ANNUAL FINANCIAL STATEMENTS

Directors' report

for the year ended 30 June 2008

The directors present their report on the activities of the company and the group for the year ended 30 June 2008. GPI has had an eventful year and shareholders are referred to the company’s prelisting statement dated 19 May 2008 for additional background information.

Nature of the business of the company

The nature of the business is to act as an investment holding company. The group also provides management services to the gaming industry.

Earnings

The results of the company and the group are set out in the income statement. Headline earnings per share increased from 20,5 cents per share to 23,17 cents per share. This represents a growth of 13% and would have been 20% had the once-off listing fees of R5 million not been incurred.

Dividends

A dividend totalling 10 cents per share (2007: 7,5 cents post the 4:1 share split) has been declared by the directors in respect of the year under review. This final dividend which represents a growth of 33%, will be accounted for in the 2009 annual financial statements as it was declared subsequent to the year-end.

Review of operations and future developments

Detailed commentary on the nature of business of the company, subsidiaries, acquisitions, future developments and prospects of the group are given in the Chairman’s and Chief Executive Officer’s reports.

Share capital

The subdivision of the company’s authorised ordinary share capital on a 4:1 basis was approved by GPI’s shareholders in a general meeting on 13 November 2007. As a result the authorised share capital of the company, comprising 500 000 000 ordinary shares with a par value of R0,001 each was subdivided into 2 000 000 000 ordinary shares with a par value of R0,00025 each. The issued share capital at year-end amounted to 469 028 354 shares, which increased by an effective 136 990 302 post-split shares which were issued at an average price of R4,62 per share during the year.

Preference shares

Preference shares classified as equity of R57,5 million were redeemed from SISA during the year. New preference shares classified as debt of R203 million were issued to Standard Bank and Depfin (refer to note 16.1 and 16.2) and are subject to the following salient terms and conditions:

the preference shares are variable rate, cumulative, redeemable preference shares and have a dividend rate of 75% of the prime rate;
BVI may redeem the preference shares at its choice, but subject to a predetermined redemption profile;
GPI guarantees the fulfilment by BVI of its obligations in terms of the preference shares; and
GPI cedes and pledges the ordinary shares that it holds in the share capital of BVI to Depfin and Standard Bank proportionately, as security for the due fulfilment by BVI of its obligations in terms of the preference shares issued and the preference share rights and privileges containing certain financial covenants to which BVI must comply.

Subsidiary companies

At the year-end, the group consists of GPI and its wholly-owned subsidiaries namely, BVI and GPI Slots.

	Ordinary share capital		Percentage		Profit
	and premium		held		after tax
	2008	2007	2008	2007	2008	2007
	R	R	%	%	R	R
Direct subsidiary companies
BVI	1 000 000	100	100	100	88 492 236	61 414 263
GPI Slots	100	100	100	100	4 806 360	530 581

Investments, associates and joint ventures

	Economic		Voting
	percentage		percentage
	2008	2007	2008	2007
	%	%	%	%
Direct interest (held by GPI)
SunWest	5,72	5,68	0,03	0,02
RAH	30,60	–	30,60	–
Akhona GPI	50,00	–	25,00	–
Worcester Casino	36,70	38,00	36,70	38,00

Indirect interest (held by subsidiaries)
SunWest	20,69	14,12	49,98	33,92
National Manco	5,67	5,67	5,67	5,67
Thuo Gaming WC	25,10	25,10	25,10	25,10
Western Cape Manco	50,00	50,00	50,00	50,00

GPI has investments in SunWest, RAH, Akhona GPI and Thuo Gaming WC which it accounts for as associates. It jointly controls Western Cape Manco which it proportionately consolidates. GPI also owns a small percentage in National Manco which it accounts for as an available-for-sale investment.

SunWest

During 2007 SunWest was accounted for as an available-for-sale investment (refer to note 10). In November 2007, the group increased its economic holding in SunWest to 26,41% and voting control to 50,001%. The additional shares purchased at a cost of R240,4 million brought the total cost of GPI’s investment in SunWest to R447,2 million. SunWest is now being accounted for as an associate in terms of IAS 28 – Investments in Associates. As a result of accounting for the business combination in terms of IFRS 3 – Business Combination, an adjustment of R784,1 million has been made for negative goodwill.

RAH

In June 2008, GPI acquired a 30,6% interest in RAH for R600,6 million. The acquisition was funded by R139,3 million in cash and R461,3 million in GPI shares. This acquisition had the effect of increasing GPI’s exposure to SunWest and other high-quality urban casino assets, whilst also significantly diversifying GPI’s asset base into areas outside of the Western Cape. An impairment loss of R92,1 million has been recognised in respect of the investment in RAH at year-end to comply with IAS 36 – Impairment of Assets.

Western Cape Manco

GPI owns 50% of Western Cape Manco. This investment is now accounted for as a joint venture, whereas previously it was accounted for as a subsidiary.

National Manco

GPI holds a 5,67% shareholding in National Manco that was initially purchased at a cost of R57,00. This investment is classified as available-for-sale, and has been revalued in terms of IAS 39 – Financial Instruments: Recognition and Measurement.

Akhona GPI

GPI holds a 50% economic and 25% voting interest in Akhona GPI. Akhona GPI owns a 6% stake in Dolcoast Investments Limited, which in turn holds a 22% stake in Sibaya Casino in KwaZulu-Natal, together with a 20% shareholding in Thuo Gaming KZN.

Worcester Casino

During the year additional shares were issued by Worcester Casino to a third party. This resulted in a dilution of GPI’s shareholding from 38% to 36,7%.

GPI Slots

GPI Slots accounts for its 25,1% stake in Thuo Gaming WC as an associate investment. Its share of associate net income amounted to R4,7 million (2007: R0,4 million).

Directors and secretary

Particulars of the present directors and secretary are given here.

Directors’ dealings

Directors’ interest in contracts:

Messrs Abercrombie and Adams have material direct interest in the following contracts entered into between the group and the companies listed below:

Mr Abercrombie

– Hofmeyr Herbstein and Gihwala Inc.

Mr Adams

– Asch Professional Services (Pty) Ltd
– Proman Project Management Services (Pty) Ltd
– Nadesons (Pty) Ltd

No other director has a material interest in the period under review.

Directors’ shareholding

As at 30 June 2008, the directors of the company beneficially held direct and indirect ordinary shares in the issued capital of the company as follows:

	2008	2007
A Abercrombie	3 193 285	40 600
H Adams	22 809 363	22 452
A W Bedford	4 951 420	49 484
R G Freese	2 740 923	1 060 230
N Mlambo	56 900	–
R Hoption	–	–
N V Maharaj	–	–
C W Williams	–	–
A Funkey	–	–
	33 751 891	1 172 766

The 2008 year includes the directors’ indirect and direct shareholding whilst only direct shareholdings have been included in the 2007 comparative.

The following direct share purchases were made by directors during the year:

A Abercrombie	14 500
R G Freese	1 538
N Mlambo	25 900

Subsequent events

On 17 August 2007, GPI concluded an agreement with SunWest and SISA which provided GPI with an option to increase its shareholding in SunWest. The salient features of this agreement are as follows:

SunWest granted GPI options to subscribe for between 500 131 and 700 182 new SunWest N ordinary shares.
The subscription price was R165,00 per SunWest share, irrespective of the date of exercise of the option.
The options expire on 29 June 2012.
The granting of the options is subject to GPI locking in between 25% and 35% of its shareholding in the hands of black shareholders. The take-up of between 500 131 and 700 182 N ordinary shares is based on a sliding scale, with the minimum number of 500 131 shares available for take-up should GPI lock in 25% of its shareholding in the hands of black shareholders.

Subsequent to year-end, GPI exercised part of this option and purchased an additional 560 000 N ordinary shares on 4 July 2008 for R92,4 million. This represents an effective increase of 2,83% of SunWest’s equity. This was granted on the basis of a 28% lock-in being obtained.

There were no other material events after balance sheet date.