Annual Report

Edcon Holdings Limited

For the 52 weeks ended 26 March 2016

EDCON ANNUAL REPORT 2016

Index Page

Business 4

Shareholders and Management 6

Summary Historical and Pro Forma Financial and Other Data 7

Management’s Discussion and Analysis of Audited Consolidated Results 8

Risk Factors 26

Audited Consolidated and Company Annual Financial Statements 39

Corporate Information 207

This annual report includes forward looking statements, including certain estimates and budgets which are based on Edcon’s current expectations and projections about future events. All statements other than statements of historical facts included in this annual report, including statements regarding Edcon’s future financial position, risks and uncertainties related to its business strategy, capital expenditures, projected costs and our plans and objectives for future operations, including our plans for future costs savings and synergies may be deemed to be forward- looking statements. Words such as “believe”, “expect”, “anticipate”, “may”, “assume”, “plan”, “intend”, “will”, “should”, “estimate”, “risk” and similar expressions or the negative of these expressions are intended to identify forward-looking statements. In the course of preparing such forward-looking statements, Edcon has taken into account historical financial performance and made certain assumptions that management of Edcon has deemed to be reasonable. None of the information contained in the forward-looking statements has been independently verified and no representation or warranty, express or implied, is made by Edcon as to the information or opinions contained in any forward-looking statement. Any forward-looking statements contained in this Annual Report are made only as of the date of this Annual Report.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Edcon cautions you that forward-looking statements are not guarantees of future performance and that the actual results of operations, financial condition and liquidity and the development of the industry in which Edcon operates may differ materially from those made in or suggested by the forward-looking statements contained in this trading update. Consequently, you should not place undue reliance on these forward-looking statements. Some of the risks and uncertainties that may cause Edcon’s actual results to differ materially from those expressed or implied by, or described in, the forward-looking statements in this Annual Report are described in the section entitled “Risk Factors” on page 26, and which Edcon urges you to read and consider in conjunction with this Annual Report. Edcon is not under any obligation to keep current any of the information (including any forward-looking statements) contained in this Annual Report, and any

opinions expressed in it are subject to change without notice. Furthermore, Edcon disclaims any obligation to update their views of any of the risks and uncertainties presented in this Annual Report. Nothing in this trading update will create an obligation on behalf of Edcon to provide information similar to the information contained in this Annual Report in the future.

Prospective investors are reminded that past financial performance is not a reliable indicator of any potential future performance, and prospective and current investors are solely responsible for making their own independent appraisal of and investigations into the financial and other information presented in this Annual Report. Edcon does not assume any obligation to review or confirm analyst expectations or estimates. Nothing in this Annual Report constitutes investment advice.

BUSINESS

Edcon Holdings Limited (together with its subsidiaries, “the Group” or “Edcon” or “we” or “us”) is southern Africa’s largest non-food retailer. We have been in operation for more than 80 years and have expanded our footprint to 1,542 stores as at 26 March 2016, including 213 stores in eight countries outside of South Africa. During the current financial period, we operated our business under four principal operating divisions comprising nine key store chains as well as mono-branded stores throughout southern Africa.

 Our Edgars division, which consists of department stores targeted at middle-to-upper-income customers, includes store chains Edgars, Edgars Active, Edgars Shoe Gallery, Boardmans and Red Square as well as our mono-branded stores, and accounted for 51.3% of total retail sales in the 52-week period ended 26 March 2016. We had 559 stores in our Edgars division (including mono-branded stores) and an average retail space of 846 thousand square meters for the financial year 2016.  Our Discount division, which consists of discount stores selling value merchandise targeted at lower- to middle-income customers, includes store chains Jet, Legit and Jet Mart, and accounted for 38.8% of total retail sales in the 52-week period ended 26 March 2016. We had 732 stores in our Discount division and an average retail space of 642 thousand square meters for the financial year 2016.  We are also a leading retailer of books and magazines in South Africa under our CNA division, which accounted for 6.9% of total retail sales in the 52-week period ended 26 March 2016. As at 26 March 2016 we had 198 stores in our CNA division and an average retail space of 79 thousand square meters for the financial year 2016.  Our business in Zimbabwe is independently managed and reported. It accounted for 3.0% of total retail sales reported in the 52-week period ended 26 March 2016. As at 26 March 2016 we reported 53 stores and an average retail space of 40 thousand square meters for the 52-week period.

We have secured exclusive rights to a number of international brands in South Africa, including Topshop, Tom Tailor, Mac, Lipsy, Bobbi Brown, Lucky Brand, Dune, TM Lewin, Salsa, Jigsaw, Calvin Klein, Kiehl’s, Victoria Secrets Beauty and Accessories, Vince Camuto, River Island, Doc Martens, Jo Malone and Gosh. Most of these brands are still relatively new to South Africa and are available on an exclusive basis in our Edgars stores as well as being rolled out in mono-branded stores. We also hold a controlling stake in companies holding the exclusive rights to Accessorize, La Senza and Inglot. As at 26 March 2016, we had a total of 85 mono-branded stores. The results of both the shop-in-shop and stand-alone stores are included in the Edgars division.

We also sell mobile phones, related accessories and airtime across all of our divisions, which accounted for 11.0% of our total retail sales in the 52-week period ended 26 March 2016. Our popular retail store chains allow us to serve a wide cross-section of society in the countries in which the Group operates.

We also offer credit and insurance products to the Group’s customers via our strategic partnerships. We still hold our own foreign book and our own second look credit book, which are worth R321 million and R164 million, respectively, and consolidate the Edgars Zimbabwe book of R481 million, which is managed by Edgars Zimbabwe as of 26 March 2016.

The Group also owns a controlling stake in Celrose Proprietary Limited which controls Eddels Proprietary Limited, which are manufacturing businesses. Celrose manufactures apparel whilst Eddels manufactures footwear.

Our Thank U rewards program, which was introduced in 2012, allows customers to earn Thank U points for their purchases in most of our stores which can be redeemed on future purchases. As at 26 March 2016, the Thank U rewards program had over 12 million members.

Our primary operations are in South Africa where the Group generated 88% of our retail sales in fiscal year 2016. The rest of our operations are in neighbouring Namibia, Botswana, Lesotho, Swaziland, Mozambique, Ghana, Zimbabwe and Zambia, where we operate 213 retail outlets. Edgars Zimbabwe is managed

independently and disclosed as a separate division. The Group generated revenues of R29,352 million, including retail sales of R27,147 million.

Although our retail businesses are divided into three principal divisions, excluding operations in Zimbabwe, we maintain seven operating segments as detailed in note 2 of the consolidated financial statements on page 89 of this report. See “Notes to the Consolidated Financial Statements of Edcon Holdings Limited – Operating Segment Report”.

SHAREHOLDERS AND MANAGEMENT

Shareholders

Edcon’s shareholders are described in the directors’ report of the consolidated financial statements on page 48 of this report. See “Audited Consolidated and Company Annual Financial Statements of Edcon Holdings Limited – Directors Report - Shareholding”.

Directors and management

Edcon has a unitary board structure comprising three executive directors, four non-executive directors and five independent non-executive directors. Our board has delegated authority for the day-to-day affairs of the Group to the Executive Management Group, which includes the chief executive officer, the chief financial officer, and the chief executives of the Edgars and Discount divisions.

The members of the board and the executive management committee are described in the directors’ report of the consolidated financial statements on page 49 of this report. See “Audited Consolidated and Company Annual Financial Statements of Edcon Holdings Limited – Directors’ Report”.

Jurgen Schreiber resigned as the Managing Director and Chief Executive Officer (CEO) on 18 August 2015, joining the Group as non-executive director on that date and resigning as non-executive director effective 31 March 2016. Dr U Ferndale and RB Daniels were appointed as interim joint Chief Executive Officers and resigned on 30 September 2015 when BJ Brookes joined the Group as Managing Director and Chief Executive Officer effective 30 September 2015.

On 16 June 2016, the Group announced the appointment of R Vaughan as Chief Financial Officer (CFO) effective 27 July 2016. T Clerckx resigned effective 22 July 2016. R Vaughan has been the Deputy Group Financial Officer for 4 years, is a qualified Chartered Accountant and has significant experience in a diverse set of roles including with Goldman Sachs and Deutsche Bank.

B Gebauer, the Chief Executive for the Edgars division resigned effective 2 March 2016 and B Brookes is currently the acting Chief Executive of the Edgars division.

The following non-executive board changes also took place during FY16: (i) J Schreiber joined as a non- executive director effective 18 August 2015 and resigned as a non-executive director effective 31 March 2016; (ii) LL von Zeuner resigned as a non-executive director effective 10 December 2015; (iii) DH Brown resigned as a non-executive director effective 31 December 2015; (iv) KDM Warburton joined as a non-executive director effective 1 February 2016; (v) A Alvarez III joined as a non-executive director effective 21 April 2016; and (vi) D Frauman joined as a non-executive director effective 31 May 2016.

A Transaction Committee was formed as a board sub-committee in April 2016, pursuant to the signing of the Coupon Deferral Term Sheet. The Committee is comprised of three independent directors (i) K Warburton, (ii) D Frauman and (iii) A Alvarez III (the Chief Restructuring Officer), as well as B Brookes (CEO) and R Vaughan (CFO). The Transaction Committee is mandated to manage and review all strategic initiatives and restructurings.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA

The following historical financial data relates to the audited consolidated financial statements for the 52-week period ended 26 March 2016, the 52-week period ended 28 March 2015 and the 52-week period ended 29 March 2014 which appear elsewhere in this annual report. These consolidated financial statements have been audited by Deloitte & Touche. Unless the context requires otherwise, references in this notice to “financial year 2016” (or “FY2016”) and “financial year 2015” (or “FY2015”) and “financial year 2014” (or “FY2014”) shall mean the 52-week period ended 26 March 2016, the 52-week period ended 28 March 2015 and the 52-week period ended 29 March 2014 respectively.

Throughout these reports Edgars refers to the Edgars division, which comprises Edgars, Red Square, Boardmans, Edgars Active, Edgars Shoe Gallery and the mono-branded stores while Discount refers to the Discount division, which comprises Jet, Jet Mart and Legit.

The summary historical and pro forma financial and other data are detailed in the next entitled section “Management’s discussion and analysis of audited consolidated results”.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF AUDITED CONSOLIDATED RESULTS

Operational Highlights

Pertaining to the 52-week period ended 26 March 2016 compared to the prior comparative period

 Deleveraging of €298 million on conclusion of the Exchange Offer and Amend & Extend of bank loans  Net accounting gain on Exchange Offer of R4,141 million - deleveraging effect of the Exchange Offer  Customer-centric strategic plan announced in December 2015  Retail sales decreased by 1.3% to R27,147 million  Retail cash sales increased by 5.3%  Retail credit sales decreased by 10.2%  Second-look trade receivables book grows in excess of 100%  Controllable costs well managed  Adjusted EBITDA decreased by 1.7% to R2,639 million  Execution of restructuring support agreement with creditors

Introduction

Operation results

The overall trading environment for the FY2016 was challenging primarily due to an increase in income taxes, rising unemployment, rising interest rates, drought-induced rise in domestic grain prices and sustained weak Rand exchange rate. The factors affected the growth of household income as a result, and consumer confidence as reported by the Bureau for Economic Research, declined close to its lowest point in 14 years during FY2016, which further weighed on consumer spending. Group retail sales decreased 1.3% to R27,147 million compared to financial year 2015 while comparative store sales declined by 3.2%. Cash sales performance for the Group increased by 5.3% compared to FY2015 despite the challenging trading environment. However, credit sales decreased by 10.2% and were mainly affected by low consumer confidence and low household incomes, as well as new credit affordability regulations which came into effect in September 2015. We estimate that the introduction of the new credit affordability regulations during FY2016 negatively affected retail sales by approximately R297 million. Credit sales contributed 38.8% of total retail sales in FY2016 compared to 42.7% in FY2015. The Group continues to supplement the Absa credit offering through the in-house second look credit solution, and Edcon’s second look trade receivables book has returned acceptance rates to a healthier level and has assisted in slowing the decline in credit sales. As at 26 March 2016, the second look trade receivables book had grown 116% compared to 28 March 2015.

Group gross profit margins decreased from 37.2% to 36.7% mainly as a result of increased clearance markdowns particularly in the Edgars division combined with increased input costs as a result of the declining Rand.

Sound cost management limited the decrease in adjusted EBITDA to only 1.7% and adjusted EBITDA in FY2016 was R2,639 million compared to R2,684 million in FY2015. Total capital investments over the year were R552 million, a decrease of R485 million, or 46.8% compared to capital investments of R1,037 million in financial year 2015. Average space increased 2.7% year on year.

The Edgars division, which includes mono-branded stores, reported total retail sales of R13,929 million, in line with the R13,929 million reported in financial year 2015, with cash sales growth of 8.2% and a decline in credit sales of 8.5%. Comparable store sales reduced 2.8%, mainly due to the decline in credit sales and challenging trading environments within central business district localised stores. Gross profit margin in the Edgars division decreased by 1% from 39.5% in FY2015 to 38.5% in FY2016, primarily due to the declining Rand, which increased input costs combined with increased clearance markdowns. Edgars’ average space increased 4.6%, including the rollout of mono-branded stores.

The Discount division decreased sales by R242 million, or 2.2%, from R10,771 million in fiscal year 2015 to R10,529 million in fiscal year 2016 and comparable store sales decreased 3.8%. Sales were impacted by a double digit decline in credit sales of 15.2%, which was only partially offset by a 5.1% increase in cash sales. Gross profit margin increased by 10 basis points from 34.9% to 35.0% mainly as a result of well managed clearance markdowns and continued improvements in buying and pricing architecture. Average space increased 1.4%.

Sales from operations outside of South Africa were in line with sales reported in fiscal 2015, despite credit tightening during fiscal year 2016 in Swaziland, Lesotho, Botswana and in particular Namibia, following the sale of the majority of the Namibian trade accounts receivable book to Absa on 1 July 2014 as well as a decrease in consumer confidence in Zimbabwe, which negatively affected sales growth in local currency in that country. The negative impact on retail sales as a result of credit tightening and reduced consumer confidence in Zimbabwe was offset by exchange gains as a result of the weaker Rand on consolidation of foreign entities.

At the end of the financial year, cash and cash equivalents were R1,693 million, an increase of R405 million or 31.4%, compared to R1,288 million in fiscal year 2015. As at 26 March 2016, net debt was R25,379 million, an increase of R1,417 million, or 5.9%, from R23,962 million reported at 28 March 2015, mainly as a result of the devaluation of the Rand against the Euro and US dollar during fiscal 2016 negating the positive deleveraging effect of the Exchange Offer detailed below. The ZAR depreciated against the Euro from EUR:R13.12 at 28 March 2015 to EUR:R17.26 at 26 March 2016. The US dollar likewise depreciated from USD:R12.04 to USD:R15.46. Net debt at 26 March 2016 at fiscal year 2015 exchange rates would have been R20,726 million, R4,653 million lower than the R25,379 million reported at 26 March 2016 and R3,236 million lower than that reported at 28 March 2015.

The primary focus of the Group continues to be the needs of its vast customer base and the return of the business to its leading position in the market. The strategic plan is customer-centric and focuses on simplicity, and people empowerment. A restructuring of management roles and responsibilities has been completed for the delivery of these strategic objectives in the financial period ending 25 March 2017 and beyond.

Exchange Offer and Amend & Extend

In June 2015, we launched and Exchange Offer for the Group’s €425 million fixed rate notes which were due 30 June 2019, which was concluded on 27 November 2015. The total deleveraging effect on the Group as a result of the Exchange Offer was €298 million, including a decrease in cash-pay leverage of approximately 25% and a reduction at the time of the Group’s annual net cash interest payments of approximately R1 billion. As a result of the Exchange Offer, we recognised a net accounting gain of R4,141 million in FY2016, which is excluded from adjusted EBITDA. Additionally, in November 2015, the Group successfully reached an agreement with all of its bank lenders to extend the maturity of over R7.9 billion of bank debt and additionally secured a Super Senior Refinancing Facility of €123 million, which, was utilised to refinance the R1,010 million floating rate notes due 4 April 2016 and the Super Senior Liquidity Facility due 30 September 2016 (together, the “Amend & Extend”).

Recent developments

Changes in senior management

B Gebauer, the Chief Executive for the Edgars division resigned effective 2 March 2016 and B Brookes took up the role of acting Chief Executive of the Edgars division.

On 16 June 2016, the Group announced the appointment of R Vaughan as Chief Financial Officer effective 27 July 2016 following the resignation of T Clerckx, effective 22 July 2016. R Vaughan, who has been the Deputy Group Financial Officer for four years, is a qualified Chartered Accountant and has significant experience in a diverse set of roles including with Goldman Sachs and Deutsche Bank.

Trading update

Key operational data

Retail sales FY2014 FY2015 FY2016 FY2014 FY2015 FY2016 growth (%) Actual Actual Actual LFL(1) LFL(1) LFL(1) Edgars 2.7 1.8 0.0 (2.7) (2.6) (2.8) Discount 7.4 2.5 (2.2) 3.2 (0.3) (3.8) CNA 3.2 (5.6) (7.2) 3.1 (7.5) (7.1) Zimbabwe(2) 28.9 23.7 2.9 27.4 20.8 9.2 Total 5.1 2.0 (1.3) 0.5 (1.6) (3.2)

(1) Like-for-like sales (same store sales). (2) On a constant currency basis retail sales decreased 13.7% and LFL sales decreased 8.0% in FY2016.

Gross profit margin (%) FY2014 FY2015 FY2016 pts change(1) Edgars 38.6 39.5 38.5 (1.0) Discount 34.1 34.9 35.0 0.1 CNA 31.1 30.5 29.9 (0.6) Zimbabwe 48.6 45.9 45.3 (0.6) Total 36.5 37.2 36.7 (0.5)

(1) FY2016 % change on FY2015.

Other FY2014 FY2015 FY2016 pts change(1) Total number of stores 1 403 1 500 1 542 2.8 Average retail space (‘000 sqm) 1 492 1 565 1 607 2.7 Customer accounts (‘000s) (2) 3 789 3 496 3 400 (2.7) Thank U cards (‘000s)(3) 11 000 12 000 12 000 - (1) FY2016 % change on FY2015. (2) Customer accounts includes Zimbabwe customer credit accounts of 142,796 FY2014, 168,763 FY2015 and 181,979 FY2016. (3) Thank U card numbers are rounded down to closest million.

Edcon’s retail business comprises three principal retail divisions, each of which are discussed in turn below.

Edgars

The Edgars division retail sales remained flat in fiscal 2016 compared to fiscal 2015 while same-store sales were 2.8% lower, negatively impacted by an 8.5% decline in credit sales. The credit sales contribution reduced from 48.9% of total sales in fiscal 2015 to 44.8% of total sales. Cash sales increased 8.2% over the same period. Edgars stores showed good performance in cosmetics, homewares and menswear offset by a weaker than expected performance in ladieswear and cellular.

Average space increased by 4.6% to 846 thousand square meters when compared to fiscal 2015. During the year ended 26 March 2016, Edcon opened ten Edgars stores, six Boardmans, fourteen Edgars Active, five Red Square, one Edgars Sale store and thirteen new mono-branded stores. During the same period, Edcon closed twenty-three stores in the Edgars division (seven Edgars, four Edgars Active, six Boardmans and six mono- branded stores) bringing the total number of stores in the Edgars division to 559, including mono-branded stores.

Gross margin was 38.5% for the financial year 2016, a decrease from 39.5% for the financial year 2015 due to increased clearance activity and higher input costs as a result of the weaker Rand.

Discount

The Discount division’s retail sales decreased by 2.2% and same store retail sales decreased by 3.8% in fiscal year 2016, primarily as a result of poor performances in childrenswear and footwear as well as a 15.2% decline in credit sales. Credit sales contribution reduced significantly from 36.4% of total retail sales in the prior year to 31.6% of total retail sales. Cash sales increased by only 5.1% over the same period. Menswear performed well and the remaining categories performed in line or slightly better than fiscal 2015.

Average space increased by 1.4% to 642 thousand square meters when compared to the 2015 financial year. During the year we opened twenty-four Jet stores, eleven Legit and four Jet Marts and closed twenty-six stores (nineteen Jet, three Jet Marts and four Legit stores) bringing the total number of stores in the Discount division to 732.

Gross profit margin of the Discount division increased from 34.9% for financial year 2015 to 35.0% for financial year 2016, as higher input costs and clearance activity were well managed within the Discount division and continued strategies to improve buying and pricing architecture contributed to maintain the gross profit margin.

CNA

CNA retail sales decreased 7.2% and same store retail sales decreased 7.1%. The decrease was primarily as a result of a reduction in average space of 6.2%, and negative cash and credit sales of 3.4% and 17.9% respectively, which impacted sales performance across most categories. During the year eight new stores were opened and five were closed, bringing the total number of CNA stores to 198. Gross margin decreased from 30.5% for financial year 2015 to 29.9% for financial year 2016 mainly due to product mix.

African expansion

The total number of Edcon group stores outside of South Africa increased by 13, from 200 at the end of financial year 2015, to 213 at the end of financial year 2016. Retail sales from these stores decreased marginally by 0.1% (1.1% decrease excluding Zimbabwe). Retail sales were impacted by credit tightening in Swaziland, Lesotho, and Botswana and in particular in Namibia, following the sale of the Namibian book to Absa on 1 July 2014 as well as reduced consumer confidence in Zimbabwe, affected by economic factors in that country. The negative impact on retail sales as a result of credit tightening and reduced consumer confidence in Zimbabwe was offset by exchange gains as a result of the weaker Rand on consolidation of foreign entities. Retail sales in Zambia and Ghana continued to perform well. Sales from stores outside South Africa contributed 12.0% (9.2% excluding Zimbabwe) of retail sales for the financial year 2016, up from 11.8% (8.9% excluding Zimbabwe) in the prior comparative period.

Credit and financial services

Edcon, excluding Edgars Zimbabwe, lost 108 thousand credit customers during FY2016 compared to the end of financial year 2015. On a twelve month rolling basis excluding Edgars Zimbabwe, credit sales decreased from 42.3% in the FY2015 period to 37.9% of total retail sales in FY2016. In September 2015, the National Credit Regulator implemented credit affordability regulations negatively affecting retail sales by approximately R297 million in the current fiscal 2016. The Group’s in-house second look trade receivables book, although still small, has returned acceptance rates to healthier levels and has assisted in slowing the decline in credit sales. Edcon will continue to supplement its Absa credit offering through the in-house second look credit solution. As at 26 March 2016, Edcon’s second look trade receivables book has grown by R88 million, or 116% to R164 million at 26 March 2016, compared to R76 million as at 28 March 2015.

As at 26 March 2016, the Group has ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale on the Statement of Financial Position as a buyer could not be found at an acceptable price.

In July 2015, the Group outsourced existing consumer credit services excluding those carried out by Edgars Stores Limited in Zimbabwe, which is separately managed. The arrangement is expected to result in an approximate R200 million service cost reduction in the initial two year period of the arrangement.

Share of profits from the insurance business decreased by R22 million or 2.9% over the prior comparative period, to R725 million for the financial year 2016 from R747 million in financial year 2015. The decline in profits was impacted by the lower number of credit customers as store credit is a prerequisite for a policy.

Financial review

Summary financial information

Rm FY2014 FY2015 FY2016 % change(1) Total revenues(2) 28 942 29 546 29 352 (0.7) Retail sales 26 974 27 510 27 147 (1.3) Gross profit 9 842 10 245 9 974 (2.6) Gross profit margin (%) 36.5 37.2 36.7 (0.5 pts) Capital expenditure 1 349 1 037 552 (46.8) Adjusted EBITDA(3) 2 622 2 684 2 639 (1.7) Net debt including cash and derivatives 22 678 23 962 25 379 5.9 Net debt/adjusted EBITDA 8.6 8.9 9.6 0.7x (1) FY2016 % change on FY2015. (2) FY2014 and FY2015 have been re-presented as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale. The results of operations previously presented in discontinued operations in the Consolidated Statement of Comprehensive Income has been re- presented and included in income from continuing operations for all periods presented. (3) See table on page 14 which reconciles trading profit/loss to adjusted EBITDA.

Revenues

Total revenues decreased by R194 million, or 0.7%, from R29,546 million in fiscal year 2015 to R29,352 million in fiscal year 2016. The decrease in total revenues is commensurate with the decrease in retail sales of R363 million as a result of the challenging trading environment, which resulted from an increase in income taxes, rising unemployment and rising interest rates, the drought as well as a sharp depreciation in the Rand. Cash sales increased 5.3% in fiscal year 2016 compared to fiscal year 2015, while credit sales decreased by 10.2% impacted largely by the change in affordability regulations implemented in September 2015 with total retail sales declining 1.3% compared to fiscal year 2015. The decrease in total revenues as a result of unsatisfactory retail sales performance, was partially offset by an increase in club fees of R40 million due to the pricing mix particularly in the Edgars division as customers migrated to the VIP Club from the classic club, finance charges on trade receivables of R72 million as Edcon’s in-house second look trade receivables book continued to grow, additional finance income of R31 million due to higher cash balances on hand during fiscal year 2016, additional administration fee income from Absa of R17 million, and an increase in manufacturing sales to third parties of R31 million.

Retail gross profit

Gross profit was 36.7% for fiscal year 2016, a decrease from 37.2% for fiscal year 2015 largely due to higher levels of promotional activity required to offset negative credit sales. Furthermore, we were unable to pass through higher product costs caused by a weaker Rand in fiscal year 2016 to our customers through price increases. Margin improvements in the Discount division were offset by declining margins in the Edgars, CNA and Zimbabwe divisions.

Reconciliation of EBITDA and Adjusted EBITDA

The following table reconciles loss for the period to EBITDA and adjusted EBITDA for each of the periods indicated:

Rm FY2014 FY2015 FY2016 % change(1) Trading profit(2) 1 213 1 305 987 (24.4) Depreciation and amortisation 1 137 1 079 1 004 Net asset write off(3) 11 37 19 Gain on sales of written down trade receivables(4) (42) (29) Loss/(profit) from brands to be exited(5) (5) - 8 Rand depreciation adjustment(6) 52 Other non-recurring costs(7) 266 305(8) 598 Adjusted EBITDA(2) 2 622 2 684 2 639 (1.7)

(1) FY2016 % change on FY2015. (2) FY2014 and FY2015 have been re-presented where necessary as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale in the Consolidated Statement of Financial Position and as discontinued operations in the Consolidated Statement of Comprehensive Income. The results of operations previously presented in discontinued operations in the Consolidated Statement of Comprehensive Income has been re-presented and included in income from continuing operations for all periods presented. (3) Relates to assets written off in connection with the closure of stores, net of related proceeds where applicable. (4) Relates to gains realised on the sale of a portfolio of written down trade receivables. (5) Adjustment to remove the EBITDA gain or loss achieved from certain brands being Express, Geox, Lucky Brand and One Green Elephant which the Group has strategically agreed to exit. (6) Foreign exchange gains recognised below the trading profit line which hedged the exposure in cost of sales as a result of the significant devaluation of the Rand. (7) Non-recurring costs in FY2014 related to the sale of the trade receivables book in the amount of R116 million, employee restructure costs of R93 million and post- retirement medical aid buyout of R57 million; non-recurring costs in FY2015 related to the sale of the trade receivables book in the amount of R73 million, employee restructure costs of R69 million and onerous lease charges of R137 million, post-retirement medical aid buyout credit of R23 million, once-off lease adjustment of R49 million; and non-recurring costs in FY2016 related to employee restructure costs of R72 million, onerous lease charges of R123 million and R1 million lease cancellation cost, post-retirement medical aid buyout of R26 million, once-off lease adjustment of R33 million, penalty costs of R57 million, transitional project related expenditure of R70 million and strategic initiative costs of R216 million. (8) Reclassified by R55 million for costs accrued relating to the Exchange Offer reclassified on the Statement of Comprehensive Income below trading profit.

As at 26 March 2016, the Group ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale on the Statement of Financial Position in the consolidated financial statements as a buyer could not be found at an acceptable price. As a result, the Group no longer reports pro- forma adjusted EBITDA, which reported normalised earnings on the basis of 100% of the trade receivables book accounted for as though all trade accounts receivable which were previously classified as held-for-sale had been sold and Group earned a fee similar to that under the Absa relationship. In addition, the Group has taken a strategic decision to exit certain international brands including Express, Geox, Lucky Brand and One Green Elephant. Adjusted EBITDA for the Group, relating to each of these brands has been restated in fiscal year 2014 and 2015 to exclude adjusted EBITDA relating to these brands.

The table below reconciles previously reported pro-forma adjusted EBITDA to adjusted EBITDA reported on page 14 for fiscal year 2014 and fiscal year 2015:

Rm FY2014 FY2015 Pro-forma adjusted EBITDA previously reported(1) 2 687 2 725 Net income/(loss) from previous card programme(2) (29) 23 Net income from new card programme(3) (31) (22) Adjusted EBITDA previously reported(1) 2 627 2 726 Gain on sales of written down trade receivables(4) (42) Loss/(profit) from brands to be exited(5) (5) - Adjusted EBITDA(6) 2 622 2 684 (1) Pro-forma adjusted EBITDA and Adjusted EBITDA as reported in the Annual Report for Edcon Holdings Limited for the 52 weeks ended 28 March 2015. (2) Net income/(loss) derived from 100% of the trade receivables including finance charges revenue, bad debts and provisions are added back as no longer accounted for as a discontinued operation. (3) Pro-forma fee earned by Edcon under the new arrangement with Absa, based on 100% of the trade receivables book, now excluded as the Group ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale. (4) Relates to gains realised on the sale of a portfolio of written down trade receivables in fiscal year 2015. (5) Adjustment to remove the EBITDA gain or loss achieved from certain brands being Express, Geox, Lucky Brand and One Green Elephant which the Group has strategically agreed to exit. (6) Adjusted EBITDA as reported on page 14.

Costs

(unaudited) Rm FY2014 FY2015 FY2016 % change(1) Store costs 5 700 6 277 6 463 3.0 Other operating costs(2) 3 791 3 804 3 650 (4.0) Store card credit administration costs(3) 800 557 417 (25.1) Non-recurring costs(4) 266 305(5) 598 96.1 (1) FY2016 % change on FY2015. (2) Other operating costs as per consolidated financial statements, before costs in notes (3) and (4) below. (3) Relates to costs associated with the administration of the store credit card funded by Absa or Edcon. Fiscal year 2014 and fiscal year 2015 have been re-presented by R244 million and R116 million respectively as the Group has ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as discontinued operations. (4) FY2014 costs relating to the sale of the trade receivables book of R116 million, employee restructure costs of R93 million and post-retirement medical aid buyout of R57 million; FY2015 costs relating to the sale of the trade receivables book of R73 million, employee restructure costs of R69 million and onerous lease charges of R137 million, post-retirement medical aid buyout credit of R23 million, once-off lease adjustment of R49 million and FY2016 employee restructure costs of R72 million, onerous lease charges of R123 million and R1 million lease cancellation cost, post-retirement medical aid buyout of R26 million, once-off lease adjustment of R33 million, penalty costs of R57 million, transitional project related expenditure of R70 million and strategic initiative costs of R216 million. (5) Re-presented by R55 million for costs accrued relating to the Exchange Offer reclassified on the Statement of Comprehensive Income below trading profit.

Total store costs were well managed during the current fiscal year increasing by only R186 million, or 3.0%, from R6,277 million in fiscal year 2015 to R6,463 million in fiscal year 2016 mainly as a result of an improved focus on stock control at stores, thereby reducing store stock losses, lower transactional fees, a reduction is the straight-lining component on store leases based on the lease age profile and a decrease in asset write-offs as capital expenditure normalised, offset by an increase in security and utility costs compared to fiscal year 2015. Manpower costs were well managed increasing 2.4%. Rental and manpower costs constituted 62.0% of total store costs in fiscal year 2016.

Other operating costs, excluding non-recurring and non-comparable costs associated with administrating the trade accounts receivable book, decreased by R154 million, or 4.0%, from R3,804 million in fiscal year 2015 to R3,650 million in fiscal year 2016. Income from Absa for administering the book in financial year 2016 of R734 million is included in other income.

Depreciation and amortisation

The depreciation and amortisation charge decreased by R75 million, or 7.0% to from R1,079 million in fiscal year 2015 to R1,004 million for fiscal year 2016 mainly due to capital expenditure normalising during the period, an increase in landlord contributions received for store fit-outs and an ageing information technology infrastructure.

Foreign exchange management

Edcon applies a strategy of hedging committed foreign denominated orders, the impact of which appears below the trading profit line. These forward contracts combined with selling price inflation absorb the impact of a weakening Rand on losses reported for the period.

Rm FY2014 FY2015 FY2016 % change(1) Derivative gains/(losses) 603 (601) 743 Foreign exchange (losses)/gains (2 458) 998 (4 515) Net movement gains/(losses) (1 855) 397 (3 772) (950.1)

(1) FY2016 % change on FY2015.

Edcon manages its foreign exchange risk on liabilities on an ongoing basis. At the end of fiscal year 2016, 28% of the Group’s total gross debt was hedged by virtue of it being denominated in local currency, whilst 72% was unhedged. During the fiscal year ending 26 March 2016, the ZAR depreciated against the Euro from EUR:R13.12 at 28 March 2015 to EUR:R17.26 at 26 March 2016 and the US dollar likewise depreciated from USD:R12.04 to USD:R15.46. The significant movement in the Rand equivalent of unhedged Euro and US dollar denominated debt resulted in significant net losses.

Net financing costs

FY2014 FY2015 FY2016 % Rm change(1) Finance income 40 33 64 Financing costs (2 668) (3 414) (4 272) Net financing costs (2 628) (3 381) (4 208) (24.5)

(1) FY2015 % change on FY2014.

Net financing costs increased by R827 million, or 24.5%, from R3 381 million in financial year 2015 to R4,208 million in financial year 2016. This increase is primarily as a result of the devaluation of the Rand against the Euro and US dollar coupled with financing costs incurred relating to the Exchange Offer and the Amend & Extend concluded in November and December 2015. Cash paid net finance costs decreased by R1,320 million, or 42.5%, from R3,103 million in fiscal year 2015 to R1,783 million in fiscal year 2016 following the successful settlement of the Exchange Offer in November 2015. Additionally, in March 2016, the Group approached the holders of its USD 250 million, EUR617 million 9.5% senior secured fixed rate notes due 2018 and lenders under its ZAR-denominated term loan due 2017 with a proposal to defer certain cash interest payments until December 2016. The proposal to defer cash interest payments on these debt instruments was accepted by the requite number of noteholders and lenders and concluded on 14 April 2016, as a result of which the Group deferred its cash interest payment obligations on these debt instruments until mid-December 2016.

Cash flow

Operating cash inflow before changes in working capital decreased by R786 million, or 31.4%, from R2,502 million in fiscal year 2015 to R1,716 million in fiscal year 2016, mainly due to weak trading performance as a result of which trading profit decreased by R318 million, or 24.4%, from R1,305 million in fiscal year 2015 to

R987 million for fiscal year 2016, as well as due to fees in the amount of R550 million paid in connection to the Exchange Offer.

In FY2016, the Group recorded a working capital outflow of R292 million compared to an inflow of R573 million in financial year 2015 due to: (i) A decrease in proceeds from the sales of the trade accounts receivable books, which were R29 million in financial year 2016 compared to R356 million in financial year 2015; (ii) A net decrease in trade receivables of R12 million in financial year 2016 compared to a net increase of R181 million in financial year 2015; (iii) An increase in sundry receivables and prepayments of R90 million in financial year 2016 compared to an increase of R78 million in 2015 financial year, mainly due to amounts owed to the Group by an associate formed during fiscal year 2016; (iv) An increase in inventory of R271 million in financial year 2016 compared to a decrease in inventory of R80 million in financial year 2015 mainly due to the weaker than anticipated retail trading performance; and (v) An increase in trade and other payables of R28 million in financial year 2016 compared to an increase of R396 million in financial year 2015 due to working capital initiatives which extended supplier payment terms with the Group.

Net cash outflow from operating activities decreased by R282 million from an outflow of R165 million in fiscal year 2015 to an outflow of R447 million in fiscal year 2016, primarily as a result of weaker trading performance, fees incurred relating to the Exchange Offer and negative working capital cash flows as detailed above, partially offset by a reduction in net finance cash costs of R1,320 million, or 42.5%, from R3,103 million in fiscal year 2015 to R1,783 million in fiscal year 2016 following the successful settlement of the Exchange Offer and the acceptance of the Group’s proposal to defer certain cash interest payments until December 2016, as well as a reduction in income taxes paid in the amount of R49 million, or 35.8%, from R137 million in fiscal year 2015 to R88 million in fiscal year 2016 due to weaker trading results.

Capital expenditure

Rm FY2014 FY2015 FY2016 % change(1) Edgars 873 577 263 Expansion 271 270 209 Refurbishment 602 307 54 Discount 212 180 78 Expansion 110 89 70 Refurbishment 102 91 8 CNA 16 14 13 Edgars Zimbabwe 32 33 20 IT 194 223 149 Other corporate capex 22 10 29 1 349 1 037 552 (46.8)

(1) FY2016 % change on FY2015.

Capital expenditure decreased by R485 million, or 46.8%, to R552 million for the financial year 2016, from R1,037 million in the financial year 2015. In the financial year 2016, the Group opened 96 new stores were opened which, combined with store refurbishments, resulted in investments in stores of R354 million (excluding Edgars Zimbabwe), compared to financial year 2015 during which we opened 142 new stores, resulting in an investment in stores of R771 million (excluding Edgars Zimbabwe). Edcon invested R149 million in information systems infrastructure in the financial year 2016 compared to R223 million in the financial year 2015.

Net debt, liquidity and capital resources

The primary source of short-term liquidity is cash on hand. The amount of cash on hand is affected by a number of factors including retail sales, working capital levels, supplier payment terms, timing of payment for capital expenditure projects, debt service obligations and tax payment requirements. Working capital requirements fluctuate during each month, depending on when suppliers are paid and when sales are generated, and throughout the year depending on the seasonal build-up of net working capital. The Group funds peaks in its working capital cycle, which typically occur in October and March, with cash flows from operations, drawings under its various facilities and other initiatives.

Rm(1) Cash PIK FY2014 FY2015 FY2016

Super senior debt ZAR Revolving credit facility 1 210 2 865 ZAR Super Senior RCF Term Loan due 31 December 2017 J+5.00% 3.00% 3 249 EUR Super Senior Refinancing Facility due 31 December 2019(2) E+4.00% 8.00% 2 033 ZAR Super Senior Hedging Debt due 31 December 2017 JIBAR 8.00% 662 EUR Super Senior Term Loan due 31 December 2017 EURIBOR 8.00% 638 ZAR Floating rate notes due 4 April 2016 J+6.25% 1 010 1 005 EUR Super Senior PIK notes due 30 June 2019 8.00% 1 876 Senior secured debt ZAR term loan due 31 December 2017(3) J+7.00% 3.00%(4) 4 008 4 083 3 011 EUR fixed rate note due 1 March 2018 9.50% 8 691 7 881 10 504 USD fixed rate note due 1 March 2018 9.50% 2 603 2 981 3 845 Deferred option premium 1 102 1 076 Lease liabilities 273 364 340 EUR Senior secured PIK Toggle 9.75% 12.75% notes due 30 June 2019 (no toggle) (toggle) 482 Senior EUR fixed rate notes due 30 June 2022(5) 5.00% 51 EUR fixed rate notes due 30 June 2019(5) 13.375% 5 948 5 381 Other loans(6) 173 254 331 Gross debt 25 018 25 890 27 022 Derivatives (1 930) (640) 50 Cash and cash equivalents (410) (1 288) (1 693) Net debt 22 678 23 962 25 379 (1) FX rates at end FY2014 were R10.56 :$ and R14.54:€; FY2015 were R12.04:$:and R13.12:€ and FY2016 were R15.46:$:and R17.26:€ (2) Will spring to mature on the same date as the Super Senior RCF Term Loan and Super Senior LC Facility unless certain refinancing conditions are satisfied. (3) The maturity of the Group’s ZAR term loan was extended from 16 May 2017 to 31 December 2017 during fiscal year 2016. (4) Rising to 4.00% from 30 June 2016. (5) The maturity of the original 2019 Notes not tendered has been extended to 30 June 2022 and the interest rate reduced to 5.0% as part of the amendments with respect to the Exchange Offer. Additionally, the aggregate outstanding principal amount of the notes not tendered in the Exchange Offer was reduced. (6) The portion of this debt relating to Zimbabwe was R170 million in fiscal year 2014, R234 million in fiscal year 2015 and R278 million in fiscal year 2016. (7) At the end of the period R247 million of a Super Senior LC facility were utilised for guarantees and LC’s.

At the end of the financial year cash and cash equivalents were R1,693 million, an increase of R405 million or 31.4%, compared to R1,288 million in fiscal year 2015. As at 26 March 2016, net debt was R25,379 million, an increase of R1,417 million, or 5.9%, from R23,962 million reported at 28 March 2015, mainly as a result of the devaluation of the Rand against the Euro and US dollar during fiscal 2016 and as a result of the settlement of

the Exchange Offer for the Group’s €425 million 13.375% Senior Notes due 2019 (the “Existing 2019 Notes”). The Exchange Offer had a total deleveraging effect on the Group of €298 million, and cash pay leverage was reduced by approximately 25%. Additionally, as a result of the Exchange Offer, annual net cash interest payments were reduced by approximately R1 billion. During fiscal year 2016, the ZAR depreciated against the Euro from EUR:R13.12 at 28 March 2015 to EUR:R17.26 at 26 March 2016 and the US dollar likewise depreciated from USD:R12.04 to USD:R15.46. Net debt at 26 March 2016 at fiscal year 2015 exchange rates would have been R20,726 million, R4,653 million lower than the R25,379 million reported at 26 March 2016 and R3,236 million lower than that reported at 28 March 2015.

Exchange Offer and Amend & Extend

In the Exchange Offer, Edcon offered holders of its Existing 2019 Notes to exchange each €1,000 in principal amount of Existing 2019 Notes (plus accrued and unpaid interest) for either (i) €350 in principal amount of New Super Senior PIK Notes issued by Edcon Limited (Option A) or (ii) (A) a pro rata portion of warrants issued by Edcon Holdings Limited which are exercisable for, and constitute rights to distribution relating to, Edcon Holdings Limited warrant shares upon certain exit events, (B) €100 in principal amount of New Super Senior 8% PIK Notes issued by Edcon Limited and; (C) €150 in principal amount of New Senior Secured 9.75%/12.75% PIK-toggle notes issued by Edcon Limited. Additionally, noteholders who validly tendered their Existing 2019 Notes and consent prior to an early consent deadline received an additional early consent fee of €50 per €1,000 of tendered Existing 2019 Notes, which fee was paid in the form of New Super Senior 8% PIK Notes.

In connection with the Exchange Offer, Edcon Holdings Limited obtained the consents of holders of more than 90% of the principal outstanding amount of the Existing 2019 Notes to effect certain amendments to the Existing 2019 Notes, including an amendment that (i) interest on the Notes will be paid in kind (and no longer in cash) at a rate of 5.0% per annum, starting on 30 June 2015, (ii) the maturity of the Notes not tendered in the Exchange Offer be extended to 30 June 2022 and (iii) the principal amount of Notes not tendered in the Exchange Offer were reduced by 72.5% (together, the “Existing 2019 Notes Amendments”). After giving effect to the results of the Exchange Offer and the Existing 2019 Notes Amendments, Edcon Holdings Limited had approximately €3 million in aggregate principal amount of Existing 2019 Notes outstanding (See footnote 5 to the table set forth in “- Net debt, liquidity and capital resources”). In connection with the reduction in the outstanding principal amount of Existing 2019 notes, the Group derecognised the Existing 2019 Notes in accordance with IAS 39 and recognised the amended Existing 2019 Notes as the €3 million fixed rate Senior Notes on 27 November 2015.

Furthermore, during November 2015, the Group secured a Super Senior Refinancing Facility of €123 million which it utilised to refinance the R1,010 million Floating rate notes due 4 April 2016 and the Super Senior Liquidity Facility due 30 September 2016, which it had previously incurred in connection with the Exchange Offer in July 2015. As a result of reaching a successful agreement with the bank lenders under the ZAR Revolving Credit Facility, ZAR Term loan and deferred option premiums concerning the amendment and extension of the Group’s bank debt during November and December 2015, none of the Group’s material debt obligations will mature until December 2017.

Events after the reporting period

Exercise of put option Under the ALI group of companies’ sale agreement, the non-controlling shareholders have a put option exercisable no sooner than 4 April 2016. On 8 April 2016, the non-controlling shareholders exercised their right to put their interest of 49.9% to Edcon Limited. The fair value of the put option is determined based on an EBITDA multiple, as determined in accordance with the terms and conditions of the contractual arrangement. A gross amount of R57 million including interest of R1 million was paid to the non-controlling interests in three instalments as follows (i) R28 million on 29 July 2016, (ii) R14 million on 31 August 2016 and; (iii) R14 million on 30 September 2016.

Deferral of interest payments on senior secured fixed rate notes During March 2016, Edcon Limited approached the Noteholders of the USD 250 million, EUR 317 million and EUR 300 million senior secured fixed rate notes due 2018 with the proposal to defer certain cash interest payments until mid-December 2016. The offer was accepted within the required grace period by the requisite majority of the Noteholders and concluded on 14 April 2016.

Bridge financing of R1.5 billion On 8 July 2016, the Group secured a combined R1.5 billion in bridge financing denominated in US dollars and Euros, which was made available by a group of Noteholders and bank lenders in two tranches upon the satisfaction of certain conditions precedent. On 12 July 2016, the Group received the first tranche being a net amount of R651 million. On 24 October 2016 and 25 October 2016 the Group received a net amount of R574 million and R103 million respectively being the second tranche under the bridge financing.

Group Executive Changes On 18 July 2016, the Group announced changes to its executive management under the restructured divisions including; A Levermore, the former Chief Operating Officer of the Edgars division was promoted to Chief Executive taking over from B Brookes who was acting in the Edgars division Chief Executive role. Dr U Ferndale was appointed Chief Executive of the Discount division replacing A Williams. A Jury previously Head of Strategy was promoted to Chief Executive of the Specialty Stores division replacing G Napier.

We have fully implemented the previously announced change in our reporting structures which show the re- alignment of our operational divisions to accomplish the objectives laid out in our new strategic plan. In line with our new strategic plan, the Edgars division now comprises Edgars, the Discount division comprises Jet and Jet Mart and the Specialty division comprises CNA, Red Square, Boardmans, Edgars Active, Edgars Shoe Gallery, Legit and our Mono-branded stores.

Sale of Legit business On 15 September 2016, the Group agreed to the sale of its Legit business for R637 million (the “Legit Sale”) to Retailability Proprietary Limited, a retail fashion holding company which operates over 200 stores across South Africa, Namibia and Botswana (including the Beaver Canoe and Style chains) and, in which Metier Private Equity is a material shareholder. This Group believes that the Legit sale is aligned with Edcon’s strategic drive to create a simpler, more agile business that is focused on carefully selected offerings in which the Group believes it can add significant value.

The Legit Sale has received Competition Commission approval and requires the satisfaction of certain other customary closing conditions. The sale is expected to be concluded by 28 February 2017.

Agreement with Creditors On 20 September 2016, certain entities in the Edcon Group and certain of the Edcon Group’s creditors, accounting for at least 80% of the outstanding principal amount of the secured debt of the Edcon Group, provided signatures in respect of a lock-up agreement (the “LUA”), pursuant to which the parties to the LUA agreed to the key terms of a proposal concerning the comprehensive restructuring of the Edcon Group’s entire capital structure (the “Restructuring”). Such Restructuring involves amongst others, a transfer of control over the Group’s operating companies from Edcon (BC) S.A.R.L (being ultimately controlled by Bain Capital) to certain of the Group’s existing creditors (the “Control Transfer”), a significant decrease in the outstanding amount of third-party debt of Edcon Limited (a significant indirect subsidiary within the Group), the refinancing of a large portion of the existing third party debt of Edcon Limited in newly established Group companies, and the renegotiation of the terms of third party debt which remain in Edcon Limited. On 13 October 2016, the various conditions precedent to the occurrence of the effective date of the LUA have been satisfied, such that the LUA became binding on all parties thereto.

The LUA contemplates that the Restructuring will be implemented between the Edcon Holdings Limited Group and certain of its creditors (consensually or, where necessary, pursuant to the South African Compromise Proceedings under Section 155 of the South African Companies Act of 2008) and the Control Transfer will be effected under an enforcement of a share pledge over the issued shares held by Edcon Holdings Limited in Edcon Acquisition Proprietary Limited and the transfer of the entire outstanding shares of Edcon Acquisition Proprietary Limited to a newly established holding company (“Parent”) which will be a wholly owned subsidiary of two other newly established holding companies (“Holdco 1” and “Holdco 2”), each of which will be incorporated and tax resident in South Africa. The majority of the shares in Holdco 2 will be owned by the holders of the existing 2018 Senior Secured Notes and 2019 Senior Secured PIK Toggle Notes and lenders under the existing ZAR Senior Secured Term Loan (or their respective nominees).

Under the Restructuring, certain of the lenders under the existing ZAR Super Senior RCF Term Loan and LC Facility (note 19.1), will provide a ZAR-denominated R575 million New Revolving Credit Facility. The Restructuring will also amend and restate the Group’s existing ZAR Super Senior RCF Term Loan and LC Facility (note 19.1), into a new ZAR-denominated R3,597 million senior secured Converted Revolving Facility (R1,250 million), Term Loan Facility and LC Facility. The Group’s existing Super Senior Liquidity Facility will be amended and restated and will comprise the existing EUR Super Senior refinancing facility (note 19.2), available to Edcon Limited (in an original principal amount of €123 million plus accrued and unpaid interest to date).

The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility, LC Facility and the Super Senior Liquidity Facility will rank pari passu amongst each other, and will be secured on a super senior basis by substantially all of the assets of Edcon Limited and its subsidiaries, together with some of the assets of the Parent and will contain LMA-style customary affirmative and negative covenants, which will be adjusted to give Edcon Limited flexibility to operate its day-to-day business activities and will permit Edcon Limited to make certain administrative parent company payments. The covenants will be set at a level reflecting the leverage and liquidity position of the operating companies of the Edcon Limited Group. The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility will mature on the earliest to occur of (i) 31 December 2019, (ii) the earliest maturity date of the Super Senior Liquidity Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Limited Group which benefits from security granted by the Edcon Limited Group’s operating companies, and may be extended upon payment of a fee. The Super Senior Liquidity Facility will mature on the earliest of (i) 31 December 2017, (ii) the earliest maturity date of the New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Group which benefits from security granted by the Edcon Group’s operating companies, and may be extended to 31 December 2018 upon meeting certain financial ratios.

per annum. The Super Senior Liquidity Facility will bear interest of EURIBOR (zero floor) + 4% cash (increasing to 9% on and from the maturity extension) and 8% PIK per annum.

Edcon Limited’s EUR Super senior term loan, EUR Super Senior PIK notes, ZAR Senior secured term loan, USD 250 million Senior secured fixed rate notes, EUR 317 million Senior secured fixed rate notes, EUR 300 million Senior secured fixed rate notes and EUR Senior secured PIK-Toggle notes will be exchanged for new pay-in-kind debt securities to be issued by Holdco 2 in the Restructuring and refinanced by Holdco 2 whilst the ZAR Super senior hedging debt and facility A3 (plus facility A1, subject to meeting certain leverage ratios) of the bridge facility will be refinanced and exchanged for new pay-in-kind debt securities to be issued by Holdco 1 in the restructuring and refinanced by Holdco 1. The proceeds of the remaining portion of Holdco 1 notes will provide the Group with fresh liquidity. The debt securities to be issued by Holdco 1 and Holdco 2 will be outside the scope of consolidation of the Edcon Limited Group following the completion of the Restructuring and as a result of the Restructuring, the Group’s gross third party debt is expected to decrease to approximately R7 billion at the Edcon Limited Group level (excluding newly issued debt at Holdco 1 and Holdco 2).

The Restructuring has been approved by the Competition Commission without conditions and the transaction was referred to the Tribunal and approved on 23 November 2016 and now requires Court Sanction.

Financial Market Risk

Foreign currency risk

We are exposed to the exchange rate movement of the Rand, our operating currency, against other currencies in respect of the merchandise we import. A substantial portion of our indebtedness is denominated in Euro and U.S. dollars. Future foreign exchange rate fluctuations may affect our ability to service our foreign-currency denominated indebtedness, including payments in Euro and U.S. dollars. Historically, our policy has been to cover all foreign-denominated import liabilities using forward exchange contracts. As at 26 March 2016, 28% of the Group’s total gross debt is hedged by virtue of it being denominated in local currency, whilst 72%, is unhedged.

Interest rate risk

As a result of the significant inter-seasonal and intra-month swings in working capital in our business, our short- term net debt can fluctuate significantly. Our treasury actively monitors interest rate exposure. We also actively manage our fixed and floating rate interest-bearing debt and our cash and cash equivalents mix as part of this exposure management process. Where appropriate we use swaps, options and forwards to manage our interest rate risk against any unexpected fluctuations in the interest rate which requires the approval of the group chief executive officer and, in some cases, the Board, depending on the size of the derivative. As at 26 March 2016, 28% of the Group’s total gross debt is hedged by virtue of it being denominated in local currency, whilst 72%, is unhedged.

Counterparty risk

Counterparty risk for deposits with financial institutions is managed by clearly defined bank mandates and delegation of authority. We carefully assess the creditworthiness of financial counterparties on an ongoing basis. Exposure limits are managed and monitored by our treasury department.

Scheduled repayments of our obligations

The following table summarises as of 26 March 2016, (i) the contractual obligations, commercial commitments and principal payments we are committed to make under our debt obligations, leases and other agreements and (ii) their maturities. Commitments due by year Total Less than 1 – 3 3 – 5 More R million 1 year years years than 5 years ZAR Super senior RCF term loan(1) 3 249 3 249 Interest on ZAR super senior RCF loan 1 051 397 654 EUR Super senior refinancing facility 2 128 2 128 Interest on EUR super senior 579 87 492 refinancing facility ZAR Super senior hedging debt 662 662 Interest on ZAR super senior hedging 207 45 162 debt EUR Super senior term loan 638 638 Interest on EUR super senior term 106 106 loan EUR Super senior PIK notes 2 091 2 091 Interest on EUR Super senior PIK 660 660 notes ZAR term loan 3 056 3 056 Interest on ZAR term loan 991 432 559 2018 Senior secured fixed rate notes 14 517 14 517 Interest on 2018 Senior secured fixed 3 394 2 069 1 325 rate notes EUR Senior secured PIK-toggle notes 665 665 Interest on EUR Senior secured PIK- 360 360 toggle notes EUR fixed rates notes 51 51 Interest on EUR fixed rates notes 19 19 Finance leases(1) 498 73 214 112 99 Other credit facilities(2) 330 179 135 7 9 Shareholder’s loan 8 949 8 949 Medical aid(3) 125 125 Leases(1), (4), (5) 12 306 2 408 5 262 3 506 1 130 Total debt obligations 56 632 5 690 36 935 3 625 10 382 (1) Includes property, equipment and store fixturing lease commitments. (2) Includes loans and overdraft facilities inclusive of interest that are held by subsidiary companies. (3) We assume that there are no medical aid obligations that will become due and payable prior to five years. (4) Our consolidated financial statements present our lease obligations in categories different from the categories we use in this table. Therefore, we have straight-lined our lease obligations to present them for the periods we use in this table. (5) The property leases into which we enter have an average initial lease term of ten years for our Edgars chain and five years for our other chains, with lease terms typically including four options to extend the lease for periods of five years each. The leases generally give us the right to sublet the leased premises and assign our

rights under the lease to our affiliate companies. Rental payments are generally made on a monthly basis and rent is increased at an agreed percentage rate (typically

7%) compounded annually.

Critical accounting policies and use of estimates

In preparing the financial statements in accordance with IFRS, management is required to make estimates, assumptions and judgements that affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Assessing available information and the application of judgement are necessary elements in making estimates. Actual results in the future could differ from such estimates, and such differences may be material to the financial statements. Estimates and their underlying assumptions are reviewed on an on-going basis. Any revisions to estimates resulting from these reviews are recognised in the period in which such estimates are revised.

Significant estimates, assumptions and judgements made at the reporting date relate to:

 assumptions around going concern (note 1.3);  credit risk valuation adjustments in determining the fair value of derivative instruments to reflect non- performance risk (note 1.11.4);  fair value measurements and valuation processes of financial instruments (note 1.2, 1.11 and 37.8);  provision for impairment of receivables (note 1.11.1);  derecognition of financial instruments (note 1.11.1 and 1.11.2);  allowances for slow-moving inventory (note 1.12);  residual values, useful lives and depreciation methods for property, fixtures, equipment and vehicles (note 1.15);  fair value measurements and valuation processes in respect of land and buildings (note 1.2, 1.15.2 and 3);  impairment of all non-financial assets including goodwill and intangibles with indefinite lives (note 1.4, 1.15.5, 1.26 and 5);  measurement of pension fund and medical aid obligations i.e. key actuarial assumptions (note 1.20, 31.3.6 and 31.5.4);  operating leases (note 1.13);  current and deferred tax, specifically with respect to the utilisation of deferred tax assets (note 1.17 and 7);  loyalty points deferred revenue (note 1.24.2);  classification of financial assets and financial liabilities into categories (note 1.11.1 and 1.11.2);  put option obligation (note 1.11.2 and 23);  onerous leases (note 1.24.3 and 22.3); and  valuation and classification of the share capital, warrants issued and the shareholder’s loan (note 13.7, note 14.2 and note 18).

RISK FACTORS

Risks Relating to Our Business and Industry

If our cash provided by operating and financing activities proves to be insufficient to fund our cash requirements, we may face substantial short-term liquidity problems.

We used a substantial amount of cash in our operating activities during fiscal year 2016. Not taking into account the proposed Restructuring “Events after the reporting period – Agreement with Creditors” and the liquidity proposed to be provided to us as a result thereof, our cash uses are currently projected to exceed our cash provided by operating activities in 2017 and we have extremely limited availability under our existing facilities. Our cash uses (outside of operating activities) are primarily capital expenditures and interest expense. Our financing costs are substantial, and amounted to R4,272 million during fiscal year 2016. Our working capital requirements and cash provided by operating activities can vary greatly from quarter to quarter and from year to year, depending in part on the level, variability and timing of our sales and general market conditions.

If our cash requirements exceed the cash provided by our operating activities, we would look to our cash balance to satisfy those needs, which will likely not be sufficient in the near term (not taking into account the implementation of the proposed Restructuring). Our existing facilities are fully drawn. Current credit and capital market conditions combined with our recent history of operating losses and negative cash flows, as well as projected industry and macroeconomic conditions in South Africa, may restrict our ability to access capital markets in the near term and any such access would likely be at an increased cost and under more restrictive terms and conditions than the ones of our current debt. Further, such constraints may also affect our agreements and payment terms with vendors. We may face further liquidity pressure if our suppliers require us to pay up front or upon delivery of products.

On 8 July 2016, the Group secured a combined R1.5 billion in bridge financing, denominated in U.S. dollars and Euros, which was made available by a group of Noteholders and bank lenders in two tranches upon the satisfaction of certain conditions precedent. On 12 July 2016, the Group received the first tranche in the amount of R651 million and on 24 October 2016 and 25 October 2016, a further R574 million and R103 million respectively being, the second tranche was received which, has eased some of our liquidity pressure.

While the bridge financing has temporarily improved our liquidity position, our liquidity position, which is severely constrained, may deteriorate further absent the implementation of the proposed Restructuring, access to additional liquidity or other sources of external financial support, including accommodations from key customers.

We may be required to sell assets or cease operations to improve our short-term liquidity, even though such asset sales may impair our ability to operate our business and compete effectively, which may depress the long-term value of our business, and such measures may be unsuccessful or only temporarily successful in improving our liquidity position.

Our liquidity continues to be adversely affected by the recent and ongoing adverse economic and industry conditions. Additionally, the deferral of cash pay interest on our 2018 senior secured notes and the senior secured term loan will expire in December 2016, which, if not extended, would further increase our cash-pay obligations.

While we have agreed a path to the restructuring of our capital structure with certain of our creditors, see “Events after the reporting period – Agreement with Creditors” there can be no guarantee that the proposed restructuring of our debt will be successfully implemented. Should we be unable to implement the Restructuring on the agreed terms (or substantially similar terms) we would revisit the options we have previously considered, including asset disposals, sales of business lines and other measures to raise cash. However, such measures may either be unsuccessful or only temporarily successful in improving our liquidity situation. Such measures could also harm our long-term prospects and undermine our future potential for growth and profitability. Ultimately, no assurance can be given that such measures would be effective, in which case we may be required to pursue a

restructuring through insolvency proceedings, which would involve significant uncertainties, potential delays and risks of extended, multi-jurisdictional litigation for us and our creditors.

A long and protracted process of engaging with capital providers, including in connection with the implementation of an out-of-court restructuring, could adversely impact our management and otherwise adversely affect our business.

A protracted process of engaging with our capital providers, including in connection with the implementation of the Restructuring described in “Events after the reporting period – Agreement with Creditors”, could disrupt our business and may divert the attention of our management from operation of our business and implementation of our business plan, and may also cause some of our members of management to leave our company. If we fail to implement the Restructuring on a timely basis, any alternative we pursue, including a South African business rescue or another in-court restructuring, may take substantial time to consummate. A protracted business rescue process would also likely result in a large amount of negative publicity, which would harm our brand. It is also likely that such a prolonged financial restructuring or bankruptcy proceeding would cause many of our suppliers to ship product to us only on terms that are unfavorable to us, or not at all. If we are unable to obtain inventory on customary terms, we would likely not be able to continue to operate our business.

Continued unfavorable macroeconomic factors may decrease consumer demand for our retail goods.

Macroeconomic factors such as interest rates, consumer indebtedness, Rand devaluation, rising inflation and employment levels affect consumer demand for our goods. South African households are still considered to be financially fragile, exacerbated by the recent slowdown in unsecured lending, following strong growth in credit in the recent past. Moreover, South Africans at the lower end of the socioeconomic spectrum have continued to feel the effect of the global economic downturn more severely due to low employment growth coupled with wage strikes, power outages and significant increases in electricity, food and property rates, interest rate hikes and taxes in South Africa. The expansion of the provision of social grants has also slowed more recently, impacting lower-end consumer spending. Consumer indebtedness, persistently high unemployment, strike action, limited power infrastructure, a leveling off of social grants and lower consumer confidence have had and could continue to have a material adverse effect on our retail sales and results of operations.

Our results are also affected by other macroeconomic factors, such as the prevailing economic climate, levels of unemployment, real disposable income, salaries and wage rates, including any increase as a result of payroll cost inflation or governmental action to increase minimum wages or contributions to pension provisions, the availability of consumer credit and consumer perception of economic conditions. Economic growth performance and prospects have deteriorated in South Africa over the past few years, affecting public finances and exacerbating social and political tensions. The national government net debt continues to rise. The substantial portion of our revenues are generated from our South African stores, and the general slowdown in South African GDP growth and the uncertain economic outlook has and will likely continue to adversely affect consumer spending habits, which may reduce our retail sales and adversely impact our results of operations.

Moreover, many of the items we sell, particularly higher margin fashion and homeware products, represent discretionary purchases, and we have experienced a marked decrease in sales in certain of our product categories. Given the continuing difficult macroeconomic climate, we expect to continue to experience a decline in retail sales, particularly in higher margin fashion and homeware products, which may be proportionally greater than the level of general economic decline. Therefore, continued unfavorable economic conditions in South Africa have had and will likely continue to have a material adverse effect on our financial condition and results of operations.

Our credit sales could further decline due to a reduction in the availability of credit under our existing consumer credit programs, changes in the terms of our private label store card program, including any future regulatory requirements, or other factors.

We maintain Edgars and Jet private label store card programs, and through an arrangement with Absa, Absa extends credit to our customers in South Africa and a large portion of our customers in Namibia. Absa issues our private label store cards to our customers and we receive a net fee for providing certain IT and administrative services with respect to the program. During fiscal year 2016, purchases completed with our private label store cards accounted for 38.8%, down from 42.7% in the prior comparative period. The continued inability or unwillingness of Absa to provide support for our private label store card program may continue to result in a decrease in store card sales to our customers, which could negatively impact our overall sales given customers’ reduced purchasing capacity. As the credit provider with the ultimate exposure to the credit risks of our cardholders, Absa has discretion to turn down store card applicants upon an assessment of each applicant’s credit risks and in light of Absa’s screening and credit requirements. Furthermore, changes in local regulation governing store card business practices, including marketing, underwriting, pricing and billing that may come into effect in the future or tightening of credit from a deterioration of the economic situation in South Africa, could place additional restrictions on consumer credit programs, including limiting the types of promotional credit offerings that may be offered to consumers. These changes could make it even more difficult for Absa to extend credit to our customers, which could also have a material adverse effect on our results of operations. In September 2015, the National Credit Regulator implemented credit affordability regulations which has negatively affected our retail sales and may continue to affect our retail sales in the future.

In addition to our strategic partnership with Absa, we continue to explore measures to address the credit sales decline, including the continued roll-out of our in-house National Credit Act compliant second-look credit solution, as well as seeking out a possible second-look credit provider to supplement the Absa funded credit proposition. However, efforts to secure a third party second-look credit provider have stagnated in light of negative publicity about uncertainty around our capital structure. If our credit sales do not improve, which also depends on a successful cooperation with any potential second-look credit provider, this would also have a material adverse effect on our results of operations.

An increase of bad debts among our credit card customers or restrictions on our ability to charge market interest rates could have a negative impact on the performance of our credit and financial services business.

An increase of bad debts as a percentage of our credit card receivables could have a material adverse effect on our revenue, results of operations and liquidity. In addition, existing or future statutory usury provisions may prevent us from increasing the interest rates we charge on our credit cards beyond a specified threshold even though our cost of credit may increase. Such restrictions could have a material adverse effect on our revenue, results of operations and liquidity.

We face the risk of adverse changes in our supplier relationships.

While we believe that our relationships with our suppliers are generally satisfactory, and that our size and consequent purchasing needs make us an important partner to many of our suppliers, they may nonetheless modify the terms of our relationships due to our financial and operational performance or position, general economic conditions currently prevailing in South Africa or otherwise. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, particular payment terms or the extension of credit limits. Instead, most of these arrangements are short-term in nature, typically on standard 30 to 75-day payment terms dependent on the nature of the supplier. We have recently experienced increased pressure from suppliers as a result of news reports surrounding the sustainability of our capital structure. In some cases, the banks through which our suppliers factor our receivables have been messaging suppliers that they should reduce their exposure to Edcon. Should any of our current suppliers decide to terminate or substantially curtail their relationship with us over concerns that we may not be able to pay for supplies, we may not be able to find

alternative suppliers, and our retail sales, results of operations and liquidity may be adversely affected. If our current suppliers were to stop selling merchandise to us on acceptable terms, including as a result of our financial condition, we may be unable to procure the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all. A significant unfavorable change in our relationships with key suppliers could adversely impact our business, and could mean that we cannot supply merchandise in our stores on an acceptable basis. In addition, any significant change in the terms that we have with our key suppliers including, payment terms, return policies, the discount or margin on products could adversely affect our financial condition and liquidity. For example, if our suppliers do not extend trade credit to us and require payment on demand, we would have a significant liquidity crisis and would not likely be able to find alternative financing to fund our trade payables. If several material suppliers ceased to extend trade credit, and we could not access other means of paying for necessary supplies, we would likely not be able to continue to do business as a going concern and could file for a South African Business Rescue proceeding. Many of our suppliers rely on credit insurers to guarantee our payment of trade payables with respect to the merchandise those suppliers provide to us. We do not have a direct relationship with these credit insurers, but if they perceive our financial condition as weak, they may require us to post collateral or guarantees to continue to provide credit insurance, or may cease providing credit insurance entirely. News reports regarding challenges with our capital structure have led and may lead credit insurers to take steps, such as those described above, to mitigate perceived risks associated with exposure to us. In the absence of factoring, these suppliers reduce credit lines, ask for shorter terms, or seek cash on delivery or payment in advance.

Our business could be adversely affected by disruptions in our supply chain.

Any significant disruption or other adverse event affecting our relationship with any of our major suppliers could have a material adverse effect on the results of our financial condition and our operations. If we need to replace any of our major suppliers, we may face risks and costs associated with a transfer of operations. In addition, a failure to replace any of our major suppliers on commercially reasonable terms, or at all, could have a material adverse effect on our financial condition and results of our operations.

The concentration of our suppliers will increase as we proceed with our ongoing strategy to reduce the number of our suppliers. Our ongoing strategy to expand our supplier base in markets such as China, Mauritius, Bangladesh, Madagascar and various countries in sub-Saharan Africa places us at risk if merchandise is in short supply in those locations. In addition, such suppliers may be unwilling to provide us with merchandise if we do not place orders at an internationally competitive order level or at a level competitive with large-volume customers. In the event that one or more of our major suppliers chooses to cease providing us with merchandise or experiences operational difficulties, and we are unable to secure alternative sources in a timely manner or on commercially beneficial terms, we may experience inventory shortages or other adverse effects on our business. If our suppliers are unable or unwilling to continue providing us with merchandise under our presently agreed terms, including as a result of our significantly increased leverage, or if we are unable to obtain goods from our suppliers at prices that will allow our merchandise to be competitively priced, there could be a material adverse effect on our retail sales, results of operations and liquidity.

The cost and availability of our supplies are dependent on many factors, including: (i) the base price of raw material costs, such as cotton and wool, as well as the cost of individual product components; (ii) freight costs; and (iii) rebates and discounts earned from suppliers.

Moreover, we purchase a portion of our products in markets outside of South Africa, principally in Asia, and the number of our foreign suppliers may increase as we proceed with our strategy to partner with suppliers in low- cost countries. We face a variety of risks generally associated with doing business in foreign markets and importing merchandise from these regions, including: (i) currency risks; (ii) political instability; (iii) increased security requirements applicable to foreign goods; (iv) the imposition of duties and taxes, other charges and restrictions on imports; (v) risks related to our suppliers’ labor practices, environmental matters or other issues in the foreign countries or factories in which our merchandise is manufactured; (vi) delays in shipping; and (vii) increased costs of transportation.

The ongoing challenging economic environment could have a number of adverse effects on our supply chain. The inability of suppliers to access liquidity, or the insolvency of suppliers, could lead to delivery delays or failures. In addition, failures of other counterparties, including banks, insurance providers and counterparties to contractual arrangements, could negatively impact our business.

Any of these risks, in isolation or in combination, could adversely affect our reputation, financial condition and results of operations. New initiatives may be proposed that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions which, if enacted, could increase the cost of products purchased from suppliers in such countries or restrict the importation of products from such countries. The future performance of our business will partly depend on our foreign suppliers and may be adversely affected by the factors listed above, all of which are beyond our control.

We are dependent upon certain major suppliers for our private-label merchandise.

We do not manufacture the majority of our own merchandise but instead work closely with a number of suppliers. During fiscal year 2016, our largest supplier of our private-label apparel accounted for 3.5% of our total purchases, and our largest five suppliers accounted for 14.9% of such purchases. We depend on our suppliers to ship merchandise on time and within our quality standards. The loss of one or more of our major suppliers, particularly at critical times during the year, could have a material adverse effect on our results of operations or financial condition.

We may not be able to accurately predict or fulfill customer preferences or demand.

A large portion of our sales are from fashion-related products, which are subject to volatile and rapidly changing customer tastes. The availability of new products and changes in customer preferences make it more difficult to predict sales demand accurately. As a multi-product retailer, our success depends, in part, on our ability to effectively predict and respond to quickly changing consumer demands and preferences and to translate market trends into attractive product offerings. Our ability to anticipate and effectively respond to changing customer preferences and tastes depends, in part, on our ability to attract and retain key personnel in our buying, design, merchandising, marketing and other functions. Competition for such personnel is intense, and we may not be able to attract and retain a sufficient number of qualified personnel in future periods.

Furthermore, many of our products are manufactured offshore. Accordingly, in some instances we must enter into contracts for the purchase and manufacture of merchandise well in advance of the applicable selling season. The long lead times between ordering and delivery make it more important to accurately predict, and more difficult to fulfil, the demand for items.

There can be no assurance that our orders will match actual demand. If we are unable to successfully predict or respond to sales demand or to changing styles or trends, our sales will be lower and we may be forced to rely on additional markdowns or promotional sales to dispose of excess or slow-moving inventory or we may experience inventory shortfalls on popular products, any of which could have a material adverse effect on our financial condition and results of operations. In addition, a number of other factors, including changes in personnel in the buying and merchandising function, could adversely affect product availability.

Our business is affected by foreign currency fluctuations.

We realise a majority of our revenue, and incur a significant portion of our costs and expenses, in rand. We purchase approximately 8.6% of our products directly from markets outside of South Africa denominated in a foreign currency, principally in Asia, and the number of our foreign suppliers may increase as we proceed with our strategy to partner with suppliers in countries with low production costs. A part of our costs are incurred through indirect suppliers, who denominate their costs in rand but are exposed to foreign currency fluctuation. The cost of foreign-sourced products is affected by the fluctuation of the relevant local currency against the rand or, if priced in other currencies, the price of the merchandise in currencies other than the rand. Although we hedge approximately 76% of all committed orders, changes in the value of the rand relative to foreign currencies

may increase our cost of goods sold and, if we are unable to pass such cost increases on to our customers, decrease our gross margins, our sales and ultimately our earnings.

In addition, a substantial portion of our indebtedness, including our outstanding 2018 EUR fixed rate notes, 2018 USD fixed rate notes, EUR Super senior refinancing facility, EUR Super senior term loan, EUR super senior PIK notes, EUR senior secured PIK-toggle notes and the EUR senior secured fixed rate notes are denominated in foreign currency, i.e., the euro and the U.S. dollar. We currently have no hedging arrangements in place with respect to these notes, and currency fluctuations in the future may affect our ability to service our foreign currency denominated indebtedness, including payments in euro on the 2018 EUR fixed rate notes, and the EUR Super senior refinancing facility, and payment in U.S. dollar on the 2018 USD fixed rate notes.

The rand has fallen from an exchange rate of R12.04 to the U.S. dollar on 28 March 2015 to R15.46 to the U.S. dollar on 26 March 2016 and from R13.12 to the euro on 28 March 2015 to R17.26 to the euro on 26 March 2016. Weakness of the rand may adversely affect our profitability as we purchase significant quantities of merchandise denominated in foreign currency. See “Management’s discussion and Analysis of Audited Consolidated Results” for discussion of the effects of the weakening Rand on our business. We cannot assure you that we will be able to manage our currency risks effectively or that any volatility in currency exchange rates will not have a material adverse effect on our financial condition or results of operations or on our ability to make principal and interest payments on our indebtedness.

If we are unable to renew or replace our store leases or enter into leases for new stores on favorable terms, or if any of our current leases are terminated prior to the expiry of its stated term and we cannot find suitable alternate locations, our growth and profitability could be harmed.

We lease all of our store locations. We typically occupy our stores under operating leases with fixed terms of between five and ten years, with options to renew for additional multi-year periods thereafter. In the future, we may not be able to negotiate favourable lease terms. Our ability to renew any expired lease on favourable terms, or, if such lease cannot be renewed, our ability to lease a suitable alternative location, as well as our ability to enter into leases for new stores on favourable terms, depend on many factors beyond our control, such as conditions in the local real estate market, competition for desirable properties and our relationships with current and prospective landlords. In addition, many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Our inability to renew the lease agreements in relation to our stores or to meet the requirement for higher rental payments may cause our occupancy costs to be higher in future years or may force us to close stores in desirable locations. Some of our leases have early cancellation clauses, which permit the lease to be terminated by us or the landlord if certain sales levels are not met in specific periods or if the shopping center in which the relevant store is located does not meet specified occupancy standards. In addition to future minimum lease payments, some of our store leases provide for additional rental payments based on a percentage of net sales, or percentage of rent, if sales at the respective stores exceed specified levels, as well as the payment of common area maintenance charges, real property insurance and real estate taxes. As we expand our store base, our lease expense and our cash outlays for rent under the lease terms will increase. An adverse change in the terms of our store lease agreement or our inability to satisfy the requirements under these agreements may have a material adverse effect on the results of our operations, profitability and financial condition. In addition, if we are unable to renew existing leases or lease suitable alternative locations, or enter into leases for new stores on favourable terms, our growth and our profitability may be significantly harmed.

We depend on cash flow from operations to pay our lease expenses. If our business does not generate sufficient cash flow from operating activities to fund these expenses, we may not be able to service our lease expenses, which could materially harm our business. If an existing or future store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, amongst other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. Our inability to enter into new leases or renew existing leases on terms acceptable to us or be released from our

obligations under leases for stores that we close could materially adversely affect our financial condition and results of operations.

Any negative impact on the reputation of, and value associated with, our brand names could adversely affect our business.

Our brand names represent an important asset of our business. Maintaining the reputation of, and value associated with, our brand names is essential to the success of our business. Significant negative publicity (including with respect to our liquidity position), widespread product recalls or other events could also cause damage to our brand names. We rely on marketing to strengthen our brand names, but our marketing initiatives may prove to be ineffective. Substantial erosion in the reputation of, or value associated with, our brand names could have a material adverse effect on our financial condition and results of operations. Similarly, any erosion in the reputation of a third-party brand for which we have exclusive license agreements in South Africa could have a material adverse effect on our financial condition and results of operations.

Our business could suffer as a result of weak retail sales during peak selling seasons.

Our business is subject to seasonal peaks. Historically, our most important trading periods in terms of retail sales, operating results and cash flow have been the Easter and Christmas seasons, with approximately one third of our retail sales occurring in April, November and December combined, for our fiscal year 2016. We incur significant additional expenses in advance of the Easter and Christmas seasons in anticipation of higher retail sales during those periods, including the cost of additional inventory, advertising and hiring additional employees. In previous years, our investment in working capital has peaked in early to mid-March, October and November and has fallen significantly in April and January. If, for any reason, retail sales during our peak seasons are significantly lower than we expect, we may be unable to adjust our expenses in a timely fashion and may be left with a substantial amount of unsold inventory, especially in seasonal merchandise that is difficult to liquidate. In that event, we may be forced to rely on significant markdowns or promotional sales to dispose of excess inventory, which could have a material adverse effect on our financial condition and results of operations. At the same time, if we fail to purchase a sufficient quantity of merchandise, we may not have an adequate supply of products to meet consumer demand, which may cause us to lose retail sales.

Our business can be adversely affected by unseasonal weather conditions.

Our results are affected by periods of abnormal or unseasonal weather conditions. For example, periods of warm weather in the winter could render a portion of our inventory incompatible with such unseasonal conditions. Adverse weather conditions early in the season could lead to a slowdown in retail sales at full price followed by more extensive markdowns at the end of the season. Prolonged unseasonal weather conditions during one of our peak trading seasons could adversely affect our turnover and, in turn, our financial condition and results of operations. In addition, extreme weather conditions, such as floods, may make it difficult for our employees and customers to travel to our stores.

The sector in which our business operates is highly competitive.

The retail markets in which we operate are highly competitive, particularly with respect to product selection and quality, store location and design, price, customer service, credit availability and advertising. We compete at national and local levels with a wide variety of retailers of varying sizes and covering different product lines across all geographic markets in which we operate. For example, in the Edgars division, we compete directly with Woolworths, Truworths and Foschini. In the Discount division, we compete with Mr. Price, Ackermans and PEP. In addition, the South African retail sector has experienced a consolidation of market formats as retail companies diversify in other sectors of the retail market. Our credit and financial services business faces competition from other retail companies, such as Truworths and Foschini, which offer financial services to their customers. Increased competition from our existing competitors or new entrants to the market could result in lower prices and margins or a decrease in our market share, any of which could have a material adverse effect

on our financial condition and results of operations. In addition, international competitors have entered our market, creating increased competition, as in the case of Cotton On, Zara, H&M and, through its acquisition stake in Massmart, Wal-Mart. We face a variety of competitive challenges including: (i) anticipating and quickly responding to changing consumer demands; (ii) maintaining favourable brand recognition and effectively marketing our products to consumers in several diverse market segments; (iii) developing innovative fashion products in styles that appeal to consumers of varying age groups and tastes; (iv) sourcing and distributing merchandise efficiently; (v) competitively pricing our products; and (vi) responding to changes in consumer behaviour resulting from changes in the economic conditions and consumer spending patterns.

Actions taken by our competitors, as well as actions taken by us to maintain our competitiveness and reputation, can and will continue to place pressure on our pricing strategy, margins and profitability, and could have a material adverse effect on our financial condition and results of operations. Some of our competitors may have greater financial resources, greater purchasing economies of scale and/or lower cost bases, any of which may give them a competitive advantage over us. Our competitors also may merge or form strategic partnerships, which could cause significant additional competition for us.

We may not be able to obtain the capital required to implement our business plan, which may force us to limit the scope of our operations and adversely impact our revenues.

In connection with implementing our business plans, we have significantly reduced our capital needs in the medium term, for example by streamlining our operations and store management. However, we still may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including our profitability, our ability to secure financing, our ability to generate revenues and our ability to attract and retain customers. We cannot assure you that we will be able to obtain capital in the future to meet our needs. If we cannot obtain additional funding, we may be required to limit the implementation our business plan, limit our marketing efforts and decrease or eliminate our intended capital expenditures.

Our growth depends in part on our ability to open and operate new stores profitably.

One of our business strategies is to expand our base of retail stores. For fiscal year 2017, we plan to spend approximately R600 million of total capital expenditure, of which we expect to spend approximately R190 million on new stores. Should we be unable to implement this strategy, our ability to increase our sales, profitability and cash flow could be impaired. Although the anticipated growth in new space is expected to decrease, to the extent that we are unable to open and operate new stores profitably, our sales growth would come only from increases in same-store sales. We may be unable to implement our strategy if we cannot identify suitable sites for additional stores, negotiate acceptable leases, access sufficient capital to support store growth, or hire and train a sufficient number of qualified employees. This could be exacerbated by our intention to decrease our level of capital expenditure in the coming years.

We rely on our key personnel and we face strong competition to attract and retain qualified managers and employees.

We are highly dependent on our key personnel who have extensive experience in, and knowledge of, our industry. In addition, our business faces significant and increasing competition for qualified management and skilled employees. We have instituted a number of programs to improve the recruitment and retention of managers and employees, and we invest substantially in their training and professional development. However, these programs may prove unsuccessful and, in conditions of constrained supply of skilled employees, there is a risk that our well-trained managers and employees will accept employment with our competitors. The loss of the service of our key personnel or our failure to recruit, train and retain skilled managers and employees could have a material adverse effect on our retail sales, results of operations and liquidity.

We depend heavily on our IT systems to operate our business.

We rely to a significant degree on the efficient and uninterrupted operation of our various computer and communications systems to operate and monitor all aspects of our retail business and our credit and financial services business, including, in respect of our retail business, sales, warehousing, distribution, purchasing, inventory control, and merchandise planning and replenishment. Any significant breakdown or other significant disruption to the operations of our primary sites for all of our computer and communications systems could significantly affect our ability to manage our IT systems, which in turn could have a material adverse effect on our financial condition and results of operations.

A continued reduction in the availability or failure to maintain the full functionality and integrity of our IT systems that are used to manage our private label store card program underwritten by Absa could have an adverse effect on our financial condition and results of operations.

Our IT and telecommunications systems are used to manage our private label store card program underwritten by Absa. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt the operation of our private label store card program. Because our IT and telecommunications systems interface depends on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, system failures or service denials could result in a deterioration of Absa’s ability to process new credit applications, collect payments and provide customer service, thereby compromising our ability to support our private label store card program effectively, which may result in damage to our reputation and/or result in a loss of customer business, any of which could have a material adverse effect on our financial condition and results of operations.

We could experience labor disputes that could disrupt our business.

Most of our store and warehouse employees are represented by trade unions and covered by collective bargaining or similar agreements that are subject to periodic renegotiation. Although we negotiated a new two- year collective bargaining agreement in May 2015 with the South African Commercial, Catering and Allied Workers Union (the “SACCAWU”), the biggest trade union active amongst our employees, current and future collective bargaining negotiations may not prove successful and could result in the disruption of our operations. Such current and future collective bargaining negotiations may result in an increase in our labour costs. In addition, our employees could join in national labour strikes, boycotts or other collective actions. Any work stoppages and labour disruptions or any increase in our labour costs could materially adversely affect our retail sales, results of operations and financial condition.

Labour disputes and other workforce-related issues have been prevalent in certain industries in South Africa. Labour disputes affecting our suppliers or social unrest in South Africa generally may also negatively impact our business, by disrupting our supply chain or causing a reduction in the spending capacity of our customers. We have had no recent labour disputes which have resulted in material stoppages.

We are subject to complaints, claims and legal actions that could affect us.

We are party to various complaints, claims and legal actions in the ordinary course of our business. These complaints, claims and legal actions, even if successfully disposed of without direct adverse financial effect, could have a material adverse effect on our reputation and divert our financial and management resources from more beneficial uses. If we were to be found liable under any such claims, our results of operations could be adversely affected.

Changes in tax regulations may have an adverse effect on our results of operations and financial condition.

Changes in tax regulations have had and may in the future have negative effects on our business, financial condition, results of operations and prospects. Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the amount and timing of taxable income. Such uncertainties with respect to tax regulations may hinder our ability to effectively plan for the future and to implement our business plan. Our tax and similar payments, as well as customs duties and foreign currency payments, are subject to audits by the tax authorities and, should any irregularities be identified, interest and monetary penalties could be imposed on us. In addition, some transactions with our subsidiaries may also be challenged for tax reasons.

Compliance with privacy and information laws and requirements could be costly, and a breach of information security or privacy could adversely affect our business.

We are subject to privacy and information laws and requirements governing our use of identifiable data relating to customers, employees and others. At present, data protection in South Africa is regulated under the Protection of Personal Information Act, 2013 (the “POPI Act”).The right to privacy is a fundamental right that is protected both under South Africa’s common law and under section 14 of the Constitution of the Republic of South Africa, which provides individuals with the right to have their private or personal information protected against disclosure by other persons.

The POPI Act aims to bring South Africa in line with international data protection law, including that of the European Union, by introducing measures to ensure that the processing of personal information (of both natural and legal persons) is safeguarded. The POPI Act introduces eight “Information Protection Conditions” which regulate the processing (both automated and non-automated) of personal information. These include the collection, receipt, recording, organization, collation, storage, updating or modification, retrieval, alteration, consultation or use, the dissemination by means of transmission, distribution or making available in any other form, and the merging, linking, as well as the restriction, degradation, erasure or destruction of information. The POPI Act also regulates the transfer and storage of information outside of South Africa as well as the use of personal information for direct marketing. In addition, the Act establishes an information regulator which is empowered to monitor and enforce compliance with its provisions. A failure to comply with the POPI Act, once the relevant provisions come into effect, will be an offence and may also attract financial penalties for the Issuer.

Compliance with such laws and requirements may require us to make necessary systems changes and implement new administrative processes. If a data security breach occurs, our reputation could be damaged and we could experience lost sales, fines or lawsuits.

We may be unable to protect our trademarks and other intellectual property or may otherwise have our brand names harmed.

We believe that our registered trademarks and other intellectual property have significant value and are important to the marketing of our products and business. While we intend to take appropriate action to protect our intellectual property rights, we may not be able to sufficiently prevent third parties from using our intellectual property without our authorization. The use of our intellectual property by others could reduce or eliminate any competitive advantage we have developed, causing us to lose sales or otherwise harm the reputation of our brands names. In addition, we may be subject to claims of breaches of intellectual property rights from third parties, which may result in legal proceedings and negative publicity.

Maintenance of our competitive position is partially dependent on our ability to license well-recognised international apparel brands.

Although we own many of our own private-label brands, we also rely on our ability to attract, retain and maintain good relationships with apparel brand licensors that have strong, well-recognized brands and trademarks, such as Nike, Adidas, Guess, Playtex, Puma, Levis, Mango, Forever New, Tom Tailor, Lipsy, TM Lewin, Topshop

and Topman and River Island. Our license agreements are generally for an initial term of five years, subject to renewal, and there can be no assurance that we will be able to renew these licenses. Furthermore, many of our license agreements require minimum royalty payments, and if we are unable to generate sufficient sales and profitability to cover these minimum royalty requirements, we may be required to make additional payments to the licensors that could have a material adverse effect on our business and results of operations. These relationships with licensors may be affected by our current or future liquidity status. In addition, because certain of our license agreements are non-exclusive, new or existing competitors may obtain licenses with overlapping product or geographic terms, resulting in increased competition for a particular market.

The growth of our business is in part dependent on our relationships with Absa as well as with Hollard Insurance, our insurance joint operation partner, and we may enter into additional joint venture relationships. If we were to lose these relationships, or the benefits we derive from these relationships were to diminish, our growth rates and our business would be harmed.

We rely on certain commercial and corporate partners to help drive our net revenues and profitability growth rates. In November 2012, for example, we entered into a long-term strategic relationship with Absa to continue to provide our customers with access to credit under our private label store card program. Absa provides critical services, such as credit underwriting and funding of the book, and we earn an administration fee for our front- facing services and maintenance of the credit book. In addition, we offer our customers Edgars and Jet branded insurance products through our business arrangement formed with Hollard Insurance. Hollard Insurance underwrites all insurance products and provides the insurance business with actuarial and compliance support. We also earn a fee for use of our brands in marketing the insurance products. We have considered entering into joint venture relationships with certain other parties in connection with sales of our assets to raise liquidity, and will monitor any such opportunities that arise in the future in order to improve liquidity.

If our relationships with these partners were to be damaged or lost, or the benefits we derive from these relationships were to be diminished, whether by our own actions, the actions of one or more governmental entities, the actions of our competitor or the actions of Absa or Hollard Insurance themselves, our growth rates and our business would be harmed. Furthermore, if these partners are unable to continue operations or perform obligations under their respective contractual arrangements with us, we may be required to identify new commercial and corporate partners which may divert management resources from other matters and otherwise interrupt our sales cycle. Moreover, we may be unsuccessful in finding replacement partners, which could have a material adverse effect on our profitability and operations.

An adverse change in economic, political and social conditions in South Africa or regionally may adversely affect economic conditions generally and demand for our products specifically, and cause our revenue, profitability and cash flow to decline.

We generated 88% of our retail sales in South Africa in fiscal year 2016. Economic, political and social conditions in South Africa have a significant direct impact on our business. South Africa has relatively high levels of unemployment, poverty and crime, and a relatively low level of education. These problems, in part, have hindered investments in South Africa, prompted the emigration of skilled workers and negatively affected economic growth. Although it is difficult to predict the effect of these problems on South African businesses or the South African government’s efforts to solve them, these problems, or the policy prescriptions enacted, may adversely affect economic conditions generally and demand for our products specifically. Government policies aimed at alleviating and redressing the disadvantages and lack of services suffered by the majority of citizens under previous South African governments may also have an adverse effect on economic conditions and our operations. There has also been economic, political and social instability in the countries surrounding South Africa, which may negatively affect South African economic, political or social conditions. An adverse change in the economic, political or social conditions in South Africa as well as regional instability may have a material adverse effect on our profitability, financial condition and results of operations.

Xenophobic attacks on foreigners in South Africa, and consequently negative South African sentiment in countries in the rest of Africa, may have a negative material adverse effect on our profitability, financial condition and results of operations.

There are risks associated with an investment in emerging markets such as South Africa, including: (i) adverse changes in economic and governmental policy; (ii) relatively low levels of disposable consumer income; (iii) relatively high levels of crime, including the risk of robberies of cash in transit; (iv) unpredictable changes in the legal and regulatory environment; (v) relatively high levels of corruption; (vi) the inconsistent application of existing laws and regulations; and (vii) relatively slow or insufficient legal remedies.

Since 1999, during the years of GDP growth, the SARB has focused on controlling inflation as its primary monetary policy. Since the global economic downturn in 2008, the SARB has adjusted its focus on inflation in favour of growth-oriented monetary policies, although growth has slowed somewhat in recent years. Year-on- year inflation is currently within the target range of 3% to 6%, with inflation for April 2016 recorded at 6.2%, above the central bank’s target range. There is a risk that the inflation outlook in South Africa may destabilise South Africa’s macroeconomic performance. This may be impacted by global and local circumstances including the strength of the South African currency, which continues to be volatile.

An adverse change in economic, political or social conditions in South Africa or neighbouring countries or emerging markets generally may adversely affect the value of the rand, economic conditions in South Africa generally or demand for our products specifically, which may have a material adverse effect on our profitability, financial condition and results of operations. In addition, any such adverse change may negatively affect investor sentiment towards South Africa or emerging markets generally.

Our results may be adversely affected by increases in energy costs.

Energy costs in South Africa have increased dramatically in the past. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase products from our suppliers. Future rises in energy costs could adversely affect consumer spending and demand for our products and could increase our operating costs, both of which could have a material adverse effect on our financial condition and results of operations.

Until the implementation of the Restructuring, we continue to be indirectly owned and controlled by investment funds advised by Bain Capital, and their interests as equity holders may conflict with yours as a Holder.

We continue to be indirectly owned and controlled by investment funds advised by Bain Capital. The interests of our equity holders may not in all cases be aligned with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders might conflict with those of the Holders. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to Holders. Furthermore, such investment funds or their affiliates may in the future own businesses that directly or indirectly compete with us. They also may pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.

Disruptions or breakdowns in South African infrastructure could disrupt our business.

Our operations rely on the continued ability of South African infrastructure to support our business activities. Disruptions in the provision of basic services such as transport, water and electricity impact our ability to reach our customers and our customers’ ability to shop in our stores. For example, the strikes at rail and other transportation providers in the past have delayed the transportation of our merchandise. The rapid growth of the population and economy of South Africa has placed pressure on the existing infrastructure of the country. For example, over the last few year significant power shortages by Eskom, the state-owned electricity provider

have resulted in rolling load shedding. This results in planned power outages during which time all power to a particular suburb or area is switched off for up to several hours, depending on the level of load shedding required. Stage 1 to 3 load shedding is well understood in the country and information on these outages is made available on short notice based on unplanned or planned maintenance requirements as well as unplanned shortages. These arrangements have been implemented to prevent a total blackout of power for the country. The impact of these arrangements on industry are significant and are expected to continue to have a material impact in the future. The continued short supply of power and any failure on the part of the South African government to invest in adequate infrastructure could adversely affect our retail sales, financial condition and results of operations.

South African currency exchange control restrictions could hinder our ability to procure and/or repay foreign-denominated financings.

The Exchange Control Regulations restrict the exchange of currency between residents of South Africa, the Republic of Namibia and the Kingdoms of Lesotho and Swaziland (the “Common Monetary Area”) on the one hand, and non-residents of the Common Monetary Area, on the other hand. In particular, South African companies are: (i) generally not permitted to export capital from South Africa, or grant security or financial assistance [including guarantees] to non-residents, hold foreign currency in excess of certain limits or incur indebtedness denominated in foreign currencies without the approval of the South African exchange control authorities; (ii) prohibited from using transfer pricing and excessive interest rates on foreign loans as a means of expatriating currency; and (iii) generally not permitted to acquire an interest in a foreign venture without the approval of the South African exchange control authorities and are subject to compliance with the investment criteria of the South African exchange control authorities.

These restrictions could hinder our ability to procure financings provided by non-resident lenders in the future. While the South African government has relaxed exchange controls in recent years, it is difficult to predict what action, if any, the government may take in the future with respect to exchange controls. The government may continue to relax or abolish exchange controls in the future. However, if the government were to tighten exchange controls, these restrictions could further hinder our ability to procure foreign-denominated financings in the future and could adversely impact our liquidity and results of operations.

The high rates of HIV infection in South Africa could cause us to lose skilled employees, incur additional costs or adversely affect economic conditions generally or demand for our products specifically, each of which could cause our retail sales, liquidity and results of operations to decline.

South Africa has one of the highest reported HIV infection rates in the world. The exact impact of increased mortality rates due to AIDS-related deaths on the cost of doing business in South Africa and the potential growth rate of the economy is unclear at this time. We may lose employees with valuable skills due to AIDS-related deaths, and our results of operations and financial condition could be materially adversely affected if we lose such employees. In addition, we may incur education and prevention costs. Our results of operations and liquidity could be materially adversely affected if our employee health-related expenses increase. Moreover, increased mortality rates due to AIDS-related deaths may slow the population growth rate, cause the South African population to decline or significantly increase the overall cost of doing business in South Africa, which may affect economic conditions generally and demand for our products specifically. The effect of HIV infection on both our employees and on the South African market may have a material adverse effect on profitability, financial condition and results of our operations.

Audited Consolidated and Company Annual Financial Statements

Edcon Holdings Limited

For the period ended 26 March 2016

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

Contents

Consolidated and Company Financial Statements Certificate by the Company Secretary 41 Approval of the Consolidated and Company Financial Statements 42 Independent Auditor’s Report 43 Directors’ Report 45 Audit Committee Report 54 Currency of the Consolidated and Company Financial Statements 56

Consolidated Financial Statements of Edcon Holdings Limited Consolidated Statement of Financial Position 57 Consolidated Statement of Comprehensive Income 58 Consolidated Statement of Changes in Equity 59 Consolidated Disclosure of Tax Effects on Other Comprehensive Income 60 Consolidated Statement of Cash Flows 61 Notes to the Consolidated Financial Statements 62

Company Financial Statements 172 Company Statement of Financial Position 173 Company Statement of Comprehensive Income 174 Company Statement of Changes in Equity 175 Company Disclosure of Tax Effects on Other Comprehensive Income 176 Company Statement of Cash Flows 177 Notes to the Company Financial Statements 178 Annexure 1 – Interests in Significant Subsidiaries 206

Corporate Information 207

These annual financial statements were prepared by the finance department of the Edcon Holdings Limited Group acting under the supervision of R Vaughan, who is a qualified Chartered Accountant, registered in South Africa.

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

Certificate by the Company Secretary

In my capacity as Company Secretary, I hereby confirm, in terms of the Companies Act, No. 71 of 2008 (the “Act”) of South Africa, that for the period ended 26 March 2016, the Company has filed with the Commission for Intellectual Property and Companies (CIPC) all such returns and notices as are required of a public company in terms of the Act and that all such returns and notices are true, correct and up to date.

CM Vikisi Group Secretary

Johannesburg 21 December 2016

Approval of the Consolidated and Company Financial Statements of Edcon Holdings Limited

For the period ended 26 March 2016

The directors’ responsibility for the Consolidated and Company Financial Statements is set out on page 53 of the directors’ report.

The Consolidated and Company annual financial statements, which appear on pages 57 to 206, were approved by the board of directors on 21 December 2016 and are signed on its behalf by:

DM Poler, BJ Brookes, Chairman Managing Director and Group Chief Executive Officer

Johannesburg 21 December 2016

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF EDCON HOLDINGS LIMITED

We have audited the consolidated and separate financial statements of Edcon Holdings Limited set out on pages 57 to 206, which comprise the statements of financial position as at 26 March 2016, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the 52 week period then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Financial Statements

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

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated and separate 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 about whether the consolidated and separate financial statements are free from material misstatement.NG

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 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 management, as well as evaluating the overall presentation of the financial statements.

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

INDEPENDENT AUDITORS REPORT (continued)

Opinion

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Edcon Holdings Limited as at 26 March 2016, and its consolidated and separate financial performance and its consolidated and separate cash flows for the 52 week period then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Emphasis of matter

We draw attention to the matter below. Our opinion is not modified in respect of this matter.

Going concern – impact of the restructuring on the Group

Without qualifying our opinion, we draw attention to Note 1.3.1 of the financial statements which stipulates the basis of preparation used in preparing the consolidated financial statements in the current year with the intended change in the shareholding structure of its subsidiaries following the Edcon Limited’s Group debt restructure. This debt restructure will affect the leverage of the Edcon Limited Group. The restructure is subject to certain future events which have been detailed in Notes 1.3.1 and 28. These conditions, along with other matters pertaining to the losses and unsustainable capital structure of the Group, indicate the existence of a material uncertainty which may cast significant doubt on the Edcon Limited Group’s ability to continue as a going concern should events not conclude as described in Note 28. This has a direct bearing on the Edcon Holdings Limited Group. Similarly, we draw attention to Note 1.3.1 which stipulates the basis of preparation used to prepare the consolidated financial statements in the current year following the intended change to shareholding structure of its subsidiaries owing to the restructure disclosed therein.

Other reports required by the Companies Act

As part of our audit of the consolidate and separate financial statements for the 52 week period ended 26 March 2016, we have read the Directors’ Report, the Audit & Risk Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements.

These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements, however, we have not audited these reports and accordingly do not express an opinion on these reports.

Report on Other Legal and Regulatory Requirements

In terms of the Independent Regulatory Board for Auditors (IRBA) Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that Deloitte & Touche has been the auditor of Edcon Holdings Limited for three years.

______Deloitte & Touche Registered Auditor

Per: AJ Dennis Partner 21 December 2016

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT

For the period ended 26 March 2016

The directors submit their report on the state of affairs, the business and profit or loss of Edcon Holdings Limited (the “Company”) and the Edcon Holdings Limited Group (the “Group”) together with the Consolidated and Company financial statements for the 52–week period ended 26 March 2016.

Nature of business

The Company is incorporated and domiciled in the Republic of South Africa. Its principal trading subsidiary Edcon Limited is engaged in the retailing of fashion apparel and related merchandise. The Group operates primarily in southern Africa. The Consolidated Financial Statements of Edcon Holdings Limited are set out on pages 57 to 171 and the Company Financial Statements are set out on pages 172 to 206.

Results of operations

The results for the period are detailed in the Consolidated and Company financial statements that follow.

Group results

Group retail sales during the period decreased by R363 million, or 1.3%, from R27,510 million in the prior financial period to R27,147 million in the current financial period. Gross profit margin decreased from 37.2% in the prior financial period to 36.7% in 2016 primarily due to increased promotional activity compared to the prior financial period as well as increased product costs in the current financial period as a result of the weaker Rand which the Group was unable to pass on in full to customers. Loss or profit before net financing costs decreased by R5,133 million to a loss of R3,492 million from a profit of R1,641 million in the prior financial period, mainly due to a decrease in gross profit compared to the prior period of R271 million, as well as, an impairment of R4,871 million (note 4 and 5) recognised on goodwill which had been allocated to the Edgars and Discount divisions as well as impairments on the indefinite life brands for CNA, Boardmans and Jet and the finite life customer relationship intangible asset for CNA. Net financing costs increased by R827 million due to increased finance costs incurred as a result of the debt refinancing initiatives (note 19) executed in November and December 2015 that are mostly paid-in-kind (“PIK”) where interest is capitalised, fees incurred relating to the refinancing, higher commitment fees incurred under the super senior liquidity facility drawn and refinanced during the financial period and higher interest charges incurred on the revolving credit facility which was fully drawn for the period prior to the refinancing in November and December 2015. The tax charge increased by R92 million from the prior year (note 33) due to R710 million in deferred tax assets not recognised (note 7) offset by lower trading profits in the current financial period accompanied by higher foreign exchange losses on the notes in issue. Net loss for the period reported was R8,035 million compared to a net loss of R1,983 million in the prior period.

Exchange offer

Noteholders who elected Option A securities under the Exchange Offer, exchanged €1,000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional interest) for €1,000 in principal amount of new Option A senior 13.375% PIK notes issued by Edcon Holdings Limited on the settlement date which were deemed to have started accruing interest on 30 June 2015, regardless of the date on which they were issued.

On 27 November 2015, the conversion date, the new Option A senior 13.375% PIK notes were called and each €1,000 in principal amount were exchanged for the following:

- €350 in principal amount of New Super Senior PIK Notes issued by Edcon Limited.

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016

Noteholders who elected Option B under the Exchange Offer Memorandum, exchanged €1,000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional interest) for €1,000 in principal amount of new Option B senior 13.375% PIK notes issued by Edcon Holdings Limited on the settlement date which were deemed to have started accruing interest on 30 June 2015, regardless of the date on which they were issued.

On 27 November 2015, the new Option B senior 13.375% PIK notes were called and each €1,000 in principal amount were exchanged for the following:

- a pro rata portion of the Edcon Holdings Limited warrants exercisable for, and rights to distribution relating to, the Edcon Holdings Limited Warrant Shares offered in the Exchange Offer. - €100 in principal amount of new super senior 8% PIK Notes issued by Edcon Limited and; - €150 in principal amount of new senior secured 9.75%/12.75% PIK-toggle notes issued by Edcon Limited.

Noteholders who validly tendered their Existing 2019 Notes and consent prior to the early consent deadline in the Exchange Offer and who did not validly withdraw such tender and consent prior to the withdrawal deadline received an early consent consideration which was payable on the settlement date of €50 in principal amount of new super senior 8% PIK notes of Edcon Limited per each €1,000 in principal amount of Existing 2019 Notes (with accrued but unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional principal) for which consents were so delivered.

As a result of the Exchange Offer, €200 million Option A 13,375% PIK notes and €241 million Option B 13,375% PIK notes were issued. These notes were called at the conversion date and exchanged as above.

Additionally, Edcon Holdings Limited obtained the consents of holders of more than 90% of the principal outstanding amount of the Notes to effect certain amendments to the Existing 2019 Notes, including an amendment that (i) interest on the Notes will be paid in kind (and no longer in cash) at a rate of 5.0% per annum, starting on 30 June 2015, (ii) the maturity of the Notes not tendered in the Exchange Offer be extended to 30 June 2022 and (iii) the principal amount of Notes not tendered in the Exchange Offer were reduced by 72.5% (together, the “Amendments”). After giving effect to the results of the Exchange Offer and the Amendments, Edcon Holdings Limited had approximately €3 million in aggregate principal amount of Notes outstanding (note 19.13). The Existing 2019 Notes were derecognised in accordance with IAS 39 and the amended notes recognised as the EUR 3 million Senior fixed rate notes (note 19.13).

Edcon Holdings Limited, the Company, recognised a net accounting gain of R6,826 million on derecognition under IAS 39 (note 19 Edcon Holdings Limited company financials) whilst the Group recognised a net accounting gain of R4,141 million (note 34.1).

Warrants issued

Under the Exchange Offer, Noteholders who elected Option B received a pro rata portion of the Edcon Holdings Limited warrants exercisable for, and rights to distribution relating to, the Edcon Holdings Limited Warrant Shares offered in the Exchange Offer.

All warrants shall be deemed to have been exercised immediately before, and conditional on, the occurrence upon the completion (but not signing) of a Sale of the Company or a Public Offering (each, an “Exit Event”) unless a Warrantholder elects to not exercise its warrants.

The warrants shall exercise as follows:

- each F1 Warrant shall exercise into one F1 Preference Share; - each F2 Warrant shall exercise into one F2 Preference Share; and - each F Warrant shall exercise into one F Ordinary Share.

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016

Refer to note 14 for details of warrants in issue as at 26 March 2016.

Non-current interest-bearing debt

During November and December 2015, the Group refinanced its debt. A Super senior refinancing facility of EUR123 million (R1,868 million) due 31 December 2017 (note 19.2) was secured and utilised to repay the ZAR1,010 million super senior floating rate notes due 4 April 2016 (note 19.5) and the Super senior liquidity facility which was drawn down during the current financial period. The Revolving Credit Facility (note 21) was converted to a Super senior RCF term loan of R3,417 million (note 19.1), due 31 December 2017 and certain deferred option premiums (note 20) were settled during 2016 and the remainder refinanced as a ZAR Super Senior Hedging debt of R657 million (note 19.3), due 31 December 2017. Under the Exchange Offer, Super Senior PIK notes of €116 million (note 19.6) and €36 million PIK-toggle notes (note 19.11) due 30 June 2019 respectively were issued and the Existing 2019 Notes (note 19.12) not tendered were derecognised under IAS 39 and the amended notes recognised as the EUR 3 million Senior fixed rate notes (note 19.13).

Non-current interest-bearing debt increased by R5,017 million from R21,486 million at 28 March 2015 to R26,503 million at 26 March 2016 mainly due to the significant weakening of the Rand in the current financial period following the Exchange Offer and debt refinancing undertaken during November and December 2015.

Current interest-bearing debt

The current interest-bearing debt decreased by R2,785 million from R2,964 million at 28 March 2015 to R179 million at 26 March 2016 mainly due to the Revolving Credit Facility (note 21) being converted to a Super Senior RCF term loan of R3,417 million (note 19.1), due 31 December 2017.

Derivative financial instruments and deferred option premiums

The decrease to nil of the Group’s net derivative financial instruments at 26 March 2016 compared to a net asset of R713 million at 28 March 2015 was as a result of the debt refinancing initiatives executed in November and December 2015, which resulted in certain derivative instruments being early terminated. Refer to note 6.4.

On the early settlement of these derivative contracts, R444 million relating to the deferred option premiums were settled (note 20) and in December 2015, Edcon Limited concluded an agreement with certain of its deferred option premium holders whereby deferred option premiums valued at R657 million which were due to be settled in December 2015 and March 2016 were refinanced through a super senior hedging debt (note 19.3).

R50 million of the deferred option premium was settled in July 2015 in accordance with the agreement.

Business combination

On 30 June 2015, Celrose Proprietary Limited, a subsidiary of the Group, acquired a 100% interest in Eddels Shoes Proprietary Limited (note 34.7.1), a company with the principle activity of manufacturing ladies, men’s and children’s shoes.

Dividends

No dividends were paid by the Company for the period ended 26 March 2016 (2015 and 2014: RNil).

Property, fixtures, equipment and vehicles

There were no major changes in the nature of the Group’s property, fixtures, equipment and vehicles during the period. During the financial period, the Group acquired fixtures, equipment and vehicles to the value of R552 million (2015 and 2014:

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016

R1 037 million and R1 349 million, respectively). Details are provided in note 3 of the financial statements.

Shareholding

Edcon Holdings Limited’s shareholders are Edcon (BC) S.A.R.L, The Edcon Staff Empowerment Trust (the “Empowerment Trust”) and ten further trusts. Edcon (BC) S.A.R.L is a société à responsabilité limitée incorporated in Luxembourg and holds 81% of the ordinary shares of Edcon Holdings Limited. The Empowerment Trust was created in July 2005 as part of our Black Empowerment Equity (BEE) program and its beneficiaries are predominantly black employees. The Staff Empowerment Trust holds shares entitling it in aggregate to 11% of the votes at any general meeting of Edcon Holdings Limited.

The remaining shareholders in Edcon Holdings Limited are the Founder Investor Trusts, Independent Investor Trusts, Secondary Investor Trusts and Tertiary Investor Trusts. These trusts, the beneficiaries of which include members of Edcon management and directors of Edcon who are considered to be related parties, collectively hold 8% of the shares of Edcon Holdings Limited.

Refer to note 38 for disclosure around transactions with related parties.

Subsidiaries

The Company has a 100% shareholding in Edcon Acquisition Proprietary Limited, and indirectly owns 100% of the issued capital of Edcon Limited. A list of significant subsidiaries is reflected in Annexure 1 on page 206.

Share capital

Details of the authorised and issued share capital of the Company and any movements during the period are disclosed in note 8 of the Company Financial Statements.

Special resolutions

During the financial period the Company issued the following special resolutions:  The existing Memorandum of Incorporation of the Company is deleted in its entirety and replaced with the new Memorandum of Incorporation of the Company (“New MOI”) in terms of section 16(5)(a) of the Companies Act, with effect from the date of the filing of the required Notice of Amendment and New MOI with the Companies and Intellectual Property Commission;  In terms of section 36(2)(a) read with section 16(1)(c) of the Companies Act, the Company’s existing authorised share capital is increased by the creation of the following number and classes of shares: o the creation of 1 000 000 000 (one billion) “F” Ordinary shares, having the preferences, rights, limitations and other terms set out in Schedule 1 to the MOI; o the creation of 1 000 000 000 (one billion) “F1” Preference shares, having the preferences, rights, limitations and other terms set out in Schedule 1 to the MOI; o the creation of 1 000 000 000 (one billion) “F2” Preference shares, having the preferences, rights, limitations and other terms set out in Schedule 1 to the MOI;  The directors of the company are hereby authorised to allot and issue the Warrants and the F Ordinary Shares, F1 Preference Shares and F2 Preference Shares in accordance with the provisions of the Warrant Agreement;  In the event that the holders of Warrants become entitled to subscribe for shares (other than F Ordinary Shares, F1 Preference Shares and F2 Preference Shares) pursuant to the exercise of their pre-emptive rights under the Warrant Agreement, the directors of the Company are hereby authorised, subject to compliance with the Companies Act and the procedure set out in the Warrant Agreement, to allot and issue such number and class of shares to such holders of Warrants determined in accordance with the provisions of the Warrant Agreement.

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016

Non-executive directors

DM Poler* (Chairman) (appointed on 25 May 2007) EB Berk* (appointed on 25 May 2007, resigned 15 December 2016) ZB Ebrahim (appointed on 23 July 2007) MS Levin* (resigned on 31 March 2015) RB Daniels* (appointed on 7 June 2014) DH Brown (resigned on 31 December 2015) TF Mosololi (appointed on 1 January 2013, resigned 15 December 2016) LL von Zeuner (resigned on 10 December 2015) M Osthoff*** (appointed on 1 April 2015, resigned 15 December 2016) J Schreiber*** (appointed as Non-executive director on 18 August 2015; resigned on 31 March 2016) KDM Warburton (appointed on 1 February 2016) A Alvarez III* (appointed on 21 April 2016) D Frauman* (appointed 31 May 2016)

Executive directors BJ Brookes**** (appointed on 30 September 2015) RB Daniels* (appointed on 18 August 2015; resigned as Executive director on 30 September 2015) J Schreiber*** (resigned as Executive director on 18 August 2015) Dr U Ferndale (appointed on 30 May 2007, resigned 15 December 2016) T Clerckx** (appointed on 17 February 2014; resigned 22 July 2016) R Vaughan (appointed 27 July 2016)

*USA **Belgium ***Germany ****Australian

Prescribed officers

G Napier – Chief Executive CNA Division (appointed on 17 February 2014) B Gebauer – Chief Executive Edgars Division (resigned on 2 March 2016) A Williams - Chief Executive Discount Division (appointed on 16 November 2015)

The directors’ and prescribed officers’ emoluments are included in the Consolidated Financial Statements in note 31.2.1 on page 130.

Directors’ remuneration

Details of remuneration relating to the executive directors of the Company can be found in note 31.2.1 of the Group financial statements.

Auditors

Deloitte & Touche.

Secretary

The Group Secretary is CM Vikisi.

Registered Office

Edgardale, 1 Press Avenue Crown Mines, Johannesburg 2092

Postal Address PO Box 100 Crown Mines 2025

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016

Events after the reporting period in terms of the Consolidated Financial Statements

In terms of the Consolidated Financial Statements, the following events have occurred after the reporting period:

Deferral of interest payments on senior secured fixed rate notes During March 2016, Edcon Limited approached the Noteholders of the USD 250 million, EUR 317 million and EUR 300 million senior secured fixed rate notes due 2018 with the proposal to defer certain cash interest payments until mid- December 2016. The offer was accepted within the required grace period by the requisite majority of the Noteholders and concluded on 14 April 2016.

We have fully implemented the previously announced change in our reporting structures which show the re-alignment of our operational divisions to accomplish the objectives laid out in our new strategic plan. In line with our new strategic plan, the Edgars division now comprises Edgars, the Discount division comprises Jet and Jet Mart and the Specialty division comprises CNA, Red Square, Boardmans, Edgars Active, Edgars Shoe Gallery, Legit and our Mono-branded stores.

The closing of the Legit Sale has received Competition Commission approval and requires the satisfaction of certain other customary closing conditions. The sale is expected to be concluded by 28 February 2017.

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016

The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility, LC Facility and the Super Senior Liquidity Facility will rank pari passu amongst each other, and will be secured on a super senior basis by substantially all of the assets of Edcon Limited and its subsidiaries, together with some of the assets of the Parent and will contain LMA-style customary affirmative and negative covenants, which will be adjusted to give Edcon Limited flexibility to operate its day-to- day business activities and will permit Edcon Limited to make certain administrative parent company payments. The covenants will be set at a level reflecting the leverage and liquidity position of the operating companies of the Edcon Limited Group. The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility will mature on the earliest to occur of (i) 31 December 2019, (ii) the earliest maturity date of the Super Senior Liquidity Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Limited Group which benefits from security granted by the Edcon Limited Group’s operating companies, and may be extended upon payment of a fee. The Super Senior Liquidity Facility will mature on the earliest of (i) 31 December 2017, (ii) the earliest maturity date of the New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Group which benefits from security

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016 granted by the Edcon Group’s operating companies, and may be extended to 31 December 2018 upon meeting certain financial ratios.

The New Revolving Credit Facility, Converted Revolving Facility and Term Loan Facility will bear interest of JIBAR + 5% cash and 3% PIK per annum. The LC Facility will bear interest of JIBAR + 5% cash and 3% PIK per annum. The Super Senior Liquidity Facility will bear interest of EURIBOR (zero floor) + 4% cash (increasing to 9% on and from the maturity extension) and 8% PIK per annum.

The Restructuring has been approved by the Competition Commission without conditions and the transaction was referred to the Tribunal and approved on 23 November 2016 and now requires Court Sanction. At least 80% of the creditors agreed to the LUA, management believes there is a high probability that the Court will sanction the transaction with creditors.

Events after the reporting period in terms of the Company Financial Statements

Other than Edcon Holdings Limited being a party to the LUA as described under the Events after the reporting period in terms of the Consolidated Financial Statements, there has been no other events that have occurred between the financial period end and the date of this report which would have a material impact on the Company’s Financial Statements (note 28 of the Company Financial Statements.

Going concern principles

The Consolidated Statement of Financial Position at 26 March 2016 reports share premium of R2 155 million (2015: R2 155 million) and warrants issued of R135 million (2015: Rnil million) in equity attributable to shareholders and a shareholder’s loan derecognised to equity of R8 311 million (2015: R8 311 million) offset by an accumulated retained loss of R24,359 million (2015: R16,318 million) and a net credit of R66 million (2015: net debit of R48 million) in other reserves, resulting in negative equity at 26 March 2016 of R13,692 million (2015: R5,900 million). After considering non-controlling interests of R254 million (2015: R146 million), total equity of the Group is a deficit of R13,438 million (2015: R5 754 million). The shareholder’s loan of R9 293 million (2015: R9 152 million) has been subordinated to the claims of all the creditors of the Group and the total negative equity and shareholder’s loan is R12,456 million (2015: R4 913 million).

The Company’s Statement of Financial Position at 26 March 2016 reports share premium of R2,975 million (2015: R2,975 million) and warrants issued of R135 million (2015: Rnil million) in equity attributable to shareholders and a shareholder’s loan derecognised to equity of R8 311 million (2015: R8 311 million) offset by an accumulated retained loss of R12,495 million (2015: accumulated gain of R2,821 million), resulting in negative equity at 26 March 2016 of R1,074 million (2015:

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

DIRECTORS’ REPORT (continued)

For the period ended 26 March 2016 positive equity of R14,050 million). The shareholder’s loan of R9 293 million (2015: R9 152 million) has been subordinated to the claims of all the creditors of the Group and the total negative equity and shareholder’s loan is R92 million (2015: positive R14,891 million).

Notwithstanding the fact that the Group’s and Company’s liabilities exceed its assets in accordance with International Financial Reporting Standards (“IFRS”), the Consolidated Financial Statements set out on pages 57 to 171 have been prepared using the recognition and measurement criteria of IFRS which is consistent with those applied in the past (note 1.3.1) and the Company Financial Statements set out on pages 172 to 206 have been prepared on the going concern basis (note 1.3.2).

The directors have considered the solvency and liquidity of the business and in doing so, have focused on the fair value of the assets and liabilities of the business (“solvency”) and the ability of the business to meet its financial obligations for the 12 months following approval of the Consolidated Financial Statements (“liquidity”). The analysis considered the Restructuring and the related step plan contemplated under the Restructuring (note 40 of the Consolidated Financial Statements and note 28 of the Company Financial Statements), the deferral of interest payments on the senior secured fixed rate notes (note 40 of the Consolidated Financial Statements), the R1,500 million bridge funding made available (note 40 of the Consolidated Financial Statements), planned future sales growth, margin growth, expected operating costs, the tax settlement of the Group, the terms of the shareholder’s loan, all guarantors and cross guarantors, the fair values of the assets and liabilities and all maturities relating to liabilities for the following 12 months.

The directors believe that while the Group in its current form (note 1.3.1) will not continue in the foreseeable future as a result of the Restructuring, the companies which individually constitute the current Group, as well as the Company, will have adequate resources to continue in operation and are considered both solvent and liquid from a going concern perspective.

Directors’ responsibility for financial reporting

The directors’ are ultimately responsible for the preparation of the Consolidated and Company financial statements and related financial information that fairly present the state of affairs and the results of Edcon Holdings Limited. The external auditors are responsible for independently auditing and reporting on these financial statements in conformity with International Standards on Auditing.

The financial statements set out in this report have been prepared by management in accordance with International Financial Reporting Standards and the South African Companies Act, No 71, of 2008. They incorporate full and reasonable disclosures and are based on appropriate accounting policies, which have been consistently applied and which are supported by reasonable and prudent judgments and estimates.

Adequate accounting records have been maintained throughout the period under review.

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

AUDIT COMMITTEE REPORT

For the period ended 26 March 2016

This report is provided by the Audit and Risk Committee (the “Committee”), in respect of the 2016 financial period of Edcon Holdings Limited, in compliance with section 94 of the Companies Act 71 of 2008 (the “Act”), as amended from time to time. The Committee’s operation is guided by a detailed charter that is informed by the Act and the King Code of Good Corporate Governance. In this regard, the board of directors (the “board”) continues to undertake the Institute of Directors endorsed Governance Assessment Instrument to assess the extent to which the Group applies best practice recommendations contained in the King Code of Good Corporate Governance.

Charter

The Committee is appointed by the board and the shareholders annually and has adopted a comprehensive and formal Charter which has been approved by the board and reviewed on an annual basis.

Execution of functions

The Committee has executed its duties and responsibilities during the financial period in accordance with its terms of reference as they relate to the Group's accounting, internal auditing, internal controls and financial reporting practices.

During the period under review the Committee, amongst other matters, considered the following:

 In respect of the external auditors and the external audit: — approved the external auditors’ terms of engagement, the audit plan and budgeted audit fees payable; — reviewed the audit process and audit reports and evaluated the effectiveness of the audit; and — obtained assurance from the external auditors that their independence was not impaired.

 In respect of the financial statements: — confirmed the going concern concept as the basis of preparation of the quarterly and annual financial statements; — examined and reviewed the quarterly and annual financial statements prior to submission and approval by the board; — reviewed any significant legal and tax matters that could have a material impact on the financial statements; — reviewed and discussed the external auditors' audit report; and — ensured that the financial statements fairly present the financial position of the Company and of the Group as at the reporting dates and the results of operations and cash flows for the reporting period and based on the above, the Committee was satisfied that at the date of this report, the financial statements complied with accounting practices of the Group.

 In respect of internal financial controls and internal audit: — reviewed and approved the internal audit charter and audit plan and evaluated the independence, effectiveness and performance of the internal audit department; — considered reports of the internal auditors on the Group's systems of internal control, including internal financial controls and maintenance of effective internal control systems; — assessed the adequacy of the performance of the internal audit function and adequacy of the available internal audit resources and found them to be satisfactory; — reviewed significant issues raised by the internal audit processes and the adequacy of corrective action in response to such findings; and — noted that there were no significant differences of opinion between the internal audit function and management; and based on the above, the Committee was satisfied that at the date of this report there were no material breakdowns in internal control, including internal financial controls, resulting in any material loss to the Group.

 In respect of legal, regulatory and compliance requirements: — reviewed with management matters that could have a material impact on the Group; — monitored compliance with the Act, JSE debt listing requirements, Irish Stock Exchange requirements and all other applicable legislation and governance codes as well as financial covenants; and

Consolidated and Company Financial Statements of Edcon Holdings Limited (Registration number 2006/036903/06)

AUDIT COMMITTEE REPORT (continued)

For the period ended 26 March 2016

— noted that no complaints were received through the Group's ethics and fraud hotline concerning accounting matters, internal audit, internal financial controls, contents of financial statements, potential violations of the law and questionable accounting or auditing matters.

 In respect of risk management and information technology — considered and reviewed reports from management on risk management, including fraud risks and information technology risks as they pertain to financial reporting, internal controls and the going concern assessment.

Going concern and basis of accounting Going concern The Committee considered the going concern status of the Company, on the basis of a review of the financial statements and the budgeted and forecast earnings and cash flow information as well as liquidity forecasts available to the Committee and recommended such going concern status for adoption by the board for the company. The board statement on the going concern status of the Company is contained on pages 52 and 53 in the directors’ report.

Basis of accounting The Committee considered the basis of accounting for the Group using the recognition and measurement criteria of International Financial Reporting Standards applied on a consistent basis and on the basis of a review of the financial statements recommended such basis of accounting for adoption by the board for the Group. The board statement on the basis of accounting is contained on pages 52 and 53 in the directors’ report.

Independence of the external auditors

The Committee is satisfied that Deloitte & Touche are independent of the Group. This conclusion was arrived at, inter alia, after taking into account the following factors:

. the representations made by Deloitte & Touche to the Committee; . the auditors do not, except as external auditors or in rendering permitted non-audit services, receive any remuneration or other benefits from the Group; . the auditors' independence was not impaired by any consultancy, advisory or other work undertaken by the auditors; . the auditors' independence was not prejudiced as a result of any previous appointment as auditor; and . the criteria specified for independence by the Independent Regulatory Board for Auditors and international regulatory bodies were met.

The Committee has reviewed the Consolidated and Company Financial Statements of Edcon Holdings Limited and recommended them to the board for approval.

On behalf of the Committee

Keith DM Warburton Chairman of the Audit & Risk Committee 21 December 2016

Currency of the Consolidated and Company Financial Statements of Edcon Holdings Limited

The presentation currency of the financial statements is South African Rand (R). The approximate Rand cost of a unit of the following currencies at each reporting period end was:

26 March 28 March 29 March 2016 2015 2014 US Dollar 15,46 12,04 10,56 Sterling 21,73 17,81 17,66 Botswana Pula 1,38 1,21 1,20 Euro 17,26 13,12 14,54 Zambian Kwacha – ZMW 1,36 1,57 1,65 Mozambique Metical 0,30 0,34 0,34 Singapore Dollar 11,26 8,76 8,41 Bangladeshi Taka 0,20 0,15 0,14 Chinese Yuan Renminbi 2,37 1,93 1,71 Hong Kong Dollar 1,99 1,55 1,37 Ghanaian Cedi 3,96 3,15

Consolidated Statement of Financial Position of Edcon Holdings Limited Reclassified1 Reclassified1 2016 2015 2014 26 March 28 March 29 March Note Rm Rm Rm ASSETS Non-current assets Properties, fixtures, equipment and vehicles 3 3 147 3 337 3 157 Intangible assets 4 11 054 16 146 16 388 Derivative financial instruments 6.1 724 Investment in associates 6 Deferred taxation 7 127 330 387 Employee benefit asset 31.3 96 110 178 Total non-current assets 14 430 19 923 20 834

Current assets Inventories 8 4 717 4 392 4 454 Trade receivables 9 966 473 323 Sundry receivables and prepayments 10 912 805 756 Derivative financial instruments 6.2 816 1 297 Cash and cash equivalents 11 1 693 1 288 410 8 288 7 774 7 240 Assets classified as held-for-sale 12.1.2 393 651 Total current assets 8 288 8 167 7 891 Total assets 22 718 28 090 28 725

EQUITY AND LIABILITIES Equity attributable to shareholders Share capital 13 - - - Share premium 13 2 155 2 155 2 155 Warrants issued 14 135 Other reserves 15 66 (48) 117 Retained loss 16 (24 359) (16 318) (14 314) Shareholder’s loan derecognised to equity 18 8 311 8 311 8 290 (13 692) (5 900) (3 752) Non-controlling interest 254 146 93 Total equity (13 438) (5 754) (3 659)

Non-current liabilities – shareholder’s loan Shareholder’s loan 18 982 841 797 Total equity and shareholder’s loan (12 456) (4 913) (2 862)

Non-current liabilities – third parties Interest-bearing debt 19 26 503 21 486 22 373 Deferred option premium 20 811 Finance lease liability 22.2 305 331 262 Lease equalisation 648 578 402 Onerous lease liability 22.3 145 129 Employee benefit liability 31.5 125 155 176 Option liability 23 73 67 Deferred taxation 7 108 90 74 Deferred revenue 25 51 52 64 27 885 22 894 24 229 Total non-current liabilities 28 867 23 735 25 026 Current liabilities Interest-bearing debt 21 179 2 964 1 270 Deferred option premium 20 1 076 291 Finance lease liability 22.2 35 33 11 Current taxation 68 19 37 Deferred revenue 25 103 77 114 Option liability 23 50 Derivative financial instruments 6.3 103 24 Trade and other payables 24 6 854 5 837 5 611 Total current liabilities 7 289 10 109 7 358 Total equity and liabilities 22 718 28 090 28 725 Total managed capital per IAS 1 14 566 19 901 21 054

1.Consumables have been reclassified from sundry receivables and prepayments to inventories. Comparatives have been reclassified to present information on a comparable basis. 57

Consolidated Statement of Comprehensive Income of Edcon Holdings Limited Re-presented1 Re-presented1 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Note Rm Rm Rm

Total revenues 27 29 352 29 546 28 942 Revenue - retail sales 27 147 27 510 26 974 Cost of sales (17 173) (17 265) (17 132) Gross profit 9 974 10 245 9 842 Other income 28 1 416 1 256 1 189 Store costs (6 463) (6 277) (5 700) Other operating costs (4 665) (4 666) (4 857) Share of profits of associates and insurance business 725 747 739 Trading profit 29 987 1 305 1 213 Derivative gain/(loss) 6.5 743 (601) 603 Foreign exchange (loss)/gain 30 (4 515) 998 (2 458) Net gain/(loss) on Exchange Offer 34.1 4 141 (55) Fair value adjustment for put option 23 23 (6) (42) Impairment of brands and goodwill 4 (4 871) (33) (Loss)/profit before net financing costs (3 492) 1 641 (717) Finance income 32.1 64 33 40 (Loss)/profit before financing costs (3 428) 1 674 (677) Financing costs 32.2 (4 272) (3 414) (2 668) Loss before taxation (7 700) (1 740) (3 345) Taxation 33 (335) (243) 834 LOSS FOR THE PERIOD (8 035) (1 983) (2 511)

Other comprehensive income after tax: Items that may be reclassified subsequently to profit or loss: Gain/(loss) on cash flow hedges 76 (175) 136 Exchange difference on translating foreign operations 117 31 41 193 (144) 177

Items that will not be reclassified to profit or loss: Actuarial gains on employee benefits 23 11 86 23 11 86

Other comprehensive income/(loss) for the period after tax 216 (133) 263 TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (7 819) (2 116) (2 248)

(Loss)/income attributable to: Owners of the parent (8 064) (2 015) (2 536) Non-controlling interest 29 32 25

Total comprehensive (loss)/income attributable to: Owner of the parent (7 927) (2 169) (2 273) Non-controlling interest 108 53 25

1.Re-presented as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale. The results of operations for this component previously presented in discontinued operations in the consolidated statement of comprehensive income has been re-presented and included in income from continuing operations for all periods presented (refer to note 12).

Consolidated Statement of Changes in Equity of Edcon Holdings Limited

Total Share- attribu- Foreign Cash holder’s table currency flow Revalua- loan – to owners Non-control- Share Share Warrants translation hedging tion Retained derecognised of the ling capital premium issued reserve reserve surplus loss to equity parent interest Total equity Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Balance as at 30 March 2013 - 2 153 (31) (37) 8 (11 864) 8 290 (1 481) 68 (1 413) Loss for the period (2 536) (2 536) 25 (2 511) Other comprehensive income for the period 41 136 86 263 263

Total comprehensive (loss)/income 41 136 (2 450) (2 273) 25 (2 248) Ordinary shares issued - 2 2 2

Balance as at 29 March 2014 - 2 155 10 99 8 (14 314) 8 290 (3 752) 93 (3 659) Loss for the period (2 015) (2 015) 32 (1 983) Other comprehensive income for the period 10 (175) 11 (154) 21 (133)

Total comprehensive (loss)/income 10 (175) (2 004) (2 169) 53 (2 116) Reclassification from shareholder’s loan in non-current liabilities 21 21 21

Balance as at 28 March 2015 - 2 155 20 (76) 8 (16 318) 8 311 (5 900) 146 (5 754) Loss for the period (8 064) (8 064) 29 (8 035) Other comprehensive income for the period 38 76 23 137 79 216

Total comprehensive (loss)/income 38 76 (8 041) (7 927) 108 (7 819) Shares issued - - Warrants issued 135 135 135 Balance as at 26 March 2016 - 2 155 135 58 8 (24 359) 8 311 (13 692) 254 (13 438) Note 13.8 13.8 14.2 15 15 15 16 18

Consolidated Disclosure of Tax Effects on Other Comprehensive Income of Edcon Holdings Limited 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

Disclosure of tax effects relating to each component of other comprehensive income/(loss):

Before tax amount Cash flow hedges 101 (223) 172 Exchange differences on translating foreign operations 117 31 41 Actuarial gain on employee benefits 32 15 119 Other comprehensive income/(loss) for the period before tax 250 (177) 332

Tax (expense)/income Cash flow hedges (25) 48 (36) Employee benefits (9) (4) (33) Tax (expense)/income (note 33.2) (34) 44 (69)

After tax amount Cash flow hedges 76 (175) 136 Exchange differences on translating foreign operations 117 31 41 Actuarial gain on employee benefits 23 11 86 Other comprehensive income/(loss) for the period after tax 216 (133) 263

Consolidated Statement of Cash Flows of Edcon Holdings Limited Re-presented1 Re-presented1 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Note Rm Rm Rm Cash retained from operating activities Loss before taxation (7 700) (1 740) (3 345) Finance income (64) (33) (40) Financing costs 4 272 3 414 2 668 Impairment of brands and goodwill 4 4 871 33 Derivative (gain)/loss 6.5 (743) 601 (603) Deferred revenue – loyalty programme 25.1 29 (71) (14) Foreign exchange loss/(gain) 30 4 555 (1 028) 2 458 Fair value adjustment on put option 23 (23) 6 42 Amortisation of intangible assets 29.1 241 247 345 Depreciation 29.2 763 832 792 Net loss on disposal of properties, fixtures, equipment and vehicles 29.5 19 37 11 Onerous leases 22.3 123 137 Net gain on Exchange Offer 34.1 (4 691) Other non-cash items 34.2 64 100 193 Operating cash inflow before changes in working capital 1 716 2 502 2 540 Working capital movement 34.3 (292) 573 (114) Cash inflow from operating activities 1 424 3 075 2 426 Finance income received 50 9 22 Financing costs paid (1 833) (3 112) (2 057) Taxation paid 34.4 (88) (137) (115) Net cash (outflow)/inflow from operating activities (447) (165) 276

Cash utilised in investing activities Investment to maintain operations 34.5 (328) (454) (882) Investment to expand operations 34.6 (262) (398) (388) Investment in other intangible assets 4 (1) (36) Investment in associates (7) Business combination 34.7 (7) (2) (25) Net cash outflow from investing activities (604) (855) (1 331)

Cash effects of financing activities Non-current interest-bearing debt increase/(decrease) 34.8 4 307 32 (294) Settlement of derivatives 34.9 1 532 826 1 658 Current interest-bearing debt (decrease)/increase 34.10 (3 823) 1 679 (260) Settlement of option premium 34.11 (494) (599) (312) Capitalised finance lease decrease 34.12 (69) (40) (40) Net cash inflow from financing activities 1 453 1 898 752

Increase/(decrease) in cash and cash equivalents 34.13 402 878 (303)

Cash and cash equivalents at the beginning of the period 1 288 410 710 Currency adjustments 3 3 Cash and cash equivalents at the end of the period 1 693 1 288 410

Notes to the Consolidated Financial Statements of Edcon Holdings Limited

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION

1.1 Corporate information

Edcon Holdings Limited (the “Company”) is a limited liability company which is incorporated and domiciled in South Africa. The address of the Company’s registered office is Edgardale, Press Avenue, Crown Mines, Johannesburg, 2092. The consolidated financial statements of the Company for the year ended 26 March 2016 comprise the Company and its subsidiaries (together referred to as the “Group”).

1.2 Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) and the Companies Act of South Africa (No. 71 of 2008). The financial statements are presented in Rand (ZAR), the currency of South Africa where Edcon Holdings Limited is incorporated.

On 21 December 2016, the financial statements were authorised for issue by the Board of Directors.

The financial statements have been prepared on a historical cost basis except for land and buildings and certain financial instruments that have been measured at fair value.

In the current period, the Group ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale as no buyer could be found at an acceptable price. The Group has concluded that the carrying amount of this store card portfolio is no longer deemed to be recovered through a highly probable sale transaction. Accordingly, the results of operations previously presented in discontinued operations in the consolidated statement of comprehensive income has been re-presented and included in income from continuing operations for all periods presented. The held-for-sale disclosure in the statement of financial position has ceased in the current period with the prior periods not restated in line with the requirements of IFRS 5, Non Current Assets Held for Sale and Discontinued Operations.

The 2016, 2015 and 2014 financial periods consisted of 52 weeks respectively.

The Consolidated and Company Financial Statements incorporate the following accounting policies which remain consistent with the prior period.

Fair value measurements and valuation processes The Group measures certain financial instruments (note 37.8) and non-financial assets (land and buildings), at fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 in the principal market for the asset or liability, or  in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.2 Basis of preparation (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.  Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.  Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level of input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

The Group’s treasury department is responsible for the fair value measurements of financial instruments, required for financial reporting purposes, including level 3 fair values, where applicable. This department reports directly to the chief financial officer (CFO) and the Audit and Risk Committee. Discussions of valuation processes and the results thereof are discussed at least once every quarter, in line with the Group’s quarterly reporting dates.

The Group regularly engages external, independent and qualified valuers to determine the fair value of the Group’s land and buildings. The Group’s property management team decides upon the involvement of external valuers annually. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The property management team decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in notes 3 and 37.8.

1.3 Basis of accounting

1.3.1 Consolidated Financial Statements of Edcon Holdings Limited

The Group recognised a loss after tax of R8 035 million for the period ended 26 March 2016 (2015: R1 983 million and 2014: R2 511 million) and as at that date, total liabilities exceeded its total assets by R13 438 million (2015: R5 754 million and 2014: R3 659 million). These conditions, along with other matters as set forth in this note, indicate the existence of material uncertainty which may cast doubt on the Group’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The Group in its current form with Edcon Holdings Limited as the parent company thereof, is not expected to continue into the foreseeable future as a result of a lock-up agreement (the “LUA”) and Restructuring which has been agreed will be pursued and implemented after the reporting period with certain of the Group’s creditors (note 40). However to give effect to the basis of consolidation required under IFRS 10, Consolidated Financial Statements as at 26 March 2016, (note 1.4 Basis of consolidation) and to provide a consolidated view of the current Group on an appropriate accounting basis for Edcon Holdings Limited, presented as a single economic entity and whose own financial statements have been prepared on the going concern basis of accounting, the Consolidated Financial Statements have been prepared using the recognition and measurement criteria of IFRS which is consistent with those applied in the past.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.3 Basis of accounting (continued)

1.3.1 Consolidated Financial Statements of Edcon Holdings Limited (continued)

In assessing the use of the recognition and measurement criteria of IFRS as the accounting basis for the Consolidated Financial Statements, management has considered the following:

(i) On 8 July 2016, the Group secured a combined R1.5 billion in bridge financing denominated in US dollars and Euros, which was made available by a group of Noteholders and bank lenders in two tranches upon the satisfaction of certain conditions precedent. On 12 July 2016, the Group received the first tranche being a net amount of R651 million. On 24 October 2016 and 25 October 2016 the Group received a net amount of R574 Million and R103 million respectively being the second tranche under the bridge financing (note 40).

(ii) On 20 September, 2016, certain entities in the Edcon Group including Edcon Holdings Limited which has reported non-current interest-bearing debt of R51 million (note 12 of the Company Annual Financial Statements) and Edcon Limited which represents a significant majority of the Group’s total assets, revenues and is the borrower of R26,300 million of the Group’s non-current interest-bearing liabilities (note 19 of the Consolidated Financial Statements of Edcon Holding Limited) and certain of the Group’s creditors, accounting for at least 80% of the outstanding principal amount of the secured debt of the Group, provided signatures in respect of the LUA, pursuant to which the parties to the LUA agreed to the key terms of a comprehensive restructuring of the Edcon Group’s entire capital structure (the “Restructuring”). Such Restructuring involves amongst others, a transfer of control over the Group’s operating companies from Edcon (BC) S.A.R.L (being ultimately controlled by Bain Capital) to certain of the Group’s existing creditors (the “Control Transfer”), a significant decrease in the outstanding amount of third-party debt of Edcon Limited (a significant indirect subsidiary within the Group), the refinancing of a large portion of the existing third party debt of Edcon Limited in newly established Group companies, and the renegotiation the terms of third party debt which remain in Edcon Limited. On 13 October 2016, the various conditions precedent to the occurrence of the effective date of the LUA have been satisfied, such that, the LUA became binding on all parties thereto. The LUA contemplates that the Restructuring will be implemented between the Edcon Holdings Limited Group and certain of its creditors (consensually or, where necessary, pursuant to South African Compromise Proceedings under Section 155 of the South African Companies Act of 2008) and the control transfer will be effected under an enforcement of a share pledge over the issued shares held by Edcon Holdings Limited in Edcon Acquisition Proprietary Limited and the transfer of the entire outstanding shares of Edcon Acquisition Proprietary Limited to a newly established holding company (“Parent”) which will be a wholly owned subsidiary of two other newly established holding companies (“Holdco 1” and “Holdco 2”), each of which will be incorporated and tax resident in South Africa. The majority of the shares in Holdco 2 will be owned by the holders of the existing 2018 Senior Secured Notes and 2019 Senior Secured PIK Toggle Notes and lenders under the existing ZAR Senior Secured Term Loan (or their respective nominees). Under the Restructuring, certain of the lenders under the existing ZAR Super Senior RCF Term Loan and LC Facility (note 19.1), will provide a ZAR-denominated R575 million New Revolving Credit Facility. The Restructuring will also amend and restate the Group’s existing ZAR Super Senior RCF Term Loan and LC Facility (note 19.1), into a new ZAR-denominated R3,597 million senior secured Converted Revolving Facility (R1,250 million), Term Loan Facility and LC Facility. The Group’s existing Super Senior Liquidity Facility will be amended and restated and comprises the existing EUR Super Senior refinancing facility (note 19.2), available to Edcon Limited, a Group company (in an original principal amount of €123 million plus accrued and unpaid interest to date). The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility, LC Facility and the Super Senior Liquidity Facility will rank pari passu amongst each other, and will be secured on a super senior basis by substantially all of the assets of Edcon Limited and its subsidiaries, together with some of the assets of the Parent and will contain LMA-style customary affirmative and negative covenants, which will be adjusted to give Edcon Limited flexibility to operate its day-to-day business activities and permits Edcon Limited to make certain administrative parent company payments. The covenants will be set at a level reflecting the leverage and liquidity position of the operating companies of the Edcon Limited Group. The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility will mature on the earliest to occur of (i) 31 December 2019, (ii) the earliest maturity date of the Super Senior Liquidity Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Limited Group which benefits from security granted by the Edcon Limited Group’s operating companies, and may be extended upon payment of a fee.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.3 Basis of accounting (continued)

1.3.1 Consolidated Financial Statements of Edcon Holdings Limited (continued)

The Super Senior Liquidity Facility will mature on the earliest of (i) 31 December 2017, (ii) the earliest maturity date of the New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Group which benefits from security granted by the Edcon Group’s operating companies, and may be extended to 31 December 2018 upon meeting certain financial ratios.

(iii) Future sales growth, margin growth, expected operating costs, the tax settlement of the Group, the terms of the shareholder’s loan (note 19) and all guarantors and cross guarantors.

(iv) The fair values of the Group’s assets and liabilities and all maturities relating to liabilities for the following 12 months in assessing its ability to trade against its operating budget.

(v) The basis of accounting applied to the parent company Edcon Holdings Limited, its subsidiaries, Staff Empowerment Trust and Edgars Stores Limited Zimbabwe individually.

In addition to the implementation of the Restructuring and the measures listed in sub-clauses (i) through (v) above, management additionally monitors the Group’s cash requirements on an ongoing basis for uncertainties which may arise and takes appropriate action where necessary. For example, such uncertainties include, economic uncertainties which may arise which may affect the businesses ability to meet its objectives in terms of sales growth, credit sales, improvement in gross margins, performance of our own credit book introduced during the current financial period, various working capital initiatives and the timing thereof.

Management anticipates that repayments of debt within the Group’s capital structure which will fall due over the following 12 months as presented in these consolidated financial statements, will be met out of operating cash flows, the bridge financing, and after taking into account and giving effect to the Restructuring and resulting cash flows. As a result of the Restructuring, the Group’s gross third party debt is expected to decrease to approximately R7 billion at the Edcon Limited Group level (excluding newly issued debt at Holdco 1 and Holdco 2). In reaching the conclusion using the principles of going concern as the basis of accounting to present these consolidated financial statements, and in mitigation of the uncertainties outlined above, management has taken into consideration the probability of a successful Restructuring, a need to have an adequate basis of consolidation applied on a consistent basis, the various working capital initiatives and ongoing management of cash requirements undertaken by the Group. There can however be no certainty as to whether such mitigants will be successful, nor the timing thereof.

Management acknowledges that uncertainty remains over the ability of the Group to meet its future funding requirements and to refinance or repay its obligations as they fall due. However, as described above, management has a reasonable expectation, that the Group taking into account the bridge financing, the Restructuring which has been approved by the Competition Commission without conditions and was referred to the Tribunal and approved on 23 November 2016 and considering that at least 80% of the creditors, have agreed to the LUA, management is reasonably confident the Restructuring will be court sanctioned, and ongoing liquidity management, that the Group will have adequate resources to meet obligation requirements as they fall due albeit in a newly formed Group of companies as a result of the Restructure.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.3 Basis of accounting (continued)

1.3.1 Consolidated Financial Statements of Edcon Holdings Limited (continued)

If for any reason the companies which collectively comprise the Group, with emphasis on Edcon Limited within the current Group structure, are unable to continue as a going concern, it would have an impact on the Group’s ability to realise assets at their recognised values, in particular goodwill and other intangible assets and to extinguish liabilities in the normal course of business at the amount stated in these consolidated financial statements.

We also refer the users of the financial statements to pages 26 to 38 “Risk Factors” of the Annual Report for the discussion of the risk areas facing the business.

1.3.2 Edcon Holdings Limited – Company Financial Statements

The Company’s financial statements have been prepared on the going concern basis.

The Company has recognised a loss after tax of R15,316 million for the period ended 26 March 2016 (2015: a profit of R264 million) and as at that date, total liabilities exceeded its total assets by R1,074 million (2015: assets exceeded liabilities by R14,050 million). These conditions, along with other matters as set forth in this note, indicate the existence of a material uncertainty which has cast doubt over the Company’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

Management has considered the effect of the Restructuring as discussed on page 64 and disclosed in note 28 of the company’s financial statements when assessing the going concern basis of accounting.

Included in the loss reported for the financial period ending 26 March 2016, are provisions totaling R13,224 million (note 1 and note 6). These provisions have been raised taking into account that the loans owing by Group companies may not be recoverable in the ordinary course of business. However, the unwinding of these loans has been contemplated under the Restructuring under the step plan that considers both liquidity and solvency of the Company at each step.

The Restructuring additionally sets out the control transfer mechanism as described on page 64. Under the step plan contemplated under the Restructuring, the Company will sell its investment in Hollard Business Partners (note 3) to a subsidiary company, the interest-free loan owing by Edcon Limited to the Company (note 1) will be delegated to a subsidiary company and the interest-bearing loan (note 1) owing to the Company by Edcon Limited will be waived. The remaining loans (note 6 and 14) will be reorganised and the interest-free debt owing to a Group Company (note 13) will be waived. The interest-bearing debt (note 12) shall either be redeemed or compromised through the Restructuring process.

After taking into account the subordination of the shareholder’s loan (note 11) and the position contemplated on completion of the Restructuring, Edcon Holdings Limited will remain both liquid and solvent and as a result, management has assessed the going concern basis of accounting to be appropriate.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.4 Basis of consolidation

The Consolidated Financial Statements comprise the financial statements of the parent company, Edcon Holdings Limited, its subsidiaries, the Staff Empowerment Trust and Edgars Stores Limited Zimbabwe, presented as a single economic entity and, consolidated at the same reporting date of Edcon Holdings Limited. The Consolidated Financial Statements are prepared using uniform accounting policies for similar transactions and other events. The Consolidated Financial Statements provide comparative information in respect of the two previous reporting periods. As the Group presents two additional statements of financial position (in addition to the current financial period), when there is a retrospective application of an accounting policy, a retrospective restatement, or a reclassification of items in the financial statements, the restated amounts are presented in the comparative period, as well as the additional third statement of financial position similar to an opening statement of financial position, where applicable.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

 power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);  exposure, or rights, to variable returns from its involvement with the investee; and  the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee including:

 the contractual arrangement with the other vote holders of the investee;  rights arising from other contractual arrangements; and  the Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expense and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary it:

 derecognises the assets (including goodwill) and liabilities of the subsidiary;  derecognises the carrying amount of any non-controlling interests;  derecognises the cumulative translation differences recorded in equity;  recognises the fair value of the consideration received;  recognises the fair value of any investment retained;  recognises any surplus or deficit in profit or loss; and  reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.4 Basis of consolidation (continued)

Business combinations Business combinations are accounted for using the acquisition method. As of the acquisition date, the Group recognises the identifiable assets acquired and the liabilities assumed at their acquisition date fair values. For each business combination, the Group measures the non-controlling interests in the acquiree either at fair value or at their proportionate share of the aquiree’s identifiable net assets.

The cost of an acquisition, is the aggregate of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity instruments issued, measured at acquisition-date fair values. Acquisition related costs are expensed as incurred. Any contingent consideration that may be transferred by the Group is recognised at fair value at the acquisition date. If the contingent consideration is classified as an asset or a liability, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. If the contingent consideration is classified as equity, it is not re-measured until it is finally settled.

Any excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the net identifiable assets acquired and liabilities assumed is considered to be goodwill and the goodwill is recognised as a separate asset on the Statement of Financial Position, initially measured at cost. If the fair value of the net assets of the subsidiary acquired exceeds the aggregate of the consideration transferred and the amount recognised for non-controlling interests, the difference is recognised in profit or loss on the acquisition date.

If the business combination is achieved in stages any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in the determination of goodwill.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

Goodwill Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised; it is tested annually for impairment and, additionally, when an indication of impairment exists at the end of each reporting period. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generation units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

For goodwill impairment testing purposes, the segments reported in note 2 are separate cash-generating units, since this is the level at which the performance of investments is reviewed and assessed by management. The recoverable amount of a segment is determined on the basis of its value in use. Refer to note 5 for details.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured base on the relative values of the disposed operation and the cash-generating unit retained.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.5 Use of estimates and judgments and assumptions made in the preparation of the Financial Statements

Significant estimates, assumptions and judgements made at the reporting date relate to:

 assumptions around going concern (note 1.3);  credit risk valuation adjustments in determining the fair value of derivative instruments to reflect non- performance risk (note 1.11.4);  fair value measurements and valuation processes of financial instruments (note 1.2, 1.11 and 37.8);  provision for impairment of receivables (note 1.11.1);  derecognition of financial instruments (note 1.11.1 and 1.11.2);  allowances for slow-moving inventory (note 1.12);  residual values, useful lives and depreciation methods for property, fixtures, equipment and vehicles (note 1.15);  fair value measurements and valuation processes in respect of land and buildings (note 1.2, 1.15.2 and 3);  impairment of all non-financial assets including goodwill and intangibles with indefinite lives (note 1.4, 1.15.5, 1.26 and 5);  measurement of pension fund and medical aid obligations i.e. key actuarial assumptions (note 1.20, 31.3.6 and 31.5.4);  operating leases (note 1.13);  current and deferred tax, specifically with respect to the utilisation of the deferred tax assets (note 1.17 and note 7);  loyalty points deferred revenue (note 1.24.2);  classification of financial assets and financial liabilities into categories (note 1.11.1 and 1.11.2);  put option obligation (note 1.11.2 and 23);  onerous leases (note 1.24.3 and 22.3); and  valuation and classification of share capital, warrants issued and the shareholder’s loan (note 13.7, note 14.2 and note 18)

1.6 Foreign currency transactions and balances – Group companies

The presentation currency of the Consolidated Financial Statements is the South African Rand, which is also the functional currency of Edcon Holdings Limited. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Subsequent to initial recognition, monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively).

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 are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.7 Foreign currency translations – Group companies

On consolidation, the assets and liabilities of entities with a functional currency other than the Rand are translated into Rand at the rate of exchange prevailing at the reporting date and their statements of comprehensive income are translated at the weighted average exchange rates for the period. The exchange differences arising on translation for consolidation are recognised in other comprehensive income (foreign currency translation reserve). On disposal of a foreign operation, the deferred cumulative amount recognised in other comprehensive income (foreign currency translation reserve) relating to that particular foreign operation is recognised in profit or loss.

1.8 Investment in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decision of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

The Group’s investments in its associates and joint ventures are accounted for using the equity method.

Under the equity method, the investment in associates and joint ventures is at cost plus post-acquisition changes in the Group’s share of net assets of the associates and joint ventures in the Consolidated Statement of Financial Position. Goodwill relating to the associates and joint ventures are included in the carrying amount of the investment and is not amortised or separately tested for impairment.

The Consolidated Statement of Comprehensive Income reflects the Group’s share of the results of operations of the associates and joint ventures. The Group’s share of profit or loss from an associate and joint venture is shown on the face of the Consolidated Statement of Comprehensive Income within operating profit or loss and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associates and joint ventures.

When there has been a change recognised directly in other comprehensive income or equity of the associates and joint ventures, the Group recognises its share of any changes, when applicable, in the Consolidated Statement of other Comprehensive Income or Consolidated Statement of Changes in Equity respectively. Where the Group transacts with an associate or joint venture, unrealised profits or losses are eliminated to the extent of the Group’s interest in the associates and joint ventures. Losses on transactions are recognised immediately if there is evidence of a reduction in the net realisable value of current assets or an impairment loss.

The reporting period for associates and joint ventures is the same as the Group’s. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

The investment in associates and joint ventures are considered for impairment on an annual basis. At each reporting date, the Group determines whether there is objective evidence that the investment in the associates and joint ventures is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount and its carrying value, and then recognises the loss in the Consolidated Statement of Comprehensive Income.

The associates and joint ventures are equity accounted until the date on which the Group ceases to have significant influence or joint control over the associate or joint venture. Upon loss of significant influence or joint control, the Group measures and recognises its remaining investment in the associate or joint venture at its fair value. The difference between the carrying amount of the investment upon loss of significant influence or joint control and the fair value of the remaining investment and proceeds from disposal is recognised in profit or loss.

The Group currently has investments in associates which are not material to the Group’s operations.

1.9 Interests in joint operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.9 Interests in joint operations (continued)

When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation:

 its assets, including its share of any assets held jointly;  its liabilities, including its share of any liabilities incurred jointly;  its revenue from the sale of its share of the output arising from the joint operation;  its share of the revenue from the sale of the output by the joint operation; and  its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation and gains and losses resulting from the transactions are recognised in the Group’s Consolidated Financial Statements only to the extent of the other parties interests in the joint operation.

When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party.

The Group currently has interests in joint operations.

1.10 Intangible assets

Intangible assets comprise separately identifiable intangible items arising from business combinations and certain purchased intangibles. Intangible assets acquired separately are initially measured at cost. The cost of intangible assets acquired in a business combination is measured at their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs are not capitalised and expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised using the straight-line method over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method as appropriate and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level (refer to note 5 for details on how impairment testing is performed for indefinite life intangible assets). The assessment of the indefinite life is reviewed annually to determine whether the indefinite life basis continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

The Group’s intangible assets and their associated useful lives are as follows:

Estimated useful life Edgars brand Indefinite Jet brand Indefinite Boardmans brand Indefinite Red Square brand 10 years Legit brand 10 years La Senza 5 years Inglot 5 years Accessorize 5 years Customer relationships 5 – 10 years Trademarks 5 – 15 years Customer lists 5 – 10 years Technology 7 years

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.10 Intangible assets (continued)

Intangible assets are derecognised on disposal or when no future economic benefits are expected through use of the intangible asset. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset and are recognised in profit or loss when the intangible asset is derecognised. Expenditure on internally developed and maintained intangible assets are expensed through profit or loss. Expenditure incurred to maintain brand names is charged in full to profit or loss as incurred.

1.11 Financial instruments

The Group recognises financial instruments on the statement of financial position when the Group becomes party to the contractual provisions of the instruments.

1.11.1 Financial assets

Initial recognition and measurement

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. Financial assets are initially recognised at fair value, including transaction costs except those at fair value directly through profit or loss, when the Group becomes a party to contractual arrangements.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.

The Group’s financial assets include trade and other receivables, derivatives and cash and cash equivalents which are classified as either loans and receivables or as derivatives at fair value through profit or loss or derivatives designated as hedging instruments in an effective hedge as appropriate.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as described below:

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held-for-trading unless they are designated as effective hedging instruments as defined by IAS 39. The Group does not undertake any trading activity in financial assets.

The Group does not have any financial assets, other than derivative financial instruments, designated at fair value through profit or loss. Derivatives are discussed in note 1.11.4.

Financial assets designated upon initial recognition at fair value through profit or loss are designated at their initial recognition date and only if the criteria under IAS 39 are satisfied. Financial assets designated at fair value through profit or loss upon initial recognition cannot be reclassified after initial recognition.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

Any gains and losses realised are recognised in profit or loss.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.11 Financial instruments (continued)

1.11.1 Financial assets (continued)

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, not classified as held-for-trading, not designated as at fair value through profit or loss or available- for-sale. Financial assets classified as loans and receivables include originated loans where funding is provided directly to the borrower. Loans and receivables are recognised when the Group becomes a party to the contractual provisions of the instrument, which is when funding is advanced to borrowers. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. Effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The losses arising from impairment are recognised in the Consolidated Statement of Comprehensive Income in other operating expenses.

Cash and cash equivalents Cash and cash equivalents are measured at amortised cost and comprise cash on hand and demand deposits together with any highly liquid investments readily convertible to known amounts of cash.

Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to- maturity when the Group has the positive intention and ability to hold them to maturity. After initial measurement, held- to-maturity investments are measured at amortised cost using the effective interest rate, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The Group did not have any held-to-maturity investments for the 2016, 2015 and 2014 financial periods.

Available-for-sale financial investments Investments classified as available-for-sale are those that are neither classified as held-for-trading nor designated at fair value through profit or loss. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from other comprehensive income to the statement of comprehensive income.

The Group did not have any available-for-sale investments for the 2016, 2015 and 2014 financial periods.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

 The rights to receive cash flows from the asset have expired; or  The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.11 Financial instruments (continued)

1.11.1 Financial assets (continued)

Impairment of financial assets

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in profit or loss. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account, to the extent the carrying value of the receivable does not exceed its cost at any reversal date.

If a write-off is later recovered, the recovery is credited to other income in the statement of comprehensive income.

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

A provision for impairment is made when there is objective evidence that the Group will not be able to collect all amounts due under the original terms of the trade receivable transactions. The process for estimating impairment considers all credit exposures, not only those of low credit quality and is estimated on the basis of historical loss experience, adjusted on the basis of current observable data, to reflect the effects of current conditions.

1.11.2 Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, loans and borrowings, deferred option premiums, put option liability and derivative financial instruments and are classified as loans and borrowings, derivatives at fair value through profit or loss or derivatives designated as hedging instruments in an effective hedge, as appropriate.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.11 Financial instruments (continued)

1.11.2 Financial liabilities (continued)

Subsequent measurement

The measurement of financial liabilities depends on their classification as described below:

Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. The Group has not designated any financial liabilities as held for trading in the 2016, 2015 and 2014 financial period.

This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held- for-trading unless they are designated as effective hedging instruments.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IAS 39 are satisfied.

Any gains and losses realised are recognised in profit or loss.

Loans and borrowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included as finance costs in the statement of comprehensive income.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the extinguishment of the original liability or part of it and the recognition of a new financial liability. The difference in the respective carrying amounts is recognised in profit or loss.

1.11.3 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis.

1.11.4 Derivative financial instruments and hedge accounting

The Group uses derivative financial instruments such as foreign currency forward contracts, foreign currency call options, cross currency swaps and interest rate swaps to manage the financial risks associated with their underlying business activities and the financing of those activities where appropriate. The Group does not undertake any trading activity in derivative financial instruments.

Derivative financial instruments are initially measured at their fair value on the date on which a derivative portfolio contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.11 Financial instruments (continued)

1.11.4 Derivative financial instruments and hedge accounting (continued)

The fair value of foreign currency forward contracts, foreign currency call options and cross currency swaps is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market interest rates for similar instruments. The fair value of cross currency swaps is determined by reference to market interest rates and forward exchange rates for similar instruments. A credit risk valuation adjustment is incorporated to appropriately reflect the Group’s own non- performance risk and the respective counterparty’s non-performance risk in the fair value measurement. The significant inputs to the overall valuations are based on market observable data or information derived from or corroborated by market observable data, including transactions, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Where models are used, the selection of a particular model to value the derivative depends upon the contractual terms of, and specific risks inherent in the instrument as well as the availability of pricing information in the market. The Group uses similar models to value similar instruments. Valuation models require a variety of inputs including contractual terms, market prices, yield curves and credit curves.

The credit risk valuation adjustments are calculated by determining the net exposure of each derivative portfolio (including current and potential future exposure) and then applying the Group’s credit spread, and each counterparty’s credit spread to the applicable exposure.

The inputs utilised for the Group’s own credit spread are based on estimated fair market spreads for entities with similar credit ratings as the Group. For counterparties with publicly available credit information, the credit spreads over the benchmark rate used in the calculations represent implied credit default swap spreads obtained from a third party credit provider.

In adjusting the fair value of derivative contracts for the effect of non-performance risk, the Group has not considered the impact of netting and any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees. The Group actively monitors counterparty credit ratings for any significant changes.

For the purpose of hedge accounting, hedges are classified as:

 Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment;  Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment; and  Hedges of a net investment in a foreign operation.

The Group does not have any hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

In relation to cash flow hedges, which meet the conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income in the cash flow hedging reserve and the ineffective portion is recognised in profit or loss.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.11 Financial instruments (continued)

1.11.4 Derivative financial instruments and hedge accounting (continued)

For cash flow hedges, the gains or losses that are recognised in other comprehensive income are transferred to profit or loss in the same period in which the hedged item affects the profit or loss.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in other comprehensive income is kept in other comprehensive income until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in other comprehensive income is transferred to profit or loss for the period.

Current versus non-current classification Derivative instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e. the underlying contracted cash flows).

When the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the reporting date, the derivative is classified as non-current (or separated into current and non-current portions) consistent with the classification of the underlying item.

Embedded derivatives that are not closely related to the host contract are classified consistent with the cash flows of the host contract.

Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instrument is separated into a current portion and a non-current portion only if a reliable allocation can be made.

1.12 Inventories

Retail trading inventories are valued at the lower of cost, using the weighted average cost, and net realisable value, less an allowance for slow-moving items. Net realisable value is the estimated selling price in the ordinary course of business less necessary costs to make the sale. In the case of own manufactured inventories, cost includes the total cost of manufacture, based on normal production facility capacity, and excludes financing costs. Work-in-progress is valued at actual cost, including direct material costs, labour costs and manufacturing overheads.

Factory raw materials and consumables are valued at average cost, less an allowance for slow-moving items.

The allowance for slow-moving inventory is made with reference to an inventory age analysis. All inventory older than 18 months is provided for in full as it is not deemed to be readily disposable.

1.13 Leases

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement at inception date and whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as a lessee Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred from the lessor to the Group as lessee. Assets subject to finance leases are capitalised at the lower of the fair value of the asset, and the present value of the minimum lease payments, with the related lease obligation recognised at the same value. Capitalised leased assets are depreciated over the shorter of the lease term and the estimated useful life if the Group does not obtain ownership thereof.

Finance lease payments are allocated, using the effective interest rate method, between the lease finance cost, which is included in financing costs, and the capital repayment, which reduces the liability to the lessor.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.13 Leases (continued)

Group as a lessee (continued) Operating leases are those leases which do not fall within the scope of the above definition. Operating lease rentals with fixed escalation clauses are charged against trading profit on a straight-line basis over the term of the lease. The resulting difference between the lease expenses arising from the application of the straight-line basis and the contractual amounts actually paid or accrued is recognised as a lease equilisation obligation or asset.

In the event of a sub-lease classified as an operating lease, lease rentals received are included in profit or loss on a straight-line basis.

Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rentals are recognised as revenue in the period in which they are earned.

1.14 Borrowing costs

Borrowing costs directly attributed to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consists of interest and other costs that an entity incurs in connection with the borrowing of funds. Currently the Group does not capitalise any borrowing costs as it does not have any qualifying assets.

1.15 Properties, fixtures, equipment and vehicles

1.15.1 Fixtures, equipment and vehicles

Fixtures, equipment and vehicles are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the fixtures, equipment and vehicles and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

1.15.2 Properties (Land and buildings)

Land is initially measured at cost and subsequently revalued by recognised professional valuers every three years and annually by internal valuers, to net realisable open-market value using the alternative or existing-use basis as appropriate (which is considered a level 3 valuation under IFRS 13), ensuring carrying amounts do not differ materially from those which would be determined using fair value at the reporting date. Buildings are also measured at fair value (as per above) less accumulated depreciation and impairment losses at the date of revaluation. Land and buildings were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.

Any revaluation surplus is recorded in other comprehensive income and hence, credited to the revaluation surplus reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case, the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

The amount in the revaluation surplus reserve is transferred to retained earnings or loss upon disposal of a particular asset. Additionally, accumulated depreciation, for buildings, as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.15 Properties, fixtures, equipment and vehicles (continued)

1.15.3 Lease premiums and leasehold improvements

Expenditure relating to leased premises is capitalised as appropriate and depreciated to expected residual value over the remaining period of the lease on a straight-line basis.

Leasehold improvements for leasehold land and buildings are depreciated over the lease periods which range from 5 to 10 years, or such shorter periods as may be appropriate.

1.15.4 Depreciation rates

Fixtures, equipment and vehicles are depreciated on a straight-line basis to their expected residual values over the estimated useful lives as follows:

Fixtures and fittings 7 – 8 years Leased assets 5 – 50 years Computer equipment 3 – 5 years Computer software 2 – 3 years Machinery 9 – 10 years Vehicles 4 – 5 years Buildings 48 – 50 years

1.15.5 Impairment of properties, fixtures, equipment and vehicles

Property, fixtures, equipment and vehicles are reviewed at each reporting date, to determine whether there is any indication of impairment. When impairment indicators are present, the impairment recognised in profit or loss (or other comprehensive income for revalued property limited to the extent of the revaluation surplus) is the excess of the carrying value over the recoverable amount (the greater of fair value less costs to sell and value in use).

Recoverable amounts are estimated for individual assets or, when an individual asset does not generate cash flows independently, the recoverable amount is determined for the larger cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s cash generating units to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

An assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the assets or the cash generating units recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior periods. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at a revalued amount in which case, the reversal is treated as a revaluation increase.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.15 Properties, fixtures, equipment and vehicles (continued)

1.15.6 Derecognition of properties, fixtures, equipment and vehicles

An item of property, fixtures, equipment and vehicles is derecognised on disposal or when no future economic benefits are expected through its continued use. Gains or losses which arise on derecognition, are included in profit or loss in the year of derecognition.

The gain or loss is calculated as the difference between the net disposal proceeds and the carrying amount of the property, fixtures, equipment or vehicles at the date of sale.

1.15.7 Asset lives and residual values

Buildings, fixtures, equipment and vehicles are depreciated over their useful life taking into account any residual values where appropriate. The estimated useful life of these assets and depreciation methods are assessed at each reporting date and could vary as a result of technological innovations and maintenance programs. In addition, residual values are reviewed at each reporting date after considering future market conditions, the remaining life of the asset and projected disposal values. Changes in asset lives and residual values are accounted for on a prospective basis as a change in estimate.

1.15.8 Software costs

Packaged software and the direct costs associated with the development and installation thereof are capitalised as computer software and are an integral part of computer hardware. The total cost is capitalised and depreciated in accordance with note 1.15.1 and 1.15.4.

1.16 Non-current assets held–for-sale and discontinued operations

Non-current assets (or a disposal group) are classified as held-for-sale if the carrying amount will be recovered through a highly probable sale transaction, rather than through continuing use. The sale is considered to be highly probable where the assets (or a disposal group) are available for immediate sale, management is committed to the sale and the sale is expected to be completed within a period of one year from the date of classification. Assets classified as held- for-sale are measured at the lower of the asset’s carrying amount and fair value less costs to sell.

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

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

Non-current assets classified as held-for-sale are not depreciated or amortised.

Where a component of the Group, being either a separate major line of business, a geographical area of operations or a subsidiary is acquired exclusively with a view to resell and management is committed to the sale and it is expected to be completed within a period of one year or has been sold, that component is classified as a discontinued operation.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of comprehensive income.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.17 Taxation

Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the Group companies.

Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax base of the assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable deductible differences, except:

 When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;  In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all temporary differences, carry forward of unused tax credits and unused tax losses, which will result in deductible amounts in future periods, but only to the extent that it is probable that sufficient taxable profits will be available against which these deductible temporary differences, and carry forward of unused tax credits and unused tax losses can be utilised, except:

 When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;  In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.17 Taxation (continued)

Deferred tax (continued) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the asset will be realised or the liability will be settled, based on enacted or substantively enacted rates at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Current and deferred tax assets and liabilities are offset when they arise from the same tax reporting entity, and relate to the same tax authority, and when the legal right to offset exists. Where applicable; non-resident shareholders’ taxation is provided for in respect of foreign dividends receivable.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss.

Refer to notes 7 and 33 for further details around current and deferred tax.

1.18 Financing costs

Finance costs comprises interest paid and payable on borrowings, calculated using the effective interest rate method, and foreign currency gains and losses in respect of borrowings. Financing costs are recognised in profit or loss in the period in which they are incurred.

1.19 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when payment is made. Revenue is measured at the fair value of the consideration received net of returns and customer loyalty points excluding discounts, rebates and sales taxes or duty. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent.

Revenue comprises retail sales of merchandise, manufacturing sales, club fees, revenue from insurance business, dividends, finance charges and administration fees accrued to the Group.

The specific recognition criteria described below must also be met before revenue is recognised.

Sales of merchandise Revenue from sale of merchandise is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of goods. Such income represents the net invoice value of merchandise provided to such third parties – excluding discounts, value-added and any general sales tax applicable. The Group chains that contribute to the revenue from sale of merchandise are the Edgars division, CNA division, Discount division and the Edgars Zimbabwe division.

Loyalty points program The Group operates a loyalty points program that allows customers to accumulate points when they purchase merchandise, subject to certain criteria, in the Group’s retail stores. The points can then be redeemed as discount against merchandise purchases. The fair value which includes the expected redemption rate, attributed to the credits awarded, is deferred as a provision and recognised as revenue on redemption of the points by customers.

Manufacturing sales Revenue from manufacturing and other operations is recognised when the sale transactions giving rise to such revenue are concluded.

Club fees Club fees are recognised as revenue as incurred.

Finance charges Finance charges on arrear account balances are accrued on a time proportion basis, recognising the effective yield on the underlying assets.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.19 Revenue recognition (continued)

Share of profits from insurance business Group customers are offered Edgars and Jet branded insurance products, in pursuance of a business arrangement formed with Hollard Insurance (Hollard). Hollard underwrites all insurance products and further provides the arrangement with actuarial and compliance support. The Group provides product distribution, marketing and billing and premium collection services. The business sells to both credit customers and cash customers and is managed by a dedicated team of people from both Hollard and the Group. Under the provisions of the agreement, the Group charges a fee for the continued management of the debtors and maintenance of systems. The Group also charges a fee for the use of the Group’s brands in the marketing of the insurance products. This fee income is recognised by the Group as and when it is accrued.

The profit share is done on a product by product basis with the profit share percentage as agreed between the parties from time to time.

The Group has a closed book for the Edgars and Jet Legal Plan underwritten by Zurich Insurance Ltd. Europ Assistance provides risk management and policy fulfillment services. Under the provisions of the agreement, if the policy premiums exceed the claims and expenses, the net profit is distributed as a fee.

Dividends Dividends are recognised when the Group’s right to receive payment is established, which is generally when shareholders approve the dividend.

Interest received Interest received is recognised using the effective interest rate method.

Administration fees Administration fees are recognised as they are accrued based on the services provided.

1.20 Employee benefits

Short-term employee benefits The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. The accruals for employee entitlements to wages, salaries, annual and sick leave represent the amount which the group has a present obligation to pay as a result of employees’ services provided to the reporting date. The short- term employee benefits have been calculated at undiscounted amounts based on current wage and salary rates.

Post-employment benefits The Group operates a number of retirement benefit plans for its employees. These plans include both defined benefit and defined contribution provident funds and other retirement benefits such as medical aid benefit plans.

Defined contribution plans – Provident fund benefits A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension, provident and retirement funds are recognised as an employee benefit expense in profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Defined benefit plans – Pension and Post-retirement Medical Aid benefits The Group uses the projected unit credit actuarial method to determine the present value of its defined benefit plans and the related current service cost and, where applicable, past service costs. Contribution rates to defined benefit plans are adjusted for any unfavourable experience adjustments. Favourable experience adjustments are retained within the funds. Net benefit assets are only brought into account in the Group’s Financial Statements when it is certain that economic benefits will be available to the Group. Actuarial gains or losses are recognised in full the period in which they occur in other comprehensive income. Such actuarial gains and losses are also immediately recognised in retained earnings and are not reclassified to profit or loss in subsequent periods.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.20 Employee benefits (continued)

Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. The Group presents service costs and net interest expense or income in profit or loss in other operating costs and financing costs in the Statement of Comprehensive income. Curtailment gains and losses are accounted for as past service costs.

The defined benefit asset or liability comprises the present value of the defined benefit obligation, less the fair value of any plan assets out of which the obligations are to be settled i.e. the net obligation represents the actual deficit or surplus in the Group’s defined benefit plans. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value is based on market price information and, in the case of quoted securities; it is the published bid price. The value of any defined benefit asset recognised is restricted to the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

1.21 Share capitalisation awards and cash dividends

The full cash equivalent of capitalisation share awards and cash dividends paid by the Group are recorded and disclosed as dividends declared in the statement of changes in equity. Dividends declared subsequent to the period- end are not charged against shareholders’ equity at the reporting date as no liability exists. Upon allotment of shares in terms of a capitalisation award, the election amounts are transferred to the share capital and share premium account; cash dividend election amounts are paid and the amount deducted from equity.

1.22 Treasury shares

Shares held by the Staff Empowerment Trust are classified in the Group’s shareholders’ equity as treasury shares. These shares are treated as a deduction from the issued number of shares, and the cost price of the shares is deducted from share capital and premium in the Group’s Statement of Financial Position. Any dividends received on treasury shares are eliminated on consolidation.

1.23 Operating Segment Report

The Group is organised into business units based on their target markets and product offering, and the business is structured under seven reportable operating segments. The segments were selected on the basis of internal reports in order to allocate resources to the segment and assess its performance. Sales of merchandise in four main operating divisions gives rise to the Edgars, Discount, CNA and Zimbabwe division which targets different domains of income, age and products. Manufacturing sales gives rise to the Manufacturing division which is an apparel manufacturer, focusing on mid to high-end garments of mostly woven construction and footwear. This operating segment, manufactures ladies and men’s outerwear and footwear for the Edgars and Discount divisions and the outside market. The Credit and Financial division focuses on the management of the Group’s trade debtors and administration of trade accounts receivable sold to Absa Limited and offers consumer credit and insurance products. The Credit and Financial Services division incorporates revenue from the arrangement between Edcon and Hollard and administration fees earned on the administration of the Absa Limited trade accounts receivable sold to Absa Limited.

1.24 Provisions

1.24.1 General

Provisions are recognised when the Group has a present obligation (legal or constructive) 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 amount of the obligation. The amount recognised as a provision will be reassessed at each statement of financial position date taking into account the latest estimates of expenditure required and the probability of the outflows. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability except those that have been taken into account in the estimate of future cash flows. Where discounting is used, the increase in a provision due to the passage of time is recognised as an interest expense in profit or loss. A provision is used only for the expenditures for which the provision was originally recognised.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.24 Provisions (continued)

1.24.1 General (continued)

When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Comprehensive Income net of any reimbursement.

1.24.2 Loyalty points deferred revenue

The Group operates a loyalty points program which allows customers to accumulate points when they purchase merchandise, subject to certain criteria, in the Groups retail stores. The points can then be redeemed as discount against merchandise purchases. The Group accounts for award credits as a separately identifiable component of the sales transaction in which they are granted. The consideration in respect of the initial sale is allocated to award credits at their fair value and is accounted for as a provision (deferred revenue) in the statement of financial position.

The fair value of an individual award credit is determined using estimation techniques reflecting the weighted average of a number of factors. A rolling 12-month historical trend forms the basis of the calculations. The number of points not expected to be redeemed by members are also factored into the estimation of fair value. Historical redemption trends are also used to determine the long and short-term portion of the deferred revenue liability. A level of judgment is exercised by management in determining the fair value of the points (note 25.1).

1.24.3 Onerous leases

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and net cost of continuing with the contract. The straight-line operating lease accrual is adjusted accordingly for any onerous leases. Before a provision is established the Group recognises any impairment loss on the asset associated with that contract.

1.25 Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

1.26 Investments in subsidiaries (Company only)

Investments in subsidiaries are equity interests which are held for the purposes of Edcon Holdings Limited business activities or for strategic reasons. They include all directly held subsidiaries through which Edcon Holdings Limited conducts its business. The investments are carried at cost less impairment. The carrying value is tested for impairment when indicators for a decrease in value exist, which include incurrence of significant operating losses. If an investment in a subsidiary is impaired, its value is generally written down to the net asset value. Subsequent recoveries in value are recognised up to the original cost value based on the increased net asset value.

1.27 New and amended standards and interpretations adopted by the Group

The Group applied for the first time, in the current year, the following amendment:

Employee contributions - Amendments to IAS 19 Employee benefits

IAS 19 Employee Benefits requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. IAS 19 requires such contributions that are linked to service to be attributed to periods of service as a negative benefit. The amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service.

The Group has assessed these requirements and does not expect any material impact on its financial statements as a result of the amendments to IAS 19.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.28 New and revised standards and interpretations in issue but not yet effective

The International Accounting Standards Board (“IASB”) issued the following standards, with an effective date after the date of these financial statements, which management believes could impact the Group in future periods. The Group has not elected to early adopt any of these standards.

1.28.1 IFRS 9 Financial Instruments

IFRS 9 Financial Instruments issued on 24 July 2014 is the IASB's replacement of IAS 39 Financial Instruments: Recognition and Measurement. The Standard includes requirements for recognition and measurement, impairment, derecognition and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. Early application is permitted for reporting periods beginning after the issue of IFRS 9 by applying all of the requirements in this standard at the same time. Alternatively, entities may elect to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as fair value through profit or loss (FVTPL) without applying the other requirements in the standard.

Key requirements: Classification and measurement of financial assets All financial assets are measured at fair value on initial recognition, adjusted for transaction costs, if the instrument is not accounted for at FVTPL. Debt instruments are subsequently measured at FVTPL, amortised cost, or fair value through other comprehensive income (FVOCI), on the basis of their contractual cash flows and the business model under which the debt instruments are held.

There is a fair value option (FVO) that allows financial assets on initial recognition to be designated as FVTPL if that eliminates or significantly reduces an accounting mismatch. Equity instruments are generally measured at FVTPL. However, entities have an irrevocable option on an instrument-by-instrument basis to present changes in the fair value of non-trading instruments in other comprehensive income (OCI) without subsequent reclassification to profit or loss.

Classification and measurement of financial liabilities For financial liabilities designated as FVTPL using the FVO, the amount of change in the fair value of such financial liabilities that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation in OCI of the fair value change in respect of the liability’s credit risk would create or enlarge an accounting mismatch in profit or loss.

All other IAS 39 Financial Instruments: Recognition and Measurement classification and measurement requirements for financial liabilities have been carried forward into IFRS 9, including the embedded derivative separation rules and the criteria for using the FVO.

Impairment The impairment requirements are based on an expected credit loss (ECL) model that replaces the IAS 39 incurred loss model. The ECL model applies to debt instruments accounted for at amortised cost or at FVOCI, most loan commitments, financial guarantee contracts, contract assets under IFRS 15 Revenue from Contracts with Customers and lease receivables under IAS 17 Leases.

Entities are generally required to recognise 12-month ECL on initial recognition (or when the commitment or guarantee was entered into) and thereafter as long as there is no significant deterioration in credit risk. However, if there has been a significant increase in credit risk on an individual or collective basis, then entities are required to recognise lifetime ECL. For trade receivables, a simplified approach may be applied whereby the lifetime ECL are always recognised.

Hedge accounting Hedge effectiveness testing is prospective, without the 80% to 125% bright line test in IAS 39, and, depending on the hedge complexity, will often be qualitative. A risk component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measureable. The time value of an option, any forward element of a forward contract and any foreign currency basis spread can be excluded from the hedging instrument designation and can be accounted for as costs of hedging. More designations of groups of items as the hedged item are possible, including layer designations and some net positions.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.28 New and revised standards and interpretations in issue but not yet effective (continued)

1.28.1 IFRS 9 Financial Instruments (continued)

Assessment The application of IFRS 9 may change the measurement and presentation of some financial instruments, depending on their contractual cash flows and the business model under which they are held. The impairment requirements will generally result in earlier recognition of credit losses. The new hedging model may lead to more economic hedging strategies meeting the requirements for hedge accounting. The Group is in the process of quantifying the effect of any impact of IFRS 9 on its financial statements.

1.28.2 IFRS 15 Revenue from contracts with customers

IFRS 15 replaces all existing revenue requirements in IFRS (IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue – Barter Transactions Involving Advertising Services) and applies to all revenue arising from contracts with customers. It also provides a model for the recognition and measurement of sales of some non-financial assets including disposals of property, equipment and intangible assets.

The standard outlines the principles an entity must apply to measure and recognise revenue. The core principle is that an entity will recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer.

The principles in IFRS 15 will be applied using a five-step model:

1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; 5. Recognise revenue when (or as) the entity satisfies a performance obligation.

For each step of the model, the standard requires entities to exercise judgement and to consider all relevant facts and circumstances when applying the model to contracts with their customers.

In addition to the five-step model, the standard also specifies how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

Application guidance is provided in the standard to assist entities in applying its requirements to common arrangements, including licences, warranties, rights of return, principal-versus-agent considerations, options for additional goods or services and breakage.

The standard is effective for annual periods beginning on or after 1 January 2018. The Group is still assessing the impact of the standard on its contracts with customers however no material impact on the financial statements is considered likely based on the current assessment of the standard.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

1.28 New and revised standards and interpretations in issue but not yet effective (continued)

1.28.3 IFRS 16 Leases

The scope of IFRS 16 includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. IFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under IAS 17. The standard includes two recognition exemptions for lessees which are leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e. leases with a lease term of 12 months or less).

At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to re-measure the lease liability upon the occurrence of certain events (e.g. a change in the lease term or a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the re- measurement of the lease liability as an adjustment to the right-of-use asset.

The standard is effective for annual periods beginning on or after 1 January 2019. The Group is in the process of quantifying the impact that applying this standard will have on its financial statements however based on assessments to date, this standard is likely to have a material impact on future financial statements.

1.28.4 IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12

The IASB issued the amendments to IAS 12 Income Taxes to clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explains in which circumstances taxable profit may include the recovery of some assets for more than their carrying amount.

The standard is effective for annual periods beginning on or after 1 January 2017. The Group will consider the impact that this standard may have on its financial statements.

1.28.5 Other standards, amendments and interpretations

The following standards, amendments and interpretations, that have been issued but are not yet effective, have been assessed for applicability to the Group. Management has concluded that they are not expected to have a significant impact on future financial statements.

 IFRS 11 Accounting for acquisitions of interests in joint operations – Amendments to IFRS 11  IFRS 14 Regulatory deferral accounts  IAS 1 Disclosure Initiative – Amendments to IAS 1  IAS 7 Disclosure Initiative – Amendments to IAS 7  IFRS 10 and IAS 28 Sale or contribution of assets between an investor and its associate or joint venture – Amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures  IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortisation - Amendments to IAS 16 Property, plant and equipment and IAS 38 Intangible assets  IAS 27 Equity method in separate financial statements – Amendments to IAS 27 Separate financial statements  Annual improvements to IFRS

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2. OPERATING SEGMENT REPORT

For management purposes, the Group is organised into business units based on their target markets and product offering, and the business is structured under seven reportable operating segments. Management monitors the operating results of the business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. The reportable segments are as follows:

Edgars division The division is targeted at middle to upper income consumers. The specialty store chains included in this division are Edgars, Boardmans, Red Square, Edgars Active, Edgars Shoe Gallery, Inglot, La Senza, Accessorize, Topshop, Tom Tailor, Mac, Lipsy, Bobbi Brown, Lucky Brands, Dune, TM Lewin, Salsa, Jigsaw, Kiehl’s, Victoria’s Secret Beauty and Accessories, Vince Camuto, River Island, Dr. Martens, Calvin Klein, Express and Jo Malone. The products within this operating segment include mainly clothing, footwear, cosmetics, mobile phones, homewares and accessories.

CNA division The CNA division is targeted at middle to upper income consumers and its product offering includes stationery, books, magazines, greeting cards, mobile phones, music, toys, photographic and digital equipment.

Discount division The discount division sells value merchandise targeted at lower to middle income consumers. The largest brand in the discount division is Jet, with associated brands that include Jet Mart and Legit. The product offering within this operating segment includes mainly clothing, footwear, mobile phones, cosmetics, homewares and accessories.

Edgars Zimbabwe division This division incorporates both the Edgars and Jet formats and is targeted at the lower to middle income consumers for Jet and middle to upper consumers for Edgars and includes both retail and manufacturing operations. The products within this operating segment include mainly clothing, footwear, cosmetics, mobile phones and accessories.

Manufacturing division The manufacturing division includes an apparel manufacturer and a footwear manufacturer, focusing on mid to high- end garments of mostly woven construction and footwear. This operating segment, manufactures ladies and men’s outerwear as well as footwear for the Edgars and Discount divisions and the outside market.

Credit and Financial Services Credit and financial services focuses on the management of the Group’s trade debtors and offers consumer credit and insurance products. For the Group’s trade debtors, this operating segment issues private label credit cards to qualifying customers who can use these credit cards in all the Group’s chains. Credit and financial services performs all aspects of the credit management process in-house including credit scoring activation, servicing and collection.

For the third party’s debtors, the third party extends credit to our private label store card customers while this operating segment remains responsible for all customer-facing activities, including the distribution of the store cards and credit collection. A net fee is paid by the third party for the administration of the accounts.

In addition, all private label store card customers are offered insurance products in partnership with insurance providers. The operating segment does not bear underwriting risk with respect to these insurance products.

Group Services Group Services performs the Group’s shared services functions which include mainly; human resources, treasury, tax, finance, internal audit, property management, logistics, loyalty, business intelligence and secretarial. Additionally, the trade accounts payable function for the Group is managed centrally by Group Services, as well as the accounting for trademarks and goodwill.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Operating segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the Consolidated Financial Statements.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2. OPERATING SEGMENT REPORT (continued)

Group financing (including all treasury functions such as finance costs and income and related borrowings), income taxes, trade accounts payable, trademarks and goodwill are managed on a group basis and are not allocated to operating segments.

(LOSS) OR PROFIT BEFORE REVENUES REVENUE-RETAIL SALES FINANCING3 2016 2015 2014 2016 2015 2014 2016 2015 2014 Rm Rm Rm Rm Rm Rm Rm Rm Rm Edgars division 14 287 14 257 14 011 13 929 13 929 13 684 962 1 305 1 538 CNA division 1 867 2 011 2 131 1 867 2 011 2 131 31 35 69 Discount division 10 746 10 986 10 735 10 529 10 771 10 513 1 010 1 220 1 212 Edgars Zimbabwe division 971 861 673 822 799 646 110 101 76 Manufacturing division 1931 1621 1331 4 (8) 19 Credit and Financial Services 1 224 1 236 1 219 1 2074 1 1214 8884 Group Services2 64 33 40 (6 816)7 (2 133)7 (4 519)7 Group 29 352 29 546 28 942 27 147 27 510 26 974 (3 492)7 1 6417 (717)7

South Africa 25 791 26 043 25 844 23 896 24 255 24 039 (3 691) 1 293 (1 002) Other 6 3 561 3 503 3 098 3 251 3 255 2 935 199 348 285

DEPRECIATION AND AMORTISATION IMPAIRMENT OF INTANGIBLES5 EXPENDITURE FOR ASSETS 2016 2015 2014 2016 2015 2014 2016 2015 2014 Rm Rm Rm Rm Rm Rm Rm Rm Rm Edgars division 314 331 266 1 563 263 577 873 CNA division 21 24 26 132 33 13 14 16 Discount division 145 150 155 3 176 78 180 212 Edgars Zimbabwe division 16 11 9 20 33 32 Manufacturing division 10 7 5 20 2 15 Credit and Financial Services 3 4 6 5 1 2 Group Services2 495 552 670 153 230 199 Group 1 004 1 079 1 137 4 871 33 552 1 037 1 349

South Africa 937 1 028 1 097 4 871 33 409 840 1 267 Other6 67 51 40 143 197 82

Notes

1. Represents manufacturing sales to third parties. In deriving the revenue, inter-group manufacturing sales of R175 million (52 weeks to 28 March 2015: R198 million and 52 weeks to 29 March 2014: R224 million) have been eliminated. 2. Incorporating corporate divisions and consolidation adjustments, including additional depreciation and amortisation which arose on formation of the Group.

3. The segmental result is stated after impairment of intangibles. 4. Includes profit share from insurance business of R725 million (52 weeks to 28 March 2015: R747 million and 52 weeks to 29 March 2014: R739 million). 5. Impairment of intangibles is accounted for by Group Services and included in Group Services operating profit but, the split of these impairments in relation to each operating segment has been disclosed here.

6. Comprising Botswana, Lesotho, Swaziland, Namibia, Zambia, Mozambique, Ghana and Zimbabwe. 7. Net financing costs of R4 208 million (52 weeks to 28 March 2015: R3 381 million and 52 weeks to 29 March 2014: R2 628 million) are reported in Group Services. The loss before taxation as reflected in the Consolidated Statement of Comprehensive Income is reconciled by including these costs.

8. 2015 and 2014 have been re-presented for the Credit and Financial Services division as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held- for-sale. The results of operations were previously presented in discontinued operations in the Consolidated Statement of Comprehensive Income (note 12).

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2. OPERATING SEGMENT REPORT (continued)

The following is an analysis of the consolidated revenue from continuing operations by reportable segment:

Credit & Discount Edgars Manufac- Financial Group Edgars CNA Division Zimbabwe turing Services Services Total Rm Rm Rm Rm Rm Rm Rm Rm

52 weeks 26 March 2016 Retail sales 13 929 1 867 10 529 822 27 147 Club revenue 358 217 15 590 Manufacturing sales1 193 193 Finance charges on trade receivables 134 166 300 Share of profits from insurance business 725 725 Finance income 64 64 Administration fee 333 333 Total revenue 14 287 1 867 10 746 971 193 1 224 64 29 352

52 weeks 28 March 2015 Retail sales 13 929 2 011 10 771 799 27 510 Club revenue 328 215 7 550 Manufacturing sales1 162 162 Finance charges on trade receivables 55 173 228 Share of profits from insurance business 747 747 Finance income 33 33 Administration fee 316 316 Total revenue 14 257 2 011 10 986 861 162 1 236 33 29 546

52 weeks 29 March 2014 Retail sales 13 684 2 131 10 513 646 26 974 Club revenue 327 222 549 Manufacturing sales1 133 133 Finance charges on trade receivables 27 200 227 Share of profits from insurance business 739 739 Finance income 40 40 Administration fee 280 280 Total revenue 14 011 2 131 10 735 673 133 1 219 40 28 942

Note

1 Represents manufacturing sales to third parties. In deriving the revenue, inter-group manufacturing sales of R175 million (52 weeks to 28 March 2015: R198 million and 52 weeks to 29 March 2014: R224 million) has been eliminated. 2 2015 and 2014 finance charges on trade receivables with respect to the Credit and Financial Services division has been re-presented as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale. The results of these operations were previously presented in discontinued operations in the Consolidated Statement of Comprehensive Income (note 12).

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2. OPERATING SEGMENT REPORT (continued)

2.1 Information on products

The following is an analysis of the Group’s retail sales by product line: 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm Clothing 12 678 12 673 12 383 Footwear 3 621 4 034 3 929 Cosmetics 2 955 2 830 2 633 Homeware 1 327 1 060 1 056 Cellular 2 952 2 966 2 715 Stationery, books, magazines etc. 978 1 116 1 728 Hardlines and FMCG 2 664 2 902 2 516 Loyalty points program (28) (71) 14 Total retail sales 27 147 27 510 26 974

2.2 Information about major customers

Revenues arise from direct sales to a broad base of public customers. The following is an analysis of the number of stores in the Group through which the Group’s product offering is distributed: 2016 2015 2014 26 March 28 March 29 March Number Number Number Edgars Division 559 533 478 CNA Division 198 195 191 Discount Division 732 719 685 Edgars Zimbabwe 53 53 49 Group 1 542 1 500 1 403

2.3 Reportable operating segment assets and liabilities

The following is an analysis of the operating segments assets and liabilities:

TOTAL ASSETS3 TOTAL LIABILITIES 2016 2015 2014 2016 2015 2014 Rm Rm Rm Rm Rm Rm Edgars division 4 336 3 944 3 908 885 1 360 332 CNA division 432 375 487 67 59 25 Discount division 2 410 2 543 2 166 341 827 6 Edgars Zimbabwe division 840 658 437 418 395 260 Manufacturing division 178 101 84 130 51 23 Credit and Financial Services 720 200 119 184 220 96 Group Services1 13 802 19 876 20 873 34 131 30 932 31 642 Assets classified as held- for-sale 393 651 Group 22 718 28 090 28 725 36 156 33 844 32 384

South Africa 20 672 26 246 26 903 35 519 33 310 32 080 Other2 2 046 1 451 1 171 637 534 304 Other2 – assets classified as held-for-sale 393 651 Notes 1 Incorporating corporate divisions and consolidation adjustments, including additional depreciation and amortisation. 2 Compromising Botswana, Lesotho, Swaziland, Namibia, Zambia, Ghana, Mozambique and Zimbabwe. 3 Included in total assets are non-current assets of R12 580 million (2015: R17 308 million and 2014: R18 439 million) which are part of Group Services. 98% of non-current assets are domiciled in South Africa.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

3. PROPERTIES, FIXTURES, EQUIPMENT AND VEHICLES

Historic cost except for revalued land and buildings Land and buildings Historic cost 4 4 4 Revaluation surplus 18 14 14 Leased assets 322 322 228 Leasehold improvements 1 050 949 986 Fixtures and fittings 3 958 3 715 4 573 Computer equipment and software 3 069 2 898 1 978 Machinery and vehicles 284 262 245 8 705 8 164 8 028 Accumulated depreciation Buildings 3 2 2 Leased assets 76 33 11 Leasehold improvements 636 545 607 Fixtures and fittings 1 589 1 228 2 576 Computer equipment and software 3 047 2 822 1 505 Machinery and vehicles 207 197 170 5 558 4 827 4 871 Net carrying value Comprising: Land and buildings 19 16 16 Leased assets 246 289 217 Leasehold improvements 414 404 379 Fixtures and fittings 2 369 2 487 1 997 Computer equipment and software 22 76 473 Machinery and vehicles 77 65 75 3 147 3 337 3 157

Opening net carrying value 3 337 3 157 2 606 Movements for the period Revaluation, cost less accumulated depreciation - - -

Additions Leasehold improvements 101 169 192 Fixtures and fittings 259 657 938 Computer equipment and software 172 204 194 Machinery and vehicles 20 7 25 552 1 037 1 349

Transfers between asset categories Leased assets 108 Leasehold improvements (32) Fixtures and fittings (1) (81) Computer equipment and software 5 5 Machinery and vehicles (4) -

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

3. PROPERTIES, FIXTURES, EQUIPMENT AND VEHICLES (continued)

Assets acquired through business combination (note 34.7) Fixtures and fittings - 1 17 Computer equipment and software 1 1 Machinery and vehicles 6 1 7 1 19

Other Currency adjustments 33 11 (3) 3 929 1 049 1 365

Disposals (net carrying value) Leasehold improvements 4 20 2 Fixtures and fittings 13 16 18 Computer equipment and software 1 - Machinery and vehicles 2 2 19 37 22

Depreciation (note 29.2) 763 832 792 Closing net carrying value 3 147 3 337 3 157

Land and buildings were revalued at 29 March 2014 to open market value based on the open market net rentals and current replacement cost of each property. Deferred taxation has been raised on the revaluation surplus. The independent valuations were carried out by professional valuers. No other categories of assets were revalued.

A register of the Group’s land and buildings is available for inspection at the Company’s registered office. If the land and buildings were measured using the cost model the cost would have been R4 million (2015: R4 million and 2014: R4 million) and the accumulated depreciation R2 million (2015: R1 million and 2014: R1 million).

At 26 March 2016, the properties, fixtures, equipment and vehicles have an estimated replacement cost and insurance value of R11 billion (2015: R9 billion and 2014: R8 billion) which excludes input value added-tax where appropriate.

These assets are security in terms of the senior secured and senior fixed rate notes, the super senior secured notes and the RCF term loan (2015 and 2014: the revolving credit facility) (note 19 and 21).

The leased assets are secured by the lease liabilities (note 22.2).

4. INTANGIBLE ASSETS

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable assets at the date of acquisition purchased as part of a business combination. Other intangible assets represent registered rights to the exclusive use of certain trademarks and brand names. Balance at the beginning of the period 16 146 16 388 16 697 Movement of intangible assets: Additions of finite life brands 20 Additions of other intangibles 4 36 Goodwill acquired (note 33.7) 20 1 13 Charge for the period (note 29.1) (241) (247) (345) Impairment of goodwill (4 343) Impairment of customer relationships (5) Impairment of indefinite life brands (note 5) (523) (33) Balance at the end of the period 11 054 16 146 16 388

Total impairment of intangible assets 4 871 33

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

4. INTANGIBLE ASSETS (continued)

Comprising: Goodwill at cost 8 547 8 527 8 526 Intangible assets at cost 12 039 12 039 12 035 Impairment of intangibles including goodwill (6 329) (1 458) (1 458) Accumulated amortisation of intangible assets (3 203) (2 962) (2 715) 11 054 16 146 16 388

Intangible assets (excluding goodwill) Intangible assets at cost: Indefinite life brands 8 492 8 492 8 492 Finite life brands 249 249 249 Customer relationships 1 974 1 974 1 974 Trademarks recognised 206 206 206 Customer lists 561 561 561 Technology 517 517 517 Other intangibles 40 40 36 12 039 12 039 12 035 Impairment of intangibles: Indefinite life brands (1 693) (1 170) (1 170) Finite life brands (40) (40) (40) Customer relationships (5) (1 738) (1 210) (1 210) Accumulated amortisation of intangible assets: Finite life brands (182) (163) (144) Customer relationships (1 791) (1 622) (1 454) Trademarks recognised (154) (141) (128) Customer lists (520) (482) (445) Technology (517) (517) (511) Other intangibles (39) (37) (33) (3 203) (2 962) (2 715) Carrying value of intangible assets: Indefinite life brands 6 799 7 322 7 322 Finite life brands 27 46 65 Customer relationships 178 352 520 Trademarks recognised 52 65 78 Customer lists 41 79 116 Technology 6 Other intangibles 1 3 3 7 098 7 867 8 110

Remaining useful lives (in years) Finite life brands 1 – 3 2 – 4 3 – 5 Customer relationships 1 2 3 Trademarks recognised 1 – 6 2 – 7 3 – 8 Customer lists 1 2 3 Technology Less than 1

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

4. INTANGIBLE ASSETS (continued)

Indefinite life brands principally comprise those brands for which there is no foreseeable limit to the period over which they are expected to generate net cash inflows.

The Edgars, Jet, CNA and Boardmans brands are considered to have an indefinite life as each has been in existence for a significant period, have strength and durability and require a low level of marketing support.

Goodwill and indefinite life brands are tested annually for impairment (note 5).

5. IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES

Goodwill acquired through business combinations and intangible assets with indefinite lives have been allocated to individual cash-generating units for impairment testing as follows:

 Edgars Division – includes Edgars, Boardmans, Red Square, Edgars Active, Edgars Shoe Gallery, Inglot, La Senza, Accessorize, Topshop, Tom Tailor, Mac, Lipsy, Bobbi Brown, Dune, TM Lewin, Salsa, Jigsaw, Calvin Klein, Kiehl’s, Victoria’s Secret Beauty and Accessories, Vince Camuto, River Island, Dr. Martens, Express and Jo Malone offering, clothing, footwear and homeware products.  CNA – offers stationery and electronic products.  Discount – includes Jet, JetMart and Legit offering clothing, footwear, beauty and homeware products.  Credit and Financial Services which administers trade receivables, offers consumer credit and insurance products.  Manufacturing division – manufactures apparel and footwear.

Impairment testing of goodwill and intangibles with indefinite lives was undertaken on the following basis:

The recoverable amount of cash-generating units has been determined based on a value-in-use calculation. To calculate this, cash flow projections are based on financial budgets approved by the board and projections covering a five-year period. The discount rate applied to the cash flow projections for the Edgars and the Discount division is 14% (2015: 12% and 2014: 13%), for CNA, 15% (2015: 14% and 2014: 15%) and for the Credit and Financial Services division, 13% (2015: 13% and 2014: 13%). The average growth rates used to extrapolate the cash flow projection of each cash- generating unit beyond the periods covered by the financial forecasts for Edgars is 3% (2015: 6% and 2014: 5%), the Discount division is 4% (2015: 7% and 2014: 8%), the Credit and Financial Services division is negative 2% (2015: 5% and 2014: 5%) and for CNA, 2% (2015: 2% and 2014: 5%) as future benefits are expected beyond the periods of the financial forecasts.

As a result, forecast sales assumptions were based on estimated growths over the short-term, and the growth rates beyond the forecasted period is 5.5% (2015: 5% and 2014: 6%) for Edgars and the Discount division, 5.5% (2015: 5% and 2014: 6%) for the Credit and Financial Services division and for CNA, 5.5% (2015: 5% and 2014: 6%).

Carrying amount of goodwill and Credit and intangibles with Financial Manufa- Indefinite lives (Rm) Edgars CNA Discount Services cturing Total 2016 Carrying amount of goodwill 346 - 3 590 20 3 956 Carrying amount of indefinite life intangibles 4 393 2 406 6 799

2015 Carrying amount of goodwill 1 767 2 922 3 590 8 279 Carrying amount of indefinite life intangibles 4 535 127 2 660 7 322

2014 Carrying amount of goodwill 1 766 2 922 3 590 8 278 Carrying amount of indefinite life intangibles 4 535 127 2 660 7 322

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

5. IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES (continued)

In the current financial period, a goodwill impairment of R1 421 million and R2 922 million relating to Edgars and Discount respectively, was recognised. R127 million (2015: nil and 2014: R33 million) of the CNA indefinite life brand, R142 million relating to the Boardmans indefinite brand within Edgars and R254 million of the Jet indefinite life brand was impaired. The impairment recognised with respect to both goodwill and the indefinite life brands is the result of lower cash flows within business plans reflecting challenging economic and competitive trading conditions, right sizing of CNA stores as well as a change in the mix of products sold impacting gross margins.

Goodwill of R20 million was recognised through a business combination during the current financial period (note 34.7.1).

Assumptions applied in value-in-use calculation of the cash generating units

The calculation of value-in-use is sensitive to changes in the following assumptions, listed in order from most sensitive to least sensitive: gross margin, revenue growth, discount rates, growth rates (used to extrapolate cash flows beyond the financial forecast period), store expenses and market share.

Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the forecast period for anticipated efficiency improvement and therefore based on financial forecasts for the Edgars, CNA and the Discount divisions.

Store expenses are applied as a percentage of sales to the forecast based on historic performance, adjusted for any future impacts. Discount rates reflect management’s estimate of the risks specific to each unit. Market share assumptions (based on external market information) are important as management considers how the unit’s position relative to its competitors might change over the forecast period.

Forecast capital expenditure is based on past experience and includes ongoing capital expenditure required to roll-out new stores and maintain existing stores and includes cash outflows for the purchase of property, plant and equipment and computer software.

Growth rate estimates are conservatively applied to each unit having considered industry expected growth rates and internal targets. The Group is not expected to exceed the long-term average growth rates of the industry.

Credit and financial services value in use is based on financial forecasts and includes assumptions with respect to, number of account, new accounts, accounts reactivated, ageing profile of accounts and insurance income and claims based of projected activity and past experience. As there is significant headroom, the value in use is not sensitive to a reasonable change in each of the assumptions used.

Sensitivity analysis

The recoverable amount of each cash-generating unit is highly sensitive to changes in management’s estimates used for each of the pre-tax discount rates, terminal growth rates, gross margins and revenue growth rates applied to the discounted cash flows.

The affect of a 1% negative variation in each of these rates would cause the carrying amount of the Edgars and Discount cash-generating unit to exceed the recoverable amount. The impact as at 26 March 2016 of either a 1% increase or 1% decrease would be as follows for each of these cash-generating units:

1% Decrease 1% Increase Edgars Discount Edgars Discount Rm Rm Rm Rm Pre-tax discount rates 1 006 624 (528) (32) Terminal growth rates (384) No impact 818 540 Gross margin (861) (713) 1 145 1 223 Revenue growth rates (1 370) (889) 1 789 1 448

The estimated recoverable amount of the Credit and Financial Services division exceeded the carrying value by approximately R7 billion and due to the significant headroom, the division is not impacted by a 1% variation to management’s estimates when comparing the carrying value to the recoverable amount.

Management continually reassesses the key assumptions relating to each of its cash generating units to consider if any further impairments are necessary.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

6. DERIVATIVE FINANCIAL INSTRUMENTS1

6.1 Non-current derivative assets Cross currency swaps 23 Foreign currency call options 701 724 6.2 Current derivative assets Cross currency swaps 747 Foreign currency call options 527 550 Call option premium 2892 816 1 297 6.3 Current derivative liabilities Foreign currency forward contracts 24 Cross currency swaps 79 24 103 24 6.4 Total derivatives Foreign currency forward contracts liability (24) Cross currency swaps (liability)/asset (79) 746 Foreign currency call option asset 527 1 251 Call option premium2 289 713 1 997 Credit risk valuation adjustments1 Foreign currency forward contracts (1) Cross currency swaps (5) (2) Foreign currency call options 1 6 (5) 4 Total derivatives before credit risk valuation adjustments Foreign currency forward contracts liability (25) Cross currency swaps (liability)/asset (84) 744 Foreign currency call option asset 528 1 257 Call option premium2 289 708 2 001

1Credit risk valuation adjustments are included in the total fair value of derivatives above. 2Represents the premium settled in November 2014 on the foreign currency call options.

The derivative contracts either matured or were terminated during the current period. In December 2015, foreign currency call options with gross notional values of €486 million and $250 million as well as, cross currency swaps with a gross notional value of €425 million were terminated. The Group realised net proceeds of R999 million on termination being, R1,339 million gross proceeds received net of R340 million relating to option premiums settled. In March 2016, foreign currency call options with a gross notional value of €72 million and $12 million as well as a forward contract with a gross notional value of €7 million were terminated and the Group realised net proceeds of R89 million being R193 million gross proceeds received net of R104 million relating to option premiums settled (note 34.9).

In September and November 2014, the Group restructured certain derivative contracts by early terminating a series of cross currency swaps and foreign currency call options with gross notional values of €230 million and €237 million, respectively, which were due to mature in March 2015. On termination, the Group realised net proceeds of R227 million being, R826 million (note 34.9) gross proceeds received, net of a R310 million (note 20) settlement relating to the option premiums which had been deferred on the early terminated foreign currency call options. The balance of R289 million related to premiums settled on foreign currency call options (refer to paragraph below).

Foreign currency call options were entered during the prior financial period which partially hedged both interest and principal with a notional value of €44 million and €385 million, respectively, on the senior secured fixed rate notes. These foreign currency call options extend the hedge cover to March 2016. Premiums payable on these foreign currency call options of R50 million and R154 million were deferred to July 2015 and March 2016, respectively, and R289 million settled in November 2014 (note 6.2). These foreign currency call options were not designated as cash flow hedges.

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

6. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

6.4 Total derivatives (continued)

Additionally, the Group entered into two foreign currency forward contracts with a notional value of €7 million each, maturing in September 2015 and March 2016, respectively, and these contracts were designated as cash flow hedges. These forward contracts partially hedged the interest payments on the €300 million senior secured fixed rate notes. The Group also entered into foreign currency call options with a notional value of $24 million to partially hedged interest on the $250 million senior secured fixed rate notes, extending hedge cover to March 2016. The foreign currency call options have not been designated as cash flow hedges.

During the 2014 financial period during November 2013 and December 2013, Edcon Holdings Limited terminated cross currency swaps, interest rate swaps and currency forwards as a consequence of the redemption of the senior floating rate notes to which they were related and received net proceeds of R277 million. Additionally, on 17 May 2013, Edcon Limited terminated cross currency swaps as a consequence of the repurchase of the senior secured floating rate notes with a nominal value of €387 million and received proceeds of R654 million which were applied to the redemption of the senior secured floating rate notes in that period.

Refer to note 37.2 for details of hedging activities.

6.5 Derivative gain/(loss) Derivative gain/(loss) recognised in profit or loss 743 (601) 603 743 (601) 603

7. DEFERRED TAXATION

Balance at the beginning of the period – asset/(liability) 264 346 (558) Recognised in profit or loss – current year (note 33.1) (275) 120 863 Recognised in profit or loss – prior year (note 33.1) 75 (241) 106 Deferred tax in other comprehensive income – cash flow hedges (note 33.2) (25) 48 (36) Other deferred tax movements (11) (5) 4 Deferred tax in other comprehensive income –employee benefits (note 33.2) (9) (4) (33) Balance at the end of the period – asset/(liability) 19 264 346

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

7. DEFERRED TAXATION (continued)

Comprising: Section 24C allowance 36 40 14 Intangible assets 1 607 1 333 1 408 Property, fixtures, equipment and vehicles 234 239 217 Prepayments 19 42 21 Employee benefits asset 17 31 50 Forward exchange contracts – application of Section 24I 3 Call option premium 76 Foreign currency call options – application of Section 24I 320 Cross currency swaps 22 Interest - application of Section 24J 20 Cross currency swaps - application of Section 24I 25 Deferred tax provision – deferred tax asset 710 Deferred tax provision 767 Gain on non-consenting 13.375% senior fixed rate notes (note 19.12) 26 Other 5 3 - Deferred tax liability 3 421 2 132 1 732

Provision for impairment of receivables 25 31 41 Provision for stock losses 13 10 7 Other payables 155 166 120 Leave pay accrual 33 42 44 Operating lease adjustment 182 166 134 Onerous lease liability 44 31 Income received in advance 84 25 28 Finance leases 84 90 77 Employee benefits liability 41 43 49 Assessed loss 2 758 1 463 1 269 Deferred option premium 301 309 Cash flow hedges 25 Restraint of trade 3 3 Interest – application of Section 24J 11 Other 7 Deferred tax asset 3 440 2 396 2 078

Net deferred tax asset/(liability) 19 264 346

Reflected in the Statement of Financial Position as follows: Deferred tax assets – continuing operations 127 330 387 Deferred tax assets – trade receivables held-for-sale (note 12.1.2) 24 33 Deferred tax liabilities – continuing operations (108) (90) (74) Net deferred tax asset/(liability) 19 264 346

100

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

7. DEFERRED TAXATION (continued)

The Group has tax losses in a South Africa subsidiary of R2 756 million (2015: R1 456 million) that is available indefinitely for offsetting against future taxable profits of that Company. A deferred tax provision of R710 million has been raised in respect to these losses and included under the deferred tax liability composition above as the subsidiary has been loss making for some time and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Group were able to recognise all unrecognised deferred tax assets, the losses would reduce by R710 million.

8. INVENTORIES

Merchandise 4 558 4 276 4 360 Raw material 113 79 57 Work in progress 17 18 19 Consumables 29 19 18 Total inventories on hand 4 717 4 392 4 454

Inventory write-downs included above 156 140 100

Cost of inventories expensed 16 994 17 155 16 939

Consumables previously classified in sundry receivables and prepayments (note 10) have been included in inventories during the current period and 2015 and 2014 reclassified.

The cost of inventories expensed includes notional interest (note 32.2) on purchases from suppliers not for cash of: 325 318 321

9. TRADE RECEIVABLES

Trade accounts receivable – retail 1 105 505 369 Provision for impairment of receivables (139) (32) (46) Total trade receivables 966 473 323

R104 million (2015: R6 million and 2014: R16 million) of the balances are covered by an account protection policy whereby the Group is the beneficiary in the event of the customer’s death, the customer being retrenched or becoming permanently disabled. The policy does not provide cover for insolvency or inability to pay.

On 6 June 2012, the Group announced the intended sale of its private label store cards to Absa, as well as the implementation of a long-term strategic agreement. On 1 November 2012, all conditions required for the first closing of the South African trade accounts receivable sale were satisfied and R8 667 million of the South African private label store and portfolio was sold to Absa. On 30 April 2013 and 30 June 2013, all conditions required for the second and third closing of the South African trade accounts receivable sale were satisfied and R461 million and R114 million, respectively, was sold to Absa. On 1 July 2014, R314 million of the Namibian private label store card portfolio was sold to Absa. In terms of the strategic agreement with Absa, Absa will provide retail credit to these Group customers which were sold to Absa, while the Group continues to be responsible for all customer-facing activities for these trade receivables which were sold to Absa, including sales and marketing, customer services and collections.

In the prior year, trade receivables of R369 million (2014: R618 million) had been disclosed as “assets classified as held- for-sale” (note 12).

101

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

9. TRADE RECEIVABLES (continued)

This portion of the card portfolio related to Lesotho, Botswana, Swaziland and the remaining Namibian trade receivables portfolio not sold to Absa. In the current period, the Group ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale as the carrying amount was no longer deemed to be recovered through a highly probable sale transaction (note 12).

The Group’s trade receivables of R966 million consists of Edgars Stores Limited Zimbabwe of R481 million, R321 million relating to net trade receivables in Lesotho, Botswana, Swaziland and Namibia and the balance relating to the South African book.

In the current period R29 million (2015: R42 million) of the written down trade receivables book was sold.

The Edgars Stores Limited Zimbabwe trade receivables have an average credit period on sale of goods of 390 days (2015: 390 days and 2014: 210 days). Interest is charged on accounts with payment terms in excess of 6 months to pay. Additional late payment interest is charged at 4.5% (2015 and 2014: 4%) per month on the outstanding balance for customers who default on their repayments.

9.1 Analysis of trade receivables past due but not impaired Overdue 30 days – 60 days 84 15 20 Overdue 60 days – 90 days 28 2 1 Overdue 90 days – 120 days 14 1 Greater than 120 days 7 3 133 17 25 9.2 Interest on impaired receivables Interest recognised on impaired receivables 30 2 6 Total interest recognised on impaired receivables 30 2 6

9.3 Provision for impairment of receivables Balance at the beginning of the period 32 46 22 Increase/(decrease) in impairment provision 107 (1) 40 Decrease in impairment provision – discontinued operation (note 12) (13) (16) Balance at the end of the period 139 32 46

10. SUNDRY RECEIVABLES AND PREPAYMENTS

Sundry receivables 810 520 595 Staff loans 4 4 6 Prepayments 85 153 96 Value added taxation 13 128 59 912 805 756

Consumables previously classified in sundry receivables and prepayments have been included in inventories (note 8) during the current period and 2015 and 2014 reclassified.

11. CASH AND CASH EQUIVALENTS

Cash on hand 238 257 251 Cash on deposit 1 455 1 031 159 1 693 1 288 410

102

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

12. TRADE RECEIVABLES DISPOSED & ASSETS CLASSIFIED AS HELD-FOR-SALE

On 6 June 2012, the Group announced the intended sale of its private label store card portfolio to Absa as well as the proposed implementation of a long-term strategic agreement. On 1 November 2012, all conditions required for the first closing of the South African trade accounts receivable were satisfied and R8 667 million of the South African private label store card portfolio was sold to Absa. On 30 April 2013 and 30 June 2013, all conditions required for the second and third closing of the South African trade accounts receivable were satisfied and a further R461 million and R114 million, respectively, was sold to Absa. On 1 July 2014, R314 million of the Namibian private label store card portfolio was sold to Absa. In terms of the strategic agreement Absa will provide retail credit to the Group’s customers which were sold to Absa, while the Group continues to be responsible for all customer-facing activities for these trade receivables which were sold to Absa, including sales, marketing, customer services and collections.

The card portfolio in Lesotho, Namibia, Botswana and Swaziland was classified as held-for-sale in 2015 and 2014. In the current period, the Group ceased to classify the trade receivables store card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale as no buyer could be found at an acceptable price. The Group has concluded that the carrying amount is no longer deemed to be recovered through a highly probable sale transaction.

Accordingly, the results of operations for this component previously presented in discontinued operations in the consolidated statement of comprehensive income has been reclassified and included in income from continuing operations for all periods presented. In the statement of financial position, no portion of the trades receivables balance is shown as held-for-sale in the current period, with the prior periods not restated.

12.1 Statement of Financial Position

The major classes of assets sold were as follows:

12.1.1 Trade receivables disposed Assets Trade receivables 314 575 Total assets disposed 314 575

12.1.2 Trade receivables held-for-sale Assets Trade receivables 369 618 Deferred tax asset (note 7) 24 33 393 651

103

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

13. SHARE CAPITAL AND PREMIUM

13.1 Authorised ordinary share capital 1 000 000 000 “A “ordinary shares with a par value of R0.00001 each - - - 100 000 000 “B” ordinary shares with a par value of R0.00001 each - - - 1 000 000 000 “C” ordinary shares with a par value of R0.00001 each - - - 1 000 000 000 “D” ordinary shares with a par value of R0.00001 each - - - 1 000 000 000 “E” ordinary shares with a par value of R0.00001 each - - - 1 000 000 000 “F” ordinary shares with no par value ------

13.2 Authorised preference share capital 1 000 000 000 “A” preference shares of R0.00001 each - - - 1 000 000 000 “B” preference shares of R0.00001 each - - - 1 000 000 000 “F1” preference shares with no par value - 1 000 000 000 “F2” preference shares with no par value - - - - -

13.3 Number of ordinary shares in issue Number of shares at the beginning of the period 569 238 564 375 564 375 “C” ordinary shares issued 8 608 1 621 1 621 “D” ordinary shares issued 8 608 1 621 1 621 “E” ordinary shares issued 8 608 1 621 1 621 Number of shares at the end of the period 595 062 569 238 569 238

Number of ordinary shares in issue comprise: “A” ordinary shares issued 500 133 500 133 500 133 “B” ordinary shares issued 69 213 69 213 69 213 “C” ordinary shares issued 31 643 23 035 23 035 “D” ordinary shares issued 31 643 23 035 23 035 “E” ordinary shares issued 31 643 23 035 23 035 Treasury shares – Staff Empowerment Trust (69 213) (69 213) (69 213) 595 062 569 238 569 238

13.4 Number of preference shares in issue Number of shares at the beginning of the period 256 707 256 707 256 707 Number of shares at the end of the period 256 707 256 707 256 707

Number of preference shares in issue comprise: “A” preference shares of R0.00001 each 200 866 200 866 200 866 “B” preference shares of R0.00001 each 55 841 55 841 55 841 256 707 256 707 256 707

104

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

13. SHARE CAPITAL AND PREMIUM (continued)

13.5 Voting rights of ordinary and preference shares Each “A” ordinary share of the Group shall entitle the holder thereof to 1 000 votes on all matters upon which shareholders have the right to vote.

Each “A” redeemable cumulative preference share of the Group shall not entitle the holders thereof to receive notice of or to attend or vote at any general meeting of the company Edcon Holdings Limited, save where a resolution affecting a matter contemplated in section 37(3)(a) of the Companies Act of South Africa is proposed.

The total “B” ordinary shareholder of the Group at any time shall, in aggregate, have the right to exercise such number of votes as is equal to 10,6% of the aggregate voting rights of the total “A” ordinary shares then in issue.

Each “B” redeemable cumulative preference share of the Group shall not entitle the holders thereof to receive notice of or to attend or vote at any general meeting of the company Edcon Holdings Limited, save where a resolution affecting a matter contemplated in section 37(3)(a) of the Companies Act of South Africa is proposed.

Each “C”, “D” and “E” ordinary share shall entitle the holder thereof to one vote on all matters upon which shareholders have the right to vote.

The “F” ordinary shares shall not entitle the holders thereof to vote at any general meeting of the company Edcon Holdings Limited, save where a resolution affecting a matter contempated in section 37(3)(a) of the Companies Act of South Africa is proposed.

The “F1” preference shares shall not entitle the holders thereof to vote at any general meeting of the company Edcon Holdings Limited, save where a resolution affecting a matter contempated in section 37(3)(a) of the Companies Act of South Africa is proposed.

The “F2” preference shares shall not entitle the holders thereof to vote at any general meeting of the company Edcon Holdings Limited, save where a resolution affecting a matter contempated in section 37(3)(a) of the Companies Act of South Africa is proposed.

13.6 Redemption of preference shares The “A”, “B”, “F1” and “F2” Preference Shares may not be redeemed within three years and one day of their date of issue and will thereafter be redeemed at a date fixed by Edcon Holdings Limited.

Edcon Holdings Limited shall pay to the member, all monies payable in respect of the redemption of such “A”, “B”, “F1” and “F2” Preference Shares as calculated in accordance with the provisions of the Memorandum of Incorporation of Edcon Holdings Limited.

The “A”, “B”, “F1” and “F2” Preference Shares shall not confer on the holders thereof any further rights to participate in the profits or assets of Edcon Holdings Limited.

13.7 Classification of preference shares at inception The preference shares have been classified as equity at inception during the 2008 financial period where management has applied significant judgement thereto having considered the rights of the preference shareholders and distribution entitlement and the conditions relating to the Shareholder’s loan agreement (note 18.3), the commercials of the private equity transaction concluded in the 2008 financial period and the shareholder’s and managements intent at inception. The Shareholder’s loan repayment is subject to Edcon Holdings Limited having declared distributions to the preference shareholders by May 2037. The classification of the preference shares are dependent on the legal interpretation of the Shareholder’s loan. Management has interpreted that the preference shares are sufficiently de-linked from the Shareholder’s loan as any distributions on the preference shares which are at the discretion of Edcon Holdings Limited and are not considered to be dependent on the repayment of the Shareholder’s loan. Alternative judgements applied and alternative interpretations of the Shareholder’s loan agreement may have resulted in the preference shares classified as financial liabilities and not equity.

105

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

13. SHARE CAPITAL AND PREMIUM (continued)

13.8 Issued shares and premium Balance at the beginning of the period 2 155 2 155 2 153 Ordinary shares issued – share capital - 2 Ordinary shares issued – share premium - Balance at the end of the period 2 155 2 155 2 155

Comprising: Share capital - - - Share premium 2 155 2 155 2 155 Total 2 155 2 155 2 155

During the current financial period the company, Edcon Holdings Limited, issued the following shares:

- - 291 “C” ordinary shares with a par value of R0.00001 per share at a premium of R163.54 per share; - - 8 317 “C” ordinary shares with a par value of R0.00001 per share at a premium of R17.11 per share; - - 291 “D” ordinary shares with a par value of R0.00001 per share at a premium of R163.54 per share; - - 8 317 “D” ordinary shares with a par value of R0.00001 per share at a premium of R17.11 per share; - - 291 “E” ordinary shares with a par value of R0.00001 per share at a premium of R163.54 per share; and - - 8 317 “E” ordinary shares with a par value of R0.00001 per share at a premium of R17.11 per share.

106

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm 14. WARRANTS

14.1 Number of warrants in issue F warrants issued 94 722 F1 warrants issued 1 694 965 720 F2 warrants issued 137 258 338 Total number of warrants in issue 1 832 318 780

14.2 Warrants issued F warrants – issued at 0 cents per warrant - F1 warrants – issued at 7.36 cents per warrant 125 F2 warrants – issued at 7.36 cents per warrant 10 135

Under an Exchange Offer Memorandum and Consent Solicitation (“Exchange Offer”) launched on 30 June 2015 by Edcon Holdings Limited with respect to its €425 million 13.375% Senior Notes due 2019 (“Existing 2019 Notes”) (note 19.12), the warrants were issued on 27 November 2015.

In terms of the Exchange Offer, Noteholders were offered to exchange each €1 000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon since 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional principal) for the securities which were set forth in Option A and Option B under the Exchange Offer.

Noteholders who elected Option B under the Exchange Offer, exchanged €1 000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional interest) for €1 000 in principal amount of new Option B senior 13.375% PIK notes issued by Edcon Holdings Limited on the settlement date which were deemed to have started accruing interest on 30 June 2015, regardless of the date on which they were issued.

On the conversion date, 27 November 2015, the new Option B senior 13.375% PIK notes were called and each €1 000 in principal amount was exchanged for the following:

- a pro rata portion of the Edcon Holdings Limited warrants exercisable for, and rights to distribution relating to, the Edcon Holdings Limited Warrant Shares offered in the Exchange Offer; - €100 in principal amount of New Super Senior PIK Notes issued by a Group company, Edcon Limited and; - €150 in principal amount of new senior secured 9.75%/12.75% PIK-toggle notes issued by Edcon Limited.

107

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

14. WARRANTS (continued)

14.2 Warrants issued (continued)

The value of the warrants issued have been determined using a valuation technique employing the Current Value Method, prepared on the basis of “Market Value” (i.e. the value as applied between a hypothetical willing vendor and a hypothetical willing prudent buyer in an open market with access to relevant information) and valued as at 27 November 2015. The Current Value Method estimated the value of the warrants issued by determining the enterprise value of Edcon Holdings Limited using discounted cash flows and subtracting the fair value of the debt as at 27 November 2015. The equity value was allocated to each class of equity including the warrants by using the Current Value Method based on the distributions that the Warrant holders would receive at the date of the valuation on 27 November 2015.

The warrants are classified as equity at inception in the current financial period. Management has applied significant judgement thereto having considered the rights of the warrant holders, rights to conversion, distribution entitlement and the conditions relating to the Shareholder’s loan agreement (note 18.3). The Shareholder’s loan repayment is subject to the Company having declared distributions to the preference shareholders by May 2037. The classification of the warrants are dependent on the legal interpretation of the Shareholder’s loan as to whether they are sufficiently linked. Management has concluded that the warrants are sufficiently de-linked from the Shareholder’s loan and provides the warrant holders with rights which are more akin to those of an equity instrument. On conversion to preference shares, any distributions on such preference shares would be at the discretion of the Company and are not considered to be dependent on the repayment of the Shareholder’s loan. Alternative judgements applied and alternative interpretations of the Shareholder’s loan agreement may have resulted in the warrants being considered to be derivatives or a financial liability and not equity.

Exercise of warrants

The warrants shall exercise as follows:

- each F1 Warrant shall exercise into one F1 Preference Share; - each F2 Warrant shall exercise into one F2 Preference Share; and - each F Warrant shall exercise into one F Ordinary Share.

Rights of Warrant holders

Warrant holders have the right to:

- receive or access information concerning the Company as the Warrant holder would be entitled to receive if the Warrant holder was a holder of Warrant shares, including the audited financial statements and securities register of Edcon Holdings Limited; - apply to court to protect their rights or rectify a harm to them as if the Warrant holder was a holder of Warrant Shares; and - apply to court for relief from oppressive or prejudicial conduct as if the Warrant holder was a holder of Warrant Shares.

Edcon Holdings Limited, shall not make any distribution unless it pays to the applicable Warrant holders an amount equal to that which they would have been entitled to receive by way of such distribution pursuant to the Memorandum of Incorporation and the Long-Term Shareholders' Loan assuming that they had exercised their Warrants in full and been issued Warrant Shares pursuant to such exercise immediately prior to the distribution.

108

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

15. OTHER RESERVES

Balance at the beginning of the period comprising: Revaluation reserve net of deferred taxation 8 8 8 Foreign currency translation reserve 20 10 (31) Cash flow hedges net of tax (76) 99 (37) (48) 117 (60) Movements Net decrease in revaluation reserve - - - Foreign currency translation reserve 38 10 41 Cash flow hedges recognised in other comprehensive income 43 (527) 564 Cash flow hedges released to financing costs 24 208 76 Cash flow hedges released to foreign exchange loss/(gain) 96 (771) Ineffective portion of cash flow hedges released to derivative

gains/(losses) as hedge ineffectiveness 34 Cash flow hedges released due to discontinuing hedge

accounting 303 Tax impact of cash flow hedges (note 33.2) (25) 48 (36) Balance at the end of the period 66 (48) 117

Comprising: Revaluation reserve net of deferred taxation 8 8 8 Foreign currency translation reserve 58 20 10 Cash flow hedges net of tax (76) 99 66 (48) 117

The foreign denominated fixed rate notes expose the Group to foreign exchange risk. Derivative instruments were executed to limit the exposure to both interest rate and/or foreign exchange risk. Certain derivative instruments were designated as a cash flow hedge. Refer to note 37.2 for details of the hedging strategy and note 6 on derivative financial instruments.

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.

16. RETAINED (LOSS)/SURPLUS

Comprising: Holding company - Edcon Holdings Limited (12 495) 2 821 2 557 Consolidated subsidiaries (11 864) (19 139) (16 871) (24 359) (16 318) (14 314)

17. FOREIGN SUBSIDIARY DISTRIBUTIONS

Distributions by certain foreign subsidiaries will give rise to withholding taxes of R74 million (2015: R57 million and 2014: R44 million). No deferred tax is raised until dividends are declared as the Group controls the timing of the reversal and it is probable that there will be no reversal in the foreseeable future. Deferred tax not raised was R205 million (2015: R145 million and 2014: R113 million).

109

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

18. SHAREHOLDER’S LOAN

18.1 Shareholder’s loan derecognised to equity Principal at the beginning of the period 8 311 8 290 8 290 Reclassification from loan recognised in non-current liabilities 21 Balance at the end of the period 8 311 8 311 8 290

18.2 Loan recognised in non-current liabilities Principal 638 638 659 Cumulative notional interest 344 203 138 Loan recognised in non-current liabilities 982 841 797

Reconciliation of loan recognised in non-current liabilities Principal and notional interest at the beginning of the period 841 797 801 Notional interest charged for the period 141 65 (4) Reclassification to loan recognised in equity (21) Principal and notional interest at the end of the period 982 841 797

18.3 Total principal due to Edcon (BC) S.A.R.L 8 949 8 949 8 949

In June 2007 the parent company, Edcon (BC) S.A.R.L., provided a shareholder loan for R5 057 million as proceeds of capital investment into the Company. The loan was denominated in South African Rands and accrued interest at the South African prime rate plus 2% p.a. up to and including 7 February 2012. Thereafter, the loan was amended to be interest-free up to and including the date of repayment. As a result of the loan being amended to be interest-free, the terms of the loan were substantially different and it was necessary to derecognise the loan in terms of IAS 39 on 8 February 2012. Applying initial measurement in terms of IAS 39 at that date, resulted in R8 290 million being recognised in equity and R659 million (the present value of the amount due at maturity) being recognised in non-current liabilities in the 2013 financial period. During the prior financial period, R21 million was reclassified from the shareholder’s loan recognised in non-current liabilities to the shareholder’s loan derecognised to equity due to a misclassification between equity and non-current liabilities as at 8 February 2012. As a result, the amount of the original loan derecognised in equity not through profit and loss at 8 February 2012 was R8 311 million. The new loan of R638 million disclosed in non-current liabilities was recognised in terms of IAS 39, at fair value on 8 February 2012 and thereafter carried at amortised cost. The R8 311 million was derecognised to equity and not through profit and loss on 8 February 2012 as in substance, this represented additional capital introduced by the shareholder, being the present value of future forgiven cash flows (interest payments). The principal of R8 949 million is repayable in May 2037 to Edcon (BC) S.A.R.L.

Because of various clauses in the Shareholder’s loan agreement and the Memorandum of Incorporation of Edcon Holdings Limited, the classification of the shareholder’s loan is potentially subject to different interpretations of the agreements. At inception of the loan, in the 2008 financial period and in the periods since then, management applied judgement with respect to the classification of the loan as a financial liability having considered the Shareholder’s loan agreement, the commercials of the private equity transaction completed at the time and the intentions of all parties at that time. Management concluded that the Shareholder’s loan met the definition of a financial liability because repayment of the loan was not dependent upon the distribution of amounts in respect of certain preference shares (note 13.4, 13.7 and 13.8) of Edcon Holdings Limited. An alternative interpretation of the Shareholder’s loan agreement, namely that the repayment of the loan is subject to the payment of distributions on the relevant preference shares, which distributions are at the discretion of Edcon Holdings Limited, and judgements applied at inception, may have resulted in the Shareholder’s loan being classified as equity and not as a financial liability.

This shareholder’s loan is regarded as capital for IAS 1 purposes (note 36). To the extent required to maintain the solvency of the Edcon Holdings Limited Group, the shareholder’s loan is subordinated to the claims of all of the creditors of the Edcon Holdings Limited Group.

110

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT

ZAR Super senior RCF term loan (note 19.1) 3 249 EUR Super senior refinancing facility (note 19.2) 2 033 ZAR Super senior hedging debt (note 19.3) 662 EUR Super senior term loan (note 19.4) 638 ZAR Super senior floating rate notes (note 19.5) 1 005 1 010 EUR Super senior PIK notes (note 19.6) 1 876 ZAR Senior secured term loan (note19.7) 3 011 4 083 4 008 USD 250 million Senior secured fixed rate notes (note 19.8) 3 845 2 981 2 603 EUR 317 million Senior secured fixed rate notes (note 19.9) 5 437 4 108 4 542 EUR 300 million Senior secured fixed rate notes (note 19.10) 5 067 3 773 4 149 EUR Senior secured PIK-toggle notes (note 19.11) 482 EUR 425 million Senior fixed rate notes (note 19.12) 5 381 5 948 EUR 3 million Senior fixed rate notes (note 19.13) 51 Other interest-bearing debt (note 19.14) 152 155 113 26 503 21 486 22 373

19.1 ZAR Super senior RCF term loan Loan raised 3 417 Loan settled (168) 3 249

Balance at the beginning of the period Loan raised 3 417 Loan settled (168) Balance at end of period 3 249

On 27 November 2015, the Group concluded an agreement with certain financial institutions whereby the super senior revolving credit facility (note 21) was converted into a ZAR Super senior RCF term loan facility, guaranteed on a super senior secured basis and secured by interests over substantially all the assets of Edcon Holdings Limited and its subsidiaries. The total exposure of the term loan was R3 717 million, comprising of R 3 417 million in cash funding and R300 million (“the ZAR Super senior LC Facility”) available for utilisation for letters of credit and guarantees. The loan is repayable on 31 December 2017, while interest is payable bi-annually in cash at an initial rate of three-month JIBAR plus 5.0% and paid-in-kind (“PIK”) at an interest rate of 3.0%.

111

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.2 EUR Super senior refinancing facility Loan raised 1 868 Foreign currency 259 Fees capitalised (94) 2 033

Balance at the beginning of the period Loan issued 1 868 Foreign currency movement 259 Fees capitalised (110) Fees amortised 16 Balance at end of period 2 033

On 27 November 2015, the Group concluded an agreement with certain financial institutions to provide a facility with a nominal value of €123 million, guaranteed on a senior secured basis and secured by interests over substantially all the assets of Edcon Holdings Limited and its subsidiaries. The proceeds on the drawdown of the facility was utilised to redeem the ZAR super senior floating rate notes (note 19.5). Interest accrues semi- annually in arrears at a rate of EURIBOR plus 4.0% per annum payable in cash and at a rate of 8.0% paid-in-kind (“PIK”). The loan matures on 31 December 2019 however, the facility will spring to mature on the same date as the ZAR Super senior RCF term loan and the R300 million ZAR super senior LC Facility due 31 December 2017 (note 19.1).

19.3 ZAR Super senior hedging debt Loan raised 657 Interest capitalised 4 Settlement premium capitalised 1 662

Balance at the beginning of the period Loan raised 657 Interest capitalised 4 Settlement premium capitalised 1 Balance at end of period 662

On 1 December 2015, the Group concluded an agreement with certain of its deferred option premium holders, whereby the deferred option premiums that were due to be settled in December 2015 and March 2016, were converted into a ZAR denominated debt instrument, guaranteed on a super senior secured basis and secured by security interests over substantially all the assets of Edcon Holdings Limited and its subsidiaries. Interest accrues quarterly in arrears at a rate of three-month JIBAR payable in cash and at a rate of 8.0% paid-in-kind (“PIK”). The debt matures on 31 December 2017. Refer to note 20.

112

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.4 EUR Super senior term loan Loan elevated (note 19.7) 552 Foreign currency 73 Interest capitalised 13 638

Balance at the beginning of the period Loan elevated 552 Foreign currency 73 Interest capitalised 13 Balance at end of period 638

On 27 November 2015, the Group concluded an agreement with its senior secured term loan providers (note 19.7), whereby the senior secured term loan maturity date would be extended. As a result, a portion of the senior secured term loan was elevated to super senior and became denominated in Euro. The nominal value of the debt is €36 million, with interest accruing quarterly in arrears. The rate of cash interest for each interest period is the percentage rate per annum equal to the applicable EURIBOR excluding any portion accrued in respect of the paid-in-kind (“PIK”) interest during the interest period. PIK interest accrues at a rate of 8.0%. The term loan matures on 31 December 2017.

19.5 ZAR Super senior floating rate notes Notes issued 1 010 1 010 1 010 Fees capitalised (5) Settled (1 010) 1 005 1 010

Balance at the beginning of the period 1 005 1 010 1 010 Fees capitalised (8) Fees amortised 5 3 Settled (1 010) Balance at the end of the period 1 005 1 010

These super senior secured notes were issued during the 2012 financial period by Edcon Limited and guaranteed on a super senior secured basis. Interest was payable quarterly in arrears at a rate of three-month JIBAR, plus 6.25%.

On 4 January 2016, the Group settled R1 010 million super senior secured notes, at a redemption price equal to the face value that was due to mature on 4 April 2016. The settlement was paid in one tranche of R1 042 million being the principal and the interest due up until the initial maturity date. These notes were settled out of the proceeds from the super senior refinancing facility (note 19.2).

There were no defaults or breaches of the principal or interest during the period.

113

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.6 EUR Super senior PIK notes Notes issued 1 748 Fair value adjustment (161) Interest capitalised 78 Foreign currency 211 1 876

Balance at the beginning of the period Notes issued 1 748 Fair value adjustment recognised in profit and loss (203) Fair value adjustment amortised (note 32.2) 42 Interest capitalised 78 Foreign currency 211 Balance at end of period 1 876

On 27 November 2015, as part of the Exchange Offer (note 19.12), the new Option A senior 13.375% PIK notes were called and each €1,000 in principal amount was exchanged for the following:

- €350 in principal amount of EUR Super senior PIK notes.

The new option B senior 13.375% PIK notes were called and each €1,000 in principal amount was exchanged for the following:

- a pro rata portion of the Edcon Holdings Limited warrants exercisable for, and the rights to distribution relating to, the Edcon Holdings Limited Warrant Shares offered in the Exchange Offer; - €100 in principal amount of new super senior 8% PIK notes; and - €150 in principal amount of new super senior secured 9.75%/12.75% PIK-toggle notes.

The super senior PIK notes were issued at a nominal value of €116 million. Interest is accrued semi-annually in arrears at 8% and will be settled on maturity of the super senior PIK notes. The notes mature on 30 June 2019. The market value of the Super senior PIK notes at 26 March 2016 was R1,681 million.

19.7 ZAR Senior secured term loan Loan raised 3 031 4 120 4 120 Fees capitalised (45) (79) (112) Interest capitalised 25 42 3 011 4 083 4 008

Balance at the beginning of the period 4 083 4 008 Loan raised 4 120 Loan elevated (note 19.4) (552) Repayment (note 34.8) (657) Fees capitalised (140) Fees amortised 34 33 28 Interest capitalised as at 27 November 2015 78 42 Interest capitalised post 27 November 2015 25 Balance at end of period 3 011 4 083 4 008

114

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.7 ZAR Senior secured term loan (continued) On 27 November 2015, the Group concluded an agreement with its senior secured term loan providers, whereby the senior secured term loan maturity date was extended from May 2017 to 31 December 2017. As result, a portion of the senior secured term loan was elevated to super senior (note 19.4) and became denominated in Euro. Interest is payable quarterly at an initial rate of three-month JIBAR plus 7.0% in cash and a 3.0% payment-in-kind (“PIK”) margin.

On 28 March 2013, the Group concluded an agreement with certain financial institutions to provide a R4 120 million term loan. The proceeds from the senior secured term loan were used to repurchase all outstanding senior secured floating rate notes in issue at that time.

The loan is guaranteed on a senior secured basis and is secured, along with the ZAR super senior RCF term loan, EUR super senior refinancing facility, ZAR super senior hedging debt, the EUR super senior term loan, EUR super senior PIK notes and the ZAR senior secured term loan, by security interests over substantially all the assets of Edcon Holding Limited and its subsidiaries.

19.8 USD 250 million Senior secured fixed rate notes Notes issued 1 737 1 737 1 737 Foreign currency 2 128 1 273 904 Fees capitalised (20) (29) (38) 3 845 2 981 2 603

Balance at the beginning of the period 2 981 2 603 2 245 Foreign currency movement 855 369 350 Fees amortised 9 9 8 Balance at end of period 3 845 2 981 2 603

The senior secured fixed rate notes of US$250 million were issued by Edcon Limited in March 2011 and guaranteed on a senior secured basis and is secured, along with the ZAR super senior RCF term loan, EUR super senior refinancing facility, ZAR super senior hedging debt, the EUR super senior term loan, EUR super senior PIK notes and the ZAR senior secured term loan, by security interests over substantially all the assets of Edcon Holding Limited and its subsidiaries. Interest is payable semi- annually in arrears at a rate of 9.5% per annum and they mature in March 2018.

The interest payment due 15 March 2016 was accrued but not paid on that date and the Group commenced engagement with noteholders of each of the senior secured fixed rate notes of US$250 million, €317 million and €300 million on that date. A formal Consent Solicitation Statement was launched on 13 April 2016 (note 40) to consent to the deferral of payment of the interest due 15 March 2016 and 15 September 2016 as well as to amend certain other terms of the Indentures relating to these fixed rate notes. The Consent Solicitation Statement additionally sought consent to waive any defaults or events of default under these note Indentures arising as a result of the non-payment of the 15 March 2016 interest. The Group obtained in excess of 90% support and as a result there were no defaults or breach of principal or interest during the period.

The market value of the senior secured fixed rate notes at 26 March 2016 was R1 179 million (2015: R2 300 million and 2014: R2 564 million).

115

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.9 EUR 317 million Senior secured fixed rate notes Notes issued 3 044 3 044 3 044 Foreign currency 2 428 1 115 1 563 Fees capitalised (35) (51) (65) 5 437 4 108 4 542

Balance at the beginning of the period 4 108 4 542 3 654 Foreign currency movement 1 313 (448) 874 Fees amortised 16 14 14 Balance at end of period 5 437 4 108 4 542

The senior secured fixed rate notes of €317 million were issued by Edcon Limited in March 2011 and guaranteed on a senior secured basis and are secured, along with the ZAR super senior RCF term loan, EUR super senior refinancing facility, ZAR super senior hedging debt, the EUR super senior term loan, EUR super senior PIK notes and the ZAR senior secured term loan, by security interests over substantially all the assets of Edcon Holding Limited and its subsidiaries. Interest is payable semi-annually in arrears at a rate of 9.5% per annum and they mature in March 2018.

The market value of the senior secured fixed rate notes at 26 March 2016 was R1 615 million (2015: R3 202 million and 2014: R4 493 million).

19.10 EUR 300 million Senior secured fixed rate notes

Notes issued 3 598 3 598 3 598 Foreign currency 1 581 339 763 Discount on notes issued (54) (79) (102) Fees capitalised (58) (85) (110) 5 067 3 773 4 149

Balance at the beginning of the period 3 773 4 149 3 279 Foreign currency 1 242 (424) 827 Fees capitalised (2) Discount amortised 25 23 22 Fees amortised 27 25 23 Balance at end of period 5 067 3 773 4 149

116

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.10 EUR 300 million Senior secured fixed rate notes (continued)

On 13 February 2013, Edcon Limited issued new senior secured fixed rate notes which mature in March 2018, with a face value of €300 million. The notes were issued at 96.5% of the face value, are guaranteed on a senior secured basis and are secured, along with the ZAR super senior RCF term loan, EUR super senior refinancing facility, ZAR super senior hedging debt, the EUR super senior term loan, EUR super senior PIK notes and the ZAR senior secured term loan, by security interests over substantially all the assets of Edcon Holding Limited and its subsidiaries. Interest is payable semi-annually in arrears at a rate of 9.5% per annum and they mature in March 2018.

The market value of the senior secured fixed rate notes at 26 March 2016 was R1 523 million (2014: R3 030 million and 2014: R4 252 million).

19.11 EUR Senior secured PIK-toggle notes

Notes issued 552 Fair value adjustment (138) Interest capitalised 39 Foreign currency 29 482

Balance at the beginning of the period 552 Fair value adjustment (169) Fair value adjustment amortised 31 Interest capitalised 39 Foreign currency 29 Balance at end of period 482

117

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.11 EUR Senior secured PIK-toggle notes (continued)

On 27 November 2015, as part of the Exchange Offer (note 19.12), the new Option A senior 13.375% PIK notes were called and each €1,000 in principal amount was exchanged for the following:

- €350 in principal amount of EUR Super senior PIK notes.

The new option B senior 13.375% PIK notes were called and each €1,000 in principal amount was exchanged for the following:

The secured senior PIK-Toggle notes were issued at a nominal value of €36 million. Interest is accrued semi-annually in arrears with an option to either pay the interest in cash at a rate of 9.75% per annum or accrue the interest as payment-in-kind (“PIK”) at a rate of 12.75% per annum. The toggle option is at the discretion of the Group. The senior secured PIK- Toggle notes mature on 30 June 2019. There have been no defaults or breaches of the principal or interest during the period.

The market value of the senior secured PIK-Toggle notes at 26 March 2016 was R528 million.

19.12 EUR 425 million Senior secured fixed rate notes

Notes issued 5 905 5 905 Foreign currency (328) 273 Fees capitalised (196) (230) 5 381 5 948

Balance at the beginning of the period 5 381 5 948 Notes issued 5 905 Foreign currency movement 169 (601) 273 Interest capitalised 384 Fees amortised 196 37 14 Fees capitalised (3) (244) Derecognition of notes (6 130) Balance at the end of the period 5 381 5 948

118

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.12 EUR 425 million Senior secured fixed rate notes (continued)

On 14 November 2013, Edcon Holdings Limited issued senior fixed rate notes (the “Existing 2019 Notes”) with a nominal value of €425 million. Interest was payable semi-annually in arrears at a rate of 13.375% per annum and the notes matured 30 June 2019.

The market value of the €425 million senior fixed rate notes at 28 March 2015 was R1 301 million.

Noteholders who elected Option A securities under the Exchange Offer, exchanged €1 000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional interest) for €1 000 in principal amount of new Option A senior 13.375% PIK notes issued by Edcon Holdings Limited on the settlement date which were deemed to have started accruing interest on 30 June 2015, regardless of the date on which they were issued.

On 27 November 2015, the conversion date, the new Option A senior 13.375% PIK notes were called and each €1 000 in principal amount were exchanged for the following:

- €350 in principal amount of New Super Senior PIK Notes issued by Edcon Limited.

Noteholders who elected Option B under the Exchange Offer Memorandum, exchanged €1 000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional interest) for €1 000 in principal amount of new Option B senior 13.375% PIK notes issued by Edcon Holdings Limited on the settlement date which were deemed to have started accruing interest on 30 June 2015, regardless of the date on which they were issued.

On 27 November 2015, the new Option B senior 13.375% PIK notes were called and each €1 000 in principal amount were exchanged for the following:

119

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.12 EUR 425 million Senior secured fixed rate notes (continued)

Noteholders who validly tendered their Existing 2019 Notes and consent prior to the early consent deadline in the Exchange Offer and who did not validly withdraw such tender and consent prior to the withdrawal deadline received an early consent consideration which was payable on the settlement date of €50 in principal amount of new super senior 8% PIK notes of Edcon Limited per each €1 000 in principal amount of Existing 2019 Notes (with accrued but unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional principal) for which consents were so delivered.

Additionally, Edcon Holdings Limited obtained the consents of holders of more than 90% of the principal outstanding amount of the Notes to effect certain amendments to the Existing 2019 Notes, including an amendment that (i) interest on the Notes will be paid in kind (and no longer in cash) at a rate of 5.0% per annum, starting on 30 June 2015, (ii) the maturity of the Notes not tendered in the Exchange Offer be extended to 30 June 2022 and (iii) the principal amount of Notes not tendered in the Exchange Offer were reduced by 72.5% (together, the “Amendments”). After giving effect to the results of the Exchange Offer and the Amendments, Edcon Holdings Limited had approximately €3 million in aggregate principal amount of Notes outstanding (note 19.13). On reduction of the notes, the remaining 2019 Existing 2019 Notes were derecognised in accordance with IAS 39 and the amended notes recognised as the EUR 3 million Senior fixed rate notes (note 19.13).

There were no defaults or breaches of the principal or interest during the period.

19.13 EUR 3 million Senior secured fixed rate notes

Notes issued 39 Foreign currency 11 Interest capitalised 1 51

Balance at the beginning of the period Notes issued on Exchange Offer 39 Foreign currency movement 11 Interest capitalised 1 Balance at the end of the period 51

120

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

19. NON-CURRENT INTEREST-BEARING DEBT (continued)

19.13 EUR 3 million Senior secured fixed rate notes (continued)

In terms of the Exchange Offer (note 19.12), Edcon Holdings Limited obtained the consents of holders of more than 90% of the principal outstanding amount of the Notes to effect certain amendments to the Notes, including an amendment that (i) interest on the Notes will be paid in kind (and no longer in cash) at a rate of 5.0% per annum, starting on 30 June 2015, (ii) the maturity of the Notes not tendered in the Exchange Offer be extended to 30 June 2022 and (iii) the principal amount of Notes not tendered in the exchange offer were reduced by 72.5% (together, the “Amendments”). After giving effect to the results of the Exchange Offer and the Amendments, Edcon Holdings Limited had approximately €3 million in aggregate principal amount of Notes outstanding.

Following completion of the Exchange Offer, the Indenture governing the 5.0% senior PIK fixed rate notes due 2022 (formerly the 13.375% senior notes due 2019 (note 19.12)) were amended to remove substantially all protective covenants and events of default. The notes mature on 30 June 2022 and the interest is paid-in-kind (“PIK”) at a rate of 5.0% per annum commencing 30 June 2015.

The market value of the €3 million senior fixed rate notes at 26 March 2016 was R14 million.

There were no defaults or breaches of the principal or interest during the period and the Group is in compliance with the remaining covenants.

19.14 Other interest-bearing debt

Edgars Stores Limited Zimbabwe loans 106 138 110 IDC loans 39 Other interest-bearing loans 7 17 3 152 155 113

The borrowing arrangements for Edgars Stores Limited Zimbabwe are secured with a Notarial General covering bond and negative pledge over assets and cession of trade accounts receivable. The weighted average effective interest rate on all the borrowings is 11.13% (2015: 11.08% and 2014: 9.79%) per annum and maturities of the interest-bearing debt range between 90 days and 3 years. The Group has guaranteed this facility in favour of Edgars Stores Limited Zimbabwe.

The Industrial Development Corporation (“IDC”) Loans relate to facilities made available to Celrose (Pty) Limited and Eddels (Pty) Limited for both capital investment and working capital purposes. The repayments of these facilities are linked to specific government grants which both companies qualified to receive.

Other interest-bearing loans relate to the borrowing arrangements for the ALI group of companies and are secured with a general notarial bond over all inventory and moveable assets and cession of trade accounts receivable. The loan bears interest at prime plus 1% p.a. and is repayable in monthly instalments over 2 years.

121

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

20. DEFERRED OPTION PREMIUM

Current 1 076 291 Non-current 811 1 076 1 102

Balance at the beginning of the period 1 076 1 102 305 Deferred option premium refinanced as ZAR super senior hedging debt (note 19.3) (657) Deferred option premium raised during the period 175 1 069 Deferred option premium settled during the period (494) (310) (312) Effective interest (note 32.2) 75 109 40 1 076 1 102

As part of the debt refinancing initiative executed in November and December 2015, the Group restructured certain derivative instruments by early termination in December 2015 and March 2016 (note 6.4).

The derivative contracts which either matured or were terminated in December 2015, relating to foreign currency call options with gross notional values of €486 million and $250 million and cross currency swaps with a gross notional value of €425 million, resulted in net proceeds of R999 million realised in December 2015, being R1,339 million gross proceeds received, net of R340 million relating to options premiums that were settled.

The derivative contracts which matured or terminated in March 2016, relating to foreign currency call options with gross notional values of €72 million and $12 million and a forward contract with a gross notional value of €7 million, resulted in net proceeds of R89 million realised in March 2016, being R193 million gross proceeds received, net of R104 million relating to options premiums that were settled.

In December 2015, Edcon Limited concluded an agreement with certain of its deferred option premium holders whereby the deferred option premiums valued at R657 million that were due to be settled in December 2015 and March 2016 would be refinanced through a super senior hedging debt (note 19.3). An additional option premium of R50 million was settled in July 2015 in accordance with the terms of the agreement with the foreign currency call option contract.

In September and November 2014, the Group restructured foreign currency call options with a notional value of €237 million by early terminating these derivative contracts that were due to mature in March 2015 and entered into new foreign currency call options to partially hedge both interest, with a notional value of €44 million and $24 million, and principal with a notional value of €385 million on the senior secured fixed rate notes; extending hedge cover to March 2016. Of these new options, a premium of R175 million was deferred and R289 million was settled in cash. Deferred option premiums of R310 million, including early termination costs, were settled in November 2014. Refer to note 6.4 for more information.

In December 2013 and January 2014, the Group restructured foreign currency call options with notional values of €150 million and US$250 million by early terminating these derivative contracts that were due to mature in March 2014 and entered new foreign currency call options to extend the tenor of hedge cover to 15 December 2015 on the principal debt of the senior secured fixed rate notes. A deferred option premium with a face value of R312 million was also settled. The Group received net proceeds of R377 million on settlement of the foreign currency call options, net of amounts due on the related deferred option premiums. New deferred option premiums with a face value of R950 million arose on the re-strike and extension of foreign currency call options. These premiums are payable on 31 December 2015 and are interest free.

In April 2013 foreign currency call options were entered into which hedge the repayment of €237 million in principal on the senior secured fixed rate notes to 12 March 2015. The premiums payable on the foreign currency call options of R317 million have been deferred to 13 March 2015 and are interest-free.

122

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

21. CURRENT INTEREST-BEARING DEBT

Revolving credit facility 2 865 1 210 Other interest-bearing debt 179 99 60 179 2 964 1 270

The revolving credit facility provided senior secured financing of up to Rnil million (2015: R3 717 million and 2014: R3 967 million) for general corporate and working capital purposes. All obligations under the facility was secured by substantially all the assets of Edcon Holdings Limited and its subsidiaries. The revolving credit facility accrues interest at applicable JIBAR plus a margin of 4% for the 2015 and 2014 financial period and was payable monthly in arrears. The facility included R2 550 million borrowing capacity available for bank guarantees, letters of credit, forward exchange contracts and for borrowings under bilateral ancillary facilities. These ancillary facilities accrued interest at ruling over-night market related lending rates.

During November 2015, the Group refinanced the Revolving Credit Facility into a ZAR Super senior RCF term loan of R3 417 million (note 19.1), due 31 December 2017.

Other interest-bearing debt consists of:

- A loan of R136 million (2015: R60 million and 2014: R39 million), bank overdraft of R21 million (2015: R25 million and 2014: R5 million) and treasury bills of R15 million (2015: R11 million and 2014: R16 million) in Edgars Stores Limited Zimbabwe. This debt in Zimbabwe is secured with an external guarantee, Notional General Covering Bond and negative pledge over the Zimbabwe assets and trade accounts receivable. The weighted average effective interest rate on all the borrowings is 11.13% (2015: 11.08% and 2014: 9.79%) per annum and maturities of the interest-bearing debt range between 90 days and 3 years; and

- A bank overdraft of R2 million (2015: R3 million and 2014: nil) in Eddels Proprietary Limited. The facility bears interest at prime and is secured by a deed of pledge and cession of trade receivables. In the 2015 financial period, a bank overdraft existed in Celrose Proprietary Limited of R3 million (2014: nil) which with interest at prime plus 2.37% and which, was unsecured.

- Borrowing arrangements in the ALI Group of companies of R5 million which are secured with a general notorial bond over all the inventory and moveable assets and cession of trade receivables and bears interest at prime plus 1% per annum and is repayable in monthly instalments over 2 years. - There have been no defaults or breaches of principal, interest or redemption terms during the current or prior periods.

123

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

22. LEASE OBLIGATIONS

22.1 Operating lease obligations

The Group leases the majority of its properties and computer equipment under operating leases whereas other operating assets are generally owned. The lease agreements of certain of the Group's store premises provide for a minimum annual rental payment and additional payments determined on the basis of turnover. Lease agreements have an option of renewal in terms of the lease agreement ranging between 5 to 10 years.

The future minimum property operating lease commitments are due as follows: 12 107 11 443 12 346 Within one year 2 260 2 015 1 879 Between two and five years 6 964 6 317 6 860 In more than five years 2 883 3 111 3 607

The future revenue expected from sub-leases is estimated to be R77 million (2015: R32 million and 2014: R29 million). The Group also leases certain computer equipment. The agreements provide for minimum annual rental payments and additional payments depending on usage.

The future minimum computer equipment operating lease commitments are due as follows: 199 218 455 Within one year 148 197 265 Between two and five years 51 21 190

22.2 Finance lease liability

The finance lease relating to leased assets (note 3) is recognised in respect of a building and furniture and fittings for which the present value of the minimum lease payments due in terms of the lease agreements amounted substantially to the fair value of the building and furniture and fittings at the time the agreement was entered into. The average borrowing rate on the lease of the building is 10.8% (2015 and 2014: 11%) and the average borrowing rate on the furniture and fittings is 12.1% (2015: 13.7% and 2014: 8.5%).

Minimum lease payments 498 562 464 Within one year 73 78 40 Between two and five years 268 277 167 In more than five years 157 207 257

The present value of the lease obligation is due as follows: 340 364 273 Within one year 35 33 11 Between two and five years 169 161 63 In more than five years 136 170 199

The present value of the interest payments is due as follows: 157 198 191 Within one year 37 45 29 Between two and five years 98 116 104 In more than five years 22 37 58

124

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

22. LEASE OBLIGATIONS (continued)

22.3 Onerous lease liability

Non-current liabilities 145 129 Current liabilities (note 24) 63 5 208 134

Balance at the beginning of the period 134 Raised during the period (note 29.6) 123 137 Utilised during the period (49) (3) Balance at the end of the period 208 134

Onerous contracts are identified where the present value of future obligations in terms of the contracts in question exceeds the estimated benefits accruing to the Group from the contracts. The provision relates to certain leases where the site is either vacant or the commercial activity on the site is incurring losses.

Future cash flows are determined in accordance with the contractual lease obligations and are adjusted by market-related sublet rentals, where applicable, and discounted at the Group’s risk-adjusted pre-tax weighted average cost of capital rate.

23. PUT OPTION LIABILITY

Put option liability 50 73 67

Balance at the beginning of the period 73 67 Put option liability raised 25 Fair value adjustment for the period (23) 6 42 Balance at the end of the period 50 73 67

On 1 September 2013, the Group acquired the following companies, collectively referred to as the ALI group of companies:

- Rosyco Retail Proprietary Limited (Lingerie retailer) - Cosyro Retail Proprietary Limited (Cosmetic retailer) - Quinmatro Retail Proprietary Limited (Accessory retailer)

Under the sale agreement the minority shareholders have a put option exercisable no sooner than 4 April 2016. The put option in respect of the shares in the ALI group of companies arises from an arrangement whereby the non-controlling shareholders of each company have the right to put their interest of 49.9% in each company to Edcon Limited. The fair value of the put option is determined based on an EBITDA multiple, as determined in accordance with the terms and conditions of the contractual arrangement. As such, the amount that may become payable under the option on exercise by the non-controlling shareholders is initially recognised at fair value within non-current liabilities at the date of acquisition with subsequent fair value adjustments recognised through profit or loss.

125

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

24. TRADE AND OTHER PAYABLES

Trade accounts payable 3 825 3 662 3 554 Sundry accounts payable and accrued expenses 1 320 1 511 1 340 Income received in advance 248 56 9 Provisions 98 38 51 Lease equalisation 9 21 73 Leave pay accrual 127 164 166 Value added taxation 40 27 Interest accrued 1 124 353 418 Onerous leases (note 22.3) 63 5 6 854 5 837 5 611 The trade and sundry payables amounts are interest-free and mature no later than 30 to 75 days. Other payables mature no later than one year.

Provisions include amounts relating to the restructuring and customer returns.

Included within sundry payables is a liability relating to gift cards purchased by customers. In the prior period, R69 million was released to the Statement of Comprehensive Income as a result of breakage rates being applied to this liability based on historic trends of the expected usage of these gift cards.

25. DEFERRED REVENUE

Deferred revenue has been classified as: Non-current liabilities 51 52 64 Current liabilities 103 77 114 Total deferred revenue 154 129 178

Deferred revenue comprises: Loyalty programme deferred revenue 132 103 178 Government grants deferred 22 26 Total deferred revenue 154 129 178

25.1 Loyalty programme deferred revenue Non-current liability 37 29 64 Current liability 95 74 114 Total 132 103 178

Reconciliation of loyalty programme deferred revenue: Balance at the beginning of the period 103 178 192 Loyalty points earned 195 208 265 Loyalty points redeemed (166) (283) (279) Balance at the end of the period 132 103 178

The deferred revenue in respect of loyalty arises from the Thank U rewards program.

126

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

25. DEFERRED REVENUE (continued)

25.2 Government grants deferred

Non-current liability 14 23 Current liability 8 3 Total 22 26

Balance at the beginning of the period 26 Grants received1 1 44 Grants amortised (5) (18) Balance at the end of the period 22 26

1Government grants have been received for the purchase of certain items of property, plant and equipment. There are no unfulfilled conditions or contingencies attached to these grants.

26. FUTURE CAPITAL EXPENDITURE

Contracted: Properties, fixtures, equipment and vehicles 382 241 382 Authorised by the directors but not yet contracted: Properties, fixtures, equipment and vehicles 231 256 669 613 497 1 051

Re-presented Re-presented 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

27. REVENUE

Retail sales 27 147 27 510 26 974 Club fees 590 550 549 Finance charges on trade receivables 300 228 227 Share of profits from insurance business 725 747 739 Finance income (note 32.1) 64 33 40 Administration fee 333 316 280 Manufacturing sales to third parties 193 162 133 29 352 29 546 28 942

28. OTHER INCOME

Club fees 590 550 549 Finance charges on trade receivables 300 228 227 Administration fee 333 316 280 Manufacturing sales to third parties 193 162 133 1 416 1 256 1 189

127

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

29. TRADING PROFIT

Trading profit is stated after taking account inter alia the following items:

29.1 Amortisation of intangible assets Charge for the period (note 4) 241 247 345

29.2 Depreciation of properties, fixtures, equipment and vehicles Buildings - - - Leased assets 43 35 20 Leasehold improvements 94 97 86 Fixtures and fittings 383 449 442 Computer equipment and software 225 229 219 Machinery 18 22 25 Total charge for the period (note 3) 763 832 792

29.3 Fees payable Managerial, technical, administrative and secretarial fees paid outside the Group 150 199 219 Outsourcing of IT function 325 380 397 475 579 616 29.4 Operating lease expenses Minimum lease payments 2 319 2 045 1 806 Turnover clause payments 10 9 10 Operating lease adjustment 59 124 38 Sublease rental income (39) (42) (38) Equipment 150 198 205 2 499 2 334 2 021

29.5 Net loss on disposal of properties, fixtures, equipment and vehicles 19 37 11

29.6 Onerous lease expense (note 22.3) 123 137

30. FOREIGN EXCHANGE GAINS/(LOSSES) AND FEES AMORTISED

Foreign exchange (loss)/gain (4 518) 1 103 (3 298) Released from other comprehensive income (note 15) (96) 771 Foreign exchange (loss)/gain on notes (4 518) 1 007 (2 527) Other foreign exchange gain/(loss) 3 (9) 69 Total foreign exchange (losses)/gains (4 515) 998 (2 458)

Net realised (loss)/gain on other foreign exchange (40) 30 - Non-cash impact of foreign exchange (losses)/gains (4 555) 1 028 (2 458)

Fees and discount amortised recognised in financing costs (note 32.2) 328 141 176

128

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

31. DIRECTORS AND EMPLOYEES

31.1 Employees The aggregate remuneration and associated cost of permanent and casual employees including directors was: Salaries and wages 3 288 3 331 3 313 Retirement benefit costs 296 317 313 Medical aid contributions: Current 65 66 67 Post-retirement 10 8 8 3 659 3 722 3 701

2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March R 000 R 000 R 000

31.2 Directors’ and prescribed officers1 remuneration Non-executive directors: Fees 1 864 1 955 1 880 1 864 1 955 1 880

Executive directors and prescribed officers: Remuneration 26 498 29 592 25 016 Retirement, medical, accidental and death benefits 1 974 2 056 2 457 Relocation payment 649 Performance bonuses 13 805 9 102 Other bonuses2 71 500 36 900 26 050 Other benefits 3 456 128 79 117 233 78 427 53 602 Retired ex-directors 100 97 89 Total 117 333 78 524 53 691

1Prescribed officers are members of the executive committee. 2Includes retention, loyalty, sign-on and other bonuses.

129

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued)

31.2 Directors’ and prescribed officers remuneration (continued)

31.2.1 Directors emoluments

2016

Retire- ment, medical, accident Perfor- Name Remu- and death Relocat- mance Other Other Fees eration benefits ion Bonus Bonuses5 benefits Total Non-executive directors R000 R000 R000 R000 R000 R000 R000 R000 ZB Ebrahim1 647 647 DH Brown2 367 367 TF Mosololi3 416 416 LL Von Zeuner4 312 312 KDM Warburton2 122 122

1Remuneration Committee chair, Social/Ethics & Transformation Committee chair and newly appointed Audit & Risk Committee Member. Total 1 864

2Audit & Risk Committee chair and Board member. Resigned in December 2015 and was replaced by KDM Warburton in January 2016.

3 Audit & Risk Committee member and Board member.

4 Audit & Risk Committee member and Board member. Resigned in December 2015. Executive directors and prescribed Months officers paid BJ Brookes6 6 4 128 26 14 000 2 856 21 010 J Schreiber 5 6 018 36 9 000 25 000 40 054 T Clerckx 12 4 555 133 1 350 12 000 18 038 Dr. U Ferndale 12 3 510 761 1 380 20 500 66 26 217 G Napier 12 2 917 686 875 66 4 544 B Gebauer 12 4 139 146 1 200 5 485 A Williams 4 1 231 186 468 1 885 117 233 Total - non-executive directors, executive directors and prescribed officers 119 097 Pension for past managerial services - retired ex directors 100 Total emoluments 119 2197 5Includes retention, loyalty, sign on and other bonuses. 6An amount of R14 million is receivable in FY17.

Executive directors

The executive board members at 26 March 2016 are the Group Chief Executive Officer (CEO), the Chief Financial Officer and the Chief Operations Officer. The remuneration committee has set their remuneration with due consideration to their performance, experience and responsibility after conducting extensive benchmarking of similar roles in companies comparable to the Group’s size, industry and risk profile.

Bernard Brookes, the CEO, entered into a two year employment contract with the Group to 18 September 2017. In terms of his contract, he is entitled to a basic annual remuneration, payment in lieu of benefits and annual performance bonus. The employment of the CEO can be terminated by either party upon 6 months prior notice.

Jurgen Schreiber, the previous CEO, entered into a five year employment contract with the Group to 1 April 2016. Jurgen resigned in August 2015. In terms of his contract, he was entitled to a basic annual remuneration, payment in lieu of benefits and annual performance bonus. The employment of the CEO can be terminated by either party upon 6 months prior notice.

Toon Clerckx, the CFO, entered into a five year contract with the Group to 15 February 2019. In terms of his contract, he is entitled to a basic annual remuneration, loyalty bonus and annual performance bonus. His employment can be terminated by either party upon 6 month prior notice.

Dr Urin Ferndale, the COO, entered into a five year contract with the Group to 1 July 2017. In terms of his contract, he is entitled to a basic annual remuneration, loyalty bonus and annual performance bonus. The employment of the COO can be terminated by either party upon 6 months prior notice.

130

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued) 31.2 Directors’ and prescribed officers remuneration (continued)

31.2.1 Directors emoluments (continued)

Executive Management

Garth Napier, the Chief Executive of the Specialty Division (the previous Chief Executive of the Discount Division), was appointed into his new role in November 2015. In terms of his contract, he is entitled to a basic annual remuneration and annual performance bonus. His employment can be terminated by either party upon 6 months prior notice.

Birgitt Gebauer, the Chief Executive of Edgars Division entered into a five year employment contract with the Group to 19 November 2018. Birgitt resigned effective 2 March 2016. In terms of her contract, she is entitled to a basic annual remuneration and annual performance bonus. Her employment can be terminated by either party upon 6 months prior notice.

Andy Williams, the Chief Executive of the Discount Division, was appointed in November 2015. In terms of his contract, he is entitled to a basic annual remuneration and annual performance bonus. His employment can be terminated by either party upon 6 months prior notice.

2015

Retire- ment, medical, accident Perfor- Name Remu- and death Relocat- mance Other Other Fees eration benefits ion bonus Bonuses1 benefits Total Non-executive directors R000 R000 R000 R000 R000 R000 R000 R000 ZB Ebrahim 634 634 DH Brown 489 489 TF Mosololi 416 416 LL Von Zeuner 416 416 Total 1 955

Executive directors and prescribed Months officers paid J Schreiber 12 12 545 80 7 500 20 125 T Clerckx 12 4 354 146 649 12 700 17 849 MR Bower 2 1 315 172 700 2 187 Dr. U Ferndale2 12 3 392 723 7 500 64 11 679 G Napier 12 2 839 661 402 5 000 64 8 966 B Gebauer 12 4 029 134 1 200 11 000 16 363 C Claasen 3 1 118 140 1 258 78 427 Total - non-executive directors, executive directors and prescribed officers 80 382 Pension for past managerial services - retired ex directors 97 Total emoluments 80 479 1Includes retention, loyalty, sign on and other bonuses. 2An amount of R7.5 million is receivable in 2016.

131

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued)

31.2 Directors’ and prescribed officers remuneration (continued)

31.2.1 Directors emoluments (continued)

2014

ZB Ebrahim 610 610 DH Brown 470 470 TF Mosololi 400 400 LL Von Zeuner 400 400 Total 1 880

Executive directors and Months prescribed officers paid J Schreiber 12 11 801 74 11 875 T Clerckx2 2 634 4 10 000 10 638 MR Bower 12 4 670 1 023 700 6 393 Dr. U Ferndale 12 3 077 656 2 350 79 6 162 G Napier3 2 448 106 554 B Gebauer4 5 1 556 52 11 000 12 608 C Claasen 12 2 830 542 2 000 5 372 53 602 Total - non-executive directors, executive directors and prescribed officers 55 482 Pension for past managerial services - retired ex directors 89 Total emoluments 55 571 1Includes retention, loyalty, sign-on and other bonuses. 2An amount of R12.7 million was receivable in 2015. 3An amount of R5 million was receivable in 2015. 4An amount of R11 million was receivable in 2015.

132

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

31. DIRECTORS AND EMPLOYEES (continued)

31.3 Employee benefit asset The Edcon Pension Fund is a defined benefit fund that offers, amongst other benefits, a pension of 2% of final pensionable salary per year of service at retirement. A statutory valuation of the Fund as of 31 December 2002 was carried out by Alexander Forbes Financial Services, using the projected unit method of valuation. The actuarial value of liabilities for all pensioners and members was R328 million and the contingency reserves were determined at R60 million. The fair value of the assets calculated by reference to the market value was R644 million. The fund was accordingly fully funded and showed a surplus of R256 million. The Group is required to contribute at a rate of 19.1% of salaries.

In the current period an actuarial estimate was performed using the projected unit credit method, and the fair value of the assets and liabilities is reflected below. The actuarial estimate was based on the principle assumptions as set out in note 31.3.6.

The main risks associated with the Fund are as follows:

- Risk of underfunding. - Longevity risk: The Fund has purchased annuities from a registered insurer to provide monthly pensions to pensioners. - Risk of insurer default on pension payments: Should the insurer default on the pension payments, the Fund would still be liable for the monthly pensions.

Edcon Pension Fund Actuarially determined amounts recognised in profit or loss: Current service cost (2) (3) (3) Finance income (note 32.1) 8 14 11 Curtailment costs 4 Net gain recognised in profit or loss 10 11 8

The contribution for the 2016 financial period is estimated to be less than R1 million.

Actuarially determined amounts recognised in other comprehensive income: Actuarial gain/(loss) on plan assets 3 3 (10) Actuarial (loss)/gain on defined benefit obligation (6) (19) 112 Net amount recognised in other comprehensive income for the period (3) (16) 102

Total cumulative gain recognised in other comprehensive income 245 248 264

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm 31.3.1 Analysis of net defined benefit asset – pension fund Defined benefit obligation (650) (651) (633) Fair value of plan assets 749 764 815 Effect of the asset ceiling (3) (3) (4) Net asset 96 110 178

133

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

31. DIRECTORS AND EMPLOYEES (continued)

31.3 Employee benefit asset (continued)

31.3.2 Reconciliation of defined benefit obligation Balance at the beginning of the period 651 633 739 Current service cost 2 3 3 Finance cost 49 59 67 Actuarial loss/(gain) in other comprehensive income - financial adjustments 6 19 (112) Curtailment cost (4) Benefits paid (54) (63) (64) Balance at the end of the period 650 651 633

31.3.3 Reconciliation of fair value plan assets Balance at the beginning of the period 764 815 915 Finance income 57 73 79 Employer contributions (20) (64) (103) Benefits paid (53) (61) (64) Actuarial gain/(loss) in other comprehensive income - financial adjustments 3 3 (10) Expenses and premiums (2) (2) (2) Balance at the end of the period 749 764 815

The assets of the Edcon Pension Fund were invested as follows: Cash 228 143 229 Equity 43 21 Bonds 5 56 65 Property and other 516 522 500 749 764 815 31.3.4 Reconciliation of the effect of the asset ceiling – pension fund

Balance at the beginning of the period 3 4 4 Interest on asset ceiling - - Change in the effect of limiting the net defined benefit asset to the asset ceiling - (1) - Balance at the end of the period 3 3 4

134

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued)

31.3 Employee benefit asset (continued)

31.3.5 Surplus apportionment

As reported in the previous period, proposals were submitted to the Financial Services Board (FSB) in 2002 to offer pensioners an enhanced pension in exchange for assuming all their medical aid liabilities. Similarly, a portion of the surplus was to be utilised to pay the lump sum to medical aid members’ provident fund accounts to meet the existing post-retirement medical aid liability for service rendered to date.

The FSB did not accept the proposal and therefore a formal surplus apportionment scheme was prepared in accordance with Section 15B of the Pension Fund Act. The aim of the scheme was to distribute the surplus as at 31 December 2002 between the various stakeholders of the fund. This surplus scheme was submitted to the Financial Services Board for consideration in January 2011 and it was approved in February 2012. On completion of the surplus apportionment, the statutory valuations subsequent to 31 December 2002 have been prepared and are in the process of approval.

The surplus scheme showed a total surplus of R256 million as at 31 December 2002, which corresponds with the statutory valuation of the fund at the same date. Of this surplus, Edcon Limited was apportioned with R100 million and members and former members were apportioned R156 million.

The funds rules were amended to allow all future surpluses to go to the employer. The member surplus of the Edcon pension fund amounted to R112 million as at 26 March 2016.

31.3.6 Valuation assumptions used

The valuation is based on assumptions which include a discount rate of 9.3% (2015: 7.9% and 2014: 9.5%) per annum, an inflation rate and pension increase rate of 6.9% (2015: 5.7% and 2014: 7.1%) per annum and a salary increase rate (including age-related merit increases) of 7.9% per annum (2015: 6.7% and 2014: 8.1%). The discount rate is determined at the reporting date with reference to the Nominal Bond Curve, as compiled by the Johannesburg Stock Exchange of South Africa. The inflation rate assumes an underlying future rate of consumer price inflation of 6.9% per annum based on the relationship between current conventional bond yields and current index-linked bond yields. The inflation assumption was calculated as the difference between the discount rate and a real bond yield and adjusted for an inflation risk premium which was assumed to be 0.5%. The salary increase is based on the assumption that the increase will be 1% above inflation. The Fund has adopted a pension increase policy that targets 100% of inflation and, as a result, a pension increase of 6.9% is used in the valuation.

31.3.7 Sensitivity analysis

The defined benefit obligation is insensitive to changes in the assumptions as the total liabilities are in respect of outsourced pensioners, where the liabilities have been set equal to the annuity values provided by the insurer.

The sensitivity results below were calculated using an approximate formula to estimate the impact of a change in the assumptions: Central assumption 2016 2015 2014 2016 2015 2014 2016 2015 2014 Inflation rate sensitivity 6.9% 5.7% 7.1% Decrease 1% Increase 1% Defined benefit obligation Rm 650 651 633 650 646 628 650 659 640

Discount Rate sensitivity 9.3% 7.9% 9.5% Decrease 1% Increase 1% Defined benefit obligation Rm 650 651 633 650 659 639 650 646 628

135

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued)

31.4 Defined contribution plans

Contributions to the Group's significant defined contribution funds are at a rate of 17.3% of benefit salary and where funds are contributory, members pay a maximum of 7.5%. The employer's portion is charged against profit or loss.

Separate funds, independent of the Group, provide retirement and other benefits for all permanent employees and their dependents. During the period there were three defined contribution funds of significance, namely Edcon Provident Fund, SACCAWU National Provident Fund and FEDCRAW Provident Fund. A defined contribution fund is available to employees in Namibia, Botswana, Swaziland, Zambia and Ghana, namely Edcon Namibia Retirement Fund, Edcon Botswana Retirement Fund, Swaziland Provident Fund, Zambia Provident Fund and Ghana Provident Fund.

Pensioners Members Contributions Number Number Rm Membership of, and employer contributions to each of the funds were: 2016 at 26 March Edcon Pension Fund 925 9 - Edcon Provident Fund 11 301 257 Edcon Namibia Retirement Fund 1 752 4 Botswana Retirement Fund 562 2 SACCAWU National Provident Fund 461 4 FEDCRAW Provident Fund 109 1 Swaziland Provident Fund 347 - Zambia Provident Fund 220 1 Ghana Provident Fund 86 - 925 14 847 269

2015 at 28 March Edcon Pension Fund 967 10 1 Edcon Provident Fund 12 323 272 Edcon Namibia Retirement Fund 1 573 3 Botswana Retirement Fund 564 1 SACCAWU National Provident Fund 622 5 FEDCRAW Provident Fund 125 1 Swaziland Provident Fund 514 - Zambia Provident Fund 220 - 967 15 951 283

2014 at 29 March Edcon Pension Fund 1 003 14 1 Edcon Provident Fund 14 488 277 Edcon Namibia Retirement Fund 829 3 Botswana Retirement Fund 542 1 SACCAWU National Provident Fund 952 6 FEDCRAW Provident Fund 177 2 Swaziland Provident Fund 601 - Zambia Provident Fund 118 - 1 003 17 721 290

136

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued)

31.4 Defined contribution plans (continued)

All funds are subject to the Pension Funds Acts of the various countries and, where required by law, actuarial valuations are conducted every three years. The market value of investments of the various Edcon funds as at 26 March 2016 was R3 958 million (2015: R3 626 million and 2014: R3 798 million).

31.5 Employee benefit liability

The Group operates a defined benefit medical aid scheme for the benefit of permanent employees. The contributions of the short-term benefit for current employees amounted to R75 million for the period ending 26 March 2016 (2015: R71 million and 2014: R67 million). Membership of the medical aid scheme is voluntary for all employees. Total membership currently stands at 3 672 principal members.

In terms of employment contracts and the rules of the schemes certain post-retirement medical benefits are provided to 671 current and past employees by subsidising a portion of the medical aid contribution of members, after retirement. The medical aid payments for these employees for 2017 are estimated to be approximately R6 million. The actuarial valuation was based on the main assumptions set out in note 31.5.4.

2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

31.5.1 Actuarially determined amounts recognised in profit or loss:

Current service cost 2 3 4 Financing costs (note 32.2) 13 16 15 15 19 19

31.5.2 Actuarially determined amounts recognised in other comprehensive income:

Actuarial gain recognised in other comprehensive income for the period 36 31 19

Total cumulative gain/(loss) recognised in other comprehensive income 50 14 (17)

31.5.3 The status of the Edcon Medical Aid Fund liability determined in terms of IAS 19 is as follows:

Reconciliation of employee benefit liability: Balance at the beginning of the period 155 176 184 Current service cost 2 3 4 Financing cost 13 16 15 Actuarial gain in other comprehensive income – demographic changes (32) (41) (12) Actuarial (gain)/loss in other comprehensive income – financial adjustments (4) 10 (7) Employee benefit payments (9) (9) (8) Recognised employee benefit liability 125 155 176

137

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

31. DIRECTORS AND EMPLOYEES (continued)

31.5 Employee benefit liability (continued)

31.5.4 Employee benefit liability valuation assumptions

The valuation is based on assumptions which include a discount rate of 10.2% (2015: 8.5% and 2014: 9.4%) per annum, inflation rate of 7.8% (2015: 6.3% and 2014: 6.8%) per annum, income at retirement would increase by 9.3% (2015: 7.8% and 2014: 8.3%) per annum, demographic assumptions based on a standard set of best estimate demographic assumptions, membership continuation and an expected retirement age of 63. The discount rate is based on a Nominal Bond Curve, as compiled by the Johannesburg Stock Exchange of South Africa. The inflation rate is based on the relationship between the nominal bond curve and the real bond yield. The inflation risk premium is assumed to be 0.5% and the future rate of the consumer price index inflation will be 7.8%. It was assumed that health care cost inflation would be the same as CPI inflation and that remuneration increases, including promotional increases would exceed inflation by 1.5% over the long-term and that income at retirement would be 60% of final salary. It was further assumed that no current in-service members eligible for benefits would discontinue membership upon reaching retirement with the Group and that they would retire on their current medical scheme option and no changes would occur on retirement.

31.5.5 Sensitivity analysis

The valuation results are extremely sensitive to the assumptions used. The value of the liability could turn out to be overstated or understated depending on the extent to which actuarial experience differs from the above assumptions.

Central assumption 2016 2015 2014 2016 2015 2014 2016 2015 2014

Inflation (CPI and health care costs) sensitivity 7.8% 6.3% 6.8% Decrease 1% Increase 1%

Accrued liability – Rm 125 155 176 110 137 155 145 177 202 Current service and interest cost – Rm 15 15 19 13 13 17 18 17 22

Retirement age sensitivity 63 years One year younger One year older

Accrued liability – Rm 125 155 176 130 159 181 121 152 171

Discount rate sensitivity 10.2% 8.5% 9.4% Decrease 1% Increase 1%

Accrued liability – Rm 125 155 176 145 177 202 110 138 155

PA (90) ult rated down 1 year PA (90) ult rated down 1 year Post-employment with 0.75% improvement p.a. with 0.75% improvement p.a. mortality tables sensitivity from 2006 from 2006

Accrued liability – Rm 125 155 176 133 165 186

26 March 28 March 29 March 2016 2015 2014 Rm Rm Rm 31.5.6 Analysis of employee benefit liability Accrued liability for post-retirement medical aid 125 155 176

138

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

32. FINANCING INCOME AND COSTS

32.1 Finance income Interest received from independent third parties 56 19 25 Employee benefits (note 31.3) 8 14 11 Notional interest received 4 64 33 40 32.2 Financing costs Notional interest charged on shareholder’s loan (note 18.2) 141 65 - ZAR Super senior RCF term loan (note 19.1) 164 EUR Super senior refinancing facility (note 19.2) 85 Fees amortised on EUR Super senior refinancing facility (note 19.2) 16 ZAR Super senior hedging debt (note 19.3) 30 EUR Super senior term loan (note 19.4) 17 ZAR Super senior floating rate notes (note 19.5) 97 115 115 Fees amortised on ZAR Super senior floating rate notes (note 19.5) 5 5 EUR Super senior PIK notes (note 19.6) 118 Notional interest on EUR Super senior PIK notes (note 19.6) 42 ZAR Senior secured term loan (note 19.7) 609 594 439 Fees amortised on ZAR Senior secured term loan (note 19.7) 34 33 28 EUR & USD Senior secured fixed rate notes (note 19.8 to 19.10) 1 288 1 182 1 059 Fees & discount amortised on EUR & USD Senior secured fixed rate notes (note 19.8 to 19.10) 77 71 65 EUR Senior secured PIK Toggle notes (note 19.11) 59 Notional interest on EUR Senior secured PIK Toggle notes (note 19.11) 31 EUR 425 million Senior secured fixed rate notes (note 19.12) 236 889 330 Fees amortised on EUR 425 million Senior secured fixed rate notes (note 19.12) 196 37 14 Interest on Option A €200 million fixed rate PIK notes (note 19.12) 167 Interest on Option B €241 million fixed rate PIK notes (note 19.12) 201 EUR 3 million Senior secured fixed rate notes (note 19.13) 2 Notional interest on deferred option premium (note 20) 75 109 40 Interest on other facilities 492 298 210 Employee benefits (note 31.5.1) 13 16 15 Fees incurred refinancing debt 77 Interest on senior secured floating rate notes 18 Interest on senior floating rate notes 266 Fees amortised on senior secured floating rate notes 23 Fees amortised on senior floating rate notes 46 4 272 3 414 2 668

The financing costs excludes notional interest on inventory purchases (note 8) from suppliers not for cash of: 325 318 321

139

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

33. TAXATION

33.1 Taxation charge Current taxation - current year (135) (122) (133) - prior years - - (2) Total current taxation expense (135) (122) (135)

Deferred taxation - current year (275) 120 863 - prior years 75 (241) 106 Total deferred taxation income/(expenses) (200) (121) 969

Total taxation (expense)/income (335) (243) 834

Comprising: South African normal taxation (205) (101) 937 Foreign taxes (130) (142) (103) (335) (243) 834

The 2015 and 2014 financial periods have been re-presented as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale (note 12).

33.2 Taxation charge to other comprehensive income Current income tax related to items charged or credited directly to other comprehensive income: Unrealised gain on cash flow hedges (7)

Deferred income tax related to items charged or credited directly to other comprehensive income: Unrealised (gain)/loss on cash flow hedges (25) 48 (29) Employee benefits tax expense (9) (4) (33) Income tax (expense)/credit reported in other comprehensive income (34) 44 (69)

140

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

33. TAXATION (continued)

33.3 Deferred income tax comprises:

Arising on deferred tax assets (note 7) Provision for impairment of receivables (6) (10) 27 Provision for stock losses 3 3 (2) Other payables (11) 46 (73) Leave pay accrual (9) (2) 3 Operating lease adjustment 16 32 15 Onerous lease liability 13 31 Income received in advance 59 (3) 28 Finance leases (6) 13 (11) Employee benefits liability 8 3 44 Assessed loss 1 295 194 578 Deferred option premium (301) (8) 232 Cash flow hedges 3 Restraint of trade - 3 Interest – application of Section 24J 11 Other 18 5 -

Arising on deferred tax liabilities (note 7) Section 24C allowances 4 (26) (14) Intangible assets (274) 75 92 Property, fixtures, equipment and vehicles 5 (22) 25 Prepayments 23 (21) (18) Employee benefits asset 13 14 23 Forward exchange contracts – application of Section 24I 3 (29) Call option premium 76 (76) Foreign currency call options – application of Section 24I 320 (320) Cross currency swaps 22 (16) Interest – application of Section 24J 20 (20) Cross currency swaps – application of Section 24I 25 (25) Deferred tax provision – deferred tax asset (710) Deferred tax provision (767) Gain on non-consenting 13.375% senior fixed rate notes (26) Interest rate hedges 14 Other (2) (3) 22 Net deferred tax movement (expense)/income (200) (121) 969

33.4 Reconciliation of rate of taxation (%) Standard rate – South Africa 28 28 28 Adjusted for: Net gain on Exchange Offer 15 Profit share from insurance business 3 - (1) Disallowable expenditure: Impairment of intangible assets (18) Interest expense disallowed (7) (29) Other (4) Adjustments relating to prior years (14) 3 Deferred tax asset not recognised (9) Foreign taxes (2) (8) (1) Temporary differences (14) 9 Effective tax rate (4) (14) 25

141

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

33. TAXATION (continued)

33.5 Section 24I application

In terms of section 24I of the Income Tax Act, the ruling exchange rate to be used in determining the foreign exchange gains/losses on currency swaps, foreign currency forward contracts and forward exchange contracts (forward exchange

contracts) on translation, is the market related forward rate for the remaining period of the forward exchange contract. Refer to tax settlement note below.

33.6 Tax Settlement

The settlement agreement in place between the Group and the South African Revenue Service (“SARS”) addresses the tax treatment of the issues in dispute for financial periods since the acquisition of the Group by Bain Capital, being financial periods 2008 through 2014, as well as future financial periods.

The main terms of the settlement agreement are as follows:

 for the financial period 2008 through to 2014, we agreed to reduce our tax losses carry forward by approximately R9 billion;

 for the financial period from the beginning of 2014 until an initial public offering or an issuance of securities representing 20% or more of the Group’s equity (if any), we agreed to limit the deduction for tax purposes of interest payable on the senior secured floating rate notes and the senior floating rate notes or any refinancing thereof (the “acquisition indebtedness”) to 50% of such interest, on an aggregate principal amount of indebtedness of approximately €1.3 billion or the equivalent thereof in rand or U.S. dollars, subject to certain adjustments. Interest on the portion, if any, of the acquisition indebtedness exceeding such cap will not be deductible for tax purposes.

As at 26 March 2016 acquisition indebtedness amounted to €668 million and therefore was in compliance with this cap;

 for the period following an initial public offering or an issuance of securities representing 20% or more of the Group’s equity (if any), we agreed that interest payable on the acquisition indebtedness would be fully deductible for tax purposes, up to an aggregate principal amount of indebtedness of approximately €711.1 million or the equivalent thereof in rand or U.S. dollars. Interest on the portion, if any, of the acquisition indebtedness exceeding approximately €711.1 million or the equivalent thereof in rand or U.S. dollars will not be deductible for tax purposes; and

 for the period from and following the 2014 financial period, interest payable on the shareholder’s loan, if any, will not be deductible for tax purposes.

The settlement is without prejudice to future changes in applicable South African tax legislation and does not relate to any matter other than those in connection with the acquisition of the Group by Bain Capital. SARS has notified the Group that it is reviewing tax matters relating to the 2013 financial period.

142

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

34. CASH FLOW

34.1 Net gain on Exchange Offer Exchange Offer fees incurred (610) (55) Gain recognised on senior fixed rate notes - €425 million (note 19.12) 124 Gain recognised on derecognition of Option A and B PIK notes (note 19.12) 4 762 Cost of warrants issued (note 14.2) (135) Net gain/(loss) on Exchange Offer 4 141 (55) Exchange Offer fees 550 55 Non-cash net gain on Exchange Offer 4 691

34.2 Other non-cash items

Operating lease adjustment 59 124 38 Medical aid buy-out 26 (23) 57 Provident fund holiday 20 65 102 Gain on sale of trade receivables (29) (42) Government grants amortised – deferred revenue (4) (18) Other non-cash items 8) (6) (4) 64 100 193 34.3 Working capital movement

(Increase)/decrease in inventories (271) 80 (639) Decrease/(Increase) in trade accounts receivable 12 (181) 39 Proceeds from sale of trade accounts receivable 29 356 575 Increase in sundry receivables and prepayments (90) (78) (302) Increase in trade and other payables 28 396 220 Employee benefits payments (7) (292) 573 (114)

34.4 Taxation paid

Taxation liability at the beginning of the period (19) (37) (10) Current taxation recognised in profit or loss (note 33.1) (135) (122) (135) Current taxation recognised in other comprehensive income (note 33.2) (7) Non-cash adjustment (2) 3 Taxation liability at the end of the period 68 19 37 (88) (137) (115)

Taxation paid has been re-presented as a result of ceasing to classify the trade receivables card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale (note 12).

34.5 Investment to maintain operations

Replacement of properties, fixtures, equipment and vehicles (328) (586) (892) Proceeds on disposal of properties, fixtures, equipment and vehicles - 132 10 (328) (454) (882) 34.6 Investment to expand operations Additions to leased premises (101) (137) (192) Additions to properties, fixtures, equipment and vehicles (161) (261) (196) (262) (398) (388)

143

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

Fair value1 2016 Rm

34. CASH FLOW (continued)

34.7 Business combination

34.7.1 Business combination - 2016

On 30 June 2015, Celrose Proprietary Limited, a subsidiary of the Group, acquired a 100% controlling interest in Eddels Shoes Proprietary Limited, a company with the principle activity of manufacturing ladies, mens and childrens shoes.

The fair value of the net assets acquired at effective date of acquisition of the companies was as follows:

Non-current assets Properties, fixtures, equipment and vehicles 7 Deferred tax - 7 Current assets Inventories 26 Trade and other receivables 16 42

Current liabilities Trade and other payables (61) Bank overdraft (1) (62)

Total identifiable assets acquired and liabilities assumed (13) Goodwill recognised on acquisition 20 Cost of business combination 7

Settled by way of: Cash (7)

1The carrying values of the acquisition approximated the fair values.

Impact of the acquisitions on the results of the Group

The goodwill recognised of R20 million is attributable to the benefits expected to be derived from combining the assets and activities of the business acquired with those of the Group, including expected synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill as the future economic benefits arising cannot be reliably measured.

144

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

Fair value1 2015 Rm

34. CASH FLOW (continued)

34.7 Business combination (continued)

34.7.2 Business combination - 2015

The Group acquired the following companies, effective 3 August 2014:

 Rowmoor Investments 582 Proprietary Limited (Lingerie retailer)  Kamnandi Retail Proprietary Limited (Accessory retailer)

These companies form part of the ALI group of companies that was acquired by the Group in the prior year (note 34.7.3).The Group effectively owns 75.5% of each of the acquired companies. Based on the contractual arrangements between the Group and the other investors, the Group has the power to appoint and remove the majority of the board of directors. The relevant activities of each company are determined by the board of directors based on simple majority votes. Therefore the directors of the Edcon Holdings Group concluded that the Group has control over these companies and as such have been consolidated.

The fair value of the net assets acquired at effective date of acquisition of the companies was as follows:

Non-current assets Properties, fixtures, equipment and vehicles 1 Deferred tax - 1 Current assets Inventories 1 Trade and other receivables 1 Current taxation - 2 Current liabilities Trade and other payables (2) (2)

Total identifiable assets acquired and liabilities assumed 1 Goodwill recognised on acquisition 1 Cost of business combination 2

Settled by way of: Cash (2)

1The carrying values of the acquisition approximated the fair values.

Impact of the acquisitions on the results of the Group

The goodwill recognised of R1 million is attributable to the benefits expected to be derived from combining the assets and activities of the businesses acquired with those of the Group, including expected synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill as the future economic benefits arising cannot be reliably measured.

34.7.3 Business combination - 2014

The Group acquired the following companies, effective 1 September 2013, collectively being the ALI group of companies:

 Rosyco Retail Proprietary Limited (Lingerie retailer)  Cosyro Retail Proprietary Limited (Cosmetic retailer)  Quinmatro Retail Proprietary Limited (Accessory retailer)

145

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

Fair value1 2014 Rm 34. CASH FLOW (continued)

34.7 Business combination (continued)

34.7.3 Business combination – 2014 (continued)

The Group owns 50.1% of each of the acquired companies. Based on the contractual arrangements between the Group and the other investors, the Group has the power to appoint and remove the majority of the board of directors of the ALI group of companies. The relevant activities of each company is determined by the board of directors based on simple majority votes. Therefore the directors of the Edcon Holdings Group concluded that the Group has control over these companies and as such have been consolidated. Under the sale agreement the minority shareholders have a put option (note 23) exercisable no sooner than 2 April 2016.

The fair value of the net assets acquired at effective date of acquisition of the companies was as follows:

Non-current assets Properties, fixtures, equipment and vehicles 19 Deferred tax 4 23 Current assets Inventories 37 Current taxation 1 38 Non-current liabilities Interest-bearing debt (3) (3) Current liabilities Interest-bearing debt (7) Trade and other payables (33) (40)

Total identifiable assets acquired and liabilities assumed 18 Intangible assets recognised on acquisition 20 Goodwill recognised on acquisition 12 Cost of business combination 50

Settled by way of: Cash (25) Put option liability at acquisition date 25

Total cost of business combination comprised of the following: Cash 25 Put option liability at acquisition date 25 Total cost of acquisition 50

1The carrying values of the acquisition approximated the fair values.

Impact of the acquisitions on the results of the Group

The acquired businesses collectively contributed to revenues and net profits as presented for the 7 months in the financial period to 29 March 2014. Had this business combination been effected on 31 March 2013, the Group revenues would have been R27 million higher and the net loss reported would have been increased by R1 million.

The goodwill recognised of R12 million is attributable to the benefits expected to be derived from combining the assets and activities of the businesses with those of the Group including expected synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill as the future economic benefits arising cannot be reliably measured.

146

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

34. CASH FLOW (continued)

34.8 Non-current interest-bearing debt ZAR Super senior RCF term loan (note 19.1) 3 249 EUR Super senior refinancing facility (note 19.2) 1 868 Fees paid on issue of EUR super senior refinancing facility (note 19.2) (110) ZAR Senior secured term loan (657) Senior secured floating rate notes repurchased (4 626) Senior floating rate notes repurchased (5 280) ZAR Senior secured term loan (note 19.7) 4 120 Fees paid on issue of ZAR senior secured term loan (note 19.7) (140) EUR 425 million Senior fixed rate notes (note 19.12) 5 905 Fees paid on issue of EUR 425 million senior fixed rate notes (note 19.12) (3) (236) Edgars Stores Limited Zimbabwe debt (note 19.14) (72) 21 (37) IDC Loan – Celrose (note 19.14) 39 ALI group of companies debt (note 19.14) (10) 14 Increase/(decrease) in non-current interest-bearing debt 4 307 32 (294)

34.9 Settlement of derivatives Settlement of derivatives 1 532 826 1 658

34.10 Current interest-bearing debt - (decrease)/increase ZAR Super senior floating rate notes (note 19.5) (1 010) Revolving credit facility (note 21) (2 865) 1 644 (253) Other current interest-bearing debt (note 21) 52 35 (7) (3 823) 1 679 (260)

34.11 Settlement of option premium Deferred option premium paid (note 20) (494) (310) (312) Call option premium paid (note 6.2) (289) Settlement of option premium (494) (599) (312)

34.12 Capitalised finance lease – decrease Capitalised finance lease (69) (40) (40) (69) (40) (40) 34.13 Cash and cash equivalents – increase/(decrease) Cash on hand (19) 6 (176) Cash on deposit 424 872 (124) Currency adjustments (3) (3) 402 878 (303)

147

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

35. FINANCIAL INSTRUMENTS BY CATEGORY

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

35.1 Financial assets by category Fair value Fair value through other through Loans and comprehensive profit or Available – receivables income loss for-sale Total Rm Rm Rm Rm Rm At 26 March 2016 Trade receivables (note 9) 966 966 Sundry receivables (note 10) 814 814 Cash and equivalents (note 11) 1 693 1 693 3 473 3 473 At 28 March 2015 Derivative financial instruments (note 37.8) 816 816 Trade receivables (note 9) 473 473 Sundry receivables (note 10) 524 524 Cash and equivalents (note 11) 1 288 1 288 2 285 816 3 101 At 29 March 2014 Derivative financial instruments (note 37.8) 769 1 252 2 021 Trade receivables (note 9) 323 323 Sundry receivables (note 10) 601 601 Cash and equivalents (note 11) 410 410 1 334 769 1 252 3 355

148

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

35. FINANCIAL INSTRUMENTS BY CATEGORY (continued)

35.2 Financial liabilities by category Financial Fair value Fair value liabilities at through through other amortised profit or comprehensive cost loss income Total Rm Rm Rm Rm

At 26 March 2016 Shareholder’s loan (note 18.2) 982 982 Interest-bearing debt (note 19 and 21) 26 682 26 682 Option liability (note 23) 50 50 Trade and other payables (note 24) 6 269 6 269 Finance lease (note 22.2) 340 340 34 273 50 34 323

At 28 March 2015 Shareholder’s loan (note 18.2) 841 841 Interest-bearing debt (note 19 and 21) 24 450 24 450 Derivative financial instruments (note 37.8) 103 103 Deferred option premium (note 20) 1 076 1 076 Option liability (note 23) 73 73 Trade and other payables (note 24) 5 526 5 526 Finance lease (note 22.2) 364 364 32 257 73 103 32 433

At 29 March 2014 Shareholder’s loan (note 18.2) 797 797 Interest-bearing debt (note 19 and 21) 23 643 23 643 Derivative financial instruments (note 37.8) 24 24 Deferred option premium (note 20) 1 102 1 102 Option liability (note 23) 67 67 Trade and other payables (note 24) 5 321 5 321 Finance lease (note 22.2) 273 273 31 136 67 24 31 227

149

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

36. MANAGEMENT OF CAPITAL

The Group considers share capital including ordinary and preference shares, share premium, warrants, the shareholder’s loan including the shareholder’s loan derecognised in equity, reserves and interest-bearing debt as capital.

The shareholder’s loan is considered to be capital as the amount is repayable in May 2037 and all notional interest is capitalised. The “A”, “B”, “F1” and “F2” preference shares are cumulative and redeemable at the option of the issuer and are therefore regarded as capital.

The long-term interest-bearing debt primarily consists of:  ZAR Super senior RCF term loan (note 19.1)  EUR Super senior refinancing facility (note 19.2)  ZAR Super senior hedging debt (note19.3)  EUR Super senior term loan (note 19.4)  EUR Super senior PIK notes (note 19.6)  ZAR Senior secured term loan (note 19.7)  USD 250 million Senior secured fixed rate notes (note 19.8)  EUR 317 million Senior secured fixed rate notes (note 19.9)  EUR 300 million Senior secured fixed rate notes (note 19.10)  EUR Senior secured PIK-toggle notes (note 19.11)  EUR 3 million Senior fixed rate notes (note 19.13)

The Group refinanced senior secured floating rate notes which were issued to finance the purchase of the assets from Edgars Consolidated Stores Limited through the issue of the EUR 300 million senior secured fixed rate notes maturing March 2018 (note 19.10) and the ZAR senior secured term loan (note 19.7) maturing 31 December 2017. Senior floating rate notes were refinanced in December 2013 through the issue of the EUR 425 million senior fixed rate notes maturing 30 June 2019 (note 19.12). Following the Exchange Offer (note 19.12), the EUR super senior PIK notes maturing 30 June 2019 (note 19.6) and the EUR senior secured PIK-toggle notes maturing 30 June 2019 (note 19.11) were issued in exchange for the EUR 425 million senior fixed rate notes and EUR 3 million senior fixed rate notes maturing 30 June 2022 (note 19.13) remained where note holders did not consent to the Exchange Offer. As such the EUR super senior PIK notes, EUR senior secured PIK-toggle notes and the EUR 3 million senior fixed rate notes are regarded as permanent capital following the completion of the Exchange Offer.

The USD 250 million and EUR 317 million senior secured fixed rate notes (note 19.8 and 19.9) issued during the 2011 financial period and the ZAR super senior floating rate notes (note 19.5) were issued to finance the settlement of the negative mark-to-market positions on the foreign currency swap contracts, which hedged the foreign currency exposure on the principal of the senior secured and the senior floating rate notes in issue at that time. On 27 November 2015, the Group concluded an agreement with certain financial institutions to provide a facility with a nominal value of €123 million (note 19.2) on a super senior secured basis. The proceeds on the drawdown of the facility was utilised to settle the ZAR super senior floating rate notes (note 19.5). As such, the EUR super senior refinancing facility (note 19.2) is considered permanent capital.

The Group additionally refinanced its capital structure in November and December 2015 where a portion of the ZAR senior secured term loan was elevated and Euro denominated and the deferred option premiums refinanced to ZAR super senior hedging debt and the Revolving Credit Facility (note 21) was refinanced to a ZAR super senior RCF term loan (note 19.1) due 31 December 2017 and as such are considered permanent capital.

The objectives in managing this capital are to:

 Ensure appropriate access to equity debt markets.  Ensure sufficient resilience against economic turmoil.  Safeguard the Group’s ability to continue as a going concern, be flexible and take advantage of opportunities that are expected to provide an adequate return to shareholders.  Optimise weighted average cost of capital, given inherent constraints.

The Group manages its capital and makes adjustments to it, in light of changes in economic conditions. No changes were made in the objectives, policies or processes during the current period.

Following the completion of the Exchange Offer Memorandum and Consent Solicitation Statement launched 30 June 2015, the Indentures governing the EUR 3 million senior fixed rate notes (note 19.13) due 2022 (formerly the EUR 425 million senior fixed rate notes due 2019) were amended to remove substantially all protective covenants and events of default. During the period, the Group has been in compliance with the remaining covenants and there have been no defaults or events of default. 150

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

36. MANAGEMENT OF CAPITAL (continued)

The Group takes cognisance of select rating agency ratios that evaluate the ability of the capital to absorb losses and the flexibility that a combination of capital instruments provide. The value placed on the corporate rating is important as the Group has issued notes on the Irish Stock Exchange to facilitate funding.

37. FINANCIAL RISK MANAGEMENT

37.1 Treasury risk management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments, where applicable, to moderate certain risk exposures.

A treasury workgroup consisting of senior management meets on a regular basis to update treasury policies and objectives, analyse currency and interest rate exposures and re-evaluate treasury management strategies against revised economic forecasts. Compliance with Group Treasury policies and objectives of the Board and exposure limits is reviewed at meetings of the Risk Management Workgroup.

37.2 Hedging strategy

The foreign denominated floating and fixed rate notes exposed the Group to both interest rate risk and/or foreign exchange risk. The Group had executed the following hedging strategy:

Euro Denominated Senior Floating Rate Notes due 2015

During November and December 2013, Edcon Holdings Limited terminated the cross currency swaps, interest rate swaps, and currency forwards as a consequence of the redemption of the senior floating rate notes to which they were related.

Euro Denominated Senior Secured Fixed Rate Notes due 2018

In April 2013, a cross currency swap was entered into which protected against variability in future interest cash flows that were subject to fluctuations based on foreign exchange rates. The notional value of the hedge was €70 million and provided cover on the coupon of the notes up to 15 March 2015. The hedge created an effective annual average fixed interest rate of 10.2% over the period of cover. The cross currency swap was designated as a cash flow hedge.

In April 2013, cross currency swaps were entered into which, (i) protected against interest rate variability in future interest cash flows on liabilities, (ii) protected against variability in future interest cash flows that were subject to fluctuation based on foreign exchange rates, and (iii) hedged the repayment of €230 million in principal and interest on notes to 15 March 2015. The hedges created an effective annual average fixed interest rate of 15.55% over the period of cover. The cross currency swaps were designated as a cash flow hedge.

In April 2013, foreign currency call options were entered into which hedged the repayment of €237 million in principal on the notes to 12 March 2015. Premiums payable on the foreign currency call options of R317 million was deferred to 13 March 2015. These options were not been designated as cash flow hedges.

In October 2013, a series of derivative contracts were entered into to extend, by a further twelve months, the maturity of hedge cover on the coupon payments relating to the senior secured fixed rate notes. Cross currency swaps were entered into, which protected against variability in future interest cash flows that were subject to fluctuations based on foreign exchange rates. The notional values for the hedges were €317 million, and provided cover on the coupons of these notes up to 15 March 2015. The hedges created an effective annual average fixed interest rate of 10.2% over the period of cover. The cross currency swaps were designed as cash flow hedges.

151

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.2 Hedging strategy (continued)

Euro Denominated Senior Secured Fixed Rate Notes due 2018 (continued)

In December 2013, the Group restructured foreign currency call options with notional values of €150 million by early terminating these derivative contracts that were due to mature in March 2014 and entered new foreign currency call options to extend the tenor of hedge cover to 15 December 2015 on the principal debt of the senior secured fixed rate notes. The premiums payable on the option contracts were deferred to 31 December 2015 (note 20). The foreign currency call options were not designated as cash flow hedges.

In September and November 2014, the Group restructured a series of cross currency swaps and foreign currency call options with notional values of €230 million and €237 million, respectively, by early terminating these derivative contracts that were due to mature in March 2015 and entered new foreign currency call options to partially hedge both interest with a notional value of €44 million and principal with a notional value of €385 million on the senior secured fixed rate notes, extending hedge cover to March 2016. R204 million of the premiums payable on the option contracts were deferred to July 2015 (R50 million) and March 2016 (R154 million) (note 20), respectively. These foreign currency call options were not designated as cash flow hedges.

Additionally, the Group entered into foreign currency forward contracts maturing 15 September 2015 and 15 March 2016, respectively, each for a notional value of €7 million to partially hedge the coupon payments due under the €300 million senior secured fixed rate notes. These foreign currency forward contracts were designated as cash flow hedges.

As at 26 March 2016, the senior secured fixed rate notes due 2018 including the coupon thereon was unhedged.

Euro Denominated Senior Fixed Rate Notes due 2019

In December 2013, cross currency swaps were entered into which protected against variability in future interest cash flows that were subject to fluctuations based on foreign exchange rates. The notional value of the hedge was €425 million and provided cover on the coupon of the notes up to 31 December 2015. The hedge created an effective annual average fixed interest rate of 14.65% over the period of cover. The cross currency swaps were designated as cash flow hedges.

Euro Denominated Senior PIK Fixed Rate Notes due 2022 - €3 million

The notes including PIK coupons were unhedged as at 26 March 2016.

US Dollar Denominated Senior secured Fixed Rate Notes due 2018

In October 2013, a series of derivative contracts were entered into to extend, by a further twelve months, the maturity of hedge cover on the coupon payments relating to the senior secured fixed rates notes. Cross currency swaps were entered into, which protected against variability in future interest cash flows that are subject to fluctuations based on foreign exchange rates. The notional values of the hedges was US$250 million, and provided cover on the coupons of these notes up to 15 March 2015. The hedges created an effective annual average fixed interest rate of 10.2% over the period of cover. The cross currency swaps were designated as cash flow hedges.

In December 2013, a series of foreign currency call options were entered into which hedged the repayment of US$250 million in principal on the notes to 31 March 2014. The premiums payable on the option contracts were deferred to between March and April 2014 (note 20). The foreign currency call options were not designated as cash flow hedges.

152

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.2 Hedging strategy (continued)

US Dollar Denominated Senior secured Fixed Rate Notes due 2018 (continued)

In December 2013 and January 2014, the Group restructured foreign currency call options with notional values of US$250 million by early terminating those derivative contracts that were due to mature in March 2014 and entered new foreign currency call options to extend the tenor of hedge cover to 15 December 2015 on the principal debt of the senior secured fixed rates notes. The premiums payable on the option contracts were deferred to 18 December 2015 (note 20). The foreign currency call options were not designated as a cash flow hedge.

In November 2014, the Group entered into new foreign currency call options with a notional value of $24 million to partially hedge interest on the senior secured fixed rate notes, extending hedge cover to March 2016 (note 6.4). These foreign currency call options were not designated as cash flow hedges.

As at 26 March 2016, the USD 250 million fixed rate notes and the coupons thereon were unhedged.

EUR super senior PIK notes and EUR senior secured PIK-toggle notes

At 26 March 2016, these notes and the related coupons thereon were unhedged.

37.3 Sensitivity analysis

37.3.1 Sensitivity analysis of non-derivative financial liabilities

The Group recognises that movements in certain risk variables (such as interest rates or foreign exchange rates) might impact the value of its variable rate financial liabilities and also the amounts recorded in its other comprehensive income and its profit or loss for the period. Therefore the Group has assessed:

(a) what would reasonably be possible changes in the risk variables at the reporting date; and (b) the effects on profit or loss and other comprehensive income if such changes in the risk variables were to occur.

The sensitivity analysis takes into account the incremental change in value arising from a parallel fall or rise in the interest rate and the exchange rate. The table below shows the approximate interest rate and exchange rate sensitivities of variable rate financial liabilities and the resulting impact on profit or loss, and other comprehensive income for financial liabilities held at the reporting date:

26 March 2016

Other comprehensive Profit or loss Non-derivative income effect financial liabilities Index Sensitivity Rm Rm JIBAR -50bps 36 ZAR denominated JIBAR +50bps (36) EUR-ZAR -10% 1 622 EUR-ZAR -5% 811 EUR denominated EUR-ZAR 5% (811) EUR-ZAR 10% (1 622) USD-ZAR -10% 386 USD-ZAR -5% 193 USD denominated USD-ZAR 5% (193) USD-ZAR 10% (386)

153

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.3 Sensitivity analysis (continued)

37.3.1 Sensitivity analysis of non-derivative financial liabilities (continued)

28 March 2015

Other comprehensive Profit or loss Non-derivative income effect financial liabilities Index Sensitivity Rm Rm JIBAR -50bps 40 ZAR denominated JIBAR +50bps (40) EUR-ZAR -10% 1 367 EUR-ZAR -5% 684 EUR denominated EUR-ZAR 5% (684) EUR-ZAR 10% (1 367) USD-ZAR -10% 301 USD-ZAR -5% 151 USD denominated USD-ZAR 5% (151) USD-ZAR 10% (301)

29 March 2014

Other comprehensive Profit or loss Non-derivative income effect financial liabilities Index Sensitivity Rm Rm JIBAR -50bps 31 ZAR denominated JIBAR +50bps (31) EUR-ZAR -10% 1 515 EUR-ZAR -5% 757 EUR denominated EUR-ZAR 5% (757) EUR-ZAR 10% (1 515) USD-ZAR -10% 264 USD-ZAR -5% 132 USD denominated USD-ZAR 5% (132) USD-ZAR 10% (264)

154

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.3 Sensitivity analysis (continued)

37.3.2 Sensitivity analysis of derivatives

The Group recognises that movements in certain risk variables (such as interest rates or foreign exchange rates) might impact the value of its derivatives and also the amounts recorded in its other comprehensive income and its profit or loss for the period. Therefore the Group has assessed:

(a) what would be reasonably possible changes in the risk variables at the reporting date; and (b) the effects on profit or loss and other comprehensive income if such changes in the risk variables were to occur.

The sensitivity analysis takes into account the incremental change in value arising from a parallel fall or rise in the yield curve and the exchange rate.

The table considers sensitivities to forward interest rate curves, of +/- 50 and +/-100 basis points respectively. If these sensitivities were to occur, the impact on the profit or loss, and other comprehensive income for each category of financial instrument held at the reporting date is shown below:

28 March 2015

Other Derivative asset / Comprehensive Profit or (liability) income loss effect Index Sensitivity Rm Rm Rm EURIBOR -100bps - -

Cross currency EURIBOR -50bps - - swaps EURIBOR +50bps - - EURIBOR +100bps 1 (1) EUR-ZAR -10% (75) 75

Cross currency EUR-ZAR -5% (37) 37 swaps EUR-ZAR 5% 37 (37) EUR-ZAR 10% 75 (75) EUR-ZAR -10% (18) 18

Forward exchange EUR-ZAR -5% (9) 9 contracts EUR-ZAR 5% 9 (9) EUR-ZAR 10% 18 (18) EUR-ZAR -10% (190) 190 Foreign currency EUR-ZAR -5% (113) 113 call options EUR-ZAR 5% 154 (154)

EUR-ZAR 10% 350 (350) USD-ZAR -10% (269) 269 Foreign currency USD-ZAR -5% (142) 142 call options USD-ZAR 5% 151 (151)

USD-ZAR 10% 306 (306)

1The above table assumes all designated hedges will change in fair value through other comprehensive income.

155

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.3 Sensitivity analysis (continued)

37.3.2 Sensitivity analysis of derivatives (continued)

29 March 2014

Other Derivative asset / Comprehensive Profit or (liability) income loss effect Index Sensitivity Rm Rm Rm EURIBOR -100bps (32) 32

Cross currency EURIBOR -50bps (8) 8 swaps EURIBOR +50bps (4) 4 EURIBOR +100bps (9) 9 EUR-ZAR -10% (593) 593

Cross currency EUR-ZAR -5% (297) 297 swaps EUR-ZAR 5% 297 (297) EUR-ZAR 10% 593 (593) USD-ZAR -10% (25) 25

Cross currency USD-ZAR -5% (13) 13 swaps USD-ZAR 5% 13 (13) USD-ZAR 10% 25 (25) EUR-ZAR -10% (415) 415 Foreign currency EUR-ZAR -5% (220) 220 call options EUR-ZAR 5% 237 (237)

EUR-ZAR 10% 486 (486) USD-ZAR -10% (164) 164 Foreign currency USD-ZAR -5% (88) 88 call options USD-ZAR 5% 97 (97) USD-ZAR 10% 201 (201)

1The above table assumes all designated hedges will change in fair value through other comprehensive income.

156

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.4 Foreign currency management

Material foreign currency forward contracts, cross currency swaps and foreign currency call options at 28 March 2015 and 29 March 2014 are summarised below. Foreign currency call options are only purchased as a cost-effective alternative to forward exchange contracts. As at 26 March 2016, the Group had not entered any derivatives covering the foreign denominated non-current interest bearing debt.

Foreign Derivative Contract Average currency fair value equivalent rate Rm Rm Foreign currency exposure against Rand hedged import forward orders 2015 US dollar 8 3 87 11.58 2014 US dollar 35 22 387 11.05 Foreign currency exposure against Rand hedged notes 2015 Euro 1 019 178 14 952 14.67 2014 Euro 1 429 1 612 19 090 13.36 2015 US dollar 274 535 2 899 10.58 2014 US dollar 500 386 5 062 10.12

The Group, in terms of approved policy limits, manages short-term foreign currency exposures relating to trade imports and exports. Net uncovered Rand transaction exposures to the US dollar at 26 March 2016 amounted to R14 million (2015: RNil million and 2014: RNil million). The Group policy is to restrict the net aggregate cover to between 100% and 145% of total foreign order exposure.

At 26 March 2016, in respect of future import commitments, if the South African Rand had weakened 5% against the US dollar, with all other variables held constant, profit or loss for the period would have increased by R14 million (2015: R4 million and 2014: R19 million). Conversely at 26 March 2016, in respect of future import commitments, if the South African Rand had strengthened by 5% against the US dollar, with all other variables held constant, profit or loss for the period would have decreased by R14 million (2015: R4 million and 2014: R19 million). Changes in the Rand/US dollar exchange rates of foreign currency creditors are largely offset by fair value changes on the forward exchange contracts.

At 26 March 2016, in respect of the foreign denominated notes exposures, the EUR super senior refinancing facility and the EUR super senior term loan, if the South African Rand had weakened 5% against the Euro and US dollar, with all other variables held constant, profit or loss for the period would have decreased by R1 004 million (2015: R835 million and 2014: R889 million). Conversely, at 26 March 2016, in respect of the notes exposures, if the South African Rand had strengthened 5% against other currencies, with all other variables held constant, profit or loss for the period would have increased by R1 004 million (2015: R835 million and 2014: R889 million). Gains and losses on translation of the floating and fixed rate notes will be offset by foreign exchange gains and losses on the cross currency swaps, foreign currency forward contracts and all foreign currency call options to the extent hedges are in place.

157

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.5 Interest rate management

As part of the process of managing the Group's fixed and floating rate interest-bearing debt and cash and cash equivalents mix, the interest rate characteristics of new and the refinancing of existing loans are positioned according to expected movements in interest rates. The maximum interest rate exposure and the repricing profile is summarised as follows:

Fixed Rate Floating Rate Short-term Long-term Short-term Long-term Rm Rm Rm Rm 26 March 2016 Interest-bearing debt 11 2701 179 8 957 Rate % note 19 note 21 note 19 28 March 2015 Interest-bearing debt 14 284 2 964 5 327 Rate % note 19 note 21 note 19 29 March 2014 Interest-bearing debt 14 284 1 270 5 243 Rate % note 19 note 21 note 19 1 Includes the EUR super senior term loan (note 19.4) which has a EURIBOR cash interest component and the EUR senior secured PIK-toggle notes (note19.11) where the rate if paid in cash, is set at 9.75% per annum and PIK at 12.75% per annum.

At 26 March 2016, if all interest rates on local borrowings had been 100 basis points lower, with all other variables held constant, profit or loss would have been R73 million (2015: R80 million and 2014: R63 million) higher. Conversely, at 26 March 2016, if all interest rates on local borrowings had been 100 basis points higher with all other variables held constant, profit or loss would have been R73 million (2015: R80 million and 2014: R63 million million) lower.

At 26 March 2016, if all interest rates on interest-bearing trade receivables and short-term cash investments at that date had been 100 basis points lower, with all other variables held constant, profit or loss would have been R27 million (2015: R22 million and 2014: R14 million) lower. Conversely, at 26 March 2016, if all interest rates at that date had been 100 basis points higher, with all other variables held constant, the profit or loss would have been R27 million (2015: R22 million and 2014: R14 million) higher. This sensitivity is due to the high value of trade receivables attracting the Usury rate interest income.

158

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.5 Interest rate management (continued)

Cash and cash equivalents are held as follows: Total Floating rate Rm Rm 2016 Cash and cash equivalents by currency US dollar 8 8 Chinese Yuan Renminbi 8 8 Mozambican Metical 12 12 Bangladeshi Taka 1 1 Botswana Pula 19 19 Zambian Kwacha 22 22 Swazi Lilangeni 10 10 Namibian Dollar 43 43 Lesotho Loti 16 16 Ghanaian Cedi - - South African Rand 1 554 1 554 2015 Cash and cash equivalents by currency US dollar 1 1 Chinese Yuan Renminbi 10 10 Mozambican Metical 13 13 Bangladeshi Taka 1 1 Botswana Pula 8 8 Zambian Kwacha 6 6 Swazi Lilangeni 6 6 Namibian Dollar 17 17 Lesotho Loti 4 4 Ghanaian Cedi 4 4 South African Rand 1 218 1 218 2014 Cash and cash equivalents by currency US dollar 5 5 Chinese Yuan Renminbi 7 7 Mozambican Metical 42 42 Bangladeshi Taka 1 1 Botswana Pula 15 15 Zambian Kwacha 52 52 South African Rand 288 288

159

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.5 Interest rate management (continued)

The following cross currency swaps, forward exchange contracts and call option contracts were in place at 28 March 2015 and 29 March 2014 to hedge against interest rate risk exposures:

Fair value of the interest rate Notes notional Notes fixed hedges amount hedged interest % asset/(liability) Rm payable Rm 2015 2014 2015 2014 2015 2014

Coupon hedges- Senior fixed rate notes

 Cross currency swaps 5 905 5 905 14.65 14.65 (79) (1)

Coupon hedges- Senior secured fixed rate notes

 Foreign currency call options (EUR 317m) 3 044 3 044 15.05 10.19 10 24  Forward exchange contracts and foreign currency call options (EUR 300m) 3 598 3 598 15.35 14.30 (19) 711

 Foreign currency call options (USD 250m) 1 737 1 737 11.99 10.17 21 12 Refer to note 37.2 for details of hedging strategy.

37.6 Credit risk management

Maximum exposure to credit risk is represented by the carrying amounts of derivative assets, trade accounts receivable, assets held-for-sale and short-term cash investments in the Consolidated Statement of Financial Position. The Group only deposits short-term cash surpluses with financial institutions of high-quality credit standing. Credit limits per financial institution are established within the Group’s treasury policies and are approved by the Risk Management Workgroup. Trade accounts receivable and the assets held-for-sale comprise a large, widespread customer base and risk exists on delinquent accounts and possible defaults by customers. The Group performs ongoing credit evaluations of the financial condition of customers. The granting of credit is controlled by application and behavioural scoring models and the assumptions therein are reviewed and updated on an ongoing basis.

At 26 March 2016, 28 March 2015 and 29 March 2014, the Group did not consider there to be any material concentration of credit risk.

Derivatives held in the 2015 and 2014 financial period were with several counterparties of high credit worthiness. The credit worthiness is assessed on a regular basis. At period end all counterparties were classified as investment grade.

160

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.7 Liquidity risk 2015 2014 28 March 29 March Rm Rm In the 2015 and 2014 financial period, the Group minimised risk of working capital illiquidity as shown by its substantial banking facilities and reserve borrowing capacity. Total banking and loan facilities 3 717 3 967 Actual borrowings (note 21) (2 865) (1 210) Unutilised borrowing facilities 852 2 757

Total banking and loan facilities of the Group comprised:

Revolving credit facility – Tranche B2 250 Revolving credit facility – Tranche B3 3 7171 3 7171 3 717 3 967 ¹Includes R2 550 million ancillary facilities.

The maturity dates of the facilities are:  Revolving credit facility Tranche B2 March 2014 March 2014 Tranche B3 December 2016 Reviewed Reviewed  Revolving credit ancillary facilities annually annually

On 27 November 2015, the Group concluded an agreement with certain financial institutions whereby the super senior Revolving Credit Facility was converted into a ZAR super senior RCF term loan (note 19.1), guaranteed on a super senior secured basis and secured by the interests over substantially all the assets of Edcon Holdings Limited and its subsidiaries. The total exposure of the loan was R3 717 million, comprising of R3 417 million in cash funding and R300 million available for utilisation for letters of credit and guarantees. The loan is repayable on 31 December 2017 and interest is payable bi-annually in cash at an initial rate of three-month JIBAR plus 5.0% and paid-in-kind at an interest rate of 3.0%.

Cash and cash equivalents on hand at each financial period end is disclosed in note 11.

161

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.7 Liquidity risk (continued)

37.7.1 Maturity analysis of derivative financial instruments’ cash flows

2015 2014 28 March 29 March Rm Rm Cash outflows Due within one year 1 113 8 004 Total due within one year 1 113 8 004

After one year but within two years 5 635 Total due after one year 5 635 Total 1 113 13 639

Cash inflows Due within one year 967 9 321 Total due within one year 967 9 321

After one year but within two years 6 318 Total due after one year 6 318 Total 967 15 639

Net cash (outflows)/inflows Due within one year (146) 1 316 Total due within one year (146) 1 316

After one year but within two years 683 Total due after one year 683 Total (146) 1 999

The maturity analysis of derivative financial instruments’ cash flows reflects the expected cash outflows and inflows of the Group using undiscounted cash flows, settlement terms and expected movements in floating rates. As at 26 March 2016, the Group had no derivatives which covered the exposure for the foreign denominated interest- bearing debt.

37.7.2 Maturity analysis of non-derivative financial liabilities (including interest payments)1

2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

Trade and other payables (note 24) 6 269 5 526 5 312 Deferred option premium 1 154 317 Interest-bearing debt due within one year 3 283 3 210 3 095 Total due within one year 9 552 9 890 8 724

After one year but within two years 27 672 6 613 3 829 After two years but within three years 123 17 603 4 906 After three years but within four years 3 877 825 16 777 After four years but within five years 61 6 381 873 After 5 years 9 185 9 156 15 799 Total due after one year 40 918 40 578 42 184 Total debt 50 470 50 468 50 908

1Includes interest on all notes in issue (note 19), finance lease payments and interest, as well as short-term interest-bearing debt (note 21) including interest. Refer to events after the reporting period, agreement with creditors with respect to the Restructuring which will affect above maturity analysis (note 40).

162

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.7 Liquidity risk (continued)

37.7.2 Maturity analysis of non-derivative financial liabilities (including interest payments) (continued)

The maturity analysis of non-derivative financial liabilities is prepared on an undiscounted cash flow basis. In respect of the cash flows that are not hedged and subsequent to the hedge maturing, the period end floating interest rates and foreign exchange rates are used to calculate the cash flows of the foreign denominated notes. The contractual maturity of the hedged coupon cash flows of the foreign denominated notes as at 28 March 2015 were calculated using forward Euribor rates (where applicable) and the exchange of principal at the derivative hedged rate.

37.8 Fair value of financial instruments

The Group uses a three-level hierarchy to prioritise the inputs used in measuring fair value. The levels within the hierarchy are described below with level 1 having the highest priority and level 3 having the lowest. Fair value is principally applied to financial assets and financial liabilities. These are measured at fair value on a recurring basis as of 26 March 2016, aggregated by the level in the fair value hierarchy within which these measurements fall. The following table presents the Group’s assets and liabilities that are measured at fair value at the period end:

Fair value measurement using Total Level 1 (a) Level 2 (b) Level 3 (c) Rm Rm Rm Rm 26 March 2016 Financial assets Cross currency swaps Foreign currency call options Total financial assets

Financial liabilities Option liability (note 23) 50 50 Foreign currency forward contracts Cross currency swaps Total financial liabilities 50 50

28 March 2015 Financial assets Cross currency swaps Foreign currency call options 816 816 Total financial assets 816 816

Financial liabilities Option liability (note 23) 73 73 Foreign currency forward contracts 24 24 Cross currency swaps 79 79 Total financial liabilities 176 103 73

29 March 2014 Financial assets Cross currency swaps 769 769 Foreign currency call options 1 252 1 252 Total financial assets 2 021 2 021

Financial liabilities Option liability (note 23) 67 67 Cross currency swaps 24 24 Total financial liabilities 91 24 67 163

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

37. FINANCIAL RISK MANAGEMENT (continued)

37.8 Fair value of financial instruments (continued)

a) Level 1 - Based on quoted market prices in active markets.

b) Level 2 - Based on observable inputs other than Level 1 prices, such as quoted prices for similar financial assets or financial liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial assets or financial liabilities.

c) Level 3 - Based on unobservable inputs that are supported by little or no market activity and are financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgement or estimation.

All financial instruments have been recognised in the statement of financial position and there is no material difference between their fair values and carrying values, except for the notes issued. There have been no transfers between levels during the current and prior periods.

The following methods and assumptions were used by the Group in establishing fair values:

Liquid resources, trade accounts receivable and loans: the carrying amounts reported in the statement of financial position approximate fair values due to the short period to maturity of these instruments.

Short-term interest-bearing debt: the fair values of the Group’s loans are estimated using discounted cash flow analyses applying the RSA yield curve. The carrying amount of short-term borrowings approximates their fair value, due to the short period to maturity of these instruments.

Notes issued: the notes issued are valued based on the exchange rate ruling at the reporting date. The market values are disclosed in note 19 and have been determined based on the closing prices of the relevant stock exchange.

Derivative financial instruments: as at 26 March 2016, the company had no derivative instruments in issue excluding forward exchange contracts which covers imports. Foreign currency forward contracts, foreign currency call options and cross currency swaps were entered into to hedge interest rate and foreign exchange rate exposure of interest-bearing debt and fair values were determined using market related rates at 28 March 2015.

38. RELATED PARTY TRANSACTIONS

The Consolidated Financial Statements include the financial statements of Edcon Holdings Limited and its subsidiaries and equity accounted earnings. Related party relationships exist within the Group. During the period all purchasing and selling transactions were concluded at arm’s length. Edcon Holdings Limited is the ultimate South African parent entity and the ultimate parent of the Group is Edcon (BC) S.A.R.L. (“Bain Capital”). The following table provides the total amount of transactions, which have been entered into with related parties: 2016

Amounts Fee paid to owed to Share of related parties related parties profits Rm Rm Rm Loan including interest to shareholder (Bain Capital) – recognised in non-current liabilities 982 Loan including interest to shareholder (Bain Capital) – recognised in equity 8 311 Fees paid to PCA (South Africa) Limited (Bain Capital affiliate) for consulting fees 52

Bain and Company SA Inc. 20 48

Share of after tax profits from insurance business with Hollard 725 Share of after tax losses from associates Lornanox Proprietary Limited and Ordiphase Proprietary Limited (1)

164

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

38. RELATED-PARTY TRANSACTIONS (continued)

2015

Amounts owed Paid to to Share of related parties related parties profits Rm Rm Rm Loan including interest to shareholder (Bain Capital) recognised in non-current liabilities 841 Loan including interest to shareholder (Bain Capital) – recognised in equity 8 311 Fees paid to PCA (South Africa) Limited (Bain Capital affiliate) for consulting fees 39 Share of after tax profits from insurance business with Hollard 747

2014

Amounts owed Paid to to Share of related parties related parties profits Rm Rm Rm Loan including interest to shareholder (Bain Capital) recognised in non-current liabilities 797 Loan including interest to shareholder (Bain Capital) – recognised in equity 8 290 Fees paid to PCA (South Africa) Limited (Bain Capital affiliate) for consulting fees 100 Share of after tax profits from insurance business with Hollard 739

38.1 Compensation relating to key management personnel2

52 weeks to 52 weeks to 52 weeks to

26 March 28 March 29 March 2016 2015 2014 Total including Total including Total including directors and directors and directors an prescribed prescribed prescribed officers officers officers Rm Rm Rm

Remuneration 48 55 42 Retirement, medical, accident and death benefits 5 6 5 Relocation - 1 Performance bonus 22 12 Other bonuses1 84 52 40 Other benefits 4 1 - 163 127 87 Comprising: Short-term employee benefits 158 121 82 Post-employment benefits 5 6 5

1Includes retention, loyalty, sign-on and other bonuses. 2Key management personnel include directors and prescribed officers (note 31.2.1) and members of the Chief Executive’s Forum.

165

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 26 March 28 March 29 March Rm Rm Rm

39. CONSOLIDATION OF EDGARS STORES LIMITED

Edgars Stores Limited is listed on the stock exchange in Zimbabwe. Edgars Stores Limited is separately managed and has a December period end. Although the Group has only a 38% ownership in Edgars Stores Limited, the directors concluded that the Group has a sufficiently dominant voting interest to direct the relevant activities of Edgars Stores Limited on the basis of the Group’s absolute size of and dispersion of the shareholdings owned by other shareholders, as well as voting patterns at previous shareholders’ meetings. Non-controlling interest in the Consolidated Statement of Financial Position relates to the minority shareholding in Edgars Stores Limited.

The effect on the Consolidated Statement of Financial Position, Consolidated Statement of Comprehensive Income and Consolidated Cash Flows of consolidating Edgars Stores Limited is detailed below. Included in the Consolidated Statement of Financial Position by line are the following balances relating to the consolidation of Edgars Zimbabwe:

ASSETS Non-current assets Property, fixtures, equipment and vehicles 135 109 75 Intangible assets - 1 2 Total non-current assets 135 110 77

Current assets Inventories 198 138 116 Trade receivables 481 397 244 Sundry receivables and prepayments 14 13 6 Cash and cash equivalents 8 1 5 Total current assets 701 549 371 Total assets 836 659 448

EQUITY AND LIABILITIES Equity attributable to shareholders Other reserves 43 31 19 Retained profit 105 86 63 148 117 82 Non-controlling interest 254 146 93 Total equity 402 263 175

Non-current liabilities Interest-bearing debt 106 139 110 Deferred tax 56 46 29 Total non-current liabilities 162 185 139

Current liabilities Interest-bearing debt 172 96 60 Current taxation 13 4 Trade and other payables 87 111 74 Total current liabilities 272 211 134 Total equity and liabilities 836 659 448 Total managed capital per IAS 1 680 498 345

166

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

39. CONSOLIDATION OF EDGARS STORES LIMITED (continued)

Included in the Consolidated Statement of Comprehensive Income by line are the following amounts relating to the consolidation of Edgars Zimbabwe:

Total revenues 971 861 673

Revenue – retail sales 822 799 646 Cost of sales (450) (432) (332) Gross profit 372 367 314 Other income 149 62 29 Store costs (161) (143) (138) Other operating costs (250) (185) (127) Trading profit 110 101 78 Finance income - - - Profit before financing costs 110 101 78 Financing costs (34) (21) (17) Profit before taxation 76 80 61 Taxation (28) (24) (17) Profit for the period 48 56 44

167

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued) 2016 2015 2014 52 weeks to 52 weeks to 52 weeks to 26 March 28 March 29 March Rm Rm Rm

39. CONSOLIDATION OF EDGARS STORES LIMITED (continued)

Included in the Consolidated Statement of Cash Flows by line are the following amounts relating to the consolidation of Edgars Zimbabwe:

Cash retained from operating activities Profit before taxation 76 80 61 Finance income - - - Financing costs 34 21 17 Depreciation 16 11 9 Amortisation 1 1 - Net loss on disposal of asset 1 - - Other non-cash items 5 - - Operating cash inflow before changes in working capital 134 113 87 Working capital movement (45) (89) (44) Increase in inventories (20) (5) (18) Decrease/(Increase) in trade accounts receivables 30 (106) (13) Decrease/(increase)/ in other receivables and prepayments 1 (5) 4 (Decrease)/increase/in trade and other payables (56) 27 (17)

Cash inflow from operating activities 89 24 43 Finance income received - - - Financing costs paid (35) (21) (17) Taxation paid (23) (10) (10) Net cash inflow/(outflow) from operating activities 31 (7) 16

Cash utilised in investing activities Investment to maintain operation (12) (34) (13) Net cash outflow from investing activities (12) (34) (13)

Cash effects of financing activities Non-current interest-bearing debt (72) 12 (30) Current interest-bearing debt 49 25 (10) Net cash (outflow)/inflow from financing activities (23) 37 (40)

Decrease in cash and cash equivalents (4) (4) (37) Cash and cash equivalents at the beginning of the period 1 5 41 Currency adjustments 11 1 Cash and cash equivalents at the end of the period 8 1 5

168

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

40. EVENTS AFTER THE REPORTING PERIOD

169

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

40. EVENTS AFTER THE REPORTING PERIOD (continued)

Agreement with Creditors (continued)

Such Restructuring involves amongst others, a transfer of control over the Group’s operating companies from Edcon (BC) S.A.R.L (being ultimately controlled by Bain Capital) to certain of the Group’s existing creditors(the “Control Transfer”), a significant decrease in the outstanding amount of third-party debt of Edcon Limited (a significant indirect subsidiary within the Group), the refinancing of a large portion of the existing third party debt of Edcon Limited in newly established Group companies, and the renegotiation of the terms of third party debt which remain in Edcon Limited. On 13 October 2016, the various conditions precedent to the occurrence of the effective date of the LUA have been satisfied, such that the LUA became binding on all parties thereto.

The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility, LC Facility and the Super Senior Liquidity Facility will rank pari passu amongst each other, and will be secured on a super senior basis by substantially all of the assets of Edcon Limited and its subsidiaries, together with some of the assets of the Parent and will contain LMA-style customary affirmative and negative covenants, which will be adjusted to give Edcon Limited flexibility to operate its day-to-day business activities and will permit Edcon Limited to make certain administrative parent company payments. The covenants will be set at a level reflecting the leverage and liquidity position of the operating companies of the Edcon Limited Group. The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility will mature on the earliest to occur of (i) 31 December 2019, (ii) the earliest maturity date of the Super Senior Liquidity Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Limited Group which benefits from security granted by the Edcon Limited Group’s operating companies, and may be extended upon payment of a fee. The Super Senior Liquidity Facility will mature on the earliest of (i) 31 December 2017, (ii) the earliest maturity date of the New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Group which benefits from security granted by the Edcon Group’s operating companies and may be extended to 31 December 2018 upon meeting certain financial ratios.

170

Notes to the Consolidated Financial Statements of Edcon Holdings Limited (continued)

40. EVENTS AFTER THE REPORTING PERIOD (continued)

Agreement with Creditors (continued)

The Restructuring has been approved by the Competition Commission without conditions and the transaction was referred to the Tribunal and approved on 23 November 2016 and now requires Court Sanction.

41. CONTINGENT LIABILITY

A contingent liability of R320 million has arisen as a result of the Group’s interest in the insurance business with Hollard. The liability would only arise on the termination of the agreements between the Group and Hollard. The Group has no intention of terminating these agreements as at 26 March 2016.

171

Audited Company Annual Financial Statements

Edcon Holdings Limited

For the period ended 26 March 2016

172

Company Statement of Financial Position 2016 2015 26 March 28 March Note Rm Rm

ASSETS Non-current assets Loans owing by Group company 1 8 449 Investment in subsidiaries 2 8 366 Investment in Hollard Business Partners 3 245 367 Total non-current assets 245 17 182

Current-assets Loans owing by Group companies 6 3 405 Current taxation - - Cash and cash equivalents 7 1 - Total current assets 1 3 405 Total assets 246 20 587 EQUITY AND LIABILTIES Equity attributable to shareholders Share capital 8.8 - - Share premium 8.8 2 975 2 975 Warrants issued 9.2 135 Cash flow hedges 10 (57) Retained (loss)/profit (12 495) 2 821 Shareholder’s loan derecognised in equity 11.1 8 311 8 311 Total equity (1 074) 14 050

Non-current liabilities – shareholder’s loan Shareholder’s loan 11.2 982 841 Total equity and shareholder’s loan (92) 14 891

Non-current liabilities – third parties Interest-bearing debt 12 51 5 381 Interest-free debt owing to Group company 13 259 Deferred taxation 5 26 23 336 5 404 Total non-current liabilities 1 318 6 245

Current liabilities Loan owing to subsidiary 14 1 1 Derivative financial instruments 4 79 Sundry payables 15 1 212 Total current liabilities 2 292 Total equity and liabilities 246 20 587

Total managed capital per IAS 1 23 218 20 272

173

Company Statement of Comprehensive Income 2016 2015 52 weeks to 52 weeks to 26 March 28 March Note Rm Rm

Total revenues 16 1 424 699

Derivative gains 17 17 - Foreign exchange (loss)/gain 18 (937) 601 Dividend income 211 230 Provisions raised against loans owing by Group companies 1 & 6 (13 224) Impairment of investment in subsidiaries 2 (8 366) Impairment of Hollard Business Partners investment 3 (122) Net gain on Exchange Offer 19 6 826 (Loss)/profit before interest received (15 595) 831 Finance income 20.1 1 213 469 (Loss)/profit before financing costs (14 382) 1 300 Financing costs 20.2 (953) (990) (Loss)/profit before taxation (15 335) 310 Taxation 21 19 (46) (Loss)/profit for the period (15 316) 264

Other comprehensive income after tax: Items that may be reclassified subsequently to profit or loss: Gain/(loss) on cash flow hedges 57 (56) Other comprehensive income for the period, after tax 57 (56)

TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD (15 259) 208

Loss attributable to: Owners of the parent (15 316) 264

Total comprehensive (loss)/income attributable to: Owners of the parent (15 259) 208

174

Company Statement of Changes in Equity Share- holder’s Cash loan flow derecog- Share Share Warrants hedging Retained nised to capital premium issued reserve profit equity Total Rm Rm Rm Rm Rm Rm Rm Balance at 29 March 2014 - 2 975 (1) 2 557 8 290 13 821 Profit for the period 264 264 Other comprehensive loss for the period (56) (56)

Total comprehensive income/(loss) (56) 264 208 Reclassification from non-current liabilities shareholder’s loan 21 21

Balance at 28 March 2015 - 2 975 (57) 2 821 8 311 14 050 Loss for the period (15 316) (15 316) Other comprehensive income for the period 57 57

Total comprehensive (loss)/income 57 (15 316) (15 259) Shares issued - - - Warrants issued 135 135 Balance at 26 March 2016 - 2 975 135 (12 495) 8 311 (1 074)

Note 8.8 8.8 9.2 10 11.1

175

Company Disclosure of Tax Effects on Other Comprehensive Income 2016 2015 52 weeks to 52 weeks to 26 March 28 March Note Rm Rm

Disclosure of tax effects relating to each component of other comprehensive income:

Before tax amount Cash flow hedges 79 (78) Other comprehensive income for the period before tax 79 (78)

Tax (expense)/income Cash flow hedges 10 (22) 22 Tax (expense)/income (22) 22

After tax amount Cash flow hedges 57 (56) Other comprehensive income for the period after tax 57 (56)

176

Company Statement of Cash Flows 2016 2015 52 weeks to 52 weeks to 26 March 28 March Note Rm Rm Cash from operating activities (Loss)/profit before taxation (15 335) 310 Finance income 20.1 (1 213) (469) Financing costs 20.2 953 990 Dividends received 16 (211) (230) Derivative gains 17 (17) - Foreign exchange loss/(gain) 18 937 (601) Provisions raised against loans owing by Group companies 1 & 6 13 224 Impairment of investment in subsidiaries 2 8 366 Impairment of Hollard Business Partners investment 3 122 Net gain on Exchange Offer 19 (6 831) Operating cash outflow before changes in working capital (5) - Loans to subsidiary (157) (222) Decrease in sundry payables - (8) Net cash outflow from operating activities (162) (230) Finance income received - 1 005 Financing costs paid (1) (1 005) Taxation paid 22.1 - - Net cash outflow from operating activities (163) (230)

Cash effects of investing activities Dividends received 22.2 211 230 Net cash inflow from investing activities 211 230

Cash effects of financing activities Termination of derivatives (47) Net cash outflow from financing activities (47)

Increase in cash and cash equivalents 22.3 1 - Cash and cash equivalents at the beginning of the period - - Cash and cash equivalents at the end of the period 1 -

177

Notes to the Company Financial Statements 2016 2015 26 March 28 March Rm Rm

1. NON-CURRENT LOANS OWING BY GROUP COMPANY

Interest-free loan owing by Edcon Limited, shareholder’s loan advanced 718 614 Provision raised against interest-free loan owing by Edcon Limited (718) Interest-bearing loan owing by Edcon Limited 8 890 7 835 Provision raised against interest-bearing loan owing by Edcon Limited (8 890) 8 449 The interest-free loan owing by Edcon Limited comprises: Principal 461 461 Cumulative notional interest charged 257 153 Provision raised (718) Interest-free loan owing by Edcon Limited principal and notional interest 614

Reconciliation of interest-free loan owing by Edcon Limited: Principal and notional interest at the beginning of the period 614 581 Notional interest charged 104 49 Reclassification to investments in subsidiaries impaired during the current financial period (note 2) (16) Provision raised (718) Principal and notional interest at the end of the period 614

Loan recognised in investments in subsidiaries and subsequently impaired (note 2) 6 398 6 398

Total principal loan at the end of the period excluding notional interest and provisions raised 6 859 6 859

The interest-bearing loan with Edcon Limited comprises: Principal and interest at the beginning of the period 7 835 8 432 Loan issued to Edcon Limited Interest capitalised during the period 1 108 420 Settlement during the period (53) (1 017) Provision raised (8 890) Principal and interest at the end of the period 7 835

Total principal loans interest-free and interest-bearing owing by Edcon Limited excluding notional interest and provisions raised 15 749 14 694

Interest-free loan owing by Edcon Limited, shareholder’s loan advanced In June 2007, the Company advanced R5 057 million from the proceeds of the initial shareholder’s loan from Edcon (BC) S.A.R.L. to Edcon Limited. Interest accrued daily at prime plus 2.25% p.a. up to and including 7 February 2012. From 8 February 2012, the terms of the loan were changed and the loan accrued interest of 0% as from that date up to and including the date of repayment. The loan is repayable by no later than 25 May 2037. As a result of the change to the terms of the loan, R6 859 million was derecognised on 8 February 2012, R6 382 million recognised in investments in subsidiaries and a R477 million principal loan recognised in non-current assets in accordance with the principles of IAS 39.

178

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

1. NON-CURRENT LOANS OWING BY GROUP COMPANY (continued)

During the prior financial period, R16 million was reclassified to investments in subsidiaries (note 2) from the principal of the interest-free loan owing from Edcon Limited due to a misclassification between the investment in subsidiaries (note 2) and the principal portion of the interest-free loan at 8 February 2012.

As a result, R6 398 million should have been recognised in investments from subsidiaries (note 2) and a R461 million loan recognised in non-current assets at that date.

As at 26 March 2016, the loan has been provided for in full due to the uncertainty of the recoverability of the loan.

Interest-bearing loan owing by Edcon Limited The proceeds raised of R6 250 million on the issuance of the senior floating rate notes were advanced to Edcon Limited on 1 June 2007. In November and December 2013, a further R791 million from the proceeds on termination of the derivatives (R488 million) which hedged the senior floating rate notes and proceeds from the over-raise on the senior fixed rate notes (R303 million) was advanced to Edcon Limited. Another R3 million was on-lent to Edcon Limited during the 2014 financial period from excess cash reserves. Interest accrues on the outstanding amount as agreed between the parties from time to time but shall at least be equal to the aggregate of the following:

a) interest incurred by the lender; b) foreign exchange differences incurred by or accrued to the lender; c) any amounts incurred by or accrued to the lender in respect of interest rate agreement or option contracts that are taken out by the lender as hedging arrangements in relation to the debt; and d) a 25 point basis premium to the amounts in a) to c) above.

The interest, as set out in a) to c) above, is payable 5 business days prior to the date that the corresponding amounts fall due by the lender. The interest, as set out in d) above is payable 5 business days after payment by the lender. The lender pays interest quarterly in arrears. The principal amount becomes due on the day it becomes payable by the lender.

To the extent required to maintain the solvency of Edcon Limited, these loans are subordinated to the claims of all of the creditors of Edcon Limited.

As at 26 March 2016, the loan has been provided for in full due to the uncertainty of the recoverability of the loan.

2. INVESTMENT IN SUBSIDIARIES 100% holding in Edcon Acquisition Proprietary Limited 1 968 Loan advanced to Edcon Limited recognised in investments (note 1) 6 398 Total investment in subsidiaries 8 366

Balance at the beginning of the period 8 366 8 350 Interest reclassified from interest-free loan owing by Edcon Limited (note 1) 16 Impairment of 100% holding in Edcon Acquisition Proprietary Limited (1 968) Impairment of loan advanced to Edcon Limited recognised in investments (note 1) (6 398) Balance at the end of the period 8 366

The investment in subsidiaries were impaired during the current financial period to their recoverable amounts of Rnil.

179

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

3. INVESTMENT IN HOLLARD BUSINESS PARTNERS

Hollard Business Partners Proprietary Limited (HBP) 245 367 245 367

The HBP investment was acquired on 2 January 2013 from Edcon Limited through the granting of a loan from Edcon Limited of R367 million. The loan was interest free and was fully repaid in the 2014 financial period from cash distributions received from HBP.

The investment in HBP was impaired during the current financial period by R122 million to the recoverable amount of the investment.

4. DERIVATIVE FINANCIAL INSTRUMENTS

Current derivative liabilities Cross currency swaps (79) Total derivatives (79)

Credit risk valuation adjustments on cross currency swaps (5)

Total derivatives, cross currency swap before credit risk valuation adjustments (84)

5. DEFERRED TAXATION

Balance at the beginning of the period – deferred taxation liability/(asset) 23 - Recognised in profit or loss – current period (note 21.1) (19) 39 Recognised in profit or loss – prior period (note 21.1) 6 Cash flow hedges (note 21.2) 22 (22) Balance at the end of the period – deferred taxation liability/(asset) 26 23

Deferred taxation comprises: Interest - application of Section 24J 20 Cross currency swaps - application of Section 24I 25 Gain on non-consenting 13.375% senior fixed rate notes (note 12.1) 26 Deferred taxation liability 26 45

Cash flow hedges (22) Deferred taxation asset (22)

Net deferred taxation liability 26 23

180

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

6. CURRENT LOANS OWING BY GROUP COMPANIES

Edcon Limited 1 262 1 051 Provision raised against loan owing by Edcon Limited (1 262) Edgars Consolidated Stores Proprietary Limited 2 354 2 354 Provision raised against loan owing by Edgars Consolidated Stores Limited (2 354) 3 405

Reconciliation of current loan owing by Edcon Limited:

Balance at the beginning of the period 1 051 821 Proceeds advanced during the period 211 230 Provision raised (1 262) Balance at the end of the period 1 051

The proceeds advanced during each financial period to Edcon Limited are from cash distributions received from the HBP investment (note 3).

The loans owing by Edcon Limited and Edgars Consolidated Stores Proprietary Limited are interest-free and payable on demand by the lender Edcon Holdings Limited.

As at 26 March 2016, the loans have been provided for in full due to the uncertainty of the recoverability of the loans.

7. CASH AND CASH EQUIVALENTS Cash on deposit 1 - 1 - 8. SHARE CAPITAL AND PREMIUM

8.1 Authorised ordinary share capital 1 000 000 000 “A “ordinary shares with a par value of R0.00001 each - - 100 000 000 “B” ordinary shares with a par value of R0.00001 each - - 1 000 000 000 “C” ordinary shares with a par value of R0.00001 each - - 1 000 000 000 “D” ordinary shares with a par value of R0.00001 each - - 1 000 000 000 “E” ordinary shares with a par value of R0.00001 each - - 1 000 000 000 “F” ordinary shares with no par value - - - - 8.2 Authorised preference share capital 1 000 000 000 “A” preference shares of R0.00001 each - - 1 000 000 000 “B” preference shares of R0.00001 each - - 1 000 000 000 “F1” preference shares with no par value - - 1 000 000 000 “F2” preference shares with no par value - - - -

181

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Number Number

8. SHARE CAPITAL AND PREMIUM (continued)

8.3 Number of ordinary shares in issue Number of ordinary shares in issue comprise: A ordinary shares issued 500 133 500 133 B ordinary shares issued 69 213 69 213 C ordinary shares issued 31 643 23 035 D ordinary shares issued 31 643 23 035 E ordinary shares issued 31 643 23 035 664 275 638 451 8.4 Number of preference shares in issue “A” preference shares of R0.00001 each 200 866 200 866 “B” preference shares of R0.00001 each 55 841 55 841 256 707 256 707

8.5 Voting rights of ordinary and preference shares Each “A” ordinary share shall entitle the holder thereof to 1 000 votes on all matters upon which shareholders have the right to vote.

Each “A” redeemable cumulative preference Share shall not entitle the holders thereof to receive notice of or to attend or vote at any general meeting of the Company, save where a resolution affecting a matter contemplated in section 37(3)(a) of the Companies Act of South Africa is proposed.

The total “B” ordinary shareholder of the company at any time shall, in aggregate, have the right to exercise such number of votes as is equal to 10.6% of the aggregate voting rights of the total “A” ordinary shares then in issue.

Each “B” redeemable cumulative preference share shall not entitle the holders thereof to receive notice of or to attend or vote at any general meeting of the Company, save where a resolution affecting the matter contemplated in section 37(3)(a) of the Companies Act of South Africa is proposed.

Each “C”, “D” and “E” Ordinary Share shall entitle the holder thereof to one vote on all matters upon which shareholders have the right to vote.

The “F” ordinary shares shall not entitle the holders thereof to vote at any general meeting of the Company, save where a resolution affecting a matter contempated in section 37(3)(a) of the Companies Act of South Africa is proposed.

The “F1” preference shares shall not entitle the holders thereof to vote at any general meeting of the Company, save where a resolution affecting a matter contempated in section 37(3)(a) of the Companies Act of South Africa is proposed.

The “F2” preference shares shall not entitle the holders thereof to vote at any general meeting of the Company, save where a resolution affecting a matter contempated in section 37(3)(a) of the Companies Act of South Africa is proposed.

8.6 Classification of preference shares at inception The preference shares have been classified as equity at inception during the 2008 financial period where management has applied significant judgement thereto having considered the rights of the preference shareholders and distribution entitlement and the conditions relating to the Shareholder’s loan agreement (note 11.3), the commercials of the private equity transaction concluded in the 2008 financial period and the shareholder’s and managements intent at inception. The Shareholder’s loan repayment is subject to the Company having declared distributions to the preference shareholders by May 2037. The classification of the preference shares are dependent on the legal interpretation of the Shareholder’s loan. Management has interpreted that the preference shares are sufficiently de-linked from the Shareholder’s loan as any distributions on the preference shares which are at the discretion of the Company are not considered to be dependent on the repayment of the Shareholder’s loan. Alternative judgements applied and alternative interpretations of the Shareholder’s loan agreement may have resulted in the preference shares classified as financial liabilities and not equity. 182

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

8. SHARE CAPITAL AND PREMIUM (continued)

8.7 Redemption of Preference Shares The “A”, “B”, “F1” and “F2” Preference Shares may not be redeemed within three years and one day of their date of issue and will thereafter be redeemed at a date fixed by the Company.

The Company shall pay to the member, all monies payable in respect of the redemption of such “A”, “B”, “F1” and “F2” Preference Shares as calculated in accordance with the provisions of the Memorandum of Incorporation of the Company.

The “A”, “B”, “F1” and “F2” Preference Shares shall not confer on the holders thereof any further rights to participate in the profits or assets of the Company.

8.8 Issued share capital and premium Balance at the beginning of the period 2 975 2 975 Ordinary shares issued – share capital - Ordinary shares issued – share premium - Balance at the end of the period 2 975 2 975 Comprising: Share capital - - Share premium 2 975 2 975 2 975 2 975 During the current financial period the Company issued the following shares: - 291 “C” ordinary shares with a par value of R0.00001 per share at a premium of R163.54 per share; - 8 317 “C” ordinary shares with a par value of R0.00001 per share at a premium of R17.11 per share; - 291 “D” ordinary shares with a par value of R0.00001 per share at a premium of R163.54 per share; - 8 317 “D” ordinary shares with a par value of R0.00001 per share at a premium of R17.11 per share; - 291 “E” ordinary shares with a par value of R0.00001 per share at a premium of R163.54 per share; and - 8 317 “E” ordinary shares with a par value of R0.00001 per share at a premium of R17.11 per share.

2016 2015 26 March 28 March Number Number 9. WARRANTS

9.1 Number of warrants in issue F warrants issued 94 722 F1 warrants issued 1 694 965 720 F2 warrants issued 137 258 338 Total number of warrants in issue 1 832 318 780

183

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

9. WARRANTS (continued)

9.2 Warrants issued F warrants – issued at 0 cents per warrant - F1 warrants – issued at 7.36 cents per warrant 125 F2 warrants – issued at 7.36 cents per warrant 10 135

Under an Exchange Offer Memorandum and Consent Solicitation (“Exchange Offer”) launched on 30 June 2015 by Edcon Holdings Limited with respect to its €425 million 13.375% Senior Notes due 2019 (“Existing 2019 Notes”) (note 12.1), the warrants were issued on 27 November 2015.

On the conversion date, 27 November 2015, the new Option B senior 13.375% PIK notes were called and each €1 000 in principal amount was exchanged for the following: - a pro rata portion of the Edcon Holdings Limited warrants exercisable for, and rights to distribution relating to, the Edcon Holdings Limited Warrant Shares offered in the Exchange Offer. - €100 in principal amount of New Super Senior PIK Notes issued by a Group company, Edcon Limited and; - €150 in principal amount of new senior secured 9.75%/12.75% PIK-toggle notes issued by Edcon Limited.

The value of the warrants issued have been determined using a valuation technique employing the Current Value Method, prepared on the basis of “Market Value” (i.e. the value as applied between a hypothetical willing vendor and a hypothetical willing prudent buyer in an open market with access to relevant information) and valued as at 27 November 2015. The Current Value Method estimated the value of the warrants issued by determining the enterprise value of Edcon Holdings Limited using discounted cash flows and subtracting the fair value of the debt as at 27 November 2015. The equity value was allocated to each class of equity including the warrants by using the Current Value Method based on the distributions that the Warrantholders would receive at the date of the valuation on 27 November 2015.

The warrants are classified as equity at inception in the current financial period. Management has applied significant judgement thereto having considered the rights of the warrant holders, rights to conversion, distribution entitlement and the conditions relating to the Shareholder’s loan agreement (note 11.3). The Shareholder’s loan repayment is subject to the Company having declared distributions to the preference shareholders by May 2037. The classification of the warrants are dependent on the legal interpretation of the Shareholder’s loan as to whether they are sufficiently linked. Management has concluded that the warrants are sufficiently de-linked from the Shareholder’s loan and provides the warrant holders with rights which are more akin to those of an equity instrument. On conversion to preference shares, any distributions on such preference shares would be at the discretion of the Company and are not considered to be dependent on the repayment of the Shareholder’s loan. Alternative judgements applied and alternative interpretations of the Shareholder’s loan agreement may have resulted in the warrants being considered to be derivatives or a financial liability and not equity.

184

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

9. WARRANTS (continued)

9.2 Warrants issued (continued)

Exercise of warrants

The warrants shall exercise as follows: - each F1 Warrant shall exercise into one F1 Preference Share; - each F2 Warrant shall exercise into one F2 Preference Share; and - each F Warrant shall exercise into one F Ordinary Share.

Rights of Warrantholders

Warrantholders have the right to: - receive or access information concerning the Company as the Warrantholder would be entitled to receive if the Warrantholder was a holder of Warrant shares, including the audited financial statements and securities register of the Company; - apply to court to protect their rights or rectify a harm to them as if the Warrantholder was a holder of Warrant Shares; and - apply to court for relief from oppressive or prejudicial conduct as if the Warrantholder was a holder of Warrant Shares.

The Company shall not make any distribution unless it pays to the applicable Warrantholders an amount equal to that which they would have been entitled to receive by way of such distribution pursuant to the Memorandum of Incorporation and the Long-Term Shareholders' Loan assuming that they had exercised their Warrants in full and been issued Warrant Shares pursuant to such exercise immediately prior to the distribution.

10. CASH FLOW HEDGING RESERVE

Balance at the beginning of the period – net of tax (57) (1)

Movements Cash flow hedges recognised in other comprehensive income 11 (176) Ineffective portion of cash flow hedges, released to derivative gains/(losses) as hedge ineffectiveness 34 - Cash flow hedges released to financing costs 34 98 Tax impact of cash flow hedges (note 21.2) (22) 22 Balance at the end of the period (57)

Comprising: Cash flow hedges net of tax (57)

The foreign denominated 13.375% fixed rate senior notes exposed the Company to foreign exchange risk. Derivative instruments were executed to limit the exposure to both interest rate risk and foreign exchange risk. These derivative instruments were designated as a cash flow hedge. Refer to note 24.2 for details of the hedging strategy. 185

Notes to the Company Financial Statements (continued) 2016 2015 26 March 28 March Rm Rm

11. SHAREHOLDER’S LOAN

11.1 Shareholder’s loan derecognised to equity 8 311 8 311

Loan recognised in equity comprises: Principal at the beginning of the period 8 311 8 290 Reclassification from loan recognised in non-current liabilities 21 Principal at the end of the period 8 311 8 311

11.2 Loan recognised in non-current liabilities 982 841

Loan recognised in non-current liabilities comprises: Principal 638 638 Cumulative notional interest 344 203 Loan recognised on non-current liabilities 982 841

Reconciliation of loan recognised in non-current liabilities: Principal and notional interest at the beginning of the period 841 797 Notional interest charged for the period (note 20.2) 141 65 Reclassification to loan recognised in equity (21) Principal and notional interest at the end of the period 982 841

11.3 Total principal due to Edcon (BC) S.A.R.L 8 949 8 949

Because of various clauses in the Shareholder’s loan agreement and the Memorandum of Incorporation of the Company, the classification of the shareholder’s loan is potentially subject to different interpretations of the agreements. At inception of the loan, in the 2008 financial period and in the periods since then, management applied judgement with respect to the classification of the loan as a financial liability having considered the Shareholder’s loan agreement, the commercials of the private equity transaction completed at the time and the intentions of all parties at that time. Management concluded that the Shareholder’s loan met the definition of a financial liability because repayment of the loan was not dependent upon the distribution of amounts in respect of certain preference shares (note 8.4, 8.6 and 8.8) of the Company. An alternative interpretation of the Shareholder’s loan agreement, namely that the repayment of the loan is subject to the payment of distributions on the relevant preference shares, which distributions are at the discretion of the Company, and judgements applied at inception, may have resulted in the Shareholder’s loan being classified as equity and not as a financial liability.

186

Notes to the Company Financial Statements (continued)

2016 2015 26 March 28 March Rm Rm

11. SHAREHOLDER’S LOAN (continued)

11.3 Total principal due to Edcon (BC) S.A.R.L (continued)

This shareholder’s loan is regarded as capital for IAS 1 purposes (note 23). To the extent required to maintain the solvency of the Edcon Holdings Limited Group, the shareholder’s loan is subordinated to the claims of all of the creditors of the Edcon Holdings Limited Group.

12. NON-CURRENT INTEREST-BEARING DEBT

13.375% Senior fixed rate notes - €425 million 5 381 5.0% Senior PIK fixed rate notes - €3 million 51 51 5 381

12.1 Senior fixed rate notes - €425 million Notes issued 5 905 Foreign currency (328) Fees capitalised (196) 5 381

Balance at the beginning of the period 5 381 5 948 Foreign currency movement 169 (601) Interest capitalised 384 Fees amortised (note 20.2) 196 37 Derecognition of notes (6 130) Fees capitalised (3) Balance at the end of the period 5 381

On 14 November 2013, Edcon Holdings Limited issued senior fixed rate notes with a nominal value of €425 million (the “Existing 2019 Notes”). Interest was payable semi-annually in arrears at a rate of 13.375% per annum and the notes matured 30 June 2019.

The market value of the €425 million senior fixed rate notes at 28 March 2015 was R1 301 million.

Edcon Holdings Limited launched an Exchange Offer on 30 June 2015 for the Group’s €425 million Existing 2019 Notes which were due 30 June 2019. The Exchange Offer was concluded on 27 November 2015. In terms of the Exchange Offer, Noteholders were offered to exchange each €1 000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon since 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional principal) for the securities which were set forth in Option A and Option B under the Exchange Offer. Noteholders who elected Option A securities under the Exchange Offer, exchanged €1 000 in principal amount of Existing 2019 Notes (with accrued and unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional interest) for €1 000 in principal amount of new Option A senior 13.375% PIK notes issued by Edcon Holdings Limited on the settlement date which were deemed to have started accruing interest on 30 June 2015, regardless of the date on which they were issued.

187

Notes to the Company Financial Statements (continued)

12. NON-CURRENT INTEREST-BEARING DEBT (continued)

12.1 Senior fixed rate notes - €425 million (continued) On 27 November 2015, the conversion date, the new Option A senior 13.375% PIK notes were called and each €1 000 in principal amount were exchanged for the following:

- €350 in principal amount of New Super Senior PIK Notes issued by a Group company, Edcon Limited.

On 27 November 2015, the new Option B senior 13.375% PIK notes were called and each €1 000 in principal amount were exchanged for the following:

- a pro rata portion of the Edcon Holdings Limited warrants exercisable for, and rights to distribution relating to, the Edcon Holdings Limited Warrant Shares offered in the Exchange Offer. - €100 in principal amount of new super senior 8% PIK Notes issued by a Group company, Edcon Limited and; - €150 in principal amount of new senior secured 9.75%/12.75% PIK-toggle notes issued by Edcon Limited.

Noteholders who validly tendered their Existing 2019 Notes and consent prior to the early consent deadline in the Exchange Offer and who did not validly withdraw such tender and consent prior to the withdrawal deadline received an early consent consideration which was payable on the settlement date of €50 in principal amount of new super senior 8% PIK notes of Edcon Limited, a Group company, per each €1 000 in principal amount of Existing 2019 Notes (with accrued but unpaid interest thereon from 31 December 2014 up to, but not including 30 June 2015, being deemed to be additional principal) for which consents were so delivered.

As a result of the Exchange Offer, €200 million Option A 13.375% PIK notes and €241 million Option B 13.375% PIK notes were issued. These notes were called at the conversion date and exchanged as above.

Additionally, Edcon Holdings Limited obtained the consents of holders of more than 90% of the principal outstanding amount of the Notes to effect certain amendments to the Existing 2019 Notes, including an amendment that (i) interest on the Notes will be paid in kind (and no longer in cash) at a rate of 5.0% per annum, starting on 30 June 2015, (ii) the maturity of the Notes not tendered in the Exchange Offer be extended to 30 June 2022 and (iii) the principal amount of Notes not tendered in the Exchange Offer were reduced by 72.5% (together, the “Amendments”). After giving effect to the results of the Exchange Offer and the Amendments, Edcon Holdings Limited had approximately €3 million in aggregate principal amount of Notes outstanding (note 12.2). On reduction of the notes, and exchange gain of R124 million (note 19) was recognised and the remaining 2019 Existing 2019 Notes were derecognised in accordance with IAS 39 and the amended notes recognised as the 5.0% senior PIK fixed rate notes (note 12.2).

There were no defaults or breaches of the principal or interest during the period.

188

Notes to the Company Financial Statements (continued)

2016 2015 26 March 28 March Rm Rm

12. NON-CURRENT INTEREST-BEARING DEBT (continued)

12.2 5% Senior PIK fixed rate notes - €3 million Notes issued 39 Foreign currency 11 Interest capitalised 1 51

Balance at the beginning of the period Notes issued on Exchange Offer 39 Foreign currency movement 11 Interest capitalised 1 Balance at the end of the period 51

In terms of the Exchange Offer (note12.1), Edcon Holdings Limited obtained the consents of holders of more than 90% of the principal outstanding amount of the Notes to effect certain amendments to the Notes, including an amendment that (i) interest on the Notes will be paid in kind (and no longer in cash) at a rate of 5.0% per annum, starting on 30 June 2015, (ii) the maturity of the Notes not tendered in the exchange offer be extended to 30 June 2022 and (iii) the principal amount of Notes not tendered in the Exchange Offer were reduced by 72.5% (together, the “Amendments”). After giving effect to the results of the Exchange Offer and the Amendments, Edcon Holdings Limited had approximately €3 million in aggregate principal amount of Notes outstanding.

Following completion of the Exchange Offer, the Indenture governing the 5.0% senior PIK fixed rate notes due 2022 (formerly the 13.375% senior notes due 2019 (note 12.1) were amended to remove substantially all protective covenants and events of default. The notes mature on 30 June 2022 and the interest is paid-in-kind (“PIK”) at a rate of 5.0% per annum commencing 30 June 2015.

The market value of the €3 million 5.0% senior PIK fixed rate notes at 26 March 2016 was R14 million.

There were no defaults or breaches of the principal or interest during the period and the company is in compliance with the remaining covenants.

189

Notes to the Company Financial Statements (continued)

2016 2015 26 March 28 March Rm Rm

13. INTEREST-FREE DEBT OWING TO GROUP COMPANY

Notes issued – R7 092 million 259 259

Balance at the beginning of the period Notes issued at fair value 250 Notional interest charged (note 20.2) 9 Balance at the end of the period 259

Following the conclusion of the Exchange Offer on 27 November 2015, the Option A and Option B 13.375% PIK Notes (note 12.1) including accrued but unpaid interest was capitalised, the Trustee resigned, all security and guarantees granted in respect of the liabilities and obligations of Edcon Holdings Limited under and in respect of the notes was released, the maturity date of the notes was deferred to 31 December 2045 and the coupon payable thereon was reduced to 0% per annum and the existing Indenture was amended to reflect the terms set out in the Amended Indenture.

Immediately following each of the above on 27 November 2015, the existing Noteholders of the Option A and Option B notes, assigned all its rights, title and interest in the notes to Newshelf 1304 Proprietary Limited, a related Group Company.

Additionally the notes were amended on 27 November 2015 to be redenominated from Euro to Rands including accrued and unpaid interest such that the principal amount of the notes became R7 092 million. The loan matures on 31 December 2045.

Applying initial measurement in terms of IAS 39 at that date, resulted in R6 842 million being recognised in profit and loss (note 19).

14. CURRENT LOANS OWING TO SUBSIDIARY

Edcon Acquisition Proprietary Limited 1 1

The loan with Edcon Acquisition Proprietary Limited was interest-free and payable on demand.

15. SUNDRY PAYABLES

Interest accrued on 13.375% senior fixed rate notes - €425 million (note 12.1 and 20.2) 212 Interest accrued on 5.0% senior PIK fixed rate notes - €3 million (note 12.2 and 20.2) 1 1 212

The sundry payables are interest-free and mature no later than one year.

190

Notes to the Company Financial Statements (continued) 2016 2015 52 weeks to 52 weeks to 26 March 28 March Rm Rm

16. TOTAL REVENUES

Finance income 1 213 469 Dividends received 211 230 1 424 699 17. DERIVATIVE GAINS/(LOSSES)

Gain on cross currency swaps 38 - Loss on foreign currency forward contracts (21) 17 -

18. FOREIGN EXCHANGE (LOSS)/GAIN

13.375% Senior fixed rate notes - €425 million (note 12.1) (169) 601 13.375% Senior Option A fixed rate notes (note 12.1) (343) 13.375% Senior Option B fixed rate notes (note 12.1) (414) 5.0% Senior PIK fixed rate notes - €3 million (note 12.2) (11) (937) 601

19. NET GAIN ON EXCHANGE OFFER

Exchange Offer fees incurred (5) Gain recognised on non-consenting 13.375% Senior fixed rate notes - €425 million (note 12.1) 124 Gain recognised on ZAR7 092 million notes derecognised under IAS 39 (note 13) 6 842 Cost of warrants issued (note 9.2) (135) Net gain on Exchange Offer 6 826

Exchange offer fees paid 5 Non-cash net gain on Exchange Offer 6 831

20. FINANCE INCOME AND FINANCE COSTS

20.1 Finance income Notional interest received from Edcon Limited 104 49 Interest received from Edcon Limited 1 108 420 Other finance income 1 - 1 213 469

191

Notes to the Company Financial Statements (continued) 2016 2015 52 weeks to 52 weeks to 26 March 28 March Rm Rm

20. FINANCE INCOME AND FINANCE COSTS (continued)

20.2 Finance costs Notional interest on shareholder’s loan (note 11.2) 141 65 Notional interest on interest-free debt owing to Group company (note 13) 9 Interest on 13.375% senior fixed rate notes- €425 million (note 12.1) 236 888 Fees amortised on 13.375% senior fixed rate notes- €425 million (note 12.1) 196 37 Interest on 5.0% senior PIK fixed rate notes- €3 million (note 12.2) 2 Interest incurred on senior fixed rate notes - €200 million Option A 13.375% PIK notes (note 12.1) 167 Interest incurred on senior fixed rate notes - €241 million Option B 13.375% PIK notes (note 12.1) 201 Other financing costs 1 - 953 990

21. TAXATION

21.1 Taxation income/(expense) Current taxation - current period - - Current taxation - prior period - (1) Total current taxation income/(expense) - (1)

Deferred taxation - current period (note 5) 19 (39) Deferred taxation - prior period (note 5) (6) Total deferred taxation income/(expense) 19 (45)

Total taxation income/(expense) 19 (46)

Comprising: South African normal taxation (expense)/income 19 (46)

21.2 Taxation charge to other comprehensive income

Deferred income taxation related to items charged or credited directly to other comprehensive income: Unrealised (gain)/loss on cash flow hedges (note 5) (22) 22 Income taxation (expense)/credit reported in other comprehensive income (note 10) (22) 22

192

Notes to the Company Financial Statements (continued) 2016 2015 52 weeks to 52 weeks to 26 March 28 March Rm Rm

21. TAXATION (continued)

21.3 Deferred income tax comprises Arising on deferred taxation liabilities Interest - application of Section 24J 20 (20) Cross currency swaps - application of Section 24I 25 (25) Gain on non-consenting 13.375% senior fixed rate notes (note 12.1) (26) Deferred taxation expense 19 (45)

21.4 Reconciliation of rate of taxation (%) Standard rate – South Africa 28 28 Adjusted for: Non-taxable income 15 (63) Dividend income 1 (21) Interest income 2 (42) Gain on Exchange Offer 12

Disallowable expenditure (43) 50 Provisions (24) Impairment on investments (15) Foreign exchange (2) (54) Derivatives - 8 Financing costs (2) 96

Effective tax rate - 15

21.5 Tax settlement On 31 August 2012, the South African Revenue Service (“SARS”) notified The Company that it was considering the issuance of an income tax assessment primarily in connection with our tax treatment of interest payable on the financing of the acquisition of the Group by Bain Capital. We challenged SARS’s position and we believe that we were in compliance with applicable South African tax laws and regulations. Nevertheless, we perceived it to be beneficial to engage in settlement discussions and we entered into a settlement agreement with SARS in relation to the matters in dispute on 14 December 2012 in order to avoid protracted litigation with SARS.

The agreement addresses the tax treatment of the issues in dispute for financial periods since the acquisition of the Group by Bain Capital, being financial periods 2008 through 2014, as well as future financial periods and in relation to both Edcon Holdings Limited and Edcon Limited. The terms of the agreement cannot be bifurcated between both companies and needs to be viewed holistically.

22. CASH FLOW

22.1 Taxation paid Taxation asset at the beginning of the period - 1 Current taxation recognised in profit or loss - (1) Taxation asset at the end of the period - - - -

193

Notes to the Company Financial Statements (continued) 2016 2015 52 weeks to 52 weeks to 26 March 28 March Rm Rm

22. CASH FLOW (continued)

22.2 Dividends received (note 16) 211 230

22.3 Increase in cash and cash equivalents Cash on deposit (note 7) 1 - 1 -

23. MANAGEMENT OF CAPITAL

The Company considers share capital including ordinary and preference shares, share premium, warrants, the shareholder’s loan including the shareholder’s loan derecognised in equity, interest- bearing debt and interest-free debt owing to a related Group company as capital.

The shareholder’s loan is repayable in May 2037. The “A”, “B”, “F1” and “F2” preference shares are cumulative and redeemable at the option of the issuer and are therefore regarded as capital. Long-term interest-bearing debt consists of:

 €3 million 5.0% Senior PIK fixed rate notes, maturing 30 June 2022.

The €425 million 13.375% senior fixed rate notes refinanced senior floating rate notes which were issued to finance the purchase of Edgars Consolidated Stores Limited in the 2008 financial period. As such, these senior fixed rate notes are regarded as permanent capital. The €3 million 5.0% Senior PIK fixed rate notes, maturing 30 June 2022 remains following the conclusion of the Exchange Offer and is likewise considered to be permanent capital.

Interest-free debt owing to a related Group company consists of:

Rand denominated notes, maturing 31 December 2045.

The Rand denominated notes initially refinanced the senior floating rate notes which were issued to finance the purchase of Edgars Consolidated Stores Limited in the 2008 financial period. As such, these Rand denominated notes are regarded as permanent capital.

The objectives in managing this capital are to: — Ensure appropriate access to other comprehensive income debt markets. — Ensure sufficient resilience against economic turmoil. — Safeguard the Company’s ability to continue as a going concern, be flexible and take advantage of opportunities that are expected to provide an adequate return to shareholders. — Optimise weighted average cost of capital, given inherent constraints.

The Company manages its capital and makes adjustments to it in light of the changes in economic conditions. No changes were made in the objectives, policies or processes during the current period. Following the completion of the Exchange Offer Memorandum and Consent Solicitation Statement launched 30 June 2015, the Indentures governing the 5.0% senior PIK notes due 2022 (formerly the 13.375% senior notes due 2019) were amended to remove substantially all protective covenants and events of default. During the period, the Company has been in compliance with the remaining covenants and there have been no defaults or events of default. The Company takes cognisance of select rating agency ratios that evaluate the ability of the capital to absorb losses and the flexibility that a combination of capital instruments provide. The value placed on the corporate rating is important as the Company has issued notes on the Irish Stock Exchange to facilitate funding.

194

Notes to the Company Financial Statements (continued)

24. FINANCIAL RISK MANAGEMENT

24.1 Treasury risk management The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effect on the Company’s financial performance. The Company uses derivative financial instruments to moderate certain risk exposures where applicable.

A treasury workgroup consisting of senior management meets on a regular basis to update treasury policies and objectives, analyse currency and interest rate exposures and re-evaluate treasury management strategies against revised economic forecasts. Compliance with Company Treasury policies and objectives of the Board and exposure limits is reviewed at meetings of the Risk Management Workgroup.

24.2 Hedging strategy

Euro Denominated 13.375% Senior Fixed Rate Notes due 2019 - €425 million In December 2013, cross currency swaps were entered into which protects against variability in future interest cash flows that are subject to fluctuations based on foreign exchange rates. The notional value of the hedge was €425 million (note 12.1) and provided cover on the coupon of the notes up to 31 December 2015. The hedge created an effective annual average fixed interest rate of 14.65% over

the period of cover. The cross currency swaps were designated as a cash flow hedge.

Euro Denominated 5.0% Senior PIK Fixed Rate Notes due 2022 - €3 million The notes including PIK coupons were unhedged as at 26 March 2016.

24.3 Sensitivity analysis

24.3.1 Sensitivity analysis of non-derivative financial liabilities The Company recognises that movements in certain risk variables (such as interest rates or foreign exchange rates) might impact the value of its variable rate financial liabilities and also the amounts recorded in its other comprehensive income and its profit or loss for the period. Therefore the Company has assessed: a) what would be reasonably possible changes in the risk variables at the reporting date; and b) the effects on profit or loss and other comprehensive income if such changes in the risk variables were to occur. The sensitivity analysis takes into account the incremental change in value arising from a parallel fall or rise in the interest rate and the exchange rate. The following table shows the approximate interest rate and exchange rate sensitivities of variable rate financial liabilities and the resulting impact on profit or loss, and other comprehensive income for financial liabilities held at the reporting date:

26 March 2016 Other Profit or comprehensive (loss) Floating rate income effect liabilities Index Sensitivity Rm Rm EUR-ZAR -10% 5 EUR-ZAR -5% 3 EUR denominated EUR-ZAR 5% (3) EUR-ZAR 10% (5)

195

Notes to the Company Financial Statements (continued)

24. FINANCIAL RISK MANAGEMENT (continued)

24.3.1 Sensitivity analysis of non-derivative financial liabilities (continued)

28 March 2015 Other comprehensive Profit or loss Floating rate income effect liabilities Index Sensitivity Rm Rm EUR-ZAR -10% 558 EUR-ZAR -5% 279 EUR denominated EUR-ZAR 5% (279) EUR-ZAR 10% (558)

The impact of changes in interest rates on profit or loss relating to the foreign denominated senior fixed rate

notes, after considering the effect of the hedging instruments which hedge the coupon payments, is nil.

24.3.2 Sensitivity analysis of derivatives The Company recognises that movements in certain risk variables (such as interest rates or foreign exchange rates) might impact the value of its derivatives and also the amounts recorded in its other comprehensive income and its profit or loss for the period. Therefore the Company has assessed at 28 March 2015:

- what would be reasonably possible changes in the risk variables at the reporting date; and - the effects on profit or loss and other comprehensive income if such changes in the risk variables were to occur.

The sensitivity analysis takes into account the incremental change in value arising from a parallel fall or rise in the yield curve and the exchange rate. The following table assumes all designated hedges will change in fair value through other comprehensive income (100% effective), and considers sensitivities to forward interest rate curves, of +/- 50 and +/-100 basis points respectively. If these sensitivities were to occur, the impact on profit or loss, and other comprehensive income for each category of financial instrument held at the reporting date is shown on the following page:

196

Notes to the Company Financial Statements (continued)

24. FINANCIAL RISK MANAGEMENT (continued)

24.3 Sensitivity analysis (continued)

24.3.2 Sensitivity analysis of derivatives (continued)

28 March 2015

Derivative Other Profit or asset/ comprehen- loss (liability) sive income effect Index Sensitivity Rm Rm Rm EURIBOR -100bps - - Cross currency EURIBOR -50bps - - swaps EURIBOR +50bps - - EURIBOR +100bps 1 (1) EUR-ZAR -10% (75) 75 Cross currency EUR-ZAR -5% (37) 37 swaps EUR-ZAR 5% 37 (37) EUR-ZAR 10% 75 (75)

Material cross currency swap contracts at 28 March 2015 are summarised below. Currency options are only purchased as a cost-effective alternative to the cross currency swap contracts. As at 26 March 2016, there were no derivatives.

Foreign currency against Rand hedged Foreign Derivative Contract Average notes exposure currency fair value equivalent rate €m Rm Rm 28 March 2015 Euro 425 79 6 077 14.30

The interest cash flows payable semi-annually on the €425 million senior fixed rate notes maturing 2019, were hedged through to 31 December 2015 (note 4 and 24.2).

24.4 Interest rate management

At 26 March 2016, in respect of the fixed rate notes exposures, if the South African Rand had weakened 5% against the Euro, with all other variables held constant, profit for the period would have decreased by R3 million (2015: R279 million). Conversely, at 26 March 2016, in respect of the floating rate notes exposures, if the South African Rand had strengthened 5% against other currencies, with all other variables held constant, profit for the period would have increased by R3 million (2015: R279 million).

197

Notes to the Company Financial Statements (continued)

24. FINANCIAL RISK MANAGEMENT (continued)

24.5 Interest rate management As part of the process of managing the Company’s fixed rate interest-bearing debt and cash and cash equivalents mix, the interest rate characteristics of new and the refinancing of existing loans are positioned according to expected movements in interest rates. The interest rate re-pricing profile is summarised as follows:

Fixed Floating Total interest- rate rate bearing debt 26 March 2016 Interest-bearing debt (Rm) – non- 51 current 51 % of total interest-bearing debt 100 100 28 March 2015 Interest-bearing debt (Rm) – non- 5 381 current 5 381 % of total interest-bearing debt 100 100

The following interest rate swaps and cross currency swaps were in place at 28 March 2015 to hedge against interest payment exposures:

al Notes fixed interest Fair value of the Notes notional % payable interest rate amount hedged – hedges Rm (liability)/asset - Rm

2016 2015 2016 2015 2016 2015 Interest rate hedges Cross currency swaps – fixed rate notes 5 905 14.65 (79)

24.6 Credit risk management Potential concentrations of credit risk consist principally of short-term cash investments. The Company only deposits short-term cash surpluses with financial institutions of high-quality credit standing. Credit limits per financial institution are established within the Group’s treasury policies approved by the Risk Management Workgroup.

The derivatives at 28 March 2015 were held with three counterparties of high credit worthiness. The credit worthiness is assessed on a regular basis. At 28 March 2015, these counterparties were classified as investment grade.

198

Notes to the Company Financial Statements (continued)

24. FINANCIAL RISK MANAGEMENT (continued)

24.7 Liquidity risk The Company has minimised risk of liquidity as shown by its substantial banking facilities and reserve borrowing capacity at a consolidated level.

24.7.1 Maturity analysis of derivative financial instruments’ cash flows 2016 2015 26 March 28 March Rm Rm Cash outflows Due within one year 890 Total due within one year 890

Total 890

Cash inflows Due within one year 771 Total due within one year 771

Total 771

Net cash flows Due within one year (119) Total due within one year (119)

Total (119)

24.7.2 Maturity analysis of non-derivative financial liabilities (including interest payments)

Sundry payables (note 15) 1 212 Interest-bearing debt 3 891 Total due within one year 4 1 103

After one year but within two years 3 746 After two years but within three years 3 746 After three years but within four years 3 746 After four years but within five years 3 6 323 After five years 16 095 8 949 Total due after one year 16 107 17 510 Total debt 16 111 18 613

199

Notes to the Company Financial Statements (continued)

24. FINANCIAL RISK MANAGEMENT (continued)

Maturity analysis of non-derivative financial liabilities (including 24.7.2 interest payments) (continued) The maturity analysis of non-derivative financial liabilities is prepared on an undiscounted cash flow basis. In respect of the cash flows that are not hedged, and subsequent to the hedges maturing, the period end fixed interest rates and foreign exchange rates are used to calculate the cash flows of the foreign denominated notes. The contractual maturity of the hedged coupon cash flows of the foreign denominated notes as at 28 March 2015 are calculated using forward Euribor rates (where applicable) and the exchange of principal at the derivative hedged rate.

24.8 Fair value of financial instruments The Company uses a three-level hierarchy to prioritise the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with level 1 having the highest priority and level 3 having the lowest. Fair value is principally applied to financial assets and financial liabilities. These are measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which these measurements fall.

The following table presents the company’s assets and liabilities that are measured at fair value at the period end as at 28 March 2015:

Fair value measurement using Total Level 1 (a) Level 2 (b) Level 3 (c)

Rm Rm Rm Rm 28 March 2015 Financial liabilities Cross currency swaps 79 79 Total financial liabilities 79 79

Level 1 – Based on quoted market prices in active markets. Level 2 – Based on observable inputs other than Level 1 prices, such as quoted prices for similar financial assets or financial liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial assets or financial liabilities. Level 3 – Based on unobservable inputs that are supported by little or no market activity and are financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgement or estimation.

All financial instruments have been recognised in the statement of financial position and there is no material difference between their fair values and carrying values, except for the notes issued.

The following methods and assumptions were used by the Company in establishing fair values:

Liquid resources, investments and loans: the carrying amounts reported in the statement of financial position approximate fair values due to the short period to maturity of these instruments.

Notes issued: the fixed rate notes issued are valued based on the exchange rate ruling at the reporting date. The market values are disclosed in note 12.

Derivative instruments: As at 26 March 2016, the company had no derivative instruments in issue. Cross currency swaps were entered into to hedge foreign exchange rate exposure of interest-bearing debt and fair values were determined using market related derivative rates as at 28 March 2015.

200

Notes to the Company Financial Statements (continued)

25. FINANCIAL INSTRUMENTS BY CATEGORY

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

Financial assets by category

Fair value through other Loans and comprehensive receivables income Total Rm Rm Rm At 26 March 2016 Non-current loans owing by Group company (note 1) 9 608 9 608 Current loans owing by Group companies (note 6) 3 616 3 616 Cash and equivalents (note 7) 1 1 13 225 13 225 At 28 March 2015 Non-current loans owing by Group company (note 1) 8 449 8 449 Current loans owing by Group companies (note 6) 3 405 3 405 Cash and cash equivalents (note 7) - - 11 854 11 854

Financial liabilities by category

Financial Fair value Fair value liabilities at through through other amortised profit comprehensive cost or loss income Total Rm Rm Rm Rm At 26 March 2016 Shareholder’s loan (note 11.2) 982 982 Interest-bearing debt (note 12) 51 51 Interest-free debt owing to Group Company (note 13) 259 259 Loans owing to subsidiary (note 14) 1 1 Sundry payables (note 15) 1 1 1 294 1 294

At 28 March 2015 Derivative financial instruments (note 4) 79 79 Shareholder’s loan (note 11.2) 841 841 Interest-bearing debt (note 12) 5 381 5 381 Loans owing to subsidiary (note 14) 1 1 Sundry payables (note 15) 212 212 6 435 79 6 514

201

Notes to the Company Financial Statements (continued)

26. RELATED-PARTY TRANSACTIONS

Related party relationships exist within the Company. During the period all purchasing and selling transactions were concluded at arm’s length. Edcon Holdings Limited is the ultimate South African parent entity and the ultimate parent of the Company is Edcon (BC) S.A.R.L. The following table provides the total amount of transactions, which have been entered into with related parties:

2016 Amounts Received/(charged) Amounts owed owed from/to related by related to related parties parties parties Rm Rm Rm Loan including notional interest owing to Edcon (BC) S.A.R.L – recognised in non-current liabilities 982 Loan owing to Edcon (BC) S.A.R.L - recognised in equity 8 311 Interest-free loan owing to Edcon Acquisition Proprietary Limited 1 Interest-free notes including notional interest owing to Newshelf 1304 Proprietary Limited 259 Interest-free loan owing by Edcon Limited 1 262 Interest-free loan owing by Edgars Consolidated Stores Proprietary Limited 2 354 Interest-bearing loan owing by Edcon Limited – recognised in non-current assets 8 890 Interest-free loan owing by Edcon Limited – recognised in non-current assets 718 Interest-free loan owing by Edcon Limited – recognised in investments1 Interest including notional interest charged to Edcon Limited 1 212

Notional interest charged by Edcon (BC) S.A.R.L (141) Notional interest charged by Newshelf 1304 Proprietary Limited (9)

1The loan was impaired by R6 398 million during the current financial period to the recoverable amount which is considered to be Rnil.

202

Notes to the Company Financial Statements (continued)

26. RELATED-PARTY TRANSACTIONS (continued)

2015 Received/(charged) Amounts Amounts owed from/to related owed by related to related parties parties parties Rm Rm Rm Loan including notional interest owing to Edcon (BC) S.A.R.L – recognised in non-current liabilities 841 Loan owing to Edcon (BC) S.A.R.L - recognised in equity 8 311 Interest-free loan owing to Edcon Acquisition Proprietary Limited 1

Interest-free loan owing by Edcon Limited 1 051 Interest-free loan owing by Edgars Consolidated Stores Proprietary Limited 2 354 Interest-bearing loan owing by Edcon Limited – recognised in non-current assets 7 835 Interest-free loan owing by Edcon Limited – recognised in non-current assets 614 Interest-free loan owing by Edcon Limited – recognised in investments 6 398 Interest including notional interest charged to Edcon Limited 469

Notional interest charged by Edcon (BC) S.A.R.L (65)

27. GUARANTEES The Company has guaranteed the following interest-bearing debt of Edcon Limited: — the super senior RCF term loan of R3 249 million on a super senior secured basis; — the super senior refinancing facility of €123 million on a super senior secured basis; — the super senior term loan of €36 million on a super senior secured basis; — the super senior PIK notes of €116 million on a super senior secured basis;

— the senior secured fixed rate notes of €617 million and US$250 million on a senior secured basis; — the senior secured term loan of R3 056 million, plus any interest capitalised on this loan on a senior secured basis; and — the senior secured PIK-toggle notes of €36 million on a senior secured basis.

28. EVENTS AFTER THE REPORTING PERIOD

controlled by Bain Capital) to certain of the Group’s existing creditors(the “Control Transfer”), a significant decrease in the outstanding amount of third-party debt of Edcon Limited (a significant indirect subsidiary within the Group), the refinancing of a large portion of the existing third party debt of Edcon Limited in newly established Group companies, and the renegotiation of the terms of third party debt which remain in Edcon Limited. On 13 October 2016, the various conditions precedent to the occurrence of the effective date of the LUA have been satisfied, such that the LUA became binding on all parties thereto.

203

Notes to the Company Financial Statements (continued)

28. EVENTS AFTER THE REPORTING PERIOD (continued)

Agreement with Creditors (continued)

Under the Restructuring, certain of the lenders under the existing ZAR Super Senior RCF Term Loan and LC Facility in Edcon Limited, will provide a ZAR-denominated R575 million New Revolving Credit Facility. The Restructuring will also amend and restate the Group’s existing ZAR Super Senior RCF Term Loan and LC Facility, into a new ZAR-denominated R3,597 million senior secured Converted Revolving Facility (R1,250 million), Term Loan Facility and LC Facility. The Group’s existing Super Senior Liquidity Facility will be amended and restated and will comprise the existing EUR Super Senior refinancing facility, available to Edcon Limited (in an original principal amount of €123 million plus accrued and unpaid interest to date).

The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility, LC Facility and the Super Senior Liquidity Facility will rank pari passu amongst each other, and will be secured on a super senior basis by substantially all of the assets of Edcon Limited and its subsidiaries, together with some of the assets of the Parent and will contain LMA-style customary affirmative and negative covenants, which will be adjusted to give Edcon Limited flexibility to operate its day-to-day business activities and will permit Edcon Limited to make certain administrative parent company payments. The covenants will be set at a level reflecting the leverage and liquidity position of the operating companies of the Edcon Limited Group. The New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility will mature on the earliest to occur of (i) 31 December 2019, (ii) the earliest maturity date of the Super Senior Liquidity Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Limited Group which benefits from security granted by the Edcon Limited Group’s operating companies, and may be extended upon payment of a fee. The Super Senior Liquidity Facility will mature on the earliest of (i) 31 December 2017, (ii) the earliest maturity date of the New Revolving Credit Facility, Converted Revolving Facility, Term Loan Facility and LC Facility, and (iii) three months prior to the maturity date of any other indebtedness of the Edcon Group which benefits from security granted by the Edcon Group’s operating companies and may be extended to 31 December 2018 upon meeting certain financial ratios.

Edcon Limited’s EUR Super senior term loan, EUR Super Senior PIK notes, ZAR Senior secured term loan, USD 250 million Senior secured fixed rate notes, EUR 317 million Senior secured fixed rate notes, EUR 300 million Senior secured fixed rate notes and EUR Senior secured PIK-Toggle notes will be exchanged for new pay-in-kind debt securities to be issued by Holdco 2 in the Restructuring and refinanced by Holdco 2 whilst the ZAR Super senior hedging debt and facility A3 (plus facility A1, subject to meeting certain leverage ratios) of the bridge facility will be refinanced and exchanged for new pay-in-kind debt securities to be issued by Holdco 1 in the restructuring and refinanced by Holdco 1. The proceeds of the remaining portion of Holdco 1 notes will provide the Group with fresh liquidity. The debt securities to be issued by Holdco 1 and Holdco 2 will be outside the scope of consolidation of the Edcon Limited Group following the completion of the Restructuring and as a result of the Restructuring, gross third party debt is expected to decrease to approximately R7 billion at the Edcon Limited Group level (excluding newly issued debt at Holdco 1 and Holdco 2).

204

Notes to the Company Financial Statements (continued)

28. EVENTS AFTER THE REPORTING PERIOD (continued)

The Restructuring has been approved by the Competition Commission without conditions and the transaction was referred to the Tribunal and approved on 23 November 2016 and now requires Court Sanction.

29. CONTINGENT LIABILITY

A contingent liability of R320 million has arisen as a result of the Company’s interest in the insurance business with Hollard. The liability would only arise on the termination of the agreements between the

Company and Hollard. The Company has no intention of terminating these agreements as at 26 March 2016.

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ANNEXURE 1 – INTERESTS IN SIGNIFICANT SUBSIDIARIES

Nature Issued ordinary capital % interest in capital Book value-shares of 2016 2015 2016 2015 2016 2015 business* R R % % Rm Rm Direct investment in subsidiaries Edcon Acquisition Proprietary Limited A 2 2 100 100 1 968 1 968

Indirect investment in subsidiaries Celrose Proprietary Limited M 100 100 55 49 62 51 Edcon Limited R 897 897 100 100 5 429 5 429 National Security Corporation Proprietary Limited L/G 2 000 100 7 Quinmatro Proprietary Limited R 521 521 50 50 15 15

Incorporated in Botswana P P Jet Supermarkets Botswana Proprietary Limited R 300 000 300 000 100 100 405 405

Incorporated in Namibia N$ N$ Edgars Stores (Namibia) Limited R 1 050 000 1 050 000 100 100 264 264

Incorporated in Swaziland L L Edgars Stores Swaziland Limited R 1 500 000 1 500 000 100 100 136 136

Incorporated in Lesotho M M Edgars Stores Lesotho (Pty) Limited R 200 000 200 000 100 100 - -

Incorporated in Zambia ZMW ZMW Jet Supermarkets Zambia Limited R 5 000 5 000 100 100 - -

Incorporated in Mozambique MZM MZM Edcon Limitada R 50 000 50 000 100 100 - -

Incorporated in Ghana GHS GHS Jetcon Mart Ghana Limited R 2 033 130 2 033 130 100 100 11 11

Incorporated in Zimbabwe USD USD Edgars Stores Limited 1 R 29 310 29 310 38 38 2 2

Interest in subsidiaries 8 292 8 288

* Nature of business A: Acquisition company, M: Manufacturing, R: Retailing, G: Group Services, D: Dormant; L: Liquidated or deregistered during the current financial period.

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Corporate Information

Edcon Holdings Limited Trustee Incorporated in the Republic of South Africa GLAS Trust Corporation Limited Registration number 2006/036903/06 45 Ludgate Hill London EC4M 7JU Non-executive directors United Kingdom DM Poler* (Chairman), EB Berk* (resigned 15 December 2016), MS Levin* (resigned 31 March 2015), ZB Ebrahim₸, Transfer Agent and Principal Paying Agent RB Daniels*, M Osthoff*** (appointed 1 April 2015, resigned The Bank of New York Mellon Limited 15 December 2016), DH Brown₸ (resigned 31 December 1 Canada Square 2015), TF Mosololi₸ (resigned 15 December 2016), LL von London E14 5AL Zeuner₸ (resigned 10 December 2015), J Schreiber*** United Kingdom (appointed as Non-executive director 18 August 2015; resigned with effect from 31 March 2016), KDM Warburton₸ Listing Agent & Irish Paying Agent (appointed 1 February 2016), A Alvarez III*₸ (with effect The Bank of New York Mellon (Ireland) Limited from 21 April 2016), D Frauman*₸ (appointed 31 May 2016). Hanover Building, Windmill Lane, Dublin 2, Executive directors Republic of Ireland BJ Brookes **** (Managing Director and Chief Executive Telephone: + 353 1 900 6991 Officer, appointed 30 September 2015), Dr U Ferndale and RB Daniels (interim joint Chief Executive Officers, appointed 18 August 2015, resigned 30 September 2015), J Schreiber***(resigned 18 August 2015), R Vaughan (Chief Financial Officer, appointed 27 July 2016), T Clerckx** (Chief Financial Officer, resigned 22 July 2016), Dr U Ferndale (Chief Operations Officer, resigned 15 December 2016).

*USA ** BELGIUM ***GERMAN ****AUSTRALIAN ₸ Independent Non – Executive Director

Group Secretary CM Vikisi

Registered office Edgardale, Press Avenue Crown Mines, Johannesburg, 2092 Telephone: +27 11 495-6000 Fax: +27 11 837-5019 Web site: www.edcon.co.za

Postal address PO Box 100, Crown Mines, 2025

Auditors Deloitte & Touche Buildings 1 and 2, Deloitte Place, The Woodlands 20 Woodlands Drive, Woodmead, 2052 Private Bag X6, Gallo Manor, 2052 Telephone: +27 11 806-5000 Fax: +27 11 806-5111

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