integrated annual report 2012 - rare

www.rare.co.za

Integrated Annual Report 2012

general information

Country of incorporation and domicile South Africa

Nature of business and principal activities The group’s principal activities are those of a fully integrated provider of complete fluid conveyance products and services to the energy, water and chemical industries

Directors T Siyolo P du Plessis MT Lategan H Odendaal SJDT Potgieter W van Coller R Viljoen

Registered office 22 Old Vereeniging Road Klipriver Midvaal 1871

Business address 22 Old Vereeniging Road Klipriver Midvaal 1871

Postal address PO Box 124186 Alrode Johannesburg 1451

Auditors Greenwoods Registered Auditors

Company Secretary R Viljoen

Company registration number 2002/025247/06

Level of assurance These financial statements have been audited in compliance with the applicable requirements of the Companies Act (No 71 of 2008) of South Africa.

Preparer The financial statements were internally compiled under supervision of R Viljoen CA(SA)

GREYMATTER & FINCH # 6617

RARE Holdings 2012 Integrated Annual Report | 1

RARE is a designer, distributor, manufacturer and service provider of

piping and related products

covering the entire fluid

conveyance cycle, across all

fluid sectors.

Our vision is to become a leading provider of

complete fluid conveyance

solutions.

Group at a glance 2

Directorate 3

Chairman’s letter to stakeholders 4

Corporate governance 5 – 9

Audit committee report 10 – 11

Directors’ responsibilities and approval 12

Statement by the company secretary 12

Report of the independent auditors 13

Directors’ report 14 – 21

Annual financial statements 22 – 83

Shareholders’ diary 84

Notice of annual general meeting 85 – 93

Form of proxy Attached

ConTEnTs

2 | RARE Holdings 2012 Integrated Annual Report

THE RARE gRoUPRARE is a designer, distributor and service provider of piping and related products covering the entire fluid conveyance cycle, across all fluid sectors. The company has evolved through management buyout and acquisitions from a specialist pipe supplier in 1975 through to the listed entity, RARE Holdings, in 2007 and ultimately the current B-BBEE-accredited and transformed RARE Group.

RARE’s vision is to become the leading provider of complete fluid conveyance solutions in Africa.

The company is a JSE AltX-listed, level four B-BBEE company with an ISO 9001:2008 accreditation. The geographical footprint includes a head office in Kliprivier, Gauteng, and sales branches in the KwaZulu-Natal and Limpopo provinces. Furthermore RARE is represented in Angola, Zambia and Botswana. The company carries an extensive stock range for the petrochemical and water market sectors at its eleven hectare premises in Kliprivier.

As a complete fluid conveyance solution provider, RARE services the petroleum, chemical, mining, electricity-generating and water engineering markets. Geographical markets include South Africa, Zambia, Ghana, Botswana, Angola and the Democratic Republic of the Congo.

The group is structured into three operating divisions: RARE Trading, RARE Pipeline Services and RARE Water Utility Services.

RARE TRAdingRARE Trading sells a comprehensive range of products, combining steel and plastic pipes, couplings, fittings and valves in a complete package to the contractor or end user. All products represented by RARE conform to international and/or national quality standards. To enhance quality and traceability of the products, RARE also offers a cut-to-length, hot stamping and colour-coding service to the market.

RARE PiPElinE sERviCEsRARE Pipeline Services undertakes the design, supply, erection, installation, commissioning and maintenance of pipeline systems for the mining, chemical and water conveyance industries.

Specialised technologies are used in the execution of pipeline projects. RARE is the sole licensee of Swagelining Technology for sub-Saharan Africa. Swagelining is a superior pipe lining technology where a high-density polyethylene (HDPE) liner is pulled through a steel pipe resulting in a tight-fitting liner which extends the service life of pressure pipelines. The system also involves the use of unique pipe couplers that enables RARE to install a fully welded steel pipeline which is lined with an HDPE lining.

Swagelining is fast becoming the preferred system for slurry and tailings pipelines on mines in Africa. RARE Pipeline Services also offers a range of pipeline rehabilitation services which make use of special technologies. The range of services includes leak detection, network analysis, pump performance monitoring and pipeline rehabilitation. Trenchless rehabilitation technologies include Cured in Place Pipes (CIPP), Aqualiner and Swagelining.

RARE WATER UTiliTy sERviCEsRARE is involved in the supply, installation, maintenance and rehabilitation of dams, bulk water pipelines, water reticulation, sewer and stormwater pipelines. Included in these services are the supply and installation of valves and pumps for dams and water treatment plants.

A new water treatment technology that uses electro coagulation to clean acid mine drainage is currently being installed at a mine and will be commercially launched once testing has been completed.

gRoUP AT A glAnCE


diRECToRATE

T siyoloNon-executive chairman

Themba obtained a sales diploma from the Ashridge Business School, an SEP from the University of Witwatersrand as well as an IRDP from the Stellenbosch Business School. He currently serves as an executive director of PG Bison Limited, while his previous board positions included that of Sanlam Collective Investments and Emergent Office Furniture.

P dU PlEssisIndependent non-executive

Pierre is a chartered accountant and after completion of his articles practised as a group accountant for 18 months. He then joined Volkskas Merchant Bank in the corporate finance and investment banking department for over 10 years. He and his partners started a corporate finance boutique and when the partners emigrated he joined Real Africa Durolink Bank’s corporate finance department. He then joined Real Africa Holdings and, as a result of his experience in corporate finance, became CEO during the value unlocking phase of the company. After the takeover of Real Africa he and his partners started a specialist corporate finance advisory business trading as Sugarbush Capital.

mT lATEgAnNon-executive

Theunie obtained a BAcc Honours, a master’s of Commerce and a doctorate of Commerce as well as a Higher Diploma in Banking. He qualified as a chartered accountant and served as a partner with Price Waterhouse Meyernel (now PricewaterhouseCoopers), specialising in taxation. His prior experience also includes positions as general manager at Rand Merchant Bank, chief executive officer of First National Bank Corporate Division and senior executive of the FirstRand Group. He served on numerous boards, including McCarthy Motor Group, Profurn, Relyant Retail and SA Rugby. He currently serves on the council of the University of Witwatersrand and on the board of Steinhoff International.

H odEndAAlIndependent non-executive

After qualifying as a chartered accountant, Hein stayed with Arthur Young and Co (now Ernst & Young) as a manager until May 1987. He joined the South African Reserve Bank as a financial manager until January 1989, after which he joined Price Waterhouse Meyernel (now

PricewaterhouseCoopers) as a partner. He left PricewaterhouseCoopers Incorporated in February 1992 and joined Vleissentraal as general manager Finance.

In February 1995, Hein joined Roadway Transport as financial director, a position he held until September 2001 when he was transferred to Steinhoff head office. (Roadway became a subsidiary company of Steinhoff during August 1998.) Hein is the managing director of Steinhoff Africa Holdings Proprietary Limited and also the managing director of Steinhoff Africa Group Services.

sJdT PoTgiETERNon-executive

Stefan obtained his BAcc Honours degree in 2004 from the University of Stellenbosch and qualified as a chartered accountant in 2007. His prior experience includes positions as financial director of multiple privately held companies across a wide array of businesses, including Mayfair Speculators Proprietary Limited and Stafric Investment and Management Services Proprietary Limited.

W vAn CollER (CEo)Wally attended the University of Stellenbosch obtaining an honours degree in Mechanical Engineering in 1978. In 1988 he was awarded a master’s degree in Business Leadership from Unisa. He also holds a Government Certificate of Competency as a mechanical engineer. Wally was previously managing director of various companies, including among other William Tell Industries and DPI Plastics. He joined RARE in June 2011 as operations director.

R vilJoEn (CFo)Renier obtained his BAcc Honours degree in 2006 from the University of Stellenbosch. He served his articles at Greenwoods Chartered Accountants in Cape Town and qualified as a chartered accountant in 2009. Thereafter he became financial manager of a private company and joined RARE during July 2011 in the role of group accountant.


CHAiRmAn’s lETTER To sTAKEHoldERs

RARE experienced a challenging year in which we had to reposition the company to ensure a return to profitability and growth. The most important was to restructure the company and the appointment of a new management team. This included a new chief executive officer, Wally van Coller, and a new financial director, Renier Viljoen, who were appointed in April 2012. Wally is a qualified mechanical engineer with 34 years of industry experience and Renier is a registered chartered accountant.

Unprofitable business activities were closed and the management team has been streamlined by implementing a flat, flexible structure. With the restructuring behind us, we are now looking forward to an improved performance.

A new funding plan was implemented which included debtors financing, stock financing and a R50 million short-term loan facility to finance working capital shortages.

The strategy going forward is to grow trading sales and gross margins which is RARE’s core business as well as the effective execution of turnkey pipeline installations by utilising our exclusive technologies in sub-Saharan Africa.

The board and management are committed to good corporate governance. We are aware that the guidelines suggested by King III are possibly not all in place, but we are committed to implementing these principles as they apply to RARE moving ahead.

This integrated annual report is another step on the road to integrated reporting. This is a journey that will take a number of years and will continue to evolve as the company grows. We support the reporting requirements dictated by the JSE Listings Requirements and the new Companies Act as a means to improve our communication with all stakeholders.

I succeeded Dr Theunie Lategan, who resigned as chairman of the board on 15 May 2012 but who still remains a non-executive board member. Theunie played a prominent role in the restructuring and turnaround of the RARE Group. He brought a fresh and professional approach to the company that should reflect in future results. I would like to thank Theunie for his contribution and I will do my best to fill his shoes and help position RARE for the future.

Finally, on behalf of the board, I thank each and every shareholder, client, supplier, financier, employee and stakeholder for standing by RARE through a testing year. I am confident that your faith, invaluable input and hard work will be rewarded as RARE transforms itself for an exiting future.

T siyoloChairman


inTRodUCTionRARE Holdings aspires to the highest level of corporate governance and best practices as enshrined in the King Report on Corporate Governance (King III). The Board not only sees value in subscribing to a system whereby King III ethics, personal and corporate integrity and governance practices set the standards of compliance, it also sees this as good business practice.

The Board recognises the responsibility of RARE to conduct its affairs with prudence and integrity, transparency, accountability and social responsibility and to account therefor in accordance with International financial reporting standards to safeguard the interests of stakeholders.

BoARd oF diRECToRsThe Board of seven directors comprise a majority of non-executive directors (five), of whom two are independent, who lead the company. This composition of the Board reflects the need to protect the best interests of the company. Having regard for the fact that T Siyolo who replaced T Lategan as chairman on 15 May 2012 is not independent and in order to comply with the King III Report, Pierre du Plessis remains the lead independent director.

The CEO, D Scheepers, and CFO, P Willemse, resigned on 27 March 2012 and were respectively succeeded by W van Coller and R Viljoen with immediate effect.

A formal and transparent nominations process is followed when appointments to the board are made, which is a matter for the board as a whole. The main objective is to establish and maintain a balanced and ethical board.

The names and brief curriculum vitae of the directors are set out on page 3 of the annual report. The appointment process for new directors is conducted at board level in a formal and transparent manner. There is an appropriate balance between the number of executive directors (two) and non-executive directors (five) to avoid any director exercising unrestricted powers of decision-making.

The Board has adopted a board charter which confers amongst others the following responsibilities to the Board:• Retainfullandmanagementcontrolofthe

company;• Givestrategicdirectiontothecompany;• Monitormanagementinimplementingplansand

strategies;• Identifyandregularlymonitorkeyriskareasand

key performance indicators of the business;• Ensurethatthecompanycomplieswithrelevant

laws, regulations and codes of business practice;• Ensurethatthecompanycommunicateswith

shareholders and relevant stakeholders openly and promptly; and

• Regularlyreviewprocessesandprocedurestoensure effectiveness of internal systems of control and accept responsibility for the total process of risk management.

Annually, the Board reviews the company’s strategy as proposed and recommended by the executive management team and monitors the execution and implementation thereof. The company’s chief executive officer is charged with the responsibility of the ongoing operations of the company. Together with the executive management team he develops the company’s long-term strategy and recommends the business plan and budgets to the Board for consideration.

In accordance with the Articles of Association, one-third of the directors of the company are required to retire by rotation at every Annual General Meeting and their re-appointment is subject to shareholders’ approval. In addition, the appointments of all new directors are subject to confirmation by shareholders at the first Annual General Meeting after their initial appointment.

Eight board meetings took place during the financial year and attendance is indicated in the schedule on the following page.

CoRPoRATE govERnAnCE


CoRPoRATE govERnAnCE (continued)

sUCCEssion PlAnning

The formal succession plan for the chief executive officer, chairman and Board is reviewed annually by the Remuneration Committee. In addition the committee regularly reviews the group’s succession strategy and makes recommendations to the Board.

BoARd CommiTTEEsTwo committees functioned during the year to assist the Board in discharging its responsibilities, namely the Audit and Risk Committee and Remuneration, Transformation and Sustainability committees. Subsequent to year-end a Social and Ethics Committee was also formed.

The committees have an important role in enforcing the high standards of governance and achieving increased effectiveness within the group. Whilst the Board has delegated certain of its functions to these committees, it remains fully accountable for the proper discharging of the responsibilities. Only non-executive directors are members of these committees of the Board. The chief executive and other members of executive management whose presence is required for such committees’ effective performance of their responsibilities are invited to be in attendance at committee meetings.

AUdiT And RisK CommiTTEE

The committee held two meetings during the year and consisted of three members, P du Plessis (Independent non-executive and chairman), H Odendaal (Independent non-executive) and S Potgieter (Non-executive). T Lategan (Independent non-executive) was appointed as a member sub-sequent to year end but before the date of this report.

The attendance at meetings of the committee was as follows:

23 september 19 marchname 2011 2012

P du Plessis 3 3

H Odendaal 3 3

S Potgieter 3 3

Report of the Audit and Risk CommitteeThe information below constitutes the report of the Audit and Risk Committee in respect of the past financial year of the company, as required by section 94 of the Companies Act (No 71 of 2008).

The Committee operates under written terms of reference, which have been confirmed by the Board, and has satisfied its responsibilities as set out in the terms of reference.

The purpose of the committee is to review the following:• Theriskareasoftheentity’soperationstobe

covered in the scope of external audits;• Theadequacy,reliabilityandaccuracyoffinancial

information provided to management;• Theaccountingorauditingconcernsidentified

as a result of the external audits;• Theadequacyofpoliciesandprocedures

considered necessary to comply with the requirements of the Companies Act;

• Thecompany’scompliancewithlegalandregulatory provisions;

• Theadequacyofitstermsofreference;and• Thescopeandresultsoftheexternalauditand

its cost effectiveness.

name 23 sept 2011

28 nov 2011

13 dec 2011

19 march 2012

10 April 2012

5 may 2012

10 may 2012

28 may 2012

T Siyolo 3 3 3 3 3 3 3 3

P du Plessis 3 3 3 3 3 3 3 3

T Lategan 3 3 3 3 3 3 3 3

H Odendaal 3 3 3 3 3 3 3 3

S Potgieter 3 3 3 3 3 3 3 3

A Martin (Resigned) 3 3

D Scheepers (Resigned) 3 3 3 3

P Willemse (Resigned) 3 3 3 3

sCHEdUlE oF ATTEndAnCE AT BoARd oF diRECToRs mEETings

BoARd


The Committee has also been responsible for ensuring adequate segregation between non-audit services and the audit services, where these services were provided by the same accounting firm.

The policy on non-audit services, which is reviewed annually by the Committee, sets out the detail of and which services may or may not be provided to RARE by the external auditors.

The Committee has assessed and positively endorsed the experience and expertise of the current financial director.

The Committee has nominated, subject to the endorsement of the Board and the approval of shareholders, the re-appointment of Greenwoods Chartered Accountants and Mr D Botha as the independent registered audit firm and the individual registered auditor of the company respectively.

Given the challenges faced by the company during the current financial year, the intention to establish a properly resourced internal audit function had to be postponed to the 2013 financial year. Certain internal audit functions are however being performed by the finance department.

The Committee has evaluated the annual financial statements of RARE Holdings Limited and its subsidiaries for the year ended 30 June 2012 and concluded that they comply with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) in all material respects, the JSE Listings Requirements and with the requirements of the Companies Act (No 71 of 2008).

The Committee concurs with the going concern premise in preparing the annual financial statements, and has recommended their adoption by the Board of Directors.

RARE is willing to take on risks at manageable levels for operations and finance, recognising that reward and opportunities flow from the acceptance of risk. The committee is in the process of conducting a comprehensive review of the risk management structure in order to reassess the risk appetite and update the current risk matrix.

In the light of the difficult financial circumstances in which the company has been trading, the current risk appetite is naturally low. However, these circumstances make the company vulnerable to outside events and aggressive competition; hence

the risk register identifies risks in excess of those acceptable in terms of the appetite. This requires close monitoring and vigilance and the company has adopted a policy which requires every level of management to accept that risk management is an integral part of his/her job responsibilities.

The company has taken steps to reduce the risks in its operations by centralising controls, cutting costs through rationalisation of corporate and organisation structures. After year-end, the company replaced its ERP system which will give management easier access to pertinent real time management information.

In addition, the company continually addresses the risks associated with its current funding structure and liaises closely with its major shareholder in this regard. There were no major investments considered during the year.

REmUnERATion, TRAnsFoRmATion And sUsTAinABiliTy CommiTTEE

During the year this committee held two meetings and comprised three members, T Lategan (Indepen-dent non-executive and chairman), P du Plessis (Independent non-executive) and T Siyolo (Non-executive). The CEO attended meetings on invitation.

Attendance of meetings is indicated in the schedule below:

23 september 19 Junename 2011 2012T Lategan 3 3

P du Plessis 3 3

T Siyolo 3 3

The Committee operates under written terms of reference which are reviewed annually. It assists the Board with various remuneration, transformation and sustainability matters, including the group’s short-, medium- and long-term incentive schemes, remuneration policy and strategy, executive succession planning, transformation and director nominations.

RemunerationRemuneration comprises three elements namely:• GuaranteedRemunerationPackage.• Short-TermIncentiveScheme

(Performance Bonus).• Long-TermIncentiveScheme(SharePlan).


CoRPoRATE govERnAnCE (continued)

Guaranteed Remuneration Package (GRP)Due to the company’s current performance the Board has decided to not implement across the board increases to guaranteed remuneration packages of the executive management team from Patterson Band D to F with effect from 1 July 2011. The GRP for executive board members for the period which they served during the current financial year is as follows:

Title Band 2012 2011DE Scheepers CEO F R1 213 400 R1 941 440(Resigned) PJ Willemse CFO E R828 126 R1 325 000(Resigned) W van Coller CEO F R416 667 –(Appointed) R Viljoen CFO E R145 419 –(Appointed)

Short-Term Incentive SchemeNo executive bonuses were paid as the required profit targets were not met.

Long-Term Incentive Scheme (Share plan)No allocation of shares was made to employees in view of the company’s performance for the year ended 30 June 2012.

Incentive reviewRARE will review its incentive schemes during the next financial year.

Non-executive directors’ feesThe Board again decided not to implement any increases in view of the current performance of the company. The non-executive directors’ fees comprise a retainer of R8 500 per month, with no additional fees for board or other committee attendance. Only P du Plessis availed hereof with none of the other non-executive directors earning any fees.

Annual Attendance retainer feeBoard chairman R120 000 R16 100Non-executive R105 000 R14 000

Performance assessmentThe Remuneration, Transformation and Sustainability committee also establishes the processes for the review of the performance of the board, the directors, as well as the board subcommittees and their members. A self-assessment process has been identified as the preferred means of performance assessment.

TransformationEmployment equityThe company’s approach to employment equity is set out in the company’s Human Resources Policy

which outlines the company’s commitment to non-discriminatory employment practices. Each division is responsible for developing and submitting employment equity plans which outline employment equity goals in terms of hiring, training and promotion. The detailed employment equity plans are made available to employees of the respective operating entities. Further targets, strategies and specific action plans are agreed and are revised annually. Certain employment equity targets have been set and performance against these is monitored.

Community and broad-based black economic empowermentRARE Holdings acknowledges its social responsibility towards the communities in which it operates through a number of social investment programmes. RARE is an equal opportunity employer and there is no discrimination on the basis of ethnic origin or gender.

A number of programmes are in place to ensure that the group’s employee profile is more representative of the demographics of the regions in which it operates whilst maintaining the group’s high standards. The group retained its level 4 rating in terms of the Department of Trade and Industry’s B-BBEE Codes of Good Practice (the Codes).

Preferential procurementPreferential procurement is dealt with via the com-pany’s quality system, which sets out the company’s objective of annually increasing the proportion of procurement from suitably qualified vendors.

sustainability EthicsRARE is committed to an organisational integrity and code of ethics by:• Creatingsystemsandprocedurestointroduce,

monitor and enforce its ethical code;• Assessingtheintegrityofnewappointeesin

selection and promotion procedures;• Exercisingduecareindelegatingdiscretionary

authority;• Communicatingwithandtrainingallemployees

regarding enterprise values, standards and compliance procedures; and

• Providing,monitoringandauditingsafesystemsfor reporting of unethical or risky behaviour.

Communication with stakeholdersThe Board accepts its duty to present a balanced and understandable assessment of the group’s position in reporting to stakeholders, taking into account the circumstances of the communities in which it operates and the greater demands for transparency and accountability regarding both financial and


non-financial matters. The chief executive officer conducts regular presentations on the group’s performance and strategy to the media and investors. RARE Holdings also maintains a website giving access to the company’s latest financial statements, operations and the annual report.

Enterprise developmentThe company assists smaller businesses through its enterprise development programme.

Skills development and trainingThe company is committed to ongoing training and development to further the skills base and empower employees to perform better in their current positions and so accelerate advancement. Total training spend for the year amounted to 0,65% of payroll.

Nine black African learners are currently benefiting from the group’s customised Leadership Development Programme designed to develop and promote future managers within the group.

SHEQ (Safety, health, environment and quality)RARE operates and complies with the related regulations defined in the OHS Act 85 of 1993 requirements. Operational risk assessments and safe work procedures (SWP) are developed to mitigate and eliminate potential hazards associated within a particular work environment, be it in a warehouse, factory or construction site. Scheduled internal location audits are performed annually to ensure compliance. Perpetual inspections are performed to detect any unsafe acts or equipment not safe for use. Group SHE audits are performed annually at all locations to ensure compliance to applicable regulations within the OHS Act.

RARE’s quality management systems are in compliance with the revised requirements of ISO 9001:2008. All locations are certified to ISO 9001:2008. Internal quality audits are performed which is a mandatory requirement within ISO. Group quality audits and external audits (UKAS accredited certification body) are performed annually.

Only minor observations were noted and reported during our external audits performed to date by BM Trada (Accredited Certification Body). No non-conformances (NCRs) were raised to date.

Hiv/AidsThe purpose of the AIDS policy is to reassure employees that HIV/AIDS is not spread through casual contact during normal work practices and to reduce unrealistic fears about contracting an HIV/AIDS virus-related condition. This policy also protects the legal right to work of employees who are diagnosed with

an HIV/AIDS virus-related condition and provides guidelines for situations where infection with the HIV/AIDS virus is suspected. Our policy is to encourage sensitivity to and understanding for employees affected with a condition of the HIV/AIDS virus.

soCiAl And ETHiCs CommiTTEEThe committee has three members namely T Siyolo (non-executive), S Potgieter (non-executive) and R Viljoen (executive). The committee is mandated to focus on social and ethics concerns and report its findings to the board on a regular basis.

oTHER CoRPoRATE govERnAnCE mATTERsComPAny sECRETARy

The newly appointed CFO, R Viljoen, attended all Board and Board committee meetings and provides advice and guidance to directors on governance and related issues. He has the responsibility for the induction of new directors and assists the CEO and chairman in determining the annual board plan and meeting agendas. The board understands that in the spirit of good corporate governance it is advisable to have an independent company secretary. The board is currently in the process of identifying a suitable candidate to act in this role

dEsignATEd AdvisER

The Board is also supplemented by the services of a designated adviser, PSG Capital Proprietary Limited, whose representatives attend all Board and Audit & Risk Committee meetings.

inFoRmATion TECHnology

The Board is aware of the importance of proper governance with regards to Information Technology. H Lander acts as the Chief Information Officer and is responsible for proper governance regarding the IT environment as a whole.

sHARE dEAlings

RARE Holdings has a policy which precludes directors and staff with access to price-sensitive information from dealing in the group’s shares during closed and prohibited periods.

T siyoloChairman

13 November 2012


This report is compiled by the audit committee appointed in respect of the 2012 financial year of RARE Holdings Limited and its subsidiaries.

1. Members of the Audit CommitteeName QualificationP du Plessis (Chairman) CA(SA)MT Lategan CA(SA)H Odendaal CA(SA)SJDT Potgieter CA(SA)

The committee is satisfied that the members thereof have the required knowledge and experience as set out in Section 94(5) of the Companies Act of South Africa and Regulation 42 of the Companies Regulations, 2011.

2. Meetings held by the Audit CommitteeThe Audit Committee performs the duties prescribed by Section 94(7) of the Companies Act of South Africa by holding meetings with the key role players on a regular basis and by providing unrestricted access to the external auditors.

The committee held 2 scheduled meetings during the 2012 financial period on 23 September 2011 and 19 March 2012 respectively. All the audit committee members were present at the meetings apart from Mr MT Lategan who was only appointed subsequent to year-end.

3. External auditorThe Audit Committee has nominated Greenwoods Chartered Accountants as the independent auditors and Mr DP Botha as the designated partner, who is a registered independent auditor, for appointment in respect of the 2012 audit.

The committee satisfied itself through enquiry that the external auditors are independent as defined by the Companies Act of South Africa and as per the standards stipulated in terms of the auditing profession. Requisite assurance was sought and provided by the Companies Act of South Africa that internal governance processes within the firm support and demonstrate the claim to independence.

The Audit Committee in consultation with executive management, agreed to the terms of the engagement. The audit fee for the external audit has been considered and approved taking into consideration such factors as the timing of the audit, the extent of the work required and the scope.

4. Financial statementsFollowing the review of the group annual financial statements the audit committee recommended board approval thereof.

AUdiT CoMMiTTEE REPoRT


5. internal control and accounting systemThe group implemented a new accounting and information system (‘the 2011 system’) at the beginning of the 2011 financial year. Previous management reported on the successful implementation of the 2011 system during the ensuing financial year.

During the finalisation of the 2012 half-year results, certain inventory write-downs became evident, which resulted in the resignation of the previous management team. A new management team was appointed during April 2012.

The Audit Committee tasked the new management team to investigate the nature and source of the inventory write-downs retrospectively. The unpredictability of the 2011 system’s inventory module was identified as a source for the write-downs. Accordingly, the company was forced to manually reconcile, recalculate and prepare certain accounting functions around the 2011 system during the financial year.

The company decided to replace the 2011 system, after due consideration of the system’s shortcomings and available support services.

The committee is satisfied to report that the previously user-friendly accounting and information system was reimplemented successfully on 1 July 2012. Concerted efforts were made to ensure the integrity, validity, completeness and accuracy of group data. Group staff, suppliers and regular clients are familiar with this system.

New management and a reliable accounting system together with focussed attention to improve the overall control environment will position the group to capitalise on future opportunities and address future challenges.

6. internal audit functionGiven the challenges faced by the company during the current financial year, the intention to establish a properly resourced internal audit function had to be postponed.

7. Accounting practicesThe Audit Committee has evaluated the group annual financial statements of RARE Holdings Limited and its subsidiaries for the year ended 30 June 2012 and concluded that they comply with the recognition and measurement requirements of International Financial Reporting Standards in all material respects, the JSE Listings Requirements and with the requirements of the Companies Act of 2008.

On behalf of the audit committee

P du PlessisChairman of the Audit Committee13 November 2012


diRECToRs’ REsPonsibiliTiEs And APPRovAl

The directors are required in terms of the Companies Act of South Africa to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the 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 with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the financial statements.

The 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 directors 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 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 30 June 2013 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 financial statements. The financial statements have been examined by the group’s external auditors and their report is presented on page 13.

The financial statements set out on pages 14 to 83, which have been prepared on the going concern basis, were approved by the directors on 13 November 2012 and were signed on their behalf by:

T siyoloChairman of the Board

sTATEMEnT by THE CoMPAny sECRETARy

I, R Viljoen, company secretary of RARE Holdings Limited and its subsidiaries, hereby certify that the company has, for the year under review, lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Companies Act of South Africa, and that all such returns are true, correct and up to date.

R viljoenCompany secretary

13 November 2012


To THE sHAREHoldERs oF RARE Holdings liMiTEd And iTs sUbsidiARiEsWe have audited the accompanying group annual financial statements of RARE Holdings Limited and its subsidiaries, which comprise the separate and consolidated statement of financial position as at 30 June 2012, the separate and consolidated statement of comprehensive income, the separate and consolidated statement of changes in equity and the separate and consolidated statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory information, as set out on pages 22 to 83.

diRECToRs’ REsPonsibiliTy FoR THE ConsolidATEd And sEPARATE FinAnCiAl sTATEMEnTsThe company’s directors are responsible for the preparation and fair presentation of these group annual financial statements in accordance with International Financial Reporting Standards, the JSE Listing Requirements, the requirements of the Companies Act of South Africa and for such internal controls as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the group annual financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the group annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the group annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the group annual financial statements.

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

oPinionIn our opinion, the group annual financial statements present fairly, in all material respects, the consolidated and separate financial position of the company and the group as at 30 June 2012, and of its separate and consolidated financial performance and its separate and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards, the JSE Listing Requirements, and the requirements of the Companies Act of South Africa.

oTHER REPoRTs REqUiREd by THE CoMPAniEs ACTAs part of our audit of the group annual financial statements for the year ended 30 June 2012, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between those reports and the audited group annual financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between those reports and the audited group annual financial statements. However, we have not audited these reports and accordingly do not express an opinion thereon.

greenwoodsPartner: dP boTHARegistered auditor

13 November 2012Cape Town

REPoRT oF THE indEPEndEnT AUdiToRs


diRECToRs’ REPoRT

The directors submit their report for the year ended 30 June 2012.

1. REviEw oF ACTiviTiEsMAin bUsinEss And oPERATionsRARE Holdings Limited is an investment and management company.

The group supplies a comprehensive range of services and products to the fluid conveyance industry. Services include design, installation and maintenance of pipelines for the mining sector and process plants across several sectors of industry. The group operates principally in South Africa, Zambia, The Democratic Republic of the Congo, Botswana and Ghana.

The group conducts business in three divisions, namely Trading, Pipeline Services and Water Utilities Services.

The Trading division includes the Kliprivier, Durban and Polokwane branches.

FinAnCiAl REsUlTsThe group incurred a total loss before taxation from continuing and discontinued operations of R109,7 million (2011: R141,4 million) and an after taxation loss of R117,0 million (2011: R139,4 million).

The company incurred a total comprehensive loss before taxation of R99,5 million (2011: R104,7 million) and an after taxation loss of R99,5 million (2011: R104,7 million).

Revenue from continued operations is 3,37% lower than the previous year, mainly due to the closure of unprofitable operations. A decrease of 20,29% in trading activities was mainly as a result of inventory shortages due to funding constraints. Pipeline Services turnover increased by 122,99% assisted by a large pipeline project in Zambia and increased activity in the DRC. An improvement in Water Affairs business resulted in a 90,24% increase in the turnover of the Water Utilities Services division.

The gross profit margin was negatively impacted by the following unanticipated expenses included in cost of sales:

• Impairmentofinventory–R25million.• Impairmentofimportdutyreceivable–R5,1million.• RedundantinventoryitemswithacarryingvalueofR23millionwassoldatcost.

The Rare Congo subsidiary was incorporated and disposed of during the year as explained under Corporate Activities. Furthermore the Polokwane and Centurion factories were closed as these units were no longer deemed profitable.

The financial results were prepared on the basis that the two factories were discontinued during the year. The prior year results have been restated for comparative purposes.

During the financial year inventory with a carrying value of R25 million was impaired or written off. This consisted of:

discontinued operationsImpairments of inventory held at factories during closure process: R7 million.

Continuing operations Net realisable value adjustments: R9,4 millionInventory count variances: R4,8 millionProvision for slow-moving stock: R3,8 million

PRioR PERiod ERRoRsComparative results were restated as a result of prior period errors further detailed in note 43.


oPERATionAl REviEwTrading conditions remained tough on the back of a soft market and a delay in the anticipated public sector spending.

Trading margins came under pressure as a result of stock buy-outs due to financing constraints. Margins is expected to improve as a result of an improved inventory combination on the back of a secure funding structure.

The Pipeline Services division designs, supplies, installs and commissions pipe systems and pipelines. It operates within RSA with cross-border activities in Botswana, Zambia and Ghana. The client base is primarily from the private sector. During the year the Pipeline Services division was relocated from its former Centurion offices to the Kliprivier head office in order to improve efficiencies.

The three year maintenance contract which the Water Utilities division held with the Department of Water Affairs has ended. Due to margin constraints it was decided not to tender for the Water Affairs contract again.

CoRPoRATE ACTiviTiEsR130 million capital raisingThe company was recapitalised during December 2011 by raising equity of R30 million. At this time, Themba Siyolo was introduced as a strategic BEE Partner resulting in the company being 25% black owned.

A further R100 million was raised, by way of a clawback offer (‘the Clawback Offer’) subsequent to year-end but before the date of this report. The rationale behind the second capital raising of R100 million was to further recapitalise the business following the introduction of a new management team during April 2012 and the poor performance during the first half of the year, largely as a result of substantial write offs against old stock and debtors. The second capital raising resulted in an increase of the shareholding of Doculate Investments Proprietary Ltd, under the control of the BEE partner, Themba Siyolo, thus securing the unique position within the industry of being a majority black owned listed company.

RARE CongoRARE incorporated a 61% share of a subsidiary in the Democratic Republic of Congo (“RARE Congo”) during the financial year. Although the subsidiary was profitable it required larger than envisaged capital investment during the expansion phase. This fact, together with the risks associated with doing business in the Democratic Republic of Congo and RARE’s current financial position, resulted in RARE disinvesting from RARE Congo during April 2012. Shares were sold to the minority partner at the Net Asset Value on the date of disposal.

EvEnTs AFTER REPoRTing PERiodThe directors are not aware of any matter or circumstance arising since the end of the financial year until the date of the financial statements other than the further R100 million capital raising as detailed above.

FUndingdebtors financingRARE successfully refinanced its debtors facility during October 2011 and secured a new R90 million facility up until 1 July 2013, subject to certain conditions and covenants. R60 million of the outstanding debtor facility was repaid on 3 September 2012, following the issue and application of the proceeds from the R100 million Clawback Offer.

stock financingDuring the financial year, China Construction Bank notified RARE of its intention to exit from its ‘on demand facility’, in an orderly fashion. The outstanding balance amounted to R25 million at year-end. The balance will be reduced as and when their Letters of Credit mature. It is estimated that the full outstanding balance will be settled by February 2013. RARE secured third-party funding to replace said stock facility on commercial terms during the current financial year.


short term loan financingThe company secured a R50 million short-term facility during the financial year to finance working capital shortages at the time. R40 million of the outstanding short-term facility was repaid on 3 September 2012 following the issue and application of the proceeds from the R100 million claw-back offer. The facility becomes due and payable on 1 July 2013.

Additional capital raisingRefer ‘Corporate activities’ above.

REsTRUCTURing PlAnTermination of unprofitable divisionsDuring the year under review a number of operations were right sized and/or closed. The Polokwane and Centurion factories were closed and the administrative activities of the Pipeline Services Division were consolidated at the Kliprivier office.

overheadsA concerted effort was made to reduce overheads during the year under review. The company will continue to interrogate each cost item to ensure that the overheads structure is aligned to the level of income generation. Based on current activities, overhead costs are expected to be reduced by more than 10% during the 2013 financial year.

Human resources and manpowerThe new management team (‘the new team’) led by Wally van Coller (chief executive officer) and Renier Viljoen (Financial director) took over the reins of the business during April 2012. The new team embarked on an intense review of all the positions within the group and key positions were complemented with outside talent. The team will continue to bolster group talent and specifically the sales and technical resources.

salesA critical review of our market and client base was performed. The intention is to grow sales generically with a focus on clients with appropriate credit ratings within the private sector.

Cash flow managementCash flow management plays a critical part in the success of the business. There is an increased focus on debtors collection and the review of all existing product lines in order to reduce and/or discontinue stock levels to match new sales objectives as closely as possible.

logistics and stock managementThe current logistics costs are too high. The entire supply chain is being interrogated in order to improve efficiencies. There is a renewed focus on proper and effective stock management by means of an increase in the frequency of stock counts. The new ERP system that has been implemented will aid in this goal. The company previously used this ERP system for a period of nearly 10 years and this has a proven track record at RARE as well as superior support from the supplier.

Project managementProject management, particularly in the Pipeline Services Division, is a critical component for the timely and profitable execution of project work. RARE is working on strengthening its relationship with technology partners which will add to increased efficiencies and reduced delivery times on project installations.

systems and processesAs mentioned above RARE has implemented a new ERP package after the previous system failed to meet requirements in terms of reporting and accuracy of information. The ERP system was successfully implemented on 1 July 2012.

diRECToRs’ REPoRT (continued)


ProspectsRARE will continue to consolidate and rightsize the business and cost structure. The company intends to leverage its existing technologies and, where possible, obtain new technologies in order to obtain a competitive edge in the market.

2. going ConCERnWe draw attention to the fact that at 30 June 2012, the company and group had accumulated losses of R143,6 million (2011: R44 million) and R187,3 million (2011: R67,2 million) respectively.

The 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.

The directors have considered the operational budget and cash flow forecasts for the ensuing year which are based on the current expected economic and market conditions, as well as the funding lines in place as further detailed in ‘Funding” above. The directors believe that RARE and its subsidiaries have adequate financial resources to continue as a going concern during the ensuing year.

Accordingly, the directors have adopted the going concern basis in the preparation of the annual financial statements.

3. EvEnTs AFTER THE REPoRTing PERiodIn addition to the matters raised above, relating to refinancing, the clawback offer was concluded on 28 September 2012 whereby the company raised an additional R100 million of capital.

4. AUTHoRisEd And issUEd sHARE CAPiTAlRARE was recapitalised during December 2011 by raising equity of R30 million by way of a subscription by Stafric Investment and Management Services (Pty) Ltd. Shareholders were offered the opportunity to participate by way of a clawback offer. 250 million no par value shares were issued at a consideration of 12 cents each.

During the year the authorised share capital was increased from 300 000 000 ordinary shares to 2 000 000 000 ordinary shares on 13 December 2011.

Further the shares were converted from ordinary shares with a par value of R0,01 to ordinary shares with no par value.

5. boRRowing liMiTATionsIn terms of the articles of association of the company, the directors may exercise all the powers of the company to borrow money, subject to the JSE Listings Requirements and any regulation made from time to time by the company at a general meeting. 6. non-CURREnT AssETsThere were no major changes in the nature of the non-current assets of the group during the year or in the policy relating to their use during the year under review. Refer to notes 3 to 10 of these financial statements for details regarding additions, impairments and disposals made during the year.

7. dividEndsNo dividends were declared or paid to shareholders during the year.


8. diRECToRsThe directors of the company during the year and to the date of this report are as follows:

name Executive/non-executive ChangesT Siyolo Non-executive/Chairman Appointed 24 August 2011P du Plessis Lead independent non-executive MT Lategan Non-executive A Martin Independent non-executive Appointed 13 December 2011/ Resigned 10 April 2012H Odendaal Independent non-executive SJDT Potgieter Non-executive D Scheepers Executive Resigned 27 March 2012W van Coller Executive Appointed 13 April 2012R Viljoen Executive Appointed 13 April 2012PJ Willemse Executive Resigned 27 March 2012

9. sECRETARyDuring the year PJ Willemse resigned as company secretary and was replaced by R Viljoen.

Business address Postal address22 Old Vereeniging Road PO Box 124186Kliprivier AlrodeMidvaal Johannesburg1851 1451

10. inTEREsT in sUbsidiARiEs And AssoCiATEs

issued share capital

Percentage holding

shares at cost/ fair value

Amount due (to)/by entities after impairments

2012 2011 2012 2011 2012 2011 2012 2011R R % % R R R R

2011directly heldRARE Group Proprietary Limited 175 171 100 100 – 10 618 284 – 58 651 449indirectly heldRARE Construction Zambia 100 100 100 100 100 100 – –RARE Tech Proprietary Limited 100 100 100 100 834 419 834 419 – –Isici Trading and Investments Proprietary Limited 100 100 100 100 100 100 – –Xylo Pipe Proprietary Limited 100 100 75 75 75 75 – –RARE Botswana 100 100 100 100 – – – –Zeta Training Solutions Proprietary Limited 100 100 49 49 – 49 – 550 223Tasonline Software Proprietary Limited 100 100 25 25 – 900 000 – 2 638 942

834 694 12 353 027 – 61 840 614

The aggregate amount of net losses incurred by subsidiaries for the year from continuing and discontinuing operations amounted to R116,6 million (2011: R143,3 million).

The company’s voting power is in direct proportion to its percentage holding.

Details of the company’s investment in subsidiaries and associates are set out in notes 6 and 7 of the financial statements, respectively.



details of subsidiaries’ and associates’ operationsThe RARE Group Proprietary Limited is engaged in sourcing, supplying and distributing pipes, valves, fittings and associated commodities within the engineering, energy and resources sector as well as logistics relating to the supply of the valves, fittings and associated commodities, manufacturing and installation of plastic engineering projects and civil maintenance work.

RARE Tech Proprietary Limited’s primary business is that of a property holding company.

Xylo Pipe Proprietary Limited is engaged in the development of solutions for rehabilitation of pipeline infrastructure.

Isici Trading and Investments Proprietary Limited and RARE Botswana were dormant in the year under review.

RARE Construction Zambia is engaged in the sourcing, supply and distribution of pipes, valves, fittings and associated commodities in Zambia.

Zeta Training Solutions Proprietary Limited is engaged in providing training solutions.

Tasonline Software Proprietary Limited is engaged in pump monitoring.

The following subsidiaries are not incorporated in South Africa:

name of subsidiary Country of incorporation

RARE Construction Zambia (indirectly held via The RARE Group Proprietary Limited) Zambia

RARE Botswana (indirectly held via The RARE Group Proprietary Limited) Botswana

In terms of SIC Interpretation 12 Consolidated Special Purpose Entities, the following entities were consolidated in the annual financial statements of the group:

RARE Capital Proprietary LimitedThe RARE Employee Share Incentive Trust

11. liqUidiTy And solvEnCyThe directors have performed the required liquidity and solvency tests required by the Companies Act 71 of 2008.

12. AUdiToRsGreenwoods will continue in office in terms of section 90 of the Companies Act 71 of 2008.

13. sPECiAl REsolUTionsAt a general meeting of the shareholders on 29 September 2011 it was resolved that financial assistance in terms of section 45 be granted to the RARE Group Proprietary Limited. The directors are satisfied that all criteria as per section 45 of the Companies Act was met.

At the annual general meeting of the shareholders held on 13 December 2011 the following was resolved:

• Non-executivedirectorsfeesofR105000perannum,payablequarterly,fortheyearended30June2012beapproved.

• Authorisedsharecapitalbeincreasedfrom300000000ordinarysharesto2000000000ordinaryshares.• OrdinarysharesbeconvertedfromshareswithparvalueofR0,01toordinaryshareswithnoparvalueand

preference shares with par value of R0,01 be converted to preference shares with no par value. • Thattheboardofdirectorsbeauthorisedtoissuesharesastheydeemnecessary.• Thememorandumofincorporationbeamendedwithrespecttoauthorisedsharecapitalandageofdirectors.

At a general meeting of the shareholders on 2 May 2012 it was resolved that the 61,00% investment held in RARE Congo SPRL by the RARE Group Proprietary Limited be sold.



14. AnAlysis oF oRdinARy sHAREHoldERs As AT 30 JUnE 2012sizE oF Holdings

number of shareholdings

% of total shareholdings

number of shares

% of shares in issue

1–1000shares 72 13,61 36 687 0,011001–10000shares 162 30,62 886 993 0,1610001–100000shares 190 35,92 7 997 011 1,48100001–1000000shares 85 16,07 32 982 308 6,121 000 001 shares and over 20 3,78 496 847 001 92,22Total 529 100,00 538 750 000 100,00

disTRibUTion oF sHAREHoldERs



number of shares


Close corporations 9 1,70 709 172 0,13Collective investment schemes 1 0,19 18 925 698 3,51Foreign custodian 2 0,38 830 000 0,15Individuals 460 86,96 66 574 731 12,36Other corporations 1 0,19 84 894 0,02Private companies 13 2,46 332 969 026 61,80Public companies 2 0,38 123 394 0,02Retirement benefit funds 1 0,19 470 000 0,09Trusts 40 7,56 118 063 085 21,91Total 529 100,00 538 750 000 100,00

sHAREHoldER TyPE



number of shares


Non-public shareholders 5 0,76 408 483 309 75,82Directors and associates of company holdings 5 408 483 309 75,82

Public shareholders 524 99,24 130 266 691 24,18Total 529 100,00 538 750 000 100,00


bEnEFiCiAl sHAREHoldERs wiTH A Holding gREATER THAn 3% oF THE sHAREs in issUE


number ofshares


Stafric Investments and Management Services (Pty) Ltd 1 220 984 335 41,02Doculate Investments (Pty) Ltd 1 107 750 000 20,00The Lategan Family Trust 1 75 147 985 13,95Flagship IP Flexible Value Fund 1 18 925 698 3,51Nkulukelo Trust 1 18 255 391 3,39Lion Steel Trust 1 16 172 471 3,00Total 6 457 235 880 84,87

diRECToRs’ sHAREHoldingThe direct and indirect beneficial interests of the directors in the issued share capital of the company as at 30 June 2012 are set out below:

Directors

beneficial direct 2012

beneficial indirect

2012

Total direct

and indirect

2012

% of issued share

capital 2012

Beneficial direct

2011

Beneficial indirect

2011

Total direct

and indirect

2011

% of issued share

capital 2011

SJDT Potgieter 220 984 335 220 984 335 41,02T Siyolo 107 750 000 107 750 000 20,00MT Lategan 75 147 985 75 147 985 13,95P du Plessis 2 364 481 2 364 481 0,44 2 364 481 2 364 481 0,82H Odendaal 2 236 508 2 236 508 0,42 2 236 508 2 236 508 0,77Total issued share capital held by directors 408 483 309 75,82 4 600 989 1,59Total issued share capital 538 750 000 288 750 000

Subsequent to year-end to date of this report all interests remain unchanged except for T Siyolo acquiring an additional indirect beneficial interest of 1 210 341 482 shares, after which he will hold 73,69% of the issued share capital of the company.


gRoUP CoMPAny2012 2011 2012 2011

Note R R R RAssETsnon-CURREnT AssETsProperty, plant and equipment 3 56 666 848 60 443 536 – –Goodwill 4 – 456 223 – –Intangible assets 5 510 712 6 092 905 – –Investment in subsidiary 6 – – – 10 618 284Investments in associates 7 – 900 049 – –Loans to group companies 8 – – – 58 651 449Other financial assets 9 21 632 285 080 – –Deferred tax 10 – 5 671 452 – –

57 199 192 73 849 245 – 69 269 733CURREnT AssETsInventories 13 60 059 147 106 297 772 – –Loans to group companies 8 – 3 189 165 – –Trade and other receivables 15 89 022 536 101 054 684 435 598 503 514Other financial assets 9 – 10 040 706 – –Current tax receivable 1 208 401 2 452 423 – –Construction contracts and receivables 14 15 193 417 7 745 402 – –Prepayments 12 2 233 611 243 080 – –Cash and cash equivalents 12 31 100 528 10 503 831 1 475 5 774

198 817 640 241 527 063 437 073 509 288ToTAl AssETs 256 016 832 315 376 308 437 073 69 779 021

EqUiTy And liAbiliTiEsEqUiTyShare capital 19 142 824 295 112 876 495 143 108 495 113 108 495Reserves 5 355 260 5 856 154 – –Accumulated loss (187 280 003) (67 201 155) (143 576 840) (44 040 879)

(39 100 448) 51 531 494 (468 345) 69 067 616

liAbiliTiEsnon-CURREnT liAbiliTiEsOther financial liabilities 24 146 640 758 8 132 450 – –Operating lease liability 100 943 115 379 – –Deferred tax 10 1 347 552 756 668 – –

148 089 253 9 004 497 – –CURREnT liAbiliTiEsTrade and other payables 25 115 239 673 138 213 782 514 822 272 480Other financial liabilities 24 30 962 111 113 247 162 – –Current tax payable 390 596 438 925 390 596 438 925Bank overdraft 16 435 647 2 940 448 – –

147 028 027 254 840 317 905 418 711 405ToTAl liAbiliTiEs 295 117 280 263 844 814 905 418 711 405ToTAl EqUiTy And liAbiliTiEs 256 016 832 315 376 308 437 073 69 779 021

sTATEMEnT oF FinAnCiAl PosiTion at 30 June 2012


gRoUP CoMPAny2012 2011 2012 2011

Note R R R RConTinUing oPERATionsRevenue 27 304 383 434 314 994 013 – –Cost of sales 28 (294 307 387)(270 091 808) – –gRoss PRoFiT 10 076 047 44 902 205 – –Other income 4 332 515 51 934 483 2 004 2 305 200Operating expenses (103 757 093) (156 351 691) (99 535 503) (101 223 829)oPERATing loss 29 (89 348 531) (59 515 003) (99 533 499) (98 918 629)Investment revenue 30 2 034 515 2 260 732 274 –Finance costs 31 (22 323 352) (17 571 332) (2 736) (5 802 956)loss bEFoRE TAx (109 637 368) (74 825 603) (99 535 961) (104 721 585)Income tax expense 32 (7 286 033) 2 037 685 – –loss FRoM ConTinUing oPERATions (116 923 401) (72 787 918) (99 535 961) (104 721 585)

disConTinUEd oPERATionsLoss from discontinued operations 17 (101 771) (66 638 141) – –loss FoR THE yEAR (117 025 172) (139 426 059) (99 535 961) (104 721 585)

oTHER CoMPREHEnsivE inCoMEExchange differences on translating foreign operations 5 106 1 523 421 – –Gains and losses on property revaluation – (2 177 399) – –Realisation of revaluation reserve on disposal (506 000) (13 520 723) – –Taxation related to components of other comprehensive income – 625 231 – –oTHER CoMPREHEnsivE loss FoR THE yEAR nET oF TAxATion 34 (500 894) (13 549 470) – –ToTAl CoMPREHEnsivE loss (117 526 066) (152 975 529) (99 535 961) (104 721 585)nET loss ATTRibUTAblE ToownERs oF THE PAREnTLoss for the year from continuing operations (116 923 401) (72 787 918) (99 535 961) (104 721 585)Loss for the year from discontinued operations (3 155 447) (32 661 449) – –loss FoR THE yEAR ATTRibUTAblE To ownERs oF THE PAREnT (120 078 848) (105 449 367) (99 535 961) (104 721 585)non-ConTRolling inTEREsTProfit/(loss) for the year from discontinued operations 3 053 676 (33 976 692) – –ToTAl CoMPREHEnsivE PRoFiT/(loss) ATTRibUTAblE To:Owners of the parent (120 579 742) (114 639 375) (99 535 961) (104 721 585)Non-controlling interest 3 053 676 (38 336 154) – –

(117 526 066) (152 975 529) (99 535 961) (104 721 585)EARnings PER sHAREFRoM ConTinUing And disConTinUEd oPERATionsBasic loss per share (c) 48 (28,90) (101,30) – –Diluted loss per share (c) 49 (28,90) (101,30) – –

FRoM ConTinUing oPERATionsBasic loss per share (c) 48 (28,14) (69,93) – –Diluted loss per share (c) 49 (28,14) (69,93) – –

sTATEMEnT oF CoMPREHEnsivE inCoME for the year ended 30 June 2012


sTATEMEnT oF CHAngEs in EqUiTy for the year ended 30 June 2012

Share capital

Share premium

Total share capital

Foreign currency

translation reserve

Revaluationreserve

Total reserves

Accumulatedloss

Total attributable

to equity holders of the

group/companyNon-controlling

interest Total equityR R R R R R R R R R

gRoUPbalance at 1 July 2010 884 950 71 713 545 72 598 495 340 749 14 705 413 15 046 162 38 248 212 125 892 869 (9 312 514) 116 580 355Changes in equityTotal comprehensive loss for the year – – – (340 749) (8 849 259) (9 190 008) (105 449 367) (114 639 375) (38 336 154) (152 975 529)Issue of shares 2 000 000 38 000 000 40 000 000 – – – – 40 000 000 – 40 000 000Purchase of treasury shares 1 390 276 610 278 000 – – – – 278 000 – 278 000Changesinownershipinterest–Angola – – – – – – – – 47 648 668 47 648 668Total changes 2 001 390 38 276 610 40 278 000 (340 749) (8 849 259) (9 190 008) (105 449 367) (74 361 375) 9 312 514 (65 048 861)Opening balance as previously reported 2 886 340 109 990 155 112 876 495 – 5 856 154 5 856 154 (53 181 907) 65 550 742 – 65 550 742

Priorperioderrors–refernote43 – – – – – – (14 019 248) (14 019 248) – (14 019 248)balance at 1 July 2011 2 886 340 109 990 155 112 876 495 – 5 856 154 5 856 154 (67 201 155) 51 531 494 – 51 531 494Changes in equityTotal comprehensive loss for the year – – – 5 106 (506 000) (500 894) (120 078 848) (120 579 742) 3 053 676 (117 526 066)Issue of shares 30 000 000 – 30 000 000 – – – – 30 000 000 – 30 000 000Sale of treasury shares (2 610) (49 590) (52 200) – – – – (52 200) – (52 200)Changesinownership–Congo – – – – – – – – (3 053 676) (3 053 676)Total changes 29 997 390 (49 590) 29 947 800 5 106 (506 000) (500 894) (120 078 848) (90 631 942) – (90 631 942)balance at 30 June 2012 32 883 730 109 940 565 142 824 295 5 106 5 350 154 5 355 260 (187 280 003) (39 100 448) – (39 100 448)

CoMPAnybalance at 1 July 2010 887 500 72 220 995 73 108 495 – – – 60 680 706 133 789 201 – 133 789 200Changes in equityTotal comprehensive loss for the year – – – – – – (104 721 585) (104 721 585) – (104 721 585)Issue of shares 2 000 000 38 000 000 40 000 000 – – – – 40 000 000 – 40 000 000Total changes 2 000 000 38 000 000 40 000 000 – – – (64 721 585) (64 721 585) – (64 721 585)

balance at 1 July 2011 2 887 500 110 220 995 113 108 495 – – – (44 040 879) 69 067 616 – 69 067 616Changes in equityTotal comprehensive loss for the year – – – – – – (99 535 961) (99 535 961) – (99 535 961)Issue of shares 30 000 000 – 30 000 000 – – – – 30 000 000 – 30 000 000Total changes 30 000 000 – 30 000 000 – – – (99 535 961) (69 535 961) – (69 535 961)balance at 30 June 2012 32 887 500 110 220 995 143 108 495 – – – (143 576 840) (468 345) – (468 345)Note 19 19 19 21, 34 22, 34 34


Share capital

Share premium

Total share capital

Foreign currency

translation reserve

Revaluationreserve

Total reserves

Accumulatedloss

Total attributable

to equity holders of the

group/companyNon-controlling

interest Total equityR R R R R R R R R R

gRoUPbalance at 1 July 2010 884 950 71 713 545 72 598 495 340 749 14 705 413 15 046 162 38 248 212 125 892 869 (9 312 514) 116 580 355Changes in equityTotal comprehensive loss for the year – – – (340 749) (8 849 259) (9 190 008) (105 449 367) (114 639 375) (38 336 154) (152 975 529)Issue of shares 2 000 000 38 000 000 40 000 000 – – – – 40 000 000 – 40 000 000Purchase of treasury shares 1 390 276 610 278 000 – – – – 278 000 – 278 000Changesinownershipinterest–Angola – – – – – – – – 47 648 668 47 648 668Total changes 2 001 390 38 276 610 40 278 000 (340 749) (8 849 259) (9 190 008) (105 449 367) (74 361 375) 9 312 514 (65 048 861)Opening balance as previously reported 2 886 340 109 990 155 112 876 495 – 5 856 154 5 856 154 (53 181 907) 65 550 742 – 65 550 742

Priorperioderrors–refernote43 – – – – – – (14 019 248) (14 019 248) – (14 019 248)balance at 1 July 2011 2 886 340 109 990 155 112 876 495 – 5 856 154 5 856 154 (67 201 155) 51 531 494 – 51 531 494Changes in equityTotal comprehensive loss for the year – – – 5 106 (506 000) (500 894) (120 078 848) (120 579 742) 3 053 676 (117 526 066)Issue of shares 30 000 000 – 30 000 000 – – – – 30 000 000 – 30 000 000Sale of treasury shares (2 610) (49 590) (52 200) – – – – (52 200) – (52 200)Changesinownership–Congo – – – – – – – – (3 053 676) (3 053 676)Total changes 29 997 390 (49 590) 29 947 800 5 106 (506 000) (500 894) (120 078 848) (90 631 942) – (90 631 942)balance at 30 June 2012 32 883 730 109 940 565 142 824 295 5 106 5 350 154 5 355 260 (187 280 003) (39 100 448) – (39 100 448)

CoMPAnybalance at 1 July 2010 887 500 72 220 995 73 108 495 – – – 60 680 706 133 789 201 – 133 789 200Changes in equityTotal comprehensive loss for the year – – – – – – (104 721 585) (104 721 585) – (104 721 585)Issue of shares 2 000 000 38 000 000 40 000 000 – – – – 40 000 000 – 40 000 000Total changes 2 000 000 38 000 000 40 000 000 – – – (64 721 585) (64 721 585) – (64 721 585)

balance at 1 July 2011 2 887 500 110 220 995 113 108 495 – – – (44 040 879) 69 067 616 – 69 067 616Changes in equityTotal comprehensive loss for the year – – – – – – (99 535 961) (99 535 961) – (99 535 961)Issue of shares 30 000 000 – 30 000 000 – – – – 30 000 000 – 30 000 000Total changes 30 000 000 – 30 000 000 – – – (99 535 961) (69 535 961) – (69 535 961)balance at 30 June 2012 32 887 500 110 220 995 143 108 495 – – – (143 576 840) (468 345) – (468 345)Note 19 19 19 21, 34 22, 34 34


sTATEMEnT oF CAsH Flows for the year ended 30 June 2012

gRoUP CoMPAny2012 2011 2012 2011

Note R R R RCAsH Flows FRoM oPERATing ACTiviTiEsCash used in operations 35 (47 156 148) (14 432 430) (1 031 094) (1 202 350)Interest income 1 641 710 300 183 272 –Dividends received 93 363 – – –Finance costs (9 038 405) (15 796 626) (2 736) (2 263)Tax received/(paid) 36 (64 500) 1 748 542 (48 329) –net cash from operating activities (54 523 980) (28 180 331) (1 081 877) (1 204 613)

CAsH Flows FRoM invEsTing ACTiviTiEsPurchase of property, plant and equipment 3 (16 078 631) (3 641 170) – –Sale of property, plant and equipment 3 6 889 014 294 842 – –Purchase of intangible assets 5 (1 380 663) (4 547 468) – –Sale of intangible assets 5 598 971 – – –Sale of businesses 38 4 065 906 – – –Loans advanced to group companies – (20 148 130) (33 957 705) (43 326 915)Loans to group companies repaid 257 740 905 980 5 035 293 4 537 210Sale of financial assets – 8 384 847 – –Purchase of financial assets – (12 985 472) – –net cash from investing activities (5 647 663) (31 736 571) (28 922 412) (38 789 705)

CAsH Flows FRoM FinAnCing ACTiviTiEsProceeds on share issue 19 30 000 000 40 000 000 30 000 000 40 000 000Proceeds from other financial liabilities 242 431 004 3 495 892 – –Repayment of other financial liabilities (189 157 863) (4 408 811) – –net cash from financing activities 83 273 141 39 087 042 30 000 000 40 000 000

ToTAl CAsH MovEMEnT FoR THE yEAR 23 101 498 (20 829 860) (4 299) 5 682Cash at the beginning of the year 7 563 383 28 393 243 5 774 92Total cash at the end of the year 16 30 664 881 7 563 383 1 475 5 774


ACCoUnTing PoliCiEs for the year ended 30 June 2012

1. PREsEnTATion oF FinAnCiAl sTATEMEnTs The financial statements have been prepared in accordance with International Financial Reporting Standards

and the Companies Act of South Africa. The financial statements have been prepared on the historical cost basis, except for the measurement of land and buildings at revalued amounts and certain financial instruments at fair value, and incorporate the principal accounting policies set out below. They are presented in South African rands.

These accounting policies are consistent with the previous period, except for the changes set out in note 2: Changes in accounting policy.

1.1 ConsolidATion basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and all entities, including special purpose entities, which are controlled by the company.

Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries are included in the consolidated financial statements from the effective date of acquisition to the effective date of disposal.

Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting policies in line with those of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity.

The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent.

Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest.

business combinationsThe group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued.

Costs directly attributable to a business combination acquired on or after 30 June 2010 are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. Costs directly attributable to a business combination acquired before 30 June 2009, formed of the cost of the business combination.


Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration recognised as part of a business combination acquired on or after 30 June 2010 are not affected against goodwill, unless they are valid measurement period adjustments. Subsequent changes within twelve months of the acquisition date to the assets, liabilities or equity which arise as a result of the contingent consideration recognised as part of a business combination acquired before 30 June 2009, were affected against goodwill.

The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business Combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal group) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and discontinued operations, which are recognised at fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date.

On acquisition, the group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date.

Non-controlling interest arising from a business combination is measured at their share of the fair value of the assets and liabilities of the acquiree.

In cases where the group held a non-controlling shareholding in the acquiree each transaction was treated separately by the acquirer, using the cost of the transaction and fair value information at the date of each exchange transaction to determine the amount of any goodwill associated with the transaction. The cost of the individual investments was compared with the acquirer’s interest in the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Goodwill recognised in a business combination is measured at its cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.

Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is translated to the functional currency of the group at the end of each reporting period with the adjustment recognised in equity through to other comprehensive income.

investment in associatesAn associate is an entity over which the group has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

An investment in associate is accounted for using the equity method, except when the investment is classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale and discontinued operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the group’s share of net assets of the associate, less any impairment losses.

Losses in an associate in excess of the group’s interest in that associate are recognised only to the extent that the group has incurred a legal or constructive obligation to make payments on behalf of the associate.

Any goodwill on acquisition of an associate is included in the carrying amount of the investment; however, a gain on acquisition is recognised immediately in profit or loss.

ACCoUnTing PoliCiEs for the year ended 30 June 2012(continued)


Profits or losses on transactions between the group and an associate are eliminated to the extent of the group’s interest therein.

When the group reduces its level of significant influence or loses significant influence, the group proportionately reclassifies the related items which were previously accumulated in equity through other comprehensive income to profit or loss as a reclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value, with the fair value adjustment being recognised in profit or loss as part of the gain or loss on disposal.

1.2 signiFiCAnT JUdgEMEnTs And soURCEs oF EsTiMATion UnCERTAinTyTrade receivablesThe group assesses its trade receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The impairment for trade receivables is calculated on an individual basis.

Allowance for slow moving, damaged and obsolete stockIncluding an allowance for stock to write stock down to the lower of cost or net realisable value and an allowance for slow moving stock. Management have made estimates of the selling price and direct cost to sell on certain inventory items. The write-down is included in the operating profit note.

impairment testingThe recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. 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 assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including supply demand, together with economic factors such as exchange rates, inflation rate and interest rate. Management uses value in use to determine the recoverable amount of goodwill and identifying assets that may have been impaired.Additionaldisclosureoftheseestimatesisincludedinnote4–Goodwill.

valuation of land and buildingsAt each reporting date the group assesses whether there is any objective evidence that the carrying value of land and buildings has increased/decreased.

Valuations are performed and management determine a carrying value for land and buildings based on the valuations available. Additional disclosure of these valuations of land and buildings is included in note 3.

TaxThe group recognises the net future tax benefit related to deferred income tax assets to the extent that there is convincing evidence that the group will have taxable income against which the assessed losses can be utilised. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.


Asset useful lives and residual valuesProperty, plant and equipment is depreciated over its useful life, taking into account residual values where appropriate. The actual useful lives of assets and residual values are assessed annually.

Residual value assessments consider issues such as future market conditions, remaining useful life and projected disposal values.

Through the assessment of the residual value of the building at the Kliprivier property as further detailed in note 3, it was found that the residual value exceeds the cost of the asset, resulting in no depreciation charge for the year under review.

1.3 PRoPERTy, PlAnT And EqUiPMEnT The cost of an item of property, plant and equipment is recognised as an asset when: • it is probable that future economic benefits associated with the item will flow to the entity; and • the cost of the item can be measured reliably.

Revaluation model – land and buildingsItems of land and buildings are initially recognised at cost. Subsequent to initial recognition, land and buildings are carried at revalued amounts, 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 an asset’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 an asset’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.

Cost model – all other items of property, plant and equipment except for land and buildings Property, plant and equipment are initially measured at cost.

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.

Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses, except for land and buildings, which is carried at a revalued amount being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Property, plant and equipment are depreciated on the straight-line basis over the expected useful lives to the estimated residual value.



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

item Average useful life Land Indefinite Buildings 50 years Leasehold improvements 3 years Plantandmachinery 5–20years Furnitureandfixtures 5–10years Motorvehicles 5–6years Computer equipment 3 years Office equipment 5 years Leasehold property Lease term Tools 2–5years

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

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 inTAngiblE AssETs An intangible asset is recognised when: • it is probable that the expected future economic benefits that are attributable to the asset will flow to the

entity; and • the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

Research costs are recognised in profit or loss when they are incurred.

Development costs are capitalised only when they meet the criteria for capitalising development expenditure, i.e: • Itistechnicallyfeasibletocompletetheassetsothatitwillbeavailableforuseorsale. • Thereisanintentiontocompleteanduseorsellit. • Thereisanabilitytouseorsellit. • Itwillgenerateprobablefutureeconomicbenefits. • Thereareavailabletechnical,financialandotherresourcestocompletethedevelopmentandtouseorsell

the asset. • Theexpenditureattributabletotheassetduringitsdevelopmentcanbemeasuredreliably.

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, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight-line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed every period-end.


Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

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

item Useful life Trademarks 10 years Licences 25 years Computersoftware 2–5years Contract development costs Period of contracts

1.5 goodwillGoodwill represents the excess of the cost of the acquisition over the fair values of the entities interest in the identifiable assets, liabilities and contingent liabilities. Goodwill is not amortised.

Goodwill acquired in a business combination for which the agreement date was before 31 March 2004 was amortised using the straight-line method over its estimated useful life.

With effect from 1 January 2005 goodwill is not amortised, but subject to an annual impairment test. Accumulated amortisation written off in previous years is not reversed, but netted off against the original cost to create an adjusted cost as at 1 January 2005.

If, on a business combination, the fair value of the group’s interest in the identifiable assets, liabilities and contingent liabilities exceeds the cost of the acquisition, the excess is recognised in profit or loss immediately. For business combinations for which the agreement date was before 31 March 2004, this was previously termed negative goodwill and presented as a negative asset. This amount was subsequently written off against opening accumulated profit in the changes in equity statement.

On disposal of a subsidiary, associate, jointly controlled entity or business unit to which goodwill was allocated on acquisition, the amount attributable to such goodwill is included in the determination of the profit or loss on disposal.

Internally generated goodwill is not recognised as an asset.

1.6 invEsTMEnT in sUbsidiARy Company’s financial statements In the company’s separate financial statements, the investment in the subsidiary is carried at cost less any

accumulated impairment. The cost of an investment in a subsidiary is the aggregate of:

• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments.

• any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.



1.7 FinAnCiAl insTRUMEnTs Classification The group and company classify financial assets and financial liabilities into the following categories:

• Financialassetsatfairvaluethroughprofitorloss–heldfortrading.• Financialassetsatfairvaluethroughprofitorloss–designated.• Held-to-maturity investments. • Loans and receivables. • Available-for-sale financial assets. • Financialliabilitiesatfairvaluethroughprofitorloss–heldfortrading.• Financialliabilitiesatfairvaluethroughprofitorloss–designated.• Financial liabilities measured at amortised cost.

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

A financial asset classified as available-for-sale that would have met the definition of loans and receivables may be reclassified to loans and receivables if the entity has the intention and ability to hold the asset for the foreseeable future or until maturity.

initial recognition and measurementFinancial instruments are recognised initially when the group becomes a party to the contractual provisions of the 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 measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Financial instruments are initially measured on transaction date at fair value plus transaction costs when the related contractual rights or obligations exist. Transaction costs in respect of financial instruments classified as fair value through profit or loss are expensed.

Regular way purchases of financial assets are accounted for at settlement date.

subsequent measurementFinancial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period.

Net gains or losses on the financial instruments at fair value through profit or loss exclude dividends and interest.

Dividend income is recognised in profit or loss as part of other income when the group’s right to receive payment is established.

Loans and receivables are subsequently measured at amortised cost, using the effective-interest method, less accumulated impairment losses.

Held-to-maturity investments are subsequently measured at amortised cost, using the effective-interest method, less accumulated impairment losses.


Available-for-sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses.

Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in equity until the asset is disposed of or determined to be impaired. Interest on available-for-sale financial assets calculated using the effective-interest method is recognised in profit or loss as part of other income. Dividends received on available-for-sale equity instruments are recognised in profit or loss as part of other income when the group’s right to receive payment is established.

Changes in fair value of available-for-sale financial assets denominated in a foreign currency are analysed between translation differences resulting from changes in amortised cost and other changes in the carrying amount. Translation differences on monetary items are recognised in profit or loss, while translation differences on non-monetary items are recognised in other comprehensive income and accumulated in equity.

Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective-interest method.

derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have expired or

have been transferred and the group has transferred substantially all risks and rewards of ownership.

Fair value determination The fair values of quoted investments are based on current bid prices. If the market for a financial asset is

not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

impairment of financial assetsAt each reporting date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

For amounts due to the group, significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy and default of payments are all considered indicators of impairment.

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-salefinancialassets,thecumulativeloss–measuredasthedifferencebetweentheacquisitioncost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss–isremovedfromequityasareclassificationadjustmenttoothercomprehensiveincomeandrecognisedin profit or loss.

Impairment losses are recognised in profit or loss.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale.

Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.



loans to group companiesThese include loans to the subsidiary of the company and the associates of the group and are recognised initially at fair value plus direct transaction costs.

Loans to group companies are classified as available-for-sale financial assets and are measured at fair value.

Trade and other receivablesTrade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.

Trade receivables are classified as loans and receivables.

Other receivables are classified as available-for-sale financial assets and are measured at fair value.

Trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised

cost, using the effective-interest method.

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 initially measured at fair value, and are subsequently measured at amortised cost.

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.

1.8 TAx Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount

already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

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


deferred tax assets and liabilitiesA 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 an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit or loss nor taxable profit/(tax loss).

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. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit/(tax loss).

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the

period, except to the extent that the tax arises from: • atransactionoreventwhichisrecognised,inthesameoradifferentperiod,toothercomprehensive

income, or • atransactionoreventwhichisrecognised,inthesameoradifferentperioddirectlyinequity;or • abusinesscombination.

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

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

1.9 lEAsEs A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to

ownership. All other leases are classified as operating leases.

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 liability. This liability is not discounted.

1.10 invEnToRy Inventory is 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 inventory comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to their present location and condition.

The cost of inventory is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar nature and use to the entity.

When inventory are sold, the carrying amount of those inventory 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 is 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.



1.11 ConsTRUCTion ConTRACTs And RECEivAblEsWhere the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognised by reference to release certificates signed by the customer.

Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent that contract costs incurred are recoverable. Contract costs are recognised as an expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profit less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the statement of financial position as a liability, as advance received. Amounts billed for work performed but not yet paid by the customer are included in the statement of financial position under construction contract receivable.

1.12 iMPAiRMEnT oF AssETs The group assesses at the end of each reporting period 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.

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 carried at cost less accumulated depreciation or amortisation other than goodwill 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, those treasury shares are deducted from equity. 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 bEnEFiTsshort-term employee benefitsThe 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) is recognised in the period in which the service is rendered and is 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 profitsharing 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 plansPayments to defined-contribution retirement benefit plans are charged as an expense as they fall due.

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

1.15 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.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another



party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 40.

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; • itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtothegroup;and • thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.

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

• theamountofrevenuecanbemeasuredreliably; • itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtothegroup; • thestageofcompletionofthetransactionattheendofthereportingperiodcanbemeasuredreliably;and • thecostsincurredforthetransactionandthecoststocompletethetransactioncanbemeasuredreliably.

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.

Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. Stage of completion is determined by the proportion of costs incurred to date bear to the total estimated costs of the transaction.

Contract revenue comprises: • the initial amount of revenue agreed in the contract; and • variationsincontractwork,claimsandincentivepayments: –totheextentthatitisprobablethattheywillresultinrevenue;and –theyarecapableofbeingmeasuredreliably.

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.

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

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.


Contract costs comprise: • coststhatrelatedirectlytothespecificcontract; • coststhatareattributabletocontractactivityingeneralandcanbeallocatedtothecontract;and • suchothercostsasarespecificallychargeabletothecustomerunderthetermsofthecontract.

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:

• Actualborrowingcostsonfundsspecificallyborrowedforthepurposeofobtainingaqualifyingassetlessany temporary investment of those borrowings.

• Weightedaverageoftheborrowingcostsapplicabletotheentityonfundsgenerallyborrowedforthepurpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when: • expendituresfortheassethaveoccurred; • borrowingcostshavebeenincurred;and • activitiesthatarenecessarytopreparetheassetforitsintendeduseorsaleareinprogress.

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 Foreign currency transactions A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying to the

foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period: • foreigncurrencymonetaryitemsaretranslatedusingtheclosingrate; • non-monetaryitemsthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedusing

the exchange rate at the date of the transaction; and • non-monetaryitemsthataremeasuredatfairvalueinaforeigncurrencyaretranslatedusingtheexchange

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 financial statements are recognised in profit or loss in the period in which they arise.

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

Cash flows arising from transactions in a foreign currency are recorded in the functional currency by applying to the foreign currency amount the exchange rate between the functional currency 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: • assetsandliabilitiesforeachstatementoffinancialpositionpresentedaretranslatedattheclosingrate

at the date of that statement of financial position; • incomeandexpensesforeachitemofprofitorlossaretranslatedatexchangeratesatthedatesofthe

transactions; and • allresultingexchangedifferencesarerecognisedtoothercomprehensiveincomeandaccumulatedas

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 to other comprehensive income and accumulated in the translation reserve. They are recognised in profit or loss as a reclassification adjustment through to other comprehensive income on disposal of 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 REPoRTingAn operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the group’s other components.

All operating segments’ operating results are reviewed regularly by the group’s CEO to make decisions about the resources to be allocated to the segment and assess its performance and for which discrete information is available.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and accessing performance of the operating segments, has been identified as the board of directors that make strategic decisions.

1.21 RElATEd PARTiEsRelated parties are considered to be related if one party has the ability to control or jointly control the other party or exercise significant influence over the other party in making financial and operating decisions. Key management personnel are also regarded as related parties. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, including all executive and non-executive directors.

Related party transactions are those where a transfer of resources or obligations between related parties occurs, regardless of whether or not a price is charged.



2. CHAngEs in ACCoUnTing PoliCy The financial statements have been prepared in accordance with International Financial Reporting Standards

on a basis consistent with the prior year except for the adoption of the following new or revised standards: • IAS24RelatedPartyDisclosures(Revised). • 2010AnnualImprovementsProject:AmendmentstoIFRS7FinancialInstruments:Disclosures. • 2010AnnualImprovementsProject:AmendmentstoIAS1PresentationofFinancialStatements. • IFRS7AmendmentstoIFRS7(AC144)Disclosures–Transfersoffinancialassets.

iAs 24 Related Party disclosures (Revised) The revisions to IAS 24 include a clarification of the definition of a related party as well as providing a partial

exemption for related party disclosures between government-related entities.

In terms of the definition, the revision clarifies that joint ventures or associates of the same third party are related parties of each other. To this end, an associate includes its subsidiaries and a joint venture includes its subsidiaries.

The effective date of the standard is for years beginning on or after 1 January 2011.

The group has adopted the standard for the first time in the 2012 financial statements.

The impact of the amendment is not material.

2010 Annual improvements Project: Amendments to iFRs 7 Financial instruments: disclosures The amendment adds an explicit statement that qualitative disclosure should be made in the context of the

quantitative disclosures required to better enable users to evaluate an entity’s exposure to risks arising from financial instruments. In addition, the IASB amended and removed existing disclosing requirements.

The effective date of the amendment is for years beginning on or after 1 January 2011.

The group has adopted the amendment for the first time in the 2012 financial statements.


2010 Annual improvements Project: Amendments to iAs 1 Presentation of Financial statements The amendment clarifies that an entity may choose to disclose an analysis of other comprehensive income

by item in the statement of changes in equity or in the notes of the annual financial statements.




iFRs 7 Amendments to iFRs 7 (AC 144) disclosures – Transfers of financial assets Amends the required disclosures to help users of financial statements evaluate the risk exposures relating to

transfers of financial assets and the effect of those risks on an entity’s financial position. These amendments require additional disclosure on transfer transactions of financial assets, including the possible effects of any residual risks that the transferring entity retains. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

The effective date of the amendment is for years beginning on or after 1 July 2011.




noTEs To THE FinAnCiAl sTATEMEnTs for the year ended 30 June 2012

2012 2011

Cost/valuation

R

Accumulated depreciation

and impairment

R

Carrying value

R

Cost/Valuation

R

Accumulated depreciation

and impairment

R

Carrying value

R3. PRoPERTy, PlAnT And

EqUiPMEnTgRoUPLand and buildings 32 800 000 – 32 800 000 32 800 000 – 32 800 000Leasehold property – – – 650 000 – 650 000Plant and machinery 24 518 821 (4 985 401) 19 533 420 26 429 530 (5 488 729) 20 940 801Furniture and fixtures 1 195 051 (567 295) 627 756 1 372 365 (548 187) 824 178Motor vehicles 4 840 711 (2 000 334) 2 840 377 6 793 383 (2 371 760) 4 421 623Office equipment 495 393 (428 946) 66 447 493 942 (363 694) 130 248Computer equipment 1 081 293 (919 667) 161 626 2 451 490 (2 115 389) 336 101Leasehold improvements 129 352 (112 580) 16 772 279 568 (179 168) 100 400Tools 1 264 834 (644 384) 620 450 1 227 626 (987 441) 240 185Total 66 325 455 (9 658 607) 56 666 848 72 497 904 (12 054 368) 60 443 536

REConCiliATion oF PRoPERTy, PlAnT And EqUiPMEnT – gRoUP – 2012

openingbalance

RAdditions

R

disposalsand

scrappingsR

disposal ofsubsidiary

R

de-preciation

RTotal

RLand and buildings 32 800 000 – – – – 32 800 000Leasehold property 650 000 – (650 000) – – –Plant and machinery 20 940 801 14 606 664 (6 062 601) (6 459 668) (3 491 777) 19 533 420Furniture and fixtures 824 178 1 301 – – (197 723) 627 756Motor vehicles 4 421 623 143 679 (582 322) – (1 142 603) 2 840 377Computer equipment 336 101 78 655 – – (253 130) 161 626Office equipment 130 248 – – – (63 801) 66 447Leasehold improvements 100 400 20 397 – – (104 025) 16 772Tools 240 185 2 301 500 (848 683) – (1 072 552) 620 450

60 443 536 17 152 196 (8 143 606) (6 459 668) (6 325 611) 56 666 848

REConCiliATion oF PRoPERTy PlAnT And EqUiPMEnT – gRoUP – 2011

Openingbalance

RAdditions

R

Reclassi-fications

R

Disposalsand

scrappingsR

Disposal ofsubsidiary

R

Re-valuations

R

De-preciation

RTotal

RLand and buildings 62 212 408 88 150 – – (27 323 155) (2 177 403) – 32 800 000Leasehold property 650 000 – – – – – – 650 000Plant and machinery 20 096 484 3 100 993 306 239 – – – (2 562 915) 20 940 801Furniture and fixtures 3 049 897 41 394 – – (1 873 517) – (393 596) 824 178Motor vehicles 6 518 337 282 674 2 702 (394 804) (297 857) – (1 689 429) 4 421 623Computer equipment 1 480 965 82 823 (774 061) – – – (453 626) 336 101Office equipment 260 677 100 510 771 359 – (848 256) – (154 042) 130 248Leasehold improvements 1 034 244 – – – (640 892) – (292 952) 100 400Workshop equipment 306 239 – (306 239) – – – – –Tools 617 343 173 421 – – – – (550 579) 240 185

96 226 594 3 869 965 – (394 804) (30 983 677) 2 177 403 (6 097 135) 60 443 536


noTEs To THE FinAnCiAl sTATEMEnTs for the year ended 30 June 2012(continued)

gRoUP CoMPAny2012 2011 2012 2011

R R R R3. PRoPERTy, PlAnT And EqUiPMEnT

(continued) EnCUMbEREd As sECURiTyCarrying value of property, plant and equipment encumbered as security:

Land and buildings 32 800 000 32 800 000 – –Encumbered as security for mortgage bonds as further detailed in note 24 as well as a third mortgage bond in favour of Mayfair Speculators (Proprietary) Limited.

Motor vehicles 2 073 835 3 827 136 – –Encumbered as security for instalment sale agreements as further detailed in note 24.

Plant and machinery 7 557 547 12 403 520 – –Encumbered as security for instalment sale agreements as further detailed in note 24.

dETAils oF PRoPERTiEsleasehold propertyBeing the building on Erf No 1088 situated in the municipality of Evander Ext 2, held under Title Deed No T95553/2002.–Atcost – 144 005 – ––Accumulatedrevaluation – 505 995 – –

– 650 000 – –Angola propertiesBeing property held under File No 09.109_328 situated in Bengo, Angola.

The prior year valuation was performed by an independent valuator, Dr Angelo Nautiseo of Proprime, Consultora e Avaliacao Imobilario, not connected to the group, based on the open market value of the land as at 30 June 2011. The controlling interest in RARE Angola Energy SA was disposed of in the prior year.–Atcost – 2 165 634 – ––Additionssincepurchase – 1 471 126 – ––Accumulatedrevaluation – 12 518 052 – ––Disposalofsubsidiary – (16 154 812) – –

– – – –


gRoUP CoMPAny2012 2011 2012 2011

R R R R3. PRoPERTy, PlAnT And EqUiPMEnT

(continued) Being property held under File No 09.109_203 situated in Huambo, Angola.

The prior year valuation was performed by an independent valuator, Dr Angelo Nautiseo of Proprime, Consultora e Avaliacao Imobilario, not connected to the group, based on the open market value of the land as at 30 June 2011. The controlling interest in RARE Angola Energy SA was disposed of in the prior year.–Atcost – 2 298 546 – ––Accumulatedrevaluation – 8 869 797 – ––Disposalofsubsidiary – (11 168 343) – –

– – – –Kliprivier Being the remainder of portion 22 of the farm Waterfall 150IR situated in the municipality of Midvaal held under the Title Deed No T168191/2007.–Atcost 12 000 000 12 000 000 – ––Accumulatedrevaluation 6 656 074 6 656 074 – ––Capitalisedexpenditure 14 143 926 14 143 926 – –

32 800 000 32 800 000 – – The effective date of the valuation was 30 June 2012. The valuation was performed by the directors. The valuation was based on the capitalised earnings method by determining the property’s maintainable earnings and using a capitalisation rate of 11,50% per annum (2011: 12,00%). The following significant assumptions were used:

1. A vacancy provision of 0,00% (2011: 2,00%); 2. Expenses have been prepared based on the

principles of a triple net lease;3. Market-related rental of R65,30 (2011: R65,30)

per square metre; and 4. Occupation of property by only one tenant.

Had the group’s land and buildings been measured on a historical cost basis, their carrying amount would have been as follows:Land 12 000 000 12 144 005 – –Buildings 14 143 926 14 143 926 – –

26 143 926 26 287 931 – –


2012 2011

CostR

Accumulated impairment

R

Carrying value

RCost

R

Accumulated impairment

R

Carrying value

R4. goodwill

gRoUP Goodwill 35 230 635 (35 230 635) – 35 230 635 (34 774 119) 456 516

opening balance

R

impairment loss

RTotal

RReconciliation of goodwill – group – 2012Goodwill 456 516 (456 516) –

Opening balance

Disposal of subsidiary

Impairment loss Total

Reconciliation of goodwill – group – 2011Goodwill 6 088 557 (347 811) (5 284 230) 456 516

For the purpose of the impairment testing, goodwill is allocated to the group’s operating divisions, which represent the lowest level within the group at which goodwill is monitored for internal management purposes and which is not higher than the group’s operating segments as reported in the consolidated financial statements.

gRoUP CoMPAny2012 2011 2012 2011

R R R RThe aggregate carrying amounts of goodwill allocated to each unit are as follows:Water Utilities division – 456 516 – –

In the current financial period, the recoverable amount of the Water Utilities division was determined to be zero due to the fact that the division was discontinued as further detailed in note 17. The remaining goodwill relating to that division was impaired in full.

In 2011, the recoverable amount of these cash-generating units were determined based on a value-in-use calculation which was determined by discounting the future pre-tax cash flows generated from the continued use of the unit and based on the following key assumptions:

• Cashflowprojectionsarebasedonfinancialbudgetsapprovedbythedirectorscoveringafive-yearperiodand are determined using past experience and actual operating results;

• Cashflowsbeyondthefive-yearperiodhasnotbeentakenintoaccount; • Thebudgetedturnoverfortheensuingfinancialyearwasescalatedbyagrowthrateof10,00%perannum,

while maintaining similar gross and net margins in line with previous years; • Workingcapitalwasmaintainedattheaverageoperatinglevelsforthelastthreeyears;and • Apre-taxdiscountrateof21,87%wasusedforthe2011calculationofgoodwill.



2012 2011

CostR

Accumulated amortisation

and impairment

R

Carrying value

RCost

R

Accumulated amortisation

and impairment

R

Carrying value

R5. inTAngiblE

AssETgRoUPTrademarks – – – 937 622 (198 014) 739 608Licences 581 455 (70 743) 510 712 581 455 (47 485) 533 970Computer software 5 579 066 (5 579 066) – 5 579 066 (759 739) 4 819 327Total 6 160 521 (5 649 809) 510 712 7 098 143 (1 005 238) 6 092 905

opening balance

RAdditions

Rdisposals

RAmortisation

R

impairment loss

RTotal

RReconciliation of intangible assets – group – 2012Trademarks 739 608 – (598 971) (140 637) – –Licences 533 970 – – (23 258) – 510 712Computer software 4 819 327 1 380 663 – (1 169 219) (5 030 771) –

6 092 905 1 380 663 (598 971) (1 333 114) (5 030 771) 510 712

Opening balance

RAdditions

R

Disposal of subsidiary

RAmortisation

R

Impairment loss

RTotal

RReconciliation of intangible assets – group – 2011Trademarks 937 622 – – (198 014) – 739 608Licences 557 228 – – (23 258) – 533 970Computer software 1 109 769 4 547 468 (47 542) (790 368) – 4 819 327Contract development cost 9 245 601 – – (1 827 157) (7 418 444) –

11 850 220 4 547 468 (47 542) (2 838 797) (7 418 444) 6 092 905

impairment of the contract development cost In the prior year the recoverable amount of the intangible asset was determined based on the value-in-use

calculation. Due to a large decline in sales activity, recurring losses and a suspension of the contract, the recoverable amount of the asset was determined to be lower than the carrying amount. An impairment of R7 418 444 was recognised in the prior financial year.

impairment of integrated accounting package An integrated accounting package (“the 2011 system”) was implemented by the group during the 2011

financial period. Notwithstanding concerted efforts by previous management to integrate and effectively implement the 2011 system, it became evident that the system could not comply with the needs of the group. The system was replaced and as such it has been impaired in full.



Name of companyListed/

unlisted% holding

2012% holding

2011

Carrying value

2012R

Carrying value

2011R

6. invEsTMEnT in sUbsidiARyThe RARE Group Proprietary Limited Unlisted 100,00 100,00 189 538 417 109 538 417Impairment of investment in subsidiary (189 538 417) (98 920 133)

– 10 618 284

The carrying amount of the subsidiary is shown net of any impairment losses. An impairment loss of R90 618 218 (2011: R98 920 133) was recognised during the year under review.

The reason for the impairment of the investment in The RARE Group Proprietary Limited is due to a decrease in the fair value of the assets and liabilities of the company.

Name of companyListed/

unlisted% holding

2012% holding

2011

Carryingamount

2012R

Carryingamount

2011R

7. invEsTMEnTs in AssoCiATEsZeta Training Solutions Proprietary Limited Unlisted 49,00 49,00 49 49Tasonline Software Proprietary Limited Unlisted 25,10 25,10 900 000 900 000

900 049 900 049Impairment of investments in associates (900 049) –

– 900 049

The carrying amounts of associates are shown net of any impairment losses. An impairment loss of R900 049 (2011: Rnil) was recognised during the year under review. The reason for the impairment of the investments in associates is due to a decrease in the fair value of the assets and liabilities of the entities.

2012R

2011R

summary of the financial information of the associatesTotal assets 1 479 074 2 030 037Total liabilities (4 792 125) (4 982 492)Revenue 4 765 669 5 132 913Loss for the year (360 695) (1 397 676)


gRoUP CoMPAny2012 2011 2012 2011

R R R R8. loAns To gRoUP CoMPAniEs

subsidiaryThe RARE Group Proprietary Limited – – 7 573 863 58 651 449 This unsecured loan does not bear interest at year-end and is not subject to any fixed terms of repayment. The loan is not expected to be recovered in the ensuing 12 months.

7 573 863 58 651 449Impairment of loan to subsidiary (7 573 863) –

– 58 651 449

AssociatesZeta Training Solutions Proprietary Limited 1 414 700 1 389 400 – –

Tasonline Software Proprietary Limited 2 755 402 2 638 942 – –

These unsecured loans bear interest at the prime overdraft lending rate being 9,00% (2011: 9,00%) at year-end and are not subject to any fixed terms of repayment. In the prior financial year the loan to Tasonline Software Proprietary Limited was secured by personal sureties in favour of the group.

4 170 102 4 028 342 – –Impairment of loans to associates (4 170 102) (839 177) – –

– 3 189 165 – –Non-current assets – – – 58 651 449Current assets – 3 189 165 – –

– 3 189 165 – 58 651 449

Credit quality of loans to group companies The credit quality of loans to group companies are assessed by reference to the financial position of the

relevant companies, past experience and other factors. During the reporting period, there has been a significant change in the financial position of the companies. The financial position of the companies was determined by assessing the companies’ solvency, liquidity and profitability. The maximum exposure to credit risk at the reporting date is the carrying value of each class of loan above.

These loans are denominated in rand.

Fair value of loans to group companies The carrying amount of the loans to group companies approximates the fair value.



gRoUP CoMPAny2012 2011 2012 2011

R R R R8. loAns To gRoUP CoMPAniEs (continued)

loans to group companies impairedAs at 30 June 2012, the following loans were impaired and provided for as follows:Zeta Training Solutions (Proprietary) Limited 1 414 700 839 177 – –The RARE Group (Proprietary) Limited – – 7 573 863 –Tasonline Software (Proprietary) Limited 2 755 402 – – –

4 170 102 839 177 7 573 863 –Reconciliation of loans to group companies impairedOpening balance 839 177 – – –Impairment losses recognised 3 330 925 839 177 7 573 863 –

4 170 102 839 177 7 573 863 –

9. oTHER FinAnCiAl AssETsAt fair value through profit or lossSanlam Collective Investments Limited – 10 040 706 – –

These funds were invested in Sanlam Alternative Income Fund and were encumbered as security for Sanlam Capital Limited in terms of the debtors securitisation agreement, which was terminated in October 2011.

Available-for-saleInvestment: RARE Group Angola SARL 64 435 64 435 – – The investment comprises 10% of the unlisted shares in RARE Group Angola SARL, a company incorporated in Angola.

Other loan receivable 21 632 285 080 – –This loan is unsecured, interest free and is not subject to any fixed terms of repayment.

RARE Petrochemical Angola Energy SARL 11 262 117 11 262 117 – – This unsecured loan bears interest at the prime overdraft lending rate, being 9,00% (2011: 9,00%). Interest is recognised to the extent that it is probable that future economic benefits will flow to the group. The loan is not subject to any fixed terms of repayment.

RARE Group Angola SARL 48 718 215 48 461 461 – – This unsecured loan bears interest at the prime overdraft lending rate, being 9,00% (2011: 9,00%). Interest is recognised to the extent that it is probable that future economic benefits will flow to the group. The loan is not subject to any fixed terms of repayment.

60 066 399 60 073 093 – –Available-for-sale (impairments) (60 044 767) (59 788 012) – –

21 632 285 081 – –Total other financial assets 21 632 10 325 787 – –non-current assetsAvailable for sale 21 632 285 080 – –Current assetsAt fair value through profit or loss – 10 040 706 – –

21 632 10 325 786 – –


9. oTHER FinAnCiAl AssETs (continued) Currencies The maximum exposure to credit risk at the reporting date is the fair value of each class of loan/asset

mentioned above. The group does not hold any collateral as security.

All financial assets are denominated in South African rand.

Credit quality of other financial assets The credit quality of financial assets are assessed with reference to the financial position of the relevant

companies, past experience and other factors.

During the reporting period under review, except for the companies mentioned below, there has not been a significant change in the financial position of the companies. The financial position of the companies was determined by assessing the companies’ solvency, liquidity and profitability.

Fair value of available-for-sale financial assets The carrying amount of the available-for-sale financial assets approximates the fair value.

Fair value of financial assets at fair value through profit or loss The fair value of these financial assets was determined based on the quoted market price.

other financial assets impaired As at 30 June 2012 other financial assets of R60 044 767 (2011: R59 788 012) were impaired and provided for

as follows:

gRoUP CoMPAny2012 2011 2012 2011

R R R RInvestment RARE Group Angola SARL 64 435 64 435 – –Loan: RARE Group Angola SARL 48 718 215 48 461 460 – –Loan: RARE Petrochemical Angola Energy SARL 11 262 117 11 262 117 – –

60 044 767 59 788 012 – –Reconciliation of other financial assets impairedOpening balance 59 788 012 –Impairment losses recognised 256 755 59 788 012 – –

60 044 767 59 788 012 – –

10. dEFERREd TAxdeferred tax (liability)/asset Unrecognised portion of tax losses and/or other temporary differences available for set-off against future taxable income (52 063 020) (13 955 872) (376 314) –Tax losses available for set-off against future taxable income 50 702 597 19 666 610 376 314 –Accelerated capital allowances for tax purposes (437 880) (2 116 905) – –Revaluation of land and buildings (1 404 922) (1 305 915) – –Provisions and accruals for bonuses, leave pay, credit notes and doubtful debts 1 182 304 2 072 817 – –Prepayments (561 224) (3 641) – –Lease liability 28 264 32 306 – –Income received in advance 1 206 329 525 380 – –

(1 347 552) 4 914 780 – –



gRoUP CoMPAny2012 2011 2012 2011

R R R R10. dEFERREd TAx (continued)

Reconciliation of deferred tax asset/(liability)At beginning of the year 4 914 780 237 910 – -Originating temporary difference on prepayments (557 583) (3 272) – –Increase in tax losses available for set-off against future taxable income 31 035 987 14 869 905 376 414 –Tax losses and/or other temporary differences not recognised as a deferred tax asset (38 107 148) (13 955 868) (376 414) –Reversing/(originating) temporary difference on property, plant and equipment 1 679 025 (91 796) – –Reversing foreign tax losses available for set-off against future taxable income – (507 052) – –Originating temporary difference on income received in advance 680 949 486 490 – –Reversing temporary difference on operating lease liability (4 042) – – –(Reversing)/originating temporary difference on provisions and accruals for bonuses, leave pay, credit notes and doubtful debts (890 513) 334 886 – –(Originating)/reversing temporary difference on revaluation of land and buildings (99 007) 3 543 581 – –

(1 347 552) 4 914 780 – –

Deferred tax asset – 5 671 452 – –Deferred tax liability (1 347 552) (756 672) – –

(1 347 552) 4 914 780 – – Use and sales rate The deferred tax rate applied to the revaluation adjustments of land and buildings is determined by the

expected manner of recovery. Where the expected recovery of the land and buildings is through sale, the capital gains tax rate of 18,65% (2011: 14,00%) is used. If the expected manner of recovery is through indefinite use, the normal tax rate of 28,00% (2011: 28,00%) is applied.

As the manner of recovery of the building is through indefinite use, the normal tax rate is used as the

deferred tax rate. The expected manner of recovery of the land is through sale, therefore the capital gains tax rate is used.

Unrecognised deferred tax asset Unused tax losses and temporary differences not recognised as deferred tax assets are detailed in note 32.

The deferred tax asset which relates to assessed losses amount to R50 702 597 (2011: R19 666 610).

The asset is recognised to the extent that sufficient taxable temporary differences are available which will result in taxable amounts against which the unused tax losses can be utilised.

The unrecognised deferred tax asset amounts to R52 063 022 (2011: R13 955 872) and could be recognised again when trading conditions improve, which will make it more probable that future taxable profit will allow the tax losses to be utilised.

In the prior financial year a deferred tax asset of R5 671 452 was recognised as, based on the budget for the

ensuing financial year prepared by management, to the extent that there was convincing evidence that it was probable that the relevant company in the group would generate sufficient taxable income to utilise said portion of the tax losses of that company.

11. 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 Pension Funds Act of 1956, exist for this purpose.

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


gRoUP CoMPAny2012 2011 2012 2011

R R R R11. RETiREMEnT bEnEFiTs (continued)

The total group contributions to such schemes 5 502 108 5 847 063 – –

12. PREPAyMEnTs Prepayments relate to upfront payments made to trade creditors.

13. invEnToRiEsRaw materials – 16 024 493 – –Work in progress – 778 577 – –Finished goods and merchandise 73 266 737 98 275 583 – –Provision for slow moving inventory and net realisable value adjustments (13 207 590) (8 780 881) – –

60 059 147 106 297 772 – –During the current financial year inventory to the amount of R25 022 572 (2011: R17 803 810) was written down and included in cost of sales as follows:

Net realisable value adjustments 9 418 500 8 780 881 – –Provision for slow-moving stock 3 789 090 – – –Write-off of inventory held at factories during closure process 6 969 248 – – –Inventory count variances as further explained in note 43 4 845 734 9 022 929 – –

25 022 572 17 803 810 – –

inventory encumbered as securityInventory was encumbered as security for a general notarial bond of Rnil (2011: R42 000 000).

Inventory to the amount of R31 467 450 (2011: R61 275 615) has been encumbered as security to China Construction Bank for trade finance. The China Construction Bank facility requires 125,00% (2011: 100,00%) inventory to loan coverage.

Mayfair Speculators Proprietary Limited facility requires 120,00% inventory to loan coverage. The inventory purchased under this facility, as further detailed in note 24, was still in the manufacturing process and ownership had not yet transferred to the group at year-end. The mentioned goods were received into inventory after year-end.

gRoUP CoMPAny2012 2011 2012 2011

R R R R14. ConsTRUCTion ConTRACTs And

RECEivAblEsContracts in progress at the end of the reporting periodAmounts due from customers under construction contracts 15 193 417 7 745 402 – – At 30 June 2012 no contract debtors are due for settlement after more than 12 months (2011: Rnil) and no contract debtors were encumbered as security for overdraft facilities.

Construction contracts and receivables with reference to contracts in progress at the reporting dateConstruction costs incurred plus recognised profits less recognised losses to date 15 193 417 7 745 402 – –Progress billings – –

15 193 417 7 745 402



gRoUP CoMPAny2012 2011 2012 2011

R R R R15. TRAdE And oTHER RECEivAblEs

Trade receivables 79 409 536 92 593 345 – –Prepayments – 13 005 – –Deposits 3 109 553 1 414 652 – –Value added taxation 3 471 273 67 916 – 67 916Other receivables 3 032 174 6 965 766 435 598 435 598

89 022 536 101 054 684 435 598 503 514

Trade and other receivables encumbered as security Trade receivables securitisation On 28 October 2008 RARE Holdings Limited and it subsidiaries collectively entered into a three-year trade

receivables securitisation funding programme, which terminated in October 2011. This facility was successfully refinanced in October 2011 as further detailed in note 24. The new facility will remain in force until 1 July 2013.

Mechanics of the structure An independently owned special purpose entity, RARE Capital Proprietary Limited (“SPE”), was incorporated

and the Group entered into the sale of existing and future trade receivables, and other agreements with the SPE. The Group maintains the right to manage and administer the collections process.

Credit quality of trade receivables The average credit period granted to customers is 30 days from statement (2011: 30 days from statement),

except for certain of the government and municipal trade receivables, which is 30 days from certification date. In the prior year, certain government and municipal customers had open account certification agreements with the group. Furthermore, one specific government and municipal debtor had a 120-day term. No interest is charged on the non-parastatal customers for the first 60 days from the date of the invoice. Thereafter, interest is charged at the prime overdraft lending rate on the outstanding balance. No interest is charged on the government and municipal customers. The company assesses whether or not to pursue legal collection for debtors exceeding 120 days from date of statement.

Of the trade balance at the end of the year, R18 067 516 (2011: R22 115 517) is due from individual debtors who represent more than 20% of the total balance of trade receivables.

gRoUP CoMPAny2012 2011 2012 2011

R R R RTrade receivablesThe ageing of total trade debtors is as follows:Current to 60 days 62 627 229 60 831 898 – –60+–90days 7 431 117 5 269 318 – –90+–120days 806 392 2 360 829 – –120+ days 8 544 798 24 131 300 – –

79 409 536 92 593 345 – –The ageing of government and municipal counterparties is as follows:Current to 60 days 7 864 755 32 314 355 – –60+–90days 64 961 1 612 784 – –90+–120days 636 572 1 580 016 – –120+ days 3 610 328 7 884 088 – –

12 176 616 43 391 243 – –


gRoUP CoMPAny2012 2011 2012 2011

R R R R15. TRAdE And oTHER RECEivAblEs

(continued)Trade receivables that are neither past due nor impaired The credit quality of trade receivables that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates and external ratings:Counterparties with credit guarantee insurance 40 801 183 37 129 225 – –Counterparties without credit guarantee insurance 13 992 453 4 576 750 – –Government and municipal counterparties 8 117 592 22 883 942 – –

62 911 228 64 589 917 – –Fair value of trade and other receivablesThe carrying amount of trade and other receivables approximates the fair value.

Trade receivables past due but not impaired At 30 June 2012, R16 498 308 (2011: R28 003 428) were past due but not impaired. These relate to customers from whom there has not been a significant change in credit quality and the amounts are still considered recoverable.

The ageing of amounts past due but not impaired is as follows:60+–90days 7 387 467 4 555 912 – –90+–120days 806 392 939 136 – –120+ days 8 304 449 22 508 380 – –

16 498 308 28 003 428 – –Trade receivables impaired An impairment provision of R1 937 882 (2011: R6 398 154) was recognised against trade receivables. The ageing of these impaired trade receivables is as follows:Current–60days 31 162 – – –60+–90days 43 650 – – –120+ days 1 863 070 6 398 154 – –

1 937 882 6 398 154 – –Reconciliation of provision for impairment of trade receivablesOpening balance 6 398 154 4 629 859 – –Impairment losses recognised 1 937 882 2 528 482 – –Amounts written off as uncollectable (6 398 154) (760 187) – –

1 937 882 6 398 154 – –CurrenciesThe carrying amount of trade and other receivables is denominated in the following currencies:Rand 56 049 386 84 890 487 435,598 503,512US dollar 32 973 150 16 164 197 – –

89 022 536 101 054 684 435,598 503,512



15. TRAdE And oTHER RECEivAblEs (continued)The creation and release of provision for impaired receivables have been included in operating expenses in the statement of comprehensive income. When there is no expectation of recovering additional cash, amounts charged to the allowance account are generally written off.

During the year under review an other receivable of R5 076 596 (2011: Rnil) was written off as irrecoverable. This related to an import duty receivable and the related write-down was included in cost of sales in the statement of comprehensive income.

Furthermore, trade receivables of R14 896 242 (2011: R683 895) was written off as irrecoverable during the year under review. The related write-down was included in operating expenses in the statement of comprehensive income. Of the amount written off R7,1 million relates to a specific debtor located in Zambia of which, during the year under review, it became clear that RARE would not be able to collect the full outstanding balance, therefore the debtor was written off.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of trade and other receivables mentioned above. The group does not hold any collateral as security. Insurance cover is taken out for trade debtors as further detailed in note 44.

gRoUP CoMPAny2012 2011 2012 2011

R R R R16. CAsH And CAsH EqUivAlEnTs

Cash and cash equivalents consist of:Cash on hand 10 114 82 496 – –Bank balances 31 090 414 10 421 335 1 475 5 774Bank overdraft (435 647) (2 940 448) – –

30 664 881 7 563 383 1 475 5 774Current assets 31 100 528 10 503 831 1 475 5 774Current liabilities (435 647) (2 940 448) – –

30 664 881 7 563 383 1 475 5 774

CurrenciesThe carrying amount of cash and cash equivalents is denominated in the following currencies:Rand 28 712 256 7 563 383 1 475 5 774Kwacha 243 678 – – –US dollar 1 708 947 – – –

30 664 881 7 563 383 1 475 5 774The banking facilities of the group are secured as follows:A general notarial bond of R30 000 000 (2011: R30 000 000) over the movable assets of the group in favour of FNB.

A general notarial bond of R40 000 000 (2011: R40 000 000) over the movable assets of the group in favour of Mayfair Speculators Proprietary Limited.

A general notarial bond of R12 000 000 (2011: R12 000 000) over the movable assets of the group in favour of Arcelormittal South Africa Limited.

A general notarial bond of R550 000 (2011: R550 000) over the movable assets of the group in favour of Spes Machines Proprietary Limited.

An unlimited cession and pledge of book debts of The RARE Group Proprietary Limited further detailed in note 15. Unlimited cross suretyship by RARE Holdings Limited.

Bank balances amounting to Rnil (2011: R7 411 442) have been encumbered as security for Sanlam Capital Limited in terms of the debtors securitisation agreement as further detailed in note 9.

Of the bank balance at year-end R26 million relates to the inventory loan from Mayfair Speculators Proprietary Limited utilised to purchase inventory subsequent to year-end as further detailed in note 13 and 24.


gRoUP CoMPAny2012 2011 2012 2011

R R R R17. disConTinUEd oPERATions

During the year under review the Polokwane and Centurion factories were closed as a result of unprofitability. The administrative activities of the Pipeline Services division were consolidated at the Kliprivier office. Furthermore, the 61% share of a subsidiary in the Democratic Republic of Congo (“RARE Congo”) was disposed of in April 2012 as further detailed in the directors’ report.

In the prior year the group had disposed of its majority shareholding in the Angolan operations due to a lack of return on these investments.

Revenue 33 045 434 50 455 273 – –Cost of sales (30 868 251) (72 169 294) – –Gross profit/(loss) 2 177 183 (21 714 021) – –Other income 19 082 5 569 326 – –Operating expenses (2 298 036) (48 916 249) – –Finance cost – (1 577 197) – –Net loss for the year (101 771) (66 638 141) – –Cash flows (used in)/generated fromOperating activities 5 915 726 2 489 835 – –Investing activities (3 684 885) (40 374 026) – –Financing activities – 37 573 158 – –

2 230 841 (311 033) – –



loans and receivables

R

Available-for-sale

RTotal

R18. FinAnCiAl AssETs by CATEgoRy

group – 2012Other financial assets – 21 632 21 632Construction contract receivable 15 193 417 – 15 193 417Trade and other receivables 79 409 536 6 141 727 85 551 263Cash and cash equivalents 31 100 528 – 31 100 528

125 703 481 6 163 359 131 866 840

Loans and receivables

R

Fair value through profit or

loss– designated

R

Available-for-sale

RTotal

Rgroup – 2011Loans to group companies – – 3 189 165 3 189 165Other financial assets – 10 040 706 285 080 10 325 786Construction contract receivable 7 745 402 – – 7 745 402Trade and other receivables 93 028 945 – 7 944 820 100 973 765Cash and cash equivalents 10 503 831 – – 10 503 831

111 278 178 10 040 706 11 419 065 132 737 949

loans and receivables

R

Available-for-sale

RTotal

RCompany – 2012

Loans to group companies – 435 598 435 598Cash and cash equivalents 1 475 – 1 475

1 475 435 598 437 073Company – 2011

Loans to group companies 58 651 449 – 58 651 449Trade and other receivables – 435 598 435 598Cash and cash equivalents 5 774 – 5 774

58 657 223 435 598 59 092 821

gRoUP CoMPAny2012 2011 2012 2011

R R R R19. sHARE CAPiTAl

Authorised2 000 000 000 ordinary shares of no par value (2011: 300 000 000 of R0,01) – 3 000 000 – 3 000 000100 000 000 preference shares of no par value (2011: 100 000 000 of R0,01) – 1 000 000 – 1 000 000

– 4 000 000 – 4 000 000issued538 750 000 ordinary shares of no par value (2011: 288 750 000 of R0,01) 32 887 500 2 887 500 32 887 500 2 887 500Share premium 112 665 126 112 714 716 112 945 556 112 945 556Share issue costs written off against share premium (2 724 561) (2 724 561) (2 724 561) (2 724 561)Treasury shares (3 770) (1 160) – –

142 824 295 112 876 495 143 108 495 113 108 495


gRoUP CoMPAny2012 2011 2012 2011

R R R R19. sHARE CAPiTAl (continued)

Reconciliation of number of shares issuedOpening balance 288 634 000 88 750 000 – –Issueofshares–ordinaryshares 250 000 000 200 000 000 – –Treasury shares (261 000) (116 000) – –

538 373 000 288 634 000 – –

20. CAPiTAl disClosUREsThe group’s objective when managing capital is to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The group did not meet its objectives due to adverse market conditions and other factors as listed in note 1 of the directors’ report. Consequently, the board has implemented a restructuring plan and a R100 million clawback offer was finalised subsequent to year-end as detailed in note 1 of the directors’ report.

21. FoREign CURREnCy TRAnslATion REsERvEThe translation reserve comprised exchange differences on consolidation of foreign subsidiaries.

RARE Construction (Zambia) Limited 5 106 – – –

22. REvAlUATion REsERvEThe revaluation reserve arises on the revaluation of the Kliprivier premises further detailed in note 3. During the current year the Evander property as detailed in note 3 was disposed of.

During the prior year the controlling interest in the Angolan operations was disposed of resulting in a transfer of the revaluation reserve relating to the Angolan properties to other comprehensive income.

Balance at the beginning of the year 5 856 154 14 705 413 – –Decrease on revaluation of properties – (2 177 403) – –Deferred tax liability arising on revaluation – 625 235 – –Non-controlling shareholders’ portion of revaluation – 400 065 – –Realisation of revaluation reserve on disposal of property (506 000) (7 697 156) – –

5 350 154 5 856 154 – –



23. non-ConTRolling inTEREsTDuring the year under review profits of R3 053 676 were allocated to the non-controlling shareholder of the RARE Congo operation. The majority stake in RARE Congo was disposed of as further detailed in note 38.

In the prior financial year losses of R33 976 692 were allocated to the non-controlling shareholders of the Angolan operations. The majority stake in the Angolan operations was disposed of in 2011 as further detailed in note 38.

gRoUP CoMPAny2012 2011 2012 2011

R R R R24. oTHER FinAnCiAl liAbiliTiEs

Held at amortised costRevolving inventory facility – 710 785 – –This secured loan incurred interest at the prime overdraft rate plus 1,00%, prime being 9,00% (2011: 9,00%) at year-end. The facility was repaid in the year under review. The facility was secured by a general notarial bond of R42 000 0000 over the movable assets of the group.

Instalment sale agreements 8 472 950 13 236 281 – –Instalment sale agreements repayable over 1 to 44 months (2011: 4 to 54 months) at effective interest rates ranging from prime less 1,50% to prime plus 1,25% (2011: prime less 1,50% to prime plus 1,25%), prime being 9,00% at year-end (2011: 9,00%). These loans are secured by assets with a carrying amount of R9 631 382 (2011: R16 230 656) and repayable in monthly instalments of R610 507 (2011: R570 414).

MayfairSpeculatorsProprietaryLimited– general facility 49 118 458 – – –This unsecured loan bears interest at 20,00% at year-end and is repayable on 1 July 2013. This loan has been subordinated in favour of creditors up to the date of the recapitalisation of the group by way of a R100 million clawback offer on 3 September 2012 as further detailed in the directors’ report.

MayfairSpeculatorsProprietaryLimited–inventory loan 26 125 973 – – –This loan bears interest at the prime overdraft lending rate plus 2,00%, prime being 9,00% at year-end. This loan is secured by inventory which was purchased after year-end as further detailed in note 13. The loan is repayable in monthly instalments of R6 million from 1 December 2012.

Loans secured by mortgage bond: Absa Bank Limited 7 200 646 7 200 646 – –The mortgage bond over property as detailed in note 3. Interest is payable at the prime overdraft lending rate less 1,00% per annum, prime being 9,00% (2011: 9,00%) at year-end. The loan is repayable in monthly instalments of R10 000 (2011: Rnil) commencing on 1 October 2012 for 12 months with annual escalations resulting in the loan to be fully repaid after 10 years.


gRoUP CoMPAny2012 2011 2012 2011

R R R R24. oTHER FinAnCiAl liAbiliTiEs

(continued)Employee funds in share incentive scheme trust 284 200 231 900 – –These unsecured funds do not bear interest and are not subject to any fixed terms of repayment.

MayfairSpeculatorsProprietaryLimited– debtors facility 86 400 642 – – –This loan bears interest at the prime overdraft lending rate plus 0,5%, prime being 9,00% at year-end. The loan requires coverage of 100,00% of the qualifying debtors of a subsidiary in relation to the loan amount. Qualifying debtors of a subsidiary include an intergroup loan claim held. The facility is repayable on 1 July 2013.

Class A debentures – 100 000 000 – –

RARE Capital Proprietary Limited had funded the purchase price paid to The RARE Group Proprietary Limited for the securitisation transaction, by issuing 100 Class A 36-month secured non-amortising rated debentures of R1 000 000 each.

The Class A debentures had been awarded a zaAA credit rating by Global Credit Ratings Co. and had been issued to Sanlam Capital Markets.

The Class A debentures incurred interest at the 3-month Jibar rate plus 2,10%, with Jibar rate being 5,58% at 30 June 2011.

The debentures were settled in October 2011.177 602 869 121 379 612 – –

non-current liabilitiesAt amortised cost 146 640 758 8 132 450 – –Current liabilitiesAt amortised cost 30 962 111 113 247 162 – –

177 602 869 121 379 612 – –



gRoUP CoMPAny2012 2011 2012 2011

R R R R25. TRAdE And oTHER PAyAblEs

Trade payables 58 164 729 56 027 260 423 779 266 548Amounts received in advance 8 433 430 8 840 000 – –Value added taxation 1 739 679 2 625 898 85 168 –China Construction Bank Trade Finance Facility 25 173 961 61 275 615 – –Accrued leave pay 1 601 522 1 524 047 – –Accrued bonus 717 085 775 335 – –Accrued expenses 4 826 921 7 037 476 5 875 5 932Accrual for goods in transit 9 472 346 – – –Accrual for legal settlements 5 110 000 – – –Other payables – 108 151 – –

115 239 673 138 213 782 514 822 272 480CurrenciesThe carrying amounts of trade and other payables are denominated in the following currencies:Rand 76 534 687 130 880 392 514 822 272 480US dollar 33 522 628 2 871 871 – –Euro 2 623 298 4 356 413 – –Pound sterling 1 339 089 105 106 – –New Ghana cedi 1 219 917 – – –

115 239 673 138 213 782 514 822 272 480

The following facilities are available to RARE Group Proprietary Limited and its subsidiaries: China Bank Construction: $3 071 868 (R25 173 961) (2011: $12 500 000 (R85 000 000)).

The terms of the China Construction Bank facility is 180 days (2011: 180 days). Interest is charged at the prime overdraft lending rate (2011: LIBOR rate plus 2,50%). The facility was reviewed and amended on 30 November 2011.

The specific inventory items purchased under this agreement act as security for the outstanding balances as further detailed in note 13.

The total amount of undrawn facilities available for the future operating activities and commitments is Rnil (2011: R23 724 385).


Financial liabilities at

amortised cost

RTotal

R26. FinAnCiAl liAbiliTiEs by CATEgoRy

The accounting policies for financial instruments have been applied to the line items below:group – 2012Other financial liabilities 177 602 869 177 602 869Trade and other payables 105 066 564 105 066 564Bank overdraft 435 647 435 647

283 105 080 283 105 080group – 2011Other financial liabilities 121 379 612 121 379 612Trade and other payables 126 747 886 126 747 886Bank overdraft 2 940 448 2 940 448

251 067 946 251 067 946Company – 2012Trade and other payables 429 654 429 654Company – 2011Trade and other payables 272 480 272 480

gRoUP CoMPAny2012 2011 2012 2011

R R R R27. REvEnUE

Sale of goods 196 077 435 236 954 290 – –Rendering of services 31 062 656 29 420 716 – –Construction contracts 79 429 360 51 310 315 – –Discount allowed (2 186 017) (2 691 308) – –

304 383 434 314 994 013 – –

28. CosT oF sAlEssale of goodsCost of goods sold and services rendered 222 620 322 224 756 632 – –Transport costs 11 933 487 8 317 662 – –Employee costs 22 764 759 18 087 539 – –Depreciation 3 875 695 1 126 165 – –Sundry receivable impaired 5 076 596 – – –Loss on disposal of property, plant and equipment 3 013 956 – – –Write-down of stock 25 022 572 17 803 810 – –

294 307 387 270 091 808 – –



gRoUP CoMPAny2012 2011 2012 2011

R R R R29. oPERATing loss

Operating loss for the year is stated after accounting for the following:

income from subsidiariesManagement fees – – – 2 305 200Remuneration, other than to employees, for:Secretarial services 4 098 228 273 – –operating lease chargesPremises•Straight-linedamounts 1 551 020 2 131 801 – –Equipment•Straight-linedamounts 1 959 734 2 154 627 – –

3 510 754 4 286 428 – –(Profit)/loss on sale of property, plant and equipment (1 759 364) 99 962 – –(Profit)/loss on sale of property, plant and equipment recognised as part of cost of sales 3 013 956 – – –Impairment of investment in subsidiary (refer note 6) – – 90 618 281 98 920 133Impairment of other financial assets (refer note 9) 256 755 59 788 013 – –Impairment of loan to subsidiary (refer note 8) – – 7 573 863 –Impairment of loans to associates (refer note 8) 3 330 925 839 177 – –Impairment of investment in associates (refer note 7) 900 049 – – –Impairment of trade and other receivables (refer note 15) 14 896 242 683 895 – –Movement in provision for doubtful debt 1 937 882 2 528 482 – –(Profit)/loss on exchange differences (293 849) (809 369) – –Amortisation on intangible assets 1 333 141 925 745 – –Impairment of intangible asset (refer note 5) 5 448 425 – – –Depreciation on property, plant and equipment 2 449 916 4 970 974 – –Depreciation on property, plant and equipment recognised as part of cost of sales (refer note 28) 3 875 695 1 126 165 – –Employee costs 37 056 170 42 948 991 107 100 518 393Employee costs recognised as part of cost of sales (refer note 28) 22 764 759 18 087 539 – –Defined-contribution fund contributions 5 502 108 5 847 063 – –Consulting and professional fees 5 718 309 1 545 517 642 697 945 517Research and development costs 33 783 27 796 4 989 27 796Legal fees 1 083 048 1 755 617 – –Impairment of goodwill (refer note 4) 456 516 5 284 230 – –Write-down of inventory recognised as part of cost of sales (refer note 13) 25 022 572 17 803 810 – –Profit on sale of subsidiary (1 006 814) (49 815 107) – –Impairment of other receivable recognised as part of cost of sales (refer note 15) 5 076 596 – – –


gRoUP CoMPAny2012 2011 2012 2011

R R R R30. invEsTMEnT inCoME

dividend revenueOther financial asset 93 363 245 144 – –interest revenueAssociates 392 805 320 050 – –Other interest 1 488 731 1 600 986 – –Bank 59 616 4 777 274 –SARS – 89 775 – –

1 941 152 2 015 588 274 –2 034 515 2 260 732 274 –

investment income per financial asset categoryLoans and receivables 59 616 4 777 274 –Available-for-sale financial assets 1 974 899 2 166 180 – –

2 034 515 2 170 957 274 –

31. FinAnCE CosTsSubsidiary – – – 5 800 693Other financial liabilities 17 091 496 9 203 793 – –Trade and other payables 3 051 049 1 694 665 – –Bank 648 030 4 554 911 2 736 –Late payment of tax – 118 311 – –Instalment sales agreements 1 430 284 1 265 905 – –Other interest paid 102 493 733 747 – 2 263

22 323 352 17 571 332 2 736 5 802 956Finance costs per financial instrument categoryAmortised cost financial liabilities 22 323 352 17 453 021 2 736 5 802 956

32. TAxATionMajor components of the tax (income)/expenseCurrentLocalincometax–currentperiod – 10 666 – –Localincometax–recognisedincurrenttax for prior periods 1 260 193 – – –

1 260 193 10 666 – –deferredOriginating and reversing temporary differences 6 025 840 (2 048 351) – –

7 286 033 (2 037 685) – –

% % % %Reconciliation of the tax expenseReconciliation between statutory tax rate and average effective tax rate.

Statutory tax rate 28,00 28,00 28,00 28,00Exempt income 0,35 17,34 – –Assessed losses and/or other temporary differences not recognised as a deferred tax asset (31,39) (15,73) (0,38) –Disallowable expenditure (1,44) (26,89) (27,62) (28,00)Capital gains tax (1,13) – – –Tax relating to previous years (1,33) – – –Tax differential on capital assets 0,29 – – –

(6,65) 2,72 – –

Tax loss available to the group for set-off against future taxable income resulting from continued and discontinued operations is R181 080 705 (2011: R62 063 264). Tax loss available to the group for set-off against future taxable income resulting from discontinued operations is R19 467 535 (2011: R8 174 598). Tax loss available to the company for set-off against future taxable income is R1 344 174 (2011: R357).



gRoUP CoMPAny2012 2011 2012 2011

R R R R33. AUdiToRs’ REMUnERATion

Fees 1 203 118 1 365 372 90 261 376 103

grossR

TaxR

net before non-

controlling interest

R

non- controlling

interestR

netR

34. oTHER CoMPREHEnsivE inCoME Components of other comprehensive income group – 2012Exchange differences on translating foreign operationsExchange differences arising during the year 842 528 – 842 528 (326 595) 515 933Realisation of foreign currency realisation reserve on disposal (837 422) – (837 422) 326 595 (510 827)

5 106 – 5 106 – 5 106gains and losses on property revaluationRealisation of revaluation reserve on disposal (506 000) – (506 000) – (506 000)Total (500 894) – (500 894) – (500 894)

GrossR

TaxR

Net before non-

controlling interest

R

Non- controlling

interestR

NetR

Components of other comprehensive income group – 2011Exchange differences on translating foreign operationsExchange differences arising during the year 6 469 204 – 6 469 204 (3 042 234) 3 426 970Realisation of foreign currency reserve on disposal (4 945 783) – (4 945 783) 1 178 064 (3 767 719)

1 523 421 – 1 523 421 (1 864 170) (340 749)gains and losses on revaluationLoss on property valuation (2 177 399) 625 231 (1 552 168) 400 065 (1 152 103)Realisation of revaluation reserve on disposal (13 520 723) – (13 520 723) 5 823 567 (7 697 156)

(15 698 122) 625 231 (15 072 891) 6 223 632 (8 849 259)Total (14 174 701) 625 231 (13 549 470) 4 359 462 (9 190 008)


gRoUP CoMPAny2012 2011 2012 2011

R R R R35. CAsH UsEd in oPERATions

Loss before taxation (109 637 368) (74 825 603) (99 535 961) (104 721 585)Adjustments for:(Profit)/loss on sale of assets 1 254 592 99 962 – –Dividends received (93 363) – – –Interest income (1 940 879) (2 216 159) (274) –Finance costs 22 323 352 17 571 332 2 736 5 802 956Impairment loss on investment 900 049 – 90 618 281 98 920 133Movements in operating lease accruals (14 436) – – –Profit on disposal of subsidiary (1 006 814) (49 815 078) – –Unrealised forex (profit)/loss (553 017) 5 744 755 – –Impairment of other financial assets 3 587 680 60 562 754 7 573 863 –Impairment loss on trade receivables: bad debts 14 896 242 723 037 – –Write-down of inventory 25 022 572 17 803 810 – –Depreciation and amortisation 7 658 752 5 896 719 – –Movement in provision for credit notes 145 575 304 922 – –Elimination of intergroup transactions with discontinued operations – 1 082 829 – –Other non-cash items – 1 604 521 – (897 156)Impairment of intangible asset 5 030 771 – – –Impairment of goodwill 456 223 5 284 230 – –Movement in provision for doubtful debts 1 937 882 2 528 482 – –Changes in working capital:Inventories 21 732 370 21 987 406 – –Trade and other receivables (16 255 645) 7 761 273 67 916 (435 335)Prepayments (1 990 531) 852 404 – –Construction contracts and receivables (7 448 015) 6 708 664 – –Trade and other payables (13 162 140) (44 092 690) 242 345 128 637

(47 156 148) (14 432 430) (1 031 094) (1 202 350)

36. TAx PAidBalance at beginning of the year 2 013 498 275 622 (438 925) (438 925)Current tax for the year recognised in profit or loss – (10 666) – –Current tax for the year relating to prior periods (1 260 193) – – –Balance at end of the year (817 805) (2 013 498) 390 596 438 925

(64 500) (1 748 542) (48 329) –

37. non-CAsH TRAnsACTionIncluded in the cash flow statement are additions to property, plant and equipment of R1 748 542 (2011: R3 016 210) which were funded by instalment sale agreements as further detailed in note 24.



gRoUP CoMPAny2012 2011 2012 2011

R R R R38. sAlE oF sUbsidiARiEs

Carrying value of assets and liabilities soldProperty, plant and equipment 6 459 668 30 984 837 – –Intangible assets – 47 542 – –Investment in subsidiary – 88 358 – –Inventories 362 378 29 008 997 – –Trade and other receivables 10 514 622 4 216 750 – –Cash and cash equivalents 3 068 261 807 806 – –Foreign currency translation reserve (837 422) (4 945 783) – –Revaluation reserve – (13 520 723) – –Loans from minority shareholders – (1 346 189) – –Deferred tax – (3 074 510) – –Other financial liabilities (1 414 784) (107 347 490) – –Trade and other payables (8 971 484) (27 619 186) – –Current tax payable – (118 964) – –Accumulated (profit)/loss attributable to non-controlling shareholders (3 053 884) 43 289 272 – –Share capital – (285 824) – –Total net assets sold 6 127 355 (49 815 107) – –Profit on disposal 1 006 814 49 815 107 – –Proceeds from sale 7 134 169 – – –Cash of subsidiary disposed (3 068 264) (807 806) – –

4 065 905 (807 806) – –Consideration received – –Net cash outflow on disposal (3 068 264) (807 806) – –Amount received 7 134 169 – – –

4 065 905 (807 806) – –

39. CoMMiTMEnTsoperating leases – as lessee (expense) Minimum lease payments due–withinoneyear 393 592 776 874 – ––insecondtofifthyearinclusive 1 118 621 52 793 – –

1 512 213 829 667 – – Operating lease payments represent rentals payable by the group for certain of its office premises and equipment. Leases are negotiated for an average term of three years (2011: three years). No contingent rent is payable.

40. ConTingEnCiEsContingent liabilitiesThe group is involved in legal action relating to claims from a third party. The total possible loss is R2,3 million. It is however not possible to accurately determine the probable loss as the matter is still subject to active litigation. Based on legal advice and the opinion of management, it is unlikely that the outcome of the action will have material effect on the company’s financial position. Should the company be held liable for the outstanding amount, the amount will be payable within the ensuing 12 months.

No significant contingent liabilities existed at year end.

gRoUP CoMPAny2012 2011 2012 2011

R R R Rguarantees issued by banks in favour of third partiesCustoms and Excise 355 000 352 500 – –Alstom S & E Africa Limited 758 527 – – –Konkola Copper Mines PLC 5 638 108 5 638 108 – –

6 751 635 5 990 608 – –


41. RElATEd PARTiEsRelationshipsSubsidiaries Refer to note 6Associates Refer to note 7Directors T Siyolo

P du PlessisA Dlamini (Resigned)MT LateganS Mashinga (Resigned)MG Meehan (Resigned)D Ncube(Resigned)H OdendaalSJDT Potgieter

Executive directors and members of key management D Scheepers (Resigned)W van CollerR ViljoenPJ Willemse

Members of key management and prescribed officers L Archer de Carvalho (until disposal of Angolan subsidiary)A KhaasH RoetsC von Graszouw

subsidiaries During the year in the ordinary course of business certain companies within the group entered into various

transactions with related parties. These transactions occurred under terms and conditions no more favourable to those entered into with third parties. These intragroup transactions have been eliminated on consolidation.

directors The remuneration for non-executive and executive directors of the holding company paid during the year

by subsidiaries within the group has been disclosed in note 42. No loans have been made to directors.

No directors had material interest in any contract of significance with any group company during the year under review.

Key management Key management personnel are those having authority and responsibility for planning, directing and

controlling activities, directly or indirectly, including any director of that entity. No key management personnel had a material interest in any contract of significance with any group company during the year under review. The remuneration for key management or prescribed officers of the group has been disclosed in note 42.


gRoUP CoMPAny2012 2011 2012 2011

R R R R41. RElATEd PARTiEs (continued)

Related party balancesloan accounts – owing (to)/by related partiesSubsidiaries – – – 58 651 449Associates – 3 189 165 – –

– 3 189 165 – 58 651 449Related party transactionsinterest paid to/(received from) related partiesAssociates (392 805) (320 050) – –Subsidiary – – – 5 800 693Subsidiary – – – –

(392 805) (320 050) – 5 800 693Management fees paid to/(received from) related partiesSubsidiary – – – (2 305 200)sales to related partiesRARE Congo – 6 519 448 – –impairment of loans to related partiesAssociates 3 330 925 839 177 – –Subsidiary – – 7 575 863 –

3 330 925 839 177 7 575 863 –impairment of investments to related partiesAssociates 900 049 – – –Subsidiary – – 90 618 281 98 920 133

900 049 – 90 618 281 98 920 133Compensation to directors and other key managementDirectors (as detailed in note 42) 2 710 712 3 622 503 107 100 –Key management (as detailed in note 42) 3 347 749 1 876 013 – –

6 058 461 5 498 516 107 100 –

Emolumentsother

benefits* TotalR R R

42. diRECToRs’ And PREsCRibEd oFFiCERs’ EMolUMEnTsExecutive2012W van Coller• 402 146 14 521 416 667PJ Willemse 725 913 102 213 828 126DE Scheepers 1 128 820 84 580 1 213 400R Viljoen• 145 419 – 145 419

2 402 298 201 314 2 603 6122011PJ Willemse 1 195 540 129 460 1 325 000DE Scheepers 1 622 087 319 353 1 941 440

2 817 627 448 813 3 266 440* Other benefits comprise travel allowance, provident fund and medical benefits.• For period during which they served as directors.

securities issuedNo shares were issued to directors during the current year under review.

service contracts Executive directors are subject to written employment agreements. The employment agreements regulate duties, remuneration, allowances, restraints, leave and notice periods of these executives.



directors’fees

RTotal

R42. diRECToRs’ And PREsCRibEd oFFiCERs’ EMolUMEnTs

(continued)non-executive2012P du Plessis 107 100 107 1002011DMJ Ncube 75 188 75 188MG Meehan 65 625 65 625S Masinga 65 625 65 625AZ Dlamini 65 625 65 625P du Plessis 84 000 84 000

356 063 356 063

securities issuedNo shares were issued to directors during the current year under review.

Prescribed officers

EmolumentsR

otherbenefits*

RTotal

R2012W van Coller 833 333 – 833 333H Roets 1 200 000 17 647 1 217 647A Khaas 165 953 – 165 953C von Graszouw 570 113 154 122 724 235R Viljoen 406 581 – 406 581

3 175 980 171 769 3 347 749* Other benefits comprise travel allowance, provident fund and medical benefits.

EmolumentsR

TotalR

2011

W van Coller 104 167 104 167H Roets 300 000 300 000L Archer de Carvalho 1 471 846 1 471 846

1 876 013 1 876 013

securities issued No shares were issued to individuals holding a prescribed office or individuals related to them in the year

under review.

service contracts Members of key management are subject to written employment agreements. The employment agreements

regulate duties, remuneration, allowances, restraints, leave and notice periods of these executives.


43. PRioR PERiod ERRoRs inventory The company implemented a new information and accounting system (“the 2011 system”) at the beginning

of the 2011 financial year. Notwithstanding concerted efforts by previous management to integrate and effectively implement the new inventory module, certain system and human errors occurred during the implementation, leading to inaccurate and overstated inventory. Previous management resigned when the differences and problems became evident. An investigation concluded that inventory was overstated and some amounts pertained to the inventory figure at 30 June 2011. The differences include double counting, input, production and reconciliation errors amounting to R6 285 177. Furthermore, previous management capitalised a portion of overheads to inventory based on certain assumptions and allocations. New management differed from said assumptions applied resulting in a prior year adjustment amounting to R2 737 752. The group impaired the 2011 system and implemented an uncomplicated and well-supported system on 1 July 2012 as further detailed in note 1 of the directors’ report.

Unrecorded liabilities The group was not able to collect a trade receivable amounting to R4 996 319 outstanding at the end of the

previous financial year during the current financial year. Correspondence with the customer in Ghana, during the current financial year, identified that the customer had received services and made payments directly to a subcontractor of the group. The group was not notified that the payments should be offset against the amounts due to the group, which resulted in the prior period error when discovered in the current financial year. The error was accordingly restated retrospectively.

The correction of the error(s) results in adjustments as follows:

gRoUP CoMPAny2012 2011 2012 2011

R R R R statement of financial position

Inventory – (9 022 929) – –Trade and other receivables – (4 996 319) – –

Profit or lossCost of sales – 14 019 248 – –

44. RisK MAnAgEMEnT The group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest

rate risk), credit risk and liquidity risk.

liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the

availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The group’s approach to managing liquidity risk is to ensure that sufficient liquidity is available to meet its liabilities when due. The group ensures it has sufficient cash on demand or access to facilities to meet expected operational expenses for the next 12 months, including the servicing of financial obligations as further detailed in the directors’ report.

The group’s exposure to liquidity risk is a result of funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future commitments and credit facilities.

Cash flow forecasts are prepared regularly, there is strict control over working capital utilisation and adequate utilised borrowing facilities are monitored.



44. RisK MAnAgEMEnT (continued) The table below analyses the group’s financial liabilities into relevant maturity groupings based on the

remaining period at the statement of financial position date 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.

less than 6 months

R

between 6 months and 1 year

R

between1 and 2 years

R

between 2 and

3 yearsR

over3 years

RTotal

RgroupAt 30 June 2012

Trade and other payables 105 066 564 – – – – 105 066 564Other financial liabilities 29 501 452 2 885 318 138 885 802 1 546 889 9 470 693 182 290 153Bank overdraft 435 647 – – – – 435 647At 30 June 2011Other financial liabilities 111 546 857 3 180 927 4 603 812 2 280 661 1 740 346 123 352 603Trade and other payables 126 747 886 – – – – 126 747 886Bank overdraft 2 940 488 – – – – 2 940 488CompanyAt 30 June 2012Trade and other payables 429 654 – – – – 429 654At 30 June 2011Trade and other payables 272 480 – – – – 272 480

interest rate risk The group’s interest rate risk at statement of financial position date arises from cash and cash equivalents,

bank overdraft, loans receivable and payable. The interest rate applicable to these financial instruments is mainly variable rates in line with those currently available in the market, hence exposing the group to cash flow interest rate risk.

Borrowings issued at fixed rates expose the group to fair value interest rate risk.

sensitivity analysis The sensitivity analysis below presents the interest rate risks in accordance with IFRS 7. It has been

determined based on the exposure to interest rates for financial instruments at the statement of financial position date and shows the effects of changes in market interest rates on interest payments, interest income and expenses and, if appropriate, shareholders’ equity. For variable rate liabilities, the analysis is prepared assuming the average liability was outstanding for the whole year. A 100 basis point increase or decrease represents management’s assessment of the reasonable possible change in interest rate.

group During the year ending 30 June 2012, if interest rates on rand-denominated borrowings had increased/

decreased with 100 basis points with all other variables held constant, net profit for the year would have increased/decreased by R1 022 558 (2011: R1 244 460) only as a result of higher/lower interest expenses on variable borrowings, cash and cash equivalent, loans receivable and trade and other payables.

Company During the year ending 30 June 2012, if interest rates on rand-denominated borrowings had been

100 basis points higher/lower, with all other variables held constant, net profit for the year would have increased/decreased by R274 (2011: Rnil), mainly as a result of the higher/lower interest expense on variable rate loan receivables and cash and cash equivalents.



Financial instrument

Current interest

rate %

Due in lessthan a year

R

Due in 1 to 2 years

R

Due in 2 to 3 years

R

Due in more than

3 yearsR

44. RisK MAnAgEMEnT (continued) Cash flow interest rate riskgroupInstalments sale agreements 9,00 (5 096 104) (2 401 595) (650 280) (324 972)China Construction Bank 9,00 (25 173 961) – – –Overdraft facilities used 9,00 (435 647) – – –Mayfair Speculators Proprietary Limited–debtorsfacility 9,50 – (86 400 642) – –Mortgage bond 8,00 (90 000) (183 000) (276 000) (6 651 000)Mayfair Speculators Proprietary Limited–inventoryfacility 11,00 (26 125 973) – – –Cash in current banking institutions 4,40 30 090 414 – – –

Fair value interest rate risk

Financial instrument

Current interest

rate %

Due in lessthan a year

R

Due in 1 to 2 years

R

MayfairSpeculatorsProprietaryLimited–generalfacility 20,00 – 49 118 458

Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in

financial loss to the group.

Credit risk consists mainly of cash deposits, cash equivalents, loan receivables and trade debtors. The group only deposits cash with major banks with high quality credit standing and limits exposure to any one counterparty.

Trade receivables comprise a widespread customer base. Management evaluates credit risk relating to customers, on an ongoing basis. The utilisation of credit limits is regularly monitored.

All new counterparties are subject to credit verification with the Credit Guarantee Insurance Corporation of Africa Limited (CGIC) where allowable. Otherwise, if there is no credit verification rating, management assesses the credit quality of the counterparty, taking into account its financial position, past experience and other factors. Credit exposure is controlled by counterparty limits that are reviewed and approved by management with reference to limits imposed by CGIC. CGIC can not be purchased for government organisations and municipalities.

At year-end there is a concentration of credit risk as a single counterparty or group of counterparties having similar characteristics, exceeded 20,00% of gross monetary assets at year-end as further detailed in note 15.

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, Euro, GB pound, Zambian kwacha and the new Ghana cedi. Foreign exchange risk arises from future commercial transactions.

The group does not hedge exchange fluctuations for customer supply contracts.

The group had certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.


44. RisK MAnAgEMEnT (continued) sensitivity analysis For the purpose of the sensitivity analysis the movement in the value of the rand against major foreign

currencies was assessed on an individual basis. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for the deemed change in foreign currency rates.

group At 30 June 2012, if the rand had weakened/strengthened by 10,00% (2011: 6,00%) against the US dollar, with

all other variables held constant, post-tax profit for the year would have been increased/decreased by R1 245 770 (2011: R574 229) mainly as a result of foreign exchange gains or losses on translation of US dollar-denominated trade receivables, trade payables and loans payable.

At 30 June 2012, if the rand had weakened/strengthened by 10,00% (2011: 9,00%) against the Euro, with all other variables held constant, post-tax profit for the year would have been increased/decreased by R187 625 (2011: R282 296), mainly as a result of foreign exchange gains or losses on translation of euro-denominated trade payables.

At 30 June 2012, if the rand had weakened/strengthened by 10,00% (2011: 13,00%) against the GB pound, with all other variables held constant, post-tax profit for the year would have been increased/decreased by R96 414 (2011: R9 838), mainly as a result of foreign exchange gains or losses on translation of GP pound-denominated trade receivables and payables.

At 30 June 2012, if the rand had weakened/strengthened by 10,00% (2011: 10,00%) against the New Ghana cedi, with all other variables held constant, post-tax profit for the year would have been increased/decreased by R87 834 (2011: Rnil) mainly as a result of foreign exchange gains or losses on translation of New Ghana cedi-denominated trade receivables and payables.

At 30 June 2012, if the rand had weakened/strengthened by 10,00% (2011: 10,00%) against the Zambian kwacha, with all other variables held constant, post-tax profit for the year would have been increased/ decreased by R13 957 (2011: Rnil), mainly as a result of foreign exchange gains or losses on translation of Zambian kwacha-denominated trade receivables and payables.


gRoUP CoMPAny2012 2011 2012 2011

R R R R44. RisK MAnAgEMEnT (continued)

Foreign currency exposure at the end of the reporting periodThe company does not hedge foreign exchange fluctuations. The following items were uncovered:Current assetsTrade and other receivables and construction contract receivables USD5 873 972 (2011: USD2 377 088) 48 166 567 16 164 197 – –Cash and other cash equivalents USD208 408 (2011: USDnil) 1 708 947 – – –Cash and other cash equivalents ZMK164 434 200 (2011: ZMKnil) 243 673 – – –Prepayments USD95 781 (2011: USDnil) 785 165 – – –

Current liabilitiesTrade payables and other payables USD4 088 125 (2011: USD422 334) (33 522 628) (2 871 871) – –Trade payables and other payables EUR252 483 (2011: EUR443 175) (2 623 298) (4 356 416) – –Trade payables and other payables GBP104 128 (2011: GBP9 634) (1 339 091) (105 106) – –Trade payables New Ghana cedi GHS286 911 (2011: GHSnil) (1 219 917) – – –

Exchange rates used for conversion of foreign items were:US dollar (USD) 8,20 6,80Zambian kwacha (ZMK) 0,0016 –Euro (EUR) 10,39 9,83GB pound (GBP) 12,86 10,91New Ghana cedi (GHS) 4,25 –

45. going ConCERn We draw attention to the fact that at 30 June 2012, the group had accumulated losses of R187 280 003 and

that the group’s total liabilities exceeded its assets by R39 100 448. Capital to the value of R100 million was raised subsequent to year-end as further detailed in note 46.

The 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.

The directors have considered the operational budget and cash flow forecasts for the ensuing year which are based on the current expected economic and market conditions, as well as the funding lines in place as further detailed in note 1 of the directors’ report. The directors’ believe that RARE and its subsidiaries have adequate financial resources to continue as a going concern during the ensuing year. Accordingly, the directors have adopted the going concern basis in the preparation of the annual financial statements.

46. EvEnTs AFTER THE REPoRTing PERiod In addition to the matters raised above, relating to refinancing, the clawback offer was concluded on

28 September 2012, whereby shares were issued to the value of R100 million.



47. sEgMEnTAl inFoRMATion The group currently has four reportable segments, as described below, which are the group’s strategic

business units. The strategic business units offer different products and services and are reviewed by management. For each of the strategic business units, the group’s CEO reviews internal management reports on at least a monthly basis. The following summary describes the operations of each of the group’s reportable segments for the year ended 30 June 2012:

• Tradingsegment–Supplyanddistributionofpipes,valves,fittingsandassociatedcommoditiesfromtheKliprivier, Durban and Polokwane trading branches.

• WaterUtilitiesServicessegment–Manufacturingofpipefittings,couplingsandcivilengineeringwork. • PipelineServicessegment–Manufacturingandinstallationofplasticengineeringprojectsandproject

work in sub-Saharan Africa. • Investment–Providesservicestoothersegments.

Primary segment reportTrading

R

waterUtility

servicesR

Pipelineservices

Rinvestment

RTotal

R

dis-continued operation

R2012Total revenue 189 994 005 31 062 656 136 894 095 3 775 200 361 725 956 33 045 434Inter-segmental revenue – – (53 567 322) (3 775 200) (57 342 522) –External revenue 189 994 005 31 062 656 83 326 773 – 304 383 434 33 045 434Segment results (30 685 400) 5 393 206 (20 742 197) (1 768 425) (47 802 816) 3 813 801Other income 2 573 151 –Investment income – 2 034 515 –Inventory impairment – (18 053 324) (6 969 248)Impairment of goodwill – (456 516) –Bad debts – (14 896 242) –Movement in provision for doubtful debts – (1 937 882)Finance costs – (22 323 352) –Income tax – (7 286 033) –Impairment of investment in associate – (900 000) –Impairment of other financial asset – (265 755) –Profit on disposal of subsidiary – (1 006 814) –Profit on disposal of assets – 1 759 364 –Impairment of loans to associates – (3 330 925) –Impairment of intangible asset – (5 030 771) –Net loss for the year – (116 923 401) (3 155 447)Total segment assets 122 690 676 9 285 371 55 003 361 33 235 958 220 214 998 –Inter-segmental assets – – – – – –Reportable segment operating assets 122 690 676 9 285 371 55 003 361 33 235 958 220 214 998 –Total segment liabilities 78 057 818 3 460 446 31 658 894 423 780 113 600 938 –Inter-segmental liabilities – – – – – –Reportable segment operating liabilities 78 057 818 3 460 446 31 658 894 423 780 113 600 938 –Capital expenditure 4 674 918 460 221 8 813 626 – 13 948 764 4 583 825Depreciation and amortisation 2 360 453 447 277 4 850 995 – 7 658 725 192 028


2012R

47. sEgMEnTAl inFoRMATion (continued)Geographic informationRevenue from external customersContinuing operationsSouth Africa 253 516 358Zambia 50 867 076

304 383 434discontinued operationsSouth Africa 2 657 845DRC 30 387 589

33 045 434Revenue from one customer amounted to R38 915 635 arising from sales by the Trading segment and revenue from another customer amounted to R37 181 786 arising from sales by the Pipeline Services segment.location of non-current assetsContinuing operationsSouth Africa 51 857 346Zambia 3 048 579Ghana 1 990 025Democratic Republic of Congo 281 610

57 177 560

Primary segment reportTrading

R

WaterUtility

ServicesR

PipelineServices

RInvestment

RTotal

R

Dis-continuedoperation

R2011Total revenue 238 358 512 16 327 805 61 390 525 4 060 600 320 137 442 50 455 273Inter-segmental revenue (1 082 829) – – (4 060 600) (5 143 429) –External revenue 237 275 683 16 327 805 61 390 525 – 314 994 013 50 455 273Segment results (23 381 714) (4 254 526) 3 048 562 (1 027 168) (25 614 846) (31 084 251)Impairment of goodwill – (5 284 230) –Profit on disposal of Angolan operations – 49 815 078 –Impairment of loans to associates – (839 177) –Impairment of financial assets – (59 788 013) –Write-down of stock – (17 803 810) –Finance cost – (17 571 333) (1 577 198)Investment income – 2 260 732 –Income tax expense – 2 037 681 –Net loss for the year – (72 787 918) (32 661 449)Total segment assets 160 394 044 30 000 627 74 837 007 33 001 178 298 232 856 –Inter-segmental assets (15 968 165) – – – (15 968 165) –Reportable segment operating assets 144 425 879 30 000 627 74 837 007 33 001 178 282 264 691 –Total segment liabilities 111 864 483 12 628 085 27 178 880 – 151 671 449 –Inter-segmental liabilities – – (15 968 185) – (15 968 185) –Reportable segment operating liabilities 111 864 483 12 628 085 11 210 695 – 135 703 264 –Capital expenditure 4 793 352 1 039 954 2 267 182 88 150 8 188 638 228Depreciation and amortisation 1 541 770 1 379 185 2 975 764 – 5 896 719 3 039 215Investment in associates 900 049 – – – 900 049 –



2011R

47. sEgMEnTAl inFoRMATion (continued)Geographic informationRevenue from external customersFrom continuing operationsSouth Africa 285 038 549Zambia 29 955 464For services as directors 314 994 013From discontinued operationsAngola 50 455 273

365 449 286 Revenue from one customer amounted to R36 570 568, arising from sales by the Trading segment, and revenue from another customer amounted to R42 084 119, arising from sales by the Angola segment.

location of non-current assetsContinuing operationsSouth Africa 61 482 030Democratic Republic of Congo 3 281 076Zambia 2 229 850

66 992 664

segment revenue and expenses Revenue and expenses that are directly attributable to segments are allocated to those segments. Those that

are not directly attributable to segments are allocated on a reasonable basis.

segment assets and liabilities Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to

the segment or can be allocated to the segment on a reasonable basis. Segment assets exclude investments, tax assets, bank balances, deposits and cash. Segment liabilities exclude loans, borrowings, bank overdraft and tax liabilities.

Capital expenditure represents the local costs incurred during the period to acquire segment assets that are expected to be used during more than one period, namely, property, plant and equipment, and intangible assets other than goodwill.


gRoUP CoMPAny2012 2011 2012 2011

R R R R48. bAsiC EARnings PER sHARE

The calculation of basic earnings per share at 30 June 2012 was based on loss for the year attributable to ordinary shareholders of RARE Holdings Limited, divided by the weighted average number of ordinary shares issued.

Loss attributable to equity holders of RAREHoldings Limited from continuing operations (116 923 401) (72 787 918) – –Profit/(loss) attributable to equity holders of RARE Holdings Limited from discontinued operations (3 155 447) (32 661 449)Weighted average number of ordinary shares in issue 415 442 861 104 091 306 – –Earnings per ordinary share from continuing operations (cents) (28,14) (69,93) – –Earnings per ordinary share from discontinued operations (cents) (0,76) (31,38) – –

49. dilUTEd EARnings PER sHARE The calculation of diluted earnings per share at 30 June 2012 was based on loss for the year attributable to ordinary shareholders of RARE Holdings Limited, divided by the fully diluted weighted average number of ordinary shares issued.

Loss attributable to equity holders of RAREHoldings Limited from continuing operations (116 923 401) (72 787 918) – –Profit/(loss) attributable to equity holders of RARE Holdings Limited from discontinued operations (3 155 447) (32 661 449) – –Fully diluted weighted average number of ordinary shares in issue 415 442 861 104 091 306 – –Diluted earnings per ordinary share from continuing operations (cents) (28,14) (69,93) – –Diluted earnings per ordinary share from discontinued operations (cents) (0,76) (31,38) – –



50. HEAdlinE EARnings PER sHARE Headline and diluted headline earnings per share are calculated on the basis of adjusted loss attributable to

ordinary shareholders divided by the weighted number of ordinary shares in issue during the year as follows:

2012 2011gross

Rnet

RGross

RNet

RLoss attributable to ordinary shareholders of RARE Holdings Limited – (120 078 848) – (105 449 367)Impairment of investment – 900 049 – 64 435Impairment of loans receivable – 3 587 681 – 59 723 577Impairment of intangible asset – 5 030 771 – –Impairment of goodwill – 456 516 – 5 284 230Profit on disposal of subsidiaries (1 006 801) (819 063) (49 815 107) (35 866 877)

Loss on disposal of property, plant and equipment 1 254 592 903 306 99 970 71 979Headline and diluted headline earnings attributable to ordinary shareholders – (110 019 588) – (76 172 023)Consisting of: – –Headline and diluted headline earnings attributable to ordinary shareholders from continuing operations – (106 864 142) – (43 510 574)Headline and diluted headline earnings attributable to ordinary shareholders from discontinued operations – (3 155 447) – (32 661 449)Weighted average number of ordinary shares in issue – 415 442 861 – 104 091 306Headline and diluted headline earnings per share from continuing operations (cents) – (25,72) – (41,80)Headline and diluted headline earnings per share from discontinued operations (cents) – (0,76) – (31,38)

51. nEw sTAndARds And inTERPRETATions51.1 standards and interpretations not yet effective The group has chosen not to early adopt the following standards and interpretations, which have been

published and are mandatory for the group’s accounting periods beginning on or after 1 July 2012 or later periods:

iFRs 9 Financial instruments This new standard is the first phase of a three phase project to replace IAS 39 Financial Instruments:

Recognition and Measurement. To date, the standard includes chapters for classification, measurement and derecognition of financial assets and liabilities and deals with derivatives and embedded derivatives. The following are main changes from IAS 39:

• Financialassetswillbecategorisedasthosesubsequentlymeasuredatfairvalueoratamortisedcost. • Financialassetsatamortisedcostarethosedebtinstrumentswherethebusinessmodelformanagingthe

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

• Undercertaincircumstances,financialassetsmaybedesignatedasatfairvalue. • Forhybridcontracts,wherethehostcontractisanassetwithinthescopeofIFRS9,thenthewhole

instrument is classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply.

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

• Financialliabilitiesshallnotbereclassified. • Investmentsinequityinstrumentsmaybemeasuredatfairvaluethroughprofitorloss.Whensuchanelection

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


51. nEw sTAndARds And inTERPRETATions (continued)51.1 standards and interpretations not yet effective (continued) • IFRS9doesnotallowforinvestmentsinequityinstrumentstobemeasuredatcost. • Theclassificationcategoriesforfinancialliabilitiesremainsunchanged.However,whereafinancialliability

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


The group expects to adopt the standard for the first time in the 2016 financial statements.

It is unlikely that the standard will have a material impact on the group’s financial statements.

iFRs 10 Consolidated Financial statements This standard replaces the consolidation sections of IAS 27 Consolidated and Separate Financial Statements

andSIC12Consolidation–SpecialPurposeEntities.Thestandardsetsoutanewdefinitionofcontrol,whichexists only if the investor has all of the following elements:

• powerovertheinvestee,i.e.theinvestorhasexistingrightsthatgiveittheabilitytodirecttherelevantactivities (the activities that significantly affect the investee’s returns).

• exposure,orrights,tovariablereturnsfromitsinvolvementwiththeinvestee. • theabilitytouseitspowerovertheinvesteetoaffecttheamountoftheinvestor’sreturns.



It is unlikely that the amendment will have a material impact on the group’s financial statements.

iAs 27 separate Financial statements Consequential amendment as a result of IFRS 10. The amended Standard now only deals with separate

financial statements and the requirements have been carried over largely unchanged from IAS 27 Consolidated and Separate Financial Statements. Requirements for consolidated financial statements are now contained in IFRS 10 Consolidated Financial Statements.


The group expects to adopt the amendment for the first time in the 2014 financial statements.


iFRs 12 disclosure of interests in other Entities The standard sets out disclosure requirements for investments in subsidiaries, associates, joint ventures and

unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to risks of such interests. The most significant impact is the disclosure requirement for unconsolidated structured entities or off statement of financial position vehicles.




iFRs 13 Fair value Measurement IFRS 13 replaces the guidance on fair value measurement in existing IFRS accounting literature with a single

standard. It generally applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements).



51. nEw sTAndARds And inTERPRETATions (continued)51.1 standards and interpretations not yet effective (continued) However, IFRS 13 does not change the requirements regarding which items should be measured or disclosed

at fair value.



It is unlikely that the standard will have a material impact on the group’s financial statements.

iAs 1 Presentation of Financial instruments The amendment now requires items of other comprehensive income to be presented as: • thosewhichwillbereclassifiedtoprofitorlosswhenspecificconditionsaremet. • thosewhichwillnotbereclassifiedtoprofitorloss.

The related tax disclosures are also required to follow the presentation allocation.

In addition, the amendment changes the name of the statement of comprehensive income to the statement of profit or loss and other comprehensive income.



As this is an amendment to presentation, it is unlikely that the amendment will have a material impact on the group’s financial statements.

iAs 12 income Taxes: Amendment: deferred Tax: Recovery of Underlying Assets The amendment now provides that for investment property measured at fair value, the recovery of the

carrying amount is presumed to be through sale for deferred tax purposes, unless this presumption is rebutted in certain circumstances. The result is that deferred tax arising on the valuation is measured using the prevailing tax rate for capital gains.




iAs 19 Employee benefits Revised The amendment revises the requirements for pensions and other post-retirement benefits, termination

benefits and other changes. • Requirerecognitionofchangesinthenetdefined-benefitliability(asset)includingimmediaterecognition

of defined-benefit cost, disaggregation of defined-benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements.

• Introduceenhanceddisclosuresaboutdefinedbenefitplans. • Modifyaccountingforterminationbenefits,includingdistinguishingbenefitsprovidedinexchangefor

service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits.

• Clarificationofmiscellaneousissues,includingtheclassificationofemployeebenefits,currentestimatesof mortality rates, tax and administration costs and risk-sharing and conditional indexation features.





sHAREHoldERs’ diARy

REPoRTsInterim half year to December Published April

Preliminary announcement of annual reports Published September

Annual financial statements Published November

Annual general meeting 13 december 2012


noTiCE oF AnnUAl gEnERAl MEETing

RARE Holdings liMiTEd(Incorporated in the Republic of South Africa)Registration number: 2002/025247/06Share code: RAR ISIN: ZAE000092714(“RARE” or “the company” or “the group”)

Notice is hereby given that the annual general meeting of the shareholders (the AGM) will be held at the company’s offices, 22 Old Vereeniging Road, Kliprivier, Midvaal on Thursday 13 December 2012 at 10:00, for the purpose of dealing with the following business and, if deemed fit, passing, with or without modification, the resolutions set out below.

PURPosEThe purpose of the meeting is to transact the business set out in the agenda below. For the avoidance of doubt, the memorandum and articles of association of the company are referred to as the memorandum of incorporation in accordance with the terminology used in the new Companies Act, 2008 (71 of 2008), as amended (the Companies Act).

AgEndA

oRdinARy bUsinEss1. Consideration of the audited annual financial statements of the company as required by article 52 of the

company’s memorandum of incorporation, including the reports of the directors and the audit committee for the year ended 30 June 2012 as set out in the company’s annual report 2012 of which this notice forms part of.

2. To consider and, if deemed fit; approve, with or without modification, the following ordinary and special resolutions:

Note: • For any of the ordinary resolutions numbers 1 to 13 and ordinary resolution 15, to be adopted, more than

50% of the voting rights exercised on each such ordinary resolution must be exercised in favour thereof. • For ordinary resolution 14 to be adopted, more than 75% of the voting rights exercised on such resolution

must be exercised in favour thereof.

3. APPRovAl oF diRECToRs’ FEEs ordinary resolution number 1 “Resolved that the directors’ fees amounting to R107 100 paid for the year ended 30 June 2011 in terms of

article 73.2 of the company’s memorandum of incorporation is hereby approved.”

The reason for ordinary resolution number 1 is that article 73.2 of the company’s memorandum of incorporation requires that directors’ fees be confirmed by the company at a general meeting.

4. REAPPoinTMEnT oF AUdiToRs ordinary resolution number 2 “Resolved that the appointment of Greenwoods as independent auditors of the company with David Botha,

being the individual registered auditor who has undertaken the audit of the company for the ensuing financial year, be confirmed on the recommendation of the company’s audit and risk committee.”

The reason for the ordinary resolution number 2 is that the company, being a public listed company, must have its financial results audited and such auditor must be appointed or reappointed each year at the AGM of the company as required by section 90 of the Companies Act.

5. AUdiToR’s REMUnERATion ordinary resolution number 3 “Resolved that the auditor’s remuneration for the year ended 30 June 2012, be confirmed on the

recommendation of the company’s audit and risk committee.”

The reason for ordinary resolution number 3 is that section 94(7) of the Companies Act requires that the company’s audit and risk committee determine the remuneration of the auditor. The board recommends that the auditor’s remuneration be considered and approved at the AGM.


6. RE-ElECTion oF RETiRing diRECToRs Reasonforordinaryresolutions4–6below:

The reason for the below-mentioned individual stand-alone resolutions is to afford shareholders the opportunity to elect in aggregate of at least 50% of the directors and one-third of the non-executive directors to the company’s Board in terms of various prescribed election and rotation criteria relating to:

• theprovisionsoftheListingsRequirementsoftheJSELimited(“theJSEListingsRequirements”)andthe third King Report on Governance for South Africa and the King Code of Governance Principles (jointly“KingIII”)–atleastonethirdofthenon-executivedirectorsinofficemustretireateveryAGMofa company;

• article85ofthecompany’smemorandumofincorporation–atleastonethirdofthedirectorsinofficemust retire at every AGM of the company; and

• theprovisionsoftheCompaniesAct–electinaggregateof50%ofthedirectorstotheboard.

Notes: a. It is confirmed that the status of independence of the non-executive directors has been assessed. With the

exception of Mr. Stefanus Johannes Du Toit Potgieter, in each case, the director’s independence was found to be undiminished, uncompromised and untainted.

b. The abbreviated curriculum vitae of the directors are set out on page 3 of this integrated report and for purposes of these resolutions, is regarded as forming an integral part of this notice of the AGM.

ordinary resolution number 4 “Resolved that, in terms of the rotation requirements of article 85 of the memorandum of incorporation,

King III and the JSE Listings Requirements, as well as the provisions of the Act, to and herewith elect Mr Pierre du Plessis as an independent non-executive director of the company.”

ordinary resolution number 5 “Resolved that, in terms of the rotation requirements of article 85 of the memorandum of incorporation,

King III and the JSE Listings Requirements, as well as the provisions of the Act, to and herewith elect Mr Hein Odendaal as an independent non-executive director of the company.”

7. ElECTion oF THE MEMbERs To THE AUdiT And RisK CoMMiTTEE Reasonforordinaryresolutions6–9below: The reason for the below-mentioned individual stand-alone resolutions is that the company, being a public

listed company, must appoint at each AGM an audit committee comprising at least three independent non-executive directors who, as a collective body, must be suitably qualified, skilled and experienced to fulfil the obligations of an audit committee as set out in the Companies Act.

notes: a. It is confirmed that, except that it relates to of Mr Stefanus Johannes Du Toit Potgieter, the status of

independence of the below-mentioned non-executive directors has been assessed. In each case, the director’s independence was found to be undiminished, uncompromised and untainted.

b. The board is satisfied that the below-mentioned directors collectively have the appropriate qualifications, skills and experience to fulfil their audit committee obligations as set out in the Companies Act.

The abbreviated curriculum vitae of the directors are set out on page 3 of this integrated report and for purposes of these resolutions, is regarded as forming an integral part of this notice of the AGM.

ordinary Resolution number 6 “Resolved that Mr Pierre du Plessis be re-elected as a member of the Audit and Risk Committee, with effect

from the conclusion of this AGM in terms of section 94(2) of the Companies Act.”

ordinary Resolution number 7 “Resolved that Mr Hein Odendaal be re-elected as a member of the Audit and Risk Committee, with effect

from the conclusion of this AGM in terms of section 94(2) of the Companies Act.”

noTiCE oF AnnUAl gEnERAl MEETing (continued)


ordinary resolution number 8 “Resolved that Mr Marthinus Theunis Lategan be elected a member of the audit and risk committee, with

effect from the conclusion of this AGM in terms of section 94(2) of the Companies Act.”

ordinary resolution number 9 “Resolved that Mr Stefanus Johannes Du Toit Potgieter be re-elected as a member of the audit and risk

committee, with effect from the conclusion of this AGM in terms of section 94(2) of the Companies Act.”

8. UnissUEd sHAREs PlACEd UndER THE ConTRol oF THE diRECToRs ordinary resolution number 10 “Resolved that the unissued shares in the company, limited to 50% of the number of shares in issue at

31 October 2012, be and are hereby placed under the control of the directors until the next AGM and that they be and are hereby authorised to issue any such shares as the directors may deem fit, subject to the Companies Act, the memorandum of incorporation of the company, and the provisions of the JSE Listings Requirements, save that the aforementioned 50% limitation shall not apply to any shares issued in terms of a rights offer.”

The reason for ordinary resolution number 10 is that the board requires authority from shareholders in terms of its memorandum of incorporation to issue shares in the company. This general authority, once granted, allows the board from time to time, when it is appropriate to do so, to issue ordinary shares as may be required, inter alia, in terms of capital raising exercises, to maintain a healthy capital adequacy ratio that may be required from time to time. This general authority is subject to the restriction that it is limited to 50% of the number of shares in issue at 31 October 2012 on the terms more fully set out in ordinary resolution number 10 and subject to the further restrictions set out in ordinary resolution number 11 below.

9. gEnERAl AUTHoRiTy To issUE sHAREs FoR CAsH ordinary resolution number 11 “Resolved that the directors of the company be and are hereby authorised by way of a general authority,

to allot and issue any of its unissued shares for cash placed under their control as they in their discretion may deem fit, without restriction, subject to the provisions of the JSE Listings Requirements and subject to the proviso that the aggregate number of ordinary shares able to be allotted and issued in terms of this resolution, shall be limited to 50% of the issued share capital at 31 October 2012, provided that:

• theapprovalshallbevaliduntilthedateofthenextAGMofthecompany,provideditshallnotextendbeyond 15 months from the date of this resolution;

• aSENSannouncementgivingfulldetails,includingtheimpactonnetassetvalueandearningspershare,will be published after any issue representing, on a cumulative basis within any one financial year, 50% or more of the number of shares in issue prior to such issue;

• thegeneralissuesofsharesforcashintheaggregateinanyonefinancialyearmaynotexceed50%ofthe applicant’s issued share capital (number of securities) of that class. The number of securities of a class which may be issued shall be based on the number of securities of that class in issue at the date of such application less any securities of the class issued during the current financial year, provided that any securities of that class to be issued pursuant to a rights issue (announced and irrevocable and underwritten) or acquisition (concluded up to the date of application) may be included as though they were securities in issue at the date of application;

• indeterminingthepriceatwhichanissueofshareswillbemadeintermsofthisauthoritythemaximumdiscount permitted will be 10% of the weighted average traded price of such shares, as determined over the 30 trading days prior to the date that the price of the issue is agreed between the issuer and the party subscribing for the securities. The JSE should be consulted for a ruling if the securities have not traded in such 30 business day period;

• anysuchissuewillonlybemadetopublicshareholdersasdefinedinparagraphs4.25to4.27oftheJSE Listings Requirements and not to related parties; and

• anysuchissuewillonlybesecuritiesofaclassalreadyinissueor,ifthisisnotthecase,willbelimitedtosuch securities or rights that are convertible into a class already in issue.”

For listed entities wishing to issue shares for cash, it is necessary for the board not only to obtain the prior authority of the shareholders as may be required in terms of their memorandum of incorporation contemplated in ordinary resolution number 10 above but it is also necessary to obtain the prior authority of


shareholders in accordance with the JSE Listings Requirements. The reason for ordinary resolution number 13 is accordingly to obtain a general authority from shareholders to issue shares for cash in compliance with the JSE Listings Requirements.

Note: At least 75% of the shareholders present in person or by proxy and entitled to vote at the AGM must cast their vote in favour of this resolution.

10. AUTHoRisEd diRECToRs And/oR THE CoMPAny sECRETARy ordinary resolution number 12 “Resolved that any one director of the company and/or the company secretary is hereby authorised to do

all such things and sign all such documents as deemed necessary to implement the ordinary and special resolutions as set out in this notice convening the AGM at which these resolutions will be considered.”

The reason for ordinary resolution number 14 is to ensure that the resolutions voted favourably upon is duly implemented through the delegation of powers provided for in terms of article 96 of the company’s memorandum of incorporation.

sPECiAl bUsinEss To consider and, if deemed fit, pass, with or without modification, the following special resolutions:

Note: For the special resolutions to be adopted, more than 75% of the voting rights exercised on each special resolution must be exercised in favour thereof.

11. inCREAsE in AUTHoRisEd sHARE CAPiTAl And ACCoMPAnying AMEndMEnT To THE MEMoRAndUM oF inCoRPoRATion

special resolution number 1 “Resolved that the authorised share capital of the company be increased by the creation of a further

1 000 000 000 ordinary no par value shares in the authorised ordinary share capital of the company, ranking pari passu in all respects with the existing no par value shares in the authorised ordinary share capital of the company, so as to result in a total of 3 000 000 000 ordinary no par value shares in the authorised ordinary share capital of the company.”

Reasons for and effect of special resolution number 1 The reason for special resolution number 1 is to increase the company’s authorised ordinary share capital in

order to create sufficient authorised ordinary share capital for future growth intentions.

The effect of special resolution number 1 is that the authorised ordinary share capital of the company shall be increased to 3 000 000 000 ordinary shares of no par value.

special resolution number 2 “Resolved that, subject to the passing of special resolution number 1 the current article 7 of the memorandum

of incorporation of the company be which reads as follows”

“7. CAPITAL The authorised share capital of the company is as follows: (iii) 2 000 000 000 ordinary shares of no par value; (iv) 100 000 000 variable rate, non-participating, non-convertible, cumulative, redeemable, preference no

par value shares.”

be hereby replaced in its entirety with the following new article 7: “7. CAPITAL The authorised share capital of the company is as follows: (iii) 3 000 000 000 ordinary shares of no par value; (iv) 100 000 000 variable rate, non-participating, non-convertible, cumulative, redeemable, preference no

par value shares.”



Reasons for and effect of special resolution number 2 The reason for special resolution number 2 is to amend the memorandum of incorporation of the company.

The effect of special resolution number 2 is that the memorandum of incorporation will be amended to reflect the increase in the authorised share capital of the company pursuant to special resolution number 1.

12. REMUnERATion oF non-ExECUTivE diRECToRs To 30 JUnE 2013 special resolution number 3 “Resolved that the remuneration of non-executive directors for the year ending 30 June 2013 be approved

on the following basis: • Chairmanoftheboard:R120000perannum,payablequarterly; • Non-executivedirectorsfee:R105000perannum,payablequarterly;

Reasons for and effect of special resolution number 3 The reason for the proposed special resolution, is to comply with section 66(9) of the Companies Act, which

requires the approval of directors fees prior to the payment of such fees.

The effect of special resolution number 3 is that the company will be able to pay its non-executive directors for the services they render to the company as directors without requiring further shareholder approval until the next AGM.

13. AUTHoRiTy To REPURCHAsE sHAREs by THE CoMPAny And iTs sUbsidiARiEs special resolution number 4 “Resolved that as a special resolution that the company be and is hereby authorised, as a general approval,

to repurchase any of the shares issued by the company, upon such terms and conditions and in such amounts as the directors may from time to time determine, but subject to the provisions of section 46 and 48 of the Companies Act, the memorandum of incorporation of the company, the JSE Listings Requirements and the requirements of any other stock exchange on which the shares of the company may be quoted or listed, namely that:

• thegeneralrepurchaseofthesharesmayonlybeimplementedontheopenmarketoftheJSEanddonewithout any prior understanding or arrangement between the company and the counterparty;

• thisgeneralauthorityshallonlybevaliduntilthenextAGMofthecompany,providedthatitshallnotextend beyond 15 months from the date of this resolution;

• anannouncementmustbepublishedassoonasthecompanyhasacquiredsharesconstituting,ona cumulative basis, 3% of the number of shares in issue prior to the acquisition, pursuant to which the aforesaid 3% threshold is reached, containing full details thereof, as well as for each 3% in aggregate of the initial number of shares acquired thereafter;

• thegeneralauthoritytorepurchaseislimitedtoamaximumof20%intheaggregateinanyonefinancialyear of the company’s issued share capital at the time the authority is granted;

• aresolutionhasbeenpassedbytheboardofdirectorsapprovingthepurchase,thatthecompanyhassatisfied the solvency and liquidity test as defined in the Companies Act and that since the solvency and liquidity test was applied there have been no material changes to the financial position of the group

• thegeneralrepurchaseisauthorisedbythecompany’smemorandumofincorporation; • repurchasesmustnotbemadeatapricemorethan10%abovetheweightedaverageofthemarket

value of the shares for five business days immediately preceding the date that the transaction is affected. The JSE should be consulted for a ruling if the applicant’s securities have not traded in such five business day period;

• thecompanymayatanypointintimeonlyappointoneagenttoeffectanyrepurchase(s)onthecompany’s behalf;


• thecompanymaynoteffectarepurchaseduringanyprohibitedperiodasdefinedintermsoftheJSEListings Requirements unless there is a repurchase programme in place as contemplated in terms of 5.72(g) of the JSE Listings Requirements; and

• thecompanymustensurethatitssponsorprovidestheJSEwiththerequiredworkingcapitallettersbefore it commences the repurchase of any shares.”

Reasons for and effect of special resolution number 4 The reason for and effect of special resolution number 4 is to grant the directors a general authority in terms

of its memorandum of incorporation and the Listings Requirements of the JSE and for the acquisition by the company of shares issued by it on the basis reflected in the special resolution.

In terms of the Listings Requirements any general repurchase by the company must, inter alia, be limited to a maximum of 20% of the company’s issued share capital in any one financial year of that class at the time the authority is granted.

special resolution number 5 “Resolved that as a special resolution that the company, insofar as it may be necessary to do so, hereby

approves, as a general approval, and authorises the acquisition by any subsidiary of the company (“the subsidiary” or “the acquiree”) of shares issued by such subsidiary and/or shares issued by the company, upon such terms and conditions and in such amounts as the directors of any such subsidiary may from time to time determine, but subject to the provisions of section 46 and 48 of the Companies Act, the memorandum of incorporation of the company, the JSE Listings Requirements and the requirements of any other stock exchange on which the shares of the subsidiary may be quoted or listed, including, inter alia, that:

• thegeneralrepurchaseofsharesmayonlybeimplementedontheopenmarketoftheJSEanddonewithout any prior understanding or arrangement between the acquiree and the other counterparty;

• thisgeneralauthorityshallonlybevaliduntilthenextAGMofthecompany,providedthatitshallnotextend beyond fifteen months from the date of this resolution;

• anannouncementmustbepublishedassoonastheacquireehasacquiredsharesconstituting,onacumulative basis, 3% of the number of shares of the acquiree company in issue prior to the acquisition, pursuant to which the aforesaid 3% threshold is reached, containing full details thereof, as well as for each 3% in aggregate of the initial number of shares acquired thereafter;

• thisgeneralauthoritytorepurchaseislimitedtoamaximumof20%intheaggregateinanyonefinancialyear of the acquiree’s issued share capital at the time the authority is granted, subject to a maximum of 10% in the aggregate in the event that it is the company’s share capital that is repurchased by a subsidiary;

• aresolutionhasbeenpassedbytheboardofdirectorsapprovingthepurchase,thatthecompanyhassatisfied the solvency and liquidity test as defined in the Companies Act and that since the solvency and liquidity test was applied there have been no material changes to the financial position of the group;

• thegeneralpurchaseisauthorisedbythecompany’smemorandumofincorporation; • repurchasesmustnotbemadeatapricemorethan10%abovetheweightedaverageofthemarketvalue

of the shares for the five business days immediately preceding the date that the transaction is effected. The JSE should be consulted for a ruling if the securities have not traded in such five business day period;

• thecompanyand/orsubsidiarymayatanypointintimeonlyappointoneagenttoeffectanyrepurchase(s) on the subsidiary company’s behalf;

• thesubsidiarycompanymaynoteffectarepurchaseduringanyprohibitedperiodasdefinedintermsofthe JSE Listings Requirements unless there is a repurchase programme in place as contemplated in terms of section 5.72(g) of the JSE Listings Requirements; and

• thecompanymustensurethatitssponsorprovidestheJSEwiththerequiredworkingcapitallettersbefore it commences the repurchase of any shares.”



Reasons for and effect of special resolution number 5 The reason for and effect of special resolution number 5 is to grant the board of directors of any subsidiary of

the company a general authority in terms of the JSE Listings Requirements to acquire shares issued by such subsidiary and/or to acquire shares issued by the company on the basis reflected in the special resolution.

In terms of the JSE Listings Requirements, any general purchase by a subsidiary of shares must, inter alia, be limited to a maximum of 20% of the issued share capital of the acquiree company in any one financial year of that class at the time the authority is granted, subject to a maximum of 10% in the event that it is the company’s share capital that is repurchased by a subsidiary.

14. FinAnCiAl AssisTAnCE To sUbsidiARiEs And oTHER inTER-RElATEd EnTiTiEs special resolution number 6 “Resolved that, the company be and is hereby authorised to provide direct or indirect financial assistance

to any subsidiary or inter-related company (as defined in the Companies Act) of the company by way of a general authority in favour of that category of recipients as contemplated in section 45(3)(a)(ii) of the Companies Act, on terms and conditions and for amounts that the board of directors may determine from time to time.”

Reasons for and effect of special resolution number 6 The reason for, and effect of this special resolution is, in compliance with section 45(3)(a)(ii) of the

Companies Act, to permit the company to provide direct or indirect financial assistance to entities within the RARE group of companies.

15. oTHER bUsinEss To transact such other business as may be transacted at an AGM or raised by shareholders with or without

advance notice to the company.

inFoRMATion RElATing To THE sPECiAl REsolUTions1. The directors of the company or its subsidiaries will only utilise the general authority to purchase shares of

the company and/or the subsidiary as set out in special resolutions numbers 4 and 5 to the extent that the directors, after considering the maximum shares to be purchased, are of the opinion that the company and its subsidiaries’ (“RARE group”) position would not be compromised as to the following:

• theRARE group’s ability in the ordinary course of business to pay its debts for a period of 12 months after the date of this AGM and for a period of 12 months after the purchase;

• theconsolidatedassetsoftheRARE group will at the time of the AGM and at the time of making such determination be in excess of the consolidated liabilities of the RARE group. The assets and liabilities should be recognised and measured in accordance with the accounting policies used in the latest audited annual financial statements of the RARE group;

• theordinarycapitalandreservesoftheRARE group after the purchase will remain adequate for the purpose of the business of the Rare Group for a period of 12 months after the AGM and after the date of the share purchase; and

• theworkingcapitalavailabletotheRareGroupafterthepurchasewillbesufficientfortheRARE group’s requirements for a period of 12 months after the date of the notice of the annual general meeting

and the directors have passed a resolution authorising the repurchase, resolving that the company has satisfied the solvency and liquidity test as defined in the Companies Act and resolving that since the solvency and liquidity test had been applied, there have been no material changes to the financial position of the RARE group.


2. For the purposes of considering special resolution number 4 and special resolution 5, and in compliance with paragraph 11.26 of the JSE Listings Requirements, the information listed below has been included in the integrated annual report, in which this notice of AGM is included, at the places indicated:

• Directorsandmanagement(page69); • Majorshareholders(page21); • Directors’interestsinsecurities(page69); • Sharecapitalofthecompany(page58); • Contingentliabilities(page68); • Responsibilitystatement(page12); • Litigationstatement(page68);and • Materialchanges(pages14and15).

3. For purposes of special resolution number 6, the board of directors of the company will only utilise the general authority bestowed upon them to provide direct or indirect financial assistance related to inter-related companies to the extent that the directors, after considering the amount of financial assistance to be granted, are of the opinion that:

• immediatelyafterprovidingthefinancialassistance,thecompanywouldsatisfythesolvencyandliquiditytest (as defined in the Companies Act);

• thetermsunderwhichthefinancialassistanceisproposedtobegivenarefairandreasonabletothecompany; and

• allconditionsorrestrictionsregardingthegrantingoffinancialassistanceassetoutinthecompany’smemorandum of incorporation have been satisfied

and that the board of directors have passed a resolution authorising the grant of the said financial assistance (“the board resolution”) under their general authority so granted, the company which will then provide written notice of the board resolution to all shareholders:

• within10daysafteradoptionoftheboardresolution,ifthetotalvalueofallloans,debts,obligationsor assistance contemplated in that resolution, together with any previous such resolution(s) during the financial year, exceeds one-tenth of 1% of the company’s net worth at the time of the board resolution; or

• within30businessdaysaftertheendofthefinancialyear,inanyothercase.

4. The company is not involved in any legal or arbitration proceedings, nor are any proceedings pending or threatened of which the company is aware that may have or have had, a material effect on the company’s financial position in the previous 12 months.

5. The directors, whose names are reflected in this integrated annual report of which this notice forms part, collectively and individually accept full responsibility for the accuracy of the information given 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 that have been made and that the notice contains all information required by the JSE Listings Requirements.


voTing1. The date on which shareholders must be recorded as such in the share register maintained by the transfer

secretaries of the company (“the share register”) for purposes of being entitled to receive this notice is Friday, 9 November 2012.

2. The date on which shareholders must be recorded in the Share Register for purposes of being entitled to attend and vote at this meeting is Friday, 7 December 2012, with the last day to trade being Friday, 2 December 2011.

3. Meeting participants will be required to provide proof of identification to the reasonable satisfaction of the chairman of the AGM and must accordingly bring a copy of their identity document, passport or drivers’ licence. If in doubt as to whether any document will be regarded as satisfactory proof of identification, meeting participants should contact the transfer secretaries for guidance.

4. Shareholders entitled to attend and vote at the AGM may appoint one or more proxies to attend, speak and vote thereat in their stead. A proxy need not be a member of the company. A form of proxy, in which are set out the relevant instructions for its completion, is enclosed for the use of a certificated shareholder or own-name registered dematerialised shareholder who wishes to be represented at the AGM. Completion of a form of proxy will not preclude such shareholder from attending and voting (in preference to that shareholder’s proxy) at the AGM.

5. The instrument appointing a proxy and the letter of representation (if any) under which it is signed must reach the transfer secretaries of the company at the address given below by no later than 12:00 on Friday, 7 December 2012.

6. Dematerialised shareholders, other than own-name registered dematerialised shareholders, who wish to attend the AGM in person will need to request their Central Securities Depository Participant (“CSDP”) or broker to provide them with the necessary authority in terms of the custody agreement entered into between such shareholders and the CSDP or broker.

7. Dematerialised shareholders, other than own-name registered dematerialised shareholders, who are unable to attend the AGM and who wish to be represented thereat, must provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between themselves and the CSDP or broker in the manner and time stipulated therein.

8. Shareholders present in person, by proxy or by authorised representative shall, on a show of hands, have one vote each and, on a poll, will have one vote in respect of each share held.

Renier viljoenCompany secretary

9 November 2012Stellenbosch

Registered office22 Old Vereeniging Road, Kliprivier, Midvaal1871

Transfer secretariesComputershare Investor Services (Pty) LtdGround Floor70 Marshall StreetJohannesburg, 2001(PO Box 61051, Marshalltown, 2107)

sponsorPSG Capital (Pty) Ltd1st floor, building 8Inanda Greens Business Park54 Wierda Road WestWierda ValleySandton, 2196


noTEs


RARE Holdings liMiTEd(Incorporated in the Republic of South Africa)Registration Number: 2002/025247/06Share Code: RAR ISIN: ZAE000092714(“RARE” or “the company” or “the group”)

FoRM oF PRoxy – FoR UsE by CERTiFiCATEd And own-nAME dEMATERiAlisEd sHAREHoldERs onlyFor use at the annual general meeting of ordinary shareholders of the company to be held at 22 Old Vereeniging Road, Kliprivier, Midvaal on Thursday 13 December 2012 at 10:00.

I/We (Full name in print)

of (address)

being the registered holder of ordinary shares hereby appoint:

1. or failing him/her,

2. or failing him/her,

3. the chairman of the meeting,as my proxy to vote for me/us at the annual general meeting for purposes of considering and, if deemed fit, passing, with or without modification, the special resolutions and ordinary resolutions to be proposed thereat and at each adjournment thereof and to vote for and/or against the resolutions and/or abstain from voting in respect of the shares registered in my/our name(s) in accordance with the following instructions (see Notes):

Number of sharesIn favour of Against Abstain

1. To consider the presentation of the audited annual financial statements2. Ordinaryresolution1–Approvalofdirectorsfees3. Ordinaryresolution2–Reappointmentofauditors4. Ordinaryresolution3–Auditorsremuneration5. Re-election of retiring directors 5.1 Ordinaryresolution4–ReappointmentofPduPlessis5.2Ordinaryresolution5–ReappointmentofHOdendaal6. Election of members to the audit and risk committee 6.1Ordinaryresolution6–ReappointmentofPduPlessis6.2Ordinaryresolution7–ReappointmentofHOdendaal6.3Ordinaryresolution8–AppointmentofTLategan6.4Ordinaryresolution9–ReappointmentofSPotgieter7. Ordinaryresolution10–Unissuedsharesplacedunderthecontrolof

the directors8. Ordinaryresolution11–Generalauthoritytoissuesharesforcash9. Ordinaryresolution12–Authoriseddirectorsand/orcompanysecretary10.Specialresolution1–Increaseinauthorisedsharecapital11. Specialresolution2–Amendmenttothememorandumofincorporation12. Specialresolution3–Remunerationofnonexecutivedirector13. Specialresolution4–Authoritytorepurchasesharesbythecompany14.Specialresolution5–Authoritytorepurchasesharesbyasubsidiaryof

the company15. Specialresolution6–Financialassistancetosubsidiariesandotherinter-

related entities

Please indicate your voting instruction by way of inserting the number of shares or by a cross in the space provided.

Signed at on this day of 2012.

Signature(s)

Assisted by (where applicable) (state capacity and full name)

Each RARE shareholder is entitled to appoint one or more proxy(ies) (who need not be a shareholder(s) of the company) to attend, speak and vote in his stead at the annual general meeting.

PRoxy FoRM

notes1. A RARE shareholder may insert the name of a proxy or the names of two alternative proxies of the

shareholder’s choice in the space(s) provided, with or without deleting “the chairman of the annual general meeting”. The person whose name appears first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of those whose names follow.

2. A RARE shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of shares to be voted on behalf of that shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the chairman of the annual general meeting, if he/she is the authorised proxy, to vote in favour of the resolutions at the meeting, or any other proxy to vote or to abstain from voting at the meeting as he/she deems fit, in respect of all the shares concerned. A shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholder or his/her proxy, but the total of the votes cast and in respect whereof abstentions are recorded may not exceed the total of the votes exercisable by the shareholder or his/her proxy.

3. When there are joint registered holders of any shares, any one of such persons may vote at the meeting in respect of such shares as if he/she was solely entitled thereto, but, if more than one of such joint holders be present or represented at any meeting, that one of the said persons whose name stands first in the register in respect of such shares or his/her proxy, as the case may be, shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member, in whose name any shares stand, shall be deemed joint holders thereof.

4. Forms of proxy must be completed and returned to be received by the transfer secretaries of the company, Computershare Investor Services (Proprietary) Limited (PO Box 61051, Marshalltown, 2107), by not later than 12:00 on Friday, 9 December 2012.

5. Any alteration or correction made to this form of proxy must be initialled by the signatory(ies).

6. Documentary evidence establishing the authority of a person signing this form of 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 chairman of the annual general meeting.

7. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so.

noTEs To THE PRoxy FoRM

general information

Country of incorporation and domicile South Africa

Nature of business and principal activities The group’s principal activities are those of a fully integrated provider of complete fluid conveyance products and services to the energy, water and chemical industries

Directors T Siyolo P du Plessis MT Lategan H Odendaal SJDT Potgieter W van Coller R Viljoen

Registered office 22 Old Vereeniging Road Klipriver Midvaal 1871

Business address 22 Old Vereeniging Road Klipriver Midvaal 1871

Postal address PO Box 124186 Alrode Johannesburg 1451

Auditors Greenwoods Registered Auditors

Company Secretary R Viljoen

Company registration number 2002/025247/06

Level of assurance These financial statements have been audited in compliance with the applicable requirements of the Companies Act (No 71 of 2008) of South Africa.

Preparer The financial statements were internally compiled under supervision of R Viljoen CA(SA)

GREYMATTER & FINCH # 6617

www.rare.co.za

Integrated Annual Report 2012

integrated annual report 2012 - rare

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