2012...2013/07/15 · 2012 A look into the ﬁnancial statements of MICROmega Holdings Limited and...

2012A look into the financial statements of MICROmega Holdings Limited and its subsidiaries for the year ended 31 December 2012

www.micromega.co.za

SCOPE OF THIS REPORT

MICROmega’s annual integrated report covers the group’s non-financial and financial performance for the financial year ended 31 December 2012 and includes an outlook on the group’s economic, social and environmental position while setting out the challenges and opportunities for the year ahead. The board of directors of MICROmega trust that this report enables all stakeholders to make an informed assessment on MICROmega’s ability to enhance and create meaningful, profitable and sustainable value in the future.

The information reported on in MICROmega’s 2012 annual integrated report encompasses all subsidiaries and associated companies over which MICROmega has direct management control. The content of the annual integrat-ed report has been informed by stakeholder expectations, internal risk management processes, the Principles of the King III report, the JSE Limited Listings Requirements, the Companies Act and the International Financial Reporting Standards.

This annual integrated report evidences MICROmega’s commitment to aligning the group’s business practices with the principles of King III and the company will ensure continual improvement on the application of the Principles in the forthcoming years.

CONTENTS

Group overview

1.......... Scope of this report2......... Our vision, strategy, values and value proposition3......... Group at a glance4......... Results at a glance5......... Investment case 9......... Executive Report10........ Core Business Reviews11......... NOSA12........ MECS Africa13........ MICROmega Securities14........ Sebata Municipal Solutions15........ Turrito Networks16........ Corporate Governance Report20........ Risk Committee Report21........ Remuneration Committee Report22....... Sustainability Report

Annual financial statements

27........ Certification by Company Secretary28........ Directors’ responsibility and approval29........ Independent Auditor’s Report30........ Report of the directors34........ Audit Committee Report37........ Statements of Financial Position38........ Statements of Comprehensive Income39........ Statements of Changes in Equity42........ Statements of Cash Flows43........ Notes to the Financial Statements100...... Annexure: King III Register106...... Notice of Annual General Meeting

1 MICROmega holdings Ltd - Annual Integrated Report 2012

OUR VALUES

Our group is characterised by sound management, strongly supported by an experienced technical team. Communication is essential to ensure our geographical-ly widespread staff complement has a sense of unity. Strong and long standing relationships with customers are testament to the exceptional service we pride ourselves on.

OUR VISION, STRATEGY, VALUE PROPOSITION AND VALUES

OUR VISION

Enabling investment opportunities through innovation and support services

OUR STRATEGY

Our group operates across defined market sectors with interests in five core businesses. Within each business we reinforce our competitive positioning by:

• focusing on unique market offerings that create value, resulting in wealth generation;• investing heavily in research and development and being first to market with product innovation;• meeting the needs of our diverse customers and assisting them with continuously evolving market conditions and government regulations; and• supporting our growing client base with sound management and highly skilled technical teams.

OUR VALUE PROPOSITION

Our business model, which leverages our diverse experi-ence and technology, differentiates us from other invest-ment companies. By applying our intellectual and tech-nological capacity, combined with our hands on approach, ensures the continuing growth and success of our core operating subsidiaries.

To grow our business we continue to invest significantly in product innovation and provide exceptional service, backed by the specialised knowledge of our people.

experienceand

technology

investmentin productinnovation

exceptionalservice

growthand

success

MICROmega holdings Ltd - Annual Integrated Report 2012 2

GROUP AT A GLANCE

Revenue R746m / 756 employees

MICROmega HOLDINGS LIMITED

NOSA provides occupational health, safety and environmental risk management services and is the exclusive provider of both the NOSA Integrated Five Star Grading System and SAMTRAC.

MECS Africa is a service orientated business that alleviates the considerable burden of manpower management by offering an integrated human resource solution to a diverse client base.

MICROmega Securities is an inter-dealer broker (IDB), providing a specialist intermediary broking service to commercial banks, investment banks, stock brokers as well as reputable trading entities in the wholesale financial markets.

Sebata Municipal Solutions provides integrated technology solutions, enterprise management systems and multidisciplinary professional services to municipalities, public entities, Provincial Government and the private sector.

Turrito Networks is a converged communication provider delivering MPLS networks, hosting facilities, internet and cloud computing services to the corporate and SMME markets.


RESULTS AT A GLANCE

SEGMENTAL ANALYSIS

Headline earnings: Continuing operations Continuing operations segmental analysis of versus Discontinued operations contribution to earnings by company

35

30

25

20

15

10

5

0

Revenue from continuing operations 23.8% to R694.9m

Profit before taxation 105.3% to R16.4m

Headline earnings per share 58.9 % to 32.58 cents

Headline earnings per share: Continuing operations 313.7 % to 27.33 cents

Net asset value per share 2.6% to 311.97 cents

26

5

31

TotalOperations

DiscontinuedOperations

ContinuingOperations

NOSA: 28486;65%

MICROmegaSecurities: 9225;

21%

Sebata: 5760;13%

MECS Africa: 188;1%

*Turrito Networks does not feature in the chart above as it made a loss in 2012. However the company is expected to make a contribution in 2013.


INVESTMENT CASE

Investing in innovation. Inspiring success

MICROmega is a holding company with controlling interests in a number of operating subsidiaries. Our businesses are primarily focused on the provision of information technology, financial, occupational health and safety, and labour supply services. MICROmega is a public company listed on the JSE under the support services sector.

WHERE IS MICROmega TODAY?Advancing from a position of restructuring and consolidation

Driving strong organic growth

OUR BELIEFSLong term sustainabilityMeet or exceed targets

Wealth generation

OUR METRICSShare gains

Revenue growthHealthy cash flow

Expanding operating margins


The market opportunity

• There is increased pressure on companies and executives to comply with occupational health, safety and environmental legislation, and to take greater responsibility for their staff and customer well-being.• This increased focus on legislation has led to a greater emphasis on risk management solutions worldwide.

• There is ever increasing investment activity and capital expenditure on the African continent. As a result, there is an increased demand for skilled labour in the mining, engineering, construction, offshore oil and gas, petrochemical and power generation sectors.• The African resources sector is placing greater pressure on organisations to develop local skills and reach nationalisation employment targets.

How we can help

• NOSA’s primary objective is to assist companies with reducing injuries and fatalities in the workplace by ensuring the work environment is safe. We accomplish this through assessment, consulting and training, thereby meeting the specific needs of our diverse client base. • Training: we provide comprehensive SETA accredited training courses to meet the demands required within the risk management field.• Auditing: we adopt a holistic approach to occupational risk management and provide companies with comprehensive reports on their compliance with legislation and best practice. • Consulting: we provide support for the development and maintenance of risk management systems. • Certification: we provide certification against the ISO 9001, ISO 14001 and OHSAS 18001 standards. • Working at Heights: based on international best practice and awareness, there is an increased requirement for working at heights solutions. This includes advanced systems, life lines and training. • Hygiene services: occupational health disease is the largest contributor to disabling injuries. This service allows us to provide surveys of the occupational stressors.• SAMTRAC International: an interactive e-learning programme that allows students to study during their own time while maintaining the level of learning delivered by a classroom environment. SAMTRAC is accredited by both the International Institute of Risk and Safety Manage- ment (IIRSM) and the Institution of Occupational Safety and Health (IOSH). SAMTRAC provides a practical experience that equips the learner with the knowledge and skills to implement and manage an occupational health, safety and environmental management system.• NOSA utilises media sales to create awareness of occupational risk management through the sale of DVDs, registers and posters.

• MECS labour supply and related support services are well positioned to take full advantage of the global skills shortage and skills demand imbalance.• MECS is able to deliver a truly integrated human resource management solution to its domestic and international client base, with in-house expertise, which enables the management of a workforce around its key services: contractual manpower, recruitment, human resource and industrial relations management, payroll bureau services, project logistics and employee benefits programmes.

MECS Africa

NOSA


MICROmega continues to enhance its core businesses by investing in product development and being first to market with product innovation. We continue to

focus on unique market offerings that create value and wealth generation. We continuously strive to meet the needs of our diverse customers

facing evolving market conditions and stringent government regulations.


• The medium term demand for skilled labour remains high across both the domestic and African resource sector and our value proposition delivers on the demands for technical, professional manpower and skilled artisanal labour.

• Given the nature of the inter-dealer broking business, earnings growth in this field continues to be directly related to market volatility, trade volumes and liquidity. • Despite a global trend of moving financial trades on to electronic trading platforms, there is still a strong need for voice aided electronic inter-dealer brokering services. • There is now growth and expansion opportunities into the African markets, as well as opportunity to enhance South African financial markets in accordance with the International Organization of Securities Commissions (IOSCO).

• In line with the principles of co-operative government, national and provincial government must support and strengthen municipalities’ capacity to manage their own affairs. • Moreover, the days of over investment in ICT support staff and unreliable systems are over.

How we can help

• We are strategically well positioned to execute project support and day-to-day operations management through a comprehensive infrastructure across South Africa and site based support services across the African continent. • As a company intimately in tune and experienced with labour markets and supporting services, we are well positioned to react effectively and timeously to the demands of manpower management.• MECS will continue to expand its a-typical labour supply across the African continent, presenting strong recruitment and support services to its client base for its African projects.• The partnership with a Perth based recruitment agency has presented our candidate base with a new employment market, attracting the Western Australian mining sector to our African operations.• Skills development programmes have been identified to deliver training to the African mining sector, to develop local enterprise and enhance the skill level of the local labour market.

• Our primary objective is to provide our client base with financial pricing and trading opportunities in the domestic and international financial markets. • We provide pre and post trade transparency to enhance local and international market participation and liquidity. • We assist investment into South Africa by means of electronic information, advertising price liquidity and transparency in the South African and African financial markets. • MMS co-operates with the appropriate Regulators to ensure that both MMS and our client base abide by local and international regulatory stipulations and standards. • MMS’ goal is to give our entire client base an equal opportunity to trade all financial instruments competi- tively in ever advancing international financial markets. This can only be achieved through price discovery, integrity, professional service delivery and utilisation of both voice and electronic trading capabilities. MMS therefore provides price discovery, market information and trading opportunities to both local and international clients. • The new five-year joint venture agreement between MMS and GFI Nyon Sarl is anticipated to dramatically advance MMS’ apabilities in the electronic trading environment.

• Service providers such as Sebata play a pivotal role in ensuring municipalities are able to deliver on their mandate and provide quality services to our communities.• Sebata’s meter reading solutions and financial management systems are perfectly suited to ensure municipalities have the necessary tools to perform their functions and facilitate the achievements of 2014 “clean audits” and future targets.

Sebata Municipal Solutions

Micromega Securities (MMS)

MECS Africa



• Significant focus has been placed on service delivery over the past few years and this pressure remains on the upswing. • Sound financial management is the foundation on which municipalities rely. As such the Presidency has set 2014 as the year for municipalities to achieve clean audits.• By 2014 water losses are to be reduced by half with government applying greater focus on meter reading accuracy and recovery of losses.

• Connectivity has become an increasingly critical tool for business. In this competitive landscape, many SMEs and corporates are unsure of which service providers are able to deliver solutions that match their business requirements. Their need to manage and understand the services from various suppliers is challenging and restrictive to their company’s growth.• Gartner research predicts that usability of data has become as important as access to data, and that cloud-based data centres will outgrow traditional data centre usage within the next two years (by 2015).• The majority of critical services to business have migrated away from self-provisioning to as a service offering. Data centres, connectivity, telephony, infrastructure and software have all followed the trend of electricity, and become services to be rented or outsourced, rather than having the skills internally to build these resources. This move towards a cloud-based service has been successfully built in almost every critical sector, except business critical applications.

How we can help

• Sebata has a unique and customised solution offering specifically tailored for the South African government. Our track record exceeds 40 years and we have pioneered a number of solutions over the years such as end-to-end integrated technology solutions, managed services and solutions, multi-disciplinary professional services, software development, spatial solutions and innovative solutions geared towards enhancing sustainable institu- tional performance and service delivery. • Given the increase in awareness of the benefits of cloud computing in South Africa, municipalities are signing up and deriving the benefits of SebataCloud.

• Turrito provides services off an agnostic model, built from all of the largest Tier 1 ISPs in the country. This enables us to deliver any solution from any provider, and have an intri- cate understanding of what the industry has to offer. We provide a single point of contact and access for all solutions, with the same high level Tier 1 service level agreements, and an advanced first line support infrastructure to deliver exceptional service to all our valued customers. • Cloudware® delivers both public and private cloud virtuali- sation, with the ability to leverage existing hardware and infrastructure, whilst beginning the migration to an organisation’s own cloud computing strategy. Our ability to build customers’ own business application stores will differentiate Cloudware® from its competitors, and supports the model of growth cloud-based data centre usage. Turrito further enhances this by providing access to vast data centres internationally, allowing customers to leverage off existing cloud-based infrastructure.• Cloudware’s® anticipated enhancements over the next 18 months will facilitate Turrito’s ability to offer business critical application stores to consumer, retail and corporate sectors, resulting in instant application stores for users to access on a “usage” model, rather than building and supporting this infrastructure internally. Companies and consumers no longer want to own, manage, support and maintain these services, they simply want to USE them.

Turrito Networks

Sebata Municipal Solutions (continued)



EXECUTIVE REPORT

2012 - the year under review

In looking at the year as a whole, the financial and operating performance of the group was adequate given the economic climate for our products and services. Market conditions were relatively neutral for our well established businesses and proved challenging for our smaller start-up enterprises. There was also a renewal of press coverage on the protracted litiga-tion by SARS and our executive chairman. This depressed the share price and contributed to making certain commercial negotiations tougher than they might have otherwise been.

NOSA provided the highlight for the group with a continuation of its above average growth in turnover and profit. MECS Africa managed to hold its own in very difficult market conditions but had to sacrifice margin to maintain and grow its customer base. MICROmega Securities was once again a steady contributor to profits despite difficult conditions in the financial broking markets. Sebata Municipal Solutions made some recovery from its relatively poor performance over the last few years, with turnover and margins now being at reasonable levels. Turrito Networks performed strongly at the turn-over level but the investment to maintain that growth resulted in margins coming under pressure.

Outlook

The outlook for 2013 looks remarkably similar to 2012, and, while there may be room for improvements at the operating level, we remain subdued regarding market conditions for our major businesses. Furthermore, our start-up enterprises are not expected to make a meaningful contribution to turnover and profit in the next financial year.

Appreciation

Our group financial director, David Case and our company secretary, Tanya de Mendonca, left the employment of the group during the year. In addition, Peter Henwood resigned from the group as lead independent non-executive director. We wish to thank them for their diligence and effort during their time with the group and wish them every success going forward.

We welcome Alan Swan and Pierre Duvenhage as non-executive directors and look forward to their contribution to the board.

We would like to extend our sincere thanks to our colleagues on the board, our management team, and all our employees for their extraordinary hard work and dedication to the group, and we look forward to working with you all again in the year ahead.

Lastly and by no means least, we thank all our clients for your unwavering support. We have proven that we will continue to invest substantially in product innovation to support your businesses, and are well placed to meet your evolving needs. Furthermore we assure you that we will continue to find ways to improve our product and service delivery and create new value.

DC King IG MorrisExecutive Chairman Group Chief Executive


CORE BUSINESS REVIEWS



www.nosa.co.za

2012Strategy and focus

• A large part of 2012’s focus was on the Working at Heights offering. • We conducted extensive hygiene surveys, the objective being to establish a greater target market and database for our Occupational Hygiene Services division.• We launched a new range of health DVDs. • We focused on bedding down the five new offices that were opened.• Our employees attended a First Aid course to increase awareness for health and safety in the workplace, as well as to empower our staff with necessary first aid skills.

Operational highlights

• Excellent outcome with Working at Heights where large contracts were signed, lending credence to the high demand for our Working at Heights knowledge and training services. Clients include BHP Billiton, Aveng, Transnet Rail Engineering and Eskom.• We successfully opened five new offices in Polokwane, Vredenburg, Klerksdorp, Welkom and Kuruman.• Health DVD sales were good.• We successfully integrated Occupational Hygiene Services into our product range, and this division enjoyed an 80% growth.• Our Auditing division signed Transnet Freight Rail as a new client.

2013

Opportunities for growth

• Training will remain the main revenue driver.• Working at Heights services has the most potential for growth, particularly training in advanced systems and life lines.• Occupational Hygiene Services has good growth potential but will remain relatively small in comparison to other services.

Outlook

• Costs and processes in NOSA’s print room - printing costs are one of our highest expenses, after salaries, and we are evaluating these costs closely and investigating any cost savings we can implement without compromising quality.• The quality of our administration processes requires attention.• We aim to bed down our accreditation with the Department of Higher Education and with the relevant SETAs.• We plan to expand our Durban, Nelspruit, Mossel Bay, Richards Bay, Alrode and Vanderbijlpark offices, and open a new office in Burgersfort.• We will continue to focus on our Working at Heights offering.• We will focus further on the development and integration of additional value adding audit protocols.



• MECS Growth has maintained a BBBEE level 4 rating and continues to accumulate momentum in the domestic resource sector.• The permanent pecruitment division is positioned as a leader in the niche resources sector.• The partnership with a Perth based recruitment agency has presented our candidate base with a new employment market that attracts the Western Australian mining sector to our African operations.• Our Secunda and Durban branches continue to gain market share.• All revenue streams continued to offer good growth in the period and our recruitment structures yielded better results in each period.

2013


• We see growth opportunities in the mining (engineering and construction) and oil and gas (both offshore and refinery) projects on the African continent.• Our labour supply from India continues to gain traction across our client base and we anticipate this to develop into a substantial contributor of profit in the medium term. • Recruitment for the domestic market increased as the need for additional labour supply for large CAPEX programmes increased.• African projects for both permanent recruitment and contractual manpower services continue to generate growth opportunities and introduce new clients and markets to the business.

Outlook

Skills development programmes and local procure-ment programmes will be introduced to our client base in 2013, addressing the following objectives:• To further develop the skills of employees.• To support delivery on nationalisation targets of African states.• To develop local procurement and supply chain strategies as a result of an up-skilling of local service providers.

www.mecs.co.za


• MECS Africa continued to develop and grow its permanent placement division which is in its third year of operation.• We focussed on attracting the right internal talent to grow our revenue stream.• We placed emphasis on growing the quality and quantity of our client base by intensifying our business development initiatives.• Growth in the domestic market has been achieved through further development of MECS Growth, our BBBEE subsidiary, and large contracts within the resources sector have been secured.• There was a large focus on the mining and oil and gas sectors of our business.• We continue to expand our contractual manpower across the African continent, presenting strong recruitment and support services to our client base for their African projects.• Our labour supply from India continues to gain traction across our client base. • There was strong focus on a new growth path; supplying labour to the resources sector outside of the African continent. The partnership with a Perth based recruitment agency contributed to the success of this growth initiative. • Greater emphasis was placed on our marketing and brand development; online and digital brand develop ment continues to be a focus as our candidate base recognises recruitment within the resources sector is continuously moving to online platforms and social and enterprise networking sites.• NOSA Employment Agency was given much attention; as such the candidate base developed to supply the SHEQ management industry with the required professional skills has gained significant traction in 2012 and now presents 7 000 candidates available to a diversified client base.• Permanent recruitment has been positioned to develop into the category leader within our niche sector.• The quality of our candidates and the conversion rate of vacancies to placements has been an area of focus.


• MICROmega Services and Support SPRL, Democratic Republic of Congo, is currently in its second year of operation and has successfully executed a large manpower project in the Katanga Province supplying both professional, technical manpower and skilled artisanal work force from India.


www.micromegas.co.za


• The global financial crisis seemed to show signs of improvement over the course of 2012 and our aim was to improve the bottom line profit in proportion to the recovery of financial markets. • Our focus was on maintaining and improving our market share volumes whilst enhancing our domestic market relationships.• MMS had to be strategically positioned to attract a new offshore broking partner as the partnership agreement with Tullett Prebon was coming to an end.


• MMS succeeded in attracting a new offshore broking partner and a five year joint venture agreement was signed with GFI Nyon Sarl in this regard.• MMS received approval from the Australian Securities and Investment Commission (ASIC) to open a full branch in Australia by mid-2013. The branch will be known as SAICMB Australia.

2013 Opportunities for growth

• We are focusing on improved service delivery to local clients due to the total price discovery transparency between MMS and GFI Nyon Sarl.• We anticipate financial NPBT growth for both MMS and GFI Nyon Sarl arising from the joint venture.• SAICMB Australia will become a self-sustainable profit centre.

Outlook

• Ensure the MMS and GFI Nyon Sarl joint venture is a success by entrenching the relationship, and by enhancing client exposure to financial pricing due to this new non-restrictive joint venture agreement.• Grow and improve turnover across all financial instruments on the CreditMatch and FXMatch electronic trading platforms. There is the possibility of expansion into African financial markets utilising these electronic platforms.• Diverse access to financial markets and products in Australia and the Far East. These markets will be accessible to SAICMB Australia due to the operational time zones.

www.sebata.co.za


• We continue to use technology as a significant driving force for growth.• We aligned Sebata Enterprise Management Systems (EMS) to the latest development and database technologies, thereby rewriting the existing legacy systems.• We initiated and implemented Sebata’s automated meter reading offering.• There was a focus on a cloud computing offering for municipalities.


• 2012 was our best year to date, with core headline earnings up 98% from 2011. • Due to 2014 “clean audit” pressures there has been a definite increase in demand for consulting and support services. Growth was therefore experienced through consulting services, cloud computing and activation of additional EMS modules at our client base. Arising from this we opened a new division called Professional and Accounting Services to meet this growing demand.• Over 40 municipalities signed up and reaped the rewards of mobility, stability and security through SebataCloud.• Meter audits proved to be in great demand which resulted in a positive growth for our meter reading business. • Our industry leading meter reading solutions resulted in the City of Joburg outsourcing a large portion of their water and electricity meter reading to Sebata.• The Ditsobotla municipality converted their entire Financial Management System over to Sebata.

2013


• Focus on selling our automated meter reading offering which allows for extremely accurate and cost effective meter readings, resulting in significant increased municipal billing. Regular 30 minute reading intervals guarantee reading cycles are maintained, thereby enhancing customer relations and significantly reduce account queries. • We anticipate SebataCloud computing services for municipalities to experience further success.• There is a significant amount of focus within local government on asset and supply chain compliance. Due to this initial success, Sebata has geared its solution to meet these specific needs, and accordingly we are receiving a great deal of interest to implement the two modules and assist municipalities with good governance and compliance with legislation.• Electronic document management systems are in demand.• Skills development services by way of the Sebata Skills Development Academy.

Outlook

• Complete roll-out of all SebataEMS modules. • Roll-out of our automated meter reading offering.• Continue to implement SebataCloud and associated ICT services.• Finalise SETA accreditation and fine tune the establishment of a Skills Development Academy. This will enable our clients to recover training funds from their respective SETA. Furthermore, we will be in a position to assist municipalities in drafting and submitting workplace skills plans and annual training reports.



www.turrito.com


• Turrito completed the roll-out of its own dedicated local and international bandwidth provisioning, over and above the provisioning through existing Tier 1 network providers, to enable more aggressive pricing to market, and further improved levels of service delivery.• Focus and investment in Cloudware’s exposure to various market segments, proving Cloud- ware’s scalability and fast enablement within customer environments. Over 130 business installations of Cloudware were conducted during 2012.• We grew our partnerships with many providers of value-added services across the networks to help circumvent the impact of commoditisa- tion within the telecommunications space in South Africa.• Several new releases of Cloudware added both performance and integration enhancements to the product, and assisted in implementing the technology in over 50 municipalities throughout South Africa.• Turrito Networks has continued its impressive growth despite the industry as a whole having gone through one of its toughest years.


• Awarded Vodacom Business Partner of the year for 2012.• Partnered with several new providers, adding additional Video, VOIP and cloud platforms to our service offering.• Cloudware license volumes experienced an aggressive increase in the last quarter of 2012, primarily due to new market pricing and the success of the many “Proof of Concepts” throughout the year.• Converted over 40 municipalities to using Cloudware as their primary software delivery mechanism. • Delivered Turrito’s first call centre VOIP infrastructure for one of the largest Insurance groups in South Africa.• Partnered with Britehouse, Vox Telecoms, MTN Business and several African based ISP’s for corporate and SME Cloudware re-seller- ships.

2013


• The Networks side of our business anticipates its highest growth to come from SMEs; there is still disparity between the levels of service delivery, consulting and support in the SME sector.• Cloudware’s continued growth will come from the delivery in response to existing demand for business software, becoming a dominant mechanism for access to these applications. Cloudware is positioned as a future standard for delivering business critical applications to businesses and consumers alike.

Outlook

• Currently growing Turrito’s sales team to meet the growing demand of Networks’ customers.• Ensure the Networks business continues to grow in a far more competitive landscape, by further enhancing service delivery and support.• A focus on Cloudware’s continued product development, creating market readiness for consumer, corporate and retail sectors. • Building our own local and international Cloud- ware infrastructure to service customers, proof of concepts, and centralising aggregation points around the world.• Growing support and integration teams to deliver Cloudware to meet its current and future demands.


APPLICATION OF THE KING III PRINCIPLES

The 2012 financial year is the second financial year in respect of which MICROmega is required to report in accordance with the principles of integrated reporting as set out in the King III report. The directors of MICROmega believe the group complies with the Principles of King III. Where the principles have not been applied or MICROmega has considered the best practice recommendations are not in the best interests of the group at present, such non-application will be highlighted and explained. MICROmega aims to achieve sound corporate governance by ensuring the principles of fairness, account-ability, responsibility and transparency are maintained. Details of compliance to the aforementioned Principles are outlined in the Annexure which can be found at the end of this report.

THE BOARD OF DIRECTORS AND RESPONSIBLE LEADERSHIP

The board of directors of MICROmega acknowledges the relationship between sound governance, company profitabili-ty, long-term equity performance and sustainability practices, which together ensure an enduring and viable business venture for all stakeholders. MICROmega remains committed to achieving the highest standards of accountability, transpar-ency and integrity in all matters concerning its stakeholders.

In accordance with the unitary board structure commonly used by South African companies, the board of directors consists of four executive directors and three non-executive directors, two of which are independent non-executive direc-tors, with the executive directors maintaining effective control over MICROmega’s strategy, financial performance, governance procedures, growth and corporate affairs.

At the end of the 2012 financial year, the board of directors comprised of:

• DC King - executive chairman, appointed 17 January 2011• IG Morris - chief executive officer, appointed 1 June 2004• DSE Carlisle - executive managing director, appointed 16 March 2009• RB Dick - executive financial director, appointed 14 August 2012• RC Lewin – independent non-executive director, appointed 18 February 2004• AB Swan – lead independent non-executive director, appointed 5 December 2012• PH Duvenhage - non-executive director, appointed 5 December 2012

Dave King is the original founder and executive chair-man of MICROmega Holdings and is responsible for the overall strategic direction of the group. Dave works close-ly with executive management in discharging his respon-sibilities.

Greg Morris is the chief executive officer of the group, responsible for the day-to-day management of the company and the corporate finance transactions of the group and works closely with the executive chairman in developing the business strategy for the group. He is also a director of numerous MICROmega subsidiaries.

Duncan Carlisle is the managing director of the group and provides first line support to Greg Morris. Duncan has been with the group since 2001 and fulfilled a number of operational roles in the group prior to his appointment as NOSA’s managing director in 2005. Duncan is respon-sible for the extraction of earnings of the group compa-nies and revenue growth across all sectors. He is also a director of numerous MICROmega subsidiaries.

David Case was the executive financial director of the group. David resigned from this position with effect from 14 August 2012, and the board of directors thanks him for his dedication and contribution. David was replaced by Russell Dick.

Russell Dick is the executive financial director of the group, effective 14 August 2012. Russell is a qualified char-tered accountant who has been with MICROmega for four years, during which time he has been involved in corporate finance and property transactions for the group. He has taken over the responsibility of the finan-cial management and financial control of the group.

Peter Henwood was the lead independent non-execu-tive director of MICROmega. Peter is a former audit partner of KPMG Inc. and brought significant expertise and experience to the board of directors. Peter was the chairman of the Audit Committee, a member of the Remuneration Committee and a member of the Risk Committee. Peter resigned from the board of directors of the company with effect from 4 December 2012, and the board of directors thanks him for his dedication and contribution.

Ross Lewin is an independent non-executive director of the group. Ross has had a successful career in the engineering and information technology sectors. He is chairman of the Remuneration Committee and a member of the Audit Committee. Ross holds director-ships on the boards of a number of international compa-nies.

Alan Swan is the lead independent non-executive direc-tor of the group, appointed to the board on 5 December 2012. Alan has been involved in various entrepreneurial pursuits and founded a number of successful companies.

CORPORATEGOVERNANCE REPORT


The board of MICROmega meets on a regular basis in order to review the strategic direction of the group, to evaluate performance and to assess any risks with which the businesses might be faced. During the 2012 financial year the board of directors met four times and attendance thereat is set out in the table below:

Attendance at board meetings during 2012:

In accordance with the provisions of the board charter, which includes the delegation of authority amongst the executives of the group and the responsibilities of the exec-utive chairman, chief executive officer and managing director, the role and responsibilities of the board collec-tively is to:

• Act as the focal point for, and custodian of, corporate governance• Provide effective leadership in the best interests of the company and stakeholders• Retain full and effective control over the company• Approve the company strategy and business plans• Identify and mitigate risks• Ensure that the company is a responsible corporate citizen by having regard for the financial aspects of the business of the company, as well as regard for employee well-being, and equally as important, the impact that business operations has on the environment and the society within which it operates

During the 2012 financial year the board of directors discharged, inter alia, the following responsibilities:

• Reviewed and approved the interim and audited results for the group• Reviewed and approved the IT Policy, the Social Media Policy and the Disclosure and Communi- cations Policy• Reviewed and approved the 2013 budgets for each subsidiary

CORPORATE GOVERNANCE REPORT

Alan has experience and investments across diverse industries including the manufacturing, construction, services, personnel and property sectors.

Pierre Duvenhage was appointed as non-executive director to the board on 5 December 2012. Pierre has a BCom from the University of the Witwatersrand and a Master of Business Leadership from UNISA. He started his career as an internal auditor. Since then he has spent the last 25 years employed in financial and general man-agement positions. He now owns a number of companies and holds directorships in others.

The board as a whole selects and appoints new directors on the basis of their skills, knowledge, business acumen and contribution to the company. A formal procedure applies to all appointments, which are confirmed by shareholders at the following Annual General Meeting. Prior to any appointment, potential board appointees are subjected to a fit and proper assessment, as required by the Companies Act (No 71 of 2008) and the JSE Listing Requirements. The guidelines contained in the JSE Listings Requirements are used to test the independence and category most applicable to each director. As such, each potential board appointee is required to submit the following: letter of intent and level of interest in serving on the board; self-appraisal form describing how the candidate has demonstrated the expected competencies for board members in the past; what they believe to be the major concerns facing the professional community; the skills or experience that they would expect to contrib-ute to the board; their curriculum vitae; a conflict-of-in-terest disclosure statement; a description of how the nominee will provide the necessary time for board service in light of his or her current work demands; and names of references.

There is a clear division of responsibilities amongst the board members and no one director has unfettered decision making powers. The continued practice of appointing an executive chairman has been considered by the board of directors and the board is of the opinion that the executive chairman is well placed to provide the necessary leadership and to develop and promote MICROmega’s strategy. If or when the executive chair-man has a perceived or actual conflict of interest, Alan Swan, the lead independent director, will assist the board in dealing with the conflict and shall provide the board of directors with independent advice and leadership.

Greg Morris and Duncan Carlisle are responsible for the day-to-day management of MICROmega and are non-ex-ecutive directors to majority of the subsidiaries of MICROmega.

The board of directors believes that at present there is a natural succession plan in place amongst the executive directors. The roles of executive chairman and chief exec-utive officer remain separate.

P = Present / A = Apologies / T = Present Via telecom / N/A = Not applicable

Acorim – Anri le Loux

T de Mendonca

PH DuvenhageAB Swan

RC Lewin

PV HenwoodRB Dick

DJ CaseDSE CarlisleIG Morris

DC King

Commitee member

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/AN/A

N/A

N/AN/AN/A

TTT

p pp

p

pp

ppp

p

pp

p

pp

p

p

p

p

p P

AAp

30 Nov2012

29 July2012

22 June2012

1 Mar2012


In addition, at each board meeting, a subsidiary of the group is invited to present to the board of directors on its business, in order to provide the directors with an oppor-tunity to understand the direction that each business is taking and to allow for discussion and improvements thereon.

The board of directors is cognisant of the importance of ensuring that each business is conducted in an ethical manner and that the directors, management and employ-ees are committed to maintaining a high ethical standard of behaviour at all times. The Code of Ethics was once again discussed and approved by the board at the first board meeting of 2012 wherein MICROmega’s core values of innovation, excellence, integrity and responsibility are entrenched, and which provides all employees with guidelines on how to apply the values to daily business. In addition, the Whistle Blowing Policy and the Ethics Hotline that were approved and established in 2011 remain ongoing. The board of directors is satisfied that to the best of their knowledge there has been no material breach of the Code of Ethics during the 2012 financial year.

The subsidiaries of MICROmega are required to imple-ment all MICROmega policies and the governance frame-work adopted by the holding company is filtered down to the subsidiaries.

BOARD COMMITTEES

Four Committees have been established in order to assist the board of directors in discharging its collective respon-sibilities for corporate governance, and certain of the board’s responsibilities have been delegated to these Committees, namely: the Audit Committee, the Risk Committee and the Remuneration Committee. The Risk and Remuneration Committee reports can be found on pages 20 and 21 of this report respectively, and the Audit Committee Report can be found on page 29. In addition the group has established a Social and Ethics Committee. The first meeting of the Social and Ethics Committee will take place on 1 August 2013. Alan Swan will chair the meeting and the following members have been appoint-ed: Duncan Carlisle, Roland Glass and Justin Hobday. Responsibilities and duties of the Social and Ethics Com-mittee will be discussed in detail in next year’s annual integrated report. We would like to state that as a result of the difficulty to appoint independent non-executive directors to the group during the period under review, the Audit Committee does not comprise of at least three independent non-executive directors, of which one should be the chairman of this Committee. We have therefore noted non-compliance with the Companies Act 2008, Section 94 and The King III Report on Governance in South Africa. (See Principle 3.2 of the King III Register in the attached Annexure). All committees are account-able to the board of directors.

Company SecretaryThe company secretary is responsible for providing the board collectively, and each director individually,

with guidance on the discharge of their responsibilities in terms of legislative, regulatory and governance requirements. The directors have unlimited access to the advice and services of the company secretary. The company secretary plays a pivotal role in the company’s corporate governance process and ensures that, in accordance with the pertinent laws, the proceedings and affairs of the board of directors, the compa-ny itself and the shareholders (where appropriate) are prop-erly administered. During the 2012 financial year, the compa-ny secretary, Tanya de Mendonca resigned, and was replaced by Acorim Proprietary Limited with effect from 5 December 2012. The board thanks Tanya for her dilligence while in the group’s employment. The board of directors and the manag-ing directors of the subsidiaries have access to a suitably qual-ified and experienced company secretary at Acorim, in accor-dance with the requirements of section 88 of the Companies Act and the principles of King III.

GOVERNANCE OF INFORMATION TECHNOLOGY

The governance of information technology (“IT”) is overseen by the Risk Committee. During the 2011 financial year, an IT policy was approved and distributed to all employees. A further policy on the protection of the intellectual property, specifically in relation to the IT companies, was in the process of development in 2011. In 2012 the latter policy was finalised and distributed to the relevant IT companies. In addition, certain IT risks, such as business continuity and disaster recovery, licensing and access to information were once again reviewed and mitigated where possible.

STAKEHOLDER ENGAGEMENT

ResponsibilityIn line with the Principles of King III, the board of directors appreciates that the company’s reputation is enhanced when performance is linked to the interests and expectations of its stakeholders. To this end, the board of director’s endeavours to provide stakeholders with timely, relevant and factual information regarding MICROmega’s strategy, policies, management and financial performance.

The board of directors has delegated the task of managing certain stakeholder relationships to the corporate communi-cations manager. Other stakeholder engagement is under-taken by the executive management of each subsidiary. Interaction with the majority stakeholders is primarily done at subsidiary level, with the Risk Committee having oversight responsibilities thereon, while the board of directors remains the ultimate custodian for improved stakeholder relations.

The board of directors maintains in full control of all communication with shareholders, investors and analysts. An Information Disclosure Policy has been adopted by the board of directors to ensure that proper procedures are adhered to when communicating with employees, the media, investors, analysts, clients and the general public.

.

CORPORATE GOVERNANCE REPORT

Moreover the board aims to ensure that disclosure of price sensitive information to the public is done in a comprehen-sive and lawful manner.

Effective stakeholder engagement is critical to the sustain-ability of MICROmega, and the executives of the group ensure that honest and clear communication is provided to all stakeholders at all times.

Shareholder engagementThe JSE Limited Listings Requirements regulates investor communication and ensures that investors are fairly and timeously informed of the company’s price-sensitive infor-mation through SENS announcements and associated press releases. The company also publishes voluntary announce-ments via SENS and in the press in order to keep sharehold-ers up to date on developments within the group and its subsidiaries. In accordance with MICROmega’s Informa-tion Disclosure Policy, the executive chairman and the chief executive officer also provide media interviews as and when required. The annual integrated report and interim results release provide stakeholders with further details on MICROmega’s performance, while all shareholders are encouraged to attend the Annual General Meeting as well as any other shareholder meetings that are held throughout the year. The company website www.micromega.co.za also provides stakeholders with detailed information on the holding company and its group of subsidiaries.

Employee engagementMICROmega management engages with its employees consistently, both from a holding company perspective and a subsidiary perspective. Where all staff are to be notified of a specific matter, communication will be disseminated via MICROmega’s chief executive officer, managing director or corporate communications manager. Furthermore, each subsidiary takes full responsibility for ensuring regular and open communication with their staff. All new employees participate in MICROmega’s employee induction programme and internal newsletters are circulated by the group and the various business units. Larger subsidiaries make use of a company intranet which provides employees with access to all company communication, policies and procedures.

Client engagementRelationships with clients are built on trust and continuous communication. The provision of superior and relevant services and products is central to MICROmega’s business. The group and its subsidiaries continuously strive to ensure that clients receive excellent service on all levels and prod-uct quality is continually improved upon and applicable to clients’ personalised needs.

Supplier and business partner engagementRelationships with suppliers and business partners are actively developed and effectively managed. MICROmega strives to ensure the responsible provision of goods and services while maintaining a high standard of integrity.

.


Industry regulator and Sponsor engagementIndustry regulators monitor compliance with, inter alia, the JSE Listings Requirements, legislation administered by the Financial Services Board, and the Companies Act. MICROmega engages with the various industry regula-tors as and when required in a timeous fashion, and a culture of compliance is fostered amongst management and employees. Communication with MICROmega’s sponsor (Java Capital) is maintained to ensure the group proactively and accurately reports to investors and the market in general.

DIRECTORS GOING CONCERN STATEMENT

After making due inquiries, the directors are satisfied that MICROmega has adequate resources available to continue to operate for the foreseeable future and there is no reason to believe that the MICROmega group will not continue in operation for the forthcoming year. The abridged annual financial statements presented on pages 27 to 99 of this report have accordingly been prepared on a going concern basis. The directors are responsible for the final approval of the abridged annual financial statements and the group’s auditor, Nexia SAB&T, is responsible for auditing and for highlighting key risks which may affect the going concern of the MICROmega group.

The board of directors endeavours to provide stakeholders

with timely, relevant and factual information regarding

MICROmega’s strategy, policies, management and financial performance.

The board of directors endeavours to provide stakeholders

with timely, relevant and factual information regarding

MICROmega’s strategy, policies, management and financial performance.


RISK COMMITTEE REPORTIn March 2011 the group’s audit and risk functions were split into two separate committees in alignment with best practice and the principles of King III. As a result the Risk Committee was formed. This is therefore the second year of operation for the Risk Committee which provides an oversight function in respect of policies and activities relating to the group’s risk management framework, as well as overseeing legal and regulatory compliance, and reports to the board of directors thereon.

Membership of the Risk Committee is comprised of exec-utive and non-executive directors and representatives from senior management. Membership during the period was as follows:

• DSE Carlisle – Chairman• PV Henwood – ex-officio member (Chairman of the Audit Committee)• DJ Case• RB Dick• DL Strydom• A Vercueil• WG Streek• RCE Glass• CE Eddey

The Risk Committee is required to meet twice a year and attendance thereat is set out below.

Attendance at Risk Committee meetings during 2012:

To ensure that risk management remains a priority at all times, sub-committee meetings were held in respect of the five core business units during the year under review.

The Risk Committee performs its duties and responsibili-ties in accordance with the Risk Committee’s terms of reference, which were approved at the first Risk Commit-tee meeting in 2011. The terms of reference were reviewed in 2012 and will be reviewed and updated annually, as required.

The Risk Committee’s terms of reference requires the members to develop a methodology for the identifica-tion, evaluation and mitigation of the following risks, and to oversee the implementation of a system of monitoring changes to such risks:

• Access to product• Access to working capital/liquidity• Business interruption• Compliance with King III and JSE Listings Require- ments• Credit risk• Currency risk• Customer retention• Fraud, corruption and theft• Insurance risk• Intellectual property protection• Legal compliance• Litigation reserves• Other commitments and contingencies• Product and environmental liability• Reputational risk• Skills retention• Solvency• Transformation and BBBEE• Valuation of assets, liabilities and warranties

The MIRACLES risk assessment methodology has been implemented by the group since 2010 as an effective risk management tool. Each subsidiary updates their risk matrix on an ongoing basis and the updated matrix is discussed at the Risk Committee meetings, and members assess, address and monitor particular areas of concern.

The Risk Committee is pleased with the progress made during the second year of its operation and believes it will continue to add value to the group in the forthcoming years.

DSE CarlisleChairman of the Risk Committee28 March 2013

P = Present / A = Apologies / T = Present via telecom / N/A Not applicable

RC Lewin

By Invitation

R Prettirajh – Internal AuditorJ Botha – Internal Auditor

RCE Glass

CE Eddey

WG Streek

A Vercueil RB Dick

DL Strydom DJ CasePV Henwood

DSE Carlisle

Commitee member

N/A

N/A

N/A

N/A

N/A

N/A

P

P

A

P

P

P

P

P

P

P

P

P

T

P

29 Nov2012

29 Mar2012

P

P

P

P


REMUNERATION COMMITTEE REPORT

Following Peter’s resignation in December 2012, Alan Swan was appointed as a member of the Remuneration Committee. The members of the board of directors and independent external auditors attend the meetings by invitation. Where the remuneration of a board member is to be discussed, that board member is recused from the meeting. The Remunera-tion Committee is required to meet at least twice a year and attendance is set out below.

Attendance at Remuneration Committee meetings during 2012:

During the 2012 financial year, the Remuneration Committee conducted a review of the fees paid to non-executive directors and approved the remuneration structure. The Committee approved the bonuses payable to all managing directors based on individual and company performance during the year under review. Overall remuneration increases across the businesses were considered by the Committee and merit- based increases and inflation based adjustments agreed upon.

REMUNERATION PHILOSOPHY

MICROmega’s remuneration philosophy is based on the premise of developing a high performance culture whereby senior executives and employees are rewarded and motivated for sustained quality performance. Senior executives are rewarded in accordance with the performance measurement system which assesses individual performance against prede-termined performance targets, innovation and market competitiveness. Employees are rewarded by way of annual incentives based on performance of the group, performance of their respective subsidiaries and their own individual perfor-mances. Annual increases are benchmarked on inflation projections and the existing package and performance of each individual.

REMUNERATION POLICY

Managing Directors:During the year under review, the performance measurement system approved by the Remuneration Committee during the previous year was applied to all the managing directors of the subsidiaries of MICROmega.

In accordance with sections 66(8) and 66(9) of the Com-panies Act and the Principles of King III, the Remunera-tion Committee presents its report for the 2012 financial year, which includes the remuneration policy upon which the shareholders will be requested to cast a non-binding advisory vote thereon at the company’s Annual General Meeting.

The Remuneration Committee performs its duties and responsibilities in accordance with the Committee’s terms of reference, which are reviewed annually and updated as and when required. The role of the Remunera-tion Committee is to assist the board to ensure that MICROmega remunerates directors and employees fairly and responsibly and that the disclosure of director remu-neration is accurate, complete and transparent. The Remuneration Committee’s terms of reference require the Committee to inter alia:

• Oversee the administration of remuneration at all levels in the company• Ensure that the remuneration policy promotes the achievement of strategic objectives and encourages individual performance• Ensure that the remuneration policy is put to a non-binding advisory vote at the Annual General Meeting of shareholders once every year• Review the outcomes of the implementation of the remuneration policy to determine whether the set objectives are being achieved• Ensure that the mix of fixed and variable pay, in cash, shares and other elements, meets the company’s needs and strategic objectives• Satisfy itself as to the accuracy of recorded performance measures that govern the vesting of incentives• Ensure that all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued• Consider the results of the evaluation of the performance of the executive chairman and other executive directors, both as directors and as executives in determining remuneration• Select an appropriate comparative group when comparing remuneration levels• Regularly review incentive schemes to ensure continued contribution to shareholder value and that these are administered in terms of the rules• Consider the appropriateness of early vesting of share-based schemes at the end of employment• Advise on the remuneration of non-executive directors

The Remuneration Committee comprises one executive director and two non-executive directors. During the year under review members included Duncan Carlisle, Ross Lewin, the chairman of the Remuneration Committee, and Peter Henwood.

P = Present / A = Apologies / T = Present via telecom / N/A = Not applicable

T de Mendonca

RB Dick

DJ CaseIG Morris

By Invitation

DSE Carlisle

PV Henwood

30 Nov2012

01 Aug2012

01 Mar2012

RC Lewin

Commitee member

N/A

N/A

N/AN/A

PP

P

P

P

P

P

P

P

P

PP

P

P

PTT


MICROmega provides neither short-term or long-term incentives nor any compensation for loss of office to non-executive directors. During the year under review, the fees paid to the non-executive directors were as follows:

• R5 000 per month as a base fee• R10 000 for attendance at each board meeting• R5 000 for attendance at each Audit Committee meeting• R5 000 for attendance at each Remuneration Committee meeting• R5 000 for attendance at each Risk Committee meeting• R5 000 for chairing each Audit Committee meet ing• R5 000 for chairing each Remuneration Commit tee meeting

Employees:MICROmega’s staff remuneration policy is applicable to all employees other than managing directors, executive directors and non-executive directors and is based on a remuneration system aimed at rewarding overall contri-bution or performance rather than on status or position. Performance bonuses are at the discretion of manage-ment and are based on the following:

• Individual performance and contribution to the subsidiary during the financial year• The necessity of competitive remuneration• Whether employees are currently receiving a contractual 13th cheque• The subsidiary’s financial performance during the financial year• The subsidiary’s future financial requirements• General business conditions, strategies and investment opportunities• Cash flows and availability of cash• Net debt levels

Other benefitsMICROmega employees may elect to join the MICROmega provident fund which is an umbrella fund established and managed by Momentum FundsAt-Work. In addition, all employees are encouraged to join the company appointed medical aid scheme, Discovery Health, and to contribute to the life cover insurance through Discovery Life.

MICROmega Share Incentive SchemeThe MICROmega Share Incentive Scheme provides MICROmega employees with the opportunity to acquire an interest in the equity of the company, thereby creat-ing further incentive to advance MICROmega’s interests and promotes an identity of interests between employ-ees and the shareholders of the company.

RC LewinChairman of the Remuneration Committee28 March 2013

This system is based on financial performance and economic sustainability, and performance targets are based on each company’s budget and performance initiatives for the year. Remuneration is based on a total cost to company for each director with the fixed pay portion of the remuneration being the basic monthly salary and the variable portion being the short-term incentives provided by the performance measure-ment system. Performance bonuses are payable to the manag-ing directors at the end of March based on audited financial statements.

Financial targets account for 75% of the performance measure-ment and require each managing director to achieve forecast earnings as per the approved budget, ensure proper working capital management and credit control and improve the company’s return on equity. Economic stability is the second principle within the performance measurement system and accounts for 25% of the performance measurement.

In order to achieve the economic stability target, each subsidi-ary company is required to meet the following requirements:

• Compliance with group policies and procedures• Legal compliance• Client relationship management• Supplier relationship management• Annual improvement of BBBEE scores• Corporate social responsibility initiatives• Enhancement of the company brand• Human resources management• New clients secured during the financial year• Ensuring internal risk assessments are completed on a monthly basis• Staff development programmes and succession plan- ning

In addition to the financial performance and economic sustainability targets, each company is required to develop a set of strategic initiatives which will be monitored by the exec-utives of the group.

Executive directors:The remuneration packages for executive directors are market related and any performance bonuses and incentives are awarded based on the individual director’s performance during the year and subject to approval by the Remuneration Committee and the board of directors. Performance bonuses are payable to executive directors at the end of March based on audited financial statements. Further details on the remunera-tion of executive directors can be found in note 32 to the detailed annual financial statements on MICROmega’s website.

Non-executive directors:The non-executive directors of MICROmega are remunerated for their services by way of a monthly base fee together with an attendance fee for each meeting attended. As required by section 66 of the Companies Act, the remuneration paid to the non-executive directors was authorised by shareholders by way of a special resolution at the Annual General Meeting held on 15 July 2011, which special resolution is valid for a period of two years.

REMUNERATION COMMITTEE REPORT


SUSTAINABILITY REPORT

Nonetheless, reducing electricity, water and paper consumption remains a priority for MICROmega. In the year ahead we aim to reduce our electricity, water and fuel consumption and move towards developing a methodology to measure and monitor resource usage. A strategy is already in place to replace all downlights with LED lights, resulting in a 90% reduction in power usage on lighting. Business travel and petrol consumption will also be closely monitored in the 2013 year and the emissions assessed accordingly.

MICROmega actively monitors printer usage within the organisation and encourages the responsible use of resources. Ensuring that less energy is used on a daily basis is supported by management and employees are encour-aged to turn off lights and air conditioners that are not being used, as well as switch computers off before leaving the office.

Going forward, MICROmega aims to make use of resource consumption figures to enable meaningful data compari-sons and to introduce further energy saving initiatives. These efforts to pursue energy saving initiatives also assist the group in reducing costs and having more disposable income. SOCIAL

MICROmega is committed to treating all stakeholders with respect, dignity and fairness, while empowering its employees and the communities in which it operates.

EMPLOYEE RELATIONS

The long-term sustainability of MICROmega is dependent on several factors, a crucial factor being its relationship with its employees. The company ensures that its core values of innovation, service excellence, integrity and responsibility are instilled throughout the business units and in the day-to-day operations of the company. All employees abide by a code of conduct which ensures that a comfortable work environment is maintained.

MICROmega endeavours to promote a fair and open work environment where communication is encouraged. Furthermore, all executives of the company adhere to an open door policy. In line with this, a group internal news-letter will be re-instated in 2013 as well as an enterprise social management tool, to promote internal communica-tion. MICROmega complies with, inter alia, the Basic Conditions of Employment Act 75 of 1997, the Labour Rela-tions Act 66 of 1995 and the Occupational Health and Safety Act 85 of 1993.

Employee wellness programmes are arranged by MICROmega allowing employees access to health care and health assessments, and fitness activities are encouraged.

MICROmega recognises that the principles of sustainable development can only be achieved if it is integrated with the financial performance of the company. Due to the nature of the group structure and the independent man-agement of the day-to-day operations of the various subsid-iaries, each subsidiary is responsible for implementing its own initiatives that will ensure sustainable management throughout the business.

ENVIRONMENT

All business activities impact the environment. Despite the diverse nature of the businesses operated by the subsidiary companies, all our subsidiaries are classified as low impact companies, in accordance with the environmental impact criteria set out in the JSE SRI Index. Most of the activities undertaken by MICROmega’s subsidiaries are classified as support services, information technology and financial services, which do not have a significant environmental impact. The main sustainability focus of these low impact companies is therefore on energy and water conservation, recycling and limiting paper usage, and creating employee awareness of environmental responsibility.

During the year under review, the businesses located at MICROmega’s head office (at 66 Park Lane Sandton), mon-itored their electricity, water and paper consumption, in an attempt to minimise wastage and improve waste disposal and recycling opportunities.

For the twelve months ending 31 December 2012, the following resources were consumed:

The figures in the corresponding tables reflect an increase in resource usage from 2011 to 2012. This can be explained by an increase in employee numbers, office revamps, and the introduction of a group canteen at MICROmega’s head office.

Water Consumption (Kilolitres)

425 5 097 506 6 072

Monthly Annually

2012 2011Monthly Annually

69 830 837 963 72 021 864 258

Monthly Annually

2012 2011Monthly Annually

Electricity Consumption (Kilowatts)

*The above calculations were determined by utilising the carbon calculator found at

http://www.trees.co.za/carbon-offset-calculator/carbon-calculator.html

Paper Consumption (Reams) 2012 2011

550 6600 15.18 37.6 362 4 344 9.99 24.8

Monthly Annually Weight No of trees Monthly Annually Weight No of trees


MICROmega’s employee demographics for the 2012 financial year-end are as follows:

At the end of the 2012 financial year, 52% of the staff had been categorised as historically disadvantaged individu-als, a slight increase from the prior year (2011: 51%). Of the total staff complement, 42% are female, an increase from 2011: 37%.

Staff movements during the 2012 financial year:

The above movements reflect a staff turnover of 32% in 2012, primarily due to the sale of Deltec and the expiry of short term contracts in various subsidiaries (2011: 21%).

ENTERPRISE DEVELOPMENT

Enterprise development (ED) involves growing small and medium sized businesses by providing finance and support services that will assist them in becoming more competitive and overcoming the constraints to growth that they face.

Each subsidiary partners with various ED organisations to contribute to job creation and social impact, both of which embody the spirit of ED in the community.

As an example, MECS Growth partners with Edge Growth, a company that specialises in offering end-to-end solutions for any business’ ED requirements. Edge Growth is a level two empowered firm and has assisted MECS Growth in developing its ED strategy.

Furthermore, group social events are organised on a quar-terly basis to encourage integration and communication between the employees of the various subsidiaries.

TRAINING AND DEVELOPMENT

MICROmega strives to attract and retain high calibre individuals and focuses on developing its employees through internal and external training. We support the skills development of our employees by providing financial assistance to enhance their qualifications through further education, providing in-house training, and offering staff the opportunity to attend external training courses presented by accredited trainers. During the year under review MICROmega spent R1 323 358 (2011: R905 064) on external staff training.

As with other areas of sustainability, each subsidiary is responsible for training their staff accordingly. In 2012:• NOSA enrolled 30 staff members into a one-year Unisa programme. The objective of this was to assist employees in reaching their potential and to ensure NOSA services its clients with highly qualified staff.• MECS Africa offered study bursaries to a number of permanent employees to further their studies in human resource management, recruitment, and project management. • MICROmega Securities consistently sent its broking staff on financial market training courses to enhance their abilities in the broking environment. This training was in accordance with financial sector regulatory requirements.• Sebata staff members were offered bursaries to further their studies. Furthermore, employees were consistently trained on the latest financial management and enterprise management systems to ensure they met their municipal clients’ needs appropriately.• Turrito Networks staff are all Cisco certified. In 2013 Turrito employees will be attending Linux RedHat Training (to become a certified partner) as well as Microsoft training (to attain Silver Partner- ship status). EQUAL OPPORTUNITIES AND BROAD BASED BLACK ECONOMIC EMPOWERMENT (“BBBEE”)

MICROmega is an equal opportunity employer and subscribes to the Codes of Good Practice issued under the Broad Based Black Economic Empowerment Act 53 of 2003, as amended. Each subsidiary in MICROmega is responsible for improving its BBBEE score and to ensure that employment opportunities are provided within the communities in which they operate.

Closing Balance

Retired

Absconded

Death

Retrenchment

Expiry of Contracts

Dismissals

Resignations due to sale of businesses

Resignations (inc temporary/ contract employees and casuals)

Appointments 244 184

31 December 2012 31 December 2011Opening Balance 748 718

Total 440 316 469 279

Indian 10 7 13 15Coloured 17 15 12 14

African 222 119 242 88

White 191 175 202 162Classification Male Female Male Female

2012 2011


756 748

0 (2)

(5) (8)

(2) (2)

(17) (6)

(33) (6)

(6) (10)

(49) (99)

(124) (21)


We believe that it is equally important for a successful corporate to share not only time but financial means with those that will use the finances to create safe, secure and inspiring platforms for the less fortunate in need of help.

Sustainability in our current economic climate is a never ending challenge for most NGOs within South Africa, and the context of the word is continually evolving and changing for them. We believe it is important to be in touch with these ever changing needs and facilitate them with an awareness and dedication to making a real and measurable difference.

With this in mind, during the 2012 financial year, the MICROmega group contributed R709 306 to the follow-ing organisations by way of donations, blanket collec-tions, fund raisers and free training:

• Hearts of Hope• Lesedi Pre-school• Hospice• Johannesburg Children’s Home• Alzheimer’s South Africa• United Cerebral Palsy Association• Chubby Chums• Meals on Wheels• Salvation Army• Abraham Kriel Children’s Home• Johannesburg, Roodeport and Alberton SPCAs• SAP Widow & Children• ST Giles• University of the Witwatersrand (and other education institutions) Technology Centres• SA Guide Dogs Association• Daktari Wild Life Institution• Save the Rhino

With a passion for investment, innovation and service we endeavour to continue our CSR footprint within South Africa.

By partnering with professionals that have the specialist skills and focus on ED, MECS Growth ensures that its ED initiatives are geared for success.

MECS Growth uses Edge Growth’s ED Action Fund Trust, a fund focusing on early growth stage enterprises. Through the fund, MECS Growth has supported the following businesses:• Cabs for Women: a metered taxi business which employs and trains previously disadvantaged women to become self-sufficient cab owners• Straight to your Door: a company which delivers fresh bread to households, spazas and schools in Alexander township

HEALTH AND SAFETY

The health and safety of every employee within the organisation is a top priority for MICROmega. Given the sector in which NOSA operates, we view ourselves as somewhat of a role model to all our stakeholders in this regard. As such, at an absolute minimum, all subsidiaries operate in accordance with the Occupational Health and Safety Act 85 of 1993.

Given the diversity of the various business sectors covered by our group, each subsidiary is required to implement and maintain sector specific health and safety controls to ensure that any risks are effectively mitigated. To this end, every year staff attend training for all relevant health and safety roles, including fire marshal and SHE representative roles. Furthermore, the Risk Committee has elected one of its members to manage all health and safety risks within the group.

MICROmega recognises that HIV/AIDS still remains one of the greatest socio-economic challenges in South Africa. We therefore encourage our employees to act responsibly and we support a workplace that is free of prejudice.

CORPORATE SOCIAL RESPONSIBILITY

MICROmega and its core businesses are not only dedicat-ed to investing in innovation and inspiring success within the corporate playing field, but also in our approach to our Corporate Social Responsibility (“CSR”). Recognising that South Africa is a diverse nation in need of assistance in all facets of society, in 2012 we took the opportunity to invest in a multitude of different charities, consciously choosing to spread our scope of assistance across these various areas of need.

When deciding the most effective way to make an impact, we assessed each charity individually and identified a trend in their need for financial assistance to facilitate their sustainability for the year.


Recognising that South Africa is a diverse nation in need of assistance in all facets of society, in 2012 we took the

opportunity to invest in a multitude of different charities, consciously

choosing to spread our scope of assistance across these various areas of need.

Recognising that South Africa is a diverse nation in need of assistance in all facets of society, in 2012 we took the

opportunity to invest in a multitude of different charities, consciously

choosing to spread our scope of assistance across these various areas of need.

Case Study

Lesedi Pre-SchoolLesedi Pre-school is a registered non-profit organisation based in an informal settlement opposite Lanseria airport in Johannesburg. At present there are 150 children being taught in two small classrooms. The pre-school also cares for 30 babies, with only six cots and one carer. Volunteers currently give up their time to provide educational morn-ings at the school, where the structured activities are hugely beneficial to both the teachers and children.

MICROmega is assisting Lesedi Pre-School with dona-tions towards building their new school and care facili-ties.


Case Study

Hearts of HopeHearts of Hope is a Section 21 registered non-profit organisation that is entirely donor funded and assists children who have been affected by HIV/AIDS. I’Themba children’s home, one of the Hearts of Hope homes based in Wendywood, Sandton, currently cares for 15 children, with plans to expand to 26 children in the next two years. Every December MECS Africa hosts a Christmas party for the children. 2012’s Christmas party was a picnic at the Johannesburg Zoo.

MECS Africa continues to make contributions to Hearts of Hope and plans to raise funds for their expansion in 2013.

REPORT ASSURANCE

MICROmega has not obtained independent third-party assurance of this sustainability report for the 2012 reporting period.

ANNUAL FINANCIAL STATEMENTS

for the year ended 31 December 2012

MICROmega Holdings Limited

MICROmega Holdings LimitedRegistration Number: (1998/003821/06)

FINANCIAL CONTENTS27........ Certification by Company Secretary28........ Directors’ responsibility and approval29........ Independent Auditor’s Report30........ Report of the directors34........ Audit Committee Report37........ Statements of Financial Position38........ Statements of Comprehensive Income39........ Statements of Changes in Equity42........ Statements of Cash Flows43........ Notes to the Financial Statements100...... Annexure: King III Register106...... Notice of Annual General Meeting

Certification by Company Secretary

In our capacity as Company Secretary, we hereby confirm, in terms of section 88(2)(e) of the Companies Act, 2008 (Act No. 71 of 2008), as amended (“the Act”), that for the year ended 31 December 2012, the company has lodged with the Companies and Intellectual Property Commis-sion all such returns as are required of a public company in terms of the Act and that all such returns are true, correct and up to date.

Acorim Proprietary LimitedCompany Secretary28 March 2013


Preparation and presentation of the annual financial statements

The annual financial statements for MICROmega Holdings Limited for the year ended 31 December 2012 have been prepared under the supervision of DJ Case (CA) SA.

The board of directors (“the directors”) is required in terms of the Companies Act 71 of 2008 to maintain adequate account-ing records and are responsible for the content and integrity of the annual financial statements and related financial infor-mation included in the annual integrated report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the company and the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements. The annual financial statements are prepared in accordance with International Financial Reporting Standards and in the manner required by the Companies Act 71 of 2008 and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and places considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effec-tive accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk man-agement in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infra-structure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied upon for the preparation of the annual financial statements. However, any system of internal financial control can only provide reasonable, and not abso-lute assurance against material mis-statement or loss The directors have reviewed the group’s cash flow forecast for the year ended 31 December 2013 and, in the light of this review and the current financial position, they are satisfied that the company and group has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently auditing and reporting on the company and the group's annual financial statements. The annual financial statements, which have been prepared on the going concern basis, were approved by the board on 28 March 2013 and were signed on its behalf by:

DC King IG MorrisExecutive Chairman Chief Executive Officer


DIRECTORS'RESPONSIBILITIES AND APPROVAL


Non-Executive DirectorREPORT OF THE DIRECTORS

The directors present their report for the year ended 31 December 2012. This report forms part of the audited group and separate financial statements of MICROmega Holdings Limited (“financial statements”).

1. General review The group's business and operations and the results thereof are clearly reflected in the attached consolidated annual financial statements.

2. Nature of the business MICROmega is a holding company with controlling interests in a number of operating subsidiaries. Our business es are primarily focused on the provision of information technology, financial, occupational health & safety and labour supply services. MICROmega is a public company listed on the Johannesburg Stock Exchange under the support services sector. 3. Dividends No dividends were declared or recommended during the year under review or the previous year.

4. Share capital There were no changes in the issued share capital of the group during the year under review. During the year the group repurchased 2 107 073 treasury shares on the open market at an average price of 442 cents to be utilised to settle future vendor payments and vested share options. 577 499 treasury shares were issued to employees during the year for vested and exercised options at an average price of 147 cents.

5. Property, plant and equipment The changes in the property, plant and equipment during the year or any changes in the policy relating to their use are set out in the attached financial statements and do not, in our opinion, require further comment.

6. Events subsequent to the year end There were no subsequent events after the reporting date.

7. Directors The directors of the group during the accounting period and up to the date of this report were as follows:

Mr DC King Executive Chairman Mr IG Morris Chief Executive Officer Mr DSE Carlisle Managing Director Mr DJ Case Financial Director (resigned 14 August 2012) Mr RB Dick Financial Director (appointed 14 August 2012) Mr PV Henwood Non-Executive Director (resigned 4 December 2012) Mr RC Lewin Non-Executive Director Mr PH Duvenhage Non-Executive Director (appointed 5 December 2012) Mr AB Swan Non-Executive Director (appointed 5 December 2012)


8. Company secretary The company secretary of the group is Acorim (Proprietary) Limited, whose business and postal addresses are:

2nd Floor North Block Hyde Park Office Towers Cnr Jan Smuts Avenue & 6th Road Hyde Park 2196

Po Box 41480 Craighall 2024

Miss T De Mendonca resigned as company secretary with effect 28 September 2012.

9. Discontinued operations The group continues to classify Kolbenco (Proprietary) Limited and Automobile Radio Dealers Association 1989 (Proprietary) Limited as discontinued operations.

During May 2012 the group disposed of the business and assets of Deltec Power Distributors (Proprietary) Limit- ed, a distributor of maintenance-free batteries.

10. Prior period error We draw your attention to Note 5 which explains the restatement of the prior year comparatives.

11. Special resolutions In addition to the special resolutions contained in the notice to the 2011 Annual General Meeting, the following special resolutions were passed:

- Certain subsidiaries changed their company names; - Deltec Power Distributors (Proprietary) Limited disposed of its business and assets; and - Deltec Africa (Proprietary) Limited disposed of its business and assets.

12. Corporate Governance Please refer to the governance section in the integrated report for a complete assessment of our King III Register and Companies Act application.


MICROmega Securities (Proprietary) Limited and its subsidiary companies

5 275 035 100 100 81 405 81 405 -20 380

MICROmega Treasury Solutions (Proprietary) Limited 943 100 100 - - -

MICROmega Properties 2 (Proprietary) Limited 13 500 100 100 92 92 461

MICROmega Investment Portfolio (Proprietary) Limited 13 500 100 100 92 92 328

SA Meter Reading Services (Proprietary) Limited 100 100 100 - 180 -

Deltec Power Distributors (Proprietary) Limited and its subsidiary company

100 100 100 14 788 14 788 4 440

Sebata Municipal Solutions (Proprietary) Limited and its subsidiary companies

392 100 100 8 015 8 015 -5 390

MICROmega National Certification (Proprietary) Limited 120 100 100 - - -18 330

NOSA (Proprietary) Limited and its subsidiary companies 120 100 100 - - 10 047

Riskworks (Proprietary) Limited 200 60 60 - - -

MICROmega Quality Assurance (Proprietary) Limited 100 100 100 - - -

MECS Africa (Proprietary) Limited and its subsidiary companies 4 500 100 100 4 931 4 931 10 408

Swazi Occupational Safety & Health (Proprietary) Limited 100 100 100 406 406 -71

Automobile Radio Dealers Association 1989 (Proprietary) Limited and its subsidiary company

16 100 100 - - 9 349

Tiseletso (Proprietary) Limited 100 100 100 - - 281

-

-

10 062

-71

10 367

271

-469

-

(40 964)

-12 088

-

61 158

2011 2012

-16 238

-

-336

Due by/(to) subsidiaries

R’000

2012 2011 2012

Number of shares in issue

Percentage holding

%

Shares at cost less accumulated impairmentR’000

13. Subsidiaries and associated companies


Mzimkhulu Financial Investments (Proprietary) Limited 100 100 100 - - 102

Stable-Net (Proprietary) Limited 120 100 100 530 530 29 828

Kolbenco (Proprietary) Limited 1 100 100 100 5 222 5 222 5 590

Limited 100 50 50 3 746 3 746 -

Sciam Professional Solutions (Proprietary) Limited 100 50 50 - - 7 157

MICROmega Financial Services (Proprietary) Limited 100 100 100 1 1 -1 737

Extriblox (Proprietary) Limited 100 100 100 1 1 -

Arbez Advanced Solutions and Services (Proprietary) Limited 1000 50 50 - - -

NOSA Nambia (Proprietary) Limited 100 100 100 - - 549

Chloroway (Proprietary) Limited 100 100 100 1 1 -Turrito Networks (Proprietary) Limited 100 60 60 1 1 11 122

Cloudware (Proprietary) Limited 100 60 60 - - 330

Kyostax (Proprietary) Limited 100 50 50 - - 5 657MICROmega Services and Support SPRL 100 100 100 271 271 -Beatrix Events (Proprietary) Limited 1000 50 50 - - 379

Symphony Trade & Invest 32 (Proprietary) Limited 100 60 60 - - 2 896

MIS Consulting (Proprietary) Limited 100 50 - - - 1 709

Gomobile (Proprietary) Limited 100 50 - - - -57

48 076

5 957

-

-180

1 354

-

-

- 109

-

1 080

5 702

MICROmega Publications (Proprietary) Limited 100 51 51 511 511

549

SAMTRAC Limited 100 100 100 4 4 - -

17 097

-

5 389

-3 486

-

-

92

13 958

MICROmega Technologies (Proprietary) Limited 100 100 100 31 31 (12 338) 8 304

Due by/(to) subsidiaries

R’000

Number of shares in issue

Percentage holding

%

Shares at cost less accumulated impairmentR’000

61 869120 228120 048

With the exception of Swazi Occupational Safety & Health (Proprietary) Limited, which is domiciled in Swaziland, SAM-TRAC Limited, which is domiciled in the United Kingdom, NOSA Namibia (Proprietary) Limited, which is domiciled in Namibia; and MICROmega Services and Support SPRL, which is domiciled in the Democratic Republic of Congo, all of the above entities are domiciled in the Republic of South Africa.

All the above entities have the same year end as MICROmega Holdings Limited.

The earnings of the subsidiaries attributable to MICROmega Holdings Limited was R34 754 798.


AUDIT COMMITTEE REPORT

In accordance with the Audit Committee’s approved terms of reference, the Committee discharged, inter alia, the following responsibilities during the 2012 financial year:

• Reviewed the interim results, annual financial statements, trading updates, SENS announcements and other similar documents, and provided comments thereon to the board of directors• Made submissions to the board on matters concerning MICROmega’s accounting policies, financial controls and reporting• Generally reviewed the group’s financial risk management and controls and held discussions with the independent external auditor in this regard• Satisfied itself with the appropriateness of the expertise and adequacy of resources of the finance function, including the appropriateness and expertise of the outgoing financial director, David Case, and incoming financial director Russell Dick• Monitored the group’s combined assurance model and ensured that significant risks facing the company were adequately addressed• Ensured that Nexia SAB&T maintained its independence and objectivity at all times• Assessed the quality and effectiveness of the audit process, reviewed and approved the budgeted audit fee for the 2012 financial year, and approved the fees paid to the independent external auditor for the 2011 financial year• Reviewed the directors’ report to be included in the financial statements prior to endorsement by the board of directors• Evaluated significant judgements and reporting decisions in the annual integrated report and the clarity and completeness of the proposed financial and sustainability disclosures

In order to ensure that the Audit Committee performed in accordance with the responsibilities laid out in the Com-mittee’s terms of reference, a checklist of matters to be considered at each meeting is drafted and circulated to the members. This checklist guides the content of the agenda for each meeting and the completed checklist forms part of the minutes of the Audit Committee.

Independent External Auditor appointment and independence

The group has a formal policy on the provision of non-audit services by the independent external auditor which speci-fies those services that the auditor is prohibited from providing to MICROmega as well as those that require pre-approval by the Audit Committee. During the year under review, Nexia SAB&T did not provide any non-audit services to MICROmega. The Audit Committee duly satis-fied itself that, in accordance with section 94(8) of the Companies Act, Nexia SAB&T, the external auditors for the group, remains independent of MICROmega.

In accordance with section 94(7)(f) of the Companies Act and the Principles of King III, the Audit Committee presents its report for the 2012 financial year to the board of directors and to all company stakeholders.

The Audit Committee is comprised of two non-executive directors, Pierre Duvenhage, the Chairman of the Audit Committee (taking over from Peter Henwood), and Ross Lewin.

Pierre Duvenhage (B Com, MBL) started his career as an internal auditor. Since then he has spent the last 25 years employed in financial and general management positions. He now owns a number of companies and holds director-ships in other companies.

Ross Lewin BSc. Eng (Hons) is an engineering professional who has had a successful career over more than 20 years in the engineering and information technology service provi-sion fields. As a founding member of various companies, he has successfully assumed financial responsibility for those companies whilst overseeing rapid and substantial growth. Ross also holds directorships on the boards of a number of international companies.

The executive directors and representatives from the inde-pendent external auditor, Nexia SAB&T, are invited to attend all Audit Committee meetings. The Audit Commit-tee is required to meet at least twice a year but met four times during the 2012 financial year and the attendance thereat is set out in the table below.

Attendance at Audit Committee meetings during 2012:

P = Present / A = Apologies / T = Present via telecom / N/A = Not applicable

T De Mendonca R Prettirajh (Internal Auditor)

J Botha (Internal Auditor)

RB Dick

DJ Case

DSE CarlisleIG Morris

DC King By InvitationRC Lewin

PV Henwood (Chairman)

Commitee member

N/A

N/A

N/A

N/A

N/A

N/A

N/A

P

P

P

T

30 Nov2012

P

P

P

P

P

P

P

29 Jul2012

P

P

P

N/A

N/A

AA

P

P

P

P

P

P

P

P

TT

P

22 June2012

1 Mar2012

P

P

P N/A


The board of directors is responsible for the internal finan-cial controls and systems in use throughout the group and the internal audit department has assisted the board of directors in evaluating the effectiveness of these internal controls. The identification of possible risks and the imple-mentation of adequate internal financial controls are delegated to the managing directors of each subsidiary, while the board of directors has ultimate authority and responsibility for ensuring that systems of internal finan-cial controls are effectively implemented and monitored. The Audit Committee is satisfied that during the 2012 financial year MICROmega maintained adequate systems of internal control over the financial reporting of the group and has ensured that group assets were adequately safeguarded and nothing has come to the attention of the Committee members that indicate a material breakdown in the functioning of the group’s internal control systems.

Whistle blowing

MICROmega has implemented a whistle blowing policy since 2011 in order to demonstrate its commitment to work-ing towards a culture of fairness, openness and transparen-cy. In conjunction with the whistle blowing policy, the MICROmega Holdings Ethics Hotline, which remains independently operated by KPMG Inc., provides employees with a mechanism to anonymously bring any unethical business practices to the attention of management. All reports received from the Ethics Hotline are forwarded to the designated representatives at MICROmega and to the Audit Committee for review, and consideration is made as to whether the action taken by the designated representa-tives was appropriate or whether further action is required. One incident was reported to the Ethics Hotline in the 2012 financial year, and the matter was dealt with accordingly.

Going concern assessment

The Audit Committee reviews the going concern status of the group by considering the documentation prepared by management and the assurance provided by the financial director at each meeting, and therefore supports the going concern statement of the board of directors.

Commentary on the financial statements and accounting practices of MICROmega

The Audit Committee checklist prepared for each meeting assists Committee members in ensuring that MICROmega complies with required accounting practices and all relevant matters are timeously brought to the attention of the Audit Committee. Input from the independent external auditors at Audit Committee meetings provides Committee members with greater insight into the financial manage-ment of the company. The Audit Committee is therefore satisfied that the financial statements of the company comply with International Financial Reporting Standards and are consistent with the previous annual financial state-ments and that no matters of significance have been raised during the 2012 financial year.

Evaluation of MICROmega’s finance function

The Audit Committee has considered the appropriateness of the expertise and experience of the outgoing financial director, David Case, and the incoming financial director, Russell Dick, together with MICROmega’s finance team, and is satisfied that Russell Dick and the finance team have the necessary knowledge, skills and expertise to perform the finance function for the group.

Internal Audit and the Internal Control System

MICROmega’s internal audit department provides the group with an independent and objective assurance func-tion and continues to operate in accordance with the inter-nal audit charter and internal audit plan approved by the board of directors in March 2011. The internal audit depart-ment reports directly to the Audit Committee and has unrestricted access to the chairman of the Audit Commit-tee. The internal auditor provides the Audit Committee with updates as to the progress made by the department and brings any significant risks or issues to be considered to the attention of the Audit Committee at every Audit Com-mittee meeting or when required.

MICROmega’s internal audit department has operated successfully for over a year in accordance with the internal audit plan, which is structured as a three year strategic internal audit rolling plan, together with a focused annual internal audit plan.

During the 2012 financial year internal audit performed planned engagements on human resources, payroll and information technology general controls for the group. Internal audit also provided an independent assessment of the group’s risk management function.



Combined Assurance Model

MICROmega’s combined assurance model aims to optimise the assurance coverage obtained on the risks affecting the group. Within MICROmega the following assurance providers deliver assurance on the group’s risk:

• Subsidiary management assurance• Internal assurance via the executive management• Internal Audit• External Audit• Audit Committee• Risk Committee

The management team of each group subsidiary addresses the risks on the day-to-day operations of that business while a monthly management meeting is held with MICROmega executive directors. The internal audit department examines, evaluates and reports on the activities and appropriateness of the systems of internal control, risk management and gover-nance processes, while the external auditor performs the annual audit in accordance with international auditing standards and reports in detail on the results of the audit to the subsidiary management, the Audit Committee and the board of directors. Lastly, the Risk Committee is responsible for assessing risk for the entire risk universe of MICROmega and the Audit Committee is responsible for monitoring the appropriateness of the combined assurance model.

The Audit Committee is satisfied that the current combined assurance model utilised by the group ensures that significant risks facing the company are adequately addressed.

Integrated reporting assurance

In accordance with the principles of King III, the Audit Committee is required to oversee MICROmega’s annual integrated report and reporting process while the board of directors is responsible for ensuring the integrity of the integrated report.

The Audit Committee fulfilled its oversight role in respect of MICROmega’s annual integrated report and the reporting process and considered and assessed the information disclosed in the integrated report against the financial, operational, governance and other information known to the Audit Committee and is satisfied that the information is reliable and consistent with the financial results.

Pierre DuvenhageChairman of the Audit Committee28 March 2013



STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2012

31 December 31 December 1 January2012 2011 2011 2012 2011

Notes R'000 R'000 R'000 R'000 R'000Restated * Restated *

Assets

Non-current assets 237 998 272 305 262 828 174 462 156 364

Property,plant and equipment 6 143 910 147 033 141 332 9 890 8 665 Intangible assets 7 48 471 67 421 62 902 - - Investment in subsidiaries 8 - - - 120 048 120 228 Investment in associates 9 27 2 038 2 476 - - Other investments 10 163 1 573 6 695 - 1 500 Amounts owing by subsidiary companies 17 - - - 31 920 14 321 Loans receivable 11 2 188 23 606 24 677 - 4 000 Deferred tax assets 12 43 239 30 634 24 746 12 604 7 650

Current assets 240 493 244 156 242 036 119 713 100 559

Inventories 14 2 542 43 793 51 631 585 953 Retirement benefits 15 1 881 21 381 26 844 - - Trade and other receivables 16 109 725 134 467 113 330 774 639 Amounts owing by subsidiary companies 17 - - - 117 847 87 601 Current portion of loans receivable 11 18 618 13 539 3 539 - 6 765 Cash and cash equivalents 18 107 727 23 742 20 963 507 3 571 Income tax receivable - 642 1 043 - 1 030 Non-current assets classified as held for sale 13 - 6 592 24 686 - -

Total assets 478 491 516 461 504 864 294 175 256 923

Equity

Share capital and share premium 19 179 169 187 022 190 797 193 405 192 792 Non-distributable reserves 20 14 834 16 653 15 888 2 937 2 861 Retained earnings 95 392 83 014 76 802 (8 369) (7 315)

Total equity attributable to owners of the company 289 395 286 689 283 487 187 973 188 338 Non-controlling interests 18 654 24 303 16 189 - -

Total equity 308 049 310 992 299 676 187 973 188 338

Liabilities

Non-current liabilities 69 835 76 480 69 877 159 1 775

Borrowings 21 55 960 65 192 56 576 159 1 775 Deferred tax liabilities 12 13 875 11 288 13 301 - -

Current liabilities 100 607 128 989 135 311 106 043 66 810

Bank overdraft 18 - 9 065 11 844 - - Current portion of borrowings 21 12 901 14 418 31 886 178 770 Trade and other payables 23 80 369 99 066 82 286 16 010 11 660 Amounts owing to subsidiary companies 24 - - - 87 898 53 846 Deferred vendor payments 22 534 534 789 534 534 Provisions 25 5 904 5 906 8 506 - - Income tax payable 899 - - 1 423 -

Total liabilities 170 442 205 469 205 188 106 202 68 585

Total equity and liabilities 478 491 516 461 504 864 294 175 256 923

* Refer Note 5

CompanyGroup

Preparation and presentation of the annual financial statements

The annual financial statements for MICROmega Holdings Limited for the year ended 31 December 2012 have been prepared under the supervision of DJ Case (CA) SA.

The board of directors (“the directors”) is required in terms of the Companies Act 71 of 2008 to maintain adequate account-ing records and are responsible for the content and integrity of the annual financial statements and related financial infor-mation included in the annual integrated report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the company and the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements. The annual financial statements are prepared in accordance with International Financial Reporting Standards and in the manner required by the Companies Act 71 of 2008 and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and places considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effec-tive accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk man-agement in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infra-structure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied upon for the preparation of the annual financial statements. However, any system of internal financial control can only provide reasonable, and not abso-lute assurance against material mis-statement or loss The directors have reviewed the group’s cash flow forecast for the year ended 31 December 2013 and, in the light of this review and the current financial position, they are satisfied that the company and group has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently auditing and reporting on the company and the group's annual financial statements. The annual financial statements, which have been prepared on the going concern basis, were approved by the board on 28 March 2013 and were signed on its behalf by:

DC King IG MorrisExecutive Chairman Chief Executive Officer


2012 2011 2012 2011Notes R'000 R'000 R'000 R'000

Restated *

Revenue 26 746 030 775 483 34 837 28 301 Revenue from continuing operations 26 694 907 561 447 34 837 28 301 Revenue from discontinued operations 26, 35 51 123 214 036 - -

Cost of sales (473 937) (520 318) (90) -

Gross profit 272 093 255 165 34 747 28 301 Gross profit from continuing operations 264 497 208 905 34 747 28 301 Gross profit from discontinued operations 35 7 596 46 260 - -

Other income 27 10 986 10 788 666 (435) Distribution expenses (4 481) (6 429) (374) (133) Administrative expenses 30 (263 619) (246 701) (40 880) (33 180) Other expenses 28 (1 292) (2 848) (6 013) (44 329)

Results from operations 13 687 9 975 (11 854) (49 776) Results from continuing operations 5 410 36 757 (11 854) (49 776) Results from discontinued operations 8 277 (26 782) - -

Finance income 33 6 754 5 731 7 630 2 956 Finance expenses 33 (6 074) (7 076) (109) (114)

Net finance (expense)/income 680 (1 345) 7 521 2 842

Share of profit / (loss) of equity accounted associates 2 060 (628) - -

Profit before income tax 16 427 8 002 (4 333) (46 934) Profit before income tax from continuing operations 10 694 35 830 (4 333) (46 934) Profit / (loss) before income tax from discontinued operations 35 5 733 (27 828) - -

Income tax expense 34 (7 753) 3 413 3 279 7 307

Profit for the year 8 674 11 415 (1 054) (39 627)

Profit from continuing operations 3 757 31 901 (1 054) (39 627) Profit / (loss) from discontinued operations 35 4 917 (20 486) - -

Other comprehensive incomeForeign currency translation differences 99 (4) - - (Revaluation reversal) / revaluation of property (2 320) 8 214 - - Realisation of revaluation reserve through disposal - 90 - - Income tax on other comprehensive income 432 (1 299) - - Other comprehensive income for the year, net of income tax (1 789) 7 001 - -

Total comprehensive income for the year 6 885 18 416 (1 054) (39 627)

Profit / (loss) attributable to:Equity holders of the company 11 603 6 964 (1 054) (39 627) Non-controlling interests (2 929) 4 451 - -

Profit / (loss) for the year 8 674 11 415 (1 054) (39 627)

Total comprehensive income / (loss) attributable to:Equity holders of the company 10 758 10 105 (1 054) (39 627) Non-controlling interests (3 873) 8 311 - -

Total comprehensive income / (loss) for the year 6 885 18 416 (1 054) (39 627)

Earnings per share Basic earnings per share (cents) 36 12,39 7,27 (1,12) (41,39) Diluted earnings per share (cents) 36 12,24 7,20 (1,11) (40,99)

Continuing operationsBasic earnings per share (cents) 7,14 28,66 (1,12) (41,39) Diluted earnings per share (cents) 7,06 28,39 (1,11) (40,99)

* Refer Note 5

Group Company

STATEMENTS OF COMPREHENSIVE INCOMEAS AT 31 DECEMBER 2012


Share capital Share premium

Revaluation reserve

Foreign currency

translation reserve

Deal differences

reserve

Share-based

payments reserve

R'000 R'000 R'000 R'000 R'000 R'000

GROUP

Balance at 01 January 2011 as previously stated 965 189 832 9 360 33 1 000 4 017

Impact of correction of prior period error * - - - - - 1 478 Balance at 01 January 2011 restated * 965 189 832 9 360 33 1 000 5 495

Total comprehensive income for the yearProfit for the year - - - - - - Other comprehensive income - - 1 739 (4) - - Foreign currency translation differences - - - (4) - - Revaluation of property - - 3 055 - - - Realisation of revaluation reserve through disposal - - (1 316) - - -

Total comprehensive income for the year - - 1 739 (4) - - Transactions with owners, recorded directly inequityContributions by and distributions toowners (22) (3 753) - - - 930 Treasury shares purchase (22) (3 788) - - - - Share-based payment transactions - 35 - - - 930 Dividends paid to non-controlling interests - - - - - -

Changes in ownership interests insubsidiaries - - - - - (1 900) Acquisitions on non-controlling interests withouta change in control - - - - - (1 900)

Total transactions with owners (22) (3 753) - - - (970)

Balance at 31 December 2011 restated * 943 186 079 11 099 29 1 000 4 525

Balance at 01 January 2012 943 186 079 11 099 29 1 000 4 525 Total comprehensive income for the yearProfit for the year - - - - - - Other comprehensive income - - (1 129) 99 - - Foreign currency translation differences - - - 99 - - Revaluation of property - - (944) - - - Realisation of revaluation reserve through depreciation - - (185) - - -

Total comprehensive income for the year - - (1 129) 99 - - Transactions with owners, recorded directly inequityContributions by and distributions toowners (15) (7 838) - - - (789) Treasury shares purchase (15) (8 451) - - - - Share-based payment transactions - 613 - - - (789) Dividends paid to non-controlling interests - - - - - -

Changes in ownership interests insubsidiaries - - - - - - Acquisitions on non-controlling interests withouta change in control - - - - - -

Total transactions with owners (15) (7 838) - - - (789)

Balance at 31 December 2012 928 178 241 9 970 128 1 000 3 736

* Refer Note 5

STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2012


REPORT OF THE DIRECTORS

The directors present their report for the year ended 31 December 2012. This report forms part of the audited group and separate financial statements of MICROmega Holdings Limited (“financial statements”).

1. General review The group's business and operations and the results thereof are clearly reflected in the attached consolidated annual financial statements.

2. Nature of the business MICROmega is a holding company with controlling interests in a number of operating subsidiaries. Our business es are primarily focused on the provision of information technology, financial, occupational health & safety and labour supply services. MICROmega is a public company listed on the Johannesburg Stock Exchange under the support services sector. 3. Dividends No dividends were declared or recommended during the year under review or the previous year.

4. Share capital There were no changes in the issued share capital of the group during the year under review. During the year the group repurchased 2 107 073 treasury shares on the open market at an average price of 442 cents to be utilised to settle future vendor payments and vested share options. 577 499 treasury shares were issued to employees during the year for vested and exercised options at an average price of 147 cents.

5. Property, plant and equipment The changes in the property, plant and equipment during the year or any changes in the policy relating to their use are set out in the attached financial statements and do not, in our opinion, require further comment.

6. Events subsequent to the year end There were no subsequent events after the reporting date.

7. Directors The directors of the group during the accounting period and up to the date of this report were as follows:

Mr DC King Executive Chairman Mr IG Morris Chief Executive Officer Mr DSE Carlisle Managing Director Mr DJ Case Financial Director (resigned 14 August 2012) Mr RB Dick Financial Director (appointed 14 August 2012) Mr PV Henwood Non-Executive Director (resigned 4 December 2012) Mr RC Lewin Non-Executive Director Mr PH Duvenhage Non-Executive Director (appointed 5 December 2012) Mr AB Swan Non-Executive Director (appointed 5 December 2012)

GROUP

Balance at 01 January 2011 as previously statedImpact of correction of prior period error *Balance at 01 January 2011 restated *

Total comprehensive income for the yearProfit for the yearOther comprehensive incomeForeign currency translation differencesRevaluation of propertyRealisation of revaluation reserve through disposal

Total comprehensive income for the yearTransactions with owners, recorded directly inequityContributions by and distributions toownersTreasury shares purchaseShare-based payment transactionsDividends paid to non-controlling interests

Changes in ownership interests insubsidiariesAcquisitions on non-controlling interests withouta change in control

Total transactions with owners

Balance at 31 December 2011 restated *

Balance at 01 January 2012Total comprehensive income for the yearProfit for the yearOther comprehensive incomeForeign currency translation differencesRevaluation of propertyRealisation of revaluation reserve through depreciation

Total comprehensive income for the yearTransactions with owners, recorded directly inequityContributions by and distributions toownersTreasury shares purchaseShare-based payment transactionsDividends paid to non-controlling interests

Changes in ownership interests insubsidiariesAcquisitions on non-controlling interests withouta change in control

Total transactions with owners

Balance at 31 December 2012

* Refer Note 5

Retained earnings

Non-controlling interests Total equity

R'000 R'000 R'000 R'000

78 280 283 487 16 189 299 676 (1 478) - - - 76 802 283 487 16 189 299 676

- - 6 964 6 964 4 451 11 415 1 406 3 141 3 860 7 001

- (4) - (4) - 3 055 3 860 6 915

1 406 90 - 90

8 370 10 105 8 311 18 416

- (2 845) (1 298) (4 143) - (3 810) - (3 810) - 965 - 965 - - (1 298) (1 298)

(2 158) (4 058) 1 101 (2 957)

(2 158) (4 058) 1 101 (2 957)

(2 158) (6 903) (197) (7 100)

83 014 286 689 24 303 310 992

83 014 286 689 24 303 310 992

11 603 11 603 (2 929) 8 674 185 (845) (944) (1 789)

- 99 - 99 - (944) (944) (1 888)

185 - - -

11 788 10 758 (3 873) 6 885

361 (8 281) (1 406) (9 687) - (8 466) - (8 466)

361 185 - 185 - - (1 406) (1 406)

229 229 (370) (141)

229 229 (370) (141)

590 (8 052) (1 776) (9 828)

95 392 289 395 18 654 308 049


Share capital

Share

premium

Share-

based

payments

reserve

Retained

earnings Total

R'000 R'000 R'000 R'000 R'000

COMPANY

Balance at 01 January 2011 1 008 191 749 2 535 32 312 227 604

Total comprehensive income for the year

Profit for the year - - - (39 627) (39 627)

Total comprehensive income for the year - - - (39 627) (39 627)

Transactions with owners, recorded directly in

equity

Contributions by and distributions to

owners - 35 326 - 361

Share-based payment transactions - 35 326 - 361

Total transactions with owners - 35 326 - 361

Balance at 31 December 2011 1 008 191 784 2 861 (7 315) 188 338

Balance at 01 January 2012 1 008 191 784 2 861 (7 315) 188 338 Total comprehensive income for the year

Profit for the year - - - (1 054) (1 054)

Total comprehensive income for the year - - - (1 054) (1 054)

Transactions with owners, recorded directly in

equity

Contributions by and distributions to

owners - 613 76 - 689

Share-based payment transactions - 613 76 - 689

Total transactions with owners - 613 76 - 689

Balance at 31 December 2012 1 008 192 397 2 937 (8 369) 187 973

STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2012


2012 2011 2012 2011Notes R'000 R'000 R'000 R'000

Restated *

Cash flows for operating activities

Cash generated / (utilised) by operating activities 44,1 80 346 31 289 1 624 1 407

Finance income 6 754 5 731 7 630 2 956

Finance costs (6 074) (7 076) (109) (114) Taxation paid 44,2 (15 798) (13 759) 778 46

Net cash inflows from operating activities 65 228 16 185 9 923 4 295

Cash flow from investing activities

Expenditure to maintain operating capacityProperty, plant and equipment acquired (14 230) (17 485) (4 871) (6 854) Intangible assets acquired (446) - - -

Proceeds of disposals of property, plant and equipment 3 996 5 364 1 453 6 331 Proceeds of disposals of intangible assets - 1 247 - 1 000

Proceeds of disposals of non-current assets held for sale 6 592 16 356 - -

Expenditure for expansionAcquisition of subsidiaries 44,3 1 - - (3 034) Disposal of subsidiaries 44,4 46 442 16 095 - 33 877 Acquisition of non-controlling interests without change in control - (2 957) - - Internally generated intangible assets (7 376) (20 885) - -

Investments (aquired) / sold (90) 6 524 - 6 561

Loans receivable granted - (8 003) - (6 765) Loans receivable repaid 12 066 2 884 6 432 -

Net cash used in investing activities 46 955 (860) 3 014 31 116

Cash flows from financing activities

Treasury shares repurchased (8 466) (3 810) - -

Dividends paid to non-controlling interests (1 406) (1 298) - - Borrowings (repaid)/raised (9 261) (4 404) (2 208) 1 995

Deferred vendor payments repaid - (255) - (255) Subsidiary company loans raised / (repaid) - - 34 052 (8 064) Subsidiary company loans granted - - (47 845) (26 401)

Net cash used in financing activities (19 133) (9 767) (16 001) (32 725)

Increase(Decrease) in cash and cash equivalents 93 050 5 558 (3 064) 2 686 Cash and cash equivalents at the beginning of the year 14 677 9 119 3 571 885

Cash and cash equivalents at the end of the year 18 107 727 14 677 507 3 571

* Refer Note 5

Group Company

STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2012


1. Reporting entity

MICROmega Holdings Limited is a company domiciled in the Republic of South Africa. The address of the company’s registered office is 66 Park Lane, Sandton. The consolidated annual financial statements of the group as at and for the year ended 31 December 2012, comprise the company and its subsidiaries (together referred to as the “group” and individually as “group entities”) and the group’s interest in associates. The group’s activities range across a broad spectrum of sectors (refer to the segment report and the report of the directors).

2. Basis of preparation

(a) Statement of compliance

The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and its interpretations adopted by the International Accounting Standards Board (IASB) and the requirements of the Companies Act of South Africa.

The financial statements were approved by the Board of Directors on 26 March 2013.

(b) Basis of measurement

The consolidated annual financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

• Derivative financial instruments are measured at fair value; and• Financial instruments at fair value through profit or loss are measured at fair value; and• Available-for-sale assets are measured at fair value; and• The defined benefit asset is recognised as the net total of the plan assets, plus unrecognised past service cost and unrecognised actuarial losses, less unrecognised actuarial gains and the present value of the defined benefit obligation; and• Owner occupied land and buildings are revalued to fair value where there is indication that there is a change from the prior year.

Refer to note 4 for the methods used to measure fair value.

(c) Functional and presentation currency

These consolidated annual financial statements are presented in ZAR (South African Rand), which is the company’s functional currency. All financial information presented in Rand has been rounded to the nearest thousand, except when otherwise indicated.

(d) Use of estimates and judgements

The preparation of the consolidated annual financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements is included in the following notes:

• Notes 3(d)(iii) & 6 – useful lives and residual values• Note 7 – measurement of the recoverable amounts of cash-generating units• Notes 8, 16, 17, 22 & 38 – valuation of financial instruments• Note 12 – utilisation of tax losses• Note 21, 42 – lease classification• Note 25 – provisions and contingencies• Note 37 – measurement of shared-based payments• Note 39 – business combinations3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated annual financial statements, and have been applied consistently by group entities.

(a) Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the group takes into consideration potential voting rights that are currently exercisable.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)FOR THE YEAR ENDED 31 DECEMBER 2012


The group measures goodwill at the acquisition date as follows:

• The fair value of the consideration transferred; plus• The recognised amount of any non-controlling interests in the acquire; plus• If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquire; less• The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Transaction costs, other than those associated with the issue of debt or securities, that the group incurs in connection with a business combination are expensed.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

(ii) Non-controlling interests

For each business combination, the group elects to measure any non-controlling interests in the acquire either:

• At fair value; or• At their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

(iii) Subsidiaries

Subsidiaries are entities controlled by the group. The financial statements of subsidiaries are included in the consolidated annual financial statements from the date that control commences until the date the control ceases. Investments in subsidiaries are carried at cost less impairment adjustments in the company’s separate financial statements.

The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the group.

(iv) Loss of control

On the loss of control, the group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently that retained interest is accounted for as an equity-ac-counted investee or as an available-for-sale financial asset depending on the level of influence retained.

(v) Investments in associates (equity-accounted investees)

Associates are those entities in which the group has significant influence, but not control, over the financial and operating policies. Significant influence is assumed to exist when the group holds between 20 and 50 percent of the voting power of another entity.

Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investment includes transaction costs.

The consolidated annual financial statements include the group’s share of the total comprehensive income of equity-accounted investees, after adjust-ments to align the accounting policies with those of the group, from the date that significant influence commences until the date that the significant influence ceases.

When the group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term invest-ments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated annual financial statements. Unrealised gains arising from transactions with equity-accounted associates are eliminated against the invest-ment to the extent of the group’s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payment during the period, and the amortised cost in foreign currency at the exchange rate at the end of the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined.


Foreign currency differences arising on translation are recognised in profit or loss.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Rand at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rand at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity. However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of, such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented within equity in the foreign currency translation reserve.

(c) Financial instruments

(i) Non-derivative financial assets

The group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.

The group derecognises a financial asset when the contractual right to the cash flows from the asset expire, or it transfers the rights to receive the contrac-tual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that are created or retained by the group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets.

Financial assets at fair value through profit or loss

A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit of loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the group’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit of loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Held-to-maturity financial assets

If the group has the positive intent and ability to hold debt securities to maturity, they are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise instalment sale assets and trade and other receivables. Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, available-for-sale financial assets are measured at fair value and changes therein, other than impairment losses and foreign currency differences in available-for-sale equity instruments, are recognised in other comprehensive income and presented in the fair value reserve within equity. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

(ii) Non-derivative financial liabilities

The group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.



The group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

The group has the following non-derivative financial liabilities: loans and borrowings, deferred vendor payments, bank overdrafts, and trade and other payables.

Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the statement of cash flows.

(iii) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduc-tion from equity, net of any tax effects.

Repurchase of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or re-issued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to / from retained earnings.

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment, with the exception of land and buildings, are measured at cost less accumulated depreciation and impairment losses. Land and buildings are revalued at regular intervals, not exceeding 3 years, by independent valuers.

Cost includes expenditure that is directly attributable to the acquisition of the items of property, plant and equipment. The cost of self-constructed items of property, plant and equipment includes the cost of materials and direct labour, any other costs directly attributable to bringing the items of property, plant and equipment to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from the disposal and the carrying amount of the item) is recognised in profit or loss.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the group and its cost can be measured reliably. The carrying value of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss during the financial period in which they are incurred.

(iii) Depreciation

Items of property, plant and equipment are depreciated from the date they are available for us or, in respect of self-constructed assets, from the date that the asset is completed and ready for use.

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line basis over their estimated useful lives. Depreciation is generally recognised in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the group will obtain owner-ship by the end of the lease term. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

• Buildings 21 – 50 years• Plant and equipment 5 – 15 years• Motor vehicles 4 – 5 years• Furniture and fittings 5 – 10 years• Office equipment 5 – 10 years• Computer equipment 2 – 5 years• Computer software 2 – 3 years• Leasehold improvements Over the period of the lease

Depreciation methods, useful lives and residual values are reviewed at each reporting date. Useful lives are affected by technology innovations, mainte-nance programmes and future economic benefits. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.


(e) Intangible assets

(i) Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is includ-ed in the carrying amount of the investment, and any impairment loss is allocated to the carrying amount of the equity-accounted investee as a whole.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the group intends to, and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

(iii) Other intangible assets

Other intangible assets that are acquired by the group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

(iv) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

(v) Amortisation

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

• Brand names Indefinite• Computer software 3 - 5 years• Customer relationships 2 - 4 years• Patents, trademarks and other rights 10 years to indefinite• Intellectual property Indefinite

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets but they are tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, and it is subsequently carried at cost less accumu-lated impairment losses.

(f) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for the sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour and any other costs directly attributable to bringing the investment property to a working condition for their intended use.

Any gain or loss on disposal of an investment property is recognised in profit or loss. When an investment property that was previously classified as proper-ty, plant and equipment is sold, any related amount included in the revaluation reserve is transferred to retained earnings.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

(g) Leased assets

Leases in terms of which the group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset class.

Other leases are operating leases and the leased assets are not recognised on the group’s statement of financial position.



(h) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Where necessary, provision is made for obsolete, slow-moving and defective inventories.

(i) Impairment

(i) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events had a negative effect on the estimated future cash flows for that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

(ii) Non-financial assets

The carrying amount of the group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of cash inflows of other assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generated units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the group on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(j) Non-current assets classified as held for sale

Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are remea-sured in accordance with the group’s accounting policies. Thereafter the assets (or disposal group) are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets or deferred tax assets, which continue to be measured in accordance with the group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Non-current assets classified as held for sale are not depreciated.

(k) Employee benefits

(i) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are made more than 12 months after the end of the period in which the employees render the service are discounted to their present value.


(ii) Defined benefit plans

A defined benefit plan is a post-employment plan other than a defined contribution plan. The group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods. Those benefits are discounted to determine the present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the group, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.

The group recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all expenses related to defined benefit plans in profit or loss.

(iii) Termination benefits

Termination benefits are recognised as an expense when the group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date or to provide termination benefits as a result of an offer made to encour-age voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.

(iv) Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonuses or profit-sharing plans if the group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(v) Share-based payment transactions

The grant date fair value of share-based payment options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the number of share options for which the related service and non-market conditions are met, such that the amount ultimately recognised as an expense is based on the number of options that meet the related service and non-market performance conditions at the vesting date.

In the event of expiry of vested share options the applicable amount held in the non-distributable reserve is transferred to retained earnings.

(l) 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 proba-ble that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

The group recognises an onerous contract as a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The group recognises the present obligation under the contract as a provision.

(m) Revenue

(i) Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing manage-ment involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

(ii) Rendering of services

Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.

(n) Government grants

Grants that compensate the group for expenses incurred are recognised in profit or loss on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate the group for the cost of an asset are recognised in profit or loss on a systematic basis over the useful life of the asset.



(o) Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

(p) Finance income and expenses

Finance income comprises interest income on funds invested, dividend income, gains on the disposal of available-for-sale financial assets, and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the group’s right to receive payment is established, which in the case of listed securities is the ex-dividend date.

Finance expenses comprise interest expense on borrowings, unwinding of discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets and losses on forward exchange contracts that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis.

(q) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differenc-es relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rate expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Dividends withholding taxes that arise from the distribution of dividends are recognised when the distributions are made to shareholders that do not qualify for exemption in terms of the Income Tax Act.

(r) Earnings per share

The group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attribut-able to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprises share options granted to employees.

The group calculates headline earnings per share (HEPS) data for its ordinary shares. Headline earnings is determined by excluding certain items from profit or loss attributable to ordinary shareholders through making use of the table and requirements contained in Circular 03/2012.

(s) Segment reporting

The group determines and presents operating segments based on the information that is internally provided to the Executive Chairman, who is the chief operating decision maker. A segment is a distinguishable component of the group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of the other segments. The group’s primary format for segment reporting is based on business segments. The business segments are determined based on the reporting business units.

No secondary geographical segment analysis has been included as geographical location does not play a significant role in the group’s operations and thus this information will not be beneficial.

Segment revenue

Segment revenue represents the gross value of services invoiced and goods sold excluding value added taxation, which is directly attributable and reasonably allocated to each business segment.


Investment income is included in the segment where the business activity holding the investment is situated.

Segment results

Segment results equal segment revenue less segment expenses before any adjustment to minority interests.

Segment assets and liabilities

Segment assets and liabilities include direct and reasonable allocable operating assets, investments in associates and liabilities. Segment assets comprise total assets less deferred tax assets, investments in associates, tax receivable assets and loans receivable from group companies. Segment liabilities comprise total liabilities less deferred tax liabilities, tax payable liabilities and loans payable to group companies.

(t) New standards and interpretations not yet adopted

At the date of authorisation of the financial statements of the group for the year ended 31 December 2011, the following Standards and Interpretations were in issue but not yet effective: Standard/Interpretation Effective dateIFRS 9 Financial Instruments Annual period commencing on or after 1 January 2015*IFRS 10 Consolidated Financial Statements Annual period commencing on or after 1 January 2013*IFRS 11 Joint Arrangements Annual period commencing on or after 1 January 2013*IFRS 12 Disclosure of Interests in Other Entities Annual period commencing on or after 1 January 2013*IFRS 13 Fair Value Measurement Annual period commencing on or after 1 January 2013*IAS 1 amendments Presentation of Financial Statements Annual period commencing on or after 1 July 2012*IAS 12 amendment Income Taxes Annual period commencing on or after 1 January 2012*IAS 19 amendment Employee Benefits Annual period commencing on or after 1 January 2013*IAS 27 amendment Consolidated and Separate Financial Statements Annual period commencing on or after 1 January 2013*IAS 28 amendment Investments in Associates Annual period commencing on or after 1 January 2013*IAS 32 amendment Financial instruments : Presentation Annual period commencing on or after 1 January 2013*IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Annual period commencing on or after 1 January 2013*IFRS 10, IFRS 12 and IAS 27 amendments Investment Entities Annual period commencing on or after 1 January 2014*

* All Standards and Interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the group).The following standards are not applicable to the business of the entity and will therefore have no impact on future financial statements: IFRS 11, IAS 19 amendment, IAS 32 amendment and IFRIC 20. The directors are of the opinion that the impact of the application of the remaining Standards and Interpretations will be as follows: IFRS 9IFRS 9 will be adopted by the group for the first time for its financial reporting period ending 31 December 2015. The standard will be applied retrospec-tively, subject to transitional provisions.IFRS 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections of IAS 39.

Under IFRS 9 there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value.Embedded derivatives are no longer separated from hybrid contracts that have a financial asset host.There will be no significant impact on the financial statements.IFRS 10 & IFRS 12IFRS 10 and IFRS 12 will be adopted by the group for the first time for its financial reporting period ending 31 December 2013. The standard will be applied retrospectively, subject to transitional provisions.IFRS 10 and IFRS 12 have been issued to replace IAS 27, IAS 28 and IAS 31. The new standards provide additional guidance to assist in the determination of control where this is difficult to assess.There will be no impact on the financial statements.

IFRS 13IFRS 13 is a new standard dealing with fair value measurement and will be adopted by the group for the first time for its financial reporting period ending 31 December 2013.The standard defines fair value and sets out a single framework for measuring fair value. It does not replace any of the fair value requirements of existing standards but rather presents clarity over fair value measurements and sets out the disclosure requirements for fair value adjustments.The impact on the financial statements would be on disclosures and it is not foreseen that there would be any material impact on the treatment of fair value accounting.

IAS 1 AmendmentThe amendment to IAS 1 contains new requirements to group together items with other comprehensive income that may be reclassified to the profit or loss section of the income statement in order to facilitate the assessment of their impact of the overall performance of an entity. The group will be required to adopt it for the first time for its financial reporting period ending 31 December 2013.

No assessment has been done on the impact of the amendment on the financial statements.

IAS 12 AmendmentThe amendment to IAS 12 provides a rebuttable presumption that an investment property will be recovered in its entirety through sale. The group early adopted this statement in the prior year.

IFRS 10, IFRS 12 and IAS 27 AmendmentsThe “Investment Entities” amendments provide an exception from the requirements of consolidation and instead require investment entities to present their investments in subsidiaries as a net investment that is measured at fair value. An investment entity is an entity whose business purpose is to make investments for capital appreciation, investment income or both. The group will be required to adopt the amendments for the first time for its financial reporting period ending 31 December 2013.There is no current impact on the amendments on the financial statements as none of the current investments in subsidiaries match the definition of an Investment Entity.


4. Determination of fair values

A number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(i) Property, plant and equipmentThe fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate.

(ii) Intangible assetsThe fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.

The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of assets.

(iii) InventoriesThe fair value of inventories acquired in a business combination is determined on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(iv) Investments in equity and debt securitiesThe fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted closing bid prices at the reporting date. In the absence of a quoted price the multi-period excess earnings method is used. The fair value of held-to-maturity investments is determined for disclosure purposes.

(v) Trade and other receivablesThe fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the report-ing date. This fair value is determined for disclosure purposes.

(vi) Share-based payment transactionsThe fair value of employee share options is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instrument (based on the rules of the share incentive scheme) expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.



5. Prior period error

All share options in terms of the loyalty scheme were exercised in 2011 and there are no further amendments that are required.

The cumulative correction of the error in 2011 and 2010 comparative figures in the statement of financial position are as follows:

December 2010 Previously

stated

2010 Restatement due to error

December 2010 Restated

2011 Movement



R'000 R'000 R'000 R'000 R'000 R'000

Statement of financial position

Non-current assets

Intangible assets 62 902 - 62 902 7 416 (2 897) 67 421

Equity

Share capital and share premium 190 797 - 190 797 (3 775) - 187 022 Non-distributable reserves 14 410 1 478 15 888 2 243 (1 478) 16 653 Retained earnings 78 280 (1 478) 76 802 7 631 (1 419) 83 014

The disclosures in the statement of comprehensive income have been restated as follows:


stated




stated



Statement of comprehensive income

Profit for the year ('R000) 7 808 (633) 7 175 11 837 (422) 11 415 Total comprehensive income for the year ('R000)

In the prior years the group had incorrectly accounted for an employee loyalty scheme. Share options in the equity of a subsidiary were granted to the subsidiary's employees in 2008 and vested over a 3 year period ended August 2011. Due to various conditions that were present upon final vesting and exercising the company purchased the shares from the employees. The group incorrectly recognised the eliminating transaction as an addition to goodwill when the company increased it's investment in the subsidiary as opposed to an acquisition of non-controlling interests. Furthermore no amounts had been recognised to profit or loss over the period of vesting of the share options as required by IFRS 2. This has been rectified with retrospective share based payment expenses being allocated to profit or loss and the correction of the eliminating transaction.



6. Property plant and equipment

2012 Accumulated depreciation

and impairment

lossesCarrying

valueCost /

Valuation


and impairment

lossesCarrying

valueR'000 R'000 R'000 R'000 R'000 R'000

GROUP

Land and buildings 120 523 3 075 117 448 124 443 1 679 122 764 Plant and equipment 2 574 1 079 1 495 2 239 1 374 865 Motor vehicles 14 700 4 997 9 703 14 380 5 672 8 708 Furniture and fittings 9 874 3 440 6 434 9 762 3 298 6 464 Office equipment 4 478 2 290 2 188 4 179 2 382 1 797 Computer equipment 12 066 7 969 4 097 13 708 9 726 3 982 Computer software 1 204 943 261 1 315 1 142 173 Leasehold improvements 4 416 2 132 2 284 3 790 1 510 2 280

169 835 25 925 143 910 173 816 26 783 147 033

Included in the figures above are the following in terms of assets leased under finance leases.

Cost


and impairment

lossesCarrying

value


and impairment

lossesCarrying

valueR'000 R'000 R'000 R'000 R'000 R'000

GROUP

Leased assetsOffice equipment held under finance leases (refer note 21) - - - 124 122 2


6. Property plant and equipment (continued)

The carrying value of property, plant and equipment can be reconciled as follows:

Carrying value at the

beginning of the year Additions

Additions through business

combinations Disposals

Disposals through

disposal of subsidiaries

R'000 R'000 R'000 R'000 R'000

GROUP

2012

Land and buildings 122 764 - - (1 600) - Plant and equipment 865 1 553 - - (496) Motor vehicles 8 708 6 045 - (1 691) (1 284) Furniture and fittings 6 464 1 014 - (62) (73) Office equipment 1 797 1 300 - (105) (62) Computer equipment 3 982 2 909 12 (211) (112) Computer software 173 239 - - (21) Leasehold improvements 2 280 1 170 - - (128)

147 033 14 230 12 (3 669) (2 176)


beginning of the year

Disposals through

disposal of subsidiaries

R'000 R'000 R'000 R'000 R'000

2011

Land and buildings 107 299 2 004 (128) - 6 600 Plant and equipment 8 852 569 (5 362) (932) - Motor vehicles 6 384 5 600 (263) (816) - Furniture and fittings 5 114 2 554 (172) (175) - Office equipment 1 755 731 (3) (37) - Computer equipment 4 976 2 463 (45) (416) - Computer software 483 143 - - (212) Leasehold improvements 6 469 3 421 (489) - (6 600)

141 332 17 485 (6 462) (2 376) (212)

Certain property, plant and equipment is encumbered as stated in note

21 - Borrowings.

A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for inspection at the registered office of the group.



GROUP

2012

Land and buildingsPlant and equipment Motor vehiclesFurniture and fittingsOffice equipment Computer equipmentComputer softwareLeasehold improvements

2011

Land and buildingsPlant and equipment Motor vehiclesFurniture and fittingsOffice equipment Computer equipmentComputer softwareLeasehold improvements

ImpairmentRevaluation

reversal DepreciationCarrying value at end of year

R'000 R'000 R'000 R'000

- (2 320) (1 396) 117 448 - - (427) 1 495 - - (2 075) 9 703 - - (909) 6 434 - - (742) 2 188 - - (2 483) 4 097 - - (130) 261

(376) - (662) 2 284

(376) (2 320) (8 824) 143 910

Carrying value at end of year

R'000 R'000 R'000 R'000

- 8 214 (1 225) 122 764 - - (2 262) 865 - - (2 197) 8 708 - - (857) 6 464 - - (649) 1 797 - - (2 996) 3 982 - - (241) 173 - - (521) 2 280

- 8 214 (10 948) 147 033


Cost


and impairment

lossesCarrying

value


and impairment

lossesCarrying

valueR'000 R'000 R'000 R'000 R'000 R'000

COMPANY

Motor vehicles 4 236 927 3 309 3 016 553 2 463 Furniture and fittings 4 329 989 3 340 4 444 974 3 470 Office equipment 1 028 387 641 745 335 410 Computer equipment 2 390 1 407 983 2 075 950 1 125 Leasehold improvements 1 746 281 1 465 1 331 134 1 197 Kitchen equipment 160 8 152 - - -

13 889 3 999 9 890 11 611 2 946 8 665


The carrying value of property, plant and equipment can be reconciled as follows:



The carrying amount of property, plant and equipment can be reconciled as follows:

Carrying value

at the

beginning of

the year Additions Disposals Depreciation

Carrying value

at end of year

R'000 R'000 R'000 R'000 R'000

COMPANY

2012

Motor vehicles 2 463 2 997 (1 497) (654) 3 309

Furniture and fittings 3 470 270 - (400) 3 340

Office equipment 410 420 (8) (183) 639

Computer equipment 1 125 609 (21) (729) 984

Leasehold improvements 1 197 415 - (146) 1 466

Kitchen equipment - 160 - (8) 152

8 665 4 871 (1 526) (2 120) 9 890

Carrying value

at the

beginning of

the year Additions Disposals Depreciation

Carrying value

at end of year

R'000 R'000 R'000 R'000 R'000

2011

Motor vehicles 648 2 179 (50) (314) 2 463

Furniture and fittings 2 222 1 655 (71) (336) 3 470

Office equipment 372 166 (1) (127) 410

Computer equipment 1 451 278 (3) (601) 1 125

Leasehold improvements 5 406 2 576 (6 677) (108) 1 197

10 099 6 854 (6 802) (1 486) 8 665

Certain property, plant and equipment is encumbered as stated in note 21 – Borrowings.

A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for inspection at the registered office of the company.




2012 2011 2012 2011R'000 R'000 R'000 R'000

- 1 555 - -

At cost - 911 - - Additions at cost - 713 - - Revaluations - 20 - - Accumulated depreciation - (89) - -

78 975 80 000 - -

At cost 47 128 47 128 - - Additions at cost 11 734 11 734 - - Revaluations 22 149 22 149 - - Accumulated depreciation (2 036) (1 011) - -

11 850 11 930 - -

At cost and revaluations 11 496 11 496 - - Additions at cost 504 504 - - Accumulated depreciation (150) (70) - -

3 855 3 935 - -

At cost 1 203 1 203 - - Additions at cost 419 419 - - Revaluations 2 378 2 378 - - Accumulated depreciation (145) (65) - -

22 768 25 344 - -

At cost 21 700 21 700 - - Additions at cost - - - Revaluations 1 812 4 132 - - Accumulated depreciation (744) (488) - -

The effective date of the revaluation was 2 January 2013. The valuation was performed by J.D. Malakou, valuer M.I.V.S.A. There was no change in value from the prior year.

Factory and office buildings situated at 6 Liebenberg Street, Alrode, Erf 1599

The property was revalued during the current year to the fair market value as indicated by agents operating in the area.

Factory and office buildings situated on remaining Extent of Stand 140 Wynberg.

The effective date of the revaluation was 2 January 2013. The valuation was performed by J.D. Malakou, valuer

year.

Residential land and buildings situated on Erf 278, Hyde

The effective date of the revaluation was 2 January 2013. The valuation was performed by J.D. Malakou, valuer M.I.V.S.A. There was no change in value from the prior

Group Company

Land and buildings comprise of the following:

Land and buildings situated on Erf 581 and Erf 582, Elsburg Extension 1, Registration Division I.R. the province of Gauteng.

The land and buildings was jointly owned by MICROmega Properties 2 (Proprietary) Limited and MICROmega Investments Portfolio (Proprietary) Limited. The land and buildings were disposed during the current the year.

Land and buildings situated on Portion 1 of Erf 90,

Total 117 448 122 764 - -


7. Intangible assets

2012 Accumulated amortisation

and impairment

Carrying value Cost


and impairment

Carrying value

R'000 R'000 R'000 R'000 R'000 R'000Restated Restated

GROUP

Patents, trademarks and other rights 8 175 101 8 074 7 910 49 7 861 Brand names 2 871 1 701 1 170 3 246 1 701 1 545 Licenses and franchises 446 45 401 - - - Computer software, internally generated 24 285 7 744 16 541 17 970 2 037 15 933 Computer software, under development 17 681 17 681 - 16 497 - 16 497 Intellectual property 250 - 250 250 - 250 Customer relationships 603 603 - 603 603 - Goodwill 31 986 9 951 22 035 32 207 6 872 25 335

86 297 37 826 48 471 78 683 11 262 67 421

A second comparative year has not been provided for the restatement as the adjustment only effected intangible assets in 2011.



The carrying amount of intangible assets can be reconciled as follows:




combinations

Disposals through

disposal of subsidiaries Disposals

R'000 R'000 R'000 R'000 R'000

GROUP

2012

Patents, trademarks and other rights 7 861 276 - (6) - Brand names 1 545 - - - - Licenses and franchises - 446 - - - Computer software, internally generated 15 933 6 291 142 - - Computer software, under development 16 497 809 - - -

Intellectual property 250 - - - -

Goodwill 25 335 -

- - -

67 421 7 822 142 (6) -


beginning of the year Additions


combinations

Purchase price

adjustments DisposalsR'000 R'000 R'000 R'000 R'000

Restated

2011

Patents, trademarks and other rights 1 158 6 734 - - - Brand names 7 988 375 - - - Computer software, internally generated 10 433 6 494 - - - Computer software, under development 9 215 7 282 - - - Intellectual property 250 - - - - Customer relationships 46 - - - - Goodwill 33 812 - - (4) -

62 902 20 885 - (4) -

7. Intangible assets (continued)

The recoverable amounts of the intangible assets were assessed for impairment at 31 December 2012 by calculating the fair value of the cash generating unit (CGU’s) to which the goodwill and other intangible assets relate. The valuations of the CGU’s reflected fair values in excess of the attributable tangible assets, intangible assets and related goodwill.

Value in use was determined by discounting the future cash flows of the CGU’s generated from the continuing use of the intangible assets and was based on the following key assumptions: · Cash flows were projected on actual operating results and the 5 year business plan. Cash flows were extrapolated into perpetuity using a terminal growth rate of 2%. Management believes that this was justified due to the nature of the business industries the subsidiaries operate in. · Revenue was projected for each subsidiary related to the intangible asset. The anticipated revenue growth included in the cash flow projec tions was 5%. · A pre-tax discount rate of 11.27% (2011: 12.18%) was applied in determining the recoverable amount of the intangibles. The discount rate was estimated as the company’s weighted average cost of capital which was based on a debt leveraging of 8.5% (2011: 9%) and a required rate of return on equity estimated at the R157 bond rate increased at a market rate of 5.35% (2011: 6.72%). The values assigned to the key assumptions represent management’s assessment of future trends in the industries in which the group operates and are based on both external sources and internal sources (historical data).


GROUP

2012

Patents, trademarks and other rightsBrand namesLicenses and franchisesComputer software, internally generatedComputer software, under developmentIntellectual propertyGoodwill

2011

Patents, trademarks and other rightsBrand namesComputer software, internally generatedComputer software, under developmentIntellectual propertyCustomer relationshipsGoodwill

Transfers Impairments AmortisationCarrying value at end of year

R'000 R'000 R'000 R'000

- - (57) 8 074 (375) - - 1 170

- - (45) 401 - (4 011) (1 814) 16 541

375 (17 355) (326) - - - - 250 - (3 300) - 22 035

- (24 666) (2 242) 48 471

Transfers Impairments AmortisationCarrying value at end of year

R'000 R'000 R'000 R'000Restated

- - (31) 7 861 - (6 818) - 1 545

212 - (1 206) 15 933 - - - 16 497 - - - 250 - - (46) - - (8 473) - 25 335

212 (15 291) (1 283) 67 421



and impairment

Carrying value


and impairment

Carrying value

R'000 R'000 R'000 R'000 R'000 R'000

COMPANY

Patents, trademarks and other rights - - - - - -

- - - - - -








R'000 R'000 R'000 R'000

COMPANY

2012

Patents, trademarks and other rights - - - -

- - - -




R'000 R'000 R'000 R'000

2011

Patents, trademarks and other rights 1 000 (1 000) - -

1 000 (1 000) - -

8. Investment in subsidiaries

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Shares at cost - - 136 491 136 671

Impairment of investments - - (16 443) (16 443)

- - 120 048 120 228

Group Company

It is management's policy to review each investment annually for impairment by assessing the carrying value of the investment against the value in use. Value in use was determined by discounting the future cash flows generated from the subsidiary and was based on the following key assumptions: · Cash flows were projected on actual operating results and the 5 year business plan. Cash flows were extrapolated into perpetuity using a terminal growth rate of 2%. Management believes that this was justified due to the nature of the business industries the subsidiaries operate in. · A pre-tax discount rate of 11.27% (2011: 12.18%) was applied in determining the recoverable amount of the investments. The discount rate was estimated as the company’s weighted average cost of capital which was based on a debt leveraging of 8.5% (2011: 9.0%) and a required rate of return on equity estimated at the R157 bond rate increased at a market rate of 5.35% (2011: 6.72%). The values assigned to the key assumptions represent management’s assessment of future trends in the industries in which the group operate and are based on both external sources and internal sources (historical data). A list of the subsidiaries is included in the director’s report.


9. Investment in associates

2012 2011 2012 2011R'000 R'000 R'000 R'000

Carrying value of investment:Shares at cost 320 320 - -

Carrying value at beginning of the year 2 038 2 476 - - Impairment of investment in current year (319) - - - Impairment of loans receivable (3 692) - - - Equity accounted losses in the currrent year 2 060 (628) - - Movement in loan to associate (60) 190 - -

27 2 038 - -

GCM Meter Reading Services (Proprietary) Limited

50% interest in the unlisted shares of GCM Meter Readings Services (Proprietary) Limited, a company involved in meter reading services.

Carrying value of investment:Shares at cost 1 1 - - Equity accounted earnings since acquisition 37 31 - - Loans from associate (11) (11) - -

27 21 - -

Summary financial information of GCM Meter Reading Services (Proprietary) Limited

AssetsCurrent assets 63 63 - -

63 63 - -

Equity and liabilitiesEquity and reserves 63 63 - - Current liabilities - - - -

63 63 - -

Revenue - - - - Net loss before tax - - - -

GCM Meter Reading Services (Proprietary) Limited ceased trading in 2008 and is now dormant.

Group Company



9. Investment in associates (continued)

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Petrolmecs LDA

Summary financial information for equity accounted

investees not adjusted for the percentage ownership held

by the group:

49% interest in the unlisted shares of Petrolmecs LDA, a

company incorporated in Angola, providing labour

solutions.

Carrying value of investment:

Shares at cost - 319 - -

Equity accounted losses - (2 055) - -

Loan to associate - 3 753 - -

- 2 017 - -

Assets

Non-current assets 363 648 - -

Current assets 13 120 18 661 - -

13 483 19 309 - -

Equity and liabilities

Equity and reserves (5 269) (4 277) - -

Non-current liabilities 4 576 4 415 - -

Current liabilities 14 176 19 171 - -

13 483 19 309 - -

Revenue 4 146 8 632 - -

Loss before tax (836) (1 282) - -

Management had impaired the full exposure to the Angolan operations due to the difficulty to effectively realise

assets as a minority shareholder in an Angolan operation.

Summary financial information for equity accounted investees not adjusted for the percentage ownership held by

the group:

Group Company


Number of pensioners 11 11

10. Other investments

2012 2011 2012 2011R'000 R'000 R'000 R'000

Financial assets designated at fair value through profit or lossListed shares 163 73 - - Unlisted investments - 1 500 - 1 500

163 1 573 - 1 500

The group held the following investments:

Number of ordinary shares

Listed sharesKelly Group Limited - 2 600 - - Sanlam Limited 3 610 3 610 - -

Prices of listed shares2012 2011

R R

Kelly Group Limited - 4 Sanlam Limited 45 29

2012 2011 2012 2011Fair value of unlisted investments R'000 R'000 R'000 R'000

Unlisted investmentsLocal investments - 1 500 - 1 500

- 1 500 - 1 500

Fair value hierachy

Group Company

The local investment in unlisted shares for the current year represents 10% of the issued share capital of Lubrication Equipment (Proprietary) Limited, a previously wholly owned subsidiary in which control was relinquished during the prior year. The amount is shown net of impairment of R5 097 333 (2011: R3 597 333).

The recoverable amount of unlisted investments is determined using a discounted cash flow analysis, considering current economic conditions at reporting date.

The fair value of investments in listed shares is obtained with reference to the closing value of the shares at the period end on the JSE Limited. The balance of listed shares represents funds held in the trading margin account. A sensitivity analysis has not been performed as the effect of changes in economic conditions on listed investments held is not considered material to group results.

The group has not presented a fair value hierachy as the only items that are fairly valued every year are the investments in shares listed on the JSE Limited and the value is immaterial. These shares are classified as level 1 fair value as their values are derived from the prices. The unlisted investments are currently carried at cost less any accumulated impairments.



11. Loans receivable

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Mguka Trading Close Corporation 231 242 - -

The loan is secured by equity securities in a number of private

companies. The loan is interest free and is repayable within 12

months.

Instalment sale assets 20 233 24 900 - -

Assets under instalment sale agreements are repayable over 2

to 5 years at effective interest rates ranging from prime

lending plus 3% per annum to prime lending plus 4.5% per

annum. The loans are secured by the assets subject to the

agreements.

Orestizone (Proprietary) Limited - 4 000 - 4 000

The loan is secured by 90% of the issued share capital of

Lubrication Equipment (Proprietary) Limited. It bears interest

at prime lending rate and is repayable over 48 months. The

loan is shown net of impairment of R3 477 289 (2011: R0)

Lubrication Equipment (Proprietary) Limited

The loan is secured by 90% of the issued share capital of

Lubrication Equipment (Proprietary) Limited. It bears interest

at prime lending rate and is repayable over 48 months. The

loan is shown net of impairment of R855 529 (2011: R0)

ARDA Durban (Proprietary) Limited

The loan is secured by the full issued share capital of the

loanee and personal suretyships provided by its directors. The

loan is interest free and repayable in equal instalments over 12

months. 342 1 238 - -

20 806 37 145 - 10 765

Less: Portion recoverable within 12 months included in current

assets (18 618) (13 539) - (6 765)

2 188 23 606 - 4 000

Group Company

All loans are Rand denominated. The loans are carried at their amortised cost which is the same as the fair value based

on interest rates applicable on non-current loans receivable.


24. Amounts owing to subsidiary companies

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Beatrix Events (Proprietary) Limited - - - 180

Deltec Power Distributors (Proprietary) Limited - - 40 964 -

GIM Holdings (Proprietary) Limited - - 3 600 5 381

Gomobile (Proprietary) Limited - - 57 -

Intermap (Proprietary) Limited - - - 350

MICRO mega National Certification Authority (Proprietary) Limited - - - 18 330

MICRO mega Financial Services (Proprietary) Limited - - 1 737 3 486

MICRO mega Investment Portfolio (Proprietary) Limited - - 469 -

MICRO mega Properties 2 (Proprietary) Limited - - 336 -

MICROmega Revenue Management Solutions (Proprietary) Limited - - - 5 668

MICROmega Technologies (Proprietary) Limited - - 12 338 -

NOSA (Proprietary) Limited - - - -

SA International Capital & Market Brokers (Proprietary) Limited - - 16 238 20 380

Sebata Municipal Solutions (Proprietary) Limited - - 12 088 -

Swazi Occupational Safety & Health (Proprietary) Limited - - 71 71

- - 87 898 53 846

Group Company

Amounts owing to subsidiary companies are carried at amortised cost. The loans are unsecured and bear interest at rates determined periodically by the board of MICROmega Holdings Limited. The loans are repayable at the discretion of the board of MICROmega Holdings Limited. In the absence of a contractually agreed repayment date, the fair values and carrying values of these loans are deemed to be similar.

25. Provisions

Carrying amount at the beginning of

the year

Additional provisions

raisedUsed during

yearCarrying value at end of year

R'000 R'000 R'000 R'000

GROUP

2012

Provision for loyalty payment 2 - (2) - Provision for severance packages 5 904 - - 5 904

5 906 - (2) 5 904

Carrying amount at the beginning of

the year Additional provisions

Used during year


R'000 R'000 R'000 R'000

GROUP

2011

Provision for loyalty payment 203 - (201) 2 Provision for onerous leases 2 399 - (2 399) - Provision for severance packages 5 904 - - 5 904

8 506 - (2 600) 5 906



Loyalty payments The Group makes provision for accumulated payments due to specific employees in terms of loyalty programs which become payable after five years from the granting date. The balance represents amounts payable to individuals still in the employment of the Group as per amounts agreed in their employ-ment contracts. Onerous leases The Group recognises an onerous contract as a contract in which the unavoidable costs of meeting the obligations under the contract exceed the econom-ic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The Group recognises the present obligation under the contract as a provision. Severance packages The Group makes provision for severance packages payable to ex-employees of the discontinued operation, Kolbenco (Proprietary) Limited.

26. Revenue

2012 2011 2012 2011R'000 R'000 R'000 R'000

The amounts attributable to the different categories are as follows:Sale of goods 85 867 242 447 - - Rendering of services 660 163 533 036 34 837 28 301

746 030 775 483 34 837 28 301

Revenue from continuing operations 694 907 561 447 34 837 28 301 Revenue from discontinued operations 51 123 214 036 - -

746 030 775 483 34 837 28 301

Revenue comprises turnover, which excludes value added tax (VAT) and represents the invoiced value of goods and services less any settlement discounts granted.

Group Company

27. Other income

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Bad debts recovered 244 1 519 - -

Conference income 5 004 5 806 - -

Government grant income - 928 - -

Other income 1 704 280 - 36

Profit / (loss) on foreign currency translation 704 1 540 - -

Profit / (loss) on disposals of property, plant and equipment 327 (1 098) (73) (471)

Profit / (loss) on disposal of intangible assets - 1 247 - -

Rent received 766 12 739 -

Warranty income 237 554 - -

Write back of prescribed liabilities 2 000 - - -

10 986 10 788 666 (435)

Group Company


28. Other expenses

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Impairment of investment in subsidiary - - - 1 312

(Profit) / loss on disposal of investment in subsidiaries (8 473) (847) 180 39 387

Impairment of investment in associate 319 - - -

Impairment of other investments 1 500 3 695 1 500 3 630

Impairment of loans receivable 8 025 - 4 333 -

Revaluation of shares (79) - - -

1 292 2 848 6 013 44 329

Group Company

29. Auditors remuneration

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Auditor remuneration 1 988 2 321 349 206

Adjustment for previous year 144 210 171 144

Tax and secretarial services 99 179 47 45

2 231 2 710 567 395

Group Company

30. Administration expenses

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Included in administrative expenses are the following expenses:

Movements in allowance for credit losses 5 490 (119) - -

Bad debts impaired 11 408 4 820 656 -

Consulting fees 1 633 961 261 37

Depreciation of property, plant and equipment 8 824 10 948 2 120 1 486

Impairment of property, plant and equipment 376 - - -

Impairment of assets classified as held for sale - 1 738 - -

Amortisation of intangible assets 2 242 1 283 - -

Impairment of intangible assets 21 366 6 818 - -

Impairment of goodwill 3 300 8 473 - -

Operating lease charges 11 619 11 729 7 426 7 485

- Premises 10 105 9 829 7 426 7 485

- Motor vehicles - 248 - -

- Equipment 1 514 1 652 - -

Group Company



31. Personnel expenses

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Salaries and wages – senior management 26 751 30 419 8 826 6 718

Salaries and wages - other 64 501 89 471 7 630 1 816

Contributions to pension and provident funds 6 938 7 212 583 350

Contributions to medical aids 4 524 4 367 247 285

Contributions to life cover 1 864 1 673 109 86

Share-based payments expense 185 965 689 326

Loss / (income) recognised on defined benefit fund - refer note 15 - 5 454 - -

104 763 139 561 18 084 9 581

Group Company

32. Directors emoluments

Basic salary Allowances BonusesProvident

fund Directors fees Total 2012 Total 2011R'000 R'000 R'000 R'000 R'000 R'000 R'000

2012

D King 2 090 - - - - 2 090 2 084 I G Morris 1 611 120 1 000 - - 2 731 1 607 DSE Carlisle 1 359 54 435 132 - 1 980 1 580 DJ Case* 547 14 200 96 - 857 1 124 RB Dick* 410 - 82 - - 492 - R C Lewin - - - - 180 180 108 PV Henwood - - - - 145 145 108

6 017 188 1 717 228 325 8 475 6 611

* DJ Case resigned as director on 14 August 2012 and was replaced by RB Dick


2012 2011

DSE Carlisle

Options granted at beginning of year 600 000 600 000

Movement during year:

- New options granted during the year - -

- Options granted at end of year 600 000 600 000

Comprising:

280 000 280 000

70 000 70 000

250 000 250 000

600 000 600 000

DJ Case

Options granted at beginning of year 500 000 500 000

Movement during year:

- New options granted during the year - -

- Balance of options on resignation from the board (500 000) -

- Options granted at end of year - 500 000

Comprising:

- 100 000

- 150 000

- 250 000

- 500 000

Share options available at an issue price of R 3.70 per share, exercisable in

equal instalments on the 1 January 2010, 2011 and 2012

The following options have been granted in terms of MICROmegadirectors and are still outstanding:

Share Incentive Trust to

Number of ordinary share

options


equal instalments on the 31 March 2012, 2013 and 2014




equal instalments on the 1 January 2010, 2011 and 2012







33. Net finance (expense)/income

2012 2011 2012 2011R'000 R'000 R'000 R'000

Interest income on bank deposits 2 408 852 446 19 Interest income on loans receivable 4 248 4 019 - - Interest income from subsidiary companies - - 6 069 2 150 Interest income from associates 97 856 - - Dividend income from subsidiary companies - - 1 115 787 Dividend income from listed investments 1 4 - -

Finance income 6 754 5 731 7 630 2 956

Interest expense on bank deposits (842) (1 648) (3) - Interest expense on instalment sale liabilities (1 500) (1 784) (106) (114) Interest expense on finance lease liabilities (2) (10) - - Interest expense on other borrowings (3 730) (3 634) - - Interest expense on loans from subsidiary companies - - - -

Finance costs (6 074) (7 076) (109) (114)

Net finance (expense)/income 680 (1 345) 7 521 2 842

Group Company

34. Income tax expense

2012 2011 2012 2011R'000 R'000 R'000 R'000

Restated

South African normal tax- Current tax 17 339 14 157 1 675 -

Current year 17 284 14 319 1 675 - Adjustments to prior year estimates 55 (162) - -

- Secondary tax on dividends- 159 - - - 159 - -

- Deferred tax (9 586) (17 729) (4 954) (7 307) Current year (9 586) (17 729) (4 954) (7 307)

Tax for the year 7 753 (3 413) (3 279) (7 307)

Reconciliation of rate of tax % % % %South African normal tax rate 28,00 28,00 28,00 28,00

Adjusted for:Disallowable expenditure 1,54 1,99 (1,76) (0,37) Exempt income (0,14) (3,10) 7,20 0,47 Derecognition of deferred tax assets 18,55 0,87 - - Investment and other allowances - 21,90 - - Impairment charges and other capital profits (6,72) (35,77) - (12,53) Change in deferred tax rate on temporary differences on land and buildings - (56,45) - - Change in capital gains inclusion rate 5,63 - 42,24 - Secondary tax on dividends - 1,87 - - Adjustments to prior year estimates 0,34 (1,96) - -

Net increase 19,20 (70,65) 47,68 (12,43)

Effective rate 47,20 (42,65) 75,68 15,57

Refer to the statement of comprehensive income for taxes recognised directly in equity.

Group Company


35. Discontinued operation

At the end of April 2012 the group disposed of the business and trading assets and liabilities of Deltec Power Distributors (Proprietary) Limited.

The group continues to recognise the operations of Kolbenco (Proprietary) Limited and Automobile Radio Dealers Association 1989 (Proprietary) Limited as discontinued operations as the process to realise current assets is still ongoing.

The comparatives also include BTM Manufacturing (Proprietary) Limited and Lubrication Equipment (Proprietary) Limited, both entities which were sold in the prior year.

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Results of discontinued operation

Revenue 51 123 214 036 - -

Cost of sales (43 527) (167 776) - -

Gross profit 7 596 46 260 - -

Operating expenses (1 863) (74 088) - -

Profit / (loss) before tax 5 733 (27 828) - -

Taxation credit (816) 7 342 - -

Profit / (loss) after tax 4 917 (20 486) - -

Cash flows from/ (used) in discontinued operation

Net cash used in operating activities 48 403 (9 629) - -

Net cash from / (used in) investing activities 17 979 22 292 - -

Net cash used in financing activities (810) (16 578) - -

Net cash from discontinued operation 65 572 (3 915) - -

Group Company

Comparatives have been restated to include the profit of Deltec Power Distributor (Proprietary) Limited.


36. Earnings per share

GROUP

2012 2011

Weighted average ordinary shares 93 659 963 95 736 164 Share options 1 174 631 937 901

Weighted average diluted ordinary shares 94 834 594 96 674 065

(2011: R19 622 733) and a weighted average of 93 659 963 (2011: 95 736 164) ordinary shares in issue throughout the year.

Reconciliation between earnings and headline earnings:

2012 2011R'000 R'000 R'000 R'000 R'000

Restated

Per the statement of comprehensive income 16 427 (7 753) 2 929 11 603 6 964

Loss / (profit) on disposal of property, plant and equipment (327) 92 - (235) 872 Impairment of property, plant and equipment 376 (105) - 271 - Profit on disposal of intangible assets - - - - (1 073) Impairment of intangible assets 24 666 (5 982) - 18 684 15 291 Impairment of assets classified as held for sale - - - - 1 251 Profit on disposal of investments in subsidiaries and busi (8 473) 1 580 - (6 893) (6 361) Impairment of other investments 1 500 (420) - 1 080 2 679 Impairment of loans receivable 8 025 (2 247) - 5 778 - Impairment of investments in associates 319 (89) - 230 -

42 513 (14 924) 2 929 30 518 19 623

Reconciliation between weighted average ordinary shares and diluted weighted average ordinary shares:

issued during the period appropriately weighted for the time the shares are outstanding. Furthermore, any treasury shares held by the Group are deducted from this amount.

The calculation of headline earnings per share of 32.58 cents (2011: 20.50 cents) is based on earnings of R30 518 092

Net profit

Profit before taxation Taxation

Non-controlling

interest

The calculation of earnings per ordinary share of 12.39 cents (2011: 7.27 cents) is based on the earnings attributable to ordinary shareholders of R11 603 304 (2011: R6 964 021) and a weighted average of 93 659 963 (2011: 95 736 164) ordinary shares in issue throughout the year. The calculation of diluted earnings per ordinary share of 12.24 cents (2011: 7.20 cents) is based on earnings attributable to ordinary shareholders of R11 603 304 (2011: R6 964 021) and a diluted weighted average of 94 834 594 (2011: 96 674 065) ordinary shares in issue throughout the year.

The calculation of earnings per ordinary share of discontinued operations of 5.25 cents (2011: 21.39 cents loss) is based on the earnings attributable to ordinary shareholders of R4 917 099 (2011: R20 484 769 loss) and a weighted average of 93 659 963 (2011: 95 736 164) ordinary shares in issue throughout the year. COMPANY The calculation of loss per ordinary share of 1.12 cents (2011: 41.39 cents) is based on the loss attributable to ordinary shareholders of R1 053 431 (2011: R39 625 824) and a weighted average of 93 659 963 (2011: 95 736 164) ordinary shares in issue throughout the year.

The calculation of diluted loss per ordinary share of 1.11 cents (2011: 40.99 cents) is based on the loss attributable to ordinary shareholders of R1 053 431 (2011: R39 625 824) and a diluted weighted average of 94 834 594 (2011: 96 674 065) ordinary shares in issue throughout the year.


37. Share-based payments The group established the MICROmega Share Incentive Trust in 2001 together with a detailed share incentive scheme. The purpose of this scheme is to provide employees of the group with the opportunity to acquire an interest in the equity of the group, thereby providing such employees with a further incentive to advance the group’s interests and promoting an identity of interests between such employees and the shareholders of the group. This trust is not owned by MICROmega Limited and has no assets and liabilities nor are any shares held by the trust. Therefore, the trust has not been consolidated as a part of the group annual financial statements. In terms of the scheme, share options may not be exercised until after the period, provided that the employee remains in the employment of the group, calculated from the acceptance date, of: · more than 3 years shall have elapsed, in which event not more than one third thereof; · more than 4 years shall have elapsed, in which event not more than a further one third thereof representing two thirds thereof cumulatively; · more than 5 years shall have elapsed, in which event not more than a further one third thereof representing 100% thereof cumulatively. The share options lapse if employment terminates before the share options have vested. The share options expire upon the expiry of the option period, being 8 years from the grant date. The group occasionally grants share options to employees of subsidiary companies in terms of loyalty schemes over the share capital of the subsidiary. These share options are constructed on the same basis as the share options of the Share Incentive Trust. Outstanding options

2012 2011 2012 2011Restated

Options granted at beginning of year 5 315 081 5 858 581 3 050 000 3 250 000 Movement during year:- New options granted during the year - - - - - Options exercised during the year (467 499) (303 500) - - - Options lapsed during the year (1 504 249) (240 000) (366 667) (200 000)

- Options granted at end of year 3 343 333 5 315 081 2 683 333 3 050 000

Comprising:

Share options available at an issue price of R 0.45 per share - 414 841 - - Share options available at an issue price of R 0.85 per share - 368 200 - - Share options available at an issue price of R 0.90 per share - 250 000 - - Share options available at an issue price of R 1.00 per share 813 333 906 540 813 333 880 000 Share options available at an issue price of R 1.25 per share - 225 000 - - Share options available at an issue price of R 1.45 per share 550 000 850 000 550 000 850 000 Share options available at an issue price of R 2.00 per share 880 000 1 200 500 220 000 220 000 Share options available at an issue price of R 3.70 per share 1 100 000 1 100 000 1 100 000 1 100 000

3 343 333 5 315 081 2 683 333 3 050 000

The following options have been granted in terms of MICROstill outstanding:

mega Share Incentive Trust to employees and are

Number of ordinary share optionsGroup Company

Group share-based payment expenditure amounting to R185 527 (2011: R929 923) related to equity-settled share-based payment transactions were recognised directly in the statement of comprehensive income. Company share-based payment expenditure amounting to R76 134 (2011: R325 984) related to equity-settled share-based payment transactions was recognised directly in the statement of comprehensive income. No options were granted during the year ended 31 December 2012



38. Financial risk management 38,1 Overview The group has exposure to the following risks from its use of financial instruments: · credit risk · liquidity risk · currency risk This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and processes for measur ing and managing risk, and the group’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight for the group’s risk management framework. The Board is responsible for developing and monitoring the group’s risk management policies. The group’s risk management policies are established to identify and analyse the risk 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 activities. The Board oversees how management monitors compliance with the group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the group. 38,2 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 obliga tions, and arises principally from the group’s trade receivables from customers, instalment sale debtors and deposits with banks. Trade and other receivables The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the group’s customer base, including the default risk of the industry and country, in which customers operate, has less of an influence on credit risk. There is no concentration of credit risk in a single customer. The Board of Directors has established a credit policy under which each new customer is analysed individually for creditworthiness before the group’s standard payment and delivery terms and conditions are offered. Customers that fail to meet the group’s benchmark creditworthiness may transact with the group only on a prepayment basis. The group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. 37,3 Liquidity risk Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient cash/ liquid assets to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation. Typically the goup ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the group’s statement of financial position remains lowly geared and thus the Directors are comfortable with the ability to receive lines of credit. 38,4 Currency risk The group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the group. The currencies in which these transactions primarily are denominated are the US Dollar and the Euro. The group hedges foreign purchases against its exports. No forward exchange contracts are currently used whilst the group retains its natural hedge. There were foreign receivables and payables outstanding at 31 December 2012. Refer to note 38.8 - Financial risk management - Exposure to currency risk. 38,5 Capital management The Board’s policy is to maintain a strong capital base so as to maintain creditor and shareholder confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the group defines as net operating income divided by total shareholders’ equity. The Board of Directors also monitors the level of dividends to ordinary shareholders. There were no changes in the group’s approach to capital management during the year. The group is not subject to externally imposed capital requirements.


12. Deferred taxation

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Deferred tax assets and liabilities are attributable to the following:

Deferred tax assets

Property, plant and equipment - (1 093) - -

Intangible assets - (4 821) - -

Investments 1 667 1 181 1 427 1 007

Loans receivable 2 686 907 1 213 -

Income received in advance - 555 - -

Accrual for straight lining of leases 2 906 1 901 2 167 1 404

Finance lease liabilities - 2 - -

Allowances for credit losses 2 946 1 929 - -

Accruals for leave pay 1 049 1 425 452 496

Provisions 1 653 1 653 - -

Tax loss carry-forwards 30 332 26 995 7 345 4 743

43 239 30 634 12 604 7 650

Deferred tax liabilities

Property, plant and equipment (10 322) (8 291) - -

Intangible assets (1 821) - - -

Investments (443) (1 071) - -

Income received in advance 540 - - -

Accrual for straight lining of leases (2 801) (2 119) - -

Allowances for credit losses 72 - - -

Accruals for leave pay 427 23 - -

Provisions - 1 - -

Tax loss carry-forwards 473 169 - -

(13 875) (11 288) - -

29 364 19 346 12 604 7 650

Group Company

Deferred tax assets and liabilities are only offset when the income tax relates to the same legal entity or fiscal authority or

they intend to settle the assets and liabilities on a net basis.



12. Deferred taxation (continued)

Carrying value at the beginning of

the year Recognised in

profitDirectly through

equityCarrying value at end of year

R'000 R'000 R'000 R'000

GROUP

2012

Property, plant and equipment (9 384) (1 370) 432 (10 322) Intangible assets (4 821) 3 000 - (1 821) Investments 110 1 114 - 1 224 Loans receivable 907 1 779 - 2 686 Income received in advance 555 (15) - 540 Accrual for straight lining of leases (218) 323 - 105 Finance lease liabilities 2 (2) - - Allowances for credit losses 1 929 1 089 - 3 018 Accruals for leave pay 1 448 28 - 1 476 Provisions 1 654 (1) - 1 653 Tax loss carry-forwards 27 164 3 641 - 30 805

19 346 9 586 432 29 364



Recognised in profit

Directly through equity

Acquisition on business

combinationsCarrying value at end of year

R'000 R'000 R'000 R'000 R'000

GROUP

2011

Property, plant and equipment (19 002) 10 915 (1 299) 2 (9 384) Intangible assets (2 013) (2 808) - - (4 821) Investments 778 (668) - - 110 Loans receivable 327 580 - - 907 Prepayments (55) 55 - - - Income received in advance 665 (110) - - 555 Accrual for straight lining of leases 158 (376) - - (218) Finance lease liabilities 8 (6) - - 2 Allowances for credit losses 1 849 127 - (47) 1 929 Accruals for leave pay 1 238 278 - (68) 1 448 Provisions 2 381 (727) - - 1 654 Tax loss carry-forwards 25 111 10 469 - (8 416) 27 164

11 445 17 729 (1 299) (8 529) 19 346

The movements in the deferred tax amount on the statement of financial position can be reconciled as follows (amounts are shown on a net basis):






R'000 R'000 R'000

COMPANY

2012

Investments 1 007 420 1 427 Loan receivable - 1 213 1 213 Accrual for straight lining of leases 1 404 763 2 167 Accruals for leave pay 496 (44) 452 Tax loss carry-forwards 4 743 2 602 7 345

7 650 4 954 12 604





R'000 R'000 R'000

COMPANY

2011

Investments - 1 007 1 007 Accrual for straight lining of leases 229 1 175 1 404 Accruals for leave pay 65 431 496 Tax loss carry-forwards 49 4 694 4 743

343 7 307 7 650

13. Non-current assets classified as held for sale

Cost


and impairment losses Carrying value Cost


and impairment losses Carrying value

R'000 R'000 R'000 R'000 R'000 R'000

Plant and equipment - - - 44 935 38 424 6 511 Furniture and fittings - - - 47 47 - Office equipment - - - 358 302 56 Computer equipment - - - 1 174 1 149 25

- - - 46 514 39 922 6 592

The plant and machinery of Kolbenco (Proprietary) Limited, a manufacturer of pistons, is presented as a disposal group held for sale following the commitment of the group's management, on 15 December 2008 to sell the plant and machinery and cease manufacturing following the down-turn in the automotive sector. An offer was received in the prior year for all the remaining plant and equipment after lengthy negotiations. The plant and machinery was impaired to its realisable value on acceptance of the offer. These assets were disposed of in the current year in terms of the offer and the negotiations.




13. Non-current assets held for sale (continued)

The carrying value of non-current assets held for sale can be reconciled as follows:


beginning of the year Additions Disposals Impairments Depreciation


R'000 R'000 R'000 R'000 R'000 R'000

2012

Plant and equipment 6 511 - (6 511) - - - Furniture and fittings - - - - - - Office equipment 56 - (56) - - - Computer equipment 25 - (25) - - -

6 592 - (6 592) - - -


beginning of the year Additions Disposals Impairments Depreciation at end of year

R'000 R'000 R'000 R'000 R'000 R'000

2011

Plant and equipment 24 615 - (16 366) (1 738) - 6 511 Furniture and fittings - - - - - - Office equipment 56 - - - - 56 Computer equipment 15 10 - - - 25

24 686 10 (16 366) (1 738) - 6 592

14. Inventories

2012 2011 2012 2011

R'000 R'000 R'000 R'000

The amounts attributable to the different categories are as follows:

Raw materials - 6 000 - -

Consumables 363 1 036 - -

Work in progress 413 231 - -

Manufactured finished goods - 7 256 - -

Merchandise 1 766 37 152 585 953

Goods in transit - 3 409 - -

2 542 55 084 585 953

Inventory write-downs (adjustments to carrying value for obsolete

and slow moving inventory) - (11 291) - -

2 542 43 793 585 953

Group Company


15. Retirement benefits

Defined benefit plan

Kolbenco (Proprietary) Limited, a wholly owned subsidiary, made contributions to a defined benefit plan that provided pension benefits for employees upon retirement. The plan entitled a retired employee to receive an annual payment equal to 2% of the employee's highest annual salary for each year of pensionable service. The pension fund was closed and finalised for liquidation in the prior year. The preliminary liquidation accounts had been submitted to the Financial Services Board on 1 December 2011. The measurement and disclosures of the fund have been based on these preliminary liquidation accounts and not on a projected unit credit method as per IAS 19. The liquidation accounts have been approved by the Financial Services Board during 2012. The administrator made payment on a portion of the employ-er surplus however the other liabilities will be settled in early 2013.

2012 2011 2012 2011R'000 R'000 R'000 R'000

Statement of financial position reconciliation

Present value of funded obligations 22 919 22 919 - - Active members 9 370 9 370 - - Current pensioners 8 903 8 903 - - Accounts payable 395 395 - - Outstanding benefits payable 3 984 3 984 - - Liquidation expenses reserve account 267 267 - - Present value of unfunded obligations - - - - Total present value of the defined benefit obligation 22 919 22 919 - - Fair value of plan assets (24 800) (44 300) - - Total employer surplus (1 881) (21 381) - -

Movement in the present value of the defined benefit obligation

Defined benefit obligations at 1 January 22 919 15 284 - - Interest cost - - Current service cost - 50 - - Employee contributions paid into the plan - 39 - - Increase in amount required for pensioners to perpetuity - 3 297 - - Correction of benefits paid following liquidators audit - 3 984 - - Increase in sundry payables - 265 - - Benefits paid by the plan - - - - Actuarial gain on obligation - - - - Defined benefit obligation at 31 December 22 919 22 919 - -

Movement in the present value of plan assets

Fair value of plan assets at 1 January 44 300 42 128 - - Actual / expected return on plan assets - 2 127 - - Contributions paid into the plan - 45 - - Employer surplus paid by the plan (19 500) - - - Actuarial gain / (loss) on plan assets - - - - Fair value of plan assets at 31 December 24 800 44 300 - -

Surplus / (expense) recognised in profit or loss

Current service cost - (50) - - Interest cost - - - - Increase in amount required for pensioners to perpetuity - (3 297) Correction of benefits paid following liquidators audit - (3 984) Increase in sundry payables - (265) Actual / expected return on plan assets - 2 127 - - Actuarial gains / (losses) - - - - Contributions paid into the plan - 6 - - Income recognised in profit or loss - (5 463) - -

Membership statistics 2012 2011

Number of members 5 5

Group Company



16. Trade and other receivables

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Trade and other receivables 98 556 120 309 230 359

VAT receivable 2 933 4 557 - -

Prepayments 7 041 8 427 370 106

Deposits 1 195 1 174 174 174

109 725 134 467 774 639

Group Company

At 31 December 2012 group trade receivables are shown after impairment adjustments of R14 489 066 (2011: R8 998 741).

The trade receivables of certain subsidiary companies have been ceded as security for banking facilities granted to certain

subsidiaries, (see note 18 - Cash and cash equivalents ).

17. Amounts owing by subsidiary companies

2012 2011 2012 2011R'000 R'000 R'000 R'000

Unencumbered loans

ARDA Professional Machining Services (Proprietary) Limited - - 15 13 Automobile Radio Dealers Association 1989 (Proprietary) Limited - - 9 334 10 354 Beatrix Events (Proprietary) Limited - - 379 - Cloudware (Proprietary) Limited - - 330 5 702 Deltec Power Distributors (Proprietary) Limited - - - 4 440 EMPOWERisk (Proprietary) Limited - - 281 281 Kolbenco (Proprietary) Limited - - 5 590 17 097 Kyostax (Proprietary) Limited - - 5 657 5 957 MICROmega Investment Portfolio (Proprietary) Limited - - - 328 MICROmega Properties 2 (Proprietary) Limited - - - 461 MICROmega Publications (Proprietary) Limited - - - 109 MIS Consulting (Proprietary) Limited - - 1 709 - Mzimkhulu Financial Investments (Proprietary) Limited - - 102 92 NOSA (Proprietary) Limited - - 60 876 9 766 NOSA Namibia (Proprietary) Limited - - 549 549 Sciam Professional Solutions (Proprietary) Limited - - 7 157 5 389 Sebata Municipal Solutions (Proprietary) Limited - - - 628 Symphony Trade & Invest 32 (Proprietary) Limited - - 2 896 1 354 Tiseletso Investments (Proprietary) Limited - - 281 271 Turrito Networks (Proprietary) Limited - - 11 122 1 080

Encumbered loans

MICROmega Revenue Management Solutions (Proprietary) Limited - - - - MECS Africa (Proprietary) Limited - - 13 661 15 789

Interest-bearing loans

MICROmega Technologies (Proprietary) Limited - - - 8 304 Stable-Net (Proprietary) Limited - - 29 828 13 958

- - 149 767 101 922

Less: Portion recoverable within 12 months included in current assets - - (117 847) (87 601)

- - 31 920 14 321

Group Company


Amounts owing by subsidiary companies are carried at amortised cost. The loan to MECS (Africa) (Proprietary) Limited has been ceded to First Rand Bank Limited as security for facilities granted to MECS (Africa) (Propri-etary) Limited. The loans to Stable-Net (Proprietary) Limited and MICROmega Technologies (Proprietary) Limited are unsecured, bear interest at the prime overdraft rate and have no fixed terms of repayment. The loans to Mzimkhulu Financial Investments (Proprietary) Limited, Tiseletso Investments (Proprietary) Limited and Stable-Net (Proprietary) Limited have been subordinated until such time that their assets fairly valued exceed their liabilities. The remaining loans are unsecured and bear interest at rates determined periodically at the discretion of the Board of Directors. The loans are repayable at the discretion of the Board of Directors. In the absence of contractual repayment dates, the fair values and carrying values of these loans are deemed to be similar.

18. Cash and cash equivalents

2012 2011 2012 2011

R'000 R'000 R'000 R'000

The amounts attributable to the different categories are as follows:

Cash on hand 165 173 3 -

Current account balances 100 800 12 162 249 188

Call account balances 6 762 11 407 255 3 383

107 727 23 742 507 3 571

Bank overdrafts used for cash management purposes - (9 065) - -

107 727 14 677 507 3 571

Group Company

The following security has been provided in respect of facilities made available to group companies: MECS Africa (Proprietary) Limited A suretyship, upon terms and conditions acceptable to First National Bank for R8 million by MICROmega Holdings Limited. Cession in favour of First National Bank given by MICROmega Holdings Limited of any and all of its rights in and to its loan account held in the company. Trade accounts receivables have been ceded for banking facilities granted. MICROmega Securities (Proprietary) Limited and its subsidiary companies

Fixed deposits held with FirstRand Bank Limited amounting to R520 000 have been ceded as security for the . . . facilities granted to the compa ny. A guarantee to the amount of R100 000 has been given to FirstRand Bank Limited as security for facilities. A suretyship in the amount of R679 000 in favour of the bank facilities granted by First National Bank.

NOSA – MICROmega National Certification Authority (Proprietary) Limited A guarantee to the amount of R211 139 has been given to FirstRand Bank Limited as security for rental of premises. Absa Bank Limited holds a contingency to the value of 39 000 NOSA – NOSA(Proprietary) Limited The company has a settlement facility from First National Bank Limited of R2 000.



19. Share capital and share premium

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Authorised

200 000 000 ordinary shares of 1 cent each 2 000 2 000 2 000 2 000

Issued

Balance at beginning of year - 100 802 677 (2011: 100 802 677) 943 965 1 008 1 008

Balance at end of year 943 965 1 008 1 008

Less treasury shares repurchased during the year (15) (22) - -

Balance at the end of year 928 943 1 008 1 008

Share premium

Balance at beginning of year 186 079 189 832 191 784 191 749

Share options exercised 613 35 613 35

Balance at end of the year 186 692 189 867 192 397 191 784

Less treasury shares repurchased during the year (8 451) (3 788) - -

Balance at end of the year 178 241 186 079 192 397 191 784

179 169 187 022 193 405 192 792

Group Company

The directors are authorised, 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, subject to the provision of section 38 and 41 of the Companies Act and the requirements of the JSE Securities Exchange South Africa. Shares repurchased by a subsidiaries and held in treasury amounted to 8 037 757 shares at year end. During the year 1 529 574 shares were repurchased at an average price of 377,86 cents per share. The group has also issued share options (see note 37 - Share-based payments).

20. Non-distributable reserves

The group had the following non-distributable reserves at year end: Revaluation reserve The revaluation reserve comprises all revaluation surpluses relating to the revaluation of owner occupied properties. Foreign currency translation reserve The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Deal differences reserve The deal difference reserve comprises a retention amount to cover any unmatched trades that may occur in the broking businesses. Share-based payments reserve The share-based payments reserve represents the vested fair value of services provided in exchange for share options.


21. Borrowings

2012 2011 2012 2011R'000 R'000 R'000 R'000

Instalment sale liabilities 6 591 12 703 337 2 545

Liabilities under instalment sale agreements repayable over periods from two years and four months to four years at effective interest rates ranging from prime lending rate less 1.25% to prime lending rate plus 1.% per annum. The liabilities are secured by property, plant and equipment with a carrying value of R6 362 387 (2011: R 7 262 338) together with a cession of revenue streams associated with revenue generating equipment financed by instalment sale agreements.

Finance lease liability - 5 - - Liability under a finance lease agreement repayable within 1 year at an effective interest rate of prime lending rate plus 1.5% per annum. Secured by property, plant and equipment with a carrying value of R0 (2011: R2 372).

Mortgage bonds 56 630 58 962 - - Mortgage bonds repayable over 94-130 months at a rate of prime minus 1% to prime minus 0.15% and are secured by property with a value of R95 865 000.

Anglo American Corporation - 2 000 -

The loan is interest free and currently is repayable upon the existence of sufficient cash reserves in Kolbenco (Proprietary) Limited. The loan is unsecured.

Warren Friedland 5 640 5 940 - -

The loan is interest free, unsecured and repayable in the ordinary course of business through the distribution of receipts from rental income.

68 861 79 610 337 2 545

Less: Amounts payable within 12 months included in current liabilities (12 901) (14 418) (178) (769)

55 960 65 192 159 1 776

All the liabilities are Rand denominated.

Please refer to note 6 - Property, plant and equipment, for disclosure on assets held under finance leases.

The fair values of the borrowings have been assessed taking into account their effective interest rates and maturity periods. None of the fair values differ materially from the corresponding carrying values.

For an analysis of the maturity of these borrowings, please refer to note 38.

Group Company



22. Deferred vendor payments

2012 2011 2012 2011R'000 R'000 R'000

The amount due to vendors represents the balance of the purchase consideration owing in respect of acquisitions. The loans are settled through the issue of shares and cash resources upon achievement of profit warranties. 534 534 534 534

Less: Amount payables within 12 months included in current liabilities (534) (534) (534) (534)

- - - -

Amounts to be settled:Through the issue of shares 534 534 534 534 Through the distribution of cash resources - - - -

534 534 534 534

Deferred vendor payments are recognised when there is a reasonable expectation that the predetermined profit warranties will be achieved.

Group Company

23. Trade and other payables

2012 2011 2012 2011

R'000 R'000 R'000 R'000

Trade and other payables 39 768 57 753 9 651 6 373

VAT payable 4 941 6 061 2 501 1 817

Income received in advance 7 430 4 181 65 180

Leave pay accrual 5 280 5 170 1 614 1 772

Payroll accruals 22 950 25 901 2 179 1 518

80 369 99 066 16 010 11 660

Group Company


38,6 Exposure to credit risk

2012 2011 2012 2011R'000 R'000 R'000 R'000

Loans receivable 20 806 23 606 - 4 000 Trade and other receivables 109 725 134 467 774 639 Cash and cash equivalents 107 727 23 742 507 3 571 Loans to subsidiaries - - 31 920 33 755 Loans to associates (11) 3 742 - -

238 247 185 557 33 201 41 965

2012 2011 2012 2011R'000 R'000 R'000 R'000

Domestic 89 116 77 671 230 359 Foreign 9 440 42 638 - -

98 556 120 309 230 359

Other receivables 11 169 14 158 544 280

Total trade and other receivables 109 725 134 467 774 639

The carrying amounts of financial assets represent the maximum exposure to credit risk as shown below:

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

Refer to note 18 – Cash and cash equivalents, for trade receivable offered as security for banking facilities.

Due to the wide spectrum of industries in which the Group operates, information on the maximum exposure to credit risk for trade receivables at the reporting date by type of customer has not been disclosed.

Group Company

38. Financial risk management (continued)

The ageing of trade and other receivables at reporting date was:

Gross Impairment Gross ImpairmentR'000 R'000 R'000 R'000

Not past due 40 602 -

230 - Past due 30 days 27 018 - - - Past due 30 – 120 days 45 425 (14 489) - -

113 045 (14 489) 230 -

Gross Impairment Gross ImpairmentR'000 R'000 R'000 R'000

Not past due 78 151 - 359 - Past due 30 days 8 204 - - - Past due 30 – 120 days 42 953 (8 999) - -

129 308 (8 999) 359 -

2011Group Company

Group Company

2011

Group Company



38,7 Liquidity riskThe following are the contractual maturities of financial liabilities:

Carrying amount

Greater than 5 years

Carrying amount 1 year 2-5 years

Greater than 5 years

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Interest bearing borrowings 63 221 7 261 25 425 30 535 337 178 159 - Non-interest bearing borrowings 5 640 5 640 - - - - - - Trade and other payables 80 369 80 369 - - 16 010 16 010 - - Deferred vendor payments 534 534 - - 534 534 - - Bank overdraft - - - - - - - - Loans owing to subsidiary companies - - - - 87 898 87 898 - -

149 764 93 804 25 425 30 535 104 779 104 620 159 -

2011

Non-derivative liabilitiesInterest bearing borrowings 71 670 6 478 39 304 25 888 2 545 770 1 775 - Non-interest bearing borrowings 7 940 7 940 - - - - - - Trade and other payables 99 066 99 066 - - 11 660 11 660 - - Deferred vendor payments 534 534 - - 534 534 - - Bank overdraft 9 065 9 065 - - - - - - Loans owing to subsidiary companies - - - - 53 846 53 846 - -

188 275 123 083 39 304 25 888 68 585 66 810 1 775 -

Group Company


2012 2011 2012 2011R'000 R'000 R'000 R'000

Domestic 29 971 43 577 9 651 6 373 Foreign 9 797 14 176 - -

39 768 57 753 9 651 6 373

Other payables (refer note 23 - Trade and other payables) 40 601 41 313 6 359 5 287

Total trade and other payables 80 369 99 066 16 010 11 660

Group Company


The maximum exposure to liquidity risk for trade payables at the reporting date by geographic region


38,8 Exposure to currency risk

Rand Euro US Dollar Other TotalR'000 R'000 R'000 R'000 R'000

Trade receivables 89 116 - 8 724 716 98 556

Trade payables 29 971 - 9 772 25 39 768

Sensitivity Analysis

10 percent strengthening

10 percent weakening

R'000 R'000

Euro - - Us Dollar (75) 75 Other (GBP) 50 (50)

Rand Euro US Dollar Other TotalR'000 R'000 R'000 R'000 R'000

Trade receivables 77 671 1 42 116 521 120 309

Trade payables 43 577 3 711 10 465 - 57 753


10 percent weakening

R'000 R'000

Euro (267)

267 Us Dollar 2 279 (2 279) Other 38 (38)

(Decrease)/increase in profit(Decrease)/increase in profit

(Decrease)/increase in profit(Decrease)/increase in profit(Decrease)/increase in profit

Group 2011

The Group is exposed to currency risk to the extent that trade receivable and trade payable foreign currency balances would fluctuate. A 10 percent movement in currencies held on the reporting date would have increased / (decreased) profit or loss as follows:


Group 2012

The Group is exposed to currency risk to the extent that trade receivable and trade payable foreign currency balances would fluctuate. A 10 percent movement in currencies held on the reporting date would have increased / (decreased) profit or loss as follows:

(Decrease)/increase in profit



38,9 Interest rate riskProfileThe interest rate profile of the interest bearing financial instruments was:

Interest 2012 2011 2012 2011rate R'000 R'000 R'000 R'000

Variable rate instruments- Bank overdraft 9,00% - 9 065 - - - Interest bearing liabilities 63 221 71 670 337 2 545

- Instalment sales agreements 7.75% - 10.00% 6 591 12 703 337 2 545- Finance lease liabilities 10,50% - 5 - - - Mortgage bond 7,00% 56 630 58 962 - -

Sensitivity analysis


1 percent

R'000 R'000

2012 (455) 455 2011 (581) 581

A change in 100 basis points in interest rates on the reporting date would have increased / (decreased) profit or loss as follows:

Decrease/(increase) in profitDecrease/(increase) in profit


Group Company

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in interest rates at the reporting date would not affect profit and loss.

38,10 Financial risk management

Carrying Value Fair Value

Carrying Value Fair Value

GROUP R'000 R'000 R'000 R'000

AssetsOther investments 163 163 1 573 1 573 Loan to associate company (11) (11) 3 742 3 742 Loans receivable 20 806 20 806 37 145 37 145 Trade and other receivables 109 725 109 725 134 467 134 467 Cash and cash equivalents 107 727 107 727 23 742 23 742

LiabilitiesInterest bearing borrowings 63 221 63 221 71 670 71 670 Non-interest bearing borrowings 5 640 5 640 7 940 7 940 Trade and other payables 80 369 80 369 99 066 99 066 Deferred vendor payments 543 543 543 543 Bank overdraft - - 9 065 9 065

Estimation of fair values

No disclosure has been done on the hierachy of the fair values reached as the group only has listed investments to the value of R163 000.

2012 2011Fair value analysis

The method of estimation of fair values has been detailed in note 4 - Determination of fair values.


Carrying Value

COMPANY R'000 R'000 R'000 R'000

AssetsOther investments - - 1 500 1 500 Amounts owing by subsidiary companies 149 767 149 767 101 922 101 922 Trade and other receivables 774 774 639 639 Cash and cash equivalents 507 507 3 571 3 571

LiabilitiesInterest bearing borrowings 337 337 2 545 2 545 Amounts owing to subsidiary companies 87 898 87 898 53 846 53 846 Trade and other payables 16 010 16 010 11 660 11 660 Deferred vendor payments 534 534 534 534

38,11 Equity price riskThe group is not materially exposed to equity price risk.

2012 2011Fair value analysis

39. Acquisitions of subsidaries and non-controlling interests

R'000 R'000

Property, plant and equipment 12 12 Intangible assets 142 142 Cash and cash equivalents 1 1 Trade and other payables (296) (296) Non-controlling interest 141 141 Total net assets acquired - - Goodwill - Consideration paid -

Total consideration -

Cash acquired 1 Cash portion of consideration -

Net cash outflowinflow (1)

No statement of comprehensive income effect has been provided as the results are already fully consolidated for the full financial year of MIS Consulting (Proprietary) Limited.

On 1 March 2012, the group acquired 50% of the issued share capital of MIS Consulting (Proprietary) Limited for R50 payable in cash. MIS Consulting (Proprietary) Limited contributed a loss of R996 652 to the group earnings.

Acquired assets and liabilities

Fair value of identifiable



40. Disposals of subsidiaries

R'000 R'000

Property, plant and equipment (2 176) (2 176) Intangible assets (6) (6) Inventories (40 075) (40 075) Trade and other receivables (19 629) (19 629) Trade and other payables 22 429 22 429 Borrowings 1 488 1 488 Bank overdraft 4 942 4 942 Total net assets disposed (33 027) (33 027) Profit on disposal (8 473) Consideration received (41 500) Bank overdraft (4 942)

Total consideration (46 442)

Gross cash inflow on disposal (46 442) Less: Retention of other investment - Less: Term loan for settlement of transaction -

Net cash inflow on disposal (46 442)

The group disposed of the trading assets and liabilities of Deltec Power Distributors (Proprietary) Limited on 30 April 2012.

Disposed assets and liabilities

Fair value of identifiable assets and liabilities

41. Comparative figures

The operations of the Deltec segment has been reclassified in the comparative figures from continued operations to discontinued operations due to the sale of the business and its assets and liabilities during the current financial year.

The comparative figures further have been amended with the corrections detailed in Note 5 - Prior Period Error.

42. Commitments

2012 2011 2012 2011R'000 R'000 R'000 R'000

Operating lease commitmentsThe future minimum lease payments under non- cancelable operating leases are as follows:

Premises and office equipmentNot later than 1 year 8 867 6 945 12 018 7 853Later than 1 year and not later than 5 years 11 792 9 759 51 061 50 152Later than 5 years - - 42 339 158 142

20 659 16 704 105 418 216 147

Finance lease liability on office equipmentNot later than 1 year - 5 - - Later than 1 year and not later than 5 years - - - -

- 5 - -

Capital commitmentsThe Group had made no capital commitments as at date of the annual financial statements

Group Company


operations due to the sale of the business and its assets and liabilities during the current financial year.

The comparative figures further have been amended with the corrections detailed in Note 5 - Prior Period Error.

43. Related Parties

2012 2011

R'000 R'000

Management fees 34 580 28 301

A dividend was received from Ocneblok Properties (Proprietary) Limited during the year for an amount of R1 115 039.

Amounts owing to and from related parties were as follows:

2012 2011

R'000 R'000

Amounts owing by subsidiary companies (see note 17) 149 767 101 922

Amounts owing to subsidiary companies (see note 24) (87 898) (53 846)

61 869 48 076

During the year there were transactions amongst Group companies. These companies are described in the director’s report. All intercompany transac-tions and balances are eliminated on consolidation. All related party transactions were made on terms equivalent to those that prevail in arm's length transactions that are made. Management fees allocated to the subsidiary companies were as follows:



44. Notes to the cash flow

2012 2011 2012 2011R'000 R'000 R'000 R'000

Restated

44,1 Cash generated by operating activities

Profit / (loss) before taxation 16 427 8 002 (4 333) (46 934)Adjustments for:Depreciation and amortisation 11 066 12 231 2 120 1 486 (Profit) / loss on disposals of property, plant and equipment (327) 1 098 73 471 Profit on disposal of intangible assets - (1 247) - - (Profit) / loss on disposals of businesses and subsidiaries (8 473) (847) - 39 387 Impairment of property, plant and equipment 376 - - - Impairment of goodwill 3 300 8 473 - - Impairment of intangible assets 21 366 6 818 - - Impairment of investment in subsidiaries - - 180 1 312 Impairment of investment in associates 319 - - - Impairment of assets classified as held for sale - 1 738 - - Impairment of other investments 1 500 3 695 1 500 3 630 Impairment of loans receivable 8 025 - 4 333 - Finance income (6 754) (5 731) (7 630) (2 956) Finance expenses 6 074 7 076 109 114 Movement in retirement benefit assets and liabilities 19 500 5 463 - - Movement in provisions (2) (2 600) - - Realisation of non-distributable reserves - 90 - - Movement in foreign currency translation reserve 99 (4) - - Share of (profit) / loss of equity accounted associates (2 060) 628 - - Movement in share-based payments reserve 185 965 689 361

70 621 45 848 (2 959) (3 129)

Movements in working capital 9 725 (14 559) 4 583 4 536 Decrease / iIncrease) in inventories 1 176 (3 036) 368 (38) (Increase) / decrease in trade and other receivables 5 113 (34 047) (135) 750 Increase in trade and other payables 3 436 22 524 4 350 3 824

80 346 31 289 1 624 1 407

44,2 Taxation paid

Balance owing at beginning of the year 642 1 043 1 030 1 076 Current tax for the year recognised in profit or loss (17 339) (14 316) (1 675) - Adjustment in respect of subsidiaries disposed during the year - 156 - - Balance owing / (prepaid) at end of the year 899 (642) 1 423 (1 030)

(15 798) (13 759) 778 46

Group Company


44. Notes to the cash flow (continued)

44,3 Acquisition of subsidiaries

During the current year the Group acquired the following entities:

2012 2011 2012 2011R'000 R'000 R'000 R'000

Restated

Fair value of assets acquiredProperty, plant and equipment 12 - - - Intangible assets 142 - - - Investment in subsidiaries - - - 3 034 Cash and cash equivalents 1 - - - Trade and other payables (296) - - - Non-controlling interest 141 - - -

Assets (acquired)/disposed - - - 3 034 Goodwill - - - -

Purchase consideration - - - 3 034 Add: Bank and cash (net overdraft) (1) - - -

Gross cash outflow on acquisition (1) - - 3 034 Less: Equity to be issued - - - - Less: Cession of loan account - - - - Less: Amounts to be paid based on profit targets - - - -

Net cash (inflow) / outflow on acquisition (1) - - 3 034

44,4 Disposal of subsidiaries

During the current year the Group acquired the following entities:

2012 2011 2012 2011R'000 R'000 R'000 R'000

Fair value of assets disposedProperty, plant and equipment (2 176) (2 376) - - Intangible assets (6) (4) - - Deferred taxation - (8 529) - - Investment in subsidiaries - - - (29 185) Amounts owing by group companies - - - (53 176) Inventories (40 075) (10 874) - - Trade and other receivables (19 629) (12 910) - - Trade and other payables 22 429 5 744 - - Tax payable - 156 - - Borrowings 1 488 4 448 - - Cash and cash equivalents 4 942 (1 466) - -

Assets (acquired)/disposed (33 027) (25 811) - (82 361) (Profit) / loss on disposal (8 473) (847) - 39 387

Purchase consideration (41 500) (26 658) - (42 974) Add: Bank and cash (net overdraft) (4 942) 1 466 - -

Gross cash inflow on disposal (46 442) (25 192) - (42 974) Less: Retention of other investment - 5 097 - 5 097 Less: Term loan for settlement of transaction - 4 000 - 4 000

Net cash inflow on disposal (46 442) (16 095) - (33 877)

Group Company

Group Company



2012 2011 2012 2011 2012 2011 2012 2011

2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

Total external revenues 228 689 155 756 296 056 255 929 47 732 129 538

106 690 100 440

20 640 9 746 38 453 40 423 3 390 84 498 23 231 17 425 764 881 793 755

Finance Income 501 202 98 856 - - 6 438 6 505

1 - 2 041 757 36 51 7 647 2 974 16 762 11 345

Finance Expenses (131) (186) (747) (948) (303) (767) (4 315) (5 051)

(2) (1) (461) (446) (4 277) (332) (4 728) (4 172) (14 964) (11 903)

Depreciation and amortisation (3 523) (2 443) (231) (222) (272) (482) (2 635) (2 486)

(462) (100) (314) (330) - (3 056) (2 238) (1 520) (9 675) (10 639)

Reportable segment profit before income tax 39 933 32 768 (404) 10 847 11 742 11 571 8 151 10 273

(8 913) (2 284) 14 419 13 520 (6 010) (39 899) (41 575) (12 696) 17 343 24 100

Share of profit/ (loss) of associates - (2 060) 628 - -

- - - (2 060) 628

Reportable segment assets 95 561 72 321 39 240 62 596 39 837 61 230 65 517 73 496

8 335 6 920 56 636 60 383 21 485 62 433 304 388 325 679 630 999 725 058

- Non-current assets 28 151 24 565 11 209 9 390 - 1 839 17 836 43 193

3 661 5 044 26 925 27 495 18 949 46 407 250 838 272 037 357 569 429 970

- Current assets 67 410 47 756 28 031 53 206 39 837 59 391 47 681 30 303

4 674 1 876 29 711 32 888 2 536 16 026 53 550 53 642 273 430 295 088

Capital expenditure 6 268 2 846 156 494 746 1 296 1 356 2 496

189 170 34 44 - 580 5 481 9 559 14 230 17 485

Reportable segment liabilities 25 642 16 915 16 922 38 043 - 30 534 24 670 34 804

15 159 9 557 7 845 12 341 21 886 58 507 73 975 84 965 186 099 285 666

- Non-current liabilities 424 1 070 119 208 - 511 2 165 5 653

- - 1 805 4 783 - 8 529 53 773 68 626 58 286 89 380

- Current liabilities 25 218 15 845 16 803 37 835 - 30 023 22 505 29 151

15 159 9 557 6 040 7 558 21 886 49 978 20 202 16 339 127 813 196 286

Holdings

MECS Deltec SebataNOSA

Turrito MICROmega Securities Automotive Disposal Total

Total external revenues

Finance Income

Finance Expenses

Depreciation and amortisation

Reportable segment profit before income tax

Share of profit/ (loss) of associates

Reportable segment assets

- Non-current assets

- Current assets

Capital expenditure

Reportable segment liabilities

- Non-current liabilities

- Current liabilities

45. Segmental analysis

Operating SegmentsInformation about reportable segments

R'000R'000R'000R'000R'000R'000R'000R'000

R'000R'000R'000R'000R'000R'000R'000R'000 R'000R'000

The trading assets and liabilities of the Deltec segment was disposed of at the end of April 2012, the results are thus for a 4 month performance.


45 Segmental analysis (continued)

Reconciliations of reportable segment revenues, profit, assets and liabilities and other material items

2012 2011R'000 R'000

RevenueTotal revenue for reportable segments 764 881 793 755 Consolidated adjustments -18 851 -18 272

Consolidated revenue 746 030 775 483

ProfitTotal profit for reportable segments 17 343 24 100 Share of (loss)/ profit of associates 2 060 -628 Consolidation adjustments -2 976 -15 470

Consolidated profit before income tax 16 427 8 002

AssetsTotal assets for reportable segments 630 999 725 058 Intangible assets arising on consolidation 17 025 20 183 Investments in associates 27 2 038 Consolidation adjustments -169 560 -230 818

Consolidated total assets 478 491 516 461

LiabilitiesTotal liabilities for reportable segments 186 099 285 666 Consolidation adjustments -15 657 -80 197

170 442 205 469

R'000 R'000 R'000Other material items 2012

Finance income 16 762 (10 008) 6 754 Finance expenses (14 964) 8 890 (6 074)

Capital expenditure 14 230 - 14 230 Depreciation and amortisation 9 675 1 391 11 066

Reportable segment

totals Adjustments Consolidated

totals R'000 R'000 R'000Other material items 2011

Finance income 11 345 (5 614) 5 731 Finance expenses (11 903) 4 827 (7 076)

Capital expenditure 17 485 - 17 485 Depreciation and amortisation 10 639 1 592 12 231

Reportable segment

totals Adjustments Consolidated

totals



45. Segmental analysis (continued)

2012 2011 2012 2011 2012 2011 2012 2011

2012 2011 2012 2011 2012 2011

2012 2011 2012 2011 2012 2011

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

R'000 R'000 R'000 R'000 R'000 R'000

R'000 R'000 R'000 R'000 R'000 R'000

Reportable segment results 39 564 32 752 (1 007) 10 939 12 045 12 337 6 028 8 819

(8 912) (2 282) 12 838 13 209 (1 769) (39 618)

(44 494) (11 498) (606) (14 683) 13 687 9 975

Share of profit/ (loss) of associates - - 2 060 (628) - - - -

- - - - -

- - - - 2 060 (628)

Finance income 501 202 98 856 - - 6 438 6 505

1 - 2 041 757 36 51

7 647 2 974 (10 008) (5 614) 6 754 5 731

Finance expenses (131) (186) (747) (948) (303) (767) (4 315) (5 051)

(2) (1) (461) (446) (4 277) (332)

(4 728) (4 172) 8 890 4 827 (6 074) (7 076)

Income tax expense (10 920) (9 279) (218) (3 111) (2 498) (2 911) (2 391) (1 566)

2 494 809 (5 193) (3 927) 1 683 10 262

8 200 13 442 1 090 (306) (7 753) 3 413

Non-controlling interest (528) (726) 2 (52) 7 (7) - -

- - - - - -

- - 3 448 (3 666) 2 929 (4 451)

Contributions to earnings per segment 28 486 22 763 188 7 056 9 251 8 652 5 760 8 707

(6 419) (1 474) 9 225 9 593 (4 327) (29 637)

(33 375) 746 2 814 (19 442) 11 603 6 964

Loss / (profit) on disposal of property, plant and equipment 22 (25) - - (10) (564) (39) 119

(5) (4) 8 (1) (264) 337

53 410 - 600 (235) 872

Impairment of property, plant and equipment - - - - - - - -

- - - - - -

271 - - 271 -

Profit on disposal of intangible assets - - - - - - (1 073)

- - - - - -

- - - - - (1 073)

Impairment of intangible assets 2 888 - - - - - 6 201 -

4 729 - - - - 1 370

3 530 - 1 336 13 921 18 684 15 291

Impairment of loan receivable - - 2 658 - - - - -

- - - - - -

3 120 - - 5 778 -

Impairment of investment in associates - - 230 - - - - -

- - - - - -

- - - 230 -

Impairment of assets classified as held for sale - - - - - - - -

- - - - - 1 251

- - - - - 1 251

Profit on disposal of investments in subsidiaries and businesses - - - - (6 893) - - -

- - - - - 6 723

- - - (13 084) (6 893) (6 361)

Impairment of other investments - - - - - - - -

- - - - - 2 679

1 080 - - - 1 080 2 679

Contribution to headline earnings per segment 31 396 22 738 3 076 7 056 2 348 8 088 11 922 7 753

(1 695) (1 478) 9 233 9 592 (4 591) (17 277)

(25 321) 1 156 4 150 (18 005) 30 518 19 623

Total

NOSA

Turrito MICROmega Securities Automotive Disposal

Holdings Consolidation Adjustment

MECS Deltec Sebata

Reportable segment results

Share of profit/ (loss) of associatesFinance incomeFinance expensesIncome tax expenseNon-controlling interest

Contributions to earnings per segmentLoss / (profit) on disposal of property, plant and equipmentImpairment of property, plant and equipmentProfit on disposal of intangible assetsImpairment of intangible assetsImpairment of loan receivableImpairment of investment in associatesImpairment of assets classified as held for saleProfit on disposal of investments in subsidiaries and businessesImpairment of other investments

Contribution to headline earnings per segment

Reportable segment results

Share of profit/ (loss) of associatesFinance incomeFinance expensesIncome tax expenseNon-controlling interest

Contributions to earnings per segmentLoss / (profit) on disposal of property, plant and equipmentImpairment of property, plant and equipmentProfit on disposal of intangible assetsImpairment of intangible assetsImpairment of loan receivableImpairment of investment in associatesImpairment of assets classified as held for saleProfit on disposal of investments in subsidiaries and businessesImpairment of other investments

Contribution to headline earnings per segment


46. Shareholder's information

Analysis of the share register at 31 December 2012

Portfolio sizeNumber of

shareholdersPercentage of shareholders

Number of shares

Percentage of share capital

1 to 50 000 998 95,69% 3 310 327 3,28%50 001 to 250 000 28 2,68% 2 851 246 2,83%Over 250 000 17 1,63% 94 641 104 93,89%

1 043 100,00% 100 802 677 100,00%

Non-public & public shareholdersNumber of Number of Percentage of

HSBC Investment Management 21 939 699 21,76%Insight Communications Limited 16 876 000 16,74%Alpha Management Limited 14 300 000 14,19%Insight Corp 12 625 921 12,53%Subsidiary companies 8 037 757 7,97%Directors (Direct & indirect beneficial interest)

3 604 446 3.58%1 452 493 1,44%

Total non - public shareholders 10 78 836 316 78,21%Total public shareholders 1 033 21 966 361 21,79%

Total 1 043 100 802 677 100,00%

Major shareholdersNumber of

sharesPercentage of share capital

HSBC Investment Management 21 939 699 21,76%Insight Communications Ltd 16 876 000 16,74%Alpha Management Ltd 14 300 000 14,19%Insight Corp. 12 625 921 12,53%Robel Management Limited 9 000 000 8,93%

Warren Friedland 3 556 281 3.53%TTSA Securities (Pty) Ltd 8 037 757 7,97%

Enigma Investments Holdings Ltd 3 000 000 2,98%The Ross Lewin Family Trust 1 427 493 1,42%Credit Suisse AG Zurich 1 002 100 0,99%

Direct Indirect Direct Indirect

D C King (Chairman) - 21 939 699 - 21 939 699I G Morris - - - - R C Lewin - 1 427 493 - 1 427 493D S E Carlisle - - 37 500 - R B Dick - - - - A B Swan 25 000 - - - P Duvenhage - - - -

Ex-Directors that resigned during 2012P Henwood - - DJ Case 42 720 -

There was no change in these shareholdings to the date of the notice of the annual general meeting

Directors - Subsidiary companies (Direct & indirect beneficial interest)

2012 2011

shareholders shares share capital



CommentsStatus

1. Ethical Leadership and Corporate Citizenship

RequirementAreaNo.

The board comprises of suitably qualified and experienced directors to effectively lead MICROmega. The board’s leader-ship is based on ethical values of responsibility, accountability, fairness and transparency. Management have implemented a comprehensive ethics policy as a basis for company values.

MICROmega’s board of directors considers non-financial factors that affect the company. The company also takes part in a number of measurable corporate social investment programmes through the group. All activity is disclosed in the integrated report annually.

MICROmega has a social and ethics committee which is respon-sible for ethics as well as promoting social and ethical aspects of business within the organisation. The board oversees this committee to ensure that ethics are managed effectively.

There is an approved board charter which forms the basis of the board’s responsibilities and duties. The directors are aware and practice their fiduciary duties. Financial and non-financial matters are considered by the board when developing and implemented company strategy. The strategy is aligned with the purpose of the company to ensure sustainable outcomes. Refer 1.1

Refer 1.2

Refer 1.3

Refer 3.1

Refer 4.1

Refer 5.1

Refer 6.1

Refer 7.1

Refer 8.1

Refer 9.1

Refer 7.1 – 7.5 and 9.1 – 9.3

1.1 The board should provide effective leadership based on an ethical foundation

1.2 The board should ensure that the company is and is seen to be a responsible corporate citizen

1.3 The board should ensure that the company’s ethics are managed effectively

2.1 The board should act as the focal point for and custodian of corporate governance

2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable

2.3 The board should provide effective leadership based on an ethical foundation

2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen

2.5 The board should ensure that the company’s ethics are managed effectively

2.6 The board should ensure that the company has an effective and independent Audit Committee

2.7 The board should be responsible for the governance of risk

2.8 The board should be responsible for information technology (IT) governance

2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards

2.10 The board should ensure that there is an effective risk-based internal audit

2.11 The board should appreciate that stakeholder perception affects the company’s reputation

2.12 The board should ensure the integrity of the company’s integrated report

2.13 The board should report on the effectiveness of the company’s system of internal controls

Applied

Applied

Applied

Applied

Applied

Explain

Applied

Applied

Applied

Applied

Applied

Applied

Applied

Applied

Applied

Applied

16.

15.

14.

13.

12.

11.

10.

9.

8.

7.

6.

5.

4.

3.

2.

1.

Role

and

Fun

ctio

n of

the

boar

d

2. Boards and directors

ANNEXURE - CORPORATE GOVERNANCEAnalysis of the application of the 75 Corporate Governance Principles as recommended in the King III Report


CommentsStatusRequirementAreaNo.

MICROmega directors are aware of their fiduciary duties and always act in the best interest of the company.

The board continuously monitors whether the company is financially distressed for the purpose of considering business rescue proceedings.

The board has appointed Mr DC King as executive chairman. A lead independent non-executive director, Mr AB Swan, has been appointed.

MICROmega has an appointed chief executive officer. There is an approved delegation of authority within the organisation.

The MICROmega board consists of 4 executive directors and 3 non-executive directors (2 of which are independent). The board is in the process of recruiting an additional independent non-executive director.

Due the size of the current board, it was decided that the board will assume the duties of a “nomination committee”. Directors are appointed by the board. MICROmega has an approved policy which details the procedures for appointments to the board of directors.

This process has not been formalised by the board. Directors are responsible for identifying and attending training courses where necessary. There is also on going internal development of directors.

The company secretarial duties have been outsourced to Acorim (Pty) Ltd. Acorim has experience in providing public and private companies with outsourced company secretarial duties.

The board of directors took a decision at the board meeting on 22 June 2012 that the use of evaluation forms be discontinued and that any matters for concern in respect of the management of the board or the performance of the board of directors and the individual directors be brought to the attention of the CEO who will deal with the matter in the appropriate manner and inform the board of directors of action taken.

The Social and Ethics Committee, Risk Committee, Audit Committee and Remuneration Committee are board commit-tees within the organisation. Although certain of the board’s responsibilities are delegated to the Committees, the board does not abdicate its own responsibilities.

MICROmega respects the fiduciary duties of the director serving in a representative capacity on the board of the subsid-iaries. The board monitors compliance with King III, the JSE Listings Requirements and the Companies Act, 2008 on an on-going basis. This forms the basis of comprehensive policies which have been implemented within the organisation to promote good governance.

2.14 The board and its directors should act in the best interests of the company

2.15 The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act

2.16 The board should elect a chairman of the board who is an independent non-ex-ecutive director. The CEO of the company should not also fulfil the role of chairman of the board

2.17 The board should appoint the chief executive officer and establish a frame-work for the delegation of authority

2.18 The board should comprise a balance of power, with a majority of non-ex-ecutive directors. The majority of non-execu-tive directors should be independent

2.19 Directors should be appointed through a formal process

2.20 The induction of and on-going training and development of directors should be conducted through formal processes

2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary

2.22 The evaluation of the board, its committees and the individual directors should be performed every year

2.23 The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities

2.24 A governance framework should be agreed between the group and its subsidi-ary boards

Applied

Applied

Explain

Applied

Explain

Explain

Explain

Applied

Applied

Noted

Applied

27.

26.

25.

24.

23.

22.

20.

21.

19.

18.

17.

Com

posi

tion

of

the

boar

d

Boar

d ap

poin

tmen

t pr

oces

s

Com

pany

se

cret

ary

Dir

ecto

r de

velo

pmen

tsPe

rfor

man

ce

asse

ssm

ent

Gro

up b

oard

sBo

ard

Com

mitt

ees


Directors’ remuneration is approved by the Remuneration Committee. The Remuneration Committee adheres to the remuneration policy. Directors’ remuneration is considered to be market related as stated in the remuneration policy.

All MICROmega directors’ remuneration is disclosed in the annual integrated report. MICROmega do not have any prescribed officers.

A resolution is included in the notice of the Annual General Meeting for shareholders to approve the remuneration policy.

MICROmega has an Audit Committee that meets 4 times a year. The terms of reference of the Audit Committee have been approved by the board. The Committee has been effective in performing its mandate. The Audit Committee is currently chaired by a non-executive director who is not independent. The board is currently in the process of recruiting a suitable non-executive director for the board who will fulfil the role of Audit Committee chairperson.

The current Audit Committee comprises of 3 non-executive directors, 2 of which are independent. The non-executive directors are adequately skilled and experienced. The board is aware of the non-compliance in the composition of the Audit Committee and is in the process of recruiting a suitable independent non-executive director to fulfil the role of Audit Committee chairperson.

The Audit Committee is currently chaired by a non-executive director who is not independent. The Board are currently in the process of recruiting a suitable independent non-executive director for the board who will fulfil the role of Audit Commit-tee chairperson.

The Audit Committee oversees the integrated reporting process. The Audit Committee reviews and comments on the financial statements and sustainability areas that are disclosed in the annual integrated report.

The MICROmega combined assurance model is used by the Audit Committee and the Risk Committee in all assurance activities.

The Audit Committee reviewed the adequacy and is satisfied with the group’s finance function. The financial director of MICROmega is a qualified chartered accountant. The finance division comprises suitably qualified and experienced individ-uals.

The Audit Committee oversees the internal audit function and approves the internal audit plan.

Risk Committee updates are communicated at all Audit Committee meetings. Recommendations are used to enhance the Risk Committee’s functions.

2.25 Companies should remunerate directors and executives fairly and responsi-bly

2.26 Companies should disclose the remuneration of each individual director and certain senior executives

2.27 Shareholders should approve the company’s remuneration policy

3.1 The board should ensure that the company has an effective and independent Audit Committee

3.2 Audit Committee members should be suitably skilled and experienced indepen-dent non-executive directors

3.3 The Audit Committee should be chaired by an independent non-executive director

3.4 The Audit Committee should oversee integrated reporting

3.5 The Audit Committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities

3.6 The Audit Committee should satisfy itself of the expertise, resources and experience of the company’s finance function

3.7 The Audit Committee should be responsible for overseeing internal audit

3.8 The Audit Committee should be an integral component of the risk manage-ment process

Applied

Applied

Explain

Explain

Explain

Applied

Applied

Applied

38.

37.

36.

35.

34.

33.

32.

31.

30.

29.

28.

3. Audit Committees

Applied

Applied

Applied

Inte

rnal

ass

uran

ce p

rovi

ders

Resp

onsi

bilit

ies o

f the

A

udit

Com

mitt

eeM

embe

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p an

d re

sour

ces

of th

e A

udit

Com

mitt

ee

Rem

uner

atio

n of

dir

ecto

rs a

nd

seni

or e

xecu

tive

s



The Audit Committee approves the terms of engagement and the audit fee annually. The quality and effectiveness of the external audit process is evaluated annually by the Audit Committee.

An Audit Committee report is included in the annual integrated report disclosing details of how the committee has achieved its statutory duties for the year

The Risk Committee is responsible for the management and implementation of risk management within the organisation. The Risk Committee reports to the board who carries the ultimate responsibility for risk governance in the organisation.

The levels of risk tolerance are different between each subsidi-ary. The levels of risk tolerance are recommended by the Risk Committee and approved by the board.

The Risk Committee is chaired by the group managing director and is empowered to assist the board with the group’s risk management responsibilities. The Audit Committee is respon-sible for the financial reporting risks, fraud risks and internal financial controls of the organisation.

A risk management process has been implemented by the Risk Committee. All subsidiary managing directors have been trained accordingly and are responsible for implementing the process within their companies. The Risk Committee evaluates the process.

Risk assessments are a continuous practice within the group subsidiaries. Formal risk assessments and discussions are conducted at all Risk Committee meetings.

The current risk management framework used within the MICROmega group has been comprehensive and effective in preparing the organisation for anticipating unpredictable risks.

Risk responses are disclosed on MICROmega group subsidiary risk schedules and are presented to the board.

Quarterly risk meetings are held between management and the subsidiary managing directors to monitor and update risks both at a subsidiary and group level. Outcomes of the Risk Commit-tee are presented to the board

A verbal assessment was provided by internal audit to the Risk Committee in 2012. Internal Audit will provide the board with a written assessment regarding the effectiveness of the risk management process in 2013.

A Risk Committee report is included in the annual integrated report.

3.9 The Audit Committee is responsi-ble for recommending the appointment of the external auditor and overseeing the external audit process

3.10 The Audit Committee should report to the board and shareholders on how it has discharged its duties

4.1 The board should be responsible for the governance of risk

4.2 The board should determine the levels of risk tolerance

4.3 The Risk Committee or Audit Committee should assist the board in carrying out its risk responsibilities

4.4 The board should delegate to management the responsibility to design, implement and monitor the risk manage-ment plan

4.5 The board should ensure that risk assessments are performed on a continual basis

4.6 The board should ensure that frameworks and methodologies are imple-mented to increase the probability of anticipating unpredictable risks

4.7 The board should ensure that management considers and implements appropriate risk responses

4.8 The board should ensure continu-al risk monitoring by management

4.9 The board should receive assurance regarding the effectiveness of the risk management process

4.10 The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders

Applied

Applied

Applied

Applied

Applied

49.

50.

48.

47.

46.

45.

44.

43.

42.

41.

40.

39.

Applied

Applied

Applied

Applied

4. The governance of risk

Applied

Applied

Explain

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The IT charter and policies are currently being drafted and awaiting board approval. This is scheduled for approval at the next board meeting in August 2013. The board ensures that IT direction is aligned to group strategy to enable the group to ensure sustainable growth.

The board has appointed a suitably qualified group IT manager in 2013 to ensure that the IT areas within the group are managed adequately.

All significant capital expenditure is approved by board member/s as per the MICROmega delegation of authority.

Discussion of IT risks is a recurring item on the agenda of all Risk Committee meetings.

MICROmega has adequate policies and comprehensive employment contracts to protect the intellectual property of the group. This is monitored on a regular basis as it forms part of IT risks.

Both the risk and Audit Committees ensure that IT risks are adequately addressed. The outcome of the assessment is presented to the board.

The board, through the company secretary, is made aware of compliance areas, which are addressed at board meetings to ensure complete compliance with all applicable areas. The risk management process also identifies areas of compliance and ensures the applicable areas are complied with.

The members of the board and group subsidiary directors are aware and understand all applicable laws, rules, codes and standards.

Compliance risk is part of the risk management process and is adequately addressed at Risk Committee meetings.

The group managing director (chair of the Risk Committee) is tasked with implementing and managing the risk management process (which includes areas of compliance). In addition, group subsidiary managing directors are responsible for all areas of compliance within their businesses.

MICROmega has an independent internal audit function. The function is governed by the Internal Audit Charter which is in line with the requirements of King III and the Institute of Internal Auditors standards.

Internal audit uses a risk based approach in determining the audit plan.

5.1 The board should be responsible for information technology (IT) governance

5.2 IT should be aligned with the performance and sustainability objectives of the company

5.3 The board should delegate to management the responsibility for the implementation of an IT governance frame-work

5.4 The board should monitor and evaluate significant IT investments and expenditure

5.5 IT should form an integral part of the company’s risk management

5.6 The board should ensure that information assets are managed effectively

5.7 The Risk Committee and Audit Committee should assist the board in carrying out its IT responsibilities

6.1 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards

6.2 The board and each individual director should have a working understand-ing of the effect of the applicable laws, rules, codes and standards on the company and its business

6.3 Compliance risk should form an integral part of the company’s risk manage-ment process

6.4 The board should delegate to management the implementation of an effective compliance framework and process-es

7.1 The board should ensure that there is an effective risk based internal audit

7.2 Internal audit should follow a risk based approach to its plan

Applied

Applied

Applied

Explain

Applied

62.

61.

60.

59.

58.

56.

55.

54.

53.

52.

51.

Applied

Applied

Applied

Applied

Applied

Applied

5. The governance of information technology

6. Compliance with laws, rules, codes and standards

57.

7. Internal Audit

63.

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A verbal assessment was provided by internal audit to the Risk Committee in 2012. Internal audit will provide the board with a written assessment regarding the effectiveness of the risk management process in 2013.

Refer 3.7

Internal audit is an independent function with access to all required areas to perform its function. Internal audit has an invitation to monthly management meetings.

The board has identified that the stakeholder process needs to be reviewed. There are current initiatives such as identifying and engaging with stakeholders that are being used to better understand the process.

The managing directors of group subsidiaries are responsible for managing stakeholder relationships. Members of the board get involved when necessary. The integrated reporting approach has helped the board to ensure interests and expectations of stakeholders are consid-ered.

MICROmega’s board ensures compliance with King III, the JSE Listings Requirements and the Companies Act, 2008 on an on-going basis which aims to protect the treatment of minority shareholders.

The integrated reporting process ensures transparent and effective communication with shareholders.

The board ensures that disputes are resolved in an appropriate and timely manner. Disputes are escalated to external parties if/when required.

The Audit Committee evaluates sustainability disclosures; however the board will ultimately be responsible for the integrated reporting and its integrity. Internal audit will provide independent assurance on sustainability reporting and disclosure.

MICROmega is using the integrated reporting approach which includes sustainability and financial reporting.

Sustainability reporting and disclosure will be assured by group internal audit for the 2012 and 2013 financial years, following which the board will consider obtaining independent assurance on the group’s sustainability reporting.

7.3 Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management

7.4 The Audit Committee should be responsible for overseeing internal audit 7.5 Internal audit should be strategi-cally positioned to achieve its objectives

8.1 The board should appreciate that stakeholder perception affects a company’s reputation

8.2 The board should delegate to management to proactively deal with stakeholder relationships

8.3 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company

8.4 Companies should ensure the equitable treatment of shareholders

8.5 Transparent and effective commu-nication with stakeholders is essential for building and maintaining their trust and confidence

8.6 The board should ensure disputes are resolved as effectively, efficiently and expeditiously as possible

9.1 The board should ensure the integrity of the company’s integrated report-ing

9.2 Sustainability reporting and disclosure should be integrated with the company’s financial reporting

9.3 Sustainability reporting and disclosure should be independently assured

Applied

Applied

Explain

Applied

74.

73.

71.

70.

68.

67.

66.

65.

64.

Explain

Applied

Applied

Applied

Applied

69.

75.

Applied

Explain

8. Governing stakeholder relationships

9. Integrated reporting and disclosure

72. Applied

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NOTICE OF ANNUAL GENERAL MEETING

MICROmega Holdings LimitedIncorporated in the Republic of South Africa

(Registration number 1998/003821/06)Share code: MMG ISIN: ZAE000034435

(“MICROmega or “the company” or “the group”)

Notice is hereby given that the Annual General Meeting of shareholders of MICROmega will be held at 10:00 on Friday, 16 August 2013 at 66 Park Lane, Sandton for the purpose of considering, and, if deemed fit, passing, with or without modification, the resolutions set out hereafter.

The board of directors of the company (“the board”) has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended, the record date for the purposes of determining which shareholders of the company are entitled to participate in and vote at the Annual General Meeting is Thursday, 8 August 2013. Accordingly, the last day to trade MICROmega Holdings Limited shares in order to be recorded in the Register to be entitled to vote will be Friday, 2 August 2013.

Ordinary resolutions to be adopted at this Annual General Meeting require approval from a simple majority, which is more than 50% of the votes exercised on such resolutions by shareholders present or represented by proxy at the meeting.

ORDINARY RESOLUTION NUMBER 1“Resolved to receive, consider and adopt the annual financial statements of the company and the group for the financial year ended 31 December 2012, including the reports of the auditors, directors and the Audit Committee.”

ORDINARY RESOLUTION NUMBER 2“Resolved to re-elect, RC Lewin who, in terms of Article 27.8 of the company’s Memorandum of Incorporation, retires by rotation at this Annual General Meeting but, being eligible to do so, offers himself for re-election.”

An abbreviated curriculum vitae in respect of RC Lewin appears on page 16 of the annual integrated report to which this notice is attached.

ORDINARY RESOLUTION NUMBER 3“Resolved to confirm the appointment of PH Duvenhage to the board of directors in terms of Article 27.2 of the company’s Mem-orandum of Incorporation.”

ORDINARY RESOLUTION NUMBER 4“Resolved to confirm the appointment of AB Swan to the board of directors in terms of Article 27.2 of the Company’s Memoran-dum of Incorporation.”

An abbreviated curriculum vitae in respect of each newly appointed non-executive director appears on page 16 of the annual integrated report to which this notice is attached.

ORDINARY RESOLUTION NUMBER 5“Resolved to appoint PH Duvenhage as a member and chairman of the MICROmega Holdings Limited Audit Committee”

ORDINARY RESOLUTION NUMBER 6“Resolved to appoint RC Lewin as a member of the MICROmega Holdings Limited Audit Committee.”

ORDINARY RESOLUTION NUMBER 7“Resolved to appoint AB Swan as a member of the MICROmega Holdings Limited Audit Committee.”

An abbreviated curriculum vitae in respect of each member of the Audit Committee appears on page 29 of the annual integrated report to which this notice is attached.

ORDINARY RESOLUTION NUMBER 8“Resolved to confirm the re-appointment of Nexia SAB&T as independent auditors of the company with Mr. Fazel Sulaman being the individual registered auditor who has undertaken the audit of the company for the ensuing financial year and to authorise the directors to determine the auditors’ remuneration.”


ORDINARY RESOLUTION NUMBER 9“Resolved that the remuneration policy of the directors of MICROmega Holdings Limited (“the company”), as set out in the Remuneration Committee report on page 21 of the annual integrated report to which this notice is attached, be and is hereby endorsed as a non-binding advisory vote of shareholders of the Company in terms of the King III Report on Corporate Gover-nance.”

ORDINARY RESOLUTION NUMBER 10“Resolved that the authorised but unissued ordinary shares in the capital of MICROmega Limited (“the company”) be and are hereby placed under the control and authority of the directors of the company ("directors") and that the directors be and are hereby authorised and empowered to allot and issue all or any of such ordinary shares, or to issue any options in respect of all or any of such ordinary shares, to such person/s on such terms and conditions and at such times as the directors may from time to time and in their discretion deem fit, subject to the provisions of sections 38 and 41 of the companies Act, 2008 (Act 71 of 2008), as amended, the Memorandum of Incorporation of the company and the Listings Requirements of JSE Limited, as amended from time to time.”

ORDINARY RESOLUTION NUMBER 11Under the JSE Listings Requirements, this ordinary resolution must be passed by a 75% (seventy five percent) majority of the votes cast in favour of the resolution by all members present or represented by proxy at the Annual General meetingApproval to issue ordinary shares, and to sell treasury shares, for cash“Resolved that the directors of MICROmega Holdings Limited (“the company”) and/or any of its subsidiaries from time to time be and are hereby authorised, by way of a general authority, to –• allot and issue, or to issue any options in respect of, all or any of the authorised but unissued ordinary shares in the capital of the company; and/or to issue any options in respect of, all or any of the authorised but unissued ordinary shares in the capital of the company• sell or otherwise dispose of or transfer, or issue any options in respect of, ordinary shares in the capital of the Company purchased by subsidiaries of the company,

for cash, to such person/s on such terms and conditions and at such times as the directors may from time to time in their discre-tion deem fit, subject to the Companies Act, 2008 (Act 71 of 2008), the Memorandum of Incorporation of the Company and its subsidiaries and the Listings Requirements of JSE Limited (“the JSE Listings Requirements”) from time to time.”

The JSE Listings Requirements currently provide, inter alia, that:• The securities which are the subject of the issue for cash must be of 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 issue• Any such issue may only be made to "public shareholders" as defined in the JSE Listings Requirements and not to related parties• The number of ordinary shares issued for cash shall not in any one financial year in the aggregate exceed 15% (fifteen percent) of the number of issued ordinary shares. The number of ordinary shares which may be issued shall be based, inter alia, on the number of ordinary shares in issue, added to those that may be issued in future (arising from the conversion of options/convertibles) at the date of such application, less any ordinary shares issued, or to be issued in future arising from options/convertible ordinary shares issued during the current financial year; plus any ordinary shares to be issued pursuant to a rights issue which has been announced, is irrevocable and is fully underwritten, or an acquisition which has had final terms announced• This general authority will be valid until the earlier of the company's next Annual General Meeting or the expiry of a period of 15 (fifteen) months from the date that this authority is given• An announcement giving full details, including the impact on net asset value per share, net tangible asset value per share, earnings per share and headline earnings per share and, if applicable, diluted earnings and headline earnings per share, will be published when the company has issued ordinary shares representing, on a cumulative basis within 1 (one) financial year, 5% (five percent) or more of the number of ordinary shares in issue prior to the issue• In determining the price at which an issue of ordinary shares may be made in terms of this authority, the maximum discount permitted will be 10% (ten percent) of the weighted average traded price on the JSE Limited of the ordinary shares over the 30 (thirty) business days prior to the date that the price of the issue is agreed between the issuer and the party subscribing for the securities• Whenever the company wishes to use ordinary shares, held as treasury stock by a subsidiary of the company, such use must comply with the JSE Listings Requirements as if such use was a fresh issue of ordinary shares"

ORDINARY RESOLUTION NUMBER 12“Resolved that each director and the company secretary of MICROmega Holdings Limited (“the company”) be and is hereby individually authorised to sign all such documents and do all such things as may be necessary for or incidental to the implemen-tation of those resolutions to be proposed at the Annual General Meeting convened to consider the resolutions which are passed, in the case of ordinary resolutions, or are passed and registered by the companies and Intellectual Property Commission, in the case of special resolutions.”

Under the JSE Listings Requirements, this special resolution must be passed by a 75% (seventy five percent) majority of the votes cast in favour of the resolution by all members present or represented by proxy at the Annual General Meeting.

SPECIAL RESOLUTION NUMBER 1 General approval to acquire shares“Resolved, by way of a general approval that MICROmega Holdings Limited (“the company”) and/or any of its subsidiaries from time to time be and are hereby authorised to acquire ordinary shares in the company in terms of sections 46 and 48 of the Com-panies Act, 2008 (Act 71 of 2008), as amended, the Memorandum of Incorporation of the company and its subsidiaries and the Listings Requirements of JSE Limited (“the JSE”), as amended from time to time.” The JSE Listings Requirements currently provide, inter alia, that: • The acquisition of the ordinary shares must be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counter party• This general authority shall only be valid until the earlier of the company's next Annual General Meeting or the expiry of a period of 15 (fifteen) months from the date of passing of this special resolution• In determining the price at which the company's ordinary shares are acquired in terms of this general authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of the market value at which such ordinary shares are traded on the JSE, as determined over the 5 (five) business days immediately preceding the date on which the transaction is effected• At any point in time, the company may only appoint one agent to effect any acquisition/s on its behalf• The acquisitions of ordinary shares in the aggregate in any one financial year may not exceed 20% (twenty percent) of the company's issued ordinary share capital• The company may only effect the repurchase once a resolution has been passed by the board of directors of the company (“the board”) confirming that the board has authorised the repurchase, that the company has passed the solvency and liquidity test (“test”) and that since the test was done there have been no material changes to the financial position of the group• The company or its subsidiaries may not acquire ordinary shares during a prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements• An announcement will be published once the company has cumulatively repurchased 3% (three percent) of the number of the ordinary shares in issue at the time this general authority is granted ("initial number"), and for each 3% (three percent) in aggregate of the initial number acquired thereafter”

Explanatory noteThe purpose of this special resolution number 1 is to obtain an authority for, and to authorise, the company and the company's subsidiaries, by way of a general authority, to acquire the company's issued ordinary shares.

It is the intention of the directors of the company to use such authority should prevailing circumstances (including tax dispensa-tions and market conditions) in their opinion warrant it.

Other disclosure in terms of Section 11.26 of the JSE Listings Requirements The JSE Listings Requirements require the following disclosure, which are contained in the annual integrated report of which this notice forms part:• Directors and management – page 16• Major shareholders of the company – Note 46 in the notes to annual financial statements • Directors' interests in securities – Note 32 in the notes to annual financial statements • Share capital of the company – Note 19 in the notes to annual financial statements• Litigation statement – page 19

Material change There have been no material changes in the affairs or financial position of the company and its subsidiaries since the company’s financial year end and the date of this notice.

Directors' responsibility statement The directors, whose names are given on page 16 of the annual integrated report of which this notice forms part, collectively and individually accept full responsibility for the accuracy of the information pertaining to special resolution number 1 and certify that to the best of their knowledge and belief there are no facts in relation to special resolution number 1 that have been omitted which would make any statement in relation to special resolution number 1 false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that special resolution number 1 together with this notice contains all information required by law and the JSE Listings Requirements in relation to special resolution number 1.



Adequacy of working capital At the time that the contemplated repurchase is to take place, the directors of the company will ensure that, after considering the effect of the maximum repurchase and for a period of twelve months thereafter: • The company and its subsidiaries will be able to pay their debts as they become due in the ordinary course of business• The consolidated assets of the company and its subsidiaries, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the consolidated liabilities of the company and its subsidiaries• The issued share capital and reserves of the company and its subsidiaries will be adequate for the purpose of the ordinary business of the company and its subsidiaries• The working capital available to the company and its subsidiaries will be sufficient for the group’s requirements

The company may not enter the market to proceed with the repurchase until its Sponsor, Java Capital Proprietary Limited, has discharged of all of its responsibilities in terms of the JSE Listings Requirements insofar as they apply to working capital state-ments for the purposes of undertaking an acquisition of its issued ordinary shares.

Other businessTo transact such other business as may be transacted at the Annual General Meeting of the company.

Voting and proxiesA shareholder entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy or proxies to attend and act in his/her stead. A proxy need not be a member of the company. For the convenience of registered members of the company, a form of proxy is attached hereto.

The attached form of proxy is only to be completed by those ordinary shareholders who: Hold ordinary shares in certificated form or are recorded on the sub-register in “own name” dematerialised form

Ordinary shareholders who have dematerialised their ordinary shares through a CSDP or broker without "own name" registration and who wish to attend the Annual General Meeting, must instruct their CSDP or broker to provide them with the relevant Letter of Representation to attend the meeting in person or by proxy and vote. If they do not wish to attend in person or by proxy, they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.

Proxy forms should be forwarded to reach the transfer secretaries, Computershare Investor Services Proprietary Limited, at least 48 hours, excluding Saturdays, Sundays and public holidays, before the time of the meeting.

Kindly note that meeting participants, which includes 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 docu-ments, driver's licenses and passports.

Electronic participation by shareholdersShareholders or their proxies who wish to participate in the meeting electronically are required to deliver a written notice to the company Secretary of MICROmega requesting attendance at the meeting by way of electronic participation. Such written notice must include a certified copy of the identity document of the person or, if the shareholder is not an individual, a certified copy of the resolution adopted by the entity authorising the person to represent the shareholder at the meeting, together with a certified copy of the individual’s identity document. A valid email address must also be provided in order for the person to receive further details on the manner of electronic participation.

Electronic participation at the meeting will only be made available to shareholders who have notified the Company Secretary by 10:00 on Thursday 8 August 2013 and the cost of the electronic participation will be at the expense of the shareholder.

Shareholders participating in the meeting by way of electronic communication will not be able to vote during the Annual General Meeting. Accordingly, such shareholders must act in accordance with the proxy and voting procedures detailed above in order to ensure that their vote is taken into account.

By order of the board

Acorim Proprietary LimitedCompany Secretary30 June 2013




CORPORATE INFORMATIONAS AT 31 DECEMBER 2012Company Registration Number: 1998/003821/06

Registered Office: 66 Park Lane, Sandton, 2196, Johannesburg, South AfricaPrivate Bag X9966, Sandton, 2146, Johannesburg, South Africa

Telephone: 011 218 8000Facsimile: 011 218 8220E-mail: [email protected]: www.micromega.co.za

DirectorsDC KingIG MorrisDSE CarlisleRB DickRC LewinAB SwanPH Duvenhage

SponsorJava Capital2 Arnold Road, Rosebank, 2196, Johannesburg, South AfricaPO Box 2087, Parklands, 2121, Johannesburg, South Africa

Transfer SecretariesComputershare Investor Services (Proprietary) Limited70 Marshall Street, Johannesburg, 2001, South AfricaPO Box 61051, Marshalltown, 2107, South Africa

AuditorsNexia SAB&T119 Witch-Hazel Avenue, Highveld Technopark, Centurion, South AfricaPO Box 10512, Centurion, 0046, South Africa

Company SecretaryAcorim Proprietary Limited 2nd Floor, North Block, Hyde Park Office Tower, Corner 6th Rd and Jan Smuts Ave, Hyde Park, South AfricaPO Box 41480, Craighall, 2024, South Africa

MICROmega Technologies John Bainbridge General Manager 011 218 8140

Turrito Networks / Cloudware Brian Timperley Managing Director 011 218 8050

Sebata Municipal Solutions Dylan Strydom Managing Director 011 218 8050

MICROmega Securities Anton Vercueil Managing Director 011 218 8120

MECS Africa Roland Glass Managing Director 011 218 8060

NCA & NQA Craig Gordon-Bennett Managing Director 010 226 4000

EMPOWERisk Karl Baily Managing Director 011 883 8775

Riskworks Riaan Lourens Managing Director 010 226 4000

NOSA Group of companies Justin Hobday Managing Director 010 226 4000

Company Name Contact Person Designation Telephone number

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