GLOSSARY OF TERMS“Act” The Companies Act, 1973 (Act 61 of 1973), and the Corporate Law Amendment Act No. 24 of 2006

“AMMS” Ansys Maintenance Management System

“Ansys” or “the company” Ansys Limited (Registration number 1987/001222/06) a public company incorporated in accordance with the laws

of South Africa, formerly Ansys Integrated Systems (Pty) Limited

“the Group” Ansys Limited (Registration number 1987/001222/06) a public company incorporated in accordance with the laws

of South Africa, and its subsidiaries

“AltX” The Alternative Exchange of the JSE

“AMD” Aerospace and Maritime Defence Industry Association

“auditors” BDO South Africa Incorporated (Practice number 905526E)

“AVI” Automatic Vehicle Identification

“BBBEE” as defined in the Broad-Based Black Economic Empowerment Act, (Act 53 of 2003) and which means the economic

empowerment of all black people, including women, workers, youth, people with disabilities and people living in

rural areas, through diverse but integrated socio-economic strategies

“business day” any day other than a Saturday, Sunday or official public holiday in South Africa

“certificated shareholders” Ansys shareholders who elect to receive physical Ansys share certificates

“common monetary area” South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho

“dematerialised shareholder” a shareholder who holds ordinary shares which have been incorporated into the Strate system and which are no

longer evidenced by physical documents of title in terms of the Custody and Administration of Securities Act, 1992

“Designated Advisor” Exchange Sponsors (2008) (Pty) Ltd (Registration number 1999/024433/07), a company incorporated in accordance

with the laws of South Africa, a Designated Advisor as contemplated in the Listings Requirements

“directors” or

“board of directors” the directors of Ansys, further details of whom appear on page 2 and 3

“Emerging Signals (Pty) Ltd” Emerging Signals (Pty) Ltd (Registration number 1952/000247/07) a private company incorporated in accordance

with the laws of South Africa

“Emerging Signals” Division of Ansys Limited

“Government” The Government of South Africa

“HDTV” High Definition Television

“IASYS” Integrated Advanced Systems (Pty) Ltd (Registration number 1987/002834/07) a private company incorporated in

accordance with the laws of South Africa

“IFRS” International Financial Reporting Standards, which comprise standards and interpretations approved by the

International Accounting Standards Board, International Financial Reporting Interpretations Committee and

International Accounting Standards, and Standing Interpretations Committee interpretations approved by the

International Accounting Standards Committee

“incorporation” The date of incorporation of Ansys, being 23 March 1987

“Invensys Rail Systems Australia” previously known as Westinghouse Rail Systems Australia

“Listings Requirements” The Listings Requirements of the JSE

“Optocon” Optocon Systems (Pty) Ltd (Registration number 2005/018161/07) a private company incorporated in accordance

with the laws of South Africa

“QuadSoft” QuadSoft (Pty) Ltd (Registration number 2001/004368/07) a private company incorporated in accordance with the

laws of South Africa

“PRASA” Passenger Rail Agency of South Africa (previously known as Metrorail/SARCC)

“Rand” or “R” or “cents” The official currency of South Africa

“SENS” The Securities Exchange News Service of the JSE

“South Africa” The Republic of South Africa

“SANDF” South African National Defence Force

“SARCC” South African Rail Commuter Corporation

“shareholders” holders of ordinary shares in Ansys

“SOE” State Owned Enterprises

“TCM” Train Condition Monitoring

“the JSE” JSE Limited (Registration Number 2005/022939/06), a company duly registered and incorporated with limited liability

under the company laws of South Africa, and licensed as an Exchange under the Securities Act 36 of 2004

“the Registrar” The Registrar of Companies in South Africa

“Transnet Freight Rail” previously known as Spoornet

“transfer secretaries” Computershare Investor Services (Pty) Ltd (Registration number 2004/003647/07), a company incorporated in

accordance with the laws of South Africa

1

Directorate and Secretariat 2

Executive Committee 4

Profile 5

Chairman’s Review 6

CEO’s Review 7

Operational Review 9

Corporate Governance Statement 14

Sustainability Report 24

Directors’ Responsibility Report 30

Company Secretary Certificate 30

Independent Auditor’s Report 31

Directors’ Report 32

Consolidated Statement of Comprehensive Income 38

Consolidated Statement of Financial Position 39

Consolidated Statement of Changes in Equity 40

Consolidated Statement of Cash Flows 41

Notes to Group Annual Financial Statements 42

Notice of Annual General Meeting 87

Administration 90

Form of Proxy 91

Ansys Limited (Incorporated in the Republic of South Africa) (Registration number: 1987/001222/06)

2010 ANNUAL REPORT

2

DIRECTORATE AND SECRETARIAT

Teddy Daka – Non-executive ChairmanTeddy, educated in the UK and USA while in exile andsubsequently in South Africa, is a foremost exponentin BBBEE issues and is an advisor to a number ofgovernment departments. His management experienceincludes executive level posts in Telkom and PhalaboraMining Company and he also runs his own company,

Bearing Management Consultants (Pty) Ltd. Hisextensive contacts in government and SOE’s are ofsignificant value to Ansys.

Alan Holloway – Chief Executive OfficerAlan is a graduate engineer with a Masters ofBusiness Leadership degree and is a RegisteredProfessional Engineer. He has acquired extensiveexperience in running high technology projects andcompanies during his 30 years in the Aerospace,Telecommunications and Rail Industries. Alan was thefounder of Avitronics in 1988. He grew it into a worldclass company for 12 years and then sold it to CelsiusTech, which became Saab. Today it is known as SaabAvitronics (High Technology Electronic WarfareCompany).

Alan also headed the Electronic Warfare Division atArmscor as well as various divisions in Denel. AfterAvitronics and Denel, he was COO at Spescom for twoyears. He gathered very useful managerial andtechnical skills during his years at Grintek, Spescomand Ansys and has a passion for growing businesses.

He was a director of JSE-listed companies (Grintekand Spescom) from 1992 to 2002 and has been CEOof Ansys since 2002.

3

Rudi Barnard – Executive DirectorRudi has 27 years’ experience in electronic railsystems, of which 21 were at Siemens. He has aNational Diploma in Electrical Engineering and hassuccessfully completed a number of postgraduatebusiness courses at UNISA.

Under Rudi’s leadership, the rail business at Ansyshas diversified to now also include railway signallingand he was instrumental in the acquisitions ofEmerging Signals and QuadSoft. Rudi is an AssociateMember of the Institution of Railway Signal Engineersand a Member of the Institute of Directors.

Rachelle Grobbelaar – Chief Financial OfficerRachelle is a qualified Chartered Accountant and hasa B.Com Acc Science (Honours) degree, a Certificatein the Theory of Accounting (CTA) and a post-graduatediploma in Auditing. She is also a member of theInstitute of Directors.

She completed her articles at Pricewaterhouse-Coopers and remained at the firm as an assistantaudit manager. Rachelle gained extensive experience

in the engineering industry and the listing environment.One of her clients at the firm was IST.

She moved to commerce in 2006 and joinedMcDonalds (SA) as their Corporate Financial Manager,where she gathered group accounting and reportingskills as well as managerial skills. Rachelle joinedAnsys towards the end of the 2007 financial year.

Melinda Gous – Company Secretary Melinda has a certificate in Advanced Business andSecurities Law from UNISA. She has over 9 yearsexperience in company secretarial practice.

4

EXECUTIVE

Alan HollowayCEO

Ansys

Rachelle GrobbelaarCFO

Ansys

Rudi BarnardExecutive Director

Ansys

Johan KotzeMarketing Executive

Ansys

Ian LamprechtOperational Executive

Ansys

Onno SakkersChief Technical

Officer

Ansys

Elsabe van der WesthuizenHuman Resource

Executive

Ansys

Johan van de PolDivisional Managing

Director

Emerging Signals

Johann FischerManaging Director

Optocon

Johan MalanManaging Director

QuadSoft

5

ANSYS LIMITED

Ansys was founded in 1987 to supply the defence force with avionic computers and other applications of embedded software inwhich they were experts.

During the late 1980s and early 1990s, the company became the National Centre of Excellence for airborne crash recorders.

This established a broad capability to gather data in extremely harsh environments, process it, and supply it as crucial managementinformation. Its in-house capabilities also allowed the company to complete complex weapons system integration projects. Thisexpertise ensured that Ansys remained responsible to Denel for a variety of weapons integration work for the SANDF.

Active participation in the rail market began in 1998 with the commissioning of an Automatic Vehicle Identification System forTransnet Freight Rail on the Coal Link line between Ermelo and Richards Bay. This system was later expanded to allow for TrainCondition Monitoring. In 2003 a similar Vehicle Identification System was installed by Ansys on the Sishen-Saldana OREX line.The successful implementation and support delivered to these major links resulted in the awarding of the Transnet Freight Railcontract to Ansys for the installation of a Vehicle Identification System on all its South African tracks in 2006.

Ansys became black empowered in 2002 when Teddy Daka acquired a 40% equity stake in the company and joined the AnsysBoard.

In 2006, Ansys and Invensys Rail Systems Australia agreed to work together to enable Invensys signalling systems to return toSouth Africa. This positioned both companies favourably for the upgrading of signalling infrastructure in most sub-Saharan Africancountries.

Ansys listed on the JSEs Alternative Exchange in June 2007.

Today Ansys dominates the local rail market in Trackside Measurement encompassing health/condition monitoring systems andautomatic vehicle identification systems. Its industrial division is involved in monitoring and control systems and informationsystems for optimisation of business processes and Ansys defence division specialises in the integration of weapon systems onaircraft, land vehicles and ships.

In December 2007, the Group acquired 100% shareholding in QuadSoft, a company that develops and maintains locomotive in-cab communications systems as well as Optocon, an engineering company that manufactures precision electro optical systems.The Group also acquired the business of Emerging Signals (Pty) Ltd, an approved railway signalling contracting company.

In November 2008, the Board of Directors was rationalised to consist of an equal number of executive and non-executive directors.An Executive committee was established which includes key employees of Ansys as well as managing directors of the subsidiariesand the division. Subsequently, two non-executive directors have resigned and the nomination committee is currently consideringthe recommendation for appointment of several candidates.

During the current financial year, the company achieved an incredible success in the development of a new Mine Rope Tester,which has been well received in the mining industry as it significantly contributes to mine safety.

■ 1987 Ansys is founded. Main aim to provide avionic computers

■ 1998 Actively participates in rail market. First Vehicle Identification System installed

■ 2002 Ansys achieves BEE status

■ 2006 Partnership between Ansys and Invensys Rail Systems Australia

■ 2007 Ansys listed on the Alternative Exchange Board of the JSE

■ 2007 Ansys acquires Optocon, QuadSoft and Emerging Signals

■ 2008 Rationalisation of the Board of Directors and the establishment of the executive committee

■ 2009 Ansys achieved remarkable success in the development of a new Mine Rope Tester

6

CHAIRMAN’S

HighlightsDuring the year the Group achieved a remarkable success in the development of a new Mine Rope Tester. This innovativedevelopment has been enthusiastically received in the mining industry as it significantly contributes to mine safety. Feedbackfrom our customers on this product is that it is the most effective Mine Rope Tester available on the world market.

Ansys has significantly diversified away from the state-owned enterprise sector. Currently more than 50% of the R100 millionorders on hand are from the private sector. Other actions were taken to improve the operational effectiveness of the businessand are expected to improve returns.

Board of directorsDuring this period, the Ansys board was blessed by a vibrant board of three executive and three non-executive directors, butMr MG Diliza and Dr JL Steyn resigned on 21 August 2009 and 1 March 2010 respectively for reasons of work pressure. The non-executive element will be brought up to strength early in the new financial year.

The Executive Committee, incorporating all the key executive appointments in the company, is functioning well.

The Board is subject to a published Board Charter and has continued to maintain its independence while staying abreast of theGroup’s strategic and operational activities.

The relationship between the board and the executives remains healthy and transparent. Currently the board has two fullyfunctional subcommittees, namely the audit and risk committee and the remuneration committee. Risk and SustainabilityProcedures have been approved and established.

Black economic empowermentAs would be appropriate for a South African corporation, Ansys is significantly Black Empowered. During the current year ofassessment Ansys improved from a Level 7 contributor to a Level 6 contributor.

In appreciationThe board acknowledges the enormous value contribution of our customers, suppliers and partners who have been loyal to ourbusiness and developing Ansys to where it is today.

On behalf of the board, I would like to take this opportunity to thank the executive committee and employees for the passion andenergy they bring to the group and for their commitment during a most challenging year. I would also like to thank my fellowdirectors for their ongoing support and council and their unfailing dedication to the group.

Teddy DakaChairman

The 2010 financial year has been another difficult year for Ansys Ltd, but through innovation inthe product domain and market diversification, the Group is well positioned to overcome thecurrent difficult world trading conditions and to exploit its very promising prospects.

Ansys is strategically focused on the continued development of South Africa. The companyemploys Afro-optimists and, as a result, does not suffer from a shortage of skills or fromemigration. We are dedicated to offering engineering excellence in a manner that benefits thepopulation as a whole.

7

CEO’S

However, prospects for 2011 financial year have improved dramatically as the factors highlighted above have in main been resolved.Government’s re-energised commitment to service delivery has encouraged our public sector clients to speed up both procurementand payment cycles. Projects in the signaling and defence domain, a major portion of Ansys’ business, are being expedited tomeet the service delivery backlogs. Demand in our mining market has begun to grow. Major orders of the Mine Rope Tester havebeen secured and more are expected for this unique product.

Improvements made to Optocon include the appointment of a new managing director and concluding a distribution agreement forthe Ansys Commercial Optical Cameras with a major distributor to boost sales. Emerging Signals, which is still imperative toAnsys’ rail operation, has been completely integrated in terms of its management and administration to enhance management’sfocus. QuadSoft, which remains profitable and a generator of free cash flows, is expected to increase its contribution as effortsare underway to expand into other markets. The performance of the rail segment of our business was again hampered by slowadjudication of tenders, but the situation has subsequently been improved.

Although Ansys is weathering the economic downturn, the current markets remain turbulent and highly unpredictable. A reviewof the prospects described below will give assurance and create an optimistic view of the year ahead. However, it is the Ansysintention to under-promise and over-deliver, so the board has posted a conservative forecast for the new financial year.

Corporate activityOur strategic acquisition plans remain depressed by the unfavourable Ansys share price. We were unwilling to proceed with ourcarefully thought out plans at any price. Further corporate activity is unlikely until the share price has recovered.

Financial performanceQuadSoft had a year of excellent financial performance and significantly exceeded its forecast. Emerging Signals had aunsatisfactory year financially, however its strategic purchase enabled Ansys to be recognised as an approved Rail Signallingcompany in South Africa which therefore allowed the Group to participate in the very large signals tender shortly to be adjudicatedby PRASA. Optocon had similarly unsatisfactory year, mainly due to projects incorporating high technical risks, which have beenlargely solved. The company operates in a vibrant market sector and has a high degree of orders on hand, mainly for export.

Strategic focus and prospectsThe 2011 financial year has begun with the award of R30 million worth of orders for Mine Rope Testers. This product is wellreceived by the market.

After the successful completion of the Bayhead pilot project, a further two orders have been received from GE South AfricaTechnologies (GESAT) for yard automation using General Electric Transportation equipment. These orders will be executed byEmerging Signals during the current financial year.

The Group order book is currently at R100 million, which is good for this time of the year and 25% better than this time last year.Sales of optical systems both locally and from exports continue to grow. Optocon has a full order book for the 2011 financial yearand a turnaround is expected. The appointment of the new Managing Director is expected to deliver the required results.

Uncertainty in the ability of State Owned Enterprises to pay on schedule has started Ansys on a path of diversification towardsmajor private corporates. Currently 50% of our order book is from non-governmental sources.

The 2010 financial year was the worst year in the history of Ansys. Performance was adverselyaffected by a number of factors. The Group experienced longer than usual procurement andpayment cycles of major clients. Optocon and Emerging Signals experienced capital equipmentpressure and delayed project execution respectively.

Revenue was depressed owing to reduced demand as a result of the global financial melt-down.The combined effect of these factors has resulted in the less than satisfactory results.

8

CEO’S

CONTINUED

Strategic focus and prospects continuedLooking ahead, the planned and budgeted growth is all generic, but the Group is still looking to becoming a Medium Cap byleveraging its share offering into acquisitive growth once the share price has recovered.

Black ownershipThe Group is fully cognisant of the need for broad transformation in the South African economy and is committed to playing anactive role through equity ownership, skills development, procurement and employment equity.

Ansys became Black Empowered in 2002 when Teddy Daka acquired a 40% equity stake in the group and joined the Ansys Board.Teddy Daka remains the majority shareholder and BEE shareholding has reached 34%. We are proud of our credentials and thissets a positive platform for business with our major clients.

Dividend Although the Group has adopted a three times cover dividend policy, no dividend has been approved for this year.

Corporate social responsibilityThe Group acknowledges the importance of social responsibility as part of being a good corporate citizen. To this end, Ansys hascontinued to contribute to SOS Childrens Villages and Olivers Home.

Employment equity Prior to the listing, Ansys successfully managed to transform the Group at both ownership and at board level. The aim now is toensure representation at all levels.

Currently 31.7% of our employees are from historically disadvantaged groups and we are able to attract and retain such employees.The Group mainly employs graduates and there are ever increasing levels of suitably qualified people from historicallydisadvantaged backgrounds graduating from South African Universities.

AppreciationI wish to thank our customers, business partners, advisors and suppliers for their contribution to Ansys Ltd in the past year. Nogrowth or economic activity would be possible without orders and the capable employees and shareholder investment to executethem. Special thanks are thus due to our financial service providers, employees and shareholders who are loyally assisting Ansysthrough this time of world economic turmoil.

Alan HollowayCEO

9

OPERATIONAL

Products, solutions and services Ansys specialises in the design, development, manufacture, integration and support of advanced technology systems and productsfor the rail, industrial and defence environments.

■ Rail Signalling and Trackside Measurement The Group offers complex, rail trackside measurement, communication and signalling to Transnet, PRASA and the mining

industry. Through its division Emerging Signals, Ansys offers signalling systems to the mining industry, a comprehensive railinstallation capability and General Electric rail products. The Ansys wholly-owned subsidiary QuadSoft specialises in GSMbased on-board locomotive communication systems.

Ansys dominates the local market in Trackside Measurement, which is health/condition monitoring systems and automaticvehicle identification systems.

Product Description

Automatic Vehicle Identification

Ansys leads the way in Automatic Vehicle Identification (AVI) systems for the South African rail industry. Ansys designed andimplemented South Africa’s first major AVI system for Transnet Freight Rail and is involved on an ongoing basis in refining thelogistic support applications. Locomotives and Wagons are fitted with passive RF tags (much like standard access cards, justmuch larger). Each tag is programmed with the unique ID number of the specific vehicle.

Vehicle identification readers are installed countrywide and as the train passes these sites, the information contained in the tagis read by the readers. When the train has passed the site, the full train consist data is sent via GPRS to a central database fromwhere viewer programs can access the data. This information provides optimisation of vehicle assignments as well as real timetracking of rolling stock.

Hot Bearing Detection

The Hot Bearing Detection (HBD) system is installed to measure bearing temperatures of rail vehicles moving up to 240km/h.Temperatures are measured with 2% accuracy, and as soon as the temperatures are outside the defined range, alarms aretriggered and the train is stopped to prevent de-railings. The HBD system can be used on electrified as well as non-electrifiedlines.

Wheel Profile Monitoring System

The Wheel Profile Monitoring System (WPMS) consists of 14 high speed cameras and lasers to measure the dimensions of thewheels of rail vehicles. The measured data is then compared with the required dimensions of the wheel. Alarm levels aredefined for each, which is used for maintenance information and scheduling.

10

OPERATIONAL

CONTINUED

■ Process improvement for large industrial companies Ansys industrial division is focused on improving maintenance management.

Product Description

Load Profile Monitoring Systems

The Load Profile Monitor System (LPMS) monitors passing trains and detects any objects or freight exceeding height and widthgauge requirements. The technology behind the system is based on interrupting an optical signal path emitted from the source(a Class II 625nm laser) via a prismatic reflector to a detector. If left undetected, out of gauge freight could cause damage totrackside infrastructure such as bridges, tunnels and signalling equipment.

Signalling

Ansys represents Invensys Rail Systems Australia, to offer rail signalling systems adapted for the developing world into the SouthAfrican market. Through its division Emerging Signals, Ansys offers mine signalling systems, a comprehensive rail installationcapability and General Electric rail products.

Product Description

Automated Maintenance Management System

The Automated Maintenance Management Systems (AMMS) provides a maintenancemanagement solution to ensure a structured and consistent maintenance processon operational infrastructure, in order to improve return on investment. Ansysprovides the AMMS to industry to combat the decay in infrastructure resulting frominefficient maintenance practices. AMMS provides the client with a new approachto outsource maintenance management in a time where skilled maintenanceresources are scarce.

Mine Rope Tester

Ansys offers the following for mine rope testing systems:

• A calibration and maintenance facility• Applied support and calibration services• Developed replacement hardware – this includes the digitising of the old

analogue hardware as well as the development of modern analogue electronicsto replace the obsolete and outdated electronics

Ansys is currently in the process of developing the Ansys Continuous Rope MonitoringSystem to enable its clients to monitor steel wire ropes at operational speeds.

11

OPERATIONAL

CONTINUED

■ System Integration and Electro-Optics in defence Ansys defence division specialises in integration of weapon systems on aircraft, land vehicles and ships. This includes on-

board weapons interfacing and services associated with integration, testing and certification of integrated weapon systems.The Ansys wholly-owned subsidiary Optocon specialises in Electro-Optic systems.

Product Description

Electro-Optic Solutions

Ansys designs, simulates, manufactures, integrates and tests electro-opticalsystems and subsystems such as:

• high performance thermal imaging systems • long range high performance visual observation systems • compact, integrated, long range, visual- and thermal observation systems

with laser ranging, designation and automatic alignment functions• remote video sighting systems operating in visual and thermal spectra with

laser ranging and fire directing computers• high performance, compact, multi-field of view visual sights for land and

maritime applications• stabilised sighting systems• weapons harmonisation systems• manufacturing of precision optical components

Test and Support Equipment

Ansys offers a complete range of operational-, intermediate-and depot-level testequipment provided during the weapons integration activities.

Product Description

System Integration

Ansys specialises in weapon-, control-, avionics and electro-optical systems integration and interface solutions on airborne,naval, mobile and land based platforms.

Electronic products

Ansys specialises in the specification, development, packaging and qualification of low volume, high technology electronicproducts. Ansys produces computer and controller solutions for applications including data recording, fire control/gun drivecomputers, stores and communications management systems and weapon controllers.

12

OPERATIONAL

CONTINUED

ANSYS LIMITEDAnsys or the company

Ansys offers high technology, harsh environment, control,measurement and process improvement systemsincorporating a wide range of electronic, electro-optic andsoftware technologies.

The main activities of the divisions are:

■ Rail segment: we offer complex, rail tracksidemeasurement, communication and signalling to Transnet,PRASA and the mining industry

■ Industrial segment: to industrial and security corporates weoffer thermal imaging, process measurement, maintenanceautomation, mine rope testers and other systems

■ Defence segment: in the defence industry we offerweapon system integration, thermal and visualsurveillance/sighting imaging systems and stabilisedplatforms for air, land and sea applications

FINANCIAL PERFORMANCE 2010 2009Revenue• Rail R37 million) R65 million)• Industrial R5.8 million) R1.2 million)• Defence R9.6 million) R4.5 million)Segment results from operations • Rail R4.2 million) R14.7 million)• Industrial (R1.5 million) R1.4 million)• Defence (R4.0 million) (R11 million)

ANSYS LIMITEDDIVISION – RAIL SEGMENT

Emerging Signals

Emerging Signals is an approved railway signallingcontractor. In addition to interlocking systems, its productdelivery also includes Railway Signalling Maintenancecontracts as well as the manufacturing and installation ofconcrete products for use by railway signalling companies.

The main activities of the division are:

■ Railway Signalling projects for Transnet Freight Rail andPRASA (Metrorail/SARCC)

■ Railway Signalling projects for industrial customers,such as Sasol and mining customers such as ImpalaPlatinum

■ Railway Signalling Maintenance contracts ■ Manufacturing of concrete products for use by railway

signalling contractors ■ Installation contracts within rail environment for Ansys

and other signalling equipment suppliers

FINANCIAL PERFORMANCE 2010 2009Revenue R7.7 million R13.9 million Loss before taxation R5.9 million R5.1 million

Operational strategy The Group is focused on utilising its intellectual excellence and entrepreneurial resources to assist the government and largecorporates in revitalising national infrastructure by providing harsh environment measurement, control and process improvementsystems incorporating a wide range of electronic, electro-optic and software technologies. Various foreign corporates requiresimilar resources and thus create export opportunities for Ansys.

Stakeholders The Group employed over 130 people, mainly graduates, and through organic and acquisitive growth we expect this number toincrease. The Group does not experience difficulty in recruiting suitable employees. The success of the Ansys Group is related tothe positive attitude of its employees.

Client List The client list has substantially increased in the current period and now includes Transnet Freight Rail, PRASA, Transnet RailEngineering, Denel Dynamics, Carl Zeiss Optronics, Saab (Sweden), Norinco (China), Aselsan (Turkey), Assmang, Exxaro, Sasol,Kumba, Anglo Platinum, Anglo Field Services, Tracker, SA Mint, GE South African Technologies amongst others.

Group structure

13

OPERATIONAL

CONTINUED

SUBSIDIARY – RAIL SEGMENT100% SHAREHOLDING

QuadSoft (Pty) Ltd

QuadSoft develops, supplies and maintains GSM basedlocomotive in-cab communication systems that support themanagement and control of locomotives.

QuadSoft core business includes:

■ Remote data communication solutions utilising variouscommunication technologies including GPRS/GSM,satellite and land based networks

■ JSP web site design interfaced to any SQL database ■ MIDP applications for Java Enabled Cell phones using

GRPS etc■ Database and Front-end design and development

FINANCIAL PERFORMANCE 2010 2009Revenue R17 million R17 millionProfit before taxation R4.7 million R5.6 million

SUBSIDIARY – DEFENCE SEGMENT100% SHAREHOLDING

Optocon Systems (Pty) Ltd

Optocon is an electro optical engineering company and alsoa manufacturer of precision electro optical systems.

Optocon core business includes:

■ Electro Optical Systems Design, Modelling andSystems Engineering

■ Optical Engineering■ Electronic Engineering■ Precision Optical Components■ Optical Subassemblies■ Electro Optical (EO) Systems

FINANCIAL PERFORMANCE 2010 2009Revenue R20 million) R22 million(Loss)/profit before taxation (R10.2 million) R1.9 million

14

CORPORATE

IntroductionIn the words on King III, “Relationships with stakeholders can only be built and maintained if the group provides complete, timely,relevant, accurate, honest and accessible information”.

Transparent and effective communication with the Group’s stakeholders is therefore fundamental for building and maintainingtheir trust and confidence.

Application of the King II Report and our approach to Corporate Governance The Board recognises the need to conduct the affairs of the Group with integrity and in line with best corporate practices. TheBoard is therefore committed to the principles of the Code of Corporate practices and conduct as set out in the King Report onCorporate Governance (King II) The Board confirms that the Group has, during the year under review, complied with the provisionsof King II as detailed below:

Status on King III complianceThe King Code of Governance principles for South Africa 2009 (King III) took effect from 1 March 2010. The Board is in processof assessing the principles of King III. The implementation of King III will be fully reported on in our next annual report.

Role of the Directors The board is overall responsible for the Group’s good corporate governance.

The board is responsible for the Group’s overall policy. Apart from the duties and responsibilities which are prescribed by law, theboard discharges the following, but not limited thereto, duties and responsibilities in the interests of good governance:

■ They seek the optimum balance for the Group between conformance with the guidelines of good governance and performance ■ They act as the focal point of the Group’s corporate governance structure■ They provide strategic direction to the Group in line with the group’s purpose■ They monitor the implementation of the strategy by management■ They ensure full, timely and transparent disclosure of all material matters■ They actively promote an ethical culture within the Group■ They review the size and composition of the board in terms of the mix of skills-diversity and the requirements for the

appropriate constitution of board committees ■ They agree on the procedure to allow directors to obtain independent professional advice where necessary■ They always act in the best interests of the Group ■ They have agreed upon procedure to manage conflict of interest■ They delegate the necessary authority to management for the day-to-day operations of the Group■ The Remuneration and Audit committees are chaired by non-executive directors

Board CharterThe purpose of the board charter is to regulate the manner in which the board and individual members of the board dischargetheir responsibilities according to the principles of good governance. The aim of the board charter is to ensure that all boardmembers clearly understand their duties and responsibilities as well as the laws, regulations and best practices governing theirconduct.

The board of directors’ charter is available on the website: www.ansys.co.za

Board of directors and committeesGeneralThe board brings a wealth of skills, knowledge and experience to the board.

Ansys board, at year end, comprised three executive directors and two non-executive directors. Mr. MG Diliza as independentnon-executive director resigned on 21 August 2009. Dr. JL Steyn as independent non-executive director resigned, after year endon 1 March 2010.

The detailed categorisation of the directors appears on pages 2 and 3 of this report.

STATEMENT

15

Board of directors and committees continuedThe ChairmanThe chairman of the board is a non-executive director. The roles of the chairman and CEO remain separate. The chairman’sperformance is evaluated annually.

Non-Executive DirectorsThe non-executive directors are not involved in the day-to-day business of the Group. The non-executive directors enjoy nobenefits from the group for their services as directors, other than their fees and potential capital gains and dividends on theirinterests in ordinary shares.

The non-executive directors have unfettered access to management.

Executive directorsAll executive directors have entered into service contracts with the Group that exceeds three years. The CEO’s performance isevaluated annually by the Chairman.

Independent non-executive directorsBoth Mr. MG Diliza and Dr. JL Steyn were appointed independent non-executive directors during the period under review.

We confirm that during their appointment:

■ They were not a representative of any shareholder who has the ability to control or materially influence management or theboard

■ They were not employed by the Company or the Group in any executive capacity for the preceding three financial years ■ They were not a members of the immediate family of an individual who is, or has been in any of the past three financial years,

employed by the Company or the Group in an executive capacity ■ They were not professional advisers to the Company or the Group, other than in the capacity as a director ■ They were not suppliers or material supplier to the Company or Group, or to the clients of the Group ■ They had no material contractual relationship with the Company or Group; and■ They were free from any business or other relationship which could be seen to materially interfere with the individual's capacity

to act in an independent manner.

Director selection, appointment and rotation A nomination committee is responsible for selecting and recommending the appointment of competent, qualified and experienceddirectors. Appointments to the board are formal, transparent and a matter for the board as a whole based on the recommendationsof the nomination committee. The process of appointment of directors is already in line with the recommendations of King III.Re-appointment to the board is not automatic, although directors may offer themselves for re-election. In terms of the Articles ofAssociation, a third of the directors retire by rotation annually. The names of the directors eligible for re-election are submittedat the annual general meeting, accompanied by appropriate biographical details set out in the annual report.

Director induction, training and development The board of directors was supplied with the information necessary to discharge their responsibilities as a board. Directors areencouraged to attend external courses. The Company Secretary is responsible for providing the Chairman and directors, bothindividually and collectively, with advice on Corporate Governance, compliance with legislation, the Companies Act and the JSEListings Requirements.

New directors are subject to a formal orientation of the business. As part of the orientation process they are familiarised with,but not limited to:■ The strategy and business plan of the Group■ The budgets of the Group■ The Board Charter■ The terms of reference of all board-appointed committees■ Important legislation

All of the directors have attended the AltX Directors Induction Programme.

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Board meetingsThe board meetings are scheduled well in advance in line with a year planner. The board meets at least quarterly. Additionalboard meetings, apart from those planned, are convened as circumstances dictate. All directors receive reasonable notice onadditional required board meetings.

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Agenda and meeting structureThe board agenda and meeting structure focus on risk management, legal matters, strategy, performance monitoring, governance,financial reviews, operational reviews and related matters. This ensures that the board’s time and energy are appropriately applied.Matters which are not specifically itemised in the agenda may be raised under General.

Board documentationManagement ensures that board members are provided with all relevant information and facts to thoroughly acquaint themselveswith the issues to be raised at the meeting to enable them to make well-informed decisions. The information is provided to theboard in a timely manner to enable them to ask questions of clarification in advance of the meeting where required. The tablingof documents at board meetings is done only in exceptional circumstances.

Company Secretary All directors have access to the advice and services of the Company Secretary. The Company Secretary is Fusion CorporateSecretarial Services (Pty) Ltd, represented by Melinda Gous.

As highlighted in the board charter, the Company Secretary assists the Board in ensuring that they are appropriately constitutedto meet its fiduciary obligation to the shareholders, by developing and implementing policies and processes regarding corporategovernance matters, by assessing Board membership needs, and by proposing Director candidates to the Board of Directors.

Board committees The board has appointed several committees to assist them in discharging their duties and responsibilities adequately. The boardacknowledges that they remain the epicenter of the Group’s corporate governance system and is ultimately responsible for theGroup’s performance. The committees are therefore generally constituted with powers of recommendation only, except in areaswhich do not usually require the full consideration of the board. All board committees are subject to regular evaluation to ascertaintheir level of performance and effectiveness.

All board committees are empowered to obtain independent outside professional advice if and when required.

There is transparency and full disclosure from board committees to the board. The minutes of the committee meetings are availableto the board. Committee chairpersons are required to provide the board with verbal reports on all recent committee activities.

Number of Number ofAppointment Resignation meetings meetings held

Name Designation date date attended while appointed

T Daka Non-Executive Chairman 10 October 2001 n/a 5 5

A Holloway Chief Executive Officer 01 February 2002 n/a 5 5

MG Diliza Non-Executive Director 01 June 2007 21 August 2009 3 3

R Grobbelaar Chief Financial Officer 01 February 2008 n/a 5 5

RF Barnard Executive Director 01 October 2006 n/a 5 5

Dr JL Steyn Non-Executive Director 01 November 2008 1 March 2010 5 5

M Gous Company Secretary 08 October 2007 n/a 5 5

Note: The board meeting scheduled for 22 February 2010 was adjourned and reconvened on 26 February 2010 and again on 8March 2010. This reflects as one meeting above.

BOARD MEETINGS ATTENDED MEETINGS HELD 5

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Committee Terms of referencesAll these committees operate under board approved written terms of reference.

The three committees functioning during the period under review were as follows: ■ The Executive Committee ■ The Audit and Risk Committee ■ The Remuneration Committee

A nomination committee was established subsequent to year end. The primary focus is to identify and make recommendationsto the board on suitable candidates for appointment as directors and to oversee succession planning in respect of key executivemanagement and board positions. The nomination committee will forthwith, together with the Company Secretary play a centralrole in the annual board evaluation process.

The Executive Committee The Executive Committee comprises three group executive directors together with certain divisional directors of each of thesubsidiary companies. The Executive Committee, which is responsible for the daily running of the Group, meets on a monthlybasis and reviews current operations in detail, develops strategy and policy proposals for consideration by the board and thenimplements its directives.

As highlighted in the Board Charter, the Executive Committee has the power and authority of Ansys Limited’s Board of Directors,to exercise their discretion between meetings of the Board of Directors or in the case of emergencies.

The Executive Committee does not have the power and authority to act on:

■ Role and responsibilities specifically delegated to the Audit Committee, the Remuneration Committee or any other Committeeestablished by the Board of Directors; or

■ To take actions, which may not by law be delegated by the Board of Directors to the Executive Committee

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EXECUTIVE COMMITTEE MEETINGS ATTENDED 11 MEETINGS HELD

Number of Number ofName Company Designation Appointment meetings meetings held

date attended while appointed

A Holloway Ansys Chief Executive Officer 01 February 2002 11 11

R Grobbelaar Ansys Chief Financial Officer 01 February 2008 7 11

RF Barnard Ansys Executive Director 01 October 2006 11 11

JJ Prinsloo Ansys Technical Executive 23 March 1987* 0 1

OK Sakkers Ansys Chief Technical Officer 19 February 1993 10 11

I Lamprecht Ansys Operational Executive 01 December 2002 10 11

JG Kotze Ansys Marketing Executive 07 May 2008 11 11

E van der Westhuizen Ansys Human Resources Executive 01 January 2009 10 11

JP Malan QuadSoft Managing Director 17 September 2008 10 11

TM Goss Optocon Managing Director 17 September 2008 10 11

JC van de Pol Emerging Signals Divisional Managing Director 17 September 2008 6 11

*JJ Prinsloo resigned at the end of March 2009

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Communications with stakeholders and shareholdersThe Group is committed to a policy of effective communication and engagement with its stakeholders on issues of mutual interest.Communication with the stakeholders is vital in building a sustainable business and it offers a tool to effectively and successfullyaddress all stakeholders’ expectations. Ansys will continue to have an interactive relationship with shareholders, investors,analysts, investors and regulators

Closed period and Price Sensitive InformationThe Group has adopted a closed period policy during which directors, senior managers, consultants and agents are prohibitedfrom trading in securities.

Designated AdvisorExchange Sponsors (2008) (Pty) Ltd, was appointed as the Designated Advisors of the Group since listing on AltX and remained assuch.

Transfer SecretaryComputershare Investor Services (Pty) Ltd is the transfer secretary of the Group. They assist all our shareholders with enquiriespertaining to shareholdings.

Report from the Audit and Risk Committee (ARC)Dear Shareholder

The following is my report in terms of section 270 (A) of the Companies Act, 1973 (as amended);

Members:■ MG Diliza (resigned 21 August 2009) (Chairman), Dr. JL Steyn (resigned 1 March 2010) and T Daka ■ The independent external auditors attend the meetings as standing invitees ■ The Designated Advisors attend the meetings as standing invitees■ R Grobbelaar (CFO) and A Holloway (CEO) attend the meetings by invitation

All the members of the committee have the necessary financial and risk management background.

The external auditors have unrestricted access to the Chairman of the ARC, which ensures that their independence is in no wayimpaired. Time is allocated at every meeting for independent discussions with the external auditors.

Although not currently compliant in terms of the constitution of the committee, the board acknowledges that the Companies Actrequires the Audit Committee to have at least two independent non-executive directors appointed as members of the Auditcommittee. The Board further supports the principle of independence in order to maintain corporate division of power andnegotiations. Our minority shareholders’ interests are however protected at all times by a strong presence of a majority of non-executive directors. The nomination committee is currently considering the recommendation for appointment of several candidates,as independent non-executive directors.

The role, purpose and principal functions of the Audit and Risk Committee:The ARC assists the board with regard to reporting financial information, selecting and properly applying accounting principles,monitoring the Group’s internal control systems and various compliance-related matters.

During the period under review, the ARC’s activities included:

■ dealing with matters relating to financial and internal control, accounting policies, reporting and disclosure ■ reviewing and recommending to the board interim and group annual financial statements ■ reviewing, together with the external auditors, the conformity of the audited group annual financial statements and related

schedules with IFRS and the quality and appropriateness of the accounting policies

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■ reviewing and considering the internal audit function ■ ensuring compliance with the applicable legislation and regulations ■ to ensure that all risks to which the Group is exposed are identified and managed in a well defined control environment ■ recommending to the board the appointment of external auditors and fees payable to the external auditors ■ evaluating the performance of the external auditors ■ approving the Group’s policy on external audit firms providing non-audit services and ensuring compliance with the policy ■ satisfying itself on the appropriateness of the experience and expertise of the Group Financial Director and the adequacy of

resources of the finance function and experience of the senior members of management responsible for the finance function ■ ensuring that the appointment of the external auditors complied with the Corporate Laws Amendment Act and any other

legislation relating to appointing external auditors ■ considering the impact of significant events and issues and controls in this regard ■ considering tax provisions and related tax matters ■ reviewing and approving external audit plans, findings, reports and fees

As Chairman of the ARC, I confirm that I have:

■ attended all meetings as a member of the ARC ■ met separately with the external auditors ■ met with executive management on a regular basis ■ reported to the board after each committee meeting

Non Audit ServiceThere were no non-audit services considered during the period under review.

External AuditorDuring the external auditor evaluation process the ARC considered various criteria, such as

■ audit planning ■ technical abilities ■ audit process and outputs ■ quality control ■ business insight ■ independence and general factors

The ARC was satisfied with the independence of the external auditors and has recommended the reappointment of BDO SouthAfrica Incorporated as the independent registered audit firm and the individual registered auditor, Berton Bosman. This is subjectto the approval of shareholders.

As part of its report to the board, the ARC comments on the financial statements, the accounting practices and the internal financialcontrols of the Group. The committee stays abreast of current and emerging trends in accounting standards.

Terms of referenceThe ARC operates under an approved written terms of reference, which is reviewed by the board annually.

Internal AuditGiven the current size of the Group, the internal audit function is in the process of being established and is not yet fully operational.

Financial DirectorThe audit committee has executed its responsibility in terms of paragraph 3.48(h) of the JSE Listings Requirements and confirmedthat they have satisfied themselves with the appropriateness of the expertise and experience of the financial director.

Annual External Audit FeeThe approved Annual Audit Fee for the financial period under review amounted to R367 790.

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Number of Number ofAppointment Resignation meetings meetings held

Name Designation date date attended while appointed

MG Diliza Chairman 01 June 2007 21 August 2009 1 1

Dr JL Steyn Member/Chairman 01 November 2008/ 27 October 2009 1 March 2010 3 3

T Daka Member 10 October 2001 n/a 3 3

A Holloway Chief Executive Officer – Invitee n/a n/a 2 3

R Grobbelaar Chief Financial Officer – Invitee n/a n/a 3 3

M Gous Company Secretary 08 October 2007 n/a 3 3

AUDIT COMMITTEE MEETINGS ATTENDED 3 MEETINGS HELD

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Meetings

Risk Management

Risk philosophyEffective risk management (ERM) is central to maintaining and improving a competitive advantage while adapting to changesin the business environment. The underlying principle of ERM or enterprise-wide risk management is that every entity existsto provide value for its shareholders. Ansys’s ERM adopts a holistic approach to managing uncertainty, representing both riskand opportunity. The aim is to establish the acceptable level of risk in each area of business, which should be as low asreasonably practical, while taking full advantage of the highest returns possible to maximise shareholder wealth. In all riskmanagement activities, compliance with the King II Code of Corporate Practice and Conduct (from 1 March 2010: King III) is afundamental principle.

Risk appetiteThe ARC of the board approves Ansys’s risk appetite and ensures it is aligned with Group strategy. Ansys’s risk appetite is afunction of its ability to withstand unexpected losses and their impact on the Group’s ability to continue as a going concern.

Risk cultureRisk owners are responsible for continuously monitoring the ever changing risk profile of the environment in which they operate.The internal environment encompasses the whole organisation and sets the basis for how risk is viewed and addressed by allresponsible employees. It takes into account the risk management philosophy, risk appetite, integrity and ethical values(corporate governance) and other compliance issues.

Risk identification processThe risk management process is continuous, with well-defined steps. Risks from all sources are identified and once they passa set materiality threshold, a formal process begins in which causal factors and consequences are identified and the correlationwith other risks and mitigating controls reviewed.

The business risks, appropriately categorised and based on impact and likelihood of occurrence, together with ameliorationcontrol measures, is disclosed below. These business risks have been approved by the executive committee, ARC of the board,and the board itself.

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The ARC is of the view that it has complied with its legal, regulatory and other statutory responsibilities.

Regards,Chairman

Description of risk Amelioration measure Probability Impact

Strategic

Dependency on governmentinfrastructure spending

• Strong BBBEE rating• Product and service diversification• Customer diversification

Medium High

Inefficient tender adjudication process• Product and service diversification• Customer diversification

Medium High

Not staying abreast with technologicaladvances, competitors and/or marketdevelopment

• Chief Technical Officer appointed in 2009• Regular technical training (formal and informal)• Focus on recruitment of young engineers

Low High

Non-compliance to customer BBBEErequirements

• Promotion from within• Identification of feasible new BBBEE partners• Explore Enterprise Development

Low Medium

Project risk

Material and equipment theft as well asvandalism

• On-site security• Insurance• Regular review by group insurance provider (independent)

Medium Low

Technical: design aspects, execution,change in specifications

• Specification sign-off by customer• Regular meetings with customer and project team

Medium Medium

Financial

Debtor recovery or late payments• Obtain upfront payments or payment bonds/guarantees• Build-up sufficient cash reserves

High High

Exchange rate volatility• Hedging of all exposures through foreign exchange contracts (FEC)• Quotation of FEC rate to customers for foreign components

Medium Low

Human Resources

Succession planning

• Focus on recruitment of young engineers and developing skills forlong-term retention

• Career planning• Skills development and training

Medium High

Uniform policies and procedures• Group HR executive appointed in 2009• Policies and procedures revised and updated in 2010• Policies and procedures implemented throughout the group

Medium Medium

Legal

Contracts • Standardised contract terms and conditions Medium High

Enterprise Governance

Adherence to legislative requirement,JSE requirements and other guidelines

• Establish a legal register• Consult corporate advisors• Knowledgeable Audit and Risk Committees

Medium High

IT

Restrict access to sensitive data• Formalise IT policy• Manage internal control access to data

Medium High

Back-up and data recovery• Formalise IT policy and procedures• Off-site data storage

Medium High

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Report from the remuneration committeeTeddy Daka non-executive director and chairperson of the remuneration committee has pleasure in submitting this report.

Members: T Daka (Chairman); MG Diliza (resigned 21 August 2009), Dr. JL Steyn (resigned 1 March 2010), A Holloway (CEO) andE van der Westhuizen (HR Executive) attend the meetings by invitation.

The remuneration committee, with approved and adopted terms of reference from the board, determines the specific remunerationpackages for each of the executive directors, incentive arrangements, profit participation and benefits of the executive directorsand executive committee. The remuneration committee consults with the CEO from time to time, where the remuneration of otherexecutives is concerned. The CEO plays no part in decision making regarding his own remuneration.

The remuneration committee is responsible for ensuring that the levels of remuneration are sufficient to attract, retain and motivateexecutives of the competence required for high-level management and key employee positions. It is also responsible for measuringthe performance of the executive directors in discharging their functions and responsibilities. It also plays an integral part in thesuccession planning, particularly in respect of the CEO and executive management.

Remuneration is performance based and is designed to provide incentives for directors and employees to perform at the highestoperational levels.

Group remuneration policyThe Group’s remuneration philosophy is supportive of the Group’s business strategy. The remuneration of the board, executivemembers and employees is fair and market related. The board, with the assistance of the remuneration committee, maintainssuch remuneration to attract suitable employees and board members, with due consideration of the return to stakeholders. Theboard acknowledges the importance of motivating individual and team performances and therefore applies the remunerationphilosophy equitably, fairly and consistently in relation to job responsibilities, the markets in which the Group operates and personalperformance.

Board remunerationIn order to align directors’ interests with that of shareholders the remuneration of directors is structured in such a way that asignificant proportion thereof is performance related.

Further detail on board remuneration for the financial period under review is available on pages 77 to 79.

Remuneration structureThe remuneration structure is delegated as follows:

■ the remuneration committee approves executive directors fees ■ the remuneration committee approves executive committee members’ fees as proposed by executive committee ■ the remuneration committee approves subsidiary managing directors’ fees as proposed by executive committee; and■ the executive committee approves employees’ remuneration

MeetingsThe remuneration committee is required to meet at least twice a year. The chairman of the board, the CEO, the Financial Directorand any other board member has the right of attendance of the remuneration committee meeting as an invitee.

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Number of Number ofAppointment Resignation meetings meetings held

Name Designation date date attended while appointed

MG Diliza Chairman 01 June 2007 21 August 2009 1 1

Dr JL Steyn Member 01 November 2008 1 March 2010 1 1

T Daka Member 10 October 2001 n/a 1 1

A Holloway Chief Executive Officer – Invitee n/a n/a 1 1

E van der Westhuizen HR Executive – Invitee n/a n/a 1 1

M Gous Company Secretary 08 October 2007 n/a 1 1

Note: The Remco meeting scheduled for 20 August 2009 was adjourned and reconvened on 31 August 2009. This reflects as one

meeting above.

REMUNERATION COMMITTEE MEETINGS ATTENDED 1 MEETING HELD

Regards,Chairman

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SUSTAINABILITY

IntroductionAt the core of all its activities, The Group remains committed to contributing to, and investing in, South Africa’s prosperity, growthand development through sustainable business practices. The Group believes that sustainable development underpins soundbusiness growth. By addressing the country’s transformation challenges, behaving responsibly and respectfully towards bothpresent and future stakeholders, embracing social investment and nurturing the environment, the Group seeks to ensure its ownlong-term commercial success, enhance the prosperity of all of the countries in which it operates including the citizens of thosecountries.

To this end, Ansys voluntarily incorporates economic, social and environmental concerns into business practices and decisionmaking to enable it to make a real and sustainable difference. Ansys also endorsed the King Code’s recommendations for integratedsustainability reporting.

Ansys’s objective is to be profitable both in a responsible and accountable manner to the broader society and communities itserves while nurturing and respecting the environment in which it operates. The Group makes a concerted effort to communicateopenly with its stakeholders and is committed to transparency. It has defined its stakeholders and determined the most effectiveand strategic methods of communicating key issues to them.

Sustainable economyThe Group accepts that its ability to act as a responsible corporate citizen in its pursuit of economic sustainability for allstakeholders is directly influenced by its financial performance and vice versa. Contributing meaningfully to the country’stransformation challenges is regarded as a key component of economic sustainability.

Investment in peopleThe Group’s sustainability policy incorporates the guiding principles which addresses social issues, which are consistently appliedin all the underlying operations of the Group to provide a working environment that attracts and retains talented employees. Theseinclude a safe and healthy place to work, employment equity, training and development, communication as well as support tothose affected by HIV and Aids.

Our commitment and priorityThe Group has a strong track record of investing in its people. Ensuring that it has the right people on board is crucial to deliveringon the Group’s vision.

■ The Group started developing an integrated, aligned, complementary framework of people development and performanceenhancement initiatives to manage its people Group-wide

■ Ansys has a good understanding of its leadership talent and gaps in its leadership profile. It is identifying a team of talentedbusiness leaders who can be deployed across the Group as the need arises

■ Several Group-wide leadership training programmes have been rolled out including a number of MBA bursaries■ Ansys’s operating groups continued to deliver relevant and accredited skills training to build technical and operational

capabilities

Aligning with global best-practices The Group will continue to align and implement best-practice policies and procedures across the businesses, in support of itsobjective to become the employer of choice in the sectors in which the Group operates.

Ansys will continue to strive to attract the best talent from the external market as well as to retain and develop key talent in theGroup.

EmployeesIn the year under review, the Group provided employment opportunities to more than 130 people around the country. Through jobcreation, Ansys had a significant beneficial impact on the societies and the economies of the areas in which it operates. Wherepossible Ansys procures labour from local communities to ensure that the local populations benefit from its operations. Despitethe movements in the workforce, the demographics of the Group’s employees do not change meaningfully from one year to thenext.

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SUSTAINABILITY

Employees continuedThe Group’s approach to addressing its employment equity and management control imperatives is to focus its efforts on skillsand leadership development with a particular focus on fast-tracking talented employees from the designated groups whodemonstrate leadership potential, attitude, commitment and ambition.

Accordingly, the Group maintained its extensive training and development programmes, targeted at all occupation levels duringthe year in order to continue developing critical skills and especially to develop senior managers with the requisite technical,commercial and engineering experience to achieve and exceed its transformation targets and objectives.

Development of an Integrated Human Resources FrameworkThe Group maintained the momentum of investing in its people during 2010 with a view to attracting and retaining the best talentin the industrial sectors in which it operates. Specific focus was given to the development of an integrated model to govern thedevelopment and alignment of common people policies, processes and interventions across the Group.

Accordingly, the Group has developed its Human Resources model, which is an integrated, aligned, complementary framework ofpeople development and performance enhancement initiatives. The model is an enabler for the development and implementationof best practice and consistent performance, reward and career development standards and practices across the Group.

Aligning remuneration practices across the GroupThe remuneration philosophy, policies and practices throughout Ansys have been aligned and communicated to management.

HIV and AidsIn accordance with the Ansys Group’s policy, operations have established HIV and Aids programmes. These aim to control, preventand reduce the impact of HIV and Aids on each member of the Group’s workforce.

The Group continues to encourage employees to undergo voluntary counselling and testing through the “know your status”campaign with the focus over the past year being to target newly established sites.

Corporate social investment (CSI)In its operations nationwide, Ansys is mindful of the potential positive and negative impacts it has on the communities in which itoperates. The Group is aware that the creation of wealth, brings with it broader responsibilities to the communities it serves andwithin which it operates.

The Group recognises the far reaching nature of its duties to support wider social upliftment and contributing to nation buildingthrough a social investment programme that has partnering and enablement as its core philosophies. Through its CSI programmes,the Group strives to meet the needs and expectations of the wider community while demonstrating that it is not harming butenhancing society, and is creating a business for future generations of South Africans.

TransformationA detailed BBBEE strategy was developed in 2010 providing a macro strategy, an Ansys Transformation Vision, a Group-wideimplementation strategy and targets to integrate BBBEE at all levels. The BEE Sub-Committee of the Ansys Executive Committeeimplemented a broad strategic framework as well as a transformation target for the operations.

Group TransformationThe Group has continued to drive transformation as a business imperative during the year under review. The transformation planof the Group is informed by the strategic plan and is regarded as a fundamental driver of change, growth and sustainability.Accordingly, BBBEE is an integral part of the overall growth strategy of the Group.

Ansys views BBBEE as a business imperative, and an integral part of the Group’s growth and sustainability. In the period underreview Ansys has reviewed its empowerment programme and its future strategy in this arena in depth.

In order to monitor the Group’s BBBBE progress, the measurement of ownership, board control and CSI is vested with the boardof Ansys Ltd. At the same time, the Executive Committee also focuses their attention on senior management control, employmentequity, skills development, preferential procurement and enterprise development and where appropriate their CSI efforts.

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The Group’s detailed scorecard is tabled below:

OwnershipAnsys led the way in its industrial segment by being the first significant Group to conclude a high-level black economicempowerment transaction in October 2002. Teddy Daka holds a 26.4% interest in Ansys.

Management controlCurrently 31.7% of the workforce is represented by the designated groups, and emphasis is placed on training suitable candidatesto accelerate promotion to management level. 22,8% of senior and middle management in the Group and one of the four boardmembers are from the designated groups.

Employment EquityIn terms of a formal policy Ansys undertakes to be an equal opportunity employer and to this end adopts a zero-tolerance approachto any perceived and/or real discriminatory obstacles and practices impeding equal employment opportunities. The Group rewardsinitiative, effort and merit while at the same time prioritising the advancement of employees from previously disadvantaged groups.Ansys is therefore committed to equal employment, training and reimbursement opportunities for all race groups and genders.

Recruitment of new employees, as per the formal Ansys policy, gives precedence to appropriately qualified candidates frompreviously disadvantaged groups. With regard to promotion, existing employees are given preference wherever viable. Where nosuitable internal candidates can be identified the position is sourced externally.

Employees retention at Ansys remains excellent, with each successive year reflecting a net gain of employees and the success ofthe Group’s strategy of empowerment, assigning responsibility and engendering a sense of ownership.

Ansys conforms to the Employment Equity Act and all the relevant reports are up to date.

Skills development and trainingAnsys continues striving to be the “employer of choice” in its industry and is achieving pleasing success in this regard. The Groupis committed to continually enhancing the skills base and facilitating the advancement of employees, and makes specific effortsto assist the progress of employees from previously disadvantaged groups. Ansys recognised the opportunity (arising from thedeterioration in market conditions in the wake of the global financial crisis) to eliminate the former skills shortage and to deepenits skills pool, and actively recruited appropriately qualified candidates during the year.

Ongoing internal technical skills development is provided through classroom, personal mentoring and “on-the-job” training.

Several Group-wide leadership training programmes have been rolled out including Sales Skills and Advanced Negotiation. Monthlytechnical talks have been implemented by the Chief Technical Officer. With these group-wide training programmes, Ansys ensuresthat its leaders are exposed to consistent leadership methods and concepts and relevant training, enabling the Group to create auniversal and aligned leadership culture as well as contributing to the long term performance and retention of talented employees.

BEE Code Charter (%) Scorecard rating (%)

2010 2009

Ownership 20 17.05 15.14

Management Control 10 0.60 1.67

Employment Equity 15 1.76 0.00

Skills Development 15 0.03 0.10

Preferential Procurement 20 8.06 10.77

Enterprise Development 15 15.00 13.64

Socio-Economic Development 5 3.87 0.83

RATING 6 7

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Skills development and training continuedA core component of Ansys’s vision of leaving a lasting legacy is to provide its people with opportunities to grow and learn skillsand competencies, for their benefit, and that of the communities in which the Group operates.

With its leadership development programmes and extensive skills training across the Group, Ansys is investing in those who havechosen to pursue a career within the Group.

ProcurementOrganisational transformation has created the necessary focus to not only improve preferential procurement scores, but to redefinethe day-to-day approach towards the award of business to external business partners. This approach communicates the strategicintent and commitment of the Group.

Currently the Group gives first preference to black empowered companies. As far as possible Ansys procures its supplies andservices and recruits its work force from local communities, particularly when operating in remote and rural areas.

In undertaking responsible procurement, supplier sustainability is considered to be a critical success factor. With preferentialprocurement across the Group, there is an emphasis on the development and mentoring of suppliers where applicable. This is acritical factor in the Group’s responsibility towards the transformation of its external business partners and the sector as a whole.

A Group wide Quality Assurance (QA) procurement system has been implemented to enable consolidated reporting and to provideauditable track records while focusing on areas which may require pro-active intervention and support. Individual operatinggroups and business units operate within this framework and are able to select competent and technically capable suppliers andvendors with the appropriate BEE credentials.

Enterprise DevelopmentAnsys believes that it can best leverage the value of its BBBEE initiative at the operating group level where partnerships withblack businesses and entrepreneurs are targeted by, facilitating enterprise development and transferring skills. The Group’s BBBEEobjectives are best served by founding and growing industry and other companies with actively involved black shareholders whohave a desire to succeed, are willing to work hard and are open to learning new skills.

Safety, Health Environment and Quality (SHEQ)Leading by example: The Board and Executive Committee of Ansys believe that strong visible leadership and adherence to world-class standards will encourage efficient practices throughout the Group to achieve zero fatalities and injuries and minimise lossesthrough rework.

Health and Safety are paramount and will never be compromised in the pursuit of any objective. Ansys is committed to a safe andhealthy working environment in strict compliance with the Occupational Health and Safety Act, 1993, as well as subscribing to azero-harm policy. To this end, our safety policy is regularly reviewed and we have commenced legal compliance audits throughour Legal Register.

In the year under review, the Group demonstrated its ongoing commitment to entrenching a safety culture by appointing a GroupSafety Officer and establishing safety workgroups with representatives from each subsidiary. A detailed risk assessment isundertaken for each project and specific tasks, which are rated according to a matrix and mitigated accordingly. Site employeesare trained and each site has a health and safety plan according to the applicable (contractual) requirements.

Extensive health and safety training took place during the past year including:

■ Health and Safety Representative training■ Fire Fighting and■ First Aid (Level 1 and 2)

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Safety, Health Environment and Quality continuedThe following measures are now in place to prevent casualties and injuries:

■ Divisional Safety Committees■ Toolbox talks■ Safety alerts■ Health and safety investigations; and■ Corrective disciplinary action in the event of proven negligence

In light of the Group’s expansion it is in the process of standardising health and safety procedures across all business units, whoreport on their progress every month.

EnvironmentAnsys recognises that due to the nature of its rail, mining and manufacturing activities, it can potentially have a significant impacton the natural environments in which it operates. The Group considers that limiting its environmental impact is vital in the longterm well-being of the communities and eco-systems in which it operates for the benefit of current and future generations.

Ansys is committed to identifying, assessing and reducing the environmental impact of the activities performed by its operations,its production and supply chain and any of its products or services that are or may have a significant direct environmental impact.To this end, the Group is committed to reducing its carbon footprint in the long term and will accordingly develop a systematicapproach specific to the sectors in which it operates.

Ansys has developed a draft Environmental Management Plan (EMP) which will be further expanded in the coming year. For majorprojects, environmental impact assessments (EIAs) are conducted in compliance with the relevant environmental legislation andregulations.

As part of its “going green” initiative, the Group has set up collection points for the recycling of batteries and fluorescent lampswhich is very well supported by all staff.

QualityAnsys has been accredited to ISO9001 since 1999, and its quality systems are still being improved continuously. In order tomaximise the benefit of its quality system, a major effort was launched over the past year to expand the quality system to itsnewly acquired business units.

This was achieved by seconding quality and configuration management employees, as well as transferring “best practices” to thesubsidiary organisations. A new initiative for the coming year is to provide direct access to a centralised repository of the Group’sprocedures and knowledge base using its in-house developed AMMS technology.

With the deployment of its new document-handling facilities, the company also launched a major effort to scan its paper recordsfor easier storage and retrieval this year, which had become major problem with the space required for thousands of documents.

Ansys has a mature quality management system, which has been improved since 1999. Our quality assurance (QA) team is ableto monitor and “close the loop” on problems experienced in the execution of all projects, as well as infrastructure through aProblem Reporting and Corrective Action System (PRACAS) database. The tool is used to monitor the quality dimension of projectexecution, and this provides the QA department with metrics on reported problems which are compared year-on-year. The PRACASdatabase is also used to generate statistics on quality trends and rework costs, which are reported to the Executive committee ona monthly basis.

As can be seen, there is reasonable correlation in the businesscycles except for April 2009. This was caused by a largenumber of problems found on imported equipment.

For the coming year, actions have been launched to expandcompliance with ISO 9001 to all business units. To this end,the company’s available infrastructure has been distributedinternally and QA and Information Technology (IT) employeeshave been seconded to get these systems off the ground.

SUSTAINABILITY

CONTINUED

16

14

12

10

8

6

4

2

0Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

■ 2008

■ 2009

29

Directors Responsibility Report 30

Certificate from the Company Secretary 30

Independent Auditors Report 31

Directors’ Report 32

Consolidated Statement of Comprehensive Income 38

Consolidated Statement of Financial Position 39

Consolidated Statement of Changes in Equity 40

Consolidated Statement of Cash Flows 41

Notes to the Group Annual Financial Statement 42

Notice to the Annual General Meeting 87

Administration 90

Form of Proxy 91

ANNUAL FINANCIAL STATEMENT

2010 FINANCIAL STATEMENT

30

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING AND APPROVAL OF ANNUAL FINANCIAL STATEMENTS

CERTIFICATE FROM THE COMPANY SECRETARY

The directors are required by the South African Companies Act to

maintain adequate accounting records and are responsible for the

content and integrity of the financial statements and related financial

information included in this report. It is their responsibility to ensure

that the financial statements fairly present the financial position of

the Group (the company and its subsidiaries) and the results of its

operations and cash flows for the year ended 28 February 2010, in

conformity with International Financial Reporting Standards and in

the manner required by the Companies Act of South Africa. The

financial statements are prepared in accordance with International

Financial Reporting Standards and the South African Companies Act

and are based upon appropriate accounting policies consistently

applied and supported by reasonable and prudent judgements and

estimates.

The directors acknowledge that they are ultimately responsible for

developing and maintaining the system of internal 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 adhere to the highest ethical standards in

ensuring the Groups 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 managed within predetermined procedures and

constraints.

The directors are of the opinion, based on the information and

explanations given by management, that the system of internal

control provides reasonable assurance that the financial records may

be relied on for the preparation of the financial statements. However,

any system of internal control can provide only reasonable, and not

absolute assurance against material misstatement or loss. The

directors have reviewed the Groups cash flow forecast for the 12

months ended 28 February 2011 and, in light of this review and the

current financial position, they are satisfied that the Group has access

to adequate resources to continue in operational existence for the

foreseeable future.

The financial statements have been examined by the Groups

independent external auditors and their report is presented on page 31.

The financial statements set out on pages 30 to 86, which have been

prepared on a going concern basis, were approved by the board of

directors on 28 July 2010 and were signed on its behalf by:

Alan Holloway Rachelle Grobbelaar

In terms of section 268G (d) of the Companies Act, (Act number 61 of 1973, as amended), I certify that, to the best of my knowledge and belief,

the Group has lodged with the Registrar of Companie’s for the financial year ended 28 February 2010 all such returns as are required of a public

company in terms of the Companies Act and that all such returns are true, correct and up to date.

Fusion Corporate Secretarial Services (Pty) Limited Company secretary

Pretoria

2010 FINANCIAL STATEMENT

31

We have audited the Group annual financial statements of Ansys

Limited and its subsidiaries, which comprise the directors report, the

consolidated statement of financial position as at 28 February 2010,

the consolidated statement of comprehensive income, the

consolidated statement of changes in equity and consolidated

statement of cash flows for the year then ended, a summary of

significant accounting policies and other explanatory notes, as set

out on pages 32 to 86.

Directors’ responsibility for the financial statements The Groups 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 South African 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.

Auditor’s responsibility Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those

standards require that we comply with ethical requirements and plan

and 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 auditor’s 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 auditor considers internal control relevant to the

entity’s preparation and fair presentation of the financial statements

in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting principles used

and the reasonableness of accounting estimates made by the

directors, as well as the overall presentaton 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 Group annual financial statements present fairly,

in all material respects, the financial position of the Group as at

28 February 2010, and of its financial performance and its cash flows

for the year then ended in accordance with International Financial

Reporting Standards, and in the manner required by the South African

Companies Act.

BDO South Africa Incorporated

Per Berton BosmanPartner28 July 2010

BDO South Africa Incorporated

Riverwalk Office Park, Building C, 3rd Floor

41 Matroosberg Road, Ashlea Gardens, Pretoria

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF ANSYS LIMITED

2010 FINANCIAL STATEMENT

32

The directors submit their report for the year ended 28 February 2010.

1. Nature of businessAnsys is an industrial conglomerate active in the Rail, Industrial and Defence segments. The Group offers high technology, harsh environment,

control, measurement and process improvement systems incorporating a wide range of electronic, electro-optic and software technologies.

The Group offers rail trackside measurement, communication and signalling equipment to Transnet, PRASA and the mining industry and offers

electro-optical thermal and visual surveillance/sighting imaging systems and stabilised platforms for air, land and sea applications systems to

local and foreign defence customers. During the current financial year, the company achieved an incredible success in the development of a new

Mine Rope Tester. This innovative development has been enthusiastically received in the mining industry as it significantly contributes to mine

safety.

Ansys’s vision is to supply State-Owned Enterprises and Corporates with high technology systems that will enhance the industrial infrastructure

of sub-Saharan countries.

This report represents no changes in operations from the prior year.

The Group is active in the following main market segments:

Rail Ansys is active in the South African market in Trackside Measurement, Automatic Vehicle Identification, Signalling and Locomotive Communication

Systems.

■ The Automatic Vehicle Identification (AVI) system provides electronic identification numbers of rail trucks, with identification data collected

by trackside electronic and software systems and transmitted to centralised software systems

■ The Train Condition Monitoring (TCM) system provides train condition data on a truck-by-truck basis that is collected by trackside electronic

and software systems and transmitted to centralised computer. Collected information is used for hazard identification and reaction, and

reliability centered maintenance

■ Signalling systems are supplied through the Ansys Invensys Rail Systems Australia alliance, which supplies both trackside signalling systems

and newer communications based authorisation systems

Rail projects constitute 63% (2009: 75%) of the Groups turnover.

IndustrialAnsys industrial segment is involved in monitoring and control systems and information systems for optimisation of business processes. Speciality

areas include health/condition monitoring systems, industrial computers, asset control systems, process monitoring and control systems and

electronic identification systems.

The industrial business is centered on state owned enterprises and large corporates that include the following:

■ Continuous Rope Monitoring Systems

■ Mobile Rope Testers

■ Business information systems

■ Health/condition monitoring systems

■ Maintenance management systems

■ Electronic identification systems

■ Process monitoring and control systems

Industrial projects constitute 6% (2009: 1%) of the Groups turnover.

Defence Ansys specialises in the integration of weapon systems on aircraft, land vehicles and ships. This includes on-board weapons interfacing and

services associated with integration, testing and certification of integrated weapon systems.

Ansys is active in the defence and aerospace industries, providing avionic, electro-optic and weapon systems products and services. It includes

the following solutions:

■ On-board interfacing and control subsystems

■ Rocket launcher system

■ Anti-armour missile launcher control system

■ Helmet mounted display electronic unit

DIRECTORS

Defence continued■ Weapons integration and certification support

■ Harsh environment computer systems

■ Electo-optic systems

Defence projects constitute 30% (2009:24%) of the Groups turnover.

Loss for the year before taxation was R18 289 463 (2009: profit of R2 416 160). Loss after taxation was R15 706 043 (Profit after taxation for

2009: R1 528 712).

2. Share capitalAuthorised share capitalThe Group initially sub-divided its authorised share capital from 4 000 ordinary shares of R1.00 each into 1 725 490 196 ordinary shares of no

par value on 19 April 2007 to reflect an authorised share capital of R1 725 490 196.

Issued share capitalThe company:

■ Bought back at par value 25 ordinary shares, of R1.00 each from M Gafner on 13 November 2006

■ Subdivided its issued share capital of 255 shares of R1.00 each and converted it from par value to no par value shares into 110 000 000

ordinary shares of no par value on 19 April 2007

■ On 7 June 2007, 30 000 000 of R1.00 each shares were issued when the Group was listed on the Alternative Exchange of the JSE

■ On 1 September 2008, 271 008 of R3.00 each shares were issued for the purchase consideration of the QuadSoft business combination

■ On 15 June 2009, 1 957 033 of R3.00 each shares were issued for the purchase consideration of the QuadSoft business combination

Vendor share capital The vendor shares relate to potential shares to be issued as result of the acquisitions. Refer to the business combination note 30, for further

details. All of the vendor shares outstanding at year end were issued subsequently.

3. Borrowing powers In terms of the Articles of Associations of the Group, the directors may exercise all powers of the Group to borrow money, as they consider

appropriate. Currently, there are no borrowings except for the group overdraft facility.

4. Material changes Other than the facts and developments reported in the financial report, there have been no material changes in the financial or trading position of

the Group since the reporting date and the date of this report.

5. Post financial position events QuadSoft, a wholly owned subsididary of Ansys, transferred its business to Ansys with effect from 1 March 2010. QuadSoft will, from the effective

date, trade as a division of Ansys. The directors are not aware of any significant events, except for the QuadSoft divisionalisation, that have

occurred between the end of the financial year and the date of this report that may materially affect the results of the Group for the period under

review or their financial position as at 28 February 2010.

6. LitigationM Gafner, a previous shareholder in Ansys Integrated Systems (Pty) Ltd who sold all his shares to the other shareholders in October 2006 had

instituted a court action to arbitrate the deal. A court hearing over the validity of arbitration was scheduled for 15 September 2009. This only

affected the original, prior listing, shareholders. We are pleased to report that Mr Gafner lost this case, with costs, and has subsequently taken

no further action.

7. Power to amend the group annual financial statementsThe entity owner’s do not have the power to amend the group annual financial statements after issue.

2010 FINANCIAL STATEMENT

33

2010 FINANCIAL STATEMENT

34

8. Dividends The Group has historically exercised a policy of paying dividends to shareholders, having due regard to the Groups profit, future capital requirements

and cash flow position. In the light of the low profitability for 2010, no dividend will be payable for this year.

Based on the 2009 annual financial results, no dividend was payable and based on the 2008 annual financial results, a dividend of R5 600 000

(R0.04 per share) was declared on 8 May 2008 to shareholders registered on 30 May 2008. A dividend of R3 553 000 (R0.0323 per share) was

declared in 2008 based on the 2007 annual financial results to shareholders registered on 28 February 2007.

9. Directorate The directors of the Group during the period and to the date of this report are as follows:

A Holloway T Daka*

RF Barnard Dr JL Steyn*2

R Grobbelaar MG Diliza*1

1 Resigned on 21 August 20092 Resigned on 1 March 2010

* Non-executive

10. Interest of the directors in share capital and contracts At year end, the directors in aggregate, were directly or indirectly beneficially interested in 55 745 521 ordinary shares, equivalent to 39.19% of

the issued ordinary shares of Ansys. The directors interests in the ordinary issued share capital of the Group as at year end is set out in the table

below.

Executive A Holloway 11 030 325 – 1 066 667 –

RF Barnard 7 127 451 – 7 027 451 –

R Grobbelaar – – –

18 157 776 – 8 094 118 –

Non–executive T Daka 37 562 745 – 37 562 745 –

MG Diliza – – – –

Dr JL Steyn 25 000 – – –

37 587 745 – 37 562 745 –

Number of shares held beneficially*28 February 2010

Number of shares held beneficially*28 February 2009

Direct IndirectDirect Indirect

Shareholder

During the financial year no contracts were entered into in which directors and officers of the Group had an interest that significantly affected the

Group other than those listed in note 31. Subsequent to year end and up to the date of this report, A Holloway acquired an additional 350 000

Ansys shares.

* No shares were held non beneficially (direct or indirect) by the directors in the 2010 or 2009 financial years.

2010 FINANCIAL STATEMENT

35

11. Analysis of shareholdersThe Group was listed on the Alternative Exchange of the JSE on 7 June 2007. The following shareholders hold more than 3% of the issued share

capital of the Group on 28 February 2010:

Number of shares PercentageShareholder held held

T Daka 37 562 745 26.41

JJ Prinsloo 16 011 765 11.26

OK Sakkers 12 000 294 8.44

A Holloway 11 030 325 7.76

RF Barnard 7 127 451 5.01

STANDLIB Capital Growth Fund 5 429 023 3.82

STANLIB Small Cap Fund 4 425 958 3.11

STANLIB Value Fund 4 138 085 2.91

PercentageShareholder Number of shares held

Held by non-public 70 563 755 49.61

Directors – as listed in note 10 55 745 521 39.19

Associates:

OK Sakkers* 12 000 294 8.44

I Lamprecht* 2 362 790 1.66

JG Kotze* 455 150 0.32

Held by public 71 664 286 50.39

Total 142 228 041 100.00

12. Shareholder spread At year end, the shares of the Group were held by the following categories of shareholders:

*Associates: previous directors of the company (they resigned from the board in November 2008 and currently serve the executive committee).

The company had the following shareholder spread at 28 February 2010:

Number of Percentage Number of shares PercentageShareholder shareholders held held

1 – 1 000 shares 151 14.10 95 731 0.07

1 001 – 10 000 shares 514 47.99 2 607 895 1.83

10 001 – 100 000 shares 328 30.63 12 178 752 8.56

100 001 – 1 000 000 shares 56 5.23 16 216 535 11.40

1 000 001 shares and over 22 2.05 111 129 128 78.14

Total 1 071 100.00 142 228 041 100.00

2010 FINANCIAL STATEMENT

36

13. Interest in subsidiaries

14. Loans made by subsidiary companies to holding companyQuadSoft (Pty) Ltd made a loan to Ansys Limited during the year. The loan is not secured, bears interest at prime rate and has no repayment

terms.

The total aggregate amount of indebtedness to the company’s subsidiaries and aggregate amount of income/(expenses) are as follows:

Percentage held (%) Net income/(loss) R’000 Net Asset Value R’000

Name Principal Activity 28 February 28 February 28 February 28 February 28 February 28 February2010 2009 2010 2009 2010 2009

Optocon Electro Optics Products and Systems 100.00 100.00 (9 675) 1 533 (7 954) 1 721

QuadSoft Rail Communications Systems 100.00 100.00 3 412) 4 084 8 809) 5 397

Optocon Systems (Pty) Ltd QuadSoft (Pty) Ltd

28 February 28 February 28 February 28 February 2010 2009 2010 2009R’000 R’000 R’000 R’000

Investment:

– shares 1 650*) 3 219* 15 711) 15 711

– loans 1 478)* 1 478* –) –

Loans to/(from) subsidiaries 18 436)* 9 617* (2 956) –

Income/(expense):

– interest 1 480)* 890* (348) 24

– fees 1 013)* –* 1 002) –

– purchases (556)* (2 734) –) –

* The movement in the investment in shares of Optocon relates to the re-assessment of the purchase consideration. Refer to note 30 in the notes

to the Group annual financial statements.

28 February 2010 28 February 2009

R’000 R’000

Balance at the end of the year 2 956 –

– Capital 2 608 –

– Interest capitalised 348 –

Highest outstanding balance during the year 5 629 –

Loan advances during the year:

– 5 June 2009 4 500 –

– 27 July 2009 950 –

– 29 July 2009 100 –

2010 FINANCIAL STATEMENT

37

15. Going concernThe group 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.

We draw attention to the fact that at 28 February 2010, the subsidiary (Optocon Systems (Pty) Ltd), had incurred losses of R9 675 253 (2009:

profit of R1 533 457) and that Optocon’s total liabilities exceed its assets by R7 953 940 (2009: total assets exceeding liabilities by R1 721 313).

The ability of the subsidiary to continue as a going concern is dependent on a number of factors. The most significant of these is that the directors

of Optocon Systems (Pty) Ltd continue to procure funding for the ongoing operations of Optocon and that Ansys Limited will provide continued

financial support and this will remain in force for so long as it takes to restore the solvency of Optocon.

16. Plant and equipmentDuring the year, the Group acquired plant and equipment to the value of R3 million. There were no changes to the accounting policy or the nature

of plant and equipment.

17. Special resolutionsOn 27 August 2009, a special resolution was passed, whereby the company is authorised by way of general authority, to repurchase ordinary

shares in the issued share capital of the Company from time to time, subject to the Articles of Association of the Company, the provisions of

sections 85 to 89 of the Companies Act (1973) as amended and in terms of the JSE Listing Requirements, when applicable.

18. Secretary Fusion Corporate Secretarial Services (Pty) Limited

Business address:

56 Regency Road, Route 21, Corporate Park, Irene 0062

PO Box 61252, Pierre van Ryneveld, 0045

19. Auditors BDO South Africa Incorporated will continue in office in accordance with Section 270(2) of the Companies Act of South Africa.

20. Ansys Limited seperate Annual Financial StatementsThe seperate company annual financial statements of Ansys Limited will be made available for inspection at the companies registered office and

principal place of business.

2010 FINANCIAL STATEMENT

38

For the year ended 28 February 2010

Note 2010 2009 R’000 R’000

Revenue 18 97 327) 120 171)

Cost of sales (63 022) (68 027)

Gross profit 34 305) 52 144)

Operating expenses (50 804) (51 165)

Other income 19 326) 90)

Other gains and (losses) 20 (1 482) 1 989)

Operating (loss)/profit (17 655) 3 058)

Finance income 22 220) 908)

Finance cost 22 (855) (1 550)

Finance (cost)/income – net 22 (635) (642)

(Loss)/profit before income tax (18 290) 2 416)

Income tax expense 26 2 584) (887)

(Loss)/profit for the year (15 706) 1 529)

Other comprehensive income, net of tax –) –)

Total comprehensive (loss)/income for the year (15 706) 1 529)

(Loss)/profit and total comprehensive (loss)/income for the year attributable to:

Equity holders of the company (15 706) 1 529)

Earnings per share attributable to ordinary shareholders (cents)

Basic (loss)/earnings 24 (11.10) 1.09)

Diluted (loss)/earnings 24 (10.95) 1.06)

Number of shares in issue (‘000)

Total shares in issue 142 228) 140 271)

Weighted number of shares in issue 141 518) 140 134)

Weighted diluted number of shares in issue 143 407) 144 503)

Fully diluted number of shares in issue 144 117) 144 640)

CONSOLIDATED STATEMENT OF

2010 FINANCIAL STATEMENT

39

as at 28 February 2010

Assets

Non-current assets

Plant and equipment 6 7 887 6 871

Intangible assets 7 6 381 3 304

Goodwill 7 22 966 25 701

Deferred tax assets 16 6 465 2 478

43 699 38 354

Current assets

Inventories 9 10 156 5 799

Trade and other receivables 10 32 261 52 235

Other financial assets 11 60 1 012

Cash and cash equivalents 12 3 355 6 965

45 832 66 011

Total assets 89 531 104 365

Equity and liabilities

Equity

Share capital 13 40 718 42 287

Retained earnings 8 029 23 735

Total equity 48 747 66 022

Non-current liabilities

Finance leases 14 388 655

Deferred tax liabilities 16 1 983 1 362

2 371 2 027

Current liabilities

Finance leases 14 274 523

Cash and cash equivalents 12 7 202 9 115

Trade and other payables 17 30 048 18 950

Other financial liabilities 15 – 5 871

Current tax payable 889 1 857

38 413 36 316

Total liabilities 40 784 38 343

Total equity and liabilities 89 531 104 365

Note 2010 2009 R’000 R’000

CONSOLIDATED STATEMENT OF

2010 FINANCIAL STATEMENT

40

Balance at 1 March 2008 28 368) 20 128) 27 806) 76 302)

Share movements during the year

– Shares issued 30 813) (813) –)) –)

– Re-assessment of shares to be issued

– as a results of business combination –) (6 209) –) (6 209)

Dividends –) –) (5 600) (5 600)

Other comprehensive income –) –) –) –)

Profit for the year –) –) 1 529) 1 529)

Balance at 28 February 2009 29 181) 13 106) 23 735) 66 022)

Share movements during the year

– Shares issued 13 5 869) (5 869) –) –)

– Re-assessment of shares to be issued

– as a result of business combinations 30 –) (1 569) –) (1 569)

Other comprehensive income –) –) –) –)

Profit for the year –) –) (15 706) (15 706)

Balance at 28 February 2010 35 050) 5 668) 8 029) 48 747)

For the year ended 28 February 2010

NotesIssued

share capital R’000

VendorsharesR’000

Retained incomeR’000

Total equityR’000

CONSOLIDATED STATEMENT OF

2010 FINANCIAL STATEMENT

41

For the year ended 28 February 2010

Note 2010 2009 R’000 R’000

Cash flows from operating activities

Cash generated from operations 27 14 764) (8 950)

Finance income 22 220) 908)

Finance costs 22 (855) (489)

Income tax paid (1 750) (3 382)

Dividends paid 25 –) (5 600)

Net cash from operating activities 12 379) (17 513)

Cash flows from investing activities

Purchase of plant and equipment 6 (3 093) (2 694)

Disposal of plant and equipment 6 213) 27)

Purchase of intangible assets 7 (4 719) (2 050)

Net cash flow from investing activities (7 599) (4 717)

Cash flow from financing activities

(Payments)/proceeds from other financial liabilities (5 950) 310)

Finance lease repayments (527) (838)

Net cash flow from financing activities (6 477) (528)

Total cash movement for the year (1 697) (22 758)

Cash at the beginning of the year (2 150) 20 608)

Total cash at end of the year 12 (3 847) (2 150)

CONSOLIDATED STATEMENT OF

1. General informationAnsys and its subsidiaries specialises in the design, development, manufacture, integration and support of advanced technology systems and

products for the transport, aerospace, manufacturing and defence industries.

The Group is a public limited Group which is listed on the Johannesburg Stock Exchange and is incorporated and domiciled in South Africa. The

address of its registered office is 170 Outeniqua Avenue, Waterkloof Park, Pretoria.

2. Accounting policies2.1. Presentation of financial statementsThe principal accounting policies adopted in the preparation of these financial statements are set out below and have been applied consistently

by all the Group entities as well as being consistent with the prior year.

Statement of ComplianceThe financial statements have been prepared in accordance with International Financial Reporting Standards, the Companies Act of South Africa

and the JSE Listing Requirements. The financial statements have been prepared on the historical cost basis, with the exception of certain financial

assets and liabilities which are measured at fair value in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

Basis of preparationThe preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires

management to exercise judgment in the process of applying the Groups accounting policies. The areas involving a higher degree of judgment or

complexity, or areas where assumptions and estimates are significant to the consolidated group financial statements are disclosed in note 4.

New Standards and Interpretationsa) Standards and interpretations effective and adopted in the current year

In the current year, the Group has adopted the following standards and interpretations that are effective for the current financial year and that are

relevant to its operations:

IAS 1 (Revised) Presentation of Financial StatementsThe main revisions to IAS 1 (AC 101):

■ Require the presentation of non-owner changes in equity either in a single statement of comprehensive income or in an income statement

and statement of comprehensive income

■ Require the presentation of a statement of financial position at the beginning of the earliest comparative period whenever a retrospective

adjustment is made. This requirement includes related notes

■ Require the disclosure of income tax and reclassification adjustments relating to each component of other comprehensive income. The

disclosures may be presented on the face of the statement of comprehensive income or in the notes

■ Allow dividend presentations to be made either in the statement of changes in equity or in the notes only

■ Have changed the titles to some of the financial statement components, where the ‘balance sheet’ becomes the ‘statement of financial

position’ and the ‘cash flow statement’ becomes the ‘statement of cash flows.’ These new titles will be used in International Financial

Reporting Standards, but are not mandatory for use in financial statements

The effective date of the standard is for years beginning on or after 01 January 2009. The Group has adopted the standard for the first time in

the 2010 financial statements. The impact of the standard is not material.

IAS 23 (Revised) Borrowing CostsThe revision requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset

(one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing

those borrowing costs has been removed.

The effective date of the standard is for years beginning on or after 01 January 2009. The Group has adopted the standard for the first time in

the 2010 financial statements. The impact of the standard is not material.

IFRS 8 Operating segmentsIFRS 8 (AC 145) replaces IAS 14 (AC 115) Segment Reporting. The new standard requires a 'management approach', under which segment

information is presented on the same basis as that used for internal reporting purposes.

The effective date of the standard is for years beginning on or after 01 January 2009. The Group has adopted the standard for the first time in

the 2010 financial statements. The impact of the standard is not material.

2010 FINANCIAL STATEMENT

42

For the year ended 28 February 2010

NOTES TO THE GROUP

2010 FINANCIAL STATEMENT

43

New Standards and Interpretations continuedMay 2008 Annual Improvements to IFRS’s: Amendments to IFRS 7 Financial Instruments: DisclosuresThe amendment relates to changes in the Implementation Guidance of the Standard. ‘Total interest income’ was removed as a component of

finance costs from paragraph IG13. This was to remove inconsistency with the requirement of IAS 1 (AC 101) Presentation of Financial Statements

which precludes the offsetting of income and expenses.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The adoption of this amendment has not had a material impact on the results of the Group, but has resulted in

more disclosure than would have previously been provided in the financial statements.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 1 Presentation of Financial StatementsThe amendment is to clarify that financial instruments classified as held for trading in accordance with IAS 39 (AC 133) Financial Instruments:

Recognition and Measurement are not always required to be presented as current assets/liabilities.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The adoption of this amendment has not had a material impact on the results of the Group, but has resulted in

more disclosure than would have previously been provided in the financial statements.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and ErrorsThe amendment clarified that Implementation Guidance related to any Standard is only mandatory when it is identified as an integral part of the

Standard.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 10 Events after the Reporting PeriodThe amendment clarified that if dividends are declared (appropriately authorised and no longer at the discretion of the entity) after the reporting

period but before the financial statements are authorised for issue, the dividends may not be recognised as a liability as no obligation exists at

the reporting date. Thus clarifying that in such cases a liability cannot be raised even if there is a constructive obligation.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 16 Property, Plant and EquipmentThe term ‘net selling price’ has been replaced with ‘fair value less cost to sell’ in the definition of recoverable amount.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 16 Property, Plant and EquipmentThe amendment requires entities that routinely sell items of property, plant and equipment that they have previously held for rental to others, to

transfer such assets to inventories at their carrying amount when they cease to be rented and are held for sale. The proceeds from the sale of

such assets should be recognised as revenue in accordance with IAS 18 (AC 111) Revenue. IFRS 5 (AC 142) Non-current Assets Held for Sale and

Discontinued Operations does not apply in these situations.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 7 Statement of Cash Flows Cash payments to manufacture or acquire property, plant and equipment that entities routinely sell and which they have previously held for rentals

to others, and cash receipts from rental and sale of such assets are to be included within operating activities.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

2010 FINANCIAL STATEMENT

44

New Standards and Interpretations continuedMay 2008 Annual Improvements to IFRS’s: Amendments to IAS 18 RevenueWith regards to financial service fees, the term ‘direct costs’ have been replaced with ‘transaction costs’ as defined in IAS 39 (AC 133) Financial

Instruments: Recognition and Measurement. This was in order to remove the inconsistency for costs incurred in originating financial assets and

liabilities that should be deferred and recognised as an adjustment to the underlying effective interest rate.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 19 Employee BenefitsWith regards to curtailments and negative past service costs clarification has been made that:

■ When a plan amendment reduces benefits, the effect of the reduction for future service is a curtailment and the effect of any reduction for

past service is a negative past service cost

■ Negative past service cost arises when a change in the benefits attributable to past service results in a reduction in the present value of the

defined benefit obligation; and

■ A curtailment may arise from a reduction in the extent to which future salary increases are linked to the benefits payable for past service

The definition of ‘return on plan assets’ has also been amended to require the deduction of plan administration costs only to the extent that such

costs have not been reflected in the actuarial assumptions used to measure the defined benefit obligation. The term “fall due” in the definition

of “short term employee benefits” has been replaced with “due to be settled”

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The adoption of this amendment has not had a material impact on the results of the Group, but has resulted in

more disclosure than would have previously been provided in the financial statements.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 23 Borrowing Costs (as revised in 2007)The description of specific components of borrowing costs has been replaced with a reference to the guidance in IAS 39 (AC 133) Financial

Instruments: Recognition and Measurement on effective interest rate.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 34 Interim Financial ReportingThe amendment clarifies that the requirement to present information on earnings per share in interim financial reports applies only to entities

within the scope of IAS 33 (AC 104) Earnings per Share.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 36 Impairment of AssetsThe amendment requires disclosures of estimates used to determine the recoverable amount of cash-generating units containing goodwill or

intangible assets with indefinite useful lives. Specifically, the following disclosures are required when discounted cash flows are used to estimate

fair value less costs to sell:

■ The period over which management has projected cash flows

■ The growth rate used to extrapolate cash flow projections; and

■ The discount rate(s) applied to the cash flow projections

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

May 2008 Annual Improvements to IFRS’s: Amendments to IAS 38 Intangible AssetsThe amendments clarify the circumstances in which an entity can recognise a prepayment asset for advertising or promotional expenditure.

Recognition of an asset would be permitted up to the point at which the entity has the right to access the goods purchased or up to the point of

receipt of services. In addition, wording perceived as prohibiting the use of the unit of production method if it results in a lower amount of

accumulated amortisation than under the straight line method has been removed.

Entities may use the unit of production method when the resulting amortisation charge reflects the expected pattern of consumption of the expected

future economic benefits embodied in an intangible asset.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

2010 FINANCIAL STATEMENT

45

New Standards and Interpretations continuedMay 2008 Annual Improvements to IFRS’s: Amendments to IAS 39 Financial Instruments: Recognition and MeasurementIAS 39 (AC 133) prohibits the classification of financial instruments into or out of the fair value through profit or loss category after initial recognition.

The amendments set out a number of changes in circumstances that are not considered to be reclassifications for this purpose.

The amendments have also removed references to the designation of hedging instruments at the segment level. The amendments further clarify

that the revised effective interest rate calculated when fair value hedge accounting ceases, in accordance with paragraph 92 IAS 39 (AC 133)

should be used for the re-measurement of the hedged item when paragraph AG8 of IAS 39 (AC 133) is applicable.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

IAS 18 Revenue: Consequential amendmentsDividends paid out of pre-acquisition profits are no longer deducted from the cost of the investment.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

IAS 21 The Effects of Changes in Foreign Exchange Rates: Consequential amendmentsA dividend paid out of pre-acquisition profits is no longer considered to be part of a disposal of an interest in a foreign operation.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

IAS 36 Impairment of Assets: Consequential amendmentsUnder certain circumstances, a dividend received from a subsidiary, associate or joint venture could be an indicator of impairment.

This occurs when:

■ Carrying amount of investment in separate financial statements is greater than carrying amount of investee’s net assets including goodwill

in consolidated group financial statements or

■ Dividend exceeds total comprehensive income of investee in period dividend is declared

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

Amendment to IAS 39 and IFRS 7: Reclassification of Financial AssetsThe amendment permits an entity to reclassify certain financial assets out of the fair value through profit or loss category if certain stringent

conditions are met. It also permits an entity to transfer from the available-for-sale category to loans and receivables under certain circumstances.

Additional disclosures are required in the event of any of these reclassifications.

The effective date of the amendment is for years beginning on or after 01 July 2008. The Group has adopted the amendment for the first time in

the 2010 financial statements. The impact of the amendment is not material.

Amendments to IFRS 7: Financial Instruments: Disclosures – Improving Disclosures about Financial InstrumentsThe amendment requires additional disclosures about fair value measurement, including separating fair value measures into a hierarchy. The

amendments also require liquidity risk disclosure to be separated between non-derivative financial liabilities and derivative financial liabilities.

The effective date of the amendment is for years beginning on or after 01 January 2009. The Group has adopted the amendment for the first time

in the 2010 financial statements. The impact of the amendment is not material.

AC 503 Accounting For Black Economic Empowerment Transactions – RevisedThe revisions align the Standard to the amendments to IFRS 2 (AC 139) Share Based Payment with regards to vesting and non-vesting conditions.

Specifically, it requires that post-vesting restrictions on the transfer of equity instruments are non-vesting conditions and should be taken into

account in determining the grant date fair value.

The effective date of the amendments is for years beginning on or after 01 January 2009. The Group has adopted the amendments for the first

time in the 2010 financial statements. The impact of the amendment is not material.

b) Standards and interpretations not yet effective The Group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the

group’s accounting periods beginning on or after 01 March 2010 or later periods:

2010 FINANCIAL STATEMENT

46

New Standards and Interpretations continuedIAS 7 Statement of Cash Flows: Consequential amendments due to IAS 27 (Amended) Consolidated and Separate Financial StatementsCash flows arising from changes in level of control, where control is not lost, are equity transactions and are therefore accounted for as cash

flows from financing transactions.

The effective date of the amendment is for years beginning on or after 01 July 2009. The Group expects to adopt the amendment for the first time

in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

AC504 – IAS 19 The Limit on A Defined Benefit Asset, Minimum Funding Requirements and Their Interaction In the South African PensionFund EnvironmentThe standard provides guidance on the application of IFRIC 14 (AC 447) in the context of South African defined benefit pension plans.

The effective date of the standard is for years beginning on or after 01 April 2009. The Group expects to adopt the standard for the first time in

the 2011 financial statements. The adoption of this standard is not expected to impact on the results of the Group, but may result in more disclosure

than is currently provided in the financial statements.

2009 Annual Improvements Project: Amendments to IAS 1 Presentation of Financial StatementsThe amendment clarifies that a liability which could, at the option of the counterparty, result in its settlement by the issue equity instruments,

does not affect its classification as current or non-current.

The effective date of the amendment is for years beginning on or after 01 January 2010. The Group expects to adopt the amendment for the first

time in the 2011 financial statements. The adoption of this amendment is not expected to impact on the results of the Group, but may result in

more disclosure than is currently provided in the financial statements.

2009 Annual Improvements Project: Amendments to IAS 7 Statement of Cash FlowsThe amendment provides that expenditure may only be classified as ‘cash flows from investing activities’ if it resulted in the recognition of an

asset on the statement of financial position.

The effective date of the amendment is for years beginning on or after 01 January 2010. The Group expects to adopt the amendment for the first

time in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

2009 Annual Improvements Project: Amendments to IAS 17 LeasesThe amendment removes the guidance that leases of land, where title does not transfer, are operating leases. The amendment therefore requires

that lease classification for land be assessed in the same manner as for all leases. The amendment is to be applied retrospectively, unless the

information is not available. In these cases, existing leases shall be reconsidered based on facts and circumstances existing at the date of adoption

of the amendment. The lease asset and lease liability shall, in these cases be recognised at their fair values on that date, with any difference in

those fair values recognised in retained earnings.

The effective date of the amendment is for years beginning on or after 01 January 2010. The Group expects to adopt the amendment for the first

time in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

2009 Annual Improvements Project: Amendments to IAS 18 RevenueThe amendment provides additional guidance in the determination of whether an entity is acting as an agent or principal in a revenue transaction.

The effective date of the amendment is for years beginning on or after 01 July 2009. The Group expects to adopt the amendment for the first time

in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

2009 Annual Improvements Project: Amendments to IAS 36 Impairment of AssetsThe amendment now requires that, for the purpose of goodwill testing, each group of units to which goodwill is allocated shall not be larger than

an operating segment as defined in paragraph 5 of IFRS 8 (AC 145) Operating Segments. Thus the determination is now required to be made

before operating segments are aggregated.

The effective date of the amendment is for years beginning on or after 01 January 2010. The Group expects to adopt the amendment for the first

time in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

2009 Annual Improvements Project: Amendments to IAS 38 Intangible AssetsThe amendment provides guidance on the measurement of intangible assets acquired in a business combination.

The effective date of the amendment is for years beginning on or after 01 July 2009. The Group expects to adopt the amendment for the first time

in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

2010 FINANCIAL STATEMENT

47

New Standards and Interpretations continued2009 Annual Improvements Project: Amendments to IAS 39 Financial Instruments: Recognition and MeasurementIn terms of the amendment, forward contracts to buy or sell an acquiree that will result in a business combination in the future, are only exempt

from the Standard if the term of the contract does not exceed that which is reasonably necessary to obtain the required approval and complete

the transaction. The amendment further clarifies that in a cash flow hedge of a forecast transaction, gains or losses should be reclassified from

equity to profit or loss in the period in which the hedged forecast cash flow affects profit or loss. The amendment also clarifies that a prepayment

option is not closely related to the host contract unless the exercise price is approximately equal to the present value of the lost interest for the

remaining term of the host contract.

The effective date of the amendment is for years beginning on or after 01 January 2010. The Group expects to adopt the amendment for the first

time in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

2009 Annual Improvements Project: Amendments to IFRIC 9 Reassessment of Embedded DerivativesThe amendment excludes form the scope of the Interpretation all embedded derivatives acquired in a business combination, in the combination

of entities under common control or the formation of joint ventures.

The effective date of the amendment is for years beginning on or after 01 July 2009. The Group expects to adopt the amendment for the first time

in the 2011 financial statements. It is unlikely that the amendment will have a material impact on the Group's financial statements.

c) Standards and interpretations not relevant

The following standards and interpretations, which have been published, but are not currently relevant for the Group are:

IFRS 1 First-time Adoption of International Financial Reporting Standards: Measurement of the cost of investments in subsidiaries, jointly controlled entities and associates when adopting IFRS for the first time (effective

first annual period commencing on or after 1/7/2009) as well as the amendments relating to oil and gas assets and determining whether an

arrangement contains a lease (effective first annual period commencing on or after 1/1/2010).

IFRS 2 Share Based payments: Amendments to vesting conditions and cancellations (effective first annual period commencing on or after 1/1/2009) as well as the accounting for

group cash-settled share-based payment transactions – clarify of the definition of the term “group” (effective first annual period commencing on

or after 1/1/2010)

IFRS 3 Business Combinations: Amendments to accounting for business combinations (effective first annual period commencing on or after 1/7/2009)

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Plan to sell the controlling interest in a subsidiary (effective first annual period commencing on or after 1/7/2009) as well as disclosures of non-

current assets (or disposed groups) classified as held for sale or discontinued operations (effective first annual period commencing on or after

1/1/2010) and amendments resulting from IFRIC 17 for assets held for distribution to owners (effective first annual period commencing on or after

1/7/2009).

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance Government loans with a below-market rate of interest and consistency of terminology with other IFRSs (effective first annual period commencing

on or after 1/1/2009)

IAS 27 Consolidated and Separate Financial Statements: Amendment dealing with dividends to be recognised as income, guidance on measurement of cost of investment when adopting IFRS for the first

time (effective first annual period commencing on or after 1/1/2009), Consequential amendments from changes to Business Combinations,

Measurement of subsidiary held for sale in separate and financial statements (effective first annual period commencing on or after 1/7/2009)

IAS 28 Investments in Associates: Required disclosures when investments in associates are accounted for at fair value through profit or loss, the impairment of investments in

associate (effective first annual period commencing on or after 1/1/2009) and the consequential amendments from changes to business

combinations (effective first annual period commencing on or after 1/7/2009).

IAS 29 Financial Reporting in Hyperinflationary Economies: Description of measurement basis in financial statements and consistency of terminology with other IFRSs (effective first annual period commencing

on or after 1/1/2009).

2010 FINANCIAL STATEMENT

48

New Standards and Interpretations continuedIAS 31 Interests in Joint Ventures: Dividends to be recognised as income, required disclosure when interests in jointly controlled entities are accounted for at fair value through profit

or loss (effective first annual period commencing on or after 1/1/2009) and consequential amendments from changes to Business Combinations

(effective first annual period commencing on or after 1/7/2009).

IAS 32 Financial Instruments: Presentation: Certain financial instruments will be classified as equity whereas, prior to these amendments, they would have been classified as

financial liabilities (effective first annual period commencing on or after 1/1/2009)

IAS 40 Investment property: Property under construction or development for future use as investment property, consistency of terminology with IAS 8 and Investment property

held under lease (effective first annual period commencing on or after 1/1/2009)

IAS 41 Agriculture: Discount rate for fair value calculations, additional biological transformation, examples of agricultural produce and products and point-of-sale

costs (effective first annual period commencing on or after 1/1/2009).

IFRIC 13 Customer Loyalty Programmes (effective first annual period commencing on or after 1/7/2008)

IFRIC 15 Agreements for the Construction of Real Estate (effective first annual period commencing on or after 1/1/2009)

IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective first annual period commencing on or after1/10/2008)

IFRIC 16 (amended) Hedges of a Net Investment in a Foreign Operation: Amendment to the restriction on the entity that can hold hedge instruments (effective first annual period commencing on or after1/7/2009).

IFRIC 17 Distribution of Non-cash Assets to Owners (effective first annual period commencing on or after1/7/2009)

IFRIC 18 Transfer of Assets from Customers (effective first annual period commencing on or after 1/7/2009) 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 other than requiring additional disclosure.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments: Addresses only the accounting by the entity that issues equity instruments in order to settle, in full or in part, a financial liability. It does not

address the accounting by the creditor (lender) (effective first annual period commencing on or after 1/4/2010).

2.2 Consolidation Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group

controls another entity.

Subsidiaries are fully consolidated from the effective date on which control is transferred to the Group. They are de-consolidated from the effective

date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as

the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly

attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured

initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill. If the

cost of acquisition is less than the fair value of the assets of the subsidiary acquired, the difference is recognised immediately in profit or loss

(see note 2.6).

2010 FINANCIAL STATEMENT

49

2.2 Consolidation continuedSubsidiaries Inter-company transactions, balances and un-realised gains on transactions between Group companies are eliminated. Un-realised losses are

also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where

necessary to ensure consistency with the policies adopted by the Group.

2.3 Segment reporting 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 committee that makes strategic decisions.

A segment is a distinguishable component of the Group engaged in providing products or services within a particular economic environment,

which is subject to risks and rewards that are different from those of other segments.

All intersegment transactions are eliminated.

The Group operates within three operating segments and its principal activities are:

■ Rail development and integration of rail systems

■ Industrial monitoring, control and information systems for optimisation of business processes

■ Defence design and integration of weapon systems

2.4 Foreign currency translation(a) Functional and presentation currency

Items included in the financial statements of each of the Groups entities are measured using the currency of the primary economic

environment in which the entity operates (the functional currency). The consolidated group financial statements are presented in Rand (R),

which is the Groups functional and presentation currency.

(b) Transactions and balances

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange

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

At each financial year end date:

■ foreign currency monetary items are translated using the closing rate

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

of the transaction, and

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

value was determined

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they

were translated on initial recognition during the period or in previous financial statements are recognised in profit or loss in the period in which

they arise.

When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised directly

in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised

in profit or loss.

Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the exchange rate

between the Rand and the foreign currency at the date of the cash flow.

2.5 Plant and equipment The cost of an item of plant and equipment is recognised as an asset when:

■ it is probable that future economic benefits associated with the item will flow to the Group, and

■ the cost of the item can be measured reliably

Costs include costs incurred initially to acquire or construct an item of plant and equipment and costs incurred subsequently to add to replace

part of or service it. If a replacement part is recognised in the carrying amount of an item of plant and equipment, the carrying amount of the

replaced part is derecognised. Plant and equipment are carried at cost less accumulated depreciation and any impairment losses.

2010 FINANCIAL STATEMENT

50

2.5 Plant and equipment continuedDepreciation is provided to write down the plant and equipment, on a straight line basis to their residual values as follows:

Item Average useful life Furniture and fittings 6 years

Marketing products 5 years

Motor vehicles 5 years

Office equipment 5 years

Computer equipment 3 years

Electronic equipment 5 years

Tools and laboratory equipment 5 years

Plant and machinery 5 – 10 years

The depreciation method, residual value and useful life of each asset are reviewed at each reporting period. An asset’s carrying amount is written

down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount (note 2.7). Gains and

losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within operating expenses or other

income in profit or loss.

Each part of an item of plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately if it has

a useful life or depreciation method that differs from the remainder of the asset. 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 derecognition of an item of plant and equipment

is included in profit or loss when the item is derecognised.

2.6 Intangible assets An intangible assets is recognised when

■ it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and

■ the cost of the asset can be measured reliably

Intangible assets are initially recognised at cost. Expenditure on research (or on the research phase of an internal project) is recognised as an

expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

■ it is technically feasible to complete the asset so that it will be available for use or sale

■ there is an intention to complete and use or sell it

■ there is an ability to use or sell it

■ it will generate probable future economic benefits

■ there are available technical, financial and other resources to complete the development and to use or sell the asset, and

■ the expenditure attributable to the asset during its development can be measured reliably

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. The residual value, amortisation period and

the amortisation method for intangible assets are reviewed every reporting period.

Reassessing the useful life of an intangible asset with a definite useful life after it was classified as indefinite is an indicator that the asset may

be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period

over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets. For all other intangible

assets amortisation is provided on a straight line basis over their useful lives. Intangible assets other than goodwill are reported at cost less

accumulated amortisation and accumulated impairment losses.

The amortisation period, residual value and the amortisation method for intangible assets are reviewed every reporting period.

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

Item Average useful life Computer software 2 years

Development cost – Ansys Maintenance Management System (AMMS) 2 years

Development cost – Signalling products 2 years

Development cost – Continuous Rope Monitoring System 2 years

2010 FINANCIAL STATEMENT

51

2.6 Intangible assets continued(a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Groups share of the net identifiable assets of the

acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in the note on intangible assets but shown

separately on the face of the statement of financial position. Goodwill is tested at least annually for impairment and carried at cost less

accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of a cash generating

unit include the carrying amount of goodwill relating to the cash generating unit sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units

or groups of cash-generating units that are expected to benefit from the business segment in which it operates (note 2.7). Internally

generated goodwill is not recognised as an asset.

2.7 Impairment of non-financial assets The Group assesses, at each financial year end date, whether there is any indication that an asset may be impaired. If any such indication exists,

the Group estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the Group also:

■ tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its

carrying amount with its recoverable amount. This impairment test is performed at the same time every year

■ tests goodwill acquired in a business combination for impairment annually. If there is any indication that an asset may be impaired, the

recoverable amount is estimated for the individual asset

If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit, to which the

asset belongs, is determined.

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

amount of an asset is less than its carrying value, the carrying value 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.

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:

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

■ Secondly, to the other assets of the unit, pro-rata on the basis of the carrying amount of each asset in the unit

For the assets other than goodwill, the entity assesses at each reporting date whether there is any indication that an impairment loss recognised

in prior periods may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated

The carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss is not increased above the carrying amount

that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss relating

to assets carried at cost less accumulated depreciation or amortisation, other than goodwill, is recognised immediately in profit or loss.

2.8 Financial assets 2.8.1 Classification The Group classifies its financial asset in the following categories: at fair value through profit or loss, and loans and receivables. The

classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial

assets at initial recognition.

(a) Financial assets at fair value through profit and loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category

if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading. Assets in this

category are classified as current assets.

2010 FINANCIAL STATEMENT

52

2.8 Financial assets continued (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

The Group’s loans and receivables comprise trade and other receivables (notes 2.11) and cash and cash equivalents (notes 2.12).

2.8.2 Recognition and measurement Financial assets carried at fair value through profit or loss is initially recognised at fair value and transaction cost is expensed in the statement

of comprehensive income. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently

carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in

the statement of comprehensive income within other (losses)/gains in the period in which they arise.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of comprehensive

income as part of investment revenue.

The Group assesses at each financial year end date whether there is objective evidence that a financial asset or a group of financial assets is impaired.

2.8.3 Impairment of financial assets Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial

assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective

evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss

event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably

estimated.

The Group first assesses whether objective evidence of impairment exists.

For trade receivables the following objective evidence should be considered in determining when an impairment loss has been incurred:

■ Significant financial difficulty of the debtor

■ A breach of contract, such as a default or delinquency in interest or principal repayments

■ It is becoming probable that the debtor will enter bankruptcy or other financial re-organisation

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash

flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The

asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive

income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the

current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of

an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring

after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised

impairment loss is recognised in the consolidated statement of comprehensive income.

2.9 Derivative financial instrumentsDerivative financial 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. Derivatives embedded in other financial instruments or other non-financial host contracts

are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contract and the host contract

is not carried at fair value with unrealised gains or losses reported in profit or loss. Changes in the fair value of derivative financial instruments

are recognised in profit or loss as they arise.

2010 FINANCIAL STATEMENT

53

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

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated

costs necessary to make the sale.

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

location and condition.

The cost of inventories is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar

nature and use to the entity.

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

recognised. The amount of any write down of inventories to net realisable value and all losses of inventories are recognised as an expense in the

period the write down or loss occurs. The amount of any reversal of any write down of inventories arising from an increase in net realisable value

is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

2.11 Trade and other receivables(a) Trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection

is expected within one year or less, they are classified as current assets. Trade receivables are recognised initially at fair value and

subsequently measured at amortised cost using the effective interest method, less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect

all amounts due according to the original terms of the receivables. The carrying amount of trade receivables is reduced directly when the

facts about the trade debtor indicate that liquidation has occurred or has been applied for thereby indicating uncollectability, and the debt

has not been previously impaired. In all other cases impairment is recognised through an allowance account. Amounts charged to the

allowance account are written off against trade receivables balance when the Group becomes aware that a debt previously impaired, is

no longer recoverable and would remain uncollectible.

(b) Project receivables Where the outcome of a project contract can be estimated reliably, project revenue and costs are recognised by reference to the stage of

completion of the contract activity at the financial year end date, as measured by the proportion that project costs incurred for work

performed to date bear to the estimated total project costs. Variations in contract work, claims and incentive payments are included to the

extent that they have been agreed with the customer.

When the outcome of a project cannot be estimated reliably, project revenue is recognised to the extent that project costs incurred are

recoverable. Project costs are recognised as an expense in the period in which they are incurred. When it is probable that total project

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

2.12 Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities

of three months or less, and bank overdrafts. Bank overdrafts are shown within cash and cash equivalents in current liabilities on the statement

of financial position.

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

reacquires its own equity instruments, those treasury shares are deducted from equity. No gain or loss is recognised in profit or loss on the

purchase, sale issue or cancellation of the company’s own equity instruments. Consideration paid or received is recognised directly in equity.

2010 FINANCIAL STATEMENT

54

2.14 Trade and other payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts

payable are classified as current liabilities if payment is due within one year or less. Trade payables are initially measured at fair value plus

directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest rate method.

2.15 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any

difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income

over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all

of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is

probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the

period of the facility to which it relates.

2.16 Current and deferred income tax (a) Current tax assets and liabilities Current tax for current and prior periods is measured at the amount expected to be paid to or recovered from the tax authorities, using the

tax rates and tax laws that have been enacted or substantively enacted by the financial year end date.

(b) Deferred tax assets and liabilities Deferred tax is provided in full, using the financial position liability method, on temporary differences arising between the tax bases of

assets and liabilities and their carrying values in the financial statements.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current

tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on

either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction, other than a business combination,

that at the time of the transaction affected neither accounting nor taxable profit or loss, it is not accounted for. In addition, deferred tax is

not recognised on goodwill.

Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted at the financial year end date and are

expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised

to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

(c) 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, directly in equity, or

■ A business combination

Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same

or a different period, directly to equity.

2.17 Employee benefits (a) Short term employee benefits The cost of short term employee benefits, (those payable within 12 months after the service is rendered such as paid vacation leave and

sick leave bonuses and non-monetary benefits such as medical care) is recognised in the period in which the service is rendered and is

not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement

or, in the case of non accumulating absences when the absence occurs. The expected cost of bonus payments is recognised as an expense

when there is a legal or constructive obligation to make such payments as a result of past performance.

Employee benefits in the form of annual leave entitlements are provided for when they accrue to employees with reference to services

rendered up to the financial year end date.

2010 FINANCIAL STATEMENT

55

2.17 Employee benefits continued(b) Defined contribution plan Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to industry managed

retirement benefit schemes are dealt with as defined contribution plans where the Groups obligation under the schemes is equivalent to

those arising in a defined contribution retirement benefit plan.

2.18 Revenue recognition Revenue, from the sale of goods and services, 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 financial year end date.

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 contract will flow to the Group

■ the stage of completion of the transaction at the financial year end date can be measured reliably

■ 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 is recognised only to the extent of

the expenses recognised that are recoverable.

The stage of completion is determined by the proportion of the contract costs incurred to date as a percentage of the total estimated contract

costs to be incurred.

Project 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

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

2.19 Borrowing costBorrowing costs are recognised as an expense in the period in which they are incurred.

2.20 Related partiesRelated parties are considered to be related if one party has the ability to control or jointly control the other party or exercise significant influence

over the party in making financial and operational decisions. Key management personnel are also regarded as related parties. Key management

personnel are those persons having authority and responsibility for planning.

2.21 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.

2010 FINANCIAL STATEMENT

56

2.21 Leases continued(a) Finance leases – lessee Leases of plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases.

Finance leases are capitalised at the leases inception at the lower of the fair value of the leased property and the present value of the

minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on

the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables.

The finance cost is charged to profit or loss over the lease period. The plant and equipment acquired under finance leases is depreciated

over the shorter of the assets useful life and the lease term.

(b) Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts

recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. Any contingent rentals are

expensed in the period they are incurred.

2.22 Headline earnings per shareThe Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to

ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Headline earnings per

ordinary share are calculated using the weighted average number of ordinary shares in issue during the period and are based on the earnings

attributable to ordinary shareholders, after excluding those items as required by Circular 8/2007 issued by the South African Institute of Chartered

Accountants (“SAICA”).

2.23 OffsettingAsset and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard. Financial asset and financial

liabilities are offset and the net amount reported only when a legally enforceable right to set off the amounts exists and the intention is to either

to settle on a net basis or to realise the asset and settle the liability simultaneously.

2.24 Dividend distribution Dividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the

dividends are approved by the company’s shareholders.

3. Objectives, policies and processes for managing risk3.1 Financial risk factors The Groups activities expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and price risk), credit

risk and liquidity risk. The Groups overall risk management program focuses on the unpredictability of financial markets and seeks to minimise

potential adverse effects on the Groups financial performance. This note presents information about the Group’s exposure to each of the above

risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative

disclosures are included throughout these consolidated group financial statements.

Risk management is carried out by the Executive Committee under policies approved by the board of directors. The board provides principles for

overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, use of derivative financial

instruments and non-derivative financial instruments and investments of excess liquidity.

There have been no changes to the objectives, policies and process for managing risk in comparison to the previous year.

(a) Market risk (i) Foreign exchange risk The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, AUS Dollar

and the Euro. The Executive Committee manages the foreign exchange risk exposure arising from future commercial transactions and

recognised assets and liabilities, entities in the Group use of forward exchange contracts. Foreign exchange risk arises when future

commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The exchange rate used for the conversion of foreign items at financial year end date was:

2010 2009 USD 7.7762 9.9845

AUD 6.9668 6.4215

EUR 10.7398 12.7215

2010 FINANCIAL STATEMENT

57

3.1 Financial risk factors continued(a) Market risk continued (i) Foreign exchange risk continued Forward exchange contracts which relate to future commitments:

Year ended 28 February 2010: AUD 24 272.40 1AUD = R7.2674 1AUD = R7.5586 29 October 2010USD 3 000.00 1USD = R7.784 1USD = R7.8697 3 March 2010USD 3 000.00 1USD = R7.8482 1USD = R7.9736 6 April 2010USD 3 000.00 1USD = R7.9029 1USD = R8.0555 5 May 2010USD 3 000.00 1USD = R7.9595 1USD = R8.1436 4 June 2010USD 93 600.00 1USD = R7.797 1USD = R7.8472 5 March 2010USD 100 000.00 1USD = R7.6275 1USD = R7.8635 10 March 2010USD 39 934.33 1USD = R7.6275 1USD = R7.8713 10 March 2010USD 52 650.00 1USD = R7.6516 1USD = R7.9013 15 March 2010

Year ended 28 February 2009: AUD 146 161.00 1AUD = R6.7340 1AUD = R6.7204 30 June 2009AUD 24 994.85 1AUD = R7.0871 1AUD = R6.9013 30 October 2009USD 71 326.74 1USD = R10.5396 1USD = R10.2241 31 March 2009USD 16 462.88 1USD = R10.5226 1USD = R10.3369 30 April 2009USD 520 8108.99 1USD = R8.4950 1USD = R10.5193 21 July 2009EUR 9 740.00 1EUR = R14.3134 1EUR = R13.2679 1 June 2009

Translation RateForward ExchangeAmount in foreign currency purchased Maturity Date

At 28 February 2010, if the currency had weakened/strengthened by 10% against the US Dollar with all other variables held constant, post-tax

profits for the year would have been R229 449 (2009: R595 132) higher/lower, mainly as a result of foreign exchange gains/losses on translation of

US Dollar-denominated foreign exchange losses/gains on translation of US dollar-denominated trade and other payables. Profit was more sensitive

to movement in US dollar exchange rates in 2009 than 2010 because of the decreased amount of US dollar denominated forward exchange contracts.

At 28 February 2010, if the currency had weakened/strengthened by 10% against the AUS Dollar with all other variables held constant, post-tax

profits for the year would have been R334 (2008: R112 943) higher/lower, mainly as a result of foreign exchange gains/losses on translation of

AUD Dollar denominated trade receivables, financial assets at fair value through profit and loss and foreign exchange losses/gains on translation

of AUD dollar-denominated trade and other payables.

At 28 February 2010, if the currency had weakened/strengthened by 10% against the Euro with all other variables held constant, post-tax profits

for the year would have been R nil (2009: R1 903) higher/lower, mainly as a result of foreign exchange gains/losses on translation of Euro-

denominated trade receivables, financial assets at fair value through profit and loss, debt securities classified as available for sale and foreign

exchange losses/gains on translation of Euro-denominated trade and other payables.

The Group reviews its foreign currency exposure, including commitments on an ongoing basis. There have been no changes to the method used

from the prior year.

(ii) Price risk The Group is not exposed to commodity price risk.

(iii) Cash flow and interest rate risk As the Group has no significant interest-bearing borrowings, the Groups income and operating cash flows are substantially independent

of change in market interest rates. The Groups interest rate risk arises from finance leases, bank overdrafts and short term deposits

at financial institutions. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

During 2010 and 2009, the Groups borrowings at variable rate were denominated in Rand. The Group analyses i ts interest rate

exposure on a dynamic basis. Various scenarios are simulated taking into consideration renewal of existing positions and alternative

financing. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. At 28 February

2010 and 28 February 2009, the Group had no foreign currency-denominated borrowings.

At 28 February 2010, if the average interest rate on cash equivalents and borrowings had been higher/lower than 1% against with

all other variables held constant, post-tax profits for the year would have been R54 680 (2008: R43 309) higher/lower, mainly as a

result of higher/lower interest expense on floating rate cash equivalents and borrowings.

The method and assumptions used in the calculations are consistent to prior years.

2010 FINANCIAL STATEMENT

58

3.1 Financial risk factors continued(b) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an

adequate amount of committed credit facilities and the ability to close out market positions. Management monitors rolling forecasts of the

Groups liquidity reserve (comprises of un-drawn borrowing facility and cash and cash equivalent (note 12) on the basis of expected cash

flow. The table overleaf analyses the Groups financial liabilities into relevant maturity groupings based on the remaining period at the

financial year end to the contractual maturity date.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying

balances as the impact of discounting is not significant.

Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years R’000 R’000 R’000 R’000

At 28 February 2010 Non derivative financial instrumentsFinance leases 274 388 – –Trade and other payables 26 683 – – –Bank overdraft 7 202 – – –

At 28 February 2009 Non derivative financial instrumentsFinance leases 523 333 332 –

Other financial liabilities 5 871 – – –

Trade and other payables 13 316 – – –

Bank overdraft 9 115 – – –

Contractual Maturity Analysis:

The directors consider the time bands used most reflective in assessing the performance and understanding the operations of the group.

There have been no defaults and breaches on trade payables, leases, bank overdraft or any other borrowings.

(c) Credit risk Credit risk arises from cash and cash equivalents and deposits, with banks and financial institutions, as well as credit exposure to customers,

including outstanding receivables and committed transactions.

Risk control assesses the credit quality of the customer, taking into its financial position, past experience and other factors. Individual risk

limits are set based on internal or external ratings in accordance with limits set by the board. In monitoring customer credit risk, customers

are mainly grouped by other credit characteristics such as ageing profile, maturity and existence of previous financial difficulties are also

considered. Customers classed as “high risk” are placed on a restrictive customer list and future contracts are entered into on an advance

payment or payment guaranteed basis with the approval of the board.

The Group has various cash deposits, forward exchange contracts and financial guarantees which are held with reputable banking

institutions which mitigate credit risk.

The maximum exposure of financial assets to credit risk equates to the carrying amounts as presented on the statement of financial position

and the notes thereto were as follows:

Trade receivables 23 709 39 351

Retention debtors 514 1 373

Contract receivables 7 222 10 632

Sundry receivables 816 879

Cash and cash equivalents 3 355 6 965

35 616 59 200

2010 2009R'000 R'000

2010 FINANCIAL STATEMENT

59

3.2 Capital Risk Management The Groups objective when managing capital is to safeguard the Groups ability to continue as a going concern in order to provide returns for

shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. This objective is

consistent with the prior year.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to

shareholders, issue new shares or sell assets to reduce debt.

Consistent with other in the industry, the group monitors capital on the basis of gearing ratio. This ratio is calculated as net debt divided by total

capital. Net debt is calculated as total borrowings (which include finance leases, other financial liabilities and bank overdraft as shown in the

consolidated statement of financial position as liabilities) less cash and cash equivalents. The total capital is calculated as equity as shown in the

consolidated statement of financial position plus net debt.

The decrease in the gearing ratio during 2010 resulted primarily from the decrease retained earnings due to the loss made, the decrease in the

cash and cash equivalents, decrease in liabilities and the changes to the vendor shares to be issued after the re-assessment of the purchase

consideration. Refer to the business combination, note 30 for details.

4. Critical accounting estimates and judgementsEstimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future

events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the

related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year are discussed below.

(a) Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.6. The

recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the

use of estimates (note 7).

(b) Revenue recognition The Group uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion

method requires the Group to actual cost incurred to date as a proportion of the total estimated contract cost. The total estimated cost of

the contract is reviewed on a monthly basis. When the outcome of the transaction involving the rendering of services cannot be estimated

reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Finance leases 14 662) 1 188)

Other financial liabilities 15 –) 5 871)

Bank overdraft 12 7 202) 9 115)

Less: cash and cash equivalents 12 (3 355) (6 965)

Net debt 4 509) 9 209)

Total equity 48 747) 66 022)

Total capital 53 256) 75 231)

Gearing ratio 8.46%) 12.24%)

Note 2010 2009R'000 R'000

2010 FINANCIAL STATEMENT

60

4.2 Critical accounting judgements(a) Impairment Management used their judgement and applied the internal and external impairment indicators to intangible assets and plant and equipment.

No impairment indicators were identified and as such the recoverable amounts of the aforementioned assets were not calculated.

(b) 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 year-end date could be impacted.

Deferred tax is provided for on a basis that is reflective of management’s intention at year end relating to the expected manner of recovery

of the carrying amount of the asset, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability.

c) Inventory Inventory is assessed on a continuous basis in order to ensure that it is correctly valued at the lower of cost or net realisable value. An

allowance is made against stock to write stock down to the lower of cost or net realisable value when it is determined to be incorrectly

valued as a consequence of changes in market conditions or it is considered to be damaged or un-saleable.

(d) Trade receivables The Group assess its trade receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded

in the income statement, the Group makes judgements as to whether there is observable data indicating a measurable decrease in the

estimated future cash flows from a financial asset. The impairment for trade receivables is assessed for impairment on an individual debtor

basis, based on historical data and future factors. This may or may not be adjusted for national and industry specific economic conditions

and other indicators present at the reporting date.

(e) Plant and equipment The Group depreciates its assets over their estimated useful lives taking into account residual values, where appropriate. The appropriateness

of its assets’ estimated useful lives, residual values and their depreciation methods are re-assessed on an annual basis. The actual lives of

these assets and their respective residual values may vary depending on a variety of factors. In re-assessing asset lives, factors such as

technological innovation, product life cycles and maintenance programmes are taken into account.

5. Segmental information The segment information has been prepared in accordance with IFRS 8 Operating Segments, which defines requirements for the disclosure of

financial information of an entity’s operating segments.

Identification of reportable segments The Group discloses its reportable segments according to the Group’s components that management monitor regularly in making decisions about operating

matters. The reportable segments comprise various operating segments primarily located in South Africa based on the group’s lines of business.

Segment information is prepared in conformity with the basis that is reported to the Executive Committee in assessing segment performance and allocating

resources to segments. These values have been reconciled to the consolidated Group financial statements. The basis reported by the Group is in accordance

with the accounting policies adopted for preparing and presenting the consolidated group financial statements and are consistent with the prior year.

Segment revenue excludes value added taxation and includes intersegment revenue. Net revenue represents segment revenue from which

intersegment revenue has been eliminated. Sales between segments are made on a commercial basis. Segment expenses include direct and

allocated expenses. Depreciation and amortisation have been allocated to the segments to which they relate.

The segment assets comprise all assets of the different segments that are employed by the segment and that either are directly attributable to the

segment, or can be allocated to the segment on a reasonable basis reliably.

2010 FINANCIAL STATEMENT

61

Rail Industrial Defence Unallocated TotalYear ended 28 February 2010 R’000 R’000 R’000 R’000 R’000

RevenueExternal sales 61 903) 5 757) 29 565) 102) 97 327)

Total revenue from operations 61 903) 5 757) 29 565) 102) 97 327)

Results

Segment result from operations 2 621) (12 698) (1 598) –) (11 675)

Unallocated expenses (4 498)

Operating loss from operations (16 173)Finance income 182) –) 12) 26) 220)

Other gains and losses (1 241) 219) (16) (444) (1 482)Finance costs (7) –) (42) 806) (855)

Loss before tax (18 290)Income tax expense 2 584)

Loss for the year from operations (15 706)

Other information

Capital additions (plant and equipment) 184) –) 2 251) 1 224) 3 659)

Depreciation 130) –) 818) 969) 1 917)

Capital additions (intangible assets) 135) 3 716) 388) 478) 4 717)

Amortisation 122) 936) 245) 339) 1 642)

Statement of financial position Assets 18 906) 12 546) 1 936) 56 143) 89 531)

Liabilities 5 066) –) 8 073) 27 645) 40 784)

)

5. Segmental information continuedReportable segments

Primary reporting format

During the year the Group conducted operations in three main business areas rail, industrial and defence. Transactions between the business

segments are on normal commercial terms and conditions.

Secondary reporting format

No secondary geographical segment information is disclosed, as the Groups business for the year ended 28 February 2010 was all conducted

within the Republic of South Africa. The risk and rewards are not considered to be different within the regions of the Republic of South Africa.

Revenue generated from significant customers includes:

Transnet Freight Rail (Rail segment) 27 452 62 521

Transnet Capital Projects (Rail segment) 13 542 10 736

Denel (Pty) Ltd t/a Denel Aerospace Systems (Defence segment) 12 654 14 919

Carl Zeiss Optronics (Defence segment) 12 595 3 576

Anglo Gold Ashanti Limited (Industrial segment) 5 977 –

Total 72 220 91 753

2010 2009R'000 R'000

2010 FINANCIAL STATEMENT

62

5. Segmental information continued

Rail Industrial Defence Unallocated TotalYear ended 28 February 2009 R’000 R’000 R’000 R’000 R’000

RevenueExternal sales 90 063) 1 270 28 635) 203) 120 171)

Total revenue from operations 90 063) 1 270 28 635) 203) 120 171)

(No inter segment sales occur)

Results

Segment result from operations 15 533) 1 417 (8 458) –) 8 492)

Unallocated expenses (7 423)

Operating profit from operations 1 069)

Finance income 171) – 98) 908) 908)

Other gains and losses 365) – 112) 1 989) 1 989)

Finance costs (466) – (1 099) (1 550) (1 550)

Profit before tax 2 416)

Income tax expense (887)

Profit for the year from operations 1 529)

Other information

Capital additions (plant and equipment) 487) – 1 702) 782) 2 971)

Depreciation 320) – 462) 762) 1 554)

Capital additions (intangible assets) –) 1 508 –) 542) 2 050)

Amortisation –) – –) 255) 255)

Statement of financial position Assets 55 936) 4 420 15 705) 28 304) 104 365)

Liabilities 13 880) – 5 713) 18 750) 38 343)

2010 FINANCIAL STATEMENT

63

6. Plant and equipment

CostR’000

AccumulatedDepreciation

R’000

CarryingValueR’000

At 28 February 2010Plant and machinery 6 541 (1 558) 4 983

Marketing products 290 –) 290

Tools and laboratory equipment 219 (179) 40

Furniture and fixtures 880 (209) 671

Motor vehicles 2 285 (1 264) 1 021

Office equipment 437 (203) 234

Computer equipment 1 638 (1 071) 567

Electronic equipment 227 (146) 81

Total 12 517 (4 630) 7 887

Assets subject to instalment sale agreement obligation

(net carrying amount) – motor vehicles and plant and equipment 1 102

At 28 February 2009

Plant and machinery 4 940 (804) 4 136

Tools and laboratory equipment 206 (168) 38

Furniture and fixtures 278 (75) 203

Motor vehicles 2 457 (777) 1 680

Office equipment 349 (114) 235

Computer equipment 1 218 (737) 481

Electronic equipment 202 (104) 98

Total 9 650 (2 779) 6 871

Assets subject to instalment sale agreement obligation

(net carrying amount) – motor vehicles and plant and equipment 1 968

At 28 February 2008Plant and machinery 3 126 (378) 2 748

Tools and laboratory equipment 195 (158) 37

Furniture and fixtures 292 (218) 74

Motor vehicles 1 907 (279) 1 628

Office equipment 304 (77) 227

Computer equipment 869 (493) 376

Electronic equipment 490 (370) 120

Total 7 183 (1 973) 5 210

Assets subject to instalment sale agreement obligation

(net carrying amount) –motor vehicles 1 968

2010 FINANCIAL STATEMENT

64

6. Plant and equipment The carrying amounts of plant and equipment at are reconciled as follows:

Acquisitionof subsidiary

R’000

OpeningbalanceR’000

Acquisition of Business

R’000Additions

R’000Disposals

R’000Depreciation

R’000TotalR’000

At 28 February 2010Plant and machinery 4 136 – – 1 601 –) (754) 4 983

Marketing products – – – 290 –) –) 290

Tools and laboratory equipment 38 – – 13 –) (11) 40

Furniture and fixtures 203 – – 596 –) (128) 671

Motor vehicles 1 680 – – – (99) (560) 1 021

Office equipment 235 – – 99 (3) (97) 234

Computer equipment 481 – – 469 (13) (370) 567

Electronic equipment 98 – – 25 –) (42) 81

Total 6 871 – – 3 093 (115) (1 962) 7 887

At 28 February 2009

Plant and machinery 2 748 – – 1 841 (21) (433) 4 136

Tools and laboratory equipment 37 – – 11 –) (11) 38

Furniture and fixtures 74 – – 160 –) (31) 203

Motor vehicles 1 628 – – 487 –) (435) 1 680

Office equipment 227 – – 85 –) (76) 235

Computer equipment 376 – – 368 –) (263) 481

Electronic equipment 120 – – 18 –) (40) 98

Total 5 210 – – 2 971 (21) (1 290) 6 871

At 29 February 2008

Plant and machinery – 2 349 107 368 –) (76) 2 748

Tools and laboratory equipment 6 – – 34 –) (3) 37

Furniture and fixtures 28 47 – 5 –) (6) 74

Motor vehicles 753 11 679 555 (133) (237) 1 628

Office equipment 25 26 – 187 –) (11) 227

Computer equipment 160 86 – 290 (32) (128) 376

Electronic equipment 143 – – 41 (27) (37) 120

Total 1 115 2 519 786 1 480 (192) (498) 5 210

2010 FINANCIAL STATEMENT

65

7. Intangible assets

CostR’000

AccumulatedDepreciation

R’000

CarryingValueR’000

At 28 February 2010Intangible assets 8 850 (2 469) 6 381

Purchased: – Computer software 2 283 (1 502) 781

Internally generated:– Continuous Rope Monitoring System 2 335 –) 2 335

– Signalling product 246 (31) 215

– AMMS Development 3 986 (936) 3 050

Goodwill 24 132 (1 166) 22 966

Total 32 982 (3 635) 29 347

At 28 February 2009Intangible assets 4 131 (827) 3 304

Purchased: – Computer software 1 281 (827) 454

Internally generated:– Signalling product 246 –) 246

– AMMS Development 2 604 –) 2 604

Goodwill 25 701 –) 25 701

Total 29 832 (827) 29 005

At 29 February 2008Intangible assets 2 081 (572) 1 509Purchased: – Computer software 739 (572) 167

Internally generated:– Signalling product 246 –) 246

– AMMS Development 1 096 –) 1 096

Goodwill 34 216 –) 34 216

Total 36 297 (572) 35 725

Refer to the business combinations, note 30, for the details of

the acquisition of the subsidiaries.

2010 FINANCIAL STATEMENT

66

7. Intangible assets continuedThe carrying value of intangible assets is reconciled as follows:

At 28 February 2010

Intangible assets 3 304 – –) –) –) 4 719) (1 642) 6 381Purchased:

– Computer software 454 – –) –) –) 1 002) (675) 781

Internally generated:

– Continuous Rope

– Monitoring System –) – –) –) –) 2 335) –) 2 335

– Signalling product 246 – –) –) –) –) (31) 215

– AMMS Development 2 604 – –) –) –) 1 382) (936) 3 050

Goodwill 25 701 – –) (1 569) (1 166) –) –) 22 966

Total 29 005 – –) (1 569) (1 166) 4 719) (1 642) 29 347

At 28 February 2009

Intangible assets 1 509 – –) –) –) 2 050) (255) 3 304Purchased:

– Computer software 167 – –) –) –) 542) (255) 454

Internally generated:

– Signalling product 246 – –) –) –) –) –) 246

– AMMS Development 1 096 – –) –) –) 1 508) –) 2 604

Goodwill 34 216 – –) (8 515) –) –) –) 25 701

Total 35 725 – –) (8 515) –) 2 050) (255) 29 005

At 29 February 2008

Intangible assets 158 54 –) –) –) 1 386) (89) 1 509Purchased:

– Computer software 158 54 –) –) –) 44) (89) 167

Internally generated:

– Signalling product – – –) –) –) 246) –) 246

– AMMS Development – – –) –) –) 1 096) –) 1 096

Goodwill – 24 821 9 395) –) –) –) –) 34 216

Total 158 24 875 9 395) –) –) 1 386) (89) 35 725

ClosingBalanceR’000

AmortisationR’000

AdditionsR’000

Re-assessmentof goodwill

R’000

Goodwillimpairment

R’000

Acquisition of business

R’000

OpeningbalanceR’000

Acquisition of subsidiary

R’000

The re-assessment of goodwill relates to the excess of the recalculated purchase consideration over the fair value of the assets acquired as part

of the business combinations concluded during the 2008 financial year. The purchase consideration was re-assessed due to the difference between

the forecasted results of 28 February 2009 and 28 February 2010 as per the initial purchase agreement to the actual results achieved at

28 February 2009 and 28 February 2010. Refer to business combination note 30.

2010 FINANCIAL STATEMENT

67

7. Intangible assets continuedImpairment tests for goodwillGoodwill is allocated to the Groups cash-generating units (CGUs) identified according to business segment. A segment-level summary

of the goodwill allocation is presented below.

The recoverable amount of CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on

financial budgets approved by the executive committee covering a three-year period. Cash flows beyond three year period are not included in the

calculations. The discount rates used are pre-tax and reflect the specific risks relating to the relevant segments. The key assumptions used for

value-in-use calculations are as follows:

■ Growth rate

Weighted average growth rate used to extrapolate cash flows beyond the budget period of 1.06%. The rate is consistent with the forecasts

included in industry

■ Discount rate

Pre-tax discount rate applied to the cash flow projections of 10%. The rate used is pre-tax and reflect specific risks relating to the relevant

operating segment

These assumptions have been used for the analysis of each CGU within the operating segment.

The impairment charge arose in Optocon following the results achieved in both the current financial year and forecasts presented for the next 3

years. There were no indications of impairment in Emerging Signals or QuadSoft.

No class of asset other than goodwill was impaired.

2010 2009 R’000 R’000

Rail

– Emerging Signals 7 907 8 184

– QuadSoft 15 059 15 059

Defence

– Optocon – 2 735

Total 22 966 25 978

2010 FINANCIAL STATEMENT

68

Held for trading Loans and through Receivables profit and loss Total R’000 R’000 R’000

At 28 February 2010Assets as per the statement of financial position

Other financial assets – 60 60

Trade and other receivables 32 261 – 32 261

Cash and cash equivalents 3 355 – 3 355

Total 35 616 60 35 676

At 28 February 2009

Assets as per the statement of financial position

Other financial assets – 1 012 1 012

Trade and other receivables 52 235 – 52 235

Cash and cash equivalents 6 965 – 6 965

Total 59 200 1 012 60 212

At 28 February 2010 At amortised cost TotalLiabilities as per the statement of financial position

Trade and other payables 26 683 26 683

Cash and cash equivalents 7 202 7 202

Finance leases 662 662

Total 34 547 34 547

At 28 February 2009

Liabilities as per the statement of financial position

Other financial liabilities 5 871 5 871

Trade and other payables 18 950 18 950

Cash and cash equivalents 9 115 9 115

Finance leases 1 188 1 188

Total 35 124 35 124

8. Financial instrument Financial instrument by categoryThe accounting policies for financial instruments have been applied to the line items below:

During the year, cash and cash equivalents was reclassified from available-for-sale financial assets to loans and receivables. Refer to note 33 for

details regarding the reclassification.

2010 FINANCIAL STATEMENT

69

2010 2009 R’000 R’000

Trade receivables Customer A – low risk 2 986) 29 155)

Customer B – low risk 2 264) 4 813)

Customer C – low risk 6 813) –)

Customer D – low risk 2 886) –)

Other customers – no external credit rating 15 561) 14,376)

Total unimpaired trade receivables 30 510) 48 344)

Cash at bank and short-term bank deposits

Bank A (5 430) (8 201)

Bank B 1 576) 6 024)

Bank C 7) 7)

(3 847) (2 170)

8. Financial instrument continuedCredit quality of financial assetsThe credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available)

or to historical information about counterparty default rates.

Customer A and B relate to existing customers (more than 6 months) with some defaults in the past. All defaults were fully recovered. Customer

C and D relate to new customers (less than 6 months). Other customers relates to existing customers (more than 6 months) with no defaults in

the past.

Financial assets that are not past due nor impaired, are of high credit quality with a historical default rate of 0.005% (2009: 0.008%). The historic

default rate is calculated by dividing the actual bad debt write off by revenue for the year. As of 28 February 2010, trade receivables of R762 588

(2009: R1 436 388) were past due but not impaired. These relate to a number of independent customers for whom there is no past history of

default.

Management only deposits with reputable bank institutions and they do not expect any non-performance from the banks. The rest of the financial

position item cash and cash equivalents is cash on hand. The notional principle amounts of the outstanding forward exchange contracts at

28 February 2010 were R2 470 887 (2009: R7 661 964).

2010 2009 R’000 R’000

Raw materials, components 6 800) 5 231

Work in progress 3 356) 568

Total 10 156) 5 799

9. Inventories

2010 FINANCIAL STATEMENT

70

2010 2009 R’000 R’000

Up to 3 months

Not past due nor impaired 30 510) 48 344)

3 to 6 months

Past due but not impaired 763) 1 591)

Past due and impaired 474) 927)

6 to 12 months

Not past due nor impaired* 514) 1 373)

32 261) 52 235)

2010 2009 R’000 R’000

10. Trade and other receivables

Trade receivables 24 183) 40 278)

Less: provision for doubtful debts (474) (927)

Trade receivables – net 23 709) 39 351)

Retention debtors 514) 1 373)

Project receivables 7 222) 10 632)

Sundry receivables 816) 879)

32 261) 52 235)

Current portion 32 261) 52 235)

Fair values of trade and other receivables are as follows:

Trade receivables – net 23 709) 39 351)

Retention debtors 514) 1 373)

Project receivables 7 222) 10 632)

Sundry receivables 816) 879)

32 261) 52 235)

The total carrying value of trade receivables have been pledged to secure the bank overdraft facilities (note 12).

The age analysis of the trade receivables, retention debtors, project receivables and other receivables are as follows:

*These debtors relate to the retention debtors. Retention is normally withheld for 12 months from commissioning date of the contract.

The directors consider the time bands used most reflective in assessing the performance and understanding the operations of the Group.

2010 FINANCIAL STATEMENT

71

2010 2009 2010 2009 Current Current Non-Current Non-Current R’000 R’000 R’000 R’000

Held for trading at fair value through profit or loss

Forward exchange contracts* 60 1 012 – –

60 1 012 – –

The fair value of the other financial assets are as follow:

Forward exchange contracts* 60 1 012 – –

60 1 012 – –

11. Other financial asset

2010 2009 R’000 R’000

Balance at the beginning of the year (927) –)

Provision for individual receivables impaired (158) (927)

Impaired amounts recovered 162) –)

Impaired amounts reversed 449) –)

Balance at the end of the year (474) (927)

10. Trade and other receivables continued

The movements on the Group provision for doubtful debts of trade receivables are as follows:

As of 28 February 2010, trade receivables of R762 588 (2009: R1 436 388) were past due but not impaired. These relate to a number of independent

customers for whom there is no past history of default. Accordingly, a provision of R474 400 (2008: R927 019) for impaired amounts were provided

for. The full carrying amount of the customer was impaired and these amounts were not secured.

* The fair value of other financial assets (forward exchange contracts) is based on a Level 2 fair value measurement hierarchy.

Fair value estimation The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market

prices at the financial year end date. The quoted market price used for financial assets held by the Group is current bid price. The fair value of

forward exchange contracts is determined using the quoted forward exchange rates at the financial year end date, with the resulting value

discounted back to present value.

The fair value of financial liabilities and financial assets categorised as “Loans and Receivables” are determined in accordance with generally

accepted pricing models comprising discounted cash flow analysis. Where the effects of discounting are immaterial, short term receivables and

short term payables are measured at the original invoice amount. Due to the short term nature of trade receivables and trade payables their

carrying amounts approximate their fair value.

2010 FINANCIAL STATEMENT

72

Ordinary shares – no par value Issued

Balance at the beginning of the year 140 271 008) 29 181) 140 000 000) 30 000)

Share issue expenses –) –) –) (1 632)

Proceeds from shares issued 1 957 033) 5 869) 271 008) 813)

Balance at the end of the year 142 228 041) 35 050) 140 271 008) 29 181)

Vendor shares

Un-issued

Balance at the beginning of the year 4 368 996) 13 106) 6 709 138) 20 128)

Transfer to ordinary shares (1 957 033) (5 869) (271 008) (813)

Re-assessment of shares to be issued as

result of business combination (522 948) (1 569) (2 069 134) (6 209)

Balance at the end of the year 1 889 015) 5 668) 4 368 996) 13 106)

2010

Number R’000

2009

Number R’000

12. Cash and cash equivalents

13. Share capital

2010 2009 R’000 R’000

Cash and cash equivalents consist of: Cash at bank and on hand 2 480) 789)

Short-term bank deposits 875) 6 176)

Bank overdraft (7 202) (9 115)

(3 847) (2 150)

Current assets 3 355) 6 965)

Current liabilities (7 202) (9 115)

Cash, cash equivalents and bank overdrafts include the following for the

purpose of cash flow statement:

Cash and cash equivalents 3 355) 6 965)

Bank overdraft (7 202) (9 115)

(3 847) (2 150)

Authorised ordinary sharesThe total authorised number of ordinary shares is 1 725 490 196 (2009: 1 725 490 196). The shares have no par value and the issued shares are

fully paid.

Un-issued ordinary sharesIn terms of a resolution of members passed at the last annual general meeting, un-issued ordinary shares are under the control of the directors.

This authority remains in force until the next annual general meeting.

Issued shares and share movementsEach issued share has one voting right and there are no restrictions.

1 957 033 Ordinary shares was issued for R3,00 on 15 June 2009 as a partial settlement of the purchase consideration of the QuadSoft acquisition.

The total carrying value of trade receivables have been pledged to secure the bank overdraft facilities (note 10).

2010 FINANCIAL STATEMENT

73

13. Share capital and share premium continued

Vendor sharesThe vendor shares arise from the acquisitions during the 2008 financial year. The purchase consideration of the acquisitions were re-assessed

due to the difference between the forecasted results for 28 February 2009 and 28 February 2010 as per the initial purchase agreement and the

actual results achieved during 28 February 2009 and 28 February 2010. The transfer to ordinary share capital, relates to the shares that were

issued after profit warranties were met. Refer to the business combination note 30 for further details.

It is Group policy to acquire certain motor vehicles and plant and equipment under finance leases. The lease terms are between 3 years to 5 years

and the average effective borrowing rate is between 12.64% and 15.14% (2009: between 13.14% and 17.63%). Interest rates are linked to prime

at the contract date. All finance leases have fixed repayment terms and no arrangements have been entered into for contingent installments.

The Groups obligations under finance leases are secured over the assets. Refer to Note 6.

The deferred payment (discounted) arises from the acquisitions during the 2008 financial year. Refer to the business combination note 30 for

further details.

14. Finance leases

15. Other financial liabilities

2010 2009 R’000 R’000

Minimum lease payments due – within one year 453) 664)

– in second to fifth year inclusive 288) 756)

Less: Future finance charges

– within one year (79) (142)

– in second to fifth year inclusive –) (90)

Present value of minimum lease payments due 662) 1 188)

Present value of minimum lease payments due – within one year 274) 523)

– in second to fifth year inclusive 388) 665)

662) 1 188)

Non-current liabilities 388) 665)

Current liabilities 274) 523)

662) 1 188)

2010 2009 2010 2009 Current Current Non-current Non-current R’000 R’000 R’000 R’000

Held at amortised cost Deferred payment – 5 871 – –

– 5 871 – –

2010 FINANCIAL STATEMENT

74

16. Deferred tax asset/(liability)

2010 2009 R’000 R’000

Deferred tax asset/(liability)

Comprising:

Temporary differences on retention debtors (144) (384)

Temporary differences on retention creditors 47) 311)

Temporary differences on plant and equipment –) (180)

Temporary differences on intangible assets (1 839) (798)

Temporary difference on finance leases 35) 39)

Temporary difference on the provision of doubtful debt 100) 195)

Temporary differences on provisions –) –)

Temporary differences on advance payments received 2 160) 84)

Temporary differences on calculated tax loss 3 974) 1 448)

Temporary differences on accrued leave pay 149) 401)

4 482) (1 116)

Reconciliation of deferred tax asset/(liability) At beginning of the year 1 116) (516)

Temporary differences on retention debtors 240) 733)

Temporary differences on retention creditors (264) (428)

Temporary differences on plant and equipment 180) (69)

Temporary differences on intangible assets (1 040) (423)

Temporary difference on finance leases (5) 39)

Temporary difference on the provision of doubtful debt (95) 195)

Temporary differences on provisions –) (3)

Temporary differences on advance payments received 2 076) 20)

Temporary differences on calculated tax loss 2 526) 1 448)

Temporary differences on accrued leave pay (252) 120)

At the end of the year 4 482) 1 116)

Non-current assets 6 465) 2 478)

Non-current liabilities (1 983) (1 362)

4 482) 1 116)

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future

taxable profits is probable. The Group did not recognise deferred income tax assets of R4 143 593 (2009: nil) in respect of losses amounting to

R14 798 545 (2009: nil) that can be carried forward against future taxable income. These unrecognised deferred income tax assets arose in

Optocon Systems.

2010 FINANCIAL STATEMENT

75

17. Trade and other payables

2010 2009 R’000 R’000

Trade payables 25 786) 11 843)

Retention creditors 169) 1 111)

VAT 1 132) 3 119)

Accrued leave pay 1 343) 1 432)

Accrued performance bonus pay 890) 1 083)

Sundry payables 728) 362)

30 048) 18 950)

The directors consider that the carrying amount of trade and other payables approximates their fair value. All amounts recognised in respect of

retention creditors are due for settlements within 12 months. The accrued performance bonus pay arose in QuadSoft (Pty) Ltd for achieving their

performance targets.

18. Revenue

2010 2009 R’000 R’000

Project revenue 94 125) 119 635)

Sale of goods 3 100) 434)

Rendering of a service 102) 102)

Total 97 327) 120 171)

19. Other income

2010 2009 R’000 R’000

Insurance reimbursement 86) –)

Bad debts recovered 162) –)

Other 78) 90)

326) 90)

The insurance reimbursements relates to the excess of the insurance proceeds over the carrying value of a motor vehicle that was in an accident.

2010 FINANCIAL STATEMENT

76

21. Operating profitOperating profit for the year is stated after accounting for the following:

2010 2009 R’000 R’000

Auditors’ remuneration

– Audit fees: current year 409) 375)

– Fees for other services 9) 222)

Depreciation on plant and equipment 1 962) 1 289)

Amortisation of intangible assets 1 642) 255)

Loss/(profit) on sale of plant and equipment 40) (6)

Goodwill impairment charge 1 166) –)

Employee costs 19 877) 25 613)

Premises: rental expense 2 322) 2 221)

Telephone and fax 697) 5 851)

Advertising and marketing 252) 104)

Number of employees 134) 130)

22. Finance income and cost

2010 2009 R’000 R’000

Interest paid on other financial liabilities measured at amortised cost:

Finance lease liabilities (128) (226)

Bank overdraft 631) (489)

Unwinding of discount factor on deferred payment –) (804)

Other financial liabilities (96) (31)

Finance cost (855) (1 550)

Interest received on loans and receivables measured at amortised cost:

Bank 220) 908)

Net finance cost (635) (642)

20. Other gains and losses

2010 2009 R’000 R’000

Other financial assets at fair value through profit or loss:

– Fair value gains – unrealised 31) 1 176)

– Fair value losses – unrealised (1 062) (44)

Foreign exchange gains and losses

– Foreign exchange gains – realised 574) 2 132)

– Foreign exchange losses – realised (1 025) (1 275)

(1 482) 1 989)

2010 FINANCIAL STATEMENT

77

23. Directors’ emolumentsThe Group consists of 3 different boards of directors. The listed company’s board is the ultimate deciding board and then there are two other

boards for the subsidiaries (QuadSoft and Optocon).

The directors emoluments for the company were as follows:

For the year ended 28 February 2010:Executive directors A Holloway – 1 409 53 161 – 1 623

RF Barnard – 948 52 109 – 1 109

R Grobbelaar – 869 – 102 – 971

Total executive directors – 3 226 105 372 – 3 703

Non-executive directors

T Daka 360 – – – – 360

MG Diliza1 121 – – – – 121

Dr JL Steyn2 252 – – – – 252

Total non-executive directors 733 – – – – 733

Total 733 3 226 105 372 – 4 436

1 Resigned on 21 August 20092 Resigned 1 March 2010

For the year ended 28 February 2009:Executive directors A Holloway – 1 272 46 154 410 1 882

RF Barnard – 923 47 109 180 1 259

I Lamprecht2 – 499 38 64 100 701

JJ Prinsloo2 – 596 27 71 100 794

OK Sakkers2 – 621 – 71 130 822

R Grobbelaar – 730 80 80 – 890

JG Kotze1,2 – 736 – 58 – 794

Total executive directors – 5 377 238 607 920 7 142

Non-executive directors

T Daka 346 – – – – 346

MG Diliza 184 – – – – 184

Dr JL Steyn1 45 – – – – 45

Total non-executive directors 575 – – – – 575

Total 575 5 377 238 607 920 7 717

1 Appointed on 1 November 20092 Appointed on 1 November 2009

TotalR’000

BonusR’000

RetirementContributions

R’000

MedicalAid

R’000Basic Salary

For servicesas director

Ansys Limited:

2010 FINANCIAL STATEMENT

78

23. Directors’ emoluments continued

For the year ended 28 February 2010:Executive directors A Holloway – – – – – –

JG Kotze – – – – – –

PW Barnard3 – 403 – 38 – 441

R Brown3 – 402 – 43 – 445

TM Goss – 782 – 92 – 874

GR King3 – 349 17 42 – 408

CR Opperman3 – 366 – 43 – 409

HH Opperman4 – 291 – – – 291

NC Pacey5 – 426 57 49 – 532

S Ramkissoon3 – 422 – 42 – 464

S Scribante6 – 249 – 41 – 290

Total executive directors – 3 690 74 390 – 4 154

3 Resigned 31 October 20094 Resigned 31 August 20095 Appointed 1 June 20096 Appointed 1 September 2009

For the year ended 28 February 2009:Executive directors A Holloway – – – – – –

JG Kotze – 118 – – – 118

PW Barnard – 600 – 58 – 658

R Brown – 582 – 63 – 645

TM Goss – 642 – 85 – 727

GR King – 507 23 61 – 591

CR Opperman – 530 – 62 – 592

HH Opperman – 582 – – – 582

S Ramkissoon – 612 – 61 – 673

Total executive directors – 4 173 23 390 – 4 586

TotalR’000

BonusR’000

RetirementContributions

R’000

MedicalAid

R’000Basic Salary

For services as director

Optocon Systems (Pty) Ltd:

2010 FINANCIAL STATEMENT

79

23. Directors’ emoluments continued

For the year ended 28 February 2010:Executive directors JP Malan – 827 – 26 355 1 208

RF Barnard – – – – – –

MPW de Swardt – 621 – 19 124 764

J van Aardt – 626 – 19 124 769

HJ Weiermans – 605 – 19 124 748

Total executive directors – 2 679 – 83 727 3 489

For the year ended 28 February 2009:Executive directors JP Malan – 729 – 2 562 1 293

RF Barnard – – – – – –

MPW de Swardt – 550 – 2 159 711

J van Aardt – 579 – 2 159 740

HJ Weiermans – 564 – 2 159 725

Total executive directors – 2 422 – 8 1 039 3 469

TotalR’000

BonusR’000

RetirementContributions

R’000

MedicalAid

R’000Basic Salary

For services as director

QuadSoft (Pty) Ltd:

2010 FINANCIAL STATEMENT

80

CONSOLIDATED INCOME STATEMENTFor the year ended 28 February 2009

Note 2008 2007 (12 months) (12 months)

Total, weighted and diluted earnings per share

Number of shares in issue (beginning of the year) 140 271 008 140 134 390 140 000 000) 140 000 000)

Shares issued during the year 1 957 033 1 383 327 271 008) 134 390)

142 228 041 141 517 717 140 271 008) 140 134 390)

Basic attributable earnings per shareBasic attributable earnings per share is calculated by dividing the net profit after tax attributable to ordinary shareholders by the weighted

average number of ordinary shares in issue during the year.

Net (loss)/profit attributable to ordinary shareholders (R’000) (15 706) 1 529)

Weighted average number of ordinary shares in issue 141 517 718) 140 134 390)

Basic (loss)/earnings per share (cents) (11.10) 1.09)

Diluted attributable earnings per shareDiluted attributable earnings per share is calculated using the weighted average number

of ordinary shares in issue, adjusted to assume conversion of all potentially dilutive

ordinary shares. For 2008 and 2009, the potentially dilutive ordinary shares relate to the

shares to be issued as part of the business combination purchase consideration.

These shares were not weighted for the calculation. Refer to note 30 for further details.

Net (loss)/profit attributable to ordinary shareholders (R’000) (15 706) 1 529)

Weighted average number of ordinary shares in issue 141 517 718) 140 134 390)

Vendor shares un-issued at year end for the purchase considerations: )

– QuadSoft –) 1 956 949)

– Emergent Signals 1 697 333) 1 697 333)

– Optocon 191 682) 714 714)

Weighted average diluted number of ordinary shares in issue 143 406 733) 144 503 386)

Diluted (loss)/earnings per share (cents) (10.95) 1.06)

Headline earnings per share attributable to ordinary shareholdersNet (loss)/profit attributable to ordinary shareholders (R’000) (15 706) 1 529)

Non-headline items after tax:

Loss on the sale of plant and equipment 40) 6)

Goodwill impairment 1 166) –)

Total tax effects of adjustments (11) (2)

Headline (loss)/earnings attributable to ordinary shareholders (14 511) (1 533)

Weighted average number of ordinary shares in issue 141 517 718) 140 134 390)

Headline (loss)/earnings per share (cents) (10.25) 1.09)

Diluted headline earnings per share attributable to ordinary shareholders Headline (loss)/earnings attributable to ordinary shareholders (14 511) 1 533)

Weighted average diluted number of ordinary shares in issue 143 406 733) 144 503 386)

Diluted headline (loss)/earnings per share (cents) (10.12) 1.06)

2010

Totalshares

Weighted shares

2009

Totalshares

Weighted shares

24. Earnings per share

2010 2009

2010 FINANCIAL STATEMENT

81

26. Income tax expense

2010 2009 R’000 R’000

Major components of the tax expenseCurrent Income tax – current period 847) 2 140)

STC –) 560)

Deferred Deferred tax expense resulting in the reversal of temporary differences (3 431) (1 813)

Tax expense (2 584) 887)

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate: %) %)

Applicable tax rate 28.0) 28.0)

Tax effect of:

– Expenses not deductible for tax purposes 2.1) 1.5)

– Tax effect of section 11D allowances (12.2) (8.7)

– Change in estimation of prior year taxation (1.1) –)

– Change in estimation of prior year deferred taxation (2.8) –)

– Adjustments in respect of prior year deferred tax –) (7.2)

– STC –) 23.1)

Average effective tax rate 14.0) 36.7)

25. Dividend per share

The dividends paid in 2008 were R3 553 000 (R0.0323 per share) based on the 2007 annual financial results and R336 000 (R1 200.00 per share)

was paid in 2007 based on the 2006 annual financial results.

A dividend in respect of the year ended 29 February 2008 of R0.04 per share, amounting to a total dividend of R5 600 000, was declared and paid

on 9 June 2008.

No dividend was declared based on the 2009 and the 2010 financial results.

The Group is regarded as a tax resident in South Africa by the South African Revenue Services (SARS) and as such is subject to tax on its worldwide

income in South Africa. On 20 February 2008 the South African Minister of Finance announced a change in the corporate tax rate from 29% to

28%. This is effective for financial years ending on any date between 1 April 2008 and 31 March 2009.

2010 FINANCIAL STATEMENT

82

27. Cash generated from operations

2010 2009 R’000 R’000

(Loss)/profit before taxation (18 290) 2 416)

Adjustments for: Depreciation and amortisation 3 467) 1 532)

Loss on sale of non-current assets 40) 6)

Finance income (220) (908)

Finance costs 855) 489)

Unrealised foreign exchange differences 1 032) (1 132)

Fair value adjustments to deferred payments –) 354)

Goodwill impairment 1 166) –)

Changes in working capital:

Inventories (4 358) 396)

Trade and other receivables 19 974) (7 964)

Trade and other payables 11 098) (4 139)

14 764) (8 950)

28. Contingencies

In respect of the acquisition of Optocon Systems (Pty) Ltd, QuadSoft (Pty) Ltd and the division Emerging Signals, additional consideration will be

payable in cash if the acquired operations achieve certain profit warranties. Refer to note 15 and 30 for the details of the payments.

Capital commitments related to capital expenditure contracted to at the financial year end date, but not yet incurred.

Operating lease payments represent rentals payable by the company for its office properties. Leases are negotiated for an average term of three

years and rentals are fixed for the term with annual escalations. No contingent rent is payable.

29. Commitment

2010 2009 R’000 R’000

Capital commitments

Plant and equipment –) 212)

Operating leases

The future minimum leases payments under non cancellable operating leases

is due as follows:

– within one year 1 555) 1 449)

– in second to fifth year inclusive –) 1 555)

1 555) 3 216)

2010 FINANCIAL STATEMENT

83

30. Business combination

Optocon Systems (Pty) Ltd:On 1 December 2007, the Group acquired 100% of the share capital of Optocon Systems (Pty) Ltd, a manufacturer of precision electro optical

systems ranging from Infra-red optical components to high performance TV sensors and video switching units and displays.

The acquired business contributed revenues of R19 961 035 (2009: R22 018 402) and net loss of R9 675 254 (Net profit 2009: R1 533 458)

to the Group during the current financial year.

The business was acquired on 1 December 2007 and contributed revenues of R1 587 727 and net loss of R416 300 to the Group for the

period from 1 December 2007 to 29 February 2008. If the acquisition had occurred on 1 March 2007, the acquired business would have

contributed revenues of R11 719 022 and net profit of R177 630 to the Group.

Details of the net assets acquired and goodwill are as follows:

Purchase consideration: 2009 Re-assessment Goodwill impairment 2010 R'000 R'000 R'000 R'000

– Cash paid 1 022) –) –) 1 022)

– Direct cost relating to acquisition 53) –) –) 53)

– Fair value of cash payable –) –) –) –)

– Fair value of shares to be issued 2 144) (1 569) –) 575)

– Goodwill impairment –) –) (1 166) (1 166)

Total purchase consideration 3 219) (1 569) (1 166) 484)

Fair value of net asset acquired (484) –) (484)

Goodwill 2 735) (1 569) (1 166) –)

The fair value of the shares issued was based on the published share price (1 December 2007).

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after the Groups acquisition

of Optocon Systems (Pty) Ltd.

The initial purchase consideration was made up as follows:

– Deposit payable of R2 500 000 for shares and previous shareholders loan accounts

– An amount equal to R375 000 for each R1 000 000 of the financial year ending 28 February 2009 Optocon Systems (Pty) Ltd profit after tax,

subject to a maximum of R6 000 000 payable in newly issued Ansys shares at an issue price of R3.00

– An amount equal to R375 000 for each R1 000 000 of the financial year ending 28 February 2010 Optocon Systems (Pty) Ltd profit after tax,

subject to a maximum of R6 000 000 payable in newly issued Ansys shares at an issue price of R3.00

The purchase consideration was re-assessed due to the difference between the initial profit forecast of 28 February 2009 and the actual

results achieved as well as the re-assessment of the 28 February 2010 forecast. The effect of the re-assessment is the decrease in the

number of shares to be issued to the previous shareholders of Optocon Systems (Pty) Ltd Fair value

Plant and equipment 2 468)

Intangible assets 27)

Inventory 653)

Trade and other receivables 4 570)

Trade and other payables (3 418)

Tax assets /liabilities (248)

Deferred tax (42)

Loans from shareholders (1 478)

Borrowings (1 378)

Cash (670)

Total net assets acquired 484)

Cash consideration paid 10 246)

Less: Cash acquired 670)

Net cash outflow on acquisition 10 916)

2010 FINANCIAL STATEMENT

84

30. Business combination

QuadSoft (Pty) Ltd: On 1 December 2007, the Group acquired 100% of the share capital of QuadSoft (Pty) Ltd, a company that develops and maintains locomotive

in-cab communication systems that support the management and control of locomotives.

The acquired business contributed revenues of R17 161 275 (2009:R17 025 756) and net profit of R3 412 079 (2009: R4 083 927) to the

Group during the current financial year.

The acquired business contributed revenues of R2 539 071 and net profit of R661 236 to the Group for the period from 1 December 2007

to 29 February 2008. If the acquisition had occurred on 1 March 2007, the acquired business would have contributed revenues of R7 256 287

and net profit of R1 001 560 to the Group.

Details of the net assets acquired and goodwill are as follows:

Purchase consideration: Re-assessment/

2009 Goodwill impairment 2010 R'000 R'000 R'000

– Cash paid 3 382) – 3 382)

– Direct cost relating to acquisition 20) – 20)

– Fair value of cash payable 5 625) – 5 625)

– Fair value of shares to be issued 6 684) – 6 684)

Total purchase consideration 15 711) – 15 711)

Fair value of net asset acquired (652) – (652)

Goodwill 15 059) – 15 059)

The fair value of the shares issued was based on the published share price (1 December 2007).

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after the Groups acquisition

of QuadSoft (Pty) Ltd.

The initial purchase consideration was made up as follows:

– Deposit payable of R3 381 750

– An amount equal to profit after tax of QuadSoft (Pty) Ltd for the financial year ending 29 February 2008, multiplied by a price earnings ratio

of 5, less the initial deposit payment, subject to a maximum of R16 750 000. 50% will be payable in newly issued Ansys shares at an issue

price of R3.00 and 50% in cash.

– An amount equal to profit after tax of QuadSoft (Pty) Ltd for the financial year ending 28 February 2009, multiplied by a price earnings ratio

of 5 less the initial deposit payment and the second payment, subject to a maximum of R16 750 000. 50% will be payable in newly issue

Ansys shares at an issue price of R3.00 and 50% in cash.

The purchase consideration was re-assessed at 28 February 2009 and the actual results achieved at 28 February 2009 are in excess of the

initial profit forecast. The purchase consideration was subject to a maximum of R16 750 000 which was achieved by QuadSoft (Pty) Ltd and

therefore no changes were made to the purchase consideration.Fair value

Plant and equipment 51)

Intangible assets 27)

Inventory 418)

Trade and other receivables 316)

Trade and other payables (208)

Tax assets/liabilities (140)

Cash 188)

Total net assets acquired 652)

Cash consideration paid 15 711)

Less: Cash acquired (188)

Net cash outflow on acquisition 15 523)

2010 FINANCIAL STATEMENT

85

30. Business combination

Emerging Signals: On 1 December 2007, the Group acquired the business of Emerging Signals (Pty) Ltd, an approved railway signalling contracting company. Its

product delivery also includes Railway Signalling Maintenance contracts as well as the manufacturing and installation of concrete products

for use by railway signalling companies. Emerging Signals will trade as a division of Ansys Ltd.

The acquired business contributed revenues of R7 743 127 (2009: R13 978 182) and loss before tax of R5 592 005 (2009: R5 142 166) to the

Group during the current financial year.

The acquired business contributed revenues of R2 706 831 and net profit of R104 009 to the Group for the period from 1 December 2007 to

29 February 2008. If the acquisition had occurred on 1 March 2007, the acquired business would have contributed revenues of R7 859 686

and net profit of R276 456 to the Group.

Details of the net assets acquired and goodwill are as follows:

Purchase consideration: Re-assessment

2009 goodwill impairment 2010 R'000 R'000 R'000

– Cash paid 5 092)) –) 5 092)

– Direct cost relating to acquisition 25)) –) 25)

– Fair value of cash payable –)) –) –)

– Fair value of shares to be issued 5 092)) –) 5 092)

Total purchase consideration 10 209)) –) 10 209)

Fair value of net asset acquired (2 302)) –) (2 302)

Goodwill 7 907)) –) 7 907)

The fair value of the shares issued was based on the published share price (1 December 2007).

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after the Groups acquisition

of Emerging Signals.

The initial purchase consideration is made up as follows:

– Deposit of R10 184 000 that will be payable in an amount of R5 092 000 in cash and an amount of R5 092 000 by issuing and allotment of

1 697 333 Ansys Shares at an issue price of R3.00 per Ansys Share,

– An amount equal to profit after tax of the division Emerging Signals for the financial year ending 29 February 2008, multiplied by a price

earnings ratio of 7, less the initial deposit payment. 50% will be payable in newly issued Ansys shares at an issue price of R3.00 and 50%

payable in cash.

– An amount equal to profit after tax of the division Emerging Signals for the financial year ending 28 February 2009, multiplied by a price

earnings ratio of 7, less the initial deposit payment and the second payment subject to a maximum of R15 000 000. 50% will be payable

in newly issued Ansys shares at an issue price of R3.00 and 50% payable in cash.

The purchase consideration was re-assessed due to the difference between the initial profit forecast of 28 February 2009 and the actual

results achieved. The effects of the re-assessment are the decrease in the number of shares to be issued and the decrease in the cash payable

to the previous shareholders of Emerging Signals (Pty) Ltd. Fair value

Plant and equipment 1 063)

Intangible assets –)

Inventory 539)

Trade and other receivables 3 446)

Trade and other payables (1 847)

Tax assets/liabilities (743)

Provisions (369)

Borrowings (511)

Cash 724)

Total net assets acquired 2 302)

Purchase consideration settled in cash 11 420)

Cash acquired (724)

Net cash outflow on acquisition 10 696)

2010 FINANCIAL STATEMENT

86

Relationships Entity controlled by shareholders with significant influence Integrated Advanced Systems (Pty) Ltd

Shareholder with significant influence T Daka

Subsidiaries – 100% shareholding Optocon Systems (Pty) Ltd and QuadSoft (Pty) Ltd

31. Related – party transactions

32. Events after reporting date

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

33. Reclassification

The Group has reclassified its cash and cash equivalents of R3 355 431 (2009: R 6 965 684) from available-for-sale financial asset, valued at fair

value, to loans and receivables, valued at cost or amortised cost.

The group has the intention and ability to hold the financial asset for the foreseeable future or until maturity.

2010 2009 R’000 R’000

Related party transactions: Rent paid to related parties

Integrated Advanced Systems (Pty) Ltd 1 432 1 432)

Administration fees received from related parties

Integrated Advanced Systems (Pty) Ltd 102 102)

Compensation to other key management

Short-term employee benefits 6 207 8 771)

Related party balances:

Loan accounts – Owing from related parties

Integrated Advanced Systems (Pty) Ltd 296 592)

2010 2009 R’000 R’000

Statement of financial position: Cash and cash equivalents

– Carrying value 3 355 6 965)

– Fair value 3 355 6 965)

– Amortised costs 3 355 6 965)

Statement of comprehensive income:– Fair value gain/(loss) recognised in profit or loss – –)

– Fair value gain/(loss) recognised in other comprehensive income – –)

– Effective interest rate and cash flows recovered – –)

2010 FINANCIAL STATEMENT

87

(Incorporated in the Republic of South Africa)

(Registration number: 1987/001222/06)

(“Ansys” or “the Company”)

ISIN Code: ZAE 000097028 Share Code: ANS

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.If you are in any doubt as to what action you should take arising from the following resolutions, please consult your CSDP, stockbroker, banker,

attorney, accountant or other professional adviser immediately.

Notice is hereby given that the Annual General Meeting of shareholders of Ansys Limited will be held in the boardroom at 170 OuteniquaAvenue, Waterkloof, Pretoria on 24 August 2010 at 10:00, for the purpose of transacting the following business:

Ordinary business:1. To receive, consider and adopt the Group Annual Financial Statements of the Group and Company for the year ended 28 February 2010,

together with the reports of the Directors and auditors contained therein;

2. To re-elect the following directors of the Company:

2.1 Teddy Daka

2.2 Rachelle Grobbelaar

who retire by rotation at the Annual General Meeting, while being eligible, do offer themselves for re-election. A brief curriculum vitae in

respect of these Directors, as referred to above, appear on pages 2 and 3 of the annual report.

3. To authorise the Directors to re-appoint BDO South Africa Incorporated, Riverwalk Office Park, Building C, 3rd Floor, 41 Matroosberg Road,Ashlea Gardens, Pretoria, 0081, South Africa, as the independent auditors and Berton Bosman as the individual designated auditor of theCompany for the ensuing year and to determine the remuneration of the auditors;

4. To approve the fees paid to directors, as disclosed in the Group annual financial statements;

5. To transact such other business as may be transacted at an Annual General Meeting.

As special business, to consider and, if deemed fit, pass with or without modification, the following resolutions, those numbered 6, 7, and 8, as

Ordinary Resolutions, and number 9 as a Special Resolution:

Ordinary resolutions:6. “Resolved that the authorised but unissued shares in the capital of the Company be and are hereby placed under the control of the directors

of the Company, and that they are hereby authorised, subject to sections 221 and 222 of the Companies Act of 1973, as amended, to allot

and/or issue shares to such person or persons on such terms and conditions as they may determine, such authority to expire at the next

Annual General Meeting of the Company.”

7. “Resolved that, subject to not less than 75% of shareholders, present in person or by proxy and entitled to vote at the Annual General Meeting

at which this ordinary resolution is considered, voting in favour thereof, the directors of the Company be and are hereby authorised, by way

of general authority, to issue all or any of the authorised but unissued shares in the capital of the Company for cash as they in their discretion

deem fit, subject to the following limitations:

■ the securities must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are

convertible into a class already in issue

■ the securities must be issued to the public shareholders as defined in the JSE Limited (“JSE”) Listings Requirements and not related

parties, unless the JSE otherwise agree thereto

■ the general issue of shares for cash in the aggregate in any one financial year may not exceed 50% of the companies issued share

capital of that class

■ the maximum discount at which securities may be issued is 10% of the weighted average traded price of those securities over the 30

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

■ after the Company has issued securities representing, on a cumulative basis within a financial year, 5% or more of the number of

securities in issue prior to that issue, the Company shall publish an announcement containing full details of the issue, including the

effect of the issue on net asset value and earnings per share; and

■ this authority shall not extend beyond 15 months from the date of this resolution, or the date of the next Annual General Meeting,

whichever is the earlier date

NOTICE OF THE

OF ANSYS LIMITED

2010 FINANCIAL STATEMENT

88

8. “It is resolved that any one director of the Company or the Company Secretary be and hereby is authorised to do all such things and to sign

all documents issued by the Company and to give effect to Ordinary Resolutions number 6, 7 and 8 as well as Special Resolution number 1

(numbered 9).”

Special resolution number 1:9. “Resolved that the directors of the Company be and are hereby authorised by way of general authority, to repurchase ordinary shares in the

issued share capital of the Company from time to time, subject to the Articles of Association of the Company, the provisions of sections 85 to

89 of the Companies Act (1973) as amended and in terms of the JSE Listing Requirements, when applicable, and

■ any such repurchase shall be implemented on the open market of the JSE

■ the Company is authorised thereto by way of its articles of association

■ any such repurchase may not be made at a price higher than 10% above the weighted average market value for the shares for the five

business days preceding the date on which the repurchase was agreed

■ the general authority is limited to a maximum of 20% of the Company’s issued share capital of that class at the time the authority is

granted

■ a press announcement giving full details of such acquisitions, including the impact on net asset value and earnings per share, will be

published as soon as the Company has acquired shares constituting, on a cumulative basis, 3% of the number of shares in issue at the

time of the granting of the general authority

■ the general authority shall only be valid until the Company’s next Annual General Meeting, provided that it shall not extend beyond 15

months from the date of passing of this special resolution number 1

■ The Company will use its best endeavours to ensure that the minimum spread requirements are maintained following the repurchase

of securities as prescribed in paragraph 3.37 of the JSE Listings Requirements

■ The Company may not repurchase securities during a prohibited period as defined in paragraph 3.67 of the JSE Listings Requirements

■ The Company may only appoint one agent to effect any repurchase(s) on its behalf

Reason for and effect of special resolution: The reason and effect for special resolution number 1 is to authorise the Company by way of a general authority to acquire its own issued shares

on such terms, conditions and such amounts determined from time to time by the Directors of the Company by the limitations set out above.

Other disclosure in terms of the JSE Listings Requirements Section 11.26: The JSE Listings Requirements require the following disclosure, some of which is elsewhere in the annual report of which this notice forms part:

Directors and management – pages 2 to 4

Major shareholders of Ansys – page 35

Directors interest in securities – page 34

Share capital of the Company – pages 33 and 72

Litigation statement In terms of section 11.26 of the JSE Listings Requirements, the Directors, whose names are given on page X of the annual report of which this

notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or

have had in the recent past, being at least the previous 12 months, a material effect on the Company’s financial position.

Directors’ responsibility statement The Directors, whose names are given on pages 2 and 3 of the annual report, collectively and individually accept full responsibility for the accuracy

of the information pertaining to this resolution and certify to the best of their knowledge and belief; that there are no facts that have been omitted

which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this

resolution contains all information required by law and the JSE Listings Requirements.

Material changeOther than the facts and developments reported on in the annual report, there have been no material changes in the affairs or financial position

of Ansys since the auditors signed off on the Group Annual Financial Statements.

The Directors of the Company have no specific intention to effect the provisions of Special Resolution number 1 but will, however, continually

review this position having regard to prevailing circumstances.

The intention of the Company and/or its subsidiaries is to utilise the general authority to repurchase; if at some future date the cash resources of

the Company are in excess of its requirements.

The method by which the Company and any of its subsidiary intends to repurchase its securities and the date on which such repurchase will take

place, has not yet been determined.

■ After considering the effect of the maximum permitted repurchase of securities, the directors of the Company will ensure that

■ the Company and the Group will be in a position to repay its debt in the ordinary course of business for the next 12 months after the

date of the notice of the Annual General Meeting

2010 FINANCIAL STATEMENT

89

■ the assets of the Company and the Group will be in excess of the liabilities for the next 12 months after the date of the notice of the

Annual General Meeting

■ The ordinary capital and reserves of the Company and the Group will be adequate for the next twelve months after the date of the

notice of the Annual General Meeting

■ Available working capital will be adequate to continue the operations of the Company and the Group for the next 12 months after the

date of the notice of the Annual General Meeting

■ The Company and the Group may not enter the market to proceed with the repurchase until the Company’s Designated Advisor, Exchange

Sponsors, has confirmed the adequacy of the Company’s working capital for the purposes of undertaking a repurchase of shares in

writing to the JSE as required in terms of schedule 25 of the JSE Listings Requirements

Voting and proxiesAll shareholders will be entitled to attend and vote at the Annual General Meeting or any adjournment thereof. On a show of hands, every

shareholder of the Company who, being an individual, is present or is present by proxy at the general meeting or which, being a company or body

corporate, is represented thereat by a representative appointed pursuant to section 188 of the Act, shall have one vote only and on a poll every

shareholder of the Company (whether an individual or a company or a body corporate) or represented by a proxy at the Annual General Meeting

shall have one vote for every share held by such shareholder.

The necessary form of proxy is attached for the convenience of certificated shareholders and dematerialised shareholders with “own name”

registration who cannot attend the Annual General Meeting, but who wish to be present thereat. Any shareholder entitled to attend and vote at

the Annual General Meeting may appoint one or more persons to attend, speak and vote in place of such shareholder. A proxy so appointed need

not be a shareholder of the Company. In order to be valid, duly completed proxy forms must be received by the Company’s transfer secretaries,

Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown, 2107), by no later than

22 August 2010 at 10:00.

Dematerialised shareholders, other than own name dematerialised shareholders who wish to attend the Annual General Meeting must request

their Central Securities Depository Participant (CSDP) or broker to provide them with a Letter of Representation or must instruct their CSDP or

broker to vote by proxy on their behalf in terms of the agreement entered into between the shareholder and the CSDP.

By order of the Board

Fusion Corporate Secretarial Services (Pty) Ltdper Melinda Gous

Company Secretary

28 July 2010

2010 FINANCIAL STATEMENT

90

Executive A Holloway RF Barnard R Grobbelaar

Non-executive T Daka

Company secretary Fusion Corporate Secretarial Services (Pty) Ltd 56 Regency Road Route 21 Corporate Park Irene 0062 PO Box 61252 Pierre van Ryneveld 0045 Telephone: 087 550 1123 Facsimile: 086 616 6545

Transfer secretaries Computershare Investor Services (Pty) Ltd Ground Floor 70 Marshall Street Johannesburg 2001 PO Box 61051 Marshalltown 2107 Telephone: (011) 370 5000 Facsimile: (011) 688 5210

Designated Advisor Exchange Sponsors (2008) (Pty) Ltd 44A Boundry Road Inanda 2196 PO Box 411216 Craighall 2024 Telephone: (011) 880 2113 Facsimile: (011) 447 4824

Auditors and BDO South Africa Incorporatedreporting accountants Riverwalk Office Park, Building C, 3rd Floor 41 Matroosberg Road, Ashlea Gardens Pretoria, 0081, South Africa Telephone: (012) 433 0160 Facsimile: (012) 346 8233

Registered office and 170 Outeniqua Avenue Waterkloof Park Pretoriaprinciple place of business Telephone: (012) 424 8500 Facsimile: (012) 348 3720

Attorneys Gildenhuys Lessing Malatji Inc GLMI House Harlequins Office Park 164 Totius Street Groenkloof 0027 PO Box 619 Pretoria 0001 Telephone: (012) 428 8600 Facsimile: (012) 428 8601

Banker First National Bank Limited Ground Floor 267 West Avenue Centurion PO Box 12154 Centurion 0046 Telephone: (012) 643 7766 Facsimile: (012) 634 7777

ANSYS LIMITED

2010 FINANCIAL STATEMENT

91

Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.

Signed this day of 2010

Signature

1. To receive, consider and adopt the Group Annual Financial Statements forthe year ended 28 February 2010

2. To re-elect the following directors: 2.1. To re-elect Teddy Daka as director 2.2. To re-elect Rachelle Grobbelaar as director

3. Authorise the directors to re-appoint BDO South Africa Incorporated asAuditors and B Bosman as the individual designated auditor.

4. To approve the directors fees

5. To continue to transact such other business as may be transacted at anAGM

6. To place unissued shares under control of the directors

7. Authorise directors by way of general authority to issue shares for cash

8. Authorise any one director or the Company Secretary to sign alldocuments to give effect to the resolutions

9. General authority to repurchase shares

I/We (please print names in full)

of (Address)

being a member/s of Ansys Limited, holding shares in the Company, hereby appoint

1. or failing him/her

2. or failing him/her

3.

4. The chairperson of the annual general meeting

as my proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at 170 Outeniqua

Avenue, Waterkloof, Pretoria,on 24 August 2010 at 10:00 and at any adjournment thereof and to speak and act for me/us and, on

a poll, vote on my/our behalf.

My/Our proxy shall vote as follows:

Number of shares

NOTICE OF THE ANNUAL GENERAL MEETING OF ANSYS LIMITED

(Incorporated in the Republic of South Africa)

(Registration number: 1987/001222/06)

(“Ansys” or “the Company”)

ISIN Code: ZAE 000097028 Share Code: ANS

For use at the Annual General Meeting of members to be held in the boardroom, 170 Outeniqua Avenue, Waterkloof, Pretoria, on 24 August

2010 at 10:00 (the “Annual General Meeting”).

(for use by certificated shareholders and own name dematerialised shareholders)

Please read the notes on the reverse side hereof.

In favour Against Abstain(Indicate instruction to proxy by way of a cross in space provided)

FORM OF

(Indicate instruction to proxy by way of a cross in space provided above)

2010 FINANCIAL STATEMENT

92

NOTES

1. A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space/s provided,

with or without deleting “the chairman of the general meeting” but any such deletion must be initialled by the member. The person

whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the

exclusion of those whose names follow.

2. Please insert an “X” in the relevant spaces according to how you wish your votes to be cast. However, if you wish to cast your

votes in respect of a lesser number of shares than you own in the Company, insert the number of ordinary shares held in respect

of which you desire to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from

voting at the Annual General Meeting as he/she deems fit in respect of the entire member’s votes exercisable thereat. A member

or his/her proxy is not obliged to use all the votes exercisable by the member or by his/her proxy, but the total of the votes cast

and in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the member or by his/her proxy.

3. Forms of proxy must be received by the Company’s transfer secretaries, Computershare Investor Services (Pty) Limited, 70 Marshall

Street, Johannesburg 2001 (PO Box 61051, Marshalltown, 2107) by not later than 22 August 2010 at 10:00.

4. The completion and lodging of this form of proxy will not preclude the relevant member from attending the Annual General Meeting

and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.

5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be

attached to this form of proxy unless previously recorded by the Company’s transfer secretaries or waived by the chairman of the

Annual General Meeting

6. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.

7. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are

produced or have been registered by the transfer secretaries of the Company.

8. The chairman of the Annual General Meeting may reject or accept a form of proxy which is completed and/or received, other than

in accordance with these notes, if the chairman is satisfied as to the manner in which the member wishes to vote.D

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