ANNUAL REPORT 2010

IN THIS SECTION

›	Administration
›	Statement of directors’ responsibility
›	Statement from company secretary
›	Report of the audit committee
›	Independent auditors’ report
›	Directors’ report
›	Consolidated statement of financial position
›	Consolidated statement of comprehensive income
›	Consolidated statement of changes in equity
›	Consolidated statement of cash flows
›	Notes to the group annual financial statements
›	Annexure A: subsidiary undertakings
›	Annexure B: associate undertakings
›	Annexure C: shareholder distribution
›	Company statement of financial position
›	Company statement of comprehensive income
›	Company statement of changes in equity
›	Company statement of cash flows
›	Notes to the company annual financial statements

Directors’ report

for the year ended 30 September 2010

The directors have pleasure in submitting their report on the annual financial statements of the Group and Company for the year ended 30 September 2010. In context of the financial statements, the term ‘Group’ refers to the Company, its subsidiaries, associates and joint ventures. The directors are of the opinion that stakeholders’ interests are best served by presenting the Group’s annual financial statements separately from those of the Company. The latter financial statements appear on pages 71 to 177.

Nature of business and listing

Life Healthcare Group Holdings Limited is an investment holding company and through its subsidiaries, associates and joint ventures operates and has extensive interests in private hospitals, sameday surgical centres and healthcare services companies in southern Africa. On 29 April 2010, the Company was converted from a private limited liability company to a public limited liability company.

The Company listed on the main board of the JSE Limited on 10 June 2010 in the Health Care Providers sector under the abbreviated name LIFEHC and the Company’s clearing house code is ‘LHC’ for its ordinary shares.

Financial results

The financial statements from page 71 to 177 fully set out the financial results of the Group and Company and do not require further comment in this report.

Special resolutions

The following resolutions were passed by the shareholders of the Company in a general meeting on 21 April 2010 and, in the case of special resolutions, registered with the Companies and Intellectual Property Registration office (CIPRO) on 29 April 2010:

›	The Company was converted from a private company to a public company.
›	Any and all preference shares in the Company’s authorised and unissued share capital were cancelled in terms of section 75(h) of the Companies Act.
›	From the date of registration of the relevant special resolution and until the business day immediately preceding listing, the Company’s memorandum and articles of association were replaced with memorandum and articles of association that contemplate authorised ordinary ‘N’ shares and a form of articles of association which contains the terms of the ordinary ‘N’ shares. (The ordinary ‘N’ shares convert into ordinary shares (ranking pari passu with other issued ordinary shares in the capital of the Company) on the second business day immediately preceding the date of listing).
›	With effect from the date of listing, the memorandum and articles of association of the Company were replaced with a memorandum that does not contemplate authorised ordinary ‘N’ shares and articles of association which do not provide for ordinary ‘N’ shares.
›	Subject to the board of directors making a positive determination as to the Company’s solvency and liquidity in terms of section 85 of the Companies Act, the board of directors was authorised to effect the share repurchase in terms of section 85 of the Companies Act; provided that the hareholders of Brimstone Investment Corporation Limited (Brimstone) have approved the participation (in respect of shares held directly in the Company or indirectly via Business Venture Investments No 813 (Proprietary) Limited) by Brimstone in the share repurchase.
›	Upon listing, any and all ‘N’ shares in the Company’s authorised but unissued share capital were cancelled in terms of section 75(h) of the Companies Act.
›	Granted the board, subject to the listing proceeding, a general authority to repurchase the ordinary shares of the Company, subject to section 85 of the Companies Act and the Listings Requirements.

All the subsidiaries in the Group have passed special resolutions to change their articles of association to comply with the JSE Listings Requirements. A complete list is available at the Company’s registered office.

Share capital

The following alterations to the share capital of the Company have occurred:

›	In terms of a special resolution registered on 15 December 2009, the Company’s authorised and issued share capital was reorganised by sub-dividing the authorised and issued ordinary and ‘N’ share capital of the Company in the ratio 10 000:1, in order to bring the total number of authorised ordinary shares to 4 000 000 000 and issued ordinary shares to 1 016 790 000, and the total number of authorised ‘N’ shares to 200 000 000 and issued ‘N’ shares to 149 980 000.
›	On 26 March 2010, the Company issued 25 419 750 shares for the sum of R395 122 000 to the Life Healthcare 2005 performance equity trust, in terms of the provisions of the trust deed of the Life Healthcare 2005 performance equity trust.
›	On 8 June 2010, the 149 980 000 ‘N’ ordinary shares in the issued share capital of the Company converted, on a one for one basis and in accordance with their terms as set out in the articles of association, into issued ordinary shares of R0.000001 each in the capital of the Company. Upon their conversion into shares, the issued ‘N’ ordinary shares rank pari passu with all the other shares in the Company in all respects.
›	On 10 June 2010, the listing date, the Company issued 321 547 006 ordinary shares at a total value of R4 340 884 000 to investors in terms of the listing offer and repurchased an equivalent number of issued ordinary shares in its capital for a total value of R 4 019 148 000. Accordingly, following the aforementioned share issue and the share repurchase, the aggregate number of shares in the issued share capital of the Company remained unchanged.

Further details of the authorised and issued share capital of the Company and the Group are given in notes 2 and 6 of the Company and notes 15 and 19 of the Group financial statements.

Distribution to shareholders

The Company’s dividend policy is to consider an interim and final dividend in respect of each financial year.

Date paid	R’000	Cents per share	Type of dividend
30 June 2009	160 000	15.54	Interim 2009
30 September 2009	100 000	9.71	Interim 2009
28 December 2009	290 000	27.83	Final 2009
13 August 2010	239 708	23.00	Interim 2010

The directors approved a final dividend of 29 cents per share on 30 November 2010. Dividends are only accounted for on the date they are declared. As a result the final dividend is not accounted for in the annual financial statements.

In compliance with the requirements of the JSE Limited, the following dates are applicable:

	Last day to trade ‘cum’ the dividend	17 December 2010
	Trading ‘ex’ the dividend commences	20 December 2010
	Record date	24 December 2010
	Payment date	28 December 2010

During the current and previous financial year the Company also repurchased ordinary and ordinary ‘N’ shares.

The details are as follows:

		Number of shares
Date paid	R’000	repurchased
16 September 2009	99 944	13 210 000
10 June 2010	4 019 148	321 547 006

Interest in subsidiaries, associates and joint ventures

Material changes in holdings in subsidiaries, associates and joint ventures are:

›	In June 2010, the Group acquired 100% of the share capital in Amabubesi Hospitals (Proprietary) Limited (Bay View Hospital) and Amabubesi Healthcare Properties (Proprietary) Limited.
›	The Group disposed of its investment of 40% in the joint venture Vincent Pallotti Oncology Unit on 31 May 2010.
›	The Group disposed of its associate investment of 30% in Joint R adiotherapy (Proprietary) Limited on 30 November 2009.
›	Wilgers Cathlab Trust and LCM Oncology (Proprietary) Limited became subsidiaries of the Group due to a change in voting rights on 1 October 2009.

Details of holdings in subsidiaries, associates and joint ventures are disclosed in Annexure A, Annexure B and note 8 in the annual financial statements.

Property , plant and equipment

The Group’s property, plant and equipment are primarily owned by its subsidiaries and the book value amounts to R3 257 593 000 (2009: R2 905 498 000). There were no changes in the nature of property, plant and equipment or in the policy regarding their use during the year.

Board of directors

The names of the directors in office at the date of this report are set out on page 66 and the company secretary’s details are set out on page 66. The remuneration of the directors is set out in note 38 to the annual financial statements.

Appointments

Trevor Munday, Louisa Mojela and Peter Golesworthy were appointed as independent non-executive directors on 10 June 2010.

Resignations

Richard Laubscher resigned as an independent non-executive director on 21 April 2010. Neo Mokhesi (formerly Sowazi) resigned as a non-executive director on 20 August 2010. Eutychus Mbuthia resigned as a non-executive director and AG Aitken resigned as an alternate director on 23 August 2010.

Interests of directors

At 30 September 2010, directors owned ordinary shares in the Company, directly or indirectly, as follows:

	2010		2009
	Direct	Indirect	Direct	Indirect
Non-executive directors
Prof GJ Gerwel	–	6 448 922¹	–	–
MA Brey	–	7 792 067^1,5	–	–
GC Solomon	107 000²	–	–	–
PJ Golesworthy	22 000²	–	n/a	n/a
TS Munday	–	–	n/a	n/a
LM Mojela	–	–	n/a	n/a
Dr JPF Dalmeyer	783 008³	–	–	–
YZ Cuba	55 460⁶	233 349¹	–	–
Dr MP Ngatane	–	–	–	–
RCM Laubscher	n/a	n/a	–	–
EW Mbuthia	n/a	n/a	–	–
NV Mokhesi	n/a	n/a	–	–
Executive directors
CMD Flemming	10 715 078⁴	40 000¹	–	9 615 834⁴
RJ Hogarth	5 446 415⁴	–	–	5 201 604⁴
Alternative directors
AG Aitken	n/a	n/a	–	–
LZ Brozin	–	1 572 387¹	–	–
PN Boynton	–	–	–	–
CWJ Lyons	–	135 021¹	–	–
	17 128 961	16 221 746	–	14 817 438

No change in the interests as set out above has occurred between 30 September 2010 and the date of this report. No arrangements to which the Company is a party existed at year end that would enable the directors, alternate directors or their families to acquire benefits by means of the acquisition of shares in the Group’s companies.

There were no contracts of any significance during or at the end of the financial year in which any director or alternate director of the Company were materially interested.

The direct and indirect holdings of certain directors have been affected by specific transactions related to the listing. Prior to the listing of the Company on the JSE, a restructuring of certain shareholdings, share repurchases, share purchases and the release of shares in terms of the performance equity scheme was completed.

Subsequent to the listing certain shareholders unbundled their interest in the Company. Brimstone Investment Corporation Limited (Brimstone) and Mvelaphanda Holdings Limited (Mvela) decided to unbundle their shareholding in the Company to their respective shareholders via Health Strategic Investments Limited (HSI). Life Doctor Investments Limited (Docvest), through which doctors had invested in the Company, distributed their holding in specie to its shareholders.

¹	Previously no direct or indirect shares were held. With the listing of the Company and the unbundling of interests in the Company by Brimstone and Mvela through HSI, which listed on the JSE Limited on 16 August 2010, a Brimstone or Mvela shareholder would have received HSI shares. The indirect shareholding reflects the holding held through HSI. The HSI shares will be unbundled after the expiry of the lock-in period. This unbundling will result in shareholders holding ordinary shares in the Company directly.
²	There are no comparative figures as these shares were bought on or after the listing.
³	The holding is a result of the distribution in specie of shares in the Company by Docvest. These shares are subject to the 180 day lock-in period.
⁴	The interest was previously held indirectly. In terms of the arrangements which preceded the listing of the Company, the indirect holding became a direct holding and the following movement in shareholdings occurred:

	CMD Flemming	RJ Hogarth
Holding September 2009	9 615 834	5 201 604
Performance equity shares	3 739 255	1 370 108
Net share repurchase	(2 640 011)	(1 125 297)
Holding September 2010	10 715 078	5 446 415

These shares are subject to the 180 day lock-in period from the date of listing.

⁵	12 740 shares are held in Life Healthcare by associates of the director. There are no comparative figures as these shares were bought on or after the listing.
⁶	There are no comparative figures as these shares were bought as part of the book-build pre-listing.

For all the interests listed, there has not been nor will there be any change in these interests that has or will occur between the end of the financial year and the date of the approval of the annual financial statements.

Going concern

The directors are of the opinion that the Group and the Company will be a going concern in the foreseeable future. The directors have considered the budget and cash flow forecast for the 2011 year. The Group is of a sound financial position and it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. Key management is in place. The directors therefore consider it appropriate to adopt the going concern basis in the preparation of the Group and Company’s annual financial statements.

Auditors

The board of directors recommends that PricewaterhouseCoopers Inc., are re-appointed as auditors of the Company and the Group in terms of the resolution to be proposed at the annual general meeting in accordance with section 290(2) of the Companies Act.

Secretary

The address of the Company’s secretary is the same as the Company’s registered address and appears on page 66 of the report.

Events after the reporting date

No other material events occurred between the accounting date and the date of this report that need further comment, in addition to those already disclosed in note 41 to the annual financial statements.