2011 integrated report

SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 WWW.SEKUNJALO.COM about this report

This is Sekunjalo Investments Limited’s We are also working towards reporting first attempt at integrated reporting, on creating shared value in terms of as we are committed to complying economic and societal benefits relative with the principles of King III. We also to cost, joint company and community acknowledge that an exclusive financial value creation. focus in our reporting is no longer appropriate given the broad spectrum Internally, we are investing in putting of environmental, socio-economic and together an integrated management governance factors that play an integral system for our diverse group of part in ensuring the long-term viability companies. We are cognisant of the fact of our business. that we have to report on our ability to operate effectively in a time of systemic This integrated report encompasses the change by reviewing our organisational Group’s sustainable related activities for competencies required to achieve our the period under review. It covers the strategic objectives. We are also in the scope of operations of our direct business process of monitoring and reporting on units regarding material issues. material impacts, risks and opportunities associated with the changing business The journey on which we are embarking environment and the implications these – from compliance-based sustainability have on our strategic objectives. to integrated sustainability – will take a few years to fully achieve. The Group is fully committed to and conscious of the necessity for environmentally sound practices and has started the process. We are moving away from only financial reporting and corporate social issues to reporting on matters creating shared value that sustains and enhances the systems and resources upon which that value depends. This encompasses the five capitals – financial capital, manufactured capital, human capital, societal capital and natural capital.

GREYMATTER & FINCH # 5656 contents

Financial highlights 2

Five-year review 3

Vision and mission 4

Board of directors 6

Executive chairman’s report 8

Chief executive officer’s report 12

Chief financial officer’s report 18

Group structure 22

Corporate governance report 24

Sustainability report 34

Shareholder information 58

Dates of importance to shareholders 136

Administration 136 financial highlights

2011 2010 2009 2008 2007 R’000 R’000 R’000 R’000 R’000

Revenue 440 390 403 169 399 481 601 534 449 516 Profit/(loss) before tax 36 500 21 085 (44 223) (1 177) 174 106 Profit/(loss) after tax (including portion attributable to non-controlling interests) 29 205 8 790 (58 772) 5 633 112 416 Headline earnings 34 181 12 898 7 571 19 088 152 688 Net asset value – Group 435 065 403 202 392 297 449 590 591 070 Net asset value – Company 682 706 639 344 629 268 632 850 1 031 492 Total assets – Group 778 761 727 638 723 457 898 985 953 774 Total assets – Company 816 901 807 103 774 845 740 413 1 181 104 Earnings per share (cents) 5.38 1.67 (12.05) 1.32 28.67 Headline earnings per share (cents) 6.99 2.64 1.55 3.94 38.20 Net asset value per share – Group (cents) 86.83 82.22 80.57 93.18 125.97 Net asset value per share – Company (cents) 139.52 130.65 128.20 129.33 219.84

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STATEMENT OF FINANCIAL POSITION 2011 2010 2009 2008 2007 R’000 R’000 R’000 R’000 R’000

Assets 778 761 727 638 723 457 898 985 953 774 Property, plant and equipment 143 443 138 193 143 614 195 535 201 374 Intangible and biological assets 89 790 107 654 121 206 185 645 143 948 Investments and loans 368 218 314 518 246 990 159 565 361 081 Deferred tax assets 24 804 24 956 31 332 35 165 14 607 Current assets 187 409 173 027 161 929 286 451 192 331 Assets of disposal groups classified as held for sale 3 336 18 386 53 964 40 433

Equity 435 065 403 202 392 297 449 590 591 070 Equity attributable to equity holders of the parent 424 870 402 335 394 239 455 948 561 329 Non-controlling interest 10 195 867 (1 942) (6 359) 29 741

Liabilities 343 696 324 436 331 160 449 396 362 704 Non-current financial liabilities 75 738 55 960 58 923 53 467 46 486 Deferred tax liabilities 102 124 97 239 93 044 87 190 106 911 Current liabilities 165 834 165 561 165 971 261 763 178 203 Post-employment medical costs 1 630 1 080 794 1 017 2 072 Operating lease liability 1 119 1 198 687 293 348 Liabilities of disposal groups classified as held for sale 5 676 11 741 45 666 28 684

Net asset value Group 435 065 403 202 392 297 449 590 591 070 Company 682 706 639 344 629 268 632 849 1 031 492

Net asset value per share (cents) Group 86.83 82.22 80.57 93.18 125.97 Company 139.52 130.65 128.20 129.33 219.84

STATEMENT OF COMPREHENSIVE INCOME 2011 2010 2009 2008 2007 R’000 R’000 R’000 R’000 R’000

Revenue 440 390 403 169 399 481 601 534 449 516 Profit/(loss) before depreciation and amortisation (EBITDA) 72 275 51 761 (5 863) 35 085 191 077 Profit/(loss) before taxation 36 500 21 085 (46 244) (1 177) 174 106 Taxation (7 295) (12 510) (13 928) 3 352 (61 690) Profit/(loss) for the year from continuing operations 29 205 8 575 (60 172) 2 175 112 416 (Loss)/profit for the year from discontinued operations (1 165) 215 (668) 3 458 – Profit/(loss) for the year 28 040 8 790 (58 772) 5 633 112 416 Attributable to: Equity holders of the company 26 304 8 176 (58 941) 6 415 114 620 Minority interests 1 736 614 169 (782) (2 204)

Headline earnings 34 181 12 898 7 571 19 088 152 688

cents cents cents cents cents

Earnings per share 5.38 1.67 (12.05) 1.32 28.67 Headline earnings per share 6.99 2.64 1.55 3.93 38.20 Diluted earnings per share 5.38 1.67 (12.05) 1.32 27.52

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CORPORATE PROFILE It is the empowerment partner of choice to many large and small businesses and enjoys Sekunjalo Investments Limited (“Sekunjalo” or solid partnerships and investments with “the Company” or “the Group”) is a majority multinationals such as Siemens, Microsoft, black-owned and black-controlled investment Julphar, GlaxoSmithKline, British Telecoms holding company situated in Southern Africa with South Africa and Saab South Africa. international partners. The Group holds strategic investments as well as investments in Marine, As a BBBEE business, Sekunjalo has strong roots Technology, Heath and Biotherapeutics, Private amongst historically disadvantaged individuals Equity and Enterprise Development supporting (“HDIs”) and community organisations. These form Broad Based Black Economic Empowerment the majority of the Group’s shareholder base. (“BBBEE”) and Small, Medium and Micro Black control of Sekunjalo exceeds 75% and the Enterprises (SMMEs). majority of its economic benefits are enjoyed by black stakeholders. Sekunjalo appoints the boards and management of all its subsidiary companies. It currently Sekunjalo is recognised by its peers as a pioneer indirectly employs over 2 000 employees and over in promoting the interests of HDIs and previously 10 000 people, predominantly in southern Africa, marginalised communities. The Sekunjalo Group benefit from its investments and associated has received numerous awards for its business companies. Sekunjalo is a significant exporter and performance and its achievement of real generates a large portion of income in economic transformation for marginalised foreign currency. South Africans.

Sekunjalo has a growing international reputation The Group’s commitment to transformation, as a founder company of the World Economic including employment equity, skills and Forum (“WEF”) New Champions and Community enterprise development, as well as corporate Global Growth Company (“CGGC”) and an social investment, makes it a role model Advisory Board Member of the Community of for BBBEE. Global Growth Companies. MISSION STATEMENT Sekunjalo has strong BBBEE credentials and has been ranked as the country’s top most Sekunjalo is an investment holding company that Empowerment Company in 2010 and the 2nd seeks to empower individuals and communities most Empowerment Company in 2011 by the through sustainable profitable investments. Financial Mail. The Financial Mail/Empowerdex It provides affordable products and services to awards have also authoritatively ranked the achieve this goal. Company in 2006 as the Top Empowerment Company and in 2004 and 2005 as one of the “Empowering people through profits” is a key Top Empowerment Companies (2nd and 7th foundation of Sekunjalo’s mission statement. respectively) out of the Top 200 companies The Company recognises that the best way listed on the Johannesburg Stock Exchange. for business to be sustainable is to partner Sekunjalo also won the award in its sector in communities and government in a social 2004, 2005, 2006 and 2010. Sekunjalo was a contract to achieve economic growth and finalist of the 2011 Metropolitan Oliver give more South Africans access to this Empowerment Awards in the Financial Services growing prosperity. Category for Business Excellence.

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For Sekunjalo, transformation is beyond the need Sekunjalo’s investment philosophy is to follow for BBBEE but is inclusive of transformation of the sound business principles and practices in culture, ethics and values of the organisation. its quest to create sustainable wealth for all of its stakeholders. The Company identifies and Sekunjalo was established when opportunities promotes entrepreneurs with potential and flair in were created for black business people and its prospective business ventures. professionals to participate in the economic mainstream, due to the political and legislative Sekunjalo also teaches its employees to framework initiated in 1994. have respect for the regulatory institutions in the public and private sectors. The Group’s From the outset, the Company’s ethos was management team is encouraged to run each a transformational one. The majority of its business unit in a sustainable manner, and with founding members had been social activists. They regard to communities and the environment. participated in the struggle to transform South Africa from a state that denied the majority of its Sekunjalo’s business model has resulted in it citizens’ political, social and economic acquiring control of the majority of its participation, to a democratic country in which investments. This enables it to add value through absolute participation was made possible. its extensive networks, whilst promoting an entrepreneurial culture within its management The BBBEE Codes of Good Practice, promulgated structure and staff groups. in 2007, emphasised the need to extend empowerment to a broader base of South In selected investments which are identified as Africans. They provided guidelines and a balanced strategic, Sekunjalo will acquire strategic non- scorecard to measure the transformation of controlling stakes, provided that the Company is a business entity from an empowerment able to add value and to influence the business perspective. Sekunjalo championed process to create wealth and achieve transformation within the Group and has since transformation. been recognised for its contribution to this process. A cornerstone of Sekunjalo’s philosophy is the upliftment of previously marginalised groups by creating employment, emphasising development and the transfer of skills. Its investment philosophy is value driven and it is always aware of the need to maintain and strengthen corporate governance.

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Executive Directors

Dr Survé is a director of significant Kaelo Awards in April 2010. Kaelo is multinational private sector a Tswana word meaning to give companies. direction or guidance.

Major directorships: Siemens Major directorships: British Limited, Nokia Siemens Networks Telecoms South Africa (BT), Saab (Pty) Ltd (“NSN RSA”), Pioneer Food South Africa (Pty) Ltd, Health Group Ltd, British Telecoms South System Technologies (Pty) Ltd, Africa (BT), Saab South Africa Sekunjalo Medical Logistics (Pty) Ltd. He is also the vice (Pty) Ltd, espAfrika (Pty) Ltd, chairman of Pioneer Food Group Amethst (Pty) Ltd, Sekunjalo Ltd and Saab South Africa. Technology Solutions Group (Pty) Ltd, Sekunjalo Capital (Pty) Ltd, EXECUTIVE CHAIRMAN Sekunjalo Financial Services (Pty) Ltd, Premier Fishing SA (Pty) Ltd Dr M Iqbal Survé (48) and Bioclones (Pty) Ltd. MBChB, BSc (Med) (Hons) Sports Med (UCT), Fellow of the American College of Sports Medicine (FACSM), MBA (UCT), SEP (Harvard)

Appointed: 20 May 1996 Nationality: South African Dr Survé is a medical doctor, an influential African entrepreneur, a global business leader and a recognised philanthropist. CHIEF EXECUTIVE OFFICER Dr Survé is a philanthropist and Khalid Abdulla (46) serves as chairman of a number of MBA (UCT), BCompt (Hons), CTA NGOs. These are strongly (Unisa), Project Management (UCT), supportive of social entrepreneurs Member of Institute of Accounting CHIEF FINANCIAL OFFICER and young people in education, and Commerce (MIAC) Chantelle Ah Sing (37) arts, sports and music. Dr Survé has a strong commitment to Appointed: 29 August 2007 Appointed: 19 November 2009 education and academia and is Nationality: South African Nationality: South African chairman of the UCT (University of Mr Abdulla is the chief executive Miss Ah Sing is the chief financial Cape Town) Graduate School of officer of Sekunjalo Investments Ltd officer of Sekunjalo Investments Business and a governor of the and has been with the Group since Limited. She joined the Sekunjalo UCT Foundation. 1999. He started as CEO of a health Group in 2007 and held financial care subsidiary and also directorship positions in Bioclones Dr Survé is co-chairman of the successfully served as CEO of the (Pty) Ltd and later at Sekunjalo Global Growth Companies (GGC) Information Technology and Capital Health Care Limited before being Advisory Board of the World businesses as well as Group CFO appointed group financial officer Economic Forum. He is also on the since being with the Group. and executive director in 2009. Advisory Board on Sustainable Innovation of the World Economic Mr Abdulla has been appointed to Major directorships: Sekunjalo Forum. He is a regular invitee and and participates on various boards Health Care Limited, Sekpharma participant at both the Davos and and NGOs. He has over 25 years (Pty) Ltd, Wynberg Pharmaceuticals Summer Davos meetings of the varied commercial experience (Pty) Ltd, Bioclones (Pty) Ltd and World Economic Forum. He has directly related to health care, Ribotech (Pty) Ltd. also recently been appointed by information technology, financial Siemens Limited as one of the ten services and fishing. global leaders on the Siemens Global Sustainability Advisory He is a regular invitee and Board. He is chairman of the participant at the World Economic Saudi South Africa Business Forum’s Summer Davos. He was the Council and a member of the South recipient of the Black Business Africa-USA Business Council. Executive Circle (BBEC)/Absa Bank

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Appointed: 8 August 2007 Nationality: South African Professor Mehana is the chairman of the LR Management Group (Pty) Ltd and also sits on the boards of various companies as well as being an active leader in non-profit organisations.

Major directorships: LR Management Group (Pty) Ltd (non-executive director), Mazwe Financial Services, Jakavula Investments (Pty) Ltd, Makana Investment Corporation (Pty) Ltd CORPORATE AFFAIRS Johannes Mihe Gaomab, (non-executive director representing the Ex-Political Prisoners Trust), chairman AND SUSTAINABILITY DIRECTOR the first (48) of the National Home Builders Cherie Felicity Hendricks Appointed: 13 September 2006 Registration Council (NHBRC), Modjadji (48) Nationality: Namibian African Empowerment Consortium Ltd Mr Gaomab is an international and Sekunjalo Technology Solutions Appointed: 18 March 2009 businessman with major business Group (Pty) Ltd. Nationality: South African interests in Namibia and South Africa. Miss Hendricks is the corporate He is the executive chairman of Falcon affairs and sustainability director Resource Holdings (Pty) Ltd and African responsible for corporate affairs Renaissance Mining Company (Pty) Ltd. which include sustainability, He is also the founder and executive regulatory compliance, corporate chairman of Namibia Atlantic Shipping social investment and group Corporation (NASCORP) which is in communication. She has more than partnership with Puma International 12 years’ experience in the Bunkering, a subsidiary of Puma Energy Sekunjalo Group and currently sits based in Geneva, Switzerland. on the boards of the Group’s major investments and links the Group’s Major directorships: Falcon Resource subsidiaries with the Group Holdings (Pty) Ltd (Executive Chairman), corporate office. Namibia Atlantic Shipping Corporation (Pty) Ltd (Chairman), Symphony Major directorships: Bioclones Salim Young (54) Resources (Pty) Ltd and African (Pty) Ltd, Health System BProc LLB (UWC), LLM (Tulane Renaissance Mining Company (Pty) Ltd. Technologies (Pty) Ltd, Premier University, USA) Fishing SA (Pty) Ltd, Ribotech (Pty) Ltd, Sekunjalo Capital Appointed: 12 December 2005 (Pty) Ltd, Sekunjalo Financial Nationality: South African Services (Pty) Ltd, Sekunjalo Health Mr Young is an experienced corporate Care Ltd, Sekunjalo Technology lawyer and is a former director of Solutions Group (Pty) Ltd, South Mallinicks Inc – now Webber Wentzel – Atlantic Jazz Festival (Pty) Ltd and where he started his legal career. espAfrika (Pty) Ltd. He is currently an executive director on the board of British American Tobacco South Africa situated in Stellenbosch. He maintains board positions in a number of other companies where he chairs or sits as a member of various subcommittees. Mr Young Professor Vukile Charles holds a master’s degree in Mehana (59) international commercial law. BTh (Rhodes University), AMP (INSEAD Business School, France), Certificate on Major directorships: British American Public Enterprises (National University Tobacco SA (Pty) Ltd, British of Singapore), MBA (De Montfort American Tobacco Holdings (Pty) Ltd, University, UK), DPhil (University of International Tobacco Company Ltd Johannesburg), ordained minister of the and Unipalm Investments Ltd. Methodist Church of Southern Africa and adjunct professor of UCT: Graduate School of Business.

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2011 was the year that Sekunjalo enhanced its stature and involvement in the international business community and established firmly its commitment towards sustainability and innovation

It is an exceptional honour and privilege to reflect The global economy and and report on Sekunjalo Investments Limited’s responsible leadership in performance in its 12th year as a JSE-listed emerging markets company. South Africa is now firmly a member of BRICS At the outset I have to congratulate the executive (Brazil, Russia, India, China and South Africa). directors: Mr Khalid Abdulla (Chief Executive), This significant participation of South Africa has Ms Chantelle Ah Sing (Chief Financial Officer) seen it enter the group of emerging market and Ms Cherie Hendricks (Corporate Affairs and economies with high growth potential. Sustainability Director), who together led the company to achieve outstanding results in the With the rapid growth of the emerging markets, the global economy is experiencing a seismic 2011 financial year. This excellent performance shift. By 2050, the collective size of the must be seen against the backdrop of a global economies we currently deem “emerging” will economic crisis in Europe which is South Africa’s have increased fivefold and will be larger than the most important export trading partner for developed world. Nineteen of the 30 largest manufactured goods, and the general poor results economies will be from the emerging world. At the from the business community as a result of same time, there will be a marked decline in the difficult trading conditions. Despite this, our economic might – and potentially the political executive team has achieved excellent and, more clout – of many small-population, ageing, and rich importantly, sustainable results. economies in Europe.

Sekunjalo is about more than just the excellent As responsible business leaders today, we have to leadership team, it is also about the management ask a couple of serious questions: How will the teams of our subsidiaries and their committed world look in 50 years from now? How can we as and dedicated employees. I have unusually, but entrepreneurs, leaders, philanthropists and deliberately, started my executive chairman’s business men and women, align our businesses report with a sincere acknowledgement and and personal strategies to create a livable and gratitude of all the efforts of our employees firstly, prosperous environment for our children’s since it is a very important factor in determining children? our success this past year and, of course, in the years to come. Innovation and creativity are equally critical for any organisation. The truth is that any company, As the executive chairman of Sekunjalo, I have the business or community group can be innovative. pleasure of, in a time of global economic difficulty, Knowledge and advanced skills are accepted as delivering a report filled with highlights. It took fundamental strategic resources for business Sekunjalo more than a decade to be where we are development and innovation. I believe that today. But our motto Africa, now is the time has knowledge and skills should be customised to never been more appropriate. We have had enhance available resources, traditional skills and many highlights this year and I am honoured markets, rather than superimpose unreal and to announce some of them. unrealistic conditions on development. Add a positive culture and attitude towards entrepreneurship and innovation, and we are talking business 2050.

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Looking back on more than a decade of Sekunjalo Sekunjalo’s strategy for the future is to build on in business, reflecting on tried and tested our trusted relationships with consumers and principles and strategies, some more successful engage them as citizens in the context of than others, gives me immense pleasure. People sustainable values. We will continually support the have grown; I have learned, travelled, networked development of a positive public attitude towards and met business and political leaders all over the increased innovation, the stimulation of new green world. The challenges for each country and its enterprises, the upskilling of new and existing leaders, over more than a decade, centred on its employees and managers, investing in research people, what they produce, at what cost, for and development and developing research centres whom, who they are going to vote for, etc. The list relevant to our industry and intellectual property, goes on and on. In the end, our own country’s i.e. patents, trademarks, licences and copyrights. business and political decision-makers aim to provide sustainable jobs for our people and create Internationally, Sekunjalo, its executives and a better world for all, so that we can spend on management continue to grow in stature. This food, health care, housing, appliances, education, year, the Sekunjalo Development Foundation, communication and, hopefully, some a philanthropic trust established to oversee entertainment. significant CSI programmes of the Group and others, will play a key role in COP 17, the climate Sekunjalo and sustainability change conference in Durban. The Foundation will partner the Stockholm Environment Institute at Global business has entered a new era of COP 17 in Durban to host a symposium on climate responsibility and accountability. In addition to change with Nobel Laureates, President Zuma producing solid financial results, business leaders and UN Secretary General, Ban Ki Moon. This are now responsible for managing their company’s event is extremely important for all humanity, environmental and social impacts, as well as since global warming and climate change will have addressing the expectations of stakeholders, a significant impact on the now 7 billion people on including legislators, investors, customers and planet earth. It is so important to ensure that we employees. reduce carbon emissions and I am delighted to highlight Sekunjalo’s efforts in our integrated By embracing these increased responsibilities, sustainability report. It is always the poor, business leaders can foster their employees’ especially on the African continent, that are most creativity and innovation – leading to resource and affected by the consequences of global warming. waste efficiencies, cost savings, new market The poor do not often have the resources to opportunities, greater bottom-line results and mitigate against the consequences of global a more sustainable future for the world. warming and therefore we have a responsibility as corporates to ensure that we do our part in The challenge for executives, entrepreneurs, dealing with carbon emissions. management, professionals and community leaders will be to strategise how sustainability- Sustainability has a special meaning for Sekunjalo driven management practices increase their since it has for many years tried to develop a company’s competitive advantage and business model where, at its core, is a social profitability. contract for responsible business between it and society. Sustainability for Sekunjalo is also linked At Sekunjalo, our goal has always been to provide to the challenge of developing innovative solutions innovative solutions to every subsidiary and client, linking economic issues and climate change and while remaining committed to social responsibility. innovation. We are of the view that an innovative Through the combined power of all our approach to climate change will see many jobs subsidiaries and our global partners, and with created and, in doing so, allow many people outstanding employee commitment, I am proud to to emerge from poverty and contribute to say that we not only achieved our goal, but have a sustainable future. really gone beyond even my own expectations over the last twelve months. Being in a position to Sekunjalo is known as a company that is driven by list South Africa’s only biotechnology company on its core values and strong commitment to social, an international stock exchange is but one of the environmental and economic change, with a great many examples where the management of emphasis on marginalised groups. This report Sekunjalo has proved their commitment again emphasises how we have integrated all of to sustainability and innovation. these into our business processes in the past

10 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 11 year. It is my role as executive chairman to ensure in rural areas. There will be continued efforts by that the Company remains committed to its values management to strategically partner with and is a leader in the area of sustainability. In this development organisations like the Development regard, our executives continue to participate in Bank of Southern Africa (DBSA), the Industrial the Cambridge Programme for Sustainability Development Corporation (IDC), as well as with Leadership, and recently we had the honour of global institutions and our international partners participating in a round table with HRH the Prince to support this initiative. of Wales on the most pertinent issues facing business leaders in South Africa and how best we Sekunjalo created at least 500 jobs directly are able to address these issues. and indirectly this year through our initiatives and investments in the Cape Town International Global recognition and Jazz Festival. The President made special innovation mention of this in his speech at the opening of Parliament at the beginning of the year. Our Sekunjalo has been acknowledged by the World investments with our international partners, Economic Forum (WEF) as a Global Growth British Telecoms and Saab SA, as well as our Company (“GGC”) also known as the New local investment in our abalone farm in Gansbaai Champions. As co-chairman of the Advisory in the Overberg region, not only created jobs but Board of the GGC representing the world’s fastest also indirectly supported hundreds of families in growing and most innovative companies, I realised poorer communities. again that we have outgrown many of our competitors in numerous ways. The WEF founder Empowerment and black business and chairman, Professor Klaus Schwab, refers to and employee ownership these New Champions as companies whose leadership has a unique DNA and are at the In 2011, Sekunjalo was once again honoured by forefront of growth through innovation, values and significant empowerment accolades. Sekunjalo is leadership. Again, it has truly been an honour to arguably the most awarded company in the black represent our country this year and to look for economic empowerment arena. This is largely due opportunities that will support our government’s to its strong commitment to job creation and job creation initiatives. enterprise development along with an extensive corporate social investment programme. Furthermore, on the international front, Sekunjalo invested substantially over the last few years in A major development this year was the formation innovative businesses. One such initiative is our of the Black Business Council to champion the investment in biotechnology, where our aim is to cause of black businesses. This is an important grow Africa’s leading biotechnology company, development in that there is a need to speed up Genius Biotherapeutics (formally known as transformation in our economy. Bioclones), that is jointly owned by local and global investors. It is the only African company to In this year, Sekunjalo was also pleased to note have developed biosimilars and can proudly boast that its management and employees participated of world-class research and development in an empowerment initiative that allowed for production facilities in South Africa. almost 10% of the company to transfer its ownership to employees. The Sekunjalo Group is the recipient of many awards for black economic empowerment, I would like to extend my sincere gratitude and enterprise development as well as corporate appreciation to the Sekunjalo board of directors, social investment programmes. What is less the Group executives and all management known about the Group is our investment and and staff within the Group. My heartfelt thanks support of innovation in all aspects of our to our investment partners who remain businesses. In particular, Sekunjalo has been at committed to the success of the Sekunjalo Group the forefront of leading innovation that is South of companies. African developed and owned in the areas of health and biotechnology.

Regional development initiatives and job creation

Sekunjalo acknowledges government’s efforts to Dr Iqbal Survé champion regional development and job creation Executive Chairman

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Sekunjalo is well positioned for further success through organic growth, acquisitions and strategic initiatives

It is with a great deal of pride that I report to One has to appreciate that in a tough operating shareholders on the progress of Sekunjalo environment and global market conditions; Investments Limited (“Sekunjalo”) for the year Sekunjalo has not only grown its bottom-line ending 31 August 2011. profits, but has also increased the underlying value of its investments. The company’s Sekunjalo is an investment holding company and performance in the past financial year underlines its interests include strategic investments, marine, my steadfast belief in the calibre of our operations information communication technology, health, and strategic holdings as well as the strength and biotherapeutics, private equity and enterprise depth of our senior management. development. I am pleased with some of the highlights of 2011 The period under review was a very trying detailed below which are a testimony of the period for most listed corporations on the executive management team’s hard work: JSE Limited (“JSE”) with the global financial crisis • As an investment holding company, our main casting a cloud of uncertainty over markets objective is growing asset value of our and the world economy. underlying investments – the most important indicator of performance in our company, Some companies on the JSE saw the need to group net asset value (NAV) which grew to restructure or refinance operations in order 87c per share from 82c per share last year. to carry on their respective businesses. Sekunjalo’s tangible NAV appreciated by Sekunjalo was in a fortunate position in that three 12.5% to 75.6c per share. Company NAV grew years ago a decision was taken to build efficiency to 139.5c per share from 130.7c. This followed and be able to present to shareholders a set of an increase in our asset base to R816.9m financial statements that reinforced the idea that from R807.1m. the company is in a much stronger position than it • Sekunjalo’s revenue shifted closer to the was in 2008 and is ready to seize any R450m mark but, more importantly, increased opportunities triggered by the prevailing turmoil. revenue gains did not come at the expense of profits with the company’s gross trading This year’s integrated report should provide more margin shifting from 28% to 30% due to, comfort to those shareholders who have remained amongst others, the operational efficiency. loyal to the company through the current • A significant portion of the Group’s revenue is economic turbulence. There is certainly no doubt now also made up of medium to long-term that this year the Company can offer tangible annuity and contractual income. evidence of its growth and prospects. The solid • Sekunjalo posted a R36.5m profit before all-round performance should send strong signals tax, compared to R21m in the previous to the market that we have obtained traction in financial year. our operations after having embarked on • Our continuing operations generated 7.2c per a successful consolidation exercise during this share in headline earnings, compared to 2.6c financial year. the previous year.

12 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 13 chief executive officer’s report continued

• The company’s main operating subsidiaries, Our more recent investment in Saab is Sekunjalo Technology Solutions Group progressing well, and we are enthusiastic about (Pty) Ltd (“Sekunjalo TSG”) and Premier future developments as the company expands Fishing SA (Pty) Ltd (“Premier Fishing”), into Africa. performed well and collectively generated R25m in operating profits. The success of these investments reinforces • Our partner of choice strategy is starting to Sekunjalo’s status as a partner of choice for bear fruit as our investment revenue grew international companies venturing into Africa. significantly during the year, from R5.9m to R20.9m. MARINE • Our first multinational strategic partnership Premier Fishing SA (Pty) Ltd (“Premier Fishing”) with British Telecoms delivered a maiden remains our largest investment and did not dividend of R13m during the year under disappoint in the past year with a solid R12m review. earned from turnover of R223m. As explained in • We convincingly answered one of the market’s our interim results announcement, the fishing biggest questions around our sustainable business is largely seasonal and traditionally growth prospects when we reported rebounds in the second half of the financial year. operational cash flow generated of R21.8m, which should, if anything, reinforce the quality The major product lines for Premier Fishing are of our operational earnings. south coast rock lobster, west coast rock lobster, • Gearing is down 14%, finance cost cover squid, abalone and pelagic. shifted up to 3.6 times and our net borrowings reduced to R59m from R44m. Premier Fishing has performed satisfactorily, • Our media subsidiary, espAfrika, swings back despite the effects of the stronger rand on sales to profits as the Cape Town International and the tough weather conditions which affected Jazz Festival continues to grow by creating landings across all sectors. Although operating many jobs as well as making a significant profits of R12m are 6.8% lower compared with the contribution to the Western Cape and prior year due to the factors above, the Company national GDP. has refocused its strategy on becoming a more • Significant progress has been made on sustainable business that is able to manage the application for the listing of Genius operational costs and efficiencies. Biotherapeutics (“Genius”) on an international stock exchange – a development that could The fishing business, which is mainly export unlock significant value for Sekunjalo orientated through the catching and marketing of shareholders. west coast and south coast rock lobster, is also starting to see the benefits of recent capital REVIEW OF INVESTMENTS expenditure. Management is confident of markedly increasing additional outside quotas for STRATEGIC INVESTMENTS the 2012 season. Sekunjalo has two main strategic investments: Our 30% stake in British Telecoms SA (“BT”) and The south coast rock lobster division’s revenue a 5% stake in Saab South Africa (“Saab”). dropped due to the stronger rand, and the catch sizes declined due to poor weather conditions in We are pleased with the developments in both the second half of the year. However, the total investments and particularly delighted to have volume of lobster landed in 2011 has increased seen the first tangible rewards from BT in the by 8.5% and continues to meet sustainable form of a R13m dividend received during the demands globally. year. BT is making great strides in Southern Africa and our investment is proving extremely robust. The west coast rock lobster division performed The dividend effectively allows us to repay satisfactorily compared to the previous year. a significant portion of the debt we incurred to Although the sales value declined due to the acquire our interest in the company three stronger rand during the year, market pricing is years ago. considerably higher due to the demand in the Far East remaining strong.

14 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 15 The pelagic sector as an industry did not fare well subsidiary providing mobile data solutions. in the 2011 season due to poor weather Wisdom Global Technology Solutions (Pty) Ltd conditions which reduced the number of fishing (“Wisdom Global”), which was set up during the days. This division, however, landed its entire year, focuses on computerised asset maintenance pilchard quota, but the landings for anchovy were management software solutions and services. significantly less than the prior year under review. A testimony as to how well the technology cluster The squid division has improved substantially is being managed is the much improved net profit with the increase in market demand. Pricing in margin, which stretched from 2% in 2010 to over the European market has increased by 25%. 9% in 2011. We are optimistic that the technology The volume of squid landed has also increased division will continue to show strong growth in the by 11%. next financial year. The division has already secured a two-year deal with National Health The abalone farm continues to produce good Laboratory Systems, which is worth approximately results and our decision to expand this business R150m. is one of the key strategies of the Group. This division performed better than last year as Sekunjalo TSG acquired a 51% stake in the a result of the increased sales prices received start-up company Wisdom Global as part of its internationally. Volumes sold during the year are strategy to implement innovative solutions to also 20% higher than the prior year. its customers. With Digital Matter, this will enable the Group to further satisfy the growing demand The Company is assessing regulatory require­ for efficient IT solutions. ments for the expansion of the farm after it acquired additional land adjacent to the farm in Saratoga and its subsidiary, Digital Matter, have Gansbaai. This additional land could increase posted good results with profits exceeding the capacity of the current Gansbaai farm to budget. Although margins have been controlled, a capacity of approximately 300 tons from the increased cost of resources to meet customer our existing 120 tons. demands has been justified by the excellent profits. Our branded names, Atlantic Fishing and Seagro, continue to have favourable support in the market Digital Matter performed satisfactorily and is in a and are considered to be well-established brands far better strategic position than the previous in the domestic and international sectors. year. Key achievements are: • Winning the preferred supplier status for its INFORMATION COMMUNICATION InspectionOne product throughout the Sasol TECHNOLOGY group in South Africa. This is expected to provide good sales growth in 2012. Sekunjalo TSG, a wholly owned subsidiary, is an • Securing a Service Level Agreement with information and communication technology niche Standard Bank for R250k per month plus other market enterprise company. maintenance contracts which will provide over R300k of annuity revenue on a monthly basis. Shareholders should be encouraged by the organic growth in the technology business, which Health System Technologies (Pty) Ltd (“HST”) is is becoming a serious contributor to group a leading provider of hospital information and revenue and earnings. Last year the technology laboratory information systems for the South interests represented 19% of top line revenue. African public sector and continues to grow. This year the contribution from the technology Key customers include the provincial government division is 28%, which makes for a better balance of the Western Cape and the National Health amongst our business segments. Laboratory Services. The company has also developed its own Billing and Accounts Sekunjalo TSG subsidiary companies include Receivable software which is suitable as part of Saratoga Software (Pty) Ltd (“Saratoga”), which is the IT solutions needed for the implementation a software development house primarily focused of the future National Health Insurance scheme in on the insurance industry; and Digital Matter (Pty) South Africa. Ltd (“Digital Matter”), a 75% Saratoga-owned

14 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 15 chief executive officer’s report continued

HST has had a very good financial year. The result in us becoming the market leader in these Hospital Information System (“HIS”) contract with niche health care products. the provincial government of the Western Cape has been renewed and secured for another three The restructuring of the Health Care division has years. Further regional pharmacy roll-outs in enabled management to grow the Company into seven hospitals will go live by the end of the new niche health care areas and expand its current financial year. Phase two of the laboratory product offerings. The Company has incurred information system contract was awarded to non-recurring costs and should reap the benefits HST in April 2011 and this implementation is of this investment in future years. progressing well and should add value over the years to come. BIOTHERAPEUTICS Genius Biotherapeutics (“Genius”) formerly The impact of these contracts has enabled the known as Bioclones (Pty) Ltd, is South Africa revenue of HST to increase by 80% to R82m and Africa’s largest medical biotechnology (2010: R45m) and operating profits have increased company with strategic interests in biogenerics by 144%. and novel compounds. HST has partnered with AME International through Genius recently made a media announcement Amethst (Pty) Ltd (“Amethst”), which has won the about its global patents on dendritic cell Gauteng Department of Health’s HIS tender which vaccine (“DCV”). entails implementing systems in over 60 Gauteng hospitals and clinics. We are very excited about Genius, especially after the recent Nobel prize for medicine was awarded However, as previously reported, the contract to Dr Ralph Steinman from Canada for his entered into between Amethst, as part of the groundbreaking research into dendritic cells and Baoki Consortium, and the Gauteng Department their application in treating infectious diseases of Health for the implementation of the HIS has and cancers. Genius holds global patents for been cancelled by the Baoki Consortium. This dendritic cell treatments that have been hailed action has been taken as a result of a non-delivery as effective agents in combating various forms by the Gauteng Department of Health on their of cancer. contractual obligations. While legal advice is being sought regarding the recovery of Genius also holds global patents for personalised outstanding debts, the Baoki Consortium medicine and vaccines. Genius’ one technology is continues to engage with the Gauteng Department in advanced stages, with the next stage of clinical of Health in an attempt to get a revised project trials. Commercial­isation with key universities and contract in place. strategic partners is expected to be finalised, in the short to medium term. HEALTH CARE

Sekunjalo Health Care Ltd (“SHC”), our health Management has assembled an experienced team care arm, grew turnover from R11.4m to R12.3m. of scientists with appropriate biopharmaceutical While this division is not yet profitable, we skills to provide a robust supply of the Repotin continue to actively seek ways to unlock the value product into the market. in our health care interests. The refurbishment of the Ribotech facility in The revenue generation of the Sekunjalo Health Goodwood, Cape Town, is now complete and Care division has not performed in line with research and development work has commenced targets, due to tough market conditions and on the granulocyte-colony stimulating factor delayed product launches. (“G-CSF”) technology.

However, the successful patents and registration MEDIA AND ENTERPRISE DEVELOPMENT of nine new consumer products will soon be It was a significant year for Sekunjalo’s media introduced into production and will be available division and subsidiary, espAfrika (Pty) Ltd for sale in 2012. Our SABS-registered range of (“espAfrika”), the owner of the world-renowned natural disinfectant and sanitiser products are Cape Town International Jazz Festival. ready to be launched into the market and should

16 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 17 After recording a R1m loss in 2010, espAfrika division for growth in the medium to long term as managed to achieve a profit on the back of well as creating significant new jobs in the increased turnover of R45m. While the profit community. registered was fairly small, the Cape Town International Jazz Festival’s stature continues to Our aquaculture business acquired six hectares of grow. It is difficult to believe that in 2000 the land adjacent to the existing Gansbaai abalone festival attracted only 6 000 music lovers and farm. We estimate that the additional land could recent figures confirm that this number has increase our capacity to approximately 300 tons grown to an impressive 33 500 and the event has from the existing 120 tons. We are assessing the been sold out year on year. espAfrika contributed regulatory requirements and once completed, R499m to the Western Cape’s GDP and expansion of the abalone farm will commence. approximately R800m to the national GDP, as well On completion, we will be able to offer new jobs as creating many jobs. to roughly 100 members of the local community. Our existing operation already employs about The company has extended its events to include, 90 people. amongst others, the Angola and Luanda Inter­ national Jazz Festivals as well as the Nelson Due to the growth of our core operational Mandela Bay International Music Festival in Port invest­ments in our technology and fishing sectors Elizabeth. espAfrika has a number of new projects during the current year, the Group has built planned for the coming year. It is determined to a strong growth platform for the next few years. create a footprint through Africa by uplifting the continent through music and culture. Due to the financial success during the year under review, we believe that Sekunjalo is well PROSPECTS positioned for further success through organic growth, acquisitions and strategic initiatives. Looking ahead, I believe Sekunjalo is well positioned to bolster its net asset value through APPRECIATION improved operational organic growth, acquisitions and strategic initiatives. I would like to extend my gratitude to the board of directors and in particular to the executive Our financial position is strong, cash flow is chairman for his leadership and guidance during improving and prospects for Sekunjalo’s mainstay a challenging year. The board’s commitment has businesses are promising. We are also likely to once again played a pivotal role in ensuring the see further benefits from new deals as Sekunjalo continued success of the Group. builds on its reputation as a value-adding BEE partner of choice. I would also like to extend my appreciation to the hardworking executives in the underlying As an investment holding company, our primary subsidiaries, as well as our strategic partners, aim is to increase the value of our investments, for their loyalty and commitment during another create employment and build communities, and demanding year. I believe that we will enhance our commitment to these factors in the years to come. Lastly, my appreciation goes out to all staff in the Group for their unselfish commitment and tireless Due to Sekunjalo TSG’s organic growth and skills efforts in meeting the business challenges of the sets built, we are keen to acquire new businesses past year with great enthusiasm and passion. in a very strategic way so that we may add value to target companies as well as our current existing businesses and contracts.

Premier Fishing’s increasingly important pelagic division should receive a boost over the next few years with the recommissioning of the pelagic fish processing plant in Saldanha Bay. An environ­ Khalid Abdulla mental impact analysis (EIA) process is still under Chief Executive Officer way. This will strategically position the pelagic

16 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 17 18 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 19 chief financial officer’s report

Highlights

Cash generated by operations increased by 98% to R31.8m

Headline earnings per share (HEPS) from continuing operations increased by 178% to 7.22c

Investment asset base increased by 7%

INTRODUCTION Cash generated from operations increased to R31.8m from R16m, a 98% improvement in cash The Group is pleased to report that its financial generation. Operating cash flows from the objectives were successfully met, and as a result underlying operations were utilised for working Sekunjalo has completed the year in a stronger capital needs and to fund the growth of our financial position. operations. The Group invested R24m in capital expenditure for its continuing operations. The financial review is set out with the intention of providing an insight into the financial performance Dividends received in the current year under and position of the Group. review were from our investments in BT and African Legend Ltd. The returns from these FINANCIAL PERFORMANCE investments improved our cash flows. The Group delivered solid financial results and Despite uncontrollable factors, such as volatility in performed well against the three financial exchange rates and tough market conditions, strategies that were set for 2011. Group revenue grew by 9%. The underlying The results show profit attributable to equity subsidiaries have proved their resilience under holders of parent has increased considerably trying conditions, with a 1% decline in revenue from R8.1m to R26.3m. Headline earnings from the fishing division and a 61% growth have increased to R34m from R12.9m which coming from the Information Communication is a 165% increase from prior year. This Technology (“ICT”) division. resulted in the HEPS from continuing operations The Group’s operating profit increased by 19% increasing from 2.59c per share to 7.22c from R32m to R38m, with the primary drivers per share. for movement in operating profit being Our first financial objective was to increase the the following: investment asset value to increase shareholder • The growth of the ICT division came through wealth. in its continuing operations’ profitability, which increased by 133%. Despite the disposal The Company net asset value (NAV) per share of the underlying Fios (Pty) Ltd’s (“Fios”) grew from 130c to 139c, mainly due to the operations, the ICT division continues to fare growth of our investment in British Telecoms strongly and is well positioned to attain further South Africa (“BT”). This emphasises the fact that acquisitions to increase its focused IT product Sekunjalo continues to meet its strategic and offerings. The operating profit was R13.2m. financial objectives to increase its investment • The fishing division performed satisfactorily asset base. with its divisional operating profit being R12m which equates to 6.8% lower compared to the Our second financial objective was to increase prior year. The Company has pursued a more revenues, thereby increasing cash generation sustainable business that is not dependent on sustainably. non-controllable environmental factors.

18 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 19 chief financial officer’s report continued

Our third financial objective was cost containment. OPERATING PERFORMANCE

Despite the prevailing economic conditions, MARINE margins in the fishing sector were maintained due Premier Fishing SA (Pty) Ltd (“Premier Fishing”) to improved efficiencies, and the technology earnings before interest and taxation (EBITDA), sector costs remained in line with management’s excluding management fees, depreciation and expectations. amortisation for the fishing operation, amount to R29m for the period under review compared The Group’s cost of sales has increased by less to R23.8m in 2010. The division has managed than 6% and the operating administrative costs to maintain its gross profit margin at 31% have declined by 3.3%. The Group’s commitment despite the strengthening of the rand, the rising to contain controllable costs is evident from cost of diesel and higher cost of repairs and these economic savings which came through from maintenance. the restructuring strategy which commenced in 2008. The various subdivisions – pelagic, lobster, squid and abalone, have had positive and negative INVESTMENTS issues affecting their performances.

Based on the discounted cash flow methodology The decline in the south coast rock lobster followed by the Group, the investments for the divisional revenue is due to the impact of the Company have been audited and fair valued at volatile weather conditions on the catching rates R649m, which is an increase of 4% from the in the second half of the year. The effect of prior year. the stronger rand has had a major impact on the sales value. As part of the Group’s strategic objectives, we sold First Light Administration Services (Pty) Ltd, Although the revenue of the west coast rock our last loss-making subsidiary in the financial lobster had declined, market pricing has services sector. The decision to dispose of our increased considerably, with sustainable demand investment in Fios generated R8.9m in cash flow from the East. to the Group. The net proceeds from the sale of these businesses were R3.6m. The pelagic division underperformed as the weather conditions hindered catching rates – DEBT PROFILE this trend was industry-wide. The overall performance has declined in comparison to Long-term bank borrowings were reduced by 21%, the prior year, with a 16% less catching rate on but total debt has increased by 4.7% to R84m due the anchovy quota. to additional growth funding obtained for our underlying operations. In the squid division, the sales volume has increased by 11%. The market demand for this The dividend received from our investment in BT product has improved, with our global customers at the end of the financial year will be utilised to achieving higher market prices. reduce the redeemable preference shares which were issued to finance the acquisition. This will The profit from the abalone division has increased have the impact of reducing this liability by from R3.5m to R5.2m in 2011. This division approximately 33%. performed considerably better than last year as a result of increased sales prices and volumes The Group’s gearing, excluding the redeemable from the prior year. preference shares, has increased from 11% to 14% during the year due to the reasons listed above. The gearing remains low and below our target of 20%. This will enable the Group to have the capacity to borrow additional funds in order to grow the operations and obtain acquisitions.

20 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 21 TECHNOLOGY development in the next financial year. The loss The Health System Technologies (Pty) Ltd (“HST”) from the associate group has increased from business secured the contract with the provincial R6.5m to R8.5m. government of the Western Cape for a further three years, with the regional pharmacy roll-out in media and ENTERPRISE DEVELOPMENT seven hospitals that will go live at the end of the The Sekunjalo media division, including espAfrika current year. Phase two of the laboratory (Pty) Ltd (“espAfrika”), produced 21% of the information system contract was awarded during Group’s revenue, which is an increase of 18% the year, with progress advancing well. from the prior year. The division was able to break even with most of the contribution coming from The financial effect of these contracts has espAfrika who earned a R2m profit. resulted in the revenue for HST increasing significantly from R45m to R82m. espAfrika has rebranded itself beyond Jazz Festivals and will continue to produce excellent Saratoga Software (Pty) Ltd (“Saratoga”), including music and other arts and culture festivals. its subsidiary Digital Matter (Pty) Ltd, posted good profits which exceeded management’s CONCLUSION expectations. Although margins were controlled, From a financial perspective, the Group will strive the increased cost of resources to meet customer to maximise its investment base as well as demands has been justified in the excellent profits generate sustainable cash in its operations. The delivered. pleasing financial results have set the platform for the next financial year by placing the Group in a Sekunjalo Technology Solutions Group (Pty) Ltd solid position for growth through acquisitions and (“Sekunjalo TSG”) acquired a 51% stake in organic expansion in our underlying subsidiaries. Wisdom Global Technology Solutions, a start-up company, as part of its strategy to present ACKNOWLEDGEMENTS innovative solutions to its customers. This, together with Digital Matter, will enable the I would like to extend my sincere appreciation to division to satisfy the growing demand for efficient the directors and staff for their hard work and IT solutions. dedication during the year to ensure a successful financial year. HEALTH CARE The restructuring of Sekunjalo Health Care Ltd My special heartfelt thanks go out to my financial (“SHC”) enabled the division to continue to invest team within the Sekunjalo Group for their in its infrastructure and its people. conscious effort and focus to meet the timeous delivery of financial results to all our stakeholders. The revenue generation of SHC did not meet management expectations but continues The board of directors have provided us with to improve on its current sales volume with excellent leadership and direction in the an 8% increase. year under review, and I would like to take this opportunity to commend them for their BIOTherapeutics constant support. Genius Biotherapeutics (“Genius”), formerly known as Bioclones (Pty) Ltd, is the largest medical biotechnology company in South Africa and operates a plant in Centurion, Pretoria, that produces and sells Repotin to the domestic market. Ribotech (Pty) Ltd, a subsidiary of Genius, has completed the upgrade of the facility in Goodwood, Cape Town, and employed scientific Chantelle Ah Sing resources to commence research and Chief Financial Officer

20 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 21 group structure

Strategic Strategic Investments Investments 100%

SEKUNJALO INDUSTRIAL MARINE HOLDINGS (PTY) LTD 100%

SEKUNJALO Technology Technology AND SOLUTIONS GROUP (PTY) LTD (“SEK TSG”) 100%

SEKUNJALO INVESTMENTs limited

sekunjalo health care ltd 74.21%

Health AND Biotherapeutics african biotechnology & medical innovation investments (pty) ltd 100%

sekunjalo capital Private Equity (pty) ltd 100%

sekunjalo media media and holdings Enterprise (pty) ltd development 100%

22 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 23 BRITISH TELECOMS SA (PTY) LTD 30%

Saab SA (PTY) LTD 5%

PREMFRESH SEAFOODS (PTY) LTD 100% PREMIER FISHING SA (PTY) LTD 100% MARINE GROWERS (PTY) LTD 100%

SARATOGA SOFTWARE (PTY) LTD digital matter (PTY) LTD 42.5% 75%

wisdom global technology solutions (PTY) LTD 51%

emergent energy (PTY) LTD 25%

HEALTH SYSTEM TECHNOLOGies (Held under Health care amethst (PTY) LTD but managed under Sek TSG) 50% 100%

sekpharma (pty) ltd 75%

wynberg pharmaceuticals sekpharma (PTY) LTD (pty) ltd 25% 100%

sekunjalo medical health system amethst (PTY) LTD services (PTY) LTD technologies (PTY) LTD 50% 100% 100%

sekunjalo medical & health commodities (PTY) LTD 100%

genius biotherapeutics ribotech (PTY) LTD 49.99% 76.1%

imagination advisory services 26% sekunjalo private equity (PTY) LTD 100% imagination capital management services 26%

sekunjalo financial imagination advisory & services (pty) ltd distribution services 100% 100%

tripos tourism investments (PTY) LTD 51%

espafrika (pty) ltd 51%

22 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 23 corporate governance report

Sekunjalo Investments Limited (“Sekunjalo”) is stakeholders and interact with the environment is incorporated in South Africa under the provisions done with respect, integrity, transparency and of the Companies Act, 2008 (No. 71 of 2008), as responsibility. amended (“Companies Act”). It is listed on the JSE Limited (“JSE”) and complies fully with the In supporting the Code, the directors recognise spirit and form of the continuing obligations of the the need to conduct the Group’s businesses with Listings Requirements of the JSE. integrity and in accordance with International Financial Reporting Standards (IFRS) and king iii on corporate governance international best practice.

The board of Sekunjalo remains committed to and The King Report on Corporate Governance 2009 endorses the principles of the Code of Corporate came into effect on 1 March 2010. The Sekunjalo Practices and Conduct as set out in the King III level of compliance has increased significantly Report. King III will be fully incorporated by the since the introduction of the Code. A gap analysis 2014/2015 financial year-end. Corporate was carried out throughout the Company, the governance ensures that the manner in which results of which are listed below. directors manage and control the Company, treat

BOARDS AND DIRECTORS King III principle 2.16 – The board should elect a chairman of the board who is an independent non-executive director Recommended practice Apply or explain basis 2.16.2 The chairman should be independent and free of The Group has an executive chairman. conflict upon appointment. 2.16.3 A lead independent director should be appointed Mr Young is the lead independent director. in the case where an executive chairman is appointed or where the chairman is not independent or conflicted. 2.16.9 The board should ensure a succession plan for The board is currently reviewing the succession the role of the chairman. plan for the role of the chairman. King III principle 2.18 – The board should comprise of a majority of non-executive directors. The majority of non-executive directors should be independent Recommended practice Apply or explain basis 2.18.1 The majority of board members should be To be applied in 2012/2013. The board is aware non-executive directors. of the imbalance and the nominations committee 2.18.2 The majority of the non-executive directors has recommended candidates. should be independent. King III principle 2.21 – The board should be assisted by a competent, suitably qualified and experienced company secretary. Recommended practice Apply or explain basis 2.21.3 The company secretary should not be a director The board is currently reviewing this of the company. recommendation. A decision will be taken in 2012. King III principle 2.26 – Companies should disclose the remuneration of each individual director and certain senior executives. Recommended practice Apply or explain basis 2.26.2 The remuneration report, included in the Detailed remuneration is available to the board integrated report, should include: the salaries of and a decision was taken to not publicly disclose the three most highly paid employees who are the information for reasons of confidentiality and not directors. sensitivity. The decision not to disclose will be reviewed next year.

24 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 25 AUDIT COMMITTEES King III principle 3.2 – Audit committee members should be suitably skilled and experienced independent non-executive directors Recommended practice Apply or explain basis 3.2.2 The audit committee should consist of at least Nominations for a third member have been three members. received and a suitable candidate is expected to be selected once the interview process has been completed in 2012.

BOARD OF DIRECTORS According to the Company’s memorandum of incorporation, all directors are subject to The Company is controlled by the board of retirement by rotation and re‑election by directors. Collectively, the board believes that the shareholders on an annual basis. current mix of knowledge, skill and experience meets the present requirements to lead the The board has a policy that allows for the clear Company effectively. division of responsibilities at board level to ensure a balance of power and authority. This means that The board comprises three non‑executive no one individual has unlimited powers when it directors and four executive directors, who comes to decision‑making. determine the standards and policies to ensure that the highest quality of corporate governance The board met five times during the year, to is maintained within the Group. review the financial and operational performance of the Group and to consider issues that may have The non‑executive directors are considered to a significant impact on the Group. Senior have the necessary skill and experience to bring managers of the Group attend board meetings balanced and independent judgement to bear on by invitation. the Group business. Whilst all directors have equal responsibility for managing the Group’s Directors are required to seek the authority of the affairs, it is the role of the executive chairman, Chairman prior to dealing in shares of Sekunjalo. chief executive officer and the executive Accordingly, directors are not permitted to make management team to run the business within the use of internal Company information when parameters prescribed by the board and to deciding to deal in the Company’s shares. produce clear, accurate and timely reports, thus enabling the board to make informed decisions. The board has full and unrestricted access to all Company information, records, documents and Appointments to the board are formal and property and monitors the non‑financial aspects transparent and a matter for the board as a whole. relevant to the business of the Group.

The board believes that as long as non‑executive The board recognises its responsibility to report directors remain completely independent of and communicate all matters of significance to management and relationships that could all of its stakeholders and to ensure effective significantly affect their decisions and advice and communication between our internal and external they are of the right calibre and integrity, they can stakeholders. perform the required function of looking after the Company’s interests. The board encourages attendance at annual general meetings (AGMs) of its directors and Through the contributions of all directors, chairpersons of its committees. It appraises the Sekunjalo has established a suitable balance of performance of the chief executive officer on power and a solid framework for the examination, an annual basis through its committees. calculation and management of risk.

24 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 25 corporate governance report continued

DIRECTORS’ ATTENDANCE AT BOARD THE CHAIRMAN MEETINGS The executive chairman, Dr MI Survé, ensures that the board is functioning efficiently and provides Board guidance and leadership for the Group. The Director attendance Sekunjalo board elects the chairman. Dr MI Survé – executive chairman 5 BOARD COMMITTEES K Abdulla 5 The board has established a number of C Ah Sing 5 committees to assist it in performing its duties and to fulfil its effective decision‑making CF Hendricks 5 processes. Specific responsibilities have been S Young 4 formally delegated to the subcommittees, with defined regulations and terms of reference. Prof. Dr VC Mehana 5 The board has appointed audit and risk, JM Gaomab 3 remuneration, investment, transformation and nomination committees as detailed below.

COMMITTEES Audit and risk Remuneration Investment Transformation Nomination committee committee committee committee committee Composition Two Two Two executive One Two non‑executive non‑executive directors non‑executive non‑executive directors directors and one director and directors and non‑executive one executive one executive director director director Committee S Young S Young Dr MI Survé Prof. Mehana Dr MI Survé members (chairman) (chairman) (chairman) (chairman) (chairman) JM Gaomab Prof. Mehana Prof. Mehana C Hendricks S Young K Abdulla Prof. Mehana Frequency of Thrice a year Twice a year Quarterly Twice a year Annually meetings Board Yes Yes Yes Yes Yes approved Charter Invitees Meetings are Meetings are Meetings are attended by the attended by attended by internal and members of the members of the external auditors management management and members of team team the management team Other The auditors have unlimited access to the audit committee ensuring independence is not compromised in any way.

26 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 27 AUDIT AND RISK COMMITTEE secretary of this committee. The committee met This committee’s responsibilities include ensuring four times during the year under review with full that internal controls are in place and that attendance by the members. Attendance of the management is continuously improving these external auditors PKF (Cpt), directors and controls. The committee is also responsible management is by invitation. for reporting to the board on the final Group financial results. The audit committee has a formal Audit Policy Document which has been adopted by the board. The main objectives of the committee include The policy document deals with duties, the following: membership and authority. The committee has • Assisting the board of directors in fulfilling formal rules governing the services provided by their responsibilities by ensuring that the the external auditors in terms of systems and system of internal controls, accounting processes. The committee considered and practices, management information systems, determined the terms of engagement and fees of financial reporting systems and auditing the external auditors. processes are functioning effectively. • To facilitate effective communication between The external and internal auditors have the board of directors, senior management unrestricted access to the audit committee and and the external auditors. attend all audit committee meetings by invitation. • To establish the credibility, objectivity and Detailed reports are presented by both the internal reliability of published financial reports and and external auditors and the chairman reports on ensuring that the financial statements comply the findings at the board meetings. with International Financial Reporting Standards (IFRS). By doing this, the committee The Group has internal controls and systems can provide an objective independent forum designed to provide assurance as to the reliability for the resolution of significant accounting and and integrity of the financial statements. The reporting-related matters. system of internal control is designed to manage • To promote the overall effectiveness of rather than eliminate the risk of failure to achieve corporate governance. the Group business objectives and can only • To evaluate the independence and provide reasonable and not absolute assurance effectiveness of the external auditors. against material misstatement or loss and to • To monitor the ethical conduct of the Group, adequately safeguard, verify and maintain its executive and senior officials. accountability for its assets. • The external auditors can communicate with the chairman of the audit committee and all In accordance with section 94(7) of the of its members throughout the year. The Companies Act, the committee reports as follows: chairman of the committee is also available The scope, independence and objectivity of the at the annual general meeting to answer external auditors was reviewed. questions about the committee’s activities. • The audit firm PKF (Cpt) Inc. and audit partner are, in the committee’s opinion, independent Report of the audit and risk committee of the Company, and have been proposed to The main purpose of the audit committee is to the shareholders for approval to be the ensure the integrity of the financial statements Group’s auditors for the 2012 financial year. and oversee the effectiveness of the internal • On an ongoing basis, the committee reviews financial controls and the external and internal and approves the fees proposed by the audit functions. external auditors. • The appointment of the external auditor The audit committee comprises two non-executive complies with the Companies Act and with directors who act independently and have been all other legislation relating to the appointment appointed by the board. The chairman of the of external auditors. committee is Mr S Young who is a board member • The nature and extent of non-audit services and attends the annual general meeting of the provided by the external auditors have been Company. Nominations for an additional reviewed to ensure that the fees for such committee member have been received and are services do not become so significant as to being reviewed. The company secretary is the call into question their independence.

26 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 27 corporate governance report continued

• The nature and extent of future non-audit Key findings are reported to the chief executive services have been defined and pre-approved. and the audit committee. A progress report on the • Obtaining assurance from the external auditors key findings is presented to the audit committee that adequate accounting records are being until all matters have been resolved satisfactorily. maintained. This enables the committee to ensure that action • Approving the internal audit charter and has been taken to address the areas of concern. internal audit manual and evaluating the independence, effectiveness and performance External audit of the internal auditor and compliance with PKF (Cpt) Inc. provides audit opinions in its charter. accordance with the Companies Act as well as the • Recommending to the board the interim and JSE Listings Requirements. Under company law, preliminary announcements of results and their responsibility is to the shareholders of the reports to shareholders and the annual Group. In addition, they have professional financial statements. responsibilities to report Reportable Irregularities, • Considering concerns regarding accounting in terms of Section 45(1) of the Auditing practices or internal audit matters. Profession Act, 2005. • The appropriateness of the expertise and experience of the financial management team The audit is conducted in accordance with was reviewed and reported to be adequate. International Standards on Auditing (ISA). Their • Review the compliance with legal, regulatory, objective is to provide a comprehensive service to codes and other standards and continually the Group. They provide value-added services, monitor the implementation of the legal largely by assisting management to achieve their compliance processes. objectives through the identification of needs and the provision of the required solutions Internal audit and services. The prime objective of the internal audit function is to examine and evaluate whether the Company They have a statutory responsibility to report to and its subsidiaries’ framework of risk the shareholders whether in their opinion the management, control and governance processes financial statements fairly present the financial is adequate and functioning properly. position, results of operations and cash flow information of the Group, in conformity with The system of internal control is designed to International Financial Reporting Standards and in ensure that the significant risks are appropriately the manner required by the Companies Act. The managed and provide reasonable assurance that: audit involves such tests of transactions and of • Operations are efficient and effective; the existence, ownership and valuation of assets • Company assets and information are and liabilities. The audit includes: safeguarded; and • Evaluating the appropriateness of the • Applicable laws and regulations are accounting policies; complied with. • Examining, on a test basis, evidence supporting the amounts and disclosures in the The role of the internal auditor is also to: financial statements; • Perform reviews on the company’s governance • Assessing the reasonableness of significant processes and ethics; estimates; and • Perform an objective evaluation of the risk • Considering the appropriateness of the overall management and internal control framework; financial statement presentation. • Systematically analyse and evaluate the business processes and associated controls; As the auditors of a public interest company, the • Provide a source of information on fraud, same individual may not serve as audit director of corruption, unethical behaviour and the engagement for more than five consecutive irregularities; and financial years. • Follow a risk-based approach The external auditor liaises with the internal auditor and attends the audit committee meetings by invitation.

28 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 29 As the auditors, they attend every annual general management plan to develop this risk meeting of a public interest company where the management framework in the underlying financial statements of the company for a financial business units. The first phase has been year are to be considered or agreed to, so as to undertaken to include the whole management respond accordingly to our knowledge and ability team from operational managers to CEOs to to any question relevant to the audit of the partake in the documentation of the risk profile of financial statements. all identified risks. This promotes a culture of awareness and consideration as risk impacts the Expertise and experience of the chief financial business as a whole. officer and the finance function In terms of the JSE Listings Requirements, the The risks are identified under the categories of audit committee is satisfied that the chief financial strategic, operational, financial, legal and other officer has the appropriate experience and risks in the risk register. From the risk evaluation expertise to meet the responsibilities of in the risk register, the significant and insignificant the position. risks are addressed in a comprehensive manner. The significant risks are reported to the audit and The audit committee has considered and is risk committee who in turn will report these satisfied that the finance department has the activities to the board. Risk registers are reviewed appropriate expertise and is adequately thoroughly twice a year by the audit and risk resourced. committee.

Risk management From this risk management implementation The board is responsible for governing risk approach, the board is able to determine whether management processes in the group in the business operations have aligned their accordance with corporate governance strategy with the Group strategy and consider the requirements. The board subcommittee, the audit mitigation of the impact on the sustainability of and risk committee, is responsible for the the business. The governance structure of the development and oversight of this risk process. risk management process is reviewed for effectiveness. The risk management forum was formed in November 2010 to assist the committee in the The significant risks that impact the Group’s discharge of their responsibilities as set out in the activities are: risk charter to ensure that the board was provided • The fishing industry’s exposure to a strong with assurance that significant business risks are rand/US dollar exchange rate will result in systematically identified, assessed and reduced to lower profitability. acceptable levels in line with the board’s risk • Expansion to new product offerings may have appetite. The board is satisfied that the risk delayed launches or unexpected lead times management process will identify and enable which result in slower investment returns. adequate actions to be taken against any • Some businesses in the Group are dependent unexpected risks. on a small number of principals and/or suppliers and their success is linked to their Risk officers are appointed in each division under ongoing financial stability and competitiveness the risk management forum to follow the group’s of products/services. comprehensive enterprise risk management • Exposure to significant large customers or programme in accordance with ISO 31000. This suppliers will make the company dependent facilitates the process of identification, analysis on the customer financial viability or capacity. and rating of risks in a structured manner, with • The going concern risk may become high if quarterly reviews with executive and senior that division does not meet its strategic and management. operational objectives due to regulatory industry and inflexibility in the market. This programme involves obtaining the • The expanding operations have necessitated commitment from all business managers within all an IT platform that will enable the growing divisions to integrate this process in their daily nature of the business and reduce the risk of operations, business planning and strategic loss of IT data. Refer to Information framework. The Group rolled out a detailed Technology Management.

28 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 29 corporate governance report continued

• Limited access to growth funding may inhibit on negotiation of the best cost structure that fits the acquisition strategy of the Group as with the operations. a whole. • The impact of the economic recovery on our The information management risk is monitored as business, customers and suppliers may result part of the Group Risk Management Framework in the loss of income and growth of operations and includes disaster recovery measures and will start to stabilise before it increases. information recoverability. • The ever-changing nature of laws and regulations across various industries will IT governance is an ongoing risk plan for the require vigilant monitoring by management. group and management ensures to make this • Skills retention, development and succession a priority for reporting as part of the King III planning remain a challenge for all divisions. recommendation.

The responsibility for monitoring the management remuneration COMMITTEE of these risks lies with the senior management of The remuneration committee’s main purpose is to each business division. The overseeing of this risk ensure that the Company’s remuneration practices management is part of the responsibility of the and policies are aligned with good corporate audit and risk committee. governance. The main aim of the committee is to assist the board in fulfilling its responsibilities in The effectiveness of risk management will need to establishing formal and transparent policies, be assured in the following year via the internal guiding principles of a standardised approach in audit structure that is in place in the group and the application of remuneration practices within all King III recommendations will be followed. the business units and functions.

Information technology management The remuneration committee comprises two The board is responsible for information independent non-executive directors who act technology (“IT”) governance. The IT governance independently and have been appointed by the framework is developed by the service division board. The chairman of the committee is of the Sekunjalo Technology Solutions Group Mr S Young who is a board member and who (“Sekunjalo TSG”) in accordance with best attends the annual general meeting of the practices and COBIT. Management at Company. The committee met twice during the divisional level is accountable for operational year under review, with full attendance by governance of IT. members. Attendance of executive directors and management is by invitation. The shared group service division of Sekunjalo TSG has identified the dire need to upgrade the The remuneration committee determines the fees IT server and infrastructure to preserve the to be paid to non-executive directors, but its IT continuity in our major operation, given the high primary focus is on executive remuneration and level of dependence of the business on benefits. Consideration is given to the relative IT systems. With the expansion of the IT division, contribution of each non-executive director and an extensive upgrade on hardware was taken in their participation in the activities of the board and the previous year and Sekunjalo TSG was able to its committees. ensure a robust operation in 2011. The remuneration committee’s responsibilities The business continuity and back-up procedures are to: have been discussed and tabled by senior • Approve the Remuneration and Benefits Policy management and risks have been identified that adopted by the Company; the current status of the IT infrastructure is not • Approve the Reward Philosophy and Strategy sufficient and a new IT solution will be adopted by the Company; implemented by our major operation in 2012. • Determine the remuneration packages of the executive directors of the Company; A proposal has been tabled at the Group’s • Determine the remuneration packages for executive committee to undertake the senior executives of the Company; implementation of the IT solution to ensure • Recommend to the board the fees to be paid business continuity. The solution will be accepted to non-executive directors for their services on the board and its committees;

30 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 31 • Disclose the directors’ remuneration and to • Support the key values of the Sekunjalo ensure it is transparent, accurate and Group’s; and complete; and • Determine executive remuneration. • Approve the executive and senior management incentive policy to be adopted by the The remuneration of executives is determined on Company. a cost to company basis and is subject to an annual review by the remuneration committee. Remuneration committee objectives Provident fund and health care provision form part and strategy of the overall cost to company packages. The strategic objectives of the remuneration committee are to ensure that appropriate Executive directors’ service contracts remuneration and incentive policies are The directors do not have fixed term contracts adopted which: but have permanent employment agreements with • Support the attainment of Sekunjalo Group’s the Company. business strategies; • Attract, retain and motivate key and Non-executive remuneration talented people; The non-executive directors receive fees for • Compete in the market place to be an serving on the board and board committees. employer of choice; The fees for non-executive directors are • Reward individual, team and business recommended by the remuneration committee performance and encourage superior to the board for approval. The board recommends performance; the fees to shareholders for approval at the annual general meeting of the Group.

The 2011 remuneration of the executive directors is set out in the table below:

MI Survé K Abdulla C Ah Sing CF Hendricks Total Executive R’000 R’000 R’000 R’000 R’000 Salary 1 800 1 344 713 472 4 329 Salary adjustment in respect of prior years – 600 – – 600 Bonus – – 140 100 240 Bonus provision in respect of prior years – 900 – – 900 Other benefits – 456 127 128 711 1 800 3 300 980 700 6 780

2010

MI Survé K Abdulla VC Mehana CF Hendricks Total Executive R’000 R’000 R’000 R’000 R’000 Salary 1 800 1 344 400 384 3 928 Bonus – 400 18 90 508 Bonus in respect of prior years – 400 – – 400 Other benefits 19 324 45 104 492 1 819 2 468 463 578 5 328 The remuneration of the non-executives is set out in the table below.

2011

S Young JM Gaomab VC Mehana Total Non-executive R’000 R’000 R’000 R’000 Directors’ fees 80 80 80 240

2010

S Young JM Gaomab VC Mehana Total Non-executive R’000 R’000 R’000 R’000 Directors’ fees 80 80 80 240

30 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 31 corporate governance report continued

Internal policies The investment committee comprises one As a leading JSE listed black empowerment non-executive director, who acts independently, company and through our brands position the and two executive directors appointed by organisation is dominant in a global context the board. The chairman of the committee relating to a variety of issues, technology is Dr MI Survé and the members are changes, globalisation, rapid change, dynamic Professor V Mehana and Mr K Abdulla. The markets and sustainability legislation. committee met quarterly during the year under review, with full attendance by the members. These issues impact the overall business strategy Attendance of the directors, management of the Sekunjalo Group while focusing on: organic and the corporate finance division is growth, acquisitions, geographic expansion, by invitation. new categories, margin improvement and transformation. The Company has a number of The committee is currently in negotiations around policies in place – some of them have been new opportunities which still have to be implemented and others are in the process of concluded. being implemented: • Audit and risk committee constitution Transformation committee • BEE incentive* The purpose of the transformation committee is • Code of ethics to lead transformation within the Group and to • Competition law compliance ensure that there are appropriate policies and • Code of conduct procedures in place to address transformation by • Decision-making framework levelling the playing fields both socially and • Duties of directors economically for a broader participation of all • Executive remuneration South Africans. • Guaranteed pay guidelines* • Remuneration committee constitution The transformation committee comprises one • Insider trading non-executive director, who acts independently, • Long-term incentive* and one executive director appointed by the • Nomination committee constitution board. The chairman of the committee is • Non-executive directors’ fees Professor V Mehana and the executive member is • Performance bonus – short-term incentive Miss C Hendricks. Attendance of the directors • Remuneration policy and management is by invitation. • Reward philosophy and strategy* • Short-term incentive The committee’s duties include: *Still to be implemented • Approving the appointment of the verification agency; social and ethics committee • Providing the scorecard targets for timeous The Group currently has an informal approach to submission to the agency; the activities of this committee. The activities of • Approving the employment equity plan to be this committee have been highlighted throughout submitted to Department of Labour; this report. The process will be formalised in the • Reviewing the equity ownership of the Group; 2012 year through the establishment of a social and and ethics committee. • Reviewing the skills development and employment equity plan of the Group and Investment committee making recommendations. The main purpose of the investment committee is to evaluate opportunities that present Nomination committee themselves to the Group and to advise the board The nomination committee is constituted as on such investment opportunities in a transparent a subcommittee of the board of directors. The procedure and to ensure that sufficient duties and responsibilities of the members of consideration has been afforded to such the committee are in addition to those as opportunities. However, the board is responsible members of the board. The deliberations of the for the final decision on all such investments. committee do not reduce the individual and collective responsibilities of board members in regard to their fiduciary duties and responsibilities, and they continue to exercise due

32 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 33 care and judgement in accordance with their • Ensure that formal succession plans for the statutory obligations. board and chief executive appointments are developed and implemented. The nomination committee comprises one • Evaluate the performance of the chairperson executive director, and two non-executive and of the board as whole. directors who act independently and have been • Report, in the annual report, the list of appointed by the board. The chairman of the directors’ current details, composition of committee is Dr MI Survé and the members board committees, number of meetings held; are Mr S Young and Professor V Mehana. and attendance at meetings. Attendance of the directors and management • Make recommendations for the reappointment is by invitation. of directors with regard to resignations or retirements due to rotation. The role of the committee is to assist the board to ensure, on an annual basis that: The committee chairman reports back to the • The board has the appropriate composition board on activities of the committee. in terms of structure, size, composition and independence for it to execute its ANNUAL FINANCIAL STATEMENTS duties effectively; • Directors are appointed through a formal The directors are required by the Companies Act process; to maintain adequate accounting records and are • Induction and ongoing training and responsible for the preparation of the annual development of directors take place; and financial statements. • Formal succession plans for the board, Statements are based on appropriate accounting chief executive officer and senior management policies, as set out in the notes to the financial appointments are in place. statements and are supported by reasonable and The committee must perform all the functions prudent judgements, as well as estimate support necessary to fulfil its role as stated above, documentation. including the following: The external auditors are responsible for providing • Ensure the establishment of a formal process an independent assessment of internal controls for the appointment of directors including: and reporting, on whether the financial statements –– Identification of suitable members of are fairly presented and whether they conform the board; to IFRS. –– Performance of reference and background checks of candidates prior to nomination; The external auditors offer reasonable, but not and absolute, assurance on the accuracy of financial –– Formalising the appointment of directors statements. Sekunjalo’s management is through an agreement between the responsible for the preparation of the financial Company and the director. statements. • Oversee the development of a formal induction programme for new directors. External auditors consult with the audit committee • Ensure that inexperienced directors are to ensure an efficient and accurate auditing developed through a mentorship programme. process. The audit committee also sets the • Oversee the development and implementation principles for recommending the use of external of continuing professional development auditors for non-auditing services. The external programmes for directors. auditors do not provide significant non-auditing • Ensure that directors receive regular briefings services. on changes in risks, laws and the environment in which the Company operates. The directors believe that the financial statements • Consider the performance of directors and fairly present the financial position of the Group at take steps to remove directors who do not the end of the financial year. They also reflect the make an appropriate contribution. result of the operations and cash flow information • Find and recommend to the board for the year under review and the Group has a replacement for the chief executive when complied with IFRS. that becomes necessary.

32 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 33 sustainability report

The Group has a key strategic objective to create sustainable value for all our stakeholders

CORPORATE CODE OF ETHICS of the Group’s position when reporting to stakeholders. The Group subscribes to the highest levels of professionalism and integrity in conducting its The executive chairman and chief executive officer businesses and dealing with all stakeholders. regularly communicate with major shareholders, All employees are expected to share its institutional investors, analysts and the media. commitment to high moral, ethical and legal standards. The Group encourages shareholders to attend the annual general meeting (AGM), which All directors and employees are aware of the code provides shareholders with an opportunity of ethics that is maintained throughout the Group. to raise concerns and ideas and to participate The Group subscribes to a code of ethical and in discussions at the AGM. The Group publishes moral behaviour that requires total transparency its financial results on SENS and shareholders for all stakeholders. Sekunjalo prides itself on receive a copy of the integrated report. fairness and honesty and is intolerant of theft and dishonesty. The integrated report deals adequately with disclosures relating to financial statements, DEALING IN GROUP SHARES auditors’ responsibility, accounting records, internal controls, risk management, accounting Directors and officers of the Company are not policies, adherence to accounting standards, permitted to trade in the shares of the Company going concern issues, as well as the Group’s during closed periods, which commence at the adherence to established codes of governance. end of the financial half-year and financial year-end and during periods when cautionary The Group acknowledges the role of the announcements are made. The Group company media, especially that of financial journalists, and secretary disseminates written notices to all it endeavours to assist these role players as much directors and senior management throughout as possible. the Group informing them that dealing in Sekunjalo shares during the closed periods may The Group has a key strategic objective to create not be undertaken. sustainable value for all our stakeholders and to integrate sustainable development into strategy, Directors are updated according to any changes management and reporting with the objective of in terms of the JSE Listings Requirements. reducing the negative impact on the environment. The responsibility and accountability for All dealings in Company shares by the directors sustainable development rests with the board and are reported on SENS within 48 hours of the trade chief executive officer and the daily responsibility having been made. is delegated to divisional management. COMMUNICATION Sekunjalo acknowledges its responsibility to all The Group subscribes to a policy of full, accurate employees and the public for compliance with and consistent communication with regard to all environmental standards. It has also established its affairs. At all times, the board seeks to present policies, identified standards and determined a balanced and understandable assessment regulatory requirements. The Group has identified

34 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 35 monitoring and measuring programmes to further The board is firmly committed to the development increase its environmental accountability. of intellectual and human capital. In line with this, the performance assessment of senior managers The Group is committed to environmental includes an assessment of how they have sustainability and renewal, especially when it developed the human capital of the organisation. comes to fishing resources. In this regard, Premier The board focuses on the development of Fishing works closely with the relevant authorities historically disadvantaged individuals in to safeguard the various fish species and pays particular. careful attention to the environmental impact of its operations. ECONOMIC SUSTAINABILITY

The board has affirmed the practice with regard VALUE ADDED STATEMENT to procurement by its subsidiaries from black A measure of the value created by the Group economic empowerment companies. The board is the amount of value added by its diverse has put policies in place to ensure that the entire activities to the cost of raw materials, products Group’s subsidiaries act in an environmentally and services purchased. friendly manner that takes into account the existence of the communities in which the This statement shows the total value created and subsidiary operations are located. how it was distributed.

2011 VALUE ADDED STATEMENT R’000 Cash value generated from revenue 428 977 Less cost of materials and services (305 157) Value added 123 821 Investment revenue 20 966 Wealth created 144 786

Distributed as follows: % Employees 64.9 93 956 Capital providers 1.7 2 507 Debt providers 9.6 13 967 Communities 1.5 2 214 Government 2.4 3 516 Retained for growth 19.8 28 626 Wealth distribution 100.0 144 786

Employee statistics Number of employees at year-end 595

Turnover per employee 721 Value added per employee 208 Wealth created per employee 243

2011 19.8% Value distribution (%) 64.9%

Capital providers 2.4% Debt providers 1.5% Communities Government

9.6% Retained for growth Employees

1.7%

34 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 35 sustainability report continued

HUMAN CAPITAL report and skills development plan. The performance rating of the employee will determine Skills Development the salary increase during the annual salary The Group believes in creating a working review process. environment that will allow its people to develop their abilities, and to benefit from being part of The Human Resources department plays a vital a progressive and dynamic organisation. role in the business philosophy of the Group. It acknowledges external trends that could impact Our employees have benefited through extensive its staff and practices. skills development, wellness and employment equity programmes and the Group has fully Headcount complied with the Employment Equity Act. The headcount in the Group, as at the end of August 2011, reflects 595 permanent employees. The aim during the year under review was to build During the year temporary employment was internal capacity through the adoption of relevant created for approximately 2 000 people. recruitment, upliftment, development, job involvement, training and promotion programmes Sub- Sub- for employees, with and beyond the Group’s African Coloured Indian White total total Total employment equity and workplace skills plan. M F M F M F M F M F 171 65 169 87 11 6 54 32 405 190 595 Close attention was paid by management and labour representatives to meeting the challenges of accelerated employee growth and development, Human Capital Development as set out in the Department of Labour’s National The Group is committed to recruiting employees Skills Development strategy. from the local communities in which it operates. The employees are the foundation of the In terms of the Skills Development Act, incentives Group’s success. The Group has implemented are offered to employers who systematically train a bursary programme that encourages growth and and develop their personnel. further education for all staff through various learnership initiatives and development The Group’s employees play a vital and exciting programmes. The employees in the Group are role in achieving its vision and Sekunjalo ensures actively involved with the University of the that it nurtures, understands and values its Western Cape, the University of Cape Town employees with the same care and coherence that (“UCT”), the University of Cape Town’s Graduate it fosters for its stakeholders. School of Business, Stellenbosch University and various other tertiary institutions. Throughout the organisation, Sekunjalo encourages the pride that its teams feel in The Group complies with the Skills Development working for this business and is proud and Act whereby the relevant reports are submitted grateful for the passion they put into serving the timeously to the Sector Education and Training Group’s stakeholders. Authority (SETA). An average of R1.987m was spent on training during the period under review. Sekunjalo has played an active role in the advancement of previously disadvantaged Human Rights persons, a fact that is reflected in the Group The Group adheres to all labour legislation in workforce. The majority of its employees are from South Africa, including the Constitution, Labour historically disadvantaged communities. Relations, Employment Equity, Occupational Health and Safety, Skills Development and Levies The Group encourages individuals wishing to and the Basic Conditions of Employment Act. study further and has an active policy in place. The Group rule is that: Performance review • employees are educated on human rights; The managers in the Group conduct formal • no child labour is permitted; reviews of their direct reports as set out in their • no forced and compulsory labour is permitted; key performance areas and rate such employees and accordingly. Targets are set for the ensuing • zero tolerance towards fraud, corruption and period. This review forms part of the training related activities.

36 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 37 There were no human rights violations for the reduce its stakeholders’ vulnerability to period under review. environmental, health and safety hazards.

Industrial Relations Strategies and plans are in place to manage and The Group has formal policies and procedures in minimise the potential impact of HIV/Aids and the place in line with the Labour Relations Act 66 consequential loss of skills and productivity. of 1995. Sekunjalo has implemented an appropriate and comprehensive HIV/Aids strategy throughout its Subsidiary companies in the Group engage with subsidiaries. various unions: Food & Allied Workers Union, the Trawler and Line Fishermen’s Union and the This strategy includes, where possible and Commercial Services and Allied Workers Union. appropriate, the provision of antiretroviral The Group has an excellent relationship with the treatment. The Group further emphasises the unions with whom it is involved and this was need for education and the inclusion of working reaffirmed with the annual wage negotiations. representatives in terms of its HIV/Aids policy.

Employment Equity Employee benefits The Group has been successful in providing equal Employees are extremely important stakeholders employment opportunities and in promoting in the success of the Group. In order to foster the internal candidates. The Group complies with the growth, product and well-being of the employees Employment Equity Act and proactively strives to of the Group, the following have been put in place: develop its people. The Group subscribes to equal opportunity and embraces diversity in all of its • Provident fund: To assist employees in operations. It supports women in management investing for their future retirement. This and inspires and aims to retain female managers. investment is made monthly as part of the benefit package offered to employees in The Group further subscribes to affirmative action all subsidiaries. measures to address any employment • Group risk insurance (linked to the provident disadvantages experienced by historically fund): This insurance provides a lump sum disadvantaged groups and individuals. The payment in the event of the death of an training and development of employees within employee in order to provide financial relief for subsidiary companies is an important strategic the family of the deceased employee. In objective of the Group. As such, the Skills addition, the risk insurance pays a reduced Development Act has provided a useful framework monthly salary to an employee to retirement and guide for the further education and training of age in the event of the employee becoming the Group’s employees. disabled and being unable to earn a living. • Employment equity (EE): Each group company Direct employees by employment category and complies with the labour laws requiring an gender: employment equity committee to be Category Male Female Total established and to meet regularly to consider Board 5 2 7 any obstacles in their company’s policies, Executive 11 6 17 procedures or conventions that present Senior management 11 11 22 obstacles to the hiring, development or Middle management 6 5 11 promotion of black people in the company. Skilled upper 92 46 138 In addition, the EE committees maintain Semi-skilled/ a register of the classification of each apprentices/trainees 26 37 63 employee in terms of race and occupational Labour/unskilled 255 82 337 category, which is used by the company in Total 406 189 595 planning for improved employment equity, and submit this plan to the Department of Labour, Health and Safety as required. Sekunjalo rigorously applies health and safety • Skills development: Each group company is regulations in its quest for an accident-free work registered with the South African Revenue environment. The Group has actively created Service for the payment of their skills greater awareness of risk exposure in these areas, development levy. They budget for and and controls have been increased to proactively execute staff training plans in order to ensure that the correct level of skills are available

36 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 37 sustainability report continued

within the company to deliver on the goods –– Meaningful share ownership schemes for and services required by their current and key management are in place in a number future customers. This skills development of group subsidiaries and associate focus assists in the development of companies. employees, thereby enhancing their –– An independent share option scheme for abilities, sense of self-worth and value to all employees exercisable in 2014 was put the company. in place in August 2011 for all employees in • Disciplinary code: All group subsidiaries the Group. operate within the Group’s HR policies and procedures aimed at ensuring respect PROCUREMENT and fairness is displayed by management in The objective of BBBEE procurement is to all dealings with employees, while in turn assist in the promotion of black businesses, clearly stating the expectations that the with a specific focus on small, medium and company has of employees in terms of micro enterprises (SMMEs). The Group strives to employee behaviour and contribution to ensure that these businesses have access to the business of the company in return for its extensive supply chain and that procurement their remuneration. is consistent with governmental strategies • Employee retention: Intellectual property on BBBEE. resides substantially in the knowledge of the employees and not in patents or physical BLACK ECONOMIC EMPOWERMENT (BEE) technology. As such, the attraction, development and retention of management Sekunjalo has been rated, as per the Department and key employees are of paramount of Trade and Industry’s Codes of Good Practice importance and a key strategic objective. gazetted in February 2007, as a Level 1 In order to promote the attraction and Contributor. In obtaining the BEE status, retention of such employees the following Qualifying Small Enterprise Principles of strategies have been employed: Statement 000 of Code 000 Paragraph 5.2 were –– The execution of succession plans for key used on the information provided to PKF BEE persons in wholly owned subsidiaries. Solutions, an independent option-based verification agency.

2011 2010 Element 2011 Element 2010 Scorecard rating weighting Score weighting Score Direct Ownership 25 25.40 25 25.62 Empowerment Management 25 27.00 25 26.78 HR Department Employment equity 25 27.00 25 27.00 Skills development 25 Excluded 25 Excluded Indirect Preferential procurement 25 Excluded 25 Excluded Empowerment Enterprise development 25 25.00 25 25.00 Socio-economic development 25 Excluded 25 Excluded Total score 104.40 104.40

Value-adding supplier Yes Yes More than 50% black owned Yes 74.21% Yes More than 30% black woman owned No 2.02% No

Broad-based BEE status Level 1 contributor Level 1 contributor Broad-based BEE procurement recognition level 135.00% 168.75%

38 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 39 Sekunjalo was also ranked as South Africa’s 2nd It is for this reason we need to give back to the Top Empowerment Company 2011 and ranked 1st community in which Sekunjalo operates. The in 2010 by the authoritative Financial Mail/ Group is committed to investing in the upliftment Empowerdex Survey. The results were compiled of society and in playing a pivotal role in improving after collecting data from companies listed on the the quality of life among the disadvantaged main board of the JSE. The survey was aimed at communities through its corporate citizenship providing the public with an overview of the initiatives. empowerment status of JSE-listed companies in order to raise awareness of BBBEE. The Group also continually strives to meet and exceed the benchmarks set by the BBBEE REGULATORY INSTITUTIONS Codes of Good Practice, and in light of this its initiatives include corporate social investment The Group complies with, inter alia, the following in different areas and fields. These include regulatory institutions: skills development, enterprise development, • Department of Health procurement and ensuring that employment equity • Medicines Control Council structures and programmes are in place within • South African Pharmacy Council the Group. • Marine and Coastal Management • National Regulator for Compulsory Sekunjalo has an active corporate social Specifications investment (CSI) programme managed by the • South African Bureau of Standards Sekunjalo Development Foundation. We have • South African Maritime Safety Authority selected focus areas that have an impact on • European Union individual and societal development and play • Department of Agriculture, Forestry and a significant role in nurturing young people who Fisheries represent the future. This strategy is shaped by an • South African Reserve Bank (SARB) increasing need to ensure effective stakeholder • Johannesburg Securities Exchange (JSE) relations and the socio-economic needs of the communities in which the company conducts its Accreditation business. Certain subsidiaries are also engaged • Hazard Analysis and Critical Control Points in CSI projects. The major focus areas of our (HACCP) CSI programme are: • Food Drug Administration (USA) • Arts and culture • Good Manufacturing Practice • Education • South African Bureau of Standards (SABS) • Sports development • National Regulator for Compulsory • Enterprise development Specifications (NRCS) • Special projects • Social development SOCIAL SUSTAINABILITY

The Sekunjalo Group subscribes to a sustainable ARTS AND CULTURE approach when it comes to doing business. The Sekunjalo Edujazz Concert The concert is an accolade to South Africa’s For Sekunjalo, corporate citizenship goes beyond musical calendar. The Sekunjalo Edujazz Concert legislative compliance. It recognises the rights celebrated its 11th anniversary this year which and responsibilities of businesses within a broader brought together a culmination of school jazz societal context and reinforces the mission of bands mentored under some of the Western Sekunjalo to implement a social contract between Cape’s most talented educators. business, government and civil society. The Sekunjalo Edujazz Concert has two primary Sekunjalo is well aware of the critical role that objectives. The most important objective is to business has to play in the upliftment and raise funds for educational bursaries for development of the previously disadvantaged disadvantaged students at disadvantaged primary majority. A task of this magnitude will, for and high schools in the Western Cape. The other a substantial period of time, be beyond the scope major objective is to promote the rich culture of of state resources alone. jazz music in Cape Town, by staging a well-known group or artist alongside up-and-coming young

38 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 39 sustainability report continued

artists from either primary or high schools. It also Delft Big Band – Youth Music supports and promotes the development of Development Programme young black musicians in our communities by This Delft Big Band, under the directorship of providing them with a platform to showcase their Ian Smith, started in August 2008 as an talents to the public. This year the schools initiative by the Department of Social Development featured were Rondebosch East Primary and NGO, Cape Outdoor Adventure Service Orchestra, Edujazz Collaboration and Alexander and Training. Sinton Jazz Band. The bassist from the Sekunjalo Edujazz Concert recently won a bass scholarship This development programme is targeted at to the prestigious Berklee College of Music in vulnerable youth from high schools in Leiden, the United States. Rosendal and Voorbrug in the Western Cape. Through this programme, which has early The concert raises funds for educational intervention as a core element, music is used as bursaries, unifies disadvantaged youth and a vehicle to equip the youth with valuable life provides a platform for inspiration and hope. skills. Currently more than 100 learners from these areas participate in the programme of which more This event has become synonymous with advanced musicians make up the Delft Big Band. Sekunjalo, as a BEE corporate concerned with the When the programme started, none of the promotion of both education and the arts, students had either picked up or played a musical specifically amongst previously disadvantaged instrument. communities. The beneficiary list has grown from 15 to 75 schools since inception. The money The band has already performed to accolades raised at the concert during the past financial at a number of high-profile events, including the year benefited more than 75 primary and high Sekunjalo Edujazz Concert, The Cape Town Big schools in the Western Cape in the form of Band Festival, and The Cape Town International bursaries, as well as jazz workshops held during Jazz Festival where, they received standing the year. Audiences can also be proud in the ovations. The vocalist, Adelia Douw, recently won knowledge that they have played a role in a scholarship to the prestigious Berklee College of contributing to a better education for our Music in the United States. disadvantaged children. Ian Smith and seven members of the Delft Big Cape Town International Band, aged between 13 and 16, recently Jazz Festival performed at the 11th World’s Children’s Prize for The Cape Town International Jazz Festival, known the Rights of the Child in Sweden. Sweden’s as Africa’s grandest gathering, is the fourth Queen Silvia presides over the awards, taking largest festival of its kind globally, outshining place at the Gripsholm Castle. The young group events such as Switzerland’s Montreaux Festival delighted the audiences at all their performances, and the North Sea Jazz Festival in Holland. making many international fans and friends. The 12th annual festival attracted in excess of Organisers felt the South African group was the 35 000 visitors, and more than 40 international best ensemble from the country in 10 years. and local artists participated in the event held over two days on five stages. Support for artists In line with our support for the arts, a decision Preceding the festival, espAfrika held a series was taken to actively seek out the paintings of of workshops targeted at previously lesser known South African artists to decorate our disadvantaged individuals which included offices. We did this to provide them with school workshops, arts journalism, music a platform to expose their artwork, while also business, master classes, gigs for kids showing our support for them. These initiatives and the pre-festival free community concert. make it possible for these and other artists to espAfrika also has mentoring programmes achieve the recognition they deserve during their and internships across all departments, lifetime, in the country of their birth. including Media and Marketing, Project Management, Talent, Production, Logistics The group also inspired and assisted a painter and Public Relations. with his artwork during the 2010 FIFA World Cup.

40 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 41 EDUCATION qualified teachers, especially in township and The Dr Iqbal Survé Bursary Trust rural schools, is often blamed for the poor (Education) quality of education. However, there are some This bursary, initiated by the executive chairman schools, even in the most impoverished areas, of Sekunjalo, gives the opportunity for further which produce superb results. The success of tuition at universities, technikons and specialised these schools, in spite of their enormous academies to many of South Africa’s young men challenges, can be attributed to remarkable and women who aspire to become qualified school leadership and, in particular, skilled and professionals within various sectors. The bursary dedicated teachers. is directed at the poorest students who, without the support of the bursary, would lack the funds The Stella Clark Teachers’ Award acknowledges and resources to fulfil their dreams. The bursary the work of exceptionally talented teachers – the fulfils the country’s dire need for more unsung heroes who go beyond the call of duty professionals and to improve the accessibility of to motivate and inspire their learners to perform better education for a broader base of South well and rise above their poverty-stricken Africans. The bursary includes the promotion of circumstances. high school and tertiary education in the country. Sekunjalo signed a three-year funding contract in RDP Education Trust support of this excellent initiative. Sekunjalo linked with the RDP Education Trust which was created to break the cycle of poverty in The Award was established in honour of Stella impoverished rural areas, giving youth access to Clark, an extraordinary UCT lecturer from primary and secondary educational institutions. the Centre of Higher Education Development’s To date over 3 000 young people have benefited (CHED) Academic Development Programme. from the Trust and preference is given to those CHED invites students to nominate high studying in the fields that underpin rural school teachers, who they believe helped development objectives, e.g. science, make it possible for them to pursue their engineering, community development, information dream of accessing tertiary education and, in technology, health, tourism as well as urban and particular, UCT. regional planning. The Trust also offers support to principals, teachers and community individuals The variety and large number of exceptional who show initiative and passion for the rural child. applications from students tell inspiring stories about remarkably dedicated teachers, some with Premier Fishing Bursary Trust national reputations and many, active beyond the This bursary trust assists employees to further boundaries of their classrooms. educate their dependants wanting to study at a tertiary institution. The bursary also includes Where Rainbows Meet – Training & dependants in Grades 11 and 12 wanting to Development Foundation qualify for future higher education by assisting Selwyn Early Childhood Development (ECD) them with additional lessons. To date the bursary Programme trust assisted 15 dependants. Where Rainbows Meet – Training & Development Foundation is based in the community of Premier Fishing Learnership Vrygrond, the oldest informal settlement in the Programme Western Cape. The foundation is based within The learnership programme covers all staff in the the community, providing services for that advancement of skills and training in society and community and is managed and facilitated by the contribution to the socio-economic conditions members from the same community and of society. To date the learnership programme has surrounding areas. assisted 10 staff members.

The programme started in 2010 with four children Stella Clark Teachers Award and now hosts over 50 children. The need arose The ongoing crisis in basic education has a huge as the children were left unsupervised and alone impact on South Africa’s ability to train the next on the streets during the day as their parents are generation of scientists, engineers, technicians involved in alcohol and drug abuse. A safe and other professionals. The shortage of suitably

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supervised environment has been created for SPORTS DEVELOPMENT these young children during the day. The Saldanha Bay Rugby Club children are supervised for approximately one The Saldanha Bay Rugby club, situated in the year, thus making space for new children to heart of the west coast, is open to all members attend the programme. During this period, the of the community. The club has a strong focus on staff engage and try to secure sponsorship sport development for the youth of the for the children to be placed either into a local community. Sekunjalo assisted with sponsorship crèche or school. of their gymnasium in their club house as this will allow the players to condition themselves to be Sekunjalo employees have become active competitive in the sport of rugby. participants in the quest to give back to the communities within which the company operates ENTERPRISE DEVELOPMENT and became involved in this community project The Business Place, eKapa with a hands-on approach. Ongoing staff support The Business Place (TBP), eKapa, is a joint took place during the year under review and, initiative between the City of Cape Town, the together with the contribution from the company, Provincial Government of the Western Cape, they were able to assist in providing a formal a bank and Sekunjalo. TBP eKapa and is one of venture play area and to ensure that some several TBPs in Southern Africa. of the basic day-to-day needs of the children are catered for. TBP eKapa, situated in central Cape Town, is a network of services, networking organisations Youth programme and community-based organisations (CBOs) Students from the community were assisted with clustered under one roof. TBP eKapa provides the payment of their school fees, school clothing a range of relevant services to aspirant and and school stationery in order to keep them in existing SMMEs and creates an inspirational school for the year. Some of these students have enabling environment that stimulates creativity, gone back to school with the financial assistance innovation and opportunity in order to unleash from the Company. individual potential. TBP eKapa has a strong focus on the youth. The World Children’s Prize for the Rights of the Child The City of Cape Town recently awarded TBP Sekunjalo supports The World Children’s Prize for eKapa a three-year agreement to develop an the Rights of the Child (WCPRC), based on the entrepreneurial ecosystem for the Mother City. United Nations Convention on Children’s Rights. This ecosystem supports the City’s vision of It is the world’s largest education activity aimed developing entrepreneurship by fostering and at building a culture of human and child rights, creating an enabling environment for enhanced democracy, environmental stewardship and global collaboration among both public and private friendships. The WCPRC strengthens the voices sector stakeholders operating within the of children and young people and promotes their entrepreneurship arena. “humanitarian growth” into global citizens and helps them to demand respect for the right of National Business Initiative (NBI) the child. National Business Initiative works with companies to grow the economy of our country, More than 27 million children in 57 450 schools society and a healthy environment in South Africa. in 102 countries are the informal owners of the NBI also acts as a catalyst of the private and WCPRC. Many of the children learn, through public sectors to contribute to political and the WCPRC Programme, for the first time that economic stability and enhancing our country’s they have rights and are empowered to demand competitiveness as a key to sustainability and that these rights are respected whilst also development. inspiring them to regain faith in a better future. It also provides children with the platform to voice equip their concerns. The WCPRC is open to all schools Sekunjalo contributes to the Education Quality and organisations around the world. Improvement Partnerships Programme (EQUIP) which is implemented in 86 schools in the Western Cape, Gauteng, Mpumalanga, the

42 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 43 Northern Cape, Limpopo and the North West. SOCIAL DEVELOPMENT Since inception of the programme, 500 schools Sekunjalo/Health System Technologies in eight of the nine provinces, benefiting more annual Golf Day than 500 000 learners, 15 000 teachers and This event was launched by HST in 2004, support staff, 4 000 principals, deputy and to date has raised more than R500 000. principals and heads of departments and Public hospitals in the Western Cape, such as 4 500 school governing body members, were Groote Schuur (paediatric ward), GF Jooste, affected by it. Brooklyn Chest Hospital, Mowbray Maternity, Somerset Hospital, Victoria Hospital, The programme assists schools in taking DP Marais SANTA Hospital and West Fleur responsibility for their own development towards Hospital have all been recipients of the generous self-reliance and the delivery of quality teaching proceeds raised at this Golf Day, which is now and learning. It also supports government in a firmly established annual event. the implementation of its education quality improvement programmes and policies. Victoria Hospital utilised these funds to build and sustain a palliative care unit. Palliative care Inyathelo concentrates on the improvement of quality of life Sekunjalo supports Inyathelo – The South for those unfortunate people with debilitation or African Institute for Advancement, which terminal illnesses. With more pressing priorities promotes philanthropy and a culture of social in the public healthcare system, patients are investment, voluntarism and self-reliance. They typically left with little or no palliative care. The build a culture of “giving” in a strong and stable DP Marais SANTA Hospital benefited from last society and democracy in South Africa. Their work year’s annual golf day. The hospital is one of includes: building sustainable organisations and the few facilities that cater for TB patients in the institutions; creating and sharing new Western Cape. advancement knowledge and practice; promoting a culture of social investment, voluntarism and The proceeds of this year’s golf day went to self-reliance; developing valued and trusting Westfleur Hospital in Atlantis. partnerships. Direct support for NGOs and Funding for Business community groupings We have assisted with start-up costs to various The Group acknowledges its responsibility to the female black empowerment companies in social upliftment of the communities within which South Africa, in varied industries. Ongoing it operates. Through the continuation and financial assistance and infrastructure are expansion of its social responsibility programmes, provided on a monthly basis to assist with the Sekunjalo provides donations or other support to operational costs, including mentoring and various individuals, NGOs, community projects business skills. and education causes. The Group has committed itself to contributing to the alleviation of hunger, SPECIAL PROJECTS poverty, illiteracy, unemployment, crime and all Greenland Learning Journey on those ills which negatively affect the moral fibre of Climate Change South African society. Sekunjalo supports the Greenland Learning Journey on Climate Change – “How to stop the ice Other melting”. The Tällberg Foundation, based in Sekunjalo has also made a significant number of Sweden, and the Active Philanthropy, based in ad hoc donations to various organisations and Germany, organised the intensive journey on causes. We believe that these groups are doing how to stop the ice melting in Greenland. very necessary work in their respective They not only study climate change in action but communities and we support them gladly. also focus with clarity and passion on what needs to be done. The Tällberg Foundation helps participants think through complex problems, creating time for reflection and discussions with peers to identify and commit to actions within their personal field.

42 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 43 sustainability report continued

RESPONSIBLE INVESTMENTS Key challenges • Declining biomass is a concern, not only to MARINE Premier Fishing, but to the wider industry. Premier Fishing SA (Pty) Ltd (“Premier Poaching is a major factor that influences the Fishing”) sustainability of the resource. To this end, “For all projects under our control, we make every the government is looking at ways on how to possible effort to preserve and conserve the best manage the resource and ensure that surrounding environment ensuring a balanced and communities and previously disadvantaged sustainable solution for future marine and individuals benefit from future legislation. aquaculture production.” • Maintaining and increasing their commercial fishing rights remains a challenge. Sustainable development is the lens through • Attracting and retaining skilled and which Premier Fishing undertakes its business. experienced human capital. While applying government policies and the strict process of allocating quotas into the decision- Strategies making process for each fishery, Premier Fishing Every business seeks to operate sustainably and ensures that the biological and socio-economic Premier Fishing ensures that they fulfil their short consequences of all proposed management and long-term objectives. measures are considered. Premier Fishing’s strategy is to ensure the survival Premier Fishing believes that there is of their business and to ensure that the following a responsibility for all aquaculturists to adhere to matters are managed efficiently: their own stringent internal operational guidelines • The natural resources on which they are that are designed to achieve long-term dependent for the survival of their business sustainability of their operation while at the same • Proper management of marine resources by time protecting their surrounding environment. various stakeholders • Supporting government departments Relationships are important in all aspects of the responsible for fisheries business, but most significantly with their consumers. The variety of cultures, customs and laws necessitate that they engage all clients with a view to understanding this diversity, yet, at the same time, fostering and growing their business model and product range in order to meet specific and individual needs and trends.

They engage civil and governmental/regulatory issues through partnering and participation in programmes in order to build margins in every aspect of their business and society to ensure that a reserve is available for future generations.

Premier Fishing values the input from all sectors, as these may hold the key to continuing growth in their sustainable practices and policies.

44 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 45 Stakeholder management Every business has a responsibility towards its stakeholders, and Premier Fishing has various procedures in place with regard to stakeholder management. These are summarised as follows:

Stakeholder Relationship Expectation Expectation managed Shareholders Owners of business • Integrity • Sound corporate • Shareholder wealth governance rules creation implemented in their • Ethical business practices business Customers Consumers of • Products sold are • Ensure inventory products legitimate and traceable availability • Quality products that meet • Ensure that all their recognised industry products have legitimate standards paperwork from relevant • Reliable long-term supply authorities in place of products • Ensure that they pass all the necessary standards such as HACCP, SABS, FDA and EU standard tests Suppliers Procurement of • Ethical business • Ensure they only do goods and services, relationships business with reputable such as raw • Commitment to BBBEE businesses materials, for their policies • Ensure that they support operations and other • Prompt payment the policy on BBBEE business units, etc • Paying suppliers timeously Regulatory Promulgate and • Compliance with laws and • Continuous training of authorities such monitor regulatory regulations of authorities management and staff as SARB, SAMSA, framework responsible for compliance MCM and NCRS with various regulations by the respective authorities • Internal control procedure checklist to ensure compliance with respective laws and regulations of authorities • Immediate corrective action noted in the event of findings raised by authorities Trade unions Employee • Engagement of the parties • Communicating to representation • Addressing of grievances employees via employee forums • Engaging with unions via recognised industry bodies

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Environmental report Status of the South African small Sustainable fisheries pelagic fishery It is estimated that three-quarters of the world’s The OMP is used to provide TAC recom­men­d­ fisheries are overexploited. Each year inefficient, ations for the small pelagic fishery which comprise destructive and/or illegal fishing practices destroy formulae that calculate these amounts from millions of tonnes of fish and marine life as resource monitoring data. unwanted by-catch. The OMP-08 formulae have been selected with Combined with reforms to socio-economic the objective of maximising the average directed policies and initiatives, Premier Fishing’s unique sardine and anchovy catches in the medium term, approach to business is a key instrument in subject to constraints on the extent to which TACs developing environmentally sustainable fisheries can vary from year to year in order to enhance that also support economic prosperity in the industrial stability. industry and fishing communities.

This report summarises the independent research and conclusions regarding the status of species that Premier Fishing is involved in harvesting.

Year Anchovy recruitment Sardine recruitment Biomass Numbers Biomass Numbers (tonnes) CV (x109) (tonnes) CV (x109) 2008 1 491 846.6 0.202 563.16 24 461.4 0.325 3.85 2009 1 317 058.9 0.188 363.39 63 468.4 0.679 9.21 2010 1 687 118.3 0.265 383.33 499 986.0 0.458 35.57 2011 1 281 260.2 0.283 104.17 53 680.9 0.475 5.47

Status of the west and south coast rock As a result, many of the assumptions underlying lobster resources the OMP are being debated by scientists involved West coast rock lobster in the management of the resource. The TAC for The west coast rock lobster resource is managed the 2011/12 fishing season will be determined by by means of a total allowable catch (TAC)-setting a new OMP formula still under development. formula, or operational management procedure (OMP), which is based on information for five One of the objectives underlying the previous so-called ‘super areas’. OMP was to try to achieve resource rebuilding. The reason for rebuilding the biomass of the Key indicators on the health of the stock in each resource is the presently low level of the biomass of these super areas are the commercial catch per relative to its pristine level. The scientific view is unit effort (CPUE), separately for hoop net and that this exposes the fishery to an ongoing risk of trap fishing, the Fisheries Independent Monitoring recruitment failure, and it also compromises the Survey (FIMS) index, and the somatic productivity that the resource can deliver. growth rates. Estimates of trends in the resource over the last The super-area information is combined into few years indicate that the desired degree of resource-wide indices in order to calculate rebuilding has not been achieved for the resource. the global TAC. This global TAC has to be The available stock assessments all suggest that divided up amongst the different sectors of the since 1996, contrary to the resource rebuilding fishery (near shore, offshore, interim relief, intentions of the various OMPs implemented since recreational), each of which has to be divided 1996, the resource abundance has declined. This and allocated by super area. OMPs are revised suggests that the view taken on the future every four years, and at present the OMP is in productivity of the resource when the prevailing the process of being revised. OMP formula was developed was over-optimistic.

46 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 47 Stock assessments carried out with this new for poaching just described, and (iii) less data reflect a less optimistic position on this optimistic moult increment scenarios, a TAC resource. A number of additional key features are reduction seems more likely than not. However, also likely to introduce less optimism into the this depends on a further factor, the scale and management of the resource. These are: duration of any resource biomass rebuilding 1. Steps by the authorities to adjust TACs to programme that is agreed to by scientists. allow for recent trends in the level of illegal unreported catches to be allowed for Notwithstanding the sober comments contained in 2. Removal of some of the scenarios which the preceding paragraphs, there are some positive allowed for future improvements in somatic signs coming from the resource. growth rates 3. Revised interpretation of CPUE data, Further factors in the determination of the OMP particularly in Area 8 are constraints on inter-annual changes in the global TAC. It is not clear at this stage whether it Regarding point 1 above, new methods are being is biologically feasible to guarantee a maximum applied to try to estimate whether levels of change in the TAC such as a 10% change poaching have recently increased in the fishery. constraint. Also unclear at this stage is the extent There are some indications that these poaching to which proposed ringfencing of allocations to levels have increased, and whatever increase is certain sectors will occur over the medium term, assumed to have occurred will ultimately come off as well as the feasibility of a proposed 10% the TAC in years to come. There is a risk that inter-annual change constraint to the offshore management could become reactive to the allocation. poaching situation and there is thus a need for proactive steps to be taken to reduce the scale South coast rock lobster: Status, of poaching. TAC and prospects During 2010, the models used by Marine Coastal The industry is considering steps such as effort Management (MCM) and its consultants in the controls to limit the exposure of the resource to management of the resource were updated. the excess fishing capacity that exists for the According to the pre-updated model the resource exploitation of west coast rock lobster. is assessed to lie between 34% and 57%. After implementation of the corrections referred to With regard to point 2 above, for many years the above, it appears that the resource could lie at west coast rock lobster resource has been a depletion level of as low as 22%. managed on the assumption that moult increments for the fishery, which used to be at A positive outcome of this revision was, however, a level of 4 – 6 mm per annum for a typical size an increase in the estimates of resource biomass, lobster caught, and are now far below this, would to a level of about 2 500 Mt tail weight. The eventually increase to historically higher levels. 2010/11 TAC of 328 Mt is 13% of the available This scenario has typically not transpired and, biomass which is a tolerable level. as a result, scientists are of the view that this possibility should receive less weight in the future. As a result of the updates and modifications referred to above, it was agreed that the Point 3 above includes the revision of how the OMP formula used for TAC determination would east of Cape Hangklip shift in the resource has be retuned and applied in this format for the been modelled, as well as the inclusion of 2010/11 and 2011/12 TACs. A new OMP will be fine-scale spatial data into the scientific developed for management of the resource standardisation of the CPUE. The net effect is that during 2012, for use in the determination of the overall trend in CPUE for Area 8 is less the 2012/13 TAC. optimistic than before. While superficially one might expect the results Exactly how the factors described above will from corrected models would give rise to at least conspire and combine to influence the TAC for a status quo TAC for 2010/11 of 345 Mt (tail 2011/12 is difficult to tell. Given the combination weight). However, the present OMP formula does of (i) new stock models which seem to suggest not allow for more than a 5% reduction in the TAC a less productive resource, (ii) the new provisions from one year to the next.

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Environmental policy • Significant investments in reliable technology Premier Fishing is supportive of regulatory policies allow them to reduce mortality for live lobster in place to manage natural resources. kept for the export market, therefore assisting in obtaining the best market price. The responsible utilisation and management of • They ensure that their factories comply with marine resources is the cornerstone on which the various acceptable approved standards, sustainable development will lead to the alleviation i.e. HACCP. of poverty and correction of historic economic imbalances. Premier Fishing therefore ensures Social sustainability that every connected business unit implements Premier Fishing believes in assisting small and applies recognised environmental standards businesses to grow and achieve their full to their business and services. In their potential by: relationships with customers and suppliers they • providing small enterprises the opportunity of drive environmental awareness as part of their engaging with their factory, administration, daily function. finance and operational divisions for skills development, training and support; A futurist world view is applied to the utilisation • assisting with financing for start-up of and application of resources to ensure that businesses; whatever is done today, will not lead to the future • as a black economic empowerment company, destruction of the resources upon which they are ensuring the availability of services by dependent. Premier Fishing adheres to this assisting with the development and growth of world view. their black partners; and • Premier Fishing is committed to the best local • imparting skills and resources with small and international fishing practices. business partners to improve business • They aim to implement innovative procedures management capacity. within the value chain to increase efficiency in • Skills development is key to sustainability. line with environmental best practice, thereby • Staff are trained to ensure that they reducing their carbon footprint. understand the value chain of the business • The environmental policy is being implemented and how important sustainability is within each to all stakeholders in the organisation level that they operate in. via training programmes and awareness campaigns. TECHNOLOGY • They recognise the rights of all stakeholders SEKUNJALO TECHNOLOGY SOLUTIONS and have a responsibility to ensure that they GROUP (PTY) LTD (“Sekunjalo TSG”) build relationships of value and trust through As a niche market enterprise, Sekunjalo TSG partnering with communities and all provides effective Information Communication stakeholders. Technology (ICT) business solutions and services • They understand that what and how they that enhance business performance in produce affects the environment and they Government and to corporate customers. The strive to ensure this in all respects – from group is comprised of businesses that are leaders community building through to improving the in their respective niche markets, have solid client quality of the life of all those with whom bases and are achieving high levels of sustained they interact. organic growth.

Economic sustainability They have international partnerships with leading • Premier Fishing has perfected its operations technology suppliers, including Intersystems Inc, and their expertly applied skills ensure that Siemens Medical and JAC (UK), with whom they they deliver the highest standard of quality to have partnered locally to implement a health their customers. information system in over 34 hospitals and • They pride themselves on their ability to 270 clinics countrywide. minimise diseases affecting abalone on their abalone farm.

48 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 49 Strategic planning and monitoring Risk management Sekunjalo TSG and its subsidiaries manage their Risk management is integrated into each of the businesses strategically by following a process group businesses. Each Sekunjalo Group which includes an annual review of past company maintains a risk register, which is performance, products/services, markets as compiled by the executive management, and well as the internal and external environment status and planned action execution is reviewed followed by the setting of strategies and action monthly. Executive management is responsible for plans, aimed at both growth and sustainability in the identification, classification and management current markets. of all operational risks.

Following the annual strategic planning session, Significant strategic and going-concern risks can quarterly reviews of strategy achievement and be identified at all levels in a group company. changes in the external environment may However, the responsibility for directing the positively or negatively affect each company. actions necessary to manage these risks is the Strategies and actions are adjusted in line responsibility of the board of directors of the with ensuring the growth and sustainability of company in which the risk arises. Sekunjalo TSG each entity. has representation on all of the group subsidiary and associate company boards and shares in this The board of each Sekunjalo Group company has responsibility. Strategic and going-concern risks approved a formal delegated authority schedule are reviewed at the quarterly board meetings and which informs executive management of the executive directors are charged with the execution necessary levels of approval for all key business of approved risk management actions. transactions. In this way the respective boards ensure that there is a senior manager or the board Stakeholder management itself reviewing each key business transaction to A key element of the strategic planning process in guarantee that the terms and conditions are in line each Sekunjalo TSG group company is the with the company strategy, are lawful, will documenting of the values and culture of the contribute to the company’s sustainability and will business. Stakeholder-oriented values include not be harmful to any stakeholders and/or the the following: environment. • Honesty and integrity • Passion for customers In this manner, Sekunjalo TSG can monitor its • Quality in all that we do financial performance against strategies set for • Development of and respect for employees the year and evaluate this against the key • Accountability and commitment performance areas of key personnel. Through • Protecting/conserving the environment. this process the sustainability of their operations are ensured. From a communication and stakeholder management perspective, the chief executive or Key challenges managing director of each Sekunjalo TSG group At present, strategic focus is aimed at overcoming company, is the point of contact for stakeholder the following potential challenges in the Sekunjalo communication to and from the company. TSG group: • Positioning group companies to win new and For certain stakeholders, the chief executive or significant contracts in 2012/13 in order to managing director may formally delegate this sustain steady growth at current levels of responsibility to a particular manager or revenue and profits at a group level prescribed officer in order to improve the level of • Increasing the amount of business in the communication and/or access to the company. private sector, customers to equal that of government customers in order to spread the Should an event of significance impact risks arising from slow and erratic payments a stakeholder or group of stakeholders, the by government customers company, and possibly representatives of • Balancing of risk by spreading its operations the board of directors, will engage with the across a wider customer base company chief executive or managing director to assist in managing the impact of the said event on the stakeholder and the company alike.

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Customers In addition, shareholders are entitled to regular Customers are considered to be the most communication through comprehensive and important stakeholders in their companies. Timely accurate reporting via the audited annual financial and professional delivery of quality goods and statements as well as the attendance of their services to their customers is a key focus of shareholder representatives at quarterly board operational management and is reviewed monthly meetings and the annual general meeting. along with the finances of the company. In larger customer projects, project management Communities methodologies are employed to ensure As corporate citizens of South Africa, Sekunjalo professional delivery of the contracts on time, in TSG group companies continually seek to improve budget, and to the anticipated quality standards. their Broad Based Black Economic Empowerment ratings as defined in the codes of good practice. Senior management is involved in the review of all contracts with customers to ensure compliance In addition, Sekunjalo TSG group companies with group values and, when difficulties in comply with all laws of the country and bylaws of relationships arise, to assist in the preservation of the metropolitan municipalities in which they business value in the contract while maintaining reside, thereby contributing to a harmonious cordial relationships with the customer for the co-existence within their local and national long term. communities.

Employees Government Employees are extremely important stakeholders Sekunjalo TSG group companies are required to in each group business. In order to foster the particularly comply with all labour and income tax growth, productivity and well-being of the laws of South Africa. employees of group subsidiary companies, the following have been put in place: Suppliers • Provident Fund ICT Group Risk Insurance Sekunjalo TSG companies interact with their (linked to the provident fund) suppliers in an honest and transparent manner, • Employment equity by complying with agreed contractual terms • Skills development relating to intellectual property ownership and • Disciplinary code payment in particular. Where compliance is not • Employee retention possible due to events beyond the control of a group company, it is the practice to engage with Shareholders the supplier in a timely and transparent manner Management recognises that without the vision and to seek ways of minimising the impact of the and finance provided by the shareholders of event on both parties. each Sekunjalo TSG group company, and the calculated risks that these stakeholders have Environmental sustainability been prepared to take in order to establish or Although the ICT industry in which the Sekunjalo acquire the relevant group business, there would TSG companies operate is not considered to be no business. make particularly heavy demands on the natural environment in which their community Management recognises the right and need for stakeholders live, management is consistently shareholders to receive a return on their mindful of reducing CO2 emissions, reducing investments which is commensurate with the paper usage and appropriate electronic waste success of the business and the level of disposal in operating decision-making. investment made in the business, while maintaining sufficient liquidity in the company for In addition, Sekunjalo TSG has made a small its foreseeable needs. Management strives to investment in a start up renewable energy/ provide this return through the sustainable energy-efficiency engineering consulting firm, achievement of revenue growth, cash and profit Emergent Energy (Pty) Ltd, to contribute towards generation with regular dividends and/or loan reducing South Africa’s consumption of and repayments made to shareholders. reliance on fossil fuels.

50 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 51 HEALTH AND BIOTHERAPEUTICS The pharmaceutical industry is acknowledged as SEKUNJALO HEALTH CARE LIMITED (“SHC”) one of the key industries by Government, and it SHC’s mission is to become a recognised force in also recognises that local companies in both the South African health and pharmaceutical distribution and manufacture need to be market. They focus on professionalism, supported and given preference in tenders, based affordability and sustainability in the delivery on the fact that they create local employment. of cost-effective and relevant solutions in SHC is diversified into several sectors of health healthcare services to the citizens of South and care delivery as well as in the fast growing sector Southern Africa. of personal/self-medication.

They recognise that their roots are in the Their strategy of increasing product offerings and communities they serve. They target niche competing in diverse sectors is well progressed markets and strive for market leadership. and, with the support of Sekunjalo Investments Limited during this growth phase, they have a very SHC has two business units – Sekpharma sustainable business. (Pty) Ltd (“Sekpharma”), which focuses on ethical and consumer products, and Sekunjalo Key challenges Health Care Commodities (“SHMC”), which is • Regulation and legislation – The compliance the trading arm of SHC that incorporates the and demands placed on companies in this medical supplies manufacturing and distribution. highly regulated industry requires continuous In addition, it is also the tendering arm of review of business capacity and strategy. SHC on which all government and state tenders • Acquisition of new and innovative products are applied. – The industry, being open to both local and international companies, is highly Sekpharma is the supplier of a leading range of competitive and their biggest challenge is ethical products in the South African state and competing with companies who have critical private markets. These products include mass and funding. corticosteroid preparations, anti-bacterial and • Staff skills and retention – This remains the wound-healing agents. Products include Topical key challenge as experience and reputation Corticosteriods, Mebo, Repotin, Fortum, are critical factors in influencing the market. Calvitalis, CD-Cal, JulMag and JulVitalis. Limited resources of high-quality personnel make staff mobility one of the highest SHC is in partnership with Julphar, the largest risk factors. pharmaceutical company in the Middle East, OmniMed who is well known in both the The high-tech nature of the industry requires that private and public health care sectors, and companies establish a presence in the market and GlaxoSmithKline, one of the largest present themselves as stable, professional and pharmaceutical companies in the world. sustainable entities. This is achieved through the quality of information, the professionalism of their SHC has diversified into key sectors of the total employees and the ability to deliver new products health delivery system in South Africa and to the markets. Southern Africa. They are increasing their product offering by acquiring innovative new products in In this area their products are mostly natural or these chosen sectors. They have highly motivated pharmaceutical grade products which have no staff with the required skills to grow the company negative environmental impact. In fact, their in each chosen sector. They focus on servicing VIBACSAN range has significant positive the public sector and compete in the environmental benefits. opportunities that arise from legislative changes. They continue to form local and international By delivering on their promises, continuing with alliances to introduce cost effective services their diversification and the growth of their and treatment relevant to the needs of South product portfolio and by developing their profile African citizens. as the partner of choice for expansion into Africa, SHC has ensured the sustainability of its business.

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Risk management medicines. These include: general The risks are based on the current disarray in the practitioners, specialists in all disciplines, regulatory departments of government which nursing staff, pharmacists in the private and delays the registration of new products and the public sectors. issuing of licences and other requirements. They • Over and above the external customer base, are entering the market with unique products important stakeholders in their business are: which will also have some degree of risk, as large financial institutions and shareholders to fund pharmaceutical companies will not stand back but new acquisitions of drugs and services. increase their efforts to compete. • Distributors on whom they rely to ensure the storage and delivery of their products into Financial support and staff retention are key risks the markets. to mitigate against as in both instances they are • Private sector hospital groups to whom they vulnerable when competing with larger sell all their products. pharmaceutical firms. Due to the high level of regulation in the industry Opportunities Government, through its legislation and regulation, Their opportunities lie in their empowered status, has the greatest impact on their business. the diversity of their portfolio and the changes to Professionals and pharmacists who prescribe the tender process which has an increased and supply their drugs, have a profound impact preference for local suppliers and manufacturers. on the end users who are the patients. Key to It also makes them the company of choice when SHC’s success is the skills of their staff and their international companies seek partners to ability to operate effectively in this highly enter Africa. competitive environment. • Regulation and legislation – the impact on the A significant opportunity exists to capture a large cost of doing business through regulation and portion of the infection control and hygiene and the flexibility to do business is prescribed by sanitation markets in the health delivery system, legislation, including pricing. the food processing sector and hospitality sector, • The customer – due to the competitiveness of with their internationally recognised, totally natural the market and legislation, the ability to range of sanitation and hygiene products. influence the professional community and pharmacists requires intense relationship Stakeholder management building as they can and do influence the final Their business is based on strong relationships user positively or negatively regarding their and highly technical information which requires products. skilled staff in all departments in their companies. • Staff – the key influencers who have to deal The industry is highly regulated and subject to professionally and effectively with the two several legislated acts, making Government a key preceding sectors and therefore have great stakeholder and one that has to be interacted with influence on the success and usage of their on a regular basis. The main ministerial or products. departmental stakeholders are: • Financial institutions and shareholders – the • The Medicine Controls Council – responsible lifeblood of innovation as the acquisition of for the registration of all medicines sold new products is the key to outgoing growth in South Africa. and success in the market which cannot • The Department of Health, both national and always be funded out of the operations. regional – who regulates the health industry as a whole and sets out policies regulating the GENIUS BIOTHERAPEUTICS delivery of health services. (“Genius”) (formerly BIOCLONES) • Treasury and Distribution Depots for State Genius Biotherapeutics (formerly Bioclones) was Enterprises regulate tenders and the established in 1982, is a biotechnology company procurement and distribution of medical dedicated to the manufacture of modern supplies to all governmental and regional biotechnology products for human pharmaceutical entities. use. The company focuses on the research and • Health professionals in both the private and development of biogenerics and novel public sector who treat patients and determine technologies. Its vision is to develop the the use through prescription of all scheduled biotechnology infrastructure and skills in health

52 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 53 across South Africa. investigated and highlighted with government agencies to ensure the bridging of the existing Genius can proudly lay claim to being the only skills gap. Courses such as Good Laboratory medical company in South Africa and on the Practices and Good Manufacturing Practice are African continent that is truly a biotechnology essential to staff training. The retention of key company with a registered product on the market. scientific staff after they receive in-house training A significant investment in the flagship product and experience with their manufacturing Repotin, has enabled it to be marketed in the processes is vital. Loss of key personnel can public and private sector. impact on productivity as the transfer of skills is a lengthy process. Ribotech, a subsidiary of Genius, has completed a state of the art pilot production facility to It is acknowledged that significant progress comply with all the requirements of current Good can only be made by investing in advanced Manufacturing Practice. It commenced with cutting- edge technology to reduce the research and development on the granulocyte- production cycle and improving output yields to colony stimulating factor (G-CSF) technology ensure the future growth and sustainability of which will be used to develop the drug to treat the company. neutropenia in cancer patients undergoing chemotherapy. The regulatory process to receive approvals for the manufacture of products and the right to The company currently holds 22 global patents in market the newly-developed products in South manufacturing techniques and technologies in the Africa is quite tedious. Genius intends to make areas of personalised medicine and vaccines. direct representation to the authorities to It may be required to take legal action to protect accelerate the process by arguing that the any infringement against its patents. product, besides being an essential one, is manufactured locally. Genius is also subject to The primary strategic objective for Genius is to extensive government regulations and standards, provide a sound infrastructure to its core if they wish to market their products outside the biosimilar products and to further advance its borders of South Africa. Dendritic Cell Vaccine (“DCV”) technology. Opportunities Key challenges Despite many challenges, Genius sees enormous The company has bravely managed to weather the opportunity for continued growth. One such difficult funding conditions that prevail in the opportunity is in the field of personalised South African market. This is exacerbated by the medicine, where they own globally-registered capital markets’ poor understanding of intellectual property and are now looking at investments in biotechnology. The perception of commercialising this new and innovative the industry is that it is a high risk. While this may technology. It is innovative since it will allow be the case, Genius at its core is a unique and medical specialists in particular therapeutic areas innovative company with novel patented related to cancer or infectious diseases, to target technology in modern human therapeutics and smaller patient groups. Despite all these can compete with some of the leading challenges, Genius believes that they have biotechnology companies in its field. made good progress in putting the country at the forefront of health care on the African The scarcity of experienced scientific skills in the continent. country has led to Genius taking on newly qualified graduates and providing them with Economic sustainability much-needed skills and training in an attempt to At present, the company is dependent on overcome this obstacle. The standard and quality its major shareholder for financial support. of technical and scientific knowledge is of a high Ribotech and Genius have incurred significant calibre in South Africa, but there is a shortage of annual operating losses and negative cash flows. technical and scientific experience that is This is not a unique situation but a characteristic essential for the commercialisation of research of most newly-established biotech companies and development. globally.

Potential job creation within this industry must be

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Environmental sustainability Having diligently established trustworthy The production facility in Centurion has been in relationships in the international music industry, existence for more than ten years and is presently espAfrika ensures a lucrative flow of artists and being upgraded to improve efficiency. Given its expertise between Africa, Europe and the size and the “pilot” scale of the facility, the impact United States. of its carbon footprint on the environment is negligible. espAfrika’s management and staff have an Imbizo annually to discuss the long and short-term The heating, ventilation and air conditioning targets that need to be reached and diversified in system is at the heart of a manufacturing facility order to maintain their existing economic, and is responsible for between 70% – 80% of its operational and environmental sustainability. electrical energy demand. The company is Monthly targets are agreed upon and managed considering integrating solar energy into its facility through the financial manager and various heads to reduce its dependency on electricity. of departments. espAfrika believes that in order to achieve the utmost, sustainability, financially Repotin, being a cold chain product (2°c – 8°c), is and holistically it is essential to formulate these an energy-intensive process and its impact on the objectives collectively. Therefore responsibility environment will be greatly reduced with the and understanding is shared amongst the staff utilisation of clean technology. and a sense of achievement is felt when targets are met. Social sustainability Genius has put in place a system to assess their Risk management progress on sustainability. Repotin was donated Retaining key staff is critical to the success of the to terminally ill patients who are on dialysis and company. As part of its sustainability plan, they cannot afford the cost of medication. Patients are train their staff internally to develop their skills. currently paying high premiums for an imported product that is in the market. As sponsorship revenue is an integral part of the Cape Town International Jazz Festival, the failure ENTERPRISE DEVELOPMENT of the company to attract potential sponsors will ESPAFRIKA (PTY) LTD (“espAfrika”) have a detrimental effect on both the liquidity and espAfrika is a cutting-edge global competitor profitability of the company. The responsibility of in events management. Over the past decade, raising funds will remain with the directors of they have staged international music festivals espAfrika and its promotion company, Prime throughout Africa and, under their leadership, Media, is to be contracted to reduce this risk. the Cape Town International Jazz Festival has been named the 4th best jazz festival Opportunities worldwide by Melodytrip Independent Survey The youth market represents a unique opportunity in 2007. for espAfrika to organise events and further increase its footprint and revenue lines. In order to espAfrika’s highly skilled and talented team is able exploit this segment of the market, espAfrika will to produce and host events ranging from festivals work in collaboration with other promoters and to corporate functions. this in turn will reduce its risks and financial exposure. In line with this strategy, they will This innovative events management company collaborate with Sun International in order to use thrives on challenges and their collective energy their facilities and also to make use of their produces dynamic results. The company’s primary marketing offerings, thus minimising their own strategy is utilising indigenous resources and they costs and risks. In addition, they have aligned collaborate with local businesses and the public themselves with Cintron South Africa, a “power- to ensure that all stakeholders benefit from this drink company” from the USA, similar to Play and collaboration. Red Bull which specifically targets the youth. espAfrika consistently aspires and inspires new espAfrika is also looking at various ways of business within the events and entertainment increasing its revenue generation for the Cape sector throughout Africa. Town International Jazz Festival. Their intention is to attract additional sponsors as well as increase

54 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 55 the people footprint in the Corporate Village by Social sustainability expanding the Saxophone lounge which proved to Their integrated sustainability plan is two be very successful during the last festival. pronged: • To develop from within the company and grow The idea of staging events in Mozambique, their human capital Namibia, Nigeria, Senegal and China is being • To develop small businesses within the considered. Depending on sponsorship funding, industry and to grow community-based some of these events will then be scheduled for services to alleviate poverty next year. espAfrika is an active member in their services Economic sustainability SETA and strongly believes in internal training and In 2010 many annual events such as their flagship development. The events industry strongly relies event, The Cape Town International Jazz Festival, on skilled contractors. However, espAfrika always felt the financial strain that the FIFA World Cup matches a skilled contractor with a permanent brought. Many corporate clients were unable to member of staff so that a transfer of skills can spend hospitality budgets on events as they had occur. espAfrika believes each and every resource already invested in the World Cup. espAfrika pre- should be utilised creatively to support and empted this financial crisis ahead of time. develop music, arts, culture and job creation. Although the world cup had an effect on the The South Atlantic Arts & Culture Trust (SAACT) festival, it was not critical. This is due to the fact is a Section 21 company created in 2000 to work that through their communal experience they have with espAfrika’s numerous skills transfer and learned to adapt and understand the event’s development projects. economic climate. As corporate visions and investments change, they have adjusted their Environmental sustainability strategies to accommodate the emerging markets espAfrika adheres to a strict internal environmen­ and social investment opportunities. espAfrika’s tally friendly policy when producing events. core strength is the quality in which they produce, conceptualise and stage events. This is their This is implemented through: primary focus in creating a flexible yet sustainable • Waste management company. • Recycling • Solar power/energy Recognising the growing demand for sustainable business in Africa, espAfrika is determined to All their events incorporate a recycling and create a footprint throughout Africa by uplifting waste management plan, using the different the continent through music and culture. As coloured bins spread throughout the event. The a collective, espAfrika has extensive knowledge in bins are transported to a waste management events with a focus on logistics and a strong complex where the waste is then recycled. Where understanding of the South African and African possible, a solar energy tower is built during events industry. They have produced events in load-in to power the event. This is a more Mozambique, Nigeria, Mauritius, Angola, and complicated and costly technology but, where Botswana and throughout the world. Uniquely possible, it is implemented in order to reduce their taking a conventional international business model carbon footprint. and adapting it to local conditions is what sets espAfrika apart. They believe in identifying and TRIPOS TOURISM INVESTMENTS (PTY) LTD using local resources and manpower in order to (“Tripos”) stimulate the local economy and develop the The travel and tourism industry, besides being events industry within these countries. Skills highly competitive, is also highly sensitive to transfer is a strong element of their SADC and external forces. Factors such as the global African events, referring not only to skills recession, acts of terrorism, volcanic ash clouds, transferred, but also the exposure the team etc. impact the industry disproportionately and receives when working abroad. are difficult to plan for. This is a major challenge of travel and tourism. espAfrika also contributed R499m to the Western Cape GDP and approximately R800m to the national GDP.

54 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 55 sustainability report continued

In order for travel and tourism companies to could negatively impact the business as good, survive, they must: reliable and experienced travel professionals • keep costs to a minimum at all times; are difficult to recruit. • be aggressively automated to maximise • Succession planning – There is no formal efficiency of processes both internally and for succession plan in place, however, they do the client’s sake; have delegation procedures which ensure that • be ready for opportunities as soon as they things run smoothly when management is present themselves; unavailable, travelling or indisposed. • have an aggressive sales and marketing • Leadership strategies – Their staff strategy, resulting in volumes that “fit” the organogram, including line management and organisation’s team size; leadership structures, is clearly defined. • focus on areas that differentiate them, such as • HR manual/policies – Their human resources niche markets and unique selling points; and policies and procedures are comprehensive • have strategies in place to ensure pricing is and clearly defined in a manual that is given to competitive, e.g. joining buying consortiums all staff. and/or direct supplier negotiation. • Procedures manual – Their operating policies and procedures are comprehensive and clearly Key challenges defined in a manual that is given to all staff. Travel and tourism is: • Communication/Meetings – Tripos Travel holds • cyclical and very sensitive to economic cycles; quarterly board meetings, monthly and • profit-driven, and arrangements with staff are bimonthly managers meetings and fortnightly attractive but many of the higher-calibre travel exco meetings. professionals do not want to be self-employed but want a fixed income; Social sustainability • sensitive to natural and political disasters They have supported the following organisations around the world. It is imperative they have by way of corporate social responsibility: a good cancellation policy in place and be • Ilitha Labanthu, The Rainbow Children’s Fund, ready to handle difficult situations. The Sunflower Fund and Zip Zap Circus.

In travel, the general rule is that “the longer the Environmental sustainability haul”, the longer and more expensive the trip will Air Travel can never be described as an be, and therefore further in advance bookings are environmentally friendly business and airlines are made and confirmed. Corporate travel clients are coming under increasing pressure to account for relatively predictable with their expenditure. their contribution to climate change, with the aviation industry expected to account for 15% of Notwithstanding the inherent unpredictability of man-made global warming by 2015. travel and tourism, the South African economy is in relatively good shape on the international stage At Tripos, they recently introduced the reporting and Tripos has no reason to believe that it will not of CO2 emissions with respect to flights on their experience steady organic growth from its existing invoices to customers. client base. STAKEHOLDER ENGAGEMENT Stakeholder management AND RELATIONS • Suppliers – It is important to remain on good terms with suppliers to ensure continuity of Sekunjalo places great value on the high both rates and credit lines. Particular attention standards of communication, transparency of is paid to the IATA rules and to ensure that information, regulatory and other directives their financial ratios meet IATA’s criteria to relating to the dissemination of information. keep their ticketing licence. This is the first year that the Group is reporting • Staff – They have a solid team and loss of any and monitoring stakeholder engagement personnel, especially senior management, and relations.

56 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 57 The table below gives an indication of stakeholders for the group:

Stakeholder Relationship Communication Forum Material issues Public Shareholders • Interim report • Financial performance shareholders • Annual report • Sustainability • Annual general meeting • Ethical operations on • SENS announcement a sustainable basis with • Website long-term growth Institutional Shareholders • One-on-one • Financial performance investors communication • Value add • SENS announcements • Market information • Roadshows • Ethical operations on a sustainable basis with long-term growth

Employees Staff • Newsletters • Skills training • Emails • Staff benefits • Notice boards • Market-related remuneration • Ethics • Health and safety • Sustainability Sponsor Sponsor • Regular meetings • Statutory compliance Partners Business partner • Board meetings • Compliance • Financial stability JSE Limited Stock Exchange • Handled by sponsor • Sustainability Regulator • Listings Requirements Bankers Financiers • Regular meetings • Risks and sustainable issues • Financing Government Stakeholders • Meetings • Compliance with law authorities and • Adherence to rules of regulatory bodies regulator Customers Consumer of • Meetings • Financing commodities • Quality of products Suppliers Producer of • Meetings • Quality of products commodities • Delivery • Financing • Legal compliance Communities, NGOs; corporate • Meetings • One-on-one meetings community-based social investment, • Financial assistance organisations enterprise • Infrastructure assistance development Trade unions Staff • Meetings • Negotiations

The year ahead • Implementation of formal engagement forums and feedback sessions • Ongoing stakeholder engagement taken into account • Employee engagement on the sustainable development of the business • Further enhancing our relationships with communities and community-based organisations within which the Group operates • Adoption of a formal stakeholder engagement policy and charter

The company is proactive in its engagement with local, national and international authorities and regularly engages with government authorities on diverse matters.

56 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 57 sustainability report continued

SHAREHOLDER INFORMATION AS AT 31 AUGUST 2011 ANALYSIS OF SHAREHOLDINGS Number Percentage Number Percentage of of of total of total issued shareholders shareholders shares share capital 1 – 5 000 807 44.59% 1 777 411 0.36% 5 001 – 10 000 311 17.18% 2 623 887 0.54% 10 001 – 100 000 513 28.34% 18 541 454 3.79% 100 001 – 1 000 000 142 7.85% 42 052 172 8.59% 1 000 001 – and more 37 2.04% 424 344 510 86.72% Total 1 810 100.00% 489 339 434 100.00%

MAJOR SHAREHOLDERS (5% AND MORE OF THE SHARES IN ISSUE) Number Number Percentage of of of total issued shareholders shares share capital Sekunjalo Investment Holdings (Pty) Ltd 202 482 652 41.38% Absa Corporate and Investment Bank 44 000 000 8.99% Miramare Investments (Pty) Ltd 32 248 068 6.59% The Fisk Trust 31 000 000 6.34% Total 4 309 730 720 63.30%

Shareholders in SA Shareholders not in SA Number Percentage Number Percentage of of issued of of issued shares share capital shares share capital Public shareholders 241 196 455 49.29% 11 874 611 2.43% Non-public shareholders 236 268 368 48.28% Total 477 464 823 97.57% 11 874 611 2.43%

PUBLIC vs NON-PUBLIC Percentage Number of of issued shares share capital Public shareholders 1 803 99.61% 253 071 066 51.72% Non-public shareholders 7 0.39% 236 268 368 48.28% Total 1 810 100% 489 339 434 100.00%

DISTRIBUTION OF SHAREHOLDERS Shareholders Shares Number Percentage Number Percentage Individuals 1 574 86.96% 95 852 112 19.59% Nominee companies and trusts 108 5.97% 46 682 645 9.54% Public companies 21 1.16% 73 445 895 15.01% Close corporations and private companies 107 5.91% 273 358 782 55.86% Total 1 810 100.00% 489 339 434 100.00%

SHARE TRADING STATISTICS Market price per share (cents) High 57 Low 30 Year-end 52 Volume traded (shares) 162 807 954 Value traded (rand) 299 694 771 Volume of shares traded as a percentage of issued capital 33.27% Market capitalisation at 31 August 2011 (rand) 254 456 532 Market capitalisation at date of integrated report (rand) 342 537 639

58 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 annual financial statements

The reports and statements set out below comprise the annual financial statements presented to the shareholders:

Audit and risk committee report 60

Report of the independent auditors 61

Directors’ responsibilities and approval 62

Directors’ interest in contracts 63

Report of the company secretary 63

Directors’ report 64

Statement of financial position 66

Statement of comprehensive income 67

Statement of changes in equity 68

Statement of cash flows 69

Accounting policies 70

Notes to the annual financial statements 87

Level of assurance

These annual financial statements have been audited in compliance with the applicable requirements of the Companies Act, 2008 (No. 71 of 2008) as amended.

Preparer Auditors Takudzwa Hove PKF (Cpt) Inc. BCom (Hons) CA(SA) Registered Auditors

Published 3 November 2011

SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 59 audit and risk committee report

1. Members of the Audit Committee

The members of the audit committee are all independent non-executive directors of the group and include:

Name Qualification Salim Young BProc LLB (UWC), LLM (Tulane University, USA) Johannes Mihe Gaomab Extensive board level experience

The committee is satisfied that the members thereof have the required knowledge and experience as set out in Section 94(5) of the Companies Act, 2008 (No. 71 of 2008), as amended (“the Companies Act”).

The audit committee does not have a minimum of three members as required by the Companies Act. Nominations for a third member have been received and are currently being reviewed by the board of directors with the view to filling the vacancy.

2. Meetings held by the Audit Committee

The audit committee performs the duties laid upon it by the Companies Act by holding meetings with the key role players on a regular basis and by the unrestricted access granted to the external auditor.

The committee held four scheduled meetings during 2011 and all the members of the committee attended all the meetings.

3. external auditor

The audit committee has nominated PKF (Cpt) Inc. as the independent auditor and Bernard van der Walt as the designated partner, who is a registered independent auditor, for appointment of the 2012 audit.

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

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

4. annual Financial Statements

Following the review of the annual financial statements, the audit committee recommends board approval thereof.

5. expertise and experience of the Chief Financial Officer

As required by JSE Listings Requirement 3.84(h), the audit committee has satisfied itself that the chief financial officer has appropriate expertise and experience.

On behalf of the audit committee

S Young Chairman Audit Committee

Cape Town 3 November 2011

60 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 61 report of the independent auditors

To the shareholders of Sekunjalo Investments Limited

Report on the Financial Statements We have audited the annual financial statements of Sekunjalo Investments Limited Group and Company, which comprise the consolidated and separate statements of financial position as at 31 August 2011, and the consolidated and separate statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, and the directors’ report, as set out on pages 64 to 135.

Directors’ Responsibility for the Financial Statements The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act, 2008 (No. 71 of 2008), as amended (“the Companies Act”).

This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, 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 auditors consider 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 directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion In our opinion, the financial statements present fairly, in all material respects, the consolidated and separate financial position of Sekunjalo Investments Limited Group and Company as of 31 August 2011, and its consolidated and separate financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act.

PKF (Cpt) Inc. Registered Auditors Chartered Accountants (SA) Registration number: 2000/016512/21 B van der Walt Cape Town

3 November 2011

60 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 61 directors’ responsibilities and approval

The directors are required in terms of the Companies Act, 2008 (No. 71 of 2008), as amended (“the Companies Act”), to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, are in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards, the Companies Act and the Listings Requirements of the JSE Limited and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The annual financial statements incorporate full and responsible disclosure in line with the philosophy of corporate governance and are prepared in accordance with the Companies Act and the JSE Listings Requirements.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost- effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the Group’s cash flow forecast for the year to 2 November 2012 and, in the light of this review and the current financial position, they are satisfied that the group has or has had access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the group’s annual financial statements. The annual financial statements have been examined by the group’s external auditors and their report is presented on page 61.

The annual financial statements set out on pages 64 to 135, which have been prepared on the going concern basis, were approved by the board of directors on 2 November 2011 and were signed on its behalf by:

Dr MI Survé K Abdulla

62 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 63 directors’ interest in contracts

During the period under review, no director had any material interest in any contract of significance with Sekunjalo Investments Limited, any of its subsidiaries, associates or joint ventures that would give rise to a conflict of interest in the ordinary course of business other than those disclosed in the related party notes. Related party transactions with the directors are disclosed in note 36 of the annual financial statements.

report of the company secretary

In terms of the Companies Act, 2008 (No. 71 of 2008), as amended (“the Companies Act”), I certify that the company has lodged with the Companies and Intellectual Property Commission and the Registrar all such returns as required by the Companies Act and that all such returns are true, correct and up to date.

All directors have access to the advice and services of the company secretary who provides guidance to the board as a whole and to individual directors with regard to corporate governance and how they should discharge their responsibilities in the best interests of the Group.

CF Hendricks Company Secretary 3 November 2011

62 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 63 directors’ report

The directors submit their report for the year ended 31 August 2011.

1. Review of activities M ain business and operations Sekunjalo Investments Limited is a black-controlled investment holding company, which holds controlling interests in six sectors and promotes Broad-Based Black Economic Empowerment and sound corporate practices. It has many operational subsidiaries, as well as investments in associates and joint ventures.

The operating results and state of affairs of the Group and Company are fully set out in the attached annual financial statements. Refer to note 44 – Group Segmental Analysis for a detailed breakdown of the proportion of net income or loss attributable to the various divisions in the Group.

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

2. events after the reporting date There were no material events after the reporting date.

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

4. Liquidity and solvency The directors have performed the liquidity and solvency tests required by the Companies Act (No. 71 of 2008), as amended, for the Group. The board is satisfied that the Group is solvent and has no reason to believe that the business will not be a going concern in the year ahead.

5. authorised and issued share capital There were no changes in the authorised or issued share capital of the Group during the year under review.

6. borrowing limitations In terms of the articles of association of the Company, the directors may exercise all the powers of the Company to borrow money, as they consider appropriate.

7. directors The directors of the Company during the year and to the date of this report are as follows:

Dr MI Survé K Abdulla C Ah Sing CF Hendricks JM Gaomab Professor VC Mehana S Young

8. secretary The secretary of the Company is Cherie Hendricks of:

Business address: Quay 7, East Pier V&A Waterfront Cape Town 8001

Postal address: PO Box 181 Cape Town South Africa 8000

9. auditors The auditors, PKF (Cpt) Inc., have indicated their willingness to continue in office for the ensuing years. The audit and risk committee has satisfied itself of the independence of the auditors and the designated auditor. The resolution to reappoint PKF (Cpt) Inc. will be proposed at the next annual general meeting.

64 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 65 directors’ report

10. subsidiaries, joint ventures and associates The following disposals occurred during the year:

Disposal Percentage Value (Rand) Fios (Pty) Ltd 70% 9 450 000 First Light Administration Services (Pty) Ltd 51% 200 000

11. directors’ interest in share capital There have been no changes in the directors’ interest between 1 September 2011 and the date of this report. None of the company’s directors bought or sold “A” or “B” class ordinary shares in this period.

As at 31 August 2011 “A” class ordinary shares – unlisted

Direct Direct Indirect Indirect Total beneficial non-beneficial beneficial non-beneficial percentage Dr MI Survé – – – 2 000 000 100% Total – – – 2 000 000 100%

“B ” class ordinary shares - listed

Direct Direct Indirect Indirect Total beneficial non-beneficial beneficial non-beneficial percentage Dr MI Survé – – – 202 482 652 41.38% K Abdulla 1 505 316 – – 31 000 000 6.64% Total 1 505 316 – – 233 482 652 48.02%

As at 31 August 2010 “A” class ordinary shares – unlisted

Direct Direct Indirect Indirect Total beneficial non-beneficial beneficial non-beneficial percentage Dr MI Survé – – – 2 000 000 100% Total – – – 2 000 000 100%

“B” class ordinary shares – listed

Direct Direct Indirect Indirect Total beneficial non-beneficial beneficial non-beneficial percentage Dr MI Survé – – – 167 158 152 34.16% K Abdulla 26 899 816 – – – 5.50% Total 26 899 816 – – 167 158 152 39.66%

12. voting rights “A” class ordinary shares each carries 500 votes per share, and “B” class ordinary shares each carries one vote per share.

13. Litigation There are no material legal actions against the Group.

14. contingent Liabilities The directors are not aware of any contingent liabilities that existed at 31 August 2011.

15. dividends No dividends were declared or paid to shareholders during the year.

16. special resolutions The statutory information relating to special resolutions passed by subsidiaries is available from the registered office of the Company. The only special resolutions were passed at the annual general meeting on 9 February 2011.

64 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 65 statement of financial position at 31 august 2011

Notes GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Assets Non-current assets Property, plant and equipment 2 143 443 138 193 25 38 Goodwill 3 34 191 51 548 – – Intangible assets 4 20 696 22 060 39 13 Investments in subsidiaries 5 – – 649 120 623 386 Investments in associates 6 130 192 138 179 – – Investment in joint ventures 7 – 50 – – Loans to group companies 8 – – 122 805 144 511 Loan to associate 9 39 111 17 900 – – Other financial assets 10 197 226 157 171 33 403 33 073 Operating lease asset 11 1 689 1 218 – – Deferred tax 12 24 804 24 956 4 573 5 312 591 352 551 275 809 965 806 333

Current assets Inventories 13 17 985 15 703 – – Biological assets 14 34 903 34 046 – – Other financial assets 10 6 060 2 886 2 340 150 Current tax receivable 1 112 864 – – Trade and other receivables 15 96 725 67 451 4 596 620 Cash and cash equivalents 16 30 624 52 077 – – 187 409 173 027 6 936 770 Assets of disposal groups and non-current assets held for sale 17 – 3 336 – – Total assets 778 761 727 638 816 901 807 103

Equity and liabilities Equity Equity attributable to equity holders of parent Share capital and share premium 18 403 177 403 177 403 177 403 177 Reserves 19 121 194 121 194 – – (Accumulated loss)/retained income (99 501) (122 036) 279 529 236 167 424 870 402 335 682 706 639 344 Non-controlling interest 10 195 867 – – 435 065 403 202 682 706 639 344

Liabilities Non-current liabilities Loans from group companies 8 – – 7 956 65 226 Other financial liabilities 20 72 839 53 454 21 807 254 Finance lease obligation 21 149 228 – – Operating lease liability 12 1 120 1 198 – – Post employment medical costs 22 1 630 1 080 – – Deferred tax 11 102 124 97 239 65 300 61 646 177 862 153 199 95 063 127 126

Current liabilities Trade and other payables 23 94 017 61 778 19 808 6 869 Other financial liabilities 20 11 621 27 237 714 17 128 Current tax payable 2 761 8 387 – – Finance lease obligation 21 85 623 – – Provisions 24 19 139 26 138 5 987 9 863 Bank overdraft 16 38 211 41 398 12 623 6 773 165 834 165 561 39 132 40 633 Liabilities of disposal groups 17 – 5 676 – – Total liabilities 343 696 324 436 134 195 167 759 Total equity and liabilities 778 761 727 638 816 901 807 103 Net asset value per share (cents) 86.83 82.22 139.52 130.65 Tangible net asset value per share (cents) 75.61 67.18 139.51 130.65

66 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 67 statement of comprehensive income for the year ended 31 august 2011

Notes GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Continuing operations Revenue 25 440 390 403 169 18 108 7 767 Cost of sales (307 886) (290 025) – – Gross profit 132 504 113 144 18 108 7 767 Other income 12 848 16 028 208 385 Operating expenses (139 891) (144 673) (22 735) (24 311) Loss on sale of subsidiaries (8 225) – – – Impairments (946) (9 111) 3 854 (16 389) Investment revenue 27 20 966 5 897 30 818 16 201 Fair-value adjustments 26 41 732 57 421 26 093 34 660 Loss from equity accounted investments (8 521) (6 596) – – Finance costs 28 (13 967) (11 025) (8 581) (8 352) Profit before taxation 29 36 500 21 085 47 765 9 961 Taxation 30 (7 295) (12 510) (4 403) 115 Profit from continuing operations 29 205 8 575 43 362 10 076 Discontinued operations (Loss)/profit from discontinued operations 17 (1 165) 215 – – Profit for the period 28 040 8 790 43 362 10 076 Other comprehensive income – – – – Total comprehensive income 28 040 8 790 43 362 10 076

Profit attributable to: Owners of the parent 26 304 8 176 43 362 10 076 Non-controlling interest 1 736 614 – – 28 040 8 790 43 362 10 076

Total comprehensive income attributable to: Owners of the parent 26 304 8 176 43 362 10 076 Non-controlling interest 1 736 614 – – 28 040 8 790 43 362 10 076

Basic and diluted earnings per ordinary share (cents) 33 5.38 1.67 – Continuing operations 5.61 1.63 – Discontinued operations (0.24) 0.04 Weighted average number of shares in issue (’000) 33 489 339 489 339 Fully diluted weighted average number of shares in issue (’000) 33 489 339 489 339

66 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 67 statement of changes in equity for the year ended 31 august 2011

Total attributable Total to equity Non- Share Share share Accumulated holders of controlling Total capital premium capital Reserves loss the Group interest equity R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Group Balance at 1 September 2009 30 402 947 402 977 121 194 (129 932) 394 239 (1 942) 392 297 Total comprehensive income for the year – – – – 8 176 8 176 614 8 790 Issue of preference shares in subsidiary – – – – – – 1 000 1 000 Treasury shares repurchased – 200 200 – – 200 – 200 Dividends – – – – – – (1 869) (1 869) Changes in ownership interest – control not lost – – – – (280) (280) – (280) Business combinations – – – – – – 3 064 3 064 Total changes – 200 200 – 7 896 8 096 2 809 10 905 Balance at 1 September 2010 30 403 147 403 177 121 194 (122 036) 402 335 867 403 202 Total comprehensive income for the year – – – – 26 304 26 304 1 736 28 040 Issue of ordinary shares in subsidiary – – – – – – 3 599 3 599 Dividends – – – – – – (2 506) (2 506) Business combinations – – – – (3 769) (3 769) 6 499 2 730 Total changes – – – – 22 535 22 535 9 328 31 863 Balance at 31 August 2011 30 403 147 403 177 121 194 (99 501) 424 870 10 195 435 065 Notes 18 18 18 19

Company Balance at 1 September 2009 30 403 147 403 177 – 226 091 629 268 – 629 268 Total comprehensive income for the year – – – – 10 076 10 076 – 10 076 Total changes – – – – 10 076 10 076 – 10 076 Balance at 1 September 2010 30 403 147 403 177 – 236 167 639 344 – 639 344 Total comprehensive income for the year – – – – 43 362 43 362 – 43 362 Total changes – – – – 43 362 43 362 – 43 362 Balance at 31 August 2011 30 403 147 403 177 – 279 529 682 706 – 682 706 Notes 18 18 18

68 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 69 statement of cash flows for the year ended 31 august 2011

Notes GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Cash flows from operating activities Cash receipts from customers 434 735 441 792 14 313 8 113 Cash paid to suppliers and employees (402 895) (425 742) (13 738) (18 811) Cash generated from/(used in) operations 34 31 840 16 050 575 (10 698) Investment revenue 7 529 5 897 13 304 16 201 Dividends received 6 000 – 17 514 219 Finance costs (13 966) (11 026) (8 581) (8 352) Tax paid (8 434) (13 219) (12) (7) Dividends paid (2 506) (1 869) – – Cash flows from discontinued operations 17 1 358 (489) – – Net cash from operating activities 21 821 (4 656) 22 800 (2 637)

Cash flows from investing activities Purchase of property, plant and equipment 2 (24 791) (12 138) (39) (1) Sale of property, plant and equipment 2 87 21 734 224 49 Purchase of other intangible assets 4 (1 791) (988) (27) – Sale of businesses 35 3 623 – – – Loans advanced to associate company – (18 916) – – Loans advanced to group companies – – (30 359) – Repayment of loans from group companies – – – (12 202) Increase in other financial assets (1 919) (424) (796) (897) Decrease in other financial assets 2 496 17 140 – 288 Net cash from investing activities (22 295) 6 408 (30 997) (12 763)

Cash flows from financing activities Receipt of other financial liabilities 24 098 8 228 17 038 17 103 Repayment of other financial liabilities (41 270) (24 528) (14 691) – Proceeds from shareholder’s loan – 16 326 – – Finance lease payments (618) (825) – (68) Net cash from financing activities (17 790) (799) 2 347 17 035

Total cash movement for the period (18 264) 953 (5 850) 1 635 Cash at the beginning of the period 10 677 7 468 (6 773) (8 408) Cash and cash equivalents held for sale – 2 256 – – Total cash at end of the period 16 (7 587) 10 677 (12 623) (6 773)

68 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 69 accounting policies

1. presentation of Annual Financial Statements

The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), the AC500 series of interpretations, the South African Companies Act, 2008 (No. 71 of 2008), as amended, and the Listings Requirements of JSE Limited. The financial statements have been prepared on the historical cost basis, except where otherwise stated, and incorporate the principal accounting policies set out below.

The accounting policies are consistent with those applied in the previous year.

1.1 underlying concepts The financial statements are prepared on the going concern basis, which assumes that the Group will continue in operation for the foreseeable future.

The financial statements are prepared using accrual accounting whereby the effects of transactions and other events are recognised when they occur, rather than when the cash is received or paid.

Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard. Financial assets and financial liabilities are only offset when there is a legally enforceable right to offset, and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Accounting policies are the specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements. Changes in accounting policies are accounted for in accordance with the transitional provisions in the standard. If no such guidance is given, they are applied retrospectively. If, after making every reasonable effort to do so, it is impracticable to apply the change retrospectively, it is applied prospectively from the beginning of the earliest period practicable.

Changes in accounting estimates are adjustments to assets or liabilities or the amounts of periodic consumption of assets that result from new information or new developments. Such changes are recognised in profit or loss in the period they occur.

Functional currency is rand and all amounts are rounded to thousands (R’000).

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

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

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

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

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

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

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

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

70 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 71 Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest.

Business combinations The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued on the date control is achieved. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments.

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

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date and the fair value can be reliably measured.

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

Non-controlling interest arising from a business combination is measured either at their share of the acquiree’s identifiable net assets and liabilities or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in note 43 for business combinations.

In cases where the group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair-value adjustments recognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.

Goodwill is determined as the consideration transferred, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree.

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

The excess of the cost of the investment over the Group’s share of the net fair value of an associate’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination is immediately recognised in profit or loss.

On disposal of a subsidiary, associate or joint venture to which the goodwill was allocated on acquisition, the amount attributable to such goodwill is included in the determination of the profit or loss for the period in which the relevant investment is disposed.

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

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

70 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 71 accounting policies continued

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

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

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

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

Interests in joint ventures A joint venture is a contractual agreement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control.

Jointly controlled entities An interest in a jointly controlled entity is accounted for using the equity method, except when the investment is classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, interests in jointly controlled entities are carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the Group’s share of net assets of the jointly controlled entity, less any impairment losses. Profits or losses on transactions between the Group and a joint venture are eliminated to the extent of the Group’s interest therein.

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

Jointly controlled operations In respect of its interests in jointly controlled operations, the Group recognises in its annual financial statements: • the assets that it controls and the liabilities that it incurs; and • the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture.

1.3 Investments in subsidiaries Group annual financial statements The Group annual financial statements include those of the holding company, subsidiaries and joint ventures. On acquisition the Group recognises the subsidiaries’ identifiable assets, liabilities and contingent liabilities at fair value, except for assets classified as held-for-sale, which are recognised at fair value less costs to sell.

Separate financial statements In the company’s separate annual financial statements, investments in subsidiaries are carried at fair value through profit or loss.

Investments in subsidiaries are initially recognised at fair value which is equivalent to the cost. The cost of an investment in a subsidiary is the aggregate of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Company.

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

72 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 73 Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the parent’s ownership interests in them. Minority interests in the net assets consist of: • the amount of those minority interests at the date of the original combination calculated in accordance with IFRS 3; and • the minority interests’ share of changes in equity since the date of the combination.

Where potential voting rights exist, the proportions of profit or loss and changes in equity allocated to the parent and minority interests are determined on the basis of present ownership interests and do not reflect the possible exercise or conversion of potential voting rights.

Where losses attributable to the minority interests exceed the minority’s interests in the subsidiary’s equity, the excess, and any further losses applicable to the minority, are allocated against the majority interest except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

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

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

Property, plant and equipment The Group assesses the useful lives, depreciation rates and residual value of these assets at each reporting date. These estimates take cognisance of current market and trading conditions for the Group’s specific assets. In addition, the useful life estimates take into account the risk of obsolescence due to advances in technology.

Intangible assets The Group assesses the useful lives, amortisation rates and residual values at each reporting date. This judgement is based on the market and trading conditions for the Group, management’s expectations and strategy for the use of the intangible, as well as by performance indicators, including sales growth rate and operating margins, of cash-generating units which use the intangible.

Biological assets Abalone is weighed and graded into specific different size categories at regular intervals. A predicted growth rate for the abalone is determined based on the actual weight of the abalone which has been weighed and graded and the birth date of the abalone. As at the reporting date, a combination of graded figures and predicted figures (those awaiting their latest grade interval) is then used to determine the weight and graded size categories of the abalone. The value of the stock is then determined based on the market value of each grading size category for the abalone. All selling costs are excluded from fair values.

Post-employment medical costs The Group uses the life expectancy of retired employees and annual increases in medical aid cost to determine the closing carrying value.

Allowance for slow moving, damaged and obsolete stock Management has made estimates of the selling price and direct cost to sell on certain inventory items at year-end by reviewing subsequent selling prices.

Impairment testing Assets are subject to regular impairment reviews as required. Impairments are measured at the difference between the cost (or amortised cost) of a particular asset and the recoverable amount which is the greater of the fair value less cost to sell and value-in-use of the asset. Impairments are recorded in the statement of comprehensive income in the period in which they occur. The Group’s policy in relation to impairment testing in respect of goodwill is detailed below.

72 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 73 accounting policies continued

The recoverable amount of the cash-generating units has been determined based on a value-in-use calculation. Key assumptions applied to determine the recoverable amount of the cash-generating units, using the value-in-use calculation relating to sales growth rates, working capital requirements and capital expenditure. Cash flow projections were based on historical information and financial budgets approved by senior management covering a five-year period.

Assumptions applied for impairment testing: Risk-free rate – R207 government bonds Beta – 1.1 Discount rate – 10.5%

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

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

Investment in subsidiaries Valuation method An entity discounted cash flow (DCF) valuation technique is used for all unlisted investments. Price/earnings valuations are not as accurate and are thus only used as a secondary review.

Application of methodology Free cash flow (FCF) forecasts are prepared year by year for a minimum of a three-year period and for high-growth companies year by year forecasts for a period of five to ten years are prepared, whereafter a terminal value will be calculated.

Terminal value growth rates When calculating the terminal value, growth rates in excess of the current inflation rate are not utilised. Real growth beyond ten years is not likely, and even if likely is difficult to forecast with any certainty.

Terminal values When calculating the terminal value, care is taken regarding the level of net capital investment assumed. This is assumed to be lower than during the specific forecast period for high growth companies. For mature, stable companies net capital investment during the specific forecast period and beyond is assumed to be the same.

Discount rate Free cash flows are discounted at the Company’s weighted average cost of capital (WACC), being the weighted cost of equity (as determined using the capital asset pricing model (CAPM)) and the weighted after-tax cost of debt and/or any other non-equity form of financing.

Risk-free rate The risk-free rate utilised is the yield on ten-year government bonds. These yields were obtained from the financial press at the time of preparing the valuations. Where no ten-year SA bonds are in issue, the nearest long-term SA bond rate was used.

Beta The equally weighted average of the relevant industry betas is used.

The betas are calculated over a five-year period (where possible). This is assumed to provide a fair estimate of the Group’s recent market risk.

74 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 75 Market risk premium A market risk premium was utilised in all valuations.

Value of equity The value of equity will be equal to the free cash flow value of the entity, less the statement of financial position values (at valuation date) of debt and any other form of financing, plus any cash on hand (per the statement of financial position) which is in excess of normal working capital requirements.

Fair value determination The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Discounted cash flows are used to determine fair value for the investments in subsidiary companies and other unlisted investments. The use of a discounted cash flow analysis requires the estimation of a number of significant components, including the future expected cash flows, and the weighted average cost of capital used to perform the discounting. Many of these factors may have a material impact on the valuation.

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

Property, plant and equipment is initially measured at cost.

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

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.

Major spare parts and standby equipment, which are expected to be used for more than one period, are included in property, plant and equipment. In addition, spare parts and standby equipment, which can only be used in connection with an item of property, plant and equipment, are accounted for as property, plant and equipment.

Major inspection costs which are a condition of continuing use of an item of property, plant and equipment and which meet the recognition criteria above are included as a replacement in the cost of the item of property, plant and equipment. Any remaining inspection costs from the previous inspection are derecognised.

Property, plant and equipment are subsequently carried at cost, including transaction costs, less accumulated depreciation and any impairment losses. Depreciation is calculated on the straight-line method at a rate considered appropriate to reduce the carrying value of an item over its useful life to its estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows: Item Average useful life Land Indefinite Buildings 5 – 40 years Plant and machinery 1 – 36 years Furniture and fixtures 2 – 20 years Motor vehicles 1 – 10 years Office equipment 3 – 21 years Computer equipment 1 – 8 years Leasehold property 5 – 40 years Vessels 3 – 32 years Computer software 2 – 5 years Pharmaceutical books 7 years

74 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 75 accounting policies continued

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

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.6 bIological assets Biological assets consist of abalone cultivated in an aquaculture farm and are measured at their fair value less estimated point-of-sale costs.

Any gains or losses arising from measurement on initial recognition or from a subsequent change in fair value less estimated point-of-sale costs is included in profit or loss for the period in which it arises.

1.7 Intangible assets An intangible asset is recognised when: • it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and • the cost of the asset can be measured reliably.

Intangible assets which are separately acquired are initially recognised at cost, being their purchase prices after adding any directly attributable costs of preparing the assets to be capable of operating in the manner intended by management.

Intangible assets with a finite useful life are stated at cost less accumulated amortisation and impairment losses.

Intangible assets with an indefinite useful life are not amortised, but are reviewed on an annual basis for indications that continue to support an indefinite useful life assessment.

Internally generated intangible assets are recognised for costs incurred in the development phase of an internal project.

Software development costs, which are generated internally, are initially measured at cost, being all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management, and are subsequently carried at cost after taking into account any accumulated amortisation and accumulated impairment losses, where applicable.

Costs incurred in the research phase are included in the calculation of profit or loss for the period in which they are incurred.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows.

The amortisation period, residual values and the amortisation method for intangible assets are reviewed at every year-end.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: Item Useful life Trademarks 15–20 years Software development 10 years Pharmaceutical dossiers 20 years

76 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 77 1.8 fInancial instruments Initial recognition and measurement The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

The Group’s principal financial assets are various investments, loans receivable, trade and other receivables and bank and cash balances. The Group’s principal financial liabilities are interest-bearing and non-interest-bearing loans payable, trade and other payables and bank overdrafts.

Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes party to the contractual provisions of the instrument.

Derecognition of financial assets and financial liabilities Financial assets or parts thereof are derecognised when: • the right to receive the cash flows has expired; • the right to receive the cash flows is retained, but an obligation to pay them to a third party under a “pass-through“ arrangement is assumed; or • the Group transfers the right to receive the cash flows, and also transfers either all the risks and rewards, or control over the asset.

Financial liabilities are derecognised when the obligation is discharged, cancelled or expired.

Loans to/(from) group companies These include loans to/(from) holding companies, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.

Subsequently these loans and receivables are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts.

On loans receivable an impairment loss is recognised in profit or loss when there is objective evidence that it is impaired. The impairment is measured as the difference between the loan’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

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

Loans from Group companies are measured at amortised cost.

Loans to shareholders, directors, managers and employees These financial assets are initially recognised at fair value plus direct transaction costs.

Subsequently these loans and receivables are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts.

On loans receivable an impairment loss is recognised in profit or loss when there is objective evidence that it is impaired. The impairment is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

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

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

76 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 77 accounting policies continued

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

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

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

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

Other financial liabilities are measured initially at fair value and subsequently at amortised cost, using the effective interest rate method.

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets designated as at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term.

Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned.

Investments are measured initially and subsequently at fair value. Gains and losses arising from changes in fair value are included in profit or loss for the period. The Group assesses these financial assets for impairment at every statement of financial position date.

Transaction costs are recognised in profit or loss. Dividend income is recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payment is established.

Derivatives Derivative financial instruments, which are not designated as hedging instruments, consisting of foreign exchange contracts are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates.

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

Derivatives are classified as financial assets at fair value through profit or loss – held for trading.

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

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

Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: • the initial recognition of goodwill; or • the initial recognition of an asset or liability in a transaction which: –– is not a business combination; and –– at the time of the transaction, affects neither accounting profit nor taxable profit/(tax loss).

78 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 79 A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, except to the extent that both of the following conditions are satisfied: • the parent, investor or venturer is able to control the timing of the reversal of the temporary difference; and • it is probable that the temporary difference will not reverse in the foreseeable future.

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

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

A deferred tax asset is recognised for the carry forward of unused tax losses and unused secondary tax on companies (STC) credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised.

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

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

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

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

1.10 leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases.

Finance leases – lessee Items leased in terms of finance leases are recognised in the statement of financial position at amounts equal to the lower of the fair value of the leased items and the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

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

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

Leased assets are depreciated over the shorter of the lease term and the assets useful life.

Operating leases – lessor Operating lease income is recognised as an income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income.

78 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 79 accounting policies continued

Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

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

1.11 Inventories Inventories are measured at the lower of cost and net realisable value on the first-in first-out basis.

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

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

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. The reversal cannot increase the carrying amount of the inventory above the carrying amount had no write-down been recognised initially.

Obsolete, redundant and slow moving items are identified on a regular basis and are written down to their estimated net realisable values.

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

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

A non-current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a disposal group classified as held for sale. An impairment loss is recognised in profit or loss for any initial and subsequent write-down of the assets 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 is not in excess of the cumulative impairment loss previously recognised.

In addition, in order to be classified as non-current assets held for sale, the following criteria must be met: • the assets (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value; and • actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

1.13 Impairment of assets The Group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the Group also: • tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period. • tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

80 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 81 If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

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

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

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order: • first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit; and • then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

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

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

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

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

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

1.15 employee benefits Post-employment medical aid cost The Group has a constructive obligation to pay the medical aid cost of certain retired employees. The entitlement of these benefits was based on the employees remaining in service up to retirement age and the completion of a minimum service period.

The present value of the liability incurred is calculated based on remaining contributions to the medical aid fund and is included in the calculation of profit or loss for the period in which the amounts are paid.

Contributions to the medical aid fund increases annually, based on current market trends.

Defined contribution plans Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

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

Other employee benefits Employee benefits in the form of annual leave entitlements are provided for when they accrue to employees with reference to services rendered up to statement of financial position date. The expense is recognised in the statement of comprehensive income of the period in which the employee renders the service.

The Group recognises a liability and an expense for bonuses. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. An accrual is maintained for the appropriate proportion of the expected bonuses which would become payable at the year-end.

80 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 81 accounting policies continued

1.16 provisions and contingencies Provisions are recognised when: • the Group has a present legal or constructive obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the obligation.

Provisions are reviewed at each statement of financial position date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. The discount rate is the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The discount rate does not reflect risks for which future cash flow estimates have been adjusted.

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

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

Provisions are not recognised for future operating losses.

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

After their initial recognition contingent liabilities recognised in business combinations that are recognised separately are subsequently measured at the higher of: • the amount that would be recognised as a provision; and • the amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised.

1.17 revenue Revenue from the sale of goods is recognised when all the following conditions have been satisfied: • the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; • the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the Group; and • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the Group; • the stage of completion of the transaction at the end of the reporting period can be measured reliably; and • the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

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

Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. Stage of completion is determined by services performed to date as a percentage of total services to be performed.

Contract revenue comprises: • the initial amount of revenue agreed in the contract; and • variations in contract work, claims and incentive payments: –– to the extent that it is probable that they will result in revenue; and –– they are capable of being reliably measured.

82 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 83 Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

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

Royalties are recognised on the accrual basis in accordance with the substance of the relevant agreements.

Dividends are recognised, in profit or loss, when the Company’s right to receive payment has been established.

Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

1.18 cost of sales When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised.

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

1.19 borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred.

1.20 Translation of foreign currencies Foreign currency transactions A foreign currency transaction is recorded, on initial recognition in rand, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period: • foreign currency monetary items are translated using the closing rate; • non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and • non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

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

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

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

1.21 segmental analysis Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive management.

Segment results include revenue and expenses directly attributable to a segment and the relevant portion of enterprise revenue and expenses that can be allocated on a reasonable basis to a segment, whether from external transactions with other group segments. Segment results are determined before any adjustments for minority interests.

Segment assets and liabilities comprise the operating assets and liabilities that are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Segment assets are determined after deducting related allowances that are reported as direct offsets in the Group’s statement of financial position. Capital expenditure represents the total costs incurred during the period to acquire segment assets that are expected to be used during more than one period, namely, property, plant and equipment, and intangible assets other than goodwill.

82 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 83 accounting policies continued

Executive management has decided to manage the Group on the basis of products and services.

Business segments comprise: • Fishing, being the Group’s fishing interests; • Health care, being the Group’s health-related manufacturing and wholesale; • Information technology, being the Group’s various information technology interests; • Financial services, being the Group’s financial services interests; • Enterprise development, being the Group’s event management and travel agency interests; • Biotechnology, being the Group’s research and development in the biotechonology interests; and • Investments, being the Group’s interest in its controlled and non-controlled investments.

1.22 earnings per share and headline earnings per share Earnings per share is calculated on the weighted average number of shares in issue, net of treasury shares, in respect of the year and is based on profit attributable to ordinary shareholders. Headline earnings per share is calculated in terms of the requirements set out in Circular 03/2009 issued by SAICA.

1.23 new Standards, Interpretations and Amendments to existing Standards issued that are not yet effective At the date of authorisation of these financial statements, the following Standards and Interpretations and amendment were in issue but not yet effective.

The group has elected not to early adopt standards issued not effective. Annual periods Standard Details of amendments beginning on or after IFRS 1: First-time Adoption • Amendment clarifies that changes in accounting policies in the 1 January 2011 of International Financial year of adoption fall outside of the scope of IAS 8. Reporting Standards • Amendment permits the use of revaluation carried out after the date of transition as a basis for deemed cost. • Amendment permits the use of carrying amount under previous GAAP as deemed cost for operations subject to rate regulation. • Standard amended to provide guidance for entities emerging 1 July 2011 from severe hyperinflation and resuming presentation of IFRS-compliant financial statements, or presenting IFRS- compliant financial statements for the first time. • Standard amended to remove the fixed date of 1 January 2004 relating to the retrospective application of the derecognition requirements of IAS 39, and relief for first-time adopters from calculating day 1 gains on transactions that occurred before the date of adoption. IFRS 3 Business • Amendments to transition requirements for contingent 1 January 2011 Combinations – Revised consideration from a business combination that occurred before the effective date of the revised IFRS • Clarification on the measurement of non-controlling interests • Additional guidance provided on un-replaced and voluntarily replaced share-based payment awards IFRS 7 Financial Instruments: • Amendment clarifies the intended interaction between 1 January 2011 Disclosures qualitative and quantitative disclosures of the nature and extent of risks arising from financial instruments and removed some disclosure items which were seen to be superfluous or misleading. • Amendments require additional disclosure on transfer 1 July 2011 transactions of financial assets, including the possible effects of any residual risks that the transferring entity retains. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period

84 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 85 IFRS 9: Financial Instruments • New standards that form the first part of a three-part project 1 January 2013 to replace IAS 39 Financial Instruments: Recognition and Measurement (effective for periods beginning 1 January 2013). IFRS 9 specifies how an entity should classify and measure financial assets, including some hybrid contracts. They require all financial assets to be: (a) classified on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset; (b) initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, particular transaction costs; and (c) subsequently measured at amortised cost or fair value. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of IAS 39. They apply a consistent approach to classifying financial assets and replace the numerous categories of financial assets in IAS 39, each of which had its own classification criteria. IFRS 10 Consolidated • New standard that replaces the consolidation requirements in 1 January 2013 Financial Statements SIC-12 Consolidation – Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. Standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess IFRS 11 Joint Arrangements • New standard that deals with the accounting for joint 1 January 2013 arrangements and focuses on the rights and obligations of the arrangement, rather than its legal form. Standard requires a single method for accounting for interests in jointly controlled entities IFRS 12 Disclosure of • New and comprehensive standard on disclosure requirements 1 January 2013 Interests in Other Entities for all forms of interests in other entities, including joint arrangements, associates, special-purpose vehicles and other off-statement of financial position vehicles IFRS 13 Fair Value • New guidance on fair value measurement and disclosure 1 January 2013 Measurement requirements IAS 1: Presentation of • Clarification of statement of changes in equity 1 January 2011 Financial Statements • New requirements to group together items within OCI that may be reclassified to the profit or loss section of the statement of comprehensive income in order to facilitate the assessment of their impact on the overall performance of an entity. IAS 12 Income Taxes • Rebuttable presumption introduced that an investment 1 January 2012 property will be recovered in its entirety through sale. IAS 19 Employee Benefits • Amendments to the accounting for current and future 1 January 2013 obligations resulting from the provision of defined benefit plans IAS 24: Related Party • Simplification of the disclosure requirements for government- 1 January 2013 Disclosure related entities • Clarification of the definition of a related party IAS 27 Consolidation and • Consequential amendments resulting from the issue of 1 January 2013 Separate Financial Statements IFRS 10, 11 and 12 – Revised IAS 28 Investments in • Consequential amendments resulting from the issue of 1 January 2013 Associates IFRS 10, 11 and 12 IAS 34 Interim Financial • Clarification of disclosure requirements around significant 1 January 2011 Reporting events and transactions, including financial instruments

84 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 85 accounting policies continued

Interpretations Annual periods beginning on or after IFRIC 14: IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding 1 January 2011 Requirements and their Interaction Amendments relating to the recognition as assets of some voluntary prepayments for minimum funding contributions IFRIC 13 Customer Loyalty Programmes 1 January 2011 Clarification on the intended meaning of the term “fair value” in respect of award credits

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group and Company.

86 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 87 notes to the annual financial statements

2. Property, plant and equipment

Group 2011 2010 Accumulated Accumulated depreciation depreciation and Carrying and Carrying Cost impairments value Cost impairments value R’000 R’000 R’000 R’000 R’000 R’000 Buildings 3 361 (708) 2 653 3 359 (635) 2 724 Computer equipment 6 177 (4 458) 1 719 6 373 (4 029) 2 344 Computer software 651 (607) 44 754 (627) 127 Furniture and fixtures 4 095 (2 773) 1 322 3 815 (2 559) 1 256 Land 3 470 – 3 470 840 – 840 Leasehold improvements 15 877 (9 319) 6 558 15 738 (8 192) 7 546 Motor vehicles 3 530 (3 008) 522 3 502 (2 608) 894 Office equipment 1 216 (891) 325 1 365 (958) 407 Pharmaceutical books 3 (3) – 3 (2) 1 Plant and machinery 130 934 (80 743) 50 191 130 424 (76 011) 54 413 Vessels 123 927 (47 288) 76 639 104 657 (37 016) 67 641 Total 293 241 (149 798) 143 443 270 830 (132 637) 138 193

Company 2011 2010 Accumulated Accumulated depreciation depreciation and Carrying and Carrying Cost impairments value Cost impairments value R’000 R’000 R’000 R’000 R’000 R’000 Computer equipment 87 (65) 22 51 (41) 10 Computer software 33 (30) 3 54 (26) 28 Total 120 (95) 25 105 (67) 38

86 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 87 notes to the annual financial statements continued

2. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment Group – 2011 Disposals through Opening business Depre- Closing balance Additions Disposals disvesture ciation balance R’000 R’000 R’000 R’000 R’000 R’000 Buildings 2 724 – – – (71) 2 653 Computer equipment 2 344 762 (4) (205) (1 178) 1 719 Computer software 127 24 (63) – (44) 44 Furniture and fixtures 1 256 771 (51) (143) (511) 1 322 Land 840 2 630 – – – 3 470 Leasehold improvements 7 546 – – – (988) 6 558 Motor vehicles 894 51 (1) – (422) 522 Office equipment 407 86 (10) (28) (130) 325 Pharmaceutical books 1 – – – (1) – Plant and machinery 54 413 511 – – (4 733) 50 191 Vessels 67 641 19 956 (345) – (10 613) 76 639 138 193 24 791 (474) (376) (18 691) 143 443

Reconciliation of property, plant and equipment Group – 2010 Disposals through Opening business Depre- Closing balance Additions Disposals disvesture ciation balance R’000 R’000 R’000 R’000 R’000 R’000 Buildings 2 831 – – – (107) 2 724 Computer equipment 1 522 2 253 (68) (89) (1 274) 2 344 Computer software 247 59 – (27) (152) 127 Furniture and fixtures 1 507 255 (14) (41) (451) 1 256 Land 840 – – – – 840 Leasehold improvements 8 451 185 – – (1 090) 7 546 Motor vehicles 1 450 44 (66) – (534) 894 Office equipment 523 38 – – (154) 407 Pharmaceutical books 2 – – – (1) 1 Plant and machinery 57 950 2 958 – – (6 495) 54 413 Vessels 68 291 6 346 – – (6 996) 67 641 143 614 12 138 (148) (157) (17 254) 138 193

88 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 89 notes to the annual financial statements continued

2. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment Company – 2011

Opening Depre- Closing balance Additions Disposals ciation balance R’000 R’000 R’000 R’000 R’000 Computer equipment 10 36 – (24) 22 Computer software 28 3 (24) (4) 3 38 39 (24) (28) 25

Reconciliation of property, plant and equipment Company – 2010

Opening Depre- Closing balance Additions Disposals ciation balance R’000 R’000 R’000 R’000 R’000 Computer equipment 83 – (49) (24) 10 Computer software 42 1 – (15) 28 Motor vehicles 69 – – (69) – 194 1 (49) (108) 38

Pledged as security Refer to notes 16 and 20 for further details on security provided over the above assets.

Capital commitments Refer to note 41 for details relating to capital commitments.

Assets subject to finance lease (net carrying amount) GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Computer equipment – 76 – – Furniture and fixtures – 520 – – Leasehold property 6 558 7 546 – – Office equipment 4 4 – – Plant and machinery – 150 – – 6 562 8 296 – –

Details Sekunjalo Properties (Pty) Ltd has land and buildings located on 15 Mail Street, Epping, Cape Town and measures 463 square metres (Sectional title unit 753). The building is registered under Title Deed ST25977/2008.

Premier Fishing SA (Pty) Ltd has land located in the Overstrand Municipality on Erf 1727 measuring 3.7 hectares and on Erf 3819 measuring 6 hectares. The land is registered under Title Deeds T455052/2002 and T160/1938.

A register containing the information required by Regulation 25(3) of the Companies Act, 2008 (No. 71 of 2008), as amended (“the Companies Act”), is available for inspection at the registered office of the Company.

88 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 89 notes to the annual financial statements continued

3. goodwill

Group 2011 2010 Accumulated Carrying Accumulated Carrying Cost impairments value Cost impairments value R’000 R’000 R’000 R’000 R’000 R’000 Goodwill 48 668 (14 477) 34 191 65 987 (14 439) 51 548

Reconciliation of goodwill Group – 2011 Disposals through Opening business balance divesture Impairments Total R’000 R’000 R’000 R’000 Goodwill 51 548 (17 319) (38) 34 191

Reconciliation of goodwill Group – 2010

Opening balance Impairments Total R’000 R’000 R’000 Goodwill 57 642 (6 094) 51 548

Goodwill acquired through business combinations has been allocated to individual cash-generating units for impairment testing as follows:

GROUP 2011 2010 R’000 R’000 Sekunjalo Investments Group – 38 Sekunjalo Technology Solutions Group 9 081 26 400 Sekunjalo Media Holdings Group 4 788 4 788 Sekunjalo Health Care Group 2 157 2 157 Sekunjalo Industrial Holdings Group 18 165 18 165 34 191 51 548 Disposals for the period Fios (Pty) Ltd 17 319 –

Refer to note 32 for details of impairment testing.

90 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 91 notes to the annual financial statements continued

4. Intangible assets

Group 2011 2010 Accumulated Accumulated amortisation amortisation and Carrying and Carrying Cost impairments value Cost impairments value R’000 R’000 R’000 R’000 R’000 R’000 Trademarks 18 159 (17 573) 586 18 131 (17 567) 564 Software development 14 125 (9 315) 4 810 12 401 (7 905) 4 496 Pharmaceutical dossiers 34 000 (18 700) 15 300 34 000 (17 000) 17 000 Total 66 284 (45 588) 20 696 64 532 (42 472) 22 060

Company Accumulated Accumulated amortisation amortisation and Carrying and Carrying Cost impairments value Cost impairments value R’000 R’000 R’000 R’000 R’000 R’000 Trademarks 51 (12) 39 24 (11) 13

Reconciliation of intangible assets Group – 2011 Opening balance Additions Amortisation Total R’000 R’000 R’000 R’000 Trademarks 564 29 (7) 586 Software development 4 496 1 762 (1 448) 4 810 Pharmaceutical dossiers 17 000 – (1 700) 15 300 22 060 1 791 (3 155) 22 060

Reconciliation of intangible assets Group – 2010 Opening Impairment balance Additions Amortisation loss Total R’000 R’000 R’000 R’000 R’000 Trademarks 555 16 (7) – 564 Software development 4 609 972 (1 085) – 4 496 Pharmaceutical dossiers 18 700 – (1 700) – 17 000 Royalty agreements 1 381 – – (1 381) – 25 244 988 (2 792) (1 381) 22 060

90 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 91 notes to the annual financial statements continued

4. Intangible assets (continued)

Reconciliation of intangible assets Company – 2011 Opening balance Additions Amortisation Total R’000 R’000 R’000 R’000 Trademarks 13 27 (1) 39

Reconciliation of intangible assets Company – 2010 Opening balance Amortisation Total R’000 R’000 R’000 Trademarks 15 (2) 13

Other information

Trademarks –– The “New Promex” brand was purchased during the 2008 financial year. The useful life of the brand had been assessed as being indefinite as it could not be determined when the economic benefits from this intangible would cease. –– The South Atlantic Lobster and Sea Diamond abalone brands are well established in the USA and Far East respectively. These brands are held in the Sekunjalo Industrial Holdings Division.

All other patents and trademarks are internally generated.

Pharmaceutical dossiers A register of the pharmaceutical dossiers is available for inspection at the registered office of Sekpharma (Pty) Ltd. All pharmaceutical dossiers have been acquired.

Software development costs All software development costs have been internally generated.

Intangibles with indefinite useful lifes The New Promex intangible asset has been assessed as having an indefinite useful life as it was not possible to determine when the economic benefits would cease. The intangible is not amortised and is subject to an annual impairment test. The recoverable amount is determined using a value-in-use calculation based on projected cash flows from financial budget approved by senior management covering a five-year period. The following assumptions were used: Pre-tax discount rates 11% – 14% Number of years 5 years Growth rate 0% Weighted average cost of capital 11% – 14%

The average remaining useful life of intangibles is listed below: –– Software development costs have a remaining amortisation period of between one and ten years. –– Patents and trademarks have a remaining amortisation period of between one and ten years. –– Pharmaceutical dossiers have a remaining amortisation period of nine years. –– Refer to note 32 for details on impairment tests.

92 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 93 notes to the annual financial statements continued

5. Investments in subsidiaries

Company The investments below have been designated as at fair value through profit and loss.

2011 2010 2011 2010 2011 2010 Voting Voting Carrying Carrying power power Holding Holding amount amount Name of company % % % % R’000 R’000 Sekunjalo Industrial Holdings (Pty) Ltd 100.00 100.00 100.00 100.00 343 069 345 600 Sekunjalo Technology Solutions Group (Pty) Ltd 100.00 100.00 100.00 100.00 10 054 24 500 Sekunjalo Capital (Pty) Ltd 100.00 100.00 100.00 100.00 – – Sekunjalo Properties (Pty) Ltd 100.00 100.00 100.00 100.00 3 285 2 500 African Biotechnological and Medical Innovation Investments (Pty) Ltd 100.00 100.00 100.00 100.00 150 000 150 000 Sekunjalo Media Holdings (Pty) Ltd 100.00 100.00 100.00 100.00 2 108 2 286 Sekunjalo Health Care Ltd 74.21 77.39 74.21 77.39 – – Sekpharma (Pty) Ltd 94.00 94.00 75.00 75.00 16 500 21 500 Kilomax (Pty) Ltd 100.00 100.00 100.00 100.00 124 104 77 000 At fair value through profit or loss – designated 649 120 623 386

African Biotechnological and Medical Innovations (Pty) Ltd holds the investment in associate – Genius Biotherapeutics (refer to note 6). Kilomax (Pty) Ltd holds the investment in British Telecom Communication Services South Africa (Pty) Ltd (refer to note 10).

Subsidiaries with less than 50% voting powers held Although the Company holds less than 50% of the voting powers in Saratoga Software (Pty) Ltd (through Sekunjalo Technology Solutions Group), the investment is considered a subsidiary because of additional voting powers granted to the parent company as set out in a shareholders’ agreement.

COMPANY 2011 2010 R’000 R’000 Original cost of subsidiaries Sekunjalo Industrial Holdings (Pty) Ltd 216 000 216 000 Sekunjalo Technology Solutions Group (Pty) Ltd – – Sekunjalo Capital (Pty) Ltd – – Sekunjalo Properties (Pty) Ltd – – African Biotechnological and Medical Innovation Investments (Pty) Ltd – – Sekunjalo Media Holdings (Pty) Ltd – – Sekunjalo Health Care Ltd 78 139 73 639 Sekpharma (Pty) Ltd 54 468 54 468 Kilomax (Pty) Ltd 1 1 348 608 344 108

Changes in ownership interest which did not result in loss of control Sekunjalo Health Care Ltd issued 23 136 308 “N” ordinary shares during the year. Of the issue, the Group subscribed to 11 568 154 “N” ordinary shares which resulted in the Group’s ownership decreasing from 77.39% to 74.21%.

92 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 93 notes to the annual financial statements continued

5. Investments in subsidiaries (continued)

During the prior year the following changes took place:

Issue of 160 shares in Saratoga Software (Pty Ltd to non-controlling interest, decreasing the Group’s ownership interest from 50.15% to 42.5%.

Sale of 300 shares in Fios (Pty) Ltd to non-controlling interest, reducing ownership of the Group’s interest from 100% to 70%. This subsidiary was sold during the current year.

Subsidiaries for which control was lost during the year The group lost control of Fios (Pty) Ltd and First Light Administration Services (Pty) Ltd on 1 March 2011.

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Loss on loss of control – Fios (Pty) Ltd 5 336 – – – Loss on loss of control – First Light Administration Services (Pty) Ltd 2 889 – – – 8 225 – – –

The loss has been included in the other operating expenses line in the statement of comprehensive income.

Fair value information Financial assets at fair value through profit or loss are recognised at fair value, which is therefore equal to their carrying amounts.

There is currently no active market for the financial assets held, and no recent transactions have been identified which are considered to be comparable to the financial assets held.

As quoted market prices are not available, valuation techniques are used to determine fair value. A discounted cash flow analysis, incorporating a terminal value calculation, has been employed to calculate the fair value. The future cash flows of the entity have been predicted using currently observable operating trends and future budgets. Once determined, the future cash flows have been discounted at an appropriate weighted average cost of capital to the present to determine the fair value. The valuation technique is consistent with the method employed in the prior year.

This technique incorporates all factors that market participants would consider in setting a price for the financial assets held, and is consistent with accepted economic methodologies for pricing financial instruments.

Reconciliation of financial assets at fair value through profit or loss measured at level 3

Gains or losses in Opening profit or Closing balance loss balance 2011 R’000 R’000 R’000 Sekunjalo Industrial Holdings (Pty) Ltd 345 600 (2 531) 343 069 Sekunjalo Technology Solutions Group (Pty) Ltd 24 500 (14 446) 10 054 Kilomax (Pty) Ltd 77 000 47 104 124 104 Sekunjalo Properties (Pty) Ltd 2 500 785 3 285 African Biotechnological and Medical Innovation Investments (Pty) Ltd 150 000 – 150 000 Sekunjalo Media Holdings (Pty) Ltd 2 286 (178) 2 108 Sekpharma (Pty) Ltd 21 500 (5 000) 16 500 623 386 25 734 649 120

2010 Sekunjalo Industrial Holdings (Pty) Ltd 320 000 25 600 345 600 Sekunjalo Technology Solutions Group (Pty) Ltd 55 950 (31 450) 24 500 Kilomax (Pty) Ltd 56 000 21 000 77 000 Sekunjalo Properties (Pty) Ltd 3 500 (1 000) 2 500 African Biotechnological and Medical Innovation Investments (Pty) Ltd 150 000 – 150 000 Sekunjalo Media Holdings (Pty) Ltd 8 286 (6 000) 2 286 Sekpharma (Pty) Ltd 26 250 (4 750) 21 500 619 986 3 400 623 386

94 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 95 notes to the annual financial statements continued

5. Investments in subsidiaries (continued)

The following significant assumptions were made in the use of the discounted cash flow model:

Investments in subsidaries WACC Sekunjalo Industrial Holdings (Pty) Ltd 14% – 18% Sekunjalo Technology Solutions Group (Pty) Ltd 24% – 27% Kilomax (Pty) Ltd 17% – 22% Sekunjalo Properties (Pty) Ltd 10% – 15% African Biotechnological and Medical Innovation Investments (Pty) Ltd* 24% – 27% Sekunjalo Media Holdings (Pty) Ltd 17% – 22% Sekpharma (Pty) Ltd 19% – 24%

Target debt/equity ratio 25% – 35% Beta 1.00 – 1.80 Specific risk premium 4% – 7% Terminal growth rate 4% – 5%

The fair value of investments in subsidiaries has been determined as per the assumptions and estimates as disclosed in note 1.4.

* Refer to note 6

Financial assets at level 3 Increases and decreases in the assumptions will result in the following changes in the fair value of subsidiaries:

2011 2010 Impact of changes in assumptions – level 3 Change R’000 R’000 Cost of debt 1% 7 221 6 935 Beta 0,1 20 739 19 917 WACC 1% 41 186 39 554 Specific risk premium 1% 32 147 30 873 Target debt/equity ratio 10% 45 002 43 218 Terminal growth rate 1% 15 678 15 056

Other Subsidiaries whose financial position or results are not material are excluded.

Details of excluded subsidiaries are available from the company secretary. Refer to note 46 for the full list of subsidiaries.

Profits and losses of consolidated subsidiary companies attributable to the Company

2011 2010 R’000 R’000 Aggregate profits after tax 51 068 21 335 Aggregate losses after tax (22 524) (42 050)

94 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 95 notes to the annual financial statements continued

6. Investments in associates

2011 2010 2011 2010 Accumu- Accumu- lated Carrying lated Carrying Holding Holding Cost losses value Cost losses value Name of company % % R’000 R’000 R’000 R’000 R’000 R’000 Genius Biotherapeutics 49.99 49.99 150 000 (19 808) 130 192 150 000 (11 803) 138 179 Emergent Energy (Pty) Ltd 25.00 – – – – – – –

The carrying amount of the associate is shown net of impairment losses and post-acquisition losses.

Genius Biotherapeutics The Group holds the investment in Genius Biotherapeutics (“Genius”), via African Biotechnological & Medical Innovation (Pty) Ltd (“ABMI”). It is carried at cost because of the complexity and uncertainty that arise when placing a fair value on the technologies held by Genius.

The directors performed an IAS 36 impairment test on the carrying amount contained within these annual financial statements. A value-in-use calculation was performed to test the investment for impairment. Explicit cash flows were forecast over a ten-year period after which they are expected to reach a terminal growth rate. A period of longer than five years has been used due to the assets of Genius being of a development nature.

However, as the valuation was performed in terms of IAS 36, estimates of future cash flows used are of the asset in its current condition. They do not include estimated future cash inflows or outflows that are expected to arise from a future restructuring of the entity which is not yet committed, or improving or enhancing the asset’s performance. Given recent trends in the biosimilars landscape and operational progress made, additional capital investment will result in the ability of Genius to generate greater future cash flows.

Genius holds 22 global patents in the areas of novel technologies, infectious disease and cancer treatment. Genius is in the process of identifying collaborative partners, over and above current university partners, to take these technologies forward to clinical trials and subsequent market launch. The directors believe the value of these technologies would increase the value of Genius significantly.

Genius has a biogeneric therapeutics division with Repotin (erythropoietin) and granulocyte-colony stimulating factor (G-CSF) as its core biogenerics. Repotin is currently manufactured in Pretoria in Africa’s only erythropoietin cell culture facility. Genius’ subsidiary, Ribotech (Pty) Ltd, has completed the refurbishment of its manufacturing facility.

Summary of Group’s interest in associates

2011 2010 R’000 R’000 Total assets 30 795 36 688 Total liabilities (44 682) (34 251) Revenue 1 226 1 379 Losses (17 042) (13 264)

Investments with more than 20% holding not considered as significant influence The Group holds a 30% equity interest in British Telecom Communication Services South Africa (Pty) Ltd. The Group also holds a 25% voting rights (5% equity interest) in Saab South Africa (Pty) Ltd. These investment are not treated as associates as the Group does not have significant influence as stipulated in the shareholders’ agreement.

96 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 97 notes to the annual financial statements continued

7. Investment in joint ventures

2011 2010 2011 2010 Carrying Carrying Holding Holding amount amount Name of company % % R’000 R’000 Amethst (Pty) Ltd 50.00 50.00 – 50 Premier Select (Pty) Ltd 50.00 50.00 – 50

Summary of Group’s interest in joint ventures

Jointly controlled entities GROUP 2011 2010 R’000 R’000 Non-current assets 1 175 3 289 Non-current liabilities 703 199 Current assets 954 19 487 Current liabilities (310 066) (142 138) Revenue 1 888 13 000 Cost of sales (24 195) – Operating expenses (19 980) (18 417) Loss for the year (44 168) (27 898)

Premier Select is a joint venture in the fishing industry. This company was dormant at year-end.

Amethst (Pty) Ltd joint venture provides software licences and support to the Department of Health.

Jointly controlled operations Non-current assets 94 316 Non-current liabilities 312 136 Current assets 982 530 Current liabilities 276 381 Revenue 15 230 15 454 Cost of sales (8 508) (11 522) Other operating income 204 5 Operating expenses (4 093) (1 735) Finance income 93 52 Profit/(loss) for the year 2 992 (2 254)

–– The Bloudam joint venture is a jointly controlled operation in the west coast rock lobster fishing sector. The operation jointly controls a vessel with external rights holders. –– The Eastern Cape hake longline joint venture is a jointly controlled operation in the Eastern Cape hake longline fishing sector. –– The Premier – BCP Hake joint venture is a jointly controlled operation in the hake fishing sector. –– The Premier Seacat joint venture is a jointly controlled operation in the squid fishing sector. The operation jointly controls a vessel with external rights holders.

Unrecognised share of losses of equity accounted joint ventures The Group has discontinued recognising its share of the losses of Amethst (Pty) Ltd, as the investment is held at Rnil (2010: 50 000) and the group has no obligation for any losses of the associate. The total unrecognised losses for the current period amount to R44 155 (2010: R27 878). The accumulated unrecognised losses to date amount to R308 241 (2010: R264 086).

96 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 97 notes to the annual financial statements continued

8. Loans to/(from) group companies

compANY 2011 2010 R’000 R’000 Loans to/from group companies Loans from subsidiaries (7 956) (65 226) 122 805 144 511 Loans to subsidiaries 219 757 250 725 Impairments of loans to subsidiaries (96 952) (106 214) Total 114 849 79 285

Non-current assets 122 805 144 511 Non-current liabilities (7 956) (65 226) 114 849 79 285

Refer to note 36 for the detailed breakdown of loans to and from Group companies.

The above loans are all unsecured and have no fixed terms of repayment.

Payment has been deferred for 12 months from the statement of financial position date for loan amounts as follows: – Loans from subsidiaries (7 956) (65 226) – Loans to subsidiaries 219 757 250 725 211 801 185 499

Credit quality of loans to Group companies The above loans are advanced to Group companies for either capital investment or working capital needs. All advances are in line with divisional budgets. The risk of default is therefore based on the success of divisional trading. Credit quality is to be considered high.

Fair value of loans to and from Group companies The carrying value of the above loans approximates fair value.

Reconciliation of provision for impairment of loans to Group companies Opening balance 106 214 91 461 Provision for impairment 13 14 753 Reversal of previously impaired loans (4 775) – Reversal of impairment due to conversion of loan to investment in subsidiary (4 500) – 96 952 106 214

Sekunjalo Health Care Ltd 57 561 66 364 Sekunjalo Capital (Pty) Ltd 37 054 37 526 Sekunjalo Corporate Services (Pty) Ltd 2 337 2 324 96 952 106 214

98 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 99 notes to the annual financial statements continued

8. Loans to (from) group companies (continued)

group compANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Loans to/(from) group companies Loans are impaired to the extent to which the recoverability of the loan in a five-year period can not be demonstrated to the satisfaction of the directors of the company.

The recoverable amount was determined using a value-in-use calculation based on projected cash flows in respect of the loans over a five-year period.

The following assumptions were used: – Pre-tax discount rates 10.5% – Number of years – five years

Applicable rates Interest-free 106 475 106 214 Prime overdraft rate less 2% – (12 543) Prime overdraft rate 105 357 75 473

Loans subordinated The following loans have been subordinated until such time as the assets of the subsidiaries fairly valued exceed the liabilities fairly valued:

Sekunjalo Health Care Ltd 67 016 66 364 Sekunjalo Capital (Pty) Ltd 37 054 37 526 Sekunjalo Corporate Services (Pty) Ltd 2 337 2 324 African Biotechnology and Medical Innovation Investments (Pty) Ltd 76 067 63 815 Sekunjalo Technologies Solutions Group (Pty) Ltd 3 931 6 497

9. Loan to associate

Genius Biotherapeutics 39 111 17 900 – –

The above loan is unsecured and has no fixed terms of repayment. Payment has been deferred for 12 months from statement of financial position date. The loan accrues interest which is linked to the prime overdraft rate.

Credit quality of loan to associate The credit quality of loan to associate that is neither past due nor impaired is assessed by reference to historical information about counterparty default rates. No defaults have occurred in the past.

Fair value of loan to associate The carrying value of the above loan approximates fair value.

Subordination The above loan has been subordinated until such time as the assets of the associate fairly valued exceed the liabilities fairly valued.

98 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 99 notes to the annual financial statements continued

10. Other financial assets

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 At fair value through profit or loss – designated Investments in unlisted public companies 2 106 1 749 2 106 1 749 Investments in unlisted private companies 194 562 153 151 31 297 31 260 Total investments at fair value through profit and loss 196 668 154 900 33 403 33 009

Included in the above is the Group’s investment in British Telecom Communications Services South Africa (Pty) Ltd and SAAB South Africa (Pty) Ltd. The fair value of these investments is estimated at R194 million.

Loans and receivables Non-interest-bearing loans – 1 945 – 27 Interest-bearing loans 37 193 33 036 4 147 1 243 Accumulated impairments (30 575) (29 824) (1 807) (1 056) Total 6 618 5 157 2 340 214

Interest on the interest-bearing loans is charged at the prime bank overdraft rate.

All the loans are unsecured. No fixed terms of repayment have been determined.

The above terms are renegotiable on an annual basis.

Total other financial assets 203 286 160 057 35 743 33 223

Non-current financial assets At fair value through profit or loss – designated 196 668 154 900 33 403 33 009 Loans and receivables 558 2 271 – 64 197 226 157 171 33 403 33 073 Current assets Loans and receivables 6 060 2 886 2 340 150 Total from other financial assets 203 286 160 057 35 743 33 223

Fair value information Financial assets at fair value through profit or loss are recognised at fair value, which is therefore equal to their carrying amounts.

There is currently no active market for the financial assets held, and no recent transactions have been identified which are considered to be comparable to the financial assets held.

As quoted market prices are not available, valuation techniques are used to determine fair value. A discounted cash flow analysis, incorporating a terminal value calculation, has been employed to calculate the fair value. The future cash flows of the entity have been predicted using currently observable operating trends and future budgets. Once determined, the future cash flows have been discounted at an appropriate weighted average cost of capital to the present to determine the fair value. The valuation technique is consistent with the method employed in the prior year.

This technique incorporates all factors that market participants would consider in setting a price for the financial assets held, and is consistent with accepted economic methodologies for pricing financial instruments.

100 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 101 notes to the annual financial statements continued

10. Other financial assets (continued)

Fair value hierarchy of financial assets at fair value through profit or loss IFRS 7 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

Level 1 – Quoted prices available in active markets for identical assets or liabilities Level 2 – Inputs used, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly Level 3 – Fair value determined by valuation that uses inputs that are not based on observable market data

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 The following financial instruments are measured at fair value:

Level 3 Investments in unlisted public companies 2 106 1 749 2 106 1 749 Investments in unlisted private companies 194 562 153 151 29 572 31 260 196 668 154 900 31 678 33 009

Reconciliation of financial assets at fair value through profit or loss measured at level 3

Group – 2011

Gains or losses Opening in profit Closing balance or loss Purchases balance Investments in unlisted public companies 1 749 357 – 2 106 Investments in unlisted private companies 153 151 41 375 36 194 562 154 900 41 732 36 196 668

Group – 2010

Gains or losses Opening in profit Closing balance or loss balance Investments in unlisted public companies 1 749 – 1 749 Investments in unlisted private companies 95 191 57 960 153 151 Beneficial interest in a trust 540 (540) – 97 480 57 420 154 900

100 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 101 notes to the annual financial statements continued

10. Other financial assets (continued)

Reconciliation of financial assets at fair value through profit or loss measured at level 3

Company – 2011

Gains or losses Opening in profit Closing balance or loss Purchases balance R’000 R’000 R’000 R’000 Investments in unlisted public companies 1 749 357 – 2 106 Investments in unlisted private companies 31 260 – 36 31 296 33 009 357 36 33 402

Company – 2010

Gains or losses Group in profit Closing balance or loss balance R’000 R’000 R’000 Investments in unlisted public companies 1 749 – 1 749 Investments in unlisted private companies – 31 260 31 260 1 749 31 260 33 009

Total gains or losses for the year included in profit or loss for assets held at the end of the reporting year

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Investments in unlisted public companies 357 – 357 – Investments in unlisted private companies 39 686 57 960 (1 687) 31 260 Beneficial interest in a trust – (540) – – 40 043 57 420 (1 330) 31 260

102 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 103 notes to the annual financial statements continued

10. Other financial assets (continued)

Signficant assumptions

Target debt/ Specific Terminal equity risk growth ratio Beta WACC premium rate Investments in unlisted public companies 30% 1.10 14%–18% 2%–4% 4.50% Investment in unlisted private companies 30% 1.30–1.50 18%–22% 2%–8% 4.50%

Impact of changes in assumptions – level 3

Financial assets at level 3 Increases or decreases in the assumptions will result in the following changes:

GROUP COMPANY 2011 2010 2011 2010 Change R’000 R’000 R’000 R’000 Interest rates 1% 2 161 1 716 – – Beta 0.1 6 205 4 914 – – WACC 1% 12 323 9 790 – – Specific risk premium 1% 9 619 7 642 – – Target debt/equity ratio 10% 13 465 10 784 – – Terminal growth rate 1% 4 691 3 059 – –

Fair values of loans and receivables The carrying amount of loans and receivables approximates fair value due to their short term nature. The future cash flows relating to loans and receivables were discounted at prime overdraft rate which reflects the risk implicit in the loans and receivables.

Reconciliation of provision for impairment for loans and receivables

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Opening balance 29 824 37 062 1 056 7 638 Additional impairments 908 901 908 901 Utilised against write-offs (157) (8 139) (157) (7 483) Closing balance 30 575 29 824 1 807 1 056

Loans impaired New Promex Corporation (Pty) Ltd 30 425 29 667 1 657 899 Other 150 157 150 157 30 575 29 824 1 807 1 056

Loans receivable are impaired to the extent to which recoverability of the asset over a five-year period cannot be demonstrated to the satisfaction of the directors of the Group.

Credit quality of loans and receivables Credit quality is considered to be high as credit risk is managed (for all material items) through a stringent policy on the granting of credit limits, continual review and monitoring of these limits as well as historic default rates. The maximum exposure to credit risk is represented by the carrying values of the companies’ financial assets.

102 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 103 notes to the annual financial statements continued

11. Operating lease asset/(liability)

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Non-current assets 1 689 1 218 – – Non-current liabilities (1 120) (1 198) – – 569 20 – –

12. Deferred tax

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Deferred tax asset/(liability) Accelerated capital allowances on property, plant and equipment (26 261) (21 250) – – Fair value gain on loan (1 745) (1 745) – – Provision for doubtful debts 431 34 – – Tax losses available for set-off against future taxable income 18 088 9 084 2 897 2 550 Fair-value adjustments on investments in associates (18 682) (18 682) – – Provisions 4 951 6 570 1 676 2 762 Software development costs (997) (24) – – Prepaid expenses (700) (398) – – Income received in advance 266 (30) – – Fair-value adjustments on other investments (23 720) (17 877) (4 663) (4 612) Operating lease liability 456 572 – – Shipping allowances (19 634) (19 004) – – Biological assets (9 773) (9 533) – – Fair-value adjustments on subsidiaries – – (60 637) (57 034) (77 320) (72 283) (60 727) (56 334)

Reconciliation of deferred tax asset/(liability) At beginning of the year (72 283) (61 712) (56 334) (53 999) Accelerated capital allowances on property, plant and equipment (5 013) 5 604 – – Fair-value adjustments on investments in associates – 1 487 – – Provision for doubtful debts 397 6 – – Tax losses available for set-off against future taxable income 9 004 (14 004) 346 2 550 Provisions (1 620) 885 (1 085) (33) Software development costs (972) 1 245 – – Prepaid expenses (303) (85) – – Fair-value adjustments on subsidiaries – – (50) (476) Income received in advance 296 (1 464) – – Fair value on other investments (5 842) (8 940) (3 604) (4 376) Operating lease liability (116) 545 – – Shipping allowances (631) 2 955 – – Biological assets (239) 1 195 – – At end of the year (77 320) (72 283) (60 727) (56 334)

The total unutilised tax credits in the group not raised as deferred tax assets amounted to R24 310 098 (2010: R23 883 307).

Deferred tax asset 24 804 24 956 4 573 5 312 Deferred tax liability (102 124) (97 239) (65 300) (61 646) (77 320) (72 283) (60 727) (56 334)

104 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 105 notes to the annual financial statements continued

13. Inventories

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Raw materials 1 313 3 466 – – Finished goods 7 681 2 456 – – Merchandise 4 452 4 126 – – Consumables 4 539 5 655 – – 17 985 15 703 – –

Inventory pledged as security Inventories with a carrying amount of R13 525 987 (2010: R11 576 984) were pledged as security for overdraft facilities of R47 000 000 (2010: R47 000 000) of the Group. At year-end the overdraft amounted to R38 211 002 (2010: R41 398 382) (refer to note 16).

14. Biological assets

Changes in fair value births Opening and balance Disposals deaths Total R’000 R’000 R’000 R’000 Reconciliation of biological assets Group – 2011 Abalone 34 046 (20 479) 21 336 34 903

Reconciliation of biological assets Group – 2010 Abalone 38 320 (17 182) 12 908 34 046

Non-financial information group 2011 2010 Quantities of each biological asset Abalone (kilograms) 84 355 99 268

Pledged as security The total carrying value of biological assets is pledged as security to Absa Bank Limited. Refer to note 20 for further details.

Methods and assumptions used in determining fair value Abalone fair value is determined by using market values of each class of abalone size. All selling costs are excluded from fair values.

104 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 105 notes to the annual financial statements continued

15. Trade and other receivables

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Trade receivables 87 484 60 166 4 596 570 Prepayments 2 788 3 967 – – Value added tax 2 462 352 – – Other receivables 3 991 2 966 – 50 96 725 67 451 4 596 620

Trade and other receivables pledged as security Trade and other receivables with a carrying amount of R25 700 515 (2010: R30 504 637) were pledged as security for overdraft facilities of R47 000 000 (2010: R47 000 000) of the Group.

Credit quality of trade receivables Twenty seven per cent of the Group’s trade receivables stem from sales within the Sekunjalo Industrial Holdings division. This division performs ongoing credit evaluations of the financial condition of their customers. Before any new customer is approved for credit, a thorough credit check is performed by an external credit agency. The agency provides credit scores and credit ratings on each of their customers. In addition to this, a recommended credit limit is provided by the credit agency. Additional internal ratings and credit limit checklist procedures are performed by management and the company’s directors before a final credit limit is approved to their customers. The credit quality of trade and other receivables that are neither past due nor impaired is assessed by management, based on historical information about counterparty default ratings if available. Any customers that have exceeded their credit limits may not purchase goods unless payment has been received from the customer. Credit quality is considered to be high.

Sixteen per cent of the Group’s trade receivables stem from sales within the Sekunjalo Technology Solutions Group division. Sales within this division are largely due to blue-chip companies. The credit risk on the trade receivables balance was assessed by divisional management and is deemed to be low. Credit quality is considered to be high.

Thirty nine per cent of the Group’s trade receivables stem from sales within the Sekunjalo Health Care division (more specifically Health System Technologies (Pty) Ltd). The outstanding balance consists predominantly of amounts owed by state institutions. The credit risk has been assessed as low by the divisional management at year-end. Credit quality is considered to be high.

The Media Group contributes eleven percent of the Group’s trade receivables, of which forty five percent stems from sales within Tripos Tourism Investments (Pty) Ltd. The nature, terms and conditions of sales made by the travel agent mitigate the risk of bad debt. The balance is from espAfrika (Pty) Ltd in respect of festivals managed locally. Ongoing evaluation of the debtors takes place. The credit risk has been assessed as low by the divisional management at year-end. Credit quality is considered to be high.

The balance is the aggregate of trade debtors in the smaller Group companies. Ongoing evaluation of the debtors takes place. The credit risk has been assessed as low by the divisional management at year-end. Credit quality is considered to be high.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group customer base consists of both foreign and local trade debtors.

Fair value of trade and other receivables The fair value of trade and other receivables approximates its carrying value due to the short-term nature and the fact that no interest is being charged.

106 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 107 notes to the annual financial statements continued

15. Trade and other receivables (continued)

Trade receivables past due but not impaired Trade and other receivables which are less than three months past due are not considered to be impaired. At 31 August 2011, R10 784 031 (2010: R10 189 004) was past due but not impaired.

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

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 One month past due 2 760 3 229 – – Two months past due 2 926 689 – – Three months past due 5 099 6 272 – –

Trade and other receivables impaired The amount of the provision was R2 054 627 as of 31 August 2011 (2010: R234 100).

Aging Over six months 2 055 234 – –

Currencies The carrying amount of trade and other receivables are denominated in the following currencies: Rand 84 150 58 960 – 711 US dollar 11 691 8 317 – 83 Euro 888 849 – 5

Reconciliation of provision for impairment of trade and other receivables Opening balance 234 378 – – Provision for impairment 2 216 234 – – Reversal of prior-year provision (395) (378) – – 2 055 234 – –

The creation and release of the provision for impairment of trade and other receivables have been included in operating expenses in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.

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

Trade and other receivables are shown net of amounts transferred to disposal groups classified as held for sale of Rnil (2010: R836 630).

106 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 107 notes to the annual financial statements continued

16. Cash and cash equivalents

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Cash on hand 2 019 299 – – Bank balances 28 605 51 776 – – Bank overdraft (38 211) (41 398) (12 623) (6 773) (7 587) 10 677 (12 623) (6 773)

Current assets 30 624 52 075 – – Current liabilities (38 211) (41 398) (12 623) (6 773) (7 587) 10 677 (12 623) (6 773)

Cash and cash equivalents with a carrying value of Rnil (2010: R2 336 260) have been transferred to disposal groups held for sale. Refer to note 17.

The bank overdrafts in the Group are secured by the following in favour of Absa Bank Ltd: – Unlimited suretyships by Premfresh Seafoods (Pty) Ltd – Unlimited suretyships by Marine Growers (Pty) Ltd – Unlimited suretyships by Sekunjalo Health Care Ltd – Unlimited suretyships by Sekunjalo Properties (Pty) Ltd – Unlimited suretyships by Sekunjalo Industrial Holdings (Pty) Ltd – Unlimited suretyships by Sekunjalo Food and Fishing (Pty) Ltd – Unlimited suretyships by Sekunjalo Medical Trading (Pty) Ltd – Unlimited suretyships by Wynberg Pharmaceuticals (Pty) Ltd – Unlimited suretyships by Health System Technologies (Pty) Ltd – Unlimited suretyships by Premier Fishing SA (Pty) Ltd – Unlimited suretyships by Sekunjalo Capital (Pty) Ltd – Unlimited suretyships by Sekunjalo Investments Ltd – Negative pledge of assets by Sekunjalo Investments Ltd – Pledge and cession of shares in Sekunjalo Health Care Ltd – First Maritime Bond for R40 000 000 by Premier Fishing SA (Pty) Ltd over marine vessels with a carrying amount of R37 357 500 – First Special Notarial Bond for R3 450 000 by Premier Fishing SA (Pty) Ltd over marine vessels with a carrying amount of R3 332 333 – General Notarial Bond for R50 000 000 by Premier Fishing SA (Pty) Ltd over stock with a carrying value of R11 576 984, movable assets, plant and equipment and vessel equipment to the value of R133 760 449 – First continuous covering mortgage bond by Premier Fishing SA (Pty) Ltd for R10 000 000 over erf 12, St. Helena Bay – Cession of loan account by Premfresh Seafoods (Pty) Ltd and Marine Growers (Pty) Ltd in Premier Fishing SA (Pty) Ltd to Absa Bank Limited – Registered cession of fire insurance covering all assets – Cession of Customer Foreign Currency accounts

Guarantees are as follows: – Eskom: R4 156 – Customs and excise: R120 000 – Perishable Product Expenditure Control Board: R4 000 – Nedbank: R182 000 – South African Revenue Service: R10 000 – Overstrand Municipality: R10 000

FirstRand: Parental guarantee of R10 650 000 for Amethst (Pty) Ltd – Other securities: Cession of Nedbank call counts and agreement to set off current account and foreign advance accounts

Credit quality of cash at bank and short-term deposits, excluding cash on hand The Sekunjalo Investments Ltd Group limits its exposure to credit risk through dealing with well-established financial institutions with high credit standing and thus management does not expect any counterparty to fail to meet its obligations.

108 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 109 notes to the annual financial statements continued

17. Discontinued operations and disposal groups held for sale

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 During the current year the Group completed the sale of Fios (Pty) Ltd, a company managed under Sekunjalo Technology Solutions Group (Pty) Ltd. The effective date of the sale was 1 March 2011. Refer to note 35 for additional details on disposal of subsidiaries.

The Group also concluded the sale of First Light Administration Services (Pty) Ltd. The Group had been in negotiations with external parties to conclude the sale since the last financial year. The effective date of the sale was 1 March 2011.

Below is a summary of the statement of comprehensive income and related cash flows of Fios (Pty) Ltd:

Fios (Pty) Ltd Revenue 15 407 33 780 – – Expenses (15 299) (31 832) – – Operating profit 108 1 948 – – Net finance costs (651) 51 – – (Loss)/profit before taxation (543) 1 999 – – Taxation – (314) – – (Loss)/profit for the year (543) 1 685 – –

Cash flows from discontinued operations Cash flows from operating activities 1 220 5 009 – – Cash flows from investing activities (472) (350) – – Cash flows from financing activities – (1 254) – – 748 3 405 – –

Below is a summary of the statement of comprehensive income and related cash flows of First Light Administration Services (Pty) Ltd:

First Light Administration Services (Pty) Ltd

Revenue 4 361 7 960 – – Expenses (4 983) (9 430) – – Operating loss (622) (1 470) – – Loss before taxation (622) (1 470) Taxation – – – – Loss for the year (622) (1 470) – –

Cash flows from discontinued operations Cash flows from operating activities 138 (1 090) – – Cash flows from investing activities (97) (791) – – Cash flows from financing activities – 1 780 – – 41 (101) – –

108 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 109 notes to the annual financial statements continued

17. Discontinued operations and disposal groups held for sale (continued)

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Assets and liabilities Property, plant and equipment – 157 Other financial assets – 6 – – Trade and other receivables – 837 Cash and cash equivalents – 2 336 – – – 3 336 – – Non-current liabilities held for sale Other financial liabilities – 5 021 – – Finance lease obligation – 575 Bank overdraft – 80 – – – 5 676 – –

18. Share capital and share premium

Authorised 10 000 000 “A” class ordinary shares of 1 cent each (unlisted) 100 100 100 100 1 000 000 000 “B” class ordinary shares of 0.002 cents each (listed) 20 20 20 20 1 000 “A” class convertible redeemable cumulative preference shares of 100 cents each 1 1 1 1 10 000 000 “B” class redeemable preference shares of 0.998 cents each 100 100 100 100 221 221 221 221

Issued 2 000 000 “A” class ordinary shares of 1 cent each 20 20 20 20 489 339 484 (2009: 489 339 484) “B” Class ordinary shares of 0.002 cents each 10 10 10 10 Share premium 403 147 403 147 403 147 403 147 403 177 403 177 403 177 403 177

Reconciliation of number of issued “B” class ordinary shares Opening balance 489 339 488 808 489 339 489 339 Treasury shares – 531 – – Closing balance 489 339 489 339 489 339 489 339

“A” class ordinary shares carry five hundred votes per share and “B” class shares carry one vote per share

110 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 111 notes to the annual financial statements continued

19. Reserves

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Capital Redemption Reserve Fund 8 034 8 034 – – Revaluation reserve 113 160 113 160 – – 121 194 121 194 – –

The capital redemption reserve fund arose when a subsidiary had a share buy-back in prior years.

The revaluation reserve relates to a change in control of Genius Biotherapeutics when significant influence was exercised for the first time. This investment was initially accounted at fair value and is currently carried at cost less accumulated post-acquisition losses. The previous fair value adjustments were transferred out of retained income into a reserve as a result of this change in control.

20. Other financial liabilities

Held at amortised cost Bank borrowings 16 573 20 873 – – Redeemable preference shares – 5 021 – – Redeemable cumulative preference shares 32 816 31 265 – – Loans from minority shareholders of subsidiary 6 000 9 000 – – Loan from shareholder 21 624 16 326 21 624 16 326 Other borrowings 7 447 3 227 897 1 056 84 460 85 712 22 521 17 382

Non-current portion of financial liabilities 72 839 53 454 21 807 254

Current portion of financial liabilities 11 621 27 237 714 17 128 Transferred to liabilities of disposal groups – 5 021 – – 11 621 32 258 714 17 128 84 460 85 712 22 521 17 382

Secured 16 574 20 873 – – Unsecured 67 886 64 839 22 521 17 382 84 460 85 712 22 521 17 382

The following represents the book value of the security for these borrowings:

Property, plant and equipment 76 639 67 642 – – Biological assets 34 903 34 046 – – 111 542 101 688 – –

Floating rates 71 013 73 485 21 624 16 326 Interest-free 13 447 12 227 897 1 056 Weighted average effective interest rate 10.40% 12.43% 10.10% 9.9%

As at 31 August 2011, the carrying amount of borrowings approximates their fair value.

All financial liabilities are denominated in South African rands.

110 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 111 notes to the annual financial statements continued

21. Finance lease obligation

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Minimum lease payments due – within one year 206 681 – – – in second to fifth year inclusive 39 233 – – 245 914 – – Less: future finance charges (11) (63) – – Present value of minimum lease payments 234 851 – –

Present value of minimum lease payments due – within one year 85 623 – – – in second to fifth year inclusive 149 228 – – 234 851 – –

Non-current liabilities 149 228 – – Current liabilities 85 623 – – 234 851 – –

It is Group policy to lease certain motor vehicles and equipment under finance leases.

The average lease term was five years and the average effective borrowing rate was 9% (2010: 10%).

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

The Group’s obligations under finance leases are secured by the lessor’s charge over the leased assets. Refer note 2.

Defaults and breaches There were no defaults or breaches during the year under review.

22. Post-employment medical costs

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Carrying value Opening balance (1 080) (794) – – Increase in provision for medical aid benefits (550) (286) Closing balance (1 630) (1 080) – –

23. Trade and other payables GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Trade payables 57 337 30 757 4 439 940 Amounts received in advance 3 234 8 141 – – Value added tax 3 637 2 509 445 331 Accrued expenses 14 996 5 677 14 890 5 500 Other payables 14 813 14 694 34 98 94 017 61 778 19 808 6 869

Fair value of trade and other payables The carrying amount of trade and other payables approximates fair value due to their short-term nature.

112 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 113 notes to the annual financial statements continued

24. Provisions

Reconciliation of provisions GROUP – 2011 Reversed Utilised Reversed through Opening during during business balance Additions the year the year disvesture Total R’000 R’000 R’000 R’000 R’000 R’000 Profit warranties 413 – (143) (270) – – Provision for leave pay 5 484 3 825 (4 192) – (274) 4 843 Provision for salary bonuses 16 135 7 218 (11 206) – (1 245) 10 902 Product warranties 1 324 – – – – 1 324 Other provisions 2 782 643 (1 355) – – 2 070 26 138 11 686 (16 896) (270) (1 519) 19 139

Reconciliation of provisions GROUP – 2010 Utilised Opening during balance Additions the year Total R’000 R’000 R’000 R’000 Profit warranties 1 000 – (587) 413 Provision for leave pay 5 410 3 118 (3 044) 5 484 Provision for salary bonuses 13 282 8 136 (5 283) 16 135 Product warranties 517 807 – 1 324 Other provisions 3 362 1 079 (1 659) 2 782 23 571 13 140 (10 573) 26 138

Reconciliation of provisions COMPANY – 2011 Provision for leave pay 953 224 (190) 987 Provision for salary bonuses 8 910 1 000 (4 910) 5 000 9 863 1 224 (5 100) 5 987

Reconciliation of provisions COMPANY – 2010 Provision for leave pay 980 – (27) 953 Provision for salary bonuses 9 000 910 (1 000) 8 910 9 980 910 (1 027) 9 863

Profit warranties are provisions relating to the acquisition of investments where there are contingent payments based on profit targets.

Employee benefits in the form of annual leave entitlements are provided for when they accrue to employees with reference to service rendered up to statement of financial position date. The above provisions represent management’s best estimate of the Group’s liability based on prior experience.

Product warranties comprise potential debtor claims as a result of the suspension of a government tender for HIV rapid diagnostic strips. The above provision represents management’s best estimate of the liability based on the amount of cancelled sales.

The provision for performance bonuses are provided for when they accrue to employees with reference to services rendered up to the statement of financial position date. The above provision represents management’s best estimate of the Company’s liabilities based on prior experience.

Other provisions mainly comprise claims made by South African Revenue Service over outstanding value added tax in dispute and other legal costs. The above provision represents management’s best estimate of the Company’s liability based on expected cash flows.

All provisions are expected to be utilised within the next 12 months.

112 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 113 notes to the annual financial statements continued

25. Revenue

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Sale of goods 255 837 253 583 – – Rendering of services 182 641 146 882 18 108 7 767 Rental income 1 912 2 704 – – 440 390 403 169 18 108 7 767

26. Fair-value adjustments

At fair value through profit and loss Investment in subsidiaries – – 25 734 3 400 Other financial assets 41 732 57 421 359 31 260 41 732 57 421 26 093 34 660

27. Investment revenue

Dividend revenue Subsidiaries – – 17 178 219 Unlisted private investments 13 100 – – – Unlisted public investments 336 – 336 – 13 436 – 17 514 219 Interest revenue Subsidiaries – – 13 304 15 891 Bank 520 448 – 5 Other interest 7 010 5 449 – 86 7 530 5 897 13 304 15 982 20 966 5 897 30 818 16 201

28. Finance costs

Group companies – – 7 391 6 632 Bank 5 821 6 434 1 087 1 167 Amortisation on liabilities carried at amortised cost 1 550 1 817 – – Other interest paid 6 596 2 774 103 553 13 967 11 025 8 581 8 352

114 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 115 notes to the annual financial statements continued

29. profit before taxation

Profit before taxation for the year is stated after accounting for the following:

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Income from subsidiaries Dividends – – 17 178 219 Interest – – 13 304 15 891 – – 30 482 16 110

Operating lease charges Premises (5 193) (6 170) – – Motor vehicles – (12) – – Equipment (360) (310) (236) (211) (5 553) (6 492) (236) (211)

Amortisation on intangible assets (3 117) (2 791) (1) (2) Depreciation on property, plant and equipment (18 692) (17 254) (28) (108) Employee costs (93 956) (110 002) (6 948) (5 061) Fair value gain (loss) on biological assets 857 (4 274) – – Impairment on goodwill (38) (6 094) – – Impairment on intangible assets – (1 381) – – Impairment on loans to group companies – – – (14 753) Impairment on other financial assets (908) (1 636) (908) (901) Loss on sale of subsidiaries (8 225) – – – Profit/(loss) on foreign exchange 1 468 (156) – – Profit on sale of property, plant and equipment 386 3 200 – – Research and development (16) (10) – – Reversal of impairment on group loans – – 4 775 – Royalty expense – (5 500) – (5 500)

Net gains on financial instruments: Financial assets at fair value through profit or loss – designated 41 732 57 421 26 093 31 260

114 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 115 notes to the annual financial statements continued

30. Taxation

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Major components of the tax expense

Current Local income tax – current period 3 863 2 473 – – Local income tax – recognised in current tax for prior periods (648) (2 732) 12 (2 450) Secondary tax on companies 300 326 – – 3 515 67 12 (2 450)

Deferred Originating and reversing temporary differences 2 550 12 443 4 391 2 335 Arising from prior period adjustments 1 230 – – – 3 780 12 443 4 391 2 335 7 295 12 510 4 403 (115)

Various subsidiaries have incurred operating losses which result in losses for tax purposes. Deferred tax assets have been raised to the extent that it is probable that future taxable profits will be available against which the unused tax losses can be utilised.

% % % % Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate Applicable tax rate 28.00 28.00 28.00 28.00

Exempt income – – (7.65) – Permanent differences (21.03) 13.73 (11.07) (21.43) Capital gains tax – 23.03 (0.06) (5.42) Disallowable charges 13.02 (9.20) – – 19.99 55.56 9.22 1.15

31. Auditors’ remuneration

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Fees 2 342 2 678 639 777 Adjustment for previous year (41) 194 – 80 2 301 2 872 639 857

116 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 117 notes to the annual financial statements continued

32. Impairment of assets

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Material impairment losses (recognised)/reversed Other financial assets (908) (1 636) (908) –

An impairment test was conducted subsequent to a restructuring in the Sekunjalo Capital Group cash-generating unit. The recoverable value was based on its value in use.

The following assumptions were used: Pre-tax discount rates: 11% – 14% Number of years: 1 Weighted average cost of capital: 11% – 14%

The cash-generating units above are managed under Sekunjalo Capital Group.

Loans to group companies – – 4 762 (14 753)

The Group performs annual cash flow forecasts for its subsidiaries (cash-generating units) over a five-year period. This process forms the basis of testing the recoverability of loans advanced to Group companies.

The recoverable amount for the loans was more than the carrying amount of the loans. Previous impairments were therefore reversed.

The recoverable value was based on its value in use, being the present value of expected cash inflows over a five-year period.

The following assumptions were used: Pre-tax discount rates: 11% – 14% Number of years: 5 Weighted average cost of capital: 11% – 14%

The cash-generating units above are managed under Sekunjalo Capital Group and Sekunjalo Health Care Group. (908) (1 636) 3 854 (14 753)

116 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 117 notes to the annual financial statements continued

32. Impairment of assets (continued)

GROUP COMPANY Significant goodwill or significant intangible assets with 2011 2010 2011 2010 indefinite useful lives R’000 R’000 R’000 R’000 Goodwill (38) (6 094) – –

The Group performs an annual valuation process for its subsidiaries (cash-generating units). This valuation process forms the basis of testing goodwill for impairment.

The recoverable amount for Sekunjalo Corporate Services (Pty) Ltd (2010: First Light Administration Services (Pty) Ltd, Tripos Travel Investments (Pty) Ltd and South Atlantic Jazz Festival (Pty) Ltd) was less than the carrying amount of the cash-generating units. Goodwill in respect of these cash-generating units was fully impaired.

The recoverable value was based on its value in use. The following assumptions were used: Pre-tax discount rates: 11% – 14% Number of years: 5 Weighted average cost of capital: 11% – 14%

The cash-generating units above are managed under Sekunjalo Investments Group (2010: Sekunjalo Capital Group and Sekunjalo Media Holdings Group).

Intangible assets – (1 381) – –

The impairment of the royalty agreement intangible asset was due to a decrease in the Group’s portion of projected royalty income. The recoverable amount was determined using a value-in-use calculation based on projected cash flows from forecast budgets approved by senior management covering a five-year period.

The following assumptions were used: Pre-tax discount rates: 11% – 14% Number of years: 5 Growth rate: 0% Weighted average cost of capital: 11% – 14%

This impairment is in respect of an asset managed under the Sekunjalo Capital Group. (38) (7 475) – – Total impairment losses (recognised)/reversed (946) (9 111) 3 854 (14 753)

118 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 119 notes to the annual financial statements continued

33. Headline earnings per share

2011 2010 Gross Net Gross Net R’000 R’000 R’000 R’000 Earnings attributable to ordinary equity holders of the parent entity IAS33 26 304 8 176 Impairment of intangible assets IAS38/IAS36 – – 1 380 1 380 Gains on disposals of property, plant and equipment IAS16 (449) (386) (3 200) (2 752) Losses on disposals of subsidiaries IAS27 8 225 8 225 – – Impairment of goodwill IAS39 38 38 6 094 6 094 Headline earnings IFRS3 34 181 12 898

Weighted average number of shares (’000) 489 339 489 339 Fully diluted weighted average number of shares (’000) 489 339 489 339 Basic earnings per share (cents) 5.38 1.67 Headline earnings per share (cents) 6.99 2.64 Diluted earnings per share (cents) 5.38 1.67 Diluted headline earnings per share (cents) 6.99 2.64

34. Cash generated from/(used in) operations

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Profit before taxation 36 500 21 085 47 765 9 961 (Loss)/profit before taxation from discontinued operation (1 165) 215 – – Adjustments for: Depreciation and amortisation 21 809 19 940 30 109 Loss/(profit) on sale of assets 386 (2 561) (200) – Loss on sale of non-current assets and disposal groups 8 225 – – – Profit on foreign exchange (214) (156) – – Loss from equity-accounted investments 8 521 6 596 – – Dividends received (13 436) – (17 514) (219) Interest received (7 530) (5 897) (13 304) (16 201) Finance costs 13 966 11 025 8 581 8 352 Fair-value adjustments (41 732) (57 421) (26 093) (34 660) Impairment loss/(reversal) 946 9 022 (3 776) 16 389 Movements in lease assets and accruals (548) (100) – – Movements in post-employment benefits 550 287 – – Movements in provisions (5 250) 2 567 (3 876) 117 Changes in working capital: Inventories (2 281) 5 931 – – Trade and other receivables (26 862) (1 563) (3 977) (392) Biological assets (857) 4 274 – – Trade and other payables 40 812 2 806 12 939 6 080 31 840 16 050 575 (10 698)

118 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 119 notes to the annual financial statements continued

35. Sale of businesses

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Carrying value of assets sold Property, plant and equipment (499) – – – Deferred tax assets (941) – – – Goodwill (17 319) – – – Other financial assets (5) – – – Trade and other receivables (4 903) – – – Trade and other payables 2 266 – – – Tax assets/liabilities 956 – – – Other financial liabilities 5 275 – – – Cash (5 355) – – – Provisions 1 519 – – – Income received in advance 5 293 – – – Group loans receivable 2 337 – – – Net assets disposed of (11 376) – – – Non-controlling interest (6 499) – – – Total net assets sold (17 875) – – – Loss on disposal 8 225 – – – (9 650) Consideration received Cash 8 977 – – – Asset – deferred payments (Fair value) 673 – – – 9 650

Net cash inflow on disposal Cash consideration received 8 977 – – – Cash sold (5 354) – – – 3 623 – – –

The details above are in respect of the sale of Fios (Pty) Ltd and First Light Administration Services (Pty) Ltd.

120 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 121 notes to the annual financial statements continued

36. Related parties

GROUP COMPANY 2011 2010 2011 2010 Relationships R’000 R’000 R’000 R’000 Holding company of the group Sekunjalo Investment Holdings (Pty) Ltd Subsidiaries Refer to note 5 Joint ventures Refer to note 7 Associates Refer to note 6 Shareholder with significant influence Sekunjalo Investment Holdings (Pty) Ltd Commonly controlled entity Cape Sunset Villas CC

The group entered into transactions in the ordinary course of business with various owned, partly owned subsidiaries and associated companies.

These transactions are conducted on an arms length basis and relate to funding and administrative services.

Related party balances

Loan accounts – Owing (to)/by related parties African Biotechnology and Medical Innovation Investments (Pty) Ltd – – 75 006 63 815 African Biotechnology and Medical Innovation Investments (Pty) Ltd – – 1 061 (12 543) Genius Biotherapeutics 39 108 17 542 – – espAfrika (Pty) Ltd – – – 2 326 Health System Technologies (Pty) Ltd – – (5 803) (5 010) Kilomax (Pty) Ltd – – 68 30 Premier Fishing SA (Pty) Ltd – – 5 474 (44 838) Sekunjalo Capital (Pty) Ltd – – 37 054 39 855 Sekunjalo Corporate Services (Pty) Ltd – – 2 337 2 323 Sekunjalo Food and Fishing (Pty) Ltd – – – 32 542 Sekunjalo Health Care Ltd – – 67 016 66 364 Sekunjalo Industrial Holdings ( Pty) Ltd – – – 1 910 Sekunjalo Investment Holdings (Pty) Ltd (21 624) (16 326) (21 624) (16 326) Sekunjalo Media Holdings (Pty) Ltd – – 7 998 7 233 Sekunjalo Properties (Pty) Ltd – – (2 120) (2 835) Sekunjalo Technology Solutions Group (Pty) Ltd – – 23 743 34 327 Khalid Abdulla (714) (802) (714) (802)

Amounts included in trade receivable/(trade payable) regarding related parties espAfrika (Pty) Ltd – – 342 (284) Fios (Pty) Ltd – – – (33) Premier Fishing SA (Pty) Ltd – – 2 123 232 Premier Fishing SA (Pty) Ltd – – – (155) Ribotech (Pty) Ltd – – – 2 SekPharma (Pty) Ltd – – – (12) Sekunjalo Health Care Ltd – – – 233 Sekunjalo Technology Solutions Group (Pty) Ltd – – 1 728 331 Tripos Tourism Investments (Pty) Ltd – – (3) (5) Tripos Tourism Investments (Pty) Ltd – – 46 –

120 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 121 notes to the annual financial statements continued

36. Related parties (continued)

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Related party transactions Interest paid to/(received from) related parties African Biotechnological and Medical Innovation Investments (Pty) Ltd – – (3 197) (5 905) Amethst (Pty) Ltd – – – 267 Genius Biotherapeutics (3 063) (1 233) (3 063) (1 233) Ribotech (Pty) Ltd 524 – – – Health System Technologies (Pty) Ltd – – 445 619 Premier Fishing SA (Pty) Ltd – – 4 158 4 664 Sekunjalo Health Care Ltd – – (407) – Sekunjalo Corporate Services (Pty) Ltd – – – (309) Sekunjalo Food and Fishing (Pty) Ltd – – (3 082) (3 163) Sekunjalo Industrial Holdings (Pty) Ltd – – (181) (186) Sekunjalo Media Holdings (Pty) Ltd – – (691) (731) Sekunjalo Properties (Pty) Ltd – – 162 117 Sekunjalo Technology Solutions Group (Pty) Ltd – – (2 617) (3 410) Sekunjalo Investment Holdings (Pty) Ltd 2 101 47 2 101 47

Administration fees received from related parties Genius Biotherapeutics – – (140) (7) Premier Fishing SA (Pty) Ltd – – (9 042) (5 609) Sekunjalo Properties (Pty) Ltd – – (420) – Sekunjalo Health Care Ltd – – (698) (203) Sekunjalo Technology Solutions Group (Pty) Ltd – – (5 327) (1 947)

Other transactions with related parties Royalty paid to Sekunjalo Investment Holdings (Pty) Ltd – 5 500 – 5 500 Rental paid to Cape Sunset Villas CC 600 360 – –

Compensation to directors and other key management Employee benefits – short term 14 224 13 932 6 780 4 726

Refer to note 37 for a detailed breakdown of compensation to directors and other key management.

122 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 123 notes to the annual financial statements continued

37. Directors’ emoluments

Salary adjustment Bonus in in respect respect of prior of prior Provident Expense Salary years Bonus years fund allowance Total R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executive 2011 MI Survé 1 800 – – – – – 1 800 K Abdulla 1 344 600 – 900 240 216 3 300 CF Hendricks 479 – 100 – 84 37 700 C Ah Sing 713 – 140 – 118 9 980 4 336 600 240 900 442 262 6 780

Bonus in respect of prior Provident Expense Salary Bonus years fund allowance Total R’000 R’000 R’000 R’000 R’000 R’000 2010 MI Survé 1 800 – – – 19 1 819 K Abdulla 1 344 400 400 222 102 2 468 CF Hendricks 384 90 – 62 42 578 C Ah Sing 400 18 – 40 5 463 3 928 508 400 324 168 5 328

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

Directors’ fees Total R’000 R’000 Non-executive 2011 JM Goamab 80 80 S Young 80 80 VC Mehana 80 80 240 240 2010 JM Goamab 80 80 S Young 80 80 VC Mehana 80 80 240 240

122 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 123 notes to the annual financial statements continued

38. Risk management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and fair-value interest rate risk), credit risk and liquidity risk.

The board of Sekunjalo Investments Ltd is accountable for financial risk management. Detailed policies and guidelines were documented in terms of managing risk and will be assessed yearly by management taking into account any changes in the economic environment in which they operate.

The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by Sekunjalo Investments Ltd under policies approved by the board.

Financial risks Fair value The carrying amounts of the Group’s financial instruments approximate their fair values as carried in the financial statements.

The directors monitor the fair value of financial assets by forecasting expected cash flows in respect of the financial assets. Where cash flows cannot be adequately demonstrated over a five-year period the terms of the financial assets are reviewed and renegotiated.

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial instruments. The following policy and procedures are in place to mitigate the Group’s exposure to liquidity risk.

The Group’s liquidity risk is managed by holding financial assets for which there is a liquid market and holding deposits at recognised financial institutions to meet any negotiated upcoming liquidity requirements. There has been no change in the Group liquidity risk management policy.

Maturity profiles The table below summarises the maturity profile of the financial liabilities of the Group based on remaining undiscounted contractual obligations.

Up to 2-5 Over 1 year* years 5 years Total R’000 R’000 R’000 R’000 GROUP At 31 August 2011 Trade and other payables 87 146 – – 87 146 Finance lease obligations 85 149 – 234 Other financial liabilities 11 621 72 839 – 84 460 Bank overdraft 38 211 – – 38 211

At 31 August 2010 Trade and other payables 61 778 – – 61 778 Finance lease obligation 623 228 – 851 Other financial liabilities 27 237 53 454 – 80 691 Bank overdraft 41 398 – – 41 398

124 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 125 notes to the annual financial statements continued

38. Risk management (continued)

Up to 2-5 Over 1 year* years 5 years Total R’000 R’000 R’000 R’000 Company At 31 August 2011 Trade and other payables 19 363 – – 19 363 Other financial liabilities – 21 807 – 21 807 Loans from group companies – 7 956 – 7 956 Bank overdraft 12 624 – – 12 624

At 31 August 2010 Trade and other payables 6 869 – – 6 869 Other financial liabilities 17 382 – – 17 382 Loans from group companies – 65 226 – 65 226 Bank overdraft 6 773 – – 6 773

* Up to a year are all commitments which are either due within the time frame or are payable on demand.

The Group has no significant concentration of liquidity risk.

Risk arising from biological assets The Group is exposed to financial risks arising from diseases that may affect the abalone. Sufficient insurance cover is taken out to minimise any losses in the event of the above occurring.

Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices (price risk).

The following policies and procedures are in place to mitigate the Company’s exposure to market risk:

A Group market risk policy sets out the assessment and determination of what constitutes market risk for the Group. Continuous monitoring takes place to ensure that appropriate assets are held where the liabilities are dependent upon the performance of specific portfolios of assets and that a suitable match of assets exists for all non-linked liabilities. Limits are applied in respect of the exposure to asset classes and individual counters.

Compliance with the policy is monitored and exposures and breaches are reported.

Currency risk Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk.

The Group is exposed to interest rate risk on interest-bearing financial liabilities and interest-bearing financial assets.

At 31 August 2011, if the interest rate had strengthened by 1% with all other variables held constant, post-tax profit for the year would have been R636 876 (2010: R507 684) higher, based on average interest rate for the year increasing.

124 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 125 notes to the annual financial statements continued

38. Risk management (continued)

Cash flow interest rate risk

Due in Due in Due in Due Current Due in two to two to three to after interest less than five three four five rate a year years years years years Financial instrument % R’000 R’000 R’000 R’000 R’000 Trade and other receivables – normal credit terms 9.00 87 484 – – – – Other financial assets – loan receivables 9.00 6 060 558 – – – Loans to associates 10.50 – 39 211 – – – Cash in current banking institutions 6.00 30 624 – – – – Trade and other payables – normal credit terms 9.00 (94 017) – – – – Overdraft facilities used 10.50 (38 211) – – – – Other financial liabilities 9.00 (11 621) (72 839) – – – Finance lease obligation 9.00 (85) (149) – – –

Price risk Price risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from interest rate or currency risk), whether the changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market.

The investment profiles are monitored and reviewed from time to time to ensure that they remain in line with the company risk appetite and long-term capital management framework. Group investments at fair value through profit and loss are affected by market movements.

Credit risk Credit risk is managed on a Group basis.

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. Credit risk consists mainly of cash deposits, cash equivalents, trade debtors and loans and other receivables. The Group only deposits cash with major banks having high-quality credit standing and limited exposure to any one counterparty. Trade receivables comprise a widespread customer base. Management evaluates credit risk relating to customers on an ongoing basis. Internal risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal ratings in accordance with criteria set by the board. The utilisation of credit limits is regularly monitored.

The following policies and procedures are in place to mitigate the Group’s exposure to credit risk: • A Group credit risk policy setting out the assessment and determination of what constitutes credit risk for the Group. • Compliance with the policy is monitored and exposures and breaches are reported to the board of directors. The policy is regularly reviewed for pertinence and for changes in the risk environment. • Net exposure limits are set for each counterparty (i.e. limits are set for investments and cash deposits and minimum credit ratings for investments that may be held). • The Group sets the maximum amounts and limits that may be advanced to corporate counterparties by reference to their long-term credit ratings.

No assets are considered to have a significant credit risk. The Group policy is to deposit cash surpluses with major banks and financial institutions of high-quality credit standing.

Refer to individual notes for credit quality on individual balances.

126 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 127 notes to the annual financial statements continued

38. Risk management (continued)

Credit exposure The maximum exposure to credit risk is the carrying amount of the financial assets as reflected on the statement of financial position at year-end.

Capital management Externally imposed capital requirements are set and regulated by the Financial Services Board. These requirements are put in place to ensure sufficient solvency margins. Further objectives are set by the Group to maintain a strong credit rating and healthy capital ratios in order to support its business objectives and maximise shareholders’ value.

The Group manages its capital requirements by assessing shortfalls between reported and required capital levels on a regular basis. Adjustments to current capital levels are made in light of changes in economic conditions and risk characteristics of the Group’s activities.

The Group fully complied with the externally imposed capital requirements during the reported financial periods and no changes were made to its capital base, objectives, policies and processes from the previous year.

Economic assumptions Investment return The investment return for all classes of business, except those where the liability has a specific asset backing it, was determined as the expected return on the underlying assets backing the liabilities of the Group less an allowance for credit risk and a compulsory margin of 0.25%.

The following long-term assumptions were assumed for each asset class: – Bonds 8.5% – Cash 8.0% – Equities 10.0%

Inflation The current assumed level of future expense inflation of 7%, after adjusting for internal and external factors, is based on the South African Reserve Bank’s long-term inflation target of between 3% and 6%.

Taxation Future taxation and taxation relief are allowed for at the rates and on the basis applicable to Section 29A of the Income Tax Act at the statement of financial position date. The Group’s current tax position is taken into account, and taxation rates, consistent with that position and the likely future changes in that position, are allowed for.

Foreign exchange risk The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

The Group manages foreign hedges using foreign exchange contracts. There were no open contracts at year-end.

At 31 August 2011, if the currency had strengthened by 10% against the US dollar with all other variables held constant, post-tax profit for the year would have been R911 577 lower (2010: R324 089 lower), mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated trade receivables, financial assets at fair value through profit or loss.

Had the currency been 10% weaker throughout the year profit after tax would have been R9 233 277 higher (2010: R8 945 947).

Profit is less sensitive to movement in Rand/US dollar exchange rates in 2011 than 2010 because of the decreased amount of US dollar-denominated borrowings.

126 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 127 notes to the annual financial statements continued

38. Risk management (continued)

Foreign currency exposure at statement of financial position date The following items are uncovered:

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Current assets Trade debtors, USD 1 656 1 133 – – Trade debtors, EUR 87 92 – –

Exchange rates used for conversion of foreign items were: USD 7.06 7.34 EUR 10.21 9.25

The Group reviews its foreign currency exposure, including commitments, on an ongoing basis. There were no foreign exchange contracts at year-end to hedge foreign currency exposure.

39. Financial assets by category

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

Fair value through Fair value profit through or loss – profit Held to Loans and held for or loss – maturity Available receivables trading designated investments for sale Total R’000 R’000 R’000 R’000 R’000 R’000 Group – 2011 Other financial assets 6 618 – 196 668 – – 203 286 Trade receivables 87 484 – – – – 87 484 Loan to associate 39 111 – – – – 39 111 Cash and cash equivalents 30 624 – – – – 30 624 163 837 – 196 668 – – 360 505

Group – 2010 Other financial assets 5 157 – 154 900 – – 160 057 Trade receivables 60 166 – – – – 60 166 Loan to associate 17 900 – – – – 17 900 Cash and cash equivalents 52 077 – – – – 52 077 135 300 – 154 900 – – 290 200

COMPANY – 2011 Loans to group companies 122 805 – – – – 122 805 Other financial assets 2 340 – 33 403 – – 35 743 Trade receivables 4 596 – – – – 4 596 Investments in subsidiaries – – 658 575 – – 658 575 129 741 – 691 978 – – 821 719

COMPANY – 2010 Loans to group companies 144 511 – – – – 144 511 Other financial assets 214 – 33 009 – – 33 223 Trade receivables 620 – – – – 620 Investments in subsidiaries – – 623 386 – – 623 386 145 345 – 656 395 – – 801 740

128 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 129 notes to the annual financial statements continued

40. Financial liabilities by category

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

Financial liabilities at amortised cost Total R’000 R’000 Group – 2011 Other financial liabilities 84 460 84 460 Trade payables 57 337 57 337 Bank overdraft 38 211 38 211 Financial lease obiligation 234 234 180 242 180 242

Group – 2010 Other financial liabilities 85 712 85 712 Trade payables 30 757 30 757 Bank overdraft 41 398 41 398 Financial lease obiligation 851 851 158 718 158 718

COMPANY – 2011 Loans from group companies 7 956 7 956 Other financial liabilities 22 521 22 521 Trade payables 19 363 19 363 Bank overdraft 12 624 12 624 62 464 62 464

COMPANY – 2010 Loans from group companies 81 553 81 553 Other financial liabilities 1 056 1 056 Trade payables 6 538 6 538 Bank overdraft 6 773 6 773 95 920 95 920

128 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 129 notes to the annual financial statements continued

41. Commitments

GROUP COMPANY 2011 2010 2011 2010 R’000 R’000 R’000 R’000 Authorised capital expenditure Authorised by directors and not yet contracted for 10 066 16 082 – –

This committed expenditure relates to plant and equipment and will be financed by available bank facilities.

Operating leases – as lessee (expense) Minimum lease payments due – within one year 5 209 4 640 – – – in second to fifth year inclusive 3 675 9 023 – – 8 884 13 663 – –

The operating lease payments above represent rental for the use of premises. No contingent rent is payable.

42. events after reporting date

There were no material events after the reporting date.

130 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 131 notes to the annual financial statements continued

43. Disposals

The following disposals of subsidiaries occurred during the current financial year: – First Light Administration Services (Pty) Ltd – Fios (Pty) Ltd

The subsidiaries were disposed of on 1 March 2011.

First Light Admini- stration Fios Services (Pty) Ltd (Pty) Ltd Total Carrying value of assets and liabilities on disposal R’000 R’000 R’000 Property, plant and equipment 377 122 499 Deferred tax assets 941 – 941 Other financial assets – 5 5 Goodwill 17 319 – 17 319 Trade and other receivables 4 052 851 4 903 Other financial liabilities – (5 275) (5 275) Trade and other payables (1 304) (962) (2 266) Tax liabilities (956) – (956) Income received in advance (5 293) – (5 293) Provisions (1 519) – (1 519) Cash 3 058 2 296 5 354 Current group loans receivable – (2 337) (2 337) Outside shareholders (1 888) 8 388 6 500

130 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 131 notes to the annual financial statements continued

44. Segment information

The following are the summarised results for the various reportable operating segments:

Enter- prise Finan- Bio- Develop- cial Info- Health tech- Invest- ment and Services matics Fishing Care nology ments Media Group R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 31 August 2011 Revenue 4 722 141 995 223 139 12 344 – 20 021 82 268 484 489 External sales 361 124 446 221 025 12 344 – 2 053 80 161 440 390 Intergroup sales – 2 142 2 114 – – 17 968 2 107 24 331 Revenue – discontinued operation 4 361 15 407 – – – – – 19 768 Segment results – – – – – – – – Operating profit/(loss) (2 654) 13 227 12 282 (8 739) (25) 23 853 78 38 022 Operating profit/(loss) – discontinued operation (368) 45 – – – – – (323) Included in segment results: (6) (2 359) (16 886) (2 072) – 40 604 (304) 18 977 (Impairments)/reversals of impairments – – – – – (946) – (946) Depreciation and amortisation (6) (2 359) (16 886) (2 072) – (169) (317) (21 809) Fair valuation of investments – – – – – 41 719 13 41 732 Carrying value of assets 209 90 469 251 672 27 116 169 301 222 199 17 795 778 761 Carrying value of liabilities 236 49 843 126 771 15 641 18 718 121 557 10 930 343 696 Loss from associates – – – – (8 521) – – (8 521) Capital expenditure – 503 23 187 519 – 39 543 24 791

31 August 2010 Revenue 8 698 116 216 226 362 11 431 – 11 422 83 827 457 956 External sales 738 77 468 226 362 11 431 – 3 343 83 827 403 169 Intergroup sales – 4 968 – – – 8 079 – 13 047 Revenue – discontinued operation 7 960 33 780 – – – – – 41 740 Segment results – – – – – – – – Operating profit/(loss) (8 869) 5 660 13 175 (7 928) (28) 35 619 (4 820) 32 809 Operating profit/(loss) – discontinued operation (6 280) 1 949 – – – – – (4 331) Included in segment results: (6 622) (507) (15 145) (3 732) – 55 412 (1 036) 28 370 (Impairments)/reversals of impairments (6 621) – – – – (1 637) (853) (9 111) Depreciation and amortisation (1) (507) (15 145) (3 732) – (271) (284) (19 940) Fair valuation of investments – – – – – 57 320 101 57 421 Carrying value of assets 3 689 79 453 272 540 34 073 156 079 165 026 16 784 727 644 Carrying value of liabilities 6 094 30 150 150 991 14 956 18 724 94 271 9 255 324 441 Loss from associates – – – – (6 596) – – (6 596) Capital expenditure 106 839 9 377 1 717 – 7 92 12 138

132 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 133 notes to the annual financial statements continued

44. Segment information (continued)

Information on geographical regions The operations of the Group are domiciled in South Africa. Twenty-eight percent of external revenue is attributable to foreign sales mainly to the United States of America (9.5%), Far East (15%) and in Europe (3.5%).

Lawrence Foods in the United States of America accounts for more than 10% of the Group’s revenue.

Information on customers Eighteen percent of the Group’s revenue comes from the public sector, mainly in the Western Cape. The balance comes from sales from the private sector. National Health Laboratory Services accounts for more than 10% of the Group’s revenue.

45. Information on joint ventures

Effective % held Investment at cost 2011 2010 2011 2010 Name of joint venture Date of acquisition % % R’000 R’000 Nature of business Bloudam 1 September 2003 18 18 – – Catching of fish Eastern Cape Hake Catching, packaging Long Line 1 May 2003 15 15 – – and processing of fish Premier – BCP Hake 1 March 2003 48 48 – – Catching of fish Premier Seacat 1 November 2002 50 50 – – Catching of fish Premier Select (Pty) Ltd 1 September 2006 50 50 – – Processing of fish Amethst (Pty) Ltd 1 September 2008 50 50 – – Information technology

46. Information on associates

Effective % held Investment at cost 2011 2010 2011 2010 Name of associate Date of acquisition % % R’000 R’000 Nature of business Genius Biotherapeutics 1 September 2007 49.99 49.99 19 932 19 932 Biotechnology Emergent Energy (Pty) Ltd 1 November 2010 25.00 25.00 30 30 Renewable energy

132 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 133 notes to the annual financial statements continued

47. INFORMATION ON INVESTMENTS Issued capital Effective % held Investment at cost Name of subsidiary 2011 2010 2011 2010 2011 2010 Nature of business R R R’000 R’000 African Biotechnological and Medical Innovations Investments (Pty) Ltd 300 300 100 100 * * Biotechnology investments Atlantic Fishing Enterprises (Pty) Ltd 100 100 100 100 * * Fishing Chapman’s Peak Fisheries (Pty) Ltd 18 000 18 000 100 100 * * Fishing Digital Matter (Pty) Ltd 100 100 32 37 * * IT investments Events Social Marketing and Productions Afrika (Pty) Ltd 100 100 51 51 4 554 4 554 Event management Fios (Pty) Ltd – 1 000 – 70 – 17 300 Information technology First Light Administration Services (Pty) Ltd – 100 – 51 – 655 Financial services Fish Drying Corporation (Pty) Ltd 4 4 80 80 * * Dormant company Friedshelf 860 (Pty) Ltd 100 100 80 80 * * Media investments Health System Technologies (Pty) Ltd 2 000 2 000 74 77 * * Information technology – Voting – – 74 77 * * Hostprops 136 (Pty) Ltd 100 100 100 100 * * Dormant company Imagination Advisory and Distribution Services (Pty) Ltd 100 100 100 100 * * Financial services John Ovenstone Ltd 1 042 000 6 000 100 100 * * Dormant company John Quality (Pty) Ltd 6 000 6 000 100 100 * * Dormant company Kuttelfish (SA) (Pty) Ltd 10 10 100 100 * * Dormant company Premier Fishing (SA) (Pty) Ltd 100 000 100 000 80 80 * * Fishing Premfresh Seafoods (Pty) Ltd 100 100 100 100 * * Fishing Saratoga Software (Pty) Ltd 8 073 8 073 43 51 3 648 3 648 Information technologies Seagro Fertilisers (Pty) Ltd 8 8 80 80 * * Marine agriculture Sekfish Investments (Pty) Ltd 200 200 100 100 * * Fishing investments Sekpharma (Pty) Ltd 100 100 86 86 * * Pharmaceuticals – Voting – – 86 86 * * Sekunjalo Aquaculture (Pty) Ltd 100 100 100 100 * * Marine agriculture Sekunjalo Arcus Facilities Management Consulting (Pty) Ltd 100 100 100 100 * * Consulting services Sekunjalo Capital (Pty) Ltd 100 100 100 100 * * Financial services investments Sekunjalo Corporate Services (Pty) Ltd 120 120 100 100 * * Consulting services Sekunjalo Empowerment Fund (Pty) Ltd 100 100 100 100 * * Dormant company Sekunjalo Enterprise Development (Pty) Ltd 100 100 100 100 * * Dormant company Sekunjalo Financial Services (Pty) Ltd 100 100 50 50 * * Financial services Sekunjalo Food and Fishing (Pty) Ltd 100 100 100 100 * * Fishing investments Sekunjalo Health Care Ltd 808 607 716 052 74 77 * * Medical investments – Voting – – 74 77 * * Sekunjalo Health and Medical Commodities (Pty) Ltd 100 100 74 77 * * Dormant company Sekunjalo Industrial Holdings (Pty) Ltd 100 100 100 100 * * Fishing investments Sekunjalo Technology Solutions Group (Pty) Ltd 100 100 100 100 * * IT investments Sekunjalo Media Holdings (Pty) Ltd 100 100 100 100 * * Media investments Sekunjalo Medical Services (Pty) Ltd 100 100 74 77 * * Medical investments – Voting – – 74 77 * * Sekunjalo Medical Trading (Pty) Ltd 100 100 74 77 * * Dormant company – Voting – – 74 77 * * Sekunjalo Motor Holdings (Pty) Ltd 120 120 80 80 * * Motor industry Sekunjalo Private Equity (Pty) Ltd 100 100 74 77 * * Financial services investments Sekunjalo Properties (Pty) Ltd 100 100 80 80 * * Property investments Sekunjalo Strategic Investments (Pty) Ltd 100 100 25 25 * * Investments South Atlantic Jazz Festival (Pty) Ltd 100 100 51 51 * * Media Southern Ocean Fishing (Pty) Ltd 100 100 80 80 * * Dormant company Synbi (Pty) Ltd 109 109 100 100 * * Information technology Tripos Tourism Investments (Pty) Ltd 100 100 32 32 831 831 Travel Wynberg Pharmaceuticals (Pty) Ltd 100 100 74 77 * * Medical manufacturing – Voting – – 74 77 * * Wisdom Global (Pty) Ltd 100 100 51 – 51 – Information technology * Under R1 000

134 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 135 notes to the annual financial statements continued

47. INFORMATION ON INVESTMENTS Issued capital Effective % held Investment at cost Name of subsidiary 2011 2010 2011 2010 2011 2010 Nature of business R R R’000 R’000 African Biotechnological and Medical Innovations Investments (Pty) Ltd 300 300 100 100 * * Biotechnology investments Atlantic Fishing Enterprises (Pty) Ltd 100 100 100 100 * * Fishing Chapman’s Peak Fisheries (Pty) Ltd 18 000 18 000 100 100 * * Fishing Digital Matter (Pty) Ltd 100 100 32 37 * * IT investments Events Social Marketing and Productions Afrika (Pty) Ltd 100 100 51 51 4 554 4 554 Event management Fios (Pty) Ltd – 1 000 – 70 – 17 300 Information technology First Light Administration Services (Pty) Ltd – 100 – 51 – 655 Financial services Fish Drying Corporation (Pty) Ltd 4 4 80 80 * * Dormant company Friedshelf 860 (Pty) Ltd 100 100 80 80 * * Media investments Health System Technologies (Pty) Ltd 2 000 2 000 74 77 * * Information technology – Voting – – 74 77 * * Hostprops 136 (Pty) Ltd 100 100 100 100 * * Dormant company Imagination Advisory and Distribution Services (Pty) Ltd 100 100 100 100 * * Financial services John Ovenstone Ltd 1 042 000 6 000 100 100 * * Dormant company John Quality (Pty) Ltd 6 000 6 000 100 100 * * Dormant company Kuttelfish (SA) (Pty) Ltd 10 10 100 100 * * Dormant company Premier Fishing (SA) (Pty) Ltd 100 000 100 000 80 80 * * Fishing Premfresh Seafoods (Pty) Ltd 100 100 100 100 * * Fishing Saratoga Software (Pty) Ltd 8 073 8 073 43 51 3 648 3 648 Information technologies Seagro Fertilisers (Pty) Ltd 8 8 80 80 * * Marine agriculture Sekfish Investments (Pty) Ltd 200 200 100 100 * * Fishing investments Sekpharma (Pty) Ltd 100 100 86 86 * * Pharmaceuticals – Voting – – 86 86 * * Sekunjalo Aquaculture (Pty) Ltd 100 100 100 100 * * Marine agriculture Sekunjalo Arcus Facilities Management Consulting (Pty) Ltd 100 100 100 100 * * Consulting services Sekunjalo Capital (Pty) Ltd 100 100 100 100 * * Financial services investments Sekunjalo Corporate Services (Pty) Ltd 120 120 100 100 * * Consulting services Sekunjalo Empowerment Fund (Pty) Ltd 100 100 100 100 * * Dormant company Sekunjalo Enterprise Development (Pty) Ltd 100 100 100 100 * * Dormant company Sekunjalo Financial Services (Pty) Ltd 100 100 50 50 * * Financial services Sekunjalo Food and Fishing (Pty) Ltd 100 100 100 100 * * Fishing investments Sekunjalo Health Care Ltd 808 607 716 052 74 77 * * Medical investments – Voting – – 74 77 * * Sekunjalo Health and Medical Commodities (Pty) Ltd 100 100 74 77 * * Dormant company Sekunjalo Industrial Holdings (Pty) Ltd 100 100 100 100 * * Fishing investments Sekunjalo Technology Solutions Group (Pty) Ltd 100 100 100 100 * * IT investments Sekunjalo Media Holdings (Pty) Ltd 100 100 100 100 * * Media investments Sekunjalo Medical Services (Pty) Ltd 100 100 74 77 * * Medical investments – Voting – – 74 77 * * Sekunjalo Medical Trading (Pty) Ltd 100 100 74 77 * * Dormant company – Voting – – 74 77 * * Sekunjalo Motor Holdings (Pty) Ltd 120 120 80 80 * * Motor industry Sekunjalo Private Equity (Pty) Ltd 100 100 74 77 * * Financial services investments Sekunjalo Properties (Pty) Ltd 100 100 80 80 * * Property investments Sekunjalo Strategic Investments (Pty) Ltd 100 100 25 25 * * Investments South Atlantic Jazz Festival (Pty) Ltd 100 100 51 51 * * Media Southern Ocean Fishing (Pty) Ltd 100 100 80 80 * * Dormant company Synbi (Pty) Ltd 109 109 100 100 * * Information technology Tripos Tourism Investments (Pty) Ltd 100 100 32 32 831 831 Travel Wynberg Pharmaceuticals (Pty) Ltd 100 100 74 77 * * Medical manufacturing – Voting – – 74 77 * * Wisdom Global (Pty) Ltd 100 100 51 – 51 – Information technology * Under R1 000

134 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 135 dates of importance to shareholders

ANNUAL GENERAL MEETING 9 February 2012, at 15:00 at the Sekunjalo Head Office, Premier Fishing, Quay 7, East Pier, V&A Waterfront

FINANCIAL REPORTS Announcement of interim results May 2012 Interim report May 2012 Announcement of annual results November 2012 Integrated report December 2012

ADMINISTRATION

COMPANY SECRETARY Cherie Felicity Hendricks

BUSINESS ADDRESS AND REGISTERED OFFICE Quay 7, East Pier, Victoria and Alfred Waterfront, Cape Town, 8001, South Africa Postal address: PO Box 181, Cape Town, 8000, South Africa Telephone: +27 21 427 1400 Facsimile: +27 21 419 0731

EMAIL AND WEBSITE Email address: [email protected] Website: www.sekunjalo.com

COMPANY REGISTRATION NUMBER 1996/006093/06

TRANSFER SECRETARIES Link Market Services South Africa (Pty) Ltd Rennie House, 13th Floor, 19 Ameshoff Street, Braamfontein, 2001 Postal address: PO Box 4844, Johannesburg, 2000 Telephone: +27 11 713 0800 Telefax: +27 86 674 4381 Website: www.linkmarketservices.co.za

AUDITORS PKF (Cpt) Inc.

SPONSOR PSG Capital

LISTING JSE Limited Sector: Diversified Industrials Share code: SKJ ISIN code: ZAE000017893

136 SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 about this report

This is Sekunjalo Investments Limited’s We are also working towards reporting first attempt at integrated reporting, on creating shared value in terms of as we are committed to complying economic and societal benefits relative with the principles of King III. We also to cost, joint company and community acknowledge that an exclusive financial value creation. focus in our reporting is no longer appropriate given the broad spectrum Internally, we are investing in putting of environmental, socio-economic and together an integrated management governance factors that play an integral system for our diverse group of part in ensuring the long-term viability companies. We are cognisant of the fact of our business. that we have to report on our ability to operate effectively in a time of systemic This integrated report encompasses the change by reviewing our organisational Group’s sustainable related activities for competencies required to achieve our the period under review. It covers the strategic objectives. We are also in the scope of operations of our direct business process of monitoring and reporting on units regarding material issues. material impacts, risks and opportunities associated with the changing business The journey on which we are embarking environment and the implications these – from compliance-based sustainability have on our strategic objectives. to integrated sustainability – will take a few years to fully achieve. The Group is fully committed to and conscious of the necessity for environmentally sound practices and has started the process. We are moving away from only financial reporting and corporate social issues to reporting on matters creating shared value that sustains and enhances the systems and resources upon which that value depends. This encompasses the five capitals – financial capital, manufactured capital, human capital, societal capital and natural capital.

GREYMATTER & FINCH # 5656 2011 integrated report

SEKUNJALO INVESTMENTS LIMITED INTEGRATED REPORT 2011 WWW.SEKUNJALO.COM