targeting growth - sharedata · 1998 014568 06 [email protected] reg.no. m ......
TRANSCRIPT
m Cubed AR Cover f/a 5/7/02 7:44 Page 1
Composite
C M Y CM MY CY CMY K
JohannesburgTelephone...................... (011) 340-2300Facsimile ....................... (011) 880-8844Cape TownTelephone...................... (021) 683-6208Facsimile ....................... (021) 683-7602
DurbanTelephone...................... (031) 303-6090Facsimile ....................... (031) 303-6037Port ElizabethTelephone...................... (041) 363-2250Facsimile ....................... (041) 363-1060
BloemfonteinTelephone...................... (051) 430 6502Facsimile ....................... (051) 430 1695Toll-free......................... 0800 117 180Website.....................www.mcubed.co.zaE-mail..............callcentre@mcubed.co.za1998 014568 06
REG.NO.
m CUBED GROUP EXCEEDS FORECASTSM CUBED HOLDINGS ANNUAL FINANCIALSTATEMENTSPG 27
SUBSTANTIAL GROWTHHEADLINE EARNINGS INCREASED BY 151%PG 06
COVER STORY: POST MERGER PROGRESSTHE SUCCESSFUL MERGER OF M CUBED CAPITAL ANDESCHER GROUPPG 14
ANNUAL REPORT - m Cubed Holding Limited
A publication of m Cubed Holdings Limited
TargetingGrowth
FIN
AN
CIA
LREPORT
VOLUME 1 - 28 FEBRUARY 2002
m Cubed Holdings Limited
Registration Number: 1998/014568/06
Share Code: MCU
ISIN: ZAE000033353
GROU
P ST
RUCT
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m CU
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INGS
LIM
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GROU
P ST
RUCT
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m CU
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HOLD
INGS
LIM
ITED
GROU
P ST
RUCT
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m CU
BED
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BROKER DISTRIBUTION
(Distribution of the entiregroup’s products andservices through anindependent financialadvisor network and via ateam of sales consultantsbased in Johannesburg,Pretoria, Cape Town, PortElizabeth, Bloemfonteinand Durban).
EMPLOYEE BENEFITS
• Escherwise (Pty) Ltd
Provides individualinvestment choiceemployee benefitadministration for self-standing and umbrellafunds for financialintermediaries andconsultants.
RETAIL ASSET MANAGEMENT
• m Cubed Unit TrustManagement CompanyLtd
Creates and markets retailand Institutional unit trusts.
• Retail InvestmentPortfolios
Creates and markets retailand institutional wrapfunds.
LIFE INVESTMENTS PRODUCTS
• m Cubed Life Ltd
Provides life investmentproducts Includingendowments, retirementannuities, equity-linkedliving annuities, pensionand provident preservationfunds and US$-based lifecover.
SECOND HAND ENDOWMENT POLICIES
• (50%) Policy Exchange(Pty) Ltd
On-sells pre-ownedendowment policies.
OUTSOURCING TOTHIRD PARTIES
• Automated OutsourcingServices Ltd
- Unit Trusts- Investment Portfolios- Asset Management
Provides outsourcedadministration servicesto internal and externallocal and internationalclients.
SPECIALISEDINVESTMENTS
• m Cubed SpecialisedInvestments (Pty) Ltd
Structures individuallytailored solutions utilisingthe group’s life and assetmanagement licenses,to provide the corporatemarket with specialisedinvestment fundingproducts.
• m Cubed InvestmentLife Ltd
Utilises the life licenseas a pooling vehicle forinvestment products.
• m Cubed Advances(Pty) Ltd
Provides policy loansto policyholders and thesale and leaseback ofintellectual capital.
STRUCTUREDPRODUCTS
• Escher StructuredProducts (Pty) Ltd
Designs, implements andadministers derivativebased capital-securedinvestment productsfor the retail andinstitutional market.
ASSET MANAGEMENT
LOCAL ASSET MANAGEMENT
• m Cubed AssetManagement (Pty) Ltd
Provides the full range ofrisk-controlled solutionsto local institutionalinvestors.
LOCAL CASH MANAGEMENT
• (50%) Corporate MoneyManagers (Pty) Ltd
Provides outsourcedtreasury services.Incorporateing cashand settlement systemmanagement.
m CUBED HOLDINGS LIMITEDHEAD OFFICE
Internal divisions including finance, marketing, human resources, companysecretarial and office services for the group.
INTERNATIONAL INVESTMENTS
• m Cubed International(Pty) Ltd
Provides internationaltax planning andadvisory services.
• m3 Capital AssetManagement (BVI) Ltd
Holding company forinternational investmentcompanies.
- m3 Capital FinancialServices Software Ltd
Owns rights forFundspower for Africa.
- m3 Capital Mutual FundPcc Ltd
Mutual fund investmentcompany.
- (98%) m3 CapitalManagement(Guernsey) Ltd
Manages mutual funds.
- m3 Capital AssurancePcc (Guernsey) Ltd
International lifeinsurance company.
INTERNATIONAL ASSET MANAGEMENT
• Escher (UK)
Provides multi-managersolutions to small andmedium-sized UK-basedpension and providentfunds.
PG 02 • 28 February • FR
COVER STORY: POST MERGER SUCCESSBy: John Storey, managing director.
2001/2002 was a year of change, growth
and refocus, made memorable due to the
successful merger of Escher Group and
m Cubed Capital ........................................... 14
FR UPFRONT:
2002 Financial synopsis ............................... 5
FR INDEPTH: CHAIRMAN’S REPORTBy: Charles Bothner, chairman.
Increased headline earnings per share ...... 6
Achieved headline earnings
per share of 9.6 cents, 28% up
year-on-year.
Successful merger process........................... 6
The merger puts us in a far stronger
position going forward.
Synergies achieved....................................... 6
Looking to leverage off our core strengths,especially in the multi-manager arena.
Offshore developments................................ 8
South Africa enjoys a 6% share of the global multi-manager market.
FR LEADERSHIP: THE BOARD OF DIRECTORS
Charles Bothner............................................ 12
John Storey ................................................... 12
Ruaridh Budge .............................................. 12
Anne Cabot-Alletzhauser............................. 12
Philip Croeser............................................... 12
Margaret Dawes............................................ 12
Jannie Mouton .............................................. 12
Chris Otto...................................................... 12
Winston Roux ................................................ 12
Ian Sinton ...................................................... 12
FR COVER STORY: POST MERGER SUCCESS
Managing director’s report by John Storey,
managing director of m Cubed Holdings
Limited.
2002 Numbers show strong growth ............ 14
Assets under management have grown
to R43bn.
Revamping our core ideologies .................. 15
“Partnership” and providing “the full range
of risk-targeted solutions” is the common
platform and focus across each business.
Product offering strengthened .................... 15
5 key challenges identified for 2002
financial year ................................................ 15
Segmental report back................................. 17
Looking ahead, the business intends to grow
its range of portfolios and products to provide
even more risk-controlled solutions for clients.
CONTENTS
m Cubed Holdings Limited(Incorporated in the Republicof South Africa)Reg. No:........1998/014568/06Share Code: .....................MCUISIN: ................ZAE000033353
AuditorsFisher Hoffman PKF (Jhb) IncPricewaterhouseCoopers
BankersStandard Bank of SouthAfrica Ltd
AttorneysRamsay Webber & Company
Group company secretaryJ Steyn[e] [email protected]
Transfer secretaries
Computershare Services LtdEndura House41 Glove StreetJohannesburg 2001
P O Box 61051Marshalltown 2107
[T]..... .............(011) 370-7700[F]............. .....(011) 836-0792
Registered office:
The Cube, Investment Place10th Road (off 2nd Avenue)Hyde Park 2196
PO Box 41259Craighall 2024
Tel .................(011) 340-2300Fax ................(011) 880-8844
Cape Town
Brookside Office ParkUnits 19 & 2011 Lansdowne RoadClaremont 7700
PO Box 50560Waterfront 8002
[T] ..................(021) 683-6208[F] ..................(021) 683-7602
Port Elizabeth
6th Floor, Fairview House66 Ring RoadGreenacres 6045
PO Box 27944Greenacres 6057
[T] ..................(041) 363-2250[F] ..................(041) 363-1060
Bloemfontein
Suite 11Kellner ParkKellner StreetWestdene 9301
PO Box 11942Universitas 9321
[T] ..................(051) 430-6502[F] ..................(051) 430-1695
Pretoria
19 La Rochelle CrescentCnr Suid and Glover AvenuesLyttelton 0157
PO Box 11910Die Hoewees 0163
[T] ..................(012) 667-6270[F] ..................(012)-667 4258
DurbanSuite 1A295 Florida Road,Morningside 4001
[T] ..................(031) 303-6090[F] ..................(031) 303-6037
[e] [email protected][w] ...........www.mcubed.co.za
CORPORATE INFORMATION
Annual Report 2002m Cubed Holdings Limited
FINANCIAL REPORT m CUBED HOLDINGS LIMITED AND ITS SUBSIDIARIES (formerly Escher Group Limited)
FR FINANCIAL REPORTING: pg 27
m CUBED HOLDINGS LIMITEDThe financial statements for
m Cubed Holdings limited are presentedon pages 27-47.
FR COVER STORY: pg 14
POST MERGER PROGRESSJohn storey explains a year of change,growth and the successful merger ofEscher Group and m Cubed Capital.
JN1138 M CUBED AR 5/7/02 8:14 Page 2
FR • 28 February 2002 • PG 03
CODE OF CORPORATE CONDUCT:
Highest ethical standards and integrity are
key corporate values ..................................... 24
FR FINANCIAL REPORTING: m CUBED HOLDINGS LIMITED
Financial statements for the year ended
December 2001.
Independent auditors’ report ...................... 27
Certificate by company secretary................ 27
Directors’ report ........................................... 28
Principal accounting policies ...................... 30
Income statements ........................................ 32
Balance sheets .............................................. 33
Statements of changes in equity ................. 34
Cash flow statements ................................... 36
Notes to annual financial statements ......... 37
Annexure A: Interests in subsidiaries......... 47
FR FINANCIAL REPORTING: m CUBED HOLDINGS LIMITED
Actuarial reports........................................... 48
Shareholder analysis .................................... 51
Notice of annual general meeting .............. 51
FR EDITOR: PRESS RELEASES
m Cubed acquires 50% stake in Policy
Exchange ....................................................... 54
m Cubed Unit Trust Management
Company moves up 9 places in the
league tables ................................................. 55
Merger results in m Cubed Asset
Management team depth.............................. 55
COVER PHOTOGRAPH: Graham Kietzman.
Bullish investors read FR.
www.mcubed.co.za
ww
w.c
od
e.c
o.z
a 1
23
FR INDEPTH: pg 06
SUBSTANTIAL GROWTHThe combined company is a much morepowerful force. There is little doubt that all shareholders are beter off.
FR EDITOR: pg 54
GROWING AWARENESSm Cubed Holdings press releases
for 2002 by Alison de Lorm.
JN1138 M CUBED AR 5/7/02 8:14 Page 3
FR • 28 February 2002 • PG 05
FR UPFRONT
m CUBED GROUP EXCEEDS FORECASTHEADLINE EARNINGS PER SHARE INCREASES BY 28% TO 9.6 CENTSOperating profit grows 191% to R64 million. Assets under management increase to R43 billion. Assets under administration increase to R52 billion.
2002 2001 % change
Income statement
Headline earnings per share (cents) 9.6 7.5 28
Headline earnings (Rm) 53.9 21.5 151
Dividend per share (cents) 2.0 3.0 (33)
Net revenue (Rm) 272.3 102.2 166
Net attributable profit (Rm) 37.0 20.2 84
Operating profit (Rm) 64.0 22.0 191
Balance sheet
Net asset value per share (cents) 52.5 28.9 105
Net tangible asset value per share (cents) 26.8 24.6 26
Number of ordinary shares in issue (‘000) 750 000 300 000 150
Weighted average number of ordinary shares in issue (‘000) 562 500 288 534 95
Assets under management (Rbn) 43.0 17.8 142
Assets under administration (Rbn) 52.0 17.8 192
Margaret DawesFinancial director
Margaret Dawes BSc ACA CA(SA) HDip TaxMargaret qualified in the United Kingdom
as a chartered accountant. She was an audit
partner at a leading accounting firm for over
10 years prior to joining the m Cubed group
in 1999.
PRESS RELEASE: 21 MAY 2002 APPEARING IN BUSINESS DAY, BEELDAND BUSINESS REPORT
m CUBED GROUPEXCEEDS FORECASTFINANCIAL COMMENTARY
MCubed Holdings, South
Africa’s largest independent
multi-manager, is pleased to
report that it has exceeded
the forecast contained in the
circular to shareholders dated
16 August 2001. Headline
earnings increased by 151%
to R53.9 million and headline
earnings per share grew to
9.6 cents from 7.5 cents.
Assets under management
have grown significantly in
the last six months, from
OPERATING PROFIT UP 191% TO R64 MILLION
R33.4 billion at the half year to
R43 billion.
GROUP HIGHLIGHTS FOR THE YEAR ENDED 28 FEBRUARY 2001
• Successful merger of Escher
Group and m Cubed Capital
Holdings to form m Cubed
Holdings effective 1 August 2001
• Consistently good investment
performance enhanced by post
merger restructuring
• Empowerment JV relationship
forged with NUMSA Investment
Company
• Purchase of 50% stake in
Policy Exchange (Pty) Ltd,
which specialises in on-sale
of pre-owned endowment
policies
• The group has seen strong
business unit performance and
benefited from merger synergies.
PORTFOLIO PERFORMANCE
The benefits of m Cubed’s risk-
controlled approach have been
realised during this past year. Its
specialist multi-manager approach
showed its mettle particularly
well in the turbulent conditions
experienced. The 5th Quadrant
Survey shows m Cubed portfolios
occupying positions in the 1st or
2nd quartile of the general fund
categories over six months and
one year. In the multi-manager
comparisons, m Cubed portfolios
occupy 1st or 2nd position in
each of the four categories over
six months and one year to
February 2002.
R64m
R22m
HEADLINE EARNINGS PER SHARE UP 28% TO 9.6 CENTS
9.6 cents
7.5 cents
Financial synopsism Cubed Holdings Limited
JN1138 M CUBED AR 5/7/02 8:14 Page 5
PG 06 • 28 February 2002 • FR
Chairman’s reportm Cubed Holdings Limited
ACHIEVED HEADLINE EARNINGSPER SHARE FORECAST
The merged company m Cubed Holdings
Limited (m Cubed) combining Escher
Group Limited (Escher) and m Cubed
Capital Holdings Limited (m Cubed Capital),
achieved headline earnings per share of
9.6 cents, better than forecast.
Taking into account that these results
combine 7 months of the “old” m Cubed
Capital and 12 months of the “old”
Escher, the directors have proposed a
dividend of 2 cents per share (dividend
cover of almost 5 times).n
By Charles BothnerNon-executive chairmanFR INDEPTH
SUBSTANTIAL GROWTHCHAIRMAN’S REPORT, m CUBED HOLDINGS LIMITED
SUCCESSFUL MERGER PROCESS
N o merger is easy, especially in such
an uncertain and unstable financial
environment as we have experienced,
even when the businesses involved are
as complementary as our companies.
There have been some difficult calls, the
inevitable disappointments, and a handful
of people losses, but the process was
completed quite swiftly and democratically
yet decisively, following the shareholders’
approval on 11 September 2001 (believe it
or not, that was the date on which this
“new” business was born).n
STRONG PLATFORM FORSTRATEGIC DEVELOPMENT
The combined company is a much more
powerful force, and the successful merger
gives us a strong, substantial platform for
strategic growth. There is little doubt that
all shareholders are fundamentally better
off, although the stock market is negative
towards relatively small financial service
companies like m Cubed in the short term.
Shareholders’ risks are now that much
better balanced, and with the quantum
leap in size comes more stability, annuity
income and the clout to negotiate fair
margins, as well as the ability to compete
in any environment.n
SYNERGIES ACHIEVED
In the short period since merger
implementation, we have started to
generate expected synergies and have
made good progress, especially in the core
asset management business.
There are more synergies to come, but we are
intent on taking a longer-term view to build
off our base. Both m Cubed and Escher
arrived where they did pre-merger in a bit of
a rush. Our new vantage point gives us the
advantage of a more measured approach,
looking to leverage off our core strengths,
especially in the multi-manager arena.n
Charles BothnerNon-executive chairman
Charles Bothner BComm (UCT) MA (Oxon)Charles is currently the chairman of Cebiko (Pty) Ltd. He is also
a director of a number of other companies and general counsel
to Absolute CRD cc.
RETAINING OUR ENTREPRENEURIAL SPIRITW e plan to leverage off our core strengths without stifling the entrepreneurial spirit
and style which has helped get us where we are. A long time general feature of the
financial service business environment is the shifting set of rules and regulations. This
means that we have to be responsive to our markets’ demands, and creative in adapting to
each set of constraints, which also provides the sharp-witted and the bold with profitable
opportunities. Whilst these sources of revenue are by definition erratic, we and others have
been successful in consistently replacing or adding profit streams to our core annuity
revenue. Again, the merger has given us the opportunity to reduce our reliance on such
entrepreneurial profits, and at the same time to make them, paradoxically, more consistent.n
The successful merger gives us a strong, substantial platform for strategic growth. The combined company is a much more powerful force.There is little doubt that all shareholders are fundamentally better off.
“With the quantum
leap in size comes
more stability,
annuity income and
the clout to negotiate
fair margins, as well
as the ability to
compete in any
environment.”
JN1138 M CUBED AR 5/7/02 8:14 Page 6
FR INDEPTH By Charles BothnerNon-executive chairman
Chairman’s reportm Cubed Holdings Limited
ENTREPRENEURIAL PROFITSCONSISTENTLY ENHANCE COREPROFITABILITY
The “old” Escher Structured Products (ESP)
performed to expectation. And, as you
would expect, our local and international
Specialised Investments business, providing
international tax and investment planning
and structuring to the domestic and offshore
institutional and private funds, performed
very well.
This whole productive scenario is the result
of the application of our entrepreneurial skills
and creative solutions to market needs,
“adding peppermint to vanilla” where that
makes sense, all the time coping positively
with sometimes reactionary rules and
regulations. For m Cubed, it is not a case
of “the problem is...” it is a case of “the
opportunity is...” n
ADMINISTRATION OUTSOURCINGOPPORTUNITIES IN REALIGN-MENTS AND OFFSHORE
A utomated Outsourcing Services, our
third party administration outsourcing
business, does well as a controllable supplier
of administrative services to an exacting
standard, essential for us to run our business.
With the rearrangement and rationalisation
taking place in the banking and financial
services industry, we would hope to join in
and play a constructive role. There is
certainly scope for parallel realignment
around established strengths in the third
party administration outsourcing business.n
OFFSHORE DEVELOPMENTS
MCubed has a controlling interest in
Escher UK Asset Management Limited,
a UK multi-management pioneer with
£120m under management. There is definite
potential in this large market – SA enjoys a
6% share of the global multi-manager
market, the UK only 3% – and we have a
position, but we will take care to develop
any strategy with patience. It is nonetheless
exciting to be able to have just such an
opportunity from an existing base.
We are also far advanced with plans to
capture existing offshore Trust business in
our own entity, which will function to our
own high standards.
We are investigating the potential for an
offshore representation of our third party
administration and outsourcing business
AOS. We may well have an opportunity
to market our world class outsource
capabilities at a competitive export price,
building on our experience and our
investment. In this business the fixed costs
can be high, but once those costs are
covered, business revenues enhance profits
in a geared fashion.n
EMPOWERMENT INITIATIVES IN PLACE
W e have undertaken some interesting
empowerment initiatives, which have
the potential to bear fruit. The multi-
manager solution seems absolutely ideal for
a number of the situations where trustees
are responsible for the allocation of funds,
and our partnering approach makes good
sense. If our strategy succeeds, we would
like to see empowerment partners earning
quite a meaningful stake and voice in
m Cubed, which would generate further
opportunities.n
SOLUTIONS HAVE MULTI- MANAGEMENT AT THE HEART
M ost of the investment solutions to the
opportunities resulted in institutional
JN1138 M CUBED AR 5/7/02 8:14 Page 8
and individual money flows into our core
multi-manager mechanism, which generated
good investment performance over the
past year. In this way, our core asset
management business is at the heart of
almost everything that we do. We seek
to offer solutions that add value in all
that we do, and especially in crafting multi-
management solutions.n
GOOD OPPORTUNITIES FORGROWTH IN MULTI-MANAGEMENT
W e continue to believe that there is good
growth potential in the multi-manager
investment solution for institutions and
individuals. Each year investing has
become more and more complex, for both
individuals and institutions, many of whom
also find the alternatives daunting: Local or
overseas? Shares, bonds or cash? Hedge
funds? Which sector? Which fund(s)?
Which professional investment advisor?
This complexity is overlaid with rules and
regulations, exacerbating the anxiety.
So, for individuals and for, say, trustees
of pension funds with heavy fiduciary
responsibilities, the multi-manager solution
(as professionally practised by m Cubed) is
part of the answer. This multi-manager trend
still has a long way to develop in South Africa
and overseas. A recent study discovered
that some 75% of medium to large funds
employed two or more investment managers,
an indication of clear opportunity, since
“split funding” has been proven to be
flawed.n
SHARE OWNERSHIP ANDLIQUIDITY
MCubed is owned by its staff with some
40%, PSG Group with some 22%, and
Royal London Scottish Life with 12%. These
shareholders make up almost three quarters
of the ownership of the company. Whilst
the dominant ownership has many valuable
advantages, including the determined
maintenance of our independence as a
competitive advantage, it can result in the
perception that there are relatively few
shares available to trade. But, we are in a
new strategic building stage of our combined
business, so patience will be required and
hopefully rewarded as our management
team apply themselves to our strategic
plans.n
THANKS
Thanks and appreciation have been
earned by the people at m Cubed who
have made the merger work, strongly led by
John Storey who combines a firm grasp of
the detail of the dynamics underlying our
business with a clear strategic vision.
Thanks to our supportive distribution
channels, in particular our independent
financial advisors (IFA’s) with whom m Cubed
has assiduously built mutually rewarding
relationships. These relationships are a
valuable investment that has taken time to
mature.
Royal London Scottish Life has delivered
quiet, constant support, and it is reassuring
If our strategy succeeds, we would like to see empowerment partners earning quite a meaningful stake and voice in m Cubed
EMPOWERMENT INITIATIVES HAVE POTENTIAL TO BEAR FRUIT
JN1138 M CUBED AR 5/7/02 8:14 Page 9
Take your eyeoff it and
you’re history.
PG 10 • 28 February 2002 • FR
Chairman’s reportm Cubed Holdings Limited
to have this £30 billion mutual as a
shareholder.
PSG knows the financial services and
investment businesses, and is in a position
to add considerable value. Although their
holding in m Cubed is much less than their
previous controlling interest in Escher, PSG
has continued to play a committed role on
a number of strategic and operational fronts,
and thanks go especially to Jannie Mouton
and Chris Otto for their pro-active support.
It is important for us to enjoy lynchpin
shareholders of stature and size.
The newly constituted board has also
suffered merger pangs, and has had to
work hard to keep up with the pace of
developments. Corporate governance in
general is high on the list of priorities and
your board, conscious of the fiduciary
responsibilities and the hydra-like nature
of the task, has best relevant practice under
constant watch.n
THE YEAR AHEAD
The year ahead is going to be challenging.
The financial environment remains
uncertain and volatile. We are also going to
be affected, as usual, by the shifting rules
and regulations that govern our operations,
especially the rules governing foreign
direct investments which are currently in
some sort of limbo awaiting the Myburgh
Commission findings. Nevertheless, we
have budgeted for overall growth.n
CMB BOTHNERNon-executive chairman
17 May 2002
There s nothing like a stream of endless administration to get in the way of one s
true ability. AOS provides financial service administration solutions for:
ll Unit Trusts ll Mutual Funds ll W rap Funds ll Life Investment Products
ll Asset Management. Leaving you free to focus on your core business.
If paperwork is taking your company s eye off the ball, call Bruce Dunnington now
on (011) 340 2450 or fax (011) 388 1276. email [email protected]
JN1138 M CUBED AR 5/7/02 8:14 Page 10
PG 12 • 28 February 2002 • FR
MEETING THE BOARDBy Johan SteynGroup company secretary
m Cubed board of directorsm Cubed Holdings LimitedFR LEADERSHIP
The newly reconstructed
m Cubed board comprises
executive and non-executive
directors, including a non-
executive chairman. Each
of the directors brings a
wealth of experience in the
financial services related
industries, both locally
and in the international
financial services markets.
CHARLES BOTHNER (58)(Non-executive
chairman)
BComm (UCT) MA (Oxon)
Charles is currently the
chairman of investment
house Cebiko (Pty) Ltd.
He is also a director of a number of other
companies and general counsel to Absolute
CRD cc.
JOHN STOREY (40)(Managing director)
CA(SA) CAIB(SA) MBA PrIMM
John has 18 years'
experience in the
financial services
industry, as an
auditor, consultant and senior executive.
RUARIDH BUDGE (53)(Alternate non-
executive director -
Scottish)
BSc FFA
Ruaridh has more than
30 years' experience in
all the divisions of Royal London Scottish
Life, where he is deputy chief executive,
directly responsible for four operational
divisions. He is also a Fellow of the Faculty
of Actuaries and a Director of Dunedin
Income Growth Investment Trust.
ANNE CABOT-ALLETZHAUSER (52)(Joint managing
director: Asset
Management)
BA MA MAT MPhil
Anne has been
involved in global fund management
for the past 23 years. Anne's work in
developing quantitative risk-targeted
investment solutions has spanned four
continents, North America, Asia, Africa
and Europe.
PHILIP CROESER (38) (Non-executive
director)
BComm (Stell)
Philip founded PSG
Escher Investments
in 1997. He has
extensive experience as an executive and
investment consultant.
MARGARET DAWES (43)(Financial director)
BSc ACA CA(SA) HDip Tax
Margaret qualified in
the United Kingdom as
a chartered accountant.
She was an audit
partner at a leading accounting firm for over
10 years prior to joining the m Cubed group
in 1999.
JANNIE MOUTON (55) (Non-executive
director)
BComm (Hons) (Stell) CA(SA)
AEP (Unisa)
Jannie is founder and
chairman of the PSG
Group. He is chairman of the Channel Group,
PSG Investment Bank and Capitec Bank.
CHRIS OTTO (52)(Non-executive
director)
BComm LLB (Stell)
Chris is managing
director of PSG Group
Limited and director
of PSG Investment Bank, Capitec Bank
and Channel Group.
WINSTON ROUX (67)(Non-executive
director)
BComm
Winston was nominated
to the board by Royal
London Scottish Life.
Formerly the deputy chairman of Standard
Equities, a wholly-owned subsidiary of
the Standard Bank of South Africa, he
is a director of a number of companies,
including Incentive Holdings Ltd.
IAN SINTON (45)(Non-executive director)
BComm LLB
Ian has practiced as an
attorney for more than
20 years and is a
founding member and
senior partner of attorneys Ramsay Webber
& Company where he advises various
listed companies in the financial services,
insurance and construction sectors. He also
serves as a non-executive director of various
unlisted companies and trustee of investment
trusts, employee incentive trusts and pension/
provident funds.
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E
ROGE
R W
OOLD
RIDG
E
The board is made up of three
executive and six non-executive
directors. Of the latter, four are
independent non-executive directors.
The board seeks to fulfill its
responsibilities as set out in the
King I Report.
JN1138 M CUBED AR 5/7/02 8:14 Page 12
John Storey CA(SA) CAIB(SA) MBA PrIMMJohn has 18 years’ experience in the financial services industry,
as an auditor, consultant and senior executive.
PG 14 • 28 February 2002 • FR
POST-MERGER PROGRESSIN THIS SECTION:
• 2002’s numbers
• Escher Group / m Cubed Capital
merger - the effect on business
• 5 key group challenges for 2002
• Segmental report back
• The year ahead
Managing director’s reportm Cubed Holdings Limited
By John StoreyManaging director
John StoreyManaging director
FR COVER STORY
THE GROUP’S 2002 NUMBERS SHOW STRONG GROWTH2001/2 was a year of change, growth
and refocus, made memorable due to the
successful merger of Escher Group and
m Cubed Capital.
O ur numbers show strong growth in bottom
line, annuity income and assets under
management. I am pleased to report that
we have achieved the forecasts contained
in our circular to shareholders dated
16 August 2001. Headline earnings increased
by 151% to R53.9m and headline earnings
per share grew to 9.6 cents from 7.5 cents,
28% up year-on-year. Our assets under
management have grown significantly in the
last six months, from R32bn at the half year,
to R43bn. We remain committed to creating
new business and employment opportunities
and to delivering shareholder value.
THE ESCHER GROUP / m CUBEDCAPITAL MERGER - WHAT ITMEANT FOR THE BUSINESSTEAM INTEGRATION
W e focused on integrating the asset
management teams, where the bulk
of the merger took place. A handful of
individuals were reassigned responsibilities
elsewhere in the group which matched their
skills sets. Some natural rationalisation took
place, which will help our cost base going
forward.
MANAGING DIRECTOR’S REPORT, m CUBED HOLDINGS LIMITED
JN1138 M CUBED AR 5/7/02 8:14 Page 14
A RECONSTITUTED BOARD OF DIRECTORS
I t was necessary to reduce the number of
board members (refer page 29), and it was
with sadness that we bade farewell to non-
executive directors Humphrey Borkum,
Brian Duffin, Cornie Foord, Andre la Grange
and Johan Pieterse. Each of them made a
meaningful contribution to the success of
the businesses on whose boards they served,
and remain good friends of the new group.
Late in 2001, Philip Croeser resigned as
managing director of the asset management
business, but continues in a non-executive
director capacity. At year end, Leon de Wit
indicated his intention to resign as a non-
executive director in order to devote his
energies to Channel Life. Tracy van der
Heijden is leaving us to begin a new career
and resigned in May 2002.
REVAMPING OUR VISION, MISSION AND CORE IDEOLOGIES
T he merger demanded a reformulation of
our mission, vision and values, and the
exploration of our core ideologies and raison
d’être. We identified “partnership” and
providing “the full range of risk-targeted
solutions” as the common platform and
focus points across each business.
Recognising how important it is for the
group to contribute meaningfully to the
broader community, we had commited, at
time of writing, to partner with the National
Business Initiative (NBI), a non-profit
business collective that undertakes education,
housing and other projects in previously
disadvantaged communities.
STAFF REMAIN THE LARGEST PROPORTION OF SHAREHOLDERS
T he new group’s 317 staff and manage-
ment still own the largest proportion of
m Cubed shares.
SHAREHOLDERS PERCENTAGE OF SHARES IN m CUBED HOLDINGS LTD
Staff 40.0%
PSG Group 22.2%
Royal London
Scottish Life 12.5%
Other 25.3%
CORE COMPETENCIES AND PRODUCT OFFERING STRENGTHENED AND BROADENED
T he merger positioned the group strongly
going forward. It broadened our core
competencies and our combined product
and service offering, resulting in synergies
and economies of scale. It also resulted in
the reconstitution of the group into five core
business areas:
• Institutional asset management
• Distribution to independent financial
advisors (IFA’s)
• Structured products
• Specialised investments
• Outsourcing to third parties
It is these five business groups that I will
use for segmental reporting purposes.
ADDRESSING THE FIVE KEYGROUP CHALLENGES WE IDENTIFIED FOR THE 2002 FINANCIAL YEAROver and above the attention devoted to the
merger process, we focused on addressing
five key group issues in 2001/2002:
the investment performance of some of
our higher risk funds, distribution,
administration and operations, the sourcing
of talent and branding.
CHALLENGE NO 1: INVESTMENT PERFORMANCE ENHANCED BYPOST-MERGER RESTRUCTURING
T he final phase of the m Cubed/Escher
asset management team marriage was
completed on 23 November 2001, after the
transitioning of both the Escher and m Cubed
portfolios, the merging of overlapping
products and the introduction of additional
specialist managers.
Fundamental to the success of this exercise
were three key principles:
• that both Escher and m Cubed remain
committed to a shared philosophy that
risks should only be taken where there
is a high probability of success
• that any changes envisaged should not
negatively impact the risk profiles required
of our clients
• that the cost of any transition exercise be
kept to an absolute minimum.
As such, any changes that did take place
were a mere fine-tuning of our existing
models and strategies.
With regard to the introduction of new
specialist managers as building blocks in our
range of products, the merger also provided
the asset management division with a
superb opportunity to completely review
the range of asset management talent
beyond our existing line-up. It was gratifying
to see that the rapid evolution of the asset
management industry now meant that
there was a far broader range of specialist
managers at our disposal. Some very
exciting new players were emerging
who could better complement the type of
mandate differentiation we required.
The management companies which were
new to both the ex-m Cubed Capital and
ex-Escher teams and which were added
to our array of specialist managers were
Prescient, on the fixed interest side, and
PeregrineQuants and Allan Gray for equities.
What often happens in a merger is that
performance is wiped out when portfolios are
combined or streamlined, or when the focus
is shifted to business issues. That said, there
was minimal impact on portfolio returns
during the realignment of the portfolios
exercise. The fact that we kept the
transaction costs of the transition to a
minimum is evidenced by the rankings of
our best investment view portfolios in the
Alexander Forbes Manager Watch surveys
for the one year to 28 February 2002.
By year end, our largest balanced multi-
manager funds ranked as follows:
• 3rd (out of 22) in the domestic-only
institutional funds category
• 10th (out of 33) in the larger category of
domestic/international funds.
Our above-average exposure to the
rampantly running bulls in the resource
sector was a major contributing factor to
our positions in the league tables.
In summary, the benefits of m Cubed’s
risk-controlled approach have been realised
during this past year. m Cubed’s specialist
MULTI-MANAGER APPROACH SHOWED ITS METTLEPLEASING INVESTMENT PERFORMANCE FOR THE YEAR
FR • 28 February 2002 • PG 15
JN1138 M CUBED AR 5/7/02 8:14 Page 15
multi-manager approach showed its mettle
particularly well in the turbulent market
conditions experienced. True like-with-like
comparisons between funds are difficult to
achieve. The 5th Quadrant Survey, which
comes closest to such a comparison, shows
m Cubed portfolios consistently occupying
positions in the 1st or 2nd quartile of the
general fund categories over six months
and one year. In the multi-manager
comparisons, m Cubed portfolios occupy
1st or 2nd position in each of the three
categories over six months and one year to
February 2002.
CHALLENGE NO 2: SUCCESSFUL EMPOWERMENT JV RELATIONSHIP FORGED WITH NUMSAINVESTMENT COMPANY
I n addition to the
existing relationship
with the Mineworkers
Investment Company,
m Cubed entered
into a joint venture
relationship with
Numsa Investment
Company. Numsa,
the National Union
of Metalworkers of
South Africa, is one
of the largest organised unions in the country.
This joint venture will enable m Cubed to
provide robust and risk-controlled investment
solutions to funds that represent Numsa’s
membership base. It will play an important
social development role as the Numsa
Investment Company is owned by an
investment trust whose sole beneficiaries
are the metalworkers. Through trust
activities financed
by the joint venture,
the livelihood of
metalworkers will
be enhanced.
Looking ahead,
we are hoping to
mobilise industry
funds in the sectors
influenced by
Numsa. In addition,
we aim to empower
union trustees to engage as equal
partners with their employer counterparts, to
educate Numsa office bearers and trustees
on retirement fund investment issues and
establish a communication platform for
Numsa and its members.
CHALLENGE NO 3: DISTRIBUTION STRENGTHENED, BUT REQUIRES ONGOING FOCUS
D istribution issues
were addressed
through the
strengthening of
m Cubed’s broker
support teams
across the country.
These teams
service m Cubed’s
supporting IFA’s
through whom
we market our
investments. This process is not complete and
we are continually finding ways to strengthen
existing and build new relationships with
IFA’s. In addition, with the acquisition of 50%
of Policy Exchange (with an additional 20%
subject to Competition Commission
approval, pending at the time of writing),
the group has significantly increased its list
of supporting IFA’s.
CHALLENGE NO 4: OUR SEARCH FOR TALENT CONTINUES
O ur search for
talent remains on
the agenda
in the new year,
although we
have significantly
strengthened the
team through some
senior appointments,
including Robin
Read (head of
Life Investment
Products), Michael Bastenie (head of IT
operations), and Candice Phillips as group
compliance officer.
CHALLENGE NO 5: NOW THAT THE BRAND HAS BEEN RESOLVED,BRAND BUILDING IS IMPERATIVE
I n order to resolve the issue of branding
the new group, we appointed external
branding specialists to conduct independent
research and put forward branding
recommendations. These recommendations
have been implemented, and the newly
named m Cubed group sports a new logo
and corporate identity. Group brand and
stature-building within our chosen target
markets is a priority for 2002/2003.
PG 16 • 28 February 2002 • FR
Managing director’s reportm Cubed Holdings Limited
By John StoreyManaging director
MORRIS MTHOMBENI. We aim toempower union trustees.
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MICHAEL BASTENIE heads up the group’s IT operations.
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CANDICE PHILLIPS, group compliance officer, has put regulatorycompliance and good corporate governance high on the agenda.
With the aquisition of 50% of
Policy Exchange, the group has
significantly increased its list of
supporting brokers.
FR COVER STORY
IAN BROWN. These JV’s play animportant social development role.
ROBIN READ will focus onenhancing service levels.
PORTFOLIO* MANDATE CATEGORY 6 MONTHS 1 YEAR
Segregated Full discretion (core/satellite) Domestic 1st out of 24 2nd out of 23
Focused 75 Global Aggressive 1st out of 17 5th out of 16
Focused 75 Aggressive Multi-managers 1st out of 6 2nd out of 5
Focused 65 Balanced Global Multi-managers 1st out of 9 2nd out of 9
Diversified 65 Balanced Global Multi-managers 4th out of 9 6th out of 9
Diversified 50 Moderate GlobalMulti-managers 1st out of 4 1st out of 4
* Portfolios not covered by the survey: Diversified 33, Low Volatility
SOURCE: 5TH QUADRANT (MARCH 2002)
EXTRACT FROM THE 5TH QUADRANT SURVEY
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JN1138 M CUBED AR 5/7/02 8:14 Page 16
SEGMENTAL REPORT BACKAs mentioned, for segmental reporting purposes the group is divided
into five segments: institutional asset management; retail investments
(distribution of investment products to individuals via IFA’s); structured
products; specialised investments; and outsourcing to third parties.
1. INSTITUTIONAL ASSET MANAGEMENT
RmRevenue 98
Headline earnings 10
COMPONENT BUSINESSES FOCUS
m Cubed Asset Management Provides local specialist multi-manager asset management to institutional and private clients. By structuring the investmentprocess to minimise purely randomoutcomes, it is able to deliver risk-controlled, targeted results.
Escher UK Provides specialist asset management and investment governance services for UK-basedpension schemes of all sizes.
Corporate Money Managers Specialises in cash management (a 50% joint venture with Brait).
m Cubed Asset Management team successfully integrated
T his business was most directly impacted by the merger. The Escher
and m Cubed Capital investment teams were integrated relatively
quickly, in no way impacting on performance delivery. This enabled
the team to focus on a complete review of the underlying asset
manager structure and was followed by the successful implementation
of the new combined portfolio structure - an enormous and
complicated undertaking. Looking ahead, the business intends to
grow its range of portfolios and products to provide even more
targeted risk-controlled solutions for clients. With this expanded
“multi-manager toolbox”, it hopes to build market share by
attracting significant new business across the total size spectrum
of clients.
Escher UK enjoyed some successes, but still needs to reach
critical mass
H ighlights for this international specialist multi-manager included
its launch of the TEAMS DC Single Investment Platform, including
the TEAMS Stakeholder (the only multi-manager stakeholder to
be launched) and its addition of a suite of active bond funds to the
TEAMS range of funds. Its flagship UK Equities Fund significantly
outperformed the benchmark by 9.5% for the calendar year 2001.
In the year ahead, it aims to expand its penetration among pensions
and investment consultants by capitalising on its five year UK
equity performance track record. It also aims to enhance its
distribution capability through an agreement with a major UK
life office.
Corporate Money Managers (CMM) reaches critical mass
This cash management business (a 50% joint venture with Brait)
reached critical mass, surpassing the R1.5bn assets under
management mark by year end. After two consecutive years of high
growth, capacity needs to be increased by appointing additional
staff and consolidating and streamlining new systems. This, together
with the expansion of its existing client base and market share, are
priorities for the new year.
VIMAL CHAGAN GERRIT LE ROUX DAVID WAKERLEY
Rapid integration of the asset management teams followed by successful implementation of a combined portfolio structure.
ANNE CABOT-ALLETZHAUSER
FR • 28 February 2002 • PG 17
JN1138 M CUBED AR 5/7/02 8:14 Page 17
PG 18 • 28 February 2002 • FR
2. RETAIL PRODUCTS SOLD VIA INDEPENDENT FINANCIAL ADVISORS
RmRevenue 104
Headline earnings 20
COMPONENT BUSINESSES FOCUS
Life investment products Provides compulsory and voluntary
life products and local and
international hedge and capital
protection investments under the
life licence. Includes single and
recurring premium endowment and
retirement annuities, compulsory
purchase equity linked living
annuities and pension and
provident preservation funds.
Retail asset management Offers local and international multi-
manager unit trusts and investment
portfolios.
International products Offers a range of products from
mutual funds to life cover in order
to provide the appropriate asset
allocation, across the risk spectrum,
for our clients. It also provides
multi-manager global investment
opportunities for local and
international clients in conjunction
with SEI, a premier US-based
global multi-manager.
Alternate investments Creates alternate, non-market
correlated, specialised international
products.
Employee benefits Offers umbrella pension and
provident funds.
National sales team Services the IFA’s who distribute
the products detailed above.
Life investment products
The period to February 2002 saw significant growth in this division
in both the Rand amount of new business written and in the breadth
and depth of new products and portfolios launched. In addition, the
administration process and back-office infrastructure were enhanced.
The main focus for the year to February 2003 will be the roll-out of
the “Client for Life” strategy. This strategy encompasses a further
significant investment in our customer service model. It will focus on
exponentially enhancing the service levels to our three main customer
groups: policyholders; brokerages and IFA’s; and broker consultants.
We will also extend our range of risk-targeted solutions by launching
additional products and portfolios. Other than the industry-relevant
challenges relating to the more stringent regulatory environment,
significant challenges facing the division are the continued growth
in new business and the focus on decreasing the administrative cost
per policy.
Retail asset management shows pleasing growth
The unit trust management company moved up nine places to 6th
largest by assets under management at the end of December 2001,
and is recognised as a leader in the growing field of institutional unit
trusts. A number of institutional unit trusts were launched during the
year, taking our total number of funds to more than 30 and covering
almost all of the critical asset classes required for constructing diversi-
fied portfolios. The Smart Cash Fund (a money market unit trust
accessible to individual investors) was also launched during the year.
Initial work has begun on launching new funds where current gaps
exist, and this will be the focus in the year to come.
Our wrap funds were rebranded as the m Cubed Investment
Portfolios during the year to reflect the difference between our
funds and similar options available in the industry. The performance
of the funds has been consistently good and remains amongst the
best in the industry over the last two years. Whilst the industry was
forecasting the demise of the wrap fund less than a year ago,
we believe the flexibility afforded to this structure will ensure its
survival and it will become a vibrant alternative investment vehicle
in the future.
International investments restructured for efficiency, launches the
first of its “alternate strategy products”
This business focuses on creating innovative products and structures
that enable clients to effectively manage their wealth and preserve
and grow capital, at a relevant international level, in terms of current
market and exchange control factors. The team was restructured
during the year into niche product silos, enabling it to address
all aspects of client needs from a more structured expertise base.
An important development was the approval of its fiduciary licence,
granted by the Guernsey Financial Services Commission, operating
as m3 Trustees Limited. Also exciting was the successful launch of
the Global Hedge Moderate Fund, the first in an innovative range
of alternate strategy and structured products.
Looking ahead, in the new year the focus will be on establishing its
own offshore administration system in order to provide faster
and more accurate reporting to clients. In addition, it will focus on
UNIT TRUSTS MANCO 6TH LARGEST IN THE INDUSTRY BYASSETS UNDER MANAGEMENT AT 31 DECEMBER 2001
Managing director’s reportm Cubed Holdings Limited
By John StoreyManaging director
HANNES SOL BRIAN KNOTT ROBIN READ
The main focus for 2003 will be the ‘Client for Life’ strategy.
JN1138 M CUBED AR 5/7/02 8:14 Page 18
maintaining existing and growing
new relationships with high net
worth clients through the
enhanced expertise of its skilled
team. In so doing, it hopes to
continue to grow the business
as a whole, as fast as possible,
within the constraints of current
regulations.
Alternate investments
This business was launched
in October 2001, under the
direction of Carla Fiford (former
CEO of Magnum Global Funds),
to focus on the creation and
marketing of innovative alternate
and specialised international
products.
Major achievements during its
short life include the launch
of the Global Hedge Moderate
Fund, a fund of funds that has a
very low volatility and achieved
7% in Dollar terms in the year
2001 (compared to the World
Equity Index which was down
17.8% for the same period). The
Minimum Return Fund, which
offers investors a 5%compounded
interest over a five-year period
with a 25% exposure to the
upside only of a conservative
basket of hedge funds, was
also successfully launched.
Imperatives for the year ahead
include positioning m Cubed as
the leading hedge fund provider
in South Africa. In order to
achieve this, the intention
is to create innovative products
that address client needs
across the risk spectrum, from
guaranteed products to products
containing an element of
gearing.
Employee benefits
This business focuses on pro-
viding individual investment
choice employee benefit
administration to self-standing
and umbrella funds for our
financial intermediaries and
consultants. We have an umbrella
pension and provident fund
registered with the Financial
Services Board, which gives
small- to medium-sized companies
the opportunity to provide their
employees with a cost-effective,
yet efficiently and professionally
managed retirement fund.
During the year, all clients were
transferred onto the Ten50six
administration platform, which
has enhanced the stability and
reliability of our administration
service while also providing a
greatly enhanced service offering
to clients. This additional service
offering enables us to provide
additional solutions for our
partners. The forthcoming year
will be an important one in
which we focus on staffing and
growing our client base.
Skills development and depth
result in pleasing performance
of national sales team
T his team, which services
the IFA’s who distribute the
investment products described
above, had a successful year in
terms of divisional distribution
and product development. We
embarked on extensive and
focused training to develop the
team technically and, although
targets were increased by 35%
during the year, the achieved
rate was 98% of the new target.
Looking ahead, the team aims to
Absa.Just one of the
names thatbanks on us.
PG 20 • 28 February 2002 • FR
Managing director’s reportm Cubed Holdings Limited
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CARLA FIFORD, a variety of alternate investments launched, with more planned
in the coming months.
RODG
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ERIC STRESO. We aim to drive new product and service development in line
with market needs.
There’s nothing like a stream of endless administration to get
in the way of one’s true ability. AOS provides financial
service administration solutions for: ● Unit Trusts
● Mutual Funds ● Wrap Funds ● Life Investment Products
● Asset Management. Leaving you free to focus on your
core business.If you’d like to join the growing list of great
companies using our services, call Bruce Dunnington now on
(011) 340 2450 or fax (011) 388 1276. email
JN1138 M CUBED AR 5/7/02 8:14 Page 20
increase its distribution base, and drive new product and service
development in line with market needs. In fact, at the time of writing,
we were in the process of establishing Moonstone Compliance (Pty)
Ltd, a joint venture aimed at providing outsourced compliance officer
services for our IFA’s. We have also secured participation in a loyalty
program for the agricultural community. This venture gives us access
to 50 000 individuals and the opportunity to benefit our supporting
brokers by referring these clients to them for financial advice.
Finally, the team will look for opportunities to create solutions for the
broader IFA base, enabling it to provide more solutions to more
clients, and to achieve its targets without being overly exposed to
foreign direct investment.
3. SPECIALISED INVESTMENTS
RmRevenue 14
Headline earnings 7
T his niche provider of customised financial solutions for institu-
tions, corporates and high net worth individuals, with a focus on
regulatory and offshore arbitrage, concluded transactions with a
value of approximately R5.5bn with leading listed entities. During
the year, the division was repositioned to include low risk lending
transactions that create opportunities within the rest of the group.
Several new products were developed for deployment during the
coming financial year. The challenge is to focus on client needs to
produce financial solutions linked to commercial transactions.
Looking ahead, there will be a focus on designing products that can
be sold through m Cubed’s existing distribution channels.
4. STRUCTURED PRODUCTS
RmRevenue 15
Headline earnings 8
This business specialises in the design, implementation and
administration of derivative-based capital-secured investment
products for the retail and institutional markets. The majority of its
products provide exposure to local and offshore markets while
providing a level of capital protection. The past year saw the launch
of 27 tranche products, with a market value of assets exceeding
R5bn. In addition, more than 100 retirement funds have invested in
structured products on a pooled or segregated basis. The merger
provided an opportunity for the team to tap into the strong m Cubed
retail distribution base, and this was the channel selected for the
distribution of its first structured hedge fund product, launched in
February of this year.
For the year ahead, the team aims to expand its retail individual
business and focus on strengthening relationships with its distribution
partners. It will also continue to extend its product range and focus
on providing superior regulatory and administrative support after deal
implementation.
5. OUTSOURCING TO THIRD PARTIES
RmRevenue 32
Headline earnings 0
Automated Outsourcing Services (AOS) provides local and inter-
national clients with a full suite of administration services for
unit trusts, offshore mutual funds, wrap investment products,
employee benefits, asset management portfolios and life investment
products.
During the year under review, our third party administration
outsourcing subsidiary grew substantially with the addition of a
number of significant asset management and wrap fund clients.
Highlights for the year under review included:
• an increase of R12bn in assets during the year
• the successful conversion of 100 000 ABSA unit trust clients onto
AOS’s administration platform
• adding employee benefit administration to the services offered by
the group (following the acquisition of Escherwise)
• the finalisation of the setting up of an offshore operation in
Guernsey.
At year end, AOS had in excess of R52bn in assets under administration.
Future growth is expected from the administration of offshore funds
through AOS Guernsey and the employee benefit administration
divisions.
ANDRÉ VISSER
27 products with an asset value exceeding R5 billion launched during the year.
JEAN-PIERRE MATTHEWS
FR • 28 February 2002 • PG 21
In the 2002 Financial Mail Top Companies survey,
m Cubed Life was top of the life assurers’ league table for
growth in Net Premium Income. (see overleaf)
JOHANN LARNEY
Transactions with a value of R5.5 billion concluded with leading entities.
RAY ESKINAZI LEON DU TOIT
JN1138 M CUBED AR 5/7/02 8:14 Page 21
PG 22 • 28 February 2002 • FR
By John StoreyManaging director
GROUP CHALLENGES FOR THEYEAR AHEADWe have identified the following as key
areas of focus for the group in the coming
year:
• Delivering good, risk-controlled performance
across all of our funds, and in some
instances, extending the range of risk-
targeted solutions currently on offer via
our investment platforms.
• Building market share in each of our
businesses, and achieving critical mass
in our asset management and employee
benefits businesses, as well as our
outsourcing operation, AOS, and
Escher UK.
• Continuing our search for empowerment
and other partnerships to forge mutually
beneficial joint ventures.
• Attracting additional talent to the
organisation - we plan to invest both
at the top and strengthen middle
management, where individuals can
be nurtured to occupy the vacuum that
forms as more experienced individuals
develop. Employment equity and
affirmative action form a key part of our
recruitment process.
• And finally, building the brand and stature
of the group in our selected markets.
IN CLOSING...A final word of thanks must go to Charles,
my chairman, to my co-directors, the
executive and the wider team at m Cubed
Holdings. I am privileged to work alongside
such a talented group of individuals. I look
forward to next year with confidence and
enthusiasm.
JOHN STOREY
Group managing director
17 May 2002 n
SOURCE: FINANCIAL MAIL, SPECIAL SURVEY - TOP COMPANIES (28 JUNE 2002)
LIFE INSURERS’ TOP LEAGUE (EXTRACT)
Ranking by Net Premium% inc Total assets Income Growth in
Year end Increase in NPI Company R’000 R’000 NPI %
Dec 00 1 m Cubed 5 245 856 3 812 785 430,62Dec 99 13 m Cubed 1 705 946 718 559 13,47
Mar 01 2 Absa 2 092 325 1 031 568 189,3Mar 00 9 Absa 1 277 021 356 574 48,78
Mar 01 3 Investec 12 738 452 12 155 882 130,09Mar 00 8 Investec 7 878 096 5 283 108 49,2
Jun 00 4 Hollard Life 2 009 636 856 523 96,44Jun 99 4 Hollard Life 1 374 038 436 029 96,98
Jun 00 5 Discovery Holdings 1 390 900 1 871 400 78,4Jun 99 7 Discovery Holdings 948 200 1 049 000 51,28
Jun 00 6 McLife Assurance 18 772 4 443 75,54Jun 99 18 McLife Assurance 16 504 2 531 *9,61
Mar 01 7 Saambou Life 865 401 587 265 75,06Mar 00 2 Saambou Life 448 877 335 469 388, 08
Jun 00 8 Regent Life 495 220 98 108 68,63Jun 99 19 Regent Life 525 090 58 178 -27,69
Dec 00 9 Pinnafrica Life 12 099 14 298 56,6Dec 99 1 Pinnafrica Life 12 316 9 130 11 757,14
Jun 00 10 Clientele Life 144 723 83 340 49,84Jun 99 11 Clientele Life 108 775 55 621 32,14
Sep 00 11 BoE Life Assurance 666 047 214 544 48,89Sep 99 N/A BoE Life Assurance 453 800 144 098 N/A
Aug 00 12 Incentive Life 49 636 15 641 35,28Aug 99 20 Incentive Life 72 941 11 562 -79,19
Dec 00 13 Charter Life 6 136 398 1 974 609 32,69Dec 99 6 Charter Life 4 788 301 1 488 109 52,62
Sep 00 14 KGA Lewens Beperk 7 969 23 389 *31,78Sep 99 N/A KGA Lewens Beperk 7 816 13 311 N/A
Jun 00 15 Assupol 670 226 118 513 21,4Jun 99 N/A Assupol 567 857 97 624 N/A
Dec 00 16 Metropolitan 29 492 000 7 106 000 *15,38Sep 99 5 Metropolitan 22 036 000 4 927 000 55,57
Mar 01 17 HTG Life 83 004 38 535 14,56Mar 99 10 HTG Life 74 438 33 637 33,65
Jun 00 18 Momentum 66 866 500 16 379 400 14,26Jun 99 N/A Momentum 58 188 300 14 334 900 N/A
Dec 00 19 Sanlam 161 076 000 25 107 000 14,12Dec 99 14 Sanlam 160 705 000 22 001 000 13,1
Dec 00 20 Liberty 69 136 200 11 644 300 11,19Dec 99 17 Liberty 63 981 900 10 472 300 -7,52
Jun 00 21 Rentsure Life 409 428 241 350 8,94Jun 99 N/A Rentsure Life 392 277 221 542 N/A
Mar 01 22 African Life 5 630 700 1 479 200 -1,76Mar 00 12 African Life 5 019 800 1 505 700 20,66
Mar 01 23 Investment Sol 32 837 553 9 718 160 -3,55Mar 00 N/A Investment Sol 28 797 651 10 075 511 N/A
Dec 00 24 Old Mutual 234 051 000 28 609 000 -4,67Dec 99 N/A Old Mutual 227 765 000 30 011 000 N/A
Sep 00 25 BoE Life 5 765 781 5 051 659 -10,08Sep 99 20 BoE Life 6 335 126 5 617 965 31,33
Mar 01 26 Sage 7 888 957 1 417 459 -24,84Mar 00 16 Sage 7 428 326 1 885 816 1,43
Dec 00 27 RMA Life 3 032 740 128 389 -39,41Dec 99 15 RMA Life 3 000 467 211 893 2,07
Mar 01 28 Guardrisk 317 671 135 598 *43,21Mar 00 N/A Guardrisk 207 771 198 964 N/A
Feb 01 29 PSG Anchor Life 204 146 89 950 -95,36Feb 00 3 PSG Anchor Life 341 208 1 853 720 330,55
* Calculation based on annualised premium Source: KPMG
Managing director’s reportm Cubed Holdings Limited
JN1138 M CUBED AR 5/7/02 8:14 Page 22
W e have audited the annual
financial statements and
group annual financial statements
set out on pages 27 to 47 for the
year ended 28 February 2002.
These financial statements are
the responsibility of the company’s
directors. Our responsibility is to
express an opinion on these
financial statements based on
our audit.
SCOPE
W e conducted our audit in
accordance with statements of
South African Auditing Standards.
These standards require that we
plan and perform the audit to
obtain reasonable assurance that
the financial statements are free
of material misstatement. An
audit includes:
• examining, on a test basis,
evidence supporting the
amounts and disclosures in the
annual financial statements;
• assessing the accounting
principles used and significant
estimates made by
management; and
• evaluating the overall financial
statement presentation.
AUDIT OPINION
In our opinion, the annual
financial statements and group
annual financial statements fairly
present, in all material respects,
the financial position of the
company and the group at
28 February 2002, and the results
of their operations and cash
flows for the year then ended in
accordance with the South
African Statements of Generally
Accepted Accounting Practice
and in the manner required by
the Companies Act, 1973.
FISHER HOFFMAN PKF (Jhb) Inc.Chartered Accountants (SA)
Registered Accountants and
Auditors
Johannesburg
17 May 2002
PRICEWATERHOUSECOOPERS Inc.Chartered Accountants (SA)
Registered Accountants and
Auditors
Johannesburg
17 May 2002n
Johan SteynGroup company secretary
INDEPENDENT AUDITORS’ REPORT
CONTENTS
To the members of m Cubed Holdings Limited
FR FINANCE
FINANCIAL STATEMENTSFOR THE YEAR ENDED 28 FEBRUARY 2002
¥
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FR FINANCIAL STATEMENTS: m CUBED HOLDINGS LIMITED
Financial statements for the year ended 28 February 2002
Independent auditors’ report ............................................................... 27
Declaration by company secretary....................................................... 27
Directors’ report .................................................................................... 28
Principal accounting policies ............................................................... 30
Income statements ................................................................................. 32
Balance sheets........................................................................................ 33
Statements of changes in equity........................................................... 34
Cash flow statements ............................................................................ 36
Notes to annual financial statements................................................... 37
Annexure A: Interests in subsidiary companies ................................. 47
FR FINANCIAL REPORTING: ACTUARIAL REPORTS AND SHAREHOLDER INFORMATION
Actuarial reports ................................................................................... 48
Shareholders’ analysis .......................................................................... 51
Notice of annual general meeting ....................................................... 51
FR • 28 February 2002 • PG 27
DECLARATION BY COMPANY SECRETARYI declare that, to the best of my knowledge, the company for the
year ended 28 February 2002, has lodged with the Registrar of
Companies all such returns as are required of a public company
in terms of the Companies Act and that all such returns are true,
correct and up to date.
JOHAN STEYNGroup company secretary
17 May 2002n
JN1138 M CUBED AR 5/7/02 8:14 Page 27
PG 28 • 28 February 2002 • FR
Financial Statements Directors’ reportm Cubed Holdings Limited
1. NATURE OF BUSINESS
The company is an investment holding
company. Its subsidiaries are involved in
a broad spectrum of financial services including
inter alia: specialised investment products,
unit trust and investment portfolio
management, asset management, life
investment products, unitised administration,
international investments, employee benefit
administration, secondhand policies and
structured products.
2. RESULTS OF OPERATIONS
The operating results and the financial
position of the company and the group are
set out in the annual financial statements.
Commentary there on is included in the
chairman’s report and the managing director’s
report.
The results include those of Escher Group
Limited (Escher) for 12 months and m Cubed
Capital Holdings Limited (m Cubed) for 7
months.
The group’s headline earnings amounted to
R53.9m (2001: R21.5m).
3. SUBSIDIARIES
W ith effect from 1 August 2001, and in
terms of the combined circular to
shareholders of Escher and m Cubed, dated
16 August 2001, Escher and its subsidiaries
merged with those of m Cubed through
the acquisition by Escher of the subsidiaries
of m Cubed, in exchange for the issue of
450 million Escher shares.
Details of interests in subsidiaries are
on page 47.
The contribution to group after-tax
profits by the subsidiaries was R53.0m
(2001: R11.0m) and the group’s share of
after-tax losses amounted to R5.2m
(2001: R1.8).
4. SPECIAL RESOLUTIONS
T hese resolutions are set out on pages 51
to 52.
5. SHARE CAPITAL
D etails of the authorised and issued share
capital are contained in note 17 to these
financial statements.
450 million shares were issued at 63 cents
pursuant to the merger agreement detailed
in note 3 above.
6. DIRECTORS
T he names of the directors in office at the
date of this report are shown on page 12.
In terms of the company’s Articles of
Association, Messrs CA Otto, IHS Sinton,
JC Storey, CMB Bothner, W Roux,
Mrs A Cabot-Alletzhauser and
Mrs MM Dawes retire at the forthcoming
annual general meeting and being eligible,
offer themselves for re-election.
The following directors were appointed
during the year under review:
RM Budge 11 September 2001
(Alternate to W Roux)
CA Otto 11 September 2001
(Alternate to JF Mouton)
IHS Sinton 11 September 2001
7. DIRECTORS’ SHAREHOLDINGS
The aggregate direct and indirect shareholdings of the directors at 28 February 2002 was 148 698 843 shares or 20% of issued share capital.
NAME BENEFICIAL NON-BENEFICIAL TOTALDIRECT INDIRECT DIRECT INDIRECT
JC Storey - - - 72 590 494 72 590 494
A Cabot-Alletzhauser - - - 39 067 832 39 067 832
PC Croeser - 8 030 694 - 11 826 307 19 857 001
IHS Sinton - - - 14 268 736 14 268 736
JF Mouton - - - 1 987 020 1 987 020
CMB Bothner 732 000 - - - 732 000
CA Otto - - - 33 098 33 098
W Roux - - - 122 000 122 000
MM Dawes 27 000 - - 13 662 40 662
759 000 8 030 694 - 139 909 149 148 698 843
There have been no changes in these holdings since the year end.
DIRECTORS’ REPORT, m CUBED HOLDINGS LIMITEDTHE ANNUAL FINANCIAL STATEMENTS ARE SET OUT ON PAGES 27 - 47
John StoreyManaging director
continued on page 29
JN1138 M CUBED AR 5/7/02 8:14 Page 28
6. DIRECTORS (CONTINUED)
JC Storey 11 September 2001
A Cabot-Alletzhauser 11 September 2001
MM Dawes 11 September 2001
CMB Bothner 11 September 2001
W Roux 11 September 2001
The following directors resigned during the year under review and
up to the date of this report:
AB la Grange 11 September 2001
CK Foord 11 September 2001
GC le Roux 11 September 2001
JM Pieterse 11 September 2001
L de Wit 17 May 2002
TM van der Heijden 17 May 2002
8. SECRETARY
D etails of the company secretary are shown on page 2.
9. DIVIDEND
B eing a young and growing company, the directors have agreed
on a conservative dividend, nearly five times covered by headline
earnings, of 2 cents per share for the year ended 28 February 2002
(3 cents per share: 28 February 2001). The dividend will be payable
to the shareholders recorded in the register at the close of business
on 26 June 2002.
The following dates are relevant to shareholders in respect of the
dividend payment:
• Last day to trade cum dividend: Wednesday, 19 June 2002
• Commence trading ex dividend: Thursday, 20 June 2002
• Record date: Wednesday, 26 June 2002
• Date of dividend payment: Thursday, 27 June 2002
10. EMPLOYEE SHARE INCENTIVE SCHEME
A t the time of the merger between Escher Group Limited and
m Cubed Capital Holdings Limited, both companies operated
share incentive schemes for their employees. Both share incentive
schemes were cancelled and replaced by a new share incentive
scheme. The new scheme was adopted by shareholders at the
General Meeting held on 11 September 2001, and registered with
the Master of the High Court under the m Cubed Share Option Trust
(“the Trust”).
The trustees of the Trust are Messrs CMB Bothner and CA Otto.
The Trust awarded options to staff, in replacement of the options
previously held by them, in the following ratios:
• Old Escher Group staff: 1 option for each option held
• Old m Cubed Capital Holdings staff: 1.23 options for each option
held.
The Trust acquired from the old share incentive schemes all the
shares held by them and currently holds 29 373 034 shares, or
3.92% percent of the issued share capital of the company.
The maximum number of shares that can be allocated to beneficiaries
is limited to 10% of the issued share capital of the company, currently
75 million shares. No one beneficiary is entitled to hold options
representing more than 2% of the issued share capital. Options vest
two years after issue and are exercisable in equal amounts over the
following five years.
Number of options allocated at registration of Trust: 64 854 012
Add: Options allocated since September 2001 10 451 113
75 305 125
Less:
• Number of options lapsed (5 688 964)
• Number of options exercised and allocated (604 606)
Number of options allocated at 28 February 2002 69 011 555
Number of options reserved for the Scheme at
28 February 2002 5 988 425
11. RETIREMENT BENEFITS
The company provides retirement benefits through defined
contribution pension and provident funds. These funds are
registered under the Pension Funds Act.
The group has no obligations for post-retirement medical benefits.
12. CHANGE OF NAME
The company changed its name from Escher Group Limited to
m Cubed Holdings Limited with effect from 17 September 2001.
13. DIRECTORS’ APPROVAL
The directors of m Cubed Holdings Limited are responsible for the
preparation, integrity and fair presentation of the annual financial
statements of the company and of the group and for the objectivity
of other information presented in the annual report.
The fulfillment of this responsibility is primarily discharged through
the establishment and maintenance of sound management and
accounting systems.
These annual financial statements have been prepared using
consistent and appropriate accounting policies, supported by
reasonable and prudent judgements and estimates, in line with
the South African Statements of Generally Accepted Accounting
Practice and in the manner required by the Companies and
Insurance Acts.
The directors have no reason to believe that the group or any
company within the group will not be going concerns in the
forseeable future based on forecasts and available cash resources.
The auditors are responsible for reporting on these financial
statements. Their report appears on page 27.
The annual financial statements, set out on pages 27 to 47, which
have been prepared on the going concern basis, were approved by
the directors on 17 May 2002 and are signed on their behalf by:
CMB BOTHNER JC STOREYNon-executive chairman Managing director
17 May 2002 17 May 2002
7
FR • 28 February 2002 • PG 29
JN1138 M CUBED AR 5/7/02 8:14 Page 29
Principal accounting policiesm Cubed Holdings Limited
1. BASIS OF PREPARATION
The accounting policies adopted by the
company and the group comply in all
material respects with Statements of
Generally Accepted Accounting Practice,
as well as the Companies Act of 1973.
The consolidated financial statements are
prepared on the historical cost basis,
adjusted by the revaluation of investments
and are consistent with those applied in
previous years except for:
• the adoption of the new accounting
statement on Events After The Balance
Sheet Date (AC 107). In terms of this
statement, dividends proposed or declared
after the balance sheet date are not
recognised as a liability at the balance
sheet date. This change in the recognition
of liabilities relating to dividends has been
applied retrospectively and comparative
figures as well as opening retained
earnings in respect of 2001 have also
been restated.
2. BASIS OF CONSOLIDATION
The group annual financial statements
comprise the annual financial statements
of the company and its subsidiaries.
Subsidiaries are those enterprises in which
the group has the power to govern their
financial and operating policies. The results
of subsidiaries are included from their
effective dates of acquisition to their
effective dates of disposal. All inter-company
transactions and balances are eliminated.
3. INCOME
Premium income
• All premiums are shown net of
reinsurance premiums.
• Premiums are accounted for when they
become due and payable.
• Where a policy loan is granted, the
premium is accounted for net of the loan.
Investment income
• Dividends are accounted for on a last day
to register basis.
• Interest is accounted for on the accruals
basis.
Commission and fees
• Commission and fees include fees earned
from providing advisory and professional
services. These are recognised as revenue
when the services are performed.
Capital appreciation
• Capital appreciation includes realised
and unrealised investment surpluses and
deficits. Realised investment surpluses are
based on the difference between market
value at the beginning of the year, or if
purchased during the year, cost and the
proceeds of sales. Unrealised investment
surpluses are based on the difference
between market value at the beginning
of the year or, if purchased during the
year, cost and market value at the
year end.
4. POLICYHOLDER BENEFITS
P olicyholder benefit payments are accounted
for net of reinsurance recoveries. Provision
is made for the estimated cost of claims
intimated but not settled at the balance
sheet date.
5. INVESTMENTS
Investments are valued on the bases set
out below. Realised and unrealised
changes in investment values in the life
insurance company are transferred to the
life fund through the income statement.
Equity investments
• Listed investments are shown at market
value. Market values are calculated by
reference to stock exchange quoted
selling prices at close of business on the
balance sheet date.
Unit trusts
• Units in unit trusts are valued at the
re-purchase value.
Government public utilities, municipal
stock and debentures
• Government public utilities, municipal
stock and debentures are stated at market
value.
Investments in listed property shares
• Investments in listed property shares are
stated at market value.
Mortgages, loans and deposits
• Mortgages, loans and funds on deposit are
reflected at par or redemption value after
making provision for anticipated losses.
Subsidiary companies
• Investments in subsidiaries are stated
at cost in the company financial
statements.
Associates
• An investment in an associate is a long
term investment in a company in which
the group has significant influence but not
control. The equity method of accounting
for associate companies is adopted in the
group financial statements. Provision is
made for any long term impairment in
value.
6. FIXED ASSETS
F ixed assets comprise computers, computer
software, furniture and equipment
and vehicles and are stated at cost less
accumulated depreciation. These assets are
depreciated over their expected useful lives
at the following rates:
Computer equipment and software
• 20% to 50% per annum
Furniture and equipment
• 10% per annum
Vehicles
• 20% per annum
Leasehold improvements
• Lease term
Software development costs are capitalised
as incurred and written off over three years,
on completion of the development.
7. EMPLOYEE RETIREMENT BENEFITS
T he group operates pension and provident
funds to which most employees belong.
Employees contribute to the pension fund
and the company contributes to the provident
fund on behalf of employees. Both funds
are defined contribution schemes and are
governed by the Pension Funds Act of 1956.
The costs of retirement benefits are charged
to income during the period in which such
benefits accrue.
8. LIFE FUND
T he group’s liabilities under unmatured
policies are computed annually at the
balance sheet date by the group’s statutory
actuary in accordance with prevailing
legislation and South African Generally
Accepted Actuarial Standards. The transfer
to the life fund reflected in the income
statement represents the increase in
actuarial liabilities over the period.
PG 30 • 28 February 2002 • FR
Financial Statements
PRINCIPAL ACCOUNTING POLICIES
JN1138 M CUBED AR 5/7/02 8:14 Page 30
9. OPERATING EXPENSES AND COST OF REVENUE
Operating expenses include:
Marketing and administration expenses
• Marketing and administration expenses
include head office administration expenses,
marketing and development expenses and
all other non-commission related expenses.
These costs are expensed when incurred.
Cost of revenue includes:
New business costs
• New business costs are recognised in the
income statement when incurred.
Commissions
• Commissions are expensed as they are
incurred
• Commissions paid annually in advance are
amortised over 12 months from the date
they are incurred.
10. FOREIGN CURRENCY TRANSACTIONS
A ssets and liabilities in foreign currencies
are translated at exchange rates ruling at
the balance sheet date.
Gains and losses on foreign transactions are
accounted for in the income statement.
Financial statements of foreign subsidiaries
are accounted for on the following bases:
• Assets and liabilities at exchange rates
ruling at the balance sheet date
• Income statement items at the weighted
average rate of exchange for the year.
Gains or losses arising on translation of
foreign entities are taken to non-distributable
reserves. Gains and losses arising on
translation of integral operations are credited
or charged against income.
11. DEFERRED TAXATION
D eferred income tax is provided, using
the liability method, for all temporary
differences arising between the tax bases
of assets and liabilities and their carrying
values for financial reporting purposes.
Currently enacted tax rates are used to
determine deferred income tax.
Where the effect of temporary differences
results in a deferred tax asset, the asset
is brought to account when recovery is
probable.
12. PROVISIONS
P rovisions are recognised when the group
has a present legal or constructive
obligation as a result of past events, where
it is probable that an outflow of resources
embodying economic benefits will be
required to settle the obligation, and a reliable
estimate of the amount of the obligation can
be made. Employee entitlements to annual
leave and long service leave are recognised
when they accrue to employees.
13. TRADE RECEIVABLES
T rade receivables are carried at anticipated
realisable value. An estimate is made for
doubtful receivables based on a review
of all outstanding amounts at the year end.
Bad debts are written off during the year
in which they are identified.
14. CASH AND CASH EQUIVALENTS
C ash and cash equivalents comprise
cash in hand, deposits held at call with
banks and investments in money market
instruments.
15. GOODWILL
G oodwill represents the excess of the cost
of an acquisition over the fair value of
the group’s share of the net assets of the
acquired subsidiary/associated undertaking
at the date of acquisition. Goodwill on
acquisitions that occurred up to and
including 29 February 2000 was written
off in full against shareholders’ funds in the
year acquired. Goodwill on acquisitions
occurring after February 2000 is capitalised
and amortised on a straight-line basis over
its estimated useful life. Goodwill is carried
at cost less any accumulated amortisation
and any accumulated impairment losses.
The carrying amount of goodwill is reviewed
annually and is written down when
permanently impaired. Impairment losses
and goodwill amortisation are included in
the income statement.
16. SCRIP LENDING
M arketable securities under scrip lending
arrangements are reflected on the balance
sheets of the company and the group.
Scrip lending arrangements are entered
into only with appropriately accredited
institutions.
17. FINANCIAL INSTRUMENTS
F inancial instruments carried on the balance
sheet include cash and bank balances,
investments, receivables, loans, advances and
trade creditors. The particular recognition
methods adopted are disclosed in the
individual policy statements associated with
each item.
Disclosure about financial instruments
to which the group is a party are
provided in note 20 to the annual financial
statements.
18. COMPARATIVES
Where necessary, comparative figures are
restated to conform to the changes in
presentation in the current year.
The broker’s broker.
www.mcubed.co.za
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JN1138 M CUBED AR 5/7/02 8:14 Page 31
PG 32 • 28 February 2002 • FR
Financial Statementsm Cubed Holdings Limited
Income statementsfor the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
Notes R’000 R’000 R’000 R’000
Net revenue 2 272 326 102 231 - 9 109
Cost of revenue (120 034) (49 869) - -
Gross profit 152 292 52 362 - 9 109
Operating expenditure (88 336) (30 355) (2 961) (333)
Operating profit before net finance income 3 63 956 22 007 (2 961) 8 776
Net finance income 4 8 276 8 869 3 002 1 697
Share of profit / (loss) of associates 553 (149) - -
Net profit before tax 72 785 30 727 41 10 473
Taxation 5 (19 170) (9 813) (12) (416)
Net profit after tax 53 615 20 914 29 10 057
Minority interest 269 597 - -
Headline earnings attributable to shareholders 53 884 21 511 29 10 057
Amortisation of goodwill (12 640) (926) - -
Costs resulting from merger 6 (4 242) - - -
Impairment charge - (421) - -
Earnings attributable to ordinary shareholders 37 002 20 164 29 10 057
Earnings per share (cents) 7
Headline earnings 9.6 7.5
Basic earnings 6.6 7.0
“Our numbers
show strong growth
in bottom line,
annuity income
and assets under
management.”
Fig. 3.1. Seeds.
JN1138 M CUBED AR 5/7/02 8:14 Page 32
FR • 28 February 2002 • PG 33
Financial Statementsm Cubed Holdings Limited
Balance sheetsAt 28 February 2002
Group Group Company Company2002 2001 2002 2001
Notes R’000 R’000 R’000 R’000
ASSETSNon-current assetsFixed assets 9 28 706 4 386 - -Investments 10 28 024 154 16 575 752 - -Goodwill 11 193 148 13 032 - -Investment in associates 12 10 689 51 3 541 200Interest in subsidiaries 13 - - 314 580 21 430Deferred tax asset 14 4 786 - - -Other non-current assets 15 28 741 5 831 17 070 -
28 290 224 16 599 052 335 191 21 630
Current assetsReceivables and prepayments 16 41 998 3 761 1 290 9 186Other investments - 23 483 - -Cash and cash equivalents 62 059 55 475 9 857 45 235
104 057 82 719 11 147 54 421
Total assets 28 394 281 16 681 771 346 338 76 051
EQUITY AND LIABILITIESCapital and reserves
Ordinary shares 17 7 500 3 000 7 500 3 000Share premium 17 332 460 62 499 332 460 62 499Revaluation and other reserves 5 967 217 - -Accumulated profits 48 079 21 040 999 10 057
Ordinary shareholders’ funds 394 006 86 756 340 959 75 556Minority interests 438 707 - -
394 444 87 463 340 959 75 556
Non-current liabilitiesProvision for policyholder liabilities 18 27 861 504 16 575 752 - -Deferred capitals gains tax 68 666 - - -
27 930 170 16 575 752 - -
Current liabilitiesTrade and other payables 49 596 11 493 5 356 79Current tax liabilities 20 071 7 063 23 416
69 667 18 556 5 379 495
Total equity and liabilities 28 394 281 16 681 771 346 338 76 051
Number of shares in issue 750 000 300 000Net asset value per share (cents) 52.5 28.9Net tangible asset value per share (cents) 26.8 24.6
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
“Assets under
management have
grown significantly
in the last six
months, from
R33.4 billion at
the half year to
R43 billion.”
JN1138 M CUBED AR 5/7/02 8:14 Page 33
PG 34 • 28 February 2002 • FR
Financial Statementsm Cubed Holdings Limited
Statements of changes in equityFor the year ended 28 February 2002
Non-Share Share distributable Accumulated
capital premium reserves profits TotalR’000 R’000 R’000 R’000 R’000
GroupBalance at 1 March 2001 as previously reported 3 000 62 499 217 11 077 76 793
Adjustment to retained income in respect of change in accountingpolicy AC 107. Dividend paid on 30 April 2001 (last date to register:20 April 2001). - - - 9 087 9 087
Balance at 1 March 2001 restated 3 000 62 499 217 20 164 85 880
Adjustment in respect of change in accounting policy - - - (9 087) (9 087)
Issue of share capital 4 500 279 000 - - 283 500Share issue expenses - (9 039) - - (9 039)Increase in non-distributable reservearising on translation - - 5 750 - 5 750Accumulated profits - - - 37 002 37 002
Balance at 28 February 2002 7 500 332 460 5 967 48 079 394 006
CompanyBalance at 1 March 2001 as previously reported 3 000 62 499 - 970 66 469
Adjustment to retained income in respect of change in accountingpolicy AC 107. Dividend paid on 30 April 2001 (last date to register:20 April 2001). - - - 9 087 9 087
Balance at 1 March 2001 restated 3 000 62 499 - 10 057 75 556
Adjustment in respect of changein accounting policy - - - (9 087) (9 087)
Issue of share capital 4 500 279 000 - - 283 500Share issue expenses - (9 039) - - (9 039)
Accumulated profits - - - 29 29
Balance at 28 February 2002 7 500 332 460 - 999 340 959
Fig. 3.1 - 3.2. Seeds.
“The merger
broadened our
core competencies
and our combined
product and
service offering,
resulting in
synergies and
economies of
scale.”
JN1138 M CUBED AR 5/7/02 8:14 Page 34
FR • 28 February 2002 • PG 35
Financial Statementsm Cubed Holdings Limited
Statements of changes in equityFor the year ended 28 February 2002
Non-Share Share distributable Accumulated
capital premium reserves profits TotalR’000 R’000 R’000 R’000 R’000
GroupBalance at 1 March 2000 1 - - - 1
Adjustment to retained income in respect of change in accountingpolicy AC 107. - - - 9 087 9 087
Issue of share capital 2 999 65 368 - - 68 367Share issue expenses - (2 869) - - (2 869)Increase in non-distributable reserve - - 217 - 217Accumulated profits - - - 20 164 20 164Dividend - - - (9 087) (9 087)
Balance at 28 February 2001 3 000 62 499 217 20 164 85 880
CompanyBalance at 1 March 2000 1 - - - 1
Adjustment to retained income in respect of change in accountingpolicy AC 107. - - - 9 087 9 087
Issue of share capital 2 999 65 368 - - 68 367Share issue expenses - (2 869) - - (2 869)Accumulated profits - - - 10 057 10 057
Dividend - - - (9 087) (9 087)
Balance at 28 February 2001 3 000 62 499 - 10 057 75 556
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
“The new group’s
317 staff and
management still
own the largest
proportion of
m Cubed shares.”
JN1138 M CUBED AR 5/7/02 8:14 Page 35
PG 36 • 28 February 2002 • FR
Financial Statementsm Cubed Holdings Limited
Cash flow statementsFor the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
Notes R’000 R’000 R’000 R’000
Operating activities 4 081 511 5 868 115 3 722 1 366
Life assurance business 10 925 663 5 843 603 7 896 -
Other receipts 233 889 102 231 - (77)
Cash received 21 11 159 552 5 945 834 7 896 (77)
Cash paid 22 (7 062 044) (73 490) 2 316 (254)
Cash generated from / (utilised by) operations 23 4 097 508 5 872 344 10 212 (331)
Net finance income 8 276 8 867 3 002 1 697
Taxation paid 24 (15 186) (7 996) (405) -
Dividends paid 25 (9 087) (5 100) (9 087) -
Investing activities (4 065 888) (5 851 622) (313 561) (19 077)
Additions to fixed assets (12 014) (3 190) - -
Proceeds on disposal of fixed assets 64 273 - -
Acquistion of business 26 2 136 (11 374) (292 589) (18 877)
Increase in investments (4 023 126) (5 843 603) - -
Increase in associates (8 795) (200) (3 902) (200)
Increase in loans receivable (24 153) (1 354) (17 070) -
Other investments - 7 826 - -
Financing activities 27 (9 039) 38 981 274 461 38 981
(Expenses) / proceeds on share issue
Net movement in cash 6 584 55 474 (35 378) 21 270
Net cash resources at beginning of year 55 475 1 45 235 23 965
Net cash resources at end of year 62 059 55 475 9 857 45 235
Fig. 3.2 - 3.4. Seeds.
“With the quantum
leap in size comes
more stability,
annuity income and
the clout to negotiate
fair margins, as well
as the ability to
compete in any
environment.”
JN1138 M CUBED AR 5/7/02 8:14 Page 36
FR • 28 February 2002 • PG 37
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
Retail Administration Asset Specialised Structured Investments Outsourcing Management Investments Products Treasury Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000
1. SEGMENTALINFORMATION
Net revenue 104 335 32 035 97 873 13 642 14 577 9 864 272 326
• Annuity 50 845 28 133 97 873 - 14 577 9 864 201 292• Upfront 53 490 3 902 - 13 642 - - 71 034
Headline earnings 20 040 (108) 9 534 6 667 8 112 9 639 53 884
Liabilities 8 784 872 34 168 15 271 19 123 002 4 659 37 865 27 999 837
• South Africa 8 742 413 34 168 12 309 19 123 002 4 659 37 698 27 954 249• UK and other 42 459 - 2 962 - - 167 45 588
Assets 8 927 529 21 281 24 921 19 008 187 17 769 394 594 28 394 281
• South Africa 8 845 660 21 281 23 296 19 008 187 17 769 394 594 28 310 787• UK and other 81 869 - 1 625 - - - 83 494
Due to differing business units prior to the merger between Escher Group Limited and m Cubed Capital Holdings Limited, comparative figures would be meaningless.
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
2. REVENUE
Net premiums 8 181 260 4 693 494 - -
Investment income 2 681 832 1 150 109 - 9 109
• Interest on investments 653 227 666 059 - -
• Dividends 142 855 67 588 - 9 109
• Capital appreciation 1 885 750 416 462 - -
10 863 092 5 843 603 - -
Transfer to provision for policyholder liabilities (10 824 655) (5 843 603) - -
Commission and fees 233 889 102 231 - -
Net revenue 272 326 102 231 - 9 109
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
“This whole
productive scenario
is the result of
the application of
our entrepreneurial
skills and creative
solutions to market
needs.”
JN1138 M CUBED AR 5/7/02 8:14 Page 37
PG 38 • 28 February 2002 • FR
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statements For the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
3. OPERATING PROFIT BEFORE NET FINANCE INCOME
The following items have been charged / (credited)
in arriving at operating profit:
Depreciation on fixed assets 7 109 2 067 - -
Operating lease charges• Equipment 795 337 - -
• Property 3 899 1 176 - -
4 694 1 513 - -
Auditors’ remuneration
• Audit fees - Current period 1 280 520 247 50
- Underprovided previous year - 97 - -
• Other services 160 163 - -
1 440 780 247 50
Abnormal item
• Impairment charges –
PSG Group Share Incentive Trust - 421 - -
Profit on disposal of fixed assets (31) (10) - -
Staff costs• Salaries and wages 40 676 11 315 - -
• Pension contributions 1 616 825 - -
42 292 12 140 - -
Number of staff 317 55 - -
Goodwill amortised 12 640 926 - -
Income from subsidiaries: dividends - - - (9 087)
4. NET FINANCE INCOMEInterest received 10 731 9 426 3 002 1 704
Interest paid (2 455) (557) - (7)
8 276 8 869 3 002 1 697
Fig. 3.3 - 3.6. Seeds.
“We seek to
offer solutions
that add value in
all that we do,
and especially in
crafting multi-
management
solutions.”
JN1138 M CUBED AR 5/7/02 8:14 Page 38
FR • 28 February 2002 • PG 39
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
5. TAXATIONSouth African normal tax
Current year 11 776 8 937 12 416
Prior years 38 - - -
Retirement fund tax 2 442 - - -
Secondary tax on companies - 876 - -
Capital gains tax 4 731 - - -
Foreign tax - current year normal tax 183 - - -
19 170 9 813 12 416
Reconciliation of tax rate attributable toshareholders’ funds
Reconciliation of rate of taxation % % % %
South African normal tax rate 30 30 30 30
Adjusted for:
Assessed losses (13.23) - - -
Income not subject to tax (0.82) (4.57) - (28.94)
Expenses not deductible for tax purposes 1.39 2.21 - 2.91
Foreign subsidiary loss 2.14 2.39 - -
Associate company loss (0.25) (0.04) - -
Secondary tax on companies - 2.94 - -
Income subject to foreign tax (3.56) - - -
Capital gains tax 7.16 - - -
Retirement fund tax 3.70 - - -
Prior year under provision (0.19) - - -
Effective tax rate 26.34 32.93 30.00 3.97
m Cubed has estimated tax losses attributable to
shareholders’ funds of R60m (2001: nil) which are
available for set-off against future taxable income.
6. COSTS RESULTING FROM MERGERLease termination payment 3 000 - - -
Loan written off 1 242 - - -
4 242 - - -
“The ‘multi-
manager toolbox’
hopes to build
market share
across the total
size spectrum of
clients.”
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
JN1138 M CUBED AR 5/7/02 8:14 Page 39
PG 40 • 28 February 2002 • FR
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statements For the year ended 28 February 2002
Group Group2002 2001
7. EARNINGS PER SHAREBasic earnings per share is calculated by dividing
the net profit attributable to shareholders by the
weighted average number of ordinary shares in issue
during the year.
Headline earnings per shareHeadline earnings attributable to shareholders (R'000) 53 884 21 511
Weighted average number of ordinary shares in issue ('000) 562 500 288 534
Headline earnings per share (cents) 9.6 7.5
Basic earnings per shareNet profit attributable to shareholders (R’000) 37 002 20 164
Weighted average number of ordinary shares in issue ('000) 562 500 288 534
Basic earnings per share (cents) 6.6 7.0
Paid by subsidiaries
RetirementShare Issue price fund
options cents per Fees Salary Bonus contributions Total’000 share R'000 R'000 R'000 R'000 R'000
8. DIRECTORS’ EMOLUMENTSExecutive directors:A Cabot-Alletzhauser* 5 843 **32 - 306 117 34 457MM Dawes* 2 153 67 - 343 100 44 487JC Storey* 4 478 67 - 243 250 - 493T M van der Heijden 450 76 - 510 100 95 705
12 924 - 1 402 567 173 2 142
Non-executive directors:CMB Bothner 46 46PJ Croeser^ 5 500 - 51 556W Roux 17 17IHS Sinton 24 24
28 February 2002 92 1 902 567 224 2 785
PJ Croeser - 532 164 58 754GC le Roux - 489 129 49 667TM van der Heijden - 421 132 76 629
28 February 2001 - 1 442 425 183 2 050
* 7 months**Weighted average^ changed from executive to non-executive during the yearNo directors hold service contracts
Fig. 3.5 - 3.9. Seeds.
“We have to be
responsive to our
markets’ demands,
and creative in
adapting to each set
of constraints,
which also provides
the sharp-witted
and the bold
with profitable
opportunities.”
JN1138 M CUBED AR 5/7/02 8:14 Page 40
FR • 28 February 2002 • PG 41
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
Computer Leaseholdequipment Office Furniture improve-& software equipment & fittings ments Vehicles Total
R'000 R'000 R'000 R'000 R'000 R'000
9. FIXED ASSETSYear ended 28 February 2002 Cost at beginning of year 5 826 626 758 355 - 7 565Additions 27 521 589 3 292 - 60 31 462Disposals (22) (11) - - - (33)
Cost at end of year 33 325 1 204 4 050 355 60 38 994
Accumulated depreciation at beginning of year 2 940 100 84 55 - 3 179
Depreciation charge (net of disposals) 6 334 336 301 129 9 7 109
Accumulated depreciation at end of year 9 274 436 385 184 9 10 288
Net carrying amount at end of year 24 051 768 3 665 171 51 28 706
At 28 February 2001
Net carrying amount 2 886 526 674 300 - 4 386
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
10. INVESTMENTSEquities and unit trusts 16 922 938 10 160 453 - -
Government and public authority stock 5 376 301 3 670 207 - -
Cash on call 2 638 618 - - -
Money market instruments 726 828 - - -
Loans to policyholders 2 359 469 2 745 092 - -
Market value 28 024 154 16 575 752 - -
Details of the above investments can be obtained
from the company's registered office.
“The unit trust
company moved
up nine places to
6th largest by assets
under management
at the end of
December 2001.”
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
JN1138 M CUBED AR 5/7/02 8:14 Page 41
PG 42 • 28 February 2002 • FR
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
11. GOODWILLOpening carrying amount 13 032 - - -
Additions 192 756 13 958 - -
Amortisation charge (12 640) (926) - -
Closing carrying amount 193 148 13 032 - -
Cost 206 714 13 958 - -
Accumulated amortisation (13 566) (926) - -
Carrying amount 193 148 13 032 - -
12. INVESTMENT IN ASSOCIATESUnlisted
CorporateMoney Policy
Managers Exchange Group Group Company Company(Pty) Ltd (Pty) Ltd 2002 2001 2002 2001
(50% held) (50% held) R’000 R’000 R’000 R’000
Investment at cost 649 4 200 4 849 200 4 849 200
Share of retained income
/ (loss) 52 352 404 (149) - -
Loan receivable
/ (payable) (1 308) 6 744 5 436 - (1 308) -
Closing carrying amount (607) 11 296 10 689 51 3 541 200
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
13. INTEREST IN SUBSIDIARIESShares at cost - - 337 985 45 395
Loans to subsidiaries - - (23 405) (23 965)
- - 314 580 21 430
See Annexure A on page 47 for details
14. DEFERRED TAX ASSETArising on losses in prior year 4 786 - - -
Fig. 3.7 - 3.12. Seeds.
“Our focus is
on creating
innovative products
and structures
that enable clients
to effectively
manage their
wealth and preserve
and grow capital.”
JN1138 M CUBED AR 5/7/02 8:14 Page 42
FR • 28 February 2002 • PG 43
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
15. OTHER NON-CURRENT ASSETSLoans and advances 11 671 1 160 - -
Loan to share trust 17 070 - 17 070 -
Other - 4 671 - -
28 741 5 831 17 070 -
16. RECEIVABLES AND PREPAYMENTSTrade receivables 36 934 3 207 1 290 81
Prepayments 1 298 158 - 9 105
Other receivables 3 766 396 - -
41 998 3 761 1 290 9 186
17. SHARE CAPITALAuthorised 1 000 000 000 ordinary shares of R0,01 each 10 000 000 10 000 000 10 000 000 10 000 000
Issued750 000 000 (2001: 300 000 000) ordinary shares
of R0,01 each 7 500 3 000 7 500 3 000
Share premiumOpening carrying amount 62 499 62 499 62 499 62 499
Shares issued during the year 279 000 - 279 000 -
Share issue expenses (9 039) - (9 039) -
332 460 62 499 332 460 62 499
The unissued shares in the company are under the control of the directors until the next annual general meeting.
18. PROVISION FOR POLICYHOLDERS’ LIABILITIESOpening balance 16 575 752 10 732 149 - -
Liabilities assumed on acquisition 5 511 724 - - -
Amount transferred from the income statementin respect of increases in actuarial liabilities 5 774 028 5 843 603 - -
Closing balance 27 861 504 16 575 752 - -
19. COMMITMENTSLease commitments
Due within one year 9 308 2 232 - -
Due thereafter 16 177 6 632 - -
25 485 8 864 - -
“Last year,
structured products
saw the launch
of 27 tranche
products with
a market value of
assets exceeding
R5 billion.”
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
JN1138 M CUBED AR 5/7/02 8:14 Page 43
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
20. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Assets and liabilities are stated at fair value in the balance sheet. Assets include listed equities, bonds and money market securities stated at their market values as at 28 February 2002 and unlisted equities, stated at directors’ valuation or the contractual terms of the investment, where applicable. Unlisted derivative instruments are valued in accordance with standardoption pricing models. Liabilities are valued in line with the assumptions detailed in the actuarial report on pages 48 to 50 of this financial report. Investment mandates for the group are established and monitored by m Cubed Asset Management (Pty)Limited. A compliance officer is responsible for the group’s compliance with regulatory requirements and practices of good corporate governance.
Equity risk
Following the principles of multi-manager management, equity investments are made by a blend of selected third party asset managers, managed by m Cubed Asset Management (Pty) Limited, on behalf of policyholders and investment clients. Eachexternal manager receives an investment mandate, which defines the universe of shares which may be invested in. Equities are reflected at market value, which is subject to fluctuation. Manager blend, performance and conformance to this mandate isclosely monitored by m Cubed Asset Management (Pty) Limited. The analysis process is supported by a well-developed researchmethodology. Equity holdings are held with an independent custodian bank registered in South Africa.
Interest rate risk
Fair values of fixed maturity investments included in the group’s investment portfolios are subject to changes in prevailing market interest rates. Changes in market interest rates have a direct effect on the contractually determined cash flows associated with floating rate financial assets and financial liabilities and on the fair value of others. m Cubed AssetManagement (Pty) Limited employs a mix of passive and active fixed interest specialist managers to manage investments in this asset class. Fixed interest holdings are held with independent custodian banks in South Africa.
Currency risk
The group has foreign-denominated cash and unit trusts. These provide exposure to foreign currency and investment fluctuation.Foreign assets are held with independent custodian banks registered in the appropriate foreign jurisdiction.
Credit risk
Fair values of investments may be affected by the credit-worthiness of the issuer of securities. m Cubed Asset Management (Pty)Limited mandates its money market managers to maintain very low levels of credit risk exposure. Counter-parties for derivative transactions are drawn from banks of the highest credit rating.
Capital adequacy
The group provides for capital adequacy on the basis of Generally Accepted Actuarial Principles in terms of the Actuarial Societyof South Africa’s guidelines.
Investment risk
Investment assets are acquired in accordance with the mandates set by the Investment Committee of m Cubed AssetManagement (Pty) Limited, which closely defines the asset classes and types of investment in which specialist managers mayinvest. The final selection of investments is in the hands of the third party managers, subject to daily review by m Cubed Asset Management (Pty) Limited’s investment team.
Derivatives are utilised solely for the purposes of hedging and obtaining appropriate exposure to asset classes in accordancewith the asset allocation benchmarks of its portfolios.
PG 44 • 28 February 2002 • FR
Fig. 3.10 - 3.16. Seeds.
“Life Investment
Products’main focus
for the year to
February 2003 will
be the roll-out of
the ‘Client for
Life’strategy.
This strategy
encompasses a
further significant
investment in our
customer service
model.”
JN1138 M CUBED AR 5/7/02 8:14 Page 44
FR • 28 February 2002 • PG 45
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
21. CASH RECEIVEDPremium and investment income 8 977 342 5 427 141 - -
Add: capital appreciation 1 885 750 416 462 - -
Decrease in trade and other receivables 62 571 - 7 896 -
Other receipts 233 889 102 231 - (77)
11 159 552 5 945 834 7 896 (77)
22. CASH PAIDExpenses 211 370 80 224 2 961 333
Depreciation (7 109) (2 067) - -
Life insurance investments made 6 844 654 - - -
Foreign translation differences (5 750) (217) - -
Profit on disposal of fixed assets 31 10 - -
Decrease / (increase) in trade and other payables 18 848 (4 460) (5 277) (79)
7 062 044 73 490 (2 316) 254
23. CASH GENERATED FROM OPERATIONSNet income before tax 72 785 30 727 41 10 473
Adjusted for:
Interest received (10 731) (9 426) (3 002) (1 704)
Interest paid 2 455 557 - 7
Cash portion of merger costs (3 000) - - -
Capital appreciation (1 885 750) - - -
Foreign translation differences 5 750 217 - -
Depreciation 7 109 2 067 - -
Profit on disposal of fixed assets (31) (10) - -
(Profit) / loss from associate (553) 149 - -
Increase in policyholder liabilites 5 865 751 5 843 603 - -
Changes in working capital:
Decrease / (increase) in trade and other receivables 62 571 - 7 896 (9 186)
(Decrease) / increase in trade and other payables (18 848) 4 460 5 277 79
4 097 508 5 872 344 10 212 (331)
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
www.mcubed.co.za
E X P O N E N T S O F G R O W T H
“Employment equity
and affirmative
action form
a key part of
our recruitment
process.”
JN1138 M CUBED AR 5/7/02 8:14 Page 45
Financial Statementsm Cubed Holdings Limited
Notes to the annual financial statementsFor the year ended 28 February 2002
Group Group Company Company2002 2001 2002 2001
R’000 R’000 R’000 R’000
24. TAXATION PAIDUnpaid at beginning of year 7 063 - 416 -
Charged to the income statement 19 170 9 813 12 416
Taxation on acquisition 3 362 6 122 - -
(Unpaid) at end of year (20 071) (7 063) (23) 416
Change in accounting policy - STC on dividend 876 (876) - -
Deferred taxation end of year 4 786 - - -
15 186 7 996 405 -
25. DIVIDENDS PAIDUnpaid at beginning of year - - - -
Charged to the income statement 9 087 - 9 087 -
Dividends acquired - 5 100 - -
(Unpaid) at end of year - - - -
9 087 5 100 9 087 -
26. ACQUISITION OF BUSINESSFixed assets 19 448 3 856 19 448 3 856
Investments and loans 5 516 043 35 977 5 516 043 35 977
Goodwill 192 755 13 958 192 755 13 958
Investments in associates 1 290 - 1 290 -
Cash and cash equivalents 2 136 7 503 2 136 7 503
Taxation payable (3 362) (6 122) (3 362) (6 122)
Dividends payable - (5 100) - (5 100)
Outside shareholders’ interest - (1 298) - (1 298)
Loans and advances - (122) 9 091 (122)
Receivables and prepayments 100 808 3 885 100 808 3 885
Provisions and current liabilities (56 951) (7 141) (56 951) (7 141)
Policyholder liabilities (5 488 667) - (5 488 667) -
Total purchase price 283 500 45 396 292 589 45 396
Less: Paid by non-cash means (283 500) (26 519) - (26 519)
Cash consideration paid - 18 877 292 589 18 877
Cash and cash equivalents of subsidiaries (2 136) (7 503) - -
Cash flow on acquisition (2 136) 11 374 292 589 18 877
27. (EXPENSES) / PROCEEDS ON SHARE ISSUEIssue of shares 4 500 418 4 500 418
Issue of share premium 279 000 38 563 269 961 38 563
Consideration for acquisition of business (283 500) - - -
Expenses written off to share premium (9 039) - - -
(9 039) 38 981 274 461 38 981
PG 46 • 28 February 2002 • FR
Fig. 3.14 - 3.21. Seeds. Growth depends on combining the right elements.
“Group brand
and stature-
building within
our chosen
target markets is
a priority for
2002/2003.”
JN1138 M CUBED AR 5/7/02 8:14 Page 46
FR • 28 February 2002 • PG 47
Annexure Am Cubed Holdings Limited
Interests in subsidiary companiesas at 28 February 2002
Indebtedness Indebtedness% % Share Share (to)/from (to)/from
of issued of issued value value subsidiaries subsidiariesshare capital share capital 2002 2001 2002 2001
2002 2001 R'000 R'000 R'000 R'000
Shares stated at cost:
m Cubed Life Ltd 100 - 117 490 - (53 774) -
m Cubed Unit Trust
Management (Pty) Ltd 100 - 5 000 - 8 395 -
Automated Outsourcing
Services (Pty) Ltd 100 - 28 350 - 34 784 -
m Cubed Advances (Pty) Ltd 100 - 8 550 - 11 112 -
m Cubed Asset Management (Pty) Ltd 100 - 68 040 - 4 331 -
m Cubed Management
Services (Pty) Ltd 100 - - - 3 023 -
m Cubed International (Pty) Ltd 100 - 28 350 - 2 040 -
m Cubed Property Investments (Pty) Ltd 100 - - - 2 767 -
Vision Healthcare and Employee
Benefits (Pty) Ltd 100 - - - (358) -
m Cubed Specialised
Investments (Pty) Ltd 100 - 36 810 - 917 -
m Cubed Investments (Pty) Ltd 100 100 5 104 5 104 (10 347) (3 354)
Escher Structured Products (Pty) Ltd 100 100 10 500 10 500 (17 330) (15 061)
m Cubed Investment Life Ltd 100 100 21 414 21 414 (9 303) (5 550)
Escherwise (Pty) Ltd 100 100 3 910 3 910 338 -
Escher UK Asset Management Ltd 75 75 4 467 4 467 - -
337 985 45 395 (23 405) (23 965)
E X P O N E N T S O F G R O W T H
www.mcubed.co.za
“Corporate Money
Managers surpassed
the R1.5 bn
assets under
management mark
by year end.”
JN1138 M CUBED AR 5/7/02 8:14 Page 47
EXTRACTS FROM THE REPORT OF THE INDEPENDENT ACTUARY TO THE MEMBERS OF m CUBED LIFE LIMITED1. FINANCIAL SOUNDNESS
Ihave conducted an actuarial review of m Cubed Life
Limited in accordance with Generally Accepted Actuarial
Standards. These principles require reasonable provision for
future outgo under such policies, generally based on the
assumption that current conditions will continue. Provision
is therefore not made for all possible contingencies. I have
accepted that the financial statements comply with the
requirements of the Companies Act and the Long-Term
Insurance Act, 1998.
Based on this review, as at 28 February 2002, in my opinion,
m Cubed Life Limited was financially sound as shown in the
following balance sheet.
ACTUARIAL BALANCE SHEET
28 February2002
Notes R’000
Net assets 3 11 309 069Policy liabilities 4 11 224 697Surplus 84 373
Represented by:
Ordinary share capital 58 348Retained Income* 26 024
• pre acquisition 25 829• post acquisition 195
Capital adequacy requirement 5 15 598
* The pre-acquisition portion of retained income relates to profits
arising prior to the merger and the post-acquisition amount relates to
profits arising from 1 August 2001 to 28 February 2002.
2. COMPOSITION OF POLICY LIABILITIES
MCubed Life Limited’s policy liabilities have the following
composition:
28 February 2002
Linked individual and corporate business 92%Group business 8%
Total 100%
3. VALUATION BASIS OF ASSETS
The assets are valued at balance sheet value, i.e. at market
or directors’ value. The basis is consistent with the basis
used to value policy liabilities.
PG 48 • 28 February 2002 • FR
Actuarial reportsm Cubed Life LimitedFR REPORTING
4. VALUATION BASIS OF POLICY LIABILITIES
• For linked policies, the liabilities
are stated at the value of the units
plus / minus the present value
of expected future shortfalls /
surpluses in policy charges over
claims and expenses.
• The liabilities for other policies are
stated as the present value of
expected future benefit payments
and expenses less the present
value of expected future premium
receipts.
• The assumptions are based on my
best estimate of future experience.
Margins are then added to the best
estimate assumptions to provide a
buffer against adverse experience
and to ensure an appropriate
release of surplus over every policy’s
life span.
• Future persistency, mortality and
expenses are estimated assuming
that recent experience will continue
except that provision is made for
deteriorating claims experience
due to AIDS in accordance with
the Long-Term Insurance Act, 1998
and the guidelines of the Actuarial
Society of South Africa (ASSA).
• The assumed future gross
investment return is 13.5% p.a.
and it is assumed that per policy
costs will increase at 10% p.a.
• Allowance has been made in the
liabilities for tax according to the
current tax basis. This includes an
allowance for Capital Gains Tax
which became applicable from
October 2001 onwards.
• It is assumed that linked policy-
holders get the full estimated net
investment return on unit funds
and that shareholders get the
net management fees and other
profits.
• The valuation basis assumes future
surrender values will reflect the
current surrender value scales in
use by the company.
• No bonus stabilisation reserves
were included in the policy
liabilities as the company’s
investment-oriented polices are
linked to the market value of the
underlying portfolio.
• The liabilities allow for planned
margins according to the Long-
Term Insurance Act, 1998 and
ASSA guidelines. A portion of the
margin between the premium and
valuation bases has not been
discounted and will emerge in
future. This represents a second
tier planned margin in the liabilities
of R11.4m.
5. CAPITAL ADEQUACY REQUIREMENT
The excess of net assets over policy
liabilities is 5.4 times the capital
adequacy requirement calculated
according to the requirements of the
Long-Term Insurance Act, 1998 and
of the ASSA.
6. MATERIAL CHANGES IN VALUATION BASISSINCE PREVIOUS REPORT
There were no material changes
in the valuation basis since the
previous report.
7. ALTERATIONS, NOTES AND QUALIFICATIONS
The actuarial assumptions will be
reviewed from time to time to
reflect changes in experience and /
or expectations.
No comparative figures have been
shown as these relate to the period
prior to the merger.
The full actuaries’ report for the 14 months ended
28 February 2002 is available for inspection at the
registered office of the company.n
ACTUARIAL REPORTING
JN1138 M CUBED AR 5/7/02 8:14 Page 48
Actuarial reportsm Cubed Investment Life Limited
1. FINANCIAL SOUNDNESS
Ihave conducted an actuarial review of m Cubed Investment Life Limited in accordance with
Generally Accepted Actuarial Standards. These principles require reasonable provision for
future outgo under such policies, generally based on the assumption that current conditions
will continue. Provision is therefore not made for all possible contingencies. I have accepted
that the financial statements comply with the requirements of the Companies Act of South
Africa and the Long-Term Insurance Act.
Based on this review, as at 28 February 2002, in my opinion, m Cubed Investment Life Limited
is financially sound, as shown in the following balance sheet.
2. COMPOSITION OF POLICY LIABILITIES
The policy liabilities of m Cubed Investment Life Limited comprise unit-linked business sold
to individual, retirement fund and corporate investors.
3. VALUATION BASIS OF ASSETS
The assets are valued at balance sheet values, i.e. at market or directors’ values as described
in the annual financial statements.
4. VALUATION BASIS OF POLICY LIABILITIES
The liabilities were valued on a basis consistent with the asset values and comply with the
Financial Soundness valuation basis required by the Long-Term Insurance Act. The liabilities
include the market value of the units allocated to policyholders and a provision for future
maintenance costs. The expected future maintenance costs were consistent with the recent
experience of the business. Planned margins have been allowed for as required by the Long-
Term Insurance Act, 1998.
5. CAPITAL ADEQUACY REQUIREMENT
The capital adequacy requirement is calculated to determine whether the excess of assets
over liabilities is sufficient to provide for the possibility of extreme negative departures of
actual future experience from the assumptions made in calculating policy liabilities and
against fluctuations in the value of assets. The level of departure or fluctuation allowed for is
as required by the Long-Term Insurance Act. The surplus is 450 times the capital adequacy
requirement.
THE REPORT OF THE INDEPENDENT ACTUARY TO THE MEMBERS OFm CUBED INVESTMENT LIFE LIMITED
28 February 28 February2002 2001
Notes R’000 R’000
Net assets 3 21 697 766 16 602 352
Policy liabilities 4 21 664 460 16 575 752
Excess of assets over liabilities 33 306 26 600
Represented by:Shareholders interest 33 306 26 600
Share capital 19 500 19 500
Retained surplus 13 806 7 100
Balance of excess (retained in the Life Fund) - -
Total 33 306 26 600
Capital adequacy requirement 5 74 180
ACTUARIAL BALANCE SHEET
JN1138 M CUBED AR 5/7/02 8:14 Page 49
PG 50 • 28 February 2002 • FR
A
1
P
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2
P
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SS
Actuarial reportm Cubed Investment Life Limited
Actuarial reportm3 Capital Assurance PCC Limited
7. ALTERATIONS, NOTES AND QUALIFICATIONS
The actuarial assumptions will be reviewed from time to time to reflect changes in experience
and/or expectations.
CR VAN DER RIET BSc, FIA, FASSAIndependent Actuary
17 May 2002n
REPORT OF THE VALUATOR TO THE MEMBERS OF m3 CAPITALASSURANCE PCC LIMITED
1. FINANCIAL SOUNDNESS
Ihave conducted an actuarial review of m3 Capital Assurance PCC Limited, according to UK
Generally Accepted Actuarial Standards, as at 28 February 2002. I certify that
the statement of actuarial values of assets and liabilities, read together with the financial
statements, fairly presented the financial position of the company.
Based on this review, in my opinion, m3 Capital Assurance PCC Limited was financially
sound.
28 February 28 February2002 2001
R’000 R’000
Increase in excess of assets over liabilities 6 705 5 186
Less share capital - -
Add the increase in dividend paid and provided for - 3 420
Earnings for the year on financial soundness valuation basis 6 705 8 606
Earnings per income statement 6 705 8 606
The earnings for the year on the financial soundness basis was comprised of:
• Investment return on free assets 2 571 2 447
• Changes to valuation basis and assumptions (738) -
• Balance of earnings for the year 4 872 6 239
Total 6 705 8 606
6. RECONCILIATION WITH INCOME STATEMENT
28 February2002
Notes US$AssetsTotal value of assets as per balance sheet 2 2 985 738
Liabilities• Actuarial value of policy liabilities 3 2 291 821• Long term and current liabilities as per balance sheet 504 566Total 189 351
Represented by:
• Share capital 203 000• Retained surplus (13 649)
189 351
Capital adequacy requirement 4 50 000
ACTUARIAL BALANCE SHEET
2. VALUATION BASIS OF ASSETS
The assets have been valued at market
value. This basis is consistent with the
basis used to value policy liabilities.
3. VALUATION BASIS OF POLICY LIABILITIES
The liabilities are stated at the value of
the units.
4. CAPITAL ADEQUACY REQUIREMENT
In terms of the Guernsey Insurance
Business Law, 1986, the company is
required to hold a minimum margin of
solvency of the greater of £50 000 and 2.5%
of the value of the fund required under
section 29(1) of the Law. In this case, the
amount of £50 000 applies.
D WAKERLEYFIAActuary
m3 Capital Assurance PCC Limited
17 May 2002n
David WakerleyActuary
JN1138 M CUBED AR 5/7/02 8:14 Page 50
FR • 28 February 2002 • PG 51
Notice of annual general meetingm Cubed Holdings Limited
By Johan SteynGroup company secretaryFR REPORTING
ANNUAL GENERAL MEETING, m CUBED HOLDINGS LIMITEDN otice is hereby given that the Annual
General Meeting of members of
m Cubed Holdings Limited (“the company”)
will be held at The Cube, Investment Place,
Tenth Road, Hyde Park, Johannesburg on
2 August 2002 at 09h30 for the following
purposes:
1. Ordinary resolution No. 1
To consider and adopt the annual financial
statements of the company, including the
auditors’ reports thereon, for the financial
year ended 28 February 2002.
2. Ordinary resolution No. 2
To elect directors in accordance with the
provisions of the company’s Articles of
Association. The following retiring
directors are eligible and offer themselves
for re-election:
2.1 CMB Bothner
2.2 A Cabot-Alletzhauser
2.3 MM Dawes
2.4 CA Otto
2.5 W Roux
2.6 IHS Sinton
2.7 JC Storey
3. Ordinary resolution No. 3
That in terms of article 28.2.1 of the
Articles of Association of the company,
with effect from 1 March 2002 and until
otherwise determined by the members at
the Annual General Meeting to be held
in 2003, the amounts of R120 000 per
annum be paid to the chairman and
R60 000 per annum be paid to each of the
non-executive directors, as remuneration
for their services.
4. Ordinary resolution No. 4
To place the unissued share capital of
the company under the control of the
directors in terms of Section 221 and 222
of the Companies Act, 1973, and to renew
the authority of the directors to allot and
issue any of the unissued shares of the
1. NUMBER OF SHAREHOLDERS
Number of shareholders Number of shareholders other Total shareholdersin SA than in SA
Nominal Nominal Nominalnumber % number % number %
Public 1 418 96.14% 38 2.57% 1 456 98.71%
Directors 13 0.88% 2 0.14% 15 1.02%
Other: share incentive scheme 1 0.07% - - 1 0.07%
Major shareholders (over 10%) 1 0.07% 2 0.13% 3 0.20%
Total 1 433 97.16% 42 2.84% 1 475 100.00%
2. NUMBER OF SHARES HELD
Number of shares Number of shares other Total sharesin SA than in SA
Nominal Nominal Nominalnumber % number % number %
Public 179 438 711 23.93% 41 913 569 5.58% 221 352 280 29.51%
Directors 66 220 978 8.83% 90 492 787 12.07% 156 713 765 20.90%
Other: share incentive scheme 34 747 297 4.63% - - 34 747 297 4.63%
Major shareholders (over 10%) 166 823 581 22.24% 170 363 077 22.72% 337 186 658 44.96%
Total 447 230 567 59.63% 302 769 433 40.37% 750 000 000 100.00%
SHAREHOLDER INFORMATIONSHAREHOLDER ANALYSIS, m CUBED HOLDINGS LIMITED
JN1138 M CUBED AR 5/7/02 8:14 Page 51
PG 52 • 28 February 2002 • FR
company on such terms and conditions
as they may deem fit, subject to the
provisions of the Companies Act, 1973,
and the requirements of the JSE
Securities Exchange (JSE).
5. Ordinary resolution No. 5
To authorise the directors to allot and
issue unissued shares of the company for
cash, on such terms and conditions as
they may deem fit, subject to the
provisions of the Companies Act, 1973,
and the Listing Requirements of the JSE.
6. Special resolution No. 1
General authority to repurchase shares.
“Resolved, as a special resolution, that the
company hereby approves, as a general
approval contemplated in sections 85 (2)
and 85 (3) of the Companies Act, 1973
(Act 61 of 1973), as amended (“the Act”),
the acquisition of the company or any of
its subsidiaries from time to time of the
issued ordinary shares of the company,
upon such terms and conditions and in
such amounts as the directors of the com-
pany may from time to time determine,
but subject to the Articles of Association
of the company, the provisions of the Act
and the Listings Requirements of the JSE
as presently constituted and which may
be amended from time to time, and:
a. any such acquisition of ordinary
shares shall be implemented on the open
market, or on the JSE;
b. this general authority shall only be
valid until the company’s next Annual
General Meeting, provided that it shall
not extend beyond 15 (fifteen) months
from the date of passing of this special
resolution;
c. a paid press announcement will be
published as soon as the company has
acquired ordinary shares constituting, on
a cumulative basis, 3% (three percent) of
the number of ordinary shares in issue
prior to the acquisition pursuant to which
the 3% (three percent) threshold is
reached, which announcement shall con-
tain full details of such acquisitions;
d. acquisitions of ordinary shares in the
aggregate in any one financial year may
not exceed 20% (twenty percent) of the
company’s issued ordinary share capital
from the date of the grant of this general
authority.
e. In determining the price at which the
company’s ordinary shares are acquired
by the company in terms of this general
authority, the maximum premium at
which such ordinary shares may be
acquired will be 10% (ten percent) of the
weighted average of the market price at
which such ordinary shares are traded on
the over-the-counter market, or the JSE,
as determined over the 5 (five) business
days immediately preceding the date of
repurchase of such ordinary shares by the
company.
The reason for this special resolution is to
grant the company a general authority in
terms of the Act for the acquisition by the
company or any of its subsidiaries of
shares issued by it, which authority shall
be valid until the earlier of the next
annual general meeting of the company
or the variation or revocation of such
general authority shall be valid until the
earlier of the next Annual General
Meeting of the company or the variation
or revocation of such general authority by
special resolution by any subsequent
general meeting of the company, provided
that the general authority shall not
extend beyond 15 (fifteen) months from
the date of this Annual General Meeting.
The passing and registration of this spe-
cial resolution will have the effect of
authorising the company or any of its
subsidiaries to acquire shares issued by
the company.
Statement by the board of directors of the
company
Pursuant to and in terms of the Listings
Requirements of the JSE, the directors of
the company hereby state that:
a. the intention of the directors of the
company is to utilise the authority if at
some future date the cash resources of
the company are in excess of its require-
ments. In this regard the directors will
take account of, inter alia, an appropriate
capitalisation structure for the company,
the long term cash needs of the company,
and will ensure that any such utilisation
is in the interests of shareholders;
b. the method by which the company
intends to repurchase its securities, the
maximum number of securities to be
repurchased and the date on which such
repurchase will take place, the directors
of the company will ensure that:
• the company and its subsidiaries will
be able to pay their debts as they
become due in the ordinary course of
business for the next 12 (twelve)
months;
• the consolidated assets of the compa-
ny and its subsidiaries, fairly valued in
accordance with Generally Accepted
Accounting Practice, will be in excess
of the consolidated liabilities of the
company and its subsidiaries;
• the issued share capital and reserves
of the company and its subsidiaries
will be adequate for the purposes of
the business of the company and its
subsidiaries for the next 12 (twelve)
months; and
• the working capital available to the
company and its subsidiaries will be
sufficient for the group’s requirements
for the next 12 (twelve) months.
7. Ordinary Resolution No. 6
In terms of clause 28.1 of the m Cubed
Share Option Trust, the trust deed be
amended by the deletion of the numbers
and words “75 000 000 (seventy five
million)” and “10% (ten percent)”
and the substitution in its stead of the
words and numbers “112 500 000 (one
hundred and twelve million five hundred
thousand)” and “15% (fifteen percent)”
where it appears in clause 1.2.35.
The effect of the above resolution is to
increase the maximum number of shares
that could be allocated to beneficiaries
from 10% to 15 % of the issued share
capital of m Cubed Holdings Limited.
Based on an issued share capital of 750
million, the number of shares allocated to
the m Cubed Share Option Trust are
increased from 75 million to 112,5 million.
8. To transact such other business as may be
transacted at an annual general meeting.
A member entitled to attend and vote at
the meeting may appoint a proxy or prox-
ies to attend, speak and vote in his stead.
Such proxy need not be a member of the
company. Instruments appointing a proxy
are obtainable from the transfer secre-
taries and must be deposited at the trans-
fer office of the company in Johannesburg
at least 48 hours before the time of the
meeting.
By order of the board.
m CUBED HOLDINGS LIMITEDJ STEYNGroup company secretary
17 May 2002n
Notice of annual general meetingm Cubed Holdings Limited
JN1138 M CUBED AR 5/7/02 8:14 Page 52
PRESS RELEASE: 22 JANUARY 2002
m CUBED ACQUIRES 50% STAKE IN POLICY EXCHANGE
L isted financial services group m Cubed
Holdings (m Cubed) has acquired a 50%
stake in Policy Exchange (Polex) from
management, making it one of the largest
players in the fast growing second hand
endowment policy market.
The transaction is effective retrospective to
1 November 2001 and will make a positive
contribution to m Cubed’s results in the next
financial year. It will not however have a
material effect on the group but will contri-
bute to the increase in annual annuity income.
m Cubed group managing director John
Storey says the group has purchased a
further 20% share in Polex, pending
Competition Commission approval. Polex
management will retain 30% of the company,
while m Cubed has the right to acquire this
stake during February 2005. Polex will
become a member of the m Cubed group,
but retain its name, at least initially.
Storey says the transaction opens up a
range of new product development options
for the group. “Polex expects to at least
triple turnover over the next two years.
The company has secured a strong supply
of second hand policies, which is the
crucial element to success in this market.”
Polex aims to concentrate on m Cubed’s
institutional market, though it will do some
tailored transactions for the independent
retail brokerages that support m Cubed.
Nick Kruger, managing director of Polex,
sees the following benefits for m Cubed that
should accrue through a powerful foothold
in the second hand endowment market:
access to additional broker relationships
through Polex’s existing relationships, new
product development opportunities for both
retail and institutional clients and a yield
enhancer for low volatility. Of the R6.6 billion
surrenders a year in South Africa, about 35%
are tradable. ”We now have the opportunity
for large upside potential from this market,”
says Storey. “It expands our service offering
to clients on both the retail and institutional
fronts.”
Polex has traditionally operated in the retail
market. The transaction gives Polex access
to m Cubed’s suite of licences and product
development expertise. These will facilitate
the distribution by it to the institutional
market as well.
Another key benefit for Polex includes a
potential international secondary endowment
base which will be strengthened by the
expertise of shareholder Royal London
Scottish Life, benefiting both the retail and
the institutional market.
ISSUED BY:TISH STEWART PR ASSOCIATES
Press releasesm Cubed Holdings Limited
By Alison de LormMarketing managerFR EDITOR
GROWING AWARENESSHIGHLIGHTS FOR 2002, m CUBED HOLDINGS LIMITED
JN1138 M CUBED AR 5/7/02 8:14 Page 54
PRESS RELEASE: 13 FEBRUARY 2002
m CUBED UNIT TRUSTMANAGEMENT COMPANY MOVESUP NINE PLACES IN THELEAGUE TABLES
D ecember has marked the end of yet
another period of exceptional growth for
m Cubed Unit Trust Management Company
(m Cubed Unit Trusts), a wholly owned
subsidiary of m Cubed Holdings Limited.
As at 31 December 2001, assets under
management for the Management Company
(Manco), which is only four years old, stand
at around R17.9 billion. This asset base
elevates m Cubed Unit Trusts to the list of
the top six South African Manco’s by assets
under management (up from 15th position
at the end of September 2001). According to
statistics released by the Association of Unit
Trusts (AUT), industry assets increased by
24.3% to R174.6 billion for the last quarter
in 2001. This compares to R43.8 billion only
five years ago.
Record net inflows into m Cubed Unit Trusts
of R15.4 billion in the fourth quarter were
largely of an institutional nature on the
back of 7 new institutional funds.
Institutional funds (where units are held by a
group rather than an individual in a structure
such as a retirement fund) now form 20.3%
of the local industry’s assets (13.6% at end-
September 2001) according to the AUT.
This has been an area of strong growth for
m Cubed Unit Trusts where it is seen as
being an industry leader. With the trend
towards greater consolidation in the industry,
this is likely to be the case for the foreseeable
future, as the lines between retail and
institutional investment markets are blurring
rapidly. As a result, companies with the
largest bulking ability will be the winners.
m Cubed Unit Trusts has positioned itself
well to take advantage of this evolution in
the industry and is now recognised and
respected as one of the largest players in
the market.
In addition to this, changes in legislation
such as Capital Gains Tax have also enticed
new entrants who previously ran wrap
funds and similar types of investments, into
the unit trust market. m Cubed Unit Trusts
has been a strong beneficiary in this shift in
strategy by many retail financial advisors
and corporate brokerages seeking a tax-
efficient unit trust solution for their clients’
assets.
“Another area of strong growth for m
Cubed Unit Trusts has been our range of
Rand-denominated international unit trusts,
which have benefited from good inflows
due to a large foreign investment capacity
component. Investors have had a strong
appetite for these funds and this view has
been vindicated by the recent collapse in
the Rand against most developed market
currencies,” said Paul Stewart, managing
director of m Cubed Unit Trust
Management Company Limited.
ISSUED BY:TISH STEWART PR ASSOCIATES
PRESS RELEASE: 21 FEBRUARY 2002
MERGER RESULTS IN m CUBEDASSET MANAGEMENT TEAMDEPTH
L ast year’s merger of m Cubed Capital
Holdings Limited and Escher Group has
been consummated with the appointment
of a new asset management team drawn
from both companies. The merger created
South Africa’s largest independent multi-
management group, m Cubed Holdings
Limited, with R35 billion in assets under
management.
Anne Cabot-Alletzhauser, formerly executive
director and head of investments at m Cubed
Capital, has been appointed joint managing
director - investments for m Cubed Asset
Management. Gerrit le Roux, former chief
investment officer at Escher, has been
appointed joint managing director -
business development, assuming the func-
tion previously handled by Philip Croeser,
who has left to pursue other interests.
Croeser remains a non-executive director
of m Cubed Holdings.
“Neither Gerrit nor I have egos to defend,
and we complement each other well,” says
Cabot-Alletzhauser. “We’ve worked well
together in the few months since the merger,
and we were determined to make sure this
was a genuine merger by capturing the best
of both groups.”
David Wakerley, formerly head of research
at m Cubed Asset Management, has been
appointed as director and chief operating
officer. Vimal Chagan, formerly in a
research role with m Cubed, has been
appointed as director and head of research
and product development at m Cubed
Asset Management.
Le Roux says the restructured management
team positions m Cubed Asset Management
for its next phase of growth. “We’re constantly
evolving and developing new concepts and
products,” he says. “We’re shifting from
an operation which offers traditional multi-
management to one which offers a full range
of risk solutions, including derivatives, prop-
erty, private equity and unlisted securities.
For that, you need a strong research
capability, which we have.”
Upcoming revisions to Regulation 28 of the
Pension Funds Act should further stimulate
the swing towards multi-management by
imposing more onerous responsibilities on
pension fund trustees.
“Once Regulation 28 is enacted, the role of
the trustee will no longer be to find the best
manager,” says Cabot-Alletzhauser.
“Trustees will in future have to act in the
best interests of their members, and choosing
the right fund manager based on the age-
old practice of relative performance will no
longer be acceptable. Experience shows
that relative performance is a risky basis for
selecting fund managers because managers
leave, market conditions change, and no
investment style will win all the time. In
future, trustees will have to define their
investment strategy and ensure their chosen
fund managers adhere to this mandate.
That’s why multi-management is gaining
prominence. It takes the guess work out of
manager selection and allows trustees to
focus on their core function, which is to look
after the interests of their members.”
Core to the success of any multi-manager is
the strength of its controls. m Cubed Asset
Management employs 17 different fund
managers: it must capture trades from
each of these managers as they occur and
ensure they remain within their investment
mandates. All trades must be reconciled
with m Cubed’s own records, which
requires a strong interface between its
own back office and that of the individual
fund managers.
“We’ve also invested heavily in putting the
best systems and controls in place, and our
clients will enjoy the direct benefit of
these,” says le Roux.
ISSUED BY:TISH STEWART PR ASSOCIATES
FR • July 2002 • PG 55
S
JN1138 M CUBED AR 5/7/02 8:14 Page 55
1. An ordinary shareholder may insert the name of a proxy or the namesof two alternative proxies of the ordinary shareholder's choice in thespace provided with or without deleting "the chairman of the AnnualGeneral Meeting". Any such deletion must be initialed by theshareholder. The person whose name appears first on the form of theproxy and has not been deleted will be entitled to act as the proxy tothe exclusion of those whose names follow.
2. An ordinary shareholder's instruction to the proxy must be indicatedin the appropriate space provided. Failure to comply with the abovewill be deemed to authorise the proxy to vote or abstain from votingat the Annual General Meeting as the proxy deems fit in respect of allvotes cast and in respect whereof abstention is recorded may notexceed the total of the votes exercisable by the ordinary shareholderor by his proxy.
3. An alteration or correction must be initialed by the signatory/ies.
4. Documentary evidence establishing the authority or a person signing thisform of proxy in the representative capacity must be attached to the formunless recorded by the transfer secretaries of the company or waivedby the chairman of the Annual General Meeting.
5. The completion and lodging of this form will not preclude the relevantordinary shareholder from attending the Annual General Meeting and
speaking and voting in the person thereat to the exclusion of any proxy
appointed in terms hereof, should such ordinary shareholder wish to
do so.
6. Forms of proxy must be lodged with, telefaxed or posted to the
company's transfer office in Johannesburg, to be received not later
than 48 hours before the time of the meeting.
COMPUTERSHARE SERVICES LIMITED(Registration number 1958/003546/06)
2nd Floor
Endura House
41 Fox Street
Johannesburg
2001
(PO Box 61051, Marshalltown, 2107)
(011) 688-7714
JOHAN STEYN
Group company secretary
m Cubed Holdings Limited
NOTES:
(ple
ase
com
plet
e th
e fo
rm a
nd m
ail i
t bac
k to
the
addr
ess
belo
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For use at the Annual General Meeting of m Cubed Holdings Limited to be held on 2 August 2002 at 09h30 in theboardroom, The Cube, Investment Place, Tenth Street (off 2nd Avenue), Hyde Park, Johannesburg.
I/we (please print) ofappoint (see note 1)or failing him/heror failing him/heror failing him/herThe chairman of the Annual General Meeting as my/our proxy to act for me/us at the Annual General Meetingwhich will be held on 2 August 2002 and at each adjournment or postponement thereof, and to vote for and/oragainst the resolutions and/or abstain from voting in respect of the ordinary shares in the issued share capital ofthe company registered in my/our names (see Note 2).
FORM OF PROXY
Signed at
on 2002
Signatureassisted by me (where applicable)
Each ordinary shareholder is entitled to appoint one or more
proxies (who need not be an ordinary shareholder of the
company) to attend, speak and vote in place of that ordinary
shareholder at the Annual General Meeting.
Resolution For Against Abstain1. Adoption of annual financial statements2.1 Election of CMB Bothner2.2 Election of A Cabot-Allezthauser2.3 Election of MM Dawes2.4 Election of W Roux2.5 Election of IHS Sinton2.6 Election of JC Storey3. Directors’ emoluments4. Unissued share capital5. Authority to issue shares for cash6. General authority to repurchase shares7. Amendment to share option trust deed8. Other business
Please mail this form to:2nd Floor, Endura House, 41 Foxglove Street Johannesburg 2001or PO Box 61051, Marshalltown 2107
m Cubed Holdings LimitedRegistration Number: 1998/014568/06Share Code: MCUISIN: ZAE00003353
Queries:(011) 340 2300Fax this form to(011) 880 8844
�
A publication of m Cubed Holdings Limited. Annual Report 2002
m Cubed AR Cover f/a 5/7/02 7:44 Page 2
Composite
C M Y CM MY CY CMY K
GrowthTargeted