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PINNACLE ANNUAL REPORT 2013

Strategic overview

2013 at a glance 02

Five-year financial review and statistics 04

Directorate 06

Group structure 08

Lines of business 09

Chief Executive Officer’s report 11

Accountability

Corporate citizenship 16

Committee membership and attendance 16

Sustainability report 19

Social and Ethics Committee report 23

Remuneration and Nomination Committee report 24

Audit and Risk Committee report 27

Annual financial statements

Directors’ responsibility statement and approval 29

Certificate by Company Secretary 30

Report of the independent auditors 31

Directors’ report 32

Statements of financial position 34

Statements of comprehensive income 35

Statements of changes in equity 36

Statements of cash flows 37

Accounting policies 38

Notes to the annual financial statements 46

Investor relations

Analysis of shareholding 76

Corporate information 77

Notice of Annual General Meeting 78

Form of proxy 89

Form of surrender 91

Contents

Pinnacle is one of Africa’s largest providers of Information and Communication Technology products and services

Through its divisions, Pinnacle

Africa, Infrasol, Centrafin and

AxizWorkgroup, Pinnacle offers

hardware and software products,

implementation solutions as well as

structured finance solutions.

Our continued focus to increase

shareholder returns will be achieved

through a combination of expanded

product selection to our basket

of offerings as well as strategic

acquisitions of enterprises that will

add value to the Group.

Navigation

Further reading online: www.pinnacleholdings.co.za

Further reading


01

The Board realises the importance of an integrated report that fully promotes transparency and accountability to reinforce its role as a responsible corporate citizen.

It has therefore approved two separate reports: the Annual Report containing financial and other information relevant to the financial year ended 30 June 2013, which is produced and published annually; and a separate report called the Corporate Citizenship Report located under “Corporate Citizenship” under the Investor Relations tab on the Group’s website atwww.pinnacleholdings.co.za. This report contains standing information on the Company’s corporate citizenship, governance structures, risk profile, sustainability and compliance with the King III Code, and is updated whenever changes occur. The two reports read together comprise what usually makes up the Integrated Report.

The Board of Directors acknowledges its responsibility to ensure the integrity of the Annual Report and the Corporate Citizenship Report and has applied its mind accordingly to both reports and to the recommendations of the King III Code.

Other than the external audit of the annual financial statements, the 2013 Annual Report and the current Corporate Citizenship Report have not been independently assured.

Signed by D Mashile-Nkosi and AJ Fourie, who have been duly authorised thereto by the Board

D Mashile-Nkosi AJ FourieIndependent ChiefNon-executive ExecutiveChairperson Officer

Integrated report

02


2012

2014

1 7

46

2013

1 8

75

1 9

49

2017

2 1

28

341315 302

271116197 265

467

96

392410

Mobile phone PC (Desktop + Notebook) Tablet Ultramobile

Units – Millions

WORLDWIDE DEVICE SHIPMENTS

2013

2012 2013

562

609

Units – Thousands

8.4%

6

70

Tablet PC (Desktop + Notebook)Desktop + Notebook)

2012 2013

2 3

63

2 5

37

Rand – Millions

7.4%

27 187

at a glance

PINNACLE DEVICE SHIPMENTS PINNACLE DEVICES REVENUE


03

2005

2004

2010

R000’s

up13%497 2

02

2006

2009

3 1

66 9

25

2012

715 4

68

2 8

33

716

2007

2008

1 7

15 8

44

1 0

50 7

93

2 4

96 3

00

2011

2013

4 9

60 0

74

5 8

44 5

92

6 5

96 2

32

2009

2012

R000’s

R167 3

85

2010

R208 2

77

2011

R322 9

34

R419 3

37

2013

R493 2

54

2009

2012

Cents

72.5

2010

81.3

2011

117.7

175.1

2013

205.6

REVENUE

EBITDA HEPS

04


Five-year financial review and statistics for the year ended 30 June 2013

2013

R’000

2012

R’000

2011

R’000

2010

R’000

2009

R’000

INCOME STATEMENTSRevenue 6 596 232 5 844 592 4 960 074 3 166 925 2 833 716

Cost of sales (5 566 701) (4 936 620) (4 215 662) (2 687 295) (2 395 040)

Gross profit 1 029 531 907 972 744 412 479 630 438 676

Operating expenses (536 277) (488 635) (421 478) (271 353) (271 291)

EBITDA 493 254 419 337 322 934 208 277 167 385

Depreciation and amortisation of software (20 753) (18 662) (13 916) (8 397) (8 744)

Reversal of software impairment – 384 – – –

Impairment of goodwill and investments – (69) (12) (10 791) –

Excess of fair value of business combination

acquisition over cost – – 5 199 – –

Operating profit 472 501 400 990 314 205 189 089 158 641

Investment income 58 548 22 633 6 943 10 845 7 428

Finance costs (77 106) (43 019) (11 510) (1 061) (12 056)

Operating profit before taxation 453 943 380 604 309 638 198 873 154 013

Taxation (128 263) (98 253) (87 297) (58 059) (43 891)

Net profit after taxation for the year 325 680 282 351 222 341 140 814 110 122

Attributable to non-controlling interests 732 2 123 2 115 1 548 4 668

Attributable to owners of the company 324 948 280 228 220 226 139 266 105 454

Fully diluted weighted average ordinary shares 157 931 159 721 181 965 181 475 182 664

in issue (’000)

STATEMENT OF CASH FLOWSCash generated by operating activities 124 960 192 550 288 361 105 037 183 379

Investment income 58 548 22 633 6 943 10 845 7 429

Finance costs (77 106) (43 019) (11 510) (1 061) (8 545)

Taxation paid (117 583) (106 565) (103 176) (52 479) (54 723)

(11 181) 65 599 180 618 62 342 127 540

Cash fl ows from investing activities (463 474) (139 416) (249 810) (13 659) (10 048)

Cash fl ows from fi nancing activities 368 932 (71 449) 7 132 (25 248) (31 038)

(Decrease)/Increase in cash and cash equivalents (105 723) (145 266) (62 060) 23 435 86 454

Net (overdraft)/cash and cash equivalents acquired

from business combinations (576) 1 334 (121 343) – –

(Overdraft)/cash and cash equivalents at the beginning

of the year (140 247) 3 685 187 088 163 653 77 199

(Overdraft)/cash and cash equivalents at the end

of the year (246 546) (140 247) 3 685 187 088 163 653


05

2013

R’000

2012

R’000

2011

R’000

2010

R’000

2009

R’000

STATEMENT OF FINANCIAL POSITIONASSETSNon-current assets 594 636 357 144 228 578 146 427 159 479

Property, plant and equipment 186 637 112 189 105 145 90 400 86 960 Intangible assets 129 117 72 060 60 541 43 558 54 210 Investments in listed shares 30 179 – – – – Long term loans 28 689 28 214 – 3 516 10 536 Deferred taxation 35 232 36 119 26 652 8 953 7 773 Finance lease receivable 184 782 108 562 36 240 – –

Current assets 2 501 814 1 862 614 1 500 117 1 108 404 856 248

Inventories 1 048 686 795 346 576 384 384 347 292 910 Finance lease receivable 65 349 35 624 11 801 – – Trade and other receivables 1 125 423 987 071 822 621 536 665 399 685 Taxation receivable 1 154 2 114 1 904 304 – Short term deposit 237 272 – – – – Cash and cash equivalents 23 930 42 459 87 407 187 088 163 653

Total assets 3 096 450 2 219 758 1 728 695 1 254 831 1 015 727

EQUITY AND LIABILITIESCapital and reserves 1 088 059 810 813 629 374 538 919 425 367

Share capital and premium 25 982 25 945 112 009 143 983 143 983 Treasury shares (41 766) (42 166) (74 885) (26 469) (20 605) Non-distributable reserves 32 588 31 528 31 204 31 578 30 780 Accumulated profit 1 066 308 791 190 560 786 387 108 269 858 Non-controlling shareholders 4 947 4 316 260 2 719 1 351

Non-current liabilities and deferred tax 503 594 61 436 66 869 19 852 24 452Current liabilities 1 504 797 1 347 509 1 032 452 696 060 565 908

Trade and other payables 1 074 736 1 021 133 863 743 677 432 539 541 Foreign exchange contracts – – – 344 9 993 Overdraft 270 476 182 706 83 722 – – Short-term loan 115 543 115 384 52 088 – – Current portion of interest-bearing liabilities 17 203 14 973 15 632 806 2 417 Warranty provisions 14 519 10 460 10 646 6 678 9 674 Taxation 12 320 2 853 6 621 10 800 4 283

Total equity and liabilities 3 096 450 2 219 758 1 728 695 1 254 831 1 015 727

Weighted average number of shares (’000) 157 931 159 721 181 965 181 475 145 382

FINANCIAL REVIEWPerformance per share (cents)Earnings 205.8 175.4 121.0 76.7 72.5Fully diluted earnings 205.8 175.4 121.0 76.7 57.7Headline earnings 205.6 175.1 117.7 81.3 72.5Fully diluted headline earnings 205.6 175.1 117.7 81.3 59.1Dividends declared 41.0 35.0 23.0 16.0 12.0Dividend cover (times) 5.0 5.0 5.1 5.1 4.9Net asset value 688.6 513.5 380.2 298.9 233.9Net tangible asset value 606.9 467.9 343.6 274.7 204.1Return on net equity 34.39% 39.04% 37.80% 29.01% 29.75%

Working capital managementInvestment in working capital (R’000) 1 084 854 750 824 524 616 236 902 143 380Stock days 66.0 46.0 44.1 52.2 44.6Debtors’ days 50.0 56.0 45.8 52.4 44.5Creditors’ days 48.0 46.0 66.1 80.7 72.1

Liquidity and solvencyDebt to equity 81.4% 44.0% 32.8% 1.8% 3.8%Current ratio 1.66 1.38 1.45 1.59 1.51Acid test ratio 0.97 0.79 0.89 1.04 1.00

Returns (%)Gross profit 15.6% 15.5% 15.0% 15.1% 15.5%EBITDA 7.5% 7.2% 6.5% 6.6% 5.9%Effective tax rate 28.3% 25.8% 28.2% 29.2% 28.5%Net profit 4.9% 4.8% 4.4% 4.4% 3.7%Net Interest cover (times) 25.5 19.7 68.8 (19.3) 34.3

06


Directorate

MS D MASHILE-NKOSI

Age: 55

Independent Non-Executive Chairperson

Appointed: 18 August 2011

Ms Mashile-Nkosi heads up a consortium that mines manganese in the Northern Cape

in partnership with ArcelorMittal. She serves as chairperson of Bakhazi-Banalima (Pty)

Limited, Kalahari Resources (Pty) Limited and Kalagadi Manganese. She also serves as

deputy c hairperson and tr ustee of the Women’s Development Bank Trust (where she

was a founding member) and a development offi cer for WDB Micro Finance. In addition

she is an independent non-executive director of Heritage Collection Holdings Limited,

Metmar Limited, various Eyesizwe group companies and the Women’s Development

Bank Investment Holdings (Pty) Limited. Ms Mashile-Nkosi is also a founding

member, shareholder and director of Temoso Holdings and a Trustee of the FirstRand

Empowerment Trust.

MR A TUGENDHAFT

Age: 65

Non-Executive Director (BA (Wits); LLB (Wits)

Appointed: 24 November 1998

Mr Tugendhaft is the senior partner of attorneys Tugendhaft Wapnick Banchetti and

Partners.

An accomplished practitioner in commercial, corporate and tax law, he has more than

30 years’ experience in practice and also serves as a non-executive director and deputy

chairman of Imperial Holdings Limited.

MR E VAN DER MERWE

Age: 51Independent Non-Executive Director BCom Hons (Accounting) and CTA (UJ); MCom Business Management (UJ)Appointed: 31 August 2012

Mr van der Merwe was been appointed to the Board of Pinnacle and to its Audit and Risk Committee as an independent non-executive director with effect from 31 August 2012. Mr van der Merwe has a MCom in Business Management and is a Chartered Accountant (SA). He did his articles at PricewaterhouseCoopers and worked for them as a senior audit manager on large national and international clients until 1993. During his time with PwC he was seconded to the London offi ce for two years. He spent a further 13 years in the corporate fi nance industry as a PwC partner and with other consulting companies completing a number of local and international due diligence, corporate advisory, merger and acquisition, JSE and SRP transactions and assignments. Mr van der Merwe joined the Rolfes Group in 2006, initially responsible for positioning that Group for a listing and completing strategic acquisitions, and was appointed as CEO of the Rolfes Group in 2007. He brings a wealth of business and corporate fi nance experience in the listed environment.

MS S CHABA

Age: 55

Independent Non-Executive Director

(Economics and Industrial Psychology); Diploma in Human Resources Management

Appointed: 31 August 2012

Ms Chaba was appointed to the Board of Pinnacle and to its Audit & Risk and Social & Ethics

Committees on 31 August 2012. Ms Chaba is currently CEO and owner of Seadimo Chaba Consulting

cc, a management consultancy. Previously she was the HR Executive: Human Capital Development at

Sasol following a period as the Chief Executive Offi cer for Creditworx (Pty) Ltd, a member of the Thebe

Investment Corporation group of companies. Before that she was employed by the Gauteng Provincial

Government as the Executive Manager (DDG) for Public Works and Management Services and Chief

Director (HR) in the Premier’s Offi ce. She holds a BA (Economics and Industrial Psychology) and a

Postgraduate Diploma in Human Resources Management from the University of the Witwatersrand.

She also has completed the Senior Executive Programme at Wits and Harvard Business Schools.

She currently sits as a non-Executive Director on the Hitachi Power Africa (Pty) Ltd, Safrican Insurance,

Amispan (Pty) Ltd and Makotulo Investment (Pty) Ltd Boards, as well as the Kgosi Neighbourhood

Foundation Board, a non-profi t organisation. In 2002 she was awarded the Boss of the Year title,

the fi rst woman to win the award in 13 years.


07

MR AJ FOURIE

Age: 51

Chief Executive Offi cer

MSc (Chem Eng)

Appointed: 24 November 1998

Mr Fourie completed his Masters in Chemical Engineering in 1986 at the University of the

Witwatersrand. He founded the Pinnacle Group in 1993 and has subsequently acquired and

integrated several companies into the Group leading to its consistent growth over the past 10

years.

Pinnacle Technology Holdings Limited was listed on the JSE Limited in 1998. In 2001 Arnold

Fourie acquired a stake in Rolfes Technology Holdings Limited, and was instrumental in

completing its listing on the AltX market of the JSE. He continues to serve as non-executive

director of that company.

MR TAM TSHIVHASE

Age: 58

Executive Director

MBL (SA); MAdmin (Econ) (Pret); HonsB (Admin) (Econ) (SA); BAdmin (UNIN); FIBSA (SA);

CPMM (Wits); CM (SA); M.Inst.D

Appointed: 3 December 2003

Mr Tshivhase joined Pinnacle in 2003, after a successful and varied career in government and

commerce.

During his tenure at Pinnacle he has demonstrably contributed to the growth and success of the

Pinnacle Group through the successful penetration of key accounts, operational management

and strategic direction.

MR RN NKUNA

Age: 41

Executive Director: Human Resources

Appointed: 1 September 2013

Mr Nkuna has fi ve years of post-qualifying experience as a senior manager in human resources

with specifi c emphasis on industrial and employee relations. He was appointed Group Head

of Human Resources for Pinnacle two years ago and has now been promoted to the newly

formed position of Human Resources Director of the Pinnacle group of companies. Mr Nkuna is

currently a member of the Board’s Social and Ethics Committee, and will continue to serve on

that committee.

Mr Nkuna holds a B Com (Hons) in Human Resources Management.

MR RD LYON

Age: 55

Chief Financial Offi cer

(Economics and Industrial Psychology); Diploma in Human Resources Management

Appointed: 1 January 2013

Mr Lyon qualifi ed as a CA in Scotland in 1983 and then joined Fisher Hoffman Stride in South

Africa shortly thereafter. He served as a Financial Manager in Metro Cash and Carry for 3 years

before taking on the Finance Director role in Cashbuild for 7 years. He has been with Pinnacle

and Axiz for over 15 years.

08

Group structure


FINANCIAL SERVICES

ICT DISTRIBUTION PROJECTS & SERVICES

CORPORATE


09

Lines of business

The Pinnacle Group is

divided into distinct business

segments and business units.

Each segment has strong

decentralised management

and support teams.

The segments are as follows:

INFORMATION AND

COMMUNICATION TECHNOLOGY

(“ICT”) DISTRIBUTIONThe ICT Distribution segment of the business imports and,

in some cases, assembles ICT hardware and software and

sells it into the sub-Saharan African markets via reseller

channels and national retail chains. The business units that

make up the ICT Distribution segment include the following:

PINNACLE AFRICAPinnacle Africa, focused on the assembly and distribution

of ICT hardware, was established in 1993. It distributes

via the reseller channel to small to medium corporate and

government markets. Pinnacle Africa re-entered the retail

markets in 2006 by partnering with leading national retail

chains.

Pinnacle Africa has branches throughout South Africa as

well as in Windhoek and Gaborone. Other sub-Saharan

African clients are serviced from Midrand.

The continually expanding product range spans the entire

breadth of ICT hardware and related peripherals. This

range includes almost all of the top international tier 1

brands, such as Lenovo, Dell, Intel, Lexmark, Samsung,

Sony, Acer and Asus as well as its own mainstay brand

of Proline personal computers, notebooks and servers.

Pinnacle Africa has branches in Midrand, Bloemfontein,

Nelspruit, Durban, Port Elizabeth, East London, Cape Town,

Windhoek and Gaborone to facilitate local sales and after-

sales service.

Other business lines within the Pinnacle Africa division are

as follows:

DataNet focuses on the distribution of high end server

racking, copper, fibre, wireless and related network

hardware and infrastructure in South and Southern Africa.

The Group acquired Modrac and JAG Engineering during

the year under review, both of which are manufacturers

of server racking and electronic enclosures. These

acquisitions not only created certainty of supply which

proved to be a problem in the prior years, but it gave the

Group a large share of the South African manufacturing

base for these products.

Pinnacle Business Solutions distributes the Sharp range of

multi-functional copiers and printers which is recognised

internationally as an advanced, reliable and well-priced

range of office automation.

PinnSec sells the Bosch and Axis ranges of upmarket

security, CCTV, fire detection and prevention and access

control systems, and represents the Group’s presence in

the physical safety and security market.

AXIZWORKGROUPAxizWorkgroup is a leading IT infrastructure and software

distributor that provides technology intelligence to its

business partners through the supply of world-class

products. AxizWorkgroup is recognised as a market

leader as result of employee empowerment and innovative

CSI initiatives such as its Ledibogo Business Partner

Programme and the Qhubeka initiative. AxizWorkgroup is

headquartered in Midrand with regional offices throughout

South Africa and in Zambia, Namibia, Botswana and

Mozambique.

Axiz was acquired by Pinnacle in November 2010 and

merged in the following months with WorkGroup to create

the new entity AxizWorkgroup. This allowed the two

companies to maximise the available synergies between

their two product sets, and to leverage off a combined

distribution and back office infrastructure. AxizWorkgroup

presents the market with some unique opportunities, both

from a vendor and customer perspective, as it is the first

distributor to combine broad-based and value-based

distribution under one roof. Its product portfolio is the most

comprehensive of any competitor in the market today,

and aligns well with new market dynamics such as cloud

computing and datacentre expansion. AxizWorkgroup

represents the leading cloud providers in the market today

and the combined product portfolio allows its partner base

to architect and provide best of breed solutions with which

to address the business requirements of their customers.

10


PROJECTS AND SERVICESThis segment comprises Infrasol (Pty) Ltd and

Merqu Communications (Pty) Ltd which are design and

development companies with project management

expertise focused on large network infrastructure, data

centre design and implementation of solution projects

that utilise a national footprint of dedicated installers to

complete works. Their partnership model has allowed many

B-BBEE companies to jointly deploy these solutions for

their clients. Furthermore, Infrasol is growing an annuity

income stream through tailor-made outsourced service

contracts offered to mid- and large organisations.

The division has also taken on the management of Pinteq,

the Group’s technology repair service. This strategic move

will give Infrasol the opportunity to build the facility into

a wholly-owned national footprint that provides vendor

accredited on-site and carry-in repair services to the

end user.

FINANCIAL SERVICESCentrafin is a fast growing finance house that provides

finance solutions to end users mainly in the government

and commercial sectors. During the last two years the

company has moved its main business from selling and

discounting financial leases and rental agreements to main

stream banks to building its own finance book. During the

last three years it has created a lease and rentals book of

over R269 million.

HOLDINGS AND PROPERTYHoldings and Properties provide the strategic direction,

shared services (including treasury, HR and ICT) and the

physical premises that are available to the Group.

Lines of business (continued)


11

The financial services

division (comprising

Centrafin), has delivered

remarkable pre-tax profit

growth of 47%

THE YEAR AT A GLANCEThe Group achieved a growth in headline earnings

per share (“HEPS”) of 17% for the financial year

ended 30 June 2013, with positive contributions from

all entities within the Group. Economic conditions

remained tough throughout the year and the volatility

of the currencies, particularly the Rand against the

US Dollar, was challenging. Nonetheless, the resilience

of the IT sector and the energy of the Pinnacle Team

ensured real growth in business activity.

OPERATIONAL

PERFORMANCEGroup turnover increased by 13% to R6.6 billion,

aided by contributions from some newly acquired

entities in Pinnacle Africa, and from pleasing revenue

gains by AxizWorkgroup in the surrounding African

countries. The financial services division (comprising

Centrafin), has delivered remarkable pre-tax profit

growth of 47%, whilst Infrasol, which makes up

the bulk of the projects and services division, has

struggled to repeat the growth experienced in the

last financial year due to some large projects not

materialising in time. Gross margin improved slightly

at a Group level (from 15.5% to 15.6%) as a result of

gains in higher margin products offsetting pressure

on margins on run rate products. This is the highest

gross margin since 2007.

Good cost control right through the Group resulted

in expenses growing at a lower rate than revenue,

allowing overheads as a percentage of turnover to

continue declining, this year from 8.4% to 8.1%. This

allowed our earnings before interest, tax, depreciation

and amortisation (“EBITDA”) margin to increase from

7.2% to 7.5%, the highest it has been this century

and a constant solid annual improvement over the

past five years from 5.9% in 2009.

Net borrowing costs decreased by 9% as a result of

the growing net contribution of Centrafin’s financial

assets and due to the lower rates payable on the bond

of R315 million placed in the capital markets at the end

of April 2013 under the Group’s Domestic Medium-

Term Bond Programme. This will enhance the quality

of Centrafin’s earnings in the future. The net result

was that the 13% turnover growth was turned into a

healthy increase in pre-tax earnings of 19%.

Tax rates returned to a more normal 28.3% compared

to the unusually low 25.8% in the prior year,

occasioned by the recognition of an assessed loss

as a deferred tax asset in a new subsidiary acquired

within Pinnacle Africa the previous year. The tax rate

will continue to deteriorate slightly due to the issue

of R130 million in preference shares by a subsidiary

to Nedbank. Although preference dividends paid by

the subsidiary are at a lower cost of capital rate than

the rest of our borrowings, they are not deductible

for tax purposes and are treated as interest in the

consolidated income statement. The preference

shares are used to fund acquisitions, which is capital

funding for tax purposes and the interest thereon

would not be tax deductible in any event.

The increase in tax eroded the strong income before

tax growth somewhat but, despite this, the profit

after tax (“PAT”) margin still increased from 4.8% to

4.9%. In short, the Group is consistently improving its

profitability ratios, which will continue to strengthen

the Group’s sustainability levels.

The positive impact of the repurchase of the

Amabubesi shares was that the weighted average

number of shares in issue was reduced, which

leveraged the year-on-year growth in HEPS

back up to 17%. HEPS ended on 205.6 cents

(2012: 175.1 cents).

Chief Executive Officer’s report

12


DIVISIONAL PERFORMANCEICT Distribution grew turnover by 13% and EBITDA by

17% year-on-year, due largely to operating efficiencies

and excellent control on the expenditure side. Core ICT

spending in the market during the second half of the

year has been tight, particularly in the retail sector where

both margins and volumes were under pressure due to

the decline in consumer demand. Promising growth was

however experienced in value-added areas including

security, cabling, racking and automation, which supported

margin improvement.

Within this division AxizWorkgroup experienced revenue

growth of 17% in the first six months which was not

followed through in the second half as the focus turned

towards margin improvement and cost control, particularly

in logistics costs and risk management. The result was a

reduction in the overheads to revenue ratio from 7.3% in

the first half of last year to 6.2% in the second half of the

year under review. The effect was that the PAT margin is

now up to 3.8% from the sub-1% that was the situation

immediately prior to our acquisition of Axiz in November

2010. The integration of Axiz and Workgroup is now

complete, and the combined entity is set for promising

future growth as it has an unrivalled product set.

Pinnacle Africa had a significantly improved second half

due to positive contributions from the newly acquired

businesses and from government spend. Expense growth

came from the aggressive marketing of the Sharp multi-

function printer range and the newly introduced businesses.

The tax rate was affected by last year’s abnormality

discussed above, but PAT still increased by 32% in the

second half, giving a year-on-year increase of 19%. The

tablet market was over estimated in the second half of

the financial year resulting in Pinnacle Africa’s inventory

becoming too high at the end of the year, although this has

been largely reduced at the date of issue of this report.

Projects and Services took over the break-fix side

of Pinnacle Africa, Pinteq, which resulted in its costs

growing but without the commensurate growth in revenue

materialising yet. Expected public sector contracts were

delayed and, although revenue grew by 23% over the first

six months of the year, it was unable to beat the revenue

of the comparable period last year. Continued emphasis

into this exciting part of the Group will show the desired

outcome in the years ahead.

Financial Services grew turnover by 25% but increased

operating profit by 48% due mainly to an improvement in

its gross margin from 48% to 55%, despite the increase in

market penetration. Customer defaults are at an all-time

low. Some deal discounting was done in the second half

but discounting is almost nil in the overall revenue mix as

most deals were held and funded internally. Expenses grew

as we set up a team to enter the corporate rentals market,

but net profit after tax still grew by 46%.

Centrafin continues to grow its book strongly (now at

R270 million from R150 million a year ago) and the book is

now approximately 49 months in average term. The funding

for the book was supplied by the listing of the Group’s first

issue of R315 million notes under the Group’s Domestic

Medium-Term Bond Programme at the end of April 2013.

The notes are repayable in three years. This funding

secures Centrafin’s capital requirements for growth at the

right rate and over the right term.

FINANCIAL POSITION AND

CASH FLOWInventories increased by R253 million which increased Days

Purchases in Inventories from 46 to 66. This came about as

a result of an over-estimation within Pinnacle Africa of the

size of the tablet market and delays in orders on the retail

side. The excess inventory will be cleared well before the

end of the calendar year.

Days Sales Outstanding however improved from 56 last

year (57 in December 2012) to 50 at the end of the financial

year. The improvement in the past six months was mainly

due to the collection after the half-year of a number of

large deals concluded in November and December 2012,

which resulted in a disproportionately higher turnover in the

final months of the period and a corresponding temporary

increase in the value of trade receivables.

There was a similar impact in Daily Purchases Outstanding

from 46 days last year (56 days in December 2012) to 48

days arising out of the same large deals.

The main cash outflows amounted to R1 054 million,

comprising:

• Net interest paid of R19 million;

• Taxation paid of R118 million;

• The annual dividend to shareholders of R55 million;

• An investment into land in Samrand of R44 million,

which will be developed into the new Gauteng office

over the next two years, and land in Bloemfontein for

R2 million, which will be used for the new improved Free

State office;

• Other property improvements, vehicles, office equipment

and software acquisitions (less disposals) making up the

balance of R14 million;

Chief Executive Officer’s report (continued)


13

• Further investment of R130 million into Centrafin’s

customer base as it continues to build its financial

lease book (R251 million) and its leased asset base

(R19 million after depreciation);

• Payments on acquisitions of R6 million and the

acquisition of the Datacentrix shares for which a total

of R267 million was paid;

• Scheduled repayments on the Axiz acquisition and other

long-term loans of R21 million; and

• Further investment into working capital of R378 million,

mainly in inventories as is explained above.

This was funded by:

• Operating cash flow from profit before interest,

depreciation and tax (excluding non-cash flow items) of

R503 million;

• Funding advanced by Investec to Centrafin of

R65 million for its finance book growth;

• The preference share issue by a subsidiary to Nedbank

of R130 million, less R65 million retained by Nedbank to

repay the bridge facility granted by them;

• The issue of a medium-term domestic note of

R315 million; and

• Increases in overdrafts of R106 million.

Interest-bearing borrowings now total R885 million (2012:

R357 million), comprising:

• R116 million in short-term loans raised on Centrafin’s

finance lease book and rental asset pool (which now

total R270 million);

• Subsidiary preference shares issued to Nedbank

(treated as interest-bearing liabilities at Group level)

of R130 million;

• The medium-term domestic note of R315 million;

• The Nedbank loan to fund the purchase of Axiz

amounting to R39 million;

• Other financial leases and long-term loans totalling

R15 million; and

• Overdrafts of R270 million against general banking

facilities of R609 million.

It must be borne in mind that this year’s borrowings profile

is considerably skewed by two assets that should be

ring-fenced due to their non-operational nature insofar as

they relate to mainstream ICT distribution. These are the

investment in Datacentrix of R267 million (2012: nil) and

the investment into Centrafin totalling R270 million (2012:

R150 million). Without these the Group’s borrowings would

only be R348 million (2012: R207 million) and its debt to

equity ratio would be under 34% (2012: 26%). The increase

of R141 million over the year is due mainly to the increase

in working capital of R378 million, land and other asset and

company acquisitions of R66 million, less operating cash

flow of R311 million after paying interest, tax and dividends.

This position will improve as the increase in inventories

referred to earlier is cleared during the first half of the new

financial year.

The Board is satisfied that the Company remains well

funded for the next 12 months.

INTRODUCING OUR NEW

BUSINESS UNITSAcquisitions were made into three areas this year – physical

security and safety equipment distribution, the manufacture

of server racking and electronic enclosures, and into the

managed services and business solutions market sector.

The first two areas comprised companies that are currently

financially stressed but have considerable potential for the

Group once they are adequately funded and restructured.

Devtrade: Pinnacle acquired 100% of the issued share

capital of Devfam Fire Prevention Equipment (trading as

Devtrade) at a price that will vary between R5.0 million

and R25.3 million depending on the earnings achieved in

the two years after acquisition. A payment of R5.0 million

was paid on acquisition and the balance of the purchase

price will be paid in two equal annual tranches based on

profits generated in our newly formed PinnSec security and

safety division for the periods ending 30 September 2013

and 2014.

Devtrade is a security business that distributes high-end

electronic security products including fire detection and

suppression equipment, public address, CCTV and access

control infrastructure. It is one of the two appointed Bosch

distributors in the country. The acquisition of Devtrade

gives critical mass and impetus to our strategic decision to

enter the security market.

JAG: Pinnacle acquired a 90% share in JAG Engineering

(SA) (Pty) Ltd (“JAG”) during December 2012 for cash,

which became effective on 1 January 2013, and then the

remaining 10% on 1 June 2013 for Pinnacle shares. JAG

designs and manufactures server racking which will reduce

the reliance on imports and uncertain local supply that

Datanet currently faces with this product range.

Modrac: The Group acquired 100% of the Modrac group

with effect from 1 June 2013. The companies in this group

manufacture electronic enclosures and server racking

under the brand names “Modrac” and “Enviroserve”. The

14


Once again there were minimal retrenchments and low staff

turnover during the year, despite tough trading conditions

and the mergers that took place both before and after

year-end.

TRANSFORMATIONThe Group renewed its Level 4 rating in January 2013,

despite the introduction of the more stringent ICT sector

codes and the loss of Amabubesi as our BEE partner.

The major area of improvement was Skills Development,

although we again scored full points in Enterprise and

Socio-Economic Development.

Meaningful employment equity and gender transformation

remains a key goal for the Group. Our Social and Ethics

Committee has taken on the responsibility for driving

policies designed to achieve this. In addition we are

working towards securing a new BEE partner during the

course of the new financial year.

DIVIDENDSThe Group has maintained its long standing dividend cover

of 5 and has, accordingly, declared a dividend of 41 cents

per share (2012: 35 cents per share) before dividend

withholding tax, where applicable. The Board applied its

mind to the solvency and liquidity of the Group for the next

12 months before declaring the dividend.

PROSPECTSThe overall economy faces challenging times ahead, with

the consumer becoming more financially constrained than

ever and the resources sector, the bedrock of the South

African industry, bedevilled by labour and demand issues.

Nonetheless, the IT sector has remained resilient in the face

of these and other economic challenges and we believe

that it will continue to remain reasonably so.

Pinnacle Africa has much work to do to bed down its

recent acquisitions in server racking manufacture and

security products and we are confident that this will yield

good benefits over the medium term. AxizWorkgroup has

recently acquired the right to distribute Cisco products,

which gives it the most complete set of IT products of any

distributor in the industry. AxizWorkgroup is in the process

of setting up its Advanced Technologies division that will

bring unparalleled expertise and products under its roof.

Infrasol is expanding its services offering and is seeing

increased traction, while our acquisition of a stake of

marginally less than 35% of Datacentrix signals a further

intention is to combine the Modrac manufacturing facilities

with those of JAG, which will give the Group a significant

manufacturing capacity in the electronic enclosure sector.

Datacentrix: Pinnacle entered into an agreement

with Co-ordinated Network Investments (Pty) Ltd and

Hoolican Investments (Pty) Ltd, companies within the

private equity arm of a large financial institution on

6 June 2013 to acquire 61 152 467 shares in Datacentrix

Holdings, amounting to 31.2% of the externally held issued

share capital of that company (i.e. excluding non-voting

treasury shares held within the Datacentrix Group). The

transaction was reported as a large merger to the South

African Competition Commission and is awaiting a decision

from the Competition Tribunal. Pinnacle paid the full cash

price of the transaction to the sellers as a deposit that

will be refunded with interest at market deposit rates if

the Competition Authorities disallow the transaction. This

payment has been treated as a short-term deposit in

the current assets section of the consolidated statement

of financial position at 30 June 2013. Pinnacle has also

acquired a further 7 364 581 Datacentrix shares on-

market during the financial year to bring its total holding in

Datacentrix to 34.995% of its voting externally held issued

share capital. This investment is shown under non-current

assets. Both items have been funded out of existing

facilities.

The Datacentrix shareholding will provide Pinnacle with a

significant revenue flow from the managed services and

business solutions market sector which is consistent with

the Group’s strategy to secure a greater portion of higher

margin annuity services and solutions revenues in its

income mix.

HUMAN RESOURCESThe Group continues to improve its learning and

development capability and delivery to its staff using both

internal and external resources. Group companies have

continued with their various learnership programmes

under which learners attend vocation-specific formal

training courses and receive practical guidance from

mentors appointed to monitor and report on their progress.

The skills so transferred are expected to greatly enhance

the learners’ work experiences and to create opportunities

for employment in the ICT industry for them.

Learnership programmes have also been tailored to

encourage and promote gender representation in the

programme with the aim to transfer skills and open

opportunities for women in the traditionally male-dominated

IT industry. The success of the programme suggests that

this will be a material corporate social initiative going

forward and we continue to engage with the MICT SETA to

secure approvals and funding for additional learnerships.

Chief Executive Officer’s report (continued)


15

step in the execution of our strategy to expand the Group

downstream into the higher margin annuity type revenue

streams that typify the ICT value-added and managed

services and projects sector. This strategy is designed to

build more income resilience and higher margins into our

business.

With the creation of our listed Domestic Medium-Term

Note Programme, Pinnacle’s finance division now has

a source of funding with a term that better matches its

assets. This will free up Centrafin to grow its ability to

enable transactions within the Group without burdening

the Group’s existing cash and funding base.

Investors are cautioned that the Group’s auditors have not

reviewed nor reported on any forward-looking statements

in this Annual Report.

ACKNOWLEDGEMENTSOverall I am pleased with the Group results in a year during

which we did not benefit much from acquisition growth.

To achieve real growth in such circumstances is a tribute

to the tremendous people of the Pinnacle Group. We have

a unique blend of people with the ability and tenacity to

deliver whatever the conditions are. For that I thank and

praise them. Furthermore thank you to my management

team for their commitment and also to my Board for

their guidance.

Arnold J Fourie

Chief Executive Officer

16


Corporate citizenship

Detailed information on Pinnacle’s Corporate Citizenship is no longer included in the Annual Report but is contained in the

Corporate Citizenship Report located under “Corporate Citizenship” under the Investor Relations tab on the Pinnacle Holdings

website at www.pinnacleholdings.co.za.

Information specific to the financial year under review is as follows:

MEMBERSHIP OF THE BOARD AND ITS COMMITTEES

AND ATTENDANCE AT MEETINGSPosition Date appointed Attendance

BOARD OF DIRECTORS – 5 meetings held

Non-executive directors

Ms Daphne Mashile-Nkosi Chairperson/Non-executive Director 18 August 2011 2

Mr Ashley Tugendhaft Non-executive Director 24 November 1998 5

Ms Seadimo H Chaba Independent Non-executive Director 31 August 2012 5

Mr Erhard van der Merwe Independent Non-executive Director 31 August 2012 4

Executive directors

Mr Arnold J Fourie Chief Executive Officer 24 November 1998 5

Mr Takalani AM Tshivhase Executive 3 December 2003 5

Mr Richard D Lyon Chief Finance Officer 1 January 2013 3

Mr Robert N Nkuna Group HR Director 1 September 2013 0

Ceased to be a member during the year

Mr F Chris Smyth Chief Finance Officer 31 December 2012 2

AUDIT AND RISK COMMITTEE –

3 meetings held


Mr Ashley Tugendhaft Chairperson/Non-executive Director 24 November 1998 3

Mr Erhard van der Merwe Independent Non-executive Director 31 August 2012 2


NOMINATIONS AND REMUNERATION

COMMITTEE – 2 meetings held


Ms Daphne Mashile-Nkosi Chairperson 18 August 2011 3

Mr Ashley Tugendhaft Non-executive Director 14 September 2011 3

SOCIAL AND ETHICS COMMITTEE –

2 meetings held

Non-executive director


Executive directors

Mr Takalani AM Tshivhase Executive Chairperson 14 September 2011 2

Mr J Vaughn Parkin Subsidiary Director 31 August 2012 2

Mr Robert N Nkuna Group HR Director 31 August 2012 2

Stepped down from committee

Ms Daphne Mashile-Nkosi Board Chairperson 31 August 2012 0

Mr F Chris Smyth Executive Director 31 August 2012 0

By invitation

Mr Albert Gerber Internal Audit Executive 31 August 2012 n/a

The Board has delegated certain functions to well-structured committees but without abdicating its own responsibilities.


17

AUDIT AND RISK COMMITTEEThe Audit and Risk Committee comprises Mr A Tugendhaft

(Chairperson) supported by two non-executive directors,

Ms S Chaba BA (Econ), and Mr E van der Merwe CA(SA).

The purpose of the committee is outlined on page 27.

REMUNERATION AND

NOMINATION COMMITTEEThe Board delegated the responsibility for remuneration

matters to the Remuneration and Nomination Committee.

The committee is chaired by the Chairperson of the

Board, Ms Daphne Mashile-Nkosi, and establishes

overall principles that govern the remuneration of the

Chief Executive Officer, other senior executives and

non-executive directors. The committee also reviews

management incentive schemes, share option schemes,

retirement and termination entitlements, fringe benefit

policies and professional indemnity policies. The

Remuneration and Nomination Committee comprises

only non-executive directors, although the Chief

Executive Officer is invited to attend meetings, but may

not participate in or attend any discussion on his own

remuneration and/or performance discussions.

The committee is also responsible for receiving,

considering and screening Board nominations making

recommendations for appointment to the Board whenever

vacancies arise on the Board.

SOCIAL AND ETHICS COMMITTEEThe Social and Ethics Committee is constituted as a sub-

committee of the Board in terms of section 72(4) of the

Companies Act read with Regulation 43 of the Companies

Act Regulations. The Board appointed Ms Seadimo Chaba

as chairperson and the non-executive director required on

the committee, together with executive directors, Takalani

Tshivhase and Robert Nkuna and a senior executive,

Vaughn Parkin.

ACCOUNTABILITY AND AUDITGOING CONCERN ASSERTIONThe Board has formally considered the going concern

assertion for Pinnacle and its subsidiaries. We have no

reason to believe that the Company and the Group will not

be a going concern in the foreseeable future. The Board

minutes the facts and assumptions used in the assessment

of the going concern status of the Group at the financial

year-end.

The Board has applied the Solvency and Liquidity

test defined in section 4 of the Companies Act on a

regular basis and whenever required in terms of the

Companies Act.

CORPORATE GOVERNANCEThe King III Report was issued in South Africa by the King

Committee on Corporate Governance and recommends

best international practices in corporate governance.

Compliance with only a small section of the King III Code

is mandatory under the Johannesburg Stock Exchange

(“JSE”) Listings Requirements. The JSE does however

require listed companies to provide explanations where

recommended principles are not implemented.

Pinnacle has adequately responded to the ‘Apply or

Explain’ requirements of the 60 elements of King III.

A gap analysis is performed each year and explanations

are reported in areas where principles had not been

applied. The gap analysis serves as a basis for an action

plan to ensure that deviations from recommended practice

are addressed in the coming financial year. Pinnacle has

complied fully with those principles that were declared

mandatory by the Johannesburg Stock Exchange

throughout the year. The details of the most recent gap

analysis and related explanations are contained on our

website under King III Code.

No individual Board member has unfettered powers

in respect of decision making and no individual Board

member has any power to commit or bind the company,

contractually or otherwise, in any way, unless the Board

has, by formal resolution, delegated such powers to him/

her, and in such case he/she may only exercise such

powers in accordance with the written terms of the

delegation.

Mr FC Smyth is the company’s appointed secretary and

plays a pivotal role in the continuing effectiveness of the

Board. Mr Smyth is not a director of the Company and was

appointed by the Board in line with requirements of the

Companies Act. Mr Smyth is considered independent and

competent in the role as Company Secretary but remains

accountable to the Board. He is sufficiently knowledgeable

in the relevant laws as required by his role.

Instances of non-compliance with Chapter 2 of the

King III Code have been detailed below:

Governance Element: Board and Directors – Role and

Function of the Board

18


Principal: 2.20 The induction of on going training and the

development of directors should be conducted through

formal processes

Recommended Practice: 2.20.3 The Board should ensure

that continuing professional development programmes are

implemented

Applied: No

Commentary: The Board considers the responsibility for

continuing professional development of directors to lie

with each individual director. Of the directors currently

on the Board, five are compelled to undergo continuing

professional development by their own professional bodies

and one is currently doing his PhD.

Governance Element: Board and Directors – Performance

Assessment

Principal: 2.22 The evaluation of the Board, its committees

and the individual directors should be performed every year

Applied: Partially

Commentary: Although informal evaluations of the Board

and its members were performed in the past, the process

was not always formally documented. Board evaluations

have recently been formalised and documented. Outcomes

will be considered and improvements made where deemed

appropriate.

Governance Element: Board and Directors – Remuneration

of Directors and Senior Executives

Principal: 2.25. The company should remunerate directors

and executives fairly and responsibly

Recommended Practice: 2.25.4 Non-executive fees should

comprise a base fee as well as an attendance fee per

meeting.

Applied: No

Commentary: The Board is of the opinion that Board

membership and associated responsibilities reach

further than merely attendance of meetings. As a result a

decision was taken to not remunerate directors based on

attendance of meetings only. Non-executive directors’

fees will continue to be based on a flat fee and as such

no attendance fees will be paid based on frequency of

attendance of meetings.

Principal: 2.1 The Board should act as the focal point for

and custodian of corporate governance

Recommended Practice: 2.1.1 The Board should have a

charter setting out its responsibilities

Applied: Partially

Commentary: The Board does act as the focal point for

and custodian of corporate governance. Due to the vast

amount of experience of the Board members, a Board

Charter has not been formalised. A Board Charter will be

drafted to ensure compliance and to formalise the mandate

of the Board, specifically relating to the custodianship of

corporate governance.

Recommended Practice: 2.12 The Board should ensure

the integrity of the company’s integrated report

Applied: Partially

Commentary: The Board mandated the Audit and Risk

Committee with the responsibility of overseeing the

combined assurance model and the integrity of the

integrated report. A decision was taken not to contract the

services of an external party to provide assurance on the

integrity of the company’s integrated report. A combined

assurance model was adopted for this purpose. Combined

assurance providers include amongst others the external

auditors, internal auditors, health and safety auditors, BEE

auditors and management.

The Board is not convinced that a formal independent

assurance process will either add value or be cost effective.

Pinnacle’s activities relate mainly to distribution, and

hence its operations do not significantly impact on the

environment. The Board, however, still monitors:

– the positive and negative effects of the company’s

operations on the environment and society; and

– the plans to improve the positive effects and remove or

reduce the negative effects in the financial year ahead.

Principal: 2.16 The Board should elect a chairman of the

Board who is an independent non-executive director.

The CEO of the company should not also fulfil the role of

chairman of the Board

Recommended Practice: 2.16.9 The Board should ensure

a succession plan for the role of the chairman

Applied: No

Commentary: The Board does not have a formal

succession plan for the role of the Chairperson in place

as it deems it unnecessary. The Chairperson’s role is

independent and the replacement would be from the

market, should the need arise, as has been done within

three weeks after the passing of the previous Chairperson.

There is sufficient expertise amongst non-executive

directors to act in the chair should this be necessary from

time to time.

Corporate citizenship (continued)


19

ECONOMIC INDICATORSThe Group’s financial performance and position are detailed in the annual financial statements which are disclosed on

pages 34 to 76.

VALUE-ADDED STATEMENTThe wealth created by the Group was distributed as follows:

2013

R’000

2013

%

2012

R’000

2012

%

Revenue 6 596 232 5 844 592

Cost of material and services (5 681 364) (5 060 858)

Value-added by operations 914 868 94.1% 783 734 97.2%

Investment income 58 548 6.0% 22 633 2.8%

973 416 100.0% 806 367 100.0%

Applied as follows:

Employees’ salaries, wages and benefits 421 614 43.3% 364 397 45.2%

Government taxation 128 263 13.2% 98 253 12.2%

Providers of capital and interest 77 106 7.9% 43 019 5.3%

Retained in the Group 346 433 35.6% 300 698 37.3%

Retained income 324 948 33.4% 280 228 34.8%

Minority shareholders 732 0.1% 2 123 2.3%

Depreciation and amortisation 20 753 2.1% 18 662 2.3%

Impairment – 0.0% (315) (0.0%)

973 416 100.0% 806 367 100.0%

SOCIAL INDICATORSLABOUR PRACTICES AND DECENT WORK EMPLOYMENTThe Group’s senior business unit managers are encouraged to enhance the motivation and commitment of all employees

by providing opportunities for involvement in business performance improvement. Each company within the Group designs

employment policies which are appropriate to its business and markets and which attract, retain and motivate the quality of

staff required to operate effectively.

An Employment Equity Committee was appointed and has approved the Group’s Employment Equity Policy and compiled and

approved the Employment Equity Report.

Sustainability report

20


WORKFORCE PROFILEThe workforce profile, extracted from the Employment Equity Report for the period October to September of each respective

year, based on the total number of permanent employees (including employees with disabilities) in each of the occupational

levels, is outlined below:

GROUP EMPLOYMENT EQUITY PROFILE

2013* ACI† White 2012 ACI† White

Occupational level AIC† White Total % % AIC† White Total % %

Top management 3 12 15 20.00 80.00 3 9 12 25.00 75.00

Senior management 24 128 152 15.79 84.21 7 40 47 14.89 85.11

Middle management 102 149 251 40.64 59.36 18 63 81 22.22 77.78

Junior management 389 310 699 55.65 44.35 246 331 577 42.63 57.37

Semi-skilled 271 85 356 76.12 23.88 357 199 556 64.21 35.79

Unskilled workers 170 5 175 97.14 2.86 118 9 127 92.91 7.09

Total 959 689 1 648 749 651 1 400

† African, Indian, Coloured.

* Excludes non-South African employees.

20%

0,1

0,2

0,3

0,4

0,7

0,6

0,7

0,8

0,9

1

80%

25%

75%

16%

84% 85%

15%

40%

60%

22%

78%

56%

44% 43%

57%

76%

24%

64%

36%

97%

3%

93%

7%

Group employment equity profi le

2013 ACI* 2013 White 2012 ACI† 2012 White

Top

Management

Senior

Management

Middle

Management

Junior

Management

Semi-skilled Unskilled

workers

Sustainability report (continued)


21

EMPLOYMENT EQUITY PROFILE

Year-end 2013 Year-end 2012

Occupational levels

Number of

workers

Number of

workers

Top management 15 12

Black male 1 1

White male 11 8

Black female 2 2

White female 1 1

Foreign national – male 0 0

Foreign national – female 0 0

Senior management 151 47

Black male 19 6

White male 99 35

Black female 5 1

White female 28 3



Professionally qualified and

experienced specialists in

micro-management 252 81

Black male 70 10

White male 101 39

Black female 32 8

White female 49 18



Skilled technical and

academically qualified

workers, junior management,

supervisors, foremen and

superintendents 699 577

Black male 232 157

White male 170 195

Black female 157 89

White female 140 115



Semi-skilled and

discretionary decision-

making 356 556

Black male 190 221

White male 38 88

Black female 81 136

White female 47 90



Unskilled and defined

decision-making 175 127

Year-end 2013 Year-end 2012

Occupational levels

Number of

workers

Number of

workers

Black male 105 84

White male 5 8

Black female 65 34

White female 0 0



Total 1 648 1 400

SUSTAINABLE DEVELOPMENT

PERFORMANCE DATAData has been collated for Pinnacle’s South African

operations, including all subsidiaries, joint ventures,

associates and over-border operations, for the period

1 July 2012 to 30 June 2013, which coincides with

Pinnacle’s financial reporting cycle.

Every effort has been made to ensure data accuracy and

completeness. There is, however, the possibility of small

inconsistencies due to human error in recording and

collating, and differences in interpretation of definitions.

Where the analysis refers to racial categories, “Black”

in that context includes Black, Indian and Coloured and

Chinese.

Employee-related data includes non-permanent, contract

employees. Data is only reported where it is considered to

be of sufficient accuracy and is reported according to the

GRI guidelines. Ongoing efforts are being made to improve

the data quality and to broaden the range of indicators.

SOCIAL INDICATORS

Employees and their

composition 2013 2012

Total number of employees 1 708 1 400

Number of full-time

employees 1 626 1 326

Growth (%) 22.0 9.2

Number of part-time

employees 82 74

Growth (%) 9.8 (45.0)

Employee benefits and

remuneration (R) 421 614 000 364 397 000

Growth (%) 15.7 13.0

22


EMPLOYMENT BY GENDER PROFILE

2013 % 2012 %

Group 1 708 1 400

Male 1 073 63 881 63

Female 635 37 519 37

Female employment

Group 635 519

Directors 3 0.47 3 0.58

Senior management 34 5 30 6

Other employees 598 94 486 94

Employment equity

profile by race 1 708 1 400

Black 675 40 514 37

White 710 42 610 44

Indian 147 9 131 9

Coloured 176 10 145 10

Employment equity by

race and gender 1 708 1 400

Black male 635 37 507 36

White male 438 26 374 27

Black female 363 21 283 20

White female 272 16 236 17

LABOUR PRACTICES 2013 2012

Staff turnover rate (%) 21.6 20.7

Average staff complement

for the year

(1 July to 30 June) 1 513 1 392

Number of retrenchments 74 54

Number of resignations 327 268

Number of dismissals 27 51

Number of disabled

employees 10 7

TRAINING 2013 2012

SDL spend (R) 3 712 936,34 2 568 000,00

Total payroll (R) 421 614 000,00 364 397 000

Total training investment

as % of payroll (%) 1.58 2.4

Total training spend

(including SDL) (R) 6 655 651 8 797 000

Training spend per

employee (R) 4 398 6 320

2012/2013

37%

9%

10%

44%

2012/2013

40%9%

10%

42%

2012/2013

63%

63%

37%

37%

Male

Female

Group employment

Black

White

Total employment by race

Indian

Coloured

2012/2013

5,78%0,58%

93,64%

2012/2013

5,35%0,47%

94,17%

Directors

Senior

Management

Female employment (Group)

Other

employees

2012/2013

36%

20%

17%

27%

2012/2013

37%

21%

16%

26%

Black male

White male

Total employment by race and gender

Black female

White female

Sustainability report (continued)


23

Social and Ethics Committee report

Pinnacle’s Social and Ethics Committee is constituted in

terms of section 72(4) of the Companies Act, 2008, and

regulation 43(2). Subsidiaries of companies that have a

Social and Ethics Committee, or those that are exempted,

do not have to have a committee. A Social and Ethics

Committee covering the Pinnacle Group was established in

2012 under the chairpersonship of Takalani Tshivhase.

MEMBERSHIPMs S Chaba was appointed as chairperson after the

resignation from the chair by Mr T Tshivhase who continues

to serve as a member in his capacity as executive director

of Pinnacle. The other two members are Mr V Parkin and

Mr R Nkuna, both appointed initially as senior managers

within the Group. Mr R Nkuna has recently been appointed

to the Board of Pinnacle and now serves on the committee

as an executive director. Mr C Smyth resigned from the

committee in the current period.

Mr A Gerber attends the meetings by invitation as the

Company’s head of internal audit. He is not a member to

avoid compromising his independence as an assurance

officer of the Group, but does report information to the

committee that falls within its mandate.

RESPONSIBILITIESThe role of the Social and Ethics Committee is to assist

the Board with the oversight of social, ethical, community

support and B-BBEE objectives and performance relating

to the Group. The committee’s main duties are stated in its

Terms of Reference with key focus areas being:

• Social and economic development, including the

Group’s standing in terms of the goals and purposes of:

– the 10 United Nations Global Compact Principles

covering human rights, labour standards, the

environment, and anti-corruption;

– the OECD (Organisation for Economic Co-operation

and Development) recommendations on corruption;

– the Employment Equity Act; and

– the Broad-Based Black Economic Empowerment Act.

• Good corporate citizenship, including the Group’s:

– Promotion of equality, prevention of unfair

discrimination and reduction of corruption:

– Contributions made to the development of

communities in which its products or services are

predominately marketed;

– Sponsorship, donations and charitable giving; and

– Impact of the Group’s activities and products/

services have on the environment, health and

public safety.

• Consumer relationships, including the Group’s

advertising, public relations and compliance with

consumer protection laws.

• Labour and employment, including:

– Monitoring the Group’s standing in terms of

international labour laws concerning the International

Labour Organisation and the World Trade

Organisation;

– Organisation Protocol on decent work and working

conditions;

– The Group’s employment relationships and its

contribution toward the education development of its

employees; and

– To report, through one of its members, to the Board

at Board meetings and to the shareholders at the

Company’s Annual General Meeting on the matters

within its mandate.

In addition and complementary to its statutory duties in

terms of the Companies Act, the committee assists the

Group in discharging its business sustainability with respect

to the implementation of practices that are consistent with

good corporate citizenship, with particular focus on:

• the King III Code;

• the Pinnacle Group’s ethics and sustainability

commitments;

• Broad-Based Black Economic Empowerment

requirements as described in the DTI combined generic

scorecard (excluding ownership targets) and associated

Codes of Good Practice.

The committee is satisfied with the progress that has been

made relative to its mandate. A particular area of focus in

the current year was matters relating to black economic

empowerment and associated legal obligations. Specific

focus for 2014 is to further this initiative.

APPROVALThis Social and Ethics Committee report has been

approved by the Board of Directors of Pinnacle.

Signed on behalf of the Social and Ethics Committee

SH Chaba

Chairperson of the Social and Ethics Committee

24


Pinnacle’s remuneration philosophy focuses on structures

that adequately attract and retain talented individuals who

can make a contribution to the Group’s sustainability.

To this end, it aims to empower every employee to make

a positive contribution to the growth of the business.

The Board defines the principles which guide the

development of Group strategy and objectives. An

appropriate balance is sought between employee and

shareholder interests. The ultimate responsibility for the

remuneration policy is vested in the Pinnacle Board of

Directors.

The Remuneration and Nomination Committee operates

in terms of a charter approved by the Board. The Board

refers certain matters to shareholders for approval,

including new and amended share-based incentive

schemes, non-executive directors’ fees and ratification

of Board appointments. The Board accepted all of the

recommendations made by the committee during the year.

PURPOSEThe Remuneration and Nomination Committee is

responsible for:

• making recommendations to the Board on the general

policy on executive remuneration, benefits, conditions of

service and staff retention;

• determining the specific remuneration packages of

executive directors and senior management of the

Group, including, but not limited to, basic salary,

performance-based short- and long-term incentives,

pensions and other benefits;

• the design and operation of the Group’s share incentive

schemes; and

• the consideration and selection of new appointees to

the Board and approval of the re-election of existing

directors.

The Terms of Reference of the Committee have been

agreed by the Board.

MEMBERSHIPDuring the year under review the Remuneration and

Nomination Committee comprised Ms D Mashile-Nkosi

(Chairperson of the Board and of the Remuneration

and Nomination Committee) and Mr A Tugendhaft. The

Company’s Chief Executive Officer, Mr AJ Fourie, is a

permanent invitee to meetings of the committee due to

his knowledge and understanding of the business and the

industry with particular reference to remuneration structures

and levels within the industry and the personalities

prominent therein. The Chief Executive recuses himself

when the committee is discussing his performance, his

remuneration or any other matter pertaining to him.

No director is involved in deciding his or her own

remuneration. The Group’s auditors, BDO South Africa

Incorporated, have not provided advice to the committee.

However, in their capacity as Group auditors, they

performed normal audit procedures on the remuneration of

directors.

Details of meeting attendance during the year are shown on

page 16.

SUMMARY OF REMUNERATION

POLICYEXECUTIVE REMUNERATIONThe committee uses a process of benchmarking by utilising

current market information relating to remuneration and

reward practices in the determination of remuneration for

executive directors.

The principle of Gross Cost of Employment is adopted

by the Company in determining executive directors,

management and staff remuneration packages. Besides

cash remuneration, this includes contributions to

retirement benefit funds, medical aid, life and disability

cover and other benefits on behalf of the employee. Basic

remuneration is complemented by performance bonuses.

In addition, executive directors benefit from a long-term

incentive share purchase scheme linked to performance

and retention measures. The share awards to executive

directors of the Company are detailed in Note 28.3 to the

financial statements.

Packages consist of the following:

• Basic salary – determined by market value and role

played;

• Short-term incentives – determined by fulfilment of

performance targets, the quantum of which variable

earnings shall be at the sole and absolute discretion of

the Company; and

• Long-term incentives – determined by creation of

sustainable shareholder value and behaviour consistent

with this goal.

The extent of managerial responsibility, together with actual

workplace location, determines base remuneration of

executive directors. Details of directors’ remuneration are

listed in Note 28.2 to the financial statements.

TERMS OF SERVICE

The Company complies with relevant legislation

when determining minimum terms and conditions for

appointment of executive directors. Unless stated otherwise

Remuneration and Nomination Committee report


25

in the contract of employment, there are no fixed terms of

employment, although where appropriate the Company

does enter minimum service term agreements of up to

four years, particularly with executives of recent business

acquisitions. None of the Company’s current executive

directors, however, are subject to such agreements.

Employment ceases on the resignation or dismissal of the

director upon notice of two months (other than during the

first six months of employment), which may or may not

be worked at the discretion of the Company. All recently

contracted employment agreements with executive

directors, management and sales staff include a restraint of

trade clause to protect the Company’s proprietary interests

and to ensure that the business is not prejudiced in any way

or form.

The retirement age of directors is not regulated in the

contract.

EXTERNAL APPOINTMENTS

Executive directors are not permitted to hold external

directorships or offices without the approval of the Board. It

will only grant approval if such appointments will not create

any conflict of interest and provided they will not impinge

upon the executive director’s ability to maintain the level

of performance expected by the Company from him in the

execution of his duties as an executive in the Company.

If such approval is granted, directors may retain the fees

payable from such appointments.

SHORT-TERM INCENTIVES

Short-term incentive levels and structures are set by the

committee on an individual basis for the CEO and all of his

direct reports. These are based on seniority, the degree to

which his performance can be measured objectively and

the relative impact he can have on the achievement of the

Group’s goals and plans. Individual awards to the CEO and

all of his direct reports are determined by the committee

after considering corporate and individual performance

based on performance evaluations.

LONG-TERM INCENTIVES

A primary objective of Group long-term incentives is the

retention of skills. Share-based incentive schemes aligning

the interests of the Group, its businesses and employees

are intended to promote this goal by attracting and

retaining high-calibre personnel. Share incentive awards

are determined by the committee only where business and

individual performance targets have been attained.

Details of the benefits held by executive directors under the

existing share incentive scheme are reflected in Note 28.3.

NON-EXECUTIVE DIRECTORSTERMS OF SERVICE

While shareholders appoint non-executive directors at

annual general meetings, interim Board appointments

may be made between annual general meetings in terms

of the MOI by the Board upon recommendation of the

Remuneration and Nomination Committee. Such interim

appointees may not serve beyond the next annual general

meeting, though they may make themselves available for

election by shareholders.

Non-executive directors serve for a period of no more

than three consecutive annual general meetings after the

annual general meeting in which they are re-elected by

shareholders and they are required to retire at the close of

the third annual general meeting, although they may offer

themselves for re-election for a further three years at that

meeting. Besides this, the MOI specifies that at least one-

third (rounded to the nearest integer) of the non-executive

directors must offer themselves for election or re-election,

as the case may be, and it may be possible that a director

is required to offer himself for re-election before the third

annual general meeting since his last election in order to

comply with this rule. Executive directors are not required

to comply with the election process and their position on

the Board is governed by their employment agreements.

FEES

Non-executive directors are remunerated for their

contribution to the Board and Board Committees and to

the Group as a whole, both in formal meetings and outside

thereof.

The proposed non-executive director fee structure is based

on a fee for Board membership and, where applicable, for

serving on sub-committees. Additional fees are paid to the

chairperson and deputy chairperson of the Board, and the

committee chairpersons, other than the Social and Ethics

Committee chairperson.

Shareholders will be requested to consider a special

resolution approving the non-executive directors’ fee

structure and fee amounts at the Annual General Meeting.

The Company does not offer short- or long-term incentive

schemes or membership of retirement benefit, medical

aid, or life and disability cover schemes to non-executive

directors. Executive management reviews non-executive

directors’ remuneration and recommendations are made

to the committee and the Board, which in turn propose

fees for approval by shareholders at the Annual General

Meeting.

Compensation for loss of office is not a contractual

agreement.

26


Fees paid to directors of Pinnacle during the year

are detailed in Note 28.2 and details of the proposed

non-executive director fee structure is included in

the Notice of Annual General Meeting under Special

Resolution Number 4. The average increase proposed

for non-executive directors’ fees in 2013 is 6%.

NOMINATIONSThe committee is responsible for securing nominations for

the Board whenever vacancies arise and for ensuring that

all nominees to the Board, including those received from

shareholders prior to the Annual General Meeting are not

disqualified from being directors. To this end the committee

investigates nominees’ backgrounds, and whether their

qualifications are in accordance with the recommendations

required for listed companies by the JSE.

The committee is also responsible for striving that the

composition of the Board has an optimal ethnic and

gender diversity, qualifications, professional skills, industry

knowledge and experience to best serve its purpose,

and it will rank nominees if there are more nominees than

vacancies and recommend the best candidates to the

Board for selection. The committee also annually reviews

the Board’s required mix in this regards and assesses

the effectiveness of the Board, its committees and the

contribution of each director.

The Social and Ethics Committee may also make

recommendations to the committee of candidates that it

believes will not only be suitably qualified and assets to the

Board, but will also further the transformation of the Group.

The Notice of Annual General Meeting contains the

names of directors submitted for election or re-election,

accompanied by sufficient biographical information to

enable shareholders to make an informed decision in

respect of their election.

All prescribed officers employed by the Company are

also executive directors, whose remuneration has been

disclosed in Note 28.2.

None of the prescribed officers of the Company’s subsidiaries

fall within the definition of the Companies Act Regulations

definition of “Prescribed Officers” in respect of the Company

itself as they do not exercise (or participate materially in

the exercise of) executive control over the Company or any

portion of the Group exceeding 50% of the Group’s size.

The Remuneration and Nomination Committee approves

the remuneration of all subsidiary CEOs and has sight of

the remuneration of all subsidiary directors and prescribed

officers and is satisfied that they are appropriate within the

markets from which Pinnacle draws its executives.

INTERESTS OF DIRECTORS IN

SHARE CAPITALDirectors’ interests in share capital is disclosed in

Note 28.1.

INTERESTS OF DIRECTORS IN

CONTRACTSThe directors have certified that they had no material

interest in any transaction of any significance with the

Company or any of its subsidiaries.

CHANGE OF COMMITTEE

MEMBERSHIPThe committee membership during the year comprised

Mr A Tugendhaft (Committee Chairperson), Ms D Mashile-

Nkosi (Chairperson of the Board) and Mr AJ Fourie (Chief

Executive Officer). Pursuant to the publication by the

JSE of an advisory letter on Corporate Governance on

16 August 2012, in which the JSE advises that the King III

Codes 3.84(a) to (j) are mandatory for listed companies, it

is now compulsory requirement for the committee to be

chaired by Chairperson of the Board and that membership

of the committee be restricted to non-executive directors.

Accordingly, on 31 August 2012, Mr Tugendhaft

relinquished the committee chair and the Board appointed

Ms Mashile-Nkosi in his stead and Mr Fourie stepped

down from the committee, although he remains an invitee

to meetings to advise the committee, other than when

the committee is in deliberations on his own performance

and remuneration.

APPROVALThis Remuneration and Nomination Committee report has

been approved by the Board of Directors of Pinnacle.

Signed on behalf of the Remuneration and Nomination

Committee

D Mashile-Nkosi

Chairman of the Remuneration and Nomination Committee

Remuneration and Nomination Committee report (continued)


27

The Pinnacle Audit and Risk Committee conducted its

work in accordance with the Terms of Reference which

was approved by the Pinnacle Board of Directors. The

committee was constituted in line with the JSE Listings

Requirements and in compliance with section 94(7)(f) of the

Companies Act.

The quality, integrity and reliability of audit and risk-related

issues of the Pinnacle Group are delegated by the Board

and on behalf of the shareholders to the committee to

assist the Board in discharging its duties relating to the

safeguarding of assets, the operation of adequate systems,

control processes and the preparation of accurate financial

reporting statements in compliance with all applicable legal

requirements and accounting standards.

MEMBERSHIPThe committee consists of three non-executive directors

who are appointed by the shareholders as determined by

the Companies Act. The Chairperson of the Board is not

eligible to chair the committee and should not be a member

of the committee. She does however have a standing

invitation to attend all committee meetings. The Chief

Financial Officer, Chief Audit Executive, Chief Risk Officer

and the External Audit Partner attend all meetings by

permanent invitation. Other attendees comprise Pinnacle

employees and consultants who are invited to attend

meetings as and when required.

PURPOSEIn specific response to the requirements of the Companies

Act, the King III Code and the committee’s Terms of

Reference, the committee performed the following key

responsibilities:

• Ensured that the appointment of the external auditors

complies with the provisions of the Companies Act

and any other relevant legislation, including auditor

independence, fees payable and the nature and extent

of any non-audit services;

• Examined the reliability and accuracy of the financial

information presented to all users of such information;

• Appointed and evaluated the Chief Audit Executive,

approved and monitored Internal Audit’s work plans,

the execution thereof and also the results of work

performed;

• Formed an integral component of the risk management

process and, as such, reviewed the risk management

process, resultant risk register and action plans to

mitigate all key risks. Key risks involved strategic risks,

financial reporting risks, fraud risks, operational risks,

risks associated with information technology, legal risks

and internal financial controls;

• Reported to the Board on the committee’s activities and

made recommendations to the Board concerning the

adequacy and efficiency of the risk policies, procedures,

practices, controls or any other matters arising from the

above responsibilities;

• Oversaw integrated reporting in its two separate

components and had regard to all factors and risks that

may impact on the integrity of the integrated report;

• Ensured that a combined assurance model is applied

to provide a co-ordinated approach to all assurance

activities;

• Monitored relationships between all assurance providers

and monitored results and actions taken to address any

deficiencies;

• Satisfied itself of the appropriateness, expertise,

resources and experience of the Company’s finance

function, and specifically the Chief Financial Officer;

• Monitored the Company’s compliance with

recommendations of the King III report; and

• In addition to the above duties, the Audit and Risk

Committee reviewed the following:

– Annual reports;

– Corporate Citizenship reports;

– Sustainability reports;

– Interim reports;

– Provisional financial results and final profit

statements; and

– Any information which is price sensitive.

EXTERNAL AUDITIn terms of section 90(1) of the Companies Act, the

committee had nominated BDO South Africa Inc. as the

independent auditor. Mr Heemal Bhaga-Muljee, a registered

independent auditor, was appointed for the 2013 audit. This

appointment was approved by shareholders at the Annual

General Meeting on 26 October 2012. The committee

satisfied itself through enquiry that BDO and Mr Bhaga-

Muljee are independent as defined by the Companies

Act and as per the standards stipulated by the auditing

profession.

The committee, in consultation with executive

management, agreed to the engagement letter, terms,

nature and scope of the audit function and audit plan for

the 2013 financial year. The budgeted fee was considered

and was approved after the appropriateness was

considered.

FINANCIAL STATEMENTSThe committee has reviewed the financial statements

of the Group for the financial year ended 30 June 2013

and is satisfied that they comply in all material respects

with International Financial Reporting Standards and the

requirements of the Companies Act.

Audit and Risk Committee report

28


GOING CONCERNResults of the Company’s solvency and liquidity tests were

considered at each meeting. The committee satisfied itself

that the Company has sufficient cash and unutilised credit

facilities to continue operations and meet its payment

obligations for the following 12 months, and that the

Company was both solvent and liquid. The results were

reported at Board meetings.

RISK MANAGEMENTThe committee satisfied itself that good progress has been

made with the completion of risk registers throughout the

Group. The risk management process has been embedded

in the day-to-day activities of some of the operations.

IT-related risks received particular committee attention

and this matter was included as a standing agenda item in

line with King III recommendations. The IT strategy set for

2012/13 and the resultant re-alignment project plan was

reviewed at all meetings. Other standing agenda items

included risks associated with legal compliance, litigation,

insurance and health and safety compliance.

INTERNAL AUDITThe internal audit department’s mandate is contained in

the Internal Audit Charter, which was again updated and

approved in 2013. A satisfactory working relationship

between the committee and the Chief Audit Executive was

maintained during the year. Internal audit work assisted

the committee in fulfilling its mandate. The internal audit

department’s 3-year risk-based rolling audit plan was also

approved by the committee and reviewed from time to

time. Both the approved plan and the Audit Charter were

issued to all relevant senior management to re-emphasise

the internal audit department’s mandate in the Company.

The performance of the function was monitored whilst also

considering the function capacity and resources to ensure

that it fulfilled its mandate. The committee met with the

Chief Audit Executive at regular intervals throughout the

year without management being present.

During the reporting period there has been internal audit

coverage in the key risk areas of the Group. The internal

audit process did not highlight any breakdowns in internal

control that are known to have a material impact on the

Group’s performance and achievement of objectives

during the period under review. Pinnacle’s overall system

of internal control remains adequate and no significant

deficiencies in the design, implementation or execution of

internal financial controls was identified.

COMBINED ASSURANCE MODELIn pursuance of the combined assurance requirements

of the committee, the internal audit department worked

closely with the various assurance providers, both internal

and external. The aim is to establish common ground

and avoid duplication of effort, ensure co-ordinated

activities and consistent results that are aligned to achieve

common objectives. Audit results were compared with the

results of other assurance providers to ensure that there

is consistency. With external audit also being one of the

assurance providers, during the period there was ongoing

communication between internal and external auditors.

WHISTLE-BLOWING AND

DEFALCATIONSAll reports to the anonymous whistle-blowing hotline were

reported to the committee via the internal audit function.

The committee also reviewed summary reports of all

defalcations throughout the Group. The committee is

satisfied that management had taken appropriate actions to

address the risks which became evident as a result of these

reports.

SUITABILITY OF THE

CHIEF FINANCE OFFICERThe committee confirms that it has reviewed and

satisfied itself of the appropriateness of the expertise and

experience of the Chief Financial Officer of the Group,

Richard D Lyon CA.

FINANCIAL STATEMENTSThe committee reports that it is satisfied that the financial

statements for the financial year ended 30 June 2013 are

a fair reflection of the Company’s financial performance.

The committee also satisfied itself that the Company has

correctly adopted proper accounting practices and internal

financial controls.

APPROVALThe Audit and Risk Committee has fulfilled its mandate

during the year under review and, accordingly, the financial

statements have been approved for recommendation to the

Pinnacle Board of Directors. The Board has subsequently

approved the annual financial statements on 30 September

2013. These statements will be open for discussion at the

Annual General Meeting of shareholders.

A Tugendhaft

Chairperson of the Audit and Risk Committee

Audit and Risk Committee report (continued)


29

Directors’ responsibility statement and approval

The directors of Pinnacle Technology Holdings Limited are required by the Companies Act, 2008, to maintain adequate

accounting records and prepare annual fi nancial statements for each fi nancial year that fairly present the state of affairs of the

Company and the Group at the end of the fi nancial year and of the profi t and cash fl ows for the period.

In preparing the accompanying annual fi nancial statements, International Financial Reporting Standards have been followed,

suitable accounting policies have been used, consistently applied, and reasonable estimates have been made. The annual

fi nancial statements incorporate full and responsible disclosure in line with the philosophy on corporate governance and have

been prepared in accordance with the Companies Act, 2008, the JSE Listings Requirements and the AC 500 standards as

issued by the Accounting Practices Board.

The directors have reviewed the Group’s budget and cash fl ow forecast for the year to 30 June 2013 and conducted solvency

and liquidity tests as defi ned in section 4 of the Companies Act, 2008. On the basis of these reviews and tests and in the

light of the current fi nancial position and existing borrowing facilities, the directors have no reason to believe that Pinnacle

Technology Holdings Limited will not be a going concern in the period to the next annual fi nancial statements and have

continued to adopt the going concern basis in preparing the annual fi nancial statements.

The Group’s external auditors, BDO South Africa Incorporated, have audited the annual fi nancial statements and their

unqualifi ed report appears on page 31. The external auditors are engaged to express an independent opinion on the Company

and Group annual fi nancial statements. The directors are responsible for the Company’s system of internal control, which

includes fi nancial controls that are designed to provide reasonable, not absolute, assurance against material misstatement and

loss. The Company maintains internal fi nancial controls to provide assurance regarding:

• the safeguarding of assets against unauthorised use or disposition; and

• the maintenance of proper accounting records and the reliability of fi nancial information used within the business and for

publication.

These controls are self-monitoring mechanisms and actions are taken to correct defi ciencies as they are identifi ed. Even an

effective system of internal control, no matter how well designed, has limitations, including the possibility of circumvention or

the overriding of controls. An effective system of internal control therefore aims to provide reasonable assurance with respect

to the reliability of the fi nancial information and, in particular, fi nancial statement presentation. Further, because of changes in

conditions, the effectiveness of internal fi nancial controls may vary over time.

The annual fi nancial statements for the year ended 30 June 2013, as set out in pages 29 to 75, were approved by the Board on

30 September 2013 and are signed on their behalf by:

D Mashile-Nkosi AJ Fourie RD Lyon, CA

Chairperson Chief Executive Offi cer Chief Financial Offi cer

30


Certificate by Company Secretary

As company secretary, I hereby confi rm that for the year ended 30 June 2013, the Company had lodged with the Companies

and Intellectual Property Commission, and/or its predecessor the Companies and Intellectual Property Registration Offi ce,

all such returns as are required of a public company in terms of the South African Companies Act, 2008 (Act 71 of 2008), as

amended and that all such returns are true, correct and up to date.

FC Smyth, CA(SA)

Company Secretary

30 September 2013

Postal address:

PO Box 483

Halfway House

1685

Physical address:

The Summit, 269, 16th Road

Randjiespark

Midrand

1685

LEVEL OF ASSURANCE

These annual fi nancial statements have been audited in compliance with the applicable requirements of the South African

Companies Act, 2008 (Act 71 of 2008), as amended.

Auditors

BDO South Africa Incorporated

Registered Auditors

Prepared under the supervision of:

RD Lyon, CA

Chief Financial Offi cer

Date of issue

30 September 2013


31

Report of the Independent Auditorsfor the year ended 30 June 2013

TO THE SHAREHOLDERS OF PINNACLE TECHNOLOGY HOLDINGS LIMITED

We have audited the Group annual fi nancial statements and annual fi nancial statements of Pinnacle Technology Holdings

Limited, which comprise the consolidated and separate statement of fi nancial position as at 30 June 2013, the consolidated

and separate statements of comprehensive income, consolidated and separate statements of changes in equity, and

consolidated and separate statement of cash fl ows for the year then ended, a summary of signifi cant accounting policies

and other explanatory notes, as set out on pages 34 to 76.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company’s directors are responsible for the preparation and fair presentation of these annual fi nancial statements

in accordance with International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the

Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards

Council and in the manner required by the Companies Act, No 71 of 2008. This responsibility includes: designing,

implementing and maintaining internal control relevant to the preparation and fair presentation of annual fi nancial statements

that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;

and making accounting estimates that are reasonable in the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these annual fi nancial statements based on our audit. We conducted our audit

in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance whether the annual fi nancial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual fi nancial

statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material

misstatement of the annual fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the annual fi nancial statements in order

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the

annual fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the annual fi nancial statements and group annual fi nancial statements present fairly, in all material respects, the

consolidated and separate fi nancial position of the Group and of the Company as of 30 June 2013, and of their consolidated

and separate fi nancial performance and its consolidated and separate cash fl ows for the year then ended in accordance with

International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Accounting Practices

Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and its

successor and in the manner required by the Companies Act, No 71 of 2008.

OTHER REPORTS REQUIRED BY THE COMPANIES ACT

As part of our audit of the fi nancial statements for the year ended 30 June 2013, we have read the directors’ report, the audit

and risk committee’s report and the company secretary’s declaration for the purpose of identifying whether there are material

inconsistencies between these reports and the audited fi nancial statements. These reports are the responsibility of the

respective preparers. Based on reading these reports we have not identifi ed material inconsistencies between these reports

and the audited fi nancial statements. However, we have not audited these reports and accordingly do not express an opinion

on these reports.

BDO South Africa Incorporated

Registered Auditors 22 Wellington Road

Per: Heemal Bhaga Muljee Parktown

Partner 2193

30 September 2013

32


Directors’ reportfor the year ended 30 June 2013

The directors present their annual report which forms part of the annual fi nancial statements of the Group for the year ended

30 June 2013.

PRINCIPAL ACTIVITIES OF THE GROUP

The principal activities of the Group are the manufacture, distribution and support of Information and Communication

Technology (“ICT”) hardware, software and infrastructure, and the provision of fi nancing products to ICT customers.

REVIEW OF OPERATIONS

The review of the Group’s operations is detailed in the Chief Executive Offi cer’s report on pages 11 to 15.

FINANCIAL REVIEW

The Group generated net profi t after tax of R325.7 million (2012: R282.4 million). The annual fi nancial statements on pages 34

to 75 detail the Group’s fi nancial performance, position and cash fl ow for the year under review.

SHARE CAPITAL

Issued share capital was increased during the year from 169 975 924 ordinary shares to 170 070 814 ordinary shares.

The Group issued 94 890 new ordinary shares in favour of Pinnacle Treasury Services Limited (RF) (Previously Pinnacle

Holdings Limited) shareholders under a blanket offer to exchange shareholding in Pinnacle Treasury Services Limited (RF)

(Previously Pinnacle Holdings Limited) for shareholding in Pinnacle Technology Holdings Limited approved by shareholders

in 1999.

The Group also disbursed the following treasury shares during the year:

17 391 ordinary shares at 2 300 cents to P Parente, being the balance of 10% of the purchase price of Jag Engineering SA

(Pty) Ltd

SPECIAL RESOLUTIONS PASSED BY SUBSIDIARY COMPANIES

The following subsidiary companies passed special resolutions relating to the provision of fi nancial assistance arising out of

the establishment of a group cash fl ow management system with the FirstRand Group:

Pinnacle Micro (Pty) Ltd, Pinnacle Facilities Management (Pty) Ltd (Previously Erf 269 Erand Property (Pty) Ltd), Protectaire

Properties (Pty) Ltd, Pinnacle Technology Shared Management Services (Pty) Ltd, Pinnacle Treasury Services (RF) Ltd,

(Previously Pinnacle Holdings Limited (RF), Parcea Computing (Pty) Ltd, Infrasol (Pty) Ltd, Pinnacle Business Solutions

(Pty) Ltd, Datanet Infrastructure Group (Pty) Ltd, Centravoice (Pty) Ltd and Workgroup IT (Pty) Ltd.

The Group’s subsidiary companies renew the special resolutions with regard to fi nancial assistance as contemplated in section 45

of the Companies Act, on an annual basis at their AGMs.

OTHER SPECIAL RESOLUTIONS PASSED

By Pinnacle Treasury Services Limited (RF) – Previously Pinnacle Holdings Limited (RF)

Special Resolution dated 24 May 2013 Resolved to changing its name from Pinnacle Holdings Limited to Pinnacle Treasury

Services Limited.

Special Resolution dated 20 February 2013: To provide security to and in favour of FirstRand Bank Limited for the obligations

of Pinnacle Facilities Management (Pty) Ltd.

Provide a suretyship limited to the amount of R50 Million in favour of FirstRand Bank Limited as security for the due

performance of the obligations of the borrower towards the bank arising from a Loan Agreement concluded with the Bank.

Special Resolution dated 24 May 2013: Resolved that references in the heading and paragraphs 3 and 21.7 of the MOI to

the name “Pinnacle Holdings Limited” and/or “Pinnacle Holdings Limited (RF)” be amended to refl ect the new name of the

Company “Pinnacle Treasury Services Limited”.

Special Resolution dated 24 May 2013: Resolved that the board of directors of the Company be hereby authorised and

empowered as and when it deems fi t, to transfer the registration of the defensive name “Pinnacle Holdings” and the right to

adopt this name as its own, to any other Group Company.

Special Resolution dated 24 May 2013: Resolved that any and all assistance contemplated in section 45(1) of the Companies

Act be provided by the Company to or on behalf of Group Companies pursuant to its Group Treasury functions be and is

hereby approved in accordance with section 45(3)(a)(ii) of the Companies Act for a period of two years.

SEGMENTAL ANALYSIS

A detailed segmental analysis of the Group performance is included on pages 73 and 74.


33

DIVIDEND

The directors are pleased to declare a dividend of 41 cents per share (2012: dividend of 35 cents per share). Prior to making

this declaration the directors applied the solvency and liquidity test to the Group as defi ned in Section 4 of the Companies

Act and satisfi ed themselves that the Group will have suffi cient banking facilities and cash resources after paying the dividend

to meet its cash fl ow needs for at least the next twelve months and that its solvency will not be prejudiced by the dividend

declaration.

REVIEW OF THE GROUP’S FINANCIAL POSITION

A detailed review of the results of operations and the fi nancial position of the Group is contained in the Chief Executive

Offi cer’s report.

CONTINGENT LIABILITY

The directors are not aware of any contingent liabilities that existed at 30 June 2013, or the date of this report, other than as

disclosed under Litigation above.

DIRECTORATE

Details of the directorate are disclosed on pages 6 and 7.

Details of shareholding held in the Company by directors are given in note 28.1, page 69.

In terms of the Company’s Memorandum of Incorporation, each non-executive director retires every three years and is eligible

for re-election. This notwithstanding, at least one-third of the non-executive directors must retire at each AGM (rounded to the

nearest whole number) and are eligible for re-election. There are no directors who have served three years this year so

Mr Ashley Tugendhaft, the longest serving director, retires and offers himself for re-election.

Mr FC Smyth resigned from the Board on 31 December 2012 and took up the post of Company Secretary and the Group’s

Corporate Finance Executive role.

Mr RD Lyon was appointed Chief Financial Offi cer of the Group with effect from 1 January 2013 and was appointed to the

Board as an executive director on that date. Shareholders will be requested to ratify the appointment at the AGM.

Mr RN Nkuna, the group’s Human Resources Director, was appointed to the Board as an executive director on 1 September

2013 and shareholders will be requested to ratify the appointment at the AGM.

Ms S Chaba and Mr E van der Merwe were appointed to the Board as independent non-executive directors and to the

Audit and Risk Committee on 31 August 2012. Ms S Chaba is a management consultant with a human capital management

background and has also joined the Social and Ethics Committee. Mr E van der Merwe is a Chartered Accountant (SA) with a

background in corporate fi nance. He has been the CEO of a listed company since 2007.

COMPANY SECRETARY

The company secretary is Mr FC Smyth.

PO Box 483

The Summit

Halfway House

269, 16th Road

Randjiespark, 1685

Midrand

Tel: 011 265 3216

e-mail: [email protected]

GOING CONCERN

The directors have considered the liquidity, solvency and working capital requirements of the Group for the 2014 fi nancial year

and have no reason to believe the business will not be a going concern in the year ahead.

AUDITORS

The company’s auditors, BDO South Africa Incorporated, have indicated their willingness to continue in offi ce for the ensuing

year. The Audit and Risk Committee has satisfi ed itself of the independence of the auditors and the designated auditor,

Mr H Bhaga Muljee. A resolution to re-appoint BDO South Africa Inc as auditors will be proposed at the next annual general

meeting scheduled to take place on 25 October 2013.

34


Consolidated statement of financial positionas at 30 June 2013

Group Company

Notes

2013

R’000

2012

R’000

2013

R’000

2012

R’000

ASSETSNon-current assets 594 636 357 144 387 390 307 966

Property, plant and equipment 1 186 637 112 189 – –

Intangible assets 2 129 117 72 060 – –

Interests in subsidiaries 3 – – 356 918 307 641

Investments in listed shares 4 30 179 – 30 179 –

Long-term loans 5 28 689 28 214 – –

Finance lease receivables 6 184 782 108 562 – –

Deferred taxation 7 35 232 36 119 293 325

Current assets 2 501 814 1 862 614 239 448 802

Inventories 8 1 048 686 795 346 – –

Trade and other receivables 9 1 125 423 987 071 1 609 8

Finance lease receivables 6 65 349 35 624 – –

Taxation receivable 24 1 154 2 114 550 550

Short-term deposit 4 237 272 – 237 272 –

Cash and cash equivalents 10 23 930 42 459 17 244

Total assets 3 096 450 2 219 758 626 838 308 768

EQUITY AND LIABILITIESCapital and reserves 1 088 059 810 813 258 361 269 310

Share capital and premium 11 25 982 25 945 25 982 25 945

Treasury shares 12 (41 766) (42 166) – –

Non-distributable reserves 13 32 588 31 528 – –

Accumulated profi ts 1 066 308 791 190 232 379 243 365

Non-controlling interests 4 947 4 316 – –

Non-current liabilities 503 594 61 436 332 184 28 360

Interest bearing liabilities 14 482 075 43 911 332 184 28 360

Deferred taxation 7 21 519 17 525 – –

Current liabilities 1 504 797 1 347 509 36 293 11 098

Trade and other payables 15 1 074 736 1 021 133 25 117 736

Interest-bearing liabilities 14 17 203 14 973 11 176 10 362

Short-term loan 16 115 543 115 384 – –

Deferred revenue 17 14 519 10 460 – –

Taxation payable 24 12 320 2 853 – –

Bank overdrafts 10 270 476 182 706 – –

Total equity and liabilities 3 096 450 2 219 758 626 838 308 768


35

Statement of Comprehensive Incomeas at 30 June 2013

Group Company

Notes

2013

R’000

2012

R’000

2013

R’000

2012

R’000

Revenue 18 6 596 232 5 844 592 – –

Cost of sales (5 566 701) (4 936 620) – –

Gross profi t 1 029 531 907 972 – –

Operating expenses (536 277) (488 635) – 27

Selling expenses (34 417) (44 590) – 27

Employees expenses (421 614) (364 397) – –

Administration expenses (90 734) (84 877) – –

Gain on discounting of finance lease agreements 382 1 535 – –

Profit on foreign exchange 10 106 3 694 – –

Earnings before interest, taxation, depreciation

and amortisation 493 254 419 337 – 27

Depreciation 1 (17 954) (15 877) – –

Amortisation 2 (2 799) (2 785) – –

Impairment of investment in subsidiary – – – (16 013)

Impairment of goodwill in subsidiary 2 – (69) – –

Reversal of impairment of software – 384 – –

Operating profi t before interest 19 472 501 400 990 – (15 986)

Investment income (Including dividends received) 19 58 548 22 633 56 482 180 954

Finance costs 19 (77 106) (43 019) (7 944) (3 819)

Profi t before taxation 453 943 380 604 48 538 161 149

Taxation 20 (128 263) (98 253) (32) (2 618)

Net profi t for the year 325 680 282 351 48 506 158 531

Other comprehensive income

Items that can be reclassifi ed into profi t or loss:

Exchange differences from translating foreign

operations 1 060 286 – –

Total comprehensive income for the year 326 740 282 637 48 506 158 531

Attributable to

– owners of the company 326 008 280 552

– non-controlling interests 732 2 085

Earnings/Dividends (in cents per share)

Earnings – basic and diluted 21 205.8 175.4

Dividends – paid during the year 35.0 23.0

Dividends – declared during the year 41.0 35.0

36


Consolidated statement of changes in equityfor the year ended 30 June 2013

R’000 Notes

Share

capital/

premium

Treasury

share

Non-dis-

tributable

reserve

Retained

earnings

Ordinary

share-

holders

Non-con-

trolling

interest

Total

equity

GROUPBalances at 30 June 2011 112 009 (74 885) 31 204 560 786 629 114 260 629 374

Issue of shares 11 57 – – – 57 (330) (273)

Shares acquired and cancelled 11 (86 121) – – – (86 121) – (86 121)

Treasury shares sold and issued 12 – 77 194 – – 77 194 – 77 194

Treasury shares acquired 12 – (44 475) – – (44 475) – (44 475)

Net profit for the year – – – 280 228 280 228 2 085 282 313

Other comprehensive income – – 324 – 324 – 324

Acquisition of non-controlling interests – – – (10 288) (10 288) 2 450 (7 838)

Dividends paid – – – (39 536) (39 536) (149) (39 685)

Balances at 30 June 2012 25 945 (42 166) 31 528 791 190 806 497 4 316 810 813

Issue of shares 11 37 – – 304 341 (341) –

Treasury shares sold and issued 12 – 400 – 400 – 400

CGT on treasury shares sold 12 – – – (3 267) (3 267) – (3 267)

Net profit for the year – – – 324 948 324 948 732 325 680

Other comprehensive income – – 1 060 – 1 060 – 1 060

Acquisition of non-controlling interests – – – (1 208) (1 208) 240 (968)

Equity-based compensation reserve – – – 9 598 9 598 – 9 598

Dividends paid – – – (55 257) (55 257) – (55 257)

Balances at 30 June 2013 25 982 (41 766) 32 588 1 066 308 1 083 112 4 947 1 088 059

COMPANYBalances at 30 June 2011 112 009 – – 126 545 238 554 – 238 554

Issue of shares 11 57 – – 57 – 57

Shares acquired and cancelled 11 (86 121) – – (86 121) – (86 121)

Net profit for the year – – – 158 531 158 531 – 158 531

Dividends paid – – – (41 711) (41 711) – (41 711)

Balances at 30 June 2012 25 945 – – 243 365 – – 269 310

Issues of shares 11 37 – – – 37 – 37

Net profit for the year – – – 48 506 48 506 – 48 506

Dividends paid – – – (59 492) (59 492) – (59 492)

Balance at 30 June 2013 25 982 – – 232 379 258 361 – 258 361


37

Statement of cash flowsfor the year ended 30 June 2013

Group Company

Notes

2013

R’000

2012

R’000

2013

R’000

2012

R’000

CASH GENERATED FROM OPERATIONS 23 124 960 192 550 2 506 (10 724)

Interest Income 58 548 22 633 3 042 –

Finance costs (77 106) (43 019) (7 944) (3 819)

Taxation paid 24 (117 583) (106 565) – (2 372)

(11 181) 65 599 (2 396) (16 915)

Cash fl ows from investing activities

Expenditure to maintain operating capacity

Property, plant and equipment acquired (84 328) (27 035) – –

Proceeds on disposal of property, plant

and equipment 8 162 6 398 – –

Acquisition of intangible assets (7 912) (7 134) – –

Net investment in finance leases receivable (105 945) (96 145) – –

Acquisition of subsidiaries 25 (6 000) (8 100) (6 000) –

Acquisition of shares in Datacentrix

(including deposit) (267 451) – (267 451) –

Acquisition of non-controlling interests – (7 400) (400) (7 614)

Dividends received – – 53 440 180 954

(463 474) (139 416) (220 411) 173 340

Cash fl ows from fi nancing activities

Interest-bearing liabilities raised 439 229 2 188 304 638 (9 703)

Interest-bearing liabilities repaid (14 724) (15 632) – –

Share capital acquired and cancelled – (86 121) – (86 064)

Treasury shares acquired – (44 475) – –

Treasury shares issued and sold – 48 980 – –

Short-term loans raised 64 720 115 384 – –

Short-term loans repaid (64 561) (52 088) – –

Decrease in long-term loans receivable (475) – – –

Increase in Group loans – – (22 566) (19 222)

Dividends paid to shareholders (55 257) (39 685) (59 492) (41 712)

368 932 (71 449) 222 580 (156 701)

Decrease in net cash, cash equivalents and

overdrafts (105 723) (145 266) (227) (276)

Net (overdraft)/cash and cash equivalents acquired

from business combinations (576) 1 334 – –

Net (overdraft)/cash and cash equivalents at

beginning of the year (140 247) 3 685 244 520

Net (overdraft)/cash and cash equivalents at end

of the year (246 546) (140 247) 17 244

Cash and cash equivalents 23 930 42 459 17 244

Bank overdrafts (270 476) (182 706) – –

38


Accounting policiesfor the year ended 30 June 2013

The consolidated annual fi nancial statements are prepared on the historical cost basis, except for the measurement of certain

fi nancial instruments and non-current assets at fair value.

The consolidated annual fi nancial statements have been prepared in accordance with International Financial Reporting

Standards, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting

Pronouncements as issued by the Financial Reporting Standards Council and its successor, and the Companies Act,

No 71 of 2008.

These consolidated annual fi nancial statements incorporate accounting policies that have been consistently applied for all

years presented in these consolidated annual fi nancial statements. No new standards came into effect during the current

fi nancial year and the accounting policies adopted are consistent with those applied in the preparation of the audited annual

fi nancial statements for the year ended 30 June 2012.

The fi nancial statements are prepared on the going concern basis and are presented in South African Rand.

BASIS OF CONSOLIDATION

The consolidated annual fi nancial statements incorporate the fi nancial statements of the Company and all entities controlled

by the Company. Where the Company has the power, either directly or indirectly, to govern the fi nancial and operating

policies of another entity or business so as to obtain benefi ts from its activities, it is classifi ed as a subsidiary. The results of

subsidiaries acquired or disposed of during the year are included in the consolidated income statement and the statement

of comprehensive income (where applicable) from or up to the effective date that control is acquired or relinquished, as

appropriate. The consolidated fi nancial statements present the results of the Company and its subsidiaries (“the Group”) as if

they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in

full. The Company carries, in its separate fi nancial statements, its investments in subsidiaries at cost less impairment, if any.

Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identifi ed separately from the

Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business

combination and the non-controlling interests’ share of changes in equity since the date of the combination.

BUSINESS COMBINATIONS

The consolidated fi nancial statements incorporate the results of business combinations using the acquisition method. The

cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given,

liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The results

of acquired operations are included in the consolidated income statement from the date on which control is obtained.

GOODWILL

Goodwill arising on acquisition represents the excess of the cost of a business combination plus non-controlling interest over

the fair value of identifi able assets, liabilities and contingent liabilities acquired. Goodwill is capitalised as an intangible asset

with any impairment in carrying value being charged to profi t or loss. Where the fair value of identifi able assets, liabilities and

contingent liabilities exceeds the fair value of the consideration paid, the excess is credited in full to profi t or loss.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefi t

from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment

bi-annually, or more frequently, when there is an indication that the unit may be impaired. If the recoverable amount of the

cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated fi rst to reduce the carrying

amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata to the carrying amount of each

asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of

the profi t or loss on disposal.

TRANSACTIONS WITH NON-CONTROLLING INTERESTS

Transactions with non-controlling interests are treated as transactions with equity owners of the Group. For purchases from

non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value

of the net assets of the subsidiary is recorded in equity.


39

REVENUE

Revenue comprises the invoiced value of sales, excluding Value-Added Tax, net of discounts. Revenue from the sale of goods

is recognised at the fair value of the consideration received or receivable when signifi cant risk and rewards of ownership have

passed to the buyer. Revenue relating to services is recognised during the period in which the service is performed. Revenue

for the sale of extended warranties is recognised over the period of the warranty.

Rental income is recognised on a straight-line basis over the period of the leases.

COST OF SALES

Cost of sales consists of the costs of inventories sold during the period including costs of conversion and other costs incurred

in bringing the inventory to its present location and condition.

INCOME FROM INVESTMENTS

Interest is recognised on a time apportioned basis that takes into account the effective yield of the asset.

Dividends are recognised when the shareholder’s right to receive payment is established.

BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part

of the cost of that asset. Other borrowing costs regularly incurred by the Group during the normal course of operations are

recognised as an expense when incurred.

DIVIDENDS

Equity dividends are recognised when they become legally payable, which is when the dividend is declared by the directors.

DEFERRED REVENUE

The Group has a present and legal obligation to repair or replace goods sold with one, two or three-year carry-in or on-site

warranties in the event that the product should fail to operate under normal operating conditions. That portion of the revenue

earned on the original sale that relates to the provision of warranties is deferred and recognised in profi t or loss over the period

of the warranties.

PROVISIONS

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be

estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. If the effect

is material, provisions are determined by discounting the expected future cash fl ows using a pre-tax discount rate that refl ects

current market assessments of the time value of money and, where appropriate, the risks specifi c to the liability. The unwinding

of discounts is recognised as a fi nance cost. Provisions are reviewed at each reporting date and adjusted to refl ect the current

best estimate.

A provision for onerous contracts is recognised when the expected benefi ts to be derived by the Group from a contract are

lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value

of the lower of expected cost of terminating the contract and the net cost of continuing with the contract. Before a provision is

established, the Group recognised any impairment loss on the asset associated with the contract.

IMPAIRMENT OF NON-FINANCIAL ASSETS

At each end of the reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, other

than goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such

indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if

any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable

amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can

be identifi ed, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the

smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identifi ed.

Intangible assets with indefi nite useful lives, including goodwill, and intangible assets not yet available for use are tested for

impairment annually, and whenever there is an indication that the asset may be impaired.

40


Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated

future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments

of the time value of money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been

adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the

carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised

immediately in profi t or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is

treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased

to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in

prior years. A reversal of an impairment loss is recognised immediately in profi t or loss, unless the relevant asset is carried at a

revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

IMPAIRMENT OF FINANCIAL ASSETS

Financial assets are assessed for indicators of impairment at each end of the reporting period. The fi nancial assets are

impaired where there is objective evidence that, as a result of one or more events that have occurred after the initial recognition

of the fi nancial asset, the estimated future cash fl ows of the asset have been impacted.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its

recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset in prior years. Impairment losses and reversal of such losses

are recognised in profi t or loss.

EXTERNALLY ACQUIRED INTANGIBLE ASSETS

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over

their useful lives. The amortisation expense is included in administration expenses in the income statement. Software and

trademarks are considered to have a fi nite useful life whilst other intangibles are considered to have an indefi nite life. The

estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any

changes in estimate being accounted for on a prospective basis.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other

contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.

The signifi cant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of

intangibles acquired in a business combination are as follows:

Mainframe software 5 to 10 years

Operating and desktop-based software 2 to 3 years

Trademarks 10 years

FOREIGN CURRENCY

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in

which it operates (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency

monetary assets and liabilities are translated at the rates ruling at the end of the reporting period. Exchange differences arising

on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in profi t or loss.

On consolidation, the results of foreign operations are translated into South African Rand at rates approximating those ruling

when the transactions took place. All assets and liabilities of foreign operations, including goodwill arising on the acquisition of

those operations, are translated at the rate ruling at the end of the reporting period. Exchange differences arising on translating

the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in other

comprehensive income (the “foreign exchange reserve”).

Exchange differences recognised in the income statement of Group entities’ separate fi nancial statements on the translation of

long-term monetary items forming part of the Group’s net investment in the foreign operation concerned are reclassifi ed to the

foreign exchange reserve if the item is denominated in the functional currency of the Group or the foreign operation concerned.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to

that operation up to the date of disposal are transferred to the income statement as part of the profi t or loss on disposal.

Accounting policies (continued)

for the year ended 30 June 2013


41

FINANCIAL INSTRUMENTS

Financial instruments are recognised when the Group becomes a party to the contractual provision of the instrument. These

fi nancial instruments are recognised initially at fair value. For instruments not at fair value through profi t or loss, any directly

attributable transaction costs are included.

Financial assets are derecognised if the Group’s contractual rights to the cash fl ows from the fi nancial assets expire or if the

Group transfers the fi nancial assets to another party without retaining control, or transfers substantially all of the risks and

rewards of the asset. Financial liabilities are derecognised if the Group’s obligations specifi ed in the contract expire or are

discharged or cancelled.

The subsequent measurement of fi nancial instruments is stated below:

The Group classifi es fi nancial instruments, or their component parts, on initial recognition as a fi nancial asset, a fi nancial

liability or an equity instrument in accordance with the substance of the contractual arrangement.

TRADE AND OTHER RECEIVABLES

Trade and other receivables classifi ed as Loans and Receivables and are measured at amortised cost using the effective

interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profi t or loss when there is

objective evidence that the asset is impaired.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand, on deposit and other short-term readily realisable liquid instruments. Cash

and cash equivalents that have been classifi ed as Loans and Receivables are initially recognised at fair value and subsequently

measured at amortised cost.

TRADE AND OTHER PAYABLES

Trade and other payables are measured at amortised cost using the effective interest rate method.

INTEREST-BEARING LIABILITIES

Interest-bearing debt is measured at amortised cost using the effective interest rate method.

The Depfi n funding has been structured as a capital contribution to a trust. The guaranteed required return of the funder is

serviced by dividends from the underlying investment. The Company has the obligation in terms of a put option in respect

of the outstanding amount of its capital contribution, together with guaranteed return, to ensure the repayment of the capital

contribution and return to the funder. Accordingly this funding arrangement has been classifi ed as a fi nancial liability and the

required return comprising dividends has been classifi ed as a fi nance cost.

In the Company’s separate fi nancial statements its obligation in terms of the put option has been discounted to present value,

and the unwinding of the discount over time is accounted for as notional interest.

Preference shares which are mandatorily redeemable on a specifi c date are classifi ed as liabilities. The dividends on these

preference shares are recognised in the income statement as an interest expense.

LOANS TO/FROM SUBSIDIARY COMPANIES

Loans to/from subsidiary companies are measured at amortised cost using the effective interest rate method.

DERIVATIVES

These instruments, comprising foreign exchange contracts, are measured at fair value. Realised and unrealised gains and

losses arising from changes in fair value of these fi nancial instruments are recognised in profi t or loss in the period in which

they arise.

TRUST LOANS

Trust loans are measured at amortised cost.

RETIREMENT BENEFITS: DEFINED CONTRIBUTION SCHEMES

Contributions to defi ned contribution pension schemes are charged to profi t or loss in the year to which they relate.

42


SHARE-BASED PAYMENTS

The Group recognises services received in share-based payment transactions when services are performed. The value of

services received is measured by reference to the fair value of such services, or, if the fair value of service cannot be measured

reliably, then the fair value of the equity instruments issued.

In terms of the employee share incentive scheme, shares are allocated at a price determined by the Board of Directors, which

price may not be less than 10% of the cost of the shares to the Group, whether issued from treasury shares, purchased in

the market or at 10% of the issue price if issued by the Company, and subsequently all risks and rewards of ownership are

transferred to the employee on acceptance of the offer. Shares were awarded to certain executives at a discount to the share

price ruling on the date of the award during the year under review, as more fully detailed in Note 28.3 and all risks and rewards

relating thereto have accordingly been transferred to them. The sale is subject to a three-year service condition, and the fair

value of the benefi t given, being the value of the discount, will be recognised over this service period. As the award was made

at the end of the previous year, the full value of one year of the share-based payment expense has been recognised in the

current fi nancial year.

LEASED ASSETS

Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group

(a “fi nance lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the

fair value or, if lower, the present value of the minimum lease payments payable over the term of the lease. The corresponding

lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element

is charged to profi t or loss over the period of the lease and is calculated so that it represents a constant rate of return on the

lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an “operating lease”), the

total rentals payable under the lease are charged to profi t or loss on a straight-line basis over the lease term.

The land and buildings elements of property leases are considered separately for the purposes of lease classifi cation.

TAXATION

DEFERRED TAXATION

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of fi nancial

position differs to its tax base, except for differences arising on:

• the initial recognition of goodwill;

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the

transaction affects neither accounting nor taxable profi t;

• investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable

that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profi t will be available

against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the end

of the reporting period and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax

balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and

liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on the same taxable

Group company.

CURRENT TAX

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the

consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years

and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax

rates that have been enacted or substantively enacted by the end of the reporting period.




43


PROPERTY, PLANT AND EQUIPMENT

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly

attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding

liability is recognised within provisions.

Freehold land and buildings are subsequently carried at revalued amount, based on periodic valuations by a professionally

qualifi ed valuer less any subsequent accumulated impairment losses. Changes in fair value are recognised in other

comprehensive income. All other items of property, plant and equipment are carried at cost less accumulated depreciation and

any impairment losses.

Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and equipment to write off the

carrying value of items over their expected useful lives. It is applied over the following periods:

Buildings 25 to 50 years

Motor vehicles 5 years

Offi ce equipment 6 years

Computer equipment 3 to 4 years

Plant and equipment 5 years

Furniture, fi ttings and other equipment 6 to 10 years

Leasehold property Remainder of outstanding lease obligation

The residual value, useful life and depreciation method of each asset are reviewed at each fi nancial period-end.

The depreciation charge for each period is recognised in profi t or loss.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profi t or loss when the

item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined

as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

SHARE CAPITAL

Ordinary shares are classifi ed as equity. Incremental external costs directly attributable to the issue of ordinary shares or share

options are recognised in equity as a deduction, net of tax from the proceeds.

TREASURY SHARES

Consideration paid/(received) for the purchase/(sale) of treasury shares is recognised directly in equity. The cost of treasury

shares acquired is presented as a separate reserve (the “treasury share reserve”) which is classifi ed under equity. The full value

realised from the disposal of treasury shares, including any excess of the consideration received on the sale of treasury shares

over the weighted average cost of the shares sold, is credited directly to the treasury share reserve, and therefore to equity.

INVENTORIES

Inventories consist of fi nished goods and are initially recognised at cost, and subsequently at the lower of cost and net

realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories

to their present location and condition. The cost of ordinarily interchargeable items is determined using primarily weighted

average cost.

SEGMENTAL REPORTING

A segment is distinguishable component of the Group that is engaged in activities from which it may earn revenue and incur

expenses, whose operating results are regularly reviewed by the chief operating decision-maker (which by delegation by the

Board of Directors, is the Chief Executive Offi cer under advice from his senior executive team) and for which discrete fi nancial

information is available. Operating segments are reported in a manner consistent with internal reporting provided to the chief

operating decision-maker.

Details of the operations and products of each of the business segments are given in Note 31.

44

PINNACLE ANNUAL REPORT 2013 PINNACLE ANNUAL REPORT 2013

EMPLOYEE BENEFITS

The cost of all short-term employee benefi ts is recognised as an expense during the year in which the employee renders the

related service.

Liabilities for employee entitlements to wages, salaries, annual leave represent the amount which the Group has a present

obligation to pay as a result of employee services provided on the period-end date.

SIGNIFICANT JUDGEMENTS

In preparing the fi nancial statements, management is required to make estimates and assumptions that affect the amounts

represented in the fi nancial statements and related disclosures. Use of available information and the application of judgement

are inherent in the formation of estimates.

Actual results in the future could differ from these estimates which may be material to the fi nancial statements. Areas of

estimation uncertainty where there is a risk of material adjustment to the carrying values of assets and liabilities in the next

fi nancial year are:

ALLOWANCE FOR DOUBTFUL DEBTS

Based on past experiences an allowance is made taking into account the aging of the debtors’ book and historical experience

of bad debts. Accounts are written off when they become irrecoverable.

NET REALISABLE VALUE OF INVENTORIES

Due to the nature of the Group’s inventory, it may become obsolete very quickly. Inventories are written down to net realisable

value based on the aging of the inventory and historical experience of obsolescence rates. Any inventory that is physically

identifi ed as damaged is written off when discovered.

IMPAIRMENT TESTING

Management uses the value in use model to determine the recoverable amount of goodwill, intangible assets with an indefi nite

useful life and identifi ed assets that may have been impaired. Additional disclosure of these estimates is included in Note 2 –

Intangible assets.

RESIDUAL VALUES, USEFUL LIVES AND DEPRECIATION METHODS

Judgement has been used in estimating the residual values and useful lives of items of property, plant and equipment.




45

STANDARDS AND AMENDMENTS TO EXISTING STANDARDS EFFECTIVE AND ADOPTED DURING THE YEAR

There were no standards, interpretations and amendments adopted by the Group since 1 July 2012 which had a signifi cant

impact on the Group’s consolidated results or fi nancial position or presentation thereof.

FUTURE ACCOUNTING DEVELOPMENTS

The following new standards, interpretations and amendments to existing standards that are relevant to and will be adopted by

the Group in the future have been issued but are not yet effective:

Effective

for periods

commencing

IFRS 9 Financial Instruments 1 January 2015

IFRS 10 Consolidated Financial Statements 1 January 2013

IFRS 11 Joint Arrangements 1 January 2013

IFRS 12 Disclosure of Interests in Other Entities 1 January 2013

IFRS 13 Fair Value Measurement 1 January 2013

Amendments

IFRS 7 Financial Instruments: Disclosure 1 January 2013

The amendment deals with the disclosure of amounts subject to the right of set-off.

IAS 1 Presentation of Financial Statements

Amendment relating to comparative information. 1 January 2013

IAS 16 Property, Plant and Equipment 1 January 2013

Amendment relating to classifi cation of servicing equipment.

IAS 32 Financial Instruments: Presentation 1 January 2013

Amendments relating to disclosure of gross amounts subject to set-off and the tax effect of

distributions to shareholders.

IAS 34 Interim Financial Reporting 1 January 2013

AMENDMENT RELATING TO DISCLOSURE OF SEGMENT INFORMATION

The Group does not intend to adopt these early. Management is of the opinion that the adoption of these standards will not

have a material impact on the consolidated fi nancial statements of the Group.

46


Notes to the annual financial statementsfor the year ended 30 June 2013

Group

Property

owned

R’000

Leasehold

improve-

ments

R’000

Vehicles

and

equipment

R’000

Rental

assets

R’000

Total

R’000

1. PROPERTY, PLANT AND EQUIPMENTBook value as at 1 July 2011 67 525 7 908 26 911 2 801 105 145

Valuation/Cost 70 860 9 692 71 500 7 715 159 767

Accumulated depreciation (3 335) (1 784) (44 589) (4 914) (54 622)

Movement for the year 2012

Additions 2 654 1 390 12 266 10 725 27 035

Valuation/Cost 2 654 1 390 11 172 10 725 25 941

Accumulated depreciation – – 1 094 – 1 094

Business combination acquisition – – 1 811 – 1 811

Valuation/Cost – – 2 905 – 2 905

Accumulated depreciation – – (1 094) – (1 094)

Revaluation

Depreciation (609) (1 689) (8 665) (4 914) (15 877)

Disposals – – (3 697) (2 231) (5 925)

Valuation/Cost – – (5 590) (2 452) (8 042)

Accumulated depreciation – 3 1 893 221 2 117

Book value at 30 June 2012 69 570 7 612 28 626 6 381 112 189

Valuation/Cost 73 514 11 082 79 987 15 988 180 571



Additions and cost 47 045 1 767 11 335 24 181 84 328

Revaluation

Business combination acquisition – – 15 800 – 15 800

Valuation/Cost – – 38 789 – 38 789

Accumulated depreciation – – (22 989) – (22 989)

Disposals – (3) (3 242) (4 481) (7 726)

Valuation/Cost – – (5 466) (4 693) (10 159)

Accumulated depreciation – (3) 2 224 212 2 433

Depreciation (667) (1 436) (8 688) (7 163) (17 954)

Book value at 30 June 2013 115 948 7 940 43 831 18 918 186 637

Valuation/Cost 120 559 12 849 124 645 35 476 293 529


Motor vehicles, plant and equipment and office equipment with a book value of R8 544 806 (2012: R2 158 440) are

encumbered (refer Note 14). The rental assets with a net book value of R18 918 115 have been provided as security for

the short-term loan facility granted as disclosed under Note 16 and as a reversionary cession for the DMTN Programme

as more fully described under Note 14.


47

Group

2013

R’000

2012

R’000

1. PROPERTY, PLANT AND EQUIPMENT (continued)1.1 Details of land and buildings

The Summit (Group Head Office in Midrand)

Offices and warehouses known as “The Summit” located on Portion 788 (a portion

of Portion 9) of the farm Randjiesfontein 405, Registration Division J.R., Province of

Gauteng, known as The Summit and situated at 269, 16th Road, Randjiespark, Midrand

Land acquired in February 1997:

– Cost 19 694 19 694

– Revaluation 36 911 36 911

– Additions 7 894 7 894

– Disposals (21) (21)

– Depreciation (4 785) (4 200)

Valued by a Professional Associated valuer of De Leeuw Africa Property Services at

R61 million as at 30 June 2009, based on the current gross market rental values at that

time, relevant expenses and a capitalisation rate of 10%. The valuation by the Directors

as at 30 June 2013, using the same criteria less disposal costs, would not be materially

different.

59 693 60 278

Port Elizabeth Branch

Offices and warehouse situate at Erven 393/394 Newton Park, Port Elizabeth

Land acquired in May 2002 and May 2007:

– Cost of Erf 394 (May 2002) 1 880 1 880

– Cost of Erf 393 (May 2007) 2 150 2 150

– Revaluations 2 751 2 751

– Additions 3 878 2 844

– Depreciation (415) (333)

Valued by a Professional Associated valuer of Douglas Property Valuations CC at

R6.9 million as at 30 June 2009, based on then current gross market rental values,

relevant expenses and a capitalisation rate of 11.5%. The valuation by the Directors as

at 30 June 2013, using the same criteria less disposal costs, and after applying the value

added following the improvements, would not be materially different.

10 244 9 292

Land for new head offi ce and warehouse complex in Midrand

Unimproved land within the Samrand Office Park comprising Erven 853 to 859, 876 and

881 to 883 in the Township of Kosmosdal Ext 11 in the Remaining Extent of Portion 2

of the Farm Olievenhoutsbosch 389, Registration Division J.R., Province of Gauteng,

totalling 5.2 hectare of usuable land and 2.5 hectare of wetlands.

Land acquired in September 2012:

– Cost 41 054 –

– Revaluations – –

– Additions 2 769 –

– Depreciation – –

The Group intends erecting offices and warehouses from the end of 2013 which is

expected to be ready for occupation in the first half of 2015. The new premises will house

the Group’s head office and all of the Group’s Gauteng operations. The land has not been

valued as it was acquired during the year and the market value is unlikely to be materially

different from the current cost of the land.

43 823 –

48


Group

2013

R’000

2012

R’000

1. PROPERTY, PLANT AND EQUIPMENT (continued)1.1 Details of land and buildings (continued)

Bloemfontein Branch

Land and offices comprising Plot 38 Quaggafontein Small Holdings, District of

Bloemfontein, Province of the Free State.

Land and Offices acquired in May 2013:

– Cost 2 046 –

– Revaluations – –

– Additions 142 –

– Depreciation – –

The Group has entered into an agreement with developers to erect a warehouse on this

property at a cost of R6.3 million to be finalised towards the end of 2013.

2 188 –

115 948 69 570

The Summit is encumbered by a continuing covering mortgage bond in favour of Depfin Investments (Pty) Ltd (a member

of the Nedbank Group) as continuing security for the financing provided by Nedbank for the acquisition of the Axiz group

of companies on 1 November 2010.

Group

Goodwill

R’000

Software

R’000

Trademarks

R’000

Total

R’000

2. INTANGIBLE ASSETSBook value at 1 July 2011 55 830 4 639 72 60 541

Cost 55 830 6 164 80 62 074

Accumulated amortisation – (1 525) (8) (1 533)


Additions at cost – 7 075 59 7 134

Business combination acquisition at cost 7 239 – – 7 239

Amortisation (69) (2 654) (131) (2 854)

Book value at 30 June 2012 63 000 9 060 – 72 060

Cost 63 069 13 241 137 76 447

Accumulated amortisation (69) (4 181) (137) (4 387)


Additions at cost – 7 912 – 7 912

Business combination acquisition 51 940 4 – 51 944

Cost 51 940 64 – 52 004

Accumulated amortisation – (60) – (60)

Disposals/Impairments

Amortisation and Impairments – (2 799) – (2 799)

Book value at 30 June 2013 114 940 14 177 – 129 117

Cost 115 009 21 217 137 136 363

Accumulated amortisation (69) (7 040) (137) (7 246)

Notes to the annual financial statements (continued)



49

Group

Segment

Year of

acquisition

2013

R’000

2012

R’000

2. INTANGIBLE ASSETS (continued)Cash generating units and goodwill allocation

Explix Technologies (Pty) Ltd ICT Distribution 2008 24 591 24 591

Pinnacle Micro (Pty) Ltd ICT Distribution 2009 17 087 17 087

Datanet Infrastructure Group (Pty) Ltd ICT Distribution 2010 1 339 1 339

Centrafin (Pty) Ltd and Centravoice (Pty) Ltd Financial Services 2011 12 744 12 744

Merqu Communications (Pty) Ltd Projects and Services 2012 2 759 2 759

e-Secure Distribution ICT Distribution 2012 4 480 4 480

Devtrade Security (Pty) Ltd ICT Distribution 2013 25 360 –

JAG Engineering (SA) (Pty) Ltd ICT Distribution 2013 6 761 –

Modrac (Pty) Ltd and Precision ICT (Pty) Ltd ICT Distribution 2013 19 819 –

114 940 63 000

ICT Distribution

Explix Technologies (Pty) Ltd, Pinnacle Micro (Pty) Ltd and Datanet Infrastructure Group (Pty) Ltd were purchased

in prior years and the respective goodwill formed part of the assets acquired in that period. During the current year,

Devtrade Security (Pty) Ltd, JAG Engineering (SA) (Pty) Ltd and Modrac (Pty) Ltd (including Precision ICT (Pty) Ltd) were

purchased with the goodwill forming part of the assets purchased, which represents the excess of the purchase price

paid over the fair value of the net assets acquired. The recoverable amount has been calculated using the value in use

method, which discounts to present value, the future after tax cash flows, attributable to the ICT Distribution business,

using an applicable discount rate. Cash flows were determined using a combination of current year’s actual profits and

next year's budgeted profits, as approved by directors. The key assumptions used in these budgets are a reflection of

management's past experience in the market in which the unit operates. Cash flows for the 4 following periods have been

extrapolated using a steady 8% per annum (2% growth and 6% inflation) growth rate for mature businesses and 12% for

new businesses, thereafter at 6%. These cash flows were discounted using a discount rate of 14.5%. Various sensitivity

analyses were performed by changing key variables by 1% in the calculation and this still resulted in the recoverable

amount exceeding the carrying amount in all instances.

Projects and Services

Merqu Communications (Pty) Ltd was purchased in prior years and the respective goodwill formed part of the assets

acquired in that period. The recoverable amount has been calculated using the value in use method, which discounts

to present value, the future after tax cash flows, attributable to the Projects and Services business, using an applicable

discount rate. Cash flows were determined using current year’s actual profits and have been extrapolated in 4 future

periods using a steady 8% per annum (2% growth and 6% inflation) growth rate, thereafter at 6%. These cash flows were

discounted using a discount rate of 14.5%. Various sensitivity analyses were performed by changing key variables by 1%

in the calculation and this still resulted in the recoverable amount exceeding the carrying amount in all instances.

Financial Services

Centrafin (Pty) Ltd and Centravoice (Pty) Ltd were purchased in prior years and the respective goodwill formed part of

the assets acquired in that period. The recoverable amount has been calculated using the value in use method, which

discounts to present value, the future after tax cash flows, attributable to the Financial Services business, using an

applicable discount rate. Cash flows were determined using current year’s actual profits and have been extrapolated in

4 future periods using a steady 8% per annum (2% growth and 6% inflation) growth rate, thereafter at 6%. These cash

flows were discounted using a discount rate of 14.5%. Various sensitivity analyses were performed by changing key

variables by 1% in the calculation and this still resulted in the recoverable amount exceeding the carrying amount in all

instances.

For the purposes of impairment testing, goodwill is allocated to the following cash generating units:

50


Issued Effective holding

Investment value

at cost

Activity share capital 2013

%

2012

%

2013

R’000

2012

R’000

3. INTEREST IN SUBSIDIARIESHoldings

Pinnacle Treasury Services Limited (RF)

formerly Pinnacle Holdings Limited (RF)

Intermediate

Holding Co 180 000 000 99.56 99.51 124 247 101 644

Parcea Computing (Pty) Ltd Operating Co 100 51 51 – –

Pinnacle Technology Shared

Management Services (Pty) Ltd Operating Co 1 000 100 100 1 1

The Pinnacle Share Purchase Scheme

Trust 100 100 – –

Axiz Investment Trust 100 100 – –

Pinnacle Africa – –

Pinnacle Micro (Pty) Ltd Operating Co 100 99.56 99.51 – –

Pinnacle Micro Namibia (Pty) Ltd

(incorporated in Namibia) Operating Co 100 99.56 99.51 – –

Boditse (Pty) Ltd

(incorporated in Botswana) Operating Co 1 000 100 100 2 2

Centravoice (Pty) Ltd 1 000 000 100 100 – –

Datanet Infrastructure Group (Pty) Ltd Operating Co 1 000 100 100 – –

Devfam Fire Prevention Equipment

(Pty) Ltd Operating Co 100 100 – 25 274 –

JAG Engineering (SA) (Pty) Ltd 100 100 – 1 400 –

Modrac (Pty) Ltd Operating Co 1 830 100 – –

Pinnacle Business Solutions (Pty) Ltd

(formerly Explix Business Solutions

(Pty) Ltd) Operating Co 100 100 100 – –

Precision ICT (Pty) Ltd Operating Co 100 100 – – –

Froggy IT Solution (Pty) Ltd (formerly

Thin Client Computers (Pty) Ltd) Operating Co 1 000 100 100 – –




51

3. INTEREST IN SUBSIDIARIES (continued)

Issued Effective holding

Investment value

at cost

Activity share capital

R

2013

%

2012

%

2013

%

2012

%

Axiz Workgroup

Axiz Technology (Pty) Ltd Holding Co 8 825 000 100 100 151 200 151 200

Axiz (Pty) Ltd Operating Co 90 100 100 – –

Axiz Botswana (Pty) Ltd

(incorporated in Botswana) Operating Co 100 100 100 – –

Axiz Namibia (Pty) Ltd

(incorporated in Namibia) Operating Co 100 100 100 – –

Appleby Solutions Limited

(incorporated in Zambia) Operating Co 5 000 100 100 – –

Workgroup IT (Pty) Ltd Operating Co 1 000 100 100 30 993 30 993

Infrasol

Infrasol (Pty) Ltd Operating Co 1 000 100 100 1 1

Merqu Communication (Pty) Ltd Operating Co 100 51 51 – –

Centrafi n – –

Centrafin (Pty) Ltd Operating Co 1 000 100 100 23 800 23 800

Property

Pinnacle Facilities Management

(Pty) Ltd (formerly Erf 259 Erand

Property (Pty) Ltd) Property Co 101 99.56 99.51 – –

Protectaire Properties (Pty) Ltd Property Co 8 000 99.56 99.51 – –

Dormant – –

Tri Continental Distribution (Pty) Ltd Dormant 100 100 – –

Pinnacle Africa Zambia (Pty) Ltd

(incorporated in Zambia) Dormant 100 – –

Explix Software Technologies (Pty) Ltd

(incorporated in Namibia) Dormant 300 100 100 – –

356 918 307 641

Unless otherwise indicated, subsidiaries are incorporated in South Africa.

Group Company

2013

R’000

2012

R’000

2013

R’000

2012

R’000

4. INVESTMENTS AND DEPOSITSInvestments in listed shares

Shares acquired on market 30 179 – 30 179 –

7 367 581 shares in Datacentrix Holdings Limited

Market value at the fi nancial year-end 28 734 – 28 734 –

Short-term deposit

In respect of shares to be acquired off-market 237 272 – 237 272 –

61 152 467 shares in Datacentrix Holdings Limited

acquired subject to approval by the Competition

Authorities. The deposit is fully refundable with

interest if the authorities decline their approval of

the acquisition.

Total 267 451 – 267 451 –

52


Group

2013

Number

’000

2012

Number

’000

2013

R’000

2012

R’000

5. LONG-TERM LOANSShare purchase scheme participant loans 4 600 4 600 28 689 28 214

4 600 4 600 28 689 28 214

Share purchase scheme loans are granted to participants in accordance with the terms of the Pinnacle Share Incentive

Trust, are secured against the shares issued and attract interest at the official rate of interest in accordance with the

7th Schedule to the Income Tax Act.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

6. FINANCE LEASE RECEIVABLESGross investment in leases due:

– within one year 100 399 56 648

– within two to five years 230 766 137 276

331 165 193 924

Less: Unearned finance income (79 816) (49 444)

Allowance for uncollectable minimum lease

payments (1 218) (294)

250 131 144 186

Non-current assets 184 782 108 562

Current assets 65 349 35 624

250 131 144 186

These leases are mainly for ICT and office equipment asset financing to business over the economic life of the assets

leased, subject to specified minimum periods varying between one and five years. The receivables are secured by

retention of ownership of the assets leased. The finance lease receivables have been provided as security as for the

short-term loan facility granted as disclosed under Note 16 and as a reversionary cession for the DMTN Programme as

more fully described under Note 14.




53

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

7. DEFERRED TAXATIONDeferred tax assets at the beginning of the year 18 594 15 013 325 333

Utilisation of assessed loss (3 703) 13 673 (32) (8)

Temporary differences 183 (10 156) – –

Temporary differences from business combination

acquisition (1 616) 64 – –

Prior year adjustment 255 – – –

13 713 18 594 293 325

Comprising:

Assessed losses 14 214 17 397 293 325

Temporary differences (501) 1 197 – –

Provision for doubtful debts 4 737 5 176 – –

Property, plant and equipment 21 304 21 862 – –

Provisions and accruals 13 979 10 545 – –

Finance lease receivables (31 062) (26 920) – –

Capital allowances – (7) – –

Revaluation of fixed property (9 459) (9 459) – –

Net balance 13 713 18 594 293 325

Categorised as:

Deferred tax asset 35 232 36 119 293 325

Deferred tax liability (21 519) (17 525) – –

In the prior year a deferred tax asset was raised in a subsidiary purchased in the 2011 year because the company has

been able to return that subsidiary to sustainable profitability and, accordingly, the directors expect sufficient future

taxable income to utilise the tax losses.

54


Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

8. INVENTORIESStock on hand 974 223 691 453 – –

Stock in transit 108 031 150 915 – –

1 082 254 842 368 – –

Write down of inventory to net realisable value (33 568) (47 022) – –

1 048 686 795 346 – –

The reduction in the allowance of non-saleable and damaged stock by R13.454 million (2012: R4.2 million) is the net

movement of stock written off, provisions raised and provisions released.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

9. TRADE AND OTHER RECEIVABLESTrade and other receivables

Trade receivable balances 1 107 663 980 698 – –

Allowances for impairments (23 511) (28 898) – –

1 084 152 951 800 – –

Other receivables 22 738 26 913 1 609 8

Value-Added Tax receivable 13 641 7 882 – –

Short-term portion of long-term loans receivable 4 892 476 – –

1 125 423 987 071 1 609 8

In the opinion of the directors, the carrying value of trade and other receivables approximates fair value. Trade

Receivables in Pinnacle Micro (Pty) Ltd, totalling R502 474 044 (2012: R368 177 889), and Axiz (Pty) Ltd, totalling

R510 961 572 (2012: R400 330 152), have been provided as security for banking facilities more fully disclosed in

Note 27.4 and also as a reversionary cession for the DMTN Programme as more fully described under Note 14.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

10. CASH AND CASH EQUIVALENTSCash on hand 181 290

Balances with banks 23 749 42 169 17 244

South African Rand 16 956 38 001 17 244

US Dollar 2 320 (30) – –

Botswana Pula 3 087 2 590 – –

Zambian Kwacha 1 386 1 608 – –

Bank overdraft (270 476) (182 706) – –

(246 546) (140 247) 17 244

Banking facilities

The Group has the following facilities:

Direct facilities 568 160 406 000 568 160 406 000

Pre-settlement facilities 71 000 56 000 71 000 56 000

639 160 462 000 639 160 462 000

The Group’s bankers have issued guarantees to the value of R1 781 143 (2012: R5 877 602) on behalf of the Group. The

Company and its subsidiaries have issued letters of suretyship for banking and finance facilities provided to certain of its

subsidiaries. The facilities were provided on cession of the Group’s cash resources, trade debtors and domestic debtors’

insurance policy. Refer to note 27.4 for utilisation of facilities.




55

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

11. SHARE CAPITAL AND PREMIUMAuthorised share capital

300 000 000 ordinary shares 3 000 3 000 3 000 3 000

Issued share capital

170 070 814 (2012: 169 975 924) ordinary shares 1 701 1 700 1 701 1 700

Share premium 24 281 24 245 24 281 24 245

25 982 25 945 25 982 25 945

2013 2012 2013 2012

Shares Shares R’000 R’000

Reconciliation of share capital:

Opening balance 169 975 924 181 316 452 1 700 1 813

Issued 94 890 142 273 1 1

Cancelled – (11 482 801) – (114)

Closing balance 170 070 814 169 975 924 1 701 1 700

Premium Capital + Premium

2013 2012 2013 2012

Reconciliation of share capital and premium:

Opening balance 24 245 110 196 25 945 112 009

Issued 36 56 37 57

Cancelled – (86 007) – (86 121)

Closing balance 24 281 24 245 25 982 25 945

During the year under review 94 890 shares were issued (2012: 142 273) to shareholders of Pinnacle Treasury Services

Limited (RF) (previously Pinnacle Holdings Limited) under the blanket offer to exchange for one share in Pinnacle

Technology Holdings Limited for each share held in Pinnacle Holdings Limited.

The Company also repurchased 11 482 801 shares from Amabubesi Technology Holdings (Pty) Ltd in 2012 and cancelled

the shares.

The directors are authorised, by a resolution of the shareholders and until the forthcoming annual general meeting, to

dispose of the unissued shares for any purpose and upon such terms and conditions as they deem fit.

56


Group Group

2013 2012 2013 2012

Number Number R’000 R’000

12. TREASURY SHARESOpening balance 12 087 365 15 788 519 42 166 74 885

Purchased – 5 798 846 – 44 475

Shares sold to third parties – (4 600 000) – (45 080)

Settled acquisition liabilities (17 391) (300 000) (400) (3 900)

Allocated to Pinnacle Share Purchase

Scheme participants – (4 600 000) – (28 214)

12 069 974 12 087 365 41 766 42 166

Foreign

Revaluation exchange Other

reserve reserve NDRs Total

R’000 R’000 R’000 R’000

13. NON-DISTRIBUTABLE RESERVESBalance at 1 July 2011 31 656 (526) 74 31 204

Movement in foreign currency translation reserve 324 324

Balance at 1 July 2012 31 656 (202) 74 31 528

Movement in foreign currency translation reserve 1 060 1 060

Balance at 30 June 2013 31 656 858 74 32 588

Group Company

Total Current Long- Total Current Long-

balance portion term balance portion term

2013 R’000 R’000 R’000 R’000 R’000 R’000

14. INTEREST-BEARING LIABILITIESSecured

Instalment sales agreements a 6 136 1 671 4 465 – – –

Depfin Investments (Pty) Ltd d 39 401 15 532 23 869 28 360 11 176 17 184

Depfin Investments (Pty) Ltd e 132 261 – 132 261 – – –

Medium-Term Domestic Note f 315 000 – 315 000 315 000 – 315 000

Unsecured

Parcea outside shareholders b 437 – 437 – – –

Merqu outside shareholders c 2 565 – 2 565 – – –

Prior shareholder of Modrac g 3 478 – 3 478 – – –

499 278 17 203 482 075 343 360 11 176 332 184

Group Company

Total Current Long- Total Current Long-

balance portion term balance portion term

2012 R’000 R’000 R’000 R’000 R’000 R’000

Interest-bearing liabilities:

Secured

Instalment sales agreements a 1 750 793 957 – – –

Depfin Investments (Pty) Ltd d 53 841 14 180 39 661 38 722 10 362 28 360

Unsecured

Parcea outside shareholders b 437 – 437 – – –

Merqu outside shareholders c 2 856 – 2 856 – – –

58 884 14 973 43 911 38 722 10 362 28 360




57

14. INTEREST-BEARING LIABILITIES (continued)

(a) Instalment sale agreements over motor vehicles, plant and equipment with a book value of R8 544 806 (2012:

R2 158 440). Interest accrues at rates varying between prime plus 2.91% and prime less 2%. The loans are

repayable in monthly instalments of R175 183 (2012: R76 361) inclusive of interest of R70 396 (2012: R10 338),

repayable by November 2015.

(b) Amounts due to the outside shareholders of Parcea Computers (Pty) Ltd. The loan is interest free with no specified

repayment term. Repayment is at the discretion of the Company.

(c) Amounts due to the outside shareholders of Merqu Communications (Pty) Ltd. The loan bears interest at prime rate

and repayment is at the discretion of the Company.

(d) The funding has been secured by Group subsidiary guarantees, by the encumbrance of all of the shares in Axiz

Technology (Pty) Ltd, and by a continuing covering mortgage bond over the Group’s head office known as The

Summit (see Note 1.1). Interest accrues at 7.08% (2012: 6.81%) and is payable monthly in arrears. The loan is

repayable in monthly instalments of R1 239 295 (2012: R1 152 204).

(e) The funding has been secured by a subsidiary through the issue of 130 000 000 Redeemable Preference shares

of R1 each. The loan bears interest at 7.076%, nominal annual compounded monthly, and is payable at the end of

March and September. The shares are redeemable on 29 March 2016.

(f) On 30 April 2013, the Group successfully issued R315 million secured notes under its registered Domestic Medium

Term Note (DMTN) Programme. The details of this particular issue are as follows: R315 million three-year listed

secured and rated corporate bond bearing interest at three-month JIBAR plus 210 (two hundred and ten) basis

points per annum. As security for the DMTN, Pinnacle Micro (Pty) Ltd, Axiz (Pty) Ltd and Centrafin (Pty) Ltd have

given reversionary cessions of their book debts and unlimited cross-suretyships between all other entities within

the Group.

(g) Amounts due to the previous shareholder of Modrac (Pty) Ltd. The loan is interest free with no specified repayment

term. Repayment is at the discretion of the Company.

Should the Group default on its obligations, creditors will have the right to proceed to recover the encumbered assets.

The carrying value of interest-bearing liabilities approximates fair value.

Minimum payments and present value:

Group Company

Total Finance Present Total Finance Present

payment costs value payment costs value

2013 R’000 R’000 R’000 R’000 R’000 R’000

Repayable

Up to one year 17 562 (359) 17 203 15 532 (4 356) 11 176

One to five years 475 860 (266) 475 594 338 868 (6 684) 332 184

Longer than five years 6 481 – 6 481 – – –

499 903 (625) 499 278 354 400 (11 040) 343 360

Group Company

Total Finance Present Total Finance Present

payment costs value payment costs value

2012 R’000 R’000 R’000 R’000 R’000 R’000

Repayable

Up to one year 15 097 (124) 14 973 14 440 (4 079) 10 361

One to five years 44 302 (828) 43 474 39 401 (11 040) 28 361

Longer than five years 437 – 437 – – –

59 836 (952) 58 884 53 841 (15 119) 38 722

58


Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

15. TRADE AND OTHER PAYABLESTrade payables 866 291 784 734 25 117 15

Other payables 92 066 101 941 – –

Accruals 77 836 108 103 – 721

Value-Added Tax payable 38 543 26 355 – –

1 074 736 1 021 133 25 117 736

The directors are of the opinion that the carrying value of trade and other payables approximates fair value.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

16. SHORT-TERM LOANInvestec Bank 115 543 50 823 – –

Nedbank – 64 561 – –

115 543 115 384 – –

Investec Bank

The loan is secured by Centrafin’s advance book and guarantees from all major subsidiaries. The loan bears interest

based on JIBAR 90 days plus 3.5% and is payable quarterly in arrears. The loan is reviewed annually in January.

Nedbank

The loan was secured by a cession of all treasury shares held by Pinnacle Holdings Limited. The loan bears interest at

prime minus 1%. The loan was repaid during the year out of a fresh issue of preference shares by Pinnacle Holdings

Limited to be subscribed for by Depfin Investments (Pty) Ltd, a member of Nedbank group.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

17. DEFERRED REVENUEOpening balance 10 460 10 646 – –

Business combination acquisition:

Provided 10 872 2 179 – –

Utilised (6 813) (2 365) – –

14 519 10 460 – –

The Group has a present and legal obligation to repair or replace goods sold with one, two or three-year carry-in or

on-site warranties in the event that the product should fail to operate under normal operating conditions. That portion of

the revenue earned on the original sale that relates to the provision of warranties is deferred and recognised in profit or

loss over the period of the warranties.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

18. REVENUEGoods 6 458 570 5 704 626 – –

Warranties 10 872 2 179 – –

Services 93 094 112 267 – –

Rental revenue 33 696 25 520 – –

6 596 232 5 844 592 – –




59

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

19. OPERATING PROFITOperating profit is stated after taking the following into

account:

Auditors’ remuneration

Audit fee 2 187 2 212 – –

Other services 398 276 – –

Staff costs 421 614 364 397 – –

Depreciation 17 954 15 877 – –

Property owned 667 609 – –

Leasehold improvements 1 436 1 689 – –

Equipment and vehicles, owned 8 688 8 665 – –

Rental equipment 7 163 4 914 – –

Intangible assets 2 799 2 854 – 16 013

Amortisation 2 799 2 785 – –

Impairment of investment in subsidiary – – – 16 013

Impairment of goodwill in subsidiary – 69 – –

Profit and loss on the sale of

property, plant and equipment (436) (473) – –

Foreign exchange gain (10 106) (3 694) – –

Unrealised 162 2 860 – –

Realised (10 268) (6 554) – –

Operating lease charges

Premises 26 872 27 208 – –

Equipment 524 455 – –

Investment income (58 548) (22 633) (56 482) (180 954)

Interest income (58 548) (22 633) (3 042) –

Dividend income – – (53 440) (180 954)

Finance costs 77 106 43 019 7 944 3 819

Short-term finance 60 368 32 287 – –

Notional interest – – 4 078 3 819

Deemed interest 5 639 4 280 – –

Bond Interest 3 866 – 3 866 –

Loans 5 950 6 002 – –

Finance leases 846 39 – –

Non-controlling interests 300 177 – –

Revenue services 137 234 – –

The aggregate profit after tax of the subsidiaries for the year, attributable to the Company was R332.423 million (2012:

R384.279 million).The aggregate loss after taxation of the subsidiaries for the year attributable to the Company was

R5.877million (2012: R5.014 million).

60


Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

20. TAXATION20.1 Taxation charge

Normal taxation 124 129 99 042 – –

Current year 123 941 99 268 – –

Adjustments in respect of the prior year 188 (226) – –

Secondary Tax on Companies – 2 728 – 2 610

Non-resident shareholders’ tax 614 – – –

Deferred taxation 3 520 (3 517) 32 8

Current year – reversing 3 478 11 769 32 8

– originating – (170) – –

Adjustments in respect of the prior year 42 (15 116) – –

128 263 98 253 32 2 618

20.2 Reconciliation of tax rate

Net profit before taxation 453 943 380 604 48 538 161 149

Taxation (128 263) (98 253) (32) (2 618)

Effective tax rate 28.3% 25.8% 0.1% 1.6%

RSA normal tax rate 28.0% 28.0% 28.0% 28.0%

Secondary Tax on Companies – 0.7% 0.0% 13.2%

Non-resident shareholders’ tax 0.1% – – –

Foreign tax rate differential 0.1% 0.1% 0.0% 0.0%

Disallowable expenditure 0.7% 0.2% (27.9%) (28.0%)

Recognition of deferred tax asset (0.6%) (4.0%) 0.0% 0.0%

Capital income – 0.9% 0.0% (11.6%)

Adjustments in respect of the prior year (0.1%) (0.1%) 0.0% 0.0%

Group

2013 2012

R’000 R’000

21. EARNINGS PER SHARENormal and diluted

Earnings per share has been calculated using the following:

Net profi t for the year attributable to ordinary shareholders 324 948 280 228

Weighted average number of shares in issue (’000) 157 931 159 721

Earnings per share (cents) 205.8 175.4




61

Group

2013 2012

R’000 R’000

22. HEADLINE EARNINGS PER SHARENormal and diluted

Headline earnings per share has been calculated using the following:

Net profi t for the year attributable to ordinary shareholders 324 948 280 228

Impairment of goodwill – 69

Reversal of prior impairment after tax – (276)

Reversal of prior impairment – (384)

Less: Taxation thereon – 108

Profit on sale of property, plant and equipment (net of tax) (314) (339)

Profit on sale of property, plant and equipment (436) (473)

Less: Taxation thereon 122 134

Headline earnings 324 634 279 682

Weighted average number of shares in issue (’000) 157 931 159 721

Headline earnings per share (cents) 205.6 175.1

Reconciliation of weighted average number of shares in issue Actual Weighted

Shares in issue at 1 July 2012 (000 shares) 169 976 169 976

Less: Held by a subsidiary as treasury shares at 1 July 2011 (12 087) (12 087)

Shares issued to acquire shares in Pinnacle Holdings Limited four times during the year 95 41

Treasury shares used as payment for acquisition of non-controlling interests on 27 March 2012 17 1

At end of the year 158 001 157 931

Being: shares in issue at the end of the year 170 071 –

held by a subsidiary as treasury shares at the end of the year (12 070) –

62


STATEMENT OF CASH FLOWS

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

23. CASH GENERATED FROM OPERATIONSNet profit before tax 453 943 380 604 48 538 161 149

Adjusted for:

Investment income (58 548) (22 633) (56 482) (180 954)

Finance costs 77 106 43 019 7 944 3 819

Non-cash fl ow Items 30 790 17 602 – 16 013

Depreciation 17 954 15 877 – –

Amortisation and impairments 2 799 2 854 – 16 013

Movement in foreign currency translation reserves 1 060 324 – –

Profit on disposal of property, plant and equipment (436) (473) – –

Acquisition payment invested in loan account – (1 000) – –

Equity-based compensation 9 598 – – –

Other non-cash flow items (185) 20 – –

Changes in working capital (378 331) (226 042) 2 506 (10 751)

Increase in inventories (243 763) (217 836) – –

(Increase)/decrease in trade and other receivables (126 979) (158 480) (1 601) 1 522

(Increase)/decrease in trade and other payables (11 648) 150 460 4 107 (12 273)

Increase/(decrease) in deferred revenue 4 059 (186) – –

124 960 192 550 2 506 (10 724)

24. NORMAL TAXATION PAIDNet taxation payable/(receivable) at beginning of year 739 4 717 (550) (788)

Tax liability acquired in business combinations (2) 817 – –

Normal taxation 124 129 99 042 – –

STC – 2 728 – 2 610

Non-resident shareholders’ tax 614 – – –

Capital Gains Tax on treasury shares sold 3 269 – – –

Net taxation (payable)/receivable at the end of the year (11 166) (739) 550 550

Taxation receivable at the end of the year 1 154 2 114 550 550

Taxation payable at the end of the year (12 320) (2 853) – –

117 583 106 565 – 2 372




63

25. BUSINESS COMBINATIONS

The Group has completed three acquisitions during the financial year.

Devtrade: Pinnacle acquired 100% of the issued share capital of Devfam Fire Prevention Equipment (Pty) Ltd (trading as

Devtrade) at a price that will vary between R5.0 million and R25.3 million depending on the earnings achieved in the two

years after acquisition. A payment of R5.0 million was paid on acquisition and the balance of the purchase price will be

paid in two equal annual tranches on 30 September 2013 and 30 September 2014. Devtrade is a security business that

distributes high-end electronic security products including fire detection and suppression equipment, public address,

CCTV and access control infrastructure. It is one of the two appointed Bosch distributors in the country. The acquisition

of Devtrade gives critical mass and impetus to our strategic decision to enter the security market.

JAG: Pinnacle acquired a 90% share in JAG Engineering (SA) (Pty) Ltd (“JAG”) during December 2012, which became

effective on 1 January 2013, and the remaining 10% on 1 June 2013. JAG designs and manufactures server racking

which will reduce the reliance on imports and uncertain local supply that Datanet currently faces with this product range.

Modrac: The Group acquired 100% of Modrac (Pty) Ltd and Precision ICT (Pty) Ltd with effect from 1 June 2013. These

companies manufacture electronic enclosures and server racking under the brand names “Modrac” and “Enviroserve”.

The intention is to combine the manufacturing facilities of Modrac and Precision ICT with those of JAG which will give the

Group a significant manufacturing capacity in the electronic enclosure sector.

The value of the goodwill recognised from these acquisitions is derived from the purchase price negotiated (which

was based on the discounted future cash flow valuation of the business) less the fair value of the assets and liabilities

acquired. In addition these acquisitions will allow us to broaden our product range into the new areas mentioned above,

giving us a wider spectrum of product offerings and less reliance on the ITC distribution segment. This goodwill is not tax

deductible. There were no separately identifiable costs for these transactions.

30 June 2013 30 June 2012

R’000

DevtradeSecurities (Pty) Ltd JAG

Modrac(Pty) Ltd

PrecisionICT

(Pty) Ltd Total

MerquCommuni-

cations

E-SecureDistri-bution Total

ASSETSProperty, plant and equipment 273 13 817 1 638 72 15 800 1 811 – 1 811

Deferred taxation – – – – – 64 – 64

Inventories 652 306 – 10 619 11 577 387 739 1 126

Less provision raised – – – (2 000) (2 000) – – –

Trade and other receivables 4 520 1 995 9 822 4 869 21 206 5 971 – 5 971

Less provision raised – – (8 633) (1 200) (9 833) – – –

Taxation receivable 2 – – 2 – – –

Cash and cash equivalents 629 40 – 1 888 2 557 1 730 – 1 730

6 076 16 158 2 827 14 248 39 309 9 963 739 10 702

LIABILITIESTrade and other payables (6 162) (9 299) (12 710) (16 806) (44 977) (4 525) (119) (4 644)

Bank overdrafts – (3 133) – – (3 133) (396) – (396)

Short-term loan – (4 426) – – (4 426) (1 466) – (1 466)

Long-term loan – (4 098) – – (4 098) – – –

Deferred taxation – (1 603) (13) – (1 616) – – –

Shareholders’ loan – – (6 329) (1 036) (7 365) (2 286) – (2 286)

Taxation – – – – – (817) – (817)

(6 162) (22 559) (19 052) (17 842) (65 615) (9 490) (119) (9 609)

Net assets acquired (86) (6 401) (16 225) (3 594) (26 306) 473 620 1 093

Less: Non-controlling interests – 640 – – 640 (232) – (232)

Goodwill on acquisition 25 360 6 761 16 225 3 594 51 940 2 759 4 480 7 239

Purchase amount – paid 5 000 1 000 – – 6 000 3 000 5 100 8 100

– to be paid 20 274 – – – 20 274 – – –

Turnover since acquisition 11 302 12 444 – 4 270 28 016 24 997 15 898 40 895

PBT since acquisition 3 027 2 787 – 1 810 7 624 1 312 1 341 2 653

*PTH turnover 6 692 856 5 890 417

*PTH profit before tax 433 419 384 332

* If Business Combinations had been acquired at the beginning of the year.

All receivables and inventories acquired in these business combinations were assessed at acquisition and written down to expected net realisable value immediately prior to acquisition. Consequently, the values shown herein are net of any additional write downs deemed necessary.

64


26. RETIREMENT BENEFITS

The Group has existing Group retirement funds in place for all operating subsidiary companies. These retirement benefits

include a Pension and Provident Fund. New employees are required to join the Provident Fund. One subsidiary has a

Retirement Annuity Fund in place for existing employees although this fund has been closed for new entrants as new

employees are required to join the Provident Fund.

Remuneration packages are based on a total cost to company basis (referred to as the “Gross Cost of Employment”),

with individuals deciding the levels of contributions to be made, by the employer, to the Pension and Provident Fund.

The Provident Fund is compulsory to all new employees joining the Company.

The total employer contributions for the financial year under review for all funds was R11 958 015 (2012: R11 788 941).

27. RISK

Overview

Risks and related mitigating procedures are assessed by executives with assistance from line managers and employees

on a continuous basis to ensure the safeguarding of the Group, its people, its assets and its businesses.

The Group has exposure to the following risks from its financial instruments:

Credit risk

Liquidity risk

Market risk (including currency and cash flow interest rate risk)

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies

and procedures for measuring and managing risk and the Group’s management of capital. Further quantitative

disclosures are included in the financial statement notes relating to the financial instrument concerned.

The Group’s objective is to effectively manage each of the above risks associated with its financial instruments, in order

to limit the Group’s exposure as far as possible to any financial loss associated with these risks.

The Board is ultimately responsible and accountable for ensuring that adequate procedures and processes are in place

to identify, assess, manage and monitor key business risks. The Board has established the Audit and Risk Committee,

which is responsible for monitoring the Group’s risk management policies.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems

are reviewed regularly to reflect changes in market conditions and the Group’s business activities. The Group, through

training and management standards and procedures, aims to develop a disciplined and structured control environment in

which all employees understand their roles and obligations.

The Audit and Risk Committee reviews the adequacy of the risk management framework in relation to the risks faced by

the Group.

27.1 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its

contractual obligations.

Financial assets which potentially subject the Group to credit risk consist principally of cash and cash equivalents and of

trade and other receivables.

Group

2013 2012

R’000 R’000

Credit risk

Long-term loans 28 689 28 214

Trade receivables 1 084 152 951 800

Finance lease receivables 250 131 144 186

Cash and cash equivalents 23 930 42 459

Short-term deposit 237 272 –

1 624 174 1 166 659




65

27. RISK (continued)

Long-term loans

Long-term loans comprise loans to participants in the Pinnacle Share Purchase Scheme. The loans are secured by

cession of the shares issued. The market value of the shares held by the Scheme as security at 30 June 2013 was

R110.0 million (2012: R72.8 million) and that figure has risen since year-end.

Cash and deposits

The Group’s cash and deposits (short and long term) are placed only with banks of the highest quality credit standing.

Trade and fi nance lease receivables

Credit is granted on application in line with policies implemented by the directors. Finance leases are secured by retaining

ownership of the leased assets. At year-end, the Group did not consider there to be any significant concentration of

credit risk which had not been insured or adequately provided for.

Short-term deposits

The short-term deposit is subject to minimal credit risk refer to note 4.

Group

Total Not past due

30 days

past due

60 days

and more

past due

2013 R’000 R’000 R’000 R’000

27.2 Impairment of trade receivables

Trade receivable balances

Trade receivables not impaired 1 084 152 738 879 263 586 81 688

Trade receivables with impairments 23 511 793 5 783 16 935

1 107 663

Allowance

Allowance for impairment (23 511)

Total trade debts net of impairment losses 1 084 152

Group

Total Not past due

30 days

past due

60 days

and more

past due

2012 R’000 R’000 R’000 R’000

Trade receivable balances

Trade receivables not impaired 951 807 609 140 193 922 148 745

Trade receivables with impairments 28 891 – 45 28 846

980 698

Allowance

Allowance for impairment (28 898)

Total trade debts net of impairment losses 951 800

Group

2013 2012

27.3 Allowance for impairment R’000 R’000

As at 1 July 28 898 24 862

Business acquisitions 988 306

Net movement in allowance for possible impairment (1 758) 5 350

Irrecoverable debts written off (4 617) (1 620)

As at 30 June 23 511 28 898

66


27. RISK (continued)

27.3 Allowance for impairment (continued)

Management considers receivables to be impaired when customers are in financial distress or otherwise are assessed

unable to pay.

Trade receivables comprise a widespread customer base with no concentrations of credit risk. Credit guarantee

insurance is purchased for most trade receivables. In certain cases, the financial position of a customer is appraised and,

if found to be of a high quality, the receivable is not insured.

Liquidity risk

The Group has minimised its liquidity risk by ensuring it has adequate banking facilities and reserve borrowing capacity

with high-quality financial institutions.

Group

2013 2012

27.4 Utilisation of facilities R’000 R’000

Direct, contingent and pre-settlement facilities 639 160 462 000

Facilities utilised (307 243) (194 743)

Unutilised direct facilities 331 917 267 257

Currency risk

The Group is exposed to foreign currency risk through the importation of merchandise. This risk is mitigated by entering

into forward exchange contracts and by offsetting the risk against foreign currency receivables. The Group does not use

forward exchange contracts for speculative purposes and does not apply hedge accounting. The adjustments to fair

value are recognised in the income statement.

A decrease or increase of up to 5% (which the directors consider reasonable) in the exchange rate between the Rand and

the US Dollar or the Euro would not have a material impact on the Group.

The fair value of forward exchange contracts have been determined based on prices obtained from the Group’s bankers.

The Group carries out a significant portion of its purchases in foreign currencies.

Group

ZAR 2013 2012 2013 2012

27.5 Foreign currency exposure F/C Rate Fc’000 Fc’000 R’000 R’000

Trade and other payables

Uncovered and unhedged foreign USD 9.543 1 358 12 960 11 921 41 872

liabilities EUR – 1 – 18

GBP 15.790 – – 6 –

Covered and hedged foreign liabilities USD 10.135 31 574 48 791 320 010 402 073

EUR 13.081 288 – 3 764 –

GBP – – – –

335 700 443 963




67

27. RISK (continued)Nominal value and fair value of foreign exchange contracts at year-end

Group

ZAR 2013 2012 2013 2012

27.6 Foreign exchange contracts on hand Rate Fc’000 Fc’000 R’000 R’000

USD – Nominal value 10.058 27 879 48 791 280 414 413 898

– Fair value adjustment – (6 461) (11 820)

EUR – Nominal value 13.081 288 – 3 764 –

– Fair value adjustment – (6) –

27.7 Interest rate risk

As part of the process of managing the Group’s interest rate risk, interest rate characteristics of new borrowings and the

refinancing of existing borrowings are positioned according to expected movements in the interest rate.

Interest on financial instruments bearing interest at floating rates is repriced at intervals of less than one year. Interest on

financial instruments bearing interest at fixed rates is fixed until the maturity of the instrument.

There have been no breaches of loan covenants during the period under review. The maturity profile of financial assets

and liabilities (with interest information) is disclosed below:

Group

Financial instruments

2013

Weighted

interest

rate

%

1 year

or less

R’000

2 to

5 years

R’000

Over

5 years

R’000

Non-

interest-

bearing

R’000

Total

R’000

Financial assets

Long term loans 6.00 – 28 689 – – 28 689

Finance lease receivables 18.19 65 349 184 782 – – 250 131

Cash and cash equivalents 2.00 23 930 – – – 23 930

Short-term deposit 5.00 237 272 – – – 237 272

Trade and other receivables – – – 1 106 890 1 106 890

Total fi nancial assets 326 551 213 471 – 1 106 890 1 646 912

Interest charges

Weighted

interest

rate

%

1 year

or less

R’000

2 to

5 years

R’000

Over

5 years

R’000

Non-

interest-

bearing

R’000

Total

R’000

Financial liabilities

Trade and other payables None – – – – 1 036 193 1 036 193

Instalment sale agreements Linked to prime 9.29 1 671 4 465 – – 6 136

Parcea shareholders None – – – 437 – 437

Merqu shareholders Linked to prime 8.50 – – 2 565 – 2 565

Modrac shareholder None – – – 3 478 – 3 478

Long-term liabilities Linked to prime 7.08 15 532 23 869 – – 39 401

Long-term liabilities Linked to prime 7.08 – 132 261 – – 132 261

Long-term liabilities Linked to JIBAR 7.13 – 315 000 – – 315 000

Short-term finance Linked to JIBAR or prime 8.65 115 543 – – – 115 543

Bank overdrafts Linked to prime 8.00 270 476 – – – 270 476

Total fi nancial liabilities 403 222 475 595 6 480 1 036 193 1 921 490

68


27. RISK (continued)Group

27.7 Financial instruments

2012

Weighted

interest

rate

%

1 year

or less

R’000

2 to

5 years

R’000

Over

5 years

R’000

Non-

interest-

bearing

R’000

Total

R’000

Financial assets

Long-term loans 6.50 – 28 214 – – 28 214

Finance lease receivables 18.80 35 624 108 562 – – 144 186

Cash and cash equivalents 5.00 42 459 – – – 42 459

Trade and other receivables – – – – 978 713 978 713

Total fi nancial assets 78 083 136 776 – 978 713 1 193 572

Interest charges

Weighted

interest

rate

%

1 year

or less

R’000

2 to

5 years

R’000

Over

5 years

R’000

Non-

interest-

bearing

R’000

Total

R’000

Financial liabilities

Trade and other payables None – – – – 994 778 994 778

Instalment sale agreements Linked to prime 9.29 792 958 – – 1 750

Parcea shareholders None – – – 437 – 437

Merqu shareholders Linked to prime 9.00 2 856 – – 2 856

Long-term liabilities Linked to prime 9.00 14 180 39 661 – – 53 841

Short-term finance Linked to JIBAR or prime 8.30 115 384 – – – 115 384

Bank overdrafts Linked to prime 9.00 182 706 – – – 182 706

Total financial liabilities 313 062 43 475 437 994 778 1 351 752

Except for certain long-term liabilities the year-end balances are representative of normal trading balances throughout

the year. Had the interest rate been 1% higher or lower at year end, with all other variables constant the effect on profit

would have been R2 441 000 (2012: R665 270) positive or negative and equity R1 757 420 (2012: R478 994) positive

or negative.

Group

Financial assets

Loans and

receivables

R’000

Available

for sale

R’000

Carrying

value

R’000

Fair

value

R’000

2013

27.8 Classes of fi nancial instruments and fair value

Trade and other receivables 1 111 782 – 1 111 782 1 111 782

Trust loans 28 689 – 28 689 28 689

Investments in listed shares – 30 179 30 179 30 179

Finance lease receivables 250 131 – 250 131 250 131

Short-term deposit 237 272 – 237 272 237 272

Cash and cash equivalents 23 930 – 23 930 23 930

1 651 804 30 179 1 681 983 1 681 983

2012

Trade and other receivables 979 189 – 979 189 979 189

Trust loans 28 214 – 28 214 28 214

Finance lease receivables 144 186 – 144 186 144 186

Cash and cash equivalents 42 459 – 42 459 42 459

1 194 048 – 1 194 048 1 194 048




69

27. RISK (continued) Liabilities at

amortised Carrying Fair

cost value value

Financial liabilities R’000 R’000 R’000

2013

27.8 Classes of fi nancial instruments and fair value (continued)

Interest-bearing liabilities 482 075 482 075 482 075

Trade and other payables 1 036 193 1 036 193 1 036 193

Current portion of interest-bearing liabilities 17 203 17 203 17 203

1 535 471 1 535 471 1 535 471

2012

Interest-bearing liabilities 43 911 43 911 43 911

Trade and other payables 994 778 994 778 994 778

Current portion of interest-bearing liabilities 14 973 14 973 14 973

1 053 662 1 053 662 1 053 662

27.9 Fair value hierarchy

The different levels have been defined as:

Level 1 – fair value is determined from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – fair value is determined through the use of valuation techniques based on observable inputs, either directly or

indirectly.

Level 3 – fair value is determined through the use of valuation techniques using significant inputs.

The only financial instrument carried at fair value is the investment in listed shares which is categorised as Level 1 (refer

to Note 4).

28. DIRECTORS2013 Total %

28.1 Directors’ interests in the Direct Indirect Total Excluding

share capital of the Company Number Number Number Treasury

Executive

AJ Fourie – 4 057 847 4 057 847 2.6

TAM Tshivhase 4 705 851 – 4 705 851 3.0

RD Lyon – 250 000 250 000 0.2

FC Smyth* 250 000 – 250 000 0.2

Non-executive

A Tugendhaft 218 600 – 218 600 0.1

E van der Merwe – 395 745 395 745 0.3

5 174 451 4 703 592 9 878 043 6.3

2012

Executive

AJ Fourie – 10 895 187 10 895 187 6.9

TAM Tshivhase 6 144 500 – 6 144 500 3.9

FC Smyth 250 000 – 250 000 0.2

Non-executive

CD Biddlecombe** – 7 933 728 7 933 728 5.0

PM Moyo*** 18 500 – 18 500 0.0

A Tugendhaft 100 000 618 600 718 600 0.5

6 513 000 19 447 515 25 960 515 16.5

* Mr Smyth resigned from the Board on 31 December 2012 to take up the post of Company Secretary

** Mr Biddlecombe passed away on 30 July 2011

*** Mr Moyo resigned from the Board on 9 February 2012

70


28. DIRECTORS (continued)28.2 Directors’ remuneration

2013

Basic

salary

R’000

Directors’

fees

R’000

Travel

allowance

R’000

Medical

contri-

butions

R’000

Other

non-cash

benefits

R’000

Perfor-

mance

bonus

R’000

Equity-

based

compen-

sation

R’000

Total

R’000

Executive

AJ Fourie 3 819 – 207 108 – 2 544 – 6 678

TAM Tshivhase 2 084 – 240 102 33 – 1 244 3 703

RD Lyon 784 – 48 22 147 501 – 1 502

FC Smyth 870 – 90 45 13 218 611 1 847

Non-executive –

D Mashile-Nkosi – 460 – – – – – 460

S Chaba – 134 – – – – – 134

A Tugendhaft – 360 – – – – – 360

E van der Merwe – 123 – – – – – 123

7 557 1 077 585 277 193 3 263 1 855 14 807

2012

Basic

salary

R’000

Directors’

fees

R’000

Travel

allowance

R’000

Medical

contri-

butions

R’000

Other

non-cash

benefits

R’000

Perfor-

mance

bonus

R’000

Equity-

based

compen-

sation

R’000

Total

R’000

Executive

AJ Fourie 3 578 – 207 101 14 2 760 – 6 660

TAM Tshivhase 1 857 – 224 88 30 792 – 2 991

FC Smyth 1 629 – 180 85 26 798 – 2 718

Non-executive

D Mashile-Nkosi – 401 – – – – – 401

CD Biddlecombe – 40 – – – – – 40

A Tugendhaft – 340 – – – – – 340

NN Mthombeni* – 156 – – – – – 156

MP Moyo – 60 – – – – – 60

7 064 997 611 274 70 4 350 – 13 366

* Resigned 25 June 2012.




71

28. DIRECTORS (continued)

Shares offered and accepted

Offer

date

Discharge

date

Out-

standing

number

Offer

price Exercised

Exercise

price

Closing

balance

2013 ’000 R ’000 R R'000

28.3 Share awards

Executive directors

FC Smyth 20 Jun 12 20 Jun 15 250 7.50 – – 250

TAM Tshivhase 20 Jun 12 20 Jun 15 400 5.50 – – 400

Other beneficiaries

3rd Issue 01 Sep 10 31 Aug 13 200 5.00 – – 200

4th Issue 20 Jun 12 20 Jun 15 3 950 5.50/7.50 – – 3 950

4 800 – – – 4 800

Shares offered and accepted

Offer

date

Discharge

date

Out-

standing

Number

Offer

price Exercised

Exercise

price

Closing

balance

2012 ’000 R ’000 R R’000

Executive directors

FC Smyth 20 Jun 12 20 Jun 15 250 7.50 – – 250

TAM Tshivhase 20 Jun 12 20 Jun 15 400 5.50 – – 400

Other benefi ciaries

3rd Issue 01 Sep 10 31 Aug 13 200 5.00 – – 200

4th Issue 20 Jun 12 20 Jun 15 3 950 5.50/7.50 – – 3 950

4 800 – – – 4 800

The Pinnacle Share Purchase Scheme is a share purchase scheme available to executive directors and other executive

managers. Shares are offered to participants at prices determined by the Remuneration Committee and sanctioned by

the Board of Directors, subject to a minimum price of 10% below the cost of the shares to the Company. Participants

accept restrictive ownership of the shares when delivered to the trustees which is done within seven days of acceptance

of the offer. Participants are therefore on full risk in respect of shares accepted. Shares vest fully to participants at

three years from the offer date and pledged to and held by the Scheme’s trustees until they vest. Should a participant’s

employment with the Group terminate prior to vesting, the trustees have the right to repurchase the shares from the

participant at the lower of the ruling market value and the original offer price plus interest accrued.

72


29. RELATED PARTY TRANSACTIONS Group

Type of Amount of Pricing

transaction transaction Balance policy

R’000 R’000

2013

Rolfes Colour Pigments International (Pty) Ltd Sale of stock 293 12 Arm’s length

– Director’s influence

Westside Trading (Pty) Ltd Sale of stock 25 213 2 174 Arm’s length

– Directors influence

2012

Rolfes Colour Pigments International (Pty) Ltd Sale of stock 263 23 Arm’s length

– Director’s influence

Westside Trading (Pty) Ltd Sale of stock 21 856 6 574 Arm’s length

– Directors influence

All key management personnel involved in the above related party transactions are directors whose remuneration is disclosed

under note 28.2

Company

Type of Amount of Pricing

transaction transaction Balance policy

R’000 R’000

2013

Pinnacle Holdings Limited Interest received 3 042 22 565 n/a

– Subsidiary

Pinnacle Holdings Limited Dividends received nil nil Arm’s length

– Subsidiary

Axiz Technology (Pty) Ltd Dividends received 14 440 nil Arm’s length

– Subsidiary

Boditse (Pty) Ltd Dividends received nil nil Arm’s length

– Subsidiary

Infrasol (Pty) Ltd Dividends received 5 000 nil Arm’s length

– Subsidiary

Workgroup IT (Pty) Ltd Dividends received 34 000 nil Arm’s length

– Subsidiary

2012

Pinnacle Holdings Limited Interest paid Nil Nil n/a

– Subsidiary

Pinnacle Holdings Limited Dividends received 143 779 Nil Arm’s length

– Subsidiary

Axiz Technology (Pty) Ltd Dividends received 30 821 Nil Arm’s length

– Subsidiary

Boditse (Pty) Ltd Dividends received 1 354 Nil Arm’s length

– Subsidiary

Infrasol (Pty) Ltd Dividends received 5 000 Nil Arm’s length

– Subsidiary




73

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

30. COMMITMENTSOperating leases

Up to one year 29 412 33 862 – –

One to five years 50 704 58 337 – –

Five years and over – 1 356 – –

80 116 93 555 – –

Capital commitments

Contracted

Purchase of property in Kosmosdal – 41 054 – –

Building of warehouse and offices in Bloemfontein 6 265 – – –

Leasehold improvements in Durban 2 063 – – –

88 444 134 609 – –

Future minimum lease payments on non-cancellable operating leases

These comprise leases on business premises occupied by the Group, and all are renewable at the end of term by

negotiation. None of the leases have any purchase options.

31. SEGMENTAL AND GEOGRAPHICAL ANALYSIS

Refer to pages 9 and 10 of the annual report for definitions of the segments. For segments affected by business

combinations refer to note 2 of the financial statements.

31.1 segmental analysis

R’000

2013 Revenue

Intergroup

revenue EBIDTA

Depn/

etc*

Investment

income

Net profit

before tax

Total

assets

Total

liabilities

Business Unit

ICT Distribution 6 461 101 (44 458) 462 511 (15 338) 17 436 418 089 2 314 557 (1 531 567)

IT Projects and Services 161 722 (15 829) 20 852 (2 922) 261 17 867 37 795 (10 916)

Financial Services 73 113 – 22 337 (185) 191 22 274 312 163 (277 840)

Group Central Services – – 4 218 (2 308) 8 594 (4 287) 431 935 (188 068)

Less: Interest received and

discounted leases within

financial services revenue above (39 417) – (16 664) – 32 066 – – –

Less: Inter-Group revenue (60 287) – – – – – – –

6 596 232 (60 287) 493 254 (20 753) 58 548 453 943 3 096 450 (2 008 391)

2012 Revenue

Intergroup

revenue EBIDTA

Depn/

etc*

Investment

income

Net profit

before tax

Total

assets

Total

liabilities

Business Unit

ICT Distribution 5 700 098 (24 592) 397 055 (14 281) 7 593 358 709 1 881 469 (1 355 535)

IT Projects and Services 154 067 (10 501) 11 991 (2 639) 38 9 396 38 109 (21 199)

Financial Services 58 280 – 15 074 (175) 304 15 162 185 718 (167 819)

Group Central Services – – 2 591 (1 252) 145 (2 663) 114 462 135 608

Less: Interest received and

discounted leases within

financial services revenue above (32 760) – (7 374) – 14 553 – – –

Less: Inter-Group revenue (35 093) – – – – – – –

5 844 592 (35 093) 419 337 (18 347) 22 633 380 604 2 219 758 (1 408 945)

* “Depn/etc” comprises depreciation, amortisation and impairments.

74


31.2 Geographical analysis

R’000

2013 Revenue EBIDTA

Depn/

etc*

Investment

income

Finance

costs

Net profit

before tax

Total

assets

Total

liabilities

Business Unit

South Africa 6 197 943 475 438 (20 337) 58 014 (76 582) 436 533 2 965 671 (1 916 742)

Botswana 98 121 6 322 (58) 50 – 6 314 32 153 (18 040)

Namibia 227 236 11 109 (188) 484 (524) 10 881 62 969 (41 217)

Zambia 72 932 385 (170) – – 215 35 657 (32 392)

6 596 232 493 254 (20 753) 58 548 (77 106) 453 943 3 096 450 (2 008 391)

2012 Revenue EBIDTA

Depn/

etc*

Investment

income

Finance

costs

Net profit

before tax

Total

assets

Total

liabilities

Business Unit

South Africa 5 519 941 397 544 (18 033) 21 730 (43 130) 358 111 2 107 315 (1 331 153)

Botswana 96 352 8 477 (70) 39 – 8 446 35 629 (27 207)

Namibia 165 201 10 160 (108) 864 111 11 027 43 994 (20 314)

Zambia 63 098 3 156 (136) – – 3 020 32 820 (30 271)

5 844 592 419 337 (18 347) 22 633 (43 019) 380 604 2 219 758 (1 408 945)

* “Depn/etc” comprises depreciation, amortisation and impairments.

Group

2013 2012

R’000 R’000

32. GROUP SURETIES AND GUARANTEESIssued by the company in favour of:

Intel Corp (UK) Ltd * *

First National Bank 10 500

Nedbank Limited * *

VMware International * *

Capital Property Fund (JHI) 254 254

Oracle Corporation SA (Pty) Ltd 80 000 80 000

Sun Micro Systems SA (Pty) Ltd 30 000 30 000

Sharp Middle East FZE 24 864 24 864

Microsoft Europe (Pty) Ltd 336 728 336 728

IBM South Africa (Pty) Ltd 139 500 108 500

Shyr-li Properties (Pty) Ltd 842 842

Outward Investments (Pty) Ltd 572 572

McAfee Ireland Limited 22 959 22 959

Wyse Technology Inc 4 144 4 144

639 863 619 363

* Full balance outstanding by the Group’s operating subsidiaries from time to time.




75

33. CAPITAL MANAGEMENT

The Group manages its shareholders’ equity, i.e. its issued share capital (including share premium), reserves and Treasury

shares, as capital. The Group’s prime objective when managing capital is to ensure that it maintains sufficient levels of

capital to safeguard its sustainability as a going concern. Its next objective is to optimise capital levels to maximise the

returns per individual share by way of both dividends and capital appreciation.

In order to achieve these objectives, the Group may adjust the dividend cover, may return capital to shareholders, and

may repurchase shares (in compliance with legislation and the JSE Listings Requirements) as it deems appropriate.

Between 30 June 2011 and 9 January 2012 the Group repurchased a total of 37 281 647 shares amounting to 20.6%

of its externally held share capital prior to the repurchase. The total cost of this repurchase was R241.8 million including

costs, of which R111.8 million was funded from the Group’s cash resources and R130 million by way ultimately of an

issue of three-year redeemable cumulative preference shares by a subsidiary. Of the 37 281 647 shares repurchased

17 298 164 were cancelled out of share premium and 19 983 483 retained as Treasury shares.

The Group also issued 94 890 shares (2012: 142 273 shares) to acquire the same number of shares still held by outside

shareholders in its subsidiary, Pinnacle Treasury Services Limited (RF) (previously Pinnacle Holdings Limited (RF)).

34. EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD

The directors are not aware of any other matter or circumstance arising since the end of the financial year, not otherwise

dealt with in the report or the Group annual financial statements that would affect the operations of the Group or the

results of those operations significantly.

76


Analysis of shareholding

2013 2012

Shareholders Shares in issue Shareholders Shares in issue

Range of shares held Number % Number % Number % Number %

1 to 5 000 5 375 71.1 8 758 690 5.2 3 179 64.9 5 898 264 3.5

5 001 to 10 000 943 12.5 7 220 433 4.2 679 13.9 5 298 029 3.1

10 001 to 50 000 933 12.3 20 950 102 12.3 738 15.1 17 378 065 10.2

50 001 to 100 000 116 1.5 8 767 099 5.2 121 2.5 9 238 736 5.4

100 001 to 1 000 000 176 2.3 48 819 379 28.7 163 3.3 48 538 580 28.6

Over 1 000 000 19 0.3 75 555 111 44.4 19 0.4 83 624 250 49.2

7 562 100.0 170 070 814 100.0 4 899 100.0 169 975 924 100.0

Shareholder spread holding 2013 2012

5% or more (excluding Treasury) Number % Number %

Mr Yu-Shan Kao (Taipei, ROC) 10 194 681 6.5 10 194 681 6.5

Government Employee

Pension Fund 8 629 659 5.5 1 868 088 1.2

Fidelity Investments (Boston,

Ma, USA) 8 200 000 5.2 8 000 000 5.1

36one Asset Management 7 995 386 5.1 10 912 733 6.9

Biddlecombe Family Trust 7 933 728 5.0 7 933 728 5.0

Mr TAM Tshivhase 4 705 851 3.0 6 144 500 3.9

Die Fourie Familie Trust 4 057 847 2.6 10 895 187 6.9

51 717 152 32.9 55 948 917 35.5

2013 2012

Shareholder distribution Shareholders Issued shares Shareholders Issued shares

Ranges of shares held Number % Number % Number % Number %

Public 7 529 99.6 131 075 440 77.1 4 868 99.9 117 719 085 69.3

Public Investment Corporation 1 0.0 8 629 659 5.1 1 0.0 1 868 088 1.1

Funds and Financial Institutions 437 5.8 56 975 816 33.5 – – 51 335 703 30.2

Other Investors 7 091 93.8 65 469 965 38.5 4 867 99.9 64 515 294 38.0

Non-public 33 0.4 38 995 374 22.9 31 0.1 52 256 839 30.7

Directors and their associates 21 0.3 15 967 172 9.4 4 0.0 18 008 287 10.6

Other employees 11 0.1 10 958 228 6.4 27 0.1 22 161 187 13.0

Treasury shares 1 0.0 12 069 974 7.1 – – 12 087 365 7.1

7 562 100.0 170 070 814 100.0 4 899 100.0 169 975 924 100.0


77

Corporate information

PINNACLE TECHNOLOGY HOLDINGS LIMITED

Incorporated in the Republic of South Africa

Registration number: 1986/000334/06

(“Pinnacle” or “the Company” or “the Group”)

BUSINESS ADDRESS

The Summit

269, 16th Road

Randjiespark

Midrand

1685

POSTAL ADDRESS

PO Box 483

Halfway House

1685

COMPANY SECRETARY

Mr FC Smyth

PO Box 483

Halfway House

1685

email: [email protected]

TRANSFER SECRETARIES

Computershare Investor Services (Pty) Limited

PO Box 61051

Marshalltown

2107

JSE Limited

Share Code: PNC

ISIN: ZAE000022570

AUDITORS

BDO South Africa Inc.

Registered Auditors

22 Wellington Road

Parktown

2193

ATTORNEYS

Tugendhaft Wapnick Banchetti and Partners

20th Floor, Sandton City Offi ce Towers

5th Street

Sandton

2196

BANKERS

Rand Merchant Bank, a division of FirstRand Bank Limited

1 Merchant Place

Corner Fredman Drive and Rivonia Road

Sandton

2196

Nedbank Limited – Business Banking Division

1st Floor, Blockbuster Building

International Business Gateway

Corner New and Sixth Roads

Midrand

1682

SPONSORS

Deloitte & Touche Sponsor Services (Pty) Limited

The Woodlands

Woodlands Drive

Woodmead

Sandton

2196

78


Notice of Annual General Meeting of Shareholders

PINNACLE TECHNOLOGY HOLDINGS LIMITED(“Pinnacle” or “the Company” or “the Group”)Registration number: 1986/000334/06Share code: PNCISIN: ZAE000022570

This document is important and requires your immediate attention. If you are in any doubt as to what action you should take in respect of the resolutions contained in this notice, please consult your Central Securities Depository Participant (“CSDP” or “Participant”), broker, banker, attorney, accountant or other professional adviser immediately.

If you have sold or otherwise transferred all your ordinary shares in the Company, please send this document together with the accompanying form of proxy at once to the relevant transferee or to the stockbroker, bank or other person through whom the sale or transfer was effected, for transmission to the relevant transferee.

This notice of meeting makes extensive and frequent reference to the new Companies Act which became effective on 1 May 2011. The new Act, known properly as the Companies Act (No 71 of 2008, as amended), is referred to hereinafter in this notice of meeting as “the Companies Act”.

For consistency of reference in this notice of annual general meeting (hereinafter the “AGM”), the term “MOI” is used throughout to refer to the Company’s Memorandum of Incorporation (previously the Company’s Memorandum and Articles of Association) which was adopted by the shareholders at the annual general meeting of shareholders held last year on 26 October 2012.

SECTION 63(1) Of THE ACT – IDENTIfICATION Of MEETING PArTICIPANTSKindly note that meeting participants (including proxies) are required to provide reasonably satisfactory identification before being entitled to attend or participate in a shareholders’ meeting. Forms of identification include valid identity documents, driver’s licenses and passports.

NOTICE Of MEETINGNotice is hereby given that the AGM of the shareholders of Pinnacle Technology Holdings Limited will be held on Friday, 25 October 2013 at 10:00 (or at any adjournment or postponement thereof) in the board room of the registered offices of Pinnacle Technology Holdings Limited, at “The Summit”, 269 16th Road, Randjiespark, Midrand, to transact the following business and resolutions with or without amendments approved at the meeting:

The minutes of the AGM held on 26 October 2012 will be available for inspection at the registered office of the Company until 16:00 on Thursday, 24 October 2013 and up to 30 minutes immediately preceding the 2013 AGM.

Included in this document are the following:

• The notice of AGM setting out the resolutions to be proposed at the meeting, together with explanatory notes.

• A proxy form for completion, signature and submission to the transfer secretaries by shareholders holding Pinnacle ordinary shares in certificated form or recorded in the sub-register in electronic form in “own name”.

• The form of surrender.

SPECIAL rESOLUTION NUMBEr 1To approve the change of the Company’s name from Pinnacle Technology Holdings Limited to Pinnacle Holdings Limited.

“RESOLVED THAT, in accordance with section 16(1)(c) of the Companies Act, the Company’s MOI be and hereby is amended to give effect to the change of the Company’s name from Pinnacle Technology Holdings Limited to Pinnacle Holdings Limited.”

rEASON fOr AND EffECT Of SPECIAL rESOLUTION 1

The traditional main business of Pinnacle is that of the manufacture and distribution of information communication technology (“ICT”) hardware and software. The Group’s current strategy is to continue its well established track record of consistent growth by expanding its product range and footprint beyond the narrower confines of the ICT distribution sector. The Group has already made small acquisitions in physical security and access control and has built a finance business. It has also started up a small project management company that operates mainly in the building of data centres and has augmented this


79

strategic direction with a substantial investment into Datacentrix Holdings Limited, a large value added services and managed

services provider. Given that the Group is expanding beyond its pure ICT distribution roots, it believes it is time to drop the

word “Technology” from its name and identify itself as a true holding company of a group that operates in a number of sectors.

IMPLEMENTATION OF THE CHANGE OF NAME

The proposed new name has been reserved by the Companies and Intellectual Property Commission (“CIPC”). The

abbreviated name of the Company for the purposes of the JSE trading system will be Pinnacle”, the JSE alpha code will

continue to be “PNC” and the new ISIN will be ZAE000184149.

For a period of not less than one year, the Company will refl ect the former name “Pinnacle Technology Holdings Limited” in

brackets beneath the new name of “Pinnacle Holdings Limited” on all documents of title.

The change of name will result in the certifi cated shareholders of the Company having to exchange their existing share

certifi cates for new share certifi cates refl ecting the new name of the Company. The procedure in respect of the surrender of

share certifi cates is set out below.

PERCENTAGE VOTING RIGHTS

The minimum percentage of voting rights that is required for this resolution to be adopted is 75% of the voting rights to be cast

on the resolution.

SALIENT DATES

See the section titled Salient Dates and Times situated below after the resolutions.

SURRENDER OF SHARE CERTIFICATES

1. Procedure for surrendering existing documents of title

1.1 Dematerialised shareholders need not take any action with regard to the name change as their accounts at the

CSDP or broker will be automatically updated with the name change by the CSDP or broker.

1.2 It is strongly recommended that certifi cated shareholders take this opportunity to dematerialise their shares. To do

this shareholder should approach a CSD Participant or their banker or broker as soon as possible to arrange for

the dematerialisation of their shares. In the event that shareholders wish to retain their shares in certifi cated form

then the following procedures should be followed.

1.2.1 Following the approval of the change of name of the Company at the AGM, it will be necessary to recall

share certifi cates from certifi cated shareholders in order to replace them with new share certifi cates

refl ecting the change of name which new share certifi cates will be sent to certifi cated shareholders, by

registered post, at the risk of such shareholders.

1.2.2 To facilitate the timely receipt by certifi cated shareholders of replacement share certifi cates, certifi cated

shareholders who wish to anticipate the name change and who do not wish to deal in their existing shares

prior to the name change are required to surrender their share certifi cates to the Transfer Secretaries by

completing the attached form of surrender (blue) in accordance with the instructions and return it to the

Transfer Secretaries.

1.2.3 Share certifi cates so received will be held in trust by the Transfer Secretaries pending the name change

being approved by shareholders at the AGM. In the event that the name change is not approved at the

AGM, the Transfer Secretaries will, within fi ve business days thereafter, return the share certifi cates to the

certifi cated shareholders concerned, by registered post, at the risk of such shareholders.

1.2.4 Those shareholders who surrender their existing share certifi cates by 12:00 on Friday, 7 February 2014 will

have their new share certifi cates posted to them within fi ve business days of the later of the record date

and the date of receipt by the Transfer Secretaries of their existing share certifi cates.

1.2.5 No receipt will be issued for the certifi cates lodged, except that lodging agents for any certifi cated

shareholders who require special transaction receipts are requested to prepare such receipts and submit

them for stamping together with the documents/s lodged.

1.2.6 Should the name change be approved and implemented shareholders who have not already surrendered

their certifi cates will be required to do so under the cover of the attached form of surrender.

80


1.2.7 If any existing documents of title have been lost or destroyed and the certifi cated shareholder provides

evidence to this effect to the satisfaction of the directors then Pinnacle may dispense with the surrender of

such documents of title against provision of acceptable indemnity.

1.2.8 Certifi cated shareholders whose registered addresses in the Company’s share register are outside the

common monetary area or where the relevant share certifi cates are restrictively endorsed are referred to

paragraph 2 below.

1.2.9 In the event that certifi cated shareholders do not complete the attached form of surrender (blue) and

who later wish to obtain a share certifi cate in the new name of the Company such shareholders will be

required to return their share certifi cates to the Transfer Secretaries together with certifi ed copies of identity

documents, if in own name, or if otherwise, certifi ed copies of company/ trust documents.

1.3 The results of the AGM approving the change of name will be released on SENS on Monday, 28 October 2013

and published in the press on Tuesday 29 October 2013. Additional forms of surrender will be available on request

from the offi ce of the transfer secretaries of the Company.

2. Instructions for non-residents

In the case of certifi cated shareholders whose registered addresses in the Company’s share register in South Africa are

outside the common monetary area, or where the relevant certifi cates are restrictively endorsed in terms of the South

African Exchange Control Regulations, the following will apply in the case of shareholders who have not dematerialised

their shares with Strate:

2.1 Non-residents who are emigrants from the common monetary area.

The replacement share certifi cate refl ecting the change of name will be restrictively endorsed in terms of the South

African Exchange Control Regulations and will be sent to the shareholder’s authorised dealer in foreign exchange

in South Africa controlling their blocked assets.

2.2 All other non-residents

The replacement share certifi cate refl ecting the change of name will be restrictively endorsed “non-resident” in

terms of the South African Exchange Control Regulations.

Shareholders who have dematerialised their shares through a CSDP or broker must not complete the form of

surrender as the surrender of the relevant documents of title will be handled by their CSDP or broker in terms of

the custody agreement entered into between the shareholder and the CSDP or broker on their behalf.

SPECIAL RESOLUTION NUMBER 2

To issue a general authority to the Company to repurchase its own shares.

“RESOLVED THAT the Company, or a subsidiary, be and hereby is authorised, by way of general authority in terms of article16

of the MOI, to acquire shares issued by it subject to the requirements of section 46 and 48 of the Companies Act and the

Listings Requirements of the JSE Limited (“JSE”) and the MOI of the Company.”

It is recorded that the Listings Requirements of the JSE require, inter alia, that the Company or a subsidiary may make a

general acquisition of shares issued by the Company only if:

• the repurchase of the ordinary shares is effected through the order book operated by the JSE trading system and done

without any prior understanding or arrangement between the Company and the counterparty (reported trades are

prohibited);

• at any point in time the Company may only appoint one agent to effect any repurchases on its behalf;

• this general authority shall only be valid until the next AGM of the Company, provided that it shall not extend beyond

15 months from the date of passing of this special resolution;

• the maximum price at which the shares may be acquired will be 10% above the weighted average market value at which

such ordinary shares are traded on the JSE, for such ordinary shares for the fi ve business days immediately preceding the

date on which the transaction is effected;

Notice of Annual General Meeting of Shareholders (continued)


81

• any such acquisition shall not, in any one fi nancial year, exceed 20% of the Company’s issued ordinary shares as at the

passing of the general authority;

• the Company or its subsidiaries may not repurchase ordinary shares during a prohibited period as defi ned in

paragraph 3.67 of the JSE Listings Requirements;

• the repurchase may only be effected, if the shareholder spread requirements as set out in paragraph 3.37 of the JSE

Listings Requirements are still met after such repurchase;

• should derivatives be used, such authority is limited to paragraphs 5.72(c) and (d) and 5.84(a) of the JSE Listings

Requirements;

• when the Company has cumulatively repurchased 3% of the number of the ordinary shares in issue at the time that

this general authority is granted, and for each 3% in aggregate acquired thereafter, a press announcement prepared in

accordance with paragraph 11.27 of the JSE Listings Requirements, will be made. As part of such press announcement, a

statement will be issued by the directors that after considering the effect of such repurchase, for a period of at least

12 months after the date of the notice of the AGM, that:

– the Group will be able to repay its debts in the ordinary course of business;

– the consolidated assets of the Group fairly valued according to International Financial Reporting Standards and on a

basis consistent with the last fi nancial year of the Company ended 30 June 2013, exceed its consolidated liabilities;

– the share capital and reserves of the Company will be adequate for ordinary business purposes for a period of

12 months after the date of the notice of AGM; and

– the Group has suffi cient working capital for its requirements.

• the Company may not enter the market to proceed with the repurchase until Pinnacle’s sponsor, Deloitte & Touche

Sponsor Services (Pty) Limited, has confi rmed the adequacy of Pinnacle’s working capital for the purposes of undertaking

a repurchase of shares, in writing to the JSE; and

• the directors have passed a resolution authorising the repurchase, resolving that the Company or the subsidiary, as the

case may be, has satisfi ed the solvency and liquidity test as defi ned in Section 4 of the Companies Act and resolving that

since the solvency and liquidity test had been applied, there have been no material changes to the fi nancial position of the

Group.

The directors of the Company do not have any specifi c intentions for utilising this general authority at the date of this AGM.

REASON FOR AND EFFECT OF SPECIAL RESOLUTION 2

The reason for and effect of special resolution number 2 is to authorise the Company and/or its subsidiaries by way of a

general authority to acquire Pinnacle issued shares on such terms, conditions and in such amounts as determined from time

to time by the directors of the Company subject to the limitations set out above and in compliance with section 48 of the

Companies Act. It is the intention of the directors of the Company to use such authority should prevailing circumstances, such

as market conditions, in their opinion warrant it.



on the resolution.

Additional disclosure requirements required in terms of paragraph 11.26 of the JSE Listings Requirements

MATERIAL CHANGES

No material changes have occurred since the announcement of the notice via SENS and the distribution of this notice as

incorporated with the Integrated Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

The directors of the Company, as set out on pages 6 and 7 of the Annual Report,

• have considered all the statements of fact and opinion in the Annual Report to which this notice is attached;

• accept, individually and collectively, full responsibility for such statements; and

82


• declare that, to the best of their knowledge and belief, such statements are correct and no material facts have been

omitted, the omission of which would make any such statements false or misleading and that they have made all

reasonable enquiries to ascertain such facts.

LITIGATION STATEMENT

In terms of section 11.26 of the Listings Requirements, the directors, whose names are given in the Annual Report of which this

notice forms part, state that they are not aware of any legal or arbitration proceedings (including such proceedings which are

pending or threatened) that the Group is party to which may have or have had in the previous 12 months a material effect on

the Group’s fi nancial position.

Other disclosure in terms of paragraph 11.26 of the JSE Listings Requirements

The JSE Listings Requirements require the following disclosures which are contained in the Annual Report.

Disclosure references in the Annual Report:

Requirements Reference

Directors Pages 6 and 7

Major shareholders Page 76

Directors’ interests in securities Page 69, Note 28.1

Share capital of the Company Page 55, Note 11


To issue a general authority to the Company for a period of two years for the Company to provide fi nancial assistance to

any of its subsidiaries.

“RESOLVED THAT, the Board of the Company be given general authority for a period of two years or until the AGM following

the next meeting, whichever occurs fi rst, in terms of section 45(3)(a)(ii) of the Companies Act to authorise the Company from

time to time to provide any direct or indirect fi nancial assistance, as defi ned in section 45(1) of the Act, to any subsidiary as

contemplated in section 45(2) of the Companies Act for such amounts and on such terms and conditions as the Board of the

Company may determine.”


The reason for special resolution number 3 is to obtain authority to transfer funds against loan accounts between Group

companies in order to continue conducting centralised treasury operations of the Group; and for the Group to continue

issuing covering guarantees in favour of fi nancial institutions and certain major suppliers for credit and advances by those

organisations to the Company’s operating subsidiaries, both of which practices now require shareholder approval by way of

special resolution in terms of section 45 of the Companies Act.

The effect of the resolution will be to allow the Group to continue critical Group functions including treasury operations and

to satisfy major lenders and suppliers security requirements so that they can continue to lend to and supply the Group. Such

fi nancial assistance will be provided as part of the day-to-day operations of the Company in the normal course of its business

and in accordance with its MOI and the provisions of the Companies Act.

COMPLIANCE WITH SECTION 45(3)(B) OF THE COMPANIES ACT, 2008

The directors of the Company will, in accordance with section 45(3)(b) of the Companies Act, ensure that fi nancial assistance

is only provided if the requirements of that section are satisfi ed, inter alia, that immediately after providing the fi nancial

assistance, the Company would satisfy the solvency and liquidity test set out in section 4(1) of the Companies Act.



on the resolution.


To approve the fee structure to be paid to directors for their services as non-executive directors of the Company.



83

“RESOLVED THAT in terms of section 66(9) of the Companies Act the Company be and is hereby authorised to remunerate its

directors for their services as directors and/or pay any fees related thereto on the following basis and on any other basis as

may be recommended by the Remuneration and Nomination Committee and approved by the Board of Directors, provided that

the aforementioned authority shall be valid with effect from 1 November 2013 until the next AGM of the Company to be held in

the last quarter of 2014 as follows:

2012/2013 2013/2014

Chairmanships

Board Chair R293 000 R310 560

Board Deputy Chair R150 000 R159 000

Audit and Risk Committee R40 000 R42 360

Remuneration and Nomination Committee R20 000 R21 240

Memberships

Board R137 000 R145 200

Audit and Risk Committee R20 000 R21 240

Remuneration and Nomination Committee R10 000 R10 620

Social and Ethics Committee R5 000 R5 340

Each fee is paid to each director who is a member of the Board or Committees referred to above. Chair fees are paid in

addition to membership fees. Executive directors do not receive directors’ fees.


The reason for and effect of special resolution number 4 is for the Company to obtain the approval of shareholders by way of

special resolution to remunerate its non-executive directors in accordance with the requirements of the Companies Act without

requiring further shareholder approval until the next AGM.



on the resolution.

ORDINARY RESOLUTIONS

The minimum percentage of voting rights that is required for the following nine ordinary resolutions to be adopted is 50% of

the voting rights plus one vote to be cast on the resolutions. The tenth ordinary resolution will require a majority of 75% as

detailed below.

1. Adoption of the Annual Financial Statements

“RESOLVED THAT the audited consolidated Group and Company annual fi nancial statements of Pinnacle for the year

ended 30 June 2013, including the Directors’ Report, the Audit and Risk Committee Report and the Auditors’ Report,

be adopted.”

2. Appointment of a New Director – Mr RN Nkuna

“RESOLVED THAT the appointment by the Board of Mr RN Nkuna as an executive director on the 1 September 2013 be

and is hereby ratifi ed and confi rmed.”

A brief biography of Mr RN Nkuna is as follows.

Mr RN Nkuna (40) has fi ve years of post-qualifying experience as a senior manager in human resources with specifi c

emphasis on industrial and employee relations. He was appointed Pinnacle’s Group Head of Human Resources two years

ago and has now been promoted to the newly formed position of Group Human Resources Director. Mr RN Nkuna holds

a BCom (Hons) in Human Resources Management.

84


Mr Nkuna was appointed a member of the Board’s Social and Ethics Committee on 31 August 2012, and will continue to

serve on that committee.

3. Appointment of a New Director – Mr RD Lyon

“RESOLVED THAT the appointment by the Board of Mr RD Lyon (55) as an executive director and Chief Financial Offi cer

on the 1 January 2013 be and is hereby ratifi ed and confi rmed.” This follows the resignation of Mr FC Smyth,

as executive director and Chief Financial Offi cer, on 31 December 2012.

A brief biography of Mr RD Lyon is as follows:

Mr RD Lyon qualifi ed as a CA in Scotland in 1983 and then joined Fisher Hoffman Stride in South Africa shortly thereafter.

He served as a Financial Manager in Metro Cash and Carry for three years before taking on the Finance Director role in

Cashbuild for seven years. He has been with Pinnacle and Axiz for over 15 years.

4. Re-appointment of a retiring Director

“RESOLVED THAT the Mr A Tugendhaft who retires in compliance with the MOI requirement that one third or more of the

non-executive directors must retire at each AGM, being eligible offers himself for re-election, be and is hereby re-elected

and confi rmed as a director.”

A brief biography of Mr A Tugendhaft is as follows.

Mr A Tugendhaft holds a BA LLB and is the senior partner at attorneys Tugendhaft Wapnick Banchetti and Partners.

An accomplished practitioner in commercial, corporate and tax law, he has more than 30 years’ experience in practice

and also serves as deputy chairman of Imperial Holdings Limited and of Pinnacle. Mr A Tugendhaft’s fi rm of attorneys has

been Pinnacle’s attorneys for a number of years and Mr A Tugendhaft has been a non-executive director of Pinnacle for

15 years, and consequently he has a deep and valuable understanding of the Group and its operations. The Board has

no hesitation in recommending his re-election.

5. Appointment of the Members of the Audit and Risk Committee

RESOLVED that the following non-executive directors, all of whom qualify in terms of section 94(4) of the Companies Act,

be reappointed as the members of the Audit and Risk Committee:

• Mr A Tugendhaft

• Ms S Chaba

• Mr E van der Merwe

Brief biographies of Ms S Chaba and Mr E van der Merwe are below. Mr A Tugendhaft’s biography is included in point 3

above.

Ms S Chaba holds a BA (Economics and Industrial Psychology), a Diploma in Human Resources Management and has

completed the Senior Executive Programmes at the Wits and Harvard Business Schools. She is currently the owner

of Seadimo Chaba Consulting cc, a management consultancy and prior to that was the HR Executive: Human Capital

Development at Sasol following a period as the Chief Executive Offi cer for Creditworx (Pty) Ltd, a member of Thebe

Investment Corporation. Ms S Chaba has extensive business experience both in general management and in Human

Resources Management both in the private and public sectors in a number of industries. She has extensive board

experience and she currently sits as a non-executive director on a number of boards.

Mr E van der Merwe is a qualifi ed Chartered Accountant (SA) and worked until 1993 as a senior audit manager on large

national and international clients. During this time he was seconded to the London offi ce of PricewaterhouseCoopers for

two years. He spent a further 13 years in the corporate fi nance industry, both as a PwC partner and with other consulting

companies, completing a number of local and international due diligence, corporate advisory, merger and acquisition,

JSE and TRP transactions and assignments. Mr E van der Merwe joined the Rolfes Group in 2006, initially responsible for

positioning that group for a listing and completing strategic acquisitions, and subsequently as CEO of the Rolfes Group

from 2007. He brings a wealth of business and corporate fi nance experience in the listed environment.

6. Re-appointment of the Auditors

“RESOLVED THAT upon the recommendation given by the Audit and Risk Committee of the Company, BDO South Africa

Incorporated be re-appointed as auditors of the Company and Mr H Bhaga Muljee be re-appointed as the designated

partner who will undertake the audit of the Group, both until the date of the next AGM.



85

7. Endorsement of the Company’s Remuneration Policy and its Implementation

“RESOLVED that shareholders endorse the Company’s Remuneration Policy as detailed in the Remuneration and

Nominations Committee Report in the Annual Report, through a non-binding advisory vote as recommended in

principle 2.27 of the King Code of Governance for SA 2009.”

8. Authorisation of the Directors to implement the Special and Ordinary Resolutions

“RESOLVED THAT any one director of the Company or the Company Secretary be and is hereby authorised to do all such

things as are necessary and to sign all such documents issued by the Company so as to give effect to such ordinary

resolutions and special resolutions with or without amendment and where applicable, registered.”

9. Placement of Unissued Shares under the Control of the Directors

“RESOLVED that all of the authorised but unissued ordinary shares in the capital of the Company be and are hereby

placed under the control of the directors of the Company as a general authority to allot or issue the same at their

discretion in terms of and subject to the provisions of section 38 of the Companies Act, the JSE Listings Requirements

and the Company’s MOI.”

10. Authority to Issue Shares for Cash

“RESOLVED that the directors of the Company be and are hereby authorised by way of a general authority to allot or

issue all or any of the authorised but unissued shares in the capital of the Company for cash, at the discretion of the

directors, as and when suitable opportunities arise, subject to the Listings Requirements of the JSE Limited.”

The allotment and issue of shares for cash shall be subjected to the following limitations:

• that the securities which are the subject of the issue for cash must be a class already in issue, or where this is not the

case, must be limited to such securities or rights that are convertible into a class already in use;

• that this authority shall not be extended beyond the next AGM or 15 months from the date of this AGM, whichever

date is earlier;

• issues in terms of this authority in any one fi nancial year shall not exceed 23 705 171 ordinary shares, which is not

greater than 15% in aggregate of the number of shares (excluding treasury shares) in the Company’s issued share

capital in issue at the date of this notice of the AGM. The 15% shall also take into account (and shall include, if

applicable) any securities to be issued pursuant to a rights issue which has been announced which is irrevocable and

fully underwritten, or securities issued in terms of an acquisition which has had the fi nal terms announced;

• after the Company has issued equity securities in terms of the approved general issue for cash representing, on a

cumulative basis within the fi nancial year, 5% or more of the number of equity securities in issue prior to that issue,

the Company shall publish an announcement giving full details of the issue, including:

– the number of securities issued;

– the average discount to the weighted average trading price of the securities over the 30 days prior to the date that the

issue was determined and agreed by the directors of the Company; and

– the impact on Net Asset Value, Net Tangible Asset Value and on Earnings and Headline Earnings per Share, shall be

published at the time of any issue representing, on a cumulative basis within a fi nancial year, 5% or more of the number

of shares in issue, prior to such issue.

• In determining the price at which shares will be issued in terms of this authority, the maximum discount permitted shall

be 10% of the weighted average traded price of such shares, as determined over the 30-day business period prior to

the date that the price of the issue is determined or agreed by the directors of the Company. If no shares have been

traded in the said 30-day business period, a ruling will be obtained from the JSE Limited.

• Any such issue will be made to public shareholders as defi ned in paragraph 4.25 to 4.27 of the JSE Listings

Requirements and not to related parties.

As required a majority of 75% of the votes cast by the shareholders present or represented by proxy at this AGM is

required for this ordinary resolution to be passed.

11. Transaction of such other matters as may be transacted at an AGM.

86


SALIENT DATES AND TIMES

Record date to receive notice of AGM Friday, 20 September 2013

Notice of AGM to be posted to shareholders on Friday, 27 September 2013

Last day to trade to be recorded in the register on the record date for

participation in the AGM

Friday, 11 October 2013

Record date to participate in and vote at the AGM Friday, 18 October 2013

Last day for lodging forms of proxy at 10:00 on AGM at 10:00 on Wednesday, 23 October 2013

AGM at 10:00 on Friday, 25 October 2013

Results of AGM released on SENS on Friday, 25 October 2013

Results of AGM regarding name change published in the press on Monday, 28 October 2013

Special resolution in respect of change of name expected to be registered by the CIPC by no

later than

Thursday, 23 January 2014

Finalisation date in respect of the change of name of the Company Friday, 24 January 2014

Last day to trade in Pinnacle shares in respect of the change of name of the Company Friday, 31 January 2014

Listing of and trading in new shares on the JSE under JSE code PNC and ISIN: ZAE000184149

from commencement of business on or about

Monday, 3 February 2014

Record date Friday, 7 February 2014

Date of issue of new replacement share certifi cates provided that the old

share certifi cates have been lodged by 12:00 on the record date (share

certifi cates received after this time will be posted within fi ve business days

of receipt) on or about

Monday, 10 February 2014

Dematerialised shareholders will have their accounts at their CSDP or broker updated on Monday, 10 February 2014

Note:

Any changes to the above dates will be announced on SENS subject to JSE approval.

VOTING AND PROXIES

Certifi cated shareholders and dematerialised shareholders who hold shares in “own name” registration who are unable to

attend the AGM and who wish to be represented thereat, must complete the form of proxy as attached to this Notice of AGM,

in accordance with the instructions contained therein and return it to the transfer secretaries to be received by no later than

10:00 on last day for lodging forms of proxy specifi ed in the Salient Dates and Times section above.

Completion of the relevant form of proxy will not preclude such shareholder from attending and voting (in preference to those

shareholders’ proxies) at the AGM.

Every person present and entitled to vote at the general meeting shall, on a show of hands, have one vote only, and on a poll,

shall have one vote for every ordinary share held or represented.

Shareholders’ rights regarding proxies in terms of section 58 of the Companies Act are as follows:

1. At any time, a shareholder of a Company may appoint any individual, including an individual who is not a shareholder of

that Company, as a proxy to:

(a) participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder; or

(b) give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.

2. A proxy appointment:

(a) must be in writing, dated and signed by the shareholder; and



87

(b) remains valid for:

(i) two months after the date on which it was signed in terms of article 33.6 of the MOI; or

(ii) any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated

in section 58(4)(c) of the Companies Act, or expires earlier as contemplated in section 58(8)(d) of the

Companies Act.

3. Other:

(a) a shareholder of the Company may appoint two or more persons concurrently as proxies, and may appoint more than

one proxy to exercise voting rights attached to different securities held by the shareholder;

(b) a proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person, subject to any

restriction set out in the instrument appointing the proxy; and

(c) a copy of the instrument appointing a proxy must be delivered to the company, or to another person on behalf of the

Company, before the proxy exercises any rights of the shareholder at a shareholders meeting.

4. Irrespective of the form of instrument used to appoint a proxy:

(a) the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person

in the exercise of any rights as a shareholder;

(b) the appointment is revocable unless the proxy appointment expressly states otherwise; and

(c) if the appointment is revocable, a shareholder may revoke the proxy appointment by:

(i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and

(ii) delivering a copy of the revocation instrument to the proxy, and to the Company.

5. The revocation of a proxy appointment constitutes a complete and fi nal cancellation of the proxy’s authority to act on

behalf of the shareholder as of the later of:

(a) the date stated in the revocation instrument, if any; or

(b) the date on which the revocation instrument was delivered as required in section 58(4)(c)(ii) of the Companies Act.

6. A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to

the extent that the instrument appointing the proxy otherwise provides.

ELECTRONIC PARTICIPATION

Should any shareholder wish to participate in the general meeting by way of electronic participation, that shareholder should

make application in writing (including details as to how the shareholder or its representative can be contacted) to so participate

to the transfer secretaries at the address below, to be received by the transfer secretaries at least fi ve business days prior

to the AGM in order for the transfer secretaries to arrange for the shareholder (and its representative) to provide reasonably

satisfactory identifi cation to the transfer secretaries for the purposes of section 63(1) of the Companies Act and for the transfer

secretaries to provide the shareholder (or its representative) with details as to how to access any electronic participation

to be provided. The Company reserves the right to elect not to provide for electronic participation at the AGM in the event

that it determines that it is not practical to do so. The costs of accessing any means of electronic participation provided

by the Company will be borne by the shareholder so accessing the electronic participation. Shareholders are advised that

participation in the AGM by way of electronic participation will not entitle a shareholder to vote. Should a shareholder wish to

vote at the AGM, he/she may do so by attending and voting at the AGM either in person or by proxy.

By order of the Board

F C Smyth

Company Secretary

27 September 2013

Registered address

Pinnacle Technology Holdings Limited

The Summit, 269, 16th Road, Randjiespark, 1685, Midrand

Transfer secretaries

Computershare Investor Services Proprietary Limited

PO Box 61051, Marshalltown, 2107

88



89

(Registration number 1986/000334/06) Share code: PNC ISIN: ZAE000022570 (“Pinnacle” or “the Company”)

Only to be completed by certificated and dematerialised shareholders with “own name” registration.

If you are a dematerialised shareholder, other than with “own name” registration, do not use this form. Dematerialised shareholders other than those with “own name”

registration who wish to attend the annual general meeting, must inform their CSDP or broker of their intention to attend and request their CSDP or broker to issue them

with the relevant Letter of Representation to attend the annual general meeting in person and vote, or, if they do not wish to attend the meeting in person, but wish to be

represented thereat, provide their CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and their CSDP or

broker in the manner and cut-off time stipulated therein.

An ordinary shareholder entitled to attend and vote at the annual general meeting to be held in the Pinnacle Technology Holdings Limited boardroom at The Summit,

269, 16th Street, Randjiespark, Midrand, on Friday 25 October 2013 at 10:00, is entitled to appoint a proxy to attend, speak or vote thereat in his/her stead. A proxy need

not be a shareholder of the Company.

All forms of proxy must be lodged at the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street,

Johannesburg, 2001, (PO Box 61051, Marshalltown, 2107), by no later than 10:00 on Wednesday 23 October 2013.

I/We (please print name in full)

of (address)

being an ordinary shareholder(s) of the Company holding ordinary shares in the Company do hereby appoint

1. or failing him/her,

2. or failing him/her,

3. the chairman of the annual general meeting

as my/our proxy to vote on my/our behalf at the abovementioned annual general meeting (and any adjournment thereof) to be held at 10:00 in the Pinnacle Technology

Holdings Limited boardroom at The Summit, 269, 16th Street, Randjiespark, Midrand, on Friday 25 October 2013, for the purpose of considering and, if deemed fit,

passing with or without modifications, the following resolutions to be considered at such meeting:

Number of votes (one per share)

In favour of Against Abstain

Special resolutions

1. Approval of the change of name of the Company to Pinnacle Holdings Limited

2. Issue of a general authority to repurchase shares

3. Issue of a general authority to provide financial assistance to any of its subsidiaries

4. Approval of the fee structure to be paid to non-executive directors

Ordinary resolutions

1. Adoption of the annual financial statements for the year ended 30 June 2013

2. Appointment of Mr RN Nkuna as an executive director

3. Appointment of Mr RD Lyon as an executive director

4. Re-appointment of Mr A Tugendhaft as an non-executive director

5. Appointment of the Audit and Risk Committee members

Mr A Tugendhaft

Ms S Chaba

Mr E van der Merwe

6. Approval to appoint BDO South Africa Incorporated and Mr H Bhaga Muljee as auditors

7. Endorsement of the Company's remuneration policy and its implementation

8. Authorisation of the directors to implement the special and ordinary resolutions

9. General authorisation to place unissued shares under the control of the directors

10. General authorisation to issue shares for cash

Insert an “X” in the appropriate block. If no indications are given, the proxy will vote as he/she deems fit. Each member entitled to attend and vote at the meeting may

appoint one or more proxies (who need not be a member of the Company) to attend, speak and vote in his/her stead.

Signed at on 2013

Signature

Assisted by (where applicable)

Please indicate whether you elect to receive documents electronically at the e-mail address inserted below by ticking the appropriate box

YES NO

E-mail

Form of Proxy

90


Notes to the Form of Proxy

1. A shareholder may insert the names of a proxy or the names of two alternative proxies of the member's choice in the space provided, with or

without deleting “the chairman of the meeting”, but any such deletion must be initialled by the shareholder. The person whose name appears

first on the proxy and which has not been deleted shall be entitled to act as proxy to the exclusion of those names following.

2. A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. A shareholder's

instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the shareholder in the appropriate box.

Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she

deems fit in respect of all the shareholder's votes.

3. A vote given in terms of an instrument of proxy shall be valid in relation to the annual general meeting notwithstanding the death, insanity or

other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the ordinary shares in respect of which the proxy

is given, unless notice as to any of the aforementioned matters shall have been received by the transfer secretaries or by the chairman of the

annual general meeting before the commencement of the annual general meeting.

4. If a shareholder does not indicate on this form that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or

gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the general meeting,

be proposed, the proxy shall be entitled to vote as he/she thinks fit.

5. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless that authority has already been

recorded with the Company's transfer secretary or waived by the chairman of the annual general meeting.

6. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian as applicable, unless the relevant documents

establishing capacity are produced or have been registered with the transfer secretaries.

7. Where there are joint holders of ordinary shares:

any one holder may sign the form of proxy;

the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of ordinary shareholders

appear in the Company’s register) who tender a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other

joint shareholder(s).

8. Proxies must be lodged at or posted to the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited, Ground Floor,

70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), to be received not later than 10:00 on Wednesday,

23 October 2013.

9. Any alteration or correction made to this form of proxy other than the deletion of alternatives, must be initialled by the signatory/ies.

10. The completion and lodging of this proxy shall not preclude the relevant shareholder from attending the meeting and speaking and voting in

person thereat to the exclusion of any proxy appointed in terms hereof.

11. The chairman of the meeting may reject or accept a proxy that is completed other that in accordance with these instructions, provided that he is

satisfied as to the manner in which a shareholder wishes to vote.


91

PINNACLE TECHNOLOGY HOLDINGS LIMITED(Incorporated in the Republic of South Africa with Registration number 1986/000334/06)

Share code: PNC ISIN: ZAE000022570

Please read the instructions overleaf. Non-compliance with these instructions may result in the rejection of this form.

If you are in any doubt as to how to complete this form, please consult your stockbroker, banker, attorneys, accountant or

other professional advisor.

Note: A separate form is required for each shareholder.

To: Pinnacle Technology Holdings Limited

c/o Computershare Investor Services (Proprietary) Limited

Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61763, Marshalltown, 2107)

TO BE COMPLETED BY PINNACLE CERTIFICATED SHAREHOLDERS

I/We hereby surrender and enclose the Pinnacle ordinary share certifi cate(s) listed below:

Certifi cate number(s) Number of Pinnacle shares covered by each certifi cate

Total

I/We irrevocably and in rem suam authorise you to produce the signature of such documents that may be necessary to

complete the replacement of the Pinnacle ordinary shares with shares in the new name of Pinnacle Holdings Limited.

I/We hereby instruct you to forward the replacement share certifi cate/s to me/us, by registered post, at my/our own risk, to

the address below and confi rm that, where no address is specifi ed, the share certifi cate/s will be forwarded to my/our address

recorded in the share register of Pinnacle.

My/Our signature(s) on the form of surrender constitutes my/our execution of this instruction.

Signature of shareholder

Assisted by (where applicable)

Name Capacity Signature

The shareholder must complete the following information in BLOCK LETTERS: Date 2013

Surname or Name of corporate body

First names (in full, if applicable)

Title (Mr, Mrs, Miss, Ms, etc)

Postal address (preferably PO Box address)

Postal code

Telephone number including area code (offi ce hours)

Cell phone number

Form of Surrender(for use by certificated shareholders only)

92


1. A receipt will not be issued for this form of surrender, or the documents lodged with it. Lodging agents who require special

transaction receipts are requested to prepare such receipts and submit them for stamping with the other documents

lodged.

2. A shareholder married in community of property or a minor must ensure this form of surrender is also signed by his/her

spouse or parent or guardian, as the case may be.

3. Where Pinnacle ordinary shares are jointly held, this form must be signed by joint holders.

4. If this form of surrender is signed under power of attorney, such power of attorney must be produced, unless it has already

been registered with the transfer offi ce of Pinnacle.

5. If this form of surrender is signed on behalf of a company, close corporation, pension or provident fund, it must be

accompanied by a certifi ed copy of the resolution authorising the signature, unless it has already been registered with the

transfer offi ce of Pinnacle.

Instructions to the Form of Surrender

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