LABAT AFRICA LIMITED Incorporated in the …successful. Product development is proceeding well and...

INTEGRATED ANNUAL REPORT OF THE COMPANY AND ITS SUBSIDIARIES FOR THE YEAR ENDED 28 FEBRUARY 2014

The following reports and financial statements for the company and the group are presented:

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Analysis of shareholders

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Directors’ Report

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Administration

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The annual report has been prepared by: David O'Neill. The consolidated annual financial statements have been audited in compliance with the applicable requirements of the Companies Act 71 of 2008. The above annual financial statements and group annual financial statements were approved by the board of directors on 05 June 2014 and are signed on its behalf.

llieN’O divaD neyooR nav nairB ROTCERID LAICNANIF RECIFFO EVITUCEXE FEIHC

LABAT AFRICA LIMITED Incorporated in the Republic of South Africa

Registration No. 1986/001616/06

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Notes to the Financial Statements 35

Summary of Rights Established 71

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Chief Executive’s Report and Review of operations

1. Results

The results for the year were disappointing as expected with a loss from continuing operations of R6 022 037. A property revaluation resulted in a further loss of R9,862,838. Sales were reduced to R9,942,035 (2013: R13,117,108) due to the adverse market conditions and the fact that existing metering products are at the end of their life cycle. Design and development is underway on a range of new and exciting products. This trend will continue until the beginning of 2015 when we expect sales to again pick up due to the introduction of a new range of improved metering products.

2. Continuing Operations

The SAMES, ICDC business is operating profitably. The transfer of manufacturing operations to China has been very successful. Product development is proceeding well and the first new products are scheduled for completion in the second half of the year. New products will be on 0.5 micron platform as opposed to the current 2 micron platform. These developments will bring substantial cost savings and allow the company to regain its cost and technology competitiveness.

3. Discontinued Operations

The old SAMES manufacturing facility has now been completely closed down and the remaining plant has been removed and sold.

4. Rights Issue

A rights issue was undertaken after year end in order to capitalise the company for growth and to allow existing shareholders to participate in future prospects at a favourable price. The rights issue raised a total of R8,548,541.

5. Global Emerging Markets (GEM) Funding

GEM, an alternative US $ 3.4 billion investment group that manages a diverse set of investment vehicles focused on emerging markets across the world has confirmed that equity funding of up to $100 million for suitable investments is still available to Labat in order to fund future acquisitions and suitable transactions. We are evaluating various opportunities, particularly in the Rail and Road logistics space. The company intends to make a major acquisition during the year ahead.

6. Properties

The SAMES property was disposed of after year end and realised R18.8 million which is being used to reduce debt and to recapitalise the group for growth.

7. Pharmaceuticals

Discussions are ongoing with the Free State Development Corporation and various identified partners to move the Pharmaceutical API business opportunity to the new development node in Harrismith.

8. Strategy Forward

After capitalising the business for growth, it is the intention of the board to grow the existing SAMES business aggressively and to seek out suitable acquisition targets particularly in the electronics, rail and road industries.

9. Rail Initiatives

As per our detailed SENS announcement on 15 May 2014, we are pleased to announce various Rail initiatives including an agreement with BFG to build a facility to manufacture interiors for the new Railway coaches for PRASA. BFG/Labat has won the first phase of this project worth an estimated R1,5 billion.

Labat also announced that it made an offer to acquire a shareholding in Imfuyo Projects, another rail related businessand its 100% subsidiary Imfuyo Air Products.

Labat also entered into an agreement with a Women’s group to build Rail production capacity in order to take advantage of existing Rail opportunities.

CHIEF EXECUTIVE’S REPORT AND REVIEW OF OPERATIONS

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The Board of Directors is of the opinion that having regard to the future strategy of the group, the group has sufficient resources to continue as a going concern.

The shortfall amounting to R27.1 million in the net current liability position is mitigated by the following significant factors as at the period end.

a) The proceeds from the property sale R18.8 million and the rights issue R8.5 million will reduce the above mentioned shortfall by R 27.3 million leaving a net positive position.

b) The other main item relates to provisions made concerning potential SARS liabilities. Labat and SARS have had some long outstanding issues dating back to 2003 when Labat’s substantial tax losses were disallowed. These tax losses were subsequently re-instated and a number of consequent tax issues are currently being resolved. An income tax audit has been completed and no liability has been identified. A VAT audit is in the course of being finalised and substantial credits will be due to Labat. A final PAYE settlement will then be finalised. These reviews are expected to be finalised within the next three months. The directors are of the opinion that any potential liabilities have been more than adequately provided for in these financial results and in fact are of the opinion that a substantial credit will be received by Labat particularly since no interest has been raised on the substantial credit balances due to the company.

c) The remaining current creditors totalling R4 075 430 are more than adequately covered by the current assets of R5 852 465

d) Provisions totaling R8 263 237 relating to unpaid directors salaries will be paid, by agreement, only when the company is in a position to do so.

11. Changes to the Board

Mr Dawood Asmal was appointed to the board on 25 April 2014 as an independent non-executive director.

12. Post Balance Sheet Events

Shareholders are referred to note 4 of the director’s report.

13. Dividends

Internal resources will be utilized in the recapitalization of the company. No dividend has been declared.

14. Prospects

The recapitalisation of the business through the sale of surplus assets and the rights issue will allow Labat to participate fully in various opportunities which are available to us. After almost four years of development work in SAMES, we are looking forward to substantial growth in the next five years. We are looking forward to a period of consolidation and expansionboth through organic growth and acquisition.

15. Thanks

I take this opportunity to thank all my colleagues on the Board and our dedicated management team and staff for their contribution during the year.

_____________________

BRIAN VAN ROOYEN

10. Going Concern

CHIEF EXECUTIVE’S REPORT AND REVIEW OF OPERATIONS (Cont)

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Group Summary

2014 2013 2012 2011 R’000 R’000 R’000 R’000

Key elements Continuing operations Revenue 9 942 13 117 15 544 27 547

Operating income / (loss) before interest, taxation and

depreciation & amortisation

(5 044) 2814 26 456 7 616

Headline profit/ (loss) earnings (6 005) 64 26 634 5 437

Ordinary shareholders’ equity (8 581) 1 379 2 278 (23 112)

Share performance

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Headline (loss)/ earnings per share (0.030) 0.001 13.51 2.75

Net asset value per share (0.04) 0.01 0.01 (0.12)

Total number of shares in issue (000) 202 212 197 155 197 155 197 155

Market price (cents per share)

- opening 13 20 45 31

- high 25 30 50 110

- low 5 4 20 19

- closing – end of February 22 13 20 45

Closing market capitalisation (R’000) 44 487 26 630 39 430 88 719

Volume of shares traded (000) 12 738 2 082 6 153 31 846

Total value of transactions (R’000) 1 792 255 1 966 17 806

Average price per share (cents) 14.76 15.40 32.86 58.22

Employee information Total number of employees 23 24 24 24

Previously disadvantaged employees 10 11 11 10

FINANCIAL HIGHLIGHTS

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SHAREHOLDER SPREAD No of Shareholders % No of Shares %

1 - 1 000 shares 222 34% 133 721 0%

1 001 - 10 000 shares 182 28% 856 579 0% 10 001 - 100 000 shares 158 24% 6 436 303 3%

100 001 - 1 000 000 shares 74 11% 24 939 530 13% 1 000 001 shares and over 23 3% 169 845 810 84%

Totals 659 100 202 212 023 100

DISTRIBUTION OF SHAREHOLDERS No of Shareholders % No of Shares %

Banks 3 0.46 20 746 435 10.26 Close Corporations 4 0.61 7 125 490 3.52

Endowment Funds 3 0.46 3 500 0.01 Individuals 601 91.20 74 240 358 36.71

Investment Companies 5 0.76 5 064 873 2.50 Nominees & Trusts 16 2.43 3 150 010 1.56

Other Corporations 9 1.37 835 333 0.41

Private Companies 10 1.52 12 225 477 6.05

Public Companies 6 0.91 20 754 189 10.26 Share Trust 1 0.15 3 210 023 1.59

Strategic Investors 1 0.15 54 856 335 27.13

Totals 659 100 202 212 023 100

PUBLIC / NON - PUBLIC SHAREHOLDERS No of Shareholders % No of Shares %

Non - Public Shareholders 2 0.30 58 066 358 28.72 Strategic Holdings (More than 10%) 1 0.15 54 856 335 27.13 Share Trust 1 0.15 3 210 023 1.59

Public Shareholders 657 99.7 144 145 665 71.28

Totals 659 100 202 212 023 100

Beneficial shareholders holding 3% or more No of Shares %

Amods Attorneys 6,113,840 3.02

Rickford Investments (Pty) Ltd 6,925,000 3.42

T L.Herbert 7,800,000 3.86

W Chammas 8,704,392 4.30

Comint Investments Ltd 8,952,065 4.43

F Osman 9,686,185 4.79

Industrial Development Corporation 10,909,091 5.39

Bank of New York (Custodian) 20,000,000 9.89

Landers and Kent 54,856,335 27.13

Totals 133,946,908 66.23

ANALYSIS OF SHAREHOLDERS

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SUSTAINABILITY REPORT for the year ended 28 February 2014

INTRODUCTION

The directors of Labat Africa Limited (“Labat’ or “the Group”) are pleased to present the Group’s sustainability report to stakeholders. Labat’s sustainability efforts are a continuous process through which the Group aims to move closer to the goals of sustainable development and to demonstrate its commitment to those goals. The board has appointed a champion at director level, the Financial Director, to drive this process. As can be expected this is a major task and for this reason Labat has decided to adopt a staggered approach. Over the next few years the board will strive to broaden and deepen the contents of this report. This will be done in conjunction with the Groups stakeholders to ensure meaningful, understandable and useful information is available on a timely basis, thus achieving true transparency and building a trusting relationship with allstakeholders.

REPORTING SCOPE

The activities of the operations in which Labat has management control are included in this report.

Sustainable development strategy Labat participates in the electronic chip sector and holds a property and as such, recognises that to meet its economic and financial objectives it needs to respect the environment and its stakeholders upon whom it has an impact. The Group is currently formulating its sustainable development strategy and aims to have this completed for inclusion in the next report. Labat has however identified the key principles that will drive this process:

• To consider the environmental impact of its decisions. • To form strong and sustainable relationships with its stakeholders, built on trust and inclusiveness. • To uplift the communities in which it operates. • To be fair to its workforce. • To apply its spending power in a responsible way.

The strategy will lie with the board of directors and is in an early stage of consideration. The implementation of the group strategy will be overseen by the board until such time as it is appropriate to delegate this responsibility.

CORPORATE GOVERNANCE REPORT

The group subscribes to the values of good corporate governance at all levels and is committed to conducting business with discipline, integrity and social responsibility.

In terms of the Listings Requirements of the JSE, the Group is required to report in respect of the third King Report on Corporate Governance (“King III”) for its financial year ended 28 February 2014, on the extent to which it has complied with the principles as set out in King III. The Board of Directors is firmly committed to promoting Labat’s adherence to the principles contained in the Code of Corporate Practices and Conduct as set out in the King III. The Code is constantly being reviewed and the directors are implementing the Code in a phased manner. The directors are committed to the implementation of the principles and non-compliance is limited to the matters listed in this report.

INTERNAL AUDIT

The Group does not have an internal audit function. Currently the size and nature of the operations of the Group does not warrant an internal audit function, however the Board, in conjunction with the Audit Committee, continually assesses the need to establish an internal audit department as the Group’s operations increase. During the year the Board has taken responsibility to ensure an effective governance, risk management and internal control environment has been maintained.

FINANCIAL STATEMENTS

In terms of the Companies Act of South Africa, 2008, as amended (“the Act”),the directors are responsible for the preparation, integrity and fair presentation of the annual financial statements of Labat. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), the Listings Requirements of the JSE Limited (“JSE”) and in the manner required by the Act.

The group has implemented internal control systems designed to provide reasonable assurance as to the integrity and reliability of the annual financial statements and to adequately safeguard the accountability of its assets. Management has extensive reporting facilities which are utilised within the group and monthly management reports are reviewed against budgets and past performances.

INTEGRATED CORPORATE GOVERNANCE ANDSUSTAINABILITY REPORT

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INTEGRATED CORPORATE GOVERNANCE ANDSUSTAINABILITY REPORT (Cont)

BOARD OF DIRECTORS

During the period under review there were three independent non-executive members of the board of directors. Meetings of executive directors are held at regular intervals with regard to the running of day to day operations in addition to regular meetings of the full board.

The composition of the board of directors is as follows:

Executive 1.

B G van Rooyen (Chief Executive Officer) 2.

D J O’ Neill (Financial Director)

Independent Non-executive 1.

B Jacobs (Independent Non-Executive Director) 2.

R Majiedt (Independent Non-Executive Chairperson) 3.

D Asmal (Independent Non-Executive Director)

Full details of the directorate are detailed below.

DIRECTORS PROFILE

Brian George van Rooyen, (54)

Brian van Rooyen is a practicing member of the Institute of Certified Professional Accountants in South Africa. He has more than 25 years of business experience and during this time he held various positions in Industry including directorships of SBDC, Italtile, Square One Solutions, SAFDICO, Leeuw Mining as well as a number of positions within the Labat Groupof Companies.

David John O’Neill, (67) F.C.A (IRL) Chartered Accountant Mr. O’Neill is a Chartered Accountant with over 30 years of commercial experience gained internationally in a variety of industries both in the financial field and in general management. Prior to joining Labat, David served as a Consulting Director for a large Management Consulting practice where he engaged in a variety of investigations and consulting assignments.

David qualified as a Chartered Accountant in 1973, becoming a Fellow of the Institute of Charted Accountants of Ireland in 1983. He subsequently embarked on a successful career in Finance, General Management and Consulting. This experience has enabled him to acquire comprehensive knowledge and practice of the financial marketing and broad general management skills.

Brian Jacobs Brian was employed by Telkom for a period of 22 years and resigned from a senior management position in 1999 to pursue personal business interests. He served on the Boards of various companies including on the Board of Trustees of the Prosano Medical Scheme of which he was the Chairman and which has an annual turnover in excess of half a billion rand. He resigned as a director of the Communications Workers Investment Company in May 2002. He has completed the Management Advanced Programme as well as the Executive Development Programme at the Witwatersrand Business School. He is currently the Chairman of Trisource Holdings and has been deployed as an Executive Director to Trisource (Pty) Ltd.

Dawood Asmal

Dawood qualified as a Chartered Accountant in 1996. He has held various positions in prominent companies such as Game Discount World, Thebe Investments (PTY) Ltd and Primedia Limited. He brought a wealth of experience to Labat when he joined in 2000 and has held various positions within the Labat group over the years.

Rowena Majiedt A qualified Mathematics teacher, obtained her High Diploma in Education from the then Bellville College of Education and is currently studying towards a B. Comm degree through the University of South Africa.

Rowena is a member of Electus Training and Development CC (a Training and Skills Development Corporation), Deputy Chairperson of NCEDA (Northern Cape Economic Development Agency), and the owner of MacDougall Lodge (an accommodation establishment) situated in Kimberley. Rowena is also a shareholder in Goldfields' South Deep Mine through a Women’s' Empowerment group. From 2002 to 2009, Rowena was the only female director of Ekapa Mining, and was also the HR Manager, for about 350 employees, at Ekapa Mining from 2003 to 2005.

CPA (S.A)

CA (S.A)

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ROLE OF DIRECTORS All Board members ensure that appropriate governance procedures are adhered to and there is a clear division of responsibilities at board level to ensure a balance of power and authority so that no one individual has unfettered powers of decision making. The role of chairman and CEO are not held by the same director. The chairman is an independent non-executive director. Board and Audit Committee meetings have been taking place periodically and the executive directors manage the daily company operations with the EXCO meetings taking place on a monthly basis.

The board is responsible for effective control over the affairs of the company, including: strategic and policy decision-making, financial control, risk management, communication with stakeholders, internal controls and the asset management process. Although there was no specific committee tasked with identifying, analysing and reporting on risk during the financial year, this was nevertheless part of the everyday function of the directors and was managed at board level. Directors are entitled, in consultation with the Chairman to seek independent professional advice about the affairs of the company, at the company’s expense.

BOARD AND BOARD COMMITTEE MEETINGS The board retains overall accountability for the day-to-day management and strategic direction of the company, as well as for attending to relevant legislative, regulatory and the best practice requirements. Accountability to shareholders remains paramount in board decisions, and this is balanced against the demands of the regulatory environment in which the company operates and the concern of its other stakeholders.

To assist the board in discharging its collective responsibility for corporate governance, an audit committee has been established, to which certain of the board’s responsibilities have been delegated.

Although the board delegates certain functions to the audit committee, it retains ultimate responsibility for audit committee activities.

During the period under review four meetings of the board of directors were held.

25 March 2013 31 May 2013 30 August 2013B. van Rooyen Present Present Present Present D. O’Neill Present Present Present Present R. Majiedt Present Present Present Present B. Jacobs Present Present Present Present D. Asmal - - - Present

AUDIT AND RISK COMMITTEE Due to the current size of the Company, a combined audit and risk committee has been established. The audit and risk committee generally meets twice a year to review its strategy. The audit and risk committee comprises the following members:

Mr Brian Jacobs Mrs Rowena Majiedt

The Audit and Risk Committee has set out its roles and responsibilities within its charter and ensured that it is aligned to good corporate governance principles.

These include: The establishment of an Audit and Risk Committee to guide the audit approach, as well as its modus operandi and the

rules that govern the audit relationship; Assess the processes relating to and the results emanating from the Group’s risk and control environment; Oversee the financial reporting process; Evaluate and co-ordinate the external audit process; Foster and improve open communication and contact with relevant stakeholders of the Group; Monitor the compliance of the Group with legal requirements and the Group’s Code of Ethics; Review the independence of the External Auditors ;and Review of the experience of Financial Director.

30 January 2014

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The board of directors are in discussions with various new independent non-executive candidate directors to participate in the audit committee. The audit and risk committee further sets the principles for recommending the external auditors for non-audit services use.

The audit committee has satisfied itself of the suitability of the financial director, and that the financial director holds the necessary expertise and has the relevant experience.

The audit and risk committee, together with the board of directors, further satisfied itself of the suitability of the company secretary, Mr A Britto, who was the company secretary during the period under review and that company secretary holds the necessary expertise and has the relevant experience. It is considered that the company secretary has an arm’s length relationship with the board of directors and exercises sufficient independence there from.

During the period under review two meetings of the audit committee were held.

30 August 2013 30 January 2014

R. Majiedt Present Present B. Jacobs Present Present

B. van Rooyen (by invitation) Present Present D. O’Neill (by invitation) Present Present

REMUNERATION COMMITTEE

The remuneration committee is empowered by the board to set short, medium and long-term remuneration for the executive directors. More generally, the committee is responsible for the assessment and approval of a board remuneration strategy for the group. The committee’s policy is to meet twice a year to review the strategy.

The remuneration committee comprises the following members:

Mr Brian Jacobs Mr Brian van Rooyen

SOCIAL AND ETHICS COMMITTEE

The committee has the following functions; - To monitor the company’s activities, having regard to any relevant legislation, other legal requirements or prevailing

codes of best practice, with regard to matters relating to; o social and economic development, including the company’s standing in terms of the goals and purposes of–

the 10 principles set out in the United Nations Global Compact Principles; the OECD recommendations regarding corruption; the Employment Equity Act; the Broad-Based Black Economic Empowerment Act; good corporate citizenship, including the company’s– and promotion of equality, prevention of unfair discrimination, and reduction of corruption; contribution to development of the communities in which its activities are predominantly conducted or

within which its products or services are predominantly marketed; and record of sponsorship, donations and charitable giving;

the environment, health and public safety, including the impact of the company’s activities and of its products or services;

consumer relationships, including the company’s advertising, public relations and compliance with consumer protection laws; and

labour and employment, including– o the company’s standing in terms of the International Labour Organization Protocol on decent

work and working conditions; o the company’s employment relationships, and its contribution toward the educational

development of its employees; and o to draw matters within its mandate to the attention of the Board as occasion requires; and o to report, through one of its members, to the shareholders at the company’s annual general meeting on the

matters within its mandate.”

NOMINATION COMMITTEE

The Group currently does not have a nomination committee.

No formal procedure exists for the appointment of new directors to the board or for the delegation of the functions of the board. Any new appointments/delegations are considered by the board as a whole. New directors appointed to the board


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during the year are appointed in accordance with the casual vacancy provisions of the company’s memorandum of incorporation, automatically retire at the next annual general meeting and their re-appointment is subject to the approval of shareholders at such annual general meeting. On appointment, new directors receive an induction pack, consisting of, inter alia , the memorandum of incorporation of the company, Section 3 of the JSE Listings Requirements relating to continuing obligations of listed companies, minutes of board meetings for the prior 12 months, resolutions passed during the prior 12 months, all announcements published on SENS in the prior 12 months and an explanation of and copies of directors’ declarations of interest. With the exception of the executive directors, one third of the directors retires by rotation each year and each retiring director is eligible for re-election by shareholders in accordance with the memorandum of incorporation. Directors are required to retire from the board at age 70. The board can however decide that a director continues in office beyond this age. Due to the size and nature of the business, it is not anticipated that a nomination committee will be established and board appointments will continue to be addressed by the board as a whole.

GOVERNANCE OF IT

The Board is responsible for IT governance as an integral part of the Group’s governance as a whole. The IT function is not expected to significantly change in the foreseeable future. The Board is in the process of compiling the required policies and procedures to ensure governance of IT is adhered to in future periods.

INTEGRATED AND SUSTAINABILITY REPORTING

King III defines Integrated Reporting as a “holistic and integrated representation of the Group’s performance in terms of both its finances and its sustainability”. The Board and its sub-committees are in the process of assessing the principles and practices of integrated reporting and sustainability reporting as outlined in King III to ensure that adequate information about the operations of the Group, the sustainability issues pertinent to its business, the financial results, and the results of its

operations and cash flows are disclosed in a single report.

Principles contained in King III complied with or not complied with and the reasons for non-compliance

The board endorses the principles contained in the King III report on corporate governance and confirms its commitment to those principles where, in the view of the board, they apply to the business. Compliance is monitored regularly and the board has undertaken an internal review process in determining compliance. Where areas of non-compliance or partial compliance have been identified these have been listed below, together with the reasons therefore, as is required by King III.

King III compliance checklist

Governance element and associated principle

Comply Partially comply

Under review/ do not comply

Governance element and associated principle

Comply Partially comply

Under review/ do not comply

ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP

Effective leadership based on an ethical foundation

√

Responsible corporate citizen

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Effective management of company’s ethics

√

Assurance statement on ethics in integrated annual report

√2

BOARDS AND DIRECTORS

The board is the focal point for and custodian of corporate governance

√

Strategy, risk, performance and sustainability are inseparable

√

Directors act in the best interest of the company

√

The chairman of the board is an independent non-executive director

√

Framework for the delegation of authority has been established

√

The board comprises a balance of power, with a majority of non-executive directors who are independent

√7

Directors are appointed through a formal process

√

Formal induction and

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on-going training of directors is conducted

The board is assisted by a competent, suitably qualified and experienced company secretary

√

Regular performance evaluation of the board, its committees and the individual director s

√1

Appointment of well-structured committees and oversight of key functions

√

An agreed governance framework between the group and its subsidiary boards is in place

√3

Directors and executives are fairly and responsibly remunerated

√

Remuneration of directors and senior executives is disclosed

√

The company's remuneration policy is approved by its shareholders

√

AUDIT COMMITTEE

Effective and independent √

Suitably skilled and experienced independent non-executive directors

√

Chaired by an independent non-executive director

√

Oversees integrated reporting

√

A combined assurance model in applied to improve efficiency in assurance activities

√4

Satisfies itself on the expertise, resources and experience of the company's finance functions

√

Oversees internal audit √4

Integral to the risk management process

√

Oversees the external audit process

√

Reports to the board and shareholders on how it has discharged its duties

√

THE GOVERNANCE OF RISK

The board is responsible for the governance of risk and setting levels of risk tolerance

√

The risk committee assists the board in carrying out its risk responsibilities

√

The board delegates the process of risk management to management

√

The board ensures that risk assessments and monitoring is performed on a continual basis

√

Frameworks and methodologies are implemented to increase the

√

Management implements appropriate risk

√1


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probability of anticipating unpredictable risks

responses

The board receives assurance on the effectiveness of the risk management process

√ Sufficient risk disclosure to stakeholders

√

THE GOVERNANCE OF INFORMATION TECHNOLOGY

The board is responsible for information technology (IT) governance

√

IT is aligned with the performance and sustainability objectives of the company

√

Management is responsible for the implementation of an IT governance framework

√

The board monitors and evaluates significant IT investments and expenditure

√

IT is an integral part of the company's risk management

√ IT assets are

managed effectively

√

The risk committee and audit committee assist the board in carrying out its IT responsibilities

√

COMPLIANCE WITH LAWS, CODES, RULES AND STANDARDS

The board ensures that the company complies with relevant laws

√

The board and directors have a working understanding of the relevance and implications of non-compliance

√

Compliance risk forms an integral part of the company's risk management process

√6

The board has delegated to management the implementation of an effective compliance framework and processes

√5

GOVERNING STAKEHOLDER RELATIONSHIPS

Appreciation that stakeholders' perceptions affect a company’s reputation

√

Delegated to management to proactively deal with stakeholder relationships

√


INTERNAL AUDIT

Ensures that there is an effective risk based internalaudit

Internal Audit provides a written assessment of the company’s system of internalcontrols and risk management.

Internal audit is strategicallypositioned to achieve itsobjectives

Internal Audit follows a risk based approach in its plan

The audit commiteeresponsible for overseeinginternal audit

√4

√4

√4

√4

√4

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There is an appropriate balance between its various stakeholder groupings

√ Equitable treatment of stakeholders

√

Transparent and effective communication to stakeholders

√

Disputes are resolved effectively and timeously

√

INTEGRATED REPORTING AND DISCLOSURE

Ensures the integrity of the company's integrated annual report

√

Sustainability reporting and disclosure is integrated with

the company's financial reporting

√

Sustainability reporting and disclosure is independently assured

√6

Explanations of partial, under review or non-compliance with the requirements of King III 1. Areas of partial compliance are areas of the recommended practice that are currently not in place but are being addressed

by the Company and are being implemented where appropriate and relevant. 2. Currently an assurance on statement on ethics has not been obtained. Consideration is currently being given as to how

this recommended practice can best be implemented. 3. Currently, no separate board exists for subsidiary companies. Consideration is currently being given to how this

recommended practice can best be implemented when one board governs all separate companies of the group. 4. The group does not currently have any internal audit function. Due to the size of the group, it does not consider it feasib le

to have an internal audit function. 5. Compliance risk currently does not form an integral part of the company’s risk management process. Consideration is

currently being given to how this recommend practice can best be implemented, including the establishment of a compliance risk function.

6. The group does not currently obtain an independent assurance on the sustainability reporting and disclosure of the group. Consideration is currently being given to how this recommended practice can best be implemented in future.

7. The group partially complied. During the year, an independent non-executive director resigned with effect 26 August 2013. A new independent non-executive director was only appointed on 04 March 2014. Therefore for a part of the year, a majority of independent non-executive directors was not in place.

EMPLOYMENT EQUITY

Labat upholds and supports the objectives of the Employment Equity Act 1998 (Act 53 of 1998). Labat’s employment policies are designed to provide equal opportunities, without discrimination, to all employees.

CODE OF ETHICS

All employees of the group are required to maintain the highest standards in ensuring that business practices are conducted in a manner, which, in all reasonable circumstances, are above reproach. The values have been embodied in a written Code of Ethics which commits directors and employees to the highest standards of ethical behavior.

COMMUNICATION WITH STAKEHOLDERS

The company is committed to ongoing and effective communication with its stakeholders.

DEALINGS IN SECURITIES

In respect to dealings in securities of the company as applied to the directors and the company secretary, the chairman is required to authorise such dealings in securities, prior to deals being executed. An independent non-executive director is required to authorise the chairman’s dealings in securities, pr ior to deals being executed. All of the directors and the companysecretary are aware of the legislation regulating insider trading. A record of dealings by directors and the company secretary is retained by the company secretary.

In accordance with the Listings Requirements of the JSE, the company’s directors and company secretary are prohibited from dealing in securities during closed periods.

There were no dealings in securities by directors during the year under review and to the date of this report.


14

CLOSED AND PROHIBITED PERIODS

A closed period is implemented by the company’s directors from the date of the end of the reporting period until the company’s results are released on SENS. Additional closed or prohibited periods are enforced as required in terms of any corporate activity or when directors are in possession of price-sensitive information. All the directors are aware of the legislation regulating insider trading. A record of dealings by directors in the company’s securities is retained by the Company Secretary at the registered office of the company.

TRANSFER OFFICE

Computershare Investor Services (Pty) Limited acts as Transfer Secretary to the company.


15

REPORT OF AUDIT AND RISK COMMITTEE (‘ARC”) for the year ended 28 February 2014

The report of the Audit and Risk Committee is presented as required by section 61(8)(a)(iii) of the Companies Act, 2008 (No 71 of 2008) (“the Companies Act”).

The Audit and Risk Committee consisted of the following non – executive directors during the year under review:

• Mr Brian Jacobs (Chairman) • Mrs Rowena Majiedt

Statement of audit committee responsibilities for the year ended 28 February 2014

The role of the Audit and Risk Committee is to assist the board by performing an objective and independent review of the functioning of the organisation’s finance and accounting control mechanisms. It exercises its functions through close liaison and communication with corporate management and the external auditors. The Committee met twice during the 2014 financial year. The Committee is guided by its terms of reference, dealing with membership, structure and levels of authority and has the following responsibilities:

• ensuring compliance with applicable legislation and the requirements of regulatory authorities; • nominating for appointment a registered auditor who, in the opinion of the audit committee, is independent of the

company; • matters relating to financial accounting, accounting policies, reporting and disclosure; • determination of fees and terms of engagement; • activities, scope, adequacy, and effectiveness of the function and audit plans; • review / approval of external audit plans, findings, reports, fees and determination and approval of any non-audit

services that the auditor may provide to the company; • review / consideration of expertise and experience of the financial director and the financial team; • compliance with the Code of Corporate Practices and Conduct; and • compliance with the company’s code of ethics

The audit committee addressed its responsibilities in terms of the charter during the 2014 financial year. One of these responsibilities was the assessment of the independence of the auditor. The committee is satisfied that the auditor was independent of the company. It has further satisfied itself that the audit firm and designated auditor are accredited to appearon the JSE List of Accredited Auditors. The Audit and Risk Committee has an established non-audit services policy as well as an approval process for non-audit services, where utilised.

Based on the system of internal financial controls and considering information and explanations given by management together with discussion held with the external auditors on the results of their audit, the committee is of the opinion that Labat’s system of internal financial controls is effective and forms a basis for the preparation of reliable financial statements.

Due to the size and nature of the operations, an internal audit function is not considered necessary.

The committee is satisfied that it has complied with its legal, regulatory and other responsibilities.

The committee is also satisfied as to the expertise and experience of the Financial Director and the finance team. Management has reviewed the financial statements with the Audit Committee, and the Audit Committee has reviewed them without management or external auditors being present. The quality of the accounting policies are discussed with the external auditors.

The Audit and Risk Committee considers the financial statements of Labat Africa Limited to be a fair presentation of its financial position on the 28 February 2014 and of the results of the operations, changes in equity and cash flows for the year then ended, in accordance with International Financial Reporting Standards and the Companies Act.

05 June 2014 Chairman

AUDIT AND RISK COMMITTEE

16

The directors are required in terms of the Companies Act 71 of 2008 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this

report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the group as at the end of the financial year and the results of its operations and cash flows for the period then ended, inconformity with International Financial Reporting Standards (“IFRS”), the Financial Reporting Guides issued by the Accounting Practices Committee of the South African Institute of Chartered Accountants, the Companies Act 71 of 2008, and the Listing Requirements of the JSE. 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 (“IFRS”), the Financial Reporting Guides issued by the Accounting Practices Committee of the South African Institute of Chartered Accountants, the Companies Act 71 of 2008, and the Listing Requirements of the JSE and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place 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, effective 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 management 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 endeavors to minimise it by ensuring that appropriate infrastructure, 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 on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the group’s cash flow forecast and, in the light of this review and the current financial position,

they are satisfied that the group has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently reviewing and reporting on the group's annual financial statements. The annual financial statements have been examined by the group’s external auditors and their report is presented on page 17

The annual financial statements set out on pages 21 to 62, which have been prepared on the going concern basis, were approved by the board on 05 June 2014 and were signed on its behalf by:

_________________________________ _ __________________________________ Director

DIRECTORS RESPONSIBILITIES AND APPROVAL

Director

17

Independent Auditors Report

To the Shareholders of Labat Africa Limited

We have audited the consolidated and separate annual financial statements of Labat Africa Limited set out on pages 21 to 62, which comprise the statements of financial position as at 28 February 2014, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Consolidated and Separate Annual Financial Statements

The company’s directors are responsible for the preparation and fair presentation of these consolidated and separate annual financial statements in accordance with International Financial Reporting Standards, and requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidatedand separate annual financial statements that are free from material misstatements, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated and separate annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated and separate annual financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate annual financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the consolidated and separate annual financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated and separate annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate annual financial statements.

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

Opinion

In our opinion, the consolidated and separate annual financial statements present fairly, in all material respects, the consolidated and separate financial position of Labat Africa Limited as at 28 February 2014, and its consolidated and separate financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.

Emphasis of matter

Without qualifying our conclusion, we draw attention to the going concern paragraph in note 38 to the annual financial statements which indicates that the group incurred a loss for the year ended 28 February 2014 of R10 709 197 and, at that date, the group’s current liabilities exceeded its current assets by R17 549 977 before the loans from shareholders amounting to R9 540 288, which have been subordinated for the benefit of other creditors to the group. These conditions, along with other matters, indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.

Other reports required by the Companies Act

As part of our audit of the consolidated and separate annual financial statements for the period ended 28 February 2014, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate, for the purpose of identifying whether there are material inconsistencies between these reports and the consolidated and separate annual audited financial statements. These reports are the responsibility of the respective preparers. Based on reading the reports we have not identified material inconsistencies between the reports and the consolidated and separate audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

Nexia

SAB&T

Registered

Auditors

Per:

T.J.de

Kock - Registered

Auditor

and

partner

119

Witch-Hazel

Avenue,

Higveld

Technopark,

Centurion,

Pretoria

05

June2014

AUDITORS REPORT

18

The directors have pleasure in presenting their report on the group’s activities for the year ended 28 February 2014.

1. Review of activities

Main business and operations

The company is an investment operating company, which, through its subsidiary, is engaged in its main business during the period under review, being the design and marketing of integrated circuits.

The operating results and state of affairs of the group and company are fully set out in the attached annual financial statements anddo not in our opinion require any further comment.

2.

Financial results

Headline losses from continuing operations have increased from (0.08) to (3.01) cents per share while earning /(losses) per sharehave deteriorated from 0.17 to (3.03) cents per share. This is mainly due to revenues having decreased by 24.2% during the year . This decline relates directly to the product life cycle of the SAMES integrated circuits. The current products are reaching the end of their marketable life cycle and are in the process of being enhanced/replaced. A four year programme to move production to Chinamove to a 0.5 micron platform and at the same time improve the products, is nearing completion. Completion of this programme will result in the re-launch of SAMES with an enhanced product range in 2014 and 2015. The development programme is currently on target. The total comprehensive loss for the year was R10 709 197 as opposed to a loss in the previous year of R898 932. The majority ofthe loss, R9 862 838, less a tax rebate of R2 761 594 related to a downward property revaluation without which the loss would have been R3 607 953. Sales were substantially down due to delays in the introduction of new products.

3.

Going concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basispresumes that funds will be available to finance future operations and that the realization of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

The going concern has been comprehensively dealt with in note 10 to the chief executive officer’s report and note 38 to the annualfinancial statements.

4.

Events after the reporting period

The directors are not aware of any matter or circumstances arising since the end of the financial year other than those documentedin note 39 to the annual financial statements.

5.

Directors' interest in shares

Details of the directors’ interest in shares and emoluments are set out in note 35 to the annual financial statements.

6.

Authorised and issued share capital

Full details of the authorised and issued capital of the group and Company at 28 February 2014 are contained in note 11 of the annual financial statements. During the year the company issued 3 387 534 and 1 670 007 shares at 0.1476 and 0.1497 cents per share respectively under its general authority to issue shares for cash.

7.

Non-current assets

During the year, the group approved the disposal of its property and related plant, Portion 1 of Erf 113, Koedoespoort, PretoriaTitle deed number T10472/1991. As a result, the property has been reclassified as a disposal group at year end as the sale is still in progress. Details of the disposal is disclosed in note 10 to the annual financial statements. Other than this disposal, there were no major changes in the nature of the non-current assets of the group during the year.

8.

Dividends

No dividends were declared during the year, but when deemed appropriate, a dividend will be declared.

9.

Directors

The directors of the company during the year and to the date of this report are as follows:

Name Nationality Executive/ Non-executive BG van Rooyen South African Executive director DJ O'Neill Irish Executive director D Asmal South African Non-executive director (Appointed 04 March 2014) R Majiedt South African Non-executive director B Jacobs South African Non-executive director D.Lupungela South African Non-executive director (Removed with effect from 26 August 2013)

DIRECTORS’ REPORT

19

10. Secretary

The secretary of the company is A. Britto

Business address 23 Kroton Avenue Weltevreden Park 1709

11. Interest in subsidiaries

Name of subsidiary Net income (loss) after tax 2014 R

Net income (loss) after tax 2013 R

South African Micro-Electronic Systems (Pty)Ltd (4 362 047) 4 282 950 SAMES Properties (Pty) Ltd (8 927 549) (454 203)

Details of the company's investment in subsidiaries are set out in note 4.

Investment in Subsidiaries Directly held Interest Held Share Capital South African Micro-Electronic Systems (Pty)Ltd 100% 8 367 000 Integrated Circuit Design Centre (Pty) Ltd 100% 1 000

Indirectly held

SAMES Properties (Pty) Ltd 100% 200

12. Auditors

Nexia SAB&T will continue in office in accordance with section 90 of the Companies Act 71 of 2008.

13. Liquidity and solvency

The directors have performed the required liquidity and solvency tests required by the Companies Act 71 of 2008 and are satisfiedthat the company will have sufficient funds available to it in order to continue as a going concern.

14. Litigation

The group has various claims and counter claims made by and against Labat which have risen in the normal course of business. Allthese matters are being dealt with by the company’s attorneys. Further details have been disclosed in note 32 to the annual financial statements.

15. Borrowing limitations

In terms of the Memorandum of Incorporation of the Company, the directors may exercise all the powers of the Company to borrow money as they consider appropriate.

16. Major shareholdings

Details of the major shareholders are provided in the audited Shareholder Analysis on page 5 of the Annual Report.

17. Special resolutions

At the Company’s annual general meeting held on 29 November 2013, the following special resolutions were passed:

- The directors were authorised to repurchase ordinary shares in the issued share capital of the Company. As at the date of the report no repurchase in terms of the special resolution had been made.

- A general authority to enter into funding agreements, provide loans or other financial assistance in terms of Sections 44 and 45

of the Companies Act was granted. - Approval of non- executive directors’ remuneration for the year commencing 1 March 2013.

18. Compositions of Board and Board Committees

The directors of the Company, as well as the classification of each director, are fully disclosed in the Corporate Governance Report. The composition of the Board Committees, as well as the attendance of directors at the committee meetings, is fully disclosed in the Corporate Governance Report.

DIRECTORS’ REPORT(Cont)

20

In my capacity as company secretary, I hereby confirm in terms of Section 88(2)(e) of the Companies Act 71 of 2008, that for theyear ended 28 February 2014, the Group has lodged with the Companies and Intellectual Property Commission all such returns as required of a public company in terms of the Act and that all such returns are true, correct and up to date.

A. Britto SECRETARY

05 June 2014

SECRETARY’S REPORT

21

Group Company

Notes

2014 201 3 2014 2013

Assets

Non-Current Assets

Property, plant and equipment 3 51 146 26 655 785 6 282 9 403 Investment in subsidiaries 4 - - 202 070 202 070

51 146 26 655 785 208 352 211 473

Current Assets

Inventories 5 4 106 651 5 296 584 - - Loans to group companies 6 - - 109 163 109 163 Other financial assets 7 9 923 9 923 - - Trade and other receivables 8 687 563 1 836 973 - 500 Cash and cash equivalents 9 1 048 328 830 044 3 000 20 519

5 852 465 7 973 524 112 163 130 182

Assets of disposal groups 10 20 671 935 - - -

Total Assets

26 575 546 34 629 309 320 515 341 655

Equity and Liabilities

Equity

Share capital 11&12 51 305 081 50 555 082 51 786 584 51 036 585 Non-distributable Reserves 13&14 5 656 040 12 926 000 15 395 407 14 552 291 Accumulated loss

(65 541 725) (62 102 488) (92 576 946) (85 659 826)

(8 580 604) 1 378 594 (25 394 955) (20 070 950)

Liabilities

Non-Current Liabilities

Deferred tax 15 - 4 553 844 - -

- 4 553 844 - -

Current Liabilities Loans from group companies 6 - - 203 081 - Loans from directors and shareholders 16 9 540 288 7 751 022 9 540 288 7 751 022 South African Revenue Services 17 11 034 748 11 757 103 5 920 136 6 220 650 Trade and other payables 18 4 075 430 3 341 278 2 097 615 894 434 Provisions 19 8 263 237 5 847 468 7 925 323 5 546 499 Bank Overdraft 9 29 027 - 29 027 -

32 942 730 28 696 871 25 715 470 20 412 605 Liabilities of disposal groups 10 2 213 420 - - -

Total Liabilities

35 156 150 33 250 715 25 715 470 20 412 605

Total Equity and Liabilities

26 575 546 34 629 309 320 515 341 655

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 28 FEBRUARY 2014

R R R R

22

Notes

(Restated)

Group Company 2014 2013 2014 2013

Continuing operations

Revenue 20 9 942 035 13 117 108 - 4 200 000 Cost of sales (3 536 955) (5 975 073) - - Gross profit 6 405 080 7 142 035 - 4 200 000 Other income 21 186 625 8 018 942 - - Operating expenses (12 151 584) (13 092 484) (6 444 462) (7 193 160)

Operating Profit (loss)

22 (5 559 879)

2 068 493

(6 444 462)

(2 993 162)

Investment revenue Impairments

23 24

12 107 -

17 507 (150 328)

- - (328)

Finance costs 25 (474 265) (1 609 544) (472 658) (1 561 555) (Loss)/profit before taxation

(6 022 037)

326 128

(6 917 120)

(4 555 043)

Taxation

26

- - - - (Loss)/profit from continuing operations

(6 022 037)

326 128

(6 917 120)

(4 555 043)

Discontinued operations

Profit (loss) from discontinued operations

10

2 414 084 (1 225 060) -

- (Loss)/profit for the year

(3 607 953)

(898 932)

(6 917 120)

(4 555 043)

Other comprehensive income:

Loss on revaluation of property (9 862 838) - - - Taxation related to revaluation of property 2 761 594 - - - Other comprehensive loss for the year net of taxation

28 (7 101 244) - - -

Total Comprehensive (loss)/income for the year

(10 709 197) (898 932) (6 917 120) (4 555 043)

Attributable to:

Owners of the parent: (Loss)/profit for the year from continuing operations

(6 022 037)

326 128

(6 917 120)

(4 555 043)

Profit/(Loss) for the year from discontinuing operations 2 414 084 (1 225 060) - - Profit/ (Loss) for the year attributable to owners of the parent

(3 607 953)

(898 932)

(6 917 120)

(4 555 043)

Attributable to:

Owners of the parent:

Comprehensive (loss)/profit for the year from continuing operations

(6 022 037)

326 128

(6 917 120)

(4 555 043)

Comprehensive loss for the year from discontinuing operations

(4 687 160)

(1 225 060)

- -

Comprehensive (loss)/profit for the year attributable to owners of the parent

(10 709 197) (898 932) (6 917 120) (4 555 043)

Earnings and diluted earnings/(loss) per share

From continuing operations Basic and diluted (loss)/earnings per share (cents)

29 (3,03) 0,17

From discontinuing operations

Basic and diluted (loss)/earnings per share (cents)

29 1,21 (0,62)

Total earnings per share Basic and diluted (loss)/earnings per share (cents)

29

(1,82)

(0,45)

CONSOLIDATED STATEMENT OF COMPREHENSIVEINCOME FOR THE YEAR ENDED 28 FEBRUARY 2014

R R R R

23

Group Company

Notes

2014 2013 (Restated)

2014 2013

Cash flow from operating activities

Cash received from customers 12 016 894 13 694 239 500 4 202 900 Cash paid to suppliers and employees (11 837 610) (18 001 409) (2 003 328) (4 294 101) Cash (used in) generated from operations 30 179 284 (4 307 170) (2 002 828) (91 201) Investment revenue

12 107 17 507 - - Finance costs (474 265) (1 609 544) (472 658) (1 561 555) Tax (paid) received (19 815) - - - Cash flows of held for sale/discontinued operations 31 (1 350 958) 683 272 - - Net cash from operating activities (1 653 647) (5 215 935) (2 475 486) (1 652 756)

Cash flows from investing activities

Purchase of property, plant and equipment 3 (12 887) (11 479) (12 887) - Net proceeds on sale of property, plant and equipment

3 23 888 3 393 428 - -

Loans to group companies repaid

- - (176 409) - Proceeds from loans from group companies

- - 379 490 - Loans advanced

- (150 000) - - Net cash from investing activities

11 001 3 231 949 190 194 -

Cash flows from financing activities

Proceeds on share issue 11 750 000 - 750 000 - Repayment of South African Revenue Services liability

(1 942 512) (1 241 122) (225 753) -

Statutory levies raised/(claimed) by South African Revenue Services

1 235 149 1 886 708 (74 767) 2 236 349

Shareholders loans received 4 299 569 1 778 258 4 299 569 1 778 258 Shareholders loans repaid (2 510 303) (2 441 467) (2 510 303) (2 441 467)

Net cash from financing activities 1 831 903 (17 263) 2 238 746 1 573 140

Total cash movement for the year 189 257 (2 001 609) (46 546) (79 616) Cash at the beginning of the year 830 044 2 831 653 20 519 100 135 Total cash at end of the year 9 1 019 301 830 044 (26 027) 20 519

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 28 FEBRUARY 2014

R R R R

24

ST

AT

EM

EN

T O

F C

HA

NG

ES

IN E

QU

ITY

F

OR

TH

E Y

EA

R E

ND

ED

28 FE

BR

UA

RY

2014

Sh

are cap

italS

hare p

remiu

mT

otal share

capital

Non

d

istribu

table

reserves

-revaluatio

ns

Non

distrib

utab

le reserves -eq

uity

loans

Accu

mu

lated

lossT

otal equ

ity

1 4

90 042

49 065 03950 555 081

15 267 000-

(63 544 556)

2 277 525-

--

-(8

98 932)

(898 932)-

--

-(898 932)

(898 932)-

-(253 00)

-253 000

-(2 088 000)

-2 088 000

--

-(2 341 000)

-2 341 000

-

1 4

90 042

49 065 03950 555 082

12 926 000

-

(62 102 488)

1 378 593-

- -

- (3 607 953)

(3 607 953) -

-

(7 101 244)

- -

(7 101 244)

-

-

7 101 244

-

(3 607 953)

(10 709 197) 699 425

750 000

-

--

750 000-

-(1

68 716)

-168 716

-699 425

750 000(168 7

16)-

168 716750 00

0

1 5

40 617

49 764 46451 305 081

5 656 040-

(65 541 725)

(8 580 604)

11/1211/12

1314

49 065 039

51 036 584

-

13 128 212

(81 104 781)

(16 939 985)

-

- -

(4 555 045) (4 555 045)

-

-

-

-

(4 555 045)

(4 555 045) -

--

1 424 079-

1 424 079-

--

1 424 079-

1 424 079

49 065 0

39

51 036 585-

14 552 291

(85 659 826)(20 070 951)

- -

- -

(6 917 120) (6 917 120)

-

-

-

-

-

-

-

-

-

-

(6 917 120)

(6 917 120) 699 425

750 000

750 000 -

-

-

843 116

-

843 116

699 425

750 000

-

843 116

-

1 593 115

49 764 46451 786 584

-

15 395 407

(92 576 946)(25 394 955)

11/1211/12

1314

Gro

up

Bala

nce a

t 01 M

arch

2012

Loss fo

r the y

ear -

Tota

l com

preh

ensive lo

ss for the y

ear -

Tran

sfer of rev

aluatio

n reserve thro

ugh u

se -

Tran

sfer of rev

aluatio

n reserve o

n disposal of property

T

ota

l con

tribu

tion

s by a

nd

distrib

ution

s to own

ers of co

mp

any reco

gnised

directly

in eq

uity

-

Bala

nce a

t 01 M

arch

2013

Loss fo

r the y

ear

- O

ther com

preh

ensiv

e loss

-

Tota

l com

preh

ensive lo

ss for the y

ear

-

Issue of shares

50 575

Tran

sfer of rev

aluatio

n reserve thro

ugh u

se

- T

ota

l con

tribu

tion

s by a

nd

distrib

ution

s to own

ers of co

mp

any reco

gnised

directly

in eq

uity

50 575

Bala

nce a

t 28 F

ebru

ary

2014

Note(s)

11/12

Com

pan

y

Bala

nce a

t 01 M

arch

2012

1 97

1 545

L

oss fo

r the y

ear O

ther co

mpreh

ensiv

e inco

me

-

Tota

l com

preh

ensive lo

ss for the y

ear

-

Reserv

e on

equity lo

ans

-T

ota

l con

tribu

tion

s by a

nd

distrib

ution

s to own

ers of co

mp

any reco

gnised

directly

in eq

uity

-

Bala

nce a

t 01 M

arch

2013

1 9

71 5

45

Loss fo

r the y

ear

- O

ther

com

preh

ensiv

e in

com

e -

Tota

l com

preh

ensive L

oss for the y

ear

-

Issue of shares

50 575

R

eserve o

n equity

loans

-

Tota

l con

tribu

tion

s by a

nd

distrib

ution

s to own

ers of co

mp

any reco

gnised

directly

in eq

uity

50 575

Bala

nce a

t 28 F

ebru

ary

2014

2 0

22 120

Note(s)

11/2

25

SIGNIFICANT ACCOUNTING POLICIES

1. Presentation of Annual Financial Statements The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards, the Financial Reporting Guides issued by the Accounting Practices Committee of the South African Institute of Chartered Accountants the , Companies Act 71 of 2008, and the Listing Requirements of the JSE. The annual financial statements have been prepared on the historical cost basis, except for the measurement of property, plant and other financial assets which is measured at fair value and incorporate the principal accounting policies set out below. They are presented in South African Rand.

The accounting policies are consistent with those of the previous annual financial statements except for the adoption of new standards and interpretations which became effective in the current year. Standards and interpretations effective from the current report ing period have been applied in line with the transitional provisions. Refer to note 2.

1.1

Consolidation

Basis of consolidation

S u b s i d i a ries (a)

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingentconsideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date ; any gains or losses arising from such re-measurement are recognised in

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform to the group’s accounting policies.

b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiaries

When the group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

profit or loss.

statement.

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SIGNIFICANT ACCOUNTING POLICIES (Cont)

1.2 Significant judgements and sources of estimation uncertainty

In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts represented in

the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Significant judgements include:

Impairment testing on financial and non-financial assets

The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. The fair value of financial and non-financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. Details of the methods of impairment testing on financial instruments are set out in accounting policy 1.5 and details on methods of impairment testing ofnon-financial assets are set out in accounting policy 1.10.

Allowance for slow moving, damaged and obsolete inventories

The allowance for slow moving inventory is made based on the reliable evidence of the amount the inventories are expected to realiseconsidering price fluctuations, possible damage to stock, technological obsolescence and previous sales trends.

Fair value estimation

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for assets held by the group is the current bid price. Refer to note 7 for more details.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

Provisions

Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these

estimates of provisions are included in note 19- Provisions.

Expected manner of realisation for deferred tax

Deferred tax is provided for on the fair value adjustments of investment properties and land and buildings based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer to note 5 – Deferred tax.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactionsand calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

The group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.

Residual values and useful lives of property, plant and equipment

The useful economic lives, depreciation method and residual values of items of property, plant and equipment and tangible assets are estimated annually. The actual lives, depreciation method and residual values may vary depending on a variety of factors and circumstances.

the annual financial statements and related disclosures. Use of available information and the application of judgements are inherent in

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The cost of an item of property, plant and equipment is recognised as an asset when: - it is probable that future economic benefits associated with the item will flow to the company; and - the cost of the item can be measured reliably.

Property comprises land and buildings held by the group for manufacturing and administration purposes. The directors review the fair value of property with reference to the last revaluation performed by professional valuers and the income generating capacity of the property. Any revaluation is credited to other comprehensive income except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged to profit or loss. Freehold land with no buildings on it is not depreciated.

Plant and equipment is stated in the statement of financial position at revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation. Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. Any revaluation is credited to the asset revaluation reserve, net of deferred tax, except to the extent that it reverses the valuation decrease for the same asset previouslyrecognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such plant and equipment is charged to profit or loss to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

All other assets are stated in the Consolidated Statement of Financial Position at their cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replacedpart is derecognised. All other repairs and maintenance are charged to profit and loss during the financial period in which they are incurred.

The depreciation is calculated at rates considered appropriate to recognise the cost of the asset less residual value over their estimated useful life on the straight line basis.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life Land Indefinite Buildings 40 years Plant, machinery and equipment 3-8 years Furniture, fittings and office equipment 3-10 years Motor vehicles 5 years Computer equipment 3-5 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment is determined as the

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

1.4

Investments in subsidiaries

Company annual financial statements

In the company’s separate financial statements, investments in subsidiaries are carried at cost less any accumulated impairment . Investments in subsidiaries are classified as non-current assets, and are stated in the separate financial statements of the company at cost, less appropriate impairments. Where the value of the investment is considered to be below the carrying value and the decrease in the value is considered not to be of a temporary nature, the investment is written down to the expected realisable value.


1.3 Property, plant and equipment

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Initial recognition

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

De-recognition

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

Offsetting

Financial assets and liabilities are offset and the net amount presented in the statement of the financial position when, the Group has a legal right to offset the amount and intends either to settle them on a net basis or to realise the asset and settle the liabilitysimultaneously.

Classification

The group classifies financial assets into the following categories: - Financial assets at fair value through profit or loss - Loans and receivables

Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

Financial assets at fair value through profit or loss

A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if the Group manages such assets and makes purchase and sale decisions based on their fair value in accordance with the Group’s risk management or investment strategy. Attributable transaction costs are recognised in profit or loss has incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend and interest income, are recognised in profit or loss.

- Financial assets at fair value through profit or loss comprise:

Other financial assets

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such as sets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Cash and cash equivalent comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used in the Group in the management of its short-term commitment.

- Loans and receivables comprise:

Cash and cash equivalents; Loans to group companies; and Trade and other receivables.

1.5

Financial instruments

(i) Non-derivative financial assets


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The Group initially recognises debt securities issued and liabilities on the date they are originated. All other financial liabilities are recognised initially on the trade date, which is the date that Group becomes a party to the contractual provisions of the instruments.

De-recognition

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Classification

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. Bank liabilities that are repayable on 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.

- Other financial liabilities comprise of:

Loans from directors and shareholders; Loans from group companies Trade and other payables; and Bank overdrafts.

(iii) Share Capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as deduction equity, net of any tax effects.

Repurchase and reissues of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as deduction from equity. Repurchase shares are classified as treasury shares and are presented in the reserve for own shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transactions is presented in share premium.

The group operated a share incentive scheme under which employees had the option to purchase shares in the company. Shares in the share incentive scheme have been converted into treasury shares.

Equity loans

The group regards an equity instrument as any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Repayments of loans purchased at a discount as a result of business combinations have been accounted for as equity loans in the holding company and are included in non-distributable reserves.

(iv) Impairment of financial assets

Assets carried at amortised cost

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (’a loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financialasset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate


1.5 Financial instruments (Cont)

(ii) Non-derivative financial liabilities

Initial recognition

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for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

1.6

Tax

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: - the initial recognition of goodwill; or - the initial recognition of an asset or liability in a transaction which:

o is not a business combination; and o at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries, except to the extent that both of the following conditions are satisfied: - the parent, investor is able to control the timing of the reversal of the temporary difference; and - it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that: - is not a business combination; and - at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries, to the extent that it is probable that: - the temporary difference will reverse in the foreseeable future; and - taxable profit will be available against which the temporary difference can be utilised.

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: - a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or - a business combination.

charged, in the same or a different period, to other comprehensive income.

Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

1.5 Financial instruments (Cont)

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or

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Operating lease income is recognised as an income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. Income for leases is disclosed under revenue in profit or loss.

Operating leases - lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematicbasis is more representative of the time pattern in which economic benefits from the leased asset are consumed. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease liability.

1.8

Inventories

Inventory comprising merchandise for resale is valued at the lower of cost determined on a unit cost basis and net realizable value. Raw materials, consumables, work in progress and finished goods are valued at the lower of cost and net realizable value on a first -in-first-out basis. Work-in-progress and finished goods include an allocation of fixed direct overheads based on normal levels of capacity. When necessary, provision is made for obsolete, slow moving and defective inventories.

1.9

Non-current assets held for sale

The group defines a discontinued operation as a component of an entity that either has been disposed of, abandoned or is the subject of formal plans for disposal or discontinuance or is classified as held for sale, and - represents a separate major line of business or geographical area of operations is part of a single co-ordinated plan to dispose of a

separate major line of business or geographical area of operations, or - is a subsidiary acquired exclusively with a view to resale.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a saletransaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Any remaining non-distributablereserves included in equity related to assets held for sale, will only be released to retained income once the sale of the asset has taken place.

Where the sale is more than one year into the future due to circumstances beyond the group’s control, the costs to sell are measured at the present value. Any increase in the present value of costs to sell are recognised in the statement of profit and loss as a financing cost.

An impairment loss is recognised in profit or loss for any initial or subsequent write-down of the asset or disposal group to fair value less costs to sell. A gain, for any subsequent increase in fair value less costs to sell, is recognised in profit or loss to the extent that it does not exceed the cumulative impairment loss previously recognised. Non-current assets classified as held for sale are not depreciated.

If the group has classified an asset (or disposal group) as held for sale, but the criteria above are no longer met, the group shall cease to classify the asset (or disposal group) as held for sale. The group shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of: - its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation

or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale, and - its recoverable amount at the date of the subsequent decision not to sell.

The group shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as h eld for sale in profit or loss from continuing operations in the period in which the criteria above are no longer met. Financial statements for the periods since classification as held for sale shall be amended accordingly if the disposal group or non-current asset that ceases to be classified as held for sale is a subsidiary. The entity shall present that adjustment in the same caption in the statement of comprehensiveincome used to present a gain or a loss, if any.

If the group removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the group meets the criteria above. Otherwise , the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date.

Any non-current assets that do not meet the criteria shall cease to be classified as held for sale.

1.10

Impairment of non-financial assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

Operating leases - lessor

1.7 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

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1.11 Employee benefits

Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlementor, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defined contribution plans

The company and its subsidiaries contribute to defined contribution retirement plans. A defined contribution plan is a pension plan under which the group pays fixed contribution into a separate fund and will have no legal or construction obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee's benefits relating to employee service in the current and prior periods.

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the group’s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan.

1.12

Provisions and contingencies

Provisions are recognised when: - the group has a present obligation as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. After their initial recognition contingent li abilities recognised in business combinations that are recognised separately are subsequently measured at the higher of: _ the amount that would be recognised as a provision; and _ the amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 32.

1.13

Revenue

Revenue is measured at the fair value of the consideration received or receivable. The group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group’s activities, as described below. The group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.


1.13 Revenue (Cont)

(i) Design and development services and merchandise sold

Revenue from sale of design and development services is recognised when targets agreed with customers have been met. Revenue fromsale of merchandise, net of returns, is brought to account when delivery takes place to the customer.

Revenue from the sale of goods is recognised when all the following conditions have been satisfied: - the group has transferred to the buyer the significant risks and rewards of ownership of the goods;

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-

the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective controlover the goods sold;

- the amount of revenue can be measured reliably; - it is probable that the economic benefits associated with the transaction will flow to the group; and - the costs incurred or to be incurred in respect of the transaction can be measured reliably.

For sales of services, revenue is recognised in the accounting period in which the services are rendered, by reference to stage of completion of the specific transaction and assessed on the basis of the actual service provided as a proportion of the total services to be

p r ovided.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

- the amount of revenue can be measured reliably;

- it is probable that the economic benefits associated with the transaction will flow to the group;

- the stage of completion of the transaction at the end of the reporting period can be measured reliably; and

- the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

(iii) Rental income

(ii) Sales of services

Rental income comprises: the initial amount of revenue agreed in the lease agreement; and escalations in the rental income over the duration of the lease agreement:

- to the extent that it is probable that they will result in revenue; and - they are capable of being reliably measured; and - are straight-lined over the duration of the lease agreement.

(iv) Interest income

Interest is recognised, in profit or loss, using the effective interest rate method.

1.14

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows: - Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary

investment of those borrowings. - Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a

qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when: - expenditures for the asset have occurred; - borrowing costs have been incurred, and - activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

1.15

Translation of foreign currencies

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rand, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period: - foreign currency monetary items are translated using the closing rate;


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-

non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and

- non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in profit or loss in the period in which they arise.

When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

Cash flows arising from transactions in a foreign currency are recorded in Rand by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.

1.16

Statement of Cash Flows

The statement of cash flows is prepared on the direct method.

1.17

Segment reporting

The group determines and presents segments based on the information that is internally provided to the Chief Executive Officer, 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 from the other segments. The group’s primary format for segment reporting is based on business segments. The business segments are determined based on the industry that the operations are linked to.

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 Segments assets and liabilities include direct and reasonable allocable operating assets and liabilities. Segment assets comprise total assets less deferred tax assets, 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.

1.18

Earnings per share

The group presents basic and headline earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding.


35

2 New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

IFRS 1, First-time Adoption of International Financial Reporting Standards

The amendments add an exception to the retrospective application of IFRSs to require that first-time adopters apply the requirements in IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs. Further amendments have also been incorporated during the annual improvements cycle for 2009-2011. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard did not impact the group as IFRS 1 has been adopted in previous years.

IFRS 7 Financial Instruments: Disclosures

The amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard did not impact the group.

IFRS 10 Consolidated Financial Statements

The standard replaces the consolidation sections of IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation- Special Purpose Entities. The standard sets out a new condition of control, which exists only when an entity is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to effect those returns through power over the investee. It further provides amendments to the transition guidance of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, thus limiting the requirements to provide adjusted comparative information. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard is not material and did not impact on the current group structure.

IFRS 11 Joint Arrangements

IFRS 11 is a new standard that deals with the accounting for joint arrangements and focuses on the rights and obligations of the arrangement, rather than its legal form. The standard requires a single method for accounting for interests in jointly controlled entities. Further amendments to the transition guidance of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosureof Interests in Other Entities limit the requirements to provide adjusted comparative information. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard is not material and did not impact on the current group structure.

IFRS 12 Disclosure of Interests in Other Entities

The standard sets out disclosure requirements for investments in Subsidiaries, associates, joint ventures and unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to risks of such interests. The most significant impact is the disclosure requirement for unconsolidated structured entities or off balance sheet vehicles. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard is not material, except for additional disclosures made.

IFRS 13 Fair Value Measurement

New standard setting out guidance on the measurements and disclosure of items measured at fair value or required to be disclosed at fair value in terms of other IFRS’s. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard is not material, except for additional disclosures made.

IAS 16 - Property, plant & Equipment

Annual improvements 2009-2011 Cycle: Amendments to the recognition and classification of servicing equipment. This amendment is

effective for annual periods beginning on or after 1 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. This standard did not have a signif icant impact on the consolidated financial statements.

NOTES TO THE FINANCIAL STATEMENTS

36

2. New Standards and Interpretations (Cont)

2.1 Standards and interpretations effective and adopted in the current year (Cont)

IAS 19 – Employee Benefits (Revised)

IAS 19 changes the definition of short term and other long term benefits to distinguish between the two. This standard is effective for annual periods beginning on or after 1 January 2013. The group does not intend to adopt this standard early. Management is of the opinion that the adoption of this standard will not have a significant impact on the consolidated financial statements. The group expects to adopt the standard for the first time in the 2014 consolidated financial statements.

IAS 27 Separate Financial Statements and IAS 28 Investments in Associates

Changes to IAS 27 and IAS 28 are consequential amendments resulting from the issue of IFRS 10, 11 and 12 as stated above. The effective date of the amendment is for years beginning on or after 01 January 2013. The group has adopted the amendment for the first time in the 2014 annual financial statements. The impact of the amendment is not material.

IAS 34 –Annual Improvements for 2009 – 2011 cycle

Clarification on reporting of segment assets and segment liabilities in interim financial reports. Such reporting is only required when it is regularly reported to the chief operating decision maker, and when there has been a material change from the previous annual financial statements. The effective amendment is for years beginning on the 01 January 2013. The group has adopted the amendment for the first time in the 2014 annual financial statements. The impact of the amendment is not material.

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine.

The IFRIC addresses stripping costs during the production phase of surface mining. The effective date of the amendment is for years beginning on or after 01 January 2013. The group has adopted the amendment for the first time in the 2014 annual financial statements. The statement did not impact the company as the company does not perform any mining activities.

2.2 Standards and Interpretations not yet effective

The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group’s accounting periods beginning on or after 01 March 2014 or later periods:

IFRS 1, First-time Adoption of International Financial Reporting Standards

Further amendments have been incorporated during the annual improvements cycle for 2011-2013 related to the clarification of the meaning of effective IFRS. The effective date of the standard is for years beginning on or after 01 January 2013. The group has adopted the standard for the first time in the 2014 annual financial statements. The impact of the standard did not impact the group as IFRS 1 has been adopted in previous years.

IFRS 2, Share-based Payment

Annual Improvements 2010–2012 Cycle: Amendments added the definitions of performance conditions and service conditions and amended the definitions of vesting conditions and market conditions. The effective date of the standard is for years beginning on or after 01 July 2014. The group expects to adopt the standard for the first time in the 2015 annual financial statements. It is unlikely that the standard will have a material impact on the company’s annual financial statements.

IFRS 3 Business Combinations

Annual improvements 2010-2012 and 2011-2013 Cycles: Amendments to the measurement requirements for all contingent consideration assets and liabilities including those accounted for

under IFRS 9. Amendments to the scope paragraph for the formation of a joint arrangement.

The effective date of the amendment is for years beginning on or after 01 July 2014. The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IFRS 8 Operating Segments

Amendments to some disclosure requirements regarding the judgements made by management in applying the aggregation criteria, as well as those to certain reconciliations. The effective date of the amendment is for years beginning on or after 01 July 2014 The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

NOTES TO THE FINANCIAL STATEMENTS(Cont)

37


2.2 Standards and Interpretations not yet effective (Cont)

IFRS 9 Financial Instruments

This new standard is the first phase of a three phase project to replace IAS 39 Financial Instruments: Recognition and Measurement. To date, the standard includes chapters for classification, measurement and derecognition of financial assets and liabilities. The following are main changes from IAS 39: - Financial assets will be categorised as those subsequently measured at fair value or at amortised cost. - Financial assets at amortised cost are those financial assets where the business model for managing the assets is to hold the assets to

collect contractual cash flows (where the contractual cash flows represent payments of principal and interest only). All other financial assets are to be subsequently measured at fair value.

- Under certain circumstances, financial assets may be designated as at fair value. - For hybrid contracts, where the host contract is an asset within the scope of IFRS 9, then the whole instrument is classified in

accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply. - Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity changes its business model

for the management of financial assets. In such circumstances, reclassification takes place prospectively from the beginning of the first reporting period after the date of change of the business model.

- Financial liabilities shall not be reclassified. - Investments in equity instruments may be measured at fair value through other comprehensive income. When such an election is made,

it may not subsequently be revoked, and gains or losses accumulated in equity are not recycled to profit or loss on derecognition of the investment. The election may be made per individual investment.

- IFRS 9 does not allow for investments in equity instruments to be measured at cost. - The classification categories for financial liabilities remains unchanged. However, where a financial liability is designated as at fair

value through profit or loss, the change in fair value attributable to changes in the liabilities credit risk shall be presented in other comprehensive income. This excludes situations where such presentation will create or enlarge an accounting mismatch, in which case, the full fair value adjustment shall be recognised in profit or loss.

The effective date of the standard is for years beginning on or after 01 January 2018. (IFRS 9 (2014) supersedes any previous versions of IFRS 9, but earlier versions of IFRS 9 remain available for application if the relevant date of application is before 01 February 2015.) The group expects to adopt the standard for the first time in the 2019 annual financial statements. It is unlikely that the standard will have a material impact on the company’s annual financial statements.

Further amendments to the measurement requirements for all contingent consideration assets and liabilities included under IFRS 9. The effective date of the amendment is for years beginning on or after 01 July 2014. The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IFRS 10 Consolidated Financial Statements

Exception to the principle that subsidiaries must be consolidate. Entities meeting the definition of Investment Entities must account for investments in subsidiaries at fair value under IFRS 9, Financial Instruments, or IAS 39, Financial Instruments: Recognition and Measurement. The effective date of the interpretation is for years beginning on or after 01 January 2014. The group expects to adopt the interpretation for the first time in the 2015 annual financial statements. It is unlikely that the interpretation will have a material impact on the company’s annual financial statements.

IFRS 11 Joint Arrangements

Amendments adding new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business which specify the appropriate accounting treatment for such acquisitions. The effective date of the interpretation is for years beginning on or after 01 January 2016. The group expects to adopt the interpretation for the first time in the 2017 annual financial statements. It is unlikely that the interpretation will have a material impact on the company’s annual financial statements.

IFRS 13 Fair Value Measurement Annual improvements 2010-2012 and 2011-2013 Cycles

Amendments to clarify the measurement requirements for those short-term receivables and payables. Amendments to clarify that the portfolio exception applies to all contracts within the scope of, and accounted for in accordance

with, IAS 39 or IFRS 9.

The effective date of the amendment is for years beginning on or after 01 July 2014. The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have any material impact on the company’s annual financial statements.


38



IFRS 14 Regulatory Deferral Accounts

IFRS 14 permits first-time adopters to continue to recognise amounts related to its rate regulated activities in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that apply IFRS and do not recognise such amounts, the Standard requires that the effect of rate regulation must be presented separately from other items. An entity that already presents IFRS financial statements is not eligible to apply the Standard. The effective date of the amendment is for years beginning on or after 01 January 2016. The group expects to adopt the amendment for the first time in the 2017 annual financial statements. It is unlikely that the amendment will have any material impact on the company’s annual financial statements.

IAS 16 Property, Plant and Equipment

Amendments to the revaluation method proportionate restatement of accumulated depreciation. The effective date of the amendment is for years beginning on or after 01 July 2014 The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

Further amendments to IAS 16 and IAS 38 to clarify the basis for the calculation of depreciation and amortisation, as being the expected pattern of consumption of the future economic benefits of an asset and establishing the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. Clarifying that revenue is generally presumed to be an inappropriate basis for measuring the consumption of economic benefits in such assets. Amendments to IAS 16 and IAS 41 which defines bearer plants and includes bearer plants in the scope of IAS 16 Property, plant and Equipment, rather than IAS 41 allowing such assets to be accounted for after initial recognition in accordance with IAS 16. The effective date of the amendment is for year’s beginning on or after 01 January 2016. The group expects to adopt the amendment for the first time in the 2017 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 24 Related Party Disclosure

Amendments to the definitions and disclosure requirements for key management personnel. The effective date of the amendment is for years beginning on or after 01 July 2014. The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 27 Consolidated and Separate Financial Statements

Requirement to account for interests in ‘Investment Entities’ at fair value under IFRS 9, Financial Instruments, or IAS 39, Financial Instruments: Recognition and Measurement, in the separate financial statements of a parent. The effective date of the amendment is for years beginning on or after 01 July 2014. The group expects to adopt the amendment for the first time in the 2016 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 32 - Financial Instruments - Presentation

Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations. This standard is effective for annual periods beginning on or after 1 January 2014. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 36 Impairment of Assets

Amendments to address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. This standard is effective for annual periods beginning on or after 1 January 2014. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 38 Intangible Assets

Annual Improvements 2010-2012 Cycle: Amendments to the Revaluation method – proportionate restatement of accumulated depreciation. This amendment is effective for annual periods beginning on or after 1 July 2014. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

Amendments to IAS 16 and IAS 38 to clarify the basis for the calculation of depreciation and amortisation, as being the expected pattern of consumption of the future economic benefits of an asset. This amendment is effective for annual periods beginning on or after 1 January 2016. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.


39



IAS 38 Intangible Assets (Cont)

Amendment to both IAS 16 and IAS 38 establishing the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. Clarifying that revenue is generally presumed to be an inappropriate basis for measuring the consumption of economic benefits in such assets. This amendment is effective for annual periods beginning on or after 1 January 2016. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 39 Financial Instruments: Recognition and Measurement

Amendments for novation of derivatives the continuation of hedge accounting. This amendment is effective for annual periods beginning on or after 1 January 2014. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 40 Investment Property

Annual Improvements 2011-2013 Cycle: Amendments to clarify the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property. This amendment is effective for annual periods beginning on or after 1 July 2014. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IAS 41 Agriculture: Bearer Plants

Amendments to IAS 16 and IAS 41 which defines bearer plants and includes bearer plants in the scope of IAS 16 Property, plant and Equipment, rather than IAS 41 allowing such assets to be accounted for after initial recognition in accordance with IAS 16. This amendment is effective for annual periods beginning on or after 1 January 2016. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.

IFRIC 21 Levies

IFRIC 21 provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain. The interpretation covers the accounting for outflows imposed on entities by governments (including government agencies and similar bodies) in accordance with laws and/or regulations. However, it does not include income taxes (see IAS 12 Income Taxes), fines and other penalties, liabilities arising from emissions trading schemes and outflows within the scope of other Standards. The effective date of the amendment is for years beginning on or after 01 January 2014. The group expects to adopt the amendment for the first time in the 2015 annual financial statements. It is unlikely that the amendment will have a material impact on the company’s annual financial statements.


40

Reconciliation of property, plant and equipment - Group – 2014

Opening balance Additions Classified as held for sale

Depreciation Impairment Loss

Total

Land and buildings 26 506 629 - (19 000 000) (405 384) (7 101 245) -Plant and machinery 53 137 - - (42 121) 11 016Furniture and fixtures 3 788 - - (2 537) 1 251Office equipment 2 229 5 787 - (4 157) 3 859Computer equipment 90 002 7 100 - (62 082) 35 020

26 655 785 12 887 (19 000 000) (516 281) (7 101 245) 51 146

Reconciliation of property, plant and equipment - Group – 2013

Opening balance

Additions Disposals Depreciation Total

Land and buildings 30 878 634 - (3 763946) (608 059) 26 506 629Plant and machinery 154 530 - - (101 393) 53 137Furniture and fixtures 15 450 - - (11 662) 3 788Office equipment 4 457 - (2 228) 2 229Computer equipment 100 651 11 479 - (22 128) 90 002

31 153 722 11 479 (3 763 946) (745 470) 26 655 785

Reconciliation of property, plant and equipment - Company – 2014

Opening balance

Additions Depreciation Total

Office equipment 2 229 5 787 (4 157) 3 859Computer equipment 7 174 7 100 (11 851) 2 423

9 403 12 887 (16 008) 6 282

Reconciliation of property, plant and equipment – Company – 2013

Opening balance Depreciation TotalFurniture and fixtures 9 125 (9 125) -Office equipment 4 457 (2 228) 2 229Computer equipment 11 926 (4 752) 7 174

25 508 (16 105) 9 403

Details of properties

Koedoespoort, Pretoria Land and building - Initial acquisition 400 000 400 000 - - - Additions to infrastructure 2 201 290 2 201 290 - - - Revaluations since acquisition 27 354 000 27 354 000 - - - Accumulated depreciation - Impairments - Transfer to non-current asset held for sale

(3 854 046) (7 101 244)

(19 000 000)

(3 448 661) - -

- 26 506 629 - -

3. Property, plant and equipment Gro up 201 4 2013

Cost Accumulateddepreciation

Carrying value


Carrying value

Land and buildings - - - 29 955 290 (3 448 661) 26 506 629Plant and machinery 4 096 008 (4 084 992) 11 016 4 096 008 (4 042 871) 53 137Furniture and fixtures 652 257 (651 006) 1 251 1 864 638 (1 860 850) 3 788Motor vehicles 30 149 (30 149) - 30 149 (30 149) -Office equipment 125 813 (121 954) 3 859 120 025 (117 796) 2 229Computer equipment 145 783 (110 763) 35 020 158 132 (68 130) 90 002Total 5 050 010 (4 998 864) 51 146 36 224 242 (9 568 457) 26 655 785

Company 2014

2013

Cost

Accumulateddepreciation

Carrying value


Carryingvalue

Furniture and fixtures 413 507 (413 507) - 413 507 (413 507)Office equipment 125 813 (121 954) 3 859 120 025 (117 796) 2 229Computer equipment 25 334 (22 911) 2 423 25 334 (18 160) 7 174Total 564 654 (558 372) 6 282 558 866 (549 463) 9 403

R R R R


Group Company 2014 2013 2014 2013

41

-

Portion 1 of Erf 113, Koedoespoort, Pretoria Title deed number T10472/1991, registration date 15 February 1991, initial acquisition consideration valued at R400 000.00.

Fair values of land and buildings

An independent valuation of the group's land and buildings was performed by valuers to determine the fair value of land and buildings. The effective date of the revaluation of land and buildings was 01 November 2013. Revaluations were performed by an independent

valuer, B.R Ryle, who is not connected to the group.

Valuation process of the group

The group's finance department includes a team that assesses the valuation of land and buildings and plant and equipment required for financial reporting purposes. This includes an assessment of the fair value hierarchy to which the non-financial asset belongs. The team reports directly to the Financial Director, whom reports to the Audit Committee. On an annual basis, if required, the group engages external, independent and qualified valuers to determine the fair value of land and buildings. Details of the valuer is described above.

In order to determine which method/s applies to the company’s property; cognisance was taken of the fact that the subject property is an income producing property, although the property will be sold in the next financial year. The Income Capitalisation Method of valuation was therefore considered to be most appropriate valuation method for the subject property. This method entails the determination of the Net Annual Income for the property, which is then capitalised at an appropriate market related capitalisation rate.

The assumptions were based on the following market conditions:

1.

Fair value is based on profits from estimated income. The value was calculated through applying an estimated 15% vacancy factor in conjunction with an expected expenditure of 29.1% over the annualised income; and

2.

The capitalisation rate within similar property valuations were estimated to be 14% per annum.

The table below shows a reconciliation from the beginning balances to the ending balances for level 3 fair value measurements. Due to the reclassification of land and buildings to disposal groups, the assets moved from a level 3 to a level 2 category. The value of the asset changed to a level 2 to as a directly observable price was obtained although not based on an active market quoted price .

Group Company 2014 2013 2014 2013

Reconciliation

Balance at 01 March 2013 26 506 629 - - - Impairment losses recognised in other comprehensive income

(7 101 245) - - -

Realisation through use (405 384) - - - Transfer to/(from) level 3 (19 000 000) - - -

- - - -

4. Investments in subsidiaries

Name of company Issued sharecapital

% holding 2014

% holding 2013

Carrying amount 2014

Carrying amount 2013

Integrated Circuit Design Centre (Pty) Ltd 1 000 100,00% 100,00% 1 000 1 000South African Micro-Electronic Systems (Pty) Ltd 8 367 000 100,00% 100,00% 201 070 201 070

202 070 202 070

The carrying amounts of subsidiaries are shown net of impairment losses. None of the subsidiaries have been impaired during the year. There are no significant restriction related to any of subsidiaries of the group.

5. Inventories

Raw materials, components - 4 505 - -Work in progress 135 035 1 268 623 - -Finished goods 4 334 579 4 023 456 - -

4 469 614 5 296 584Inventories (write-downs)

(362 963) -

4 106 651 5 296 584 - -

Inventory is carried at the lower of the cost and the net realisable value. No inventory has been pledged as security against financial liabilities.

3. Property, plant and equipment (Cont)

The detail of the above properties are as follows:


R R R R

42

SAMES Properties (Pty) Ltd

Share Incentive Scheme

- - (203 081) -

Labat Share Incentive Scheme - - 109 163 109 163

Current assets

- - 109 163 109 163Current liabilities

- - (203 081) - - - (93 918) 109 163

The loans are unsecured, bear no interest and have no fixed terms of repayment

Loans to group companies pledged as collateral

The loans to the group companies have not been pledged as security for any other financial obligations. None of the loans are past due or impaired.

7. Other financial assets

At fair value through profit or loss

Total Client Services Limited A total of 992 363 (2013: 992 363) sharesheld with a value of 1cent per share (2013:1 cent per share) at 28 February 2014.

9 923 9 923 - -

Current assets At fair value through profit or loss 9 923 9 923 - -

Fair value hierarchy of financial assets at fair value through profit or loss

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements.

The significance of the inputs determine which level on the hierarchy the assets fall, as in this case the significance is derived through utilisation of quoted market prices in active markets for identical assets and liabilities, and are thus categorised as Level 1 on the fair value hierarchy.

Level 1

Listed shares - Total Client ServicesLimited

9 923 9 923 -

The maximum exposure to price risk at the reporting date is the fair value of each class of other financial asset mentioned above.

8. Trade and other receivables

Trade receivables 2 803 093 3 539 488 - -Provision for bad debts (2 276 810) (1 763 663) - -Operating lease receivable 161 280 - - -Short term loans receivable - 500 - 500Other receivables - 60 648 - - 687 563 1 836 973 - 500

Trade and other receivables pledged as security

None of the above stated trade and other receivables were pledged as security at period end.

6. Loans to (from) group companies

Subsidiaries

Group Company 2014 2013 2014 2013


Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

43

The ageing of amounts past due but not impaired is as follows:

1 month past due 218 522 129 170 - -2 months past due 119 744 108 636 - -3 months past due - 187 393 - -

Trade and other receivables impaired

As of 28 February 2014, trade and other receivables of R 2 276 811 (2013: R 1 763 663) were impaired and provided for. Theprovision is in line with the group policy of providing for trade debtors outstanding for greater than 90 days. No settlements havebeen received in the current year in respect of the amounts outstanding.

The ageing of these trade receivables is as follows:

1 to 6 months 336 162 - - -Over 6 months 1 940 649 1 763 663

(1 763 663)

- -

Reconciliation of provision for impairment of

Opening balance (1 717 719) - -Additional provision for impairment (513 147) (45 944) - -

- - - -

1 250 516 (1 763 663) - -

9. Cash and cash equivalents

Cash and cash equivalents consist of:

Cash on hand 5 404 13 110 3 000 3 000Bank balances 1 042 924 816 934 - 17 519Bank overdraft (29 027) - (29 027) - 1 019 301 830 044 (26 027) 20 519

Current assets 1 048 328 830 044 3 000 20 519Current liabilities (29 027) - (29 027) - 1 019 301 830 044 (26 027) 20 519

The group has the following arrangements with the financial institution:

ABSA Bank Limited Cessions:

- Limited general cession of ABSA investment account: (2066671423) R 20 000.00 - Limited general cession of ABSA investment account: (2064712332) R 100 000.00

R120 000 of the fixed deposit is ceded in favour of the Department of Finance customs and excise.

Amounts written off as uncollectable

Group Company 2014 2013 2014 2013


Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

trade and other receivables

8. Trade and other receivables (Cont)

Trade and other receivables past due but not impaired

Trade and other receivables which are less than 3 months past due are not considered to be impaired. At 28 February 2014, R 338 266 (2013: R 425 199) were past due but not impaired.

44

A special resolution was passed in October 2013 for the disposal of a significant asset. The decision was made by the board to discontinue these operations due to the lack of return on investment.

An active programme to locate a buyer and complete the plan was initiated. A signed offer from Morgan Creek of R 18 800 000 was

received, while the fair value per the certificate of valuation was R 19 000 000.

A R3 000 000 deposit and a bank guarantee from Morgan Creek has been received in the current financial year and is held in trust by the entity's attorney Norton Rose.

Due to the reclassification of these assets, the prior year financial statements have been restated in accordance with the applicable standard.

Fair value process In accordance with IFRS 5, the assets and liabilities were written down to their fair value less cost to sell. This is a non-recurring fair value which has been measured on observable inputs, and is therefore within level 2 of the fair value hierarchy. The fair value of land and buildings has been measured by obtaining an independent offer for the purchase of the land and building by a third party and is therefore considered a level 2, as an observable direct price has been obtained. All remaining assets and liabilities are considered equal to its carrying values and will be recovered, or paid at their prevailing values with no expected additional selling costs.

SAMES Properties (Pty) Ltd

Statement of profit or loss and comprehensive income Revenue 771 375 168 790 - -Expenses (2 024 331) (1 805 799)Net loss before tax

(1 252 956) (1 637 009) - -

Tax 3 867 039 853 722 - -Net profit (loss) after tax 2 614 083 (783 287) - -Gain (loss) on measurement to fair valueless costs to sell

(200 000) - - -

2 414 084 (783 287) - -

Assets and liabilities

Assets of disposal groups Investment property 18 800 000 - - -Other financial assets

187 513 - - -Trade and other receivables

270 308 - - -Deferred tax 1 303 432 - - -Cash and cash equivalents

110 682 - - -

20 671 935 - - -

Liabilities of disposal groups Trade and other payables 223 184 - - -Deferred tax 1 990 236 - - -

2 213 420 - - -

SAMES - Wafer fabrication facility

Statement of Comprehensive Income Loss on sale of non-current assets held forsale

- (441 773) - -

Cash utilised

Proceeds/Payments from disposal of non-current assets held for sale and disposalgroups

(1 350 958) 683 272 - -

Group Company 2014 2013 2014 2013


10. Disposal groups

In line with the group policy of discontinuing non-performing underlying investments and operations in the group, the company has decided to dispose of the property (Erf 36, Koedoespoort, Pretoria. Title deed number T25393/1991, registration date 25 Apr il1991).

11. Share capital

Aut h orised 300 000 000 Ordinary shares of 1 cent each 3 000 000 3 000 000 3 000 000 3 000 000

Reconciliation of number of shares issued:

Reported as at 01 March 2013 197 154 482 197 154 482 197 154 482 197 154 482Treasury shares at 1 March 2011 (3 210 023) (3 210 023) (3 210 023) (3 210 023)Issue of shares - ordinary shares 5 057 541 - 5 057 541 -

45


202 212 023 193 944 459 202 212 023 193 944 459

Reconciliation of nominal value of shares Share capital issued at beginning of year 1 971 545 1 971 545 1 971 545 1 971 545Shares issued in the current year 50 575 - 50 575 -Treasury shares at beginning of year (481 503) (481 503) - - 1 540 617 1 490 042 2 022 120 1 971 545

Issued

202 212 000 Ordinary shares of no parvalue

2 022 120 1 971 545 2 022 120 1 971 545

Share premium

49 764 464 49 065 040 49 764 464 49 065 040Treasury shares

(481 503) (481 503) - -

51 305 081 50 555 082 51 786 584 51 036 585

12. Treasury Shares

The Group entered a share incentive scheme for the benefit of employees during 2001. Share options totalling 4,866,667 had been

allotted towards this scheme during the 2001 financial period through the issue of 4,866 667 shares to the share incentive scheme. In terms of the scheme, employees were entitled to exercise their options to purchase these shares in specific tranches within a five year period from grant date. These options have subsequently expired or has been exercised. Included in the share capital are 3 210 023 Labat Africa Limited shares that have been issued to the share incentive scheme and remain in the custody of the group through the Share incentive scheme with a value of R481 503. These shares have been treated as treasury shares, and thus eliminated on consolidated level.

13. Non-distributable reserves – Revaluations

The revaluation reserve arose as a result of the revaluation of land and buildings in accordance with the company’s accounting policies. The revaluation reserve is transferred in line with the depreciation policy applicable to the land and buildings on consolidation. During the current year, the property was transferred to disposal groups following a decision by the Board of Directors to dispose of the property. The remaining reserve will be transferred on disposal of the land and buildings.

Opening balance - Revaluation of land andbuildings

12 926 000 15 267 000 - -

Transfer of revaluation reserve to retainedincome

(168 716) (253 000) - -

Transfer of revaluation reserve to retainedearnings on disposal of property

- (2 088 000) - -

Impairment of property plant andequipment on revaluation

(7 101 244)

5 656 040 12 926 000 - -

14. Non-distributable reserve -equity loans

A loan owing to a subsidiary company was purchased at a discount on acquisition of the subsidiary. This loan was treated as part of equity at acquisition of the subsidiary as the loan is not repayable by the holding company to the subsidiary. The movement in the loan represents loan payments from the subsidiary. Additionally loans during the year from the subsidiary arising from transactions in the current year are considered capital loans and are not repayable by the holding company to the subsidiary. The additional loan movements are disclosed as part of non-distributable reserves.

Opening balance - Equity loan toward SAMES (Pty) Ltd

- - 14 552 291 13 128 212

Movement - - 843 116 1 424 079 - - 15 395 407 14 552 291

Group Company 2014 2013 2014 2013

- --

Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

46

Reconciliation of deferred tax asset (liability)

At beginning of the year (4 553 844) (5 407 566) - -Reversal of originating temporary differences on the revaluation of the property

2 761 594 - - -

Temporary difference on assessed loss 118 256 (68 278) - -Temporary difference on operating leases (45 158) - - -Reduction on revaluation reserve due to change in rate used from normal tax to capital gains tax rate

959 337

Temporary difference on revaluation of

property due to use 73 011 110 000

Reversal of temporary difference on disposal of property

- 812 000

Transfer of revaluation temporary difference to disposal groups

1 945 078 - - -

Transfer of temporary differences on assessed losses to disposal groups

(1 303 432) - - -

Transfer of temporary differences on operating leases to disposal groups

45 158

- (4 553 844) - -

Recognition of deferred tax asset

An The company shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition when: The utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the

reversal of existing taxable temporary differences; and The entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax

asset relates.

The company and group, except for its subsidiary, SAMES Properties (Pty) Ltd has experienced significant tax losses in precedingyears. Therefore no deferred tax assets has been raised for future taxable earnings of Labat Africa Limited and its subsidiarySAMES (Pty) Ltd, as significant uncertainty exists whether sufficient taxable profits in excess of the profits arising from thereversal of existing taxable temporary differences will be obtained. The deferred tax asset held in SAMES Properties (Pty) Ltd I expected to be recovered through the disposal of the property and has therefore been recognised as part of the disposable group.

Use and sales rate

The deferred tax rate applied to the fair value adjustments of property, plant and equipment is determined by the expected mannerof recovery. Where the expected recovery of the property, plant and equipment is through sale the capital gains tax rate of 19%

(2013: 19%) is used. If the expected manner of recovery is through indefinite use the normal tax rate of 28% (2013: 28%) isapplied. Due to the change in the expected recovery of property from use to sale during the current year, the deferred tax rate used, changed from normal tax rate to capital gains tax rate.

The major deferred tax liability and deferred tax asset recognised by the group, and the movements thereon, during the current andprior reporting periods relate to the operational activities of a separate subsidiary of Labat Africa Limited.

Group Company 2014 2013 2014 2013

- - -


15. Deferred tax

Deferred tax liability

Revaluation of land and buildings - (5 739 020) - -Tax losses available for set off againstfuture taxable income

- 1 185 176 - -

(4 553 844) - -

Group Company 2014 2013 2014 2013

47

the company returning to a positive netasset value.

Landers and Kent (Pty) Ltd This loan is unsecured, bears no interestand has no fixed terms of repayment. Theloan has been subordinated in favour ofother creditors of the company until suchtime as the assets of the company exceedits liabilities. Repayment is conditionalupon the company returning to a positivenet asset value.

1 102 459 863 808 1 102 459 863 808

Directors loans This loan is secured over a first right toregister a mortgage bond in favour of thelender in the amount of R2 000 000, bear

interest at 3% per month, compoundedmonthly and is repayable by 30th June 2014

1 957 160 - 1 957 160

9 540 288 7 751 022 9 540 288 7 751 022

Default on loans to directors

During the year the borrower defaulted on the repayment date of the principal and interest portion of the loan as detailed below.The terms of the loan was renegotiated to ensure the repayment and execution of the security is not implemented. The newrepayment date has been agreed as 30 June 2014.

Carrying value of defaulted loans

Directors loans

1 957 160 - 1 957 160 -

17. South African Revenue Services

South African Revenue Services consist of significant individual liabilities payable in terms of the Tax Act, VAT Act and other

statutory regulations. Due to the significance of these balances they have been disclosed separately within the consolidated annual financial statements.

Value Added Taxation (10 012 353) (9 687 407) (28 663) 207 138 Employee related taxes 18 942 889 19 428 559 5 489 393 5 554 106 Interest and penalties 2 104 212 2 015 950 459 406 459 407

11 034 748 11 757 102 5 920 136 6 220 651

18. Trade and other payables

Trade payables 3 369 460 2 829 668 1 877 499 797 839 Accruals 180 000 187 515 - - Operating lease payable 72 357 11 051 72 357 11 051 Deposits received 78 354 - - - Other payables 375 259 313 044 147 759 85 544

4 075 430 3 341 278 2 097 615 894 434

Fair value of trade and other payables

Trade payables, other payables and accrued expenses are unsecured and are repayable within a period of twelve months. The carrying value of trade and other payables equal their fair values due mainly to the short term nature of these payables.


Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

16. Loans from directors and shareholders

Directors loans These loans are unsecured, bears nointerest for the 2014 year, (bears interest atprime for the 2013 year) and have no fixed terms of repayment. The directors' loansare subordinated in favour of othercreditors of the company until such time asthe assets of the company exceed itsliabilities. Repayment is conditional upon

6 480 669 6 887 214 6 480 669 6 887 214

Group Company 2014 2013 2014 2013

48

Provision for leave pay 562 966 36 945 (6 012) 593 899Provision for Workmen’s Compensation

10 989 - - 10 989

5 847 468 2 421 781 (6 012) 8 263 237

Reconciliation of provisions - Group 2013

Opening balance Additions Reversed during the year

Total

Provision for salaries 2 891 674 2 381 839 - 5 273 513Provision for leave pay 687 308 - (124 342) 562 966Provision for Workmen’s Compensation - 10 989 - 10 989

3 578 982 2 392 828 (124 342) 5 847 468

Reconciliation of provisions - Company 2014

Openingbalance

Additions Reversed during the year

Total

Provision for salaries 5 273 513 2 384 836 - 7 658 349Provision for leave pay 272 986 - (6 012) 266 974

5 546 499 2 384 836 (6 012) 7 925 323

Reconciliation of provisions - Company 2013

Opening balance Additions Total Provision for salaries 2 891 674 2 381 839 5 273 513 Provision for leave pay 263 030 9 956 272 986

3 154 704 2 391 795 5 546 499

Provision for leave pay

The leave pay provision represents management's best estimate of the group's liability under the current employment terms where the employees of Labat Africa Limited are eligible for leave based on the underlying terms and conditions of employment with the entity. The uncertainties within the provision relates to the timing differences due mainly with regard to utilisation and compensation of leave owed.

Provision for salaries

The provision related to salaries has been raised as significant uncertainty exists as to whether these emoluments will be paid and when these emoluments will be paid, due to the current financial constraints of the group. No payments have been made subsequent to the financial year end.

20. Revenue

Sale of goods 9 942 035 13 117 108 - -Rendering of services - - - 4 200 000

9 942 035 13 117 108 - 4 200 000

21. Other Incom e

Gains on foreign exchange differences 162 737 962 690 - -Waiver of SARS interest and penalties - 6 949 854 - -Other

23 888 106 398 - -

186 625 8 018 942 - -


Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

19. Provision s

Reconciliation of provisions - Group - 2014

Opening balance Additions Reversed during the year

Total

Provision for salaries 5 273 513 2 384 836 - 7 658 349

49

Operating lease charges

Premises

344 783 281 550 398 726 280 695Equipment

11 694 6 005 11 694 6 005

356 477 287 555 410 420 286 700

Profit (loss) on sale of property, plant andequipment

23 888 (370 518) - -

Loss on exchange differences

(162 737) (962 690) - -Depreciation on property, plant andequipment

479 585 690 444 8910 16 107

Employee costs

7 550 646 4 344 481 3 771 842 1 196 031Contributions to provident funds 255 714 689 313 107 220 433 439

23. Investment revenue

Interest revenue

Bank

12 107 17 507 - -

24 Impairments

Material impairment losses (recognised) reversed:

Operating profit/(loss)

Elsec loan - (150 328) - (328)Decrease in carrying value on loan, due mainly to concerns surrounding the recoverability of said facility from external parties.

- (150 328) - -

25. Finance costs

Directors and shareholders 457 160 1 357 376 457 160 1 357 376Trade and other payables 39 204 179 39 204 179South African Revenue Services 17 066 47 989 15 459 - 474 265 1 609 544 472 658 1 561 555

26. Taxation

Major components of tax

Deferred and Income tax - - - -

Reconciliation between accounting

Accounting profit (loss) (6 022 037) 326 128 (6 917 120) (4 555 045)

Tax at the applicable tax rate of 28% (2013:28%)

(1 686 170) 91 316 (1 936 794) (1 275 412)

Tax effect of adjustments on taxableincome

Non-taxable income - 541 604 - -Tax charge on expenses not deductible fortax purposes

16 665 191 430 4 328 4 127

Utilisation of deferred tax losses (262 961) (1 219 710) - -Unrecognised deferred tax asset in respectof normal tax losses for the year

1 932 466 395 360 1 932 466 1 271 285

- - - -

Group Company 2014 2013 2014 2013


Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

Group Company 2014 2013 2014 2013

22. Operating (loss) profit

Operating (loss) profit for the year is stated after accounting for the following:

profit and tax expense.

50

27. Auditors' remuneration Fees 402 684 774 880 180 984 330 386

28. Other comprehensive income

Components of other comprehensive income- Group 2014

Movements on revaluation

Gross Tax Net

Gains (losses) on property revaluation (9 862 838) 2 761 594 (7 101 244)

29. Earnings per share

Basic earnings per share

Basic earnings per share is determined by dividing profit or loss attributable to the ordinary equity holders of the parent by theweighted average number of ordinary shares outstanding during the year.

Basic (loss) earnings per share From continuing operations (c per share) (3,03) 0,17 -From discontinued operations (c per share) 1,21 (0,62) -

(1,82) ( 0 ,45) -

Reconciliation of profit or loss for the year to basic earnings

Profit or loss for the year attributable toequity holders of the parent fromcontinuing operations

(6 022 037) 326 128 -

Profit or loss for the year attributable toequity holders of the parent fromdiscontinuing operations

2 414 084 (1 225 060)

3 607 955 (898 932) -

Headline earnings per share

Headline earnings per share are determined by dividing headline earnings and by the weighted average number of ordinary shareoutstanding during a period.

In the determination of headline earnings per share, profit or loss attributable to the equity holders of the parent, and the w eightedaverage number of ordinary shares are adjusted for the effects of all potential headline transactions applicable to the ordinary shares.

Where there is a discontinued operation, headline earnings per share is determined for both continuing and discontinuingoperations.

Headline earnings per share (c) From continuing operations - headline earnings per share (c)

(3,01) (0,08) -

From discontinued operations - headline earnings per share (c)

1,31 (0,40) -

(1,70) (0,48) -

Reconciliation between earnings (loss) and headline earnings (loss) from continued operations

Basic earnings (loss) (6 022 037) 326 128 -Adjusted for: Impairment of assets - (150 328)Loss/ (Profit) on disposal of assets 17 199 (334 375) (6 004 838) (158 575) -

Reconciliation between earnings (loss) and headline earnings (loss) from discontinued operations

Basic earnings (loss) 2 414 082 (1 225 060) -Adjusted for: Impairments

- 441 773 -

Loss on fair value of non- current assets held for sale

200 000 - -

2 614 082 (787 287) -

Group Company 2014 2013 2014 2013


Group Company 2014 2013 2014 2013

51

29. Earnings per share (Cont)

Reconciliation of weighted average number of ordinary shares

Basic (loss) earnings per share 2014 Continuing operations

2014 Discontinued

operations

2013 Continuing operations

2013 Discontinued

operations Issued shares at the beginning of the year 197 154 482 197 154 482 197 154 482 197 154 482 Shares issued-31 Aug 2013 2 528 771 2 528 771 - - 199 683 253 199 683 253 197 154 482 197 154 482

During the year ended 28 February 2014, 5 057 541 new shares were issued on 31 August 2013.

30. Cash (used in) generated from operations

(Loss) profit before taxation (6 022 037) 326 128 (6 917 120) (4 555 045)Adjustments for: Depreciation and amortisation 479 585 690 444 8 910 16 107Profit on sale of assets (23 888) - - -Interest received (12 107) (17 507) - -Finance costs 474 265 1 609 544 472 658 1 561 555Fair value adjustments - 150 328 - 328Movements in provisions 2 415 769 2 314 430 2 378 824 2 391 795Equity loan movement - - 843 115 1 424 079Non cash acquisition of PPE 7 104 - 7 104 -Waiver of penalties and interest on South African Revenue Services liability

- (6 949 551) - -

Changes in working capital: Inventories 1 189 933 (2 063 227) - -Trade and other receivables 890 589 341 787 500 2 900Trade and other payables 780 071 (709 546) 1 203 181 (932 920)

179 284 (4 307 170) (2 002 828) (91 201)

31. Cash flows of held for sale / discontinued operations

Profit/(loss) for the year before taxation (1 452 956) (2 078 782) - -Fair value adjustment 200 000 441 773 - -Proceed on disposal of non-current asset held for sale

- 2 168 072 - -

Depreciation 36 787 55 028 - -Loss on sale of assets - 370 518 - -Finance costs - 5 837 - -Working capital movements - - - -Trade and other receivables (258 821) 3 428 - -Trade and other payables 45 919 2 653 - -Tax paid (32 569) (285 255) - -Cash on hand 110 682 - - -

(1 350 958) 683 272 - -


52

32. Contingencies

There are various claims and counter claims made by and against Labat which has risen in the normal course of business which may have a material effect on the Labat Group's financial position. Details of these matters are as follows, with estimates of the financial effect where a reliable estimate was available:

The South African Post Office Limited : A consortium of which Labat forms part of is suing The South African Post Office Limited for breach of contract regarding the implementation of a contract awarded to Labat. A damages claim has been prepared. The legal representatives of the respective parties are currently engaged in settlement discussions. Directors are of the view a substantial settlement will be obtained.

Limpopo Province: Labat have requested a review of the process, which led to the award of a contract to pay pensions in the Limpopo Province. The

contract has now been set aside and Labat is preparing a damages claim.

Audit fees: A dispute has arisen with the previous auditors who are claiming fees of R1,1 million against a quoted figure of R438,900. The board has taken the decision to aggressively fight this claim. This is being dealt with the assistance of the company’s attorneys, Norton Rose. No approval was obtained for such overruns in addition, the board has taken a decision to lodge a complaint with South African Institute of Charted Accountants (“SAICA”) for overcharging and we have already lodged a complaint with Independent Regulatory Board for Auditors (“IRBA”).

It is not anticipated that any material liabilities will arise from the aforementioned contingent liabilities. As a result no provision had been raised in the annual financial statements as at 28 February 2014.

South African Revenue Services: The assessments issued by South African Revenue Services ("SARS") for VAT, PAYE and interest for Labat as well as SAME'S have been disputed by management. The resolution of the disputed assessments have been on-going for an extended period of time and has yet to be finally resolved. SARS and management have amended certain assessments and management have engaged the services of appropriate taxation experts to assist in finalising the outstanding disputed assessments. Management have provided for a charge of R11 million which management consider as the correct amount raised by SARS of R 17 million. SARS and management are co-operating to finalise this matter.

It is not anticipated that any material liabilities will arise from the aforementioned contingent liabilities.

33. Commitments

Future operating lease payments are as follows:

- within one year 335 500 - - - - in second to fifth year inclusive 1 141 030 - - -

1 476 530 - - -

Operating lease payments represent rentals payable by the group for certain of its office properties. The operating leasecommitment stated above escalated at an annual rate of 10%.

34. Related parties

Relationships

Subsidiaries and share incentive scheme Refer to note 4 Shareholder with significant influence Directors and members of key management

Landers and Kent (Proprietary) Limited Brian van Rooyen David O’Neill Dawood Asmal Brian Jacobs Alison Britto Rowena Majiedt

Group Company 2014 2013 2014 2013


53

34. Related parties (Cont)

Related party balances

Loan accounts - Owing (to) by related parties

South African Micro-Electronic Systems (Proprietary)Limited

- - 50 245 608 46 300 723

SAMES Properties (Proprietary) Limited - - (203 081) - Landers and Kent (Proprietary) Limited (1 102 459) (863 808) (1 102 459) (863 808) Brian van Rooyen 5 584 923) (3 700 955) (5 584 923) (3 700 955)) David O'Neill (2 150 571) (2 473 925) (2 150 571) (2 473 571) Dawood Asmal (599 255) (609 255) (599 255) (609 255) Victor Labat (103 081) (103 081) (103 081) (103 081) Director loans raised as provision (7 658 349) (5 273 513) (7 658 349) (5 273 513)

Related party transactions

Interest paid to (received) from) relatedparties

Directors and shareholders

457 160

1 357 376

457 160

1 357 376

Rent paid to (received from) related parties

Landers & Kent (Proprietary) Limited 398 726 280 695 398 726 280 695

Administration fees paid to (received from) related parties

South African Micro-Electronic Systems (Proprietary) Limited

- - - 4 200 000

Compensation to directors and other key management

Short-term employee benefits 3 979 718 3 979 716 3 979 716 3 979 716

All transactions with related parties were undertaken on an arm’s length basis. The amounts due to and from related parties are

payable on terms of trade that are no more favourable than those that apply to all other suppliers and debtors of the group. The normal terms and conditions are applicable to all purchases from or to related parties which means that amounts are unsecured and are payable within 30 days of invoice. All amounts are to be settled by bank payment. No provision for bad debt has been made or any amount has been written off against any related party transaction.

No guarantees were given to or by any related parties during the year under review.

Group Company 2014 2013 2014 2013


54

DJ O'Neill 1 633 785 102 216 104 364 180 000 2 020 365

3 499 718 391 765 208 728 480 000 4 580 211

2013

Emoluments Provident fund Medical aid Travel TotalBG van Rooyen 1 856 433 138 756 289 549 300 000 2 559 846DJ O'Neill 1 633 785 102 216 104 364 180 000 2 020 365

3 499 718 240 972 200 172 480 000 4 580 211

Non-executive

2014

Directors' fees TotalR Majiedt 60 000 60 000B Jacobs 45 000 45 000

105 000 105 0002013

Directors' fees Total

R Majiedt 40 000 40 000B Jacobs 30 000 30 000

70 000 70 000Directors' interest in shares

Direct Indirect Total % interest

Beneficial

B G van Rooyen - 34 856 335 34 856 335 17,24 DJ O 'Neil - 20 000 000 20 000 000 9,98

- 54 856 335 54 856 335 27,22

2013

Direct Indirect Total %interestBeneficial

B G van Rooyen

- 34 856 335 34 856 335 17,68

DJ O 'Neil

- 20 000 000 20 000 000 10,14

- 54 856 335 54 856 335 27,82

35. Directors' emoluments

No emoluments were paid to the directors or any individuals within entities other than the company through the year.

Executive 2014

Emoluments Provident fund Medical aid Travel TotalBG van Rooyen 1 865 933 289 549 104 364 300 000 2 559 846


2014

55

36. Risk management

Capital risk management

The group and company’s capital structure consists of debt which includes interest-bearing and non-interest bearing borrowings and equity attributable to equity holders of the company which comprises issued share capital, share premium and accumulated earnings. The group’s capital management objective is to achieve an effective weighted average cost of capital while continuing to safeguard the group’s ability to meet its liquidity requirements, repay borrowings as they fall due and continue as a going concern, whilst concurrently ensuring that at all times its credit worthiness is considered to be at least investment grade. Management reviews the capital structure, analyses interest rate exposure and re-evaluates treasury management strategies in the context of economic conditions and forecasts regularly. This could lead to an adjustment to the dividend yield and/or an issue or repurchase of shares.

There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.

Financial risk management

The group and company is exposed to risks from its use of financial instruments. This note describes the group’s objective, policies and processes for managing those risks and the methods used to measure them. As the risk management is addressed on a group wide basis, the policies and procedures governing the risk management processes are addressed at group level and information specific to the company is added. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes to the group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Informationdisclosed has not been disaggregated as the financial instruments used by the group share the same economic characteristics and market conditions.

The principal financial instruments used by the group, from which financial risk arises, are as follows: - Trade and other receivables; - Cash and cash equivalents; - Loans to group companies; - Other financial assets; - Borrowings (Shareholder loans); and - Trade and other payables.

The group is currently exposed to credit risk, liquidity risk and market risk (which comprises cash flow interest rate risk and price risk). The group is exposed to foreign exchange risk as the group does have direct dealings with suppliers or customers where an exchange risk may occur.

Risk management is carried out by management under policies approved by the Board. The Board provides principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk and the use of derivative financial instruments. The directors monitor their collections from the group’s receivables, movement in prime lending rates and the risks that the group is exposed to based on current market conditions, on a monthly basis.

The directors are of the opinion that the carrying amount of all current financial assets and financial liabilities approximate their fair values due to the short-term maturities of these financial inst ruments unless otherwise stated. The fair value of other financial liabilities and financial assets are determined in accordance with generally accepted pricing models comprising discounted cash flow analysis or quoted market information. Where the effects of discounting are immaterial, short term receivables and short term payables are measured at the original invoice amount.

The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. The group do es not use derivative financial instruments to hedge certain risk exposures.

The main purpose of financial liabilities is to raise finance to fund the acquisition of plant and equipment, working capital and any future acquisitions. Procedures for avoiding excessive concentration of risk include:

- Maintaining a wide customer base; - Continually looking for opportunities to expand the customer base; - Reviewing current developments in technology in order to identify any product line which may increase margins in the future; - Reviewing the trade debtors’ age analysis regularly with the intention of minimising the group’s exposure to bad debts; - Maintaining cash balances and agreed facilities with reputable financial institutions; - Effecting necessary price increases as and when required; and - Reviewing the group’s bank accounts daily.


56

36. Risk management (Cont)

Liquidity risk

Liquidity risk is the risk that the group will experience financial difficulty in meeting its financial obligations as they fall due. The group’s policy is to ensure that it will always have sufficient cash to allow it to meet its obligations when they fall due. To achieve this it seeks to maintain cash balances and agreed facilities with reputable financial institutions. This is also achieved by monitoring the economy to ensure that necessary price increases are effected. There have been no defaults or breaches on Trade payables during the course of the financial year. The group has no un-used banking facilities.

Management of liquidity risk in regard to financial liabilities includes a daily review of the group’s bank accounts and transfer of excess funds from the main current account to other facilities in order to increase the group’s interest earnings. Furthermore, the group has secured a further credit line with GEM, an alternative investment group that manages a diverse set of investment vehicles focused on emerging markets across the world. GEM has confirmed that funding of $100 million for suitable investments is still available to Labat Africa Ltd in order to fund future acquisitions and transactions.

The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the consolidated statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Group

At 28 February 2014 Less than 1 yearTrade and other payables 3 549 467 Loans from shareholders 9 540 288

At 29 February 2013 Less than 1 yearTrade and other payables 3 017 183 Loans from shareholders 7 751 022

Company

At 28 February 2014 Less than 1 yearTrade and other payables 1 877 495 Loans from shareholders Loans from group company

9 540 288 203 079

At 29 February 2013 Less than 1 yearTrade and other payables 797 840 Loans from shareholders 7 751 022

Interest rate risk Interest rate risk refers to the risk of fluctuating interest rates that will have a negative financial effect on cash outflows and the income statement. It is the risk that the future cash flow of a financial instrument will fluctuate because of changes in interest rat es. The group’s interest rate risk mainly arises from loans to shareholders and cash and cash equivalents. Future changes to the prime lending rates will have a direct impact on the future cash payments towards the settlement of the financial obligation. The risk remains un-hedged at the reporting date. Exposure to cash flow interest rate risk on financial assets and liabilities is monitored on a continuous basis. The group does not carry any fixed interest bearing financial instruments and is therefore not exposed to fair value interest rate risk.

Deposits and cash balances attract interest at a rate that varies with prime. The group policy is to manage interest cost using fixed contracted rate debts where possible.

The group has used a sensitivity analysis technique that measures the estimated change to the Consolidated Statement of Comprehensive Income of an instantaneous increase or decrease in market interest rates on financial instruments from the applicable rate as at 28 February 2014, for each class of financial instrument with all other variables remaining constant. The calculations were determined with reference to the outstanding financial liability and financial asset balances for the year. This represents no change from the prior period in the method and assumptions used. This analysis is for illustrative purposes only and represents management’s best estimate.

At 28 February 2014, if interest rates on Rand-denominated borrowings and bank balances held had been 1 % higher/lower with all

other variables held constant, post-tax profit for the year would have been R 6 791 (2013: R 21 608) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.


57

Financial instrument Interest rate Due in less than a year

Cash and cash equivalents 8,50% 1 013 897 Loans from directors 36.00% (1 957 160)

Credit risk Credit risk arises from trade receivables and bank balances. The credit quality of customers is assessed by taking into account their financial position, past experience and other factors. Individual risk limits are set internally and are regularly monitored. It is the group’s policy that all customers be subjected to a credit verification procedure before agreements are entered into. In addition, the trade debtors’ age analysis is reviewed weekly with the intention of minimising the group’s exposure to bad debts.

When a customer is identified as having cash flow problems, the credit manager will take the following steps: - Confirm the situation with the customer; - Advise the director of the situation during the monthly meeting at which outstanding debtors balances are reviewed; - Place the customer on hold to mitigate further risks; and - Issue letters of demand and decide whether to proceed with further legal action.

No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. No collateral has been provided for any of the financial assets held by the group.

The maximum exposure of financial assets to credit risk equates to the carrying amounts as presented on the Statement of Financial Position. The carrying amount of financial assets that are past due at reporting date but not impaired has been disclosed in note 8 and note 9 to the annual financial statements. No other financial assets than those disclosed in note 8 and note 9 are considered to be either past due nor impaired. Due to the short term nature of financial assets, the fair value of all financial assets are considered to approximate its carrying values as reflected in the Statement of Financial Position.

Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the British Pound and Euro to a lesser extent. Foreign exchange risk arises from future commercial

transactions, recognised as assets and liabilities.

The group does not hedge foreign exchange fluctuations.

At 28 February 2014, if the currency had weakened by 10% against the US dollar with all other variables held constant, post-tax profit for the year would have been R 212 594 (2013: R 43 934) higher, mainly as a result of foreign exchange gains or losses on translation of US dollar denominated trade receivables, cash and cash equivalents and trade payables.

At 28 February 2014, if the currency had weakened by 10% against the British pound with all other variables held constant, post-tax profit for the year would have been R2 241(2013: R116) higher, mainly as a result of foreign exchange gains or losses on translation of British pound denominated cash and cash equivalents.

At 28 February 2014, if the currency had weakened by 10% against the Euro with all other variables held constant, post-tax profit for the year would have been R4 348 (2013: R 182) higher, mainly as a result of foreign exchange gains or losses on translation of Euro denominated cash and cash equivalents.

Foreign currency exposure at the end of the reporting period

Cur r ent as sets Trade and other receivables (USD) 3 067 160 3 010 716 - -Cash and cash equivalents (USD) 658 019 447 292 - -Cash and cash equivalents (GBP) 31 130 23 058 - -Cash and cash equivalents (EUR) 60 400 33 752 - -

Current liabilities

Trade and other payables (USD) 772 484 993 653 - -Trade and other payables (GBP) - 4 430 - -


Cash flow interest rate risk


Group Company 2014 2013 2014 2013

58

USD 10.7894 8.8410

GBP 17.9793 13.4237

EUR 14.7563 11.6192

Foreign currency sensitivity

The group reviews its foreign currency exposure, including commitments on an ongoing basis.

Market risk The group's activities expose it primarily to the risks of fluctuations in foreign currency exchange rates and price risk. Foregoing currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Refer to the currency risk disclosure as stated above where the sensitivity analysis on the effect of currency fluctuations are shown.

Price risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices other that those arising from currency risk.

The table below summarises the impact of increases/decreases of the indexes on the group's post-tax profit for the year and on equity. The analysis is based on the assumption that the equity indexes has increased/decreased by 5% with all other variables held constant and all the group's equity instruments moved according to the historical correlation with the index:

Group

Impact on post-tax profit in Rand Impact on other components of equity in Rand

Financial instrument 2014 2013 2014 2013JSE Limited 497 497 - -

Post-tax profit for the year would increase/decrease as a result of gains or losses on equity securities classified as at fair value through profit or loss.

37. Comparative figures

In accordance with the company’s accounting policy and the requirements of IFRS5: Non-current assets held for sale and discontinued operations, certain comparative figures have been reclassified in the Statement of Comprehensive Income to disclose, into a single separate line, the loss on disposal groups identified during the current year. The reclassification does not constitute a change in accounting policy nor a prior period error. Details relating to the classification and the balances reclassified have been disc losed in note 10.

38. Going concern

Although the group incurred a loss for the year ended 28 February 2014 of R10,709,197 and, at that date, the group’s current liabilities exceeded its current assets by R17,549,977 before the loans from shareholders amounting to R9,540,288, which have been subordinated for the benefit of other creditors to the group, the board of directors is of the opinion that, having regard to the current status and the future strategy of the Group, the Group has sufficient resources to continue as a going concern. Subsequent to year end the group dispose of its property and concluded a rights issue which has served to strengthen the balance sheet of the group. The ability of the company to continue as a going concern is however dependent on a number of factors. The most significant uncertainty, is the successful negotiating with which the directors are currently involved with SARS regarding PAYE, Income Tax and VAT liabilities , ongoing since 2004. The group has applied for a section 91A compromise with SARS in order to settle the liability as full and final settlement. Directors are of the view that the net result will be a substantial credit in favour of the company.


Exchange rates used for conversion of foreign items were:


59

The plan is to establish a fully-fledged BFG facility in Johannesburg producing the full range of BFG products, including a range of Rail products together with a range of Architectural and Wind Energy products.

Global Emerging Markets (“Gem”), through its existing $100 million equity line of credit with Labat, has agreed with BFG to provide funding for the establishment of the business. It is estimated that between 200 to 300 jobs will be created in this new venture and is in line with PRASA’s objectives of achieving a local content leve l of over 65% and the creation of 33 000 direct and indirect jobs.

2. Proposed acquisition of controlling interest in Imfuyo Projects Proprietary Limited (“Imfuyo Projects”)

Labat further announced that it has made an offer to acquire a majority shareholding in Imfuyo Projects and its 100% subsidiary

Imfuyo Air Products. Voith Turbo, a German based Industrial group, has waived its pre-emptive right in favour of Labat. The acquisition is from a related party and the acquisition will be subject to the JSE Listings requirements, which will include obtaining a fairness opinion on the transaction.

The purchase consideration will be by way of 20 000 000 ordinary shares, with the potential of a further 10 million ordinary shares based on performance to be agreed, at an issue price based on the independent valuation of Imfuyo Projects. Imfuyo Projects is a manufacturer of a range of electronic and other components to the Rail industry particularly the

existing PRASA fleet. Imfuyo Projects is also the local agent or partner of several international OEM’s who require local partners in order to deliver on the current Rail Initiatives. Some of these OEM’s have been awarded contracts by Gibela of more than R2 billion. Discussions are underway with a view of establishing similar facilities like the one with BFG. Imfuyo Air Products is an importer and distributor of Compressors and related products with a Rail emphasis.

3. Women in Rail Initiative

Labat has entered into an agreement with a Women’s Group who is part of the Women in Rail Initiative of PRASA to be their partner in building capacity in Rail to take advantage of existing opportunities and creating real Women in Rail Industrialists.

The new entity to be titled Labat Rail will be owned 49% by Labat and 51% by the Woman In Rail Group who has access to specific opportunities to provide products and services to PRASA and Transnet. This entity will be the operating entity and will provide opportunities in all aspects of rail to historically disadvantaged individuals with an emphasis on women and young female learners. This is in line with Government’s initiative in providing opportunities for women in rail.

Through this Labat will create a Local Rail Company which will provide a range of products and services to the industry, together with a research and development capability to train young women to part of the mainstream process of the rail industry. Labat will also be looking at a number of acquisitions to enhance its local capacity.

4. Rights issue

It is the view of the Directors that the recapitalisation of Labat by way of the rights offer is required to enable the Labat Group to reduce borrowings, improve the balance sheet and availability of cash in order to facilitate the future growth of the Group. The Group therefore commenced the process to initiate the rights offer. Subsequent to year end, the rights issue was concluded which raised a total of R8 548 541.


39. Events after the reporting period

1. Participation in rolling stock fleet upgrade

Following the announcement on the 29 April 2014 by Passenger Rail Agency of South Africa (“PRASA”) and Gibela Rail Transportation (“Gibela”) that financial closure has been reached on the first phase of R51 billion Rolling Stock fleet upgrade, Labat and its partner through a signed Memorandum of Understanding, BFG International Group (“BFG”), a Bahrain based global leader in the design and manufacturing of Fibre Reinforced Polymer (“FRP” ) products, will accelerate its plans to establish a South African manufacturing facility to manufacture products for the Rail Industry initially. The BFG/Labat entity has been awarded a portion of the PRASA/Alstom tender to supply interiors for the new railway coaches. The first phase of this tender is estimated to be at least R1.5 billion over a ten year period.

60

Level 3

Land and buildings - 26 506 629 - -

41. Segment reporting

The group had three segments which are as follows:

• Technology which manufactures and distributes integrated circuits - South African Micro-Electronic Systems (Pty) Ltd;

• Head office operations which provide management services to the group through Labat Africa Ltd; and

• SAMES (Pty) Ltd comprising the operating lease operations of the group

• The segments as reported in the segmental analysis are consistent with the internal reports that are provided to the chief operation decision makers.

• The Technology segment does not have extensive reliance on any single customer.

The following factors have been utilised to differentiate between the individual reporting segments:

- The nature of the products/ services delivered by these individual segments' operational activities; and - The financial significance of the individual segments


Consolidated Statement of Financial Position

Level 1Other financial assets 9 923 9 923 - -

Level 2Assets of disposal group 20 671 935 - - - Liabilities of disposal groups (2 213 420) - - -

40. Determination of fair value hierarchy

In line with the disclosure requirements of IFRS 13, the group has established a fair value hierarchy that categorises financial and non-financial assets and liabilities carried at fair value into three levels, based on the inputs to valuation techniques used to measure their fair values. The different levels have been defined by the group as follows:

- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)

or indirectly (that is, derived from prices) (Level 2). - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The following

table analyses the non-financial assets and liabilities carried at fair value, by valuation method

Company 2014 2013 2014 2013

Group

61

28

Feb

ruary

201

4

S

egm

ents

Con

soli

dat

ed

tota

lD

isco

nti

nu

ed

op

erat

ion

Con

tin

uin

g

o

per

atio

ns

Man

ufa

ctu

rin

gP

rop

erti

esT

ech

nol

o gy

(O

per

atio

nal

T

otal

)

Hea

d O

ffice

Tot

alC

onso

lid

atio

n

Ad

just

men

ts

and

el

imin

atio

ns

Gro

up

Oth

erG

rou

p

RR

RR

RR

RR

R

Sta

tem

ent

of C

omp

reh

ensi

ve I

nco

me

E

xter

nal

reve

nue

9 94

2 035

-9

942

035

-9

942

035

-9

942

035

-9

942

035

9 94

2 035

-9

942

035

-9

942

035

-9

942

035

-9

942

035

R

even

ue

9

942

035

-9 9

42 0

359

942

035

-9

942

035

-9

942

035

Cos

t of

sale

s

(3

536

956)

-(3

536

956)

-(3

536

956

)-

(3 5

36 9

56)

-(3

536

956

) G

ross

pro

fit

6 40

5 079

-6

405

079

-6

405

079

-6

405

079

-6

405

079

Oth

er i

ncom

e

18

6 6

25-

186

625

-18

6 62

5-

186

625

-18

6 62

5 O

pera

ting

exp

endi

ture

(10

862

263)

-(1

0 862

263

)(6

435

552

)(1

7 29

7 81

5)5

257

131

(12

040

684)

-(1

2 04

0 68

4)D

epre

ciat

ion

(101

989)

-(1

01 9

89)

(8 9

10)

(110

899

)-

(110

899

)-

(110

899

)R

ecu

rrin

g op

erat

ing

pro

fit/

(lo

ss)

(4

372

548)

-(4

372

548

)(6

444

462

)(1

0 81

7 01

0)5

257

131

(5 5

59 8

79)

-(5

559

879

)

Inte

rest

rec

eive

d

12

107

-12

107

-12

107

-12

107

-12

107

Inte

rest

pai

d

(1

606

)-

(1 6

06)

(472

658

)(4

74 2

65)

-(4

74 2

65)

-(4

74 2

65)

Impai

rmen

ts

-(1

0 29

2 95

7)(1

0 292

957

)-

(10

292

957)

10 2

92 9

57-

--

Pro

fit/

(lo

ss)

bef

ore

taxa

tion

(4 3

62 0

47)

(10

292

957

)(1

4 655

004

)(6

917

120

)(2

1 57

2 12

5)15

550

088

(6 0

22 0

37)

-(6

022

037

)

Tax

atio

n ex

pens

e

-

45 2

1145

211

-45

211

(45

211)

--

-P

rofi

t on

non-

curr

ent

asse

t hel

d fo

r sa

le

-

1 3

20 1

97

1 320

197

-1

320

197

(1 3

20 1

97)

--

-

Pro

fit

on d

ispo

sal

gro

up

--

--

-2

414

083

(2 4

14 0

83)

-P

rofi

t/(l

oss

) fo

r th

e y

ear

(4 3

62 0

47)

(8 9

27

549)

(13 2

89 5

96)

(6 9

17 1

20)

(20

206

71

7)

16

598

76

3(3

607

954

)(2

414

083

)(6

022

037

)

Ass

ets

and

lia

bil

itie

s

Seg

men

t as

sets

5 9

83 2

0018

060

126

24 0

43

326

320

515

24 3

63 8

412

211

705

26 5

75 5

4620

671

935

5 90

3 61

1S

egm

ent

liab

ilit

ies

(51

056

443)

(11

320

984

)(6

2 37

7 42

7)(2

5 71

5 47

0)(8

8 09

2 89

7)52

936

747

(35

156

150)

(2 2

13 4

20)

(32

942

730)

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S(C

ont)

2 41

4 08

3

62

T

echn

ology

Prop

ertiesT

echn

ology

(Op

erationa

lT

otal)

Head

Offi

ceT

otalC

onsolid

ation

adju

stmen

ts an

d

elimin

ations

Ind

ustries

Grou

pO

ther

Grou

p

R

R

RR

RR

RR

RS

tatemen

t of Com

preh

ensive In

come

E

xternal revenue

13 117 108

-

13 117 108-

13 117 108-

13 117 108-

13 117 108M

anagement fees

-

--

4 200 0004 200 000

(4 200 000

)-

--

13 117 108

-13 117 108

4 200 000

17 317 108(4 2

00 000)

13 117 108-

13 117 108

R

evenue

13 117 108

-13 117 108

4 200 000

17 317 108(4 200 0

00)

13 117 108-

13 117 108C

ost of sales

(5 975 073)

-

(5 975 073)-

(5 975 073)-

(5 975 073)

-(5 975 073)

Gross p

rofit

7 142 035

-7 142 035

4 200 00011 342 035

(4 200 000)

7 142

035-

7 142

0350O

ther income

8 018 942

-8 018 942

-8 018 942

-8 018 94

2-

8 018 942O

peratin

g expenditure

(10 134 465)

(370 5

20

)(1

0 504 985)(7 177 056)

(17 682 041)5 280 001

(12 402 040)-

(12 402 0

40)

D

epreciation

(121 307)

-

(12

1 307)(16 106)

(137 413)(553 031)

(690 444)

-(6

90 444)

Recu

rring op

erating

profi

t

4 905 205

(370 5

20

)4 534 685

(2 993 162)1 541 523

526 970

2 068 493

-2

068 493

Interest received

17 507-

17 507-

17 507

-17 507

-1

7 507Interest paid

(47 989)

-(47 989)

(1 561 555)(1 609 544)

-(1 609 54

4)-

(1 609 544)

Impairm

ents

(150 000)-

(150 000)(328)

(150 328)-

(15

0 328)-

(15

0 328)

Profi

t before

taxation

4 724 723

(370 520)4 354 203

(4 555 045)(200 842)

526 970

326 12

8-

32

6 128

Tax expense

-

473 326473 326

-473 326

(473 326

)-

--

Profi

t/ (loss) from

discontinued operations

(441 773)

(557 009)(998 782)

-(998 782)

(226 278

)(1 22

5 060)(1 225 060)

-

Profi

t for the year

4 282 951(454 203)

3 828 747(4 555 045)

(726 298)(172 634)

(898 932)(1 225 060)

326 128

Assets an

d liab

ilities

Segm

ent assets

8 070 04930 746 399

38 816 448341 655

39 158 103

(4 528

794)34 629 309

-3

4 629 309S

egment liabilities

(48 761 431)

(15 079 708)(63 841 139)

(20 412 605)(84 253 744)

51 003 029

(33 250 715)

-(3

3 250 715)

29 F

ebru

ary

2013

S

egm

ents

C

onsolid

ated

total

Discon

tinu

ed

operation

Con

tinu

ing

operation

s

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S(C

ont)

63

DIRECTORS

R. Majiedt (Independent Non-Executive Chairperson), B.G. van Rooyen (Chief Executive Officer), D.J. O’Neill (Financial Director), B Jacobs (Independent Non-Executive Director), D Asmal (Independent Non-Executive Director)

SECRETARY AND REGISTERED OFFICE S Van Rooyen 23 Kroton Avenue, Weltevreden Park, 1709 Private Bag X09-248, Weltevreden Park, 1715

2.1.1

BUSINESS OFFICE 23 KrotonAvenue, Weltevreden Park, 1709 Private Bag X09-248, Weltevreden Park, 1715 Telephone: (011) 675-6844 Telefax: (011) 675-1019 Website: www.labatafrica.com

E-mail: [email protected]

2.1.2

TRANSFER SECRETARIES Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001 South Africa P.O. Box 62053, Marshalltown 2107, South Africa Telephone: 27 11 370 5000 / 086 110 0933 Telefax: 27 11 688 7732 / 086 110 0932 www.computershare.com

AUDITORS Nexia SAB&T 119 Witch-Hazel, Avenue, Centurion, 0046 P O Box 10512, Centurion, 0046 Telephone: (012) 682 8800

ATTORNEYS Norton Rose 15 Alice Lane Sandton 2196 Telephone: (011) 685 8595

PRINCIPAL BANKERS ABSA Bank Limited

SPONSOR Arcay Moela Sponsors (Pty) Limited Ground Floor, ONE Health Building, Woodmead North Office Park 54 Maxwell Drive, Woodmead, PO Box 62397, Marshalltown, 2107 Telephone: (010) 591 2228 Labat Africa Limited

ADMINISTRATION

64

Notice is hereby given that the twenty third annual general meeting of the company will be held on 28 November 2014 at 15:00 at the registered offices of the company, to conduct the following business:

Electronic Participation in the Annual General Meeting

Please note that the Company intends to make provisions for shareholders of the Company, or their proxies, to participate in the annual general meeting by way of electronic communication. Should you wish to participate in the annual general meeting by way of electronic communication, you will need to contact the Company at +27 11 675 6844 by 14 November 2013 so that the Company can provide for a teleconference dial-in facility. Please ensure that if you are participating in the meeting via teleconference that the voting proxies be sent through to the transfer secretaries, namely Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 26 November 2014.

The board of directors of the Company has determined that the record date for the purpose of determining which shareholders of the Company are entitled to receive notice of this annual general meeting is 01 November 2014 and the record date for purposes of determining which shareholders of the Company are entitled to participate in and vote at the annual general meeting is 22 November 2014. Accordingly, only shareholders who are registered in the register of members of the company on 26 November 2014 will be entitled to participate in and vote at the annual general meeting.

1.

Ordinary resolution number 1 – Approval of Financial Statements

“Resolved that the annual financial statements of the Company and its subsidiaries for the period ended 28 February 2013, together with the directors’ report, auditors’ reports and social and et hics committee report, be received, considered and adopted.”

Explanatory note: The annual financial statements are required to be approved in terms of the Companies Act, 2008 (No 71 of 2008) (“the Act”).

The minimum percentage of voting rights that is required for ordinary resolution 1 to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote to be cast on this resolution.

2.

Ordinary resolution number 2 – Re-appointment of Auditors

“Resolved that the reappointment of Nexia SAB&T as auditors, with Mr Tert ius de Kock as the designated auditor at partner status of the company, be and is hereby approved.”

Explanatory note: Nexia SAB&T has indicated its willingness to continue as the company’s auditors until the next AGM. The audit and risk committee has satisfied itself as to the independence of Nexia SAB&T. The audit and risk committee has the power in terms of the Companies Act, No 71 of 2008, to approve the remuneration of the external auditors. The remuneration and non-audit fees paid to the auditors during the year ended 28 February 2013 are contained on page 49.

The minimum percentage of voting rights that is required for ordinary resolution 2 to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote.

3.

Ordinary resolution number 3 – Director retirement and re-election

“Resolved that Mr Brian Jacobs be re-elected as a director in terms of the company’s articles of association.”

4.

Ordinary resolution number 4 – Director retirement and re-election

“Resolved that Mrs Rowena Majiedt be re-elected as a director in terms of the company’s articles of association.

Explanatory note for ordinary resolutions 3 and 4: In accordance with the memorandum of incorporation of the company one-third of the directors is required to retire at each meeting and may offer themselves for re-election. In terms of the memorandum of incorporation of the company the CEO, during the period of his service contract, is not taken into account when determining which directors are to retire by rotation.

The minimum percentage of voting rights that is required for ordinary resolution 2 to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote

5.

Ordinary resolution number 5 – Director Appointment

“Resolved that the appointment of Mr Dawood Asmal as a director of the company as from 20 March 2014 be and is hereby approved

His curriculum vitae are set out on page 7 of the Annual report.

NOTICE OF ANNUAL GENERAL MEETING

Explanatory note for ordinary resolutions: In accordance with the memorandum of incorporation of the company one-third of the directors is required to retire at each meeting and may offer themselves for re-election. In terms of the memorandum of incorporation of the company the CEO, during the period of his service contract, is not taken into account when determining which directors are to retire by rotation.

7. Ordinary resolution number 5 – Appointment of Audit Committee members

“Resolved that Mrs Rowena Majiedt be and is hereby approved to be a member of the Audit Committee.”

Her curriculum vitae are set out on page 7 of the Annual report.

65

6. Ordinary resolution number 6 – Re-appointment of Audit Committee members

“Resolved that Mr Brian Jacobs be and is hereby approved to be a member of the Audit Committee for the ensuing year ”

His curriculum vitae are set out on page 7 of the Annual report.

Explanatory Note for ordinary resolutions 5 and 6: In terms of Section 61 (8)(c)(ii) of the Companies Act No 71 of 2008, shareholders are required to approve the appointment of the Audit Committee members.

The minimum percentage of voting rights that is required for ordinary resolution 5, 6 and 7 to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote.

8. Ordinary resolution number 8 – Approval of Remuneration Policy

“Resolved that the Remuneration Policy, a summary of which has been tabled below, be and is hereby approved.”

Remuneration Policy Summary:

Objective Under the overriding guidance of the Remuneration Committee, ensure the integrity, transparency and legitimacy of remuneration within the Group including, the development and implementation of related policies, programmes, practices and decisions.

Key Policy 1.

Non-discriminatory practice - remuneration policy directives and practices will be free of unfair distinction. Internal equity – transparent, equitable and consistent application.

2.

External parity - competitive remuneration based on remuneration trends 3.

Performance based – direct link between remuneration and performance 4.

Motivation – integral component of employee motivation

Consideration 1.

Company viability – budgetary constraints as determined by the board 2.

Company performance – target achievement and wealth generation 3.

Retention of key skills. 4.

Sustainability. 5.

Career development.

Application 1.

Cost to company – flexible total package structure 2.

Balance – basic salary vs performance reward 3.

Shares – implementation of appropriate share incentive scheme/s for management

Directors’ remuneration 1.

Executive directors – determined by Remuneration Committee, ratified by shareholders 2.

Non-executive directors – determined by executive directors, ratified by shareholders

Explanatory Note: Chapter 2 of King III dealing with boards and directors requires companies to every year table their remuneration policy to shareholders for a non-binding advisory vote at the annual general meeting. This vote enables shareholders to express their views on the remuneration policies adopted and on their implementation.

This ordinary resolution is of an advisory nature only and failure to pass this resolution will therefore not have any legal consequences relating to existing arrangements. However the board will take the outcome of the vote into consideration when considering the Company’s remuneration policy.

9.

Ordinary resolution number 9 - Approval to issue ordinary shares for cash

“RESOLVED THAT subject to the approval of 75% of the members present in person and by proxy, and entitled to vote at the meeting, the directors of the Company be and hereby are authorised, by way of general authority, to allot and issue all or any of the authorised but unissued shares in the capital of the Company as they in their discretion deem fit, subject to the following limitations:-

- the shares 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 equity securities or rights that are convertible into a class already in issue;

this authority shall not endure beyond the next annual general meeting of the Company nor shall it endure beyond 15 months from the date of this meeting;

there will be no restrictions in regard to the persons to whom the shares may be issued, provided that such shares are to be issued to public shareholders (as defined by the JSE Limited (“JSE”) in its listing requirements) and not to related parties;

NOTICE OF ANNUAL GENERAL MEETING(Cont)

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upon any issue of shares which, together with prior issues during any financial year, will constitute 5% or more of the number of shares of the class in issue, the Company shall by way of an announcement on Securities Exchange News Service (“SENS”), give full details thereof, including the effect on the net asset value of the Company and earnings per share;

the aggregate issue of a class of shares already in issue in any financial year will not exceed 15% of the number of that class

of shares (including securities which are compulsorily convertible into shares of that class); and the maximum discount at which shares may be issued is 10% of the weighted average traded price of the Company’s shares

over the 30 business days prior to the date that the price of the issue is determined or agreed by the directors of the applicant.”

Explanatory note on ordinary resolution 9: In terms of the Company’s memorandum of incorporation, read with the JSE Listings Requirements, the shareholders may authorise the directors to allot and issue the authorised but unissued shares for cash, as the directors in their discretion think fit.

The minimum percentage of voting rights that is required for this ordinary resolution to be adopted is 75% (seventy five percent) of the voting rights plus 1 (one) vote to be cast on each resolution.

9.

Special resolution number 1 – Non-Executive Directors’ remuneration “Resolved that subject to the approval of 75% of the members present in person and by proxy, and entitled to vote at the meeting, the approval of the remuneration payable to the non-executive directors for the financial year commencing 1 March 2013 as follows:

Chairman Other members of committees Board meeting: Attendance fee per meeting R20 000 R15 000 Audit and Risk Committee meeting: Attendance fee per meeting

R15 000 R15 000

Remuneration Committee meeting: Attendance fee per meeting

R15 000 R15 000

Explanatory Note: In terms of Section 69 (9) of the Companies Act, No 71 of 2008, shareholders are required to approve the remuneration in relation to services of directors.

The minimum percentage of voting rights that is required for this special resolution to be adopted is 75% (seventy five percent) of the voting rights plus 1 (one) vote to be cast on each resolution.

10.

Special resolution number 2 – General authority to enter into funding agreements, provide loans or other financial assistance

subject to the approval of 75% of the members present in person and by proxy, and entitled to vote at the meeting, in terms of Section 45 of the Companies Act, No 71 of 2008, as amended, the company be and is hereby granted a general approval authorising

that the company and or any one or more of and/or its wholly-owned subsidiaries incorporated in the Republic to enter into direct or indirect funding agreements guarantee a loan or other obligations, secure any debt or obligation, or to provide loans or financial assistance between any one or more of the subsidiaries from time to time, subject to the provisions of the JSE Limited’s Listings Requirements, for funding agreements and as the directors in their discretion deem fit.”

Explanatory Note: The purpose of this resolution is to enable the company to enter into funding arrangements with its subsidiaries and to allow intergroup loans between subsidiaries. The minimum percentage of voting rights that is required for this special resolution to be adopted is 75% (seventy five percent) of the voting rights plus 1 (one) vote to be cast on each resolution.

11.

Special resolution number 3- General authority to repurchase the company’s securities

“Resolved that, subject to the approval of 75% of the members present in person and by proxy, and entitled to vote at the meeting, the company and/or any subsidiary of the company is hereby authorised, by way of a general authority, from time to time, to acq uire ordinary shares in the share capital of the company from any person in accordance with the requirements of Labat’s memorandum of incorporation, the Act and the JSE Listings Requirements, provided that:

- any such acquisition of ordinary shares shall be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement with the counterparty;

- this general authority shall be valid until the earlier of the company’s next annual general meeting or the variation or revocation of such general authority by special resolution at any subsequent general meeting of the Company, provided that it shall not extend beyond 15 months from the date of passing of this special resolution number 3;

- an announcement will be published as soon as the company or any of its subsidiaries have acquired ordinary shares constituting,

on a cumulative basis, 3% of the number of ordinary and/or preference shares in issue and for each 3% in aggregate of the initial number acquired thereafter, in compliance with paragraph 11.27 of the JSE Listings Requirements;

- acquisitions of shares in aggregate in any one financial year may not exceed 5% of the company’s ordinary issued share capital,

as the case may be, as at the date of passing of this special resolution number 1; - ordinary shares may not be acquired at a price greater than 10% above the weighted average of the market value at which such

ordinary shares are traded on the JSE as determined over the five business days immediately preceding the date of acquisition of such ordinary shares;

- the company has been given authority by its memorandum of incorporation;


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-

the board of directors authorises the acquisition and that the company passed the solvency and liquidity test, as set out in Section 4 of the Act, and that since the solvency and liquidity test was performed there have been no material changes to the financial

position of the company; - in terms of section 48 (2)(b) of the Act, the board of a subsidiary company may determine that it will acquire shares of its holding

company, but (i) not more than 10%, in aggregate, of the number of issued shares of any class of shares of a company may be held by, or for the benefit of, all of the subsidiaries of that company, taken together; and (ii) no voting rights attached to those shares may be exercised while the shares are held by the subsidiary, and it remains a subsidiary of the company whose shares it

holds; - in terms of section 48 (8)(b) of the Act, the repurchase of any shares is subject to the requirements of sections 114 and 115 if,

considered alone, or together with other transactions in an integrated series of transactions, it involves the acquisition by the company of more than 5% of the issued shares of any particular class of the company’s shares;

- at any point in time, the company and/or its subsidiaries may only appoint one agent to effect any such acquisition; - the company and/or its subsidiaries undertake that they will not enter the market to so acquire the company’s shares until the

company’s sponsor has provided written confirmation to the JSE regarding the adequacy of the company’s working capital in accordance with Schedule 25 of the JSE Listings Requirements; and

- the company and/or its subsidiaries may not acquire any shares during a prohibited period, as defined in the JSE Listings Requirements unless a repurchase programme is in place, where dates and quantities of shares to be traded during the prohibited

period are fixed and full details of the programme have been disclosed in an announcement over the Securities Exchange News Service (SENS) prior to the commencement of the prohibited period.

Explanatory note on special resolution 3: The reason for and effect of this special resolution is to grant the company and its subsidiaries a general authority to facilitate the acquisition by the company and/or its subsidiaries of the company’s own shares, which general authority shall be valid until the earlier of the next annual general meeting of the company or the variation or revocation of such general authority by special resolution at any subsequent general meeting of the company, provided that this general authority shall not extend beyond 15 months from the date of the passing of this special resolution number 3.

Any decision by the directors, after considering the effect of an acquisition of up to 5% of the company’s issued ordinary shares, as the case may be, to use the general authority to acquire shares of the company will be taken with regard to the prevailing market conditions and other factors and provided that, after such acquisition, the directors are of the opinion that:

- the company and its subsidiaries will be able to pay their debts in the ordinary course of business; - recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements,

the assets of the company and its subsidiaries will exceed the liabilities of the company and its subsidiaries; - the share capital and reserves of the company and its subsidiaries will be adequate for the purposes of the business of the

company and its subsidiaries; and - the working capital of the company and its subsidiaries will be adequate for the purposes of the business of the company and its

subsidiaries, for the period of 12 months after the date of the notice of the annual general meeting. The company will ensure that its sponsor will provide the necessary letter on the adequacy of the working capital in terms of the JSE Listings Requirements,

prior to the commencement of any purchase of the Company’s shares on the open market.

The JSE Listings Requirements require, in terms of section 11.26, the following disclosures, which appear in this annual report:

- Directors and management – refer to pages 7 of this annual report. - Major shareholders – refer to page 5 of this annual report. - Directors’ interests in securities – refer to pages 50 of this annual report. - Share capital of the company – refer to page 10 of this annual report.

Litigation statement In terms of paragraph 11.26 of the JSE Listings Requirements, the directors, whose names appear on page 7 of this annual report of which the notice of annual general meeting forms part, are not aware of any legal or arbitration proceedings that are pending or threatened, that may have or had in the recent past, being at least the previous 12 months, a material effect on Labat’s financial position.

Directors’ responsibility statement The directors, whose names appear on page 7 of this annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to this special resolution and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statements false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this special resolution contains all information required by law and the JSE Listings Requirements.

Material changes Other than the facts and developments reported on in this annual report, there have been no material changes in the financial or trading position of the company and its subsidiaries since the date of signature of the audit report and up to the date of the notice of annual general meeting. The directors have no specific intention, at present, for the company or its subsidiaries to acquire any of the company’s shares but consider that such a general authority should be put in place should an opportunity present itself to do so during the year, which is in the best interests of the company and its shareholders.

The directors are of the opinion that it would be in the best interests of the company to extend such general authority and thereby allow the company or any of its subsidiaries to be in a position to acquire the shares issued by the company through the order book of the JSE, should the market conditions, tax dispensation and price justify such an action.


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The minimum percentage of voting rights that is required for this special resolution to be adopted is 75% (seventy five percent) of the voting rights plus 1 (one) vote to be cast on this resolution.

12.

Ordinary resolution number 10 - Signature of documents

“Resolved that each director of Labat Africa 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 implementation of these resolutions to be proposed at the annual general meeting convened to consider this resolution which are passed (in the case of ordinary resolutions) or are passed and registered by CIPC (in the case of special resolutions).”

Other business

To transact such other business as may be transacted at an annual general meeting.

Voting and proxies

Certificated shareholders and dematerialised shareholders with “own name” registration If you are unable to attend the annual general meeting of Labat’s shareholders to be held in the boardroom, 23 Kroton Avenue, Weltevreden Park, Roodepoort at 15:00 on Friday 29 November 2014 and wish to be represented thereat, you should complete and return the attached form of proxy in accordance with the instructions contained therein and lodge it with, or post it to, the transfer secretaries, namely Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown, 2107) so as to be received by them by no later than 10h00 on Wednesday, 27 November 2014.

Dematerialised shareholders, other than those with “own name” registration If you hold dematerialised shares in Labat through a CSDP or broker and do not have an “own name” registration, you must timeously advise your CSDP or broker of your intention to attend and vote at the annual general meeting or be represented by proxy thereat in order for your CSDP or broker to provide you with the necessary authorisation to do so, or should you not wish to attend the annual general meeting in person, you must timeously provide your CSDP or broker with your voting instruction in order for the CSDP or broker to vote in accordance with your instruction at the annual general meeting.

Each shareholder, whether present in person or represented by proxy, is entitled to attend and vote at the annual general meeting. On a show of hands every shareholder who is present in person or by proxy shall have one vote, and, on a poll, every shareholder present in person or by proxy shall have one vote for each share held by him/her.

A form of proxy (white) which sets out the relevant instructions for use is attached for those members who wish to be represented at the annual general meeting of members. Duly completed forms of proxy must be lodged with the transfer secretaries of the Company to be received by not later than 10h00 on Wednesday, 26 November 2014.

By order of the Board

Stanton Van Rooyen Company Secretary 30 August 2014 Johannesburg


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Labat Africa Limited Incorporated in the Republic of South Africa (Registration number 1986/001616/06) JSE code: LAB ISIN: ZAE 000018354 (“Labat” or “the company”)

FORM OF PROXY (for use by certificated and own name dematerialised shareholders only)

For use by certificated and “own name” registered dematerialised shareholders of the Company ("shareholders") at the annual general meeting of Labat Africa Limited be held at 10:00 on Friday, 28 November 2014 at the registered offices of the company ("the annual general meeting").

I/We (please print) _______________________________________________________________________

of (address) ____________________________________________________________________________

being the holder/s of ______________________ordinary shares of 0.01 cent each in Labat, appoint (see note 1):

1. _______________________________________________________ or failing him,

2. _______________________________________________________ or failing him,

3. the chairperson of the annual general meeting,

as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purpose of considering, and if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions (see note 2):

Number of votes

For Against Abstain Ordinary Resolution Number 1 – Approval of Financial Statements

Ordinary Resolution Number 2 – Re-appointment of Auditors

Ordinary Resolution Number 3 –

Director retirement and re-election (Mr ………….)


Director retirement and re-election (Mr ………….)


Appointment of audit committee member – Mrs R Majiedt


Re-appointment of audit committee member – Mr B Jacobs

Ordinary Resolution Number 7 – Approval of Remuneration Policy

Ordinary Resolution Number 8 – Approval to issue ordinary shares for cash

Special Resolution Number 1 –

Non-Executive Directors’ Remuneration

Special Resolution Number 2 – General authority to enter into funding agreements, provide loans or other financial assistance

Special Resolution Number 3 – General authority to repurchase the company’s securities

Ordinary Resolution Number 9 – Signature of documents

Signed at ________________________________________ on ________________________________________ 2014

Signature _______________________________ Assisted by me (where applicable) ____________________________

Name ___________________________ Capacity ___________________ Signature _________________________

PROXY FORM

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1. This form is for use by certificated shareholders and dematerialised shareholders with "own-name" registration whose shares are registered in their own names on the record date and who wish to appoint another person to represent them at the meeting. If duly authorised, companies and other corporate bodies who ar e shareholders having shares registered in their own names may appoint a proxy using this form, or may appoint a representative in accordance with the last paragraph below.

Other shareholders should not use this form. All beneficial holders who have dematerialised their shares through a Central Securities Depository Participant ("CSDP") or broker, and do not have their shares registered in their own name, must provide the CSDP or broker with their voting instructions. Alternatively, if they wish to attend the meeting in person, they should request the CSDP or broker to provide them with a letter of representation in terms of the custody agreement entered into between the beneficial owner and the CSDP or broker.

2. This proxy form will not be effective at the meeting unless received at the registered office of the Company at 23 Kroton Avenue, Weltevreden Park, Roodepoort, Republic of South Africa, not later than Wednesday, 26 November at 10h00.

3. This proxy shall apply to all the ordinary shares registered in the name of shareholders at the record date unless a lesser numberof shares are inserted.

4. A shareholder may appoint one person as his proxy by inserting the name of such proxy in the space provided. Any such proxy need not be a shareholder of the Company. If the name of the proxy is not inserted, the chairman of the meeting will be appointedas proxy. If more than one name is inserted, then the person whose name appears first on the form of proxy and who is present atthe meeting will be entitled to act as proxy to the exclusion of any persons whose names follow. The proxy appointed in this pr oxy form may delegate the authority given to him in this proxy by delivering to the Company, in the manner required by these instructions, a further proxy form which has been completed in a manner consistent with the authority given to the proxy of thisproxy form.

5. Unless revoked, the appointment of proxy in terms of this proxy form remains valid until the end of the meeting even if the meeting or a part thereof is postponed or adjourned.

6.

If 6.1

a shareholder does not indicate on this instrument that the proxy is to vote in favour of or against or to abstain from voting on any resolution; or

6.2

the shareholder gives contrary instructions in relation to any matter; or 6.3

any additional resolution/s which are properly put before the meeting; or 6.4

any resolution listed in the proxy form is modified or amended,

the proxy shall be entitled to vote or abstain from voting, as he thinks fit, in relation to that resolution or matter. If, however, the shareholder has provided further written instructions which accompany this form and which indicate how the proxy should vote or abstain from voting in any of the circumstances referred to in 6.1 to 6.4, then the proxy shall comply with those instructions.

7.

If this proxy is signed by a person (signatory) on behalf of the shareholder, whether in terms of a power of attorney or otherwise, then this proxy form will not be effective unless:

7.1

it is accompanied by a certified copy of the authority given by the shareholder to the signatory; or 7.2

the Company has already received a certified copy of that authority.

8. The chairman of the meeting may, at his discretion, accept or reject any proxy form or other written appointment of a proxy which is received by the chairman prior to the time when the meeting deals with a resolution or matter to which the appointment of the proxy relates, even if that appointment of a proxy has not been completed and/or received in accordance with these instructions. However, the chairman shall not accept any such appointment of a proxy unless the chairman is satisfiedthat it reflects the intention of the shareholder appointing the proxy.

9. Any alterations made in this form of proxy must be initialled by the authorised signatory/ies.

10. This proxy form is revoked if the shareholder who granted the proxy:

10.1

delivers a copy of the revocation instrument to the Company and to the proxy or proxies concerned, so that it is received by the Company by not later than Wednesday, 26 November 2014 at 10h00; or

10.2

appoints a later, inconsistent appointment of proxy for the meeting; or 10.3

attends the meeting in person.

11. If duly authorised, companies and other corporate bodies who are shareholders of the Company having shares registered in their own name may, instead of completing this proxy form, appoint a representative to represent them and exercise all of their rights at the meeting by giving written notice of the appointment of that representative. This notice will not be effective at the meeting unless it is accompanied by a duly certified copy of the resolution/s or other authorities in terms of which that representative is appointed and is received at the Company's registered office at 23 Kroton Avenue, Weltevreden Park, Roodepoort, Republic of South Africa, not later than Wednesday, 26 November 2014, at 10h00.

PROXY FORM(Cont)

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SUMMARY OF RIGHTS ESTABLISHED

Summary of rights established by section 58 of the Companies Act, 71 of 2008 ("Companies Act"), as required in terms of subsection 58(8)(b)(i)

1. A shareholder may at any time appoint any individual, including a non-shareholder of the Company, as a proxy to participate in, speak and vote at a shareholders' meeting on hi s or her behalf (section 58(1)(a)), or to give or withhold consent on behalf of the shareholder to a decision in terms of section 60 (shareholders acting other than at a meeting) (section 58(1)(b)).

1. A proxy appointment must be in writing, dated and signed by the shareholder, and remains valid for one year after the date on which it was signed or any l onger or shorter period expressly set out in the appointment, unless it is revoked in terms of paragraph 6.3 or expires earlier in terms of paragraph 10.4 below (section 58(2)).

2. A shareholder may appoint two or more persons concurrently as proxies and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder (section 58(3)(a)).

3. A proxy may delegate his or her authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy ("proxy instrument") (section 58(3)(b)).

4. A copy of the proxy instrument must be delivered to th e Company, or to any other person acting on behalf of the Company, before the proxy exercises any rights of the shareholder at a shareholders' meeting (section 58(3)(c)) and in terms of the memorandum of incorporation ("MOI") of the Company at least 48 hours before the meeting commences.

5. Irrespective of the form of instrument used to appoint a proxy:

5.1 the appointment is suspended at any time and to the exte nt that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder (section 58)4)(a));

5.2 the appointment is revocable unless the proxy appointment expressly states otherwise (section 58(4)(b)); and 5.3 if the appointment is revocable, a shareholder may revoke the proxy appoi ntment by cancelling it in writing

or by making a later, inconsistent a ppointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the Company (section 58(4)(c)).

6. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy's authority to act on behalf of the shareholder as of the later of the date stated in the revocation instrument, if any, or the date on which the revocation instrument was delivered as contemplated in paragraph 6.3 above (section 58(5)).

7. If the proxy instrument has been delivered to a Company, as long as that appointment remains in effect, any notice required by the Companies Act or the Company's MOI to be delivered by the Company to the shareholder must be delivered by the Company to the shareholder (section 58(6)(a)), or the proxy or proxies, if the shareholder has directed the Company to do so in writing and paid any reasonable fee charged by the Company for doing so (section 58(6)(b)).

8. A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the MOI or proxy instrument provides otherwise (section 58(7)).

9. If a Company issues an invitation to shareholders to appoint one or more persons named by the Company as a proxy, or supplies a form of proxy instrument:

9.1 the invitation must be sent to every shareholder entitled to notice of the meeting at which the proxy is intended to be exercised (section 58(8)(a));

9.2 the invitation or form of proxy instrument supplied by the Company must:

9.2.1 bear a reasonably prominent summary of the rights established in section 58 of the Companies Act (section 58(8)(b)(i));

9.2.2 contain adequate blank space, immediately preceding the name(s) of any person(s) named in it, to enable a shareholder to write the name, and if desired, an alternative name of a proxy chosen by the shareholder (section 58(8)(b)(ii)); and

9.2.3 provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution(s) to be put at the meeting, or is to abstain from voting (section 58(8)(b)(iii));

9.3 the Company must not require that the proxy appointment be made irrevocable (section 58(8)(c)); and

9.4 the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to paragraph 7 above (section 58(8)(d)).

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NOTES

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