirements and costs. Capitec Bank
is able to offer banking facilities that are very secure, easy to
operate, fast and at less than half the cost of other banks.
Christiaan Oosthuizen (51)
Chief executive – Information technology
Chris held the position of chief executive – information technology
at Boland PKS, where he was employed from 1976 to 2000.
Christian George van Schalkwyk (50) BComm LLB, CA(SA)
Chief executive – Risk management and company secretary
Christian was chief executive – credit risk and legal services at
Boland PKS from 1997 to 2000. Previous positions include being
a partner at attorneys Jan S de Villiers (1987 – 1996) and tax
consultant at Arthur Andersen (1985).
Leonardus Venter (44) BA (Hons), MA (Industrial Psychology)
Chief executive – Human resources
Leon was a human resources manager at Iridium Africa from 1998
to 1999. Previous positions include manager – human resources
and support at Telkom SA (1993 – 1997) and area personnel
manager at Iscor Limited (1986 – 1992).
Ma
na
ge
me
nt C
om
mitte
e
CAPITEC BANK HOLDINGS AND CAPITEC BANK
MANAGEMENT COMMITTEE
Riaan Stassen (52) BComm (Hons), CA(SA)
Chief executive offi cer
André Pierre du Plessis (44) BComm (Hons), CA(SA)
Financial director
Carl Gustav Fischer (49) BComm (Hons), MBA
Chief executive – Marketing and corporate affairs
Carl was chief executive of marketing and support services of
Boland PKS from 1999 to 2000. Previous positions include group
marketing and sales director (1996 – 1998) and group production/
operations director of Stellenbosch Farmers’ Winery Limited
(1993 – 1996).
Gerhardus Metselaar Fourie (42) BComm (Hons), MBA
Chief executive – Operations
Gerrie was area general manager of Stellenbosch Farmers’ Winery
(1997 – 2000), focusing on distribution and sales.
André Olivier (38) BComm (Hons), CA(SA)
Chief executive – Business development
André was a fi nancial risk manager at Boland PKS from 1997 to
2000, after which he was head of operations of PEP Bank, the
micro-lending division of BoE Bank Limited. He gained extensive
audit and business advisory experience with Arthur Andersen
(1990 – 1997).
MANAGEMENT COMMITTEE
1918
CORPORATE GOVERNANCEAND RISK MANAGEMENT REVIEW
AffordabilityWe offer free debit card purchases, bank
statements at no charge and the lowest monthly transaction fees available.
In January 2006, the Internal Audit department of Capitec Bank, in conjunction with Deloitte, executed a
review of the governance practices, structures and processes in place at Capitec Bank. This was then benchmarked
against the guidelines of the King II report as far as these guidelines are appropriate to Capitec Bank and not
overridden by specifi c regulatory requirements. The following graph serves to illustrate the fi ndings of the
review with regard to Capitec Bank’s compliance level against Deloitte’s benchmark of other Southern African
companies for which they have completed similar reviews.
Board functioning and effectiveness Capitec Bank has a functioning and effective board which meets six
times per annum. A record of attendance by each board member
is published in Annexure A. The Capitec Bank board operates
in terms of an approved charter which, apart from detailing the
powers, duties and responsibilities of the board, also specifi es the
reserved powers of the board. To allow non-executive directors
the opportunity to familiarise themselves with the Capitec Bank
business outside of board meetings, they are invited to executive
meetings and an annual board conference is held at which senior
managers present the various aspects of the business to directors.
This approach facilitates access by board members to company
information, records, documents and property.
The board has established various board committees to monitor
the implementation of their plans and strategies. The detail
thereof is set out in Annexure B.
Board structure and continuity The board comprises a majority of non-executive directors,
consisting of a proper balance of two executive, four non-
executive and four independent non-executive directors. A
directors’ affairs committee comprising all the non-executive and
independent non-executive directors and chaired by the chairman
of the board has been established. In terms of its board approved
charter it is, inter alia, responsible for recruitment and selection of
new directors. New appointees are recommended to the board
for approval, subject to the approval of the Registrar of Banks.
GOVERNANCE STRUCTURE AND PROCESSES ASSESSMENT: CAPITEC BANK AVERAGE VS BENCHMARK
Benchmark Capitec Bank
KEY
1.0 – Do not comply2.0 – Compliance with the “letter” of good governance3.0 – Compliance with the “spirit” of good governance4.0 – Beyond compliance with “spirit” of governance (Monitored process)
Boa
rd f
unct
ioni
ng &
eff
ecti
vene
ss
Boa
rd s
truc
ture
& c
onti
nuit
y
Cha
ir/C
EO
pow
er b
alan
ce
Dire
ctor
s’ s
elec
tion
& o
rien
tati
on
Dire
ctor
’s r
emun
erat
ion
Boa
rd m
eeti
ng r
evie
w p
roce
sses
Boa
rd c
omm
itte
es
Boa
rd/d
irect
or e
valu
atio
n
Dea
ling
in s
ecur
itie
s
Com
pan
y se
cret
ary’
s ro
le
Aud
itin
g &
acc
ount
ing
Rep
orti
ng
Aud
it c
omm
itte
e
Inte
rnal
aud
it
Ris
k m
anag
emen
t fr
amew
ork
Ris
k m
anag
emen
t co
ntro
l & r
epor
ting
Sust
aina
bili
ty is
sues
Rel
atio
ns w
ith
shar
ehol
der
s
Com
mun
icat
ion
Cod
e of
eth
ics
2120
CORPORATE GOVERNANCEAND RISK MANAGEMENT REVIEW
AffordabilityWe offer free debit card purchases, bank
statements at no charge and the lowest monthly transaction fees available.
In January 2006, the Internal Audit department of Capitec Bank, in conjunction with Deloitte, executed a
review of the governance practices, structures and processes in place at Capitec Bank. This was then benchmarked
against the guidelines of the King II report as far as these guidelines are appropriate to Capitec Bank and not
overridden by specifi c regulatory requirements. The following graph serves to illustrate the fi ndings of the
review with regard to Capitec Bank’s compliance level against Deloitte’s benchmark of other Southern African
companies for which they have completed similar reviews.
Board functioning and effectiveness Capitec Bank has a functioning and effective board which meets six
times per annum. A record of attendance by each board member
is published in Annexure A. The Capitec Bank board operates
in terms of an approved charter which, apart from detailing the
powers, duties and responsibilities of the board, also specifi es the
reserved powers of the board. To allow non-executive directors
the opportunity to familiarise themselves with the Capitec Bank
business outside of board meetings, they are invited to executive
meetings and an annual board conference is held at which senior
managers present the various aspects of the business to directors.
This approach facilitates access by board members to company
information, records, documents and property.
The board has established various board committees to monitor
the implementation of their plans and strategies. The detail
thereof is set out in Annexure B.
Board structure and continuity The board comprises a majority of non-executive directors,
consisting of a proper balance of two executive, four non-
executive and four independent non-executive directors. A
directors’ affairs committee comprising all the non-executive and
independent non-executive directors and chaired by the chairman
of the board has been established. In terms of its board approved
charter it is, inter alia, responsible for recruitment and selection of
new directors. New appointees are recommended to the board
for approval, subject to the approval of the Registrar of Banks.
GOVERNANCE STRUCTURE AND PROCESSES ASSESSMENT: CAPITEC BANK AVERAGE VS BENCHMARK
Benchmark Capitec Bank
KEY
1.0 – Do not comply2.0 – Compliance with the “letter” of good governance3.0 – Compliance with the “spirit” of good governance4.0 – Beyond compliance with “spirit” of governance (Monitored process)
Boa
rd f
unct
ioni
ng &
eff
ecti
vene
ss
Boa
rd s
truc
ture
& c
onti
nuit
y
Cha
ir/C
EO
pow
er b
alan
ce
Dire
ctor
s’ s
elec
tion
& o
rien
tati
on
Dire
ctor
’s r
emun
erat
ion
Boa
rd m
eeti
ng r
evie
w p
roce
sses
Boa
rd c
omm
itte
es
Boa
rd/d
irect
or e
valu
atio
n
Dea
ling
in s
ecur
itie
s
Com
pan
y se
cret
ary’
s ro
le
Aud
itin
g &
acc
ount
ing
Rep
orti
ng
Aud
it c
omm
itte
e
Inte
rnal
aud
it
Ris
k m
anag
emen
t fr
amew
ork
Ris
k m
anag
emen
t co
ntro
l & r
epor
ting
Sust
aina
bili
ty is
sues
Rel
atio
ns w
ith
shar
ehol
der
s
Com
mun
icat
ion
Cod
e of
eth
ics
2120
To facilitate continuity of the board, one third of the board retires
at each annual general meeting and have to date been re-elected
by shareholders.
Chair/CEO power balance The roles and responsibilities of the chairman and chief executive
offi cer are separated. Capitec Bank has a non-executive
chairman, Jannie Mouton, with proven business acumen and
of good standing in the South African business community. His
responsibiities include:
participating actively in the selection of board members; and
ensuring that all directors are given opportunity to add value
to the formulation of the strategy of the company.
The chief executive offi cer’s responsibilities include:
developing and implementing a company strategy;
taking initiative in managing relationships with shareholders
and the investment public in general; and
acting as the chief spokesperson on behalf of the company.
The performance of the chief executive offi cer and the board as a
whole, including its committees, is appraised at least annually.
Directors’ selection and orientation A formal orientation programme consisting of extensive discussions
on the company’s business environment and operations is held with
new directors. In addition, directors are provided with company
records such as copies of board minutes, applicable legislation
and board committee charters. Directors are invited to attend
presentations by independent specialists on matters relevant to
the board in the Capitec Bank environment and when considered
necessary, such presentations are arranged in-house.
Director remunerationA remuneration committee comprising two non-executive directors
and an independent non-executive director considers matters
relating to director and executive remuneration. This committee
executes its responsibilities in accordance with the terms and
references incorporated in the board approved remuneration
committee charter. Remuneration of directors is disclosed in the
directors report.
Board meeting review processTo assist the board in reviewing processes and procedures to
determine the effectiveness of internal systems of control in the
company, the board has established committees with specifi c
mandates to cover all aspects of the Capitec Bank business. These
committees report their fi ndings to the board thereby ensuring
that the decision making capability of the board and the accuracy
of its reporting and fi nancial results are maintained at high levels.
Information assessed by the board comprises fi nancial as well as
non-fi nancial information and enables the board to assess the
adequacy and effi ciency of corporate governance and internal
controls in operation from time to time.
Board committees The board has established various sub-committees such as the
management, directors’ affairs, audit, remuneration, and risk
committees, each with an approved charter containing terms of
reference for these committees. Further particulars on each of the
committees are set out in Annexure B.
Board/director evaluation The directors’ affairs committee meets at least twice a year to
assess, amongst other things, the skills needs of the board and
feels satisfi ed that the board composition currently represents an
adequate mix of skills and diverse backgrounds.
Dealing in securities The board has approved a policy in accordance with the JSE
Listings Requirements in terms of which directors, senior
management and employees with access to management reports
are required to obtain clearance to deal in the shares of the
company prior to transacting. This policy also bars any trading
in the shares of the company during
a prohibited period; standard closed
periods are year end up to publication
of year end results and at half-year up
to publication of interim results. Great
emphasis is placed on proper and correct
declaration of interests by directors in
compliance with relevant legislation,
including their shareholding in the
company.
One of the business strategies at Capitec Bank is to
create a cashless environment in branches. Secure
drop safe deposits ensure that cashiers are left with
a minimal daily fl oat for small transactions. Drop
safes are emptied by an independent security fi rm
and cash is counted and banked off premises.
The register of directors’ interests is circulated at every board
meeting and signed by all members present.
Company secretary’s role The company secretary plays a pivotal role in ensuring sound
corporate governance of the company, supports the chairman
in ensuring the effective functioning of the board and provides
the board and directors individually with guidance on the proper
discharging of their responsibilities. As such the company
secretary:
strives to inform the board of relevant legislation;
makes information on the company available to board
members;
ensures compliance with statutory and regulatory matters; and
acts as primary point of contact with shareholders.
Auditing and accountingWe are privileged to have a prestigious international fi rm as our
external auditors. Both the external auditors and internal audit
department of Capitec Bank observe the highest levels of business
and professional ethics and independence. The company and
management encourage regular coordination and consultation
between external and internal auditors to ensure an effi cient
audit process.
Reporting Annual fi nancial and interim results are submitted to the audit
committee for consideration and recommendation to the board
for fi nal approval. The audit committee’s mandate includes the
authority to determine whether or not the interim report should
be subject to an independent review by the auditors.
The facts and assumptions used by the board to assess the going
concern status of Capitec Bank at each year end are recorded and
submitted annually, in terms of the Banks Act (Act 94 of 1990), to
the Registrar of Banks.
Audit committee The audit committee comprises two non-executive and two
independent non-executive directors as well as the chief executive
offi cer of the company. The chairman of the committee is an
independent non-executive director. The chairman of the board
is not a member of the audit committee. The audit committee
derives its authority and responsibilities from a board approved
charter with which it has complied during the year under review.
Audit fees are set annually in advance by the audit committee in a
manner which should not impact on the scope of the audit. Non-
audit services rendered by our external auditors are limited to ad
hoc tax advice and other assurance-related services within the
parameters of a policy approved by the audit committee limiting
such expense to 40% of the annual audit fee. This consideration is
disclosed in the annual fi nancial statements.
Internal auditThe company has an independent internal audit department with
direct access to both the chairman and the chief executive offi cer.
Apart from its own staff it functions on a co-sourced basis with
Deloitte as external consultants and in accordance with a charter
approved by the audit committee. The charter formally defi nes the
purpose, authority and responsibility of the internal audit activity
and is consistent with the Institute of Internal Auditors’ defi nition.
The head of internal audit attends all audit and risk committee
meetings and submits a report to each audit committee meeting.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
vie
w
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
vie
w
2322
To facilitate continuity of the board, one third of the board retires
at each annual general meeting and have to date been re-elected
by shareholders.
Chair/CEO power balance The roles and responsibilities of the chairman and chief executive
offi cer are separated. Capitec Bank has a non-executive
chairman, Jannie Mouton, with proven business acumen and
of good standing in the South African business community. His
responsibiities include:
participating actively in the selection of board members; and
ensuring that all directors are given opportunity to add value
to the formulation of the strategy of the company.
The chief executive offi cer’s responsibilities include:
developing and implementing a company strategy;
taking initiative in managing relationships with shareholders
and the investment public in general; and
acting as the chief spokesperson on behalf of the company.
The performance of the chief executive offi cer and the board as a
whole, including its committees, is appraised at least annually.
Directors’ selection and orientation A formal orientation programme consisting of extensive discussions
on the company’s business environment and operations is held with
new directors. In addition, directors are provided with company
records such as copies of board minutes, applicable legislation
and board committee charters. Directors are invited to attend
presentations by independent specialists on matters relevant to
the board in the Capitec Bank environment and when considered
necessary, such presentations are arranged in-house.
Director remunerationA remuneration committee comprising two non-executive directors
and an independent non-executive director considers matters
relating to director and executive remuneration. This committee
executes its responsibilities in accordance with the terms and
references incorporated in the board approved remuneration
committee charter. Remuneration of directors is disclosed in the
directors report.
Board meeting review processTo assist the board in reviewing processes and procedures to
determine the effectiveness of internal systems of control in the
company, the board has established committees with specifi c
mandates to cover all aspects of the Capitec Bank business. These
committees report their fi ndings to the board thereby ensuring
that the decision making capability of the board and the accuracy
of its reporting and fi nancial results are maintained at high levels.
Information assessed by the board comprises fi nancial as well as
non-fi nancial information and enables the board to assess the
adequacy and effi ciency of corporate governance and internal
controls in operation from time to time.
Board committees The board has established various sub-committees such as the
management, directors’ affairs, audit, remuneration, and risk
committees, each with an approved charter containing terms of
reference for these committees. Further particulars on each of the
committees are set out in Annexure B.
Board/director evaluation The directors’ affairs committee meets at least twice a year to
assess, amongst other things, the skills needs of the board and
feels satisfi ed that the board composition currently represents an
adequate mix of skills and diverse backgrounds.
Dealing in securities The board has approved a policy in accordance with the JSE
Listings Requirements in terms of which directors, senior
management and employees with access to management reports
are required to obtain clearance to deal in the shares of the
company prior to transacting. This policy also bars any trading
in the shares of the company during
a prohibited period; standard closed
periods are year end up to publication
of year end results and at half-year up
to publication of interim results. Great
emphasis is placed on proper and correct
declaration of interests by directors in
compliance with relevant legislation,
including their shareholding in the
company.
One of the business strategies at Capitec Bank is to
create a cashless environment in branches. Secure
drop safe deposits ensure that cashiers are left with
a minimal daily fl oat for small transactions. Drop
safes are emptied by an independent security fi rm
and cash is counted and banked off premises.
The register of directors’ interests is circulated at every board
meeting and signed by all members present.
Company secretary’s role The company secretary plays a pivotal role in ensuring sound
corporate governance of the company, supports the chairman
in ensuring the effective functioning of the board and provides
the board and directors individually with guidance on the proper
discharging of their responsibilities. As such the company
secretary:
strives to inform the board of relevant legislation;
makes information on the company available to board
members;
ensures compliance with statutory and regulatory matters; and
acts as primary point of contact with shareholders.
Auditing and accountingWe are privileged to have a prestigious international fi rm as our
external auditors. Both the external auditors and internal audit
department of Capitec Bank observe the highest levels of business
and professional ethics and independence. The company and
management encourage regular coordination and consultation
between external and internal auditors to ensure an effi cient
audit process.
Reporting Annual fi nancial and interim results are submitted to the audit
committee for consideration and recommendation to the board
for fi nal approval. The audit committee’s mandate includes the
authority to determine whether or not the interim report should
be subject to an independent review by the auditors.
The facts and assumptions used by the board to assess the going
concern status of Capitec Bank at each year end are recorded and
submitted annually, in terms of the Banks Act (Act 94 of 1990), to
the Registrar of Banks.
Audit committee The audit committee comprises two non-executive and two
independent non-executive directors as well as the chief executive
offi cer of the company. The chairman of the committee is an
independent non-executive director. The chairman of the board
is not a member of the audit committee. The audit committee
derives its authority and responsibilities from a board approved
charter with which it has complied during the year under review.
Audit fees are set annually in advance by the audit committee in a
manner which should not impact on the scope of the audit. Non-
audit services rendered by our external auditors are limited to ad
hoc tax advice and other assurance-related services within the
parameters of a policy approved by the audit committee limiting
such expense to 40% of the annual audit fee. This consideration is
disclosed in the annual fi nancial statements.
Internal auditThe company has an independent internal audit department with
direct access to both the chairman and the chief executive offi cer.
Apart from its own staff it functions on a co-sourced basis with
Deloitte as external consultants and in accordance with a charter
approved by the audit committee. The charter formally defi nes the
purpose, authority and responsibility of the internal audit activity
and is consistent with the Institute of Internal Auditors’ defi nition.
The head of internal audit attends all audit and risk committee
meetings and submits a report to each audit committee meeting.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
vie
w
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
vie
w2322
Role and function of internal audit The internal audit function focuses on adding value to the
operations of Capitec Bank. To this end it emphasises:
compliance with company policies and procedures;
regulatory compliance;
prevention of theft and fraud; and
production of quality management information.
Scope of internal auditThe department annually submits a coverage plan to the audit
committee for approval. The scope of this plan encompasses the
entire business of Capitec Bank and is drafted with the strategic
aim of the bank in mind. In our developing environment great
emphasis is placed on implementation and effi ciency of systems.
In addition, the operational environment is closely monitored and
assurance is derived that controls are functioning adequately.
Increased emphasis is placed on development of centralised
monitoring. In this process, any defi ciency detected in governance
is escalated to management for action.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
ve
iw
Risk management framework and responsibilityCapitec Bank views risk management as a measure of ensuring
a responsible return on shareholders’ equity. Ultimately, the
board remains responsible for risk management. To assist them
in performing this duty, the company is managed through a
system of internal controls functioning throughout the entity so
that an awareness of risk pervades every aspect of our business
and is seen as the responsibility of each and every employee of
Capitec Bank.
The board has established a risk committee comprising one non-
executive and three independent non-executive directors, chaired
by an independent non-executive director. The committee has a
formal charter in accordance with which it assists the board in
reviewing the processes followed to identify risk and considering
such risks in the Capitec Bank group environment. The committee
also assists the board in ensuring that risk assessment is an
ongoing process and that a formal risk assessment is undertaken
at least quarterly. Sub-committees comprising executives and
senior management have been established to deal in a structured
manner with specifi c risks facing the company:
Credit committee – credit risk;
Assets and liability committee (ALCO) – interest rate, market,
liquidity, counterparty, currency and capital adequacy risk; and
Operational risk committee – legal, compliance, technology,
operational and reputational risk.
Risk management control and reportingThe greater risks facing Capitec Bank reside in information
technology, human skills levels, credit extension and, as explained
elsewhere in the annual report, the regulatory environment. The
emphasis thus tends to fall in these areas, however, to enhance
shareowners’ and other stakeholders’ interests, all risks are
mitigated to an acceptable level relative to the return produced
by the activity concerned. This remains a central theme of the
manner in which Capitec Bank conducts business.
The company operates in a structured manner with defi ned
processes and procedures enabling risk assessment within a
controlled environment. Accordingly, an assessment of key risks
is performed with weightings on impact and probability assigned.
Existing controls are assessed and if necessary, adjusted.
Thereafter reports are generated at regular intervals to enable
monitoring of risk levels.
Business continuity and disaster recovery plans have been
developed and set in place to ensure continuity of business in
the event of a disastrous incident which could impact the bank’s
activities. These plans are tested periodically to ensure their
continued effectiveness.
INTEGRATED SUSTAINABILITY REPORTING
Capitec Bank is exceedingly conscious of the necessity to ensure
that, to the extent that it can take responsibility therefore, the
environment in which it exists remains sustainable. This attitude
is refl ected in, and substantiated by, what is reported below
and should encompass ever-widening reaches as the company
grows and prospers in years to come, to the betterment of all
stakeholders.
Stakeholder relations Shareholders
Shareholders are respected as the providers of capital and as such
we strive to provide them with suffi cient information on which
investment decisions can be based. To this extent the company
makes a huge effort to ensure that shareholders attend shareholder
meetings and send personal invitations, over and above the notice
of the annual general meeting, to shareholders encouraging
them to attend these meetings. At the annual general meeting,
the company’s results are presented and opportunity is created
to ascertain the common objectives of the company and its
shareholders. We also endeavour to communicate with each new
shareholder to introduce individuals with whom shareholders may
make contact on company matters. In addition, we strive to maintain
regular, transparent and timely communication with our shareholders
through the media, our website and formal announcements. We
create wealth for shareholders; our market capitalisation doubled
from last year to over R2.2 billion at year end.
Investment Community
Regular communication is maintained with analysts, fund managers
and providers of funding.
Regulators
Relationships with regulators are maintained in a businesslike
manner – frank, open and with mutual respect. We acknowledge
the task and responsibility of regulators. As a result we have had
valued support from these bodies in building a business which
contributes to the improvement of society. From our dominant
position, holding between 30% and 40% of the market share in
the 30-day micro-credit industry, we play an important role in
regularising the micro-lending industry and improving service
levels available to the public.
Suppliers
We strive to manage these relationships in an atmosphere of
certainty and fairness. Service level agreements are general
practice. Capitec Bank has implemented a targeted procurement
strategy to enhance black economic empowerment (BEE), the aim
being in line with the Financial Sector Charter (FSC) to procure at
least 50% of supplies from BEE-accredited companies by 2008
and 70% by 2014. The FSC exempts certain suppliers from BEE
accreditation. Accordingly, only R168 million of Capitec Bank’s
expenditure procurement is subject to its BEE procurement policy.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
vie
w
RISK
THE CAPITEC BANK RISK FRAMEWORK
CREDITALCOOPERATIONAL RISK
EXECUTIVEMANAGEMENT
Van Zyl Smit(Chairman)
Mehl
Mjoli-Mncube
Otto
Mouton(Chairman)
Le Roux
Lockey
Mehl
Mjoli-Mncube
Otto
Solms
Van Zyl Smit
Otto(Chairman)
Le Roux
Solms
Van Zyl Smit(Chairman)
Le Roux
Otto
Solms
Stassen
DIRECTORS’AFFAIRS AUDIT REMUNERATION
MANAGEMENT
INTERNAL AUDITFUNCTION
COMPLIANCEFUNCTION
2524
Role and function of internal audit The internal audit function focuses on adding value to the
operations of Capitec Bank. To this end it emphasises:
compliance with company policies and procedures;
regulatory compliance;
prevention of theft and fraud; and
production of quality management information.
Scope of internal auditThe department annually submits a coverage plan to the audit
committee for approval. The scope of this plan encompasses the
entire business of Capitec Bank and is drafted with the strategic
aim of the bank in mind. In our developing environment great
emphasis is placed on implementation and effi ciency of systems.
In addition, the operational environment is closely monitored and
assurance is derived that controls are functioning adequately.
Increased emphasis is placed on development of centralised
monitoring. In this process, any defi ciency detected in governance
is escalated to management for action.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
ve
iw
Risk management framework and responsibilityCapitec Bank views risk management as a measure of ensuring
a responsible return on shareholders’ equity. Ultimately, the
board remains responsible for risk management. To assist them
in performing this duty, the company is managed through a
system of internal controls functioning throughout the entity so
that an awareness of risk pervades every aspect of our business
and is seen as the responsibility of each and every employee of
Capitec Bank.
The board has established a risk committee comprising one non-
executive and three independent non-executive directors, chaired
by an independent non-executive director. The committee has a
formal charter in accordance with which it assists the board in
reviewing the processes followed to identify risk and considering
such risks in the Capitec Bank group environment. The committee
also assists the board in ensuring that risk assessment is an
ongoing process and that a formal risk assessment is undertaken
at least quarterly. Sub-committees comprising executives and
senior management have been established to deal in a structured
manner with specifi c risks facing the company:
Credit committee – credit risk;
Assets and liability committee (ALCO) – interest rate, market,
liquidity, counterparty, currency and capital adequacy risk; and
Operational risk committee – legal, compliance, technology,
operational and reputational risk.
Risk management control and reportingThe greater risks facing Capitec Bank reside in information
technology, human skills levels, credit extension and, as explained
elsewhere in the annual report, the regulatory environment. The
emphasis thus tends to fall in these areas, however, to enhance
shareowners’ and other stakeholders’ interests, all risks are
mitigated to an acceptable level relative to the return produced
by the activity concerned. This remains a central theme of the
manner in which Capitec Bank conducts business.
The company operates in a structured manner with defi ned
processes and procedures enabling risk assessment within a
controlled environment. Accordingly, an assessment of key risks
is performed with weightings on impact and probability assigned.
Existing controls are assessed and if necessary, adjusted.
Thereafter reports are generated at regular intervals to enable
monitoring of risk levels.
Business continuity and disaster recovery plans have been
developed and set in place to ensure continuity of business in
the event of a disastrous incident which could impact the bank’s
activities. These plans are tested periodically to ensure their
continued effectiveness.
INTEGRATED SUSTAINABILITY REPORTING
Capitec Bank is exceedingly conscious of the necessity to ensure
that, to the extent that it can take responsibility therefore, the
environment in which it exists remains sustainable. This attitude
is refl ected in, and substantiated by, what is reported below
and should encompass ever-widening reaches as the company
grows and prospers in years to come, to the betterment of all
stakeholders.
Stakeholder relations Shareholders
Shareholders are respected as the providers of capital and as such
we strive to provide them with suffi cient information on which
investment decisions can be based. To this extent the company
makes a huge effort to ensure that shareholders attend shareholder
meetings and send personal invitations, over and above the notice
of the annual general meeting, to shareholders encouraging
them to attend these meetings. At the annual general meeting,
the company’s results are presented and opportunity is created
to ascertain the common objectives of the company and its
shareholders. We also endeavour to communicate with each new
shareholder to introduce individuals with whom shareholders may
make contact on company matters. In addition, we strive to maintain
regular, transparent and timely communication with our shareholders
through the media, our website and formal announcements. We
create wealth for shareholders; our market capitalisation doubled
from last year to over R2.2 billion at year end.
Investment Community
Regular communication is maintained with analysts, fund managers
and providers of funding.
Regulators
Relationships with regulators are maintained in a businesslike
manner – frank, open and with mutual respect. We acknowledge
the task and responsibility of regulators. As a result we have had
valued support from these bodies in building a business which
contributes to the improvement of society. From our dominant
position, holding between 30% and 40% of the market share in
the 30-day micro-credit industry, we play an important role in
regularising the micro-lending industry and improving service
levels available to the public.
Suppliers
We strive to manage these relationships in an atmosphere of
certainty and fairness. Service level agreements are general
practice. Capitec Bank has implemented a targeted procurement
strategy to enhance black economic empowerment (BEE), the aim
being in line with the Financial Sector Charter (FSC) to procure at
least 50% of supplies from BEE-accredited companies by 2008
and 70% by 2014. The FSC exempts certain suppliers from BEE
accreditation. Accordingly, only R168 million of Capitec Bank’s
expenditure procurement is subject to its BEE procurement policy.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
vie
w
RISK
THE CAPITEC BANK RISK FRAMEWORK
CREDITALCOOPERATIONAL RISK
EXECUTIVEMANAGEMENT
Van Zyl Smit(Chairman)
Mehl
Mjoli-Mncube
Otto
Mouton(Chairman)
Le Roux
Lockey
Mehl
Mjoli-Mncube
Otto
Solms
Van Zyl Smit
Otto(Chairman)
Le Roux
Solms
Van Zyl Smit(Chairman)
Le Roux
Otto
Solms
Stassen
DIRECTORS’AFFAIRS AUDIT REMUNERATION
MANAGEMENT
INTERNAL AUDITFUNCTION
COMPLIANCEFUNCTION
2524
STAFFTRAINING
Of this expenditure, 49.9% of supplies were procured from BEE-
accredited companies.
Community
Capitec Bank is in the process of formalising its Corporate Social
Investment (CSI) Strategy. The main theme of this CSI strategy is
Financial Education and the bank has, in conjunction with UNISA,
formulated a Financial Education Programme for presentation
to communities, schools, teachers and parents with the aim
of increasing the broader understanding of fi nancial terms and
products. This programme allows participants to improve their
fi nancial life in terms of learning basic skills such as budgeting,
understanding the use of debit orders and electronic banking
products such as internet banking and debit cards.
Capitec Bank has been piloting the fi rst of these courses in
conjunction with UNISA since the beginning of 2006. These
courses are presented free of charge and are National Qualifi cation
Forum accredited.
The allocation of donations over the past year has followed the
Financial Education theme which means that institutions involved
in job creation and community enlistment were favoured when
allocating the donations budget.
It is the Capitec Bank offer, however, which should be considered
for its value to the communities which the bank serves. By
extending credit in a manner which may contribute to the relief
of poverty, we strive to contribute in the long-term to relieving
pressure within these communities and creating sustainability. We
strive to achieve sustainability within communities by:
increasing access to banking facilities through positioning
of our branches and banking facilities in the areas where the
majority of our client base operates;
extending our banking hours to be more aligned with the
needs of our clients;
reduction of our interest rates to make credit economically
feasible for clients;
providing real savings opportunities;
continuous development of new products to increase our
product offer; and
transparent and lower fees.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
ve
iw
Underlying the aim to become the retail bank of choice and
measures set in place to achieve this, is the requirement to ensure
sustainable banking practices to the entire spectrum of our
client base.
Employees
The employment equity profi le of Capitec Bank is 84% previously
disadvantaged and 16% white. At present, almost all employees
recruited in operations are previously disadvantaged.
EMPLOYMENT EQUITY STATUS
Capitec Bank values its employees and strives continuously
to train staff to facilitate personal development and provide a
sophisticated staff interface to the Capitec Bank client specifi cally
and other stakeholders of the bank in general. To this extent, we
have run 17 training programmes during the year under review,
accommodating 3 099 employees (a number of employees
attended numerous training programmes) and indirectly, as a
result of inter alia this training, were able to promote 275
employees of which 84% are previously disadvantaged individuals.
Total training expenditure, including overheads in the period
under review, amounted to R18 million.
17 training programmes
3 099 employees
275 promotions
R18 million training expenditure
Capitec Bank endeavours to inspire employees to further their
education and, with this in mind, makes bursaries available in
support of further education of employees. As such, 31 bursaries
were approved for staff for tertiary education in 2006 of which at
least 90% were awarded to previously disadvantaged employees.
Currently Capitec Bank is supporting a total of 49 employees at a
total spend of R367 000 in their tertiary studies.
Ethical practices and organisational integrity Capitec Bank continues to position itself as an institution within
the communities which it serves. For this reason the board and
management ruthlessly enforce the highest standards of ethical
behaviour, from internal compliance with policies and procedures
to external criminal prosecution of offenders.
We subscribe to the Code of Good Banking Practice and expect
our employees to bind themselves to support and maintain the
ethical principles and standards prescribed by the board and
management.
Safety, health and the environment (SHE) Capitec Bank places great emphasis on the safety of its employees.
Security of staff therefore remains an ongoing concern and
considerable time and resources have been spent to combat
armed robbery, which we are happy to report, is much curtailed.
We remain committed to stamping out this evil and work within
the banking industry to achieve this aim.
One of the core business strategies of Capitec Bank is to create a
cashless environment in the branches. This is effected by installing
ATMs for cash dispensing and secure safes to deposit cash,
leaving cashiers with only a minor daily fl oat for small transactions.
The drop safes are emptied regularly by an independent security
fi rm and cash is counted and banked off premises. In addition to
standard security measurements, security guards are deployed at
high-risk branches.
In terms of the Occupational Health and Safety Act, 1993 (Act 85
of 1993), a policy has been set in place in accordance with which
health and safety representatives, fi rst-aid workers and emergency
wardens have been appointed at head and regional offi ces. These
employees have been trained to cope with workplace accidents
and other emergency situations. Details of emergency offi cials are
made available to all employees.
As a retail fi nancial services supplier, our business has little impact
on the environment. Our aim is to develop the retail business
so that branches operate in a paperless environment; this has
been achieved to a large extent, aligning the bank with healthy
environmental practices.
By extending credit in a manner which may contribute to the relief
of poverty, we hope to contribute in the long-term to relieving
pressure on the environment and creating sustainability.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
ve
iw
Quality service is provided by competent and
motivated employees. Capitec Bank incentivises
staff and invests heavily in personal development
to deliver a unique service experience for clients.
Black
Coloured
White
Asian
64%
17%
16%
3%
2726
STAFFTRAINING
Of this expenditure, 49.9% of supplies were procured from BEE-
accredited companies.
Community
Capitec Bank is in the process of formalising its Corporate Social
Investment (CSI) Strategy. The main theme of this CSI strategy is
Financial Education and the bank has, in conjunction with UNISA,
formulated a Financial Education Programme for presentation
to communities, schools, teachers and parents with the aim
of increasing the broader understanding of fi nancial terms and
products. This programme allows participants to improve their
fi nancial life in terms of learning basic skills such as budgeting,
understanding the use of debit orders and electronic banking
products such as internet banking and debit cards.
Capitec Bank has been piloting the fi rst of these courses in
conjunction with UNISA since the beginning of 2006. These
courses are presented free of charge and are National Qualifi cation
Forum accredited.
The allocation of donations over the past year has followed the
Financial Education theme which means that institutions involved
in job creation and community enlistment were favoured when
allocating the donations budget.
It is the Capitec Bank offer, however, which should be considered
for its value to the communities which the bank serves. By
extending credit in a manner which may contribute to the relief
of poverty, we strive to contribute in the long-term to relieving
pressure within these communities and creating sustainability. We
strive to achieve sustainability within communities by:
increasing access to banking facilities through positioning
of our branches and banking facilities in the areas where the
majority of our client base operates;
extending our banking hours to be more aligned with the
needs of our clients;
reduction of our interest rates to make credit economically
feasible for clients;
providing real savings opportunities;
continuous development of new products to increase our
product offer; and
transparent and lower fees.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
ve
iw
Underlying the aim to become the retail bank of choice and
measures set in place to achieve this, is the requirement to ensure
sustainable banking practices to the entire spectrum of our
client base.
Employees
The employment equity profi le of Capitec Bank is 84% previously
disadvantaged and 16% white. At present, almost all employees
recruited in operations are previously disadvantaged.
EMPLOYMENT EQUITY STATUS
Capitec Bank values its employees and strives continuously
to train staff to facilitate personal development and provide a
sophisticated staff interface to the Capitec Bank client specifi cally
and other stakeholders of the bank in general. To this extent, we
have run 17 training programmes during the year under review,
accommodating 3 099 employees (a number of employees
attended numerous training programmes) and indirectly, as a
result of inter alia this training, were able to promote 275
employees of which 84% are previously disadvantaged individuals.
Total training expenditure, including overheads in the period
under review, amounted to R18 million.
17 training programmes
3 099 employees
275 promotions
R18 million training expenditure
Capitec Bank endeavours to inspire employees to further their
education and, with this in mind, makes bursaries available in
support of further education of employees. As such, 31 bursaries
were approved for staff for tertiary education in 2006 of which at
least 90% were awarded to previously disadvantaged employees.
Currently Capitec Bank is supporting a total of 49 employees at a
total spend of R367 000 in their tertiary studies.
Ethical practices and organisational integrity Capitec Bank continues to position itself as an institution within
the communities which it serves. For this reason the board and
management ruthlessly enforce the highest standards of ethical
behaviour, from internal compliance with policies and procedures
to external criminal prosecution of offenders.
We subscribe to the Code of Good Banking Practice and expect
our employees to bind themselves to support and maintain the
ethical principles and standards prescribed by the board and
management.
Safety, health and the environment (SHE) Capitec Bank places great emphasis on the safety of its employees.
Security of staff therefore remains an ongoing concern and
considerable time and resources have been spent to combat
armed robbery, which we are happy to report, is much curtailed.
We remain committed to stamping out this evil and work within
the banking industry to achieve this aim.
One of the core business strategies of Capitec Bank is to create a
cashless environment in the branches. This is effected by installing
ATMs for cash dispensing and secure safes to deposit cash,
leaving cashiers with only a minor daily fl oat for small transactions.
The drop safes are emptied regularly by an independent security
fi rm and cash is counted and banked off premises. In addition to
standard security measurements, security guards are deployed at
high-risk branches.
In terms of the Occupational Health and Safety Act, 1993 (Act 85
of 1993), a policy has been set in place in accordance with which
health and safety representatives, fi rst-aid workers and emergency
wardens have been appointed at head and regional offi ces. These
employees have been trained to cope with workplace accidents
and other emergency situations. Details of emergency offi cials are
made available to all employees.
As a retail fi nancial services supplier, our business has little impact
on the environment. Our aim is to develop the retail business
so that branches operate in a paperless environment; this has
been achieved to a large extent, aligning the bank with healthy
environmental practices.
By extending credit in a manner which may contribute to the relief
of poverty, we hope to contribute in the long-term to relieving
pressure on the environment and creating sustainability.
Co
rpo
rate
Go
ve
rna
nc
e a
nd
Ris
k M
an
ag
em
en
t Re
ve
iw
Quality service is provided by competent and
motivated employees. Capitec Bank incentivises
staff and invests heavily in personal development
to deliver a unique service experience for clients.
Black
Coloured
White
Asian
64%
17%
16%
3%
2726
ANNEXURE A – ATTENDANCE OF MEETINGS BY DIRECTORS
COMMITTEES PURPOSE COMPOSITION QUORUM MEETINGS
1. Board The Board of Directors 4 non-executive directors A majority of 6 times
of Directors is responsible for JF Mouton (Chairman) directors for the a year
the strategy and overall MS du P le Roux time being in
management of the D Lockey offi ce of which at
company CA Otto least 50% must be
4 independent non-executive directors non-executive
MC Mehl (Prof)
NS Mjoli-Mncube (Ms)
JG Solms
J van Z Smit (Dr)
2 executive directors
R Stassen (CEO)
AP du Plessis (FD)
2.1 Executive Responsible for R Stassen 3 members Once
Management operational decision AP du Plessis a week
Committee making and approvals GM Fourie (CE – Operations)
of administrative nature CG van Schalkwyk (CE – Risk Management)
on an ongoing basis
2.2 Management Responsible for R Stassen (Chairman) 3 members Once a
Committee operational decision AP du Plessis month
making and CG Fischer (CE – Marketing and Corporate Affairs) (report on
implementation of GM Fourie operational
strategic decisions A Olivier (CE – Business Development) matters on a
approved by the board C Oosthuizen (CE – Information Technology) weekly basis)
CG van Schalkwyk
L Venter (CE – Human Resources)
3. Directors’ Responsible for evaluation All non-executive directors are 4 members Twice a year
affairs of board effectiveness; members of this committee
committee senior management and
board succession planning;
corporate governance
ANNEXURE B – COMPOSITION OF BOARD AND BOARD COMMITTEES
COMMITTEES BOARD AUDIT REMUNERATION RISK DIRECTORS’ CORPORATE
AFFAIRS COMMUNICATIONS
Number of meetings in the
period of review 6 3 4 2 2 1
JF Mouton 6 - - - 2 -
AP du Plessis 6 - - - - -
MS du P le Roux 6 3 4 - 2 1
D Lockey 6 - - - 2 1
MC Mehl 5 - - 2 2 -
NS Mjoli-Mncube 5 - - 2 2 1
CA Otto 6 3 4 2 2 -
JG Solms 6 3 4 - 2 -
R Stassen 6 3 - - - -
J van Z Smit 6 3 - 2 2 -
28
29
ANNEXURE A – ATTENDANCE OF MEETINGS BY DIRECTORS
COMMITTEES PURPOSE COMPOSITION QUORUM MEETINGS
1. Board The Board of Directors 4 non-executive directors A majority of 6 times
of Directors is responsible for JF Mouton (Chairman) directors for the a year
the strategy and overall MS du P le Roux time being in
management of the D Lockey offi ce of which at
company CA Otto least 50% must be
4 independent non-executive directors non-executive
MC Mehl (Prof)
NS Mjoli-Mncube (Ms)
JG Solms
J van Z Smit (Dr)
2 executive directors
R Stassen (CEO)
AP du Plessis (FD)
2.1 Executive Responsible for R Stassen 3 members Once
Management operational decision AP du Plessis a week
Committee making and approvals GM Fourie (CE – Operations)
of administrative nature CG van Schalkwyk (CE – Risk Management)
on an ongoing basis
2.2 Management Responsible for R Stassen (Chairman) 3 members Once a
Committee operational decision AP du Plessis month
making and CG Fischer (CE – Marketing and Corporate Affairs) (report on
implementation of GM Fourie operational
strategic decisions A Olivier (CE – Business Development) matters on a
approved by the board C Oosthuizen (CE – Information Technology) weekly basis)
CG van Schalkwyk
L Venter (CE – Human Resources)
3. Directors’ Responsible for evaluation All non-executive directors are 4 members Twice a year
affairs of board effectiveness; members of this committee
committee senior management and
board succession planning;
corporate governance
ANNEXURE B – COMPOSITION OF BOARD AND BOARD COMMITTEES
COMMITTEES BOARD AUDIT REMUNERATION RISK DIRECTORS’ CORPORATE
AFFAIRS COMMUNICATIONS
Number of meetings in the
period of review 6 3 4 2 2 1
JF Mouton 6 - - - 2 -
AP du Plessis 6 - - - - -
MS du P le Roux 6 3 4 - 2 1
D Lockey 6 - - - 2 1
MC Mehl 5 - - 2 2 -
NS Mjoli-Mncube 5 - - 2 2 1
CA Otto 6 3 4 2 2 -
JG Solms 6 3 4 - 2 -
R Stassen 6 3 - - - -
J van Z Smit 6 3 - 2 2 -
28
29
FINANCIAL STATEMENTS
COMMITTEES PURPOSE COMPOSITION QUORUM MEETINGS
4. Audit Oversees fi nancial J van Z Smit (Chairman) 50% of members Three times
Committee controls, reporting and MS du P le Roux of which 50% must a year
disclosure CA Otto be non-executive
JG Solms directors
R Stassen
Independent attendee
DG Malan (External audit partner – PricewaterhouseCoopers)
Management attendees
J-HC de Beer (Compliance offi cer)
AP du Plessis (Financial management)
J Gourrah (Internal Audit)
CG van Schalkwyk (Risk management) (Secretary)
5. Remuneration Directors’ and senior CA Otto (Chairman) 3 members Twice a year
Committee executives’ remuneration MS du P le Roux
is discussed and JG Solms
determined as well as Management attendees
levels of remuneration, R Stassen
adjustment thereof at L Venter
intervals and, when
applicable, additional
remuneration such as
bonuses and incentives,
including share incentives
6. Risk Committee J v Zyl Smit (Chairman) 3 members Twice a year
MC Mehl
NS Mjoli-Mncube
CA Otto
Management attendees
J-HC de Beer
AP du Plessis
J Gourrah
R Stassen
CG van Schalkwyk
7. Corporate Provides advice on D Lockey (Chairman) 3 members Twice a year
Communications obtaining maximum MS du P le Roux
Committee positive exposure for NS Mjoli-Mncube
Capitec Bank and reviews Management attendee
communication strategy CG Fischer
ANNEXURE B – COMPOSITION OF BOARD AND BOARD COMMITTEES
Reviews processes
followed to identify risk
and consider such risks in
the Capitec Bank group
environment. Assists the
board in reviewing the risk
management systems and
processes and the
signifi cant risks facing
the company
30
31
FINANCIAL STATEMENTS
COMMITTEES PURPOSE COMPOSITION QUORUM MEETINGS
4. Audit Oversees fi nancial J van Z Smit (Chairman) 50% of members Three times
Committee controls, reporting and MS du P le Roux of which 50% must a year
disclosure CA Otto be non-executive
JG Solms directors
R Stassen
Independent attendee
DG Malan (External audit partner – PricewaterhouseCoopers)
Management attendees
J-HC de Beer (Compliance offi cer)
AP du Plessis (Financial management)
J Gourrah (Internal Audit)
CG van Schalkwyk (Risk management) (Secretary)
5. Remuneration Directors’ and senior CA Otto (Chairman) 3 members Twice a year
Committee executives’ remuneration MS du P le Roux
is discussed and JG Solms
determined as well as Management attendees
levels of remuneration, R Stassen
adjustment thereof at L Venter
intervals and, when
applicable, additional
remuneration such as
bonuses and incentives,
including share incentives
6. Risk Committee J v Zyl Smit (Chairman) 3 members Twice a year
MC Mehl
NS Mjoli-Mncube
CA Otto
Management attendees
J-HC de Beer
AP du Plessis
J Gourrah
R Stassen
CG van Schalkwyk
7. Corporate Provides advice on D Lockey (Chairman) 3 members Twice a year
Communications obtaining maximum MS du P le Roux
Committee positive exposure for NS Mjoli-Mncube
Capitec Bank and reviews Management attendee
communication strategy CG Fischer
ANNEXURE B – COMPOSITION OF BOARD AND BOARD COMMITTEES
Reviews processes
followed to identify risk
and consider such risks in
the Capitec Bank group
environment. Assists the
board in reviewing the risk
management systems and
processes and the
signifi cant risks facing
the company
30
31
CAPITEC BANK HOLDINGS LIMITED AND ITS SUBSIDIARIES
The directors are responsible for the preparation, integrity and fair presentation of the fi nancial statements of Capitec Bank Holdings
and its subsidiaries. The fi nancial statements presented on page 35 to 77 have been prepared in accordance with International Financial
Reporting Standards (IFRS), and include amounts based on judgements and estimates made by management.
The directors consider that in preparing the fi nancial statements they have used the most appropriate accounting policies, consistently
applied and supported by reasonable and prudent judgements and estimates, and that all statements of IFRS that they consider to be
applicable have been followed. The directors are satisfi ed that the information contained in the fi nancial statements fairly presents the
results of operations for the year and the fi nancial position of the group and company at year end. The directors also prepared the other
information included in the annual report and are responsible for both its accuracy and consistency with the fi nancial statements.
The directors have the responsibility for ensuring that accounting records are kept. The accounting records should disclose, with
reasonable accuracy, the fi nancial position of the companies to enable the directors to ensure that the fi nancial statements comply with
relevant legislation.
Capitec Bank Holdings Limited and its subsidiaries operated in a well established control environment, which is documented and
regularly reviewed. This incorporates risk management and internal control procedures, which are designed to provide reasonable, but
not absolute, assurance that assets are safeguarded and that the risks facing the business are being controlled.
The going concern basis has been adopted in preparing the fi nancial statements. The directors have no reason to believe that the group
or any company within the group will not be going concerns in the foreseeable future, based on forecasts and available cash resources.
These fi nancial statements support the viability of the company and the group.
The Code of Corporate Practices and Conduct has been adhered to, as noted in the Corporate Governance Risk Management Review.
The group’s external auditors, PricewaterhouseCoopers Incorporated, audited the fi nancial statements and their report is presented
on page 34.
The fi nancial statements were approved by the Board of Directors on 29 March 2006, and are signed on its behalf by:
Jannie Mouton Riaan Stassen
Chairman Chief Executive Offi cer
CERTIFICATE BY THE COMPANY SECRETARY
I hereby certify, in terms of section 268G of the Companies Act, No 61 of 1973, that to the best of my knowledge, for the year ended
28 February 2006, the company has lodged with the Registrar of Companies all such returns as are required of a public company in
terms of this Act and that all such returns are true, correct and up to date.
CG van Schalkwyk
Company Secretary
Stellenbosch
29 March 2006
STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS
Statement of Responsibility by the Board of Directors 33
Certifi cate by the Company Secretary 33
Report of the Independent Auditors 34
Directors’ Report 35
Balance Sheets 40
Income Statements 41
Statements of changes in Shareholders’ Equity 42
Cash Flow Statements 44
Notes to the Annual Financial Statements 45
CONTENTS
33
CAPITEC BANK HOLDINGS LIMITED AND ITS SUBSIDIARIES
The directors are responsible for the preparation, integrity and fair presentation of the fi nancial statements of Capitec Bank Holdings
and its subsidiaries. The fi nancial statements presented on page 35 to 77 have been prepared in accordance with International Financial
Reporting Standards (IFRS), and include amounts based on judgements and estimates made by management.
The directors consider that in preparing the fi nancial statements they have used the most appropriate accounting policies, consistently
applied and supported by reasonable and prudent judgements and estimates, and that all statements of IFRS that they consider to be
applicable have been followed. The directors are satisfi ed that the information contained in the fi nancial statements fairly presents the
results of operations for the year and the fi nancial position of the group and company at year end. The directors also prepared the other
information included in the annual report and are responsible for both its accuracy and consistency with the fi nancial statements.
The directors have the responsibility for ensuring that accounting records are kept. The accounting records should disclose, with
reasonable accuracy, the fi nancial position of the companies to enable the directors to ensure that the fi nancial statements comply with
relevant legislation.
Capitec Bank Holdings Limited and its subsidiaries operated in a well established control environment, which is documented and
regularly reviewed. This incorporates risk management and internal control procedures, which are designed to provide reasonable, but
not absolute, assurance that assets are safeguarded and that the risks facing the business are being controlled.
The going concern basis has been adopted in preparing the fi nancial statements. The directors have no reason to believe that the group
or any company within the group will not be going concerns in the foreseeable future, based on forecasts and available cash resources.
These fi nancial statements support the viability of the company and the group.
The Code of Corporate Practices and Conduct has been adhered to, as noted in the Corporate Governance Risk Management Review.
The group’s external auditors, PricewaterhouseCoopers Incorporated, audited the fi nancial statements and their report is presented
on page 34.
The fi nancial statements were approved by the Board of Directors on 29 March 2006, and are signed on its behalf by:
Jannie Mouton Riaan Stassen
Chairman Chief Executive Offi cer
CERTIFICATE BY THE COMPANY SECRETARY
I hereby certify, in terms of section 268G of the Companies Act, No 61 of 1973, that to the best of my knowledge, for the year ended
28 February 2006, the company has lodged with the Registrar of Companies all such returns as are required of a public company in
terms of this Act and that all such returns are true, correct and up to date.
CG van Schalkwyk
Company Secretary
Stellenbosch
29 March 2006
STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS
Statement of Responsibility by the Board of Directors 33
Certifi cate by the Company Secretary 33
Report of the Independent Auditors 34
Directors’ Report 35
Balance Sheets 40
Income Statements 41
Statements of changes in Shareholders’ Equity 42
Cash Flow Statements 44
Notes to the Annual Financial Statements 45
CONTENTS
33
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF CAPITEC BANK HOLDINGS LIMITED We have audited the annual fi nancial statements and group annual fi nancial statements of Capitec Bank Holdings Limited, set out on
pages 35 to 77, for the year ended 28 February 2006. These fi nancial statements are the responsibility of the company’s directors. Our
responsibility is to express an opinion on these fi nancial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. These standards require that we plan and perform
the audit to obtain reasonable assurance that the fi nancial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the
accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement
presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion these fi nancial statements fairly present, in all material respects, the fi nancial position of the company and group at
28 February 2006 and the results of their operations and cash fl ows for the year then ended in accordance with International Financial
Reporting Standards and in the manner required by the South African Companies Act.
PricewaterhouseCoopers Inc
Chartered Accountants (SA)
Registered Accountants and Auditors
Cape Town
29 March 2006
The directors present their annual report, which forms part of the audited fi nancial statements of the company, for the year ended
28 February 2006.
1. NATURE OF BUSINESS The main business of the company is that of a bank controlling company as envisaged in the Banks Act, 1990. The company’s
subsidiaries are involved in retail banking and the wholesale distribution of consumer goods.
2. REVIEW OF OPERATIONS The operating results and the state of affairs of the company and the group are fully set out in the attached balance sheets, income
statements, statements of changes in equity, cash fl ow statements and notes thereto. The group’s earnings attributable to shareholders
amounted to R115.3 million (2005: R67.4 million).
3. FINANCIAL RESULTS AND DIVIDENDS The fi nancial results of the company and the group are set out in the attached fi nancial statements.
Current year dividend
A dividend of 45 cents per share is proposed (2005: 30 cents). No accrual was made for this dividend, which is in line with recommended
accounting practice.
It is the policy of the company not to declare an interim dividend.
Previous dividend
A dividend of 30 cents per share was declared on 25 May 2005 and paid on 13 June 2005. The total dividend of R21 578 524, less
R260 817 relating to shares held by the share incentive trust, was settled in cash.
4. SHARE CAPITAL There were no movements in ordinary share capital during the current fi nancial year.
Settlement of share options
The group settled 2 486 744 options (2005: 2 899 857 options) relating to the share incentive scheme.
5. DIRECTORS AND SECRETARY Information relating to the directors and secretary of the company is presented on pages 16 and 92 of the fi nancial statements and
in the annual report.
DIRECTORS’ REPORT
3534
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF CAPITEC BANK HOLDINGS LIMITED We have audited the annual fi nancial statements and group annual fi nancial statements of Capitec Bank Holdings Limited, set out on
pages 35 to 77, for the year ended 28 February 2006. These fi nancial statements are the responsibility of the company’s directors. Our
responsibility is to express an opinion on these fi nancial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. These standards require that we plan and perform
the audit to obtain reasonable assurance that the fi nancial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the
accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement
presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion these fi nancial statements fairly present, in all material respects, the fi nancial position of the company and group at
28 February 2006 and the results of their operations and cash fl ows for the year then ended in accordance with International Financial
Reporting Standards and in the manner required by the South African Companies Act.
PricewaterhouseCoopers Inc
Chartered Accountants (SA)
Registered Accountants and Auditors
Cape Town
29 March 2006
The directors present their annual report, which forms part of the audited fi nancial statements of the company, for the year ended
28 February 2006.
1. NATURE OF BUSINESS The main business of the company is that of a bank controlling company as envisaged in the Banks Act, 1990. The company’s
subsidiaries are involved in retail banking and the wholesale distribution of consumer goods.
2. REVIEW OF OPERATIONS The operating results and the state of affairs of the company and the group are fully set out in the attached balance sheets, income
statements, statements of changes in equity, cash fl ow statements and notes thereto. The group’s earnings attributable to shareholders
amounted to R115.3 million (2005: R67.4 million).
3. FINANCIAL RESULTS AND DIVIDENDS The fi nancial results of the company and the group are set out in the attached fi nancial statements.
Current year dividend
A dividend of 45 cents per share is proposed (2005: 30 cents). No accrual was made for this dividend, which is in line with recommended
accounting practice.
It is the policy of the company not to declare an interim dividend.
Previous dividend
A dividend of 30 cents per share was declared on 25 May 2005 and paid on 13 June 2005. The total dividend of R21 578 524, less
R260 817 relating to shares held by the share incentive trust, was settled in cash.
4. SHARE CAPITAL There were no movements in ordinary share capital during the current fi nancial year.
Settlement of share options
The group settled 2 486 744 options (2005: 2 899 857 options) relating to the share incentive scheme.
5. DIRECTORS AND SECRETARY Information relating to the directors and secretary of the company is presented on pages 16 and 92 of the fi nancial statements and
in the annual report.
DIRECTORS’ REPORT
3534
Opening (Options exercised)/ Closing
balance Options granted** balance
Strike Number Number Market Number
Maturity Issue price of share of share price Exercise of share
date date R options options R date options
AP du Plessis
(indirect benefi cial) 16 Jul 05 17 Jul 00 1.42 129 970 (129 970) 25.75 19 Dec 05 -
16 Jul 06* 17 Jul 00 1.42 129 970 (129 970) 29.99 20 Feb 06 -
16 Jul 07 17 Jul 00 1.42 98 777 - 98 777
29 April 07 29 April 04 5.73 25 000 - 25 000
29 April 08 29 April 04 5.73 25 000 - 25 000
29 April 09 29 April 04 5.73 25 000 - 25 000
29 April 10 29 April 04 5.73 25 000 - 25 000
(direct benefi cial) 20 May 08 20 May 05 14.05 - 17 500 17 500
20 May 09 20 May 05 14.05 - 17 500 17 500
20 May 10 20 May 05 14.05 - 17 500 17 500
20 May 11 20 May 05 14.05 - 17 500 17 500
458 717 (189 940) 268 777
R Stassen
(indirect non-benefi cial) 16 Jul 05 17 Jul 00 1.42 280 734 (280 734) 23 50 5 Dec 05 -
16 Jul 06* 17 Jul 00 1.42 280 734 (280 734) 29 99 20 Feb 06 -
16 Jul 07 17 Jul 00 1.42 249 541 - 249 541
29 April 07 29 April 04 5.73 100 000 - 100 000
29 April 08 29 April 04 5.73 100 000 - 100 000
29 April 09 29 April 04 5.73 100 000 - 100 000
29 April 10 29 April 04 5.73 100 000 - 100 000
(direct benefi cial) 20 May 08 20 May 05 14.05 - 70 000 70 000
20 May 09 20 May 05 14.05 - 70 000 70 000
20 May 10 20 May 05 14.05 - 70 000 70 000
20 May 11 20 May 05 14.05 - 70 000 70 000
1 211 009 (281 468) 929 541
Total 1 669 726 (471 408) 1 198 318
Direct Indirect Direct Indirect Shares %
AP du Plessis* - 1 149 970 - - 1 149 970 1.60
MS du P le Roux - - - 12 292 244 12 292 244 17.09
D Lockey - - - 15 412 995 15 412 995 21.43
MC Mehl 110 000 - - - 110 000 0.15
NS Mjoli-Mncube 100 000 - - - 100 000 0.14
JF Mouton 451 302 - - 7 033 104 7 484 406 10.41
CA Otto 967 - - 453 760 454 727 0.63
JG Solms 33 779 - - 18 183 51 962 0.07
R Stassen* 135 122 - - 2 897 229 3 032 351 4.22
J van Z Smit 139 647 33 783 - 30 707 204 137 0.28
970 817 1 183 753 - 38 138 222 40 292 792 56.02
DIRECTORS’ REPORT
NUMBER OF SHARES HELD
2006 B e n e f i c i a l N o n - b e n e f i c i a l To t a l
Direct Indirect Direct Indirect Shares %
AP du Plessis* - 800 000 - - 800 000 1.11
MS du P le Roux - - - 12 292 244 12 292 244 17.09
D Lockey - - - 11 250 913 11 250 913 15.64
MC Mehl 100 000 - - - 100 000 0.14
NS Mjoli-Mncube 100 000 - - - 100 000 0.14
JF Mouton 304 297 - - 7 033 104 7 337 401 10.20
CA Otto 967 - - 753 760 754 727 1.05
JG Solms - - - 18 183 18 183 0.03
R Stassen* 135 122 - - 2 930 761 3 065 883 4.26
J van Z Smit 173 430 - - 30 707 204 137 0.28
813 816 800 000 - 34 309 672 35 923 488 49.94
* Executive
6. INTERESTS OF THE DIRECTORS IN SHARE CAPITAL AND CONTRACTS 6.1 At year end, the directors, in aggregate, were directly or indirectly, benefi cially or non-benefi cially, interested in 40 292 792
(2005: 35 923 488) Capitec Bank Holdings Limited shares, equivalent to 56.02%, (2005: 49.94%) of the issued share capital of
Capitec Bank Holdings Limited. The individual interests of the directors were as follows.
2005 B e n e f i c i a l N o n - b e n e f i c i a l To t a l
6.2 At year end the directors were participants in the Capitec Bank Holdings Limited share incentive scheme in respect of 1 198 318
(2005: 1 669 726) Capitec Bank Holdings Limited share options as follows:
D i r e c t o r s
2006
* It was decided to allow the early exercise of options maturing in the 2006/07 year to the extent that there were shares available in
the share incentive trust.
** These options were (exercised)/granted in the current fi nancial year.
3736
DIRECTORS’ REPORT
Opening (Options exercised)/ Closing
balance Options granted** balance
Strike Number Number Market Number
Maturity Issue price of share of share price Exercise of share
date date R options options R date options
AP du Plessis
(indirect benefi cial) 16 Jul 05 17 Jul 00 1.42 129 970 (129 970) 25.75 19 Dec 05 -
16 Jul 06* 17 Jul 00 1.42 129 970 (129 970) 29.99 20 Feb 06 -
16 Jul 07 17 Jul 00 1.42 98 777 - 98 777
29 April 07 29 April 04 5.73 25 000 - 25 000
29 April 08 29 April 04 5.73 25 000 - 25 000
29 April 09 29 April 04 5.73 25 000 - 25 000
29 April 10 29 April 04 5.73 25 000 - 25 000
(direct benefi cial) 20 May 08 20 May 05 14.05 - 17 500 17 500
20 May 09 20 May 05 14.05 - 17 500 17 500
20 May 10 20 May 05 14.05 - 17 500 17 500
20 May 11 20 May 05 14.05 - 17 500 17 500
458 717 (189 940) 268 777
R Stassen
(indirect non-benefi cial) 16 Jul 05 17 Jul 00 1.42 280 734 (280 734) 23 50 5 Dec 05 -
16 Jul 06* 17 Jul 00 1.42 280 734 (280 734) 29 99 20 Feb 06 -
16 Jul 07 17 Jul 00 1.42 249 541 - 249 541
29 April 07 29 April 04 5.73 100 000 - 100 000
29 April 08 29 April 04 5.73 100 000 - 100 000
29 April 09 29 April 04 5.73 100 000 - 100 000
29 April 10 29 April 04 5.73 100 000 - 100 000
(direct benefi cial) 20 May 08 20 May 05 14.05 - 70 000 70 000
20 May 09 20 May 05 14.05 - 70 000 70 000
20 May 10 20 May 05 14.05 - 70 000 70 000
20 May 11 20 May 05 14.05 - 70 000 70 000
1 211 009 (281 468) 929 541
Total 1 669 726 (471 408) 1 198 318
Direct Indirect Direct Indirect Shares %
AP du Plessis* - 1 149 970 - - 1 149 970 1.60
MS du P le Roux - - - 12 292 244 12 292 244 17.09
D Lockey - - - 15 412 995 15 412 995 21.43
MC Mehl 110 000 - - - 110 000 0.15
NS Mjoli-Mncube 100 000 - - - 100 000 0.14
JF Mouton 451 302 - - 7 033 104 7 484 406 10.41
CA Otto 967 - - 453 760 454 727 0.63
JG Solms 33 779 - - 18 183 51 962 0.07
R Stassen* 135 122 - - 2 897 229 3 032 351 4.22
J van Z Smit 139 647 33 783 - 30 707 204 137 0.28
970 817 1 183 753 - 38 138 222 40 292 792 56.02
DIRECTORS’ REPORT
NUMBER OF SHARES HELD
2006 B e n e f i c i a l N o n - b e n e f i c i a l To t a l
Direct Indirect Direct Indirect Shares %
AP du Plessis* - 800 000 - - 800 000 1.11
MS du P le Roux - - - 12 292 244 12 292 244 17.09
D Lockey - - - 11 250 913 11 250 913 15.64
MC Mehl 100 000 - - - 100 000 0.14
NS Mjoli-Mncube 100 000 - - - 100 000 0.14
JF Mouton 304 297 - - 7 033 104 7 337 401 10.20
CA Otto 967 - - 753 760 754 727 1.05
JG Solms - - - 18 183 18 183 0.03
R Stassen* 135 122 - - 2 930 761 3 065 883 4.26
J van Z Smit 173 430 - - 30 707 204 137 0.28
813 816 800 000 - 34 309 672 35 923 488 49.94
* Executive
6. INTERESTS OF THE DIRECTORS IN SHARE CAPITAL AND CONTRACTS 6.1 At year end, the directors, in aggregate, were directly or indirectly, benefi cially or non-benefi cially, interested in 40 292 792
(2005: 35 923 488) Capitec Bank Holdings Limited shares, equivalent to 56.02%, (2005: 49.94%) of the issued share capital of
Capitec Bank Holdings Limited. The individual interests of the directors were as follows.
2005 B e n e f i c i a l N o n - b e n e f i c i a l To t a l
6.2 At year end the directors were participants in the Capitec Bank Holdings Limited share incentive scheme in respect of 1 198 318
(2005: 1 669 726) Capitec Bank Holdings Limited share options as follows:
D i r e c t o r s
2006
* It was decided to allow the early exercise of options maturing in the 2006/07 year to the extent that there were shares available in
the share incentive trust.
** These options were (exercised)/granted in the current fi nancial year.
3736
DIRECTORS’ REPORT
DIRECTORS’ REPORT DIRECTORS’ REPORT
7. INVESTMENT IN SUBSIDIARIES
Information relating to the company’s fi nancial interest in its subsidiaries is set out in note 10 to the fi nancial statements.
8. MATERIAL EVENTS AFTER YEAR END
No event, which is material to the fi nancial affairs of the company, has occurred between the balance sheet date and the date of
approval of the fi nancial statements.
2006
6.3 The directors’ remuneration in respect of the fi nancial year ended 28 February 2006 was as follows:The following options were exercised in the previous fi nancial year.
Maturity Issue Number of Strike Market Exercise
date date share options price price date
CJ Borstlap* 31 Aug 04 1 Sept 00 38 991 1.42 9.70 4 Oct 04
30 Sep 04 1 Oct 00 7 798 1.42 9.70 4 Oct 04
31 Aug 05 1 Sept 00 38 991 1.42 10.00 25 Oct 04
30 Sep 05 1 Oct 00 7 798 1.42 10.00 25 Oct 04
31 Aug 06 1 Oct 00 7 798 1.42 10.00 25 Oct 04
30 Sep 06 1 Oct 00 7 798 1.42 10.00 25 Oct 04
30 Sep 07 1 Oct 00 7 798 1.42 10.00 25 Oct 04
AP du Plessis 16 Jul 04 17 Jun 00 129 970 1.42 13.00 10 Jan 05
MS du P le Roux** 31 Aug 04 1 Sept 00 389 908 1.42 5.79 26 May 04
31 Aug 05 1 Sept 00 389 908 1.42 5.79 26 May 04
31 Aug 06 1 Sept 00 358 715 1.42 5.79 26 May 04
R Stassen 16 Jul 04 1 Jul 00 280 734 1.42 13.70 24 Dec 04
1 666 207
D i r e c t o r s
OPTIONS EXERCISED
* CJ Borstlap was allowed by the board of directors to accelerate the exercise of his options outstanding at 6 October 2004 before
the end of October 2004, as a result of his early retirement as an executive director on 6 October 2004.
** MS du P le Roux was allowed by the board of directors to accelerate the exercise of his options outstanding at 31 March 2004
before the end of May 2004, as a result of his early retirement as an executive director on 31 March 2004.
Salaries Fringe benefi ts Bonuses Fees Total R’000 R’000 R’000 R’000 R’000 Executive CJ Borstlap * 637 172 - - 809 AP du Plessis 921 188 212 - 1 321 MS du P le Roux ** 41 10 - - 51 R Stassen 1 489 270 337 - 2 096
Non-executive MS du P le Roux ** - - - 92 92 MC Mehl - - - 80 80D Lockey - - - 15 15 NS Mjoli-Mncube - - - 60 60 JF Mouton - - - 500 500 CA Otto - - - 163 163 JG Solms - - - 100 100 J van Z Smit - - - 120 120 3 088 640 549 1 130 5 407 * CJ Borstlap resigned on 6 October 2004. ** MS du P le Roux retired as an executive director and was appointed as a non-executive director on 31 March 2004.
2005
3938
2005 Salaries Fringe benefi ts Bonuses Fees Total R’000 R’000 R’000 R’000 R’000 Executive AP du Plessis 1 247 203 63 - 1 513 R Stassen 1 965 278 7 000 - 9 243 Non-executive MS du P le Roux - - - 147 147 MC Mehl - - - 84 84D Lockey - - - 95 95 NS Mjoli-Mncube - - - 105 105 JF Mouton - - - 500 500 CA Otto - - - 158 158 JG Solms - - - 105 105 J van Z Smit - - - 126 126 3 212 481 7 063 1 320 12 076 The total share option expense refl ected in the income statement in terms of IFRS 2 relating to directors, amounts to R329 688 (2005 : R83 471).
DIRECTORS’ REPORT DIRECTORS’ REPORT
7. INVESTMENT IN SUBSIDIARIES
Information relating to the company’s fi nancial interest in its subsidiaries is set out in note 10 to the fi nancial statements.
8. MATERIAL EVENTS AFTER YEAR END
No event, which is material to the fi nancial affairs of the company, has occurred between the balance sheet date and the date of
approval of the fi nancial statements.
2006
6.3 The directors’ remuneration in respect of the fi nancial year ended 28 February 2006 was as follows:The following options were exercised in the previous fi nancial year.
Maturity Issue Number of Strike Market Exercise
date date share options price price date
CJ Borstlap* 31 Aug 04 1 Sept 00 38 991 1.42 9.70 4 Oct 04
30 Sep 04 1 Oct 00 7 798 1.42 9.70 4 Oct 04
31 Aug 05 1 Sept 00 38 991 1.42 10.00 25 Oct 04
30 Sep 05 1 Oct 00 7 798 1.42 10.00 25 Oct 04
31 Aug 06 1 Oct 00 7 798 1.42 10.00 25 Oct 04
30 Sep 06 1 Oct 00 7 798 1.42 10.00 25 Oct 04
30 Sep 07 1 Oct 00 7 798 1.42 10.00 25 Oct 04
AP du Plessis 16 Jul 04 17 Jun 00 129 970 1.42 13.00 10 Jan 05
MS du P le Roux** 31 Aug 04 1 Sept 00 389 908 1.42 5.79 26 May 04
31 Aug 05 1 Sept 00 389 908 1.42 5.79 26 May 04
31 Aug 06 1 Sept 00 358 715 1.42 5.79 26 May 04
R Stassen 16 Jul 04 1 Jul 00 280 734 1.42 13.70 24 Dec 04
1 666 207
D i r e c t o r s
OPTIONS EXERCISED
* CJ Borstlap was allowed by the board of directors to accelerate the exercise of his options outstanding at 6 October 2004 before
the end of October 2004, as a result of his early retirement as an executive director on 6 October 2004.
** MS du P le Roux was allowed by the board of directors to accelerate the exercise of his options outstanding at 31 March 2004
before the end of May 2004, as a result of his early retirement as an executive director on 31 March 2004.
Salaries Fringe benefi ts Bonuses Fees Total R’000 R’000 R’000 R’000 R’000 Executive CJ Borstlap * 637 172 - - 809 AP du Plessis 921 188 212 - 1 321 MS du P le Roux ** 41 10 - - 51 R Stassen 1 489 270 337 - 2 096
Non-executive MS du P le Roux ** - - - 92 92 MC Mehl - - - 80 80D Lockey - - - 15 15 NS Mjoli-Mncube - - - 60 60 JF Mouton - - - 500 500 CA Otto - - - 163 163 JG Solms - - - 100 100 J van Z Smit - - - 120 120 3 088 640 549 1 130 5 407 * CJ Borstlap resigned on 6 October 2004. ** MS du P le Roux retired as an executive director and was appointed as a non-executive director on 31 March 2004.
2005
3938
2005 Salaries Fringe benefi ts Bonuses Fees Total R’000 R’000 R’000 R’000 R’000 Executive AP du Plessis 1 247 203 63 - 1 513 R Stassen 1 965 278 7 000 - 9 243 Non-executive MS du P le Roux - - - 147 147 MC Mehl - - - 84 84D Lockey - - - 95 95 NS Mjoli-Mncube - - - 105 105 JF Mouton - - - 500 500 CA Otto - - - 158 158 JG Solms - - - 105 105 J van Z Smit - - - 126 126 3 212 481 7 063 1 320 12 076 The total share option expense refl ected in the income statement in terms of IFRS 2 relating to directors, amounts to R329 688 (2005 : R83 471).
R’000 R’000 R’000 R’000
ASSETSCash and cash equivalents 4 582 293 362 873 - -
Investments at fair value through profi t or loss 5 7 149 16 842 - -
Loans and advances 6 454 661 207 897 - -
Inventory 7 11 800 8 635 - -
Other receivables 8 7 077 8 020 - -
Group loans receivable 9 - - 100 000 101 513
Investment in subsidiaries 10 - - 267 023 267 914
Property and equipment 11 133 956 114 381 - -
Intangible assets 12 47 688 62 032 - -
Deferred income tax assets 13 6 648 24 534 - 5
Total assets 1 251 272 805 214 367 023 369 432
LIABILITIES Deposits at amortised cost 14 537 894 222 412 - -
Deposits held at fair value through profi t or loss 15 57 102 58 283 - -
Trade and other payables 16 69 667 50 063 - 1
Current income tax liabilities 22 493 38 - -
Provisions 17 300 1 000 - -
Group loans payable 18 - - 4 326 5 139
Total liabilities 687 456 331 796 4 326 5 140
EQUITYShare capital, share premium and group shares 19 347 865 330 341 347 865 347 865
Reserves 20 710 700 - -
Retained earnings 215 241 142 377 14 832 16 427
Total equity 563 816 473 418 362 697 364 292
Total equity and liabilities 1 251 272 805 214 367 023 369 432
2006 2005 2006 2005
BALANCE SHEETS
as
at 2
8 F
eb
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6
INCOME STATEMENTS
for th
e y
ea
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de
d 2
8 F
eb
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6
No
tes
G r o u p C o m p a n y
No
tes
G r o u p C o m p a n y
R’000 R’000 R’000 R’000
Interest income 21 783 902 543 982 - -
Interest expense 21 (40 079) (16 890) - -
Net interest income 21 743 823 527 092 - -
Net fee income 14 942 4 423 - -
Fee income 44 314 11 338 - -
Fee expense (29 372) (6 915) - -
Dividend income 1 015 75 22 625 16 861
Net impairment charge on loans and advances 22 (95 625) (39 249) - -
Net movement in fi nancial instruments held
at fair value through profi t or loss 23 1 431 (6 001) - -
Non-banking gross profi t 6 563 4 464 - -
Sales 131 368 118 039 - -
Cost of sales (124 805) (113 575) - -
Other income 4 6 1 170 1 425
Income from operations 672 153 490 810 23 795 18 286
Banking operating expenses (500 075) (386 589) (1 249) (1 465)
Non-banking operating expenses (5 965) (5 172) - -
Operating profi t before tax 24 166 113 99 049 22 546 16 821
Income tax expense 25 (50 832) (31 670) (2 562) (1 628)
Profi t for the year 115 281 67 379 19 984 15 193
Attributable earnings per share (cents)
Basic 26 163.4 97.8
Diluted 26 154.7 91.6
Proposed dividend per share (cents) 28 45.0 30.0
* Comparative fi gures have been restated to disclose computer software as intangible assets in terms of IAS 38.
4140
2006 2005 2006 2005
R’000 R’000 R’000 R’000
ASSETSCash and cash equivalents 4 582 293 362 873 - -
Investments at fair value through profi t or loss 5 7 149 16 842 - -
Loans and advances 6 454 661 207 897 - -
Inventory 7 11 800 8 635 - -
Other receivables 8 7 077 8 020 - -
Group loans receivable 9 - - 100 000 101 513
Investment in subsidiaries 10 - - 267 023 267 914
Property and equipment 11 133 956 114 381 - -
Intangible assets 12 47 688 62 032 - -
Deferred income tax assets 13 6 648 24 534 - 5
Total assets 1 251 272 805 214 367 023 369 432
LIABILITIES Deposits at amortised cost 14 537 894 222 412 - -
Deposits held at fair value through profi t or loss 15 57 102 58 283 - -
Trade and other payables 16 69 667 50 063 - 1
Current income tax liabilities 22 493 38 - -
Provisions 17 300 1 000 - -
Group loans payable 18 - - 4 326 5 139
Total liabilities 687 456 331 796 4 326 5 140
EQUITYShare capital, share premium and group shares 19 347 865 330 341 347 865 347 865
Reserves 20 710 700 - -
Retained earnings 215 241 142 377 14 832 16 427
Total equity 563 816 473 418 362 697 364 292
Total equity and liabilities 1 251 272 805 214 367 023 369 432
2006 2005 2006 2005
BALANCE SHEETS
as
at 2
8 F
eb
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ry 2
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6
INCOME STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
No
tes
G r o u p C o m p a n y
No
tes
G r o u p C o m p a n y
R’000 R’000 R’000 R’000
Interest income 21 783 902 543 982 - -
Interest expense 21 (40 079) (16 890) - -
Net interest income 21 743 823 527 092 - -
Net fee income 14 942 4 423 - -
Fee income 44 314 11 338 - -
Fee expense (29 372) (6 915) - -
Dividend income 1 015 75 22 625 16 861
Net impairment charge on loans and advances 22 (95 625) (39 249) - -
Net movement in fi nancial instruments held
at fair value through profi t or loss 23 1 431 (6 001) - -
Non-banking gross profi t 6 563 4 464 - -
Sales 131 368 118 039 - -
Cost of sales (124 805) (113 575) - -
Other income 4 6 1 170 1 425
Income from operations 672 153 490 810 23 795 18 286
Banking operating expenses (500 075) (386 589) (1 249) (1 465)
Non-banking operating expenses (5 965) (5 172) - -
Operating profi t before tax 24 166 113 99 049 22 546 16 821
Income tax expense 25 (50 832) (31 670) (2 562) (1 628)
Profi t for the year 115 281 67 379 19 984 15 193
Attributable earnings per share (cents)
Basic 26 163.4 97.8
Diluted 26 154.7 91.6
Proposed dividend per share (cents) 28 45.0 30.0
* Comparative fi gures have been restated to disclose computer software as intangible assets in terms of IAS 38.
4140
2006 2005 2006 2005
Share Share Retained
capital premium earnings Total
R’000 R’000 R’000 R’000
COMPANYBalance at 1 March 2004 688 325 727 15 001 341 416
Net profi t for the year - - 15 193 15 193
Shares issued 31 21 772 - 21 803
Share issue expenses - (353) - (353)
Dividend - - (13 767) (13 767)
Balance at 28 February 2005 719 347 146 16 427 364 292
Net profi t for the year - - 19 984 19 984
Dividend - - (21 579) (21 579)
Balance at 28 February 2006 719 347 146 14 832 362 697
Notes 19 19
Shares
Share Share held by Retained
capital premium the group Reserves earnings Total
R’000 R’000 R’000 R’000 R’000 R’000
GROUP Restated balance at 1 March 2004 688 325 727 (537) 745 99 041 425 664
As previously stated 688 325 727 (537) 745 101 548 428 171
Change in accounting for operating leases (note 43) - - - - (2 507) (2 507)
Realisation of hedges - - - (45) - (45)
Net profi t for the year – as restated - - - - 67 379 67 379
As previously stated - - - - 67 926 67 926
Change in accounting for operating leases (note 43) - - - - (547) (547)
Shares issued 31 21 772 - - - 21 803
Share issue expenses - (353) - - - (353)
Loss on group shares relating to odd-lot offer - - - - (415) (415)
Dividend - - - - (13 730) (13 730)
Share-based staff costs - - - - 1 068 1 068
Shares acquired for employee share options at cost - - (16 987) - - (16 987)
Realised loss on settlement of employee share options - - - - (15 666) (15 666)
Tax effect on settlement of options - - - - 4 700 4 700
Balance at 28 February 2005 719 347 146 (17 524) 700 142 377 473 418
Net profi t for the year - - - - 115 281 115 281
Dividend - - - - (21 318) (21 318)
Share-based staff costs - - - - 1 603 1 603
Shares acquired for employee share options at cost - - (15 871) - - (15 871)
Realised loss on settlement of employee share options - - 33 395 - (30 623) 2 772
Tax effect on settlement of options - - - - 8 088 8 088
Tax rate change - - - 10 (167) (157)
Balance at 28 February 2006 719 347 146 - 710 215 241 563 816
Notes 19 19 20
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
for th
e y
ea
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de
d 2
8 F
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6
4342
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
for th
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8 F
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6
Share Share Retained
capital premium earnings Total
R’000 R’000 R’000 R’000
COMPANYBalance at 1 March 2004 688 325 727 15 001 341 416
Net profi t for the year - - 15 193 15 193
Shares issued 31 21 772 - 21 803
Share issue expenses - (353) - (353)
Dividend - - (13 767) (13 767)
Balance at 28 February 2005 719 347 146 16 427 364 292
Net profi t for the year - - 19 984 19 984
Dividend - - (21 579) (21 579)
Balance at 28 February 2006 719 347 146 14 832 362 697
Notes 19 19
Shares
Share Share held by Retained
capital premium the group Reserves earnings Total
R’000 R’000 R’000 R’000 R’000 R’000
GROUP Restated balance at 1 March 2004 688 325 727 (537) 745 99 041 425 664
As previously stated 688 325 727 (537) 745 101 548 428 171
Change in accounting for operating leases (note 43) - - - - (2 507) (2 507)
Realisation of hedges - - - (45) - (45)
Net profi t for the year – as restated - - - - 67 379 67 379
As previously stated - - - - 67 926 67 926
Change in accounting for operating leases (note 43) - - - - (547) (547)
Shares issued 31 21 772 - - - 21 803
Share issue expenses - (353) - - - (353)
Loss on group shares relating to odd-lot offer - - - - (415) (415)
Dividend - - - - (13 730) (13 730)
Share-based staff costs - - - - 1 068 1 068
Shares acquired for employee share options at cost - - (16 987) - - (16 987)
Realised loss on settlement of employee share options - - - - (15 666) (15 666)
Tax effect on settlement of options - - - - 4 700 4 700
Balance at 28 February 2005 719 347 146 (17 524) 700 142 377 473 418
Net profi t for the year - - - - 115 281 115 281
Dividend - - - - (21 318) (21 318)
Share-based staff costs - - - - 1 603 1 603
Shares acquired for employee share options at cost - - (15 871) - - (15 871)
Realised loss on settlement of employee share options - - 33 395 - (30 623) 2 772
Tax effect on settlement of options - - - - 8 088 8 088
Tax rate change - - - 10 (167) (157)
Balance at 28 February 2006 719 347 146 - 710 215 241 563 816
Notes 19 19 20
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
for th
e y
ea
r en
de
d 2
8 F
eb
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6
4342
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYfo
r the
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28
Fe
bru
ary
20
06
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
1. ACCOUNTING POLICIES The consolidated fi nancial statements of Capitec Bank Holdings Limited have been prepared in accordance with International
Financial Reporting Standards (IFRS). Prior to adoption of IFRS the consolidated annual fi nancial statements were prepared in
terms of South African Generally Accepted Accounting Practice (“SA GAAP”). The Group implemented IFRS during the year
under review, the effective date of transition being 1 March 2004. In preparing these audited consolidated fi nancial statements
in accordance with IFRS 1 (First time adoption of IFRS), the Group has applied the mandatory exemptions and elected the
exemption relating to business combinations (IFRS 3). The Group early-adopted the standard on share based payments (IFRS 2)
for the year ended 28 February 2005, resulting in no additional IFRS 2 adjustments with the adoption of IFRS. The conversion to
IFRS did not result in any material adjustments to profi t and loss or equity and no additional disclosure as stated in IFRS 1 and IAS
34 on fi rst time adoption is required. The accounting policies applied conform to IFRS.
The policies set out below have been consistently applied to all the years presented.
Basis of preparation
The consolidated fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of
fi nancial instruments held at fair value through profi t or loss.
The preparation of fi nancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the consolidated fi nancial
statements, are disclosed in note 2.
The following are the principal accounting policies used by the Group.
1.1 Basis of consolidation
The consolidated fi nancial statements include those of the company, all its subsidiaries and the share incentive trust.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the fi nancial and
operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of
potential voting rights would be considered when assessing whether the Group controls another entity, had such rights existed.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group. They are de-consolidated from the
date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifi able assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of
any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the income statement.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated.
Transactions and minority interests
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group.
Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from
minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary.
No
tes
G r o u p C o m p a n y
CASH FLOW STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
R’000 R’000 R’000 R’000
CASH FLOW FROM OPERATING ACTIVITIES Cash from operations 32 317 920 330 723 22 545 16 822
Tax paid 33 (2 560) (1 639) (2 557) -
Dividend paid (21 318) (13 730) (21 579) (13 767)
294 042 315 354 (1 591) 3 055
CASH FLOW FROM INVESTING ACTIVITIES Investment in property and equipment* 11 (59 627) (72 760) - -
Investment in computer software* 12 (12 767) (11 296) - -
Proceeds from disposal of equipment 892 135 - -
Decrease/(Increase) in loans receivable from group companies - - 1 513 (21 070)
Pre-acquisition dividend - - 891 13 063
Disposal/(Acquisition) of investment
at fair value through profi t or loss 9 979 (16 745) - -
(61 523) (100 666) 2 404 (8 007)
CASH FLOW FROM FINANCING ACTIVITIES Net cash outfl ow on odd-lot offer 34 - (855) - -
Increase/(Decrease) in group loans payable - - (813) (16 498)
Shares issued 35 - 21 450 - 21 450
Shares acquired and options settled 36 (13 099) (32 213) - -
(13 099) (11 618) (813) 4 952
Net increase in cash and cash equivalents 219 420 203 070 - -
Cash and cash equivalents at beginning of year 362 873 159 803 - -
Cash and cash equivalents at end of year 4 582 293 362 873 - -
* Comparative fi gures have been restated to disclose computer software as intangible assets in terms of IAS 38.
4544
2006 2005 2006 2005
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
1. ACCOUNTING POLICIES The consolidated fi nancial statements of Capitec Bank Holdings Limited have been prepared in accordance with International
Financial Reporting Standards (IFRS). Prior to adoption of IFRS the consolidated annual fi nancial statements were prepared in
terms of South African Generally Accepted Accounting Practice (“SA GAAP”). The Group implemented IFRS during the year
under review, the effective date of transition being 1 March 2004. In preparing these audited consolidated fi nancial statements
in accordance with IFRS 1 (First time adoption of IFRS), the Group has applied the mandatory exemptions and elected the
exemption relating to business combinations (IFRS 3). The Group early-adopted the standard on share based payments (IFRS 2)
for the year ended 28 February 2005, resulting in no additional IFRS 2 adjustments with the adoption of IFRS. The conversion to
IFRS did not result in any material adjustments to profi t and loss or equity and no additional disclosure as stated in IFRS 1 and IAS
34 on fi rst time adoption is required. The accounting policies applied conform to IFRS.
The policies set out below have been consistently applied to all the years presented.
Basis of preparation
The consolidated fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of
fi nancial instruments held at fair value through profi t or loss.
The preparation of fi nancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the consolidated fi nancial
statements, are disclosed in note 2.
The following are the principal accounting policies used by the Group.
1.1 Basis of consolidation
The consolidated fi nancial statements include those of the company, all its subsidiaries and the share incentive trust.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the fi nancial and
operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of
potential voting rights would be considered when assessing whether the Group controls another entity, had such rights existed.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group. They are de-consolidated from the
date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifi able assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of
any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the income statement.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated.
Transactions and minority interests
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group.
Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from
minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary.
No
tes
G r o u p C o m p a n y
CASH FLOW STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
R’000 R’000 R’000 R’000
CASH FLOW FROM OPERATING ACTIVITIES Cash from operations 32 317 920 330 723 22 545 16 822
Tax paid 33 (2 560) (1 639) (2 557) -
Dividend paid (21 318) (13 730) (21 579) (13 767)
294 042 315 354 (1 591) 3 055
CASH FLOW FROM INVESTING ACTIVITIES Investment in property and equipment* 11 (59 627) (72 760) - -
Investment in computer software* 12 (12 767) (11 296) - -
Proceeds from disposal of equipment 892 135 - -
Decrease/(Increase) in loans receivable from group companies - - 1 513 (21 070)
Pre-acquisition dividend - - 891 13 063
Disposal/(Acquisition) of investment
at fair value through profi t or loss 9 979 (16 745) - -
(61 523) (100 666) 2 404 (8 007)
CASH FLOW FROM FINANCING ACTIVITIES Net cash outfl ow on odd-lot offer 34 - (855) - -
Increase/(Decrease) in group loans payable - - (813) (16 498)
Shares issued 35 - 21 450 - 21 450
Shares acquired and options settled 36 (13 099) (32 213) - -
(13 099) (11 618) (813) 4 952
Net increase in cash and cash equivalents 219 420 203 070 - -
Cash and cash equivalents at beginning of year 362 873 159 803 - -
Cash and cash equivalents at end of year 4 582 293 362 873 - -
* Comparative fi gures have been restated to disclose computer software as intangible assets in terms of IAS 38.
4544
2006 2005 2006 2005
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
1.2 Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including: cash
and non-restricted balances with central banks, treasury bills and other eligible bills, loans and advances to banks, amounts due
from other banks and short-term government securities. Cash and cash equivalents are stated at cost which approximates fair
value due to the short-term nature of these instruments.
1.3 Financial instruments
1.3.1 The Group classifi es its fi nancial assets in the under meantioned categories. Management determines the classifi cation of its
investments at initial recognition and re-evaluates this classifi cation at each reporting date. Financial assets are initially recognised
at fair value plus transaction costs for all fi nancial assets not carried at fair value through profi t or loss.
(a) Financial assets at fair value through profi t or loss
This category has two sub-categories: fi nancial assets held for trading, and those designated at fair value through profi t or loss at
inception. A fi nancial asset is classifi ed as held for trading if acquired principally for the purpose of selling in the short-term or if
so designated by management. Derivatives are categorised as held for trading unless they are designated as hedges.
Purchases and sales of fi nancial assets at fair value through profi t or loss are recognised on trade date, being the date on which
the Group commits to purchase or sell the asset.
(b) Loans and advances
Loans and advances are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market.
They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the advance.
Loans are recognised when cash is advanced to the borrowers.
(c) Held-to-maturity investments
Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturities that the
Group’s management has the positive intention and ability to hold to maturity. Were the Group to sell other than an insignifi cant
amount of held-to-maturity assets, the entire category would be tainted and reclassifi ed as available-for-sale.
(d) Available-for-sale
The Group currently has no available for sale asstes. Available-for-sale investments are those intended to be held on a continuing
basis, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.
Purchases and sales of fi nancial assets at fair value through profi t or loss are recognised on trade date. Financial assets are
derecognised when the rights to receive cash fl ows from the fi nancial assets have expired or where the Group has transferred
substantially all risks and rewards of ownership.
Financial assets at fair value through profi t or loss are subsequently carried at fair value. Loans and advances are carried at
amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of the ‘fi nancial assets
at fair value through profi t or loss’ category are included in the income statement in the period in which they arise.
The fair values of quoted investments in active markets are based on current bid prices.
1.3.2 The Group classifi es its fi nancial liabilities in under mentioned categories.
(a) Deposits held at amortised cost
Deposits are recognised initially at fair value and are subsequently stated at amortised cost. Any differences between net proceeds
and the redemption value are recognised in the income statement over the period of the borrowing using the effective yield
method.
(b) Deposits held at fair value through profi t or loss
These deposits are fair valued by discounting the value using an appropriate discount rate determined with reference to quoted
rates on market instruments with similar credit characteristics and maturities.
1.3.3 Offsetting fi nancial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable
right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously.
1.3.4 Derivative fi nancial instruments and hedge accounting
Derivative fi nancial instruments are restricted to forward foreign exchange contracts which are initially recognised in the balance
sheet at fair value (including transaction costs) and are subsequently re-measured at their fair value. Fair values are obtained from
quoted market prices. All contracts are carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivatives are held only for hedging purposes and not for trading.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (ie, the fair value of the consideration
given or received) unless the fair value of that instrument is evidenced by comparison with other observable current market
transactions in the same instrument (ie, without modifi cation or repackaging) or based on a valuation technique whose variables
include only data from observable markets.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) fair value
hedges (hedges of the fair value of recognised assets or liabilities or fi rm commitments); or, (2) cash fl ow hedges (hedges of highly
probable future cash fl ows attributable to a recognised asset or liability, or a forecasted transaction). Hedge accounting is used
for derivatives designated in this way provided certain criteria are met.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash fl ows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges are recognised
in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect profi t or
loss (for example, when the forecast sale that is hedged takes place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised
in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the income statement.
4746
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
1.2 Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including: cash
and non-restricted balances with central banks, treasury bills and other eligible bills, loans and advances to banks, amounts due
from other banks and short-term government securities. Cash and cash equivalents are stated at cost which approximates fair
value due to the short-term nature of these instruments.
1.3 Financial instruments
1.3.1 The Group classifi es its fi nancial assets in the under meantioned categories. Management determines the classifi cation of its
investments at initial recognition and re-evaluates this classifi cation at each reporting date. Financial assets are initially recognised
at fair value plus transaction costs for all fi nancial assets not carried at fair value through profi t or loss.
(a) Financial assets at fair value through profi t or loss
This category has two sub-categories: fi nancial assets held for trading, and those designated at fair value through profi t or loss at
inception. A fi nancial asset is classifi ed as held for trading if acquired principally for the purpose of selling in the short-term or if
so designated by management. Derivatives are categorised as held for trading unless they are designated as hedges.
Purchases and sales of fi nancial assets at fair value through profi t or loss are recognised on trade date, being the date on which
the Group commits to purchase or sell the asset.
(b) Loans and advances
Loans and advances are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market.
They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the advance.
Loans are recognised when cash is advanced to the borrowers.
(c) Held-to-maturity investments
Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturities that the
Group’s management has the positive intention and ability to hold to maturity. Were the Group to sell other than an insignifi cant
amount of held-to-maturity assets, the entire category would be tainted and reclassifi ed as available-for-sale.
(d) Available-for-sale
The Group currently has no available for sale asstes. Available-for-sale investments are those intended to be held on a continuing
basis, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.
Purchases and sales of fi nancial assets at fair value through profi t or loss are recognised on trade date. Financial assets are
derecognised when the rights to receive cash fl ows from the fi nancial assets have expired or where the Group has transferred
substantially all risks and rewards of ownership.
Financial assets at fair value through profi t or loss are subsequently carried at fair value. Loans and advances are carried at
amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of the ‘fi nancial assets
at fair value through profi t or loss’ category are included in the income statement in the period in which they arise.
The fair values of quoted investments in active markets are based on current bid prices.
1.3.2 The Group classifi es its fi nancial liabilities in under mentioned categories.
(a) Deposits held at amortised cost
Deposits are recognised initially at fair value and are subsequently stated at amortised cost. Any differences between net proceeds
and the redemption value are recognised in the income statement over the period of the borrowing using the effective yield
method.
(b) Deposits held at fair value through profi t or loss
These deposits are fair valued by discounting the value using an appropriate discount rate determined with reference to quoted
rates on market instruments with similar credit characteristics and maturities.
1.3.3 Offsetting fi nancial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable
right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously.
1.3.4 Derivative fi nancial instruments and hedge accounting
Derivative fi nancial instruments are restricted to forward foreign exchange contracts which are initially recognised in the balance
sheet at fair value (including transaction costs) and are subsequently re-measured at their fair value. Fair values are obtained from
quoted market prices. All contracts are carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivatives are held only for hedging purposes and not for trading.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (ie, the fair value of the consideration
given or received) unless the fair value of that instrument is evidenced by comparison with other observable current market
transactions in the same instrument (ie, without modifi cation or repackaging) or based on a valuation technique whose variables
include only data from observable markets.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) fair value
hedges (hedges of the fair value of recognised assets or liabilities or fi rm commitments); or, (2) cash fl ow hedges (hedges of highly
probable future cash fl ows attributable to a recognised asset or liability, or a forecasted transaction). Hedge accounting is used
for derivatives designated in this way provided certain criteria are met.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash fl ows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges are recognised
in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect profi t or
loss (for example, when the forecast sale that is hedged takes place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised
in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the income statement.
4746
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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1.4 Impairment of advances
The estimation of allowances for impairments is inherently uncertain and depends on many factors, including general economic
conditions, structural changes within industries, changes in individual customer circumstances and other external factors such as
legal requirements, regulatory specifi cations and governmental policy changes.
Loans and advances are stated net of identifi ed and incurred but unidentifi ed impairments.
Loans and advances are considered impaired if, and only if, there is objective evidence of impairment as a result of events that
occurred after initial asset recognition (known as loss events) and these loss events have an impact on the assets’ estimated future
cash fl ows that can be reliably measured.
In determining whether a loss event has occurred, loans and advances are subjected to regular evaluations that take cognisance
of inter alia past experience of economic conditions that remain relevant in the current context, overall client risk profi le and
payments record.
Historical loss experience is adjusted on the basis of observable data to refl ect the effects of current conditions that did not affect
the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do
not currently exist.
Objective evidence that loans and advances may be impaired, includes observable data that comes to the attention of the group
and may include the following loss events:
(a) A breach of contract, such as a default or delinquency in interest or principal payments.
(b) Observable data indicating that there is a measurable decrease in the estimated future cash fl ows from a group of fi nancial
assets since the initial recognition of those assets, although the decrease cannot yet be identifi ed with the individual fi nancial
assets in the group including:
Adverse changes in the payment status of borrowers in the group; or
National or local economic conditions that correlate with defaults on the assets in the group.
On a collective basis, the group assesses whether objective evidence of impairment exists for groups of fi nancial assets with
similar repayment terms. If there is objective evidence that an impairment loss on loans and advances has been incurred, the
amount of the loss is measured as the difference between the assets’ carrying amounts and the present value of estimated future
cash fl ows (excluding future credit losses that have not yet been incurred) discounted at the respective fi nancial assets’ original
effective interest rates (the recoverable amount).
1.4.1 Identifi ed impairment
Advances within the group all comprise a large number of small homogenous assets. Statistical techniques are used to calculate
impairment allowances collectively, based on historical default and recovery rates. These statistical analyses use as primary inputs
the extent to which accounts in the portfolio are in arrears and historical information on the eventual losses encountered from such
delinquent portfolios.
These statistics feed discounted cash fl ow models which have been developed for each of the loan products offered by the group.
The models are updated periodically in order to refl ect appropriate changes in inputs.
Models contain both judgemental and non-judgemental inputs. The extent of judgement utilised in models developed for new
loan products is greater than that for older products given the limited historical experience available for the new products.
In outline, the statistical analyses are performed on a portfolio basis as follows:
Loans and advances are monitored on a product basis, with each month’s advances being treated as a discrete portfolio,
on which an analysis of the run-off of recoveries, in period buckets, is performed in order to develop a historical base for
statistics on default.
These derived statistics, based on actual experience, are used in plotting values on a model curve that refl ects the risk
profi le of the portfolio.
Loans in arrears by more than 90 days are handed over for collection. Recoveries from these loans are regarded as
negligible as collateral is not required for the granting of advances in the current product range.
Upon impairment the accrual of interest income on the original term of the advance is discontinued, but the increase in the
present value of impaired advances due to the passage of time is reported as interest income.
1.4.2 Incurred but unidentifi ed impairment
In addition to the impairment estimated for assets with recognised objective evidence of impairment, an estimate is made
for impairments associated with those assets in the balance sheet that are impaired, but for which objective evidence is not
yet available.
The impairment calculation utilises the results of the statistical analyses referred to above to estimate the proportion
of assets in each portfolio that are likely to display objective evidence of impairment over the emergence period. The
emergence period is defi ned as the experience of the length of time that it takes for objective evidence to become
apparent after the asset has become impaired.
In considering the occurrence of a loss event over the life of a loan, the following judgemental assumptions have been
made: For one and three month products it is assumed that there is a constant risk of the loss event occurring at any point
in the life of the loan.
For six and twelve month loans the risk of occurrence of a loss event is plotted on a model curve that gives greater weight
to the probability of a loss event occurring earlier in the life of the loan.
The methodology and assumptions used for estimating future cash fl ows are reviewed regularly to reduce differences between
loss estimates and actual loss experience.
All impaired loans and advances are reviewed on a regular basis and any changes to the amount and timing of the expected
future cash fl ows compared to previous estimates will result in a change to the charges for impairment of loans and advances in
the income statement.
1.4.3 Loan write-offs
Short-term loans (and the related impairment allowance accounts) are normally written off in full for amounts in arrears for more
than 90 days. Long-term loans are written off 90 days after the loan has reached full maturity.
1.5 Inventory
Inventory is stated at the lower of the cost or net realisable value. Cost is determined using the fi rst-in, fi rst-out (FIFO) method.
Net realisable value is the estimate of the selling price in the ordinary course of business, less selling expenses. Inventory is carried
net of rebates. All inventory comprises fi nished goods.
1.6 Interest-free loans granted
Interest-free loans granted, with fi xed maturities, are stated at amortised cost. The redemption value is discounted to present
value using the borrowers incremental borrowing cost. The unwinding of the resulting discount value is recognised in the income
statement over the period of the borrowing. Interest free loans with no fi xed maturities are carried at cost net of impairment.
1.7 Current income tax
Income tax payable on profi ts, based on the applicable tax law in each jurisdiction, is recognised as an expense in the period in
which profi ts arise. The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable
that future taxable profi ts will be available against which these losses can be utilised.
1.8 Property and equipment
Land and buildings comprises a warehouse. All property and equipment is stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
4948
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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1.4 Impairment of advances
The estimation of allowances for impairments is inherently uncertain and depends on many factors, including general economic
conditions, structural changes within industries, changes in individual customer circumstances and other external factors such as
legal requirements, regulatory specifi cations and governmental policy changes.
Loans and advances are stated net of identifi ed and incurred but unidentifi ed impairments.
Loans and advances are considered impaired if, and only if, there is objective evidence of impairment as a result of events that
occurred after initial asset recognition (known as loss events) and these loss events have an impact on the assets’ estimated future
cash fl ows that can be reliably measured.
In determining whether a loss event has occurred, loans and advances are subjected to regular evaluations that take cognisance
of inter alia past experience of economic conditions that remain relevant in the current context, overall client risk profi le and
payments record.
Historical loss experience is adjusted on the basis of observable data to refl ect the effects of current conditions that did not affect
the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do
not currently exist.
Objective evidence that loans and advances may be impaired, includes observable data that comes to the attention of the group
and may include the following loss events:
(a) A breach of contract, such as a default or delinquency in interest or principal payments.
(b) Observable data indicating that there is a measurable decrease in the estimated future cash fl ows from a group of fi nancial
assets since the initial recognition of those assets, although the decrease cannot yet be identifi ed with the individual fi nancial
assets in the group including:
Adverse changes in the payment status of borrowers in the group; or
National or local economic conditions that correlate with defaults on the assets in the group.
On a collective basis, the group assesses whether objective evidence of impairment exists for groups of fi nancial assets with
similar repayment terms. If there is objective evidence that an impairment loss on loans and advances has been incurred, the
amount of the loss is measured as the difference between the assets’ carrying amounts and the present value of estimated future
cash fl ows (excluding future credit losses that have not yet been incurred) discounted at the respective fi nancial assets’ original
effective interest rates (the recoverable amount).
1.4.1 Identifi ed impairment
Advances within the group all comprise a large number of small homogenous assets. Statistical techniques are used to calculate
impairment allowances collectively, based on historical default and recovery rates. These statistical analyses use as primary inputs
the extent to which accounts in the portfolio are in arrears and historical information on the eventual losses encountered from such
delinquent portfolios.
These statistics feed discounted cash fl ow models which have been developed for each of the loan products offered by the group.
The models are updated periodically in order to refl ect appropriate changes in inputs.
Models contain both judgemental and non-judgemental inputs. The extent of judgement utilised in models developed for new
loan products is greater than that for older products given the limited historical experience available for the new products.
In outline, the statistical analyses are performed on a portfolio basis as follows:
Loans and advances are monitored on a product basis, with each month’s advances being treated as a discrete portfolio,
on which an analysis of the run-off of recoveries, in period buckets, is performed in order to develop a historical base for
statistics on default.
These derived statistics, based on actual experience, are used in plotting values on a model curve that refl ects the risk
profi le of the portfolio.
Loans in arrears by more than 90 days are handed over for collection. Recoveries from these loans are regarded as
negligible as collateral is not required for the granting of advances in the current product range.
Upon impairment the accrual of interest income on the original term of the advance is discontinued, but the increase in the
present value of impaired advances due to the passage of time is reported as interest income.
1.4.2 Incurred but unidentifi ed impairment
In addition to the impairment estimated for assets with recognised objective evidence of impairment, an estimate is made
for impairments associated with those assets in the balance sheet that are impaired, but for which objective evidence is not
yet available.
The impairment calculation utilises the results of the statistical analyses referred to above to estimate the proportion
of assets in each portfolio that are likely to display objective evidence of impairment over the emergence period. The
emergence period is defi ned as the experience of the length of time that it takes for objective evidence to become
apparent after the asset has become impaired.
In considering the occurrence of a loss event over the life of a loan, the following judgemental assumptions have been
made: For one and three month products it is assumed that there is a constant risk of the loss event occurring at any point
in the life of the loan.
For six and twelve month loans the risk of occurrence of a loss event is plotted on a model curve that gives greater weight
to the probability of a loss event occurring earlier in the life of the loan.
The methodology and assumptions used for estimating future cash fl ows are reviewed regularly to reduce differences between
loss estimates and actual loss experience.
All impaired loans and advances are reviewed on a regular basis and any changes to the amount and timing of the expected
future cash fl ows compared to previous estimates will result in a change to the charges for impairment of loans and advances in
the income statement.
1.4.3 Loan write-offs
Short-term loans (and the related impairment allowance accounts) are normally written off in full for amounts in arrears for more
than 90 days. Long-term loans are written off 90 days after the loan has reached full maturity.
1.5 Inventory
Inventory is stated at the lower of the cost or net realisable value. Cost is determined using the fi rst-in, fi rst-out (FIFO) method.
Net realisable value is the estimate of the selling price in the ordinary course of business, less selling expenses. Inventory is carried
net of rebates. All inventory comprises fi nished goods.
1.6 Interest-free loans granted
Interest-free loans granted, with fi xed maturities, are stated at amortised cost. The redemption value is discounted to present
value using the borrowers incremental borrowing cost. The unwinding of the resulting discount value is recognised in the income
statement over the period of the borrowing. Interest free loans with no fi xed maturities are carried at cost net of impairment.
1.7 Current income tax
Income tax payable on profi ts, based on the applicable tax law in each jurisdiction, is recognised as an expense in the period in
which profi ts arise. The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable
that future taxable profi ts will be available against which these losses can be utilised.
1.8 Property and equipment
Land and buildings comprises a warehouse. All property and equipment is stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
4948
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is
probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, as follows:
Banking application hardware 3 - 5 years
Automated teller machines 8 years
Computer equipment 3 - 5 years
Offi ce equipment 5 - 8 years
Motor vehicles 5 years
Buildings 25 years
The assets’ residual values and useful lives are reviewed and adjusted if appropriate, annually.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in the income
statement.
1.9 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifi able assets
of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating
units for the purpose of impairment testing. Each of those cash-generating units is represented by each primary reporting segment
(see Note 3).
(b) Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specifi c
software.
Costs associated with developing or maintaining computer software programs are recognised as an expense as incurred. Costs
that are directly associated with the production of identifi able and unique software products controlled by the Group, and that will
probably generate economic benefi ts exceeding costs beyond one year, are recognised as intangible assets. Direct costs include
software development employee costs and an appropriate portion of relevant overheads.
Computer software is amortised over its useful life as follows:
Banking application software 6 years
Server software 3 - 5 years
Desktop application software 2 - 4 years
The assets’ useful lives are reviewed and adjusted, if appropriate, annually.
1.10 Impairment of non-current assets (property and equipment, computer software)
Equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount
of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use.
1.11 Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts for fi nancial reporting purposes. Deferred income tax is determined using tax laws
and rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
The principal temporary differences arise from depreciation of property and equipment, revaluation of certain fi nancial assets and
liabilities and tax losses carried forward. Deferred tax assets are raised only to the extent that it is probable that future taxable
income will be available against which the unused tax losses can be utilised.
Deferred tax related to fair value measurement of cash fl ow hedges is also credited or charged directly to equity and is subsequently
recognised in the income statement together with the deferred gain or loss. A deferred tax asset is raised on unutilised secondary
tax on companies (STC) credits, to the extent that these will be used in future years.
1.12 Provisions
Provisions are recognised when:
the group has a present legal or constructive obligation as a result of past events;
it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation; and
a reliable estimate of the amount of the obligation can be made.
1.13 Share capital
(a) Share issue costs
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity
as a deduction, net of tax, from the proceeds.
(b) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s shareholders.
Dividends for the year that are declared after the balance sheet date are dealt with in the directors’ report.
(c) Treasury shares
Where the Company or other members of the Group purchase the Company’s equity share capital, the consideration paid is
deducted from total shareholders’ equity as shares held by the group until they are cancelled or sold.
1.14 Employee benefi ts
(a) Pension obligations
The Group contributes to a provident fund classifi ed as a defi ned contribution fund.
For defi ned contribution plans, the Group pays fi xed contributions to publicly or privately administered pension insurance plans
on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been
paid. The contributions are recognised as employee benefi t expense when they are due. Prepaid contributions are recognised as
an asset to the extent that a cash refund or a reduction in the future payments is available.
(b) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted on grant date, excluding the impact of any non-market vesting
conditions (for example, profi tability and sales growth targets). Non-market vesting conditions are included in assumptions about
the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of
the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if
any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.
5150
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is
probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, as follows:
Banking application hardware 3 - 5 years
Automated teller machines 8 years
Computer equipment 3 - 5 years
Offi ce equipment 5 - 8 years
Motor vehicles 5 years
Buildings 25 years
The assets’ residual values and useful lives are reviewed and adjusted if appropriate, annually.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in the income
statement.
1.9 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifi able assets
of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating
units for the purpose of impairment testing. Each of those cash-generating units is represented by each primary reporting segment
(see Note 3).
(b) Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specifi c
software.
Costs associated with developing or maintaining computer software programs are recognised as an expense as incurred. Costs
that are directly associated with the production of identifi able and unique software products controlled by the Group, and that will
probably generate economic benefi ts exceeding costs beyond one year, are recognised as intangible assets. Direct costs include
software development employee costs and an appropriate portion of relevant overheads.
Computer software is amortised over its useful life as follows:
Banking application software 6 years
Server software 3 - 5 years
Desktop application software 2 - 4 years
The assets’ useful lives are reviewed and adjusted, if appropriate, annually.
1.10 Impairment of non-current assets (property and equipment, computer software)
Equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount
of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use.
1.11 Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts for fi nancial reporting purposes. Deferred income tax is determined using tax laws
and rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
The principal temporary differences arise from depreciation of property and equipment, revaluation of certain fi nancial assets and
liabilities and tax losses carried forward. Deferred tax assets are raised only to the extent that it is probable that future taxable
income will be available against which the unused tax losses can be utilised.
Deferred tax related to fair value measurement of cash fl ow hedges is also credited or charged directly to equity and is subsequently
recognised in the income statement together with the deferred gain or loss. A deferred tax asset is raised on unutilised secondary
tax on companies (STC) credits, to the extent that these will be used in future years.
1.12 Provisions
Provisions are recognised when:
the group has a present legal or constructive obligation as a result of past events;
it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation; and
a reliable estimate of the amount of the obligation can be made.
1.13 Share capital
(a) Share issue costs
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity
as a deduction, net of tax, from the proceeds.
(b) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s shareholders.
Dividends for the year that are declared after the balance sheet date are dealt with in the directors’ report.
(c) Treasury shares
Where the Company or other members of the Group purchase the Company’s equity share capital, the consideration paid is
deducted from total shareholders’ equity as shares held by the group until they are cancelled or sold.
1.14 Employee benefi ts
(a) Pension obligations
The Group contributes to a provident fund classifi ed as a defi ned contribution fund.
For defi ned contribution plans, the Group pays fi xed contributions to publicly or privately administered pension insurance plans
on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been
paid. The contributions are recognised as employee benefi t expense when they are due. Prepaid contributions are recognised as
an asset to the extent that a cash refund or a reduction in the future payments is available.
(b) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted on grant date, excluding the impact of any non-market vesting
conditions (for example, profi tability and sales growth targets). Non-market vesting conditions are included in assumptions about
the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of
the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if
any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.
5150
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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1.15 Foreign currency translation
(a) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in Rands,
which is the Group’s functional and presentation currency. The fi nancial statements of all the subsidiaries are also presented in Rands.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges. Translation differences on
non-monetary items are reported as part of the fair value gain or loss.
1.16 Revenue recognition
1.16.1 Interest income and expense
Interest income and expense are recognised in the income statement for all instruments measured at amortised cost using
the effective interest method.
Refer to note 21 for interest income.
The effective interest method is a method of calculating the amortised cost of a fi nancial asset or a fi nancial liability and
of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the fi nancial instrument or, when
appropriate, a shorter period to the net carrying amount of the fi nancial asset or fi nancial liability. When calculating the
effective interest rate, the Group estimates cash fl ows considering all contractual terms of the fi nancial instrument (for
example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.
Once a fi nancial asset or a group of similar fi nancial assets has been written down as a result of an impairment loss, interest
income is recognised using the rate of interest used to discount the future cash fl ows for the purpose of measuring the
impairment loss.
1.16.2 Fee and commission income
Fees and commissions are recognised on an accrual basis when the service has been provided.
1.16.3 Non-banking sales
Non-banking sales represent the net sales value of all products sold to third parties after the deduction of trade discounts.
Revenue is recognised when risks and rewards of ownership have been transferred to the customer. Revenue is recognised
net of value added tax.
1.17 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different from those of other business segments.
1.18 Leases
(a) Where a group company is the lessee
Leases where a signifi cant portion of the risks and rewards of ownership are retained by the lessor, are classifi ed as operating leases.
Payments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on
a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by
way of penalty is recognised as an expense in the period in which termination takes place.
(b) Where a group company is the lessor
Rental from the sub-letting of leased premises is recognised on a straight-line basis over the lease term.
1.19 Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the
Group’s accounting periods beginning on or after 1 January 2006 or later periods but which the Group has not early adopted, as
follows:
Applicable and effective for the Group for year ends beginning on 1 January 2006:
IAS 39 (Amendments), Financial Instruments : Recognition and Measurement & IFRS 4, Insurance contracts.
– Cash fl ow hedge accounting of forecast intragroup transactions:
The amendment would allow the designation as a hedged item in the consolidated fi nancial statements of the Group
for the foreign currency risk of a highly probable forecast intragroup transaction under certain conditions.
– Financial guarantee contracts:
The amendment would permit the measurement of a fi nancial guarantee contract initially at fair value and subsequently
at the higher of the amount recognised in terms of IAS 37 (Provisions) and the amount initially recognised less any
cumulative amortisation.
– Fair value option:
The amendment restricts the extent to which the fair value option currently available in IAS 39 without restrictions can
be applied to the Group in designating any fi nancial asset or fi nancial liability at fair value through profi t or loss.
The impact of these amendments is not considered to be signifi cant. The internal criteria applied within the Group for applying
the fair value option under the current IAS 39 is restrictive enough that the amendment is unlikely to reduce the Group’s current
usage of the option.
5352
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
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Fe
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20
06
1.15 Foreign currency translation
(a) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in Rands,
which is the Group’s functional and presentation currency. The fi nancial statements of all the subsidiaries are also presented in Rands.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges. Translation differences on
non-monetary items are reported as part of the fair value gain or loss.
1.16 Revenue recognition
1.16.1 Interest income and expense
Interest income and expense are recognised in the income statement for all instruments measured at amortised cost using
the effective interest method.
Refer to note 21 for interest income.
The effective interest method is a method of calculating the amortised cost of a fi nancial asset or a fi nancial liability and
of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the fi nancial instrument or, when
appropriate, a shorter period to the net carrying amount of the fi nancial asset or fi nancial liability. When calculating the
effective interest rate, the Group estimates cash fl ows considering all contractual terms of the fi nancial instrument (for
example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or
received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.
Once a fi nancial asset or a group of similar fi nancial assets has been written down as a result of an impairment loss, interest
income is recognised using the rate of interest used to discount the future cash fl ows for the purpose of measuring the
impairment loss.
1.16.2 Fee and commission income
Fees and commissions are recognised on an accrual basis when the service has been provided.
1.16.3 Non-banking sales
Non-banking sales represent the net sales value of all products sold to third parties after the deduction of trade discounts.
Revenue is recognised when risks and rewards of ownership have been transferred to the customer. Revenue is recognised
net of value added tax.
1.17 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different from those of other business segments.
1.18 Leases
(a) Where a group company is the lessee
Leases where a signifi cant portion of the risks and rewards of ownership are retained by the lessor, are classifi ed as operating leases.
Payments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on
a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by
way of penalty is recognised as an expense in the period in which termination takes place.
(b) Where a group company is the lessor
Rental from the sub-letting of leased premises is recognised on a straight-line basis over the lease term.
1.19 Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the
Group’s accounting periods beginning on or after 1 January 2006 or later periods but which the Group has not early adopted, as
follows:
Applicable and effective for the Group for year ends beginning on 1 January 2006:
IAS 39 (Amendments), Financial Instruments : Recognition and Measurement & IFRS 4, Insurance contracts.
– Cash fl ow hedge accounting of forecast intragroup transactions:
The amendment would allow the designation as a hedged item in the consolidated fi nancial statements of the Group
for the foreign currency risk of a highly probable forecast intragroup transaction under certain conditions.
– Financial guarantee contracts:
The amendment would permit the measurement of a fi nancial guarantee contract initially at fair value and subsequently
at the higher of the amount recognised in terms of IAS 37 (Provisions) and the amount initially recognised less any
cumulative amortisation.
– Fair value option:
The amendment restricts the extent to which the fair value option currently available in IAS 39 without restrictions can
be applied to the Group in designating any fi nancial asset or fi nancial liability at fair value through profi t or loss.
The impact of these amendments is not considered to be signifi cant. The internal criteria applied within the Group for applying
the fair value option under the current IAS 39 is restrictive enough that the amendment is unlikely to reduce the Group’s current
usage of the option.
5352
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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3. SEGMENTAL REPORTING Primary reporting format – business segments During the year the group conducted operations in two main business areas – banking and wholesale distribution of
consumer goods.
2006
2005
The following amendments to standards and interpretations are not affect to the Group’s reported results or fi nancial position.
IAS 19 (Amendment) – Employee Benefi ts.
IAS 21 (Amendment) – The Effect of Changes in a Foreign Operation.
IFRS 6 (Amendment) – Exploration for and Evaluation of Mineral Resources.
IFRS 1 (Amendment) – First-time Adoption of International Financial Reporting Standards and IFRS 6 (Amendment),
(Amendment) Exploration for and Evaluation of Mineral Resources.
IFRIC 4 – Determining whether an Arrangement contains a Lease.
IFRIC 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds.
IFRIC 6 – Liabilities arising from Participating in a Specifi c Market – Waste Electrical and Electronic Equipment.
IFRIC 7 – Applying the Restated Approach under IAS 29 : Financial Reporting in Hyperinfl ationary Economies.
IFRIC 8 – Scope of IFRS 2.
IFRIC 9 – Reassessment of Embedded derivatives.
Applicable and effective for the Group for year ends beginning on 1 January 2007.
IFRS 7 – Financial Instruments: Disclosures, and a complementary Amendment to IAS 1, Presentation of Financial Statements
– Capital Disclosures. IFRS 7 introduces new disclosures to improve the information about fi nancial instruments. It requires
the disclosure of qualitative and quantitative information about exposure to risks arising from fi nancial instruments, including
specifi ed minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market
risk. It replaces IAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and disclosure
requirements in IAS 32, Financial Instruments: Disclosure and Presentation. The amendment to IAS 1 introduces disclosures
about the level of an entity’s capital and how it manages capital. Management is currently assessing the potential impact of
the Standard on the results of the Group. It is believed that the Standard will not impact the results of the Group, but will
result in potentially more disclosure than what is currently provided in the Group’s annual fi nancial statements.
2. CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next fi nancial
year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Impairment losses on loans and advances
The Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment
loss should be recorded in the income statement, the Group makes judgements as to whether there is any observable data
indicating that there is a measurable decrease in the estimated future cash fl ows from a portfolio of loans before the decrease
can be identifi ed with an individual loan in that portfolio. This evidence may include observable data indicating that there has
been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate
with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk
characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash fl ows. The
methodology and assumptions used for estimating both the amount and timing of future cash fl ows are reviewed regularly to
reduce any differences between loss estimates and actual loss experience. To the extent that the default modelling rates increase
or decrease by 5 percent, the provision would be estimated R1 620 000 higher or R885 000 lower.
Adjustment for Wholesale intra-segment Banking distribution items Total
Year ended 28 February 2006 R’000 R’000 R’000 R’000 Revenues 830 157 131 368 (922) 960 603 Segment earnings 115 719 (438) - 115 281 Segment headline earnings 116 860 (468) - 116 392 Segment assets 1 246 970 14 158 (9 856) 1 251 272 Segment liabilities 678 968 18 344 (9 856) 687 456 Capital expenditure 72 190 204 - 72 394 Depreciation* 37 522 73 - 37 595 Amortisation* 27 111 - - 27 111
Year ended 28 February 2005 Revenues 556 528 118 039 (1 127) 673 440 Segment earnings 69 334 (1 955) - 67 379 Segment headline earnings 71 466 (1 955) - 69 511 Segment assets 803 589 11 942 (10 317) 805 214 Segment liabilities 326 423 15 690 (10 317) 331 796 Capital expenditure 82 551 1 505 - 84 056 Depreciation* 37 852 53 - 37 905 Amortisation* 13 296 - - 13 296 Secondary reporting format No secondary geographical segment information is disclosed as the company’s business for the year ended 28 February 2006 was
all conducted within the Republic of South Africa.
* In terms of the revised IAS 38 ”Intangible assets”, computer software that is not an integral part of the related computer hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has been reallocated from property and equipment to intangible assets.
5554
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
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NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
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Fe
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20
06
3. SEGMENTAL REPORTING Primary reporting format – business segments During the year the group conducted operations in two main business areas – banking and wholesale distribution of
consumer goods.
2006
2005
The following amendments to standards and interpretations are not affect to the Group’s reported results or fi nancial position.
IAS 19 (Amendment) – Employee Benefi ts.
IAS 21 (Amendment) – The Effect of Changes in a Foreign Operation.
IFRS 6 (Amendment) – Exploration for and Evaluation of Mineral Resources.
IFRS 1 (Amendment) – First-time Adoption of International Financial Reporting Standards and IFRS 6 (Amendment),
(Amendment) Exploration for and Evaluation of Mineral Resources.
IFRIC 4 – Determining whether an Arrangement contains a Lease.
IFRIC 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds.
IFRIC 6 – Liabilities arising from Participating in a Specifi c Market – Waste Electrical and Electronic Equipment.
IFRIC 7 – Applying the Restated Approach under IAS 29 : Financial Reporting in Hyperinfl ationary Economies.
IFRIC 8 – Scope of IFRS 2.
IFRIC 9 – Reassessment of Embedded derivatives.
Applicable and effective for the Group for year ends beginning on 1 January 2007.
IFRS 7 – Financial Instruments: Disclosures, and a complementary Amendment to IAS 1, Presentation of Financial Statements
– Capital Disclosures. IFRS 7 introduces new disclosures to improve the information about fi nancial instruments. It requires
the disclosure of qualitative and quantitative information about exposure to risks arising from fi nancial instruments, including
specifi ed minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market
risk. It replaces IAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and disclosure
requirements in IAS 32, Financial Instruments: Disclosure and Presentation. The amendment to IAS 1 introduces disclosures
about the level of an entity’s capital and how it manages capital. Management is currently assessing the potential impact of
the Standard on the results of the Group. It is believed that the Standard will not impact the results of the Group, but will
result in potentially more disclosure than what is currently provided in the Group’s annual fi nancial statements.
2. CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next fi nancial
year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Impairment losses on loans and advances
The Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment
loss should be recorded in the income statement, the Group makes judgements as to whether there is any observable data
indicating that there is a measurable decrease in the estimated future cash fl ows from a portfolio of loans before the decrease
can be identifi ed with an individual loan in that portfolio. This evidence may include observable data indicating that there has
been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate
with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk
characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash fl ows. The
methodology and assumptions used for estimating both the amount and timing of future cash fl ows are reviewed regularly to
reduce any differences between loss estimates and actual loss experience. To the extent that the default modelling rates increase
or decrease by 5 percent, the provision would be estimated R1 620 000 higher or R885 000 lower.
Adjustment for Wholesale intra-segment Banking distribution items Total
Year ended 28 February 2006 R’000 R’000 R’000 R’000 Revenues 830 157 131 368 (922) 960 603 Segment earnings 115 719 (438) - 115 281 Segment headline earnings 116 860 (468) - 116 392 Segment assets 1 246 970 14 158 (9 856) 1 251 272 Segment liabilities 678 968 18 344 (9 856) 687 456 Capital expenditure 72 190 204 - 72 394 Depreciation* 37 522 73 - 37 595 Amortisation* 27 111 - - 27 111
Year ended 28 February 2005 Revenues 556 528 118 039 (1 127) 673 440 Segment earnings 69 334 (1 955) - 67 379 Segment headline earnings 71 466 (1 955) - 69 511 Segment assets 803 589 11 942 (10 317) 805 214 Segment liabilities 326 423 15 690 (10 317) 331 796 Capital expenditure 82 551 1 505 - 84 056 Depreciation* 37 852 53 - 37 905 Amortisation* 13 296 - - 13 296 Secondary reporting format No secondary geographical segment information is disclosed as the company’s business for the year ended 28 February 2006 was
all conducted within the Republic of South Africa.
* In terms of the revised IAS 38 ”Intangible assets”, computer software that is not an integral part of the related computer hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has been reallocated from property and equipment to intangible assets.
5554
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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G r o u p C o m p a n yG r o u p C o m p a n y
5756
2006 2005 2006 2005 R’000 R’000 R’000 R’000 4. CASH AND CASH EQUIVALENTS Cash on hand 173 914 95 689 - - Bank balances 322 520 189 378 - - Central Bank balances: Debentures 75 356 73 331 - - Mandatory reserve deposits with central bank 10 503 4 475 - - 582 293 362 873 - -
Debentures are short-term fi xed interest securities issued by the South African Reserve Bank.
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Listed preference shares 6 766 16 745 - - Fair value adjustment 383 97 - - Total at fair value 7 149 16 842 - -
6. LOANS AND ADVANCES Demand to one month 255 803 174 318 - - One to three months 128 679 53 833 - - Three months to one year 151 671 - - - More than one year 11 157 10 414 - -
547 310 238 565 - - Provision for impaired advances (92 649) (30 668) - - Net amount 454 661 207 897 - - Included within loans and advances is related accrued interest receivable of R13 319 000 (2005: 8 697 000) Effective interest rates per month (%) Demand to one month 18.3 19.6 - - One to three months 13.7 16.2 - - Three months to one year 11.5 - - - More than one year 0.9 0.9 - - Movement on provision for impaired advances: Balance at 1 March 2005 30 668 28 753 - - Unidentifi ed losses 45 364 2 170 - - Identifi ed losses 21 054 (255) - - Amounts recovered during the year (4 437) - - - Balance at 28 February 2006 92 649 30 668 - -
2006 2005 2006 2005 R’000 R’000 R’000 R’000
7. INVENTORY Finished consumer goods 11 800 8 635 - -
8. OTHER RECEIVABLES Prepayments 5 238 5 016 - - Rental deposits 1 692 1 812 - - Other 147 1 192 - -
7 077 8 020 - -
9. GROUP LOANS RECEIVABLE Loans to subsidiaries - - 100 000 101 513 Currently all loans are interest-free with no fi xed terms of repayment. 10. INVESTMENT IN SUBSIDIARIES Unlisted at cost - - 267 023 267 914 The directors’ valuation of the investment in subsidiaries is at least equal to the book value. The following information relates to the company’s interest in subsidiaries. Name Proportion Domicile owned Nature of business Capitec Bank Limited South Africa 100% Banking Keynes Rational Corporate Services (Pty) Limited South Africa 100% Dormant Smartfi n Financial Services (Pty) Limited South Africa 100% Dormant Finaid Financial Services (Pty) Limited South Africa 100% Dormant Keymatrix (Pty) Limited South Africa 100% Dormant Key Distributors (Pty) Limited South Africa 75% Wholesale distribution Capitec Bank Holdings Share Trust South Africa - Share incentive trust The holding company’s interest in the aggregate income earned and losses incurred after tax by the subsidiaries amounted to
R117.8 million (2005: R70.7 million) and R0.5 million (2005: R2.0 million) respectively. All holdings are in the ordinary share capital of the subsidiary concerned. Holdings are unchanged from 2005.
In terms of the shareholders agreement the holding company absorbs all losses incurred by Key Distributors (Pty) Limited including the minority’s share of these losses. In the event that Key Distributors begins to generate profi ts prior losses must be made good before the minorities can participate in their share of the profi ts.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
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06
G r o u p C o m p a n yG r o u p C o m p a n y
5756
2006 2005 2006 2005 R’000 R’000 R’000 R’000 4. CASH AND CASH EQUIVALENTS Cash on hand 173 914 95 689 - - Bank balances 322 520 189 378 - - Central Bank balances: Debentures 75 356 73 331 - - Mandatory reserve deposits with central bank 10 503 4 475 - - 582 293 362 873 - -
Debentures are short-term fi xed interest securities issued by the South African Reserve Bank.
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Listed preference shares 6 766 16 745 - - Fair value adjustment 383 97 - - Total at fair value 7 149 16 842 - -
6. LOANS AND ADVANCES Demand to one month 255 803 174 318 - - One to three months 128 679 53 833 - - Three months to one year 151 671 - - - More than one year 11 157 10 414 - -
547 310 238 565 - - Provision for impaired advances (92 649) (30 668) - - Net amount 454 661 207 897 - - Included within loans and advances is related accrued interest receivable of R13 319 000 (2005: 8 697 000) Effective interest rates per month (%) Demand to one month 18.3 19.6 - - One to three months 13.7 16.2 - - Three months to one year 11.5 - - - More than one year 0.9 0.9 - - Movement on provision for impaired advances: Balance at 1 March 2005 30 668 28 753 - - Unidentifi ed losses 45 364 2 170 - - Identifi ed losses 21 054 (255) - - Amounts recovered during the year (4 437) - - - Balance at 28 February 2006 92 649 30 668 - -
2006 2005 2006 2005 R’000 R’000 R’000 R’000
7. INVENTORY Finished consumer goods 11 800 8 635 - -
8. OTHER RECEIVABLES Prepayments 5 238 5 016 - - Rental deposits 1 692 1 812 - - Other 147 1 192 - -
7 077 8 020 - -
9. GROUP LOANS RECEIVABLE Loans to subsidiaries - - 100 000 101 513 Currently all loans are interest-free with no fi xed terms of repayment. 10. INVESTMENT IN SUBSIDIARIES Unlisted at cost - - 267 023 267 914 The directors’ valuation of the investment in subsidiaries is at least equal to the book value. The following information relates to the company’s interest in subsidiaries. Name Proportion Domicile owned Nature of business Capitec Bank Limited South Africa 100% Banking Keynes Rational Corporate Services (Pty) Limited South Africa 100% Dormant Smartfi n Financial Services (Pty) Limited South Africa 100% Dormant Finaid Financial Services (Pty) Limited South Africa 100% Dormant Keymatrix (Pty) Limited South Africa 100% Dormant Key Distributors (Pty) Limited South Africa 75% Wholesale distribution Capitec Bank Holdings Share Trust South Africa - Share incentive trust The holding company’s interest in the aggregate income earned and losses incurred after tax by the subsidiaries amounted to
R117.8 million (2005: R70.7 million) and R0.5 million (2005: R2.0 million) respectively. All holdings are in the ordinary share capital of the subsidiary concerned. Holdings are unchanged from 2005.
In terms of the shareholders agreement the holding company absorbs all losses incurred by Key Distributors (Pty) Limited including the minority’s share of these losses. In the event that Key Distributors begins to generate profi ts prior losses must be made good before the minorities can participate in their share of the profi ts.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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Offi ce
Land and Computer equipment
buildings* equipment and vehicles Total
Year ended 28 February 2006 R’000 R’000 R’000 R’000
Opening net book value 1 456 50 048 62 877 114 381
Additions 35 18 391 41 201 59 627
Disposals - (832) (1 625) (2 457)
Depreciation charge (40) (18 010) (19 545) (37 595)
Net book value at end of year 1 451 49 597 82 908 133 956
Cost 1 517 109 904 141 169 252 590
Accumulated depreciation (66) (60 307) (58 261) (118 634)
Net book value at end of year 1 451 49 597 82 908 133 956
Year ended 28 February 2005
Opening net book value - 42 512 40 211 82 723
Additions 1 482 29 322 41 956 72 760
Disposals - (335) (2 862) (3 197)
Depreciation charge (26) (21 451) (16 428) (37 905)
Net book value at end of year 1 456 50 048 62 877 114 381
Cost 1 482 94 337 103 230 199 049
Accumulated depreciation (26) (44 289) (40 353) (84 668)
Net book value at end of year 1 456 50 048 62 877 114 381
* The land and buildings are encumbered in terms of a mortgage bond (note 14).
* In terms of the revised IAS 38 ”Intangible assets”, computer software that is not an integral part of the related computer
hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has
been reallocated from property and equipment to intangible assets.
G r o u p C o m p a n y11. PROPERTY AND EQUIPMENT G r o u p
2006
2005
R’000 R’000 R’000 R’000
12. INTANGIBLE ASSETS Goodwill
Opening net book value - - - -
Impairment charge - - - -
Net book value at end of year - - - -
Cost 6 107 6 107 2 446 2 446
Accumulated impairment (6 107) (6 107) (2 446) (2 446)
Net book value at end of year - - - -
Computer software*
Opening net book value 62 032 64 032 - -
Additions 12 767 11 296 - -
Amortisation charge (27 111) (13 296) - -
Net book value at end of year 47 688 62 032 - -
Cost 98 406 85 639 - -
Accumulated amortisation (50 718) (23 607) - -
Net book value at end of year 47 688 62 032 - -
Total 47 688 62 032 - -
Computer software substantially consists of the primary banking application system.
* In terms of the revised IAS 38 “Intangible assets”, computer software that is not an integral part of the related computer
hardware should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has
been reallocated from property and equipment to intangible assets.
2006 2005 2006 2005
5958
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
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nd
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28
Fe
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06
Offi ce
Land and Computer equipment
buildings* equipment and vehicles Total
Year ended 28 February 2006 R’000 R’000 R’000 R’000
Opening net book value 1 456 50 048 62 877 114 381
Additions 35 18 391 41 201 59 627
Disposals - (832) (1 625) (2 457)
Depreciation charge (40) (18 010) (19 545) (37 595)
Net book value at end of year 1 451 49 597 82 908 133 956
Cost 1 517 109 904 141 169 252 590
Accumulated depreciation (66) (60 307) (58 261) (118 634)
Net book value at end of year 1 451 49 597 82 908 133 956
Year ended 28 February 2005
Opening net book value - 42 512 40 211 82 723
Additions 1 482 29 322 41 956 72 760
Disposals - (335) (2 862) (3 197)
Depreciation charge (26) (21 451) (16 428) (37 905)
Net book value at end of year 1 456 50 048 62 877 114 381
Cost 1 482 94 337 103 230 199 049
Accumulated depreciation (26) (44 289) (40 353) (84 668)
Net book value at end of year 1 456 50 048 62 877 114 381
* The land and buildings are encumbered in terms of a mortgage bond (note 14).
* In terms of the revised IAS 38 ”Intangible assets”, computer software that is not an integral part of the related computer
hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has
been reallocated from property and equipment to intangible assets.
G r o u p C o m p a n y11. PROPERTY AND EQUIPMENT G r o u p
2006
2005
R’000 R’000 R’000 R’000
12. INTANGIBLE ASSETS Goodwill
Opening net book value - - - -
Impairment charge - - - -
Net book value at end of year - - - -
Cost 6 107 6 107 2 446 2 446
Accumulated impairment (6 107) (6 107) (2 446) (2 446)
Net book value at end of year - - - -
Computer software*
Opening net book value 62 032 64 032 - -
Additions 12 767 11 296 - -
Amortisation charge (27 111) (13 296) - -
Net book value at end of year 47 688 62 032 - -
Cost 98 406 85 639 - -
Accumulated amortisation (50 718) (23 607) - -
Net book value at end of year 47 688 62 032 - -
Total 47 688 62 032 - -
Computer software substantially consists of the primary banking application system.
* In terms of the revised IAS 38 “Intangible assets”, computer software that is not an integral part of the related computer
hardware should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has
been reallocated from property and equipment to intangible assets.
2006 2005 2006 2005
5958
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
G r o u p C o m p a n yG r o u p C o m p a n y
R’000 R’000 R’000 R’000
13. DEFERRED INCOME TAX ASSETS Deferred income taxes are calculated on all temporary differences
under the liability method using an effective tax rate of 29% (2005 : 30%).
The movement on the deferred income tax account is as follows:
At beginning of year* 24 534 49 745 5 -
Tax effect on settlement of share options 8 088 4 700 - -
Rate change effect on settlement of share options (157) - - -
Cash fl ow hedges
Fair value measurement - 20 - -
Movement in deferred tax taken to income statement (25 817) (29 931) (5) 5
Utilisation of assessable losses (24 455) (33 138) - -
Movements due to other temporary differences (801) 3 087 - -
STC credits received 96 120 (5) 5
Rate change (657) - - -
At end of year 6 648 24 534 - 5
Deferred tax asset may be analysed as follows:
Assessable losses - 16 932 - -
Provisions and accruals* 7 339 7 086 - -
Capital allowances 503 396 - -
Prepayments (1 410) - - -
STC credits 216 120 - 5
6 648 24 534 - 5
The expected recovery of deferred tax is as follows:
Deferred tax asset to be recovered within 12 months 6 270 24 245 - 5
Deferred tax asset to be recovered after more than 12 months 378 289 - -
6 648 24 534 - 5
Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax
benefi t is probable.
* Refer to note 43 for the restatement of the comparative amount.
R’000 R’000 R’000 R’000
14. DEPOSITS AT AMORTISED COST Deposits from customers on demand 314 348 73 539 - -
Term deposits 223 546 148 873 - -
Within one month 12 585 7 648 - -
One to three months 2 080 1 042 - -
Three months to one year 8 054 1 772 -
More than one year 200 827 138 411 - -
537 894 222 412 - -
Effective interest rates per annum (%)
Demand to one month 9.1 9.8
One to three months 8.8 10.2
Three months to one year 9.6 11.8
More than one year 11.3 11.9
Term deposits include a mortgage bond of R1.2 million (2005 : R1.2 million) that is secured as stated in note 11.
The remainder of the deposits are unsecured.
15. DEPOSITS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS Term funding 52 149 52 185 - -
Within one month - - - -
One to three months 2 149 2 185 - -
Three months to one year - - - -
More than one year 50 000 50 000 - -
Fair value adjustment 4 953 6 098 - -
57 102 58 283 - -
The contractual interest rate on the funding is fi xed at 13.075% (2005: 13.075%) and the fair value thereof at 28 February 2006
was determined after applying a discount rate of 9.03% (2005 : 9.22%).
16. TRADE AND OTHER PAYABLES Trade payables 39 586 24 774 - 1
Accruals* 30 077 25 289 - -
Derivatives (note 41) 4 - - -
69 667 50 063 - 1
* Refer to note 43 for restatement of the comparative amount.
2006 2005 2006 2005 2006 2005 2006 2005
6160
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
G r o u p C o m p a n yG r o u p C o m p a n y
R’000 R’000 R’000 R’000
13. DEFERRED INCOME TAX ASSETS Deferred income taxes are calculated on all temporary differences
under the liability method using an effective tax rate of 29% (2005 : 30%).
The movement on the deferred income tax account is as follows:
At beginning of year* 24 534 49 745 5 -
Tax effect on settlement of share options 8 088 4 700 - -
Rate change effect on settlement of share options (157) - - -
Cash fl ow hedges
Fair value measurement - 20 - -
Movement in deferred tax taken to income statement (25 817) (29 931) (5) 5
Utilisation of assessable losses (24 455) (33 138) - -
Movements due to other temporary differences (801) 3 087 - -
STC credits received 96 120 (5) 5
Rate change (657) - - -
At end of year 6 648 24 534 - 5
Deferred tax asset may be analysed as follows:
Assessable losses - 16 932 - -
Provisions and accruals* 7 339 7 086 - -
Capital allowances 503 396 - -
Prepayments (1 410) - - -
STC credits 216 120 - 5
6 648 24 534 - 5
The expected recovery of deferred tax is as follows:
Deferred tax asset to be recovered within 12 months 6 270 24 245 - 5
Deferred tax asset to be recovered after more than 12 months 378 289 - -
6 648 24 534 - 5
Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax
benefi t is probable.
* Refer to note 43 for the restatement of the comparative amount.
R’000 R’000 R’000 R’000
14. DEPOSITS AT AMORTISED COST Deposits from customers on demand 314 348 73 539 - -
Term deposits 223 546 148 873 - -
Within one month 12 585 7 648 - -
One to three months 2 080 1 042 - -
Three months to one year 8 054 1 772 -
More than one year 200 827 138 411 - -
537 894 222 412 - -
Effective interest rates per annum (%)
Demand to one month 9.1 9.8
One to three months 8.8 10.2
Three months to one year 9.6 11.8
More than one year 11.3 11.9
Term deposits include a mortgage bond of R1.2 million (2005 : R1.2 million) that is secured as stated in note 11.
The remainder of the deposits are unsecured.
15. DEPOSITS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS Term funding 52 149 52 185 - -
Within one month - - - -
One to three months 2 149 2 185 - -
Three months to one year - - - -
More than one year 50 000 50 000 - -
Fair value adjustment 4 953 6 098 - -
57 102 58 283 - -
The contractual interest rate on the funding is fi xed at 13.075% (2005: 13.075%) and the fair value thereof at 28 February 2006
was determined after applying a discount rate of 9.03% (2005 : 9.22%).
16. TRADE AND OTHER PAYABLES Trade payables 39 586 24 774 - 1
Accruals* 30 077 25 289 - -
Derivatives (note 41) 4 - - -
69 667 50 063 - 1
* Refer to note 43 for restatement of the comparative amount.
2006 2005 2006 2005 2006 2005 2006 2005
6160
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
G r o u p C o m p a n yG r o u p C o m p a n y
6362
2006 2005 2006 2005 2006 2005 2006 2005 R’000 R’000 R’000 R’000 20. RESERVES The cash fl ow hedge reserve is released on recognition of the related hedged liability. An analysis of the movements in each category within reserves is presented below: Cash-fl ow hedge reserve At beginning of year - 45 - - Movements during the year: Losses from changes in fair value - (65) - - Deferred tax - 20 - -
At end of year - - - - General banking risk reserve At beginning of year 700 700 - - Tax rate change 10 - - - At end of year 710 700 - -
Total 710 700 - -
21. NET INTEREST INCOME Interest income Loan book 767 624 533 905 - - Bank balances 10 962 7 627 - - Central bank balances 5 316 2 450 - - 783 902 543 982 - - Interest expense Demand deposits (15 650) (2 619) - - Term deposits (24 414) (14 258) - - Foreign exchange contracts (15) (13) - - (40 079) (16 890) - - Net interest income 743 823 527 092 - -
Included within interest income is R3 314 000 (2005: Rnil) with respect of interest income accrued on impaired fi nancial assets. 22. NET IMPAIRMENT CHARGE ON LOANS AND ADVANCES Bad debts 54 181 55 608 - - Movement in impairment provision 61 981 1 915 - - Bad debts recovered (20 537) (18 274) - -
Net impairment charge 95 625 39 249 - -
All issued shares are fully paid.
7 192 841 (2005: 6 883 725) of the unissued shares are under the control of the directors until the next annual general meeting.
* The share incentive trust held shares in the group for the purpose of settling share options issued to employees in terms of
the group share incentive scheme. The shares are refl ected as a deduction against equity at cost to the group. During the
year a loss of R31 million, R23 million after tax (2005: R16 million, R11 million after tax) was realised on the settlement of
share options as refl ected in the statements of changes in shareholders’ equity.
R’000 R’000 R’000 R’000
17. PROVISIONS Provision for pending litigation
Opening balance 1 000 1 746 - -
Net release (700) (746) - -
Closing balance 300 1 000 - -
18. GROUP LOANS PAYABLE Loans from subsidiaries - - 4 326 5 139
Loans from subsidiaries are interest free and have no fi xed terms of repayment.
19. SHARE CAPITAL, SHARE PREMIUM AND GROUP SHARES Share capital
Authorised
Ordinary shares
100 000 000 shares of R0.01 each 1 000 1 000 1 000 1 000
Non-redeemable non-cumulative non-participating preference shares
100 000 000 shares of R0.01 each 1 000 - 1 000 -
2 000 1 000 2 000 1 000
Issued
Ordinary shares
71 928 412 shares of R0.01 each (2005: 71 928 412 shares of R0.01 each) 719 719 719 719
Share premium 347 146 347 146 347 146 347 146
Shares held by the group
Nil shares held at cost (2005: 1 486 339 )* - (17 524) - -
Total share capital premium and group shares 347 865 330 341 347 865 347 865
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
G r o u p C o m p a n yG r o u p C o m p a n y
6362
2006 2005 2006 2005 2006 2005 2006 2005 R’000 R’000 R’000 R’000 20. RESERVES The cash fl ow hedge reserve is released on recognition of the related hedged liability. An analysis of the movements in each category within reserves is presented below: Cash-fl ow hedge reserve At beginning of year - 45 - - Movements during the year: Losses from changes in fair value - (65) - - Deferred tax - 20 - -
At end of year - - - - General banking risk reserve At beginning of year 700 700 - - Tax rate change 10 - - - At end of year 710 700 - -
Total 710 700 - -
21. NET INTEREST INCOME Interest income Loan book 767 624 533 905 - - Bank balances 10 962 7 627 - - Central bank balances 5 316 2 450 - - 783 902 543 982 - - Interest expense Demand deposits (15 650) (2 619) - - Term deposits (24 414) (14 258) - - Foreign exchange contracts (15) (13) - - (40 079) (16 890) - - Net interest income 743 823 527 092 - -
Included within interest income is R3 314 000 (2005: Rnil) with respect of interest income accrued on impaired fi nancial assets. 22. NET IMPAIRMENT CHARGE ON LOANS AND ADVANCES Bad debts 54 181 55 608 - - Movement in impairment provision 61 981 1 915 - - Bad debts recovered (20 537) (18 274) - -
Net impairment charge 95 625 39 249 - -
All issued shares are fully paid.
7 192 841 (2005: 6 883 725) of the unissued shares are under the control of the directors until the next annual general meeting.
* The share incentive trust held shares in the group for the purpose of settling share options issued to employees in terms of
the group share incentive scheme. The shares are refl ected as a deduction against equity at cost to the group. During the
year a loss of R31 million, R23 million after tax (2005: R16 million, R11 million after tax) was realised on the settlement of
share options as refl ected in the statements of changes in shareholders’ equity.
R’000 R’000 R’000 R’000
17. PROVISIONS Provision for pending litigation
Opening balance 1 000 1 746 - -
Net release (700) (746) - -
Closing balance 300 1 000 - -
18. GROUP LOANS PAYABLE Loans from subsidiaries - - 4 326 5 139
Loans from subsidiaries are interest free and have no fi xed terms of repayment.
19. SHARE CAPITAL, SHARE PREMIUM AND GROUP SHARES Share capital
Authorised
Ordinary shares
100 000 000 shares of R0.01 each 1 000 1 000 1 000 1 000
Non-redeemable non-cumulative non-participating preference shares
100 000 000 shares of R0.01 each 1 000 - 1 000 -
2 000 1 000 2 000 1 000
Issued
Ordinary shares
71 928 412 shares of R0.01 each (2005: 71 928 412 shares of R0.01 each) 719 719 719 719
Share premium 347 146 347 146 347 146 347 146
Shares held by the group
Nil shares held at cost (2005: 1 486 339 )* - (17 524) - -
Total share capital premium and group shares 347 865 330 341 347 865 347 865
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
* In terms of the revised IAS 38 “Intangible assets”, computer software that is not an integral part of the related computer hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has been reallocated from property and equipment to intangible assets.
G r o u p C o m p a n y G r o u p C o m p a n y
2006 2005 2006 2005
6564
2006 2005 2006 2005 R’000 R’000 R’000 R’000 23. NET MOVEMENT IN FINANCIAL INSTRUMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets held at fair value through profi t or loss 286 97 - - Deposits held at fair value through profi t or loss 1 145 (6 098) - - 1 431 (6 001) - - 24. OPERATING PROFIT BEFORE TAX The following items have been included in arriving at operating profi t before tax: Loss on disposal of equipment 1 565 3 062 - - Depreciation on fi xed assets* Change in estimated useful lives of certain hardware components - 5 778 - - Depreciation based on original estimates 37 595 32 127 - - 37 595 37 905 - - Amortisation of computer software* Change in estimated useful life of software 10 000 - - - Amortisation based on original estimates 17 111 13 296 - -
27 111 13 296 - - Operating lease rentals Land and buildings 43 984 37 485 - - Offi ce equipment 2 988 3 730 - - 46 972 41 215 - - Income from sub-letting (1 129) (1 140) - - Auditors’ remuneration Audit fees – current year 1 270 1 182 - – under provision previous year 35 - - - Other services 127 282 - - 1 432 1 464 - - Directors’ emoluments (included in staff costs below) Executive Salaries 3 212 3 088 Fringe benefi ts 481 640 Bonuses 7 063 549 Non-executive Fees 1 320 1 130 Less: Paid by subsidiaries (12 076) (5 407) - -
R’000 R’000 R’000 R’000 24. OPERATING PROFIT BEFORE TAX – continued Staff costs Salaries and wages 187 547 146 399 - - Share-based payment 1 602 1 068 - - Social security cost 4 058 2 636 - - Training cost 13 173 12 911 - - Training refund (777) (585) - - 205 603 162 429 - - Consultancy fees relating to non-employees comprise: Managerial services 240 295 - - Secretarial services 432 366 137 168 Technical 2 164 2 455 - - Administrative 1 862 203 - - 4 698 3 319 137 168
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
* In terms of the revised IAS 38 “Intangible assets”, computer software that is not an integral part of the related computer hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has been reallocated from property and equipment to intangible assets.
G r o u p C o m p a n y G r o u p C o m p a n y
2006 2005 2006 2005
6564
2006 2005 2006 2005 R’000 R’000 R’000 R’000 23. NET MOVEMENT IN FINANCIAL INSTRUMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets held at fair value through profi t or loss 286 97 - - Deposits held at fair value through profi t or loss 1 145 (6 098) - - 1 431 (6 001) - - 24. OPERATING PROFIT BEFORE TAX The following items have been included in arriving at operating profi t before tax: Loss on disposal of equipment 1 565 3 062 - - Depreciation on fi xed assets* Change in estimated useful lives of certain hardware components - 5 778 - - Depreciation based on original estimates 37 595 32 127 - - 37 595 37 905 - - Amortisation of computer software* Change in estimated useful life of software 10 000 - - - Amortisation based on original estimates 17 111 13 296 - -
27 111 13 296 - - Operating lease rentals Land and buildings 43 984 37 485 - - Offi ce equipment 2 988 3 730 - - 46 972 41 215 - - Income from sub-letting (1 129) (1 140) - - Auditors’ remuneration Audit fees – current year 1 270 1 182 - – under provision previous year 35 - - - Other services 127 282 - - 1 432 1 464 - - Directors’ emoluments (included in staff costs below) Executive Salaries 3 212 3 088 Fringe benefi ts 481 640 Bonuses 7 063 549 Non-executive Fees 1 320 1 130 Less: Paid by subsidiaries (12 076) (5 407) - -
R’000 R’000 R’000 R’000 24. OPERATING PROFIT BEFORE TAX – continued Staff costs Salaries and wages 187 547 146 399 - - Share-based payment 1 602 1 068 - - Social security cost 4 058 2 636 - - Training cost 13 173 12 911 - - Training refund (777) (585) - - 205 603 162 429 - - Consultancy fees relating to non-employees comprise: Managerial services 240 295 - - Secretarial services 432 366 137 168 Technical 2 164 2 455 - - Administrative 1 862 203 - - 4 698 3 319 137 168
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
G r o u p C o m p a n y
R’000 R’000 R’000 R’000
25. INCOME TAX EXPENSE Current tax 25 015 1 739 2 557 1 633
Normal company tax 22 458 13 - -
Secondary tax on companies 2 557 1 726 2 557 1 633
Deferred tax 25 817 29 931 5 (5)
Normal company tax 25 913 30 051 - -
Secondary tax on companies (96) (120) 5 (5)
50 832 31 670 2 562 1 628
The tax for the year differs from the theoretical amount that
would arise using the basic tax rate as follows:
Profi t before tax 166 113 99 049 22 546 16 821
Tax calculated at a tax rate of 29% (2005: 30%) 48 173 29 715 6 538 5 047
Secondary tax on companies 2 461 1 606 2 562 1 628
Income not subject to tax (649) (295) (6 561) (5 058)
Expenses not deductible for tax purposes 18 48 - -
Unutilised tax loss 150 589 23 11
Capital gains tax 22 7 - -
Tax rate change 657 - - -
Tax charge 50 832 31 670 2 562 1 628
Estimated tax losses at year end available for utilisation
against future taxable income 9 729 65 652 171 92
Less: Applied in raising a deferred tax asset - (56 440) - -
Net calculated tax losses carried forward 9 729 9 212 171 92
Tax relief calculated at current tax rates 2 821 2 764 50 28
The utilisation of the tax losses is dependent on suffi cient future
taxable income being earned.
G r o u p
2006 2005 2006 2005
6766
2006 2005 R’000 R’000
26. ATTRIBUTABLE EARNINGS PER SHARE
Basic attributable earnings per share Basic attributable earnings per share is calculated by dividing the net profi t after tax attributable
to equity holders by the weighted average number of ordinary shares in issue during the year. The shares held in the company by the share incentive trust reduced the weighted average number of shares for the year.
Net profi t after tax attributable to shareholders 115 281 67 379
Weighted average number of ordinary shares in issue (‘000) 70 555 68 860
Basic attributable earnings per share (cents) 163.4 97.8
Diluted attributable earnings per share Diluted attributable earnings per share is calculated using the weighted average number of
ordinary shares in issue, adjusted to assume conversion of all potentially dilutive ordinary shares. For 2006 and 2005 potentially dilutive ordinary shares consisted only of share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company’s shares) based on the monetary value of the subscription rights attached to outstanding options. The number of
shares calculated above is compared with the number of shares that would have been issued
assuming the exercise of the share options. The difference is added to the denominator as an
issue of ordinary shares for no consideration. No adjustment is made to earnings (numerator).
Net profi t used to determine diluted attributable earnings per share 115 281 67 379
Weighted average number of ordinary shares in issue (‘000) 70 555 68 860 Adjustment for: – exercise of share options (‘000) 3 979 4 676
Weighted average number of ordinary shares for diluted attributable earnings per share (‘000) 74 534 73 536
Diluted attributable earnings per share (cents) 154.7 91.6
27. HEADLINE EARNINGS PER SHARE Basic headline earnings per share Net profi t attributable to shareholders 115 281 67 379
Non-headline items after tax
Disposal of equipment 1 111 2 132
Headline earnings 116 392 69 511
Headline earnings per share (cents) 165.0 100.9
Diluted headline earnings per share Headline earnings 116 392 69 511 Diluted headline earnings per share (cents) 156.2 94.5
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
rua
ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
G r o u p C o m p a n y
R’000 R’000 R’000 R’000
25. INCOME TAX EXPENSE Current tax 25 015 1 739 2 557 1 633
Normal company tax 22 458 13 - -
Secondary tax on companies 2 557 1 726 2 557 1 633
Deferred tax 25 817 29 931 5 (5)
Normal company tax 25 913 30 051 - -
Secondary tax on companies (96) (120) 5 (5)
50 832 31 670 2 562 1 628
The tax for the year differs from the theoretical amount that
would arise using the basic tax rate as follows:
Profi t before tax 166 113 99 049 22 546 16 821
Tax calculated at a tax rate of 29% (2005: 30%) 48 173 29 715 6 538 5 047
Secondary tax on companies 2 461 1 606 2 562 1 628
Income not subject to tax (649) (295) (6 561) (5 058)
Expenses not deductible for tax purposes 18 48 - -
Unutilised tax loss 150 589 23 11
Capital gains tax 22 7 - -
Tax rate change 657 - - -
Tax charge 50 832 31 670 2 562 1 628
Estimated tax losses at year end available for utilisation
against future taxable income 9 729 65 652 171 92
Less: Applied in raising a deferred tax asset - (56 440) - -
Net calculated tax losses carried forward 9 729 9 212 171 92
Tax relief calculated at current tax rates 2 821 2 764 50 28
The utilisation of the tax losses is dependent on suffi cient future
taxable income being earned.
G r o u p
2006 2005 2006 2005
6766
2006 2005 R’000 R’000
26. ATTRIBUTABLE EARNINGS PER SHARE
Basic attributable earnings per share Basic attributable earnings per share is calculated by dividing the net profi t after tax attributable
to equity holders by the weighted average number of ordinary shares in issue during the year. The shares held in the company by the share incentive trust reduced the weighted average number of shares for the year.
Net profi t after tax attributable to shareholders 115 281 67 379
Weighted average number of ordinary shares in issue (‘000) 70 555 68 860
Basic attributable earnings per share (cents) 163.4 97.8
Diluted attributable earnings per share Diluted attributable earnings per share is calculated using the weighted average number of
ordinary shares in issue, adjusted to assume conversion of all potentially dilutive ordinary shares. For 2006 and 2005 potentially dilutive ordinary shares consisted only of share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company’s shares) based on the monetary value of the subscription rights attached to outstanding options. The number of
shares calculated above is compared with the number of shares that would have been issued
assuming the exercise of the share options. The difference is added to the denominator as an
issue of ordinary shares for no consideration. No adjustment is made to earnings (numerator).
Net profi t used to determine diluted attributable earnings per share 115 281 67 379
Weighted average number of ordinary shares in issue (‘000) 70 555 68 860 Adjustment for: – exercise of share options (‘000) 3 979 4 676
Weighted average number of ordinary shares for diluted attributable earnings per share (‘000) 74 534 73 536
Diluted attributable earnings per share (cents) 154.7 91.6
27. HEADLINE EARNINGS PER SHARE Basic headline earnings per share Net profi t attributable to shareholders 115 281 67 379
Non-headline items after tax
Disposal of equipment 1 111 2 132
Headline earnings 116 392 69 511
Headline earnings per share (cents) 165.0 100.9
Diluted headline earnings per share Headline earnings 116 392 69 511 Diluted headline earnings per share (cents) 156.2 94.5
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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29. FINANCIAL RISK MANAGEMENT
Financial instruments carried on the balance sheet consist of cash and cash equivalents, loans and advances, other receivables,
investments, forward foreign exchange contracts, intergroup loans receivable and payable, deposits and current accounts and
trade and other payables.
Credit risk
Potential concentrations of credit risk exist principally in cash and cash equivalents. The Group only deposits cash surpluses with
major banks and asset managers of high credit standing.
Advances are disclosed net of impairment provisions. The group operates in the micro-fi nancing industry. The group’s exposure
to concentrated credit risk is low due to the nature and distribution of the loan book. Exposure to systemic credit risk is regarded
as being higher than normal banking activities due to the demographic credit characteristics of the client base. Measures taken
by the group to limit credit risk to acceptable levels include, inter alia, the application of standard credit acceptance procedures
to assess potential customers, daily monitoring of collectible balances at both branch and head offi ce level and monitoring by
the risk committee.
Geographical concentrations of assets, liabilities and off-balance sheet items
All the Group’s operating activities are situated within the Republic of South Africa.
Interest rate risk
The group operates within the ambit of the Usury Act exemption notice when considering interest rates on the advance of short-
term micro-loans.
The current group interest profi le is uncomplicated and is monitored by the Asset and Liability Committee. Effective rates on
loans and advances are disclosed in note 6 and on deposit balances are disclosed in notes 14 and 15.
Liquidity risk
The bank manages liquidity cautiously and operates an uncomplicated maturity profi le which is monitored by the asset and
liability committee. The short-term nature of the loan book relative to the size of the deposit book and the term nature of much
of the funding reduces the liquidity risk of the group.
The table below analyses assets and liabilities of the Group into relevant maturity groupings based on the remaining period at
balance sheet date to the contractual maturity date.
28. PROPOSED DIVIDEND PER SHARE At the annual general meeting on 25 May 2006 a dividend in respect of 2006 of 45 cents per share (2005: 30 cents per share)
amounting to a total dividend of R32.4 million (2005: R21.6 million) will be proposed. The secondary tax on companies in
respect of this dividend will amount to R4.0 million (2005: R2.7 million). These fi nancial statements do not refl ect this dividend
payable, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the year ending
28 February 2007, which is in line with recommended accounting policy.
29. FINANCIAL RISK MANAGEMENT – continued
Demand One to Three More Fair to one three months to than one value month months one year year adjustment TotalMaturities of assets and liabilities R’000 R’000 R’000 R’000 R’000 R’000
2006 Assets Loans to customers 255 803 128 679 151 671 11 157 - 547 310Cash and bank balances 506 937 - - - - 506 937Investments at fair value through profi t or loss* 6 766 - - - 383 7 149Treasury bills/Debentures 75 356 - - - - 75 356
Assets 844 862 128 679 151 671 11 157 383 1 136 752 Liabilities Liabilities to depositors 326 933 2 080 8 054 200 827 - 537 894Trade and other payables 69 967 - 17 905 4 588 - 92 460 Deposits at fair value through profi t or loss* - 2 149 - 50 000 4 953 57 102
Liabilities 396 900 4 229 25 959 255 415 4 953 687 456
Net liquidity gap 447 962 124 450 125 712 (244 258) (4 570) 449 296 Cumulative liquidity gap 447 962 572 412 698 124 453 866 449 296 449 296
2005Assets Loans to customers 174 318 53 833 - 10 414 - 238 565 Cash and bank balances 289 542 - - - - 289 542 Investments at fair value through profi t or loss* 16 745 - - - 97 16 842 Treasury bills/Debentures 73 331 - - - - 73 331
Assets 553 936 53 833 - 10 414 97 618 280
Liabilities Liabilities to depositors 81 187 1 042 1 772 138 411 - 222 412 Trade and other payables 51 101 - - - - 51 101 Deposits at fair value* - 2 185 - 50 000 6 098 58 283
Liabilities 132 288 3 227 1 772 188 411 6 098 331 796
Net liquidity gap 421 648 50 606 (1 772) (177 997) (6 001) 286 484
Cumulative liquidity gap 421 648 472 254 470 482 292 485 286 484 286 484
* Items held at fair value are stated at nominal values for the purposes of the maturity gap analysis.
The repricing dates for items above are not materially different from their contractual maturity dates.
6968
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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29. FINANCIAL RISK MANAGEMENT
Financial instruments carried on the balance sheet consist of cash and cash equivalents, loans and advances, other receivables,
investments, forward foreign exchange contracts, intergroup loans receivable and payable, deposits and current accounts and
trade and other payables.
Credit risk
Potential concentrations of credit risk exist principally in cash and cash equivalents. The Group only deposits cash surpluses with
major banks and asset managers of high credit standing.
Advances are disclosed net of impairment provisions. The group operates in the micro-fi nancing industry. The group’s exposure
to concentrated credit risk is low due to the nature and distribution of the loan book. Exposure to systemic credit risk is regarded
as being higher than normal banking activities due to the demographic credit characteristics of the client base. Measures taken
by the group to limit credit risk to acceptable levels include, inter alia, the application of standard credit acceptance procedures
to assess potential customers, daily monitoring of collectible balances at both branch and head offi ce level and monitoring by
the risk committee.
Geographical concentrations of assets, liabilities and off-balance sheet items
All the Group’s operating activities are situated within the Republic of South Africa.
Interest rate risk
The group operates within the ambit of the Usury Act exemption notice when considering interest rates on the advance of short-
term micro-loans.
The current group interest profi le is uncomplicated and is monitored by the Asset and Liability Committee. Effective rates on
loans and advances are disclosed in note 6 and on deposit balances are disclosed in notes 14 and 15.
Liquidity risk
The bank manages liquidity cautiously and operates an uncomplicated maturity profi le which is monitored by the asset and
liability committee. The short-term nature of the loan book relative to the size of the deposit book and the term nature of much
of the funding reduces the liquidity risk of the group.
The table below analyses assets and liabilities of the Group into relevant maturity groupings based on the remaining period at
balance sheet date to the contractual maturity date.
28. PROPOSED DIVIDEND PER SHARE At the annual general meeting on 25 May 2006 a dividend in respect of 2006 of 45 cents per share (2005: 30 cents per share)
amounting to a total dividend of R32.4 million (2005: R21.6 million) will be proposed. The secondary tax on companies in
respect of this dividend will amount to R4.0 million (2005: R2.7 million). These fi nancial statements do not refl ect this dividend
payable, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the year ending
28 February 2007, which is in line with recommended accounting policy.
29. FINANCIAL RISK MANAGEMENT – continued
Demand One to Three More Fair to one three months to than one value month months one year year adjustment TotalMaturities of assets and liabilities R’000 R’000 R’000 R’000 R’000 R’000
2006 Assets Loans to customers 255 803 128 679 151 671 11 157 - 547 310Cash and bank balances 506 937 - - - - 506 937Investments at fair value through profi t or loss* 6 766 - - - 383 7 149Treasury bills/Debentures 75 356 - - - - 75 356
Assets 844 862 128 679 151 671 11 157 383 1 136 752 Liabilities Liabilities to depositors 326 933 2 080 8 054 200 827 - 537 894Trade and other payables 69 967 - 17 905 4 588 - 92 460 Deposits at fair value through profi t or loss* - 2 149 - 50 000 4 953 57 102
Liabilities 396 900 4 229 25 959 255 415 4 953 687 456
Net liquidity gap 447 962 124 450 125 712 (244 258) (4 570) 449 296 Cumulative liquidity gap 447 962 572 412 698 124 453 866 449 296 449 296
2005Assets Loans to customers 174 318 53 833 - 10 414 - 238 565 Cash and bank balances 289 542 - - - - 289 542 Investments at fair value through profi t or loss* 16 745 - - - 97 16 842 Treasury bills/Debentures 73 331 - - - - 73 331
Assets 553 936 53 833 - 10 414 97 618 280
Liabilities Liabilities to depositors 81 187 1 042 1 772 138 411 - 222 412 Trade and other payables 51 101 - - - - 51 101 Deposits at fair value* - 2 185 - 50 000 6 098 58 283
Liabilities 132 288 3 227 1 772 188 411 6 098 331 796
Net liquidity gap 421 648 50 606 (1 772) (177 997) (6 001) 286 484
Cumulative liquidity gap 421 648 472 254 470 482 292 485 286 484 286 484
* Items held at fair value are stated at nominal values for the purposes of the maturity gap analysis.
The repricing dates for items above are not materially different from their contractual maturity dates.
6968
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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29. FINANCIAL RISK MANAGEMENT – continued
Currency risk
The exposure to foreign currency risk is limited to the importation of capital equipment, technology and technology support
services needed for the core banking activities. This risk is managed through the purchase of forward foreign exchange contracts
to hedge anticipated payments.
Capital adequacy
To monitor the adequacy of its capital the Group uses ratios established by the South African Reserve Bank (SARB). These ratios
measure capital adequacy (minimum 15% as required by SARB) by comparing the Group’s eligible capital with its balance sheet
assets, off-balance-sheet commitments and market and other risk positions at weighted amounts to refl ect their relative risk.
Reporting to the SARB on capital adequacy occurs on a periodic basis. The group capital adequacy ratio at year end was 56%
(2005: 84%).
30. RETIREMENT BENEFITS The group contributed R9.0 million (2005: R6.5 million) on behalf of all employees who elected to be members of the provident
fund. The provident fund, a defi ned contribution fund, is administered independently of the Group and is subject to the Pension
Funds Act, 1956 (Act 24 of 1956). These amounts have been included in staff costs. Since 1 July 2001 it is compulsory for all
new appointments to be members of the provident fund. The company will continue to contribute to the fund on behalf of all
members. The group has no exposure in respect of any post-retirement benefi ts payable to existing or former employees.
G r o u p C o m p a n y
7170
2006 2005 2006 2005 R’000 R’000 R’000 R’000 31. RELATED-PARTY TRANSACTIONS Transactions with subsidiaries Investments in subsidiaries are disclosed in note 10. Dividend received Capitec Bank - - 22 623 16 861 Finaid Financial Services - - - 13 810 Keynes Rational Corporate Services - - 792 - Loans due from: Capitec Bank* - - 100 000 101 513 Loans due to: Capitec Bank - - 79 - Finaid Financial Services - - 4 246 4 246 Keymatrix - - 1 1 Keynes Rational Corporate Services - - - 891 Transactions with other related parties Transactions with Arch Equity Limited** Interest received 1 050 849 - - Loan receivable 10 000 10 000 - - * R100 million of the loan due from Capitec Bank is subordinated by the company, with a fi ve-year notice period and qualifi es
as secondary capital for Reserve Bank capital adequacy requirements (2005: R100 million). ** Arch Equity Limited held 21.21% of the share capital of Capitec Bank Holdings Limited on 28 February 2006 (note 44). Key management compensation*** Salaries and other short-term benefi ts 8 355 7 423 Post-employment benefi ts 96 84 Share-based payments 525 711 8 976 8 218
Less paid by subsidiaries (8 976) (8 218) - -
Loans to Key Management 761 332 less advanced by subsidiaries (761) (332)
- - *** Key Management compensation excludes directors’ remuneration. Refer to the directors’ report for directors’
remuneration. Key Management Key management is considered to be members of the management committee as set out on page 19.
Directors All directors of Capitec Bank Holdings Limited have given notice that they did not have a material interest in any signifi cant
contract with the company or any of its subsidiaries, which could have given rise to a confl ict of interest during the year. Details relating to directors’ emoluments, shareholdings and share options granted are included in the directors’ report.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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29. FINANCIAL RISK MANAGEMENT – continued
Currency risk
The exposure to foreign currency risk is limited to the importation of capital equipment, technology and technology support
services needed for the core banking activities. This risk is managed through the purchase of forward foreign exchange contracts
to hedge anticipated payments.
Capital adequacy
To monitor the adequacy of its capital the Group uses ratios established by the South African Reserve Bank (SARB). These ratios
measure capital adequacy (minimum 15% as required by SARB) by comparing the Group’s eligible capital with its balance sheet
assets, off-balance-sheet commitments and market and other risk positions at weighted amounts to refl ect their relative risk.
Reporting to the SARB on capital adequacy occurs on a periodic basis. The group capital adequacy ratio at year end was 56%
(2005: 84%).
30. RETIREMENT BENEFITS The group contributed R9.0 million (2005: R6.5 million) on behalf of all employees who elected to be members of the provident
fund. The provident fund, a defi ned contribution fund, is administered independently of the Group and is subject to the Pension
Funds Act, 1956 (Act 24 of 1956). These amounts have been included in staff costs. Since 1 July 2001 it is compulsory for all
new appointments to be members of the provident fund. The company will continue to contribute to the fund on behalf of all
members. The group has no exposure in respect of any post-retirement benefi ts payable to existing or former employees.
G r o u p C o m p a n y
7170
2006 2005 2006 2005 R’000 R’000 R’000 R’000 31. RELATED-PARTY TRANSACTIONS Transactions with subsidiaries Investments in subsidiaries are disclosed in note 10. Dividend received Capitec Bank - - 22 623 16 861 Finaid Financial Services - - - 13 810 Keynes Rational Corporate Services - - 792 - Loans due from: Capitec Bank* - - 100 000 101 513 Loans due to: Capitec Bank - - 79 - Finaid Financial Services - - 4 246 4 246 Keymatrix - - 1 1 Keynes Rational Corporate Services - - - 891 Transactions with other related parties Transactions with Arch Equity Limited** Interest received 1 050 849 - - Loan receivable 10 000 10 000 - - * R100 million of the loan due from Capitec Bank is subordinated by the company, with a fi ve-year notice period and qualifi es
as secondary capital for Reserve Bank capital adequacy requirements (2005: R100 million). ** Arch Equity Limited held 21.21% of the share capital of Capitec Bank Holdings Limited on 28 February 2006 (note 44). Key management compensation*** Salaries and other short-term benefi ts 8 355 7 423 Post-employment benefi ts 96 84 Share-based payments 525 711 8 976 8 218
Less paid by subsidiaries (8 976) (8 218) - -
Loans to Key Management 761 332 less advanced by subsidiaries (761) (332)
- - *** Key Management compensation excludes directors’ remuneration. Refer to the directors’ report for directors’
remuneration. Key Management Key management is considered to be members of the management committee as set out on page 19.
Directors All directors of Capitec Bank Holdings Limited have given notice that they did not have a material interest in any signifi cant
contract with the company or any of its subsidiaries, which could have given rise to a confl ict of interest during the year. Details relating to directors’ emoluments, shareholdings and share options granted are included in the directors’ report.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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R’000 R’000 R’000 R’000 35. SHARES ISSUED Specifi c issue of shares - 21 803 - 21 803 Share issues expenses - (353) - (353) - 21 450 - 21 450
36. SHARES ACQUIRED AND OPTIONS SETTLED Share options settled in cash 826 515 - - Shares acquired for options settled 15 871 19 137 - - Proceeds on settlement of options (3 598) (3 986) - - Shares transferred from odd-lot offer - (440) - - Increase in shares held by the group - 16 987 - - 13 099 32 213 - -
37. COMMITMENTS AND CONTINGENT LIABILITIES Property rental commitments* Within one year 45 905 39 307 - - From one to fi ve years 115 599 68 245 - - After fi ve years 4 203 6 104 - - 165 707 113 656 - - Other operating lease commitments Within one year 1 473 1 867 - - From one to fi ve years 3 251 1 099 - - 4 724 2 966 - - Guarantees Issued to non-banking institutions 10 206 1 976 - -
Facilities Unutilised loan facilities to clients 79 700 - - - Capital commitments – approved by the board Contracted for 3 927 2 514 - - Not contracted for 79 985 81 261 - - 83 912 83 775 - - * The Group changed from accounting for operating leases on the contractual basis to the straight-line basis during the period
as required in the SAICA Circular 7/2005. Refer to note 43 for the restatement of comparative amounts.
G r o u p C o m p a n y G r o u p C o m p a n y
7372
2006 2005 2006 2005 2006 2005 2006 2005 R’000 R’000 R’000 R’000
32. CASH FROM OPERATIONS Net profi t before tax 166 113 99 049 22 546 16 821
Adjusted for
Non-cash items
Fair value adjustments (1 431) 6 001 - -
Movement in impairment charge 61 981 1 915 - -
Depreciation* 37 595 37 905 - -
Amortisation* 27 111 13 296 - -
Movement in provisions (700) (746) - -
Share-based staff costs 1 603 1 068 - -
Loss on disposal of equipment 1 565 3 062 - -
Movements in current assets and liabilities
Increase in loans and advances (308 745) (74 934) - -
Decrease/(Increase) in inventory (3 165) 506 - -
Decrease/(Increase) in other receivables 943 3 108 - -
Increase in deposits 315 446 225 721 - -
Increase in trade and other payables 19 604 14 772 (1) 1
Cash from operations 317 920 330 723 22 545 16 822
* In terms of the revised IAS 38 “Intangible assets”, computer software that is not an integral part of the related computer
hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has
been reallocated from property and equipment to intangible assets.
33. TAX PAID Outstanding at beginning of year (38) 62 - -
Charge to the income statement (50 832) (31 670) (2 562) (1 628)
Income statement movement in deferred tax 25 817 29 931 5 (5)
Secondary tax on companies - - - 1 633
Outstanding end of year 22 493 38 - -
Tax paid (2 560) (1 639) (2 557) -
34. NET CASH FLOW OUTFLOW ON ODD-LOT OFFER
Share acquired - 1 347 - - Shares sold - (784) - - Odd-lot expenses - 292 - - - 855 - -
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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R’000 R’000 R’000 R’000 35. SHARES ISSUED Specifi c issue of shares - 21 803 - 21 803 Share issues expenses - (353) - (353) - 21 450 - 21 450
36. SHARES ACQUIRED AND OPTIONS SETTLED Share options settled in cash 826 515 - - Shares acquired for options settled 15 871 19 137 - - Proceeds on settlement of options (3 598) (3 986) - - Shares transferred from odd-lot offer - (440) - - Increase in shares held by the group - 16 987 - - 13 099 32 213 - -
37. COMMITMENTS AND CONTINGENT LIABILITIES Property rental commitments* Within one year 45 905 39 307 - - From one to fi ve years 115 599 68 245 - - After fi ve years 4 203 6 104 - - 165 707 113 656 - - Other operating lease commitments Within one year 1 473 1 867 - - From one to fi ve years 3 251 1 099 - - 4 724 2 966 - - Guarantees Issued to non-banking institutions 10 206 1 976 - -
Facilities Unutilised loan facilities to clients 79 700 - - - Capital commitments – approved by the board Contracted for 3 927 2 514 - - Not contracted for 79 985 81 261 - - 83 912 83 775 - - * The Group changed from accounting for operating leases on the contractual basis to the straight-line basis during the period
as required in the SAICA Circular 7/2005. Refer to note 43 for the restatement of comparative amounts.
G r o u p C o m p a n y G r o u p C o m p a n y
7372
2006 2005 2006 2005 2006 2005 2006 2005 R’000 R’000 R’000 R’000
32. CASH FROM OPERATIONS Net profi t before tax 166 113 99 049 22 546 16 821
Adjusted for
Non-cash items
Fair value adjustments (1 431) 6 001 - -
Movement in impairment charge 61 981 1 915 - -
Depreciation* 37 595 37 905 - -
Amortisation* 27 111 13 296 - -
Movement in provisions (700) (746) - -
Share-based staff costs 1 603 1 068 - -
Loss on disposal of equipment 1 565 3 062 - -
Movements in current assets and liabilities
Increase in loans and advances (308 745) (74 934) - -
Decrease/(Increase) in inventory (3 165) 506 - -
Decrease/(Increase) in other receivables 943 3 108 - -
Increase in deposits 315 446 225 721 - -
Increase in trade and other payables 19 604 14 772 (1) 1
Cash from operations 317 920 330 723 22 545 16 822
* In terms of the revised IAS 38 “Intangible assets”, computer software that is not an integral part of the related computer
hardware, should be treated as intangible assets. In order to comply with the requirements of IAS 38, computer software has
been reallocated from property and equipment to intangible assets.
33. TAX PAID Outstanding at beginning of year (38) 62 - -
Charge to the income statement (50 832) (31 670) (2 562) (1 628)
Income statement movement in deferred tax 25 817 29 931 5 (5)
Secondary tax on companies - - - 1 633
Outstanding end of year 22 493 38 - -
Tax paid (2 560) (1 639) (2 557) -
34. NET CASH FLOW OUTFLOW ON ODD-LOT OFFER
Share acquired - 1 347 - - Shares sold - (784) - - Odd-lot expenses - 292 - - - 855 - -
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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40. SHARE OPTION EXPENSE
Data utilised in the valuation of options granted
The table below provides detail regarding the data used in the valuation of the share options to which International Financial Reporting
Standard (IFRS) 2 has been applied.
Fair value on Value taking Share price Volatility issue/repricing Expected into account on issuing/ used in date ignoring vesting expected Strike repricing valuation Dividend Risk-free Number vesting proportion vesting Year price date (note 3) yield Year rate of options conditions (note 4) proportion granted R R % % maturing % outstanding R’000 % R’000 2000/1 (note 1) (note 2) 1.42 1.72 40 16.3 2006/07 11.7 349 526 97 97.1 94 2007/08 11.7 754 862 187 86.8 163 2001/2 (note 1) (note 2) 1.42 1.72 40 16.3 2006/07 11.7 101 780 29 98.3 28 2007/08 11.7 227 655 57 88.3 51 2002/3 (note 2) 1.59 1.71 40 16.5 2006/07 11.5 94 875 22 97.9 22 2007/08 11.5 181 500 39 88.1 35 2003/4 2.40 2.52 40 7.4 2006/07 10.3 166 875 109 98.9 108 2007/08 10.1 188 125 130 89.0 116 2008/09 10.1 188 125 134 80.1 107 2009/10 10.0 188 125 135 72.1 97 2004/5 5.73 5.30 28 3.7 2007/08 9.5 422 500 463 88.5 410 2008/09 9.7 422 500 553 79.6 440 2009/10 9.8 422 500 626 71 6 448 2010/11 9.9 422 500 684 64.5 441 7.36 8.15 28 3.7 2007/08 8.3 12 500 27 85.0 23 2008/09 8.5 12 500 30 76.5 23 2009/10 8.7 12 500 33 68.9 23 2010/11 8.9 12 500 35 62.0 22 2005/6 13.72 13.71 36 2.1 2008/09 7.8 18 750 75 80.2 60 2009/10 8.0 18 750 87 72.2 63 2010/11 8.2 18 750 97 65.0 63 2011/12 8.3 18 750 105 58.5 61 14.05 13.90 36 2.1 2008/09 7.5 377 500 1 497 79.1 1 184 2009/10 7.8 377 500 1 739 71.2 1 238 2010/11 8.0 377 500 1 942 64.1 1 245 2011/12 8.1 377 500 2 114 57.7 1 219 17.64 18.90 35 2.0 2008/09 7.2 18 750 110 77.5 85 2009/10 7.3 18 750 125 69.7 87 2010/11 7.5 18 750 137 62.8 86 2011/12 7.6 18 750 148 56.5 83
Grand Total 5 841 448 11 566 70.2 8 125
38. BORROWING POWERS In terms of the articles of association of Capitec Bank Holdings Limited, the directors may at their discretion raise or borrow
money for the purpose of the business of the company without limitation. These borrowing powers are subject to the limitations
of the Banks Act, 1990 (Act 94 of 1990).
The increase in borrowings from the previous year is for the purposes of funding of general banking business including future
expansion of the loan book and capital expenditure.
(1) Initially issued at R5 strike price, repriced to R1.42 on 26 April 2002. Valuation done as at repricing date as required by IFRS 2. (2) Issued/repriced prior to 7 November 2002 and will never be expensed through the income statement in terms of IFRS 2. (3) The share options granted prior to 28 February 2003 have been valued for disclosure purposes by applying a standard expected volatility of 40%,
since the short listing history available at the valuation date for those share options was inappropriate for forecasting purposes. The share options granted, to which IFRS 2 has been applied, have been valued by applying the expected volatility of the share price as of December 2003 as it was considered more appropriate in the valuation because the shares were traded more frequently after the PSG unbundling.
(4) Average South African executive staff turnover of 10% p.a. used to estimate likelihood of vesting conditions realising. A re-estimate in terms of IFRS 2 will be done on an annual basis.
39. SHARE INCENTIVE SCHEME
2006 2005 Number Number
Options issued to personnel of Capitec Bank Limited
Total number of options outstanding at year end 5 841 448 6 753 192
Balance at beginning of year 6 753 192 7 859 924
Options granted 1 690 000 1 810 000
Options cancelled (115 000) (16 875)
Options exercised (2 486 744) (2 899 857)
2006 2006 2005 2005
Expiry Weighted Weighted
average strike average strike
price (R) Number price (R) Number
Financial year 2005/06 - - 1.44 1 545 151
2006/07 1.67 713 056 1.55 1 664 651
2007/08 2.60 1 787 142 2.63 1 809 640
2008/09 8.60 1 038 125 4.78 640 625
2009/10 8.60 1 038 125 4.78 640 625
2010/11 9.80 850 000 5.78 452 500
2011/12 14.22 415 000 - -
5 841 448 6 753 192
2006 2005 Number Number
Shares available for settlement of options at year end - 1 486 339
Balance at beginning of year 1 486 339 93 762
Shares purchased during the year 953 617 4 177 834
Shares used for settlement of options (2 439 956) (2 785 257)
Options exercised during the year 2 486 744 2 899 857
Settled in Cash 46 788 114 600
Settled in Shares 2 439 956 2 785 257
7574
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
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40. SHARE OPTION EXPENSE
Data utilised in the valuation of options granted
The table below provides detail regarding the data used in the valuation of the share options to which International Financial Reporting
Standard (IFRS) 2 has been applied.
Fair value on Value taking Share price Volatility issue/repricing Expected into account on issuing/ used in date ignoring vesting expected Strike repricing valuation Dividend Risk-free Number vesting proportion vesting Year price date (note 3) yield Year rate of options conditions (note 4) proportion granted R R % % maturing % outstanding R’000 % R’000 2000/1 (note 1) (note 2) 1.42 1.72 40 16.3 2006/07 11.7 349 526 97 97.1 94 2007/08 11.7 754 862 187 86.8 163 2001/2 (note 1) (note 2) 1.42 1.72 40 16.3 2006/07 11.7 101 780 29 98.3 28 2007/08 11.7 227 655 57 88.3 51 2002/3 (note 2) 1.59 1.71 40 16.5 2006/07 11.5 94 875 22 97.9 22 2007/08 11.5 181 500 39 88.1 35 2003/4 2.40 2.52 40 7.4 2006/07 10.3 166 875 109 98.9 108 2007/08 10.1 188 125 130 89.0 116 2008/09 10.1 188 125 134 80.1 107 2009/10 10.0 188 125 135 72.1 97 2004/5 5.73 5.30 28 3.7 2007/08 9.5 422 500 463 88.5 410 2008/09 9.7 422 500 553 79.6 440 2009/10 9.8 422 500 626 71 6 448 2010/11 9.9 422 500 684 64.5 441 7.36 8.15 28 3.7 2007/08 8.3 12 500 27 85.0 23 2008/09 8.5 12 500 30 76.5 23 2009/10 8.7 12 500 33 68.9 23 2010/11 8.9 12 500 35 62.0 22 2005/6 13.72 13.71 36 2.1 2008/09 7.8 18 750 75 80.2 60 2009/10 8.0 18 750 87 72.2 63 2010/11 8.2 18 750 97 65.0 63 2011/12 8.3 18 750 105 58.5 61 14.05 13.90 36 2.1 2008/09 7.5 377 500 1 497 79.1 1 184 2009/10 7.8 377 500 1 739 71.2 1 238 2010/11 8.0 377 500 1 942 64.1 1 245 2011/12 8.1 377 500 2 114 57.7 1 219 17.64 18.90 35 2.0 2008/09 7.2 18 750 110 77.5 85 2009/10 7.3 18 750 125 69.7 87 2010/11 7.5 18 750 137 62.8 86 2011/12 7.6 18 750 148 56.5 83
Grand Total 5 841 448 11 566 70.2 8 125
38. BORROWING POWERS In terms of the articles of association of Capitec Bank Holdings Limited, the directors may at their discretion raise or borrow
money for the purpose of the business of the company without limitation. These borrowing powers are subject to the limitations
of the Banks Act, 1990 (Act 94 of 1990).
The increase in borrowings from the previous year is for the purposes of funding of general banking business including future
expansion of the loan book and capital expenditure.
(1) Initially issued at R5 strike price, repriced to R1.42 on 26 April 2002. Valuation done as at repricing date as required by IFRS 2. (2) Issued/repriced prior to 7 November 2002 and will never be expensed through the income statement in terms of IFRS 2. (3) The share options granted prior to 28 February 2003 have been valued for disclosure purposes by applying a standard expected volatility of 40%,
since the short listing history available at the valuation date for those share options was inappropriate for forecasting purposes. The share options granted, to which IFRS 2 has been applied, have been valued by applying the expected volatility of the share price as of December 2003 as it was considered more appropriate in the valuation because the shares were traded more frequently after the PSG unbundling.
(4) Average South African executive staff turnover of 10% p.a. used to estimate likelihood of vesting conditions realising. A re-estimate in terms of IFRS 2 will be done on an annual basis.
39. SHARE INCENTIVE SCHEME
2006 2005 Number Number
Options issued to personnel of Capitec Bank Limited
Total number of options outstanding at year end 5 841 448 6 753 192
Balance at beginning of year 6 753 192 7 859 924
Options granted 1 690 000 1 810 000
Options cancelled (115 000) (16 875)
Options exercised (2 486 744) (2 899 857)
2006 2006 2005 2005
Expiry Weighted Weighted
average strike average strike
price (R) Number price (R) Number
Financial year 2005/06 - - 1.44 1 545 151
2006/07 1.67 713 056 1.55 1 664 651
2007/08 2.60 1 787 142 2.63 1 809 640
2008/09 8.60 1 038 125 4.78 640 625
2009/10 8.60 1 038 125 4.78 640 625
2010/11 9.80 850 000 5.78 452 500
2011/12 14.22 415 000 - -
5 841 448 6 753 192
2006 2005 Number Number
Shares available for settlement of options at year end - 1 486 339
Balance at beginning of year 1 486 339 93 762
Shares purchased during the year 953 617 4 177 834
Shares used for settlement of options (2 439 956) (2 785 257)
Options exercised during the year 2 486 744 2 899 857
Settled in Cash 46 788 114 600
Settled in Shares 2 439 956 2 785 257
7574
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
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8 F
eb
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00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
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eb
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ry 2
00
6
41. DERIVATIVE FINANCIAL INSTRUMENTS Included in other receivables are the following forward foreign
exchange contracts
Notional Fair values
amount Assets Liabilities
Year ended 28 February 2006 R’000 R’000 R’000
Forward foreign exchange contracts
– Notional amounts in ZAR 1 609 - 4
– Notional amounts in US$ 257
Year ended 28 February 2005
The Group had no open forward foreign exchange contracts at 28 February 2005.
Forward foreign exchange contracts represent commitments to purchase foreign currency, including undelivered spot
transactions.
42. RINGFENCED ASSETS In terms of the Keynes Rational Limited restructuring agreement, PSG Investment Bank Holdings Limited, the 100% holding
company of PSG Investment Bank Limited, warranted to and in favour of the minority shareholders in Keynes Rational Holdings
Limited and to Capitec Bank Holdings Limited that the tangible net asset value of Capitec Bank Limited as at 28 February 2001,
would not be less than R100 million, comprising cash injected as share capital and share premium. During 2002, this liability
was assumed by PSG Group Limited on the sale of PSG Investment Bank Holdings Limited.
It was agreed during the abovementioned restructuring that all assets and liabilities (the ringfenced assets), other than the
R100 million mentioned above, in existence at, or emanating from activities prior to 1 March 2001, would be held and
administered for the exclusive benefi t, risk, profi t and loss of PSG Investment Bank Limited. This benefi t was transferred to Axiam
Holdings Limited, a 100%-held subsidiary of PSG Group Limited, on the sale of PSG Investment Bank Holdings Limited.
G r o u p
G r o u p
7776
43. ACCOUNTING FOR OPERATING LEASES The Group changed from accounting for operating leases on the contractual basis to the straight-line basis during the period
as required in the SAICA Circular 7/2005. The impact on results for the year (mainly on property rentals) and the restated prior
periods were as follows:
Reduction in Increase in Reduction in Increase in
net profi t deferred retained lease
after tax tax asset income escalation
accrual
R’000 R’000 R’000 R’000
Prior to 29 February 2004 2 507 1 075 2 507 3 582
Year ended 28 February 2005 547 1 309 3 054 4 363
Year ended 28 February 2006 1 185 1 732 4 239 5 971
44. SHAREHOLDERS HOLDING MORE THAN 5% OF THE COMPANY’S SHARES Year ended 28 February 2006
Number %
Shareholder of shares held shareholding
Arch Equity Limited 15 253 929 21.21%
Limietberg Beleggings (Pty) Limited (previously Bielkor Beleggings (Pty) Limited) 11 548 950 16.06%
JF Mouton Familie Trust 5 105 700 7.10%
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
for th
e y
ea
r en
de
d 2
8 F
eb
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ry 2
00
6
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfo
r the
ye
ar e
nd
ed
28
Fe
bru
ary
20
06
41. DERIVATIVE FINANCIAL INSTRUMENTS Included in other receivables are the following forward foreign
exchange contracts
Notional Fair values
amount Assets Liabilities
Year ended 28 February 2006 R’000 R’000 R’000
Forward foreign exchange contracts
– Notional amounts in ZAR 1 609 - 4
– Notional amounts in US$ 257
Year ended 28 February 2005
The Group had no open forward foreign exchange contracts at 28 February 2005.
Forward foreign exchange contracts represent commitments to purchase foreign currency, including undelivered spot
transactions.
42. RINGFENCED ASSETS In terms of the Keynes Rational Limited restructuring agreement, PSG Investment Bank Holdings Limited, the 100% holding
company of PSG Investment Bank Limited, warranted to and in favour of the minority shareholders in Keynes Rational Holdings
Limited and to Capitec Bank Holdings Limited that the tangible net asset value of Capitec Bank Limited as at 28 February 2001,
would not be less than R100 million, comprising cash injected as share capital and share premium. During 2002, this liability
was assumed by PSG Group Limited on the sale of PSG Investment Bank Holdings Limited.
It was agreed during the abovementioned restructuring that all assets and liabilities (the ringfenced assets), other than the
R100 million mentioned above, in existence at, or emanating from activities prior to 1 March 2001, would be held and
administered for the exclusive benefi t, risk, profi t and loss of PSG Investment Bank Limited. This benefi t was transferred to Axiam
Holdings Limited, a 100%-held subsidiary of PSG Group Limited, on the sale of PSG Investment Bank Holdings Limited.
G r o u p
G r o u p
7776
43. ACCOUNTING FOR OPERATING LEASES The Group changed from accounting for operating leases on the contractual basis to the straight-line basis during the period
as required in the SAICA Circular 7/2005. The impact on results for the year (mainly on property rentals) and the restated prior
periods were as follows:
Reduction in Increase in Reduction in Increase in
net profi t deferred retained lease
after tax tax asset income escalation
accrual
R’000 R’000 R’000 R’000
Prior to 29 February 2004 2 507 1 075 2 507 3 582
Year ended 28 February 2005 547 1 309 3 054 4 363
Year ended 28 February 2006 1 185 1 732 4 239 5 971
44. SHAREHOLDERS HOLDING MORE THAN 5% OF THE COMPANY’S SHARES Year ended 28 February 2006
Number %
Shareholder of shares held shareholding
Arch Equity Limited 15 253 929 21.21%
Limietberg Beleggings (Pty) Limited (previously Bielkor Beleggings (Pty) Limited) 11 548 950 16.06%
JF Mouton Familie Trust 5 105 700 7.10%
STATUTORY INFORMATION
for th
e y
ea
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de
d F
eb
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ry 2
00
6
Number % of Number %
of shareholders total of shares interest
Analysis of shareholders
1 – 1 000 shares 1 684 53.17 805 987 1.12
1 001 – 10 000 shares 1 155 36.47 4 057 678 5.64
10 001 – 100 000 shares 260 8.21 7 438 026 10.34
100 001 and over 68 2.15 59 626 721 82.90
3 167 100.00 71 928 412 100.00
Number % of Number %
of shareholders total of shares interest
Shareholder spread
Public shareholders 3 143 99.24 31 635 620 43.98
Holdings less than 5% 3 140 99.15 27 897 396 38.78
Holdings of 5% or more: Sanlam 3 0.09 3 738 224 5.20
Directors 24 0.76 40 292 792 56.02
Directors of the company or any of its subsidiaries 7 0.22 970 817 1.35
Associates of directors of the company or any of
its subsidiaries 17 0.54 39 321 975 54.67
Trustees of employee share scheme 0 0.00 0 0.00
3 167 100.00 71 928 412 100.00
InvestmentWe invest heavily in our people. We ran 17 training
programmes throughout the year which accomodated 3 099
employees. This resulted in 275 employee promotions.
79
78
STATUTORY INFORMATIONfo
r the
ye
ar e
nd
ed
Fe
bru
ary
20
06
Number % of Number %
of shareholders total of shares interest
Analysis of shareholders
1 – 1 000 shares 1 684 53.17 805 987 1.12
1 001 – 10 000 shares 1 155 36.47 4 057 678 5.64
10 001 – 100 000 shares 260 8.21 7 438 026 10.34
100 001 and over 68 2.15 59 626 721 82.90
3 167 100.00 71 928 412 100.00
Number % of Number %
of shareholders total of shares interest
Shareholder spread
Public shareholders 3 143 99.24 31 635 620 43.98
Holdings less than 5% 3 140 99.15 27 897 396 38.78
Holdings of 5% or more: Sanlam 3 0.09 3 738 224 5.20
Directors 24 0.76 40 292 792 56.02
Directors of the company or any of its subsidiaries 7 0.22 970 817 1.35
Associates of directors of the company or any of
its subsidiaries 17 0.54 39 321 975 54.67
Trustees of employee share scheme 0 0.00 0 0.00
3 167 100.00 71 928 412 100.00
InvestmentWe invest heavily in our people. We ran 17 training
programmes throughout the year which accomodated 3 099
employees. This resulted in 275 employee promotions.
79
78
SPECIAL RESOLUTIONS OF SUBSIDIARIESSPECIAL RESOLUTIONS OF SUBSIDIARIESDetails of special resolutions passed by the company’s subsidiaries during the fi nancial year under review are presented below.
1. Capitec Bank Limited
Authority to acquire shares in the holding company
Resolution passed authorising directors of the bank, as a general approval, to acquire shares issued by its holding company upon
such terms and conditions as the directors of the bank may from time to time decide, subject to the provisions of sections 85 to
89 of the Companies Act, 1973 (Act 61 of 1973), the articles of association of the company and holding company and insofar as it
may be applicable, the Listings Requirements from time to time of the JSE Limited (“JSE”), provided always that:
This general approval shall expire at the date of the bank’s next annual general meeting in 2006, but no later than
25 August 2006;
Repurchase of securities in the holding company will only be effected through the order book operated by the JSE trading
system and done without any prior understanding or arrangement between the company and the counter party;
An announcement must be published when the bank has acquired, on a cumulative basis, 3% of the number of shares the
holding company had in issue prior to the acquisition, pursuant to which the aforesaid 3% threshold is reached, containing full
details thereof as well as for each 3% in aggregate of the initial number of that class acquired thereafter;
Acquisitions by the bank of shares in its holding company will be limited to an aggregate of 10% of the holding company’s
issued capital as at the date this authority is granted;
The bank will not acquire shares in the holding company at a price more than 10% above the weighted average of the market
value for the fi ve business days immediately preceding the date of acquisition;
The bank will, at any point in time, appoint only one agent to effect any purchase(s) of the holding company’s shares;
The bank will only undertake an acquisition of the holding company’s shares if, after such acquisition, at least 500 public
shareholders as defi ned in the Listings Requirements of the JSE continue to hold at least 20% of that class of the company’s
issued shares;
The bank will not purchase any shares in its holding company during any prohibited period as defi ned in par 3.67 of the Listings
Requirements of the JSE.
SPECIAL RESOLUTIONS OF SUBSIDIARIES
3. Alteration to memorandum of association Resolution passed authorising that, in terms of section 56(4) of the Companies Act, 1973 (Act 61 of 1973), as amended, section
56(1)(a) of the Banks Act, 1990 (Act 94 of 1990) the memorandum of association of the company be amended by the deletion of the entire paragraph 8(a) and the substitution thereof with the following new paragraph 8(a):
8(a) Par value:
The share capital of the company is R51 000 000 (fi fty one million Rand) divided into:
(i) 5 000 000 000 (fi ve thousand million) ordinary shares with a par value of R0.01 (one cent) each; (ii) 100 000 000 (one hundred million) non-redeemable, non-cumulative, non-participating preference shares of R0.01
(one cent) each; (iii) the amount of redeemable preference shares with a par value are NIL.
4. Approval of the terms attaching to the new preference shares Resolution passed authorising the amendment of the company’s articles of association by the deletion of the entire clause 83 and
the substitution thereof with the following new clause 83:
83. Non-redeemable, non-cumulative, non-participating preference shares
The following terms shall attach to the 100 000 000 non-redeemable, non-cumulative, non-participating preference shares of R0.01 each in the share capital of the company:
83.1 for purposes of this article 83 –
83.1.1 “business day” means any day other than a Saturday, Sunday or statutory public holiday in the Republic of South Africa;
83.1.2 “deemed value” means the deemed value of each preference share for purposes of calculating the preference dividend, being an amount determined by the directors at the time of allotment and issue of the fi rst preference shares, notwithstanding the actual issue price of a preference share (that is the nominal value of the preference share plus a premium thereon) which may vary because of a difference in the premium at which the preference shares may be issued from time to time;
83.1.3 “Income Tax Act” means the Income Tax Act, 1962 (Act 58 of 1962), as amended or substituted from time to time;
83.1.4 “issue price” means the actual issue price of each preference share, being the par value of a preference share plus the premium at which a preference share is allotted and issued;
83.1.5 “preference dividend” means a non-cumulative, non-participating, preference cash dividend calculated in accordance with article 83.2.4;
83.1.6 “preference dividend calculation date” means the last day of February and 31 August of each year;
83.1.7 “preference dividend payment date” means a date at least 5 (fi ve) business days prior to the date on which the company pays its ordinary dividend, if any, in respect of the same period, but in any event the preference dividend shall be payable not later than 120 (one hundred and twenty) business days after the last day of February and 31 August, respectively;
83.1.8 “preference dividend rate” means, subject to article 83.2.7 below, a rate determined by the directors at the time of allotment and issue of the fi rst preference shares, which will not exceed the prime rate;
SPECIAL RESOLUTIONS OF SUBSIDIARIES
2. Authority to cancel preference share capital forming part of the authorised share capital of the company Resolution passed authorising, in terms of section 75(1)(h) of the Companies Act, 1973 (Act 61 of 1973), as amended and article
11.2.3 of the articles of association of the company, that the 10 000 (ten thousand) preference shares with a par value of R1.00 (one Rand) each in the authorised share capital of the company, all of which have not been subscribed for by any person, or which no person has agreed to subscribe for, be cancelled.
Authority to increase share capital Resolution passed, in terms of section 75(1)(a) of the Companies Act, 1973 (Act 61 of 1973), as amended and article 11.1.1
of the articles of association of the company, authorising an increase in the share capital of the company from R50 000 000 to R51 000 000 by the creation of 100 000 000 non-redeemable, non-cumulative, non-participating preference shares with a par value of R0.01 each, the rights and conditions of which are set out in new article 83 of the articles of association of the company.
8180
SPECIAL RESOLUTIONS OF SUBSIDIARIESSPECIAL RESOLUTIONS OF SUBSIDIARIESDetails of special resolutions passed by the company’s subsidiaries during the fi nancial year under review are presented below.
1. Capitec Bank Limited
Authority to acquire shares in the holding company
Resolution passed authorising directors of the bank, as a general approval, to acquire shares issued by its holding company upon
such terms and conditions as the directors of the bank may from time to time decide, subject to the provisions of sections 85 to
89 of the Companies Act, 1973 (Act 61 of 1973), the articles of association of the company and holding company and insofar as it
may be applicable, the Listings Requirements from time to time of the JSE Limited (“JSE”), provided always that:
This general approval shall expire at the date of the bank’s next annual general meeting in 2006, but no later than
25 August 2006;
Repurchase of securities in the holding company will only be effected through the order book operated by the JSE trading
system and done without any prior understanding or arrangement between the company and the counter party;
An announcement must be published when the bank has acquired, on a cumulative basis, 3% of the number of shares the
holding company had in issue prior to the acquisition, pursuant to which the aforesaid 3% threshold is reached, containing full
details thereof as well as for each 3% in aggregate of the initial number of that class acquired thereafter;
Acquisitions by the bank of shares in its holding company will be limited to an aggregate of 10% of the holding company’s
issued capital as at the date this authority is granted;
The bank will not acquire shares in the holding company at a price more than 10% above the weighted average of the market
value for the fi ve business days immediately preceding the date of acquisition;
The bank will, at any point in time, appoint only one agent to effect any purchase(s) of the holding company’s shares;
The bank will only undertake an acquisition of the holding company’s shares if, after such acquisition, at least 500 public
shareholders as defi ned in the Listings Requirements of the JSE continue to hold at least 20% of that class of the company’s
issued shares;
The bank will not purchase any shares in its holding company during any prohibited period as defi ned in par 3.67 of the Listings
Requirements of the JSE.
SPECIAL RESOLUTIONS OF SUBSIDIARIES
3. Alteration to memorandum of association Resolution passed authorising that, in terms of section 56(4) of the Companies Act, 1973 (Act 61 of 1973), as amended, section
56(1)(a) of the Banks Act, 1990 (Act 94 of 1990) the memorandum of association of the company be amended by the deletion of the entire paragraph 8(a) and the substitution thereof with the following new paragraph 8(a):
8(a) Par value:
The share capital of the company is R51 000 000 (fi fty one million Rand) divided into:
(i) 5 000 000 000 (fi ve thousand million) ordinary shares with a par value of R0.01 (one cent) each; (ii) 100 000 000 (one hundred million) non-redeemable, non-cumulative, non-participating preference shares of R0.01
(one cent) each; (iii) the amount of redeemable preference shares with a par value are NIL.
4. Approval of the terms attaching to the new preference shares Resolution passed authorising the amendment of the company’s articles of association by the deletion of the entire clause 83 and
the substitution thereof with the following new clause 83:
83. Non-redeemable, non-cumulative, non-participating preference shares
The following terms shall attach to the 100 000 000 non-redeemable, non-cumulative, non-participating preference shares of R0.01 each in the share capital of the company:
83.1 for purposes of this article 83 –
83.1.1 “business day” means any day other than a Saturday, Sunday or statutory public holiday in the Republic of South Africa;
83.1.2 “deemed value” means the deemed value of each preference share for purposes of calculating the preference dividend, being an amount determined by the directors at the time of allotment and issue of the fi rst preference shares, notwithstanding the actual issue price of a preference share (that is the nominal value of the preference share plus a premium thereon) which may vary because of a difference in the premium at which the preference shares may be issued from time to time;
83.1.3 “Income Tax Act” means the Income Tax Act, 1962 (Act 58 of 1962), as amended or substituted from time to time;
83.1.4 “issue price” means the actual issue price of each preference share, being the par value of a preference share plus the premium at which a preference share is allotted and issued;
83.1.5 “preference dividend” means a non-cumulative, non-participating, preference cash dividend calculated in accordance with article 83.2.4;
83.1.6 “preference dividend calculation date” means the last day of February and 31 August of each year;
83.1.7 “preference dividend payment date” means a date at least 5 (fi ve) business days prior to the date on which the company pays its ordinary dividend, if any, in respect of the same period, but in any event the preference dividend shall be payable not later than 120 (one hundred and twenty) business days after the last day of February and 31 August, respectively;
83.1.8 “preference dividend rate” means, subject to article 83.2.7 below, a rate determined by the directors at the time of allotment and issue of the fi rst preference shares, which will not exceed the prime rate;
SPECIAL RESOLUTIONS OF SUBSIDIARIES
2. Authority to cancel preference share capital forming part of the authorised share capital of the company Resolution passed authorising, in terms of section 75(1)(h) of the Companies Act, 1973 (Act 61 of 1973), as amended and article
11.2.3 of the articles of association of the company, that the 10 000 (ten thousand) preference shares with a par value of R1.00 (one Rand) each in the authorised share capital of the company, all of which have not been subscribed for by any person, or which no person has agreed to subscribe for, be cancelled.
Authority to increase share capital Resolution passed, in terms of section 75(1)(a) of the Companies Act, 1973 (Act 61 of 1973), as amended and article 11.1.1
of the articles of association of the company, authorising an increase in the share capital of the company from R50 000 000 to R51 000 000 by the creation of 100 000 000 non-redeemable, non-cumulative, non-participating preference shares with a par value of R0.01 each, the rights and conditions of which are set out in new article 83 of the articles of association of the company.
8180
SPECIAL RESOLUTIONS OF SUBSIDIARIES
83.2.7 If there is an amendment or amendments to the Income Tax Act which results in the preference dividends being taxable in the hands of the preference shareholders and which results in payment of the preference dividend becoming a deductible expense for the company, provided such amendment is uniformly applicable to all corporate taxpayers and not only because of the particular circumstances of the company or any preference shareholder, the percentage of the prime rate referred to in article 83.1.8 above will be increased by the company. Such increase will be equal to the lower of the reduced cost for the company or the uniformly reduced income in the hands of corporate taxpayers, which cost savings or reduced income would not have arisen but for such amendments to the Income Tax Act. If such amendments to the Income Tax Act do not result in the company incurring reduced costs in servicing the preference shares, then, notwithstanding that such amendment may result in a decrease in the after-tax returns of any preference shareholder on its holding of preference shares, no amendment shall be made to the percentage of the prime rate contemplated in article 83.1.8 above. The company shall require its auditors to verify whether it is obliged to increase the percentage of the prime rate referred to in article 83.1.8 above in accordance with this article 83.2.7. The auditors in deciding whether such increase is required in terms of this article 83.2.7 shall act as experts and not as arbitrators or quasi-arbitrators and their decision in the absence of manifest error shall be fi nal and binding on the company and all preference shareholders. The costs of such auditors shall be borne and paid by the company.
83.2.8 Save as set out in articles 83.2.2, 83.2.3, 83.2.6 and 83.2.7 above, the preference shares shall not be entitled to any further participation in the profi ts or assets of the company nor on a winding-up to any surplus assets of the company.
83.2.9 The holders of the preference shares shall be entitled to receive notice of and be present but not to vote, either in person or by proxy, at any meeting of the company, by virtue of or in respect of the preference shares, unless either or both of the following circumstances prevail at the date of the meeting:
83.2.9.1 the preference dividend or any part thereof remains in arrear and unpaid as determined in accordance with article 83.2.5.3 after 6 (six) months from the due date thereof; and
83.2.9.2 a resolution of the company is proposed which resolution directly affects the rights attached to the preference shares or the interests of the holders thereof, including a resolution for the winding-up of the company or for the reduction of its capital, in which event the preference shareholders shall be entitled to vote only on such resolution.
83.2.10 At every general meeting of the company, at which holders of preference shares as well as other classes of shares are present and entitled to vote, a preference shareholder shall be entitled to that proportion of the total votes in the company which the aggregate amount of the nominal value of the preference shares held by him bears to the aggregate amount of the nominal value of all shares issued by the company.
83.2.11 Notwithstanding the provisions of article 83.2.2, no shares in the capital of the company ranking, as regards rights to dividends or, on a winding-up as regards return of capital, in priority to the preference shares, shall be created or issued, nor will the rights for the time being attached to the preference shares be modifi ed, amended, added or abrogated, without
83.2.11.1 the prior sanction of a resolution passed at a separate class meeting of the holders of the preference shares in the same manner mutates mutandis as a special resolution; or
83.2.11.2 the consent in writing of the holders of at least 75% (seventy fi ve percent) of the preference shares.
At every meeting of the holders of the preference shares, the provisions of these articles relating to general meetings shall apply, mutatis mutandis, except that a quorum at any such general meeting shall be persons holding or representing by proxy at least one quarter of the issued preference shares provided that if at any adjournment of such meeting a quorum is not so present, the provisions of the articles relating to adjourned general meetings shall apply, mutatis mutandis.
SPECIAL RESOLUTIONS OF SUBSIDIARIES
83.1.9 “preference shares” means the non-redeemable, non-cumulative, non-participating preference shares of R0.01 each in the share capital of the company;
83.1.10 “prime rate” means the publicly quoted basic rate of interest expressed as a percentage per year, compounded monthly in arrear and calculated on a 365 (three hundred and sixty fi ve)-day year factor (irrespective of whether or not the year is a leap year) from time to time quoted by the corporate bankers of the Capitec Bank group as being its prime overdraft rate as certifi ed by any manager of such bank, whose appointment and/or designation need not be proved. A certifi cate from any manager of the bank concerned as to the prime rate at any time shall constitute prima facie proof thereof.
83.2 The following are the rights, privileges, restrictions and conditions which attach to the preference shares:
83.2.1 The issue price for each tranche of preference shares to be issued will be determined by the directors at the time of allotment thereof.
83.2.2 Each preference share will rank as regards dividends and a repayment of capital on the winding-up of the company prior to the ordinary shares, and any other class of shares in the capital of the company not ranking prior to or pari passu with the preference shares. The preference shares shall confer on the holders, on a per preference share and equal basis, the right to a return of capital on the winding-up of the company of an amount equal to the aggregate of the par value and premium of the preference shares then in issue, divided by the total number of preference shares in issue in priority to any payment in respect of any other class of shares in the capital of the company not ranking prior to or pari passu with the preference shares.
83.2.3 Each preference share will confer upon the holder thereof the right to receive out of the profi ts of the company which it shall determine to distribute, in priority to any payment of dividends to the holders of any other class of shares in the capital of the company not ranking prior to or pari passu with the preference shares, the preference dividend calculated in terms of article 83.2.4 below.
83.2.4 The preference dividend shall be calculated:
83.2.4.1 by multiplying the deemed value of the preference shares by the applicable preference dividend rate applicable on the preference dividend calculation date (determined on a 365-day year factor, irrespective of whether the year is a leap year or not), on a daily basis, in arrear, but never compounded, for the appropriate period referred to in article 83.2.4.2 below; and
83.2.4.2 from the date following a preference dividend calculation date until and including the preference dividend calculation date immediately following, provided that the fi rst dividend payment, in respect of each tranche of preference shares issued, shall be calculated from the issue date up to and including the next preference dividend calculation date.
83.2.5 The preference dividend shall, if declared:
83.2.5.1 accrue on the preference dividend calculation date, calculated in accordance with 83.2.4.2 above;
83.2.5.2 be payable on the preference dividend payment date; and
83.2.5.3 failing payment by the relevant preference dividend payment date, considered to be in arrear.
83.2.6 If a preference dividend is not declared by the company in respect of the period to which such preference dividend calculation date relates, the preference dividend will not accumulate and will accordingly never become due to the holders of the preference shares and payable by the company whether in preference to payments to any other class of shares in the company or otherwise.
8382
SPECIAL RESOLUTIONS OF SUBSIDIARIES
83.2.7 If there is an amendment or amendments to the Income Tax Act which results in the preference dividends being taxable in the hands of the preference shareholders and which results in payment of the preference dividend becoming a deductible expense for the company, provided such amendment is uniformly applicable to all corporate taxpayers and not only because of the particular circumstances of the company or any preference shareholder, the percentage of the prime rate referred to in article 83.1.8 above will be increased by the company. Such increase will be equal to the lower of the reduced cost for the company or the uniformly reduced income in the hands of corporate taxpayers, which cost savings or reduced income would not have arisen but for such amendments to the Income Tax Act. If such amendments to the Income Tax Act do not result in the company incurring reduced costs in servicing the preference shares, then, notwithstanding that such amendment may result in a decrease in the after-tax returns of any preference shareholder on its holding of preference shares, no amendment shall be made to the percentage of the prime rate contemplated in article 83.1.8 above. The company shall require its auditors to verify whether it is obliged to increase the percentage of the prime rate referred to in article 83.1.8 above in accordance with this article 83.2.7. The auditors in deciding whether such increase is required in terms of this article 83.2.7 shall act as experts and not as arbitrators or quasi-arbitrators and their decision in the absence of manifest error shall be fi nal and binding on the company and all preference shareholders. The costs of such auditors shall be borne and paid by the company.
83.2.8 Save as set out in articles 83.2.2, 83.2.3, 83.2.6 and 83.2.7 above, the preference shares shall not be entitled to any further participation in the profi ts or assets of the company nor on a winding-up to any surplus assets of the company.
83.2.9 The holders of the preference shares shall be entitled to receive notice of and be present but not to vote, either in person or by proxy, at any meeting of the company, by virtue of or in respect of the preference shares, unless either or both of the following circumstances prevail at the date of the meeting:
83.2.9.1 the preference dividend or any part thereof remains in arrear and unpaid as determined in accordance with article 83.2.5.3 after 6 (six) months from the due date thereof; and
83.2.9.2 a resolution of the company is proposed which resolution directly affects the rights attached to the preference shares or the interests of the holders thereof, including a resolution for the winding-up of the company or for the reduction of its capital, in which event the preference shareholders shall be entitled to vote only on such resolution.
83.2.10 At every general meeting of the company, at which holders of preference shares as well as other classes of shares are present and entitled to vote, a preference shareholder shall be entitled to that proportion of the total votes in the company which the aggregate amount of the nominal value of the preference shares held by him bears to the aggregate amount of the nominal value of all shares issued by the company.
83.2.11 Notwithstanding the provisions of article 83.2.2, no shares in the capital of the company ranking, as regards rights to dividends or, on a winding-up as regards return of capital, in priority to the preference shares, shall be created or issued, nor will the rights for the time being attached to the preference shares be modifi ed, amended, added or abrogated, without
83.2.11.1 the prior sanction of a resolution passed at a separate class meeting of the holders of the preference shares in the same manner mutates mutandis as a special resolution; or
83.2.11.2 the consent in writing of the holders of at least 75% (seventy fi ve percent) of the preference shares.
At every meeting of the holders of the preference shares, the provisions of these articles relating to general meetings shall apply, mutatis mutandis, except that a quorum at any such general meeting shall be persons holding or representing by proxy at least one quarter of the issued preference shares provided that if at any adjournment of such meeting a quorum is not so present, the provisions of the articles relating to adjourned general meetings shall apply, mutatis mutandis.
SPECIAL RESOLUTIONS OF SUBSIDIARIES
83.1.9 “preference shares” means the non-redeemable, non-cumulative, non-participating preference shares of R0.01 each in the share capital of the company;
83.1.10 “prime rate” means the publicly quoted basic rate of interest expressed as a percentage per year, compounded monthly in arrear and calculated on a 365 (three hundred and sixty fi ve)-day year factor (irrespective of whether or not the year is a leap year) from time to time quoted by the corporate bankers of the Capitec Bank group as being its prime overdraft rate as certifi ed by any manager of such bank, whose appointment and/or designation need not be proved. A certifi cate from any manager of the bank concerned as to the prime rate at any time shall constitute prima facie proof thereof.
83.2 The following are the rights, privileges, restrictions and conditions which attach to the preference shares:
83.2.1 The issue price for each tranche of preference shares to be issued will be determined by the directors at the time of allotment thereof.
83.2.2 Each preference share will rank as regards dividends and a repayment of capital on the winding-up of the company prior to the ordinary shares, and any other class of shares in the capital of the company not ranking prior to or pari passu with the preference shares. The preference shares shall confer on the holders, on a per preference share and equal basis, the right to a return of capital on the winding-up of the company of an amount equal to the aggregate of the par value and premium of the preference shares then in issue, divided by the total number of preference shares in issue in priority to any payment in respect of any other class of shares in the capital of the company not ranking prior to or pari passu with the preference shares.
83.2.3 Each preference share will confer upon the holder thereof the right to receive out of the profi ts of the company which it shall determine to distribute, in priority to any payment of dividends to the holders of any other class of shares in the capital of the company not ranking prior to or pari passu with the preference shares, the preference dividend calculated in terms of article 83.2.4 below.
83.2.4 The preference dividend shall be calculated:
83.2.4.1 by multiplying the deemed value of the preference shares by the applicable preference dividend rate applicable on the preference dividend calculation date (determined on a 365-day year factor, irrespective of whether the year is a leap year or not), on a daily basis, in arrear, but never compounded, for the appropriate period referred to in article 83.2.4.2 below; and
83.2.4.2 from the date following a preference dividend calculation date until and including the preference dividend calculation date immediately following, provided that the fi rst dividend payment, in respect of each tranche of preference shares issued, shall be calculated from the issue date up to and including the next preference dividend calculation date.
83.2.5 The preference dividend shall, if declared:
83.2.5.1 accrue on the preference dividend calculation date, calculated in accordance with 83.2.4.2 above;
83.2.5.2 be payable on the preference dividend payment date; and
83.2.5.3 failing payment by the relevant preference dividend payment date, considered to be in arrear.
83.2.6 If a preference dividend is not declared by the company in respect of the period to which such preference dividend calculation date relates, the preference dividend will not accumulate and will accordingly never become due to the holders of the preference shares and payable by the company whether in preference to payments to any other class of shares in the company or otherwise.
8382
ORDINARY BUSINESS TO BE PASSED BY ORDINARY RESOLUTION
1. To consider and, if accepted, approve the audited annual
fi nancial statements of the company for the year ended
28 February 2006 as incorporated in the consolidated annual
fi nancial statements of the Capitec group.
2. To re-elect as an independent non-executive director Ms NS
Mjoli-Mncube, who retires by rotation in accordance with the
articles of association of the company and, being eligible,
offers herself for re-election.
Summary curriculum vitae of Nonhlanhla Sylvia Mjoli-Mncube:
Ms Mjoli-Mncube, aged 47, obtained an MA in City and
Regional Planning from the University of Cape Town (1985).
She is economic advisor to the deputy president of the Republic
of South Africa, Ms Phumzile Mlambo-Ngcuka, chairperson
of the National Urban Reconstruction and Housing Agency
(Nurcha), in South Africa and director of the Mjoli Development
Group. She was an executive director of Nurcha from 1994 until
2003. She studied at the Universities of Fort Hare and Cape
Town; the Harvard Business School (USA); the Wharton School
of Business (USA); Warwick University and the Massachusetts
Institute of Technology (USA), where she was a SPURS fellow.
She has served as an advisor to the housing ministry and won
several awards for her work to advance women in business
and strengthen community development, including SABC
Business Woman Of the Year, Standard Bank/Tribute Woman
of Substance, and Old Mutual/Femina Woman of the 90s.
Amongst others she sits on the boards of Cadiz Holdings Limited
and National Housing Finance Corporation (Pty) Limited.
She is a member of the risk, corporate communications and
directors’ affairs committees of Capitec.
NOTICE OF ANNUAL GENERAL MEETINGHis experience as director includes executive and non-executive
positions with companies such as PSG Group Limited, Alnet
(Pty) Limited and British American Tobacco Holdings South
Africa (Pty) Limited (“BAT”). He also acts as chairman of the
audit committees of PSG Group Limited, BAT and Alnet
(Pty) Limited. He is a member of the board remuneration
committee of BAT.
Dr Van Zyl Smit is the chairman of the audit and risk committees
and a member of the directors’ affairs committee of Capitec.
5.1 To ratify the directors’ remuneration for the fi nancial year
ended on 28 February 2006 as disclosed in the annual fi nancial
statements; and
5.2 Authorise the remuneration committee of the board to
determine the directors’ remuneration for the fi nancial year
ending on 28 February 2007, subject to ratifi cation by the
company in general meeting. This mandate will allow the
company to remunerate the directors bi-annually at the end of
August 2006 and February 2007 respectively.
6. To re-appoint Messrs PricewaterhouseCoopers Inc. as auditors
of the company to hold offi ce until the conclusion of the next
annual general meeting of the company.
7. To authorise the directors to determine the remuneration of
the auditors.
8. To authorise the payment of a cash dividend of 45 cents
per share, payable in cash on Monday, 12 June 2006 to the
shareholders of the company, recorded in the register on
Friday, 9 June 2006. The last day to trade to be eligible to
receive a dividend will be Friday, 2 June 2006.
SPECIAL BUSINESS
To consider and, if deemed fi t, pass the following resolutions
as ordinary and special resolutions as the case may be, with or
without modifi cation:
9. Ordinary resolution number 1
Resolved that 7 192 841 of the unissued ordinary shares in
the authorised ordinary share capital of the company and
all the non-redeemable, non-cumulative, non-participating
preference shares in the authorised but unissued preference
share capital of the company be placed under the control of the
directors until the next annual general meeting of the company
and that they be hereby authorised to issue any such shares
as they may deem fi t, subject to the Companies Act 1973,
(Act 61 of 1973), as amended, the articles of association of the
company and the Listings Requirements of the JSE Limited.
10. Ordinary resolution number 2
Resolved that, subject to ordinary resolution number 1 being
passed, the directors be hereby authorised as a general approval
to allot and issue ordinary shares, options or convertible securities
that are convertible into an existing class of equity securities for
cash without restriction, as they may deem fi t, subject to the
Companies Act, 1973 (Act 61 of 1973), as amended, the articles
of association of the company and the Listings Requirements of
the JSE Limited (“JSE”), provided that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
Any such issue will only be securities of a class already in issue,
or limited to such securities or rights that are convertible into
a class already in issue;
The securities will be issued only to the public as defi ned in the
Listings Requirements of the JSE and not to related parties;
During the period permitted in terms of this general approval, the
general issues of shares of a specifi c class in the aggregate:
– will not exceed 10% of the company’s issued share capital
in that class at the date of the fi rst such issue;
– the securities of a particular class will be aggregated
with the securities that are compulsorily convertible into
securities of that class; and, in the case of the issue of
compulsorily convertible securities, aggregated with the
securities of that class into which they are compulsorily
convertible;
– the number of securities of a class which may be issued
shall be based on the number of securities of that class in
issue, added to those that may be issued in future at the
date of such application;
– less any securities of the class issued or to be issued in
future arising from options/convertible securities issued
during the current fi nancial year;
– plus any securities of that class to be issued pursuant to
a rights issue (which has been announced, is irrevocable
and is fully underwritten), or acquisition (which has had
fi nal terms announced) may be included as though they
were securities in issue at the date of application.
Notice is hereby given that the annual general meeting of the shareholders of Capitec Bank Holdings Limited
(“Capitec” or “the company”) will be held in the Simonsberg Room, The Spier Conference Centre, Spier,
Lynedoch Road, Stellenbosch, on Wednesday, 24 May 2006 at 12:00 to transact the following business:
3. To re-elect as an independent, non-executive director Prof. MC
Mehl, who retires by rotation in accordance with the articles of
association of the company and, being eligible, offers himself
for re-election.
Summary curriculum vitae of Merlyn Claude Mehl:
Prof. Mehl, aged 63, obtained a Ph.D. (Physics) from the
University of Cape Town (1985).
He is widely known in education and development circles in
South Africa and internationally. He is recognised as a leader
in his fi elds of expertise which include educational change and
development, especially in relation to dealing with problems
of poverty. His career includes having served as professor in
physics at UWC, chancellor of Peninsula Technicon and chief
executive offi cer of the Independent Development Trust. Prof
Mehl serves on various boards.
He is a member of the risk and directors’ affairs committees
of Capitec.
4. To re-elect as an independent non-executive director Dr J van
Zyl Smit, who retires by rotation in accordance with the articles
of association of the company and, being eligible, offers
himself for re-election.
Summary curriculum vitae of Jacobus van Zyl Smit:
Dr Van Zyl Smit, aged 64, obtained his academic qualifi cations,
including an LLB (1963) and D.Comm (1971) from the University
of Stellenbosch. He qualifi ed as a chartered accountant (S.A.)
in 1965.
He has extensive experience as a chartered accountant,
including seven years as a partner of Coopers & Lybrand
Chartered Accountants and 15 years as professor of accounting
at the University of Stellenbosch. He has been a member of
legal and other committees of the accountancy board and
is currently a member of the examination committee of this
board. He also acts as fi nancial and research consultant.
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8584
ORDINARY BUSINESS TO BE PASSED BY ORDINARY RESOLUTION
1. To consider and, if accepted, approve the audited annual
fi nancial statements of the company for the year ended
28 February 2006 as incorporated in the consolidated annual
fi nancial statements of the Capitec group.
2. To re-elect as an independent non-executive director Ms NS
Mjoli-Mncube, who retires by rotation in accordance with the
articles of association of the company and, being eligible,
offers herself for re-election.
Summary curriculum vitae of Nonhlanhla Sylvia Mjoli-Mncube:
Ms Mjoli-Mncube, aged 47, obtained an MA in City and
Regional Planning from the University of Cape Town (1985).
She is economic advisor to the deputy president of the Republic
of South Africa, Ms Phumzile Mlambo-Ngcuka, chairperson
of the National Urban Reconstruction and Housing Agency
(Nurcha), in South Africa and director of the Mjoli Development
Group. She was an executive director of Nurcha from 1994 until
2003. She studied at the Universities of Fort Hare and Cape
Town; the Harvard Business School (USA); the Wharton School
of Business (USA); Warwick University and the Massachusetts
Institute of Technology (USA), where she was a SPURS fellow.
She has served as an advisor to the housing ministry and won
several awards for her work to advance women in business
and strengthen community development, including SABC
Business Woman Of the Year, Standard Bank/Tribute Woman
of Substance, and Old Mutual/Femina Woman of the 90s.
Amongst others she sits on the boards of Cadiz Holdings Limited
and National Housing Finance Corporation (Pty) Limited.
She is a member of the risk, corporate communications and
directors’ affairs committees of Capitec.
NOTICE OF ANNUAL GENERAL MEETINGHis experience as director includes executive and non-executive
positions with companies such as PSG Group Limited, Alnet
(Pty) Limited and British American Tobacco Holdings South
Africa (Pty) Limited (“BAT”). He also acts as chairman of the
audit committees of PSG Group Limited, BAT and Alnet
(Pty) Limited. He is a member of the board remuneration
committee of BAT.
Dr Van Zyl Smit is the chairman of the audit and risk committees
and a member of the directors’ affairs committee of Capitec.
5.1 To ratify the directors’ remuneration for the fi nancial year
ended on 28 February 2006 as disclosed in the annual fi nancial
statements; and
5.2 Authorise the remuneration committee of the board to
determine the directors’ remuneration for the fi nancial year
ending on 28 February 2007, subject to ratifi cation by the
company in general meeting. This mandate will allow the
company to remunerate the directors bi-annually at the end of
August 2006 and February 2007 respectively.
6. To re-appoint Messrs PricewaterhouseCoopers Inc. as auditors
of the company to hold offi ce until the conclusion of the next
annual general meeting of the company.
7. To authorise the directors to determine the remuneration of
the auditors.
8. To authorise the payment of a cash dividend of 45 cents
per share, payable in cash on Monday, 12 June 2006 to the
shareholders of the company, recorded in the register on
Friday, 9 June 2006. The last day to trade to be eligible to
receive a dividend will be Friday, 2 June 2006.
SPECIAL BUSINESS
To consider and, if deemed fi t, pass the following resolutions
as ordinary and special resolutions as the case may be, with or
without modifi cation:
9. Ordinary resolution number 1
Resolved that 7 192 841 of the unissued ordinary shares in
the authorised ordinary share capital of the company and
all the non-redeemable, non-cumulative, non-participating
preference shares in the authorised but unissued preference
share capital of the company be placed under the control of the
directors until the next annual general meeting of the company
and that they be hereby authorised to issue any such shares
as they may deem fi t, subject to the Companies Act 1973,
(Act 61 of 1973), as amended, the articles of association of the
company and the Listings Requirements of the JSE Limited.
10. Ordinary resolution number 2
Resolved that, subject to ordinary resolution number 1 being
passed, the directors be hereby authorised as a general approval
to allot and issue ordinary shares, options or convertible securities
that are convertible into an existing class of equity securities for
cash without restriction, as they may deem fi t, subject to the
Companies Act, 1973 (Act 61 of 1973), as amended, the articles
of association of the company and the Listings Requirements of
the JSE Limited (“JSE”), provided that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
Any such issue will only be securities of a class already in issue,
or limited to such securities or rights that are convertible into
a class already in issue;
The securities will be issued only to the public as defi ned in the
Listings Requirements of the JSE and not to related parties;
During the period permitted in terms of this general approval, the
general issues of shares of a specifi c class in the aggregate:
– will not exceed 10% of the company’s issued share capital
in that class at the date of the fi rst such issue;
– the securities of a particular class will be aggregated
with the securities that are compulsorily convertible into
securities of that class; and, in the case of the issue of
compulsorily convertible securities, aggregated with the
securities of that class into which they are compulsorily
convertible;
– the number of securities of a class which may be issued
shall be based on the number of securities of that class in
issue, added to those that may be issued in future at the
date of such application;
– less any securities of the class issued or to be issued in
future arising from options/convertible securities issued
during the current fi nancial year;
– plus any securities of that class to be issued pursuant to
a rights issue (which has been announced, is irrevocable
and is fully underwritten), or acquisition (which has had
fi nal terms announced) may be included as though they
were securities in issue at the date of application.
Notice is hereby given that the annual general meeting of the shareholders of Capitec Bank Holdings Limited
(“Capitec” or “the company”) will be held in the Simonsberg Room, The Spier Conference Centre, Spier,
Lynedoch Road, Stellenbosch, on Wednesday, 24 May 2006 at 12:00 to transact the following business:
3. To re-elect as an independent, non-executive director Prof. MC
Mehl, who retires by rotation in accordance with the articles of
association of the company and, being eligible, offers himself
for re-election.
Summary curriculum vitae of Merlyn Claude Mehl:
Prof. Mehl, aged 63, obtained a Ph.D. (Physics) from the
University of Cape Town (1985).
He is widely known in education and development circles in
South Africa and internationally. He is recognised as a leader
in his fi elds of expertise which include educational change and
development, especially in relation to dealing with problems
of poverty. His career includes having served as professor in
physics at UWC, chancellor of Peninsula Technicon and chief
executive offi cer of the Independent Development Trust. Prof
Mehl serves on various boards.
He is a member of the risk and directors’ affairs committees
of Capitec.
4. To re-elect as an independent non-executive director Dr J van
Zyl Smit, who retires by rotation in accordance with the articles
of association of the company and, being eligible, offers
himself for re-election.
Summary curriculum vitae of Jacobus van Zyl Smit:
Dr Van Zyl Smit, aged 64, obtained his academic qualifi cations,
including an LLB (1963) and D.Comm (1971) from the University
of Stellenbosch. He qualifi ed as a chartered accountant (S.A.)
in 1965.
He has extensive experience as a chartered accountant,
including seven years as a partner of Coopers & Lybrand
Chartered Accountants and 15 years as professor of accounting
at the University of Stellenbosch. He has been a member of
legal and other committees of the accountancy board and
is currently a member of the examination committee of this
board. He also acts as fi nancial and research consultant.
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In determining the price at which an issue of shares may
be made in terms of this authority, the maximum discount
permitted will be 10% of the weighted average traded price
as determined over 30 business days prior to the date of
the directors’ resolution authorising the issue, or where no
announcement is required and none has been made, the date
of issue of the shares concerned. The JSE will be consulted for
a ruling if the company’s securities have not traded in such 30
business day period;
At least 75% of the shareholders present in person or by proxy
at the annual general meeting cast their vote in favour of this
resolution.
11. Ordinary resolution number 3
Resolved that subject to ordinary resolution number 1 being
passed, the directors be hereby authorised as a general
approval to allot, issue and otherwise dispose of the non-
redeemable, non-cumulative, non-participating preference
shares in the authorised but unissued preference share capital
of the company for cash without restriction, as they may deem
fi t, subject to the provisions of the Companies Act, 1973 (Act
61 of 1973), as amended, the Listings Requirements of the
JSE Limited (“JSE”) and the company’s articles of association,
provided that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
The securities will be issued only to the public as defi ned in the
Listings Requirements of the JSE and not to related parties;
This resolution is subject to at least 75% of shareholders
present in person or by proxy at the annual general meeting
casting their vote in favour of this resolution.
12. Special resolution number 1
Resolved that the company be authorised as a general
approval to repurchase any of the ordinary shares issued by the
company upon such terms and conditions and in such amounts
as the directors may from time to time decide, but subject
to the provisions of sections 85 to 88 of the Companies Act,
1973 (Act 61 of 1973), as amended, the Listings Requirements
from time to time of the JSE Limited (“JSE”) and the articles of
association of the company, provided always that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
The repurchase will only be effected through the order book
operated by the JSE trading system and done without any
prior understanding or arrangement between the company
and the counter party (reported trades are prohibited);
An announcement must be published when the company has
acquired, on a cumulative basis, 3% of the number of shares of
the relevant class it had in issue prior to the acquisition, pursuant
to which the aforesaid 3% threshold is reached, containing full
details thereof as well as for each 3% in aggregate of the initial
number of that class acquired thereafter;
Aggregate repurchases under this general authority will not
exceed 20% of the company’s issued share capital of that class in
any one fi nancial year as at the date this authority is granted;
The company will not make the repurchases at a price more than
10% above the weighted average of the market value of the
securities of that class in issue for the fi ve business days immediately
preceding the date on which the transaction is effected;
The company will, at any point in time, appoint only one agent
to effect any repurchase(s) on the company’s behalf;
The company will only undertake a general repurchase of
securities if, after such repurchase, at least 500 public shareholders
as defi ned in the Listings Requirements of the JSE continue to
hold at least 20% of the company’s issued ordinary shares;
The company will not repurchase its shares during any
prohibited period as defi ned in par 3.67 of the Listings
Requirements of the JSE.
13. Special resolution number 2
Resolved that the company, insofar as it may be necessary to do
so, hereby approves of, as a general approval and authorises
the acquisition by any subsidiary of the company of shares of
any class issued by such subsidiary and/or by the company
either through a repurchase or through subscription for shares
as contemplated herein upon such terms and conditions
and in such amounts as the directors of such subsidiary/ies
may from time to time decide, but subject to the provisions
of sections 85 to 89 of the Companies Act, 1973 (Act 61 of
1973), as amended, (“the Act”) the articles of association of
the company and insofar as it may be applicable, the Listings
Requirements from time to time of the JSE Limited (“JSE”),
provided always that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
A repurchase of securities in the company will only be effected
through the order book operated by the JSE trading system
and done without any prior understanding or arrangement
between the company and the counter party (reported trades
are prohibited) save in relation to an acquisition by a subsidiary
of shares in the company through subscription, to the extent
permitted under the Act;
An announcement must be published when the subsidiary has
acquired, including the aquisition of shares in the company
through subscription, on a cumulative basis, 3% of the number
of shares of that class which the acquiree company had in issue
prior to the acquisition, or in the case of a subsidiary acquiring
shares in Capitec, 3% of the number of shares of that class
which Capitec had in issue prior to the acquisition, pursuant
to which the aforesaid 3% threshold is reached, containing full
details thereof as well as for each 3% in aggregate of the initial
number of that class acquired thereafter;
Acquisitions by any company of its own securities under this
general authority may not exceed 20% in the aggregate of the
acquiree company’s issued share capital of that class in any one
fi nancial year as at the date this authority is granted and in the
case of the subsidiary acquiring shares in the company, either
through repurchase or subscription, limited to an aggregate of
10% of the company’s issued capital of that class as at the date
this authority is granted;
The subsidiaries will not acquire securities in the company or
subscribe for shares as contemplated herein at a price more
than 10% above the weighted average of the market value of
securities of that class for the fi ve business days immediately
preceding the date of acquisition;
The subsidiaries will, at any point in time, appoint only one
agent to effect any purchase(s) of the company’s securities if
applicable;
The subsidiaries will only undertake an acquisition of the
company’s securities if, after such acquisition at least 500
public shareholders as defi ned in the Listings Requirements of
the JSE continue to hold at least 20% of the company’s issued
ordinary shares;
The subsidiaries will not purchase any shares in themselves
or the company or allow the issue of shares as contemplated
above during any prohibited period as defi ned in paragraph
3.67 of the Listings Requirements of the JSE.
14. To transact such other business as may be transacted at an
annual general meeting.
EXPLANATORY NOTES
The reasons for and effect of the two special resolutions listed
above are:
Special resolution number 1 – General authority to purchase own
shares
The reason for this special resolution is that the company seeks
a general authority to repurchase its shares in the market subject
to specifi c statutory requirements. The directors have no present
intention of making any purchases under this authority but believe
that the company should retain the fl exibility to take action if future
purchases could be considered desirable and in the best interests
of shareholders.
In terms of the Listings Requirements of the JSE any general
repurchase by the company must, inter alia, be limited to a
maximum of 20% of the company’s issued share capital in any one
fi nancial year of that class at the time the authority is granted.
The directors intend only to use this authorisation to repurchase if
there is in their opinion no doubt that, after such repurchase:
The company and the group will each be able to repay its
debt in the ordinary course of business for a period of twelve
months from the date of this annual general meeting;
The assets of the company and the group, valued in terms
of Generally Accepted Accounting Practice, will respectively
exceed the liabilities of the company and the group for a
period of twelve months from the date of this annual general
meeting; and
The share capital and reserves and working capital of the
company and the group will be adequate for ordinary business
purposes for a period of twelve months from the date of this
annual general meeting.
The effect of this special resolution, if passed, is to grant a general
authority to the directors of the company to repurchase its shares in
the market subject to the provisions of the Companies Act, 1973 (Act
61 of 1973), as amended, the articles of association of the company
and the requirements of the JSE Limited, where applicable.
Special resolution number 2 – General authority to subsidiaries
to acquire shares
The reason for this special resolution is that the company seeks
a general authority to empower directors of subsidiaries to
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In determining the price at which an issue of shares may
be made in terms of this authority, the maximum discount
permitted will be 10% of the weighted average traded price
as determined over 30 business days prior to the date of
the directors’ resolution authorising the issue, or where no
announcement is required and none has been made, the date
of issue of the shares concerned. The JSE will be consulted for
a ruling if the company’s securities have not traded in such 30
business day period;
At least 75% of the shareholders present in person or by proxy
at the annual general meeting cast their vote in favour of this
resolution.
11. Ordinary resolution number 3
Resolved that subject to ordinary resolution number 1 being
passed, the directors be hereby authorised as a general
approval to allot, issue and otherwise dispose of the non-
redeemable, non-cumulative, non-participating preference
shares in the authorised but unissued preference share capital
of the company for cash without restriction, as they may deem
fi t, subject to the provisions of the Companies Act, 1973 (Act
61 of 1973), as amended, the Listings Requirements of the
JSE Limited (“JSE”) and the company’s articles of association,
provided that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
The securities will be issued only to the public as defi ned in the
Listings Requirements of the JSE and not to related parties;
This resolution is subject to at least 75% of shareholders
present in person or by proxy at the annual general meeting
casting their vote in favour of this resolution.
12. Special resolution number 1
Resolved that the company be authorised as a general
approval to repurchase any of the ordinary shares issued by the
company upon such terms and conditions and in such amounts
as the directors may from time to time decide, but subject
to the provisions of sections 85 to 88 of the Companies Act,
1973 (Act 61 of 1973), as amended, the Listings Requirements
from time to time of the JSE Limited (“JSE”) and the articles of
association of the company, provided always that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
The repurchase will only be effected through the order book
operated by the JSE trading system and done without any
prior understanding or arrangement between the company
and the counter party (reported trades are prohibited);
An announcement must be published when the company has
acquired, on a cumulative basis, 3% of the number of shares of
the relevant class it had in issue prior to the acquisition, pursuant
to which the aforesaid 3% threshold is reached, containing full
details thereof as well as for each 3% in aggregate of the initial
number of that class acquired thereafter;
Aggregate repurchases under this general authority will not
exceed 20% of the company’s issued share capital of that class in
any one fi nancial year as at the date this authority is granted;
The company will not make the repurchases at a price more than
10% above the weighted average of the market value of the
securities of that class in issue for the fi ve business days immediately
preceding the date on which the transaction is effected;
The company will, at any point in time, appoint only one agent
to effect any repurchase(s) on the company’s behalf;
The company will only undertake a general repurchase of
securities if, after such repurchase, at least 500 public shareholders
as defi ned in the Listings Requirements of the JSE continue to
hold at least 20% of the company’s issued ordinary shares;
The company will not repurchase its shares during any
prohibited period as defi ned in par 3.67 of the Listings
Requirements of the JSE.
13. Special resolution number 2
Resolved that the company, insofar as it may be necessary to do
so, hereby approves of, as a general approval and authorises
the acquisition by any subsidiary of the company of shares of
any class issued by such subsidiary and/or by the company
either through a repurchase or through subscription for shares
as contemplated herein upon such terms and conditions
and in such amounts as the directors of such subsidiary/ies
may from time to time decide, but subject to the provisions
of sections 85 to 89 of the Companies Act, 1973 (Act 61 of
1973), as amended, (“the Act”) the articles of association of
the company and insofar as it may be applicable, the Listings
Requirements from time to time of the JSE Limited (“JSE”),
provided always that:
This general approval shall expire at the date of the company’s
next annual general meeting in 2007 or 24 August 2007,
whichever is the earlier;
A repurchase of securities in the company will only be effected
through the order book operated by the JSE trading system
and done without any prior understanding or arrangement
between the company and the counter party (reported trades
are prohibited) save in relation to an acquisition by a subsidiary
of shares in the company through subscription, to the extent
permitted under the Act;
An announcement must be published when the subsidiary has
acquired, including the aquisition of shares in the company
through subscription, on a cumulative basis, 3% of the number
of shares of that class which the acquiree company had in issue
prior to the acquisition, or in the case of a subsidiary acquiring
shares in Capitec, 3% of the number of shares of that class
which Capitec had in issue prior to the acquisition, pursuant
to which the aforesaid 3% threshold is reached, containing full
details thereof as well as for each 3% in aggregate of the initial
number of that class acquired thereafter;
Acquisitions by any company of its own securities under this
general authority may not exceed 20% in the aggregate of the
acquiree company’s issued share capital of that class in any one
fi nancial year as at the date this authority is granted and in the
case of the subsidiary acquiring shares in the company, either
through repurchase or subscription, limited to an aggregate of
10% of the company’s issued capital of that class as at the date
this authority is granted;
The subsidiaries will not acquire securities in the company or
subscribe for shares as contemplated herein at a price more
than 10% above the weighted average of the market value of
securities of that class for the fi ve business days immediately
preceding the date of acquisition;
The subsidiaries will, at any point in time, appoint only one
agent to effect any purchase(s) of the company’s securities if
applicable;
The subsidiaries will only undertake an acquisition of the
company’s securities if, after such acquisition at least 500
public shareholders as defi ned in the Listings Requirements of
the JSE continue to hold at least 20% of the company’s issued
ordinary shares;
The subsidiaries will not purchase any shares in themselves
or the company or allow the issue of shares as contemplated
above during any prohibited period as defi ned in paragraph
3.67 of the Listings Requirements of the JSE.
14. To transact such other business as may be transacted at an
annual general meeting.
EXPLANATORY NOTES
The reasons for and effect of the two special resolutions listed
above are:
Special resolution number 1 – General authority to purchase own
shares
The reason for this special resolution is that the company seeks
a general authority to repurchase its shares in the market subject
to specifi c statutory requirements. The directors have no present
intention of making any purchases under this authority but believe
that the company should retain the fl exibility to take action if future
purchases could be considered desirable and in the best interests
of shareholders.
In terms of the Listings Requirements of the JSE any general
repurchase by the company must, inter alia, be limited to a
maximum of 20% of the company’s issued share capital in any one
fi nancial year of that class at the time the authority is granted.
The directors intend only to use this authorisation to repurchase if
there is in their opinion no doubt that, after such repurchase:
The company and the group will each be able to repay its
debt in the ordinary course of business for a period of twelve
months from the date of this annual general meeting;
The assets of the company and the group, valued in terms
of Generally Accepted Accounting Practice, will respectively
exceed the liabilities of the company and the group for a
period of twelve months from the date of this annual general
meeting; and
The share capital and reserves and working capital of the
company and the group will be adequate for ordinary business
purposes for a period of twelve months from the date of this
annual general meeting.
The effect of this special resolution, if passed, is to grant a general
authority to the directors of the company to repurchase its shares in
the market subject to the provisions of the Companies Act, 1973 (Act
61 of 1973), as amended, the articles of association of the company
and the requirements of the JSE Limited, where applicable.
Special resolution number 2 – General authority to subsidiaries
to acquire shares
The reason for this special resolution is that the company seeks
a general authority to empower directors of subsidiaries to
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articles of association of the subsidiaries and the company and the
requirements of the JSE Limited, where applicable.
Special resolutions 1 and 2 are renewals of resolutions approved at
the previous annual general meeting held on 25 May 2005 save for
an alteration of special resolution 2 to allow subsidiaries to acquire
shares in the company by subscription, subject to the provisions
of the Act.
VOTING
Shareholders entitled to attend and vote at the general meeting
may appoint one or more proxies to attend, speak and vote
thereat in their stead. A proxy need not be a member of the
company. A form of proxy, in which are set out the relevant
instructions for its completion, is enclosed for use by a certifi cated
or dematerialised shareholder with own name registration who
wishes to be represented at the general meeting. Completion of
a form of proxy will not preclude such shareholder from attending
and voting (in preference to that shareholder’s proxy) at the annual
general meeting.
Proxy forms must be delivered or posted to Computershare
Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall
Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
to be received by no later than 12:00 on Monday, 22 May 2006.
On a poll, ordinary shareholders will have one vote in respect of each
share held and on a show of hands shareholders present in person,
by proxy or by authorised representative shall have one vote each.
Benefi cial owners who have dematerialised their shares through a
CSDP or stockbroker, other than those in own name, must provide
the CSDP or stockbroker with their voting instruction. Alternatively,
they must request the CSDP or stockbroker to provide them with
a letter of representation should they wish to attend the meeting
in person in terms of the custody agreement entered into between
the benefi cial owner and the CSDP or stockbroker.
By order of the board
C G van Schalkwyk
Company Secretary
2 May 2006
resolve that the said subsidiaries acquire shares in the company
via subscription, to the extent permitted by the Companies Act,
1973 (Act 61 of 1973), as amended (“the Act”) or shares issued by
such subsidiaries and/or by the company in terms of the Act, their
respective articles of association and the requirements of the JSE
Limited (“JSE”), when applicable.
The directors have no present intention of making any acquisition
under this authority but believe that the company should retain the
fl exibility to take action if future acquisitions could be considered
desirable and in the best interests of shareholders. One such
eventuality could be the acquisition of shares in the company for
delivery in terms of the Capitec Bank Holdings Share Trust (“the share
incentive scheme”), the terms of which deed have been approved by
shareholders at a general meeting held on 7 February 2002.
In terms of the Listings Requirements of the JSE any general
acquisition by a company of its listed shares must, inter alia, be
limited to a maximum of 20% of the issued share capital of the
acquiree company in any one fi nancial year of that class at the time
the authority is granted, subject, in terms of the Act, to a maximum
of 10% of that class in the event that a subsidiary acquires shares
of a specifi c class in the company’s share capital.
The authorisation to subsidiaries to acquire their own shares or
shares in the company will only be exercised by the directors of
the subsidiaries if, at the discretion of the board of the company,
circumstances should merit and if there is in their opinion no doubt
that, after such acquisition:
The company, relevant subsidiaries and group will each be able
to repay its debt in the ordinary course of business for a period
of twelve months from the date of this annual general meeting;
The assets of the company, relevant subsidiaries and the group
valued in terms of Generally Accepted Accounting Practice,
will respectively be in excess of the liabilities of the company,
relevant subsidiaries and the group for a period of twelve
months from the date of this annual general meeting; and
The share capital, reserves and working capital of the company,
relevant subsidiaries and the group will be suffi cient to meet
the respective needs of the company, relevant subsidiaries
and the group for a period of twelve months from the date of
this annual general meeting.
The effect of this special resolution, if passed, is to grant a general
authority to the directors of the company's subsidiaries to acquire
shares issued by such subsidiaries and/or by the company, inter
alia by subscription, subject to the provisions of the Act, the
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FORM OF PROXYCapitec Bank Holdings Limited (Incorporated in the Republic of South Africa)
(Registration number 1999/025903/06) (“Capitec” or “the Company”)(JSE share code: CPI ISIN: ZAE000035861)
For use of shareholders who are: (1) registered as such and who have not dematerialised their Capitec ordinary shares; or (2) hold dematerialised Capitec ordinary shares in their own name, at the annual general meeting of shareholders of the company to be held in the Simonsberg Room, The Spier Conference Centre, Spier, Lynedoch Road, Stellenbosch, on Wednesday 24 May 2006 at 12:00.
Benefi cial owners who have dematerialised their shares through a CSDP or stockbroker, other than those in own name must provide the CSDP or stockbroker with their voting instruction. Alternatively, they must request the CSDP or stockbroker to provide them with a letter of representation should they wish to attend the meeting in person in terms of the custody agreement entered into between the benefi cial owner and the CSDP or stockbroker.
I/We (BLOCK LETTERS please)
of (address)
being the registered holder(s) of ordinary shares hereby appoint:
1. of or failing him/her,
2. of or failing him/her,
3. the chairman of the meeting, as my proxy to vote on my/our behalf at the annual general meeting to be held on 24 May 2006 and at each adjournment thereof for purposes of considering and, if deemed fi t, passing, with or without modifi cation, the special resolutions and ordinary resolutions to be proposed thereat and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary sharesregistered in my/our name/s in accordance with the following instructions (see notes on the opposite page):
Ordinary Business
1. Approve annual fi nancial statements
2. Re-elect Ms NS Mjoli-Mncube as a director
3. Re-elect Prof MC Mehl as a director
4. Re-elect Dr J van Z Smit as a director
5.1. Ratify the directors’ remuneration up to 28 February 2006
5.2 Authorise the remuneration committee of the board to determine the directors’ remuneration for the period 1 March 2006 up to 28 February 2007
6. Re-appoint auditors
7. Authorise the directors to approve the auditors’ remuneration
8. Authorise payment of a cash dividend of 45c per share
Special Business
9. Ordinary resolution number 1 (approval to place 7 192 841 of the unissued ordinary shares in the authorised ordinary share capital of the company and all the non-redeemable, non-cumulative, non-participating preference shares in the authorised but unissued preference share capital of the company under the control of the directors)
10. Ordinary resolution number 2 (general approval to issue new ordinary shares for cash)
11. Ordinary resolution number 3 (general approval to issue non-redeemable, non-cumulative, non-participating preference shares for cash)
12. Special resolution number 1 (general approval to the company to repurchase shares issued by the company)
13. Special resolution number 2 (general approval to any subsidiary of the company to acquire shares in such subsidiary and/or the company)
(Indicate instruction to proxy by way of a cross in the space provided above)
Signed at on this day of 2006.
Signature(s)
Assisted by (where applicable) (state capacity and full name) Each Capitec shareholder is entitled to appoint one or more proxy(ies) (who need not be a shareholder(s) of the company) to attend, speak and vote in his/her stead at the annual general meeting.
In favour of Against Abstain
Number of shares
89
88
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articles of association of the subsidiaries and the company and the
requirements of the JSE Limited, where applicable.
Special resolutions 1 and 2 are renewals of resolutions approved at
the previous annual general meeting held on 25 May 2005 save for
an alteration of special resolution 2 to allow subsidiaries to acquire
shares in the company by subscription, subject to the provisions
of the Act.
VOTING
Shareholders entitled to attend and vote at the general meeting
may appoint one or more proxies to attend, speak and vote
thereat in their stead. A proxy need not be a member of the
company. A form of proxy, in which are set out the relevant
instructions for its completion, is enclosed for use by a certifi cated
or dematerialised shareholder with own name registration who
wishes to be represented at the general meeting. Completion of
a form of proxy will not preclude such shareholder from attending
and voting (in preference to that shareholder’s proxy) at the annual
general meeting.
Proxy forms must be delivered or posted to Computershare
Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall
Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
to be received by no later than 12:00 on Monday, 22 May 2006.
On a poll, ordinary shareholders will have one vote in respect of each
share held and on a show of hands shareholders present in person,
by proxy or by authorised representative shall have one vote each.
Benefi cial owners who have dematerialised their shares through a
CSDP or stockbroker, other than those in own name, must provide
the CSDP or stockbroker with their voting instruction. Alternatively,
they must request the CSDP or stockbroker to provide them with
a letter of representation should they wish to attend the meeting
in person in terms of the custody agreement entered into between
the benefi cial owner and the CSDP or stockbroker.
By order of the board
C G van Schalkwyk
Company Secretary
2 May 2006
resolve that the said subsidiaries acquire shares in the company
via subscription, to the extent permitted by the Companies Act,
1973 (Act 61 of 1973), as amended (“the Act”) or shares issued by
such subsidiaries and/or by the company in terms of the Act, their
respective articles of association and the requirements of the JSE
Limited (“JSE”), when applicable.
The directors have no present intention of making any acquisition
under this authority but believe that the company should retain the
fl exibility to take action if future acquisitions could be considered
desirable and in the best interests of shareholders. One such
eventuality could be the acquisition of shares in the company for
delivery in terms of the Capitec Bank Holdings Share Trust (“the share
incentive scheme”), the terms of which deed have been approved by
shareholders at a general meeting held on 7 February 2002.
In terms of the Listings Requirements of the JSE any general
acquisition by a company of its listed shares must, inter alia, be
limited to a maximum of 20% of the issued share capital of the
acquiree company in any one fi nancial year of that class at the time
the authority is granted, subject, in terms of the Act, to a maximum
of 10% of that class in the event that a subsidiary acquires shares
of a specifi c class in the company’s share capital.
The authorisation to subsidiaries to acquire their own shares or
shares in the company will only be exercised by the directors of
the subsidiaries if, at the discretion of the board of the company,
circumstances should merit and if there is in their opinion no doubt
that, after such acquisition:
The company, relevant subsidiaries and group will each be able
to repay its debt in the ordinary course of business for a period
of twelve months from the date of this annual general meeting;
The assets of the company, relevant subsidiaries and the group
valued in terms of Generally Accepted Accounting Practice,
will respectively be in excess of the liabilities of the company,
relevant subsidiaries and the group for a period of twelve
months from the date of this annual general meeting; and
The share capital, reserves and working capital of the company,
relevant subsidiaries and the group will be suffi cient to meet
the respective needs of the company, relevant subsidiaries
and the group for a period of twelve months from the date of
this annual general meeting.
The effect of this special resolution, if passed, is to grant a general
authority to the directors of the company's subsidiaries to acquire
shares issued by such subsidiaries and/or by the company, inter
alia by subscription, subject to the provisions of the Act, the
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FORM OF PROXYCapitec Bank Holdings Limited (Incorporated in the Republic of South Africa)
(Registration number 1999/025903/06) (“Capitec” or “the Company”)(JSE share code: CPI ISIN: ZAE000035861)
For use of shareholders who are: (1) registered as such and who have not dematerialised their Capitec ordinary shares; or (2) hold dematerialised Capitec ordinary shares in their own name, at the annual general meeting of shareholders of the company to be held in the Simonsberg Room, The Spier Conference Centre, Spier, Lynedoch Road, Stellenbosch, on Wednesday 24 May 2006 at 12:00.
Benefi cial owners who have dematerialised their shares through a CSDP or stockbroker, other than those in own name must provide the CSDP or stockbroker with their voting instruction. Alternatively, they must request the CSDP or stockbroker to provide them with a letter of representation should they wish to attend the meeting in person in terms of the custody agreement entered into between the benefi cial owner and the CSDP or stockbroker.
I/We (BLOCK LETTERS please)
of (address)
being the registered holder(s) of ordinary shares hereby appoint:
1. of or failing him/her,
2. of or failing him/her,
3. the chairman of the meeting, as my proxy to vote on my/our behalf at the annual general meeting to be held on 24 May 2006 and at each adjournment thereof for purposes of considering and, if deemed fi t, passing, with or without modifi cation, the special resolutions and ordinary resolutions to be proposed thereat and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary sharesregistered in my/our name/s in accordance with the following instructions (see notes on the opposite page):
Ordinary Business
1. Approve annual fi nancial statements
2. Re-elect Ms NS Mjoli-Mncube as a director
3. Re-elect Prof MC Mehl as a director
4. Re-elect Dr J van Z Smit as a director
5.1. Ratify the directors’ remuneration up to 28 February 2006
5.2 Authorise the remuneration committee of the board to determine the directors’ remuneration for the period 1 March 2006 up to 28 February 2007
6. Re-appoint auditors
7. Authorise the directors to approve the auditors’ remuneration
8. Authorise payment of a cash dividend of 45c per share
Special Business
9. Ordinary resolution number 1 (approval to place 7 192 841 of the unissued ordinary shares in the authorised ordinary share capital of the company and all the non-redeemable, non-cumulative, non-participating preference shares in the authorised but unissued preference share capital of the company under the control of the directors)
10. Ordinary resolution number 2 (general approval to issue new ordinary shares for cash)
11. Ordinary resolution number 3 (general approval to issue non-redeemable, non-cumulative, non-participating preference shares for cash)
12. Special resolution number 1 (general approval to the company to repurchase shares issued by the company)
13. Special resolution number 2 (general approval to any subsidiary of the company to acquire shares in such subsidiary and/or the company)
(Indicate instruction to proxy by way of a cross in the space provided above)
Signed at on this day of 2006.
Signature(s)
Assisted by (where applicable) (state capacity and full name) Each Capitec shareholder is entitled to appoint one or more proxy(ies) (who need not be a shareholder(s) of the company) to attend, speak and vote in his/her stead at the annual general meeting.
In favour of Against Abstain
Number of shares
89
88
perf
1. A Capitec shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space(s)
provided, with or without deleting the chairman of the annual general meeting. The person whose name appears fi rst on the form of proxy
and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
2. A Capitec shareholder’s instructions to the proxy must be indicated clearly by the insertion of the relevant number of ordinary shares to be
voted on behalf of that member in the appropriate box provided. Failure to comply with the above will be deemed to authorise the chairman
of the general meeting, if he/she is the authorised proxy, to vote in favour of the resolutions at the general meeting, or any other proxy to vote
or to abstain from voting at the general meeting as he/she deems fi t, in respect of all the ordinary shares concerned. A shareholder or his/her
proxy is not obliged to use all the votes exercisable by the shareholder or his/her proxy, but the total of the votes cast and in respect whereof
abstentions are recorded may not exceed the total of the votes exercisable by the shareholder or his/her proxy.
3. When there are joint registered holders of any shares, any one of such persons may vote at the meeting in respect of such shares as if he/she
is solely entitled thereto, but, if more than one of such joint holders be present or represented at any meeting, that one of the said persons
whose name stands fi rst in the register in respect of such shares or his/her proxy, as the case may be, shall alone be entitled to vote in respect
thereof. Several executors or administrators of a deceased member, in whose name any shares stand, shall be deemed joint holder thereof.
4. Every member present in person or by proxy shall, on a poll, have one vote for every ordinary share held, whereas on a show of hands,
members present in person, by proxy or by authorised representative shall have one vote each.
5. Forms of proxy must be completed and returned to be received by the transfer secretaries of the company, Computershare Investor Services 2004
(Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), by no later than 12:00 on Monday, 22 May 2006.
6. Any alteration or correction made to this form of proxy must be signed in full by the signatory/ies and not initialled.
7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this
form of proxy unless previously recorded by the company’s secretaries or waived by the chairman of the annual general meeting.
8. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and
speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.
9. The chairman of the general meeting may reject or, provided that he is satisfi ed as to the manner in which a member wishes to vote, accept
any form of proxy which is completed other than in accordance with these instructions.
Benefi cial owners who have dematerialised their shares through a CSDP or stockbroker, other than those in own name must provide the
CSDP or stockbroker with their voting instruction. Alternatively, they must request the CSDP or stockbroker to provide them with a letter of
representation should they wish to attend the meeting in person in terms of the custody agreement entered into between the benefi cial owner
and the CSDP or stockbroker.
FORM OF PROXY Client Care CentreOur 24-hour Client Care Centre ensures that you have
access to your bank account and our personal service 24/7.
90
1. A Capitec shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space(s)
provided, with or without deleting the chairman of the annual general meeting. The person whose name appears fi rst on the form of proxy
and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
2. A Capitec shareholder’s instructions to the proxy must be indicated clearly by the insertion of the relevant number of ordinary shares to be
voted on behalf of that member in the appropriate box provided. Failure to comply with the above will be deemed to authorise the chairman
of the general meeting, if he/she is the authorised proxy, to vote in favour of the resolutions at the general meeting, or any other proxy to vote
or to abstain from voting at the general meeting as he/she deems fi t, in respect of all the ordinary shares concerned. A shareholder or his/her
proxy is not obliged to use all the votes exercisable by the shareholder or his/her proxy, but the total of the votes cast and in respect whereof
abstentions are recorded may not exceed the total of the votes exercisable by the shareholder or his/her proxy.
3. When there are joint registered holders of any shares, any one of such persons may vote at the meeting in respect of such shares as if he/she
is solely entitled thereto, but, if more than one of such joint holders be present or represented at any meeting, that one of the said persons
whose name stands fi rst in the register in respect of such shares or his/her proxy, as the case may be, shall alone be entitled to vote in respect
thereof. Several executors or administrators of a deceased member, in whose name any shares stand, shall be deemed joint holder thereof.
4. Every member present in person or by proxy shall, on a poll, have one vote for every ordinary share held, whereas on a show of hands,
members present in person, by proxy or by authorised representative shall have one vote each.
5. Forms of proxy must be completed and returned to be received by the transfer secretaries of the company, Computershare Investor Services 2004
(Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), by no later than 12:00 on Monday, 22 May 2006.
6. Any alteration or correction made to this form of proxy must be signed in full by the signatory/ies and not initialled.
7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this
form of proxy unless previously recorded by the company’s secretaries or waived by the chairman of the annual general meeting.
8. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and
speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.
9. The chairman of the general meeting may reject or, provided that he is satisfi ed as to the manner in which a member wishes to vote, accept
any form of proxy which is completed other than in accordance with these instructions.
Benefi cial owners who have dematerialised their shares through a CSDP or stockbroker, other than those in own name must provide the
CSDP or stockbroker with their voting instruction. Alternatively, they must request the CSDP or stockbroker to provide them with a letter of
representation should they wish to attend the meeting in person in terms of the custody agreement entered into between the benefi cial owner
and the CSDP or stockbroker.
FORM OF PROXY Client Care CentreOur 24-hour Client Care Centre ensures that you have
access to your bank account and our personal service 24/7.
90
Financial year end
Profi t announcement
Annual report
Annual general meeting
Interim report
Last date to trade to be considered
for the dividend payment
Record date in respect of the
dividend payment
Payment date
Share certifi cates may not be
dematerialised, both days inclusive
28 February 2006
29 March 2006
May 2006
24 May 2006
September 2006
Dividend
Friday, 2 June 2006
Friday, 9 June 2006
Monday, 12 June 2006
5 to 9 June 2006
SHAREHOLDERS’ CALENDAR
1999/025903/06
PricewaterhouseCoopers Inc
AP du Plessis
MS du P le Roux
D Lockey
MC Mehl (Prof)
NS Mjoli-Mncube (Ms)
JF Mouton
CA Otto
JG Solms
R Stassen
J van Zyl Smit (Dr)
CG van Schalkwyk
10 Quantum Street
Techno Park
Stellenbosch
7600
PO Box 12451
Die Boord
Stellenbosch
7613
www.capitecbank.co.za
Registration number
Auditors
Directors
Secretary
Registered address
Postal address
Website
ADMINISTRATION AND ADDRESSES
92
Low-cost
Simplifi edAccessible
Affordable
Convenient
Paperless
Innovative
CapAnnCOVrepro.indd 1CapAnnCOVrepro.indd 1 1/1/70 11:42:42 AM1/1/70 11:42:42 AM
