brait 2006 annual report - sharedata · page the business of brait 1 group profile 2 activities 2...

PARTNERSHIPS BASED ON PASSION, ENERGY AND

A PIONEERING SPIRIT OF ENTERPRISE

2006 AN N UA L RE P O RT

www.brait.com

G R A P H I C O R 3 4 1 5 6

Page

The business of Brait 1

Group profile 2

Activities 2

Annual highlights 3

Senior chairman's statement 4

Group chief executive's report 6

Brait timeline 9

Group scorecard and performance measurement 10

Salient features 11

Financial commentary 12

Segmental review 17

– Private Equity 17

– Specialised Funds 27

– Corporate Finance 31

– Group Investments 33

Corporate governance 35

Board profile 40

Remuneration report 42

Risk management review 46

06Bra i t ANNUAL REPORT

Brait S.A., Société Anonyme, Incorporated in Luxembourg (RC Luxembourg B-13861)

CO N T E N T S

Page

Sustainability report 48

– Introduction 48

– Stakeholders 49

– Group value added statement 51

– Share analysis 52

– Performance on the JSE Limited exchange 53

– Social responsibility 54

– Employee report 57

– Environmental 61

– GRI index 64

Group statistics 66

Annual financial statements 71

Principal subsidiaries, associated

companies and joint ventures 108

Shareowners' diary 109

Notice of annual general meeting 110

Administration 112

Form of proxy (perforated) 113

Brait is an international investment and financial services group focused on

private equity, corporate finance and specialised funds. It is listed on the

Luxembourg, London and Johannesburg stock exchanges.

THE BUSINESS OF Bra i t

Our core values are reflected in our attitude towards partnerships –

to establish fair, positive and enduring relationships that seek shared

reward.

FAIR We seek balanced solutions on a foundation of good faith,

professionalism and integrity.

POSITIVE We do everything with passion, energy and a

pioneering spirit of enterprise.

ENDURING We invest our intellectual and financial capital for long-

term value beyond today’s transactions.

SHARED REWARD With our partners we grow and participate in the

benefits flowing from discovered opportunities.

Brait Annual Report 2006 1

2 Brait Annual Report 2006

PROFILE

GROUP ACTIVITIES

Brait’s primary activities are:

Brait is an international investment and financial services groupfocused on private equity, specialised funds management, corporatefinance and strategic investing. It is listed on the Luxembourg, Londonand Johannesburg stock exchanges, with shareowners’ funds ofUS$158 million at 31 March 2006.

As an international group, we operate and invest in South Africa, sub-Saharan Africa, Europe and North America. We provide a wide range ofinvestment and specialised financial services to a substantial clientbase that includes listed and unlisted companies, financial andgovernment institutions and high net worth individuals.

Our private equity activities involve the management of third partycapital in a fund format and leveraging our skills, insights andrelationships by making medium to long-term investments in ourprivate equity funds and proprietary investments.

Our specialised funds activities pioneered the formation of a uniquehedge funds product designed for South African institutional investors

and has shown excellent results in its first four years of fundsmanagement.

Brait’s corporate finance capability effectively addresses client andgroup needs with the emphasis on debt advisory services focusing onstructuring and distribution of debt products.

Brait’s group investment activities houses the group’s strategicinvestments of which the group’s interest in Bayport, a sub-Saharanmicrolending and financial services provider, is the most significant.

Brait’s earnings are primarily derived from:• Private equity management fees and investment returns;• Alternative funds management fees and investment returns;• Corporate and debt advisory services fees; and• Group investment returns.

Group Investments

• Strategic investments• Treasury and capital

management

Specialised Funds

• Hedge fundmanagement

• Hedge fund investments• Multi management

Private Equity

• Private equity fundsmanagement

• Private equity investments• Funds investments

Corporate Finance

• Debt advisory services• Capital structuring


Relative Brait share price versus JSEGeneral Financial Index (2001 = 100)

275

225

175

125

75

25

Inde

x

Mar

01

JSE General Financial Index Brait share price

Sep

01

Mar

02

Sep

02

Mar

03

Sep

03

Mar

04

Sep

04

Mar

05

Sep

05

Mar

06

Jun

06

Dividend per share*

20,0

15,0

10,0

5,0

0

US c

ents

04 05 06

*excluding special dividends

ANNUAL HIGHLIGHTSfor the year ended 31 March 2006

Financial• Earnings continue to grow strongly

– Attributable earnings increased by 38,6% to US$47,0 million(ZAR300,8 million)

– Headline earnings increased by 22,4% to US$41,5 million(ZAR265,5 million)

• Return on equity increased from 32% to 45,9%• Annual dividend distributions increased by 32,7% to 18,24 US cents

per share • NAV improved to 155,7 US cents per share (961,6 SA cents per

share) – after adding back dividends paid• Growth in funds under management (fee earning) from

US$508 million to US$1 046 million

Attributable earnings

50,0

40,0

30,0

20,0

10,0

0

US$

mill

ion

04 05 06

Operational• Private Equity

– First closing of Brait IV– Advanced realisations of Brait III investment programme– Unwinding of Brait II substantially complete

• Specialised Funds– Assets under management grew significantly– Brait Absolute SA Fund continues to outperform three-year

rolling objectives– In advanced stage of launching a multi-strategy fund

• Corporate Finance– Pioneered first euro high yield bond for a South African corporate– Advised on first South African management buy-out funded by

euro bonds• Group investments

– Accelerated advances and earnings growth in Bayport– Establishment of a joint venture mezzanine fund management

business

Strategic• Achieve critical mass in Specialised Funds• Debt capital raised of US$72,9 million (ZAR450 million) to leverage

organic growth• Reduce earnings dependency on Private Equity• Restructure Corporate Finance to focus on debt and capital

advisory services• Increase external debt capital in Bayport


SENIOR CHAIRMAN’S STATEMENT

Group resultsAt the announcement of the interim results, I reported that the outlookfor the second half of the year was encouraging. More specifically Iinformed shareowners that the prospects for raising Brait’s new PrivateEquity Fund, Brait IV, were good and that Specialised Funds stood tobenefit from new capital inflows. Furthermore, the group’s earnings inthe second half should, subject to market forces, meet or exceed thosereported in the first half of the year.

It pleases me to report that my predictions have been realised.The group’s financial performance continued to improve in the secondhalf as a result of a strong performance in Private Equity and increasedspecialised funds income, group investment returns and specialiseddebt advisory service fees.

The financial results of the year ended 31 March 2006show attributable earnings growth of 38,6% to US$47 million(ZAR300,8 million), return on equity increased from 32% to 45,9%and growth in fee earning funds under management, fromUS$508 million to US$1 046 million.

Operationally Brait was voted the best African Private Equity managerby Private Equity International in 2005. Investor support for Brait’s newPrivate Equity Fund, Brait IV, has been strong. The projection is that thisfund will close, by December 2006, as Brait’s largest fund ever. Thedebt advisory offering continues to show that it is one of theinnovators in funding structures for South African corporations and isable to conclude large transactions through its internationalrelationships. The future growth of Specialised Funds within the Braitgroup is most encouraging, particularly as it has continued to exceedits initial targets, and deliver expected performance.

Bayport continued to expand its micro-lending and financial serviceoperations in Africa. Several strategic partners acquired a portion of theBayport equity which has resulted in Brait’s economic interest reducingto 41,66%.

Macro environmentDespite widening global current account imbalances, rising oil prices,and natural disasters, the global economy expanded at a respectablepace of 3,4% during the course of 2005. This slowdown, somewhatslower than the 4,0% recorded the previous year, was mainlyprecipitated by more expensive energy costs, but was also influencedby capacity constraints in the resources sector and by the effects oftightening monetary policy in the United States. The relatively fasterpace at which China and India grew, compared with the rate by whichindustrialised economies grew, bolstered global financial stabilityduring 2005. Against this background, the South African economyregistered another impressive performance.

One of the most significant achievements for South Africanpolicymakers, over the past year, has been the elevation of thecountry’s sovereign rating to the upper end of the lower investmentgrade rating. The Baa1 rating by Moody’s and the BBB+ rating byStandard & Poors are significant acknowledgements of South Africa’sfavourable mix of macro-economic, fiscal and monetary policy. Theseratings, in place for 30 consecutive quarters, acknowledge the upwardtrend in economic growth. The 4,9% rate at which gross domesticproduct grew in 2005 is the fastest annual rate of expansion since1984. While the economy remained in an upward phase of its businesscycle, the longest on record, foreign investors took note that economicactivity continued to take place.

Interest in domestic securities rose to an historic high, and foreigndirect investment interest remained encouraging, with two of thelargest inward investments on record, in the banking andtelecommunications sectors, being registered. With the scorecard onkey policy issues becoming increasingly impressive, the environment forprivate equity investments looks promising.

Relative international market trendsIndex 1999 = 100

350

300

250

200

150

100

50

0

Inde

x

Apr 9

9

Dow Jones Index Nasdaq Index JSE ALSI Index

Oct

99

Apr 0

0

Oct

00

Apr 0

1

Oct

01

Apr 0

2

Oct

02

Apr 0

3

Oct

03

Apr 0

4

Oct

04

Apr 0

5

Oct

05

Apr 0

6

Profit from operations

60,0

50,0

40,0

30,0

20,0

10,0

0

US$

mill

ions

04 05 06


The challenges facing policymakers today are generally external innature, relating to the impact monetary tightening has on emergingmarkets, such as South Africa. The economy, which is not immune todevelopments beyond its control, has shock-absorbers in place whichsuggest that it is capable of weathering external influences betterthan it has in the past, and generally better than many otherdeveloping economies. The inflation targeting mechanism, in placesince 2001, has been successfully managed, to the extent thatinflation, excluding mortgage rates, has been within its designatedrange for 31 consecutive months. Inflation averaged 3,9% in 2005,the lowest on record. Another economic achievement has been theturnaround in reserves, facilitating a more stable outlook towardsthe currency than previously.

The boardOur value driver is reflected in our partnership approach from whichbase we adopt a fair, positive and enduring relationship with ourstakeholders. Brait, as a European company, has complied with bestcorporate practice in Europe, the United Kingdom and South Africa.

Critical stakeholders in Brait are its private equity fund investors. In lightof the leadership change in Brait, following the appointment of JohnCoulter as the group’s new Chief Executive Officer during the periodunder review, these investors requested that Antony Ball and JohnGnodde hold senior positions in the group, even though their principaloperational roles would remain in Brait’s private equity business. Havingregard to this requirement, the board deemed it to be in the bestinterests of the group to appoint Anthony Ball and John Gnodde topositions where they continue to be seen to operate as leaders in thegroup, being an important criteria for our fund investor stakeholders.Anthony Ball became Executive Chairman and continues to chair theBrait Private Equity board, whilst playing an active role in the strategicoversight of Brait. John Gnodde became Executive Deputy Chairman andcontinues to act as CEO of Brait Private Equity. In order to ensure thatindependent non-executive oversight of the board continues, I becamethe Senior Chairman of the group and, in this role, continue to chair the

board and the remuneration committee, sit on the audit and riskcommittee, act as the link between the board and management and asa direct link with the shareowner base of the group.

As part of its evaluation process the board will, however, reviewits structure.

DividendThe group’s balance sheet is strong and earnings from operations haveincreased materially. In light of this the board resolved to recommend afinal dividend of 10,39 US cents per share to shareowners. This, togetherwith the interim dividend, will result in a total annual dividend of 18,24 UScents per share, if approved at the 2006 annual general meeting.

The year aheadBrait will continue to focus on its core businesses and to exploreexciting new business opportunities. The prospect of significant newcapital from Brait IV, together with increased inflows to SpecialisedFunds, indicates that earnings growth and equity returns will improvein the year ahead.

In appreciationI record both my and the board’s appreciation of the executivemanagement’s dedication and performance during the year underreview. I thank my board members for their contributions and expressmy appreciation to staff for their efforts. In addition, my appreciation isextended to our strategic partners, investors, shareowners and otherstakeholders for their continued support of the group.

Mervyn E King19 June 2006Senior Chairman

Historical exchange rate movement

1,20

1,15

1,10

1,05

1,00

0,95

0,90

0,85

0,80

0,75

0,70

Euro

Apr 0

2

Euro invested against USD (LHS)

Sep

02

Mar

03

Aug

03

Feb

04

Jul 0

4

Jan

05

Jun

05

Dec

05

May

06

Rand against USD (RHS)

Rand

12,25

11,25

10,25

9,25

8,25

7,25

6,25

5,25

Brait was voted thebest African PrivateEquity manager


GROUP CHIEF EXECUTIVE’S REPORT

Review of performance2006 saw Brait build on the sound business platform and strongresults of the prior year, producing a set of financial results which haveexceeded the performance of 2005. All business units have contributedpositively to the bottom-line and the prospects are for continued valueto be derived from Brait’s current portfolio of businesses andinvestments, and for a growing and more diversified earnings streamin the short to medium-term.

Review of operationsPrivate EquityPrivate Equity earnings were marginally up on the prior year’s strongresults, with profit from operations increasing by 1%, toUS$39,1 million, producing a return on equity of 40,8% on averagecapital employed of US$95,8 million. This performance was primarilydriven by value recognition in investments in Brait III and growth invalue of the group’s proprietary investments, against a background ofa strongly performing economy and capital markets in South Africa,during the period.

A number of realisations from Brait II investments were achievedduring the year, which included Shoe City, Prime Cure and Unispan,leaving Brait II with one remaining investment prior to being closedand fully wound up.

The portfolio companies in Brait III, primarily Net 1, Pepkor, LogicalOptions and Wilderness, all performed very well operationally duringthe course of the year. Brait Private Equity management and teambelieve that there is still considerable value to be produced from theinvestments in Brait III. Notable transactions in Brait III, during theyear, were:• The listing of Net 1 on Nasdaq which unlocked considerable value

for shareowners through the rebenchmarking of the Net 1 share toapproximately eight times its prelisting value and in which Braitsold 20% of its holding.

• Leveraged recapitalisation of the Reclamation Group, through anMBO facilitated by the raising of debt in the Eurobond market,which resulted in Brait III’s realisation of five times its originalinvestment in Reclamation.

Fundraising for Brait IV continues to exhibit positive momentum, withan increased level of interest being shown in both South Africa andprivate equity, by both new investors and investors in existing Braitfunds. The first close of Brait IV, in the first quarter of 2006, gives usgreat confidence that we are on track to achieve the target ofUS$500 million (ZAR3,1 billion) for Brait IV which would, to date, makeit the largest of the Brait funds and the largest fund raised from thirdparties for private equity in South Africa.

During 2005/2006, private equity grabbed international headlines withnearly US$500 billion of private equity backed M+A deals concludedglobally in 2005, and about 33% of all M+A deals in Europegenerated through private equity. In South Africa, the South AfricanVenture Capital and Private Equity Association’s (SAVCA) estimate ofprivate equity driven M+A activity was approximately ZAR5 billion(2%) for 2005. If South African capital and investment markets followthe international trends, it would indicate significant potential for thegrowth of private equity linked transactions in the immediate future.

At Brait we believe that the future prospects for private equity businessin South Africa give rise to considerable optimism. The current macro-economic environment is the most supportive that it has been forprivate equity business, in Brait’s 15-year history. Factors supportingthis include low inflation, a low interest rate environment, strong andupwardly trending economic growth, the availability of debt financestructures and amounts that are new for this market, and thetransformation of the economy through BEE, which acts as a catalystfor M+A activity. We believe that Brait is extraordinarily well positionedto take advantage of this platform, given its existing well performingportfolio of assets with considerable residual value, a new fund in BraitIV providing the capital for future investments, and a healthy pipelineof innovative and market significant transactions which are, in manycases, in an advanced stage of development. In addition to this, Braithas an experienced, cohesive team, capable of delivering on theopportunities presented and we are confident that Brait Private Equitywill continue to grow assets and earnings and exceed its ROE targets.

Corporate FinanceThe relatively strong improvement in corporate finance earnings, albeita minor contribution in absolute terms, is primarily due to fees earnedby the Specialised Debt unit. Fees were generated via Brait’s role asadvisor and lead arranger in transactions that were innovative andground-breaking for the South African debt markets, in particular theFoodcorp and Reclamation transactions. Central to both of thesetransactions was the raising of debt in amounts and structure relativeto equity, on a scale never previously witnessed in South Africa. Bothtransactions enabled the respective companies to restructure theircapital base, thereby reducing their weighted average cost of capital.They made use of the High Yield bond market in Europe to raise asignificant portion of the debt, and are among the first South Africancompanies to do so. Within the Specialised Debt unit, Brait has a highlytalented team with a track record of closing innovative transactionsthat have consistently reshaped the parameters of debt transactions inSouth Africa. Our intention, going forward, is to build on this platform,and to broaden the capacity and expertise of the team members intoother debt products and services.

Despite the existence of a promising mid-year pipeline of mandateddeals and work in progress, the M+A/advisory business continued tostruggle to conclude transactions and generate fees, resulting in aUS$2,1 million operational loss for the year from this unit within theCorporate Finance segment. Consequently Brait has decided, post year-end, to restructure this unit to primarily provide internal advisory andinvestment support for other Brait business segments.

Specialised FundsSpecialised Funds’ income, which consists of management andperformance fees derived from the management of third party capitalin the group’s hedge funds, and investment returns generated fromBrait’s own seed capital, increased by 18% to US$6,5 million fromUS$5,5 million the prior year. Operating earnings increased by 8% toUS$1,3 million from US$1,2 million in 2005.

The focus for Specialised Funds, during 2006, was on building capacity,and increasing funds under management. Realised revenue andearnings for the year, despite an 8% increase in earnings over 2005,


significantly understate the future potential of this business segment.Indeed, this year was characterised by an exponential increase inassets under management in the Brait Funds of Hedge Funds, of almost700% from ZAR403,7 million to ZAR3,1 billion at year-end. A largeportion of these funds were committed in the latter half of the financialyear. The timing of these large inflows, combined with the group’spolicy of not recognising performance fees until 31 December of eachyear, means the business will only benefit from the fee revenueassociated with this new scale of assets under management in the nextfinancial year.

With ZAR3,1 billion of assets largely invested in its funds of hedgefunds and in emerging fund opportunities, and Brait’s foresight insecuring nearly ZAR3,1 billion of additional capacity. Brait has firmlyestablished itself as the leading Fund of Hedge Fund manager in SouthAfrica. Brait’s fund of hedge funds have been designed to appeal toinstitutional investors as a high yielding, low risk investmentalternative to cash and bonds, and have attracted funds from four ofthe top ten pension funds, by size, in the country. Brait Absolute has afour-year track record of producing cash plus 6% with a correlationand beta to the ALSI of 0,33 and 0,06 respectively, and has recorded44 consecutive months of positive returns. It should be noted thatassets under management, plus commitments, have already exceededZAR4,1 billion since year-end.

We believe that Specialised Funds is well positioned within a marketthat is increasingly understanding of, and receptive to, hedge funds asan alternative asset class. As investors look to rebalance their portfolios,following the strong gains experienced in equities in recent years, weexpect continued significant asset growth in the funds of hedge fundsin 2007, particularly as investors look for more defensive investmentstrategies should market uncertainty and volatility persist into 2007.

During the course of the next financial year, Specialised Funds willlaunch a multi-strategy fund which will utilise a dynamic risk allocationprocess across multiple investment disciplines. This fund will exhibit riskand return parameters that differentiate it from the current Brait fundof hedge fund products.

Group InvestmentsEarnings from the Group Investments segment have again contributedsignificantly to the group’s earnings performance. Operating earningsare up by 35,7% to US$11,6 million, giving a return on equity of16,7%.

Bayport, which provides financial services and micro-lending in sub-Saharan Africa, is the largest single contributor to this segment withoperating earnings growing by 170% to US$6,4 million. Advanceshave grown by 109% to US$33,8 million, with the majority of thisgrowth emanating from its largest businesses in Zambia, Ghana andUganda. The bad debt experience, at 3,5%, is still well below thecomparable South African industry average. A number of pilot projectsare in trial which would add services in existing markets, as well asexpand Bayport’s regional footprint. We anticipate that a number ofthese projects will become operational in the second half of FY 2007.

Brait’s principal interest in South African micro-lending is through itsinvestment in Capital Alliance Finance, which was profitable and cashgenerative over the year.

In November 2005, Brait South Africa Limited established anindependent mezzanine fund management business, MezzaninePartners (Pty) Ltd (“Mezzanine Partners”), in a joint venture with OldMutual Asset Managers (South Africa) (Pty) Ltd and MezzaninePartners executive management. At year-end the fund hadUS$45 million capital committed. It concluded its maiden investmentsubsequent to year-end.

The remaining earnings in this segment were derived from the group’streasury activities and other minor investments.

CapitalThe accessibility of unsecured funding for companies has increased, whilethe cost of raising corporate debt finance, has declined significantly inSouth Africa, and this has presented a window of opportunity for Brait toraise a significant amount of low cost, long-term debt, which will meet thegroup’s need or capital to expand its operations.

31 March 2005

Private Equity 80% Specialised Funds 1%

Corporate Finance 2% Group Investments 17%

31 March 2006

Private Equity 74% Specialised Funds 2%

Corporate Finance 2% Group Investments 22%

Segmental profit from operations

GROUP CHIEF EXECUTIVE’S REPORT CONTINUED


Immediately prior to 31 March 2006, Brait secured a US$73 million(ZAR450 million) long-term debt facility and has drawn down thecapital in full.

Brait intends to use the capital for expansion of existing operations,new organic business activities and BEE investing opportunities. Asmall portion may be used for a share buy-back programme. Thedeployment of this capital should enhance earnings growth, createcapital efficiencies and improve Brait’s market rating by decreasingearnings dependency on private equity investing income.

Strategic review and outlookOur 2006 goals were primarily operational in nature and largely builton similar goals for 2005:• Focus on driving value of high impact investment in Private Equity.

This was achieved as evidenced by a 40,8% return on equity fromthat business.

• Make substantial progress in raising of Brait Fund IV. A successfulfirst closing of Brait IV, and the positive response received frominvestors gives us confidence that the Fund target ofUS$500 million (ZAR3,1 billion) will be achieved.

• Increase funds under management in Specialised Funds. Withassets under management increasing by almost 700% to ZAR3,1 billion, this goal was achieved in spectacular fashion.

• Improve profitability and sustainability of Corporate Finance. Bothobjectives were achieved in respect of the Specialised Debtbusiness, however, we were disappointed that continued lack ofprofitability in the M+A/advisory unit has led to a need torestructure that business unit.

• Further develop our investment in Bayport.

For the year ahead, our objectives build on the achievements and solidbusiness platform created over the last few years, and look to utilisethe increased pools of capital available to Brait to capitalise on theopportunities we see across all our business segments:• In Private Equity, maximise value in investments in Brait III, finalise

Brait IV and begin the investment process in that fund.• In Specialised Funds to build assets under management, secure

additional hedge fund capacity and launch a multi strategy fund.• Within Corporate Finance it is our intention to broaden our product

and service capabilities in the capital markets.• Develop and leverage our investment in Bayport, and further

explore a number of opportunities, primarily in financial services,that are potential additions to our suite of strategic investments.

In conclusion, we believe that the sustainable macro-economicprospects for Brait’s core businesses are as good as they have been inthe past decade. In the absence of any unexpected significant negativemarket or other events outside of the group’s control, we areencouraged as to the prospects for continued earnings growth and thegeneration of attractive equity returns for our shareowners.

SustainabilityThe sale of 26% of Brait South Africa Limited (‘Brait”) to SitogoHoldings (Pty) Ltd (“Sitogo”), a broad-based black empowermentgrouping led by a number of entrepreneurial black business people, wasconcluded in the prior financial year.The partnership between the Sitogoand Brait executives is working well as evidenced by increasedinteraction and joint exploration of business opportunities between the

partners. The partnership has already created value for all stakeholders.For example, the benefit of the partnership to the business was clearlyfelt in the gathering of assets under management this year. Secondly,the original intention in the Sitogo transaction was that forecastearnings and cash generation would be sufficient to repay theunderpinning financing within six years. Earnings and cash generationover the two years of the partnership is 15% ahead of forecast with theexpected commensurate benefit to Sitogo.

In terms of broader BEE impact, Brait benchmarks itself against theapplicable sections of the Financial Services Charter Scorecard, namelyemployment equity, procurement, ownership and control andcorporate social investment. When measured against these criteriaBrait scored an “A” rating for the year.

Brait is a strong supporter of the JSE Limited’s Socially ResponsibleInvestment (JSE SRI) Index. The JSE SRI Index evaluates companies ontheir sustainability in terms of governance, economic, environmentaland social factors and Brait is pleased to be one of 58 companiesincluded in the2005/2006 annual review of the JSE SRI Index.

Staff and stakeholdersThe strong relationship we have with all our stakeholders is critical tothe performance and sustainability of our business. On behalf of theexecutive and my partners at Brait, I would like to formally thank mycolleagues at Brait for their hard work and dedication, ourshareowners and BEE partners for their commitment and partnership,and our clients and private equity and specialised fund investors fortheir loyalty and support. Your partnership is much appreciated andimportant to the current and future success of Brait.

John CoulterGroup Chief Executive19 June 2006

TIMELINE


Some of the more significant events that have shaped the current structure and position of the Brait S.A.group are listed below:

2006

2004

2003

20012000

1998

• Achieved first close of Brait Private Equity Fund IV • Quantum AUM growth – Specialised Funds • Fee earning funds under management in excess of US$1 billion• US$73 million of new debt capital raised• Bayport loan book doubles to US$33 million• Lead arranger for two of first four High Yield Eurobonds

• Substantial completion of Brait III Investment Programme• Introduction of BEE partners to Brait South Africa• Initiation of fund raising Brait Private Equity Fund IV

• Distribution of banking capital to shareowners• Reorganisation of Corporate Finance business

• Closure of Banking operations - deregister banking licence• Reorganisation and focus on core operations• Initial raising of third-party Specialised Funds capital

• Establishment of Brait Specialised Funds

• Completion of Brait II Investment Programme

• Establishment of Brait on the Luxembourg, London and Johannesburg stock exchanges• Merger of Private Equity and banking operations• Establishment of Brait Private Equity Fund III• Establishment of Braitec Private Equity Fund I• Incorporation of full advisory and investing operations in Mauritius

• Completion of Brait I Investment Programme

• Establishment of Brait Private Equity Fund II

• Establishment of Brait Private Equity Fund I (FCF Fund)

2005

199619951991

GROUP SCORECARD AND PERFORMANCE MEASUREMENT


ObjectiveTo achieve a long-term US dollar return on shareowner’s funds of 20%.

Measured as follows:• Annual ROE – measured by growth in NAV, adjusted by dividends,

over average capital• Long-term ROE – IRR on opening and closing NAV plus dividends

ProgressFollowing the restructure and recapitalisation of the group in 2003/2004, Brait has increased its long-term ROE target to 20% in US dollarterms (for South African investors this should equate to approximately25% in rand terms in the current macro-economic environment). Thisperformance has been measured from 1 April 2004 as any comparisonprior to this date would be misleading because of the changes thathave occurred in the group since then.

Brait has generated an annual return on equity in 2006 of 45,9%and a cumulative three-year return of 36,2%, which has comfortablyoutperformed its long-term target of 20%.

ObjectiveTo double alternative asset funds committed, including specialisedfunds, every four years.

ProgressBrait has a sound base of commitments from which it expects to growits funds under management. The raising of Brait Fund IV in the 2006financial year and the explosive growth of assets under management inspecialised funds have had a major beneficial impact on this deliverable.

ObjectiveTo grow alternative asset funds invested at 20% per annum.

ProgressBrait has to date exceeded its target of invested funds. Newinvestments by the Brait Absolute Fund of Funds have contributedsignificantly to this performance in the 2006 financial year.

ROE – average capital

60

40

20

0

%

04 05 06

Return on shareowners’ funds in US$

Long-term objective 20%

Long-term ROE*

40

30

20

10

%

04

Cumulative ROE

05 06

Long-term objective 20%

* Adjusted for special dividends

Alternative assets cumulative funds invested

1 000

700

400

100

US$

mill

ions

98 99 00 01 02 03 04 05 06

Invested (US$ million) Investing objective

Alternative assets – funds committed*

1 500

1 200

900

600

300

0

US$

mill

ions

98 99 00 01 02 03 04 05 06

Funds committed (US$ million)* Funds committed objective

* Original commitment in private equity and year-endcommitments in specialised funds


SALIENT FEATURESfor the year ended 31 March

Supplementary rand information (Note 1)

302,8 338,6 Profit from operations 52,9 48,5 9,1

242,4 250,2 Private equity 39,1 38,8 0,7 5,8 Corporate finance 0,9 0,1 7,3 8,3 Specialised funds 1,3 1,2

52,4 74,3 Group investments 11,6 8,4

(15,7) (15,4) Finance costs (2,4) (2,5)(69,7) 12,2 Capital items 1,9 (11,2)

217,4 335,4 Profit before taxation 52,4 34,8 50,6(3,1) (17,3) Taxation (2,7) (0,5)

214,3 318,1 Profit after taxation 49,7 34,3 44,9(2,6) (17,3) Minority interest (2,7) (0,4)

211,7 300,8 Attributable earnings 47,0 33,9 38,6

PERFORMANCEHeadline earnings per share

237,1 291,7 – Basic (cents) 45,8 38,0 20,5216,7 256,7 – Diluted (cents) 40,3 34,7 16,1

Attributable earnings per share237,1 331,9 – Basic (cents) 51,9 38,0 36,6216,7 292,1 – Diluted (cents) 45,6 34,7 31,489,89 119,32 Dividends per share 18,24 13,75 32,7

21,47 51,51 – Interim (cents) 7,85 3,5068,42 67,81 – Final proposed (cents) 10,39 10,25

813,0 961,6 Net asset value per share (cents) 155,7 130,3 19,5

32,0 45,9 Return on equity (%) 45,9 32,0 43,4

FINANCIAL STATISTICSMarket capitalisation

1 033,4 2 536,9 – 31 March (m) 410,8 165,6 148,0

88,3 101,5 Shares in issue (m) – excluding treasury shares 101,5 88,3 14,9

Weighted average shares in issue89,3 90,6 – Basic (m) 90,6 89,3 1,597,7 103,0 – Diluted (m) 103,0 97,7 5,4

Closing share price1 170,0 2 500,0 – 31 March (cents) 404,8 187,5 115,9

ZAR/US dollar exchange rates6,2395 6,1765 – closing 0,1619 0,16036,2503 6,3979 – average 0,1563 0,1600

Note 1: The disclosure above is for information purposes and does not form part of the group financial statements.

2005 2006 2006 2005 ChangeZARm ZARm US$m US$m %

FINANCIAL COMMENTARY

Headline earningsAs International Financial Reporting Standards (“IFRS”) do notrecognise the concept of headline earnings, the followingreconciliation between earnings and headline earnings at 31 March

2006 has been provided for illustrative purposes for South Africanusers, based on adjustments required by South African Statements ofGenerally Accepted Accounting Practice.


Supplementary rand information31 March 31 March 31 March 31 March

2005 2006 2006 2005ZARm ZARm US$m US$m

211,7 300,8 Attributable earnings 47,0 33,9– (35,2) Headline earnings adjustments: (5,5) –

– (18,6) Profit on disposal of interest in subsidiary (2,9) –– (17,9) Profit on sale of non-current assets held for sale (2,8) –– 1,3 Realisation of translation adjustment 0,2 –

211,7 265,6 Headline earnings 41,5 33,9

Segmental analysis of Brait’s operationsA segmental analysis of the group’s results have been prepared for thebusiness and geographical segments of Brait’s activities on pages 17to 34. The geographical segments have been changed this year to abasis of distinguishing between the actual geographical source ofincome rather than distinguishing between the economic environmentswhich have similar specific risks and regulations.

The nature of the operational income, expenses and capital flows ofthe principal business segment activities are as follows:

• Private Equity– annuity income flows from fixed long-term contracted

management fees;– investment income and capital participations from fund

investments and proprietary ‘private equity’ styled transactions;– investing income typically includes dividends, interest, investment

gains and capital participations, which are market and specificinvestment dependent;

– the cost structure is predominantly fixed; and – significant capital is co-invested in the group’s private equity

funds and to a lesser extent on proprietary investments.

• Corporate Finance– recurring advisory income from specialised financial services;– lumpy participation fees are derived from the specialised finance

activities;– the cost structure is variable; and– minimal capital is required.

• Specialised Funds– annuity income flows from contracted management fees;– investment income from seed capital in the group’s funds;– investing returns typically include dividends, interest and

investment gains, which are market and specific investmentdependent;

– the cost structure is predominantly fixed; and – seed capital is invested in the group’s hedge fund products and in

emerging hedge funds.

• Group capital– recurring income from strategic investments and loans in

subsidiaries, associates and joint ventures; and– meaningful capital investments.

Accounting policiesThe financial statements of the group are prepared in accordance withIFRS on the going-concern principal and using the historical cost basis,except where otherwise indicated.

The accounting policies are consistent with those applied in theprevious year.

Currency hedgeBrait has consistently applied its policy of hedging the majority of itsSouth African rand tangible net assets into US dollars, which is thepresentation and performance measurement currency of Brait S.A.. Asat 31 March 2006, approximately 88% of the group’s capital, inclusiveof the currency hedge, was effectively maintained in US dollars. Theaverage cover for the year, including inherent hedges, exceeded 80%.

The purpose of the hedging policy is to protect the US dollar capital ofthe group against rand weakness for the following reasons:• the group’s functional and presentation currency is in US dollars;• the group’s performance measurement targets are set in US dollars

in order to be aligned with its presentation currency;• the group has a significant international shareholder base which is

unique for a predominantly South African focused financial servicesbusiness. The hedging strategy offers these shareowners protectionagainst Rand weakness; and

• the hedge provides greater reporting transparency and simplicity ofthe group results. Without the hedge, the impact of currencytranslation adjustments would obscure the core underlyingperformance of the group’s operations.

Included in the 88% US dollar capital cover is a US$35,0 million five yearcurrency call option, purchased in March 2006, against the tangible netasset investment by the group in its South African operation. The primaryterms of the option include a maturity date of 25 March 2011 and aforward rate of ZAR7,084 to the US dollar. The spot rate at theacquisition date of the option was ZAR6,235 to the US dollar.


The previous currency hedge comprised a US$30,0 million crosscurrency swap taken out in February 2005 with a settlement dateat the end of March 2006, combined with a put option to sellUS$30,0 million against the rand at a rate of ZAR5,84 to the US dollar.

The income statement charge for the period of the currency hedge wasUS$2,2 million (2005: US$4,1 million). This cost is offset by a gain ofUS$0,7 million arising from the translation of the group’s non-USdollar assets into US dollars at 31 March 2006 which is disclosed underthe foreign currency translation reserve in the balance sheet incompliance with IFRS.

An approximate illustrative impact of the currency hedge on thegroup’s net asset value (’NAV’) in US dollars and rands is set outrespectively in the graphs below.

Debt capital – US$73 millionCapital has traditionally been a scarce resource for Brait andconsequently the group has always preserved and managed its capitaljudiciously. At the same time, Brait has had to balance this resourcewithin the limits of its dividend policy which has been to distributeregular and substantial dividends as part of Brait’s goal of generatingincremental long-term wealth accumulation for shareowners.

Brait currently has a US$13,0 million (ZAR80 million) unsecured short-term banking facility which it has utilised to meet its working capitaland short-term operational financing needs. This facility though, hasnot been substantial enough for Brait to pursue its longer term growthstrategy. Brait has been reluctant to raise new equity capital to fund itsgrowth due to the perceived market underpricing of Brait’s equity.

Over the last twelve months the accessibility to unsecured fundingas well as the cost of raising corporate debt finance has declinedsignificantly in South Africa. Importantly for Brait, this has presented awindow of opportunity to raise a significant amount of low cost, long-term debt which will meet the group’s need for capital to expand itsoperations.

Immediately prior to 31 March 2006, Brait secured a long-term debtfacility and has drawn down the full capital balance. The principalterms of the facility are as follows:• Amount: ZAR450 million (approximately US$73 million)• Instrument: Redeemable preference shares issued by

Brait South Africa Limited• Rate: 78% of the South African prime rate on a

floating rate basis• Term: Seven year loan with a redemption schedule

commencing annually at the end of thefourth year

• Currency: ZAR• Guarantees: Brait S.A. group underpin• Early redemption: Brait is entitled to an early redemption at

any time prior to the specified settlementdates.

US$ capital before and after hedging

45

40

35

30

25

20

Capi

tal

Balance sheet capital (no hedging) Hedging effect

ZAR/USD exchange rate

5,5

5,75 6,0

6,25 6,5

6,75 7,0

7,25 7,5

7,75 8,0

8,25 8,5

8,75 9,0

ZAR capital before and after hedging

315

300

285

270

255

240

225

210

195

180

ZAR

mill

ions

4,0

4,5

5,0

6,0

6,5

7,0

8,0

7,5

8,5

9,0

5,5

Rand NAV without hedging effect Rand NAV with hedging effect

ZAR/USD exchange rate

Earnings continue to grow strongly

FINANCIAL COMMENTARY CONTINUED

Brait intends to apply the capital as follows:• to accelerate growth of existing operations;

– increase Brait IV co-investment– new private equity proprietary investing– additional seed capital and product development in Specialised

Funds– loan book growth and expansion in Bayport

• to initiate new organic business activities; and• to facilitate BEE investing opportunities.

Brait may also consider a limited share buyback programme.

The outcome of the deployment of the additional capital should:• enhance earnings growth from investment returns;• increase the growth in funds under management;• improve Brait’s earnings yield from capital and share buyback

efficiencies; and• improve Brait’s market rating by decreasing earnings dependency

on private equity investing income.

Brait will continue to follow its stringent investment disciplines beforeinvesting this new capital. Subsequent to year-end, Brait has depositeda large portion of the capital drawn with the Brait Absolute Fund as acautionary interim investment until such time as it is allocated to thegroup’s operations.

Operations and performanceBrait has continued its strong performance in the previous year withimproved earnings in all business areas. This performance was primarilydriven by the private equity and group investment operations.

Key financial scorecard performance deliverables this year have been:• an annual 45,9% return on shareowners’ funds and a cumulative

long-term ROE since 1 April 2003 of 36% – this substantiallyexceeds the group’s long-term target ROE of 20% in US dollars;

• cumulative fund commitments of US$1 529 million exceed thegroup objective of US$852 million by 79%; and

• cumulative funds invested increased by 72% from US$615 millionto US$1 060 million against the group objective of 20% per annum.

Income statementAn analysis of the line item results for the year ended 31 March 2006as disclosed in the income statement is set out below:

• RevenueGroup revenue for the year was US$44,5 million, marginally downfrom the US$45,0 million reported for the previous year.

The following sets out revenue per operating segment forthe year under review:

31 March 31 March2006 2005 Variance %

US$m US$m US$m change

Private Equity 11,0 22,8 (11,8) (51,8)Corporate Finance 7,9 4,1 3,8 92,7Specialised Funds 3,9 2,4 1,5 62,5Group Investments 21,7 15,7 6,0 38,2

Revenue 44,5 45,0 (0,5) (1,1)

The decrease of 51,8% in revenue from Private Equity, was morethan offset by the increase in other private equity income, and waslargely the result of significant dividend received on the disposal ofa proprietary investment in the prior year.

Revenue from Corporate Finance and Specialised Funds, which ispredominantly fee income, increased substantially from the previousyear by 92,75% and 62,5% respectively, albeit off a low base.

Group Investments’ revenue, comprising primarily of interestincome in Bayport, increased by 38,2% and can be directlyattributed to the growth in the underlying business volumes.

• Other incomeOther income increased by 50,3% to US$49,3 million from US$32,8 million.

The following sets out the other income per operatingsegment for the year under review:

31 March 31 March2006 2005 Variance %

US$m US$m US$m change

Private Equity 45,9 29,8 16,1 54,0Corporate Finance (0,1) (0,3) 0,2 66,7Specialised Funds 2,6 3,1 (0,5) (16,1)Group Investments 0,9 0,2 0,7 >100

Other income 49,3 32,8 16,5 50,3

The increase in other income is predominantly the result of fairvalue recognitions of Private Equity’s underlying funds andproprietary investments. Unrealised fair value gains totallingUS$41,9 million are included in this income.


Return on equity (ROE)

60,0

45,0

30,0

15,0

0

%

04 05 06


• Operating expensesOperating expenses increased by 38% from US$30,9 million in theprevious year to US$42,6 million and is primarily attributable tothe following:– an increase in Bayport’s operating expenses which accounts for

33% of the total increase;– 25% of the increase relates to non-recurring abnormal charges of

approximately US$4 million in private equity for:> raising Brait IV> new Private Equity accounting and administration

system; and> infrastructural costs and performance awards in

Specialised Funds; and– the balance of 4% to normal inflationary increases.

• AssociatesIncome from associates has increased marginally fromUS$1,6 million to US$1,7 million and comprises largely of thegroup’s equity income share from its 32% interest in its SouthAfrican BEE partner holding company, Sitogo Holdings(Pty) Limited.

• Joint venturesThe group’s joint venture interests comprise its 50% stake inCapital Alliance Finance (CAF). No income was recorded on thegroup equity holding in CAF’s micro-lending business during theyear as the operation focused on collecting cash to repayshareholders’ loans rather than aggressively pursuing growth in itslending book.A substantial amount of the shareowners’ loans wererepaid and this policy will continue until the business isself financing.

• Finance costsFinance costs relate largely to interest paid on the shareowners’loan from Brait’s BEE partner, Sitogo Holdings and the remainder ofthe financing structure on Brait’s Johannesburg office building thatwas disposed of during the second half of the financial year.

Revenue and other income

100

80

60

40

20

0

US$

mill

ions

04 05 06

• Capital items2006 2005

Capital items include the following: US$m US$m

– The fair value adjustment to the financial liability of US$8,2 million, arising fromthe 26% sale of the South Africanoperations to Brait’s BEE partner.* (1,4) (7,1)

– Profit generated on the disposal of part of Brait’s interest in Bayport Holdings to new strategic partners reducing its economic interest to 41,66%. 2,9 –

– Currency hedge cost as referred to on page 12. (2,2) (4,1)

– Profit generated on the disposal of Brait’s Johannesburg office building and fittings. 2,8 –

– Realisation of translation adjustment following the part repayment of the rand denominated loans granted by Brait S.A. to Sitogo Holdings (Pty) Limited and Brait South Africa Limited. (0,2) –

Total capital items 1,9 (11,2)

* The purchase consideration paid by Sitogo to Brait S.A. for its 26%

interest in Brait South Africa is accounted for under IFRS as a financial

liability and not as a minority shareowner. The financial liability is fair

valued annually to match the net asset value of Brait South Africa.

• TaxationThe taxation expense for the year of US$2,7 million arises primarilyfrom Brait’s non-South African operations. In South Africa, thegroup has estimated tax losses of some US$38,7 million at31 March 2006 (2005: US$38,2 million) of which US$8,6 millionhas been absorbed by the deferred tax asset of US$2,8 millioncarried at year-end.

Net asset valueGroup net asset value in US dollars has increased by 54,5% afteradding back dividends paid during the year.

Change in NAV

200

160

120

80

40

0

US$

mill

ions

04 05 06

Balance sheetA simplified analysis of the group balance sheet at 31 March 2006after deconsolidating Bayport, is depicted below.

Cash flow statementAn analysis of the movement in line item results as disclosed in thecash flow statement is set out below:

• Net cash generated from operating and investmentactivities– Operating activities

Operating cash, including dividend and interest receivedreduced from US$20,6 million in the previous year toUS$12,9 million and is primarily the result of lower dividendsreceived on private equity investments.

– Working capitalWorking capital increase reflects the significant growth in theBayport advances book (US$17,0 million) that was partly offsetby decreases in strategic loans and other receivables.

– Investing activitiesThe net year-on-year inflow of US$22,0 million on investingactivities was largely the result of proceeds received on therealisation of private equity investments and the disposal ofBrait’s Johannesburg office building and fittings.

• Cash flows from financing activitiesThe net year-on-year financing activity inflow of US$61,7 million wasattributed primarily to the raising of US$72,9 million from the issueof redeemable preference shares by the subsidiary company, BraitSouth Africa Limited.The group also applied US$15,1 million to settlethe outstanding secured liability associated with the funding of theoffice building and fittings that were disposed of during the year.

At March 2006 the balance sheet was strong with approximately53% (2005: 16%) of shareowners’ capital held in cash and cashequivalents. This balance includes a large portion of the debt capitaldrawn just prior to year-end.


FINANCIAL COMMENTARY CONTINUED

Cash appliedUS$25,1 million

Bayport US$17,0 million (67%)

Finance cost US$2,4 million (10%)

Capital items US$3,5 million (14%)

Taxation US$2,2 million (9%)

NAVUS$158,0 million (2005: US$115,1 million)

100

80

60

40

20

0

-20

-40

-60

-80

-100

US$

mill

ions

Cash

and

cas

heq

uiva

lent

s

2006

Inve

stm

ent i

npr

ivate

equ

ity fu

nds

Priva

te e

quity

prop

rieta

ry in

vest

men

t

Bayp

ort

Spec

ialis

ed fu

nds

seed

cap

ital

Net

inve

stm

ent i

nw

orki

ng c

apita

l

Net

BEE

inve

stm

ent

Debt

2005

Cash generatedUS$49,4 million

Investing actvities US$22,0 million (44%)

Working capital US$12,9 million (26%)

Operating activities US$14,5 million (30%)

An analysis of cash generated and cash applied in operating and investment activities is depicted in the following graphs:

2006 net cash generated from operating investments and investment activities


SEGMENTAL REVIEWPRIVATE EQUITY

Performance for the year2006 2005

US$m US$m

Revenue and other income 56,9 52,6Profit from operations 39,1 38,8Closing capital employed 109,4 82,2Return on equity before taxation (%) 40,8 47,2

Overview of Brait Private EquityThe Private Equity business of Brait comprises:• The management of third-party capital committed by a set of

international and South African investors, including Brait and theteam, to its private equity funds;

• The management of Brait capital committed through the ProprietaryInvesting Programme in terms of which investments are made intransactions completed by its Private Equity division which falloutside the investment mandate of the private equity funds; and

• The deployment of such capital by making medium to long-terminvestments into corporate South Africa across the variousindustries in our economy.

Brait’s fund format allows it to leverage its own skills alongside thecapital of a premier set of international and South African investors orlimited partners. The earnings stream from these operations are of ahigh quality, comprising predominantly annuity management fees andcapital participation returns on invested capital. The economic modelfollowed is true to the principles tried and tested originally in theUS and Europe, which are:• The fund investment holding vehicles are not traded publicly;• Funds are committed for the long-term but are closed-end in

nature, usually giving the manager five years in which to draw thecommitted capital to make investments, and a total of 10 to 12years from the fund’s inception to return the capital to investors.Cumulative commitments to private equity funds under Brait’smanagement currently total over US$1 billion;


45

40

35

30

25

20

15

10

5

0

US$

mill

ions

04 05 06

Profit from operations ROE

%

50

45

40

35

30

25

20

15

10

5

0

Investors

Third-party capital invested

Brait capital invested

Manager

Economic effect on Brait:

• 2% management fee p.a.

• 10% capitalparticipation

• >30% IRR oninvested capital

Investees

Diversified acrossvarious industries in corporate SA

Team capital invested

Given the long-term nature of the commitment and illiquidity of the fundinvestment, investors make careful and extensive reviews of the manager.Brait enjoys relationships with a premier group of investors who havemade successive commitments to Brait I, Brait II, Brait III and now Brait IV.

Managed:• Over 10 years• Illiquid• Discretionary

• Management fees are payable on committed capital independentof the amount drawn or the valuation of the portfolio, representinga stable long-term revenue stream. As a result, the interests ofinvestor and manager are aligned by allowing a patient andconsidered pace of investment rather than rewarding a rapiddeployment of funds. Brait receives annual fees of approximately2,0% on committed capital of its private equity funds, reflecting thespecialisation of the team and the intensity with which it supportsthe investment processes;

• The funds draw down cash for investment as and when required bythe manager and, on realisation, pass proceeds directly back toinvestors; and

• Unrealised capital participations are recognised in income when thereturn of the fund’s investments exceeds certain threshold returns andare payable only once cash has been returned to investors coveringcash drawn down for investments and fees, together with a preferredreturn (generally 8% in US dollar terms). These capital participations,which are dependent on a minimum capital commitment by Brait andthe investment team, typically represent 20% of the returns. Theprivate equity team shares in these participations equally with Brait,again aligning the motivation of all parties.

Brief overview of Brait Private Equity Model

Cumulative funds committed

1 200

1 000

800

600

400

200

0

US$

mill

ions

98 99 00 01 02 03 04 05 06

SEGMENTAL REVIEWPRIVATE EQUITY CONTINUED

During the year, a number of new prestigious international and localinvestors have committed to Brait’s new fund, Brait IV. Both new andexisting investors have all formed a positive long-term view of theBrait team, its investment strategy, and ability to continue deliveringoutstanding returns.

Brait I, Brait II and Brait III, all now fully invested, invest in later stageprivate equity transactions. Brait IV has an investment strategyconsistent with these prior funds.

Brait I is fully realised, and Brait II needs to exit one further investment andwill then be fully realised. Brait II was the first South African private equityfund to raise US capital and the SA vehicle of the fund, after Brait I, willbe the second fund to be fully realised.

Braitec, also fully invested, is focused on early-stage technologyinvesting, and represents less than 5% of Brait Private Equity’s fundscurrently under management.

Fair value of fund portfolio investments(cumulative)

800

700

600

500

400

300

200

100

0

US$

mill

ions

98 99 00 01 02 03 04 05 06

Brait II Brait III Braitec

Number of private equity M&A deals of more thanUS$1 billion, worldwide

120

100

80

60

40

20

098 99 00 01 02 03 04 05

US$

mill

ions

Source: Citigroup Global Markets Inc., The Washington Post, Private EquityInternational

The track record of the Brait Private Equity funds reflects a consistently impressive performance over the past 15 years, as highlighted in thetable below:

InvestmentFund name Vintage type Size Gross IRR Special features

Brait I 1991 Later stage ZAR228 million 29% Rand First fund managed by an independent privateequity manager in South Africa. Investmentprogramme complete.

Brait II 1995 Later stage US$144 million >30% US$ Pioneered international LPs into South Africa, inpartnership with local LPs.

Brait III 1999 Later stage US$409 million >30% US$ South Africa’s largest independent private equityfund.

Braitec 1999 Early stage ZAR277 million Negative IRR –

Brait IV 2006 Later stage Target Not yet closed. First closing in 2005.US$500 million –

Proprietary Investing Ongoing Later stage n/a >30% Rand Invests in transactions that fall outside of theinvestment mandate of the Brait Private Equity Funds.

International overview*2005 was the private equity industry’s biggest year yet with almostUS$500 billion of private equity firm backed merger and acquisitionactivity around the world – an increase of 18% over the previous12 months. According to Private Equity International, 114 large dealsof US$1 billion or more were completed worldwide in 2005 comparedto 78 in 2004.

Deals such as the US$15 billion leveraged buy out of Hertz, theUS$11 billion leveraged buy out of Sun Guard Data Systems, and theUS$10 billion offer for Danish telecommunications operator TDC showthat the number of companies too big to be touched by private equityare shrinking. 2005 was also a record year for fundraising, with anumber of US$10 billion funds being closed by US buyout firms. A totalof US$261 billion was committed to new private equity funds



Brait believes private equity is coming of age in South Africa. There arevery few non-resource South African firms which can be consideredimmune from private equity driven strategies due to size. Despite theoutstanding performance of the JSE over the past two years, Braitbelieves the South African environment is better suited to privateequity than at any time previously. There are a number of reasons forthis including:(i) the stable macro-economic environment with good economic

growth, particularly in certain sectors;(ii) improved availability of debt finance, both through banks and

bond markets;(iii) strong merger and acquisition activity, particularly with respect to

black economic empowerment transactions, with room for privateequity to take up a bigger proportion of this activity; and

(iv) very healthy and diverse exit environment.

Brait believes 2006 and 2007, should see a number of transactionswhich form new milestones in the history of the industry in South Africa.

Why Private Equity?What reasons are there for the explosive growth in private equityinternationally? Why are more institutional investors committing agreater proportion of their assets under management to private equity?

Brait believes private equity enables a company to pursue a long-termgrowth strategy, sheltered from the short-term dynamics of the publicmarket. This is particularly important for (and why private equity isparticularly suited to) companies going through change. The companyis accountable to a small group of focused shareowners who helpdevelop, buy into and monitor the companies strategic and operationalplans. Private equity owners should be vigilant owners with activeaccess to management and company information.

In addition, a private equity owned company is in a strong position toattract, incentivise and remunerate outstanding management teamsaway from the public spotlight. Increasingly these, and other reasons,are leading institutional investors, both in South Africa andinternationally, to conclude that there is an important place for privateequity in building successful, dynamic companies in an economy.

The fact that top-performing private equity funds with excellent trackrecords tend to continue to perform consistently well throughsubsequent funds (compared to the mean reversion which often occurswith public asset managers) also lowers the investment risk anddemonstrates why internationally and locally good private equitymanagers tend to become enduring institutions.

Brait Private EquityBrait Private Equity will continue to execute the investmentfundamentals which have enabled it to build an outstanding 15-yeartrack record. These include an experienced, cohesive team; supportfrom senior industrialists; strong, self-originated dealflow; a large,active pool of capital from a diversified investor base; a diversifiedportfolio of assets; and a coherent empowerment strategy. In addition,South Africa is experiencing a growing, stable macro-environment andan efficient diverse exit environment – factors which were not alwayspresent during the building of Brait’s track record and which shouldenhance returns further.

worldwide, nearly US$100 billion more than 2004, which was itself avery successful year for fundraising. In addition, 2005 appears to havebeen a record year for distributions from private equity funds back totheir investors. There is no doubt that private equity has become amajor component of economic activity in the US and Western Europe.

(*Source: The Private Equity Annual Review 2005 published by PrivateEquity International).

With respect to emerging markets a large amount of private equitycapital is focusing on China, India, other Asian markets and EasternEurope. However, Brait has during its own Brait IV fundraising processseen an increasing amount of interest in South Africa frominternational limited partners. This is further evidenced by the growingnumber of LP’s visiting South Africa and media attention from industrypublications – such as Private Equity International which has nowincorporated an award for African private equity firm of the year for thefirst time in its prestigious annual global private equity awards. Braitwas voted, by its international peers, as winner of this inaugural award.

South African overviewAccording to the South African Venture Capital Association (“SAVCA”)South Africa’s private equity industry had approximately ZAR44 billionunder management at 31 December 2005, up from approximatelyZAR40 billion at 31 December 2004. The increase was largely due tofinancial services groups and government related entities increasingtheir private equity allocations. SAVCA indicates that there wasapproximately ZAR5 billion of private equity investment activity inSouth Africa in 2005, which amounts to around 2% of merger andacquisition activity in South Africa (ZAR269 billion according to Ernst &Young). Internationally private equity has been generating 20% to33% of merger activity in Europe according to the Economist inSeptember 2005, indicating the enormous scope for growth of privateequity in South Africa. Although the 2005 SAVCA survey identifiessome 62 entities that may potentially be classified as private equityfirms or are involved in the management of private equity funds, Braitbelieves that due to size, experience and length of track record, thereare few funds in South Africa able to compete in the same largetransaction space as Brait IV.

Some of the most significant and largest industry deals which Brait hasconcluded since 2000 include:1. Afgri ZAR1,3 billion – unique public opportunity (Brait III)2. Southern Mining ZAR560 million – expansion capital (Brait III)3. Smartcall ZAR500 million – entrepreneurial partnership (Brait III)4. LogicalOptions ZAR617 million – leveraged buyout (Brait III)5. Pepkor ZAR3,9 billion – entrepreneurial partnership (Brait III and

Old Mutual)6. Net 1 ZAR1,5 billion – entrepreneurial partnership (Brait III)

Brait IV will continue to focus on the same types of deals as Brait’sprior private equity funds. These are:• Entrepreneur Partnering, in which capital is provided in support

of established entrepreneurs in profitable businesses that arepositioned to take advantage of organic growth and acquisitionopportunities, including platforms for build-up strategies.

• Buyouts of private and stock exchange-listed companies, whereBrait believes it has the opportunity to accelerate growth alongsidestrong management teams.

• Unique Public Opportunities, where Brait’s skills and networkcan be used to take advantage of undervalued strategicopportunities, to purchase public shares, enabling Brait to effectchange through the board of directors and execute a private equitystrategy whilst the investee company remains public.

All three transaction types feature the following primary components:• Entry

• Identify an opportunity that has the ability to significantlyenhance EBITDA growth and strategic appeal

• Thorough due diligence executed by Brait• Develop the value-build plan with management

• Development stage• Help execute the value-build plan; focus on areas where value

can be added; requires flexible approach• Partnership approach versus head office approach requiring

frequent interaction• Exit

• Maximise exit opportunity through timing and methodology• Trade sale, IPO, re-leverage the business

Financial results and commentaryPrivate equity earnings for the financial year have once again produceda solid performance. Profit from operations improved by 1% fromUS$38,8 million to US$39,1 million.

Revenue and other income in aggregate have increased by 8% fromUS$52,6 million to US$56,9 million driven primarily by valuerecognition in Brait III and further growth in proprietary investingincome. Revenue and other income from Private Equity investing is bynature volatile and dependent on opportunistic timing and marketconditions. Revenue includes management fees, dividend distributionsand interest income from investing activities. Other income typicallyincorporates realised and unrealised fair value based uplifts.Approximately 68% of total private equity income in the period isattributable to unrealised gains on investments.

Costs have increased disproportionately by 29% from US$13,8 millionto US$17,8 million primarily due to non-recurring charges on raisingand administering Brait IV. The largest components of the expense lineare staff costs, supporting systems and infrastructure.

Return on equity in private equity was 40,8% on average capitalemployed of US$95,8 million.



Brait believes that successful private equity managers require a healthy mix of the following:

Item Brait position Reflected in . . .

1. Solid sustainable track record ✓ Invested in over 80 companies over the past 14 years which, on anaggregate basis, yielded in excess of 30% IRR

2. Diversified investor base ✓ Brait has managed money for both international (60%) and SA (40%)investors over the past 10 years – 25 key investors

3. Coherent empowerment strategy ✓ Brait has executed a successful four-pronged strategy at various levels:1) equity ownership 2) employment equity 3) franchise development4) investee profiles

4. Experienced, cohesive team ✓ 14 investment professionals; leadership group has worked as a team for8 – 10 years

5. Engaged senior industry advisors ✓ Active involvement with five industrialists

6. Strong originated dealflow ✓ Over 90% of transactions have been originated on an exclusive basis

7. Diversified portfolio ✓ Across all sectors (except typical exclusions, eg: tobacco, gambling, etc)

8. Large, active pool of capital ✓ • SA’s largest and independent player – ZAR1 billion committed funds to date• Brait III is SA’s largest Private Equity fund to date

9. Efficient, growing macro environment ✓ • Macro fundamentals are healthy• Regulatory procedures are strong

10. Efficient, diverse exit environment ✓ • IPO’s; trade sales (domestic and international); leverage recaps


Operational reviewHighlightsIn August 2005, the listing of Brait III portfolio company, Net 1 on theNasdaq realised 20% of the Brait III holding in Net 1 and returnedapproximately 1,4 times capital invested in Net 1. Brait III continues tohold 80% of its Net 1 holding, which is currently trading at overeight times invested capital with a market value of over US$300 millionfor Brait III’s remaining holding. This is the first Nasdaq listing to besponsored by a South African private equity firm. The bookrunners,JP Morgan and Morgan Stanley, labelled it a significant success, being10 times oversubscribed and priced at US$22 per share, outside thecover range of US$18 to US$20 per share. The share has traded uppost-listing to a range of US$30 to US$32.

Other highlights during the financial year include a number of Brait IIexits such as Shoe City, Prime Cure and Unispan. The local Brait IIvehicle (SAPET I) is now fully realised and Brait believes this to be thesecond fully realised closed end private equity fund using third-partycapital in the history of the local private equity market. SAPET Ireturned a gross rand IRR of approximately 58%. The offshore Brait IIfund (SACGF) needs one further realisation before it will be fullyrealised and wound up.

The Reclamation Group, a Brait III portfolio company, realisation inearly 2006, through a leveraged recapitalisation, was particularlyinnovative and another South African first. The company issued aEurobond which enabled management to purchase the company backfrom Brait III and other shareholders. The Reclamation Group, anenvironmental services group focused on the secondary metals market,with developing operations in waste paper, glass, rubber and plasticrecycling, proved to be a highly successful investment for Brait IIIreturning over five times the original investment and an IRR greaterthan 40%. Brait believes the company has a bright future.

Brait continues to apply considerable resources to enhancing strategicplans of existing portfolio companies. Brait III portfolio companiesNet I, Pepkor, LogicalOptions and Wilderness have all performedexceptionally well at an operational level during the course of the year.

Cumulative funds invested(at cost)

600

500

400

300

200

100

0

US$

mill

ions

98 99 00 01 02 03 04 05 06

Cumulative funds returned(actual)

700

600

500

400

300

200

100

0

US$

mill

ions

98 99 00 01 02 03 04 05 06

FV of portfolio investments in funds(cumulative)

800

700

600

500

400

300

200

100

0

US$

mill

ions

98 99 00 01 02 03 04 05 06

Investment in Private Equity FundsThe group has a direct investment of US$44 million in its private equityfunds (excluding capital participations), primarily invested in Brait III.Brait has also committed a minimum of US$23 million to Brait IV, andgiven the exceptional current prospects for this fund and the privateequity environment, it will probably look to increase this commitmentsignificantly before the final closing of the fund capital raisingprogramme later this year.

The group has exceeded its ROE targets on its investments into itsprivate equity funds to date.



Proprietary Investment ProgrammeThe portfolio companies within Brait Private Equity’s ProprietaryInvestment Programme have continued to perform in accordance withexpectation. Brait has US$42 million invested in the portfolio at31 March 2006. During the year under review a further follow oninvestment was made into Pangea and the group realised its interestsin Dywidag and RMS, Metra Holdings and Aqua Online.

Brait continues to be highly selective in adding exposure to itsProprietary Investing Programme targeting special opportunities in theUS$1 million to US$3 million range.

Sectoral analysis – Proprietary investments31 March 2006 (US$42 million)

Information technology 39%

Tourism 3%Mineral resource exploration 12%

Manufacturing 46%

IRR – Brait’s investment in its funds

60

50

40

30

20

10

0

%

Over 7 years

IRR (Rand) IRR (USD)

Over 5 years Over 3 years Over 1 year

Sectoral analysis – Brait’s investment in its funds31 March 2006 (US$44 million)

Consumer goods 60% Tourism 1%

Information technology 23% Services 9%

Other 7%

IRR – Brait’s investment in proprietary investments

90

80

70

60

50

40

30

20

10

0

%

Over 7 years




BraitecThe Brait Technology and Innovation Fund I (“Braitec”) is fully investedand, apart from participating in a small Floppy Sprinkler rights offer,made no significant follow-on investments during the year underreview. The focus of the team was on the consolidation of the portfolioin difficult markets for small technology companies and to ensure thatas many portfolio companies as possible start to generate positive cashflows. Websoft, a provider of software and outsourcing solutions toshort-term insurers and insurance brokers, was sold during the yearunder review. A number of realisations have occurred post year-endwhich will result in a significant proportion of the remaining value inthe portfolio being returned to investors.

Medu CapitalPrivate equity fund manager Medu Capital, an empowerment initiativewith Brait which has approximately US$40 million under management,performed well during the year under review. Medu Capital hasconcluded six transactions including VitalAire (respiratory care),Ampaglass (plastics), Capital Outsourcing (labour broking), Zest(exclusive distributor of WEG electric motors and drivers), Pepkor(retail) and NCS Resins (producer of resins). The portfolio hasperformed exceptionally well, with most portfolio companiescontinuing to trade in line with, or ahead of budget. Medu Capital,having successfully deployed the majority of committed capital in itsfirst private equity fund, has commenced with the raising of its secondfund, Medu II. On the strength of a sound portfolio and capablemanagement team, Medu Capital is seeking capital commitments fromdomestic institutions.

The aggregate return on Brait’s private equity investing in its fundsand proprietary investments (excluding capital participation) isrecorded below:

IRR – Total private equity return from investments infunds and proprietary programme (weighted average)

70

60

50

40

30

20

10

0

%

Over 7 years



Sectoral analysis – Brait’s investment in its fundsand proprietary investments

31 March 2006 (US$86 million)

Consumer goods 30% Information technology 32%

Manufacturing 21% Mineral resource exploration 6%

Services 5% Tourism 2%

Other 4%

Portfolio of investmentsThe current portfolio of private equity fund and proprietary investments spans a broad range of economic sectors and is summarised in thetables below:

Name of investment Description of business Status

FUND II

Freeplay Energy Developer of technology involving the generation and storage of human-generated energy. Expected to berealised shortly.

Nortech International A global supplier of manufactured components for detection solutions. Sold during the year.

Prime Cure Clinics Provider of high quality, low cost primary healthcare services through a national network Sold during the year.of medical centres.

Shoe City Holdings National retailer of discounted formal, casual and sports footwear. Sold during the year.

Uni-Span Formwork and Manufacturer and distributor of scaffolding and formwork products to the construction and Sold during the year.Scaffolding International building sector.

FUND III

LogicalOptions Leading recruitment, staffing and IT services and business with interests in South Africa Follow on investment and North America. made during the year.

Metrofile (formerly MGX) A provider of document management services and solutions. –

Net I UEPS Technologies Developer of technology utilising smart card technology to provide fully integrated systems Partial sale (20%) to meet the requirements of “under-banked” populations of developing countries. during the year.

Pepkor Retailer of clothing and footwear with operations in Africa, Australia and Europe, trading under the names of Pep, Ackermans, Dunns, and Best & Less. –

The Reclamation Group Environmental services group focused on the secondary metal market, with developing Sold during the year.operations in waste paper, glass, rubber and plastic recycling.

Wilderness Safaris Leading tourism wholesaler and operator of safari camps and related guest logistics. –




Name of investment Description of business Status

BRAITEC

Breathetex Owner of technology to apply waterproof, breathable membranes to fabric. –

Connect One Developer and producer of chips, software and hardware enabling non-PC devices to connect to the internet. –

Eastmin Information Provider of hardware and software solutions for the office automation and productivity Technology environments. –

Floppy Sprinkler Irrigation technology business which has developed a worldwide patented, low cost sprinkler Follow on investment system. made during the year.

Grapevine Interactive Provider of collaborative messaging solutions to the corporate market. –

Graphic Data Provider of document management solutions in the UK through the use of a network of scanning and microfilming bureaus. –

IBA Health Provider of healthcare information systems in Australia, Singapore, New Zealand and the UK to hospitals and clinics. –

Intenda Developer of procurement and tender management software solutions. –

Intervate Provider of collaboration and productivity solutions utilising intranet, portal and mobile technologies. –

Websoft Provider of software and outsourcing solutions to insurance brokers and short-term insurers. Sold during the year.

Unique World Developer of high quality end-to-end technology and e-marketing solutions for Australian businesses. –

Tissue Link Developer of medical technology combining radio frequency energy with conductive fluid for use in surgical applications principally in the USA. –

PROPRIETARY INVESTMENT PROGRAMME

Aqua Online Aqua Online comprises e-strategy consulting, web design, software engineering and systems Sold during the year.integration. –

Beverage Packaging Independent beverage contract packing company with facilities to package beverages in cans,glass and PET bottles. –

Candy Tops Sugar confectionery manufacturer which targets lower income consumers through a network of principally wholesale customers both in South Africa and in the export market. –

Douglas Green Bellingham Producer, distributor and marketer of wine and spirit brands in South Africa and internationally. –

Dywidag and RMS Industrial services businesses operating in the roof bolt, steel reinforcing and mesh markets. Sold during the year.

Eyeperoptics Supplies spectacles, spectacle frames, contact lenses and other optometric products and administration and management of optometric practices and the manufacture of optometric products. –

IBA Health Provider of healthcare information systems in Australia, Singapore, New Zealand and the UK to hospitals and clinics. –

Isegen Manufacturer and marketer of plastic additives and resin raw materials, as well as certain food acids used principally for the soft drink, food processing and pharmaceutical industries. –

Equine Holdings and Software developer and distributor of virtual online horse racing software. –Race Clubs

Metra Holdings Management consulting and services group acting as licensee of Gemini Consulting Sold during the year.in South Africa.

Net I UEPS Technologies Developer of technology utilising smart card technology to provide fully integrated systems Partial sale (20%) to meet the requirements of “under-banked” populations of developing countries. during the year.

Pangea Exploration Mineral resource exploration company engaged in the development of several resource Follow on investment projects in sub-Saharan Africa. made during the year.

Wilderness Safaris Leading tourism wholesaler and operator of safari camps and related guest logistics. –

ProspectsEarnings from Private Equity have consistently increased over the pastthree years and in aggregate have delivered US$90 million ofoperational profits. The macro-economic prospects for private equityinternationally, and particularly in South Africa are as good as theyhave ever been in the last 15 years.

Importantly, Brait now has in place all the essential tools, which itbelieves should ensure that it capitalises on the opportunities prevalentin this market. These include:• a uniquely experienced and capable team;• the potential to deliver significant further value in Brait III;• substantial new capital and future prospects from Brait IV; and• new low cost capital to expand Brait’s proprietary investment

growth.

If the macro-economic conditions prevail, Brait Private Equity isconfident that it will continue to grow its assets and earnings andexceed its ROE targets.



Private equity – allocation of capital investedat 31 March 2006

140

120

100

80

60

40

20

0

-20

US$

mill

ions

05(US$82,2 million)

06(US$109,4 million)

Direct investment and capital participation in fundsProprietary investmentsWorking capital

31 March 2005 US$71 million

Pepkor 28% Net 1 20%

DGB 16% Medu 8%

Reclamation 6% Tradehold 4%

Capital Africa Steel 3% LogicalOptions 2%

Beverage Packaging 2% Isegen 2%

Other 9%

31 March 2006 US$86 million

DGB 13% Pepkor 23%

Net 1 30% Other 6%

Tradehold 3% LogicalOptions 3%

Pangea 5% Isegen 8%

Medu 9%

Brait’s effective look-through investment into underlying portfoliocompanies at 31 March 2005 and at 31 March 2006 is detailed in thecharts below:

Braits effective investment in underlying porfolio companies


SEGMENTAL REVIEWSPECIALISED FUNDS


US$m US$m


Overview of Specialised FundsThe Specialised Funds division of Brait comprises:• the management of South African institutional and high net worth

third-party capital in hedge fund products;• the seeding and supporting of emerging hedge funds, and the

provision of customised infrastructure, risk management andbusiness support to investment boutiques offering hedge fundproducts; and

• private equity investments in select investment boutiques that offerthe development potential of a long-term investment franchisewithin active management.

Brait Specialised Funds is the largest institutional fund of hedge fundbusiness in South Africa, with more than five years experience inseeding and supporting emerging hedge fund managers. We investalongside our clients in well-diversified products, with specific risk-adjusted return targets, which offer important portfolio diversificationbenefits to traditional portfolios. Considerable industry experience andsignificant investments in infrastructure and risk managementcapabilities are designed to provide institutionally acceptable hedgefund solutions.

Financial Results and CommentarySpecialised funds income, which consists of fees earned from themanagement of third-party capital in the group’s hedge funds andinvestment returns generated from Brait’s own seed capital, increasedby 18% to US$6,5 million from US$5,5 million the previous year.Operating earnings increased by 8% to US$1,3 million fromUS$1,2 million the previous year.

Performance during the year was satisfactory, with Brait Absolute SAFund (Brait Absolute) continuing to outperform three-year rollingreturn objectives, returning 6,6% above cash and 11,8% ahead ofinflation, whilst limiting volatility to 2,6%. Brait Absolute extended itsconsecutive positive monthly returns to 44 months, while correlationand beta to the All Share Index remained very low at 0,25 and0,06 respectively.

Revenue (excluding investment gains)

3,0

2,5

2,0

1,5

1,0

0,5

0

US$

mill

ions

04 05 06

Return over 3 years, 1 year (to March 05) and1 year (to March 06)

140,0

120,0

100,0

80,0

60,0

40,0

20,0

0

Rand

mill

ions

Over 3 yrsMarch 02

1 yrMarch 05

Over 1 yrMarch 06

%

20

15

10

5

0

Opening capital invested IRR on capital invested

Capital as at:

Profit from operations (including investment gain)and ROE

1,4

1,2

1,0

0,8

0,6

0,4

0,2

0

US$

mill

ions

04 05 06

ROE

(ave

rage

cap

ital)

(%)

10,0

9,0

8,0

7,0

6,0

5,0

4,0

3,0

2.0

1,0

0

SEGMENTAL REVIEWSPECIALISED FUNDS CONTINUED

Operational reviewOver the last five years, Specialised Funds has single-mindedly focusedon building performance consistency and infrastructure capabilitywithin our fund of hedge funds, to offer institutional investors a cashplus product that is complementary to traditional equity exposure.We have therefore been fortunately positioned to benefit from anincreased focus on portfolio re-balancing within risk management byour target client base, and have emerged as a leader in ourparticular space.

Assets under management (AUM) grew significantly, increasingby 691% since 31 March 2005 to US$512 million, spread across19 hedge funds, chosen by our multi-management team for theirability to balance risk against investment opportunity. Despite theconsiderable growth in AUM, we are fortunate to have secured anadditional R3,1 billion of single strategy capacity with our existingmanagers, and plan to add to this during the year as we search for newsources of alpha.


Funds under management

4 500

4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

0

AUM

(mill

ions

of R

ands

)

03 04 05 06

AUM Commitments after year-end

The underlying fund managers within the Brait Funds of Funds include:

Fund Investment strategy Fund manager

Polaris Hedge Fund Long/short equity, Marius van Rooyenrelative value, liquid,low turnover

Lauriston Absolute Relative value multi- Kevin CousinsFund class, neutral, liquid,

low turnover

Brait Ruby Fund Short-bias, directional, Craig Buttersliquid, low turnover

Frater Absolute Fund Long-bias equity, Terrance Craigdirectional, liquid,low turnover

Re:CM Alpha Fund Long-bias equity, Piet Viljoendirectional, liquid,low turnover

PSG Quant Fund Managed futures multi- Derick Burgerclass, long-short,directional, highly liquid,high turnover

GyroTerm Fund Fixed-income relative Lourens Pretoriusvalue, highly liquid,high turnover

Investec SA FI Hedge Fixed-income relative Malcolm CharlesFund value, highly liquid,

high turnover

Spyglass Focused Long-bias equity, Sean KatzFund directional, liquid,

low turnover

Osborne Flexible Fund Multi-class, long-bias, Niall Browndirectional, liquid,low turnover

Tantalum MNC Fund Multi-class, long-bias, Morne Maraisdirectional, liquid,low turnover

Spyglass General Equity Equity, long/short, Gary Abrahamsdirectional, liquid,moderate turnover

Aeon Multi Strategy Multi-class, long/short, Asief MohamedFund directional, liquid,

moderate turnover

Tantalum Fusion Fund Fixed interest, long/ Melanie Stockigtshort, directional – relative value, liquid,moderate turnover

Empire Growth Fund Equity, long/short, Roger Williamsdirectional, liquid,low turnover

Fairtree Fund Equity, long/short, Andre Malandirectional, liquid,low turnover

Spyglass Opportunities Equity, long/short, Sean KatzFund directional, liquid,

moderate turnover


International overviewIn recent years the hedge fund industry has moved into mainstreamthinking, due to the ability to offer alternative sources of alpha andmeaningful diversification in a world that is contracting due toglobalisation. Industry assets top the US$1,3 trillion mark, havinggrown approximately 25% per annum since 1990, with more than10 000 funds.

The key is that specialised strategies and broad mandates allowessentially non-correlated performance, often with lower volatility.According to the Bank of New York, “Institutions, particularly pensionfunds and endowments, will become the primary source of capital forhedge funds. Their demands will transform the industry.”

This increase in utilisation of hedge funds by institutions is confirmedby a survey performed during 2005-2006 by the Russel InvestmentGroup. This survey, which was based on responses from 327 largeorganisations responsible for managing tax exempt assets, indicatedthat the utilisation of hedge funds by such institutions had increasedfrom 21% in 2003 to 35% in 2005 in Europe and from 23% in 2003to 27% in 2005 in North America. The results of this survey alsosuggest that globally alernative assets are poised for rapid growth andare expected to reach record levels by 2007, and that hedge fundassets are likely to continue to garner a significant share of increasedcommitments amongst alternatives.

Trends in fee levels: According to an article in Business Standard, thereis a clear desire and ability of the newer funds in the global industry tocharge higher fees. No longer are funds charging a 1% managementfee and 20% performance fee – the norm for the first generation offunds set up in the early 1990’s.

Comparative returns since inception – November 2001

280

260

240

220

200

180

160

140

120

100

80

%

Oct

01

Brait Absolute

Apr 0

2

Oct

02

Apr 0

3

Oct

03

Apr 0

4

Oct

04

Apr 0

5

Oct

05

Jan

06

CashAll Bond Index All Share Index

Bond comparison: Volatility 2,6% versus 4,9%,Correlation 0,3, Beta 0,14

20

15

10

5

0

-5

Mon

thly

retu

rns

Oct

01

Apr 0

2

Oct

02

Apr 0

3

Oct

03

Apr 0

4

Oct

04

Apr 0

5

Oct

05

Brait Absolute SA

Cum

ulat

ive

retu

rns

200

175

150

125

100

75

Monthly returns ALBI

Increased utilisation of hedge funds by institutions

% u

sing

hedg

e fu

nds

Europe North America

20032001

40

35

30

25

20

15

10

5

0

2005

Source: Russell Survey on Alternate Investing 2005 – 2006

Growth of US institutional hedge fund capital

350

300

250

200

150

100

50

0

Capi

tal i

nves

ted

($Bn

)

01

Source: Casey Quirk & Acito and The Bank of New York

02 03 04E 05E 06E 07E 08E


One of the most notable trends in the international hedge fund arenahas been the increased scrutiny placed on infrastructure andoperational risk areas, and the regulatory drive towards valuationindependence. Investment managers focused on portfoliomanagement are finding these demands onerous, and are increasinglyutilising outsourced expertise to pass muster.

South African overviewThe EuroHedge Special Report, “South Africa: A new hedge fundmarket emerges”, February 2006, states that “South Africa’s hedgefunds are rapidly evolving into an impressive industry . . ., which standsout among global emerging markets”. A contributor states, “Newfunds are being started at a phenomenal rate . . . According to ourdatabase, there were about 65 hedge funds one year ago, and now itsup to 84 . . .”, and industry assets are estimated at around R12 billionat the end of 2005.

In the section covering funds of hedge funds entitled “Competing hardfor distinctive niches”, the following observation is noteworthy:“. . . Brait has emerged as the largest, and certainly, the mostinnovative FoHFs manager in South Africa. What distinguishes Braitfrom its competitors, is that it has pioneered long-term capacityagreements with talented managers and has developed an incubatormodel that has nurtured 17 hedge funds . . .”

Global and SA hedge fund growth

1 600

1 400

1 200

1 000

800

600

400

200

0

AUM

(US$

bn)

Global assets under management SA assets under management

AUM

(ZAR

bn)

60

50

40

30

20

10

004 05 0603

Source of global assets 2004 – 2005: IFSL estimates based onEuropehedge and Hennessee Group data

◆

◆

◆

◆

SEGMENTAL REVIEWSPECIALISED FUNDS CONTINUED

Strategic initiativesWe remain focused on delivering expected performance withinspecialised mandates utilising hedge fund strategies, and aim toexpand our capabilities during the year ahead through specific productdevelopments. We are in advanced stages of launching a large multi-strategy fund, which promises to enhance our abilities to deliverexciting performance whilst minimising operational risk. In addition,we believe that an increasing client base, including internationalinvestors attracted to South Africa’s macro-economic developments,will expect more customised solutions, which our experience in theindustry suggests we can now accommodate.


US$m US$m

Revenue and other income 7,8 3,8Profit from operations 0,9 0,1Closing capital employed (2,3) (0,4)Return on equity before taxation (%) n/a* n/a*

* Brait’s Corporate Finance operations are organised and structured toutilise minimal capital

During the period under review, Brait’s Corporate Finance team hasbeen at the forefront of the development of the debt markets in SouthAfrica. This is best evidenced by Brait’s role as lead arranger for two ofthe first four high yield Eurobonds raised for South African companies.

Overview of Corporate FinanceIn the year under review, Brait Corporate Finance provided marketleading debt advisory products and services, as well as M&A advisoryservices, to both South African and international companies.

M&A advisory provided advice, execution, process and transactionmanagement for acquisitions and disposals. Services included in thesefunctions are the provision of strategic advice, valuations, transactionstructuring and deal negotiation. Additionally, the team providedadvice on the listing requirements of the JSE Limited and the Securitiesand Regulation Code on Takeovers and Mergers (“the Code”) of theSecurities Regulation Panel, capital structure, and selected sponsorrelated activities.

The services and products provided by Specialised Debt Finance includedebt origination and distribution, capital structure optimisation,structuring of innovative debt solutions, negotiation with third partyfunders and preparation of and advice on documentation.

Financial results and commentaryOperating earnings for the year from Corporate Finance were up toUS$0,9 million, from US$0,1 million the previous year.

Despite a seemingly promising pipeline of transactions mid-year, theM&A advisory unit failed to convert mandates and work in progressinto fee income, recording a US$2,1 million operational loss for theperiod. This result was disappointing considering the efforts in prioryears to refocus the business and the generally positive marketenvironment. This loss, which follows a number of years when the unithas under-performed, has resulted in the post year-end decision torestructure the unit to focus on supporting on-balance sheetinvestment and providing advisory services internally.

Brait is currently working with clients and the M&A internationalnetwork to determine how best to accommodate each client’sindividual circumstances within the new structure.

The Specialised Debt Finance business unit (“SDF”) was the maingenerator in fee revenue for Corporate Finance recording operationalearnings of US$3,2 million for the period under review. Debt in excessof US$800 million (ZAR5 billion) was raised for clients within a broadrange of transactions and debt types.

Operational reviewSDF demonstrated significant market leadership this year in a growingand developing debt market in South Africa. The SDF team wasinstrumental in driving a greater awareness of debt and its potentialimpact on corporate capital structure, through innovative structuringand the introduction of new sources and new types of debt to theSouth African market.

Following the success of the first Euro high yield bond for a SouthAfrican corporate, pioneered by SDF, it advised on the first SouthAfrican management buyout funded by Eurobonds. The high volume ofleveraged transactions internationally has raised the profile of the highyield bond market to such an extent that it is now being considered asa strong alternative source of funding in the local market. This providesSouth African corporates with the opportunity to tap the internationalcapital markets and serves as a catalyst in the local funding arena, byintroducing additional competitive pressure on local institutions.

Nowhere are these factors more evident than in the advisory and leadarranger role Brait performed in the debt restructuring for Foodcorp,and in the recapitalisation and management buy-out of theReclamation Group. Both of these transactions involved therestructuring of the company’s capital structure, lowering theirweighted average cost of capital, and involved the assumption of debtof varying seniority from senior to subordinated and mezzanine. Thedebt package, in both deals, included the raising of a high yieldEurobond in the international capital markets. The Foodcorp Eurobond


SEGMENTAL REVIEWCORPORATE FINANCE

Revenue

10,0

8,0

6,0

4,0

2,0

0

US$

mill

ions

04 05 06

SEGMENTAL REVIEWCORPORATE FINANCE CONTINUED


reopened the high yield market in June 2005 and both this and theReclamation bonds, were well received by European investors. Theyhave traded above par, since issuance, and were two of the first fourHigh Yield Eurobonds issued by South African companies.

SDF’s ability to identify opportunities and to design innovative fundingstructures, using various funding sources and instruments, presentsstrong opportunities for continued earnings growth. Its marketleadership, experience, international relationships and expertise gainedthrough, amongst others, its facilitation of two of the four Eurobondofferings by South African issues to date, should contribute in thisregard.

Strategic initiativesThe immediate focus for Corporate Finance, for the coming year, is toexecute a number of interesting, high potential deals which arecurrently in the pipeline. In addition, Brait will look to further broadenits capacity in capital market products, services and investments.


1,0

0,8

0,6

0,4

0,2

0

US$

mill

ions

04 05 06


SEGMENTAL REVIEWGROUP INVESTMENTS


US$m US$m


Overview and operational review of Group InvestmentsGroup Investments comprises largely of Brait’s strategic non-privateequity managed interest in Bayport, Capital Alliance Finance and thenewly established independent joint venture mezzanine fundmanagement business. It also incorporates the group’s central treasuryoperations.

BayportOverviewBayport is a group of micro-lending and financial services businesseswith established operations in Ghana, Uganda and Zambia. It iscurrently also developing a niche opportunity in South Africa.Established in 2002 by industry professionals together with capitalprovided by Brait, Bayport has developed from a start-up operation toa well managed and established business, generating attractive risk-adjusted returns.

Following the initial performance of Bayport and given its potentialgrowth opportunities, Brait provided additional capital to Bayport in ablend of equity and interest-bearing debt financing. As Brait is thelargest debt financier of Bayport, it has voting control of the business.

At year-end, Brait has invested US$9,9 million in Bayport in a blend ofequity and interest-bearing debt financing and in addition thereto, hascommitted a further US$6,8 million of debt which is available for drawdown by Bayport.

Bayport has developed a unique model for each of the jurisdictions inwhich it has established operations and has developed invaluable

relationships with local partners, each of whom has an equity interestin the local operation. Bayport’s experience in the financial markets inwhich the African businesses operate, demonstrates the commercialpotential for developing micro-lending and financial services offeringsto lower-income earning employees, on a sustainable basis, throughoutthe African continent.

Bayport on an ongoing basis identifies and evaluates new markets andjurisdictions in which it believes opportunities for expansion anddevelopment exist. As and when such opportunities arise, Bayportestablishes projects with a view to fine-tuning the specific businessmodel and cementing relationships with local partners and otherstakeholders. Once such projects have demonstrated the ability toproduce Bayport’s targeted risk-adjusted returns, Bayport will deploy ameaningful quantum of its own capital into the operation and will inaddition, seek to maximise leverage from local financial institutions.

Bayport is structured by centrally managing a pool of funds at theBayport holding company level and allocating these funds judiciouslyacross a portfolio of various micro-lending and financial servicesbusinesses operating throughout the African continent.

Brait’s interests in Bayport are held through Bayport Holdings Limited.Bayport Holdings has an interest in Bayport Management Limited,through which the African businesses are conducted and BayportHoldings (South Africa) (Pty) Ltd, a South African entity through whichthe South African businesses are conducted.

During the year Brait completed the sale of a portion of its equity inBayport Holdings to strategic co-investors. In addition, Brait and theminority shareholders in each of the African and South Africanbusinesses sold a portion of their interests to the Adobe Group, aninvestment group controlled by Sir Samuel Esson Jonah, a pre-eminentbusinessman and non-executive director and president of AngloGoldAshanti Limited. He is a director of the African and South Africanbusinesses and is actively involved in the strategy and operations ofBayport.

Pursuant to the sale to the strategic co-investors and to Adobe, Braiteffectively owns 41,66% of each of the African and South Africanbusinesses. Through arrangements with the strategic co-investors, Braitcontrols 53,41% of the voting rights, resulting in the consolidation ofBayport’s results, into Brait.

Financial results and commentaryThe year under review saw significant continued growth in Bayport’sbusiness. Through additional funding from Brait as well as fromfunding provided by financial institutions in the jurisdictions in whichthe African businesses have a presence, Bayport has grown its loanbook by 109% from US$16,2 million to US$33,8 million. At the sametime bad debts written off have been well controlled and equate to3,5% of the loan book at year-end. The provision at year-end for badand doubtful debts equates to 4,5% of the loan book. As the loanbook matures and grows to an optimal size, the bad debts written offshould tend towards the level of the provision. The organisationalinfrastructure in the African business is now considered to be optimalfor the jurisdictions in which it operates. Pre-tax earnings wereUS$6,4 million for the year, which represents an increase of 276% overthe US$1,7 million earned in the previous year. With average capitalemployed during the year of US$8,2 million, return on equity increased

Profits from operations and ROE

14

12

10

8

6

4

2

0

US$

mill

ions

04 05 06

Profit from operations ROE

ROE

(ave

rage

cap

ital)

%

30

25

20

15

10

5

0


to 40,0% from 28,1% in the previous year. Brait’s share of Bayport’searnings for the year plus its interest on loan advances wasUS$3,3 million, 77% up from US$1,9 million in the prior year.

ProspectsBrait is pleased with the development made by Bayport and itsprospects. With an experienced and capable management team, asound business model, a stable and fully developed infrastructure andstrong demand for its products, Bayport aims to be a truly Africanmicro-lending and financial services organisation. Bayport is wellpositioned to become an even greater contributor to Brait’s earningsin future.

Capital Alliance FinanceThe group has a 50% joint venture interest in Capital Alliance Finance(“CAF”) with a carry value R17,3 million, represented primarily by aloan advance. CAF operates in South Africa and provides affordableloan products to the lower income market and credit accessibility to itsclients. CAF’s historical target market is typically formal incomeearners, who were not considered “bankable” by the formal retailbanking sector and are generally employees of the government andprivate sector.

CAF’s micro-lending business remained profitable for the year andgenerated surplus cash. In line with its strategy, business volumes weremaintained at existing levels to allow the cash generated by thebusiness to be applied in the repayment of shareholder loans.

During the year under review, the National Credit Regulations wereintroduced in the newly promulgated National Credit Act to replace theUsury Act and the Credit Agreements Act. The new regulations havebeen designed to fix interest rates, to regulate administration andmonthly service fees and prohibit reckless lending. Initial indicationsare that the new regulations will have a material impact on the entireindustry which could lead to a consolidation within the industry. CAF isin the process of assessing the impact that the regulations will have onits operations and strategy.

Mezzanine Partners (Proprietary) LimitedIn November 2005, the group established an independent mezzaninefund management business. Mezzanine Partners, a joint venturebetween Brait South Africa Limited, Old Mutual Asset Managers and itsexecutive management, is South Africa’s first independent mezzaninefund manager. At year-end, the fund had committed capital ofUS$45 million. It concluded its maiden investment subsequent to year-end.

Financial results and commentaryEarnings from the group’s strategic investments have increased by38% to US$11,6 million from US$8,4 million with Bayport continuingto be the largest single contributor with the balance coming from CAFand treasury operations. Return on average capital employed ofUS$62,9 million was 18% compared with 17% in the prior year.

Size of book

40

35

30

25

20

15

10

5

0

US$

mill

ions

05 06

Bayport

1,8

1,6

1,4

1,2

1,0

0,8

0,6

0,4

0,2

0

US$

mill

ions

05 06

Provision for bad debtsBad debts written off

SEGMENTAL REVIEWGROUP INVESTMENTS CONTINUED


Governance principlesGeneralCorporate governance encompasses the concept of sound businesspractice and is an integral part of Brait’s business philosophy. Brait iscommitted to an open governance process, which provides itsshareowners and other stakeholders with the assurance that, in addingvalue to and protecting the group’s financial and human investment,the group is being managed ethically in accordance withpredetermined risk parameters and in compliance with bestinternational practices.

The directors of Brait subscribe fully to the principles embodied inappropriate international corporate governance codes including thosecontained in the King Report on Corporate Governance for South Africa2002 (“King II”), and believe that these principles have been adheredto and complied with in the discharge of their duties. Adherence tosound principles of governance going forward, remains both a boardand management priority. The board believes that even thoughcompliance with formal standards of governance is significant, greateremphasis is placed on ensuring the effectiveness of governancepractice, with substance prevailing over form (as and when required).

Policies, objectives and performance measurementThe philosophy, policies, values and objectives of the group aredetermined by the board of directors of Brait who, in turn, receive inputand guidance from the boards of its principal subsidiaries. The boardsets the strategic objectives of the group and determines investmentand performance criteria. Management is charged with the detailedplanning and implementation of that policy in accordance withappropriate risk parameters. The achievement of objectives andcompliance with policies is monitored by the board through mandatedreports from management who are accountable for their actions.

Risk managementRisk management is central to Brait’s business. The group hasdeveloped comprehensive systems and risk management processes tocontrol and monitor all activities in the group. A critical element ofBrait’s strategy has been the development of skilled professionals whohave an established culture of risk management. While ultimateaccountability for risk lies with the board of Brait, the management ofrisk is closely monitored by the boards of its primary operatingsubsidiaries. In addition, the board has formally mandated the groupaudit and risk committee to include the review of risk managementpolicies and processes of the group in its terms of reference.

Business integrity and ethicsThe group subscribes to a corporate ethos, which requires directors andemployees to adopt the highest personal ethical standards in dealingwith all stakeholders in the conduct of the group’s affairs. Theprinciples to which each individual subscribes, include integrity,openness, accountability, impartiality and honesty, and are embeddedin the group’s Human Resources Policy document to which eachemployee is bound. The Brait Group Code of Conduct is being updatedand is awaiting board ratification.

Brait maintains a zero-tolerance approach to unethical or dishonestbehaviour and any employee found to be acting unethically, is subjectto disciplinary action/proceedings in accordance with the company’sdisciplinary code. The ultimate sanction for breach or non-adherencewould be the dismissal of the employee. The board believes that therehas been no material non-adherence to these principles, by anyemployee, during the year under review.

In accordance with Brait policies, no donations were made to anypolitical parties by any of the companies within the Brait group, duringthis period.

Employee empowermentThe group places great emphasis on the development and training ofits people and endeavours to ensure that it offers staff equalopportunity and appropriate participation in decision-makingprocesses. Through its various share incentive schemes, managementhave ownership in the company and are incentivised intheir performance.

The environment, health and safetyWhile Brait’s direct activities do not pose any significant threat to theenvironments in which they operate, the group has mandated its groupEnvironmental Steering Committee to monitor compliance withenvironmental policies and guidelines dealing specifically withenvironmental challenges. Brait also seeks to ensure that it invests inbusinesses which conform to environmental standards. Similarly, itmakes investments where the health and safety of employees and thewell being of the communities in which these companies operate isrecognised as an important component of corporate governance.

ReportingBrait is committed to transparent reporting and disclosure. Informationprovided to all stakeholders, including financial results and the annualreport, are presented in a meaningful and relevant manner so as toenable users to gain a proper and objective perspective of the group.Brait’s website is maintained as a relevant means of communicatingBrait’s message to all its stakeholders.

Share dealingsThe group adheres to a “closed period” policy, as defined in its listingrequirements, in which directors, officers, participants in the shareincentive schemes and employees who may have access to price-sensitive information are prohibited from dealing in Brait shares for theentire closed periods prior to the release of the group’s interim andfinal results. This is also extended to any period when the company istrading under a cautionary announcement. All board members andemployees across the group are timeously informed of such closedperiods. In terms of the policy, “shares” also include options.

Details of directors’ dealings in Brait shares are disclosed to theboard and to public via the group’s various securities exchangenews services.

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE CONTINUED


Directors’ dealings for the year under review were as follows:

Nature of Shares purchased Shares soldName of director Date of purchase/sale interest Number Price Number Price

BI Childs 11 August 2005 Indirect 6 500 R17,60BI Childs 18 August 2005 Indirect 5 000 R18,50BI Childs 30 August 2005 Indirect 16 000 R17,80AC Ball* 28 March 2006 Indirect 1 000 000 R25,40JA Gnodde* 28 March 2006 Direct 1 000 000 R25,40CJ Tayelor* 28 March 2006 Direct 864 000 R25,40CJ Tayelor* 28 March 2006 Direct 31 307 R24,60

* The above directors have in aggregate made commitments to Brait IV in excess of the net proceeds arising from the disposal of these shares andthe primary purpose for the disposals was to fund these obligations.

• induction and orientation of new directors;• conduct regarding conflicts of interest;• evaluation of directors;• board relationship to staff and external advisors, including

unrestricted access to company books and records;• succession and emergency planning; and• board meetings and procedures.

In terms of the board Charter, the directors are to be assessed annually,both individually as directors, and collectively as a board. In addition,the non-executive members of the board, in consultation with thechairperson, formally evaluates the performance of the chief executiveofficer (CEO) on an annual basis.

In accordance with the company’s Articles of Incorporation, all directorsare subject to re-election by shareowners at each annual generalmeeting. The board comprises people with skills, knowledge andexperience who are conscious of their duty to ensure that the groupmaintains a high standard of corporate governance.

The board has ensured that its information needs are well defined andregularly monitored. A formal orientation programme with members ofmanagement is provided to assist all newly appointed directors.Directors have unrestricted access to all group information, records anddocuments and are provided with comprehensive board packs prior toeach scheduled meeting. If necessary, a board member may takeindependent professional advice concerning the affairs of the group, atthe expense of the group.

Board membership and meeting attendanceThe board of directors of the company is chaired by an independentnon-executive director of the company who is supported by anadditional six independent non-executive directors and six executivedirectors. The board is therefore comprised of a majority of non-executive, directors who are also independent of management andpromote the interests of stakeholders. The independence of the non-executive directors has been assessed having regard to the criteria setout in international corporate governance codes, and King II.

Company secretaryThe functions of the company secretary, domiciliary agent and registraris overseen by Experta Luxembourg S.A.. They are responsible forensuring compliance with all board procedures. All directors haveaccess to the advice and services of the company secretary.

Key governance developmentsThe following developments were important to Brait’s corporategovernance process during the year under review:• ongoing compliance with King II and other international corporate

governance codes;• the inclusion in the JSE Socially Responsible Investment (SRI) Index

for the second consecutive year;• the implementation of an audit committee self-assessment, which

evaluated and assessed the effectiveness of the group audit andrisk committee;

• ongoing awareness of emerging and international governancetrends, which are considered for implementation if deemedapplicable to the business of Brait, taking into account marketpractices and substance over form; and

• the implementation of a formal compliance monitoring processresponsible for evaluating the effectiveness of the company’scompliance to regulatory and legal requirements.

Governance structuresBoard of directorsThe board meets quarterly and monitors the management, controls,compliance and proper conduct of the business under its direction.Having due regard for the recommendations by its executivecommittees, the board determines and monitors matters relating to theimplementation and/or modification of policies and strategic plans,group investments and dispositions, major capital expenditure andoperating and financial budgets.

The board Charter describes the board’s mission, duties andresponsibilities and, in particular, salient aspects concerningthe following:• the fiduciary responsibilities of directors;• board composition and leadership;


Serving members of the Brait S.A. board, the date of their appointment, and their attendance at board meetings, are as follows:

Number ofmeetingsattended

Date of during Attendanceappointment the year record

4 meetingsNon-executive directors held

ME King (Senior Chairman)* 29 July 1998 4 100%RJ Koch† 29 July 1998 4 100%AM Rosenzweig‡ 29 July 1998 3 75%JE Bodoni** 29 July 1998 3 75%HRW Troskie‡ 27 July 2005 3 100%PL Wilmot* 3 August 1999 4 100%PAB Beecroft† 27 July 2005 3 100%

Executive directors

AC Ball* 29 July 1998 4 100%JA Gnodde* 27 July 2005 3 100%JJ Coulter° 27 July 2005 3 100%CJ Tayelor* 29 July 1998 4 100%SJP Weber** 28 May 2001 3 75%BI Childs† 27 July 2005 3 100%

* South African, ** Luxembourgish, † British, ‡ Dutch, ° Irish

Risk management and internal controlResponsibility for the group’s risk management, including its systemsof internal financial and operational control is recognised andacknowledged by the board as being its responsibility, but specificallymonitored by the group audit and risk committee. The foundations forthe group’s internal control process can be found in its governanceprinciples which incorporate ethical behaviour coupled withcompliance with legislation and sound accounting practice.

The control systems include clearly defined lines of accountability anddelegation of authority, and provide for full reporting and analysisagainst approved budgets. The executive directors are responsible fordetermining the adequacy, extent and operation of these systems. Inthis regard, the executive directors are of the opinion that the systemsin operation provide reasonable assurance that the assets areprotected against material loss or unauthorised use and thattransactions are properly authorised and documented.

The group’s internal audit process reviews and tests the control of keybusiness risks in the group as well as the assurance of the effectivenessof the internal control systems in operation. The results of these andexternal audit reviews are submitted to the group audit and riskcommittee for consideration and evaluation of the adequacy of theprimary business risks as well as the systems of internal control inoperation. It is the responsibility of this committee to inform thedirectors of any material losses which may have arisen as a result of abreakdown of the systems in operation, and to report on remedialaction taken or required.

Internal auditAll business and support units within the group are subjected to anindependent internal audit on an annual basis. The group follows a riskbased approach and the audit and risk committee reviews and

approves audit programmes and plans. The head of internal audit hasunrestricted access to the chairman of the audit and risk committee.

External auditThe group’s external auditors are Deloitte S.A. and the independenceof the external auditors is recognised, and reviewed with the auditorsby the audit and risk committee on an annual basis.

The audit and risk committee meet with the external auditors to reviewthe scope of the external audit, budgets and any other matters arising.

In accordance with the requirements relating to pre-approval ofservices to Securities Exchange Commission (SEC) registrants or theirsubsidiaries, the group’s audit and risk committee evaluates theservices supplied by the external auditors to ensure that the servicesare not prohibited as defined by the SEC prior to approval by thecommittee of these services.

The external auditors attend the audit and risk committee meetingsand have unrestricted access to the chairman of the audit andrisk committee.

ComplianceThe directors recognise their responsibility to conduct business inaccordance with the applicable laws and regulations in the variouscountries in which the group operates. The responsibility for dailycompliance with laws and regulations within the business areas restswith the various heads of departments.

The chief role of group compliance is to assist management incomplying with all the applicable statutory, regulatory and supervisoryrequirements, and the compliance function forms part of the overallrisk framework. Where applicable, business units have a dedicated

CORPORATE GOVERNANCE CONTINUED


compliance officer, with a direct link to the group compliance officerwhose responsibility it is to assist with the implementation andmonitoring of compliance in the particular unit. The businessunits follow a self-assessment approach to controls viacompliance checklists.

Board committeesCertain responsibilities of the board have been delegated to boardcommittees to assist and enable the board to properly discharge itsduties and responsibilities. These committees comprise the group auditand risk committee and the remuneration committee, both of whichoperate under written terms of reference confirmed by the board. Ad-hoc committees are also mandated to attend to specific businessmatters from time to time. The existence of these committees does not,however, reduce the overall responsibility of the board and, therefore,all committees must report and make recommendations to the board.

Objective, duties and primary functions/responsibilitiesThe group audit and risk committee’s primary objective is to providethe board with additional assurance regarding the quality andreliability of the financial information used by the directors and toassist them in the discharge of their duties.

Specific responsibilities in terms of the charter of the group audit andrisk committee include:• providing satisfaction to the board that adequate and appropriate

financial and operating controls are in place;• ensuring compliance with appropriate standards of governance,

reporting and other regulations;• reviewing and approving internal audit, risk and compliance

policies, reports and findings;• ensuring that significant business, financial and other risks have

been identified and are being managed; and• reviewing and recommending to the board the adoption of the

interim and annual financial statements.

The group audit and risk committee has satisfied their terms ofreference for the year under review.

Issues relating to accounting, auditing, internal control and financialreporting matters are discussed with the group’s external auditors atmeetings convened on a periodic basis. Both the internal and externalauditors are afforded unrestricted access to the group audit andrisk committee.

The group’s internal auditors report to an independent internal auditcommittee as well as the group audit and risk committee. The mainresponsibilities of the internal audit function include the examinationand evaluation of the effectiveness of operational activities, togetherwith the attendant business risks and systems of operational andfinancial control. Material deficiencies, development needs and instancesof non-compliance are reported to the audit and risk committee, theexternal auditors and operational management for resolution.

At certain meetings, time is reserved for separate discussions with thecommittee together with management (excluding the externalauditors) and the committee together with the external auditors(excluding management). These separate discussions provide anopportunity for committee members, management and externalauditors to communicate privately and independently.

The internal and external auditors have unrestricted access to thegroup audit and risk committee, ensuring that their independence ismaintained at all times.

Remuneration committeeThe remuneration committee has three members of whom two,including the chairman, are independent. The remuneration committeehas a charter and is mainly charged with the remuneration strategy forthe group and meets regularly to consider the annual reviews,remuneration issues, incentives and policy matters. Refer to theRemuneration report on page 42 for further detail on remunerationand remuneration policies.

All board committees are chaired by an independent non-executivedirector and are free to obtain independent external professionaladvice in the carrying out their duties as and when required.

Group audit and risk committeeThe group audit and risk committee has a minimum of three membersall of whom are independent non-executive directors, including thechairperson. Various non-members, including the executive chairman,the group chief executive officer, group financial director,representatives of the finance function, internal auditor and externalauditor attend meetings by invitation.

Membership and meeting attendanceServing members of the group audit and risk committee, the date oftheir appointment, and their attendance at the meetings areas follows:

Number ofmeetingsattended Attendance

Date of appointment Date of resignation Independent during the year record

4 meetingsMembers held

PL Wilmot* (Chairman) 4 August 1999 Yes 4 100%ME King* 9 September 1998 Yes 4 100%RJ Koch† 9 September 1998 31 May 2006 Yes 4 100%AM Rosenzweig‡ 31 May 2006 Yes 0 n/a

* South African, † British, ‡ Dutch


Board sub-committeesThe Brait S.A. board has established several additional sub-committeeswhich report either directly or indirectly to the board and whosefunctions are to manage specific risks and activities of the group. Thesesub-committees operate within defined terms of reference, and includethe following:• Private equity proprietary investment committee;• Group internal audit committee;• Social investment committee;• Environmental steering committee;• Employment equity committee; and• Marketing committee.

Major subsidiary companiesBrait International Limited boardThe Brait International Limited board is, in addition to its statutoryobligations, mandated as a sub-committee of the Brait S.A. board withthe responsibility to carry out specific tasks delegated to it in respectof the group’s international operations outside South Africa. Servingmembers of the international board are:

Date of Date ofName appointment resignation

Executive directors

BI Childs (Chairman)† 21 October 2004EA Venpin* 22 July 2004 30 March 2006D Boodhoo* 10 June 2003

* Mauritian, † British

Brait South Africa Limited board (“BSAL board”)The South African holding company board, in addition to its statutoryobligations, is mandated by the Brait S.A. board to carry out specifictasks delegated to it in respect of the South African operations of thegroup. The serving members of the BSAL board are tabled below:

Date of Date ofName appointment resignation

Independent non-executive directors

BL Sibiya (Chairman)* 1 October 2004OK Chikane* 1 October 2004ME Gevers* 1 November 2004I Matthews* 1 November 2004(Alternate to ME Gevers)BMC Ngcobo* 1 October 2004 28 September 2005Reappointed – 25 January 2006VV Reddy* 1 October 2004SDM Zungu* 10 October 2004

Executive directors

AC Ball* 11 July 2000AD Campbell* 6 October 2003JJ Coulter° 6 June 2005FR de Beer* 25 January 2006DG Field* 11 June 2004JA Gnodde* 10 October 2002E Guiterrez-Garcia* 1 April 2003WF Hirzebruch* 1 April 2003BL MacRobert* 1 January 2003CL Smart* 1 April 2003CJ Tayelor* 10 October 2002

* South African, ° Irish

Membership and meeting attendanceThe serving members, the date of their appointment, and attendance at the remuneration committee meetings are as follows:

Number ofmeetingsattended Attendance

Date of appointment Independent during the year record

4 meetingsMembers held

ME King* (Chairman) 9 September 1998 Yes 4 100%AC Ball* 9 September 1998 No 3† 100%RJ Koch† 9 September 1998 Yes 4 100%

* South African, † British† AC Ball recused himself from a meeting during the year.


BOARD PROFILE

Mervyn Eldred King (68)*BA, LLB (cum laude) H Dip Tax (Wits)Senior Chairman – Appointed to the board 1998Mervyn King is a senior counsel and former Judge of the SupremeCourt of South Africa. He has chaired and been a director of severalcompanies listed on the Johannesburg Stock Exchange, including FirstNational Bank Holdings Limited, Capital Alliance Limited, Metro Cash& Carry Limited and Frame Group Holdings.

In South Africa, he is Professor Extraordinaire at the University of SouthAfrica on Corporate Citizenship, Chairman of the King Committee onCorporate Governance in South Africa, President of the AdvertisingStandards Authority, First Vice president of the Institute of DirectorsSouthern Africa, a member of the Securities Regulation Panel whichoversees all mergers and acquisitions in South Africa, Chairman of theBoard of Governors of the Witwatersrand University Foundation andChairman of the Appeal Committee of the United Cricket Board ofSouth Africa.

He is a member of the Private Sector Advisory Group to the World Bankon Corporate Governance, a member of the international advisoryboards of Stern Stewart of the USA, Tomorrows Company of the UnitedKingdom and the Asian Centre of Corporate Governance. He is thechairman and a member of the United Nations Steering Committee ofeminent persons to review the governance and oversight within theUnited Nations, its funds, programmes and specialised agencies.

He was the first President of the Commonwealth Association ofCorporate Governance, a former Governor of the InternationalCorporate Governance Network and the South African representativeof the International Chamber of Commerce International Court ofArbitration in Paris.

He is presently Chairman of the Automobile Association of SouthAfrica, Strate, the settlement arm of trades in equities and otherinstruments in South Africa and a director of JD Group listedin Johannesburg.

He has consulted, advised and spoken on legal, business and corporategovernance issues in 28 countries and has received many awards.

Antony Charles Ball (47)*BCom (Hons), MPhil (Oxon), CA(SA)Executive Chairman – Appointed to the board 1998Antony Ball was a co-founder of Brait’s Private equity business. He hasled the raising and governance of the group’s principal private equityfunds. He is responsible for numerous of the groups’ private equityinvestments. He was appointed group Chief Executive of Brait in March2000 and Executive Chairman in 2005.

Paul Adrian Barlow Beercroft (59)†MA (Oxon) Physics, MBA (Harvard Business School), F. Inst. PNon-Executive Director – Appointed to the board 2005Adrian Beercroft has a first class honours degree in physics from theQueen’s College, Oxford. Following graduation in 1968, he worked forICL in the computer industry for five years. In 1974 he went as aHarkness Fellow to the Harvard Business School, graduating as a Bakerscholar in 1976. He then joined the Boston Consulting Group inLondon. He was promoted to manager in 1979 and then to vice-president of BCG Worldwide in 1982.

Adrian joined Apax, the venture capital and private equity investmentcompany, in 1984. He played a major part in the internationalexpansion of the business, which now has over US$15 billion undermanagement. Apax is widely recognised as one of the leading privateequity houses in Europe. Adrian is the company’s chief investmentofficer and second largest shareholder. He was chairman of the BritishVenture Capital Association in 1991/92. He has represented Apax onthe boards of over 20 private and public companies.

Jean Ernest Bodoni (58)**Commercial EngineerNon-Executive Director – Appointed to the board 1998Jean Bodoni has in excess of 30 years’ experience in the Luxembourgbanking sector and currently holds the position of President of theExecutive Board with Experta Luxembourg S.A.. Jean is a director of anumber of Luxembourg resident companies.

Brett Ivor Childs (44)†CA(SA)Executive Director – Appointed to the board 2005Brett Childs, following completion of his training with Deloitte &Touche in 1987, co-founded a small re-insurance consultancy businessproviding investigative and audit services to the London re-insuranceindustry which was sold in 1994. He was one of the first to beapproved by Lloyds of London to act in the capacity of Finance Directorto agencies managing the first corporate capital syndicates admitted toLloyds of London.

He joined New Africa Technology Holdings (Proprietary) Limited, theinformation technology arm of New Africa Investments Limited, in1998 as Finance Director. Following a management buy-out in 2000,he managed, the buy-out vehicle realising value for its shareownersthrough IPO’s and trade sales. Following this, he started his ownsuccessful private equity investment company in Mauritius where hecurrently resides. Brett joined Brait in November 2004 as ExecutiveChairman of its Mauritian operation.


John Joseph Coulter (44) °Law Degree (Trinity College Dublin), Master’s in Business Studies(University College Dublin)Group Chief Executive – Appointed to the board 2005After a 20 year career with JPMorgan in London, New York andJohannesburg, John Coulter joined Brait S.A. as the Group ChiefExecutive Officer in June 2005. Prior to joining Brait, John wasChairman, Investment Banking, for JPMorgan in Central and EasternEurope, Middle East and Africa from 2004 to 2005. He was the ChiefExecutive Officer of JPMorgan South Africa from 1999 to 2005 withfunctional responsibility for Investment Banking. From 2002 to 2004,John was Chairman of the Foreign Bankers Association. On joiningJPMorgan in 1985, John was employed in Interest Rate, CurrencySwaps and Commodity Derivatives businesses in London and then NewYork until 1996 when he returned to London to head JPMorgan’sCommodity Trading businesses.

John Andrew Gnodde (40)*BCom (UCT)Executive Deputy Chairman – Appointed to the board 2005John Gnodde, is a director of Brait and CEO of Brait’s private equitybusiness and has overall responsibility for Brait’s private equity funds,having previously led the management of each of the PredecessorFunds. John joined Brait in 1995 and has been responsible forinvestments in consumer products, construction, pharmaceutical,manufacture, beverages, resources, mobile telecommunications andrecruitment outsourcing among others. Prior to joining Brait, Johnworked for Goldman Sachs International in London for six years wherehe served in the investment banking division.

Richard John Koch (55)†MA (Oxon), MBA (Wharton)Non-Executive Director – Appointed to the board 1998Richard Koch was a founder of The LEK Partnership, a partner of Bain& Co and a consultant with the Boston Consulting Group, and hasadvised the chief executive officers and chairmen of many blue-chipAmerican and European corporations. Richard is an author, investorand promoter in private equity investment.

Allan Mark Rosenzweig (51)‡BA, LLB, H Dip TaxNon-Executive Director – Appointed to the board 1998Allan Rosenzweig was an international tax advisor and corporatefinancier with Price Waterhouse including its New York office andIntertax, a South African international tax consultancy. Allan is adirector of both listed and unlisted companies. He joined the MIHGroup where he served as Group Director of Corporate Finance. Allanis also a founding member of the Ibex Group, which is active in thefield of asset-backed finance. Allan is currently based in New York.

Christopher John Tayelor (49)*BAcc, CA(SA), AMP (Harvard)Finance Director – Appointed to the board 1998Chris Tayelor was part of the Southern African national technical teamat Price Waterhouse before he joined Johannesburg ConsolidatedInvestment Company Limited (“Johnnies”) in Corporate Finance, whichhe headed from 1990 to 1994. Following the unbundling of Johnnies,Chris was appointed Financial Director of JCI Limited and to the boardsof its listed operations. He left this position prior to joining Brait inMay 1998.

Hermanus Roelof Willem Troskie (36)‡B Juris, LLB, LLMNon-Executive Director – Appointed to the board 2005Herman Troskie, is a director of Maitland, an international professionalservices firm, and resides in Luxembourg. After completing a legalresearch project at the Vrije Universiteit in Amsterdam, Herman spentthree years in legal practice in Cape Town before joining theLuxembourg office of Maitland in 1998. He specialises in the area ofinternational corporate structuring and financing, and has experiencein international tax planning for corporate entities and individuals, witha particular focus on Luxembourg and other European cross-borderinvestment structures. His practice also includes the listing ofcompanies and investment funds. Herman is admitted as a SouthAfrican Attorney and as an English Solicitor.

Serge Joseph Pierre Weber (42)**Business Diploma (ESSEC Business School, Paris)Executive Director – Appointed to the board 2001Serge Weber is a director of TRAXYS Europe SA, part of the TRAXYS SAGroup, a joint-venture created in 2003 between the Luxembourgbased ARCELOR Group and the Belgian-based UMICORE Group. He isthe Chief Financial Officer of TRAXYS Europe and the Group Controllerfor the TRAXYS Group, a leading metals and minerals marketing andtrading group operating worldwide. He has worked in treasury andfinance for many years, including Renault Trucks in France and SA desMinerais in Luxembourg.

Peter Linford Wilmot (66)*CA(SA)Non-Executive Director – Appointed to the board 1999Peter Wilmot was the chairman of Deloitte & Touche in South Africafrom 1996 until his retirement in August 1999 after a career spanning41 years in the auditing profession. Peter has chaired the AccountingPractices Committee and was President of the Transvaal Society ofChartered Accountants and the South African Institute of CharteredAccountants. He was also the deputy chairman of the StandardsAdvisory Council of the International Accounting Standards Board andis the immediate past Chairman of the Accounting Practices Board.

Nationality* South African

** Luxembourgish† British‡ Dutch° Irish

REMUNERATION REPORT


The remuneration committee’s main objective is to provide the boardwith assurance that the employees, directors and senior executives ofthe group are fairly rewarded for their individual contributions to thegroup’s performance. The group views the inclusion of share incentivesas an essential element in the remuneration package, as this promotesan alignment of interests with shareowners and incentivises long-termcommitment. Share incentive schemes and fringe benefit policies areregularly reviewed by the remuneration committee.

The remuneration strategy includes the determination of incentive paystructures for directors and senior executives, for both the short andlong term, and the positioning of these levels in accordance withtrends in local and international markets.

Non-executive directorsNon-executive directors do not have service agreements. Letters ofappointment confirm the terms and conditions of their service.Remuneration packages of non-executive directors are agreed anddetermined by the remuneration committee. Directors fees arestructured so as to encourage maximum board and subcommitteeparticipation. Certain non-executive directors were paid additional feesvarying between US$11 250 and US$36 750 for the year, dependingon the time spent on certain activities of the group.

The following scale of fees for meeting attendance was in place for the year:

• US$2 750 per meeting as a member of the Brait S.A. board• US$3 150 per meeting as the chairman of the Brait S.A. board• US$1 365 per meeting as a member of other board committees• US$2 100 per meeting as the chairman of other board committees

For the 2007 financial year, a fee increase of 5% was recommendedand approved by the board.

Executive directors and employeesService agreements entered into with executive directors are initiallyfixed for a certain term and, thereafter, may be terminated by eitherparty giving requisite written notice to each other. The terms ofemployment and remuneration packages are approved by theremuneration committee. Executive directors are not permitted toaccept external remunerative work or board appointments withoutapproval of the Brait S.A. board.

Remuneration packages for executive directors and employeescomprise some or all of the following:

• Base salary and benefits• Annual bonus• Long-term equity and/or share incentive plans

Base salary and benefitsExecutive directors and employees are permitted to structure their basesalaries and benefits in terms of existing legislation in theiremployment domicilium. Salary packages, including benefits, arereviewed annually with reference to relevant geographical and industrycriteria as a benchmark. Benefits largely include provident fund, grouplife, disability, medical aid and other benefits as dictated by competitivemarket practices.

Annual bonusesAnnual bonuses are closely linked to performance and pre-determinedtargets on both formulaic and discretionary bases.

Share equity and incentive schemesA summary of the scheme rules and share entitlements outstandingand granted to directors and employees of the group under the variousschemes are as follows:

Brait S.A. Share Incentive SchemeSalient features• The scheme is a share option scheme with deferred delivery.• Entitlements are granted at market price at the date of grant.• Vesting typically accrues within six years.• Entitlements expire after eight years.• Entitlements are forfeited if the participant leaves the group before

vesting.

Entitlements granted under the scheme:2006 2005

Share entitlements outstanding at beginning of year 2 975 262 2 568 624Granted and exercised 150 000 1 374 480Delivered (808 018) (61 151)Cancelled (by resignation,retrenchment or repurchase) (578 740) (906 691)

Share entitlements outstanding at end of year 1 738 504 2 975 262

Analysis of share entitlements outstanding at 31 March 2006

Entitlement expiry date Number of shares Issue price (ZAR)

31 December 2010 48 750 8,5731 December 2011 648 690 7,1930 June 2012 670 964 7,206 July 2012 220 100 7,221 October 2013 150 000 18,04

1 738 504

The Brait Executive Share Purchase SchemeSalient features• The scheme is structured as a share purchase scheme and

participants are offered an opportunity to acquire ordinary sharesin the company at a price fixed on a leveraged, deferred paymentand delivery basis. Critically, participants are required to make anupfront contribution equal to one third of the market value of theirentitlements granted.

• Participants are offered ordinary shares at market price.• Participants are offered leverage (loan finance) based on twice the

value of their contributions.• The leverage is subject to an arm’s length related interest rate.• The scheme shares or any rights flowing from such shares vest

over three years.• Participants may only take delivery of their entitlements under the

scheme on vesting and full settlement of their loan accounts.• Loan accounts must be settled within five years of the grant of

shares or the entitlements expire.


• Unvested entitlements are forfeited if the participant leaves thegroup before vesting.

The executives carry market risk on any decline in the Brait share priceduring the tenure of the scheme up to a maximum limit of their pre-paid contribution and will benefit from any market price increase, butonly to the extent that the increase exceeds the compounded primeinterest rate on the advance, net of dividends.


Prepaid OutstandingRepayment Interest contributions loan account Number of Sharedate of loan rate by participants balances shares purchase pricebalance of loan US$ US$ granted US$

31 March US dollar2008 Prime 457 605 537 344 1 933 269 0,710125 October US dollar 2008 Prime 460 212 550 767 1 944 284 0,710113 May US dollar2009 Prime 167 700 246 053 500 000 1,006231 March US dollar2010 Prime 1 565 833 3 758 062 2 500 000 1,8790

2 651 350 5 092 226 6 877 553

Entitlements granted under the scheme:2006 2005

Share entitlements outstanding at beginning of year 16 563 460 17 296 489Granted 2 500 000 500 000Delivered (12 185 907) (778 105)Cancelled (by resignation,retrenchment or repurchase) – (454 924)

Share entitlements outstanding at end of year 6 877 553 16 563 460

Brait South Africa Share Scheme 2005Salient features• A new scheme implemented with effect from 1 April 2005.• The scheme consists of a management scheme and an executive

scheme.• The executive scheme requires a capital contribution on which the

executive is exposed to market risk.• The scheme is based on a share appreciation right linked to a Brait

S.A. share.

• A vested share appreciation is converted into shares at marketprice.

• Entitlements are granted at market price at the date of grant.• Vesting accrues between three and five years.• Entitlements are forfeited if the participant leaves the group before

vesting.

Entitlements granted under the scheme:Management Executive

scheme scheme Total

Share entitlements outstanding at beginning of year – – –Granted 2 110 823 – 2 110 823Cancelled (by resignation or retrenchment) – – –

Share entitlements outstanding at end of year 2 110 823 – 2 110 823

REMUNERATION REPORT CONTINUED



Expiry date Number of shares Issue price (ZAR)

A shares – 5 years 31 March 2010 1 250 823 11,83A shares – 5 years 30 September 2010 125 000 18,04A shares – 5 years 31 December 2010 135 000 18,99C shares – 3 years 31 March 2008 500 000 11,83C shares – 3 years 31 December 2008 100 000 18,99

2 110 823

Directors’ emolumentsFor Brait S.A. and its subsidiariesRemuneration

Fees andexpenses Other Other

For the year ended as Cash Performance benefits services 200631 March 2006 directors salary bonus (note 1) (note 2) Total

US$000 US$000 US$000 US$000 US$000 US$000

Executive directorsAC Ball 12,4 507,7 781,5 33,4 – 1 335,0BI Childs 8,3 48,0 – – – 56,3JJ Coulter (note 3) 8,3 232,0 – 804,6* – 1 044,9JA Gnodde (note 3) 8,3 298,3 922,6 24,7 – 1 253,9CJ Tayelor 11,2 339,1 518,0 32,9 – 901,2SJP Weber – – – – 36,8 36,8

48,5 1 425,1 2 222,1 895,6 36,8 4 628,1Non-executive directorsPAB Beecroft 8,3 – – – 14,0 22,3J Bodoni 8,3 – – – – 8,3ME King 20,1 – – – 184,0 204,1RJ Koch 17,8 – – – 21,0 38,8AM Rosenzweig 8,3 – – – 21,0 29,3HRW Troskie 8,3 – – – 11,2 19,5PL Wilmot 19,4 – – – 21,0 40,4

90,5 – – – 272,2 362,7

Total US$000 139,0 1 425,1 2 222,1 895,6 309,0 4 990,8

* Mr Coulter was paid a US$750 000 ‘sign-on’ consideration in June 2005. Should he leave the group’s services prior to 1 June 2008, a pro-rata portion

will be refundable

Note 1 Other benefits represent provident fund contributions, motor vehicle allowances, medical aid and group life cover.Note 2 Other services represent time spent by directors in the management and/or day-to-day activities of the company and/or its subsidiaries.Note 3 Messrs Coulter and Gnodde were appointed directors of the company on 27 July 2005. Their remuneration is in respect of the eight month period from this date.


Directors’ emoluments (continued)For Brait S.A. and its subsidiariesRemuneration

Fees andexpenses Other Other

For the year ended as Cash Performance benefits services 200531 March 2005 directors salary bonus (note 1) (note 2) Total

US$000 US$000 US$000 US$000 US$000 US$000

For the year ended 200531 March 2005 Total

Executive directorsAC Ball 16,0 461,0 800,0 34,0 – 1 311,0CJ Tayelor 10,0 307,0 400,0 33,0 – 750,0SJP Weber – – – – 36,0 36,0

26,0 768,0 1 200,0 67,0 36,0 2 097,0Non-executive directorsJ Bodoni 8,0 – – – – 8,0FZ Haller (resigned 7 February 2005) 12,0 – – – 17,0 29,0ME King 25,0 – – – 185,0 210,0RJ Koch 16,0 – – – 20,0 36,0AM Rosenzweig 10,0 – – – 20,0 30,0PL Wilmot 39,0 – – – – 39,0

110,0 – – – 242,0 352,0

Total US$000 136,0 768,0 1 200,0 67,0 278,0 2 449,0

Share entitlements2006 2005

(a) Brait S.A. Share Incentive Scheme Expiry date Shares granted Issue price (ZAR) Expiry date Shares grantedIssued price (ZAR)

RJ Koch 31 Dec 11 15 300 7,19 31 Dec 11 15 300 7,196 July 12 34 700 7,22 6 July 12 34 700 7,22

ME King 31 Dec 11 24 000 7,19 31 Dec 11 24 000 7,196 July 12 76 000 7,22 6 July 12 76 000 7,22

AM Rosenzweig 31 Dec 11 15 300 7,19 31 Dec 11 15 300 7,196 July 12 34 700 7,22 6 July 12 34 700 7,22

SJP Weber 31 Dec 11 10 000 7,19 31 Dec 11 10 000 7,196 July 12 40 000 7,22 6 July 12 40 000 7,22

PL Wilmot 31 Dec 11 15 300 7,19 31 Dec 11 15 300 7,196 July 12 34 700 7,22 6 July 12 34 700 7,22

BI Childs 1 Oct 13 50 000 18,04 – – –HRW Troskie 1 Oct 13 50 000 18,04 – – –PAB Beecroft 1 Oct 13 50 000 18,04 – – –

450 000 300 000

(b) Brait Executive Share Purchase Scheme2006 2005

Prepaid Outstanding Outstandingcontribution loan loan

by the account Expiry Shares Issue account Expiry Shares Issueparticipant balance date granted price balance date granted price

US$000 US$000 US$ US$000 US$

CJ Tayelor – – – – – 822 31 Mar 08 1 895 307 0,7101JA Gnodde 318 373 31 Mar 08 1 342 377 0,7101 – – – –JJ Coulter 1 566 3 758 31 Mar 10 2 500 000 1,8790 – – – –

RISK MANAGEMENT REVIEW


Managing risk to enhance shareowner value goes to the very heart ofBrait’s business. The group places great importance and priority on itsapproach to risk management and has a strong culture of riskmanagement. It recognises that risk impacts on profitability and is anintegral component of most transactions. A careful process of riskmanagement is employed to effectively identify, evaluate and assess alltypes of risks and to optimise the risk-reward trade-off.

Risk management responsibility and structuresUltimate responsibility for the formulation of risk management policiesand the systems of control and review lies with the board of Brait andthe boards of its primary subsidiaries. There are nonetheless,intervening committees and executives who have designatedresponsibility for focusing on specific risk categories. Effective riskmanagement is also achieved through the decentralisation ofresponsibilities to managers of risk taking units, with reporting lines tothe group Chief Executive and designated risk committees. The riskcontrol structures are summarised in the following diagram:

Investment limits at each control level are approved by the boardand reviewed regularly to ascertain their relevance andappropriateness. Management is expected at all times to remain withinthe prescribed limits.

Brait measures the current profit and loss on its proprietary investmentportfolio monthly, or more regularly if specifically needed. The monthlyreports are supplemented by a full quarterly review of all investments.Controls are in place to ensure that other market risk transactions arebooked at prevailing market rates and that positions are revalued atcurrent market prices.

The risk measurement function in the group operates with clearindependence and authority from the operations and reports to seniormanagement and the board.

Credit and counterparty riskCredit and counterparty risk refers to the effects on future cash flowsand earnings of borrowers defaulting on their obligations. This alsocovers trading counterparties, issuers of instruments held by the groupor as collateral. Such risk arises primarily from lending and investmentactivities as well as from the settlement of proprietary financial markettransactions and those undertaken on behalf of clients.

Brait manages these risks by setting prudent credit exposure limits,constantly measuring current credit exposures, estimating maximumpotential credit exposures that may arise over the duration of atransaction, and responding quickly when corrective action needs tobe taken.

All material credit exposures are governed by authorisation limits atboth subsidiary and Brait S.A. board level.

Impairment provisions for doubtful debts are raised throughout theyear and approved by the audit and risk committee.

Interest rate and liquidity risksInterest rate risk refers to the impact on future cash flows and earningsof assets and liabilities of interest rates repricing either at differentpoints in time or on a different basis.

Exposures to interest rate movements are managed by a combinationof floating and fixed rate instruments, which give the group its desiredmaturity profile. The interest rates of the majority of the group’s termborrowings have been fixed in order to minimise the risks of interestrate volatility and match the estimated yield of the underlying assetsfunded with the borrowings, where applicable. The maturity ofborrowings is disclosed in the notes to the financial statements.

Liquidity risk arises in the general funding of the group’s activitieswhen there are mismatches between the sizes and maturities of assetsand liabilities and also in its Funds Management and tradingoperations. The liquidity risk refers to the ability of the group to meetits financial obligations as they fall due.

Currency risk Although the group’s holding company is domiciled in Luxembourgand its financial and reporting currency is the US dollar, it has

Different types of risks are clearly defined and such definitions provide thebasis for measuring risk and implementing risk management processes.

The group has risk exposures to market risk, credit risk, interest rate andliquidity risk, currency risk, solvency risk, operational risk, legal andcompliance risk and strategic risk.These risk factors are considered below.

Market riskMarket risk is the potential change in the value of a financialinstrument resulting from changes in market conditions. On a portfoliobasis, this is the risk of a decrease in the value of the portfolio as aresult of an adverse move in market parameters such as equity prices.

Primary control of risk is established through a comprehensive limitstructure that promotes the alignment of the group’s risk appetite,primarily for proprietary investments.

Direct reporting lines

Indirect reporting lines Environmentalsteering

committee

Employmentequity

committeeGroup Chief

Executive

Brait board of directorsGroup audit andrisk committee

Proprietaryinvestmentcommittee

Marketingcommittee

GroupInternal audit

committee

Primarysubsidiaryboards ofdirectors

Risk taking units


significant operations and/or investments in South Africa, Europe,Mauritius, North America and Australia. The group’s net assets reflectthe currency impact on individual investments. Brait has undertaken tomitigate the currency exposure of these net assets by hedging orholding a large portion of its capital in US dollars. At 31 March 2006,approximately 88% of the net tangible assets of the group wascovered or held in US dollars.

Solvency risk It is essential to ensure that the group is adequately capitalised toabsorb potential losses in its activities, to maintain the confidence ofall those with whom it does business and to fund the future growthof its operations. The geographical and legal structure of the groupminimises the potential contamination of losses in one segment ofoperation with those of another. The group also has a satisfactorycapital base to support the operations of its underlying businesses.

The group held some 53% of its capital in short-term cash deposits at31 March 2006 and has approved banking facilities of US$13,0 million(ZAR80,0 million).

Operational risk and IT technologyOperational risk is the potential for loss caused by a breakdown ininformation, communication and transaction processing systems andprocedures. While these risks can never be fully protected, Braitattempts to reduce them by maintaining comprehensive systems ofinternal controls, and sound policies and practices in the areasof information technology, human resources, physical security andinsurance. The enforcement and monitoring of compliance with suchpolicies and standards of practice is an essential component ofoperational risk management.

The group has dedicated significant resource and commitment to aninternal audit function, which is focused on a business and risk-basedaudit approach. The primary responsibility for operational riskmanagement lies at business unit management level. The group alsoensures that operational risk is minimised through the implementationof sound accounting methods, administrative controls and a code ofconduct.

The assessment of information technology is in the hands of theexecutive committee which not only sets IT policies, but also act as thefinal decision making authority. The group employs both onsite andoffsite disaster recovery facilities which are tested regularly. Businesscontinuity plans are in place in the case of catastrophic events. Allbusiness processes are supported by software systems, which are keptcurrent with the latest technology trends.

The group audit and risk committee, which has responsibility, inter alia,for overseeing of the management of operational risk, comprises non-executive directors to whom both the external auditors and internalauditor function have direct access. The functioning of this committeeis dealt with more fully under the corporate governance section of theannual report.

Legal riskLegal risk is the risk that transactions or agreements with third partiesmay not be legally enforceable or do not reflect the intentionsapproved by the boards or their committees. Brait recognises the legalrisks inherent in complex financial transactions. Brait engagesreputable third party legal professionals who are familiar with thegroup’s operations and the specific nature of its business for itstransactions in order to mitigate such risks.

Compliance riskCompliance or regulatory risk is the risk of non-compliance withregulatory requirements. Brait has allocated skilled staff to specificcompliance functions as part of its risk management framework. Themanagement of compliance risk is achieved through monitoring,reporting and other services, and reports regularly to the audit and riskcommittee.

Risk management for fund investmentThe group acts as manager for several funds financed primarily by thirdparty capital. In both Private Equity and Specialised Funds these fundsare typically subject to a number of governance controls with riskmanagement effects, including where appropriate:

• fund mandates setting out investment parameters includingtargeted markets, transaction types and investment limits;

• controlled investment processes including appropriate approval byinvestment committees;

• investor review by way of periodic reporting and performanceevaluation;

• advisory committee review for resolution of certain potentialconflicts of interest; and

• statutory and regulatory controls.

Brait’s internal control processes ensure that fund mandates areadhered to, and these controls are subject to internal audit and thusaudit and risk committee review. The effect on Brait’s financial positionis assessed by applying sensitivity analysis to material positions held inits funds under management.

ConclusionThe key focus of Brait’s risk management strategy is ongoingidentifying, assessing, managing and monitoring all known forms ofrisk resident in its operations. This is a continuous process ofdeveloping and enhancing comprehensive risk and control proceduresso as to enable the group to effectively identify and monitor allpotential risks that it may reasonably be exposed to.

SUSTAINABILITY REPORT

IntroductionBrait’s approach to corporate sustainability is to create long-termshareowner value by embracing opportunities and managing the risksderived from economic, social and environmental developments. Braitviews sustainable development as an essential component in thegrowth and improvement of the group in all its operations. In light ofthis, it strives to find a balance between economic objectives, socialupliftment and environmental responsibility (“triple bottom line”), inrecognition of the financial and reputational benefits of integratingsustainability into sound business practice.

Brait is pleased to present the group’s third consecutive annualsustainability report. The aim of this report is to demonstrate tostakeholders the group’s continued commitment to operate asustainable company, whilst respecting all three aspects of the triplebottom line. This report covers the activities of the Brait group, duringthe 2006 reporting period.

The report follows a similar format used for the two previous reports,and draws on the framework of the internationally accepted GlobalReporting Initiative (GRI) Sustainability Guidelines (2002), as well asthe criteria of the JSE Limited’s (JSE) Socially Responsible Investment(SRI) Index, as guides for sustainability reporting on the triple bottomline. These criteria have been used for guidance only, with this reportfocusing on issues that are specifically material to the the business ofBrait. Sustainability is not an isolated undertaking removed from day-to-day business activities, and as such, this report should be read inconjunction with the rest of the annual report to gain a full overviewof the group’s activities.

As a financial services company, the group’s contribution to promotingsustainable development relates largely to its ability to make a positiveimpact on social upliftment, and economic development. The group hasthus taken the strategic decision to focus its sustainability activities onaddressing the challenges that are most material to its business,namely the responsible provision of its financing, lending and fundsmanagement activities (taking into account both social andenvironmental indirect impacts), the roll-out of its BEE initiatives,the promotion of its CSI motto of “better opportunities througheducation”, and the implementation and maintenance of soundemployment practices. Brait nevertheless recognises the importance ofthe natural environment, and the minimisation of both the direct andindirect environmental activities of its business.

With the increased focus on sustainability, worldwide, Brait hasbenchmarked itself against the criteria of the JSE Socially ResponsibleInvestment (SRI) Index, launched in May 2004. This index aims topromote and enhance good corporate sustainability practices, in SouthAfrica, by using a set of predetermined criteria to assess and measurecompanies’ triple bottom line performance. Participation in the JSE SRIIndex is voluntary and limited to the 160 companies listed in theFTSE/JSE All Share Index. Brait has participated in this process, for thethird consecutive year, and is proud to be one of the 58 companiesincluded in the JSE SRI Index for 2006.


Interaction with our stakeholder groups is fundamental to thesustainability process. Brait looks forward to engaging with all itsstakeholders on the issues raised in the report, and encouragesfeedback to advance the company’s approach to sustainabilitydevelopment and management, in an effort to continually improve inthese key areas.

The framework for reporting on the triple bottom line, in this report, isas follows:

Stakeholders – Economic performanceSocial responsibility – Social performanceEmployee report – Social performance/occupational

health and safetyEnvironmental – Environmental performance

StakeholdersBrait recognises the importance of building and cementing long-termreciprocal relationships with our stakeholders and views this as integralto the success of our business. Our direct stakeholders areshareowners, clients, investors, employees, suppliers, government andregulators, whilst our indirect stakeholders include the communities inwhich we operate encompassing the education fraternity which servesas a source of future employees of the group. All our stakeholders playa key role in the sustained success of Brait’s business and we regularlyengage and consult with them. Brait is committed to creating wealthand adding value for all our stakeholders, and further strengtheningour relationship with them.

Shareowners and providers of capitalShareowners are our providers of capital and their key performancemeasures are the achievement of superior long-term sustainablegrowth in earnings and dividends, and the consistent demonstration ofexceptional returns on shareowners’ equity. The past year has seen thegroup meet and exceed these performance measures with a significantincrease in earnings, and the declaration of a total dividend of18,24 US cents per share to shareowners. ROE on a performancescorecard basis improved to 45,9%, exceeding our target of 20%. Thegroup’s risk exposure has been conservatively managed and the long-term nature of our private equity business and the good standing ofour client franchise are still intact.

ClientsWe view our clients as partners and work hand in hand with themin the creation of shared value. They are key to the long-termsustainability of our business. Our approach and objectives fit those ofour clients. In fostering long-term and mutually beneficial relationshipswith them, we go the extra mile and respond quickly and innovativelyto their needs. Clients appreciate our integrated multi-disciplinaryservice offering, and our enthusiasm to co-invest with them in supportof our advice and ideas.


InvestorsWe have an obligation to our investors to deliver superior returns and,as a result, our ability to find and convert opportunities into financialreward provides our investors in funds under management with abalance of risk/return profile with consistent and sustainable returnsand earnings that they are unlikely to achieve themselves, or within ourpeer group. Brait has committed itself to stringent standards ofreporting transparency and disclosure. This practice is followed not onlyfor shareowners, but also at client and investor levels. Investors in ourprivate equity funds receive regular, transparent and comprehensivereporting disclosure in regard to their investments. They arerepresented on advisory boards and are party to the investmentstrategy with regard to these funds. All investments are fully discussedwith our investors at bi-annual meetings. The trust and confidence ofour investors in our private equity team is reflected by the historicrecord of growth in Brait’s funds under management and their ongoingparticipation in Brait’s new fund offerings.

EmployeesThe intellectual capital of Brait’s employees form the foundation, andis the key driver behind the success of the group. Recognition of ouremployees performance is aligned with the performance of the group.We are focused on the development of our pool of talented people andare committed to education and training to improve and extend theirskills. Recruitment and retention of good people is important to thegroup, and our human capital base is stable. Employees are treatedwith respect and are key partners to the business.

Regulators and other industry bodiesThe group engages proactively in the regulatory process and pursuesopportunities to interact with various regulators. It engages with allthree stock exchanges, on which the group’s shares are listed.

Brait is a full member of the Southern African Venture Capital andPrivate Equity Association (SAVCA). The main objective of SAVCA is thepromotion of the venture capital and private equity industry in

southern Africa. Over the past five years, Brait has been activelyinvolved with SAVCA, and has played an integral role in a number ofits key initiatives. Brait is represented on SAVCA’s board of directors, itsexecutive committee, as well as on a number of project sub-committees. The group also engages with the Micro Finance RegulatoryCouncil (MFRC) and the Securities Regulation Panel (SRP).

Government and public sector officialsDuring the period under review, Brait has engaged with the SouthAfrican Deputy Minister of Finance, who has been most supportive interms of the group’s efforts to expose international investors to seniorpolicymakers in government. We have further engaged with theDepartment of Public Enterprise, the Department of Trade and Industry,and other relevant government sectors pertinent to an investorcompany’s business.

SuppliersBrait is committed to furthering black economic empowerment, andhas procedures in place to substantially increase the company’sprocurement from black-owned (shareholding), and black-staffedenterprises. Suppliers are required to submit their employer andemployee profiles and employment equity strategies. The group is alsodedicated to sourcing suppliers with appropriate environmentalpolicies in place (re-cycling, environmentally-friendly products, etc).

Communities and social interest groupsBrait is committed to assisting less fortunate people in thecommunities in which we operate, and to developing human capital.We recognise that we have a contribution to make in uplifting thesecommunities. This is primarily facilitated through the activities of theBrait Foundation, which has a chief objective to promote, nurtureand develop intellectual capital in commercial activities in thesecommunities and to work in conjunction with academic institutions,including the granting of educational bursaries for employmentequity candidates.

SUSTAINABILITY REPORT CONTINUED

StakeholdersShareowners and providers of capitalShareowners are our providers of capital and their key performancemeasures are the achievement of superior long-term sustainablegrowth in earnings and dividends, and the consistent demonstration ofexceptional returns on shareowners’ equity.

Clients (including Fund Investors)Creating lasting and mutually beneficial relationships with ourcustomers with the creation of shared value, and an obligation todeliver superior returns to our investors.

EmployeesCreating a positive, supportive, healthy and diversity-friendly workingenvironment.

Regulators and other industry bodiesBrait actively engages with the various stock exchanges on which it islisted, and other statutory authorities to ensure that the interests of thegroup, its shareholders and customers are properly represented in allpolicy-making and regulatory processes in the development of financialservices markets.

GovernmentThrough the executive management, Brait engages with governmentby interacting with key personnel within various governmentdepartments relevant to the business of the group.

SuppliersWe view our suppliers as business partners and are committed to aligningwith reputable suppliers, and assisting with supplier transformation.

CommunitiesBrait is committed to assisting less fortunate people in thecommunities in which we operate and to developing human capital.

Methods of engagement

• Media releases• Corporate website: www.brait.com• The Stock Exchange News Service (SENS)• Annual and interim results• Presentations and investor visits• Annual general meeting• The annual report• Analyst briefings, including results presentations• Conference calls

• Advertising and marketing• Corporate website• Electronic, telephonic and telefax communication• Corporate hospitality• Client seminars• Daily economic research reports• Quarterly, monthly and weekly Fund reports• Distribution through the M&A Network Inc.• Investor memorandums• Investor visits• Educational seminars• Industry surveys

• The intranet• Electronic and verbal communication• Internal newsletters• Wellness at work programme• Training and development• Emerging Fund Manager programme• Employment equity and diversity• Staff share schemes• Paid maternity leave• Health and safety (Regular on-site eye assessments, sponsored flu

vacinations)• Study loan scheme• Annual appraisal/employee satisfaction surveys

• Electronic, telephonic and telefax communication• Attend road shows and presentations• Meetings • Forums• Board representation

• One-on-one consultations between staff and key governmentpersonnel

• Economic briefings• Public-Private Partnerships

• Electronic, telephonic and telefax communication• One-on-one consultations between relevant staff and suppliers

• The Brait Foundation


Below is a table setting out methods of engagement with each stakeholder group:

A number of important challenges have emerged from stakeholder feedback:• To raise awareness about the Corporate Social Investment initiatives run by the Brait Foundation.• To achieve diversity at all levels throughout the organisation, particularly within senior management.• To actively communicate the group’s BEE implementation status to ensure awareness of the group’s initiatives amongst stakeholders.


GROUP VALUE ADDED STATEMENT

As restated2006 2005

for the year ended 31 March US$m % US$m %

Value addedFees, investment returns, interest and other revenues (note 1) 101,2 79,4Cost of services (23,7) (25,2)

Wealth created 77,5 54,2

Distribution of wealthEmployeesSalaries, wages and other benefits 24,5 32 18,9 35Governments – national and regionalTaxation and duties 2,8 4 0,6 1ShareownersDividends 19,6 25 14,5 27Retentions for reinvestmentRetained earnings and depreciation 30,6 39 20,2 37

77,5 100 54,2 100

Note 1. Interest is included net of interest expense

Distribution of wealth

Employees, 32%

Governments – national and regional, 4%

Shareowners, 25%

2006 2005

Employees, 35%

Governments – national and regional, 1%

Shareowners, 27%

Retentions for reinvestment, 39% Retentions for reinvestment, 37%


SHARE ANALYSIS

Distribution of shareowners at 31 March 2006Shareowners Shares held

Number % Number %

Range of shareowning1 to 10 000 3 531 88,1 5 705 038 5,210 001 to 50 000 294 7,3 7 019 132 6,450 001 to 100 000 54 1,3 4 013 828 3,6more than 100 000 131 3,3 93 749 323 84,8

4 010 100,0 110 487 321 100,0

The analysis of shareownings above includes the underlying beneficial shareowners in nominee companies.

Shareowner spreadTo the best knowledge of the directors and after reasonable enquiry, as at 31 March 2006, the spread of shareowners was as follows:Public 3 992 99,6 94 375 333 85,4Non-public 18 0,4 16 111 988 14,6

Directors and associates 14 0,3 7 107 103 6,4Share trusts 4 0,1 9 004 885 8,2

4 010 100,0 110 487 321 100,0

Category/classification of shareowners Banks 45 1,1 8 683 519 7,9Close corporations 97 2,4 451 766 0,4Endowment fund 18 0,5 522 105 0,5Individuals 3 048 76,0 10 515 041 9,5Insurance company 18 0,4 3 004 043 2,7Investment company 4 0,1 10 492 565 9,5Mutual fund 88 2,2 19 943 124 18,0Nominees and trusts 381 9,5 14 797 855 13,4Other corporations 78 2,0 5 853 683 5,3Pension fund 49 1,2 8 400 553 7,6Private companies 171 4,3 15 618 128 14,1Public companies 9 0,2 3 200 054 2,9Share trust 4 0,1 9 004 885 8,2

4 010 100,0 110 487 321 100,0

Major shareownersAccording to the company's share register, the following are the ten largest shareowners as at 31 March 2006: Shares held

Number %

Stanlib Group (for and on behalf of clients) 8 322 891 7,5The Brait Executive Share Purchase Scheme 6 877 552 6,2Public Investment Commissioner 5 833 254 5,3Investec Group (for and on behalf of clients) 5 470 722 5,0 Securitas Services Limited 5 344 560 4,8 The Thierry Dalais Family Trust 5 248 408 4,8 Ball Family Trust 5 097 375 4,6 Battersea Services Limited 3 916 938 3,5 Drocheda Limited 3 000 000 2,7 Sanlam Group (for and on behalf of clients) 2 978 332 2,7

Total 52 090 032 47,1


Performance on the JSE Limited* for the year ended 31 March 2006 2005 2004 2003 2002 2001 2000

Price performanceTraded prices (South African cents per share)

– year-end closing price 2 500 1 170 730 650 860 1 145 2 200 – high 2 630 1 250 850 1 170 1 590 2 200 3 975 – low 1 170 676 560 650 845 1 145 1 790 – weighted average price – per share traded 1 785 892 662 921 1 331 1 605 2 628

Price-earnings ratio (on closing price) 7,5 4,9 165,7 (4,4) 3,4 5,2 8,3

Volume performanceNumber of shares in issue (‘000) 110 487 102 256 102 256 93 483 93 483 93 483 93 483 Volume of shares traded (‘000) 56 222 29 717 37 567 22 773 26 758 25 034 37 298 Number of transactions 9 575 3 166 2 071 1 897 3 333 5 268 10 068 Volume traded as % of average shares in issue 51 29 37 24 29 27 40 Number of shareholders (at 31 March) 4 010 2 872 2 692 2 574 3 108 2 184 2 696

Value performance Value of shares traded – ZAR’m 1 081 265 249 192 367 394 980 – US$’m 169 42 40 24 32 49 150

Market capitalisation at 31 March (m)

– ZAR’m 2 762 1 196 746 608 804 1 070 2 057 – US$’m 447 190 119 77 71 134 315

Yield Earnings yield (%) 12,8 20,3 0,6 (23,0) 12,4 19,2 12,0 Dividend yield (%) 4,6 7,3 2,8^ 3,3^ 7,5 5,2 3,4

Liquidity rating of securitiesBrait's shares have a class one maximum liquidity rating on the JSE Limited

* The performance on the JSE Limited has been analysed as this is the most liquid exchange on which Brait's shares trade.

^ Excluding special dividends

Volume traded

14

12

10

8

6

4

2

0

Mill

ions

May

05

Jun

05

Jul 0

5

Aug

05

Sep

05

Oct

05

Dec

05

Nov

05

Jan

06

Feb

06

Mar

06

Value traded

350

300

250

200

150

100

50

0

ZAR

mill

ions

May

05

Jun

05

Jul 0

5

Aug

05

Sep

05

Oct

05

Dec

05

Nov

05

Jan

06

Feb

06

Mar

06

Average price

3 000

2 500

2 000

1 500

1 000

500

0

Cent

s

May

05

Jun

05

Jul 0

5

Aug

05

Sep

05

Oct

05

Dec

05

Nov

05

Jan

06

Feb

06

Mar

06

SOCIAL RESPONSIBILITY


The Brait Foundation was established in July 2000, as a partnershipbetween the group and its employees. The Foundation’s objective is toprovide better opportunities to previously disadvantaged communitiesin South Africa, through education. It is resourced via financialcontributions from the group’s business units, staff and fundraisinginitiatives, but its main strength lies in the commitment of its memberswho, together with Brait staff, volunteer their time, energy andexpertise to manage, monitor and assist the various projectsundertaken by the Foundation.

As an organisation that recognises and promotes excellence, drive andentrepreneurial spirit, Brait seeks to foster individuals whose ability,commitment to learning and determination to overcome barriers canbe an example to their peers and the wider community. The BraitFoundation is proud to be associated with individuals, organisations,institutions and projects which share the same passion shown by Braitand its staff members.

Moletsane Secondary SchoolMoletsane School, located in Soweto, was established in 1972 andgraduated into a fully fledged senior secondary school in 1976.Moletsane currently has 1 330 learners enrolled, supported by37 educators and three administrative officers. During recent years theBrait Foundation has developed a strong partnership with Moletsaneand has set up a number of successful programmes in conjunction withthe school.

The Foundation has over the past five years, assisted Moletsane byupgrading school buildings and facilities, and implementing variouslearning programmes which have assisted and encouraged bothlearners and teachers alike. This is reflected in the marked improvementin Moletsane’s matric results over the past few years.

2001: 46% pass rate2002: 86,4% pass rate with 35 distinctions2003: 93,4% pass rate with 22 distinctions2004: 91% pass rate (the best Gr 12 results in the Soweto area)2005: 80% pass rate with four distinctions

Moletsane is now much admired, within the Soweto schoolcommunity, for the improvement of its matric results as well as for theenormous commitment it shows to the continuing education andupliftment of both its teachers and pupils.

Projects, achievements, milestones, awards:

• Brait annually sponsors seven teams from Moletsane to participatein the JSE/Liberty Life Investment Schools Challenge. Thecompetition involves learners from grades 10 and 11 managinglisted equity investment portfolios on the JSE, and is aimed atintroducing learners to the workings of the stock market and theprinciples of equity investment. Brait staff mentor the pupils, on avoluntary basis, sharing their extensive investment experience.Moletsane has taken the competition by storm, having three teamsplaced in the top 10 in the past three years, and emerging aswinners in the 2005 competition. The Foundation was attractedto this project because of the educational benefits to theparticipating learners and their classmates. Moletsane hasreported improved results in commercial subjects, since theintroduction of the competition at the school.

• Brait has sponsored the upgrade of the library facilities at theschool and in partnership with READ (a literacy focused NGO), hasmanaged to ensure that the library is now fully functional. It hasbecome a vibrant, integral part of the school. The Foundationcontinues to fund the purchase of books and provides ongoingtraining to school staff members to ensure the sustainability of thelibrary. Once a year, Brait staff are encouraged to donate books,which are sorted, covered, catalogued and presented to the library.The Foundation is also responsible for the supply and upkeep ofcomputers to the school and the sponsoring of a part-timecomputer teacher.

• Through the Brait Foundation a number of career guidanceinitiatives have been implemented. These include career andsubject choice workshops (run by PACE), together with schooloutings to businesses and places of interest in various sectors ofthe economy (the latter organised by Brait Foundation members).The Foundation has also set up the “PACE” software programmeat Moletsane in order to assist pupils with decisions regardingsubject choices and careers.

• In 2003, Brait and Moletsane participated in the first Cell C “Takea Girl Child to Work Day”. Brait has continued to support thisprogramme, hosting girls from Moletsane each year, and endorsesCell C’s initiative to “deepen the thinking of the girl child withregard to their infinite roles in society, enhance her self-esteem,inspire and motivate her to reach her full potential and throughexposure to diverse careers and positive role models assist her toprepare for the world of work”. Supporting this kind ofprogramme ties in with the Foundation’s motto of “betteropportunities through education”.

• Other projects initiated at Moletsane, by Brait, include theintroduction of the Activate Mindset Programme. Activate, achannel of the Mindset Network, offers a complete learning planvia satellite television with multimedia support. The channel isaimed at supporting teachers and learners with the new FETcurriculum. Moletsane is able to access Activate via DStv channel82. The daily broadcasts are supported by print supplementsprovided via the Sunday Times.

• The Foundation introduced the “Entrepreneurs on the Move”project to the school. The aim of this project is to introduce andencourage entrepreneurship amongst students and school leavers.It is focused on business development, mentorship, anentrepreneurship project, job creation and skills development. Thisprogramme is currently being successfully run by the school’seconomics teacher.

• Towards the end of 2005, the Brait Foundation working togetherwith “Habitat for Humanity” started building a school hall atMoletsane. The hall is able to seat up to 1 200 pupils and isexpected to become central to the working of the school. Chairsfor the hall were purchased from personal donations received fromBrait’s staff. The new hall will enable the school to hold assemblies,host functions, public speaking events etc, and can also be used asextra classroom space, as required.


• The school hall project was a great innovator towards team-building initiatives within the group. Staff volunteers had theopportunity to be involved in physically helping to build the hall atMoletsane, in Soweto. Brait staff worked side-by-side withMoletsane teachers digging, pushing wheelbarrows, fillingbuilding foundations, wielding pickaxes, laying bricks andgenerally assisting the contractors with whatever manuallabour required.

The new Moletsane school hall was officially opened by theHonourable Minister of Education, Ms Naledi Pandor, on 22 May 2006,when it was announced that Moletsane would now form part ofthe Education Department’s “Dinaledi” (“Star”) initiative – a proudmoment for all involved.

Thuthuka Bursary Fund Brait is a proud sponsor of the Thuthuka Trust initiative, developed bythe South African Institute of Chartered Accountants (SAICA), to fundaspirant students from previously disadvantaged communities who arestudying towards becoming chartered accountants. A significantnumber of Brait’s professional staff are chartered accountants, andshare SAICA’s vision of increasing the number of chartered accountantsfrom previously disadvantaged backgrounds. In the true spirit ofpartnership, Brait not only provides funding, but also involves its staffmembers in mentoring the bursary students.

PUSH PUSH is registered as a non-profitable community based organisationwith the Department of Social Development. Its approach is to mobiliseschools and communities to work together, in partnership, to addresskey risk factors like HIV/Aids/STI and tuberculosis, early pregnancy andbehaviour change and to eliminate some of the problems aroundstigma, discrimination and denial, to increase prevention awareness.The Foundation decided that HIV/Aids was one of the areas on whichit needed to increase its focus and activities and, thus, aligned withPUSH on an HIV/Aids programme. Together, the Foundation and PUSHcreated an opportunity for Moletsane to receive the necessary teachingand education to build awareness, train, treat and monitorinterventions to combat the epidemic, through regular workshops andquestion and answer sessions.

MaAfrika TikkunThe Foundation made a further commitment to the fight againstHIV/Aids, during August 2005, when it decided to support the AidsEducational Centres being set up by MaAfrika Tikkun in the OrangeFarm, and Diepsloot, informal settlements. The HIV/Aids caregiversproject, managed by MaAfrika Tikkun, encourages members of thecommunity to train as caregivers to provide home-based care topatients who are bedridden and infected by the HIV virus, along withadditional support for the family. The caregivers are trained incounselling (grief, depression) and data collection, collectinginformation directly from the community. This enables government andNGOs to effectively identify the community’s needs, to be able toprovide essential services and proactively manage vulnerable familiesand infected patients.

Endeavour Given the extremely high level of unemployment in South Africa theBrait Foundation realised that the development of entrepreneurs wasan area of high importance. In light of this, it decided to support a

programme called Endeavour. This programme was set up in the USAin 1997 with the express intention of encouraging entrepreneurship indeveloping nations. Having achieved initial success in Argentina andChile, Endeavour SA was launched in 2004.

Each year, approximately 40 entrepreneurs are identified. Interviewsand panel discussions are held between the candidates and theEndeavour Board members (Brait is represented on the board byMr John Gnodde), following which two or three entrepreneurs areselected. Endeavour then offers assistance, advice and demand-drivenservices to these carefully chosen entrepreneurs, ensuring that theirinitial ideas expand into major growth and employment benefits.

During the initial stages of entrepreneur selection, senior Braitemployees assist a number of the candidates in compiling theirpresentations. This programme is re-evaluated on an annual basis.

Gordon Institute of Business Science (GIBS) At the end of 2004, the Brait Foundation decided to fund the fees fora previously disadvantaged student to attend the Gordon Institute ofBusiness Science’s MBA programme over a period of two years. TheFoundation wanted to foster the idea of excellence in education andGIBS seemed a natural choice given the close links between Braitand GIBS.

After a rigorous selection process conducted by both institutions, onefull scholarship and two partial scholarships were awarded.

The scholarships formed a three way relationship between the BraitFoundation, the students and GIBS and close contact is maintainedbetween the parties. The awarding of this scholarship will be re-evaluated at the end of 2006.

Rally to Read Rally To Read, a joint venture between The Financial Mail, McCarthyMotor Holdings and the READ Educational Trust, has been supportingrural education since 1998, and has had a direct influence on the livesof more than 100 000 school children at 345 remote, rural schools ofSouth Africa. Full sponsorship costs ZAR17 000, of which ZAR11 000buys books, and ZAR6 000 funds teacher training. Annually, duringweekends in May, convoys of off-road vehicles depart from main citiesacross the country to deliver books and other teaching materials tosome of the country’s most neglected schools. The project allows forthe sponsors to personally deliver portable libraries and other teachingaids to remote schools during The Rally weekend. On arrival at theschool, Rally participants meet and interact with the learners andteachers who benefit from the books and subsequent professionaldevelopment, provided for three years by the READ Educational Trust.Sponsors return to the same set of schools for three consecutive yearsand can witness the progression of the teachers and learners. The BraitFoundation’s objective to assist impoverished communities witheducational initiatives, and to enhance the learning experience foryoung South Africans, is met in supporting this project. Foundationmembers take part in Rally to Read, annually, with the end goal ofimproving the reading and writing skills of hundreds of learners. DuringMay 2006, three Brait teams participated in this project, reporting thatit was one of the highlights of the year.

SOCIAL RESPONSIBILITY CONTINUED


Student Sponsorship Programme (SSP) In keeping with the Brait Foundation’s theme of investment ineducation, the Foundation currently provides financial sponsorship forthree students from previously disadvantaged backgrounds to attendRoedean School SA, in Johannesburg. The sponsorship continues untilthe students matriculate (the girls are currently in grades 9 and 10). Inaddition to financial sponsorship, each student has a mentor from theBrait Foundation, who monitors the students’ performance and offersthe girls general support and encouragement.

Cell C Take a Girl Child to Work Day Cell C launched its Take a Girl Child to Work Day project in 2003 in thehope of breaking down the stereotyping of women as having a role inthe home and not necessarily in the workplace. The Brait Foundation isproud to have participated in this inspirational day since its inception,and 2006 will be the fourth consecutive year Brait is involved in thisworthy project. The Johannesburg offices will host 20 girl learners fromMoletsane Secondary School in Soweto, and an additional 20 girllearners from Tlakula High School in Kwa-Thema, Springs (spreadacross grades 10 to 12). This day is also open to all Brait staff withdaughters in these grades.

It is an extremely motivating day for both the girl learners and the Braitemployees, and provides the girls with the opportunity of entering aformal office environment, enabling them to see first hand the varietyof roles available to them in a financial services institution. It is a dayduring which they are encouraged to be all that they can be, anddream of being.

Girls and Boys Town South AfricaNelson Mandela endorsed his support for Boys Town in 1996, praisingthe work done by Mr Joe Araujo, executive director (and former pupil) ofan organisation which has built a reputation for supporting young boysfrom disadvantaged backgrounds. The organisation has since extendedits much-needed activities to include support for both boys and girlsacross the racial spectrum. The Brait Foundation identified a role it couldprovide in mentoring children from this background, and sponsors onechild within the guidelines prescribed by Girls and Boys Town.

The LEAP Science and Maths School C.T.The LEAP Science and Maths School was established to provideintensive tuition in mathematics and science to promising learnersfrom disadvantaged communities in and around Cape Town. Given thedesperate need for maths and science graduates in South Africa, theBrait Foundation decided to support this initiative through financialassistance and via mentorship of the learners.

The Twilight Children’s ShelterThe Twilight Children’s Shelter for abused and homeless children wasfounded in the early 1980’s to help the growing masses of streetchildren from Hillbrow and surrounding areas in Johannesburg. It is anon-profit organisation dedicated to assisting inner city kids, byproviding a place of safety, offering shelter, food, clothing, educationand protection from the extremely volatile situation on the streets. Theshelter provides medical attention, support groups in the form of socialworkers, skills training and clothing to approximately 70 boys agedeight years up to 20 years. The boys are encouraged to attend schooland careworkers assist with their homework in the afternoons. The

Brait Foundation has sponsored the education and uniforms of fourboys, enabling them to attend Sparrows Schools. The Foundation hasalso donated two computers to the shelter, and Brait has supported theshelter’s pottery workshop by purchasing pottery artefacts made bythe Twilight Children for the Private Equity investor visits. An annualdrive of the sale of Christmas cards, designed by the Twilight Children,is also extended throughout Brait.

We would like to extend our gratitude to all our staff for theircontributions and participation in the various projects, and we hope tocontinue to make a difference to the individuals and communities weassist, as well as to our staff through their involvement with the BraitFoundation.

Corporate social investment – funding allocationBrait’s Corporate Social Investment (CSI) expenditure is fundedby the annual allocation of not less than half a percent of prioryear attributable earnings from the entire group’s operations.

The full amount allocated during 2006 was managed byThe Brait Foundation, and committed to programmes in terms

of section 13 of the Financial Sector Charter.


Human resources approachOur people are our greatest asset. The continued success of the group’sbusiness is dependent on the ability of the leadership to sustainindividual excellence within a framework of outcome-orientedteamwork. Competitive, innovative and personalised remuneration,together with progressive incentive and profit sharing schemes serve toreward excellence. Accountability and productivity are encouraged andsustained via an environment characterised by trust and mutualrespect.

Our celebration of individual differences supports creative andalternative thinking while a spirit of free mindedness is fostered withinan environment that is devoid of formal, traditional corporatehierarchy. A flat, integrated organisational structure facilitatescommunication between all levels, allowing for a free flow of thoughtthereby fostering unfettered maneuverability in response to clientneeds.

Operational guidelines replace formal policy to allow for individualism,and open communication facilitates the understanding of teamdynamics and individual strengths. Brait is a lean organisation staffedby a relatively small group of highly qualified, young and energeticindividuals who are driven by challenge, achievement, accountabilityand high work ethics. Brait believes its employees are the driving forcebehind its reputation, image and results.

EMPLOYEE REPORT

Age distribution

50

40

30

20

10

0

%

Under 30 30 – 39 40 – 49 50 +

Age

23,3%

44,5%

24,4%

7,8%

Staff qualifications distribution

Non-degree 36% Degree 17%

Postgraduate qualification 47%

Ratio of professional staff to support staffat 31 March 2006

Professional 59% Support 41%

Professional staff Number of employees

CA(SA) 21Other Master’s level qualifications 5

26

EMPLOYEE REPORT CONTINUED


Human capital developmentMentorship and coaching initiatives will always be the cornerstone ofmanpower development within Brait. Learning and development is acore part of Brait’s human capital strategy, with two main objectives:

• To grant each employee the opportunity to achieve his or herpotential in pursuit of organisational objectives; and

• To provide a challenging work environment and opportunities forpersonal growth.

This strategy serves to facilitate the effective transfer of essential areasof knowledge to Brait’s future executives whilst allowing fordevelopment of character, values and individualised careerdevelopment. Opportunities exist for staff to develop broad businessskills ranging from financial analysis and valuations, to business andpeople management, as well as investor relations. Brait’s emphasis onthis form of development has resulted in the formation of closely-knitmulti-cultural teams joined by strong relationships and commonality ofpurpose. Standards of performance are clearly understood and teammembers promote and reinforce the consistent and ethical applicationthereof. Through the introduction of structured and customised TraineeEmerging Manager and employee development programmes, effortsare made to develop the potential of existing staff and provide a futurechannel of potential managerial and senior staff resources for differentareas of the business.

Staff are encouraged to continually improve on their levels of skill andpersonal development. The amount expended on skills development,during the period under review, was ZAR470 000. In support of this,training and educational programmes are regarded as essentialcomponents of the group’s investment in human capital. A closedbursary scheme is available to all staff, and an amount of ZAR212 000has currently been utilised through this scheme.

Brait closed bursary scheme Number of employeesCertificates/Diplomas 1Degrees 2Postgraduate degrees 5

8

Effective communication throughout the organisation is vital to sustainmanpower strategies and serves to develop a culture of openness,honesty and trust.

Transformation and diversity in South AfricaBrait’s human resource structure continues to focus on the strategy ofrecruiting and retaining the best individuals from South Africa’s diversepopulation base. Recruitment standards are high and leadership ismeasured on the recruitment, development and retention ofintellectual talent.

There has been strong progress towards the realisation of equityobjectives. Despite a progressive reduction in employee numbers,Employment Equity targets established in the 2001 Employment Equityreport have been exceeded during this financial year.

Workforce demographics show a progression over the past four-yearperiod which reflects the overall objective and intent of Brait, thatworkforce demographics must, more closely, reflect the demographicsof the economically active South African population as a whole. Thistrend will continue as objectives are consistently met.

A fully representative Employment Equity committee ensures regularworkforce analysis to monitor the achievement of defined numericaltargets and to ensure fair and equitable employment practices.

Transformation continues to be driven on several fronts including socialinvestment, black economic empowerment initiatives, corporate socialinvestment and employment equity initiatives.

Although Brait has progressed well with regard to its transformationprocess, female representation at senior and executive levels remains apriority. Overall, females represent 48% of the total group workforce,however, improvement is required with regard to representation atsenior levels. Strategies have been put in place that are aimed at theidentification of professional female talent in the marketplace, and thePrivate Equity division has appointed a female director this year.

Group headcount at 31 March 2006

250

200

150

100

50

0

Num

ber

02 03 04 05 06

Group gender representationat 31 March 2006

Male 52% Female 48%


Changes in workforce demographics are reflected when comparing theperiod ended 31 March 2003 to the current period under review,ending 31 March 2006, as shown above:

Financial Sector Charter in South AfricaThe Financial Sector Charter (“charter”), as applicable from January2004, sets out the commitments of organisations in the financialservices sector to achieving the ideals of transformation andempowerment in South African society. The charter provides theframework for promoting black economic empowerment and Brait hasmade considerable progress in meeting this objective. Brait, as a partyto the charter, is committed to the aims and the full achievement of allapplicable requirements, with an internal objective to surpass thecharter targets, wherever possible.

Performance measurement in respect of the Financial Sector CharterScorecard is fully operational. Achievements to date in respect ofownership and control, corporate social investment and procurementclearly indicate that the group is on track to achieve the 2008 targetsestablished by the charter.

Employee well-beingBrait’s most valued asset remains its people and the optimisationof their abilities, skills and talents is paramount. An employeewellness programme provides individuals with support mechanismsnecessary to cope with trauma, stress and health, including HIV/Aidsand other difficult life situations. The programme providesprofessional, confidential counselling and advisory services, via a24-hour helpline, and is available to all staff and their immediatefamily members.

Regular well-being programmes are run in-house to ensure theoptimisation of health with the more popular programmes beingeyesight tests and annual flu vaccinations.

HIV/AidsBrait recognises that the scope of the HIV/Aids pandemic in South andSouthern Africa is such that it is likely to have a significant impact onthe national economy. The board acknowledges the impact thatHIV/Aids may have on its workforce, and is committed to creating andmaintaining a safe working environment for all employees, andundertakes to deal with HIV-infected employees and/or employeeswith Aids in the same way as with employees suffering from any otherlife-threatening disease. This is done with due consideration for allstakeholders, whilst addressing the issue in a positive, supportive andnon-discriminatory manner.

Brait continues to commit its full support and co-operation through anHIV/Aids policy designed to assist management and employees dealwith HIV/Aids issues in the workplace. Strategies will be formulatedthis year to assess the impact of HIV/Aids on the business and todevelop plans to mitigate the adverse effect that HIV/Aids will have onthe people and business of Brait.

The group HIV/Aids policy was reviewed in November 2005. The policyprovides for voluntary HIV testing, confidentiality and the privacy ofthose who are HIV-positive and/or suffering with Aids, HIV/Aidseducation programmes as well as the management, care andcounselling of HIV/Aids employees.

Brait currently makes use of an Employee Wellness Programme (EWP)with regard to HIV/Aids. This programme offers a comprehensiveprevention and support approach which includes, inter alia, care andsupport strategies, pre- and post-test counselling, bereavement andloss counselling. Brait employees and their immediate family membershave access to telephonic counselling services and up to three face-to-face counselling services.

The EWP provides a specialist network of trauma counsellorsthroughout South Africa who have specific training and experience inthe management of trauma. Any individual either self-referred orreferred by a supervisor, will be offered individual trauma counselling.

at 31 March 2003

African 16% Coloured 4%

Indian 4% White 76%

ACI representation of total workforce: 24%

at 31 March 2006

African 23% Coloured 11%

Indian 11% White 55%

ACI representation of total workforce: 45%

Group equity representation

EMPLOYEE REPORT CONTINUED


By early 2007, Brait would like to roll out the voluntary HIV/Aidstesting programme, supervised and managed by our employeewellness provider. This programme will incorporate the following:

• HIV/Aids education and awareness training for employees,managers and HR consultants;

• Support for managers and HR consultants to deal with disclosure,HIV/Aids support and incapacity management;

• Voluntary counselling, testing and referral into the various diseasemanagement programmes offered by three medical aids;

• Support for employees who are infected with or affected byHIV/Aids;

• One of the crucial components of a comprehensive HIV/Aidsstrategy is the “Know your Status” campaign. Whilst employeescan be tested by their private medical doctors or at other facilities,only a limited number of people make use of this opportunity. Todeal with this problem of participation on-site “Know your Status”programmes will be implemented;

• Ongoing coaching and mentoring to managers, supervisors as wellas to peer educators; and

• Programme management as part of a comprehensive HIVprogramme.

This HIV/Aids programme will ensure adherence to the Code of GoodPractice on Key Aspects of HIV and Aids and Employment issued interms of the Employment Equity Act No 55 of 1998 and the Scheduleon HIV testing issued in terms of the National Policy of Health Act No116 of 1990, and promotes the principles as contained in the ILO Codeof Practice on HIV/Aids and the World of Work.

Occupational health and safetyEmployee health and safety in the workplace remains a group priority,and is reviewed and monitored by the health and safety committee ona regular basis. The health and safety representative, appointed interms of South Africa’s Occupational Health and Safety Act (OHASA),conducts regular workplace safety investigations via daily, weekly andmonthly site inspections of the various different components of theJohannesburg offices. Potential health hazards, and any related safetyor risk issues highlighted are reported and resolved immediately. High-risk matters are reported to line management for follow-up remedialaction and, if necessary, are escalated further. The facilities manager isresponsible to ensure that all business units comply with theiroccupational health and safety.

In addition, three members of staff have been trained as first aidofficers and are available to deal with any day-to-day emergencies.There were no work-related accidents or incidents reported over thepast year and, consequently no related man-hours lost.

Remuneration and benefitsThe purpose of the group’s remuneration and reward strategy is toattract, retain and motivate employees. Brait’s ability to inspire andretain staff through the joint establishment of outcomes-based rewardstructures and participative remuneration assessment, continues todifferentiate the group. Guaranteed remuneration is reviewed once ayear to ensure that employees who contribute to the success of thegroup are remunerated competitively. Guaranteed remunerationconsists of a basic salary, company contributions to a retirement fund,group life and disability insurance, and a flexible portion that can beallocated to various benefits, such as a car allowance, and medical aidcontributions. Employees may, once a year during the annual review,elect to have higher levels of group life cover, or increase theirretirement funding contributions.

A focused, hands-on management style allows for the formulation ofpersonalised remuneration design. Individualised variable rewardstructures allow for centred performance targets against whichachievement can be monitored monthly.

Performance management ensures the alignment of individual andcorporate strategy. Informal performance assessment takes placeweekly with formal structures taking place annually.

A remuneration committee comprising executive and non-executiverepresentation provides the Brait board with assurance that thedirectors, senior executives and staff of Brait are fairly rewarded fortheir individual contributions to the group’s performance anddemonstrates to stakeholders that such remuneration and reward is setby an independent committee of the board. Remuneration is surveyedannually to ensure the company is ahead of industry practicesand trends.

Share incentive schemes align the interests of staff and stakeholdersand instill a sense of ownership amongst participants.

ENVIRONMENTAL


Brait operates in many different regions, some of which have criticalresource bases, which need to be wisely used if they are to providesustainable support for development. This is particularly applicable inthe group’s African operations. It has become increasingly importantfor organisations worldwide to participate in conserving theenvironment. All companies, to a varying extent, have an impact onenvironmental resources and therefore need to develop strategies tomeasure and monitor their impact, and implement systems to ensurethat these resources are used in a responsible manner.

The board recognises that, as a financial services organisation, Brait’senvironmental impacts are lower than those of other industries, butthat environmental risk may arise indirectly from the environmentalimpact of the actions of its suppliers, clients, staff, business partnersand investment companies. Its strategy and objectives, in terms of theenvironment, are based on the premise of ensuring a better life forall the group’s stakeholders and future generations and, in doing so,ensuring that none of the group’s activities have a detrimentaleffect on the environment. The group undertakes to conductits business activities in a manner that minimises or eliminatesnegative impacts, and maximises positive impacts of an environmentalor socio-economic nature.

The board has committed to ensuring that Brait, and those parties overwhom it has influence, set appropriate standards to deal specificallywith environmental challenges and the subsequent measures requiredto reduce any negative impact on the environment.

Due to the significance of the group’s commitment to the environment,the group chief executive, assumes direct responsibility for ensuringthat the group policies in place are appropriate and will lead to theachievement and maintenance of, as a minimum, the benchmarkpractice in all jurisdictions in which the Brait group operates.

The environmental steering committee, chaired by the group chiefexecutive, is mandated to assume responsibility for environmental risksacross all aspects of the group’s operations and to provide the boardof directors with assurance that the group policies and standards inplace are appropriate. The committee meets at least twice a year, andtheir brief incorporates the following areas of responsibility:

• Identifying all critical environmental issues and risks;• Setting minimum standards for the group;• Reviewing standards against best industry practice;• Implementing the group’s environmental policy;• Monitoring the company’s use of natural resources;• The development of indicators to assess progress against

recognised standards;• Measuring environmental performance in each of the group’s

operations; and• Reporting to the board.

Performance against objectives• Targets approved to reduce the electricity and water consumption

at the Johannesburg office premises by 15% over a three-year period.

• Accurate consumption figures are available up until the sale ofland and buildings (October 2005). As a tenant, subsequent tothis date, we have been unable to obtain exact consumptionfigures specific to our business, however, our facilities departmentare addressing this issue with the landlord, and investigatingvarious solutions to obtain accurate measurements in the future.

• Redesign of Johannesburg office premises to consolidate andreduce the required space to accommodate the same number ofemployees, resulting in more effective utilisation (and reduction)of electricity consumption. Comparison between annual figuresfor 2004 and 2005 (adjusted to accommodate missing readingsfor Nov and Dec 2005 – post sale of building) reflect that thetarget for reduction in water consumption was met, whilst theanticipated energy saving from this initiative will only reflectduring 2006.

• Increased focus on procurement of suppliers who are both BEEcompliant and offer environmentally-friendly solutions (i.e. wastepaper collection for re-cycling).

Achievement against objectives

Objectives set for the 2006 financial year• Approval of targets for the reduction of energy and water usage.

• Continued measurement, and monitoring of energy and waterconsumption.

• Further initiatives to reduce direct environmental impacts.

• Enhanced management of indirect environmental impacts.

ENVIRONMENTAL CONTINUED


Core objectives for the 2007 financial year:• Focus on reducing the use of paper, encouraging electronic

communication;• Increasing the percentage of paper recycled;• Implementing an accurate monitoring system to measure use of

water and energy resources.

References in this report to targets, measurements, consumption andutilisation of resources and materials refer to the Johannesburg officesof Brait.

Direct environmental impactsThe facilities division of Brait manages Brait’s internal directenvironmental impacts (energy saving, recycling, etc), and also some ofBrait’s indirect environmental impacts (via procurement). Theresponsibility for the environmental management of the Johannesburgoffices rests with the facilities manager. The division is mandated toeliminate, minimise or control at source any impact the company’sactivities might have on the environment by applying appropriateproactive and remedial measures to foster environmentallysustainable solutions.

The following internal areas of direct impact use, are managed,monitored and measured:• Energy• Water• Materials• Emissions, effluents and waste.

Energy and water usageBrait used 2004 as the year for collecting accurate baselineinformation to be used as a starting point from which to set preliminarytargets for reducing consumption over the coming years. These targetswill be reviewed and, if required, revised annually as the quality ofmanagement information continues to improve.

Targets were set, during 2005, to reduce electricity and waterconsumption by 15% over a three-year period. Notwithstanding thedifficulties in obtaining accurate consumption readings since becominga tenant at the end of 2005, comparison of the annual waterconsumption figures (2004: 2005), adjusted to accommodate themissing readings for November and December 2005, reflect areduction in excess of the target, whilst the adjusted electricityconsumption figures (2004: 2005) reflect a 2% increase. The expectedlowering of energy consumption, as a result of the reduction and re-design of office space to facilitate more effective utilisation ofelectricity (completed in November 2005), and the resultant electricitysaving, is only expected to reflect during 2006.

The board has reviewed the company’s use of natural resources, andhas decided not to include these results (annual comparable data onutilisation of resources) in this report. This information, however, isavailable to any interested stakeholder on request.

MaterialsBrait utilised 350 boxes/1 750 reams of paper during the period underreview, and continues to encourage electronic communication with itsstakeholders. Waste paper is separated for recycling, shredded on-siteand collected by companies involved in the recycling of paper.

The majority of laser toner cartridges supplied to Brait are recycledcartridges which, once empty, are returned to the supplier for furtherrecycling until the cartridges are no longer viable.

Redundant office furniture, equipment, carpets and computers areeither sold second-hand to staff via an internal ‘bid/offer’ auction ordonated to institutions as approved by the board.

Emissions, discharges and wasteAs a financial institution, the group is a service provider and themeasuring and monitoring of emissions to the air is not material orsignificant to the business of Brait. Every effort is made to reducevehicle emissions, by regularly maintaining and servicing the companyfleet of three cars, as prescribed by the manufacturers of the respectivevehicles. The group does not operate any trucks or heavy-duty vehiclesin its fleet.

There is a full-time onsite service operator servicing the air-conditioning units in the building. The current air-conditioning systememits ozone depletion gasses (R22 and 134A), however, disposal tothe atmosphere is minimised by the recovery, reclamation and recyclingof the refrigerant gas as per SABS standards, during regularmaintenance procedures conducted by the supplier. In addition, air-conditioners are programmed for energy saving to only operate duringnormal business hours.

The group produces an insignificant amount of water discharges as itis a provider of financial products and services, and not a producer ormanufacturer of resources or goods. Water is primarily used forconsumption and ablution facilities.

The collection and disposal of waste is contracted to a third party forsafe disposal. A daily waste disposal service removes waste from thebuilding, in accordance with the safety regulations of (ISO 14000). TheISO 14000 standards are a series of international voluntary standardson environmental management. The group does not transport, store ortrade in hazardous waste, nor recycle or reclaim waste materials, norown any waste disposal sites.

There were no uncontrolled releases, discharges or spills of any kind,during the period under review.

BiodiversityBrait has no significant impact on biodiversity through landoccupation, as the group currently occupies (under various leaseagreements) existing offices worldwide.

Indirect environmental impactsThe Brait group recognises that as a financial services institution itsmost significant environmental risk may arise indirectly from theenvironmental impact of third parties such as its clients, investors andbusiness partners. Indirect risks have the potential to cause financiallosses and reputational damage.

Clients, investors and business partnersBrait addresses the indirect environmental impact of its investor, andinvestee companies, with a stringent set of guidelines designedspecifically for the Private Equity Funds under the management andadministration of the group. Brait, as the fund manager, requires thatits activities and those of the investee companies in which the funds


have or will have an investment, comply with all applicableenvironmental laws and regulations of the host country and any othercountries in which the investee companies may have an operation. Inaddition, the World Bank/IFC safeguard policies and guidelines areused, in the environmental impact assessment process. Where theenvironmental risk is considered to be material, a detailed riskassessment and mitigation is required, which would typically entailenvironmental impact studies undertaken by suitably qualified,independent assessors.

Illovo Property Owners’ AssociationDue to the sale of the Johannesburg office premises (including the landand buildings), by the group during the period under review, Brait is nolonger directly represented in the Illovo Property Owners’ Association,but is represented on the board of the Illovo Boulevard ManagementDistrict via their landlord’s representative. This association addresses,inter alia, the environmental impact of its members and neighbours onits direct surroundings.

Procurement and supply chainThe facilities manager continues to source suppliers who meet certainspecified minimum environmental requirements, by practising their in-house environmental policies, re-cycling, utilising environmentally-friendly products, etc, and to promote black economic empowermentthrough the supply chain. Brait is in the process of modifying theprocurement guidelines to include key environmental and socialaspects in the evaluation processes, and procurement questionnaireswill be updated to stimulate greater environmental responsibility.

ComplianceThe group has not incurred any fines or penalties for non-conformanceor non-compliance with environmental regulations during the periodunder review.

The Brait group constantly strives to improve on its sustainability andnon-financial reporting, on an ongoing basis. In light of this, we valueany feedback, recommendations and/or suggestions regarding contentthat would add to the value of future reports, from our stakeholders.

Please feel free to contact us with your comments and suggestions onBrait’s sustainability reporting as follows:

Luxembourg South Africa MauritiusMyriam Jacoby Veronica Boswell Dhanraj BoodhooExperta Luxembourg S.A. Brait South Africa Limited Brait International Limited180, rue de Aubépines Private Bag X1 Suite 509-510L-1145, Luxembourg Northlands St James Court

Johannesburg, 2116 St Denis StrSouth Africa Port Louis

Mauritius

Tel +352 269255 2180 Tel +27 11 507 1230 Tel+230 213 6909Fax +352 269255 3642 Fax +27 11 507 1231 Fax +230 213 6913 Email [email protected] Email [email protected] Email [email protected]


GRI INDEX

The following table provides a summary of Brait’s reporting against the criteria of the Global Reporting Initiatives Sustainability Reporting Guidelines(www.globalreporting.org). Brait is utilising the GRI indicators as a basis for sustainability reporting for the third time, and aims to continue toimprove and widen the scope of its reporting.

GRI element Page Report section/Additional comment

1. Vision and strategy

1.1 Vision and strategy 1, 48 The business of Brait, Sustainability report – Introduction1.2 CEO statement 6 – 8 Group Chief Executive’s Report

2. Profile

2.1 Name of organisation – Inside Cover2.2 Major products and services 2 Profile2.3 Operational structure 2 Group activities2.4 Organisational structure 2 Group activities 2.5 Geographic locations 2, 82, 83 Profile and geographical segments2.6 Nature of ownership/legal form 52 Sustainability report – Share analysis2.7 Nature of markets served 2 Profile2.8 Scale of reporting organisations 80 – 83 Business and geographical segmental reports2.9 List of stakeholders 48, 49 Sustainability report – Stakeholders2.10 Contact information 63, 112 Administration and sustainability report2.11 Reporting period 75 Introduction to financial statements2.12 Date of previous report – March 20052.13 Boundaries of report 48 Sustainability report – Introduction2.14 Significant changes 102 Notes to AFS – Note 362.15 Basis for reporting 48 Sustainability report – Introduction2.16 Restatements of information statements 105 Notes to AFS – Note 402.17 Decisions not to apply GRI principles 48 Sustainability report – Introduction2.18 Criteria/definitions 48 Sustainability report – Introduction2.19 Significant changes in measurement – None2.20 Assurance – None at present2.21 Independent assurance – None at present2.22 Additional information – None

3. Management systems

3.1 Governance structure 35 – 39 Corporate governance3.2 Independence, non-executive directors 35 – 41 Board profile and corporate governance3.3 Board member expertise 40, 41 Board profile3.4 Board level processes 35 – 39 Corporate governance3.5 Executive compensation 42 – 45 Remuneration report3.6 Organisational structure 35 – 39 Corporate governance3.7 Mission and value statements 1 The business of Brait3.8 Shareowner communication engagement 48 – 50 Sustainability report – Stakeholders methods of engagement3.9 – 3.12 Identification of major stakeholders 48 – 50 Sustainability report – Stakeholders3.13 Precautionary approach – Not reported on3.14 Externally developed charters, principles, initiatives 8, 35, 59, CEO statement, Corporate governance, GRI Index

64, 65 Sustainability report – Employee3.15 Principal memberships – Not reported on3.16 Managing upstream and downstream impacts 59 Financial Sector Charter procurement3.17 Managing indirect impacts 48, 61 – 63 Sustainability report – Introduction and environmental3.18 Decisions regarding location and changes in operation 6 – 8 CEO report3.19 Sustainability programmes and procedures – Not reported on3.20 Certification status – Not currently measured

4. Economic

EC1 Net sales 80 – 83 Business and geographical segmental reportsEC2 Geographic breakdown of markets 80 – 83 Business and geographical segmental reportsEC3 Cost of goods, materials and services 51 Group value added statementEC4 Contracts paid in accordance with agreed terms 12 – 16 Financial commentary


GRI element Page Report section/Additional comment

4. Economic

EC5 Payroll and benefits 42 – 45, 88 Remuneration report, Notes to AFS – Note 357 – 60 Sustainability report – Employees

EC6 Distribution to providers of capital 51 Group value added statementEC7 Retained earnings 51, 79 Group value added statement, statement of changes

in equityEC8 Taxes paid 51, 89 Group value added statement, Notes to AFS – Note 6EC9 Subsidies received – NoneEC10 Donations to community, civil society and other groups 54 –56 Sustainability report – Social responsibility

5. Environment

EN1 Materials used 62 Sustainability report – environmentalEN2 Waste from external sources 62 Sustainability report – environmentalEN3 Direct energy use 62 Sustainability report – environmentalEN4 Indirect energy use 62 Sustainability report – environmentalEN5 Total water use 62 Sustainability report – environmentalEN6 Land in biodiversity-rich habitats 62 Sustainability report – environmentalEN7 Major impacts on biodiversity 62 Sustainability report – environmentalEN8 Greenhouse gas emissions 62 Sustainability report – environmentalEN9 Ozone-depleting substances 62 Sustainability report – environmentalEN10 Air emissions 62 Sustainability report – environmentalEN11 Total amount of waste 62 Sustainability report – environmentalEN12 Discharges to water – Not applicableEN13 Significant spills of chemicals, oils and fuels – Not applicableEN14 Impact of products and services – Not applicableEN15 Reclaimable product – Not applicableEN16 Incidents of fines 63 Sustainability report – environmental compliance

6. Social

LA1 Breakdown of workforce 57 – 59 Sustainability report –EmployeesLA2 Employment creation 57 – 59 Sustainability report –EmployeesLA3 Trade union representation – Not applicableLA4 Labour relations 57 – 59 Sustainability report – EmployeesLA5 Recording of occupational accidents and diseases 60 Sustainability report – EmployeesLA6 Health and safety committees 35, 60 Corporate governance, sustainability report – EmployeesLA7 Injury and absentee rates – Not reported onLA8 HIV/Aids 59 – 60 Sustainability report – EmployeesLA9 Training 57 – 59 Sustainability report – EmployeesLA10 Equal opportunity 35, 58 Corporate governance, sustainability report – EmployeesLA11 Diversity 57 – 59 Sustainability report – Employees

HR1 Human rights policies – The principles of freedom of association, and HR2 Human rights and investment/procurement – the acknowledgment of human rights, formHR3 Human rights and supply chain – the cornerstone of Brait’s interaction with itsHR4 Non-discrimination – stakeholders and are, accordingly, embodiedHR5 Freedom of association – in the Group’s value system and culture.HR6 Child labour –HR7 Forced labour –SO1 Community 54 – 56 Sustainability report – Social responsibilitySO2 Bribery and corruption 35 Corporate governance – Business integrity and ethicsSO3 Political contributions 35 Corporate governancePR1 Customer health and safety – Not reported onPR2 Products and services – Not reported onPR3 Respect for privacy – Not reported on


GROUP STATISTICS

Financial definitions

Attributable earningsEarnings attributable to shareowners’ funds.

Average shareholders’ fundsAverage of the shareowners’ funds at the beginning and end of thefinancial year.

Closing priceThe closing market price of a Brait share on the Johannesburg StockExchange at the group’s financial year-end.

Dividend coverDiluted earnings per share divided by the total dividend per share.

Dividend yieldDividend per share expressed as a percentage of the closing share priceper share.

Earnings per employeeAttributable earnings divided by the average number of employees inservice during the year.

Earnings per shareBasicAttributable earnings divided by the weighted average number ofshares in issue, less the number of treasury shares, expressed in cents.

DilutedAttributable earnings adjusted by the after tax effect of any changes inincome and expenses that would result from the issue of shares fromdilutive instruments. The resultant earnings are divided by the weightedaverage number of shares in issue, including all dilutive instruments,excluding the number of treasury shares, expressed in cents.

Earnings yieldBasic earnings per share expressed as a percentage of the closing priceper share.

Net asset value per shareShareowners’ funds divided by the number of shares in issue less thenumber of treasury shares, expressed in cents.

Price earnings ratioThe closing price per share divided by the basic earnings per share.

Return on equityMovement in NAV (after adding back dividends) expressed as apercentage of average NAV.

Return on shareowners’ fundsAttributable earnings expressed as a percentage of averageshareowners’ funds (after adjusting for dividends).

Return on total assetsAttributable earnings expressed as a percentage of average totalassets.

Shareowners’ fundsShare capital, share premium and all reserves. Share capital andpremium has been reduced by shares held in treasury.

Treasury sharesBrait S.A. shares held by the company and/or its subsidiaries.

Weighted average shares in issueThe pro-forma number of shares in issue at the beginning of the year,plus shares issued during the year, less treasury shares acquired duringthe year, weighted on a time basis for the period during which theyhave participated in the income of the group.


GROUP STATISTICSThree-year review (1)

2006 2005 2004US$m US$m US$m

Share statisticsSharesIn issue (total) (m) 110,5 102,3 102,3Weighted average

– Basic (m) 90,6 89,3 89,5– Diluted (m) 103,0 97,7 93,7

Earnings per shareHeadline (cents)

– Basic 45,8 38,0 5,1– Diluted 40,3 34,7 4,9

Attributable (cents)– Basic 51,9 38,0 0,7 – Diluted 45,6 34,7 0,6

Dividends (cents) 18,24 13,75 35,80

– interim (declared) 7,85 3,50 –– final (proposed) 10,39 10,25 3,30– special (paid) – – 32,50

Dividend cover (times) 2,5 2,5 n/aDividend yield• (%) 4,7 7,3 2,8Net asset value per share (cents) 155,7 130,3 99,2

Key ratiosReturn on shareowners’ funds (%) 32,1 32,3 0,5Return on total assets (%) 19,5 21,9 0,4Return on equity (after adding back dividends) (%) 45,9 32,0 15,8Price earnings ratio (historical) 7,5 4,9 165,7 Earnings/(loss) yield (%) 13,3 20,3 0,6

Other statisticsNumber of employees at year-end 95,0 103,0 100,0Earnings per employee (US$ 000)* 494,7 329,0 –Total assets 299,6 182,7 127,5Shareowners’ funds 158,0 115,1 88,8Average shareowners’ funds 136,6 101,9 98,8Specialised Funds assets under management 511,8 64,7 30,8Private Equity committed funds 979,7 759,3 654,5Attributable earnings 47,0 33,9 0,6(1) In 2003/04 the group was reorganised and restructured following the discontinuation of banking operations. Any comparison of the results prior

to this date would not be meaningful in the context of the current group operations. Accordingly no information has been disclosed prior to 2004.• Excluding special dividends


GROUP BALANCE SHEETSThree-year review

2006 2005 2004US$m US$m US$m

ASSETSNon-current assets 153,1 118,9 75,8

Goodwill 2,5 – –Property and equipment 1,9 1,3 8,5Investments in associates and other 11,6 11,1 5,2Private equity investments 113,3 80,5 44,3Specialised funds investments 18,0 19,9 15,3Term loans 3,0 3,6 –Deferred tax assets 2,8 2,5 2,5

Current assets 146,5 55,6 51,7

Private equity investments 1,8 2,2 1,1 Other current investments 16,0 – –Trading investments – – 6,7 Loans and advances 37,9 25,7 14,5 Accounts receivable 6,9 9,9 14,4 Cash and cash equivalents 83,9 17,8 15,0

Non-current assets held for sale – 8,2 –

Total assets 299,6 182,7 127,5

EQUITIES AND LIABILITIESEquity and reservesShare capital and premium 36,0 66,6 70,6Legal reserve 2,6 2,6 2,6Foreign currency translation reserve (29,4) (30,1) (30,6)Retained reserves 138,9 72,0 43,7Equity reserves 3,5 2,6 2,5Minority interest 6,4 1,4 –

Total equity 158,0 115,1 88,8

LIABILITIESNon-current liabilities 99,2 28,9 1,1

Deferred tax liabilities – – 1,1Redeemable preference shares 72,9 – –Non-current borrowings 26,3 28,9 –

Current liabilities 42,4 38,7 37,6

Accounts payable 15,4 15,1 17,2Provisions 7,0 3,5 4,2Liabilities directly associated with non-current assets held for sale – 13,2 –Current borrowings 18,9 5,9 16,2Taxation 1,1 1,0 –

Total liabilities 141,6 67,6 38,7

Total equity and liabilities 299,6 182,7 127,5

GROUP INCOME STATEMENTSThree-year review

2006 2005 2004US$m US$m US$m

Revenue 44,5 45,0 28,8 Other income 49,3 32,8 18,1

Total income 93,8 77,8 46,9

Profit from operations 52,9 48,5 21,3

– Private Equity 39,1 38,8 11,4– Corporate Finance 0,9 0,1 0,3– Specialised Funds 1,3 1,2 0,9 – Group Investments 11,6 8,4 8,7

Finance cost (2,4) (2,5) (6,3) Capital items 1,9 (11,2) (11,3)

Profit before taxation 52,4 34,8 3,7 Taxation (2,7) (0,5) (1,0)

Profit after taxationfrom continuing operations 49,7 34,3 2,7 Discontinued operations – – (2,1) Minority interest (2,7) (0,4) –

Attributable earnings 47,0 33,9 0,6

RULING EXCHANGE RATES

Average rate – ZAR/USD 6,3979 6,2503 7,1541Closing rate – ZAR/USD 6,1765 6,2395 6,2925


ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March


Contents

Directors’ responsibility 72

Report of independent auditors 72

Directors’ report 73

Introduction to the financial statements 75

Group income statements 76

Group balance sheets 77

Group cash flow statements 78

Group statements of changes in equity 79

Business and geographical segmental reports 80

Accounting policies 84

Notes to the group financial statements 88

Principal subsidiaries, associated companies and joint ventures 108

Shareowners’ diary 109

Notice of annual general meeting and form of proxy 110

Administration 112

Form of proxy for registered shareowners only (perforated) 113

Notes to proxy (perforated) 114

DIRECTORS’ RESPONSIBILITY

The directors are responsible for the preparation, integrity andobjectivity of financial statements that fairly present the state of theaffairs of the group at the end of its financial years and the income,cash flow and statement of changes in equity statements for theseyears, as well as for other information contained in the annual report.

In preparing the group financial statements:• International Financial Reporting Standards have been adopted; and• reasonable and prudent judgements and estimates have been made.

To enable the directors to meet the financial reporting responsibilities:• the board and management set standards and the management

implements internal control, accounting and information systemsaimed at providing assurance as to the integrity and reliability ofthe financial statements and to safeguard, verify and maintain thegroup’s assets; and

• the group audit and risk committee, together with the externalauditors, plays an integral role in matters relating to financial andinternal control, accounting policies, reporting and disclosure.

To the best of their knowledge and belief, based on the above, thedirectors are satisfied that no material breakdown in the operation ofthe systems of internal control and procedures has occurred during theperiod under review. The auditors concur with this statement.

The directors are of the opinion that Brait S.A. will continue as a goingconcern in the year ahead and have adopted the going concern basisin preparing the financial statements. The auditors concur with thisopinion.

The group’s external auditors, Deloitte & Touche, have audited thefinancial statements and their unqualified report appears below.

The financial statements which appear on pages 73 to 108 wereapproved by the board of directors on 19 June 2006 and are signed onits behalf by

ME King JJ CoulterSenior Chairman Group Chief Executive


REPORT OF INDEPENDENT AUDITORS

TO THE SHAREOWNERS OF BRAIT S.A.We have audited the accompanying balance sheet of Brait S.A. and itssubsidiaries as at 31 March 2006 and the related group statement ofincome, cash flows and changes in equity set out on pages 73 to 108for the year then ended. These financial statements and the directors’report are the responsibility of the group’s directors. Our responsibilityis to express an opinion on these financial statements based on ouraudit and to check the consistency of the directors’ report with them.

We conducted our audit in accordance with International Standards onAuditing. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis forour opinion.

In our opinion, the group financial statements present fairly, inall material respects, the financial position of the group at31 March 2006, and the results of its operations and cash flows

and changes in equity for the year then ended in accordance withInternational Financial Reporting Standards. The directors’ report isconsistent with these group financial statements.

The supplementary Rand information presented in the annual financialstatements is presented for the convenience of users of these financialstatements. It has not been audited by us and, accordingly, we do notexpress an opinion thereon.

Deloitte SA Réviseur d’enterprises

S MitchellPartner19 June 2006


DIRECTORS’ REPORT

The directors have pleasure in presenting their report for the yearended 31 March 2006.

NATURE OF BUSINESSBrait is an investment and financial services group with its primarylisting on the Luxembourg Stock Exchange. It also has secondarylistings on the Johannesburg and London stock exchanges. The grouphas shareowners’ funds of US$158 million as at 31 March 2006 anddiverse earnings from the following activities:

• private equity management fees and investment returns;• specialised funds management fees and investment returns;• corporate and debt advisory services; and• group investment returns.

SHARE CAPITALAuthorisedThe authorised share capital of the company comprises 150 000 000ordinary shares of no par value.

IssuedDuring the year, the company increased its ordinary issued sharecapital from 102 255 732 ordinary shares of no par value by way of abonus issue of 8 231 589 ordinary shares to 110 487 321 ordinaryshares of no par value. Of this number, 9 024 663 ordinary shares areheld for delivery of shares granted to management in terms of the BraitS.A. Share Incentive Scheme, Brait South Africa Share Scheme 2005and the Brait Executive Share Purchase Scheme.

Unissued sharesAt the forthcoming annual general meeting, members will be asked toplace the unissued shares in the capital of the company under thecontrol of the directors in terms of the provisions of the company’sArticles of Incorporation.

It should be noted that in terms of the Articles the directors may notissue shares in any one year, whether for cash or otherwise, if the issueexceeds 10% of the company’s issued ordinary share capital and suchissues shall not in aggregate, in any three-year period, exceed 15% ofthe company’s issued ordinary share capital.

Renewal of authority for the repurchase of sharesThe conditions relating to the repurchase by the company of its ownshares are governed by the company’s Articles of Incorporation whichprovide, inter alia, that this authority shall not extend beyond the dateof the forthcoming annual general meeting unless such authority isrenewed by shareowners in general meeting. At the forthcomingannual general meeting shareowners will accordingly be requested torenew this authority until the conclusion of the next annual generalmeeting to be held on 25 July 2007.

DEBT CAPITAL RAISEDIn March 2006 a subsidiary of the group, Brait South Africa Limited,raised US$72,9 million (ZAR450 million) preference share capital toprovide additional capital to leverage the group’s internal growthstrategy. A total of 450 000 (four hundred and fifty thousand)cumulative redeemable preference shares were issued at a par value

of ZAR0,01 and a premium of ZAR999,99 per share. These shares carrya dividend of 78% of the South African prime interest rate and areredeemable (at issue price) in four tranches on 31 July of each yearcommencing in 2010 until 2013.

Including the abovementioned debt raised, the total borrowings in thegroup remain well within the maximum limit of 150% of the totalcapital and reserves of the group as stipulated in the company’sArticles of Incorporation.

SUBSIDIARY COMPANIESThe interests in subsidiary and associated companies, whereconsidered to be material in the light of the group’s financial positionand results, are set out on pages 108.

FINANCIAL RESULTSThe financial results of Brait S.A. group are set out in thefinancial statements and accompanying notes for the year ended31 March 2006.

DIVIDENDS• Interim dividend 2005The board announced an interim dividend of 7,85 US cents(51,51 South African cents) per ordinary share on 3 November 2005.The dividend, which absorbed US$8,342,973 was paid on21 November 2005 to shareowners registered as such on therecord date, 18 November 2005. Shareowners will be asked to ratifyand confirm the declaration by the board and the payment of theinterim dividend at the annual general meeting of shareowners of thecompany which will be held in Luxembourg on Wednesday,26 July 2006.

• Final dividendThe board has recommended a final dividend of 10,39 US cents pershare for the year ended 31 March 2006. In terms of the Articles ofIncorporation, shareowners are required to approve the declaration ofthe dividend which will be tabled at the forthcoming annual generalmeeting of shareowners of the company. If approved by shareowners,payment of the final dividend, in respect of the year ended 31 March2006 will be effected on Wednesday, 16 August 2006 to shareownersregistered as such on the record date, Friday 11 August 2006. The lastdate to trade ‘cum dividend’ will be Thursday, 3 August 2006 and theshare will commence trading ‘ex dividend’ on Friday, 4 August 2006.Share certificates may not be dematerialised or rematerialised betweenFriday, 4 August 2006 and Friday, 11 August 2006 both days inclusive.No transfers between registers may take place between Friday, 28 July2006 and Friday, 11 August 2006 both days inclusive. Non-residentshareowners registered on the South African register, who prefer theirdividends to be paid in US dollars, are advised to inform theirCSDPs/brokers accordingly and provide their banking details to theirCSDPs/brokers by the required deadline in terms of their agreementsentered into with their CSDPs/brokers.

SHARE INCENTIVE SCHEMESBrait currently operates various share incentive schemes for thepurpose of incentivising directors, executives and management of the


group and to align their economic interests with shareowners andretain their services on a long-term basis.

The maximum number of entitlements that may be granted in terms ofthe three schemes are as follows:

The Brait S.A. Share – 6,7% of the company’s issuedIncentive Scheme share capital.

The Brait Executive Share – 19,6% of the company’s issuedPurchase Scheme share capital (limited to 20 million

ordinary shares).

Brait South Africa – The shares granted under thisShare Scheme 2005 scheme may not in aggregate exceed(new scheme implemented the capacity authorised in the aboveon 1 April 2005) two schemes.

A summary of the scheme rules and share entitlements outstanding andgranted to directors and employees of the group under the variousschemes are outlined in the ‘Remuneration Report’ section on page 42.

DIRECTORATEDuring the year, the following members were appointed to the BraitS.A. board:

Date of appointment

Non-executiveHRW Troskie** 27 July 2005PAB Beecroft• 27 July 2005

ExecutiveBI Childs• 27 July 2005JJ Coulter^ 27 July 2005JA Gnodde* 27 July 2005

* South African, • British, ** Dutch, ^ Irish

No other changes in the composition of the board of directors occurredbetween 31 March 2006 and the date of this report. In terms of thecompany’s Articles of Incorporation, the directors’ terms of office endimmediately after the conclusion of the annual general meeting ofshareowners and they may be re-appointed at that meeting.

Accordingly, Messrs AC Ball, PAB Beecroft, JE Bodoni, BI Childs, JJ Coulter,JA Gnodde, ME King, RJ Koch, AM Rosenzweig, CJ Tayelor, HRW Troskie,SJP Weber and PL Wilmot retire from the board at the annual generalmeeting and, being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTSAccording to information available to the company, after reasonableenquiry, the aggregate interests of the directors and their families atthe date of this report, including the holdings of ordinary shares andshare entitlements, were as follows:

31 March 31 March2006 2005

Number of shares held• Beneficial 6 999 103 5 711 684• Non-beneficial 108 000 –

Number of share scheme entitlements • Beneficial 4 292 377 2 195 307 • Non-beneficial – –

A register of the directors’ interest in the capital of the company isavailable on request. There were no changes to the directors’ interestsbetween 31 March 2006 and the date of this report.

MAJOR SHAREOWNERSAccording to information available to the company, after reasonableenquiry, the following shareowners held 5% or more of the issuedcapital of the company as at 31 March 2006:

Shareowner %

Stanlib Group (for and on behalf of clients) 7,5The Brait Executive Share Scheme 6,2Public Investment Commissioner 5,3Investec Group (for and on behalf of clients) 5,0

DIRECTORS’ EMOLUMENTSAn analysis of the remuneration of executive and non-executivedirectors is disclosed under ‘Remuneration Report’ on page 42.A register of individual directors’ emoluments is maintained atthe company’s offices and is available on request at thecompany’s offices.

SPECIAL RESOLUTIONSAt the extraordinary general meeting held on 27 July 2005 specialresolutions were passed in terms of which:• the issued capital was increased from US$153 383 598 to

US$165 730 981,50 by the issue of 8 231 589 fully paid Brait S.A.shares to the Brait Executive Share Purchase Trust

• To amend the company’s Articles of Incorporation for the issueof the additional Brait S.A. shares persuant to the abovementionedresolution.

EVENTS SUBSEQUENT TO THE BALANCE SHEET DATENo events have taken place between 31 March 2006 and the date ofthis report, which would have a material impact on either the financialposition or operating results of the group.

COMPOSITION OF GROUP COMMITTEESThe composition of the board, the group audit and risk, remunerationand other sub-committees of the board are disclosed in the corporategovernance section of this report.

CORPORATE GOVERNANCEFull details regarding the company’s commitment to and its compliancewith appropriate international corporate governance practices are setout on pages 35 to 39.

DIRECTORS’ REPORT CONTINUED


INTRODUCTION TO THE FINANCIAL STATEMENTS

ACCOUNTING POLICIESThe group financial statements for the year ended 31 March 2006 are prepared in accordance with International Financial Reporting Standards (IFRS), onthe going-concern principle, using the historical cost basis, except where otherwise indicated.

In terms of IFRS as well as international trends, unrealised gains as well as unrealised losses are recognised in the period during which these arise.Luxembourg Law, following the European Union law, does not permit the recognition of such unrealised gains. Accordingly, unrealised gains haveonly been recognised on consolidation, and not in the holding company.

The directors are of the view that the group financial statements, prepared in accordance with IFRS, represent more appropriately the financialposition of the group and the results of its operations and cash flows and have, accordingly, adopted IFRS for the group.

The accounting policies are consistent with those applied in the previous year.

SUPPLEMENTARY INFORMATIONPresentation currencyThe group statements as at 31 March 2006 have been prepared using the US Dollar as the presentation currency and are consistent with the previousfinancial year. The presentation currency and the functional currency of Brait SA are the same.

Supplementary Rand informationThe results of the group have also been presented in Rand for the convenience of South African stakeholders in the group using IFRS interpretationSIC 30. The supplementary Rand results have been converted from the USD measurement results using the closing rate for the balance sheet andthe average rate for the income statement.

Currency conversion guideThe approximate US Dollar cost of a unit of the following currencies at 31 March 2006 was:

2006 2005

Rand– closing rate 0,1619 0,1603– average rate 0,1563 0,1600

Sterling – closing 0,5339 1,8905

Euro – closing 0,7827 1,2964

The approximate Rand cost of a unit of the following currencies at 31 March 2006 was:

2006 2005

US Dollar– closing rate 6,1765 6,2395– average rate 6,3979 6,2503

Sterling – closing 10,7181 11,7955

Euro – closing 7,4738 8,0858


GROUP INCOME STATEMENTSfor the year ended 31 March

Supplementary Rand information

2005π 2006π 2006 2005ZARm ZARm Notes US$m US$m

281,2 284,8 Revenue 1 44,5 45,0204,9 315,4 Other income 2 49,3 32,8

(193,3) (272,5) Operating expenses 3 (42,6) (30,9)10,0 10,9 Income from associates 1,7 1,6

302,8 338,6 Profit from operations 52,9 48,5(15,7) (15,4) Finance costs 4 (2,4) (2,5)(69,7) 12,2 Capital items 5 1,9 (11,2)

217,4 335,4 Profit before taxation 52,4 34,8(3,1) (17,3) Taxation 6 (2,7) (0,5)

214,3 318,1 Profit for the year 49,7 34,3Attributable to:

2,6 17,3 Minority shareholders 2,7 0,4211,7 300,8 Equity holders of the parent 47,0 33,9

ZAR ZAR US USCents Cents Cents Cents

Attributable earnings per share 7237,1 331,9 – Basic (cents) 51,9 38,0216,7 292,1 – Diluted (cents) 45,6 34,789,89 119,32 Dividends per share 8 18,24 13,75

21,47 51,51 – Interim (cents) 7,85 3,5068,42 67,81 – Final proposed (cents) 10,39 10,25

π The supplementary Rand information has been translated from US dollars results on the basis set out on page 75.


GROUP BALANCE SHEETSas at 31 March

Supplementary Rand information

ASSETS741,9 945,5 Non-current assets 153,1 118,9

– 15,4 Goodwill 9 2,5 –8,1 11,7 Property and equipment 10 1,9 1,3

69,3 71,6 Investments in associates and other 11 11,6 11,1502,3 699,8 Private equity investments 12 113,3 80,5124,1 111,2 Specialised funds investments 13 18,0 19,9

22,5 18,5 Term loans 14 3,0 3,615,6 17,3 Deferred tax assets 15 2,8 2,5

346,9 904,8 Current assets 146,5 55,6

13,7 11,1 Private equity investments 16 1,8 2,2– 98,8 Other current investments 17 16,0 –

160,4 234,1 Loans and advances 18 37,9 25,761,7 42,6 Accounts receivable 19 6,9 9,9

111,1 518,2 Cash and cash equivalents 20 83,9 17,8

51,1 – Non-current assets held for sale 21 – 8,2

1 139,9 1 850,3 Total assets 299,6 182,7

EQUITY AND LIABILITIES718,1 975,8 Equity and reserves 158,0 115,1

415,6 222,4 Share capital and premium 22 36,0 66,616,2 16,1 Legal reserve 23 2,6 2,616,2 21,6 Equity reserves 24 3,5 2,6

(187,8) (181,7) Foreign currency translation reserve (29,4) (30,1)449,2 857,9 Retained reserves 138,9 72,0

8,7 39,5 Minority interest 6,4 1,4

180,3 612,7 Non-current liabilities 99,2 28,9

– 450,3 Redeemable preference shares 25 72,9 –180,3 162,4 Non-current borrowings 26 26,3 28,9

241,5 261,8 Current liabilities 42,4 38,7

94,3 95,1 Accounts payable 27 15,4 15,121,8 43,2 Provisions 28 7,0 3,536,8 116,7 Current borrowings 29 18,9 5,982,4 – Liabilities directly associated with non-current assets held for sale 30 – 13,26,2 6,8 Taxation 1,1 1,0

1 139,9 1 850,3 Total equity and liabilities 299,6 182,7

813,0 961,6 Net asset value per ordinary share (cents) 155,7 130,3

Note: Certain amounts have been re-allocated, subsequent to the publishing of the preliminary results. These changes have no material impact onthe group balance sheets.π The supplementary Rand information has been translated from US dollars results on the basis set out on page 75.

2005π 2006π 2006 2005ZARm ZARm Notes US$m US$m


GROUP CASH FLOW STATEMENTSfor the year ended 31 March

Cash flows from operating activities 4,8 13,2

Cash generated by operations 37.1 5,7 5,4Dividends received 1,7 11,3Interest received 5,5 3,9Interest paid (2,4) (2,5)Currency hedge cost (3,5) (4,1)Taxation paid 37.2 (2,2) (0,8)

Change in working capital 37.3 (2,5) (6,2)

Cash generated by operating activities 2,3 7,0Cash flows from investing activities 22,0 (17,1)

Acquisition of property and equipment (1,0) (0,9)Acquisition of subsidiary 37.5 – 0,4Proceeds on disposal of a portion of subsidiary 1,9 –Proceeds on sale of property and equipment 11,5 –Decrease/(increase) in investments 9,1 (13,0)Loan advanced/(repaid) to associate company 0,5 (3,6)

Dividends paid 37.4 (19,8) (6,3)Cash flows from financing activities 61,7 19,2

(Decrease)/increase in borrowings (13,7) 6,4Repurchase of share entitlements (0,1) (3,4)Proceeds from share scheme shares delivered 7,8 –Increase in non-current borrowings 67,7 16,2

Net increase in cash and cash equivalents 66,2 2,8Effects of exchange rate changes on cash and cash equivalents (0,1) –Cash and cash equivalents at beginning of year 17,8 15,0

Cash and cash equivalents at end of year 20 83,9 17,8

Note: Certain amounts have been to be re-allocated, subsequent to the publishing of the preliminary results. These changes have no material impacton the group cash flow statements.

2006 2005Notes US$m US$m

GROUP STATEMENTS OF CHANGES IN EQUITYfor the year ended 31 March

Attributable to equity holders of the parent

Share Foreign Totalcapital currency equity

and Legal Equity translation Retained Minority andpremium reserve reserves reserve reserve interest reserves

US$m US$m US$m US$m US$m US$m US$m


Balance at 31 March 2004 70,6 2,6 2,5 (30,6) 43,7 – 88,8Net translation adjustments (1) – – – 0,5 – – 0,5Profit for the year – – – – 33,9 0,4 34,3Share entitlements – – 0,4 – – – 0,4Foreign currency adjustment on capital loan – – (0,3) – – – (0,3)Ordinary dividends paid – – – – (6,3) – (6,3)Treasury shares (3,3) – – – – – (3,3)Transfer from capital to reserves (0,7) – – – 0,7 – –Acquisition of subsidiary – – – – – 1,0 1,0

Balance at 31 March 2005 66,6 2,6 2,6 (30,1) 72,0 1,4 115,1

Net translation adjustments (1) – – – 0,7 – 0,8 1,5Restructuring of subsidiary – – – – (0,3) (0,3) (0,6)Sale of interest in subsidiary – – – – – 1,8 1,8Bonus shares issued (2) 12,3 – – – – – 12,3Treasury shares (3) (12,3) – – – – – (12,3)Delivered share scheme shares 9,4 – – – – – 9,4Profit for the year – – – – 47,0 2,7 49,7Foreign currency adjustment on capital loan – – 0,2 – – – 0,2Share entitlements – – 0,7 – – – 0,7Ordinary dividends paid – – – – (19,8) – (19,8)Transfer from capital to reserves (40,0) – – – 40,0 – –

Balance at 31 March 2006 36,0 2,6 3,5 (29,4) 138,9 6,4 158,0

(1) Net translation adjustmentsThe movement on the foreign currency translation reserve arises primarily from the translation of the reporting currencies of foreign entitiesinto the USD measurement currency upon consolidation.

(2) Bonus sharesDuring the year, the company issued 8 231 589 bonus shares at a par value of US$12,3 million to the Brait Executive Share PurchaseScheme Trust.

(3) Treasury sharesAs at 31 March 2006 treasury shares constitute a total of 9 024 663 (2005: 13 933 707) shares of Brait S.A. and are held as follows:– 6 877 553 (2005:10 798 871) shares by The Brait Executive Share Purchase Scheme Trust; and– 2 147 110 (2005: 3 134 836) shares by The Brait S.A. Share Incentive Scheme Trust.

BUSINESS SEGMENTSThe primary business segments reflect the group’s current organisational structure and its internal financial reporting system. For managementpurposes, the group is currently organised into four operating business units. These business units are the basis on which the group reports its primarysegment information.

The principal activities are as follows:

– Private Equity;– Corporate Finance;– Specialised Funds; and– Group Investments.

Segment information about these businesses is presented below:

Private Corporate Specialised GroupEquity Finance Funds Investments Total

2006 US$m US$m US$m US$m US$m

REVENUE AND INCOMERevenue 11,0 7,9 3,9 21,7 44,5Other income 45,9 (0,1) 2,6 0,9 49,3

Total segment income 56,9 7,8 6,5 22,6 93,8

RESULTSegment result 39,1 0,9 1,3 11,6 52,9

Finance costs (2,4)Capital items 1,9

Profit before taxation 52,4Taxation (2,7)

Profit after taxation 49,7

OTHER INFORMATIONAssetsSegment assets 119,0 0,3 76,1 107,0 302,4

Other unallocated assets (2,8)

Total assets per balance sheet 299,6

LiabilitiesSegment liabilities 9,6 2,6 1,1 29,9 43,2

Other unallocated liabilities 98,4

Total liabilities per balance sheet 141,6

Net assetsSegment net assets 109,4 (2,3) 75,0 77,1 259,2

Other unallocated net liabilities (101,2)

Total net assets per balance sheet 158,0

OtherCapital additions 0,1 – 0,1 0,8 1,0Depreciation – – – 0,6 0,6Share entitlement expenses 0,4 0,1 0,1 0,1 0,7


BUSINESS AND GEOGRAPHICAL SEGMENTAL REPORTSfor the year ended 31 March


BUSINESS SEGMENTS (CONTINUED)Private Corporate Specialised GroupEquity Finance Funds Investments Total

2005 US$m US$m US$m US$m US$m

REVENUE AND INCOMERevenue 22,8 4,1 2,4 15,7 45,0Other income 29,8 (0,3) 3,1 0,2 32,8

Total segment income 52,6 3,8 5,5 15,9 77,8

RESULTSegment result 38,8 0,1 1,2 8,4 48,5

Finance costs (2,5)Capital items (11,2)

Profit before taxation 34,8

Taxation (0,5)


OTHER INFORMATIONAssetsSegment assets 86,7 1,5 20,8 68,9 177,9

Other unallocated assets 4,8

Total assets per balance sheet 182,7

LiabilitiesSegment liabilities 4,5 1,9 0,2 20,3 26,9

Other unallocated liabilities 40,7

Total liabilities per balance sheet 67,6

Net assetsSegment net assets 82,2 (0,4) 20,6 48,6 151,0

Other unallocated net liabilities (35,9)

Total net assets per balance sheet 115,1

OtherCapital additions – – – 0,9 0,9Depreciation 0,1 – 0,1 0,2 0,4Impairment losses recognised in income – 0,3 – 0,6 0,9


BUSINESS AND GEOGRAPHICAL SEGMENTAL REPORTS CONTINUEDfor the year ended 31 March

GEOGRAPHICAL SEGMENTSThe geographical segments of the business have been separated between “International” and “South Africa” to distinguish between operations andassets that are managed in these economic environments. The international segment comprises the following:

– Mauritius operations;– Other African operations;– United States of America operations; and– European operations.

The following table provides the revenue and income per geographical segment

International South Africa Total2006 US$m US$m US$m

REVENUE AND INCOMERevenue 21,7 22,8 44,5Other income 9,5 39,8 49,3

Total segment income 31,2 62,6 93,8

RESULTSegment result 11,5 41,4 52,9

Finance costs (2,4)Capital items 1,9



OTHER INFORMATIONSegment assets 137,7 161,9 299,6Additions to property and equipment 0,8 0,2 1,0

GEOGRAPHICAL SEGMENTS (CONTINUED)International South Africa Total

2005 US$m US$m US$m

REVENUE AND INCOMERevenue 13,9 31,1 45,0Other income 2,3 30,5 32,8

Total segment income 16,2 61,6 77,8

RESULTSegment result 13,1 35,4 48,5

Finance costs (2,5)Capital items (11,2)



OTHER INFORMATIONSegment assets 92,5 90,2 182,7Additions to property and equipment – 0,9 0,9



ACCOUNTING POLICIESfor the year ended 31 March

BASIS OF PRESENTATIONThe financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRS), on the going concernprinciple, and using its historical cost basis, except where otherwise indicated.

ACCOUNTING POLICIESThe accounting policies are consistent with those applied in the previous year.

PRINCIPLES OF CONSOLIDATION• Business combinations

Business combinations are accounted for in accordance with the underlying nature of the combination. Acquisitions are accounted for usingpurchase accounting. Where an investment in a subsidiary or associated company is acquired or disposed of during the financial year, its resultsare included from, or to, the date control became, or ceased to be, effective. Mergers which took place before 31 March 2004, the effective dateof IFRS 3 “Business Combinations” were accounted for using the uniting of interests method.

• Basis of consolidationThe consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (itssubsidiaries) up to 31 March each year. Control is achieved where the company has the power to govern the financial and operating policies ofan investee entity so as to obtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary aremeasured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assetsacquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (iediscount on acquisition) is credited to profit and loss in the period of acquisition. The interest of minority shareholders is stated at the minority’sproportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of theminority interest are allocated against the interests of the parent.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date ofacquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used by the group. All intra-group transactions, balances, income andexpenses are eliminated on consolidation.

• GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net assets of its subsidiaries, associates,joint ventures or intangibles at the date of acquisition.

Goodwill arising on the acquisition of subsidiaries, associates or joint ventures and intangibles, which were not part of the merger in 1998, andis disclosed as such.

The carrying amount of goodwill is reviewed annually and written down for impairment where considered necessary.

• Associated companiesAssociates are those enterprises in which the group holds a long-term equity interest and over which it has the ability to exercise significantinfluence, but not control, and which are neither subsidiaries, nor joint ventures. Investments in private equity associates are referred to under“Private equity investments” on pages 93 and 94.

Equity accounted income, which is included in the carrying values of the associates, represents the group’s proportionate share of the associates’profit after tax, after accounting for dividends payable by those associates.

• Joint venturesA joint venture is a contractual arrangement whereby the group and other parties undertake an economic activity which is subject to joint control.Equity accounted income, which is included in the carrying values of joint ventures, represents the group’s proportionate share of the jointventures’ profit before tax, after accounting for dividends payable by the joint ventures.

TRANSLATION OF FINANCIAL STATEMENTS OF FOREIGN ENTITIES INTO THE PRESENTATION CURRENCYAssets and liabilities of foreign entities are translated into the group’s presentation currency, US dollar, at year-end exchange rates. The presentationcurrency is in accordance with the functional currency of Brait S.A..

Capital and reserves are translated at historical rates. Income statement items are translated at the average exchange rates for the year.

Translation differences arising from the translation of foreign operations are taken directly to reserves. On disposal of foreign operations, suchtranslation differences are recognised in the income statement as part of the gain or loss on disposal.

FOREIGN CURRENCY ASSETS AND LIABILITIESIn preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency, are recorded atthe rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currency aretranslated at rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currency areretranslated at the rates prevailing when the fair value was determined. Non-monetary items that are measured in terms of historical costs in aforeign currency are not translated at the current rate.

TAXATIONIncome tax on the profit and loss for the year comprises current and deferred tax. Current income tax is the expected tax payable on the taxableincome for the year, using tax rates enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.

Deferred tax is provided for on the comprehensive basis, using the balance sheet liability method, for all temporary differences arising between thetax bases of assets and liabilities and their carrying values for financial reporting purposes, using tax rates enacted at the balance sheet date.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax lossescan be utilised.

PROPERTY AND EQUIPMENTProperty and equipment is stated at historical cost less accumulated depreciation.

Depreciation is provided on historical cost, using the straight-line basis at rates considered appropriate to write the assets down to their expectedresidual value over their estimated useful lives (refer note 10). Land is not depreciated.

NON-CURRENT ASSETS HELD FOR SALENon-current assets classified as held for sale are measured at the lower of the assets’ previous carrying amount and fair value less costs to sell.

Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuinguse. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale, within one year from the dateof classification.

FINANCIAL INSTRUMENTSFinancial instruments refer to all assets and liabilities, including derivative instruments, but exclude investments in subsidiaries, associated companiesand joint ventures, property and equipment, deferred taxation, taxation payable, intangible assets and goodwill.

Financial assets are initially recorded at cost and are remeasured to fair value at subsequent reporting dates on the group’s balance sheet when thegroup has become a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cashflows from the financial asset expire, or the asset is transferred.

• Listed investmentsListed investments are carried at their fair values, using quoted prices at year-end. Where an active market does not exist for the quotedinvestment, estimation techniques are used to determine fair value. Changes in fair value are reflected in the income statement under “otherincome”.

• Private equity investmentsPrivate equity investments, which include listed and unlisted co-investments and capital participations in Brait’s managed funds, as well asproprietary investments, are valued at their estimated fair value as determined by the board at the reporting date. The resultant increase ordecrease in fair value is recognised as other income in the income statement.

The fair value measurement of unrealised capital participations takes into consideration the attrition effect of the preferred return on the future valueof the capital participation. This adjustment is measured by discounting the future fair value of the capital participation, at Brait’s cost of equity, for theremaining anticipated life of the fund.

In valuing investments, the directors follow the principles recommended in the International Private Equity and Venture Capital Valuation Guidelines.In cases where fair value cannot be reliably measured, existing book value, less any impairment, is used as the basis of valuation.

Fair value represents the amount for which an asset could be exchanged between knowledgeable, willing parties at an arm’s length transaction. Inestimating fair value, the directors use a methodology which is appropriate in light of the nature, facts and circumstances of the investment. Due tothe inherent uncertainties in estimating the value of private equity investments, the directors exercise due caution in applying the variousmethodologies.

The principal methodologies applied in valuing unlisted investments include the following:

• Earnings multiple;• Price of recent investment;• Net assets;• Discounted cash flow or earnings (of the underlying business);• Discounted cash flow (from the investment);• Industry valuation benchmarks; and• Available market prices.

In applying the earnings multiple methodology, the directors apply a market-based multiple that is appropriate and reasonable to themaintainable earnings of the company.



ACCOUNTING POLICIES CONTINUED

FINANCIAL INSTRUMENTS (CONTINUED)Where a recent investment has been made, this price will be used as the estimate of fair value. An alternative methodology may be used at anytime if this is deemed to provide a better assessment of the fair value of the investment.

• Specialised funds investmentsThese investments represent the group’s share in various specialised funds and are measured at fair value. The underlying investments of thesefunds comprise cash and various listed equity, bond and derivative investments. Fair values of the various funds are determined using quotedmarket prices of the underlying investments of these funds at year-end. Changes in fair value are reflected in the income statement under “otherincome”.

• Trading investmentsInvestments held for trading, which includes unlisted investments, are valued at their estimated fair value as determined by the board at thereporting date. The resultant increase or decrease in fair value is recognised in the income statement.

• SecuritiesInvestments in securities are recognised on a trade date basis and are initially measured at cost.

At subsequent reporting dates, debt securities that the group has the expressed intention and ability to hold to maturity (held-to-maturity debtsecurities) are measured at amortised cost, less any impairment loss recognised to reflect irrecoverable amounts. The annual amortisation of anydiscount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of theinstrument so that the revenue recognised in each period represents a constant yield on the investment.

Investments, other than held-to-maturity debt securities, are classified as either held for trading or available for sale investments, and aremeasured at subsequent reporting dates at fair value, based on quoted market prices at the balance sheet date. Where securities are held fortrading purposes, unrealised gains and losses are included in net profit or loss for the year.

Where securities are classified as available for sale investments, unrealised gains or losses are included in equity until such time as the securityis disposed of. On disposal, the amount carried in equity is recognised in the income statement.

Where there is no formal market, insufficient liquidity in the security, or there is a restriction on the right of sale, the fair value reflects directors’valuation.

• Loans and advancesLoans and advances are stated at amortised cost using the effective interest rate method net of impairment provisions. Impairment provisionsare made against specifically identified doubtful loans and advances.

• Account receivablesTrade receivables are stated at their nominal value, as reduced by appropriate allowances for estimated irrecoverable amounts.

• Cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise cash and balances with banks, and short-term cash depositedwith the Brait Absolute Fund.

• Derivative financial instrumentsDerivative financial instruments are initially recorded at cost and are remeasured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments that are designated and effective as cash flow hedges are recognised directly in equity.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement asthey arise.

Financial liabilities are initially recognised at cost and are re-measured to fair value at subsequent reporting dates on the group’s balance sheet whenthe group has become a party to the contractual provisions of the instrument. Financial liabilities are de-recognised when the obligation specific inthe contract is discharged, cancelled or expires.

• ProvisionsProvisions are recognised when the group has a present, obligation as a result of a past event, which it is probable will result in an outflow ofeconomic benefits that can be reasonably estimated.

• Trade payablesTrade payables are stated at their nominal value.

• Liabilities held for tradingLiabilities held for trading are stated at fair value at the reporting date. The resultant increase or decrease in value is recognised in theincome statement.

• BorrowingsInterest-bearing bank loans, overdrafts and other borrowings are recorded at the proceeds received, net of direct issue costs. Finance charges,including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount ofthe instrument to the extent that they are not settled in the period in which they arise. All borrowing costs are expensed in the period in whichthey are incurred.

OFF-SETTINGFinancial assets and liabilities are off-set and the net amount reported in the balance sheet when there is a legally enforceable right to off-setthe recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

REVENUE AND INCOME RECOGNITIONFee income is recognised, net of value added tax, once all significant acts relating to services have been executed and the client has been invoiced.

Interest income is recognised on a basis that reflects the effective yield on the underlying instruments.

With the exception of preference share investments, dividends are brought into account as at the last date of registration in respect of listed sharesand when declared in respect of unlisted shares. Where dividends on preference shares are calculated with reference to time and the ultimate receiptis beyond doubt, dividends are accrued on a daily basis.

Realised and unrealised gains and losses on trading investments are recognised in other income.

Realised and unrealised gains and losses arising from fair value adjustments to private equity and specialised funds investments are recognised inother income.

BORROWING COSTSAll borrowing costs are recognised in profit or loss in the period in which they are incurred.

TREASURY SHARESShares purchased by subsidiary companies of Brait S.A. are treated as treasury shares and held at cost. In the group financial statements, the costof treasury shares is deducted from share capital. Dividends received on treasury shares are eliminated on consolidation.

SHARE-BASED PAYMENTSThe group has applied the requirements of IFRS 2 “Share-based Payments”. In accordance with the transitional provisions, IFRS 2 has been appliedto all grants of equity instruments after 7 November 2002 that had not vested as of 1 January 2005.

The group issues equity-settled share-based payments to certain directors and employees. Equity-settled share-based payments are measured at fairvalue at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-linebasis over the vesting period, based on the group’s estimate of shares that will eventually vest.

Fair value is measured by use of a binominal and three-dimensional binominal tree pricing model or the Black Scholes model where applicable. Theexpected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictionsand behavioural considerations.

RELATED-PARTY TRANSACTIONSAll related-party transactions are, unless otherwise disclosed, at arm’s length and in the normal course of business.

RETIREMENT BENEFIT COSTSPayments to defined contribution retirement benefit plans are charged as an expense as they fall due.

COMPARATIVE FIGURESWhere necessary, comparative figures have been restated to conform with changes in presentation in the current year (refer note 40).



NOTES TO THE GROUP FINANCIAL STATEMENTSfor the year ended 31 March

1. REVENUEFee income 19,0 16,8Dividends 1,7 11,3Rental income 0,4 0,8Net interest received – micro-lending operations 17,9 12,2Interest received 5,5 3,9

Total revenue 44,5 45,0Revenue includes the following related party transactions:– Interest received from associates and joint ventures 1,0 1,9

2. OTHER INCOMECurrency gains on operating transactions – 0,3Realised gains on financial assets and instruments 9,3 3,3Unrealised gains on financial assets 40,0 29,2

Total other income 49,3 32,8Unrealised gains from an active market amounted to US$ 34,4 million (2005: US$ 14,8 million).

3. OPERATING EXPENSESIncludes the following:Employee costs 18,9 16,0Retirement funding costs 0,7 0,6Auditors’ remuneration 0,5 0,5

Audit fees 0,3 0,3Prior year underprovision 0,1 0,1Other services 0,1 0,1

Directors’ emoluments 5,0 2,4

Executive directors

As directors of Brait S.A. 0,1 0,1Paid by subsidiaries within the group 4,5 1,9Non-executive directorsAs directors of Brait S.A. 0,1 0,1Paid by subsidiaries within the group 0,2 0,2Otherwise in connection with the group 0,1 0,1

Depreciation 0,6 0,4Movement in provisions 4,3 0,8Property lease rentals 1,2 1,0Foreign currency profit (0,4) (0,8)Provision net of recoveries raised against loans and advances 0,6 0,8Share entitlement expenses (refer note 35.1) 0,7 0,4Other expenses 10,5 8,8

Total expenses 42,6 30,9Operating expenses includes the following related party transactions:– Fees paid to associates and parties connected to directors (0,6) (0,7)

2006 2005US$m US$m


2006 2005US$m US$m

4. FINANCE COSTSInterest on shareholder’s loan 1,2 0,6Interest paid other 1,1 0,3Debt restructuring cost 0,1 1,6

Total finance costs 2,4 2,5Finance cost includes the following related party transactions:– Interest paid to associates 1,2 0,6

5. CAPITAL ITEMS5.1 Currency hedge cost (2,2) (4,1)

Comprises the net fair value adjustment associated with the group’s policy of hedging the majority of its net tangible assets of its foreign entities into its presentation currency, the US Dollar.

5.2 Fair value adjustment to financial liability (1,4) (7,1)Represents the change in fair value of the financial liability arising from the sale of a 26% share of Brait South Africa Limited.

5.3 Profit on disposal of interest in subsidiary 2,9 –During the year the group introduced new strategic partners to Bayport reducing Brait’s effective economic interest to 41,66%.

5.4 Profit on disposal of property, buildings and fittings 2,8 –The group sold its Johannesburg property and buildings, including fittings, situated at 9 Fricker Road,Illovo and, in terms of the conditions of the sale, entered into a five-year renewable operating lease agreement.

5.5 Realisation of translation adjustment (0,2) –As a result of partial repayments on Rand denominated loans to group companies.

Total capital items 1,9 (11,2)

6. TAXATION6.1 Income tax expense

Luxembourg – –Foreign expense 2,3 1,5Deferred taxation (refer note 15)– Current year expense/(credit) 0,4 (1,0)

Total income tax expense 2,7 0,5

The group has reconciled its income tax to the income tax rate applicable to the holding company for the year ended 31 March 2006. In thejurisdiction that the holding company is registered, the income tax rate is zero, as other forms of taxation are applied.

One of the group’s subsidiaries, Brait South Africa Ltd, has STC credits amounting to US$34,8 million available for set off against futuredividend payments.

6.2 Tax reconciliationTaxation of foreign operations is calculated at the rates prevailing in the respective jurisdictions.The tax expense for the year is reconciled to the profit per the income statement as follows:

2006 2005US$m % US$m %

Profit before taxation 52,4 34,8

Tax at the Luxembourg income tax rate – – – –Non-deductible expenses 5,1 10 43,5 125Non-taxable income (7,2) (14) (36,7) (105)Capital gains 0,5 1 – –Deferred tax assets not raised/utilised 0,2 – 1,0 2Tax differential (0% vs 35%) 4,1 8 (7,3) (21)

Tax expense 2,7 0,5

Effective tax rate % for the year 5 1


NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 March

7 ATTRIBUTABLE EARNINGS PER SHAREThe calculation of the basic and diluted earnings per share is based on the following data:– Attributable earnings 47,0 33,9

Number Numberof shares of shares

The weighted average number of shares is calculated as follows:Total number of ordinary shares issued (million) 110,5 102,3

Less: Weighted average number of treasury shares (million) (19,9) (13,0)

– Weighted average number of ordinary shares for the purposes of basic earnings per share (million) 90,6 89,3– Dilutive potential of share options granted to:

• employees (million) 1,3 0,9• executive directors (million) 11,1 7,5

– Weighted average number of ordinary shares for the purposes of diluted earnings per share (million) 103,0 97,7

US cents US cents

8. DIVIDENDS PER SHARE 18,24 13,75– An interim dividend of 7,85 US cents per share (51,51 SA cents per share for shareowners

registered on the South African register) was proposed and paid by the board of directors in respect of the interim period which ended 30 September 2005.

– The board has recommended a final dividend of 10,39 US cents per share (67,81 SA cents per share for shareowners registered on the South African register) for the year ended 31 March 2006.

The shareowners will be asked to ratify the interim dividend paid and approve the payment of the final dividend for the year ended 31 March 2006 at the annual general meeting of shareowners to be held on 26 July 2006 in Luxembourg.

2006 2005US$m US$m

9. GOODWILLArising on acquisition of a subsidiary 2,5 –

At 31 March 2006 2,5 –

The goodwill has been allocated to the cash generating unit of Ghana Financial Services and arose from an additional 20% stake purchased in the company.

Reconciliation of goodwill at year-endBalance at beginning of year – –Increase on acquisition of subsidiary 2,6 –Goodwill realised on restructuring of subsidiary (0,1) –

Balance at end of year 2,5 –

An impairment test was done on the goodwill at year-end using an earnings multiple model.

2006 2005US$m US$m

FurnitureLand and and Motor Computerbuildings fittings vehicles equipment Total

US$m US$m US$m US$m US$m


10. PROPERTY AND EQUIPMENTCost2006Carrying amount at beginning of year – 0,7 0,5 2,4 3,6Additions 0,2 0,2 0,2 0,4 1,0Disposals – – (0,1) – (0,1)Translation differences 0,1 0,1 0,1 0,1 0,4

Carrying amount at end of year 0,3 1,0 0,7 2,9 4,9

2005Carrying amount at beginning of year 7,2 3,1 0,1 1,6 12,0Take on balance – 0,1 0,1 0,3 0,5Additions – 0,2 0,3 0,4 0,9Disposals – (0,2) – – (0,2)Translation differences – – – 0,1 0,1Reclassification as held for sale (7,2) (2,5) – – (9,7)

Carrying amount at end of year – 0,7 0,5 2,4 3,6

Accumulated depreciation2006Carrying amount at beginning of year – 0,4 0,1 1,8 2,3

Charges for the year – 0,2 0,1 0,3 0,6Disposals – – – –Translation differences – – – 0,1 0,1Reclassification as held for sale


2005Carrying amount at beginning of year 0,5 1,5 – 1,5 3,5Take on balance – – – 0,1 0,1Charges for the year – 0,1 0,1 0,2 0,4Disposals – (0,1) – – (0,1)Translation differences – – – – –Reclassification as held for sale (0,5) (1,1) – – (1,6)


Carrying value– at 31 March 2006 0,3 0,4 0,5 0,7 1,9– at 31 March 2005 – 0,3 0,4 0,6 1,3

Depreciation rates:Furniture and fittings 10% – 33%Equipment 10% – 20%Computer equipment 20% – 50%Computer software 50% – 100%Motor vehicles 20% – 25%Buildings 2%



11. INVESTMENTS IN ASSOCIATES AND OTHER11.1 Carrying values

Investments in associatesUnlisted 11,1 8,6

– cost 3,0 3,3– share of retained earnings and currency adjustments 8,1 5,3

SecuritiesUnlisted– other 0,5 2,5

Joint ventures (carried at nil value) – –

Total carrying value of investments 11,6 11,1

(Refer page 108 for details of principal associates)

11.2 ValuationInvestments in unlisted – associates 11,1 8,6Securities – unlisted 0,5 2,5

Directors’ valuation of investments 11,6 11,1

Directors’ valuation of unlisted investments is based on expected return and other relevant factors.

11.3 Joint venturesThe following sets out the group’s proportionate share of joint venture assets,liabilities, revenue and expenses:Balance sheet

Non-current assets 0,5 0,2Current assets 12,7 7,6Non-current liabilities (8,9) (6,5)Current liabilities (4,1) (1,8)

Total net asset value 0,2 (0,5)

Income statementRevenue 12,3 4,5Expenses 9,2 5,2

11.4 AssociatesThe following sets out the group’s aggregated amount of associate assets,liabilities, income and expenses:Balance sheetAssets 25,4 27,6Liabilities (8,5) (13,3)

Net asset value 16,9 14,3

Income statementRevenue 2,9 2,6Profit for the year 5,1 5,0

2006 2005US$m US$m

12. PRIVATE EQUITY INVESTMENTSProprietary investments at fair value

Listed 18,1 10,7Unlisted 30,2 27,9

Total proprietary investments at fair value 48,3 38,6Private equity funds investments 65,0 41,9

113,3 80,5

Carrying values of proprietary investments, per sector:Entertainment, leisure, tourism 1,2 1,2Information technology 16,7 9,9Manufacturing 6,6 3,3Services 11,3 11,5Other 12,5 12,7

Total private equity proprietary investments 48,3 38,6

12.1 Assumptions applied in estimating fair value of private equity investmentsThe fair values of unlisted private equity investments are primarily based on earnings multiple models.

12.2 Unlisted investments comprise the following:Shareholding of 5% and less

UFP Investments (Proprietary) LimitedWilderness Safaris Limited

Shareholding in the > 5% to 25% rangeRaceclubs Holdings LimitedEquine Global Holdings N.V.Pangea Diamond Fields Limited

Shareholding in the > 25% to 50% rangeDGB (Proprietary) LimitedCandy Tops (Proprietary) LimitedBeverage Packaging (Proprietary) LimitedIsegen South Africa (Proprietary) LimitedPangea Exploration (Proprietary) Limited

13. SPECIALISED FUNDS INVESTMENTSUnlisted specialised fundsBrait Absolute South Africa Fund 15,8 10,9Brait US Opportunity Fund – 3,9Emerging Managers Funds 2,2 5,1

Total fair value using the underlying market value 18,0 19,9

2006 2005US$m US$m




14. TERM LOANSSitogo Holdings (Proprietary) Limited 1,4 3,6This loan is rand denominated, bears interest at South African prime overdraft rate with fixed quarterly interest payment in arrears. This loan has a six-year term subject to accelerated maturity conditions on the third anniversary date in the event of certain ”trigger events”.

Brait S.A. has the right to dispose of the loan at any time during the duration of the loan agreement for the face value of the loan plus accrued interest thereon.

Renaissance Asset Management (Pty) Limited 0,6 –This loan is rand denominated, bears interest at South African prime overdraft rate with the total interest being payable at maturity. This loan has a five-year term subject to default conditions.

Neural Capital 1,0 –This loan is US dollar denominated, bears interest at 5% per annum with capital and interest payments commencing in March 2008. This loan has a four-year term subject to default conditions.

Total term loans 3,0 3,6

15. DEFERRED TAX ASSETS15.1 Assets and liabilities

Deferred tax assets 2,8 2,5

15.2 Analysis of assetsThe following are the major deferred tax assets recognised by the group and the movement thereon during the year:

Balance at beginning of year 2,5 2,5Credit to income for year 0,4 –Translation differences (0,1) –

Balance at end of year 2,8 2,5

In terms of IAS 12, a deferred tax asset should be recognised on unutilised tax losses to the extent that it is probable that profits will be available, against which the deductible temporary differences can be utilised.

Based on the estimated cumulative tax losses of US$38,7 million in the group’s operations,a maximum asset amounting to US$11,2 million could have been raised.

The deferred tax asset is estimated at US$2,8 million as at year-end, calculated on the budgeted taxable profit in the entities concerned, over the next three years, after taking into consideration current market conditions.

16. PRIVATE EQUITY INVESTMENTSProprietary investments at fair value

Short-term private equity investments 1,8 2,2

Carrying values of proprietary investments, per sector:Information technology – 0,1Manufacturing 1,8 0,3Infrastructure – 1,8

Total private equity proprietary investments 1,8 2,2

Assumptions applied in estimating fair value of private equity investmentsThe fair values of unlisted private equity investments are primarily based on earnings multiple models.

2006 2005US$m US$m

17 OTHER CURRENT INVESTMENTSInvestment at fair valueListed* 16,0 –

* The fair value was based on the listed market value. US$15,4 million of this investment is matched with a corresponding liability which is included in current liabilities disclosed in note 29.

18. LOANS AND ADVANCESCurrent loans and advances 39,5 28,5Less: Provision for impairment (1,6) (2,8)

Total loans and advances 37,9 25,7

18.1 Maturity structure**One year or less 38,0Between one and five years 1,5More than five years –

39,5

18.2 Geographical analysis**South Africa 11,4Other African countries 28,1

39,5

** Prior year information not available.

18.3 Movement in provision for impairmentBalance at beginning of year 2,8 1,8Acquisition of subsidiary – 0,2Current year charge net of recoveries 0,6 0,8Recoveries of loans previously written off (1,0) –Loans and advances written off (1,2) –Translation differences 0,4 –


19. ACCOUNTS RECEIVABLEOther receivables 3,0 5,7

Clients and other receivables (fully pledged as security – refer note 26) 3,6 5,8Impairment against receivables (0,6) (0,1)

Fair value of currency hedge 3,6 2,3Prepayments and accrued income 0,1 0,4Other 0,2 1,5

Total accounts receivable 6,9 9,9

20. CASH AND CASH EQUIVALENTSBalances with banks 36,8 17,8Bank overdraft (9,3) –Balances invested on short-term notice in Brait Absolute Fund 56,4 –

Total cash and cash equivalents 83,9 17,8

21. NON-CURRENT ASSETS HELD FOR SALELand and buildings – 6,7Furniture and fittings – 1,4Translation differences – 0,1

– 8,2

During the current financial year, the property was unconditionally sold. The gain on the disposal of the property was recognised as part ofcapital items (refer note 5) on the income statement.

2006 2005US$m US$m




22. SHARE CAPITAL AND PREMIUM22.1 Share capital

Authorised share capitalThe authorised share capital of the company is US$225 000 000 represented by 150 000 000 shares of no par value (accounting par valueof US$1,50 per share).

Issued share capitalThe issued share capital of the company is 110 487 321 (2005:102 255 732) ordinary shares of no par value. During the current financialyear 8 231 589 bonus shares of no par value were issued out of the share premium account.

At an extraordinary general meeting of shareholders held on 27 July 2005 it was resolved that an amount of US$40,0 million be appropriatedfrom the ‘Share premium ‘account of the company to the ‘Retained reserves’ account of the company.

The unissued ordinary shares are under the control of the directors, subject to certain constraints, until the forthcoming annual general meeting.

At 31 March 2006, the company has granted options/share entitlements to directors and employees to subscribe for 10 726 879(2005: 19 538 722) ordinary shares in the company as set out on page 100.

22.2 Share premiumThe share premium account of the company at 31 March 2006 is US$3,2 million (2005: US$55,5 million).

2006 2005US$m US$m

23. LEGAL RESERVELuxembourg Law requires the appropriation of 5% of the prior year’s unconsolidated net earnings of Brait S.A. to a legal reserve until such reserve equals 10% of its issued share capital.The legal reserve is not available for distribution, except upon dissolution of Brait S.A. The transfer to the legal reserve is subject to the approval of shareowners.


24. EQUITY RESERVESEquity reserves include the following:

24.1 Share entitlement expenses in terms of IFRS 2 (Share-based Payments)Balance at beginning of the year 2,9 2,5Income statement charge 0,7 0,4


24.2 Foreign currency adjustment on capital loan (0,1) (0,3)

Total equity reserves 3,5 2,6

25. REDEEMABLE PREFERENCE SHARESTotal debt capital 72,9 –

In March 2006 a subsidiary of the group, Brait South Africa Limited, raised US$72,9 million (ZAR 450 million) preference share capital toprovide additional capital to leverage the group’s internal growth strategy. 450 000 (four hundred and fifty thousand) cumulative redeemablepreference shares were issued at a par value of 0,01 cents and a premium of ZAR 999,99 per share. These shares carry a dividend of 78% ofthe South African prime rate and are redeemable in four tranches on 31 July of each year commencing in 2010 as follows:– 31 July 2010 – ZAR 45,0 million– 31 July 2011 – ZAR 67,5 million– 31 July 2012 – ZAR 67,5 million– 31 July 2013 – ZAR 270,0 million

Brait is entitled to early redemption at any time prior to the specified settlement dates.In terms of the agreement, there are a number of early redemption events as set out below:– tangible NAV falls below a specified amount;– earnings/debt service coverage ratio falls below a certain threshold; and– the group has a negative EBIT for any two consecutive years;This liability is secured via a guarantee by Brait S.A. and other subsidiaries.This issue had no significant impact on the earnings per share.

26. NON-CURRENT BORROWINGS26.1 Unsecured loan

– Sitogo Holdings (Proprietary) Limited 4,4 11,4This loan is Rand denominated, bears interest at South African prime overdraft interest rate with fixed quarterly interest payments in arrears and conditional terms of repayment

26.2 Secured loans

– Social Security and National Insurance Trust 0,5 1,1

Total liability 1,2 1,7Less: Portion repayable within 12 months (0,7) (0,6)

This loan is Ghanaian Cedi denominated and bears interest at 200 basis points above the Ghana Treasury Bill rate. Interest payments are made quarterly in arrears. Capital is repayable over three years in three equal annual instalments commencing December 2005 with the last payment due December 2007. This loan is secured by a subsidiary’s receivables.

– Rural Housing Loan Fund 3,9 1,5

Total liability 3,9 3,2Less: Portion repayable within 12 months – (1,7)

This loan is Rand denominated, repayable over two years and bears interest at 600 basis points above Bond Exchange of South Africa’s bond yield. The loan is secured by a deed of pledge and cession over Bayport’s receivables.

– Jawmend Rossi Capital (Proprietary) Limited 1,8 –

This loan is Rand denominated, repayable over two years starting on 31 March 2008 and bears interest at 600 basis points above the mid point of the fixed rate swap curve. The loan is secured by a reversionary right to Bayport Financial Services’ cash and receivables.

– Barclays Bank of Zambia – –

Total liability 0,1 –Less: Portion repayable within 12 months (0,1) –

This loan is US dollar denominated, repayable over two years from the 30th of August 2005 and bears interest at a fixed rate of 7,5%. The loan is secured by a mortgage debenture over Stand No 581, Independence Avenue, Lusaka.

– Bayport shareholder loans 0,8 –

Total liability 0,7 –Less: Portion repayable within 12 months (0,2) –This loan is US dollar denominated, bears interest at 20% per annum repayable in 36 equal instalments commencing in June 2006. The loan is secured by a residual cession of the book debts in Bayport Management.

This loan is US dollar denominated, bears interest at 20% per annum repayable in 36 equal instalments commencing in December 2007. The loan is secured by a residual cession of the book debts in Bayport Management. 0,3 –

26.3 Financial liabilityFinancial instrument – Sitogo Holdings (Proprietary) Limited 14,9 14,9

The sale by the company of a 26% share of its South African wholly-owned subsidiary has not been recorded as a sale as it did not meet the accounting requirement for recognition as such. Consequently the sale proceeds have been recorded as a financial liability as it has given rise to a financial instrument which has been disclosed in terms of IAS 32 ”Financial Instruments: Disclosure and Presentation” and measured in terms of IAS 39 “Financial Instruments: Recognition and Measurement”. The fair value adjustment is based on the net asset value of Brait South Africa Limited as at 31 March 2006 and gave rise to a charge of US$1,4 million for the current year (refer note 5.2).The liability has a potential six-year term subject to accelerated maturity conditions from the third anniversary date should certain “trigger events” arise.

Total non-current borrowings 26,3 28,9

2006 2005US$m US$m




2006 2005US$m US$m

27. ACCOUNTS PAYABLETrade payables 3,0 4,2Employee costs and benefits 8,6 4,1Pre-paid fees – 0,6Executive share trust participants’ loan accounts 2,9 4,6Reclassified as short-term liabilities – (1,9)Other 0,9 3,5

Total accounts payable 15,4 15,1

28. PROVISIONSLeave pay 0,4 0,3Private equity rights 0,8 1,0Legal fees – 1,0Commission expenses 2,1 –Other 3,7 1,2

Total provisions 7,0 3,5

PrivateLeave Equity Legal Commission 2006 2005

pay rights fees expenses Other* Total TotalUS$m US$m US$m US$m US$m US$m US$m

Movement of provisionsThe movements for the year in the group’s provisions were as follows:Balance at beginning of year 0,3 1,0 1,0 – 1,2 3,5 4,2Provisions utilised during the year – (0,2) (0,7) – (0,6) (1,5) (1,5)Charge to income for the year 0,1 – (0,3) 2,1 3,1 5,0 0,8

– current year 0,1 – – 2,1 3,1 5,3 1,3– amounts released to

income statement – – (0,3) – – (0,3) (0,5)

Balance at end of year 0,4 0,8 – 2,1 3,7 7,0 3,5

* Other provisions include Brait IV fund-raising and foreign withholding tax provisions in Bayport.

All provisions are anticipated to realise within the next 12 months.

29. CURRENT BORROWINGSLoans from associates 2,3 1,7Current portion of non-current secured liabilities (refer note 26) 1,0 2,3Shareholder loan 0,3 –This loan is US dollar denominated, bears interest at 20% per annum with no fixed repayment terms.Other current borrowings 15,3 1,9Other current borrowings include short-term loans which are matched by an equivalent asset reflected under ’Other current investments’ in note 17. Both the asset and the liability are expected to be realised within 12 months.

Total current borrowings 18,9 5,9

30. LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALESecured liabilities – 13,2

The loan was directly associated with the group’s Johannesburg property and buildings, including fittings, situated at 9 Fricker Road, Illovo.The loan was settled with the sale of the property.

2006 2005US$m US$m


31 RETIREMENT BENEFIT PLANSMost of the group’s employees are members of its defined contribution retirement funds.The group does not have any defined benefit plans. The majority of the group’s employees also participate in various disability and group life assurance benefits.

32. CONTINGENT LIABILITIES, COMMITMENTS AND SUBORDINATED LOANS32.1 Contingencies 0,2 1,7

Sureties and guarantees 0,2 0,2Other contingent liabilities – 1,5

32.2 Commitments

Commitments to invest in funds and proprietary investments (to be funded primarily from cash from operations and, if necessary, through debt capital raised – refer note 25) 34,9 9,3

Other 1,1 –Commitments to acquire shares (including employee share schemes) – 10,8Rental commitments 5,1 0,3

Within one year 1,1 0,3Between one and five years 4,0 –More than five years – –

32.3 Subordinated loans 5,3 6,8

46,6 28,9

33. FAIR VALUE OF FINANCIAL INSTRUMENTSThe accounting policies of the group prescribe that all financial assets and liabilities are measured at fair value.

Fair values have been determined using available market information and appropriate valuation methodologies.

34. DERIVATIVE FINANCIAL INSTRUMENTSThe group utilises currency derivatives to hedge the tangible capital of its non-US dollar subsidiaries into its measurement currency. It doesthis by means of foreign currency call options.

The notional principal disclosed below is the gross value of derivative contracts outstanding at the year-end and serves only as an indicatorof the extent of the group’s derivative activities. The notional principal does not necessarily reflect the amount payable or receivable undera derivative contract.

The fair value of a financial instrument represents the present value of the positive or negative cash flows which would have occurred if therights and obligations arising from that instrument were closed out by the group in an orderly marketplace transaction at year-end.

2006 2005Gross Positive Negative Gross Positive Negative

notional fair fair notional fair fairprincipal value value principal value value

US$m US$m US$m US$m US$m US$m

Hedging derivativesForeign exchange derivativesForward foreign exchangecontract/currency swaps – – – 30,0 1,6 –Currency put option – – – 30,0 0,7 –Currency call option 35,0 3,6 – – – –

Total derivatives 35,0 3,6 – 60,0 2,3 –

There are no gains or losses on hedging instruments deferred in the balance sheet, nor were there any reclassifications of hedginginstruments resulting in gains or losses arising in prior years being recognised in subsequent years.

The above foreign exchange derivative matures on 25 March 2011.



35. SHARE-BASED PAYMENTS (IFRS 2)The following information has been provided to disclose the effect of share-based payments on the group, in terms of the provisions ofIFRS 2 to all unvested entitlements granted to participants after 7 November 2002.

35.1 Effect on the current year distributable earnings2006 2005

US$m US$m

Income statementShare entitlement expense 0,7 0,4

35.2 Equity-settled share entitlement plansThe group has three equity-settled share entitlement plans.• The Brait S.A. Share Incentive Scheme;• The Brait Executive Share Purchase Scheme; and• The Brait South Africa Share Incentive Scheme 2005.

The terms of these schemes are described in the ‘Remuneration report’ on page 42. In summary, the schemes provide for:• An equity issue price equal to an average quoted market price of Brait shares on the date of grant;• A vesting period, typically staggered over three to six years;• Expiry of options/entitlements which remain unexercised after a period of five to eight years (depending on the scheme) from the

date of grant; and• Forfeiture of options/entitlements if the participant leaves the group before vesting.

The assumptions applied in determining the income statement effect for each of the group’s share-based payments schemes underIFRS 2 are set out below:

2006 2005Share Weighted Share Weighted

entitle- average entitle- averagements issue ments issueprice price

ZAR ZAR

The Brait S.A. Share Incentive SchemeShare entitlements outstanding at beginning of year 2 975 262 7,23 2 568 624 7,33Granted and exercised during the year 150 000 18,04 1 374 480 7,20Delivered during the year (808 018) 7,25 (61 151) 8,17Forfeited during the year (by resignation, retrenchment or repurchase) (578 740) 7,20 (906 691) 7,39

Share entitlements outstanding at end of year 1 738 504 8,16 2 975 262 7,23

Share entitlements exercisable at end of year 379 841 7,21 829 335 7,21

The weighted average issue share price for share entitlements granted during the period was ZAR18,04. The unvested entitlementsoutstanding at 31 March 2006 had a weighted average issue price of ZAR8,16 and a weighted average remaining maximum contractuallife of approximately 6,9 years.

35. SHARE-BASED PAYMENTS (IFRS 2) (CONTINUED)The inputs into the binominal and 3D binominal tree pricing model were as follows:

2006 2005ZAR ZAR

Weighted average share price of new issues during year (all issues done at market price) 18,04 7,20Expected volatility 28,13% 27,53% – 32,35%Expected life 3 years 3 – 5 yearsRisk free rate 7,37% – 7,57% 7,6% – 12,76%

Expected future dividend yield 5% 5%

Expected volatility was determined by calculating the historical volatility of the group’s share price from 1 April 2003. The expected life usedin the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions andbehavioural considerations.

2006 2005Share Weighted Share Weighted

entitle- average entitle- averagements issue ments issueprice price

ZAR ZAR

The Brait Executive Share Purchase SchemeShare entitlements outstanding at beginning of year 16 563 460 0,7190 17 296 489 0,7101Issued during the year 2 500 000 1,8790 500 000 1,0062Delivered during the year (12 185 907) 0,7101 (778 105) 0,7101Forfeited during the year (by resignation, retrenchment or repurchase) – – (454 924) 0,7101

Share entitlements outstanding at end of year 6 877 553 1,1564 16 563 460 0,7190

Share entitlements exercisable at end of year 3 877 552 0,7101 10 060 879 0,7101

The weighted average issue share price for share entitlements granted during the period was US$1,8790. The unvested entitlementsoutstanding at 31 March 2006 had a weighted average issue price of US1,1564 cents and a weighted average remaining maximumcontractual life of approximately four years.

The inputs into the binominal and 3D binominal tree pricing model were as follows:2006 2005US$ US$

Weighted average share price of new issues during year (all issues done at market price) 1,879 1,0062Expected volatility 29,90% 24,9% – 30,7%Expected life 3 years 3 yearsRisk free rate 4,33% 2,0% – 3,24%Expected future dividend yield 5% 5%

Expected volatility was determined by calculating the historical volatility of the group’s share price from 1 April 2003. The expected life usedin the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions andbehavioural considerations.




2006Weighted

Share averageentitlements issue price

ZAR

35. SHARE-BASED PAYMENTS (IFRS 2) (CONTINUED)The Brait South Africa Share Scheme 2005Share entitlements outstanding at beginning of year – –Issued during the year 2 110 823 12,99Delivered during the year – –

Share entitlements outstanding at end of year 2 110 823 12,99

The weighted average issue share price for share options granted during the period was ZAR12,99. The unvested entitlements outstandingat 31 March 2006 had a weighted average issue price of ZAR12,99 and a weighted average remaining maximum contractual life ofapproximately three and a half years.

The inputs into the Black Scholes model were as follows:

2006 2005ZAR ZAR

Weighted average share price of new issues during the year (all issues done at market price) 12,99 – Expected volatility 27,19 % – 29,9 % – Expected life 3 – 5 years – Risk free rate 7,26 % – 7,59 % –

Expected volatility was determined by calculating the historical volatility of the group’s share price from 1 April 2003. The expected life usedin the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, andbehavioural considerations.

36. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATENo events have taken place since 31 March 2006 and the date of the release of this report, which would have a material impact on eitherthe financial position or operating results of the group.

2006 2005US$m US$m

37. CASH FLOW INFORMATION37.1 Cash generated by operations

Profit before taxation 52,4 34,8Adjustments for:Dividends received (1,7) (11,3)Interest received (5,5) (3,9)Interest paid 2,4 2,5Depreciation 0,6 0,4Share entitlement expenses 0,7 0,4Fair value adjustment of financial liability 1,3 7,1Unrealised gains on financial assets and instruments (40,0) (29,2)Equity accounted earnings of associates and joint ventures (1,7) (1,6)Profit on sale of building (2,8) –Profit on sale of subsidiary (2,9) –Impairment of investment in joint ventures – 0,4Provision for doubtful debts 1,0 1,7Currency hedge cost 2,2 4,1Other (0,3) –

Total cash generated by operations 5,7 5,4

37. CASH FLOW INFORMATION (CONTINUED)37.2 Taxation paid

Taxation balance at beginning of year (1,0) –Balance taken on at acquisition of subsidiary – (0,3)Current tax expense for the year (2,3) (1,5)Taxation balances at end of year 1,1 1,0

Total taxation (paid)/received (2,2) 0,8

37.3 Change in working capitalIncrease/(decrease) in accounts payable and provisions 5,6 (1,4)Decrease in accounts receivable 3,9 7,9Increase in loans and advances (12,0) (12,7)

Total change in working capital (2,5) (6,2)

37.4 Dividends paidDividends represent the final dividend for the year ended 31 March 2005 of US 10,25 cents per share paid in July 2005 and the interim dividend of US 7,85 cents per share paid in November 2005.The comparative represents the final dividend of US 3,25 cents per share paid in August 2004 and the interim dividend of US 3,50 cents per share paid in November 2004.

37.5 Net cash inflow from acquisition of subsidiaryTotal consideration – (1,1)Cash and cash equivalents received by the group – 1,5

Net cash inflow from acquisition of subsidiary – 0,4

37.6 Non-cash transactionsThe disposal of a portion of the group’s interest in Bayport was settled through the receipt of a 20% share in Ghana Financial Services tothe value of US$2,8 million.

Dividends paid to the employees under the Brait South Africa Share Scheme 2005 were settled with the issuance of treasury shares to thevalue of US$0,9 million.

38. RELATED PARTY TRANSACTIONSTransactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are notdisclosed in this note. Transactions between the group and its associates are disclosed below. Transactions between the company and itssubsidiaries and associates are disclosed in the company’s separate financial statements. Details of transactions between the group and keymanagement are disclosed under the ‘Remuneration Report’ on page 42.

Trading transactionsDuring the year, group companies entered into the following transactions with related parties who are not members of the group:

2006 2005Amounts Amounts Amounts Amountsowed by owed to owed by owed to

related related related related parties parties parties parties

38.1 AssociatesSitogo Holdings (Pty) (Limited) (refer note 15 and 27 for further detail) 1,4 (4,3) 3,6 (11,4)Other 2,2 (2,2) 1,4 (1,3)

38.2 Joint venturesCapital Alliance Finance (Pty) (Limited) 2,8 – 5,4 –The loan has no firm repayment date and carries interest at Standard Bank prime, as revised from time to time plus 5%.A total of US$0,6 million interest was received during the year.

38.3 Key management 5,1 (8,0) 7,3 (11,9)(Arising in terms of the Brait Executive Share Incentive Scheme)

2006 2005US$m US$m




39. SUBSIDIARIES39.1 Acquisition of subsidiary

2005On 7 May 2004, the group increased its interest in, Bayport Management Limited, from 49,9% to 62,8%.

Book Fair value Fairvalue adjustments value

US$m US$m US$m

i) Net assets acquired – – –Equipment 0,4 – 0,4Investments and receivables 0,1 – 0,1Goodwill 0,1 (0,1) –Current assets 3,3 0,2 3,5Cash and cash equivalents 1,5 – 1,5Current liabilities (0,6) – (0,6)Non-current liabilities (2,8) – (2,8)Minority interests (0,4) 0,1 (0,3)

Total net assets at acquisition 1,6 0,2 1,8

Less: Minority interest of 37,2% (0,7)

Total consideration for 62,8% 1,1

At date of After Total foracquisition acquisition current year

US$m US$m US$m

ii) Financial effect of business combinationRevenue 0,3 8,3 8,6Profit before taxation for the period 0,1 2,6 2,7

2006 2005US$m US$m

39.2 Loans and advances to/(from) subsidiariesNameBrait South Africa Limited* 12,3 34,2Capital Partners Group Holding Limited# (6,3) (8,9)Brait III Investments Limited# – 0,2SAPEF III International GP Ltd# 1,5 0,7The Brait Executive Share Trust# – 5,1Brait International Limited# 3,2 21,1

Total net loans and advances 10,7 52,4

* This loan is Rand denominated, bears interest at South African prime overdraft rate with fixed quarterly interest payments in arrears andno fixed repayment terms for the capital.

# These loans are US dollar denominated, have no repayment terms and are interest free.

40. COMPARATIVE FIGURESThe following comparative figures have been restated to conform to changes in presentation in the current year and had no effect on theresults of the previous year.

Currently Previouslystated statedUS$m US$m

40.1 Balance sheetCurrent liabilities– Accounts payable 15,1 17,0– Current borrowings 5,9 4,0The above liability has been re-classified from “Accounts payable” to “Current borrowings” to more appropriately reflect the non-working capital nature of the liability.

40.2 Cash flowChange in working capital (8,1) (6,2)Cash flows from financing activities– Increase in borrowings 24,5 22,6The impact on the cash flow statement of the re-classified “Current liabilities” in 40.1 above

40.2 Segmental reportSegment assets– International 92,5 86,0– South Africa 90,2 65,0Revenue and other income– International 2,3 13,0– South Africa 30,5 19,8The geographical segments have been changed to a basis distinguishing between the actual geographical source of income rather than between the economic environments which have similar specific rules and regulations.




41. FINANCIAL STATEMENTS OF BRAIT S.A.Brait S.A. is the holding company of the group. It was incorporated on 5 May 1976 in the Grand Duchy of Luxembourg in terms of the law of 31 July 1929.

41.1 Income statements for the periodProfit/(loss) for the year 2,2 (3,8)

Net financial and other income 5,0 9,5Currency hedge cost (2,0) (4,1)Loss on sale of 26% of subsidiary – (8,4)Administrative and other expenses (0,8) (0,8)

41.2 Balance sheetsAssetsNon-current assets 187,7 220,8Financial assets 3,6 –Investments 184,1 220,8

Subsidiaries 145,8 151,1Associates 2,7 2,7Intercompany advances 19,4 64,8Other investments 16,2 2,2

Current assets 42,9 9,6

Accounts receivable and prepayments 8,4 6,8Cash and cash equivalents 34,5 2,8

Total assets 230,6 230,4

EquityShare capital and premium 168,8 208,9Legal reserve 2,6 2,6Distributable reserves 34,9 7,2

Total equity and reserves 206,3 218,7

LiabilitiesNon-current liabilities

Intercompany loans 8,6 9,4Current liabilitiesAccounts payable and other current liabilities 15,7 2,3

Total equity and liabilities 230,6 230,4

2006 2005US$m US$m

41. FINANCIAL STATEMENTS OF BRAIT S.A. (CONTINUED)41.3 Share capital

Authorised150 000 000 (2005: 150 000 000) ordinary shares of no par value

Issued110 487 321 (2005: 102 255 732) ordinary shares of no par value 165,7 153,4

41.4 Distributable reservesAt beginning of year 7,2 35,3

Profit/ (loss) for the year 2,2 (3,8)Prior year result to be allocated – (4,2)Dividends paid (14,5) (20,1)Transfer from share premium 40,0 –

At end of the year 34,9 7,2

41.5 Significant accounting policies– Significant accounting policies for the company are consistent with those disclosed for the group, except for unrealised gains which have

been excluded from income in accordance with Luxembourg Law.

– The carrying value of subsidiaries is reflected at the lower of cost or fair value, where the write-down below cost is considered permanent.The sale by the company of a 26% share in its South African operation has been recorded as a sale.

2006 2005US$m US$m



PRINCIPAL SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES

Issuedordinary

Name and Date of share capital Holdingregistration number incorporation Nature of business US$m %

SUBSIDIARY COMPANIESBrait South Africa Limitedø 26/10/60 Investment and financial services 0,4 741960/003893/06Bayport Holdings Limited‡ 17/11/04 Micro-lending – 53,453441Capital Partners Group 13/03/98 Holding company 15,9 100Holdings Limited*

271641Brait Mauritius Limited‡ 01/04/99 Financial services – 100507172Brait International Limited‡ 30/06/98 Investment and financial services – 10020703/4507Brait Investments Limitedø 29/11/96 Trading and financial services – 1001996/016949/06

CarryingDate to which Issued value

Name and equity income ordinary 2006 Holdingregistration number accounted for Nature of business share capital US$m %

ASSOCIATED COMPANIESLauriston Capital (SA)(Proprietary) Limitedø 31/03/06 Funds management – 0,1 25,02002/026011/07Lauriston Capital (US) 31/03/06 Funds management – 0,2 25,0(Proprietary) Limited*

517917Medu Capital (Proprietary) Limitedø 31/03/06 Funds management – 0,0 49,02003/000273/07Sitogo Holdings (Proprietary) Limitedø

2004/018117/07 31/03/06 Financial services – 5,4 32,3

JOINT VENTURESCapital Alliance Finance(Pty) Limitedø 31/03/06 Financial services – – 50,01998/006840/07

* Incorporated in the British Virgin Islands.‡ Incorporated in Mauritius.ø Incorporated in South Africa.

SHAREOWNERS’ DIARY

Announcement of results 2 June 2006

Annual report issued beginning July 2006

Annual general meeting 26 July 2006

Proposed final dividend– declaration 26 July 2006– record date 11 August 2006– payment 14 August 2006

Interim report early November 2006

Financial year-end 31 March 2006



NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the annual general meeting of shareowners of the company will be held at the registered office of the company,180, rue des Aubépines, L-1145, Grand Duchy of Luxembourg on Wednesday, 26 July 2006 at 14:30 for the following purposes:

AGENDAA. Ordinary business1. To ratify and confirm the payment of an interim dividend on 21 November 2005;

2. To receive and adopt the reports of the directors, statutory auditor and independent auditors for the year ended 31 March 2006;

3. To receive and adopt the statutory financial statements of the company and the consolidated financial statements of the group for the yearended 31 March 2006;

4. To grant discharge to the directors, officers and the statutory auditor in respect of the execution of their mandates to 31 March 2006;

The directors, officers and the statutory auditor of the company are appointed by the company with a one-year mandate, in terms of thecompany’s articles and Luxembourg Law. It is customary practice to discharge the directors, officers and the statutory auditor from theirmandate at the annual general meeting, prior to their re-appointment to office for the following year. The discharge of the mandate doesnot affect the obligations and liability of the directors, officers and statutory auditors in respect of their duties while in office.

5. To re-elect the following directors for a further term of office in accordance with the provisions of the Articles of Incorporation:– Mr AC Ball – Mr PAB Beercroft – Mr JE Bodoni – Mr BI Childs – Mr JJ Coulter – Mr JA Gnodde– Mr ME King – Mr RJ Koch – Mr AM Rosenzweig– Mr CJ Tayelor – Mr HRW Troskie – Mr SJP Weber – Mr PL Wilmot

6. To receive and act on the statutory nomination of the statutory auditor and the independent auditor for a term of one year ending at theannual general meeting in 2007;

7. To allocate the company’s profits;

In terms of Luxembourg Law, the company is required to transfer to a legal reserve a minimum of 5% of the unconsolidated net earningsfor each financial year until the reserve equals 10% of its issued share capital. The legal reserve is not available for distribution, except upondissolution of the company.

8. To approve the declaration and payment of a final dividend for the year ended 31 March 2006 of 10,39 US cents per share and 67,81 centsper share for the shareowners registered on the South African register, (to be paid on 16 August 2006 to those shareowners appearing onthe share register as at 3 August 2006).

9. To renew the authority granted to the company to purchase its own shares subject to the following limitations:

9.1 unless a tender offer is made to all shareowners on the same terms and except in case of an emergency where the purchase is carried outto avoid a material loss which the company would otherwise incur, each purchase shall be made through a stock exchange on which theshares in the company are regularly traded and the purchase price shall not exceed 5% above the average market value for the shares onall stock exchanges on which the ordinary shares are listed and have traded for the 10 (ten) business days before the purchase;

9.2 if purchases are by tender, tenders must be available to all shareowners alike; and 9.3 the maximum number of shares that may be repurchased pursuant to this authority shall not exceed 10% of the issued share capital of the

company from time to time.

This authority shall not extend beyond 18 (eighteen) months from the date of this annual general meeting but shall be renewable for furtherperiods by resolution of the annual general meeting of the shareowners from time to time.


B. Special business10. To renew, in terms of the Law of 10 August 1915 on commercial companies, as amended, and the Listing Requirements of the Luxembourg Stock

Exchange, London Stock Exchange and JSE Limited, the authority granted to the board, subject to the terms of the Articles of Incorporation, to issuefurther ordinary shares, whether for cash or otherwise, as and when suitable situations arise, up to the total authorised capital, without reservingfor the existing shareowners a preferential subscription right to subscribe to the shares issued, subject to the following limitations:

10.1 that this authority shall not extend beyond 15 (fifteen) months from the date of this annual general meeting but shall be renewable forfurther periods by resolution of the annual general meeting of the shareowners from time to time;

10.2 that a paid press announcement giving details, including the impact on net asset value and earnings per share, will be published at the timeof any such issue of shares representing, on a cumulative basis within one year, 5% or more of the number of ordinary shares in issue priorto any such issues;

10.3 that issues (excluding shares to be issued pursuant to any share purchase or incentive scheme established for the benefit of the employeesof the company and its subsidiaries (“incentive schemes”)) in aggregate in any one year may not exceed 10% of the company’s issuedordinary share capital, provided further that such issues (excluding shares to be issued pursuant to incentive schemes) shall not in aggregatein any three-year period exceed 15% of the company’s issued ordinary share capital;

10.4 that, in determining the price at which such an issue of ordinary shares will be made in terms of this authority, the maximum discountpermitted will be 10% of the average market price of the ordinary shares as determined over the 30 (thirty) days prior to the date that theprice of the issue is determined or agreed by the directors on all stock exchanges on which the ordinary shares are listed and have tradedduring that period; and

10.5 that any such securities so issued for cash shall be made to the “public” and will also not result in an affected transaction.

Without this authority, the board has no capacity in terms of the company’s Articles to issue shares to settle employee share entitlements.For this reason, the board has proposed that its authority to issue shares is significantly restricted so that any material issues of share capitalare taken to shareowners for approval.

By order of the board of directors

ME KingSenior Chairman

19 June 2006

Note: Any shareowner may, in writing, appoint a proxy, who need not be a shareowner, to represent him at any general meeting. Any company,being a shareowner, may execute a form of proxy under the hand of a duly authorised officer or may authorise in writing such person as itthinks fit to act as its representative at the meeting subject to the production to Brait S.A. of such evidence of authority as the board mayrequire. The instrument appointing a proxy, and the written authority of a representative, together with evidence of the authority of theperson by whom the proxy is signed (except in the case of a proxy signed by the shareowner), shall be deposited at the registered office ofthe company or a transfer office, two clear business days (in the Grand Duchy of Luxembourg or the jurisdiction where the relevant transferoffice is located) before the time for the holding of the meeting or adjourned meeting (as the case may be) at which the person named insuch instrument proposes to vote. No instrument appointing a proxy shall be valid after the expiration of 12 months from the date ofits execution.

A form of proxy is enclosed with this annual report, the completion of which will not preclude a shareowner from attending and voting at the meetingin person to the exclusion of any proxy appointed.

ADMINISTRATION

Brait S.A. Registration No: RC Luxembourg B-13861

REGISTERED OFFICE Brait S.A.180, rue des AubépinesL-1145 Luxembourg Tel: +352 269255 2180Fax: +352 269255 3642

Brait South Africa Limited9 Fricker RoadIllovo BoulevardIllovoSandtonSouth AfricaTel: +27 11 507 1000Fax: +27 11 507 1001

LISTING AGENT Dexia Banque Internationale à Luxembourg69, route d’EschL-2953 Luxembourg Tel: +352 45901Fax: +352 45902010

TRANSFER AGENT/REGISTRAR United KingdomCapita IRG plcBourne House34 Beckenham RoadBeckenhamKent, BR3 4TUUnited KingdomTel: +44 208 639 2157Fax: +44 208 639 2342

Website: http://www.brait.com

LEGAL ADVISORS TO THE COMPANYElvinger, Hoss & Prussen2, Place Winston ChurchillL-1340, LuxembourgTel: +352 446 6440Fax: +352 44 2255

INDEPENDENT AUDITORS Deloitte S.A.560, rue de Neudorf L-2220, LuxembourgTel: +352 451 451Fax: +352 451 452 666

DOMICILIARY AGENT AND REGISTRARExperta Luxembourg S.A.180, rue des AubépinesL-1145, LuxembourgTel: +352 269255 2180Fax: +352 269255 3642

South AfricaComputershare Investor Services 2004 (Pty) Limited70 Marshall StreetJohannesburg, 2001

Or

PO Box 61051Marshalltown, 2107Tel: +27 11 370 5000Fax: +27 11 688 5200

JSE and LSE issuer name and codeIssuer long name – Brait S.A.Issuer code – BRAITInstrument alpha code/Ticker symbol – BATISIN – LU 0011857645


FORM OF PROXY


BRAIT S.A.Société Anonyme

(Incorporated in Luxembourg)(the “company”)

R.C. Luxembourg B 13.861Registered Office: 180, rue des Aubépines, L-1145 Luxembourg

Share code: BAT ISIN: LU0011857645

FOR USE IN RESPECT OF THE ANNUAL GENERAL MEETING OF SHAREOWNERS TO BE HELD AT THE REGISTERED OFFICE OF THE COMPANYON 26 JULY 2006 AT 14:30

Brait S.A. shareowners in South Africa who have dematerialised their shares with a CSDP or broker, other than with Own Name Registration,must arrange with the CSDP or broker concerned to provide them with the necessary authorisation to attend the annual general meeting or theBrait S.A. shareowners concerned must instruct them as to how they wish to vote in this regard. This must be done in terms of the agreement enteredinto between the Brait S.A. shareowner and the CSDP or broker concerned.

I/We (BLOCK LETTERS PLEASE)of (address)Telephone (work) ( ) Telephone (home) ( )

being the holder(s) of Brait S.A. shares, appoint (see note 1):1. or failing him/her,2. or failing him/her,3. the chairman of the annual general meeting,as my/our proxy to act on my/our behalf at the annual general meeting which will be held for the purpose of considering and, if deemed fit, passing,with or without modification, the resolutions to be proposed thereat and at each adjournment thereof and to vote for or against such resolutions orto abstain from voting in respect of the Brait S.A. shares registered in my/our name(s), in accordance with the following instructions (see note 4):Number of votes For Against AbstainOrdinary resolution number 1 (ratification of interim dividend)Ordinary resolution number 2 (adoption of directors and auditors reports)Ordinary resolution number 3 (approval of financial statements)Ordinary resolution number 4 (discharge of mandates)Ordinary resolution number 5 (re-election of existing directors)• Mr AC Ball• Mr PAB Beercroft • Mr JE Bodoni • Mr BI Childs • Mr JJ Coulter • Mr JA Gnodde • Mr ME King • Mr RJ Koch • Mr AM Rosenzweig • Mr CJ Tayelor• Mr HRW Troskie • Mr SJP Weber• Mr PL Wilmot Ordinary resolution number 6 (nomination of auditor)Ordinary resolution number 7 (allocation of profits to legal reserve)Ordinary resolution number 8 (declaration of dividend)Ordinary resolution number 9 (authority to purchase own shares)Special resolution number 10 (board authority to issue further shares)

(Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.)Each Brait S.A. shareowner is entitled to appoint one or more proxies (who need not be a Brait S.A. shareowner) to attend, speak and vote in placeof that Brait S.A. shareowner at the annual general meeting.Signed at this day of 2006

Signature(s)Capacity and authorisation (see note 7)Please read the notes on the reverse side hereof.• There is no quorum requirement for resolutions number 1 to 9 and these resolutions will be passed by a simple majority of the shares represented

at the annual general meeting.• For the passing of resolution number 10, a quorum of 50% of the shares in the company outstanding is required. This resolution requires the

consent of two-thirds of the shares represented at the annual general meeting.


NOTES TO FORM OF PROXY

1. A member may insert the name of a proxy or the names of two alternate proxies of the members’ choice in the space(s) provided, with orwithout deleting “the chairman of the annual general meeting”. The person whose name stands first on this form of proxy and who ispresent at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

2. The completion and lodging of this form of proxy will not preclude the relevant member from attending the annual general meeting andspeaking and voting in person to the exclusion of any proxy appointed in terms hereof, should such member wish to so do.

3. The chairman of the annual general meeting may reject or accept any form of proxy, which is completed and/or received, other than incompliance with these notes.

4. A Brait S.A. shareowner’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by thatBrait S.A. shareowner in the appropriate space provided. Failure to comply with the above will be deemed to authorise the proxy to vote orto abstain from voting at the annual general meeting as he/she deems fit in respect of all the Brait S.A. shareowner’s votes exercisablethereat. A Brait S.A. shareowner or the proxy is not obliged to use all the votes exercisable by the Shareowner or by the proxy, but the totalof the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the Brait S.A.shareowner or the proxy.

5. Brait S.A. shareowners in South Africa who have dematerialised their shares with a CSDP or broker, other than with Own Name Registration,must arrange with the CSDP or broker concerned to provide them with the necessary authorisation to attend the annual general meetingor the Brait S.A. shareowners concerned must instruct them as to how they wish to vote in this regard. This must be done in terms of theagreement entered into between the Brait S.A. shareowners and the CSDP or broker concerned.

6. Any alteration to this form of proxy, other than the deletion of alternatives, must be initialled by the signatory/(ies).

7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity (eg on behalf of acompany, close corporation, trust, pension fund, deceased estate, etc) must be attached to this form of proxy, unless previously recorded bythe company or waived by the chairman of the annual general meeting.

8. A minor must be assisted by his/her parent or guardian, unless the relevant documents establishing his/her capacity are produced or havebeen recorded by the company.

9. Where there are joint holders of shares:• any one holder may sign this form of proxy; and• the vote of the senior joint holder (seniority determined by the order of the names as recorded in the company’s register of members) by

proxy or in person will be accepted to the exclusion of the vote(s) of the other joint shareowner(s).

10. Forms of proxy should be lodged at or posted to the:

Transfer Secretaries in South AfricaComputershare Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg,2001 (PO Box 61051, Marshalltown,2107)

Transfer agents in the United KingdomCAPITA IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, United Kingdomso as to be received by no later than 11:30 on Monday, 24 July 2006.

PARTNERSHIPS BASED ON PASSION, ENERGY AND

A PIONEERING SPIRIT OF ENTERPRISE

2006 AN N UA L RE P O RT

www.brait.com

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