STEEL BSi - ShareData STEEL_ar_08.pdf · PROFILE BSI (SA) Limited group of companies (“BSi...

BSI (SA) LIMITED

ANNUAL REPORT 2008

STEELBSi

2

PROFILE

BSI (SA) Limited group of companies (“BSi Steel” or “the Company” or “the Group”), operates in the steel and associated industries with strategically located operations in South Africa, the Democratic Republic of Congo (DRC) and Zambia servicing the southern African markets.

The operations are grouped into four distinct activities-

• Processing: providing a primary processing service to the BSi operational businesses;

• Stockists: providing a just in time (JIT) service to localised clients;

• Bulk sales: bulk sales to larger end users; and

• Exports.

The South African operations focus on the manufacturing and construction industries, whilst the Zambian and DRC are largely focused towards mining.

The main products that the group sells are flat products (hot rolled, cold rolled, galvanised and plate); long products (light and medium mill sections, tubing) and structural steel sections.

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Administration

Financial Highlights

Incorporation and History

Operating Entities

Business Profiles

Directorate

Chairman's Report

Joint Chief Executive Officer’s Report

Divisional review Stockists

Divisional Review Bulk Sales

Divisional Review Exports

Sustainability

Corporate Governance

Remuneration Report

Share Incentive Scheme

Directors’ Responsibility Report

Secretarial Certification

Independent Auditors Report

Directors’ Report

Balance Sheets

Income Statements

Statements of Changes in Equity

Cash Flow Statements

Notes to the Annual Financial Statements

Shareholders Analysis

Notice of Annual General Meeting

Form of Proxy

Form of Surrender

CONTENTS

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Company secretary and registered office

S Hackett, B. Com.

Eden Park Drive,

Murrayfield Park, Mkondeni

Pietermaritzburg, 3201

PO Box 101096, Scottsville, 3209

Telephone: (033) 846 2208

Facsimile: (033) 346 0870

Transfer secretaries

Computershare Investor Services 2004 (Pty) Limited

(Registration number 2004/003647/07)

Ground Floor

70 Marshall Street

Johannesburg, 2001

PO Box 61051, Marshalltown, 2107

Telephone: (011) 370 5000

Facsimile: (011) 688 5210

Designated Adviser

Vunani Corporate Finance


39 First Road

Hyde Park, 2196

P.O.Box 413972 Craighall, 2024

Telephone: (011) 4472951

Facsimile: (011) 4471929

Attorneys

Venn Nemeth & Hart Attorneys


281 Pietermaritz Street,


PO Box 600, Pietermaritzburg, 3200

Telephone: (033) 355 3100

Facsimile: (033) 394 1947

Auditors and reporting accountants

Deloitte and Touche

(Practice Number 901482)

81 Hoosen Haffejee Street


P.O.Box 365, Pietermaritzburg, 3200

Telephone: (033) 345 0271

Facsimile: (033) 345 0285

Commercial banker

Nedbank Limited


90 Ordinance Road,

Durban, 4001

PO Box 10267, Marine Parade, 4000

Telephone: (031) 364 1111

Facsimile: (031) 364 2479

ADMINISTRATION

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FINANCIAL HIGHLIGHTS

EBITDA UP REVENUE UP

163% 62 %

REVENUE

The group’s revenue has grown from R882 million in 2007

to R1 432 million in 2008

EARNINGS PER SHARE UP

HEADLINE EARNINGS PER SHARE UP

268 % 303 %

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INCORPORATION AND HISTORY

‘85May

• Discount Steel cc

was founded by William Battershill

• The company

supplied steel through two divisions into Kwazulu-Natal [ KZN Stockists] and the rest of South Africa [Bulk Sales]

‘89

• The group

started its property division by purchasing its Pietermaritz-burg premises through Red Chip Invest-ments (Pty) Ltd.

‘93Dec

• Garrison Steel

was launched to offer a Just In Time service to the Gauteng region and is part of the stockist operations

• Garrison Steel

was initially incorporated as a cc.

‘96June

• LA Braziers (Pty)

Limited was acquired.

‘95Nov

• The processing

division of the group was started under the name Shearcut Precision Steel cc

‘97

• Growth into Africa

was started with the birth of Discount Steel Africa with Grant Mackenzie and Paul Arnott as executive directors.

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7

‘05Feb

• Through the

procurement of the latest technology cut to length processing line, the processing division expanded and now includes Shearcut (Pty) Ltd

‘01Sept

• Discount Steel

cc (converted to a (Pty) Ltd)changed its name to BSI (SA) (Pty) Limited

• Shearcut

Precision Steel was converted to a (Pty) Lim-ited.

• Garrison Steel

cc. also converted to a (Pty) Limited.

‘03Jan

• The assets of

LA Braziers (Pty) Ltd were sold along with the name, leaving the operation now trading as Newcolab(Pty) Ltd.

Aug

• The operations

of BSI (SA) (Pty) Ltd were split into two, based on geography and method of business. This created the companies of Discount Steel KZN (Pty) Ltd and Discount Steel Trading (Pty) Ltd

‘07April

• The group’s

continued expansion into Africa culminated in the purchase of the Zambia and Congo Agencies

• The group began

a restructure process to convert all subsidiaries within the group to wholly owned subsidiaries. Minority shareholders within the sub-sidiary groups were converted into shareholders of the holding company BSI (SA) (Pty) Ltd

• Through the

restructure BSI became the holding company of Garrison Steel, Discount Steel KZN, Discount Steel Africa, Discount Steel Zambia, Doddleprops 6,Red Chip In-vestments and Newcolab

Oct ‘07

• BSI (SA) (Pty)

Ltd was con-verted to a public company. BSI (SA) Limited was listed on the AltX of the JSE

‘02

• The Gauteng

region property was purchased into Doddleprops 6 (Pty) Ltd, expanding the property division of the group .

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OTHER

BULK SALES

EXPORTING

STOCKIST

SHEARCUT

OPERATING ENTITIES BS

I (SA

) LIM

ITED

BSi STEEL TRADING

BSi STEEL

KZN

BSi STEEL

EXPORTS

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BSi STEEL

ZAMBIA

BSi STEEL

GAUTENG

NEWCOLAB

BSi STEEL

DRC

RED CHIP

INVESTMENTS DODDLEPROPS 6

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BSi STEEL KZN FORMERLY: DISCOUNT STEEL KZN – Pietermaritzburg

This business provides a Just in Time service to the Kwazulu – Natal client base and has the warehousing stocks and logistics to support this endeavor. Most goods are delivered on demand with its own transport. This company has strength in a number of products, including flat, long and tube products.

BSi STEEL GAUTENG FORMERLY: GARRISON STEEL – GautengProvides a JIT service to the Gauteng client base and holds stock to support this endeavor. This business is highly service orientated and specialises in flat products at present, with long products being developed. Goods are delivered on demand.

BSi STEEL BULK SALES FORMERLY: DISCOUNT STEEL TRADING –

Pietermaritzburg

This business provides the bulk supply services to larger clients, mainly in the Gauteng region, with a few outlets in Kwazulu-Natal and the Western Cape. The businesses take positions on parcels of steel, both imported and through the Mittal tender system when they deal in prime and downgraded steel.

BSi STEEL EXPORTS

FORMERLY: DISCOUNT STEEL AFRICA –

Pietermaritzburg • Isando • GautengThis company provides a procurement and logistics infrastructure for BSi’s outlets in Zambia and the DRC and provides an indent service to clients that prefer to buy directly from South Africa. Direct clients include mines and larger end users. There are regular direct clients in Zambia, DRC and Zimbabwe, with ad hoc trade to Mozambique, Kenya and Tanzania.

BUSINESS PROFILES

EXPORTING

STOCKISTS

BULK SALES

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BSi STEEL ZAMBIA FORMERLY: DISCOUNT STEEL ZAMBIA –Lusaka • KitweThis company holds significant stocks and provides a JIT service to the clients in Zambia. The Lusaka operation is weighted towards agriculture and construction, whilst the Kitwe operation has a large mining element

BSi STEEL DRC FORMERLY: DISCOUNT STEEL DRC –Lubumbashi • KolweziThe Lubumbashi operation is heavily weighted towards the mines. The market is unsophisticated, requiring a wide range of steel products to be held in stock. The Kolwezi operation is fairly new and is in its development stages, with a full time manager and a secured site.

OTHER

SHEARCUT – GautengShearcut provides a processing service to the group with a cut to length line and a slitting line. Processing is limited to the cutting and slitting of steel from coils to produce sheets and slit strip. BSI will be making significant investments in specialised processing plant in the future.

DODDLEPROPS 6 – GautengDoddleprops (6) (Pty) Ltd owns premises in Alrode which house the BSI Gauteng and Shearcut (Pty) Ltd operations.

RED CHIP INVESTMENTS – PietermaritzburgRed Chip Investments (Pty) Ltd owns premises in Mkondeni, Pietermaritzburg which house the head office and BSI KZN operations of the group.

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WILLIAM BATTERSHILL – Executive Director: Joint Group Chief Executive Officer (Chairperson) (48)

William left school aged 17 and commenced his working career with his father, John Battershill, at his manufacturing and agricultural supply company in Zimbabwe. He immigrated to RSA in 1981 and worked for Way Industries, a manufacturing company in Qwa Qwa, where he was appointed as a Director at the age of 23. In May 1985, William resigned from Way Industries and started Discount Steel. This was the founding company from which BSi was spawned. William’s strengths are his broad based understanding of business and his ability to recognise and convert business opportunities. He is an archetypal entrepreneur.

GRANT MACKENZIE – (MBChB) Executive Director: Joint Group Chief Executive Officer (43)

Grant started his working career at a subsidiary of Anglovaal in 1994. In 1995 he moved to Lusaka, Zambia, where he was instrumental in starting Discount Steel Zambia in 1997. He returned to South Africa in 2005 as the Managing Director and continued to grow export operations into overland Africa. Grant was appointed as the Chief Operating Officer of BSI in May 2007 and Joint CEO in April 2008.

JAMES WALLER – (BCompt Hons) Executive Director: Group Financial Director (43)

James completed his articles with KPMG Inc. before moving into commerce. He worked as Financial Director for Positron, Purdon Murdock and Waller, ATM (Pty) Limited and Terrafin Management Services (Pty) Limited. In 2001 he was appointed as Financial Director at BSI. James comes with a wealth of experience gained in the industry and has been instrumental in managing the group’s high growth.

ROSS TEICHMANN – Executive Director - BSi Steel Gauteng (42) (appointed in April 2008)

Ross started a fencing business in Pietermaritzburg in 1987. In 1990 he joined McNaughtans where he ran the Empangeni branch for 18 months and then moved back to Durban as the sales manager for the region. Ross joined Discount Steel in 1991 as a sales representative and was responsible for the Durban region for 3 years. He relocated to Johannesburg in 1995 to start Garrison Steel. Ross has been with BSI for the last 16 years and has contributed to the success of the steel business through his extensive experience of the steel industry.

CRAIG PARRY – Executive Director - BSi Steel Bulk Sales (38) (appointed in April 2008)

Craig commenced his working career at Nampak Limited as the production planner for laminated and coated products. Craig joined Discount Steel in 1992 taking responsibility of the trading division of the group. He has now been with the group for 15 years and has a wealth of experience in the steel industry.

NIGEL PAYNE – (B.Com (Hons), CA (SA), MBL) Independent Non-Executive Director (48) joined the board in 2007

Nigel is an experienced independent non-executive director who currently serves on the boards of a number of other listed companies, namely the JSE Limited, the Bidvest Group Limited, the Mr Price Group Limited and Glenrand MIB Limited, where he generally chairs the audit and/or risk committees. He also serves on the boards of some significant non-listed entities. Nigel is a member of the King Committee on Corporate Governance and is a member of the Council of the Institute of Directors.

DIRECTORATE

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ETHAN DUBE – (MSc (Statistics) MBA (Sweden)) , Independent Non-Executive Director (47) ( resigned 13 June 2008) Ethan has gained significant corporate finance and asset management experience over the years. He worked for Southern Asset Managers for three years as a Senior Analyst and for Standard Chartered and Merchant bank for two years in the Corporate Finance departments. In 1996 Ethan founded Infinity Asset Management with three other partners and in 1998 he started Vunani Capital Holdings (Pty) Limited (Registration number 1997/020641/07) an investment banking company where he is the current Chief Executive Officer.

STEPHEN HACKETT– (B. Com) Company Secretary (51) Steve has a B.Com degree from UNISA. He completed articles with Thornton-Dibb, Van Der Leeuw and partners. He has held various financial management positions in the motor industry before joining BSI in 1997.

Dr RICHARD LEWIS – (B.A.,LL.B.,MBA.D.Juris) Alternate Non-Executive Director: (49) ( appointed 12 May 2008)

Richard is the principal associate of Richard Lewis, Smith & Associates CC, a firm specialising in strategic planning, human resources, and leadership development. Richard completed his BA, LLB degrees at the University of Natal where after he became an advisor with the Natal Chamber of Industries for two years. He then went to live in Germany to lecture at the Euro-Akademie, Cologne. Whilst there, he completed an MBA degree and a Doctorate in Law. Primarily a strategist, Richard is also specialised in corporate governance. He is a member of the SA Board of Personnel Practitioners, and was also past ‘Director: South Africa’, of the German- SA Trade Organization. He is a member of the SA Society for Labour Law and is also Vice Chairperson of the Wildlife Society of SA with the Strategy and Corporate Governance portfolio responsibility. Richard is a non-executive Director of Wynleigh International – a quality compliance management systems company.

BUTANA KHOZA– (B.Com, PGDA , CA (SA)) Independent Non-Executive Director (41) ( appointed 12 May 2008)

Butana completed his articles with KPMG in 1994 and spent six months in KPMG's office in Vancouver, Canada. He then joined Southern Asset Management and later transferred to Future Growth, then a division of Southern Life. He left Southern Life to establish African Harvest Capital with Ethan Dube. Butana has served in a number of senior executive roles at African Harvest Capital. He is chairman of Vunani Securities (Pty) Ltd.

MARK ANDERSON - (B.Com (Hons), CA (SA) Alternate Independent Non -Executive Director (48) (appointed 13 May 2008) Mark has been involved in corporate finance activities since 1991. Mark consulted to a number of the major Cosatu trade unions in the 1980's and early 1990's and initiated a number of early BEE deals. Mark is a director of Vunani Limited, a company listed on the JSE's AltX.

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William Battershill:

Group Chairman and Joint CEO

It is my pleasure & privilege to present to you the maiden results of BSI (SA) Ltd (BSi) for the year ended March 2008. The transition from a private company to a listed entity has been rewarding for all stakeholders; the capital raised at listing was deployed to maximum effect, resulting in profits after tax of R99.4million, some 24% over forecast.

PERFORMANCE OVERVIEW Revenue up 62% Attributable earnings up 196% to R99.4m Earnings per share up 268% Headline earnings per share up 303% Net tangible asset value up 213%

On balance, these are most satisfactory results. Earnings were under pressure for the first half of the fiscal, hampered by cuts in the steel prices. However, this modest performance was much improved with a combination of solid growth in tons sold, coupled to steel price increases for Feb and March. Our sales tonnage increased by 36% against the SA market growth of 4%; this was an especially pleasing aspect of the year’s performance.

STEEL INDUSTRY OUTLOOK The international demand for steel seems set firm for at least 6 months. Whilst it is notoriously difficult to predict, reasonable demand appears likely for a number of years. A significant slump in world economic growth could change this quickly. In the South African context, steel prices remain low against international levels, despite significant price increases by local mills. Should the Rand weaken further, there is no doubt that local prices will continue to increase until late this calendar year. I believe that the South African demand will remain similar to last year, with Southern African regional growth being more bullish on the back of the commodities boom. The South African manufacturing sector will be under pressure, with infrastructural demandbuoying up overall consumption.

PROSPECTS FOR THE YEAR AHEAD BSI remains committed to growth, balanced with sustainability and strong risk management. Our market share is 2.7% of the localSouth African market, with an estimated 3.4% of the regional market, including South Africa, Zambia, Zimbabwe and DRC.

CHAIRMAN’S REPORT

BSi 5 year MISSION

By year ending March 2013, we aim to achieve:

Turnover R6 billion

Sell 700,000 tons p.a.

provided such targets are underpinned by good business

BSI (SA) Ltd (BSi) for the year ended BSI (SA) Ltd (BSi) for the year ended March 2008. The transition from a private company to a listed entity has been rewarding for all March 2008. The transition from a private company to a listed entity has been rewarding for all

ct, resulting in profits after tax of ct, resulting in profits after tax of

sold, coupled to steel price increases for Feb and March. Our sales tonnage increased by sold, coupled to steel price increases for Feb and March. Our sales tonnage increased by

William Battershill:

Group Chairman and Joint CEO

15

PROSPECTS FOR THE YEAR AHEAD (cont)

There are five facets to our growth program:

1. ORGANIC Remains our best return and lowest risk option Supported by our relatively low market share

2. NEW PRODUCTS PLATE and STRUCTURAL products will be the main drive for the next 2-3 years We are introducing some specialized mining products in Zambia/DRC

3. GEOGRAPHIC Options are being explored both locally and regionally Focus is on countries south of the equator

4. ACQUISITIONS Targeting companies giving Geographic or Product diversity Aiming at low-risk ventures – well managed, established, good trade history Considering cultural fit

5. BBBEE Aiming at level 6 status by Aug/Sept 2008 Aiming at Level 4 status by Aug/Sept 2010 New target markets include – Government tenders & mining Scope exists to increase sales within current client base with improved BBBEE rating

KLIPRIVIER We have commenced with the construction of a 20,000sqm warehousing facility and 1200sqm office block on our 23 hectare site in Kliprivier . This modern facility promises increased stock holding efficiency and increased processing capacity, which will provide the platform we require to support our growth for the foreseeable future.

decisions and aimed at the highest possible net profit.

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CHAIRMAN’S REPORT (cont) DIRECTORATE

The following changes to the Board have taken place.

It is with regret that we bid Ethan Dube farewell. Ethan has found that the increased pressure of managing the recently listed Vunani Limited has prohibited his meaningful involvement going forward. We thank Ethan for his valued contribution and wish him every success for the future. We welcome Butana Khoza as Ethan’s replacement. Butana is one of Vunani’s founding members and we are looking forward to working with him in the future.

Craig Parry & Ross Teichmann are long-standing seasoned members of the BSI team, with 16 and 17 years service respectively. We anticipate that their hands-on involvement in the trading activities will add an important dynamic to our varied skills.

Dr Richard Lewis & Mark Anderson join us as alternate Directors. Richard has extensive knowledge of labour law and is involved in BSi as a consultant to our HR Director and strategist to the board. Mark Anderson is also a founder member of Vunani and is welcomed as an alternate to Butana.

NOTE OF APPRECIATION BSi has produced excellent results due to the unstinting services of the Board and Staff, to whom I extend my heartfelt appreciation for the fine effort. It has been a tough year for us all and we can be justifiably proud of our achievements.

I thank our clients for their support, despite the difficulties we have faced through shortages and more recent price increases. BSi remains committed to offering you the finest service and quality possible, at competitive prices.

To our shareholders, thank you for trusting us with your investment in these turbulent times. We assure you that we are totallycommitted to creating ongoing wealth through growth and a disciplined business approach – we will not let you down.

I thank our suppliers for their ongoing support, especially the steel mills, who have adopted a tough but fair method of allocating steel, based on historic consumption.

In closure, I would like to state that the leaders and staff of BSi are totally committed to building a leading centre of excellence within the steel distribution industry of Southern Africa. We believe we have the talent, the will and the vision to set the standard.

W L Battershill Chairman and Joint CEO

Name Change

W L Battershill 01 April 2008: Relinquishing exclusive role of CEO; now Joint CEO and Chairman

G D G Mackenzie 01 April 2008: Relinquishing role of CE Exports; assuming role of Joint CEO.

C Parry 01 April 2008: New appointment as Executive Board member; CE Bulk trading Division

W R Teichmann 01 April 2008: New appointment as Executive Board member; CE RSA stockists

E Dube 13 June 2008: Resigned

B M Khoza 13 June 2008: New appointment; replaces Ethan Dube

Dr R G Lewis 12 May 2008: New appointment as alternate to Nigel Payne; chairs REMCO

NM Anderson 13 June 2008: New appointment as alternate to Butana Khoza

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JOINT CHIEF EXECUTIVE OFFICER’S REPORT

It is with great pleasure that I present my CEO’s report to you following the completion of our first financial year since listing BSI in October 2007 on the AltX of the JSE.

While the listing has significantly increased the workload of our key executives, it has been both a challenging and rewarding experience. We believe the capital raised has been utilised sensibly, and BSI has managed to take advantage of the opportunities born out of a volatile steel price, market shortages and a buoyant regional appetite for our products.

The South African and SADC markets have been consistently growing their demand for steel, and through the geographic footprint of our merchanting businesses in Kwazulu Natal, Gauteng, Zambia and the Democratic Republic of Congo (DRC), supported by our bulk sellers and export traders further expanding this footprint, we have managed to out-perform the steel growth in these markets.

Cost-containment is a core focus for BSI. While we’ve needed to remain geared for growth opportunities, we’ve also remained focused on maintaining a low cost per tonne mindset across the group. It is a fine line to manage, and remains one of the key challenges of management, as sustainability from a staff capacity point of view is equally critical to us.

PRODUCTSBSI deals in carbon steel products divided into long and flat steel. South Africa’s steel consumption is split as follows :

Long product - 55% Flat product - 45%

Including our long, flat and coil-processed products, BSI has 4,000-5,000 active product lines stocked and sold across all our business units.

Grant Mackenzie

Joint CEO

JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT JOINT CHIEF EXECUTIVE OFFICER’S REPORT

challenging and rewarding experience. We believe the capital raised has been utilised sensibly, and BSI out of a volatile steel price, market shortages

Gauteng, Zambia and

group. It is a fine line to manage, and remains one of the key challenges of management, as sustainability

Grant Mackenzie

Joint CEO

19

OPERATIONS

BSI is a company that merchants, bulk sells, processes, distributes and exports steel products within southern Africa. We are the interface between the primary producer (the steel mills) and the end-user (our customers), and we typically play a buying, primary processing, stocking, distribution and financing role in the value chain. Depending on the business unit and its situational requirement, we may play a wholesale or retail role always aiming to fulfil the unique needs of our customers.

We have three trading structures namely; 1. Stockists; 2. Bulk sales; and 3. Exports.

These business styles all complement one another and are underpinned by our steel processing division which further expands our product offering and widens our access to customers.

20

JOINT CHIEF EXECUTIVE OFFICER’S REPORT (cont)

STOCKISTS BSI Steel Gauteng is a Gauteng-based merchant situated in Alrode, near Alberton. Its main focus is supplying the just-in-time (JIT) market in Gauteng. This business is highly service orientated and specialises in flat products with long products being developed. BSI Steel KZN is based in Pietermaritzburg from which it services the Kwazulu-Natal market. Most goods are delivered on demand with its own transport. This company has strength in its variety of products which include flat, long, tube and structural.

BULK SELLING BSI Steel Bulk Sales is a bulk sales / steel distribution business based in Pietermaritzburg. This division services customers who are larger end users. The sourcing and distributing of product, from both locally and abroad, is fundamental to the success of this division.

EXPORTS BSI Steel Exports is based in Pietermaritzburg and has a consolidation depot in Isando, Gauteng. Export Sales Directors have been involved in the supply of bulk steel into overland African markets, including Zimbabwe, Zambia, DRC, Malawi and Mozambique since1997. Over the years we have expanded our product offering significantly, ensuring we have remained the supplier of choice to selected customers. The SADC countries offer consistent growth opportunities, albeit at higher risks and administrative complexities than the local businesses. Our competitive advantage lies in our experience in dealing with African customers built up over ten years of trade. In addition to performing a specialised buying function for direct clients, BSI Steel Exports also provides a buying and logistics service to the BSI Steel merchants on the ground in Zambia and the DRC.

BSI Steel Zambia’s Lusaka depot services the Lusaka market as well as the central, southern and eastern provinces of Zambia. It is involved primarily in the supply of steel to the non-mining, agricultural sectors of the economy as well as through cash-sale outlets. Our facility in Lusaka is in a prime location within the light industrial area, and attracts both walk-in cash business, as well as services our many industrial clients. Zambia’s economy appears set to grow at 6-8% year-on-year and this bodes well for our continued success in this market.

BSI Steel Zambia’s Kitwe operation by comparison is involved almost exclusively with supplying the mining industry and is involved in long term supply contracts with many of the mining companies in Kitwe, Mufilira, Solwezi and Lumwana. In addition, the business also supplies the heavy engineering and fabrication industries that support the mining industry.

BSI Steel Lubumbashi is a DRC-based stockist with two depots, one in Lubumbashi’s industrial area supplying the mining and industrial sectors, and one in the retail area supplying the cash sale sector. There is no doubt that doing business in the DRC is both risky and costly due to the infrastructural and human resource challenges. However, we are making excellent progress in finding the balance between good growth and lower risk business within the Lubumbashi area.

BSI Steel Kolwezi is based in the heart of the main mining area of the DRC with many mines starting up within a 100km radius of Kolwezi town. The business is in its infancy and finds itself operating within very difficult conditions due to the fact that Kolwezi has little infrastructure. Operating costs are therefore high and returns need to justify our decision to take a stake in the market. The future does look very promising for this business due to the massive growth potential of the mining sector.

PROCESSING Shearcut is situated on the same premises as BSI Steel Gauteng in Alrode, and consists of an installed cut-to-length line with a capacityof over 60,000 tonnes per annum. Our slitting line has been overhauled and is ready to be installed at our new facility in Kliprivier on the R59 north of Meyerton in October 2008. Increasing our processing capacity has been part of our strategy for 2008 and will continue to play an important part of our growth through volume and product diversification. We will be taking delivery of a batch blanking line and a second cut-to-length line in 2009 to further boost the range of our product offering.

MOVE TO KLIPRIVIER Our Gauteng operations have been working from the following locations : BSI Steel Exports – Isando, Gauteng (consolidation of loads for overland African exports) BSI Steel Bulk Sales – coil storage at various warehouses throughout Gauteng BSI Steel Gauteng – Alrode, Gauteng Shearcut – Alrode, Gauteng Long product storage – Alrode, Gauteng

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Despite the geographically fragmented nature of our business, we have managed to secure sound profitable growth across all our business units. However, in early 2007 we identified an important need to consolidate our Gauteng-based businesses under one roof to extract maximum synergy from a cost-saving and stock-sharing point of view. Additional strategic value will come from hav-ing senior personnel under one roof, which will foster greater teamwork and release entrepreneurial interaction between execu-tives. In 2007, we purchased a 23 hectare site on the eastern side of the R59 highway that links Johannesburg with Vanderbijlpark in the vicinity of the Everite factory, adjacent to the Kliprivier Railway Station. This is a growing industrial node evidenced by the increased development activity in the area and most notably the new Heineken Brewery being built on the western side of the high-way.

We expect our cut to length line to be installed by December 2008, the office block completed by February 2009, and coil and long product storage by end 2008. Materials handling capability will be increased significantly, improving our steel distribution capacity from four trucks to ten trucks loaded simultaneously with capacity for a further sixteen trucks being commissioned by June 2009.The second cut-to-length line will be installed in July 2009.

REBRANDING EXERCISE As of the 1st July 2008, all our divisions will trade as BSI Steel, and the names Garrison Steel and Discount Steel will be withdrawn. This will promote unity and synergy within the divisions and create a stronger identity for the group amongst our shareholders,staff, customers and suppliers.

ENTERPRISE RESOURCE PLANNING, BUSINESS INTELLIGENCE AND COMMUNICATION BSI has been running fragmented database instances which have hindered true synergy amongst the business units, especially those up in Africa. We have decided to integrate all our business units onto the same single instance running the same platform to which African operations will connect via VSAT. We have decided to go with Microsoft Dynamics AX as our new ERP software solution supported by Microsoft Performance Point Business Intelligence tool.

In addition, we have made a strategic decision to outsource our connectivity function and Server Farm to an independent serviceprovider. Our in-house IT capacity will shift to expand our business intelligence capacity as we see this as vital to making better commercial decisions and improving our performance management capabilities.

This roll out will continue throughout 2008, to be completed for the South African operations by December 2008, and for the African operations, by April 2009

HUMAN CAPITAL Our success at BSI has everything to do with the commitment and talent of our staff. Our flat management structure encourages the development of people who flourish within an empowered, entrepreneurial environment, and BSI remains committed to our vision of being the “employer of choice” within the steel industry. We have embarked on an ambitious employee training and executive development program that ensures the investment we make in our staff leads to long term sustainability even at currentand projected growth levels. Our expansion into Africa offers great opportunities to individuals who want to share the risks andrewards within very challenging yet dynamic environments.

CONCLUSION We have had a great year at BSI, despite the challenges of consolidating our many different businesses and listing on the Alternate Exchange of the JSE. We believe that by extracting synergies from business units that were once operating very independently, wewill attain a critical mass and efficiency that will greatly enhance our value for both shareholder and customer. Our relatively low market share gives us the opportunity to maintain our growth strategy through expanding our geographic footprint and increasingproduct diversity, while maintaining our focus on sustainability.

We’d like to thank our fellow directors for the time and effort they have put into their duties to the board. We are very fortunate to have members that instil a quality to our strategic discussions that will be felt for many years to come.

Thank you to our customers and suppliers that make our business possible, and from whom we continue to learn.

Lastly thank you to all our staff that have given so much to the company, and for your contributions to BSI’s excellent results. We encourage you to continue to use the platform that the group provides to give you the growth and self-fulfilment you deserve.

Grant Mackenzie Joint CEO

The financial year ended March 2008 has been an excellent year in all respects. Due to the group’s strong buying power, and ability to source material from various suppliers, we increased our volumes despite supply problems from the local mills. This in conjunction with significant price increases contributed to our increased margins.

A number of strategic decisions taken towards the end of 2006 have contributed to our exciting results.

Firstly, a far bolder position on stock-holding. Not only did we increase our stock in terms of volume, but we also expanded our range to include plate and structural steel. The divisions had previously operated with a very narrow product range, a strategy that had enabled us to flourish in the early 2000’s. However, a change to this strategy was necessary to ensure long-term sustainability and growth. This investment in stock paid off handsomely in this financial year.

Secondly, we made a major investment in our sales staff. Curtis Read joined BSI Steel Gauteng in January 2007 as Sales Director. Curtis spent a number of years working for Discount Steel in PMB, followed by 6 years in the UK. He has made a meaningful contribution to the business and I am pleased to say Curtis has continued to grow our sales team. Glenn Daff joined BSI Steel KZN in October 2006 as a Sales Director; Glenn has had 25 years experience in the steel industry.

His ability to negotiate at high levels and form meaningful relationships will make an important contribution to our growth in KZN.

BSI Steel Stockists are now fortunate to have a sales team that has the right mixture of youthful energy and experience and it isfast becoming an extremely effective sales force.

Thirdly, in-house processing has been a major contributor. Shearcut has enabled us to offer the market improved service and quality. We can offer greater flexibility in terms of finished goods and lead times. This has definitely added to our ability to trade competitively.

STOCKISTS: BSi STEEL KZN AND GAUTENG

STOCKISTS GROSS REVENUE CONTRIBUTION TO THE

GROUP

DIVISIONAL REVIEW

Chief Executive -

BSI Steel KZN

LEE DAFF

The main contributing factors to our growth are the considerable investment in stock holding and the

expansion of our product range.

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STOCKISTS PROFIT FROM

OPERATIONS

CONTRIBUTION TO THE GROUP

MARKETS

The divisions trade in a relatively stable and established market. Our ability to retain and grow our market share is largely dependent on us maintaining a level of service and delivery for which we have become known. There is no doubt that the steel industry is generally buoyant, although we can expect some tough patches in the year ahead. It is imperative that we continue to read the market and manage our stock / turnover ratio so as to minimise the effects of a downturn, while maximising the upside.

THE FUTURE

Over the last year we have seen relationships with new and existing customers develop and strengthen. This strong foundation coupled with the introduction of new lines into our stock range will enable us to continue growing our business in future. The benefits of the new Kliprivier development will soon be realised, the strong divisional cooperation through stock holding synergy will see us emerge as a “solution” provider rather than purveyors of commodities. This will continue to enhance our status as a supplier of choice to the local market, and allow us to continue to develop as a competitive player. BSI Steel Gauteng will be moving to Kliprivier later this year, as they have now outgrown their present facility and are facing severe space constraints. We recognise the efforts of both Rob MacFarlane (Divisional Admin and Logistics Director) and Duzi Buthelezi (Warehouse and Logistics Manager) for maintaining our service standard with such limited resources.

With the infrastructural spend that the Government has initiated, we believe that the steel industry as a whole can expect solid growth for a number of years to come. We plan to take full advantage of this situation, whilst ensuring that the business we do is sustainable. We have always sought to have a clear understanding of our clients’ needs, ensuring that those needs fit with our own and then working hard on building a strong mutually beneficial relationship. This approach will continue into the future.

We also recognise the need to drive our BBBEE programme. We believe that being BBBEE compliant is not only essential for our long term plans, but it is also right for the country.

We will continue to grow our product range in a sensible manner, invest in our staff and strive for continued improvement. We see no reason for us to fall short of our goals in the foreseeable future.

Chief Executive-BSI Steel Gauteng

ROSS TEICHMANN

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24

BSI Steel is investing significantly in a

specialised processing plant

MARKETS

Our markets remain buoyant even with steep price increases being the order of the day. Consumer demand has not diminished, partly due to the steel allocations that have been implemented by the producing mills and partly due to the growth that the various industries are experiencing. I anticipate allocations to ease going forward, which has certainly been the case with Hot Rolled and Cold Rolled in the last quarter of this year. I still see pressure on the supply of galvanised steel going forward, as demand outstrips the production capability by some 30%. Colour coated products are in a similar position where demand outstrips production by some 40%. Plans are in place to increase production, but it will still take some years for this to filter through to the markets. The current scenario allows us to maximise our return, and allows the possibility of procuring material from our International contacts.

I believe the market will remain buoyant for the foreseeable future. Our ability to read the market and keep abreast with world trends has set us in good stead, and has allowed us to maximise our opportunities. Conversely we are also well positioned to make a quick correction if needed in a downward price cycle.

THE FUTURE

Year on year has seen the division grow from strength to strength. We have a passionate hard working team who are aligned towards a common goal. We have correctly positioned ourselves in the South African steel market and our ability to move with the market has

produced some excellent results.

We remain committed to being one of the lowest cost per ton distributers in the market place, a position that will allow us toweather any down turn and to take advantage of any upturn .

We continue to build the team with proven profit generators to take full advantage of growth potential in the market place. Someone said “ the future is what you make it”, we intend to make it great!

BULK SALES: BSi STEEL BULK SALES AND NEWCOLAB

DIVISIONAL REVIEW

Someone said “ the future is what you make it”, we intend to make it great!

Chief Executive BSI STEEL BULK SALES

CRAIG PARRY

BULK SALES PROFIT FROM OPERATIONS


BULK SALES REVENUE


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A TOTAL COMMITMENT TO PROVIDING A TOP QUALITY SERVICE AND INVESTMENT IN STAFF WILL SEE BSI EXPORTS GROW FROM ITS CURRENT STRENGTH TO THE STEEL SUPPLIER OF CHOICE INTO AFRICA This financial year was one that saw tremendous growth in spite of a relatively strong Rand in the first half of the year and the steel shortages. The shortage of steel available for exports was created in the main by a surge in local demand. Steel supply from our traditional local sources was very disruptive which forced us to seek alternate suppliers. The last quarter saw a surge in steel prices and included the abolition of export rebates. Fortunately the Rand devalued against the USD and so a portion of the increase was offset.

Our investment in quality staff paid off as we were able to continue to provide excellent service to all our markets in spite of the challenging market conditions. The large price increases experienced have proven challenging but have not slowed our growth in tons and have boosted revenue.

MARKETS

Our shift in 2005 from the broad shotgun approach to dedicated focus on specific countries has paid off handsomely. Not only have we seen tremendous growth in revenue but we have

developed a reputation as being a top notch service provider. Our main markets are Malawi, Zambia, DRC and Zimbabwe. Ad hoc supplies are also currently conducted into Mozambique, Tanzania, Namibia and Botswana.

ZIMBABWE

Over the last three years we have shown significant growth in the Zimbabwean market. Unfortunately the current political and economic turmoil has slowed the exports down significantly. Last year total tons exported from South Africa to Zimbabwe declined by 7.0%, yet we showed a growth of 23.5%. We have solid relationships with clients in the mining, manufacturing and agricultural sectors which will give us the perfect spring board to produce solid growth and revenue once the situation returns to some sort of normality.

MALAWI

We have experienced fantastic growth in the market over the past six months; this is due to a renewed focus on the market. Therehas been a great deal of interest shown in Malawi’s natural resources from large mining houses. There are some substantial projects planned for the coming years and with our knowledge, energy, and infrastructure, the future looks very promising for BSI in Malawi.

ZAMBIA

Our business has grown significantly off the back of the commodities boom and particularly in the copper mines where we are benefiting from our strong brand presence on the ground. Our focus over the past few years has been on providing an excellentsteel procurement service directly to various mines and indirectly via the extensive mine support industries network. In the southern province including Lusaka we have also been and continue to be heavily involved in new projects which are predominantly linked directly or indirectly to the agricultural sector. We are also well networked with the numerous aid fundedprojects.

EXPORTS REVENUE CONTRIBUTION TO THE GROUP

Joint Chief Executive

BSI STEEL EXPORTS

PAUL ARNOTT

Joint Chief Executive

BSI STEEL EXPORTS

CRAIG LOTZE

EXPORTS: BSi STEEL EXPORTS, BSi STEEL ZAMBIA

DIVISIONAL REVIEW

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A strategic decision to stock up the branches and try and cushion both the stock shortages and the impact of rising prices has paid dividends in an increased margin and turnover.

In terms of tonnage Lusaka grew by 13% and Kitwe grew by 26% over the previous fiscal. This growth has been attributed to a more focused approach to quality business and a growing reputation as “can do” suppliers in the markets. Our investment in quality staff has also paid dividends through higher outputs and a more customer focused approach.

The Zambian operations are recognised as leaders in customer service and professionalism.

The economic outlook for the country is still positive and the commodity prices have remained stable therefore the mines are still investing heavily, with new mines planned and coming on stream in the coming months.

DRC

As with Zambia our market focus in DRC is predominately linked to the rehabilitation and growth of the mining sector in the Katanga province where there are some exciting projects under way. We are well networked directly and via our local offices in Lubumbashi and Kolwezi and as such are well positioned to continue to provide our procurement service to the projects. Lubumbashi has seen exceptional growth once again and this has been reinforced by the addition of a new merchant base in Kolwezi. Whilst the project is still in its infancy it has certainly exceeded expectations and we believe that it will contribute significantly to the growth of BSi in the Katanga region of the DRC. Intensive mining rehabilitation is still the order of the day in Katanga and there are a number of projects on the go. BSI is aligning itself with these projects and hopes to provide a professional service based on JIT and volume deals.

The recruitment of more top quality staff for the branches is underway and we hope that the addition of these staff will further enhance our growing reputation in these regions.

We anticipate further growth throughout the coming year in line with the commodity boom and our increased service levels through the development of the Kliprivier project which once completed will add volume to our throughput ability and group stocking opportunities.

THE FUTURE

Even with the current supply problems and the ever volatile and unpredictable African markets, the future looks very positive. Our new premises at Kliprivier will see all the branches, exports and processing consolidated under one roof. This will go a long way to giving us the tools to improve on our logistics and general service delivery to our clients and as such grow our market share.

Our new computer systems will streamline our administration by avoiding unnecessary duplications and providing more accurate information to enable us to ultimately enhance our service to our clients in the region.

Once in Kliprivier we plan to open new markets based in Africa. This will be achieved by employing the correct staff and remaining focused on our commitment to providing a reliable service , thereby staying ahead of the competition.

EXPORTS PROFIT FROM OPERATIONS


Director: BSI STEEL

OVERLAND AFRICA

DAVID GALE

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INTRODUCTION

BSI is committed to addressing the challenges that are faced by responsible companies within South Africa to effect social andeconomic transformation to make for a better future for all stakeholders. In order to achieve such goals it is important to monitor how sustainable our initiatives are with regard to social and economic performance within the broader South African economy.

RECRUITMENT AND SELECTION

The company prides itself on a rigorous recruitment process undertaken in conjunction with preferred recruitment agencies alignedto the group’s vision and corporate culture. We make use of panel interviews, structured interview questionnaires, face to facereference checks and further analysis of shortlisted candidate’s behavioral/job suitability with the use of scientifically validated assessment tools. Every attempt is made to match potential recruits to the job function as well as to the culture of the business.

EMPLOYMENT EQUITY

Our employment equity plan was originally formulated in 2000 and has been continually modified to reflect accurate current demographic profiles, as well as to take into account the changing dynamics within the company. We have an Employment Equity Committee which sits once a quarter to give feedback on the progress made towards the EE Plan targets as well as to discuss anyissues arising in the workplace which are centered around employment equity. Employment Equity candidates are given a preferential weighting upon interview to further assist the company with meeting predetermined EE targets. One of the targets forthe coming year is to recruit black disabled employees in order to improve our representation of the South African demographic.

SUSTAINABILITY

“BSI IS PASSIONATE ABOUT ITS COMMITMENT TO RECRUIT AND RETAIN THE MOST TALENTED AND SKILLED INDIVIDUALS AND TO FURTHER TRAIN AND DEVELOP THESE INDIVIDUALS TO REACH THEIR FULL POTENTIAL AND PUT THEM ON A PLATFORM TO SEIZE OPPORTUNITIES THAT COME THEIR WAY TO GROW THEIR CAREERS WITHIN THE GROUP”

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BROAD BASED BLACK ECONOMIC EMPOWERMENT

BSI is fully committed to Broad Based Black Economic Empowerment and has tabled a formal BBBEE strategy to ensure that over the next three years we progressively move up the BBBEE scorecard to reach our target of Level 4. The company understands that in order to uplift SA and its people, as well as to remain competitive and preserve the company’s current markets, it needs to invest into BBBEE initiatives.

The Group is preparing to undertake its first formal BBBEE scorecard rating in August/September 2008. We have laid the foundation for a smooth rating process over the last year by having already conducted an internal BBBEE audit to ensure that weare strategically focused on building our BBBEE scorecard in a sustainable manner.

OWNERSHIP

Vunani Capital (Pty) Limited currently owns a 7% stake in BSi and our intention is to secure additional black ownership, with due cognizance to the adjusted recognition for gender weighting, prior to our formal BBBEE rating in July/August 2008.

Group Hu-man Re-sources

Director Group Human Resourses Director

Chantal Lombaard

Group Human Resourses Director

Chantal Lombaard

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MANAGEMENT CONTROL

It has taken BSI over two decades to develop the synergistic functioning of the current management structure of highly talentedindividuals. As such the company has recognised that change cannot occur overnight without negative impact on the company. We have therefore committed that through natural attrition and future growth opportunities the inclusion of further black individuals onto the management team will be of utmost importance.

SUSTAINABILITY (cont)

SKILLS DEVELOPMENT

In order to remain competitive, stay abreast with current technology and to be seen as an employer of choice, BSI has recognised the importance of strategically aligned skills development and training for all our staff. Of primary focus within our training and development strategy is to ensure that we secure the advancement of staff so that they may reach for their goals and develop within the company over a long term career built with BSI. BSI has an extremely committed and actively involved Skills Development Committee, which meets once a quarter to review all training initiatives and to plan for upcoming training priorityareas. This committee is reflective of the diversity of our staff and has input from every level of the business from elementarylabour right through to senior management.

Much of our training budget is spent on the training of black staff, training and development of our leadership team and on training staff in the lower echelons of the business who need basic education and skills based training in order to improve their quality of life.

ENTERPRISE DEVELOPMENT

The Group subscribes to assisting with the development of SMME’s and other micro enterprises if South Africa is to become a strong global player.

As part of our BBBEE strategy we are currently investigating the possibility of assisting the PMB Business Support Centre, headed by Chairman Reginald Nyandeni, in their endeavors to guide, support and develop emerging and prospective entrepreneurs so that they too can contribute meaningfully and sustainably to the growth of our economy. In this way we can play a direct and measurable part in developing emerging black business in our local community

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ENTERPRISE DEVELOPMENT (cont)

BSI’s procurement policy ensures balance between applying commercial factors and BBBEE strategy to procurement decisions. BSI is committed to purchasing as much of its raw material / finished goods product from source as possible. Procurement focus is onbest price from source supplier, which is defined as a mill or primary processor. The purchase of services and products for consumption is evaluated with a strong focus of maximising BBBEE rating out of this group of providers.

BSi is committed to establishing a platform for our supplier base to assist in providing a sustainable development plan to achieve and maintain favorable BEE scores in the medium term. We are aiming for our generic supplier base to score between levels 4 to 6 in the short to medium term, realizing that BSi has a joint responsibility to assist suppliers in the development of their own sustainable BBBEE strategy.

In addition, BSi recognizes that the following 3 categories of suppliers needs a separate focus :

Qualifying Small Enterprises. BSi would encourage a 3 year development plan for relevant suppliers in this area to attain a score of level 6 and up.

Exempted Micro-Enterprise. The support of EME’s is encouraged within all branches that make procurement decisions at any level.

Black owned Enterprise. BSi must actively seek out sustainable procurement sources that conform to this ownership criteria.

CORPORATE SOCIAL INVESTMENT

For many years BSI has supported the less privileged within our trading commu-nities. As the company has grown, so has the need to formulate a more formal CSI policy in terms of how BSI can best support the needs of the under privileged people living in these communities. We are currently speaking to Greater Good SA to formalize a sound CSI policy and to identify sustainable, measurable target beneficiaries.

Over the last year the company has actively supported the following key beneficiaries:

Reach Out With Love – Food Donation into France Township, PMB PMB Community Chest Donation to June Nichols School and the Thshepong Care Centre Jacob’s Well Ministries SSVP St Martin’s Feeding Programme Obededom Children’s Ministries PMB Salvation Army Rena Le Rona Feeding of Aids Orphans in JHB

Group Supply

Chain Director

COLLEEN COMMONS

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CSI policy in terms of how BSI can best support the needs of the under

Over the last year the company has actively supported the following key

CSI policy in terms of how BSI can best support the needs of the under

Over the last year the company has actively supported the following key

Group SupplyChain Director

COLLEEN COMMONS

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CORPORATE GOVERNANCE

BSI Listed on the AltX of the JSE on 24 October 2007. The board of directors (“the board”) subscribe to the principles contained in the code of corporate practices and conduct as recommended by the 2002 King Report on Corporate Governance for South Africa(King II). The board strives to continually enhance operational and corporate practices to ensure compliance with the King II and the JSE listing requirements.

THE BOARD

At the year end, the board consisted of three executive and two independent non- executive directors and was chaired by the Chairman and Joint Group CEO W L Battershill. In terms of the listing requirements of the JSE for AltX companies, the separation of the Chairman and the Chief executive officer is not required. The non- executive directors hold shares directly and indirectly in the company, but neither have the ability to control or significantly influence management. BSI believes the non-executives to be high-calibre individuals and their views carry significant weight in the board’s decisions. The responsibilities of the executive and non-executive directors are strictly separated to ensure that no director can exercise unfettered powers of decision making.

Particulars of the composition of the board of directors and board committees appears on pages 12 and 13 of this report.

The Board operates in terms of an approved charter, and its primary powers and responsibilities include:

Retain full and effective control of the company Give strategic direction to the company Identify and regularly monitor keys risk areas and key performance indicators of the business Regularly review processes and procedures to ensure effectiveness of internal systems of control and accept responsibility forthe total process of risk management Ensure that the company communicates with shareholders and relevant stakeholders openly and promptly.

The board meets quarterly and ad-hoc meetings may be convened if necessary.

The following is a schedule of the number of meetings held and attended by the directors for the period 24 October 2007 to 31 March 2008. The number in brackets denotes the number of meetings attended.

*Non-Executive

# Chairman Audit and Risk Committee

^Invitee to committee meetings

Directors Board Meetings Audit Committee Meetings

Risk Committee Meetings

Remuneration Com-mittee Meetings

WL Battershill (Chairman)

1(1) 2(2)^ 1(1) 2(2)

E Dube * 1(0) 2(1) 1(0)

GDG Mackenzie 1(1) 2(1)^ 1(1) 2(2)

NG Payne*# 1(1) 2(2) 1(1)

JR Waller (Financial Director)

1(1) 2(2)^ 1(1) 2(2)

RG Lewis (appointed 12.05.08)

2(2)

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The Board is committed to relevant and timeous reporting to all

shareholders whilst ensuring that the Group’s business is conducted in

the highest standard.

SHARE DEALINGS

Directors are required to obtain prior approval from the Chairman before dealing in the company’s shares. The company secretary, together with the Designated Advisor ensure that share dealings are reported on SENS. In addition, all directors and management with access to financial information and other price sensitive information are prohibited from dealing in BSI shares during closed periods.

SELF EVALUATION

It is anticipated that the board will conduct the first self-evaluation exercise during the current financial year.

SUCCESSION PLANNING

Mentorships programmes are in place where deemed necessary, including the post of Chief Executive Officer.

APPOINTMENTS TO THE BOARD

The Chairman in consultation with the non-executive directors identifies suitable candidates and makes recommendations to the board. All new directors are required to attend the AltX Directors Induction programme.

COMPANY SECTRETARY

All directors have access to the advice and services of the Company Secretary. The Company Secretary is responsible for ensuring that the board procedures and applicable rules and regulation are complied with. Where necessary the Company Secretary will involve the Designated Advisor and other experts in this regard.

BOARD COMMITTEES

Audit committee

The audit committee consists of the two independent non–executive directors and the Designated Advisor and is chaired by NG Payne. The audit committee meets quarterly and ad-hoc meetings are convened when necessary.

Responsibilities of the Audit Committee include:

Appointment of the external auditor Evaluate the independence and effectiveness of the external auditors and consider any non-audit services rendered by such auditors as to whether this substantially impairs their independence Review the interim and annual financial statements as well as any announcement of results Ensure that the financial statements are prepared based on appropriate accounting policies consistently applied Review the effectiveness of management information, the annual audit, and the systems of internal control .

The audit committee reports to the board on these matters.

Stephen Hackett

Company secretary

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CORPORATE GOVERNANCE (cont)

BOARD COMMITTEES (cont)

Risk Committee

The risk committee consist of the CEO, Financial Director, Company Secretary and is chaired by independent non-executive director NG Payne.

Responsibilities of the Risk committee include:

To ensure that the company has implemented an effective ongoing process to identify risk, to measure its potential impact, and to activate what is necessary to pro-actively manage these risks To ensure that a systematic assessment of the processes and outcomes surrounding key risks is undertaken at least annually To review processes and procedures to ensure the effectiveness of internal systems of control To review key risk areas and key performance indicators, and monitor these factors

The risk committee reports to the board on these matters.

Remuneration Committee

See Remuneration Report on Page 35 .

ACCOUNTING AND AUDITING

External Audit

The external auditors provide an independent assessment of the group’s internal financial controls and express an independent opinion on the annual financial statements. The preparation of the annual financial statements is the responsibility of the directors. The external auditors have unrestricted access to the audit committee and its chairman.

During the year under review, the external auditors BDO Spencer Steward (Midlands) Inc merged with Pricewaterhousecoopers. PWC had an independence issue due to other services being provided by them to the group. BDO Spencer Steward (Midlands) Inc resigned as external auditors with from 1 February 2008 and Deloitte and Touche were appointed from the same date.

Internal Audit

Having taken the size of the group into account, the directors have deemed a dedicated internal audit function to be unnecessary.

Internal Control

The company’s internal control systems are designed to provide reasonable but not absolute assurance as to the integrity of theannual financial statements and to ensure the safeguarding of the company’s assets.

Internal control procedures are monitored and reviewed by the Group Financial Director and management. The directors are not aware of any material breakdown in the internal controls during the period under review.

Management Reporting

The group has established management reporting disciplines which includes the preparation of annual business plans including strategic and tactical policies by all operating entities. Monthly results are compared to the business plans and prior year results. Cash flow forecasts and working capital requirements are reviewed on an ongoing basis.

STAKEHOLDER COMMUNICATION

The company is committed to open and timeous communication with all stakeholders, including a newsletter to all staff. Company announcements and financial results are published on SENS and also available on the company’s website.

ETHICS

Directors and employees are required to maintain the highest ethical standards in all business practices. It is anticipated that a formal Code of Ethics will be drawn up during the current financial year.

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The Company has set up a Remuneration Committee; an executive committee with approved Terms of Reference. All decisions taken are communicated to the Board at the earliest meeting following the Remuneration Committee meeting. The Committee ensures that the company's directors and senior executives are fairly rewarded for their individual contributions to the company's overall performance. In addition, it determines an acceptable and fair annual salary increase percentage for all permanent staff and also reviews performance incentive schemes and other benefits from time to time.

The Remuneration Committee is chaired by Dr. Richard Lewis, a non-executive director (alternate), who is a strategy and human resources specialist. The current members are:

Dr Richard Lewis

Mr William Battershill

Mr Grant Mackenzie

Mr James Waller

Ms Chantal Lombard

The remuneration strategy is aimed at ensuring that levels of remuneration are sufficient to attract, retain and motivate executives, and where appropriate, aimed at aligning executives’ interests with those of shareholders. Consequently, an element of the strategy is aimed at ensuring that the performance-related elements of the executives’ remuneration should constitute a growing portion of total remuneration.

The Remuneration Committee recognises its responsibility for ensuring due compliance with the King Code of Corporate Practice and Conduct in respect of remuneration and related matters, and for reporting thereon to the Board.

The BSI share incentive scheme provides an opportunity to Directors, management and certain key staff members to purchase shares in the company at the beginning of each fiscal year. The strike price is based on the weighted average price for the month of March. The shares are issued by the company to the BSi Share Incentive Trust at the strike price and the Trust provides an interest bearing loan to the participants, which is repayable at certain times over a four year period.

During the year 1 920 232 shares were issued to the BSI share incentive scheme trust. The BSI share price had fallen well below the strike price by March 2008 and a decision was taken by the Trustees, with unanimous agreement of the participants, to cancel the sale of these shares.

REMUNERATION REPORT

Remuneration Committee Chairman

RICHARD LEWIS

SHARE INCENTIVE SCHEME

37

The directors are required by the Companies Act of South Africa, 1973, to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in thisreport. 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, in conformity withInternational Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and 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 endeavours 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 for the year to 31 March 2009 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 37.

The annual financial statements set out on pages 38 to 97, which have been prepared on the going concern basis, were approved by the board on 29 May 2008 and were signed on its behalf by:

___________________________ __________________________

WL Battershill JR Waller

Pietermaritzburg

29 May 2008

I certify, to the best of my knowledge and belief, that the company has, in respect of the period under review, lodged with theRegistrar of Companies all returns that are required by a Public Company, and that all returns are true, correct and up to date.

___________________________

SJ Hackett

Company Secretary

Pietermaritzburg

29 May 2008

DIRECTORS’ RESPONSIBILITY REPORT

SECRETARIAL CERTIFICATION

36

36

TO THE MEMBERS OF BSI (SA) LIMITED

We have audited the annual financial statements and the group annual financial statements of BSI (SA) Limited, which comprise the directors’ report, the balance sheet and the consolidated balance sheet at 31 March 2008, the income statement and the consolidated income statement, the statement of changes in equity and the consolidated statement of changes in equity and cash flow statement and the consolidated cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 38to 97.

Directors’ Responsibility for the Financial Statements

The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these 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 performthe audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of thefinancial 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 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 internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by the directors, as well as evaluating the overall presentation of the 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 financial statements present fairly, in all material respects, the financial position of the company and of the group at 31 March 2008, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.

Deloitte and Touche

Registered Auditors

Per C A Sagar Pietermaritzburg 181 Hoosen Haffejee Street Partner 29 May 2008 Pietermaritzburg

National Executive: GG Gelink (Chief Executive), AE Swiegers (Chief Operating Officer), GM Pinnock (Audit), DL Kennedy (Tax & Legal and Financial Advisory), L Geeringh (Consulting), L Bam (Corporate Finance), CR Beukman (Finance), TJ Brown (Clients & Markets), NT Mtoba (Chairman of the Board).

Regional Leader: GC Brazier

Pietermaritzburg

29 May 2008

INDEPENDENT AUDITORS REPORT

37

38

For the year ended 31 March 2008

The directors submit their report for the year ended 31 March 2008.

1. Review of activities

Main business and operations

The group is engaged in sale, processing and distribution of steel and allied products and operates principally in South Africa, Zambia and the Democratic Republic of Congo.

During the year the group acquired businesses operating in Zambia and the Democratic Republic of Congo.

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

Net profit of the group was R 99 367 479 (2007: profit R33 529 582), after taxation of R34 166 758 (2007: R14 239 367).

2. Going concern

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

3. Post balance sheet events

The directors are not aware of any material matter or circumstance arising since the end of the financial year and the date of this report.

4. Authorised and issued share capital

Refer to note 9 of this report and note 18 of the annual financial statements for details of the changes in the above during the year.

5. Dividends

In line with point 12.3.1 of the prospectus, the intention of the company is to reconsider its dividend policy once the company has achieved mature growth and periodically thereafter to take account of prevailing circumstances and future cash requirements.

No dividends were declared or paid to shareholders during the year. (2007: R1 942 221)

6. Directors

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

Name Nationality Changes

WL Battershill South African

JR Waller South African

C Parry South African Resigned 26 September 2007

IS Colenbrander South African Resigned 06 June 2007

GDG Mackenzie South African Appointed 12 July 2007

NG Payne (Non-Executive) South African Appointed 14 September 2007

EG Dube (Non-Executive) South African Appointed 10 September 2007

Resigned 13 June 2008

DIRECTORS’ REPORT

39

7. Secretary

The secretary of the company is Stephen Hackett of:

Business address: Eden Park Drive Murrayfield Park Mkondeni Pietermaritzburg 3201

Postal address: P.O. Box 101096 Scottsville Pietermaritzburg 3209

8. Interest in subsidiaries

Details of the company’s investment in subsidiaries are set out in note 8.

9. Special resolutions

At a general meeting of the shareholders on 30 August 2007 the following resolutions were approved:

the group converted its 200 000 divisional shares having a par value of 1 cent each into 200 000 ordinary shares having a par value of 1 cent each. It was further resolved that the Group sub-divide its authorised share capital of 1 000 000 ordinary shares of 1 cent each into 1 000 000 000 ordinary shares of 0.001 cent each;

the Company be converted from being a private company with limited liability to being a public company with limited liability;

the Company adopt the amended Articles of Association which allowed it to be listed on the AltX of the JSE Limited;

the directors of the company be authorised , until the next annual general meeting, to procure that the company or any subsidiary of the company acquire shares of the company, subject to the Listing requirements of the JSE Limited.

10. Auditors

Deloitte and Touche was appointed in accordance with section 270 (2) of the Companies Act on 01 February 2008.

11. Directors’ interest in shares

Since the year end N G Payne has purchased a further 3 693 824 shares bringing his total holding to 5 300 000 shares and W L Battershill has purchased a further 80 000 shares bringing his total directly beneficial holding to 654 914 shares.

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Directly beneficial NG Payne 1 606 176 - 1 606 176 -

WL Battershill 574 914 - 574 914 -

GDG Mackenzie 11 437 434 50 11 437 434 50

JR Waller 3 000 000 - 3 000 000 -

Indirectly beneficial

E Dube 50 240 000 - 50 240 000 - WL Battershill 328 727 332 850 328 727 332 850

GDG Mackenzie 84 949 740 - 84 949 740 -

JR Waller 8 967 178 20 8 967 178 20

C Parry - 80 - 80

Total 489 502 774 1 000 489 502 774 1 000

Group Chief Financial

Officer

JAMES WALLER

STEADY GROWTH HAS FIRMLY PLACED THE GROUP TO BE ON TRACK FOR ITS FIVE YEAR VISION OF 700,000 TONS and R6 BILLION OF REVENUE BY MARCH 2013

40

BALANCE SHEETS as at 31 March 2008

GROUP COMPANY Notes

2008

R

Restated

2007

R

2008

R

2007

RAssets Non-current assets Property, plant and equipment 5 103 082 234 38 911 026 26 507 692 846 378 Goodwill 6 13 442 080 3 772 862 - - Intangible assets 7 1 527 489 188 445 1 527 497 181 480 Investments in subsidiaries 8 - - 59 699 153 12 464 818 Other financial assets 11 - - 1 920 232 -

Deferred tax 13 2 859 549 5 255 452 - - 120 911 352 48 127 785 89 654 574 13 492 676

Current assets Inventories 14 188 440 437 90 532 635 134 155 794 826 485 Loans to group companies 9 - - 27 915 988 81 060 023 Other financial assets 11 837 445 - 837 445 - Current tax receivable 1 337 228 189 427 - - Trade and other receivables 15 380 314 204 185 755 157 294 226 160 17 012 596 Cash and cash equivalents 16 26 235 946 17 112 017 15 073 425 9 293 815 597 165 260 293 589 236 472 208 812 108 192 919 Non-current assets held for sale 17 - 3 000 000 - -

Total assets 718 076 612 344 717 021 561 863 386 121 685 595 Equity and Liabilities

Capital and reserves Share capital and share premium 18 124 301 168 1 000 126 221 396 1 000 Non distributable reserves 12 373 001 1 473 616 - 295 360 Accumulated profit 160 404 993 60 521 785 50 878 606 18 481 248 Attributable to equity holders of the company 297 079 162 61 996 401 177 100 002 18 777 608

Minority interest - 18 621 575 - -

297 079 162 80 617 976 177 100 002 18 777 608 Liabilities Non-current liabilities Other financial liabilities 21 46 254 674 16 282 022 15 763 175 - Deferred tax 13 6 101 235 2 141 474 214 934 190 202 52 355 909 18 423 496 15 978 109 190 202 Current liabilities Loans from group companies 9 - - - 15 602 697 Loans from shareholders 10 - 8 357 567 - 7 915 317 Other financial liabilities 21 13 712 898 352 415 8 626 535 33 382 Current tax payable 23 668 998 9 522 527 8 446 837 297 245 Finance lease obligation 22 1 989 400 - - - Trade and other payables 24 188 314 635 103 207 878 245 185 941 78 858 233 Provisions 23 1 202 211 1 801 625 1 202 211 - Bank overdraft 16 139 753 399 122 433 537 105 323 751 10 911 368 641 541 245 675 549 368 785 275 102 717 785 Total liabilities 420 997 450 264 099 045 384 763 384 102 907 987

Total equity and liabilities 718 076 612 344 717 021 561 863 386 121 685 595

41

INCOME STATEMENTS for the year ended 31 March 2008

GROUP COMPANY

Notes

2008

R

Restated

2007

R

2008

R

2007

R

Revenue 26 1 432 302 478 882 138 134 404 438 359 2 498 048

Cost of sales 27 (1 135 268 482) (757 248 817) (316 645 436) (2 013 425)

Gross profit 297 033 996 124 889 317 87 792 923 484 623 Other income 3 322 951 4 557 663 3 164 454 2 712 119

Operating expenses (145 923 374) (71 613 047) (45 586 829) (4 638 631)

Operating profit/(loss) 28 154 433 573 57 833 933 45 370 548 (1 441 889)

Investment income 29 1 487 349 1 226 651 11 885 662 7 962 517

Fair value adjustments 30 - 1 688 207 - -

Finance costs 31 (22 386 685) (12 979 842) (12 166 653) (3 764 995)

Profit before taxation 133 534 237 47 768 949 45 089 557 2 755 633

Taxation 32 (34 166 758) (14 239 367) (12 987 559) (347 258)

Profit for the year 99 367 479 33 529 582 32 101 998 2 408 375

Attributable to:

Equity holders of the parent 99 367 479 25 038 911 32 101 998 2 408 375

Minority interest - 8 490 671 - -

99 367 479 33 529 582 32 101 998 2 408 375

Earnings per share (cents) 33 15.05 4.07 - -

42

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45

CASH FLOW STATEMENTS for the year ended 31 March 2008

GROUP COMPANY

Notes 2008

R

Restated

2007

R

2008

R

2007

R

OPERATING ACTIVITIES

Cash receipts from customers 1 253 161 898 - 137 080 418 -

Cash paid to suppliers and employees (1 316 975 669) 5 000 789 (335 157 124) 25 224 503

Cash (used in) / generated from operations 34 (63 813 771) 5 000 789 (198 076 706) 25 224 503

Interest income 1 487 349 1 194 150 10 758 995 5 550 017

Dividend received - 32 501 1 126 667 2 412 500

Finance costs (20 403 683) (12 347 761) (11 803 549) (3 764 995)

Taxation paid 35 (18 689 908) (9 140 764) (4 773 395) (594 230)

Cash flows from non-current assets held for sale 36 3 000 000 - - -

Net cashflows (used in) / from operating activities (98 420 013) (15 261 085) (202 767 988) 28 827 795

INVESTING ACTIVITES

Purchase of property, plant and equipment 5 (52 685 450) (26 546 345) (26 990 523) (198 961)

Proceeds on disposal of property, plant and equipment 4 908 033 2 842 458 582 032 385 500

Acquisition of intangible assets 7 (1 499 379) (81 698) (1 502 662) (81 698)

Proceeds on disposal of other intangible assets 97 735 223 289 97 733 143 067

Acquisition of subsidiaries 37 (22 304 686) - (22 304 686) -

Purchase of minority interest - - (24 929 649) -

Proceeds from loans from group companies - - 37 541 338 -

Repayment of loans from group companies - - - (16 339 889)

Acquisition of financial assets - - (1 920 232) -

Disposal of financial assets 300 000 600 000 - 600 000

Net cashflows used in investing activities (71 183 747) (22 962 296) (39 426 649) (15 491 981)

46

CASH FLOW STATEMENTS (cont) for the year ended 31 March 2008

GROUP COMPANY

Notes 2008

R

Restated

2007

R

2008

R

2007

R

FINANCING ACTIVITES

Proceeds on share issue 18 126 220 396 - 126 220 396 -

Reduction of share capital – treasury shares 18 (1 920 232) - - -

Proceeds from other financial liabilities - 4 000 000 - -

Proceeds/(repayment) of other financial liabilities 43 333 135 (7 538 667) 24 356 328 (542 957)

Repayment of shareholders loan (8 357 567) (3 355 350) (7 915 317) 6 518 900

Finance lease proceeds 6 688 11 481 101 - -

Dividends paid - (1 942 222) - (1 116 667)

Proceeds from finance leases 1 989 400 - - -

Net cashflows from financing activities 161 271 820 2 644 862 142 661 407 4 859 276

Net (decrease) / increase in cash and cash equivalents (8 331 940) (35 578 519) (99 533 230) 18 195 090

Cash and cash equivalents at the beginning of the year (105 321 520) (69 743 001) 9 282 904 (8 912 186)

Effect of exchange rate movement on cash balances 136 007 - - -

Total cash and cash equivalents at end of year 16 (113 517 453) (105 321 520) (90 250 326) 9 282 904

47

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2008

ACCOUNTING POLICIES

1.1 Presentation of annual financial statements

The annual financial statements have been prepared in accordance with International Financial Reporting Standards, the interpretation adopted by the International Accounting Standards Board ("IASB), and the Companies Act of South Africa, 1973. The annual financial statements have been prepared on the historical cost basis, as modified by the revaluation of land and buildings, available for sale financial assets and financial liabilities at fair value through profit andloss. They incorporate the principal accounting policies set out below, which have been consistently applied.

Standards and interpretations effective in the current period:

In the current year, the group has adopted:

•IFRS 7 Financial Instruments: Disclosures

- Effective for annual reporting periods beginning on or after 1 January 2007; and

•Consequential amendments to IAS 1 Presentation of Financial Statements.

The impact of the adoption of IFRS 7 and the changes to IAS 1 has been to expand the disclosures provided in these financial statements regarding the group’s financial instruments and management of capital.

Four interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current period. These are:

•IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies;

•IFRIC 8 Scope of IFRS 2;

•IFRIC 9 Reassessment of Embedded Derivatives; and

•IFRIC 10 Interim Financial Reporting and Impairment.

The adoption of these interpretations has not led to any changes in the group’s accounting policies.

At the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective:

•IFRS 8 Operating Segments

-Effective for annual periods beginning on or after 1 January 2009;

•IAS 23 (Revised) Borrowing costs

- Effective for annual periods beginning on or after 1 January 2009;

•IFRIC 11 IFRS 2 Group and Treasury Share Transactions

- Effective for annual periods beginning on or after 1 March 2007;

•IFRIC 12 Service Concession Arrangements

- Effective for annual periods beginning on or after 1 January 2008;

•IFRIC 13 Customer Loyalty Programmes

- Effective for annual periods beginning on or after 1 July 2008; and

•IFRIC 14/IAS 19 The limit on Defined Benefit Assets Minimum Funding Requirements

- Effective for annual periods beginning on or after 1 January 2008.

Management is in the process of assessing the impact of the new and revised standards.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS (cont) for the year ended 31 March 2008

1. ACCOUNTING POLICIES (cont)

1.2 Significant judgements

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

Trade receivables and loans and receivables

The group assesses its trade receivables and loans and receivables for impairment at each balance sheet date. In determining whether an impairment loss should be recorded in the income statement, the group makes judgements as to whether there is observable data, on an individual basis, indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Allowance for slow moving, damaged and obsolete stock

An allowance for stock is held in order to write stock down to the lower of cost or net realisable value. Management reviews the stock ageing report regularly, with the policy that stock should always be sold. There are limited circumstances where stock is sold below cost. Stock obsolescence is reviewed on a stock item basis with any unrealisable stock being written off in the relevant period.

Fair value estimation

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.

Impairment testing

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values. These calculations require the use of estimates and assumptions.

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. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assts are inherently uncertain and could materially change over time.

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 23 - Provisions.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS(cont) for the year ended 31 March 2008


1.2 Significant judgements (cont)

Contingent provisions on business combinations

Contingent liabilities acquired in a business combination are initially measured at fair value at the date of acquisition.

At subsequent reporting dates, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation recognised in accordance with IAS 18 Revenue.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

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 balance sheet date could be impacted.

Property, plant and equipment

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment.

Day-to-day expenses incurred on property, plant and equipment are expensed directly into profit or loss for the period. Maintenance that meets the recognition criteria is capitalised.

Property, plant and equipment, except for owner-occupied property, is carried at cost less accumulated depreciation and any impairment losses.

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1.3 Property, plant and equipment (cont)

Property is carried at revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. 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 balance sheet date. Any increase in a property’s carrying amount, as a result of a revaluation, is credited directly to equity in the revaluation reserve. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. Any decrease in a property’s carrying amount, as a result of a revaluation, is recognised in profit or loss in the current period. The decrease is debited directly to equity in the revaluation reserve to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

Item Average useful life

Land Indefinite

Plant and machinery 1 to 12 years

Furniture and fixtures 4 years

Motor vehicles 1 to 5 years

Office equipment 4 years

IT equipment 6 years

The residual value and the useful life of each asset are reviewed at each financial period-end.

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 shall be 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 derecognition 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 derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.4 Goodwill

Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the group's interest of the net fair value of the identifiable assets, liabilities and contingent liabilities at the date of acquisition.

Goodwill is initially measured at cost and is subsequently measured at cost less any accumulated impairment loss.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

The excess of the company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is immediately recognised in profit or loss.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss.

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1.5 Intangible assets

Intangible assets acquired are initially recognised at cost and thereafter reported at cost less accumulated amortisation and accumulated impairment loss.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets. For all other intangible assets amortisation is provided on a straight line basis over their useful life, and tested for impairment if there is an indication that they may be impaired.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows

Item Useful life

Computer software 2 to 10 years

1.6 Investments in subsidiaries

Consolidated annual financial statements

The consolidated annual financial statements include those of the holding company and its subsidiaries. The results of the subsidiaries are included from the effective date of acquisition or up to the effective date of disposal as appropriate.

On acquisition the group recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value,except for assets classified as held-for-sale, which are recognised at fair value less costs to sell. Any excess of the cost ofacquisition over the fair values of the identifiable assets acquired is recognised as goodwill.

Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired, such as a discount on acquisition, is credited to profit and loss in the period of acquisition. The interest of minority shareholders is stated atthe minority’s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the parent. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the group.

All material inter-company balances and transactions are eliminated.

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1. ACCOUNTING POLICIES (cont) 1.7 Financial instruments

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are initially measured at cost, which includes transaction costs, when the group becomes party to the contractual arrangement. Subsequent measurement of financial instruments is set out below.

Financial assets

Financial assets of the group are classified into the following categories:

- financial assts at fair value through profit or loss (FV TPL); and

- loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of original recognition.

Financial assets at FVTPL

Financial assets are classified as FVTPL where the financial asset is designated as FVTPL. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss.

Loans and receivables

Trade receivables, loans and other receivables that have fixed and determinable payments, not quoted on an active market, are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest rate method, less any impairment.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the financial assets original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

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1.7 Financial instruments (cont)

Derecognition of financial assets

The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities

Financial liabilities other than derivatives are recognised at their original debt value less principal payments.

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

Financial liabilities at FVTPL

Financial liabilities are classified as FVTPL where the financial liability is either held for trading or it is designated as FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Derivative financial instruments

The group enters into the following derivative financial instruments (forward exchange contracts) in order to manage its exposure to interest rate and foreign exchange rate risk which have a cash flow impact.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently measured to their fair value at each balance sheet date. The resultant gain or loss is recognised in profit or loss immediately.

Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.

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1.7 Financial instruments (cont)

Investments

Investments in subsidiaries are recorded at cost, less impairments. Loans and finance leases receivables are recorded at amortised cost. Other investments are shown at fair value and gains and losses are recognised in income.

Trade and other receivables

Short duration receivables with no stated interest rate are measured at original invoice amount less provision for doubtful debts.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are measured at cost which is equivalent to fair value.

Equity

Equity instruments issued by the company are recorded at the proceeds received, net of direct costs.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs.

Other financial liabilities are measured initially at cost, which is equivalent to fair value.

1.8 Taxation

Current tax

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, directly in equity, or a business combination.

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 to equity.

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 latest assessments and tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

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1. ACCOUNTING POLICIES (cont) 1.8 Taxation (cont)

Deferred tax

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:

- is not a business combination; and

- 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 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 and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits 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 balance sheet date.

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1.9 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.

Finance leases - lessor

The group recognises finance lease receivables on the balance sheet.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the group’s net investment in the finance lease.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the balance sheet at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

Any contingent rents are expensed in the period they are incurred.

1.10 Inventories

Inventories are measured at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects is assigned using specific identification of the individual costs.

The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for all inventories having a similar nature and use to the entity.

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

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1.11 Non-current assets held for sale (and) (disposal groups)

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction 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.

Non-current assets held for sale (or disposal group) are measured at the lower of its carrying amount and fair value less costs to sell.

A non-current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a disposalgroup classified as held for sale.

Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised in profit or loss.

1.12 Impairment of assets

The group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the group also:

tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment

annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during

the annual period and at the same time every period.

tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash- generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:

first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and

then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

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1. ACCOUNTING POLICIES (cont) 1.12 Impairment of (cont)

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets (other than goodwill) carried at cost less accumulated depreciation or amortisation is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.13 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

If the group reacquires its own equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those instruments are deducted from equity until the shares are cancelled or reissued. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s own equity instruments. Consideration paid or received shall be recognised directly in equity.

1.14 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 entitlement or, 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

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.

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1. ACCOUNTING POLICIES (cont)1.15 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.

After their initial recognition contingent liabilities 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 39.

1.16 Revenue

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; the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over 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.

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.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

Turnover comprises of sales to customers and services rendered to customers. Turnover is stated at the invoice amount and is exclusive of value added taxation.

Interest is recognised, in profit or loss, using the effective interest rate method. Royalties are recognised on the accrual basis in accordance with the substance of the relevant agreements. Dividends are recognised, in profit or loss, when the company’s right to receive payment has been established. Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

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1.17 Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

1.18 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.

1.19 Translation of foreign currencies

Functional and presentation currency

Items included in the annual financial statements of each of the group entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’).

The consolidated annual financial statements are presented in ‘Rand’ (‘R’), which is the Group's functional and presentation currency.

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1 ACCOUNTING POLICIES (cont)

1.9 Translation of foreign currencies (cont)

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rands, 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 each balance sheet date:

foreign currency monetary items are translated using the closing rate;

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 directly in equity, any exchange component of that gain or loss is recognised directly 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 Rands by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.

Investments in subsidiaries, joint ventures and associates

The results and financial position of a foreign operation are translated into the functional currency using the following procedures: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement item are translated at exchange rates at the dates of the transactions; and all resulting exchange differences are recognised as a separate component of equity.

Exchange differences arising on a monetary item that forms part of a net investment in a foreign operation are recognised initially in the translation reserve and recognised in profit or loss on disposal of the net investment.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation.

The cash flows of a foreign subsidiary are translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows.

1.20 Segment reporting

A business segment report is a group of assets and operations engaged in providing products of services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those segments operating in other economic environments.

For management purposes, the group is currently organised into three main segments, namely merchanting, trading and exporting.

This is the basis on which the group reports its primary segment information. The geographical split is a secondary segment, with the major geographical segments being South Africa and the balance of the African continent. Segment information is presented in Note 4.

1.21 Accounting for financial guarantee contracts

Financial guarantee contracts are accounted for in terms of IFRS 4 Insurance Contracts and consequently measured initially at cost and thereafter in accordance with IAS 37 Provision, contingent liabilities and contingent assets.

62


1. ACCOUNTING POLICIES (cont)1.22 Related parties

Parties are considered related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. The group enters into various related party transactions in the ordinary course of business. The terms and conditions of those related party transactions are no more favourable than those granted to third parties in arm's length transactions.

2. KEY SOURCES OF ESTIMATION UNCERTAINTY

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

The carrying amount of goodwill at the balance sheet date was R 13 442 080 (2007: R 3 772 862). No impairment losses were recognised. (2007: Nil).

Useful lives of property, plant and equipment

As described in 1.2 above, the Group reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. During the financial year, the directors considered the current useful lives appropriate. No changes were made.

3. RISK MANAGEMENT

3.1 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. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.

The group expects its foreign exchange contracts to hedge its exposure to foreign currency fluctuations. The group also purchases US Dollars on an ongoing basis to hedge its exposure. The balances arising on material transactions denominated in foreign currencies is immediately hedged through the use of foreign exchange contracts.

At 31 March 2008, if the currency had strengthened by 10% against the US dollar with all other variables held constant, post-tax profit for the year would have been R 2,842,000 (2007: R 575,930) higher, mainly as a result of foreign exchange gains/losses on translation of US dollar denominated trade receivables, financial assets at fair value through profit or loss, debt securities classified as available for sale and foreign exchange losses/gains on translation of US dollar denominated borrowings. 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 2,842,000 (2007: R 575,930) lower.

Profit is more sensitive to movement in Rand/US dollar exchange rates in 2008 than 2007 because of the increased amount of US dollar-denominated earnings.

63


3. RISK MANAGEMENT (cont)

3.1 Foreign exchange risk (cont)

2008 Amount in foreign currency purchased Forward exchange rate Maturity date

3 500 000 US$ 1USD = R7.8981 28 June 2008

2007

Prior year:

713 032US$ 1USD= R7.1043 02 April 2007

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

foreign exchange contracts to hedge foreign exchange exposure.

3.2 Price Risk

The Group is not exposed to commodity price risk.

GROUP COMPANY 2008

R

2007

R

2008

R

2007

R

Foreign currency exposure at balance sheet date

Liabilities

Current, USD 1 100 000 loan(2007:USD-) 8 626 535 - 8 626 535 -

Exchange rates used for conversion of foreign items were:

USD 8,1200 7,3049 8,1200 7,3049

Forward exchange contracts which relate to future commitments

Recognised in profit/(loss) for the year:

Foreign exchange variance 837 445 33 382 837 445 33 382

64



3.3 Interest rate risk

The company is exposed to interest rate risk through its cash and cash equivalents and interest bearing borrowings. Interest rate exposures are reviewed regularly. The group’s deposits, investments and all borrowing facilities are linked to the prime overdraft rate. The group’s policy is to manage interest rate risk so that fluctuations in variable interest rates do not have a material impact on the group’s profit or loss.

The group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies.

Interest rate profile of the group

Sensitivity analysis

At year-end the sensitivity to open to exposure of floating interest rates on the operating profit is as follows:

2008

+10% 2 647 716

-10% (2 647 716)

2007

+10% 1 817 500

-10% (1 817 500)

3.4 Credit risk

Credit risk is managed on a group basis.

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter- party.

Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis.

If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards.Credit guarantee insurance is purchased for all South African based trade and other receivables.

No financial assets were exposed to credit risk at year end. All group companies stand joint surety for each other for the banking facilities supplied by Nedbank Corporate. Refer to note 16 for additional details.

Financial instrument 2008 2007

Shareholders’ loans 12.50% - 12.50% 8 357 567

Cash in current banking institutions 11.00% 26 203 143 10.00% 17 093 950

Albion Trade Finance Resources Limited 12.00% 5 086 363 - -

Undisclosed debtors discounting facility 14.00% 139 753 398 12.50% 122 433 537

Bond over property - floating rate 12.50% 26 578 968 11.00% 4 035 136

Finance leases 13.75% 21 665 106 11.00% 12 565 919

65



3.5 Liquidity risk

The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate borrowing facilities are maintained. The directors may from time to time at their discretion raise or borrow monies for the purpose of the group as they deem fit. There are no borrowing limits in the articles of association of the company or its subsidiaries.

The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet 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.

Fair value estimation

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

Group Less than 1 year Between 1 and 2 years

Between 2 and 5 years

Over 5 years 2008

Borrowings 1 402 089 1 496 557 5 896 255 17 317 780

Trade and other payables 188 314 635 - - -

2007

Borrowings 271 700 304 606 1 154 047 2 797 474


Company Less than 1 year Between 1 and 2 years

Between 2 and 5 years

Over 5 years 2008

Borrowings 403 692 458 629 1 829 286 6 119 170


2007


66

4. SEGMENT REPORTING (cont)

Primary reporting format - primary business segments.

At 31st March 2008, the group is organised on a national basis into three main business segments:

Other group operations mainly comprise of the rental of property and the processing of plant. Neither of these constitutes a separately reportable segment.

The segment results for the year ended 31st March 2008 are as follows:

2008

Stockists Bulk sales Exporting Other Total

R R R R R

Revenue - external 510 844 432 452 260 170 453 087 004 16 110 872 1 432 302 478

Revenue - internal 3 929 509 (12 097 416) 18 204 169 (10 036 262) -

Total segment revenue

514 773 941 440 162 754 471 291 173 6 074 610 1 432 302 478

Operating profit 41 239 570 40 723 870 67 070 437 5 399 696 154 433 573

Net finance costs (6 240 665) (9 045 812) (2 191 225) (3 421 634) (20 899 336)

Investment income 276 356 714 157 195 905 300 931 1 487 349

Finance costs (6 517 021) (9 759 969) (2 387 130) (3 722 565) (22 386 685)

Profit before taxation 34 998 905 31 678 058 64 879 212 1 978 062 133 534 237

Taxation (8 939 631) (9 027 663) (15 302 101) (897 363) (34 166 758)

Profit for the year 26 059 274 22 650 395 49 577 111 1 080 699 99 367 479

2007

Stockists Bulk sales Exporting Other Total

R R R R R

Revenue - external 308 446 475 338 011 301 239 364 149 6 175 473 891 997 398

Revenue - internal (7 357 583) (1 457 797) (237 745) (806 139) (9 859 264)

Total segment revenue 301 088 892 336 553 504 239 126 404 5 369 334 882 138 134

Operating profit 1 155 655 20 995 881 9 644 825 6 037 572 57 833 933

Fair value adjustment - - - 1 688 207 1 688 207

Net finance costs (4 310 544) (4 529 555) (444 127) (2 468 965) (11 753 191)

Investment income 46 631 116 939 101 262 961 819 1 226 651

Finance costs (4 357 175) (4 646 494) (545 389) (3 430 784) (12 979 842)

Profit before taxation 16 845 111 16 466 326 9 200 698 5 256 814 47 768 949

Taxation (5 139 286) (4 713 671) (2 897 009) (1 489 401) (14 239 367)

Profit for the year 11 705 825 11 752 655 6 303 689 3 767 413 33 529 582


67



Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would have been available to unrelated third parties.

Segment assets consist primarily of property, plant and equipment inventories, trade and other receivables and cash and cash equivalents.

Unallocated assets comprise deferred taxation, intangible assets and other financial assets.

Segment liabilities comprise operating liabilities. Unallocated liabilities comprise items such as taxations and borrowings.

Capital expenditure comprises additions to property, plant and equipment (Note 5), including additions resulting from acquisitions through business combinations.

The segment assets and liabilities at 31st March 2008 and capital expenditure for the year then ended are as follows:

2008

Stockists Bulk sales Exporting Other Eliminations Total

R R R R R R

Assets 541 816 421 31 332 030 139 254 821 57 558 340 (51 885 000) 718 076 612

Liabilities (336 079 767) 374 306 (46 468 467) (34 776 614) (4 046 908) (420 997 450)

Capital ex-penditure

205 736 654 31 706 336 92 786 354 22 781 726 (55 931 908) 297 079 162

The segment assets and liabilities as at 31st March 2007 and capital expenditure for the year then ended are as follows:

2007

Stockists Bulk Sales Exporting Other Eliminations Total

R R R R R R

Assets 112 820 077 95 187 889 39 009 370 141 719 953 (44 020 268) 344 717 021

Liabilities (92 596 220 ) (77 196 656) (21 558 492 ) (106 514 122 (33 766 445) (264 099 045)

Capital expenditure

20 223 857 17 991 233 17 450 878 35 205 831 (10 253 823) 80 617 976

68



Secondary reporting format – geographical segments

The Group’s four biggest segments operate in two main geographical areas. The home country of the Company is the Republic of South Africa. The areas of operation are principally merchandising, trading and exporting of steel.

2008 RSA Africa Total

R R RTotal revenue 979 215 474 453 087 004 1 432 302 478

Revenue - internal (18 204 169) 18 204 169 -

Revenue - external 961 011 305 471 291 173 1 432 302 478

Operating profit 87 363 136 67 070 437 154 433 573 Net finance costs (18 708 111) (2 191 225) (20 899 336)

Finance income 1 291 444 195 905 1 487 349

Finance costs (19 999 555) (2 387 130) (22 386 685)

Profit before taxation 68 655 025 64 879 212 133 534 237

Taxation (18 864 657) (15 302 101) (34 166 758)

Profit for the year 49 790 368 49 577 111 99 367 479

2007

RSA Africa Total

R R R

Total revenue 652 633 249 239 364 149 891 997 398

Revenue - internal (9 621 519) (237 745) (9 859 264)

Revenue - external 643 011 730 239 126 404 882 138 134

Operating profit 48 189 108 9 644 825 57 833 933

Fair value adjustment 1 688 207 - 1 688 207

Net finance cost (11 309 064) (444 127) (11 753 191)

Finance income 1 125 389 101 262 1 226 651

Finance costs (12 434 453) (545 389) (12 979 842)

Profit before taxation 38 568 251 9 200 698 47 768 949

Taxation (11 342 358) (2 897 009) (14 239 367)

Profit for the year 27 225 893 6 303 689 33 529 582

69



Revenue is allocated based on the country in which the customer is located.

The segment assets and liabilities at 31st March 2008 and capital expenditure for the year then ended are as follows:

2008

RSA Africa Eliminations Total

Assets 630 706 791 139 254 821 (51 885 000) 718 076 612

Liabilities (370 482 075) (46 468 467) (4 046 908) (420 997 450)

Capital expenditure 260 224 716 92 786 354 (55 931 908) 297 079 162

2007

RSA Africa Eliminations Total

Assets 349 727 919 39 009 370 (44 020 268) 344 717 021

Liabilities (276 306 998 ) (21 558 492) 33 766 445 (264 099 045)

Capital expenditure 73 420 921 17 450 878 (10 253 823) 80 617 976

70


5. PROPERTY, PLANT AND EQUIPMENT

GROUP 2008Cost/

valuation

Accumulated

depreciation

Carrying

value R R R

Land and buildings 66 445 697 - 66 445 697 Plant and machinery 25 302 666 (1 502 423) 23 800 243 Furniture and fixtures 896 945 (190 580) 706 365 Motor vehicles 8 720 137 (453 564) 8 266 573 Office equipment 1 073 142 (448 854) 624 288 IT equipment 1 733 231 (1 013 158) 720 073 Leased assets 7 573 695 (5 054 700) 2 518 995

Total 111 745 513 (8 663 279) 103 082 234 2007

Cost/

valuation

Accumulated

depreciation

Carrying

value R R R

Land and buildings 17 399 268 - 17 399 268

Plant and machinery 18 129 562 (1 043 936) 17 085 626

Furniture and fixtures 888 546 (646 301) 242 245

Motor vehicles 5 303 092 (1 815 723) 3 487 369

Office equipment 254 741 (143 311) 111 430

IT equipment 2 727 823 (2 142 735) 585 088

Total 44 703 032 (5 792 006) 38 911 026

COMPANY 2008Cost/

valuation

Accumulated

depreciation

Carrying

valueR R R

Land and buildings 15 075 682 - 15 075 682 Plant and machinery 2 500 570 (155 549) 2 345 021 Furniture and fixtures 601 747 (101 870) 499 877 Motor vehicles 7 544 479 (242 851) 7 301 628 Office equipment 1 039 914 (441 891) 598 023 IT equipment 1 692 815 (1 005 354) 687 461

Total 28 455 207 (1 947 515) 26 507 692

2007Cost/

valuation

Accumulated

depreciation

Carrying

value R R R

Land and buildings 334 936 - 334 936 Plant and machinery 217 515 (151 216) 66 299 Furniture and fixtures 702 880 (538 629) 164 251 Motor vehicles 134 625 (124 484) 10 141 Office equipment - - - IT equipment 2 035 287 (1 764 536) 270 751

Total 3 425 243 (2 578 865) 846 378

71

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73


5. PROPERTY, PLANT AND EQUIPMENT (cont)

Other than the land and buildings, the above assets are all encumbered by instalment sale agreements, which bear interest at prime less 1%, are repayable over varying periods of 2 to 64 months and for which the monthly instalments total R 474 959.

The land and buildings are encumbered by mortgage bonds bearing interest at varying rates linked to prime (12.5% - 13.5%), are repayable on a ten year term in total monthly instalments of R 410 547.

Assets subject to finance lease (Net carrying amount)

Revaluations

Land and buildings are re-valued annually.

The effective date of the revaluation of the Alrode property was 09 April 2008. Revaluations were performed by independent valuer, Mr Dick Anstee (member Estate Agents Board of South Africa), of Reef Property Consultants Reef Property Consultants and is not connected to the group.

The valuation was performed using the discounted cash flow approach, and the following assumptions based on current market conditions were used:

Capitalisation rate – 12%;

Current market related Gross Rentals were assumed; and

Increased demand for industrial land.

The effective date of revaluation of the properties in Zambia was 11 May 2007. The revaluations were performed by Mr. Musonda Kasase of Anderson and Anderson International Valuation Surveyors. Anderson and Anderson are not connected to the group.

The carrying value of the revalued assets under the cost model would have been:

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

GROUP COMPANY

2008

R

2007

R

2008

R

2007

RPledged as security

Carrying value of assets pledged as security:

Motor vehicles 5 817 591 1 984 665 5 817 591 -

Plant and machinery 19 549 404 14 212 893 989 186 -

Office equipment 261 581 - 261 581 -

Land and buildings 52 078 009 17 399 268 15 075 682 -

Property, plant and equipment – Zambia 2 518 995 - - -

Land and buildings 51 639 104 16 478 937 - -

74


6. GOODWILL

Reconciliation of goodwill - 2008


Impairment testing of goodwill

The remaining goodwill was assessed by reference to the value-in-use of the cash-generating units. Discount factors ranging between 10% to 12% per annum (2007: 10% to 12% per annum) were applied in the value-in-use model.

Allocation of goodwill to cash-generating unit Goodwill has been allocated for impairment testing purposes to the underlying discreet business segments as they represent separately identifiable cash-generating units. The following cash-generating units, being the lowest level of asset for which there are separately identifiable cash flows, have carrying amounts of goodwill:

GROUP 2008

Cost/valuationAccumulatedamortisation

Carryingvalue

R R R

Goodwill 13 442 080 - 13 442 080

2007

Cost/valuation Accumulatedamortisation

Carryingvalue

R R R

Goodwill 3 772 862 - 3 772 862

Openingbalance

Additions throughdivisionalisation

Foreign exchange movements Total

R R R R

Goodwill 3 772 862 9 257 059 412 159 13 442 080

Openingbalance Total

R R

Goodwill 3 772 862 3 772 862

2008

R

2007

R

Stockists 4 215 585 1 450 285

Bulk sales 1 185 136 -

Exporting 5 482 306 -

Other 2 559 053 2 322 577

13 442 080 3 772 862


6. GOODWILL



Impairment testing of goodwill

The remaining goodwill was assessed by reference to the value-in-use of the cash-generating units. Discount factors ranging between 10% to 12% per annum (2007: 10% to 12% per annum) were applied in the value-in-use model.

Allocation of goodwill to cash-generating unit Goodwill has been allocated for impairment testing purposes to the underlying discreet business segments as they represent separately identifiable cash-generating units. The following cash-generating units, being the lowest level of asset for which there are separately identifiable cash flows, have carrying amounts of goodwill:

GROUP 2008

Cost/valuationAccumulatedamortisation

Carryingvalue

R R R

Goodwill 13 442 080 - 13 442 080

2007


Carryingvalue

R R R

Goodwill 3 772 862 - 3 772 862

Openingbalance

Additions throughdivisionalisation

Foreign exchange movements Total

R R R R

Goodwill 3 772 862 9 257 059 412 159 13 442 080

Openingbalance Total

R R

Goodwill 3 772 862 3 772 862

2008

R

2007

R

Stockists 4 215 585 1 450 285

Bulk sales 1 185 136 -

Exporting 5 482 306 -

Other 2 559 053 2 322 577

13 442 080 3 772 862

75


7. INTANGIBLE ASSETS

Reconciliation of intangible assets Group 2008

Reconciliation of intangible assets Group 2007

GROUP 2008


Carryingvalue

R R R

Computer software 2 013 616 (486 127) 1 527 489

2007


Carrying value

R R R

Computer software 759 697 (571 252) 188 445

COMPANY 2008

Cost/valuation Accumulated amortisation

Carrying value

R R R

Computer software 2 013 620 (486 123) 1 527 497

2007

Cost/valuation Accumulated amortisation

Carrying value

R R RComputer software 699 634 (518 154) 181 480

Openingbalance

Additions Disposals Amortisation Total

R R R R RComputer software 188 445 1 499 379 (97 735) (62 600) 1 527 489

Opening balance

Additions Disposals Amortisation Impairment loss

Total

R R R R R RPatents, trade-marks and other rights

4 840

-

-

-

(4 840)

-

Computer software

493 776 81 698 (228 129) (158 900) - 188 445

498 616 81 698 (228 129) (158 900) (4 840) 188 445

76


7. INTANGIBLE ASSETS (cont)

Reconciliation of intangible assets Company 2008

Reconciliation of intangible assets Company 2007

8. INVESTMENT IN SUBSIDIARIES

* Indirect holding of Discount Steel Lubumbashi SPRL – 100% (2007: -)

Openingbalance

AdditionsAdditions through business

combinations

Disposals Amortisation Total

R R R R R R

Computer Software

181 480 1 499 385 3 277 (97 733) (58 912) 1 527 497

Opening balance

Additions Disposals Amortisation Total

R R R R R

Computer software, other

480 227 81 698 (221 545) (158 900) 181 480

Name of company

%holding

2008

%holding

2007

Carrying amount

2008

Carrying amount

2007% % R R

Discount Steel Africa (Proprietary) Limited 100% 65% 7 589 081 650

Red chip Investments (Proprietary) Limited 100% 100% 2 460 968 2 460 968

Newcolab (Proprietary) Limited 100% 100% 1 000 1 000

Shearcut Precision Steel (Proprietary) Limited 100% 100% 1 000 1 000

Discount Steel Exports (Proprietary) Limited 100% 100% - 800

Discount Steel Cape (Proprietary) Limited 100% 100% - 100

Discount Steel Trading (Proprietary) Limited 100% 70% 5 817 086 70

Shearcut (Proprietary) Limited 100% 100% 100 100

Discount Steel KZN (Proprietary) Limited 100% 80% 1 471 602 80

Doddleprops (Proprietary) Limited 50% 50% 1 239 023 730 634

Garrison Steel (Proprietary) Limited 100% 75% 15 779 781 9 269 416

Discount Steel Zambia Ltd * 100% -% 25 339 512 -

Less: impairment - -

59 699 153 12 464 818

77


9. LOANS TO/(FROM) GROUP COMPANIES

All intercompany loans are made in the ordinary course of business, are interest-free, unsecured and repayable within 30 days of statement issue.

The above loans are disclosed as follows:

Loans to/(from) group companies are classified as loans and receivables at amortised cost (financial liability at amortised cost). The carrying values of the above loans approximate the current fair values.

10. LOANS FROM SHAREHOLDERS

The above loans are unsecured, interest free and have no fixed terms of repayment. The above loans to shareholders are held at amortised cost. The carrying amounts of the above loans approximate the current fair values.

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Subsidiaries

Discount Steel Africa (Proprietary) Limited - - - (10 197 543)

Red chip Investments (Proprietary) Limited - - - (5 405 154)

Shearcut Precision Steel (Proprietary) Limited - - - 8 641 519

Discount Steel Trading (Proprietary) Limited - - - 26 556 116

Shearcut (Proprietary) Limited - - 723 401 230 944

Discount Steel KZN (Proprietary) Limited - - 21 366 474 36 289 937

Doddleprops 6 (Proprietary) Limited - - - 1 313 284

Garrison (Proprietary) Limited - - - 8 028 223

Discount Steel Zambia Limited - - 5 826 113 -

27 915 988 65 457 326

Current assets - - 27 915 988 81 060 023

Current liabilities - - - (15 602 697)

27 915 988 65 457 326

WL Battershill - (8 055 959) - (7 705 959)

J Waller - (27 931) - (27 931)

G McKenzie - (82 214) - (69 714)

C Parry - (111 713) - (111 713)

R Teichmann - (74 750) - -

P Arnott - (5 000) - -

- (8 357 567) - (7 915 317)

78


11. OTHER FINANCIAL ASSETS

The financial assets are disclosed as follows:

The above loans and receivables are held at amortised cost and the carrying value is deemed to be the fair value. Note 3.1 provides detail on the origination of the current asset held at fair value through profit or loss.

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Fair value through profit or loss

Foreign exchange contract 837 445 - 837 445 -

The above contract expires on

28 June 2008


The BSI Share Trust - - 1 920 232 -

The above loan is unsecured, interest free

with no fixed terms of repayment.

Total other financial assets 837 445 - 2 757 677 -

Non-current assets

Loans and receivables - - 1 920 232 -

Current assets

Held for fair value through profit and loss 837 445 - 837 445 -

Total other financial assets 837 445 - 2 757 677 -

79


12. FINANCIAL ASSETS BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below:


Fair value through profit

or lossTotal

R R R

Group - 2008

Other financial assets 1 920 232 837 445 2 757 677

Cash and cash equivalents 26 235 947 - 26 235 947

28 156 179 837 445 28 993 624

Group - 2007




or loss Total

R R R

Company - 2008

Loans to group companies 27 915 988 - 27 915 988

Other financial assets 1 920 232 837 445 2 757 677


44 909 645 837 445 45 747 090



or lossTotal

R R R

Company - 2007

Loans to group companies 81 060 022 - 81 060 022


90 353 837 - 90 353 837

80


13. DEFERRED TAX

Reconciliation of deferred tax asset/(liability)

Deferred tax is disclosed as follows:

14. INVENTORIES

Inventory pledged as security

Inventory was pledged as security for debtors discounting facilities and in respect of guarantees issued by Nedbank Corporate on behalf of the group. At year end the discounting facility amounted to R 133,107,903 (2007: R121,424,138).

GROUP COMPANY 2008

R

2007

R

2008

R

2007

RAccelerated capital allowances for tax purposes

(1 030 061) 80 520 (214 934) (190 202)

Revaluation, net of related depreciation (4 095 395) (783 295) - - Tax losses available for set off against future taxable income

1 883 770 4 358 910 - -

Other deferred tax - (542 157) - -

(3 241 686) 3 113 978 (214 934) (190 202)

At beginning of the year 3 113 978 4 695 465 (190 202) (120 723)Prior year correction 10 333 - 101 492 -Decrease in tax losses available for set off against future taxable income

(2 419 598) (548 816) - -

Originating temporary difference on tangible fixed assets

(4 569 168) (1 032 671) 171 767 (69 479)

Reduction due to rate change (114 764) - 7 700 -Acquisition of business 737 533 - (305 691) -

(3 241 686) 3 113 978 (214 934) (190 202)

Non-current asset 2 859 549 5 255 452 - -Non-current liability (6 101 235) (2 141 474) (214 934) (190 202)

(3 241 686) 3 113 978 (214 934) (190 202)

Work in progress 12 064 668 5 992 555 12 064 668 785 629 Merchandise 176 375 769 84 540 080 122 091 126 40 856

188 440 437 90 532 635 134 155 794 826 485

Maximum value of inventory pledged as Security

25 000 000 25 000 000 25 000 000 25 000 000

81


15. TRADE AND OTHER RECEIVABLES

Trade and other receivables are classified as loans and receivables at amortised cost and their carrying values approximate their fair value.

Trade and other receivables pledged as security

Trade and other receivables with a value of R278 752 184 (2007: R164 408 239) were pledged as security for the undisclosed debtors discounting facility. At year end the outstanding balance on the facility amounted to R1 32 397 983 (2007: R128 479 198).

Trade and other receivables past due but not impaired

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

Trade and other receivables impaired

As of 31 March 2008, trade and other receivables of R 5,618,144 (2007: R 858,540) were impaired and provided for.

The ageing of this provision is as follows:

The carrying amount of trade and other receivables are denominated in the following currencies:

Reconciliation of provision for impairment of trade and other receivables

The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The group does not hold any collateral as security.

At the year end trade and other receivables comprised on 1 102 individual debtors (2007: 785.)

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Trade receivables (net of provision) 357 260 333 169 062 155 282 931 593 15 573 652

Prepayments 3 858 904 34 134 106 675 32 479

Deposits 239 714 74 250 31 750 -

VAT 14 022 008 10 197 746 7 897 973 -

Staff loans 157 730 - 109 508 -

Sundry debtors 4 775 515 6 386 872 3 148 661 1 406 465

380 314 204 185 755 157 294 226 160 17 012 596

1 month past due 9 824 630 8 908 379 7 060 680 3002 months past due 17 006 548 7 487 069 13 377 425 3 016

Over 6 months 5 618 144 858 540 2 640 559 -

Rand 276 428 060 169 770 771 290 269 125 -US Dollar 4 059 874 - - -

Opening balance 858 540 1 350 904 - 592 214

Provision for impairment 5 352 040 1 189 309 2 760 428 -

Amounts written off as uncollectible (687 968) (1 592 137) (73 647) (511 038)

Unused amounts reversed (905 982) (89 536) (46 222) (81 176)

Acquisition of business 1 001 515 - - -

5 618 145 858 540 2 640 559 -

82


16. CASH AND CASH EQUIVALENTS

The undisclosed debtor discounting facility is secured by:

- invoice discounting agreement incorporating a purchase of book debts;

- unlimited suretyship, excluding cession of loan funds by:

Discount Steel Africa (Proprietary) Limited

Redchip Investments (Proprietary) Limited

Shearcut Precision Steel (Proprietary) Limited

Garrison Steel (Proprietary) Limited

Newcolab (Proprietary) Limited

Discount Steel Trading (Proprietary) Limited

Discount Steel KZN (Proprietary) Limited

Shearcut (Proprietary) Limited

Doddleprops (Proprietary) Limited;

- cession of Lombards Local and Export Policy No. SDC8720/D1 and 104045;

- cession of AIF Policy No. 02EAA001296; and a

- general notarial bond of R 25 000 000 over stock.

At 31 March 2007 the company had an overdraft facility from Stanbic Bank Zambia Limited of USD500 000 (2006: USD500 000) to secure working capital and an additional USD100,000 guarantee for the supplier line. If called in the company would have an obligation to the bank in terms of counter indemnity. The guarantee is secured by way of legal mortgage of USD600 000 (comprising of USD500 000 on the bank overdraft and USD 100 000 guarantee for the supplier line) on the company's properties (2006: USD600,000).

17. NON-CURRENT ASSETS HELD FOR SALE

In the prior year, the group decided to dispose of one of its properties, namely Sub 587 (of 585) of the farm “Shortts Retreat” No. 1208, Erf No. 2205, Pietermaritzburg, measuring 2.567 hectares with factories and warehouses erected thereon.

The decision was made by the board to discontinue these operations due to the successful conclusion of a sale agreement for the above property. Transfer took place during the current financial year.

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Cash and cash equivalents consist of:

Cash on hand 32 803 18 067 25 287 14 937

Bank balances 26 203 143 17 093 950 15 048 138 9 278 878

Bank overdraft (139 753 399) (122 433 537) (105 323 751) (10 911)

(113 517 453) (105 321 520) (90 250 326) 9 282 904 Cash and cash equivalents are disclosed as follows:Bank and cash equivalents 26 235 946 17 112 017 15 073 425 9 293 815

Bank overdraft (139 753 399) (122 433 537) (105 323 751) (10 911)

(113 517 453) (105 321 520) (90 250 326) 9 282 904

Non-current assets held for sale

Investment property - 3 000 000 - -

83


18. SHARE CAPITAL AND SHARE PREMIUM

Unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.

19. FOREIGN CURRENCY TRANSLATION RESERVE

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Authorised

100 000 000 Ordinary shares of 0.001 cent each

10 000 - 10 000 -

800 000 ordinary shares of R0.01 each - 8 000 - 8 000

200 000 divisional par value shares of R0.01 each

- 2 000 - 2 000

10 000 10 000 10 000 10 000

Issued

719 854 996 Ordinary shares of 0.001 cents each

7 202 - 7 218 -

10 000 ordinary shares of R0.01 each - 1 000 - 1 000

Share premium 124 293 966 - 126 214 178 -

124 301 168 1 000 126 221 396 1 000

Reconciliation of number of shares issued:

Reported as at 01 April 2007 10 000 10 000 10 000 10 000

Share conversion 99 990 000 - 99 990 000 -

Issue of ordinary shares 132 267 454 - 132 267 454 -

Issue of ordinary shares to directors 489 507 774 - 489 507774 -

Less: treasury shares held (1 920 232) - - -

719 854 996 10 000 721 775 228 10 000

Reconciliation of share premium:

Issue of shares – ordinary shares 127 377 655 - 127 377 655 -

Share issue expenses (1 163 476) - (1 163 477) -

Less: treasury shares held (1 920 213) - - -

124 293 966 - 126 214 178 -

Translation reserve comprises exchange differences on consolidation of foreign subsidiaries.

Acquisition of business 2 827 451 - - -

Subsequent consolidation 2 834 731 - - -

5 662 182 - - -

84


20. REVALUATION RESERVE

In terms of the articles of association, these reserves are distributable on realisation.

21. OTHER FINANCIAL LIABILITIES

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Property revaluation reserves 6 710 819 1 473 616 - 295 360

At fair value through profit or loss Drawbridge Trading Limited 8 626 535 - 8 626 535 -

The above loan was incurred on the purchase of Discount Steel Zambia Limited. It is unsecured, interest free and repayable on 30/06/2008.

Forward exchange contract - 33 382 - 33 382

8 626 535 33 382 8 626 535 33 382

Held at amortised cost

Albion Trade Finance Resources Limited 5 086 363 - - -

The loan facility of USD 1,000,000 was obtained to finance working capital and the loan is repayable on demand. The loan attracts interest at a rate of 12% per annum, an annual arrangement fee of 3% of the facility and a commitment fee at 0.5% on the unutilised portion of the facility at each month-end. The facility is not secured.

Instalment sale agreements 19 675 706 12 565 919 6 763 175 -

The above instalment sale agreements are secured over property, plant and equipment as per note 5. They are repayable over periods varying from 2 to 64 months and bear interest at varying rates linked to prime.

Mortgage bond 26 578 968 4 035 136 9 000 000 -

The above bonds are secured by land and buildings per note 4. They bear interest at varying rates linked to prime(12.5% - 13.5%), are repayable on a ten year term in total monthly instalments of R 408 705.

51 341 037 16 601 055 15 763 175 -

Total other financial liabilities 59 967 572 16 634 437 24 389 710 33 382

85


21. OTHER FINANCIAL LIABILITIES (cont)

The fair values of the financial liabilities approximate their carrying values.

22. FINANCE LEASE OBLIGATION

It is group policy to lease certain motor vehicles, plant and equipment under finance leases.

The leases are all repayable in the next financial year and the average effective borrowing rate was 13% (2007:11%).

Interest rates are linked to prime at the contract date. All leases repayments vary with the interest rate and no arrangements have been entered into for contingent rent.

The group's obligations under finance leases are secured by the lessor's charge over the leased assets. Refer note 5. These liabilities are measured at amortised cost.

GROUP COMPANY 2008

R

2007

R

2008

R

2007

R Other financial liabilities are disclosed as follows:

Non-current liabilities

At amortised cost 46 254 674 16 282 022 15 763 175 -

Current liabilities

At fair value through profit and loss 8 626 535 33 382 8 626 535 33 382

At amortised cost 5 086 363 319 033 - -

13 712 898 352 415 8 626 535 33 382

Total other financial liabilities 59 967 572 16 634 437 24 389 710 33 382

Present value of minimum lease payments due

- within one year 1 989 400 - - -

86

NOTES TO THE ANNUAL FINANCIAL STATEMENTS (cont.) for the year ended 31 March 2008

23. PROVISIONS

This provision represents management's best estimate of the group's shortfall of export rebates already taken to income. There is an expectation that these export rebates will be received but due to the complexity of the qualifying regulations and past experience, it is expected that not all export rebates will be received.

The provision for export rebates is classified as a financial liability measured at amortised cost.

24. TRADE AND OTHER PAYABLES

The intercompany investment loans arose on the divisionalisation of the following businesses into BSI SA Limited:

- Discount Steel Africa (Proprietary) Limited

- Discount Steel KZN (Proprietary) Limited

- Garrison Steel (Proprietary) Limited

- Discount Steel Trading (Proprietary) Limited

Reconciliation of provisions - Group 2008 OpeningBalance

Utilised during the year

Total

R R R

Provision export rebates 1 801 625 (599 414) 1 202 211

Reconciliation of provisions - Group 2007 Opening Balance

Additions Total

R R R

Provision export rebates - 1 801 625 1 801 625

Reconciliation of provisions - Company 2008 OpeningBalance

Additions Total

R R R


GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Trade payables 158 497 208 83 870 760 132 286 219 68 130 807

VAT 38 228 952 101 - 652 954

Accruals and other payables 29 086 250 18 385 017 17 839 529 10 074 472

Accrued expense 20 488 - - -

Other accrued expenses 126 496 - 171 942 -

Deposits received 545 913 - - -

Intercompany investment loans 52 - 94 888 251 -

188 314 635 103 207 878 245 185 941 78 858 233

Reconciliation of provisions - Group 2007


23. PROVISIONS

This provision represents management's best estimate of the group's shortfall of export rebates already taken to income. There is an expectation that these export rebates will be received but due to the complexity of the qualifying regulations and past experience, it is expected that not all export rebates will be received.

The provision for export rebates is classified as a financial liability measured at amortised cost.

24. TRADE AND OTHER PAYABLES

The intercompany investment loans arose on the divisionalisation of the following businesses into BSI SA Limited:

- Discount Steel Africa (Proprietary) Limited

- Discount Steel KZN (Proprietary) Limited

- Garrison Steel (Proprietary) Limited

- Discount Steel Trading (Proprietary) Limited

Reconciliation of provisions - Group 2008 OpeningBalance

Utilised during the year

Total

R R R

Provision export rebates 1 801 625 (599 414) 1 202 211

Reconciliation of provisions - Group 2007 Opening Balance

Additions Total

R R R


Reconciliation of provisions - Company 2008 OpeningBalance

Additions Total

R R R


GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Trade payables 158 497 208 83 870 760 132 286 219 68 130 807

VAT 38 228 952 101 - 652 954

Accruals and other payables 29 086 250 18 385 017 17 839 529 10 074 472

Accrued expense 20 488 - - -

Other accrued expenses 126 496 - 171 942 -

Deposits received 545 913 - - -

Intercompany investment loans 52 - 94 888 251 -

188 314 635 103 207 878 245 185 941 78 858 233

87


25. FINANCIAL LIABILITIES BY CATEGORY The accounting policies for financial

The accounting policies for financial instruments have been applied to the line items below:

2008 GROUP Financial

liabilities at amortised cost


or loss Total

Other financial liabilities 51 341 037 - 8 626 535 59 967 572 Finance lease obligation 1 989 400 - - 1 989 400 Trade and other payables 188 314 633 - - 188 314 633 Bank overdraft 139 753 399 - - 139 753 399

381 398 469 - 8 626 535 390 025 004

2007Financial



or loss Total

Loans from shareholders 8 357 567 - - 8 357 567 Other financial liabilities 16 634 437 - 33 382 16 667 819 Trade and other payables 103 207 878 - - 103 207 878 Bank overdraft 122 433 537 - - 122 433 537

250 633 419 - 33 382 250 666 801

2008 COMPANY Financial



or loss Total

Other financial liabilities 15 763 175 - 8 626 535 24 389 710 Trade and other payables 245 185 941 - - 245 185 941 Bank overdraft 105 323 751 - - 105 323 751

366 272 867 - 8 626 535 374 899 402

2007

Financial liabilities at

amortised cost


or loss Total

Loans from group companies 15 602 695 - - 15 602 695 Loans from shareholders 7 915 317 - - 7 915 317 Trade and other payables 78 858 233 - - 78 858 233 Bank overdraft 10 911 - - 10 911

102 387 156 - - 102 387 156

GROUP COMPANY 2008

R

2007

R

2008

R

2007

R

26. REVENUE

Sale of goods 1 432 262 338 881 893 190 404 438 359 2 498 048 Rental income 40 140 244 944 - -

1 432 302 478 882 138 134 404 438 359 2 498 048

Financialliabilities at

amortised cost

Fair valuethrough profit

or lossTotal

2008

15 763 175245 185 941105 323 751

366 272 867

24 389 710245 185 941105 323 751

374 899 402

8 626 535--

-8 626 535

----

88


27. COST OF SALES

28. OPERATING PROFIT/(LOSS)

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

GROUP COMPANY2008

R

2007

R

2008

R

2007

R

Cost of goods sold 1 135 268 482 757 248 817 316 645 436 2 013 425

Dividends received - 32 501 1 126 667 2 412 500

Operating lease charges

Premises

Contractual amounts 2 019 874 786 526 1 533 340 711

Equipment

Contractual amounts 100 736 - - -

2 120 610 786 526 1 533 340 711

Profit/(loss) on sale of property, plant and equipment

1 006 787 1 887 411 (49 886) (16 000) Profit on sale of other financial assets 300 000 - 300 000 -

Foreign exchange gains 15 750 357 731 134 - -

Auditors’ remuneration - fees 984 370 213 540 207 250 90 567

Auditors’ remuneration - consulting fees 56 247 16 703 14 800 -

Depreciation 6 278 865 1 477 228 697 291 324 490

Amortisation 62 600 158 900 58 912 158 900

Impairment charges - 4 840 - -

Employee costs 50 494 448 38 124 794 7 795 011 94 084

Expenses by nature

Employee benefit expense (50 494 448) (38 124 794) (7 795 011) (94 084)

Depreciation (6 278 865) (1 477 228) (697 291) (324 490)

Amortisation (62 600) (158 900) (58 912) (158 900)

Impairment charges - (4 840)

Transportation expenses (570 626) (132 347) (197 955) -

Advertising costs (844 514) (394 311) (115 605) (154 433)

Operating lease payments (2 120 610) (786 526) (1 533 340) (711)

Other expenses (1 220 820 193) (787 782 918) (351 834 151) (5 919 438)

Total cost of sales, distribution costs

and administrative expenses (1 281 191 856) (828 861 864) (362 232 265) (6 652 056)

89


29. INVESTMENT INCOME

30. FAIR VALUE ADJUSTMENTS

31. FINANCE COSTS

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Dividend received

Subsidiaries - Local - 32 501 1 126 667 2 412 500

Interest income

Bank 923 527 474 724 622 951 2 146

Interest charged on trade and other receivables

288 287 758 833 60 190 3 573

Interest source - other 275 535 (39 407) 10 075 854 5 544 298

1 487 349 1 194 150 10 758 995 5 550 017

Total investment income 1 487 349 1 226 651 11 885 662 7 962 517

Investment property - 1 688 207 - -

Non-current borrowings 874 983 68 002 - -

Trade and other payables 4 386 788 4 988 032 6 993 891 2 912 988

Finance leases 1 983 002 632 081 363 104 -

Bank 9 111 401 8 829 812 10 649 39 507

Current borrowings 3 780 238 - 2 993 848 -

Interest paid - - 772 413 -

Other interest paid 2 237 377 (1 572 472) 1 032 748 812 500

Shareholders loans 12 896 34 387 - -

22 386 685 12 979 842 12 166 653 3 764 995

622 951

60 190

10 075 854

10 758 995

11 885 662

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

- 1 126 667

90


32. TAXATION

GROUP COMPANY

2008

R

2007

R

2008

R

2007

R

Current

Local income tax – current period 31 540 047 13 083 192 12 922 987 564 447

Secondary Tax on companies - 238 714 - 139 583

31 540 047 13 321 906 12 922 987 704 030

Deferred

Originating and reversing temporary differences

2 522 280 350 402 24 732 (356 772) Changes in tax rates 114 764 - 7 137 -

Benefit of unrecognised tax loss - 567 059 - -

Prior period adjustment (10 333) - 32 703 -

2 626 711 917 461 64 572 (356 772)

Total taxation 34 166 758 14 239 367 12 987 559 347 258

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate.

% % % %

Applicable tax rate 29.00 29,00 29.00 29,00

Tax loss used (1.80) - - -

Decrease in tax rate (0.09) - (0.02) -

Permanent differences (0.29) - (0.07) (25.38)

Secondary tax on companies - 1.82 - 5.85

Other (0.47) (1.02) (0.11) 3.13

Non taxable foreign items (0.76) - - -

25.59 29.80 28.80 12.60

91


33. EARNINGS PER SHARE

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the group by the weighted average number of ordinary shares in issue during the year.

Headline

Headline earnings per share is calculated by excluding all capital gains and losses from the profit attributable to ordinary shareholders and dividing the resultant headline earnings by the weighted average number of ordinary shares in issue during the year.

GROUP

2008

R

2007

R

Profit attributable to equity holders of the group 99 367 479 25 038 911

Weighted average number of ordinary shares in issue 660 174 383 615 126 997

Basic earnings per share (cents) 15.05 4.07

Headline earnings reconciliation

Profit attributable to equity holders of the group 99 367 479 25 038 911

Adjusted for:

- Profit on disposal of property, plant and equipment (1 306 787) (1 887 411)

- Fair value adjustment on investment property - (1 688 207)

- Tax impact of the above adjustments 365 900 1 036 929

Headlines earnings attributable to ordinary shareholders 98 426 592 25 500 222

Weighted number of shares 660 174 383 615 126 997

Headlines earnings per share (cents) 14.91 3.66

92


34. CASH (USED IN) / GENERATED FROM OPERATIONS

35. TAXATION PAID

36. CASH FLOWS OF NON-CURRENT ASSETS HELD FOR SALE

GROUP COMPANY2008

R

2007

R

2008

R

2007

R

Profit before taxation 133 534 237 47 768 949 45 089 557 2 755 633

Adjustments for: Depreciation 6 278 865 1 477 228 697 291 324 490

Amortisation 62 600 158 900 58 912 158 900

Impairment charges - 4 840

(Profit)/loss on sale of assets (1 306 787) (1 887 411) (250 114) 16 000

Dividends received - (32 501) (1 126 667) (2 412 500)

Interest received (1 487 349) (1 194 150) (10 758 995) (5 550 017)

Finance costs 22 386 685 12 979 842 12 166 653 3 764 995

Fair value adjustments - (1 688 207) - -

Movement in provisions (599 414) - 1 202 211 -

Foreign exchange gain on forward exchange contract

(837 500) - (837 500) -

Foreign exchange gains (15 750 357) - - -

Changes in working capital:

Increase in inventories (81 088 052) (45 729 880) (133 329 309) (158 096)

(Increase)/decrease in trade and other receivables

(170 432 152) (35 195 857) (277 213 564) 15 177 392

Increase in trade and other payables 45 425 453 28 339 056 166 224 819 11 147 706

(63 813 771) 5 000 789 (198 076 706) 25 224 503

Balance at beginning of year (9 333 100) (5 151 958) (297 245) (187 445)

Current tax for the year recognised in income statement

(31 540 047) (13 321 906) (12 922 987) (704 030)

Adjustment in respect of businesses sold and acquired during the year including exchange rate movements

(148 531) - - -

Balance at end of the year 22 331 770 9 333 100 8 446 837 297 245

(18 689 908) (9 140 764) (4 773 395) (594 230)

Non-current assets held for sale 3 000 000 - - -

2007

R

2007

R

GROUP COMPANY

93


37. ACQUISITION OF SUBSIDIARIES

On 01 April 2007, the Group acquired 99% of the share capital of Discount Steel Zambia Limited, a steel merchant, operating in Zambia and the Democratic Republic of the Congo. The acquired business contributed revenues of R301,836,290 and net profit of R 23,014,388 to the Group for the period from 01 April 2007 to 31 March 2008.

GROUP

2008

R

2007

RCarrying amount of assets acquired

Property, plant and equipment 7 680 409 -

Deferred tax assets/liabilities 15 198 911 -

Inventories 8 281 149 -

Trader and other receivables 20 657 556 -

Trade and other payables (33 124 193) -

Cash 1 799 664 -

Bank overdraft (2 053 422) -

Current tax payable (148 531) -

18 291 543 -

Fair value of assets acquired

Property, plant and equipment 13 558 237 -

Deferred tax assets/liabilities 13 141 669 -

Goodwill 2 261 889 - Inventories 8 281 149 -

Trade and other receivables 20 657 556 -

Trade and other payables (33 124 193) -

Cash 1 799 664 -

Bank overdraft (2 053 422) -

Current tax payable (148 531) -

Outside shareholders (269 668) -

24 104 350 -

The goodwill is attributable to the established business in Africa and future expected profitability of the company.

Consideration paid

Cash (24 104 350) -

Net cash outflow on acquisition

Cash consideration paid (24 104 350) -

Cash acquired 1 799 664 -

(22 304 686) -

94


38. COMMITMENTS

Authorised capital expenditure

39. CONTINGENCIES

40. RELATED PARTIES

Relationships

Holding company BSI SA Limited

Subsidiaries Refer to note 8

Shareholder with significant influence Refer to shareholding analysis

Benefit plan for employees of entity and/or other related parties The BSI Share Incentive Trust

Entity under control of shareholder with indirect influence Drawbridge Trading Limited

Members of key management William Battershill

Grant Mackenzie

James Waller

GROUP COMPANY2008

R

2007

R

2008

R

2007

R

Not yet contracted for and authorised by directors

70 000 000 9 000 000 -

-

This committed expenditure relates to the establishment of the steel processing and distribution plant in Kliprivier, Johannesburg and will be financed by available bank facilities and mortgage facilities.

Operating leases – as lessee (expense)

Minimum lease payments due - within one year 1 087 128 - - - - in second to fifth year inclusive 4 348 512 - - -

5 435 640 - - -

Operating lease payments represent rentals payable by the group for certain of its office properties. Leases are negotiated for an average term of seven years and rentals are fixed for an average of three years. No contingent rent is

payable.

The group has issued cross-guarantees in the form of unlimited suretyships excluding loan cessions, in favour

of Nedbank Corporate as per note 16.

95


40. RELATED PARTIES (continued)

COMPANY

2008

R

2007

R

Loan accounts – owing (to)/by related parties

Discount Steel Africa (Proprietary) Limited 44 571 600 (10 197 541)

Garrison Steel (Proprietary) Limited 38 686 570 8 028 222

Newcolab (Proprietary) Limited 3 615 233 -

Shearcut Precision Steel (Proprietary) Limited (131 904) -

Dooddleprops (Proprietary) Limited 1 854 362 1 313 284

Redchip Investments (Proprietary) Limited (3 729 514) (5 405 154)

Shearcut (Proprietary) Limited 7 008 280 8 872 464

Discount Steel KZN (Proprietary) Limited 25 273 223 36 289 937

Discount Steel Trading (Proprietary) Limited 100 511 828 26 556 116

Drawbridge Trading Limited 8 626 535 -

Amounts included in trade receivable/ (trade payable) from/ (to) related parties

Shearcut (Proprietary) Limited (1 925 424) -

Discount Steel (Zambia) Limited 37 694 426 -

Discount Steel Africa (Proprietary) Limited 9 476 471 1 434 984

Discount Steel KZN (Proprietary) Limited - 263 407

Garrison Steel (Proprietary) Limited - 13 274 362

No provision for doubtful debts, nor any bad debt written off during the year, were in respect of related parties.

Interest paid to/(received from) related parties

Discount Steel Africa (Proprietary) Limited (327 394) (723 292)

Discount Steel Africa (Proprietary) Limited 400 070 -

Shearcut (Proprietary) Limited (988 495) (372 605)

Doddleprops (Proprietary) Limited (158 418) (116 823)

Garrison Steel (Proprietary) Limited (1 432 560) (575 016)

Discount Steel KZN (Proprietary) Limited (659 774) (2 167 566)

Newcolab (Proprietary) Limited (415 863) (348 941)

Newcolab (Proprietary) Limited 102 826 -

Discount Steel Trading (Proprietary) Limited (443 925) (1 246 438)

Discount Steel Trading (Proprietary) Limited 404 596 257 262

Red Chip Investments (Proprietary) Limited (42 719) -

Red Chip Investments (Proprietary) Limited 299 810 888 561

96



COMPANY

2008

R

2007

R

Purchases from/(sales to) related parties

Shearcut (Proprietary) Limited 2 764 963 -

Garrison Steel (Proprietary) Limited 318 355 -

Discount Steel Africa (Proprietary) Limited - 237 745

Administration fees paid to/(received from) related parties


Shearcut (Proprietary) Limited (13 764) -

Garrison Steel (Proprietary) Limited (355 545) (363 144)

Discount Steel KZN (Proprietary) Limited (989 568) (909 516)

Discount Steel Trading (Proprietary) Limited (449 370) (405 648)

Dividends from/(to) related parties

Discount Steel Africa (Proprietary) Limited 1 126 667 -


Discount Steel Trading (Proprietary) Limited - 338 333

Compensation to directors and other key management

Details of compensation to directors and other key management is detailed in note 41.



COMPANY

2008

R

2007

R

Purchases from/(sales to) related parties

Shearcut (Proprietary) Limited 2 764 963 -

Garrison Steel (Proprietary) Limited 318 355 -

Discount Steel Africa (Proprietary) Limited - 237 745

Administration fees paid to/(received from) related parties


Shearcut (Proprietary) Limited (13 764) -

Garrison Steel (Proprietary) Limited (355 545) (363 144)

Discount Steel KZN (Proprietary) Limited (989 568) (909 516)

Discount Steel Trading (Proprietary) Limited (449 370) (405 648)

Dividends from/(to) related parties

Discount Steel Africa (Proprietary) Limited 1 126 667 -


Discount Steel Trading (Proprietary) Limited - 338 333

Compensation to directors and other key management

Details of compensation to directors and other key management is detailed in note 41.

97


41. DIRECTORS’ EMOLUMENTS

42. COMPARATIVE FIGURES

Certain comparative figures have been reclassified.

43. RETIREMENT BENEFITS

Defined contribution plan. It is the policy of the group to provide retirement benefits to all its employees. A number of defined contribution provident funds, all of which are subject to the Pensions Fund Act exist for this purpose.

The group is under no obligation to cover any unfunded benefits.

GROUP

Executive 2008

BasicRemuneration

Performance bonus

Retirement, medical and

other benefits TotalR R R R

W L Battershill 1 078 352 3 044 284 191 363 4 313 999

G D G Mackenzie 967 354 2 878 411 176 587 4 022 352

J R Waller 723 542 1 721 432 263 120 2 708 094

C Parry* 335 766 651 610 99 150 1 086 526

3 105 014 8 295 737 730 220 12 130 971

2007

Emoluments Performancebonus

Total

R R R

W L Battershill 1 080 036 2 426 191 3 506 227

G D G Mackenzie 914 575 1 118 141 2 032 716

J R Waller 841 680 1 269 359 2 111 039

2 836 291 4 813 691 7 649 982

Non-executive

Directors’fees

Committeefees Total

R R R

N G Payne 46 667 75 833 122 500

E Dube ** 46 667 23 333 70 000

93 334 99 166 192 500

* resigned 26 September 2007 ** resigned 13 June 2008

2008 2007

R R

The total group contribution to such schemes 2 605 591 1 772 716

Number of members on scheme 214 188

GROUP 2008 2007

R R

2 605 591

214

98

SHAREHOLDERS ANALYSIS

BSI (SA) Limited : Shareholder Analysis Tables

Register Date: 28 March 2008

Issued Share Capital: 721,775,228 shares

SHAREHOLDER SPREAD No. of shareholders % No. of Shares %

1 - 1,000 shares 23 2.73 15,141 0.00

1,001 - 10,000 shares 393 46.56 2,088,848 0.29

10,001 - 100,000 shares 301 35.66 10,895,822 1.51

100,001 - 1,000,000 shares 88 10.43 31,749,686 4.40

1,000,001 shares and over 39 4.62 677,025,731 93.80

844 100.00 721,775,228 100.00

DISTRIBUTION OF SHAREHOLDERS No. of shareholders % No. of Shares %Broker 2 0.24 864,939 0.12 Close Corporation 12 1.42 1,622,380 0.22 Endowment Funds 5 0.59 164,125,838 22.74 Hedge Fund 1 0.12 5,898,778 0.82 Individuals 715 84.72 105,205,021 14.58 Investment Company 3 0.36 8,954,084 1.24 Mutual Funds 12 1.42 36,190,673 5.01 Nominees and Trust 56 6.64 338,089,910 46.84 Other Corporations 9 1.07 1,143,651 0.16 Pension Funds 2 0.24 20,000 0.00 Private Companies 25 2.96 57,489,722 7.97 Public Companies 1 0.12 250,000 0.03 Share Trust 1 0.12 1,920,232 0.27

844 100.00 721,775,228 100.00

PUBLIC / NON - PUBLIC SHAREHOLDERS No. of shareholdings % No. of Shares %

Non - Public Shareholders 51 6.04 576,798,374 79.91

Directors of the Company holdings 4 0.47 439,262,774 60.86

Subsidiary Directors holdings 14 1.66 131,385,368 18

Designated Advisor 5 0.59 2,833,000 0.39

Staff 27 3.20 1,397,000 0.19

Share Trust (BSI Share Incentive Trust) 1 0.12 1,920,232 0.27

Public Shareholders 793 93.96 20.09

844 100.00 721,775,228 100.00

Beneficial shareholders holding of 3% or more No. of Shares %

Longefellow Trust 164,055,838 22.73

Denbigh Trust 164,055,838 22.73

Jamand Trust 84,949,740 11.77

Craig Parry Family Trust 52,466,950 7.27

Vunani Capital (Pty) Ltd 50,240,000 6.96

144,976,854

99

NOTICE OF ANNUAL GENERAL MEETING

BSI (SA) Limited (Incorporated in the Republic) (Registration no 2001/023164/06) JSE code: BSS ISIN: ZAE000107371 (“BSI” or “the Company”)

Notice is hereby given that the annual general meeting of members of BSI (SA) Limited will be held at the Michelangelo Hotel Business Centre, Nelson Mandela Square, Sandton on Thursday, 11 September 2008 at 9.00 am to consider the business set out herein and if deemed fit, to pass, with or without modification the ordinary and special resolutions set out below:

ORDINARY BUSINESS:

Ordinary resolution no. 1: Consideration of Annual Financial Statements

To receive and adopt the annual financial statements for the company and the group for the year ended 31 March 2008, together with the directors’ and auditors’ reports.

Ordinary resolution no. 2: Re-appointment of auditors

To re-appoint Deloitte and Touche as independent auditors of the company for the year ending 31 March 2009.

Ordinary resolution no. 3: Re-election of directors

In terms of article 108 of the company’s articles of association, the following directors retire at this annual general meeting, but being eligible, offer themselves for re-election. Such re-elections are to be voted on individually unless a resolution is agreed to by the meeting (without any vote against it) that a single resolution be used.

Ordinary resolution no. 4: Re-election of directors

In terms of article 117 of the company’s articles of association, the following directors retire by rotation at the annual general meeting, but being eligible, offer themselves for re-election. Such re-elections are to be voted on individually unless a resolution is agreed to by the meeting (without any vote against it) that a single resolution be used.

A brief CV of each director is available on pages 12 & 13 of this annual report.

Ordinary resolution no. 5: Directors’ remuneration

Resolved that the remuneration of the directors as set out on page 97 of this report be confirmed and approved.

Ordinary Resolution no. 6: Unissued ordinary shares placed under the control of the directors

Resolved that the entire authorised but unissued ordinary share capital of the company, from time to time be placed under the control of the directors of the company, which directors are, subject to the rules and regulations of the JSE Limited (“JSE”) and the provisions of sections 221 and 222 of the Companies Act,1973 as amended, authorised to allot and issue any such shares at such time or times, to any such person or persons, company or companies and upon such terms and conditions as they may determine, such authority to remain in force until the next annual general meeting of the company, but at all times subject to sufficient unissuedshares being available for issue and subject to the provisions of the Companies Act.

N G Payne

W R Teichmann

C Parry

R G Lewis

B M Khoza

N M Anderson

WL Battershill

J R Waller

100

Ordinary resolution no. 7: General authority to issue of shares for cash

Resolved that in terms of the Listing Requirements of the JSE Limited (“JSE”), the mandate given to the directors of the companyin terms of a general authority to issue shares for cash, as and when suitable opportunities arise be renewed subject to the following conditions:

1. That the general authority be valid until the company’s next annual general meeting provided that it shall not extend beyond fifteen months from the date of the passing of this ordinary resolution (whichever period is shorter).

2. The allotment and issue of the shares must be made to public shareholders as defined in the Listing Requirements of the JSE.

3. 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 shares or rights that are convertible into a class already in issue.

4. The number of shares issued for cash in aggregate in any one financial year shall not exceed 50% (fifty percent) of the company’s issued share capital of ordinary shares. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares issued during the current financial year, provided that any ordinary shares to be issued pursuant to a rights issue (announced, irrevocable and fully underwritten) or acquisition (concluded up to the date of application including announcement of the final terms) may be included as though they were shares in issue at the date of application.

5. The maximum discount at which ordinary shares may be issued is 10% (ten percent) of the weighted average traded price of those shares over the 30 business days prior to the date that the price of the issue is agreed between the company and the party subscribing for the securities or any other price agreed to by the JSE.

6. After the company has issued shares for cash which represent, on a cumulative basis within a financial year, 5% (five percent) or more of the number of shares in issue prior to that issue, the company shall publish an announcement containing full details of the issue (including the number of shares issued, the average discount to the weighted average traded price of the shares over the 30 days prior to the date that the price of the issue is determined or agreed to by the directors and the effect of the issue on net asset value and earnings per share), or any other announcements that may be required in such regard in terms of the Listing requirements of the JSE which may be applicable from time to time.

In terms of the Listing Requirements of the JSE, a 75% (seventy five percent) majority of the votes cast by shareholders present or represented by proxy at the general meeting, excluding the Designated Adviser and the controlling shareholders together with their associates, must be cast in favour of ordinary resolution number 7 for it to be approved.

SPECIAL BUSINESS

Special resolution no. 1: Name change [11.36]

“Resolved, as a special resolution, that the name of the company be changed from BSI (SA) Limited to BSI Steel Limited.”

Reason for and effect of Special Resolution number 1 [11.1(a)]

The reason for and effect of Special Resolution number 1 is to change the name of the company in order to more accurately reflectthe company’s core business.

The abbreviated name on the JSE will be BSI Steel, JSE code BSS and ISIN ZAE000125134 from the commencement of business on Monday, 6 October 2008, subject to shareholders approval and the registration of special resolution number 1 at CIPRO. This date may be changed at the JSE’s request.

Please take careful note of the following provisions regarding the action required by shareholders in regard to the company’s name change: [11.1(b)]

1. If you have disposed of all of your shares, a copy of this annual report should be forwarded to the purchaser of such sharesor the broker, Central Securities Depositary Participant (“CSDP”) banker or other agent who disposed of your shares for you.

2. If you are in any doubt as to what action to take, consult your CSDP, broker, attorney, banker or other professional adviserimmediately.

3. Special resolution number 1 relates to the proposed change of name of the Company. You should carefully read through the following information and decide how you wish to vote on the relevant resolution to give effect to the change of name of the Company.

4. Voting instructions are set out on page 106 below. 5. Surrender of shares - On the assumption that the resolution to give effect to the proposed name change of the company is

approved by the requisite majority of shareholders at the annual general meeting, and the Registrar of Companies has registered the requisite special resolution, shareholders should act as follows:

NOTICE OF ANNUAL GENERAL MEETING (continued)

101

• If you have dematerialised your shares, you do not need to take any further action as your CSDP or broker will arrange for your account to be updated with the new ordinary shares.

• Certificated shareholders must complete the attached form of surrender and submit it to the transfer secretaries, together with their documents of title, in order to receive replacement share certificates. Replacement share certificates will be issued on or about Monday, 13 October 2008 for forms of surrender together with documents of title, received by 12:00 on Friday, 10 October 2008 and thereafter within five business days of receipt of such forms of surrender, together with documents of title. [11.1(e)] [11.1(f)] [11.1(f)(iii)] [3.53]

• If any existing documents of title have been lost or destroyed and the certificated shareholder provides evidence to this effect to the satisfaction of the directors, then the company may dispense with the surrender of such documents of title against provision of an acceptable indemnity. [3.54] [3.55]

• Receipts will not be issued for the surrender of existing documents of title. Lodging agents who require special transaction receipts are requested to prepare such receipts and submit them for stamping together with the documents of title lodged. [3.58]

• In terms of Exchange Control regulations, if the registered address of any certificated shareholder is outside the common monetary area or if any certificates surrendered are restrictively endorsed in terms of those regulations, the relevant certificates to be issued on implementation of the name change will also be restrictively endorsed in terms of those regulations. With regard to dematerialised shareholders having a registered address outside the common monetary area, the shareholdings are annotated in the sub-register of shareholders and statements are restrictively endorsed in terms of those regulations.

• The results of the annual general meeting approving the change of name will be announced on SENS on Thursday, 11 September 2008. Additional surrender forms will be available on request from the transfer secretaries of the Company. [11.1(d)]

Salient Dates and times: [11.1(f)(vi)]

Note: The dates and times provided for in this circular are subject to amendment. Any such amendment will be released on SENS.Shareholders will not be able to dematerialise or rematerialise securities in the name of BSI (SA) Limited after Friday, 3 October 2008.

Opinions, recommendations and voting

The directors of BSI who have direct and indirect interests in the issued share capital of the Company support the proposal to change the company’s name and intend to vote in favour of the requisite special resolution in respect of all their shares and recommend that shareholders vote in favour of the relevant special resolution.

Special resolution no. 2: Increase in Authorised Share Capital

Resolved that the company increase its existing authorised ordinary share capital from R 10 000 divided into 1 000 000 000 ordinary shares of 0.001 cent to R 100 000 divided into 10 000 000 000 ordinary shares of 0.001 cent each by the creation of 9 000 000 000 ordinary shares of 0.001 cent each.

Notice of annual general meeting containing information re change of name, posted to shareholders and released on SENS Wednesday, 20 August 2008

Last day to lodge forms of proxy for the general meeting by 09h00 on Wednesday 10 September 2008

Annual general meeting at 9h00 on Thursday, 11 September 2008

Results of annual general meeting released on SENS including information relating to change of name Thursday, 11 September 2008

Special resolution registered with Registrar of Companies by no later than Thursday, 25 September 2008

Finalisation date Friday, 26 September 2008

Change of name effective from commencement of trading on Monday, 6 October 2008

List and trade new shares in the new name from commencement of trading on Monday, 6 October 2008

Record date Friday, 10 October 2008

Replacement share certificates will be posted to certificated shareholders, provided their share certificate/s together with a form of surrender has been received by the transfer secretaries before 12:00 on the record date. Any share certificates received after 12:00 on the record date will be replaced within 5 business days after receipt . Dematerialised shareholder accounts at CSDP and/or brokers updated on


Friday, 26 September 2008Last day to trade Friday, 3 October 2008

Monday 13 October 2008

102

The reason for Special resolution no 2 is to increase the company’s authorised share capital in order to allow the company to issue further ordinary shares for the purpose of increasing working capital and potential acquisition opportunities beneficial to thecompany. The effect of the special resolution will be to approve the increase in the authorised share capital of the company tofacilitate the issue of shares for funding transactions beneficial to the company.

Special resolution no. 3: General Authority to repurchase shares:

Resolved in terms of section 85 of the Companies Act No 61 of 1973 as amended and the memorandum and articles of association of the company (or one of its wholly-owned subsidiaries) that the directors of the company be authorised, by way of a general approval, until this authority lapses at the next annual general meeting of the company provided that it shall not extend beyond fifteen months from the date of passing of this special resolution (whichever period is the shorter), to acquire the company’s own shares, upon such terms and conditions and in such amounts as the directors may from time to time decide, but subject to the Listings Requirements of the JSE (“JSE”) subject to the following terms and conditions:

1. any repurchase of securities must be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and the counter party;

2. the company may only appoint one agent to effect any repurchases on its behalf; 3. the number of shares which may be repurchased pursuant to this authority in any financial year may not in the aggregate exceed 20% (twenty percent) of the company’s issued share capital as at the date of passing of this special resolution or 10% of the company’s issued share capital in the case of an acquisition of shares in the company by a subsidiary of the company;

4. repurchases of shares may not be made at a price greater than 10% (ten percent) above the weighted average of the market value of the securities for the five business days immediately preceding the date on which the transaction was effected;

5. repurchases may not be undertaken by the company or any of its wholly owned subsidiaries during a prohibited period as defined in the Listings Requirements of the JSE unless a repurchase programme is in place where the dates and quantities of securities to be traded during the relevant period are fixed and full details of the programme have been disclosed in an announcement over SENS prior to the commencement of the prohibited period;

6. repurchases may only take place if, after such repurchase, the shareholder spread of the company complies with the Listing Requirements of the JSE;

7. after the company has acquired shares which constitute, on a cumulative basis, 3% (three percent) of the initial number of shares in issue (at the time that authority from shareholders for the repurchase is granted) of the relevant class of securitiesand for each 3% in aggregate of the initial number of that class acquired thereafter, the company shall publish an announcement containing full details of such repurchase, and;

8. the company’s Designated Advisor shall confirm the adequacy of the company’s working capital for purposes of undertaking the repurchase of shares in writing to the JSE prior to entering the market to proceed with the repurchase.

The effect of the special resolution no 3 and the reason therefor is to extend the general authority given to the directors of the company or any subsidiary of the company in terms of the Act and the JSE Listings Requirements for the acquisition by the company or its subsidiaries of the companies securities which authority shall be used at the directors’ discretion during the course of the period authorised.

In accordance with the Listings Requirements of the JSE Limited, the directors record that:

Although there is no immediate intention to effect a repurchase of securities of the company, the directors would utilise the general authority to repurchase securities as and when suitable opportunities present themselves, which opportunities may require expeditious and immediate action.

The directors, after considering the maximum number of securities which may be repurchased and the price at which the repurchases may take place pursuant to the repurchase general authority, are of the opinion that for a period of 12 months after the date of this notice of this annual general meeting:

• the company and the group will be able to pay their debts in the ordinary course of business;

• the consolidated assets of the company and of the group will be in excess of the liabilities of the company and the group for a period of 12 months after the date of the announcement. For this purpose the assets and liabilities should be recognised and measured in accordance with the accounting policies used in the latest audited group annual financial statements ;

• the share capital and reserves of the company and of the group will be adequate for the purposes; and

• the working capital available to the company and its subsidiaries will be adequate for ordinary business .


103

Disclosures required in terms of paragraphs 11.19 and 11.26 of the Listings Requirements:

The following additional information, some of which may appear elsewhere in this annual report is provided in terms of the Listing Requirements for purposes of ordinary resolution number 8 and special resolutions numbered 1, 2 and 3:

Directors of the company – pages 12 & 13

Major shareholders – page 98

Directors’ interest in the company’s shares – page 39

Company’s share capital – page 83

Directors’ responsibility statement

The directors, whose names are given on pages 12 and 13 of this annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to the above 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 statement false or misleading and that all reasonable enquiries to ascertain such facts have been made and that the aforementioned special resolution contain all the information required by the JSE.

Material change

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 or its subsidiaries since the company’s financial year end and the signature of this report.

Litigation statement

Other than as disclosed or accounted for in this annual report, the directors are not aware of any, legal or arbitration proceedings , including any proceedings that are pending or threatened of which the company is aware which may have or have had in the recent past, being at least the previous 12 months from date of this annual report, a material effect on the financial position of the company and its subsidiaries.


104

Voting and Proxies

A shareholder of the company entitled to attend, speak, and vote at the annual general meeting is entitled to appoint a proxy or proxies to attend, speak and on a poll vote in his stead. The proxy need not be a shareholder of the company. A form of proxy is attached for the convenience of any certificated shareholder and own name registered dematerialised shareholder who cannot attend the annual general meeting, but who wishes to be represented.

Additional forms of proxy may also be obtained on request from the company’s registered office. The completed forms of proxy must be deposited at, posted or faxed to the transfer secretaries at the address set out on the inside of the back cover, to be received by no later than 9:00 on Wednesday, 10 September 2008. Any member who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the annual general meeting should the member subsequently decide to do so.

On a show of hands, every shareholder of the company present in person or by proxy shall have 1 (one) vote only, irrespective of the number of shares he holds or represents, provided that a proxy shall, irrespective of the number of members he represents have only 1 (one) vote. On a poll, every shareholder of the company who is present in person or represented by proxy, shall have one vote for every share held in the company by such shareholder.

Shareholders who have dematerialised their ordinary shares through a CSDP or broker, other than own name registered dematerialised shareholders, and who wish to attend the annual general meeting must request their CSDP or broker to issue them with a Letter of Representation. Alternatively, dematerialised shareholders other than own name registered dematerialised shareholders, who wish to be represented, must provide their CSDP or broker with their voting instructions in terms of the custody agreement between them and their CSDP or broker in the manner and by time-frame stipulated.

In terms of the listings Requirements any shares held by the BSI (SA) Limited Share Incentive Scheme will not have their votes at the annual general meeting taken into account in determining the results of voting on the special and ordinary resolution tabled thereat.

By order of the board

S J Hackett

Company Secretary

Pietermaritzburg

19 August 2008


S J Hackett

105

BSI (SA) Limited(Incorporated in the Republic) (Registration no 2001/023164/06) JSE code: BSS ISIN: ZAE000107371 (“BSI” or “the Company”)

For use by the holders of the company’s certificated ordinary shares (“certificated shareholder”) and/or dematerialised ordinary shareholders whose shares are held through a CSDP or broker and who have selected own name registration (“own name dematerialised shareholders”) at the annual general meeting of the company to be held at the Michelangelo Hotel Business Centre,Nelson Mandela Square, Sandton on Thursday, 11 September 2008 at 9.00 am and at any adjournment thereof. [11.1(f)(iv)] [11.1(f)(v)]

Not for the use by holders of the company’s dematerialised ordinary shares who are not own name dematerialised shareholders. Such shareholders must contact their CSDP or broker timeously if they wish to attend and vote at the annual general meeting andrequest that they be issued with the necessary Letter of Representation to do so, or provide the CSDP or broker timeously with their voting instructions should they not wish to attend the annual general meeting in order for the CSDP or broker to vote thereat in accordance with their instructions. [11.1(f)(v)]

I/We (Please print full names)

of (address)

being the holder(s) of ordinary shares in the company, hereby appoint or failing him / her or failing him / her

the chairperson of the annual general meeting, as my/our proxy to vote for me/us on my/our behalf at the annual general meetingwhich will be held for the purpose of considering and deemed fit, passing, with or without modification, the special and ordinaryresolutions to be proposed thereat and at any adjournment thereof; and to vote for/and or against the special and ordinary resolution and/or abstain from voting in respect of the ordinary share register in my/our name/s, in accordance with the following instruction:

(*Please indicate with an ”X” the appropriate space below how you wish your votes to be cast unless otherwise instructed my/ourproxy may vote as he/she thinks fit.

Signed this day of 2008

Signature

Assisted by (if applicable)

Please read the notes on the reverse.

In favour Against Abstain

ORDINARY BUSINESS 1. To adopt the annual financial statements for the year ended 31 March 2008

2. To re-appoint Deloitte and Touche as independent auditors of the company

3. (a) To re-elect Mr N G Payne as a director

(b) To re-elect Mr W R Teichmann as a director

(c) To re-elect Mr C Parry as a director

(d) To re-elect Mr R G Lewis as a director

(e) To re-elect Mr B M Khoza as a director

(f) To re-elect Mr N M Anderson as a director

4. (a) To re-elect Mr W L Battershill as a director (b) To re-elect Mr J R Waller as a director

5. To approve remuneration paid to directors

6. To place unissued shares under the control of the directors

7. General authority to issue shares for cash

SPECIAL BUSINESS: 8. Special resolution no. 1: To change the name of the company 9. Special resolution no. 2: To increase the authorised share capital

10. Special resolution no. 3: General authority to repurchase shares

FORM OF PROXY [3.52]

Dr

106

1. This form of proxy is to be completed only by those members who are:

a) holding shares in certificated form; or

b) recorded in the sub register in electronic form in their “own name”.

2. A shareholder may insert the name or names of two alternative proxies of his/her choice in the space provided, with or without

deleting “the chairman of the meeting”. The person whose name appears first on the form of proxy and who is present at the

annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. Any such proxy, who

need not be a shareholder of the company, is entitled to attend, speak and vote on behalf of the shareholder.

3. A proxy is entitled to one vote on a show of hands and, on a poll, one vote for each share held. A shareholder’s instructions to the

proxy must be indicated in the appropriate spaces.

4. If a shareholder does not indicate on this instrument that the proxy is to vote in favour of or against any resolution or to abstain

from voting or gives contradictory instructions, or should any further resolution/s or any amendment/s which may be properly

put before the annual general meeting be proposed, the proxy shall be entitled to vote as he thinks fit.

Forms of proxy must be lodged at, posted to or faxed to the transfer secretaries, Computershare Investor Services (Pty) Ltd, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (P O Box 61051, Marshalltown, 2107) to reach the company by no later than 09.00 on Wednesday, 10 September 2008.

5. Documentary evidence establishing the authority of the person signing the proxy in a representative capacity must be attached

to this form of proxy unless previously recorded by the company’s transfer secretaries or waived by the chairperson of the

annual general meeting.

6. The completion and lodging of this form of proxy does not preclude the relevant shareholder from attending the annual general

meeting and speaking and voting in person to the exclusion of any proxy appointed in terms of this proxy form.

7. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.

8. The chairman of the meeting may accept or reject any form of proxy, which is completed and/or received other than in

accordance with these notes, provided that he shall not accept a proxy unless he is satisfied as to the manner in which a

member wishes to vote.

9. Shareholders who have dematerialised their shares must inform their Central Securities Depository Participant (“CSDP”) or

broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the

necessary Letter of Representation to attend the annual general meeting or provide their CSDP or broker with their voting

instructions should they not wish to attend the annual general meeting in person but wish to be represented there at. This

must be done in terms of the agreement entered into between the members and their CSDP or broker.

NOTES TO FORM OF PROXY

107

BSI (SA) Limited (Incorporated in the Republic) (Registration no 2001/023164/06) JSE code: BSS ISIN: ZAE000107371 (“BSI” or “the Company”)

Form of surrender (for use by certificated BSI shareholders) [11.1(f)(ii)]

Please refer to the instructions below before completing the form.

To: Computershare Investor Services (Proprietary) Limited 70 Marshall Street Johannesburg, 2001 (PO Box 61763, Marshalltown, 2107)

Dear sirs,

I/We, the undersigned, hereby surrender the enclosed documents of title in respect of the shares held by me/us in BSI.

I/We hereby instruct you to post to me/us at my/our risk, a replacement certificate/s or other documents of title reflecting the name of the company.

Yours faithfully

Replacement share certificates will be issued on or about Monday, 13 October 2008 for forms of surrender together with documents of title, received by 12:00 on Friday, 10 October 2008 and thereafter within five business days of receipt of such forms of surrender, together with documents of title, to the address as shown in the company’s register of holders, or should such address appear in this form, to that address.

Signature of shareholder


Date

Surname

First names (in full)

Title (Dr, Prof, Mr, Mrs, Miss, Ms, etc)

Postal address (preferably PO Box to which certificates should be sent, if other than in the company’s share regis-tered):)

Postal code

Telephone number including area code (office hours)

Signature of shareholder


Date

Surname

First names (in full)

Title (Dr, Prof, Mr, Mrs, Miss, Ms, etc)

Postal address (preferably PO Box to which certificates should be sent, if other than in the company’s share register)

Postal code

Telephone number including area code (office hours)

the new name of the company.

108

To be completed by all emigrants from and non-residents of the common monetary area

Notes:

1. All shareholders completing and returning this form must also surrender all their existing share certificates. 2. No receipts will be issued for documents lodged, unless specifically requested. In compliance with the requirements of

the JSE, lodging agents are requested to prepare special transaction receipts. Signatories may be called upon for evidence of their authority or capacity to sign this form of acceptance and surrender.

3. Any alterations to this form of surrender must be signed in full and not initialled. 4. If this form is signed under power of attorney, then such power of attorney or a notarially certified copy thereof must be

sent with this form of surrender for noting (unless it has already been noted by the transfer secretaries). 5. Where the member is a company or a closed corporation, unless it has already been registered with the transfer

secretaries, a certified copy of the director’s or members’ resolution authorising the signing of this form of surrender must be submitted if so requested by the transfer secretaries.

6. Note 5 above does not apply in the event of this form of surrender bearing the stamp of a broking member of the JSE. 7. Where there are joint holders of any shares only that holder whose name appears first in the register in respect of such

shares need sign this form of surrender. 8. A shareholder married in community of property or a minor must ensure this form of surrender is also signed by his/her

spouse or parent or guardian, as the case may be.

Name of registered holder (separate form for each holder)

Certificate number/ s Number of shares

For office use only

Total

Signature of authorised dealer/bank

Address

Account number

Signature of shareholder Stamp and address of agent lodging this form (if any)

Assisted by me (if applicable)

(State full name and capacity)

Date

Telephone number (work)

Cell phone number

Postal address

Signature of authorised dealer/bank

Address

Account number

Signature of shareholderStamp and address of agent lodging this form (if any)

Assisted by me (if applicable)

(State full name and capacity)

Date

Telephone number (work)

Cell phone number

Postal address

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